Strategic Recommendations for Target's Entry into the Indian Market Assignment Sample

Introduction Of Strategic Recommendations for Target's Entry into the Indian Market

The company that has been selected to do the study is one of the famous retailers named as Target. The main aim behind conducting this study is to show how Target will enter India and in what manner they will select the best city to set up their store to operate. The headquarters of the retail chain Target are in Minneapolis, Minnesota. Target had a healthy profit margin in its most recent fiscal year (2022), as evidenced by its $4.8 billion in net income on $97.4 billion in revenue. Target had a 4.6% market share in the US as of 2021, making it the eighth-largest retailer in the nation (IBISWorld, 2021). Target serves a wide range of customers, including young adults, families, and budget-conscious shoppers, and has a diverse product selection that includes groceries, clothing, electronics, and home goods (Target, 2021). Additionally, the business has increased its online sales, which will account for 18% of overall sales in 2021 (IBISWorld, 2021).

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1. Macro-Environmental Analysis

In this segment of the study a macro environmental analysis will done of the selected country India to show how much it is feasible for Target to set up a new business there.

Macro-Segmentation

Any business looking to enter a new market, like Target in India, must first conduct a market screening. Target can assess the potential of the Indian market by using the general and specific screening processes which is two main elements of a funnel approach. This will help in identifying why India is the best Suited Country for entering Target to set up their new business.

First Screening:Considering the country identification it has been already mentioned that India has been selected as the country to set up the new business for Target. Establishing knock-out standards that a nation must meet in order to proceed in the screening process is the first step.Two important knock-out criteria have been established for Target's entry into India.is that it must first focus on the low skilled wage segment also the cost of import (India ,2021) These requirements are necessary for Target to make sure that the market it enters is stable, open to new products, and free of any existing competition. But in order to select India Target has to go through a funnel approach process considering other three countries to set up their business which are Russia, Vietnam and Bangladesh and the result are given below :

Country	GDP (trillions USD)	Population (millions)	Area (millions km²)	Currency
India	2.9	1,366	3.29	Indian Rupee (INR)
Russia	1.7	144	17.13	Russian Ruble (RUB)
Vietnam	0.3	98	0.33	Vietnamese Dong (VND)
Bangladesh	0.3	165	0.14	Bangladeshi Taka (BDT)

Now based on the above given table a preliminary screening will be done wherein it will be discussed which counties will be out of the further screening process. From the data given it is clearly evident that Vietnam and Bangladesh have got very low GDP rate which is same 0.3 USD that is much lower as compared to India and Russia. Also, from the data it can be seen that area wise and population wise also both the countries is very less populated which might bring issues to Target to set up business as their as they will not be able to incur proper target market which will bring loss ultimately. Thus, both the two countries will be out from the selection criteria. Now in the second screening we will be showing how India has been selected for target to set up the business there.

Second Screening:In the second step of macro segmentation, an in-depth screening will be done to justify why target has selected India for the new business. Target has selected India and Russia for further analysis. In this step, the two countries will be compared based on their economics and risk of the business environment to determine which country is more suitable for Target's market entry.

Country	Average Wage (USD)	Low Skilled Wage (USD)	Risk Ranking	Cost of Import (USD)	Foreign Direct Investment (USD)	Unemployment Rate (%)
India	1,568	328	71	1,261	64.4 billion	4.8
Russia	6,718	294	43	1,304	19.7 billion	4.8

From the table it is evident that India is a labour-efficient nation with an average wage of USD 1,568 and a low-skilled wage of USD 328. However, Russia is a relatively expensive country for labour with an average wage of 6,718 USD and a low-skilled wage of 294 USD. Retail market always looks for a low labour country so that they can utilise the resources available to provide the customer best result. Thus, based on the final selection of the country it can be said that India will be best for Target to enter their for-business purpose. Now the direct experience will be considered on the basis of how much profit is earned by Target within 6 months which will help in considering that selecting India was the right decision by Target.

An overview of main opportunities and threats

India is a desirable market with many chances for business expansion. The expanding middle class in India, which has more purchasing power, is one of the key opportunities. By 2025, the middle class in India is predicted to increase from 50 million to 583 million people, according to a McKinsey report (Mahajan & Banga, 2020). This gives businesses like Target plenty of opportunities to take advantage of this expanding market by providing cost-effective goods and services. In the Indian market, there are, however, a number of threats to take into account. The market's intense competition is one of the main threats. There are many domestic and foreign competitors in India's various industries. This can make it difficult for recent entrants like Target to increase their market share. Foreign businesses may also be threatened by the nation's complicated regulatory environment and administrative challenges (Sharma, 2020).

Consideration of the product to be sold in the selected market

When entering a new market, it's crucial to decide whether to offer the same product that's currently available in the domestic market or a brand-new item specifically designed for the area. It might be advantageous to offer a combination of both new and old products if Target enters the Indian market. While some goods, like electronics, might be popular all over the world, other goods might require localization. For instance, Target could provide a variety of new items catered to regional preferences in India, such as ethnic wear or Indian spices. According to a KPMG report, foreign businesses that customise their goods for the Indian market have a higher chance of success (KPMG, 2019).

2. Market Entry modes

In this segment of the study the best suitable market entry mode for target within India will be discussed in detail.

The different market entry methods available and explain with a justification which one you recommend to your own organisation

Companies looking to enter international markets can choose from a variety of market entry strategies. These include wholly-owned subsidiaries, joint ventures, licencing, franchising, and exporting. The choice of method will depend on a number of variables, including the company's resources, the characteristics of the target market, and the level of control the company wants to maintain. Each method has advantages and disadvantages of its own (W, 2017)

Considering that Target is a sizable, well-resourced company, a wholly-owned subsidiary might be the best strategy for breaking into the market. Target would be able to fully control all aspects of its operations in India, including the products it offers, the prices it charges, and the marketing tactics it employs. A wholly-owned subsidiary would also enable Target to keep all profits made in India and put them to good use. Nevertheless, establishing a wholly-owned subsidiary can be a difficult and expensive process, especially in an overseas market with different legal requirements and commercial customs. Therefore, before choosing this method of entry, Target ought to do an in-depth examination of the Indian market as well as its statutory and regulatory environment (E,2017).

Previous Market Entry Methods

Target has used a variety of market entry strategies, including joint ventures, acquisitions, and organic growth, as it has grown internationally. Target entered the Canadian market in 2014 through acquisitions, paying $1.8 billion for the leases on 220 Zellers stores. However, the plan did not pan out, and Target suffered a $2 billion loss in the Canadian market. The failure of Target in Canada emphasises the significance of comprehending and adjusting to local market dynamics. Target, on the other hand, entered the Australian market in 2011 through organic growth and the slow opening of stores. However, it encountered difficulties as a result of the fierce retail competition and unique shopping preferences of Australian consumers. Target's operations in Australia reported a $238 million loss in 2013. In the end, Target decided to leave the market, closing its 133 stores in 2016. Joint ventures are reportedly growing in popularity as a means of market entry for retailers due to their numerous benefits, including decreased risk, knowledge of the local market, and shared investment costs (H, 2019). Joint ventures can also give access to local distributors and suppliers, which can be difficult for foreign businesses to establish on their own. According to a different recent study, businesses expanding overseas should think about combining their acquisition and organic growth strategies. According to the study, businesses that used both strategies performed better financially and had lower exit rates than those that only used one strategy (Y, 2019).

The Macro-Environmental Analysis of Point 1

Target should take into account both the opportunities and challenges revealed by the macroenvironmental analysis of India. A significant market for consumer goods and retail goods is provided by India's sizable and expanding middle class (KPMG, 2021). With a median age of just 27 years old, India also has a sizable and youthful population (World Bank, 2021). Target now has the chance to establish itself as a company that appeals to young, urban customers who are looking for products that are both affordable and trendy. India does, however, also come with a number of difficulties. The complicated regulatory environment in the nation, which can be challenging for foreign businesses to navigate, is one of the main obstacles (KPMG, 2021). Additionally, there are still infrastructure issues in many regions of the nation, which can make it challenging to ship and distribute goods (KPMG, 2021). Last but not least, the political climate of the nation can be unpredictable, with frequent modifications to law and order that may have an effect on how businesses are run (The Economist Intelligence Unit, 2021). Target must gain a thorough understanding of the Indian market, collaborate closely with local partners to navigate the regulatory landscape, and create a robust distribution network in order to overcome these obstacles. In order to ensure that its products can be efficiently distributed across the nation, Target must also be ready to make sizeable investments in infrastructure and logistics. In addition, Target must be adaptable in its approach to conducting business in India and be ready to adjust to shifting market conditions (The Economist Intelligence Unit, 2021).

3. Apply STP

In this segment of the study a brief customer profile segmentation will be done in details for Target in India.

Create a customer profile

Target's customer profile in India can be segmented based on demographic, geographic, and psychographic factors.

Demographic

Age: Target's customers in India would be primarily young and middle-aged adults, aged between 25-45 years.

Income: Target's target customers would be middle and upper-middle-class individuals with an average annual income of around INR 10-20 lakhs.

Gender: Target's customer base in India would be skewed towards females due to their higher involvement in household purchases (S, 2021)

Education: Target's customers would be well-educated individuals, with at least a college degree.

Geographic:

• Urban areas: Target would initially target customers in major urban centres, such as Mumbai, Delhi, Bangalore, Chennai, and Kolkata.
• Proximity to stores: Target would target customers who live in close proximity to its stores, as it would make shopping at Target more convenient for them.

Psychographic:

Lifestyle: Target's customers in India would be individuals who are health-conscious, eco-friendly, and value quality over price.

Values: Target's customers would value innovation, creativity, and individuality.

Personality: Target's customers would be outgoing, sociable, and modern(A, 2021)

Demographic	Geographic	Psychographic
Age: 25-45	Urban areas	Health-conscious
Income: INR 10-20 lakhs	Proximity to stores	Eco-friendly
Female	Value quality over price
College-educated	Value innovation, creativity, and individuality
Outgoing, sociable, and modern

Explain what the targeting strategy will be

Target should use a differentiated targeting approach based on the customer profile and market analysis of India. With this strategy, various market segments are targeted with various products or marketing mixtures based on the unique requirements and preferences of each segment. Based on demographic, lifestyle, and behavioural factors, Target is able to target different market segments in India. For instance, it can offer a variety of goods, such as clothing, home goods, and groceries, to urban middle-class customers who place a premium on quality, convenience, and affordability. With products that appeal to their lifestyle preferences, it can also market to the younger generation. With convenient online shopping options and home delivery services, it can also cater to working professionals and busy families. Target will be able to customise its products and services to meet the unique needs and preferences of each segment thanks to its differentiated targeting strategy. This strategy will assist Target in building a solid brand reputation, growing customer loyalty, and gaining a competitive edge in the Indian market. In order to discover new market segments and shifting consumer needs, Target should also continuously monitor and analyse market trends and consumer behaviour. This will enable Target to modify its marketing tactics and product line-up in order to remain competitive in the fast-paced Indian market.

According to a McKinsey & Company study, businesses entering the Indian market have found success with a differentiated targeting strategy (Jain et al., 2018). This strategy enables businesses to meet the wide range of demands of the Indian market.

Create a perceptual map

In the case of Target entering the Indian market, a perceptual map can be created by identifying key attributes that are important to Indian consumers in the retail industry, such as price, quality, variety, and customer service. Then, Target's brand and its competitors in the Indian market can be plotted on the map based on these attributes to identify gaps and opportunities in the market. For example, if Indian consumers perceive Target as having high-quality products but at a higher price point compared to competitors, Target can use this information to adjust its pricing strategy to better align with consumer expectations and improve its competitive position in the market.

4. Porter’s Generic Strategy

To gain a competitive edge in a particular industry, Porter's general strategies are frequently employed. Porter suggests three strategies: cost leadership, differentiation, and focus. Target can gain a competitive edge in the Indian market by implementing the differentiation strategy. Target's differentiation strategy will help it stand out in the market by offering distinctive goods or services that its rivals do not. In emerging markets like India, differentiation is a successful strategy, according to a recent study by Raza, Ahmad, and Khan (2022). Companies can cater to the specific needs and preferences of customers in these markets by differentiating. Target can set itself apart from its competitors by providing superior goods, distinctive designs, and cutting-edge features. Offering a wide selection of goods is another way Target can set its products apart. Customers in the Indian market favour to shop at establishments that stock a wide range of goods. Products available from Target include groceries, household necessities, electronics, and clothing. Target will gain a competitive edge over its rivals as a result of attracting a diverse range of customers.

Target can also gain a competitive edge by providing top-notch customer service. According to a study by Jain and Singh (2022), customer service has a significant impact on consumer behaviour in the Indian market. Target can offer product recommendations, unique promotions, and loyalty programmes to its customers to provide personalised services. Customers will become more devoted as a result, and customer retention rates will rise. By utilising technology, Target can also gain a competitive advantage. E-commerce platforms have grown significantly in the Indian market in recent years. By providing online shopping, home delivery, and mobile applications, Target can capitalise on this trend. This will bring in online-only, tech-savvy customers and open up a new source of income for the business.

In conclusion, Target will have a competitive advantage in the Indian market thanks to its differentiation strategy. Target can set itself apart from its rivals and build a devoted customer base by providing distinctive products, excellent customer service, a wide selection of products, and using technology. Target can successfully implement the differentiation strategy and gain a competitive advantage in the Indian market by utilising its strengths in product design, supply chain management, and customer service.

Recommendation

Based on the macro-environmental analysis, customer and market segmentation, and competitive strategy analysis, it is recommended that Target should enter the Indian market using a focused differentiation strategy. This strategy will allow Target to differentiate its products and services from those of its competitors, focusing on a specific segment of the Indian market that values quality and unique products. To implement this strategy, Target should invest in product development to ensure that its products are tailored to the specific needs and preferences of the Indian market.

Target should also focus on building strong relationships with suppliers and distributors to ensure that its products are readily available to customers throughout India. In addition, Target should leverage its brand image as a high-quality and innovative retailer to differentiate itself from other retailers in the Indian market. This can be achieved through targeted marketing campaigns that highlight Target's unique product offerings and customer service. Reach customers in all parts of India. Providing a seamless online shopping experience with fast and reliable delivery options will help Target to gain a competitive advantage in the Indian market.

Finally, Target should closely monitor the competitive landscape in the Indian market and be prepared to adjust its strategy as necessary. Regular market research will be crucial in identifying emerging trends and changing consumer preferences, allowing Target to stay ahead of the competition.

In conclusion, by implementing a focused differentiation strategy, investing in product development and building strong relationships with suppliers and distributors, leveraging its brand image, prioritizing customer service, building a strong online presence, and monitoring the competitive landscape, Target can gain a strong foothold in the Indian market and achieve long-term success.

References

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