S. economy is down, Target profits are likely to go down in response.
The main strategic problem is low employee wages, which has altered public perceptions. The retail industry is very unstable and some of the competition Target faces ebbs and flows quickly. The main competitors Target faces are Wal-Mart, K-Mart and Sears. Most cities have other smaller stores and department stores, which all compete with Target for the same customers. Wal-Mart has more locations than Target, which makes Wal-Mart more accessible to customers. In addition, Wal-Mart has tapped into the foreign market places. This competitor is well-known for its low prices and discounted prices. The goods Wal-Mart offers is not of as high a quality as Target, but most of the consumers who patronize this store is looking for the money savings. The competitors Target faces are a constant threat to the profit margin of the organization.
Currently, Target stores tend to attract younger and more educated and affluent customers than Wal-Mart, among other competitors. The median Target shopper is 41 years old, the youngest of all major discount retailers that Target competes directly against. The median household income of Target's customer base is roughly $63,000 U.S.$. Roughly, 76% of Target customers are female, and more than 45% have children at home. Lastly, about 80% have attended college and 48% have completed college (Target, 2012).
A direct correlation between profit margins and service levels exist. Causes for low wages include the need to increase profit margins, to stay competitive, and to eliminate unions. Already, Target is beginning to get some unwanted attention from labor groups that have been struggling to reform Wal-Mart's workplace practices for nearly two decades. Entry-level hourly workers in Target stores earn roughly the same pay and have more difficulty qualifying for health care coverage than its peers at Wal-Mart. Both retailers oppose unions and have taken steps to prevent organizing efforts in stores. Moreover, both have outsourced jobs overseas to save costs (Wall Street Journal, 2012).
Target does not disclose details about its compensation and benefits, but labor groups and former and current employees of Target in the Twin Cities say the retailer sometimes pays less than Wal-Mart. Target pays between $6.25 an hour to $8 an hour for entry-level, hourly positions in its Twin Cities stores, according to a recent survey of local Target workers by the UFCW. Comparatively, this is in line with what Wal-Mart pays in this market, although some starting-level Wal-Mart workers can earn $9 to $10 an hour, the UFCW said.
Overall, the Minneapolis-based retailer sales grew 5.1% to $4.61 billion for the four weeks that ended Jan. 28, which was better than expected (Stych, 2012). Hence, Target could afford to increase its compensation and benefits for its employees. Three potential solutions include for the customers and/or employees:
Conduct a quarterly Employee Survey to obtain feedback for specific areas of improvement and obtain an average of 90% or above satisfaction rate based on four quarterly Associate Surveys conducted annually.
Conduct a quarterly Customer Survey to obtain feedback for areas of improvement and obtain an average of 90% or above satisfaction rate based on four quarterly Customer Surveys conducted annually.
Conduct monthly Employee & Customer Surveys to obtain feedback for areas of improvement.
It is prudent to conduct a quarterly Employee Survey to obtain feedback for specific areas of improvement, which is not as costly as monthly surveys. Employees are the background of any organization. Therefore, it is imperative to ensure its needs are met. Without employees, a business will not sustain without any customers. With feedback from the focus groups, Target must be willing to implement suggestions and changes, even if there are financial implications. Profit margins have increased beyond expectations (Associated Press, 2012). By increasing compensation packages, profit margins will decrease in the short-term. However, with happy employees, productivity and morale will have a positive effect for the employee and customer experience.
Establish employee-led focus groups to engage and solicit genuine feedback. Annually, implement two viable suggestions from focus groups. Additionally, Target should host an annual employee appreciation event. To implement this action plan will require key managers to dedicate time to the process, which is lost opportunity cost in other arenas, such as sales. This may be met with some resistance from stakeholders, such as the investors. However, investing in the employees has indirect costs that yield future dividends.
Management needs to have a full understanding of the organization's strengths, weaknesses, opportunities, threats, and trends to make the necessary decisions to maintain the good reputation it has achieved, as well as stay in competition in the leading discount retailing industry. Throughout the years, the Target Corporation has shown to be a stable and dependable company. Each day, the company's management face many challenges, resulting from customers, economy, competitors, and from its own decisions. Without the foresight and good decision-making, Target would not thrive as it is today. Insomuch, Target has proven that its management team is doing well on planning, organizing, and implementing strategic plans to keep up with the changing times in the retail industry. However, a shift in employee-focus is warranted for sustainability.
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Stych, E. (2012, February 2). Target sales grow twice as fast as expected. Retrieved from http://www.bizjournals.com/twincities/news/2012/02/02/target-january-sales-strong.html
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Associated Press. (2012, February 02). Target's key revenue metric rises 4.3 pct. Retrieved from http://www.theolympian.com/2012/02/02/1973893/targets-key-revenue-metric-rises.html