Shawn Buck

1
Company Situation Analysis for Target

• Team 2
• Shawn Buck
• Ashley Burnett
• Whitney Horton
• Kelly Riester
• Jennifer Shotts
• Sam Snelling
• Mickea Smith

2
Target

• Founded 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.

3
Core Competency

• Focus on design.
• Began with the store layout.
• In the 90s 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

4
Competitive Position

• Target 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.

5
Important financial ratios- Profitability
These are the profits you make after interest and
taxes for every dollar.
6
Important financial ratios- Profitability
This is the rate of return that the company is
earning on the companys investment
7
Important financial ratios-Profitability
This is the rate of return that the company is
offering its shareholders.
8
Important financial ratios-Liquidity
This demonstrates liquidity. For ever dollar of
short term debt that they have, they have the
number above in current assets to pay
9
Important financial ratios-Liquidity
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
10
Important financial ratios-leverage
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 firms
capital structure, the more interest payable
therefore there is more interest available to be
added into after tax income.
11
Kohls financial ratios
12
Worksheet 9.1
Target                  
  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                  
                   
13
PIMS

• According 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
  ROI
• Product quality is key to market leadership
• ROI is positively correlated with market growth
• Vertical integration can help in product life
  cycle
• High investment intensity leads to less ROI
• Capacity 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.

14
Key People

• Mr. Douglas A. Scavanner- Target
• Mr. Thomas M. Schoewe- Wal-mart
• Mr. Michael D. Collins- Kmart
• Mr. Wesley S. McDonald- Kohls

15
Target

• Threat of entry
• Large discounters have driven down prices with
  imports from other countries and slower holiday
  sales.
• Most independent retailers dont 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.

16
Powerful Suppliers Buyers

• Suppliers
• 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.

17
Powerful Suppliers Buyers

• Buyers
• 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.

18
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.

19
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 womens, mens and childrens
  clothing.
• Target maintains a large product inventory so
  they are able to offer high volume discounts.

20
Products, Operations Technology

• Operations
• 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.

21
Products, Operations Technology

• Technology
• 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.

22
Stages in Product Distribution

• Target
• 26 distribution centers in 21 states
• Giving the ability to fulfill the needs of their
  stores within a 24 hour time frame
• Target also competes on a cost leadership
  strategy but focus more on quality. Expect more.
  Pay less
• Private labels such as Massimo Converse One
  Star
• Target currently operates 1,685 stores in all but
  two states in the U.S. (Vermont Hawaii)

23
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.

24
Key People Then and Now

• Robert Ulrich
• CEO from 1987-2008

• Gregg Steinhafel
• CEO from 2008-present

25
Gregg Steinhafel Level 5 Leader

• Steinhafel and Ulrich have been working together
  at Target since 1984
• Resolve to do what must be done
• Steinhafel 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

26
Design and Emphasis

• Design Targets 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.

27
Training

• Target 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.

28
Retention Strategies

• Health Benefits
• Full benefits package
• Dental Benefits
• Vision Benefits
• Use of Target Pharmacy 10 discount
• Team Member LifeResources counseling program
• Private counseling, support, and information
• Child care arrangements
• Elderly care arrangements
• Help developing a healthy dinner menu

29

• Financial Support
• Aid in saving for retirement through TGT 410(k)
  Plan
• For every dollar an employee deposits, up to five
  percent of their pay, Target matches it
  dollar-for-dollar
• Daycare Flexible Spending Account (FSA)
• Save before-tax dollars from each paycheck that
  will be used for qualifying daycare and eldercare
  expenses
• Insurance
• Company-paid life insurance
• Disability coverage (short-term)
• Choice auto and home insurance
• Offer group rates from various different
  insurance companies

30

• Benefits
• Team member discount
• 10 percent
• Qualified family members can use the discount as
  well
• Tuition reimbursement
• Up to 3,000 per year, per child
• Education loan aids
• Offered through Wells Fargo Student Loan program
• Qualified employees may borrow up to 25,000 per
  year for expenses such as room and board, books,
  etc.
• Home loans
• Home Buyers Assistance program
• Adoption 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

31

• 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 centers
• Target Credit Union
• Banking
• Savings accounts and loan options
• Target Work Perks - Miscellaneous Discounts
• Fitness centers
• Cell phone plans
• Computers
• Clothing
• Flowers
• Etc.

32
Company Culture

• In Target stores, guests will always find a
  clean, organized, welcoming atmosphere and smart,
  stylish merchandise.
• All Target employees are empowered
• Employees 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.

33
Marketing

• Targets 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.
• Targets brand value was found to be 17.1 billion

34
Advertising

• In 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?vKdTwVCNKxV8

35
Store Design

• The store is designed to feel more like a
  boutique than a warehouse style store.
• Store is filled with contemporary signage,
  backdrops and liners
• These are mostly printed on inexpensive paper or
  foam boards
• Tar-zhey the psuedo-French pronunciation coined
  to express the designer feel of Target.

36
Store Design

• Target 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.

37
Targets target market

• Median customer is around 41 years old
• Household income of roughly 63,000
• 75 of the customers are made up of woman
• More than 45 of the customers have at least 1
  child
• 80 of Targets customers have attended College
  with around 48 having completed college

38
Sales Forces

• Target 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

39
Sales Forces

• The down turn in the Housing market has affected
  Targets 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.

40
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 SKUs, 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 brand
• Even there gift cards are biodegradable!!
• Vision strengthen families and communities
  wherever we do business.

41
It All Starts With Diversity

• Believe this motto
• 57 of the corporate positions are held by women
• 10 higher than the national average
• Have a number of minority scholarship offered
• Hispanic Sch. Fund, Unit. Negro Fund, Asian Am.
  Fund
• Their corporate partners are from a wide range of
  backgrounds to better suit the customers needs
• Includes employees, marketing, and suppliers
• Work with independent suppliers, some of which
  are women (Wal-Mart cant say that)
• Support free days for those less fortunate
• Over 1,500 events- baseball, museums, carnivals,
  etc.

42
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 logic
• Wal-Mart will cut long standing suppliers out of
  deals for pennies on the dollar.

43
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 State
• Shopping carts, carpet, gift cards, bags,
  electronics
• Experimenting with gardens

44
More Keys

• Compromising 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.

45
Where Target is Now

• Mature Company
• Careful that dry rot does not set in
• A few programs to prevent this circumstance
• Productivity enhancement
• Organizational effectiveness and training
• Executive coaching
• Teambuilding
• Effective mentoring

46
Space Chart Analysis

• Financial strength
• Target was ranked 31 out of 500 for largest U.S.
  Corporations in 2008
• Revenue exceeding 65 billion
• Competitive Advantage
• Quality product and a reasonable price by
  world-class designers
• Targets middle-class
• Innovation
• Clear Rx
• Itso Furniture

47
Space Chart Analysis

• Industry Strength
• Number 2 behind Walmart
• Average salary of Customer is 60,000
• Targets middle class, 51 with college degrees
• Environmental Stability
• Active within communities supporting the arts
• Active with recycling efforts and uses of
  alternative energy

48
A Few Issues

• Constantly improve convenience
• Instill use of SmartCart
• Strive for lower prices on their goods

Decrease Price
Use chart from the book, Blue Ocean Strategy
Goal
Increase Customer Utility
49
Conclusion

• Get the right people on the bus and the wrong
  people off of the bus
• Right people are the most important tool for a
  successful company
• Target puts prominence on their slogans to
  emphasize their goals
• Train employees to work towards the same goals

50
Conclusion

• Target aims for the middle class
• Walmart is ahead, but Target is keeping up
  soundly
• Target 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

51
Conclusion

• The most important concept to remember is that
  people are the most important part of the business