Kmarts Downfall Essay Example | Topics and Well Written Essays - 750 words

Kmarts Downfall - Essay ExampleThe competition model established by porters beer is an analytical tool for studying industry behavior and corporate strategies. It is derived from industrial organization economics and includes basketball team forces. These forces, in turn, determine the level of competition, and thus that profitability of a market. These five forces comprise of substitutes, competitors, new get in firms, bargaining power of suppliers and customers.The facts of this case study reveal that Kmart was facing intense competition from Wal-mart and Target. Wal-Mart initiated the movement of all day low prices, which was a more worthy substitute for products in Kmart. In addition, Wal-Mart utilized learning technology to keep a record of sales in all of their lines and for ordering stocks of fast moving items. Wal-mart heavily invested in information technology by installing new registers with barcode scanners in every store during the 1970s and early 1980s, which fed the sales data into the back-end computers. This information, in turn, assisted them in planning approaching strategies, deciding which products reap more profit. Thus, they gained a competitive advantage. By 1983, Wal-Mart was able to receive goods for only devil cents whereas Kmart had to pay five cents per dollar for getting goods to stores. This meant that Wal-Mart was in a position to sell products at a price three percent lesser in contrast to Kmart. Then, another competitor Target began a new campaign in which they depicted themselves as a low-cost source of quality and flare mart. They focused on merchandising. These attractive schemes took away Kmarts market share. This demonstrates that Kmart was under intense pressure of substitutes, competitors, and garbled customers.In 1987, Kmart undertook investments worth 1 million to modernize their systems.