Kmart Marketing Strategy

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Agenda
• • • • • • • • • • Organizational Overview Industry Snapshot Competitor Analysis Financial Analysis SWOT Overview Current Strategy Strategic Issues Recommended Solutions Implementation/Justification Recommendation Recap

Organizational Overview
• • • • • • Founded by Sebastian S. Kresge in 1962 Number 3 discount retailer in the U.S. Operates 1,479 stores in 49 states Maintains 3 retail concepts Filed bankruptcy in 2002 Merged with Sears, Roebuck & Co. in March 2005

Industry Analysis Key Success Factors
• Advanced technology that enables

Technology

merchandising efficiency

Distribution

• Efficient Supply Chain Management • High return on inventory investment/high inventory turnover • Good working relationship with suppliers • Low distribution costs • Low replenishment cycle times • Ability to predict consumer demand • Courteous customer service • Breadth of product line and brand selection • High sales per square footage (store productivity) • Effective merchandising strategies • Ability to meet local preferences and price sensitivities • Overall low costs and underpricing strategies • Convenient store locations

Marketing

Skills & Capability

Other types

Kmart’s Microenvironment
Economic Conditions

Rivals

Substitute Products

Technology

Legislation/ Regulations

Suppliers

Buyers

New Entrants

Society Values/ Lifestyles

Demographics

Disposable Personal Income
Retail Sales Approaching 41.5% in 2005

Consumer Confidence is beginning to rise

Competitive Analysis
High

Low
Variety

High

Low Price

Competitive Analysis
Expensive

Low
Variety

High

Inexpensive Price

Product Line Strategy
A time phased plan for introducing products, each product targeting a specific target market How Targets: African American Hispanic Asian American

Use unique strategic brand alliances Advantages and licensing agreements that are culturally specific to our target market

Favorable market share Increase Barriers to Entry Increased Image benefits

Examples “Dora The Explorer” Kenyon “K-Mart” Martin Special Food Seasoning

Financial Overview
300000

Historical Sales Actual Revenues

250000

Yr. 2000 2001

U.S. 35,925 37,028 36,151 30,762 23,253

200000

150000

2002 2003

100000

2004

50000

* In millions of dollars

0 2000 2001 2002 2003 2004 2005

Kmart Target Walmart

Financial Overview
8000 7000 6000 5000 4000 3000 2000 1000 0 2000 2001 2002 2003 2004

Kmart Gross Margin
Actual Margins Yr. 2000 2001 2002 2003 2004
Gross Margin

U.S. 7,764 7,296 6,298 4,504 5,407

* In millions of dollars Actual Net Income Yr. 2000 2001 2002 2003 Kmart Target Walmart

Kmart Net Income
12000 10000 8000 6000 4000 2000 0 -2000 2000 2001 2002 2003 2004 2005

U.S. (740) (530) (495) (636) 1,106

2004

Inventory Turnover April 2005
Walmart

7.7

Target

5

SHLD

4.5
Low Sales, High Inventory

SWOT Analysis
Strengths
• • • • • • Buying Power Brand Awareness Big K-Mart Sears Acquisition Restate Locations 7% increase Stock

Weaknesses
• • • • • • • • Supply Chain Management Poor Leadership Bankruptcy Poor store house keeping Strategy execution Lack of Customer service Excessive slow moving inventory Accounting practices

Opportunities
• • • • • • Buying Power Growth with Sears International Growth Big K-Mart Meaningful Acquisitions Technology

Threats
• • • • • • Poor Leadership Bankruptcy Poor store house Strategy execution Customer service NON Appealing to the youth

Kmart’s Downfall
• • • • • • • • • Weak customer image Poor merchandise buying Inability to maintain proper inventory levels Inability to keep up with buyer preferences Poor supplier relationships Unsuccessful diversification initiatives Mismanagement of capital investment funds Inexperienced management Dismal holiday sales

Facts About The Merger
• Merger announced November 2004; Completed March 2005 • Creates 3rd...
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