Table of Contents
Executive Summary
This report analyzes the impact of e-trade initiatives on the operations, growth, and profitability of firms. The selected company for the research is Target Corporation. Also included in the report is the company history, market analysis, company overview, market research, strategic recommendations and financial information. The company has undergone several stages of transformation till today. The corporation started with a single departmental store, but it has now expanded its business into foreign countries due to improved e-commerce integration in the business. The expansion is boosted by acquisitions made by the firm.
The firm deals with a broad category of commodities. The product lines include household essentials, electronics, and accessories, and home furnishings. The corporation has several exceptional brands which promote the sales volume. The main competitor of the organization is Wal-Mart Inc. The firm has robust strategies which boost its competitive advantage. Among the main strategies employed by the firm is the e-commerce initiative which has helped the organization to improve its sales volume.
The Corporation has employed various marketing strategies to ensure competitiveness and to promote faster expansion and growth. The firm has ensured the development of exceptional brands, promotion of its commodities through advertisement, providing discounts and lowering prices to enhance profitability and improved performance.
The corporation acquired Grand Junction to enhance efficient after sales delivery of commodities and improved online tracking of orders and delivery routes thus creating an extensive customer base and therefore increased sales volume. Proper inventory management, margin reduction, and customer value are among the essential strategic recommendations to enhance performance and profitability of the firm. The e-commerce initiatives have helped the firm improve its sales and profit margins hence faster growth and expansion.
Company History
Target Corporation was founded by George Dayton. The firm was known as Goodfellow in early 1902 the name changed in 1903 to Dayton Dry Goods Company. Seven years later the name ‘Dry Goods’ was changed, and it just remained Dayton Company. Years later the name changed to Dayton Hudson Corporation and recently, Target Corporation.
In the year 1969, there was a significant acquisition of Hudson Company. The integration caused Dayton Hudson Company which was ranked the fourteenth-biggest retailer. After the acquisition, Dayton Hudson shares were listed on the NYSE.
In 1980, Dayton Hudson acquired Ayr-Way and consequently converted the units to Target stores. In 1982, the firm sold the Dayton Hudson Jewelers. The operations of the organization changed since its two department stores were combined to form the Dayton Hudson Department Store Company, but the Hudson’s and Dayton’s units remained independent. The net revenues of the firm reached the $10 billion mark in the year 1987. Between 1990 and 1995 the Target Greatland, Target Guest Card and SuperTarget were launched.
In 1994, Target executive member Robert J. Ulrich was appointed as the chairman and the Chief Executive Officer the Dayton Hudson Company. In that same year, the firm began a new strategy that is establishing a “boundaryless” structure where marketing, resources, and management expertise was to be shared by all the three departments to enhance efficiency in the company.
Target stores have continued to expand at a very high rate of approximately 70 stores per year. It has grown into the leading urban areas of New York City and Chicago as well as a significant push in the Northeast. The growing dominance of the discount chain led to the renaming of the company in January 2000 to Target Corporation. During the year, the organization increased its online services and e-commerce. Target direct was also launched as an e-commerce unit.
In January 2008, The Chief Executive Officer Bob Ulrich retired and named Gregg Steinhafel as his successor.
In 2009, Target Corporation started to expand outside the United States. Two departmental stores were opened at Oahu in Hawaii and Alaska. In June 2010, the corporation announced its charitable goal to provide donation $1 billion to the education charities by the year 2015. In 2011, the business announced its first expansion internationally by the acquisition of the Zellers retail.
Currently, the company has expanded into many foreign countries hence boosting its sales volume. Online services and e-commerce have been incorporated to foster the faster growth of the firm. In 2017, the corporation agreed to the acquisition of Grand Junction to promote delivery efficiency.
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Company Overview
The Corporation owns and operates general-merchandise stores. The firm’s retail outlets mainly record revenues at the point of sale. The company has been boosted by robust e-commerce initiatives that have been put in place for competitive advantage. Sales from digital channels comprise of shipping revenue which is recorded upon delivery. The company also earns commissions from leased departments. Revenues from sales of gift cards are recognized upon the redemption of the gift card. The organization’s gift cards do not expire. The corporation operates the SuperTarget stores general merchandise goods and a line of foods. The company is ranked highly in the retail industry. The firm offers household essentials, beauty and personal care, paper products and apparel for women as well as accessories. Target Corporation’s headquarters are in Minneapolis, Minnesota. The company is evaluating the presence of particular ancillary income channels which includes credit card income profit sharing. The firm has flourished in the retail industry due to online networking and enhanced e-commerce.
About 60% of Target Corporation’s customer base comprised of females particularly younger ones as compared to its competitors such as Walmart where the demographic represents an average of 40% of shoppers. Also, Target has the most affluent consumers who can raise over $100,000 in a year. The firm is far and away the most favored retailer in the industry with 25% of its customers reporting such much income. The company is facing stiff competition from Amazon in the customer base since the demographics of the two companies the same by age, income, and gender.
Product lines and Competition
The firm operates in the following product categories: household essentials which include the pharmacy, personal care, beauty and baby care, Paper products and foods, apparel and accessories, electronics, and accessories and home furnishings.
The corporation’s exceptional brands include but not limited to Champion’s C9, Mossimo, Hand-made modern and Fieldcrest. The organization also generates its revenue from amenities such as Target Café, Target Optical, Target Photo, Portrait Studio and Starbucks. The firm’s competitors are Best Buy, Amazon Inc, and Wal-Mart. Companies in the retail sector depend majorly on the manufacturers for their commodities since they do not produce commodities directly.
Firms in this sector have to maintain proper stock management systems due to the broad range of commodities involved. Departmental stores provide goods to consumers at a fair price. Competition in the retail sector is stiff hence company survival depends on the quality of the strategic plans initiated by the organization’s management. E-commerce strategies and plans have brought huge financial impact on firms in the retail sector. Improvement of online services has been a source of competition in the retail industry due the enormous benefits attached regarding product design and sales growth.
Future expansion of the Corporation relies on the ability to integrate e-commerce effectively and product development through new brands. Maintenance of excellent customer relationship is also another factor that determines profitability and growth of the company. The company has to maintain the development exceptional brands which will boost sales volume by encouraging shoppers to buy.
Stiff competition motivates most retailers to opt on margin reduction to maintain competitiveness in pricing.
Market Analysis
Target Corporation has employed various marketing strategies to ensure competitiveness and to promote faster expansion and growth of the firm. The marketing plans put in place are as illustrated below:
Product Development
The company has enhanced fabric development through the use of technical expertise to ensure innovation and development of quality and affordable fabrics for existing and new product lines with a keen focus on the customer need and requirements. The Corporation has created designs for the exceptional Target brands which support consumer objectives. This facilitates the transformation of excellent and creative ideas into commodities that delight the customers. Also, proper authorization has been enhanced to ensure quality and appropriate product development. Target stands for quality and standardized commodities that promote organizational goals and financial objectives. It has collaborated with designers, engineers and robust project teams to create splendid brands and ensure profitability.
Pricing Strategy
Target is completely revising its pricing policies as it tries to win the stiff competition created by its peers such as Wal-Mart and Amazon. The firm has announced new price matching plans referred to as round price to try and match the pricing of the other retail giants. Also, Discounts for the commodities has been considered for specific periods to promote sales.
Selling the goods at significantly lower prices will increase sales volume as well the customer base. Moreover, multiple pricing for the electronics and groceries has been initiated to boost the sales. The corporation has issued warranties for the electronics and other accessories and also introduced components such as the gift registry, Target Card, Savings programs to ensure customer satisfaction and brand loyalty.
Promotion
The company has enhanced its campaign to ensure maximum awareness of its brands through advertising, sales promotion, and Public relations. The firm has participated in the social responsibility initiatives to provide a right image of the company to the public (Jain & Haley, 2009). The business has made use of the social network including twitter, facebook, and LinkedIn to write attractive messages about its commodities and services. Commercials have also been maintained in various media channels to promote sales and ensure profitability. The firm has also created an interactive website with interactive images and videos to provide awareness and use of its products and new brands.
Distribution
The company issues and distributes its commodities through an extensive network of channels and distribution centers putting into consideration the cost-benefit analysis. The organization also provides its general merchandise through online portals and its website.
The main Target Corporations competitor is Wal-Mart Inc. The organization has ensured that it puts in place robust strategies to remain at the top of the retail industry.
Wal-Mart’s Inc. marketing mix includes the following elements.
Product development
The firm designs and develops brands based on the consumer requirements and the general objectives of the organization. The exceptional brands have been vital to the organizations continued profitability.
Pricing Strategy
The firm uses the daily low price pricing strategy. The pricing strategy advertisements are commonly seen on the interactive website of the company. The primary objective of this policy is to attract more customers. This strategy goes in conjunction with the Wal-Mart’s core business strategy of cost leadership. The plan has promoted sales and profitability of the organization.
Promotion
The promotion mix of Wal-Mart is composed of sales promotions, advertisements, public relations and personal selling. The company makes ads on websites and newspapers. Sales promotions are done in the form of exclusive discounts and deals. Personal selling is usually carried out at Wal-Mart stores. The sales personnel typically persuade shoppers to try new commodities. The firm regularly sponsors the charity programs to ensure a good image of the organization and that of its brands.
Distribution
Wal-Mart Inc. uses the intensive distribution network design. The firm continues to open more new stores for convenience to the customers. The distribution mix of the company helps attract customers by making access to commodities convenient.
Marketing Research
The survey methodology involved online focus groups. The research is qualitative. To obtain the relevant information on the market research I conducted polls amongst students group chart. The number of students involved in the study was 30. Focus groups are always used to obtain group and personal feelings, opinions, and perspectives. This method is also time-saving and cost-effective as compared to other ways (Groves, Fowler, Couper, Lepkowski, Singer, & Tourangeau, 2011). Also, this method enables access to a wide range of information and also provides an opportunity seek clarification.
The students answered questions from the market survey questionnaire. Relevant answers were given to the questions. The questions asked revolved around customer satisfaction, pricing and general view of the organization. The answers provided for the questions revolved around the following:
First, when asked about the critical features assessed by a customer before buying a commodity, the respondents emphasized on the quality and quantity of the products. Secondly, when asked about the needs that are always spearheading the purchase of specific products, the respondents insisted on the basic needs and requirements as compared to luxury. Thirdly, when asked about the factors considered in preference of particular brands, most students emphasized on the specifications and ease of use. Last but not least, when asked about online and regular shopping, most students preferred usual shopping.
In summary, customer satisfaction mostly relies on the quality and efficient use of the commodity. An organization should aim at ensuring quality and standardized products for a large customer base and increased profitability.
Financial Information
Historical stock price information (Target Corporation)
| Year | Price $ | Volume |
| 217 | 61.37 | 3,611,449 |
| 2016 | 72.23 | 3,069198 |
| 2015 | 72.61 | 3,488,209 |
| 2014 | 75.71 | 2,160,758 |
| 2013 | 63.27 | 6,783,431 |
(Source: corporate.target.com)
Historical stock price Information(Walmart Inc.)
| Year | Price $ | Volume |
| 2017 | 96.55 | 5757200 |
| 2016 | 69.12 | 6872000 |
| 2015 | 61.30 | 6555100 |
| 2014 | 85.88 | 4087100 |
| 2013 | 78.69 | 3859100 |
(Source: www.walmart.com)
In 2014 the market price per share for Target corporation improved significantly from $63.27 in 2013 to $75.71 in 2014 which represents a favorable variation of 19.66%, but the price is lower as compared to that of Wal-Mart inc. in the same year. In 2015, the market price slightly dropped to 72.61 representing an adverse variation of 4.09%. The price was higher than competitors such as Wal-Mart which registered $61.30. In 2016, the Market price per share for Target Corporation dropped to $72.23, but the price was still higher than that of Wal-Mart which registered $69.12. However, the price has dropped significantly in 2017 by $10.86 representing a negative deviation of 15.4%. This is much lower as compared to Wal-Mart which has $96.55. The stock prices are stable despite the differences hence a motivation to the prospective investors to invest in the Target Corporation’s shares (Bodie, Kane & Marcus, 2014).
| Year | Sales $m | EBIT $m | Net earnings $m | Diluted earnings per share |
| 2016 | 69495 | 4969 | 2669 | 4.58 |
| 2015 | 73785 | 5530 | 3321 | 5.25 |
| 2014 | 72616 | 4535 | 2449 | 3.83 |
| 2013 | 71279 | 5170 | 2694 | 4.20 |
| 2012 | 73301 | 5740 | 3315 | 5.00 |
(www.corporate.target.com)
Low sales volume was recorded in 2016 as compared to the previous year, but the revenue was still higher than the average of the industry. This is due to the prevailing economic conditions, In 2015, the Target sales raised due to a general increase in sales of 5.7 % in the retail segment. The growth is reflected by a comparable percentage of 4.0% to the general store’s increase. The organization has maintained a steady rate of the diluted earnings per share. The net earnings of the Target Corporation are desirable hence an indicator of shareholders’ wealth maximization and the continuity and survival of the company in the retail industry. This is encouraging to both the existing and potential investors of the firm.
Recent Events
Target recently acquired Grand Junction to enhance same-day delivery business. The firm had been working with Target Corporation on a same-day delivery program on the pilot basis. This has given the boot the need for consumers to transport their massive purchases home by themselves. The organization has a portal that is used by distributors, retailers and logistics providers to control and manage local deliveries through a broad network. The software aids in determining the fastest and efficient route for transportation and also track shipments hence providing a clear overview of carrier performance.
By incorporating this technology, Target believes that it will be able to provide same-day delivery in many regions, as well as installation and assembly services. With the acquisition, the Corporation gains instant access to the technology of Grand Junction which will allow efficient after sales delivery and hence a vast customer base and therefore profitability. The acquisition is part and parcel of Target’s efforts to strengthen its supply chain to enhance speed, convenience, and reliability for the customers. Timely and efficient delivery network is a source of competition among companies in the retail industry. Target is seizing the opportunity to leverage delivery as a retail industry differentiator.
Improved delivery services in the firm have led to an increase in the sales revenue just in a few months. This has improved the competitive advantage of the company in the retail industry and increased profit margins.
Strategic Recommendations
The firm has to enhance performance and improved business activities by incorporating strategies such as good inventory management system, margin reduction through lowering profits and promoting e-commerce in the organization.
A good inventory management system is a vital practice for any firm. This helps in reducing potential inventory challenges and errors hence ensuring optimal profitability for the organization (Stevenson & Hojati, 2007). Proper inventory management strategy enhances inventory order accuracy, savings in cost and time, increased productivity, and high customer return rate.
Proper inventory management system is vital for organizations in the retail industry since they deal with a wide range of commodities. Failure to ensure proper inventory management leads to enormous losses for any company. A good inventory management system has the following benefits:
- A good stock management strategy enhances the accuracy of orders and requisitions. Proper inventory management systems help to prevent shortages of stock and allow the company to maintain adequate stock levels in the warehouse (Chen, Sim, Simchi, & Sun, 2007).
- Proper inventory management ensures order in the store. Many firms choose to organize their stores by placing the highest selling commodities together and in easily accessible locations. This speeds up the ordering process and keeps shoppers happy.
- Helps to save costs and time. Proper inventory management has monetary and real-time benefits. By keeping track of stocks on-hand and ordered ensures accurate records hence profitability.
The margin reduction strategy involves lowering profits to increase the sales volume. Pricing policies always affect the ability of the firm to compete favorably with its competitors. Where a business has a significant market share and can survive and ensure continuity on decreased margins, lowering prices makes it very difficult for the competitors to survive and compete favorably since they can’t make profits at those lower prices (Armstrong, Kotler, Harker & Brennan, 2015). This strategy also prevents new entries in the market due to the high startup costs that reduce the profit margins significantly.
The essential business strategy involves the integration of e-commerce in the firm. Improved online buying and selling of commodities boosts the sales of any firm and ensures profitability as well as customer satisfaction. E-commerce reduces the operational costs of any firm and ensures easy control and management of stores.
The important Strategic Recommendation
Competition in the retail industry has made it necessary for firms to promote e-commerce initiatives. Companies have been making strategic moves to enhance online services since no organization is willing to be edged out by the strong competition. The launch of plans such as next-day shipping helps in boosting sales and enhancing customer satisfaction due to timely delivery of commodities. Mobile payment services are also vital in enhancing easy payment for commodities and reducing extra costs. Businesses should also focus on the development of applications which facilitate redemption of bonus points and receiving discounts.
E-commerce has several financial benefits to organizations. The e-commerce initiatives put in place will always determine the firm’s competitive strength and survival in the industry. Poor strategies may make a company to succumb to stiff completion and even exit the market. The following are some of the merits of e-commerce:
First, the e-commerce initiatives have promoted sales growth and hence profitability of the firm due to improved business activities. Secondly, it has led to improved customer satisfaction as well a broad customer base. This is due to improved payment services and timely delivery as well as tracking of orders. Thirdly, e-commerce helps firms to reduce operational costs hence improvement in the profit margins. Last but not least, it has led to proper management of departmental stores and improved inventory control.
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