When Target Corporation and Logistics in Canada announced that it would exit Canada in 2015, many people were not surprised since the business was making losses in billions in a foreign country. Target Corp. acquired Zellers Inc. stores in 2011 and after that renovated them and opened 124 stores, and constructed three distribution centers in Canada. The retailer had been and is still highly respected in the United States because of its success in developing and maintaining customer loyalty. It offers competitive prices in the U.S., and it had an excellent reputation locally. Target Corp. was well known to Canadians since they cross the border and purchase affordable fashion and household products from the U.S. Target location. However, since its launching, Target, which is the second-largest discount chain in the U.S., struggled in the Canadian market (Laird, 2012). The main reason for that was that it assumed many things in its first international launch in Canada. Although it had a customer base in Canada, it should have made considerations before the launch.
One reason why Target Corp. was not successful in international expansion was that, according to Brian Cornell, the Chairman and CEO of the company, was that it moved to Canada too quickly. Before its first international launch, Cornell argues that the company missed the mark by “taking too much too first” (Spenser, 2014). The mistake of sudden entry did not give the retailer a chance to consider things like prices very critical to Canadians. Their entry disappointed Canadian shoppers because they felt that the company had let them down because of the pricing discrepancies between Target stores on the different sides of the border (Edelson, 2015). The prices from stores in the U.S. were lower than those in Canada. There were high expectations from Canadians since they knew the company. They felt that their expectations were not meant mainly because of the high prices compared to what they used to spend across the border in the same Target Corporation (Target Canada Supply Chain Woes, 2014). There was a misjudgment on the side of Target Corp. by setting prices at noticeably higher levels than that which the Canadians were accustomed to at the U.S. locations.
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Another consideration that Target Cop. should have considered was Canada’s low population density and vast geography compared to the U.S., where it was doing well. The low population and vast geography in Canada forced Target to make a strategic decision to outsource distribution to a third-party logistics firm known as Eleven Points Logistics ( Supply Chain Problems a Critical Factor in Target Missing the Mark , 2015). The decision led to the increased cost of distribution which the company had not accounted for before launching stores in Canada. There was also inefficiency in the distribution of its products in different stores within Canada.
Another consideration that Target failed to consider was the risks that are associated with conducting international business. Such hazards include higher currency exchange fluctuation and cost of doing business which provides for higher taxes, legislation, and higher wage rates. There are higher real estate costs and labor costs in Canada than in the U.S., and therefore the prices of its products went high. The company also did not consider established competitors such as Wal-Mart and Loblaws, a Canadian grocery chain store (Spenser, 2014).
The reason why Target Corp. has not expanded to the global market is that it fails in its trial in Canada, and it has focused its attention on other goals and the U.S. market. There are opportunities in the global market, and Target Corp. should expand. However, since its brand resonates best with the U.S. market, it should optimize its potential in the local market.
From the Target Corporation and Logistics case study, I have learned that it is essential to consider expanding into the global market. One consideration is consumer preferences which Target failed to consider when it raised its prices, and the customers were disappointed. Another thing is the risks associated with the international market, such as currency fluctuations and operations costs.
References
LAIRD K. Target, Canada. Marketing Magazine. 2012;117(16):34. Accessed February 23, 2021. https://search-ebscohost-com.ezproxy.bethel.edu/login.aspx?direct=true&db=buh&AN=83747006&site=ehost-live&scope=site
Spenser, J. (2014, May 24). Canada: More foreign than Target realized . https://www.startribune.com/canada-more-foreign-than-target-realized/260468691/?refresh=true.
Supply Chain Problems a Critical Factor in Target Missing the Mark . GHY International. (2015, April 7). https://www.ghy.com/trade-compliance/supply-chain-problems-a-critical-factor-in-target-missing-the-mark/.
Target Canada Supply Chain Woes. (2014, March 13). https://mwpvl.com/html/target_canada_supply_chain_woes.html.
Edelson, S.Target Exiting Canada, Court OKs Liquidation. WWD: Women’s Wear Daily. 2015;209(10):1. Accessed February 22, 2021. https://search-ebscohost-com.ezproxy.bethel.edu/login.aspx?direct=true&db=buh&AN=100676302&site=ehost-live&scope=site
