Сase study on target disaster in Сanada Essay
Сase study on target disaster in Сanada
Globalisation had an increasingly significant impact on international marketing. As the cost and complexity of operating in overseas market has been reduces by globalisation, more and more markets are now becoming open to international organization. This system has resulted into increased market competition which in turn increasing the importance of effective international marketing. Most of the companies want to explore themselves in international market rather than becoming a player in a long held domestic market. All in all, this paper aims at explaining and defining the strategies through which international organizations can adapt to the ever changing environment, tastes and preferences of customers and policies through which the company can ensure successful business operations in the global market. . In order to capture international market, the Target Corporation also enter into Canada to attract more and more buyers as a result more profits. Despite target being a successful player in neighbour country of America, but fails to attract customers in Canada. Target got so many big competitors in Canada and competes with traditional and off-price general merchandise retailers, apparel retailers, internet retailers, wholesale clubs, category specific retailers, drug stores, supermarkets and other forms of retail commerce. Target fails to explore itself in canada which can be easily seen by understanding the case study of TARGET DISASTER CANADA.
In 1881, native New Yorker George D. Dayton decides to explore the growing Midwest markets. After many years in banking and real estate, Dayton decides Minneapolis offers the strongest opportunities for growth. He purchases land on Nicollet Avenue and forms the Dayton Dry Goods Company–today, known as Target Corporation. He became a partner in Goodfellow’s Dry Goods Company, the fourth largest department store in Minneapolis, Minn. The following year, showing greater involvement, Dayton took sole ownership of the store and became the first President of the newly named Dayton Dry Goods Company. In 1911 because of the rapid growth, The Dayton Company reflected its wide assortment of goods and services. It was started to be known as Dayton’s department store. On May 1, 1962, Target’s first store was opened with a grand opening in Roseville, Minn. It was taken as a new idea in discount stores. Target distinguished itself from other retail stores by joining many of the best department store’s features like fashion, quality and services with low prices. By the end of 1962, Target opened its additional locations in St. Louis Park, Crystal and Duluth, Minn.
In 1966 Target opened its first stores outside Minnesota in the Denver metro area.
In 1969 Dayton Corporation seams forces with the J.L. Hudson Company of Detroit to create the Dayton-Hudson Corporation. The two companies had parallel merchandising values of promise to outstanding corporate governance. After the merger they establishes the corporation as one of the 15 largest non-food retailers in the nation. In 1975 Target Stores becomes the No. 1 revenue manufacturer of the Dayton-Hudson Corporation. In the mid-1980s, manufacturers began to test and implemented the UPC bar-code packaging technology. In 1988, Target became the first form of merchandiser to present UPC scanning at all Target stores and Delivery Centres In July 2001 Target Stores licensed a main landmark as a national retailer after opening its 1,000th store. Guests were having 1000 reasons to celebrate with a greater selection of style and value in more locations. 2004 Associated Merchandising Company is renamed Target Sourcing Services.
In 2005 For the first time, Target exceeds $50 billion in annual sales and In 2007 Target Corporation presents the Target Check Card.
In 2013 continuing the tradition of Target’s strategy philosophy that great design should be reasonable and reachable to all Target Canada teams up with its first VENTURING IN INTERNATIONAL MARKET
There are numerous factors that urged Target to go worldwide and expand its business operations outside the Australia. One factor can be that Target had reached its maximum in U.S and there was no further room for improvement and expansion and competition was very high. Target Canada’s main rival in the discount store category was Walmart; while there was also competition with supermarket chains such as Loblaw’s, Metro, and Sobeys (despite having an agreement with said grocer), and other retailers such as Costco, Sears Canada, Canadian Tire, and Shoppers Drug Mart. One concept that Target had while going in Canada was that it had winning strategies because of which it succeeded in U.S and it will achieve success in any part of world. Target opened first store in Canada in 2013 and within one year it successfully expanded to 130 stores in all over Canada. The local success factor of Target was its economical prices as cost advantage is the major part of its strategy, Cost advantage strategy is company’s ability to lower its cost base by low-cost labor, low-cost sourcing, economies of scale in production, efficiency (Lasserre, 2012).
Large volume sales, and the supply chain was also excellent but this was normal because U.S was the home for target and these factors were easily controllable by Target. But in Canada it was not so efficient in its operations because of transportation costs, distribution costs and the fuel costs were higher, wage rates vary across the country, the tax rates are different, cost of goods are different. The approach of Canadians plus their culture mostly favors the medium, and small sized retailers who know inside out of the complex labor laws, the distribution systems that are multi layered and restricted business hours in the country but even though they have big retailers like K-Mart as well. It was difficult for Target to succeed in Canada because they didn’t study the Canadian preferences and culture in depth and one main factor can be the low commitment of the expatriates. Target usually focus on its low prices and have an edge because of that but in Canada this thing didn’t worked much because of the fact that Canadians when they were buying low priced products they were concerned about the quality of the product they were buying and its also not so easy to trust a new business chain easily. ENTRY IN CANADIAN MARKET
Targets entry into Canada became a game changing event for Canadian retailing, and shook the industry to its very foundations. On January 13, 2011, the announcement was made that within two years of time, Target Corporation is entering into Canadian market for the first time. The target corp took over Canadian leases for zellers stores owned by hudson’s bay co, one of the north America oldest company. The lease agreement was signed between target corporation and hudson’s bay co of leasing up to 220 zellers stores for C$1.825 billion. Target opens its first Canadian store in March 2013 by acquiring the leaseholds of 189 locations with intent to use 125 stores of these sites to open target stores. Further, target management anticipated that by 2017, the Canadian target chain will grew into more than 150 stores. The first store of target was opened in the Toronto area and their entry had change Canadian retail and the Canadian real estate industry, from coast to coast. The strategy of target while entering into Canada was not a unique strategy. It was simply unprecedented for a retailer to come to Canada and open so many stores at once but target successfully executed its strategy correctly.
Target management team expected to get more than CAD $6 billion from its annual sales in Canada. Target acquired its warehouse located near Quebec border near Calgary. Target hired eleven points’ logistics and a subsidiary of Pittsburgh based Genco, to run its three warehouses in Canada. Each warehouse covers around 1.5 million square feet which is almost similar to 26 American football fields In Canada, Target main rivals in the discount store category were Walmart and Costco as well as competition with supermarket chains such as Loblaw’s, Metro, and Sobeys. The consumers were pretty excited about target stores coming to Canada but target’s opening disappointed consumers as Canadian shoppers were met with empty shelves, higher prices and different labels. Target acquired existing sites from Canadian discount retailer sellers and since the stores were not built with Target in mind, there were quirks, such as apparel being on the second floor of a store while the dressing room was on the ground floor. (Karabus, 2014)
PROBLEMS IN CANADA:
Retailers setting up operations in Canada are quickly learning it isn’t as easy as packing a bag and heading north. (G. Krystina, 2014). Following are some major problems pointed out by us, 1 The supply chain disaster
When target was opening its first store in Canada, the chief executive, Gregg Steinhafel told its investors that he was happy the way his workers and systems were handling the launch. But things were way different from what everyone expected. The major problem was found in the supply chain as goods reached the warehouses very quickly but were unable to reach the stores as there was a mismatching between the barcodes on the items and that on the computer system. For instance, when the shirts arrived and checked 12 shirts per box, the system was showing 24. The cause of such errors is not clear. As a result of the inconsistency between the goods and the computer, the goods in the stores were piled up thus leading to a chain reaction of delays. The target canda story will go down in history books as on eof the great supply chain disasters of Canadian history. (M. Allison, H. Solarina & T. Susan, 2014) 2 The adoption of U.S store culture
Target Canada has been described as a “botched” effort to foolishly run a Canadian operation with American executives. A management level employee from target Canada stated in a report that the expatriates or the international assignees were sent by the United States for a limited period to help in the setting up of the stores and how to team for success. On the contrary, the assignees were found as obstacles instead of guides. Canada is demographically and regionally different from United States on a large scale. The expatriates adapted the same U.S store culture rather for team members and customers rather than adapting according to the Canadian tastes and culture. Stores were left with empty shelves; the managers restrained the employees from refilling them. Items which were required could not be found and the items which were in less demand were available in abundance. For example, Barbie SUV’s. basic items like milk, food or consumables which were always in demand were never available in the stores. 3 The inventory and distribution problem
Another major problem was the store inventory and the distribution of the right product required or needed by a store. There were 3 national distribution centres to service the requirement and demands of around 124 stores. The stores had no idea what was loaded in trucks and what was present at the distribution centres. The employees used to open a 54 foot trailer and would be scared whether the product required was present or not in the truck. To their bad luck, the product what was required, was never found in the trucks. Therefore, the stores had to stock and fill the
backrooms. 4 Failure to compel to change their habits
Target failed to change the shopping habits of the customers. The stores couldn’t compel to attract the customers with the items which were present in the stores. For example, items like milk, eggs and bacon could not be replaced with apparel. The customers got highly dissatisfied as what they were looking for was never found in the stores. 5 Reduction of staff
Another major problem faced was the significant reduction in the staff by the target headquarters in U.S around 40% of the staff was said “goodbye” by the senior leaders. Canadian culture emphasis more on customer service rather then self-service. Slowly and slowly the staff started moving out as they were not satisfied with their jobs and also had a fear of being terminated anytime. Now the requirement for the best retail talent was undertaken. 6 Deadline to open stores
Another major problem faced by target was the renovation of 124 stores and that too in one years’ time as all the major landlords did not allow to close the stores for such a long time. With unfurnished stores and stiffed penalties, there was a deadline to make the stores fully operational. Therefore, seed were sown way before even the opening of first store was done. CONCLUSION
Target Canada is an unmitigated disaster. From the customers to investors to the company’s executive agree about the wrong strategies followed by Target. In the second quarter, Target lost around US$200 million. Target was having a tough competition with Walmart and Costco. Canadian used to cross the border into the United States on shopping excursions, Target was a prime destination but when it came to Canada the magic somehow vanished. The main reason why customers do not prefer to go into target stores in Canada was the pricing policy as well as supply chain delays by Target. The consumers who had already shopped at target stores in the U.S anticipated the same low price but the prices of the newly open target in Canada outlets were higher than in the U.S target. In justification to pricing policy, the management said that the prices are higher because of higher rates for transformation, wages, taxes, duties, and cost of goods. Whereas the same goods and products are offered by the competitor at comparatively low prices. The cause of target’s stumble in its first foreign excursion is the wrong policies of opening 124 stores in a new market within months. Most foreign retailers launch with a smaller number of stores that’s where Target took on a very big challenge which leads to its failure. Inventory problem have often lead to empty shelves and many of the stylish, exclusive brands what Canadian see in target’s American stores did not come to Canada. Moreover, the announcement regarding arrival of the target in Canada was made 2 years before so the competitors had enough time to plan their strategies accordingly. Analysis
1. Unable to understand the Canadian tastes and culture
The target failed to understand and appreciate that though Canada and u.s. are closely related but there was a huge difference between the tastes and the culture. This means that the company should have understood the culture, the likes and dislikes and the do’s and don’ts of Canadian people rather than assuming that what tastes and culture is going in U.S, will go the same way in Canada too. It is hard for target to succeed in Canada until and unless it does not understand its culture. This could be seen there was a loss of 1 billion dollars in the very first year. 2. Failed to carry risk analysis
The company failed to carry the risk analysis and opened 124 stores in one go. It was a huge risk which it carried. Target should have a different strategy before entering in Canadian markets. The customer demands, pricing polies, differences in the wages, all these factors should have been kept in mind before venturing in Canada. Moreover, the renovation of 124 stores and that too in such a short period of one year was a major risk which the company took.
3. Supply chain failure
The company faced a major problem in the supply chain, what was needed was not available. The mismatching of the barcodes and the computer systems, etc, was a major hurdle in letting the products goes to the right place.
Demand was more and supply was equally there but of the products which were not required. Tonnes of products were kept in the backrooms with empty shelves in the stores. This led to customer dissatisfaction as the customers never found what they wanted. Target tried to change the customer’s tastes by offering products which could not be used on daily basis but gradually it failed. RECOMMENDATIONS
In order to get successful in Canada, the Target corporation has not focus on its new entry strategy in the country. Joint Ventures or Acquisitions
One entry strategy that the company can think off in order to capture major share in retail market is joint venture or mergers and acquisition with other retail companies. A joint venture is a business agreement in which different companies deal with each other and agree to come up with new asset or entity by giving mutual equity. It basically means that company will share the assets, expenses and revenues of the company. The other policy is merger and acquisition. Acquisition basically means an act of acquiring an existing company and recognizing its own. On the other hand merger means combining forces with another company and seeing it as one. This strategy can act well for Target as this company’s already exist there and The attitude of Target plus their culture only favours the medium, and small sized retailers who know inside out of the complex labour laws, the distribution systems , the supply chain that are multi layered and restricted business hours in the country. This would limit the risks associated in entering a new environment as the existing company are already familiar with it and can initiate the company in the new environment. Environmental and Strategic Analysis Tools
In order to get successful, the other factor that target corporation must consider is to take a complete environmental analysis on the whole country. Studying about the environmental analysis of the country is important as it it helps in analysing, determining the strategies, risk associated in entrering that country, political economical and social well-being of the country. Moreover it also helps in analysing the tastes and preferences of the customers. In Canada, most of the year is cold so demand for warm clothes and warm products will be preferable. The target corporation needs
to work out on the pricing strategy. Pricing policy is an act of the company by which they determines the wholesale and retail prices for its product or services. A good pricing strategy is the one which aims at optimise prices for the products typically including overall marketing objectives, consumer demand, product attributes, competitors pricing and market and economic trends. The Target Corporation needs to look on all these issues as the foremost reason of failure of target was higher prices of products in Canada than America. In order to capture market of Canada, the company can make use of strategic analysis tool i.e. PESTEL. Its meaning is analysing the political, economic, social, technological, environmental and legal environmental factors which affect the growth and establishment of the company. Another tool which company can use to get triumphant and to get desired result or profits is using the policy or theory of SWOT. Basically, SWOT recognize the strengths, weaknesses, opportunities and threats of entering into a new country and identifies both internal and external factors affecting an organization.
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