Company Overview Of Target Corporation

The Dayton Company opened the doors of the first Target Store in 1962 in Roseville, Minnesota, as the name had been chosen to differentiate the new discount retailer from the Dayton Company’s more upscale stores. The name had begun to flourish and by the year 2000, Dayton Hudson had officially changed its name to Target Corporation. By 2005 Target had become a major retailing powerhouse with $52.6 Billion in revenues from 1,397 stores in 47 different states, with analysts expecting capital expenditures would continue at a level of 6%-7% of revenues, which equates to about $3.5 billion in 2006. In contrast with Wal-Mart's focus on low prices, Target’s strategy was to consider the customer’s shopping experience. Target referred to its customers

One main concern an analyst would have is the role the real-estate manager plays in the capital budgeting process, as new store proposals presented the majority of capital project requests. The pre-CPR work requires a certain number of expenditures that would not be recoverable if the project were ultimately rejected by the CEC. More importantly were the “emotional sunk costs” for the real-estate managers who believed strongly in the merits of their proposals and felt significant disappointment if any project was not approved. An analyst looking at the structure of this would not approve due to the lack of assurance and efficiency. One critique that would need to be made would be to set a certain number of expenditures aside that could be recoverable for the pre-CPR work if the project were to fall through. Evidently, if the project is taking 12 to 14 months even before being sent to the CEC for approval, this could result in the loss of potentially millions of dollars depending on the project size if the project were to fall through. Target could limit the amount of sunk costs for the real-state managers if the management team could find a way to set aside a specific amount of capital expenditures that the real-estate team could use for research and development (R&D) for each project, similar to how sales are estimated by

In the case of the Whalen Court project, there are a few hidden premiums in terms of where it was placed strategically speaking, the demographic it intends to target, as well as the market it will penetrate. Despite Target already operating in 45 different stores, Whalen Court gives Target an opportunity to enter a major Metropolitain area, with the highest population among all the projects at 632,000. As mentioned previously, this population exposure can expand Target’s brand awareness, and help the company further expand in surrounding areas and continue to grow. One important piece of data that an analyst can build a case from, is the percentage of adults four years or more out of college, in which the area that Whalen Court is going to be placed has about 45%, in comparison to the average among the five projects of 28%. Simply thinking, an older demographic is the ideal target to generate the most revenue for a grocery and retail store like Target, as this is typically the age where people start to shop for themselves, live on their own, or start to raise and support their families. Another important fact an analyst may want to note is the demographic close to each of the project's locations. The case highlights 3-mile radius data, and the reader can see that Whalen Court has the highest 2005 population of 1,248, with its