Target Corporation Swot Analysis

TO: Katherine Ryan, C-204 Professor

FROM: Brantley Davis, Member of Pack Consulting

DATE: September 24, 2015

SUBJECT: Target Corporation Acquisition Proposal

This document includes the following sections.

1) Understanding Target (pg. 1)

This is an Annotated Bibliography describing Target Corporation. This section outlines Target as an overall company, its mission, goals, business strategies, competitors, and their strengths and weaknesses.

2) SWOT Analysis of Target

This section of the document is a graph describing Target’s top strengths, opportunities, weaknesses, and threats.

3) Omnichannel Definition

This is an Annotated Bibliography describing the concept of omnichannel. It summarizes what omnichannel means, what an omnichannel

consumer is and expects, and finally what omnichannel trends are expected in 2014. Is accompanied by a Works Cited.

4) Proposed Acquisition
This is a one-page document that presents the company that Target should acquire. This gives background information on the company along with an assessment of their business strategy, financial risks, and operations. Is accompanied by a Works Cited.

5) Growth through Acquisition
The final section of the document answer’s questions #1, 2, 4, 6 on the “Growth through Acquisition” document found under the resources tab on OnCourse.

Understanding Target

Target. "Target Mission, Values & Stories Behind Them." Target Corporate. Target Brands, Inc., 2014. Web. 23 Sept. 2014

Target’s mission and their ultimate goal is to provide connections from both inside and outside their store. They want to be the store that you choose to when you physically go out and shop for groceries, the website you choose to buy your new Xbox One, the company that comes to mind when you think of “Expecting More, and Paying Less.” They try and offer an experience they is fun, up-lifting, and energetic for everyone from any background and in any situation. They also have the goal of giving you the greatest customer service possible. They have included price matching with a 5% savings when you use their company credit card, REDcard. They want to give you more for your money.

Factiva. "Target Corp Company Profile." 2014. Factiva, Inc. Web. 23 Sept. 2014.

This company snapshot gives a very good overview of Target and their company’s position in the industry. Over the last 3 months Target’s stock price has seen a considerable jump of over 4 dollars per share. Target’s Credit Card (REDcard) seems to be of big importance in how they generate revenue and also how they have such high customer loyalty. Along with their stores in the US they have expanded to Canada which has not been a promising business decision. Sales have actually decreased by .96% over the past year. Though their net income is still a promising $1,971 million. Which is an increase of 2.72% compared to last year. It is quite evident how big Target is having reported 366,000 employees which is an increase of 5,000 employees from 2013. At the bottom of this report it states Target’s biggest competitors in the department store industry. Domestically, companies such as Macys. Kohls, and J. C. Penney are listed. All of these have less than $30,000 million in sales. Target is sitting on top with just under $73,000 million.

MarketLine. "Target Corporation: Major Products and Services." 23 March 2014. MarketLine Advantage. Web. 23 Sept. 2014.

Target is one of the largest and most profitable retailers in the United States. They have a wide variety of products that are sold in their stores. They sell household items, video games, sporting goods, apparel for all ages, home furnishings, food, and also pet supplies. In summary, if you are looking for practically anything Target most likely offers it in their store. As a company Target owns a number of different brands. Chefmate, Converse One Star, and Shaun White are just a few of the more popular ones. It isn’t hard to see that Target as a company has a wide range of revenue from all different types of products. On top of just selling merchandise, they also offer pharmacy, dining, and optical services. This gives them a lot of oppositions when deciding where they want to go in the future.

Leinbach-Reyhle, Nichole. "How Target Stands Out Among Its Discount Store Competitors." Forbes. Forbes Magazine, 8 Aug. 2014. Web. 23 Sept. 2014.

According to Ms. Leinbach-Revhle Target has set the bar for shopping as a discount store. Although it can be argued that Target is more of a superstore with the plethora of products and services it provides. One way they have achieved this is by their knowledgeable and outgoing staff. The shopping experience is greatly enhanced with the staff they have on hand, always looking to help benefit the customer. Whether that is by giving recommendations, being fast in check out time, or just by being friendly. All of these things are making a major impact of the Target experience and is being shown in their revenue. In a survey given to 60 retail stores during 2013 it stated that sales are increased by 25-50% when they are assisted by staff that are friendly and helpful. The type of characteristics that Target employees present. Investing in knowledgeable staff is a sure way in raising your revenues. A report released by TimeTrade stated that 85% of customers buy more when they are assisted by helpful staff. Target is doing exactly what they need to get their reputation back up after the recent 2013 data breach.

MarketLine. "Target Corporation: SWOT Analysis." 23 March 2014. MarketLine Advantage. Web. 23 Sept. 2014.

This article provides a detailed SWOT analysis on Target.

By the end of the fiscal year of 2013 Target had over 1,778 stores in the United States. Target’s presence is very well known throughout the US and it is one of their biggest strengths. They recorded above their top retail competitors in revenues, having a revenue of $73,301 million in 2013. Since Target is so large they have the ability to influence suppliers in prices, which in turn lowers the prices of their products for their customers. Another strength of Target is that it has developed over their years of operation a certain type of differentiation from stores such as Walmart. They do not market their products as always being the lowest price, but instead “affordable yet stylish.” They have launched designer collections, the first being in 2010 by partnering with Liberty of London. Along with designer collections they started allocating space within their store to certain boutiques to give their store that upscale look and feel. Target’s biggest opportunity laying in front of them is their food and grocery segment of the sore. Along with that they can see great increases in revenue by expanding their e-commerce site target.com. Target’s biggest threat is the ever growing online market. Products are being bought more online as time goes on. Along with online competition, Walmart and Target has seen their number of price wars on the same product. Target very rarely benefits from this type of action. Amazon has been on top of the industry in selling products online and with rising labor wages this is only hurting

Target.

SWOT Analysis

Omnichannel Definition

Dinsdale, James. "What Is OmniChannel?" Omnichannel.me. CloudTags, n.d. Web. 23 Sept. 2014.

Omnichannel is a lot like the word multichannel. Both meaning multiple or many, but omni more means all or universal. That is exactly what retailers are trying to do today. They are trying to connect and make relationships with customers on all levels of communication. Omni-channel is being able to take the experience and feeling a customer has inside a store and be able to have that same experience on a website, or mobile application. All brands need to interpret and adapt to this business strategy. Companies need to learn that not just their customer, but all customers are winners. Target distinguishes itself by giving a customer a certain experience within their store. They need to be able to create that same feeling across all of their networks, and companies that they own.

Green, James. "Why And How Brands Must Go Omni-Channel in 2014." Marketing Land. Third Door Media, Inc., 27 Jan. 2014. Web. 23 Sept. 2014.

An omnichannel consumer is one who looks at a certain stores website, views an advertisement on the television, and then accesses information about that same product on his/her mobile device. They are taking all of the resources at their disposal and applying it to their consumer behaviors. The omnichannel consumer expects that everything they need to make a purchase should be accessible through their very fingertips. 80% of store shoppers check online prices, with another 33% checking their phone while looking at the product on the shelf. 1.1 trillion dollars in store sales were influenced by the prices on the internet. With $12 billion in retail sales made just through people’s phones. This is an avenue that Target cannot miss out on. The consumers are looking for companies that will give them the convenient access to the most information out there on a specific product. Target needs to define their digital presence and expand it as large as they can.

Brown, Matthew. "10 Omni-Channel Trends in 2014." PFS Web. PFSweb, Inc., 21 Feb. 2014. Web. 24 Sept. 2014.

Many trends are starting to establish themselves in 2014 and they’re the result of omnichannel retailing. Customers now expect to be able access information about the same product in real time through online and offline channels. Companies are starting to keep this up to date type of information and it is better to start now than to hop on later. Customers care about this type of synchronized shopping experience, and it is only going to grow in importance as time progresses. Digital marketing strategies are being put in place to help capture customers on the web. With this growth, the amount of big data (i.e. cookies) a company is able to collect can greatly affect their revenues and profit margins. Being able to view online if the store closet to you has a certain product is separating retail companies all across the United States. That very feature on a website is attracting and keeping customers around. Omnichannel is already in full swing. If you are not on the train by now, you are behind the game.
Acquisition
Go to google.com and type in the search bar “Online Shopping.” Third down from the top is Overstock.com. Overstock is a complete online retailer of a wide variety of products. Much like the products the Target offers at their brick and mortar stores. Overstock’s strategy goes right along with Targets in which they want to offer customers higher end products for lower prices. There is minimal financial risk associated with this acquisition. It will also has very low operations cost, since it is solely an online retailer. Together Overstock.com and Target can create a more refined digital presence for online customers.
Overstock.com is a very well renounced online retailer. They sell products that are aligned with Target such as clothing, furniture, electronics, and beauty products. Customers who are looking for a particular product on Targets online retail store, would most likely be able to find the same one on Overstock.com. This creates a certain oneness between the two companies. Just as Target operates primarily in the US, so does Overstock. One of Targets biggest strengths is that their employees give great customer service. In 2010 Overstock.com received the very top ranking in employee satisfaction from a survey given by Forbes.com (“Overstock.com Ranked Number One”). This satisfaction turns into giving award winning service to customers.
Overstock.com in in two types of business segments. One is selling their products to the customer directly. The other is buying and selling other companies, including retailers, products through their website (MarketLine). This is an extremely effective strategy since Overstock.com has a very high customer satisfaction rating. Target will not only benefit from the increase of sales through Overstock.com, but also by reducing the sales generated by their competitors through Overstocks website. There will be some operating costs incurred with the acquisition of Overstock.com, but they will be minimal. Shipping fees are mostly incurred by the customer who purchases the product. One way of cutting costs would be instead of shipping the specific Target products that they want to sell on Overstock.com from their warehouse to Overstock’s, they could ship right from the warehouse itself. Which would also cut down on delivery time since Target has 37 different distribution centers in the United States (Target).
As far as financial risk is associated with Overstock there seems to be very little. According to analysts from Thompson ONE there should be an increase in both, Sales and Gross Profit in this coming year. With a company that has absolutely no financial debt, accompanied by a 115 Return on Equity ratio they seem to be quite the low risk investment. Growth seems to be a problem with Overstock and because of that I see them negotiating with Target for an offer that is well in favor of Target. The impact on financial statements should be minimal as well. There are no red flags when looking over Overstocks financial statements, and since they are a publically traded company they already follow all SEC and FASB standards. In fact Overstock.com made it onto Forbes list of 100 Most Trustworthy Companies of 2014 (Dill). As stated above, this financial information was taken from the Thompson ONE database.
When considering the value drivers of both Target and Overstock.com they seem to be well aligned. They both have the same goal and mission for their customers. Overstock will help give Target their online presence they so badly need. Along with improving their own sales, they will help diminish those of their competing retail companies using Overstock’s website. Target has the opportunity to open up into a huge consumer market at very minimal financial risk. There is no reason that Target shouldn’t acquire Overstock.com.
Works Cited
Dills, Kathryn. "America's 100 Most Trustworthy Companies." Forbes. Forbes Magazine, 18 Mar. 2014. Web. 24 Sept. 2014.
MarketLine. "Overstock.com Company Profile." 17 March 2013. MarketLine Advantage. Web. 23 Sept. 2014.
"Overstock.com Ranked Number One in Employee Satisfaction." Overstock.com Investor. Overstock.com, Inc., 3 Dec. 2010. Web. 24 Sept. 2014.
Target. "Target Distribution Center Locations: USA." Target Corporate. Target Brands, Inc., 2014. Web. 24 Sept. 2014.
Thompson ONE. “Overstock.com Company Summary.” 2010. Thompson Reuters, Inc. Web. 23 Sept. 2014.

Growth Through Acquisition

1. Strategy: With the acquisition of Overstock.com Target will help solve their biggest weakness and opportunity, having an online presence. As of now not many people are going to their online store to buy products. They are going to their brick and mortar store down the street. That is because they are getting beat out by online companies such as Amazon (Reagan). By acquiring Overstock.com it will help close this gap. The future is all about omnichannel retailing and this will help expand Target’s strategy in doing so. They will give that same customer experience that Target has down so pact, but be able to do so through an online channel.

2. Guest: The experience guest have when coming into Target’s store is of extreme importance. They have a certain type up-scale feeling when shopping at Target, and Overstok.com has that same exact feeling. Their website is very visually pleasing and not just a list of low priced products. Guest will perceive this acquisition as Target improving their company by expanding their business into the online segment. Reinforcing the idea of omnichannel retailing. Guest loyalty is a strength of Target and this loyalty will be able to be applied to Overstock.com by being able to use REDcard through Overstock’s website. Creating more savings and giving customers that feeling that Target has their back both at their store, and their subsidiaries.

4. Positioning: Target has recently just acquired both DermStore.com and Cooking.com. Both which are online stores that help them with their online presence. Overstock.com will fit right alongside of these companies their portfolio. It is clear that Target is making a push to make their online presence known and this acquisition will help do exactly that.

6. Marketing: Expect More. Pay Less. That is Targets strategy and mission. Addressing the “Expect More” Overstock.com has had great reviews in customer service. They were ranked fourth in overall customer satisfaction among U.S. retailers, according to the latest American Customer Satisfaction Index (“Overstock.com Ranks High”). That can most likely be accredited to the employee satisfaction at their company. When employees are content they are willing to go above and beyond for the customer. That is exactly what Target’s goal is. Overstock.com is in the business of selling other retailer and designer products for a lower cost than those companies do. So the “Pay Less” is already intertwined in Overstock’s business strategy. Target will have to very little, if anything, to change Overstock.com to fit their mission.

Works Cited
Reagan, Courtney. "Subscribe for Savings: Target Takes on Amazon." CNBC. CNBC LLC, 20 May 2014. Web. 24 Sept. 2014.
"Overstock.com Ranks High in Customer Satisfaction." Deseret News. Deseret Digital Media, 17 May 2014. Web. 24 Sept. 2014.