target
TRANSCRIPT
The History of Target
Target is one of the leading retail stores in the world that providing a vast variety of products
to consumers. From fashionable clothing to school supplies, cleaning products to houseware, Target
has it all. A few examples of what Target provides to consumers consist of: men, women, and
children appeal (both casual and professional), toys, small appliances, casual and athletic shoes,
health and beauty aids, school and office supplies, jewelry and accessories. They also provide to
consumers, food and beverages, stationery, party supplies, home decor and gifts, electronics,
automotive accessories, outdoor sports and fitness accessories, music, movies, books and much
more.
Although Target can satisfy the average consumer’s need, they did become the successful
and large corporation that they are today overnight. Target’s history began in 1902 when George
Dayton opened the first small retail business called Goodfellow in downtown Minneapolis. In 1903,
Dayton changed the company to Dayton Dry Goods Company. However, in 1910 The Dayton Dry
Food company received another name change to The Dayton Corporation. It wasn’t until sixty years
later in 1962 that George Dayton and his company entered the discount merchandising business
with the opening of its first Target store in Roseville Minnesota. Shortly after the successful opening
of Target, Dayton Corporation had its first public offering of common stock in 1967. Then in 1969,
Dayton Corporation merged with J.L Hudson Company (at the time, the world’s largest shopping
center in Detroit), creating Dayton Hudson Corporation (DHC). After the merger of J.L Hudson and
Dayton Corporation (DHC), the retail store Mervyn’s opened creating DHC to the 7th largest U.S.
retailer.
Evidence that DHC was going to stop growing was never an issue; it continued to grow
quickly over the next 30 years. It was then in 1979, that Dayton’s Target store become the
corporation’s top revenue producers. However, it was not until 2000 that Dayton Hudson
Corporation celebrated its change of name to Target Corporation.
Throughout the years, Target grew substantially making them stand out among the rest. In
the 70’s Target paved new ground by implementing electronic cash registers storewide to monitor
inventory and speed up guest services. Target also began hosting an annual shopping event for
seniors and people of disabilities and a toy safety campaign. In the 80’s Target began to open stores
at a rapid pace extending beyond the East Coast. Following the 80’s was the new and innovative
90’s. Target launched its first Target Greatland® store, Club Wedd (a bridal gift registry) and Lullaby
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Club (baby registry) when nationwide. The late 90’s brought about Target opening their first
SuperTarget store, which combined groceries and special services with a Target Greatland store
atmosphere. Target later introduced their credit card and the Target Guest Card service, in which
people would an alternative mean of paying for Target’s products. However, the success of Target’s
history continues. In 2000, the company had its name changed to Target Corporation as a result of
the fantastic performance over the years, thus separating themselves from the Dayton Hudson
Corporation.
Despite the many changes throughout the Dayton Corporation, Target proved to be a worthy
investment. Unlike many of the other mass merchandisers of this time, Target had department store
roots. George Dayton realized the high demand for a store that sold less expensive goods in a quick,
convenient environment. Target was the first retail store to offer well-known national brand
products at a discounted price.
It is clear as to the type of business George Dayton had in mine back in 1902. The clarity of
his motivation and innovation is clear from researching the history of how Target began. It is
interesting to see how his visions and aspirations have continued to this day. This is illustrated by
Target’s mission statement, which states: “Our mission is to be the retailer of choice in the discount,
middle market and department store retail segments. By focusing on trend leadership, excellent
guest service, exciting team member opportunities, and community outreach, we create long-term
shareholder value.” 1
The Current Status of Target
Only in second place behind Wal-Mart, Target is one of the leaders in the industry as far as sales
and revenue. In 2003 Target Corporation had revenues of approximately $48 billion compared to
Industry wide revenues of approximately $279 billion. According to these statistics, this shows that
Target’s market share for 2003 was just above 17%. Target Corporation also owned Mervyn’s and
Marshall Field’s until the summer of 2004. However, 84% of revenues in 2003 were derived from the
Target stores, with Mervyn’s making up 9% with approximately $3.5 billion and Marshall Field’s
making up 6% with $2.5 billion in revenues. Now, as a result of Target selling off the Mervyn’s and
Marshall Field’s divisions costs have been cut extensively. Since these divisions combined only made
1 Email response from Investor Relations
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up 16% of Target’s total revenues, Target looks for revenues to increase significantly in 2004 in their
strong areas of retail.
It comes to no surprise that whenever and where ever people travel, a Target store is not had to
find. Target operates in 47 states with 1,313 stores and 136 Super Target stores. The company is
headquartered in Minneapolis, Minnesota and is looking to keep expanding across the United
States. The majority of Target’s market share are stores located in California with 184 stores, Texas
with 107, Florida with 78, Minnesota with 65, and 62 in Illinois.
Target is also supported by a number of loyal, content employees. Currently, Target has
approximately 328,000 employees nation-wide in 2003. However, these numbers have fluctuated a
bit in 2004 as a result of Target selling off its Mervyn’s and Marshall Field’s divisions and with the
increase of popularity and demand for Target stores nationwide.
The success of Target would not be possible without the relationship it has with their suppliers.
Without their suppliers, there would be no Target around to sell quality goods at a descent price for
everyone to enjoy. Suppliers of Target Corporation include Amy Coe, Isaac Mizrahi, Michael Graves,
Liz Lange, Mossimo, Sonia Kashuk, and Archer Farms just name a few. In order to be a supplier for
Target Corporation, there are certain requirements that must be met. For example, The National or
Regional Minority Supplier Development Council, the Women’s Business Enterprise National
Council, or The U.S. Small Business Administration is certified as one of the major requirement.
Another major requirement to qualify as a supplier of Target Corporation is being part of their
Electronic Data Interchange or EDI. This is how Target communicates with its suppliers and
establishes an efficient and responsive supply chain. Some other requirements for suppliers include
financial stability, the ability to serve multiple companies, a history of successful projects, an
understanding of Target’s business practices, the ability to provide high quality goods that are cost
competitive, compliance with OSHA, and last but not least ethical business conduct.
Even though Target must have an important relationship with their suppliers, there is another
important part of the overall picture of the Target Corporation, the customers. Customers of Target
Corporation cover a wide array of markets and, as with many department stores, there is not a
target or niche market predominantly. Although Target is a retailer that sales to anybody at any age,
the median age of Target’s customers is 45 years old with an average income of approximately
$57,000 annually. Another interesting statistic about Target’s customers is that 90% of the
customers are female, and of that 90%, 39% of those females have children. College students are
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also an important consumer to the Target population holding 44% of the total Target consumer
population.
Target Corporation like any other major retail store has its competitors. Among Target’s main
competitors they consist of Wal-Mart, K-Mart, JC Penny, Costco, Walgreen’s, Best Buy, and
Gottschalks. Other companies that are considered to be competitors include Urban Outfitters, E-Bay,
Williams-Sonoma, May, and Saks.
With this what is known about Target thus far, it is then understandable how important
information technology plays in the overall role of Target. Target Corporation’s use of information
technology and information system is very extensive and serves a number of purposes for the
company. IT and IS play a big part in Target’s supply chain, particularly with the company’s suppliers
and customers. For its suppliers, Target has a designated website that uses Electronic Data
Interchange to facilitate information and communication. This Information system is Target’s
Partner Online system. This system does require suppliers to have EDI in order to be part of Target’s
supply chain. By using EDI payments and other transactions are recorded and taken care of quickly
and reliably. For customers, Target uses a number of information technologies to better serve and
learns about their customers. One information technology that has helped to enhance the
customer’s shopping experience is the company’s real-time customer relationship management
system (CRM) implemented in 2001. Target was one of the first retailers to implement such a
system and has since helped to increase customer satisfaction. Target’s CRM allows the company to
analyze data via the company call center, credit card system, and customer service department. The
system enables Target to determine loyal customers and what products should be promoted to
those customers. In turn, this system also helps Target not only to promote products to customers
who already have loyalty to those products, but not promote products to customers who have no
interest in a particular product. Target can also determine which complimentary products could be
promoted to customers by using their CRM system. By this being a real-time system Target gets
immediate feedback on products and customer satisfaction with those products.
Within the same year (2001) this system was implemented, Target had a database of over 50
million customer profiles. Some of the information that contributes to Target’s CRM system is
Target’s Visa Smart Card. The card was offered in 2001 also and is not just limited to Target and
Target owned stores, the card is accepted everywhere Visa is accepted. The card earned the name
Smart Card because each card has a microchip with 64k of memory to track the customer’s
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shopping. The incentive for customers is the 10% savings earned at any Target or Target owned
store with each purchase by using the Visa Smart Card. By offering incentives with the card, Target
felt as though their customers had more loyalty to the store by earning incentives and using the card
at Target’s stores. A free card reader is also given to each cardholder that can be used to make
secure purchases online and downloading coupons from the Internet.
Target’s use of implementing information technology and information systems did not end
there. They also established Target.com, which is regarded as one the top five online retail websites
on the Internet. While Wal-Mart and K-Mart were in a rush to roll-out their websites in the late
1990’s, sacrificing functionality for speed, Target took its time to develop a website that would
operate appropriately and securely. Target used the website to focus on the customer and
promoting the company’s brands as well as a sales engine. To strength their competitive edge
against their competitors, Target decided to partner with Amazon.com and let Amazon power
Target’s website as a result of Amazon’s expertise with e-commerce. Now the website, like
Amazon’s, uses a 1-Click checkout system using a cyber shopping cart for customers to add to the
products to the shopping cart and checkout and pay for merchandise when ready. With the traffic
that Target.com receives security is a big concern for Target and its customers. So Target
implemented a Secure Socket Layering (SSL) system to protect customers’ purchases. SSL encrypts
the data exchanged between the Web browser of the customer and Target’s server. The system has
proved to work very well with Target.com to ensure the safety of the information about Target’s
customers.
Portor’s Competitive Forces Model applied to Target
In his book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors”,
Michael Porter identifies five competitive forces that shape every single industry and market. All of
the forces defined by Porter’s Five Competitive Forces Model are equally important to the sustained
success of any business, but for Target Corporation the areas of Competitive Rivalry, Threat of New
Entrants, and Threat of Substitutes are the most significant forces affecting the business. The
Bargaining Power of Suppliers and Bargaining Power of Buyers are also significant forces, however,
not as prominent. The use of Porter’s model is beneficial to Target Corporation because it can
provide analysis of everything from the intensity of competition to the profitability and
attractiveness of an industry.
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As the second largest establishment in the discount retailer market, the threat of new
entrants is a concern for Target because it is more susceptible to losing market share than industry
goliath Wal-Mart (Bhatnagar, 2004). As a result of their secondary position, Target would be first to
confront any type of competition from new and upcoming discount retail stores. A store posing
such a threat is Kohl’s. Kohl’s Corporation is a similar type of moderately priced department-store
chain. Kohl’s stores performance surprised Wall Street in August 2002 with a 4 percent increase in
same-store sales (http://money.cnn.com). Kohl’s stores have recently begun showing up in
northern California, which has been a region previously only established by Target and Wal-Mart
stores.
The Power of Suppliers is another one of the forces in Porter’s model that affects the Target
Corporation. Traditionally, the power of suppliers generates from a pressure that suppliers place on
a business. However, in Target’s case, the suppliers seem to be working willingly, and very
cohesively, with Target. In an effort to continue with their “cheap chic” image, Target has taken
many of the artsy wrinkles of the full priced department stores and ironed them out for those on a
tighter budget (Munarriz, 2003). For example, Target has formed partnerships with famed architect
Michael Graves and the fashion gurus at Mossimo. Joint ventures such as these have helped Target
improve its product quality while at the same time reinforcing it’s stance as the smaller, hipper
alternative to other discount department stores. Furthermore, Target has reinforced the strength of
its marketing ingenuity by succeeding with such affiliations and not following the same path as other
ill-fated partnerships, such as Kmart’s collaboration with classy celebrities Jaclyn Smith and Martha
Stewart.
Another significant concern for Target is the Power of Buyers force. As is essential as
obtaining quality products from suppliers, what good is it if nobody buys them? This is why the
pressure buyers (i.e. consumers) place on a business is extremely important to the five forces model
analysis. One reason why the power of buyers is so important is because consumers are able to
switch to another product with relative ease. In Target’s case, such a switch could be buying simple
house and/or personal care items from competitor stores such as Wal-Mart or K-mart.
Furthermore, customers are price sensitive, which means that retailers must be aware of how their
prices compare and contrast to other competitors.
In an attempt to manage the power of buyers to their best ability, Target has chosen to cater
their products to a particular demographic niche. The “target” market for Target is slightly above
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the typical demographics of a discount department store chain. Target lists its customers’ median
income at $57,000 vs. mid-$40,000 for a typical Wal-Mart shopper (Levy, 2004). Furthermore, the
median age of a Target shopper is 44, four out of every five patrons is female, and a little more than
half have completed college (Munarriz, 2003). These characteristics have proven beneficial to
Target as their sales remain strong and continue to grow, even in the face of trying economic times,
including a shaky job market. In addition, industry observers have recognized that while high
gasoline prices appear to have forced Wal-Mart’s lower-income customers to curtail spending,
Target’s more upscale core shoppers have been less affected by higher gas prices (Munarriz, 2003).
The availability of substitutes is another significant threat recognized in Porter’s five forces
model. The majority of the products that Target sells are common home and personal care items,
such as appliances, clothes, furniture, toiletries, electronics, and automotive products. Customers
can very easily find substitute goods for these products at specialty stores, which compete with
specific and superior products for equal or lower price. For example, IKEA and Pottery Barn are
specialty furniture stores which compete with Target. Also, Bed Bath and Beyond is a store that
specializes in home accessories and competes with Target in this market as well.
In addition to the traditional types of substitutes, another threat to Target is On-Line or
catalog shopping. Substitute goods for the products that Target sell can easily be found on the
Internet and/or in the catalogs of competing specialty stores. This is a threat to Target because
there is no need for shoppers to physically go to Target stores if they can simply browse and buy
products via the Internet from the comfort of their own home. However, Target has taken a
proactive approach to combating this particular threat with the conception and operation of their
own on-line shopping domain, Target.com.
Finally, the fifth and most prominent threat to Target is the force of Competitive Rivalry
within the industry. As previously mentioned, in the discount retailer market, the two main players
are Wal-Mart and Target. As the world’s largest retailer, Wal-Mart Stores Inc. operates more than
3,000 discount stores and super centers, compared to Target’s 1,300 establishments (Levy, 2003).
Regardless of the size differences Target has continually performed well in the shadow of its
mammoth competitor. Recent financial history reveals that shares of the Minneapolis-based
discounter are up 31 percent in the past year, compared with a 3 percent decline in Wal-Mart Stores
Inc. stock (Levy, 2004). Having taken notice of such impressive performances, Wall Street’s focus
has been exclusively on the strong same-store sales at Target—sales that have been healthier than
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those at discount rival Wal-Mart (Bhatnagar, 2004). Furthermore, according to the website Target
Corporation reported that its net sales from continuing operations for the four weeks ended
October 30, 2004 increased 12.6 percent to $3.311 billion from $2.940 billion for the four week
period ended November 1, 2003 (www.target.com). This information represents an impressive
trend for Target as it celebrates a 15th consecutive month of better same-store sales gains than
industry giant Wal-Mart stores (Levy, 2004). Described as a “one-stop titan for the bargain hungry
public” (Munarriz, 2003), analysts have attributed Target’s notable performance to the success of its
creative marketing strategy of winning over shoppers by offering them more exclusive brands and
fashionable, yet affordable, merchandise.
Another example of the intense competition between Target and Wal-Mart can be found
right here in the local bay area. As a reported by the American City Business Journals Inc., the red
stores vs. blue stores battle seems to be developing beyond simply competitive stock prices. In the
town of San Leandro, which already has a Wal-Mart store at 1919 Davis St., Wal-Mart Inc. recently
leased property across town at 15555 Hesperian Blvd in what appears to be the first step towards
opening a second operating venue. However, what is strikingly interesting about this situation is
that address happens to the address of a discount store operated by Wal-Mart’s archrival, Target
Corp (Goll, 2004). In what appears to be a direct attack at the competition, Wal-Mart has revealed
its concern for Target as it increasingly impedes upon its quickly diminishing market-share.
Target’s Strategy to Maintain their Competitive Advantage
Every business, in every type of industry, has some sort of battle with their respected
competitors. Companies are constantly questioning whether their business strategy will aid them in
having the best competitive advantage in the industry possible or the weakest. There are a number
of different competitive strategies that a business can use to gain their competitive advantage over
competitors. In the case of Target, they are a prime example of how their competitive strategies
have given them then reputation as “a trendy assortment of distinct products, and crafted a unique
approach to marketing both itself and the goods it sells. If may have only a fifth of the sales and
profits of Wal-Mart, but it reels them in with ten times the panache” (Schlosser, 2004). It is not an
unknown fact that Wal-Mart is the leader in low-cost goods in the retail industry. However, it is a
fact that Target has done extraordinary job uses its varies competitive strategies to stay in the
difficult race with Wal-Mart.
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One of Target’s competitive strategies used is the cost leadership strategy, in which it strives
to deliver quality goods and a reasonable, low-cost price to consumers. This goal of Target is clear
with their statement that they will deliver to customers quality brands at a low price with their
slogan, “Expect more, pay less.” From personal experiences, people often assume that Wal-Mart will
always have the lowest prices compared to Target. To investigate if these claims were actually true, I
constructed a list of five items that could be found at both Wal-Mart and Target and visited each
store to see if Wal-Mart or Target offered the better price. Surprisingly, prices between Wal-Mart
and Target differed (if any, only two products had slight variation) by a small number of cents. My
conclusion was simple, Target can be considered the low-cost leader just as much as Wal-Mart can.
Using the low-cost strategy is not the only strategy Target has proven to be effective. Target
has also implemented a differentiation strategy. A differentiation strategy is a strategy in which a
company develops new ways to differentiate (make their product or service stand out) from its
competitors or reduce the differentiation advantages of competitors (O’Brien, p.43). Target has
taken a number of different angles to make them stand out amongst their competitors. For
example, Target has introduced a vast variety of fashionable and popular goods to be sold in
throughout their stores. The introduction of popular fashion designers such as Isaac Mizrahi
(clothing), Liz Lange (maternity clothing), Swell (bedding and décor), Michael Graves (interior design
and decoration) are all part of making Target products stand out amongst similar products sold in
other retail stores.
Closely tied with Target’s use of a differentiation strategy, Target has joined a number of
strategic alliances to expand their competitive advantage. An alliance strategy occurs when a
business establishes new business linkages and alliances with customers, competitors, suppliers,
consultants, and other companies (O’Brien, 43). As mentioned previously, Target has actively joined
up with varies top designers to provide original, one-of-a-kind products to be sold in only Target
store. Isaac Mizrahi brings to Target its runway fashions, Liz Lange brings famous fashions to
pregnant women, Swell provides higher quality bedding, and Michael Graves brings in television
program ideas to customers.
Another differentiation strategy that Target used occurred during the summer of 2003, when
they entered a partnership to help promote the Justin Timberlake and Christina Agilera tour,
“Stripped,” and their exclusive collaborative CD sold only at Target. Not only did this partnership
promote the tour via television commercials, magazine advertisements, and decorations through
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Target stores, but it also helped Target attract the younger generation and profit off the
collaborative CD’s that were sold exclusively to Target patrons.
Of all the competitive strategies that Target has taken an active role, the strategy that stands
out as the leader of them all is their innovative strategy. Target has consistently taken active steps in
creating new ways of doing business and providing the best services possible. Within the Target
organization, there is a clear goal of always looking for new and exciting ways of doing things. Target
solicits everyone in the company to find the next new thing (Schlosser, 2004). The marketing chief of
Target, Michael Francis, leads a quarterly contest that he calls the “Big Idea.” Everyone in the
organization can participate in finding, creating, or improving ideas within Target. Francis states,
“We (marketing department) put that challenge out to the whole organization. Some people who
come back with good ideas are not in the core (marketing or product development) areas. We might
be someone from finance doing (ad) storyboards…Everyone is always looking for trends, from the
top down” (Schlosser, 2004).
Another very interesting innovative strategy Target has used to stand above the others was
the use of stunt stores. In 2002, Target docked a 220-feet floating shop on Manhattan’s West Side
filled with holiday décor (Schlosser, 2004). This was Target’s way of bring their business directly to
consumers. Amazing! Manhattan residences were able to buy a variety of Christmas decorations
from their very own Target store at their doorstep. With the success of this traveling store during
the holiday season, Target did a similar approach during the summer. Target’s “Deliver the Shiver”
road through Manhattan streets selling air conditioners to heat stricken residents proved to be yet
another success to Target’s innovative team.
While researching Target’s varies competitive strategies, the issue of random endorsements
appeared to have a lasting impression and effect on Target’s competitive advantage. During an
interview on Conan O’Brien, Sarah Jessica Parker (most known for her active role in HBO’s Sex and
the City) spoke very highly over her $12.99 pair of Target pajamas. It comes to no surprise the
power that celebrities’ words have over the public. The simple reference to her favorite pair of
pajamas caused a rush of popularity for similar Target pajamas as Sarah Jessica Parker had
referenced to.
Although Target has done an excellent job using different strategies to increase their
competitive advantage, a great deal of it would not have been possible with information technology
and information systems. Target’s ability to be a low-cost competitor is through the use of
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information technology to reduce the cost of business processes. Information technology allows for
Target’s manufacturers to use varies technology to increases its efficiency and productivity of varies
products. For example, the use of Computer-Aided Manufacturing (CAM) allows manufacturers to
automate the production process. CAM allows manufacturers to direct monitor the flow of goods
through the manufacturing process.
Target’s use of information technology and information systems is also used to make their
differentiation and innovative strategy effective. The use of information technology is used to
reduce the differentiation advantages of competitors and to focus on products and services of
selected market niches. Computer-Aided Design (CAD) is an example of how Target has used
information technology to increase their competitive advantage. CAD uses computers and advanced
graphics hardware and software to provide interactive design assistance to companies (O’Brien,
2004). Target uses CAD to aid in the creation of new products throughout the year.
The Internal Strengths and Weaknesses of Target
Target’s strengths include a strong customer base, product diversity through the
introduction of credit cards, and its strong growth. Target’s strong customer base includes middle
and upper end customer growth. To ensure that Target maintains a trusting and loyal customer
base, they have taken the initiative to deliver consumable products. Target has also included brand
label product lines such as Mossimo and Mizrahi. These product lines have made Target the fashion
leader in discount stores. Another product that Target has included are Sony products that are in
accordance with their image.
A strong framework that Target has created has enabled them to maintain its strong growth
potential. Target’s wide variety of resources and large size as a corporation has allowed them to
benefit in so many ways. For example, Target is able to reduce costs through economies of scale and
their strong brand image increases barriers to enter into the market and assists in the guarantee of
future sales.
In order to offer their customers with the most convenience, Target has produced over 100 new
stores in 2003. For the past five years, Target’s retail square footage has increased at an annual rate of
about 10 percent. In 1999, Target Corporation added a total of about seventy-four new stores; this
increased the division’s square footage by nearly 9 percent.
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In the next few years, it is expected that growth will continue with the opening of approximately
eighty new stores in 2000, and an estimated growth in retail square footage of 8 to 10 percent annually.
In 2004, Target Corporation plans to continue expanding their Target store base with a growth range of
nearly 8 to 10 percent net new square footage annually. This means that Target is expected to add a total
of about 90-100 new stores, or approximately 80-85 new stores minus the relocations and closings.
As mentioned previously, Target’s introduction of the Target Visa Card and the feedback from
customers has proved a strong success. This card offers high rewards and limits with low rates. The
purpose of the Visa Card was to increase customer sales, raise higher income, and improve CRM. The
revenues from the credit cards increase by $182 million, totaling $1,479 million of revenues in 2003.
With any company comes its weakness and Target has their fair share of them. Target
Corporation’s weaknesses include choosing poor strategic plans, and the continuing poor performances
of Marshall Field’s and Mervyn’s, prior them selling it this last summer. Target has not been as fast and
strong as Wal-Mart in embracing an effective strategy and incorporating products that include Panasonic
LCD’s and Sony flat screens. They have been slow to merge into selling top high-end electronic products.
Target, however, is adopting a new strategic option by lowering process on their products, but this plan
has no sign of success. Target also provides a larger line of apparels than Wal-Mart, but this area has
recently been declining, which may affect profit due to inventory costs. Target sold both Mervyn’s and
Marshall Field’s and 9 other locations in for about $3.2 billion in cash.
Now know the strengths and weaknesses of Target, what can information technology and
information systems can be used to improve their performance? Target Corporation can further
improve with IT/IS through their networking and usage of Internet technologies. With different
Target units all over the United States, they need to use IT/IS in order to send information and
communicate with other Target Corporation employees in different locations, possibly through
cross-functional enterprise systems. This would allow them the ability to cross over functional
boundaries and open the lines of communication. Cross-functional enterprise systems would give
Target the ability to share information resources and improve their overall efficiency and
effectiveness of their business processes, and develop a strong strategic relationship with their
customers, suppliers, and business partners.
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Information technology can improve Target’s ability to overcome their biggest competitor,
Wal-Mart. Wal-Mart is known for the strength in supply chain operations and management which
allows them to be the low cost leader in the industry. Target’s tactic to overcome this barrier would
be to increase their focus on supply chain management, searching for and supporting better
technology, and being more efficient in the overall process. Supply chain management uses
information technology to help support and manage linkage between a company’s main business
processes and its respected business partners. The goal is to create, a fast, effective, efficient, and
low-cost network of business relationships. Implementing a more efficient supply chain
management system, Target could potentially raise above Wal-Mart.
The Opportunities and Challenges within Target
Target, being the nations number two discount store, faces many challenges and
opportunities within its corporation. It has seen many changes in the past several years, from
gaining agreements with respectable labels to building SuperTarget stores. However, Target has had
the ability to capitalize on its distinctive competency of providing products that reflect a better
image to its more affluent customers at an affordable price.
In 2001, a report published by DSN Retailing Today mentioned that “sixty to 62 SuperTarget’s
will be open by yearend. And while that may seem small relative to Wal-Mart’s supercenter
expansion of more than 170 units this year, it’s a sizable leap for Target” (Retailing Today). With the
increase of new superstores for Target, this adds an advantage for the company to increase its
profitability through the increased revenue. The opportunity gained from this new development is
that the corporation is able to provide more services, such as groceries, apparel, and entertainment
products to its customers. The value is the added benefit of providing a one-stop shopping point
where the customers can handle all of their shopping needs.
Target differentiates itself by providing the customers with the experience they desire that is
not only inviting, but entertaining as well. In this aspect, Target is different from its rivals in that the
customers can save money in a discount store and not endure the miser of pushy crowds, overhead
noise, dirt and clutter, and extremely long checkout lines. The Company’s strategy has leveraged its
positioning in attracting knowledgeable college educated customers who want good products at a
reasonable price. Target has “carved out a niche by offering more up-scale, fashion forward
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merchandise than rivals Wal-Mart and Kmart” (Target Corporation). Therefore, this position has
caused top companies to view Target as particularly appealing for developing exclusive agreements.
Currently, Target “collaborates with leading companies such as Sony and Calphalon to
develop exclusive, affordable collections specifically for the discounter” (Rowley, 2003). Customers
recognize the name and do not necessarily make the distinction between the Target’s merchandise
and the manufacturer’s more upscale products. The opportunity from the agreement between the
companies is two fold, the customers are able to receive products of value and the corporation gets
added exposure because of the specific product Yet, another opportunity as a result of the
positioning strategy is that “Target is bearing it all with an exclusive deal (through spring '05) with
Build-A-Bear Workshop” (Bear Target). Target delivers variety to the product mix which in turn
creates profitable margins. At the same time, it has also developed “the first nationwide mass
market retailer to work with Brothers Gourmet Coffee Inc on an in-store coffee program” (Discount
Store News). The benefit is the ability to provide the customers with in-store coffee availability and
convenience.
An advantage in creating profitable relationships with various merchandisers is the use of IT
Target currently utilizes. For instance, the availability of products can be easily scanned and indicate
whether or not the inventory is no hand, and at the same time report to the supplier if any shipment
is necessary. With the EDI in place, Target can extend its knowledge to the new merchandisers in
order to efficiently and effectively serve the customer base. Thus, the emphasis on IT is crucial for
gaining the continued acceptance and satisfaction of not only the customers, but the vendors as
well.
One of the benefits Target possesses is the corporate culture established within its
organizations, which in turn delivers the gratifying store ambience that is so mush experienced and
appreciated by customers and employees. In 1990, “Dayton Hudson chairman and CEO Kenneth
Macke first mentioned the new Disney-inspired service changes” (Rowley,2003). The new training
program emphasized the importance of delivering good customer service through a well trained
employee base. As a result, Target came up with the idea of calling customers “guests” and
employees “team members.” Target began to implement the new change by relaxing some of the
rigid rules and regulations it had, thus making it readily easier to address the needs of the customer.
The new system resulted in placing more employees on the floor, giving them more freedom to
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exert their own judgment on common sense situation, as well as reducing executive store visits
which would often resulted in intimidated employees rather than improving customer service.
Furthermore, Target changed not only its recruiting and training programs, but its retention
programs as well. According to the Target’s website, the company interviewed and accepted team
members that were enthusiastic and saw Target’s job opportunities not merely as employment, but
as a job career. Target also “monitors staff to make sure they deliver on the promise of ‘fast, fun,
and friendly’” (Rowley, 2003). This program in turn, has increased the customer’s experience and
improved costumer loyalty and satisfaction.
A way that Target can improve on obtaining feedback from the team members is by having a
way for the employees to post their concerns via internet. By utilizing information technology
through this method, the employees would be able to freely express some of their experiences, so
that the issues are addressed in order to improve the situation and the organization.
Even though there are several opportunities for which Target is capitalizing on, there are
challenges within the company that it must deal with as well. First of all, the company has to deal
with the retail giant Wal-Mart. Although Target is increasing its size, it still has to compete with Wal-
Mart, which has been opening up more stores than Target during a given period. Target has to
effectively manage its situation so that it can adequately survive the fierce competition. The
information technology, such as EDI, CRM, visa card, and scanners that Target currently uses to
maintain positive customer and suppler relationships will definitely aid in improving and maintaining
its market position. Equally likely, Target must be sensitive of the changes in the environment and
address those issues appropriately.
The second challenge Target faces is with the return policy; “the company tightened rules in
recent years, and will no longer take back merchandise without a receipt-even from gift registry
customers” ( Rowley, 2003). This situation has caused many grievances among the customers,
especially when a gift registrant is trying to exchange a duplicate product. Often times, the customer
is willing to purchase other items that are usually more. Unfortunately, this situation ultimately
deteriorates customer satisfaction. The purpose of the strict return system is to enforce the efforts
against theft. However, alienating customers by having them go through a rigorous returns process
can have major impacts on the business. Even though gift receipts are available, most customers do
not find it appropriate to put it in a wedding present. The resolution to this problem would have to
15
come from thoughtful assessment, and determining whether or not losing-up the return policy
would be advantageous from a strategic point of view.
The third challenge Target faces are the issues oversees with respect to labor. Target uses
oversees labor to make its private-label goods; and “in 1999, four labor groups filed a federal class-
action lawsuit” (Rowley, 2003). The company was accused of using indentured labor. This situation
has been an issue for many corporations, and the challenge for Target would be to overcome this
situation. Perhaps implementing viewing capabilities through networks that would allow
management to see whether or not operations oversees are in accordance with regulations. Target
can make improvements on the challenges it faces by aligning its strategy and establishing mutually
beneficial relationships with its employees, customers, and suppliers through its merchandizing
agreements, website, and information technology.
16
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