SWOT Analysis of Target 1

Module 3 SWOT Analysis of Target

Sun Devil Strategic Managers

OGL355: Leading Organizational Innovation and Change

Bill Erwin

June 5, 2022

Arizona State University

SWOT Analysis of Target 2

SWOT Analysis of Target

The Target Corporation was incorporated in 1902, in Minnesota. Even though the Target

Corporation has changed the company’s name many times over the last 120 years, the Target

Corporation that consumers know and love today was officially founded in 1962 (Target

Corporation, n.d., “History Timeline”). For the last 40-years, the Target Corporation has been

operating as a big-box retailer selling general merchandise in stores throughout all 50 U.S. states

and through their online digital channels. As a publicly traded company that employs over

400,000 plus team members and is the seventh largest retailer in the world, the Target

organization has been able to capture the admiration and respect of its investors, team members,

and customers for decades (Debter, 2022, “Chart”). In this SWOT analysis, we will discover the

details of why the Target Corporation has been able to stay relevant for decades while continuing

to have a competitive advantage over its competitors as a retail favorite with its loyal customers.

SWOT Analysis

A SWOT Analysis is an assessment method used to conduct an environmental scan of an

organization by analyzing the strengths, weaknesses, opportunities, and threats (SWOT) of an

organization. In this SWOT analysis, we will analyze the internal strengths and weaknesses used

to create competitive growth strategies by evaluating the tangible and intangible resources and

core capabilities currently identified within the Target Corporation. We will also evaluate the

company’s external opportunities and threats by examining the external environmental changes

currently facing the retail industry as a whole and the corporation directly.
SWOT Analysis of Target 3

Strengths Weaknesses

● Positive financial position ● Low profit margins

● Positive customer shopping ● Lack of focus on E-Commerce
experience ● Lack of amenities
● Target Circle Loyalty Program ● International presence
● The amount of locations. ● Perception of higher prices
● Brand recognition. ● Lack of product diversity
● Employee benefits. ·

Opportunities Threats

● Increase market presence ● Rising costs

● Increase sustainability ● Uncertain times
● Improve digital interfaces (website ● Increased competition
& app) ● Technology risks/data breaches.
● Improve diversity, equity and
inclusion
● Expand private label brands
● Increase number of locations

Strengths

Finding the strengths within an organization are important working holistically. Strengths

and weaknesses are often seen as hand in hand but focusing on just strengths shows a company

what they have done well and teaches them what they need to do to stay strong. “Strengths are

resources the organization possesses and capabilities it has developed, both of which can be

exploited and developed into a sustainable competitive advantage” (Coulter, 2013). To have a
SWOT Analysis of Target 4

competitive advantage is a strength in itself and Target has managed to have many different

strengths throughout its time as a company. We have identified Target’s strongest strengths

which are people, property, and profits.

Positive Financial Position

The Target Corporation has many strengths which is why it has remained so successful

over the years. Target strives to create a positive and inviting environment for its customers to

help create brand loyalty and encourage repeat business. The implementation of the Target circle

loyalty program and the Target debit and credit red cards have also been influential features in

helping to achieve a positive financial position. “Years of investment in our team and business

have driven our sales beyond $100 billion and positioned Target to meet the needs of our guests

no matter how they choose to shop” (Target, 2022). To help boost sales Target has implemented

new and innovative ways to shop with online ordering, store pick-up, in-store shopping, and

delivery services.

Brand Recognition and Locations

With plans to introduce 30 more stores in 2022 (Target, 2022), Target will continue on its

growth trajectory by improving accessibility and increasing its customer base. As they add new

locations in both foreign and familiar places, the company raises its brand recognition as more

and more people become familiar with the red bullseye logo. “The stores will range in footprint,

from mid-size locations in dense suburban areas to small-format stores in city centers like

Charleston, SC, and New York’s Times Square” (Target, 2022). The adoption of storefronts to

more locations is a strength as they are creating a new and better level of accessibility for

customers and employees alike.

Employee Benefits
SWOT Analysis of Target 5

The Target Corporation has many strengths when serving and catering to loyal

customers, but the corporation also treats its employees (team members) well, too. Right now,

the retail industry is struggling to capture new employees and fill positions, which lends to the

reason why Target has recognized they need to invest in their current employees and attract new

ones. A recent polling survey conducted by Gallup found that “employees want increase pay,

better work-life balance and wellbeing, job stability and job security, that the organization is

diverse and inclusive to all types of people, and the ability to do what they do best” (Wigert,

2022, para 1-22).

Target plans to make a $300 million investment in their employees. While the company

is introducing many enhancements to its benefits program, there are a few things that are

“positioning Target as a benefits leader in the retail industry” (Zboraj, 2022, “Title”). Some of

the benefits setting Target apart from other retailers include increasing starting “hourly” wages to

“$15 to $24, access to better health benefits, a debt-free college program, access to more stable

schedules, and making Thanksgiving Day store closings permanent” ( Zboraj, 2022, para.9). By

investing in its employees, Target can build on their core capabilities as a strength for the

company but also provide employees’ the benefits they really want.

Weaknesses

Weaknesses, in relation to organizations, are internal competency struggles that can,

potentially, be converted into opportunities for internal growth thereby becoming an asset in

relation to their competition. In reference to Target, numerous weaknesses have been identified,

including low international presence, perception of higher pricing, and lack of product line
SWOT Analysis of Target 6

diversity. However, emphasis will be on three primary weaknesses pinpointed as the most

detrimental to the organization; each of which will be examined in greater detail.

Low Profit Margins

According to The Grocery Store Guy.com, “Conventional grocery stores have a profit

margin of about 2.2%, making them one of the least profitable industries in the US” (Campbell,

2021). Fortunately, mass merchandisers like Target have more than just grocery items in their

stores that lend themselves to increased profits. Through their clothing and furniture offerings to

their private line of goods, Target was able to realize a net profit margin of 6.55% for 2021.

Effectively, this denotes that the organization is very susceptible to external costs and how

beholden they are to their vendors and logistics expenses.

Lack of focus on E-Commerce

Target arrived late to the E-commerce sector, which has translated into missed

opportunities and loyalty shifts amongst their customer base. Target’s primary competitor,

Walmart, launched their e-commerce site in 2000; 10 full years before Target entered this area.

Despite investing vast amounts of resources over the past several years, in 2021 Walmart

realized 617.2 million monthly visitors, compared to Target’s 282.5 million visitors (Nguyen,

2021). The industry is based on high-presence, high volume, and economies of scale; therefore,

this presents a clear disadvantage over the competition.

Lack of Amenities

Shoppers have been enjoying the one-stop shopping experience for decades and this has

generated the need for and implementation of a greater number of amenities at supermarkets and

mass merchandisers. From fast food establishments to drive-thru pharmacies, to fueling centers,

people are seeking convenience in every aspect of their consumer lives. Regardless of this
SWOT Analysis of Target 7

continuing trend, Target has neglected this niche and is translating into lower numbers of visitors

and annual sales.

Opportunities

Opportunities are external changes used by an organization to create a competitive

advantage and improve its performance. An organization must always know what potential or

pending internal and external actions are likely to positively or negatively influence them, thus

strategically planning how to address them (Lusthaus et al., 2002, pg. 46). Strategic planning

must mitigate negative influences and take advantage of opportunities. Opportunities can be

augmented by forming new alliances and partnerships, and by forging new ways of thinking

about generating resources (Lusthaus et al., 2002, pg. 46). In our analysis, we found that Target

has been successful at capitalizing on opportunities in many ways, such as their sustainability

efforts with “Target Forward”, improving their diversity, equity, and inclusions program, by

expanding their private “owned” brand, and developing its aggressive strategy for consumer

accessibility with over 47 new brick & mortar locations opening, some well over 100k sq ft

(Target, 2022).

Increase Market Presence

Target has huge plans to expand its market presence. On March 1, 2022, the Target

Corporation “announced its plan to invest up to $5 billion to continue scaling its operations in

2022” (para.1). Target’s business strategy to expand its market presence will allow the company

to build 30 new stores and remodel 200 existing stores, while also improving same-day

fulfillment services by continuing to invest in digital experiences that will drive growth for the

retail giant (Target Corporation, 2022, para. 1, 3 & 8). Target is taking the opportunity to build

on their core capabilities for projected long-term growth for the corporation.
SWOT Analysis of Target 8

Increase Sustainability

With the ongoing issue of climate change and limited resources many companies,

including Target, have taken notice and are taking action towards more sustainable choices. To

help protect the planet and the success of its company, Target is working with its communities

and partners to be “Target Forward”. Through Target Forward, the company is working towards

more sustainable choices such as 100% renewable energy sources by 2030, the use of sustainably

sourced, 100% recycled or regenerative materials in their private labels by 2030, and net zero

emissions by 2040 (Target, n.d). While these efforts are great, there is still more that they could

be doing.

An opportunity for improvement with the Target Forward program would be more

transparency in the progress the corporation is making towards its sustainability goals. One of

Target’s competitors, Costco, is also working on tackling environmental and social issues, and

has its goals and progress available to view on its website (Costco Wholesale, 2022). Other

companies like Patagonia, an outdoor clothing and gear company, are taking their commitment

to the environment a step further. Patagonia fixes its customers Patagonia apparel for life, offers

credit for used Patagonia apparel, sells its own used apparel as well as new merchandise, and is

calculating an environmental profit and loss for each of its products. These environmental profit

and loss metrics show the carbon, water and waste impact of each item. With these metrics,

Patagonia is able to identify opportunities within its supply chain and products, and stop selling

items that do not meet its standards (Patagonia, n.d). While Patagonia is not a company that sells

items as diverse as Target, the company is taking more actions to lessen its impact on the

environment. As Target continues to develop its sustainability strategy, it should utilize

opportunities to implement sustainable strategies used by other companies to protect the planet.
SWOT Analysis of Target 9

Improve Diversity, Equity and Inclusion

Companies today are taking more ownership of the impact they have on their

communities and their employees. A recognizable organization like Target can help create

change in the lives of its employees, the communities it serves, and help to influence change in

other organizations. Target’s current strategy on diversity, equity and inclusion (DE&I) is to

focus on creating an inclusive environment for its customers and employees, to ensure a diverse

workforce and be a positive influence on society (Target, n.d). Target has made huge strides in

the DE&I area in the past several years. They have increased their promotion of women into

senior leadership roles by 16%, the promotions of people of color has risen by 62% and half of

their leadership team is made up of women and 24% of people of color (Target, n.d). While these

accomplishments are great, there is still work to be done. Target can work to improve their DE&I

through its brands and its suppliers. They can work to support and carry products whose

ownership is indicative of DE&I. Target can do more to help create change that will positively

affect diversity, inclusion and equity within its workforce, stores, communities, society and other

companies.

Expand Private Labels

Target currently has 45 private labels that range in categories from grocery to home decor

to apparel. The advantage of these owned brands for the company is that they are cheaper than

third party products. Target’s private labels make up about a third of its sales with four of its

brands surpassing $4 billion in sales (Cat & Jack, Up & Up, Threshold and Good & Gather)

(Ochwat, D., 2021). Target has had much success with its private labels and should continue to

capitalize on them.
SWOT Analysis of Target 10

One area in particular that Target can focus on expanding is its grocery category. In

2019, Target’s food and beverage category made up about 20% of its sales, but only commanded

about 3% market share. However, Target's competitors, Walmart and Kroger, have claimed 21%

and 10% of the market share. According to Target’s own president of food and beverage,

Stephanie Lundquist, when customers shop in Target’s food and beverage areas, they on average

end up spending twice as much (Repko, M., 2020). With the food and beverage market being

difficult to compete in, due to low profit margins, it makes sense for Target to focus on how they

can expand their private label Good & Gather and attempt to eliminate third party brands where

they can. In order for Target to remain a strong competitor, and be a one stop shop, expanding its

owned private brands will be one of the ways to help Target use these products as an opportunity

for growth.

Threats

Threats are capable of acting against an asset in a manner that can result in harm.

Threats, in relation to organizations, refers to factors that have the potential to cause harm to an

organization's success. Identified below are the major threats that Target currently faces.

Increased Competition

Based on Porter’s Five Forces of competition, the threat of new entrants, the likelihood

that another company is going to enter your industry. Even though “Target is the seventh-largest

retailer in the world” and has a higher-than-average customer loyalty when compared with its

competitors, Target must consistently be vigilant to offset the threats from its competitors and

the entire retail industry ( Reuter, 2022). Consumers are patronizing Target’s competitors, like

Walmart and Amazon, with great frequency due to more advanced and user-friendly ecommerce

platforms. Additionally, its primary competitor, Wal-mart, owns its entire logistics system
SWOT Analysis of Target 11

allowing it to ship products “from warehouse to store in less than 48 hours. This allows Wal-

mart to replenish the shelves four times faster than its competition” (MBA Knowledge Base,

2021).

To address the threats of its competitors, Target also remained competitive with its brand

name partnerships such as Starbucks, Levi Strauss & Co., Apple, Disney, and Ulta Beauty. Not

only has Target made itself more competitive with these partnerships, but they have also created

more than 45 of its owned private brands (Target, 2021). In addition, Target is redesigning its

stores to appeal to a broader, younger, market while continuing to offer affordable pricing on

merchandise. Target understands the changing needs of its customers, by appealing to

convenience and price and the development of new smaller stores which “are designed to appeal

to students and people living in densely populated urban centers, like Manhattan” (Peterson,

2022) . To strategically offset threats, Target strategically markets toward its critical

demographic of shoppers and constantly works to introduce new and innovative competitive

strategies to marketing.

Rising Costs and Uncertain Times

With inflation at a 40-year high and worldwide concerns over the long-term effects of the

war between Russia and Ukraine, consumers are starting to feel the effects in every part of their

lives. Rising prices and delays in the supply chain are still big concerns for Target as “a large

portion of our merchandise is sourced, directly or indirectly, from outside of the U.S., with China

as our single largest source” (Target Corporation, 2022, “Item 1A Risk Factors”). The Target

Corporation is paying close attention to the trending market to ensure they identify threats to the

U.S. economy and the global economy and adjust to avoid the effects of a declining market. In

the recently published Target Corporation Annual Report (January 30, 2022), the company stated
SWOT Analysis of Target 12

it is “highly dependent on the U.S. economy and U.S. consumer confidence, which can be

affected by a variety of factors, including housing prices, unemployment rates, and inflation”

(“Item 1A Risk Factors”).

On the bright side, Reuter.com (March 1, 2022), interviewed Brian Cornell, CEO of

Target, and he indicated that the “supply chain constraints are steadily working themselves out

but will likely take more time…made more uncertain by the crisis in Ukraine” (Kumar &

Venugopal, 2022, para. 3). In its annual report, Target has identified the risks currently affecting

the company due to uncertain times and is developing strategies to address them. While the

threats of rising costs and the uncertainty of ongoing global crises loom for all companies in the

retail industry, Target must consistently scan its external environment to protect its resources.

Conclusion

By conducting this SWOT analysis, we discovered the reasons why the Target

Corporation has been able to maintain a sustainable competitive advantage over its competitors

as a retail favorite while also confirming the corporation’s decisions to create competitive growth

strategies by using its strengths to pursue and build opportunities for continued growth. Through

our analysis, we identified the weaknesses in the organization and confirmed the threats currently

facing the organization that could cause potential harm to the corporation if migration strategies

are not developed. As a team, we identified and created recommendations that could be

implemented or further explored, expanded, or watched.

Good leadership is a valuable and important strength of an organization. Brian Cornell

has been the CEO of Target since 2014 and has been instrumental in navigating the successful

strategic growth of the company through the nearly 2,000 Target stores and digital channels
SWOT Analysis of Target 13

since his appointment (Target Corporation, n.d., para. 1 & 2). Under Brian Cornell’s leadership,

Target has been able to build upon its strengths by using its competitive advantages to

strategically grow the company by investing in infrastructure and continuing to expand their

owned brands while also partnering with leading national brands. For Target to maintain its

sustainable competitive advantage, the corporation must consistently build upon its strengths and

utilize them as opportunities for growth by using the differentiation strategy.

We identified a few weaknesses in Target and have suggestions that can help the

corporation overcome these weaknesses by turning them into opportunities. First, to advance its

market share and improve its standing versus its competitors, Target should evaluate the

aforementioned weaknesses to ascertain if any can be transitioned into competitive advantages.

Second, with further research and development in the realm of ecommerce, strategies can be

deployed to starve off major competitors and regain the loyal customers that have transitioned to

other retailers like Amazon and Walmart. Lastly, through strategic expansion of offerings at

their larger marketplace, greater gains can be realized from the return of some one-stop shoppers

that visit other retailers that offer extra amenities atop the items on their shelves. From fueling

stations and drive-thru pharmacies to in-store childcare and craft bars, competitors are breaking

the mold and Target needs to conduct further analysis into consumers' desires to direct customers

back to their locations.

Lastly, the threats currently facing the Target Corporation should be watched carefully.

The corporation should maintain situational awareness of the retail industry while also scanning

the global environment for risks that may affect the corporation to conduct daily or future

operations. For example, while the pandemic may have caused supply chain issues for the
SWOT Analysis of Target 14

retailer, the backlog did not affect the growth sales of Target. As of May 18, 2022, the Target

Corporation has experienced “20 consecutive quarters of sales growth” (“Highlights”). Even

though Target has no ability to control its external environment, the corporation must continue to

be diligent in formulating strategies to achieve and maintain a competitive advantage over its

competitors.
SWOT Analysis of Target 15

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