This PowerPoint examines the corporate structure of Target in a strategic manor. See how it compares to its competitors and why it is one of the leading retailers in today's society.

1. TARGET
By Team C
Allison Friedrich,
Kyle Brown,
Subin Kim,
Kelly Lubbers,
Jacqueline Skinner, and
Kaley Young
Corporate Analysis (Part A) of:

2. QUESTION #1
Assess the overall performance of the firm using the
Balanced scorecard.

3. Balanced Scorecard
Financial Customer
Learning &
Growth
Internal
Business
Processes
Business
Strategy

4. Financial Perspective
Target Corporation strives to achieve 15% or more for their average earnings per
share overtime by demonstrating effective leadership and corporate
governance.
2013
• Rev=$73,301(m)
• EPS= $4.52
• Div=$1.38
2014
• Rev=$72,596(m)
• EPS=$3.07
• Div=$1.65
2015
• Rev=$52,188(m)
• EPS=$1.57
• Div=$1.47

5. Financial Perspective
2011 2012 2013
ROCE
Return On
Capital
Employed
16.5%
=5,322,000/
(46,630,000-14,287,000)
15.7%
=5,371,000/(48,163,000-
14,031,000)
13.3%
=4,229,000/(44,553,000-
12,777,000)
Assessment:
A higher ROCE indicates more efficient use of capital.
Since Target’s ROCE has been declining since 2011,
it indicates that Target has not utilized its capital efficiently.
In 2012, Earnings has increased, but total assets in 2011
has increased more than the EBIT. It leads to decline of
ROCE in 2012. In 2013, all components of ROCE have
decreased significantly.

6. Financial Perspective
(Million) 2011 2012 2013
EVA
Economic Value
Added
1739.5728
=3512.52-(15487*5.75%)
2583.0246
=3491.15-(15821*5.74%)
2622.0175
=2706.56-(16558*5.84%)
Assessment:
EVA is a performance metric that calculates the creation of
shareholder value. Since Target’s EVA has been increasing
for the past three years, the firm has more profits remained
after the costs of the company’s capital.

7. Financial Perspective
(Million) 2011 2012 2013
FCF
Free Cash Flows
1069
=5434-4368
2048
=5325-3277
3067
=6520-3453
Assessment:
Cash is the real asset that firms generate. FCF gives a much
clearer view of the ability to generate profits. Target’s FCF
has been increasing in the trend where cash flows from
operating activities is increasing and capital expenditure
is decreasing. It could mean that Target started earning
profit from its investment in the past.

8. Consumer Perspective
• Strategic Objectives
Predicting
Customer
Needs
• Larger Inventory
Target is seen as an upscale discount store, because it has
many major designers that design a line of products just for
Target. Their chic, upscale discounter image is used as their
focus in building and enhancing their brand personality, with
the ability to better target key customer groups.
• High-end Atmosphere
Customers prefer to shop in an atmosphere where they are
treated well and feel good about the store. This results in a
willingness to pay more for items, and individuals who are
not as price sensitive.

9. Consumer Perspective
• Strategic Objectives
Gaining
Customer
Loyalty
• Occasional Event for targeted loyal
customers.
According to a study performed by Maritz Research there
20% of Target shoppers are highly loyal to shopping at
Target. There are more females than males, 80% are under
the age of 40 and are also college educated, and they are in
the middle to upper income range. Customers of Target also
prefer to shop at a place where there friends and family are
likely to shop, and they are not price sensitive.

10. Consumer Perspective
• Strategic Objectives
Customer
Service
• Online Customer Service
This hits more of the tech savvy buyers that like to use the
internet to search, review and buy products online than
going to the store. Other than showing products, it also
allows the customer to see where their money is being
contributed to by the company.

11. Learning & Growth Perspective
Providing
financial
assistance
Volunteering
Social
organizations
Environmental
efforts
Education &
Arts

12. Internal Business Process
Target encourages
the workplace by
enhancing the
individuality of the
staff and
employees

13. THE BALANCED SCORECARD
:
Learning & Growth Internal Customer Financial
Provide
Financial
Assistance
Volunteer,
educate,
participate
Promote
Individuality
Understand
customer
segments
“Expect
More Pay
Less”
Increase
customer
confidence
Annual
EPS
Growth
Effective
Leadership
Set
personal
goals
Learning
&
Growth
Business
Efficiency
Revenue
Growth

14. QUESTION #2
Identify all threats and opportunities associated with all
7 segments of the general environment.

15. SEGEMENTS OF GENERAL
ENVIRONMENT
General
Environment
7 Segments
Demographics
Socio-
cultural
Political
Physical
Technological
Global
Economic

16. Demographic
Opportunities • 1,801 stores in the U.S.
• 37 Distribution centers
• International locations
(India and Canada =
Ethnic)
• Continuously expanding
• Over 350,000 team
members
• Age structure for all ages
target towards families
Threats • Competitors have larger
distribution areas
• Larger amount of stores
(Walmart)

17. Economic
Opportunities • Continuous economic
success during economy
hardships
• Continuous sales growth
• Customers continue to
choose target as one of
the top retailers
Threats • Inflation rates could be
higher, lacking due to fall
of economy over the
years.

18. Global & Political/Legal
Opportunities • Target Citizens Political
Action Committee
determines decisions for
corporate.
• Joins organizations and
associations to be apart of
corporate contributions on
state/national level
• Expansions outside of U.S.
• Education learning
strategies such as book
donations, field trips, food
pantry visits, and cash
donations.
Threats • Backlash from some
donations (Ex. Target
protests in Minneanapolis
due to support of anti-same
sex marriage campaigner.)

19. Sociocultural & Physical
Opportunities • “By fostering an inclusive
culture, we enable all of our
team members to leverage
their unique talents and high
performance standards to
drive innovation success.”
• Variety of services, like
online store, Super Target,
Target Financial Services
(Red Card/Visa Card)
• Contributes 5% back to
company and is an
environment friendly
corporation.
Threats • Competitors (Walmart) in
their prices, but have gone
forward to ELIMINATE the
negative by offering price
matches for identical
products.

20. Technological
Opportunities • Very diverse with technology
• Apps through cell phones –
Cartwheel – discounts and
coupons
• Target.com exclusive deals
• Active through social media
such as Facebook and
Twitter
• Social media is used for
customer services as well as
marketing of products and
promotions.
Threats • Security breaches with
personal information such
as social security and credit
card information has been
stolen by hackers

21. Porter’s Five Forces
Threat of Entry
MODERATE
• National and International retail
companies
• Cut-throat Competiton
• Mergers of companies
Bargaining Powers of Buyers
MODERATE
• Diversity of products to be bought.
• Arrange of prices to compliment wide
range of needs.
• Continuously growing positive
reputation.
• Large distribution of products in store.

22. Porter’s five forces cont.
Bargaining Supply of Suppliers
LOW
• Suppliers give discounts on products.
• Incentives of giving back to the
consumers (Red Card)
• Special types of product promotions
(Donations, BOGO)
Industry Rivalry
STRONG
• Amount of Retailers (Walmart, Kmart,
Kohl's, Meijer's, Etc.)
• Internet outlets (Amazon, etc) at
discounted prices and shipping
incentives.
• Carrying same type of products
Threat of Substitutes
MODERATE
• Products offered at other retailers.
• Similar products being offered at
lower prices.
• Choosing another retailer based on
convenience
Most
Important!
Collectively, we find Target company to be an attractive industry with high profit potential!

23. Attractiveness of Target Co.
• Simple slogan: Expect more, pay less
• Recognizable branding with products.
• Expanding of stores nationwide.
• High end deigns and innovation of products.
• Higher end products for everyday, affordable
costs.
• Distinguish themselves compared to their
competitors (Ex. Target has a distinct logo)
• Competitive incentives such as price matching,
coupons, discounts.
• Target has several different types of programs
for the customers as well as through corporate.
• Continuous growth of consumers and sellers of
products.

24. Industry Attractiveness
The attractiveness of the industry…
A. Attractive: Economic Opportunity…
 Consumers regularly shopping for their
needs/wants
B. Unattractive: Industry Rivalry…
 Many different retailers for consumers to
choose from
 Heavy competition from successful
Walmart
Key Success Factors
Many buyers and suppliers
Recognizable Brand

25. QUESTION #3
To what extent is the firm’s performance attributable to
industry attractiveness and to what extent to competitive
advantage?

26. Target’s Performance –
1. Target vs. Competitors
ROCE
TGT= 13.3%
WMT= 19.93%
AMZ= 3.77%
Margin
SGA
Expenses/Sales
TGT= 21.18%
WMT= 19.18%
AMZ= 26.23%
COGS/Sales
TGT= 70.5%
WMT= 75.18%
AMZ= 72.77%
Profit Margin
TGT= 2.7%
WMT= 3.36%
AMZ= .37%
Fixed
Assets/Sales
TGT= 43.2%
WMT= 24.76%
AMZ= 14.71%
Capital
Turnover
Inventory
Turnover
TGT= 8.28
WMT= 10.62
AMZ= 10.05
Fixed Asset
Turnover
TGT= 2.31
WMT= 4.04
AMZ= 6.80
Receivables
Turnover
TGT= 12.43
WMT= 71.33
AMZ= 15.62

27. EBIT
TOTAL
ASSETS
Current
Liabilities
ROCE
Target’s Performance –
1. ROCE Concept
• Return on Capital Employed
(ROCE) depicts a corporations use
of capital.
• The higher the ROCE, the more
efficient the use of its capital
• Let’s utilize this concept to
compare Target’s advantages and
disadvantages with a competitor…

28. Target’s Performance –
1. Compared with…
Advantage Ratios Why?
1 ROCE TGT = 4,229,000 / (44,553,000 -
12,777,000) = 13.3%
AMZ = 647,000 / (40,159,000 -
22,980,000) = 3.77%
ROCE = EBIT / (total assets - current liabilities)
 Target has a 10% higher ROCE than Amazon.
 This high ROCE means Target uses their capital
more efficiently.
2 SGA / Sales TGT = 15,375,000 / 72,596,000 =
21.18%
AMZ = 19,526,000 / 74,452,000 =
26.23%
 Target has a 5% lower SGA to sales ratio than
Amazon.
 This shows their Selling, General, and
Administrative expenses are taking up a smaller
percentage of their sales.
3 COGS /
Sales
TGT = 51,160,000 / 72,596,000 =
70.5%
AMZ = 54,181,000 / 74,452,000 =
72.77%
 Target’s 2% lower COGS to sales ratio indicates
that they don’t have to spend as much money
on the goods that they sell.
4 Profit
Margin
TGT = 1,971,000 / 72,596,000 =
2.7%
AMZ = 274,000 / 74,452,000 =
.37%
Profit Margin = net income / revenues
 Target’s profit margin is significantly higher due
to its superior net income.
 Target’s net income benefits from its lower
selling/general/administrative expenses
compared with Amazon.

29. Target’s Performance –
1. Compared with…
Disadvantage Ratios Why?
1 Inventory
Turnover
(Days Sales
Inventory)
TGT = 72,596,000 / 8,766,000 = 8.28
*days sales inventory = (1 / 8.28) x 365
= 44.08
AMZ = 74,452,000 / 7,411,000 = 10.05
*days sales inventory = (1 / 10.05) x 365
= 36.32
Days Sales Inventory = [1/ (sales/inventory)] x 365
 Target’s days sales inventory of 44.08 means that they sell
their entire inventory in 44 days. However, Amazon sells
their entire inventory within 36 days, which is 8 days faster.
 This means Amazon doesn’t have to store inventory as long,
giving them lower inventory storage costs and the ability to
put new merchandise out their sooner.
2 Fixed Asset
Turnover
TGT = 72,596,000 / 31,378,000 = 2.31
AMZ = 74,452,000 / 10,949,000 = 6.80
Fixed Asset Turnover = net sales/net property, plant,
equipment
 Amazon has a significantly higher fixed asset turnover ratio,
indicating that they generate more sales from their fixed
asset investments.
3 Receivables
Turnover
TGT = 72,596,000 / 5,841,000 = 12.43
AMZ =74,452,000 / 4,767,000 =
15.62
Receivables Turnover = sales / accounts receivable
 Target’s receivables turnover is slightly lower, meaning they
should investigate their method of collecting accounts
receivable.
 They aren’t quite as efficient as Amazon.
4 Fixed Asset /
Sales
TGT = 31,378,000 / 72,596,000 =
43.2%
AMZ = 10,949,000 / 74,452,000 =
14.71%
 This ratio shows the percentage of fixed asset dollars per
sales dollars.
 Target’s percentage is about 30% higher than Amazon’s,
concluding that Amazon once again generates mores sales
dollars from their fixed assets.

30. Target’s Performance –
2. Compared with…
Advantage Ratios Why?
1 COGS / Sales TGT = 51,160,000 /
72,596,000 = 70.5%
WMT = 358,069,000 /
476,294,000 = 75.18%
 Once again, Target excels at their COGS to
sales percentage.
 They have a 5 % advantage on Walmart, who is
spending significantly more on their goods that
they sell.
COGS /
Sales
Target beats both
Amazon and Walmart
when it comes to this
ratio!

31. Target’s Performance –
2. Compared with…
Disadvantage Ratios Why?
1 ROCE TGT = 4,229,000 / (44,553,000 -
12,777,000) = 13.3%
WMT = 26,991,000 / (204,751,000 -
69,345,000) = 19.93%
ROCE = EBIT / (total assets - current liabilities)
 Target’s ROCE is 6.5% lower than Walmart’s, indicating their
need to use their capital more efficiently.
2 Inventory
Turnover
(Days Sales
Inventory)
TGT = 72,596,000 / 8,766,000 = 8.28
*days sales inventory = (1 / 8.28) x 365 =
44.08
WMT = 476,294,000 / 44,858,000 = 10.62
*days sales inventory = (1 / 10.62) x 365 =
34.37
Inventory Turnover = [1/(sales/inventory)] x 365
 Again, Target sells their entire inventory in 44 days, while
Walmart sells its entire inventory within 34 days.
 Walmart has lower inventory storage costs as a result.
3 Fixed Asset
Turnover
TGT = 72,596,000 / 31,378,000 = 2.31
WMT = 476,294,000 / 117,907,000 = 4.04
Fixed Asset Turnover = net sales/net property, plant,
equipment
 Target’s fixed asset turnover ratio is about half of Walmart’s.
 This means that Target must work on better using their
assets to generate revenue.

32. Target’s Performance –
2. Disadvantages Cont’d…
Disadvantage Ratios Why?
4 Receivables
Turnover
TGT = 72,596,000 / 5,841,000 = 12.43
WMT = 476,294,000 / 6,677,000 = 71.33
Receivables Turnover = sales / accounts receivable
 Walmart’s receivables turnover is nearly 6 times that of
Target.
Target needs to investigate their method of collecting
accounts receivable, in order to become as efficient at it as
Walmart.
5 SGA
Expenses /
Sales
TGT = 15,375,000 / 72,596,000 =
21.18%
WMT = 91,353,000 / 476,294,000 =
19.18%
 Target here has a 2% higher SGA expenses to sales ratio
than Walmart.
 This shows that Target spends more on their selling, general,
and administrative expenses than does Walmart.
6 Fixed Assets
/ Sales
TGT = 31,378,000 / 72,596,000 = 43.2%
WMT = 117,907,000 / 476,294,000 =
24.76%
 This ratio, similar to the fixed asset turnover ratio, shows the
ratio of fixed asset dollars to sales dollars.
Again, Target does not use their assets to generate revenue
nearly as well as Walmart, whose percentage is 20% lower.
7 Profit Margin TGT = 1,971,000 / 72,596,000 = 2.7%
WMT = 16,022,000 / 476,294,000 =
3.36%
Profit Margin = net income / revenues
 Walmart once again trumps Target in profit margin, by .66%.
Target keeps 2.7% of every sales dollar, while Walmart keeps
3.36%.

33. Target’s Performance –
1. Competitive Advantages
Target will continue to
succeed in this industry
because of its competitive
advantages.
1. Low COGS % of sales
2. Strong ROCE % and Profit
Margin
3. Recognizable Branding
4. Superior Marketing

34. QUESTION #4
Draw the firm’s value chain. In which of the firm’s
principal functions and activities does the firm
competitive advantage lie?

35. THE VALUE CHAINANALYSIS
Finance Global Workforce IT
Design
Operations
ShipSell
Use and
Reuse
Support
Functions
Primary
Functions

36. Value Chain Analysis
A. Primary Functions
Inbound Logistics
Target Corporation promotes design through imagination, improvement
and innovative ideas that enable them to give more. While dreaming up
new products and sketching new store sites, Target is building
responsibility and sustainability into every brainstorm. This is reflected
through Target’s CGS/Sales ratios. They have a lower percentage than
Amazon and Wal-Mart.
Produce
Through Target’s everyday operations, design and raw materials merge
to become the products sold. Target collaborates with highly qualified
vendors and aim to make production better for the people of the planet.
Target’s inventory ratios are disadvantages as compared to Amazon and
Wal-Mart in that Target’s products sit on the shelves longer than its
competitors.
Outbound Logistics
Shipping is Target’s outbound logistics process of moving products from
the source to the guest. Target has reduced loads they’ve shipped and
miles traveled in order to save on fuel, reduce our carbon emissions and
lower costs, while, getting products to their guests promptly and
efficiently. This is reflected in Target’s fixed asset ratios.

37. Value Chain Analysis
A. Primary Functions
Marketing and Sales
Target’s main focus in selling is the guests
experience. They are focusing mainly on the
sustainability and the responsibility of operations
from their corporate headquarters in Minneapolis,
Minnesota. These ratios are reflected in Target’s
CGS/Sales ratios.
Customer Service
Use and Reuse is the motto that Target uses when it
comes to customer service. Guests determine the
destiny of the products they buy and Target
provides the tools, information and incentives to
help them reduce waste and turn their old items into
something new. Refer to Target’s Sales ratios for the
competitive advantages and disadvangtes.

38. Value Chain Analysis
B. Supportive Functions
Finance
A significant portion of Target’s total sales is derived from stores located
in just five states; California, Texas, Florida, Minnesota, and Illinois
which results in Target being dependent on a strong local economy in
these areas. As Target does not own a consumer credit card receivables
portfolio, they do share the economic performance of the credit card
program with TD(?) Having a deteriorated economic condition, Target
could receive lower profit sharing payments.
Global and Changing
Workforce
Target is dependent on their ability to attract, train and retain an
appropriate mix of qualified team members, contractors and temporary
staff. If they are unable to obtain these appropriate levels of staff then
the support functions of Target could suffer. Target has a concentration
of support functions in India, however, it is more unstable than the US
when taking into consideration financial and environmental issues.
Information Technology
Target is becoming increasingly reliant on technology investment and the
returns on theses investments. They are currently making and will
continue to make significant investments to support their multichannel
efforts, implement improvements and transform their computer systems
to run more efficiently and remain competitive to the guests.

39. Hypothesis Relationship
– PrincipalFunctions and competitive advantages.
1. Target ‘s strongest primary function is Distribution and Marketing & Sales.
The company has relatively lower 70.5% as COGS/Sales ratio compared to
other companies, which means that it maintains its efficient sales department
and distribution management.
2. Target also has strong ROCE and Profit Margin, which proves that
the company uses its capital more efficiently. It leads to the
fact that Target has been managing its business well and
generating profits properly.
3. Target is known for its recognizable Branding,
which resulted from its well-designed Marketing & Sales strategy.

40. Driver of Competitive Disadvantage
1. Inventory Turnover
Target has competitive disadvantage as to its Inventory Turnover compared
to Amazon’s and Wal-mart’s. Sales have to match inventory purchases
otherwise the inventory will not turn effectively. Target’s inventory is 8.48
bigger than the firm’s sales.
Bigger number in Inventory Turnover indicates the fact that Target needs
to spend more of their budget on managing and storing its inventory and
has less choices when it needs to put new goods and merchandises.
2. Fixed Asset Turnover
Target’s Fixed Asset Turnover ratio is also inferior to two competitors’.
This illustrates that Target is required to create a new strategy to use their
fixed assets more efficiently rather than keeping the one they are implementing now.
3. Receivable Turnover
The reason for Target’s relatively lower Receivable Turnover is that
there might be some problems in their method of collecting accounts receivable.
As the higher ratio, the more favorable, Target should investigate what causes
its low receivable turnover ratio to improve its account receivable quality.

41. QUESTION #5
What is the firm’s business strategy? To what extent are
the firm’s principal functions sustainable?

42. Business Strategy
BUSINESS
STRATEGY
MODEL Lowest Cost Distinctiveness
Broad Market Cost Leadership Differentiation
Narrow Market
Segments
Focused Cost
Leadership
Focused
Differentiation
Integrated Cost
Leadership &
Differentiation

43. Target’s Business Strategy
Target uses an integrated cost leadership/differentiation
strategy with “Expect More, Pay Less”. It has helped the
store deliver greater convenience, increased savings
and more personalized shopping experience. Target
looks to provide the consumers with new ways of
convenient retail shopping.
A way that Target puts their plan into action is by
introducing a new formatting of the store called
CityTarget, which is being tested in large urban dwellers
such as Chicago, Los Angeles, Seattle, and San
Francisco, and is continuously growing. Target is
looking at having successful branding and formatting of
the stores. Target provides its own branding such as Up
and Up, Market Pantry, C9 by Champion and several
other brands.
Target offers price matching to its competitors and
incentives to its consumers with things such as Red
Card Rewards. The Target Corporation is always looking
to bring value to its guests by finding new ways to shop
with innovative products, providing a unique experience
for each consumer.

44. Resources & Capabilities
1. Distribution
Logistics
Six Sigma data
driven methodology
to measure
performance and
improving
processes
Target Distribution
Center and Supply
Chain Management

45. Resources & Capabilities
2. Marketing & Sales
Customer Service
Social
Responsibility
Returns and
Exchanges, Target
Red Card services,
Promotions, Baby
and wedding
registeries
Lead the way to
sustainable
environments, tools for
strong and safe
communities,
volunteering, health &
well-being initiatives

46. Resources & Capabilities
3. Human Resources
Employee
Relations
Acquisitions
Retaining employees,
Employee Discounts,
Education Programs,
Motivation
DermStore, CHEFS
book, Sensa

47. Core Competencies
Valuable? Rare?
Costly to
Imitate?
Non-
Substitutable?
Advantage
Type?
Returns
?
Distribution
Yes Yes Yes No (Different
stores and
brands)
Sustainable
Competitive
Advantage
Above
Average
Marketing
& Sales
Yes Yes Yes Yes
Sustainable
Competitive
Advantage
Above
Average
Human
Resources
Yes Yes Yes No (Other
qualified
employees)
Sustainable
Competitive
Advantage
Above
Average

48. Goals, Strategies, Resources &
Capabilities, and the Environment
GOALS STRATEGIES RESOURCES &
CAPABILITIES
ENVIRONMENT
To give outstanding
customer service
• Positive Attitude
• Refunds and
Exchange Policies
• Easy and Ready
customer service
Marketing
&
Human Resources
• Online access to
information
• Available in person
or phone
• Innovation of Target
To retain and
increase employees
well-being (avoid
turnover)
• Employee
Discounts
• Employee Benefits
• Employee Well-
being incentives
Human Resources
• Diversification in
the workforce
(Ethnics)
• Employee
Incentives
To produce and put
out quality products
• Six Sigma
Production
• Target Distribution
Center
• Supply Chain
Management
Marketing
Distribution
• Innovative Products
• Online and In-Store
• Growing technology
• Cell Phone Apps
• Marketing Sales
Catalogs

49. Goals, Strategies, Resources &
Capabilities, and the Environment
GOALS STRATEGIES RESOURCES &
CAPABILITIES
ENVIRONMENT
To see continuous
growth in sales
• Positive employees
• Customer loyalty
• Productive
business model
• Pricing and
branding
• Strategic
Management skills
ALL
Marketing
Distribution
Human Resources
• Demographics
• Family friendly
• Location of store
• Incorporation of
technology
• Innovation of Target
Products
• Happy and
returning
consumers
To market Target
Corporations brand
• Team members
well-being
incentives
• Volunteering events
• Working with
environment and
educational
programs
Marketing
• Promotions in-
store, online, phone
app
• Innovation of Target
products
• Quality products at
affordable costs

50. QUESTION #6 (BONUS)
Use the Competitive Rivalry model to illustrate the rivalry
between two of the three main competitors in the industry.
Predict Competitive Behavior of your firm and that of the
competitor’s.

51. Competitive Analysis
- Market Commonality
- Resource Similarity
Drivers of Competitive Behavior
-Awareness
-Motivation
-Ability
Interfirm Rivalry
-Likelihood of Attack
-First Mover Incentives
-Organizational Size
-Quality
-Likelihood of Response
-Type of Competitive Action
-Reputation
-Market Dependence
Outcomes
-Market Position
-Financial Performance
Feedback
Competitive Rivalry Model

52. Competitive Rivalry Model
Firms are mutually
interdependent…
 Actions/responses affect one
another
Marketplace success is derived
from…
 Individual strategies AND their
consequences
 The model helps…
 Understand the competitor
 Predict their behavior
 Reduce uncertainty of their
actions

53. 1) Competitive Analysis
Market Commonality
 Associated with the number of markets with which the firm and a competitor are
jointly involved and the level of importance of their respective, individual markets
 Affects firm’s perceptions and resulting motivation (i.e. more likely to attack low
market commonality competitors)
As two main players in the retail chain industry, both Target and Walmart share high-levels
of market commonality. Although their strategies and target customers differ, they
nevertheless offer similar services, such as: discounted products, pharmacy centers, and
express outlets. Furthermore, both retailers compete with one another internationally in
countries like India and Canada.
Resource Similarity
 Tangible and intangible resources that are comparable to a competitor’s
 Includes both type and amount of resources
Despite Walmart’s massive size, Target and Walmart have similar resources (such as
equitable brand recognition, similar amounts of human capital, and location.) However, they
tend to differ in essence: “Target's employees are proficient in project management and
leadership skills while Walmart staff concentrates on developing its sales and retail pharmacy
knowledge.” Target also places a large focus on product innovation and quality in
comparison to Walmart’s lowest price strategy. In addition, Target has superior advertising
practices. Therefore, their resource similarity is of a moderate-level.

54. 2) Drivers of Competitive Behavior
Awareness
 Extent competitors recognize the degree of their mutual interdependence that results from market
commonality and resource similarity
 Greatest when firms have highly similar resources.
Target and Walmart have high-levels of market commonality and a moderate-level of resource similarity. Thus,
their awareness of one other is moderately-high. The extent of the consequences of competitive actions and
responses of one will more than likely have an impact on the other, as experienced when Walmart Express was
met with a later rebuttal of City Target.
Motivation
 Firm’s incentive to take action/respond to a competitor’s attack
 Driven by perceived gains and losses
Because Walmart and Target have high-levels of market commonality, they will probably be less motivated to
engage in rivalry at the stake of their respective market positions. Although it tends to avoid head-to-head combat,
Target is not opposed to response. When Walmart moved into urban areas with Walmart Express, the action
became Target’s incentive to retaliate with City Target.
Ability
 Each firm’s resources and flexibility (i.e. financial capital and people)
 Similar resources often means similar abilities
Target and Walmart have relatively similar resources and are both big-name retail industry players. Thus, they
have the ability to attack—even each other, should the need arise, as is the case with Walmart Express and City
Target. Clearly, Walmart’s threat is felt globally by all competitors.

55. 3) Interfirm Rivalry
Likelihood of Attack
First-Mover Incentives
 Firm that takes initial competitive action to build/defend its competitive advantages or
improve its market position.
Walmart first started defending its competitive advantages by building Walmart Express stores
which were much smaller than its supercenters. These are built in more urban areas. Target has
since built a few Target Express / City Targets, but these are directly in the city to target city goers.
Organizational Size
 Small firms will launch competitive actions more readily and more quickly because of
their flexibility. Large firms will launch more competitive actions with more strategic
actions over a certain period.
Target has around 1800 stores in the U.S. and India, with roughly 366,000 employees and net
revenues of 72.6 billion. Walmart is much bigger in comparison, with 11,000 stores in 27 countries,
2.2 million employees and revenues of 476.3 billion. With Walmart’s massive size, they are able to
do a lot of strategic action like building new stores, without it being a huge deal.
Quality
 When the company’s goods or services meet or exceed customers’ expectations.
Target seems to have the upper hand when it comes to quality. They partner with designers each
year to offer high-end products for great prices. Walmart is not known for its quality, but for its low
rollback prices.

56. 3) Interfirm Rivalry
Likelihood of Response
Type of Competitive Action
 Strategic actions usually elicit strategic responses, while tactical actions elicit tactical
responses.
Walmart opened its first smaller Walmart Express stores in 2011. Target strategically responded
by opening its first City Target Stores in 2012, just one year later. In 2014, Target also opened up
its Target Express Stores, to further compete with Walmart.
Reputation
 “The positive or negative attribute ascribed by one rival to another based on past
competitive behavior” (147).
Walmart and Target both have great reputations. Because of Walmart’s size, it is always being
watched. When Walmart met with success by downsizing into Walmart Express stores, Target
jumped in this market with its City Target.
Market Dependence
 The extent of the company’s revenues/profits that come from a certain market.
Both Target and Walmart are the main competitors in the retail industry. Any threats to their
market position by other retailers will cause them to respond in a strong manner. Threats by
convenience stores have caused both Target and Walmart to open their smaller express stores to
thwart this competition.

57. 4) Outcomes
Market Position
Target’s stock price from Feb 2014 to 2015 went from 55.07 to 75.87, while Walmart’s
stock price went from 72.82 to 86.19. Although Target increased 6$ more than
Walmart’s did this past year, these two companies seem to be doing well and have a
great market position.
Financial Performance
Target’s sales revenues have stayed relatively the same from 2013 to 2014, decreasing
by less than 1%. Walmart’s sales revenues have increased by roughly 1.6% from 2013
to 2014. Both are performing well financially it seems. Although it is hard to compare
Target to the great retail giant of Walmart, we can see that Target is doing very well for
its size, and even beats Walmart when it comes to the COGS to sales ratio.

58. Competitive Behavior Prediction
Target Walmart
Target will continue to monitor the success
of its City Targets and Target Express
stores, since they are relatively new. They
will probably continue to open more stores
in this smaller scale to cater to consumers
in the city demanding this convenience.
Target will keep partnering with designers
each year, because these high-end goods
at great prices are something that
differentiates Target from Walmart.
Target’s failure in Canada may leave it
hesitant to attack Walmart on a global
scale.
Walmart will work on lowering their
COGS, because Target is doing
significantly better in this regard.
Walmart will try to improve their store
image in the eyes of city-dwellers. Since
Walmart is downscaling their stores to fit in
the urban areas, they will need to change
their image to fit this different clientele.
Walmart may expand the range of
products featured in its Express stores to
match the range of products found in City
Targets.

59. QUESTION #7
Define and discuss the three major types of strategic
alliances. Review the company’s alliance strategy.

60. Types of Strategic Alliances
• Joint Venture
• Equity Strategic
Alliance
• Non-Equity Strategic
Alliance

61. Types of Strategic Alliances
• Joint Venture
Is defined as two or more firms that create a legally
independent company to share resources and
capabilities to develop a competitive advantage.
By uniting, they are able to achieve those goals that they
could not by themselves. They will begin to see a more
rapid and effective growth under a joint venture together.
It is legally independent.
Ex. Disney owning ABC

62. Types of Strategic Alliances
• Equity Strategic Alliance
Is defined by two or more firms that own different
percentages of the company they have formed by
combining some of their resources and capabilities
for the purpose of creating a competitive
advantage. They own different percentages of the
company
Example: Aircel (mobile network operator overseas)

63. Types of Strategic Alliances
• Non-Equity Strategic
Alliance
Is defined as two or more firms that develop a
contractual relationship to share some of their
unique resources and capabilities to create a
competitive advantage.
Examples: Licensing agreements, distribution
agreements, supply contracts, outsourcing commitments

64. Types of Strategic Alliances
• Non-Equity Strategic
Alliance
Also uses outsourcing as apart of its
strategy, which is a non-equity
strategic alliance, it is the purchasing
of value, creating primary or support
activity from another firm.

65. Strategic Alliances & Target Corp.
• Alliance Strategy
Target has stated on their website---
“We know we can do more good through partnerships than
we ever could on our own, which is why we turn to our
stakeholders, and listen to their ideas, concerns and
perspectives. We have ongoing relationships with
community leaders, government agencies and non-
governmental organizations that help us understand the
most pressing issues facing our communities. They also
help us influence how we support our team members and
guests.”
Resource: https://corporate.target.com/corporate-responsibility/stakeholder-engagement

66. Strategic Alliances & Target Corp.
• Target Alliances Examples
• The Heart of America Foundation
• To Make US Healthiest
• Fish Wise
• Federal Emergency Management Agency
• Brands:
• Michael Graves
• Marc Ecko
• Todd Oldham
• Etc.

67. Strategic Alliances & Target Corp.
• Target Alliances
Examples
• They have done partnerships to help the
alliance of the Target brand through the
Heart of America Foundation, which
recognizes and encourages youth who are
making a difference in their communities
and schools.
• To Make US Healthiest, which is a company
that strives to help U.S. citizens become
more physically and emotionally healthy.
• Target has also alliances Fish Wise as an
environmental partner that they work to
reduce the amount of purchased
unsustainable resources.

68. Strategic Alliances & Target Corp.
• Target Alliances
Examples
• Lastly, Target also does work with the
Federal Emergency Management Agency in
relations for safety and preparedness within
its private and public sectors of the
company for any type of emergency that
may take place in any area of its locations.
• By joining all of these alliances it gives
Target a competitive advantage over other
retailers than do not have these agreements
with other organizations.

69. Strategic Alliances & Target Corp.
• Target Alliances
Examples
• Target has alliances with Michael Graves,
Marc Ecko, and Todd Oldham to sell
specific types of products and designer
items within the store that other stores do
not have incorporated into their branding of
products.
• As target continues to expand, it looks to
take this innovative strategies and
partnerships to be able to expand globally,
creating a workplace that is enjoyable and
gives back to communities.

70. QUESTION #8
What corporate governance mechanisms are available to
manage relationships with stakeholders and to influence the
strategic direction and performance of the company?

71. Corporate Governance
Definition: “The set of mechanisms
used to manage the relationship
among stakeholders and to determine
and control the strategic direction and
performance of organizations”
(pg. 294)
 Makes sure decisions are effective
and help the company achieve
strategic competitiveness
3 Internal Governance Mechanisms
1) Ownership Concentration
2) Board of Directors
3) Executive Compensation
Ownership
Concentration
Board of
Directors
Executive
Compensation

72. Ownership Concentration
Target’s Ownership Concentration = Low
 Have 0 large-block holders that own at least
5% of their shares
 Institutional owners are becoming large-
block holders, instead of individuals
Result = Diffuse Ownership
 This can cause manager’s decisions to be
weakly monitored
Target’s Major Shareholders
% of Shares Held by All Insider and 5% Owners: 0%
% of Shares Held by Institutional & Mutual Fund Owners: 85%
% of Float Held by Institutional & Mutual Fund Owners: 86%
Number of Institutions Holding Shares: 1063

73. Ownership Concentration
Top Institutional Holders Shares %
State Street Corporation 59,878,459 9.40
Vanguard Group, Inc. (The) 37,945,527 5.96
Franklin Resources, Inc 32,992,866 5.18
FMR, LLC 27,135,556 4.26
Barrow, Hanley Mewhinney & Strauss, Inc. 25,096,966 3.94
Massachusetts Financial Services Co. 22,455,289 3.53
Dodge & Cox Inc 17,758,389 2.79
BlackRock Institutional Trust Company, N.A. 16,895,093 2.65
Invesco Ltd. 15,496,858 2.43
Brown Brothers Harriman & Co 12,593,685 1.98
Total 268,248,688 42.12 %

74. Ownership Concentration
Top Mutual Fund Holders Shares %
Franklin Custodian Funds-Income Fund 20,000,000 3.14
Vanguard/Windsor II 13,316,400 2.09
Vanguard Total Stock Market Index Fund 10,355,738 1.63
Dodge & Cox Stock Fund 10,337,647 1.62
MFS Series Trust I-MFS Value Fund 7,693,133 1.21
SPDR S&P 500 ETF Trust 6,847,075 1.07
Vanguard 500 Index Fund 6,579,093 1.03
Vanguard Institutional Index Fund-Institutional
Index Fund
6,420,001 1.01
Franklin Managed Trust - Rising Dividends Fund 5,706,920 0.90
Vanguard Specialized-Dividend Appreciation Index
Fund
4,469,104 0.70
Total 91,725,111 14.40 %

75. Ownership Concentration
As institutions gain more control over
corporations like Target….
 Institutional activism may occur
 Large institutional owners might affect the firm’s
decisions in regards to innovation and diversification
 This activism can also discipline managers and
promote shareholder’s interests

76. Board of Directors
Definition: “A group of elected
individuals whose primary
responsibility is to act in the owners’
best interests by formally monitoring
and controlling the firm’s top-level
managers” (pg. 302)
 Individual shareholders with small
ownership percentages are highly
dependent on the board of directors
to represent them.
 Board members are expected to
provide resources
 i.e. Personal knowledge and
expertise
 Members include:
Insiders, Outsiders, and Related
Outsiders
Related
Outsiders
(Some
relationship)
Insiders
(Top-level
managers)
Outsiders
(Independent
counsel)

77. Board of Directors: Target
Name Position Company Type
Roxanne S.
Austin
President Austin Investment Advisors Outsider
Douglas M.
Baker, Jr.
Chairman and CEO Ecolab Inc. Outsider
Brian C.
Cornell
Chairman of Board and CEO Target Corp. Insider
Calvin Darden Chairman Darden Development Group Outsider
Henrique De
Castro
Former CEO Yahoo! Inc. Outsider
James A.
Johnson
Founder and Principal of
Johnson Capital Partners
Johnson Capital Partners Outsider
Mary E.
Minnick
Partner of Lion Capital Lion Capital Outsider
Anne M.
Mulcahy
Chairman of Board of
Trustees
Save the Children Federation, Inc. Outsider
Derica W. Rice EVP, CFO Global Services, Eli Lilly & Co. Outsider
Kenneth L.
Salazar
Partner WilmerHale (legal) Outsider
John G.
Stumpf
Chairman of Board,
President, and CEO
Wells Fargo & Co. Outsider

78. Board of Directors: Target’s Guidelines
Target’s Board of Directors… The Chair of the Board…
Effectively communicates with
Stakeholders
(Directors must attend annual
shareholder meetings)
“…Facilitate(s) constructive interaction
between the Board and management of
the Corporation.”
Form or disband board committees as
needed
The CEO and Chair of the Board can be
the same person, but it isn’t required
“…Have broad perspective, experience,
knowledge and independence of
judgment, and business backgrounds.”
Brian C. Cornell is both Chairman of
the Board and CEO of Target, so he
holds CEO duality.
Ranges between 10-15 members Formerly Gregg Steinhafel before the
security breach debacle
Evaluates CEO and Chair of Board
Annually reviews its performance

79. Risk &
Responsibility
Board Committees
The board’s 5 committees, include
1 Chair + Members:
 Finance:
 Oversees financial policies, risks, and
conditions
 Audit:
 Oversees integrity of financial statements,
performance of the independent auditor,
collaborates with Corp. Risk and
Responsibility Committee
 Compensation:
 Oversees the review and recommendation
of compensation plans
 Nominating & Governance:
 “…Reviews and recommends the
composition, organization and
responsibilities of the Board and its
committees.”
 Corp. Risk & Responsibility:
 Identifies strategic, business etc. risks.
Oversees ethics and compliance programs,
provides oversight on reputation and social
responsibility
Finance
Audit
Nominating &
Governance
Compensation

80. Executive Compensation
Executive compensation is a very important thing to consider when
evaluating an investment opportunity.
Executive compensation is a governance mechanism that tries to
align the interests of top managers and owners through salaries,
bonuses, and long-term incentive compensation, such as stock awards
and stock options

81. Executive Compensation
Breakdown of the total annual pay for the top executives at Target Corp.
as reported in their proxy statements (2013).

82. Executive Compensation
Breakdown of the total annual pay for the top executives at Target Corp.
as reported in their proxy statements (2013).

83. Executive Compensation
•Total Cash Compensation is comprised of yearly Base Pay
and Bonuses.
•Total Equity aggregates grant date fair value of stock and option
awards and long term incentives granted during the fiscal year.
•Other Compensation covers all compensation-like awards that
don't fit in any of these other standard categories. Numbers
reported do not include change in pension value and non-qualified
deferred compensation earnings.

84. Ethical Behavior
Target Corporation is committed to conducting business
lawfully and ethically. Every team member is obligated to act at
all times with honesty and integrity based on their Code of
Conduct.

85. Ethical Behavior
According to Tim Baer, executive vice
president, general counsel and corporate
secretary. “More than six decades ago our
company founders established an
unwavering commitment to ethical business
practices and generous community support.
We expect every one of our 350,000 team
members to demonstrate sound, ethical
business practices that bring good judgment
and integrity to every business decision.”
Consequently, it will strengthens competitive
advantage and supports the superior experience
guests expect.

86. QUESTION #9
Please discuss the firm’s structure and strategic leadership
responsibilities of the firm’s CEO.

87. Strategic Leadership Responsibilities
Leadership
Strategic Direction
Managing Firm
Resources and Portfolios
Balanced
Organization
Controls
Ethical PracticesOrganizational Culture

88. Strategic Leadership Responsibilities
• Leadership: The Target Brand. CEO Brian Cornell
• Strategic Direction: Strategic responsibilities, as noted in mission and value statements
‘Our mission and values work together to foster connections and conversations both
inside and outside our doors.’
• Balanced Organizational Controls: The balanced score card, which describes learning
and growth for financial assistance, volunteering, educating, participating, setting goals.
Internally through promoting, understanding consumer segments and efficiency.
Customers through confidence. Financially through EPS and revenue growth, as well ass
effective leadership skills.
• Managing the Firm’s Resources and Portfolio: All relates to the innovations and
efficiency of the technology that target maintains through its retail establishments, online
website, social media and apps. Also in programs for consumers and employees.
• Organizational Culture: Previously discussed in the strategic partnerships with Target,
such as The Heart of America Foundation, To Make US Healthiest, Fish Wise and
Federal Emergency Management Agency
• Ethical Practices: Including all types of relationships, including any types of minorities,
sex, vendors, suppliers, etc. This allows the company to become industry leaders.

89. Strategic Leadership Responsibilities
CEO of Target: Brian C. Cornell
Addressed Mission Statement
“Our 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.”

90. Strategic Leadership Responsibilities
• Target CEO Brian C. Cornell believes in social
responsibility for the branding. There are
specific types of integrated areas that the
target brand focuses in the direction of its
mission statement and value to its consumer.
• Design for all
• Great guest services
• More for your money
• A fun and rewarding workplace
• Celebrating diversity and inclusion
• A legacy of giving and service
• This is the background of the
ever popular company
slogan-----
‘Expect more. Pay less.’

91. QUESTION #10
Please make recommendation for the firm. Help the firm
improve its competitive strategy, corporate strategy,
corporate governance and strategic leadership.

92. Recommendations
•Keep higher quality and
innovative products.
•Bond with exclusive
partnerships with
designers.
•Appeal the firm’s
original atmosphere and
appearance.
•Increase locations the
nation.
•Decrease high stock-out
rate.
•Change customers’
pricing perception.
•Set the firm’s own style
among the increasing
rivalry in retail market.
•Predict the change in
economy and
governmental policy.
•Expand in international
markets.
•Diversify its grocery
department.
•Engage more in
exclusive design
partnerships.
•Increase advertising for
private brands.
•Enhance efforts to be
environmentally firendly.
Strengths Weaknesses
Opportunities Threats

93. Competitive Strategy
Competitive strategy is a long-term action plan devised to help a company
gain a competitive advantage over its rival. To improve its competitive strategy
Target should:
• Implement a better re-stocking system for inventory management:
• Point-of-sale stocking system.
• Remove the potential for human error and would be extremely fast and cost
efficient.
• Focus on design and innovation to develop a competitive advantage through
value-creating diversification
• Maintain quality difference in comparison to Walmart
• Incorporate employee incentive plans to decrease employee turnover and
retain valuable human capital
• Identify improvements for employee hiring and training standards
• Continue finding ways to enhance the customer’s shopping experience:
• Offer free food sample.
• Install store mannequins displaying the latest fashion trends.

94. Corporate Strategy
Idea Suggestion
Expand into South
America
 Large rising middle-
class.
 American companies
are perceived as having
better quality products.
 Existing infrastructure
Vertical Integration  Engage in vertical
integration
 Continue offering
private-label brands
(i.e. Archer Farms)
focusing on quality and
cost
 Explore Pharmaceutical
expansion

95. Corporate Strategy
Idea Suggestion
CityTarget Outreach  Pursue further market
development in urban
areas with CityTarget
 Create value with its
large selection targeted
at urbanites
 Explore shopping
experience
enhancement

96. Corporate Strategy
What Went Wrong Better Suggestion
Rushed Market Entry
 Target bought cheap leases and opened 124 stores
in a timespan of 10 months.
Target should slowly enter the market with a few stores,
first introducing to new customers and developing hype
among fans of the US branch, like J. Crew who
successfully entered the market with this strategy.
Inconvenience
 Target stores were located in out-of-the-way
locations
 Stores were smaller than their US counterparts and
often has smaller isles—proving difficult to navigate
in Canada’s cold winters when everyone is bundled
up!
While entering the market little by little, choose
locations convenient for customers and help the Target
brand become visible in the public eye.
Identify aspects of Canadian lifestyle despite similarity
to the US. Assumption leads to faulty judgment, as with
the size of the isles becoming troublesome in winter.
Lacked in comparison to competitors
 Walmart has already infiltrated the Canadian Market
 Target seemed to provide less at higher prices in
comparison
Target offered less selection than that in the US, which
disappointed those already familiar with the Target
brand. If Target is going to charge a higher price, it
needs to prove its diversification.
REVALUATE INTERNATIONAL STRATEGY
 Implementing a transnational strategy may aid Target’s international
expansion into Latin or Canadian markets to combine global integration
and local responsiveness
 Target had lasted less than two years in the Canadian market—its first
global outreach—closing 133 stores

97. Corporate Governance
Increase the diversity of the
backgrounds of board members…
About half of their backgrounds are
financial or investment related; look for
someone with academic background
for example
Look into hiring more women (3 women
vs. 8 men) & more ethnic individuals (8
white vs. 3 non-white)
Modify executive compensation…
Reduce stock options, which
sometimes cause problems such as
option backdating

98. Strategic Leadership
Maintain core competencies…
Including: Distribution, Marketing, and Human Resources
Keep building and improving human capital…
Provide effective training and learning opportunities for team members,
and offering incentives
Knowledgeable and happy employees help the firm’s strategic success!
Improve the balanced scorecard
framework…
Scrutinize the security
process to ensure that data
breach doesn't happen again
Improve customer
satisfaction and ensure
customers are fully satisfied
with their Target experience

99. Woof.(shop at Target)
The End