IBM Assignment # 2

Submitted by: Shama Khan

Roll number: 190011

Class: BBA 8

Submitted to: Miss Sidra

Provide a recent practical example of an organization that has faced the
challenges of international competition and expansion.

Target in Canada
Background
The most recent high-profile example of an international expansion failure is Target’s
withdrawal from the Canadian market. Founded in 1902 and headquartered in Minneapolis,
Minnesota, Target is the second-largest discount retailer in the United States and in direct
competition with market leader Walmart. Given its overwhelming success in America, Target
announced in 2011 its first international expansion into Canada. Over $4.4 billion was invested
into the expansion, and expecting a rapid recoup of its investment, the company stated its
Canadian stores would become profitable by 2013. But it was not the case. Hence, on January
15, 2015, Target announced it was abandoning Canada and would close stores in a planned
manner.

Reasons
Following are the reasons for Targets’ challenges in Canada:

 Buying pre-existing shops instead of opening own retail stores: Target tried to enter
the market with buying pre-existing retail stores that did not meet the brand
expectations that people had from Target. The stores were smaller than what people
expected.
 Lack of market research regarding the location: The location of the retail shops was not
ideal and inconvenient for customers. They had to go out of their way to shop there.
They did not research enough to select locations that would attract more customers.
 Supply chain problems: Target opened 124 stores and 3 distribution centres within 3
months that led to delivery problems. People were unable to find too much variety at
the shops because of supply chain problems.
 Technology failure: The computerized ordering system was not upto the mark and had
glitches.
 Did not study customers’ behaviors: Canadian expected low prices and discounted
items just like Walmart which Target failed to provide.
 Competition: Walmart entered Canadian market 2 years before Target did and Target
did not have any competitive advantage over Walmart and other players in the market.
Lack of competitive strategy also led to Target’s failure.
 Did not follow internationalization process steps: Target did not follow the proper
steps of internationalization process whereby the risk of failure can be some what
minimized.
Overall this expansion not only hurt Target finances but also had negative impact on the
Canadian economy as many people lost their jobs when target announced to close their shops.

Starbucks’ struggling in Australia

Background
Starbucks is a brand known around the world. It has expanded to many countries and
succeeded in international markets.
Starbucks then decided to expand into Australia where it opened its first shop in Sydney in
2000. Till 2008 it had more than 87 shops in different locations in Australia. They thought it will
be a success just like it had been a success in other countries but what happened was not what
the organization think tankers hoped for. During early years, Starbucks reported $105 million in
losses.

Reasons
Following were the reasons for their losses:

 Not enough market research: The biggest mistake that Starbucks made when they
decided to move into Australia was that they thought they didn’t need to adjust their
offerings. Australia has a rich coffee culture, where local cafe menus are dominated by
complex coffee drinks. They did not properly research the market and thought that
people will buy the drinks because of the brand name.
 Different taste preferences: Australians do not like too much sugary drinks and
Starbucks’ drinks were too sugary for their taste.
 Cultural differences: Australians like to go to coffee shops mainly to have conversations,
to meet people and converse about different topics and then get complimentary drinks
while having those conversations. Starbucks did not understand that Australians prefer
coffee shops as a meeting place as opposed to the US where you buy your drink and
then head out.