An analysis of your company’s (TARGET company name) industry from the point of view of
Porter’s Five Forces (if your industry operates in perfect or monopolistic competition),
Game Theory (if your industry operates in oligopolistic competition) or the
Resource Based View of the Firm (if your industry operates as a full monopoly),
and any other strategy frameworks that provide insight to your understanding of the industry.
Industry Competitive Analysis
The company Target Cooperation, which is a Minnesota based company is considered 11th largest retailer of the world regarding its sales. The company operates in a monopolistic competition in which giant retailers like Wal-Mart, Costco, Tesco, and Kroger operates. The Target Company was founded in 1902 over a century ago. The company has about 1792 retail stores in the United States and store a variety of merchandise like electronics, apparel, food, toys, grocery, medicine, health, and fitness (Traders.Com, 2018).
Porter’s Five Forces Model
Competition by Rivals
Target face competition in this industry from other giant retailers like Wal-Mart, Kroger, Costco, Home Depot, Macy’s, Kohls and Amazon (Zhu, Singh, & Manuszak, 2009). The target can manage these challenges by innovating new product lines, building its capacity, investing in research and development, use its economies of scale to lower its fixed cost per unit, and introduce new products in the market (Soni, 2016).
Ease of Entry
The Mass Merchandiser operates in a very competitive retail industry in which it is relatively easy for the entrant retailers to open a business as Target. However, it is difficult for the new entrants operate the business on the same scale as Target.
Bargaining power of the Buyers
The highly competitive nature of the industry in which Target operates provides some choices for the consumers and buyers. It includes alternatives available at online mediums and on brick-and-mortar stores. As the products offered by Target have a very low level of differentiation, the company has to keep the prices of the products lower or competitive for keeping sales intact.
The target can mitigate higher bargaining power of the buyers through building a larger customer base. It can also work on innovating products which provide new markets.
Ease of Substitution
The products offered by Target like the electronics and groceries are very much undifferentiated among all retailers. Thus, customers do not face any significant switching costs while switching from one retailer to another.
It is evident that Target has tried to create loyalty among its customer by using its guest experience. Moreover, the company also offers exclusive private labeled products which are only present at its stores for different purpose.
The target can also use being service oriented to tackle this challenge. By using the understanding of the core need of the customer than what it is buying, Target can leverage its position among other substitutes. Another way can be to increase the switching cost (Zhu, Singh, & Manuszak, 2009).
Bargaining Power of Suppliers
The company is one of the largest retailers in the world and the United States. The merchandise marketed by Target is on a larger variety which makes its supplier base diverse as well. No single supplier of target accounts for more than 5% of the sales of Target.
Because of its huge size, it does enjoy favors from the suppliers while negotiating. However, it can be said that the bargaining power of Target is lower than that of Wal-Mart; still, it is significant enough to provide it with leeway.
Though the bargaining power of suppliers is low, Target can make it more effective by building an efficient supply chain and developing the dedicated suppliers whose business solely depend on the business provided by Target. The target can use the learning of its competitor Wal-Mart and Nike who used third-party manufacturers as suppliers whose business was solely dependent on the business provided by the companies. Another way of lowering the supplier bargaining power is to experiment using other alternative sources of raw material in case if the prices or supply of the main raw material affects the business, it can opt to the other alternative raw material (Roy, 2015).
References
Roy, D. (2015). Strategic Foresight and Porter’s Five Forces (1 ed.). GRIN Verlag.
Soni, P. (2016, April 2). Analyzing the Investment Fundamentals of Discount Retailer Target. Retrieved April 8, 2018, from https://marketrealist.com/2016/04/porters-five-forces-analyzing-targets-competitive-positioning
Traders.Com. (2018, April 8). Target Corporation (TGT). Retrieved April 8, 2018, from http://www.4-traders.com/TARGET-CORPORATION-12291/charts-sector/
Zhu, T., Singh, V., & Manuszak, M. D. (2009). Market Structure and Competition in the Retail Discount Industry. Journal of Marketing Research, 46(4), 453-466.
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