Essay About Main Issue Facing Target Corporation And Target Corporation

Target Corp.
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The main issue facing Target Corporation is what it should do with its department store
and Mervyns divisions. The company has considered closing or selling the divisions
several times over the past few decades. Although both divisions continue to make a
profit, the company could be better off focusing all of its attention on the Target
stores. On the other hand, maybe the company needs to take a different approach with the
divisions and try to make them more successful to generate greater profits.
Target Corporation is going to have to sell its department store and Mervyns divisions
if they do not show significant improvements in next year after the new strategy goes
into affect. These two divisions are holding Target back and depleting some of its
much-needed resources. In the short run the other two divisions are going to start
conducting business in the same fashion as the Target stores. If after a year the new
strategy, which is making the other two divisions more like the target division, has not
produced more profit for the company, it will be time to either sell or close the
companies. Target would much rather sell the companies, but that can only happen if
another company is willing to buy.
The goal for the new change is that within a few months the change will be in full swing.
After a year the companies should be making not only more revenue but also more profit.
Unfortunately, if the changes do not work as planned, Target Corporation will not be able
to keep the businesses.
Background
Dayton Hudson Corporation changed its name to Target Corporation in January this year.
The origins of the company date back to 1891 when Joseph Hudson opened a mens clothing
store in Detroit. In 1903 George Dayton opened Dayton Dry Goods Company, which changed
its name to The Dayton Company in 1910. The Dayton Company entered the discount
merchandise retail industry in 1962 when it opened its first Target store. The two
companies merged and formed Dayton Hudson Corporation in 1969. The company continued to
expand by purchasing Mervyns in 1978 and Marshall Fields in 1990. By 1979 Target had
become the corporations top revenue producer.
In the past three years the company has changed significantly. Besides changing its name,
it has also attempted to diversify by acquiring two more companies. In 1998 it bought
Rivertown Trading Company and The Associated Merchandising Corporation. The acquisition
of Rivertown Trading Company showed that the company was willing to try something new by
entering the major catalog market. The Associated Merchandising Corporation was already a
supplier for many of the companies products, so it was very convenient for it to take
over operations. As recently as 1999, the company launched its e-commerce capability with
store brand web sites.
When the company claimed the Target Corporation name in January this year, it was
acknowledging its dependency on the success of its Target stores. The Target stores and
the e-commerce focus appear to hold the future of Target Corporations Success. The
department store and Mervyns divisions still play a major role in generating revenue for
the company, but the future of those divisions is less predictable.
SWOT – Situation Analysis
External Industry Analysis
Prospects for Volume and Profit – Industry Wide
Target Corporation is in the general merchandise retailing industry, sometimes called the
discount retailing industry. Its store brands include Target, Daytons, Marshall Fields,
Hudsons and Mervyns California. Selected information on the stores in the three
divisions is given in Exhibit 1 through 4. The acquisition of Rivertown Trading Company
marked Target Corporations first entry into a major catalog business. Rivertown and
Targets e-commerce team have combined to make one business called target.direct. This
creation allows Target Corporation to strengthen its capabilities in the direct marketing
retail channel and Internet retailing.
The general merchandise industry has experienced significant growth of 15.8% annually in
the past five years due partly to the strong economy. The industry accounted for $346
billion dollars in 1998. Experts project that it will increase this year and next year by
19.6% and 18.8% respectively. The five-year projection for the industry shows an annual
increase of 18%. Selected information on the industry is given in Exhibit 5 and 6. Target
Corporation accounted for approximately 9.7% of the industrys sales in 1999. However,
its largest competitor, Wal-Mart, was responsible for about 47% of the sales. With the
industry growing at such a rapid pace, each corporation will have to continue to increase
sales