Economic Analysis of Kmart

Paper Summary:

This paper reviews how Kmart is currently being squeezed by Wal-mart, Target, Kohl's and a host of other discount establishments. The writer explains why the company now risks becoming irrelevant in a discount store world that has moved beyond them. The writer argues that had Kmart taken to heart certain key microeconomic concepts and applied them consistently they could possible have avoided this current state of affairs. These concepts are discussed.

From the Paper:

"Kmart certainly has its work cut out for itself. But how did it arrive at this state of affairs? Kmart declared bankruptcy in 2002 - the culmination of a number of bad decisions starting in the late 1980's and 1990's. The company had expanded rapidly, seeking to build up "a portfolio of category-dominant chains to complement its core business, the Kmart discount store." (Conrad, Hanson & Hoffman, 2001, p. 2). This strategy appears to have been an attempt to gain economies of scale. However most of these acquisitions had to be sold off as the economies of scale turned to diseconomies. There followed a concerted attempt to reorient the company back to the original discount store strategy."

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