Target Corporation Case

The Capital Executive Committee (CEC) of Target Corporation must choose which of 5 large construction projects to approve. More than 1 project can be implemented; however, the capital budget for the fiscal year in question cannot exceed $3. 5B. This case is about force ranking the 5 Capital Project Requests for new construction from best opportunity to worst opportunity to aid the CFO, Doug Scovanner, in the upcoming CEC meeting where the final decision will be made.

Essay Example on Target Corporation Case Study Solutions

As stated on page of the case, “each investment decision would have long-term implications for Target: an underperform store would be a drag on earnings and difficult to turn around without significant investments of time and money, whereas a top-performing store would add value both financially and strategically for years to come.

” Capital Executive Committee Composition: The decision makers for capital project requests consists of 5 of the 12 executive officers of Target, including the President and the Chairman / Chief Executive Officer.

The other 3 members are the executive vice presidents of Property Development, Stores, and the Chief Financial Officer. The CEC has representation necessary to make effective decisions; however, given the importance of Research and Planning for the inputs to the Capital Project Request Process, as well as the impact of credit card services to the discounted cash flow analysis, Target should consider including the EVP of Marketing and the President of Target Financial Services to this committee.

Capital Review Process: The capital review process for Target is consistent with the overarching strategic objective of growth by adding about 100 stores a year while maintaining a positive brand image.

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Financial performance targets of Net Present Value and Internal Rate of Return based on discounted cash flow analysis over a 60 year period have been established.

The discounted cash flows account for store generated cash flows and credit card generated cash flows. The review process includes market demographics analysis that considers population growth forecasts, median household income, and education levels. It also assesses progress of existing company plans for the areas and how new developments will impact sales at other Target locations. A specific consideration by the CEC is duration of project.

The desire is for projects to complete within the fiscal year the capital is approved to minimize risk of cost overruns that may require additional debt financing and “raise questions from equity analysist as to the increase risk to the shareholders as well as to the ability of management to accurately project the company’s funding needs. ” (p4). Other criteria considered by the CEC include, but are not limited to, total investment size, project profit, and impact to earnings-per-share.