Target Corporation

Target Corporation

Background

Target had become a major retailing powerhouse with %52.6 billion revenues from 1,397 stores in 47 states by 2005. Its success was not one that has come easily; a major contribution to Target’s strong performance is because of its successful investment decisions and expansion. Over the past five years the company had announced its goals to continue growth by opening approximately 100 stores per year, where company’s sales growth were derived from opening new stores to access new markets and tap into a new pool of consumers and organic growth through existing stores.

Target Corporation is one of the top five largest discount retailers in the United States with a mission of making Target the preferred shopping destination for their guests by delivering outstanding value, continuous innovation and an exceptional guest experience by consistently fulfilling their slogan of “Expect More. Pay Less” brand promise. Not only has it fulfilled its brand promise but the company has been highly successful at promoting its brand awareness with consistent advertising spending that resulted in the Target bull’s –eye logo’s being ranked among the most recognized corporate logos nationwide.

Case Objective

To analyze the long term value drivers, evaluate, and rank the five project investments on whether capital was better spent on one project or another to create the most value and the most growth for Target shareholders.

The Retail Industry

The intensity of competition among retailers had resulted in razor-thin margins, with tight margins, the pressure was felt throughout the supply chain as retailers constantly pressured their suppliers to accept lower prices. In order to keep their competitive edge, retailers used off-shore sources as low-cost substitutes for their products and implemented methods such as just-in-time inventory management, low-cost distribution networks, and high sales per square foot to...