Chapter 3

Chapter 3

Chapter3

OrganizationalOperations and Strategies

FinancialAnalysis

Target’ssales have been on a downward spiral in the recent past, with thereducing traffic of guest in the last six straight quarters. Target’sprofits have been severely hurt by the corporation’s ambitious butpoorly executed plan to enter the Canadian market (TargetCorporation, 2014a). Target opened 124 retail stores in Canada in aperiod of 12 months, which ended in total failure and closure of allstores in 2015 after a period of low profits, returns and complexityin mastering the market. In year ended January 2014 net income hadfallen by more than a third to $1.97 billion (Target Corporation,2014a).

Thegraph above juxtaposes the cumulative shareholder return in Targetcommon stock for the past five accounting years with that S$P 500index, previous peer group (made up of 15 large competitors in theindustry that includes, Wal-mart, J.C. Penney, Supervalu, Costco,Walgreen, Home Depot, Amazon.com, Kroger, Sears, Best Buy, Safeway,CVS Caremark, Macy’s and Kohl’s), and current peer group made ofprevious group excluding Supervalu. The basic assumption is thatinvestment of $100 for all firms and reinvestment of all dividends(Target Corporation, 2014a).

Inthe financial year ended January 2014, the gross profit margin ratewas 29.4%, which a weaker than that registered in 2013 (29.8%) and2012 (29.7%).The decrease recorded in 2014 was primarily due toTarget’s increased promotional activities (Target Corporation,2014a). The increase in 2013 gross profit was as a result of a shiftin vendor agreements relating to payments received in support ofmarketing agenda, ensuing from more vendor consideration beingacknowledged as a decrease of Target’s cost of sales rather than alessening of SG &ampA. Nonetheless, the increase was offset byTarget’s incorporated growth plan of the loyalty program and themassive store redesign program (Target Corporation, 2014a).

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Thefollowing can be noted from the financial analysis of financial year2014:

GAAPearning per share were $(2.56) encompassing a dilution of $(6.38)linked to suspended operations. Adjusted earnings per share were$4.27. Compared to the previous financial year, sales have increasedby 1.3%. sale on the online platform grew by more than 30%, whichaccounted for about 0.7% points to the sales increase in 2014 (TargetCorporation, 2014a).

Targetpaid dividends of $1,205 million in 2014, which was an increase of19.8% from that recorded in 2013. Sales from continuing businessoperations were $72,618 million in the previous financial years whichwas an increase of 1.0% from that attained in 2013 (TargetCorporation, 2014a).

CorporateLeadership

Target.comadministers all the three e-commerce agenda that the corporationdeals with. It only in 2010 that Target corporation partnership witha subsidiary of one of the largest online firms-Amazon.com- wasterminated (Kuma, 2015). The subsidiary used to assist thecorporation to handle all guest services and fulfillment ofTarget.com.

Target’scorporate leadership is organized in a hierarchical order that makesit easy and possible for the corporations leadership to see to itthat the middle managers stick and follow the strategic plan of thefirm with the tactics they are employing to attain the corporationstargets (Kuma, 2015). Majority of the individual in the managerialpositions have been with the corporation for many years and Targetdoes pride itself on promoting from within and employing individualswho are going to succeed in their departments and stores (Smith,2011). The corporation has employed more than 360,000 people and over1,600 retail stores in different locations (Kuma, 2015). Target isinvolved in the communities that they serve and prides as the firstcorporation to give a proportion of their sales to local communities.Since mid 1960s Target has donated a significant fraction of thecompany sales to various groups (Kuma, 2015). The most recent andperhaps most conspicuous being the program that allows clients to register to have one percent of their card purchases contributed tothe learning institution of the choice every year. Within the first24 months this program had donated more than $800,000 to learninginstitutions in communities where the corporation operates (Target,2015a).

Inthe recent past Target corporation has performing quite well in theretail industry and has made frantic effort to sell off some of thesubsidiaries that have been underperforming such as the MarshallFields and the Mervyn’s. Such strategic moves have made Targetcorporation leaner and put it in a better position to be able toconcentrate on their core business activities-Target store (Kuma,2015).

StrategicPlanning

TargetCorp. offers customers commonly referred to as ‘guest’ dailyessentials, differentiated products and fashionable at a low-costprice (Target Corporation, 2014b). The company’s ability to offerits guest an ideal shopping experience is supported by its soundtechnological framework, discipline in its method of approachingbusiness management, strong supply chain, devotion to innovation andinvesting in the future. Before 2015 there have been two reportablemarket segments, The US and Canada segments (Target, 2015c). Theretail stores are designed in a way that customers can buy productsimpeccably in the physical stores, online platforms or mobile devices(Smith, J. (2011). . The US segment encompasses credit cardservicing, corporate activities and specific centralized operatingactivities. On the other hand the Canadian segment used to includeretail store operations that included 124 stores (Target, 2015b).

Thecredit card segment prior to may 2013, was used to provide credit tocustomers through a branded credit cards. Today the card s owned byTD bank. Target also performs primary market and account servicingactivities(Target,2015c).

Organizationalhierarchy and structure

Atypical Target Corporation store has a minimum of sevenadministrative managers including the general manager. The executiveteam is allocated strategic portfolios of expertise: Logistics, Assetprotection, Soft Lines, Guest service, Hard Lines, and store teamleader (Kuma, 2015). In stores that are labeled as super Target(volume of guest is high) there are three extra executive managerswith the following titles operations team leader, replenishment teamleader and food team leader. Down the leadership hierarchy, there aredepartment team leaders. On average there are 19 department managers(team leaders) in every Target store. There are also store membersranging from aesthetic, electronic to food and cart attendants(Target, 2015a).

Atarget store has an average of 113 store employees, referred in thecorporation a team members under the executive team. Its maincompetitor Wal-Mart employs 50% more employees per store, whichtranslates to 162 members in every retail store (Wal-Mart, 2013). Inthe last three years, Wal-Mart sales volume have been about 6 timeshigher than Target’s (Serres,2015).In relation to sales volume it is evident that Target has slackoperations on the payroll facet of the corporation. Perhaps most themost noticeable element in leadership hierarchy is the presence of ateam member in every retail store at Target with the duty andresponsibility of comparison price shopping at retail giant Wal-mart(Serres,2015).In every week the team members gives information of the prevailingprice of key products so that Target can act accordingly in respectto the company’s motto of pay less earn more. Despite the factthat Target has used this strategy for the last 10 years, thecorporation is yet to attain the title of low price leader, a labelthat has always been linked to Wal-mart (Serres,2015).

FormerCEO Mr. Steinhafel adopted collaborative leadership style, where theinput of leaders at the stores was highly valued. The key emphasiswas to adopt a different meaning of the company mantra of “fast,fun and friendly” (Ziobro &amp Serena, 2014). This definition ofthis mantra took a weightier meaning during Steinhafel tenure, whereteam leaders were encouraged to host regular happy hours by takingtheir team to out for exciting events.

Targetemployed both informal and formal internal mode of communication. Inthis light team members at any level in the headquarters, stores andeven distribution centers were called upon to use the corporation’sarray of social media platforms share news and remain connected(Ziobro &amp Serena, 2014).

Thenew Target chief executive officer and chairman to the board has adopted a transformational leadership to change the outlook of Targetin United and Canada. Target performance in Canada wasunsatisfactory, with the corporation losing more than $3.1 millionfor the two years it had been operating in Canada (Ziobro &ampSerena, 2014). Brian Cornell first assignment wa to figure out howTarget would pull out of Canada. In the recent past Target had becomemore agile to responding to the shifting buying dynamics of itscustomers and more aggressive in the industry. Cornell swiftlyreduced operations to Canada and initiated a support framework thatwould take care of the workforce that was working in Canada (Target,2015c).

Targethad recruited the new CEO from outside Target and hence he was ableto execute plans and bring new solutions and perspective thatinsiders would have been loath to consider. Cornell has depicted anew leadership style that has managed to get the support of the boardand get all the leaders aligned around the strategy to make thenecessary transformations and offer a support framework for displacedemployees (Ziobro &amp Serena, 2014).

LaborRelations

Targethas experience a very turbulent year as along as labor relationsmatter is concerned. In September a group of workers from one of theTarget’s store in New York expressed their desire to join unions(Nassauer &amp Ziobro, 2015). The voting exercise was conducted bythe National Labor Relations Board upon the request by some workersat the store from the pharmacy wing (Nassauer &amp Ziobro, 2015).In the past Target has dissuaded its workforce to join unions throughintimidation and other unorthodox measures. Recently the Company paida whopping $2.7 million to pay in discrimination claims waged by theUnited States Employment Opportunity Commission (Halter, 2015). Thishas revealed a side of Target that has not been in the public domain.While the retail leader Wal-mart has been very vocal on anti-unionpronouncement, Target has always maintained a low profile, disguisingits real agenda by paying fair wages to its workforce and providingexcellent working environment (Nassauer &amp Ziobro, 2015).

Targethas voiced its dissatisfaction with the vote, stating that such amovewas ill advised bearing in mind the company pending sale offthe pharmacy business. Target has succinctly indicated itswillingness to appeal the vote in the coming days, and it remains tobe sent what we happen to this otherwise image destroying decision(Nolan, 2012). The HR department has maintained that its workforcedoes not need to a third party representation. Since 1990 there havebeen only two attempts by the workforce at Target to vote to joinunions and both have been met with massive resistance and criticismby the management (Nassauer &amp Ziobro, 2015).

SectionII: Corporate &amp Business Strategies

Missionand Vision

Target’smission is to make the corporation the preferred shopping destinationfor our guests by offering stupendous value, unremitting innovationand an excellent guest experience by constantly trying to fulfill thecompany’s motto “Expect More” (Rowley, 2003).

Controlat Target to ensure Adequate Compensation and Reward System

Targetemploys a performance based-pay system to remunerate is workforce.Seniority and length of service are the main criteria used todetermine the amount of pay and other benefits that a specificemployee will get (Nolan, 2012). In the recent past, Target has alsomade concerted effort to incorporate employee contribution in ratingthe overall performance of an employee and hence the level of pay andreward (Target, 2015a). To assess employee performance Target hasformulated one of the most effective performance appraisal systems inthe retail industry (Target, 2015a).

Thepresent performance appraisal system at Target seeks to give astructured feedback on the contribution and results and attained,skills and performance demonstrated on the basis of goals set andobjectives established (Target, 2015c). The performance appraisalprovides the grounds for individual employee growth and development,and decision making for performance connected remuneration. Targetrating technique can be termed as a graphic rating scale. This meansthat the behavioral facet are presented on which the performance ofthe employee has to be determined with the assistance of a scale.With the exclusion of managers all employee are subject to theperformance appraisal, where five key groups of competencies areexamined (Target, 2015c). The scale mentioned above has five verbal-portrayed points (A—B-C-D-E). A signifies aspects of performanceand behavior that are yet to attain the minimum requirement of thejob position in question, it is primarily used during the jobtraining process. A “B” signifies that a given employee hasattained the job requirement but there is a big room for improvement.A “C” indicates an overall good performance that meritsrecognition. “D” means exemplary performance that surpassesexpectation of the position in question. “E” signifies speciallyidentified strengths that past what is expected of an employee in theposition (Target, 2015c). It is the highest display of skills,excellent behavior and excellent result. Such employees are amongthe highest paid at Target and majority are promoted into managementpositions when occasion warrant (Target, 2015c).

OperationsDecisions and Procedure

TargetsCorp. has implemented the stratagem of increasing its attention onits signature categories and smaller-store design to attract back oldcustomers. Having recorded a drop of 2.5% in this year andregistering a mediocre performance in the consumer directory (5%decrease) Target is committed to revolutionize its operations andincrease its sales by improving the store traffic in the extremelycompetitive retail industry (Ziobro &amp Serena, 2014). Mostnoticeably target is tapering its focus support growth by committingmore resources towards facets where the company is performing well.In line with this strategy the management is planning to stress onthe corporation’s key areas of operations (Kuma, 2012). Themanagement has learnt from failures in the past that it is notpossible to prioritize all categories and that some hard line actionsneeds to be initiated to boost signature categories, that have beenand are expected to be the principal traffic divers (Ziobro &ampSerena, 2014).

Inthis light, Target has recognized that it is of utmost import thatcompany makes guests shopping experience more expedient to attractthem back and to be in a position to sustain and improve itscompetitiveness (Target, 2015b). For this reason Targets plans tofocus on areas that capture the attention and interest of customers.To attain the aforementioned goal, Target plans to commit moreresources and greater concentration to infant and children’sproducts, fashion, furniture and wellness product categories (Serres,2015). These areas of operations have beenidentified as the main categories that once attracted customers toTarget stores, and the management expects to put resources in theseareas to turn Target around. It is worth noting that Target has noplans of exiting any category, but rather the management wants tofocus more on core segments hat are considered the prime ones(Target, 2015c).

Marketing

Informationis critical in the modern business environment, and Target hasrecognized the need to keep its clients up to date with all theproducts in the stores and all events that shape the its operations.Target Corporation is offering an exceptional case in point of acontent-based strategy. In the recent past Target has revivified andrelaunched its website with an aim to inform the public thecorporation story (Masunaga, 2015).

Targethas also been using television ads to draw more customers especiallyfrom groups where sales have not been satisfactory. For example, the‘sintraduccion’ ads is meant for Latinos (Masunaga, 2015). Thisis one of the efforts meant to focus of particular demographics tocomplement the cultural concept that from the backbone of thecorporations strategy.

Targethas also used it website to campaign for what has come to be known asa ‘three solution focused strategy’. This initiative encompassesstore pickup, subscriptions and cartwheel (Masunaga, 2015). Theextensive research Target has identified these three features as thekey solution to assist customers not only save money but also timeand remain organized. For a long time Target Corp. has been usingeducational videos on its website to provide pertinent information onvarious features and events to the public to help them have a betterexperience while shopping at the brick and wall retail store oronline. Use of celebrities and prominent personalities to promotebrand and Target image to different demographics Target has been ableto expand brand perception (Masunaga, 2015).Researchand development

TargetCorp has research and development department is composed of many subunits meant to achieve a specific goals. The most important area forthis department is research design, innovation and productdevelopment. Target boosts of any brands that are a product ofingenuous research and development (Target, 2014b). Most recently,the advent of digital technology into the retail operations hascompelled the corporation to create a digital and technology team tonot only create but also assess the effectiveness of currenttechnology used in the firm. The new center called the technologyinnovation center is meant to recruit able workforce and talentedscientists and engineers who can generate high tech mobile apps andingenious methods to forecast customer behavior (Target, 2015a)

Researchand development has played a key role in helping the firm revamp andchange the store based culture controlled by suppliers and marketersinto an efficient innovative machine. New ways of doing things has not only reduced operations costs but have also saved the companyresources and time. Plans relating to merchandise, clothes collectionand other accessories that used to tale years, do not consumevaluable time any more, as processes are now more efficient. In thepast months Target has retooled its mobile platform to supportdigital programs (Target, 2015b).

Company’sstrategy

Duringthe era of the former CEO Steinhafel Gregg, Targeted had laid immenseemphasis on daily consumption products, while categories such asfashion which at one time used to be the corporation’s strengthwere tangential (Ziobro &amp Serena, 2014). Also, the retail chainpaid attention to increasing the size of the stores to augment thecarrying capacity and product assortment, take no notice of theshifting consumer inclination in the direction of convenienceshopping. The new chief executive officer Cornell Brian, has changedthe strategy so that more attention is put on signature categoriesthat match the shifting consumer trend (Ziobro &amp Serena, 2014).Focus on signature facets is also meant to attract shoppers lost tocompetitors who saw the changing tides and adopted strategies thatmatched with shoppers trends.

ChapterSummary

Itis evident that Target strategy has remained he same over the yearswith few changes that have been occasioned by the shiftingenvironmental conditions. The key objective has been to offerquality, fashionably designed products and all life essentials, in aclean, well organized and convivial environment. The excellentexperience that Target seeks to provide its customers is rooted inits commitment to discounted prices and stylish innovations. Thetimeliness of this strategy has empowered Target to incessantlystrive for excellence both on the inside and externally.

Thenature of Target’s stores has been another integral corporatestrategy that the company has maintained for many decades. As wellhighlighted in its company website, the devotion to quality,reasonable price and style has offered individuals with an excellentexperience at the stores, a feature that has enabled Target to gainand maintain it number two position in the retail business in theUnited States. This strategy has enabled Target to carve its ownniche in the industry and differentiate itself from other players inthe retail business. The strategy has not only enabled Targetorganizational structure to remain flexible over the years, but hasalso created a platform from where departmental managers are able tomake some decisions relating to various elements affecting theiroperations. This flexibility has made it possible for Target toextend its brand and pursue significant growth opportunities.

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