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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"What Target did was figure out how to eke out a position on that [retail] landscape that was not about solely playing the cost game, they went a very different direction from Wal-Mart."¹

- Nancy Koehn, a Harvard Business School professor and retail historian.

"Clearly there is a certain drive to be creative. They see ways of doing business that are based on taste and ideas, not just price. Doing that is even more difficult today than in the past because of all of the pressure to perform on both a long and short-term basis by Wall Street. That Target has been able to proceed the way it has speaks to the company's creativity and vision."²

- Marvin Traub, former chairman and CEO, Bloomingdale's³, commenting on Target.

"Branding is one of the things they (Target) do a good job of, and it represents where they want to be in the market"⁴

- Chris Merritt, principal at Kurt Salmon Associates, commenting on the branding strategies of Target.

Target The Upscale Discounter

In March 2005, Target Corporation (Target) had 1,330 retail stores in 47 states of the United States. Even though it only had a fifth of the sales and profits of Wal-Mart⁵, it had a loyal customer base that was looking for a trendy, yet, affordable range of merchandise. Target's customers, whom it referred to as 'Guests', were younger and more affluent than that of its rival Wal-Mart.

Target's positioning was based on more than just pricing; it encompassed quality, style, and trend. This was the differentiation strategy that was consistently applied since the launch of the chain.

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Target positioned itself as an upscale discount chain. It differentiated itself from its competitors by offering trendy merchandise at affordable prices. Target used attractive marketing promotions to communicate this message to customers. By 2002, the company became the second largest discount retailer in US. The differentiation followed by the company and its effective communication programs helped it to continuously increase its revenue and net income (Refer to Exhibit I).

Background Note

The first Target Store was opened by the Dayton Company in 1962, in Roseville, a suburb of the twin cities Minneapolis-St. Paul, Minnesota. The Dayton Company was started by George Dayton who opened his first store called Goodfellows in Minneapolis in 1902. In 1903, he changed the corporate name to The Dayton Dry Goods Company and in 1910 he changed it to The Dayton Company (Dayton). By the 1940s, it was a thriving family business that operated department stores called Dayton's in the upper Midwest region of the U.S. In 1956, Dayton opened Southdale, the world's first fully enclosed two-level shopping center, in Minneapolis.

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1] Schlosser, Julie, "How Target Does It,"www.fortune.com, October 18, 2004.

2] Arlen, Jeffrey, "Why Is Target So Cool?", www.findarticles.com, April 2, 2001.

3] Operated by Federated Department Stores, Inc., Bloomingdales is a chain of 36 retail stores in US with sales of $2 billion in 2004.

4] "Mass Merchants: Aggressive and innovative,"www.internetretailer.com, December 2002.

5] Net sales and net income for Wal-Mart for 2004 was $285200 million and $10300 million respectively.