The ability of a business to compete and thrive is dependent on its ability to study its environment and then respond appropriately. SWOT analysis is a tool used to map both the internal and external environments of an organization. Therefore, using this tool will help in gaining a better understanding of US retailer Target.
Strengths
Target is a major US retailer with a presence all across the United States. With a large workforce of more than 300,000 staff, the company has been able to grow and to have a strong market position. The size and scope with which the company operates is an obvious advantage as Target is able to enjoy economies of scale and it can pass on discounted prices to customers.
Delegate your assignment to our experts and they will do the rest.
The target brand is well perceived, recognized, and respected by customers all across the United States (Dunne & Carver, 2013). Moreover, customers genuinely love Target which might not be the case for Wal-Mart.
Target has over the years gained a lot of marketing experience in highly profitable product lines such as fashion as well as household furnishings. Therefore, it is well positioned to continue making gains in those areas as well as exploring some new ones going forward.
The retail chain is also liked by middle class shoppers. They find the place better suited to their needs unlike Wal-Mart that only seems to focus on the lowest ends of the market (Fernie & Fernie, 2015).
Target has an online shopping platform which allows customers to shop remotely and is a key driver of its numbers. In choosing to develop the E-Commerce option, Target sought to respond to the trend in the market whereby consumers are buying their stuff online.
The management of target has been outstanding over the years and has been critical to the success that the company enjoys today. Ultimately, some of the strategic decisions that the firm’s management has made over the years have put in a good stead and enabled it to keep performing as well as it has been doing over time. For example, the decision to expand into the urban markets is one area where the management pulled a masterstroke (Dunne & Carver, 2013).
Another key strength that Target has is its focus on differentiation. It is easy to copy what everyone else is doing like using discounts as the main attraction for customers. However, Target has instead chosen to focus on the younger generation which is more image conscious (Fernie & Fernie, 2015). To that end, Target differentiates itself via the kind of merchandise that it sells. For the most part, Target offers products that are affordable but also stylish. This is possible through the company’s partnerships with different designers and dealers who provide the differentiated merchandise at prices that are lower than what is to be found at its rivals.
The REDcard loyalty program is another indicator of Target’s strategic shrewdness. Since being introduced in 2010 (Fernie & Fernie, 2015). The loyalty scheme rewards customers with discounts on purchases either in-store on online. It is just one way of showing appreciation to the customers and getting them to keep coming back to Target stores to shop.
Weaknesses
The desire by Target to offer differentiated products means that the company relies to a great extent on foreign suppliers. The policy that Target has held onto for years could end up hurting the company.
In 2013, Target experienced a data breach in which a lot of customer information including credit card details was compromised. The incident was not the most reassuring for an institution such as Target that has an online shopping platform that requires shoppers to key in their card details.
The firm lacks a presence in international markets outside the US and that could prove to be an impediment in the future. It is even more significant considering that Wal-Mart has a large international footprint which means that it is not as susceptible to the factors related to the US economy.
Target’s business model is a problem. The firm seems to prefer the big box stores and supercenters while many shoppers today seem more interested in convenience stores around the corner (Dunne & Carver, 2013). Even more concerning is Target’s stubbornness and blatant refusal to adapt to the changing tide. As Wal-Mart looks to open a growing number of smaller stores, Targets still clings onto its model of big box stores. The decision could prove detrimental to the retailer.
While Target is one of the big retailers in the US, it is still not as diversified as some of its rivals such as Wal-Mart or Kroger (Fernie & Fernie, 2015). Therefore, the company might be more vulnerable to unfavorable economic conditions than any of its other rivals.
The lack of flexibility on the part of target is also visible in its failure to venture into some of the increasingly lucrative retail segments such as financial services or filling stations. One would think that Target would try and follow the lead of Kroger which has made a significant foray into the filling stations business and had much success but that has not been the case.
Opportunities
The US economy has shown continuous growth over the years since recovering from the financial crisis. As people’s disposable incomes grow, Target should expect to keep growing its sales into the future. Moreover, the focus on US expansion should help Target take advantage of the opportunities in this market.
In recent years, there has been a rapid growth in E- commerce with many people comfortable with making purchases online. The success of Amazon and other companies goes to illustrate this fact. Target already has an E- commerce platform which puts it in a good place to take advantage of the trend.
The growth in private label brands in the US and Europe is also an opportunity for Target to exploit (Dunne & Carver, 2013). As it is, the firm stocks a range of private labels which means that it has experience in that area. There is scope to see even more growth in this segment going forward.
The urban market segment remains strong and one of the best performers. Target’s focus on this area is a real opportunity for the company and one that the management should be looking to fully exploit.
The rise of the cost- conscious shopper could work to Target’s favor. With more people looking for value, Target has the opportunity to tap into this segment and grow its sales.
Threats
Target has to deal with rising labor costs in the US which threaten its profitability and make it harder for the company to compete on low prices.
The company faces intense competition from Wal-Mart and Kmart particularly as they seem to have similar offerings.
Target has to deal with the rise of the small box retailers and dollar stores such as Dollar General which are preferred for their low prices and convenience.
Having broken down the SWOT analysis for Target, one notices that the company’s critical strengths lie in its brand and the focus. However, the model that it operates as well as the apparent lack of diversification counts as significant weaknesses. Going forward, Target needs to take advantage of E- Commerce and the price- conscious customers. However, the company needs to do more to stay ahead of the competition.
References
Dunne, P., & Carver, J. (2013). Retailing Boston: Cengage Learning.
Fernie, J., & Fernie, S. (2015). Principles of retailing London: Routledge.
