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However, they are using different strategies in order to gain competitive advantages. Wal-Marts is adapting a cost-leadership strategy, while Target has a product differentiation…
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Target versus Wal-Mart Target and Wal-Mart are certainly competitors since they are competing in the same industry. However, they are using different strategies in order to gain competitive advantages. Wal-Marts is adapting a cost-leadership strategy, while Target has a product differentiation strategy notably evidenced by the recent PFresh initiative. Even though Target recently had to cut prices in product departments where they are directly competing with Wal-Mart, does not mean they are changing their strategy. Price cutting strategy adopted by Target is arguably a double-edged sword. First, it is an opportunistic response to the weak economy evidenced by the way customers respond to price reductions. Secondly, price cutting is a also a differentiated competitive strategy against the main competitor, Wal-Mart. This is evidenced by the fact that Target has maintained high price margins on home goods, electronics and designer apparel, and invested that extra capital in lowering prices in departments where they are directly competing with Wal-Mart, such as their grocery sector.
However, it is worth noting that price wars have escalated with time forcing both retail giants to lower their price margins considerably. For instance, Mercent Corp. claims to change prices of approximately two million products every hour (Angwin and Mattioli web). This is no different from Target and Wal-Mart, as they seek to retain respective market shares. Considering Target’s strategy is more oriented towards product differentiation, then it cannot simply translate to “Wal-Mart mini-me” simply because Wal-Mart has a more price oriented strategy. Since Wal-Mart has maintained low price strategy especially in outlets competing with Target implies that Target is a worthwhile competitor to Wal-Mart. Target definitely needs a more rigorous strategy to grow. The best strategy will certainly depend on what Wal-Mart will do. Perhaps, Target may take Wal-Mart as a benchmark as they formulate their way forward.
Works Cited
Angwin, Julia and Mattioli Dana. Coming Soon: Toilet Paper Priced Like Airline Tickets. The WallStreet Journal. September 5, 2012. Web. 24 April 2013. Read More
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