The purpose of this paper is to perform an analysis on Target and K-Mart. By doing this analysis we will find out what each company does well, where the failures are and what they can do to keep the company alive and profitable. We will begin by looking at Target as a whole and then identify a successful business strategy and show how that strategy has moved Target into one of the leaders of the industry. We will then look at K-Mart as a company and then move on to identifying a failed business strategy and show how that strategy is holding K-Mart back within the industry.
We will than perform a cross-case analysis by comparing and contrasting the case studies on the points of parity and points of difference. This will entail us looking at a side-by-side comparison of a SWOT Analysis and Five Forces Analysis. Case Study 1: Target The first Target store opened in 1962 in the Minneapolis suburb of Roseville, Minn. , with a focus on convenient shopping at competitive discount prices. Fast forward to 2013 where Target remains committed to providing a one-stop shopping experience for guests by delivering distinctive merchandise and outstanding value with its Expect More…Pay Less® brand promise.
Target currently is the second largest general retailer in America behind Wal-Mart, with Target. com being ranked as one of the most-visited retail Web sites. Target currently has 1,784 stores in the United States and 24 stores in Canada. Target has over 16,000 team members that work together to act as the bridge between suppliers and stores – distributing products to over 1,700 Target stores from its 37 distribution centers. Worldwide, Target has more than 365,000 team members that work in their stores, distribution centers, at the online business at target. om and in the corporate headquarters.
According to 2012 numbers, Target made $68. 87B in total revenues for the year. Net earnings were $2. 93B. When you look closely at how they accomplished this goal, we can break the sales mix. 25% of monies made was from the household essentials, 19% was from hairlines (electronics and such), apparel and accessories and food and pet supplies. Rounding out the other 18% of those earnings was the home furnishings and decor department.
Target’s mission is to make Target the preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences by consistently fulfilling their expect more pay less brand promise” (Mission and Values). “Target believes that great design is fun, energetic, surprising and smart—and it should be accessible and affordable for everyone. When they talk about their dedication to good design, they don’t just mean how something looks, but also how it satisfies a need, how it simplifies your life, and how it makes you feel” (Mission and Values).
Target, along with other companies, are constantly questioning whether their business strategy will aid them in having the best competitive advantage in the industry possible or the weakest. “There are a number of different competitive strategies that a business can use to gain their competitive advantage over competitors. In the case of Target, they have several strengths that are very evident. The most prominent of those is that the company has been very good at distinguishing itself from the competition through its competitive advantage.
The bulk of Target’s strengths lie in the areas of image, brand and style. Target has spared no expense when coming up with the catchy marketing tactics and advertising campaigns that have in essence, made it “cool” to shop at a discount store. Target’s well-known brand, paired with its hip stores, has given the company an image that beats its major competitors hands-down in the area of style. Target’s alignment with chic, upscale brands such as Starbucks, Yahoo, Isaac Mizrahi, Cynthia Rowley and others contribute to this phenomenon of style” (Mama, 2007 ).
Case Study 2: K-Mart More than one hundred years ago, Sebastian Spering Kresge opened a modest five-and-dime store in downtown Detroit which ended up changing the landscape of retailing. “The store that Kresge built has evolved into an empire of more than 1,500 stores and an Internet presence that reaches millions of customers. The Kmart name has become a symbol of Americana, standing for quality products at low prices” (Sears Holdings Corporation). “Attention Kmart shoppers: Kmart is the #3 discount retailer in the US, behind Wal-Mart and Target.
It sells name-brand and private-label goods (including its Joe Boxer and Jaclyn Smith labels), mostly to low- and mid-income families. It runs about 1,300 off-mall stores (including 30 Supercenters) in 49 US states, Puerto Rico, Guam, and the US Virgin Islands. About 270 Kmart stores sell home appliances (including Sears’ Kenmore brand) and some 980 locations house in-store pharmacies. Poor sales have forced its parent, Sears Holdings Corp. , to close 100 to 120 Kmart and sister subsidiary Sears, Roebuck stores.
Kmart also operates the kmart. om website, which includes merchandise from Sears” (Hoovers). The most current sales figures for Sears Holdings are very dismal in the big scheme of things. The earnings for 2012 were $41. 5M, with a profit of -$3. 1M. These numbers are 4. 1% less than what they earned in 2010. In light of the steady decrease the company faced, Sears Holdings has closed between 100 to 120 Kmart and Sears. This does not prove well for the company and its subsidiaries. So where did Kmart go wrong? To start, Kmart struggles to define itself in the market.
The way the company describes itself “mass merchandising company that offers customers quality products through a portfolio of exclusive brands and labels” is just what all the competitors could describe themselves as” (Leinwand & Mainardi, 2010). At one point in history, Kmart was the epitome of low prices and convenience because of its many locations and its wide variety of product. But as time went on Wal-Mart took the edge on the low prices and the convenience. Instead of being a store of convenience Kmart became a hassle to shop at because of the long lines and out-of-stock products. Today, with the exception of its Martha Stewart housewares collection, Kmart resonates with consumers mostly as a dingy place to shop, hardly an image to build on when going head-to-head with the country’s two discount titans” (Chandler, 2002).
Besides Kmart struggling to define itself in the market, their greater problem is their poor brand strategy and negative image among consumers. As Wal-Mart’s branding includes “Roll back the Prices” and Target has “Expect More. Pay Less”, Kmart introduced its trademark – the “Blue Light Special. ” Kmart shoppers ould hear the phrase “Attention Kmart shoppers” and would know that there was a blue light flashing somewhere in the store which meant that there was a special discount on some closeout merchandise. This strategy helped give Kmart their identity with consumers all over the US. When Kmart discontinued the Blue Light Special they said it was to cliche and they began losing customers. But the fact matter was that it was Kmart’s dirty, unkempt stores that generated that loss and the bad reputation. When sales started slipping, Kmart tried to revive the Blue Light in 2001.
They believed that because the concept was so powerful in the past, they could re-introduce it and spark a positive image and memory of the old Kmart. However, the Blue Light failed to spark any significant sales when Kmart reintroduced it with a $25-million marketing splash. It was a case of too little, too late and here we are now with more and more stores closing. Cross-Case Analysis In order to find out the points of similarities and the points of difference we will look at the Porter’s Five Forces Analysis and a SWOT analysis of both companies.
By looking at both of these analysis’, we will be able to quickly see what the companies are doing the same and what they are doing differently, which will show why one is more successful than the other. We will begin by doing a cross case analysis using the Porter’s 5 Forces analysis. Rivalry/Competition: Competition is very intense in this type of market. Many rivals with similar product lines and services are always entering the market and threatening the livelihood of both companies. The strength is HIGH. Threat of New Entrants: Large capital is necessary for operation – large workforce, large chains of stores, etc.
There is difficulty of creating reliable suppliers and distribution channels to sustain business. Threat for Target is low compared to a high threat level for Kmart as it is having difficulty sustaining business. Threat of Substitutes: The substitutes are the brand name stores that sell specific items – example Toys R’ Us. Both companies are not responding to the threat because the threat of substitutes is not risking the diversity of products they generate. The strength is low. Bargaining Power of Buyers: Buyer power is high. Many competitors available, shopping online is available too.
Kmart’s bargaining power is high since the brand is going through difficulties. For Target, the market is perceived as more sophisticated and is at a moderate level compared to Kmart. Bargaining Power of Suppliers: The companies rely on suppliers to deliver quality products as they both sell nationwide and offer store locations in very prime shopping areas. There are many suppliers for both locations. The level of strength for Target is low but the level of strength for Kmart is high due to the re-payment problems from in the past up to this point.