Relative to Target and Kmart, Wal-Mart has the largest volume of product line available in the market, which is also being accompanied by the size and number of its stores around the American domestic market. From apparel to foods and electronics, even household equipments and money services are all available on Wal-Mart. The reason behind the large diversity of Wal-Mart’s product line would be on the fact that suppliers keeps on swooning around Wal-Mart and trying to become one of its suppliers resulting to the diversification of Wal-Mart’s product line.
Wal-Mart is so influential in the market, to the extent that it can make or break the financial stability of its suppliers since it holds 20 percent of the market share in the retail industry. Due to the large size and number of Wal-Mart stores, it provides a strategic distribution channel to most suppliers in the market, and this is the reason why almost all of the products in the market are can be found on Wal-Mart’s stores. Kmart and Target that have relatively less stores in the market, roughly 900 and stores 1,000 respectively, compared to the 3,800 stores of Wal-Mart in the United States alone.
Therefore, suppliers provide priority to Wal-Mart as their main distribution center compared to Kmart and Target since both of them have relatively fewer stores in the market. By the end of the day, Wal-Mart will have the majority of product lines in the market displayed on its shelves and boxes. It is now clear that Wal-Mart has the competitive advantage in terms of product lines compared to Kmart and Target.
Prices of Wal-Mart’s products are the cheapest in the market as its management continues to minimize its operational costs. Compared to Target and Kmart, Wal-Mart can offer the lowest price possible on a given product due to its influences to its suppliers. Since Wal-Mart serves as the main distribution channel of most suppliers/manufacturing companies in the market, it plays a vital role to the success of these suppliers.
In this regard, Wal-Mart has been able to utilize their importance to the manufacturing industry by demanding more discounts every time they will purchase the product of a given supplier (Cbr.cam.ac.uk, 2005). Manufacturers on the other hand does not have enough power to bargain on Wal-Mart’s demands since once Wal-Mart withdrew their purchases on a given product, say iPod, the manufacturer of the said product will surely suffer from tremendous amount of potential profit and sales volume in the market.
By the time, those discounts that Wal-Mart has able to accumulate, it will the now have enough room to use those discounts to lower the prices of their products in the market. Kmart and Target do not have enough market influence compared to Wal-Mart based from the size and number of their stores, which later on providing them with less power to demand higher discount rate of their suppliers. The cheap prices of Wal-Mart’s products are the main reason why customers prefer shopping on their stores, thereby making Wal-Mart’s profit to boom and so with their sales volume. In this regard, Wal-Mart indeed has the competitive advantage in terms of price level compared to Kmart and Target.
In terms of location, Wal-Mart has a competitive advantage in the urban areas especially to major cities in the United States. Minorities from the rural areas are on the least priority of target customers of Wal-Mart. This is the main reason why most of the Wal-Mart’s stores are concentrated on the urban areas and major cities.
On the other hand, Shopko Stores and Costco Stores are just some of the retailing stores that dominate the rural market for retail industry. Since market competition with Wal-Mart on urban areas and major cities is very tight, most of the small retailers chose to concentrate their operation on rural areas of United States to avoid competing face to face with the Giant Retailer. Wal-Mart do not have the competitive advantage on operating in the rural areas since most of its products is misaligned on the type of product lines that minorities and people from rural areas prefers.
The structure of Wal-Mart stores is also not “pro-rural” or environmental. This is why most people from rural areas do not want Wal-Mart stores on their town because they feel their sanctuary will be disturbed and so with the environment. At present, Wal-Mart is trying to explore the potential market on rural areas as the market on urban and major cities starts to become saturated. Its management is already on the process of redesigning the stores of Wal-Mart especially made for their rural operations (Icsc.org, 2005). In this regard, is therefore clear that Wal-Mart has only a competitive advantage on the urban and major city market while still weak in the rural market.
In terms of budget for advertising campaign, Wal-Mart does not have the competitive advantage in this aspect relative to Target. Target’s budget for advertising increases rapidly every year as its try to build its brand name on a larger scale through the use of media. With the aim of Target to surpass the market share of Wal-Mart, it continuous allot significant amount of resources to promotional activities primarily in advertising campaigns. Target’s budget for advertising campaign increased by 12 percent from $824 million to $924 million by 2005 while Wal-Mart only spent around $570 million for its annual budget last 2005 (Echeat.com, 2008).
By 2006, Wal-Mart starts improving its budget for advertising campaigns as its promotion and marketing strategies recently affects its overall profitability. Target is also intensifying its credit card services in order to improve the frequency of those customers that primarily uses credit cards in shopping. Wal-Mart provides less attention the use of credit card into their stores since it is mostly concerned with other promotional activities though media either in print ads of television advertisements. In this regard, Wal-Mart does not have the competitive advantage in terms of product advertisements since it only spends few budgets on its ad campaigns relatively to Target.
- Cbr.cam.ac.uk (2005). The Wal-Mart Model: Is It Sustainable? Retrieved May 30, 2008, from http://www.cbr.cam.ac.uk/news/011205.htm
- Echeat.com (2008). Target Versus Wal-Mart, Wal-Mart Competitive Analysis. Retrieved May 30, 2008, from http://www.echeat.com/essay.php?t=27488
- Icsc.org (2005). Wal-Mart Launches New Merchandising Strategy. Retrieved May 30, 2008, from http://www.icsc.org/srch/apps/newsdsp.php?storyid=2230