Analysis of Kmart

The purpose of this report is to answer a series of questions regarding the status of Kmart, a ubiquitous American discounter that has fallen on hard times in recent years. Yue (Summer slump getsa, 2002) reported that this Troy, Michigan-based company filed for Chapter 11 bankruptcy reorganization on January 22, 2002. Kmart shoppers and employees and industry experts are divided on the question of why sales are not higher despite efforts to improve the firm's image, merchandising, inventory programs, and store design.

Kmart, despite its current financial situation, is the nation's number two discounter, behind competitor Wal-Mart and slightly ahead of Target (Target's aima, 2002). For many years, Kmart was the leading discounter in America with a presence in virtually every American city or town of any size. Recently, Moin (2002) noted that Kmart's declining sales revenues have led to the bankruptcy reorganization as well as store closings, downsizing at headquarters and distribution centers, and the development of a new strategic company business.

Currently, Moin (2002) stated that Kmart is a $36 billion company. However, shoppers continued to abandon Kmart during the summer of 2002, choosing other stores for frequently purchased items and leaving the retailer with a $377 second quarter loss and double digit declines in sales (Yue, Summer slump getsa, 2002).

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described above. At the corporate level, Chief Executive Officer Jim Adamson identified a number of specific moves as part of the company's reorganization; it should be noted that these strategic and organizational shifts are what is needed at both the corporate and business levels of strategy to return Kmart to a viable position in its market. The moves are: Closure of 283 underperforming stores Elimination of 400 headquarters jobs and 100 currently open positions Phasing out of 130 contract positions A staffing cost reduction of $66 million for 2002 and $130 million annually thereafter Elimination of low-priority projects and the consolidation of workloads Development of new brand alliances (e.g., the Joe Boxer line) Enhanced efforts in ethnic marketing and the development of advertising circulars and media advertising in Spanish language Creation of ethnic clothing lines targeting both Hispanics and African-Americans, who together constitute Approximately one-third of all Kmart shoppers (Howell, 2002). Kmart is apparently relying on new marketing programs, brand-focused differentiation, and possibly a new store design to regain shopper loyalty and return this company to its former status as a growth-oriented and p

Category: Business - A