Tuesday, May 4, 2010


Sears, Roebuck, and Co.

Fact File

Founders: Richard Sears and Alvah C. Roebuck.

Distinction: World's first mass-retailing network.

Primary Products: Apparel, home fashions, appliances, home

improvement products, lawn and garden equipment.

Annual sales: $41.071billion.

Number of employees: 324,000.

Major competitors: Wal-Mart, Target, JC Penney.

Chairman, president and CEO: Alan J. Lacy.

Headquarters: Hoffman Estates, Ill..

Year founded: 1886.

Web site: www.sears.com.

Richard Sears started things by simply peddling some gold–filled watches

to coworkers along a Minnesota railroad line. Today, a mind–boggling

selection of products and services is offered through some 850 mall-based

stores, 1,400specialty stores, and 650 small–town stores that mostly all

bear his name. New high-tech sales tools and trendy advertising

campaigns are consistently tested and deployed. And, for those who

prefer to shop at home, there's even a state-of-the-art Web site designed

to match competitors in the newest marketplace of all.

In the 1880s, Richard Sears was a station agent for the Minneapolis and

St. Louis railway in North Redwood, Minn. To fill the quiet days and pick

up extra cash, he sold lumber and coal to residents of the area. When a

neighboring jeweler received a shipment of watches that he didn't want,

Sears offered to take them off his hands. He sold them for a profit to

other station agents, and realized that there was money to be made in

this market. In 1886 he formed the R.W. Sears Watch Company in

Minneapolis set off upon a new career in retailing.

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Success came quickly and the ambitious Sears began looking for ways to

expand. During the very next year he relocated to Chicago. Immediately

upon his arrival, he sought help in his new venture through a classified ad

in the Chicago Daily News. One of the respondents was Alvah C. Roebuck,

an experienced watchmaker from Indiana. Sears hired him on the spot.

The two men, both in their 20s, kicked off a business partnership that

would permanently alter America's retailing landscape.

In 1893, they changed their corporate name to Sears, Roebuck

and Co. At the time, about two-thirds of the nation's 60 million residents

were living in rural areas and most of them–farmers in particular–were

forced to purchase all of their goods from small, high-priced general

stores. Sears and Roebuck were among several entrepreneurs who felt

they could offer better deals through mail-order catalogs. Others who hit

upon the same strategy included fellow Chicago merchant Aaron

Montgomery Ward, who already had turned in into a multimillion–dollar

enterprise. BY purchasing products in bulk and utilizing the railroads and

a growing package delivery system, these companies became rising

commercial stars.

Richard Sears knew the rural market from his days in Minnesota. He also

knew how to write catalog copy that convinced people to purchase what

he was selling. By 1893 the company's sales hit $400,000. Two years

later, Sears and his partner were churning out catalogs with more than

500 pages featuring watches and jewelry as well as shoes, women's

clothing, wagons, fishing gear, stoves, furniture dishes and glassware,

musical instruments, saddles, firearms, buggies, bicycles, and baby

carriages. Sales jumped to $750,000 and Chicago clothing manufacturer

Julius Rosenwald was brought abroad to help organize the booming


The company moved into larger quarters and began construction on a 40-

acre, $5 million plant and office building on Chicago's West Side.

Roebuck, who was in ill health, resigned soon after. Rosenwald became

vice president, and in 1901 was additionally named treasurer. Five years

later Sears and Rosenwald decided to take the company public to obtain

additional capital. Its stock symbol, still a lone "S", under scores the

pioneering place that it holds in America's business and financial



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That same year, the company moved into its new headquarters and

opened an office in Dallas to serve the growing southwestern U.S.

market; Sears hoped to ultimately open 10 such regional facilities. His

rapidly expanding business was experiencing some growing pains,

however, primarily related to shipping snafus. To solve them, company

officials designed and implemented an elaborate system that

helped efficiently handle an even greater sales volume. According

to company lore, Henry Ford was among those who traveled to the plant

to study these advanced assembly line techniques.

The catalog was fine-tuned during the early days of the 20th century, but

it still carried an astounding assortment of products at prices that seem

incredible today. Men's suits were $9.95, while a "Stradivarius model

violin" went or just $6.10. To help distribute even more catalogs, Sears

hit upon an innovative marketing scheme: He asked customers to pass

them out to friends and neighbors, and offered premiums (such as

bicycles or sewing machines) when these secondary recipients placed

orders. After experimenting with this plan in Iowa, Sears rolled it out


Despite all this, significant changes in American life began threatening

mail-order sales. The growth of cities and their steadily improving modes

of transportation, meant less captive rural customers who relied upon the

Wish Book. A proliferation of chain stores that sprang up around the

country to meet this new reality simultaneously created a major new form

of competition. Sears decided to fight back by opening its own stores in

various cities. Robert E. Wood–a company vice president who later

became president and board chairman–was placed in charge of the effort.

The first store opened in Sears's Chicago plant in 1925. It was a huge

success, and seven more immediately followed. Within two years, 27

stores were operating. By 1929, the company had 319. Thousand of

customers flocked to them, and retail sales topped mail order for the first

time in 1931. "Leases can't be signed fast enough, stores can't be readied

fast enough, personnel can't be hired fast enough," one company official

noted. This popularity helped convince Sears to begin offering products

under brand names of its own. The unveiling of Craftsman, Kenmore, and

Diehard items came next.


Sears decided to move into other areas as well. It created Allstate

Insurance as a wholly-owned subsidiary in 1931. In later years, it added

the Dean Witter Reynolds financial organization, Coldwell Banker real

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estate Company, and Discover credit card business to complete what it

saw as a collection of full-line customer services. Catalog sales offices

were launched in towns too small to support a full-scale retail outlet,

while stores were also opened outside the United States (Cuba was the

first locale in 1942, followed by Mexico, South America, Europe, and

Canada.) The continual growth demanded additional management space,

and in 1969 construction was begun on a new headquarters building in

downtown Chicago. When completed four years later the 110-story Sears

Tower became one of the world's tallest buildings.

General Motors Corp.

Fact File

Founders: William C. Durant.

Distinction: World's number-one automaker, and largest company in

terms of sales.

Primary Products: Cars, trucks and related parts.

Annual sales: $176.558 billion.

Number of employees: 388,000.

Major competitors: DaimlerChrysler, Ford, Toyota.

Chairman: Johan F. Smith, Jr.; President and CEO: G. Richard Wagoner


Headquarters: Detroit, Mich.

Year founded: 1908.

Web site: www.gm.com.

General Motors was the brainchild of William Crapo Durant, a brilliant

salesman who was born in Boston in 1861. After his father's foray into the

stock market ended badly, Durant's mother moved the family to the

upper Midwest. There, her own father had made a fortune in the lumber

business before serving as the mayor of Flint and the governor of

Michigan. And there, Bill Durant also found his calling.


High school held little appeal for the ambitious youngster, and Durant

dropped out long before graduation. He immediately took a job as a

salesman for a local cigar manufacturer, and proved a natural in the field

by selling 22,000 cigars on his very fist sales trip. In 1885, he took a spin

in a friend's wagon and the particularly smooth ride changed his lifeconvincing

him, then and there, that better business opportunities lay in

the fledgling field of transportation. Durant offered the manufacturer

$1,500 for patent rights to his unique suspension system, and he hooked

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up with a partner. By 1900, he had built the Duant-Dort carriage

company into America's largest.

Durant quickly grew rich but cored. So, when he was able to drive an

early horseless carriage around Flint, he knew it held the key to his

future. In 1904 he purchased the Buick Motor Company, which was

turning out decent vehicles but was in constant financial trouble. His sales

savvy immediately translated into order for some 1,100 cars, which was

more than 25-times the total that Buick had produced during its entire

three-year history. To meet this demand, Durant sold stock in the firm to

everyone he knew. In 1905, he had Buick building 725 vehicles a year. By

1908, annual production hit 8,820 and it became the number-one car

manufacturer in the United States, outselling numbers two and three


Durant, however, felt that bigger would be better-even in a business that

was dependent upon the fickle tastes of the public. So, on September 16,

1908, he formed the General Motors Corporation to bring numerous auto

types and styles together under one roof. His new venture absorbed

Buick, and then bought Olds Motor Vehicle, Cadillac Automobile, and

some 20 smaller firms including Ewing, Merquette, and Elmore.

In its first year, GM sold an astonishing 25,000 cars and trucks and

reported net sales of $29 million. But many of Durant's deals wee illconceived

and he soon proved far more adept at building a business than

operating one. Within two years, GM was in serious financial trouble.

Durant had to turn to a syndicate of bankers for a loan to save it from

ruin. One of the loan's conditions barred him from the company for five

years, but Durant could not sit still. While the bankers were righting

General Motors with a more conservative approach, he founded the

Chevrolet Motor Company and quickly made it a huge success. By 1915-

the year his banishment from GM was to end-Durant had built Chevy into

the country's biggest car maker.


He was itching to get back to his baby, though, and began buying up

shares of GM stock. In 1918, he regained control and brought Chevroletalong

with other properties such as the Hyatt Roller Bearing Companyinto

its fold. He began expanding once more, too, enlarging existing

plants, starting construction on a new research laboratory as well as a 15-

story Detroit headquarters, and acquiring more companies, such as Fisher

Body. He also moved GM into the finance business by creating the

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General Motors Acceptance Corporation in 1919, the same year GM made

more than $60 million in profits on sales of nearly 400,000 cars and

trucks. Once more, Durant's big plans resulted in big-time fiscal disaster.

GM's stock price tumbled from $42 to $14 in just seven months, and

Durant was financially destroyed. Bankers were gain summoned to bail

out the company, and in 1920 he was again forced to resign.

One good thing that came out of this was the appointment of Alfred Sloan

as executive vice president. Sloan, a Hyatt manager joined GM after its

acquisition. He instantly set about implementing a revolutionary

administrative system that essentially called for centralized management

and budget control, decision-making by committee, and the delegation of

day-to-day responsibilities to appropriate divisions. He also separated the

various automotive operations so that each would create specific cars for

specific consumers, who then would move from one to another. Chevrolet

became the car for the masses; Cadillac, the standard-bearer among

luxury vehicles; Oldsmobile and Buick built their own distinct audiences;

and Oakland, which later was renamed Pontiac, found its niche as a

performance machine.

In 1923, Sloan was named GM's president. Eight years later, the company

began its uninterrupted reign as the world's leader in car and truck sales.

Sloan retained his top spot in the company until 1956; he then became

chairman until his death in 1966 at age 91.

General Motors flourished as the automobile became ingrained in society.

Its total vehicle sale hit 25 million in 1940. However, World War II hit,

and GM's factories were refit to support the U.S. effort. More than $12.3

billion worth of airplane parts, trucks, tanks, guns, shells, and other items

rolled out of GM plants during he following years. Hen regular production

resumed in 1946, new automakers like Packard, Studebaker and Nash

joined the fray. Most, though, didn't last very long.

Aided by technical innovations like power steering and power brakes,

along with design advances (that led, among other things, to the

introduction of the Corvette) GM recorded its first billion-dollar profit in

the 1950s. A decade later it had produced over 100 million vehicles. The

company was also still atop the automotive pack in the 1970s, although

Japanese competitors Toyota and Nissan had climbed to numbers two and

three. When these companies passed U.S. firms in total production for the

first time in 1980, General Motors struck back by linking up. It signed an


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agreement to jointly make Toyotas in California, invested heavily in Isuzu,

and arranged for Suzuki to produce small cars for sale in America.

Still, during the 1980s, GM's market share dropped from 44 percent to 35

percent. It remained the world's largest motor vehicle manufacturer, with

700,000 employees in 149 U.S. plants, 13 Canadian facilities, and

operations in 29 other countries. But the writing was on the wall, and the

tradition-bound management team did not know how to respond.

Although some of their ideas held promise-such as the Saturn line, and an

electric vehicle called the Impact-factory inefficiencies began taking their

toll, vehicle designs grew unimaginative, product quality declined, and

consumers turned away in drives.

GM was forced to close plants in order to maintain a profitable edge. This

was a PR disaster.

GM sales remained far ahead of its nearest rivals, but the company

suffered multibillion dollar losses in 1990 and 1991. Its board rebelled by

dumping the chairman, president, vice chairman and executive vice

president. Jack Smith was picked to fill the top posts. By 1995, he had

begun turning things around. That year, GM reported its highest-ever net


A costly 1998 strike and continued assault from foreign competitors

knocked GM's U.S. market share down to 27.7 percent-the lowest it had

been since Sloan's arrival. Smith voluntarily stepped into the board suite

to make way for Wagoner, a well-regarded up-and-comer who had filled a

variety of roles at GM during 23 of his 47 years. Wagoner's mission was

immediately made clear: Continue cutting costs and upgrading vehicle

designs for today's consumers, and do it fast.

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