Sears Kmart Essay

Excerpt from Essay :

Sears / Kmart

Sears and Kmart

Sears History

Sears began its activity in 1886, when Richard W. Sears created the R.W. Sears Watch Company. After resigning from his job as a railroad station agent, he started selling watches to other agents. In 1887 Alvah C. Roebuck joins Sears. The company introduces jewelry and other products in its catalogue. The company continues to expand its range of products and its area of activity. Sears, Roebuck and Co. was officially established in 1893. The company's catalogue included: sewing machines, bicycles, sporting goods, appliances, groceries, and others.

During this period, Sears continuously developed its range of products and services, and also the work conditions for its employees. For example, in 1901 Sears publishes an employee newsletter. In 1906, Sears issued an initial public offering. In 1911, Sears opens a series of product testing labs. The company continues to show its interest in its employees and in the community by implementing a series of programs designed to improve their conditions (Sears, 2010).

In 1921 Sears confronted with a financial crisis, which forced one of the company's owners to use his fortune in order to save the company. The company further started to involve in agriculture, by creating an agricultural foundation. During the 1930s Sears launched an insurance company, changed its top management, and expanded its chain of stores.

The World War II significantly affected the company's activity, but Sears managed to develop strategies that helped the company maintain its position on the market. During the following decades, Sears continued to introduce numerous products in its catalogue, to expand the geographical area that the company addresses. The technological developments and the marketing strategies that continuously developed in order to suit the market's needs have also developed the strategy implemented by Sears.

Sears Strategy

The business segments owned by Sears Holdings Corporation are Kmart, Sears Domestic, and Sears Canada. In order to maintain and improve its position on the market, Sears relies on improving the company's productivity and efficiency (Annual Report, 2009). These objectives are intended to be achieved by focusing on outsourcing, supply chain efficiencies, franchising, labor model optimization, consolidation of functions.

The company also focuses on investing in technology and innovation. This is intended to improve customer experience. Sears has observed the customers' increased interest in online shopping and has decided to develop and implement a series of services designed to facilitate customers' online shopping activity and to diminish the risks associated with the Internet.

Sears and Kmart Merger

The merger between Sears and Kmart was intended to join together the strengths of both companies. The main objective of the merger was represented by increasing the availability of the company's products and services by increasing the number of locations and customer distribution channels. The type of stores owned by sears before the merger reveals a mall-based format, while Kmart used large format locations.

The merger allowed Sears to obtain the logistics required in order to compete with companies that use such large format, but without having to invest significant amounts of financial resources into building other locations.

Another reason for this merger is represented by the fact that the owners of the company decided that Sears needed to become more adaptable to challenges of the business environment. The company's strategy is therefore based on improved customer service, increased transparency, tighter integration of the company's stores, service businesses, and online experiences.

However, it seems that the merger between Sears and Kmart did not achieve its objectives. The owner's approach seems to be too complex for the type of company that Sears should be. This is because the Sears' manager is not a retailer or a trader, and does not have the abilities and skills required for managing the company (Eisinger, 2008).

In other words, given the fact that the owner does not have a vision about what Sears should become and what mission it should follow, Eddie Lampert is trying to develop and implement a series of ideas that he thinks are suitable for the company and its situation. Since he bought Sears, Lampert began testing several ideas that he thought would revolutionize Sears and its activity.

In doing so, Lampert turned the company's stores in places that the customers do not recognize anymore and do not approve of. For example, Eisinger's article presents certain situations that reveal customers' disapproval regarding the changes implemented by Sears. The article presents the case of an older woman trying to find a replacement part for her sewing machine. She cannot manage to find anything in the new display of the store.

Lampert tries to convince her to buy a new sewing machine, but the woman refuses, insisting to buy a replacement part. Lampert then asks a salesperson to help her. Given this situation, it may seem that Sears needs to address younger customers. But there seem to be problems with this customer segment also.

The article presents the situation of two young women trying to purchase some sort of coat. The changes of the store do not seem to be appealing to them either. They consider that the store does not feel like a Sears anymore, but as a wholesaler. They do not think that Sears has improved, but on the contrary. This means that the company's strategy of modifying the stores in order to gain competitive advantage is not a suitable one for Sears' position.

The evolution of Sears was not anticipated by many specialists in the field. This is because Lampert's acquisition of Sears was considered to be an example for other investors. Before the merger, Kmart was in a bankruptcy situation. Due to significant cost reduction, Lampert managed to make Kmart a profitable division, and even significantly increased the company's stocks value.

The reason behind this situation relies on the fact that the strategy developed and implemented by Lampert is not suitable with the current conditions of the business environment. Such a strategy consists in purchasing a company like Sears and implementing certain financial strategies designed to rapidly increase profits for the company and its owners.

But such strategies cannot be applied in the current business environment because the market does not allow for cheap financing to be available. As a consequence, financial managers like Lampert must actually manage the companies they purchase. This is what Lampert was forced to do.

Initially, he focused on reducing costs. Although the profits were unsatisfactory in the beginning, the method proved to be successful on medium term and on long-term. However, there are several aspects that Lampert managed to improve at Sears. One of these aspects is represented by negotiation.

Lanmpert changed the negotiation strategy of the company. In other words, Sears became a tougher negotiator. This situation led to several disputes with vendors, partners, and shareholders. This is because Lampert is determined to obtain the best conditions that the opponents can offer. This is called conflict negotiation. This type of negotiation is simpler than others. It is used when the negotiator has the position of power and the ability to impose its conditions.

The Kmart store in New York City is one of the most important retailers in the area. Given the fact that the customers in this area are numerous and have quite diverse requirements, the store manages to address these challenges. For example, when trying to purchase a jacket, I found out that the offer in the case of this product is very diversified. Kmart provides a wide range of jackets that include casual, office, and sports jackets.

The price range is also quite diversified, being able to address all budget types. The wide variety of fabrics of such jackets appeals to most preferences. From what can be observed, customers seem to be satisfied with the display of the store, its range of products and services, and with the prices of the company's products.

Store Improvement Recommendations

As mentioned above, many of Sears' and Kmart's customers do not agree with the changes that the companies' stores have implemented. The same opinion is shared by specialists in the field and journalists that have analyzed these changes and their implications. For example, Richard Hastings, a retail analyst considers that "the stores don't look good enough. And it's one thing to hire talented people, but if you're going to be in retailing you have to be in it all the way up to your eyeballs and get in there, fix up those stores and spend the money."

In other words, this is a matter of investments. Financial analyses have revealed that the company's competitors, like Wal-Mart and Target, spend ten times more than Sears Holdings Corporation on their stores. The increased sales of Wal-Mart prove that their investments are successful. In order to improve this situation, it is recommended that Sears conducts some research among customers regarding their opinion on the company's stores, what is bothering them, and what they would like the stores to look like. Based on the results of the research, the managers should develop…

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