Porter’s Five Forces Analysis
Discuss about the Strategic Management of K-mart.
Kmart Australia Limited refers to the chain of Australian stores which is owned by the Wesfarmers. It is instrumental in operating around 214 stores within Australia along with 20 store within New Zealand (Kmart.com.au 2018). The head office of K-mart Australia is located within Melbourne. With the help of K-mart Australia the customers can shop online different items like toys, furniture, home décor and home & entertainment appliances. The latest selection pertaining to products makes shopping at K-mart a pleasurable experience for the consumers. Retail industry within Australia is facing a great amount of disruption. There are various overseas business that has entered the market and they have brought a new approach in relation to retailing. Retail landscape has changed along with the demands of the customers in the present age. The customers in the modern age have become more tech savvy which is a major reason for the popularity of online shopping in the present era (Hill, Jones and Schilling 2014). The expectations of the customers have evolved in the present age and technology has played a major role in changing the behaviour of the customers. This report discusses about the porter’s five forces pertaining to K-mart and the recommendations that can help in increasing the attractiveness of the industry.
Porter’s Five Forces refers to a model that can help in the analysis of the five competitive forces that can help in the shaping of the industry. It can prove to be useful in the determination of the strengths along with weakness of the industry (Wheelen et al. 2017). The five forces framework can help in addressing diverse kinds of problems and it can help a business in becoming more profitable. The Porter’s model is applicable to segment of economy that can help in assessing the attractiveness of the company.
Threat of New Entrants
The new entrants can decrease the profitability of the other firms within the industry. There are a large number of new entrants of retail firms in Australia that makes the threat very high for K-mart Australia. There are new entrants like the American retailer TJX Company Inc which is instrumental in operating 35 stores within Australia. The department stores of UK John Lewis along with Debenham have joined forces with that of the established operator. The new entrant is French leisure good retailer called Decathlon that poses a threat for the business of K-mart (Rothaermel 2015). Australia is one of the 163 member of World Trade Organization that engages itself in international trade with that of other member nations. Australia has different bilateral along with regional trade agreement that makes the threat from new entrants to be very high. Australia is one of the open economy within the world and it has reversed the restrictive trade regime that makes the threat from new entrants to be very high (Meyer, Neck and Meeks 2017).
Threat of New Entrants
Substitute product makes use of different technology for solving same economic need. K-mart was founded in the year 1969 and it has been able to create loyal followers of their brand. The retail firm has been able to draw a large number of customers on account of the different kinds of products that are offered by the retail firm. It has 214 Kmart stores within Australia that makes it accessible to a large number of consumers. This makes it difficult for it to be substituted as it has been able to establish a brand name (Lasserre 2017). K-mart offers different kinds of facilities like the latest products, fitness tech products and items for party décor that can help it in attracting a large number of customers. K-mart makes use of new ideas for designing the outfits and toys that makes it stand out from the rest of the retail firms and makes the threat of substitutes to be low (Bettis et al. 2015).
Bargaining power of customers is indicative of market of the outputs. It can help in putting a firm under immense pressure that can affect the sensitivity of the customer to the changes in price. The bargaining power of the customers can be said to be high due to the presence of many retail firms within the Australian market. There are various Australian retailers in the Australian market like Temple & Webster, Kogan, The Iconic, Booktopia, JB Hi-fi, Red Balloon and Lorna Jane from where the Australian consumers can buy the items and apparels (Bettis et al. 2016). The switching cost of the buyer is low and they can easily look for an alternative company on account of the presence of so many firms within the Australian market. The customers can easily look for an alternative retail firm that makes the power of customers to be quite high. The prices of the products are similar in most of the firms and the consumers have the option of buying the products from the different firms.
Bargaining power of the suppliers is indicative of the market pertaining to inputs. The suppliers of the raw materials can prove to be powerful for the firm in the event of having less number of substitutes. The bargaining power of the suppliers can be said to be low on account of the fact that there are a large number of suppliers of the raw materials of K-mart. There are different suppliers of raw materials in the Australian market like Amtrade International Pty Limited, Sanwa Pty Limited, Raw and DIY materials and Redox. They provide raw material sources for the retail companies of Australia. Amtrade International Pty Limited acts as the supplier of chemicals, plastics along with raw materials to the Australian industry. Sanwa Pty Limited acts as the supplier of barley, canola, cotton seeds along with sorghum wheat to the Australian market (Porter and Heppelmann 2014). Raw and DIY Materials helps in providing the raw cosmetic material ingredient to the different cosmetic manufacturers along with retail business. Redox is an ingredients distributor that helps in providing quality materials to the different business in Australia. The industry experts of Redox helps in providing quality materials to the different customers in Australia, New Zealand and Malaysia.
Threat of substitutes
The intensity pertaining to competitive rivalry acts as the major indicator of competitiveness prevailing within the industry. It is important that the industry rivals are understood that can help in the successful marketing of a product. K-mart is able to gain competitive advantage on account of its innovative products. The varying product lines offered by K-mart helps in catering to the needs of many customers and the diverse products makes the customers satisfied. K-mart also have outfits that are designed for that of holiday fun that can serve the young Australian population. K-mart also have different kinds of innovative toys that helps their business in rising above the competitors. One can also get fun furniture in K-mart that sets it apart from the rest of the retail companies. The featured categories of K-mart like home office and kids and toys makes it popular among the Australian retail industry. Industry rivalry can be said to be high however the innovations of the products of K-mart helps it to gain competitive advantage over the other retail companies.
Primary Activities
Inbound Logistics- K-mart has their own transportation system that helps them in delivering products in a convenient manner.
Operations- K –mart carries out the quality insurance assessment that can help them in removing the defective products (Porter and Heppelmann 2014)
Outbound Logistics- K-mart has very strict product delivery standard. In the event of a supplier failing to provide the reliable service to the customers the suppliers have to suffer financial penalties and the products of the suppliers are de-listed (Rothaermel 2015).
Marketing and Sales- K-mart advertises their broad range of products by taking recourse to advertising that helps in the promotion of their products. They send e-mails to the customers so that the customers get to know about their products.
Services- Different kinds of facilities are provided to the consumers like warranties along with guarantees that attracts the customers towards K-mart.
Support Activities
Firm infrastructure- K-mart is equipped with the necessary infrastructure that can help them in providing satisfaction to consumers along with employees.
Human Resource management– K-mart motivates the employees and provides them with a happy environment that helps the employees in staying longer with the company.
Technology Development- K-mart opens self-checks so that it can help in improving the customer service and reduce the cost. K-mart makes use of technology so that it can connect with the customers.
Procurement- The procurement process of K-mart company can be said to be quite good. K-mart takes the help of Big Data Analytics that helps in providing unprecedented visibility into that of the consumer behaviour (Lasserre 2017).
The entry of overseas business has helped in bringing a new approach to the concept of retailing. Retail landscape along with demands of customers have undergone changes in the current age. Modern age customers are tech-savvy which makes online shopping extremely popular in the current age. New entrants in Australian market like TJX Company, John Lewis & Debenham and Decathlon proves to be a threat pertaining to the business of K-mart. K-mart has been able to attract consumers owing to the variety of products that are offered by this retail firm. The 214 K-mart stores that it has makes it possible for it to serve the needs of customers spread over a vast geographic area. The bargaining power of the consumers is high as there are many firms in that of the Australian market. The suppliers bargaining power can be said to be low on account of the fact that there are many suppliers of raw materials of that of K-mart. There are various kinds of products that helps in satisfying the need of different kinds of customers. The different kinds of outfits that are there in K-mart can cater to the diverse population within Australia. The key findings are:
- Threat of new entrants is high
- Threat of substitutes is low
- Bargaining power of customers is high
- Bargaining power of suppliers is low
- Industry rivalry is high
- K-mart can take recourse to greatest-assortment strategy that involves the dominating of a product like office supplies or that of furniture
- A new strategy should be implemented by K-mart that shall empower that of the junior employees so that they can run a store in the profitable manner (Sölvell 2015).
- The company management of K-mart should instruct regarding new strategy to the section managers that can communicate about the practical changes made to that of the junior employees
References:
Bettis, R.A., Ethiraj, S., Gambardella, A., Helfat, C. and Mitchell, W., 2016. Creating repeatable cumulative knowledge in strategic management. Strategic Management Journal, 37(2), pp.257-261.
Bettis, R.A., Gambardella, A., Helfat, C. and Mitchell, W., 2015. Qualitative empirical research in strategic management. Strategic Management Journal, 36(5), pp.637-639.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Kmart.com.au (2018). [online] Kmart.com.au. Available at: https://www.kmart.com.au/ [Accessed 27 Jun. 2018].
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship?strategic management interface. Strategic entrepreneurship: Creating a new mindset, pp.17-44.
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard Business Review, 92(11), pp.64-88.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Sölvell, Ö., 2015. The Competitive Advantage of Nations 25 years–opening up new perspectives on competitiveness. Competitiveness Review, 25(5), pp.471-481.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy. pearson.
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