Target has a strong position in the US retail market because of its superior quality in product design and elaborate marketing. The company has improved its operations by integrating new marketing ideas, like the new designer line of clothes, into its main operations. Nonetheless, Target has failed to achieve greater expansion to match the operations of its competitors, like Walmart and Kmart. Technological innovation is creating new business opportunities for mass retailers, including online retail practice. The industry rivalry is too intense, leading to reduced revenue margins. Target needs to focus its strategy on cash cow products to increase its revenue base and enhance profitability.
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Target has a strong design quality that has been central to enhancing its growth in the market. This has seen it commit its resources to the sale of merchandise that is both unique and contemporary, thereby being able to attract huge customer demand. The design quality of the firm has seen Target also differentiate the merchandising layout successfully using innovative ideas like low shelves, track lighting, and halogen lighting. Target has equally succeeded in establishing itself as a prestigious company that sells branded goods, such as the selection of expensive designer outfits by Michael Graves, in its stores. Thirdly, Target boasts of an efficient marketing plan that has seen it establish equity and develop experimental marketing efforts that have enhanced its global outlook.
Target has not managed to expand its internal business capacity to match the size of other leading brands of mass retailers, such as Walmart and Kmart. This implies that its revenue base and capacity are relatively curtailed.
Technological advancement is widening the opportunities for mass retailers to explore other unique avenues of sustainable business operations, including online retailing (Gadhave & Pai, 2012). This eliminates the disadvantage caused by bounded markets of the physical brick-and-mortar stores. The virtual market space has greater capabilities of pushing sales margins and profits higher than the physical stores.
The presence of numerous brands of mass retail chains points to a higher degree of competition in the industry. The high competition also implies that revenue and profit margins are smaller because the competition is mainly focused on lower pricing, instead of other aspects like quality and brand value. More importantly, the industry is dominated by large, well-established brands like Walmart. These rivals use their huge capacities to force suppliers to lower prices (Lauren, Richey, & Reynolds, 2011).
Probable Marketing Strategy
It is important for Target to focus on market maturity strategies, given the threats posed in the industry, which mainly borders on smaller revenue and profit margins due to a large number of mass retailers. This entails a maintenance strategy, as explained on the BCG matrix, for purposes of holding onto a steady marketing mix (Vu, Shi, & Hanby, 2009). Thus, Target should optimise its management on all its cash cows, including its line of designer products and the prestigious products that fetch the largest amount of revenues and profits for the company.
Focusing on the cash cows will enable Target to expand the level of its margins in this category of products, thereby gaining more resources for purposes of sustaining operations in the industry. On the other hand, the company should continue stocking the low performing categories of products, although investment towards this sector should be limited. The returns from these products are minimal, thus, the firm stands to lose very little if it minimises its expenditure on this category of goods (Vu et al., 2009). As revenue from the cash cows grows over the years, the company can consider creating a market niche that only focuses on a limited range of products, instead of focusing on a wide range of products that give limited profits.
Gadhave, T. B., & Pai, V. A. (2012). Prospects and opportunities in retail sector. International Journal of Marketing and Technology, 2(8), 91-100.
Lauren, S. B., Richey, R. G., & Reynolds, K. E. (2011). Exploring a new perspective on service efficiency: Service culture in retail organizations. The Journal of Services Marketing, 25(3), 215-228.
Vu, D. A., Shi, Y., & Hanby, T. (2009). Strategic framework for brand integration in horizontal mergers and acquisitions. Journal of Technology Management in China, 4(1), 26-52.