Target Corporation earns through merchandise sales and credit card profit sharing, among other revenues, by providing discounts to their customers. This retail corporation operates as a chain of discount department stores and hypermarkets in the US, making it one of the world’s most recognized brands. As America’s leading retailer, researchers surveyed and evaluated how the corporation would do in China. China’s retail market size grows in bounts every year. Consequently, it is expected to grow from USD 1.79 to USD 2.65 by 2028 from 2023, at a CAGR of 8.17% during the targeted period (2023 – 2028) (Oliveira et al. D. 2022).
Industry Rivalry
China has a large population, which leads to retailers and business-minded people looking for a spot in China to engage in business. The middle class in China has proliferated with economic restrictions loosening due to the significant transition happening to the market. Due to a lack of retail infrastructure in lower-tier cities, scarcity drives Chinese middle-class consumers online. This has led to the thriving of these individuals, with figures at 400 million or about a third of China’s population. Target corporations could thrive due to the vast population of China, yet the rapidly growing online retail shopping could surpass it.
Demand Conditions
China has low labor costs yet a robust business ecosystem, a lack of regulatory compliance, low taxes and duties, and competitive currency practices, leading to this being an attractive location for many businesses and individuals willing to join the retail industry. Moreover, the Chinese market is driven by increased disposable income, which helps people purchase more goods. This situation creates the demand for goods and items that keep companies profitable while hiring new workers. Furthermore, with more money flowing into the households of China, China’s wages increased by 10 percent and more in 2014, and consumption levels have increased significantly.
Related and Supporting Industries
The top four areas where most middle-class Chinese use their spare cash are dining out, buying new clothes, investing in education funds, and saving deposits. These areas have also led to robust growth in health- and wellness-related sectors. Small independent stores dominate the retail landscape to support people in the rural areas supported by the leading industries in China: manufacturing, services, and agriculture. With the primary industries growing, the Chinese retail market has been acting as crucial sectors, including food and grocery, clothing and footwear, home, electricals, and health and beauty, among others, since 2022 (Sarma, A, 2022). The growth and support of these small industries would lead to the development of Target Corporation if started in China, as it focuses on the critical sectors listed above.
Factor Endowments
China’s emergence as a trading power has extensively and adversely affected US labor, which led to import penetration in China and increased exports to China, which later hurt the wages and employment of the production and nonproduction workers. On the other hand, economists have surveyed China and concluded that the rapid economic growth is based on large-scale capital investment – financed by both considerable domestic savings and foreign investment – and rapid productivity development. These factor endowments have pushed the growth of China’s retail shopping and would be positive for Target Corporation. China has also facilitated and benefited from globalization through membership in the World Trade Organisation, health, welfare, and education reform, and the privatization of state-owned enterprises, which cause difficulties for foreign individuals or businesses.
The threat of new entrants
Growing niches like online shopping, bargain retailers, and specialized stores have significantly affected the stiff competition of businesses and keeping consumers. Target’s most important business areas, like food and home products, could be affected by the small online retail shops while focusing on excellent illustrations like Alibaba and IKEA. These entries provide discounts at their best, which could be a significant threat to Target if it expands its business to China.
Power of buyers
With increased online retail shops, consumers have a grip on the retail sector since they negotiate while having several product options due to the abundance of shops. Target would have a take in China due to their discounted prices (Hussein & Muchemi, 2019). The variety, quality, and availability are abundant in China, which could lead to suffocating buyer competition. This situation is profitable for Target since it is a discounted retail store chain; hence, consumers join Target stores. Furthermore, with the rise of technology, consumers tend to read store reviews online. With great reviews from the US, Target could maintain its footing in China.
Power of substitutes
In retail stores (China is not an exemption), most products and services have substitutes according to price, quality, and availability and exist in retail, including internet shopping, direct sales, second-hand marketplaces, and do-it-yourself projects (Payson et al., 2023). Due to the substitution condition, Target retail stores could have a chance of growth in the Chinese market. On the other hand, China has online retail shopping dominating the country and could be an effective competitor for Target Corporation. The consumers have already been pulled by their best sellers; hence, the power of substitutes could work against or in favor of Target in China.
Complements
Target offers its branded cards in partnership with major credit card issuers like Visa and Mastercard. These cards come with discounts, rewards, and convenience for customers. The cards could boost business in China since every consumer wants a unique item with a great deal or discount for an aftersale. Target also advertises its products on social media platforms, hence the growth of the retail industry in China.
Recommendations and Rationale
Target managers should develop a global mindset to absorb information, traditions, and cultural norms around China and conceptualize its impact (Yukhanaev, A., 2020). This will help develop an advantageous mindset about the biases in China and awareness of how to tackle them and grow Target in China. Developing sensitivity to cultural differences is essential since biases and prejudices are examined thoroughly (van Boeijen et al., 2019). Target can manage their own biases and those of the Chinese. In this manner, Target can keep it simple and maintain the Chinese norms while ensuring they do not feel offended. This will create opportunities with like-minded groups and consumers in China, hence a chance to grow and expand. Target should also learn decentralization from China and let the local levels and more minor factions of their stores delegate and make decisions concerning their units. By following this plan, Target can reach consumers from different parts of China and provide them with what they need. Target should also decide on the level of involvement in the business in China since China’s consumers have key industry sectors they need. Target should know what part of China needs a specific product and service to maximize its growth and expansion.
Conclusion
Target’s expansion to China is based on consumers, the availability of online retail stores, and Target’s global mindset. Most of the factors discussed above support the expansion of Target to China, while some show that the rapid growth of the Chinese economy could lead to the downfall of Target. With Alibaba and IKEA present, Target should thoroughly create a work plan before expanding in China.
References
He, C., Baranchenko, Y., Lin, Z., Szarucki, M., & Yukhanaev, A. (2020). From global mindset to international opportunities: The internationalization of Chinese SMEs. Journal of Business Economics and Management, 21(4), 967-986.
Hussein, S. S., & Muchemi, A. (2019). Michael Porters five forces on performance of savings and credit cooperative societies in Nairobi City County, Kenya. International Academic Journal of Human Resource and Business Administration, 3(7), 14-35.
Oliveira, M. G. D. (2022). Whirlpool and the future of retail-the rise of e-commerce (Doctoral dissertation).
Payson, A., Fitton, T., & Ayres, J. L. (2023). Introduction: second-hand cultures in unsettled times. JOMEC Journal: Journalism, Media and Cultural Studies, (17).
Sarma, A., Chakraborty, T., & Das, M. K. (2022). Nanocosmeceuticals: Current trends, market analysis, and future trends. In Nanocosmeceuticals (pp. 525-558). Academic Press.
van Boeijen, A., Sonneveld, M., Hao, C., & Khodadadeh, Y. (2019). Developing cultural sensitivity: A student’s perspective. In DS 95: Proceedings of the 21st International Conference on Engineering and Product Design Education (E&PDE 2019), University of Strathclyde, Glasgow. 12th-13th September 2019.
write