Financial Outcome: Expansions will have negative financial affect Target’s revenues have increased steadily over the past five years, rising to $65.4 billion in 2009. Despite positive indicators of growth, other retail chains still pose a serious threat, and Target struggles to maintain competitive advantage. From a positive standpoint, Target is intensifying the vision to provide users with superior products by expanding existing stores and continuously incorporating new merchandise. Target’s expansion will likely prove positive for the corporation, but the possibility exists that the expansion will hurt Target due to the large price paid for the expansions (approximately $1 billion) combined with the current unstable economic conditions. The retail industry is dependent on consumer spending. Target’s history of having a higher and less stable debt to equity ratio indicates that it may suffer during troubling economic conditions.
Financial Outcome: Website will bring global expansion for growth in sales
All of Target’s stores are located within the United States. This limits sales opportunities for the corporation, and this is why Target has plans to expand mobile and online capabilities for shoppers as well as examining possibilities for international store expansion. Target already proved successful at this by opening stores in Hawaii and Alaska, outside the contiguous states. Target has always been a leader when it comes to innovative products. Target’s website is one area where creativity and innovation could be utilized. Target’s website as of now appears cluttered and navigation can be troublesome. Further development of the website would allow for greater control over the company image. Also, website statistics could be manipulated into usable information for the company. This would certainly deliver profitable market share growth in the upcoming years.
Financial Outcome: No increase or decrease in sales
Target’s main marketing strategy is differentiation. Target offers more upscale products than many of its competitors yet still offers reasonable prices. Target’s advertising slogan, “expect more, pay less” entices customers to shop for quality and stylish items while still paying reasonable prices. Target offers a more pleasant shopping experience than many of its competitors with shorter checkout lines and nicer restrooms. The company is reaching more upscale clientele with product launches from fashion designers such as Jean Paul Gaultier. Since March 2009, when the market rebound began, Target’s stock has risen 138% in 13 months.
These investments, if successful, can result to significant improvement in the company’s financial results over time. On the other hand, if they fail, then the impact on the financial statements would be more immediate. This means that the equipment and other expenditures capitalized without alternative uses and value to the organization have to be written off as failures. I believe that Target’s success will continue as long as the market is able to maintain stability. When people lose confidence in the market again, they will likely choose the retail stores with the lowest prices.
Reference
http://media.corporate-ir.net/media_files/irol/65/65828/AP_Hi.pdf
