Target Corporation: Ethics, CSR, and Strategic Trends

External Environment Trends

Target is subject to a number of different trends that affect its business. These include external factors in the economic, technological, political, and social environments. The economic environment has the most direct impact on a company like Target, which sells a broad range of consumer staples to a wide audience across the entire country. During the last major recession, Target struggled with sales that tracked GDP, flatlined margins, and sluggish profit trends — all the result of consumers reining in their spending during a time of substantial economic uncertainty (Marketwatch, 2010). For many consumers, Target is seen as slightly higher on the discount hierarchy, so when a recession strikes, they trade down to Walmart, dollar stores, and warehouse stores to save even more money on staples (Marketwatch, 2010).

The political environment is less a direct factor in Target's business, except when it affects the broader economy. There have been increasing warning signs of a pending recession, in many cases driven by political policies that are hurting economic growth. Target in particular has felt stress from an increase in tariffs and other trade barriers, especially those involving China, which is a major supplier for the company. Target was among the companies that have publicly — and through lobbying efforts — been at the forefront of a fight with the Trump administration over policies that directly led to tariffs on Chinese goods (Kopecki, Reagan, & Soisson, 2018).

The social environment is less likely to affect sales directly, but there are a few interesting elements to consider. Shifts in the social environment can be a double-edged sword for retailers. A retailer needs to stay on top of trends, especially in clothing; if Target successfully identifies trends ahead of time, it can accelerate sales growth. If it does not, Target might find itself in a situation where its inventory turnover decreases and it must sell unwanted goods at steep discounts simply to clear them. Target addresses this risk in its annual report.

The technological environment is also a double-edged sword, providing significant opportunity if the company gets it right, but real risk if it does not. In the back end of a high-volume discount retail operation, technology is king — it allows the company to reduce costs, maximize efficiency, and meet customer needs simultaneously. Investment in supply chain technology, to the tune of $7 billion, was a cornerstone of the company's digitization efforts that began in 2015. These efforts included investment in fully autonomous warehouses and an "order to shelf" system, which represents the next level of just-in-time (JIT) inventory management (Bedetti, 2017).

All told, Target's ability to identify social and technological trends and respond quickly is one of the critical success factors for the company — and for any competitor in the industry. This places emphasis on Target's leadership to build responsive systems that allow it to make quick pivots when these elements shift.

Internal Environment Trends

Target has traditionally sought to play to its strengths, which include competencies in supply chain management, marketing, staffing, and merchandising. The company has effectively defined its brand, which has helped it attract a loyal customer base and extend into new markets across the United States. The company has also made social responsibility a part of its platform, with a particular focus on community engagement and its workforce. These moves have made Target an employer of choice at the lower end of the labor market, meaning most of its stores are staffed with relatively friendly, competent employees.

Target has not faced many ethical issues in recent years, even as other companies — such as Walmart — have been targeted by activist groups. That said, warehouse competitors like Costco have even stronger reputations on that front. Target also has sustainability targets built into its strategy, but this is not an area of particular strength for the company. Importing goods from China, especially goods that are relatively cheaply made, is not especially sustainable. The measures that Target pursues regarding waste reduction therefore mask the fact that its business model is inherently not genuinely sustainable. Waste reduction is a noble goal and helps Target operate more efficiently, but it remains a form of sustainability constrained by a broader model that encourages consumer culture and mass fossil fuel usage.

Corporate Social Responsibility

In response to the social trend toward corporate responsibility, Target publishes a Corporate Responsibility Report. As with all CSR initiatives, Target's efforts are entirely voluntary, and the company defines its own success metrics and priorities within that context. The company focuses on the following major responsibility elements: internal staffing, customer service, community involvement, materials management, and stakeholder engagement. The report is highly detailed, outlining the company's targets and its progress toward those targets.

That said, Target's CSR efforts represent only a portion of the total responsibility possibilities available to a company of its size. The upside is that Target has built the social responsibility endeavors it does pursue into its overall corporate strategy. The downside is that elements of CSR that do not fit neatly with the company's strategy have largely been ignored. So while Target is not a poor performer in this area, it is not a standout performer either — except, perhaps, on community and staff engagement.

Target should, however, be aware of the trends in this dimension and begin preparing to take a leadership role. Other companies in its space have been targeted by activist groups, and that pressure has taken some heat off Target, but eventually its business model will come under fire. Target will want to have a strategy for reducing its dependence on cheap Chinese goods. In a way, those tariffs that cause so much grief in the retail industry might actually be a blessing for any company that has a long-range vision of dramatically reducing its carbon footprint.

References

Bedetti, B. (2017). Shrinking the supply chain: Target needs an integrated digitization strategy to thrive as an omnichannel retailer. Harvard Business School. Retrieved March 30, 2019, from

Isidore, C. (2016). Target's $20 million answer to transgender bathroom boycott. CNN. Retrieved March 30, 2019, from https://money.cnn.com/2016/08/17/news/companies/target-bathroom-transgender/

Kopecki, D., Reagan, C., & Soisson, I. (2018). Target is deeply troubled over Trump's tariffs. CNBC. Retrieved March 30, 2019, from https://www.cnbc.com/2018/09/21/target-deeply-troubled-over-trumps-tariffs-as-retailers-push-back.html

Marketwatch. (2010). Target versus the recession. Marketwatch. Retrieved March 30, 2019, from https://www.marketwatch.com/story/target-takes-on-the-recession-2010-08-18

Segarra, L. (2018). How diversity and inclusion power both Target and Tesla. Fortune. Retrieved March 30, 2019, from http://fortune.com/2018/12/12/mpw-next-gen-target-tesla-diversity-inclusion-hiring/

Target 2018 Corporate Responsibility Report. Retrieved March 30, 2019, from