Newchallenges will arise for both Amazon and Sears Holdings as they are building theirnew company.
The following external environment variables will impact Amazonand Sears Holdings’ current situation and need to be addressed as soon aspossible: Competition: The most prevalent factor will be the competition mainly from Walmart and Targets. With a Red ocean strategy, the Amazon and Sears Holdings have a competitive edge over the other companies with Amazon’s superior online service and distribution network while Sears has a strong Brand presence and a home installation and auto repair services to offer customers. Customers: With the newly formed Amazon/Sears Holding entity, customers will have a greater exposure to the online services. With Sears Holding brands and services being available online as well in the store fronts, customers will have a greater convenience to shop online or in the stores. Legal/Laws: Changing legislation can impact how this newly formed entity operates especially in a time where large companies merging, acquiring or strategically aligning themselves with partners who can help them compete or gain in market share. Current Product and Service Analysis Amazon brings a vast variety of goods and productsutilizing their world class e-commerce operations. They have a large customerbase across the globe and pride themselves in retaining and bringing low costproducts to the consumer. The value thatAmazon brings for their customers is a convenient, cost effective way for theconsumer to shop from their homes.
Amazon enjoys a distinct advantage in the technologyarena with their distribution and supply chain operations over all competitorsincluding Walmart. They also enjoy astrong name recognition which allows them the opportunity to have a largecustomer base across the globe. Sears Holding is known for having strong brandrecognition in addition to having many physical locations at prime sites suchas malls which brings many customers to the area. Sears brings many products including specificbranded names such as Kenmore and Craftsman.
In addition, Sears also provides customers with home installation andauto repair services which sets them apart from other competitors. Current Market / Competitive Landscape AssessmentOne of the most significant competitors for the newAmazon/Sears Holding is Walmart and Targets. Walmart has a couple of strategicfactors in their favor which puts their company as a main competitor: The first factor is Walmart’s physical locations. They have brick and mortar stores across the country with a large variety of produce and goods to sell.
The second factor resolves around Walmarts vast distribution and supply chain operations. Walmart can use their purchasing power and influence to persuade vendors to provide the lowest pricing for the customers. The third factor is Walmart’s strategy of acquiring companies to better compete against Amazon’s low pricing and shipping advantages. “The retail giant made its name as a low-price physical retailer, but when it moved to the e-commerce space, it found that Amazon was able to regularly beat its prices. It has since invested in its own e-commerce efforts, and has made a number of acquisitions in order to compete. Those investments appear to be paying off, as it can now go toe-to-toe with Amazon on price, giving it a competitive edge in certain categories.
” (Keyes, 2017) Target, with its well known red logo caters tocustomers as a family store. They have a wide variety of low priced productsand a well-managed distribution and supply chain operation. Target haslocations in the United States, Canada and India and has been slow in expandingglobally. Target does have an online presence Current Company IdentityAnalysis Sears Holdings is abrick and mortar store that is losing tremendous revenue and closing retailstores. While they still have somestrong brands, and are ahead of schedule reducing their debt, Sears still lagsin sales from previous years.
Amazon is a leadingcompany in giving low prices over a wide variety of products and customerrecognition. Amazon also has marketplaces across many countries which givesthem a footprint in many other markets outside of the United States and Canada. Amazon/Sears Holdings are not the biggest brick and mortar – forexample: Ø Amazon is not physically located in any brick and mortar stores tosell to its customers.
Ø Customers of Amazon must select their purchases online and havethe items shipped to them.Ø Amazon is not the premier competitor in the retail market and isfairly small in size to it’s larger competitors like Walmart and Targets.Ø Amazonis also not as profitable as its direct retail competitors as it “competes with a whole slew of specialty retailers, ranging from NeimanMarcus, to Williams Sonoma to Crate and Barrel, who hold an advantage not involume, but in merchandising expertise.” (Satell, 2013)Ø Sears Holdings does not operate a premieronline service. They are customer centric and prefer experts in the stores toserve their customers through their purchases. Business is basically conductedthrough their physical locations. Biggest issues/challenges facing the companycurrently Some of the biggestissues/challenges facing the Amazon/Sears Holding entity will be integratingthe Amazon presence into the Sears Holdings physical location stores.
Walmarthas an advantage in the physical location arena as they are established. Walmartis also strategically acquiring e-commerce entities to better compete with theAmazon/Sears Holding company. Proposed Business Plan Given your assessment ofwhere the company is right now – positioned against their current competitionand knowing the strategic moves that this competition has undertaken – preparean assessment that Bezos and Lampert can use to craft a new Red Oceanstrategy for the strategic unit. Red Ocean Strategic PlanThe Amazon/Sears Holdingcompany must develop strategies to be in a growth strategy competing againstcomparable competitors such as Walmarts. The goal forAmazon/Sears Holding will be to beat their competitors in the pricing arena andalso providing valuable low-cost products in the Kenmore and Craftsman brandsand take advantage of the home installation and auto repair services of Sears.Walmarts can compete in the pricing arena but will struggle without asignificant acquisition of a home installation and a reputable automotiverepair center that Sears has nurtured for many years. At this time a mergerand acquisition of Sears Holding by Amazon would be the most favorablestrategic sense for both companies.
Sears Holding is drowning in decliningrevenue and loss of customer base. “Theretailer also has total debt of $4.4 billion as of the end ofOctober, including $303 million in senior secured notes due in 2018.” (Berr,2017) Additional InternationalExpansion The Amazon/Sears Holdingentity should have a great international footprint in addition to the brandedproducts and services that no other company can do with the efficiency thatSears Holding had built.
Amazon already has a footprint in many foreigncountries so expanding to newer markets with tremendous growth such as India,Brazil and Russia. Strategic Alliances Amazon/Sears Holdingsmay want to consider aligning with entities in the foreign markets that theyseek to conduct business in. For example, India is a large emerging market thatan acquisition would help to integrate the Amazon/Sears Holding company’s productsand services versus trying to grow the business organically in this market. Another considerationfor Amazon/Sears Holdings will be to negotiate with their vendors includingSears Holdings branded vendors such as Kenmore and Craftsman. The strategy willbring value to the customer but also allow these new products to be marketedalong with their services as an added advantage to customers to shop online andin the newly formed Amazon stores. Characteristics of RedOcean strategyAmazon/Sears Holdingneed to use Amazon’s advantage in e-commerce to draw customers to the onlinearena and to the newly designed brick and mortar stores.
While Walmart iscurrently acquiring businesses to compete in the e-commerce arena, Amazon isclearly established and can easily scale their operations and integrate SearsHolding products and services into their system quickly and at a low cost. Structural ExecutionSteps – Strategy/Structure Match For Amazon/Sears Holdingto align their structure to their strategy, Sears Holdings should be integratedinto Amazon’s organizations. To accommodate the integration of Amazon intoSears Holdings physical locations, the retail leadership must be identified toinclude a new division for Amazons activity within the stores. The retail leadershipwill be tasked to change each stores appearance to bring Amazon’s strong name,products, online services to the forefront. Included with this change, thestore must also present customers with the branded products and services thatSears has been known for by customers for years. This combined value of products, services anda strong online presence and convenience for the customers should present avery attractive opportunity for the customers to shop for high value, low costproducts with this newly formed store. The nextstrategy/structure to consider will be the Board of Directors.
The Board will need to represent Amazon’se-commerce interest for investors. Thisdistinct advantage will still need strong leadership to move into an ever morecompetitive arena as larger retailer such as Walmart work to acquire e-commercebusinesses to better compete with Amazon/Sears Holding. The Board of Directors will also need torepresent the Sears Holdings brick and mortar stores. The direction to improve and integrate theAmazon name into these stores will need to support the strategy of usingAmazon’s strong name recognition to draw current and new customers to thestores.
The Board of Directorslastly will need to have representation for Sears Holdings branded productssuch as Kenmore and Craftsman. These brands are household names for a largecustomer base plus they also have a distinct advantage of having services such ashome installations and automotive repairs centers. Centralization/Decentralization Pros of structure1. This structure willaddress the distinct advantages that the merger of Amazon/Sears Holdings needsto compete in a Red Ocean scenario. 2.
This structure will giveAmazon/Sears Holdings a head start to further eliminate their competitors fromtaking their market share. 3. Lastly, this structurewill give this merger the ability to scale larger and globally. 4.
Amazon/Sears Holdingwill not need to invest much capital in physical locations as the SearsHoldings locations are in high customer traffic areas. Consof structure 1. Competitors may study this new structure andtry to replicate to compete. 2.
Competitors may undercutprices despite margins to take business away from this merger. Strategic and Structural Flexibility Utilize the Amazon name as much as possible in their products. Amazon is one of the most recognizable company names in the world and this newly formed company must capitalize on this advantage. 2. Keep expanding onlinecapabilities across the globe. Amazon has the distribution expertise andinfrastructure in place as compared to their main competitor Walmart which mustacquire e-commerce technology in order to compete. This effort is a large undertaking that willtake time to create.
Amazon is alreadynimble with its operations.