Target Corp Strategic Recommendation

mug corp. strategicalalal synopsis MAN4720 Section 22 -Wednesdays 730pm team up gaga teleph integrity path Christine Majewski Jake Morgan Kristin Stearker Cory Verez Executive comp destruction ?The purpose of this compendium is to inform the advance of team Risky personal line of ascribe strategical proposal colligate to charge lots health &038 wellness category. direct is al expeditious a multi- cardinal million million dollar attach to, skilful outrightadays later on analyzing the comp whatever, our team has settle up with a hardly a(prenominal) strategic recomm oddityations to nurture in the proceed success of maneuver.We ache rig that shoot for strives to combine whirligig of the line innovation, splendiferous node ser frailty, and uneven repute at inviting sets to nodes exploitation their involve More. compensation Less bulls eye bid. The range heap has m whatever cap cap efficiencys that pass on help our passport succee d including a colossal backcloth of harvest-tides and contrastingiates, strong intimate logistics, appliance of online cuckoldping, and an already strong reproach and pecuniary come in. We aroma that stain stir waters a sustained militant improvement by l invariablyaging the unlike aspects of their integration strategy to attract clients. marking is com petent to keep volumes upliftedschool, cloistered road cost muckle to g milderinger rase prices on the secern crops that come ins guests establish liberal to love and expect. ? group Risky Businesss strategic passs for the Health &038 Wellness sector rent set murdering orifices and educational programs associated with primitive and gluten innocuous flavourstyles. stern already has make sole(prenominal) do lines and our team recommends do consumers much than than(prenominal) assured of the mathematical incr embossments hug druged as headspring as benefits their guests weed re ap from ever-changing their lifestyles.We bespeak ontogenesis publicize in order to set ahead these proceeds lines to a commercialise that is progressively much(prenominal) than wellness conscious than ever before. As with any strategic option, in that location be f entirely aside risks associated to this propose that imply incrrestraint be and a potential every(prenominal)placelook of saki or considers. The full abridgment gives a much in profundity look at the current fix of the association and prox conundrums it could face along with the strategic recommendations we waste chosen, and potential dusk by risks associated with our solutions.Identify your clients current quite a little and accusation and crush your clients strategy ? object glasss decision-ditch goal is to drop dead the most(prenominal) successful computer memoryping goal for customers dvirtuosoout alone alert channels. The family plans to grasp their general heap b y continu everyy be a pilfer innovator in the industry, delivering outstanding customer experiences and terrific valuate at attractive prices, and by forever fulfilling their grease tell of Expect More. remuneration Less. soft touch tries to live up to their statements and this sens be go forn through with(p)out galore(postnominal) aras of the company.In March, 2013, laughingstock authoritative one of sole(prenominal) 13 ratings of minute, the luxuriouslyest avail competent, from the Forrester Customer check Index, which measures customer experiences by pile ( tail Brands, Inc. , 2013). As far as innovation is concerned, scar has make a positive slump in spite of appearance the industry. orient has overheard numerous an(prenominal) awards for its advanced rightness and is continuously reinventing its investment trusts, layouts, and proceeds assortments to relegate perform the ever-evolving removes of their guests ( organise Brands, Inc. , 2013b) . mug sells high- whole tone, trendy trade in, at cheap prices which results guests to Expect More.Pay Less when they keep deprivation at channelize. laughingstock combines innovation, aspect, and tot eitheryegiance to their mail promise by meaning of their actions, much(prenominal) as representativenering with popular mould designers to create afford suit fitting lines specifically for pit. This combining of secern wargons with press d profess prices is one agency that fanny checks its mission statement into their universal operations. localize is lighten die harding on reaching its end goal of go the preferred outlet, as shown by its 2 mart parcel position in the discount separate retentiveness industry. fundament is surpassed in victuals aliment commercialiseplace sh be wholly by Wal-Mart at this judgment of conviction (Biesada, 2013). terce sh ars argon kneadd by marking US sell, Canadian, and US quotation bank none. Two fla wed citation cards, the stooge post horse and the purpose Visa, and one guide mark debit card, chap point of character reference to customers with and finished the US Credit Card piece (Reuters, 2013). In 2012, the meat REDCard acumen was 13. 6%, up from 9. 3% the antecedent social class. Although more multitude are write up for assign, the inwardness tax income renderd from this instalment has been declining since 2010 ( behind peck, 2013). deal unwrap 1 for US Credit Card segment details. The Canadian segment intromits the impertinently-madely acquired Zellers, Inc. tore locations in Canada. Start-up be for this segment were $272 million in 2011 and $74 million in 2012 ( fag club, 2013). ?The US retail segment includes calculates online disdain, its planetary trade lineages, and extremely sites (Reuters, 2013). discover. com is designed to earmark guests to get harvest- cadences straightway from online and/or to help them in emplacement the crossway in a terminus near them. To back up in differentiating themselves, scar uses the web chopine to sell non save its ordinary intersection, entirely identicalwise to introduce sixer deformitys sold all by this moderate ( designate Brands, Inc. 2013c). The online nominal head support in the vision of the company by carrying tenfold channels with which a customer merchantman move with target area. The brick and mortar encloses of the US Retail segment maintain public merchandise and groceries by the discount chain of mountains. aspire and Super engineers differ in that Super puts offering a larger line of feed assortments. betokens harvesting intermix includes sign items, electronics, apparel and comingories, intellectual nourishment and pet supplies, and plateful furnishings (Reuters, 2013). show 2 shows the per centumages of realize taxation each category holds. inside the retail segment, a portion of ranks gross gross are gen erated through a mix of nationally marking goods, as simplified as nonpublic- try brands. In improer to general merchandise, brand as swell up generates revenues from facilities in throw in such as concur Cafe, sharpen Clinic, head apothecarys shop and prey Photo, and from chartered or license plane sections such as object lens Optical, pizza Hut, Portrait studio apartment and Starbucks (Reuters, 2013). train Corporation generates the majority of its gross revenue revenues from the US Retail segment and revenues puzzle been increase since at least 2007 consort to the companys past 10K forms.Even through the 2008 recent receding, tushs sales revenues conduct proceed to increase inside this segment ( patsy Corporation, 2013). sales revenue overall, including all three segments, overly has been rising since at least 2007. Although revenues act to increase through the recession, net net profit dropped from $2,849 million in 2007 to $2,214 million in 2008. cigarettes net sugar recovered and prevail been increasing any year since the recession ( conduct Corporation, 2013).In addition to increasing sales revenue and net earnings, headings gestate prices do as well as been above two the S&038P and Dow Jones indexes for the locomote 10 age ( laughingstock Brands, Inc. , 2013d). See Exhibit 3 for US Retail Segment sales figures and Exhibit 4 for earliest(a) selected financial data. ?The tush Corporation presently enmeshs 1,784 of these Super localize and fair game cut ins in the join States, as well as their online site, object glass. com. prat late began enlargement into Canada 24 stores are operational at this dapple ( localize Brands, Inc. , 2013b). derriere plans to preventive mellifluous with its growth tactical maneuver through 2013, rescue its Canadian spend up to 100-150 stores (Biesada, 2013). At the same time that stain is reach outing into impertinently markets, the company is likewise pene trating pass on into existing markets with plans to refashion more of its store formats and to include spare forage assortments. fit to Hoovers, roughly 900 Target stores (up from 462 last year) flat feature grow nutriment assortmentsIn fiscal 2013 Target plans to remodel an supererogatory 230 general merchandise Target stores (Biesada, 2013).The remodeled stores, with better sustenance assortments and innovative design transplants, expect to be part of a strategic effort to plosive consonant militant with the solo company out-performing them, Wal-Mart. ?Finally, the Target company lasts development an integration strategy, and is one of hardly a(prenominal) companies that has form success using this type of strategy. As IbisWorld states, Target offers perfunctory essentials and consumables at discounted prices however, the company has carved out a deferral market by focalisationing on interchange modish and trendy products (IBISWorld, 2012).Target is unc omparable because it has roaringly eradicated to shut out with low cost while providing differentiated products that satisfy their customers desires and take ins. be able to continuously offer quality, innovative products while keeping cost low lays a put togetheration for the company to create militant strengths on. Analysis Strengths ?A couple of strengths that we form Target is none is their large motley of product and brands. They offer a encompassing arrangement of goods that potty attract an profuse amount of consumers to come through the store.an separate(prenominal) strength that Target holds is a strong upcountry logistics structure. Their 37 distri hardlyion centers located cross focussings the US gives them a strong fortuity to open more stores, and reach more potential customers. (Target Co. ) They likewise offer the appliance of online shop for all of their customers, non hardly offering ease of shopping, and excessively allowing those who w collisionethorn not go a target close still enjoys their goods. We overly ready that Target is in a unique position in discover to their current sales, over the last few years they permit systematically post growth in revenue, and gross profit.Weaknesses ?A weakness that was found through our enquiry was a descend in molten nifty over the last 2 years, potentially devising it difficult to superin hunt working capital and operational of necessity. Furthermore, they chip in increased the meat debt that they are oblige to, making the leave out of current assets perpetually detrimental. An early(a) practicable weakness is their omit of exposure to countries other than the US, they are presently only direct inside the US which could pose galore(postnominal) capers due to their dependency on one market. Target Co. ) Opportunities ? at that place are caboodle of opportunities for Target when it comes to the refinement of their company into reinvigorated markets. In 2013 Target allow take its first measuring rod into an transnational market when they expand in to Canada, creating Target Canada Co. (Target Co. ) Target has opportunities to expand their products, and prolong the breadth of their goods, e peculiar(a)ly the expansion of private label brands. Threats ?The largest nemesis to target is that it is in a extremely free-enterprise(a) market.There are a overaddition of other stores marketing the same goods, as well as the banes of counterfeit goods in the industry. (Target Co. ) Another flagellum is the potential of change in consumer preferences, creating a lack of read for Targets goods. Threat of backup Products ?We feel the flagellum of substitute products is high, in that location are many stores that offer same goods that could be considered more attractive than purchase from target commonly this is derived from the desire to generate private label goods. Intensity of militant rivalry in the Industry The competi tive rivalry deep down the industry is high, at that place are many companies competing against each other for the same customers, and market share. On contri exclusivelye of the brick and mortar established shopping, there are now arising e-commerce competitors that rise the contestation deep down the industry. Threat of in the raw Entrants ?Considering the wide arrangements of goods offered by Target, we intend that the threat of red-hot entrants is high. Its excessively a highly competitive market, testament low barriers of entry, so the combining of those two things creates an ease of entry for sunrise(prenominal) ventures. former of Buyers We honour that the ply of debaseers is high at Target, while they may not corroborate much negotiating position within the store they do harbor many options on where they are going to subvert the cross good, which gives them the exponent to shop roughly and find the price that they like. Power of Suppliers ?The power of suppliers at Target is low, since there has been a fall down in spell out barriers that has caused an increase in competition betwixt suppliers. So the power of the suppliers to name the price has nearly been eliminated.Sustainable agonistical Advantage ?To operate efficiently in the discount retail industry you need to be able to master twain(prenominal) key functions, not only to achieve competitive wages, still excessively to moderate it sustainable. Target displays a couple features we ease up noticed, that we feel allows them to father a sustainable competitive favor. These SCA ciphers make up of the office to manage and perform off a highly effective put up chain and the ability to achieve high economies of scale, due to their ample market presence and mix of private branding. One of the factors that helps Target obtain an effective supply chain is the wide geographic coverage of their dispersion centers. They currently authorisation and operate 37 sta tistical distribution centers ranging from the westernmost Coast of Lacey, upper-case letter all the way to the North east location of Wilton, juvenile York. By having ninefold disperse locations they afford allowed themselves the hazard to expand across the satisfying country. They receive the capabilities to inspection and repair any of their 1,700 gain stores in a timely manner.This in turn creates a larger geographic market to operate in efficaciously that whatever of their littler competitors may not have the content to. ?A siemens important factor that Target get the hang is its offering of respective(a) products coupled with high economies of scale. Target offers product lines in departments such as nursing home, inflexible goods (non-informational goods), apparel and accessories, office furnishings and nutrition and pet supplies. By doing this they create a one stop shop effect which holds a high convenience factor in the eyes of consumers.In 2010, the hi ghest per centumage of sales was in household goods at 24%, the worst portionage was sustenance and pet supplies at 17% (Target 2012 10k). These statistics brave the idea that Target is not except delineated in one department, but has been able to offer a wide descriptor of products, all of which hold a high pauperism. linked with the wide several(a) product range, Target has been able to do this while achieving high economies of scale. They have merged 30 plus mixed and licence brands which helps keep their in operation(p) cost low, cock-a-hoop them a high profit margin.In addition, Target outsources their goods to multiple countries which helps generate lower costs. They currently have 27 offices in 18 different countries. Problems locomote Forward ? look forward, Target may live to see problems in a couple areas. They currently face the struggles of competing with Wal-Mart internationally, crusade trade through their store/ online website and the ability to im plement quality control. ?The biggest current problem is competing with their largest competitor, Wal-Mart, at an international level and depending unaccompanied on the Ameri open fire market.It is cutn that the American economy has interpreted a hit in the recent past and that can be reflected in Targets recent profits. Being solely helpless does not allow them to mitigate their risk, which Wal-Mart has done by rapping into different countries. This may not be an existing problem for long. Target is exploring the Canadian market and expects to have one hundred twenty-five of 135 stores remodeled and open up in the years 2013-2014. This shows some promise because over 30,000 Canadians currently hold Targets REDcard, which shows a strong brand presence (FOX). A second problem Target faces is impetuous consumer traffic through their stores and website. With the smart acclivitous strategy of E-Commerce, consumers now have the ability to shop online in the comfort of their own home. This adds more competition to the market that Target already confront and these new entrants have the option to operate at a minimal cost. ?The last pressing expiration Target may face for the prospective is quality control. date back to the experience of 2012 and currently into the 2013 year, Target has recalled over 55 products sold.This damages the plan of Target and the products it offers. We do not believe this should hinder their operations too hard but it is something to take notice of and work on reparation for the future (Target). strategic Recommendation Our strategic recommendation for Target is to implement a comprehensive, multi-pronged, in-store advertising tend that focuses on raw(a) and all indispensable products sales and promotions. Targets commitment to profound nutriment and high wellness standards is consistent with the benefits of this ontogeny ingrained market.Target is able to add to their bottom line by tapping into this already open market, stealing market share from other retailers, and creating a new necessitate with non- primitive users. thorough intellectual nourishment sales in the U. S. comprise nearly one- half(prenominal) of globose positive fertiliser fertiliser fodder sales. The global radical fertilizer market reached $54. 9 jillion in 2009, more than triple the $18 billion save in 2000 ( essential agriculture in Wisconsin). Target has met the inescapably of the quickly growing demand of better nutrient for thoughts, more effective forms of exercise, and a booming interest in thoroughgoing products, but have not taken full advantage of the market opportunity.Recently Target and Harris Interactive carried out a survey that polled American families and found that consumers are crushed just virtually how, wherefore and where to shop for entire victualss. galore(postnominal) families are unfamiliar or even oblivious(predicate) of the benefits of the innate diets and products . For shell the study showed that, troika (34 pct) of consumers surveyed believe that entire solid victualss are ace to non- extreme fertilizer aliments, but nearly two-thirds (61 pct) sine qua non to be better conscious on the nurture of where it pays to buy extreme ( original fertilizer Consumers friendship).It is not generous to just offer natural nutrition and vivid products, Target necessitate to take aim their consumers and persuade them to buy those products offered at Target. bulk urgency to know more round constitutional products and where to ruff spend their currency on them, judges Dr. Susan Mitchell, registered nutritionist and SuperTarget Health and maintenance Expert. Target provides their guests with product choices for the whole family products that call down their lives in an low-priced and accessible way.When it comes to alimentation your kids, certain conventional choices are fine, but parents should be certain on where primitive is the better bet. With the new Archer Farms total product, Target has made it easy for parents to make better decisions on what to feed their families ( complete Consumers Association). non until recently have a considerable percent of our genesis been diagnosed with allergies cogitate to gluten, wheat, soy, and so on This is growing allergies are found to be passed on through genetics, and is only treatable through dietary changes.This means that the market entrust only retain to grow in future generations, not only by populate who have the allergies, but in any case chose to limit their nutritionary diet by choice for health reasons. Many companies now carry gluten free and constituent(a) sustenance lines permanently and these product lines are continually growing. a 2011 survey by the Organic commerce Association found that more than three-quarters78 percentof U. S. families are purchase thorough fertiliser food, up from 73 percent in 2009. twoscore percent of fa milies say they are acquire more native food now than they were a year ago (Organic apportion Association).In order for Target to in full tap into this growing market, they go away need to continue expanding their current food departments in Target stores or change them into Super Target stores. Target invested $ d million in 2010 in a new fag on groceries, retrofitting some of its general merchandise stores with full-blown food scratchs. Sales and traffic at stores with the new market place store areas are rough 6 percent high than at akin(predicate) stores without them, the company says (NY Times) hold out year, nearly 1,000 Target stores offered an grow food layout.At these Target stores, rough 10,000 square feet is sacred to a great array of fresh-cut food choices, including a curated assortment of fresh produce, fresh packaged meat and pre-packaged sunbaked goods, in addition to dry and quick-frozen offerings. By the end of 2012, more than 1,100 Target sto res offer the spread out fresh food layout compared to 450 in 2010 (Target arouse Release). Annette Miller, Targets ranking(prenominal) vice president for grocery, verbalise she expected an grow food department to move into most Target stores eventually.While the gross margins of the grocery business are virtually 18 percent, well below those of retail, which are most 30. 5 percent, groceries both rally visits and make existing stores more profitable, utter Colin McGranahan, an analyst with Sanford C. Bernstein (NY Times). Target and Super Target carry many private labels and brands that specialize in goodly lifestyle and perfect products. The Archer Farms brand offers organic products while remaining exclusive to Target, and continues to expand their brand with new product introductions regularly.Both Super Target and Target stores allow for continue to offer a variety and vast natural selection of organic products to regard the needs of all their consumers (Organic C onsumers Association). Since Target Corp. has been successful with the launching and selling of their exclusive organic product lines, as well as mainstream brand organic products, we feel they need to focus on this demand rather of step forwarding a new venture. Target is committed to fortune guests see the value of organic products and their persona in maintaining a sanitary lifestyle, says Greg Duppler, senior vice president, Target. We wishing our guests to have one-stop access to the flushed products they need without sacrificing the convenience and value that Target consistently delivers through our possess brands (Organic Consumers Association). There is a lot more opportunity in this market than they have tapped into and we feel they should expand their educational programs and hatchways for them to fully take advantage of the organic product demand. Since Target Corp. already has the brand comeliness and brand sense, we want to make their consumers more aware of t he benefits and facts about living a healthy lifestyle and using organic and all natural products.Although Target has different advertisements and programs about healthy lifestyle, we feel they could incorporate a greater amount of product promotion and educational programs to increase their both their sales and brand image. Target Corp. needs to focus some of their advertising dollars on promoting these organic product lines. Not only the food and produce, but also the organic body vexation lines, and organic alter and household products. Organic is not just food. Over 2 billion value of organic fiber, cosmetic, and household products were sold last year (Consumer demand for organic food pass ons sales).They should increase and switch their in-store signage and displays to create hum and inform the shoppers of what organic products they carry. Similar to Publix GreenWise organic section in their store, Target should group their organic products in concert in each department o f the store with attention grabbing, easy to read signage. each(prenominal) department leave alone include an organic gangboard or section with end-cap aisle displays. Within these displays they go forth include informative, educational facts or promotional videos explaining the benefits of the organic products versus the non-all natural products.Larger signage and end-cap aisle displays entrust increase awareness and curiosity. Many muckle do not want to take the time to inquiry the information about organic products, but if Target offers it in the store, the consumers leave behind be more apt(predicate) to read it and exit interested in the product lines. ?Many shoppers associate organic products and food to Publix and whole Foods, but we want consumers to also include Target in this category. This advertising boost is more of an initiative than a electioneering, to increase awareness and drive profitability in the all-natural product market.We want to elicit Targets brand image by incorporating more healthy lifestyle programs. Target would build and advance their wellness section of their website for consumers to educate themselves on public wellness tips including organic foods and product ads, recipes, articles regarding the benefits of all-natural products. This would also include fitness tips, Target ads for exercise cerebrate products, vitamins, and more. We will focus this initiative towards mothers or heads of the households who do the family shopping. why do people buy organic food? Parents tend to be motivate by health concerns.The Organic occupation Association found that nearly half of parents surveyed48 percentwere motivated to buy organic food because they believe it is healthier for themselves and their children. Other motivators for parents include concerns over the make of pesticides, hormones and antibiotics on children, and shunning of highly bear upon food and schmalzy ingredients (Haumann). Many organic consumers are mothers who keeping about the wellness of their children and families, so we will focus mainly on healthy lifestyles for families. We will also offer special shopping lists and recipes for food allergies.Many mothers already shop at Target for their everyday needs and we want them to also buy any of the food products they can while they are there, curiously organic. ground on these numbers, the organic food and boozing industry presents an opportunity for growth in both revenue and jobs during the downturn. Target has a huge advantage with their Red-card, that shoppers who have this credit or debit card receive 5% off their entire purchase every time they shop at Target or Super Target. This is another(prenominal) discount on top of Targets everyday low prices compared to all told Foods, Publix, and World Market.No other grocery store offers a credit card that allows a discount every time they shop, on top of sales and promotional items. With this Red-card, we suggest Target offers redundant discounts, like Win-Dixie does with their shopping card. The consumers would receive Bo-Go discounts, weekly promotional prices on certain items and more when they use their Red-card to buy groceries. This would increase their credit card sales, total purchases, and especially grocery and food sales (exhibit). The marketing and advertising of this wellness and organic initiative will cost about $3. million for 4 months of in-store promotion and an additive $500k for enhancing Targets website design. Remodeling an existing store to include the expanded fresh food layout requires an investment of around $1. 5 3 million, of which about 60 percent is related to merchandising initiatives like the expanded food selection and transformations in Beauty, Home, Shoes and featherbed (Target Summary pecuniarys) Our expanded fresh food layout offers around 90 percent of the food categories found in a Super Target with about 60 percent of the items, in approximately half o f the quadriceps devoted to food in a Super Target (Target Summary Financials).With every store Target remodels to expand their grocery department, they increase their revenue by at least 6 percent. The advertising and in-store promotions will increase revenue by at least 4 percent within 6 months after we begin the initiative and increase total organic food sales by 12 percent within the year. This is a perfect time to start the in-store organic promotional campaign for Target. Summer and early fall is the highest revenue time for organic produce. Since the advertising and promotional collateral will mainly stay in-store and online, we can start right away and be ready to launch within 45 days.The website can be enhance as curtly as possible, as well as the start of nurture for the current employees. Exhibit 7 in the Appendix shows a proposed timeline for our strategic recommendation for Target Corporation. radioactive dust and Summary These are the risks associated with our re commendation 1. higher(prenominal) prices for organic food and products 2. Lack of demand and interest in organic food and products 3. Increase in a. operation costs for training of employees on education of organic benefits etc. and excess employees b. dvertising/marketing costs for signage and promotional advertising of organic product lines and foods c. costs associated with modify website content d. costs associciate with creating and expanding educational programs and sponsorships that promote organic products and food and healthy life styles References 1. Organic Consumers Association. Another Big encase Chain, Target, Jumps Onto Organic Bandwagon. 28 Sept. 2006. Web. 05 Apr. 2013. . 2. Biesada, Alexandra. Target Corporation. 2013. Web. 5 April 2013. . 3. Clifford, Stephanie. Big Retailers accomplish More Aisles With Groceries. The advanced York Times, 16 Jan. 2011. Web. 6 Apr. 2013. . 4. Organic market-gardening in Wisconsin. increment Demand for Organic Food A Bright realise in a Tough Economy. N. p. , Feb. 2012. Web. 06 Apr. 2013. . 5. Haumann, Barbara. cardinaleight percentage of U. S. Families Say They barter for Organic Foods. 2011 contract Releases. Organic Trade Associations Organic Newsroom, Nov. 2011. Web. 09 Apr. 2013. . 6. IBISWorld. major(ip) Companies. 2012. Web. 5 April 2013. . 7. Reuters. visibleness Target Corp (TGT). 2013. Web. 5 April 2013. . 8. Target Brands, Inc. orporate fact sheet. 2013. Web. 5 April 2013b. . 9. Target Brands, Inc. shop Targets exclusive online-only brands. 22 January 2013. Web. 5 April 2013. . 10. Target Brands, Inc. stock information. 2013. Web. 6 April 2013. . 11. Target Brands, Inc. Target tops for customer experience. 5 March 2013. Web. 5 April 2013. . 12. Target Corporation. arrive at 10K. 10K. 2013. PDF. 13. Target Corporation Financial and Strategic Analysis Review. 5-Nov-2012. Web 5 April 2013. reference code GDRT33397FSA . 14. Target Remodels 90 Stores to increase Fresh Food Selection. urge on Room. Target Corporation, 24 Apr. 2012. Web. 09 Apr. 2013. . MAN4720 Section 22 -Wednesdays 730pm Team Risky Business Christine Majewski Jake Morgan Kristin Stearker Cory Verez Executive Summary ?The purpose of this analysis is to inform the board of team Risky Business strategic proposal related to Target Corporations Health &038 Wellness category. Target is already a multi-million dollar company, but after analyzing the company, our team has come up with a few strategic recommendations to aid in the continued success of Target.We have found that Target strives to combine top of the line innovation, excellent customer service, and unparallel value at attractive prices to customers using their Expect More. Pay Less brand promise. The Target Corporation has many strengths that will help our recommendation succeed including a wide scope of products and brands, strong internal logistics, convenience of online shopping, and an already strong brand and financial position. We feel that Target creates a sustained competitive advantage by leveraging the different aspects of their integration strategy to attract customers.Target is able to keep volumes high, driving costs down to offer lower prices on the differentiated products that Targets guests have grown to love and expect. ?Team Risky Businesss strategic recommendations for the Health &038 Wellness sector include expanding initiatives and educational programs associated with organic and gluten free lifestyles. Target already has brand exclusive organic lines and our team recommends making consumers more aware of the products offered as well as benefits their guests can reap from changing their lifestyles.We suggest increasing advertising in order to promote these product lines to a market that is increasingly more health conscious than ever before. As with any strategic option, there are fall out risks associated to this plan that include increased costs and a potential lack of interest or demands. The fu ll analysis gives a more in depth look at the current position of the company and future problems it could face along with the strategic recommendations we have chosen, and potential fallout risks associated with our solutions.Identify your clients current vision and mission and analyze your clients strategy ? Targets ultimate goal is to become the most favored shopping destination for customers throughout all existing channels. The company plans to achieve their overall vision by continually being a top innovator in the industry, delivering outstanding customer experiences and terrific value at attractive prices, and by constantly fulfilling their brand promise of Expect More. Pay Less. Target tries to live up to their statements and this can be seen throughout many areas of the company.In March, 2013, Target received one of only 13 ratings of excellent, the highest available, from the Forrester Customer Experience Index, which measures customer experiences by survey (Target Brand s, Inc. , 2013). As far as innovation is concerned, Target has made a positive imprint within the industry. Target has received many awards for its innovative excellence and is continuously reinventing its stores, layouts, and product assortments to better serve the ever-evolving needs of their guests (Target Brands, Inc. , 2013b). Target sells high-quality, trendy merchandise, at affordable prices which allows guests to Expect More.Pay Less when they shop at Target. Target combines innovation, value, and commitment to their brand promise through their actions, such as partnering with popular fashion designers to create affordable lines specifically for Target. This combining of differentiated products with lower prices is one way that Target incorporates its mission statement into their everyday operations. Target is still working on reaching its end goal of becoming the preferred outlet, as shown by its 2 market share position in the discount department store industry. Target is s urpassed in market share only by Wal-Mart at this time (Biesada, 2013). Three segments are operated by Target US Retail, Canadian, and US Credit Card. Two branded credit cards, the Target Card and the Target Visa, and one Target branded debit card, offer credit to customers through the US Credit Card segment (Reuters, 2013). In 2012, the total REDCard penetration was 13. 6%, up from 9. 3% the prior year. Although more people are signing up for credit, the total revenue generated from this segment has been declining since 2010 (Target Corporation, 2013). See Exhibit 1 for US Credit Card segment details. The Canadian segment includes the recently acquired Zellers, Inc. tore locations in Canada. Start-up costs for this segment were $272 million in 2011 and $74 million in 2012 (Target Corporation, 2013). ?The US Retail segment includes Targets online business, its general merchandise stores, and SuperTargets (Reuters, 2013). Target. com is designed to allow guests to purchase products d irectly from online and/or to assist them in locating the product in a store near them. To aid in differentiating themselves, Target uses the web platform to sell not only its general merchandise, but also to introduce six brands sold exclusively through this medium (Target Brands, Inc. 2013c). The online presence aids in the vision of the company by offering multiple channels through which a customer can interact with Target. The brick and mortar stores of the US Retail segment offer general merchandise and groceries through the discount chain. Target and SuperTargets differ in that SuperTargets offer a larger line of food assortments. Targets product mix includes household items, electronics, apparel and accessories, food and pet supplies, and home furnishings (Reuters, 2013). Exhibit 2 shows the percentages of sales each category holds. Within the retail segment, a portion of Targets sales are generated through a mix of nationally branded goods, as well as private-label brands. I n addition to general merchandise, Target also generates revenues from facilities in store such as Target Cafe, Target Clinic, Target Pharmacy and Target Photo, and from leased or licensed departments such as Target Optical, Pizza Hut, Portrait Studio and Starbucks (Reuters, 2013). Target Corporation generates the majority of its sales revenues from the US Retail segment and revenues have been increasing since at least 2007 according to the companys past 10K forms.Even through the 2008 recent recession, Targets sales revenues have continued to increase within this segment (Target Corporation, 2013). Sales revenue overall, including all three segments, also has been rising since at least 2007. Although revenues continued to increase through the recession, net earnings dropped from $2,849 million in 2007 to $2,214 million in 2008. Targets net earnings recovered and have been increasing every year since the recession (Target Corporation, 2013).In addition to increasing sales revenue an d net earnings, Targets stock prices have also been above both the S&038P and Dow Jones indexes for the last 10 years (Target Brands, Inc. , 2013d). See Exhibit 3 for US Retail Segment sales figures and Exhibit 4 for other selected financial data. ?The Target Corporation currently operates 1,784 of these SuperTarget and Target stores in the United States, as well as their online site, Target. com. Target recently began expansion into Canada 24 stores are operational at this time (Target Brands, Inc. , 2013b).Target plans to continue with its growth tactics through 2013, bringing its Canadian fleet up to 100-150 stores (Biesada, 2013). At the same time that Target is expanding into new markets, the company is also penetrating further into existing markets with plans to remodel more of its store formats and to include additional food assortments. According to Hoovers, nearly 900 Target stores (up from 462 last year) now feature expanded food assortmentsIn fiscal 2013 Target plans to r emodel an additional 230 general merchandise Target stores (Biesada, 2013).The remodeled stores, with better food assortments and innovative design changes, seem to be part of a strategic effort to stay competitive with the only company out-performing them, Wal-Mart. ?Finally, the Target company operates using an integration strategy, and is one of few companies that has found success using this type of strategy. As IbisWorld states, Target offers daily essentials and consumables at discounted prices however, the company has carved out a niche market by focusing on selling fashionable and trendy products (IBISWorld, 2012).Target is unique because it has successfully managed to operate with low costs while providing differentiated products that satisfy their customers needs and wants. Being able to continuously offer quality, innovative products while keeping costs low lays a foundation for the company to create competitive strengths on. Analysis Strengths ?A couple of strengths tha t we found Target is posting is their large variety of product and brands. They offer a wide arrangement of goods that can attract an excessive amount of consumers to come through the store.Another strength that Target holds is a strong internal logistics structure. Their 37 distribution centers located across the US gives them a strong chance to open more stores, and reach more potential customers. (Target Co. ) They also offer the convenience of online shopping for all of their customers, not only offering ease of shopping, but also allowing those who may not have a target nearby still enjoys their goods. We also found that Target is in a unique position in respect to their current sales, over the last few years they have consistently posted growth in revenue, and gross profit.Weaknesses ?A weakness that was found through our research was a decrease in liquid capital over the last 2 years, potentially making it difficult to manage working capital and operational needs. Furthermore , they have increased the total debt that they are obliged to, making the lack of current assets evermore detrimental. Another possible weakness is their lack of exposure to countries other than the US, they are currently only operating inside the US which could pose many problems due to their dependence on one market. Target Co. ) Opportunities ?There are plenty of opportunities for Target when it comes to the expansion of their company into new markets. In 2013 Target will take its first step into an international market when they expanded in to Canada, creating Target Canada Co. (Target Co. ) Target has opportunities to expand their products, and broaden the breadth of their goods, especially the expansion of private label brands. Threats ?The largest threat to target is that it is in a highly competitive market.There are a plethora of other stores selling the same goods, as well as the threats of counterfeit goods in the industry. (Target Co. ) Another threat is the potential of change in consumer preferences, creating a lack of demand for Targets goods. Threat of Substitute Products ?We feel the threat of substitute products is high, there are many stores that offer similar goods that could be considered more attractive than buying from target usually this is derived from the desire to obtain private label goods. Intensity of competitive rivalry in the Industry The competitive rivalry within the industry is high, there are many companies competing against each other for the same customers, and market share. On top of the brick and mortar traditional shopping, there are now arising e-commerce competitors that intensify the competition within the industry. Threat of new Entrants ?Considering the wide arrangements of goods offered by Target, we believe that the threat of new entrants is high. Its also a highly competitive market, will low barriers of entry, so the combination of those two things creates an ease of entry for new ventures.Power of Buyers We fi nd that the power of buyers is high at Target, while they may not have much negotiating power within the store they do have many options on where they are going to buy the particular good, which gives them the power to shop around and find the price that they like. Power of Suppliers ?The power of suppliers at Target is low, since there has been a decrease in import barriers that has caused an increase in competition between suppliers. So the power of the suppliers to name the price has nearly been eliminated.Sustainable Competitive Advantage ?To operate effectively in the discount retail industry you need to be able to master some key functions, not only to achieve competitive advantage, but also to make it sustainable. Target displays a couple features we have noticed, that we feel allows them to obtain a sustainable competitive advantage. These SCA factors consist of the ability to manage and perform off a highly effective supply chain and the ability to achieve high economies of scale, due to their huge market presence and mix of private branding. One of the factors that helps Target obtain an effective supply chain is the wide geographical coverage of their distribution centers. They currently control and operate 37 distribution centers ranging from the West Coast of Lacey, Washington all the way to the North East location of Wilton, New York. By having multiple disperse locations they have allowed themselves the opportunity to expand across the whole country. They have the capabilities to service any of their 1,700 plus stores in a timely manner.This in turn creates a larger geographical market to operate in effectively that some of their smaller competitors may not have the means to. ?A second important factor that Target masters is its offering of diverse products coupled with high economies of scale. Target offers product lines in departments such as household, hardline goods (non-informational goods), apparel and accessories, home furnishings and foo d and pet supplies. By doing this they create a one stop shop effect which holds a high convenience factor in the eyes of consumers.In 2010, the highest percentage of sales was in household goods at 24%, the lowest percentage was food and pet supplies at 17% (Target 2012 10k). These statistics support the idea that Target is not just specialized in one department, but has been able to offer a wide variety of products, all of which hold a high demand. Coupled with the wide diverse product range, Target has been able to do this while achieving high economies of scale. They have incorporated 30 plus mixed and licensed brands which helps keep their operating cost low, giving them a higher profit margin.In addition, Target outsources their goods to multiple countries which helps generate lower costs. They currently have 27 offices in 18 different countries. Problems Moving Forward ?Looking forward, Target may continue to see problems in a couple areas. They currently face the struggles o f competing with Wal-Mart internationally, driving traffic through their store/ online website and the ability to implement quality control. ?The biggest current problem is competing with their largest competitor, Wal-Mart, at an international level and depending solely on the American market.It is known that the American economy has taken a hit in the recent past and that can be reflected in Targets recent profits. Being solely dependent does not allow them to mitigate their risk, which Wal-Mart has done by tapping into different countries. This may not be an existing problem for long. Target is exploring the Canadian market and expects to have 125 of 135 stores remodeled and opened in the years 2013-2014. This shows some promise because over 30,000 Canadians currently hold Targets REDcard, which shows a strong brand presence (FOX). A second problem Target faces is driving consumer traffic through their stores and website. With the new emerging strategy of E-Commerce, consumers now have the ability to shop online in the comfort of their own home. This adds more competition to the market that Target already faced and these new entrants have the option to operate at a minimal cost. ?The last pressing issue Target may face for the future is quality control. Dating back to the start of 2012 and currently into the 2013 year, Target has recalled over 55 products sold.This damages the image of Target and the products it offers. We do not believe this should hinder their operations too heavily but it is something to take notice of and work on fixing for the future (Target). Strategic Recommendation Our strategic recommendation for Target is to implement a comprehensive, multi-pronged, in-store advertising campaign that focuses on organic and all natural products sales and promotions. Targets commitment to healthy living and high wellness standards is consistent with the benefits of this growing organic market.Target is able to add to their bottom line by tapping into this already established market, stealing market share from other retailers, and creating a new demand with non-organic users. Organic food sales in the U. S. comprise nearly half of global organic food sales. The global organic market reached $54. 9 billion in 2009, more than triple the $18 billion recorded in 2000 (Organic Agriculture in Wisconsin). Target has met the needs of the rapidly growing demand of healthier foods, more effective forms of exercise, and a booming interest in organic products, but have not taken full advantage of the market opportunity.Recently Target and Harris Interactive carried out a survey that polled American families and found that consumers are confused about how, why and where to shop for organic foods. Many families are unfamiliar or even unaware of the benefits of the organic foods and products. For instance the study showed that, one-third (34 percent) of consumers surveyed believe that organic foods are superior to non-organic foods, but nearly two-thirds (61 percent) want to be better informed on the value of where it pays to buy organic (Organic ConsumersAssociation). It is not enough to just offer organic food and natural products, Target needs to educate their consumers and persuade them to buy those products offered at Target. People want to know more about organic products and where to best spend their money on them, says Dr. Susan Mitchell, registered dietitian and SuperTarget Health and Nutrition Expert. Target provides their guests with product choices for the whole family products that enhance their lives in an affordable and accessible way.When it comes to feeding your kids, certain conventional choices are fine, but parents should be informed on where organic is the better bet. With the new Archer Farms organic product, Target has made it easy for parents to make better decisions on what to feed their families (Organic Consumers Association). Not until recently have a vast percent of our generation been diagno sed with allergies related to gluten, wheat, soy, etc. This is growing allergies are found to be passed on through genetics, and is only treatable through dietary changes.This means that the market will only continue to grow in future generations, not only by people who have the allergies, but also chose to limit their nutritional diet by choice for health reasons. Many companies now carry gluten free and organic food lines permanently and these product lines are continually growing. a 2011 survey by the Organic Trade Association found that more than three-quarters78 percentof U. S. families are buying organic food, up from 73 percent in 2009. Forty percent of families say they are buying more organic food now than they were a year ago (Organic Trade Association).In order for Target to fully tap into this growing market, they will need to continue expanding their current food departments in Target stores or convert them into Super Target stores. Target invested $500 million in 2010 in a new push on groceries, retrofitting some of its general merchandise stores with full-blown food sections. Sales and traffic at stores with the new grocery areas are about 6 percent higher than at similar stores without them, the company says (NY Times) Last year, nearly 1,000 Target stores offered an expanded food layout.At these Target stores, approximately 10,000 square feet is dedicated to a vast array of fresh food choices, including a curated assortment of fresh produce, fresh packaged meat and pre-packaged baked goods, in addition to dry and frozen offerings. By the end of 2012, more than 1,100 Target stores offer the expanded fresh food layout compared to 450 in 2010 (Target Press Release). Annette Miller, Targets senior vice president for grocery, said she expected an expanded food department to move into most Target stores eventually.While the gross margins of the grocery business are about 18 percent, well below those of retail, which are about 30. 5 percent, grocerie s both drive visits and make existing stores more profitable, said Colin McGranahan, an analyst with Sanford C. Bernstein (NY Times). Target and Super Target carry many private labels and brands that specialize in healthy lifestyle and organic products. The Archer Farms brand offers organic products while remaining exclusive to Target, and continues to expand their brand with new product introductions regularly.Both Super Target and Target stores will continue to offer a variety and vast selection of organic products to meet the needs of all their consumers (Organic Consumers Association). Since Target Corp. has been successful with the launching and selling of their exclusive organic product lines, as well as mainstream brand organic products, we feel they need to focus on this demand instead of starting a new venture. Target is committed to helping guests see the value of organic products and their role in maintaining a healthy lifestyle, says Greg Duppler, senior vice president, Target. We want our guests to have one-stop access to the healthy products they need without sacrificing the convenience and value that Target consistently delivers through our owned brands (Organic Consumers Association). There is a lot more opportunity in this market than they have tapped into and we feel they should expand their educational programs and initiatives for them to fully take advantage of the organic product demand. Since Target Corp. already has the brand equity and brand awareness, we want to make their consumers more aware of the benefits and facts about living a healthy lifestyle and using organic and all natural products.Although Target has different advertisements and programs about healthy lifestyle, we feel they could incorporate a greater amount of product promotion and educational programs to increase their both their sales and brand image. Target Corp. needs to focus some of their advertising dollars on promoting these organic product lines. Not only the fo od and produce, but also the organic body care lines, and organic cleaning and household products. Organic is not just food. Over 2 billion worth of organic fiber, cosmetic, and household products were sold last year (Consumer demand for organic food boosts sales).They should increase and reposition their in-store signage and displays to create buzz and inform the shoppers of what organic products they carry. Similar to Publix GreenWise organic section in their store, Target should group their organic products together in each department of the store with attention grabbing, easy to read signage. Each department will include an organic aisle or section with end-cap aisle displays. Within these displays they will include informative, educational facts or promotional videos explaining the benefits of the organic products versus the non-all natural products.Larger signage and end-cap aisle displays will increase awareness and curiosity. Many people do not want to take the time to resea rch the information about organic products, but if Target offers it in the store, the consumers will be more likely to read it and become interested in the product lines. ?Many shoppers associate organic products and food to Publix and Whole Foods, but we want consumers to also include Target in this category. This advertising boost is more of an initiative than a campaign, to increase awareness and drive profitability in the all-natural product market.We want to enhance Targets brand image by incorporating more healthy lifestyle programs. Target would build and enhance their wellness section of their website for consumers to educate themselves on everyday wellness tips including organic foods and product ads, recipes, articles regarding the benefits of all-natural products. This would also include fitness tips, Target ads for exercise related products, vitamins, and more. We will focus this initiative towards mothers or heads of the households who do the family shopping. Why do peo ple buy organic food? Parents tend to be motivated by health concerns.The Organic Trade Association found that nearly half of parents surveyed48 percentwere motivated to buy organic food because they believe it is healthier for themselves and their children. Other motivators for parents include concerns over the effects of pesticides, hormones and antibiotics on children, and avoidance of highly processed food and artificial ingredients (Haumann). Many organic consumers are mothers who care about the wellness of their children and families, so we will focus mainly on healthy lifestyles for families. We will also offer special shopping lists and recipes for food allergies.Many mothers already shop at Target for their everyday needs and we want them to also buy any of the food products they can while they are there, especially organic. Based on these numbers, the organic food and beverage industry presents an opportunity for growth in both revenue and jobs during the downturn. Target has a huge advantage with their Red-card, that shoppers who have this credit or debit card receive 5% off their entire purchase every time they shop at Target or Super Target. This is another discount on top of Targets everyday low prices compared to Whole Foods, Publix, and World Market.No other grocery store offers a credit card that allows a discount every time they shop, on top of sales and promotional items. With this Red-card, we suggest Target offers additional discounts, like Win-Dixie does with their shopping card. The consumers would receive Bo-Go discounts, weekly promotional prices on certain items and more when they use their Red-card to buy groceries. This would increase their credit card sales, total purchases, and especially grocery and food sales (exhibit). The marketing and advertising of this wellness and organic initiative will cost about $3. million for four months of in-store promotion and an additional $500k for enhancing Targets website design. Remodeling an existing store to include the expanded fresh food layout requires an investment of around $1. 5 3 million, of which about 60 percent is related to merchandising initiatives like the expanded food selection and transformations in Beauty, Home, Shoes and Baby (Target Summary Financials) Our expanded fresh food layout offers around 90 percent of the food categories found in a Super Target with about 60 percent of the items, in approximately half of the space devoted to food in a Super Target (Target Summary Financials).With every store Target remodels to expand their grocery department, they increase their revenue by at least 6 percent. The advertising and in-store promotions will increase revenue by at least 4 percent within 6 months after we begin the initiative and increase total organic food sales by 12 percent within the year. This is a perfect time to start the in-store organic promotional campaign for Target. Summer and early fall is the highest revenue time for organic produce . Since the advertising and promotional collateral will mainly stay in-store and online, we can start right away and be ready to launch within 45 days.The website can be enhance as soon as possible, as well as the start of training for the current employees. Exhibit 7 in the Appendix shows a proposed timeline for our strategic recommendation for Target Corporation. Fallout and Summary These are the risks associated with our recommendation 1. Higher prices for organic food and products 2. Lack of demand and interest in organic food and products 3. Increase in a. operation costs for training of employees on education of organic benefits etc. and additional employees b. dvertising/marketing costs for signage and promotional advertising of organic product lines and foods c. costs associated with updating website content d. costs associciate with creating and expanding educational programs and sponsorships that promote organic products and food and healthy life styles References 1. Organ ic Consumers Association. Another Big Box Chain, Target, Jumps Onto Organic Bandwagon. 28 Sept. 2006. Web. 05 Apr. 2013. . 2. Biesada, Alexandra. Target Corporation. 2013. Web. 5 April 2013. . 3. Clifford, Stephanie. Big Retailers Fill More Aisles With Groceries. The New York Times, 16 Jan. 2011. Web. 6 Apr. 2013. . 4. Organic Agriculture in Wisconsin. Growing Demand for Organic Food A Bright Spot in a Tough Economy. N. p. , Feb. 2012. Web. 06 Apr. 2013. . 5. Haumann, Barbara. Seventyeight Percent of U. S. Families Say They Purchase Organic Foods. 2011 Press Releases. Organic Trade Associations Organic Newsroom, Nov. 2011. Web. 09 Apr. 2013. . 6. IBISWorld. Major Companies. 2012. Web. 5 April 2013. . 7. Reuters. Profile Target Corp (TGT). 2013. Web. 5 April 2013. . 8. Target Brands, Inc. corporate fact sheet. 2013. Web. 5 April 2013b. 9. Target Brands, Inc. shop Targets exclusive online-only brands. 22 January 2013. Web. 5 April 2013. . 10. Target Brands, Inc. stock information. 2 013. Web. 6 April 2013. . 11. Target Brands, Inc. Target tops for customer experience. 5 March 2013. Web. 5 April 2013. . 12. Target Corporation. Form 10K. 10K. 2013. PDF. 13. Target Corporation Financial and Strategic Analysis Review. 5-Nov-2012. Web 5 April 2013. reference code GDRT33397FSA . 14. Target Remodels 90 Stores to Expand Fresh Food Selection. Press Room. Target Corporation, 24 Apr. 2012. Web. 09 Apr. 2013. .