Target Corporation Analysis
Introduction of Target Corporation
Target Corporation is an American department store that sells a variety of food and merchandise. The company was established and has since expanded operations in different parts of the United States. Nationwide expansion began in the 1980s when the company introduced new store formats (Bloomberg, 2021). The company name was then renamed to Target Corporation in 2000 after the company began restructuring to eliminate department stores. The company is currently among the largest retail stores in the United States and has maintained a reputation for offering high-quality products at affordable prices. As of 2021, the company operated more than 1500 stores in the United States. The company also owns various subsidiaries such as Financial and Retail Services, Target Commercial Interiors, Target Sourcing Services, and Target Brands. Financial and Retail services issue debit and credit cards. Customers can use debit cards to shop in Target stores and deposit 5% of every purchase. Target Sourcing Services locates goods from across the world for the company and helps import them to the United States. The company has 27 full-service offices, seven concessionaires, and 48 quality control offices worldwide that serve online and offline stores. Target Commercial Interiors provides office space furniture and design services for customers. Target brands oversee and own the company’s private label merchandise, including electronics and meat. The company also operates online through its www.target.com website, which oversees and owns the e-commerce division. The company has maintained a good d competitive advantage in the United States retail sector despite a security breach in 2010 that exposed customer credit information. The company’s success is attributed to good leadership and stakeholder collaboration to understand customer needs and preferences.
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Leadership Analysis
Target Corporation has a complex leadership structure that enabled it to maintain a top position in the retail sector. The company has a line-and-staff organizational structure. It is divided into two main departments. The first is the line department, and the second is the staff department. The staff department includes sales, marketing, finance, and product. Every division in the department is in charge of its own specialized set of activities. Line departments only focus on decisions affecting the main operations in the organization, and staff departments offer specialized technical support to the line department. The main leader of the company is the chief executive officer (CEO), the president of the company’s board. The CEO is the most powerful leader in the company and is in charge of making decisions. The company applies an autocratic leadership style whereby the CEO can make decisions and delegate tasks ( Tuleja, 2021). The company also applies a functional organizational structure and follows a hierarchy with the CEO at the top, followed by the executive vice presidents. The executive vice presidents include the executive vice presidents in charge of food and beverage, growth, finance, communication, human resources, legal affairs and risks, operations, information management, merchandising, marketing, external engagement, and stores. The CEO heads the company’s global dynamic team that is in charge of increasing sales across different stores.
A president heads every department. The departments include the distribution and financial departments, collaborating to meet the company’s shared goals and objectives. On-management and hourly employees are at the bottom of the hierarchy and must report to the department managers. The company is divided into districts, groups, and individual stores (Eades et al., 2020). Every group has a director and support staff. The support staff includes a human resource manager and specialist in charge of completing various tasks in the department. Every group oversees 50 to 70 stores across the United States, reporting to the department presidents. The company is further subdivided into districts headed by a director and support staff. The district manager reports to the executive vice president and is in charge of delegating tasks to every group operating within the district.
The CEO mainly makes decisions, and employees are rarely involved in the decision-making process. However, top management makes decisions relating to strategy development and oversees the leadership of the Cooktops management also oversees labor sourcing, expansion, financial oversight, acquisition of goods, and standard development. Store-level management handles the needs of consumers in different department stores by ensuring that the standards and strategies are implemented based on the company’s values. The board of directors strategizes and makes long-term plans and major strategies to reach the company’s goals. The supervisor managers are in charge of operational planning. They are also in charge of weekly and daily plans for every department to ensure that middle and top management’s plans and objectives are met. The leadership team is reshuffled occasionally to enhance the implementation of new ideas. Leaders may be sourced externally or internally. Internal hiring includes promoting individuals on different hierarchy levels. External hiring includes reviewing the expertise level of an individual and involving the board of directors to vet an individual and determine whether they are fit for the vacant position.
Ethical Factors
Target Corporation’s mission is to make the company the preferred shopping destination for clients by delivering outstanding value, exceptional customer experiences, and continuous innovation by consistently fulfilling their promises and paying less. The company’s vision is to guide commitments to the community, eat value, the environment, and diversity. The company’s main value is to create the most conducive, fun, and friendly environment for everyone to ensure that customers get the best services when they shop. Other values are diversity, inclusion, ethics, and community engagement. The mission, vision, and values are founded on setting reasonable processes, convenience, and exceeding expectations. The company has maintained a reputation for offering a wide range of products to meet different customer needs and preferences, thus creating convenience. It categorizes all products so that customers can easily select what they want. The company adds value to the community and protects the environment by offering employment to community members. Reasonable prices support the company’s mission to enable customers to get everything they want at an affordable process by complying with the required pricing strategy (Target Corporation, 2020). The company also embraces the inclusion of employees by ensuring that they interact and work with communities around the company and cultivating a behavior that promotes the vision and mission statements. The company also ensures that all its actions aim to make it a leader or top business in the retail sector by offering unique services. The comprehensiveness of the vision and mission statements gives an impression that the company understands the business dynamics in the retail sector and is adequately equipped with the right tools to be what the market expects. This has enabled the company to maintain a competitive advantage in the United States’ retail market.
Strategic Analysis
Target Corporation is a recognized and well-established brand. The brand name has enabled the company to be respected and trusted by its customers, thus creating a competitive advantage. The company also has innovative and high-quality products that attract and retain customers. The main weakness that could limit the company’s success is that the brand is not a household name in the retail sector and can not be recognized by many customers. The company’s e-commerce sector is also lagging compared to competitors, limiting its customer base to in-store customers. The company also has poor marketing and advertising strategies, limiting brand awareness. One of the opportunities that the company could take advantage of is reducing prices to attract more customers because the financial power of the middle class in the United States is declining, thus increasing demand for cheap products (Target Corporation, 2021). The company can also venture into global markets hence increasing their customer. Another opportunity is e-commerce. Customers are gradually developing a preference for online shopping, so Target corporation should consider improving its e-commerce platform to increase online sales. The company may also bring diversity to the grocery section and enhance the effort taken to be eco-friendly. The company’s main threat is stiff competition from major brands such as Amazon. The COVID-19 pandemic has also reduced the purchasing power of customers across the United States due to tough economic times. The annual government taxes and rising interest rates are also a major threat to the company’s growth. The retail sector is also transitioning to online stores, thus limiting the company’s market share growth because it has not yet created a strong online shopping platform.
Financial Factors
Target Corporation has maintained a strong financial position. Last year, the company’s sales increased by 127%. The sales were attributed to the growth in market share as customers took advantage of the reduced prices to buy various products during the panic shopping wave. The company’s store comparable sales also increased by 9.7%, and the digital comparable sales increased by 29%. Same-day services such as drive-up and order pick-up increased by 60%. Most of the sales were fulfilled by the company’s stores across the United States. All five main merchandise categories offered double-digit comparable growth in sales. The company’s total revenue increased by 13.3%, with a 13.2% increase in sales (Target Corporation, 2021).
The operating income in 2021 was $2.0 billion. The operating income margin rate in the third quarter was 7.8%. The gross margin rate in the third quarter was 28.0%. The gross margin rate demonstrated pressure from freight costs and higher merchandise, increased inventory shrink, and increased supply chain costs from increased headcount and compensation in the distribution centers. A slight benefit from the category mix of favorable merchandise partly offsets the pressures. The company’s interest expense was $105 million during the third quarter. It paid $440 million in dividends, reflecting a 32.4% increase in dividend per share, partly offset by a decline in the average share count. The corporation also repurchased shares worth $2.2 billion in the third quarter last year, retiring 8.8 million common stock shares at an average cost of $246.80. By the end of 2021, the remaining capacity was $14.6 billion under the repurchase program approved by the board of directors. The after-tax return on the invested capital was 31.3%. The increase in return on investment on capital was mainly driven by increased profitability. The company’s financial performance last year was affected by uncertainties and risks.
The company’s continued access to financial markets relies on various factors, including the condition of capital markets, debt, operating performance, and maintaining strong credit ratings. If the rating agencies reduce credit ratings, the company’s ability to access the debt markets could be negatively affected. The cost of funds and other terms could also be adversely affected. Every credit rating agency reviews the ratings occasionally, and there is no guarantee that the current credit rating will not change. The company also uses various derivate products to manage the market exposure to risk and fluctuations in interest rates. Turmoil and disruptions in the financial markets could reduce the company’s ability to fund its operations and capital investments and result in losses on derivative positions caused by counterparty failures that could adversely affect the company’s operations and financial position (Wilson, 2010). The company’s comparable growth in sales was strong across its multi-category portfolio, with significantly higher growth in the categories in the lower margin. The gross margin was negatively affected by channel and category sales mix changes. The main expenses included important incremental costs related to investments in benefits and pay for store team managers, the increase in the volume of merchandise in the stores and the supply chain, incremental cleaning and safety supplies, and the effect of additional team member hours dedicated to more severe cleaning routines in its facilities. The incremental costs exceeded the cost leverage arising from a strong sales increase. The company issued $2.5 billion of 5 and 10-year notes to increase its cash. It also entered into an annual $900 million credit facility, increasing the total undrawn committed credit facilities.
The operating performance during the third and second quarters of 2020 and financial positions allowed the company to repurchase a debt of $1.77 billion before its maturity at the market value. The company’s period-end cash and equivalents balance increased to $8.5 billion. The cash and equivalents balance included short-term investments amounting to $7.6 billion (Wilson, 2010). The company’s investment policy is designed to preserve liquidity and principal for its short-term investments. The policy allows large investments or short-term instruments to mature after 60 days or less. It also places dollar limits on its investments in individual instruments and funds. Capital expenditures decreased after the company modified its plans to include strategic initiatives such as remodeling stores and creating new openings due to Covid-19.
References
Bloomberg. (2021). Target Corporation. Bloomberg – Are you a robot?. https://www.bloomberg.com/profile/company/TGT:US
Eades, K.?., Ding, D., & Yeaton, S. (2020). Target Corporation. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3682596
Target Corporation. (2020). 2020 Annual Report Target Corporation. investors | Target Corporation. https://investors.target.com/static-files/717a6df4-172c-484e-afbd-611131a7ce7b
Target Corporation. (2021). Company leadership | Target Corporation. Target Corporate. https://corporate.target.com/about/purpose-history/leadership
Target Corporation. (2021, July 30). Target company profile. Fortune. https://fortune.com/company/target/
Tuleja, E. A. (2021). Target Corporation. Intercultural Communication for Global Business, 180-185. https://doi.org/10.4324/9780367423827-13
Wilson, R. E. (2010). Target Corporation: Maintaining relevance in the 21st century gaming market. https://doi.org/10.4135/9781473995253
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Question 
Target Corporation Analysis
Section 1- Introduction of Target Corporation (1 page)
Section 2- Leadership analysis (2 pages):
Report on the organizational structure that the company operates under, and report on the various leaders of the company (organizational chart of CEO, CFO, etc.). Describe the key senior leadership, who reports to whom, and what they are responsible for. Reflect on how the organization and leadership are important and impact the organization’s future.
Section 3- Ethical factors (1 page):
This section needs to contain an analysis of
-the mission statement
-vision statement
-and core values of Target
Section 4- strategic analysis(1 page)
A SWOT is how we get to the strategy. So what is their strategy? Is it to cut overhead? Find new markets? Sell more to existing customers? These improve the bottom line of a company. What do the annual reports say about the goals and objectives for the future?
Section 5- financial factors (2-3 pages)
Use the financial statement of the target corporation to compute the following ratios for the past five years: Return on Assets, Cash Return on Assets, Return on Equity, Debt to Assets, and stock pricing. Analyze the trends of the ratios and relate any trends to the strategic plan and demand analysis. Report on how well Target did versus the industry average for large retailers.