Environmental Analysis of Sears Holdings

Environmental Analysis of Sears Holdings
There are several external factors that will impact Sears Holdings Corp. direction over the next ten years. These factors, which make up the external environment, include factors in the remote, industry, and operating environment.
In the remote environment there are economic and technological factors that will impact Sears Holdings. Economic factors such as availability of credit, level of disposable income, and the willingness of people to spend will all be major factors affecting the company (Pearce-Robinson, 2003). Technology will also be a concern for the organization. To avoid obsolescence and promote innovation, a firm must be aware of technological changes that might influence its industry (2003). In recent years, the ease and availability of the internet has opened the doors in the retail setting where people now do not have to leave their home to purchase everyday items. During the next five to ten years the internet will become a way of life. Customers will be able to purchase their appliances, schedule an appointment, and even view, in a real time environment, the location of their service technician. To help Sears Holdings remain competitive they must remain conscious of market trends and internet technologies. Technological forecasting can help protect and improve the profitability of firms in growing industries (2003).
The nature and degree of industry factors relies heavily on competitive forces. These competitive forces include the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services, and jockeying among current contestants (Pearce- Robinson, 2003). One of the more critical factors affecting the company in regards to the industry involves new entrants and innovation. Currently, Sears is the number one home appliance retailer as well as a leader in tools, lawn and garden, and home electronics. During the next decade Sears must remain active in the Research and Development sector as new technologies are being introduced to sustain its advantage in the home-appliance business. For example, Kenmore, a key proprietary brand, recently introduced a cooktop oven that uses electromagnetic frequency rather than conventional heating elements. This state of the art of technology heats a pot of water in literally a second and keeps the pot at a constant temperature. In the future, there will be companies that develop more technologically advanced products and appliances than what is on the market today. Sears must remain conscious of new technologies and new entrants into the market in order to maintain its advantage over its competitors.
The operating environment comprises factors in the competitive situation that affect a firm?s success in acquiring needed resources or in profitability marketing its good and services (Pearce- Robinson, 2003). The recent merger between Kmart and Sears has positioned Sears Holdings as the nation?s third largest retailer, with approximately 3,800 full line and specialty retail stores in the United States and Canada. From a competitive position standpoint this move will allow two unprofitable companies to combine assets and compete with Wal-Mart and Target. In addition to viewing the competitive position of the company, assessing consumer behavior and market trends becomes key elements in the process of satisfying your market needs (2003). During the next few years Sears Holdings plans to introduce a new store format based on the needs of the consumers. Sears Essentials will offer products from both Sears and Kmart including refrigerators, lawnmowers, pet supplies, and produce. In addition, these stores will located at off mall sites and include pharmacies, banks, and garden centers.

Another key component of the operating environment involves financial position. Two years ago Sears sold it?s credit division to help pay off some debt and focus more on its retail business. During the next few years Sears will continue to focus its attention on the core business presented by the merger of Kmart and Sears. Sears Holdings recently announced that it is pursuing strategic alternatives for its Orchard Supply Hardware business. In the same regards, Sears may decide to outsource its Product Repair Division over the next few years and concentrate solely on its retail business.

Overall, there are several areas in the external environment that Sears Holdings must remain aware of. As stated these areas include issues in the operating, remote, and industry environment. The long-term objectives for Sears Holdings focus on remaining an industry leader in home appliances. Currently Sears Holdings is the third largest retailer with approximately $55 billion in annual revues. Over the next five years Sears wants to continue to drive sales and profit growth. One of it goals is to have $100 billion in annual revenues. In order to reach this level it may focus exclusively on its retail business. This may cause them to separate themselves from their hardware stores as well as their product repair division.

Pearce-Robinson. (2003). Strategic Management, 8th edition McGraw-Hill Companies.

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