New Store Growth In Target example essay topic

I. Mission Statement: II. External Environmental Analysis. Remote environment - these are the factors, which affect all businesses, and frequently, neither the business nor the industry has any control over them - examples: i. Entry barriers ii. Social. Political iv.

Technological. Ecological factors vi. Economic factors: 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. b. Industry environment: i.

Entry barriers. Economies of scale: Target can compete well against county general stores, surplus and salvage stores, Army and Navy goods stores, warehouse club stores, and catalog showroom stores because they have a significant cost advantage over any new rival. B. Product Differentiation: Target creates high entry barriers through their high levels of advertising and promotion (Essentials of Strategic Management) ii. Supplier power. Buyer power iv. Competitive rivalry: The increased productivity gap between Wal-Mart and Target is affecting both companies in terms of competitive stances. Wal-Mart will attempt to exploit the existing gap by lowering prices further and creating an even stronger advantage.

This is highlighted through the disparity in sales per square foot; 1999 was the narrowest, with Wal-Mart selling $441 and Target selling $260; by 2002 Wal-Mart had increased this to $498 and Target to only $271 per square foot. Similarly, the operating productivity of Wal-Mart, far outstripped Target. Target must therefore address this competitive issue. Investors continue to choose K-Mart and Wal-Mart first Investors in retail are less prepared to acquire Target stock than the two other main competitors in the sector.

Substitute availability c. Opportunities: i. Changes in government regulations ii. Technological breakthroughs. Credit Cards: The introduction of the store credit card is an attempt to gain two advantages: one is to increase the frequency of visits; the other is to gain fees for the card. It has already been shown that Target credit card holders visit the store more frequently than non-holders do. iv. alternative product streams: The company plans to add more emphasis on the good value on offer in the stores in future marketing initiatives.

It has announced a plan to expand the assortment of food items (including more private-label) in new and remodeled stores, while downsizing men's apparel, home improvement, automotive, and sporting goods. vs. Specific demands by a narrow group of customers. Threats. Geographic interventions ii. Unexpected competition: The largest threat to Target is product and company competition.

The Target division competes with many discount, off-price, and drug chains, moderate department stores, and specialty retailers. The biggest of these is US giant Wal-mart, which dominates many consumer goods sectors in the US, focusing on low prices and good value. Super Target's rivals include grocery stores, Super Centers, and warehouse clubs. Target must compete with Wal-Mart in product ranges as well as through actual store numbers.. New substitute products. Operational Environment - these are factors in the immediate environment in which the business operates - examples: a.

Competition: The company has been slow to move into the higher-end consumer electronics market, whereas Wal-Mart has adopted an aggressive strategy and incorporated products such as Sony flat screens or Panasonic LCDs. Furthermore, the company is adopting a new strategic direction, by lowering prices on consumables in order to drive more traffic, though this appears to have been unsuccessful to date. b. Creditors / Suppliers. Customer profiles d. Labor: The retail industry was a significant source of employment in the United States, accounting for roughly 18 percent of the labor force.

According to the U.S. Department of Labor discount stores employ over two million people. The average non-supervisory retail worker's hourly wage was $9.17 and average weekly hours were 28.7. 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. e. Environmental factors: 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 signboards. Target also sponsored Kids for Saving the Earth, a grass roots environmental organization. IV.

Key Success Factors - these are the characteristics derived from the above factors, which any business must have in order to be successful in the SPECIFIC industry being considered - examples: a. Location: Target's corporate headquarters are located in Minneapolis, Minnesota. b. Hours open c. Inventory levels d. Capitale.

Technology. Management skills. Distribution system: More distribution centers to increase volume and improve inventories. In 2003, the company invested $3.2 to $3.4 billion, mostly in new square footage for Target stores, and the distribution infrastructure and systems to support this. A few years ago Target suffered from high out-of-stocks. This made Target engage in a two-year program to rectify the problem, through better inventory methods and more distribution centers.

Company's Strengths and Weaknesses. Strengths i. Competitive edge: 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 financial's 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. The Mizrahi and Mossimo lines have made Target the fashion leader in discount store products. Finally, the company has begun to introduce Sony products that are consistent with the Target image. ii. Financial reserves or credit lines: The recently released Target visa card has proved a resounding success. It offers low rates, high limits and rewards. It has been specifically designed to produce higher income, increase the volume of customer purchases, and improve CRM.

Credit revenue was $1,479 million in 2003 (against $1,297 million in 2002), increasing on continued growth for the Target visa card. In 2003, Target visa cardholders are further benefited from the launch of e-coupons or tailored promotional offers using smart chip technology.. Proprietary technology iv. Management team. Weaknesses - weaknesses make the company / organization vulnerable competitively and may make the pursuit of certain options impossible - examples: i. Obsolete facilities, including plant and equipment developing a 'boundary less' corporate structure wherein resources and marketing and management expertise could be shared by each of the three divisions to create a more efficient organization.

In 1996 Ulrich launched a ii. Too narrow a product line. Old, inflexible or poor management iv. Excessive debt VI. Financial Analysis -Target Corporations net earnings were $1,144 million for this fiscal year. Revenues are $33,702 million, 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. Inventory levels increased $323 million, but were fully funded by the $364 million increase in accounts payable over the same period. Basic earnings per share were $2.56 resulting in $. 10 of dividends declared per share each quarter.

The price of Target Corporations common stock ranged from $33.75 to $63.75. The total return to shareholders over the past five years averages 43% annually. The main expense areas were selling, general, and administrative, which accounted for $7,490 million or 22% of revenues. Capital expenditures are currently a minimal expense on average of 5.56% Capital expenditures were $1,918 million.

Approximately 69% of the total expenditures were for new stores, expansions, and remodels. Strong cash flow helped reflect a retail debt ratio of 40%. This is separate from the credit operations debt ratio due to the different financial characteristics. The total debt ratio is 49%. The price to cash flow ratio was 14.7, and the price to revenue ratio was. 89.

The price to revenue ratio more than doubled since 1995 when it was only. 23. Target Corporation has been very efficient, which reflects a return on equity of 20.2%. Inventory turnover was relatively low at 6.3. It is one of Targets main areas of concentration. Profitability can be seen by comparing net profit after taxes to net sales resulting in a net profit margin of 3.5%.

Target Corporation also displayed a gross profit margin of 31.7%. VII. Corporate Strategic Objectives - these are specific for each company / organization and represent the results of a match between strengths and perceived opportunities in the industry - examples: a. Increased market share, e.g. % per year in years: Estimated 2004 store opening program at Target reflects net square footage growth of approximately 8% to 9%, or 95 to 100 total new stores. In addition, Target expects to remodel approximately 70 stores in 2004. b. Below cost leader with highest quality in the retail industry.

Increase revenues % within years: Target showed a growth in net earnings of 24.5%. d. Reduce debt % per year for the next years: Target has started a three-year program to cut $200 million in annual operating expenses, particularly at the under performing Mervyn's and department store units. And focus on the more profitable discount dept stores Note: these are usually quantifiable and measurable for the period considered. V. Corporate Strategies a. Diversification It does not play music in its stores, 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, including Issac Mizrahi, Michael Graves, Mossimo, and Liz Lange, among others.

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. 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. b. 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. 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. Strengths and Weaknesses Target Corporations core strength is its variety of retail stores, which provide exceptional value and variety to its customers. Among the value chain components, technological development has been a great asset to the company and employees. The acquisition of Rivertown Trading Company marked Target Corporations first entry into a major catalog business.

Rivertown and Targets 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. c. Retrenchment V I. THIS SECTION IS ESSAY FORMAT and should be logically based on the information you were able to find in the previous outline sections. Strategic Choice and Implementation - choose at least one grand strategy or a combination of Grand Strategies (master strategy combining the focused elements you have chosen that will determine the future direction / course of your company) and develop implementation guidelines to achieve your objectives. Summarize Works Cited Target Corp. Notable Corporate Chronologies.

Gale Group, 2003. Reproduced in Business and Company Resource Center. Farmington Hills, Mich. : Gale Group.

2005. web 'World's Most Admired General Merchandisers, 2003. ' Fortune, Global Most Admired Companies (annual), web March 8, 2004. Business Rankings Annual 2005. Thomson Gale, 2005. web Apgar, Sally, 'Dayton Hudson at Crossroads: CEO Ulrich Still Struggling to Jump-Start Mervyn's Stores,' Minneapolis Star-Tribune, July 23, 1995, p. 1 A. Berner, Robert, 'Dayton Hudson's Once-Fashionable Stores Tread Water,' Wall Street Journal, August 1, 1996, p. B 4. Borden, Mark, 'Shoppers Love Target, but Shareholders Are Seeing Red,' Fortune, September 18, 2000, pp. 64, 68.

Branch, Shelly, 'Hot Target Got Hot,' Fortune, May 24, 1999, pp. 169-70,172,174. Chakravarty, Sub rata N., 'Planning for the Upturn,' Forbes, December 23, 1991, pp. 48+. Chandler, Susan, 'Speed Is Life' at Dayton Hudson,' Business Week, March 27, 1995, pp. 84-85. ' Under the Gun at Dayton Hudson,' Business Week, May 20, 1996, pp. 66+. Clark, Evan, 'Is Target Cooling? : Slow Growth Feared at Hot Discounter,' Women's Wear Daily, September 30, 2002, pp. 1+.

Conlin, Michelle, 'Mass with Class,' Forbes, January 11, 1999, pp. 50-51. Dayton, George Draper, II, Our Story: With Histories of the Dayton, McDonald, and Winchell Families, Wayzata, Minn., 1987. Face nda, Vanessa L., 'Is Target Becoming Too Trendy? ,' Retail Merchandiser, December 2002, pp. 19+.

Gill, Penny, 'Macke Maps Plan for Dayton Hudson,' Stores, November 1991, pp. 28+. Halverson, Richard, 'Target Powers Dayton Hudson's Growth,' Discount Stores News, June 19, 1995 Datamonitor Company Profiles. 12 June 2004. Available from web 'Retail Store Industry. ' New York: Value Line Publishing Inc. Value Line Investment Survey, 14 May 2004.

' Miscellaneous General Merchandise Stores. ' Encyclopedia of American Industries. Online Edition. Gale, 2004.2005. web department stores generated $134.4 billion in sales in 2001, up 2.64 percent from the previous year.

They are also known as discount variety stores, general merchandise discount stores, mass merchandisers, full-line discounters, or discount houses. Discount stores numbered 9,120 in 2001, up 10.5 percent for the decade a. : Target offers larger lines of apparel than Wal-Mart, an area that has been deflated recently and is likely to impact on the profits of the company in the future because of the associated inventory costs. Finally, although not entirely due to the direction of Target, declining stock markets are more likely to affect the customers at Target than Wal-Mart, due to higher income levels and savings. Estimated 2004 store opening program at Target reflects net square footage growth of approximately 8% to 9%, or 95 to 100 total new stores partially offset by closings and relocations. In addition, Target expects to remodel approximately 70 stores in 2004.

The increased productivity gap between Wal-Mart and Target is affecting both companies in terms of competitive stances. Investors continue to choose K-Mart and Wal-Mart first Investors in retail are less prepared to acquire Target stock than the two other main competitors in the sector; Wal-Mart and K-Mart. Many cited the simplicity of Wal-Mart and K-Mart for stock purchase. Another example of the increased complexity of Target is the introduction of the credit card scheme and Super Target. This makes investors want more from the company, against the no nonsense of Wal-Mart. Target is testing the international waters, so to speak, with its newest merchandising initiative, Global Bazaar, an eclectic assortment of home decor items.

Featuring imported home goods and further enhances Target's position as a source for distinctive proprietary goods. Should the effort be successful, expect Target to bring it back for more than a single season. 'Target management could continue to roll out a new assortment of 'Global Bazaar' products in between other seasonal periods,' said Dreher. 'At the very least, we expect management will likely incorporate best-selling products into Target's current home furnishings department. ' 'The impressive offering could potentially take market share from both Cost Plus World Market and Pier 1, in our view,' wrote JP Morgan analyst Charles Grom, Saint Paul Pioneer Press (St. Paul, Minnesota) (via Knight-Ridder / Tribune Business News), June 20, 2005 p NA Target Corp. is pioneering new approaches to merchandising in a host of categories. The discounter's innovations range from a novel prescription drug bottle to a partnership with an on-line wedding registry.

And other initiatives have been launched in the food and digital photofinishing segments. Meanwhile the retailer's Target Club Wedd gift registry -- described as the largest wedding registry in the country -- is partnering with The Knot, said to be the world's most-trafficked wedding web site. In the food arena the discounter has debuted a line of premium steaks under the Sutton & Dodge label in Super Target units. The meat, produced by Hormel Foods, is aimed at consumers seeking steakhouse-quality cuts of beef. The move is seen as analogous to Target's positioning as a fashion-forward off-price clothier.

As of this fall the service will enable consumers to order prints online for pickup within a few hours at any Target outlet. By e-mailing a link to an online album, friends and family can enjoy the photos and order their own set of prints. Photos also can be shared in real time with Yahoo! Messenger, on a mobile phone or through a personal public web address. Consumers can print at home, have their prints delivered directly to their home or office, or choose to have prints delivered to a recipient's doorstep. To further personalize the experience consumers can create custom gifts, including mugs, aprons and magnets for friends and family using their favorite photos, and have the gifts delivered. and is known for providing cutting-edge technology and services, which makes this a great partnership as we continue to look for ways to offer convenience and affordability to our guests.

' The company also launched its Club Wedd bridal gift registry and the Lullaby Club baby registry. At the same time, Target also began the development of a prototype store for smaller markets, carrying merchandise similar to that in larger Target stores. combining a successful business mix of clean, easy-to-navigate stores with quality, trend-responsive merchandise. The year 1990 saw the opening of the first of over 50 expanded Target Great land stores; in 1995, following the lead of such rivals as Wal-Mart and Kmart, the company opened its first Super Target, which combined the chain's successful general merchandise mix with a grocery store. Along with expanding its traditional department stores along the East Coast, six new Super Targets were planned for 1996 alone.

The proliferation of shopping malls and the recessionary economy of the early 1990's caused sharp changes in consumer spending patterns throughout the United States. By 1996 the country could boast 4.97 billion square feet of retail space -- an average of 19 square feet per person nationwide -- but retailers felt the pinch caused by such a large number of stores courting increasingly spending-shy consumers. This situation most negatively affected the mid-range and upper-range sales volumes generated by stores on the level of Mervyn's, Dayton's, Marshall Field's, and Hudson's. developing a 'boundary less' corporate structure wherein resources and marketing and management expertise could be shared by each of the three divisions to create a more efficient organization. In 1996 Ulrich launched a three-year program to cut $200 million in annual operating expenses, particularly at the under performing Mervyn's and department store units. 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. 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. 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...

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 L isanti, 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 Aguilar 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-sale Nevertheless, 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.

When the company claimed the Target Corporation name in January this year, it was acknowledging its dependency on the success of its Target stores. The Target stores and the e-commerce focus appear to hold the future of Target Corporations Success. 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.

Currently unemployment 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 Internet not 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. 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. 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. 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. 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.