Posted: May 25th, 2022
K-Mart’s Bankruptcy — a Case Study
Why did the store synonymous with low prices for relatively high quality, the famed purveyor of blue-light specials, fall into dissolution and financial despondency and eventual bankruptcy in January of 2002? (CNN, 2002) The fall of Kmart the mega-store cannot be pinned simply to single internal or external phenomena, although the company was misguided and mismanaged on multiple levels, and the economy was enduring one of its rockiest retailing passages at the time. What left Kmart “singing the blue-light blues,” (LaMonica, 2002) can be subscribed to a variety of marketing, positioning, and branding phenomenon, as well as economic miscalculations and the company’s leadership.
In 2002 analysts later said that Kmart management had made two big mistakes during the holiday shopping season when retailers consistently attempt to land themselves in the ‘black’ after ‘black Monday,’ the season between Thanksgiving and the New Year. Instead, Kmart had cut back on advertising during a season when consumers were particularly unwilling to part with recession-threatened cash and failed to brand itself in a homespun and patriotic fashion, as did Wal-Mart. Furthermore, it entered a price war with Wal-Mart it could not hope to win. (CNN, 2002)
But the undoing of the retail giant in the months after the recession began to grip the American heartland and do considerable damage to the infrastructure of blue chip stock as well as blue light specials shows that Kmart’s fall from grace cannot be blamed on the rise of Wal-Mart or Target alone, for it was one that had been long in coming, given internal corporate decisions as well as external economic phenomena such as the recession and the rise and rise of Wal-Mart in consumer’s hearts and pocketbooks.
Firstly, on a purely internal in-house basis, it was later revealed on January 25, 2002 that there were substantial accounting irregularities at Kmart, exaggerating profits for a long period of time. On December 9, 2002 Kmart admitted it had discovered additional mistakes in its books and that it had restate its financial results for the last three years as well as merely 2002. Kmart had also been overextending itself for a long period of time. On March 8, 2002 Kmart announced plans to close 283 stores and cut 22,000 jobs by June because it could not financially support this expansion anymore. Stores included 18 in Michigan, some of the least profitable enterprises.
Having to cut stores generated bad press for Kmart in an area of critical regional strength and consumer loyalty. Also, the giant spatial sprawl of Wal-Mart as a retail structure, not simply the dominance of the company was partly to blame — customers preferred that they could buy more things in the geographically spread-out Midwest at Walmarts, and did not have to travel to other stores to buy groceries, than they could at Kmarts. Thus, the closing of so many Midwestern stores also showed to Kmart stockholder everywhere that the flaws of the Kmart organization struck at the heartland, the heart of Kmart consumers. (“Timeline,” 2003)
Another problem with Kmart was that the Chief Executive Officer or CEO of Kmart of 2002 seemed more interested in improving his own status as a leader and his own financial profile, rather than creating a new direction for the company. Kmart Chairman and CEO Chuck Conaway ultimately had to resign after fewer than two years of service, walking away with at least $9 million in his pockets and leaving investors whom had lost more than $4.6 billion during his reign behind. (“Timeline,” 2003) Significantly in a statement on the Tuesday night, directly after the debacle of Conaway’s early resignation, Conaway’s successor Edward Lampert promised to take an active role in Kmart’s affairs. “Going forward, Kmart will be led by a board that has a substantial investment in the company,” he said. (Haber, “New Executive,” 2003)
In terms of its market strategy and positioning Kmart has since made attempts both to increase its revenue amongst its traditional Midwestern base, as well as to expand its outreach to new American communities, particularly the burgeoning Southwestern Hispanic demographic. Culturally and in terms of sheer dollar numbers, Latin Culture has begun to expand across the American nation in its influence and consumer domination. On December 10, 2002, “Latin sensation” singer known as Thalia and Kmart announced a partnership to sell a line of the entertainer’s clothing and accessories at Kmart stores, predominantly in Hispanic markets.
Timeline,” 2003) But Thalia is no J-Lo, and Hispanic consumers seem more attracted still by Wal-Mart’s lower prices than any specific identification with Hispanic culture in particular branding areas offered by the company.
Kmart’s current stated strategy includes “high-low pricing,” focusing on brand names and operating fewer stores. However, many analysts believe this shows the company is still thinking along the same economic lines as it did before. “High-low” pricing means offering deep discounts on selected items, which are advertised heavily. This pricing technique is a way of luring shoppers into the store, who will come for the specifically advertised discounts. The company hopes that after entering the store they will also buy other items at full price. High-low pricing a strategy used by many retailers, including supermarkets and drugstores, but it can be an expensive practice. It requires printing costly circulars and newspaper ads, which must be redone each week to offer different specials. (Haber, It’s a Lean Operation,” 2003)
Also, more customers are buying online, and can surf to sales, filtering out higher-priced items. Again, to make a point of comparison, Wal-Mart, Kmart’s chief competitor, no longer uses this strategy, and instead simply promises the lowest prices, all of the time. This illustrates how, still, and quite significantly, Wal-Mart has a greater understanding of modern consumer behavior and needs for cheapness and convenience at great speed rather than time-consuming price clipping and advertisement-scanning. This marketing reason is another one of the most frequently cited reasons for Kmart’s fall as a retailer in terms of strategy as well as in pricing, branding, store design, and span of items offered.
In fact, it is particular its focus on brand names, also in contrast to Wal-Mart, that has been problematic for Kmart in recent years, more than attempts to out-price the other retail giant. Firstly, some of Kmart’s highest-profiled exclusive brands like Martha Stewart house wares and linens have become tarnished. Even before her legal struggles, in 2002 Martha Stewart’s image had become an object of mockery rather than favor in the eyes of the American consumer. Other Kmart brands such Joe Boxer apparel and Disney and Sesame Street children’s clothes, might have been available only at Kmart in particular styles, but were still available at other outlets such as The Disney Store, Macy’s and toy stores, in some shape or form. Celebrities, such as Thalia that have been targeted by the company, often lack enough of a crossover appeal to other market segments or do not have enough consumer loyalty in one segment to generate sales revenues.
True, “shoppers like brand names, and they haven’t abandoned Stewart despite the domestic diva’s legal problems.” But “other than Stewart’s merchandise, Kmart’s brands may not have enough cache to attract shoppers. “They all have name recognition,” says Jordan Kaplan, professor of managerial science at Long Island University. “But Joe Boxer, in and of itself, is not going to bring bumble-gum-chewing Gen X’ers into Kmart.” (Haber “It’s a Lean Operation,” 2003)
Lastly, the strength of Kmart’s competitors, more than its weaknesses, may have more to do with its failures, which is something difficult for a company to address — it has simply been out positioned by cheaper, better, and leaner young companies.
Even attempts to ‘slim down’ may be counterproductive. True, running a leaner operation. Kmart closed about 600 stores during its bankruptcy, shrinking its store base to 1,513. But “while that saved millions and got the retailer out of leases for less-profitable locations, fewer stores mean many shoppers will have to drive farther to reach the nearest Kmart. How many will drive past Wal-Mart and Target to get to Kmart?” (Haber, “It’s a Lean Operation,” 2003)
Finally, problems existed and continue to exist as well regarding Kmart’s expenditures and its outlays to shareholders, past and future. “I see considerable challenges to Kmart attracting investor dollars,” said David Sowerby, a portfolio manager with Loomis, Sayles & Co. In Bloomfield Hills. Sowerby said there are so many other retail stocks available that investors have their pick without taking a chance on a company that is just emerging from bankruptcy. The stock market remains shaky, despite the recent economic recovery, and during the last round of reparations to investors, there was dissatisfaction with the company.
Some Kmart creditors, including landlords and vendors received only 10 cents a share in stock for each dollar the retailer owed them. The memory of this will not fade fast, and many other creditors, who would have preferred cash instead of stock, were dissatisfied with the bankruptcy settlement. Thus, K-mart remains tarnished in the minds of consumers, and also in the minds of those whom might give it the necessary dollars to reposition itself in the future.
CNN.com. (January 22, 2002) “Kmart files for Bankruptcy.” Retrieved on September 12, 2004 at http://cnnstudentnews.cnn.com/2002/fyi/news/01/22/kmart/index.html
Haber, Gary. (May 7, 2003) “Kmart hopes pricing, brand names work: It’s a lean operation leaving bankruptcy.” Detroit Free Press. Retrieved on September 12, 2004. http://www.freep.com/money/business/kbox7_20030507.htm.
Haber, Gary. “Kmart names new chairman: Largest shareholder Lampert promises active role.” Detroit Free Press. Retrieved on September 12, 2004. http://www.freep.com/money/business/kmart7_20030507.htm
LaMonica, Paul. (January 18, 2002). “Singing the Blue Light Blues.” CNN.com. Retrieved on September 12, 2004 http://money.cnn.com/2002/01/18/investing/q_kmart/index.htm
Time Line: Kmart’s bankruptcy in review (May 7, 2003) Detroit Free Press. Retrieved on September 12, 2004 http://www.freep.com/money/business/ktime7_20030507.htm
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
There is a very low likelihood that you won’t like the paper.
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!
Place an order in 3 easy steps. Takes less than 5 mins.