Target Stores' Differentiation Strategies
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Case Details:
Case Code : BSTR164
Case Length : 15 Pages
Period : 1962 - 2005
Organization : Target Stores
Pub Date : 2005
Teaching Note : Available
Countries : USA
Industry : Retailing
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Background Note Contd...
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In the 1950s, the discount store retail format was taking shape and the pioneers
of this format were just establishing themselves. After the success of its
department stores, Dayton began exploring the possibilities of starting its own
chain of discount stores.
John Giesse (Giesse), who was a vice-president at Dayton, was extremely
interested in the discount retail format and was even contemplating leaving
Dayton to open his own discount stores. Executives at Dayton, who knew about
Geisse's ambitions, pointed out to him that he would need capital for the
project.
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Dayton had the capital, they said, and asked Geisse to submit a report on his
observations and ideas for a chain of discount stores. Geisse, who studied
the existing discount stores, was of the opinion that there was a place for
an upscale discount store. Dayton decided to launch a discount store chain
as a subsidiary and named it Target.
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In 1962, Dayton launched the first Target in
Roseville, Minnesota, and three more in Crystal, St. Louis Park, and
Duluth, Minnesota, the same year.
The first four stores made about $11 million in sales but did not make
any profits in 1962. Slowly, sales began increasing and in 1965, sales
were worth about $39 million. In the same year, another Target was
opened in Minneapolis. In 1966, Target decided it was time to open
stores outside Minneapolis. It opened two stores in Denver. In 1967,
Target's parent company Dayton, went public. The same year, two stores
were opened in Minnesota, bringing the total number of stores to nine,
and by 1968, Target opened two more stores in St. Louis. |
A major change occurred at Dayton in 1969 - Dayton merged with the J. L. Hudson Company to form the Dayton Hudson Corporation (DHC). The J. L. Hudson Company operated a chain of department stores called Hudson's in Detroit. Also in 1969, Target decided to open stores without supermarkets. Even though Target believed that providing discount groceries was essential to providing a one-stop shopping experience to the customer, it decided to open its new stores with only general merchandise.
By the end of the 1960s, Target had opened stores in Texas and Oklahoma, and a
Northern Distribution Center in Fridley, Minnesota, which had a computerized
distribution system. In 1970, it expanded into Wisconsin and the next year into
Colorado and Iowa. For its expansion in Colorado, Iowa, and Oklahoma, it
acquired 16 Arlans stores and converted them into Target Stores. In addition, it
opened six new stores in these states. In 1972, Target started testing
electronic point-of-sale terminals with two Minneapolis stores and four stores
in Dallas the next year. However, in 1972, the operating income and profits of
the Target Stores started declining. Target's top executives had limited
experience in the discount retail business and they found the rapid expansion to
46 stores by 1973 difficult to manage...
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