Target Corporation (Essay Sample)

Target Corporation
Student’s Name
Institution
Target Corporation
Executive Summary
The retail industry is one of the core industries driving the US economy. It is extremely competitive owing to the low entry barriers, the availability of substitutes and the high threat of competition. It becomes vital for a firm in this industry to embrace the best practices of the retail industry in order to remain relevant and optimize profitability. This paper seeks to determine the best practices in the retail industry with a special focus on Target Corporation, one of the best performing firms in the retail industry. The paper will juxtapose Target Corporation’s performance, marketing and operational strategies against those of immediate competitors to draw comparisons and note the areas that need improvement.
The paper is divided into three parts; the external environment analysis, the internal environment analysis and the final report analysis. The external environment analysis comprises of the general environment trends, the industry environment and the competitor environment segments that analyze the various factors that impact the performance of the firms in the retail industry. The other segments include the future objectives, strategies, driving forces and key success factors. The internal environment analysis contains sections that analyze Target Corporation and its competitors’ resources, capabilities, core competencies and competitive advantage. The final part, analyses the key result areas (KRAs), the company’s policies and decision criteria.
The KRAs (Key Result Areas) included:
* Low interest rates in the U.S: To investigate whether it is wise for the business to borrow under the existing low interest rates.
* Low profit margin: To investigate whether Target Corporation’s cash flow is sufficient and allows it to aptly pay its expenses.
* Relations with employees and customers: Target must focus on the relationship between employees and customers to convert them into its loyal brand ambassadors.
* The number of employee "specialist”: To investigate whether specialists enhance the customer-employee relationship and brand image.
* Owned and exclusive brand management: This key area will show whether owned and exclusive products enhance brand equity, and to what extent.
* Leading industry by forecasting and differentiating capability: Differentiating to create a unique and attractive value proposition through a careful combination of price, merchandise assortment, convenience, guest service, loyalty programs and marketing efforts.
* Improve workplace productivity: It is important to keep employees motivated and productive to enhance the firm’s profitability.
* Seasonal employees’ dependency: Target, being in the retail industry, is affected by seasonality of business. Adjusting work arrangement and schedule should hedge against the adverse effects of seasonality.
Among the key, actionable recommendations is that Target Corporation should increase its sales through intensive marketing and innovative collaborations. It should also increase the number of product lines of owned and exclusive products to boost sales revenue. Target should also closely manage its supply chain to maintain high product quality and should strengthen its information security systems to hedge against data breach and promote digitization of operations. As for the financials, the company should increase its current and quick ratios to avail more funds for its operations.
Conclusion
It is evident that Target Corporation follows most of the retail industry’s best practices. Adherence to these practices have ensured that it has risen to become the second most profitable company in the discount retail industry bettered only by Walmart. It is also clear that Target Corporation is in a healthy financial position as exhibited by the financial ratios such as the quick ratio, the current ratio, debt ratio and account receivable turnover ratio among others most of which are better than the industry average. Target Corporation’s financial ratios that are not favorable with regard to the industry average are not that badly off either. Target Corporation has managed to effectively integrate its vast amount of resources to a working whole that is profitable. Its major tangible resources include its numerous distribution centers spread across the US and Canada, its dutiful employees who embrace the spirit of the company, its use of current technology, corporate citizenship and brand equity. All these resources have been appropriated by Target Corporation to uniquely position the firm in the industry. Consequently, Target Corporation positions itself as a seller of wide range of consumer products at discounted prices, following Walmart’s cue. However, this positioning, though profitable than the ones assumed by other competitors such as Kmart, JC Penney and Macy’s, does not leverage Target’s potential to the fullest. In order for optimization of profitability to be realized, Target would have to expand its customers’ spectrum albeit within its current market positioning. The following recommendations provide the specific details on how Target Corporation can hedge against cut-throat competition in this extremely competitive retail industry.
Recommendations
Target Corporation should undertake to market its products vigorously so as to promote its sales. Even though Target is profitable, its profit margins are still below the industry average. In 2015, for instance, Target registered revenues totaling US $72,618 million translating into a profit margin of 29%, which was three points less than the retail industry average (Target, 2015). The low sales were extremely detrimental in 2014 and are the cause of its unfavorable current and quick ratios. To boost its sales, Target should first roll out a variety of sales promotion strategies, for instance, a points system where frequent shoppers are rewarded. Target has a Shop Your Way points system but it is not robust and is hardly noticeable. Target Corporation will need more vigorous reward system that would entice the customers to increase their spending (Cota-Uyar, 2011).
Target Corporation should also consider reducing the prices of its commodities marginally. This is one of its core competencies which Target Corporation is yet to fully explore. Its sheer size makes pricing not only a marketing strategy but also a key resource and driving force since most other industry players cannot imitate or match Target Corporation in price wars. The retail industry is extremely competitive (Cavusgil, Knight & Riesenberg, 2008). There is little customer loyalty meaning that the buyers’ power is high. There are also many products that can act as substitutes. Marginal price differences therefore can have considerable influence on the fortune of the firms in the retail industry. Since the consumers are price-sensitive, reducing the prices should prove to be a viable strategy to promote sales (Dhar, 2007). However, Target Corporation should take care not to make losses in a bid to attract customers. Price reduction should be complemented with extensive marketing through advertisements, publicity, after sales services, sales promotion and others means that promote awareness and stimulate sales.
Crucially, Target Corporation should expand the number of its own products that it manufactures as they promote the Target brand. Its owned and exclusive products contributed to more than a third of 2014’s revenue total (Target, 2015). This is in spite of the fact that Target Corporation has 16 product lines only. If these lines are expanded, the company’s profitability can also be optimized. The owned and exclusive products represent untapped potential to enhance profitability. Most importantly, Target Corporation can brand its owned and exclusive products with its unmistakable red colored bull’s eye thus growing its brand equity. Other undertakings that can promote sales which the company has attempted to institute include increased collaboration with partners especially in outsourcing of raw materials and designing a better, marketable product mix (Cota-Uyar, 2011).
Target Corporation should also closely manage its supply channels to maintain the high quality of the products it offers. This is extremely important especially since we have recommended that Target Corporation should increase the number of owned and exclusive products it offers. To uphold the good quality, it will be extremely imperative that the company sources for raw materials that are of high quality. As such, even though there are many suppliers that supply the retail sellers, Target Corporation should only contract a few who will deal exclusively with Target Corporation. Such an arrangement will give Target greater control over the quality of raw materials it sources. To further ensure that such an arrangement does not confer unlimited powers to the suppliers, Target Corporation should consider signing long-term contracts with the suppliers to hedge against misuse of the increased power of the suppliers (Porter, 2008).
Target Corporation recently experienced a data breach that resulted in significant losses. The company had to spend a substantial amount of money in recovering the lost data. Target Corporation should, therefore, institute measures to prevent against a similar occurrence in the future. Target Corporation has already instituted measures to hedge against another data breach by changing its credit and debit cards. Currently it uses MasterCard’s chip and have robust PIN system solutions. This will make it almost impossible for thieves to steal data unless they have bot...