Essay: Target company strategy

Target’s history began in the early 1900s. The company’s founder, George Dayton, purchased a department store by the name of Goodfellows. Dayton later changed the company’s name to Dayton Dry Goods Company. The name was then later changed a third time to Dayton Company. Dayton had no experience or skill to run a retail business. He had made a career as a banker prior to purchasing the retail store. Dayton adhered to strict Presbyterian guidelines, which he incorporated into his business decisions. He refused to sell alcohol and he chose to close his business for the sabbath. His Presbyterian principles contributed to the company’s success. After George Dayton’s death five members of the Dayton family assumed leadership of the company. These family members quickly abandoned George Dayton’s conservative approach. They began selling liquor and kept the store open on Sundays. They also adopted a more aggressive approach that favored expansion. The first Target discount store was opened in 1962 as a result of this change in management styles. The new management choose to open their first discount retail store in Roseville, Minnesota and have since developed it into one of the largest retail corporations in the United States (Hong, 2014). Target has given customers a place to buy unique and high-end clothing as well as other products at competitive prices and a place to one stop shop. These factors have given Target great success and even prompted a move into an International market. Target choose to do this by taking a similar path their competitors when entering the international market. Target spent 1.8 billion dollars to purchase store locations from the Canadian retailer Zellers in order to renovate them into target stores. Target made a wise decision to purchase the retail space rather than building the stores as it would have cost almost double according to the estimates (Hong, 2014). They choose Canada as their first international market largely because Canada was perceived as the easiest international market to enter. This is due to a pre-established brand recognition and many similarities to the cultural of the United States. However, high expectations from the Canadian citizens came as a result of this brand recognition came. Target failed to meet these expectations because of the poor distribution system, poor pricing, the insignificant presence of Canadian products. The elite distribution, competitive pricing and presence of location specific items is what had made Target successful in the United states. The failure to incorporate these into their international expansion led to failure in Canada.
Target Canada’s positive brand recognition, intellectual property, and financial resources are all strengths that come as a result of the parent company, Target Corporation. Target Canada has positive brand recognition due to the success and popularity of Target. People can identify Target by its “Bullseye” logo or by the company mascot, a bull terrier named Bullseye. Target’s second strength, intellectual property, is made available by offering unique and fashionable designs. Target accomplishes this by partnering with talented designers who make clothes that are Target exclusive. Financial recourses were Target Canada’s third and greatest strength. Financial resources allowed them to investment of 1.8 billion dollars in purchasing retail space from the Canadian, Zellers. Different than a startup corporation who may have a few thousand dollars this was a huge advantage. As a result of their vast financial recourses Target was able to purchase their excellent logistics system that contributed to their success. Target’s core competency is defined by these strengths. While these potential strengths could have helped them establish themselves in Canada it was their weaknesses that presented a greater influence.
Target Canada’s weaknesses became evident shortly after their entrance into Canada. They found that they had issues with rising costs and the competence of their workforce and management. The issue with rising costs came from their suppliers. The entrance into Canada was met by great opposition from existing stores as they attempted to improve their stores and lower their prices while driving Target’s prices up. Sobeys, a Canadian competitor was chosen when Target was establishing their supply chain. Target agreed to buy their food and grocery items from them. This quickly became an issue because Sobeys was able to limit the number of items they purchase and as a result drive up the price that Target Canada pays for wholesale as well. The other major weakness of Target Canada is the competence of their employees. Many of the management and non-management positions where brought from the United States. These employees have little to no knowledge of how the Canadian market works. Also, as a result of hiring American workers, Target was criticized for its treatment of Zellers’ former employees. Many Canadians believed that Target should have retained these workers.  As a result many of the decisions that were made early on would be popular in the United States but are much less popular in Canada. The chosen employees ended up creating a weakness for Target. They made decisions such as signing Starbucks as the in-store coffee supplier rather than the Canadian equal Tim Hortons. These decisions by Target cost them some of their potential consumers.
Target’s opportunities for them to improve their business in Canada are vast. If those opportunities fall within their strengths they should and could take advantage of them, however, they should try to create a partnership if the opportunities fall in an area of weakness. New technology, relaxing government regulations, elimination of internal trade barriers, and changing consumer preference are possible opportunities for Target Canada. Improve their checkout services and online services through advancements in new technology are one opportunity that Target Canada has. This could mean they integrate a grab and go feature like Amazon has adopted in some of the Whole Foods. The new emerging Marijuana market in Canada is another potential opportunity for Target Canada to take advantage off. The government recently legalized it and it is something they could integrate it into their stores. Adding THC and medical marijuana products into their pharmacy could help to bring in a new consumer base. Negotiate a new grocery items supplier is another opportunity for Target Canada to improve their business. They should sign with more popular Canadian brands such as Tim Horton’s. This would improve traffic in the stores and potentially interest more Canadian customers.
Competition, lack of ability to expand, and expectations are the major threats that Target has faced in their entrance into the Canadian market. The entrance into the market has been met with new competition as well as some familiar competition. Walmart, Loblaw, Shoppers Drug Mart, Canadian Tire, and Amazon are some of the competitors that Target found that they have to compete for shares of the market with. Some of these are more familiar Canadian retail stores that already exist and have a customer base in Canada. Walmart Canada and their low prices and recognition are the hardest challenge facing Target in their entrance into Canada. As stated in the case study, “Since its launch, Walmart has established itself as the second largest retail chain in Canada… Currently Walmart is operating 391 retail units in Canada” (Hong 13, 2014). With only 124 locations, Target Canada has a significantly fewer number of stores that its American counterpart. However, the biggest threat to Target Canada is the parent company and the customers’ expectations. The failure to meet these expectations and the failure to establish their core competency has led the corporation to try and determine if this experiment is worth it continuing or if they should cut their losses and get out.
Two types of strategy that are used by companies are Business-level and corporate-level. Business-level strategy is a way to gain and retain customers. It focuses on the steps that a company must do in order to accomplish this. A company can offer goods and services that satisfy the customers’ needs and wants. While corporate-level strategy is creating a mix of business departments that will allow the company to succeed as a whole (Garcia, 2018). Business-level strategy is done by controlling the suppliers through vertical integration and creating unity between the departments. In order to control price and availability of supplies a company buys a supplier, this is known as vertical integration. Share recourses and avoiding the repeating of mistakes by learning from each other can be accomplished by creating unity through different departments. Target’s business-level strategy is to create customer value through a high-end atmosphere and through a large inventory (Target, 2018). This allows customers to feel valued while being able to find pretty much anything, they would need at one of the stores for a decent price (Target, 2018). Target attempts to bring in customers and retain those customers through the use of this strategy.
Targets corporate-level strategy is to maximize efficiency between their suppliers, distribution centers, and stores in an attempt to get customers their goods quickly and cheaply (Target, 2018). This efficiency allows Target to get their different segments to exchange goods and learn from each other. This is how Target supplies high-end discount shopping to their customers efficiently. Target attempts to use price and differentiation in order to separate themselves from their customers. They use the differentiation strategy in order to gain customers through their unique and stylish items. This separates them from their competitors because of the quality and unique styles that they offer. However, they also use price strategy to keep their prices similar or better to their competitors. This allows them to compete on items that their competitors also offer and gives them a well-rounded base. This well-rounded base is what has helped Target to be successful.
My suggestions for Target Canada would be for them to sell off their least successful locations, renegotiate their deals with their suppliers or buy the suppliers, and hire people who know more about the Canadian market and what the customers want. The reason I suggest that they should sell off the worst preforming locations is so that they can take that money and refocus it on to the locations that are doing better in order to improve them and their performance before they try expanding again. My second suggestion would be for Target to buy Sobeys, or a similar company, in order to control the prices and supply to their stores. This would help Target to eliminate their abnormally high prices in Canada and help them establish the business model that was successful in the United States. This success would also be aided if Target hired experts in the Canadian markets. This would help exponentially in Target’s attempt to gain customer support. The support gained would be a result of Target stocking items that interest the specific Canadian market. These suggestions are how I believe that Target could mount a successful move into Canada.