BUS 499 BSBA Integrative Project
Sears Holdings Corporation Causal Chains
The table above represents the summarized Balance Scorecard and strategy map for Sears Holdings Corporation complete with causal chains. The process of strategic management is complex and time consuming. Managers dealing with strategy are usually occupied with other operational issues. It is therefore possible for an organization to lay down strategy and stakeholders continue focusing on operations and meeting short term targets at the expense of the overall strategy. The Balanced Scorecard approach is a method that can be useful in not only enabling an organization create strategy but also ensuring that short term actions are focused towards achievement of the overall objective. A study of Sears Holdings Corporation reveals that strategic action plans are important for the success of any organization. The Balanced Scorecard approach is therefore a useful tool, applicable to most organizations for identifying strategic action plans.
Sears Holdings Corporation is the holding company of many subsidiaries operating in various industries including retail, clothing and home services. Towards the end of the past decade, the retail industry experienced a transformation. Some companies such as Borders and Blockbuster ran out of business and closed a majority of their stores. In part, this was occasioned by the lack of disposable income caused by the credit crunch that affected the US economy and the entire world in 2008. The other reason for this was the change in consumer trends, with customers preferring to shop from home.
The then CEO, Lou D’Ambrosio, realized that the company was facing tough times and was reported saying that if "You don't change, you die" . He was referring to the need for retail stores to realize the change in trends and therefore adjust to the change. D’Ambrosio devised a plan to concentrate company efforts on improving internet presence, improving the technical aspect of stores and training employees on how to use technology to interact with customers for feedback . The company also adopted a new employee incentive scheme that aimed at rewarding executives based on performance. It is this strategic change that helped Sears Holdings Corporation, together with its subsidiaries, survive tough economic times.
The company did manage to survive, but its financial performance continued to worsen, with a three year consecutive drop in sales from 2007 to 2009. Key ratios from the previous financial year reveal that the company had recorded a loss per share of $8.8. The latest financial data also shows a loss of 279 Million attributable to shareholders for the first quarter of 2013. The company had, however, recorded a profit of 189 Million in a similar quarter in 2012 . The company is therefore not building shareholder wealth consistently. The strategy that D’Ambrosio adopted seems not to be sufficient to ensure financial stability of the company. One could argue that a strategic plan is not important in ensuring business success. It is, however, important to note that when D’Ambrosio was interviewed by Miguel Bustillo of the Wall Street Journal in 2009, the interviewer noted that D’Ambrosio did not have a clear picture of where he wanted to see the company in the near future. This is a classic case of management being focused on operational goals and ignoring the overall objective. The financial performance could have been caused by lack of focus, and not the quality of the strategic plan.
Rabenstine (2009) also noted that Sears Holdings Corporation lacked a clear strategy. Rabenstine talked to analysts on the future of Sears and one analyst, William Dreher, said that Sears had adopted a good plan in focusing on internet sales, but that they had to ensure that they could sell merchandise through their stores for them to make any progress. This view by Dreher shows that Sears Holdings Corporation was focusing its energy on one side, that of innovation, while ignoring the need to improve on the traditional side of retail, which was responsible for a large portion of their investment. This means that Sears did not adopt a wholistic approach to their business strategy. Had they used the Balanced Scorecard, they would have realised the cost of ignoring the traditional aspect of their business.
Sears has also improved its internal operations tremendously, with the adoption of a transport management system referred to as a transport scorecard. The system was adopted in response to the realization that both Sears and its recent acquisition, Kmart, use freight services to transport most of its merchandise. The reduced cost is partly responsible for the good performance in the first quarter of 2012. This shows that a well organised strategy can contribute positively to a company’s performance. This strategy, however, only represents one aspect of the business, that of operations.
The innovative aspect of Sears Holdings Corporation involves the use of internet marketing to reach their customers, such as the ‘shop your way’ promotion, which also doubles as a way to collect customer feedback. Rabenstine (2009) notes that even with the innovative internet sales in place, the company’s profits were still declining. Customers responded differently when questioned, with some saying they will continue to buy at Sears and others saying that Sears was too espensive and did not have what they needed. This brings to the light the relationship betwee Sears and its suppliers. Dreher says that companies are avoiding to do business with Sears, perhaps due to the failing brand. Sears’ customer feedback has therefore not been efficient since it has not revealed the loss of business due to reduction in product range. This would also have been noted if Sears had adopted a supplier relations plan. This shows that their plan is not wholistic.
The fluctuating performance of Sears Holdings Corporation is an indication that an organization can not afford to ignore a wholistic approach to strategy. It is important to create a strategy, but if the strategy does not look into all aspects of the organization, it may not deliver success as expected. The Balanced Scorecard is a wholistic strategy-formulation process that allows an organization to evaluate its internal and external environment while organising short term activities to be in line with the overall objective. Sears Holdings Corporation’s plan may have helped it survive, but if the company does not adopt a wholistic approach to strategy such as the Balanced Scorecard, it may not succeed in the long run. The Balanced Scorecard is therefore remains a useful tool in strategic planning due to its wholistic approach.
References
Bustillo, M. (2012, March 12). The Plan to Rescue Sears: With Deeper Knowledge, Can Retailer Win Back Shoppers? The Wall Street Journal. Retrieved June 7, 2013, from http://online.wsj.com/article/SB10001424052702303717304577275632246292326.html
faqs.org. (2013). SEARS HOLDINGS CORP - FORM 8-K - February 19, 2013. Advameg, Inc. Retrieved June 7, 2013, from http://www.faqs.org/sec-filings/130219/SEARS-HOLDINGS-CORP_8-K/d488607dex101.htm
GuruFocus. (2013). Sears Holdings Corporation. Retrieved June 7, 2013, from http://www.gurufocus.com/gurutrades/SHLD
Procurement Executives' Association. (n.d.). Guide to a Balanced Scorecard Performance Management Methodology. Retrieved June 2, 2013, from http://energy.gov/sites/prod/files/maprod/documents/BalancedScorecardPerfAndMeth.pdf
Rabenstine, C. (2009, December 8). Sears Holdings Corp. struggles to compete and lacks concise strategy. Retrieved June 7, 2013, from http://news.medill.northwestern.edu/chicago/news.aspx?id=152307
SC Digest. (2011, August 18). Logistics News: Sears Builds Powerful Transportation Scorecard, and Shares Experiences on How to Get it Right. Retrieved June 7, 2013, from http://www.scdigest.com/ontarget/11-08-18-1.php?cid=4862
Sears Holdings Corporation. (2013). About Sears Holdings Corporation. Retrieved June 7, 2013, from http://www.searsholdings.com/about/
Sears Holdings Corporation. (2013, May 23). Sears Holdings Reports First Quarter 2013 Results. Retrieved June 7, 2013, from http://www.searsholdings.com/invest/
Vallely, B. (2012, March 2). The Balanced Scorecard Approach to Performance Management. Retrieved June 2, 2013, from http://www.cpaireland.ie/UserFiles/File/students/2012%20Examinations/Exam%20Related%20Articles/P1MFCPAARTICLE2012.pdf
