Target Mission Statement: A Paper on Target Corporation

Target Corporation is performing spectacularly well. Recent reports have indicated spectacular figures and satisfying gross profits. It reported sales of $39.9 billion for the most recent fiscal year, mainly from its 1,100 Target stores, pushing it ahead of Kmart to make Target the nation's second biggest discounter ("Target"). Analysts are impressed with its earnings, which went up 36 percent, and up to $345 million, in the most recent quarter as revenue increased 15 percent, to $9.59 billion. Target's share price rose 27 percent last year, although it is off around 6 percent this year. By comparison, Wal-Mart's sales in the first quarter rose 14.4 percent, to $55 billion. Its net income in that period jumped 19.7 percent, to $1.7 billion ("Walmart's Financial Center").

Target has earned itself an image with arty distinctive and crafty ads. It is considered that the Target chain is by far the best-performing unit of the parent corporation. In the first quarter, Target stores provided 89 percent of the company's pretax profit, up from 82 percent last year. In 2004, 92 percent of the corporation's capital spending, or $2.9 billion, went to the Target chain. Target executives like to point out that the chain promotes contemporary fashion while it keeps prices low, while Wal-Mart is known for low prices, and low prices only ("Target Stores").

Target's advertising budget is rising rapidly. In 2003, it spent $824 million on advertising, up just 4 percent, or $33 million, from the previous year. But last year, that budget was $924 million which was a 12 percent jump. Marketing is considered essential to help build Target's persona. The believe in what is called the "the wow" for its customers ("Target Stores").

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Such marketing, though, is not something that Wal-Mart makes a priority. One way that Target is trying to offset such disparity on the balance sheet is by expanding its credit card operations. Credit card income generated $445 million in pretax profit, or about 15 percent of Target's pretax profit last year. the company expected that to rise to around 20 percent of total earnings in the next year or two. But despite some of their different tactics, these two chains have a lot in common. Both are building grocery stores by the dozen.

Wal-Mart calls them SuperCenters and Target calls them SuperTargets. Bakersfield has its own which is named, 'Target Greenland'. This helps them to attract new customers. That means they will be competing more intensely in a category in which margins are already very thin. 40 percent of Target's growth is stemming from SuperTarget this year. And it is obvious that Target plans to expand its grocery operations. This puts Target just around Wal-Mart's ballpark. Also, by expanding into the grocery business, Wal-Mart wants to increase the volume of shoppers coming into its stores. But it also wants to increase the average purchase made by those shoppers, which also means adding higher-ticket products to the mix of general merchandise.

In turn, Target says its strategy is to have its existing customers buy groceries, swelling their purchases and bringing them into the stores more often. The company says it is not counting on luring customers from other supermarkets but it is assuming that former Kmart customers will wind up at Wal-Mart rather than Target. They want to avoid this ("Target Stores").

In some areas, Wal-Mart has already shown how it intends to compete with Target. For example, Wal-Mart hired extra workers earlier this year to try to beat Target in the crucial area of customer satisfaction. So there had been a big change as far as customer service goes at Wal-Mart stores ("Walmart; Our Commitment").

It is a tactic that can be replicated almost anywhere, because the two companies compete across the country. About 70 percent of Target's stores are in markets where there is also a Wal-Mart, and Target has more stores in California, Texas and Florida than anywhere else. Because most shoppers have a choice, the question becomes whether the two companies can coexist.

I agree with the Target companies' cash flow decisions. It has been evident that expanding to lure in new customers has proved effective and doing so would eventually lead them in front of Wal-Mart stores. I would recommend Target to continue marketing as effective as they have been until their customers realize that there are enough Target Stores existent to eventually eliminate unnecessary marketing costs. One main recommendation for Wal-Mart is to continue working on their customer service skills. It would be at a disadvantage to them to work on their advertising because it is already considered a well known chain.

References:

1. "Target Stores" (2005). Retrieved November 4, 2005, from www.target.com/findatacenter/analy454%NOV2005.html
2. "Wal-Mart's Fiancial Center" (2005). Retrieved November 4, 2005, from www.walmart.com/ficenter_05nov.html
3. "Wal-Mart; Our Commitment" (20050. Retrieved November 4, 2005, from www.walmart.com/commitmentcent/overview_wm.html

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