Target Corporation Argumentative

HISTORY

It was in 1902, in Minneapolis, Minnesota where Target Corporation had its roots. George Dayton started the Dayton department store chain. It changed its name several times in a span of six decades, when finally in 1962 it branched to discount merchandising, and aptly named the new venture as Target discount store.

Much has evolved since its inception in 1902, from Dayton Dry Goods Company in1903 to Dayton Company in 1910. 1956 saw the opening of the first fully enclosed multi level shopping center in Edina also in Minnesota. And in 1968 Target Corporation changed its bullseye logo to the one presently in use.

Its history is marked with the aspiration to expand, and acquisition of existing stores and refurbishing it as Target Stores, was a practical solution. Some redundant stores were sold and new areas planned to increase sales and profitability. This management strategy brought Target Corporation to the 47 States of the Union.

Before 2007 ends, Target Corporation will be in Alaska, Vermont and Hawaii. From humble beginnings the Company grew to be the 6^th largest retailer, behind the giants (Wal Mart, Home Depot, Kroger, Sears and Costco), no.1 in gift cards and 3^rd largest music album seller in the United States.

Realizing a profit of over 2 billion dollars annually, it has helped in its commitment to the environment, to education, to disaster areas and joined foundations to help the needy.

MANAGEMENT

The growth of Target Corporation from a small store in 1902 to a major player against the likes of Wal-Mart and K-Mart today could only be attributed to the concerted effort of management.

The desire to be the best, prompted management to promote and made use of their expansion theories. They gambled on the acquisition of lesser-known stores and converting same to Target Stores just to penetrate existing markets, wherever they may be. Such move though unconventional really paid off.

Management made their superstores clean and attractive to shoppers. Items are varied and of good quality, with an efficient after sales reliability and attentive, courteous team members. Plus amenities like coffee shops, dining areas to make shopping enjoyable.

LEADERSHIP

Target Corporation has always strived to be different and to lead the retail business. In fact it has introduced so many innovations that others pale in comparison.

Products sold in their retail outlets are thoroughly assessed by engineers for their quality, product durability, or that it exceeded the sanitary requirement of FDA or local codes. It is this partnership that has strengthened Target Corporations hold on the buying public.

The public is treated to designer products, original creations of Isaac Mizrahi, Michael Graves, Mossimo Giannulli to name a few, as added perks. You are assured of good quality and legitimate line of designer products.

Target Corporation also leads in addressing socially relevant issues. It joined hands with the Salvation Army to rehabilitate those in disaster areas, helped students nationwide, co-sponsor with foundations in its outreach program for the needy, and is doing steps to arrest the degradation of the environment.

Current Vision

We’re a company living a clear vision; to be the best. In every area of our business. In everything we do.

Current Mission Statement

Target Corporation’s mission is to be the retailer of choice in the discount, middle market, and department store retail segments. Target Corporation focuses on trend leadership, excellent guest service, exciting team member opportunities, and community outreach, to create long-term shareholder value. It plans to continue to reach multiple market segments with its many operating divisions. Each division is specifically geared toward American consumers with stores ranging from upscale discount, to full service department stores.

Current Objective

Generate Average annual earnings per share growth of 15% or more over time.

Current Strategies

Differentiation strategy – Offering more upscale, trend-forward merchandise at low cost.

Market Penetration – Expansion in urban areas that were traditionally resistant to big box retailers.

Forward Integration – Its stores are almost in all states of America except Hawaii, Alaska, and Vermont.

Conglomerate Diversification – The Company comprises several operations in addition to Target stores.  These operations include the Associated Merchandising Corporation, a leading global sourcing organization; Target Financial Services, which operates the corporation’s credit card services, and Target Commercial Interiors, a provider of office interiors in the upper Midwest.

Developed Vision

We’re a company that thrives in a vision “to be the best in everything”. This has guided our decisions concerning business expansion and management strategies. Target Corporation is embarking on a massive expansion plan to serve everyone in the American Market. Regardless of creed and belief we will be there to extend a helping hand.

The coming decade will see Target Corporation in the avenues of Hong Kong, on areas near the Eiffel Tower or see the hazy mist of the Tower of London. Exporting American business, drive and beliefs.

Developed Mission Statement

Target Corporation’s mission is to be the retailer of choice in the discount, middle market, and department store retail segments. Target Corporation focuses on trend leadership, excellent guest service, exciting team member opportunities, and community outreach, to create long-term shareholder value. It plans to continue to reach multiple market segments with its many operating divisions. Each division is specifically geared toward American consumers with stores ranging from upscale discount, to full service department stores and to bring American business to consumers abroad.

EXTERNAL AUDIT

The rate of sales growth in the industry slows down. The lower growth rate of sales is due to the customers who switch to other products and substitutes.  This creates overcapacity in the industry, which leads to intensified competition.  The competitors scramble to find and enter niches.  They increase their advertising and trade and consumer deals.  They make deals to supply private brands.  Weaker competitors withdraw and the industry is left with well-entrenched competitors whose basic drive is to gain competitive advantage.

Competitive Profile Matrix (CPM)

Critical Factors	Weight	TARGET		WAL-MART		KMART
		Rate	Score	Rate	Score	Rate	Score
Management	0.18	2	0.36	4	0.72	2	0.36
Competitive Workforce	0.15	3	0.45	3	0.45	3	0.45
Marketing	0.15	3	0.45	3	0.45	2	0.30
Expansion	0.14	1	0.14	4	0.56	2	0.28
Pricing	0.20	3	0.60	4	0.80	3	0.60
Product Variety	0.10	3	0.30	3	0.30	3	0.30
Market Share	0.08	2	0.16	4	0.32	3	0.24
Total	1.00		2.46		3.60		2.53

 Pricing (20%) is the main factor in the industry as it differentiates this industry to other retail industries.  Management (18%) guides the company in reaching its goals.  Marketing and Competitive Workforce (15%) helps in the profitability of the company.  Expansion (14%) helps the company in reaching its markets.  Product Variety (10%) allows the company to have customer loyalty.  Market Share (8%) sets the company’s position in the industry.

Interpretation:  Wal-Mart is the leader in the retail industry.  It has set trends and has catered many markets.  As shown above, it has a great advantage over its competitors.  Some of its competitors are KMART and TARGET.  These companies are having difficulty in competing and in order to sustain they find niches.

External Factor Evaluation (EFE) Matrix

Opportunities	Weight	Rating	Score
Political 1. International: lower tariff duties and higher dollar exchange rates	0.12	1	0.12
Economic 1. International: Market opportunities in Asia and Europe 2. Local: Market opportunities in Alaska, Hawaii and Vermont	0.14	2	0.28
Socio-cultural 1. International: Emulation of American culture abroad 2. Local: Rapid growth of US minority segments	0.15	2	0.30
Technology 1. International: American technology	0.08	2	0.08
Threats	Weight	Rating	Score
Political 1. International: Specific government regulations	0.12	1	0.12
Economic 1. Local: Slower than anticipated economic growth in North America and saturated US market	0.12	3	0.36
Socio-cultural 1. International: Different cultural traditions and variety of language 2. Local: sluggish consumer spending 3. Local: growth of the elderly population 4. Local: Rapid growth of US minority segments 5. Local: Importance of shopping convenience and consumers wanting one-stop shopping 6. Local: Rising number of two-income families	0.17	3	0.51
Technology 1. Plagiarism	0.10	3	0.30
Total	1.00		2.07

 Socio-cultural has the greatest effect because the industry is connected with the people.  A change in preference or lifestyle of the market would make a difference in the industry.  Economic has its effect on the buying power of the market.  Political dictates the fairness in the industry.  Technology helps in growth of the company and the industry.

Interpretation:  A total weighted average score of 2.07 is average.  Target Corporation did not take advantage of the existing opportunities in the industry.  It concentrated in the US market, which is already saturated in terms of the number of stores, available locations and competition.

Overall Assessment of the External Audit

The US retail industry is saturated.  There are fewer opportunities for growth since almost all the markets have been catered with.  In order for companies to maintain its position, they must be able to find new techniques to satisfy their markets otherwise they would loose these.  International opportunities are considered by some of the companies because there are many markets that need to be served.

INTERNAL AUDIT

Competitive Advantage

1. Bullseye logo is recognized by 96% of Americans.
2. It offers trendy and stylish goods in an environment that is bright and attractive.
3. It has low prices on film and flip-flops, lozenges and lampshades, diapers and DVD’s all under one roof.
4. It has exceptional prices for designers like Mossimo Gianulli, Michael Graves and Liz Lange.
5. Its stores have bright lights, wide aisles, drop ceilings, and quick checkouts.
6. It sells more gift cards than any other retailer in the US.
7. It has successfully expanded in urban areas that were traditionally resistant to big box retailers.
8. It is one of the most philanthropic companies in the country.

Internal Factor Evaluation (IFE) Matrix

Strengths	Weight	Rate	Score
Superior Quality 1.   Wide variety of quality products at low prices 2.   Has stores in almost all states except Alaska, Hawaii and Vermont 3.   Trademark: TARGET	0.20	4	0.80
Superior Innovation 1.   Stylish and trendy products	0.15	3	0.45
Superior Efficiency 1.   Competitive team leaders and team members 2.   Image-enhancing advertising and promotion programs	0.10	2	0.20
Superior Customer Responsiveness 1.   Increase in Market growth	0.10	2	0.20
Weaknesses	Weight	Rate	Score
Inferior Quality	0.00		0.00
Inferior Innovation 1.   Other products have better substitutes	0.15	3	0.45
Inferior Efficiency 1.   Low Receivable turnover, Inventory turnover and Asset turnover	0.15	3	0.45
Inferior Customer Responsiveness 1.   Low market share	0.15	3	0.45
Total	1.00		3.00

Quality is one of the factors that consumers consider in buying a product.  Innovation is an addition to an existing product that has been outgrown.  Efficiency shows how the company is able to satisfy the customers and itself.  Customer responsiveness shows the company growth.

Interpretation:  A 3.00-weighted average score is above average.  Target Corporation has chosen and implemented strategies that focus on taking advantage on their strengths.  However, the weaknesses remain.

Overall Assessment of the Internal Audit

Target Corporation has a number of strengths as a company.  The opportunities it has engaged in has added to its growth but because of stiff competition its weaknesses remain.  The company needs a lot of improvement and excessive researches to achieve and maintain their position.  If it does not do so, it would end up to its withdrawal in the industry.

Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

	Strengths 1. Wide variety of quality products at low prices 2. Has stores in almost all states 3. Trademark: TARGET 4. Stylish and trendy 5. Competitive team leaders and team members 6. Image-enhancing advertising and promotions 7. Market growth	Weaknesses 1. Other products have better substitutes 2. Low Receivable turnover, Inventory turnover and Asset turnover 3. US market is saturated
Opportunities International: 1. Lower tariff duties and higher dollar exchange rates 2. Market opportunities in Asia and Europe 3. Emulation of American culture abroad 4. American technology Local: 5.  Market opportunities in Alaska, Hawaii and Vermont 6. Rapid growth of US minority segments	SO 1. Expansion in Asia and Europe (S1,S3,S7,O1,O2,O3,O4) 2. Find new promotional techniques (S3,S4,S6,S7,O5) 3. Expansion in Hawaii, Alaska, and Vermont (S2,S7,O5)	WO 1. Innovate products (W1,W2,O4) 2. Develop products for US minority (W1,W2,O6)
Threats International: 1. Specific government regulations 2. Different cultural traditions and variety of language Local: 3. Slow economic growth in North America and saturated US market 4. Sluggish consumer spending 5. Growth of the elderly population 6. Rapid growth of US minority segments 7. Importance of shopping convenience and consumers wanting one-stop shopping 8. Rising number of two-income families 9. Plagiarism	ST 1. Improve stores for convenience (S7,T7) 2. Prevent plagiarism (S3,S7,T9)	WT 1. Develop new products for existing markets (W1,W3,T4)

There are 3 strategies developed: Market Penetration, Market Development, and Product Development.

Strategic Position and Action Evaluation (SPACE) Matrix

CA	FS		Considering Target Corporation’s environment, it must push through with conservative strategies to improve its position in the industry.  Such strategies are: Market Penetration – Find new ways of serving the market. Market Development – Find new markets that             IS
	Conservative (-0.40,0.20)	Aggressive
	Defensive	Competitive
	ES

have not yet been served.  Product Development – Continuously improve the existing products to answer the needs of the customers.

Strategic Position and Action Evaluation (SPACE) Matrix computations:

Financial Strength (FS) Return on Investment Leverage Risk involved Return on Equity Operating Margin	4 3 4 3 4 18/5 =	3.6	Environmental Stability (ES) Technology changes Price range of competing products Competitive Pressure Inflation Barriers to entry into market	3 3 4 3 4 17/5=	3.4
Industry Strength (IS) Growth Potential Profit Potential Financial Stability Technology know-how Productivity	3 3 3 4 4 17/5=	3.4	Competition Advantage (CA) Product Quality Customer Loyalty Trademark Technology know-how Ads and Promos	4 4 4 4 3 19/5=	3.8
FS – ES = 3.6 – 3.4 = 0.20			IS – CA = 3.4 – 3.8 =  -0.40

Boston Consulting Group (BCG) Matrix

Business Growth Rate	High	Stars	Target Corporation has a high growth rate but low market share.  If nothing is done to change the market share, great amount of cash will be absorbed and when the growth stops, it becomes a dog.  What the company can do is either invest heavily or sell off or invest nothing and invest nothing and generate Question Mark
	Low	Cash Cows	Dogs
		High	Low
		Relative Position (Market Share)
Legend: Wal-Mart                        Target Kmart

whatever cash it can.  Increase market share or deliver cash.

The Internal – External (IE) Matrix

		Strong 3.0	Average 2.0	Weak 1.0
High 3.0 to 4.0	3.0	I	II	III
Med 2.0 to 2.99	2.0	IV **********	V	VI
Low 1.0 to 1.99	1.0	VII	VIII	IX

The Internal and External Factor Evaluation total weighted score (3.00,2.07) of Target Corporation falls into cell IV.  Since it belongs to the Grow and Build region, the strategies that are appropriate are Market Penetration and Product Development.

Grand Strategy Matrix

Weak Competitive Position	Rapid Market Growth		Strong Competitive Position
	Quadrant II 1. Market Development 2. Market Penetration 3. Product Development 4. Horizontal Integration 5. Divestiture 6. Liquidation	Quadrant I 1. Market Development 2. Market Penetration 3. Product Development 4. Forward Integration 5. Backward Integration 6. Horizontal Integration 7. Concentric Diversification
	Quadrant III 1. Retrenchment 2. Concentric Diversification 3. Horizontal Diversification 4. Conglomerate Diversification 5. Divestiture 6. Liquidation	Quadrant IV 1. Concentric Diversification 2. Horizontal Diversification 3. Conglomerate Diversification 4. Joint Ventures
	Slow Market Growth

Target Corporation belongs to a fast growing market where competition is great.  Even if the business growth rate is increasing, it still has a low market share and a weak competitive position.  In order to improve its position these strategies must be considered:  Market Development, Market Penetration, Product Development, Horizontal Integration, Divestiture, and Liquidation.

Quantitative Strategic Planning Matrix (QSPM)

	Weight	Strategy 1		Strategy 2		Strategy 3
Key Internal Factors		Rate	Score	Rate	Score	Rate	Score
Research and Development	0.12	4	0.48	3	0.36	4	0.48
Marketing Innovation	0.12	4	0.48	4	0.48	4	0.48
After Sales Reliability	0.08	3	0.24	2	0.16	2	0.16
Human Capital	0.15	4	0.60	4	0.60	4	0.60
Financial Stability	0.07	3	0.21	3	0.21	2	0.14
Key External Factors
Political	0.10	3	0.30	2	0.20	3	0.30
Economic	0.10	2	0.20	2	0.20	2	0.20
Socio-Cultural	0.08	3	0.24	3	0.24	3	0.24
Technology	0.08	2	0.16	2	0.16	2	0.16
Competition	0.10	4	0.40	3	0.30	4	0.40
Total	1.00		3.31		2.91		3.16

Strategy 1.  Saturate US market by expanding in Alaska, Hawaii and Vermont.  Serve the US minority segment to increase sales and continuously develop products.

Strategy 2.  Enlarge stores having high sales and profits.  Serve the US minority segment and continuously develop products.

Strategy 3.  Expansion in Asia and Europe.

Strategy	Advantages	Disadvantages
1	·         New market opportunities ·         New products for expanding market	·         Stiff competition ·         Limited opportunities for company growth
2	·         Short-term goal ·         Strengthen market share	·         Low opportunity for company growth ·         Stiff competition
3	·         More market opportunities ·         Increase company growth ·         Develop more products	·         Long-term goal ·         Expensive ·         Fluctuating exchange rate, unstable politics and economy abroad

Specific Strategies with cost

Strategies	1st year	2nd year	3rd year	4th year	5th year
1. Expansion in Alaska	$16,160,000	$16,160,000	$16,160,000	$16,160,000	$16,160,000
2. Expansion in Hawaii	16,160,000	16,160,000	16,160,000	16,160,000	16,160,000
3. Expansion in Vermont	16,160,000	16,160,000	16,160,000	16,160,000	16,160,000
4. Develop products for the US minority segment	3,000,000	3,000,000	3,000,000	3,000,000	3,000,000
5. Find and develop new products for existing market	10,000,000	10,000,000	10,000,000	10,000,000	10,000,000
Total Cost per Year	$61,480,000	$61,480,000	$61,480,000	$61,480,000	$61,480,000

Recommendation:

1. Every year, 1 outlet will be opened in Alaska, Hawaii and Vermont.
2. Allocate $3,000,000 every year for developing products for the US minority segment.
3. Allocate $10,000,000 every year for finding and developing new products for existing market.

Assumption:

Lot and Building             $15,000,000.00

Labor                           325,000.00

Mobilization                   750,000.00

Utilities                 ______85,000.00

Total                            $16,160,000.00

Long-term Objectives

In 5 years, the US market will be inundated.

Actual strategies versus Recommended strategies

Actual strategies ·         Aggressive plans to have 2,000 stores by 2010 ·         Expansion in Hawaii

Recommended strategies ·         Expansion in Alaska, Hawaii, and Vermont ·         Develop products for the US minority segment ·         Find and develop new products for existing market

The recommended strategies are more profitable because the company is able to serve the entire US and this would allow the company to broaden its market.

Implementation of Recommendation

Expansion in Alaska, Hawaii and Vermont

1. Hire competent people who will work on the outlets.
2. Conduct training for team leaders and team members.
3. Hire consultants to determine the kinds of product that would be profitable.
4. Prepare for the opening day.
5. Invite local officials for the opening.
6. Provide promotions for the opening day.

Products for the US minority and existing markets

1. Research on the market.
2. Find and develop the appropriate products.
3. Prepare aggressive advertisements and promotions.

Expected Results

• 6 months after opening, profits should be realized and the initial investment should be paid in 5 years.
• US minority products would sell about 15% of volume made.

Projected Financial Statements

Target Corporation
Projected Income Statement
	1st year	2nd year	3rd year	4th year	5th year
SALES (in $millions)	$ 52,620.00	$ 58,934.40	$ 66,006.53	$ 73,927.31	$ 82,798.59
% increase	0.12	0.12	0.12	0.12	0.12
TOTAL SALES	58,934.40	66,006.53	73,927.31	82,798.59	92,734.42
less: Cost of Sales	38,307.36	42,904.24	48,052.75	53,819.08	60,277.37
GROSS PROFIT	20,627.04	23,102.28	25,874.56	28,979.51	32,457.05
less: Selling and Administrative Expenses	13,407.58	15,016.49	16,818.46	18,836.68	21,097.08
INCOME	7,219.46	8,085.80	9,056.10	10,142.83	11,359.97
less: other expenses	1,443.89	1,617.16	1,811.22	2,028.57	2,271.99
INCOME before income tax	5,775.57	6,468.64	7,244.88	8,114.26	9,087.97
less: Income tax	2,194.72	2,458.08	2,753.05	3,083.42	3,453.43
NET INCOME	3,580.85	4,010.56	4,491.82	5,030.84	5,634.54

$52,620.00 Total sales as of January 28, 2006

Target Corporation
Projected Cash Flow
(In $millions)
	1st year	2nd year	3rd year	4th year	5th year
Net Income	$   3,580.85	$   4,010.56	$   4,491.82	$   5,030.84	$   5,634.54
Other	919.15	639.44	358.18	(80.84)	(384.54)
Net Cash provided by Operating Activities	4,500.00	4,650.00	4,850.00	4,950.00	5,250.00
Net Cash provided by Investing Activities	(2,000.00)	(2,350.00)	(2,375.00)	(2,400.00)	(2,500.00)
Net Cash provided by Financing Activities	(3,000.00)	(2,130.00)	(2,000.00)	(2,190.00)	(2,500.00)
Increase in Cash and Cash equivalents	(500.00)	170.00	475.00	360.00	250.00
Add: Beginning Cash	1,648.00	1,148.00	1,318.00	1,793.00	2,153.00
Ending Cash	1,148.00	1,318.00	1,793.00	2,153.00	2,403.00

$1,648.00 Cash balance as of January 28, 2006

Target Corporation
Balance Sheet
(In $millions)
	1st year	2nd year	3rd year	4th year	5th year
Assets
Cash	$   1,148.00	$   1,318.00	$   1,793.00	$   2,153.00	$   2,403.00
Other Current Assets	13,269.94	13,532.48	13,502.99	13,601.87	13,824.52
Long-Term Assets	21,626.91	22,275.72	22,943.99	23,632.31	24,341.28
TOTAL ASSETS	$ 36,044.85	$ 37,126.20	$ 38,239.98	$ 39,387.18	$ 40,568.80
Liabilities
Current Liabilities	9,732.11	10,024.07	10,324.79	10,634.54	10,953.57
Long-Term Liabilities	11,894.80	12,251.64	12,619.19	12,997.77	13,387.70
TOTAL LIABILITIES	21,626.91	22,275.72	22,943.99	23,632.31	24,341.28
TOTAL EQUITY	14,417.94	14,850.48	15,295.99	15,754.87	16,227.52
TOTAL LIABILITIES & EQUITY	$ 36,044.85	$ 37,126.20	$ 38,239.98	$ 39,387.18	$ 40,568.80

Timetable for Construction of New Outlet

Activities		Days completed	Sample Dates
			Starting Date (2007)		Ending Date (2007)
1	Acquisition of Lot	20	March 1	–	March 28
2	Planning	30	March 15	–	April 25
3	Construction	130	April 19	–	October 17
4	Advertisements and Promotions	120	June 27	–	December 11
5	Hiring of staff	30	June 13	–	July 24
6	Training of staff	60	July 25	–	October 16
7	Moving-in	60	October 17	–	November 27
8	Product stuffing	10	November 14	–	November 27
9	Dry-run/Inauguration	5	November 21	–	November 27
10	Grand opening	10	November 28	–	December 11

Specific Annual Objectives

Generate average annual earnings per share growth of 12% or more.

Policies

1. Target Corporations is committed to follow National Laws and Local Codes in the conduct of its business. That in no way shall team leaders and members violate such ordinances.
2. Every personnel of Target Corporation shall act with utmost loyalty and integrity. They shall be guided with the policy of acting at their own discretion on affairs that will promote goodwill to all parties concerned.
3. Conflict of interests could arise, and each team member is expected to resolve such cases as discreet as possible without incurring the ire from the aggrieved party.
4. Always put the Company first, and follow religiously the Company Policies.

Procedures for strategy review and evaluation

• Check sales figure of new outlets and compare it with existing stores.
• Check actual sales and inventory of US minority products and compare to projected.

References

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