New challenges will arise for both Amazon and Sears

New
challenges will arise for both Amazon and Sears Holdings as they are building their
new company. The following external environment variables will impact Amazon
and Sears Holdings’ current situation and need to be addressed as soon as
possible:

 

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.

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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 products
utilizing their world class e-commerce operations. They have a large customer
base across the globe and pride themselves in retaining and bringing low cost
products to the consumer.  The value that
Amazon brings for their customers is a convenient, cost effective way for the
consumer to shop from their homes. 

 

Amazon enjoys a distinct advantage in the technology
arena with their distribution and supply chain operations over all competitors
including Walmart.  They also enjoy a
strong name recognition which allows them the opportunity to have a large
customer base across the globe.

 

Sears Holding is known for having strong brand
recognition in addition to having many physical locations at prime sites such
as malls which brings many customers to the area.  Sears brings many products including specific
branded names such as Kenmore and Craftsman. 
In addition, Sears also provides customers with home installation and
auto repair services which sets them apart from other competitors.

 

Current Market / Competitive Landscape Assessment

One of the most significant competitors for the new
Amazon/Sears Holding is Walmart and Targets. Walmart has a couple of strategic
factors 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 to
customers as a family store. They have a wide variety of low priced products
and a well-managed distribution and supply chain operation. Target has
locations in the United States, Canada and India and has been slow in expanding
globally. Target does have an online presence

 

 

 

Current Company Identity
Analysis

 

Sears Holdings is a
brick and mortar store that is losing tremendous revenue and closing retail
stores.  While they still have some
strong brands, and are ahead of schedule reducing their debt, Sears still lags
in sales from previous years.

 

Amazon is a leading
company in giving low prices over a wide variety of products and customer
recognition. Amazon also has marketplaces across many countries which gives
them a footprint in many other markets outside of the United States and Canada.

 

Amazon/Sears Holdings are not the biggest brick and mortar – for
example:

Ø  Amazon is not physically located in any brick and mortar stores to
sell to its customers.

Ø  Customers of Amazon must select their purchases online and have
the items shipped to them.

Ø  Amazon is not the premier competitor in the retail market and is
fairly small in size to it’s larger competitors like Walmart and Targets.

Ø  Amazon
is also not as profitable as its direct retail competitors as it “competes with a whole slew of specialty retailers, ranging from Neiman
Marcus, to Williams Sonoma to Crate and Barrel, who hold an advantage not in
volume, but in merchandising expertise.” (Satell, 2013)

Ø 
Sears Holdings does not operate a premier
online service. They are customer centric and prefer experts in the stores to
serve their customers through their purchases. Business is basically conducted
through their physical locations.

 

Biggest issues/challenges facing the company
currently

 

Some of the biggest
issues/challenges facing the Amazon/Sears Holding entity will be integrating
the Amazon presence into the Sears Holdings physical location stores. Walmart
has an advantage in the physical location arena as they are established. Walmart
is also strategically acquiring e-commerce entities to better compete with the
Amazon/Sears Holding company. 

 

Proposed Business Plan

 

Given your assessment of
where the company is right now – positioned against their current competition
and knowing the strategic moves that this competition has undertaken – prepare
an assessment that Bezos and Lampert can use to craft a new Red Ocean
strategy for the strategic unit.

 

Red Ocean Strategic Plan

The Amazon/Sears Holding
company must develop strategies to be in a growth strategy competing against
comparable competitors such as Walmarts.

The goal for
Amazon/Sears Holding will be to beat their competitors in the pricing arena and
also providing valuable low-cost products in the Kenmore and Craftsman brands
and take advantage of the home installation and auto repair services of Sears.
Walmarts can compete in the pricing arena but will struggle without a
significant acquisition of a home installation and a reputable automotive
repair center that Sears has nurtured for many years.

 

At this time a merger
and acquisition of Sears Holding by Amazon would be the most favorable
strategic sense for both companies. Sears Holding is drowning in declining
revenue and loss of customer base.  “The
retailer also has total debt of $4.4 billion as of the end of
October, including $303 million in senior secured notes due in 2018.” (Berr,
2017)

 

 

Additional International
Expansion

 

The Amazon/Sears Holding
entity should have a great international footprint in addition to the branded
products and services that no other company can do with the efficiency that
Sears Holding had built. Amazon already has a footprint in many foreign
countries so expanding to newer markets with tremendous growth such as India,
Brazil and Russia.

 

 

Strategic Alliances

 

Amazon/Sears Holdings
may want to consider aligning with entities in the foreign markets that they
seek to conduct business in. For example, India is a large emerging market that
an acquisition would help to integrate the Amazon/Sears Holding company’s products
and services versus trying to grow the business organically in this market.

 

Another consideration
for Amazon/Sears Holdings will be to negotiate with their vendors including
Sears Holdings branded vendors such as Kenmore and Craftsman. The strategy will
bring value to the customer but also allow these new products to be marketed
along with their services as an added advantage to customers to shop online and
in the newly formed Amazon stores. 

 

Characteristics of Red
Ocean strategy

Amazon/Sears Holding
need to use Amazon’s advantage in e-commerce to draw customers to the online
arena and to the newly designed brick and mortar stores. While Walmart is
currently acquiring businesses to compete in the e-commerce arena, Amazon is
clearly established and can easily scale their operations and integrate Sears
Holding products and services into their system quickly and at a low cost.

 

 

 

 

Structural Execution
Steps – Strategy/Structure Match

 

For Amazon/Sears Holding
to align their structure to their strategy, Sears Holdings should be integrated
into Amazon’s organizations. To accommodate the integration of Amazon into
Sears Holdings physical locations, the retail leadership must be identified to
include a new division for Amazons activity within the stores.

 

The retail leadership
will be tasked to change each stores appearance to bring Amazon’s strong name,
products, online services to the forefront. Included with this change, the
store must also present customers with the branded products and services that
Sears has been known for by customers for years.  This combined value of products, services and
a strong online presence and convenience for the customers should present a
very attractive opportunity for the customers to shop for high value, low cost
products with this newly formed store.

 

The next
strategy/structure to consider will be the Board of Directors.  The Board will need to represent Amazon’s
e-commerce interest for investors.  This
distinct advantage will still need strong leadership to move into an ever more
competitive arena as larger retailer such as Walmart work to acquire e-commerce
businesses to better compete with Amazon/Sears Holding.  The Board of Directors will also need to
represent the Sears Holdings brick and mortar stores.  The direction to improve and integrate the
Amazon name into these stores will need to support the strategy of using
Amazon’s strong name recognition to draw current and new customers to the
stores.

 

The Board of Directors
lastly will need to have representation for Sears Holdings branded products
such as Kenmore and Craftsman. These brands are household names for a large
customer base plus they also have a distinct advantage of having services such as
home installations and automotive repairs centers.

 

Centralization/Decentralization 

 

Pros of structure

1.     This structure will
address the distinct advantages that the merger of Amazon/Sears Holdings needs
to compete in a Red Ocean scenario.

 

2.     This structure will give
Amazon/Sears Holdings a head start to further eliminate their competitors from
taking their market share.

 

3.     Lastly, this structure
will give this merger the ability to scale larger and globally.

 

4.     Amazon/Sears Holding
will not need to invest much capital in physical locations as the Sears
Holdings locations are in high customer traffic areas.

 

Cons
of structure

 

1.      Competitors may study this new structure and
try to replicate to compete.

 

2.     Competitors may undercut
prices 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 online
capabilities across the globe. Amazon has the distribution expertise and
infrastructure in place as compared to their main competitor Walmart which must
acquire e-commerce technology in order to compete.  This effort is a large undertaking that will
take time to create.  Amazon is already
nimble with its operations.