Master of Business Administration (MBA) Examination

III Semester

(Sales and Distribution Management)

Time : 3 Hours]           -                                                                                   [Max. Marks : 80

Section A

1.         Discuss the following :

(a)        The role of Personal Selling in Marketing Mix;

(b)        Types of Sales Job.

2.         If you were preparing a sales presentation for the following products, what information about a prospect would you seek as part of your preparation ?

(a)        Two Bedroom Condominium.

(b)        Carpeting for a home redecorating project.

3.         ,Explain the following :

(a)        Sales Forecasting and Sales Budgeting.

(b)        Territory Design and Setting Quotas.

4.         Discuss with the help of suitable example :

(a)        Marketing Decisions for Wholesalers and Retailing Importance.

(b)        EDI and Supply Chain.

5.         A new company is designing and making stylish - in fact, very trendy- Women's clothing. Should the firm establish a website to sell its products?

Section B

Analyse the following case and answer the questions given at the end :


For many years after its first discount store opened in 1962, Target proceeded cautiously. It followed a plan for modest growth, locating new stores throughout the Midwest. But when Bob Ulrich was appointed Target's new chief executive officer in 1994, he had bigger plans for the company. He envisioned nationwide expansion, with Target becoming a powerful brand, on par with labels such as Disney and Apple.

To fulfill this vision, Target's top management needed to design a set of strategies to distinguish the chain in the minds of consumers. "We rod three strategic choices," said Target's vice chairman. "To specialize, to become the

low-cost Producer, or to differentiate ourselves. Wal-Mart is already the recognized low-cost leader in discount retailing. and specialization was deemed too narrow an approach. So Target decided to differentiate itself within the industry by blending designer with discount and fashion with frugality. The chain hired successful designers, such as Todd Oldham, Michael Graves. and Mossimo Giannulli, to develop economically priced lines of housewares and fashions that would be sold only in Target stores. And it opened new outlets all across the country, with the intention of growing its parent company's revenues from $40 billion in 2001 to at least $65 billion in 2005.

Aiming to Harness the "Power of One"

Target was the creation of The Dayton Company, a century-old. conservative department store chain based in Minnesota. In 1902, George Dayton opened Goodfellows, a large department store, in downtown Minneapolis. By 1910, the corporation had adopted The Dayton Company name. Over time, stores were opened throughout the Midwest, including the world's first enclosed, two-story shopping mall in suburban Minneapolis in 1956. Six years later, Target made its debut in Roseville, Minnesota, and was promoted as "a new idea in discount stores".

In 1969, The Dayton Company merged with the J. L. Hudson Company, another Midwestern department store company, which was based in Detroit, Michigan. The outcome was The Dayton Hudson Corporation (DHC). In 1978, DHC purchased Mervyn's, a West Coast chain of midprice stores, thereby becoming the nation's seventh- larges retailer.

By 1979, Target was contributing more revenues to DHC than any of its other entities. Corporate sales exceeded $10 billion in 1987. Given its size, DHC was able to acquire the prestigious, Chicago-based Marshall Field's department stores in 1990.

Since Ulrich assumed the helm of DHC, all of the firm's department stores (including 19 Dayton's locations and 21 Hudson's locatiohs) have been renamed Marshall Field's. This rebranding decision rankled both employees and customers in Minneapolis and Detroit. One company spokesperson explained the decision, "We selected Marshall Field's name because it is known worldwide and represents our largest business."

An even. more significant name change took place in January 2000 when DHC became Target Corporation. The change is understandable considering that the Target unit accounts for 80% of the entire firm's revenues. It is expected that if Target Corporation achieves its sales goal of at least $65 billion by 2005, Target stores alone will account for $57 billion or more of

total revenues. While Mervyn's (now called Mervyn's California) and Marshall Field's struggle to achieve consistent sales performances and have no plans for new stores in the near future, Target continues to build revenues and expand throughout the U. S.

Some industry analysts have questioned whether one company can adequately address the distinctive demands of a discount chain (Target,) a midpriced operation (Mervyn's California,) and a department store chain (marshal! Field's). But Ulrich believes these three entities can benefit from each other. The company adopted a strategy, called the "Power of One," which seeks to infuse each division's best practices throughout the entire organization. The divisions also share valuable information and data. For instance, fashion trends being observed by Marshall Field's department stores help Target's merchandising department predict which styles will be popular each season.

Focusing on Fashion

Target's strategies to become the designer discount chain also include brightly lit, clutter-free store interiors and edgy advertising campaigns that feature Target's ubiquitous bull's-eye logo. But the merchandise is what truly distinguishes Target from its rivals.

Michael Graves' line of housewares has transformed mundane objects,' such as tea kettles and spatulas, into art deco pieces. Mossimo's line of adult apparel incorporates the latest trends into clothing basics, providing updated looks for budget- minded consumers. And Todd Oldham, a renowned woman's clothing designer, was hired to develop a line of home fashions that reflect his preference for big prints and bright colors. "Target and I have very similar views about what's important in design," Oldham said "We both believe that consumers crave design that's smart and interesting, while at the same time is accessible and affordable." Oldham's words certainly coincide with Target's slogan, "Expect More / Pay Less." '

Part of Target's strategy is to concentrate on "soft lines," such as apparel and bedding, which are susceptible to style updates. (It's a bit more difficult to make a power tool, for instance, fashionable.) Also, if a category or line doesn't work out well, Target's executives are not reluctant to abandon it. "They're smart at selectively bailing out of categories early," commented a former Target executive.

Soft lines also have the potential for good profit margins. All factors considered, it was no surprise when Target stopped selling personal computers in the mid - 1990s. PCs require a great deal of personal selling, have small

profit margins, and suffer from high rates of customer returns. Target continues to sell software; however "They've had a tough time in hard lines. but so many specialty retailers are in hard line," explained one retail consultant. "The key place to win is in apparel, and Target is going to win it in soft lines."

Target has also updated its distribution strategy. In the past. it had a difficult time keeping hot items adequately stocked in its stores. To remedy this situation, it has implemented a new sbelf tag system to identify the chain's top 1,000 items and a system to expedite the flow of these items from its original distribution centers to Target stores. The company also said it would double its number of regional distribution centers by 2005. "We believe these steps are critical to our ability to increase market share and profitability," explained the company president.

Targeting Kmart and Wal-Mart

Where as Wal-Mart touts its low prices and Target promotes its fashion sense, Kmarthas been unable to develop and maintain a consistent and effective appeal to shoppers. Forced into bankruptcy, many Kmart stores have fallen into disarray, with erratic inventory levels and outdated layouts and decor. In contrast, Target stores are clean and uniform in appearance, with 12-foot aisles and no boxes of unshelved merchandise in sight.

Target rang up sales of almost $44 billion in fiscal 2002, producing earnings in excess of $1.5 billion. Kmart generated more than $30 billion in revenues, but lost over $2 billion. Target's recent expansion into the northeast portion of the country has been especially threatening to Kmart. On Long Island, New York, for instance, a Kmart saw its sales decrease by 25% when a new Target opened in the same area.

Although Target has supplanted Kmart as the #2 discount chain in the U. S., it continues to run far behind Wal-Mart. In fact, as measured by sales, Target is less than one-fifth the size of its Arkansas-headquartered competitor. Target avoids head-to-head clashes with Wal-Mart by stressing fashion and using promotional discounts, whereas Wal-Mart emphasizes well-known items and everyday low prices. But Target is intent on matching Wal-Mart emphasizes well-known items and everyday low prices. But Target is intent on matching Wal-Mart's prices when they compete directly in the same market. However, Target rounds up its prices to the nearest 99 cents (e.g., $18.99), butWal-Mart doesn't (e.g., $18.76).

Wal-Mart is not only the largest discount chain in the U. S., but also the largest company in the entire world as measured by sales volume. It amassed more than $244 billion in sales for the fiscal year ending in (January

2003 - more than the combined revenues of the next nine largest discount retailers (including Target and Kmart). As of early 2003, Wal-Mart had more than 2,800 stores in the U. S. whereas Target had over 1,100.

But Target is looking to aggressively expand in the near future. It already has stores in 47 states, although its major markets remain in the Midwest, especially Chicago, Minneapolis, and Detroit. In 2001, Target committed $ 3.5 billion in capital spending to expand even further, and used some of that money to take over 35 locations previously occupied by the now defunct Montgomery Ward chain. Target is adding square footage at a rate of 10% to 12% per year, which translates to about 65 store openings annually. About one-third of these new stores are Super Targets, designed to compete with Wal-Mart's Supercentres.

Taking a Shot at New Formats

Wal-Mart originally developed the supercenter format as a way to get people into its stores on a more regular basis. Eventually, Target saw the huge potential of the hybrid stores. "Consumer preferences were changing, with folks being pressed for time," said Target's president. "The combination of general merchandise and food was growing in popularity." Thus the first Target supercenter opened in Omaha, Nebraska, in 1995, and offered typical Target merchandise plus groceries. By late 2002, 82 Super Targets had been opened, compared to 1,243 Wal-Mart Supercenters.

Adding groceries to the merchandise mix dramatically increases the complexity of a store's operations, and the profit margins are significantly smaller on food than on nonfood items. Wal-Mart's

Ownership of 25 grocery warehouses throughout the U. S. as well as its volume of business give it significant price and cost advantages over Target. It's estimated that Target's grocery prices are 8% below supermarket chains' prices, but Wal-Mart Are at least 20% lower.

Both companies are fully committed to the format. Target intends to have 310 supercenters in operation by 2010, whereas Wal-Mart

Plans to have about 2,700 by then. Noting Wal-Mart Much more aggressive expansion plans for super centers, a wholesaling middleman commented, "If Target was winning [in super centers], they would speed it up.”

Target opened another types of store in 1998 when it launched its own website. But the company couldn't keep up with the growing Internet sales volume. Hence, Target arranged for Amazon to handle a number of website related tasks, such as software development and order fulfillment. Besides

offering a 5 L6Sei of the physical store's merchandise. as many other retailers do, www., features items not available at its bricks-and-mortar locations. The distinctive offerings include oversized products. such as Little Tikes furniture, and items the company wants to test-market. such as a $200 Graco jogging stroller. A wide assortment of merchandise from Mervyn's and Marshall Field's will be offered at the website as well.

In addition to its website, Target has been promoting its new Target Visa card, the first "smart card" to be offered by a retailer in the U.S. "This revolutionary new card offers our guests a credit vehicle with greater convenience, broader utility, increased value and expanded rewards programs," stated Target's vice chairman. With an embedded chip, each card contains 64 kilobytes of memory that enables users to download special promotional offers from the Internet and from readers located as Target stores.

The smart card can track purchases for the company's loyalty program and for its Take Charge of Education School Fundraising Program. In this loyalty program, customers who charge a certain amount of merchandise on the Target Visa card receive a coupon for 10% off a day's purchases at the chain. In the Take Charge program, Target donates a small percentage of a cardholder's purchases to a school selected by the customer. •

Smart cards have proven to be quite popular in Europe, and Target hopes they will catch on in the U. S. According to a top executive at Target, "Adding a smart chip and providing chip readers in our stores underscores our commitment to introduce creativity and excitement to our guests." And when it comes to being creative and exciting, this company seems to be right on target.

Questions :

1.      Besides other discount chains such as Wal-Mart and Kmart, what types of retailers represent serious competition for Target ?

2.      What else can Target do to differentiate itself from Wal-Mart ?

3.      What are the advantages and disadvantages to Target of operating superstores ?