team 2 shawn buck ashley burnett whitney horton kelly riester jennifer shotts sam snelling mickea...
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Team 2Shawn Buck
Ashley Burnett
Whitney Horton
Kelly Riester
Jennifer Shotts
Sam Snelling
Mickea Smith
Company Situation Analysis for Target
TargetFounded by the Dayton Company in 1962.Dayton was previously focused on
department stores and bringing European quality to the mid west.
They were able to keep customer loyalty by offering name brands at discounted prices.
In 2000 the Dayton Hudson company officially changed their name to Target.
Since Founding in 1962, Target now operates 1,685 stores and is expanding on a global scale.
Core CompetencyFocus on design.Began with the store layout.In the 90’s Target partnered with the world
famous architect Michael Graves.Target has also partnered with designers
Mossimo Giannuli and Sonia Kashuk.Target also puts on community art
competitions to find up and coming designers.
Wal Mart and K Mart cannot compete on this level
Competitive PositionTarget is currently second to Wal Mart.Continue to compete, even in a troubled
economy.They have effectively differentiated
themselves in their market, making their brand difficult to replace.
Important financial ratios- Profitability
Net profit Margin
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
Target Wal-mart Sears Holding
Net profit Margin
These are the profits you make after interest and taxes for every dollar.
Important financial ratios- Profitability
Return on Assets
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Target Wal-mart Sears Holding
Return on Assets
This is the rate of return that the company is earning on the company’s investment
Important financial ratios-Profitability
Return on Equity
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Target Wal-mart Sears Holding
Return on Equity
This is the rate of return that the company is offering its shareholders.
Important financial ratios-Liquidity
Current Ratio
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Target Wal-mart Sears Holding
Current Ratio
This demonstrates liquidity. For ever dollar of short term debt that they have, they have the number above in current assets to pay
Important financial ratios-Liquidity
Quick Ratio
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Target Wal-mart Sears Holding
Quick Ratio
This is another liquidity measure. It excludes inventory from the ratio, so it only includes cash and cash equivalents to pay off. Current debt above one is wanted
Important financial ratios-leverage
Debt to Equity
0
0.5
1
1.5
2
2.5
Target Wal-mart Sears Holding
Debt to Equity
This means for every one dollar of equity they have the amount above of debt, which means they are leveraged and thus recognized by the tax shield advantage. The Tax shield advantage is recognized by the shareholders and can be explained by the accounting rule that interest is tax deductible. The more debt present in a firm’s capital structure, the more interest payable therefore there is more interest available to be added into after tax income.
Kohl’s financial ratiosKohls
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Gross Profitmargin
Net profitmargin
Return onAsset
Return onEquity
Kohls
Kohls
0
1
2
3
4
5
6
7
CurrentRatio
QuickRatio
Inventoryto NetworkingCapital
Debt toAsset
Debt toEquity
InventoryTurnover
Fixedasset
turnover
Kohls
Worksheet 9.1Target
0% Weak Neutral Strong 100%
Access to Capital when Required
Degree of Capital Utilization
Ease of exit from the market
Profitability, renturn on Investment
Liquidity, Avaiable Internal Funds
Degree of Leverage, Financial Stablility
Ability to compete on prices
Capital Investment, Capacity to meet demands
Stability of Costs
Ability to Sustain effort in Cyclic Demand
Price Elasticity of demand
PIMSAccording to the profit impact of market strategy
the six steps in pims are true. The six steps are as follows:Absolute and relative market share correlate with ROIProduct quality is key to market leadershipROI is positively correlated with market growthVertical integration can help in product life cycleHigh investment intensity leads to less ROICapacity use is critical with a high level of capital
intensity However Wal-mart has broken the mold on this
and does not follow these steps and they are the leader in the discount variety stores, and because of this PIMS is used less frequently today.
Key PeopleMr. Douglas A. Scavanner- TargetMr. Thomas M. Schoewe- Wal-martMr. Michael D. Collins- KmartMr. Wesley S. McDonald- Kohl’s
Target Threat of entry
Large discounters have driven down prices with imports from other countries and slower holiday sales.
Most independent retailers don’t have the margins to compete on price.They have to be creative in finding ways to get people
shopping at their stores. Offering exclusive gift items & giving more
personalized service or hosting event and fund-raisers to lure in more foot traffic.
Powerful Suppliers & BuyersSuppliers
Suppliers are continuously increasing due to the boom in online retailers & large supercenters.
Target stores are able to secure a particular % of certain suppliers business.
Online market gives suppliers additional channels to get their products to consumers but it increases their ability to negotiate for their prices.
Powerful Suppliers & BuyersBuyers
There are usually multiple retailer in one community that offer similar or identical products, buyers are prone to shop at a store based on factors other than loyalty.
This gives the buyers an intermediate level of bargaining power but the suppliers and retailers still control most of the power.
Target:Industry overview
Annual revenue of $130 billion Discount department store Industry
encompasses 5000 individual retail stores.Franchise giants like Target, Wal-Mart, Kmart.
Target has 26 distribution centers in 21 states.Top 8 companies hold 100% of the industry sales.
Products, Operations & Technology• Products
– Major products that are sold in discount stores include apparel (20% of sales)
– Personal Care Products (15%)– Electronics & Groceries ( 7%)– Toys (6%)– Apparel includes women’s, men’s and children’s
clothing.• Target maintains a large product inventory so they are
able to offer high volume discounts.
Products, Operations & TechnologyOperations
Discount department stores inhabit a large portion of the market & require big portions of real estate: the average size is about 100,00 square feet.
Companies like Target, K-mart, & Wal-mart select locations near population centers, other retail centers, or major highways.
Supercenter arrangement averages 180,000 square feet & offers a more wide-ranging merchandise & grocery section.
Products, Operations & TechnologyTechnology
Reduces labor costs and overall operating cost.These systems include automated distribution
centers, point of sale systems (POS), and computerized inventory management systems.
Keeping track of inventory on the floor is done electronically with hand held scanners, bar codes, and radio frequency identification (RFID) tags.
These systems can also be used on a network to connect inventory and sales information across the nation.
Wal-mart has incorporated a satellite communications system to link all its facilities.
Stages in Product Distribution Target
26 distribution centers in 21 statesGiving the ability to fulfill the needs of their stores
within a 24 hour time frameTarget also competes on a cost leadership
strategy but focus more on quality. “Expect more. Pay less”Private labels such as: Massimo & Converse One
StarTarget currently operates 1,685 stores in all
but two states in the U.S. (Vermont & Hawaii)
Core Capabilities• Strategic intent-
– every employee in the organization must understand his or her role and how their actions affect the outcome of the organization.
• Obsessive customer focus– Understanding what customers want
• Innovation and Commercialization– Private labels, customer service, POS, Supply
chain Mgt.• Talent Mgt
– Finding the right people to work and having them in the right places within the organization.
Gregg Steinhafel – Level 5 Leader
Steinhafel and Ulrich have been working together at Target since 1984
Resolve to do what must be doneSteinhafel took a pay cut of a little over 24 percent due to
the failing economy in order for Target to stay afloat Personal Humility
Variety, a popular entertainment magazines describes Gregg by saying:He “keeps his head down when it comes to the news media -- in fact,
his handlers say he has a standing policy not to talk to the trade press.”
Willful and Fearless“Our space, signing, promotional programs and the hundreds
of millions of consumers in our stores annually should not be undervalued.”
-Gregg Steinhafel
Design and EmphasisDesign: Target’s main focus is on innovation,
design, and store experience.Target conveys its design not only through their
floor layout and in-store displays, but also through their media.Catchy commercials targeting youth
Emphasis: “Expect more, pay less,” and “Design for all” essentially embody everything that Target stands for.
TrainingTarget prefers to recruit management at the
college entry level. Target University
A training program for educating future managers and trainers.
The graduates of Target University will eventually go out to the stores and train the store-level employees.
Additionally, each brick-and-mortar store has at least one employee who has attended the Disney training program in order to manage ongoing and new-hire training.
Retention StrategiesHealth Benefits
Full benefits packageDental BenefitsVision BenefitsUse of Target Pharmacy – 10% discount“Team Member LifeResources” counseling program
Private counseling, support, and informationChild care arrangementsElderly care arrangementsHelp developing a healthy dinner menu
Financial SupportAid in saving for retirement through TGT 410(k)
PlanFor every dollar an employee deposits, up to five percent of
their pay, Target matches it dollar-for-dollarDaycare Flexible Spending Account (FSA)
Save before-tax dollars from each paycheck that will be used for qualifying daycare and eldercare expenses
InsuranceCompany-paid life insuranceDisability coverage (short-term)Choice auto and home insurance
Offer group rates from various different insurance companies
BenefitsTeam member discount
10 percentQualified family members can use the discount as well
Tuition reimbursementUp to $3,000 per year, per child
Education loan aidsOffered through Wells Fargo Student Loan programQualified employees may borrow up to $25,000 per year for
expenses such as room and board, books, etc.Home loansHome Buyer’s Assistance programAdoption Assistance Reimbursement program
Up to $5,000 to cover any fees such as application, filing, placement, and/or agency costs, as well as court costs, immigration, translation and/or attorney fees
Benefits (cont.)Group Legal Plan
Gives employees access to legal representation at an affordable price
Childcare discount Up to 10% off weekly tuition at more than 2,500 conveniently
located childcare centersTarget Credit Union
BankingSavings accounts and loan options
“Target Work Perks” - Miscellaneous DiscountsFitness centersCell phone plansComputersClothingFlowersEtc.
Company CultureIn Target stores, guests will always find a clean,
organized, welcoming atmosphere and smart, stylish merchandise.
All Target employees are empoweredEmployees are recognized as part of a winning,
successful team (an asset)“The strength of many, the power of one,”
means that contributions from everyone make one end result that benefits everybody.
Marketing
Target’s Mission: “…delivering outstanding value, continuous innovation and an exceptional guest experience by consistently our ‘Expect More. Pay less’ brand promise.”
96% of Americans recognize the bulls-eye symbol as representing the Target brand.
Target’s brand value was found to be $17.1 billion
AdvertisingIn the year 2008, Target spent roughly
$1 billion on advertising.Recently decided that 3/4ths of their
marketing budget will be spent on advertisements that would show the price of their products.
This would go along with their brand promise, “Expect More. Pay Less”
http://www.youtube.com/watch?v=KdTwVCNKxV8
Store DesignThe store is designed to feel more like a
boutique than a warehouse style store.Store is filled with contemporary
signage, backdrops and linersThese are mostly printed on inexpensive
paper or foam boards“Tar-zhey” the psuedo-French
pronunciation coined to express the designer feel of Target.
Store DesignTarget has been
experimenting with new store designs that enable them to blend within the area.
These include multilevel-building with escalators and elevators
They even designed a new carts for people to use on escalators
New “urban” designs have lead Target to expand into places such as: New York City, New Orleans, Los Angeles, etc.
Target’s target marketMedian customer is around 41 years old Household income of roughly $63,00075% of the customers are made up of
womanMore than 45% of the customers have at
least 1 child80% of Target’s customers have
attended College with around 48% having completed college
Sales ForcesTarget created the “cheap chic” in
response to the demand for cheap but fashionable clothes
Brought in Designers like Isaac Mizrahi and Sonia Kashuk who are high-end designers that developed a lower-end merchandise for Target
They are also experimenting with limited edition designer series
Sales ForcesThe down turn in the Housing market
has affected Target’s sales Target Home goods sales have mirrored
the housing market.The rising cost of Health care has lead
to innovative designs and cheaper medication.
Target Clinic has been introduced in to some store layout to provide cheap and fast healthcare.
Success Stems From….Social responsibility:
$3 million/week awarded to schools throughout the U.S. Recycling programs in every store in a number of different
ways. Carts, carpet, boxes, bags, walls 70% of the store has and will eventually be recycled
Always looking for innovative techniques to drive down cost while retaining quality consumer goods. Through SKU’s, customer feedback
Employees are urged, not mandated, to perform community service (avg. store does 100 hrs./month)
Product lines are big on organics, naturals, energy saving Infant products, domestic products such as linins, lighting
throughout the stores, skin care products- Target brandEven there gift cards are biodegradable!!
Vision: “strengthen families and communities wherever we do business.”
It All Starts With DiversityBelieve this motto
57% of the corporate positions are held by women10% higher than the national average
Have a number of minority scholarship offeredHispanic Sch. Fund, Unit. Negro Fund, Asian Am. Fund
Their corporate partners are from a wide range of backgrounds to “better suit the customer’s needs”Includes employees, marketing, and suppliers Work with independent suppliers, some of which are
women (Wal-Mart can’t say that)Support “free days” for those less fortunate
Over 1,500 events- baseball, museums, carnivals, etc.
Target Coordination“Focused on the efficiency of the process
as opposed to the contribution to expansion.”Porter believed in: short term vision only
breeds short term results.Believe in “healthy relationships
throughout the supply chain.” -Back to success logicWal-Mart will cut long standing suppliers out
of deals for pennies on the dollar.
Innovation“ClearRx”- introduced to the market in
2005“flattened out the label and turned
everything upside-down for easier, more legible bottles”
Reduce and Reuse:PVC : “Polyvinyl chloride”
Certificate of Appreciation from Sec. of StateShopping carts, carpet, gift cards, bags,
electronics Experimenting with “gardens”
More KeysCompromising is the value addition to their
supply chain.“Target spends three-quarters of their
budget on advertising and logistical operations” –Corp. Website
Witty commercials and newspaper advertisements have suppliers at heart.Good business practices
Operations are tied together by: Inbound logistics, surveillance, front of store, back of store, and operations.
Where Target is NowMature CompanyCareful that “dry rot” does not set inA few programs to prevent this
circumstanceProductivity enhancementOrganizational effectiveness and trainingExecutive coachingTeambuilding Effective mentoring
Space Chart AnalysisFinancial strength
Target was ranked 31 out of 500 for largest U.S. Corporations in 2008
Revenue exceeding 65 billionCompetitive Advantage
Quality product and a reasonable price by world-class designers
Targets middle-classInnovation
Clear RxItso Furniture
Space Chart AnalysisIndustry Strength
Number 2 behind WalmartAverage salary of Customer is 60,000Targets middle class, 51% with college
degreesEnvironmental Stability
Active within communities supporting the arts
Active with recycling efforts and uses of alternative energy
A Few Issues…Constantly improve convenience
Instill use of SmartCartStrive for lower prices on their goods
DecreasePrice
Increase CustomerUtility
Goal
Use chart from the book,Blue Ocean Strategy
ConclusionGet the right people on the bus and the
wrong people off of the busRight people are the most important tool
for a successful companyTarget puts prominence on their slogans to
emphasize their goalsTrain employees to work towards the same
goals
ConclusionTarget aims for the middle classWalmart is ahead, but Target is keeping up
soundlyTarget is a sound company, but needs to
make sure they avoid “dry rot”Keep focusing on making shopping more
convenient and driving costs of their quality products down