Capstone Analysis: Target

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Target Chihiro YamaguchiKai-Jen Shih (David)

Diana ColgroveYuxiao Li

Linyu Chang

Group 4

Agenda

Internal AnalysisHistory and PerformanceCulture/Ethics Analysis

Industry AnalysisSWOT/Trend AnalysisRecommendations

Who shops at Target?

Why do you shop at Target?

Question…

Low-price, high-quality,

well-designed merchandise

Comfortable, fun, and safe

shopping environment

One-stop shop, large selection

History & Performance

History

1902Dayton Dry

1962Target

Discount store

2000Target

Corporation

2011Target

Canada & City Target

Current Status

2nd Largest Discount Department Store

1,763 Stores

3 Branches

Expanded Offerings: PFresh, Target Clinic

How Does Target Define Performance?

Market Player Brand Recognition

Community Giving

Service Performance

Financial Performance

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

Total Revenue (Millions)

Total Revenue

Financial Performance

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

Yearly Total Net Income

Total Net Income

Product Categories

• Pharmacy, beauty, personal careHousehold

• Toys, electronics, music, movies, books, sporting goodsHardlines

• Apparel for women, men, boys, girlsApparel and Accessories

• Dry grocery, dairy, frozen food, beveragesFood and Pet Supplies

• Furniture, lighting, kitchenware, small appliances, home decor, bed and bath

Home Furnishings and Décor

Service Category: REDcard

Financial service: Debit/Credit cardTarget REDcard

Offers great discount Free shipping Donation to education Extra savings on prescriptions No annual fee

Competitive Space

TargetToys

ToysRus, Disney Store, Amazon, EBay, Learning

Express , U.S. Toy Co., Inc., Barnes &

Noble Inc.

ApparelRoss, Kohl’s,

TJ MAXX, Marshall’s, Costco

GroceryCostco, Ralphs,

Albertsons, Food 4 Less, Vons, Stater Bros

PharmacyCVS, Costco, Rite Aid, Walgreens,

Clinic Pharmacies

Culture/Ethics Analysis

Employee Interview

Mission Statement:“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.”

Major Commitment:

Mission

Meet the guests’ needs

Continuously cater to the

guest experience

Diversity Teamwork Community Innovation Service

Values

= most important moral value

Within the company, culture is transferred to all:Vendors, Part Times, Seasonals, Etc.

“Fast, Fun, and Friendly”

Integrity

Core Values:

Fifty”

these values are ingrained in the culture

Organizational Structure

General Manager

Senior Group Leader

Group Leader

Team Member

Senior Group Leader

Group Leader

Team Member

Group Leader

Team Member

Distribution Center:

• One GM per building• SGL: Performance,

Strategic Planning• GL: 2-12+ Team

Members, Monitor Performance and Development

• Team Members

Structure transfers to all areas ERA 1

Organizational Culture

Process-Oriented Concern with getting things done with integrity

Employee-Oriented Deeply concerned with the wellbeing of employees

Professional Embrace diversity in the hiring process

Open System Welcoming to new employees, orientation persistence

Loose/Tight Control Improvisation welcomed, yet training programs enforced

Pragmatic Orientation Driven by the market, desire to meet guests’ needs

Fulfilling Target’s Values

Customer Satisfaction Action Plans: Message + Training Orientation Overviews Modeled Top-Down Working on a Team No Guesswork Involved Guest Service Departments

Diversity

To promote diversity:• Embrace team member differences

Individual and Community

• Foster a feedback culture Weekly meetings Upward Communication

• Diversity Events Ex: Chinese New Year at Downtown Riverside

Second Nature, Inclusive

Artifacts

• Symbols• Language

Customers = Guests Employees = Team Members

• Heros• Rituals

Ethical Climate

Ethical Criteria: Benevolence

• Team Interest

• Social Responsibility

Wellbeing Pillars

Individual

SafetyHealthy Living

Exercise

Community

OutreachService

Social

CelebrationsRecognition

Events

Financial

Tuition Reimbursement

Financial Planning

Sustainability/Social Responsibility

• Volunteer Events

• Community Giving/Support Commitment to Education 5% of Income Given Back

• “Here For Good”

Here For Good

• Sustainable Living• Energy Smart

• Smart Development• Green roofs, Urban Stores

• Sustainable Products• Traceable seafood, Packaging

• Efficient Operations• LED lights, motion centers

Partnerships

Partnership

LocalAuthorities

Going Green

RecycleSave EnergyReduce WasteReduce Water UsageTransportation EfficienciesENERGY STAR CertificationsReduce Greenhouse Gas Emissions

Trends to Watch

Social Consciousness Longer Life SpanGreen Practices

Target is on track to staying ahead of these trends with their commitment to individual and environmental sustainability

Industry Analysis

Market Positioning Analysis

Industry Classification = Discount Department Store

Market Share

Walmart54%

Target14%

Costco13%

Kmart3%

Dollar General

Others14%

Discount Department Store Market Share, 2010

2010 Sales (in billions)

Walmart 258

Target 67

Costco 60

Kmart 16

Dollar General 13

Others 66

Prospector, Analyzer, or Defender?

Target = Analyzer Stable, routine, and efficient in its product market domains Closely watches competitors and rapidly adopts promising new ideas

BCG Matrix

Slow growth industry Relatively high market shareHigh sales

Discount Department Store Industry

• Toy industry is expected to shrink

• Target is among the top 3 toy retailers

• Target is in a leading position in this segment

BCG Matrix

For 2009-2014, the estimated growth rate is 2%Target’s sales in 2009 were 6.7B, representing a 4% market shareTarget’s market share in the industry is not dominant, but the market is fragmented

BCG Matrix

Apparel

Grocery retailing is a mature, saturated market in the USTarget’s grocery sales in 2011 was 13.27B, representing a 1.6% market share

Grocery

BCG Matrix

The US pharmaceutical industry is expected to grow at a rate of 6.4% in the next 5 years The industry growing fast but Target’s share in this market is small.

Pharmacy

BCG Matrix

Bargaining Power of Suppliers

Apparel: ModeratePharmacy: HighToys: Moderate

Grocery: Low

Threat of New Entrants Apparel: High

Pharmacy: ModerateToys: High

Grocery: High

Bargaining Power of

CustomersHigh

Threat of Substitutes Apparel: High

Pharmacy: LowToys: High

Grocery: Moderate

Rivalry: High

5 Forces Analysis

Threat of New Entrants Apparel: High

Pharmacy: ModerateToys: High

Grocery: High

Threat of New Entrants

Capital Market Share

Bargaining Power of Suppliers Apparel: Moderate

Pharmacy: HighToys: Moderate

Grocery: Low

Bargaining Power of Suppliers

Exclusive BrandsCommodities

Threat of Substitutes Apparel: High

Pharmacy: LowToys: High

Grocery: Moderate

Threat of Substitutes

Designer/Used ClothingMusic/Video Games

Grocery DeliveryRestaurants

Gaming Population

2009 201155

Gaming Population vs. Actual Population(Ages 2-17) in the US in Millions

Gaming Population (Ages 2-17) in the US (In Mil-lions)

Population (Ages 2-17) in the US (In Millions)Po

Bargaining Power of Customers

Variety of Discount Stores is Large

Low Switching Costs

Internal Rivalry

Rivalry: High

02/03/2

02/02/2

01/31/2

01/30/2

01/29/2

01/28/2

01230.0030.5031.0031.5032.0032.5033.0033.5034.0034.50

Gross Margin(%)

Report Date 02/03/2007 02/02/2008 01/31/2009 01/30/2010 01/29/2011 01/28/2012

Total Revenues 59,490 63,367 64,948 65,357 67,390 69,865Net Earnings (Loss) 2,787 2,849 2,214 2,488 2,221 2,849

Product Life Cycle

Has reached high domestic market share

Product prices in Target are beginning to drop

Executing differentiation strategy

Target

Leap Frog Opportunities: PFresh, City Target, Target Canada

Product Life Cycle

Factors to Watch For

GDP Consumer Confidence CPI Income

Macroeconomic Conditions:

Other Factors:

Online Retail Sales Growth

Population Growth

Birth Rates

Current US Economy

US GDP Growth Rate

Consumer Confidence

CPI: Food & Beverage

CPI: Apparel

2009 2010 20110

100000

150000

200000

250000

300000

DomesticInternationalTarget

Going Global: Competitor Sales

(in millions)

Strengths• Superior Customer Service• Positive Customer Perception• Strong Leadership Program/Training• Product Design – Low Price, Stylish• Exclusive Brands -> Brand Equity• Continuous Improvement• Strong Marketing Initiatives• One Stop Shop• Synergy Creation

Weaknesses• Geographic Concentration• Not Low Price Leader

Opportunities• Canadian Market• Global Expansion• “Going Green” Trend• Growth of Pharmacy• Vertical Integration

Threats• Severe Competition• U.S. Economy• Mature Industries

SWOT Analysis

Expand business globally Continue to establish exclusive brandsGrow/expand online marketIncrease grocery selection Vertical integration

Recommendations

Thank you!

Questions?

Capstone Analysis: Target

Entertainment & Humor