Strategic Management for Target in Australian Retail Industry

This report discusses the strategic management of Target in the Australian retail industry. It includes market trends, financial and corporate performance, SWOT analysis, and recommended growth strategy.

Business Environment 1
Strategic Management

Business environment 2
Executive Summary
Strategic management is defined as the continuous planning, monitoring, analysis, and
assessment of all the required areas, because it is important for the organization in terms of
meeting its goals and objectives. Strategic management mainly involves the formulation and
implementation of the major goals and also the initiatives taken by the top management on
behalf of the owners, and this is mainly based on the consideration of resources and also the
evaluation of the internal and external environment in which business of the organization is
conducted.
Structure of this report includes the market size & trends, financial and corporate performance,
strategic options, final recommended strategy, implementation of the final strategy, and
monitoring and controlling of the future performance. At the end, brief conclusion is there which
concludes all the important aspects of this paper.

Business environment 3
Markets Trends & Analysis
Retail industry in Australia is mainly segmented by the product such as food retail/grocery,
apparel, footwear, beauty products, durable goods, furniture & furnishings. Further, it is
segmented by the retail stores which mainly include the hypermarkets & supermarkets,
convenience stores, etc. It must be noted that, complete size of the retail market of Australia is
$122 USD in the year 2013 (Mordor Intelligence, 2017.
Target is the departmental store which is mainly supported by the strong brand heritage, and
characterized by fashion, basics, and quality at the best prices. It mainly operates in the clothing
home ware and general apparels in the retail industry of Australia. The main aim of this
departmental store is to provide both quality and fashion at the reasonable prices (Wesfarmers,
2018.
Following are the industry statistics and market size for the Target in context of retail industry of
Australia-
Growth Revenue Businesses Employment
Annual
Figures
$557.8bn 182145 1933977
Current Growth
2012-2017
1.1% -2.1% -0.1%
Forecast Growth
2017-2022
1.1% -0.4% 0.5% (IBIS World,
2018
The industry of the clothing retailing faced number of challenges from last five years, and these
challenges mainly incudes the spending related to the cautious customers, intense competition,
and rising cost of rent. It is expected that revenue of this industry shows the growth at an
annualized 2.0% over the five years through 2018-19 that is total $16.7 billion. This mainly
happens because of the bricks and mortar retailer’s expansion in terms of the online sales
channels. It is anticipated that industry revenue will grow by 0.1% in 2018-19 because of the
weak income disposable growth. Difficult trading environment is created for the Target from last
five years, and this mainly happened because of the negative customer sentiments and online
only retailers (IBIS World, 2018. Following is the industry statistics of the clothing retailing
market-
Revenue Annual growth from
2014-2019
Employment Business
$ 17 billion 2.0% 109957 11380

Business environment 4
From last few years, target reflects the losses for the Wesfarmers and this is the reason number of
stores of the Target lead to closure. In this context, steps are taken by the organization for fixing
the buds. Guy Russo, executive of the Wesfarmers who drove margin of Kmart’s from 3% in
2009 to 10% in 2015, take the charge of the Target. In America, these stores adopt the strategy of
the fewer promotions, direct sourcing, and the low price. Russo is confident that with this
strategy, target definitely shows the improvement from the loss in 2016 to more than $300
million in the operating income of the organization over the time (Carlises, 2017.
In this context, target mainly focus on delivering the quality fashion at the best price to the
customers on daily basis, and giving the best services to the customers. All these activities are
supported by the higher level of direct sourcing, improvement in the discipline of merchandise
and planning systems, and also the simplification in the operation process. Market targeting is
the larger process of marketing in terms of the target customers, as it includes both the research
market and the practice of the brand positioning. Positioning mainly involves the brand
positioning, and it further includes the different strategies and projects that are initiated by the
organization in context of communicating the brand to the target market.
Financial & Corporate performance
Target mainly reported the net profit after the tax (NPAT) of $ 306 million for the full year
which is ended on the 30th June 2018. NPAT in terms of operations excluding $300 million non-
cash impairment in Target increased 5.2% to $2,904 million. Managing Director Rob Scott of the
Wesfarmers stated that, this financial year was considered as important change for the
Wesfarmers. Decisive actions are taken in terms of repositioning the group portfolio for ensuring
the sustainable growth in earning and also for improving the returns of shareholders
(Wesfarmers, 2018.
Following are the profit index of the Target which is extracted from Assignment 1-
Year Revenue Growth EBIT Growth
2012-13 3.66 N/C 136.0 N/C
2013-14 3.50 -4.4 86.0 -36.8
2014-15 3.44 -1.7 90.0 4.7
2015-16 3.46 0.6 -195.0 N/C
2016-17 2.95 -14.7 -10.0 -94.9
2017-18* 2.80 -5.1 N/A N/C
Source- Assignment 1

Business environment 5
Corporate performance
As stated in assignment 1, Target can develop the competitive advantage by making changes in
the production process of the organization. As stated supply chain of the organization purchased
number of things directly and number of things from the distributors, and this process can be
changed by the Wesfarmers in terms of getting the competitive advantage. In this context, Target
can remove the middle-man from their supply chain and this ensures the raw material at low
cost. This low cost resulted in the low prices of the products, and this ultimately leads to the
competitive advantage for the organizations (Wesfarmers, 2017. Another factor on the basis of
which, competitive advantage can be taken by the organization and these factors are large stores
and customer experience. Target mainly focuses on giving the best experience to the customers.
In this context, energy efficiency target is set by the Target that is 25% reduction of energy per
square metre by 2019 December in comparison of the 2015. Target focus on the overarching
strategy in terms of the low cost abatement first, and this is combined with the collation of the
improved data analytics, systems, and processes. This action of the target leads the department
stores towards the drive efficiency projects (Elmas, 2017
However, there is one negative factor also which can result in lack of customer’s satisfaction that
is in terms of cutting the cost, organization opts the self-service mode. This mode is not suitable
for Australian consumers to adopt, because it is not easy to change the culture of consumers in
Australia (Wesfarmers, 2018.
Following are the SWOT analysis in terms of the corporate performance of the Target, as this
analysis is extracted from assignment 1-
Strength Weakness
 Product: volume, quality, fashion and
basics
 Value: low costs and its consistently
 Promotion, brand love with mass
reach
 Partnerships: Well-known designers
 Global presence
 Streamlined distribution process
 Strong relationships with suppliers
and vendors
 Business reset and change
 Competitor activity
 Conversion scale instability
 Penetration in emerging countries
 Limited visibility in international
markets
 Ineffective online presence
 High cost structure
Opportunity Threats

Business environment 6
 Increase direct sourcing
 Enhance center around space
productivity
 Increment commitment of better and
best ranges through reset of value and
form
 Expansion in international markets
and emerging countries
 Diversity in grocery department
 employee fascination and maintenance
 Vulnerable economies
 High fashion consciousness
 High cost structure
 Increased competition in retail
segment
Source- Assignment 1
Strategic Options
Corporate strategy is defined as the highest strategic plan of the organization, as this plan defines
the objectives of the organization and also the ways through which these objectives can be
achieved in terms of the strategic management. Corporate strategy is the hierarchy of high level,
and vision and mission of the organizations is the most important elements of the organization.
While developing this strategy numbers of techniques are used to evaluate all the SWOT, VRIO,
PESTEL (CFI, no date. Following are the important strategies in terms of the strategic
management of the organization and these strategies can be used by the Target-
Growth strategy- This strategy mainly focuses on considering the methods to get more revenues
from the sales of products or goods. This strategy is mainly considered by the leaders of the
industry, as they usually talk about the vertical and horizontal strategies while referring to the
growth strategies. Vertical strategy in this context seeks growth by taking over the different
components of the operations path. On the other hand, horizontal strategy states those methods
through which business extends its reach in terms of the existing products and services to the
new geographic areas or the new target markets (Brussesls, no date.
Diversification Strategy- This strategy mainly refers to the products and services of the
organization, and this develops the strategy for successful marketing and sales. The two most
important diversification strategies in this context are single-business strategy and the dominant
business diversification strategy. This single-business strategy mainly put limitation on the
number of products and services to the few people, but not to the single individual. An
organization which is using this strategy mainly wants to be the leader in the niche market. This
can be understood through the example, single business strategy is the carpet cleaner that
exclusively markets the services for the carpet cleaning to the homeowners and restoration
services. This single-business strategy could transit the dominant business diversification
strategy by also offering the restoration services. The transition might involve the other cleaning
and contracting services, and this is accompanied with the primary carpet cleaning services.

Business environment 7
Stability Strategy- It is possible for the organization to achieve its optimal market share goals,
instead of scaling up. In this context, leaders of the organization can chose stability strategy that
considers the existing success under the existing platforms in terms of maintaining its market
share. These methods mainly includes the making the process of the organization more efficient
in terms of cost with the help of automation, and this is done by cutting the cost in all those areas
where possible and also negotiating better costs on materials or distribution margins. This
strategy also requires the leaders to focus on the retention of customers, and this is mainly used
at the times when there are adverse economic periods. However, generally this strategy is useful
for the business organizations which are small size and medium size, in terms of the external
business environment (Leonard, 2018.
Final recommended strategy
In terms of the Target the most recommended strategy is the Growth Strategy, as this strategy
can be used by the management because they are the leaders of the market by capturing big share
in the market. There are types of growth strategy, and in terms of the Target it is recommended
to the management to use the market penetration, market development, and product
development. Management can use this strategy for getting the number of advantages, and some
of these advantages are stated below-
 This strategy gives the greatest competitive advantage in terms of the production process
of the organization, as any efficiency in the production output will bring down the cost
per unit and help in achieving the savings.
 This strategy is mainly used by the leaders of the organization, because they already
achieve the stage of stability in the market, and after that there is requirement of growth.
This strategy helps the organization in achieving the required position in the market.
Growth strategy also facilitates number of things for the Target-
 It helps the organization in increasing their resources and stock.
 It helps the organization in achieving more sales target and enhance profitability in the
organization.
 It also helps the organization in reaching the new customers or markets.
 It also helps in making the more investments.
 This strategy holds the power to influence the market price of any product.
 It further decrease the risk related to the external factors such as competitors, market or
updates in technology (NI business, no date.
Target can implement the growth strategy by considering following sections of this strategy-
Market penetration- The main aim of this strategy is to enhance the sales of the existing
products or services in the existing markets. This element of the growth strategy helps the
department stores in increasing their market share. Through this strategy, Target attract more

Business environment 8
customers and also take the capability to put away the customers of their competitors (Ilhan, &
Durmaz, 2015.
Market Development- In this, Target can focus on increasing the sales of their existing products
or services in those markets which are not explored at previous stage. It mainly involves the
analysis of the way in which existing offers of the organization can be sold in the new markets.
Product development- The main objective in this context is to launch the new products and
services in the existing market. In other words, product development can be used in the form of
extended offers which can be given to the existing customers (Wheelen & Hunger, 2012).
Implementation of the recommended strategy
Following steps are required in terms of implementing the growth strategy-
 Target need to focus on the creation of the value proposition, which means, in terms of
ensuring the long growth of the business organization need to develop the factors which
result in high value for the organization. In this context, management need to identify the
reasons because of which customers chose their products over the products of their
competitors.
 Another step states that, organization need to identify their potential customers, which
means, ideal customers for the existing products and service. In other words, organization
needs to identify the customers.
 It is necessary for the organization to develop the policy through which any changes in
the internal and external environment can be measured. In case organization is not able
to measure the change, then there is no way to understand whether such changes are
effective in nature or not. In this context, those key indicators must be identified the
organization which directly affects the growth of the organization.
 Target further needs to identify their current streams of revenue, as these streams help the
organization in making the business more profitable in nature.
 Competition and strategy of competitors must be evaluated by market (Biederman, 2015.
Monitoring & Control of future performance
This is considered as important function of the organization, and before taking any decision
organization need to evaluate this area. External and internal environment impose number of
challenges for the organization, and for dealing which these challenges organization need to
make changes in the strategies and processes. Following are the measures through which,
management can control and monitor their future performance-
 Control measures must be developed by the organization in terms of controlling the
future performance, and these measures include the control management team,
monitoring tools, etc.

Business environment 9
 Another step in which organization needs to focus is the development of the control
policy through which these measures can be achieved.
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Business environment 10
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