What core competencies do you think the company has and what is needed to exploit opportunity and counter

threats. As revealed by the SWOT analysis earlier Kmart has potential to pull itself out of its current position of facing closure. In order to exploit opportunities and counter threats Kmart needs to build on these competencies to strengthen its position and counter internal weaknesses against the single largest industry threat - increased competition in a mature market. Some core competencies that must be exploited are: Brand Kmart is an existing well-known and trusted national brand in USA Kmart has private label and designer clothing that is well endorsed Infrastructure Kmart has a large number of well-located, low-cost, leased stores in urban far away from competitors through out the country ( Appendix B ). Staffing Confidence by the market in Kmart is created by the achievements of its staff and management. With the turn-around strategy in place, new blood has been put into the top management structures. In any renewal there will be retrenchment as unprofitable stores are closed. This can be used as an opportunity to retain and move high performing staff to where they are needed and to get rid of non-performing staff. Anderson the chairperson of Kmart is well supported by Wall Street and the board of Directors. These new staff members enter the company with needed skills to address problems in certain areas that previously were poorly managed such as inventory control and merchandising. Store locations, layout and Performance Stores conveniently located away from competitors like Wal-mart and Target therefore less to compete for customers face-to-face. There are 250 nonperforming stores who have already been identified as being more cost effective to close than continue with running costs. Expertise exists in-house for the planning of store layout and appearance to meet different customer segments. This concentration of effort will enable focus on key areas Technology Kmart has already invested in good retailing systems. The system can be use to control inventory, supplier payments, track customer buying and monitor income versus profit margins across all stores. Research and Development The planning department is well established and in cross-functional to provide various perspective. The planning department to ensure that strategies at all levels are executed can further use the access to past data and knowledge of changes in buying patterns. Financial Backing JP Morgan Chase has agreed to support Kmart to avert the current threat of closure due to bankruptcy. It needs to be determined whether the loan terms are compatible with the company's profitability objectives. The single largest threat to face Kmart is from the fact that discount retailing is a mature industry, with many competitors, a few of which are large and cater for differentiated market segments with better profit margins. It is also true that " the affect of these conditions was that many of the discount retailers went bankrupt and others such as Woolworths withdrew or divested interests in the discount industry completely. Increased competition in price and specialization retailing meant that Kmart was growing at a slower rate than competitors, making lower margins and not moving stock quickly enough. Increased competition in the mature market took several forms such as price wars between Kmart and Wal-mart, increased customer service and specialty stores such as Toys "R" Us concentrating on toys in the discount sector. Cost leadership is not an alternative for Kmart as proven by the disastrous outcomes of price fights with Wal-mart. Kmart cannot compete as Wal-mart can handle a sustained price cutting war. Kmart should therefore consider the differentiation strategy option. Choose a strategic position from the generic strategies shown below and avoid 'Stuck in the middle' syndrome. "Being all things to everyone is a recipe for strategic mediocrity and below average performance" Porter (1998). He refers to this as being "Stuck in the middle". Cost Leadership Differentiation 3. Cost focus 4. Focused Differentiation Broad target Competitive Scope Narrow target Figure 1.3 Generic Strategies (Source: Porter, M. E. (1998b): Competitive advantage: creating superior performance, New York: Free Press) Discussion of Recommentations

Kmart needs to review its strategies an all areas, but especially in operations. The four perspectives on operations strategy (Source: Slack,N., Stuart,C., Johsnton,R. 2003) Change is required, but the process of how change is handled makes the difference. Communications of actions, companies strategies, and financial must be transparent and made available to all to win support for the changes and understanding with why they are essential to the turnaround in Kmart. Kmart would have ensured it future success by focusing on four elements necessary to withstand competition discussed by Pearce and Robinson (2003,p76). Industry Boundries Structure of the Industry Identification of who the competitors are Knowledge of the major determinants of competition in discount retailing These are some of the recommendations that need to be looked at: Carve out its competitive niche Shutter underperforming stores Advertising cut, did not work (spend more on advertising) Promote private branding Sort out operational, logistic and technology problems and the linkages between them. Go back to general merchandising Improve ability to implement plans Branded goods can offer real or perceived differentiation of value from dealing with Kmart, and poses a competitive disadvantage for new entrants and acts as a deterrent to existing players in the industry. Kmart should be reviewing their product range, locations and management teams and deliverables. Crucial to Kmarts success in a mature, competitive environment is to satisfy the customer's needs and expectations. Porter's value chain Strategy implementation and management means that everyone understands what is required across all activities in the organization. In delivering value to the customer every activity in the value chain needs to be examined. Those activities that do not add value must not be given priority, efforts needs to be expanded on activities that add customer value. Porter's value chain ( Appendix C) provides a framework to look at a business as a chain of activities that transfer inputs to outputs that customers value by assessing the primary activities (those involved in the physical creation of the product, marketing, transfer to the buyer and after sale service), and the support activities that assist the company through the provision of infrastructure. Kmart needs to use this kind of framework given the problems of communications, failure to implement plans and failure to execute and manage strategies ( Top / Down ) What core competencies do you think the company has and what is needed to exploit opportunity and counter threats. As revealed by the SWOT analysis earlier Kmart has potential to pull itself out of its current position of facing closure. In order to exploit opportunities and counter threats Kmart needs to build on these competencies to strengthen its position and counter internal weaknesses against the single largest industry threat - increased competition in a mature market. Some core competencies that must be exploited are: Brand Kmart is an existing well-known and trusted national brand in USA Kmart has private label and designer clothing that is well endorsed Infrastructure Kmart has a large number of well-located, low-cost, leased stores in urban far away from competitors through out the country ( Appendix B ). Staffing Confidence by the market in Kmart is created by the achievements of its staff and management. With the turn-around strategy in place, new blood has been put into the top management structures. In any renewal there will be retrenchment as unprofitable stores are closed. This can be used as an opportunity to retain and move high performing staff to where they are needed and to get rid of non-performing staff. Anderson the chairperson of Kmart is well supported by Wall Street and the board of Directors. These new staff members enter the company with needed skills to address problems in certain areas that previously were poorly managed such as inventory control and merchandising. Store locations, layout and Performance Stores conveniently located away from competitors like Wal-mart and Target therefore less to compete for customers face-to-face. There are 250 nonperforming stores who have already been identified as being more cost effective to close than continue with running

costs. Expertise exists in-house for the planning of store layout and appearance to meet different customer segments. This concentration of effort will enable focus on key areas Technology Kmart has already invested in good retailing systems. The system can be use to control inventory, supplier payments, track customer buying and monitor income versus profit margins across all stores. Research and Development The planning department is well established and in cross-functional to provide various perspective. The planning department to ensure that strategies at all levels are executed can further use the access to past data and knowledge of changes in buying patterns. Financial Backing JP Morgan Chase has agreed to support Kmart to avert the current threat of closure due to bankruptcy. It needs to be determined whether the loan terms are compatible with the company's profitability objectives. The single largest threat to face Kmart is from the fact that discount retailing is a mature industry, with many competitors, a few of which are large and cater for differentiated market segments with better profit margins. It is also true that " the affect of these conditions was that many of the discount retailers went bankrupt and others such as Woolworths withdrew or divested interests in the discount industry completely. Increased competition in price and specialization retailing meant that Kmart was growing at a slower rate than competitors, making lower margins and not moving stock quickly enough. Increased competition in the mature market took several forms such as price wars between Kmart and Wal-mart, increased customer service and specialty stores such as Toys "R" Us concentrating on toys in the discount sector. Cost leadership is not an alternative for Kmart as proven by the disastrous outcomes of price fights with Wal-mart. Kmart cannot compete as Wal-mart can handle a sustained price cutting war. Kmart should therefore consider the differentiation strategy option. Choose a strategic position from the generic strategies shown below and avoid 'Stuck in the middle' syndrome. "Being all things to everyone is a recipe for strategic mediocrity and below average performance" Porter (1998). He refers to this as being "Stuck in the middle". Cost Leadership Differentiation 3. Cost focus 4. Focused Differentiation Broad target Competitive Scope Narrow target Figure 1.3 Generic Strategies (Source: Porter, M. E. (1998b): Competitive advantage: creating superior performance, New York: Free Press) Discussion of Recommentations Kmart needs to review its strategies an all areas, but especially in operations. The four perspectives on operations strategy (Source: Slack,N., Stuart,C., Johsnton,R. 2003) Change is required, but the process of how change is handled makes the difference. Communications of actions, companies strategies, and financial must be transparent and made available to all to win support for the changes and understanding with why they are essential to the turnaround in Kmart. Kmart would have ensured it future success by focusing on four elements necessary to withstand competition discussed by Pearce and Robinson (2003,p76). Industry Boundries Structure of the Industry Identification of who the competitors are Knowledge of the major determinants of competition in discount retailing These are some of the recommendations that need to be looked at: Carve out its competitive niche Shutter underperforming stores Advertising cut, did not work (spend more on advertising) Promote private branding Sort out operational, logistic and technology problems and the linkages between them. Go back to general merchandising Improve ability to implement plans Branded goods can offer real or perceived differentiation of value from dealing with Kmart, and poses a competitive

disadvantage for new entrants and acts as a deterrent to existing players in the industry. Kmart should be reviewing their product range, locations and management teams and deliverables. Crucial to Kmarts success in a mature, competitive environment is to satisfy the customer's needs and expectations. Porter's value chain Strategy implementation and management means that everyone understands what is required across all activities in the organization. In delivering value to the customer every activity in the value chain needs to be examined. Those activities that do not add value must not be given priority, efforts needs to be expanded on activities that add customer value. Porter's value chain ( Appendix C) provides a framework to look at a business as a chain of activities that transfer inputs to outputs that customers value by assessing the primary activities (those involved in the physical creation of the product, marketing, transfer to the buyer and after sale service), and the support activities that assist the company through the provision of infrastructure. Kmart needs to use this kind of framework given the problems of communications, failure to implement plans and failure to execute and manage strategies ( Top / Down ) Case Study: What Happened to Kmart? Kmarts Business Model and Business Strategy The main strategy of the company is to offer low price but high-quality products. The company had targeted the family as their primary customers, which is suitable due to the fact that they are offering different commodity products, more particularly those products that are useful to the different task at home. Another important strategy of the company is their virtual store that serves as companion for the customers. Figure 1 Five Forces Model of the Kmart in the Retailing Industry

Figure 1 shows the Five Forces Model of Kmart upon its entry in the retailing industry. Due to the fact that the retailing business has a great need for a large initial capital, it would be somewhat hard for other prospect competitors to enter the said industry. The times that will be needing in order to contact different suppliers and gain customers are also long. The said reasons are somewhat in the advantage to the part of the company. In terms of competitive rivalry, there are just few competitors who are into the business, the said reason is somewhat good for the company, but the main problem is that all of the competitors are already established and had already gained their position in the market. Due to the fact that the company has been established 100 years ago, it had already created an image to the mind of the public. Thus it can help the company to maintain their position in the market, because they have already created a strong relationship with their customers. Due to the fact that the industry focuses on the retailing aspect, most of the products that the company and its competitors are selling are almost the same; it can affect the ability of the customers to substitute. On the other hand, the main advantage of the industry is that different companies are implementing their different strategies in order to gain the loyalty of their customers. The main rivals of the company in the industry is the Wal-Mart, Kohls and Target. In the aspect of the customers, they have their influence to the company. First is that customers are buying only the significant part of the output, it is due to the fact that they are selling different goods from different suppliers. But because the company is focusing to the families as their customers, they have a fragmented buyers meaning, they are not just focusing on specific age bracket or sex. In terms of supplier, the supplier has their little control over the company that is due to the fact that the company has their many suppliers that deliver different products to the company. Another thing is that the cost that is needed in order to switch from one supplier to another is low. Another important factor is that the products that the suppliers are delivering are commodity product, and the competition in the said industry is somewhat high. The major suppliers of the company are the: Fleming and Miracle-Go plant food. There are also many local suppliers.

The threats of substitution focus on the low cost of switching and the inclination of the customers to switching. There are different convenience store and the likes that are subject for substitution. Value Chain Analysis Figure 2 Value Chain of Kmart Figure 1 shows the value chain analysis of the company. It starts from the suppliers. The inbound logistics activities involve the shipments of the products, the storage of the product to the warehouse and the management of the excessive inventories. It will eventually lead to the operations; where in the products will be grouped with accordance to the categories. The quality control is also included in accordance to the standard of the company. Next process is the outbound logistic which focuses on the exhibiting and presenting of the different retail products. The next process in the marketing and sales, which is considered as one o the most important process, it includes the advertisement, pricing and the channel selection. The last process is the service, it pertains to the different services that the company is offering, in the case of the company, and they are offering the customer service that will handle to the different enquiries and suggestions of the customers. All of the said processes are for the benefits of their customers. What Went Wrong? There have been many flaws and problems about the value chain of the company. Primarily is the process of shipment. The products that are being ordered are being allocated and decided by the central planner, not on individual store, it is a big problem due to the fact that different stores has different demands from their customers, that is why there are many excess inventory, and it can cause another problem because it occupy space. The said problem lead to another, it had helped to increase the problem of the company regarding their space in warehouses. It had also causes for cases of shrinkage or the loss of their products due to theft or breakage. The said cases had lead to loss of money for the company. Another important matter is inability of the company to target their specific customers that had led them to lack in their marketing and sales aspect. The company uses the shotgun approach where in everyone is my customer (cited in Turner 2003, p. 37). Another important aspect is its inability to choose feasible location and the presentation of their store that had affected their image. Customers are also complaining about the approach of the customer relation department to them. Business Processes and Information System The IT of the company had been tagged as ancient and incompetent (cited in Turner 2003, p. 121). The flow of the different data and information in the network of more than 2,000 stores are considered as slow and created a web of another problem that had putted the company behind the times (cited in Turner 2003, p. 121). Kmart is saying that the primary problem is the money that they are going to invest for a particular system that must be used, but if you are going to look back at the history of the company, you will see that there have been many OIC that had implemented different systems. Critics have been saying that the problem is the inconsistency companys strategy. A distinctive retailer has main business processes that can be directed competently by technology. However, technology will not be useful without clear vision of goals and objectives of the company. That is the primary problem of Kmart, they didnt have a clear and established vision of what the company is trying to aim and achieve (Turner 2003, p. 122). The company also, didnt use their IT to gain full benefits, the main objective of their IT is to focus on the how to cut cost as well as the reduce waste (Turner 2003, p. 123). It is opposite of what Wal-Mart is doing where in it is using their IT in order to coordinate to the different data that will help them for decision-making in different important aspects such as marketing, reordering, stock management and inventories. It could have been better if the

company had been able to focus in managing the demand and supply of their products that would help them to foretell demand of different products. Conaway was the first CEO of the company that had been able to plan about restructuring the supply chain management of the company by applying IT on it. It had announced a $670 million investment for technology that will be using for logistics infrastructure such as: new inventory management system, state-of-the-art scanners and cash registers. Another addition is the merchandise management system that will assist the buyer in tracking the movement of the product. It had focuses on the logistic and distribution network of the company (Turner 2003, p. 125). Unfortunately, the said reconstruction had not been that successful due to lack of execution. The said centralization of the system had not been pushed due to lack of budget, but more primarily because of the refusal of the local managers to give up their control to the store (cited in Turner 2003, p. 126). The said strategy could have been a great help because the company will be able to monitor the different demand and flow of products of the company as a whole. The application of i2software of the company was not successful due to the conflict of the company and the developer. In the end, the developer had said that it was the fault of Kmart why the system had failed. Supply Chain Management Information chain management depicts the flow of information from the cash register that is stored in the computers that will handle the orderentry system that will keep the product replacement in relation with the needs of the store (Turner 2003, p. 145). Supply chain management is one of the problems of the company. It has already experiencing disconnection between the demand and supply that leads to inefficient merchandise management. Being able to manage the supply and demand chain is important because it will allow the company to order more of what the customers want, and order less for the other way around (Turner 2003, p. 146). In order to solve the said dilemma, the company had asked for the service of the i2 Technologies, an IT company that is located in Dallas. The primary goal of the i2 project is to help the company to improve their supply chain management that will help the company to maintain the inflow and outflow of products inside the company. The usage of the i2 technologies was not a very good decision for the company due to the fact that the logical flow of the done system was not parallel to the actual process of the company. All in all, the company had just wasted their money in availing the system.

Collapse of the Company and i2software The i2software was not successful. Due to the said event, Kmart and the i2Technologies are now having a misunderstanding about whos to blame about the failure. If you are going to analyze the situation, you can say that both of the parties have their own share of mistake. Primarily, the company or the management has their responsibility to explain the different important aspects and processes of the company in details. That is due to the fact that they are the one who are knowledgeable when it comes to the different business rules of their company. They must give priority to the request for information of the i2technologies. On the other hand, it is the responsibility and role of the IT Company to give details to their client about the different matters about IT and how it will affect their process. It is also the role of the company to give details about the system requirements and other characteristics of the expected system. One of the problems about the company is that they are not unified. Local stores are working on their own but not in the positive way. Managers had not been able to support the system to the fullest due to their fear and misunderstanding.

According to the company, and their primary reason why they sued the i2technologies is that it didnt work according the processes and flow of information of the company. Kmarts IT Strategy Kmart is always been compared to Wal-Mart, because Wal-Mart can be considered as baby when it compares to the experience and stay of Kmart in the industry. The primary edge of the Wal-Mart to the company is that, Wal-Mart had been able to use the advantage of IT during the first bloom of the said technology. Unlike Kmart, Wal-Mart had been able to use the data and information in order to decide on different matter such as marketing, management, sales, orders, pricing and more particularly, the supply chain. Kmart doesnt have strong program that will help them to manage change. It can be seen throughout the history of the company that they had already attempted to improve in terms of technology, but, in the end, they always fail. This is due to the fact that employees are not cooperating that much. It has been said the first part of the paper that, most of the store manager are refusing for centralization due to the fact that they dont want to loose their control over the store. There have been many CEOs who tried to save the company from potential bankruptcy. Unfortunately, none of them became successful. One of the reasons it had happened is due to the fact that the strategies that they are trying to use in order to regain their position in the market were just the same, the difference is the amount or the cost of the project and impact to the company. Again and again, the company has made different decisions that give the impressions to fly in the face of realism or rationality (Turner 2003, p. 205). They had been focusing on the same spot or aspect of their process not giving emphasis on those parts that are in great need or importance and can help the company to grow. They also had already spent that much in IT but no result had been gained. Conaway and Kmart When Chuck Conaway had taken over in Kmart in 2000, he had faced lots of dilemmas and problems. One of the major problem is the logistics of the company, where in the excess inventory are being placed in container van behind the store. Another problem is the over and under stock of different products and goods in each and every store. Another matter is the refusal of different store manager to centralize the operation or the database of the company. During his time, the company is not really working well and is positioned at the blink of bankruptcy. The mismanagement of the supply chain is also another matter. The company is also experiencing high percentage of shrinkage due to improper storage of product. The advertisement or in more general, the marketing and the customer relationship of the company is also an important matter. Another thing is that the company had already built a negative image about the appearance of their stores as well as the approach of the customer-relation officers. It would be better if Conaway had reconstructed their standards to customer relationship in order to guide their employees about proper communication to the costumers. Another thing is that the renovation of their stores. Those are little strategy but it has a great impact to the preference of the customers. Another thing is the change management, it could have been better if the company will be going to implement and deploy different programs such as seminars, meetings, orientations and trainings that will motivate and inform the employees about the importance of technology to the company as well as to their work. In the sense of marketing, targeting specific group of customers is important; this has been implemented by Wal-Mart, because they believe that everyone is their customers. It would be easy for them to deploy different

marketing strategies such as advertisements and pricing that will suit to the needs, demands and preferences of their targeted customer. Read more: http://ivythesis.typepad.com/term_paper_topics/2010/04/case-study-what-happened-tokmart.html#ixzz1lbjIanfW