Strategic Management of Kohls Corporation - Case Study Example

? Case Study Introduction As per the case study, Kohl’s corporation, headquartered in Milwaukee suburb of Menomonee Falls, Wisconsin, is one of the largest departmental stores in America. The company operates with around 800 departmental stores in 45 states, but most of its stores located in the Midwest of America. Now company wants to expand its business in western and southern part of United States, which requires a proper understanding of the changing needs of its customer group. Kohl’s Corporation has adopted a selective approach for its store location; that is always located in the heart of soccer mom country. The target market of a company is women aged from 25 to 54 who have children and a sufficient income to spend on their products. The company strategic approach is built around the convenience and price suitable for its customers. Under this strategy, company has built its stores in a boxlike structure where shoppers can use carts to browse throughout the stores. Strategic management strategy of Kohl’s Corporation plays a vital role in maintaining the company’s profitability even in adverse situations. The customer’s taste and preferences are changing regularly, which can directly affect the business. To avoid certain situation, it is necessary to review the external trends of the market regularly in order to take strategic actions on time. For this purpose, the strategic manager needs to review the internal and external environment of the company. It involves the process of job scanning, addressing external environment and trends, and identification of opportunities and threats. External trends for Kohl’s Corporation The manager at Kohl’s Corporation has to face various external trends that mainly concern external business environment. The profitability of the company is based upon these internal and external factors existing in the business environment. The external factors of the business environment are concerns the competition faced by the company. It also comprises the analysis of the country’s economy which the company belongs to, government policies, socio-cultural trends, technological and future trends of the market. Environmental factors affect the company’s profitability because they are uncontrollable by nature. Economic factors. In the past few years, there has been a decline in general economic condition of the country that leads to reduce the customer demand for merchandise. It also leads to reduce the sales and gross profit margins of the company. According to the case, the company’s present economic condition is quite well, and it is able to compete with its competitors, but for future prospective, company must keep track of functional and technological changes in the retail industry so that managers can take decisions on time (Jeffs, 44). Technological trends. At present, there are various technological trends entering the retail and departmental store industry that can affect the consumer taste and preferences such as shopping malls, where various brands can open their store under one roof. According to Kohl’s business strategy, they operate their stores in three settings: the stand alone buildings, the big box mall and the lifestyle center. These three kinds of stores are able to create an environment that is convenient, friendly and exciting for their customers. It gives a unique feature to its business strategy. Governmental factors. What concerns the political situation, governmental policies and political system of the country are extremely uncontrollable, and it can adversely affect the consumer confidence. The outbreak or escalation of war, the occurrence of terrorist’s acts and the other hostilities of the political system can lead to a decrease in spending by consumers. Socio-cultural factors. Socio-cultural factors include the knowledge, art, beliefs, morals, laws and customs of the society. The choices and purchasing habits of the customers are largely influenced by the socio-cultural factors, and it changes over time. Kohl’s Corporation adopts a family and value oriented approach that mainly focuses the middle class family for purchasing. Future trends. Currently, company is operating in the Western, Southern and Midwest parts of America, but there are various other future business opportunities available in the market. The company wants to expand its business in order to fulfill this need; they can plan to expand overseas. Competition. Retail and departmental store industry is one the difficult industries to compete in. There are various retail stores existing in the market with effective management strategies; nevertheless, Kohl’s has done well in establishing its brand name. Now Kohl’s is facing some serious challenges such as its competitors J.C Penney and Sears, and Macy’s have copied Kohl’s business approach. In order to compete in the market, they have to take some immediate action regarding their strategy so that they can provide some unique feature to its customers. Basically, Kohl’s product mix consists of apparels, shoes, accessories, etc. Presently, various specialty stores like Old navy, and American Eagle are also shifting towards clothing and apparel industry, which can hugely affect Kohl’s business. Wal-Mart has added various national brands in order to improve the quality of its apparels even in the discount end stores. Thus, they need to adopt a proactive approach so that strategic management can better change its business strategy with respect to their competitors. Important trends and methods to review changes Among these external trends, competition and socio-cultural trends are the most significant areas for managers to work on. Other factors, like economic, technological and political factors, are uncontrollable by nature and always affect the profitability of a business, but manager can take decisions to update the business strategy so that Kohl’s can compete with its competitors. In order to deal with socio-cultural factors, managers can review the changes in taste and preferences of the customers so that appropriate actions can be taken. Changes in socio-cultural factors can be analyzed by various methods such as survey, questionnaire, and through market analysis. Managers can take feedback from customers in order to know the customer requirements and their response for the existing products (Ryall and Sadler 67). Required External Information If I were a strategic decision maker at Kohl’s headquarter, I would need some external information in order to take corrective actions. The information regarding the company’s resources, its cost position, its competitors’ strength, and the company’s competitive strength over rivals is necessary for the evaluation of the company’s position in the market. In addition to this, I need to know the financial position of the company so that expansion decisions can be taken appropriately. External information also includes information regarding financial objectives and the company’s overall performance. It explains whether the company’s business strategy is working or not. There are some indicators available that help to evaluate the company’s business strategy, e.g. trends in the company’s sales and earnings growth, trends in the company’s stock price and its overall financial strength, the company customer retention rate and changes in the company’s reputation in the minds of its customers. These kinds of information are truly required to take managerial decisions for further improvements. Role of Strategic Decision Maker As per the case, the company’s revenue for 2006 is $13 billion dollars that are up almost by 15%, as compared to 2002. It indicates that the company’s sales and its earnings growth are at a significant position. Kohl’s Corporation working strategy plays a vital role in maintaining its customers because it revolves around convenience and price, and both are the influential factors for consumers. Currently, company operates with 800 plus discount department stores in around 45 states. It also reflects the company’s attractive financial strength and its relative cost position. Working strategy. Working strategy of a company is also known as a business strategy. There exist various retailing companies in the market, and most of them located their stores in shopping malls and other shopping complexes, whereas Kohl’s Corporation have adopted a decidedly selective approach for its store location that is the main factor behind its convenience. Typically, Kohl’s Corporation avoids malls when setting their shops; rather, they set up their stores in the heart of soccer mom country. The target customers of Kohl’s Corporation are a two-income family with kids at home – those who do not have time, but who are looking for value products (Jeffs 182). Company believes that its target customers are young mothers who do not have time to drive long and certainly do not want to involve in parking hassles when they go shopping. Kohl’s free-standing stores comprise a box-like structure where shoppers can use carts while browsing through the shelves of clothing, shoes, and other home apparels. It focuses on the location where several large and specially retailing brands are located together. As an example, Kohl’s spring-field store is adjacent to McDonalds, Wal-Mart super center, a Michael’s hobby and crafts store and other famous dining restaurants. It provides convenience, choice and price efficiency to its customers. According to this analysis, strategic decision maker have done an admirable job in scanning and assessing the company’s environment. Opportunities and threats Kohl’s Corporation wants to expand its business in different areas; thus, there are enormous opportunities for store expansion. To provide more traffic, there is also a growth potential and opportunities not establish new businesses in different areas. Company can modify its product mix or can move from clothing to other products to have more opportunities for sales. Weakening consumer spending and industry consolidation are the key existing threats for the company. Reviewing customer preferences and the company’s business strategy is necessary to remove its threats and to maintain future sales. Works Cited Ryall, M.J., and Philip Sadler. Strategic Management. Sterling: Kogan Page Publishers, 2003. Print. Jeffs, Chris. Strategic Management. London: SAGE, 2008. Print. Read More