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Target Corp. Key External Factors
Opportunities Weight Rating Weighted Score
1. Economic downturn inspiring more downturn .10 3 .30
choice
2. Low price high quality demand .15 3 .45
3. 251 more stores in 2009 .10 3 .30
4. Economics demands more one-stop shopping .07 2 .14
5. High gas prices drive more neighborhood
(close to home) shopping .07 2 .14
6. Economics and competitors inspire
brand loyalty and return customers .05 4 .20
7. Increased demand for service and quality .09 3 .27
Subtotal 1.78
Threats
8. Competitors offering more variety; i.e., foods .08 3 .24
9. Media attention to recent campaign contribution .04 2 .08
10. Price wars .10 3 .24
11. Steady U.S. Unemployment .08 2 .16
12. Rising costs .07 2 .14
1.00 2.64 total
Given the preceding analysis of external factors, the Target Corporation has numerous opportunities to capitalize on its retail experience over the last one hundred plus years. After all, it has faced the Great Depression and subsequent recessions in the 1970s, 1980s and even into the 1990s. Throughout the latter recessions, the target Corporation realized growth and expanded. Using its quality and price guarantee it not only encouraged customers to try their products and services but also promoted customer loyalty. Inevitably, these internal factors influence the Target Corporation reactions to the steady unemployment in the United States, the rising costs not only for retailers but for its consumers. Accordingly, more consumers seek low price and quality, one-stop shopping when possible and convenience. Inevitably, store proximity plays a significant role in this, as well.
While its competitors have waged a price war and have traditionally offered more products in several categories including fresh produce, SuperTarget stores were originally established to compete with Super Wal-Mart and Costco stores for this reason. However, Target recently opted to not only make low price, lesser quantity products available for public consumption, but more importantly chose to include fresh produce in Target stores including those grown by local farmers, organics and the like. Notably, Target Corporation has also included many food products in its store brand, as well. Therefore, it is addressing consumer demands and consumer budget constraints while providing the same service, same guarantees and more options. Notably, as well, it more directly targets its competitors through these actions.
Competitive Profile Matrix
Target Costco Walmart
Critical Success Factors Weight Rating Score Weight Rating Score Weight Rating Score
1. Advertising .15 3 .45 .10 1 .10 .15 3 .45
2. Product Quality .10 3 .30 .15 3 .45 .10 2 .20
3. Price Competitiveness .10 3 .30 .15 3 .45 .15 4 .60
4. Merchandise Options .10 4 .40 .10 2 .20 .10 2 .20
5. Value added Services .10 4 .45 .05 1 .05 .05 1 .05
6. Management .10 3 .30 .10 1 .10 .10 1 .10
7. Customer Loyalty .10 3 .30 .15 2 .30 .10 2 .20
8. National Expansion .10 4 .40 .10 1 .10 .10 3 .30
9. Market Share .05 3 .15 .10 1 .10 .10 2 .20
10. Financial Position .10 3 .30 . 05 1 .05 .10 1 .10
1.00 3.35 1.00 1.90 2.40
Even though Target Corporation stands above its competitors, Costco and Wal-Mart in this Competitive Profile Matrix, Target will need to capitalize on its strengths and fortify them within the current economic conditions and the fierce competition it has expectedly induced. While its advertising, quality for low price guarantee and value added services have inevitably encouraged potential customers to try Target stores, these same guarantees have also maintained a fairly reasonable percentage of loyal Target customers. Its expansion has actually met the needs of consumers seeking better shopping options closer to home as well as those seeking more convenient one-stop shopping.
However, this is not to say that its competition has not posed a threat. While Wal-Mart has engaged in a price war, Wal-Mart failed to forecast customers’ budgetary restraints and the need to buy less quantity for many items. In turn, this has strengthened target’s competitive position because it forecast it and addressed it. Costco though mostly a bulk retail seller that offers membership to the public has made some retail gains but suffered the same fate as Wal-Mart in this regard. Additionally, of course, there are significantly less Costco stores than Target stores. Therefore, any shopping trip at Costco is likely to equate a higher dollar value but alternately inspires less frequent travel to Costco stores. For these reasons, Target must capitalize on its strengths.
On another related matter, both Wal-Mart and Costco have been parties in some very prominent lawsuits. Costco’s attracts attention for several reasons. First, it not only ‘illegally’ sold Swiss watches for less than the manufacturer cost. The ruling in this lawsuit may have many implications for retailers including but not limited to the aforementioned companies. Nevertheless, in the age of customer attention to social and ethical responsibility, these lawsuits targeting competitors may prove beneficial for target, if only short term.
Target Financial ratio analysis (MSN, 2010)
Target Growth Rates % Company Industry S&P 500
Sales (Qtr vs year ago qtr) 3.10 4.00 13.20
Net Income (YTD vs YTD) 21.00 12.40 45.10
Net Income (Qtr vs year ago qtr) 14.30 9.20 34.20Sales
(5-Year Annual Avg.) 6.89 7.52 9.02
Net Income (5-Year Annual Avg.) 5.71 6.41 8.31
Based on the above, Target’s sales fall nearly a point behind the industry as does its five year annual average. Although its net income stands nearly nine points above the industry and its quarterly income also stands above the industry by more than five points, Target still must improve its performance to remain competitive. While Target’s expansion both in the number of stores and the types of merchandise its stores now include may partially explain some differences in the net incomes here, these efforts attract attention and consideration when analyzing the complete picture.
|Target Price Ratios |Company |Industry |S&P 500 (MSN, 2010) |
|Current P/E Ratio |15.0 |15.5 |21.6 |
|P/E Ratio 5-Year High |NA |6.0 |42.5 |
|P/E Ratio 5-Year Low |NA |2.2 |2.5 |
|Price/Sales Ratio |0.59 |0.51 |2.16 |
|Price/Book Value |2.58 |3.02 |3.48 |
| |8.20 |9.50 |13.00 |
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|Financial Condition |Company |Industry |S&P 500 |
| Debt/Equity Ratio |1.08 |0.71 |1.04 |
|Current Ratio |1.7 |1.1 |1.3 |
|Quick Ratio |0.9 |0.4 |0.9 |
|Interest Coverage |6.4 |25.4 |36.9 |
|Leverage Ratio |2.9 |2.6 |3.4 |
|Book Value/Share |21.13 |18.21 |21.85 |
(MSN, 2010)
| |Company |Industry |S&P 500 |
|Investment Returns % | | | |
|Return On Equity |18.2 |20.7 |25.6 |
|Return On Assets |6.2 |8.4 |8.0 |
|Return On Capital |8.0 |12.9 |10.5 |
|Return On Equity (5-Year Avg.) |17.4 |19.0 |16.4 |
|Return On Assets (5-Year Avg.) |6.4 |8.0 |7.8 |
|Return On Capital (5-Year Avg.) |8.7 |12.3 |10.4 |
Financial data in U.S. dollars
Industry: Discount, Variety Stores
(MSN, 2010)
|Management Efficiency |Company |Industry |S&P 500 |
|Income/Employee |7,755 |8,774 |102,027 |
|Revenue/Employee |189,692 |276,768 |924,465 |
|Receivable Turnover |9.9 |268.7 |15.2 |
|Inventory Turnover |6.1 |8.6 |10.8 |
|Asset Turnover |1.5 |2.4 |0.8 |
Financial data in U.S. dollars (MSN, 2010)
| |Avg P/E |Price/ Sales |Price/ Book |Net Profit Margin (%) |
|01/10 |12.90 |0.59 |2.49 |3.8 |
|01/09 |16.10 |0.37 |1.71 |3.4 |
|02/08 |18.00 |0.77 |3.05 |4.5 |
|02/07 |16.70 |0.91 |3.41 |4.7 |
|01/06 |19.70 |0.92 |3.33 |4.6 |
|01/05 |22.20 |0.96 |3.38 |4.0 |
|01/04 |20.50 |0.83 |3.11 |3.9 |
|02/03 |24.10 |0.69 |2.72 |3.7 |
|02/02 |24.20 |0.99 |4.99 |3.4 |
|02/01 |22.10 |0.92 |5.09 |3.4 |
(MSN, 2010)
| |Book Value/ Share |Debt/ Equity |Return on Equity (%) |Return on Assets (%) |Interest Coverage |
|01/10 |$20.61 |1.10 |16.2 |5.6 |4.8 |
|01/09 |$18.22 |1.37 |16.1 |5.0 |4.0 |
|02/08 |$18.70 |1.12 |18.6 |6.4 |6.9 |
|02/07 |$18.18 |0.64 |17.8 |7.5 |7.5 |
|01/06 |$16.25 |0.69 |17.0 |6.9 |7.9 |
|01/05 |$14.63 |0.73 |14.5 |5.8 |5.1 |
|01/04 |$12.21 |0.99 |14.5 |5.2 |4.7 |
|02/03 |$10.38 |1.18 |14.6 |4.8 |3.8 |
|02/02 |$8.68 |1.14 |17.4 |5.7 |4.7 |
|02/01 |$7.26 |NA |19.4 |6.5 |4.8 |
Internal Factors Matrix for Target, Corp
Opportunities Weight Rating Weighted Score
1. Its gross margins of sales increased from previous year .10 4 .40
29.6$ to 30.5%.
2. EBIT margin increase 6.5% to 6.9% .05 3 .15
3. 46 more Target stores in 2009 .15 3 .45
4. Revenues per sq. ft. increased 4.2% .10 3 .30
5. 12 more SuperTargets .10 3 .30
6. Long-term debt decrease .10 4 .40
7. Capital investment decreased .10 4 .40
Subtotal 2.40
Threats
8. Credit card revenues decreased from previous .10 2 .20
9. Greater depreciation 2 ,023 vs. 1,826 .05 2 .20
10. Rising admin and selling costs .15 2 .20
1.00 3.00 total
Based upon the preceding internal analysis, Target Corporation has many internal strengths. Its overall investments and expenditures, except for administrative and sales costs have decreased. This obviously strengthens its financial and retail position. However, depreciation values increased, which signals some poor buying choices and/or in the case of foods spoilage. Given that Target stores will sell more produce, this number may fluctuate. However, such additions were necessary to bolster its retail position and answer consumer demands. Given the economics, target Corporation has many of the elements it needs such as store locations and selections already in place. However, it should bolster its Target Rewards program to attract more credit expenditures to attain maximum returns.
References
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MSN. (2010). Target/ Corp. Key ratios. Retrieved from
investor/invsub/results/compare.asp?Symbol=TGT
Target Corporation. (2010). Our mission. Retrieved from
en/company/page.jsp?contentId=WCMP04-031699
(2010). Through the years. Retrieved from
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Target Corporation. (2010). The New York Times. Retrieved from .
com/topics/news/business/companies/target_corporation/index.html
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Wal-Mart Stores. (2010). The New York Times. Retrieved from
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