TARGETCorporation_5B1_5D.doc - TARGET Corporation

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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) The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix,
2) The Strategic Position and Action Evaluation (SPACE) Matrix,
3) The Grand Strategy Matrix,
4) The Internal-External (IE) Matrix.

Summary of Matrix Analysis

Stage 3: The Decision Stage

Quantitative Strategic Planning Model [QSPM]

Recommendations

Epilogue

2
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 Field’s, and Mervyn’s. 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, Dayton’s and Hudson’s.

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, Dayton’s gone
public and grew through acquisitions.

Hudson’s originally began in 1873 when Joseph Hudson opened a men’s
clothing store in Detroit that offered its customers return privileges and price
marking instead of bargaining. Hudson’s became the largest retailer of men’s
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

3
States. In 1956, Dayton’s built the world’s first fully enclosed shopping mall,
Southdale. In 1962, Dayton’s opened the first Target store. The Dayton Hudson
Corporation formed in 1969 after the acquisition of the family-owned Hudson’s.
Dayton Hudson bought Mervyn’s retail chain of forty-seven stores in 1978, and
Marshall Field’s department stores in 1990. Because the Target division was so
successful, the company changed its name to Target Corporation in 2000.

Vision Statement
We’re 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 best—and 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

4
Category Explanation
Customers Target Corporation’s Provide all Customers the best products and
services with satisfaction under one roof and a wide array of
products and many necessary goods.
Products / Services Provide Products and Services at reasonable prices and will
continue to improve high quality of Products.
Markets It is clearly to show with the concept of “one-stop shopping.”
Technology Grow technically and research capabilities Consumers have been
conveniently provided not only with the use of on-line shopping.
Survival / Growth / Target Corporation’s team is devoted to everything that has
Profitability accomplished as a universal competitor and
to strive to be the best in the retail industry
Philosophy Create and offer an environment in which satisfied customers,
highest quality services at the lowest price.
Self-Concept Quality / safety by providing benefits for excellent performance,
clean environments to work in, and by providing equal-opportunity
for all individuals.
Concern for Public Image Aim to be the leading public relations in the retail industry in the
USA and hopes of providing well- education.
Concern for Employees Be a major force in high performance for employees and
workforce and retaining employees of good moral standing.

Although Mr. Ulrich’s 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 2). Competitive Profile 3). Internal Factor
Evaluationatrix (EFE) Matrix (CPM) 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:

5
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
competitor’s 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 Corporation’s 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

6
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 low-
cost 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 1990’s 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.

7
External Factor Evaluation Matrix for Target Corporation

Key
Weighted
External Weight Rating
Score
Factors
Opportunities:
 Consumers want ease of shopping 0.05 3 0.15
 Internet shopping growing 0.1 3 0.3
 Better educated and more affluent
0.05 0.1
consumers 2
 Increased disposable income 0.1 4 0.4
 Financial Services- (credit cards) 0.05 4 0.2
 Expanding economy 0.05 2 0.1
 Similar shopping patterns worldwide 0.1 2 0.2
 Retail sales expected to increase 0.05 2 0.1
 Environment conscious consumers 4
0.05 0.2
and Increased social awareness
 Growing Industry/ greater demand for 2
products 0.05 0.1

 Demand for Top quality, luxury, 3
comfort 0.025 0.075

 Technology (Internet, credit cards, 3
reservations) 0.075 0.225

Threats:
 Substitute products more easily
0.05 0.05
because of intense competition 1
 Competition offers better 1
0.025 0.025
quality/comfort
 Aging population 0.05 1 0.05
 Rising interest rates 0.025 2 0.025
 Increase in online shopping 0.025 3 0.05
 Trend is toward super centers 0.025 1 0.075
 Decreased Customer Spending 0.05 1 0.05
TOTAL 1.00 2.475
Rating: 1 = Poor Response 2 = Average Response
3 = Above Average Response 4 = Superior Response

* Target Corporation’s has main opportunities that we identified were increasing
Internet shopping; ease of shopping .The increase in on-line shopping is the

8
most important factor affecting the industry. Target Corporation has an electronic
retailing division called target direct. Consumers can access online shopping
services through Target Corporation’s 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. Target’s 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 Corporation’s 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.

Rating Target Wal-Mart JC Penny K-mart
Critical Success
Rating Weighted Rating Weighted Rating Weighted Rating Weighted
Factors
Score Score Score Score
Advertising 0.20 4 0.8 3 0.6 2 0.4 3 0.6
Global
0.10 2 0.2 4 0.4 2 0.2 3 0.3
expansion
Price
0.10 3 1.20 4 0.4 1 0.1 3 0.3
Competitiveness
Financial
0.15 3 0.40 4 0.6 2 0.3 2 0.3
Position
Product Quality 0.10 4 0.40 3 0.3 3 0.3 2 0.2
Customer
0.10 3 0.40 3 0.3 2 0.2 2 0.2
Loyalty
Market Share 0.05 3 0.60 3 0.15 2 0.1 1 0.05
Reputation 0.10 4 0.40 4 0.4 3 0.3 3 0.3
Management
0.10 3 0.40 2 0.2 2 0.2 2 0.2
Practices
Total 1.00 3.3 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.

9
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 Wal-Mart 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
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.

10
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,
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

11
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, store-
by-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
Mervyn’s, Marshall Field’s, and Target retail outlets cater to all income groups.
Mervyn’s, with stores primarily in California, caters to lower-to-middle income
shoppers. Marshall Field’s department stores are strong in the upper Midwest,
with a significant share of the markets in Detroit, Chicago, and Minneapolis.
Target’s upscale general merchandise stores are spread across the country and
account for nearly 80 percent of the company’s 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
Corporation’s 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, Target’s stock price, adjusted for splits,
has risen by a factor of five since 1994.

12
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 Field’s division experienced a 30 percent decrease in sales in 2001
and the Mervyn’s division sales only increased 6 percent. This is disappointing as
compared to the Target division’s 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 Corporation’s 2001 sales were
$38.9 billion, approximately 11 percent.
 Computer Information Systems
We did not find any weaknesses in Target Corporation computer information
systems.

13
Internal Factor Evaluation Matrix for Target Corporation

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

* 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 Corporation’s 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.

14
* Target Corporation’s has Two major weakness is their underperforming
division, Marshall Field’s. Sales at Marshall Field’s 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 Corporation’s 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 2003 2002
Ratio

This ratio indicates the extent to
Current assets
which current assets, if liquidated,
------------------------------- would cover current liabilities.
Current ratio 1.59 1.37
Current liabilities

Current assets - Inventory A stringent test that indicates if a
firm has enough short-term assets
-------------------------
(without selling inventory) to cover
Quick Ratio Current liabilities its immediate liabilities. It is ratio, 0.84 0.61
indicating whether liabilities could
be paid without selling inventory.
This ratio measures financial
Total Debt
position. The debt/asset ratio 0.37
Debt to asset ------------------------------- 0.39
compares total debt obligations
ratio Total assets owed against the value of total
assets.
This ratio measures financial 1.14
Total Debt
position and reflects the extent to
------------------------------- which debt capital is being
1.18
Debt to Total Equity
equity ratio combined with equity capital.

Long-Term 1.02
Long term Debt The balance between debt and
Debt-to- ------------------------------- equity in company long term 1.07
Equity ratio Total Equity capital structure'

15
Sales
Fixed Assets Sales productivity and plant and
------------------------------- equipment utilization
3.1 3.2
Turnover Fixed Assets
Indicates the relationship between
assets and revenue. This ratio is
Sales
Asset useful to determine the amount of
------------------------------- sales that are generated from each
1.7 1.8
Turnover Total Assets dollar of assets.

These three profit margin ratios
state how much profit the company
Sales – Cost 0f goods sold makes for every dollar of
Profit
------------------------------- sales. .The profit margin ratio 33.4% 31.7%
margin ratios Sales provides clues to the company's
pricing, cost structure and
production efficiency.
Earning before interest The operating margin ratio
The determines whether the fixed costs
and taxes EBIT
operating are too high for the production 9.2% 7.9%
-------------------------------
margin volume.
Sales
Net profit before interest
The net profit margin, measures
Net profit and taxes
trading profit relative to sales 3.77% 3.43%
margin ------------------------------- revenue.
Sales revenue
Return on total assets is a measure
Net income of profit in relation to the total
Return on ------------------------------- assets invested in the business;
Total Assets Total Assets This ratio measures the ability of 6.27% 6.27%
(ROTA) general management to utilize the
total assets of the business in order
to generate profits.
Rate of Net income
This ratio measures the rate of
-------------------------------
return on return on equity capital employed 19.13% 19.00%
Total stockholder equity in the farm business.
farm equity
Net income The portion of a company's profit
------------------------------- allocated to each outstanding share
of common stock. EPS serves as an
Earnings Per Number of shares of
indicator of a company's 19.9% 9.4%
Share - EPS common stock profitability.
outstanding 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-earning Market price of the share
price. Indicate a lack of confidence 19.2 N/A
Ratio Earning per share (EPS) in the company's ability to
maintain earnings growth.

16
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)

17
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: Weaknesses:
1. Ongoing development of its 1. Competition
employees. 2. Underperforming divisions
2. Supercenters offer one stop 3. Market Share
shopping. 4. Lack of global presence
3. Reputation. 5. Small number of super centers
4. Diverse Customer Base and 6. Weak in control
Product. 7. Increased Economies of Scale
5. Products and services. 8. environment & Operations
6. Satisfaction for Customer oriented. continued
7. Efficient distribution system 9. Expansion Pace (growth
8. Large convenient stores. Orientation)
9. Corporate citizenship.
10. Strong Management Leadership.
11. Leads industry in information
technology.

Opportunities: SO Strategies: WO Strategies:
1. Consumers want ease of Advertise more for shopping on-line Open more super centers (W5, O6).
shopping. (S1, O2) Expand into markets in Mexico and
2. Internet shopping growing. Promote quality products (S5-S7-O3- Canada (W4-O6)
3. Better educated and more affluent O4)
consumers. 3. Increase awareness of Target's
4. Increased disposable income philanthropic activities (S10-O9)
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)

Threats: ST Strategies: WT Strategies:
1. Substitute products more easily New products and services for older Open more super centers (W5, T6)
because of intense competition. society (S5-T3) Expand into markets in Canada &
2. Competition offers better Build more Supercenters for the Mexico (W4 –T6).
quality/comfort. increased demand for one stop Increase awareness of on-line shopping
3. Aging population. shopping (S2, T2) convenience and benefits (W3, T5)
4. Rising interest rates. Increase awareness of online shopping Sell underperforming divisions(W2,
5. Increase in online shopping. convenience and benefits (S7-T5) T4)
6. Trend is toward super centers.
7. Decreased Customer Spending.

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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. Target’s efficient
distribution system will allow them to provide customers with a wide selection of
options and Target’s 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 Target’s 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 Target’s 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
Target’s 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
 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 6
* Target Corp. gross profit margin increased to .32 in 2001 from .31 in 2000 5
Average score for financial strength 5.5
INDUSTRY STRENGTH
* Retail industry has potential for steady sales growth 6
* Internet shopping increasing 3
* Retail industry has potential for increased profit growth 6
Average score for industry strength 5
ENVIRONMENTAL STABILITY
* Retail industry takes large capital investment to enter -2
* Low rate of inflation -3
* Population is aging -4
* Population is growing -4
Average score for environmental stability -3.25

COMPETITIVE ADVANTAGE
* Target Corp. sales growth for past four years has exceeded comparable stores -1
* Target Corp. has excellent distribution system -3
* Target Corp. reputation for quality products -3
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

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The variables of the SPACE matrix for Target Corporation are:
 Financial Strength
Target Corp. had received a rating of +6 and Target’s 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 Corporation’s sales growth has exceeded that received a rating of –1.
Target’s 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

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Target Corporation’s 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.

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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 Average Weak
3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
High I II III
3.0 to 3.99

Medium IV V VI
The EFE Total 2.0 to 2.99
Weighted Score

Low VII VIII IX
1.0 to 1.99

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 Consumer’s need for general
merchandise will continue to grow and become more comfortable.

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Grand Strategy Matrix
RAPID MARKET GROWTH

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

WEAK STRONG
COMPETITIVE COMPETITIVE
POSITION

Quadrant III Quadrant IV
* Retrenchment * Concentric
* Concentric diversification
diversification * Horizontal
* Horizontal diversification
diversification * Conglomerate
* Conglomerate diversification
diversification * Joint ventures
* Liquidation

SLOW MARKET GROWTH

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Summary of Matrix Analysis

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

* 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.

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Quantitative Strategic Planning Model [QSPM]
Strategic Alternatives
Key Internal Factors Weight Build more Supercenters for the Expand into markets
increased demand for one stop shopping in Canada & Mexico
Strengths AS TAS AS TAS
Ongoing development of its employees 0.05 4 0.2 3 0.15
Supercenters offer one stop shopping 0.10 3 0.3 2 0.2
Reputation 0.05 2 0.1 3 0.15
Diverse Customer Base and Product 0.10 4 0.4 2 0.2
Products and services 0.05 4 0.2 3 0.15
Satisfaction for Customer oriented 0.05 _ 0 _ 0
Efficient distribution system 0.10 4 0.4 2 0.2
Large convenient stores 0.05 4 0.2 3 0.15
Corporate citizenship 0.05 _ 0 _ 0
Strong Management Leadership 0.05 3 0.15 3 0.15
Leads industry in information technology 0.025 4 0.1 2 0.05
Weaknesses
Competition 0.05 4 0.2 2 0.1
Underperforming divisions 0.05 4 0.2 3 0.15
Market Share 0.025 _ 0 _ 0
Lack of global presence 0.05 4 0.2 2 0.1
Small number of super centers 0.025 4 0.1 3 0.075
Weak in control 0.025 3 0.075 2 0.05
Increased Economies of Scale 0.025 3 0.075 2 0.05
environment & Operations continued 0.05 4 0.2 2 0.1
Expansion Pace (growth Orientation) 0.025 4 0.1 3 0.075
SUBTOTAL 1.00 3.2 2.1
Opportunities AS TAS AS TAS
Consumers want ease of shopping 0.05 3 0.15 4 0.2
Internet shopping growing 0.1 2 0.2 3 0.3
Better educated and more affluent consumers 0.05 2 0.1 2 0.1
Increased disposable income 0.1 3 0.3 2 0.2
Financial Services- (credit cards) 0.05 4 0.2 4 0.2
Expanding economy 0.05 _ 0 _ 0
Similar shopping patterns worldwide 0.1 4 0.4 2 0.2
Retail sales expected to increase 0.05 4 0.2 2 0.1
Environment conscious consumers and Increased social 0.05 _ _
awareness 0 0
Growing Industry/ greater demand for products 0.05 2 0.1 2 0.1
Demand for Top quality, luxury, comfort 0.025 4 0.1 4 0.1
Technology (Internet, credit cards, reservations) 0.075 4 0.3 2 0.15
Threats
Substitute products more easily because of intense 3 2
competition 0.05 0.15 0.1
Competition offers better quality/comfort 0.05 2 0.1 1 0.05
Aging population 0.025 2 0.05 1 0.025
Rising interest rates 0.05 4 0.2 2 0.1
Increase in online shopping 0.025 4 0.1 3 0.075
Trend is toward super centers 0.025 _ 0 _ 0
Decreased Customer Spendi 0.025 4 0.1 2 0.05
SUBTOTAL 1.00 2.75 2.05
SUM TOTAL ATTRACTIVENESS SCORE 5.95 4.15

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Legend
1 Not Acceptable
2 Possibly Acceptable
3 Probably Acceptable
4 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 Mervyn’s store division and Marshall
Field’s 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 public’s awareness of Target’s generous corporate governance policies.
The Mervyn’s store division should be increasing the advertising campaigns with
the focus on Mervyn’s 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 Field’s 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
Field’s 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

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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 Corporation’s 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.
.