Target Strategic Outline
Essay Preview: Target Strategic Outline
Report this essay
Mission Statement:
External Environmental Analysis
Remote environment – these are the factors, which affect all businesses, and frequently, neither the business nor the industry has any control over them – examples:
Entry barriers
Social
Political
Technological
Ecological factors
Economic factors:
The economy has a major influence over the retail industry. Targets market has a very broad scope. When the economy affects the purchasing ability of its customer base, customers turn to less expensive commodities offered by discount retailers.
Industry environment:
Entry barriers
Economies of scale: Target can compete well against county general stores, surplus and salvage stores, Army and Navy goods stores, warehouse club stores, and catalog showroom stores because they have a significant cost advantage over any new rival.
Product Differentiation: Target creates high entry barriers through their high levels of advertising and promotion (Essentials of Strategic Management)
Supplier power
Buyer power
Competitive rivalry: The increased productivity gap between Wal-Mart and Target is affecting both companies in terms of competitive stances. Wal-Mart will attempt to exploit the existing gap by lowering prices further and creating an even stronger advantage. This is highlighted through the disparity in sales per square foot; 1999 was the narrowest, with Wal-Mart selling $441 and Target selling $260; by 2002 Wal-Mart had increased this to $498 and Target to only $271 per square foot. Similarly, the operating productivity of Wal-Mart, far outstripped Target. Target must therefore address this competitive issue. Investors continue to choose K-Mart and Wal-Mart first Investors in retail are less prepared to acquire Target stock than the two other main competitors in the sector
Substitute availability
Opportunities:
Changes in government regulations
Technological breakthroughs
Credit Cards: The introduction of the store credit card is an attempt to gain two advantages: one is to increase the frequency of visits; the other is to gain fees for the card. It has already been shown that Target credit card holders visit the store more frequently than non-holders do.
alternative product streams: The company plans to add more emphasis on the good value on offer in the stores in future marketing initiatives. It has announced a plan to expand the assortment of food items (including more private-label) in new and remodeled stores, while downsizing mens apparel, home improvement, automotive, and sporting goods.
Specific demands by a narrow group of customers
Threats
Geographic interventions
Unexpected competition: The largest threat to Target is product and company competition. The Target division competes with many discount, off-price, and drug chains, moderate department stores, and specialty retailers. The biggest of these is US giant Wal-mart, which dominates many consumer goods sectors in the US, focusing on low prices and good value. SuperTargets rivals include grocery stores, SuperCenters, and warehouse clubs. Target must compete with Wal-Mart in product ranges as well as through actual store numbers.
New substitute products
Operational Environment – these are factors in the immediate environment in which the business operates – examples:
Competition: The company has been slow to move into the higher-end consumer electronics market, whereas Wal-Mart has adopted an aggressive strategy and incorporated products such as Sony flat screens or Panasonic LCDs. Furthermore, the company is adopting a new strategic direction, by lowering prices on consumables in order to drive more traffic, though this appears to have been unsuccessful to date.
Creditors/Suppliers
Customer profiles
Labor: The retail industry was a significant source of employment in the United States, accounting for roughly 18 percent of the labor force. According to the U.S. Department of Labor discount stores employ over two million people. The average non-supervisory retail workers hourly wage was $9.17 and average weekly hours were 28.7. As a result of increasing technology, information technology and information services retail professionals have been called upon and now play substantial roles in the discount stores infrastructure.
Environmental factors: In another effort to draw and retain loyal customers involved the promotion of environmental awareness. In addition to touting recyclable and environmentally friendly products, many discount stores attempted to cut back on lighting, heating, cooling, and other energy-draining expenses. They also began using recycled paper for printed advertisements and signboards. Target also sponsored Kids for Saving the Earth, a grass roots environmental organization.
Key Success Factors – these are the characteristics derived from the above factors, which any business must have in order to be successful in the SPECIFIC industry being considered – examples:
Location: Targets corporate headquarters are located in Minneapolis, Minnesota.
Hours open
Inventory levels
Capital
Technology
Management skills
Distribution system: More distribution centers to increase volume and improve inventories. In 2003, the company invested $3.2 to $3.4 billion, mostly in new square footage for Target stores, and the distribution infrastructure and systems to support this. A few years ago Target suffered from high out-of-stocks. This made Target engage in a two-year program to rectify the problem, through better inventory methods and more distribution centers
Companys Strengths and Weaknesses
Strengths