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Kmart shocked the retail world by announcing an $11 billion merger with Sears. Kmart is buying Sears and both will survive, though some Sears stores may close.
Kmart plans to merge the two operations. This has the potential of being a strategic stroke?but only if they can execute it effectively.
The mergers of AOL-Time Warner with ABC and Disney were greeted with enthusiasm in the marketplace, but it turned disastrous.
The challenge for Kmart and Sears lies in bringing two different retail cultures together. Sears developed a business model that sells in shopping malls. It developed in-house brand names like Kenmore appliances and Craftsman tools. Kmart developed largely stand-alone stores that push discount brands.
Edward Lampert of Kmart is expected to run the combined companies. He plans to cross-sell products from each retailer. He wants to gain significant operating efficiencies by combining their operations. Previous mergers have taught us that while these goals are certainly worthwhile, they are much easier said than done.
Selling Kenmore appliances at Kmart outlets may sound great, but appliance salespersons must be much more knowledgeable than discount store clerks. Can they make the jump? Further, appliances take up a lot of floor space. If K-mart stores carry a large appliance line, what K-mart merchandise would be jettisoned to make room?
Some manufacturers, like Nike, sell to Sears but resist selling to K-mart in an effort to preserve their upscale image. Will the new management team be able to convince Nike to allow its products to flow to Kmart?
The biggest issue is this: Can the Sears management team, which evolved out of traditional department store models, blend with a Kmart team that is steeped in a competitive discount store model?
The Prophet Amos wrote, "How can two walk together unless they are in agreement?" (Amos 3:3). If these teams are not in agreement, the merger will fail.
Both companies have fallen on hard times. Kmart emerged from bankruptcy protection, after shutting down more than 110 stores. Hard times should be motivation enough to spark the differing teams to walk together and make this merger work.
Steve Marr is the former CEO of the fourth largest import-export firm in the U.S., a company which facilitated international trade for many of the largest companies in America. Currently, Steve consults with with businesses and ministries utilizing ancient Biblical principles for success in today's marketplace. Clickhereto contact Steve, or visit his website atwww.businessproverbs.com.