Strategic International Management For Target Australia

About the industry

Strategic management is important for formulating the success of a business. Without proper strategies, it can be difficult for business organisations to gain a competitive advantage in the market. According to Hill, Jones and Schilling (2014), certain factors need to be taken into consideration while formulating strategies such as the financial factor and the competitive factor. The report focuses on the importance of strategic management that needs to be undertaken by Target Australia so that it can maintain its dominance in the Australian market. The size of the market in Australia is determined along with the corporate performance of the business. A SWOT analysis of the company is undertaken so that analysis of the competition can be conducted. The strategic options available to Target Australia are also undertaken and recommendations for improving the strategies are provided.

Online shopping industry is one of the growing industries in the competitive market. According to Wheelen et al. (2017), the concept of shopping sitting at home without having to visit physical stores at a reasonable rate has been appealing to many people across the globe. The origin of the industry can be traced in the mid 19^th century in the US during which most of the clothes were custom made. The clothes were made either as home production or were ordered from dressmakers and tailors. In Australia, the online shopping industry began in the 20^th century when new technologies such as sewing machine came into the fray. Some of the popular online shopping centres that were developed in the country include Kmart, Big W and Target Australia and so on. This provided the Australian online shopping industry with the level of competition that it needed so that the tradition of the industry can be upheld.

Target Australia is a department store chain that is owned by Wesfarmers. It is considered as the largest department store chain in Australia in terms of number of stores that it possesses. Recent report has shown that Target Australia owns and operates 305 stores across the country (Target.com.au, 2018). The store was founded in 1926 and is headquartered in North Geelong Australia. Recent reports have provided evidence that the revenue of the company has taken a fall along with its operating income and total number of assets (Target.com.au, 2018). The number of people employed in the stores is about 16,000.

The market size of Target Australia can be considered as second highest in the retail and departmental stores in the country. The company spends about 7.7% of the amount earned for purchasing fashionable clothes that suit well in the industry. It has been reported that Target Australia has a fall in revenue of about AUD$3 billion. As reported by Blockeel et al. (2016), the revenue earned by the company amounts to about 22% of the entire revenue earned by the online fashion industry.

About the company

Figure 1: Market share of Target Australia

(Source: Meyer, Neck & Meeks, 2017)

The trend set by Target Australia in terms of delivering fashionable clothes can be attributed to the fact that it uses the fashion of different eras and target specific customers for the sale of the products. One of the biggest trends that Target Australia set is the fact that it promotes important events online based on the needs and demands of the people (Rothaermel, 2015). In the case of Australia, the company provides clothes that appeal to the young generation in the Australian culture. At the same time, the prices of the clothes are kept low so that children and teenagers can afford to shop online. Therefore, despite its recent threats of takeover in the Australian market, Target Australia has managed to maintain its composure in the industry.

		Year 1	Year 2	Year 3
Operating activities
	Net income	$0	$0	$0
	Depreciation	$57,940	$59,099	$60,258
	Accounts receivable	$0	$0	$0
	Inventories	$0	$0	$0
	Accounts payable	$0	$0	$0
	Amortization	5,000	5,000	$5,000
	Other liabilities	5,000	5,000	$5,000
	Other operating cash flow items	0	0	$0
	Total operating activities	$67,940	$69,099	$70,258
Investing activities
	Capital expenditures	$0	$0	$0
	Acquisition of business	0	0	0
	Sale of fixed assets	($29,568)	($30,159)	($31,727)
	Other investing cash flow items	0	0	0
	Total investing activities	($29,568)	($30,159)	($31,727)
Financing activities
	Long-term debt/financing	($95,000)	$0	$0
	Preferred stock	0	0	0
	Total cash dividends paid	5,000	5,000	5,000
	Common stock	0	0	0
	Other financing cash flow items	0	0	0
	Total financing activities	($90,000)	$5,000	$5,000
Cumulative cash flow	($51,628)	$43,939	$43,530
Beginning cash balance	$0	($51,628)	($7,689)
Ending cash balance	($51,628)	($7,689)	$35,842

Table 1: Cash Flow statement of Target Australia

(Source: Created by author)

		Year 1	Year 2	Year 3	Year 4	Year 5
Gross revenue	$225,500	$230,010	$239,210	$253,563	$273,848
Cost of goods sold	$13,000	$13,260	$13,790	$14,618	$15,787
Gross margin	$212,500	$216,750	$225,420	$238,945	$258,061
Other revenue [source]	$0	$0	$0	$0	$0
Interest income	$0	$0	$0	$0	$0
Total revenue	$212,500	$216,750	$225,420	$238,945	$258,061
Sales and marketing	$6,000	$6,120	$6,365	$6,747	$7,286
Payroll and payroll taxes	$50,000	$51,000	$53,040	$56,222	$60,720
Depreciation	$57,940	$59,099	$60,258	$61,416	$62,575
Maintenance, repair, and overhaul	$0	$0	$0	$0	$0
Total operating expenses	$113,940	$116,219	$119,662	$124,385	$130,582
		$98,560	$100,531	$105,758	$114,560	$127,479
Interest expense on long-term debt	$0	$0	$0	$0	$0
		$98,560	$100,531	$105,758	$114,560	$127,479
Loss (gain) on sale of assets	$0	$0	$0	$0	$0
Other unusual expenses (income)	$0	$0	$0	$0	$0
		$98,560	$100,531	$105,758	$114,560	$127,479
	30%	$29,568	$30,159	$31,727	$34,368	$38,244
		$68,992	$70,372	$74,030	$80,192	$89,235

Table 2: Profit-Loss statement of Target Australia

(Source: Created by author)

According to Lasserre (2017), one of the advantages of Target Australia in the Australian market is that it provides the people with an opportunity to remain fashionable in the society. The fact that the Australian people are fashion conscious forces the company to make clothes that does not relate to any problems within the people. Therefore, it can be said that Target Australia takes care of the people in the society by gaining finances that help the company to maintain its reputation in the business market.

Strength · Successful brand image · Promote environmental friendly strategies · Pocket-friendly prices	Weakness · Weak product development · Management of large number of stores · High employee turnover
Opportunity · Growth of online shopping industry · Expansion into multiple countries · Discounts during seasonal shopping	Threat · Fashion conscious customers · Local competitors provide threat · Economic recession

Table 3: SWOT analysis

(Source: Created by author)

From the analysis, it can be seen that the strength of Target Australia lies in the fact that the company has a successful brand image. This is mainly due to its reputation in the Australian market and the manner in which the company have been able to retain the loyalty of the people. The fact that Target Australia provides the customers with fashionable clothes plays a crucial role in providing the company with an advantage to expand into other countries of the world. At the same time, Target Australia promotes an environment friendly strategy that helps to maintain the society in a proper manner. The corporate social responsibility of the company provides them with an opportunity to maintain the community in which it works and provide a proper understanding of the need and expectations of the people (Daellenbach, 2014). The pocket friendly prices of the company help it to serve various types of customers that include children and teenagers. The pocket-friendly prices help in attracting children, thereby, providing it with a wide range of target customers.

Market size and trend

The weakness of the company is that it has a weak product development. According to Dimitriou and Sartzetaki (2017), Target Australia provides clothes that can be easily replicated by the customers. The designing of the product is done in such a manner that provides the competitors of Target Australia like Kmart to design replicate the products.  Therefore, slight increase in prices or drop in quality may force customers to select Big W or KMart over Target Australia. At the same time, competitors such as Amazon provide its customers with various choices relating to clothes and other appliances such as mobile appliance or electric appliance. Therefore, it can be said that such weakness provides the company with a huge disadvantage in the market.  At the same time, Target Australia has a large number of stores that makes it difficult for the managers to maintain discipline. Although the stores gain the maximum revenue, the complaints and scandals regarding employee satisfaction in the Perth stores have provided Target Australia with a bad reputation (Grant, 2016). This leads to a high employee turnover and therefore, the quality of work in the company are sacrificed.

The weakness can lead to major threat for Target Australia along with the fact that in Australia, the company have to deal with people that have a high sense of fashion. The Australian people remain aware of their looks and this can be seen in the fact that most people provided a strong opinion for development of the online store in the market. At the same, the threat from the local competitors also provides a threat for the company, as the local competitors understand the needs of the local people. Therefore, according to Vogel (2014), online fashion stores such as Ally Fashion, Dragstar Clothing and Bec & Bridge gain a competitive edge over Target Australia not only for the fashion conscious people but also for the diverse choice of clothing and appliances. However, the biggest threat comes from the economic recession that usually occurs in Australia. Changes in the value of American dollars bring about a significant impact in the country. Therefore, this deprives people from being indulged with purchasing fashionable clothes thereby; forcing online shops like Target Australia to reduce the prices of the products.

After analysing the capabilities of Target Australia and its competitors, it can be said that the company can implement Porter’s Generic matrix to determine the market and the type of products that can be manufactured and supplied. According to Bettis et al. (2016), the implementation of Porter’s Generic matrix provides the company with an opportunity to identify the manner in which market can be penetrated and developed. In the case of Target Australia, the market penetration can be related to gaining a competitive edge over the local markets. This is mainly due to the controversy that the company had to endure during its initial set up at Victoria. The strategy to penetrate the market can be done using diversification of products so that the people residing in Australia can get to wear fashionable clothes with varieties.

Financial and corporate performance

The application of the market development can help Target Australia to continue with gaining the trust of the people. Customer satisfaction can help a company to grow in the market and develop its position in a manner that provides the people with trust over the brand (Michael, Storey & Thomas, 2017). In this case, the advantage of Target Australia is the fact that the company has preceded reputation in the international market. Therefore, Target Australia need to develop its market based on the fashion consciousness of the people. The development undertaken can be in the form of diversification of clothing designs or by introducing new techniques to produce clothes.

Therefore, as observed by Morschett, Schramm-Klein and Zentes (2015) Target Australia can provide diversification of the products and make itself competitive as compared with other companies like KMart. This comparison can be based on the manner in which the company retains its employees and the consistency involved in the manufacturing of clothes. Target Australia can implement the liquidation strategy so that the assets can be converted into liquid cash for the development of the products. Cost leadership strategy can help Target Australia maintain its position in the market by keeping in mind the excessive pricing of the products. Therefore, certain changes can help the company to continue its business in a strategic manner in the market of Australia.

Figure 2: Strategic options available for Target Australia

(Source: Jin, Ji & Gu, 2016)

It is important for Target Australia to implement certain changes in its strategies so that it can continue to dominate business in the Australian market. One of the changes that Target Australia need to be make is the fact that it needs to maintain the satisfaction of the employees. The employees are the assets of an organisation and without proper employee strength; it can be difficult for any company to continue gaining competitive advantage in the business. It was rumoured that Target Australia, had run into controversies about paying employees with less wages. This needs to be changed by the application of motivating factors such as providing monetary rewards and proper wages so that the employees remain loyal to the company.

Apart from this, Target Australia can adopt the strategic approach of adapting in the market. The prediction of changes need to done based on the responses of the people. Therefore, it is recommended that Target Australia maintain a healthy relationship with the people by continuously understanding their needs and demands. At the same time, a proper promotional activity is necessary so that Target Australia can provide people with the knowledge related to any new products.

Despite the weakness and the threats, Target Australia has various opportunities in the market. Target Australia has over 300 countries and therefore, expansion can be considered as an opportunity so that it can spread in many other countries. Expansion into New Zealand can help Target Australia maintain collaboration with Australia mainly due to the trade relations that exist between the countries. At the same time, the rate at which online service industry is growing in the modern day can provide an opportunity for Target Australia to continue its dominance in the food market (Goldfarb & King, 2016). The fact that the company provides discounts during festive seasons to the people provides Target Australia with an opportunity to continue its dominance in the market of Australia. Therefore, it can be said that Target Australia can use the opportunity that it has and mitigate the threats and weakness. As stated by Hubbard, Rice and Galvin (2014) the opportunities arise mainly due to the strength of the company and it is the duty of the managers to ensure that the opportunities are grasped by formulating proper strategies.

Conclusion

Therefore, it can be concluded that the strength of Target Australia lies in the fact that it is a reputed company in Australia and that it provides the people with an opportunity to consume healthy food. The financial balance of the company is such that it can help it to make decisions that provide it with a corporate opportunity. Despite stiff competition from other international and local online retail stores in Australia, Target Australia can remain the leading online retail store in Australia by implementing the recommended strategies. It can help in building up the business in a proper manner and provide Target Australia with an opportunity to gain a stiff competitive advantage in the market.

References

Bettis, R. A., Ethiraj, S., Gambardella, A., Helfat, C., & Mitchell, W. (2016). Creating repeatable cumulative knowledge in strategic management. Strategic Management Journal, 37(2), 257-261.

Blockeel, C., Drakopoulos, P., Santos-Ribeiro, S., Polyzos, N. P., & Tournaye, H. (2016). A fresh look at the freeze-all protocol: a SWOT analysis. Human reproduction, 31(3), 491-497.

Bull, J. W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C., … & Carter-Silk, E. (2016). Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis of the ecosystem services framework. Ecosystem services, 17, 99-111.

Daellenbach, U. (2014). Competitor Analysis. Wiley Encyclopedia of Management.

Dimitriou, D. J., & Sartzetaki, M. F. (2017). Competitor Analysis to Quantify the Benefits and for Different Use of Transport Infrastructure. World Academy of Science, Engineering and Technology, International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 11(11), 2545-2548.

Dyer, J. H., Godfrey, P., Jensen, R., & Bryce, D. (2015). Strategic Management: Concepts and Cases. Wiley Global Education.

Goldfarb, B., & King, A. A. (2016). Scientific apophenia in strategic management research: Significance tests & mistaken inference. Strategic Management Journal, 37(1), 167-176.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Hubbard, G., Rice, J., & Galvin, P. (2014). Strategic management. Pearson Australia.

Jin, J., Ji, P., & Gu, R. (2016). Identifying comparative customer requirements from product online reviews for competitor analysis. Engineering Applications of Artificial Intelligence, 49, 61-73.

Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.

Meyer, G. D., Neck, H. M., & Meeks, M. D. (2017). The entrepreneurship?strategic management interface. Strategic entrepreneurship: Creating a new mindset, 17-44.

Michael, S., Storey, D., & Thomas, H. (2017). Discovery and coordination in strategic management and entrepreneurship. Strategic entrepreneurship: Creating a new mindset, 45-65.

Morschett, D., Schramm-Klein, H., & Zentes, J. (2015). Strategic international management . Springer.

Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.

Simon, D., Fischbach, K., & Schoder, D. (2014). Enterprise architecture management and its role in corporate strategic management. Information Systems and e-Business Management, 12(1), 5-42.

Target.com.au. (2018). Retrieved from https://www.target.com.au/

Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis. Cambridge University Press.

Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. Pearson.