Target Team Case Proposal
MGMT 4842 Section 010
Taylor Young, Blake Teasley, Danny Seavey
April 15, 2013
Introduction
Target Corporation was originally founded in 1901 as Dayton Dry Goods Company and
is currently the second largest general merchandise retailer in the world today. They are a
Minneapolis based corporation that operates over 1,600 brick and mortar store locations across
49 different states. The classic bull’s-eye logo that emblemizes target today was created in 1962;
months later followed the first grand opening of a Target retail store in Roseville, Minnesota.
The idea behind the bull’s-eye logo was “As a marksman's goal is to hit the center bulls-eye, the
new store would do much the same in terms of retail goods, services, commitment to the
community, price, value and overall experience" (Target). Today’s mission statement parallels
with the same beliefs created over five decades ago as is states “Our mission is to make Target
your preferred shopping destination in all channels by delivering outstanding value, continuous
innovation and exceptional guest experiences by consistently fulfilling our Expect More. Pay
Less.® brand promise”. As a company they make their all people their number one priority as
they value great customer service, getting more for your money, product quality, providing a fun
and rewarding place to shop and work, celebrating diversity and inclusion, and giving back to the
community. In the most recent three years the company has been heavily focused on expanding
into Canada, growing their food distribution and supply, and continuing to be involved within the
community through service and charitable donations.
Target works to attract a range of customer segments which include women, kids, teens,
young singles and families. Target’s market includes guests who “are young, well-educated,
moderate-to-better market families who live active lifestyles. The median age of our guests is
41, the youngest of major discount retailers. They have a median annual income of $63,000. 56
percent have completed college and 44 percent have children at home” (Target). In the recent
years the company has seen a decline in due to factors such as e-commerce companies, other
mega retailers, and showrooming tactics used by customers. In the beginning of 2013 the
company took the largest stab against showrooming and implemented a price match guarantee
that will match prices from the company’s largest competitors Wal-Mart.com, Amazon.com,
BestBuy.com, and others. Online shopping has taken a large turn largely in thanks to mobile
phones that allowing customers to shop anywhere at any time. E-commerce is currently
expanding at an unbelievably rapid rate impacting brick and mortar retailers greatly. Our team
constructed an implementation plan with hopes to increase Target’s e-commerce market share
their largest competitors within the industry. This plan includes global expansion, membership
benefits such as free shipping on all orders, and a continued promise to fulfill the price-match
guarantee.
Target Market
The company’s largest competitive advantage lies in their differentiation found within the
customer base. As listed in the introduction, Target’s target market is constructed of a young
market with higher than average annual income. Target caters to a different demographic of
customer than that of their major competitors’. Wal-mart, Target’s largest direct competior,
serves a lower class customer with an average household income of $50,000 which has forced to
the company to focus on low prices with difficuluty in promoting higher quality and higher price
tagged products. Target maintains a more stable customer base with less risk as living costs are
rising within the United States. With rising economic conditions Target’s customers have
increased spending, whereas lower income bracket customers such as that of Wal-mart are still
holding tight and limiting their expenditures.
SWOT Analysis
Strengths
 Strong Brand Recognition (97% of
Americans Recognize the Target
Bull’s-eyes)
 Customer Loyalty
 Size and Cost Advantages
 Store Atmosphere
 Customer Relations
 Face to Face Customer Service
 Efficient Operations
 Wide Product Selection
 Consistency with Layout and Product
Selection
 Revenue has Grown Every Fiscal Year
 Top 50 Company for Diversity
 Top 20 Military Friendly Companies
 In Ever State but Vermont
 Union Free
 Market Leader in Gift Cards
 Operates 38 Distribution Centers
 Target RedCard
 One of the Largest Company
Philanthropist
Opportunities
 International Expansion
 Exclusive Labels
 Growth Through Internet Sales
(Target.com)
 Target’s Purchase of Canada’s Zeller
Chain Will Provide 100 to 150 Stores
in Canada
 Recovery of Global Economy will
Allow Consumers to Turn to Better
Quality
 Target Club Card
 Price Match Guarantee for Certain
Product Lines
 Free Shipping From Target.com
Weaknesses
 High Staff Turnover
 Saturated Domestic Market
 Geographic Concentration
 Over emphasis on Quality puts them at
a Price Disadvantage to Wal-Mart
 Unattractive Wages, Benefits, and
Certifications for Employees
 Intense Involvement from Pending
Lawsuits
 Dependence on Vendors
 Low International Expansions
Compared to Competitors
 Does Not Endorse Services and Items
Through It’s Public Address System
 Many Thefts, Frauds, and Other
Criminal Activity Have Occurred on
Property.
 Environmentally Questionable
Behavior
 Behind on Internet Sales
(Amazon.com, Wal-Mart.com)
Threats
 Competition from Industry Giants
(Wal-Mart, Amazon)
 Poor Economic Conditions
 Lack of Operations in Foreign Markets
 Increased Minimum Wages (Domestic
and Abroad)
 Volatile Commodity Cost
 Interest Rates Increasing with Increase
In Government Taxes
 Inflation Forces Customers to Lower
Price Opposed to Quality
SWOT Analysis Expanded
Targets product focuses on a higher quality, and more upscale image compared to its
main brick and mortar competitors, Wal-Mart and Target. They have pushed their brand heavily,
becoming one of the most recognizable brands in the country, even edging out athletic wear
giant, Nike. Domestically, they have expanded heavily into ever state, with the exception of
Vermont, with over 1,700 stores. They offer a wide variety of products from everything to
clothing, electronics, sporting goods, furnishing and décor, as well as a large grocery presence.
Due to their huge selection, and ‘upscale’ product quality, they have become the number one
company in gift card sales. Furthermore, Target has become one of the most philanthropic
companies in the world. Since 1946, it has issued 5% of its profits to communities through
grants, and programs such as Take Charge of Education. Thanks to increasing revenue every
single fiscal year, this amounts to about 3 million dollars per week, not to mention, millions of
hours of community service devoted by its employees.
Despite all the positives, Target has still been at the center of controversy. It has lately
been burdened by lawsuits over environmental damages, and has specifically settled with the
state of California over hazardous material violations resulting in a 22.5 million dollar
settlement. Perhaps, their biggest strength could also be seen as their biggest weakness. As they
differentiate from Wal-Mart and Kmart as higher quality, they are seen as more expensive, and
in most cases, this is true. Due to poor economic conditions in the United States, this has turned
many customers away from the higher quality, seeking out the lowest possible prices instead.
Their inability to push beyond the North American boarders is also hurting the company. As the
domestic market continues to get saturated, their competition only increases driving down profit
margins and opportunity. Like must low cost providers, Target suffers from high turnover rates,
resulting in a customer service that has been criticized as being poorly trained and
unprofessional. This problem largely stems from low wages, lack of benefits, certifications, and
the fact that employees are unable to unionize. Most Target employees make the state level
minimum wage, and even managers are poorly paid compared to many competitors.
As the domestic, and global economy pull out of this slum, we should see the emergence
of many opportunities for Target. With the recent purchase of Canadian company Zeller’s, we
will finally see a strong presence outside of the United States. Target has already announced an
expansion of 100 to 150 stores north of the boarder. Although this is a step in the right direction,
Target needs to take an aggressive approach and reach as many new markets as possible. Their
high quality, low cost approach is desirable everywhere. Their excellent marketing and brand
are strong and easily remembered. With Wal-Mart already in countries such as Mexico, Target
needs to follow suit. Expansion in Europe, South America, and Asia also need to be looked into,
as these are huge markets looking for what Target has to offer. Opportunities aren’t only
international however. Target has the chance to issue a club card, giving discounts, and
allocating points to their best customers. One of these perks should be a price match to
homogenous products that are no different from competitors Wal-Mart and Kmart. Furthermore,
a push to expand rapidly growing online sales is a must. To do this, an aggressive advertising
campaign, as well as free shipping needs to be implemented. This allows the company to better
compete with online retailers such as Amazon.
Despite its favorable position as the second largest general retailer and fortune 100
company, there are still many threats Target faces. Competition from Wal-Mart and Kmart
continue to grow as they fight for more domestic market share and continue to encroach and
overlap each other’s territories. With economic uncertainty, the economy could take a turn for
the worst, driving more customers to Wal-Marts, lowest cost products. With their lack of
international coverage, they could suffer more than their industry competitors, since their entire
operation is basically dependent on the United States. Because of this uncertainty, volatile
commodity prices could drive Target’s prices higher, causing consumers to look elsewhere.
Inflation is another problem that also effects Targets prices, if they were to diversity their
footprint, that could help alleviate this potential problem. Domestically speaking, two other huge
threats are increased taxes, and increased minimum wages. Lately, corporations in the United
States have taken an imagine beating as people worry about the sustainability of our current
business model. Companies continue to get huge, the upper-class continues to increase wealth,
the middle class is suffering, and the lower class seems to be getting left behind. Because of this,
increase in corporate taxes seems to be a major threat to big business. How exactly this will
affect Targets business strategy is unforeseen, but it could cost major issues to companies that
operate with razor thin profit margins. Secondly, the worried about increased minimum wage.
Both Target and Wal-Mart have thrived on paying their employees minimum wage. An increase,
even in the slightest, could cost the company millions of dollars, further damaging their low cost
strategy. This threat however doesn’t only loom domestically but also abroad. Target depends
on cheap, primarily Asian, labor. Recently, there has been an outcry by people domestically and
abroad about the poor conditions and long hours these workers face. An increase in their wages
and conditions will either cause Target to look elsewhere for cheap labor, or cause them to
dramatically increase prices.
Objectives


Increase web presences
Offer price match for homogenous everyday products




Strong marketing campaign pushing highest quality for lowest price
Offer Target Club Card
o Special deals
o Point Priority system for loyal customers
 Increased special deals
 Free priority shipping
 More points: higher % off total purchases
 Lenient returns
 Better warranties
Increase international presence
o Phase 1: Mexico, Canada
o Phase 2: Europe, Asia, South America
Free ground shipping from Target.com
Industry Analysis
To date, Target.com is the fourth most-visited retail website in the United States. A big
part as to why customers use the website so often is because it encourages them to create product
reviews and interact with other guest by adding photos and videos. The website also has online
exclusives. In 2002, the retail giant Target Corporation became the second largest in the industry
of discount, variety stores just behind Wal-Mart Stores Inc. Target Corporation is focused on
developing and delivering products that solve everyday products for its customers and to do this
they make their products simple and convenient while providing great customer service. Target
has a large market share of the general merchandise market with approximately 1,750 stores
located in 49 states throughout the United States. Over the past five years Target has expanded
its grocery sections in each retail store nationwide. Target Corporation has approximately
355,000 employees and is looking to expand into Canada this year by adding more than 200
stores. Target is one of only 13 companies to receive a top rating of “excellent” with an overall
score of 86, which is up from 83 last year. Although cost of revenue has increased over the last
year from $47,860,000 to $50,568,000, gross profit has increased from $22,005,000 to
$22,733,000. Total revenue as of February 2013 was $73,301,000, which is up from last year at
$69,865,000. Target Corporation faces stout competition from department stores such as Sears
Holding Company, as well as wholesalers like Wal-Mart and Costco. In the department store
market, they hold a 33.4% market share, and the Super Target represents 3.8% of the warehouse
clubs & super centers in the United States. Earnings per share are at $4.52. The price to earnings
ratio is at 185.18, which is second only to
Costco Wholesale Corporation, which is at 287.47. The market capitalization for Target
is 536.84 billion, industry leading Wal-Mart Inc. is the industry leader at 692.91 billion. Target is
committed to giving customers the best value on everything with their Low Price Promise that
includes a Price Match Guarantee. Target presents a fun and energetic environment with their
great product brand designs and easy-to-navigate store layouts and appealing exteriors. An area
for concern for Target Corporation is the earnings per share growth at 1.30%, while the leader
stands at 84.50%. Average net profits margin for the industry is at 3.0% while Target is above
that average at 4.23%.
Implementation
Our plan to better Target’s positioning in the industry focuses on 3 main areas: increased
web presence, Target Club Card, and international expansion. The first order of business is to
better position Target.com, as an industry leader. To do this, we intend to implement a price
match guarantee on products that are the same as those sold by Wal-Mart, Kmart, and Amazon.
The reason we do not wish to do this for all products is because we want to ensure that we stick
by our company goal of better quality and not just simply become Wal-Mart. To help with
online presence, as well as in store sales, we want to offer a Target Club Card. This card will be
free of charge and available to all customers. It will be unique to each customer, allowing them
to get special deals and build a point system that will offer a myriad of benefits to our loyal
customers. These benefits will be an increase on deals, free priority shipping for online or in
store sales, percentages of total sales when bench marks are reached, more lenient return
policies, and access to better warranties to ensure we keep our best customers. With our further
push for a greater online presence, we will also aggressively market Target.com, as we have
done so well without brand. Furthermore, offering free ground shipping, will allow us to
compete with companies that do the same, such as Amazon.com and Bestbuy.com. The next
step is immediate expansion. Target is currently doing this with its recent purchase of Zeller’s in
Canada, but a more aggressive approach needs to be taken. Wal-Mart receives over 27 percent
of its sales from stores in Mexico, Canada, Japan, China, United Kingdom, and Central and
South America. Target can easily achieve this same success, but we wish to do it into two
phases. Phase one is immediate entry into Mexico and Canada. Both are large markets that are
very similar to the United States. Transition shouldn’t be that hard, and can easily be managed
by Target’s corporate headquarters in the United States. Phase two consist of expansion into the
huge markets in Asia, Europe, and South America. We believe getting into large and emerging
markets is key to the international success of Target. The markets we are specifically looking at
consist of China, Japan, India, Indonesia, Brazil, Argentina, United Kingdom, France, and
Germany. All of these markets have either significant wealth or population. Getting Target into
these markets will allow it to better compete with online retailers as people will be able to
physically walk into the store and immediately leave with their products.
New SWOT Analysis
Strengths
 Larger web presence
 Multinational corporation covering 4
continents
 Larger percent of sales from Ecommerce
 Internationally recognized brand
 Increased customer loyalty
 Larger customer base
 Increased Revenue
 Lower overseas wages for most new
markets
Opportunities
 Continual expansion in the global
market
 Increased membership benefits
 Expansion of exclusive brands
 Increased in sales from recovering
economy
Weakness
 Lower profit margin
 Increased expensive
 Dealing with different cultures and
international laws
Threats
 New global competitors
 Government regulations outside of the
United States
 Currency exchange rates
References
About Target: Our Passion, Our Commitments | Target Corporate. (n.d.). Retrieved from
https://corporate.target.com/about
Investor Corporate Overview, Financial Summary | Target Corporation. (n.d.). Retrieved from
http://investors.target.com/phoenix.zhtml?c=65828&p=irol-homeprofile
Miscellaneous General Merchandise Stores market report | HighBeam Business: Arrive
Prepared. (n.d.). Retrieved from http://business.highbeam.com/industryreports/retail/miscellaneous-general-merchandise-stores
Stock:Target (TGT). (n.d.). Retrieved from http://www.wikinvest.com/stock/Target_(TGT)
Stock:Wal-Mart (WMT). (n.d.). Retrieved from http://www.wikinvest.com/stock/WalMart_(WMT)
Target Corp. Pays California $22.5M to Settle Environmental Suit - The Bay Citizen. (n.d.).
Retrieved from https://www.baycitizen.org/news/environment/target-corp-payscalifornia-225m-settle/
Target Corporation SWOT Analysis | Marketing Mixx. (n.d.). Retrieved from
http://marketingmixx.com/marketing-basics/swot-analysis-marketing-basics/177target-corporation-swot-analysis.html
Target Now Price Matching Amazon, Walmart.com, BestBuy.com & Toysrus.com Year-Round |
TechCrunch. (n.d.). Retrieved from http://techcrunch.com/2013/01/08/target-nowprice-matching-amazon-walmart-com-bestbuy-com-toyrus-com-year-round
TGT: Summary for Target Corporation Common Stock- Yahoo! Finance. (n.d.). Retrieved from
http://finance.yahoo.com/q?s=TGT
The end of the Zellers era - Business - The Vanguard. (n.d.). Retrieved from
http://www.thevanguard.ca/Business/2013-03-26/article-3207525/The-end-of-theZellers-era/1