Target Corporation: The Canadian Decision Harvard Case Solution & Analysis

Target Corporation: The Canadian Decision Case Study Solution

External Analysis

External analysis has been performed to examine the environment of the industry. The purpose of external analysis is to know the opportunities and threats present in the industry that Target Corporation can use for expansion, growth and profitability.

Industry Analysis

The political and cultural situations are almost similar in Canada as well as the United States, but Target did not adapt and understand the social public and free enterprise policies of Canada. Several issues affected the performance of Target in Canada, such as: labor unions, environmental issues and employee retention and attraction. Walmart, the biggest competitor of Target,has already taken a leadership role in Canada in environmental projects. The social difference between the United States and Canada also affects the Target’s expansion plan. Canadian spend almost 10% of total United States retail spending, saddled with high household debt. Several large players in the industry are expecting Target’s launch in Canada as a game-changer. As the prices are almost 14% higher in the Canadian market, Target could get benefit from this expansion by providing low-priced merchandise, but its success is hinged on the company’s ability to address these uniquely Canadian features. Target Canada is facing various challenges, such as building a loyal customer base, community good-will and attracting qualified employees. Walmart provides cheaper products than Target so, customers are more attracted towards Walmart. Target should have done research on the behavior and preferences of the Canadian customers. The customers;expectations are very high as they are expecting same experience from Target Canada as they expect from the Target United States.

Alternatives

Note: See Exhibit-3: Alternatives

Continue Operation in Canada

On the basis of analysis, Target could continue its operations in Canada. Target should invest in research and development to gather information about the preferences and expectations of the Canadian customers. Target should change its strategies and start providing cheaper products than Walmart. Once the Target knows about the social behavior and spending patterns of Canadians, it should implement the strategies according to the research’s results.

Exit Canadian Market

Internal and external analysis indicate that Target should not continue its operations in Canada as it already is a very giant player in the market and the financial performance of the Target is also not favorable to have the expansion. The company is almost seventy to eighty percent financed by leverage. As the company is facing loss so it would not able to pay its debt. Although the political and economic situation in Canada are favorable for the business, but Target requires the  implementation of better strategies for its expansion.

Expansion in Local Market

The parent company has also been facing challenges in the local market, so it is suggested that the company should start its expansion in local market as the population rate is very high in the United States and there is a high potential for growth in this market. Along with the expansion in local market, Target should enhance its RED card rewards to get the better insight of the customers. Although the company has the chances to face challenges in this expansion plan, because competitors like Amazon and Walmart are very strong players, but opening of small format stores and technological advancement will lead to better market share.

Recommendation

On the basis of above analysis, it is suggested that company should close its operations in Canada as the company is facing huge losses and most of its assets are financed by debt. Higher leverage increases the risk and cost of capital. The company’s financials show that the company cannot survive more in this market. Although the economic and political situations are stable, but the consumer’s loyalty, inappropriate strategies and employee retention could affect the company’s performance. The company should focus on its parent company, as it is also facing challenges in the United States.

Conclusion

Target Corporation’s expansion plan in Canada cannot work better as the company is already facing billions of losses. The parent company in the United States is also facing challenges from its competitors. The internal and external analysis indicate that the company should exit the Canadian market and start focusing on the parent company which is in the Unites States.The competitors are capturing the market share of Target because of their technological advancement. Target could take advantage from its brand image in the United States, and can sustain in the market by focusing on a new and improved strategy.

Appendices

Appendix-1: Financial Performance Analysis

 Appendix-2: SWOT Analysis

 Appendix-3: Alternatives

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