Target
Trends – External Environment
Target is subject to a number of different trends that affect its business. These include external factors in the economic, technological, political and social environments. The economic environment has the most direct impact on a company like Target that sells a broad range of consumer staples to a broad audience across the entire country. During the last major recession, Target struggled with sales that tracked GDP, flatlined margins and slugglish profit trends, all the result of consumers reeling in their spending during a time of substantial economic uncertainty (Marketwatch, 2010). For many consumers, Target is seen as slightly higher on the discount hierarchy, so when there is a recession, they trade down to Wal-Mart, dollar stores and warehouse stores to save even more money on staples (Marketwatch, 2010).
The political environment is less a factor in Target’s business, until of course it affects the economy. There have been increasing warning signs of a pending recession, in many cases due to political policies that are hurting the economy. Target in particular is feeling stress from an increase in tariffs and other trade barriers, especially where China is concerned, as that country is a major supplier for Target. Target was among the companies that have publicly – and in their lobbying efforts – been at the forefront of a fight with the Trump administration over policies that have directly led to tariffs with China (Kopecki, Reagan, Soisson, 2018).
The social environment is less likely to affect sales, but there are a few interesting elements to this. One is that shifts in the social environment can be a double-edged sword for retailers. A retailer needs to stay on top of trends, especially in clothing, and if Target successfully identifies trends ahead of time, it can accelerate sales growth. If it does not, then Target might find itself in a situation where its inventory turnover decreases and it has to sell unwanted goods at steep discounts just to get rid of them. Target's discusses this in its annual report.
The technological environment is also a double-edged sword, providing significant opportunity if the company gets it right, but risk if it does not. In the back end of a high-volume discount retailer, technology is king, allowing the company to reduce costs, maximize efficiency, and meet customer needs simultaneously. Investment in supply chain technology, to the tune of $7 billion, was a cornerstone of the company’s digitization efforts that began in 2015, including investment in fully autonomous warehouses and “order to shelf”, which is the next level of JIT systems (Bedetti, 2017).
All told, the ability of Target to identify social and technological trends, and respond quickly, is one of the critical success factors for it, and any other company in the industry. This places emphasis on Target’s leadership to build responsive systems that allow it to make quick pivots when these elements shift.
Trends – Internal Environment
Target has traditionally sought to play to its strengths, which include competencies in supply chain management, marketing, staffing and merchandising. The company has effectively defined its brand, which has helped it to attract a regular customer base, and extend into new markets across the United States. The company has made social responsibility a part of its platform, with a particular focus on community and on its staff. These moves have made Target an employer of choice at the low end of the labor market, so most of its stores will have relatively friendly, competent staff. Target has not faced many ethical issues in recent years, even as other companies, such as Wal-Mart have been targeted by activist groups. That said, warehouse competitors like Costco have even better reputations on that front. Target also has sustainability targets that it aims for, and has built into its strategy, but this is not an area of strength for the company. Importing goods from China, especially goods that are relatively cheaply made, is not especially sustainable, so the measures that Target aims for...…sustainable. Sustainability is not just about efficiency, but also about reducing waste at the consumer level – not selling goods that break easily, are disposable, or are made with materials that are not sustainably sourced.
That said, Target makes an effort in areas where it feels that it can have an impact on at least improving the potential sustainability of its operations. In its social responsibility report, it outlines the use of energy efficient buildings, initiatives surrounding renewable energy, and the work that is does with its suppliers to source ethical, sustainable products. In the report, it specifically cites things like deforestation and palm oil as issues it addresses with its suppliers, as well as animal welfare issues, using recycled materials and managing its water footprint. Sustainability in packaging is another issue that the company tackles. So while there is an inherent unsustainability to the company’s business model, it at least seeks to eliminate waste, and build in social concerns around the environmental impact of its supply chain into its strategy. This, at the very least, improves the impact of its business on the environment.
Conclusions
Target is a relatively progressive company for a major retailer of its size. The company takes into account a lot of the trends in the social environment, including concerns surrounding resource usage in its supply chain, and the trend towards diversity and inclusiveness. Target’s efforts in these areas put it in a leadership position in many respects. It does not discuss climate change much in its responsibility report, largely because of the carbon footprint of its business model, but ultimately where Target has seen an opportunity to take a leadership role, it has typically done so, and furthermore has built such initiatives right into its strategy, and its organizational culture. Diversity, inclusion and supply chain efficiency are publicly supported at the highest levels of the organization, so they are being used as a part of the strategy, and communicated as such to the market as a means of improving…
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