Team 2Shawn Buck

Ashley Burnett

Whitney Horton

Kelly Riester

Jennifer Shotts

Sam Snelling

Mickea Smith

Company Situation Analysis for Target

TargetFounded by the Dayton Company in 1962.Dayton was previously focused on

department stores and bringing European quality to the mid west.

They were able to keep customer loyalty by offering name brands at discounted prices.

In 2000 the Dayton Hudson company officially changed their name to Target.

Since Founding in 1962, Target now operates 1,685 stores and is expanding on a global scale.

Core CompetencyFocus on design.Began with the store layout.In the 90’s Target partnered with the world

famous architect Michael Graves.Target has also partnered with designers

Mossimo Giannuli and Sonia Kashuk.Target also puts on community art

competitions to find up and coming designers.

Wal Mart and K Mart cannot compete on this level

Competitive PositionTarget is currently second to Wal Mart.Continue to compete, even in a troubled

economy.They have effectively differentiated

themselves in their market, making their brand difficult to replace.

Important financial ratios- Profitability

Net profit Margin

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

Target Wal-mart Sears Holding

Net profit Margin

These are the profits you make after interest and taxes for every dollar.

Important financial ratios- Profitability

Return on Assets

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Target Wal-mart Sears Holding

Return on Assets

This is the rate of return that the company is earning on the company’s investment

Important financial ratios-Profitability

Return on Equity

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Target Wal-mart Sears Holding

Return on Equity

This is the rate of return that the company is offering its shareholders.

Important financial ratios-Liquidity

Current Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Target Wal-mart Sears Holding

Current Ratio

This demonstrates liquidity. For ever dollar of short term debt that they have, they have the number above in current assets to pay

Important financial ratios-Liquidity

Quick Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Target Wal-mart Sears Holding

Quick Ratio

This is another liquidity measure. It excludes inventory from the ratio, so it only includes cash and cash equivalents to pay off. Current debt above one is wanted

Important financial ratios-leverage

Debt to Equity

0

0.5

1

1.5

2

2.5

Target Wal-mart Sears Holding

Debt to Equity

This means for every one dollar of equity they have the amount above of debt, which means they are leveraged and thus recognized by the tax shield advantage. The Tax shield advantage is recognized by the shareholders and can be explained by the accounting rule that interest is tax deductible. The more debt present in a firm’s capital structure, the more interest payable therefore there is more interest available to be added into after tax income.

Kohl’s financial ratiosKohls

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Gross Profitmargin

Net profitmargin

Return onAsset

Return onEquity

Kohls

Kohls

0

1

2

3

4

5

6

7

CurrentRatio

QuickRatio

Inventoryto NetworkingCapital

Debt toAsset

Debt toEquity

InventoryTurnover

Fixedasset

turnover

Kohls

Worksheet 9.1Target                  

  0%   Weak   Neutral   Strong   100%

Access to Capital when Required                  

Degree of Capital Utilization                  

Ease of exit from the market                  

Profitability, renturn on Investment                  

Liquidity, Avaiable Internal Funds                  

Degree of Leverage, Financial Stablility                  

Ability to compete on prices                  

Capital Investment, Capacity to meet demands                  

Stability of Costs                  

Ability to Sustain effort in Cyclic Demand                  

Price Elasticity of demand                  

                   

PIMSAccording to the profit impact of market strategy

the six steps in pims are true. The six steps are as follows:Absolute and relative market share correlate with ROIProduct quality is key to market leadershipROI is positively correlated with market growthVertical integration can help in product life cycleHigh investment intensity leads to less ROICapacity use is critical with a high level of capital

intensity However Wal-mart has broken the mold on this

and does not follow these steps and they are the leader in the discount variety stores, and because of this PIMS is used less frequently today.

Key PeopleMr. Douglas A. Scavanner- TargetMr. Thomas M. Schoewe- Wal-martMr. Michael D. Collins- KmartMr. Wesley S. McDonald- Kohl’s

Target Threat of entry

Large discounters have driven down prices with imports from other countries and slower holiday sales.

Most independent retailers don’t have the margins to compete on price.They have to be creative in finding ways to get people

shopping at their stores. Offering exclusive gift items & giving more

personalized service or hosting event and fund-raisers to lure in more foot traffic.

Powerful Suppliers & BuyersSuppliers

Suppliers are continuously increasing due to the boom in online retailers & large supercenters.

Target stores are able to secure a particular % of certain suppliers business.

Online market gives suppliers additional channels to get their products to consumers but it increases their ability to negotiate for their prices.

Powerful Suppliers & BuyersBuyers

There are usually multiple retailer in one community that offer similar or identical products, buyers are prone to shop at a store based on factors other than loyalty.

This gives the buyers an intermediate level of bargaining power but the suppliers and retailers still control most of the power.

Target:Industry overview

Annual revenue of $130 billion Discount department store Industry

encompasses 5000 individual retail stores.Franchise giants like Target, Wal-Mart, Kmart.

Target has 26 distribution centers in 21 states.Top 8 companies hold 100% of the industry sales.

Products, Operations & Technology• Products

– Major products that are sold in discount stores include apparel (20% of sales)

– Personal Care Products (15%)– Electronics & Groceries ( 7%)– Toys (6%)– Apparel includes women’s, men’s and children’s

clothing.• Target maintains a large product inventory so they are

able to offer high volume discounts.

Products, Operations & TechnologyOperations

Discount department stores inhabit a large portion of the market & require big portions of real estate: the average size is about 100,00 square feet.

Companies like Target, K-mart, & Wal-mart select locations near population centers, other retail centers, or major highways.

Supercenter arrangement averages 180,000 square feet & offers a more wide-ranging merchandise & grocery section.

Products, Operations & TechnologyTechnology

Reduces labor costs and overall operating cost.These systems include automated distribution

centers, point of sale systems (POS), and computerized inventory management systems.

Keeping track of inventory on the floor is done electronically with hand held scanners, bar codes, and radio frequency identification (RFID) tags.

These systems can also be used on a network to connect inventory and sales information across the nation.

Wal-mart has incorporated a satellite communications system to link all its facilities.

Stages in Product Distribution Target

26 distribution centers in 21 statesGiving the ability to fulfill the needs of their stores

within a 24 hour time frameTarget also competes on a cost leadership

strategy but focus more on quality. “Expect more. Pay less”Private labels such as: Massimo & Converse One

StarTarget currently operates 1,685 stores in all

but two states in the U.S. (Vermont & Hawaii)

Core Capabilities• Strategic intent-

– every employee in the organization must understand his or her role and how their actions affect the outcome of the organization.

• Obsessive customer focus– Understanding what customers want

• Innovation and Commercialization– Private labels, customer service, POS, Supply

chain Mgt.• Talent Mgt

– Finding the right people to work and having them in the right places within the organization.

Key People – Then and NowRobert Ulrich:CEO from 1987-2008

Gregg Steinhafel:CEO from 2008-present

Gregg Steinhafel – Level 5 Leader

Steinhafel and Ulrich have been working together at Target since 1984

Resolve to do what must be doneSteinhafel took a pay cut of a little over 24 percent due to

the failing economy in order for Target to stay afloat Personal Humility

Variety, a popular entertainment magazines describes Gregg by saying:He “keeps his head down when it comes to the news media -- in fact,

his handlers say he has a standing policy not to talk to the trade press.”

Willful and Fearless“Our space, signing, promotional programs and the hundreds

of millions of consumers in our stores annually should not be undervalued.”

-Gregg Steinhafel

Design and EmphasisDesign: Target’s main focus is on innovation,

design, and store experience.Target conveys its design not only through their

floor layout and in-store displays, but also through their media.Catchy commercials targeting youth

Emphasis: “Expect more, pay less,” and “Design for all” essentially embody everything that Target stands for.

TrainingTarget prefers to recruit management at the

college entry level. Target University

A training program for educating future managers and trainers.

The graduates of Target University will eventually go out to the stores and train the store-level employees.

Additionally, each brick-and-mortar store has at least one employee who has attended the Disney training program in order to manage ongoing and new-hire training.

Retention StrategiesHealth Benefits

Full benefits packageDental BenefitsVision BenefitsUse of Target Pharmacy – 10% discount“Team Member LifeResources” counseling program

Private counseling, support, and informationChild care arrangementsElderly care arrangementsHelp developing a healthy dinner menu

Financial SupportAid in saving for retirement through TGT 410(k)

PlanFor every dollar an employee deposits, up to five percent of

their pay, Target matches it dollar-for-dollarDaycare Flexible Spending Account (FSA)

Save before-tax dollars from each paycheck that will be used for qualifying daycare and eldercare expenses

InsuranceCompany-paid life insuranceDisability coverage (short-term)Choice auto and home insurance

Offer group rates from various different insurance companies

BenefitsTeam member discount

10 percentQualified family members can use the discount as well

Tuition reimbursementUp to $3,000 per year, per child

Education loan aidsOffered through Wells Fargo Student Loan programQualified employees may borrow up to $25,000 per year for

expenses such as room and board, books, etc.Home loansHome Buyer’s Assistance programAdoption Assistance Reimbursement program

Up to $5,000 to cover any fees such as application, filing, placement, and/or agency costs, as well as court costs, immigration, translation and/or attorney fees

Benefits (cont.)Group Legal Plan

Gives employees access to legal representation at an affordable price

Childcare discount Up to 10% off weekly tuition at more than 2,500 conveniently

located childcare centersTarget Credit Union

BankingSavings accounts and loan options

“Target Work Perks” - Miscellaneous DiscountsFitness centersCell phone plansComputersClothingFlowersEtc.

Company CultureIn Target stores, guests will always find a clean,

organized, welcoming atmosphere and smart, stylish merchandise.

All Target employees are empoweredEmployees are recognized as part of a winning,

successful team (an asset)“The strength of many, the power of one,”

means that contributions from everyone make one end result that benefits everybody.

Marketing

Target’s Mission: “…delivering outstanding value, continuous innovation and an exceptional guest experience by consistently our ‘Expect More. Pay less’ brand promise.”

96% of Americans recognize the bulls-eye symbol as representing the Target brand.

Target’s brand value was found to be $17.1 billion

AdvertisingIn the year 2008, Target spent roughly

$1 billion on advertising.Recently decided that 3/4ths of their

marketing budget will be spent on advertisements that would show the price of their products.

This would go along with their brand promise, “Expect More. Pay Less”

http://www.youtube.com/watch?v=KdTwVCNKxV8

Store DesignThe store is designed to feel more like a

boutique than a warehouse style store.Store is filled with contemporary

signage, backdrops and linersThese are mostly printed on inexpensive

paper or foam boards“Tar-zhey” the psuedo-French

pronunciation coined to express the designer feel of Target.

Store DesignTarget has been

experimenting with new store designs that enable them to blend within the area.

These include multilevel-building with escalators and elevators

They even designed a new carts for people to use on escalators

New “urban” designs have lead Target to expand into places such as: New York City, New Orleans, Los Angeles, etc.

Target’s target marketMedian customer is around 41 years old Household income of roughly $63,00075% of the customers are made up of

womanMore than 45% of the customers have at

least 1 child80% of Target’s customers have

attended College with around 48% having completed college

Sales ForcesTarget created the “cheap chic” in

response to the demand for cheap but fashionable clothes

Brought in Designers like Isaac Mizrahi and Sonia Kashuk who are high-end designers that developed a lower-end merchandise for Target

They are also experimenting with limited edition designer series

Sales ForcesThe down turn in the Housing market

has affected Target’s sales Target Home goods sales have mirrored

the housing market.The rising cost of Health care has lead

to innovative designs and cheaper medication.

Target Clinic has been introduced in to some store layout to provide cheap and fast healthcare.

Success Stems From….Social responsibility:

$3 million/week awarded to schools throughout the U.S. Recycling programs in every store in a number of different

ways. Carts, carpet, boxes, bags, walls 70% of the store has and will eventually be recycled

Always looking for innovative techniques to drive down cost while retaining quality consumer goods. Through SKU’s, customer feedback

Employees are urged, not mandated, to perform community service (avg. store does 100 hrs./month)

Product lines are big on organics, naturals, energy saving Infant products, domestic products such as linins, lighting

throughout the stores, skin care products- Target brandEven there gift cards are biodegradable!!

Vision: “strengthen families and communities wherever we do business.”

It All Starts With DiversityBelieve this motto

57% of the corporate positions are held by women10% higher than the national average

Have a number of minority scholarship offeredHispanic Sch. Fund, Unit. Negro Fund, Asian Am. Fund

Their corporate partners are from a wide range of backgrounds to “better suit the customer’s needs”Includes employees, marketing, and suppliers Work with independent suppliers, some of which are

women (Wal-Mart can’t say that)Support “free days” for those less fortunate

Over 1,500 events- baseball, museums, carnivals, etc.

Target Coordination“Focused on the efficiency of the process

as opposed to the contribution to expansion.”Porter believed in: short term vision only

breeds short term results.Believe in “healthy relationships

throughout the supply chain.” -Back to success logicWal-Mart will cut long standing suppliers out

of deals for pennies on the dollar.

Innovation“ClearRx”- introduced to the market in

2005“flattened out the label and turned

everything upside-down for easier, more legible bottles”

Reduce and Reuse:PVC : “Polyvinyl chloride”

Certificate of Appreciation from Sec. of StateShopping carts, carpet, gift cards, bags,

electronics Experimenting with “gardens”

More KeysCompromising is the value addition to their

supply chain.“Target spends three-quarters of their

budget on advertising and logistical operations” –Corp. Website

Witty commercials and newspaper advertisements have suppliers at heart.Good business practices

Operations are tied together by: Inbound logistics, surveillance, front of store, back of store, and operations.

Where Target is NowMature CompanyCareful that “dry rot” does not set inA few programs to prevent this

circumstanceProductivity enhancementOrganizational effectiveness and trainingExecutive coachingTeambuilding Effective mentoring

Space Chart AnalysisFinancial strength

Target was ranked 31 out of 500 for largest U.S. Corporations in 2008

Revenue exceeding 65 billionCompetitive Advantage

Quality product and a reasonable price by world-class designers

Targets middle-classInnovation

Clear RxItso Furniture

Space Chart AnalysisIndustry Strength

Number 2 behind WalmartAverage salary of Customer is 60,000Targets middle class, 51% with college

degreesEnvironmental Stability

Active within communities supporting the arts

Active with recycling efforts and uses of alternative energy

A Few Issues…Constantly improve convenience

Instill use of SmartCartStrive for lower prices on their goods

DecreasePrice

Increase CustomerUtility

Goal

Use chart from the book,Blue Ocean Strategy

ConclusionGet the right people on the bus and the

wrong people off of the busRight people are the most important tool

for a successful companyTarget puts prominence on their slogans to

emphasize their goalsTrain employees to work towards the same

goals

ConclusionTarget aims for the middle classWalmart is ahead, but Target is keeping up

soundlyTarget is a sound company, but needs to

make sure they avoid “dry rot”Keep focusing on making shopping more

convenient and driving costs of their quality products down

ConclusionThe most important concept to remember

is that people are the most important part of the business