Posted: August 12th, 2013
Target, Appendix 1, Case 3
1. What micro environmental factors have affected Target’s performance over the past few years?
Target’s performance has been affected by a range of micro environmental factors. The major micro environmental factor was the drop in sales revenues and the dwindling profits. Wal-Mart’s sales were growing, and that meant that Target’s sales would go down since consumers preferred Wal-Mart for Target. The inability of Target’s managers to identify a solution to the problem of dropping sales and develop a viable course of action also affected Target’s performance. Another micro environmental factor was the thriftiness of customers all over America, which endeared them to Wal-Mart. The impatience of Target’s shareholders and the pressure they exerted on the company’s board to deliver was also a major factor. The marketing strategies that were adopted by the management also failed to turn things around. However hard the company tried, they were unable to establish a firm grip on the market.
2. What macro environmental factors have affected Target’s performance during that period?
Target’s performance was affected by the global financial crisis that hit the world during that time. The crisis caused a fall in GDP and massive unemployment. This affected the buying habits of customers who then preferred to buy from Wal-Mart due to their legacy as a low-cost discounting store. Wal-Mart, Target’s main competitor, was attracting more customers because of its low-cost selling strategy. Consumption patterns were all of a sudden frugal; this made Target lose many customers since it was perceived as a luxury store. Another possible macro-environmental factor that must have affected Target’s performance was the coverage of its underperformance by the media. The focus on its falling sales by the media might have created the impression that it was selling at higher prices.
3. By focusing on the “pay less” part of its slogan, has target pursued the best strategy? Why or why not?
Target’s pay less strategy was a good idea. It marketed target as a store that sells at lower prices than other stores. The focus on the “pay less” part was important especially during a time when consumers were thrift in their spending. It also meant that Target would compete with Wal-Mart for those consumers who preferred to buy goods at lower prices. The “pay less” part marketed Target as a discounting outlet and placed Target at a level playing field with competitors like Wal-Mart.
4. What alternative strategy might Target have followed in responding to the first signs of declining revenues and profits?
Target should have embarked on massive re-branding of its stores and advertisement strategies. The stores and products should have been made to reflect a new price cutting strategy. The idea should have been to convince the customer that target is no longer a luxury store but a low price discount outlet. Rather than focusing on the “pay less” part of its slogan alone, Target should have engaged the consumer to find out the reason they preferred Wal-Mart and identify how they can improve their customer service.
5. Given Target’s current situation, what recommendations would you make to CEO Steinhafel for his company’s future?
The company should continue with its re-branding initiative while at the same time marketing Target as a destination for quality products. They should also market Target aggressively using the “pay less” slogan. This will inform consumers that Target stocks lower-price products than its competitors. Target should monitor customer behavior and interact with them to find out their preferences and identify shortcomings in customer service. The management must ensure that they are constantly in touch with customers for feedback on performance and service rendered.
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