What do Wal-Mart, Starbucks, McDonalds, Dominos Pizza, Coca-Cola and Pepsi all have in common? The answer is quite simply; each and every company has expanded their operations outside of the United States. By expanding into international market, each company has benefited in one form or another. The most obvious benefit for a company considering international expansion would be increased sales. For example in 2006, Wal-Mart (the world’s largest retailer) announced for its International Division 1fiscal year end sales of $62.7 billion, an 11.4 percent increase from 2005. By catering to
an international audience, Wal-Mart manages to sell nearly 11 times more merchandise than Target. With a little more than 95 percent of the world’s population living outside 2the United States, one begs the question; Why hasn’t Target Corporation expanded its operations outside of the United States?
As a new team member in Targets Business Development office, your first assignment is to develop an international entry strategy for Target. To do this your supervisor has provided back ground information about Target as well as information about the current international market. Furthermore your supervisor has included a list of factors to be considered when deciding which country Target should enter first. Carefully read the information, consider every opportunity and remember Targets motto for life is to be Fast, Fun and Friendly.
Clean, organized and a welcoming smile, this is what you would expect upon entering any Target Store in the country. Designer trends with low prices in addition to the fundamental of life, makes Target the shopping destination for millions of guest who visit every year. A commitment to great prices, continuing innovation as well as pledge to make communities a better place to live in, Target has created a one-of-a-kind experience.
It all started in 1962, in the small suburb of Roseville, Minnesota. Target, formerly know as The Dayton Company opened it first retail store. Later that year the company opened three more Target stores throughout Minnesota. Three short years after opening the first 3store, the Dayton Company experienced sales worth $39 million. In 2002 sales were 4topping $40 billion..
Stores are typically 126,000 square feet in size; total store square footage of Target Stores is approximately 140,255 million. Target employs approximately 292,000 employees.
1 http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=369 2 http://www.census.gov/ipc/www/world.html 3 Jampani, Suchitra and Smkar, Ajith. Target Stores’ Differentiation Strategies. ICFAI Center for
Management Research 2005. 4 Barwise, Patrick and Meehan, Sean. Exert from Simply Better HBS Working Knowledge
Roughly 100-150 new Target stores are opened each year during three cycles in March, July and October. New store prototypes utilize advancements in technology and design to better respond to Target guest needs.
Target operates out of 23 regional distribution centers (RDC). Each RDC services roughly 40-70 stores a piece.
Fridley, MN Maumelle, AR Fontana, CA Pueblo, CO
Woodland, CA Tifton, GA Oconomowoc, WI Albany, OR
Indianapolis, IN Stuarts Draft VA Tyler, TX Wilton, NY
Madison, AL Galesburg, MI Phoenix, AZ Topeka, KS
Midlothian, TX Amsterdam, NY West Jefferson, OH Lugoff, SC
Chambersburg, PA Cedar Falls, IA Shafter, CA
Target also operates three import warehouses. These facilities allow imports to be purchased and stored in bulk quantities to be later distributed to the Regional Distribution Center’s as needed.
Target is an upscale discounter with a focus on high-quality, on-trend merchandise at affordable prices. The Target brand is based upon an “Expect More. Pay Less.” strategy
Target Corporation consists of much more than the retail outlets. The company owns several subsidiaries which include:
; Target Financial Services (TFS): issues Target's credit cards, known as the Target
REDcard, consisting of the Target VISA and the Target Card, issued through
Target National Bank. Target Financial Services also oversees GiftCard balances
; Target Sourcing Services / Associated Merchandising Corporation (TSS/AMC):
This global sourcing organization locates merchandise from around the world for
Target and helps import the merchandise to the United States. Such merchandise
includes garments, furniture, bedding, and towels. TSS/AMC has 27 full-service
offices, 48 quality-control offices, and seven commissionaires located throughout
the world. TSS/AMC employs 1,200 people.
; Target Commercial Interiors: provides design-services and furniture for office
space. Currently, Target Commercial Interiors has an unusually high market share
of Fortune 500/1000 business customers, and are expanding to attract small to
medium sized businesses, as well as home offices. This subsidiary has six
showrooms in Illinois, Minnesota, and Wisconsin, including a first-of-its-kind
retail concept store and showroom in Bloomington, Minnesota that opened on
June 23, 2005.
; Target Brands: owns and oversees the company's private label products, including
the grocery brands Archer Farms and Market Pantry.
; Target.direct: owns and oversees the company's e-commerce initiatives, such as
the Target.com domain. Founded in early 2000, target.direct is a combination of
the company's e-commerce team and its direct merchandising unit into a single, 5integrated organization.
These subsidiaries offer support to the 1,444 Target stores though out the United States. Included in this mix are approximately 130 Target Greatlandstores, 158 SuperTarget
stores, 1,079 pharmacies, 758 Photo Labs, 232 Optical Centers, 161 Portrait Studios, and 30 multi-level stores. The entire corporation is brought together under one vision: “To be the Best Company Ever, for our guest, team members, shareholders and communities.”
Giving Back to the Community
Community involvement is a priority for Target and its team members. Target continues to support and strengthen the communities it serves and donates nearly $2 million dollars a week. Among the thousands of volunteer hours Target team members have given to their communities, Target has formed partnerships with United Way, American Red Cross, St. Jude Children’s Research Hospital, Target House, United Negro College Fund and the Hispanic Scholarship Fund.
Target believes that in order to further strengthen the communities it serves, Education should also be a priority. Take Charge of Education (TCOE) helps improve funding for
schools and education programs through the Target Visa and Target Guest Card. Target donates 1% of a guest’s purchase made with these credit cards to the school of their choice. Target also sponsors Ready. Sit. Read!, a program that encourages early
childhood reading through book festivals and reading contests. With the partnership of Tiger Woods, Target co-sponsors Start Something, a dream building program for youths
that helps them define and achieve goals and dreams.
Tip-Toeing into the International Market
In the past year Target has been dipping its toes into international waters. First and much more obvious to those who are stateside is the new GO International campaign. Target is taking its guest on a whirl wind tour of Europe via clothing designers. The first designer to make her debut at Targets nation wide was the British born Luella Bartley. Her designers duds were even showcased on MTV’s TRL. Following her was Canadian born
Tara Jarmon and The French line Paul and Joe. These designers have captured the attention and pockets of many teens and young women.
During the 2006 Winter Olympic Games in Turin, Italy, Target introduced itself to the world. In a multi-lingual branding event, Target added a splash of red with Bullseye branded trains. Inside the trains, team members clad in ski apparel and branded skiing bib welcomed riders aboard the trains. In order to further spread the red, team members handed out cowbells, whistles and sports horns subtly showcasing the Bullseye.
5 http://en.wikipedia.org/wiki/Target_Corporation#_note-5 Accessed May 15, 2006
Changes in the Retail Industry
Economic growth in emerging markets, such as India and Asia, will significantly change the consumer landscape. Almost a billion new consumers will enter the global market place in the next decade. From now to 2015, the consumer's spending power in emerging economies will increase from $4 trillion to more than $9 trillion--nearly the current spending power of Western Europe. Thanks to technology and more importantly the internet, consumers, regardless of where they live, will increasingly have information 6about and access to the same products and brands.
Things to consider
Now that you have been provided a brief insight into Target and the international market place, it is time to create an international market entry strategy for Target Corporation. First, be creative and innovative, think outside the box but remember to include basics such a SWAT analysis of both Target and the new market in ordered to determine if it is a good idea to entry a new country. Take into consideration staffing issues and cultural differences when deciding on the best way to staff the new stores. Consider the branding and marketing efforts that will be needed to educate consumers on Target. And lastly, remember Targets motto for business is to be Fast, Fun and Friendly.
“Ten Trends To Watch In 2006.” McKinsey Quarterly (2006)