PEST Analysis of Sears: Strategy and Market Position

Introduction

In 1886, Sears, Roebuck & Company emerged and has since grown into the nation's fourth largest retailer, with nearly 929 full-line stores and 1,200 specialty retail stores throughout the United States and Canada. Recently, Sears Domestic and Sears Canada have been experiencing financial losses due to poor customer service (Skariachan, 2011). Sears is a leading retailer of a diverse range of products, including home appliances, home electronics, lawn and garden supplies, tools, and automotive maintenance and repair (Sears, 2010). It sells these products and services through its proprietary brand names — such as Kenmore, Craftsman, and DieHard — which allow Sears to capitalize on the popularity of these labels. The company is also a leader in clothing and apparel sales, carrying such brands as Joe Boxer, Lands' End, Apostrophe, Covington, and Jaclyn Smith. With more than 12 million service and maintenance calls made yearly, Sears is the nation's largest provider of home services.

The large diversity of products and services offered by Sears requires its management to have a strong understanding of the external factors that govern operations. To gain market share relative to competitors, Sears must take advantage of political, economic, social, and technological factors shaping the world today. By evaluating the political landscape, economic conditions, social issues, and technological aspects, Sears may improve its competitive advantage in the marketplace.

Political Landscape

Some political realities that must be taken into account for business operations include trade quotas and restraints, industry subsidies, investment incentives, trade agreements, economic treaties, and bureaucratic processes. Each factor plays a major role in business processes and profitability. The majority of Sears merchandise is manufactured overseas (Sears, 2010), leading to an increase in operating costs. When fuel costs increase, the cost of transporting goods increases as well. Sears depends on political stability in the countries in which its suppliers operate; therefore, it is paramount to monitor the economic climate in those regions.

Sears' management has focused attention on merchandising in overseas markets through its brand management division. Sears Brands Management Corporation specializes in developing overseas business for the export of Sears-branded products such as Kenmore appliances, Craftsman hardware and lawn and garden tools, and DieHard batteries. This focus on globalization shifts much of Sears' home appliance product line toward major overseas markets.

Economic Conditions

Retailers depend on the purchasing power of their customers, and when economic conditions are unfavorable, customers feel the adverse effects in terms of disposable income and creditworthiness. Such changes reduce their ability to purchase the large-ticket items that comprise a large portion of Sears' profits. Other economic indicators that affect Sears include consumer spending propensity, unemployment, price indexes, tax rates, consumption patterns, gross domestic product trends, and interest rates. The company's ability to plan equitably across generations and cultures has fostered new development in globalization for the retailer.

The retail industry is a seasonal business subject to uncontrollable factors — such as poor climate conditions — that affect sales. Moreover, Sears depends on economic stability in the United States and in other countries because of the direct correlation to consumer spending. The current state of the economy has caused Sears' sales to decline. Problems include understaffed stores, poor signage, closed cash registers, inconsistent inventory, and uncompetitive pricing. In 2008, Sears recorded its first gain in market share in over a decade (New York Times, 2011). Today, U.S. consumers may have very little disposable income, and credit criteria have become more stringent, making it difficult for consumers to obtain the financing needed to purchase higher-priced items. Consequently, Sears operates its own credit card through Citigroup, offering a variety of benefits to the consumer.

Conclusion

The evaluation of Sears' political landscape, economic conditions, social issues, and technological aspects provides insight into the company's strategic vision to meet the challenges of the future. One aspect is not more important than the others. Careful evaluation must be conducted to ensure the best possible competitive advantage in the market. By leveraging the strength of its size in name recognition, scope of products and services offered, and the international nature of its supply chain and sales, Sears can capitalize on growing globalization trends.

Its innovative use of e-commerce is part of Sears' plan to integrate technology into its operations, increasing its customer base and offering products with greater convenience than ever. Delivering these services has not diminished Sears' commitment to the environment and community; however, the company must improve customer service levels or risk losing goodwill. Finally, Sears utilizes the diversity of its workforce to promote a corporate culture of acceptance and recognition of superior performance, holding true to its corporate vision of "improving the lives of our customers by providing quality services, products, and solutions that earn their trust and build lifetime relationships" (Sears, 2010).