Target UK Market Entry

¶ … Growth Strategy

Market Entry Strategy

There are a number of different options for the market entry strategy. These include licensing, joint venture and direct investment. For Target there are a number of considerations to make. First, the company just utilized the direct investment strategy in Canada, buying the real estate assets of a large chain of discount stores that went under. This move gave Target a large real estate footprint with which to work. Theoretically, that should have helped the company with things like economies of scale, but instead it was too big for Target to manage and the company suffered massive stockouts that may have set it back in that country years (Shaw, 2014). Target can view this one of two ways -- either it learned something from the experience and can enter the UK market most effectively via direct investment, or it should avoid direct investment and find a joint venture partner.

A joint venture gives Target the expertise to operate in the UK market, thereby flattening the learning curve. The downside is that Target, while sharing the risk, shares the rewards as well, and there is no guarantee that the JV partnership is going to be worth the cost (QuickMBA, 2010). An alliance might help with certain things, like distribution, while allowing Target to handle the retailing side of things. However, the cost leadership strategy that Target follows demands that it exercise a high level of control over its supply chain -- it is risky to allow an alliance or joint venture partner have control over critical elements of the business model.

It is recommended, therefore, to utilize the direct investment strategy. The question then is what form that should take. Target was lucky enough that Zeller's the failed Canadian discounter, fell into its lap, allowing Target the opportunity to get large store spaces in anchor positions at a discounted price. It might have this luxury in the UK as well, if it is willing to wait. The reason for that is that right now in the UK there is a brutal supermarket war that could open the door for one of the weaker competitors in that market to sell out to Target, handing the American company some prime high street real estate to work with. Already food producers in the supply chain are going out of business and it is only a matter of time before a large grocer goes under (Bermingham, 2014).

Should either Target not want to wait this out to see if someone becomes vulnerable, it could invest immediately in building out its stores. Real estate will be at more of a premium under this option. Also Target will have to move more slowly. After the Canadian experience, moving slowly might be a good thing, but it will also render it very difficult for Target to be a cost leader, as it will not have any economies of scale in the UK. If Target is going to go to the trouble of building out its supply chain competencies, it should enter the market via acquisition so that it has a lot of real estate to work with.

Distribution channels should be replicated from home, because efficiency in distribution is one of the competitive advantages that Target has over most stores. The company will have the opportunity, when it is able to make a bid on a supermarket chain, to acquire the distribution capabilities of that same company. The UK is quite centralized, so three or four large distribution centers should suffice -- the distances are seldom far.