A business strategy guided by employee development and steady values can allow a company to compete with the world's largest retailer, Chairman, President and Chief Executive Officer of Target Corp. Gregg Steinhafel said during a "Boardroom Insights" lecture Friday in the Mendoza Business College.
In the early 1990s, when Wal-Mart began to implement more aggressive pricing tactics, Target faced a "crossroads" - the retailer could compete with Wal-Mart and Kmart for the same consumer base, or it could develop a new strategy, Steinhafel said.
"That was when Wal-Mart was gaining incredible momentum and they were basically wiping out everybody, and we had to do decide, are we going to compete with them?" he said.
Steinhafel said rather than targeting the same market segment as Wal-Mart and Kmart, the executives at Target decided to market their store to wealthier consumers.
"The second decision that we made is that we're going to differentiate ourselves from them. We decided to make a more upscale franchise," he said. "Kmart and Wal-Mart fought for the same demographic. We knew if we didn't attack differently, we wouldn't be around."
From insights gained during Target's business transition, Steinhafel discussed the importance of talent development, a foundation of firm values and balancing the needs of a corporation's constituencies. He said one of the key differences between Target and its biggest competitor is their respective corporate cultures.
"I would tell you this: they are a productivity culture, we are a development culture," he said. "They focus on primarily results. We focus both on what you do and how you do it."
Steinhafel explained Target's development culture, emphasizing its focus on employee cohesion and continuing education as well as "organizational alignment."
"It's not different than what you do as students and faculty for pep rallies," Steinhafel added.
To stimulate excitement and camaraderie among employees for selling consumer products, Target holds a national convention annually with celebrity appearances, well-known music groups and a fashion show.
Steinhafel also discussed the importance of developing effective leaders within a company.
"I spend a lot of time on talent. If they tell you it's strategy or execution, it doesn't matter unless you have the right team in place to get it done," he said. "Eventually, if you don't have a company that breeds great leaders, it's not a self-sustaining strategy."
According to Steinhafel, Target serves four main groups - guests, communities, team members and shareholders - and none of these constituencies can be neglected.
He said Target seeks to help its customers differentiate themselves from shoppers at other stores, helping them to take on a more appealing identity.
"We call them guests not shoppers, because we want to treat our shoppers' aspirations," he said.
But Steinhafel said a good business treats all its constituencies with equal appreciation.
"If you only focus on your shopper, you're probably not focusing on your shareholders and that's going to limit your growth," he said.
Steinhafel also emphasized that people should have expectations for corporations that go beyond the balance sheet, citing "bad pay practices" and other detrimental behavior from corporations that "can put their enterprises at risk and put the country at risk."
"We were founded in a way that put corporate values right at the center of who we are as an organization," he said.
