Wednesday, May 3, 2017

Could They Say What Their Strategy Was: Target's Canadian Failure

In the article “Can You Say What Your Strategy Is?” by David J. Collis and Michael G. Rukstad, the authors discuss the importance of having a clear, measurable, and succinct strategy statement that encompasses the objective of the company, the scope of what the firm will concentrate on, and its competitive advantage.

While I was reading this article, I started thinking about how I have been taking the strategy statement for granted in a general sense. As mentioned in the article, “[Leaders of firms] assume that the initiatives described in the voluminous documentation that emerges from an annual budget or a strategic planning process will ensure competitive success.” However, it is extremely vital that a firm takes seriously the development process of their strategy statement in order to not only provide a ‘guiding light’ for employees of the company, but also to also identify the strategy ‘sweet spot’ that incorporates both customers’ needs as well as a company’s capabilities. As the authors suggest, in order to find this sweet spot and craft the strategy, firms must take the time to evaluate the industry landscape and analyze both customers’ desires and competitors’ present and future strategies.

One case study that we can use to analyze the importance of strategy development and implementation is that of Target’s failed expansion into the Canadian market. After opening 124 Target stores all at once all over Canada in 2013, the retailer found itself pulling the plug two years later and shutting down all stores just two years later, resulting in billions of dollars worth of losses.

One of the reasons cited for Target’s failure include the company’s misunderstanding of the Canadian consumer. For instance, the idea of ‘one-stop shopping’ was dubbed as more of an American style of consumption, whereas Canadians typically preferred to go to numerous stores to do their overall shopping. Therefore, one can see that there was a strategic mismatch such that customer habits were not as well analyzed as they could have been by executives and Target Canada’s strategy seemed more aligned in its objective and scope towards the American consumer than the Canadian consumer.

As mentioned earlier, another important part of the strategy development process and the creation of the strategy statement is the evaluation of competitors’ strategies and reactions. Once Target opened its doors in Canada, competitors who had already established a presence in the Canadian market such as Wal-Mart and Loblaws responded by increasing their product offerings and decreasing their prices relative to Target’s, thus putting a dent on the retailer’s competitive advantage in Canada.

Target Canada’s capabilities were also an issue, as many Canadian customers complained of empty shelves due to the retailer’s inability to find a right mix of inventory, not to mention the pressure that opening up that many stores all at once had on stock levels. With that being said, the notion of assessing the firm’s capabilities was not as strong as it could have been for Target Canada, which led to poor strategic development and a missed opportunity for success in an international market.

Sources:

http://fortune.com/2015/01/15/target-canada-fail/
http://fortune.com/2015/01/15/target-to-exit-canada-market/

http://www.theglobeandmail.com/report-on-business/missing-the-mark-5-reasons-why-target-failed-in-canad/article22459819/

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