The History of Target

Target is one of the leading retail stores in the world that providing a vast variety of products

to consumers. From fashionable clothing to school supplies, cleaning products to houseware, Target

has it all. A few examples of what Target provides to consumers consist of: men, women, and

children appeal (both casual and professional), toys, small appliances, casual and athletic shoes,

health and beauty aids, school and office supplies, jewelry and accessories. They also provide to

consumers, food and beverages, stationery, party supplies, home decor and gifts, electronics,

automotive accessories, outdoor sports and fitness accessories, music, movies, books and much

more.

Although Target can satisfy the average consumer’s need, they did become the successful

and large corporation that they are today overnight. Target’s history began in 1902 when George

Dayton opened the first small retail business called Goodfellow in downtown Minneapolis. In 1903,

Dayton changed the company to Dayton Dry Goods Company. However, in 1910 The Dayton Dry

Food company received another name change to The Dayton Corporation. It wasn’t until sixty years

later in 1962 that George Dayton and his company entered the discount merchandising business

with the opening of its first Target store in Roseville Minnesota. Shortly after the successful opening

of Target, Dayton Corporation had its first public offering of common stock in 1967. Then in 1969,

Dayton Corporation merged with J.L Hudson Company (at the time, the world’s largest shopping

center in Detroit), creating Dayton Hudson Corporation (DHC). After the merger of J.L Hudson and

Dayton Corporation (DHC), the retail store Mervyn’s opened creating DHC to the 7th largest U.S.

retailer.

Evidence that DHC was going to stop growing was never an issue; it continued to grow

quickly over the next 30 years. It was then in 1979, that Dayton’s Target store become the

corporation’s top revenue producers. However, it was not until 2000 that Dayton Hudson

Corporation celebrated its change of name to Target Corporation.

Throughout the years, Target grew substantially making them stand out among the rest. In

the 70’s Target paved new ground by implementing electronic cash registers storewide to monitor

inventory and speed up guest services. Target also began hosting an annual shopping event for

seniors and people of disabilities and a toy safety campaign. In the 80’s Target began to open stores

at a rapid pace extending beyond the East Coast. Following the 80’s was the new and innovative

90’s. Target launched its first Target Greatland® store, Club Wedd (a bridal gift registry) and Lullaby

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Club (baby registry) when nationwide. The late 90’s brought about Target opening their first

SuperTarget store, which combined groceries and special services with a Target Greatland store

atmosphere. Target later introduced their credit card and the Target Guest Card service, in which

people would an alternative mean of paying for Target’s products. However, the success of Target’s

history continues. In 2000, the company had its name changed to Target Corporation as a result of

the fantastic performance over the years, thus separating themselves from the Dayton Hudson

Corporation.

Despite the many changes throughout the Dayton Corporation, Target proved to be a worthy

investment. Unlike many of the other mass merchandisers of this time, Target had department store

roots. George Dayton realized the high demand for a store that sold less expensive goods in a quick,

convenient environment. Target was the first retail store to offer well-known national brand

products at a discounted price.

It is clear as to the type of business George Dayton had in mine back in 1902. The clarity of

his motivation and innovation is clear from researching the history of how Target began. It is

interesting to see how his visions and aspirations have continued to this day. This is illustrated by

Target’s mission statement, which states: “Our mission is to be the retailer of choice in the discount,

middle market and department store retail segments. By focusing on trend leadership, excellent

guest service, exciting team member opportunities, and community outreach, we create long-term

shareholder value.” 1

The Current Status of Target

Only in second place behind Wal-Mart, Target is one of the leaders in the industry as far as sales

and revenue. In 2003 Target Corporation had revenues of approximately $48 billion compared to

Industry wide revenues of approximately $279 billion. According to these statistics, this shows that

Target’s market share for 2003 was just above 17%. Target Corporation also owned Mervyn’s and

Marshall Field’s until the summer of 2004. However, 84% of revenues in 2003 were derived from the

Target stores, with Mervyn’s making up 9% with approximately $3.5 billion and Marshall Field’s

making up 6% with $2.5 billion in revenues. Now, as a result of Target selling off the Mervyn’s and

Marshall Field’s divisions costs have been cut extensively. Since these divisions combined only made

1 Email response from Investor Relations

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up 16% of Target’s total revenues, Target looks for revenues to increase significantly in 2004 in their

strong areas of retail.

It comes to no surprise that whenever and where ever people travel, a Target store is not had to

find. Target operates in 47 states with 1,313 stores and 136 Super Target stores. The company is

headquartered in Minneapolis, Minnesota and is looking to keep expanding across the United

States. The majority of Target’s market share are stores located in California with 184 stores, Texas

with 107, Florida with 78, Minnesota with 65, and 62 in Illinois.

Target is also supported by a number of loyal, content employees. Currently, Target has

approximately 328,000 employees nation-wide in 2003. However, these numbers have fluctuated a

bit in 2004 as a result of Target selling off its Mervyn’s and Marshall Field’s divisions and with the

increase of popularity and demand for Target stores nationwide.

The success of Target would not be possible without the relationship it has with their suppliers.

Without their suppliers, there would be no Target around to sell quality goods at a descent price for

everyone to enjoy. Suppliers of Target Corporation include Amy Coe, Isaac Mizrahi, Michael Graves,

Liz Lange, Mossimo, Sonia Kashuk, and Archer Farms just name a few. In order to be a supplier for

Target Corporation, there are certain requirements that must be met. For example, The National or

Regional Minority Supplier Development Council, the Women’s Business Enterprise National

Council, or The U.S. Small Business Administration is certified as one of the major requirement.

Another major requirement to qualify as a supplier of Target Corporation is being part of their

Electronic Data Interchange or EDI. This is how Target communicates with its suppliers and

establishes an efficient and responsive supply chain. Some other requirements for suppliers include

financial stability, the ability to serve multiple companies, a history of successful projects, an

understanding of Target’s business practices, the ability to provide high quality goods that are cost

competitive, compliance with OSHA, and last but not least ethical business conduct.

Even though Target must have an important relationship with their suppliers, there is another

important part of the overall picture of the Target Corporation, the customers. Customers of Target

Corporation cover a wide array of markets and, as with many department stores, there is not a

target or niche market predominantly. Although Target is a retailer that sales to anybody at any age,

the median age of Target’s customers is 45 years old with an average income of approximately

$57,000 annually. Another interesting statistic about Target’s customers is that 90% of the

customers are female, and of that 90%, 39% of those females have children. College students are

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also an important consumer to the Target population holding 44% of the total Target consumer

population.

Target Corporation like any other major retail store has its competitors. Among Target’s main

competitors they consist of Wal-Mart, K-Mart, JC Penny, Costco, Walgreen’s, Best Buy, and

Gottschalks. Other companies that are considered to be competitors include Urban Outfitters, E-Bay,

Williams-Sonoma, May, and Saks.

With this what is known about Target thus far, it is then understandable how important

information technology plays in the overall role of Target. Target Corporation’s use of information

technology and information system is very extensive and serves a number of purposes for the

company. IT and IS play a big part in Target’s supply chain, particularly with the company’s suppliers

and customers. For its suppliers, Target has a designated website that uses Electronic Data

Interchange to facilitate information and communication. This Information system is Target’s

Partner Online system. This system does require suppliers to have EDI in order to be part of Target’s

supply chain. By using EDI payments and other transactions are recorded and taken care of quickly

and reliably. For customers, Target uses a number of information technologies to better serve and

learns about their customers. One information technology that has helped to enhance the

customer’s shopping experience is the company’s real-time customer relationship management

system (CRM) implemented in 2001. Target was one of the first retailers to implement such a

system and has since helped to increase customer satisfaction. Target’s CRM allows the company to

analyze data via the company call center, credit card system, and customer service department. The

system enables Target to determine loyal customers and what products should be promoted to

those customers. In turn, this system also helps Target not only to promote products to customers

who already have loyalty to those products, but not promote products to customers who have no

interest in a particular product. Target can also determine which complimentary products could be

promoted to customers by using their CRM system. By this being a real-time system Target gets

immediate feedback on products and customer satisfaction with those products.

Within the same year (2001) this system was implemented, Target had a database of over 50

million customer profiles. Some of the information that contributes to Target’s CRM system is

Target’s Visa Smart Card. The card was offered in 2001 also and is not just limited to Target and

Target owned stores, the card is accepted everywhere Visa is accepted. The card earned the name

Smart Card because each card has a microchip with 64k of memory to track the customer’s

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shopping. The incentive for customers is the 10% savings earned at any Target or Target owned

store with each purchase by using the Visa Smart Card. By offering incentives with the card, Target

felt as though their customers had more loyalty to the store by earning incentives and using the card

at Target’s stores. A free card reader is also given to each cardholder that can be used to make

secure purchases online and downloading coupons from the Internet.

Target’s use of implementing information technology and information systems did not end

there. They also established Target.com, which is regarded as one the top five online retail websites

on the Internet. While Wal-Mart and K-Mart were in a rush to roll-out their websites in the late

1990’s, sacrificing functionality for speed, Target took its time to develop a website that would

operate appropriately and securely. Target used the website to focus on the customer and

promoting the company’s brands as well as a sales engine. To strength their competitive edge

against their competitors, Target decided to partner with Amazon.com and let Amazon power

Target’s website as a result of Amazon’s expertise with e-commerce. Now the website, like

Amazon’s, uses a 1-Click checkout system using a cyber shopping cart for customers to add to the

products to the shopping cart and checkout and pay for merchandise when ready. With the traffic

that Target.com receives security is a big concern for Target and its customers. So Target

implemented a Secure Socket Layering (SSL) system to protect customers’ purchases. SSL encrypts

the data exchanged between the Web browser of the customer and Target’s server. The system has

proved to work very well with Target.com to ensure the safety of the information about Target’s

customers.

Portor’s Competitive Forces Model applied to Target

In his book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors”,

Michael Porter identifies five competitive forces that shape every single industry and market. All of

the forces defined by Porter’s Five Competitive Forces Model are equally important to the sustained

success of any business, but for Target Corporation the areas of Competitive Rivalry, Threat of New

Entrants, and Threat of Substitutes are the most significant forces affecting the business. The

Bargaining Power of Suppliers and Bargaining Power of Buyers are also significant forces, however,

not as prominent. The use of Porter’s model is beneficial to Target Corporation because it can

provide analysis of everything from the intensity of competition to the profitability and

attractiveness of an industry.

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As the second largest establishment in the discount retailer market, the threat of new

entrants is a concern for Target because it is more susceptible to losing market share than industry

goliath Wal-Mart (Bhatnagar, 2004). As a result of their secondary position, Target would be first to

confront any type of competition from new and upcoming discount retail stores. A store posing

such a threat is Kohl’s. Kohl’s Corporation is a similar type of moderately priced department-store

chain. Kohl’s stores performance surprised Wall Street in August 2002 with a 4 percent increase in

same-store sales (http://money.cnn.com). Kohl’s stores have recently begun showing up in

northern California, which has been a region previously only established by Target and Wal-Mart

stores.

The Power of Suppliers is another one of the forces in Porter’s model that affects the Target

Corporation. Traditionally, the power of suppliers generates from a pressure that suppliers place on

a business. However, in Target’s case, the suppliers seem to be working willingly, and very

cohesively, with Target. In an effort to continue with their “cheap chic” image, Target has taken

many of the artsy wrinkles of the full priced department stores and ironed them out for those on a

tighter budget (Munarriz, 2003). For example, Target has formed partnerships with famed architect

Michael Graves and the fashion gurus at Mossimo. Joint ventures such as these have helped Target

improve its product quality while at the same time reinforcing it’s stance as the smaller, hipper

alternative to other discount department stores. Furthermore, Target has reinforced the strength of

its marketing ingenuity by succeeding with such affiliations and not following the same path as other

ill-fated partnerships, such as Kmart’s collaboration with classy celebrities Jaclyn Smith and Martha

Stewart.

Another significant concern for Target is the Power of Buyers force. As is essential as

obtaining quality products from suppliers, what good is it if nobody buys them? This is why the

pressure buyers (i.e. consumers) place on a business is extremely important to the five forces model

analysis. One reason why the power of buyers is so important is because consumers are able to

switch to another product with relative ease. In Target’s case, such a switch could be buying simple

house and/or personal care items from competitor stores such as Wal-Mart or K-mart.

Furthermore, customers are price sensitive, which means that retailers must be aware of how their

prices compare and contrast to other competitors.

In an attempt to manage the power of buyers to their best ability, Target has chosen to cater

their products to a particular demographic niche. The “target” market for Target is slightly above

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the typical demographics of a discount department store chain. Target lists its customers’ median

income at $57,000 vs. mid-$40,000 for a typical Wal-Mart shopper (Levy, 2004). Furthermore, the

median age of a Target shopper is 44, four out of every five patrons is female, and a little more than

half have completed college (Munarriz, 2003). These characteristics have proven beneficial to

Target as their sales remain strong and continue to grow, even in the face of trying economic times,

including a shaky job market. In addition, industry observers have recognized that while high

gasoline prices appear to have forced Wal-Mart’s lower-income customers to curtail spending,

Target’s more upscale core shoppers have been less affected by higher gas prices (Munarriz, 2003).

The availability of substitutes is another significant threat recognized in Porter’s five forces

model. The majority of the products that Target sells are common home and personal care items,

such as appliances, clothes, furniture, toiletries, electronics, and automotive products. Customers

can very easily find substitute goods for these products at specialty stores, which compete with

specific and superior products for equal or lower price. For example, IKEA and Pottery Barn are

specialty furniture stores which compete with Target. Also, Bed Bath and Beyond is a store that

specializes in home accessories and competes with Target in this market as well.

In addition to the traditional types of substitutes, another threat to Target is On-Line or

catalog shopping. Substitute goods for the products that Target sell can easily be found on the

Internet and/or in the catalogs of competing specialty stores. This is a threat to Target because

there is no need for shoppers to physically go to Target stores if they can simply browse and buy

products via the Internet from the comfort of their own home. However, Target has taken a

proactive approach to combating this particular threat with the conception and operation of their

own on-line shopping domain, Target.com.

Finally, the fifth and most prominent threat to Target is the force of Competitive Rivalry

within the industry. As previously mentioned, in the discount retailer market, the two main players

are Wal-Mart and Target. As the world’s largest retailer, Wal-Mart Stores Inc. operates more than

3,000 discount stores and super centers, compared to Target’s 1,300 establishments (Levy, 2003).

Regardless of the size differences Target has continually performed well in the shadow of its

mammoth competitor. Recent financial history reveals that shares of the Minneapolis-based

discounter are up 31 percent in the past year, compared with a 3 percent decline in Wal-Mart Stores

Inc. stock (Levy, 2004). Having taken notice of such impressive performances, Wall Street’s focus

has been exclusively on the strong same-store sales at Target—sales that have been healthier than

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those at discount rival Wal-Mart (Bhatnagar, 2004). Furthermore, according to the website Target

Corporation reported that its net sales from continuing operations for the four weeks ended

October 30, 2004 increased 12.6 percent to $3.311 billion from $2.940 billion for the four week

period ended November 1, 2003 (www.target.com). This information represents an impressive

trend for Target as it celebrates a 15th consecutive month of better same-store sales gains than

industry giant Wal-Mart stores (Levy, 2004). Described as a “one-stop titan for the bargain hungry

public” (Munarriz, 2003), analysts have attributed Target’s notable performance to the success of its

creative marketing strategy of winning over shoppers by offering them more exclusive brands and

fashionable, yet affordable, merchandise.

Another example of the intense competition between Target and Wal-Mart can be found

right here in the local bay area. As a reported by the American City Business Journals Inc., the red

stores vs. blue stores battle seems to be developing beyond simply competitive stock prices. In the

town of San Leandro, which already has a Wal-Mart store at 1919 Davis St., Wal-Mart Inc. recently

leased property across town at 15555 Hesperian Blvd in what appears to be the first step towards

opening a second operating venue. However, what is strikingly interesting about this situation is

that address happens to the address of a discount store operated by Wal-Mart’s archrival, Target

Corp (Goll, 2004). In what appears to be a direct attack at the competition, Wal-Mart has revealed

its concern for Target as it increasingly impedes upon its quickly diminishing market-share.

Target’s Strategy to Maintain their Competitive Advantage

Every business, in every type of industry, has some sort of battle with their respected

competitors. Companies are constantly questioning whether their business strategy will aid them in

having the best competitive advantage in the industry possible or the weakest. There are a number

of different competitive strategies that a business can use to gain their competitive advantage over

competitors. In the case of Target, they are a prime example of how their competitive strategies

have given them then reputation as “a trendy assortment of distinct products, and crafted a unique

approach to marketing both itself and the goods it sells. If may have only a fifth of the sales and

profits of Wal-Mart, but it reels them in with ten times the panache” (Schlosser, 2004). It is not an

unknown fact that Wal-Mart is the leader in low-cost goods in the retail industry. However, it is a

fact that Target has done extraordinary job uses its varies competitive strategies to stay in the

difficult race with Wal-Mart.

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One of Target’s competitive strategies used is the cost leadership strategy, in which it strives

to deliver quality goods and a reasonable, low-cost price to consumers. This goal of Target is clear

with their statement that they will deliver to customers quality brands at a low price with their

slogan, “Expect more, pay less.” From personal experiences, people often assume that Wal-Mart will

always have the lowest prices compared to Target. To investigate if these claims were actually true, I

constructed a list of five items that could be found at both Wal-Mart and Target and visited each

store to see if Wal-Mart or Target offered the better price. Surprisingly, prices between Wal-Mart

and Target differed (if any, only two products had slight variation) by a small number of cents. My

conclusion was simple, Target can be considered the low-cost leader just as much as Wal-Mart can.

Using the low-cost strategy is not the only strategy Target has proven to be effective. Target

has also implemented a differentiation strategy. A differentiation strategy is a strategy in which a

company develops new ways to differentiate (make their product or service stand out) from its

competitors or reduce the differentiation advantages of competitors (O’Brien, p.43). Target has

taken a number of different angles to make them stand out amongst their competitors. For

example, Target has introduced a vast variety of fashionable and popular goods to be sold in

throughout their stores. The introduction of popular fashion designers such as Isaac Mizrahi

(clothing), Liz Lange (maternity clothing), Swell (bedding and décor), Michael Graves (interior design

and decoration) are all part of making Target products stand out amongst similar products sold in

other retail stores.

Closely tied with Target’s use of a differentiation strategy, Target has joined a number of

strategic alliances to expand their competitive advantage. An alliance strategy occurs when a

business establishes new business linkages and alliances with customers, competitors, suppliers,

consultants, and other companies (O’Brien, 43). As mentioned previously, Target has actively joined

up with varies top designers to provide original, one-of-a-kind products to be sold in only Target

store. Isaac Mizrahi brings to Target its runway fashions, Liz Lange brings famous fashions to

pregnant women, Swell provides higher quality bedding, and Michael Graves brings in television

program ideas to customers.

Another differentiation strategy that Target used occurred during the summer of 2003, when

they entered a partnership to help promote the Justin Timberlake and Christina Agilera tour,

“Stripped,” and their exclusive collaborative CD sold only at Target. Not only did this partnership

promote the tour via television commercials, magazine advertisements, and decorations through

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Target stores, but it also helped Target attract the younger generation and profit off the

collaborative CD’s that were sold exclusively to Target patrons.

Of all the competitive strategies that Target has taken an active role, the strategy that stands

out as the leader of them all is their innovative strategy. Target has consistently taken active steps in

creating new ways of doing business and providing the best services possible. Within the Target

organization, there is a clear goal of always looking for new and exciting ways of doing things. Target

solicits everyone in the company to find the next new thing (Schlosser, 2004). The marketing chief of

Target, Michael Francis, leads a quarterly contest that he calls the “Big Idea.” Everyone in the

organization can participate in finding, creating, or improving ideas within Target. Francis states,

“We (marketing department) put that challenge out to the whole organization. Some people who

come back with good ideas are not in the core (marketing or product development) areas. We might

be someone from finance doing (ad) storyboards…Everyone is always looking for trends, from the

top down” (Schlosser, 2004).

Another very interesting innovative strategy Target has used to stand above the others was

the use of stunt stores. In 2002, Target docked a 220-feet floating shop on Manhattan’s West Side

filled with holiday décor (Schlosser, 2004). This was Target’s way of bring their business directly to

consumers. Amazing! Manhattan residences were able to buy a variety of Christmas decorations

from their very own Target store at their doorstep. With the success of this traveling store during

the holiday season, Target did a similar approach during the summer. Target’s “Deliver the Shiver”

road through Manhattan streets selling air conditioners to heat stricken residents proved to be yet

another success to Target’s innovative team.

While researching Target’s varies competitive strategies, the issue of random endorsements

appeared to have a lasting impression and effect on Target’s competitive advantage. During an

interview on Conan O’Brien, Sarah Jessica Parker (most known for her active role in HBO’s Sex and

the City) spoke very highly over her $12.99 pair of Target pajamas. It comes to no surprise the

power that celebrities’ words have over the public. The simple reference to her favorite pair of

pajamas caused a rush of popularity for similar Target pajamas as Sarah Jessica Parker had

referenced to.

Although Target has done an excellent job using different strategies to increase their

competitive advantage, a great deal of it would not have been possible with information technology

and information systems. Target’s ability to be a low-cost competitor is through the use of

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information technology to reduce the cost of business processes. Information technology allows for

Target’s manufacturers to use varies technology to increases its efficiency and productivity of varies

products. For example, the use of Computer-Aided Manufacturing (CAM) allows manufacturers to

automate the production process. CAM allows manufacturers to direct monitor the flow of goods

through the manufacturing process.

Target’s use of information technology and information systems is also used to make their

differentiation and innovative strategy effective. The use of information technology is used to

reduce the differentiation advantages of competitors and to focus on products and services of

selected market niches. Computer-Aided Design (CAD) is an example of how Target has used

information technology to increase their competitive advantage. CAD uses computers and advanced

graphics hardware and software to provide interactive design assistance to companies (O’Brien,

2004). Target uses CAD to aid in the creation of new products throughout the year.

The Internal Strengths and Weaknesses of Target

Target’s strengths include a strong customer base, product diversity through the

introduction of credit cards, and its strong growth. Target’s strong customer base includes middle

and upper end customer growth. To ensure that Target maintains a trusting and loyal customer

base, they have taken the initiative to deliver consumable products. Target has also included brand

label product lines such as Mossimo and Mizrahi. These product lines have made Target the fashion

leader in discount stores. Another product that Target has included are Sony products that are in

accordance with their image.

A strong framework that Target has created has enabled them to maintain its strong growth

potential. Target’s wide variety of resources and large size as a corporation has allowed them to

benefit in so many ways. For example, Target is able to reduce costs through economies of scale and

their strong brand image increases barriers to enter into the market and assists in the guarantee of

future sales.

In order to offer their customers with the most convenience, Target has produced over 100 new

stores in 2003. For the past five years, Target’s retail square footage has increased at an annual rate of

about 10 percent. In 1999, Target Corporation added a total of about seventy-four new stores; this

increased the division’s square footage by nearly 9 percent.

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In the next few years, it is expected that growth will continue with the opening of approximately

eighty new stores in 2000, and an estimated growth in retail square footage of 8 to 10 percent annually.

In 2004, Target Corporation plans to continue expanding their Target store base with a growth range of

nearly 8 to 10 percent net new square footage annually. This means that Target is expected to add a total

of about 90-100 new stores, or approximately 80-85 new stores minus the relocations and closings.

As mentioned previously, Target’s introduction of the Target Visa Card and the feedback from

customers has proved a strong success. This card offers high rewards and limits with low rates. The

purpose of the Visa Card was to increase customer sales, raise higher income, and improve CRM. The

revenues from the credit cards increase by $182 million, totaling $1,479 million of revenues in 2003.

With any company comes its weakness and Target has their fair share of them. Target

Corporation’s weaknesses include choosing poor strategic plans, and the continuing poor performances

of Marshall Field’s and Mervyn’s, prior them selling it this last summer. Target has not been as fast and

strong as Wal-Mart in embracing an effective strategy and incorporating products that include Panasonic

LCD’s and Sony flat screens. They have been slow to merge into selling top high-end electronic products.

Target, however, is adopting a new strategic option by lowering process on their products, but this plan

has no sign of success. Target also provides a larger line of apparels than Wal-Mart, but this area has

recently been declining, which may affect profit due to inventory costs. Target sold both Mervyn’s and

Marshall Field’s and 9 other locations in for about $3.2 billion in cash.

Now know the strengths and weaknesses of Target, what can information technology and

information systems can be used to improve their performance? Target Corporation can further

improve with IT/IS through their networking and usage of Internet technologies. With different

Target units all over the United States, they need to use IT/IS in order to send information and

communicate with other Target Corporation employees in different locations, possibly through

cross-functional enterprise systems. This would allow them the ability to cross over functional

boundaries and open the lines of communication. Cross-functional enterprise systems would give

Target the ability to share information resources and improve their overall efficiency and

effectiveness of their business processes, and develop a strong strategic relationship with their

customers, suppliers, and business partners.

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Information technology can improve Target’s ability to overcome their biggest competitor,

Wal-Mart. Wal-Mart is known for the strength in supply chain operations and management which

allows them to be the low cost leader in the industry. Target’s tactic to overcome this barrier would

be to increase their focus on supply chain management, searching for and supporting better

technology, and being more efficient in the overall process. Supply chain management uses

information technology to help support and manage linkage between a company’s main business

processes and its respected business partners. The goal is to create, a fast, effective, efficient, and

low-cost network of business relationships. Implementing a more efficient supply chain

management system, Target could potentially raise above Wal-Mart.

The Opportunities and Challenges within Target

Target, being the nations number two discount store, faces many challenges and

opportunities within its corporation. It has seen many changes in the past several years, from

gaining agreements with respectable labels to building SuperTarget stores. However, Target has had

the ability to capitalize on its distinctive competency of providing products that reflect a better

image to its more affluent customers at an affordable price.

In 2001, a report published by DSN Retailing Today mentioned that “sixty to 62 SuperTarget’s

will be open by yearend. And while that may seem small relative to Wal-Mart’s supercenter

expansion of more than 170 units this year, it’s a sizable leap for Target” (Retailing Today). With the

increase of new superstores for Target, this adds an advantage for the company to increase its

profitability through the increased revenue. The opportunity gained from this new development is

that the corporation is able to provide more services, such as groceries, apparel, and entertainment

products to its customers. The value is the added benefit of providing a one-stop shopping point

where the customers can handle all of their shopping needs.

Target differentiates itself by providing the customers with the experience they desire that is

not only inviting, but entertaining as well. In this aspect, Target is different from its rivals in that the

customers can save money in a discount store and not endure the miser of pushy crowds, overhead

noise, dirt and clutter, and extremely long checkout lines. The Company’s strategy has leveraged its

positioning in attracting knowledgeable college educated customers who want good products at a

reasonable price. Target has “carved out a niche by offering more up-scale, fashion forward

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merchandise than rivals Wal-Mart and Kmart” (Target Corporation). Therefore, this position has

caused top companies to view Target as particularly appealing for developing exclusive agreements.

Currently, Target “collaborates with leading companies such as Sony and Calphalon to

develop exclusive, affordable collections specifically for the discounter” (Rowley, 2003). Customers

recognize the name and do not necessarily make the distinction between the Target’s merchandise

and the manufacturer’s more upscale products. The opportunity from the agreement between the

companies is two fold, the customers are able to receive products of value and the corporation gets

added exposure because of the specific product Yet, another opportunity as a result of the

positioning strategy is that “Target is bearing it all with an exclusive deal (through spring '05) with

Build-A-Bear Workshop” (Bear Target). Target delivers variety to the product mix which in turn

creates profitable margins. At the same time, it has also developed “the first nationwide mass

market retailer to work with Brothers Gourmet Coffee Inc on an in-store coffee program” (Discount

Store News). The benefit is the ability to provide the customers with in-store coffee availability and

convenience.

An advantage in creating profitable relationships with various merchandisers is the use of IT

Target currently utilizes. For instance, the availability of products can be easily scanned and indicate

whether or not the inventory is no hand, and at the same time report to the supplier if any shipment

is necessary. With the EDI in place, Target can extend its knowledge to the new merchandisers in

order to efficiently and effectively serve the customer base. Thus, the emphasis on IT is crucial for

gaining the continued acceptance and satisfaction of not only the customers, but the vendors as

well.

One of the benefits Target possesses is the corporate culture established within its

organizations, which in turn delivers the gratifying store ambience that is so mush experienced and

appreciated by customers and employees. In 1990, “Dayton Hudson chairman and CEO Kenneth

Macke first mentioned the new Disney-inspired service changes” (Rowley,2003). The new training

program emphasized the importance of delivering good customer service through a well trained

employee base. As a result, Target came up with the idea of calling customers “guests” and

employees “team members.” Target began to implement the new change by relaxing some of the

rigid rules and regulations it had, thus making it readily easier to address the needs of the customer.

The new system resulted in placing more employees on the floor, giving them more freedom to

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exert their own judgment on common sense situation, as well as reducing executive store visits

which would often resulted in intimidated employees rather than improving customer service.

Furthermore, Target changed not only its recruiting and training programs, but its retention

programs as well. According to the Target’s website, the company interviewed and accepted team

members that were enthusiastic and saw Target’s job opportunities not merely as employment, but

as a job career. Target also “monitors staff to make sure they deliver on the promise of ‘fast, fun,

and friendly’” (Rowley, 2003). This program in turn, has increased the customer’s experience and

improved costumer loyalty and satisfaction.

A way that Target can improve on obtaining feedback from the team members is by having a

way for the employees to post their concerns via internet. By utilizing information technology

through this method, the employees would be able to freely express some of their experiences, so

that the issues are addressed in order to improve the situation and the organization.

Even though there are several opportunities for which Target is capitalizing on, there are

challenges within the company that it must deal with as well. First of all, the company has to deal

with the retail giant Wal-Mart. Although Target is increasing its size, it still has to compete with Wal-

Mart, which has been opening up more stores than Target during a given period. Target has to

effectively manage its situation so that it can adequately survive the fierce competition. The

information technology, such as EDI, CRM, visa card, and scanners that Target currently uses to

maintain positive customer and suppler relationships will definitely aid in improving and maintaining

its market position. Equally likely, Target must be sensitive of the changes in the environment and

address those issues appropriately.

The second challenge Target faces is with the return policy; “the company tightened rules in

recent years, and will no longer take back merchandise without a receipt-even from gift registry

customers” ( Rowley, 2003). This situation has caused many grievances among the customers,

especially when a gift registrant is trying to exchange a duplicate product. Often times, the customer

is willing to purchase other items that are usually more. Unfortunately, this situation ultimately

deteriorates customer satisfaction. The purpose of the strict return system is to enforce the efforts

against theft. However, alienating customers by having them go through a rigorous returns process

can have major impacts on the business. Even though gift receipts are available, most customers do

not find it appropriate to put it in a wedding present. The resolution to this problem would have to

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come from thoughtful assessment, and determining whether or not losing-up the return policy

would be advantageous from a strategic point of view.

The third challenge Target faces are the issues oversees with respect to labor. Target uses

oversees labor to make its private-label goods; and “in 1999, four labor groups filed a federal class-

action lawsuit” (Rowley, 2003). The company was accused of using indentured labor. This situation

has been an issue for many corporations, and the challenge for Target would be to overcome this

situation. Perhaps implementing viewing capabilities through networks that would allow

management to see whether or not operations oversees are in accordance with regulations. Target

can make improvements on the challenges it faces by aligning its strategy and establishing mutually

beneficial relationships with its employees, customers, and suppliers through its merchandizing

agreements, website, and information technology.

16

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