Target Corporation: a Capital Budgeting Analysis

Topics: Net present value, Internal rate of return, Target Corporation Pages: 5 (1428 words) Published: May 16, 2011
Target Corporation: A Capital Budgeting Analysis

Target Corporation was founded in 1902 and headquartered in Minneapolis, Minnesota. Target Corporation operates general merchandise and food discount stores throughout the United States. The company’s products range from household essentials, to electronics, to toys, to apparel and accessories, to home furnishings, to food and pet supplies. Most of the merchandise is sold under Target and SuperTarget trademarks, but it also sells under private-label brands, such as Archer Farms, Circo, Merona, and Room Essentials. The company also offers merchandise through programs like ClearRx, Great Save, and Home Design Event. Additionally, Target markets its merchandise under license and designer brands such as Eddie Bauer, Converse One Star, Michael Grace Design, and Mossimo. Target Corporation also operates in-store amenities like Target Café, Target Clinic, Target Pharmacy, and Target photo, along with leased or licensed departments such as Pizza Hut, Portrait Studio, and Starbucks. Target markets its products through a network of distribution centers, third parties, and its online shopping site. The corporation provides credit to qualified guests through its branded credit cards, which include Target Visa and the Target Card. As of June 2, 2010 it operates 1,740 stores in 49 states and the District of Columbia. Target’s biggest competitor is WalMart which competes on price rather than quality. Target’s main goal is to have the largest market share in America.

SWOT Analysis
Well known after WalMart; one of the most recognized logos
One of the largest/most competitive retail company
Appealing shopping environment
Ability to anticipate demands of the customers and ability to provide high quality/innovative product Up-to-date technology that can cater to fast changing management trends and marketing operations Competitive practice in maintaining human resources

Strong environmental commitment
Focus on controlling cost and increasing efficiency
Reinforcing agent through programs and activities that concerns socio-economic and humanitarian development WEAKNESSES
Focused just in America
Brand popularity comparatively low than competitors
More expensive products but better quality
Inability of management to anticipate price increases
Lack the capacity to carefully manage business because of large entities and separated units of the business Lack of strategic decision making
May not allocate specific attention in the flexibility of some of its rivals in the market OPPORTUNITIES
Catch up with competition in the American retail industry in terms of providing more quality and less price products/services to clients Gain more customer if company could determine latest trends for products to meet demands of their target market(s) Gain loyalty through innovation, supportive management, supporting environment/societal/humanitarian issues Continuous diversification of its revenue resources

Inevitable threat of stiff competition
Interest rates increasing with increasing govt taxes
Expansion of operations means adjusting to the trade policy and problems of the locality Dynamic needs/demands of customers
Risk of consumer bevhavior and satisfaction with product/service procurement Ever changing technology
Fast pace industry with constant trend change

Ratio Analysis

Ratio analysis of Target Corporation for 2004 through 2006 indicates a firm that is losing its way. On the operational side, the firm has seen slight improvement in efficiency with slower accounts payable turnover compared to faster accounts receivable turnover. Inventory turnover has also improved albeit only slightly. However, profitability is down over this period. The company’s profit margin is down from 7% to 5%. Return on equity and return on assets are both down as well. To add to this issue, liquidity is way down for 2006. At .89, the quick ratio indicates a...
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