BUSINESS PLAN EVALUATION: KMART Steve Horbachuk, Karen Huang, Dusan Ivanovic, and Michael Spooner MGT310 4/13/2008

Introduction and History  1899 – SS Kresge Company founded by Sebastian S. Kresge  New Strategy: Kmart stores and Corporation  Redesigning the identity  3-way operation: Traditional Kmart Stores, Kmart Super Centers, Big Kmart

Introduction and History (cont.)  Kmart’s Mission Statement: Kmart will become the discount store of choice for middle-income families with children by satisfying their routine and seasonal shopping needs as well as or better than the competition  Desired Customer Group: women with children at home in households with an annual income of $20,000 to $60,000

Introduction and History (cont.)  2002 – Kmart filed for reorganization under Chapter 11 of the US Bankruptcy Code  Stock plunged, downgraded credit, removed from top 500 leading stocks  “Cutting down $350 million on annual expenses through reorganization and job cuts”  Result: 600 stores closed, thousands of jobs cut, new management hired, new investors

Introduction and History (cont.)  2004 – Sears Holdings Corporation emerges as a merger between Sears and Kmart  3,800 retail stores across US and Canada  $55 billion in annual revenue  Competing: Sears Essentials to become Sears Grand, new store concept  Speculation: Sears Holdings dropping Kmart in the next decade

About this Store  Located in Watertown, CT  Opened August 6, 1976  Small store (compared to others)

Competition  Obvious Competition  Wal-mart  Target  Local Completion  Grocery Stores  Staples

Management Cycle

Management Cycle (cont.)  Set Goals  Business/functional-level goals articulate company direction and give associates a plan for personal workload  Evaluate Performance  Each associate and his/her manager will complete ratings on Business Results and Organization Values

Management Cycle (cont.)  Assess Potential  Each associate will be evaluated on their potential next assignments and their capability to accept broader scope or accountability  Reward Performance  Based on the rating from their performance, an associate may be rewarded for excellence by an increase in their compensation

Staying Competitive  Aggressive pricing is NOT a top priority  Exclusive, licensed and quality products  Focus on customer service and product knowledge

Store Managers Oversee Operations within Individual Stores  Implement orders from corporate  Assign tasks and follow up  Deal with customers when needed

Chain of Command  Floor employee/associate  Department managers  Operations and Assistant Managers  Store Managers  District Manager

Staying Informed  Manager holds “huddles” to keep employees informed and share sales data

Culture  Corporate code of ethics  Manager as “role model”  Strict dress code  Teamwork, focus on the customer  Community contributions

Technology  Improved communication with corporate and other stores  Faster, more organized systems  Conference calls

How is Performance Measured?  Through measuring their overall sales performance of the store compared to other stores in the district’s overall sales

Type of Control Utilized  Concurrent control: managers monitors the ongoing employee activities to ensure they are consistent with the company’s performance standards

Controlling Through Associates  Gets the right things done with a sense of urgency  Acquire skills that will impact his or her personal performance  Constantly works to improve their knowledge about the business and apply  Identify multiple ways to achieve results

Controlling Through Managers  Understands how the organization’s processes and functions  Uses financial data to accurately diagnose business conditions, identify key issues, develop strategies and plans to achieve the organization’s financial goals  Evaluate overall success by examining the total impact of decisions and actions

Conclusion  Recommendations for improvement  Update mission statement  Conduct more research on products, services and practices  Increase Information Technology resources and the training of personnel  Procedural evaluations by management outside of the local branch