Target Five Forces Analysis

Target Five Forces Analysis

The retail landscape of US has grown highly competitive. There are several US and non-US brands that are competing for market share. Target is one of the best known retailers in US which faces tough competition from Walmart and Costco.  Amazon as the biggest e-retailer also poses a strong threat to Target’s business. In an age of technology and customer service, building and retaining a competitive advantage is difficult.

Moreover, the battle has become so tough that to retain market share every brand has to focus a lot on customer service and customer’s convenience. Here is a five forces analysis that discusses the five important forces which affect competition in an industry and the competitive position of a brand. These forces are there in every industry and every market and businesses can strengthen their competitive position relative to others using this analytical tool.

Threat of New entrants: moderate

The retail industry is quite big and there are both big and small brands in it. New entrants can enter it and form a business as per their ability to invest capital. However, the small brands are not a major challenge for big and established brands like Target. The challenge comes only from the major players Still, some non US brands have entered the US during past few years and many more are planning to enter it. So, the threat of new entrants is moderate for Target. Most of the threat is from the established foreign brands that hold enough capital to establish a strong presence In US in a short time.

Bargaining power of buyers: low

Target sells a very large range of products. However, consumers have several choices including the traditional retailers and the e-retailers. The factors that moderate the bargaining strength of the buyers are the low prices and the wide range of products offered by Target.  Apart from it, the brand image of Target is better and its positive reputation has kept growing in the past years. All these factors moderate the bargaining strength of buyers which remains low for Target.

Bargaining power of suppliers: low

The bargaining power of Target’s suppliers is low mainly because of their size. None of the suppliers is large enough to hold major influence.  The chances of their forward integration are very low. Moreover, the number of suppliers is very large and that reduces the pressure on Target which can easily switch from one to next. The suppliers have to follow the rules set by Target and comply with its code of conduct. However, the clout of the brand also increases with its size and Target may have less control over the suppliers as compared to Walmart or Costco.

Threat of Substitutes: Moderate

The threat of substitutes for Target is moderate.  There are a large number of big and small retailers that offer similar products. Moreover, there are e-retail brands like e-bay and Amazon which sell similar products. The factors that limit this threat are low prices and the wide range of products that Target sells. Overall, the threat of substitutes is moderate.

Level of Competitive Rivalry: High

The level of competitive rivalry in the retail industry is strong. It is for there are several large players. Even the smaller players pose some competitive threat. The main competitors of Target include Walmart, Costco, Amazon and E-bay.  However, there are other influential names in the field of retail too that pose a competitive threat to Target. This threat has grown bigger with the entry of the new foreign brands in the market