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STR 581 Week 4 Strategic Choices and Evaluation

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STR 581 Week 4 Strategic Choices and Evaluation
Strategic Choices and Evaluation
STR/581
Strategic Choices and Evaluation
Target Stores Strategic Choice and Evaluation
The first Target Store was opened in 1962 by the Dayton Company. Though
there were other discount chains in the US at that point of time, many of them
do not exist today. Target was able to adapt itself to the changing environment
and by 2002; it was the second largest discount retailer in the US (Target.com,
2012)
http://www.icmrindia.org/casestudies/catalogue/Business
%20Strategy/BSTR164.htm]
In June 2002, Target Corporation (Target) had 1,330 retail stores in 47 states of
the United States. Even though it only had a fifth of the sales and profits of Wal-
Mart, it had a loyal customer base that was looking for a trendy, yet, affordable
range of merchandise (Hays, 2002 pg. 2). Target's customers, whom it referred
to as 'Guests', were younger and more affluent than that of its rival Wal-Mart
| |
An early strategic choice to build a brand around the Target name fostered the
company's steady growth. From the very beginning, George Dayton's strategy
was to position Target as an upscale discount chain at which the prices would be
just above the lowest prices. To achieve this upscale image, it offered trendy and
stylish goods in an environment that was bright and attractive, unlike other
discount stores of the time (HBS Working Knowledge, 2004 para 2). Once a
generic strategy is selected Target will also need to consider how to implement
its grand strategy to ensure it correlates with its long term goals. In the
following paragraphs it describes how Target has identified its best value, and

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how it has selected a strategy to ensure the company can achieve its long term
goals.
Identify the Best Value Discipline
Successful companies anchor on to one of the three value disciplines to pursue;
operational excellence, product leadership, and customer intimacy (Horwath,
2006). Operational excellence focuses on creating the best total cost for
customers, offering customers competitive pricing and delivering this value in
an efficient manner (Horwath, 2006). Customer intimacy includes a strategy
that accommodates the customer tailored requests to ensure individual customer
satisfaction and product leadership strives to provide a continuous stream of
state of the art products and services (Pearce & Robinson, 2011).
Target's positioning was based on more than just pricing; it encompassed
quality, style, and trend. This was the differentiation strategy that was
consistently applied since the launch of the chain. To achieve this upscale
image, it offered trendy and stylish goods in an environment that was bright and
attractive, unlike other discount stores of the time.
Target’s strategy incorporates providing the best value for customers to build
consumer loyalty and product differentiation. “In retailing, the brand is the full
experience plus value for money. Great advertising might get shoppers into the
store once but only once if the experience and value for money do not meet
expectations” (HBS Working Knowledge, 2004 para 3).
Target’s strategy gravitates toward leading the industry in price, merchandising
and convenience by pursuing a focus on lean and efficient operations (Pearce &
Robinson, 2011).
Operational excellence is the best value discipline for Target because they are
working to minimize costs through reduced overhead, eliminating intermediate
production steps, reducing transaction costs, and optimizing business processes
across functional and organizational boundaries (Pearce & Robinson, 2011).
Operational excellence is the driving force behind Target’s strategy to continue
focusing on decreasing consumer costs, increasing customer value, and
simplifying overall company operational costs.
Identification of a generic strategy
Generic strategy is implementing a long term or grand strategy that is based on
a core idea about how the firm can best compete in the marketplace. There are
three generic strategies: striving for overall low-cost leadership in the industry;

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striving to create and market unique products for varied customer groups
through differentiation; striving to have special appeal to one or more groups of
consumer or industrial buyers, focusing on their cost or differentiation concerns.
(Pearce & Robinson, 2011).
In evaluating alternatives, Target will incorporate the four strategies to
encourage growth. First, Target recently announced that it will revamp its
growth strategy of increasing store counts and acquisitions. “The company in
July 2011 issued corporate bonds worth $1.0 billion with a maturity period of
three years (Seeking Alpha, 2011).
Secondly, as part of the generic strategy, Target will create unique products and
services. With its successful merchandising strategy this will help Target to
stand out from its competitors.
“Target's positioning as an upscale discount chain was reflected in its
merchandising strategy as well. Target developed an image and displayed
products that matched its customers’ lifestyles and created enhanced
merchandise displays. It offered a mix of private labels and national brands in
creative and innovative layouts and displays” (ICMR, 2005).
Thirdly, as part of the generic strategy, through marketing and promotion Target
acknowledges the need to market products through differentiation. It planned do
so through upscale discounting, a concept associating style, quality of products,
and price competitiveness. This "cheap-chic" strategy enabled Target to become
a major brand and consumer-shopping destination, articulated around two main
interrelated branding activities: designer partnerships and clever, creative
advertising.
It consistently used its famous Bulls eye logo and tag line, 'Expect more, Pay
less” in its marketing and promotions. According to an article in Advertising
Age in 2003, its logo was recognized by 96% of Americans (ICMR, 2005). The
"bull's-eye world" spots, displaying a funky retro pop culture place where happy
blondes serve red bull's eye-shaped Jell-O molds, was awarded the Marketer of
the Year award by Advertising Age nineteen years after Wal-Mart won (HBS
Working Knowledge, 2004 para 10).
The final part to the generic strategy which Target is eyeing is the opening of
stores in international markets, such as Canada and Latin America. The
company plans to open 100 to 150 stores in Canada by 2013 and 2014 as a
result of acquisition of leasehold interest in Zellers' stores. The opening of
stores outside the United States will definitely boost the company's top and

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