This week on Analysis of business problems, we treated a case of a company in the United States of America called Target. This company was the second biggest retail company in America and they recently expanded their operations into Canada and faced some challenges which had a significant effect on their revenue. The CEO of the parent company in America has to decide if they should continue with their operations in Canada or leave Canada.
Target cooperation in 2012 had considered expanding into Canada which happens to be right beside the United States. They had hoped the business who go smoothly in Canada just as it had been in US considering they had a lot of cross boarder customers coming in from Canada.
Their arrival had been anticipated by indigenous retail stores in Canada as well as Walmart which was the biggest of them all even in America.
After they launched, within the first year the company incurred a loss of about $1.3 billion dollars which was as a result of poor data management, empty shelves in their stores as a result of inadequate supply chain and brand identity ( the stores target was operating in had been bought from a former retail brand and the customers felt target had not rebranded well enough as it didn’t like target stores in America and lastly the prices of goods were more expensive than target stores in America and the stores lacked a variety of products.
Due to these issues, the performance of target Canada was very poor and they incurred a lot of loss. This made the CEO of target Canada Tony Fisher resign after working for the company for over 15 years. After three months a new CEO was appointed Mark Schindele, he was the vice president of merchandising operations. This change in leadership was viewed by many as a positive step by the company towards improving their operations.
Mark resumed during the second month of the third quarter and he was determined to tackle the known problems dragging their revenue down and increasing expenses. Mark ensured the retail stores received steady supplies from their distribution centers, he worked on the pricing so as to ensure it was in competition with that of Walmart, he introduced variety of products, he rebranded the stores and improved on the data management system and at the end of the quarter, the revenue improved and expenses dropped significantly compared to that of the previous year.
This was good progress but it was not great enough to offset the huge loss on ground. The president of Target coperation then wanted to decide if these changes would be good enough to keep the company running in the long run or they should close up. After counducting a detailed analysis with data provided in the case, we looked at a scenario were the progress they had made was increasing at that same pace and discovered it would still take target Canada three more years to start making profit (which was a best case scenario) but also in the case the progress made was constant and no further improvements were made, the company was not making progress in the foreseeable future.
This prompted us to advise Cornell the CEO of target corporations to pack up and leave immediately as they would incur more losses by staying.