Value Chain Management Analysis of Target Corporation
In today’s business world, competitive advantage is the only way to remain in business .The aim of any business unit is to meet the customers’ expectations better than competitors while making profits. In the past cutting down cost and reducing commodity prices were the tactics used by firms to survive in the challenging economy. However business competition has become stiff; organizations have discovered value chain management as a strategy to gaining a competitive advantage (Sabri & Shaikh 2010). While supply chain is simply responsible for efficiency and cost reduction, value chain improves this further by ensuring that customer’s needs are met and exceeded (Stickney 2010) .Supply chain is short term and emphasizes on cost reduction and offering low prices and this tends to overlook customer needs (Walters & Rainbird 2007). This paper will use Target Corporation as the model to illustrate how value chain management has improved efficiency in business. It will discuss the various components in value chain management and how they put firms ahead of their competitors. It will further assess the efficiency of Target Corporation’s supply chain and establish how it supports its demand chain.
Value Chain Management Analysis of Target Corporation
Target Corporation is a firm that has its head quarters located Minneapolis in the United States. This company has concentrated on its theme, ‘’ Expect more, pay less”. It grew in numbers from 1,397 in 2005 to 1,591 in 2008 and this has been attributed to the efforts put in ensuring that customer’s needs are not only met but also exceeded. Value chain involves placing the customer first, and this has been done to both the products and the quality of services offered. They started referring to their customers as guests, this delighted the customers and willing to purchase the wide range of products they offered (Stickney 2010). Producing goods at a low cost and selling to customers at the same range of prices as those of the competitors is not enough. A company is bound to differentiate itself from the rest. The customer is the sole target to appeal to. To achieve this, once goods are produced at a sustainable cost; the next step is to delight the customer. Initially this was solely done through marketing but today every company is seeking to add value to customer expectations (Walters & Rainbird 2007). This value is all about concentrating on the needs of the customer s, studying demand as well as the changes in the market.
Merchandising being one of the components of Value chain has seen Target Corporation grow its profits and differentiate itself from the rest of the competitors. It has made this firm to be among the best general merchandise businesses in the United States (Gysberg, Lee & Cline 2010). The products variety has been increased with brand names being used as lead products to sell the rest of the company’s products (Stickney 2010). This increased variety added value to consumers because they are able to do a one stop shopping. When the consumers are attracted by the lead product they are lured into buying other goods in the stores. Therefore this merchandise is a strategy to increasing sales because when consumers find goods under one roof their shopping is simplified.
Supply chain is driven by efficiency in costs entirely, and this results to short term profits. This is risky because a firm should have plans to remain competitive even in future. To improve on this chain, an organization should study the nature of the demand and the market. This helps it to come up with products that will move fast while the possibility of changing in the new future is limited. Supply is tailor made to ensure that it fits into the nature of demand. This involves electronic communication which ensures that customers are linked with the suppliers. Emphasizes are not only put on reduced costs and low prices but also on improving the quality of products offered. This is not improved through production but in the nature in which it is delivered to the consumer (Walters & Rainbird 2007).This introduces the value chain concept in which customers needs are anticipated and met while maintaining low operational costs. For Target Corporation, its layout which gives the shops an aesthetic beauty and attractive to the customers has put it ahead of its competitors. Structure is long term plan which may not be copied easily due to the costs associated with it. It has also increased its locations which makes it accessible to a bigger number of customers. They have allowed demand to lead its market and this has resulted to a big market and increased profits.
Target Corporation is in the retail industry thus it requires a supply chain with proper management for maximum efficiency. This is because their profits can be realized in the short term. However supply chain cannot be effective on its own, it requires a customer approach which means that it has to support the demand chain (Walters & Rainbird 2007). In the case of Target Corporate, they have employed a number of strategies. First, human resource contributes a lot towards meeting and exceeding customer expectations. Target Corporation has a high retention of its staff. It has given its human resource incentives that have encouraged staff to market their products and offer quality services to their customers. This is especially evident in the marketing department which offers continuous surprises that keep customers coming back (Gysberg, Lee & Cline 2010).
Secondly, target Corporation has concentrated on the appearance of its stores. This has been done through widening the aisles to give customers more space to shop. These super stores have also been arranged with no clutter which enables customers to view the displayed items easily (Stickney 2010). Value chain operation requires that firms avail products to customers where they need them and when needed. This should be done at a low cost to the firm but at a competitive price to the customer (Koontz & Weihrich 2007). As seen in Target Corporation, visibility and easy access to products adds value to products. The duration of time taken for a customer to obtain goods should be as short as possible. Companies should be responsive and flexible to go along with the changes in customer needs and preferences (Sabri & Shaikh 2010). Technology has met this need for a hustle free shopping where consumers find the goods available in web sites and know which stores to go to. Target Corporation has employed technology to add value to its goods (Gysberg, Lee & Cline 2010).
When supply chain and demand chain are linked to work together in an organisation, the products and services offered gain value (Walters & Rainbird 2007). These two concepts result to value chain which is the strategy that worked for Target Corporation. When trade barriers where lowered in the US, retailers experienced competition from low priced products from Asia. The firm had to cut down costs in energy use, purchase of raw materials and its general operation costs. With reduced costs, Target Corporate had to concentrate on generating large volumes of sales. Adopting consumer approach the saved the company the stiff competition fro the low priced goods from foreign markets. This approach was long term and has helped it to survive the competition and emerge as a top performer in the United States (Gysberg, Lee & Cline 2010).
Supply chain is effective when it comes to reducing operational costs and delivering goods to consumers at a competitive price. However from the above analysis, it is evident that a firm requires more than supply chain. Supply chain is only effective if it supports the demand chain as is the case in Target Corporation. This firm employed value chain to improve its work with supply chain and this worked excellently. The company gained a competitive advantage through adding value to their products by enhancing their presentation and concentrating on the customers needs. Supply chain supports demand chain and this should be the case for an organization to remain ahead of its competitors. When these two concepts are applied together, the quality of services and products gains value which makes them preferable to consumers. Value chain has interchanged the traditional way of marketing in which supply determined the kind of goods that consumers will go for. In today’s market, consumer needs and preferences are what determine what producers and suppliers avail in the market. Organizations that focused on consumer needs like the case of Target Corporate have achieved great sales volumes and profitability.