External Environmental Analysis
Remote environment these are the factors, which affect all businesses, and frequently, neither the business nor the industry has any control over them examples: i.
The economy has a major influence over the retail industry. Target's market has a very broad scope. When the economy affects the purchasing ability of its customer base, customers turn to less expensive commodities offered by discount retailers. b.
Economies of scale: Target can compete well against county general stores, surplus and salvage stores, Army and Navy goods stores, warehouse club stores, and catalog showroom stores because they have a significant cost advantage over any new rival. B.
Product Differentiation: Target creates high entry barriers through their high levels of advertising and promotion (Essentials of Strategic Management) ii.
Competitive rivalry: The increased productivity gap between Wal-Mart and Target is affecting both companies in terms of competitive stances. Wal-Mart will attempt to exploit the existing gap by lowering prices further and creating an even stronger advantage. This is highlighted through the disparity in sales per square foot; 1999 was the narrowest, with Wal-Mart selling $441 and Target selling $260; by 2002 Wal-Mart had increased this to $498 and Target to only $271 per square foot. Similarly, the operating productivity of Wal-Mart, far outstripped Target. Target must therefore address this competitive issue. Investors continue to choose K-Mart and Wal-Mart first Investors in retail are less prepared to acquire Target stock than the two other main competitors in the sector v.
Changes in government regulations
Credit Cards: The introduction of the store credit card is an attempt to gain two advantages: one is to increase the frequency of visits; the other is to gain fees for the card. It has already been shown that Target credit card holders visit the store more frequently than non-holders do. iv.
alternative product streams: The company plans to add more emphasis on the good value on offer in the stores in future marketing initiatives. It has announced a plan to expand the assortment of food items (including more private-label) in new and remodeled stores, while downsizing men's apparel, home improvement, automotive, and sporting goods. v.
Specific demands by a narrow group of customers
Unexpected competition: The largest threat to Target is product and company competition. The Target division competes with many discount, off-price, and drug chains, moderate department stores, and specialty retailers. The biggest of these is US giant Wal-mart, which dominates many consumer goods sectors in the US, focusing on low prices and good value. SuperTarget's rivals include grocery stores, SuperCenters, and warehouse clubs. Target must compete with Wal-Mart in product ranges as well as through actual store numbers. iii.
New substitute products
Operational Environment these are factors in the immediate environment in which the business operates examples: a.
Competition: The company has been slow to move into the higher-end consumer electronics market, whereas Wal-Mart has adopted an aggressive strategy and incorporated products such as Sony flat screens or Panasonic LCDs. Furthermore, the company is adopting a new strategic direction, by lowering prices on consumables in order to drive more traffic, though this appears to have been unsuccessful to date. b.
Labor: The retail industry was a significant source of employment in the United States, accounting for roughly 18 percent of the...
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