Dayton Hudson Case Study

CASE STUDY

DAYTON HUDSON CORPORATION 1998

I. Brief Background

II. Statement of the Problem

Dayton-Hudson Corporation should determine ways of how to make its divisions more cost-effective.

III. Objectives

1. To be able to observe Dayton Hudson’s strengths and weaknesses.

2. To site Dayton Hudson’s opportunities and threats.

IV. Areas of Consideration

1. In 1891, Hudson’s was the largest retailer of men’s clothes in America.

2. Merchandise innovations were return privileges and price marketing in place of bargaining.

3. Hudson’s bought Marshall Fields Dept. taking on a billion dollar debt in the process.

4. Target’s system is “micro marketing”.

5. Department Stores use a more conservative promotional strategy.

6. Mervyn’s revenues declined 3.2 percent.

7. Credit card transactions were handled by Hudson’s wholly owned Retailers National Bank, chartered 1994.

8. Since 1946, Hudson’s has contributed 5 percent of its pretax profits for philanthropic purposes.

9. Hudson’s primary objective is to maximize share holder value over time.

V. Alternative Courses of Action

• The Hudson Corporation is committed to serving their guests better than their competitors with trend right, high quality merchandise at very competitive prices.

• Provide a low-cost, high quality distributor of merchandise through “boundary less” functioning.

• Dayton Hudson’s Mervyn’s and Department store division should adapt Target’s “micro-marketing” strategy.

• Hudson Corporation should liquidate the divisions which are not doing well in the market and expand those which are profitable.

VI. Conclusion

Hudson Corporation should liquidate the divisions which are not doing well such as the Mervyn’s division (Asset Sale). Mervyn’s performance in the recent years has been disappointing. Revenue declined 3.2 percent because Mervyn’s clothing line was bland and narrow. According to selected data for Mervyn’s Division, its operating profit was 280 (’97), 153 (’96), 100 (’95), 206 (’94), 179 (’93), 284 (’92) in millions of dollars were fluctuating which indicates that Mervyn’s financial standing were unstable. This is also evident in their number stores which declined from 300 stores in 1996 to only 269 in 1997.

Hudson Corporation, on the other hand, should expand their Target Division after liquidating Mervyn’s division. Hudson’s Target Division is its most profitable division, it’s an upscale discount store that provides good quality, and family oriented merchandise at attractive prices. Target’s performance has been strong and consistent across merchandise categories and geographical regions during the last several years. Targets micro-marketing program helped improve its merchandise assortments. Micro-marketing is for tailoring merchandise assortments to customers’ needs in individual stores or markets based on regional demographics and ethnic factors. In this case, Department store division should try to adapt Target’s micro-marketing strategy against its conservative promotional strategy to help improve their financial situation.

Target has the