The Current Position of Target Corporation in the Market - Case Study Example

? Target Corporation of the of Table of Contents Introduction 3 Possible solutions to the problem 4 Conclusion 8 References 11 Introduction The modern business world is highly competitive. The main business objective of firms is to gain higher profit and take the company to better levels of business performance. In the course of doing business companies study the strategies of their competitors and try to develop superior strategies. Any company that has an edge over its competitors offers greater value to its customers than the products offered by rivals by offering lower prices or higher quality at similar prices (Wagner, 2005). Product quality plays an important role in determination of performance of companies that gain success in the long term (Foss & Knudsen, 2003). In this paper, the issue of maintaining good quality of products by Target Corporation has been discussed as a method of defeating the company’s rivals (Ehmke, 2008). Customers prefer making purchases from Target stores since they get the appropriate products that they are searching for at the most reasonable prices (Nadia, 2001). The key strategies that have led this company up the success ladder are excellent marketing and advertising strategies, high brand value developed through strategic promotion of brand and intense product differentiation (Franco-Santos, et al., 2007). Being one of the top ranking companies in the US market, the company faces steep competition from other dominant firms in the market, such as, Wal-Mart, K-Mart and Costco. However, recently, the firm has been facing certain problems, such as high price of products than market standards and very close substitutes of its products. The main issue faced by Target Corporation is that whether it should follow the strategy of maintaining high quality of its products. The two contesting arenas that arise in this regard are high quality and high price. Target is considering high quality for its products while it is out wedged by competitors that offer low priced products. This paper is dedicated to the discussion of bringing solution to this problem. Different possible solutions to this problem would be discussed. These solutions are provided after considering the current business environment in which the company operates. Although, all the possible solutions are proposed on the basis of the some analysis of the company situation and overall industry condition, these refer to diverse aspects. However, in order to gain advantage over its nearest rivals, the company would have to identify the loop holes in which it is directly lagging behind its competitors. In this case, the problem is that the company is facing price war. Competitors, such as Wal-Mart, K-Mart and Costco, which are known across the globe for their low price items, are gaining edge over Target Corporation, since the prices charged by Target are higher than the products that they offer. In this case the company might aim at reducing cost so as offer the products at lowered prices. However, price wars can be sustained only up to a certain limit, beyond which prices cannot be reduced for maintaining profitable business. Hence, it would have to take some other option for maintaining its competitive position in the industry. These possible solutions are discussed in the next section. Possible solutions to the problem In the current business world, companies are concerned about the gaining an extra edge over other market players. An important aspect that helps in assessing the performance of a particular company in the market is the extent to which customers would be attracted more towards a particular brand than other brands available in the market. It is imperative for every business to develop a base of loyal customers that would increase over time (Smith & Wright, 2004). Niche markets are growing rapidly in the modern world and they are increasing awareness of customers about product features and characteristics of products that they purchase. Individual customers as well as wholesale buyers specifically look for products that satisfy their particular demands. In this environment Target corporation is faced with the issue of whether it should follow the strategy of maintaining high quality of its products. This paper is dedicated to the discussion of bringing solution to this problem. The two contesting arenas that arise in this regard are high quality and high price. Target is considering high quality for its products while it is out wedged by competitors that offer low priced products. Product differentiation is one of the most rapidly adopted strategies by modern businesses to out wedge their competitors. It includes acts of offering higher quality products, better services or lower prices or a combination of several such features (Ehmke, 2008). It is not enough for the companies to focus on volume of production or cost incurred for producing the good. Therefore, managers and decision makers are adopting the strategy of product differentiation, by which they are capable of altering their product offering to the target customers. Slight changes in the materials used in production also lead to major differentiation (Rubini, Motta & Tommaso, 2013). For example, using organic or natural ingredients for preparing the products or abolishing the use of child labor in the production process or simply offering other variants of the same product (in terms of color or flavor) might add to the value of the firm and increase the competitive advantage of a particular firm. Although price rises in this endeavor, the target customers would be attracted by the quality of the products (Prajogo, 2006). Validity of this fact has been adjudged with reference the company’s objective of defeating its competitors in the course of upcoming five years. After evaluation of these aspects, the most viable option would be identified. Advantages of aggressive international expansion International expansion provides a company with the opportunity to renew its core capabilities and exploit them. In the period of last 30 years, cost of transportation and communication has reduced considerably, which has pulled down various trade barriers that used to prevail before in the international trade forum (McEvily & Marcus, 2005). Hence, the multinational corporations have reshaped their strategies and are currently inclined towards global expansion. Decentralization of supply chains is allowing companies to become geographically dispersed, due to which new markets are emerging. Emerging markets are inviting new entrepreneurs and offering them scope for growth; established multinationals, therefore, face new challenges in the international business platform (Kristandl & Bontis, 2007). In this competitive landscape, Target Corporation might consider the opportunity of international expansion to maintain its dynamic competitive positioning in the market. It should not focus on identifying the markets that are closest to the domestic market of the company in terms of taste and preferences of consumers or level of economic development of the market, rather, it should sharpen its strengths that it enjoys in the domestic market in order to apply them to the foreign markets. According to researchers, every company should at first concentrate upon developing and exploiting the advantages that it enjoys at home (Morgan, Kaleka & Katsikeas, 2004). These advantages accrue to the firm by virtue of its capabilities. There are several examples of companies that have gained from their international expansion. These companies have successfully leveraged the homegrown capabilities, which they had strengthened prior to expansion, in the foreign markets. For instance, IKEA has transferred the concept of low-cost and modular furniture to other markets successfully. It is the first producer that has made the Nordic design popular in the international market. McDonald’s has made breaking news in the international market by becoming one of the most successful retail food chain in the developed as well as the developing countries (Ma, 2000). Based on homegrown capabilities; these companies need to make few nominal regional adjustments to make its products more acceptable to its customers. Closing unproductive stores According to Gottschalg & Zollo (2007) closing of unproductive retail stores helps a company to deal with its competitors better. Retail stores are the major source of revenue for discount retail chains. These stores are the selling points and one important point of contact with the customers. The kind of service that customers receive in these stores develops a dominant impression about the brand in their minds. This implies that the kind of performance of each single store of the retail chain play an important factor in determining the overall performance of the brand. Some of the stores of Target have been closed down in and after 2010 due to strong competition from other competitors, like, Wal-mart and also other domestically operating stores. Alternatively, the company might take initiatives to renovate some of the stores by improving store layout and training store staff to bring the stores back into profitable business (Evans, 2013). Increasing product difference and improve quality Competitiveness and market performance of a firm has close relationship with quality of its products. Companies can enjoy cost-based advantage, service based or product based advantage (Gottschalg & Zollo, 2007). Advantage due to low cost of production or better store service is a traditional way of earning higher competitive score (Franco-Santos, et al., 2007). However, improving the quality of product also leads to increased competitive advantage. According to scholars, product quality is one important basis that helps a firm to strengthen its position in the market (Franco-Santos, et al., 2007). Practical evidence also supports this thesis. Several global companies, from different industries, such as, QuinStreet and Sony, have proven that improvements in quality of product improve company performance. Walmart is also a significant market player in this respect. The primary objective that any business follows and pursues is to satisfy its customers and customers are satisfied the most, when they are offered high quality products at reasonable prices. Various management accounting guidelines show that improved product quality leads to increased sales and higher revenue. When product quality is considered, it relates to the design and other features of the product, impacts of the products on environment and satisfaction of customer requirements to the maximum level (Rubini, Motta & Tommaso, 2013). Therefore, quality of the product is widely accepted as a strong competitive weapon of organizations in the modern business environment. It helps in achieving as well as maintaining a global competitive advantage. Target defines its business objectives in close relation with creating value for customers and meeting their demand and expectations. Thus, by focusing on product quality, the company would be able to defense its position in the market and also regain its leadership in the market (Evans, 2013). Conclusion Target Corporation is one of the well established retail discount chains in the United States. The current research shows that although the company holds a leading position in the country, it is presently facing some problems with regard to its competitive positioning in the market. The company should put higher emphasis on the process of strengthening those areas in which it generates high value of sales. According to the nature of the problem, it has been found that the focus in the problem statement lies on the fact that the company is facing a problem to decide whether to improve product quality at unchanged prices or to reduce price to a level lower than its rivals. Given knowledge regarding the problem faced and the possible alternatives, this discussion is aimed at finding the most recommendable solution. Improved product quality would develop a loyal base of customers. Some of the places in which the company has already decided to set up stores are New York and Huntington. The New York store is set to open in October 2013. It would start off with 250 store staff. Additionally, 17 other Target stores would be opened in the US in 2013 (Zacks Equity Research, 2013). Alongside, Target also seeks international expansion opportunities. It has developed plans to enter overseas markets in Latin America and Canada by introducing small-format stores, named ‘City Target’. If the company offers products of high quality, it would find a strong base of takers that would patronize its products (Morgan, Kaleka & Katsikeas, 2004). In such cases, a higher price tag would not bar the customers from purchasing from the company. Hence, the company has to follow the policy of maintaining high product quality. Target has an online platform to allow customers to match prices offered by other retail giants with the product price offered by Target (Zacks Equity Research, 2013). For some products, the company has reduced price. However, for many other products prices are higher than competitive prices. With respect to this situation, the company is recommended to concentrate on maintaining high quality of all its products and promote superiority of their products in the target markets. Services offered by the store staff as well as after sales services should be of superior quality. This would eventually draw customers’ attention toward Target stores, since they would receive value for price. The discussion on the current position of Target Corporation in the market shows that the company is losing its shares in the market due to strong similarity of its products with other retail chain giants, such as Wal-Mart. It has been found that product quality is one of the most influential factors affecting market performance of companies. However, the problem of high price might be solved only if the company sticks to good quality of products and establishes faith among customers about superiority of its products (Foss & Knudsen, 2003). Customers would then be willing to pay more for acquiring better quality products from Target than other stores that sell low priced products. Hence, it has been established through discussion that product quality is one of the key drivers behind increased sales (Evans, 2013). Improvement in product quality would allow the company to deal with its competitors successfully. It would also help in attracting and retaining customers (Nadia, 2001). It has been widely reported that product quality is that feature of every product, which determines the level up to which customer expectations are satisfactorily met. The company should follow the third alternative solution and increase product difference and maintain high quality of product. References Ehmke, C. (2008). Strategies for competitive advantage. Retrieved from http://ag.arizona.edu/arec/wemc/nichemarkets/05competitiveadvantage.pdf . Evans, J. R. (2013). Quality & performance excellence. Connecticut: Cengage Learning. Foss, N. 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(2004). Antecedents of export venture performance: A theoretical model and empirical assessment. Journal of Marketing, 68 (5), 90–108. Nadia, A. (2001). Consumer ‘sovereignty’ and policy issues in the development of product eco labels. European Environment, 11 (7), 14-26. Prajogo, D. I. (2006). Progress of quality management practices in Australian manufacturing firms. The TQM Magazine, 18 (5), 501 – 513. Rubini, L., Motta, L. & Tommaso, M. R. D. (2013). Quality-based excellence and product-country image: case studies on Italy and China in the beverage sector. Measuring Business Excellence, 17 (2), 35 – 47. Smith, R.E. & Wright, W.F. (2004). Determinants of customer loyalty and financial performance. Journal of Management Accounting Research, 16 (2), 183-205. Wagner, M. (2005). Sustainability and competitive advantage: Empirical evidence on the influence of strategic choices between environmental management approaches. Environmental Quality Management, 14 (3), 31-48. Zacks Equity Research, 2013. Target's Strategic initiatives. Retrieved from http://finance.yahoo.com/news/targets-strategic-initiatives-201851286.html . Read More