In this assignment help you will get company failure analysis of
Enron
United Airlines
Kmart
Three companies that declared bankruptcy during the last ten years are
listed above. Choose one of these and find information about the company on the
Internet. Clearly identify the main failures of planning and/or environmental
scanning, and analysis that gave rise to the situation,
which caused the company to declare bankruptcy. In hindsight what might they
have done differently?
Failure of Kmart
Kmart Corporation was the third
largest discount retailer in US market. Due to huge debts and erosion of
consumers’ confidence, Kmart filed for bankruptcy in 2002 (Probst & Raisch,
2005). According to the
assignment help experts followings are the main factors that were responsible for failure of
Kmart planning’s.
Less
efficiency of Supply chain management: Behind the bankruptcy of Kmart, the
main contributor was an inadequate management of its supply chain that unable
the firm to manage the demands of customers and supply of required products effectively.
Its competitor Wal-Mart focused on customers’ requirement and better supply
channels, which enabled Wal-Mart to provide its products to customers timely.
On the other hand, Kmart followed traditional approaches in its supply chain
that reduced its ability to manage ups and downs in demands of its products (Konicki,
2002). Therefore, the shelves of Kmart’s stores’ were empty, but the stockrooms
were piled up by products that grew the inventory cost and declined profits of
Kmart.
Lack of IT systems: Behind the failure of
Kmart’s planning, lack of IT systems were much responsible. Wal-Mart and other
retail players were investing huge money for adapting advanced technology to
predict the potentiality of retail markets and for sending important
information regarding to customers and markets within organization. But, Kmart failed
to adopt advanced technology due to the investment of huge money that also reduced
the competency level of Kmart (Hays, 2002)
. With the help of advanced technology and cooperative
relationship with suppliers, Wal-Mart was saving huge amount on the delivery of
products at its retail stores, whereas, Kmart was expending more money to manage
its supply-chain systems that was major cause in the lack of its profitability (CNN
Money, 2002)
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Greater
Competition: Due to use of advanced technology, Wal-Mart provides low-cost
products to its customers that increased the level of competition in retail
market. Due to its effective supply chain structure, Wal-Mart was able to make
attractive demands for its products that also helped to deduct the cost of
transportation along with inventory (Lehavy & Udpa, 2011). But, Kmart failed
to predict importance of technology aspects, which caused failure of its
discount business planning and raised bankruptcy factors.
Less
effective marketing approach: Due to lack of information regarding to the
prediction of customers’ needs and wants according to market competitiveness, Kmart
and its retail store’s employees was also unable to create positive environment
for its products as like Wal-Mart and other competitors (CNN Money, 2002). Kmart’s
stores were not make an effective communication with its customers related to products
and its timely availability at the place of stores that effectively reduced the
impact of its marketing planning and caused bankruptcy.
Volatility
of capital market: Due to changing scenario of business environment and
greater impact of economic recession, Kmart was not effectively managed its
business operations that affected the flow of organizational liquidity and
increased its debt also (Lehavy & Udpa, 2011). Therefore, most of Kmart
stores were in loss that reduced its profit margin and increased its liabilities,
which was also an impressive reason for its bankruptcy.
Price
leadership strategy: Kmart was focusing on price leadership strategy and
quality products that effectively reduced its competitive capability along with
the image of its products. Therefore, Kmart was not able to provide low-cost and
high quality products to customers as like Wal-Mart, which dramatically created
grounds for the elimination of Kmart form retail markets (Probst & Raisch,
2005). It was also responsible for the bankruptcy of Kmart.
Recommendations for
Kmart’s leaders
assignmenthelpexperts.com provide the following recommendations for Kmart’s leaders should use restructuring process in its
business operations. The first stapes of this process would include redefining
strategies related to information technology systems. Through which, it will
reconstitute its supply chain that can help to reduce overall labor cost. After
that, leaders must evaluate the productivity, profitability and lease periods
of its stores by which they can save extra expenses and can invest in other operations
(Sears Holding Corporation, 2008). In the next steps, leaders should focus on
the reduction of its annual expenses and they can reduce these expenses by
reduction in staff, offices and closings of some Kmart retail centers, which
will improve its marketing efficiency and reduce debts significantly.
After this, it should change price
leadership strategy that will help to earn extra profits (Gartner, Inc., 2004).
The last step w
ould
consider the modification of its merchandising and marketing strategy, which
helps to offer exclusive brands of products in discount market to create
differentiation from competitors. So, this process can help in getting
significant
position in
retail discount market and to make huge profits for Kmart organization.
References
Lehavy, R. &
Udpa, S. (2011). Kmart: Predicting Bankruptcy, Fresh Start Reporting, and
Valuation of Distressed Securities. Issues
in Accounting Education, 26(2), 391–419.
Probst, G. &
Raisch, S. (2005). Organizational crisis: The logic of failure. Academy of Management Executive, 19(1),
90-130.
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