Confidental

ANALZSIS AND Paper

Target CorporationDecision
ISIN: US87612E1064
Minneapolis,
Author: Samuel
Minnesota,
Wagner USA

PROPOSITION FOR
INTERNATIONALIZ

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Matter of Internationalization
1. Should the Target Corporation internationalize?
To decide whether the Target Corporation should internationalize, strengths,
weaknesses should be considered as well as threats that are valid for a
potential internationalization plan:

Strengths: Targets’ strategies of expansion or extension of business scope as

well as size are characterized by great success in the past decades. The
intra-state expansion at high pace beginning in 1966 to over a total of 1.613
stores spread across the US achieved through organic as well as inorganic
growth proof the capability of growth of the Target Corporation. Decades of
experience increase the odds of a profitable market penetration in foreign
retail markets. Successful acquisitions (e.g., 1978 Mervyn’s, 1990 Marshall
Field’s, 1998 Dayton-Hudson Corporation) and introductions of innovations
into the industry (e.g.,1988 UPC technology, Target Guest Card, Designer
low-cost fashion) affirm Targets’ core competences in the Retail Business
market, revealing the competence to expand internationally through
acquisitions as well as being able to adapt to the market segment and market
environment with the required means of inventiveness. The experience also
proofs that Target can differentiate from its’ competitor by having further
focused on its core strategy in the discount retail segment (through target
stores), maintaining market share and continuous growth in a highly
competitive market. Furthermore, the enterprise acquired the ability to
develop independently in-house premium products (e.g., “Archer Farms”
brand) giving the enterprise the possibility to increase margins and
simultaneously maintaining control over development and branding. This can
be regarded as highly important, when considering market development, as
the need of joint ventures or cooperations to guarantee product procurement
might be redundant. The passing of the $50 billion annual sales mark in 2006
is a sign of long-term competitiveness and profitability. Target Corporation
has a healthy basement, backing its’ plans for further growth on an
international level.
Weaknesses: Being the sixth-largest retail chain in the US, Target
Corporation can make us of economies of scale, learning curves or input
capacity but is facing limits as being in an extremely competitive market, not
possessing the possibility to compete with the opportunities of e.g. Walmart
or Costco.

Threats: Walmarts’ internationalization experiences prove that consumer

preferences differ from one country to the other and especially when
compared to the domestic ones. A mere transfer of business models and
strategies that work in the domestic market are no grant for international
success. The worst case can turn an intended market penetration into a
complex challenge with unexpected difficulties if not thoroughly researched in
advance. This limits the internationalization possibilities in terms of countries.
In addition to that many markets are already saturated.

Recommendation: Targets’ focus on a specific segment made it attain a

competitive advantage in the US market. The underlying numerous
competences mentioned in the sections above are the enabler for a
successful international market penetration. A crucial success factor is the
observation of Walmarts’ internationalization projects that sometimes were
unsuccessful and generated losses instead of profits.
Therefore, besides the consumer preferences and habits, amount and size of
the current market player as well as their market shares, the simple
advantage to avoid committing the same failures of other market players give
Target a practical benefit. The consulting firm A.T. found high potential
markets that reveal promising implementation possibilities. The results of the
market analysis demonstrate characteristics of those markets that seem
attractive enough to pursue the internationalization strategy.
When its’ resources will be focused on its’ strengths Target can increase its
overall benefit of the available resources and make a successful market
penetration more likely.
2. Which market should Target internationalize?
The analysis of opportunities indicates which market in particular have the
highest probability of a successful outcome.

Opportunities:
Emerging markets like Mexico or China in particular reveal high potentials for
internationalization plans. Especially the low saturation value gives the Target
Corporation the grand opportunity to gain the market sovereignty with its
know-how in acquisition and growth whereas being at rank six of the largest
retail chains in the US.
In contrast to Mexico, South Africa and India do not possess equally
favorable potential analysis data. The language advantage does not offset
the less good data of Mexico or China.
Especially China has a great middle-class segment that fits with the segment
of the Target Corporation. High growth numbers for their emerging markets
and auspicious demographics result in a growing Target consumer segment.
Risky is the unique business model of offering cheap chic retail products as
the products could be perceived as less qualitative.
Mexicos’ growth numbers are lower than of China but with a higher likeliness
of the customer segment for acquiring a liking for Targets’ business model
“cheap chip”. Another decisive argument for the Mexican market is the
geographical proximity and the therefore low logistic costs and facilitated
control mechanisms compared to far markets like India or South Africa.

Recommendation: Walmarts’ ambitious intentions of expanding into diverse

markets demonstrate that many markets are sensitive towards new
competitor entries. Buying power of consumers need to be examined, as of
Germany where loyalty and consumer buying habits are a relevant issue.
How business models and its’ product types are perceived decide on
acceptance or rejection of the costumer base.
Hence, after assessing the risks of performing market development in the
most promising markets, a smaller profit in a more secure market (Mexico)
outweighs a risky endeavor (China) and contributes better to the overall
character of Target as a slow grower.
3. How should Target implement internationalize?
Picking Mexico as the dedicated market, those competences of Target must
be found that have the strongest impact in the foreign market. This way the
resources are employed to the maximum. Internationalizing into a new
market always brings a degree of risk that can never be pushed to zero.
Hence, the Target Corporation should implement the safest strategy with the
objective to achieve a successful market penetration, testing the acceptance
of the customer base and if successful, incrementally expand by acquiring
already existing retail companies maintaining the brand name. This strategy
was pursued by the discounter chain “ALDI” in Austria where the acquired
supermarket chain name “Hofer” has not been replaced by the name “ALDI”
to date. Likewise, by averting the mistakes of Walmart in Germany and South
Korea, Target increases the probability of a successful internationalization. A
permanent analysis of the costumer segment, its preferences and examining
the market and its dynamics thoroughly enable a promptly reaction and
means to minimize damages or turn hazards into opportunities.