Case 19: Target
This case provides insight into how capital budgeting decisions are made and the factors that influence the decision making process of large corporations. Specifically, the case centers on the capital expenditure meeting for the Target Corporation, which is one of the top ten retailers in the United States. All corporations have some version of this meeting. The goal of the meeting is to determine what capital expenditure projects the company will undertake in the future to promote growth. Below is our analysis of the Target Corporation’s top five capital budgeting requests (CPR) up for debate. We will first compare Target’s business model with its two top competitors, Wal-Mart and Costco, then we will analyze Target’s capital budgeting process, explain the importance of dashboards to managers, explain how we decided which CPRs to accept, discuss the different hurdle rates Target uses and discuss whether financing CPRs through debt or equity is a good decision for Target in the future.
Business Model Comparison
Target’s main competitors are Wal-Mart and Costco. While other retail stores such as Sears, JCPenney and Meijer’s create competition, Wal-Mart and Costco have similarities with Target’s business strategy and thus investment analyst tend to compare these three firms regularly. Target’s mission is “to make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences by consistently fulfilling our Expect More. Pay Less.® brand promise” (Target.com). The store’s business model centers on appealing to style-conscious consumers by offering unique assortments of home and apparel items, while competitively pricing on items unique to both Wal-Mart and Target. They also call all customers guests to make the shopping experience more comfortable. Target prefers not to fund any CPRs through debt or equity. Due to massive advertising campaigns the round
Business Model Comparison
Target’s main competitors are Wal-Mart and Costco. While other retail stores such as Sears, JCPenney and Meijer’s create competition, Wal-Mart and Costco have similarities with Target’s business strategy and thus investment analyst tend to compare these three firms regularly. Target’s mission is “to make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences by consistently fulfilling our Expect More. Pay Less.® brand promise” (Target.com). The store’s business model centers on appealing to style-conscious consumers by offering unique assortments of home and apparel items, while competitively pricing on items unique to both Wal-Mart and Target. They also call all customers guests to make the shopping experience more comfortable. Target prefers not to fund any CPRs through debt or equity. Due to massive advertising campaigns the round
Cited: 1. Mission and Values. Target Brands, Inc., 2013. Web. 29 June 2013. . 2. Why Become a Member. Costco Wholesale Corporation, 2013. Web. 29 June 2013. .