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Kmart stores were characterized by various negative features before the arrival of Guy Russo as the new Chief Executive Officer. The stores had shabby change rooms, old carpets, less motivated staff, inadequate supply of products to customers and daunting product range which demoralized customers from making their purchases. The business model that employers were operating under had some broken hitches and broken processes.
The arrival of Guy Russo changed the company making it experience increased profits and, at the same time, enjoy top ranking on the retail map. The CEO changed the leadership structure through handpicking executive management team comprising of six people and, at the same time, considering issues of gender balance within Kmart’s leadership structure.
Then he went ahead to moderate Kmart’s product range lines, as well as improving pricing mechanisms (Clawson, 2012). Additionally, Guy enriched the supply chain by reducing involvement of middlemen and wholesalers (John et al, 2006). Model where middlemen and wholesalers are used characterizes Australian retail model which does not practice direct sourcing model.
Russo ensured that Kmart’s target market segments were clearly defined (McKee et al., 2013). At the same time, Russo assisted in positioning the store in the market as a place where all essential goods can be found, including home appliances and clothes, at affordable prices. This ensured reduction of company’s operational costs and at the same time maintained focus on Kmart’s real business processes (Lussier and Achua, 2010).
Guy Russo also encouraged company development through application of the principle of ”less is more” whereby Kmart replaced all expensive goods with less expensive ones. This was for the purposes of capturing considerable market share since majority within various market segments considered purchasing quality goods at affordable prices (Cravens and Piercy, 2009).
Russo also removed spot discount imposed on products sold. This was contrary to tradition of most Australian retailers who applied pricing model involving offering percentage-off discount for the purpose of improving sales.
He ensured that all new managers were taken through thorough training granting them new perspective in leadership and management of company affairs. Good example is when Guy took over hundred of store managers to Beijing for the purposes of giving them new perspective on looking at life (Lussier and Achua, 2010).
Such moves as change in management style had consequent results, Russo’s leadership style within Kmart’s management prompted replacement of several company staff based on the fact that they could not commit to efforts of turnaround.
This led to replacement of approximately 20% of chain store management officers. At the same time, application of direct model brought by Russo led to cases of unemployment since many people were pushed out of their jobs especially wholesalers and middlemen. Direct sourcing was applied in markets in low-cost countries and such strategy could only be adopted by large retailers rather than small players.
The CEO introduced intensive use of modern technology system for the purposes of managing its inventory. Such improvement ensures that the company achieves highest sales within every market segment compared to its competitors within the same market. Serving low-end consumers prompted Russo to encourage division of its products to fully satisfy their clients (Lussier and Achua, 2010).
However, intensive use of technology might not work well in low markets like Bangladesh since not all consumers are technologically literate to use services such as those provided on the Internet. However, Kmart’s application of the web pages on the Internet in retailing provides consumers with efficient means which they can utilize in selecting variety of goods available online, hence saving their time (McKee et al., 2013).
Clawson, J 2012, Level Three Leadership: Getting below the Surface, 5th Ed, Prentice Hall, USA
Cravens, D & Piercy, N 2009, ‘Strategic Marketing, ‘McGraw Hill, London
John, S, Caroline, E, Godsell, J, Harrison, A 2006, ‘Supply chain Management: theory, practice and future challenges,’ International Journal of Operations Production Management, Vol. 7, No. 26, pp 754-774.
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Lussier, R, N & Achua, C, F 2010, Leadership: Theory, Application & Skill Development, 4th Ed, South-Western Publishing, Australia
McKee, A, Kemp, T & Spence, G 2013, Management: A Focus on Leaders, Pearson Education, Australia