Target vs Wal Mart Essay
Target has a long standing tradition of providing superior products to consumers. Whether it is clothing or your groceries, Target is known for being a top competitor to the retail giant Wal-Mart.
Target also has a long standing tradition of making economic decisions that benefit the consumer. In their most recent decision to move into Canada, Target is now moving into international business. Their brand name is not widely known throughout Canada, but given their reputation in America, Target should have no problem entering the Canadian market.In this new change for Target, they have also made a big decision in deciding to go with Starbucks as their coffee provider inside their stores. This is big news to Canadian consumers whose local coffee shop is Tim Horton’s, because Target was considering Horton’s in their new shops [ (Target to Partner with Starbucks in Canada, 2012) ]. Target is continually growing in the United States and now internationally in Canada, and this corporate giant has the potential to continue its economic growth for years to come.The first of three principles Target is using is learning Canada’s standard of living, and how that will affect its ability to provide goods and services in a new market [ (Mankiw, 2012) ].
Analyzing the living standards in Canada compared to its US market is a great way for Target to learn how they can provide goods and services to the consumer. I the 4th quarter of 2011, a recent 15 year study by Statistics of Canada, showed the standard of living in Canada is increasing more than the United States [ (Stechyson, 2011) ].By knowing what the standard of living is in Canada increases Target knowledge of the culture, and the merger with Starbucks ill benefit from this increased standard of living. The second principle Target is utilizing is responding to incentives. Becoming an international corporation has benefited a lot of companies around the world. Their top competitor, Wal-Mart has been doing these to an extreme, and seen good success.However, given the amount of stores Wal-Mart has compared to Target (almost 7000 more locations [ (Target, 2011) ] [ (Wal-Mart, 2011) ]), Target incentive is providing Canada with the top fashion, great groceries, and current trends at a low price, while never sacrificing overall quality.
The incentive is to provide consumers in Canada with an experience they have not had before in retail chains. The third principle Target is using is opportunity cost.This is a big risk for Target moving out of their comfort zone and into a foreign market with competitors who have been there for nearly 20 years [ (Walmart Canada, 2012) ]. Target has the option to stay in the US and focus on its product market there, but is taking the risk to try something new in hopes it will benefit largely from what they are giving up by not focusing directly on their American market. As I have mentioned, Target is entering a new market and has to face a different set of competitors than it is used to.While Wal-Mart is still a top competitor, they will also be competing against Hart Stores, Giant Tiger, Real Canadian Superstore, Costco, and all of the grocery chains [ (Walmart Canada, 2012) ]. This is the issue for Target itself, but now you have to think about the competition that Starbucks will face given the amount of retail option Canadians have before choosing to go to Target.
Starbucks however has the upper hand given its name recognition throughout the globe, and with an additional 125-135 locations opening up [ (Target to Partner with Starbucks in Canada, 2012) ], Starbucks name will be on every corner.Unfortunately for Starbucks, there are so many substitute products out there that their partnership with Target will have to will hopefully increase their business. The more foot traffic Target brings, the better the Starbucks business will be and this is true vice versa as well. Imports will also increase for the Canadian economy with the new retailer moving in. Probably not drastically at first, but after a couple years in the market place, I think imports will increase and Canada will see a difference. To tag along with the above information, jobs will also increase because of the retailer.IN my most recent experience with Target, I have found that given the size of the stores and the amount of stores planning to open, Target and Starbucks will have job opportunities to help battle unemployment in Canada. Over the last several years, the standard of living has been increasing in Canada as mentioned above.
With this continual increase, you will see the GDP rise in Canada. This is great news for both Target and Starbucks since both are known for providing higher quality products which people want.The best part about it for both companies is that they offer those products at low prices which makes consumers want more. The chart below shows Canadian GDP growth over the last 40 years: [ (World Bank, 2012) ]. With steady increases over the last 10 years (excluding 2009) Canada’s GDP is rising which makes it a more attractive area for Target and Starbucks to jump into. If the standard of living continues to increase, the decision to move will be a great one.
Unfortunately for the duo, the Consumer Price Index is also increasing.The average price of goods is continually increasing in Canada, which is not a good thing for new retailers. This is generally not a good thing for a retailer to hear, because with the rising CPI, it would lead to a decrease in purchases of a given product [ (Mankiw, 2012) ]. Below you can see the CPI in Canada over the last couple years: [ (Canada, 2012) ] But, to a consumers delight, low price retailers entering the market who can off great products for a low cost aren’t generally concerned with the CPI and how it pertains to their spending.Most consumers just want to find the best deals they can, and Starbucks offers a low priced coffee, while Target offers low prices on everyday needs. Another good thing about both Starbucks and Target is their workplace environment. If a union is formed, there is a bunch of unnecessary costs to the employees and the employers.
The best way to combat that and to be fair is to offer a workplace that is superior to all others. Target is a very equally opportunity employer. This doesn’t just mean hiring based on race, gender, etc, but they provide equal benefits to all their employees.This is what sets them apart from other retailers. Target’s policy is to keep the team happy, and they do so very well. From my personal experience, I have never had so many things available to me with any other employer. Whether it is discounts or health benefits, all Target employees have these options available to them.
By providing this type of work environment it helps prevent those costs that unions can incur. Starbucks employees inside of Target also get these benefits. Even though they are working for the Starbucks, they are actually Target employees.Target purchases the rights to have Starbucks in their locations, and hires Target employees to run the Starbucks, but they have district leaders to run and maintain the Starbucks side of the business. It is a smart play, because it keeps that equality between departments and there is no employee that gets more than the other. The partnership between Target and Starbucks is a huge win for both companies. Given Target’s purchase of the retail chain Zeller’s in Canada, its entrance to the Canadian market will be easier than some would think.
Zeller’s was a top competitor of Wal-Mart Canada, so it will be a continued battle for Target and Wal-Mart now in Canada. Even though there is a lot to figure out and to process in this move, Target is making huge steps in their business by stepping outside their comfort zone and getting into the Canadian market. With the GDP of Canada rising, business interests into Canadian dealings are more influenced. In 2013 when the first Target/Starbucks stores open, it will be interesting to see how the store does in their first few years and how the chain is accepted into the new market.From a personal standpoint, I really believe this is a huge win for Canada and for Target. I work for Target as a mid-level supervisor and have been following this development ever since it was announced last year.
For myself, I want to see Target be successful and as a consumer I know I want a Target in close proximity to my location. By providing high quality products and low prices, Target will be setting a new standard in the Canadian market.BibliographyCanada, S. (2012). Latest release form the Comper Price Index. Toronto: Statistics Canada. Mankiw, G. (2012).
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