Case Study – What Happened to Kmart?
1. Evaluate Kmart using the value chain and competitive forces models. What was Kmart's business model and business strategy? Kmart has numerous problems with its value chain. This is evident from the suppliers sending items that the suppliers want to sell, shelves remaining unstocked, the "hand shifting" reordering process for popular items, products being allocated by central planners and not based on individual store demand, excess inventory stored in 15,000 truck-trailers behind its stores, shrinkage, and having to choose to either ship toothpaste or Christmas trees. Since its entrance as the first discount store in the 1960s, Kmart has not been able to ward off new entrants into the discount chain business. The new entrants, such as Wal-Mart and Target, have come on strong and surpassed Kmart. Kmart's suppliers seem to be calling the shots with the retailer, since they are promoting the items that they can sell and not helping Kmart address its mounting problems. Kmart's customers are voting with their pocketbooks and shopping at its competitors' stores. Kmart uses a promotions-drive business model. The company uses advertising circulars to promote its "blue-light" specials. 2. What was the relationship of information systems to Kmart's business processes and business strategy? How well did its systems support its strategy? Kmart's information systems and its business processes and business strategy were not in alignment. As an example, the information systems could collect data, but the data were not available for analysis and decision-making purposes. As the case mentions, forecasting decisions were based on management's judgment, not on the data. Kmart's systems did not support its strategy. One of the problems mentioned in the case is that its supply chain management system could not easily accommodate the sharp increases and decreases in demand. The distribution center's outdated technology led to supplies sitting...
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