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In today’s dynamic business era, the
things have changed in every aspect of the business for every industry. Retail
industry is one of the industries, which has been growing with a rapid pace,
because demand for consumer goods never slows down. The retail industry has
been evolving with the passage of time, and now it is turning its focus to
e-retail business through e-commerce platforms. However, both physical retail
stores and e-commerce stores are enjoying great success due to various factors.
There are many giants in this business, and it is important to understand the
fact that sustaining long term success in this industry is not an easy thing to
do. The retail companies and stores have to make constant efforts and rebuild
strategy every now & then to keep up the levels to growing competition. In
this paper, two companies from retail industry are going to be analyzed with
different aspects; Walmart and Target Corporation. The overview of these
companies will be provided to see their business growth and success over the
period of times, and then their financial and managerial decisions will also be
compared. The focus will be to review articles from the Wall Street Journal; however,
few other sources will also be utilized.
Historical Development of the Two
Companies Walmart and Target Corporation
the historical development of Walmart
It is important to analyze the
historical development of Walmart that how business was started, and how it
became one of the largest retail companies in the world. The first single
discount store of Walmart was opened at Rogers, Arkansas in 1962 by its founder
Sam Walton. This was just the beginning of a retail revolution as Walmart
marked huge success in coming years. Just after five years of its business, the
numbers of stores for Walmart were grown up to 24 stores in 1967. The official
incorporation as Wal-Mart Stores, Inc. was made in 1969. The 1970s marked another
success, when company want on national level and it became a publically traded
company. The price of its first stock share was $16.50/share. The first ever
distribution office off Walmart was opened in 1971 at Bentonville, Arkansas. In
9172, the company attained its listing at New York Stock Exchange with 54 numbers
of stores. The Walmart foundation was developed in 1979. In 1980, the total
number of stores for Walmart had reached at 276 stores, which shows that how
quickly it gained success and attraction from consumers. The year 1988 was
another important year for the company as first ever Supercenter of Walmart was
opened in Washington, Missouri, where a full scale super market and general
merchandise was combined together. At the start of 1990s era, Walmart had
become the number one retailer in United States. Now it was time to expand the
business outside United States, so first leap was made to Canada in 1994, when
Woolco stores were purchased by Walmart in Canada. The first store in China was
opened in 1996. Asda was acquired by Walmart in 1998, which marked its entry in
United Kingdom. In year 2000, online shopping platform was found by the company
with Walmart.com. Currently, the company is having its presence in 27 countries
with 11000 stores serving around 200m customers per week. The company has
employed approximately 2.3m associates all over the world
history of Target
The history of Target is older than
Walmart as it dates back to year 1902, when George Draper Dayton, the founder
of today’s Target Corporation opened Dayton Dry Goods Company. It was just the
beginning of another future biggest retail stores in United States. In 1911,
the company’s name was changed to Dayton's Department Store. The year 1918 was
an important one for the company as its founder developed The Dayton Foundation
to play its part in welfare of people. In 1969, the foundation name was
changed, but the final name was given in 2000 to this foundation as the Target
Foundation. In 1922, the company created one of the radio stations with the
name of WBAH Radio in Minneapolis. In 1938, George D. Dayton passed away and
his son became the company’s President. The expansion outside Minneapolis was
happened in 1954, when a store was opened in Rochester, Minn. This expansion
continued to the suburbs of Minneapolis 1956. In 1961, it was decided that
company will go national with chain of discount stores, so new name was given
to the company as Target in 1962. The first store outside the area of Minnesota
was established in 1966, when a store was opened in Denver metro area. In 1967,
the company went on national level through its first ever Initial Public
Offering (IPO). The first distribution center of the company was established in
1969. The company came with grand opening of 30 stores in Southeast of the
country in 1989. In 1993, 11 Target stores were opened in Chicago. The first
ever super target store was opened in 1995. Another leap was made by the
company by going online in 1999 through Target.com. The innovation and growth
continued as company started providing offering of fresh food in 2009. In 2011,
it expanded outside U.S and went to Canada by acquiring 189 Zellers sites, but
these stores were closed in 2015. This growth, success and innovation continued
till today and company is focusing the target of reaching 1000 number of stores
till 2020
Strategic SWOT and Financial Analysis
of the Companies
Walmart SWOT Analysis:
It is important to do a strategic
SWOT analysis for the company to see how it is standing firm in the retail
industry.
Strengths of Walmart
Corporation (Internal)
·
The company has global business presence
in 27 countries around the world
·
The company enjoys the essence of global
supply chain
·
The company is one of the renowned and
trusted brands of consumers
Weaknesses of Walmart
Corporation (Internal)
·
The company’s business strategy and model
is easily imitated by its competitors
·
The company believes in giving more to
consumers, so profit margins for Walmart are very thin
·
The company is dealing with high level
competition with specialty sellers having high end products
Opportunities of Walmart
Corporation (External)
·
They have presence in developed markets
around the world, and by using their experience, the company can look to expand
its business reach to developing countries
·
They can improve their overall quality
standards
Threats of Walmart
Corporation (External)
·
The healthy and organic trend of lifestyle
is increasing
·
The competition is getting intense and
aggressive with the passage of time
·
The popularity and reach of e-commerce
business is the biggest threat to Walmart
Walmart Financial Analysis:
The company is having more than
2.20m employees across the globe and current sales/revenues for the company are
$ 514.41 billion. The net income growth for the company was +69.52%, and sales
or revenues were $138.79 billion in Jan 2019. The sales/revenue growth observed
in Jan 2019 by the company was +8.80B. As per annual financial data of 2019,
the company has been experiencing -32.37% net income growths, which is a bit
worrying sign for them. However, sales or revenue growth has been on the rise
with +2.90% in 2019. The current stock price of the company is $103.18, which
has observed a bit increase
Figure 2: Walmart 1 Month Stock Performance at NYSE
Source: https://quotes.wsj.com/WMT
Target SWOT Analysis:
Here is a brief SWOT analysis of Target Corporation with a strategic point of view:
Strengths of Target
Corporation (Internal)
·
The company is enjoying a strong brand
portfolio
·
The customer level of satisfaction is high
·
The company has developed a strong
community of dealers and they have good number of reliable suppliers
Weaknesses of Target
Corporation (Internal)
·
The company has not been able to achieve
any success other than its core business
·
In different categories, the company has
not been able to compete with new entrants
·
The R&D investment made by the company
is below par industry’s level
·
The financial planning and analysis of the
company is not as efficient as it should be
Opportunities of Target
Corporation (External)
·
They have huge opportunity to expand their
business outside United States by targeting specific retail markets
·
The online shopping platform is another
viable opportunity to grab the attention of consumers
·
The spending by consumers is increasing
and economic performance is stable as well
Threats of Target
Corporation (External)
·
The local as well as international retail
stores are growing their reach and coming up with new differentiated strategy
·
The competition is getting tough,
aggressive and intense from multiple channels
·
The company is lacking skilled labor to
come up with innovative products
·
The behavior changes shown by consumers
towards online shopping trend are another considerable threat for Target retail
stores
Target Financial Analysis:
The Target Corporation is one
of the major players in retail/wholesale industry in United States. The current
number for its employees is 360,000. As per NYSE stats, the current stock share
price of the company is $83.26, which has been experiencing a steady growth for
last few days. In Jan 2019 quarter, the next growth for the company was -27.59%
and sales/revenue was $22.98 billion. +0.93% growth was observed in terms of
sales/revenue growth. However, as per annual stats of 2019, net income growth
has been on the positive side with +0.07%. The sales/revenue for 2019 was
$75.36 billion along with +4.84% growths in sales/revenue. It means that
overall annual financial results are showing good results for Target Corp
Source: https://quotes.wsj.com/TGT
Figure 4: Target Corp. 1 Month Stock Performance at NYSE
Source: https://quotes.wsj.com/TGT
Comparing Walmart & Target for
their Managerial & Financial Decisions
It is important to look at key decisions
made by the management of Target and Walmart. A recent article published in WSJ
revealed that more tasks related to retail stores are being automated by both
Walmart and Target. It is quite interesting to see that two companies are
making management decisions, which are similar in nature. It was revealed that in
2000 stores across United States; Target is aiming to make addition of automatic
cash counting machines. These machines are known as Grey Machines and it is
known to count coins and bills more quickly than any other machines. This particular
decision made by Target showed that initially, 500 stores will be added by
these machines till August 2018. Similar managerial decisions are being made by
Walmart to run its business with automation to save costs. It was revealed that
around 7000 jobs related to accounting were removed by Walmart stores in 2018. The
company is also planning to add autonomous robots in their stores from 2019. These
robots will have the capability to scan inventory of shelf by detecting that
which products are available and which ones are out of stock. The automatic
conveyor belts are also used by Walmart to speed up the process of unloading
trucks
Both Target and Walmart are dealing
with various issues, and one of the issues for them has been their shoppers. It
was explained through a WSJ article in 2015 that both Target and WSJ are facing
issues from their shoppers, and they are not spending as much as expected. The
consumers are showing unwelcoming behavior to shot at stores of both companies.
Both Target and Walmart has made various decisions to increase their financial
performance such as new management teams have been enlisted to makes sure that
any mistakes made by both companies are cleared and stores are given a fresh
look to attract new shoppers across different markets. The Target Corp is
trying to get back to its root of being a stylish retail company. They are
looking to freshen up their business processes like refurbishing their grocery
and stores with some innovation. Walmart is trying to make viable decisions to
increase its financial performance in domestic U.S markets by reinforcing its
image of being a low-price company. The company is also looking to make considerable
decisions to change their strategy regarding their service levels, stocks,
grocery etc. Both retail companies are also making similar decisions such as
opening stores chains with smaller scale near city centers to facilitate and
reach as many consumers as possible
Future Direction of Retail Industry and Target & Walmart Companies
It is a fact that consumers are
enjoying more power and expecting more from retail industry as space is
narrowing for the companies in this industry. The sectors with consumer focus
are colliding with the existing retail industry, and this disruption is
increasing with the passage of time. According to results of retail industry in
2018, lots of things were evident such as mixed earnings in retail, holiday
season with new records, strong U.S economic performance as well as tensions
for global economics and trade. The retail sales experienced strong performance
in recent years, but coming years may come up with few economic hiccups, so
retail industry will have to be well prepared for such situation. The industry
has to make considerable decisions for a better future direction. For instance,
the industry will have to navigate disruption to stay as competitive as
possible. The industry also needs to attain transaction as well as emotional loyalty
by consumers. The industry should also invest in emerging technologies to be
more efficient in its business processes. The industry also needs to learn
lessons from China
It is a fact that online business is
gaining more attraction from consumers as it provides more ease and convenience
to their shopping experience. It was good to know that Target has understood
this future direction of the retail business and they are coming up with a new
and innovative online strategy, which asserts that “Less is more” The Company is looking to rebuild its digital
strategy and also focusing on store sales to be improved. The Target is
learning the lesson from its competitor Walmart, who are heavily investing in
their e-commerce business. The company is looking to make mergers and
acquisitions with major e-commerce players to keep driving business in right
future direction
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