Target Case Study Group 10
The purpose of this case study was for the CFO of Target, Doug Scovanner and 4 other members of the Capital Expediture Committee, to evaluate the top 5 capital expenditure requests of 10 and decide which would best fit Target’s future store growth. Prior to this meeting Target’s management was committed to opening 100 new stores a year to compete with other competitors such as Wal-Mart and Costco.
Target’s strategy is to profile consumers such as "college-educated women with children at home who are more affluent than the typical Wal-Mart customer”. This type of consumer is labeled as Target’s “core guest” for whom Target advertises the slogan of “expect more. Pay less”. Target guarantees a shopping experience that features a store décor and pleasing ambience that provides the core guest with a satisfactory shopping experience.
Gopher Place- this store is a $23 Million investment to build a P04 store that has a positive NPV of $16,800,000 and IRR of 12.3%. The area Gopher Place is located in is considered to be an important market. The population growth rate of 27% coupled with a median family income of $56,400 and expected competition from its competitors makes this a vital area for potential growth. Consequently, of the adults living in the surrounding area of Gopher Place only 12% meet Target’s core guest criteria of having four or more years of college education.
Whalen Court- is a $119.3 million investment to build a unique store to help capture the metropolitan area that is populated by 632,000 people where 45% of adults have obtained four or more years of college education. Advantages of this area include Target’s largest NPV of $25,900,000. Unfortunately, Target will have to lease this property instead of purchasing the land on which to build the store.
The Barn- the cheapest of all capital expenditure requests, The Barn was a $13...
Please join StudyMode to read the full document