The History of Target Target is one of the leading retail stores in the world that providing a vast variety

of products to consumers. From fashionable clothing to school supplies, cleaning products to houseware, Target has it all. A few examples of what Target provides to consumers consist of: men, women, and children appeal (both casual and professional), toys, small appliances, casual and athletic shoes, health and beauty aids, school and office supplies, jewelry and accessories. They also provide to consumers, food and beverages, stationery, party supplies, home decor and gifts, electronics, automotive accessories, outdoor sports and fitness accessories, music, movies, books and much more. Although Target can satisfy the average consumers need, they did become the successful and large corporation that they are today overnight. Targets history began in 1902 when George Dayton opened the first small retail business called Goodfellow in downtown Minneapolis. In 1903, Dayton changed the company to Dayton Dry Goods Company. However, in 1910 The Dayton Dry Food company received another name change to The Dayton Corporation. It wasnt until sixty years later in 1962 that George Dayton and his company entered the discount merchandising business with the opening of its first Target store in Roseville Minnesota. Shortly after the successful opening of Target, Dayton Corporation had its first public offering of common stock in 1967. Then in 1969, Dayton Corporation merged with J.L Hudson Company (at the time, the worlds largest shopping center in Detroit), creating Dayton Hudson Corporation (DHC). After the merger of J.L Hudson and Dayton Corporation (DHC), the retail store Mervyns opened creating DHC to the 7th largest U.S. retailer. Evidence that DHC was going to stop growing was never an issue; it continued to grow quickly over the next 30 years. It was then in 1979, that Daytons Target store become the corporations top revenue producers. However, it was not until 2000 that Dayton Hudson Corporation celebrated its change of name to Target Corporation. Throughout the years, Target grew substantially making them stand out among the rest. In the 70s Target paved new ground by implementing electronic cash registers storewide to monitor inventory and speed up guest 1

services. Target also began hosting an annual shopping event for seniors and people of disabilities and a toy safety campaign. In the 80s Target began to open stores at a rapid pace extending beyond the East Coast. Following the 80s was the new and innovative 90s. Target launched its first Target Greatland store, Club Wedd (a bridal gift registry) and Lullaby Club (baby registry) when nationwide. The late 90s brought about Target opening their first SuperTarget store, which combined groceries and special services with a Target Greatland store atmosphere. Target later introduced their credit card and the Target Guest Card service, in which people would an alternative mean of paying for Targets products. However, the success of Targets history continues. In 2000, the company had its name changed to Target Corporation as a result of the fantastic performance over the years, thus separating themselves from the Dayton Hudson Corporation. Despite the many changes throughout the Dayton Corporation, Target proved to be a worthy investment. Unlike many of the other mass merchandisers of this time, Target had department store roots. George Dayton realized the high demand for a store that sold less expensive goods in a quick, convenient environment. Target was the first retail store to offer well-known national brand products at a discounted price. It is clear as to the type of business George Dayton had in mine back in 1902. The clarity of his motivation and innovation is clear from researching the history of how Target began. It is interesting to see how his visions and aspirations have continued to this day. This is illustrated by Targets mission statement, which states: Our mission is to be the retailer of choice in the discount, middle market and department store retail segments. By focusing on trend leadership, excellent guest service, exciting team member opportunities, and community outreach, we create long-term shareholder value. The Current Status of Target
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Email response from Investor Relations

Only in second place behind Wal-Mart, Target is one of the leaders in the industry as far as sales and revenue. In 2003 Target Corporation had revenues of approximately $48 billion compared to Industry wide revenues of approximately $279 billion. According to these statistics, this shows that Targets market share for 2003 was just above 17%. Target Corporation also owned Mervyns and Marshall Fields until the summer of 2004. However, 84% of revenues in 2003 were derived from the Target stores, with Mervyns making up 9% with approximately $3.5 billion and Marshall Fields making up 6% with $2.5 billion in revenues. Now, as a result of Target selling off the Mervyns and Marshall Fields divisions costs have been cut extensively. Since these divisions combined only made up 16% of Targets total revenues, Target looks for revenues to increase significantly in 2004 in their strong areas of retail. It comes to no surprise that whenever and where ever people travel, a Target store is not had to find. Target operates in 47 states with 1,313 stores and 136 Super Target stores. The company is headquartered in Minneapolis, Minnesota and is looking to keep expanding across the United States. The majority of Targets market share are stores located in California with 184 stores, Texas with 107, Florida with 78, Minnesota with 65, and 62 in Illinois. Target is also supported by a number of loyal, content employees. Currently, Target has approximately 328,000 employees nation-wide in 2003. However, these numbers have fluctuated a bit in 2004 as a result of Target selling off its Mervyns and Marshall Fields divisions and with the increase of popularity and demand for Target stores nationwide. The success of Target would not be possible without the relationship it has with their suppliers. Without their suppliers, there would be no Target around to sell quality goods at a descent price for everyone to enjoy. Suppliers of Target Corporation include Amy Coe, Isaac Mizrahi, Michael Graves, Liz Lange, Mossimo, Sonia Kashuk, and Archer Farms just name a few. In order to be a supplier for Target Corporation, there are certain requirements that must be met. For example, The National or Regional Minority Supplier Development Council, the Womens Business Enterprise National Council, or The U.S. Small Business Administration is certified as one of the major requirement. Another major 3

requirement to qualify as a supplier of Target Corporation is being part of their Electronic Data Interchange or EDI. This is how Target communicates with its suppliers and establishes an efficient and responsive supply chain. Some other requirements for suppliers include financial stability, the ability to serve multiple companies, a history of successful projects, an understanding of Targets business practices, the ability to provide high quality goods that are cost competitive, compliance with OSHA, and last but not least ethical business conduct. Even though Target must have an important relationship with their suppliers, there is another important part of the overall picture of the Target Corporation, the customers. Customers of Target Corporation cover a wide array of markets and, as with many department stores, there is not a target or niche market predominantly. Although Target is a retailer that sales to anybody at any age, the median age of Targets customers is 45 years old with an average income of approximately $57,000 annually. Another interesting statistic about Targets customers is that 90% of the customers are female, and of that 90%, 39% of those females have children. College students are also an important consumer to the Target population holding 44% of the total Target consumer population. Target Corporation like any other major retail store has its competitors. Among Targets main competitors they consist of Wal-Mart, K-Mart, JC Penny, Costco, Walgreens, Best Buy, and Gottschalks. Other companies that are considered to be competitors include Urban Outfitters, E-Bay, Williams-Sonoma, May, and Saks. With this what is known about Target thus far, it is then understandable how important information technology plays in the overall role of Target. Target Corporations use of information technology and information system is very extensive and serves a number of purposes for the company. IT and IS play a big part in Targets supply chain, particularly with the companys suppliers and customers. For its suppliers, Target has a designated website that uses Electronic Data Interchange to facilitate information and communication. This Information system is Targets Partner Online system. This system does require suppliers to have EDI in order to be part of Targets supply chain. By using EDI 4

payments and other transactions are recorded and taken care of quickly and reliably. For customers, Target uses a number of information technologies to better serve and learns about their customers. One information technology that has helped to enhance the customers shopping experience is the companys real-time customer relationship management system (CRM) implemented in 2001. Target was one of the first retailers to implement such a system and has since helped to increase customer satisfaction. Targets CRM allows the company to analyze data via the company call center, credit card system, and customer service department. The system enables Target to determine loyal customers and what products should be promoted to those customers. In turn, this system also helps Target not only to promote products to customers who already have loyalty to those products, but not promote products to customers who have no interest in a particular product. Target can also determine which complimentary products could be promoted to customers by using their CRM system. By this being a real-time system Target gets immediate feedback on products and customer satisfaction with those products. Within the same year (2001) this system was implemented, Target had a database of over 50 million customer profiles. Some of the information that contributes to Targets CRM system is Targets Visa Smart Card. The card was offered in 2001 also and is not just limited to Target and Target owned stores, the card is accepted everywhere Visa is accepted. The card earned the name Smart Card because each card has a microchip with 64k of memory to track the customers shopping. The incentive for customers is the 10% savings earned at any Target or Target owned store with each purchase by using the Visa Smart Card. By offering incentives with the card, Target felt as though their customers had more loyalty to the store by earning incentives and using the card at Targets stores. A free card reader is also given to each cardholder that can be used to make secure purchases online and downloading coupons from the Internet. Targets use of implementing information technology and information systems did not end there. They also established Target.com, which is regarded as one the top five online retail websites on the Internet. While Wal-Mart and K5

Mart were in a rush to roll-out their websites in the late 1990s, sacrificing functionality for speed, Target took its time to develop a website that would operate appropriately and securely. Target used the website to focus on the customer and promoting the companys brands as well as a sales engine. To strength their competitive edge against their competitors, Target decided to partner with Amazon.com and let Amazon power Targets website as a result of Amazons expertise with e-commerce. Now the website, like Amazons, uses a 1Click checkout system using a cyber shopping cart for customers to add to the products to the shopping cart and checkout and pay for merchandise when ready. With the traffic that Target.com receives security is a big concern for Target and its customers. So Target implemented a Secure Socket Layering (SSL) system to protect customers purchases. SSL encrypts the data exchanged between the Web browser of the customer and Targets server. The system has proved to work very well with Target.com to ensure the safety of the information about Targets customers. Portors Competitive Forces Model applied to Target In his book, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Michael Porter identifies five competitive forces that shape every single industry and market. All of the forces defined by Porters Five Competitive Forces Model are equally important to the sustained success of any business, but for Target Corporation the areas of Competitive Rivalry, Threat of New Entrants, and Threat of Substitutes are the most significant forces affecting the business. The Bargaining Power of Suppliers and Bargaining Power of Buyers are also significant forces, however, not as prominent. The use of Porters model is beneficial to Target Corporation because it can provide analysis of everything from the intensity of competition to the profitability and attractiveness of an industry. As the second largest establishment in the discount retailer market, the threat of new entrants is a concern for Target because it is more susceptible to losing market share than industry goliath Wal-Mart (Bhatnagar, 2004). As a result of their secondary position, Target would be first to confront any type of 6

competition from new and upcoming discount retail stores. A store posing such a threat is Kohls. Kohls Corporation is a similar type of moderately priced department-store chain. Kohls stores performance surprised Wall Street in August 2002 with a 4 percent increase in same-store sales (http://money.cnn.com). Kohls stores have recently begun showing up in northern California, which has been a region previously only established by Target and Wal-Mart stores. The Power of Suppliers is another one of the forces in Porters model that affects the Target Corporation. Traditionally, the power of suppliers generates from a pressure that suppliers place on a business. However, in Targets case, the suppliers seem to be working willingly, and very cohesively, with Target. In an effort to continue with their cheap chic image, Target has taken many of the artsy wrinkles of the full priced department stores and ironed them out for those on a tighter budget (Munarriz, 2003). For example, Target has formed partnerships with famed architect Michael Graves and the fashion gurus at Mossimo. Joint ventures such as these have helped Target improve its product quality while at the same time reinforcing its stance as the smaller, hipper alternative to other discount department stores. Furthermore, Target has reinforced the strength of its marketing ingenuity by succeeding with such affiliations and not following the same path as other ill-fated partnerships, such as Kmarts collaboration with classy celebrities Jaclyn Smith and Martha Stewart. Another significant concern for Target is the Power of Buyers force. As is essential as obtaining quality products from suppliers, what good is it if nobody buys them? This is why the pressure buyers (i.e. consumers) place on a business is extremely important to the five forces model analysis. One reason why the power of buyers is so important is because consumers are able to switch to another product with relative ease. In Targets case, such a switch could be buying simple house and/or personal care items from competitor stores such as Wal-Mart or K-mart. Furthermore, customers are price sensitive, which means that retailers must be aware of how their prices compare and contrast to other competitors.

In an attempt to manage the power of buyers to their best ability, Target has chosen to cater their products to a particular demographic niche. The target market for Target is slightly above the typical demographics of a discount department store chain. Target lists its customers median income at $57,000 vs. mid-$40,000 for a typical Wal-Mart shopper (Levy, 2004). Furthermore, the median age of a Target shopper is 44, four out of every five patrons is female, and a little more than half have completed college (Munarriz, 2003). These characteristics have proven beneficial to Target as their sales remain strong and continue to grow, even in the face of trying economic times, including a shaky job market. In addition, industry observers have recognized that while high gasoline prices appear to have forced Wal-Marts lower-income customers to curtail spending, Targets more upscale core shoppers have been less affected by higher gas prices (Munarriz, 2003). The availability of substitutes is another significant threat recognized in Porters five forces model. The majority of the products that Target sells are common home and personal care items, such as appliances, clothes, furniture, toiletries, electronics, and automotive products. Customers can very easily find substitute goods for these products at specialty stores, which compete with specific and superior products for equal or lower price. For example, IKEA and Pottery Barn are specialty furniture stores which compete with Target. Also, Bed Bath and Beyond is a store that specializes in home accessories and competes with Target in this market as well. In addition to the traditional types of substitutes, another threat to Target is On-Line or catalog shopping. Substitute goods for the products that Target sell can easily be found on the Internet and/or in the catalogs of competing specialty stores. This is a threat to Target because there is no need for shoppers to physically go to Target stores if they can simply browse and buy products via the Internet from the comfort of their own home. However, Target has taken a proactive approach to combating this particular threat with the conception and operation of their own on-line shopping domain, Target.com. Finally, the fifth and most prominent threat to Target is the force of Competitive Rivalry within the industry. As previously mentioned, in the 8

discount retailer market, the two main players are Wal-Mart and Target. As the worlds largest retailer, Wal-Mart Stores Inc. operates more than 3,000 discount stores and super centers, compared to Targets 1,300 establishments (Levy, 2003). Regardless of the size differences Target has continually performed well in the shadow of its mammoth competitor. Recent financial history reveals that shares of the Minneapolis-based discounter are up 31 percent in the past year, compared with a 3 percent decline in Wal-Mart Stores Inc. stock (Levy, 2004). Having taken notice of such impressive performances, Wall Streets focus has been exclusively on the strong same-store sales at Targetsales that have been healthier than those at discount rival Wal-Mart (Bhatnagar, 2004). Furthermore, according to the website Target Corporation reported that its net sales from continuing operations for the four weeks ended October 30, 2004 increased 12.6 percent to $3.311 billion from $2.940 billion for the four week period ended November 1, 2003 (www.target.com). This information represents an impressive trend for Target as it celebrates a 15th consecutive month of better same-store sales gains than industry giant Wal-Mart stores (Levy, 2004). Described as a one-stop titan for the bargain hungry public (Munarriz, 2003), analysts have attributed Targets notable performance to the success of its creative marketing strategy of winning over shoppers by offering them more exclusive brands and fashionable, yet affordable, merchandise. Another example of the intense competition between Target and Wal-Mart can be found right here in the local bay area. As a reported by the American City Business Journals Inc., the red stores vs. blue stores battle seems to be developing beyond simply competitive stock prices. In the town of San Leandro, which already has a Wal-Mart store at 1919 Davis St., Wal-Mart Inc. recently leased property across town at 15555 Hesperian Blvd in what appears to be the first step towards opening a second operating venue. However, what is strikingly interesting about this situation is that address happens to the address of a discount store operated by Wal-Marts archrival, Target Corp (Goll, 2004). In what appears to be a direct attack at the competition, Wal-Mart has revealed its

concern for Target as it increasingly impedes upon its quickly diminishing market-share. Targets Strategy to Maintain their Competitive Advantage Every business, in every type of industry, has some sort of battle with their respected competitors. Companies are constantly questioning whether their business strategy will aid them in having the best competitive advantage in the industry possible or the weakest. There are a number of different competitive strategies that a business can use to gain their competitive advantage over competitors. In the case of Target, they are a prime example of how their competitive strategies have given them then reputation as a trendy assortment of distinct products, and crafted a unique approach to marketing both itself and the goods it sells. If may have only a fifth of the sales and profits of Wal-Mart, but it reels them in with ten times the panache (Schlosser, 2004). It is not an unknown fact that Wal-Mart is the leader in low-cost goods in the retail industry. However, it is a fact that Target has done extraordinary job uses its varies competitive strategies to stay in the difficult race with Wal-Mart. One of Targets competitive strategies used is the cost leadership strategy, in which it strives to deliver quality goods and a reasonable, low-cost price to consumers. This goal of Target is clear with their statement that they will deliver to customers quality brands at a low price with their slogan, Expect more, pay less. From personal experiences, people often assume that Wal-Mart will always have the lowest prices compared to Target. To investigate if these claims were actually true, I constructed a list of five items that could be found at both WalMart and Target and visited each store to see if Wal-Mart or Target offered the better price. Surprisingly, prices between Wal-Mart and Target differed (if any, only two products had slight variation) by a small number of cents. My conclusion was simple, Target can be considered the low-cost leader just as much as Wal-Mart can. Using the low-cost strategy is not the only strategy Target has proven to be effective. Target has also implemented a differentiation strategy. A differentiation strategy is a strategy in which a company develops new ways to 10

differentiate (make their product or service stand out) from its competitors or reduce the differentiation advantages of competitors (OBrien, p.43). Target has taken a number of different angles to make them stand out amongst their competitors. For example, Target has introduced a vast variety of fashionable and popular goods to be sold in throughout their stores. The introduction of popular fashion designers such as Isaac Mizrahi (clothing), Liz Lange (maternity clothing), Swell (bedding and dcor), Michael Graves (interior design and decoration) are all part of making Target products stand out amongst similar products sold in other retail stores. Closely tied with Targets use of a differentiation strategy, Target has joined a number of strategic alliances to expand their competitive advantage. An alliance strategy occurs when a business establishes new business linkages and alliances with customers, competitors, suppliers, consultants, and other companies (OBrien, 43). As mentioned previously, Target has actively joined up with varies top designers to provide original, one-of-a-kind products to be sold in only Target store. Isaac Mizrahi brings to Target its runway fashions, Liz Lange brings famous fashions to pregnant women, Swell provides higher quality bedding, and Michael Graves brings in television program ideas to customers. Another differentiation strategy that Target used occurred during the summer of 2003, when they entered a partnership to help promote the Justin Timberlake and Christina Agilera tour, Stripped, and their exclusive collaborative CD sold only at Target. Not only did this partnership promote the tour via television commercials, magazine advertisements, and decorations through Target stores, but it also helped Target attract the younger generation and profit off the collaborative CDs that were sold exclusively to Target patrons. Of all the competitive strategies that Target has taken an active role, the strategy that stands out as the leader of them all is their innovative strategy. Target has consistently taken active steps in creating new ways of doing business and providing the best services possible. Within the Target organization, there is a clear goal of always looking for new and exciting ways of doing things. Target solicits everyone in the company to find the next new thing (Schlosser, 2004). The marketing chief of Target, Michael Francis, leads a 11

quarterly contest that he calls the Big Idea. Everyone in the organization can participate in finding, creating, or improving ideas within Target. Francis states, We (marketing department) put that challenge out to the whole organization. Some people who come back with good ideas are not in the core (marketing or product development) areas. We might be someone from finance doing (ad) storyboardsEveryone is always looking for trends, from the top down (Schlosser, 2004). Another very interesting innovative strategy Target has used to stand above the others was the use of stunt stores. In 2002, Target docked a 220-feet floating shop on Manhattans West Side filled with holiday dcor (Schlosser, 2004). This was Targets way of bring their business directly to consumers. Amazing! Manhattan residences were able to buy a variety of Christmas decorations from their very own Target store at their doorstep. With the success of this traveling store during the holiday season, Target did a similar approach during the summer. Targets Deliver the Shiver road through Manhattan streets selling air conditioners to heat stricken residents proved to be yet another success to Targets innovative team. While researching Targets varies competitive strategies, the issue of random endorsements appeared to have a lasting impression and effect on Targets competitive advantage. During an interview on Conan OBrien, Sarah Jessica Parker (most known for her active role in HBOs Sex and the City) spoke very highly over her $12.99 pair of Target pajamas. It comes to no surprise the power that celebrities words have over the public. The simple reference to her favorite pair of pajamas caused a rush of popularity for similar Target pajamas as Sarah Jessica Parker had referenced to. Although Target has done an excellent job using different strategies to increase their competitive advantage, a great deal of it would not have been possible with information technology and information systems. Targets ability to be a low-cost competitor is through the use of information technology to reduce the cost of business processes. Information technology allows for Targets manufacturers to use varies technology to increases its efficiency and productivity of varies products. For example, the use of Computer-Aided 12

Manufacturing (CAM) allows manufacturers to automate the production process. CAM allows manufacturers to direct monitor the flow of goods through the manufacturing process. Targets use of information technology and information systems is also used to make their differentiation and innovative strategy effective. The use of information technology is used to reduce the differentiation advantages of competitors and to focus on products and services of selected market niches. Computer-Aided Design (CAD) is an example of how Target has used information technology to increase their competitive advantage. CAD uses computers and advanced graphics hardware and software to provide interactive design assistance to companies (OBrien, 2004). Target uses CAD to aid in the creation of new products throughout the year. The Internal Strengths and Weaknesses of Target Targets strengths include a strong customer base, product diversity through the introduction of credit cards, and its strong growth. Targets strong customer base includes middle and upper end customer growth. To ensure that Target maintains a trusting and loyal customer base, they have taken the initiative to deliver consumable products. Target has also included brand label product lines such as Mossimo and Mizrahi. These product lines have made Target the fashion leader in discount stores. Another product that Target has included are Sony products that are in accordance with their image. A strong framework that Target has created has enabled them to maintain its strong growth potential. Targets wide variety of resources and large size as a corporation has allowed them to benefit in so many ways. For example, Target is able to reduce costs through economies of scale and their strong brand image increases barriers to enter into the market and assists in the guarantee of future sales. In order to offer their customers with the most convenience, Target has produced over 100 new stores in 2003. For the past five years, Targets retail square footage has increased at an annual rate of about 10 percent. In 1999,

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Target Corporation added a total of about seventy-four new stores; this increased the divisions square footage by nearly 9 percent. In the next few years, it is expected that growth will continue with the opening of approximately eighty new stores in 2000, and an estimated growth in retail square footage of 8 to 10 percent annually. In 2004, Target Corporation plans to continue expanding their Target store base with a growth range of nearly 8 to 10 percent net new square footage annually. This means that Target is expected to add a total of about 90-100 new stores, or approximately 80-85 new stores minus the relocations and closings. As mentioned previously, Targets introduction of the Target Visa Card and the feedback from customers has proved a strong success. This card offers high rewards and limits with low rates. The purpose of the Visa Card was to increase customer sales, raise higher income, and improve CRM. The revenues from the credit cards increase by $182 million, totaling $1,479 million of revenues in 2003. With any company comes its weakness and Target has their fair share of them. Target Corporations weaknesses include choosing poor strategic plans, and the continuing poor performances of Marshall Fields and Mervyns, prior them selling it this last summer. Target has not been as fast and strong as Wal-Mart in embracing an effective strategy and incorporating products that include Panasonic LCDs and Sony flat screens. They have been slow to merge into selling top highend electronic products. Target, however, is adopting a new strategic option by lowering process on their products, but this plan has no sign of success. Target also provides a larger line of apparels than Wal-Mart, but this area has recently been declining, which may affect profit due to inventory costs. Target sold both Mervyns and Marshall Fields and 9 other locations in for about $3.2 billion in cash. Now know the strengths and weaknesses of Target, what can information technology and information systems can be used to improve their performance? Target Corporation can further improve with IT/IS through their networking and usage of Internet technologies. With different Target units all over the United States, they need to use IT/IS in order to send information and communicate 14

with other Target Corporation employees in different locations, possibly through cross-functional enterprise systems. This would allow them the ability to cross over functional boundaries and open the lines of communication. Crossfunctional enterprise systems would give Target the ability to share information resources and improve their overall efficiency and effectiveness of their business processes, and develop a strong strategic relationship with their customers, suppliers, and business partners. Information technology can improve Targets ability to overcome their biggest competitor, Wal-Mart. Wal-Mart is known for the strength in supply chain operations and management which allows them to be the low cost leader in the industry. Targets tactic to overcome this barrier would be to increase their focus on supply chain management, searching for and supporting better technology, and being more efficient in the overall process. Supply chain management uses information technology to help support and manage linkage between a companys main business processes and its respected business partners. The goal is to create, a fast, effective, efficient, and low-cost network of business relationships. Implementing a more efficient supply chain management system, Target could potentially raise above Wal-Mart. The Opportunities and Challenges within Target Target, being the nations number two discount store, faces many challenges and opportunities within its corporation. It has seen many changes in the past several years, from gaining agreements with respectable labels to building SuperTarget stores. However, Target has had the ability to capitalize on its distinctive competency of providing products that reflect a better image to its more affluent customers at an affordable price. In 2001, a report published by DSN Retailing Today mentioned that sixty to 62 SuperTargets will be open by yearend. And while that may seem small relative to Wal-Marts supercenter expansion of more than 170 units this year, its a sizable leap for Target (Retailing Today). With the increase of new superstores for Target, this adds an advantage for the company to increase its profitability through the increased revenue. The opportunity gained from this 15

new development is that the corporation is able to provide more services, such as groceries, apparel, and entertainment products to its customers. The value is the added benefit of providing a one-stop shopping point where the customers can handle all of their shopping needs. Target differentiates itself by providing the customers with the experience they desire that is not only inviting, but entertaining as well. In this aspect, Target is different from its rivals in that the customers can save money in a discount store and not endure the miser of pushy crowds, overhead noise, dirt and clutter, and extremely long checkout lines. The Companys strategy has leveraged its positioning in attracting knowledgeable college educated customers who want good products at a reasonable price. Target has carved out a niche by offering more up-scale, fashion forward merchandise than rivals Wal-Mart and Kmart (Target Corporation). Therefore, this position has caused top companies to view Target as particularly appealing for developing exclusive agreements. Currently, Target collaborates with leading companies such as Sony and Calphalon to develop exclusive, affordable collections specifically for the discounter (Rowley, 2003). Customers recognize the name and do not necessarily make the distinction between the Targets merchandise and the manufacturers more upscale products. The opportunity from the agreement between the companies is two fold, the customers are able to receive products of value and the corporation gets added exposure because of the specific product Yet, another opportunity as a result of the positioning strategy is that Target is bearing it all with an exclusive deal (through spring '05) with Build-ABear Workshop (Bear Target). Target delivers variety to the product mix which in turn creates profitable margins. At the same time, it has also developed the first nationwide mass market retailer to work with Brothers Gourmet Coffee Inc on an in-store coffee program (Discount Store News). The benefit is the ability to provide the customers with in-store coffee availability and convenience. An advantage in creating profitable relationships with various merchandisers is the use of IT Target currently utilizes. For instance, the availability of products can be easily scanned and indicate whether or not the 16

inventory is no hand, and at the same time report to the supplier if any shipment is necessary. With the EDI in place, Target can extend its knowledge to the new merchandisers in order to efficiently and effectively serve the customer base. Thus, the emphasis on IT is crucial for gaining the continued acceptance and satisfaction of not only the customers, but the vendors as well. One of the benefits Target possesses is the corporate culture established within its organizations, which in turn delivers the gratifying store ambience that is so mush experienced and appreciated by customers and employees. In 1990, Dayton Hudson chairman and CEO Kenneth Macke first mentioned the new Disney-inspired service changes (Rowley,2003). The new training program emphasized the importance of delivering good customer service through a well trained employee base. As a result, Target came up with the idea of calling customers guests and employees team members. Target began to implement the new change by relaxing some of the rigid rules and regulations it had, thus making it readily easier to address the needs of the customer. The new system resulted in placing more employees on the floor, giving them more freedom to exert their own judgment on common sense situation, as well as reducing executive store visits which would often resulted in intimidated employees rather than improving customer service. Furthermore, Target changed not only its recruiting and training programs, but its retention programs as well. According to the Targets website, the company interviewed and accepted team members that were enthusiastic and saw Targets job opportunities not merely as employment, but as a job career. Target also monitors staff to make sure they deliver on the promise of fast, fun, and friendly (Rowley, 2003). This program in turn, has increased the customers experience and improved costumer loyalty and satisfaction. A way that Target can improve on obtaining feedback from the team members is by having a way for the employees to post their concerns via internet. By utilizing information technology through this method, the employees would be able to freely express some of their experiences, so that the issues are addressed in order to improve the situation and the organization.

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Even though there are several opportunities for which Target is capitalizing on, there are challenges within the company that it must deal with as well. First of all, the company has to deal with the retail giant Wal-Mart. Although Target is increasing its size, it still has to compete with Wal-Mart, which has been opening up more stores than Target during a given period. Target has to effectively manage its situation so that it can adequately survive the fierce competition. The information technology, such as EDI, CRM, visa card, and scanners that Target currently uses to maintain positive customer and suppler relationships will definitely aid in improving and maintaining its market position. Equally likely, Target must be sensitive of the changes in the environment and address those issues appropriately. The second challenge Target faces is with the return policy; the company tightened rules in recent years, and will no longer take back merchandise without a receipt-even from gift registry customers ( Rowley, 2003). This situation has caused many grievances among the customers, especially when a gift registrant is trying to exchange a duplicate product. Often times, the customer is willing to purchase other items that are usually more. Unfortunately, this situation ultimately deteriorates customer satisfaction. The purpose of the strict return system is to enforce the efforts against theft. However, alienating customers by having them go through a rigorous returns process can have major impacts on the business. Even though gift receipts are available, most customers do not find it appropriate to put it in a wedding present. The resolution to this problem would have to come from thoughtful assessment, and determining whether or not losing-up the return policy would be advantageous from a strategic point of view. The third challenge Target faces are the issues oversees with respect to labor. Target uses oversees labor to make its private-label goods; and in 1999, four labor groups filed a federal class-action lawsuit (Rowley, 2003). The company was accused of using indentured labor. This situation has been an issue for many corporations, and the challenge for Target would be to overcome this situation. Perhaps implementing viewing capabilities through networks that would allow management to see whether or not operations oversees are in 18

accordance with regulations. Target can make improvements on the challenges it faces by aligning its strategy and establishing mutually beneficial relationships with its employees, customers, and suppliers through its merchandizing agreements, website, and information technology.

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References Bear Target. License! Vol. 7 Issue 9, p16. Retrieved November 20,2004 from ephost@epnet.com at SJSU Library Database. Bell, Jim. Eidemiller, Emily. Holm, Erin. Morlock, Brian. Trem, Phil. Strengths and weakness of working as a manager at Target, viewed 11/20/2004 http://oak.cats.ohiou.edu/~bm318699/esp/targetmemo.htm

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Target Corporation Official Website. www.target.com, viewed 10/28/2004 and 11/20/2004 Target Openings up Supercenters by 13. DSN Retailing Today; 7/23/2001, Vol. 40 Issue 14, p1. Retrieved November 20,2004 from ephost@epnet.com at SJSU Library Database. Wal-Mart, Target, Others Report Earnings. (2004). Retrieved November 12, 2004, from http://www.retailnet.com/story.cfm?ID=17479

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