The first issue is the top-down management style at Target, in which top-level management plays a vital role in the company’s operation, the company’s top 600 positions are now directly chosen by its CEO. As a result, the retirement of its CEO – Ulrich, who has led the corporation very well during his term of business, will leave Target and its new CEO with a lot of issues especially in the current gloomy economic situation.
Secondly, the fierce price competition from Wal-mart left Target no choice but find its own style to survive and to keep its market shares. While Wal-mart was and is now very successful with its everyday low-price strategy, Target finds that it cannot operate that way nor run a “bifurcated strategy” (one focus on low-price and one is its traditional strategy). Instead, Target decided to pay more attention to innovation, design, and quality, which was then Target’s motto “Expect more, pay less”, and it is exactly what customers expect when they come to Target.
Unique–designed products has become an advantage and has created Target’s brand, however, the company decided to open its SuperTarget which offers more consumable items such like food, and toilet paper in order to attract customers do their basic shopping at the stores. It would be a wrong choice of Target as it cannot compete with Wal – mart in term of food; however, Target persevered, hoping that this would even out economic cycles.
Target invests a large amount of money in marketing (from public relation like donation and sponsor activities, to advertising), and R&D activities. However, it is said to have had inconsistent merchandising, which even does not match the marketing. And despite all of Target’s efforts to offer its customers the lowest prices possible, buyers still think that Wal-mart is the cheapest. Furthermore, many of the firm’s unique products, which are considered Target’s advantages, are becoming familiar. All of these contribute to the lost of its market share to Wal-mart. In response, Target is making changes to focus more on prices, mainly in food and commodities. It also lowered the expected growth for 2008 to 2% to 3% per month. It goes against the emphasis’s of Target on design and quality, however, in the current weak economy, when people consider every dollar pay out and look for bargains, it is a reasonable decision.
Another problem of Target is its credit card business, especially in this hard time when people fail to pay for their loans. To reduce its exposure to credit, Target has negotiated to sell half of its credit card receivables which were about $4 billion.
