On November 17th, 2004 Kmart and Sears publicly announced the impending merger of the two struggling companies to become Sears Holding Corporation. Kmart, for 11.5 billion dollars would be the buyer, however due to strong brand name recognition and history, Sears would be the face of the new conglomerate. At the heart of this merger was Edward Lampert, an extremely successful hedge fund manager who had made a name for himself by, purchasing companies in the red and making them profitable once again. There were numerous detractors who though the idea of simply combining two once formidable chains, who now were both failing, into the third largest retailer without regard for the structural problems that doomed both companies in the past would simply delay the inevitable. Lampert thought otherwise, even without extensive management experience, he had previously demanded positions on the executive board of past companies he had bought majority shareholder status in when they were in the red. From this vantage point, he did have some experience with faltering chain stores, and this situation was similar. Environment
The United States economy had a slight rebound from the lingering recession of the dot.com bubble burst of 1999. In 2004 gross domestic product climbed 4.4%, outpacing the previous three years growth (Wood 2004).
The trend of big box store openings was in the waning period of their ascendancy of dominating how the consumers make purchases. They were no longer new and exciting, however they had provided consumers with a one-stop shopping experience that cut down on time and price. Big-box retailers such as Home Depot, Best buy, and Wal-Mart, were welcomed in virtually every urban area throughout the United States, and found success in rural areas as well. This did not bode well for either Kmart or Sears. These outdated retailers could not compete on the basis of price, selection, or convenience of the new entrants.
Sears and Kmart both do have strong brand equity capital built up from there times of market dominance, Sears more so than Kmart. Kmart was a giant in the 1990’s as a retailer and was second only to Sears in terms of market share. Their blue light specials were known throughout the country and the store found themselves in numerous films as a signifier of their importance in American pop culture.
Sears had been a staple of America since the late 19th century. Through the Sears Roebuck catalogue Americans all over the country could find a convenient way to purchase products without having to get to the store. In the late 1800’s and early 1900’s the majority of the country did not populate urban areas as they do today, and automobiles were nowhere near as prevalent. Sears was able to adapt to the influx of people into cities throughout the 20th century and became a staple of malls and shopping centers. Customers were open to this change and made Sears the country’s leading retailer for decades.
Sears Holding Corporation is in the discount/variety/retail industry. These locations hope to offer convenience and ease to consumers with a one stop shopping center that carries most if not all of the essential products the average American would need. The major competition for Sears Holding Corporation comes from Wal-Mart the largest retailer and grocery chain in the country (Fishman 2003).
Wal-Mart is an American corporation started by Sam Walton in 1962; it is currently the largest retailer in the world. Wal-Mart is discount retailer that in 2008 reported sales of 374.5 billion. Wal-Mart currently operates more than 7,250 stores and 2,800 combination discount and grocery stores, with this distinct location advantage Wal-Mart dominates not only competition, but their suppliers as well. Wal-Mart has consistently outperformed itself every year since 2001, after experiencing an 8.6% growth from 2007 to 2008, as well as becoming the largest retailer in Canada and Mexico,...
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