Wal-Mart Vs. Target

Introduction

Wal-Mart and Target are the two largest retail chains in the United States categorized of SIC code 5331 which is the retail-variety group assigned by the SEC. Both American based corporations, they are the two most recognized and successful supercenters of their kind rendering several other smaller companies obsolete. Wal-Mart is the larger of the two and has gained enough resources to quickly spring into international business endeavors and expansion of different segments while Target remains a primarily domestic corporation with just one segment. While both stores serve generally the same purpose, the stores attract different markets and both feel intense competition from one another. While Wal-Mart is much larger in scale, Target is very competitive from a financial standpoint. The following will attempt to analyze both corporations’ finances and give some determinant to which company would be more prosperous for a typical investor based on integral financial information found in the companies’ annual reports and some from other reputable resources.

Wal-Mart Overview: Background, Goals and Marketing Strategy

Wal-Mart originated in 1969 under the leadership of Sam Walton. Wal-Mart is the largest superstore chain in the United States. Their products vary from groceries and perishable items to car care in some stores. However Wal-Mart is not just made up of the traditional supercenters that over 100 million people frequent weekly. Wal-Mart is comprised of three separate segments. A segment of a company is defined by a subsidiary or part of a corporation that makes up more than ten percent of its assets or revenues. “Wal-Mart Stores” is a heading that includes the company’s supercenters, discount stores, and neighborhood markets that are located in the United States as well as walmart.com. The “Sam’s Club” segment comprises the warehouse membership clubs in the United States and samsclub.com. The “International” segment is made up of numerous other operations all located outside the country. In the most recent year with Wal-Mart Stores segment counted for over 65% of total net sales within the company. Internationally Wal-Mart has 6,779 stores encompassing all of these segments and brought in a record breaking $345 billion in net sales this past year. Wal-Mart has been a publically traded company since 1972 and since then has become a world leader in retail.

Wal-Mart has a president and CEO (Lee Scott), and a chairman of the board of directors (Rob Walton) who oversee a large variety of management and directors who are designed to manage and lead ever aspect of the Wal-Mart Corporation. They portray themselves as very customer oriented and reinforce the fact that most of their corporate officers climbed the ladder with Wal-Mart for years in an effort to make it the most efficient it could possibly be. Wal-Mart states may of their goals in their annual report. The first of which is the most recognizable, which is to be the company with the lowest brand name prices, always. All other goals are pretty much obtained in order to complete their largest and most final goal. They, like most other companies strive to provide the highest possible value to their shareholders. They state they believe in fair employee treatment which can be disputed by various lawsuits filed in America. The following is Wal-Mart’s mission statement as found on walmart.com:

“At Wal-Mart, we are guided by our three founding basic beliefs, and these include: Respect for the Individual, Service to Our Customers, and Strive for Excellence.

We are a global retailer committed to saving people money so they can live better and serving communities around the world. We earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices while fostering a culture that rewards and embraces mutual respect, integrity and diversity.”

Wal-Mart uses the “Every Day Low Prices” philosophy in their marketing strategy. Their goal is to have all the name brands at the lowest prices. While they may have attained this goal, they have and are still receiving criticisms from cynics who believe that Wal-Mart’s brand equity and reputation as a corporation is faltering in light of new retailers. Wal-Mart also realizes that they have to be proactive in order to remain on the top of their game. They are attempting to accomplish this “through the out in front” strategy. Wal-Mart has seen an overall increase in net sales and net income for the last several years. However these numbers do not provide all the needed information to make an educated assessment of value to an investor.

Wal-Mart SWOT

Wal-Mart’s strengths include their management style which conforms to the changing environment and solicits internal feedback from all associates to keep management abreast to the most recent trends and developments. The Everyday Low Pricing campaign is a strength which has kept them at the top of discount merchandising. Wal-Mart has a very diverse and sought after product variety and depth. Brands want to be carried at Wal-Mart because they are such a widely known and frequented organization. They have grown substantially in recent years, global expansion. They have exceptional information technologies. They are the largest grocery retail in the U.S. They have the resources to forge new and innovative plans that their competitors may not have access to.

Some of Wal-Mart’s weaknesses include their lack of diversity in upper level management. They have a relatively low EPS for each stockholder. Because Wal-Mart sells so many types of merchandise they cannot be as focused as some of their competitors. They have so many employees in such a large store that it is difficult to get the type of people one would want running a customer service retail oriented chain. The have a high employee turnover rate.

Wal-Mart’s opportunities lie heavily within their new global expansion efforts. There are many countries that Wal-Mart has not penetrated yet. They could team with retailers internationally to increase the chances of them being accepted into different cultures. Wal-Mart could increase their brand equity by forging relationships with more quality suppliers to increase the respectability of their lines. They could better train their staff and raise pay to decrease employee turnover. There is also opportunity in conducting business online