Target Case 2016 Final PDF

Why Statement

APPENDIXTarget’s Why

Value Creation Model

Awareness Process

Customers

Website Demo

Sample Ad

Non-Accredited

Suppliers

Method

Profit Breakdown

Return

Onboarding Cost

Risks & Mitigation

Other

Vendor Timeline

TARGET’S WHY | SUPPLIERS | CUSTOMERS | RETURN | Q&A

Travel & Meeting Cost

Mktg/Maintenance Cost

Cost Breakdown

Current Locations

Marketing Timeline

Cannibalization

Decision Matrix

Startup Incubator

Decision Matrix Criteria

APPENDIX CONT.

Supplier Diversity

Data

Suppliers

Acquisition

Acquisition Pro/Con

Tradeshows List

Suppliers

Tradeshows Pro/Con

Sticker Price

Breakdown

Return

Informational Tag

Breakdown

Objectives

Other

Golden Circle

Lightbulb Breakdown

Financial Analysis

Non-Monetary ROI

FreshPaper

Unweighted Matrix

How Explanation

Supplier Diversity

“Best Practices”

Vendor Decision

Matrix

Supplier Consultant

Startup Incubation

Process

Startup Incubation

Incentives


Risk Mitigation

• Upsetting current vendors

• Positioning

• Adding new customers

• Core beliefs/Why

• Vendors selling to others

• Build loyalty

• Sign priority contracts

• Rebrand

• Reinforced through online and in stores

• Diversifies targets image


Non-Accredited

• Discover

• Reach out to different chambers of commerce

• Chose Valid vendors

• Develop

• Utilize the start incubator

• Distribute

• Focus on region, type of store or random test store


Method

• Origins

• Small company started by two college grads

• was in 1 grocery store by 2001

• Big break

• They got sourced by target in late 2001 and entered 90 stores

• Were massive success and expanded into all target stores

• Why they stood out

• They were a niche product with important morals

• They did things other competitors wouldn’t think of


Current Locations






Profit BreakdownCurrent EOY 2016 EOY 2017 EOY 2018

COGS 0 $50,000,000 $60,000,000 $66,000,000

Gross Margin Percent 0 0.29 0.29 0.29

Revenue 0 70422535.21 84507042.25 92957746.48247887323.

9

6% Profit Margin 0 $4,225,352.11 $5,070,422.54 $5,577,464.79 Subtract Expenses of New Program -744000 $2,636,500 $2,832,500 $3,037,700

EBIT -744000 $1,588,852 $2,237,923 $2,539,765 $5,622,539

NPV $3,584,217.14

ROI 161%


Onboarding New Employee Cost

Employees - Researchers/Buyers

Average Salary Per New Employee $60,000 $60,000 $60,000

Average Benefits Per New Employee $18,000 $18,000 $18,000

Average Training Cost Per New Employee $1,500 $1,500 $1,500 $1,500

Total New Cost Per Employee $1,500 $79,500 $79,500 $79,500

Number of Employees Hired 10 10 10 10

Total Cost For New Employees $15,000 $795,000 $795,000 $795,000 $2,400,000

Employees - Consultants

Average Salary Per New Employee $75,000 $75,000 $75,000

Average Benefits Per New Employee $22,500 $22,500 $22,500

Average Training Cost Per New Employee $1,500 $1,500 $1,500 $1,500

Total New Cost Per Employee $1,500 $99,000 $99,000 $99,000

Number of Employees Hired/Employed 10 10 10 10

Total Cost For New Employees $15,000 $990,000 $990,000 $990,000 $2,985,000

Employees - Website and Marketing

Average Annual Income $55,000 $55,000 $55,000

Average Employee Benefits $16,500 $16,500 $16,500

Average Training Cost $1,000 $1,000 $1,000

Cost Per Employee $72,500 $72,500 $72,500

Number of Employees 3 3 3

Total Staffing Costs 0 $217,500 $217,500 $217,500 $652,500


Travel and Meeting Cost Breakdown

Annual Meeting (Education)

Number of Suppliers 0 25 55 88

Number of Representatives Per Supplier 2 2 2 2

Total Representatives at Meeting 0 50 110 176

Airfare and Accommodations Costs Per Person $2,400 $2,400 $2,400 $2,400

Total Airfare/Accomodations for annual meetings $0 $120,000 $264,000 $422,400 $806,400

New Employee Travel (Research and Consultant)

Incrimental Number of New Traveling Employees 15 15 15 15

Number of Trips per Employee (Average) 1 3 3 3

Average Number of Trips 15 45 45 45

Travel and Accomodation Cost Per Trip $2,400 $2,400 $2,400 $2,400

Total Travel and Accomodation Cost (Employees) $36,000 $108,000 $108,000 $108,000 $360,000

Other Meeting and Educational Costs

Food $0 $10,000 $22,000 $35,200

Materials $0 $5,000 $11,000 $17,600

Venue $10,000 $10,000 $10,000

Total Other Meeting and Educational Costs $25,000 $43,000 $62,800 $130,800


Marketing and Maintenance Costs

Display Items - Marketing

Sticker Branding $142,000 $157,000 $174,000 $192,000

Lighting Display $355,000 $36,000 $44,000 $44,000

Informational Breakdown on Tags $71,000 $78,000 $87,000 $96,000

Total Display Cost $568,000 $271,000 $305,000 $332,000

Maintence and Implementation - Marketing

Website Maintainance $10,000 $10,000 $10,000 $10,000

Employee Education $100,000 $100,000 $100,000 $100,000

Total Maintaince Cost$110,000 $110,000 $110,000 $110,000 $440,000


What is a Startup Incubator?

• Provides a platform to accelerate the successful development of

entrepreneurial companies


What is a Startup Incubator?

• Provides a platform to accelerate the successful development of

entrepreneurial companies


Decision Matrix Criteria Selection

• Core Values/Why

• Return on Investment

• Feasibility

• Sustainability

• Vender Relations

• Customer Satisfaction

• Price/Cost

• Product Quality

• Delivery

• Warranty and Claims

• Labor Relations

• Management and

Organization

• Conflict/Problem

Solving Capability

• Communication System

• Technical Capability

• Production Capability

• Packaging Capability

• Operational Controls

• Amount of Past

Business

• Reputation

• Industry Position

• Reciprocal

Arrangements

• Impression

• Business Attempt

• Maintainability

• Size

• After Sales Service

• Technical

Support/Expertise

• Attitude

• Total Service Quality

• Training Aids

• Performance History

• Financial Stability

• LocationTARGET’S WHY | SUPPLIERS | CUSTOMERS | RETURN | Q&A

List of Tradeshows

• Supplier Diversity Minority Business Entrepreneur Trade Show

• National Minority Supplier Diversity Council Conference and Business

Opportunity Exchange

• Supplier Diversity Business Conference

• Women Business Enterprise National Council Conference & Business Fair

• National Gay & Lesbian Chamber of Commerce National Business &

Leadership Conference

• Veterans In Business Conference

• National Veterans Small Business Engagement


Tradeshows

• Pros

• Tried and trued method of increasing diverse suppliers

• Easy access to large network and database of suppliers

• Cons

• More competition among buyers to secure high-value diverse vendors

• Higher expenses to attend conferences and tradeshows

• Not directly related to our core values and Why campaign


Overall Approach: Best Practices to Increase Supplier Diversity

• Have Top-Down Commitment

• Set Metrics to Ensure Accountability

• Integrate Supplier Diversity Throughout the Organization

• Invest in Diverse Supplier Education & Training

• Share In-House Expertise With Diverse Suppliers

• Protect Your Investment, Provide Financial Support

• Tap Diverse Suppliers for Solutions

• Consider Diverse Supplier Consortiums

• Partner With Regional or Industry-Focused Groups


Startup Incubator Decision Matrix Criteria


Supplier Strategic Consultant


Target Supplier Diversity Data

2014

• Diverse Suppliers - 762

• New Diverse Suppliers - 160

• First-Tier Spending with Diverse Suppliers - $965,527,141

• Second-Tier Spending with Diverse Suppliers - $557,091,949

• Spending with Diverse Suppliers - 26.21% decrease over 2013*

• Diversity Spending 2008-2013 Compound Annual Growth Rate - 0%

2013



• First-Tier Spending with Diverse Suppliers - $1,300,000,000


• Spending with Diverse Suppliers - 31% increase over 2012



Target Supplier Diversity Data

2014



• First-Tier Spending with Diverse Suppliers - $965,527,141





Acquisition

From 2014 Corporate Responsibility Report:



Sticker Price Further Breakdown: Marketing

Sticker Price Breakdown Assumptions:

Diversity Suppliers revenue allocated based on sq ft

sticker price wholesale of $.002/sticker

Revenue trends follow overall store

Current EOY 2016 EOY 2017 EOY 2018

Total Square Feet Allocated to Diversity Suppliers 2369668.246 2613744.076 2906398.104 3199052.133Revenue per Square Feet 300 300 300 300Total Revenue Allocated to Diversity Suppliers 710900473.9 784123222.7 871919431.3 959715639.8Average cost per Item Sold by Diversity Suppliers (Low end) 10 10 10 10Total Items Sold by Diversity Suppliers (High End) 71090047.39 78412322.27 87191943.13 95971563.98Cost per Sticker 0.002 0.002 0.002 0.002Total Sticker Cost 142180.0948 156824.6445 174383.8863 191943.128


Informational Tag Further Breakdown -Marketing

Informational Tag Breakdown Assumptions:Financial Calculations for tags are previously known and paid for.

Each tag costs $0.001Allocation of items sold based

on Square Feet

Current EOY 2016 EOY 2017 EOY 2018Total Items Sold by Diverse Suppliers (High End) 71090047.39 78412322.27 87191943.13 95971563.98

Total Cost Per Tag 0.001 0.001 0.001 0.001

Total Cost of Tags 71090.04739 78412.32227 87191.94313 95971.56398


Light Bulb Cost Further Breakdown –Marketing

Light Bulb Cost Breakdown Assumptions:

EOY 2018( 34 months)

Linear Growth of store placements

75 cents per bulbTotal Revenue Per Square Feet 300 Bulbs last entire life of project

Gross Margin Percent 0.7061335Average COGS per Square Foot 211

Current EOY 2016 EOY 2017 EOY 2018

Diversity Supplier COGS 500000000 551500000 613250000 675000000

Average COGS/Sq ft 211 211 211 211Total Sq ft Allocated to Diversity Suppliers 2,369,668 2,613,744 2,906,398 3,199,052

Total Square Feet Per Light bulb 5 5 5 5

Total Bulbs Needed 473933.6493 522748.8152 581,280 639810.4265

Incrimental Bulbs Needed 473933.6493 48815.16588 58,531 58,531

Price Per Bulb 0.75 0.75 0.75 0.75

Total Bulb Price 355450.237 36611.37441 43898.10427 43898.10427


Cannibalization

• Affect existing sales

• Will have a minor effect on sales • Target buys $12,440 million work of goods

• We are sourcing just 500 million

• Will increase over sales

• Increase customer loyalty

• Identifies the spesfic needs of certain customers

• Increases customer equity


Acquisition

• Pros

• More control over vendors and outputs

• Strengthens top-down method

• Cons

• Larger fixed expense

• Does not grow diversity efforts

• Has failed in the past


Marketing Timeline

• Year 1

• Focus: Test Market

• Implement in store campaign in 90 stores

• Website Launch

• Year 2

• Focus: Nationwide Expansion

• Stickers Campaign

• Year 3

• Focus: Adjust/Maintain Current Plan

• Further education and awareness


Documents

Target Case 2016 Final PDF