How Does Target's Business Model Differ for That of Wal-Mart?
1. How does Target 's business model differ for that of Wal-Mart?
Wal-Mart 's business model is centered around providing a widespread of products at "always low prices." Wal-Mart has chosen to have "greeters" at each of their store entrances. It is an industry practice for retailers to charge a slotting price for their items to be seen on store shelves, but Wal-Mart is one of a few retailers who do not. Their main focus is to sell popular products and to drop products that are no longer selling. Also, Wal-Mart has built their chain in over 15 different countries which accounts for 24.2% of its total net revenues. Whereas, Target Corporation 's business model is the "expected more pay less" philosophy. Target wanted to give everyday customers, with a wide range of wages, the unique designer label products in conjunction with traditional retail store items in a clean upscale atmosphere. Target also wanted to offer good customer service, management that is business savvy, and be capable of adjusting to changing times. Also, by Target introducing credit cards it caused an increase of store visits by customers which in turn caused as increase in sales.
2. How are these model differences reflected in Target 's and Wal-Mart 's financial performance? How would you evaluate Target 's relative financial performance to Wal-Mart? What are the key metrics most useful to understanding their relative performance?
In 2008, Target was unable to surpass Wal-Mart 's same-store sales. With sales at its core retail business wavering and bad-debt write-offs growing with their credit card, Target was unable to provide the same sales throughout the year. Comparing the debt-to-equity ratios will show how much debt is used to finance operations which could cause the company to produce more revenue than it could have without the debt. The debt-to-equity ratios in 2008 for Target and Wal-Mart were 1.12 and .69, respectively. A high debt-to-equity ratio, like Target, indicates
Wal-Mart 's business model is centered around providing a widespread of products at "always low prices." Wal-Mart has chosen to have "greeters" at each of their store entrances. It is an industry practice for retailers to charge a slotting price for their items to be seen on store shelves, but Wal-Mart is one of a few retailers who do not. Their main focus is to sell popular products and to drop products that are no longer selling. Also, Wal-Mart has built their chain in over 15 different countries which accounts for 24.2% of its total net revenues. Whereas, Target Corporation 's business model is the "expected more pay less" philosophy. Target wanted to give everyday customers, with a wide range of wages, the unique designer label products in conjunction with traditional retail store items in a clean upscale atmosphere. Target also wanted to offer good customer service, management that is business savvy, and be capable of adjusting to changing times. Also, by Target introducing credit cards it caused an increase of store visits by customers which in turn caused as increase in sales.
2. How are these model differences reflected in Target 's and Wal-Mart 's financial performance? How would you evaluate Target 's relative financial performance to Wal-Mart? What are the key metrics most useful to understanding their relative performance?
In 2008, Target was unable to surpass Wal-Mart 's same-store sales. With sales at its core retail business wavering and bad-debt write-offs growing with their credit card, Target was unable to provide the same sales throughout the year. Comparing the debt-to-equity ratios will show how much debt is used to finance operations which could cause the company to produce more revenue than it could have without the debt. The debt-to-equity ratios in 2008 for Target and Wal-Mart were 1.12 and .69, respectively. A high debt-to-equity ratio, like Target, indicates