54 Part 1: Strategic Management Inputs
Target Lost Its Sway Because Tar-zhey No Longer Drew the Customers
Strategic Focus
Target became known by consumers as Tar-zhey, the retailer of
cheaper but ‘chic’ products. The firm offered a step up in quality
goods at a slightly higher price than discount retailers such as
Walmart, but was targeted below major, first line retailers such
Macy’s and Nordstrom. Additionally, it promoted its stores to offer
one-stop shopping with clothing, toys, health products, and food
goods, among other products. For many years, Tar-zhey “hit the
bullseye” and performed well serving this large niche in the
market. But the company took its eye off the target and began
losing market share (along with other poor strategic actions).
The first major crack in the ship appeared with the announce-
ment of a massive cyberattack on Target’s computer system
that netted customers’ personal information. The attack exposed
customers (data on 70 million customers) to potentially sub-
stantial losses due to credit card fraud. Not only was this a public
relations disaster, it drew a focus on Target that identified other
problems. The “light” on Target showed that the strategic decision
to enter the Canadian market in a major way (133 stores across
multiple geographic areas) was failing. Finally, the careful analysis
showed that Target was losing customers to established competi-
tors and new rivals, especially Internet retailers (e.g., Amazon.com).
Target’s marketing chief stated that “it’s not that we became
insular. We were insular.” This suggests that the firm was not analyzing
its environment. By allowing rivals, and especially newer Internet
competitors, to woo the company’s customers, it lost sales, market
share, and profits. It obviously did not predict and prepare for the
significant competition from Internet rivals. Competitors were offering
better value to customers (perhaps more variety and convenience
through online sales). When combined with the loss of consumer
confidence because of the massive hack of personal customer data,
Target’s reputation and market share were simultaneously harmed.
The unparalleled failure of the Canadian operations within
a very short time (two years) also showed a lack of market
understanding likely stemming from the failure to analyze the
market. It is probable that all of the problems Target was expe-
riencing were transferred to its Canadian operations as well. In
addition, it failed to attract customers from its major Canadian
retailers, such as Loblaw Companies, Canada’s largest grocer
that recently introduced low-cost clothing boutiques. Costco
and Walmart were also well-established in the Canadian mar-
ket. Target was unable to differentiate the value it provided
from the established retailers in Canada. It also experienced
problems in its Canadian supply chain suggesting again that
it did not fully understand the business markets in Canada
before entering the market.
Because of all of the problems experienced, Target’s CEO
resigned in May 2014. A new CEO, Brian Cornell, was hired
three months later. He was a top executive at PepsiCo and
had experience heading Sam’s Warehouse for Walmart as well.
Cornell is the first CEO to be hired from outside the company,
and most of his experience is from outside the industry as well.
Since arriving on the job in August of 2014, Cornell has started
making changes. For example, he is trying to regain Target’s “chic”
image by focusing on fashion, infant’s, children’s, and health
departments to increase customer traffic and sales. The focus in
foods is more upscale, more organic food, specialty granola, cof-
fee and tea, wine, and beer. Sales exceeded the forecast in the
fourth quarter of 2014 with the highest growth in three years. In
January 2015, Cornell also closed all Canadian stores and thereby
laid off 17,600 employees, a painful but necessary move. Finally,
he announced another layoff of close to 2,000 employees in
March 2015. Most of these employees will come from the main
office with the intent to make Target more nimble and agile.Interestingly, Cornell did not take the large corner suite
accorded to the former CEOs but instead chose a smaller
office near the company’s market data collection site. There a
staff of ten employees gather information from social media
sites such as Pinterest, Facebook, and Twitter and from televi-
sion news from nine large TV screens. The CEO stops by every
morning to learn the latest information. These actions alone
suggest the importance he places on gathering and analyzing
data on the market and competitors’ actions.
Sources: 2015, What your new CEO is reading: Smell ya later; targets new CEO, CIO
Journal/Wall Street Journal, http://www.wsj.com/cio, March 6; I. Austen & H. Tabuchi, 2015,
Target’s red ink runs out in Canada, New York Times, http://www.ntimes.com, January 15;
H. Tabuchi, 2015, Target plans to cut jobs to help save $2 billion, New York Times, http://www.
ntimes.com, March 3; P. Ziobro & C. Delaney, 2015, Target sales grow at fastest rate
in three years, Wall Street Journal, http://www.wsj.com, February 25; J. Reingold, 2014, Can
Target’s new CEO get the struggling retailer back on target? Fortune, http://www.
fortune.com, July 31; G. Smith, 2014, Target turns to PepsiCo’s Brian Cornell to restore its
fortunes, Fortune, http://www.fortune.com, July 31; P. Ziobro, M. Langley, & J. S. Lublin, 2014,
Target’s problem: Tar-zhey isn’t working. Wall Street Journal, http://www.wsj.com, May 5.Target Lily Pulitzer Line.PNG
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