Operations Management Target to Begin

Operations Management

Target

To begin with an analysis of operations management -- here is a riddle: What company is not as big as Wal-Mart but lacks the retail difficulties of Sears and K-Mart? What major company uses the same the "big-box general-merchandise" strategy as these major competitors, yet purportedly has not shed a bead of sweat over the recent Sears and K-Mart merger, nor cares very much that Wal-Mart still dominates the market, despite the fact that Wal-Mart has "nearly 3,000 stores" with "revenue of $247 billion in 2003"? (Mitchell, 2004)

The answer? Yes, you're right on, shall we say, 'Target.'

Analysts also agree on what advice they would give Target, regarding the merger of K-Mart and Sears. "Don't change a thing." In other words, "even if Sears Holdings emerges as real competition, Target already does what it needs to do: concentrate on promotions and merchandising, increase same-store sales, expand carefully and wisely, and add to the bottom line." (Mitchell, 2004) the operations management decisions to concentrate more on advertising, promotions, and merchandising as well as Wal-Mart's focus on lowering the cost of its products alone at the expense of extensive advertising, has meant that "Target's stock is ahead, rising more than 60% in the last two years while Wal-Mart's has gained less than 5%. And Target's niche as Middle America's 'cheap chic' destination is secure, analysts say." (Mitchell, 2004) it is inexpensive, savvy, and youth-oriented, focused on a market with nearly limitless expansion.

The first crucial decision made by Target was not to attack its major competitor Wal-Mart on that behemoth's own turf, but to create a different image, while still purveying similar goods. "Target whittles away - slowly - at Wal-Mart's lead in sales," a decision to move slowly yet slightly more stylishly and only almost as cheaply as Wal-Mart that has worked as an effective operations strategy. (Mitchell, 2004) in retailing, "there is no such thing as "too big to fail," as investors have often learned to their sorrow," so Target pursued a cautious expansionist approach, lavishing attention on every individual store before adding additional components and product lines like food. (Norris, 2004)

Deciding to expand into food only recently thus worked as its first key operations management decision. The second crucial operations decision has been to target the Target market ever so slightly at a more affluent, well-educated, and brand-conscious consumer in a way to yield a median customer with more disposable income to spend when he or she crosses the line into the store. "30% of Kmart's shoppers did not have bank accounts." But "Target is focused on a family of four earning $50,000 a year," in contrast "Wal-Mart's customers make $40,000 a year. Kmart's make $32,000. You tell me which chain is more attractive in the long run." (Mitchell, 2004)

Not only are Target's consumers more able buy big-ticket items, but also more affluent consumers are more apt to make impulse buys. Target stores have thus "recently started stocking more consumables - everyday products like soap and paper towels - and has put them near cash registers and in other high-traffic areas." (Mitchell, 2004) Target soon followed with Target Great land stores, which were bigger than regular stores and sold some groceries; in 1995, it opened its first Super Target, which includes a full supermarket. Cautiously it expanded, but surely.