Target Case

Target Corporation

Introduction

Every November, Doug Scovanner, CFO of Target Corporation, meets with the Capital Expenditure Committee to discuss future projects and locations of new Target stores. Going into this meeting, there were ten new options presented to the committee, 5 of them were guaranteed to pass by the board. Doug Scovanner wants to analyze the remaining 5 projects, to see what ones would be beneficial to the corporation, and to avoid projects that are not beneficial to Target Corporation. These projects include building completely new stores and renovating and updating pre-existing locations. By choosing the correct projects to participate in, Target Corporation can continue their growth and competitiveness in the retail industry.

Executive Summary

Target was first founded in 1962, opening their first store in Roseville, Minnesota. The store was designed to differentiate themselves from the existing upscale stores in the area. The company’s idea flourished and by 2005, Target became a major retailing powerhouse, recording revenues of over $52 billion from stores located in 47 different states. One of the main reasons Target was able to become as successful as they are, is the idea of focusing on the shopping experience as a whole, and not just focusing on lower prices compared to their competitors. By embracing this idea, Target has been able to successfully attract their target demographic, a mid-aged, college-educated female, with children.

In today’s market, Target faces 2 main competitors: Wal-Mart and Costco. Wal-Mart operates their stores similar to how Target’s stores are operated, and their stores are generally in competing areas of another. Wal-Mart focuses on driving their prices as low as possible, creating a very small profit margin on their items, but makes a large profit due to their large amount of sales. Costco is a warehouse retailer that charges a membership fee in order to receive their discounted prices....