Www.jmu.edu



This case was written solely for an exam in the MBA 640 class. It is adapted from the articles noted as sources. There are many direct quotes that are not attributed. Please do not disseminate until I have a chance to clean it up and fix the attribution problems. INFORMATION SYSTEMS AT TARGETExpect More. Pay Less.The first Target store opened in 1962 in the Minneapolis suburb of Roseville, Minnesota, with a focus on convenient shopping at competitive discount prices. Today, Target remains committed to providing guests with the right merchandise mix—from everyday commodities and grocery offerings to trend-right home and apparel lines—at outstanding value. Target continually reinvents its stores, including layout, presentation, and merchandise assortment, to create an engaging shopping experience. Target Corporation is the second-largest discount retailer in the United States and is ranked 36th on the Fortune 500 as of 2013. Their mission is “to make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences by consistently fulfilling our Expect More. Pay Less.??brand promise.”TARGET HISTORYDayton Dry Goods Company was founded in 1902 by?George Draper Dayton, a banker who built his wealth by buying farm mortgages in southwest Minnesota. During the?Panic of 1893?which caused a decline in retail estate prices, the Westminster Presbyterian Church burned down, and because its insurance wouldn't cover the cost of a new building, the church was looking for revenue. Its congregation appealed to Dayton to buy the empty corner lot next to the demolished building from the church so it could rebuild. Dayton bought it and eventually constructed a six-story building on that corner lot in downtown Minneapolis. In 1902, Dayton, looking for tenants, convinced Reuben Simon Goodfellow Company to move its nearby Goodfellows department store into his newly erected building. Goodfellow retired and sold his interest in the store to Dayton.?The store's name was changed to the Dayton Dry Goods Company in 1903, later being changed to the Dayton Company in 1911. Dayton, who had no prior retail experience yet maintained connections as a banker, held tight control of the company, and ran it as a family enterprise.?On May 1, 1962 the Dayton Company, opened its first Target discount store located at 1515 West County Road B in the?Saint Paul suburb of?Roseville, Minnesota. The name "Target" originated from Dayton's publicity director, Stewart K. Widdess, and was intended to prevent consumers from associating the new discount store chain with the department store.?Douglas Dayton, grandson of George Draper Dayton,?served as the first president of Target. The new subsidiary ended its first year with four units, all in Minnesota. Target Stores lost money in its initial years but reported its first gain in 1965, with sales reaching $39?million, allowing a fifth store to open in Minneapolis.By 1982, Target became the top subsidiary of the Dayton Company. Until 1982, Target had focused upon the central United States. In that year, they expanded into the West Coast. Revenue for Dayton-Hudson increased to $33.7 billion, and net income reached $1.14 billion, passing $1 billion for the first time in 1999. This increase in profit was due mainly to the Target chain, which then CEO Bob Ulrich had focused on making feature high-quality products for low prices.?On September 7, 1999, the company relaunched its website as an?e-commerce?site as part of its discount retail division. The site initially offered merchandise that differentiated its stores from its competitors, such as its?Michael Graves?brand. In January 2000, Dayton-Hudson Corporation changed its name to Target Corporation. Their expansion continued throughout the United States. By 2013, they had stores in 49 states (all states except Vermont.) They expanded into Canada in 2011.Today, Target Corporation has its headquarters on?Nicollet Mall?in Minneapolis,?near the site of the original Goodfellows store.?The complex includes Target Plaza North and?Target Plaza South. Target Corporation competes directly against other discount retailers, mainly Walmart and Kmart. Since its founding, it has intended to differentiate its stores from its competitors by offering what it believes is more upscale, trend-forward merchandise at lower costs, rather than the traditional concept of focusing on low-priced goods. Douglas Dayton explained the concept: "We will offer high-quality merchandise at low margins, because we are cutting expenses. We would much rather do this than trumpet dramatic price cuts on cheap merchandise."As a result, Target stores tend to attract younger and more educated and affluent customers than?Walmart, among other competitors. The?median?Target shopper is 41 years old, the youngest of all major discount retailers that Target competes directly against. The median household income of Target's customer base is roughly $63,000. Roughly 76% of Target customers are female, and more than 45% have children at home. About 80% have attended college and 48% have completed college.?97% of American consumers recognize the Target Bullseye logo. Promoting Christmas sales is a hallmark of Target's advertising. Target has enlisted many singing personalities to promote its holiday sales. Amy Grant and Charlotte Church have been among the spokespersons seen over the years. One particular Christmas campaign featured LeAnn Rimes and the Looney Tunes characters (Bugs Bunny, etc.).In October 2008, Target announced plans to fight the perception that their products are more expensive than those of other discount retailers. It planned to add perishables to their inventory, cut back on discretionary items, and spend three-quarters of their marketing budget on advertising that emphasizes value and includes actual prices of items featured in ads. Target also planned to slow its expansion from about 100 stores a year down to 70 stores a year. History of PhilanthropyIn 1918, George Draper Dayton, who gave away most of his money to charity, founded the Dayton Foundation with $1 million. Dayton believed that "success is making ourselves useful in the world, valuable to society, helping in lifting the level of humanity." He lived his whole life according to that philosophy, giving away a tenth of his income every year and in 1918 donating $1 million (the equivalent of more than $15 million today) to establish the Dayton Foundation, which was renamed the?Target Foundation?in 2000.In 1946, The Dayton Company formalized its practice of giving 5 percent of profits to the community, and has kept that commitment alive ever since, supporting partners and programs that enrich the communities where we do business. By 1999 that 5 percent added up to $1 million a week, and by 2002 the number had doubled to more than $2 million a week. In 2013, Target announced that their giving now equals more than $4 million every week to the communities they serve. Those dollars go toward fighting hunger, aiding disaster preparedness and relief efforts, supporting the arts and putting more kids on the path to high school graduation. began as target.direct. Founded in early 2000, it was formed by separating the company's existing e-commerce operations from its retailing division, and combining it with its Rivertown Trading direct marketing unit into a stand-alone subsidiary.?In 2002, target.direct and?’s subsidiary Amazon Enterprise Solutions created a partnership in which would provide order fulfillment and guest services for in exchange for fixed and variable fees. The Target and Amazon partnership may go down in history as a big business blunder. But, back in 2001, when Target picked to power its e-commerce offerings it seemed like a good idea. After the company sold Marshall Field's and Mervyns in 2004, target.direct became . The domain??attracted at least 288 million visitors annually by 2008.? The End of the Target and Amazon partnershipIn August 2009, Target announced that they would build and manage a new platform, independent of?. This new platform was to launch in 2011, in advance of the holiday season. Their current website is an online retail experience that it fully controls. “Establishing a new platform for allows Target to reinvent our guests’ online environment and create a more user-friendly, reliable experience,” said Steve Eastman, president, . The move was a slow deliberate one with Eastman saying in 2009 that “it is in Target’s best interest going forward to assume full control over the design and management of Target’s e-commerce technology platform, fulfillment and guest services operations.”In 2011, the two sites were formally separated. However the launch was bumpy. As John Cook reported on August 24, 2011 in Geekwire:“… the Minneapolis-based retailer has rolled out a site that is beautiful to look at — complete with a white dog (showcasing the company’s trademarked bullseye logo over his left eye) helping to guide the way. I should say that is beautiful when you can see it. The site was crawling when I tried to access it this morning, and my first attempt was met with [an] error message...Not a great first impression.”The bumpy start continued with a major crash on September 13, 2011. With its limited-edition Missoni for Target line, and other low-price designer collections, Target has been trying to position itself as the chicest of the discount stores. Missoni’s clothing usually costs in the hundreds or thousands of dollars, but it had designed a number of cheaper items for Target, like a $40 skirt in its signature zigzag design and a $600?patio set. However, the limited-edition fashions were more limited than Target might have wanted. In an unusual fumble for the large retailer, Target was unprepared for online shoppers’ hunger for the items. The? site was wiped out for most of the day; the company said that demand for items was higher than it was on a typical day after Thanksgiving, and that is usually the biggest shopping day of the year.“The excitement for this limited-time designer collection is unprecedented,” said Morgan O’Murray, a spokeswoman for Target, in an e-mail. Target’s Web site was working properly again at about 11 p.m. But on Twitter and other social media sites, thwarted shoppers posted furious messages and commiserated about the site’s failure, with a few bragging that they had made it through in the brief periods that ?was working.Marketing experts said the blunder was amateurish, although they said it should not have any lasting effect on Target’s reputation. “It’s a little bit embarrassing for one of the nation’s largest retailers to have a Web site that can’t support a rush — it’s not like they’re any strangers to rushes,” said Ian Schafer, chief executive of the digital marketing firm Deep Focus. “It’s saying, ‘We’re so popular we had to turn people away at the door.’ Then get a bigger place.”The retailer's decision weighs in on the 'build' side of the build vs. buy argument that large corporate IT departments grapple with regularly. In Target's case, the benefits of being able to add greater customization to its Web site and better control customer experience appear to have trumped the advantages of outsourcing technology and support to a third-party vendor. And while Amazon was born an e-retailer and lays claim to extensive technology experience, IT is not core to Target's business. Baird financial analyst Peter Benedict notes that “We believe that e-commerce became strategically too important for Target to outsource this business to Amazon, in particular given the increasing competition between the two companies. Nonetheless, Target was a source of high margin commission revenues for Amazon (we estimate in the $100M+ range) on roughly $1.2 billion in merchandise volume.”Benedict notes that a number of large retailers have left the Amazon nest in recent years, including Toys-R-Us and Marks & Spencer. Target's move shows the retailer's interest in establishing a unique online identity. Amazon offers limited customization in its e-commerce services; if Target wants to add greater customization to different areas of its site, the company is better off building its own platform, says StorefrontBacktalk.Technology at TargetTo continue offering merchandise at appealing prices, Target looks for ways to control its operating costs. Consequently, the company’s IT department, called Target Technology Services, chooses technology that’s cost-effective and delivers real business value. “Target Technology Services is considered a strategic enabler for just about everything we do in retail strategy,” says Brad Thompson, Director of Infrastructure Engineering at Target. “That said, we are still a cost center, and so we are always looking to drive down costs where possible, as long as we meet the requirements of our guests, our application development teams, and our business partners.”In January 2010, Target announced their vendor partners for the re-platforming project for . More than 20 vendor technology partners were involved in the construction of the new .?Key contributors include:SapientNitro:? Lead partner and primary systems integratorIBM:? Multichannel eCommerce platform providerHuge:? Site creative – visual and interactive designInfosys:? Global inventory visibility and cross-channel order-management functionalityAT&T: Hosting provider?Amy Reilly, Spokesperson for Target, points out that technology also underlies the customer experience at each Target store: “When our guests come into our stores, they have a certain expectation of their experience. They expect clean, wide aisles and to find what they need and check out quickly because they lead busy lives. So reliability in our technology, including our POS [point-of-sale] and replenishment applications, is very important to helping us deliver on our ‘Expect More. Pay Less.’ brand promise.”Target has a highly distributed IT infrastructure with more than 300,000 endpoints, including servers, computers, POS registers, kiosks, and mobile devices dispersed among its 1,755 retail stores. Except for centralized authentication, domain name resolution, and endpoint monitoring services, each retail store functions as an autonomous unit. “Every one of our stores has its own control room, with its own network and compute capacity inside the store,” says Thompson. “So if you think of our infrastructure across all those stores, we have to get very creative with how we build, scale, and manage that environment.”Until recently, each store had seven servers that housed a suite of mission-critical applications. These include a POS solution that runs an average of 30 registers per store, security applications, inventory-management and stock-replenishment applications, pharmacy applications for those stores with a Target Pharmacy on-site, and database, infrastructure, and asset-protection applications.“With Target’s growth, the proliferation of servers, and the increasing portfolio of applications that we manage, it was time for a new approach to our IT infrastructure,” says Fritz DeBrine, Senior Group Manager of Server Technology and Enterprise Storage at Target. “We used to work in a model where if you were developing an application for a store, you’d have to buy a server for that application. Over time, that’s amounted to a lot of money. We wanted to reduce the number of physical servers that we need to run our applications at each store.”Server sprawl and the accompanying rise in hardware and electricity costs, plus a rapidly growing, highly distributed infrastructure with hundreds of thousands of endpoints to manage, were challenges that suggested a virtualization solution. However, it was a specific business need that arose in 2004 that became the catalyst for the company’s first virtualization solution. Target needed to replace the aging servers that hosted the company’s pharmacy application running on the IBM AIX operating system for those stores with a Target pharmacy.“The hardware we had been using for the pharmacy solution was no longer available,” says Thompson. “At the same time, we didn’t want to replace a lot of hardware that would cost us millions of dollars. By this point, virtualization had become a viable alternative to simply deploying more servers. It also would allow us to make better use of existing server capacity and reduce infrastructure management. We just needed to find the right virtualization solution for Target.”In 2004, Target joined the Microsoft Technology Adoption Program (TAP) for virtualization and found the solution it was looking for. During the TAP, the Microsoft team worked closely with Target Technology Services team members to virtualize the Linux-based pharmacy solution and run it successfully in a Microsoft Virtual Server 2005 environment. “Microsoft was pretty creative about developing a virtual machine edition for SUSE Linux for us,” says DeBrine. “So the first virtual instance in our stores was actually a Linux virtual machine, and it worked great. We deployed that solution to approximately 1,500 stores.” By the time Microsoft released the Windows Server 2008 operating system with Hyper-V virtualization technology in February 2008, the only remaining workloads running on their own physical servers were the POS and asset-protection solutions.Using virtualization to consolidate thousands of servers means that Target is spending less time and money on its physical infrastructure. Now the company can devote more resources to driving its competitive advantage through a superior guest experience. “A Microsoft Virtualization solution runs our stores on two servers instead of seven, reducing costs by millions of dollars a year through power savings, maintenance savings, and avoided hardware costs,” says Thompson. Also, Target will be spending less on its monthly maintenance contract. “With fewer physical machines to manage, we’ll be paying less for maintenance every month,” says Thompson. “Additionally, fewer servers reduces our power consumption. At Target, we take environmental sustainability very seriously, with goals to reduce our environmental footprint integrated throughout our business.”The money that Target saves on physical infrastructure and daily server and application maintenance can be reinvested into the business through improved IT services to team members and by further differentiating the shopping experience it offers guests. “We want to free up money for investments in business process automation and in deploying new applications that are directly visible to our guests and to our team members,” says DeBrine.?SOURCESClifford, Stephanie (2011). “Demand at Target for Fashion Line Crashes Web Site,” [], accessed on 9/13/13.Cook, John (2011). “Target (finally) parts ways with Amazon, but retailer’s new site sputters at launch,” , accessed on 9/11/13.Garretson, Cara (2009). “Severing Amazon Deal, Target Opts to Build, Not Buy,” , accessed on 9/13/13Microsoft (2011). “Large Retailer Relies on a Virtual Solution to Deliver Optimal Shopping Experience,” , accessed on 9/11/13.Target (2013). accessed on 9/13/13.Target (2011). “Target Launches Redesigned E-Commerce Website,” , accessed on 9/10/13.Wikipedia (2013). en.wiki/Target_Corporation, accessed on 9/13/13. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download