According to Michael Porter’s five forces model, the Target brand proves to be capable of making a high profit. Target’s industry faces several barriers to entry. First, Target and its current nation-wide competitors enjoy significant economies of scale. Purchasing inputs in bulk enables Target to reduce pricing in their stores. Also Target benefits from brand loyalty with their customer which makes it difficult for competitors to gain customers. Due to its high level of power as a buyer, Target purchases large quantities of products, has many choices between equivalent products, and the corporation can easily switch between the offerings of different firms. Target is able to demand a decrease in prices from the sellers due to its high volume of purchases and its large selection of choices. If company wants its products on the shelves of target it must listen to Target’s demands. Again, due to Target’s high level of power as a buyer it is able to switch its product inputs without enduring a large cost. The third force of the bargaining power of the suppliers holds little relevance to Target in that Target’s suppliers hold little power over the prices of their inputs. This occurs because Target can easily switch suppliers if one does not cooperate with its desires. The threat of substitutes, another force, proves important to the target corporation. Several Target-like stores exist today and can somewhat satisfy similar customer needs. The intensity of Rivalry represents the final force. Target’s main competitor Wal-Mart carries the same commodity products as Target causing an intense rivalry between the two major corporations.
Overall, Target continues to gain revenue yearly proving that remain strong in the five forces and therefore remain successful. As far as barriers to entry, Targets ability to purchase large quantities and its superior brand loyalty makes it very difficult for new enterprises to enter into its industry... [continues]
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