1.0 Introduction

1.1 Historical Overview

Kmart opened its first discount department store in Burwood, Victoria in 1969. On the

opening day with over 40,000 customers, Kmart was a success. It was a new era in

Australian retailing. Kmart is one of Australia’s largest discount department store

retailers. Today, Kmart has 186 stores throughout Australia and New Zealand. With a

massive range of products, including men’s, women’s and children’s wear; garden;

home; health & beauty; outdoor living; entertainment; toys & sporting; camping &

fishing; automotive and everyday needs.

1.2 Aim

The purpose of this report is to examine how Kmart’s strategic vision aligns with its

mission, goals, objectives and policies. It will also evaluate company competitive

position in the industry. This report will assess Kmart’s business strategic and key

success factors in relation to the company’s performance in the competitive market.

1.3 Scope

The report evaluates the Kmart company websites and other related on-line resource for

the purpose of finding rich information and the formulation of this strategic business

report.

2.0 Kmart’s strategic vision

A strategic vision is important for a company to set a greater direction and make a strategic

value successfully. It involves all the external and internal factors that drive the company to

prepare for the challenges in the future, such as different customer needs and expectations,

the methods of overtaking or outrunning competitors, the paths of obtaining market

opportunities and using new technologies (Thompson & Strickland 2003).

Kmart is one of the largest discount department store retailers with Australia’s largest

automotive service, repair and tyre business. It is focused on serving customers quality

products at low prices in an easy to shop environment and will try its best to become the

choice for middle-income families with children by satisfying their routine and seasonal

shopping needs as well as or better than the competition (‘Our renewal ensuring sustainable

growth 2009’).

2.1 Kmart’s strategic vision and its mission

A mission is some task, duty or purpose that motivates or drives someone in a certain

direction. Therefore, a corporate mission should play an important role in determining

strategic actions, which consists of the fundamental principles that mobilize and propel the

firm in a particular direction (De Wit & Meyer 2010).

In these years, Kmart has a renewed focus on its long-term sustainability which faces

diverse challenges, so it focuses on minimising the potential negative impacts of its business

and increasing its positive and healthy impacts on the community and environment (‘Our

renewal ensuring sustainable growth 2009’).

2.2 Kmart’s goals and objectives

Guy Russo was appointed as the managing director of Kmart in 2008. Under Russo’s

direction Kmart has undergone a major strategic change, increased profits by 100 per cent

this past financial year and is firmly back on the retail map ( ‘Guy Russo puts Kmart on the

road to recovery’ 2010). After a review of the business, where Kmart looked at its

operation, its aim is to achieve sustainable growth.

The goals of Kmart’s strategies are ‘an improved customer experience in clean, tidy and

uncluttered stores that are easy to shop; on trend products that customers want and quality

they trust; prices that customers can rely on and demonstrate outstanding value; promotions

that excite the customer and are easily understood; places that are a success and new sites in

great locations; team members that are in the right roles, ensuring it has a customer-focused

culture and operate safely and increased profit resulting from the renewed and major focus

on customer, product, price, promotion, place and people’ (‘Our renewal ensuring

sustainable growth 2009’, pp.5).

2.3 Kmart’s policies

Kmart’s environmental policy was developed as a long-term plan to reduce environmental

impact. This plan covers reducing energy use, reducing the amount of water consumed,

increasing the amount of waste recycled and reducing the footprint of new stores.

There is a reduction of 17 per cent on last year carbon dioxide emissions by introducing

better reporting systems to accurately capture our emissions and the factors used to convert

electricity into carbon dioxide emissions are lower this year compared to last year. A

significant amount of solid waste is produced by Kmart however systems are in place to

ensure that the majority of this is recycled. Kmart’s liquid waste that includes oil and

coolant as well as chemicals used in our photo laboratories are recycled more of this during

the year.

One of the policies adapted by Kmart is Ethical Sourcing in which the company has the

commitment to purchase goods and services that are produced without exploiting and

endangering health, safety or the environment. This is to ensure that goods sold in all Kmart

stores are made in safe working conditions, national laws are obeyed and that basic human

rights are respected.

Assisting in the community is also one of the policies Kmart considered as important.

Kmart programs have supported over a thousand small community groups either through

further fundraising or gathering much needed goods from Kmart stores.

3.0 Kmart’s competitive position in the industry

Competition in the discount retail industry is very intense. By the very definition of the word

discount, price competition is fierce. The industry borders on being a loose oligopoly

dominated by Target, Kmart and Big W in which Big W and Target are considered as

Kmart’s main competitors. Each retailer has survived by differentiating itself into so many

ways. Target uses it’s in store tag line Target for Fashion, Quality and Value while Big W

has itself advertised as “everyday low prices”. Kmart on the other hand now has narrowed it

price positioning by slashing its product range and tagged the company in its web page as

“Kmart Australia – Providing Everyday Low Prices”. This stiff competition that faced

Kmart in the retail market could adversely affect the market share of Kmart.

The culture of the leadership teams within Wesfarmers which owns Kmart and Target and

Woolworths Group that owns Big W is very similar. They believe in performance

meritocracy and passionate about providing their shoppers and customers with the best

quality experiences at the best possible prices. Both companies are lead by a combination of

talented retailers and manufacturers. This is viewed that there are two strong players in one

market and there is a genuine competition that is very visible between two more equally

matched retail groups that will only translate to the shopper resulting to more innovative

store formats, a real increase in service and ultimately a world class shopper experience at the

best price.

Figure 1

4.0 Kmart’s business strategies

4.1 Price strategy

The central factor in the discount retail industry by its very nature is price. The one

defining characteristic of Kmart many customers is essentially price sensitivity.

Because of this, there are few options available to K-mart in developing a pricing

strategy to compete with Target or Big W.