“Sears Holdings”, a household name as we all know it has gone through many ups
and downs. Starting from the days they were individual companies (Sears and
Kmart), they struggled to stay afloat and remain competitive in the retail
industry. Sears was founded in 1886 by Richard W. Sears and Alvah C. Roebuck,
and it later merged with Kmart corporation in 2005 and they formed a new name—
“Sears Holdings”. The company now operates
through its subsidiaries, including Sears, Roebuck and Co. and Kmart
Corporation, with full-line and specialty retail stores across the United
States.” (searsholdings.com, 2017). Amazon on the other hand, a company known
for its online retail presence and its large collection of data from its
customers activities has for many years been doing well financially. Amazon and
Sears Holdings struck a deal dubbed Red Ocean strategy, that allows Sears to
sell its Kenmore appliances through Amazon. The deal was supposed to allow the
syncing of Kenmore gadgets with Alexa to allow customers the ability to control
their gadgets with the use of voice activated commands.
A situation where all Amazon, Sears,
and Whole Foods come together to do business as one entity is a very good idea.
Amazon happens to be a retailer that strived in the artificial intelligence
era. Just about everything Amazon does is designed to rake in data so that its
artificial intelligence can target and serve every Amazon’s individual
customer. Amazon has about 300 million users. Amazon knows a lot about its
customers and potential customers. Therefore, with the plan for Amazon do
business with Sears and Whole Foods, it all companies will benefit from the
artificial intelligence and the amount of data they can potentially capture
about their customers. Whole Foods, on the other hand will help the new
business learn about organic product consumer sector. Sears, equally will
provide its customer service expertise as well as the household name products
they are known for. Overall, this is a win-win for everyone involved.
Can Amazon avoid the same mistakes
that Sears made? The answer is dependent on how management of the new entity
handle its strategic decisions. Some of the issues that troubled Sears was its
assets. Sears’ tangible assets value in terms of real-estate exceeded its
market value by close to 50%. The extensive competition from other retailers
was one of the most significant threat to Sears Holding. Most notable are the
likes of Walmart and even Kmart. The pressure was so big that it caused sears
to apply some strategic survival measures. One of those strategic decisions
include the merger between Sears and Kmart. In an article from the Harvard
Business Review, Sears applied a PESTEL analysis from data it collected from
about 800 stores called “employee-customer-profit chain—model shows that a
5point improvement in employee attitudes will drive a 1.3-point improvement in
customer satisfaction, which in turn will drive a 0.5% improvement in revenue
growth. If we knew nothing about a local store except that employee attitudes
had improved by 5 points on our survey scale, we could predict with confidence
that if revenue growth in the district as a whole were 5%, revenue growth at
this particular store would be 5.5%.” (Rucci et al. 1998). With the result of
this analysis, the company realizing the need to improve employees’ attitude.
“We used Porter’s Five Forces analysis
to analyze the level of competition within the department stores industry
(GICS). This framework allowed us to analyze competition within the industry
and revealed what these firms must do to generate a profit. To analyze the
retail industry, we used J.C. Penney (JCP), Kohl’s. These companies are Sear’s
closest competitors in terms of revenue, products, and target-market. The five
firms (the representative firms) we chose are assumed to be indicative of
industry trends for our analysis.” (Chanon et al. 2015). Some of Sears
competitors include Kohl, Macy’s, JCPenney, and Walmart who is now biggest
retailer in the US. JCPenney as one of Sears’ competitors is another company in
turmoil. It has gone through several transformations, both in looks and in
processes, but appears JCPenney is the more preferred brand to Sears by
customers. Macy’s and Kohls have also gone
through several transformations. But it seems they are now more stable than
Regarding Sears Holding’s current
business-level or positioning strategy, “preliminary fourth quarter 2016
operating results represent significant year-over-year improvement. Launches
comprehensive restructuring to streamline operations, targeting at least $1.0
billion in annualized cost savings in 2017. Right-sizes asset-based credit
facility, creating an incremental $1401 million in liquidity. Plans to reduce
outstanding debt and pension obligations by at least $1.5 billion, utilizing
proceeds from recent transactions and operational improvements”. (Sears
Holdings Corporation, 2017). Sears has embarked on a cost reduction strategy.
They are also modeling “more agile, asset-light and innovative retailer focused
on member experience”. (Sears Holdings Corporation, 2017). Furthermore, to help
drive profitability, Sears Holding plan to “Capitalize on valuable real estate
through potential in-store partnerships, sub-divisions, and reformatting to
support our Integrated Retail model; and Continue to evaluate strategic options
for our Kenmore and DieHard brands and our Sears Home Services and Sears Auto
Centers business through partnerships, joint ventures or other means.” (Sears
Holdings Corporation, 2017).
Amazon, Sears and Whole-Foods have one
thing in common other than just doing business for profit–They equally have
the same major competitors right like Walmart and Target. Out of the 300
million Amazon customers, about 20 percent of them purchase goods from Amazon at
least once a week. While Walmart is familiar with stores
than all other retailer, Whole-Foods knows more about organic products, and Amazon
is more familiar with people.
The new organization should either deliberately determine its market
positioning Strategy. This must come first. They can then watch the market and
determine whether they should let their positioning strategy happen
organically. There are some pros and cons of choosing either of the
above-mentioned positioning strategy. For this reason, my advice is for the new
organization to start off with a deliberate positioning strategy that they can
easily control based on the amount of data they have collected from Amazon and
the entire feasibility study. They equally must know and plan to let the market
decide what action to take whenever there is a market shift. It is imperative
for the new brand to have something they stand for, both short and long term
set of values. All this will help determine how the new organization will
strive in terms of longevity.
The mergers/acquisitions have a lot of implications in the future
of retail and the entire food industries. The fact remains that Whole Foods and
Sears Holding need help, while Amazon is in need of food and urban and food real
estate exposure. Food delivery services is now a trend in the food/retail
industry, and this is what Amazon is trying to capitalize on. The new business
is a terrifying situation for its potential competitors. Another fact is that
the acquisition by Amazon does not only affect the potential sales increase, it
also bought all upper-income and prime-location distribution nodes that whole
foods has. There is also the potential for additional international market
expansion, even though very slim. But if the expansion extends to Europe, then
it will be a lot easier to maneuver, but they must establish local retail hubs
around the continent while taking further advantage of the delivery market
share that Amazon currently has.
As Sears continues to struggle to remain profitable, sales are
getting lower, they have been making series of bad management decisions, and
they have not made good attempts to improve their strategies with regards to
branding, and the stock price is also declining. Sears continue to struggle. It
is closing hundreds of its stores across US and Canada. Their stocks are sold
at discount rate, and many experts have dubbed the company as a company that is
going to fail within the next year or so. Sears are no longer the leading
retail outfit like it used to be, due to fierce competition and poor strategic
decisions. Amazon, whole-Foods and Sears Holdings have struck a deal dubbed Red
Ocean strategy, that allows Sears to sell its Kenmore appliances through
Amazon. The deal will also allow the syncing of Kenmore gadgets with Alexa.
This will allow customers to control their gadgets with the use of voice
Mission Statement: We strive to optimize our home delivery
business and ensure customer centricity around the world.
New Vision: To become
the world’s leading commodity sales with agility and excellence.
To achieve our newly created vision and mission, we must implement
the following align our business with courier services company like FedEx or
UPS to ensure safe and swift delivery of our goods and services to our
customers world-wide for a very minimal shipping fee. Another strategic
activity would to have instore locations of selected courier service. These
strategies will give the business a greater market share and as well set the
business apart from our competitors because we are now taking the business to a
There are a few reasons why my strategies are Blue Ocean strategy
as opposed to Red Ocean. First our new strategy focuses on attempts to increase
the size of our business by attracting new customers who have never purchased
from our type of business. Second is that we are competing in an existing
market, that is that we strive to maximize our value while reducing cost.
Fourth, because we intend to go global, we intend to reach customers who would
never have thought about buying from us. Fifth reason is that we intend avoid
turning the ocean red again we excessively aggressive strategies. The sixth
reason is that we plan to align our organization with other organizations that
have the same focus of cost reduction.
The new deal with
Whole-Foods and Amazon didn’t just happen from out of the blue. Amazon has been
testing this type of initiative with brick-and-mortar organizations for the
past several years. The new business must maintain the existing individual
structure but still utilize the business model that involves technology and online
retailing. It is also imperative that they maintain a centralized management
strategy. This will ensure that the policies are set the same way across the
board while putting into consideration some of the differences as it applies to
different localities. It will ensure unbiased work allocation, promote flexibility,
and reduce duplication of effort. On the contrary, the centralization strategy
could potentially encourage dictatorship, limits creativity, communication and
flexibility. But with a culture built on transparency, some of these negatives
can be avoided.
Jeff Bezos is the
current CEO of Amazon and working with Daniel P. Huttenlocher, the current independent
director of for Amazon. Currently, Eddie Lampert is the Chief Executive of
Sears Holdings. Other senior management team include “Robert A. Riecker, Chief
Financial Officer; Julie Ainsworth, Chief People Officer; Leena Munjal, Senior
Vice President, Customer Experience and Integrated Retail; Robert Naedele,
Chief Commercial Officer, Shop Your Way; and Dean Schwartz, President,
Hardlines”. (searsholdings.com, 2017). With Jeff Bezos leading this
organization, there is no doubt that with his experience and longevity at Amazon,
the new organization will certainly position itself strategically to succeed.
Amazon is undoubtedly the king of ecommerce. Between
November 2014 and November 2015 it made more than $71 billion in online sales
alone. This is more than its top ten competitors like Walmart Costco etc. combined.
With this type of numbers, they should set their yearly sales budget to 2 times
the sales from the previous year or three times that of its top ten
competitors. The financial impact of this new business is huge. It will make
their competitors to sit-up. I would like to however, mention this point that “Including
about $153 million in expenses related to the Amazon acquisition, operating
income turned negative at Whole Foods in the September quarter. Excluding those
costs, Whole Foods turned in about a 2.5 percent operating margin in the
quarter. That is skinny by Whole Foods standards but rather nice by Amazon
standards. In its September quarter, Amazon’s operating margin was 0.8 percent.”
As technology continues to evolve, this new organization will grow with
it through strategic planning and innovation. Artificial intelligence is working.
We can see how it worked for Amazon. The organization should expect about a 25%
growth within the first year, and about 40% in the second year. My excitement about
this organization includes the presence and growth of Alexa—a virtual
assistance gadget created to enhance lifestyle. Amazon Go is another one – a
new type of store designed with no checkout required. Enhanced delivery network
of products of all kinds will help the growth of the organization’s bottom line.
Finally, a reduced training time facilitated by the new Amazon Web Services, a
new form of artificial intelligence (AI) service that can recognize texts
images facial identification and translate them into lifelike speech, and
thereby reduce training time for several applications. With all these, new jobs
will be created as well.
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