Why Target Failed in Canada?

Target Co

Song Tingting - 301177811

Simon Fraser University

Beedie School of Business

12 April 2015

Table of Contents

company description(2)

• brief history

• company success in US
• company expansion strategy (for growth): expansion to canada market
• company fail definition (evidence of fail)

strategic fail reasons

• Canadian industry introduction+analysis (why attractive to Target)

• declining industry strategy+cost & differential pressure (textbook)
• company’s industry position in Canada

• whether it is truly a good idea to enter

Yes→If it was a good idea, why did Target's entry failed so quickly?

No →  If it was a bad idea to begin with, why did Target chose to do it? (addition reasons为什么坚持进入)

• SWOT of U.S.(whether successfully transfer to Canada)

• no experience
• mistakenly use American experience
• poor store location+bad pricing
• Store Inventory and Distribution problems
• overambitious (open too much stores at beginning) --> it was rushed ( aggressive)
• management team conflict

parallel

• declining industry
• expansion strategy

Introduction

George Draper Dayton founded Goodfellow Dry Goods in 1902. The company name changed to Dayton Dry Goods Company in 1903 and shortening to Dayton Company in 1911. Fifty-one years later, in 1962, the organization opened its first Target store, modeled as a discount version of their department stores. The retailer has a bull’s-eye logo which represent the concept of the retailer was to hit the center of this bull’s-eye. Indicate they will be able to meet customer’s needs. It offers a range of products including household essentials, clothing, groceries, and private label products.

Later, it expanded department store operations while merging and acquiring other competitors to fuel its growth. It opened Target  Greatland store and the premier SuperTarget. It also acquired a number of retailers including Fedco, FedMart, Gemco, Rivertown Trading Company, and Associated Merchandising Corporation. By 1999, Target had consists of 912 business units, which including department stores, hypermarkets, superstores, and Target distribution centers with sales over $26 billion.

In August 2000, the company had officially changed its name from Dayton Dry Goods to Target Corporation. The company differentiates itself from the competition by offering a high quality shopping experience with trendy fashion apparel and household items while remaining a relatively low cost retail leader. This strategy helps Target to avoid direct competition with the low cost retail, such as Wal-Mart. Target’s varies store platforms located throughout the United State also ensure that the convenience needs of their guests are met.总结其他成功原因

In 2011, Target is America’s second largest discount retailer. It operates nearly 1,800 stores in 49 states. The market share of Target is close to 11% and sales revenues over $69 Billion. However, large presence in the country and weak economic environment in domestic limited the growth opportunities of the corporation.  

Target had been looking to expand outside the U.S. for a long time, because it presents a tremendous growth opportunity for the company. Among all the alternative countries, Canada ranked very high. First, Canada is geographically close to the U.S. and they have similarity in many areas, such as language and culture. Second, market research shows a positive customer response, lots of Canadian went across the border to shopping at U.S. Target. Third… (competition and market potential)

In 2010, NRDC Equity Partners acquired Canada’s Hudson’s Bay Company, which also included Zellers discount chain. NRDC don’t want the Zellers chain and sold Target the rights to purchase the leases on the Zellers locations. This offers the opportunity for Target to get access to the Canadian market. Therefore, they caught the opportunity and decided to expand to Canada.

Target spent more than $4 billion to setting up its Canadian operations. Up to January 2015, Target encompasses 133 stores and 17,600 employees. However, their entry to Canada Market was not successful. Losses for the business totaled $941 million in 2013, $369 million in 2012 and $122 million in 2011. Though sales for the first nine months of fiscal 2014 increases 90% to $1.32 billion, the Canada section still loss $627 million for earnings before interest and taxes. Altogether, Target endured $2.5 billion in losses after entry Canada market.

This outcome severely challenged Target’s overall profitability. In addition, according to analysis, it would not become profitable until at least 2021. After a deep examination, Target CEO Brian Cornell decided to shut down the business of Canada, wiping out billions of dollars in investment to focus on the more pressing task of reviving its sluggish U.S. business. The reversal brings an end to Target’s first attempt to expand beyond the U.S.

To examine why Target’s success in United State cannot replicate in Canada, we will first analyse the canadian department stores industry by porter’s five forces. Combline with the industry life cycle and industry structure to see why Target regard it as profitable market. Afterward, we will investigate Target’s strength and weaknesses to see what opportunities and threats they will face when enter into Canadian market. Lastly we will try to figure out the root causes of Target;s failure and review some similar companies that made the same mistakes in global expansion.