Target Corporation - the Hypermarkets of Malaysia Retailing Industry

INTERNATION MARKETING

Mode of entry and the rationale for choosing the mode

According to Hassan, H., Mahdee, J., Rahman, M. S., & Sade, A. B. (2015), the hypermarkets of Malaysia retailing industry show a very impressive development. Based on Hassan, H., & Rahman, M. S. (2012), the expansion opportunity for hypermarkets industry is still ongoing dramatically. According to Hassan, H., Rahman, M. S., & Sade, A. B.  (2015), Malaysian prefer to purchase their basic household’s necessities in hypermarkets. This opportunity creates Malaysia as a very attractive country for any foreign hypermarket to enter for capturing the market share. Hence, it will be a very profitable business if Target Corporation wants to enter Malaysia. However, without an appropriate entry mode, Target Corporation will fail to capture and enjoy this profitable opportunity.

Target Corporation is suggested to use Greenfield investment when it wants to enter Malaysia hypermarket retailing industry. Greenfield investment (GI) is considered as one type of the foreign direct investments (FDI) and wholly-owned subsidiaries (WOS) entry mode, which a completely new venture will be started up in a foreign market. According to A. Slangen and J.-F. Hennart (2007), Greenfield investment is involving the establishment of new foreign subsidiaries in a target foreign host country by headquarter in the home country. Greenfield investment is an attractive entry mode because the company can choose a site that starts afresh, meets its own needs better and adapts itself to the new business culture by its own way. (Dr. Yakup Durmaz and Ahmet Taşdemir, 2014). However, a company without strong financial background and deep understanding of a country are not recommended to use Greenfield investment as the entry mode. (Philipp Harms and Pierre-Guillaume Méon, 2012).

Greenfield investment is a very costly investment due to high fixed plant setup cost. (Qiu, L. D., and Wang, S. Z., 2011). However, Target Corporation able to overcome high fixed cost through its strong financial background. Target Corporation had maintained a profitable brand image of hypermarket in United State. (Katie, T., Kelly, M., Roman, D., Keenan, M., & Thomas, M., 2012). It has grown consistently year by year. For example, Target Corporation is able to use $10 billion for its stock buyback program and thus raising its dividends by 7.7% and also demonstrates a positive earning pattern for its net income which raises almost 52% compared to the same quarter a year prior. (Tony Owusu, 2015). This shows that Target Corporation is a healthy and growing company with a strong financial background that will be a powerful support for using Greenfield investment as its entry mode into Malaysia.