In this report I discuss the comparison of competitive strategies between the two major departmental stores in Australia being David Jones and Target and how they differ from each other. I also discuss the current issues that are faced such as Global Financial Crisis that has had much impact on both stores as well as future threats such as online shopping which is believed to be the latest trend is shopping which has already affected the stores but could make competition even tougher in the near future for both stores.
Target Stores is a major retail store that first opened in 1925 in Geelong as Lindsay’s Emporium selling from clothing to household goods, appliances, sporting goods, toys etc. From that date opened a few other stores around the country until really beginning to expand in 1973 when they become known as Target with now 305 stores across Australia. The aim of Target stores is to provide Australians with great quality at an affordable price. David Jones on the other hand is aimed at a higher class of people as their products come across more expensive than Target. David Jones stores began in 1838 but only currently have 37 stores across Australia Both Target and David Jones face competition within the retail market with Targets main competitor being K-Mart and Big- W while David Jones’ main competitor is Myer. Both stores have strengths and weaknesses and both hold different competitive strategies as Target shows a focus on cost leadership while David Jones follows a differentiation leadership. The rest of the report will look into strengths, weaknesses and the different competitive strategies with more detail.
As previously mentioned Target first opened in 1925 but did not become Target Australia Pty Ltd until 1973 when the opportunity for growth was recognised. From there Target expanded to Target Home, Target Country and Target Baby which all are a part of the Westfarmers group. Target has a large range of products which include menswear, ladies wear, kids wear, sporting goods, appliances, household goods, toys, electrical, etc. The extension of Target home and Target Baby was not necessarily a positive move by the company as many of these stores closed down shortly after as it was not seen to increase sales or profits. Over the past 10 years Target has attempted to become more ‘in’ with the current trends by keeping up with other well known stores such as Jeans West, Sportsgirl, Jay-Jays etc, but by offering a more affordable price that these stores. The main target was between young teens and early 30s as it was believed these young Australians can be stylish for a much more affordable price. This change in market position came after Target announced its first loss in 2001 of $43 million and a new senior management were put in place.
This was seen to improve the financial revenues from a loss to a profit within 18 months. Target face a fierce competition in which they must take into consideration and differ from these if they are to remain a strong competitor in today’s retail industry. The two main competitors are K-mart and Big W. K-Mart is also a part of Westfarmers where as Big W is owned by Woolworths which is Westfarmers greatest threat. Target attempts to be more attractive to Australians by offering such low prices but still providing great quality in their products. Target must sustain this quality if they are to remain strongly in the market as if product quality deteriorates then customers will find a new place to purchase their goods. Another competitive strategy that Target hold is the range in different products they hold. In comparison to a retail store like Jeans West, customers can purchase stylish clothes in the same shop that they can purchase toys, appliances, etc, which makes Target extremely attractive for families during the Christmas period when shopping can become such a hassle and time consuming.
Over the recent years the latest craze is online shopping which no doubt would affect the retail industry. Online shopping is a much more convenient and cheaper alternative. As the phenomenon become a large part of today’s society, Target decreased the effect by also introducing Target online which customers to continue to choose Target to purchase their goods even if they prefer to shop online. As one of Targets key competitive strategies is cost leadership they must have high control and emphasise on expenses and costs within the business. For Target to provide greater quality in their products for a lower price they must focus on cost reduction and lower each cost or expense where possible. This is where product differentiation also plays a key factor. Target is able to do so by developing their own lines of products which has many advantages. Firstly by doing so they can ensure a low price but high quality as the costs of their own lines would be much less as they are produced within Westfarmers rather than purchasing others lines/brands. These products are also exclusively available at Target providing them product differentiation as if customers are extremely happy with their purchase they are only able to purchase it from Target creating a regular customer base.
These products also allow a much higher profit margin due to the lower cost in production and also allow more flexibility in prices as they can ensure they have the lower prices than competitors but still make a substantial profit. For Target to have an edge over other competitors they would have used strategic management tools such as competitor analysis, value chain analysis and strategic planning. By analysing competitors Target could find aspects that they could exceed their competitors in to ensure that customers would then prefer to shop at Target than elsewhere and also ensure that Target remains competitive and do not lose market share. Value chain analysis would have been used to compare the differences in their differentiated products and their other products. By analysing this, higher cost activities would have been noticed and therefore rectified to ensure cost leadership. Target also would have analysed and planned their strategies in which they would present to the retail market in this case being low cost but high quality.
David Jones was founded in 1838 and currently still remains as one of the most recognized companies in Australia. A big focus and positive of David Jones is the consumer confidence and highly valued brand name which shows that customers will continue to shop at these stores as they have obviously had many positive encounters or purchases through these stores. David Jones range from clothing, cosmetics, household goods, furniture and electrical. During the global financial crisis David Jones faced some difficulties as their sales were reduced by 6.4% in 2009. Due to this crisis the sales have declined throughout the whole retail industry because of financial uncertainty but the positive that David Jones holds is that as they are known as one of the most well-known and trusted stores customers will continue to shop here even if it is less often. David Jones greatest threat in the retail industry is Myer which is Westfarmers Company with many more stores Australia wide than David Jones Stores and also offer lower prices than David Jones.
David Jones is also faced with online shopping becoming a great threat to the sales and revenues over the next 5 years as online shopping seems to be taking over the retail market in the near future. David Jones has a strong set up in its corporate governance and promotes diversity, workplace safety and has a strong code of ethics with applies to all of the company directors, employees and contractors. They comply with all of the ASX’s optional corporate governance principles and recommendations. They have included their corporate sustainability report with the FY2011 annual report for the first time which is not legally required but does hold greater positive value. These are all reasons for the good-image and brand name that David Jones holds. David Jones also appears to hold great importance towards 4 areas being their customers, safety, health and wellbeing, the community and the environment. Proof of their importance towards safety, health and wellbeing is the 50% decrease in injuries and compensation claims since 2009.
The importance of community to David Jones is clearly shown by the generosity in donating $1.1 to charities during that year which helps the positive and well-trusted brand name that has been created. As well as the above decisions and actions by David Jones since the global financial crisis, the company has also put in strategic plans to help remain competitive and profitable in the retail industry. These strategies include an increase in number of stores around Australia but introducing smaller stores so that these new stores can be in more convenient and other places where such a large store would not be able to be placed. This will increase their profits as customers will be able to shop at David Jones at shopping centres where there may not have been available area for such a large store, hence the reason for the smaller sized stores. This also would have come about with the struggles of opening up new stores, as the required area for a David Jones store would have only been available in brand new shopping centres rather than existing centres where space is limited.
David Jones also has a strategy in place to increase the available stock online before Christmas 2012 to increase customer satisfaction making it easier for Christmas shopping and also ensuring that David Jones isn’t left behind in the latest trend in online shopping. One factor that may make it difficult for David Jones to keep up with online shopping is the pricing factor as David Jones products are more expensive than those products which can be purchased online. This is one factor that requires attention if they are to remain competitive. David Jones through value chain analysis is trying to remove and reduce costs from non value adding activities. They aim to remove 30 million dollars worth of costs in the next 3 years. This strategic management tool will help ensure they can achieve their maximum amount of profit possible by cutting unnecessary costs out of the equation. David Jones also would have used the tool on competitor analysis to ensure that they could continue remain competitive and not lose market share but also to excel in areas that other competitors may not.
Comparing David Jones and Target.
Target and David Jones are both very similar companies but also different in many ways. They have both created such a well-known brand name in Australia for many years now. Target has many more stores around the country which is more appropriate as they target a wider community of people as they portray themselves as the lowest price where as David Jones is targeted more towards the wealthier community therefore having 300 stores would be unrealistic. Target have double the amount of sales that David Jones but they earn approximately the same profits as target sells more lower cost goods at lower prices where the profit margin is still high, whereas David Jones has a much higher cost margin therefore generating a similar profit to Target.
Both companies have entered the online market to ensure they do not lose market share but face many issues such as pricing especially David Jones. As David Jones has a higher pricing on products and online is known to be cheaper due to fewer costs involved customers may not be attracted to shopping online at David Jones. Target and David Jones both have strategic management accounting plans for the future to ensure that they can remain as such as large competitor in the retail industry. They have both created a well trusted and well known brand name which customers have grown to love. With the strategic management tools that are being used to analyse the market and competitors both companies should be able to adapt well to any threats that may arise in the future with online shopping clearly becoming the most current major competitor for both companies market share.
Recommendations and Conclusions
Both Target and David Jones appear to be in a positive position for the next 10 years as they have been able to react quickly to changes in the market and should be able to do so. They are two of the most well known brand names helping them hold a large market share. They do not have high debt levels or profitability problems showing that they will remain a high part of the industry in the near future. As online shopping is the latest and best trend, both companies need to carefully analyse this market to ensure they can remain competitive and also to develop a way differentiate themselves from other online stores.
1.Will both stores be able to adjust to online shopping to ensure they do not lose retail market share and will they pricing become an issue especially for David Jones. 2.How would the vision, mission, goals and strategy differ between Target and David Jones? 3.Targets products are more low cost and high quality whereas David Jones products tend to be higher priced but differentiated to ensure customer satisfaction. Explain the differences in value chain analysis that are derived from the difference in the company’s products. 4.Target aims to all Australians where as David Jones aims at the wealthier community. Explain how customer profitability analysis and target pricing affects this. 5.Explain how the analysis of competitors such as K-Mart and Myer identify opportunities and threats for Target and David Jones. State an opportunities and threat and how these companies may have avoided threats or capitalised on an opportunity.
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