Chapter 15 Case Study_Final

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Target Canada MK-672-I03 Dr. Stephanie Buffaloe Divestment: Market Demand The first of the three drivers to review as part of determining a divestment decision is analyzing market demand. The Canadian market seemed that it was prime for Target to expand its business globally. Research had shown that nearly 10 percent of Canadians were crossing the board to shop while 70 percent were familiar with its brand (Sorensen, 2015) . Based on research performed, no signals were warning Target management that this decision would negatively impact the company as it did. Divestment: Competitive Intensity The second of the three drivers to review as part of this review is competitive intensity. The company’s leaders chose to expand very quickly to the market without testing the waters which lead to its downfall. The company opened 124 stores within two years (Aaker & Moorman, 2017, p. 282) . The company was not well equipped from a procurement/sourcing perspective. The company had storefront but did not have the goods to fill the stores. This would then lead to a lack of sales due to low product availability. After Target had experienced struggles entering the Canadian markets and troubles with sourcing products, Walmart began to assert its dominance in the market. During the first year in Canada, Target reported a loss of $1 billion (Jain, 2015) . With Walmart’s long history of providing the lowest prices to its customers, Target could not compete with the low prices Walmart had to offer customers (Aaker & Moorman, 2017, p. 282) . Divestment: Change in Strategic Thrust Page 1 of 3

The third driver to consider is a change in strategic thrust. Target had spent roughly $1.8 billion to secure leases on124 storefronts in Canada (Jain, 2015) . Target Canada was reporting losses of revenue month over month. The stores were unable to source goods they needed to fill the stores and produce sales. It was clear to management that the company could not get control of the issues and it needed to protect its brand. In the fourth quarter of 2014, the company decided it was time to depart from the Canadian market. The company reported a loss of $5.4 billion in the fourth quarter of 2014 (Jain, 2015) . After attempting to expand its business globally for two years, Target decided to exit the market. Response to Walmart Price War If I were President of Target Canada when Walmart started the price war, I would have asked my colleagues to perform an analysis to determine whether we as a company were in a position to compete. It was clear that the market was relatively stable, and the customer base was there. However, a red flag would have been the continued losses Target Canada was experiencing year over year. The company could not continue to operate under a model where the United States branch was supporting the Canadian stores. I do not believe there was any way to win the price war with Walmart. Walmart has been in Canada since 1994, and they have a strong position in the market. Target was essentially bleeding out and the only way to prevent any additional loss was to cut off the source of the bleeding which was the Target Canada business. Target Canada was not able to compete with a company like Walmart due to the position it put itself in. Target was experiencing sourcing issues and issues with their store locations. These are critical issues that they could not recover from without continued loss or store closures. References Page 2 of 3

Aaker, D. A., & Moorman, C. (2017). Strategic Market Management. Hoboken: John Wiley & Sons, Inc. Jain, V. (2015, January 18). Target Canada's Demise: Where It Went Wrong . Retrieved from https://seekingalpha.com/article/2828786-target-canadas-demise-where-it-went-wrong: https://seekingalpha.com/article/2828786-target-canadas-demise-where-it-went-wrong Sorensen, C. (2015, January 15). Off-Target: How a U.S. retail giant misread the Candaian market . Retrieved from Mclean's: https://www.macleans.ca/economy/economicanalysis/off-target-how-a-u-s-retail-giant- misread-the-canadian-market/ Page 3 of 3

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Chapter 15 Case Study_Final

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