BM2021

TASK PERFORMANCE

Walmart vs. Target (Blocher et al., 2019)

Talk about a success story! Walmart has grown from its first discount store in 1962 to become the world’s
largest company, with almost $500 billion or 25 trillion pesos in sales. It has achieved this through clear,
day-to-day attention to accomplishing its business strategy and living up to its motto of “Save Money, Live
Better.” Walmart achieves success through extensive use of technology and aggressive efforts to grow the
business globally. And the business environment is very competitive!

A key competitor, Target, with a different strategy and a different motto (“Expect More, Pay Less®”) has
challenged Walmart with aggressive advertising campaigns and new stores. During the 2004–2007 period, Target
was outpacing Walmart in sales growth and stock price growth. This reversed in 2008, as the global economic
outlook weakened for many consumers and the low-cost strategy of Walmart proved to be more successful.
Since 2009, Walmart and Target have been facing the heat of increased competition from other retail giants like
Amazon.com. The stakes are high, and the competition is fierce.

Most would argue that Walmart is a cost leader because of its focus on low prices. Its operating efficiencies and
the persistent pursuit of low costs from its suppliers help Walmart achieve these low prices.

Target also values low prices but competes somewhat differently. The financial report of the company states
that, for Target, the competitive focus is to offer customers “both everyday essentials and
fashionable, differentiated merchandise at discounted prices.” These statements point to a differentiated firm,
even though the low price is an element of the competition. Another difference is that Target’s advertising
budget is somewhat larger, at 2% of sales in 2017, relative to half of 1% for Walmart in the same period. In June
2017, Walmart had a stock price increase of 10% over July 2016, while Target’s stock price declined by a third in
the same period. Why? While both retailers have suffered a loss in “walk-in” sales, Walmart has been very
successful in recent years in online sales. In the first quarter of 2017,
Walmart’s online sales increased by an impressive 63%.

Requirements:

Based on the case facts/supplementary research, analyze and compare the value chain activities of Walmart
and Target. Adhere to the given outline below.

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I. Value Chain Activities

a. Identify the specific and COMMON value-adding activities between Walmart and Target,
from sourcing of goods/raw materials to delivery and customer service.

Walmart leads in cost due to low prices, achieved through efficiencies and supplier-
focused efforts. Target, on the other hand, offers everyday essentials and fashionable,
differentiated merchandise at discounted prices, demonstrating a differentiated firm
despite low prices. Walmart and Target engage in value-adding activities that are similar
in that they prioritize effective sourcing, inventory control, supply chain logistics,
technology integration, customer support, e- commerce, private label brands, and
environmental sustainability. Them competitive advantage is from streamlining these
procedures to provide customers with value in an economical way.

b. Simply fill in the given table. An example is provided below.

Steps in the Value Chain Activities Expected Output of Activities

1. Materials acquisition Purchasing, receiving, Various parts and materials

2. Marketing and Sales
3. Customer Service
4. Outbound Logistics
Stocking
Products pricing and Best cost products
Advertisements
Processing returns, repairs Reducing product mishandling.
and inquiries
Order picking, packing, shipping and Delivery of completed goods from the
delivery. warehouse or
distribution facility to clients.

II. Competitive advantage

a. This part must detail and compare the value proposition and value-adding activities of Walmart
and Target.

Walmart's success is attributed to its business strategy, technology use, and aggressive global
growth. However, competitor Target, with a different motto, has outpaced Walmart in sales and
stock price growth between 2004 - 2007. While Walmart and Target engage in a lot of value-adding
activities together, their value propositions are different when it comes to product selection,
pricing, and the whole shopping experience. Target seeks to strike a balance between style and
value, catering to a little wealthy customer than Walmart, which places a strong emphasis on
accessibility and price.

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b. A detailed assessment of the firms’ competitive advantage over each other must also be
presented.

Walmart and Target face fierce competition from Amazon.com, with Walmart experiencing a 10%
stock price increase in July 2016, while Target's stock price declined by a third. Walmart has an
advantage over Target due to its global reach, cost leadership, and exclusive alliances. Target also
focuses on a somewhat wealthy client base and maintains a strong brand image. Their different
approaches and market positions have an impact on the competition between the two retailers.

III. Opportunities for Added Value

a. This includes business areas/activities in which Walmart and Target can add significant value for
their customers.

Walmart and Target have various opportunities to enhance value for their customers across
different business areas. These include offering diverse product selections, improving convenience
through better layouts and online platforms, maintaining competitive pricing, investing in quality
customer service, engaging with communities, and integrating technology for a smoother shopping
experience. By focusing on these areas, both companies can meet evolving customer needs and
remain competitive in the retail industry.

b. This also explains which between the two (2) rival firms effectively capitalizes
opportunities for improvement of products and/or services.

Walmart and Target are major retail competitors in the United States, each with its own approach
to capitalizing on opportunities for improving products and services. Walmart focuses on efficiency
and low prices through its extensive supply chain network and investments in e-commerce. Target
offers a more upscale shopping experience, emphasizing design and customer service. Both
companies analyze market trends and customer feedback to enhance their offerings, with Walmart
excelling in operational efficiency and cost management, while Target leads in branding, design, and
customer experience. Overall, they are both formidable competitors in the retail industry, with
different strengths and strategies.

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c. Cite recommendations for the firm with weaker value-adding efforts and suggestions to maintain
competitiveness with the other firm.

To maintain competitiveness against leaders like Walmart and Target, a firm with weaker value-adding efforts
should focus on several key strategies:

1. Analyze competitors' advantages to understand areas needing improvement.

2. Enhance supply chain efficiency through streamlining processes and leveraging technology.
3. Improve product offerings by researching customer preferences and strengthening supplier
partnerships.
4. Invest in enhancing the overall customer experience, both in-store and online.
5. Develop pricing strategies that balance competitiveness and profitability.
6. Embrace innovation and technology to differentiate and improve efficiency.
7. Invest in employee training to ensure a skilled and motivated workforce.
8. Strengthen brand identity through effective branding and marketing.

By implementing these recommendations, the firm can enhance its value-adding efforts and remain competitive in the
retail market. Ongoing monitoring and adaptation to market changes are crucial for sustained success.

IV. Opportunities for Reduced Costs

a. This includes an assessment of both Walmart’s and Target’s non-competitive value chain
areas/activities.

Walmart and Target excel in non-competitive value chain areas, such as supply chain management,
store operations, procurement, human resources, IT infrastructure, marketing, CSR, and financial
management. Their strategies ensure efficient inventory management, strong supplier relationships,
customer service, ethical procurement, employee satisfaction, robust IT infrastructure, community
engagement, and corporate social responsibility.

b. This part must present a comparison of cost-efficiency between the two (2) firms.

Walmart's scale and low-cost leadership strategy enable it to offer low prices across a wide range of
products. Target, on the other hand, emphasizes quality and a premium shopping experience, potentially
resulting in higher operating expenses but attracting a different customer demographic.

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c. Provide recommendations for the firm with weaker cost-cutting initiatives and suggestions to
maintain cost competitiveness to the other firm.
 To enhance cost competitiveness relative to Walmart, Target can focus on several key
strategies:
 Operational Efficiency: Streamline operations, optimize store layouts, and improve supply
chain logistics to reduce costs.
 Supplier Negotiation: Negotiate better contracts with suppliers to secure favorable pricing
on merchandise.
 Technology Investment: Implement advanced technologies for inventory management, data
analytics, and customer relationship management to drive efficiency.
 Marketing Optimization: Allocate marketing budgets effectively and leverage data analytics
to target specific customer segments efficiently.
 Cost Reduction Initiatives: Establish a cost-conscious culture and incentivize employees to
contribute ideas for efficiency improvements.
 Supply Chain Optimization: Optimize the supply chain network to reduce transportation
costs, minimize inventory holding costs, and improve delivery times.
 Employee Training: Provide comprehensive training programs to improve productivity,
reduce turnover costs, and enhance customer service.

Implementing these strategies can help Target strengthen its cost-cutting initiatives and improve its overall cost
competitiveness compared to Walmart, while maintaining product quality, customer service, and brand reputation.

Reference:
Blocher, E., Jurds, D., Smith, S., & Stout D. (2019). Cost management.

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