The Business Environment: Environmental Scan Report – Part A

This report conducts an environmental scan of Target, one of the subsidiary brands of Wesfarmers. The report finds that the Company faces two challenges in forms of ineffective positioning of products and the affected supply chain management. Few solutions are being recommended to address these challenges. Ineffective positioning of products can be mitigated by building up new and small stores, and reducing the number of items in its portfolio. The supply chain management can be improved with technologies such as RFID and Cloud-based software. Moreover, there is a need for an effective synchronisation between the supply chain and marketing teams. This will help know the market demands and generate appropriate supply of merchandise.

The Business Environment: Environmental Scan Report – Part A
[Target Australia]
Kabita Shrestha
Torrens University

1ENVIRONMENTAL SCAN REPORT
Executive summary
This report conducts an environmental scan of Target, one of the subsidiary brands of
Wesfarmers. The report finds that the Company faces two challenges in forms of ineffective
positioning of products and the affected supply chain management. Few solutions are being
recommended to address these challenges. Ineffective positioning of products can be mitigated
by building up new and small stores, and reducing the number of items in its portfolio. The
supply chain management can be improved with technologies such as RFID and Cloud-based
software. Moreover, there is a need for an effective synchronisation between the supply chain
and marketing teams. This will help know the market demands and generate appropriate supply
of merchandise.

2ENVIRONMENTAL SCAN REPORT
Table of Contents
1. Introduction to the business.........................................................................................................3
2. Identification and analysis of micro environmental factors........................................................3
Porters’ Five Forces.....................................................................................................................3
Marketing Mix (4Ps)....................................................................................................................5
3. Challenges and solutions.............................................................................................................6
4. Conclusion...................................................................................................................................7
References........................................................................................................................................8

3ENVIRONMENTAL SCAN REPORT
1. Introduction to the business
The chosen business for this study is Target Australia, which is one of the subsidiary
brands of Wesfarmers. The Company was formed in the year 1926 (Target.com, 2019). The
number of stored for the Company as of now is approximately close to 301 (Target.com, 2019).
Target remained quite a successful brands for Wesfarmers; however, in recent few years the
story has changed for the Company. On the contrary, Kmart, which is another subsidiary brand
of Wesfarmers has picked up and doing excellently well. In fact, Kmart is performing better in
areas where Target is lacking such as ‘Supply Chain’ and ‘Product Positioning’. The main
purpose of this ‘Environmental Scan Report’ is to identify challenges being faced by Target and
proposing appropriate solutions to the Company.
2. Identification and analysis of micro environmental factors
This section analyses ‘Target’ based on the micro environmental factors using the
Porter’s Five Forces analysis of the Australian supermarket industry and Marketing Mix (4Ps) of
Target. Follow is the analysis:
Porters’ Five Forces
Bargaining power of buyers: (High)
Customers have wide range of options in discount department stores. Other than Target
there are other leading names in the Australian supermarket sector such as Costco, Kmart, Myer,
David Jones and specialist niche retailers (New Idea Magazine, 2019). Costco was named the
leading discount department store for 2018 in Australia (New Idea Magazine, 2019). Indeed, it is
very difficult to build up a reputation of trust and maintain an incremented level of customer
satisfaction.

4ENVIRONMENTAL SCAN REPORT
Bargaining power of suppliers: (High)
Consumers have strong preference for products that are cheaper yet provide values to
their purchase. They want quality products at the most competitive price. It accelerated a price-
based war between the leading supermarket brands (Business Insider Australia, 2019).
Industry rivalry: (High)
There are increased competition between supermarket brands. Woolworths witnessed its
resurgence in 2016-17 (Ibisworld.com, 2019). The Company gained market shares. On the other
hand, Coles’ performance has been the poorest in past several years. The performance was
largely being affected from an expanding Aldi and more buoyant Woolworths. There are
growing threats from AmazonFresh brand in Australia. Another threat is form David Jones that
recently allowed to launch a standalone food store in Melbourne (Ibisworld.com, 2019).
Threat of entry: (Low)
Despite being a favourable market to enter new entrants do not pose too much of threats
to market leaders. New entrants can better operate in the niche market. However, they will still
be facing huge competition in the niche market. In the mid-level market, there are big names like
Kmart, Target and Costco. Any new entrant will itself find this difficult to get a foothold on the
industry. In the high-level market, it is close to impossible for any new entrant to sustain its
business. This sector is represented by industry’s leading names like Woolworths, Coles, Aldi,
Myer and David Jones (Business Insider Australia, 2019).
Threat of substitutes: (High)

5ENVIRONMENTAL SCAN REPORT
Aldi posed huge threats to the price-based competency of Coles and Woolworths. Aldi
included a huge number of private-label products in its product line (Inside Retail, 2019). The
strategy did help the Company to effectively reduce the products’ price. It also encouraged
Woolworths and Coles to follow the similar path, which is to include private-label products in
their product line (Inside Retail, 2019). This was done to be able to counter the rising threat of
Aldi.
Marketing Mix (4Ps)
Product:
It offers mid-priced products such as clothing, general merchandise and homewares. It
also provides online services to its customers (Target.com, 2019).
Price:
Target offers low to mid-priced products. The Company had the success until recently
being affected from another subsidiary brand of Wesfarmers, ‘Kmart’ (Target.com, 2019).
Place:
Target has close to 300 stores in Australia. Online sales option is also there for the
consumers (Target.com, 2019). They just need to select the product they want and this will be
delivered to their preferred address subject to terms and conditions.
Promotion:
Target has discount, loyalty and promotion schemes. Customers will get extra points on
their every visit to the store and purchasing with the target Insurance Products and Target Credit
Card (Target.com, 2019).

6ENVIRONMENTAL SCAN REPORT
Physical Evidence:
Target has 300 stores, which serve as its physical evidence. Target considers
refurbishments of stores to enhance the level of consumer experience. A wide range of products
including also the private-label brands are available for the purchase (Target.com, 2019).
People:
Target prefers trained employees in the form of floor sales support, cashiers etc. The
Company is committed to deliver a high standard of service to consumers.
Process:
Target seems to have lost its competency in the supply chain management. Stores are
bigger with a very huge product line. On the other hand, Target has not been able to
appropriately maintain the stocks. Target looks to be confused with its positioning strategy as
sometime it targets the mid-priced customers while low-priced customers on some other time.
The Company has not been able to retain its brand image as the cost-leader. Kmart, on the other
hand, is one of the leading names in the low-level market (ABC News, 2019). Two main
Challenges that are affecting its business are ‘Supply Chain Management’ and ‘Products’
Positioning Strategy’.
3. Challenges and solutions
1. Supply Chain Management: Supply chain management is one of the challenges that has
largely affected Tiger’s business competency in recent few years. Recommended solution
would include building up small format stores and reducing the size of its portfolio, and
using technologies like deploying cloud-based software, RFID and a synchronisation

7ENVIRONMENTAL SCAN REPORT
between supply chain and marketing teams (Handfield et al., 2015). Cloud-based
software will generate real-time data for suppliers. Hence, the supply will improve. RFID
will help tracking the products over the supply chain thus avoiding any misplace and
misuse of the products. A synchronisation between marketing and supply chain teams
will effectively balance the market demands and supply of products.
2. Products’ Positioning Strategy: Target must make it clear that it operates in the low-
level segment of the market. To do this, it must reduce its portfolio size keeping only
sellable and in-demand products. New and small format stores should be made. Such
stores are appealing to Millennials as they prefer shopping in small baskets (Heinberg,
Ozkaya & Taube, 2017).
4. Conclusion
Therefore, Target faces two challenges in forms of its ineffective positioning of products
and supply chain strategies. Few solutions are being recommended in this report to address these
challenges. Positioning strategy can be improved with new and small stores having decreased
number of products in its product portfolio. Supply chain issues can be resolved by deploying
technologies like RFID and Cloud-based software. Moreover, a sync is needed between the
supply chain and marketing teams to effectively balance the market demands and supplies.

8ENVIRONMENTAL SCAN REPORT
References
ABC News. (2019). How Kmart ate Target: A story of retail cannibalism. Retrieved from
https://www.abc.net.au/news/2016-05-31/kmart-ate-target-story-retail-cannibalism/
7461564
Business Insider Australia. (2019). A new wave of threats points to another supermarket price
war primed to break out in Australia. Retrieved from
https://www.businessinsider.com.au/australian-supermarkets-kaufland-threats-ibisworld-
analysts-2018-9
Handfield, R. B., Cousins, P. D., Lawson, B., & Petersen, K. J. (2015). How can supply
management really improve performance? A knowledge‐based model of alignment
capabilities. Journal of Supply Chain Management, 51(3), 3-17. [DOI:
10.1111/jscm.12066]
Heinberg, M., Ozkaya, H. E., & Taube, M. (2017). The influence of global and local iconic
brand positioning on advertising persuasion in an emerging market setting. Journal of
International Business Studies, 48(8), 1009-1022. [DOI: 10.1057/s41267-017-0071-2]
Ibisworld.com. (2019). IBISWorld reveals state of the supermarkets and grocery industry |
IBISWorld Industry Insider. Retrieved from https://www.ibisworld.com/industry-
insider/press-releases/checkout-update-q1-2018-ibisworld-reveals-the-state-of-play-in-
the-supermarkets-and-grocery-stores-industry/
Inside Retail. (2019). The secret to Aldi’s success - Inside Retail. Retrieved from
https://www.insideretail.com.au/news/the-secret-to-aldis-success-201808

9ENVIRONMENTAL SCAN REPORT
New Idea Magazine. (2019). Experts name Australia's leading discount store. Retrieved from
https://www.newidea.com.au/australia-costco-leading-discount-store
Target.com. (2019). Retrieved from https://www.target.com.au/