Analyzing a Retailer

Target In general, Target is not subject to significant interference in the political environment. In an industry like discount retailing, where the margins as razor thin, taxation can affect the decisions that a company makes, because even a small increase in the net tax burden can render a store, project or company unprofitable. However, it is unusual that Target would be subject to unusual taxes not also shared by its major competitors in the discount or warehouse retail spaces.

Likewise, there is a complex legal and regulatory burden on Target, encompassing areas like marketing, human resources and the company's stock. However, there is nothing undue about Target's burden relative to that of its major competitors. Target's current expansion plans are taking it to Canada, so it is worth considering that Target needs to understand an entirely new legal, regulatory and tax environment as part of this strategy -- something Wal-Mart and Costco have already done since they have been in that market for a couple of decades.

With respect to social trends, Target appears to be in a good position to capitalize on some trends, like moves towards organic and green goods. Target already has an organic line of food in place to capture share of this fast-growing segment. The company is not as well-positioned in groceries as some of its largest competitors, however, so Target will have to work harder to make this a relevant part of its business.

The green trend actually benefits Target, because part of being green is reducing waste and inefficient resource use. Target is already oriented to waste reduction and efficiency because of its tight margins. Target can promote itself as a green option, and can try to bring more customers into its stores by offering more environmentally-friendly goods. Online shopping has become mainstream, and most consumers take advantage of online shopping options. For Target, this is another opportunity.

Arguably, however, the company is at a disadvantage because it waited too long to make online shopping a priority. So while there is tremendous room for growth, the world's two leading online retailers Amazon and Wal-Mart are well ahead of Target in the online retailing market. There is opportunity, however, to grow its current share of this market. There is also opportunity for Target to build links between its online and offline operations, something that holds promise for increasing sales from its existing customers.

In general, Target has a strong competitive position, but is not the leader in its industry. Wal-Mart is larger by far, and that gives it superior buying power that it uses to undercut Target. As well, warehouse stores like Costco, online retailers like Amazon and specialists like Home Depot all compete in some product lines against Target and all are.