Corporate Structure Strategy and Competitive Environment of Target Corporation

¶ … Target Corporation:

Corporate Structure, Strategy, and Competitive Environment

The Target Corporation is fascinating, as it has been able to grow and compete with others that are better known, such as Wal-Mart. A history of the Target Corporation is important, but it will be kept brief and to the point, as there is more of a need for analysis of the current situation with the Target Corporation than there is for a reconstruction of how it was gotten to this point in its history. Some information, however, is necessary for a more complete understanding of where the Target Corporation stands now and where it appears that it will be going in the future if it stays on the same path. The rest of the information contained herein will be an analysis of the corporate strategy that Target has and what kinds of changes should be made to it to ensure that the Target Corporation has continued profitability and success in the retail sector.

One of the things that Target has done to differentiate itself from Wal-Mart is to create an image that is more upscale (Target, 2004c). Kmart, which has not done this, has consistently had more trouble with the differentiation issue because it has not found something that it can do very differently that will set it apart. While most people think of Target Corporation as only owning Target stores, it is actually quite a large corporation and has owned many different chains of stores in the past including Marshal field, Mervyns, Dayton's, and Hudson's (Target, 2002). Headquartered in Minneapolis, Minnesota, Target Corporation only changed its name in 2000. Until then, it went by the name of Dayton-Hudson Corporation (Target, 2004a).

Target Corporation began in 1902 with one retail store and has since grown very rapidly (Target, 2004c). Its earnings have also grown rapidly with each quarter of each year making gains. This is expected to continue well into the future. The Corporation now has stores in 47 states and employs over 328,000 people across the United States (Target, 2004a). Its revenue for this year is nearing $50 million (Target, 2004c). All of this makes the Target Corporation one of the fastest growing retailers in the country and there are plans to offer paid vacations and health care benefits to employees that work part time (Cameron, 2001). Most retailers do not offer these things to employees unless they are considered to work full time.

What is most significant about the Target Corporation, however, is their corporate strategy, and this appears to be the key to their competitive advantage. They have taken their competition with Wal-Mart and other retailers and adjusted it just enough that they have set themselves apart. Mostly, they have done this by their slightly upscale image, but they have been careful with this, as well. A list of 'upscale' retailers would likely not include the Target Corporation in name, but some of the stores under their command might be there. A list of discount or general retailers might also include some of their stores -- most likely their Target stores. These Target stores make up approximately 75% of the Corporation's business and help to increase its profits (Target, 2004b).

The important thing to note is that there are stores owned by the Target Corporation in many different areas of retail. It is this corporate strategy of diversification that appears to be working so well for them. By diversifying what they have and what they do, the Corporation has ensured that it will be around for a long time yet to come. If one chain of stores or one market fails to do well, there are plenty of other stores and other markets on which the Target Corporation can rely for profit and growth. Other retailers do not seem as interested in this diversification in their field, and they rely on having a great many stores of the same kind in various locations instead of different kinds of stores in various locations.

For example, someone that is not interested in shopping at their local Target store might choose to shop at Marshal Field, not realizing that they are actually giving money to the same parent company. This diversified approach is helping the Target Corporation with its success and allowing it to go forward and grow in an economy where many businesses and retailers are struggling, even with the upcoming holiday season and the profits that are anticipated from all of the shopping that is usually done during that time.

It looks at though the Target Corporation has chosen the right strategy for the retail marketplace, but there is no way to know exactly what will become of the Corporation in the future. Even though they are doing well now and their profits are growing, economies can change quite quickly. Consumer preferences and opinions can also change quite quickly, and the Target Corporation's general attitude of being slightly more upscale than the stores that it competes with may eventually go stale in the marketplace. Granted, this has not yet happened, but the future is not something that even the best accounting and marketing individuals can predict.

For now, however, concerns about the Target Corporation can generally be laid to rest, as there are no apparent problems in sight. The diversity that the Corporation has is important, but it is not the only thing that the Target Corporation has going for it. The Corporation also appears to follow the strategy of caring about others, and this seems to be very useful. It also seems to be sincere, which is important. Customers, employees, and society in general can usually spot when a company or business is only making an effort to 'be nice' because of what they think will be in it for them. This kind of behavior usually does not go over well in the marketplace, and retailers that display this behavior will often see their profits slide and their stores avoided. However, with the Target Corporation the concern about their employees and the rest of the community appears to have sincerity behind it.

The Target Corporation has given money to cities that have been ravaged by floods, donated to many charities, and held many drawings for gift cards and other merchandise (Strategic, 2004). It appears that the Corporation sees this as an important part of doing business and values those that they have relationships with in various communities across the country. These relationships are also crucial to the success of the business. Businesses can have the best and most important merchandise in the world, but it does not matter if there are no customers. The Target Corporation knows how to bring in these customers by treating them properly, carrying the merchandise that they want, and providing that slightly more upscale image than that of Wal-Mart (Biesada, 2004).

This image also comes with slightly higher prices, but the prices are not so much different that they discourage most shoppers from patronizing the Target stores and most of the other stores that are owned by the Target Corporation. As strange as it seems to some, there are individuals that will not shop at Wal-Mart. This is largely because of the image that comes from shopping there, and the belief that Wal-Mart shoppers are typically poor and rural. While this is not technically accurate, and many people that have plenty of money shop at Wal-Mart simply because their prices tend to be lower than most places, there is still a stereotypical attitude that prevails with some individuals.

These kinds of individuals believe that they are getting better quality and a better image when they shop at stores that charge more, have different layouts, etc., and therefore they choose many of the stores that belong to the Target Corporation. It would seem that the Target Corporation has spent a great deal of time researching this issue because the Corporation is careful to ensure that its stores are upscale enough to bring in those that are not comfortable with Wal-Mart and Kmart but also not so upscale that those people without a lot of money are too intimidated to shop there (Pratt & Spencer, 2000). This is something that the Target Corporation has worked hard to balance and it is what works so well for them.

Had the Target Corporation attempted to compete directly with Wal-Mart, it is quite likely that it would not have done as well. Wal-Mart is the number one retail chain and it looks as though they will stay that way. They have competition from Kmart, but it is not a competition that Kmart appears to have any real chance of winning, as Kmart has had bankruptcy troubles and other issues that have plagued them for some time. Even though they have emerged from bankruptcy protection they are still on somewhat shaky ground when it comes to their finances and profit margins. The only problem that Wal-Mart seems to have is that their stores are not always wanted in small towns where some people feel that they will take the business away from the 'mom and pop' stores that have always been there. Even though Wal-Mart creates jobs, some other types of jobs are also lost when they come to a town.

With the Target Corporation, this does not seem to be a problem, as they do not seem to cause these job losses and other issues when they decide to open a store in a new town. This is likely because of the way that they market and the kind of merchandise that they sell. Their prices are typically higher than Wal-Mart and therefore they are not in as much direct competition with the smaller stores that seem to be a fixture of the downtown areas of most cities. While Wal-Mart often sells things at a cheaper price than the smaller stores, Target stores do not do this with too many items and they are not seen as a threat in this way. They also have not had the hiring and fair treatment concerns that have been in the news about Wal-Mart in the last few years and so they have avoided problems with groups of individuals that will not work for them because of concerns about the way that they are treated while on the job and the rights that they have.

As to the financial well being of the Target Corporation, their growth continues in each quarter that they report and although that growth has not been of spectacular proportions it has been steady enough to keep the Target Corporation's stock performing well. This is important to those that own and manage the Corporation and the various stores, but also to the stockholders that feel that the Target Corporation remains a good and generally sound investment. Since its stock is doing well, the Target Corporation is able to borrow money and move assets around very comfortably, which helps the Corporation to have more flexibility when it wishes to build more stores or expand into markets that it may not have previously tried.

An example of this is the SuperTarget stores that are now appearing in some cities. These are very similar in nature to the Wal-Mart SuperCenters in that they carry groceries as well as the standard items that the Target stores are known to carry. This is a good idea and it is good for business for the Target Corporation since it will entice customers that prefer the Target stores to buy their groceries there as well when they come to shop for other items. By doing this they will, on average, spend more money at the stores of the Target Corporation, which will offset the money that was spent to create these larger stores and purchase groceries and the freezers and other equipment that are necessary to provide them.

The financial well-being of the Target Corporation seems to relate back to the idea of its corporate strategy and the ways that the Corporation develops its customer base. Not only are the Target stores indicating that they are more upscale than Wal-Mart, but some of them are also providing the same types of amenities as Wal-Mart, such as the groceries mentioned previously. This is very important because the business of having an all-inclusive store is a lucrative one, and Wal-Mart was the only store like this in many cities for quite some time. The Target Corporation has not done this with that many of their stores yet, but it is only a matter of time before they do so.

This creation of larger and more fully stocked stores to keep up with growing trends in the retail field is part of the corporate strategy that the Target Corporation has been using. The Corporation may not be the first to create new ideas, but they follow along quickly and because they are not in exactly direct competition with Wal-Mart and Kmart this following along in the footsteps of what works well for other stores seems to be working for them in a way that is good for their employees, their customers, and their stockholders as well. This follow-up approach will not earn them the number one retailer spot, but they have enough business from new and repeat customers to keep them running quite smoothly and efficiently (Coulter, 1998). The Corporation is in no danger of bankruptcy, has not had to restructure or close down stores, and still posts a rate of growth both in its financial dealings and in the number of stores it has that has been very commendable.