Target Case Study Essay
Current Situation A. Current Performance Target is an upscale discounter that provides high-quality, on-trend merchandise at attractive prices in clean, spacious and guest-friendly stores. Target Corporation is the nation’s #2 discount chain. The company operates about 1,745 Target and SuperTarget stores in 49 states, as well as an online business called Target. com. After a reversal in fortune that coincided with the onset of the deep recession in the US, Target is growing its grocery business, remodeling stores, and looking to grow outside the US.
Its current Price/Earnings ratio is positive and its current Gross Profit Margin is over 30%. B. Strategic Posture 1. Mission •“Our mission is to make Target the preferred shopping destination for our guests by delivering outstanding value, continuous innovation and an exceptional guest experience by consistently fulfilling our Expect More. Pay Less. ® brand promise. ” 2. Objectives •The objectives of the Target Corporation are to provide their customers with excellent service and high quality products at affordable prices. “Cheap chick strategy. To gain competitive advantage over its competitors by committing to growth and delivering superior return to their shareholders. •To cater employee development through excellent human resource development. •“At Target, diversity is much more than a goal or campaign. It’s a core value we integrate into every area of our business — from our suppliers, to our teams, to the shopping experience in our stores. We foster an inclusive culture that allows our high-performing and diverse team to drive innovation. ” Gregg Steinhafel, CEO. 3. Strategies Target’s Cheap Chic Strategy: Target decided to reposition itself as a mass merchandiser of affordable chic goods. •Target’s success was attributable to two key factors: the right kind of differentiation and distinctive marketing communications. 4. Policies •Limiting payroll expenses so stores are thinly staffed. •Employing inexpensive and yet attractive merchandising techniques. •High-quality merchandise at low margins due to cutting expenses. II. Strategic Managers A. Board of Directors “The duty of the board of directors of Target Corporation is to act on behalf of shareholders and oversee management.
The company believes there is a direct correlation between the quality of the company’s board of directors and the overall performance of the corporation. ” (Target. com) The Chairman of the Board may, but is not required to, also hold the office of the Chief Executive Officer. The offices of CEO and Chairman of the Board are separately evaluated by the independent members of the Board of Directors each year. The Board of Directors consists of 12 members, all from outside companies, such as McDonald’s Corporation and Wells Fargo, among others, except for the Chairman, President and Chief Executive Officer of Target, Gregg Steinhafel.
The Board has the following Committees: Audit, Finance, Nominating and Governance, Compensation, and Corporate Responsibility. B. Top Management Target’s vision is composed of team members providing exquisite service to the guests and giving back to the community and the environment, whilst promoting diversity internally and externally. Target Corp. promotes diversity which is reflective in their operations as well as its human resources. Their markets are totally different individuals who need various products/services for their personal consumption taking in their minds the need to satisfy themselves.
Diversity in their workforce makes them unique form others. They utilize the idea of diversity into a competitive advantage. III. External Environment: Opportunities and Threats A. Societal Environment 1. Economic •The economy has a major influence over the retail industry. Target’s market has a very broad scope. When the economy affects the purchasing ability of its customer base, customers turn to less expensive commodities offered by discount retailers. •Competitive rivalry: The increased productivity gap between Wal-Mart and Target is affecting both companies in terms of competitive stances. Wal-Mart attempts to exploit the existing gap by lowering prices further and creating an even stronger advantage. 2. Technological •The utilization of new software and technology for faster production and marketing, which is more helpful and useful because it makes the job of the employees and management easier and error free. •Gift cards can now be used in both the store and on the Internet, thus leading to more sales and reaching the computer literate market. 3. Political-Legal •The new healthcare bill imposed by the government will have some changes both positive and negative with Target Corp.
In general. The retail industry will endure higher costs in expenses due to the changes. On the other hand, the bill will have positive effects on Target Corporation because the bill will aid in controlling the prices of the medicines in the market which in return will help the consumers, as well as the company. 4. Sociocultural •The influence of cheap labour from the Hispanic population and other immigrants would affect the American workers because the pay for these workers is relatively cheaper; therefore, companies like Target Corporation would rather employ these workers than the locals. The rise of the population of the retiree: the retirement of employees is rapidly getting higher while the replacement does not increase. B. Task Environment 1. Threat of New Entrants •Target is already ferociously competing with retail giants such as Wal-Mart and Sears. The threat of new entrants in this type of industry would most likely dethrone Target of their 2nd position of retail companies in America. •They have not achieved economies of scale with Wal-Mart due to its low prices. •Target has kept its promise to customers: “Cheap Chic” wherein new entrants will most likely have to compete against that. . Bargaining Power of buyers •Buyers affect this industry though their ability to force down prices. Unfortunately, for Target, Wal-Mart has achieved that through their mass customization. •Target’s customers are primarily young, well educated, moderate to-better income families. Target’s median household income is about $49,000. They expect more, but pay less. 3. Threats of substitutes products or services •There is always the threat about new products in the retail industry. Target differentiate itself from other competitors due to it high quality products at low prices. Wal-Mart is number one in the industry. 4. Bargaining power of suppliers •Licensing and partnerships with designers and other product makers give them a competitive advantage. 5. Rivalry among competing firms •Standard & Poor’s Global Industry Classification standard categorizes Target in the information Technology Sector with a description of General Merchandise Stores. •Wal-Mart is number one in low prices of all products in the retail industry. •Target’s biggest rival and competitor is Wal-Mart. Therefore, I do not agree with the category the Standard & Poor’s Global
Industry Classification standard placed Target in. The sector and industry that Wal-Mart targets should be the same as Target Corp. Wal-Mart is categorized as a Consumer Staples Sector in an Industry of Hypermarkets and Supercenters. IV. Internal Environment: Strengths and Weakness A. Corporate Structure •Target Corporation operates two reportable segments: Retail and Credit Cards. •Retail segments include all merchandising operations, including the operations of the large-format merchandise stores, pharmacies, and online buying at target. com. Credit card segment offers credit to guests which helps increase the bond among guests and drives an increase in profitability. B. Corporate Culture •Target is committed to the pursuit of profitable and sustainable growth. •It’s “all about the brand. ” Cheap Chic. Expect more, Pay Less Mentality. •The department-store roots evolved into discount-store savvy. Target’s Community-minded founder fostered a national philanthropic mindset like their Bull’s-eye logo. •Focus on Design and Innovations. •Target is an innovative and influential retail store.
Their mission statement focuses on four core roles: great guest service, clean stores, in stock merchandise, speedy checkout. These guidelines make up the culture of the fast, fun and friendly stores. C. Corporate Resources 1. Marketing Target has used its marketing expertise to transform its trademark bull’s-eye into a universally recognized symbol. Target has successfully shown consumers that there’s something difference about this big-box retailer, and its image comes across as hipper and edgier and more fun that other retail stores. Target’s marketing approach focuses on the retailer as a brand. . Finance •Target Corporation (NYSE:TGT) reported that its net retail sales for the five weeks ended April 3, 2010 were $6,233 million, an increase of 12. 5 percent from $5,543 million for the five weeks ended April 4, 2009. On this same basis, March comparable-store sales increased 10. 3 percent. (Target. com). 3. R&D •Target has a reputation for new product development and creativity. •Target remains focused on investing capital to create substantial shareholder value over time. •Investment in technology to support strategies such as perishable food distribution and pharmacies. 4. Operations Intensified efforts to expand the assortment of foods in their Super Targets, pharmacy products and general merchandise to enhance the one-stop shopping convenience. 5. Human Resources •Their legacy of community leaving both in terms of financial support and team member volunteer hours is a hallmark of Target’s brand and differentiating factor in their ability to attract and retain talent. 6. Information Systems •Sophisticated Inventory Management focusing in assortment, presentation and space, which enables Target to manage inventory more effectively and in return increasing sales and profitability.
V. Analysis of Strategic Factors 1. Strengths •Target Corporation is the second largest retailer after Wal-Mart in US •Target is committed to having their location accessible to many of their current and potential guests. •Top designers have signed agreements with Target to sell their items at affordable prices under an agreed upon name. For example, Victoria’s Secret produces the Gillian O’Malley lingerie line. . •It has the number of subsidiaries which includes Target Financial Services, Target Sourcing services, Target Commercial Interiors, Target Brands and Target. com. •Huge market share in US. Target has a reputation for new product development and creativity. 2. Weaknesses •Target is not global retailer, which means that they do not have a presence in countries worldwide. They should definitely look into traveling overseas, since their competitors are working internationally and boosting revenues. •Pharmacy guests account for over 7% of their total sales. The turnover rate for Pharmacists is very high, since they are required to work 12-hour workday schedules. •Big rivalries with Wal-Mart. Competing against the number one retailer in America and against its low price and mass customization culture. 3.
Opportunities •Gift cards can now be used in both the store and on the Internet, thus leading to more sales and reaching the computer literate market. •To take on competitions plans (i. e. , Wal-Mart) and focus on opening stores in international markets. •New locations give Target the opportunity to be diverse in the market. More and more Targets are attaching to trendy malls in different market segments. •Target Corporation should focus on cost cutting to reduce the prices of products. •It should enter into untapped international markets. •Formulation of labor Union is required to increase employee satisfaction. . Threats •Fierce competition from Wal-Mart and Sears. •The current recession possibly divert the customer from high price products to low price products. •Annual government taxes and increasing interest rates. VI. Strategic Alternatives and Recommended Strategy A. Strategic Alternatives Target has a strong customer base. It appears to have developed a much more defensible niche with middle and upper end customers than perhaps its growth and financials indicate. The company has taken action to ensure it maintains a loyal and reliable customer base to drive revenues.
For instance, the turn toward consumables is seen as necessary to promote traffic. Target has extended the relationship it has with some key design labels. Target has a strong customer base. It appears to have developed a much more defensible niche with middle and upper end customers than perhaps its growth and financials indicate. The company has taken action to ensure it maintains a loyal and reliable customer base to drive revenues. For instance, the turn toward consumables is seen as necessary to promote traffic. Target has extended the relationship it has with some key design labels.
Diversification: Target calls its customers “guests” and its employees “team members”. Target designs it stores to be more attractive than Wal-Mart by having wider aisles and drop ceilings, among other things. Target has many exclusive deals with various designers. Target was not as aggressive at converting into superstores in the early 2000s. Instead, the retailer focused on honing its merchandise assortments, including the trendier line of clothing and merchandise that has differentiated Target from its less chic competitors. Target gained more than 6 percent in sales during 2001.
Although the majority of store profits were attributable to merchandise sales, food divisions began to draw customers into the store and accounted for 40 percent of a super center’s sales In their ongoing battle for market share, discounters also began focus on appealing to specific ethnic groups, striving to become familiar with the needs of the diversifying market, some stores employed bilingual clerks, particularly in Hispanic communities, and featured signs and advertisements in languages other than English Growth: Operational strategy is to offer high-quality fashionable merchandise at affordable prices.
It plans to achieve a future of strong growth in revenues and earnings by looking toward new store growth in Target, the primary segment. One of its functional strategies is to reinvest $2. 5 to $3 billion in the business with a combination of capital investment and share repurchase. It plans to open 80 new stores and expand its reach to consumers by entering two new markets in West Virginia and Connecticut. Another strategy is to increase capital expenditures to continue remodeling programs for the existing divisions of Target Corporation. Suppliers are crucial part of the product distribution process.
One strategy Target plans to continue using to promote good relations with suppliers is acknowledging excellent performance from vendors. Another strategy for Target Corporation to compete with larger retail stores is to focus on a more upscale customer, which will create a unique capability in the retail sector. The smaller divisions will be used to provide cash flow to improve Targets growth. Corporate strategy also includes anticipating new opportunities and acting promptly to adapt to change when the need arises. Target Corporation will have to continue to invest and use its resources efficiently to carry out its strategies.
B. Recommended Strategy: Target Corporation’ strategy to compete with larger retail stores should be to focus on a more upscale customer, which will create a unique capability in the retail sector. In its plan for the future, Target Corporation plans to focus efforts for success on the major division, Target. The smaller divisions will be used to provide cash flow to improve Targets growth. Corporate strategy also includes anticipating new opportunities and acting promptly to adapt to change when the need arises. Target Corporation will have to continue to invest and use its resources efficiently to carry out its strategies.
VII. Implementation Target’s marketing strategy “Expect more, Pay Less” is their market niche. Better relationship with distributors and more partnerships and licensing contracts should be made to differentiate Target to its competitors. VIII. Evaluation and Control •Target should investing in food offering to maximize its ability to drive greater frequency, strengthen guest loyalty and make Target a preferred shopping destination •Target should concentrate on fewer, more powerful brands to make a more impactful statement about these exclusive, high-quality, affordable assortments. To maintain maximum financial and strategic flexibility, Target should continue to evaluate proposed new store projects and open open more locations throughout America. •Target should consider expanding into new countries to make this company global. Outsourcing ould help reduce overhead at least with the segment of online shopping IX. Sources Cited http://investors. target. com/phoenix. zhtml? p=irol-irhome&ref=nav%5Ffooter%5Finvestors&c=65828 http://en. ikipedia. org/wiki/Target_Corporation http://online. wsj. com/article/BT-CO-20100408-706786. html? mod=WSJ_earnings_MIDDLETopHeadlines http://topics. nytimes. com/topics/news/business/companies/target_corporation/index. html http://finance. paidcontent. org/v? Page=QUOTE&Ticker=TGT http://www. orlandosentinel. com/topic/economy-business-finance/target-corp. -ORCRP014887. topic http://profiles. portfolio. com/company/us/mn/minneapolis/target_corp_/2584877/