Dayton HudsonBusiness Strategy And Policy Essay Research

Dayton Hudson(Business Strategy And Policy) Essay, Research Paper

Statement of Problem:

Dayton Hudson Corporation; the fourth largest discount and fashion retailer in the United States, is facing a plethora of problems, that is causing top management to implement new strategic actions to try to salvage the company. The first of their problems dealt with an inability to generate profits. Their first quarter earnings had fallen 72%, and their net earnings were down 28%. The Mervyns division has reported that their profits were down 51% from the previous year. Second, they experienced trouble with the U.S Labor Department. Hurting their image of being a socially responsible firm. Finally, they face personnel problems. This occurred due to numerous top-level employees leaving the firm abruptly.

Company History:

Dayton Hudson Corporation has retail operations in all segments of the discount and clothing industry. These range from their national upscale discount stores (Target), to a moderate-priced family department store (Mervyns), as well as a Department Store Division which is a centrally operated full-line, full-service chain, emphasizing fashion leadership (Marshall Fields, Dayton, Hudson). However it was not started this way. Initially, Dayton and Hudson were two separate companies that both specialized in shopping centers. Both realized they had market potential and grew through mergers and acquisitions. Dayton focused on internal growth ventures as well, hoping to capitalize on low margin merchandising. In 1962, Dayton opened their first Target stores, hoping to obtain this goal. In 1969, the two companies merged to form the Dayton Hudson Corporation (DHC). This merger made DHC the 14th largest general merchandise retailer in the United States. DHC continued with its growth strategy and merged with Mervyns in 1978. Mervyns was a West Coast department store chain. The following merger allowed DHC to become the countries 7th largest general merchandise retailer. In 1990, DHC made its final major acquisition by acquiring Marshall Fields, a Midwest up-scale department store chain. DHC ventured out East into Florida; however, heavy competition was causing the Mervyns stores to lose it.s market share.

Internal Analysis of Company:

Strategy. DHC, overall, follows a differentiation strategy. Though one may think they are following a price leadership strategy, they are competing in a discount merchandise industry, therefore their competitors are also advertising at prices just as low as theirs. The target division is actually the only one of the three that uses a hybrid structure. Target is trying to have high quality at low prices. They are price oriented in their strategy. However they also follow a differentiation strategy. They use promotional devices to attract people to their store (they were the first mass merchant to use promotional toys). They introduced several new strategies, including establishing local flexibility through micromarketing, initiating a total quality system, and focusing on efficiency through the use of advanced communication technology and reduced inventory levels. It also donates millions of dollars to local nonprofit organizations, establishing goodwill in the community in which it operates. Mervyns uses a differentiation strategy by offering brand names and customer credit. It using a new pricing strategy, shrinking inventory, sprucing up their stores, and tailoring merchandise to match the needs of the local customers. The department stores division, like Mervyns, uses a focused differentiation strategy. Its allows the DSD to focus on image as well as fashion trends in the marketplace due to its very good customer service and brand name products, despite the higher prices. It is also assisted by its dedication to the communities in which it operates, which are mainly in three Midwest states.

Resources and Core Capabilities. The first core competence of the company is its reputation with the community around it. Though the labor incident with Mervyns may have slightly injured this competence, their commitment to charitable organizations in the local community boosts their image amongst their potential customers. Another core competence is their strong market position in the industry. Target and the department stores have a strong image in the markets in which they compete, which, as you will see later on in the discussion, is a pretty stable marketplace with little potential for new entrants. Also the experience and knowledge of Robert J. Ulrich is a core competence for the company. With the loss of numerous high level employees, Ulrich a long time employee and key factor in target (their most successful segment) growth, took over as CEO of all the entire company. His knowledge from Target can be incorporated now into the other segments of the business, to help them generate a profit. However the company has a shortage of cash and also needs to rectify its image problem caused by the Mervyns issues with Labor department

Sustainable Competitive Advantage. The current source of strategic advantage is their reputation and ability to offer superior products at low prices. With the recent law suit they may have to work at regaining their prior reputation amongst the public. Yet it seems unlikely that they will lose their advantage of being able to supply high quality at low prices (except in the