Sears Holdings Corporation: Monopolistic Competition

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The retail industry is one of the largest sector in the United States and is steadily growing in size. According to the National Retail Federation, there is an approximately 3.7 million retail establishments in the United States and it brings in $2.6 trillion in GDP (NRF, 2014). The retail industry is highly competitive. Where there is competition, it brings in price and product differentiation that distinguishes other retail establishments from each other. These are the some attributes of a monopolistic competition. Monopolistic Competition Sears Holdings Corporation is operating in a monopolistic competition market structure. According to McConnell, Bruce and Flynn, monopolistic competition is characterized by a relatively large number…show more content…
According to Sears Holdings Corporation’s financial report, the company lost $1.4 billion last year and another $975 million during the first half of 2014. Sears Holdings’ CEO, Edward Lampert has lend the retailer $400 million from his Hedge fund, ESL Investment in hopes to help rescue…show more content…
Furthermore, he is also listed as owning 23.7 percent of Sears (Peters, 2014). Because of Lampert’s action, this has raised some concerns whether this has been a conflict of interest. According to Sears Holdings’ Third Quarter Nov 2014 report, they had a net loss attributable to Sears Holdings’ shareholders at $5.15 loss per share compared to $ 5.03 loss per share for the previous year third quarter. Investors are bailing out because they see instability within Sear. There are several concerning issues behind the CEO investing his own capital back into the company. First of all, "Is it legal, ethical or a strict conflict of interest?" According to an article by Peters (2014), the loan from ESL Investments is secured by 25 unspecified properties. What raises a concern is that Sears Holdings did not disclose which properties are being held for as collateral. It also gives Lampert the opportunity to swap certain stores with other ones. Another concern is, according to Yahoo! Finance, Sears Holdings in the past have sold its stores between $20 and $50 million, but now, the stores are valued at $16 million according to the filing (Macke, 2014). Another question that arises is, since there is an investment of capital gains by the CEO, what will his Return on Investment be? These are just some of the questions that comes to investors

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