Solution of Target Corporation

CASE 20: TARGET CORPORATION

Company analysis

Target Corporation is a discount retailer who focused on creating customer’s shopping experience, treating them as guests with the slogan of “Expect more, Pay less”. The company main competitors are Wal-Mart and Costco which compete mainly on price competition strategy. Especially for Wal-Mart, they always compete in the same geographic area with thousands of same products offering.

Because of razor-thin margin from intense competition in retail industry, every aspects in income statement is very significant for company profit and growth. To survive and success in this business, the ability to control operation cost and improve sale growth is very essential.

Most companies strive to control cost by apply the JIT inventory management, low-cost of distribution networks and pressure suppliers to accept low price. Two main sources of sale growth for retail business come firstly from establishing new stores which can get access to the new market and earn more band awareness and secondly from increasing sale volume of their existing stores. Target management team plans to open approximately 100 new stores per year to achieve their growth strategy. However, this growth objective would be affected by economic health as well.

Hence, We realize that only NPV alone is not enough to justify the project winner, we also need to take into account of other economic indicators including Risk/Opportunity (sensitivity test) of each project, Demographic data such as number of population, population growth, income and education of people in interested area, and so forth.

Problem Statement

Each month the Capital Expenditure Committee (CEC) have to determine which projects best fit with Target’s future store growth and capital expenditure plan. They faced with 5 difficult projects to invest including 4 new stores openings which are Gopher Place, Whalen Court, The Barn, and Goldie's Square and 1 renovate store which is Stadium Remodel. CEC have to make the decision on raking projects’ attractiveness and which project to approve or drop.

Recommendation

To evaluate those complex projects, we construct our ranking system using the combination of three critical inputs which are financial objective of the company, brand awareness of the customers, and the area attractiveness. Challenge here is how to quantify some factors that normally defined as qualitative topics.