Target Corporation-The Canadian Decision The case solution
The threat of substitute:
The threat of substitutes in the US retail industry is low because they are serving the basic needs that cannot be served without a retail system. But trends are moving from physical to online systems so the retailers are following the trend.
Competitive rivalry:
There is high competitive rivalry in the US, not only from domestic but also from internationals. There are 8 large competitors in US retail market(GORDON SCOTT, 2020).
Canadian market analysis (Porter’s Analysis)
Bargaining power of buyers:
The bargaining power of customers is high in the Canadian retail market because of more options available to customers, and low switching cost.
Bargaining power of suppliers:
There is the low bargaining power of suppliers in the US retail industry because they are heavily dependent on such a large customer, from whom they are earning a heavy amount.
The threat of new entrance:
The threat of new entrance is also higher in the Canadian retail industry because there are lenient legal requirements, no need for any professional skills to start a business in the retail industry, and new entrants can start with a small scale business and can grow to large one such as target.
The threat of substitute:
The threat of substitutes is high in Canada because there is a high investment in research and development to innovate and produce new products.
Competitive rivalry:
There is high competitive rivalry in the Canadian retail industry from the existing competitors. So it became difficult for target in Canada to earn profit.
Financial Analysis (Ratio Analysis)
To assess the company’s financial performance, financial analysis has been put into consideration, whereby the Target Corporation’s ratios are compared with Walmart to get an idea of how competitive Target Corporation is operating in the market.
United States Market Segment
First of all, the sales growth is analyzed, which reveals that the Target Corporation’s sales growth was 2.7% in 2012 but it decreased by 0.4% in 2013. On the other hand, Walmart’s sales growth has increased from 1.6% to 2.4%. Apart from the gross margin of the Target Corporation has almost remained the same from 2012-2013 i.e. 29.7% in 2012 and 29.8% in 2013. However, Walmart’s gross margin in the United States segment is comparatively lower than the Target Corporation. The gross profit margin of Walmart has remained constant at 24.5% in 2012 and 2013.
On the other hand, comparing the selling general and administrative expenses, it is found out that the selling, general and administrative expenses of Target Corporation have increased from 19.1% of sales to 20% of the company’s sales in 2013. On the other hand, the selling, general and administrative expenses of Walmart have remained constant at 19% during the period 2012-2013. In the US segment, the target corporation’s EBIT margin is higher than Walmart's. But the EBIT margin of Walmart has remained constant over the period 2012-2013, but the EBIT margin of Target Corporation in the US segment has decreased from 7.8% in 2012 to 7% in 2013.
Canadian Market Segment
The financial ratios of the Target Corporation’s Canadian segment show that the company has been facing losses in this particular segment, as indicated by a -71.5% EBIT margin. It means that the company is unable to generate operating income and its expenses are quite higher. The financial ratios in the Canadian segment reveal that the company is facing operational challenges and high competition, as a result of which the company has reported a negative EBIT margin in the fiscal year 2013.
Alternatives
Alternative:1 Building Effective Distribution System
The target needs to build an effective distribution network by aligning itself with the existing developed network that is being used in the US retail industry.A company developed a unique distribution network, but it shows poor results ad customers dissatisfaction, such as customers are complaining about empty shelves, etc.
Pros & cons:
- Increase the profit of target and losses will decrease.
- Building an effective system option is available for the company to improve performance, and it is a low-cost alternative because the target had already built the distribution system so needs to improve only.
- Due to cultural issues that will be difficult for them to adopt that unique distribution system in Canada.
Alternative:2 Compete In Canadian Market
The second alternative is that the target corporation should operate and compete in the Canadian market only, where they have a loyal customer base, good reputation, and the most important thing is the culture that will be the same for the company.as we saw in case the sales and profit today is very disappointing but conditions will improve very soon.
Pros & cons:
- But this move also has some disadvantages such as this is a very costly step to take as well as intense competition.
- Tough completion may deal with the more losses
Alternative:3 Leaving The Canadian Market
The third alternative for the target is to quit the Canadian market to decrease the losses that it is facing in the Canadian market.
Pros & cons:
- But their some drawbacks to choosing this option. The downsizing is the solution of decreasing sales in every case, the target needs to focus on improving operations,
- not on the leaving market in which they are facing issues.
Recommendation & Conclusion
As the results of the analysis related to the situation that targeting is facing, such as decreasing sales in the Canadian retail industry.The CEO of Target Corporation was facing the situation to make a few important decisions related to its operations and strategies.And he has a total of 133 stores but the company is facing issues in its operational chain, the sales are decreasing, and competition in the industry is increasing. so we will be recommended that the target should improve the already developed distribution network, and improve the culture to grow and get sales and profit back instead of leaving the market or downsizing. Mostly focus should be on an area where the issues are huge, so to improve the distribution system target needs to build a strong relationship with distribution partners, the target should provide them quotas, use push strategy, , and build contract, so in this way,the target can improve its performance in Canada...........................
This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.
Related Case Solutions & Analyses:
North Lake Medical Center
Introduction to Analytical Probability Distributions
Competing with Social Networks: Designing Social Strategy
Analytical Probability Distributions
Rambus Inc. 2005
Joline Godfrey Update–1992-2002
Cellular Telephone Industry in 1999
Look Before You Leap (A): Considering a Job Offer With an Early-Stage Company
The 3M Company (B): Integrating Europe (Spanish)
Stock Manipulation by China’s Pangang Group Case
