Analysis of Risk factors
One of the risks for KMART is a volatile customer loyalty. Customers are likely to shift their loyalties from the products of the company to those of competitors, and this is a high risk to the marking of the company’s products. Change in customer loyalty will affect the volume of sales of the company, and may dent the reputation that the company has worked hard to develop over the years. Lower sales volumes will have an adverse impact on the revenues of the company both in the long run and in the short run. It is therefore very critical that the risk that customers will change their loyalties be under close observation, and corrective measures taken immediately at any hint of change of loyalty of customers.
The risk of misunderstanding customers is also very high. It is important that the needs of the both current and potential customers of KMART be established so that product offerings can be developed accordingly. It would be disastrous if the company offered in the market products that customers do not need or not of their liking. This is a risk that should be considered when developing a marketing plan.
Failure to understand customer behavior is another risk factor in Kmart. It is important to establish, as accurately as possible, the behavior patterns of current and potential customers. Carrying out timely and periodic market surveys will reduce this risk, as the company will be able to establish the needs of its customers and act to meet these needs.
Poor pricing is a risk factor in marketing of Kmart products. Since the company operates in the retail industry that is very competitive and has well established multinational competitors, it is important that the company price its products in a most optimal way. Poor pricing of products will most likely result in the loss of business to these competitors. Low prices will result in reduced revenues, so a balance needs to be struck in pricing in an effort to attract and retain customers. This will reduce the risk of loss of customers, and by extension revenues because of poor pricing.
Operating Risk Factors
Kmart faces several risk factors in its operations. The main risk in operations is the loss of products sold to customers in the delivery process. There is a difficulty delivering goods bought by customers from Kmart online, and the company may incur huge losses if this is not contained. A new delivery strategy will need to be developed as a way of reducing this risk. A good tracking strategy will need to be developed to ensure that customers’ purchases are well tracked during the delivery process.
Failure to understand the forces of demand and supply as they relate to the operations of Kmart is another risk factor. The company may incur losses by not accurately forecasting demand and supply resulting in over or undersupply of stock, and as a result low sales or stock wastage. It is imperative that tools for gauging the market forces of demand and supply, and accurately forecasting the demand of the company’s goods and supply of stock to the company. This will reduce the risk associated with changes in demand for the company’s goods and supply of stock to the company.
Kmart also bears an operational risk in human resources. There is a need to develop well trained and loyal human capital to handle the operations of the business. Market trends in terms of development and compensation should be well studied so that the company can attract and retain a motivated workforce. Failure to have well trained work force will most likely affect the operations of the company negatively. A well guided and informed human capital policy will reduce this risk.
Changes in technology pose an operational risk to Kmart. This is because the company has invested heavily in the past in developing an online market for its products. Changes in technology may render some of these developments redundant, and if changes are not made in good time, this may result in loss of customers, and by extension revenues to the company. Management of technology will ensure that the company has in place the best technology for its operations and reduce this risk.
Global changes also bear a risk on the operations of Kmart. The company markets products from different parts of the globe, and any changes in global trends may cause losses to the company. Changes in global trends may affect the supply of stock to the company, resulting in customer dissatisfaction, and loss of business. The operations department should keep a close eye on the changes in global trends to ensure that the company does not suffer losses as a result of such changes.
Management Risk Factors
Management offers leadership of nay organization. In Kmart, management is responsible for setting out both long term and short term objectives and develops policies on how these will be achieved within planned timelines. Poor management is a risk factor in Kmart. Poor management will ultimately result in poor performance of the business as a whole.
Setting of objectives plays a critical role in the success of any company. However, there is a probability that a company will incur losses if it sets out inappropriate objectives for its operation. Setting the wrong objectives is a management risk factor in Kmart because it will affect the performance of the company both in the short and long run.
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