Page 130 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Unit 6: Retail Planning and Environment

Restructuring the supply chain: On September 6, 2001, Kmart announced that it will Notes
restructure certain aspects of its overall operations. The focus of this restructuring program
was on the supply chain infrastructure including the reconfiguration of Kmart’s distribution
center network and implementation of new operating software across is supply chain.
Reconfiguration of the distribution center network entailed the replacement of two aging
distributions centers with two state of the art facilities, which was aimed at improving the
productivity the flow of goods to nearly half of the stores .In addition the distribution of
slower moving goods would be centralized to one newly designated center to improve
efficiency across all other centers and facilitate the expansion of Applying Store Operation
Across Retail Formats the Blue Light Always campaign. New operating software was
implemented cross Kmart’s supply chain and completion of the implementation was
expected by the end of the second quarter of 2002.
In conjunction with these actions, Kmart expected to record special charges totaling
approximately $195 million ($124 million, after taxes) over the next three quarters.
Approximately $130 million of the charges related to the impairment of supply chain
software and hardware that would no longer be utilized and to accelerated depreciation
on assets that would continue to be used until their replacement. Approximately $65
million of the charges related to costs of exiting the outdated distribution centers. Cash
outlays related the supply chain strategy were approximately $45 million.
Approximately $150 million of the charge would be recognized in the third quarter of
2001. As certain components of the Company’s supply chain software would to be utilized
until replaced, depreciation would be accelerated to reflect the revised useful lives and
these assets would be fully amortized by mid 2002. The expected incremental depreciation
aggregated $15 million in the fourth quarter of 2001 and $30 million in 2002.

Question:
Discuss the issue of promotional pricing of Big Kmart.
Source: http://www.citeman.com/10844-retail-formats-in-operation

6.9 Summary

Retailing is the latest buzzword among the business. It is evolving into a global, high-tech
business and occupies a pre-eminent position in the economics of all modern societies.
The Indian retailing Industry is becoming intensely competitive, as more and more players
are vying for the same set of customers.

Strategy planning or formulation of strategy consists of a set of decisions that leads to the
development of an effective strategy. We check all the activities related to the internal and
external factor those affect directly or indirectly to the organization.

Companies need to categorise segments according to their present and future attractiveness
and their company’s strengths and capabilities relative to different segments’ needs and
competitive situation.

Porter suggests that there are five basic competitive forces, which influence the state of
competition in an industry.
Strategic retail planning process divided into the following steps: Deciding the store’s
mission and objectives, Situation analysis, Formulation of retail strategy, and
Implementation and control of strategy.

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