In terms of the contemporary competition and intense growth of small businesses, there is a need to know how to perform a financial analysis of any selected company. The current paper is a reflection of the detailed analysis of the financial statement of Target, one of the most popular retailing companies in America. The chosen corporation for the analysis has a long history, which makes it an appropriate example for the assessment of financial indicators. Outstanding management, reliable partnership, and enormous experience in the field of retail make Target a complex object for financial evaluation. The company’s profile introduces the main peculiarities, which further will have a connection to the financial indicators. Efficient conclusions are supported by statistical data from the annual report of the corporation. Moreover, financial indicators help to analyze the performance of the corporation and make conclusions regarding its development and further growth. In general, the paper is a reflection of statistical financial data revealing the financial performance of one of the most influential retailing corporations. By the end of the paper, it is possible to get a complex image of Target with its strong and weak points, which play their role in shaping the company’s financial health and overall sustainability.
Value Chain Analysis
Target Corporation strives to provide its customers with a positive experience. Target’s marketing campaign consists of the contributions of several professionals monitoring market trends across the country. Customers can be sure in receiving more benefits at the most affordable price across the country. A marketing department of the company strictly regulates each marketing process, which influences an overall sustainability of the corporation. Human Resource department is also one of the important spheres of the company’s activity, which follows a strict selection of candidates and works on designing effective training for the company’s employees. All these activities result in the low level of employee turnover rate. Further, Target successfully tests its new technological innovations with customers by offering them to be a part of the corporation’s evolution. It leads to the establishment of trustful relations between Target and its stakeholders, including consumers willing to receive the best they can.
Porter’s Five Forces
An increased competition led to the decrease of the barriers allowing new companies to enter the market. However, Target has competitors and may face a threat from the companies working in discount stores, groceries, internet business, drug stores and other similar retailing networks working on local, nation-wide, and international terms. Suppliers have a weak bargaining power because the competition has increased, and retailing corporations have enough sources of supply. Regardless of the competition, the threat of substitutes does not have much power. As long as customers continuously seek for low prices, Target is the optimal source of products at the most affordable price. Finally, the rivalry has the highest impact on the corporation. As long as there are many companies working in the same field, Target needs to review its marketing strategies on a regular basis in order to be the one fully satisfying the customers’ needs.
Target’s achievement of the economies of scale is one of the most valuable elements in its development. It helped to create a solid background leading to stable evolution, extension of the market share, and overall improvement. Diversification of the operations is a key to success according to the corporation’s focus. Another strength of Target relates to the mix of brands, which are the perfect opportunity for any customer to find a product according to his/her financial opportunities. Licensed and private brands open the diversity of opportunities for customers including a wide range of products with a different purpose. Target’s weaknesses also have their influence, endangering the financial stability of the company. First, the corporation needs to review its quality control system as long as there were cases when toys were dangerous for usage. It is unacceptable to let the company neglect the quality of the products it offers. Luxurious and budget categories of products should pass the same control. However, the company still misses an effective quality control system regulating the flow of high-quality products. If the company continues to neglect control over the quality, customers will lose trust to the corporation, which will lead to the negative brand image. Another weakness of Target is that it has a concentration on the U.S. market without trying to extend its performance in the international arena. Concentration on the American market makes Target vulnerable to changes in the political, social, and economic spheres, which endangers the company’s existence, in general. However, all these weaknesses open the diversity of opportunities. For example, Target should focus on the expansion of its performance beyond the U.S. area. In addition, the improvement of quality control is an obligation, which should be an excellent opportunity to win the loyalty of thousands of customers. However, Target should be aware of threats in the form of competitors willing to be the primary leaders in the market. In addition, there is a threat of the American market, which warns that unexpected slowdowns may take place and have a negative influence on the company’s sustainability. Focusing on the domestic market can result in financial non-stability and overall dependence on the market changes, which cannot be avoided even to the high flexibility level.
Current and Non-Current Investments
Financial analysis of the Target’s current and non-current investments has shown that, in the form of current investments, the company repurchases shares. In total, this amount of cash flow equals 129 608 $, according to the annual report of 2014. Informational technologies, disposal of property, store remodels, and expansion also take a form of current investments. Financial statements do not have a detailed reflection of long-term investments; however, the corporation spends 387$ million on long-term investing (Target Corporation, 2015). Probably, the company puts much effort to the overall upgrade and evolution of the performance as it is mentioned in its strategic direction of the performance.
Target’s comprehensive income includes net income in the amount of 1636 $, with pension and other benefit liabilities equaling 139 $; cash flow hedges in the amount of 431$, and other comprehensive income in the amount of 292$ (Target Corporation, 2015).
Sources of Revenue
Target’s sources of revenue include GAAP earnings, comparable sales growth, revenue from the stores and digital channel sales, and continuing operations. However, discontinued operations, such as removal of Canadian stores, led to the decrease of total revenue in 2014 (Target Corporation, 2015). Probably, it will still have its influence and reflection in the financial report of 2015.
The highest expenses of Target relate to three spheres of its activity. First, the corporation had to experience a data breach, when an intruder stole a payment card and other valuable information resulting in the loss of 191$ million. Regardless of the insurance coverage, Target lost 145$ million. Another expense relates to the cost of sales; it is one of the highest indicators, equaling 51278$. Finally, administrative expenses formulate the last element in the highest expenses of the corporation.
The financial statement of the corporation does not have enough information regarding non-operating income. There is no mentioning of receiving dividends or other non-operating income. However, the company consists of many shareholders receiving their dividends, which means that Target had a chance to increase investments along with the number of its shareholders.
Horizontal and Vertical Analysis
It is obvious that the company continues to increase its revenue. If Target received 71279$ in 2013, it managed to increase its revenue in 2014 resulting in 72618$ (Target Corporation, 2015). However, there is a serious deviation in net income due to the accident related to the discontinued operations in Canada. In 2013, the company generated 1971$ of net income, while in 2014, an indicator was 1636$ (Target Corporation, 2015). In general, the company manages to grow and increase its revenues thanks to the decreased costs in the credit card. However, the rising cost of sales should be an alarming sign for the corporation to take immediate action and improve the mentioned indicator. In addition, the company has a rising nature of its assets, while its liabilities continue to decrease, which means that the company moves in the appropriate direction of the development.
The reflected above financial analysis of the Target Corporation shows that its performance is sustainable enough to continue its development and evolution. However, there are some gaps in the security measures and expansion abilities. For example, the company should work on the improvement of data security and overall opportunities related to the international expansion. If the company neglects taking care of these areas, it is most likely to increase its liabilities and fall in debts, which will result in the decrease of its revenue. In general, Target’s strategic development shows that there are enough opportunities for the overall improvement and establishment of long-term relations with shareholders, suppliers, and customers.