Strategy Analysis Target vs. Kmart: Dan Saguy, Shai Zamir

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Strategy final project
Target vs. Kmart
Shai Zamir
Dan Saguy

Introduction
Kmart Corporation, incorporated in May 1916, is a chain of discount retail stores and a general merchandise retailer, headquartered in the United States, with store locations in all 50 states, as well as Puerto Rico. Kmart went through significant changes in the last 10 years: In 2002 a scandal similar to that of Enron, Kmart’s management was accused of misleading information.  In 2003, after filing for chapter 11, it emerged as a new corporation, closing hundreds of stores. In 2005, it acquired Sears, forming a new corporation under the name Sears Holdings Corporation. Ever since, it has continuously reported sales decreases, On December 27, 2011, after a poor showing from holiday shoppers, it announced that 100 to 120 of Sears/Kmart stores will be closing.

Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota. Target operates general merchandise stores for discount retail goods, in the United States. Target operated 1,750 stores in 49 states. Further, it offers general merchandise products through its Website, Target.com. The company distributes its merchandise through a network of distribution centers, as well as third parties and direct shipping. Target also suffered from increasing competition from the market’s leader (Walmart). However, it continues to grow, opening new stores in new locations (recently announced it’s expension into Canada), and showing excellent sales results. Even though both companies operate in the same market, selling similar merchandise, suffering from the same competioin, one company, Target corporation, managed to maintain a steady increase in sales and to open many stores, while the other is slowly dying. This paper will attempt to answer why External Analysis- Porter’s 5 forces

Below is the application of this business analysis tool to Target and Kmart. Rivalry/Competition: Competition is intense. Several businesses operate in the retailing industry and targeting similar audience. The main rivals include the leader Wal-Mart, Home Depot, Kroger, Kmart Corp., and Costco. All of these competitors produce similar products as well as offer same services to consumers. Threat of new Entrants: One of the barriers is the large capital necessary to operate a retail company with a considerable number of stores and employees. In order to acquire the right workforce, supplies and distribution channels, the starting company must have a high initial capital. Another barrier is the difficulty of accessing distribution channels abroad. Corporations in the retailing business must have an effective globalization strategy and apply the right international practices. These Certain requirements like business stability, market and revenue must be met. Thus, not all retailers are able to distribute their products abroad and acquire large international markets. We conclude that the threat of new entrants is rather low. Bargaining power of buyers: Buyer power is high. First, there are many other retail store competitors available, as well as online. For Target Corp. the target market is perceived to be more sophisticated. In a survey conducted, Target Corp. shoppers fall on a 46 years old age median, more educated and well-off clientele as to compare with its rival. For Kmart, the bargaining power is even higher, since the Kmart brand is going through difficulties for the last decade. Suppliers: Prime suppliers are used for production and product line. The companies rely on suppliers to deliver products that are of high standards, and there is a great importance for an existing high quality chain of suppliers. On the other hand, both companies sell nationwide and offer store locations in prime shopping locations. Suppliers are also abundant. Thus, the power of the suppliers in the industry is fair. Kmart’s supplier power will be higher than Target because Kmart has had payment problems in the...
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