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SWOT Analysis of Target Corporation

According to Sarsby (2016), a SWOT analysis is a simple yet very powerful tool that helps managers of an entity develop its business strategy. It helps managers to prioritize what a business needs to do to ensure it succeeds. This paper presents a SWOT analysis of Target Corporation. Target Corporation, commonly referred to as “Target” is an American-based retail stores chain. Target is the second biggest retailer in the U.S. after Walmart; it offers household goods, apparel, food supplies, home furnishings, and accessories among others (Rowley, 2003).

Strengths

Strong brand

Target is among the oldest discount retailers in the U.S. It has an extensive footprint of stores all over the country and has significant brand recognition. Target has created a unique image in the otherwise competitive industry; its image of “cheap, yet stylish” has helped the company differentiate itself from other retailers such as Walmart and Kroger.

Outstanding loyalty programs

The company’s marketing programs also give it unique strengths; for example, the REDCard loyalty program, which gives regular customers a 5% discounts on their purchases has enhanced the company’s market penetration. The initiative has already reached a penetration of over 21 %. This program and others such as the Cartwheel win customer loyalty, which in turn provides business security.

Differentiation through unique merchandise

Target focuses on differentiating itself from other retailers such as Walmart by offering affordable yet stylish products. To ensure its products are more stylish than those of competing retailers are, Target partners with various dealers and designers to offer differentiating merchandise assortments. In addition, the company performs excellent outbound logistics, marketing, and sales promotion that help the company create a more upscale and chic image compared to other low-cost retailers.

Excellent vendor relationships

Target has strong bonds with its vendors and suppliers. Due to its strong presence in the American market, the company enjoys economies of scale, which enable it to request products in bulk. Due to its strong relationships with suppliers and vendors, the company is assured of timely deliveries and a streamlined distribution process.

Weaknesses

Underutilization of Target.com platform

Target offers customers an online platform where they can do item searches and even order online. Customers can find more options on this platform than even on physical stores. However, the online platform is significantly underutilized. The company needs to improve awareness of this medium.

Geographic locations

Target operates only in the U.S.A. It also does not have a presence in Vermont, Alaska, and Hawaii. This means the company does not take advantage of the opportunities available in the international market.

Over-reliance on foreign suppliers

Target sources most of its products from foreign nations. This results in business risks because changes in economic or political conditions in a country that is a key source of its merchandise can significantly impact its supplies and thus its revenues.

Electronic data breaches

Target has a high risk of being exposed by data breaches. Data breaches cost companies a lot of money to resolve and manage. In addition, they harm a company’s brand image.

Opportunities

International expansion

Target should consider expanding its operations to international markets. Although its maiden expansion into Canada failed massively, it should not deter the company from expanding to countries such as China and Japan. Doing so would decrease its exposure to business risks whenever the U.S. economy slows down.

Strong online presence

Target recognizes the increasing trend of consumers to prefer e-Commerce to the traditional “brick-and-mortar” retail stores. Online sales are increasing all over the world. The company has sufficient resources and is well equipped to exploit this growth.

Brand exclusives

The company should collaborate with more designers especially in signature products to enhance its revenue growth. Brand exclusives in categories such as apparel, health and wellness, and toys are among the reasons why sales of the company are increasing.

Private-label brands

The U.S. and Europe are witnessing an increasing demand for private label merchandise. Target, which offers a range of private labels, stands to benefit from this trend. Private-label brands provide a retailer with a touch of uniqueness as well as enhance its margins. Other competitors such as Walmart, Costco Wholesale, and Kroger have realized this and are currently investing significantly in their store brands.

Flexible format stores

The launch of smaller store formats that sell curated merchandise varieties in urban settings is a capital-efficient and cost-effective way of reaching new customers in new markets. Target should expand its flexible format stores to reach more customers.

Threats

Competition

The discount retail industry is very competitive. Competition from other brick and mortar retail stores such as Walmart, Kroger, and Costco Wholesale is stiff; in addition, online-based retailers such as Wayfair, Jet-com, and Amazon are putting more pressure in the industry.

The U.S.A. economy

Because Target is only based in the U.S.A., a slowdown of the U.S. economy could greatly affect the performance of the company.

E-Commerce

Although the company has ventured into e-commerce to grow its online sales, its main brick and mortar stores are in serious threat as more customers ditch physical stores in favor of online-based stores.

Rising labor costs

As wages rise in the U.S., labor costs too rise. Due to this, companies like Target that employ many workers in their stores are forced to spend more on salaries which affect their finances and profitability negatively.

Strategic Goals

Global expansion

Target should focus on expanding its presence in the global market. Unlike its large-scale entry into Canada that proved disastrous, the company should use smaller stores that resemble TargetExpress and CityTarget locations. Such small but densely stocked stores would particularly be successful in rising economies such as India and China which are densely populated.

Refurbish the e-Commerce strategy

Due to the potential of e-Commerce, Target should focus on revamping its strategy. The company needs more than just a website; it should launch warehouses across the globe to ensure items ordered are shipped from local stores. Currently, all items ordered online are shipped from its distribution centers in the U.S.A, which results in import duties and high shipping costs.

Reimagine the Company’s Owned Brand Portfolio

Following the success the company has had with the current portfolio of exclusive brands, it should accelerate the introduction of more exclusive brands. It should also enter into more designer collaborations.

References

Rowley, L. (2003). On target: How the world's hottest retailer hit a bull's-eye. John Wiley & Sons.

Sarsby, A. (2016). SWOT analysis. Lulu. com.