BUSINESS MODEL INTERROGATION & DEVELOPMENT
Kmart, is a wholly owned subsidiary of Sears Holdings Corporation, a retail merchandising company which, of late, has seen a continuous decline of its market share in the Retail Industry. Kmart’s has a low cost business model and relies on the use of promotions to drive its revenue. Kmart and Sears formed a merger in 2004 hoping to realise significant cost savings, reach more customers and to reposition themselves in America’s retail industry. On January 14, 2016, Fortune.com reported that the company’s market share continues to dwindle as it closes several of its stores in the United States of America (see: http://fortune.com/2016/01/14/kmart-closing-stores/). In 2002, Sears acquired Lands End in what has been described as a poor acquisition strategy. It is believed that Sears bought the company at an overvalued price of $1.9billion. In 2013, Sears span off Land’s End despite being one of its profitable brands. (See: http://fortune.com/2015/07/27/landsend-marchionni-strategy/) Analysts believe that Sears Holdings Corporation is on a path to bankruptcy. A brief discussion of the perceived flaws in Sear’s strategic position is given below: 2 3 4 5 Source: http://www.forbes.com/sites/panosmourdoukoutas/2015/06/10/fourstrategic-mistakes-that-haunt-sears/#2d290f813b16 Annual Reports The Sears Annual reports are available here: https://searsholdings.com/invest/annual-reports. Question: Drawing on the annual reports on Sears Holdings Corporation and the articles above, evaluate the business model of the company by emphasing how its 6 product market and capital market interact to drive profit. What products does the company sell and what does it buy? You can use any known framework e.g. the Boston Consulting Group Matrix or Product Life Cycle approach to describe their product/service portfolio (product market). You are advised to focus your assignment on the financial and strategic side of the debate with a marginal focus on other business functions such as marketing or HR. Your work should also include a discussion of product portfolios, their relative profitability (or lack thereof) and that is how it may differ from a marketing or HR essay. Evaluate how the mergers and acquisition strategies of Sears have contributed to the company’s current position. You are also required to discuss the internal structures or architecture which need changing or revising as this business is on the brink of bankruptcy. In doing so, you should also discuss what you perceive to be wrong with the current business model in the light of other competition and new product developments from rivals. Finally, you should provide a few recommendations on how the company should respond to changes in its business and social environment to ensure its viability. As additional guide, always think in terms of how your critique affects the bottom line (whether from revenue or cost side). Further Guidelines: • A background to the company’s current operations and architecture would be very useful. • You should evaluate the company’s current business model (strategy operating and financial architecture) and whether it should be changed or modified. • Evaluate how the company’s business strategy affects its organisational structure. • Is the current organisational structure right for the business in the light of its business model and the changes you may propose? • Have any technological changes disrupted the business model and operating architecture (or would it impact on their model if there were such a technology)? • Think about avenues for reducing cost and/or improving quality. • Use of visual representations such as graphs/charts is highly recommended. 7 • Chapters 1, 2 & 3 of Custom Book can be a good starting place. WORD LIMIT: NOT MORE THAN 2,500 WORD This assignment is weighted at 50%. There is NO FINAL EXAM!