General Company Information
Target stores are discount stores that have high end products for mark down prices. The Target experience is distinctive in contrast other leading mass merchandisers. Their stores are fresh, friendly, and easy to shop in environment. Quick customer service and fashionable merchandise delivered for less is emphasized. Target stores are usually built on a one level shop floor, generally between 100,000 and 2000,000 square feet. Target provides employment close to 300,000 people with a employee growth rate of 9%. The retail giant has grown to over 1,400 stores spread over 47 states.
Target stores are distinct from many mass merchandisers, because they have department stores roots. In 1961, Dayton’s department store recognized a demand for a store that sold quality goods in a quick and convenient format at a less expensive cost to the consumer. This led to the expansion of Target. It started in 1962 when the initial Target store opened its doors in Roseville, Minnesota. Target was the first vendor store to offer well known exclusive brands at discount prices, providing a new niche in an old market place.
During the 1970’s, Target started the implementation of the electronic cash registers storewide to observe inventory and speed up visitor service. Target hosted an annual shopping event held for seniors and people with disabilities, plus they headed a toy safety campaign. The 1980’s brought Target to open new stores regularly and had implemented electronic scanning nationwide. In the 1990’s the first gift registers such as Club Wedd and Lullaby Club, for weddings and baby showers, was introduced. The first Super Target store, was opened during this time. Also, introduced was the Target credit card, the Target Guest Card, which was and still is a big money maker for the corporation. With all if this history, there is still a bright future for Target.
The success of Target stores a result from the key center of the Company. Their mission statement is as follows: ” Our mission is to become the Best Company Ever by serving our guests, our team, our shareholders and our communities.” Goals at Target stores are to remain focused on both content differentiation and variety balance. The company has an “Expect More. Pay Less.” assurance to its guests. To fulfill the “Expect more”, the company continues its successful partnerships with existing labels and has established new relationships with new brands such as Mossimo, Waverly and Eddie Bauer. A factor equally as important to the company is the “Pay Less” promise. This commitment is met by cleansing their mix of good, better, and best products with in key merchandise areas. In 2002, target stores continued to execute their primary strategy, remaining competitive in price and differentiating in their merchandising.
Company’s SWOT Analysis
Porter’s Five Forces Model
The use of Porter’s Five Forces model allows for a comprehensive analysis of the external industry environment. The five forces contains: threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, threat of substitutes, and competitive rivalry within the industry. The threat of new entries depends on the extent to which there are barriers to entry. In the mass merchandisers sector, the threat of new entry barrier is very low, which can be a threat. Many stores can offer similar or same products that Target sores offer. However, their are high initial investments and fixed costs that go into opening and operating a new store. There are cost advantages of Target being an existing player due to the experience curve effects of operation with fully depreciated assets.
Also, the distribution channels that are controlled by existing players would be a major benefit in the case of new entrants. Target stores also possess protected intellectual property like patents and licenses. Overall, the products and services offered at Target stores can be rivaled, but not duplicated. The unique trendy goods available are not commonly found at discount stores in addition to the common everyday products that are also offered. The marketing and brand image for target has been reinforced by all of these exclusive qualities. This has created a niche market for Target stores because many individuals shop their regularly for the convenience of retail goods offered in the same location as the other products and services.
Bargaining power of customers is another aspect of the five forces model. Many of the products and services offered at target stores are undifferentiated and can be replaced by substitutes. If they do not carry a specific laundry detergent, a customer will easily be able to go to a grocery, convenient, or another discount store to pick up such an item. This type of bargaining power can impose not much pressure on margins and volumes of the company. Also, switching to an alternative product is relatively simple and is not related to high costs.
Again, if customers know that Target stores do not carry a particular brand, they can easily shop a different discount store at little to no cost to them. However, Target has already begun to reduce the bargaining power of customers by partnering with labels witch can exclusively be found at their stores. There has been an increase in customer loyalty by offering unique brands and speedy which in-turn creates a value added factor.
The threat of substitutes is another force that helps to analyze the external industry. Firms in other industries are offering substitutes products which can be a threat to Target stores. Such outlets are grocery or convenience stores. Although the products offered may be more costly, they can certainly substitute the goods ad services found in discount stores. There is a brand loyalty issue that is included in the threat of substitutes. If one of the previously stated stores in another industry offers a brand that consumers want, they will purchase it outside of the discount store industry, most importantly outside of Target.
There may also be close customer relationships associated with the use of substitute products. Many consumers look for that relationship or connection with a store and its staff, and may not find that at Target stores. The threat of substitutes can be combated by the increase of the costs of switching. Again, Target stores are already doing so with the implementation of their slogan, “Expect more. Pay Less.”
Bargaining power of suppliers is a large factor in Target’s external market environment. In Target’s case, the supplier bargaining power is likely low. The market is flooded by patchy source of supply. Since Target stores have a large buying power by buying in bulk, there is a relationship to powerful suppliers The company could easily switch to another supplier for commonly purchased goods. However, limited partnerships are dominant throughout Target stores. The associates that possess and supply these labels have a higher bargaining power than any other suppliers. Target stores can reduce the bargaining power of suppliers by increasing the dependency that these suppliers have on Target. In this case, Target stores have already done this through their partnerships.
The final force that can be used in evaluating the external business of Target is the competitive rivalry with in the industry. Competitive demands are shaped by each business lobbying for superior market place and competitive advantages. There is high rivalry within the discount store industry, which is a threat to Target stores. There are many existing players that are about the same size (K-mart, Meijer). Most of these existing members have similar strategies of offering goods and services that consumers want at process they can afford. Target has already implemented a strategy that sets itself apart from the other discount stores in the industry. The products that the Target stores carry are differentiated from competitors by their uniqueness and trendy appeal.
Four Building Blocks of Competitive Advantages
When dealing with competitive advantage of a company there are four basic building blocks. These building blocks are efficiency, innovation, quality, and customer responsiveness. Target stores have many competitive advantages over rival discount stores. First of all, innovation is a major factor in Target’s success as a discount store. The company is constantly brainstorming new ideas and implementing them in day-to-day activities. As stated in their annual report, innovation is at the heart of their ability to enhance guest loyalty and drive sales. With consideration to efficiency, Target stores so a great job out of maximizing their floor space throughout all of their stores. The company does this by utilizing the best displays and storage capabilities.
Customer responsiveness has always been a driving force behind the Target stores accomplishments. The company concentrates in “Fast, Fun, and Friendly” service. The service offered is allowed by the selection and training of outstanding team members. In doing so, Target stores are supporting their customers throughout the store and reducing the amount of time that customers spend waiting in line to check-out. Consumers want fast and friendly service from a discount store, and Target has responded swiftly. Reacting to customers has allowed the stores to please guest’s expectations for merchandise enthusiasm and value, and for in-stock dependability.
Another essential factor when considering competitive advantage is quality. Target stores offer quality products at discounted prices to their customers. The company is able to do so through their impressive channels of distribution and large buying power. Their history of experience in this industry accounts for the quality brand name that they have crated for themselves. Target’s “Expect More. Pay Less.” assurance heacily under the quality aspect of the building blocks. Guests at Target stores can expect more because of the top brand names to be had, but can also pay less due to the blend of good, better, and best products within key merchandise areas.
Target has many strengths that they posses in their market place. They have many innovations in retail goods and services which gives them an edge over other companies like Wal-Mart. They also have great convenient, speedy service representatives on the floor at all times to aide in the customers assistance. Target holds a high positive relationship with shareholders. Target also holds a certain niche, they sell higher quality goods with more of a name brand then competing mass merchandisers. Also, Target is very involved in the communities in which they enter, through programs to help the unfortunate and the elderly.
Target stores are well known all over the county for presenting the customer with, stylish goods for less. By doing this, Target has carved out a niche by offering more upscale, fashion-forward commodities than rivals Wal-Mart and struggling Kmart. The four building blocks that the company exemplifies, take part in a major role in its success. Efficiency is already being met by the current expansion, remodeling, and utilization of floor space. However, there are still areas where Target stores can enter the Market
domestically into all 50 states instead of just the 47 they are in currently, and more importantly Target should go global. There is a opportunity for a joint venture or partnership for the corporation internationally. This would be a great future move for the company to advance their market share.
prompt convenient service is one of most important goals for Target. They feel this is one of the many reasons that keeps return business so high for them. However, with the growth potential, there is always an opportunity to advance on the service offered. To improve customer relations, self-checkout lanes will allow the customers to scan their own items and pay for the items on their own. This would save on time if only a few items need to b purchased and the customer is in a rush, this would also save on employment since there is only a need for one employee for several registers. Also, there could perhaps be a drive-up window service at some stores to advance convenience for the customers.
Another possible venue for the company is to continue to associate with brands and labels that consumers are use to and trust. This will promote the brand loyalty of customers and create an added-value to validate some of Targets higher priced goods. Consumers will be willing to pay higher prices to receive higher quality goods with a modern demand. The retail goods presented at the stores have lengthened enormously throughout the past ten years. Instead of just basic bland products, there are high fashion pants, jackets, shoes, house ware, and more professional attire available. Again, there is more growth possibility in this area because of the modern fashion at a Low Target discounted price.
With success of their traditional discount stores other facets throughout the United States, it is sonly the commencement for the potential at Target. The company’s continuous innovation and commitment to service benefit both guests and team member and the community as a whole is corresponding by few. The future looks brilliant for Target stores if they develop their strategies and continue to offer quality goods at discounted prices.