King Saud University College of Administrative Sciences

Strategic Management 597 BUS

Case analysis Target Corporation

Professor Dr. Nadia Ayoub

Submit by Ghadeer Al- Mutawa Reem Abdul Jabbar

9, January 2007

Contents
Introduction Vision Statement Mission Statement

Strategy Analysis
State 1: The Input Stage External Factor Evaluation o Opportunities o Threats Competitive Profile Matrix Internal Factor Evaluation o Strengths o Weaknesses Summary of Financial Ratios in Target Corporation Stage 2: The Matching Stage 1) 2) 3) 4) The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, The Strategic Position and Action Evaluation (SPACE) Matrix, The Grand Strategy Matrix, The Internal-External (IE) Matrix.

Summary of Matrix Analysis Stage 3: The Decision Stage Quantitative Strategic Planning Model [QSPM] Recommendations Epilogue

Introduction
Target Corporation is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. Target Corporation is the third-largest general merchandise retailer in the United States. It offers an assortment of general merchandise, including consumables and commodities; electronics, entertainment, sporting goods, and toys; apparel and accessories; and home furnishings and decor; as well as a line of food items. The company operates its stores under Target and SuperTarget brands. It also sells its merchandise online, as well as offers credit cards to its customers. In addition, the company runs Target Clinics in select twin cities Target stores, which offer various services, including flu shots; and treatment for common illnesses, such as strep throat, bronchitis, and skin conditions. Target's first store opened in Roseville, Minnesota, in 1962. Its on-trend merchandise at affordable prices launched a new era in discount retailing. This "T-1" stores were easy to shop, attractive and always clean. It served as the prototype for every Target store opened since then, and it changed how consumers think about discount shopping. Today, Target operates approximately 1,500 stores in 47 states, including more than 175 Super Target stores that add an upscale grocery shopping experience. In addition to the photo processing, pharmacy and Food Avenue restaurants found in almost every Target, Super Target includes an in-store bakery, deli, and meat and produce sections. The corporation consists of six operating divisions, three of which are the retail stores Target, Marshall Fields, and Mervyns. In addition, there is target direct (direct marketing and electronic retailing division), Target Financial Services, and Associated Merchandising Corp. Robert Ulrich, Chair and CEO, has led these six divisions since 1994. Target Corporation evolved from two long-standing retail chains, Daytons and Hudsons. In 1903, George Dayton established Dayton Dry Goods store in Minneapolis, MN that offered return privileges and liberal credit. His store eventually expanded into a full-line department store that was twelve stories tall. In 1966, Daytons gone public and grew through acquisitions. Hudsons originally began in 1873 when Joseph Hudson opened a mens clothing store in Detroit that offered its customers return privileges and price 3

marking instead of bargaining. Hudsons became the largest retailer of mens clothing by 1891. After World War II, both companies saw the need to expand into the growing suburban market. It was the largest shopping center of its time in the United States. In 1956, Daytons built the worlds first fully enclosed shopping mall, Southdale. In 1962, Daytons opened the first Target store. The Dayton Hudson Corporation formed in 1969 after the acquisition of the family-owned Hudsons. Dayton Hudson bought Mervyns retail chain of forty-seven stores in 1978, and Marshall Fields department stores in 1990. Because the Target division was so successful, the company changed its name to Target Corporation in 2000.

Vision Statement
Were a company living a clear vision: to be the best. In every area of our business. In everything we do. Our nationwide channel of retail stores, distribution centers and corporate offices offer you thousands of opportunities to join our team and bring your best. Our team members bring more than their great energy to work every day. They bring their unique perspectives, experiences and differences to work, too. They give us the strength to dare ourselves to be the bestand the power to achieve it.

Mission Statement
The primary mission is to expand our worldwide leadership position in quality, cost, and customer satisfaction through the integration of people, technology, and business systems and to transfer knowledge, technology, and experience throughout Target Corporation. Mission Statement Components 1. Customers 2. Products or services 3. Markets 4. Technology 5. Concern for survival, profitability, growth 6. Philosophy 7. Self-concept 8. Concern for public image 9. Concern for employees

Category Customers Products / Services

Markets Technology

Survival / Growth / Profitability

Philosophy

Self-Concept

Concern for Public Image

Concern for Employees

Explanation Target Corporations Provide all Customers the best products and services with satisfaction under one roof and a wide array of products and many necessary goods. Provide Products and Services at reasonable prices and will continue to improve high quality of Products. It is clearly to show with the concept of one-stop shopping. Grow technically and research capabilities Consumers have been conveniently provided not only with the use of on-line shopping. Target Corporations team is devoted to everything that has accomplished as a universal competitor and to strive to be the best in the retail industry Create and offer an environment in which satisfied customers, highest quality services at the lowest price. Quality / safety by providing benefits for excellent performance, clean environments to work in, and by providing equal-opportunity for all individuals. Aim to be the leading public relations in the retail industry in the USA and hopes of providing well- education. Be a major force in high performance for employees and workforce and retaining employees of good moral standing.

Although Mr. Ulrichs first letter to shareholders stated, We are committed to serving our guests better than the competition with trend-right, high-quality merchandise at very competitive prices. We are committed to being a low-cost, high-quality distributor of merchandise through boundary-less functioning, -through leverage resources, expertise, and economies across divisions.

Strategy Analysis
There are three-stage decision-making frameworks: State 1: The Input Stage 1). External Factor Evaluationatrix (EFE) 2). Competitive Profile Matrix (CPM) 3). Internal Factor Evaluation (IFE)

External Factor Evaluation

The External Factor Evaluation includes weighing a list of key factors that are external, or outside the control of the company. The most important an external audit focuses that managers can formulate strategies to take advantage of the opportunities and minimize of threats. There are five categories of key external forces that could benefit an organization in the future: 1. Economic Forces, 2. Social, Cultural, Demographic, and Environmental Forces, 3. Political, Governmental, and Legal Forces, 4. Technological Forces, and 5. Competitive Forces. There are sources for information on external factors including the Internet, and competitors financial statements.

1. Opportunities:
The opportunities identified for Target Corporation are as follows: Consumers want ease of shopping An opportunity facing the industry is that customers want ease of shopping. To provide the ease of shopping the industry is guaranteeing that the customers will find what they want when they want it. This is supported by convenient presentation and the right level of service every time the customer shops. Technological An opportunity facing the industry is that Internet shopping is growing. To take advantage of Internet shopping, the industry is focused around the customer. The customer receives friendly site designs, efficient order fulfillment, fast delivery and professional customer response. They process returns, refunds, and rebates quickly. That mean the internet can be used as a marketing tool, and it can greatly reduce communication costs. It can also act as a substitute for a newsletter published on paper.

 Better-educated and more affluent society Government has taken an active role in the education of society. Increased level of income More people are getting better paying jobs Because of the increase in the education level of society and increase the number of two-income households. This is increase of money available for non-essential purchases, and for the purchase of higher-priced quality goods. Expanding economy The economy in the United States has been growing steadily in recent years and Low inflation, unemployment, and low interest rates increased spending and growth opportunities for businesses and individuals. Increased social awareness and Environment conscious consumers Target Corporations objectives have always included Corporate Governance and genuine concern for the communities in which they operate. Retail sales expected to increase and similar shopping patterns worldwide

2. Threats:
The threats identified for Target Corporation are as follows: Technological A threat facing the industry is that technological advances may make the products obsolescent. As technology advances, products being sold today are gone tomorrow; this provides fewer products for retailers to sell. Competition for Market Share Substitute products more easily because of intense competition, the cost of producing many consumer products tend to have fallen because of lower manufacturing costs. Manufacturing cost has fallen due to outsourcing to lowcost regions of the World. This has lead to price competition, resulting in price deflation in some ranges. Intense price competition is a threat. The population is aging The population of the United States is rapidly becoming older. The percentage of the population over age 50 increased by 18.5 percent during the 1990s while the population under age 50 grew by only 3.5 percent. Target should address this issue by offering products and services that are attractive to an aging society in order to remain competitive. Interest rates are rising

Rising interest rates are a threat to all organizations due to the increased cost of borrowing and their inverse relationship to stock prices. This could force an organization to forego capital expenditures for expansion or implementation of certain strategies. Increase in online shopping Consumers now have access to multitudes of retail outlets online. They can comparison shop and make purchases without having to leave their home. The E-commerce industry has grown rapidly and is changing the way people do business. Trend is toward super centers The convenient one-stop shopping center has evolved into the super center. More consumers are enjoying the convenience of one-stop shopping for all their retail needs.

External Factor Evaluation Matrix for Target Corporation

Key External Factors Opportunities: Consumers want ease of shopping Internet shopping growing Better educated and more affluent consumers Increased disposable income Financial Services- (credit cards) Expanding economy Similar shopping patterns worldwide Retail sales expected to increase Environment conscious consumers and Increased social awareness Growing Industry/ greater demand for products Demand for Top quality, luxury, comfort 8 Weight Rating Weighted Score 0.15 0.3 0.1 0.4 0.2 0.1 0.2 0.1 0.2
0.1

0.05 0.1 0.05 0.1 0.05 0.05 0.1 0.05 0.05 0.05

3 3 2 4 4 2 2 2 4 2

3 0.025
0.075

3 Threats: Substitute products more easily because of intense competition Competition offers better quality/comfort Aging population Rising interest rates Increase in online shopping Trend is toward super centers Decreased Customer Spending 0.05 0.025 0.05 0.025 0.025 0.025 0.05 1.00 1 1 1 2 3 1 1 0.05 0.025 0.05 0.025 0.05 0.075 0.05 2.475 Technology (Internet, credit cards, reservations) 0.075
0.225

TOTAL Rating: 1 = Poor Response 2 = Average Response 3 = Above Average Response 4 = Superior Response

* Target Corporations has main opportunities that we identified were increasing Internet shopping; ease of shopping .The increase in on-line shopping is the most important factor affecting the industry. Target Corporation has an electronic retailing division called target direct. Consumers can access online shopping services through Target Corporations corporate Web site. Because Target has an above average response to this factor, it received a rating of 3. * Another important factor affecting the retail industry is the trend towards super centers. Targets response to this factor is poor because there are only two Super Targets in operation, so it received a rating of 1. * The final score in Target Corporations is 2.475 indicates that they are slightly below average in their efforts to pursue strategies that capitalize on external opportunities and minimize threats.

Competitive Profile Matrix

A competitive profile matrix is a strategic tool used to compare performance with others in the same industry. Critical Success Factors Advertising Global expansion Price Competitiveness Financial Rating Target Wal-Mart JC Penny K-mart Rating Weighted Rating Weighted Rating Weighted Rating Weighted Score Score Score Score 4 0.8 3 0.6 2 0.4 3 0.6 2 3 3 0.2 1.20 0.40 4 4 4 9
0.4 0.4 0.6

0.20 0.10 0.10 0.15

2 1 2

0.2 0.1 0.3

3 3 2

0.3 0.3 0.3

Position Product Quality Customer Loyalty Market Share Reputation Management Practices Total

0.10 0.10 0.05 0.10 0.10 1.00

4 3 3 4 3

0.40 0.40 0.60 0.40 0.40 3.3

3 3 3 4 2

0.3 0.3 0.15 0.4 0.2

3 2 2 3 2

0.3 0.2 0.1 0.3 0.2

2 2 1 3 2

0.2 0.2 0.05 0.3 0.2

3.3

2.1

2.45

The most critical success factor would be advertising with a weighted score of 0.20. The next critical success factor is global expansion with a weighted score of 0.10. Price competitiveness and financial position are ranked next on the competitive profile matrix with a weighted score of 0.10 and 0.15. Product quality and customer loyalty is found on the competitive profile matrix to have a weighted score of 0.10 for each. Than the market share with a weighted score of 0.05. Last critical success factors are Reputation and management- each with a rating of 0.10. The key factors for success in this industry are: *Compared together, Wal-Mart, Target and Kmart are very close competitors. They are all retail-variety discount stores making their existence known throughout the world, except Target, which you cannot find globally. These three companies are constantly vying for the reputation as the lowest priced retailer. *In the competitive profile matrix, the most critical success factor would be advertising with this, Target was scored the highest with a rating of 4 while both WalMart and Kmart are rated as a 3. This is because Target does a lot more advertising then Wal-Mart and Kmart.

*The next most critical success factor is global expansion with Wal-Mart was found to be rated the highest with a 4 with Kmart was rated next with a 3, and
finally Target rated as a 2 because Wal-Mart was the highest are found around world, than Kmart was next because they are only found in a few other countries. And finally Target, ranking last, does not have any global branches that insignificant weakness.

*Price competitiveness and financial position with Wal-Mart, the highest in both cases with a 4, is above all competitors. This is because they price reasonably with lower prices then all the competitors and their financial position is great.
Target is next with a rating of 3 in both price competitiveness and financial position because somewhat high prices and people tend to see that and want to go shopping elsewhere like Wal-Mart. Their financial position is not that great with the minor strength, but they are keeping up with their major competitor, Wal-Mart. Finally, Kmart is found to have a rating of a 3 in price competitiveness, and a rating of 2 in financial position. This is because Kmart does keep up with the prices of competitors, but they do get pricey in some areas.

* Next, product quality and customer is found on the competitive profile matrix in

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Target is have a rating of 4 in product quality. In customer loyalty they have a rating of a 3. This is because products found in Target tends to be top brand products, but at the same time, customers see these products somewhere else for a lower price and they tend to go to that place instead. Wal-Mart is next with a rating of 3 in both product quality and customer loyalty. Wal-Mart may not have top brand products but the quality is fairly good.

* In Target Corporation customer loyalty is also ranked as a 3

because some people do like to get better products no matter how much it costs. Kmart, last with a 2. This is because they do not carry quality products. People tend to go other places for what they want because of the better selection and quality.

* Finally, the last critical success factor is market share with Wal-Mart

and Target are both ranked 3 while Kmart is ranked 1. This is about right because as indicated by the total weighted score, Kmart is the weakest with 2.45 . Target's total weighted score closer to Wal-Mart's score of 3.3 that means the strongest weighted score in industry.

In conclusion of the competitive profile matrix, Wal-Mart and Target as a competitor rises above both JC Penny and Kmart.

Internal Factor Evaluation

An Internal Factor Evaluation Matrix identifies and evaluates key inner strengths and weaknesses from all functional areas of business. The most important functional areas, which are the key internal forces of most corporations, are: 1. Management, 2. Marketing/Sales, 3. Finance/Accounting, 4. Human Resources, 5. Management Information Systems, 6. Production/Operations, and 7. Research and Development.

1. Strengths
The strengths identified for Target Corporation are as follows: Customer oriented Target Corporation has been the best satisfaction of their customer oriented approach. (They simply take the product back and promptly refund the price of the product, nearly no questions asked and customer can ask an employee if they can help them in any way) Reputation Target Corporation is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store Supercenters offer one stop shopping Target Corporation is organized into distinct divisions and offers thousands of products. And the Target Corporation stores contain groceries, clothes, healthcare products, toys, electronics, bedding, sports and recreation,

11

automotive, among other items. Because of this conglomeration of products, the typical consumer can go into Target Corporation and walk out without having to stop at another store for anything that they could need. Products and services Target Corporation has a long-standing reputation for providing its guests with merchandise of exceptional quality at prices that are very competitive. Target Corporation has grown substantially over recent years. Leads industry in information technology

The company has a core competence involving its use of information technology to support its system. Computer Information Systems They also offer a safe, secure and complete website where consumers can purchase all of the same products found in the store. The website is strength because it is not only a means for purchasing products, but is also a very thorough informational site. Consumers can log onto www.target.com and do company financial searches, find
employment, email the company about problems, and learn about any recalls of products sold through

Target Corporation that provides information about the organization and industry information For example, it can see how individual products are performing country-wide, storeby-store at a glance. IT also supports Target Corporation's efficient procurement. Development of its employees A focused strategy is in place for human resource management and development. People are key to Target corporation's business and it invests time and money in training people, and retaining a developing them and providing all employees training resources and development time to help achieve career objectives Efficient distribution system Target Corporation has eight regional distribution centers that process 90 percent of all freight. The objective of the distribution center is to provide next-day service to all locations. Large convenient stores The average size of Target stores is 125,000 square feet. They offer their guests a clean, spacious, and customer friendly environment in which to shop. Diverse customer base Mervyns, Marshall Fields, and Target retail outlets cater to all income groups. Mervyns, with stores primarily in California, caters to lower-to-middle income shoppers. Marshall Fields department stores are strong in the upper Midwest, with a significant share of the markets in Detroit, Chicago, and Minneapolis. Targets upscale general merchandise stores are spread across the country and account for nearly 80 percent of the companys sales and profits. Management Most directors have established a good working relationship with one another through previous business dealings. They are educated and successful business people and all directors and staff. Strong Management Leadership in Target 12

Corporations executive office that provides leadership for all divisions. The divisions are encouraged to share advances in technology and coordinate purchasing and financial management. Target Corporation has experienced accelerated growth in sales and earnings under the management leadership of Robert Ulrich, Chair & CEO. In addition, Targets stock price, adjusted for splits, has risen by a factor of five since 1994.

2. Weaknesses
The weaknesses identified for Target Corporation are discussed as follows: Target Corporation is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. Since Target Corporation sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors. The company is has no experienced global expansion that Target Corporation operates stores in the continental United States only. Its largest competitor, Wal-Mart, has stores in Canada, Mexico, and many other countries Small number of super centers: Super centers are revolutionizing the discount store battlefield. Major retailers are opening increasing numbers of super centers across the country. These super centers are one-stop shopping centers where consumers can purchase just about anything from appliances to milk and bread. Underperforming divisions The Marshall Fields division experienced a 30 percent decrease in sales in 2001 and the Mervyns division sales only increased 6 percent. This is disappointing as compared to the Target divisions 15 percent increase. Market Share Although Target Corporation is the fourth largest general merchandise retailer in the United States, there is great potential for Target to increase its market share. Combined sales in 2001 for the five largest general merchandise retailers in the United States were over $366 billion. Target Corporations 2001 sales were $38.9 billion, approximately 11 percent.

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 Computer Information Systems We did not find any weaknesses in Target Corporation computer information systems.

Internal Factor Evaluation Matrix for Target Corporation

Key Internal Factors Strengths Ongoing development of its employees Supercenters offer one stop shopping Reputation Diverse Customer Base and Product Products and services Satisfaction for Customer oriented Efficient distribution system Large convenient stores Corporate citizenship. Strong Management Leadership Leads industry in information technology Weaknesses Competition Underperforming divisions Market Share Lack of global presence Small number of super centers Weak in control Increased Economies of Scale Environment & Operations continued Expansion Pace (growth Orientation) TOTAL Rating: 1 = Major Weakness 2 = Minor Weakness 3 = Minor Strength 4 = Major Strength 0.05 0.05 0.025 0.05 0.025 0.025 0.025 0.05 0.025 1.00 1 1 2 2 2 1 1 2 1 0.05 0.05 0.05 0.1 0.05 0.025 0.025 0.1 0.025 2.875 Weight 0.05 0.10 0.05 0.10 0.05 0.05 0.10 0.05 0.05 0.05 0.025 Rating 3 4 3 3 4 4 4 3 4 3 4 Weighted Score 0.15 0.4 0.15 0.3 0.2 0.2 0.4 0.15 0.2 0.15 0.1

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* The strengths are determined by how important that quality is to Target Corporation and how hard of an impact each has against other businesses. Target Corporations has three major strengths are their efficient distribution system, Diverse Customer Base and Product and their Supercenters offer one stop shopping. Target have the ability to do a very good job of capitalizing on these strengths, strong management leadership and offer its stores next-day delivery in order to ensure that there are no stock-outs of inventory. Target has a reputation for offering quality trend-setting merchandise ant very competitive prices. * Target Corporations has Two major weakness is their underperforming division, Marshall Fields. Sales at Marshall Fields stores have decreased in recent years because Target has not done a very job of minimizing this weakness and a lack of global presence so it received the lowest weight of .05. Global presence is not as important to Target Corporation because of its large presence in United States, but Target could develop strategies to tap into this very large marketplace. * Target Corporations total weighted score of 2.875 indicates that they are slightly above average in formulating strategies that capitalize on their strengths and minimize their weaknesses.

Summary of Financial Ratios in Target Corporation

Explanation
Current assets ------------------------------Current liabilities Current assets - Inventory ------------------------Current liabilities
This ratio indicates the extent to which current assets, if liquidated, would cover current liabilities. A stringent test that indicates if a firm has enough short-term assets (without selling inventory) to cover its immediate liabilities. It is ratio, indicating whether liabilities could be paid without selling inventory.

2003

2002

ratio

1.59

1.37

tio

0.84

0.61

15

sset

Total Debt ------------------------------Total assets Total Debt ------------------------------Total Equity Long term Debt ------------------------------Total Equity Sales ------------------------------Fixed Assets Sales ------------------------------Total Assets

This ratio measures financial position. The debt/asset ratio compares total debt obligations owed against the value of total assets. This ratio measures financial position and reflects the extent to which debt capital is being combined with equity capital. The balance between debt and equity in company long term capital structure' Sales productivity and plant and equipment utilization Indicates the relationship between assets and revenue. This ratio is useful to determine the amount of sales that are generated from each dollar of assets. These three profit margin ratios state how much profit the company makes for every dollar of sales. .The profit margin ratio provides clues to the company's pricing, cost structure and production efficiency. The operating margin ratio determines whether the fixed costs are too high for the production volume. The net profit margin, measures trading profit relative to sales revenue. Return on total assets is a measure of profit in relation to the total assets invested in the business; This ratio measures the ability of general management to utilize the total assets of the business in order to generate profits. This ratio measures the rate of return on equity capital employed in the farm business. The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an

0.39

0.37

1.14 1.18 1.02 1.07

tio

rm

tio

sets r

3.1

3.2

1.7

1.8

atios

Sales Cost 0f goods sold ------------------------------Sales Earning before interest and taxes EBIT ------------------------------Sales Net profit before interest and taxes ------------------------------Sales revenue Net income ------------------------------Total Assets

33.4%

31.7%

9.2%

7.9%

3.77%

3.43%

n ets

6.27%

6.27%

ity

Net income ------------------------------Total stockholder equity Net income ------------------------------Number of shares of

19.13%

19.00%

Per PS

19.9%

9.4%

16

common stock outstanding

ning

Market price of the share Earning per share (EPS)

indicator of a company's profitability. Statement analysis and other measures. The Price/Earning ratio or the PE ratio is the term commonly used to assess the fairness of the stock price. Indicate a lack of confidence in the company's ability to maintain earnings growth.

19.2

N/A

Stage 2: The Matching Stage

The matching stage is a process of matching internal factors with external factors by using one or more five techniques in any sequence. These techniques are 1. The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, 2. The Strategic Position and Action Evaluation (SPACE) Matrix, 3. The Boston Consulting Group (BSG) Matrix, 4. The Grand Strategy Matrix, 5. The Internal-External (IE) Matrix.

1). the Strengths - Weaknesses - Opportunities - Threats (SWOT) Matrix:

The (SWOT) Matrix is an important matching tool that helps managers develop four types of strategies: 1. Strengths-Opportunities (SO) 2. Weaknesses-Opportunities (WO) 3. Strengths-Threats (ST) 4. Weaknesses-Threats (WT)

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The Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix: This matrix helps to create four types of strategies: SO Strategies, WO Strategies, ST Strategies, and WT Strategies.
Strengths:
1. Ongoing development of its employees. 2. Supercenters offer one stop shopping. 3. Reputation. 4. Diverse Customer Base and Product. 5. Products and services. 6. Satisfaction for Customer oriented. 7. Efficient distribution system 8. Large convenient stores. 9. Corporate citizenship. 10. Strong Management Leadership. 11. Leads industry in information technology.

Weaknesses:
1. 2. 3. 4. 5. 6. 7. 8. 9. Competition Underperforming divisions Market Share Lack of global presence Small number of super centers Weak in control Increased Economies of Scale environment & Operations continued Expansion Pace (growth Orientation)

Opportunities:
1. 2. 3. Consumers want ease of shopping. Internet shopping growing. Better educated and more affluent consumers. 4. Increased disposable income 5. Financial Services- (credit cards) 6. Expanding economy. 7. Similar shopping patterns worldwide. 8. Retail sales expected to increase. 9. Environment conscious consumers and Increased social awareness 10. Growing Industry/ greater demand for products. 11. Demand for Top quality, luxury, comfort. 12. Technology (Internet, credit cards, reservations)

SO Strategies:
Advertise more for shopping on-line (S1, O2) Promote quality products (S5-S7-O3O4) 3. Increase awareness of Target's philanthropic activities (S10-O9)

WO Strategies:
Open more super centers (W5, O6). Expand into markets in Mexico and Canada (W4-O6)

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Threats:
1. 2. 3. 4. 5. 6. 7. Substitute products more easily because of intense competition. Competition offers better quality/comfort. Aging population. Rising interest rates. Increase in online shopping. Trend is toward super centers. Decreased Customer Spending.

ST Strategies:
New products and services for older society (S5-T3) Build more Supercenters for the increased demand for one stop shopping (S2, T2) Increase awareness of online shopping convenience and benefits (S7-T5)

WT Strategies:
Open more super centers (W5, T6) Expand into markets in Canada & Mexico (W4 T6). Increase awareness of on-line shopping convenience and benefits (W3, T5) Sell underperforming divisions(W2, T4)

TOWS Summary in Target Corporation Strengths-Opportunities (SO) Strategies The SO alternative strategies for Target Corporation are to present their quality products and philanthropic activities because Target can use their reputation for quality products and services to promote to todays better-educated and more comfortable society in order to increase sales to this market. Targets efficient distribution system will allow them to provide customers with a wide selection of options and Targets management team identifies the importance of corporate social responsibility. Weaknesses-Opportunities (WO) Strategies The WO for Target Corporation is to open additional super centers in order to take advantage of the growing economy to sell all or part of these divisions in order to minimize their Targets financial performance and to expand into markets in Mexico and Canada because Target is at this time not concerned in foreign markets and Target should seek to overcome is their underperforming divisions that are not contributing to Targets growth. Strengths-Threats (ST) Strategies The ST for Target Corporation is to needs to develop new products and services in order to increase share market segment that will help to increase their on the whole sales revenues and developing an advertising program to promote their electronic retailing division target direct. Weaknesses-Threats (WT) Strategies The WT strategies for Target Corporation are to open additional super centers, expand into markets in Canada and Mexico, advertise online shopping convenience and benefits, and to sell underperforming divisions that will increase Targets ability to compete with existing super centers and will give the ability to increase sales by developing this new market and efforts on developing Target division. Based on the TOWS Matrix, the following possible strategies were identified: Horizontal Integration Market Penetration Market Development 19

Product Development Concentric Diversification Retrenchment Joint Venture

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2). Strategic Position & Action Evaluation (SPACE) Matrix

It is another important Stage 2 matching tool and its four-quadrant framework indicates: 1. Aggressive 2. Conservative 3. Defensive 4. Competitive Overall Strategic position determined by: 1. Financial Strength [FS] 2. Competitive Advantage [CA] 3. Environmental Stability [ES] 4. Industry Strength [IS]

S.P.A.C.E. Matrix
FINANCIAL STRENGTH
* Target Corp. had 9.7% sales growth in 2001 compared to 2.7% for comparable stores * Target Corp. gross profit margin increased to .32 in 2001 from .31 in 2000 6 5

Average score for financial strength INDUSTRY STRENGTH

* Retail industry has potential for steady sales growth * Internet shopping increasing * Retail industry has potential for increased profit growth

5.5
6 3 6

Average score for industry strength ENVIRONMENTAL STABILITY

* Retail industry takes large capital investment to enter * Low rate of inflation * Population is aging * Population is growing

5
-2 -3 -4 -4 -3.25 -1 -3 -3

Average score for environmental stability COMPETITIVE ADVANTAGE

* Target Corp. sales growth for past four years has exceeded comparable stores * Target Corp. has excellent distribution system * Target Corp. reputation for quality products Average score for competitive advantage

-2.33

CONCLUSION
IS Average is 15/3 = 5.00 CA Average is -7/3 = -2.33 FS Average is 11/2 = 5.50 ES Average is -13/4 = -3.25 Directional Vector Coordinates: x-axis (IS + CA) 5.00 + (-2.33) = 2.67

y-axis (FS + ES) 5.50 + (-3.25) = 2.25

The variables of the SPACE matrix for Target Corporation are: Financial Strength Target Corp. had received a rating of +6 and Targets gross profit margin received a rating of +5. The total average score is +5.50. Industry Strength The retail industry has the potential for steady sales growth and the potential for increased profit growth received ratings of + 6 each because the public will always need the products The growth of Internet shopping is a potential threat to the industry. This factor received a rating of +3. The average score is +5. Environmental Stability The general merchandise retail industry is received a rating of -2. The inflation rate has been received rating of -3. The composition of the population is, the world population has been received a rating of 4 because of these changing trends. The average score is 3.25. Competitive Advantage Target Corporations sales growth has exceeded that received a rating of 1. Targets distribution system received a rating of 3. Target Corporation has a reputation for quality products at competitive prices received a rating of 3 also. The average score is 2.33.

S.P.A.C.E. Matrix Graph

Target Corporations directional vector is located in the Aggressive quadrant is an excellent position to use its internal strengths to: 1. Take advantage of external opportunities, 2. Overcome internal weaknesses and 3. Avoid external threats. Target Corporation a financially strong firm that has achieved major competitive advantages in a growing and stable industry. The appropriate Strategies in SPACE matrix for Target Corporation are: Market penetration, Market development, Product development, Backward integration, Forward integration, Horizontal diversification, Or a combination strategy all can be feasible, depending on the specific statuses that face the firm.

3). The Internal-External (IT) Matrix:

The IE Matrix is tool involve plotting organization divisions in a schematic diagram. The IE Matrix based on two key dimensions: The IFE total weighted scores on the x-axis. The EFE total weighted scores on the y-axis. The IFE Total Weighted Score
Strong 3.0 to 4.0 High 3.0 to 3.99 I Average 2.0 to 2.99 II Weak 1.0 to 1.99 III

The EFE Total Weighted Score

Medium 2.0 to 2.99

IV

VI

Low 1.0 to 1.99

VII

VIII

IX

Hold and maintain

* Target Corporation Divisions that fall into cell V can be managed best with hold and maintain strategies; market penetration and product development are two commonly employed strategies for these types of divisions.

4). Grand Strategy Matrix

Target Corporation located on Quadrant I of the Grand Strategy Matrix are in an excellent strategic position because Target Corporation Concentration on current markets and products, strong competitive position because of their ability to increase sales above their competition and a financially strong company that has experienced a steady rate of growth because Consumers need for general merchandise will continue to grow and become more comfortable.

Grand Strategy Matrix

RAPID MARKET GROWTH

Quadrant II
* Market development * Market penetration * Product development * Horizontal integration * Divestiture * Liquidation
WEAK STRONG COMPETITIVE POSITION

Quadrant I
* Market development * Market penetration * Product development * Forward integration * Backward integration * Horizontal integration * Concentric diversification

COMPETITIVE

Quadrant III
* Retrenchment * Concentric diversification * Horizontal diversification * Conglomerate diversification * Liquidation

Quadrant IV
* Concentric diversification * Horizontal diversification * Conglomerate diversification * Joint ventures

SLOW MARKET GROWTH

Summary of Matrix Analysis

Alternative Strategies Forward Integration Backward Integration Horizontal Integration Market Penetration Market Development Product Development Concentric Diversification Conglomerate Diversification Horizontal Diversification Joint Venture Retrenchment Divestiture Liquidation (SPACE) IE Matrix X X X X X X X X X X Grand TOWS Total X X X X X X X 2 2 2 4 4 3 2 0 1 1 1 0 0

X X X X X

* The results of the Matrix Analysis for Target Corporation exposed that the most attractive strategies for Target Corporation to pursue, with market development strategies and Market Penetration. Also, the results of the integration strategies revealed that Forward, Backward and horizontal strategies the equal for this set of strategies but Target might consider purchasing a weaker competitor, such as K-Mart, and turn the company around using their existing strengths if they decided to pursue horizontal. The results of the diversification strategies exposed that concentric diversification strategies would be the most attractive strategy for this set of strategies. Target could consider adding new products related to their current product line. This might include adding products for online purchaser or products that appeal to an older generation. Therefore, Target could not consider defensive strategies among the strategies to implement.

Stage 3: The Decision Stage

The decision stage is the process of putting all the feasible alternative strategies together in the Quantitative Strategic Planning (QSPM) Matrix in order to determine the relative attractiveness of each potential strategy.

Quantitative Strategic Planning Model [QSPM]

Strategic Alternatives
Key Internal Factors Weight Build more Supercenters for the increased demand for one stop shopping Expand into markets in Canada & Mexico

Strengths Ongoing development of its employees Supercenters offer one stop shopping Reputation Diverse Customer Base and Product Products and services Satisfaction for Customer oriented Efficient distribution system Large convenient stores Corporate citizenship Strong Management Leadership Leads industry in information technology Weaknesses Competition Underperforming divisions Market Share Lack of global presence Small number of super centers Weak in control Increased Economies of Scale environment & Operations continued Expansion Pace (growth Orientation) SUBTOTAL Opportunities Consumers want ease of shopping Internet shopping growing Better educated and more affluent consumers Increased disposable income Financial Services- (credit cards) Expanding economy Similar shopping patterns worldwide Retail sales expected to increase Environment conscious consumers and Increased social awareness Growing Industry/ greater demand for products Demand for Top quality, luxury, comfort Technology (Internet, credit cards, reservations) Threats Substitute products more easily because of intense competition Competition offers better quality/comfort Aging population Rising interest rates Increase in online shopping

0.05 0.10 0.05 0.10 0.05 0.05 0.10 0.05 0.05 0.05 0.025 0.05 0.05 0.025 0.05 0.025 0.025 0.025 0.05 0.025 1.00 0.05 0.1 0.05 0.1 0.05 0.05 0.1 0.05 0.05 0.05 0.025 0.075

AS 4 3 2 4 4 _ 4 4 _ 3 4 4 4 _ 4 4 3 3 4 4 AS 3 2 2 3 4 _ 4 4 _ 2 4 4 3

TAS 0.2 0.3 0.1 0.4 0.2 0 0.4 0.2 0 0.15 0.1 0.2 0.2 0 0.2 0.1 0.075 0.075 0.2 0.1 3.2 TAS 0.15 0.2 0.1 0.3 0.2 0 0.4 0.2 0 0.1 0.1 0.3 2 0.15 0.1 0.05 0.2 0.1 1 1 2 3

AS 3 2 3 2 3 _ 2 3 _ 3 2 2 3 _ 2 3 2 2 2 3 AS 4 3 2 2 4 _ 2 2 _ 2 4 2

TAS 0.15 0.2 0.15 0.2 0.15 0 0.2 0.15 0 0.15 0.05 0.1 0.15 0 0.1 0.075 0.05 0.05 0.1 0.075 2.1 TAS 0.2 0.3 0.1 0.2 0.2 0 0.2 0.1 0 0.1 0.1 0.15

0.05 0.05 0.025 0.05 0.025

2 2 4 4

0.1 0.05 0.025 0.1 0.075

Trend is toward super centers Decreased Customer Spendi SUBTOTAL SUM TOTAL ATTRACTIVENESS SCORE

0.025 0.025 1.00

_ 4

0 0.1 2.75 5.95

_ 2

0 0.05 2.05 4.15

Legend 1 2 3 4

Not Acceptable Possibly Acceptable Probably Acceptable Most Acceptable

The QSPM for Target Corporation compares the two most feasible alternative strategies to pursue: (1) Build more Supercenters for the increased demand for one stop shopping and (2) Expand into markets in Canada & Mexico. In order to determine the overall ratings of each alternative strategy, the QSPM analysis needed to draw from the previous data in previous matrices and data gathered. After examining the scores of both the strengths, weaknesses, opportunities and threats in comparing these alternative strategies, it would seem that selecting a Build more Supercenters for the increased demand for one stop shopping would be most useful and effective, little risk, as a higher score means a more acceptable alternative.

Recommendations
A review of the Strategic Matrix for Target Corporation showed the most attractive strategies to be market penetration and market development. Target should continue the unique advertising. Continue to invest in R&D for creating innovative products and Continue to compete with Wal-Mart. Target Corporation should establish an annual objective to increase sales revenues for Target stores division, the Mervyns store division and Marshall Fields store division by 15 percent annually. This can be accomplished by setting a goal for increasing sales revenues for each division. The Target stores division has been the best divisional performer for the corporation with sales increasing by 13.1 percent last year for this reason must be increase advertising expenses to promote these new products and to increase the publics awareness of Targets generous corporate governance policies. The Mervyns store division should be increasing the advertising campaigns with the focus on Mervyns competitive prices, and market research on the purchasing preferences of discount store consumers. The research and development department should increase its effort to obtain quality discount merchandise based on the research results from the marketing department. The Marshall Fields store division has been the worse performer for the corporation. Sales revenues decreased 4.8 percent last year and decrease in sales that needs to concentrate market research in order to increase Marshall Fields competitiveness in the marketplace.

Target Corporation should continue to develop its existing markets by increasing its attendance in existing markets and should seek to increase its current market share by 30 percent by 2008. Target Corporation should establish a goal of opening 10 new Target stores in its less ill increase market share, but marketing expenditures advertising, promotion, and research need to be increased annually based on the increase in sales. A market development strategy to be implemented is to establish a goal of opening 25 new Target super centers (Super Targets) by the year 2008.The marketing department should conduct research to determine the best locations for the new stores based on demographics, market segmentation, and include the new stores into the existing distribution system .The human resources department will be responsible for the staffing requirements of the new stores. When Target Corporation peruse market development strategy is to consider opening Target discount stores in Canada and Mexico. The research and development department, along with accounting and finance, should research the feasibility of this strategy and develop a plan for entering these markets.

Epilogue:
Target Corporation is a powerful retail brand that offers a variety of merchandise, quality brands and trendy merchandise all in one store. The purpose of this report is to conduct a study of Target Corporations external and internal environment using the strategic management process and to make specific recommendations for its future. The primary objective of Target Corporation is to maximize shareholder value over time and to increase their number of super centers and to increase the number of stores in less penetrated markets in order to increase sales through a consistent commitment to improving upon previous weaknesses, addressing potential threats, taking advantage of possible opportunities while using their strengths to achieve its objectives and increased success organization. .