1.0 Internal Assessment [from Phase 1]
The SWOT Analysis, using the Internal Factors Evaluation (IFE), noted Sear’s strengths in the areas of retail network (expansive), strong brand recognition (e.g. Kenmore Home Appliances, Craftsman Tools, etc.), and a strong management team (lots of untapped potential), among others. Conversely, its weakness were also notable: deteriorating debt margin (has exceeded its assets and capital), unreliable revenues (fluctuating), and poor management style (cause of poor strategies), among others.
2.0 Current strategy
Supplier and merchandise inventory management: Despite the fact that the fourth quarter only generates not more than 29 percent of its total revenues (thus only four percent higher than the average revenue shares in the first three quarters, Sears continued to incur heavy inventory spending for this quarter using outright purchases from cash flows, supplier credit terms, and domestic debt (Sears, 2015), thus overspending for a revenue (not operating profit margin) increase of only four percent.
Retail brand portfolio management: Sears relies primarily on its own branded merchandises with apparently no tough monitoring on its sales performance strength relative to other branded products (Sears, 2015), particularly those selling superbly in competitor stalls and shopping windows.
Workforce management: Sears had around 178,000 employees in the United States and territories, including part-timers, without disclosing the ratio between regular and part-time employees (Sears, 2015). This ratio may indicate an irrational ratio, which can contribute in driving its employee costs.
Online shopping: Of the 941 Kmart stores in 49 American states and three international markets, only 697 stores has in-store pharmacies and only around 900 stores engaged in pick up services for its online shopping channels (e.g. mygofer.com; kmart.com; or shopyourway.com) (Sears, 2015).
2.1 SWOT Matrix
1. Strong presence 1. Ever-widening debt margin
(Expansive retail market) (Inadequate capitalization)
2. Strong brand recognition 2. Unreliable revenue stream
3. Strong management team 3. Inferior management style
(Untapped though) (Ignores diverse opinions)
Opportunities SO Strategies WO Strategies
1. Increased health spending 1. Increase inventory by 30% 1. Close all persistently negative
of health products in all net profit outlets (W1, O2)
outlets (S1, O1)
2. Broadening of sales 2. Maximize sales on loyal 2. Ensure dependable revenue
(Focus on loyal customers) customers and win more and profit streams from loyal
new customers (S1, O2) customers (W2, O2)
3. Expedient online shopping 3. Increase profit margin in 3. Maximize idea generation to
online shopping channels improve online sales figures
(S2, O3) by 30% (W3, S3)
Threats ST Strategies WT Strategies
1. Intense competition 1. Increase retail outlets 1. Use low interest debts in
profit performers (S1, T1) (W1, T1)
2. Economic recession 2. Expand on brands with 2. Increase profitability by ±30%
strong value propositions by focusing on high value
(S2, T2) products and space leasing
(W1, T2)
3. High labor cost 3. Rationalize labor expense 3. Improve engagement with
per outlet and per unit and participation by high
job performance (S3, T3)
2.2 BCG Matrix of Sears Holdings in 2014
Segments Revenues* ($) % Rev Profits % Profits Rel. Market Share Industry Growth (%)
1 12,074 38 (422) 28
2 17,036 55 (920) 61
3 2,088 7 (166) 11
Total 31,198 100 (1,508) 100
1-Kmart; 2-Sears Domestic; 3-Sears Canada [All $ figures in millions]
(*) As merchandise sales and services; (**) As operating income (loss)
2.3 SPACE Matrix
2.4 IE Matrix
3.0 Possible strategic alternatives
The central strategic issues that Sears need to address with priority may be grouped into four areas consistent with its current strategy. First, in its supplier and merchandise inventory management, its current strategy must be replaced with a supplier space lending for external branded merchandises (to cut down on inventory expenditures all year round), no debt inventory building in the fourth quarter (to focus on historically highly saleable items at cash flow defined inventory levels), and display space rationalization between in-house brands and high performing outside brands (to provide more display spaces for highly performing self-financed merchandise inventory).
Second, in its retail brand portfolio management, Sears must adopt high selling space preferential policy both for in-house and external brands, especially in merchandises that it must spend money directly with suppliers to avoid allocating money and space on low sellers.
Third, in its workforce management, Search institute a performance-based employee retention policy (to retain only those with high performance contributions to the company) and a net profit outlet policy (to cut down on employee costs in unprofitable outlets). Its failure to report the regular-part time employee ratio must indicate its failure to rationalize its employee expenditures.
Fourth, in its online shopping management, it is clear that its retail outlets had not been maximized in supporting sales from its online shopping portals, which expectedly limits the number of consumers engaged, particularly in markets where no pickup from store or direct-to-home delivery mechanisms have been established. Moreover, free direct-to-home delivery services, which is common in online shops, is costlier than the pickup in the store mechanism.
4.0 Evaluation of current organizational structure
5.0 Recommendation changes
6.0 References [6]
Sears. (2016). Sears Holdings Corporation 10-K Form. Illinois: Sears Holdings Corporation.
