Industry Analysis Report on Kmart

INDUSTRY ANALYSIS REPORT

Industry Analysis Report on Kmart

INTRODUCTION

Kmart is a huge vintage company that had peeked at one time and now is struggling to survive due to competition and other legal battles. This analysis report will describe and analyze the major forces that shape the structure and competitive intensity of Kmart. This report will look at Kmart's history, competitors, marketing strategies, and some legal battles that have affected the company. The shaping and structuring of Kmart started more than one hundred years ago.

HISTORY

Over a century ago, Sebastian Spering Kresge opened a small store in Detroit, Michigan and tainted the entire setting of retailing. He built this store not intending that his store would develop into an empire of more than twenty one hundred stores and an Internet presence that reaches millions of customers everyday.

The S.S. Kresge Company founded in 1899, opened its first Kmart discount store in 1962. By the next year, Kmart had opened 53 stores, on the verge of being the number one retailer. In the 1970s, Kresge began opening smaller 40,000 square foot stores in smaller towns and switched from brand name to private label goods manufactured internationally at low cost. Over the years, Kmart hurt its own development efforts by diversification into specialty retailing, which brought it close to bankruptcy. In the 1990's, the company had to sell off its Sports Authority, Borders, Office Max and Builders Square chains. A decade later in the twentieth century Charles Conaway replaces Floyd Hall as chairman and CEO. About a year after the new chairman and CEO joins Kmart, the corporation bought BlueLight.com Internet service and soon there after Kmart Corporation files for Chapter 11 bankruptcy protection due to stiff competition, corrupt leadership, and bad financial planning.

COMPETITORS

Kmart filed for bankruptcy protection, once the largest retailer ever to do so in U.S. history. Most industry analysts believe the cause of the company's bankruptcy filing was due to stiff competition from WalMart, Target, and lack of marketing strategies. Besides, when WalMart and Target predictably entered into Kmart's territory, Kmart had given its customers every reason to go somewhere else.

With more than 4,000 stores and insistent expansion plans, WalMart is a one of the strongest retail forces. Their advanced inventory management system, pull with suppliers, and thrifty corporate culture have enabled the industry giant to produce solid boundaries while offering the lowest prices. Target is also a fearsome competitor, offering fashionable items at reasonable, but not the lowest prices.

Competition is not the only source of Kmart's consistent poor performance. Another reason is that Kmart's never had a marketing strategy. Kmart needs a structure to guide its decisions in pursuit of performance objectives.

MARKETING STRATEGY

In the past, Kmart depended on the focus of expanding into rural areas where other retailers did not go. They should have focused on just being in the market, as well as protecting its geographic advantages. Nevertheless, the company continued to open new stores and bought several specialty chains, including sporting goods, office supplies, and bookstores. While buying all these specialty chains, conditions at their existing locations declined in cleanliness, service quality, and the selection of merchandise all became problems.

The marketing strategies Kmart made in an attempt to recapture market share in the 1990s proved to be unrelated and secluded events. Their first strategy consisted of converting all Kmart stores to the "Big Kmart". Big Kmart's format was larger, brighter, and the stores had more categories of merchandise. Kmart also decided to sign an exclusive deal to distribute Martha Stewart's line of products, bed and bath fashions and house paints created by Martha Stewart, the famous home and garden icon. Inevitably, the same inventory and service problems continued. Unless you have to own Martha Stewart products there still is no reason to go to Kmart.

Most recently, Kmart started to drop its prices and develop advertisements to promote the price cuts. Kmart also brought back the Blue light special, a once popular reward program for Kmart shoppers to unexpectedly save on select items. Even though Kmart had these great deals, their competitors had the advantage in the low price game, responding with further cuts Kmart could not beat later leading into legal battles and struggles

LEGAL STRUGGLES

Kmart's legal battles began with two former Kmart Corporation vice presidents that were indicted on federal charges that claim their actions inflated the company's income for part of the year before the retailer filed for bankruptcy. They were charged with security fraud,