Comparison Of Kmart And Target
Retail Comparison
Kmart and Target
Word Count: 2500
Executive Summary
The comparison that has been undertaken in the study is a thorough study taking in to account the external and the internal environment of both the retail companies Kmart and Target which are both successful in different countries. Kmart in Australia is successful while target is a struggling Company. Both deal with the same types of products and both companies belong to the same sector. The aim of the study is to find out why one retailer is successful and another retailer in the same type of environment is unsuccessful
What came out during the course of the study is that the customer segment that was being targeted by both companies was similar and yet …show more content…
the approach and the pricing strategy of both companies were different. This has provided an edge to Kmart along with the support that it receives from the government. Target is an American group that has expanded into the region and the expansion program though successful has not produced the expected results increasing their investment in real estate but providing very little returns from the real estate so far.
Introduction
In the global environment the retail competition is stiff and many of the companies indulge in a price war and a policy of trying to increase the customer base though price differentiation and the customer service changes that are increasingly become technology driven to cut costs and increase the customer experience through automation
Selection: The two retailers that have been chosen are Kmart and Target
Kmart
The products of Kmart are all retail consumer markets that are sold from retail outlets. The service categories are in insurance, in food, in chemical and fertilizers and in Industrial services. So far the company operates in Australia and New Zealand. It also operates out of U.S.A. The segment that Kmart caters to is the lower middle class, the upper middle income and successful professionals who do not have the time but have the money to shop. The format that is sued is the Big Box store format which suits Kmart (Bogenrief, 2012).
Target
Target has discounted departmental stores, super center, super store and hyper market. It caters in Financial, Retail, Medical and retail services. It is extensively present in U.S.A., Australia and India. Its customer segment is generally urban customers that are uptown.mid town mix and an urban core customer segment. Its channels and formats include urban store format and the Big Box format (Golberg et al., 2005).
Situational Analysis –Kmart
Political Forces: The political and the legal forces are in favor of Kmart as it is a home corporation and there is absolutely no requirements of regulations that are proving to be obstacles especially since the customer base are the lower middle income groups and the middle income groups.
It is supported by the Australian government because of the large scale employment that the organization provides to Australians.
Economic Forces: The economic conditions in Australia have been good. The tax rate that Kmart pays in Australia is 30%, the level of regulations is low for Kmart, and it has the scope to be able to do business in the entire region facilitated by trade and online business. The international scope is not very good currently after having filed for bankruptcy in 2002 in U.S.A with acquisitions that did not perform.
Socio Cultural Forces: The Australian customer base and the culture and social conditions are well known to the company which is why it has been able to outperform Target Corporation by understanding the needs of the lower middle class and the middle class. The social challenge that Kmart has thrown to the customer segment is if the customers can find a lower price in Australia then the company will match …show more content…
it!
Technological Forces: The technological changes that Kmart has put in place have worked in Australia but it did not work in America. The technology that Kmart is using is to deliver work styles and to be able to make user friendly applications for self kiosks. The sole objective of using technology to a high level is to offset the losses made in U.S.A. (Hafeez, 2014).
Situational Analysis -Target Corporation
Political Forces: The political forcers for target are neutral as they are compliant as a company to all the essential regulations and maintain a political balance in the areas that they operate. The corporation is under surveillance by law enforcing agencies because of the loss of confidential data of nearly 40 million customers that set Target back in customer confidence levels which they are stiller gaining.
Economic Forces: The revenue growth in U.S.A, Canada and in India is sustaining their operations in Australia even though the company is struggling for survival. This is partly due to the political innuendo where Wal-Mart threw K mart out of America so K mart and Australia will attempt to throw Target Corporation out of Australia. The rate of taxation that Target pays as a foreign company is 35% which makes the expenses higher than expected and eats into the profits.
Socio Cultural Forces: The community initiatives and the corporate social initiatives that Target has taken are helping it to survive. They spend large amounts of time and money in community base services building schools, shelters libraries donating awards to schools etc. They are seen to do more than K mart in the socio-cultural environment.
Technological Forces: Technologically the company is well converted but the security aspects of the technology needs to be increased as it appears to be easy to penetrate the Target Corporation data bases for information (McIntyre, 2013).
Natural Environment
The natural environment for both companies is the same but the supplier network in the case of Kmart is more readily accessible and hence the costs of transportation is cheaper, but for Target most of its supplies come from China or are exported from U.S.A which increases the transportation and the shipping costs Energy, power are both green energy and power which makes both the companies sustainable.
Analysis for Kmart
The relevant trends for the company sit heat they are likely to grow according to the budget forecast and the revenue estimations that they have made in Australia.
Analysis for Target
Critical Success Factors
Rating
Target
K-mart
Rating
Weighted Score
Rating
Weighted Score
Advertising
0.2
4
0.8
3
0.6
Global expansion
0.1
2
0.2
3
0.3
Price Competitiveness
0.1
3
1.2
3
0.3
Financial Position
0.15
3
0.4
2
0.3
Product Quality
0.1
4
0.4
2
0.2
Customer Loyalty
0.1
3
0.4
2
0.2
Market Share
0.05
3
0.6
1
0.05
Reputation
0.1
4
0.4
3
0.3
Management Practices
0.1
3
0.4
2
0.2
Total
1
3.3 2.45
The relevant trends for the company are that they will need to structure the strategy for Australia in order to survive in the Australian market.
The environmental factors that are affecting Kmart are the levels of pollution from noise, garbage and the use of energy. This is common for both Kmart and Target. The most important environmental factors for both Target and Kmart are the consumption of energy. The new factors that might come to light in the future are the disposal of garbage and the carbon emission or the contribution of both retailers towards pollution.
External Analysis for Target:
The Market/ Customer Analysis: For Target the situation is not good in Australia with their customer segment having the strength to shop in Singapore and go abroad to vacation and travel. The economic recession is high in Australia and the unemployment rates as at April 2015 is 7.8% which means that the upper middle class and the young urban professionals of Australia have less spending power.
Competitor Analysis for Target: The competitors for Target in Australia are Kmart, Woolsworth, Arrow, Drake, Coles and Action Retail Chains.
Wheel of Retailing for Target: For target is medium and in Australia to gain a stronger foothold it must first stop the struggle to survive by changing the strategy of upper middle class to the strategy of serve one serve all.
Lifecycle of Target: target has completed the first three phases of the lifecycle now it needs to grow in Australia and mature that leaves the most important lifecycles to attain in Australia for target Corporation.
Market Analysis: Kmart
Growth rate: The growth rate is 17.7% per annum in Australia
Market profitability: the market profitability is $ 3.45 billion
Industry cost structure: 7%
Distribution channels: the distribution channels of Kmart are low cost but not completely efficient as would be expected. Market trends: The market trends are upswing for the company and there is every scope that the growth will be more than the projected 3.2%
Key success factors: operational capacity, low costs low prices for products, mass affordability
Market Analysis – Target Corporation
Growth rate: 6.47%
Market profitability: $19.71 billion
Industry cost structure: 6.7%
Distribution channels: the distribution channels are low cost as compared with the distances of shipping and transportation it has an uninterrupted distribution channel that is very efficient.
Market trends: The market trends are upswing and the growth projection as an overview is higher for target even though it is struggling in Australia. 2015 will show growth for target in Australia.
Key success factors: Cost controlling methods, dependable systems differentiation, and operational excellence.
Market Segmentation of Kmart
Geographic: The customers are mostly regional customers from local neighborhoods
Demographic: Cost conscious customers who are in the late 30s upwards in age, the education, income family status are lower than the middle calls urban population. They have a similar customer segment to Wal-Mart
Psychographic: The psychology is one of trying to save as much as possible and yet taken home all that is needed.
Behavioral: Typical behavior patterns of going wherever a better bargain is available low customer loyalty.
Market Segmentation of Target Corporation
Geographic: The customers are located in Indian America Australia and Canada.
Demographics: Mostly urban population who are young and sophisticated. Income is above $52,000 per annum
Psychographic: Buying at good prices that is equal to the quality that is being given is the main factor. The customers at Target do not mind paying a little more. Customer loyalty is strong.
Behavioral: The patterns of behavior are not mass behavior but are cultured and have a social standing. The Target customers belong to a certain class in society that is upswing.
Competitive Analysis
Competition for both is tough and stiff and in the current market scenario both companies are struggling but the struggle is easier for Kmart as they are on home ground and harder for Target as it is on foreign turf (Wooten, 2007).
The competition for Target falls under the categories of:
Intra type competition and Intertype competition
Objectives: The current objectives of the competition are to penetrate the market share of target Corporation.
Current Strategy: The current strategy of the competition is the price differentiation where they’re lower than Target Corporation and intend to remain lower.
Current Resource Base: The competitors of Target Corporation in Australia are strong resourcefully except for the area of technology. Financially they competitors are sound.
Expected Future Strategy: The competitors might use price differentiation to enter Target Corporation’s market, and look at it as an investment rather than as expenditure.
Segmentation Evaluation
Actionable: Target is unable to clearly visualize which segment it should cater to in Australia.
Identifiable: target has identified the customer segment even though it is not the correct segment for target in Australia. The size of the market to which Target currently caters to makes up only 28% of the Australian population. The growth prospects in this segment will take another two years to stabilize unless the Australian economy improves before that. The composition of that market segment is made up of more women than men in the age groups of 18 years to 40 years out of which 52% are women and the rest are men.
Substantial: This segment will not be able to give Target the profits to sustain business if Target Corporation depends on this segment alone to do business in Australia.
Reachable: Target Corporation has the means resources, and the best expertise global markets to be able to reach out to the customer.
Porter’s Five Forces Analysis
Threat of new entrant is low as the total revenue is shrinking for the industry.
Supplier Power is also low because there are many suppliers in the industry.
Buyer Power is high as they can switch if there are better deals available somewhere else.
Threat of substitute is high as other retailers offer almost similar products and customers have easy access to those retailers as well.
Internal Rivalry is the industry is also fierce.
From the Porter’s Five Forces it is necessary for Target to cut out waste functions and to decrease the levels of rivalry and raise the barriers to competition in a way that will ensure that the competitive power is low and target will be able to survive without the REOI levels decreasing any further in Australia.
Another reason for target’s struggle in Australia is that the dollar is strong and the consolidated financial statements are affected by the strength of the dollar. The tax rates Target Corporation has to pay in Australia is higher than Kmart or any other resident company which is currently making it difficult for target Corporation to absorb the outgoing amount of financial resources in Australia.
Internal Analysis
Target Corporation
Target operates as subsidiary of Wesfarmers and its managing director also serves as MD of the parent organization. There are managers under each category in Target. Target’s earnings in the first quarter of 2015 are in line with that of previous year but the sales have dropped to almost 2 percent as compared to 2014. The revenue of target has also decreased by 1.5 percent and stands at $1.9 billion. Target’s main target in the operational market is the mid-market and it has continued to invest in the new stores and also in the refurbishment. In the operational strategy, it relies heavily on the communication mediums such as social media and internet. The merchandise category is also high in Target and is working constantly in order to refine the presentation of products in the store. Target has never lost concentration while focusing on the core customer categories and also on the delivery of differentiated products (Tongue et al., 2012).
The recent plunge in profitability of Target has mainly come from the old stock clearance at a discounted rate. To replenish the old stock with new one asked for discount on holding costs to cater customers with new products in a fiercely competitive market. However, catering to the demand of customers is important as it may help Target in the long run.
SWOT Analysis
Strengths: brand value, financial strength, strategic advantage and professional management and customer loyalty
Weaknesses: Higher product prices, higher overhead costs
Opportunities: The new range of products for the young generation, a change in the product line lower costs due to lower fuel prices
Threats: Competition, pricing of products, less of food retailing problem with its dairy products (Lea, 2015).
Position Analysis
Basically, Target operates in the middle level of the market position and its most of the stores are located in countryside that are meant to cater the demands of mid and lower level income group customers.
It also focuses heavily on the delivery speed and the fresh products for customers in a competitive market (Tongue et al., 2012).
Future Projections
CEO of Target Corporation, Paul Ziobro, has made clear plans for future as he aims to double down on some of the departments within Target stores. The special future plan aims to build on baby products and health and wellness products associated with Target. Target is also focusing on strengthening supplier management that will provide edge to the company in competitive market. Target is also aiming at revamping fashion and furniture segment to boost its sales volume (Furno, 2014).
Recommendations for Target Corporation
Target needs to focus on changing the customer segment in Australia. It needs to focus also on upper segment of the market rather than focusing majorly on mid level market. Strengthening brand loyalty among existing customer base is also equally important.
It also needs to spend less on corporate social responsibility in order to cut costs and increase its
profitability.
Keeping the prices constant will be another important aspect considering the nature of industry as the customers have more number of choices to switch to another organization because of price instability.
In order to promote its growth opportunity, it needs to provide unmatchable quality and widely publicize itself to reach all the consumer segments. Decreasing operational costs in Australia will also be a good strategy.
Conclusion
Both being in the retail industry have a different management strategy of running the business in Australia as a result the resident company Kmart appears to know the mass customers of Australia better than Target knows the upscale customer in Australia. In America however Target Corporation is the second largest retailer and has ample room for growth choosing it future markets carefully.
References
Bogenrief, Margaret. (2012) Three Things That Kmart Needs To Fix If It Wants To Survive, Business Insider, www.businessinsider.com, retrieved on April 15th 2015
Furno, A. (2014). Brian Cornell plots Target Corporation’s Future, http://www.benzinga.com/media/wall-street-journal/14/09/4840930/brian-cornell-plots-target-corporations-future retrieved on April 15th 2015
Golberg, Katie.,Moreck,Nicole.,Hardy,Clint., Holft,Tom., Noetzel,John., (2005) Strategic Industry Analysis,www.c.umm.edu, retrieved on April 15th 2015
Hafeez, Ameen. (2014) Target Corporation Strategic Analysis, ameenhafeez.weebly.com retrieved on April 15th 2015
Hahn, Lindas. (2014) Target Corporation Strategic Report, http://economics-files.pomona.edu/jlikens/SeniorSeminars/sagegroup2005/Reports/Targetreport.pdf
Kmart (2015) Corporate Website, www.kmart.org retrieved on April 15th 2015
Lea, Morgan. (2015) SWOT and PEST Analysis, http://prezi.com/
McIntyre, Douglas. (2013) Companies Paying the Most Income Taxes, USToday, www.ustoday.com retrieved on April 15th 2015
Wooten, Lynn. (2007) Target Corporation, Expansion Into Urban Markets, Thesis, www.uebases.bus.umian.edu retrieved on April 15th 2015
S.C. Digest (2005) Wheel of Retailing- Target Corporation, Supply Chain Digest,www.scdigest.com retrieved on April 16th 2015
Sinclair, Samantha. (2014) For Kmart Australia, Stability and Low Cost Are Key, CSC, www.csc.com retrieved on April 15th 2015
Tongue, K., McDonald, K., Doutkevitch, R., Midgley, K and Munro, T. (2012). Target Corporation: Case Synopsis, http://www.sfu.ca/~sheppard/478/syn/1123/SynopsisB.pdf retrieved on April 16th 2015
Kmart and Target
Word Count: 2500
Executive Summary
The comparison that has been undertaken in the study is a thorough study taking in to account the external and the internal environment of both the retail companies Kmart and Target which are both successful in different countries. Kmart in Australia is successful while target is a struggling Company. Both deal with the same types of products and both companies belong to the same sector. The aim of the study is to find out why one retailer is successful and another retailer in the same type of environment is unsuccessful
What came out during the course of the study is that the customer segment that was being targeted by both companies was similar and yet …show more content…
the approach and the pricing strategy of both companies were different. This has provided an edge to Kmart along with the support that it receives from the government. Target is an American group that has expanded into the region and the expansion program though successful has not produced the expected results increasing their investment in real estate but providing very little returns from the real estate so far.
Introduction
In the global environment the retail competition is stiff and many of the companies indulge in a price war and a policy of trying to increase the customer base though price differentiation and the customer service changes that are increasingly become technology driven to cut costs and increase the customer experience through automation
Selection: The two retailers that have been chosen are Kmart and Target
Kmart
The products of Kmart are all retail consumer markets that are sold from retail outlets. The service categories are in insurance, in food, in chemical and fertilizers and in Industrial services. So far the company operates in Australia and New Zealand. It also operates out of U.S.A. The segment that Kmart caters to is the lower middle class, the upper middle income and successful professionals who do not have the time but have the money to shop. The format that is sued is the Big Box store format which suits Kmart (Bogenrief, 2012).
Target
Target has discounted departmental stores, super center, super store and hyper market. It caters in Financial, Retail, Medical and retail services. It is extensively present in U.S.A., Australia and India. Its customer segment is generally urban customers that are uptown.mid town mix and an urban core customer segment. Its channels and formats include urban store format and the Big Box format (Golberg et al., 2005).
Situational Analysis –Kmart
Political Forces: The political and the legal forces are in favor of Kmart as it is a home corporation and there is absolutely no requirements of regulations that are proving to be obstacles especially since the customer base are the lower middle income groups and the middle income groups.
It is supported by the Australian government because of the large scale employment that the organization provides to Australians.
Economic Forces: The economic conditions in Australia have been good. The tax rate that Kmart pays in Australia is 30%, the level of regulations is low for Kmart, and it has the scope to be able to do business in the entire region facilitated by trade and online business. The international scope is not very good currently after having filed for bankruptcy in 2002 in U.S.A with acquisitions that did not perform.
Socio Cultural Forces: The Australian customer base and the culture and social conditions are well known to the company which is why it has been able to outperform Target Corporation by understanding the needs of the lower middle class and the middle class. The social challenge that Kmart has thrown to the customer segment is if the customers can find a lower price in Australia then the company will match …show more content…
it!
Technological Forces: The technological changes that Kmart has put in place have worked in Australia but it did not work in America. The technology that Kmart is using is to deliver work styles and to be able to make user friendly applications for self kiosks. The sole objective of using technology to a high level is to offset the losses made in U.S.A. (Hafeez, 2014).
Situational Analysis -Target Corporation
Political Forces: The political forcers for target are neutral as they are compliant as a company to all the essential regulations and maintain a political balance in the areas that they operate. The corporation is under surveillance by law enforcing agencies because of the loss of confidential data of nearly 40 million customers that set Target back in customer confidence levels which they are stiller gaining.
Economic Forces: The revenue growth in U.S.A, Canada and in India is sustaining their operations in Australia even though the company is struggling for survival. This is partly due to the political innuendo where Wal-Mart threw K mart out of America so K mart and Australia will attempt to throw Target Corporation out of Australia. The rate of taxation that Target pays as a foreign company is 35% which makes the expenses higher than expected and eats into the profits.
Socio Cultural Forces: The community initiatives and the corporate social initiatives that Target has taken are helping it to survive. They spend large amounts of time and money in community base services building schools, shelters libraries donating awards to schools etc. They are seen to do more than K mart in the socio-cultural environment.
Technological Forces: Technologically the company is well converted but the security aspects of the technology needs to be increased as it appears to be easy to penetrate the Target Corporation data bases for information (McIntyre, 2013).
Natural Environment
The natural environment for both companies is the same but the supplier network in the case of Kmart is more readily accessible and hence the costs of transportation is cheaper, but for Target most of its supplies come from China or are exported from U.S.A which increases the transportation and the shipping costs Energy, power are both green energy and power which makes both the companies sustainable.
Analysis for Kmart
The relevant trends for the company sit heat they are likely to grow according to the budget forecast and the revenue estimations that they have made in Australia.
Analysis for Target
Critical Success Factors
Rating
Target
K-mart
Rating
Weighted Score
Rating
Weighted Score
Advertising
0.2
4
0.8
3
0.6
Global expansion
0.1
2
0.2
3
0.3
Price Competitiveness
0.1
3
1.2
3
0.3
Financial Position
0.15
3
0.4
2
0.3
Product Quality
0.1
4
0.4
2
0.2
Customer Loyalty
0.1
3
0.4
2
0.2
Market Share
0.05
3
0.6
1
0.05
Reputation
0.1
4
0.4
3
0.3
Management Practices
0.1
3
0.4
2
0.2
Total
1
3.3 2.45
The relevant trends for the company are that they will need to structure the strategy for Australia in order to survive in the Australian market.
The environmental factors that are affecting Kmart are the levels of pollution from noise, garbage and the use of energy. This is common for both Kmart and Target. The most important environmental factors for both Target and Kmart are the consumption of energy. The new factors that might come to light in the future are the disposal of garbage and the carbon emission or the contribution of both retailers towards pollution.
External Analysis for Target:
The Market/ Customer Analysis: For Target the situation is not good in Australia with their customer segment having the strength to shop in Singapore and go abroad to vacation and travel. The economic recession is high in Australia and the unemployment rates as at April 2015 is 7.8% which means that the upper middle class and the young urban professionals of Australia have less spending power.
Competitor Analysis for Target: The competitors for Target in Australia are Kmart, Woolsworth, Arrow, Drake, Coles and Action Retail Chains.
Wheel of Retailing for Target: For target is medium and in Australia to gain a stronger foothold it must first stop the struggle to survive by changing the strategy of upper middle class to the strategy of serve one serve all.
Lifecycle of Target: target has completed the first three phases of the lifecycle now it needs to grow in Australia and mature that leaves the most important lifecycles to attain in Australia for target Corporation.
Market Analysis: Kmart
Growth rate: The growth rate is 17.7% per annum in Australia
Market profitability: the market profitability is $ 3.45 billion
Industry cost structure: 7%
Distribution channels: the distribution channels of Kmart are low cost but not completely efficient as would be expected. Market trends: The market trends are upswing for the company and there is every scope that the growth will be more than the projected 3.2%
Key success factors: operational capacity, low costs low prices for products, mass affordability
Market Analysis – Target Corporation
Growth rate: 6.47%
Market profitability: $19.71 billion
Industry cost structure: 6.7%
Distribution channels: the distribution channels are low cost as compared with the distances of shipping and transportation it has an uninterrupted distribution channel that is very efficient.
Market trends: The market trends are upswing and the growth projection as an overview is higher for target even though it is struggling in Australia. 2015 will show growth for target in Australia.
Key success factors: Cost controlling methods, dependable systems differentiation, and operational excellence.
Market Segmentation of Kmart
Geographic: The customers are mostly regional customers from local neighborhoods
Demographic: Cost conscious customers who are in the late 30s upwards in age, the education, income family status are lower than the middle calls urban population. They have a similar customer segment to Wal-Mart
Psychographic: The psychology is one of trying to save as much as possible and yet taken home all that is needed.
Behavioral: Typical behavior patterns of going wherever a better bargain is available low customer loyalty.
Market Segmentation of Target Corporation
Geographic: The customers are located in Indian America Australia and Canada.
Demographics: Mostly urban population who are young and sophisticated. Income is above $52,000 per annum
Psychographic: Buying at good prices that is equal to the quality that is being given is the main factor. The customers at Target do not mind paying a little more. Customer loyalty is strong.
Behavioral: The patterns of behavior are not mass behavior but are cultured and have a social standing. The Target customers belong to a certain class in society that is upswing.
Competitive Analysis
Competition for both is tough and stiff and in the current market scenario both companies are struggling but the struggle is easier for Kmart as they are on home ground and harder for Target as it is on foreign turf (Wooten, 2007).
The competition for Target falls under the categories of:
Intra type competition and Intertype competition
Objectives: The current objectives of the competition are to penetrate the market share of target Corporation.
Current Strategy: The current strategy of the competition is the price differentiation where they’re lower than Target Corporation and intend to remain lower.
Current Resource Base: The competitors of Target Corporation in Australia are strong resourcefully except for the area of technology. Financially they competitors are sound.
Expected Future Strategy: The competitors might use price differentiation to enter Target Corporation’s market, and look at it as an investment rather than as expenditure.
Segmentation Evaluation
Actionable: Target is unable to clearly visualize which segment it should cater to in Australia.
Identifiable: target has identified the customer segment even though it is not the correct segment for target in Australia. The size of the market to which Target currently caters to makes up only 28% of the Australian population. The growth prospects in this segment will take another two years to stabilize unless the Australian economy improves before that. The composition of that market segment is made up of more women than men in the age groups of 18 years to 40 years out of which 52% are women and the rest are men.
Substantial: This segment will not be able to give Target the profits to sustain business if Target Corporation depends on this segment alone to do business in Australia.
Reachable: Target Corporation has the means resources, and the best expertise global markets to be able to reach out to the customer.
Porter’s Five Forces Analysis
Threat of new entrant is low as the total revenue is shrinking for the industry.
Supplier Power is also low because there are many suppliers in the industry.
Buyer Power is high as they can switch if there are better deals available somewhere else.
Threat of substitute is high as other retailers offer almost similar products and customers have easy access to those retailers as well.
Internal Rivalry is the industry is also fierce.
From the Porter’s Five Forces it is necessary for Target to cut out waste functions and to decrease the levels of rivalry and raise the barriers to competition in a way that will ensure that the competitive power is low and target will be able to survive without the REOI levels decreasing any further in Australia.
Another reason for target’s struggle in Australia is that the dollar is strong and the consolidated financial statements are affected by the strength of the dollar. The tax rates Target Corporation has to pay in Australia is higher than Kmart or any other resident company which is currently making it difficult for target Corporation to absorb the outgoing amount of financial resources in Australia.
Internal Analysis
Target Corporation
Target operates as subsidiary of Wesfarmers and its managing director also serves as MD of the parent organization. There are managers under each category in Target. Target’s earnings in the first quarter of 2015 are in line with that of previous year but the sales have dropped to almost 2 percent as compared to 2014. The revenue of target has also decreased by 1.5 percent and stands at $1.9 billion. Target’s main target in the operational market is the mid-market and it has continued to invest in the new stores and also in the refurbishment. In the operational strategy, it relies heavily on the communication mediums such as social media and internet. The merchandise category is also high in Target and is working constantly in order to refine the presentation of products in the store. Target has never lost concentration while focusing on the core customer categories and also on the delivery of differentiated products (Tongue et al., 2012).
The recent plunge in profitability of Target has mainly come from the old stock clearance at a discounted rate. To replenish the old stock with new one asked for discount on holding costs to cater customers with new products in a fiercely competitive market. However, catering to the demand of customers is important as it may help Target in the long run.
SWOT Analysis
Strengths: brand value, financial strength, strategic advantage and professional management and customer loyalty
Weaknesses: Higher product prices, higher overhead costs
Opportunities: The new range of products for the young generation, a change in the product line lower costs due to lower fuel prices
Threats: Competition, pricing of products, less of food retailing problem with its dairy products (Lea, 2015).
Position Analysis
Basically, Target operates in the middle level of the market position and its most of the stores are located in countryside that are meant to cater the demands of mid and lower level income group customers.
It also focuses heavily on the delivery speed and the fresh products for customers in a competitive market (Tongue et al., 2012).
Future Projections
CEO of Target Corporation, Paul Ziobro, has made clear plans for future as he aims to double down on some of the departments within Target stores. The special future plan aims to build on baby products and health and wellness products associated with Target. Target is also focusing on strengthening supplier management that will provide edge to the company in competitive market. Target is also aiming at revamping fashion and furniture segment to boost its sales volume (Furno, 2014).
Recommendations for Target Corporation
Target needs to focus on changing the customer segment in Australia. It needs to focus also on upper segment of the market rather than focusing majorly on mid level market. Strengthening brand loyalty among existing customer base is also equally important.
It also needs to spend less on corporate social responsibility in order to cut costs and increase its
profitability.
Keeping the prices constant will be another important aspect considering the nature of industry as the customers have more number of choices to switch to another organization because of price instability.
In order to promote its growth opportunity, it needs to provide unmatchable quality and widely publicize itself to reach all the consumer segments. Decreasing operational costs in Australia will also be a good strategy.
Conclusion
Both being in the retail industry have a different management strategy of running the business in Australia as a result the resident company Kmart appears to know the mass customers of Australia better than Target knows the upscale customer in Australia. In America however Target Corporation is the second largest retailer and has ample room for growth choosing it future markets carefully.
References
Bogenrief, Margaret. (2012) Three Things That Kmart Needs To Fix If It Wants To Survive, Business Insider, www.businessinsider.com, retrieved on April 15th 2015
Furno, A. (2014). Brian Cornell plots Target Corporation’s Future, http://www.benzinga.com/media/wall-street-journal/14/09/4840930/brian-cornell-plots-target-corporations-future retrieved on April 15th 2015
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