Target Case Analysis
Target Case
EXECUTIVE SUMMARY
Target Corporation, originally Dayton Dry Goods Company, was founded in 1902 and headquartered in Minnesota. The first Target store was opened in 1962 with the purpose of providing customers with discounted values. Currently there are 1888 stores in the US and Canada and in 2004 Target Corporation sold all of their subsidiaries in order to focus on the Target stores. Today they are the second largest discount retailer in the world but are in continuous competition with stores like Wal-Mart and Costco. While Target needs to adjust its capital budgeting process, Doug Scovanner should accept all stores except Goldie’s Square. Furthermore, if Target were to limit its capital budget for store expansion to $120 million, Gopher Place, The Barn, and the Stadium Remodel should be accepted.
INTRODUCTION
This executive memorandum compares Target’s business model to Wal-Mart’s and Costco’s, and analyzes Target’s capital budgeting process. Additionally, this memorandum analyzes which of the 4 CPR’s Doug Scovanner should accept using various financial calculations, as well as customer demographics and brand-awareness. Lastly, this memorandum covers the decision and analysis for what Target should do regarding its CPR’s if it’s capital budgeting was limited to $120 million.
ANALYSIS AND RECOMMENDATIONS There are many similarities and differences between the business models of Target, Wal-Mart, and Costco. Target and Wal-Mart’s business strategies are more similar in that they offer a lot of the same products. The main difference is that Target aims to provide a better shopping experience while Wal-Mart aims to provide the lowest possible prices. Target wants to be held at a higher standard; their ideal customer is a college-educated woman looking for a quality shopping experience. Costco targets the same type of customer but their business model is different than that of Target. Costco is membership based, which accounts for a majority of
EXECUTIVE SUMMARY
Target Corporation, originally Dayton Dry Goods Company, was founded in 1902 and headquartered in Minnesota. The first Target store was opened in 1962 with the purpose of providing customers with discounted values. Currently there are 1888 stores in the US and Canada and in 2004 Target Corporation sold all of their subsidiaries in order to focus on the Target stores. Today they are the second largest discount retailer in the world but are in continuous competition with stores like Wal-Mart and Costco. While Target needs to adjust its capital budgeting process, Doug Scovanner should accept all stores except Goldie’s Square. Furthermore, if Target were to limit its capital budget for store expansion to $120 million, Gopher Place, The Barn, and the Stadium Remodel should be accepted.
INTRODUCTION
This executive memorandum compares Target’s business model to Wal-Mart’s and Costco’s, and analyzes Target’s capital budgeting process. Additionally, this memorandum analyzes which of the 4 CPR’s Doug Scovanner should accept using various financial calculations, as well as customer demographics and brand-awareness. Lastly, this memorandum covers the decision and analysis for what Target should do regarding its CPR’s if it’s capital budgeting was limited to $120 million.
ANALYSIS AND RECOMMENDATIONS There are many similarities and differences between the business models of Target, Wal-Mart, and Costco. Target and Wal-Mart’s business strategies are more similar in that they offer a lot of the same products. The main difference is that Target aims to provide a better shopping experience while Wal-Mart aims to provide the lowest possible prices. Target wants to be held at a higher standard; their ideal customer is a college-educated woman looking for a quality shopping experience. Costco targets the same type of customer but their business model is different than that of Target. Costco is membership based, which accounts for a majority of