K-Mart Anaylsis

Kmart's internal strengths include their current CEO Floyd Hall and their current Restructuring plan. Floyd Hall has demonstrated himself to be of great value to Kmart. He saved them from near bankruptcy in January 1996. He negotiated with leaseholders, vendors and creditors not to force them into bankruptcy in spite of the junk bond rating they had received.

Their internal weaknesses include their inability to compete with Wal-Mart on price, their image, and inability to implement goals and strategy, and their corporate culture. Kmart's image is so negative that 49% of Wal-Mart's customers indicated in a survey that they drive past a Kmart to get to a Wal-Mart. The reasons cited for perceiving Wal-Mart as better included the perceptions that Wal-Mart's prices are cheaper and that their products are better both in quality and value.

The external opportunities for Kmart are their private-label merchandise, which has improved in both quality and value. Overseas Expansion is another opportunity for all companies within the retail industry. Although Kmart has recently pulled out of some global markets and ventures, they are still active in others. Also, when they are through restructuring, they will probably have other opportunities for global opportunities.

The external threats facing them include Wal-Mart's competitive pricing strategy. Wal-Mart will not be undersold; they will beat any price by 5%. Wal-Mart also has such strong supplier relations they are able to stronghold them into lower prices.

Industry Analysis

Identifying Competitors and Market Shares

The discount retail industry consists of several segments: full-line discount stores, specialty discounters, warehouse clubs and others. There is overlapping for any store between the different segments. For the purpose of this analysis we examined Kmart in the general merchandise segment of the retail industry.

This segment of the retail industry grossed $253 billion in sales in 1997. Kmart currently ranks second in this segment with 12.7% of the market, which is $32,183 million of sales for 1997. The leading competitor in the industry is Wal-Mart (who is currently "America's largest revenue measured by total revenues" (1)) with 46.6% share of the market and $117,958 million in sales, which is 3.67 times larger than Kmart's sales. Dayton Hudson Corp (who owns Target and Mervynn's) ranks third with 10.9% market share and $27,757 in sales for 1997. (5)

Dominant Economic