Sears Holdings Corporation (SHLD) was officially formed in 2005 following one the largest and recent merger acquisitions in the United States. The merger acquisition combined Sears, Roebuck, and Co. with Kmart and both the companies were American retail icons since 19th century. An outstanding hedge fund manager called Edward T. Lampert was the architect behind the merger that was worth $12B that created the third largest merchant in the U.S. Nonetheless, since the merger, the performance and investor confidence of SHLD has drastically dropped to ninth place among U. S. retailers. SHLD comprises of three business segments namely, Sears Canada, Sears Domestic, and Kmart. Presently SHLD trails Wal-Mart, CVS Caremark, Kroger, Costco, Home Depot, Target, Walgreen’s, and Lowe’s. Parija (2007), states that according to a recent Wall Street Journal article, Gary Balter was quoted as saying that “Put a fork in it. We continue to view Sears Holdings as the most overvalued stock in our coverage.” Similar pessimistic sentiments are likely to overturn SHLD performance in the retail market.
SHLD is based in Canada and it is not known internationally. SHLD’s product assortments in Sears Department Stores, Discount Stores, and Kmart Super Stores covering all the product categories such as outfits, major home appliances such as refrigerators, dishwashers, home improvement/ repair, auto repair services, and groceries among others. Conversely, Wal-Mart Stores Inc. is based in the United States and it is the leading retail company ranked number one on the Fortune 500 Index according to Fortune Magazine (Thomas & Scott, 2007). The principal target market for Sears Holding Co. is women aged 25 to 54 with a modest household income; home and family while that of Wal-Mart is low to mid income families. These families rely on Wal-Mart for location handiness and one stop shopping.
Sears Holdings Corporation Competitive Analysis Verses Wal-Mart and Target
Since Sears has three business segments, Kmart as a general merchandise and discount chain directly competes with Wal-Mart, Target among other merchant stores (Thomas & Scott, 2007). Sears Domestic segment has a full line department store selling their general merchandise. Sears Canada though consolidated, it conducts comparable operations as Sears Domestic of selling general merchandise comprising of clothing, appliances and tools, electronics among others. Thomas and Scott (2007), affirms that Sears Holdings is currently the third largest general merchandise retailer globally in terms of net sales followed by both Wal-Mart and Target. They however says that both Wal-Mart and Target have enormous scale that enables each to extort value in their stock purchases and pass these savings on to consumers.
First and foremost, when comparing for instance Wal-Mart and Sears’ Kmart as retail companies, it is clear that they both have different strategies that allow them to reach competitive advantage. The type of competition between Sears and Wal-Mart is a monopoly competition. While Wal-Mart provides its clientele with low price and product differentiation, Sears focuses on efficient leadership, product differentiation, and different quality brands. Looking at the organizational structures, Wal-Mart is better placed since it has an organized system that is easy to maintain. Conversely, Sears, specifically Kmart has developed their resources to aid in value improvement as well as their competitive advantage. Gerhard, et al. (2009) revealed that Sears has improved their brands such as Kenmore, Diehard, Lands’ End, Jaclyn Smith, Joe Boxer, Apostrophe, and Covington brands and are already popular in the market. Wal-Mart also has developed their resources to gain competitive advantage. In so doing, both retail companies are likely to increase their production capability and become better placed in the market.
Secondly, because of minimal growth in the past years and high stakeholder’s prospects, Wal-Mart has focused on strategizing on how to appeal to the upscale customers and maintaining their low costs (Gerhard, et al. 2009). They have decided to create additional upscale lines in their product line aimed at attracting upscale clientele. This in turn will make the company to create more revenues thus increasing stakeholders’ stock value. In fact, Wall-Mart’s main objective is to close the gap with discount competitors like Target. Another part of Wal-Mart’s strategy is to focus on learning and growth. This has been accomplished by considering the technological perspective. It has therefore requested most of their suppliers to resume using internet as a prerequisite (Gerhard, et al. 2009).
Finally, Target has recorded growth over the past few years as compared to Sears and Wal-Mart. If Sears tries product differentiation from those of Wal-Mart and focus on their brand image, then it will likely compete against Target. Target has developed itself and become a stylish alternative to other discounters and that has allowed it to draw higher income shoppers in comparison to Wal-Mart. In order to combat such threats from Target, Sears ought to devise its own ways of competing. Much of Sears’s successful hinges on whether it can create an effective supply chain and with it cost savings, and in this cut throat industry, Sears must establish an efficient business strategy which will determine its competitive advantage (Gerhard, et al. 2009).
According to the above analyses, it is probable that Sears Holding Corp. is likely to become a thriving large retailer. Because they have learnt from their past mistakes and use their excessive size to take advantage of the economies of scale and create a dependable information technology structure aimed at enhancing its supply chain. Target on the other hand will remain vigilant on the growth and success of Sears. None of them should take the rivalry nonchalantly but start out strong and build infrastructure for completion. Failures of all the three companies will likely help them develop a proper recipe for success.