... ts. And focus on the more profitable discount dept stores, as part of its drive to turn around the Mervyn's chain, Dayton Hudson sold off or closed 35 Mervyn's outlets, including all of that chain's stores in Florida and Georgia. The late 1990 s also saw a retrenchment on the department store front, as Dayton Hudson sold its Marshall Field's stores in Texas and also closed its Marshall Field's store in downtown Milwaukee.

Target Corp. followed Wal-Mart, with fiscal year 2004 sales of $48. 2 billion and 192, 000 employees. Heading into the mid-2000 s, the retail industry in general was doing relatively well. Following an economic downturn during the early 2000 s, retail chains were witnessing an increase in consumer spending. Due to the continued market dominance of discount retailers, superstores, and warehouse clubs, the future growth of catalog showrooms, which also are a part of this retail segment, appears to be flat.

Customers are frequenting superstores on a fairly regular basis and those stores that want to stay competitive need to explore ways to improve customer service and use technology effectively in their store's operation. The emergence of discounters, which relied heavily on technological advances to improve productivity and cut costs, had a tremendous impact on the financial well-being of full-price retailers. This trend was expected to continue in the new millennium, as consumers are increasingly concerned with value shopping and saving money. Other factors affecting the future of discount retailing include a consumer base of greater ethnic diversity, a heightened concern for the environment, interactive technology, and international retailing.

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. Moreover, an awareness of traditions and holidays specific to certain ethnic groups helped store managers to stock seasonal merchandise. In another effort to draw and retain loyal customers involved the promotion of environmental awareness. In addition to touting recyclable and environmentally friendly products, many discount stores attempted to cut back on lighting, heating, cooling, and other energy-draining expenses.

They also began using recycled paper for printed advertisements and sign boards. Target sponsored Kids for Saving the Earth, a grass roots environmental organization. The early 2000 s were a tough time for retail due to the events of September 11, 2001, combined with a shaky economy. The picture for discounters was mixed at best. More people went to discounters to save money but overall sales were generally flat. The big three continued their dominance in this sector in the new millennium, and small businesses within the industry were becoming scarcer.

Small companies such as Ann & Hope closed completely, regional Shop Ko was forced to close stores, and Ames was forced into bankruptcy... Target was not as aggressive at converting into superstores in the early 2000 s. 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. The company posted 2003 sales of $43 billion, up more than 10 percent from 2001, .

As larger companies relied more heavily on computer technology, lowering labor costs and increasing productivity, employees of Wal-Mart, Kmart, and other discount establishments found that job descriptions changed accordingly. With these advances, more jobs became available. According to Discount Store News editor Tony Lisanti, Wal-Mart is the largest employer in the United States and soon will become the largest employer in the world. Success in international retailing remains linked to a company's sensitivity to cultural differences.

In a Chain Store Age article, Ames Department Store CFO Rolando de Aguiar stated, 'Too many retailers do not pay attention to differences of doing business in different countries.' This mistake lead to technological problems as well, as different countries use different types of communication and computer systems. With Internet sales expected to increase by the billions by 2003, discount retailers have been forced to create an online presence to tap into increased market share. As a result of increasing technology, information technology and information services retail professionals have been called upon and now play substantial roles in the discount stores infrastructure... Credit continued to perform well with write-off rates and delinquencies down. Credit continues to be a growing part of the company's earnings and with operating income up almost 28% Total company revenues increased 12. 7%, with a 12.

9% increase in credit revenue Inventories up 21% at the end of the quarter on a 12. 7% sales increase. While this may seem alarming at first, 9% of the increase is attributable to a change in accounting related to when the company takes possession of the inventory in the supply chain. The remainder reflects the natural increase required to support additional square footage, same store sales growth, and focus on increasing direct imports. Payables to inventory decreased to 94. 5% from 97.

4% last year. Target generated $651 million in operating cash flow ($0. 73/share) versus $432 million a year ago ($0. 47/share). After $768 million in capital expenditures and $71 million in dividends, FCF ran at a deficit of $188 million versus a deficit of $264 million a year ago. This includes a $562 million use of cash to support receivables growth in the credit card business.

traditional economic and competitive pressures, effective execution of corporate strategies and stock market volatility. Additionally, the company may be subject to government regulation as well as corporate litigation, patent litigation and expirations. Due to the price sensitive nature of the industry, discount stores have to maintain efficient operations to achieve maximum profitability. The implementation of computer technology was, and is, essential to store operations. Development of technology such as computer-assisted bar code scanning, online receiving, merchandise tracking, and labor management is crucial to store profitability. With the onset of computerized operations, discount stores were able to reduce inventory, speed up inventory turnover, and shorten the lead time required to move merchandise into the store.

Interactive touch screens for point-of-sale (POS) operations went into development in 1998. Graphical user interface (GUI) payment terminals are slated to become increasingly popular, despite negative feedback. Jim Dion, a senior partner with the J. C. Williams Group, stated in a Stores article, 'For some time now, retailers have made interactive kiosks, touch-screen information terminals, and similar capabilities available to customers at or near the point-of-saleNevertheless, vendors are pushing the new POS systems.

Checkmate developed a new product, the eN-Touch 1000, which is predicted to replace existing counter top credit and debt terminals. In the same Stores article, Mary Lynne Campbell, Director of Business Development for Checkmate, stated, 'retail marketers can achieve 'virtual customer intimacy' through nonpayment applications such as advertising, personal messaging, instant credit, loyalty programs, cross selling, electronic coupons, surveys, managerial sign off, information kiosks, and product locators.' Large, national retailers are expected to implement these new devices. Use of handheld computers in the industry also increased in the late 1990 s, greatly facilitating in-store communications, particularly for price verification and inventory tracking. Wal-Mart, Target, and Kmart used wireless in-store systems. The handhelds proved beneficial in maintaining stock levels and facilitating price markdowns.

Moreover, the development of spread-spectrum radio promised greater bandwidth in wireless communications, allowing stores to use wireless systems for a wide variety of tasks. Future applications for spread-spectrum radio included use as a local-area network infrastructure, which would connect handheld computers; new generations of wireless (and possibly mobile) POS systems; and electronic shelf labels to provide graphs of sales trends among other information. Manufacturers of spread-spectrum radio systems continue development on graphical interfaces. During this same period the corporation quietly developed an e-commerce strategy that involved managing its own online distribution. It bought Rivertown Trading Company, a Twin Cities-based mail-order firm, in 1998 for $120 million to handle fulfillment, marketing, and distribution services for the e-commerce efforts of all the corporation's retail units. Online retailing gained a larger profile in early 2000 with the formation of a separate e-commerce unit called Target Direct.

New store brand web sites were launched later that year. Strong Momentum Should Continue We continue to think Target is well positioned to outperform its discount-store peers in the quarters ahead as the company benefits from its somewhat higher-income customer (who is less sensitive to gas prices), an ongoing introduction of new and compelling merchandise and strong overall execution. We believe traffic has been tracking up 2% to 3% recently, ahead of FY 04 and considerably better than key competitors " The main issue facing Target Corporation is what it should do with its department store and Mervyn s divisions. The company has considered closing or selling the divisions several times over the past few decades. Although both divisions continue to make a profit, the company could be better off focusing all of its Attention on the Target stores. On the other hand, maybe the company needs to take a different approach with the divisions and try to make them more successful to generate greater profits Target Corporation is going to have to sell its department store and Mervyn s divisions if they do not show significant improvements in next year after the new strategy goes into affect.

These two divisions are holding Target back and depleting some of its much-needed resources. In the short run the other two divisions are going to start conducting business in the same fashion as the Target stores. If after a year the new strategy, which is making the other two divisions more like the target division, has not produced more profit for the company, it will be time to either sell or close the companies. Besides changing its name, it has also attempted to diversify by acquiring two more companies. In 1998 it bought Rivertown Trading Company and The Associated Merchandising Corporation. The acquisition ofRivertown Trading Company showed that the company was willing to try something new by entering the major catalog market.

The Associated Merchandising Corporation was already a supplier for many of the companies products, so it was very convenient for it to take over operations. As recently as 1999, the company launched its e-commerce capability with store brand web sites. Whenthe company claimed the Target Corporation name in January this year, it was acknowledging its dependency on the success of its Target stores. The Targetstores and the e-commerce focus appear to hold the future of Target Corporations Success. The acquisition ofRivertown Trading Company marked Target Corporation s first entry into a major catalog business.

Rivertown and Target s e-commerce team have combined to make one business called target. direct. This creation allows Target Corporation to strengthen its capabilities in the direct marketing retail channel and Internet retailing. The general merchandise industry has experienced significant growth of 15. 8% annually in the past five years due partly to the strong economy. The industry accounted for $346 billion dollars in 1998.

Experts project that it will increase this year and next year by 19. 6% and 18. 8% respectively. The five-year projection for the industry shows an annual increase of 18%. We offer proprietary credit in each of our business segments. Our credit portfolio is the second largest among retailers that issue their own cards and currently includes more than 30 million cards held by our guests.

The growth of the Target Guest Card continues to drive increases in profit contribution from credit. Target uses its credit program to help promote community involvement by donating 1% of all purchases made on the cards to local communities. Guest loyalty programs at each of our stores help us build stronger relationships with our guests and increase patronage of our stores. At Target, more than 4 million guests are enrolled in our Take Charge of Education program, where 1 percent of purchases made on the Target Guest Card are donated to a K-12 school of the guest's choice.

We plan to grow credit's contribution to our results in the future by opening new accounts, enhancing guest loyalty programs and managing the business with financial discipline. Target Corporation accounted for approximately 9. 7% of the industry s sales With the industry growing at such a rapid pace, each corporation will have to continue to increase sales to keep up with the competition. Threats and Opportunities Wal-Mart dominates the general merchandise retail industry and is the only major threat to Target Corporation. It is so far ahead that its competitors need to focus on competing rather than trying to keep up. Currentlyunemployment is unusually low, which can make it difficult to hire qualified employees.

Quality employees are needed to ensure good customer service, so customer service could suffer due to low unemployment. Technology is a major influence in the industry and the companies are trying to cash in on thee-business boom. Most of the companies in the industry allow customers to shop on the Internet. Suppliers for the general merchandise retail industry play a major role and could be an opportunity or a threat.

Several stores in the industry use the same suppliers and have to compete to get low prices and keep costs low. Target envisions the Internetnot only as a channel for selling merchandise, but also as an important communications tool to reach consumers and improve customer service. Target devoted more resources to building the merchandising, marketing, fulfillment, and technology processes required to support Internet shopping There are a few key factors for success in the general merchandise retail industry. Companies in the industry have to deliver value in dramatic new ways to keep customers loyal and keep market share. Each company will have to offer well-designed merchandise at great prices, with powerful presentations in attractive stores. Companies need to try to offer more exclusive products, with a greater emphasis on design.

Target Corporation has tried to meet these customer needs by expanding its target market and improving the quality of products it sells. Customers want fast service with a respectful tone. That means getting in and out of the store quickly, finding merchandise in stock, and obtaining rapid and knowledgeable answers to questions. Consumers find service to be more important to them than any other part of their store experience, so companies in this industry need to focus on customer service. Target Corporation s well-trained staff continues to give its customers excellent customer service.

Corporations in the general merchandise retail industry need to maintain cooperative relationships with the communities in which they do business. The commitment to be an active member of the communities where they operate is essential for success. The companies should work together with educational programs and provide financial support when possible. Successful businesses need to continue to look for innovative ways to partner with nonprofit agencies to build stronger communities.

Some of its main objectives are providing better quality and prices compared to competitors, creating a fun and inviting variety of products, and developing guest-friendly, convenient stores. Target claims that it provides better quality than some of its competitors, but it is more difficult to compete on price. Target Corporation s stores are convenient for its customers, but it needs to continue to focus on consumers changing wants and needs. The principle objective of the company, which is to deliver annual earnings per share growth of 15% or more over time In some of its department stores and Mervyn s, some clothing lines have unique styles and broader ranges of sizes available to attract a more upscale market. Its major store, Target, focuses on offering a wide variety of products at more affordable prices. Target Corporation works on getting customers in and out of the store quickly and makes sure merchandise is constantly in stock.

The department store and Mervyn s divisions still play a major role in generating revenue for the company, but the future of those divisions is less predictable. SWOT Situation Analysis External Industry Analysis Prospects for Volume and Profit Industry Wide Target Corporation is in the general merchandise retailing industry, sometimes called the discount retailing industry. Its store brands include Target, Dayton s, Marshall Field s, Hudson s and Mervyn's California. Target stores are surging, but its department stores and Mervyn s do not have the same appeal to customers. Marketing strategies for those two divisions are weak and the company will need to make them more appealing to consumers for them to continue to make profits. Competitive Position of the Firm Target Corporation is the fourth largest retailer after Wal-Mart, K-Mart, and Sears, so the company must make sure it is taking advantages of any opportunities to increase its market share.

Target must also promptly address threats that may affect future earnings of the company. Although the company has began introducing new product lines and offering a wider variety of products, the company needs to focus on more customer loyalty and creating new ways to present its products to gain more of the market share. The main issue facing Target Corporation is what it should do with its department store and Mervyn s divisions. The company has considered closing or selling the divisions several times over the past few decades. Although both divisions continue to make a profit as shown in Exhibits 2 and 3, the company could be better off focusing all of its attention on the Target stores. On the other hand, maybe the company needs to take a different approach with the divisions and try to make them more successful to generate greater profits.

The main reason for the problem is that the divisions are too separated from one another and work as separate companies rather than one team. Target claims that the continued growth of its divisions is key contributors to its overall strategy. It actually has strategies for each division, all in somewhat different directions. Its department stores are trying to focus on stronger commitment to newness and fashion products in its assortments. One way it is reinventing the shopping experience is through events like the Paris Flea Market and our popular 'Fash Bash' fashion shows. Marketing initiatives for our Department Stores will continue to reinforce the strong brand heritage of our stores.

Some of these new changes are leading to increasing costs in merchandise and employee training. Mervyn's made a more concentrated effort to let it customers know about its new brands. Again the company had increasing costs in attempt to meet the demanding needs of the customers. Target stores had still a different approach, but it had much more success. Its primary growth comes from new store expansion. Target continues to open stores in new U.

S. markets; the more it opens, the more profit it generates. As stated earlier, of the three divisions, Target alone generated about 78% of the revenues with $26, 080 million in sales. Mervyns produced about 12% while the department stores accounted for 9% with sales of $4, 099 million and $3, 074 million respectively. The revenues from Mervyns and the department stores have remained fairly consistent over the last five years with minimal increases from the department stores segment and minimal decreases from Mervyns. These two divisions are dragging target down.

The amount of resources that could be added to Target if the company did not have to strive to keep the other two divisions profitable could really add to Target s success. Target is easily the strongest part of the company and needs to receive the majority of research and development. Currently the other two divisions are receiving much of the R and possibly holding back Target s growth. Recommendation Target Corporation is going to have to sell its department store and Mervyn's divisions if they do not show significant improvements in next year after the new strategy goes into affect. These two divisions are holding Target back and depleting some of its much-needed resources. In the short run the other two divisions are going to start conducting business in the same fashion as the Target stores.

They will use similar purchasing, inventory control, and marketing techniques. Target has been very successful using these practices so it is time to see if it will work for the other divisions. This new strategy should work better than what the company has been doing with its smaller divisions. The two divisions have been making a profit but not enough to justify all of the cost. If after a year the new strategy, which is making the other two divisions more like the target division, has not produced more profit for the company, it will be time to either sell or close the companies.

Target would much rather sell the companies, but that can only happen if another company is willing to buy. This solution was derived from the fact that Target alone generated about 78% of the revenues while Mervyns generated only 12% and the department stores accounted for 9%. If it is found after a year that the smaller two divisions cannot generate more revenue, Target will begin receiving all of the resources that had been going to the other businesses and turn it in to greater profits. The changes will be implemented immediately with a new advertising campaign to make the consumers aware of the changes. It will let consumers know that the department stores and Mervyns will not appear to change, but they will be run more efficiently. The actual changes in the business will not change much, and those employees will not need much training.

The upper level management will have to make the changes to make their companies operate more like Target. These changes will generate more costs at first. The funding will come from internal sources and marginally increasing debt. The goal for the new change is that within a few months the change will be in full swiss.

And focus on the more profitable discount dept stores, as part of its drive to turn around the Mervyn's chain, Dayton Hudson sold off or closed 35 Mervyn's outlets, including all of that chain's stores in Florida and Georgia. The late 1990 s also saw a retrenchment on the department store front, as Dayton Hudson sold its Marshall Field's stores in Texas and also closed its Marshall Field's store in downtown Milwaukee. Target Corp. followed Wal-Mart, with fiscal year 2004 sales of $48.

2 billion and 192, 000 employees. Heading into the mid-2000 s, the retail industry in general was doing relatively well. Following an economic downturn during the early 2000 s, retail chains were witnessing an increase in consumer spending. Due to the continued market dominance of discount retailers, superstores, and warehouse clubs, the future growth of catalog showrooms, which also are a part of this retail segment, appears to be flat. Customers are frequenting superstores on a fairly regular basis and those stores that want to stay competitive need to explore ways to improve customer service and use technology effectively in their store's operation.

The emergence of discounters, which relied heavily on technological advances to improve productivity and cut costs, had a tremendous impact on the financial well-being of full-price retailers. This trend was expected to continue in the new millennium, as consumers are increasingly concerned with value shopping and saving money. Other factors affecting the future of discount retailing include a consumer base of greater ethnic diversity, a heightened concern for the environment, interactive technology, and international retailing. 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. Moreover, an awareness of traditions and holidays specific to certain ethnic groups helped store managers to stock seasonal merchandise. In another effort to draw and retain loyal customers involved the promotion of environmental awareness.

In addition to touting recyclable and environmentally friendly products, many discount stores attempted to cut back on lighting, heating, cooling, and other energy-draining expenses. They also began using recycled paper for printed advertisements and sign boards. Target sponsored Kids for Saving the Earth, a grass roots environmental organization. The early 2000 s were a tough time for retail due to the events of September 11, 2001, combined with a shaky economy.

The picture for discounters was mixed at best. More people went to discounters to save money but overall sales were generally flat. The big three continued their dominance in this sector in the new millennium, and small businesses within the industry were becoming scarcer. Small companies such as Ann & Hope closed completely, regional Shop Ko was forced to close stores, and Ames was forced into bankruptcy... Target was not as aggressive at converting into superstores in the early 2000 s. 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. The company posted 2003 sales of $43 billion, up more than 10 percent from 2001, . As larger companies relied more heavily on computer technology, lowering labor costs and increasing productivity, employees of Wal-Mart, Kmart, and other discount establishments found that job descriptions changed accordingly. With these advances, more jobs became available. According to Discount Store News editor Tony Lisanti, Wal-Mart is the largest employer in the United States and soon will become the largest employer in the world.

Success in international retailing remains linked to a company's sensitivity to cultural differences. In a Chain Store Age article, Ames Department Store CFO Rolando de Aguiar stated, 'Too many retailers do not pay attention to differences of doing business in different countries.' This mistake lead to technological problems as well, as different countries use different types of communication and computer systems. With Internet sales expected to increase by the billions by 2003, discount retailers have been forced to create an online presence to tap into increased market share. As a result of increasing technology, information technology and information services retail professionals have been called upon and now play substantial roles in the discount stores infrastructure... Credit continued to perform well with write-off rates and delinquencies down.

Credit continues to be a growing part of the company's earnings and with operating income up almost 28% Total company revenues increased 12. 7%, with a 12. 9% increase in credit revenue Inventories up 21% at the end of the quarter on a 12. 7% sales increase. While this may seem alarming at first, 9% of the increase is attributable to a change in accounting related to when the company takes possession of the inventory in the supply chain. The remainder reflects the natural increase required to support additional square footage, same store sales growth, and focus on increasing direct imports.

Payables to inventory decreased to 94. 5% from 97. 4% last year. Target generated $651 million in operating cash flow ($0. 73/share) versus $432 million a year ago ($0. 47/share).

After $768 million in capital expenditures and $71 million in dividends, FCF ran at a deficit of $188 million versus a deficit of $264 million a year ago. This includes a $562 million use of cash to support receivables growth in the credit card business. traditional economic and competitive pressures, effective execution of corporate strategies and stock market volatility. Additionally, the company may be subject to government regulation as well as corporate litigation, patent litigation and expirations.

Due to the price sensitive nature of the industry, discount stores have to maintain efficient operations to achieve maximum profitability. The implementation of computer technology was, and is, essential to store operations. Development of technology such as computer-assisted bar code scanning, online receiving, merchandise tracking, and labor management is crucial to store profitability. With the onset of computerized operations, discount stores were able to reduce inventory, speed up inventory turnover, and shorten the lead time required to move merchandise into the store. Interactive touch screens for point-of-sale (POS) operations went into development in 1998.

Graphical user interface (GUI) payment terminals are slated to become increasingly popular, despite negative feedback. Jim Dion, a senior partner with the J. C. Williams Group, stated in a Stores article, 'For some time now, retailers have made interactive kiosks, touch-screen information terminals, and similar capabilities available to customers at or near the point-of-saleNevertheless, vendors are pushing the new POS systems. Checkmate developed a new product, the eN-Touch 1000, which is predicted to replace existing counter top credit and debt terminals. In the same Stores article, Mary Lynne Campbell, Director of Business Development for Checkmate, stated, 'retail marketers can achieve 'virtual customer intimacy' through nonpayment applications such as advertising, personal messaging, instant credit, loyalty programs, cross selling, electronic coupons, surveys, managerial sign off, information kiosks, and product locators.' Large, national retailers are expected to implement these new devices.

Use of handheld computers in the industry also increased in the late 1990 s, greatly facilitating in-store communications, particularly for price verification and inventory tracking. Wal-Mart, Target, and Kmart used wireless in-store systems. The handhelds proved beneficial in maintaining stock levels and facilitating price markdowns. Moreover, the development of spread-spectrum radio promised greater bandwidth in wireless communications, allowing stores to use wireless systems for a wide variety of tasks. Future applications for spread-spectrum radio included use as a local-area network infrastructure, which would connect handheld computers; new generations of wireless (and possibly mobile) POS systems; and electronic shelf labels to provide graphs of sales trends among other information. Manufacturers of spread-spectrum radio systems continue development on graphical interfaces.

During this same period the corporation quietly developed an e-commerce strategy that involved managing its own online distribution. It bought Rivertown Trading Company, a Twin Cities-based mail-order firm, in 1998 for $120 million to handle fulfillment, marketing, and distribution services for the e-commerce efforts of all the corporation's retail units. Online retailing gained a larger profile in early 2000 with the formation of a separate e-commerce unit called Target Direct. New store brand web sites were launched later that year. Strong Momentum Should Continue We continue to think Target is well positioned to outperform its discount-store peers in the quarters ahead as the company benefits from its somewhat higher-income customer (who is less sensitive to gas prices), an ongoing introduction of new and compelling merchandise and strong overall execution. We believe traffic has been tracking up 2% to 3% recently, ahead of FY 04 and considerably better than key competitors " The main issue facing Target Corporation is what it should do with its department store and Mervyn s divisions.

The company has considered closing or selling the divisions several times over the past few decades. Although both divisions continue to make a profit, the company could be better off focusing all of its Attention on the Target stores. On the other hand, maybe the company needs to take a different approach with the divisions and try to make them more successful to generate greater profits Target Corporation is going to have to sell its department store and Mervyn s divisions if they do not show significant improvements in next year after the new strategy goes into affect. These two divisions are holding Target back and depleting some of its much-needed resources.

In the short run the other two divisions are going to start conducting business in the same fashion as the Target stores. If after a year the new strategy, which is making the other two divisions more like the target division, has not produced more profit for the company, it will be time to either sell or close the companies. Besides changing its name, it has also attempted to diversify by acquiring two more companies. In 1998 it bought Rivertown Trading Company and The Associated Merchandising Corporation.

The acquisition ofRivertown Trading Company showed that the company was willing to try something new by entering the major catalog market. The Associated Merchandising Corporation was already a supplier for many of the companies products, so it was very convenient for it to take over operations. As recently as 1999, the company launched its e-commerce capability with store brand web sites. Whenthe company claimed the Target Corporation name in January this year, it was acknowledging its dependency on the success of its Target stores. The Targetstores and the e-commerce focus appear to hold the future of Target Corporations Success. The acquisition ofRivertown Trading Company marked Target Corporation s first entry into a major catalog business.

Rivertown and Target s e-commerce team have combined to make one business called target. direct. This creation allows Target Corporation to strengthen its capabilities in the direct marketing retail channel and Internet retailing. The general merchandise industry has experienced significant growth of 15. 8% annually in the past five years due partly to the strong economy. The industry accounted for $346 billion dollars in 1998.

Experts project that it will increase this year and next year by 19. 6% and 18. 8% respectively. The five-year projection for the industry shows an annual increase of 18%. We offer proprietary credit in each of our business segments.

Our credit portfolio is the second largest among retailers that issue their own cards and currently includes more than 30 million cards held by our guests. The growth of the Target Guest Card continues to drive increases in profit contribution from credit. Target uses its credit program to help promote community involvement by donating 1% of all purchases made on the cards to local communities. Guest loyalty programs at each of our stores help us build stronger relationships with our guests and increase patronage of our stores. At Target, more than 4 million guests are enrolled in our Take Charge of Education program, where 1 percent of purchases made on the Target Guest Card are donated to a K-12 school of the guest's choice. We plan to grow credit's contribution to our results in the future by opening new accounts, enhancing guest loyalty programs and managing the business with financial discipline.

Target Corporation accounted for approximately 9. 7% of the industry s sales With the industry growing at such a rapid pace, each corporation will have to continue to increase sales to keep up with the competition. Threats and Opportunities Wal-Mart dominates the general merchandise retail industry and is the only major threat to Target Corporation. It is so far ahead that its competitors need to focus on competing rather than trying to keep up. Currentlyunemployment is unusually low, which can make it difficult to hire qualified employees. Quality employees are needed to ensure good customer service, so customer service could suffer due to low unemployment.

Technology is a major influence in the industry and the companies are trying to cash in on thee-business boom. Most of the companies in the industry allow customers to shop on the Internet. Suppliers for the general merchandise retail industry play a major role and could be an opportunity or a threat. Several stores in the industry use the same suppliers and have to compete to get low prices and keep costs low.

Target envisions the Internetnot only as a channel for selling merchandise, but also as an important communications tool to reach consumers and improve customer service. Target devoted more resources to building the merchandising, marketing, fulfillment, and technology processes required to support Internet shopping There are a few key factors for success in the general merchandise retail industry. Companies in the industry have to deliver value in dramatic new ways to keep customers loyal and keep market share. Each company will have to offer well-designed merchandise at great prices, with powerful presentations in attractive stores. Companies need to try to offer more exclusive products, with a greater emphasis on design.

Target Corporation has tried to meet these customer needs by expanding its target market and improving the quality of products it sells. Customers want fast service with a respectful tone. That means getting in and out of the store quickly, finding merchandise in stock, and obtaining rapid and knowledgeable answers to questions. Consumers find service to be more important to them than any other part of their store experience, so companies in this industry need to focus on customer service.

Target Corporation s well-trained staff continues to give its customers excellent customer service. Corporations in the general merchandise retail industry need to maintain cooperative relationships with the communities in which they do business. The commitment to be an active member of the communities where they operate is essential for success. The companies should work together with educational programs and provide financial support when possible. Successful businesses need to continue to look for innovative ways to partner with nonprofit agencies to build stronger communities. Some of its main objectives are providing better quality and prices compared to competitors, creating a fun and inviting variety of products, and developing guest-friendly, convenient stores.

Target claims that it provides better quality than some of its competitors, but it is more difficult to compete on price. Target Corporation s stores are convenient for its customers, but it needs to continue to focus on consumers changing wants and needs. The principle objective of the company, which is to deliver annual earnings per share growth of 15% or more over time In some of its department stores and Mervyn s, some clothing lines have unique styles and broader ranges of sizes available to attract a more upscale market. Its major store, Target, focuses on offering a wide variety of products at more affordable prices. Target Corporation works on getting customers in and out of the store quickly and makes sure merchandise is constantly in stock. The department store and Mervyn s divisions still play a major role in generating revenue for the company, but the future of those divisions is less predictable.

SWOT Situation Analysis External Industry Analysis Prospects for Volume and Profit Industry Wide Target Corporation is in the general merchandise retailing industry, sometimes called the discount retailing industry. Its store brands include Target, Dayton s, Marshall Field s, Hudson s and Mervyn's California. Target stores are surging, but its department stores and Mervyn s do not have the same appeal to customers. Marketing strategies for those two divisions are weak and the company will need to make them more appealing to consumers for them to continue to make profits. Competitive Position of the Firm Target Corporation is the fourth largest retailer after Wal-Mart, K-Mart, and Sears, so the company must make sure it is taking advantages of any opportunities to increase its market share.

Target must also promptly address threats that may affect future earnings of the company. Although the company has began introducing new product lines and offering a wider variety of products, the company needs to focus on more customer loyalty and creating new ways to present its products to gain more of the market share. The main issue facing Target Corporation is what it should do with its department store and Mervyn s divisions. The company has considered closing or selling the divisions several times over the past few decades. Although both divisions continue to make a profit as shown in Exhibits 2 and 3, the company could be better off focusing all of its attention on the Target stores. On the other hand, maybe the company needs to take a different approach with the divisions and try to make them more successful to generate greater profits.

The main reason for the problem is that the divisions are too separated from one another and work as separate companies rather than one team. Target claims that the continued growth of its divisions is key contributors to its overall strategy. It actually has strategies for each division, all in somewhat different directions. Its department stores are trying to focus on stronger commitment to newness and fashion products in its assortments. One way it is reinventing the shopping experience is through events like the Paris Flea Market and our popular 'Fash Bash' fashion shows.

Marketing initiatives for our Department Stores will continue to reinforce the strong brand heritage of our stores. Some of these new changes are leading to increasing costs in merchandise and employee training. Mervyn's made a more concentrated effort to let it customers know about its new brands. Again the company had increasing costs in attempt to meet the demanding needs of the customers. Target stores had still a different approach, but it had much more success. Its primary growth comes from new store expansion.

Target continues to open stores in new U. S. markets; the more it opens, the more profit it generates. As stated earlier, of the three divisions, Target alone generated about 78% of the revenues with $26, 080 million in sales. Mervyns produced about 12% while the department stores accounted for 9% with sales of $4, 099 million and $3, 074 million respectively. The revenues from Mervyns and the department stores have remained fairly consistent over the last five years with minimal increases from the department stores segment and minimal decreases from Mervyns.

These two divisions are dragging target down. The amount of resources that could be added to Target if the company did not have to strive to keep the other two divisions profitable could really add to Target s success. Target is easily the strongest part of the company and needs to receive the majority of research and development. Currently the other two divisions are receiving much of the R and possibly holding back Target s growth. Recommendation Target Corporation is going to have to sell its department store and Mervyn's divisions if they do not show significant improvements in next year after the new strategy goes into affect. These two divisions are holding Target back and depleting some of its much-needed resources.

In the short run the other two divisions are going to start conducting business in the same fashion as the Target stores. They will use similar purchasing, inventory control, and marketing techniques. Target has been very successful using these practices so it is time to see if it will work for the other divisions. This new strategy should work better than what the company has been doing with its smaller divisions. The two divisions have been making a profit but not enough to justify all of the cost. If after a year the new strategy, which is making the other two divisions more like the target division, has not produced more profit for the company, it will be time to either sell or close the companies.

Target would much rather sell the companies, but that can only happen if another company is willing to buy. This solution was derived from the fact that Target alone generated about 78% of the revenues while Mervyns generated only 12% and the department stores accounted for 9%. If it is found after a year that the smaller two divisions cannot generate more revenue, Target will begin receiving all of the resources that had been going to the other businesses and turn it in to greater profits. The changes will be implemented immediately with a new advertising campaign to make the consumers aware of the changes. It will let consumers know that the department stores and Mervyns will not appear to change, but they will be run more efficiently. The actual changes in the business will not change much, and those employees will not need much training.

The upper level management will have to make the changes to make their companies operate more like Target. These changes will generate more costs at first. The funding will come from internal sources and marginally increasing debt. The goal for the new change is that within a few months the change will be in full swing.