Business Strategy

    

Five Forces Model

Five Forces Model Responses 

Threat of New Entrants - Target will have to strengthen loyalty through loyalty programs like Target Circle and exclusive partnerships with other brands. Leverage will also need to be established with their supply chain in order to reduce costs and maintain competitive pricing.

Bargaining Power of Suppliers- Target will have to develop relationships with multiple suppliers in order to reduce dependency on any single source. In addition Target can expand their private labels and build strategic partnerships to negotiate favorable terms.

Bargaining Power of Buyers- Target can enhance in-store and online experiences through better store layouts and user-friendly apps. In addition, they can also use price-matching policies to stay competitive. Services such as same-day delivery, curbside pickup, and personalized recommendations can be improved as well.

Threat of Substitutes- Target will have to ensure unique offerings such as exclusive brands and collaborations with other companies. Target can also invest in fast and reliable options like drive-up services and partnerships with delivery platforms. Also by focusing on sustainable and ethically sourced products, Target will appeal to environmentally conscious consumers.

Industry Rivalry- Target has to establish differentiation from other companies. Their design and quality of products will have to stand out from competitors. To keep customer engagement, maintaining a strong digital and social media presence is key.

Is the Industry Profitable? The retail industry can still be profitable despite the fierce competition and     the strong purchasing power of consumers, especially for businesses like Target that have made significant investments in information technology and strong supply chain management. Target has maintained profits through the use of technology in its mobile app, inventory control, and logistics by boosting productivity, providing competitive pricing, and enhancing customer satisfaction. However, because there is little product differentiation and intense competition, profit margins are typically thin.

Using MIS, Porter's four competitive strategies are divided into cost differentiation and industry-wide or focus. After analyzing Target and its industry structure, we concluded that it follows an industry-wide and low-cost competitive strategy. The cooperative business model allows target members to join resources to obtain larger quantities of products at lower costs, thus creating affordable shopping for the ultimate consumer. To cut costs, not only does Target procure national brand items for its members and wholesale customers, but it develops products under its private label brands (Good & Gather). Through its private label and national brand procurement, Target also ensures that its members properly serve the customers in their communities. This is a crucial factor in maintaining its competitive advantage, considering each customer segment varies depending on each store location.

Additionally, the target uses proactive analysis and action execution to counter the dangers posed by the five industrial factors. The cooperative has made sure to stay ahead of its competitors by closely examining their strategies and seizing new opportunities because it operates in a market that is dominated by massive companies like Walmart. For instance, Target has raised entry barriers by successfully implementing information systems to support members customers shop from home experiences. It has also guaranteed the creation of a free membership initiative known as the Red card. Customers may enhance savings with coupons and other incentives, and members can log every transaction with this Red target Plus card. It also creates switching costs as customers accumulate points with their purchases, which they can later redeem on certain holidays, for instance, on Christmas gifts for the family . Additionally, Target provides a wide range of unique selections with its private label, making substitutions a bit more difficult for the customer. Finally, the cooperative has established relationships with multiple suppliers for its procurement practices to reduce reliance and avoid overpricing. 

Value Chain

Target Corporation gains value through its complex network of activities that ultimately lead to customer satisfaction. The beginning of this great process starts from its Inbound Logistics, where the main focus of the company is to build or continue to maintain strong relationships with supplier/vendor companies. They also work with managing its supply chain to continue to efficiently source product’s quality. In Operations, Target approaches customers with an omnichannel approach – offering various ways for customers to navigate the store (online, in-person, social media, etc.) Outbound Logistics makes sure that services such as delivery and pick-up goes smoothly. This process also includes times where Target works with 3^rd parties to ensure safe, efficient, and fast delivery. Through Marketing & Sales, Target’s relationship with marketing its brand is well focused on positioning itself as an affordable retailer that offers great quality products at affordable prices, includes loyalty program (Target Circle) and continues to attract people with their aesthetic and even establishing a Starbucks stand in most stores.  Lastly, we have Service, among all companies, Target prioritizes the satisfaction of its customers. Therefore, implementing flexible return policies and great customer service. 

Business Processes

In order to successfully run the operations Target uses systems of interlinked activities, repositories, roles, resources, and workflows that collaborate to achieve a business objective (Kroenke & Boyle, 2021, p. 44), known as business processes. 

Sales Process (structured) – This process includes the management of purchases that are continuously happening online and in-person. The process starts with advertising a product that can captivate the attention of potential customers and, most of the time, ends with a purchase, sometimes followed by delivery and a receipt. The reason this falls under a structured process is that it follows a clear and efficient workflow. Its basic steps leave little to no room for variation. A structured process is formally defined as a standardized process that involves day-to-day operations, such as accepting a return, placing an order, or purchasing raw materials. The process starts with advertising a product that can captivate the attention of potential customers and, most of the time, ends with a purchase, sometimes followed by delivery and a receipt. The IS system that supports the sales process is Target’s POS system. 

Marketing (dynamic) –  Target uses multiple dynamic processes because the store has a variety of options for the customers to choose from. Given that the target market is very diverse, marketing tends to change and adapt accordingly. A dynamic process is a flexible, informal, and adaptive process that normally involves strategic and less specific managerial decisions and activities. An example of this process can be Social Media Platforms such as Instagram. Right now Target’s Instagram account is one of the most popular accounts for big-box retailers/superstores with 6 million followers, almost more than half than Walmart.

An information system is a group of hardware, software, data, procedures, and people components that interact to produce information.  Target for the last couple of years has integrated Ai to help customers experience their online app. Target uses Ai to help with their inventory management systems. It also helps with their efficiency and allows people to experience shopping online in a whole new way. For the holidays, Target uses Ai to make sure products never go out of stock and people can shop and pick up their gifts. Target also uses something called Enterprise Cart and Checkout (ECCO), which helps power their checkout experience on their app and website. The social media system that will be analyzed is Target’s Instagram. 

Process Implementation

Cascale, an organization of ~ 250 brands, retailers, suppliers, and nonprofits with the goal of reducing the environmental impact of clothing and footwear globally was founded in 2009. Target established alliances with Walmart and other businesses as they became a founding member of Cascale. They saw the future potential this firm had and were later proven to be right about Cascale’s potential. 

In 2011, the group released the “Higgs Index”. This set of tools aims to assist participating companies in streamlining their manufacturing processes and measure their areas of improvement more effectively. The implementation of the Higgs Index would reduce costs for Target in the long run.

In 2012, Target asked factories that produced their products to use the Higgs Index Self-Assessment. Later in 2020, Target began to require these factories to complete the Higgs Facilities Environmental Module (FEM) Self-Assessment.

This benefits Target in multiple ways, as the continued usage of the Higgs Index by larger corporations such as itself within the industry would create entry barriers for upcoming or start-up firms who do not have access to the Higgs Index. This process implementation was a successful move done on Target’s end, as it raises entry barriers, establishes alliances, and reduces costs.