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Kmart Case Study

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Kmart Case study

Introduction

From modest beginnings in Burwood East, Victoria, in 1969, they created a promise of an affordable lifestyle for all Australians. It was the beginning of a well-known Australian brand that has transformed how people purchase goods in Australia and New Zealand. They currently play a vital role in over 300 communities. Today, Kmart serves millions of consumers annually via its more than 300 shops spread across Australia and New Zealand. Every time a customer buys, they want to improve the shopping experience by offering cheap pricing for life in every store, on every aisle, and online.

Vision and mission statement

The vision of Kmart is to provide affordable, everyday goods to families. They do this by operating efficiently, selling a lot of stuff, having adaptive stores, and having a fantastic culture. The company's mission is to better the lives of its clients by offering high-quality services, goods, and solutions that gain their confidence and foster long-term partnerships.

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Industry structure and economic feature

In Australia, there are over 140,000 retail establishments, which provide 4.1% of the country's GDP and 10.7% of all jobs. The retail sector displays a lot of variation in terms of firm size, geographic location, retail format, sector-level rivalry, and the types of items supplied. Longer-term trends and the trading environment right now are both difficult. As customers have been saving more of their growing salaries and shifting their spending more and more into a variety of non-retail services, the growth of retail sales has been trending downward over the previous five years.

Due to Australia's high rate of urbanisation and expanding e-commerce market, online retailing is one of the distribution methods that is expanding the fastest in the nation. The unexpected COVID-19 epidemic has fuelled its expansion in 2020. The internet distribution channel had a considerable increase throughout the research period. Lockdown measures and other factors, such as strong payment gateways, new omnichannel practises like click-and-collect, and faster delivery options like same-day and one-day deliveries for most product categories, including electronics and a few health and beauty products, have helped the segment see more transactions in 2020. The pattern is expected to persist over the projection period, and merchants have already begun concentrating on improving their distribution and digital payment capabilities.

Corporate and business level strategies

Kmart significantly improved its marketing and public relations efforts. The major adjustment was to refocus the brand so that it now primarily targets women, and moms in particular, as opposed to having a wide "everyman" appeal. One of their most effective marketing techniques is substituting a variety of popular pop tunes for a corporate jingle in their television ads. The most surprising development for Kmart has been the positive feedback its new home goods and clothing brands have gotten on social media. Websites, Instagram accounts, and Facebook groups dedicated to "Kmart hacks" and "shelfies" are multiplying, and many Australian women are eager to display their own home styles and DIY makeovers made using Kmart items.

One of the primary objectives was to create a "back to basics" product line that was more narrowly focused and more streamlined. This strategy led to a drastic decrease in product lines, which were cut from 50,000 to only 12, 000. The first to depart were many of the major names, which were then replaced by Kmart's own private labels. By streamlining some parts of in-store merchandising, stock management, sourcing, and shipping, the product selection was also simplified. The largest adjustment was Kmart's switch to a direct-sourcing approach, which reduced the number of suppliers it works with by eliminating the middleman and communicating directly with producers. Kmart has many low-cost sourcing connections with producers in countries including Bangladesh, China, and India. Kmart's switch to a business strategy that avoids using local wholesalers for imported goods has been a huge success, and other retailers are now keeping an eye on it.

Competitive analysis

  1. Existing competitive rivalry:The degree of competitiveness in the sector is really high. This is due to the large number of competitors competing in comparable product categories.
  2. Threat of new entrants:Along with the expense of operations, starting a new firm in the sector requires a significant amount of cash. Additionally, it might be challenging to build lasting, friendly connections with suppliers and distribution networks. As a result, the risk is minimal.
  3. Threat of substitutes:Shopping directly from brand outlets for a specific product as opposed to going to such retail establishments with a wide selection of goods to choose from may be regarded as the primary replacement for this kind of company. The risk is, however, minimal since the business also has an online presence.
  4. Bargaining power of buyers:Buyers' negotiating power can be seen as considerable. This is due to a competitive market that is oversaturated with both online and offline competitors. Additionally, switching costs for customers are almost non-existent.
  5. Bargaining power of suppliers:The company relies heavily on suppliers to provide clients with high-quality goods. The organisation is not dependent on just one supplier since there are several suppliers spread throughout the globe; therefore, the negotiating strength of suppliers may be moderate given the switching costs involved.

SWOT Analysis

Strengths:

  • A high reputation, dating back more than 50 years, and knowledge accumulation.
  • A vast logistical network is made up of retailers, distributors, and other ancillary services.
  • A variety of efficient physical and online marketing and communication methods
  • Early implementation of a programme for social business responsibility
  • A strong clientele with a unique community and culture.

Weaknesses:

  • Low-cost approach results in low employee salaries.
  • Poor working conditions.
  • Previous financial difficulties included issues with pricing competition with other businesses.

Opportunities:

  • A favourable outlook for the labour market will increase discretionary income.
  • Stable expansion in the retail industry.
  • Free trade agreements with other nations, particularly the CPTPP.
  • An increase in online consumer interaction and shopping.
  • Movement toward healthier and more ecologically friendly goods.
  • Permeation of markets abroad.

Threats:

  • Economic downturns in China and other trade partners of Australia.
  • Trade disputes and political hostility between the US and China.
  • The increase of terrorism worldwide.
  • There is a lot of rivalry in the market.
  • Consumers worry about privacy and moral corporate conduct.

PESTLE Analysis

  • Political Factors:Australia's political landscape has remained remarkably consistent. Strong legal systems serve as the cornerstone of the nation's judicial system and guarantee of individual freedom. Additionally, the nation presents itself as a close ally of the United States, particularly in terms of defence and economic cooperation. Due to the fact that China is Australia's largest economic partner but the United States is its strategic ally, Australia has suffered greatly as a result of the trade war between the two giants. This leaves Australia in an awkward position to manoeuvre between the two.
  • Economic factors:In terms of the economy, it is anticipated that global economic growth will reach 2.8 percent in 2021 after stagnating in 2019 at an expected 2.6 percent. However, there is a persistent upward trend in global retail sales, with a growth rate that increased from 2.2% in 2012 to 3.4% in 2018. The total value of global retail sales is expected to reach $4 trillion by 2019. It is thought that the retail sector would strengthen due to strong employment growth and rising disposable income. More than 65% of the top 250 largest retailers in the world—those with annual revenues of at least USD 3.7 billion—operate on the global market.
  • Social factors:Data from the World Bank shows that Australia's population grew by 1.6% in 2018. 18.8% of the population was under the age of 15, more than 65% of the population was of working age, and only 15.7% of the population was above the age of 65. Millennials and Generation X, who are more internet-aware and have a propensity to spend more freely on personal leisure, have replaced Baby Boomers as the primary consumers of enterprises. Australians pay greater attention to the ethical element of companies, and they are more prepared to spend more to purchase from and promote firms with an ethical reputation.
  • Technological factors:According to KPMG International's Global Retail Trends 2019 research, merchants are shifting toward offering highly individualised services to their clients in 2019. In order to automate the purchasing process, new technologies like speech recognition and chatbots are also used; these procedures have become commonplace and are well-liked by consumers. Additionally, retailers are using social media to promote their brands, interact with consumers, and direct people to their online stores.
  • Legal factors:Australia's cybersecurity legislation has been stricter in 2019 due to the surge in worries about cyberattacks such as identity theft, internet fraud, and credit card fraud. Consumer concern about the use of their personal data has raised the issue of privacy. The Fair Work Act, which was enacted in 2009 and outlines the basic rights for Australian workers, including the minimum income, leaves, and other working conditions, is another example of Australia's severe labour regulations. These constraints can create difficulties when Kmart works to reduce expenses in order to lower its pricing.
  • Environmental factors:In recent years, consumers have sought to reduce their carbon footprint and environmental impact by emphasising green buying. Retailers are under increased pressure to use less plastic in packing and shipping, so many of them are experimenting with cotton, paper, and other eco-friendly materials.

Marketing Mix

  1. Product:Kmart provides a wide range of consumer goods, including furniture, electronics, accessories for apparel and cosmetics, and sports and party supplies. Seasonal product categories include those for the holidays, presents, and parties. Due to the fact that most of Kmart's merchandise is household-related, women, married couples, and those in lower and middle-income brackets make up the bulk of its clientele.
  2. Price:Kmart has always positioned itself as a cheap retailer, seeking to provide common items to consumers at the lowest possible cost. Even better, it guarantees to match costs for the same or related items offered by other businesses. Kmart also creates and markets its own in-house brands to further reduce costs for customers.
  3. Promotion:Kmart uses both retail and internet marketing strategies. The business manages its online contact and client involvement well, and it has a highly successful Facebook fan page with more than 100,000 followers. It also strengthens its presence on other websites, such as YouTube, where it has around 9,000 subscribers, and Twitter, where it has about 200,000 followers, for example. Kmart follows current trends in internet marketing, including the use of hashtags, influencers, popular videos, and online coupon and sale programmes.
  4. Place:More than 200 Kmart locations may be found in Australia and New Zealand. It does business for the worldwide market under the brand name "Anko" in a number of countries, including the United States of America, Thailand, and Indonesia, among others. In addition, the firm offers services for buying online, including shipping services both inside and outside the country.

Problems and Issues in Kmart

There have been three different CEOs at Kmart in the previous seven years, and each of them has their own plan for turning the firm around. This has caused the top management at Kmart to be like a revolving door. Not only does this management style and shifting direction confuse consumers and workers, but it also shakes up the cultural basis on which a successful organisation is based.

Financial analysis

The Kmart Corporation has already started the bankruptcy process. Although a "liquidity" issue was given as the reason for Kmart's decision to seek protection under the bankruptcy laws, the fact of the matter is that the company has not been profitable for an extended period of time (several years). The decline in same-store sales, a high operating structure as a result of a lack of technology, and a high overhead structure as a result of carrying leases on "dark" or unoccupied stores as a result of poor business decisions made in the past are the primary contributors to the poor profit performance.

Conclusion

Kmart as a company, although having a significant historical presence, is a thing of the past since the company is no longer a going concern as a result of Kmart filing for Chapter 11 bankruptcy in 2018 under the ownership of Sears Holdings.

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