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EXTERNAL ANALYSIS FOR TARGET CORPORATION

CHAPTER 1

1.0 INTRODUCTION

Target Corporation or Target specializes in the retailing business is an American
company headquartered in Minneapolis, Minnesota. The company was first founded as
Dayton Dry Goods Company which was later on converted into Dayton Hudson
Corporation. The Dayton Corporation started its first Target discount store in 1962.
Target grew and eventually became the largest division of Dayton Hudson Corporation,
culminating in the company being renamed as Target Corporation in August 1990
(Pederson, 2004).
Target is the second largest discount retailer in United States after Walmart (Bloomberg,
2009) and it is ranked at number 30 on the Fortune 500 as of 2010 (onesource, 2011) and
is a component of the Standard & Poor's 500 index.. Target operates general merchandise
stores with an assortment of general merchandise and food items. During the fiscal year
ended January 30, 2010, the Target stores also included a deeper food assortment,
including perishables and an offering of dry, dairy and frozen items (Annual Report,
2010).



CHAPTER 2

2.0 SWOT ANALYSIS
2.1 SWOT MATRIX
The SWOT analysis ofTarget Corporation is as follows:
Strengths
y Celebrity endorsements
y Strong brand awareness and
recognition
y Business and operations strategies
y Employee retention
y Design and innovation
Weaknesses

y Low global presence
y Quality obsession
y Litigation
Opportunities
y Global expansion
y Tapping the untapped
y Focus on private label products
Threats
y Economic condition
y Fierce competition


2.1.1 STRENGTHS
Target Corporation has a very strong brand. The Target brand, the color red and
the bulls eye logo are recognized by more than 97% of the United States population
(Target Facts sheet, 2007; Community Grand Forks, 2007). For more than a decade their
brand promise has been Expect More-Pay Less. The target brand has become an icon
for all that is hip, cool and stylish in the world of retail.The company has established a
relationship with the younger consumers due to its ads and partnerships with designers
such as Mossimo, Issac Mizrahi, Liz Lange, Amy Coe, and Michael Graves.Target has a
total of 1,750 stores in the United States (USSEC, 2011).Targets advertising campaigns
and unique marketing tactics have positioned the company as a cool discount store. It
has store in almost all the states of United States except Vermont (USSEC, 2011).One of
its strength is its ability to anticipate the demands of the customers and its ability to
provide high-quality and innovative products which in return make their customers
become loyal of availing all their services and products.

2.1.2 WEAKNESSES
Target Corporation is currently located only in the United States. There are 3
states (Alaska, Hawaii, and Vermont) that are currently void of Target stores (USSEC,
2011).They may benefit by expanding in these states as well as globally. As compared to
its competitor, it has little or no international presence in the markets.Unfortunately for
Target, they have been the victim of numerous lawsuits in recent years. It has lost its
focus from its markets and business goals in resolving lawsuits against the company. Its
over emphasis upon the quality of products makes its products expensive than its
competitor Wal-Mart.
2.1.3 OPPORTUNITIES
There are number of opportunities available to Target corporation among them is
expanding businesses unit to the global markets. This would be highly beneficial to the
company. Considering the developing markets of China and India, there are millions of
customers that can be had. Expanding globally would also take a bite out of Wal-Mart,
their number one competitor. By entering foreign markets, Target may be less susceptible
to a US slowdown in the economy. While Target is doing a considerable domestic
expansion they may benefit from tapping un-entered US markets. There are currently 3
states that have no Target presence. They could take steps to place retail stores in Alaska,
Hawaii, and Vermont. Apart from the expansion, Target has an excellent reputation with
their brands at this point and would be wise to continue improving and expanding them.
2.1.4 THREATS
The biggest threat faced by Target Corporation is the competition among the
local, national and international retail companies. The retail business is a cut throat
competition. The market players have multitude of businesses across various states of US
and around the globe. Moreover, many companies are merging and becoming large
entities. For instance, the recent merger of K-Mart and Sears has allowed them to offer
each others product lines in both stores reaching a larger consumer base. Another threat
faced by all these market players is the recession faced by the US economy. Targets
revenue growth will likely be affected. The housing market crisis combined with an
increase in food and utility prices leaves consumers with less disposable income. Since
Target only operates in the United States they dont have the ability to fall back on their
foreign markets.


CHAPTER 3

3.0 PESTEL ANALYSIS
The PESTEL analysis contains the analysis of Political, Economic, Social,
Technological, Environmental and Legal environments of a country with reference to a
particular object. The PESTEL analysis of The Home Depot Inc. is as follows:
3.1 POLITICAL
The political environment plays very important role in the changes and
transformation overtime in the regulations and the share of the retail stores in the
healthcare bill. The political environment has huge impact on the business of Target
Corporation. The regulations in retail industry has negative trend on the businesses of
market players because the regulations tend to change the industry very easily and can
affect the business adversely in terms of increased cost. The healthcare bill, on the other
hand, will have positive effects on Target Corporation because the bill will aid in
controlling the prices of the medicines in the market which in return will help the
consumers, as well as the company. The general retail industry has greatly benefited
from the liberalization of international trade. With the lowering of US tariffs and the
ending of Europes Multi Fiber Agreement, these markets now benefit from the
availability of low cost labor (Datamonitor, 2007).
3.2 ECONOMIC
There is an overall increase in the prices of fuel around the globe. This increase has
adversely affected the businesses operations of various companies. Target Corporation
must find a way to manage the increased cost of its fuel prices for the distribution
networks as well as to aid in saving the environment.The current economic situation
within the United States could pose problems for retailers operating within the country.
The threat of recession looms over consumers who have increasingly become more frugal
with their spending habits (Datamonitor, 2007). This shift to economic frugality benefits
the firms implementing a price leadership strategy. As the economy worsens the price of
crude oil continues to rises. The changing cost increases a firms costs associated with
energy, transportation, and raw materials. Logistical modifications must be made to
accommodate the rise in oil prices (Datamonitor, 2007). The price increase also directly
affects consumers. Energy and transportation costs for consumers also rise. A greater
proportion of disposable income must be allotted to cover these expenses (Datamonitor,
2007). Because of the deteriorating economic situation, firms must find ways to motivate
sales.
3.3 SOCIAL
Target is committed to provide support to community through their business
strategies. The community involvement has strengthened the brand image and reputation
of the company. They hire and develop diverse group of team members in all the
locations. Target further more offers a selection of products in the stores that appeal to
their guests wide-ranging tastes, cultures and lifestyles. Fostering an inclusive culture
has long been one of their strengths, and will continue to be an important part their
business strategy as they expand into new markets. Target is an employer of choice for
talented, high-potential team members and offers variety of pay-and-benefit plans and
programs for different stages of life, as well as tools and resources to help team members
manage their physical, emotional and financial well-being (Target Social Responsibility,
2011).
3.4 TECHNOLOGICAL
Technology is the main driving force that has direct impact on the sales and the
market share of a company. Research has shown consumers in developed nations prefer a
relaxed, uncomplicated shopping experience. With the proliferation of company websites,
consumers can now peruse available products anywhere internet access is available
(Datamonitor, 2007).Target Corporation has joined forces with Visa U.S.A. to become
the first U.S. retailer to enhance the shopping experience for millions of its guests
through the introduction of Target smart Visa cards (Target Corporation, 2001).As of
2010, Target announced that its guests no longer need to carry their Target GiftCards in
order to redeem them;they can now save GiftCard information to a PIN-secure account
on the Target.com mobile site. All thats needed is a mobile phone with Internet
capabilities, which a guest can use to retrieve GiftCard barcodes for scanning at checkout
(Target Corporation, 2010).
3.5 ENVIRONMENTAL
Target is trying to be a responsible corporation in terms of environmental safety and
protection initiatives. It seeks to understand the impact of carrying out business practices
on the environment. They try to offer natural, organic and eco-friendly products to their
customers, influence their venders to embrace practices that are in coherence with the
environment, avoid the use of technology or practices that are source of carbon dioxide,
and the use of resources effectively and efficiently in order to meet the environmental
challenges (Target Environmental policy, 2008).

3.6 LEGAL
There are incidences that the Target Corporation was alleged for various law
suits. Among them are the racial discrimination suit against Target Corporation (NFB,
2008), racial discrimination lawsuit (2007) and fines paid for selling outlawed aerosol
confetti string to US EPA .The company is trying hard to save its face by paying off all
the expenses and fines incurred for the law suits against it. These negative promotions
have severely damaged the face of organization and its public dealings.











CHAPTER 4

4.0 PORTERS FIVE FORCES ANALYSIS

4.1 RIVALRY AMONG ESTABLISHED COMPETITIONS
The level of competition is strong in the retail industry. Target has three main
competitors and the level of competition is intense. Its main rivals include Wal-Mart
stores, Home Depot, Seers and Costco Wholesale Corp. All of these competitors produce
similar products as well as offer same services to consumers. Target Corporation is using
internet based action via its website, internet ads, partnerships and mergers etc. to combat
competition.
4.2BARGAINING POWER OF SUPPLIERS
The level of bargaining power of suppliers to drive their profits from the market
players is pretty fair. Target is using diverse range of suppliers to meet its requirements.
For this many suppliers have to give discounts and other incentives in order to remain in
business and meet the challenges imposed by the other suppliers in the market. Through
these suppliers, Target Corp. is able to offer products that are of high standards. Target
Corp. can find other suppliers that can provide its supply needs. Thus, the power of the
suppliers in the industry is then counterbalanced by the availability of substitutes.

4.3THE BARGAINING POWER OF BUYERS

The bargaining power of buyers is very high in the case of retail business. Due to
the presence of various similar services providers the customer tends to switch to the
other if they find their product better in terms of quality and prices. There are a number of
factors that support this claim. For instance, buyer power is high as many substitutes are
made available to the market. With this source of buyer power, buyers tend to have a
greater control over the manufacturers. Target Corp. is considered as the retail store that
caters to the younger and more educated and well-off clientele as to compare with its
rival.

4.4THE THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

The threat of substitute products in case of Target Corporation is high. There are
various retailers in the market competing with each other. This makes the great degree of
availability of alternative products to the buyers. They have significant amount of product
choices and option available. The high rate of substitutes for products is then considered
a threat for Target Corp.

4.5THE THREAT OF THE ENTRY OF NEW COMPETITORS
There are certain barriers to entry in the markets currently. This means that the
threat of new competitors in the markets is low. The new entrants have to comply with
the government regulations in order to enter the markets. There are trade restrictions
imposed on various levels that discourages many new entrants to start their business set
up. In retail industry, Target Corp. and its counter parts are protected by a number of
barriers to entry, which makes it difficult for new business entrants to rise and compete.
One of these barriers is the requirement of huge working capital to start the business
operations in order to compete with the existing giants in the market. In order to acquire
the right workforce, supplies and distribution channels, the starting company must have a
high initial capital. This barrier to entry then prevents other firms to compete effectively
with other global companies such as Target Corp.
Another significant barrier to the new entrants of markets is the difficulty to access
the distribution channels abroad. To carry out the retailing business, the firm must have
an effective globalization strategy and implementation of international business practices.
These important strategies on the other hand, take years to develop.














CHAPTER 5

5.0 RECOMMENDATIONS

This study provided brief overview on the external environment analysis of
Target Corporation. The findings of the study suggested that the Target Corporation
should focus on the following factors in order to excel its business and social image in the
world:
1. Expansion of business operations to the other parts of the world. The Target
Corporation is currently conducts its business practices in US only. They should
expand their business perspective and have a broader sense of doing things. For
this it should consider developing markets of Asia like India, China and Japan etc.
these markets show great potential of expansion and profitability.
2. Target Corporation is obsessed with the quality thingy. Quality concern is a good
thing but obsession is not. Targets obsession of quality makes its products
expensive as compared to that of its competitor. Therefore it must devise effective
strategies to ensure high quality at economic prices.
3. Law suits against the company have badly affected the face of Target
organization. The cases of racial discrimination, suits by the blind community and
the gay community boycott etc. have adversely affected the public image of the
company and significantly hurt its profitability. It should develop effective CSR
strategies to ensure the public that Target is not an enemy instead it is highly
concerned for the environment, people and the betterment of the country.This will
help Target to restore its lost value and trust.






















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