This report attempts to make a case for Target retaining its operations in Canada. It shows that Target officially entered the Canadian market in 2013 after mulling over doing so for almost ten years. This entry into the Canada ensured that it was able to take full advantage of its brand name to sell its products. However, the problems that this company encountered in its new venture have raised speculations concerning its possible exit from the Canadian market. The report shows the various advantages that Target has in Canada and provides recommendations of how it can better be able to survive the market and become highly successful; thus reversing its fortunes.
Target is one of the largest discount retail chains in the United States and it had such massive success in this country that it chose to expand north into Canada. It is essential to note that Canada presents a growing market that a company such as Target cannot afford to miss and this means that it has to ensure that it has a major presence. Such presence is necessary to make possible the expansion of its sales within Canada while at the same time helping in the development of better ideas concerning how to navigate in markets outside the United States. The experience gained would help this chain able to replicate the success that its long time rival, Wal-Mart, has been able to have in markets across the globe. It is essential to note that as result of its presence in Canada, Target has an opportunity to ensure that it is able to work within a different cultural and national environment which has diverse needs which will help this company be able to work within a more global setting where it has to deal with a more challenging clientele. Such experience would help in making possible the development of a situation where Target gets into the next step of its success; this time at a global level.
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The purpose of this consulting report is to develop reasons why Target should not withdraw from the Canadian market. This department store chain has had massive success in the United States and this success can be replicated in Canada if only this company chooses to work towards developing itself into a chain that Canadians respect and are fond of. Throughout its long history, there have been rumors that it would likely expand to Canada and when this happened in 2013, there were great expectations as a result of its entrance into the market (Flavelle, 2010). Therefore, this report is one which attempts to show that despite the problems that it has faced in recent times with its Canadian subsidiary, Target should not withdraw from Canada because to do so would mean the loss of numerous opportunities.
Background of the opportunity
Target officially entered the Canadian market in 2013 after mulling over doing so for almost ten years and its entry ensured that it was able to take full advantage of its brand name to sell its products. While this may have been the case, this company has since its entry faces several problems which have led to speculations concerning its withdrawal. Among these problems include not having the commercial success that it had expected, its inability to cater for the needs of the Canadian customers as a result of higher prices than similar stores, as well as product selection, which has had a negative effect on its sales (Anderson, 2014). Despite these problems seemingly being too large to be countered, the Canadian market can be considered to be an opportunity because it offers Target a chance to modify some of its operations in such a way that it is able to turn itself from a company that is all-American, and instead develop into one which can be able to survive the international market. Its ability to cater for the needs of its Canadian customers would enable it to not only regain most of its investments, but will also allow it to expand at a much faster rate and develop into a leading chain in Canada through an increase in sales and a greater attachment to its brand than it has received so far.
Sources of information
This report shall make use of diverse sources of information to ensure that it is as comprehensive as possible while at the same time helping in the creation of better knowledge concerning why Target should remain in Canada. Among the most important sources of information are newspaper articles, journals, books, as well as online sources that cover the period of Target’s operations in Canada. These will help in the creation of knowledge about the reasons why target should remain within the Canadian market and how it can achieve success within this market without compromising its position. Furthermore, it should be noted that newspapers, specifically those that deal with issues concerning business, such as the Financial Times, the Wall Street Journal, among others, will be used because of the in depth content and analysis that they have about the matter at hand as well as information concerning the actions that Target can take to make possible its success in Canada.
Scope of the proposal
The aim of this proposal is to help Target develop the necessary strategy to ensure both its short- and long-term survival in the Canadian market. It is aimed at helping this company realizes that entering new markets is not easy and that it takes time, investment, research, as well as patience to make sure that success is achieved. Without these ingredients, Target is unlikely not only to survive the Canadian market, but also any other market in the world, and such a situation would be most detrimental for its survival in the long run. The main objective of this proposal is to show that despite its high success rate in the United States, Target is still a young company at the international level and it needs to take the time to study its markets, in this case the Canadian one, before making the decision to pull its operations back to its home base. The proposal aims at developing a more comprehensive picture of the market situation in Canada and the strategies that Target can adopt in its bid to compete with its rivals within this market while at the same time increasing its presence in a country whose population is growing at a much faster rate. It is through such knowledge that Target’s presence in Canada and its success in this market can be ensured; helping it develop a strong brand not only within this country, but potentially in the rest of the world where it has yet to develop a presence.
Founded in 1902, Target is one of the most recognizable brands in the United States and it has had a high level of success in this country second only to Wal-Mart. The result of this success is that it has come to have a significant following in the market with many individual opting to buy from Target than from other lesser known brands. Some of the policies that it has adopted, such as ensuring that it does not allow guns and does not sell any on its premises, has been considered to be an endearing characteristic among its customers (Epstein, 2014). The success that it had enjoyed in the United States for years encouraged its venture into Canada and it is in the latter that it has come to face a crisis at the international level.
Target Canada is a subsidiary of the United States based Target Corporation and it was formed in a bid to ensure that all its Canadian operations were managed under the same umbrella. Created in 2013, within two years, it had 133 stores and some 17600 employees, becoming one of the most significant employers in Canada. This company had to face diverse hurdles in a bid to enter the Canadian market and these have proven to be costly for the company to such an extent that it has recorded losses of almost $2 billion (Li and Khouri, 2014).
The Business and Market Environment
It is essential to note that as a result of its not being able to use its American supply chain, the goods in Target Canada are more costly than those of its American counterparts with some Canadians often choosing to travel to the United States in order to buy goods from Target stores there. The lack of a wider product range as a result of Canadian restrictions have made Target Canada to lose customers to its American counterparts and this has created a situation where it has become essential for it to not only compete with local stores, but also the Target stores in the United States.
Target Canada has a diverse number of competitors in the Canadian market and among these are Loblaws, Metro, Sobeys, Sears Canada, Canadian Tire, Shoppers Drug Mart, and Rexall. These are companies that have had a longer history in the market than Target and have developed themselves into highly recognizable brands. This recognition has ensured that they have an appeal within the market that Target is yet to develop and it is necessary that Target studies the practices of its rivals so that it can better adapt to the new environment.
Target Canada’s Objectives
Among the major objectives of this company is to ensure that it replicates its success in the United States in Canada. Target has had massive success in the American market for many decades and this has made it confident of success in Canada. Therefore, in the establishment of its Canadian operations, this company has brought its American structure and model with it.
Overview of Target Canada’s Problems
When Target entered the Canadian market, it expected to take advantage of its unique position in the United States as a favored destination for Canadian customers. In this way, it aimed at ensuring that Canadian customers no longer had to travel across the border in order to acquire the products that they needed in American Target stores. However, this bid came to face logistical problems especially considering that Target Canada was not able to achieve price parity with its stores in the United States (Berfield, 2014a). Instead, its cost was higher as a result of the higher fuel costs in Canada as well as varying tax and wage rates across Canada.
Furthermore, this company had to face a new kind of market that was less densely populated than the American one and which did not have the same demand as a result of the significant number of rival stores available from which to choose. In addition, as a result of product restrictions in Canada, there developed a situation where Target was not able to put the products that were of the highest demand by Canadian customers and this reduced their return rates (Lang, 2015). Because this company did not have the local authority to order its own merchandise, it was forced to only sell local merchandise which ensured that its rivals had an edge over it based on their having been in the market longer.
Moreover, Target was not able to meet its objective of attracting Canadian customers and these still preferred going to Target stores across the border (CBC News, 2014). This problem was further increased through the development of supply chain problems as well as demand issues while led to a situation where some of the Target locations were not adequately stocked with the goods that were of the highest demand. The result was that a number of these stores ended up with empty shelves; greatly reducing the impact and expectations that this company had when it initially entered the Canadian market (Strauss, 2013). For many customers, Target Canada was a disappointment because they expected it to provide the same favorable process that its American stores met, meaning that this company ended up losing a significant clientele.
In general, Canadians tend to select those stores that give them the best deals rather than those that have the best services. This situation led to a significant reduction in the number of customers who visited Target stores in Canada; making a reduction in revenue inevitable (Austen, 2014). The two billion dollar investment that Target has put in its Canadian subsidiary ended up not being enough to ensure its success in the new market and it created a situation where this investment seemed to be a waste. While this may have been the case, the management of Target Canada can be blamed for not having taken the initiative to ensure that it made a complete study of the market and taking the action necessary to ensure the company’s success in the new market.
In spite of its having entered the new market at such a strong pace and having shown a significant ability to bring with it its American way of operations, Target did not study the Canadian market (Berfield, 2014b). This lack of information created a problem where this company was not able to penetrate the market as effectively as it should. Logistical problems that arose, especially those concerning the manner through which it obtained its supplies, made it difficult for it to connect with Canadian consumers. The negative attitude that resulted is a reason for the problems that Target is facing in Canada because it has led to its having to consider closing its operations in the country.
The promotion of its products is a problem that Target has been facing in the Canadian market as a result of its not having the variety of products that was expected by most Canadians when it entered the market (Gollom, 2015). This problem has come about because of the significant restrictions that it has faced in the market, based on taxes and other costs which are relatively higher than those encountered in the United States. The high cost of products has made Target promotions not to be taken very seriously in Canada and this has led to significant complaints from Canadian customers who have expressed disappointment about pricing. Promotions have become difficult because this company has already expended a lot of funds into the Canadian venture and to continue increasing investments would mean that its revenues would end up taking a serious hit.
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