With the advent of technology, the competition in the present business environment has become increasingly fierce. In order to combat against this competition, any business will be required to formulate adequate strategies which would then assist the organization in achieving a competitive advantage (Lasserre, 2017). To form strategies, any business first would be required to analyse the capability of the organization itself, the competition in the market and other relevant factors as present in the market which tend to have an impact on its operations. The aim of the report is to analyse the organization capabilities and external market conditions of the chosen company Target in Australia. The Target is a clothing company in Australia and the proposed plan is to expand it into the Indian market in Asia.
2. Market Analysis
The market analysis can be described as the analysis of the market where the company is planning to expand in. The market which has been chosen for the report is the Indian market. This section will be identifying the size of the market in India for the retail industry.
2.1 Size of the market and growth rates
The Indian clothing retail industry has occupied a remarkable position in the global market and has a high market potential, low economic risk and political risk as well. India has been performing considerably well and India is expected to become a leader in the retail domain with expected consumption to reach out to US$ 400 billion by the year 2025. The revenue generated from online retail is projected to grow US$60 billion by 2020 (Ibef.org, 2018). Hence, the market is very huge for the retail company like the Target Company.
India has a population of 1.32 billion. The price of the clothes sold at Target will be targeting the higher end crowd of the country and hence, the target market is 2.4 million who have a higher standard of living.
2.3 Market Barriers and Market Drivers
Market barriers can be described as those barriers which do not allow the firm to conduct the business properly and act as a wall in front of the enterprise and restrict their operations. The different market barriers as present in the Indian clothing retail sector has been given as follows:
Import Licensing: The import licensing rules and regulations are very strict in the country which tend to act as a barrier in front of the operations of the retailers like Target which belong to the foreign countries.
Anti- Dumping and Countervailing Measures: India has a strict set of laws with respect to Anti-dumping and Countervailing Measures in order to protect their domestic producers.
Service Barriers: Lastly there are various service barriers like the banking, securities, legal services and others which tend to act as a barrier in front of the different companies.
Market drivers can be described as the factors which promote the business in India:
Technological Advancement: The technology advancement of the country has improved considerably and there are facilities which help the organizations aiming to invest in the country to perform well (Morschett, Schramm-Klein & Zentes, 2015).
Cheap Labour: The labour available in the market of India is also very cheap which further motivates the foreign companies to invest in the company.
Increasing income: The income level of the Indian population has been on a rise and thus this is a driver.
3. Organisational Analysis
The Target Australia Company can be described as a mid-price departmental store which is primarily owned by the Wesfarmers (Target.com.au, 2018). The store is one of the largest chains in the country with more than 205 stores. Although the store sells a wide variety of products ranging from clothing to cosmetics, homewares, electronics and fitness, the clothing section of the Target is the most popular one. The organization is headquartered in Australia where recently it is at Williams Landing.
Although certain stores located strategically continue to perform well, there are certain stores which have been shut down recently. The company made a net loss of 10 million in 2017.The performance of Target in the Australian market has been dipping considerably as observed in the given figure:
The organization uses a mid-pricing strategy in the Australian market and was established in 1926. Over the years certain store have closed due to low profitability , however, it is one of the best performing company under the parent group Wesfarmers.The marketing Mix of Target is as follows:
Product: The stores offer a large variety of goods from fashion clothes for women, men and children to electronics, homeware and cosmetics.Price: The Company prices its products at a comparatively lower costs and can be described as a mid-priced retailer (Trigeorgis & Reuer, 2017).Place: The Company has an online website and more than3205 stores all around Australia.
Promotion: The Target Company makes use of various social media techniques to advertise. Traditional advertisement methods are also used.
3.3 Competitor Analysis
The analysis of competition forms a crucial part of the organization whereby the business needs to understand which competitors are performing better and the positioning of the company. The different competitors of the Target are:
- Kmart: sells similar products like Target
- H and M: deals in clothing and fashion
- Zara: deals in clothing and fashion
- Allen Solley: deals in clothing
- ONLY: deals in clothing and fashion
- Lowes: Deals in clothing, homeware and fashion
These competitors are multinational brands which are popular throughout the globe and provide good quality products to the customers.
3.4 Competitor Advantage of Target Clothing Line
The primary competitive advantage of Target stores is that it offers good quality products at considerable moderate prices (Jarillo, 2013). The stores are located at strategic locations and thus, it is easier for the organization to attract the target audience.
3.5 Positioning Map of Competitors
Hence, from the given analysis it can be stated that the current positioning of Target is in the 4th quadrant with high quality and medium prices (Rothaermel, 2015). Moreover, in future the company can increase its market share by introducing a premium clothing line which competes with the luxury brands.
4. Macro environment
The Pestle Analysis is a useful tool which is used to analyse the external environment of a particular business pertaining to a particular country. Given below is the PESTLE analysis of the Indian clothing retail market
The government has bought down the different restrictions on foreign investment which has made the business considerably (Rees & Smith, 2017).
The upgradation of the national technology and removal of taxation schemes further support the business retail clothing industry.
However, the upcoming elections in 2019, can be a threat to any FDI investments.
The economic factors in India like the per capita income, national income and infrastructural development have a great influence on the clothing sector.
Moreover, the textile sector greatly accounts for the industrial output and hence, the sector has adequate attractiveness.
Social factors like the knowledge, education, rural and beliefs have greater value in the country. Moreover, the Indian audience which the Target aims to target like to dress well for various occasions (Wheelen et al., 2017).
Technology has a crucial role to play in the textile industry in India. With the advent of technology, the textile industry has become highly advanced. As e-commerce has emerged as a domain, it tends to have a positive impact and provides a boost to the economy.
There are various laws which need to be abided by when setting up business in India. The Trade Membership License, Tax licenses and other relevant legislatives.
The government in India is highly concerned about the ecological balance. Hence, they have strict measures for various companies as present in the Indian clothing industry.
4.1 Porter five forces model
The Porters Five Forces model is a useful tool which can be used to analyse the industry environment. In the given scenario, the Porters Five Forces shall be used to analyse the industry of the retail clothing in India.
Threat of Substitutes: The threat of substitutes is comparatively high in the Indian market as clothes with similar designs from various other brands are available adequately.
Threat of New Entrants: The threat of new entrants is very high because, the Indian market is a growing one and any organization who wants to enter a prospering Asian country, will target India itself because of its growing market.
Power of Buyers: The power of buyers in the given country is moderate in nature because although the designs of clothes are easily available with other brands, the quality with certain brands cannot be compromised.
Power of Suppliers: The power of suppliers in the Indian clothing industry is quite low because the suppliers lack the unity and as they are varied in size and afraid of imports, they agree at a reasonable quote (Goworek, McGoldrick & McGoldrick, 2015).
Competitive Rivalry: The competitive rivalry in the Indian retail clothing market is considerably very high with the presence of various brands like the H and M, ONLY, Mango, Levis and Vero Moda among the others. Moreover, there exists fierce competition from the domestic retailers as well.
4.2 Value Chain
The Value chain of the Retail Apparel industry in India is very extensive in nature and has been given as follows:
Logistics and Supply Chain
It comprises of the measurement of supplier performance, optimization of the route, shipment and tracking report as well as planning of the inventory. All these aspects need to be managed accordingly due to the large size of the large size of the market.
Strategy and Planning
This involves planning of the sales and forecasting the future demand to manage the production accordingly.
Merchandising is a critical aspect of the retail industry and involves competitive intelligence, analysis of market basket, pricing optimization as well as the analysis of private labour.
The operations of the store also need to be managed effectively by the company where layout management, labour management and the customer conversion needs to be taken into consideration (Hill, Jones & Schilling, 2014).
Marketing forms an essential aspect of the value chain analysis whereby various activities like segmentation of the customers, Database Marketing, Target Marketing and Potential estimation are crucial.
Lastly the management of the customer experience forms a crucial part and the organization needs to ensure that there are adequate loyalty and customer relationship programs to look after the welfare of the customers (Gamble & Thompson, 2014).
4.3 BCG Matrix
The BCG matrix is a useful tool which is used to determine the success of various sub units of a larger organization. The target organization is a sub unit of the Wesfarmers organization in Australia and in order to analyse and understand the positioning of the company in Wesfarmers, the given diagram can be analysed.
The star: The star companies are the organizations which take up high investment but the growth rate is also particularly high. In the given scenario the Coles along with the Burings division of the country is taken to be the star part.
The question mark: The question mark is an underperforming segment of the organization whereby the industry growth is good but the performance of the company is poor (Frynas & Mellahi, 2015). The energy and resources under Wesfarmers belong to this part.
The dog is the poorest unit in the portfolio and in case of Wesfarmers it is the Safety and chemicals unit.
Lastly, the cash cow is a good performing unit in a poor market. In case of Wesfarmers, the Kmart and Target unit act as its cash cows.
Therefore, from the given analysis it can be stated that the Target Australia, has been a strategically profitably sector overall for the Wesfarmers organization and that the organizational position of the company can be stated to be quite strong. The report proposes for the company to expand into the Indian market in Asia and it seems to be an economically viable option. The report analysed the industry as well as external market analysis. It examined the organizational capabilities of Target and provided as a SWOT for the final findings. Hence, the company can expand its operations to India but it needs to be aware of the different aspects of the Indian apparel industry as identified.
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