Case Analysis Format

I. Background (The Case itself)

II. Time Context – period when the problems started or originated

III. Viewpoint- person or officer responsible in finding solution to the problem.

IV. Central Problem- statement of the major problem.

V. Objectives:
a. Must Objective – intervention that should be done.
b. Want objective- status the company is aiming or would want to
maintain.

VI. Areas of Considerations:

➢ Strength - internal positive aspects a company has over other or its
competitors.
➢ Weaknesses - internal negative aspects the company cannot overcome.
➢ Opportunities – external factors awaiting which may put the company
on top and maintains its status as a leader.
➢ Threats - external factors considered as challenges that must be
overcome otherwise these may affect the company’s status as a leader.

VII. Alternative Courses of Actions (ACA) –prepare at least 3 ACAs; Give

advantages and disadvantages of each ACA

VIII. Recommendation. (Choosing the best ACA and give your rationale why
choosing such ACA)

IX. Plan of Action- steps or things to be done or considered in implementing the

ACA as solution to the problem.
SAMPLE CASE STUDY

“Kmart Corporation - Seeking Survival in a Changing Marketplace (2002)”

Summary of the Problem:

On January 22, 2002, Troy, Michigan - based Kmart Corporation became the largest
retailer in the history of the United States to seek bankruptcy protection. In its voluntary petition
for reorganization under Chapter 11 of the U.S. Bankruptcy Code, Kmart management announced
that it would outline a plan for repaying its creditors, reducing, restructuring its business, and
emerging from court protection in July 2003. “After considering a wide range of alternatives, it
became clear that this course of action was the only way to truly resolve the company’s most
challenging problems”, Kmart Chief Executive Charles C. Conway said in a prepared statement.

On March 11, 2002, Kmart announced that Charles Conway had resigned. He was replaced
as Chief Executive Officer (CEO), by James B. Anderson, who also would continue as Chairman
of the Board of Kmart, a position he was elevated to just prior to the bankruptcy. Upon assuming
the position, Anderson indicated that Kmart would emerge from bankruptcy protection “as strong
and healthy competitor, with a clearly defined place in the discount retail sector. On his first day
as CEO, Anderson said he would initially be focusing on basics, such as cleaning up stores and
making sure selves were full of merchandise. He knew that he must develop a strategic plan of
action that would guide the long run performance of the organization following bankruptcy
protection.

The early years of the 21 century were problematic and difficult ones for Kmart and the
st

entire retail industry. Sluggish consumer spending, rising unemployment, the energy crisis,
increased competitive pressures, battle for market share, a dismal holiday season, halts in
shipments from wary vendors, problems in the securities and bond market, liquidity issues and
the events of September 11, 2001, all came together to make this period a very challenging time in
which to operate. Several historic retail chains had also filed for protection and had either been
reorganized or liquidated. Some analyst doubted if Kmart could survive in a changing market
place and felt it would face eventual liquidation. Others felt that the firm needed an entirely new
strategy that would reorganize and reposition the company in an extremely competitive
marketplace. Retail analyst agreed that Kmart management had a huge task to undertake in the
immediate future and the years ahead….
I.TIME CONTEXT: September, 2001

II. VIEWPOINT: James B. Anderson

III. CENTRAL PROBLEM: Strategy that would reorganize and reposition Kmart
Corporation in the extremely competitive discount retail sector of the U.S. Market.

IV. OBJECTIVES:
Must Objectives:
1. To formulate and implement a strategy that would reorganize and reposition Kmart
Corporation as the third- largest discount retailer in the United States by July, 2003.
2. To make Kmart Corporation a stronger, more dynamic, more profitable enterprise
with a well- defined position in the discount retail industry sector by July, 2003.
3. To generate an annual net income of $ 2.5 billion from operations for the year 2002.

Want Objectives:
1. To be the leading discount retail store and emerge as the leading mass merchandize
retailer in the U.S. in 10 years’ time.

V. AREAS OF CONSIDERATION:

STRENGHTS:

1. Kmart Corporation as one of the market leaders

2. New leadership: Experienced CEO
3. Capability of Kmart to grow despite a mature retail market.
4. Kmart continue to acquire business operation including interest in other businesses to
establish itself.
5. Proving its capabilities as a market leader and continue growing in the mature market.

WEAKNESSES:

1. Kmart Corporation’s lack of definable niche in the discount retailer industry

2. Poor financial performance.
3. Lack of clearly defined turnaround plans.

OPPORTUNITIES:

1. Broad customer base.

2. Bankruptcy of other big retailers such as venture, Ames Department Inc.,
Montgomery Ward and Company, Jacobson’s Son’s store Inc. and others.
 THREATS;

1. Increase competitive pressures.

2. Discount department stores were being challenged by several other retail format.
3. Some retailers were assortment oriented, with a much greater depth of assortment
within a given product category.
4. Based from industry competitive analysis, Kmart is quite far below other competitive
stores in U.S.

VI. ALTERNATIVE COURSES OF ACTION:

ACA # 1: RESTRUCTURING

The firm should implement reorganization and restructuring of the corporation. The
following can be implemented:
1. Disposition of non- core assets.
2. Closing of underperforming stores.
3. Clearing of aged and discontinued inventory.
4. Conversion of stores to other formats.

Advantages:
1. This will increase the cash inflows due to proceeds in disposition of assets.
2. Reduction in cost of maintaining non- performing stores.
3. New formatted stores may recapture the customers. It may also serve as a test ground
for the future Kmart stores format.
4. Clearing of inventories not only pleases the store managers and staff but the customers
as well.

Disadvantages:
1. Untimely or unwanted disposition of assets do not generate the correct or justifiable
value of the asset to b implies that some workers will have to be sold.
2. Closing stores are anti-labor which implies that some workers will have to lost their
jobs if the company cannot accommodate them in other stores.

ACA # 2 – BACKWARD VERTICAL INTEGRATION

The backward vertical integration alternative will move Kmart to speak to their
suppliers. Kmart can invest in the suppliers or be part owners of such business, if not
establishing his own.

Advantages:
1. If Kmart will invest in its suppliers, price of the products or commodity will be reduced
because it is directly sourced from the suppliers of which Kmart has an interest.
2. If Kmart will invest in putting up its own product businesses, there will be a definite
decrease in the retail prices since the supplier, a channel of the market has been
eliminated.
 Disadvantages:
1. Converting in business of suppliers will entail cost. It may also endanger same
investments due to lack of technical know-how or expertise on the business of such
suppliers.
2. Investing in production of goods and products will be another business that Kmart
may not be of interest. This will entail cost and will be an expansion, or even addition
of activities of the Kmart Corporation.

ACA # 3 - HORIZONTAL DIVERSIFICATION

(The idea of seeking ownership or increased control over the direct and indirect
competitors of the business.
Advantages:
1. The corporations can execute policies that will be both beneficial to the corporations.
2. Should any of the corporations or both agree to acquisition or merger, such action will
be easily discussed and agreed upon by parties.
3. If a company has direct control or ownership over its direct or indirect competitors, it
may benefit to the performance of the better company. (This will increase profits or
reduce losses for the other company.

Disadvantages:
1. Agreement of parties may be limited since they are competitors in business.
2. If someone agrees to selling partly, or wholly to its competitor, it will be very costly to
the side of the buyer.

VII. RECOMMENDATION:

ACA # 1 - RESTRUCTURING

Kmart Corporation should restructure, reorganize, and consolidate its resources.

They done this before sometime in 1995 and survived. Restructuring will also leave the
corporation with good performing assets; reorganization will also help Kmart Corporation
select better manpower complement to its operation. Kmart will also have the effort to
consolidate its resources to plan and emerge a better corporation.

VIII. PLAN OF ACTION:

1. Board of Directors approves the recommendation of restructuring and instructs CEO to

implement the decision.
2. CEO prepares a Plan of Action to include the following:
2.1 Audit of all assets and performance of the assets of the corporation.
2.2 Review of performance of all stores and recommends appropriate action such as
closure, or reformatting.
3. Evaluation of employees to determine who have to retained or retrenched.
4. Instruct all store/ department managers to clear aged and discontinued inventory.
5. Review pricing policy of goods sold.
6. Prepare an environmental scanning of Kmart.
7. Submit plan of action to the Board for approval.
8. Implement the plan.