Target Corp.

The main issue facing Target Corporation is what it should do with its department store

and Mervyn's divisions. The company has considered closing or selling the divisions

several times over the past few decades. Although both divisions continue to make a

profit, the company could be better off focusing all of its attention on the Target

stores. On the other hand, maybe the company needs to take a different approach with the

divisions and try to make them more successful to generate greater profits.

Target Corporation is going to have to sell its department store and Mervyn's divisions

if they do not show significant improvements in next year after the new strategy goes

into affect. These two divisions are holding Target back and depleting some of its

much-needed resources. In the short run the other two divisions are going to start

conducting business in the same fashion as the Target stores. If after a year the new

strategy, which is making the other two divisions more like the target division, has not

produced more profit for the company, it will be time to either sell or close the

companies. Target would much rather sell the companies, but that can only happen if

another company is willing to buy.

The goal for the new change is that within a few months the change will be in full swing.

After a year the companies should be making not only more revenue but also more profit.

Unfortunately, if the changes do not work as planned, Target Corporation will not be able

to keep the businesses.

Background

Dayton Hudson Corporation changed its name to Target Corporation in January this year.

The origins of the company date back to 1891 when Joseph Hudson opened a men's clothing

store in Detroit. In 1903 George Dayton opened Dayton Dry Goods Company, which changed

its name to The Dayton Company in 1910. The Dayton Company entered the discount

merchandise retail industry in 1962 when it opened its first Target store. The two

companies merged and formed Dayton Hudson Corporation in 1969. The company continued to

expand by purchasing Mervyn's in 1978 and Marshall Field's in 1990. By 1979 Target had

become the corporation's top revenue producer.

In the past three years the company has changed significantly. Besides changing its name,

it has also attempted to diversify by acquiring two more companies. In 1998 it bought

Rivertown Trading Company and The Associated Merchandising Corporation. The acquisition

of Rivertown Trading Company showed that the company was willing to try something new by

entering the major catalog market. The Associated Merchandising Corporation was already a

supplier for many of the companies products, so it was very convenient for it to take

over operations. As recently as 1999, the company launched its e-commerce capability with

store brand web sites.

When the company claimed the Target Corporation name in January this year, it was

acknowledging its dependency on the success of its Target stores. The Target stores and

the e-commerce focus appear to hold the future of Target Corporation's Success. The

department store and Mervyn's divisions still play a major role in generating revenue for

the company, but the future of those divisions is less predictable.

SWOT - Situation Analysis

External Industry Analysis

Prospects for Volume and Profit - Industry Wide

Target Corporation is in the general merchandise retailing industry, sometimes called the

discount retailing industry. Its store brands include Target, Dayton's, Marshall Field's,

Hudson's and Mervyn's California. Selected information on the stores in the three

divisions is given in Exhibit 1 through 4. The acquisition of Rivertown Trading Company

marked Target Corporation's first entry into a major catalog business. Rivertown and

Target's e-commerce team have combined to make one business called target.direct. This

creation allows Target Corporation to strengthen its capabilities in the direct marketing

retail channel and Internet retailing.

The general merchandise industry has experienced significant growth of 15.8% annually in

the past five years due partly to the strong economy. The industry accounted for $346

billion dollars in 1998. Experts project that it will increase this year and next year by

19.6% and 18.8% respectively. The five-year projection for the industry shows an annual

increase of 18%. Selected information on the industry is given in Exhibit 5 and 6. Target

Corporation accounted for approximately 9.7% of the industry's sales in 1999. However,

its largest competitor, Wal-Mart, was responsible for about 47% of the sales. With the

industry growing at such a rapid pace, each corporation will have to continue to increase

sales