Sears, Roebuck and Company commonly known as Sears is an American company that was incorporated in 1886 by Richard Sears and Alvah Roebuck. It became a subsidiary of Seers Holding Corporation in 2005 after a merger with Kmart Corporation. Contemporarily, the company is domiciled at Hoffman Estates in Illinoi. The company majorly deals with clothing, electrical appliances, home products and services, automotive repair tools and products and other hardware. It has around 1700 operational stores across the US. It had approximately 300,000 employees in 2011. The company also operates in Mexico and Canada. In Canada, it carries its operations through the Sears Canada Incorporation. Sears Holdings operates through its three major subsidiaries namely; Kmart, Roebuck and Sears (About Sears, 2016).
The company grew tremendously throughout the ages since it was founded in the 1886. In the 1960s, the company was expanding exponentially and as an attestation to the growth, almost a third of Americans had a credit card from Sears. It incorporated novel trends such as mail-orders when American was still considered rural. Quite a significant percentage of Americans were positively affected by the presence of the company especially those living in Chicago were it was initially domiciled (Blaszczyk, 2009). As the automobile industry grew, the retailer saw the need of moving even closer to the people and making its presence and impact in the business world across America felt. It thus opened store rapidly across shopping malls in all the American states. Sears currently has store in 49 states in America (Blaszczyk, 2009).
The company majors in the manufacturing and distribution business since it was founded almost 130 years ago. Some of the products the company retails in entail: home appliances and consumer electronics. In fact, the company has been ranked as the leading retailer across the US when it comes to home appliances, their installation and servicing (Sears, 2011). The company is also among the leading producers of gardening and lawn maintenance tools. Other key products from the company include; apparels, fitness equipment and automotive products such as tools that are used to carry out repairs. The company has its own brands which include; Kenmore Home Appliances, Craftsman Tools, DieHard Batteries and apparels trading as Lands’ End and Joe Boxer among others (About Sears, 2015).
According to Adam Hartung, the company had an intangible value of around $11 billion when it merged with Kmart in November 2004 under the chairmanship of Edward Lampert. However, it’s disheartening to note that the company’s value has shrunk to a mere $ 1.6 billion a decrease in value of around 85%. Hurtung (2016) further indicates that the share value of the company has taken a nose dive from $ 92 when it merged with Kmart to a paltry $15 in 2015. Despite the new strategies that the company has come up with, the future of the company seems bleak and business experts such as Melich Greg (2014) who works with Evercore ISI indicate that the value of the company has been damaged utterly and it is at the verge of bankruptcy (Cochman, 2016).
For a long time, those in management have felt that the company has not had a clear strategy on what it seeks to achieve (Sweeney, 2012). Business analyst Panos Mourdkoutous (2015) opines that, it is the lack of a clear business strategy which has landed the giant retail company into a lot of financial trouble. The first one was during the 1980s when the company engaged in an aggressive expansion strategy into real estate and financial services. This new venture was not in line with its core business of retailing and thus it spelt doom for the company. The other big strategy mistake was in 2006 when the company restructured its operations which meant the newly created units were to be under the management of unqualified people who lacked requisite experience (Mourdkoutous, 2015).
Additionally, the company adopted another strategy of selling some of its leading brands and company stores as a way of generating more income for its expansion. This is due to the fluctuating revenue and the ever widening debt margin which faces the company (Hartung, 2016).The strategy had a negative impact in that it lost the scale advantage and brand diversity it previously enjoyed. The strategies implemented since the 1980s have worked against the company in that instead of realizing more growth, the company has been losing a lot of money and customers (Blaszczyk, 2009).
Contemporarily, the strategy of Sears according to its spokeswoman Kimberly Freely include working towards the restoration of its profitability; putting more focus on its loyal customers and profitable stores, focusing on the most sought after products which are mainly home appliances and other home-based services, the generation of more funds through increased sales and a disposal of assets owned by its stores. The solicitation of more funds from the investors as a way of reinforcing its financial flexibility has also been identified as another viable strategy. The strategy is bound to help the company to regain the competitive edge it once enjoyed as a leading retailer (Sears, 2015).
One critical event of Sears, Roebuck and Company was its Merger with Kmart in 2005 to create the current Sears Holding Corporation which is the holding company of Sears and Kmart (Blaszczyk, 2009). The other critical event was the diversification of its business portfolio in the 1980s to incorporate real estate and financial services. Another critical event was the selling of its long standing brand of Lands’ End. Some of its competitors include Wal-Mart, Ark, Dillards, Best Buy, Amazon, and the Gap.
In terms of leadership, the company has been on the spot for poor management by its top echelon management. The company is currently headed by Edward S. Lampert who doubles as the chairman of the Board of Directors and Chief Executive Officer. Others in the top management include Robert Schriesheim who is currently the Executive Vice President and doubles as the Chief Financial Officer. The Chief Administrative Officer in charge of the day to day running of the company is James Andrew is Executive Vice President who fills in the position of the CEO in absentia.
Sears has come under a lot of criticisms from all quarters because of its poor performance which has largely been attributed to its poor management. In 2014, the current CEO was ranked the second worst CEO in America by Forbes largely because of the poor strategies and policies he has enacted to no fruition. The poor performance which now eminently threatens the survival of the giant company has been attributed to the micromanagement and segregation of the low and middle management and employees by the high ranking management when it comes to decision making. In particular, the Chairman Edward Lampert has been cited as being authoritarian and leaving no room for divergent opinions. His style of leadership has been through issuance of strict orders which have to be followed to the latter. Any employee or even manager who dares challenge his perceptions about the company will mostly than not be sent packing.
The mission of Sears reads and I quote, “To grow our business by providing quality products and services at great value when and where our customers want them, and by building positive, lasting relationships with our customers. The vision statement of Sears is and I quote, “to be the preferred and most trusted resource for the products and services that enhance home and family life”. The essence of a mission statement is to express the purpose of an organization. An effective mission statement has to capture the following elements of an organization: the products and services available, the target markets, emphasis of values espoused by the organization and its major priorities for subsistence (Macnamara, 2014). The author further avers that a mission statement should be unique and concise and it needs to give the employees a sense of direction and prioritization in their work.
The mission of Sears does not mention the products and services it offers specifically. However, it does mention the value of quality by stating that it aspires to provide quality products and services to its customers. It also does not mention the clientele it is targeting. However, on the brighter side, it can be inferred that its survival strategy is through the establishment of positive and lasting relationships with the customers. The mission statement is concise and unique. It easy for an employee to discern that his or her core duty is to ensure that they provide quality services which will ultimately lead to a positive and lasting relationship with the clientele. That way the company will remain afloat and continue thriving. In my assessment, apart from the failure to specifically mention the services and products offered and the target clientele, the mission statement is relevant and fairly strong.
Macnamara (2014) describes a vision as a motivational tool which expresses the desired optimal goals and objectives the organization aspires to achieve through the implementation of its strategic plan. The vision has to be inspirational and memorable as it guides and encourages the employees to move towards the achievement of a desired future. The vision of Sears which states that the retailer aspires to be the preferred and most trusted resource for the products and services that enhance home and family life is both inspirational and encouraging. The ultimate goal of any business owner is to be the most trusted source of the products and services one does offer. The vision of Sears is both robust and pertinent for such a business.
A critical external factor evaluation of Sears Holdings reveals the following facts. In terms of the opportunities, the retailer has the following; its private labels and brands have been growing, its online sales have been increasing despite facing cutthroat competition from companies such as Amazon and Best Buy, decentralization of its operations by venturing into new markets such as Canada and Mexico and an Increased spending by American citizens on health which means its exercising equipment will have a broader market in the near future. These opportunities if optimized have the potentiality of spurring growth and expansion of the retail company.
SWOT Analysis using EFE tool
Where 4 means a superior response, 3 – above average response, 2 – average response and 1 – poor response.
The external threats that Sears faces include the following; Intense competition from robust competitors such as Wal-Mart, Best Buy, Amazon, Bentonville, Ark, Dillards, Gap among others. As the competition becomes more intensified, more companies are merging and this will pose a huge threat to the company. Recent surveys also indicate a low consumer confidence as analysts have continued to foresee a gloomy future for the retailer shop (Melich, 2014). Such a loss in consumer confidence has the potentiality to impact the reputation of the company negatively which would further sink its fortunes. The other eminent threat is the fact that the company has been affected by the economic slow-down which means consumers has less money to spend. Finally, an alteration in the minimum wage policy has seen the cost of labor escalate. These are some of the threats which pose a detrimental impact on the overall performance and growth of the retail giant. Competitive Profile Matrix of Sears, Wal-Mart & Target
Where 4 means a superior response, 3 – above average response, 2 – average response and 1 – poor response.
An evaluation based on the Competitive Profile Matrix indicates that Sears is still a competitive company but its market capital has shrinked. It is the leading retailer in home appliances and electrical products, installation and maintenance services, lawn and gardening tools among others. A comparison between Sears, Wal-Mart Stores and Target indicate that the company has not been doing well in terms of its quarterly Revenue Growth which stands at -23.30% compared to Wal-Mart which stands at -0.10% and Target at 2.80%. In terms of its operating margin compared to the other stores, it recorded a -0.06 % while the others are at 5.0% and 6.0%. In terms of profitability, the company has not realized any profits since 2012 as opposed to the other retailers which continue raking more profits for the investors. The share value of Sears has also been on the decline and is currently trading at $ 15 while Wal-Mart, Amazon, Target and Industry have realized significant growth (Forbes Business, 2015).
The trends observed from the EFE and CPM analysis have the following strategic implications on Sears Holdings. In order for the company to stay afloat, in needs to convert the current trend of loss making into profitability. Profitability will be realized through dealing with the intense competition which contemporarily prevails in the retail store market. As indicated by the current CEO Edward Lampert, more needs to be done in terms of overhauling the stores to meet the current consumer trends and needs and this will be through more capitation. . The leadership of the company needs to be changed and a more autonomous, consultative and consensus building approach should be adopted (Melich, 2014). The management teams which heads the units which were created in the restructuring plan of 2006 need to be trained as a way of making them more competent. Another segment of the business that needs to be looked at is ensuring the good reputation the company has always had is not tarnished and that consumer trust and confidence is bolstered (Hartung, 2016).
SWOT Analysis of Sears using IFE Tool
Where 4 means a superior response, 3 – above average response, 2 – average response and 1 – poor response
An evaluation of the Internal Factor Evaluation indicates the following strengths and weaknesses. In terms of strengths, Sears has the following strongholds namely; the company has a strong retail network though it has closed quite a number of its stores through selling the stores and their assets to generate more operation income. The other strength is the fact that the company still has brands which remain popular among its customers which include Kenmore Home Appliances and Craftsman Tools. The other strength the company has is that it has a strong management team which has the potentiality to realize incredible results if the management style would be altered.
Some of the weaknesses which are apparent include the ever widening debt margin which needs to be cleared if the company is to turn its fortunes around. The company has also had a challenge with the fluctuating revenues and inadequacy of operating capital. The company needs to bring more investors on board who will in turn inject more capital if the share value is to be made valuable. The employees and the middle and low tire management also need to be motivated and they need to be given more discretion to come up with more novel strategies which will remedy the ailing retail giant.
Financial Ratio Analysis of Sears
A financial Ratio Analysis of Sears Holdings in terms of Sales, Earnings and Shareholder Equity show the following trends. In terms of sales, no growth has been realized in the last five years and this can be attested from the operating profit margin. Sales have been declining at an average rate of around 6% and annually and the quarterly revenue has been on a downward spiral. In terms of earning, the company has been experiencing a decline in earnings which have significantly shrunk. The number of customers has also been going down which means it will become harder to reduce prices as a way of attracting more customers (Cochman, 2016). This is majorly because with declining sales and negative profitability, offering low item and service costs that is line with economies of scales is impossible.
In terms of shareholders’ equity and consequent returns, the company has recorded a negative shareholders’ equity. This essentially means that the company has more liabilities than assets to an excess of $912 million. According to Wei (2013), going by the indicators especially the negative shareholder equity, negative profitability, negative net profit margins and negative earnings per share, it can be concluded without any fear of contradiction that the company is technically bankrupt.
The strategic implications from the IFE analysis is that the company needs to change its management style, it needs to stabilize its revenue, it needs to come up with new strategies, it needs to prudently use the resources it has and it needs to engage in more CSR activities as a way of ameliorating its reputation. An overhaul in the management style means more consultation when it comes to decision making and allowing employees and other members of the management to concoct new strategies of dealing with the cut-throat competition, loss of earnings and revenue. A prudent use of its resources especially those acquired from Kmart means more market presence and a reduction of the current debt while broadening profitability margins (Wei, 2015).
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References
Blaszczyk, R.L. (2009). American Consumer Society, 1865 - 2005: From Hearth to HDTV. Wiley
Publishers.
Cochman, L. H. (2016). One of the Analyst Covering Sears say it isn’t Viable. Retrieved from:
http://www.bloomberg.com/news/articles/2016-02-09/one-of-only-analysts-still-covering-
sears-says-it-isn-t-viable
Hartung, A. (2016). The 5 ways Ed Lampert Destroyed Sears. Retrived from:
http://www.forbes.com/sites/adamhartung/2016/02/11/the-5-ways-ed-lampert-
destroyed-sears/#c6c80e41de67
Macnamara, C. (2014). Basics of Developing, a Mission, Vision and Value Statement. Retrieved
Melich, G. (2014). The Future of Sears. ISI Group.
Mourdkoutous , P. (2015). Four Strategic Mistakes that Haunt Sears. Forbes Business. Retrieved
mistakes-that-haunt-sears/#3a0155c113b1
Sears Holdings(2015). About Sears Holdings Corporation. Retrieved From:
http://www.sears holdings.com/about
Wei, J. (2015). Sears's 3 Key Financial Ratios (SHLD). Retrieved from:
http://www.investopedia.com/articles/markets/122315/searss-3-key-financial-ratios-shld.asp
