Walmart Versus Target Term Paper

Excerpt from Term Paper :

Wal-Mart vs. Target

History of Wal-Mart and Target

(a) History of Wal-Mart:

Headquartered in Bentonville, Arkansas, Wal-Mart is the largest retail company in the world with its core competence being specialization in the operation of mass retailing and running supermarket stores. The company manages through three segments, viz the Wal-Mart stores, Sam's Club and the international segments based in Asia, Europe and S. America. Wal-Mart's revenues for the fiscal year ended Jan'05 was $285.2 billion which is 11.3% up compared to the pervious year with the net income being $10.3 billion for the year. (Wal-Mart Stores Inc.)

Wal-Mart was founded by Sam Walton in 1962, which set the ball rolling for discount retailing. During the same period his small chain of variety stores in Arkansas and Kansas was already encountering competition from the regional discount chains. Founder, Sam traveled the country to research this breakthrough, new retailing concept and could foresee that in future, organized retailing will be a big success. Sam along with his wife invested 95% of the funds to launch the first Wal-Mart store in Rogers, Arkansas with the vision there was a demand for a different form of general store and the American customer was looking forward to it. Presently, Wal-Mart is a worldwide company having in excess of 1.3 million associates and approximately 5,000 stores and wholesale clubs spanning 10 countries. Fortune magazine has rated Wal-Mart as the 'most admired retailer' and in its history of its formation it has recorded 2004 one of its best years. Wal-Mart has clocked in excess of $256 billion in global revenue, setting a new record and generating more than $26 billion in sales. Wal-Mart earned nearly $9.1 billion as net income and its EPS went up by more than 15%. (The Story of Wal-Mart)

(b). History of Target Corporation:-

Target Corporation was formed in the year 1902 and its headquarters is located in Minneapolis, Minnesota. The store is efficient in running general merchandising discount stores in the U.S. which has collections of men and women's clothing, home furnishing, electronic items, sports products, toys and entertainment products and it also sells it products through the Internet. Currently, the company has over 1330 stores across 47 states in U.S.. (Business Summary) Target's commitment has been total in respecting diversity. Its definition is wide, inclusive, and focused on appreciating the individuality of each and every team member, guest and community member. The company is focused on persisting to make diversity an integral constituent of the culture at Target -- from the manner in which team members relate to one another, to the manner in which the company caters to the needs of the guest and communities, to carrying out the correct business opportunities for the shareholders. (A message from Bob Ulrich, Chairman and CEO)

2. SWOT analysis for Wal-Mart and Target

(a) SWOT Analysis of Walmart

Strengths (i) Wal-Mart is a strong retail brand with a reputation of value for money, convenience and wide variety of products all under one roof. (ii) There has been a substantial growth of the company over the recent years, and has expanded on a global basis, for instance its purchase of the U.K. based retailer ASDA. (iii) The company has a core competence entailing the application of IT tools to lend support to its global logistics system. For instance, it is able to track how individual products are faring on a countrywide basis, as well as per store basis. IT also looks after Wal-Mart's procurement in an efficient manner. (iv) Wal-Mart follows a focused strategy for human resource management and development. People remain the key to business of Wal-Mart and the company devotes both time as well as money to provide training to people and retaining a developing team. (SWOT Analysis: Wal-Mart)

Another important strength at Wal-Mart was the motto of Exceeding Customer Expectations. Wal-Mart founder Sam Walton termed it as 'aggressive hospitability'. He constantly motivated upon his employees to be the friendliest to his customers by dealing with them in the friendliest manner. By extending the customer a better service beyond his expectations, the same customer repeatedly comes back again and again. (Exceeding Customer Expectations) The Sundown Rule: Wall-Mart has a unique practice based on the old cliche 'why put off until tomorrow what you can accomplish today.' This continues to be an important constituent of the culture at Wal-Mart and is the reason behind the popularity of the associates for customer service. Adhering to the Sundown Rule signifies that the personnel at Wal-Mart endeavor to answer requests by sundown on the same day the request is received. Sam Walton's three fundamental beliefs are supported by the Sundown principle, which are respect for the individual, excellent customer service and working for excellence. (The Sundown Rule)

Weaknesses (i) Wal-Mart is the world's largest grocery retailer; it might leave it weak in certain areas because of the massive span of control despite its having its IT advantages. (ii) As Wal-Mart retails some products across a lot of sectors like apparel, food or stationery, it might possess the flexibility of some of its business rivals who are more focused. (iii) Although the company is a global one, but it has a presence in comparatively few nations across the world. (SWOT Analysis: Wal-Mart)

Opportunities: (i) To acquire, merge or constitute a strategic alliance with a lot of other international retailers, concentrating on specific markets like Europe or the Greater China Region. (ii) Wal-Mart presence has been in a small number of nations. Thus the company foresees heavy opportunities for future business prospects in expanding consumer markets like China and India. (iii) New locations and type of stores offer the company opportunities to exploit market development. They made their diversification from large super-centers to regional and mall-based sites.

Threats: (i) Target of competition from the local as well as global level as the company is number one in its category (ii) Because of being a global retailer implies that one is exposed to political problems in the nations in which Wal-Mart conducts its business. (iii) The production cost of a lot of consumer products have come abysmally down due to low manufacturing costs. The cost of production has bottomed out because of outsourcing to low-cost regions of the world. Because of this there has been price competition, leading to price deflation in some ranges. Intense price competition is a threat. (SWOT Analysis: Wal-Mart)

(b). SWOT Analysis of Target

Strengths: (i) The core strategy at Target Corporation has been to make the customers happy by persistently delivering the correct mix of innovation, design and value in the products, in their marketing and in the stores. This has been the spirit of the brand promise which is 'Expect More. Pay Less.' (ii) Sustaining the advantage needs a commitment to a great design, innovation and improvement on an ongoing basis. Target continuously expect more of themselves and carry out opportunities which promote superior merchandise design, improve value and selection, increase the pace of business and propel higher efficiency. (iii) During 2004, the company considerably expanded the product offering in its website to complement the merchandise assortment present in the stores. (Target Corporation Annual Report: 2004)

Target Corporation's main strength lies in its variety of retail stores that deliver outstanding value and variety to its customers. Among the value chain components, technological development has been a great asset of the company and employees. Target has recently made an alliance with AOL which assists in the introduction of new buyers to the Target brand. Target enjoys the second largest credit portfolio among the retailers who issue credit cards. There has been a continuous rise in the Credit card numbers and it has already surpassed 30 million guest cards.

Weakness: The primary weakness facing Target corporation is what is must do with it Department store and Mervyn's division. The company has though of shutting down or selling its divisions a lot of times during the previous few decades. Even though its both divisions continue to earn profits, the company will be serving itself better if it concentrates it total attention on Target stores. Target Corporation must take a decision to sell its Department store and Mervyn's division in case they fail to show considerable improvements as these two divisions are back pulling Target and depleting some amount of its much required resources. Although Target has started introducing line of new products and offering a wider variety of products, it is imperative that the company attends to more of customer loyalty and building novel ways of presenting its products in order to gain more of the market share.

Opportunities: Opportunities exist for Target to compete on the quality front and prices as compared to its rivals, creating a fun and inviting a large variety of products, and developing convenient stores that are guest friendly. During the last several years Target has build a fun and inviting situation for its customers by strategic planning and marketing. Although the stores of Target Corporation are convenient for its…

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