1. Overview of the industry – competitive landscape, expected short-term and long-term industry trends, key players in the industry. Summarize the key facts from the case in about one to two paragraphs. Identify the closest peers to Target.
• Porter’s five forces
• Trend towards “omnichanel” strategy – flexibility for the consumer
The Multiline retail industry can be divided into two large segments: Department stores and General Merchandisers/Discounters. Department stores tend to offer a more upscale experience while discounters tend to offer a larger array of products at low, bargain prices.
Target can be classified as a General Merchandiser, but faces intense competition not only from competitors within its sub-section (16, Industry
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• Supplier Power is relatively low, as consolidation of the industry has given industry competitors large influence over their suppliers
• Threat of Substitutes can vary, depending on one’s definition of the industry. Product offerings by multi-line retailers are diverse and unlikely to be replaced. However, other various methods of distribution such as Online, Supermarkets, Drug stores, and Convenient stores do pose some threat to the multi-retail industry. Online retail, especially, has outpaced the industry in growth and is expected to constitute a larger percentage of retail sales in the near future.
• Industry Rivalry is intense and easily the strongest of the five forces presented here. Homogenous product offerings as well as similar corporate strategies (investing in “omnichannel” distribution including online sales, etc.) have forced retailers to cut prices to increase buyer value proposition.
• Threat of New Entrants are low, given the substantial capital investment needed to compete effectively with large
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Business description and a brief history of the company. Does the company have any unique strategic positioning within the industry?
Current position:
• “Cheap but Chic” – competes with other discount sellers but offers slightly higher quality product lines.
Target is a large-scale General Merchandising chain with over 1800 stores in the United States. The firm is the second largest discount retailer in the country (behind Walmart) and sells all sorts of products ranging from household essentials to apparel and accessories (5, MarketLine). Target strategically positions itself as a discount retailer (a brand that sells a myriad of goods for low prices) whose products are more upscale than its competitors (Hoovers History)(30, Survey).
The firm was founded in 1902 by George Dayton, who opened a dry-goods store in Minneapolis. Eventually merging with Hudson’s in 1966, the brand grew through the late 20th century to become the big-box retailer it is today – offering a vast selection of products at slightly higher qualities relative to its competitors. Today, the firm is led by CEO Brian Cornell, who has bought in decades of experience from the retailing and food business sectors.
SWOT:
Strengths:
• Diversified Product
According to Kantar Retail, most of Target’s shoppers are younger on average than its rivals, and more educated. That means it has to consistently offer something different and appealing; it emphasizes more on the latest-trend apparel, eye-catching home décor and exclusive designer merchandise than its competitors. This results in a willingness to pay a bit more for items by customers who are willing to pay a bit more. Moreover, this successful
The threat of rivalry is high because there are several firms in the industry such as Safeway, Sobeys, Atlantic and Pacific, Metro, convenience stores, and online grocery shopping. Moreover, with the addition of Wal-Mart in the mix this increases the threat among the rivalry which will cause an intense price rivalry. This is also caused by firms unable to different their products in the industry, in this case they are forced to compete on the basis of price which will result in price competition.
Target has seen consistent growth since its inception, and has confidence that future growth will continue (see attached financial statements). In 2004, Target sold two of there business units, Mervyn's and Marshall Field's for approximately $4.9 billion. This allowed for extensive aggregate pretax cash that will be used for future store sites (as well as upper management bonuses). Target's Board also approved a $3 billion share repurchase program which they expect to complete in two to three years.
Founded in 1962 by George Dayton of the Dayton Corporation, the first store was opened in Roseville, Minnesota, and served as the prototype for all Target stores opened since then and changed how consumers thought about discount shopping.1 Each store was designed with the customer in mind; the founders of Target realized that the appeal of clean, organized, and well-designed stores would set them apart from all others in the industry. In every store, related departments are conveniently placed next to each other. In 2000 the company was renamed the Target Corporation and now has over 1300 stores in 47 states, including more than 140 SuperTarget stores, as well as a consumer-friendly website. Many stores now have a pharmacy and Club Wedd and Target Baby gift registries. SuperTarget stores even have a separate side devoted to groceries. The corporation also offers the Target Visa Credit Card and the Target REDcard, which is a credit card that can only be used in Target stores or through the website.
1. The Discount Department Store. Target prefers to be called as the latter instead of just department store. Expect more, pay less. With this tagline, the customers expect to purchase more items and pay the least amount possible. Not like other retail industries like its competitor Kmart and Wal-Mart, Target maintains retail value in terms of product offerings. They are known in their designer’s items in clothes, exclusive beauty products, categorized and functional goods, and seasonal offerings. It also sells the greatest number of gift cards among its rival business.
The growing popularity of online retailing is attracting competition from traditional and online multi-retailers such as Wal-Mart and Amazon which are gaining considerable market shares in many of the product segments included in the specialty retail sector.
Target Corporation has indicated a significant increase in the number of years it has been operational. The company experienced important changes in growth when it transformed from a regional store to a national retailer.
The Target Corporation formerly known as “The Dayton Dry Goods Company” is a major retailing company that was founded in 1902 in Minneapolis, Minnesota by George Draper Dayton. It is ranked the second largest discount retailer in the United States and ranked thirty- sixth on the Fortune 500 as of 2013. The Target Corporation has been serving this nation with the best price possible goods since their expansion from “Dayton” and is continuously winning the hearts of consumers with their dedication and service. A phenomenal merchandising strategy and cross channeling has enabled this upscale discounter to serve their purpose of customer loyalty and fulfill their promise of “Expect more and Pay less”.
In general merchandise retailing, Wal-Mart’s primary competitors are Target and Kmart. Retail superstores such as Circuit City and Bed, Bath, and Beyond, also provide retail competition. A survey found that the majority of respondents favored Wal-Mart over stores like Target and Kmart. Respondents claimed Wal-Mart offered lower prices, better variety and selection, and good quality. The needs of consumers is an important economic feature in all competitive environments. What attributes (price, variety, quality, etc.) prompt buyers to choose one retailer over another is very important in the competitive landscape.
These leading competitors account for 69.9% of the industry’s revenue (2). Chain stores currently account for nearly 50% of the prescription market in the Unites States (3). A key characteristic of competition in the current industry, as well as a trend for the next five years, is consolidation. By consolidating independently operated pharmacies, drug stores and small chains, the key industry players such as CVS and Walgreens will have the choice to either strengthen their market shares or diversify their product and services, offering to compete in healthcare (2). Discount supermarket chains are gaining more market share in the pharmacy business, pressuring industry leaders to adapt.
Target has not significantly penetrated the online shopping business as compared to its competitors Walmart and Amazon.com
Professor David Soberman describes his disappointing experience, “I have gone into Target stores looking for things, and the product line is not where it needs to be. You want certain things, but you can’t find them. You can find them at Wal-Mart. I just took my child down to school at Queen’s, and I was trying to buy things. I got 95 per cent of what I wanted at Wal-Mart. The other five per cent I got at Canadian Tire. I did go into Target, but I couldn’t find what I needed”
Rivalry among established firms is fierce. There are several factors that illustrate this: established market players (6.1). The product is highly standardized and the switching costs of the customers are low. Players are aggressive (6.2)
Recommendations to achieve a sustained competitive advantage: Online, mobile, and store purchase will certainly increase customer traffic with the online and store combinations gives Target Corporation with a best possible low-cost price. A best-cost provider strategy allows Target to position itself and compete with low-cost providers such as Walmart. In addition, it employs a competitive strategy with a designer label along with superior supply chain, increased operational capabilities, and skilled employees. . The strategy of sending coupons are huge for a customer, so increase discount based on their purchase history and use the store brand credit card to attract more customers.
On the Target website, it is stated that their mission is to, ”…fulfill the needs and fuel the potential of our guests. That means making Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional experiences—consistently fulfilling our Expect More. Pay Less.® brand promise” (Target Corp). It has 1,799 stores in the United States alone and has locations in India. In 2014, they made $72.6 Billion. Similar to Wal-Mart, Target sells household essentials, apparel, groceries, pet supplies. health, beauty items, home furnishing, entertainment, and electronics. Both also have their own branded items to sell at a lower price than the commercial brands, and each corporation also has a