S3752293 a2 - A2 IB course PDF

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A2 IB course...

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RMIT International University Vietnam BUSM 3311 – International Business

A2 Subject Code:

BUSM3311

Subject Name:

International Business

Location & Campus

RMIT Vietnam , HCMC / Hanoi

Class Group Number:

Group 1

Student name:

Nguyen Phuong Khanh Vy

Student Number:

s3752293

Your Teacher:

Tzach Ronen

Word Count:

1122 words

Target’s failure in Canada and its internationalization process Introduction Target, a globally successful retailing company of United States, hoped to expand the company into nearly 1800 stores by purchased 200 Zeller stores in Canada. Nevertheless, after two years entry into Canada, Target has to exit the market as their misstep has brought to total net loss approximately $2 billion (Wahba, 2015). To be more detailed, this essay will analyze the firm mistakes in their international expansion process and will be provided some recommendations to the firm in order to improve their international business performance.

Analysis 1

To begin with, Target has using FDI entry method by acquisition. In fact, Target has bought more than 120 Zeller stores from Hudson Bay Co. Apparently, this is an effective method in its own right. However, Target has applied this method inefficient and they have failed. Moreover, by applying the FDI by acquisition method, there are some inevitable risks related to this method, such as differences in cultural, language hurdle and legislative issues from the targeted market (Moon, 2016)

Target Canada has failed to apply the FDI by acquisition as they had ignored diverse nuances associate with foreign management. As can be seen, the locations of Canada Target were smaller than the typical US stores as they have to spend more money to convert into their distinct layout. Additionally, over 120 Zeller stores the bought from Hudson Bay Co. was located in the shopping center, which was not an ideal location and hard to access.

What we perceived is Target Canada launch was overambitious as when entered the market, they were rushed to open 124 stores in the first year. According to the FDI entry characteristic, the timeline was too competitive, and their scale was immense. The strategy of Target seems to be rushed as they were inexperience in the new market (Castaldo, n.d.).

Moreover, this fiasco can be blamed by the fact that Target Canada did not comprehend cultural nuances of Canadian. The retailer was misunderstanding to assumed that the Canadian’s consumer behavior is similar to American’s. For instance, the Canadian consumers are sensitive to price and they tend to compare prices of different retailers (Santander Trade Markets, n.d.). However, Target Canada had disappointed their customers by high prices (Banjo and Trichur, 2014). Hence, this is one of the key factors lead to poor sales performance of Target. Hence, Target again lost their credibility to Canadian consumers and it is hard to recover consumer’s trust.

Subsequently, it is believed that psychic distance will create difficulty that could affect the company to enter any market, including the differences in society, language, cultural and geographical characteristic (Korte, 2016). What we perceive is Target Canada has failed on geographical expanse. It is clear that the population of United States is only one tenth of Canada, but Canada is bigger than United States. Hence, each retail stores have to be located by long distance from each other. As a 2

result, because of the long-distance locations, Target Canada have to deal with transport and distribution issues (Dahlhoff, 2015). Following by the transport and distribution issues, their poor supply chain management is one of the reasons for their poor sales performance. There were stock outs owing because they had to deal with distribution and shelf replenishment (Gollom, 2015). The firm has made a bad impression to who were new to the brand as there are limited stock shelves, range of products and higher prices when compared to the initiative stores (Dahlhoff, 2015). In fact, in an interview with The Wall Street Journal, a former employee has admitted that he had to full-filled an entire shelf with one detergent brand because it cannot be filled by other products (Banjo and Trichur, 2014). Generally, Target has failed in create the adequate distribution system.

As can be seen, technology has played an important role in business as it helps the firm operate smoothly and efficiency (Suleman, 2019). However, Target Canada was not catch up with the ecommerce. At the time the retailer operated in the new market, they were lacked of online presence. Meanwhile, their competitors such as Wal-Mart and Amazon have expanded their online offerings at the time. In addition, the Canadian retailers has suffered a serious data breach, which made personal information of over 110 million customers were stolen. In other words, that situation has made the customers less visit Target as they felt that their information security was compromised (Forbes, 2014). What we perceived is the technological misstep cannot be blamed for the failure of the Canadian retailer.

Last but not least, the Canadian retailer has made a mistake on human resource management. At first, when Target bought the Zeller stores, the management decide to fire the former employee of Zeller and hire completely new worker. In addition, Target has sent their new employee to United States for training, which bring the American way back to Canada. The new employees that sent to United States is new, so they do not know how to relate with the local population. When they came back, they would suffer a cultural shock because the technologies in United States is different with Canada, which resulted in more problems for the management.

Recommendations 3

In general, the retailer should have done differently in order to be successful. Firstly, they have to take more time for the plans and research about the new market, especially with the new transition. Then, they have to repair the supply chain management before open a huge number of stores. In addition, the management was not interacting with the customers, resulted in disappointment for their customers. Hence, the management need to response immediately to the customers in order to satisfy them. Otherwise, franchising from the beginning of the project is an ideal option for Target. Target should have thought smaller from the beginning rather than take an entire Zeller location. In this case, take a small step will help Target comprehend on how the Canadian market was and better understanding their target market (Wahba, 2015).

Conclusion To sum up, the launch of Target was over ambitious. From the beginning, the whole project was rushed. Because of the lack of well-organized, resulted in the failure of Target with negative sales performance. Even though the retailer is not planning to go back to the Canadian market, this case has recommended the location strategy and logical alternative options for their international expansion process.

Reference list Wahba, P 2015, ‘Why Target failed in Canada’, Fortune, January 15, viewed 15 November 2019,

Moon, Hwy-Chang 2016, ‘FDI Impacts on Country: From Negative to Positive Perspective’, World Scientific Pte., pp. 79-95

Castaldo, J, ‘The Last Days Of Target, Canadian Business’, viewed 16 November 2019,

Santander Trade Markets, Reaching the Canadian consumer, santandertrade.com, viewed 16 November 2019, 4

Banjo, S. and Trichur, R 2014, ‘How Target Missed the Mark in Canada’’, The Wall Street Journal, May 7, viewed 16 November 2019, Korte, D 2016, ‘The concept of "psychic distance" and its meaning for the global activity of small, medium, large sized businesses operating in foreign markets’, GRIN Verlag,

Dahlhoff, D 2015, ‘Why Target’s Canadian Expansion Failed’, Harvard Business Review, January 20, viewed 16 November 2019, Gollom, M 2015, ‘Target’s launch into Canada ‘a multifaceted failure’’, January 16, viewed 16 November 2019,

Suleman, F 2019, ‘10 Reasons that Demonstrate the Importance of Technology in Business’, August 16, viewed 16 November 2019,

McMahon, T 2015, ‘Missing the Mark: Some Five Reasons and Explanations Why Target Failed in Canada’, The Globe and Mail, January 15, viewed 17 November,

Forbes, 2014, ‘Target's CEO Steps Down Following The Massive Data Breach And Canadian Debacle’, May 8, viewed 17 November 2019,

Wahba, P 2015, ‘Why Target failed in Canada’, Fortune, January 15, viewed 17 November 2019,

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