Analysis of Walmart and Target Corporation - Case Study Example

Case Analysis of Two Companies- Wal-Mart Stores, Inc Target Corporation BMGT 495 6980 Dr. Calloway Table of ContentsI. Wal-Mart i. Vision and Mission ii. Objectives and Strategies iii. Company Strengths iv. Company Weaknesses v. Competition: Threats and Opportunities vi. Recommendation: Future Strategies II. Target i. Vision and Mission ii. Objectives, and Strategies iii. Company Strengths iv. Company Weaknesses v. Competition: Threats and Opportunities vi. Recommendation: Future Strategies III. Reference I. Wal-Mart Wal-Mart is the largest retailer in America. These discount stores became part of American’s life in 1960s. At present it is operating in 15 countries, it employs more than 1.8 million associates worldwide. The number of stores is nearly 6,500 stores and serves more than 176 million customers per week. The "most admired retailer" according to FORTUNE magazine has just completed one of the best years in its history: Wal-Mart generated more than $312.4 billion in global revenue in the fiscal year ended January 31, 2006, establishing a new record and an increase of 9.5 percent. The company earned almost $11.2 billion in net income in fiscal 2005.1 Wal-Mart has gone through considerable changes through the year 2003-04. Wal-Mart had increased its advertising budget by $434 million between 2003 and 2004. i. Vision and Mission The mission of Wal-Mart has been to provide good jobs, good works, and citizens and do good investments in 2004. The vision of Wal-Mart has always been to provide customer each and every product at the lowest price. In 2003 company had been experienced external environmental factors like war, terrorism and despite that it performed profitably. It was due to their mission to think locally. It focused on small level and focused on the understanding the shopping experience of local customer at the local stores. Wal-Mart Stores, Inc. has always been a values-based, ethically led company. The values guiding our decisions and leadership are the 3 basic beliefs established by our founder, Sam Walton, in 1962:2 Respect for the Individual Service to the Customer Strive for Excellence ii. Objectives and Strategies Wal-Mart procures goods directly from manufacturer and drives hard bargains. It focused on the supply chain to reduce cost and offer the best prices to the customers. It consistently focuses on the distribution and logistics, marketing, customer service and technology. It is a non union company and have entrepreneurial, participatory and goal oriented management style. The marketing activities revolve around the equation People+ Price+ Product=Value. Focusing on each of the factor of this equation organization tries to bring values to the customers. Sam Walton has established all the strategies based on building customer and employees loyalty. He focused on all the factors to achieve the same. Wal-Mart has been ranked as most admired company in US by Fortune magazine in 2003. In the same year it had reported sales growth of 11% amounting $6.4 billion. This was the year when the business environment was worst due to the war and terrorism activities. Wal-Mart was able to operate profitably due to its customer focus and low cost strategies. Wal-Mart attempted to expand globally through combinations of strategies like Greenfield Projects and acquisitions. It has established most advanced computer technologies for its stores and various units. It has set standard goals for its sales inventories. Wal-Mart focused on cost cutting by its strategy on the merchandise mix and various operations. It utilized its database for consumer and requirement analysis. This helped it to understand the demand pattern of various products and helped in inventory management to make products available when customer wanted it most. Wal-Mart also emphasized on increasing the operating cash flows and lowering the capital spending to control cash requirements. For the foreign markets it minimized foreign exchange risk by depending on the local currency for the local transactions. It also utilized the forward contracts to minimize risk of the foreign exchange. In 2004 Wal-Mart had another challenge. It was being criticized for its labor policies, heavy bargaining with the suppliers and several other corporate responsibilities related issues. One of the focus areas in 2004 has been towards improving image among the consumers and prospects. It has increased its advertising and publicity budget in this period. iii. Company Strengths At present the strengths of the company are the well established logistics and distribution network, cost effectiveness, large customer base, consistent up gradation on technological front to serve the customer best, huge financial and capital base, brand name and customer loyalty. It has been early global mover due to which it has not only gained first mover advantage but also could leverage on knowledge and experience at the home country. During 2003-2004 company has been improving its product and services and was providing excellent customer experiences. iv. Company Weaknesses One of the major weaknesses of the organization which has been in news from last few years is related to labor related policies. This not only have generated lots of criticism against Wal-Mart throughout the world but also rooted some anti Wal-Mart activities i.e. launch of anti Wal-Mart websites, forums etc. The organization had been accused for having inadequate employee concerns. Other than that Wal-Mart has not been very successful in keeping its suppliers and manufacturer satisfied who are the important parts of Wal-Mart’s value creation process for customer. v. Competition: Threats and Opportunities Wal-Mart has been facing immense competition. 2003-2004 was the period when retailing was growing worldwide and especially in the countries like China where the retail sector growth fast, more competitors were being attracted. Due to the volumes in retail sector industry worldwide was attracting more competitors. Apart from that the uncertainty and security threats raised due to the increasing terrorism and recent Gulf war also had impact on business. The margins are anyway low for the discount stores and due to the competitions it is decreasing further and impacting the profit. Apart from that increasing number of competitors’ retail outlets are attracting the footfalls from these stores as well. This surely puts the management into immense pressure to keep on building values for the customers. The organization operates globally. The political and social factors are area of concern. The exchange rate fluctuations, inflation and other risks are also to operate globally. There are some countries where retail sector is growing. The some of important countries are India, Russia, Ukraine, China and others. The major opportunities lie in the Asian countries and Eastern Europe. Countries like India and China which has been largely dominated by unorganized retailing provides excellent market place to attract customers profitably. According to Global Retail Development Index the top markets for retailing in 1995 are not the same in 2005. In year 1995 it was Korea, Poland and Brazil which occupied the top positions while in 2005 it is India, Russia and China. The markets of 1995 have been oversaturated. There is a change in consumer behavior as well. Consumers today are adopting the new marketing facilities like telephonic and electronic marketing. II. Recommendation: Future Strategies In the year 2003 the growth in the profits has been 20.5% which dropped in year 2004. There can be various factors to that like investments in new capital, impact of war and terrorism on overall business etc. Year Profit ($ millions) Change (%) from previous year Change in Growth Rate 2002 6,295 17.1 - 2003 8,039.0 20.5 3.4 2004 9,054 12.6 (7.9) 2005 10,265 13.4 0.8 In 2005 -2006 the sales and profits of Wal-Mart should increase. This can be inferred due to the prediction of stable external environmental factors like war. It can look at the growing markets. Wal-Mart needs to focus more on its human resource and labor strategies. It can focus more on the website and e-marketing because the cost of transaction at e-marketing is considerably very low as compared to any other marketing. The operating cost goes down in this. But e-transactions have a drawback in the level of customer satisfaction hence it needs to be very prompt and efficient at delivery of products and customer service. Wal-Mart can keep its focus on the low price and value creation for the consumer. It has been effective so far. But according the markets and demand it can focus on the various segments of the customer groups differently. III. Target Corporation With the revenues of $52,620 million and profits of $2408 million Target Corporation ranked 27 on the list of Fortune 500 companies. Target Corporation have impressive layout, sophisticated outlook and it’s offering range from everyday essentials to the fashionable, differentiated merchandise. Target Corporation has tied up with famous designers and brands for exclusive offers. Target operates more than 1,300 stores in 47 states, including over 140 SuperTarget® stores that add an upscale grocery shopping experience. In addition to the photo processing, pharmacy and Food Avenue® restaurants found in almost every Target, SuperTarget includes an in-store bakery, deli, meat and produce sections.3 i. Vision and Mission The vision of Target Corporation is to be the best. It wants to be the best in every area of its business and everything it does. In the annual report of Target Corporation 2004 published that We are committed to:4 Consistently delighting our guests, Creating a workplace that is preferred by our team, Generating profitable growth to our shareholders over time, and Investing in programs that strengthen our communities The mission of Target Corporation in was ‘to deliver financial products and services that drive sales, deepen guest relationships and sustain outstanding profitability.’ ii. Objectives and Strategies Target Corporation has somewhere adopted the similar strategy of offering low price and best value to the customer. It has adopted strategy to match Wal-Marts prices on commodity items like food and cleaning supplies and others. It has offered more space to the customers and different layout. This helped in creating a different image among the customers and target group. Target has been focusing on its expansion plans. In the year 2003 it has noticed considerable growth in its profits while in year 2004 this profitability growth rate got declined. In 2005 again it has showed more than 60% growth rate of its profitability rate. Year Profit ($ millions) Change (%) from previous year Change in Growth Rate 2002 1,368 8.2 - 2003 1,652 20.9 12.7 2004 1,841 11.3 (9.6) 2005 3,198 73.1 61.8 But it has differentiated itself by sales of trendy-but-affordable designer merchandise. It focused on maintaining cost and offering the best values to the customers. It has very ambitious expansion plan of opening 600 stores by year 2010. The numbers of employees have been increasing with the year and number of stores. In 2005 it has 88 more operational stores where investments have been made in the year 2004. This can be one of the reasons of decline in the growth rate of profits in the year 2004. iii. Company Strengths The strengths of the organization include the brand name, loyal customer base, employee loyalty and relationship with the stakeholders. It has well maintained its unique selling proposition of being stylish and trend setter. The creativeness, designs and change with the changing requirements of the customer has been one of the biggest strength. Apart from all the above its association with leading brands and designers to offer exclusive products has given it an added advantage. It has been able to create a distinct image and brand in the highly competitive retail world which is one of its strongest strengths. iv. Company Weaknesses It has been criticized for its labor policies and low hourly wages. It has also been compared with Wal-Mart for its poor employee related policies and environmental concerned. v. Competition: Threats and Opportunities Increased competition and pressure of social groups like trade union etc has posed some threat in front of the Target Corporation. Retail sector on the various parts of the world is growing offering opportunities globally. The consumer today has become technology savvy and their buying behavior is changing. There are some countries where retail sector is growing. While in the country where Target operates the retailing sector have already attracted various new played and the competition within the market and for the market share have increased in many folds. It needs to look upon the other growing markets of the world. The some of important countries are India, Russia, Ukraine, China and others. The major opportunities lie in the Asian countries and Eastern Europe. Countries like India and China which has been largely dominated by unorganized retailing provides excellent market place to attract customers profitably. According to Global Retail Development Index the top markets for retailing in 1995 are not the same in 2005. In year 1995 it was Korea, Poland and Brazil which occupied the top positions while in 2005 it is India, Russia and China. The markets of 1995 have been oversaturated. IV. Recommendation: Future Strategies Target corporation need to focus more on the investment decisions. It needs to focus on its labor policies and human resource so that it can build reputation among workers and win their loyalty. Target Corporation has expansion plans. It can further expand to the regions with high retail growth like India, Russia etc. The consumer today has become technology savvy and their buying behavior is changing. It can also look various customer groups according to their demographic profiles with attractive offers. Target Corporation has established its name among a different group of customers who prefer designer stuff. It can be called up market customers than Wal-Mart. Target can focus more on the technological front and provide customer the very shopping experience which it offers. It needs to focus on the people related policies and investment plans carefully to maintain the substantial profit goals. Its vision indicates that it is committed to people from all the area whether they are customer, employees or member of the community it is operating. References Kotler, Philip, Marketing Management, Prentice-Hall Inc. New Jersy, 10th Edition, 2000 Nankani, Economic Growth in the 1990s: Learning from a Decade of Reform retrieved on 12 May 2006 from http://www1.worldbank.org/prem/lessons1990s/chaps/01-Ch01.pdf Serres, Chris Target vs. Wal-Mart, Is Target Corporation Any Better for Workers? May 22nd, 2005 retrieved on 2 August 2006 from http://www.reclaimdemocracy.org/walmart/2005/target_better.php http://investors.target.com/phoenix.zhtml?c=65828&p=irol-newsArticle&ID=233786&highlight=accessed on 2 August 2006 http://www.sathguru.com/Note_on_Retail_Industry.pdf accessed on 2 August 2006 http://www.atkearney.com/shared_res/pdf/GRDI_2005.pdf accessed on 29 July 2006 http://www.cei.org/pdf/4992.pdf accessed on 29 July 2006 http://www.thunderbird.edu/pdf/about_us/case_series/a09040012.pdf accessed on 29 July 2006 http://www.corpwatch.org/article.php?id=12458 accessed on 29 July 2006 www.walmartstores.com accessed on 29 July 2006 www.walmart.com accessed on 29 July 2006 www.target.com accessed on 29 July 2006 http://www.fastcompany.com/magazine/77/walmart.html accessed on 29 July 2006 http://www.wakeupwalmart.com/facts/ accessed on 29 July 2006 http://www.corpwatch.org/article.php?id=13508 accessed on 29 July 2006 Read More