Executive Summary
Among the identified risks for Kmart were manufacturing and supply chain issues, worsening of the clothing distribution, excessive centralization, and low production quality. The importance of risk management lies in the opportunity not only to prevent potential risks but also to rationally manage them without losing the company’s revenue and customers. Consequently, after risk identification, specific strategies were proposed for implementation.
Among them, collaboration with other countries and the concept of decentralization were stressed. Remarkably, decentralization was recommended as the most efficient way to cope with risks and reduce Kmart’s losses. As part of the expected benefits, the opportunity for qualitative innovations implementation should be underlined, as well as the saving of the corporation’s market position.
Introduction
The modern world presents challenges to the successful operation of every business, including high competition, external events, and the country’s policies. Due to this factor, corporations tend to identify risks before they arise, enabling them to adapt to new realities and minimize losses quickly. However, some organizations are unable to identify potential solutions that will benefit the company and distinguish it from competitors. As a result, neglecting risk management prevents the implementation of innovations vital to future progress.
This paper examines Kmart’s vision, values, and potential risks in Australia. The Kmart organization is a company that designs and produces clothes for Australians. It was established in Burwood East, Victoria, in 1969 (About Kmart, no date). The focus will also be on strategies for addressing the stated risks and challenges. As the primary risk for Kmart, customer loss should be highlighted due to misperceptions about their needs and the company’s focus.
Identification of Risks
Before proceeding with risk identification, it is essential to specify the requirements of the chosen company. Notably, the Kmart corporation was selected to research potential risks and solutions (We’re committed to low prices, no date). In particular, at the moment, this company has more than 300 stores across Australia and New Zealand and offers a vast range of services for its customers (About Kmart, no date).
Nowadays, the company’s primary focus is to provide customers with high-quality clothing and goods while seeking innovative solutions that enable it to use its resources effectively without compromising product quality or clients’ enthusiasm. Therefore, while considering the company’s peculiarities and risks, it is vital to note that it is based in Australia and has various specifications aligned with this country’s traditions.
Manufacturing and Supply Chains
The first major risk for Kmart is manufacturing issues arising from both internal and external factors. For example, the presence of uncontrolled events worldwide is a crucial factor to consider. The manufacturing process depends heavily on supply chains from other countries and regions that provide the company with raw materials (Kunst, 2023). In the case of Kmart, there are various types of fabrics and other materials needed for clothes (Kreye, 2023).
Consequently, in the face of adverse outcomes and events such as natural disasters, wars, and other problems, the quality of supply chains can be undermined. This risk will directly impact Kmart’s ability to provide its customers not only with high-quality clothing but also to align with its long-term strategy (Kreye, 2023). Many decisions regarding the implementation of new clothes will be canceled due to the lack of essential materials. That is why it is essential to develop strategies that allow the corporation to use alternative sources, including additional suppliers able to produce them in-house.
Distribution
In contrast to the supply chains and the receipt of raw materials, the distribution of the company’s production is another aspect of the problem identified above. This risk is closely connected with the corporation’s infrastructure. However, another side of the issue that highlights the second risk is the policies and visions of other countries, including local governments in Australia (Tonti, 2023). As an illustrative example of this risk, one can cite the United States, with its many states. Remarkably, each of them provides companies with its own laws and policies that differ from those of the others (Shalini et al., 2021).
Consequently, it is extremely difficult for the company to meet all requirements and distribute its production across all regions. In the case of Kmart, the risk assumes the same situation but within Australia (We’re optimistic about our future and yours, no date). The lack of common policies among regions and cities can worsen the organization’s ability to distribute clothes. As a result, the company will lose its potential customers and be less competitive in the market.
Retail and Excessive Centralization
To better understand the risks, one should pay attention to the company’s statements on its official website. Among the most essential factors is that Kmart tends to incorporate both the design and production of its clothes into its functioning (Kulkarni and More, 2022). As About Kmart (no date) states, “We are proud to design and make over 80% of the products you’ll find in our stores or online.” (para. 5). Therefore, one can conclude that the corporation wants to control the overwhelming majority of functions that start from obtaining raw materials and ending up with the distribution of the completed production.
Although this strategy will enable Kmart to produce more customized goods aligned with the corporation’s view and long-term strategy, there is a significant risk of excessive centralization (Benjamin et al., 2023). It means the company may not be able to manage such an extreme manufacturing load. It can happen due to a lack of professionals to manage the process or due to their incompetence. As a result, this risk can lead to the collapse of the entire company.
Low Quality of the Production and Reputation
Another conclusion regarding the possible risks can be drawn from Kmart’s other statement. According to Circular Economy (no date), “we want to change how we work so that where possible, we can keep materials in ‘circulation’ instead of in landfill.” (p. 1). This position poses significant threats to Kmart’s production quality. All innovations need to be thoroughly researched and tested before being implemented. Without calculating the pros and cons of every new decision, the final result can be extremely negative (Shupeng, Andrew, and Daniel, 2020).
In the case of the fashion industry and clothes, it is essential to take into account the customer’s preferences, modern trends, and the corporation’s ability to align its production to them. However, decisions such as replacing specific materials can worsen the situation (Farooq et al., 2021). Kmart’s willingness to keep material in circulation can be disadvantageous to the quality of the clothes and, therefore, to the company’s reputation. Despite the commitment to saving the environment and reducing climate change, it did not help the corporation earn additional scores in the market.
The Collection of The Information
The information for risk identification was collected through research of the company’s policies, values, and strategies as described on its official website. Particularly, pages such as About Us (no date) were explored to understand Kmart’s vision for its future and how it wants to serve its customers. Consequently, the obtained information was thoroughly assessed, and key points, such as the company’s orientation toward keeping materials in circulation, were highlighted.
After this phase, other credible sources from the e-libraries were collected to understand the pros and cons of Kmart’s values and concepts (Meredith and Shafer, 2019). Therefore, it was possible to clearly understand the potential risks for the corporation. While comparing the information described in the sources and articles based on similar studies, the above-mentioned risks were identified.
Impact of Risks
If the risk is not managed properly, the organization will promptly lose its market position. All of the above-stated risks affect many organizations’ operations, from accepting materials and implementing innovations to communicating with customers and distributing products. As a quantitative loss, the company will experience a reduced opportunity to meet the client’s demands. In addition, qualitative risks assume a lowering of the quality of clothes. Failure to address these risks could undermine Kmart’s material procurement efficiency, leading to supply chain disruptions and impairing production capabilities.
Additionally, ineffective innovation implementation may lead to outdated offerings, weakening Kmart’s competitive advantage. When risk is poorly managed, the organization will experience a decline in customer satisfaction and loyalty. At the same time, distribution issues may cause delays, stock-outs, and revenue loss. Hence, Kmart must identify and manage these risks to protect its market position and ensure ongoing growth and profitability.
In Australia, businesses face a myriad of risks that can significantly impact their operations and bottom line. One prominent risk is the country’s vulnerability to natural disasters, including bushfires, floods, cyclones, and droughts. These events can disrupt supply chains, damage infrastructure, and lead to significant financial losses for businesses operating in affected regions.
Additionally, Australia’s economy is closely tied to global markets, making it susceptible to fluctuations in commodity prices, currency exchange rates, and international trade tensions. Uncertainties surrounding global economic conditions, geopolitical conflicts, and trade policies can all pose risks to Australian businesses, affecting their export opportunities and profitability.
The Strategies to Deal with Risk
The first strategy proposed is for Kmart to expand its manufacturing and collaborate with other countries. It can be beneficial to open new facilities near vital sources of fabrics, such as cotton fields. It will not only improve control over the procurement of materials for clothing but also ease their transportation (Herrmann et al., 2021). Remarkably, this strategy requires significant financial investments and new personnel willing to work in other countries.
However, the most suitable strategy for Kmart is decentralization. This concept assumes the diversification of tasks among different manufacturing facilities. Moreover, it depicts that the company’s management should also be split into different departments and groups to avoid excessive centralization (Bhandal et al., 2022).
As a significant advantage of this strategy, the different points of view should be stated. It will allow the company to assess its risks and potential losses from different perspectives, which is crucial for developing qualitative, effective solutions in the future. As a benefit, the current decentralization will create a long-term strategy that will benefit Kmart in the market and increase its chances of successfully implementing innovations such as circular use of materials. Notably, this strategy can have cons, as it requires a considerable number of professionals and managers. As the primary criterion for the strategy, it is essential to underline that it should address Kmart’s most extreme risks.
Discussion and Conclusion
As essential findings regarding Kmart’s business, the company strives to implement specific innovations. Without sufficient research, these changes can impose more threats to Kmart’s products than benefits. Among the risks, points such as the lack of management in a centralized structure, the loss of clothing quality due to the circulation strategy, and others were highlighted.
As an Australian company, Kmart needs to collaborate effectively with local authorities and government structures to ensure its policies and laws are suitable for distributing its products. As a limitation of the study, one should note the lack of research on the chosen company. Therefore, while researching the Kmart corporation, one can assess only the data available on the company’s official website. It limits data quality and lacks diverse perspectives. Consequently, it is vital to conduct additional research into Kmart’s operations and to understand how to address the identified risks.
Reference List
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Benjamin, R. et al. (2023) ‘A review on reinforcement learning algorithms and applications in supply chain management,’ International Journal of Production Research, 61(20), pp. 7151-7179.
Bhandal, R. et al. (2022) ‘The application of digital twin technology in operations and supply chain management: a bibliometric review,’ Supply Chain Management, 27(2), pp. 182-206.
Circular Economy. (no date).
Farooq, M. et al. (2021) ‘Supply chain operations management in pandemics: a state-of-the-art review inspired by COVID-19,’Sustainability, 13 (2504).
Herrmann, F. et al. (2021) ‘Green supply chain management: conceptual framework and models for analysis,’ Sustainability, 13(8127).
Kreye, M. (2023) Sustainable operations and supply chain management. United Kingdom: Taylor & Francis.
Kulkarni, M. and More, H. (2022) Operations and supply chain management. N.p.: Ashok Yakkaldevi.
Kunst, A. (2023) Kmart brand awareness, usage, popularity, loyalty, and buzz among fashion store customers in the United States in 2022.
Meredith, J. and Shafer, S. (2019) Operations and supply chain management for MBAs. United Kingdom: Wiley.
Shalini, T. et al. (2021) ‘Big Data in operations and supply chain management: a systematic literature review and future research agenda,’ International Journal of Production Research, 59(11), pp. 3509-3534.
Shupeng, H., Andrew, P. and Daniel, E. (2020) ‘Social media in operations and supply chain management: State-of-the-Art and research directions,’ International Journal of Production Research, 58(6), pp. 1893-1925.
Tonti, L. (2023) Kmart Group urged to join industry textile recycling scheme or face regulation, government says.
We’re committed to low prices and helping create positive change. (no date).
We’re optimistic about our future and yours. (no date).