By choosing the correct projects to participate in, Target Corporation can continue their growth and competitiveness in the retail Indus try. Executive Summary Target was first founded in 1 962, opening their first store in Roseville, Imines tot. The store was designed to differentiate themselves from the existing upscale store sees in the area. The company’s idea flourished and by 2005, Target became a major retailing pop rouses, recording revenues of over $52 billion from stores located in 47 different states.
One of the main reasons Target was able to become as successful as they are, is the idea of focusing o the shopping experience as a whole, and not just focusing on lower prices compared to thee r competitors. By embracing this idea, Target has been able to successfully attract their target d anemographic, a medaled, collateralized female, with children. In today’s market, Target faces 2 main competitors: Walter and Cost. Wall Mart operates their stores similar to how Target’s stores are operated, and their SST ores are generally in competing areas of another.
Walter focuses on driving their prices as low a s possible, creating a very small profit margin on their items, but makes a large profit du to their large 1 amount of sales. Cost is a warehouse retailer that charges a membership f e in order to receive their discounted prices. The company relies heavily on these fees, as they ma eke up 72. 8% of operating income. Cost attracts many of the same customers Target attract s, but the companies are generally not in the same locations.
Targets Capital Expenditure Committee is made up of top executives who me et monthly to review all capital project requests costing more than $100,000. This commit tee could approve any and all projects, unless the projects were worth more than $50 million an in this case, the project would need approval from the board of directors. If the project involve sees openings new location, a real estate manager, located in that specific geographic area, was r expansible for the proposal and presentation Of the proposal. The committee uses different fact Ores when analyzing the capital project requests.
The factors are: NP and AIR, the size and cost of the project, the effect this project has on other Target store’s sales, store sensitivities, variance e to prototype, customer demographics, and the impact it has on the Target brand. By care Ely analyzing each of these factors and locations, we were able to come up with a decision for EAI chi location. Analysis and Recommendations The first project we will discuss is the Gopher Place location. The proposal is f or $23 million to build a POP Target Store. This location has a very strong NP and IR R in terms to the expense of the project.
With the prototype NP achievable with sales of 5. 3% below R & P forecast, we would expect this store to be financially stable. The size of the pr Eject is reasonable, and with the strong NP and AIR the cost should be redeemed. The biggest factor against this location is the centralization of sales from preexisting Target stop rest. In this location, there are five Target stores already established and plans of two Inc miming Walter 2 Superstores. 19% of our sales are expected to come from existing Target stop rest in the area, not benefiting the corporation.
This location has a relatively small population, thou ugh they have been experiencing the largest population growth of the five projects. Only 12 % of the population fits our target demographic of adults with 4+ years of college education. The median salary is also on the higher end of the remaining projects and does not fit our target d anemographic. This location doesn’t bring any new brand awareness to the Target brand and is go inning into a very crowded area of competition. The Whalen Court project is by far the most expensive project, costing $1 19. Million to build a unique, one floor Target store. This project has a project NP of $25. 9 million and an AIR of 9. 8%. With the large amount of investment, the NP and AIR figures AR .NET necessarily that strong but are still positive and could see growth. This is by far the large SST size project, with the largest expense by far. The expense alone makes us worried about the pr Eject. There are currently 45 other stores in the area, but this store would be the only one in a n urban center off major metropolitan area.
This location would not have a major impact on Sal sees from other Target stores, but could take away customers from competitors that are cure .NET in the Metropolitan area. The population of 632,000 is by far the largest population and 45% of them fit our demographic of collateralized adults. This location also brings a nun queue branding and advertising advantage and the expense could be balanced against the brand wariness. The Barn is a proposal for a POP store costing $13 million and can reach its NP V with sales 18. 1% below the projected. The small investment allows for a large return run, even if sales fall below the projected.
There are no other Target stores in the area and the strong population of 3 151 ,OHO people fits our target median income. This project should have been passed already if it weren’t for a disagreement with the developer. Soldiers Square is a project for a Supermarket costing $23. 9 million. In order t o achieve the forecasted NP and AIR of $300,000 and 8. 1 % respectively, sales would en d to be at 45. 1% above the forecasted sales level. The area is largely populated with other rate leers and currently 12 Target stores, with plans of building another 12.
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