Discuss Walmart vs. Kmart case

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Zrrm1010

Business Finance

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Discuss Walmart vs. Kmart case read the attached please. 1 and 2. see the attachment

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Example Wal-Mart Wins with Logistics Kmart and Wal-Mart are two retail mer- chandise chains that, a few years back, looked alike, sold the same products, sought the same customers, and even had similar names. When the race began, people were quite familiar with the "big red K," whose stores dotted metropolitan areas, but few had heard of Wal-Mart, whose stores were in rural settings. Considering the similar- ity of the stores and their mission, analysts attribute the fates of the two chains pri- marily to differing management philosophies. In 1987, Kmart was far ahead, with twice as many stores and sales of $26 billion, compared to $16 billion for Wal-Mart. With its urban presence and a focus on adver- tising, Kmart had more visibility. In contrast, Wal-Mart began in stand-alone stores outside small towns, luring customers away from the mom-and-pop stores in aging downtowns. But so rapidly did Wal-Mart multiply over the rural landscape that an invasion of urban America—and a confrontation with Kmart—was inevitable. Kmart executives focused on marketing and merchandising, even using Hollywood star Jaclyn Smith to promote her clothing line. By contrast, Sam Walton, Wal-Mart's founder, was obsessed with operations. He invested millions of dollars in a company-wide computer system linking cash registers to headquarters, enabling him to quickly restock goods. He also invested heavily in trucks and modern distrib- ution centers. Besides enhancing his control of the supply chain, these moves sharply reduced costs. While Kmart tried to improve its image and cultivate store loyalty, Walton kept lowering costs, betting that price would prove more important than any other factor in attracting customers. Wal-Mart's incredibly sophisticated distribution, inventory, and scanner systems meant that customers almost never encountered depleted shelves or price-check delays. Meanwhile, Kmart's woes mounted, as distribution horror stories abounded. Employees lacked the training and skill to plan and control inventory properly, and Kmart's cash registers often did not have up-to-date information and would scan items and enter incorrect prices. This led to a lawsuit in California, and Kmart settled for $985,000 for overcharging its customers. Over the years, it has been Wal-Mart's focus on logistical matters that enables it to keep its prices low and its customers happy and returning often. Today, Wal-Mart is nearly six times the size of Kmart!18 Kmart continued its focus on ad circulars and promotional pricing into the twenty-first century, whereas Wal-Mart continued to focus more on supply chain efficiencies and less on advertising, with the results that selling, administrative, and overhead costs were 17.3 percent for Wal-Mart and Kmart's were 22.7 percent. Wal-Mart was able to achieve prices that average 3.8 percent below Kmart's and . even 3.2 percent below Target's. In 2002, Kmart went into bankruptcy and reorganization.19
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Explanation & Answer

Attached.

The idea of investing in what matters is just as important as where your businesses are. As
they say "location,location,location", Kmart’s city attraction versus the rural growth of
Walmart all had to end up how to execute them. This was simply in knowing that if one has
to cater to upscale consumers, there is going to be more cost in development. Kmart spent
on advertising and prepping up their products by contracting with celebrity lined products.
W...


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