Target’s Failure in Canada

Target is one of America’s largest and most successful retailers. The 114-year-old company that evolved out of the old Dayton-Hudson Corporation now has more than 1,800 retail locations.

In August 2014 Brian Cornell was appointed chief executive officer (CEO) for Target Canada, as this period the company was experiencing serious challenges in operations, sales, intensified competition, and recently recorded a loss amounting to $1.36 billion.

Target Corporation was launched in 1902 by George D. Dayton in Minneapolis, USA, and the vision is to “combine the best of the fashion world with the best of the discount world”. In 1960 the company had more than 75 stores, after an Initial Public Offering (IPO), it unveiled its brand “Expect More. Pay Less). By the end of 2014, Target Corporation has 347,000 employees, owned 173 retail outlets and 40 distribution centers.

In 2013, Target Corporation, the second-largest general merchandise generate over US$72.5 billion in revenue, US$4.2 billion in EBIT, and US$1.97 billion in net earnings. To make their product more assessable, Target e-commerce was launched, making customers make a purchase on the website and the comfort of their phone using the App. However, Target’s e-commerce was only able to capture 2.1% of the online market, this was due to the high growth rate of the online shop from 191 million in 2013 to 215 million in 2018.

To expand beyond the shores of USA, the Target Canada was launched, invested over US$4 billion, with 133 stores and three DCs, and employ 17,600 staff. By 2011, the company purchases an additional 220 stores from Canadian discounter Zellers for $1.8 billion. The incumbent Canadian retailers anticipated the entrance of Target Canadian, hence the intensified competition. The supply chain was overwhelmed leading to inconsistencies between the goods and the data system, when these issues persist and all efforts to resolve them were abortive, this led to the resignation of the CEO, Greg Steinhafel in June 2014. 

Problem Statement.

1. Where the cultural differences affect the purchasing power of US and Canadian customers.
2. How is population affecting the sales/revenue?
3. Why is the spending power of Canadians a major factor in sales/revenue?
4. Why is it so difficult for Target Canada to gain entrance to the retail market in Canada after being popular before launch?
5. What is the effect of our expansion on sales?
6. What is the effect of our employee volume on sales?
7. What is the effect of the team members from the US on sales?
8. What is the effect of Data management & Forecasting Systems on sales?
9. Is the outsourcing approach on operations affected sales?
10. What was the effect of data inconsistencies between the goods and the data system on sales?

Objective.

To make Target Canada profitable amidst competition.

Criteria to determine the problem statement.

What is the cost implication for various expansions?

When likely can Target Canada break even?

To say that Target had unrealistic and highly optimistic growth plans for its entry into Canada would be an understatement—in 2011 the company had plans to open 124 locations by the end of 2013 with the expectation that the Canadian company would be profitable within its first year of operations. Not to mention that they also intended to build three new distribution centers in less than two years—a feat that typically takes a couple of years per center. The end result was that Target Canada filed for bankruptcy, wasted billions of dollars, tarnished its reputation and left approximately 17,600 people without jobs. In most cases, this would have completely destroyed a company’s chances of surviving and Target has been lucky to continue to see success among its U.S. stores.