Target Case Study: Global Marketing Plan for Middle East Expansion

Abstract

Global Marketing Strategy aims to coordinate a company's marketing efforts in new markets outside of the home country, while focusing on the pursuit of competitive advantage (Keegan & Green. 2020). With the globalization of products, trade and fierce competition for growth and sustainability, it is essential for a global marketer to build environmental analysis in the global arena to apply the right strategies in the environment to create a competitive advantage at low risk while keeping the company's mission at the heart of its strategy. Success is measured by the quality of the company's image on a global scale and the value it brings to local consumers.

In this article, we will analyze Target as a mentoring company to create a Global Marketing Strategy for Target in the Middle East with UAE as the first chapter. This paper also identifies why UAE makes for the next destination in Target's global expansion. We will study how Target can apply Integrated Marketing Campaign (IMC) and promote Corporate Social Responsibility (CSR) in UAE to help establish a brand for people and community in UAE.

Summary

Target is currently the second largest retail store located across all states in U.S.A. Statistically “75% of the American population live within 10 miles” of a Target store and 350K employees supporting them globally helping them continue to provide a wholesome experience for their customers with distinguished goods and outstanding value driven brand promise - "Expect More. Pay Less." (Target.com).

A company with global vision must master its domestic market and Target has endeavored that in USA through strategic store locations, brands, subsidiaries, private labels, e-commerce expansion, robust supply chain, expanding distributions centers, employment diversity, philanthropy efforts, wage revisions, sponsorship events (Wikipedia, Target).

Target after its Canada expansion failure has been conservative in its global plan. A thorough analysis of existing environment, general and specific plan marketing strategy will help establish potential opportunity for Target in UAE in this paper.

Environmental Analysis

There are several factors that drive customer engagement with a brand or product - society, culture, economy, trade, legal and politics at both regional and global front. For Target to scale globally, considering those environmental factors are business critical -

Economic: Target has both model of business – Product Foundry and Producer. The economic viability of Target has seen immense success in USA as an exclusive producer of brands that attract the quality conscious buyer with an eye for right pricing. Target provides that exclusivity and experience. Pricing competitively in a new market with a Target brand exclusivity will be crucial to avoid any economic backlashes due to closing businesses in international market as in case of Canada (Vanessa Page for Investopedia, April 29, 2020). Research also suggests that population of UAE have a higher index for economic freedom (Keegan & Green. 2020), and with a diverse population that comprises of local and global residents from all corners of the world. Given the diversity of the population in UAE it would be difficult to get a demographic survey from Government sources and thereby Target may need to develop over time a Data Lake of customers as they do business to create an effective marketing campaign with personalized ad offerings for UAE customer base.

Trade: Target was able to expand and scale very fast with right trade ties in all 50 states and DC that was needed to create the impact. As explained in Keegan & Green (2020. P95) the Global Cooperation Council (GCC) and its six countries which includes UAE heavily depend on imports for most of the goods and services and has a long-standing trade relationship with USA for these exports which they pay for using crude oil. With fluctuating oil prices and GCC’s approach to increase ease of trade with Asian regions it is important for Target to benefit from existing trade ties with USA to scale into larger Middle Eastern region within GCC.

Social and Cultural: Target has global offices in locations that do not have store operation, that helps build a runway for cultural empathy of a market. As explained in Keegan & Green (2020) a culture is a learned behavior passed from generations and an outsider company must endeavor to attain cultural empathy.

·?????Diversity and philanthropy sensitivity has been at Target’s mission statement and will be an important factor in expanding to global markets.

·?????Younger consumer average age of 41 choose Target for consumer goods

95% of Middle East population follows Islam with 5% of mix in other religions. Researchers believe that even with a homogeneous religious belief UAE does not exhibit a homogeneous social behavior and tradition, with diverse social groups in terms of class, education, wealth (Keegan & Green. 2020). And the culture of UAE statistically has shown affinity to western cultures in terms of clothing and consumer convenience goods. Target must have global offices in UAE to create a brand and culture awareness to create a better positioning of goods and services that provide customers with cultural cross over to western tastes keeping the core social values intact thereby placing itself a brand for UAE focus.

Political, Legal and Regulatory: Global organizations are expected to be more aware of the political and legal environment where they are doing business directly or indirectly. Target has in the past been subject to environmental lawsuits and losses due to compromised credit card data on file and is very important to consider in the global arena to understand risk exposure globally (Wikipedia, Target Corporation).

As explained in Keegan & Green (2020), “Political Risk is the possibility of a change in a Country’s political environment or government policy that would adversely affect a company’s ability to operate effectively and profitably”. Target has a good mix of supply chain coming from China, India, SriLanka and Bangladesh which is ideal keeping in mind unforeseen political tensions between nations as was seen in 2020 between China and USA which caused sanctions on import. Politically UAE is known to be a federation of 7 constituent monarchies or emirates which means the pace of the local government is decided by the monarch who rules the region. Target has had strategies in place locally in USA which also has a specific State and Federal law of the land for operating across 50 states, so Target will have to strategically establish federation policies for UAE and find similar operating framework as in USA that works deliberately with the federation council and the local monarchies.

General Strategy

Target has yet to expand operations in Middle East. With United Arab Emirates (UAE) as the next market and its environmental analysis needs Target to use general strategies that involve segmentation, targeting, positioning, and market entry –

Segmentation: As Keegan & Green (2020) explains that market segmentation helps categorizing customer groups based on identified common characteristics.

·?????Opportunity for a global entry in UAE to market latest styles with best prices to a tech savvy generation with 50% of Middle East population in below 25 years. Promotional campaigns and sponsorship events and outreach youth events. UAE is also elevating women empowerment and a social abolishment of draconian laws that poses a great opportunity as Target’s growing customer base.

·?????Target must conduct deep demographic analysis as available UAE demographic data suggests a large market share with a population that spends a lot on consumer goods. Based on Go-Gulf (September 27, 2020) – “Competition in Middle East is not very high; it’s just dominated by a small number of big brands. Everything, from electronics, media, beauty or even restaurants is owned by big brands, supported by local investors”. Which means it’s a great opportunity for Target to expand in UAE.

·?????A venture like Target which offers the next best thing to Luxury goods through alternate exclusive local trends to youth needs at competitive prices. UAE is not as culturally volatile compared to some other parts of the Middle East thereby providing an opportunity for Target to learn and adapt without disrupting cultural preferences.

·?????UAE will benefit with Target’s expansion locally with an opportunity for an investment in the region that changes lives of people and community in a better way

·?????Another segment Target would focus on would be the middle-class population. Since the UAE population values luxury western goods, Target has an opportunity to offer a that.

Targeting: Targeting focuses on assessing the market segments and researchers believe that the growth potential lies in marketing the group of people with the maximum potential to respond from that segment (Keegan and Green, 2020). As identified in segmentation Target has a huge opportunity in focusing on the young families with high income and affinity for western brand value.

Positioning: Researchers state Positioning as the act of strategy development for claiming a market with a gap fulfillment for the targeted consumers (Keegan and Green, 2020). Based on our environment analysis for Target customer segments in USA and UAE’s growing western affiliation with younger generation, Target has a vibe with the younger customer out of college and in a new job or expanding a young family who look for affordable yet exclusive brands and shopping experience that delights them at par luxury shopping.

Market Entry: Target’s Canada expansion included fast establishment of brick-and-mortar stores that led to operational set back in a new market eventually suffering heavy losses till closure. With that learning it would be essential for Target to determine the UAE market entry plan from the standard strategies – exporting, licensing, joint venture, contract manufacturing, joint venture, and partnership. With digital growth and e-commerce success Target’s entry into UAE could be assessed better through an e-commerce roll out that would allow data collection for more targeted marketing campaigns. With an early assessment of the goods and services favored by UAE customer segments Target will be positioned favorably to expand its brick-and-mortar strategy with a joint venture. UAE has laws in place where foreign investments need a local business owner partner hence fulfilling both the legal, and market scale needs. Similar strategy has also been success for Walmart in India.

Specific Strategy

Researchers believe (Keegan & Green, 2020), competitive advantage is a firm’s match to distinctive competencies and the factors critical for success within its industry. Five industry forces known to affect competitive advantage –

1.????New entrant threat exists for Target when there is a retailer that offers similar experience that may impact Target’s exclusivity. Among the 8 sources of barriers which are used to gauge the threat, Target can be associated with the product differentiation barrier which talks about a customers’ perception in considering the Target product better due to an elevated experience of purchase of the same product in Target v/s anywhere else. Target must consistently monitor and remediate any red flags towards its customer experience factor in its retail experience.

2.????Substitute product threat is when a similar product alternative competes with what is majorly available in Target. Target in general is a competition to Walmart where target sells similar products in many segments and in many examples, Walmart is cheaper however the exclusive branding and placement in stores makes Target stand out in this threat and they should be able to capitalize on this strategy in UAE.

3.????Bargaining power of buyers as per Keegan & Green (2020) refers to retailers, based on Porter’s model. So, Target must create a strategy to gain leverage on vendor suppliers for their brick-and-mortar stores that creates a huge dependency on Target as a major consumer of supplied goods which in turn allows them to have more bargaining power on purchased goods thereby increasing margin.

4.????Bargaining power of suppliers is exactly the opposite of Bargaining power of buyers where suppliers command prices of goods and services. Target has positioned a lot of exclusive brands and a supply chain in South Asia that provides for the needed goods. Additionally, Target must conduct research on local suppliers and their ability to scale demands and their existing business buyers to understand its pricing prospects in the longer run when Target needs to scale operations in UAE.

5.????Competitor rivalry is a specific phenomenon in retail industry where Target will face existing and new forces that challenge their existence and growth in UAE. Target must position its products and services with its unique servicing focus and price advantage on the near-luxury branding of its products and services which works well with UAE market segment.

Apart from competitive advantages some additional factors that impact the competitive advantage of a firm are called as the 4 Ps in marketing –

1.????Product and Brands: Target’s marketing slogan is “Expect More Pay Less” resonates well with the UAE customer segment of young and successful population that appreciates brand exclusivity with a sensitivity to the pricing. Target has been known to have a special floor plan often referred to as the “Target Effect” and they will need to continue this brand strategy in UAE for success. Deep engagement with customers through social media platforms with personalized view and offers would attract customers to the retail stores.

2.????Price: Given the analysis on the segmentation of customers being young families and new earning individuals, Target is attractive from a brand value and esteem this customer segment looks for and pricing will be key in attracting and building a loyal customer base. Geocentric pricing, as defined in Keegan & Green (p358), is based on the unique local market realization is a suitable strategy for UAE. Target will also need to apply ECR and EPS methods to analyze and define effective consumer preferences.

3.????Place: Target has a great opportunity in establishing its presence in UAE which is marketed as the global shopping capital with swanky malls and retail spaces and Target is well positioned to drive to scale through joint venture strategies to attract global shoppers stepping into its UAE stores in or adjacent to one of the global mall destinations.

4.????Promotion: Target must utilize IMC strategy (Integrated Marketing Communication) which includes advertising, PR, sponsorships, sales promotion elements to drive their outreach to targeted customers in UAE. Target is known to have active presence in social media digital channels like Twitter, Facebook, Instagram, and YouTube engaging prospects and customers with ad strategies that attracts them to stores or e-commerce channels. UAE like most nations has a high user concentration in Mobile devices and digital apps thereby making it a critical resource for digital marketing by Target. Target has excelled in IMC strategy mix in USA. Target promotes a bottom-line message to communicate its low-cost upscale design, beginning with its slogan, “Expect More, Pay Less”. According to Target corporate (holiday-marketing, 2021), a new ad which is built on Target’s “What We Value Most Shouldn’t Cost More,” campaign across channels: YouTube (Digital TV) Medium, Proprietary Digital Website, Print Media Publication & Social Media Post (pasted below)?

Apart from competitive advantages and marketing mix of 4Ps a global brand must also bring social values to the table to not only do business and drive revenue growth but also address Corporate Social responsibility (CSR) for the market aligned to its global CSR strategic principles.

Target has demonstrated effective corporate policies that support CSR activities in operating markets and that must extend to the UAE market that identifies a local cause while driving international. As Keegan & Green (2020) explains, there are many ways global companies can demonstrate their commitment to CSR and to name a few areas - Human Rights, Labor, and Environment. Target must align with UAE vision to become a global leader in CSR (CSR UAE) and create policies that extend to CSR UAE goals and focus. This provide Target with an opportunity to be recognized as a people’s brand in UAE.

Conclusion

Companies going global project that the product and brands have been globalized. Product, price, placement, and promotion are key pointers along with the multiple factors that impact the customer engagement and positioning of the brand value. Target has a fresh appeal and the ability to associate esteem, superiority, prestige, and status that is important for today’s customer and youth. Shopping for the luxury brands is a trend in Middle East however according to a McKinsey study (May 1, 2019) Middle East has a growing price sensitivity and declining brand loyalty which perfectly fits for Target to fill that space with stylish consumer goods with local sensitivity to esteem and economics. Target corporation has been extra cautious on its global expansion after the Canada failure and with the right mix of Marketing Strategy and Product placement Target will eventually be able to follow on as the next leading global brand in retail.

References

Green, M. C., & Keegan, W. J. (2020).?Global marketing?(10th ed.). Pearson

Team Members, n.d., corporate responsibility - corporate-responsibility/team-members

Our Locations, n.d., About Target page - locations

Target Brands, n.d., found in https://corporate.target.com/about/products-services/Target-Brands

Vanessa Page for Investopedia, April 29, 2020., - how-target-can-expand-internationally

Go-Gulf, September 27, 2020., – what-are-the-differences-between-marketing-in-the-middle-east-vs-the-western-world

Abdellah & Ahmed for McKinsey & Company, May 1 2019., - navigating-a-perfect-storm-in-the-middle-easts-consumer-sector

CSR UAE. (n.d). - https://www.csruae.ae/en