Research Analysis for Business

Research Analysis for Business

ECO/561

Introduction

The purpose of this assignment is to create an analysis for a publicly traded company that can show the recommendation of the future and current success in its market. The company that I have chosen is the Target. Target Corporation (TGT) is a retail company known to many Americans for its low prices and variety of brands to choose from. The organization has a brand name that is recognized around the world as well. Target Corporation is the second-largest discount store retailer in the United States, behind Walmart, and a component of the S&P 500 Index. A research analysis for the Target Corporation has been conducted by gathering information to make the industry aware of how the guest will react to your current or potential products and services of the organization. This report will serve several purposes including identifying Target’s market structure, explain trends in current macroeconomic indicators, evaluate trends in demand, explain how price elasticity of demand can be determined, apply concepts of fixed and variable costs, and to make recommendations for sustainability based on those findings.

Target Corporation Market Analysis

Target Corporation is the second largest American retailer and mass merchandiser. It offers both everyday essentials and fashionable merchandise at discount prices. The company’s market share in relation to its competition is 2.09%. The market structure in which Target operates is an oligopoly. “Oligopolies in the retail sector result in increased profits for companies that are part of the market structure because they can raise the prices on their products beyond fair market values” (Hamilton, 2018). Target faces major competition from other discount retailers such as Costco, Walmart, Dollar General, Family Dollar and even Amazon. These retailers are able to offer the same goods as Target at similarly low prices. Walmart is Target’s largest competitor with an even greater global presence and greater market share. A new competitor wishing to enter this market may consider doing so via a cost leadership strategy, it would not necessarily be advantageous in this instance.

Trends in Current Macroeconomic Indicators

Target continues to maintain low competitive prices of all available products and carefully is very selective in the introduction of new brands and products. Target‘s 2018 performance has been above its guidance and market expectations so far. The company has been looking to overhaul its business model with the expansion of small-format stores, in addition to revamping its existing stores and improving supply chain management, since the beginning of 2017. In the first half of fiscal 2018, the retailer’s revenue increased 5% year-over-year (y-o-y) to $34.6 billion, primarily due to a strong 4.8% increase in comparable sales. Among the components of the reported comparable sales in this period, traffic grew a solid 5% y-o-y and the average transaction amount declined 0.3% y-o-y. In addition, the company’s digital comparable sales grew 1.3% y-o-y, while store comparable sales grew 3.4% y-o-y. The fact that the company has been able to grow its store comparable sales, despite significant competitive pressure, suggests that its initiatives are resonating well with customers. In terms of the bottom line, the company’s GAAP EPS from continuing operations and adjusted EPS grew almost 15% y-o-y in the fiscal first half. Target benefited from strength in the home, apparel, toys, baby and electronics categories. Notably, Target’s digital sales grew 41% y-o-y in the second quarter after jumping 32% y-o-y in Q2 last year.

Accordingly, Target’s expected revenue is to grow by nearly $5 billion (3% CAGR) through 2019. Target Corp. is overhauling its pricing strategies as it tries to win price wars with Wal-Mart stores Inc. and Amazon.com. Introducing their year-round price match offering by online retail giants.

Pricing Strategies

Variety of deals = BOGO, 2 for one, buy one get one free

Offering gift cards when buying multiple items

Service Components

Credit cards

Gift registry

Mobile app = latest deals, discounts. Coupons etc.

Savings programs

Distribution Strategy

Brick and mortar stores

Online

catalog

Price Elasticity

Price elasticity is an economic measure of the change in the quantity demanded or purchased of a product in relation to its price change. Price elasticity is used by economists to understand how supply or demand changes given changes in price to understand the workings of the real economy. For instance, some goods are very inelastic, that is, their prices do not change very much given changes in supply or demand. Because of the abundance of competition that exists for Target Corporation, it is imperative for the organization to price its products, especially the ones sold by themselves and the competition, in a range that conveys the savings to the consumer, but allows the company be profitable as well.

Fixed and Variable Cost

The fixed and variable costs that an organization such as Target incurs greatly affect how competitive the company is able to remain in its market. Fixed costs for needed materials and resources are expected, so the organization is able to absorb any perceived financial damage because those costs have already been accounted for. Variable costs like raw materials and labor are taken into account as well, though the fluctuation of those cost can affect how the company is able to conduct business and remain competitive.

Conclusion

For a number of organizations operating in the discount retail market presents the opportunity to offer customers various goods at a low rate keeping in line with its competitor. Target must continue to expand in international markets, diversified the grocery department and engage in more exclusive design partnerships. They are doing a great job in implementation new brands in their market but must increase in the advertising of these private brands to have a bigger impact in sales. Target Corp. continues to strive innovation to keep up with updated market trends. The organizations focus is to keep a high-volume sale stability against the competition and to continue so they take business seriously and consistently find ways to benefit sales and growth. Target is a great place to work for who cares very much on their employee’s well-being and markets growth.

I believe more marketing and promotion toward Target owned brands is one way of increasing demand for those products and less money being spent with outside firms to acquire those same products. Target’s position as a nationally known retailer will allow the organization to accommodate this strategy. There is a steady increase in demand for discount retailers. This will allow Target to continue to expand its global efforts in the future.