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Strategic RecommendationsIntroduction of Recommended StrategyWe reason that our purposed strategic changes are in line with Target’s vision of “Our mission is to make Target the preferred shopping destination for our guests by delivering outstanding value, continuous innovation and an exceptional guest experience by consistently fulfilling our Expect More. Pay Less.? brand promise.” Furthered by, “To support our mission, we are guided by our commitments to great value, the community, diversity and the environment.”However we seek to expand the concept of Target to more than just Target retail stores. We really want to focus on the guest being able to expect even more from the Target brand.In this hostile economic environment it is our belief that in order to succeed it is critical to not rest on one’s laurels and become irrelevant, but to instead attack and seek the innovation Target is known for having.A major problem Target faces in the constant comparison to Wal-Mart. Target has a strong brand name but is lacking in image. Target is seen as the store that is a little nicer than Wal-Mart. Our strategy is primarily centered on fixing this.We also feel we can leverage Target’s existing resources to turn around a struggling Pier 1 Imports. They have the management talent to take this store back into the prominence it once held.By tapping into the green industry we seek to expand customer base and market share. The green industry is growing and is hugely underserved. This industry focuses around eco-friendly and sustainable practices and products. It also garners huge public appeal.Overview of RecommendationsFocus is “a?central?point,?as?of?attraction,?attention,?or?activity,” (). Not only is this part of the strategy named Focus which is an expansion store which focuses on eco-friendly, sustainable living products. It also is the focus of our strategic recommendation.Pier 1 Imports will be acquired with the capital derived from the sale of Target’s credit card sales receivables. This acquisition will provide a base of locations for 329 initial Focus store locations. The remainder of the sustainable Pier 1 Import locations will continue operations under Target management seeking to revamp the brand as a whole.A key crossover is the talent core of Pier 1 Imports in the home goods and furniture industry. These individuals will be essential in the creation Focus as part of the Target Brand Family.Another major benefit is in dealing with the supply chain. By integrating the three supply chains the costs are driven down for the smaller stores enabling better economies of scale not normally possible for stores of that size. A possible completion of the initial strategic changes is set for 2015 with the opening of the first 329 Focus store locations.For Target taking on a more green approach to business spells a better brand image, a differentiated and expanded product line, a wider base of customers, increased bottom lines from a higher margin business development and better international positioning.Overall this strategy improves Target’s positioning in the market, especially in the home goods industry.Target Stores Home GoodsTarget Retail Stores focus more on green business practices and publicize them further for enhanced branding. The next step for these stores is to split existing product lines between the three outlets to reduce cannibalization and create more of a sense of specialization for each store. This will also create unused floor space in Target store to expand other profitable areas of the product offering.Specifically furniture would be removed from Target store and might be replaced with additional electronics.Rebuilding Pier 1 Imports Utilizing Target corporation’s vast business building expertise and experience we are confident that management in cooperation with some of the existing member’s of Pier 1 Imports executive staff will be able to turn Pier 1 Imports back in a positive direction.Pier 1 Imports also has experience in the Canadian market which could prove very useful as Target seeks to expand their presence in that country. Further down the road Pier 1 Import’s presence in Mexico could be utilized as well.Why Pier One Imports?If focus were to enter into market as a standalone operation one of the main competitor s would be Pier 1 Imports. Elimination of possible competitor is the first reason we chose Pier 1 Imports.Second, Pier 1 Imports fits with the distribution model and relative store size we were hoping for during the initial concept stages behind what came to be Focus.Our last reason to pick Pier 1 Imports is the current financial state of the company. They have been under pressure the past few years and are in need of a turnaround. This weakens their potential power in the case of a buyout.Focus by TargetPart of green is a local approach to doing business and many times the more eco-friendly way is local. Although this is not always the case, we believe a good strategy would be to include Focus on the Local sections in the Focus stores to feature location home goods producers.Not everything in Focus stores will be green, but they would operate as sustainability focused stores. This includes both kinds of green: financially and eco-friendly.Focus stores would utilize architecture to compliment their product offering in addition to other sales increasing business practices. An idea to have local food and drink has been suggested as well.Focus stores will have sales representatives with incentives to be the best at what they do. They will help create an environment which attracts guest to visit and enjoy shopping there.Why Focus?By portraying the local production it reduces much of the negative impact for having a large portion of Target’s products produced in China. If you take it one step further and produce as much as possible locally it beats the reliance on the foreign country eliminating many more of the issues which correspond with that.There is no major presence in the green home goods sales industry giving Target somewhat of a first mover positioning, since all that is available in this fairly new industry is boutiques and smaller regional operations.Required ResourcesPier 1 Imports current market cap is 1.36B (Yahoo! Finance). The acquisition costs will likely be based off this number. We have found that in addition to the receivables sale opportunity, Target has the available cash flow to finance this purchase separately if need be. This purchase would be structured in a 3-to-1 cash leverage purchase utilizing bonds or other similar securities.A leveraged buyout would likely be the more profitable option to acquire Pier 1 Imports. This allows a more decisive take over as well, eliminating additional stockholder interests post-buyout.There is a tremendously amount of preparation required for each stage of this strategic development plan and this has been accounted for in the timeline. In addition to time human resources are required and have been accounted for by the acquisition of Pier 1 Import’s talent pool.A marketing plan ranging somewhere between $100 and $150 million is suggested for the Focus strategy to be best implemented.Total cost of implementing this strategy is estimated at around $2billion. Target would be liable for only about ? of this amount, greatly lessening their risk in the venture.New SWOT Positioning StrengthsWeaknessesStrong brand name and imageHigh diversification and product assortmentExperienced workersHigher Prices than other discountersReliance on ChinaUnfamiliarity with green industryOpportunitiesThreatsExpansion in profitable and new marketsE-commerce and M-commerceRoom for innovation and improvementDeclines in consumer confidenceCompetition of multiple industriesHousing market fluctuationsTimeline2012-2013Sale of credit receivablesStart of negotiations with Pier 1 ImportsImprovement in Target eco-friendly business practicesBoth retail and corporate level2014 Acquisition and evaluation of Pier 1 Imports storesPier 1 Imports chain initiates Target Brand PlanBegin renovations for Focus storesMarketing efforts for Focus as a movement startsTotal marketing campaign focusing on new ideas and new storesIntroduction of Target as a brand of storesIncludes all three stores2015Opening of Focus storesPossibly Earth Day 2015, Wednesday April 22, 2015Financial SummaryAfter researching Pier 1 Imports historical performance a conservative estimate of 10% profit growth is expected from continuing current operations between 2012- 2015.Both Pier 1 Imports and Focus by Target are expected to have higher overall profit margins than the Target segment of the future company.The average profit margin profit margin on this expansion based on the industry average, 45.3%, (, 2008) is almost twice that of Target’s current gross margin of 32.15% (Yahoo!). Key Investment Decision Criteria Expected ValuesNPV = $381million(2015, improvements only), $416million(2020, with acquisition)ROI = 15.8% (2015)Payback Period = 66months (5years, 6months)P/E Ratio=14.8 (2015)Key Assumptions This is based on average store earnings of $737,000, $12,500 expense beyond margin, with 5% sales growth each year. The average margin progresses from 36% to 45.3% over five years. Tax expense progresses from 20% to 35% over four years. MARCS depreciates out after 5 years. 329 out of 1750 Pier 1 Import stores are converted to Focus stores at the cost of 1million per store. Target Brand implements the suggested size Focus brand marketing campaign including all three store chains. RisksIf Pier 1 Imports collapses financially after the buy-out Target would suffer greatly.There could be total consumer unresponsiveness to parts of the strategy or the whole of it.The failure of the Focus stores to capture sufficient customer volume is present as the market is still developing.Imitation by current competitors remains a threat, in addition to the new competitors gained by the execution of an expansion.Bib "Focus | Define Focus at ."? | Free Online Dictionary for English Definitions. Web. 19 Apr. 2011. <, U.S. Census Bureau. "Gross Margin as % of Sales."?Docstoc – Documents, Templates, Forms, Ebooks, Papers & Presentations. Web. 19 Apr. 2011. <;."PIR: Summary for Pier 1 Imports, Inc. Common Sto- Yahoo! Finance."?Yahoo! Finance - Business Finance, Stock Market, Quotes, News. Web. 19 Apr. 2011. <;. ................
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