Case 19: Target

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This case provides insight into how capital budgeting decisions are made and the factors that influence the decision making process of large corporations. Specifically, the case centers on the capital expenditure meeting for the Target Corporation, which is one of the top ten retailers in the United States. All corporations have some version of this meeting. The goal of the meeting is to determine what capital expenditure projects the company will undertake in the future to promote growth. Below is our analysis of the Target Corporation’s top five capital budgeting requests (CPR) up for debate. We will first compare Target’s business model with its two top competitors, Wal-Mart and Costco, then we will analyze…show more content…
Target’s Capital Budgeting Process Capital budgeting is the process of evaluating and selecting long-term investment. For target, this process is meant to be rigorous because capital investment has significant impact on the short-term and long-term profitability of the company. Targets Capital Budgeting process includes: 1) Proposals are prepared. CPRs (Capital Project Requests) go through a 12-24 months of development prior to being forwarded to the CEC for consideration. These proposals vary widely from remodeling, relocating, rebuilding, and closing existing stores. 2) Projects are then partitioned because not all projects that are proposed as investment opportunities can actually be profitable. It’s at this point that the CEC (Capital Expenditure Committee) reviews the proposed CPRs. 1. Projects in excess of $100,000 are evaluated by the CEC; however projects larger than $50 million, require approval through the board of directors. 2. Also in situations where the CEC cannot agree, the CEO will make the final decision. Management’s highest priority in their decision making process was to continue its growth by opening approximately 100 stores per year in the United States and maintain a positive brand image. Their strategy to maintain growth was not necessarily to focus on low prices such as Wal-Mart; however, their strategy was to consider the customer’s shopping experience as a whole. This is definitely in line with the company’s business and

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