SWOT Analysis of Target Corporation

Assignment Overview

For the Module 2 Case, we will be formulating a SWOT analysis of Target. 

Case Assignment

Go to IBISWorld in the Trident Online Library. Enter the term “Department Stores in the U.S.” After you have familiarized yourself with the IBISWorld contents (be sure that you review all pages on the retail industry), perform some additional and more current research in the library on Target Corporation (use trade journals, newspaper articles, and magazines). Review the company’s most recent 10-K report as well and provide the following in your 5-page paper.  

  1. Perform an assessment of Target’s external environment, identifying key opportunities and threats, by doing the following: 
    1. Complete an analysis of Target’s external environment using Porter’s Five Forces. 
  2. Using the Function Approach to Internal Analysis, identify key strengths and weaknesses at Target by performing an in-depth internal analysis of the company. Use what you have learned in previous courses to perform your analysis. At a minimum, evaluate the following functional areas: 
  • Marketing 
  • Human Resources 
  • Operations Management 
  • Technology 
  • Logistics 
  1. Accounting/Finance: Include your analysis of at least three key financial ratios. If you need a resource, see:Rist, M. & Pizzica, A. J., (2015). Financial Ratios for Executives: How to Assess Company Strength, Fix Problems, and Make Better Decisions. Chapter 1: Ratios Overview. Available in the Trident Online Library. Rist, M. & Pizzica, A. J., (2015). Financial Ratios for Executives: How to Assess Company Strength, Fix Problems, and Make Better Decisions. Chapter 2: Ratios Description. Available in the Trident Online Library.
  2. After you have completed your Internal and External analyses, prepare a table in which you clearly show the most important strengths and weaknesses of the company and the most salient opportunities and threats currently facing Target. 
  3. Conclude your analysis by answering the following: 
    1. Does Target have more strengths or weaknesses? Explain. 
    2. Does Target have more opportunities or threats? Explain. 
    3. Does Target have any sustainable competitive advantages? If so, what are they?

SAMPLE SOLUTION FOR THE ASSIGNMENT

SWOT Analysis of Target

Introduction

In the constantly changing retail industry landscape, organizations are impelled to navigate a dynamic environment replete with opportunities to seize and threats to overcome. One of these organizations is Target Corporation, a general merchandise retailer operating discount department stores and hypermarkets. This paper delves into a comprehensive assessment of Target Corporation, examining its external environment using Porter’s Five Forces and conducting a detailed internal analysis across core functional areas. By scrutinizing these aspects, the paper uncovers Target’s intrinsic strengths and weaknesses and discerns the external opportunities and threats it faces.  

Target’s External Environment

Target’s external environment is assessed using Porter’s Five Forces framework, which reveals the competitive dynamics surrounding the corporation. Each force – the threat of new entrants, bargaining power of suppliers and buyers, threat of substitutes, and industry rivalry – is examined to give a picture of Target’s positioning within the retail sector.

Porter’s Five Forces for Target Corporation

  1. Threat of New Entrants:
    • Moderate to High: Target operations in the retail industry with relatively low entry barriers, allowing new competitors to enter with ease. Nonetheless, economies of scale, established brands, and customer loyalty create some barriers. 
  2. Bargaining Power of Suppliers:
    • Moderate: The Company’s large scale gives room for negotiation leverage, but some suppliers may have power due to limited alternatives or unique products.
  3. Bargaining Power of Buyers:
    • Moderate: In the retail sector, buyers have a moderate level of power due to their ability to switch between retailers. However, Target’s customer experience and strong brand can alleviate this.
  4. The Threat of Substitute Products:
    • Moderate: There are various substitutes in the retail industry, such as e-commerce platforms and other brick-and-mortar stores. However, Target’s product diversity and customer experience can reduce the impact of substitutes.
  5. Industry Rivalry:
    • High: The retail industry is highly competitive, with numerous competitors competing for market share. Factors such as marketing strategies, differentiation efforts, and price competition escalate the intense rivalry.

Key Strengths and Weaknesses at Target

  1. Marketing:

Strengths:

  • Brand equity: Target Company has set up a robust brand identity associated with quality and affordability. This enables it to attract a diverse client base.
  • Effective advertising: The Company’s innovative marketing promotions resonate well with its target audience. This enhances brand recognition.
  • Customer loyalty programs: Effective loyalty programs such as Circle rewards and Target REDcard discounts encourage repeat buying and enrich customer loyalty.

Weaknesses:

  • Limited global presence: Target mainly operates within the USA. This restricts its exposure to global markets and growth opportunities.
  • E-commerce competition: Stiff competition from e-retailers, such as Amazon, affects Target’s capability to maintain market share in the digital space.
  1. Human Resources:

Strengths:

  • Employee development: Target significantly invests in employee training, nurturing a skilled workforce and improving overall performance.
  • Diversity and inclusion: Target capitalizes on diversity and inclusion, creating an inclusive work environment that attracts diverse talent.
  • Employee benefits: Competitive compensation packages and employee benefits contribute to higher job satisfaction and retention rates.

Weaknesses:

  • Labor relations: Past issues related to labor relations and employee strikes have impacted Target’s reputation and operational stability.
  • High employee turnover: The retail industry is known for high turnover rates, which can affect operational consistency and customer service quality.
  1. Operations Management:

Strengths:

  • Efficient supply chain: Target’s well-managed supply chain ensures timely product availability and reduces inventory holding costs.
  • Store layout and design: The Company’s store layout and design create an attractive shopping experience, encouraging longer customer visits.
  • Private label brands: Target’s emphasis on private label brands allows for better control over pricing and quality.

Weaknesses:

  • Inventory management challenges: Overstocking or understocking can lead to operational inefficiencies and lost sales opportunities.
  • Seasonal fluctuations: Sales volatility during peak shopping seasons may strain operations and supply chain logistics.
  1. Technology:

Strengths:

  • E-commerce platform: Target’s robust online platform facilitates convenient shopping experiences and accommodates the growing demand for e-commerce.
  • Data analytics: Utilization of data analytics enhances customer insights, enabling personalized marketing and product recommendations.

Weaknesses:

  • Cybersecurity risks: As with any technology-driven company, Target faces potential cybersecurity threats and data breaches that could damage its reputation and customer trust.
  1. Logistics:

Strengths:

  • Efficient distribution network: Target’s distribution centres are strategically located, enabling efficient product distribution and reduced lead times.
  • In-Store pickup options: Convenient in-store pickup services provide customers with flexibility and enhance the omnichannel shopping experience.

Weaknesses:

  • Last-Mile delivery challenges: Ensuring timely and accurate last-mile deliveries can be challenging, particularly during peak demand periods.

Key Financial Ratios

Return on Equity (ROE): ROE is a measure of financial performance determined by dividing net income by shareholders’ equity.

ROE = Net Income/ Average Shareholder’s Equity

Target’s ROE = $2.72B / $11.61B

  = 23.4% 

Target’s ROE has been comparatively stable and competitive within the retail industry.  

Current Ratio:  The current ratio or working capital ratio assesses a company’s ability to cover short-term liabilities with its short-term assets. It indicates the company’s liquidity and short-term solvency.  

Current Ratio = Current Assets / Current Liabilities

                                        Target’s Current Ratio = $16.10B/ $19.33B  

                                                                                =0.83%

The current ratio shows Target has the ability to pay off short-term debts.

Gross Profit Margin: Gross profit margin measures the percentage of revenue that exceeds the cost of goods sold (COGS). It is the profit after subtracting the cost of goods sold (COGS).

                                        Gross Profit Margin = (Net Sales – COGS)/Net Sales

                                    Target’s Gross Profit Margin = ($24.773B – $17.798B)/$24.773B

                                                                                                 = 28.2%

Target Corporation turns its sales into a profit. It makes approximately 28.2% profit after accounting for the direct costs it incurs doing business.

Target’s SWOT

STRENGTHS WEAKNESSES
  • Effective advertising and marketing campaigns.
  • Efficient supply chain and well-managed distribution network.
  • Embracing technology for e-commerce and data analytics.
  • Robust customer loyalty programs (Target REDcard, Circle rewards).
  • A skilled and diverse workforce with an emphasis on employee development.
  • Strong brand recognition and customer loyalty.

 

  • High employee turnover in the retail industry.
  •  Inventory management challenges during peak seasons.
  • Limited international presence compared to some competitors.
  • Past labor relations issues impacting reputation.
  • Vulnerability to e-commerce competition and online retail giants.

 

OPPORTUNITIES THREATS
  • Embracing sustainability and eco-friendly initiatives.
  • Expansion into untapped international markets.
  • Further development of private label brands for better control over pricing and quality.
  •  Investing in technology to enhance customer experience and operational efficiency.
  • Leveraging online platforms for increased e-commerce growth.

 

  • Economic downturns affecting consumer spending.
  • Intense competition from both traditional and online retailers.
  • Potential cybersecurity threats and data breaches.
  • Rapidly changing consumer preferences and trends.
  • Supply chain disruptions and logistics challenges.

 

Conclusion

Target Corporation exhibits a balance of strengths and weaknesses, emphasising greatly on the strengths that enable it to compete effectively in the retail industry. Though opportunities beckon, the corporation should also address potential threats to secure its market position. Target’s sustainable competitive advantages lie in its strong brand identity, efficient supply chain, customer-centric approach, and innovative marketing strategies. The company’s ability to leverage these advantages will play a pivotal role in its ongoing success and resilience in the dynamic retail landscape.

Recommended readings

  • Isabelle, D., Horak, K., McKinnon, S., & Palumbo, C. (2020). Is Porter’s Five Forces Framework Still Relevant? A study of the capital/labour intensity continuum via mining and IT industries. Technology Innovation Management Review10(6).
  • Rice, J. F. (2022). Adaptation OF PORTER’S FIVE FORCES MODEL TO RISK Management. Defense AR Journal29(2), 126-139.
  • Ariesa, Y., Tommy, T., Utami, J., Maharidha, I., Siahaan, N. C., & Nainggolan, N. B. (2020). The effect of current ratio (CR), firm size (FS), return on equity (ROE), and earning per share (EPS) on the stock prices of manufacturing companies listed in Indonesia stock exchange in the 2014-2018 period. Budapest International Research and Critics Institute (BIRCI-Journal): Humanities and Social Sciences3(4), 2759-2773.
  • Mahdi, M., & Khaddafi, M. (2020). The influence of gross profit margin, operating profit margin and net profit margin on the stock price of consumer good industry in the Indonesia stock exchange on 2012-2014. International Journal of Business, Economics, and Social Development1(3), 153-163.