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
business.
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
marketplace.
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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
nationally.
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
Jr.
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
combined.
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
income.
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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