Target Corporation business strategy and market analysis

¶ … discount chain store Target is inseparable from the history of the Dayton Hudson Corporation, a long-standing leader in American mass retail. In 1902, George Dayton opened a modest department store in downtown Minneapolis named Goodfellows, one of the many that appeared on Main streets all over the United States. Over the course of the next few years, while changing the company name several times before settling on The Dayton Company, he not only established his store as an institution in the Minneapolis marketplace, but also in the Minneapolis community; five percent of all of the profits of the Dayton Company went directly back into the environment. It is on these basic principles of recognition, establishment, and commitment to community that Target Corporation strides today.

Target Corporation: History, Environment, and Success.

By the middle of the twentieth century, the Dayton Company was well on its way to corporate success. At the same time, malls were taking shape as the desired form of the modern marketplace, and in that trend, J.L. Hudson opened the Northland Center in Detroit, then the world's largest shopping center, in 1953. Within two years, Dayton's asserted its strength in Southdale, just outside of Minneapolis, by opening a story in the world's first fully enclosed two-level shopping center.

The Dayton Company held its commercial strength by staying on the fore-front of trends, be they in product, company character, or location; by 1962, it saw the rising power of the discount market and opened its first Target. The logo, one ring larger than the unmistakable red logo of today, described the store with its first motto: "Target is a new idea in discount stores." Target, initially successful, prompted the Dayton Corporation to open its first public offering of common stock tow years later.

By 1971, revenues topped a billion dollars, and Dayton merged with the J.L. Hudson Company to create a larger magnate, the Dayton Hudson Corporation. In 1978, DHC acquired Mervyn's, the popular low-end department store, and assumed its role as the 7th largest retailer in the United States. DHC originally maintained its separate department stores, but after the initial merger, the success was so palpable that the stores merged to become Dayton Hudson Department Store Company, the largest U.S. independent department store in 1982. Growth for the company continued to skyrocket through the eighties, and in 1990 DHC was able to acquire Marshall Field's, adding a decidedly upscale store to its chain.

1994 was a landmark year for DHC that completely revolutionized its idea of success. Not only did revues top twenty billion dollars, but Bob Ulrich, who was already Chairman and CEO of the Target Stores, was named CEO of DHC. Ulrich had pushed the Target stores under two philosophical stratagems for success: the "Power of One" and the "speed of Life." Target locations sprang up nationwide and the long fingers of DHC were touching all levels of the retail community. In 1995, Target launched the first discount store credit card in the industry, the Target Guest Card, and opened its first Super Targets. A year later, revenues surpassed twenty five billion dollars and Target launched its Take Charge of Education campaign, a community relations and credit initiative.

The next ten years saw amassing expansion nationwide and consolidation of power inside DHC. In 1997, DHC took over both the Rivertown Trading Company and AMC, the Associated Merchandising Corporation. Additionally, and more with defining aplomb, DHC instituted cross-company discounts, making discounts available to all team members and their dependants at Target Stores, Mervyn's (now Mervyn's California), Dayton's, Marshall Field's, and Hudson's. The next year, growth steadily continued and in 1998 DHC reported revenues over thirty billion dollars. In 1999, DHC launched e-commerce capabilities for its stores and brands, and in 2000, it officially changed its name to the Target Corporation.

Structure of Target Corporation

At its helm, Target is directed by a 11-man group that controls the cadre of Executive Officers. All maintain the sleek image set forth by the Target Brand philosophies, and are consummated in the leaders. The Board brings with it a plethora of diverse experience, all of which culminate in the successful sale of the Target image and the ever-increasing profits.

Underneath the Board of Directors is a list of Executive Officers 11 people long; the divisions are separated into the requisite aspects of the Corporation's success. Below them serve a motley crew of division-specific Vice Presidents, whose terrain is based not only geographically but also by skill. These leaders serve the corporation, dictating and overseeing every aspect of the store's livelihood. Each program is engineered at the national level, from store set-up, which is run through multi-level approval at the mock store at headquarters in Minneapolis, to direct-advertising campaigns, as well as community initiatives. The corporation does well to attract leading minds in business, design, and sales, recruiting directly form the nation's best colleges and professional schools every year to fill its administrative offerings every year.

Leadership and Management

Roxanne S. Austin has worked as the Former Executive Vice President for Hughes Electronics Corporation and Former President and Chief Operating Office of its subsidiary, DIRECTV, Inc. After the leadership at DIRECTV changed in a recent merger, she joined the Target team. Fortune put her on a 2003 list of "Women to Watch," saying "while media barons debate the face of DirecTV, Austin penned a manifesto that defined its turnaround strategy. She's widely credited with reducing customer churn."

Her addition to the Target team insures the cutting-edge business directives from which some mainstream industries shy away, but mark the Target success.

Calvin Dervin worked his way up the chain from a UPS hub supervisor to Senior Vice President of U.S. Operations before retiring to Target. The nose-to-the-grindstone executive was fast one the five percent of non-caucasion senior executives at Fortune 500 companies. The African-American Atlantan is cited by many business critics, including the authors of "Soul Management: How African-American Mangers Can Succeed in a White Business Environment" for his great work, but his personal professional success is based on an ear to the customer and systems of fast production.

Richard M. Kovacevich brings fiscal policy to the table with his experience as Chairman and Chief Executive Officer of Wells Fargo & Co. USBanker put him as the Number Four on their March 2005 roster of "A Listers." They credit his strong leadershi pand business sense. "With the nation's No. 1-rated Internet bank and a keen sense of the need to acquire more assets under management, Richard Kovacevich, a pensive man known for keeping his own counsel, is doing what many thought impossible: showing the same Wells Fargo face to all customers. Whether in the high-touch business of asset management or the more traditional business lines, how customers interface with Wells doesn't matter; how they perceive the bank does -- and it's consistency that brings profits for Kovacevich and his team."

He brings to Target the interface theme that is key to Target Corporation -- uniform business with everyone, everywhere.

Anne Mulcahy adds more female power as the second of the woman-dual on the Board; her work history is as Chairman and Chief Executive Officer of Xerox Corporation. She is hailed as one of the greatest business-minded women, who brought Xerox into the next century. Alongside her works Stephen Sanger, whose experience is similar; he worked as Chairman and Chief Executive Officer of General Mills, Inc., and is familiar not only with mass-product for the average America, but also impressive advertising campaigns and quality assurance.

The list of business greats continues. Michele Hooper co-founded and was a managing partner for The Director's Council. James Johnson served as Vice Chairman of Perseus, LLC. Warren R. Staley was Chairman and Chief Executive Office of Cargil, Inc. George W. Tamke was a partner at Clayton, Dubiler, and Rice, Inc. Solomon D. Trujillo worked as the Former Chief Executive Officer of Orange SA.

The Executive Officers, whose work is directly supported by other officers and the chained hierarchy, cover a variety of specifics in terms of the Corporation's leadership. Among them are executive vice-presidents of: Human Resources and Assets Protection, Stores, Marketing, Property Development; they are joined by a Senior Vice President who serves as General Counsel and Corporate Secretary. They work hand-in-hand with the financial management team, which includes a President of Target Financial Services, an Executive Vice President and Chief Financial Officer, and Senior Vice President in charge of Target Technology Services and Chief Information Officer. Gerald Storch serves as Vice Chairman, Robert J. Ulrich is Chairman and Chief Executive Officer, and Gregg Steinhafel is President.

Marketing Management

Newness, excitement, and innovation are key to the marketing accomplishments set forth by the Target objectives. This comes into play during times of big business, like the winter purchasing craze. Holiday sales are a major push for Target, as they are for all in the retail industry, particularly discounters. Wal-Mart and Neighborhood Markets, the two largest international discounters, report heavy growth during the holiday season, and increase their hiring to account for the super center shopping. After this past holiday season, Target reported net income for the fourth quarter of $825 million, selling at 91 cents a share. "Target is gaining market share with the apparel and department store market,' says Dreher, noting 80% of Target's popular apparel line is private label. 'They have as good a fashion sense as any retailer out there, and it's affordable and it doesn't look cheap," reported USA Today in February.

John Remmington, Vice President of Communication and Event Marketing at Target, is largely responsible for the private label, brand-associated success that pushes Target to the forefront of retail sales. Remmington, who, along with the company, refuse to reveal the precise sales of the individual lines, knows that the private-label marketing is a bit hit for Target Corp. Remmington attracts high-brow designers, like Cynthia Rowley, Mossimo, and Michael Graves, to downgrade their professional lines to a mass-market approach.

Isaac Mizrahi, one of the many uber-hip designers gracing the Target stage, credit the Corporation with its ability to encourage the artistic direction of the designer without sacrificing the quality of the material. He says the key to Target success is their apparent instinct for production. "In terms of production, 'They are experts,'" he said to the Wall Street Journal. "They know how to make something on the cheap -- that if you stitch the jacket this way instead of that, you can save money.' He points out the seams, lining, and buttons on an orange paisley corduroy blazer, 'At $29.99, how cute is that,' he exclaims."

At the same time, the sacrifice in craftsmanship and couture has cost Mizrahi some critical peer review. "While some in haute fashion circles have criticized his commercial turn, Mr. Mizrahi is sanguine about his creative efforts, considering himself both an artist and an entrepreneur. 'Target has an image -- a humor and a freedom that is more cutting-edge than anywhere,' he says enthusiastically. ' You're not selling out, you're reaching out.'"

Target maximizes on this, with its tongue-in-check pseudo French moniker tar-jay, and says that the sensibilities of Mirazhi have not only extended to his personal line, but has helped the group, resulting in the sale of his line in all 1,304 of his stores. Remmington reports that the interaction with Mizrahi has "exceeded our initial expectations," and continues its growth.

The success of Target as the cutting-edge center for mass-appeal hip, as Mizrahi described it, is that it sells a brand-image at all levels. Unlike Wal-Mart, which sells the MaryKateandAshely brand, the Veggie Tales brand, and the Barbie brand, Target manufactures and sells -- successfully -- the target brand. "Our brand is strong," declares the 2004 Annual Report.

Target attributes this to a careful balance of value and differentiation, "through careful nurturing and in tense focus on consistency and coordination throughout our organization, Target has built a strong, distinctive brand."

Marketing strategies at Target are centered around innovation and direct-to-demographic programs. The catchy commercials and ads pair chic models with visually scintillating artwork, displaying a lifestyle that incorporates not only the price-satisfaction of the discount market but also the characteristics of an upper-crust life. Target posits it succinctly:

"Our innovative marketing campaigns excite our guests with their engaging and distinctive style, their energy and their sense of surprise. Whether print or broadcast advertising -- such as "Eat Well. Pay Less." And "Design for All," promotional events -- such as "Deliver the Shiver" or programs that strengthen our communities -- such as "Ready. Sit. Read!" And Target House, our marketing captures and conveys the true spirit of Target's brand."

With unerring clear sight, Target manufactures and sells its brand as a shopping experience. The presence of Starbucks in Super Target, a lively, young staff, and the coordination with Apple to sell the iPod are demonstrative of the corporate Target brand, not just the products available inside the store.

Information System and Financial Management

Financially, Target is controlled by its leadership team and overseen directly by Terrence Scully. Scully, an officer at the company since 1998, keeps the prices low with successful business management skills.

Deep in the debate over PIN disclosure and POS debit fees, he is known throughout the business world for his shrewd and intelligent tactics. Reporting to him are Douglas Scovanner, the Chief Financial Officer and Jane Windmeier, the Senior Vice President of Finance. Information systems are likewise controlled, engineered, and implemented top-down. Paul Singer heads up the Target Technology Services as Chief Information Officer.

Their implementation of basic cuts, like limiting access to cold medicines, have created simple waves with huge financial incentives that they insist benefit not only the company, but also the consumer.