Target Corp Case Essay Example
MGT 6060 SPRING SEMESTER, 2013 CASE #2 – TARGET CORP Group: Blake West Daeyoun Bae Charles Scott Ahmed Sattar Alex Harkey
#1: Target’s Capital budgeting system
Target Corporation uses an interesting capital-budgeting system. Projects are proposed using Capital Project Requests (CPRs) and must be approved before money can be spent. The level of approval needed depends on the amount being requested. For projects requiring less than $100K, lower management can approve, but anything above this amount goes to the Capital Expenditure Committee (CEC) which is comprised of 5 executive officers. For projects requiring greater than $50 million, the Board of Directors must approve.
The Capital Expenditure Committee meets once a month to approve projects. The committee tries to stay within the capital budget, push for opening 100 stores yearly, and approve projects that keep the company on a growth trajectory. In the monthly meeting, projects are presented by their sponsoring real estate manager, along with data in the form of a dashboard that summaries key metrics of each project. The monthly meeting usually last several hours. We feel that this meeting is not the best use of time for executive officers. To help allow for better use of time we suggest that the approval cut-off for projects be raised from $100K to something closer to $1million. This should help lower the number of projects discussed and in turn shorten the meeting while the proposed projects can be discussed more in depth.
The project proposals (CPRs) are owned and presented by the real estate managers. There is a lot of pre-work that goes into the project before it’s presented. Typically 12-24 months of work is done to collect various data such as NPV, IRR, demographics, brand awareness, and sensitivity analysis. The sales projections are provided by the Research and Planning group and all project metrics are summarized into a standardized
#1: Target’s Capital budgeting system
Target Corporation uses an interesting capital-budgeting system. Projects are proposed using Capital Project Requests (CPRs) and must be approved before money can be spent. The level of approval needed depends on the amount being requested. For projects requiring less than $100K, lower management can approve, but anything above this amount goes to the Capital Expenditure Committee (CEC) which is comprised of 5 executive officers. For projects requiring greater than $50 million, the Board of Directors must approve.
The Capital Expenditure Committee meets once a month to approve projects. The committee tries to stay within the capital budget, push for opening 100 stores yearly, and approve projects that keep the company on a growth trajectory. In the monthly meeting, projects are presented by their sponsoring real estate manager, along with data in the form of a dashboard that summaries key metrics of each project. The monthly meeting usually last several hours. We feel that this meeting is not the best use of time for executive officers. To help allow for better use of time we suggest that the approval cut-off for projects be raised from $100K to something closer to $1million. This should help lower the number of projects discussed and in turn shorten the meeting while the proposed projects can be discussed more in depth.
The project proposals (CPRs) are owned and presented by the real estate managers. There is a lot of pre-work that goes into the project before it’s presented. Typically 12-24 months of work is done to collect various data such as NPV, IRR, demographics, brand awareness, and sensitivity analysis. The sales projections are provided by the Research and Planning group and all project metrics are summarized into a standardized