Sears and Kmart merger analysis and outcomes

Sears Kmart Merger

How do you predict the Sears and Kmart merger will work out in the long-term? Use a synthesis of research to justify your answer

Sears and Kmart have been longtime rivals in the discount general retail market. However, because of the dominance of Wal-Mart, and Wal-Mart's consistently lower prices on everything from clothing to home goods to appliances, both of these stores have been suffering in recent years. Unlike the quasi-luxury discount brand Target, they do not have a particular company image that attracts consumers. Thus consumers, given the choice of Wal-Mart's lower prices, are unlikely to select either Sears or Kmart as their place of choice to do discount shopping.

Sears once had a strong reputation for quality, particularly in automotive and large appliances, but K-Mart always floundered because of a poor product image, usually staying competitive in the market because of price alone, and its 'blue light' specials. It also had success with Martha Stewart's product line in its lucrative home goods division. Given the companies' similar marketing and branding problems, fusing their two fates into one larger entity, Sears Holdings, seems like a dubious proposition at best over the next several years, despite Edward Lampert's ability in recent years to increase Sears' shares by an impressive 79% (Weiss, & DiStefa 2007)..

Kmart only recently emerged from bankruptcy, and there is the additional problem of real estate and location, location, location -- many of its remaining properties are in older shopping centers that draw little traffic (Irwin 2005). To innovate, Sears is creating a new line of stores "one that amounts to a hybrid of the traditional Kmart and Sears," although Sears has always done poorly in clothing and makeup, in contrast to Kmart (Irwin 2005). This may eat away at Kmart's strengths rather than enhance the merged entity's reputation. Finally, Sears says that it wishes to create a hybrid of the big box and the department store, yet Target already offers a similar experience, the value of this concept seems somewhat dubious.

Compare and contrast Edward Lampert to/with Warren Buffett

Edward Lampert was said to have modeled his approach to investing upon Warren Buffet. He is noted "for finding undervalued stocks" and turning them into gold -- or at least, in the case of some of his finds, removing their current tarnish (Weiss, & DiStefa 2007). In fact, Lampert is cited as still frequently drawing his top picks from consulting the shareholder letters of Buffet, and drawing from Buffet's advice to guide him in his own investment decisions.

Warren Buffet is famed as the billionaire chairman of Berkshire Hathaway Inc. Like Buffett, Lampert is said to seek investments in "stable businesses with predictable income streams that have very strong brands," that are currently suffering troubled fortunes but are not fundamentally misguided in their core brand concepts (Weiss, & DiStefa 2007). For example, in his own investment strategies, Buffet resisted the dot.com boom and bust, by and large, and so did Lampert. Buffet prefers companies that are traditional blue chips that produce products you can see, touch, and can count upon to build a customer base steadily, over time.