With today’s retail business having a major role with employment and indicating if the overall economy is strong or weak, due to the financial performances of the retail sales, Kmart has struggled tremendously with its competitors. And, during this case analysis on Kmart, there are several major reasons why other retail stores have obtained a competitive and comparative advantage, which resulted in Kmart filing for bankruptcy and losing an enormous amount of shareholders wealth.
Initially, Kmart was a corporation following the regulatory guidance by the state of Michigan in 1916, by an entrepreneur named Sebastian Kresge, who opened his first store in 1893. In fact all items in his store were sold for the price of a nickel or a dime, which it seemed to make all purchases very easy for consumers. This concept by Kresge is practically the basic concept for the most prosperous discount retail stores in the world today. Apparently, the success of this store led to the decision making process of opening the first Kmart in 1962. According to Reuven Lehavy, an Associate Professor at University of Michigan, who is a renowned analyst in investor recognition and stock returns, along with Suneel Udpa, a Professor at St. Thomas college of California, “By 1912, he had expanded to 85 stores with annual sales of more than $10 million. After operating the Kresge department stores for more than 45 years, the company opened its first Kmart discount department store in 1962. By 1977, nearly 95 percent of the Kresge company sales were generated by Kmart stores.” (p. 391) So, with a major head start over other retailers in the business today, you would have to ask some pertinent questions. Those questions are: Why is Kmart doing so horrible, when compared to other retailers such as Wal-Mart or Targets? What caused them to file for bankruptcy? How and when did they lose their advantage on shareholders wealth? How do they reorganize the company in order to obtain success?
First and...