Instruction on Target Corporation Case Study

Instruction on Target Corporation Case Study

Please also read the Format of Case Studies document for the format of case analysis. When you finish

the case, please submit the executive memo in a Word document (no Excel sheet this time) through the

case 2 submission link on the Blackboard. Each group only needs to submit one Word document. All the

names of group members should be listed on the submitted Word document. Make sure you answer all

the questions in your case study.

Question 1: How does Target’s business model compare with Walmart’s and Costco’s? Combine the case

materials and your personal experience.

Question 2: Describe Target’s capital-budgeting process.

Question 3: Explain what the dashboards tell you as a manager.

Question 4: Please rank the five CPRs. Explain how each of the following items influenced your decision.

a. NPV

b. Sensitivity analysis

c. Initial investment required

d. Erosion cost and synergy gain of other stores’ sales

e. Variance to prototype

f. Brand-awareness impact

Hint on answering question 3:

 Most items are compared with that of the prototype.

 Total sales vs. Incremental sales (because of erosion cost and synergy gain)

 “Hurdle Adjustment” shows how much would sales need to fall or rise (e.g. -3%) before NPV

equals the prototype.

 “Risk/Opportunity” is the traditional sensitivity analysis.

Hint on answering question 4:

This case material further expands our understanding of project selection. The base scenario NPV is not

the only determinant of the project selection. Sensitivity analysis on the key factors such as decline in

sales should be considered too. If there is a constraint on the capital available for the initial investment,

the preference of the projects can be affected too. In addition, the “financial number” sometimes does

not mean everything. If the management team has a long-term horizon, the trade-off between current

financial benefit and long-term business strategy should be taken into consideration too.