Sears External Analysis
Sears Holdings Corporation was one of the biggest merchandise retailer store in the U.S after it was surpassed by Walmart. The company lost its competitive advantage in ecommerce to an extent that it filed for bankruptcy protection. Multiple factors are attributed to the Sears’s sales and financial losses for the past 6 years (Patten & Zhao, 2014, June). The company’s fate is highly attributed increased competition in the retail sector, missed opportunities and poor leadership. The paper is an external analysis when Sears lost its competitive advantage.
To start with, there was an economic recession in the U.S between 2008-2009 prior to sear’s loss in its competitive advantage.it was a major blow to the company which had been doing well in its real estate venture. Sears’ entry into other businesses are also attributed to the company’s fall down. What followed the economic decline is that the company significantly cut down on its costs and sold of its assets from $7 billion in 2007 to $2.6 in 2016. In 2014, Sear’s online sales also began to decline even though the e-commerce industry has been expanding by at least 15 percent per year (Hortaçsu & Syverson, 2015). During that time, Amazon’s sales had drastically increased. Given that Sears was already in the online business before Amazon, it can suggests that the company’s leadership lowly regarded e-commerce. Amazon’s Jeff Bezos saw the opportunity in online shopping and managed to leverage it (Carré, Tilly & Appelbaum, 2014). As such, Sears lost its competitive advantage by not seizing the online shopping opportunity, with Amazon and other companies did.
Sears faces tough competition from Amazon, Walmart, Target, and Macy. Also, Lowe’s Companies Inc., Penney, and Target Corp are big rivals with the company. Based on Porter’s five forces model, competitive rivalry was a central driver that contributed to the loss of Sears’s competitive advantage. Markets are highly driven by the number and ability of participants (E. Dobbs, 2014). A market may be rendered unattractive due to the presence of multiple companies that sell similar products (Wang, 2014). As such, all the opponents of Sears Holdings Corporation and especially Amazon, played a central role competing for the firm’s customers.
Sears has a strong global presence which is one of its core strengths. The company has approximately 3, 500 stores located in the U.S and Canada, and most of them are retail-based. Apparel and fashion, consumer goods, and marketing and advertising are some of the main industries that Sears has ventured into. Buyer power might have driven the company to an extent of losing its competitive advantage in e-commerce (Tedlow, 2013). The business had not paid attention to online business and did little to attract the online buyers. As such, Sears had few online buyers and when Amazon became popular, it would have been easier for the customers to switch. More so, Amazon was selling a wide range of goods with a reliable delivery system.
Overall, Sears was one of the biggest retail companies in the U.S after it was surpassed by Walmart. The corporation had a good opportunity to focus on venturing into e-commerce as it was already into online selling which was its competitive advantage before Amazon. However, Amazon saw the opportunity to enter into online shopping and seized it. However, Sears experienced a wide range of challenges such as economic recession which largely contributed to the collapse of the business.
Carré, F., Tilly, C., & Appelbaum, L. (2014). Competitive Strategies and Worker Outcomes in the US Retail Industry. Members-only Library.
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Hortaçsu, A., & Syverson, C. (2015). The ongoing evolution of US retail: A format tug-of-war. Journal of Economic Perspectives, 29(4), 89-112.
Patten, D. M., & Zhao, N. (2014, June). Standalone CSR reporting by US retail companies. In Accounting Forum (Vol. 38, No. 2, pp. 132-144). Elsevier.
Tedlow, R. (2013). The Rise of the American Business Corporation. Taylor & Francis.
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