Target Corporation Analysis

Writing Mentor Meeting Held 2/12/15

Ryan Revia

Table of Contents

Balanced Scorecard Page 1

Market Commonality vs. Resource Similarity Page 4

SWOT Analysis Page 7

Uniqueness Drivers Page10

Conclusion Page12

References Page13

Balanced Scorecard Approach

Target’s Vision: "Our mission is to make Target the preferred shopping destination for

our guests by delivering outstanding value, continuous innovation, and an exceptional

guest experience by consistently fulfilling our Expect More. Pay Less. Brand promise."

“Our mission is to make Target the preferred shopping destination for our guests

by delivering outstanding value, continuous innovation, and an exceptional guest

experience by consistently fulfilling our Expect More. Pay Less. Brand promise.”

The four perspectives of the balanced scorecard show Target’s variety of strategic

initiatives and the actions taken to achieve them. Maintaining a large market share in the

retail industry for a number of years, Target looks to drive financial performance by

reaching $100 billion in sales and $8 per share profit by 2017. Financial statements show

that Target’s revenue has decreased 1% over the last year, while gaining 2.3% over the

last five years. In addition, earnings before interest and taxes (EBIT) have decreased

21.3% in the last year and 0.8% over the last five. Similarly, net earnings and diluted

earnings per share (diluted EPS) have decreased by 34.3% and 32.1% over the last year,

and losing 2.3% and 1.4% over the last five, respectively. While the financial indicators

are significantly low, Target looks to rebound with improved performance in Canada and

through investment in their current product lines and Omni-channel presence.

From the customer perspective, Target looks to increase market share through

development in current product lines. One of the 2015 initiatives is to increase their

sustainable seafood selection to 100%, of which 45% of the current inventory has

fulfilled. In 2016, Target looks to improve its owned-brand packaging. Of the 50 brands,

32 have undergone changes to reflect improvements in weight, such as the Archer Farms

nuts and trail mixes, and environmental impact. Target also looks to increase its organic

offering 25% by 2017 (currently up 13%). Target plans to make additional improvements

in the learning and growth perspective over the next year.

Target will reinforce their mantra of “A legacy of giving and service” through a

number of team and company goals. For example, Target planned to reach 700,000

employee volunteer hours by 2015. Target employees actually reached more than a

million hours over the last year, a statistic they now look to maintain. In addition, Target

plans to increase employee use of financial tools, like their 401K, by 30% in 2015.

Currently, only 18% of employees are enrolled. Target also looks to increase health

assessments of those offered in their plan to 80%, an increase from 45% today. Biometric

screening of employees on the company-sponsored health plan also looks to rise, at 60%

of the desired 80% in 2015. Other employee healthcare initiatives include screenings for

breast cancer, colon cancer, cervical cancer, diabetes (HbA1C), and educational support

or giving.

Efficiency is also a focus for improvement in the next year, with transportation

costs and environmental impact leading the way. In 2015 Target looks to improve

inbound transportation by 15% Cartons/Mile (C/M) and outbound transportation by 20%

C/M. Inbound transportation has improved by 16% C/M and outbound transportation has

improved by 22% C/M. Target also plans to achieve ENERGY STAR certifications for

75% of it’s U.S. buildings, of which 45% currently have. Target will also continue their

reduction of greenhouse gas emissions in two measures: per square foot and per million

dollars. Currently, emissions have been reduced by 7.1% per square foot of the desired

10% and 7.4% per million dollars of the 20% desired, respectively. Water use will also be

monitored, now with a 4.8% per square foot decrease of the desired 10%.

Market Commonality vs. Resource Similarity for Target Corporation

Market Commonality

HighLow

Low

High

Amazon.com Inc.

Kohl's Corporation

Wal-Mart Stores Inc.

Sears Holdings Corporation

Costco Wholesale

CorporationBig Lots Inc.

Fred's Inc.

The previous chart compares several firms in the discount retail industry and the

extent to which those firms share market commonality and resource similarity with

Target Corporation. Market commonality indicates a similar customer base between two

companies, while resource similarity indicates that the products, or range of products,

offered by two firms are alike. Seven other major discount retailers were used as a basis

for analysis of the Target Corporation’s external environment.

As Wal-Mart is Target’s largest retail competitor, it was a natural fit for the

market commonality and resource similarity analysis. Wal-Mart has the most

commonality with Target in terms of both resource and market similarity, thus it is the

most direct competitor of Target. In other words, the actions of Wal-Mart have the most

impact on Target’s customer base and ability to generate sufficient revenue. While they

are the most similar, Wal-Mart actually offers a larger range of products, has a greater

geographic dispersion, and does so through a broad low-cost strategy. Because of this,

Target has to avoid losing customers on the basis of price by continued differentiation of

products and services that generate value greater than the cost savings associated with

switching.

Both Sears Holding Corporation and Costco Wholesale Corporation have high

resource similarity to Target, however, Costco has less market commonality because it is

a wholesale distributor, whereas Sears and Target are not. Furthermore, Target shares

high market commonality with Amazon.com because of their immense popularity and

customer base. Amazon.com has a lower resource similarity to Target because of the

immense range of products of they offer, far exceeding that of Target. Kohl’s

Corporation is moderately similar in terms of market commonality; however, it lacks the

product range and overall scope needed to indicate resource similarity. Big Lots had the

lowest levels of market commonality and resource similarity for a number of reasons.

While both Target and Big Lots are discount retailers, Big Lots is generally perceived as

a low-cost provider. In other words, while Target’s customers may not mind paying a

premium for better service and cleaner stores, many customers of Big Lots shop on the

basis of price alone. In addition to the low market commonality, Target carries a broader

range of products and services like pharmacies, grocery sections, and electronics. By

understanding the market commonality and resource similarity between firms of the same

industry, one can indicate where true rivalry exists and thus, where external risk is

coming from.

SWOT Analysis of Target

Strengths

-Quality of service and customer’s in-store experience

-Cleanliness of the stores

-Loyalty programs like Cartwheel

-Target credit card, Target Visa credit card, and Target

REDcard

-Strong owned-brand presence

-Price match policy

-Product range

Weaknesses

-Less locations than Wal-Mart, their closest competitor

-Exists solely in the U.S.

-Higher perception of pricing than other discount retailers

-Reliance on the value of differentiating guest experience

-Expansion into Canada

Opportunities

-Continued enhancement of its grocery department,

especially in organic foods and sustainable seafood

-Further development of online retail capabilities

-Increased push of owned-brand products

-Lead the industry in conducting environmentally friendly

business practices

Threats

-Increasingly competitive retail segment

-Reliance on a recovering U.S. economy

-Increased development of multichannel retailing by

competitors

-Loss of consumer confidence in online retail activities

following the 2013 data breach

The SWOT analysis is used to evaluate a company’s resources, capabilities, and

competitiveness by separating the internal and external factors by whether or not they

could help or hurt the firm. The four distinct categories that result are the internal

strengths and weaknesses, and the external opportunities and threats. Internally, Target

Corporation maintains a very strong brand that has resulted in the strengthening of other

owned-brands and a loyal customer base. In addition, the overall guest experience,

cleanliness of the store, loyalty programs, and internal financing options (like the Target

credit card) are critical strengths that have helped differentiate Target as a company.

On the contrary, some of the weaknesses that will need to be monitored include

the lower geographic dispersion of stores as compared to Wal-Mart (their closest

competitor) and the lack of Target’s international presence. When Target announced in

January that it would be closing Canadian operations, it ended its journey into

international expansion. Some other relevant weaknesses were the perception of Target as

a more expensive store and their reliance on guest experience to be valuable enough to

offset the higher cost.

Target has a number of opportunities to grow the firm, as the development of the

grocery section mirrors a public shift toward healthier, and oftentimes organic, food

choices. By having the correct products in place to satisfy the changing market

conditions, Target can benefit from the larger profit margin of owned-brand products, in

addition to third-party suppliers. As the retail industry continues to move towards

multichannel and online dispersion, Target will have to continue to update its capabilities

beyond the current applications and loyalty programs so that they can merely maintain

market share and not be squeezed out by an internet giant like Amazon.com. Finally,

Target has the opportunity to lead the retail industry in a movement towards responsible,

eco-friendly business practices across all segments of the business.

From an external perspective, Target will be threatened by the increasingly

competitive discount retail industry, much of which is now moving towards multichannel

distribution because of the flexibility and lower costs associated with online customers.

Because of Target’s reported data breach in 2013, Target will have to work towards

repairing consumer confidence in Target’s online presence and assurance that they will

be able to protect customer’s financial information safe. The final external threat was

Target’s heavy reliance on a soft and unstable U.S. economy, which if consumer

preference changes, would remove Target’s customer base.

Analysis of Uniqueness Drivers for Target Corporation

Uniqueness Drivers

Product Features and Performance:Higher perceived qualityUnique and distinctive merchandise

Customer Service:Differentiated guest experienceFriendly and personalized serviceCleanliness/store appearance

Production and R&DUse of techniques that are less environmentally impactfulOwned-brand product and packaging developmentInvestment in multichannel retailing

Technology and InnovationCartwheelPartnership with Facebook and Pinterest

Input QuaityHigher perceived quality than competitors

Employee skill, training, experience:Friendly and helpful employees support a differentiated shopping experienceGuest experience

Sales & Marketing:bullseye logo, brand promiseHigher perceived quality as a discount retailer

Quality Control Processes:Waste, water, and greenhouse gas emission reduction initiativesEco-friendly manufacturing and packaging initiatives

Since Target follows a differentiation strategy, an analysis of the uniqueness

drivers was completed to show the actions that differentiate Target from that of the

competition. For example, by using quality control processes to ensure less waste and

minimum ecological impact during manufacturing, Target can set the example for the

discount retail industry and other firms as a whole. Minimizing waste will also result in

the cost savings generated from using the least amount of inputs, while maximizing the

quality of those inputs to ensure that the extra cost of Target’s products are accurately

adjusted for the additional perceived quality. Target also benefits heavily from their

unique brand image. While the bull’s-eye is a very noticeable symbol in the United

States, the perception that it and its products are of a greater level of quality is much more

valuable.

Target’s most important uniqueness driver is their customer service and overall

guest experience. By creating a clean, enjoyable, and personalized experience for each

shopper, Target creates more value to the customer than the money that might be saved at

another retailer. In order to sustain this advantage, Target will have to continue to invest

in their employees and employee development programs.

Conclusion

After analyzing Target Corporation through the balanced scorecard, market

commonality and resource similarity comparison, SWOT, and a review of the company’s

uniqueness drivers, it is apparent that the differentiation strategy employed by Target has

contributed heavily to the company’s placement as one of the discount retail market

leaders. Target has effectively differentiated itself through investment in guest experience

and service, meaning customers value their time in Target more than any other discount

retailer. Because of that, people are willing to, all other things being equal; pay more for

an item because of the subsequent Target experience than they would for the same item at

a different store.

By continuing to develop multichannel distribution techniques and Target’s

online presence, the company can continue to grow its revenue base through browser or

application based sales. In addition, the move towards online sales can potentially help

Target attain some of the market share that online marketplaces like Amazon.com

currently control.

This will become increasingly important as Target looks to recover from their

failed expansion into Canada, leaving a loss of about $5.4 billion after closing each of the

124 stores opened just two years ago. With consumer trends long indicating movement

towards Internet and application-based shopping, Target will either move with the trend

and reap the benefits of online shopping, or they will suffer in a digital age where some

people now solely shop online.

References

Leinbach-Reyhle, Nicole. (2014, August 8). How Target stands out among its discountstore competitors. Forbes Magazine. Retrieved fromhttp://www.forbes.com/sites/nicoleleinbachreyhle/2014/08/28/target-shopping/

Wahba, Phil. (2015, January 15). Why Target failed in Canada. Fortune Magazine.Retrieved from http://fortune.com/2015/01/15/target-canada-fail/

Target Corporation. (2014, June). Target 2013 Corporate Responsibility Report.Retrieved from https://corporate.target.com/_media/TargetCorp/csr/pdf/2013-corporate-responsibility-report.pdf

Target Corporation. (2014, March 14). Target 2013 Annual Report. Retrieved fromhttps://corporate.target.com/annual-reports/pdf-viewer-2013?cover=6725&parts=6724-6726-6727-6730-6728

Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A.J. (2014). Craftingand Executing Strategy: The Quest for Competitive Advantage (19th ed.).McGraw Hill Education.