Business Strategy of the Leading Chain of Retail Outlets of Australia - Case Study Example

K-MART THE B2B BUSINESS STRATEGY OF THE LEADING CHAIN OF RETAIL OUTLETS OF AUSTRALIA Introduction: Since 1969, K-Mart has been the leading chain ofretail outlets. When it started its operations in 1969, it was an instant success amongst the ladies since it was the largest discount departmental store. K Mart set new standards in Australian retailing and became a trend setter in world wide retail business. "Today, Kmart operates 182 stores throughout Australia and New Zealand and employs thousands of local residents. With our 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; DIY and everyday needs, Kmart is sure to make anytime a good time"(K-Mart Website) 1.0 Key Product Lines& Suppliers K Mart: Product Lines: K Mart Product Lines Business Partners:Suppliers Buying Situation Automotive Range Castrol, Mobil Kenco Wynns Motorpro Projecta Ryco filters Shell helix K+H surface technologies Straight Rebuy Camping and Fishing Jacker doo Stockman weekender Straight Rebuy Children and infants Kidurable Hot Chilli girl Straight Rebuy Do it yourself Arlec Black & Deckler Chubb First alert Homemaker Paint express Wormald Stanley Sellys Straight Rebuy Everyday needs Groceries, drinks snacks, cleaning products, products for the bathroom Modified Rebuy/New Task Footwear Sandals, loafers, mules, sneakers Brand Hot Chilli Girl and others not mentioned Straight Rebuy/modified Rebuy Garden Green life stores stock KMarts full range of plants and garden supplies BRANDS: Homemaker lifestyle, gardeners choice, guarantee to grow Straight Rebuy/modified Rebuy Health & beauty Fragrances general Revlon Max Factor L'oreal Rimmel Auistralis Cosmetics Innoxa Physicians Formula Straight Rebuy Home Entertainment Authorised Distributor HP invent Fuji Film Olympus Lexmark Microsoft Canon Acer Lexar Straight Rebuy Home wares Living with Deborah Hutton Homemaker Straight rebuy K-Foto Kodak Straight rebuy Men's wear Alpha Bonds Diadora Exchange Rivergum Golden Breed Holeproof Jackeroo Now Sports Ltd No Fear Straight Rebuy Outdoor living Homemaker lifestyle Jackeroo Stationary and home office Open Market Modified Rebuy /New Task Storage Open Market Modified Rebuy /New Task Toys and sporting Barbie Lego Fisher Price Bratz HotWheels Straight Rebuy Women's wear Contempo Girl Express Secret Love Bonds Solutions Sports Now Bub2b Beachley Straight Rebuy 2.0 NETWORK SURROUNDING KMART 3 Overview of Products acquired from Upstream Supplier: The supply chain of a company contains three parts: 1) The upstream that which includes suppliers and their sub-suppliers and their sub-suppliers etc. 2) The internal supply chain which includes all the processes used in transforming the inputs received from the above suppliers to the outputs, from the time the inputs enter an organization to the time that the product(s) go to distribution. 3) The downstream which includes all the activities involved in delivering the product to final customers, including the "afterlife" that is, where the product ends up after it has served its useful life - recycle, reuse, refuse, etc. K-MART is one of the largest retail networks of the world. In view of keeping the organizational purchasing process transparent and systematic, K-Mart utilizes a "Supplier Diversity Program" by Diversity Business.com. They have completely outsourced their vendor management to Diversity Business.com. K-Mart believed in Supplier Diversity and for this they have a specific Supplier Diversity Program. Supplier Diversity Mission Statement "Kmart is committed to improving the economic position of minority owned businesses. Our diverse store locations require that we go above and beyond to meet our customers' expectations. It is our goal to actively seek qualified, reliable, minority owned vendors that can provide a strategic advantage to Kmart." (www.diversitybusiness.com) It can be seen that it would be difficult to analyze which one of the numerous suppliers is more important for K Mart. However, the key to success of retail business is the association and presence of Hot Cake brands at the outlet. This gives a dual benefit of enhancing the retails outlets own image and increases the traffic of crowd on the outlet. For analyses purpose, we will be discussing the major suppliers of K Mart Supplies from upstream suppliers-Straight Rebuy 1.Hot Chilli Girl provides products for the following product lines of K-Mart: 1. Children & Infants Products 2. Footwear 2. Homemaker Lifestyle caters to the following product lines: Do it yourself Garden Home wares Outdoor Living 3. Jackerdoo provides the Following Products to K Mart:- Camping and Fishing Men's Wear Out Door Living From the above suppliers, K Mart at large purchases in bulk quantities. These are high selling brands and are much in demand. Due to their good business relationship, K Mart keeps renewing their business contracts with them. Supplies from upstream suppliers-Modified Re-buy:- In a modified re-buy, the buying situation is different from the other two situations and the terms and conditions might be different. K Mart using the modified Re Buy in the following product categories:- 1. Everyday Needs 2. Footwear 3. Garden These are high selling categories. However, the consumers of these categories are not very brand conscious and are highly attracted by price discounts. Also, the demand for these products, is seasonal in nature and varies due to which the terms and conditions of order have to be re-negotiated. Supplies from upstream suppliers-New Task:- This is a purchasing process in which Kmart for the first time purchases a product. This is the most complex buying situation in which no previous trends have already been set. K Mart follows new task buying for the following product lines: Stationary & Home office Storage The reason for this is that no significant brands are present in this category.2ndly, these are small value purchases and have little impact on the overall image of Kmart. DOWN STREAM CUSTOMERS: K Mart has 3 types of customers: 1. outlet visitors 2. industrial customers 3. b2b customers-online orders 1. Outlet Visitors: The outlet visitors frequent any one of the outlets and show an impulse buying behavior process and purchase what they require on the spot. Due to the presence of well-known brands in the women's wear and men's wear category, the buying process has evolved to be planned as well. 2. Industrial Customers: These are customers that do not necessarily visit the outlet but buy in bulk quantities. These include customers of the Home entertainment category. One of such downstream clients would be Offices in Australia purchasing HP invent hardware from K Mart on a regular basis. 3. B 2 B Customers: These are customers who access the website and place their orders online. Web Portals are a key instrument to generating sales in this era due to the time and transportation hassles involved. UPSTREAM SUPPLIER AND DOWNSTREAM CUSTOMER RELATIONSHIP MANAGEMENT STRATEGIES Up stream supplier (Homemaker Lifestyle, Hot Chilli Girl and Jackerdoo): The key to K-Marts success is Good Vendor Management. Due to this it can acquire a strategic competitive edge over its competitors. Realizing the importance of this function, K Mart has completely outsourced its vendor management to Diversity Business .com. However, this might not be a very good strategy. The reasons why such a strategy is prone to high risk are: No control over vendors Less room to provide personalized services to high business volume vendors The same company maybe providing outsourcing services to competitors of K Mart (unless bound by contract) Room for fraudulent activities especially involving misquotation of prices. No control over own supply chain which might lead to hiccups in case of disagreement with the outsourcing partner. The best way to over come these faults are: Keeping control over vendors even after outsourcing Bind the vendor to provide exclusive services to K-Mart and no other competitors in the retail business. Channel the tender opening and proposal process through K Mart to keep in loop on the activities. Provide personalized services to the key vendors Other relationship activities include Supplier Training Programs, Supplier Performance Management and Appraisal programs and Best Supplier Awards. Supplier Training Programs: These are necessary to introduce the suppliers and subsequently their sub suppliers of the key policies of the suppliers. These can be organized from time to time .A specific program should be designed for any new vendors who have not previously supplied services and products to K Mart. Supplier Performance Management: Usually in MNC's, vendor evaluation is carried out on a regular basis. However, in this case, since it is outsourced so it can not be sure whether they carry out a proper vendor evaluation and performance appraisal program based on the following factors: Quality of Product Match with specifications Delivery After Sales Service Warranty Status Best Supplier Awards: These are necessary to provide motivation to the suppliers. These are based on the performance appraisal. It also stresses the importance of the business provided by K-Mart to them and encourages them to perform better next time. DOWN STREAM CUSTOMER RELATIONSHIP MANAGEMNET STRATEGIES The downstream customers of K Mart include Retail/Domestic Customers, B2B Customers and Industrial Customers. Separate and differentiated relationship management strategies need to be followed. The best theory applied to Consumer Purchase process is the stimulus response model of Buyer Behaviour: In this model, marketing and other stimuli enter the customers "black box" and produce certain responses. Marketing management must try to work out what goes on the in the mind of the customer - the "black box". The Buyer's characteristics influence how he or she perceives the stimuli; the decision-making process determines what buying behaviour is undertaken. (www.tutor2u.net) Retail Customers: For such customers, the best way to keep them attracted is by providing good after sale services and unmatched warranty. Other than this, they can arrange to have off season sales and special discounts. These are strategies already being followed successfully by K Mart and have to be kept up. Other than this, they can have a visitor drop box in which visitors and customers can drop their visiting cards. Through these business cards a database can be compiled and email shots can be taken out every now and then to announce new deals or new arrivals. Likewise, the cell numbers can be collected the SMS marketing can also be carried out to announce any deals and discounts. On the counter, small giveaways can be given like maybe candies and stuffed toys for kids to remind them of their shopping experience at K Mart. Industrial Customer: Industrial customers are the cream of any business and thrive on value added services and bulk discounts As defined by Kotler and Armstrong 1989:- "Organizational Buyer Behaviour is the decision making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers." K-Mart can provide their primary industrial clientele with substantial discounts, good credit terms and delivery at their office. They can also stress on their suppliers to provide unmatched after sales services to their industrial customers who have channeled their orders through K Mart. As it can be seen from the consumer purchase decision making process, post Purchase evaluation is an important factor that determines future purchase. (www.tutor2u.net) B 2 B Customers: online business is growing day by day and includes of a large proportion of international clients. For this purpose, the greatest challenge in this regard is to overcome the hassles of international business in terms of geographical constraints and K Mart can strike deals with DHL and TCS to deliver the orders on time and at reasonable freight charges. Also, K Mart to encourage online business can introduce sharing of freight charge deal on high volume purchases. This would be a limited time offer to boost internet and email sales. Conclusion: It can be concluded that K Mart is one of the best performing retail sector companies in terms of vendor and customer management. At this point, credit can be given to its various business partners especially outsourcing partner. However, there are potential risks involved in outsourcing of the procurement process including a risk of hiccups in case of disagreement with the outsourcing partner; the outsourcing partner might be rendering services to competitors, and it does not allow for good relationship Management activities. It is suggested that K Mart should keep in the loop on all activities in the procurement process and introduce policies to train the suppliers. In this regard, having a best supplier award program would be a very good idea. The downstream customer policies of K Mart are good enough and customer retention can be attained by introducing new deals and discounts. Executive Summary: This is a paper ion the B 2 B supplier and downstream customer management of one of the largest retail networks of the world K Mart. K Mart was a pioneer in Australia of the Retail outlet network. However, with time, competition has increased and there is a presence of Kohl's, Target and Wal-Mart. Due to increased competition and emergence of online marketing, K Mart needs to aggressively persue good internal marketing strategies including efficient supplier management and effective Customer Retention Policies. In this report, we have identified the major suppliers of K Mart and their product lines. Also, we have drawn up the business network of K Mart including the major players in the business process. Towards, the end we have recommended strategies for management of upstream suppliers and downstream customers. 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(1995), "Patterns of Buyer Behaviour:. Regularities, Models and Extensions", Marketing Science TABLE OF CONTENTS Topic Pages 1 Introduction 1 2 K Mart Product Lines 1 3 Network Surrounding K Mart 4 4 Overview of Products acquired from Upstream Supplier: 5 5 Conclusion 13 Read More