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Robert JonesTarget Corp. Met With Jordan:2/9/2015ContentsPorters Five ForcesPages 2-4Strategic Group MapPages 5-7Market and Resource Pages 8-10SWOT AnalysisPages 12-13Conclusion Page 14References Page 15-822960000Figure 1: Porters Five Forces Model for Target Porters Five ForcesThe first framework that I am choosing to present is Porter’s Five Forces Model. This model holds that competitive pressures on companies within an industry has Five Forces. According to Crafting and Exciting Strategy, Michael Porter’s five forces of competition are: competition from rival sellers, competition from potential new entrants in the market, competition from producers of substitute products, the bargaining power of suppliers, and the bargaining power of customers(as cited in Thompson, Peteraf, Gamble,& Strickland, p.49). To use Porter’s Five Forces, first identify parties involved along with any specific factors that create competitive pressures, then evaluate how strong the pressures from each of the five forces are in the industry (Thompson, Peteraf, Gamble, & Strickland, p.49).Target’s rivals have a strong influence on the company’s operations. For instance, after Target had a bad holiday season in 2012, the price matching policy they had over the holiday season year around (Furman, 2013). During the 2014 holiday season, consumers planned to do more than 40% of their shopping online, which caused Target, and other brick and mortar retailers to compete against e-commerce retailers (Kapner, Stevens and Germano, 2013).The threat of new entrants have a moderate influence on Target’s strategies. Due to the capital needed for a traditional brick and mortar store and Target’s contracts with suppliers make it hard for a new direct competitor for Target to appear. However, Target feels threatened by e-commerce, who can enter the market relatively easy. For instance to combat showrooming, which is the act of price shopping at a store to price shop, in 2012, Target suggested to suppliers create separate, Target exclusive products to shield from showrooming (Zimmerman 2012). Target has a moderate threat to substitute products or services. Under Porter’s Five Forces, substitute products and services does not mean companies within the same industry, but instead relates to similar services in a similar industry. While they take a portion of Target’s market share, stores like Macy’s, Toys R Us, and The Home Depot each specialize in a field that would consider them substitutes. Those are based on either price point, or the types of product their companies provide. Customers have a strong bargaining power with Target. If customer service isn’t good the customer can easily move to a rival retailer. Customers want both trust in the company, and for price to be as low as possible. In 2013 Target had a data breach in the computer system. That data breach resulted in a 40 percent decline in profit (Harris 2014). Sales in Q4 2013 fell nearly 3.8 percent (as cited in Harris 2014). In order to get those customers back, Target had to create unanticipated sales, like a 10% discount and clearance sales (Harris 2014). However, by the end of January both sales, and customer perception of the company began to improve. Target’s suppliers have a moderate bargaining power. While Target has a specific set of requirements for whomever they get their suppliers, companies can chose not to be a Target supplier. Target also has a program for diverse suppliers in both size, and scope of the business. If a large supplier decides not to become a supplier of Target’s that would result in a rival of Target’s gaining the sales from the company who doesn’t choose Target. -4889500Figure 2: Strategic Group Map for Target Strategic Group MapThe next framework that I am presenting is Strategic Group Maps. A strategic group consists of industry members, and their position in the market (Thompson, Peteraf, Gamble, & Strickland, p.69). To construct a strategic group map, the following is needed: Identifying the competitive characteristics that determine the strategic approaches used in the industry. In the map above, I compared the geographic reach of various companies compared to the perceived quality of the products for the price. Using the two variables above, you plot the firms on a two plot map. You then assign firms that occupy the same location to the same strategic group. You then draw a circle around each group, making the groups proportional to the size of the group’s share of the sales revenues of the industry. The value of a Strategic Group map is to identify what are considered close competitors, and what would be considered distant competitors. Companies would use this to focus most of their competition to their close competitors On the map, I gave a lot of little circles to Local Stores as high perceived quality for price and a narrow market. These stores only operate in the geographic area of their store, which results in the higher prices, but with higher quality merchandise than most competitors. On the opposite end of the map is Macy’s. Macy’s, like regional department stores is known for their high quality merchandise. While Macy’s focuses on being in large city, there is at least one store in the various major cities nationwide. Thus, they have a high price point for their merchandise. Target has stores nationwide, and is in the mid-market when it comes to product quality. Target has products from name brand designers, and unlike some of their competitors, their in house brands have quality products. This comes with a higher price point than Walmart, but the company has a lower price point than Macy’s. Walmart is the biggest retailer in the United States, and they have a large geographic reach. Walmart has a low price point for their merchandise, and depending on the product, the merchandise you get is either good, or is bad. While Walmart carries name brand products, the in house brands that they carry are not the quality that the national brands have. Below Macy’s, Target and Walmart is Dollar Tree. While you can purchase anything at the store for one dollar, the merchandise that was given is horrible, with some merchandise being worse than others, and Walmart having higher quality product than Dollar Tree has. Other than select areas in the Midwest, Dollar Tree has a national presence in the United States, and has a presence in Canada. Figure 3: Market and Resource Commonality Model for Target.Market Commonality and Resource Similarity Model.The next framework that I am choosing to present is the Market commonality and Resource Similarity Model. Unlike the Strategic group map, which looked at the revenue and geographic size of the strategic groups, the Market Commonality and Resource Similarity Model compares each of Target’s competitors to one another based on how common the market share is when compared to Target, and the amount of resources that a company has. This can be used to determine whom of the competitors in the market are likely taking the market share from Target. I placed Dollar Tree as both low Resource Similarity, and Market Commonality. The Dollar Tree market are the people who want to purchase multiple items for a few dollars. Unlike with Target, which competes as a general retailer (Target Corp. p 4), Dollar Tree competes as a discount retailer. Neither company are direct competitors of each other, and do not consider each other as such. Dollar Tree also doesn’t have the same resources they can use. While Target had a net loss in the 2014 fiscal year, they had $72.6 Billion in sales in 2014 (Target Corp p.31), while Dollar Tree had $8.6 Billion in sales in 2014 (Dollar Tree Inc. p. 39). The Home Depot doesn’t have much, if any overlap with Target, as they sale different kinds of products. In resource similarity; however, the two companies are very similar. In 2013, The Home Depot had a slighter edge in sales dollars than Target, The Home Depot had $78.8 Billion made off of sales in 2013 (Home Depot Inc. p.20), compared to $71.3 Billion in sales Target generated in 2013 (Target p.31).Walmart is high in both market commonality, but I have it low in resource similarity. While having a slightly different market generate, both companies are very similar in that they carry a large breadth of products in their stores. Unlike with Dollar Tree, the reason I gave Walmart a low resource similarity is that Walmart’s total sales for 2014 in the United States was $279.4 Billion (Walmart Inc. p 20). That is way over the total sales Target generated in 2014. StrengthsWeaknessesStrong Product Variety Convenience Perceived QualityBrand Recognition??Few International LocationsHigher Prices than some Competitor’sOpportunitiesThreatsExpansion into Mobile RetailingUrban Expansion???Increased Competition from , and other e-commerce companiesCustomer perception from the 2013 Data Breach Figure 4: Target SWOT AnalysisSWOT AnalysisThe final framework that I am going to present is what is possibly the simplest, a SWOT analysis. The SWOT analysis is a simple, but effective tool for sizing up the overall strengths and weaknesses of a company, along with the companies’ opportunities and threats (Thompson, Peteraf, Gamble, & Strickland, p.92). With an effective SWOT analysis, one can determine a company’s core competency. A core competency is an activity that a company performs where they have a high degree of proficiency, and is central to a company’s operations.Target’s first strength is in the wide product selection that Target has. Target carries products from Food to Health and Beauty, and everything in between. Since Target has so many product lines and categories, a customer can conveniently shop in one place for all of the products they need to get. Unlike some of their other competitors, Target gets the perception of having higher quality merchandise compared to Walmart, their major competitor. In the United States, Target is a company that is highly recognized due to the various add mediums the company uses. One opportunity that Target has to expand their name is to continue its expansion into mobile retailing. While Target already has a mobile app, and is one of the top 5 mobile retail apps in the 2014 holiday season (Ohm 2015), Target can try to get more attention to the app. One way for Target to do this is to expand price matching to their mobile app. Another opportunity for Target is to expand their presence in urban areas by creating smaller stores. Target doesn’t have much international presence. Even prior to closing down Target Canada in January, the only other country that Target expanded into was Australia, and that is a licensing agreement with an Australian company. Target has higher prices for their merchandise than their competitors. For some of their products that is fine, but for national brands that other retailers also sale, consumers will go to the competitor instead. Online retail is a threat to Target. E-commerce is growing rapidly in the United States, and Amazon is one of the biggest retail companies in the country. The 2013 data breach is also a threat to Target. While customers are slowing going back to Target, the data breach will cause some customers to not return to Target. ConclusionTarget is in a unique position in that while they had a net loss in 2014, it was mainly because of the amount of expenses of the company. Target’s total net sales and total revenue of increased from 2013 to 2014, and is despite the data breach of 2013. As a result of the breach, Target outsource their accounts reciveable to an third party company. If I was Target, my main suggestion would be to continue testing smaller stores. Target is currently testing Target Express Stores. Target plans on having five stores, with only current store near the Campus of the University of Minnesota, with another in St. Paul, and the other three stores in San Francisco (Halter, 2014). While Target’s expansion into Canada failed, I wouldn’t tell Target to stop expanding internationally. Instead, I would follow their Australian model, and find a company that knows the needs of the area that Target wants to expand into, and license the Target name to the company. This will not require as much expense as having wholly owned companies would, and Target, as the licensee would get some of the revenue of the expansion. ReferencesThompson, A., & Strickland, A. (2013). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases (19th ed.). Boston: McGraw-Hill/Irwin.Furman, P. (2013, January 8). Target to match prices year-round of rival retailers Walmart, Amazon, Best Buy and Toys ‘R’ Us. Retrieved March 19, 2015.Kapner, S., Stevens, L., & Germano, S. (2014, November 28). Wal-Mart and Target Take Fight to Amazon for Holiday Sales. Retrieved March 19, 2015.Zimmermann, A. (2012, January 23). Showdown Over 'Showrooming' Retrieved March 19, 2015.Target Corp. (n.d.). Retrieved March 19, 2015, from Information. (n.d.). Retrieved March 19, 2015, from Annual Reports. (n.d.). Retrieved March 19, 2015, from , S. (2015, February 10). How Walmart & Target are winning mobile. Retrieved March 19, 2015.Halter, N. (2014, July 23). Dinkytown TargetExpress store is a taste of what's to come (Photos) - Minneapolis / St. Paul Business Journal. Retrieved March 19, 2015. ................
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