Obs Strategy

7/30/2019 Obs Strategy

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Case study analysisSears tries to stop its market share slide

Group 6

Salani sah 12202151Sambhit mohanty 12202152Sangya Sankshipta Das 12202153Sanjoy Saha 12202154

Sankalpa patnaik 12202155Saurabh raj - 12202156

STRATEGY
http://www.aboutsears.com/


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Introduction to the case One of the premier retailers in the US

In the 1940s Sears management saw a growth opportunity in the suburb hencewithout waiting opened stores because of heavy parking area available.

This move increased their sales and profit

The company ran into problems after several decades in 1980 because it had lostits number one position in retailing to Kmart with Wal-Mart which was in third

position The main reason was due to the operating expenses and distribution cost which

were touching the sky in comparison to Kmart and Wal-Mart

Due to this they could not offer competitive prices to their customers.

Their market share also decrease from 18% to 13%.

Along with this a high number of outlet and people in them looked towards thetop management because they didnt have any authority in their hand

The coordination and control problem was so high that one of their stores inNew Jersey was still showing old jewellery and clothes on dummies.


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Sears in late 1988 announced to sell their Sears tower which is located inChicago, Illinois

Another problem was that their consumer started to project where Sear isin the retail hierarchy

A step taken by Sears to improve their reputation was by calling themselvesas a fashion store but this didnt help them in anyway

It took another step in 1989, which was of everyday low pricing, through

this they thought they can reduce their administrative cost and will be ableto compete directly with the discounters

The huge market share enjoyed by Sears led its employees becomingincompetent, inefficient and indifferent to the changing needs oftheir customers

Sears senior executive has been trying to change their attitude, thoughwhen questioned they deny facing any problem.


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What is a strategy?Strategycan be defined as the common long term goal and

accusatives of an enterprise.Strategies undertaken by sears :

Business level strategy:-

Selling more products at reduced prices continuously

Everyday low pricing strategy to cut administrative overheads and competedirectly with discounters

Significant Cut of inventories in order to end giant promotional expenses

Selling of other brands like RCA, Sony and Maytag alongside its own privatelabel brand

Corporate level strategy:- A decision to sell the sears tower in 1988 and move 90 percent of

corporate staff to cheaper quarters

Repositioned itself as a fashion store


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Strategic DimensionsInnovation To what degree does any organization introduces a new product or

services.

offering high quality, moderate priced merchandise sold under its own retail roof. a fashion store strategyMarketing differentiation create customer loyalty in order to particular needs of

the customer Locating new stores in the suburban regions, offering plenty parking space for

automobile consumers.Breadth refers to the scope of market to which the company extends business

catering Basically Sears managed to touch the suburban region after the inception with

firing profits, with moving time and non-realization of coordinating andcontrolling problems along with bloated structure, management , was unable toconcentrate upon consolidating product catering above 825 outlets and 5,26,000people .

Cost control -An extent to which an organization tightens the cost, refrains fromincurring unnecessary innovation or expenses. The everyday low- pricing strategy Dropping hundreds of styles and models ( largely cutting inventories )


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Chandlers strategy structure thesis

Classic work on relationship between organization strategyand its structure .( published in 1960) .

Studied close to 100 of Americas largest firm . From 1909 to 1959 ( DuPont, Sears, General Motors,

Standard Oil of New Jersey) . structure follow strategy for efficient results. Company began as Centralized structure. It expanded and developed different structures to cope up

with the changing strategies.


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Chandlers thesis

t t+1 t+2

PRODUCTDIVERSIFICATION

STRATEGY

low high

STRUCTURE Simple Functional Divisional


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Porters 3 generic strategiesAn organization must choose a strategy that can give it a competitive advantage.

Cost Leadership

Differentiation

Focus

In context to Sears

Sears followed a strategy of everyday low pricing.

Price of most of the goods were sharply and permanently cut and discountpromotion are largely eliminated.

It believed that it would help them to minimize the administrative overheadsand they could compete with the other retails who were providing discounts atthat time.

Sears thought that by cutting down the inventories it will be able to become alow cost operator.

It provided brands like RCA, Sony and Maytag along with its own private labelbrand to differentiate it self from the competitors.


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Questions & AnswersQn 1). Describe how sears original strategy influenced its

structure.Ans: In relation to strategy:

Sears original strategy was defender, it had built its reputation on a strategy asoffering high-quality, moderate priced merchandise, merchandise sold under itsown private label, offer hundred of different items each week on sale.

Seek stability by producing only a limited set of products directed at narrowsegment of total potential mark, no scanning of new environment.

Any thing new was seen as threatening and therefore, resisted.

Strives aggressively to prevent competitors entering their turf, company managerbelieved that they will be able to become low-cost operator by dropping hundredsof styles and models and by ending the huge promotional expenses associated with

planning, buying, storing, distributing and advertising the ongoing sales.

In relation to structure :

This strategy enforce high centralized decision making.

Structure became bloated, resulting in problems


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Qn. 2 ) Do you think its exchange in strategy in 1989 should have lead tochanges in structure?

Answer :

In 1989, Sears proposed to pursue a strategy of every day low pricing.

Prices of all the goods were sharply and permanently cut and deepdiscount promotions were eliminated, management tried to make itself alow cost operatorby dropping hundreds of styles and models and by

ending the huge promotional expense associated with planning, buying,storing, distributing and advertising on the on-going sale of goods.

It used other name brands along with its own private label, seeking bothflexibility and stability.

Management must have maintained its current strategystructure

relationship despite overwhelming changes in environmental conditions. Arrogance among employees (less flexibility)

Resistance to chance

Low formalization

High complexity


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Qn. 3) How has size influenced sears structure?

Ans : is as follows

As size increases, it increases complexity in terms ofhorizontal and vertical differentiation, which increasescommunication distortion.

It had coordination and control problem that means

formalization was not efficiently managed to reduceconfusion of employees as size increases.

Centralization remained high, though the size wasincreasing which require decentralization, and blocked the

flexibility of employees work and work in harmony


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Qn. 4 ) K-mart is almost the same size as Sears but is more effective.What structural factors do you think might contribute to k-martbeing more effective than Sears?

Answer: What follows is the answer :

K-mart manages to maintain low cost while providing superior selectionof goods.

K-mart might be using focus strategy, which may involve moredecentralized decision making & flexibility and high customer satisfactionunlike Sears.

Values & rewards flexibility and customer intimacy


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Qn. 5) Is sears a mature or a declining firm?

Answer: Very close to end of its maturity period and heading towards decline

Lost its market share, outward shift form environment alignment

Decline caused atrophy, organization took success for granted and becameattached to practices and structure that worked in the past and failed toadapt to changes in the environment

It tried many different strategies but was unable to deal with problems

The social fabric of organization eroded; dramatic action such as replacingtop administrators, thus revolutionary changes in the structure, strategy,and culture was required


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Qn. 6) What problems does Sears face that Wal-mart andk-mark dont?

Answer: The coordination and control problem among departments

Highly centralized structure causing difficulty in meeting the needs ofcustomers to their satisfaction.

High operating costs

Switching to many strategies and failing to maintain structure accordingto strategy

Arrogant staff

Managers were slow to respond to change

Any thing new seen as threatening


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