Target Corporation: Objectives and Strategy
Long term objectives
1. To gain competitive advantage over its competitors by committing to growth and delivering superior return to their shareholders.
2. To cater employee development through excellent human resource development.
Rationale
It has been known to the company that Target Company has the highest quality products among its competitors however the company has the difficulty in the competing with its competitors in price. A competitive advantage is important for the company to gain more customers and to be able to grow and gain superiors returns.
According to (1985), “competitive advantage grows fundamentally out of the value a firm is able to create for its buyers that exceeds the firm’s cost of creating it.” Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price.” To generate such advantage, a resource must be rare, valuable, inimitable, non-tradable, and non-substitutable, as well as firm-specific (1986, 1991; 1989; 1991). According to (1991), a firm’s unique resource is treated as being inherently related to performance. The unique, inimitable, and immobile resource is valuable precisely in the sense that it generates economic rent.
In addition, with the nature of business of Target Corporation, it is important that the company commit on employee development. A company operates with the help of the employees and they are as important with other resources of the company. Without them the business would be incapacitated.
The human capital is consists of the education, experiences, and skills at a given point in time (1999) that help in the tasks of getting one’s work done. According to (1995), employee development increase productivity through increasing employees’ skills and motivation.
Short term objectives
1. Increase earning per share by 10% by the end of 1 year.
2. To reduce cost by 20% by the end of two years.
Rationale
Congruent to its long term objectives of delivering superior returns the Target Corporation has continually target to increase earning per share every year. The company knows that they deliver excellent quality of products however the company needs to lower its cost in order for them to stay on the competition. When cost is lower, the company would have the chance to lower its price. With a lower price with a high quality product the company would surely gain more customers over time and would increase its returns.
Grand strategy
From the objectives stated above, it is suggest that the Target Corporation follow two strategies. Target Corporation should commit on human resource development and on cost leadership to gain competitive advantage.
Human Resource Development
Human resource development (HRD) plays a vital function by maximizing employee expertise to achieve the main objectives of an organization. Human resource development (HRD) has served the needs of organizations to provide employees with up-to-date expertise. According to (1994), human resource development models and processes is a way to kept pace with the increasingly sophisticated information and production technologies that continue to diffuse throughout most of the industries. As a factor integral to business success, employee expertise itself has been expanded through effective programs of employee development. Expertise is defined as the optimal level at which a person is able and/or expected to perform within a specialized realm of human activity (1994).
The HRD function has long been relied upon to support a broad range of business objectives that require competent employees. Business objectives themselves are almost as diverse in nature as the wide range of organizations that articulate them. Enhancing employee expertise through HRD increases the likelihood that business objectives will be achieved (1995; 1994).
Once competitive advantage is attained and begins to attract the attention of other key players in the marketplace, an organization’s premier market position can quickly erode unless the organization finds ways to sustain its present advantage or generate new ones. Organizations in market leadership positions realize sooner or later that human resources are ultimately the only business resource with the creativity and adaptive power to sustain and renew an organization’s success despite changing market conditions (1993). The development of employee expertise provides a potentially inexhaustible source of ideas for further innovation and increased productivity because the most basic output of the highly competent employee-knowledge – is not used up in the process of producing it (1989). Developing employee expertise at all levels of the organization and using knowledge as a catalyst for growth and competitive advantage represents a major frontier in organizational performance that is only now beginning to be fully appreciated (1994; 1995). By continuously developing employee expertise in key domains of product and market expertise, competitive advantage is achieved and maintained.
With the nature of the business of Target Corporation, it is important to have the most skilled and experts employees. Target Corporation should provide trainings to their employees to enhance skills of its employees to better promote its productivity and quality service and products.
Cost Leadership Strategy
Target Corporation is known for its quality products however the company is weak in managing its costs. To this, the company should commit on managing its cost to gain the lowest costs over its competitors and to gain competitive advantage. It is highly conceivable that the firm with the lowest cost in a market may not enjoy better performance than a rival which happens to have overwhelming advantage in access to distribution.
Cost Leadership creates excess returns by providing a basic, or commodity level, product at the lowest cost of production. Firms following this strategy accept cheaper components, use standard production processes, and seek high market share in order to reduce unit costs (1983). Many customers will accept lower quality for a substantially lower price, and the firm which can optimize its production efficiencies can generate larger margins in a price taking business.
According to (1985), a firm with a cost leader strategy should be expected to seek an economic level of quality where the total cost of added quality and of lost customers is minimized. However, Target Corporation needed not to compromise its quality to reduce cost as according to (1983) quality and cost leadership do act together to provide high levels of performance for certain firms. The customer can be offered both a better product and a better price.
(2000) suggested some of the required skills and capabilities to successfully implement a low-cost strategy. This includes capital access and the willingness to invest it in a low-cost leadership strategy; products redesigned for a low-cost manufacturing environment; expertise in process engineering; and supervisors and a labor force committed to the low-cost leader strategy. Other drivers that enhance the benefits of a low-cost-leadership strategy include economies of scale and learning, better process technology, improved product design, cost-effective process redesign, lower input costs, and optimum capacity utilization (2000).
CURRENT FINANCIAL RECORDS
Table 1. Financials Statements of Target Corporation (In millions of USD)
Income Statement
Quarterly
(Feb ’07)
Annual
(2007)
Annual
(2006)
Total Revenue
19,710.00
59,490.00
52,620.00
Gross Profit
6,166.00
19,384.00
16,917.00
Operating Income
1,809.00
4,497.00
3,860.00
Net Income
1,119.00
2,787.00
2,408.00
Balance Sheet
Total Current Assets
14,706.00
14,706.00
14,405.00
Total Assets
37,349.00
37,349.00
34,995.00
Total Current Liabilities
11,117.00
11,117.00
9,588.00
Total Liabilities
21,716.00
21,716.00
20,790.00
Total Equity
15,633.00
15,633.00
14,205.00
Cash Flow
Net Income/Starting Line
1,119.00
2,787.00
2,408.00
Cash from Operating
3,150.00
4,862.00
4,451.00
Cash from Investing
-1,387.00
-4,693.00
-4,149.00
Cash from Financing
-1,401.00
-1,004.00
-899.00
Net Change in Cash
362.00
-835.00
-597.00
Credit:ivythesis.typepad.com
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