Free «The Rise and Fall of Kmart» Essay Paper

Content

This research paper seeks to trace Kmart’s rise and fall. The research will give a brief history of the Kmart and its current state of operation. The paper will also identify any existing challenges, faced by the corporation and suggest possible solutions. It will further give the corporation’s strategies of dealing with future challenges. In addition, HR related issues would also be deliberated on to give a clear view of the department’s existing problems and feasible remedies. In the same breadth, this research will tackle issues, affecting employee performance in the corporation, majorly the turnover and remuneration. Finally, the research will also give an insight of ways of improving the production and project discharge by the organization. This study is particularly essential because it analyzes the strengths and weaknesses of Kmart Corporation, and additionally, makes suggestions on improving its performance. Scholars have more or less agreed about this topic; thus, the paper argues for a better interpretation.

Methodology

A comparative case study is the methodology, utilized in this study. The utilization of the comparative case study is because of abundance of information, elaborating on the topic of discussion. In addition, by looking at past researches on the topic of discussion, this research ascertains various opinions made, concerning Kmart operations and ways of improving it to enhance its competitive power. Thus, reliance on past researches provides satisfactory information vital in addressing the topical issue.

 

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Research Findings

Introduction

Kmart came into existence approximately 100 years ago, when Sebastian Spering Kresge launched a Five-and-Dime Store. Detroit was the location of the first store that offered goods at a discount rate. Continuous improvement and expansion of the business to different geographical locations led to subsequent establishment of retail chain stores in different States. These chain stores sold goods at a discount; thus, attracting large numbers of loyal consumers. Later, the chain stores merged to Kmart Corporation.It was the second largest U.S. discount retailer shop by 2002, behind Wal-Mart stores. In this period, Kmart had over 2100 outlets, located in 50 states. Therefore, the corporation enjoyed economies of scales due to large and numerous retail branches across the world. As a result, the competitive power of the corporation was relatively high, raising no doubt of possible emergency of potential competitor to outdo the outfit in the retail industry (Case, 2007).

However, the corporation suffered from stiff competition in early 2002. The main cause of poor performance of the corporation was the adoption of poor management styles and policies. For example, too much diversification of its products led to high production cost. High production cost exposed the corporation to dangers of price competition, leading to loss of market share. As a result, the corporation recorded a massive decline in sales volumes, leading to lose of large amounts of revenues. Another reason for the downfall was the lack of commitment by the corporation to its core businesses, and poor strategies, employed to stifle competition (Case, 2007).

Challenges and Solutions

The corporation’s going concern was seriously challenged in early 2002 due to increased competitive pressure that dominated in the retail industry. The major competitor, at that time, was Wal-Mart, which sold a diversity of products to customers at relatively cheap prices. Despite the looming competition that kept the corporation’s continuity at the verge, the managers instituted measures that helped to revive the corporation in the retail industry. The management sold all the chain stores that were operating at a loss. Disposing off the stores was a strategy, aimed at resolving liquidity bottlenecks in the corporation. In addition, the corporation’s operation in the retail industry was sustained after massive shuffle in management structures. Shuffling of managers aided in the creation of new strategies that brought in new ideas pertinent in keeping with competitive pressures. The radical surgery in management structures, innovation in retail services and maintenance of unique clientele accounts for improved performance of the Kmart Corporation. However, to date, Kmart is still experiencing challenges in the retail industry. Some of the major challenges include the following (Hill & Jones, 2004).

The major problem, facing Kmart Corporation, is increased competition from large multinational companies. It is impossible for the corporation to eradicate competition in the industry it is operating. This is because the other players are constantly making counter moves to enhance their competitive power. Competition in the retail industry is even stiffer because of existence of large companies that are enjoying economies of scale. For example, Wal-Mart, which is the largest corporation in the retail industry, offers its goods at lower prices. Thus, Wal-Mart is wooing more customers relative to its competitors. Therefore, competition remains one of the great challenges, facing Kmart in the retail industry (Hill & Jones, 2004).

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Since it is difficult to eradicate competition, there are many ways of mitigating the adverse effect of competition on the corporation. First, the corporation should invest in improvement of its customer service by making sure that consumer needs are given priority. Enhancing customer service creates a customer’s loyalty towards the corporation goods. For example, when a customer places an order for the goods, he should get them in the shortest time possible. This is only possible if the corporation invests in a computerized system to enhance efficiency in searching and distribution of required goods to the customer. An enhanced customer service not only builds customer’s loyalty, but also increases the corporation’s profitability through increased sales (Case, 2007).

Second, Kmart Corporation can significantly enhance its competitive power by addressing pricing issues. The current pricing model is inefficient in addressing price competition. As a result, the corporation loses its competitive power due adoption of poor pricing mechanism. However, for the corporation to lower their prices below the level, offered by Wal-Mart, it has to improve its production efficiency. This is because Wal-Mart prices are extremely lower, as it has achieved efficiency in production. Thus, the firm should enhance its production efficiency and charge a price slightly higher than the cost of producing one unit of a given commodity. Otherwise, the firm will lose the market share if they charge very high prices, or make loses if they charge a price below the cost of producing one unit of a given commodity. Therefore, the corporation can only solve the competitive pressures by embracing modern production technologies. Advanced technologies will enhance the production efficiency there by reducing the production cost (Case, 2007).

Another problem of Kmart Corporation is the lack of enough goods and services in the stores. This is a very critical problem, affecting the Kmart Corporation. When goods run out of stock, it threatens the corporation’s profitability due to forgone sales. In addition, lack of enough goods forces customers to look for alternative sources. As a result, the customers may express dissatisfaction, which forcing them to quit from the corporation’s services in favor of the competitive firms. In some cases, the customers may discover amazing offers in rival firms that make them never come back. Lack of enough stock in the Kmart Corporation has mainly resulted from inefficient inventory management, incompetent production, and poor forecasting of customer’s demand. Therefore, lack of enough inventories can be resolved through the following measures (Case, 2007).

First, the corporation should employ qualified expert who will be responsible for making demand forecast. This will avoid cases of out stocking due to increased demand for goods and service in the future. Thus, efficient demand forecast is essential to the planning process of the amount of goods and services the corporation should produce and at that time. In addition, enhanced demand forecast is beneficial in the minimization of stocking cost. This is because the corporation will only produce the amount of goods and services, needed at a particular time. Hence, cost of stocking, associated with damage, expiring, and loss of goods is highly minimized (Case, 2007).

Second, the corporation needs to improve the inventory management system. Proper store keeping principles should be observed, and vital policy should be instituted to ensure that the store keeping meets the corporation’s objectives. Efficiency in stock management requires computerized system, and hiring of qualified personnel to manage the stock system. Therefore, to achieve best results Kmart Corporation should institute radical changes through intensive computerization of the whole system. This will provide up-to-date data on availability of various goods and efficient mechanism of increasing the clientele services (Case, 2007).

Finally, production efficiency needs should be addressed to ensure availability of goods at all times. Kmart Corporation should invest in upgrading the production system that is flexible, according to the amount of goods, required at the current period. This is because the current production system is not efficient. For example, the production system is not responsive to the market demand; thus, it cannot produce goods, wherever they are required. As a result, increase in anticipated demand will lead to lack of enough inventories to support the high demand. Therefore, the corporation should consider introducing Just-In-Time production system (JIT). JIT is a production technology that favors production of goods at the time they are required. This production system has minimum cost, resulting from wastage, and ensures that the market demand is always offset by the required amount of supply (Case, 2007).  

Meeting Foreseeable Challenges

Economic forecasting is an essential part in any survival of a corporation or business. Business growth is only attained through a thorough examination and setting of realistic goals to be attained by the organization at a given time in the future. Thus, for the organization to realize its visions, it should set aside resources, necessary for accomplishment of its goals. In the context of the Kmart Corporation, the following are the foreseeable challenges.

The retail industry in the future will experience rapid technological innovations. There will be cutting-edge technologies in production of consumer goods. The quality of goods that will be offered in the future will be of a high standard due to enhanced innovation in production. As a result, Kmart Corporation should set aside some resources that will help bringing in a smooth transition from inefficient technology to advanced technology. Some of the resources include hiring of experienced personnel, responsible for managing the organization’s operations in the future. Another resource is financial resources necessary for purchasing machinery and equipments that will be used in transformation of production factories, to meet the needs of the new technologies (Case, 2007).

Another challenge that will arise in the future is globalization in the economy. Globalization leads to the formation of the digital world that will create convergence of the consumer taste and preferences. This will increase the competition among firms in the retail industry, as each firm will try to exploit the opportunities present across the border. Expansion of a global market due to increased globalization calls for review of marketing strategies. Therefore, Kmart Corporation should research on effective marketing strategies, to enhance their competitive power. The corporation’s expansion in the future is assured if it puts in place correct market mix that will make the corporation successful in competing in the new markets.

How to Manage Changes That Are On the Horizon

The economic environment is so complex and is characterized by dynamic movement of economic variables. This is the reason for existence of different business cycles in the economy. These cycles include depression, recession, recovery, and boom. Businesses in the world are forced to embrace changes in their operation to avoid the inherent risk of collapsing. As a result, companies need to foresee the tentative changes in the operation, which they should implement before it is too late to avoid unfavorable events.

Therefore, Kmart Corporation should plan properly and identify all changes that are necessary in the survival of its business operations. However, not all changes are healthy. Some of the changes if not careful thought may bring disastrous results. Thus, it is crucial for the organization to ensure that not all changes implemented are against the corporation mission. This will enhance the corporation’s commitment in meeting the needs of its customers and achievement of the organization’s blue print (Hill & Jones, 2004).  

Improved HR Related Issues

Human capital is very essential in the productivity of any business entity. It is even more crucial in businesses, where a major part of the capital outlay relies of human expertise. It is the case with the service-offering firms, investing heavily on human capital. Thus, sound policy in human resource department is paramount in ensuring that the productivity of the workers is amplified significantly. Therefore, Kmart should not be left behind in the enhancement of the productivity of their workers. The corporation should implement the following measures for better results in their human resource department.

Since Kmart is a large multinational corporation with branches in over 86 states, then, it must have a complex human resource database. Therefore, for efficient management of the human resource information the corporation should ensure that there is the availability of efficient human resource information system. Human resource information system is a computerized human resources information data. In this database, the information on employees’ details is stored in the computer systems that are networked in all branches of the organization. The availability of up-to-date data, relating to employees in the organization, helps in easy access of information, relating to the employees in the organization. As a result, the corporation human resource will be in a position, to make a sound decision, regarding the hiring of new employees to replace those aging. This will ensure that shortage of the employees in the organization does not arise in the course of the organization’s operation (Hill & Jones, 2004).

In addition, availability of human resource information system also helps in adding value to the process of evaluating the performance of the individual workers in an organization. Thus, the performance appraisal of every worker is made efficient. Hence, there is a high chance of promoting only deserving worker in an organization. This will boost the morale of workers, as their contribution to the organization can be measured and receive rewards for their outstanding performance (Hill & Jones, 2004).

Another way of motivating the employees in the Kmart Corporation is by improving the hiring process. Many organizations have failed in achieving high productivity due to poor hiring policies. Hence, they end up with unqualified personnel, which are entrusted for critical organization positions. This leads to under-utilization of available resources, resulting from the inadequacy of the hired personnel in running organizational activities. Therefore, Kmart Corporation should review its hiring guidelines that must be followed in the process of hiring the employees.

Finally, to attract qualified personnel, higher reservation wage is necessary. This will win over individuals of outstanding expertise to seek employment opportunities in the corporation. Unless Kmart offer high remuneration package, it may fail to attract individual, required to spearhead its operations. In addition, poor working conditions and remuneration are cited as the main causes of high employee’s turnover. This is because when individuals never get satisfied with what they receive from the employer, and in the event of a better job opportunity, an employee is bound to transfer to a better position. Therefore, Kmart should increase its remuneration package to reduce chances of high employees’ turnover and to enhance the employees’ morale (Case, 2007).

Solving Production and/or Project Issues

The success secrets of any corporation lie in the efficiency of its production process. More businesses are becoming aware of the importance of enhanced production processes. Majority are increasingly investing in modern technologies, which have the ability to transform the production capacities of many firms; thus, lowering the costs, associated with production of goods. However, Kmart requires a much efficient production system to enable it to compete in ever challenging business environment. This is because the corporation deals with the distribution of retail goods in numerous chain stores, located in many countries. Consequently, a high level of production is required to ensure optimal inventory requirements. In addition, the production process is required to manufacture or procure goods at the lowest cost per unit. This is because Kmart is a corporation that sells goods at discounts in its large retail chain outlets (Hill & Jones, 2004).

The corporation can achieve a high level of production, while incurring minimum cost per unit if it implements the following. First, the corporation should use product focus strategy. It is a strategy, enabling the firm to produce high volumes of goods, which are not highly differentiated. Production of goods in large volumes enables the corporation to enjoy economizes of scales. As a result, the fixed cost is spread to large volumes of goods. This leads to low per unit cost of production. Product focus strategy is essential, as it does not encourage massive diversification of products. This reduces the cost, which would have been, otherwise, incurred if the products were massively customized. Second, the production process should be subjected to continuous review. This will ensure that the production process matches with the recent developments in the retail industry (Case, 2007).

In conclusion, the poor performance of Kmart Corporation is rooted in improper management of its operations. This is because, in the early times, the corporation dominated the retailing industry. However, due to lack of proper management, it was overtaken by Wal-Mart, which is the current dominant retailer. Another reason is poor marketing mix that made the corporation lose its potential customers to potential competitors. As a result, Wal-Mart became the dominant corporation in the retail industry. This is because it successfully competed for the available retail customers, leading to decline in the market share of Kmart. Finally, Kmart made a very big mistake through massive and irregular diversification. This led the corporation to lose identity; thus, the consumer loyalty towards the corporation seriously declined. This forced consumers to abandon the outfit’s services in favor of what the competitors were offering. However, if the leadership of Kmart is changed to address the above issues, the corporation is bound to increase its competitive power. This will enable the corporation to possibly compete and expand its market share, hence, its profitability.