Kmart sears case study

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The Kmart/Sear Merger of Faltering Firms

|1. Do you think this merger will fly? Why or why not. |

Yes, we believe that the merger between Kmart and Sears would fly. We believe that the merger would enhance Sear Holding’s competitiveness in the US retail market. We believe the merger would create a synergy that wouldeliminate or reduce the problems plaguing each firm individually, and as a whole promote a more effective and efficient firm.

We have based our conclusion on the use of the following model analysis:
1. Porter’s Five Force Analysis
3. Contingency Corporate Strategy

The first step of our analysis was to analyze the retail industry’s potential and challenges, as we wanted toknow whether Edward Lampert’s decision to enter the retail market was a wise investment.

Porter’s Five Force Analysis

| |Potential Entrants | |
| |High Leverage | |
|Suppliers|Industry Competitors |Buyers and Customers |
|High Leverage |Medium Leverage |Low Leverage |
| |Substitutes | |
||Low Leverage | |

Figure A.

In depth Analysis of Porter’s Five Force Analysis

Based on the assumption of the merger between Kmart and Sears, we believe that Sears Holding has a relatively attractive potential to maintain its business in the broad retail industry.

1. Potential Entrants – There is arelatively high barrier to enter the broad retail market and compete competitively against the existing retail giants such as Wal-Mart, Sears, Kmart, Target, etc. Therefore, we believe that the merger between Sears and Kmart would further exacerbate the difficulty in entering the broad retail market based on its sheer size.

2. Substitutes – There is a relatively low barrier for substitutesto gain market share from the broad retail market players.
• Niche players.
Linen and Things. Bed, Bath and Beyond – home accessories.
Safeway. Ralph’s – supermarkets.
AutoZone. Meineke. Pepboys – Auto.
• Convenience stores. 7-11, gas stations, mom and pop stores
• Malls and Shopping Outlets
• Television advertorials and shoppingguides
• Internet

3. Buyers & Consumers – The retail industry has no leverage over the buyer’s decision to purchase goods from their specific stores. Customers would have relatively low loyalty to any specific retail player.

4. Suppliers – The retail industry has a high leverage towards its suppliers, as the size of the main players can command a significant influence. As aresult, the supplier’s bargaining power is low in comparison to the buyers – retail giants.

5. Industry Competitors – There is intense rivalry among the major retail giants in the industry, but the sheer size of Sears Holdings is a significant enough to be considered as a major player to be reckoned with in the retail market. In terms of broad retailing, Sears Holdings would only be secondto Wal-Mart.

(Note: The book mentions Home Depot as second largest retailer, but they are more of niche player of hardware products for home improvement or DIY market, which is not comparative to broad retailers such as Wal-Mart, Target, Kmart and Sears.)

SWOT Analysis of Kmart and Sears Merger

|Strengths |Weakness |Opportunities...
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