Target Corporation: A Robust Entry in the United Kingdom (UK)

Target Corporation: A Robust Entry in the United Kingdom (UK)
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Executive Summary
Target is a leading retail chain store in the US, with approximately 1,950 physical stores in more than 50 states. The company has 55 supply chain facilities and revenue of USD106 billion. The COVID-19 outbreak introduced a paradigm shift in the global retail industry. However, a notable improvement is observed in the British market. British households expressed discretionary spending behavior and price sensitivity since the pandemic due to the 17% inflation rate. Brands like Tesco, Sainsbury’s, Asda, and Morrison’s have the most market share, titled the Big Four. The environmental scanning further indicated that the British government strictly regulates environmental laws, data protection, and privacy rights, bounding companies to strengthen infrastructure. Target is proposed with a robust marketing objective for FY2024. The company will enter through Greenfield Investments to build a strong network and brand relevance in the UK. Target must monitor the paradigm shifts and align promotional strategies to operate sustainably in the British retail industry.
Table of Contents Executive Summary. 2 1. Introduction. 5 2. Environmental Analysis. 5 2.1 PESTLE Analysis. 5 2.1.1 Political 5 2.1.2 Economic. 6 2.1.3 Social 7 2.1.4 Technological 7 2.1.5 Legal 8 2.1.6 Environmental 8 2.2 Porter’s Five Forces. 9 2.2.1 Bargaining Power of Buyers – Strong. 9 2.2.2 Bargaining Power of Suppliers – Moderate. 10 2.2.3 Threats of New Entrants – Strong. 10 2.2.4 Threats of Substitutes – Strong. 11 2.2.5 Industrial Rivalry – Strong. 11 3. Market Entry Strategy. 12 4. Initial Marketing Strategy. 12 4.1 Marketing Objectives. 12 4.2 Segmentation, Targeting, and Positioning (STP) 13 4.3 Marketing Mix. 14 4.3.1 Product 14 4.3.2 Price. 14 4.3.3 Promotion. 15 4.3.4 Place. 15 5. Conclusions. 16 6. References. 17 7. Appendices. 21 List of Figures Figure 1: GDP Speculations in the UK.. 20 Figure 2: 17% Inflation Rate in the UK – Highest since 1980. 20 Figure 3: Opportunities to Capitalise for Overcoming GDP Deficit until FY2023. 21 Figure 4: GDP Deficit of GBP71.6 billion. 21 Figure 5: E-Commerce Sales in the UK.. 22 Figure 6: FinTech Usage in the UK by Specialised Segments. 23 Figure 7: Emerging Household Spending Trends in the UK.. 23 Figure 8: British Household Spending Trend on E-Commerce Retail 24 Figure 9: Retail Store Market Share in the UK.. 25
Target Corporation: A Robust Entry in the United Kingdom (UK)
1. Introduction
This report aims to create a marketing strategy and examine the environmental viability of Target Corporation (Target) in the United Kingdom (UK). Target was founded in 1902 by George Draper Dayton in Minneapolis, Minnesota. Target is a leading American retailer that offers customers general merchandising and food assortments. The portfolio includes perishable goods, fast-moving consumable products (FMCGs), dairy items, frozen goods, clothing, accessories, and generalized household products at discounted prices. The company operates on retail and wholesale channels. Target has 450,000 employees under the leadership of Brian Cornell, the company’s Chairman and Chief Executive Officer (CEO; Forbes, 2023). The company has approximately 1,950 stores in the United States of America (US), 55 supply chain facilities, and a global presence in 28 countries. The revenue for FY2021 is USD106 billion (Target, 2022). The British retail market is increasing and could create more opportunities for Target to expand its global presence and operations internationally.
2. Environmental Analysis
2.1 PESTLE Analysis
2.1.1 Political
The political relationship in the UK experienced turmoil after the British Exit (BREXIT) from the European Union (EU). The UK experiences a supply-side barrier from the EU after revised political exchanges since the BREXIT. The cost of trading increased in the UK since the country is not privileged with EU free-trade paradigms. The Trade and Cooperation Agreement (TCA) signed between the UK and EU reduced trade exchanges by 15% in the country, making political terms with giant European countries vulnerable (McGee, 2022). However, Britain has held a ‘special relationship’ with the US for decades. A recent visit of Rishi Sunak, UK’s Prime Minister (PM), in San Diego strengthened the UK-US relationship further. President Joe Biden and Sunak discussed prospects to increase trade exchanges and improve political relationships between the two countries (Sunak, 2023). Target would experience a stabilized political condition in the UK, considering existing terms with the American government.
2.1.2 Economic
The UK’s economic conditions fluctuate rapidly due to different parameters in the macro business environment. According to Forrest and Kupelian (2022), the geopolitical changes and increased gross domestic product (GDP) would favor the British economy. The GDP will grow by 0.6% until FY2024 (See Figure 1 in the Appendices). However, the country experiences peak inflation of 17%, the highest since FY1980 (See Figure 2 in the Appendices). Figure 3 in the Appendices illustrates the core opportunities for the British economy that could provide strategic support to increase GDP by GBP71.6 billion until FY2023 (See Figure 4 in the Appendices). The overall economic conditions are subject to market speculations, particularly for multinational enterprises (MNEs; Forrest & Kupelian, 2022). Target must conduct a strategic cost-benefit analysis (CBA) and monitor economic fluctuations in the UK before penetration. The current inflation rate indicates that Target would experience a high operational cost that Britain could control by capitalizing on highlighted prospects.
2.1.3 Social
The social structure for British household spending has changed rapidly since the COVID-19 outbreak. The pandemic introduced new paradigms among UK consumers by shifting spending patterns. A market report claimed that British households have engaged in discretionary spending since the pandemic. Households would spend the highest disposable income on food, personal care, and household commodities (Carlyle & Rindone, 2020). Market dynamics indicate that British households reduced 21% spending on beauty products, 15% reduction in leisure products, and 12% reduction in clothing products. Most UK brands offer value to households to encourage spending on retail products. Brands promote health and well-being in products while distributing them to households through different channels. However, discretionary spending behavior has remained constant in the British social structure since the pandemic (Carlyle & Rindone, 2020). Target must understand the social structure in the UK and align product portfolio while penetrating the market.
2.1.4 Technological
Technology solutions became a prevalent market dynamic in the UK. British consumers embraced the digital landscape that evolved during the pandemic. According to SRD (2022), the UK market reported 60 million e-commerce buyers. A nominal proportion is recorded for non-digital buyers. Online retailing expects a boost for a few product segments like fashion apparel, grocery items, food delivery, and other household commodities until FY2025. Smartphones have the most traffic for online purchases, followed by tablets, desktops, and other electronic tools (SRD, 2022). Figure 5 in the Appendices captures the value of online retail sales in the UK until FY2022. The COVID-19 outbreak boosted financial technology (FinTech) in the UK. Consumers embraced specialized sectors like banking, lending, wealth, and payments since the pandemic to support e-commerce exchanges for routine spending (See Figure 6 in the Appendices; Brett & Slade, 2022). Target must understand the technological evolution while aligning its business model in the UK.
2.1.5 Legal
The British government is strict about data protection and user privacy. With the evolution of e-commerce in the UK, followed by developments in FinTech, the British government made strict rules for companies to protect sensitive data and shield user privacy from cybercrimes and violations. Businesses in the UK are investing heavily in infrastructure development and talent acquisition to meet the guidelines of the EU’s General Data Protection Regulation (GDPR) and Data Protection Act (DPA) while operating in the UK (Almeida et al., 2022). Target’s data breach history could make legal compliance vulnerable for the company while operating in the British market. In November 2013, cybercriminals sabotaged card-swipe terminals in Point-of-Sale (POS) systems at Target. Data of more than 110 million customers was compromised, comprising card numbers, expiry dates, and card verification value (CVV) numbers (Sebastian, 2022). Target must understand the data protection vulnerability in internal systems to avoid legislative consequences in the UK.
2.1.6 Environmental
Environmental protection is strictly regulated in the UK. According to Laville (2022), UK’s environmental laws restrict businesses and individuals from complying with water quality, sewage, pollution, and habitat protection guidelines. Britain removed approximately 570 environmental laws since the BREXIT to introduce flexibility for businesses and individuals. However, the UK government regulates and monitors existing laws to protect the environment (Laville, 2022). According to Ramzan et al. (2022), the UK government understands the paradigm shifts introduced by financial globalization and international penetrations of businesses. As a result, the government emphasizes green innovation, energy transitions, and ecological sustainability while permitting businesses to operate in the country. Target must understand the ecological sensitivity in the UK. Target has a detailed US environmental, social, and governance (ESG) prospect to support green innovation and ecological sustainability (Target, 2022a). However, the company must review and modify ESG prospects to align with environmental guidelines shared by the British government to avoid financial and reputational damage.
2.2 Porter’s Five Forces
2.2.1 Bargaining Power of Buyers – Strong
The force is unfavorable for Target while operating in the UK. A market report published by McKinsey & Co (2022) conducted a detailed survey to capture consumer behaviors of British households while making retail purchases. Figure 7 in the Appendices illustrates consumer themes emerging in the UK about consumer behavior. The survey found that British households are frequent brand switchers and sensitive towards price and value. Consumers have been hostile to performing impulse buying since the pandemic. The fluctuating economic conditions and rising consumer price index (CPI) made consumers sensitive toward spending (McKinsey & Co, 2022). Al-Hamli and Sobaih (2023) found that Generation-Z customers would select retail brands simultaneously offering convenient purchase journeys, price competitiveness, and product quality in the servicescape. Target would experience complexity while building a sustainable relationship with British households. The company must maintain value, convenience, and price competitiveness to capture relevant audiences for repeated purchases.
2.2.2 Bargaining Power of Suppliers – Moderate
Supply chain networks in the UK are sensitive to ecology and legal restrictions imposed by the government. PM Sunak announced ten critical points to boost ecological sustainability in the country since the pandemic. PM Sunak engaged Climate Change Committee (CCC) to introduce parameters for achieving greenhouse gas (GHG) emissions results and reducing carbon footprints. CCC focused mainly on manufacturing practices to achieve results while preparing ten critical points for environmental protection (Cridland & Ekins, 2021). The regulatory engagement made suppliers vulnerable to environmental protection. Suppliers must offer green innovation to achieve higher results and comply with CCC guidelines. As a result, most suppliers operate on net-zero commitments and report companies that fail benchmarks (Cridland & Ekins, 2021). Target must acknowledge the ecology sensitivity in the UK while selecting suppliers. Target could experience complexities in building a robust supply chain network under environmental guidelines while operating in the British retail sector.
2.2.3 Threats of New Entrants – Strong
British consumers embraced the digital transformation introduced during the pandemic lockdowns. The British Retail Consortium (BRC) claimed that the retail industry grew during the pandemic by 6.9%. British households frequently spend on commodities, groceries, and personal care items to meet essentials. The rise of FinTech provided further support to e-commerce in the national retail industry (Partington, 2023). Figure 8 illustrates the household spending in the UK until FY2021. The illustration confirmed that annual household spending expects to reach GBP1.33 trillion by FY2022, attracting new players in the retail industry. The statistical growth further speculates that the government would issue easy licenses and permits to new entrants to expand the national retail industry (Sabanoglu, 2022). Hence, Target would experience intense competition from new players that aim to capitalize on evolving opportunities in the British retail industry. New entrants could offer competitive pricing and convenience to households to secure more market share.
2.2.4 Threats of Substitutes – Strong
British households have had equal access to convenience stores since the pandemic. According to Bedford (2022), Millennial and Generation-Z customers have frequent footfalls in convenience stores, whic...