Case Study

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Introduction

The U. S. discount department store industry had reached maturity by 2004 and Kmart no longer possessed a clearly- defined position within that industry. Its primary competitors were Wal-Mart, Sears, Target, Kohl’s, and J. C. Penney, with secondary competitors in certain categories. J. C. Penney operated more than 1,000 stores in all 50 states. Un-like Sears, the company chose not to locate in large shopping malls but to establish its discount stores in highly visible corner locations. By 1990, however, when Wal-Mart first surpassed Kmart in annual sales, Kmart’s stores had become dated and lost their appeal. Attempting to avoid this fate, Kmart management updated and enlarged the stores, added name brands, and hired Martha Stewart as its lifestyle consultant. Out of bankruptcy, Kmart became profitable primarily by closing or selling (to Sears and Home Depot) around 600 of its retail stores. Management had been un-able to invigorate sales in its stores. In a surprise move, Edward Lampert, Kmart’s Chairman of the Board and a control-ling shareholder of Kmart, initiated the acquisition of Sears by Kmart for $ 11 billion in November 2004. The new company was to be called Sears Holdings Corporation. Like many retailers, both Sears and Kmart struggled to attract shoppers in an overcrowded industry and a slumping economy. Sears Holdings had just launched a bid in November 2007 to purchase Restoration Hardware, a home- goods retailer (Wheelen and Hunger, 2012). The remainder of this assignment answers discussion questions based on the content of Unit 4 and the Case Analysis of “Kmart and Sears: Stuck in the Middle.”

Body - Discussion Questions:

a)Give your opinion on the retrenchment strategy(s) used by Kmart. Kmart’s brain trust put heavy emphasis on the planning function. Management perceived the role of corporate planning to be “making decisions now to improve performance tomorrow.” Kmart had been very successful in the area of strategic...
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