Organizational Strategy

Target Corp. Fights For New Life

Danny Howard

Target

The booming of all-everything, online retailers have had a serious impact on one-stop-shops such as Target and Walmart.  The stealing of over 40 million credit and debit card numbers from Target during the 2013 holidays did not help the case for customers to keep heading to the stores instead of purchasing many products on websites such as Amazon.com.  According to a report from Paul Ziobro from the Wall Street Journal, Target is progressively trying to counter the strengths of both online retailers and “shoppers (that) are defecting to stores that are easier to navigate” (WSJ Ziobro).

Target’s rookie CEO, Brian Cornell, is focusing his attention on signature categories that include baby products, toys, “design and style” (or fashion), furniture, and wellness products such as organic food and natural cleaning products.   The ultimate question is will this be the answer to a company who has had a fall in customer traffic for 7 straight quarters?  Target’s adjusted earnings per share were at $0.78 after the second quarter in 2014, a decrease of 20.6 percent from $0.98 per share in 2013.  Simply put, the company needs change, but how much is too much?

In the mid 2000’s the previous CEO made the initiative to increase customer traffic by focusing on groceries.  It worked as everyday household goods and grocery sales increased 14% from five years previously.  It helped counter the recession but now former executives and analysts think Target has lost part of its appeal with fewer unique items.  They are bringing in high-end baby products from Jessica Alba’s Honest Co. to counter these thoughts (WSJ Ziobro).  Target almost seems to be re-branding.

Mr. Cornell only arrived a month ago and it seems that one too many initiatives have been implemented in a short period of time.  Do Target executives, especially those outside of the CEO, have a clear vision of Target’s direction or is it muddied as they look back on previous successful models that focused on major areas such as furniture or groceries?  They want to compete with smaller retailers with new, smaller stores instead of a one-stop shop but they seem to be in a paradox: Target is increasing their inventory in certain departments mentioned previously, while maintaining the size of all their other departments, but also creating smaller stores.  It seems plausible that one department could unintentionally be hindered by the expansion of another, for instance focus on trending clothing instead of trending groceries such as specific organic brands.

The company is putting more power into suppliers’ hands, giving up some control as suppliers choose the products, and relying on them to be unique and ahead of other retailers and stores.  Even Mr. Cornell does not know the future of the grocery department which proved to be a successful, potentially company saving addition, in the past stating: “over the next few months, we’re going to decide what we stand for in the food space” (WSJ Ziobro).  Target is clearly a proven, well-run company and is even known for its management training in particular, but they may be running themselves into trouble if they create too much structural change at once.


Sources

Ziobro, Paul. “Target’s New CEO Narrows The Merchandise Bull’s-Eye.”The Wall Street Journal. Dow Jones & Company, Web. 10 Sept. 2014.

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