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Target Corporation Ackman versus the Board Case Solution

Solution Id Length Case Author Case Publisher
2739 1394 Words (6 Pages) Krishna G. Palepu, Suraj Srinivasan, James Weber Harvard Business School : 109010
This solution includes: A Word File A Word File

Target is one of the United States leading retailers was established in the year 1962. Target Corporation Ackman versus the Board is the action of swift amendments proposed after 15 years of an incredible performance by the Target. Due to Target's unfortunate performance through an economic recession, an activist shareholder commenced a proxy conflict. Target, during its initial years, gave a tough competition to the America’s largest retailer, Wal-Mart, by using various strategies, one of the most dominant ones being its upscale discount shopping experience which gave Target Corporation a mammoth advantage in times of good economic growth of the country. But because of the 2008–2009 financial crisis, many individuals began spending at Wal-mart instead of Target. To overcome these challenges, one of the leading shareholders at Target began a proxy war in lieu of getting five of his director nominees elected to the board. He proposed three major amendments: 1. Selling Target’s credit cards, 2. Increasing Target’s buyback program and, lastly, selling Target’s real estate holdings. Even though Target prevailed in the proxy war, there were still doubts about whether it had a plan that would be effective in both good and bad times.

Following questions are answered in this case study solution:

  1. How does Target's business model differ from that of Walmart?

  2. How is the business story reflected in the financial story?

  3. Do You Think Ackman’s Demands for Changes at Target Are Justified?

  4. Based on your reading of the case, lecture notes, and the other readings posted on the topic of corporate governance, do you think hedge-fund activists are short-termists?

Case Study Questions Answers

1. How does Target's business model differ from that of Walmart?

According to the findings in the case study, the comparative analysis for Target and Wal-Mart in 2009 shows that with nearly $64 billion in total sales, Target was the second-largest retail business in the United States. This was so because the company’s focus was more reliant on smaller stores, and there was an emphasis on the upscale approach; and this was one of the differentiating factors for Target. Building on its “expect more, pay less” motto, Target’s upscale offerings consisted of a collaboration between higher quality, fashion or designer, which were a rarity to find at other stores. These product offerings were more dominant in, home furnishing, kitchenware, and apparel. This was derived from the apprehension that not every consumer would be willing to pay more for a designer build, hence these better-looking pieces were an attraction for them. What gave Target a cutting edge over its biggest competitor was the introduction of the credit card in 1995, and labeled itself as the first major discount store to have its own store card. This strategy not only increased sales, substantially, but also gave customers a wide-ranging options for the mode of payment preferred by them.

With global sales of more than $400 billion, Wal-Mart was the biggest retailer in the world. The business model for Walmart was divided into three segments: Wal-Mart Supercenters, Walmart discount stores and Walmart neighborhood markets. The main objective of Wal-Mart was to provide the cheapest pricing attainable every day. Its tagline is "Save Money. With the money they saved at Walmart, shoppers could "live better," according to the slogan "Live Better." This goes to show how the two giant retailers, providing similar products, were at the same time differentiating and competing with one another. While Walmart continued to be competitive, Target developed strategies which gave it a competitive edge and a differentiating factors over Walmart during a stable economic regime.

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