Target Corporation is one of the leading retail stores in the United States which was founded in 1962. The parent company of the Target Corporation has been working since 1902 named Dayton Company. The company achieved initial success and then expanded the business in the 1980s in different states of the US. The company did not stop here and went international after the success in the overall United States. In 2018, the company has collected a revenue of 77.06 billion USD which is evidence for the success and growth of the company (Statista, 2020). To keep the company on the track of success and growth, it is important to analyze different factors of the industry through Porter’s five forces analysis.
Competitive Rivalry
The retail market of the US has been attracting national and international investors to start a business and grab the market share. It is the reason there are multiple stores conducting business in this industry in the US. There are 8 major competitors for the retail market of the US that are intensifying the competition along with many other large and small level retailers. Walmart is leading the industry with a revenue collection of 374.80 billion USD. The revenue collection for Kroger Co, Amazon, Costco, Walgreens, and Target corporation is 115.89 billion USD, 102.96 billion USD, 93.08 billion USD, 82.75 billion USD, and 71.88 billion USD respectively (Tyler, 2018). The huge amount of sales for all of these retailers shows their strength and competitive force in the market which is intensifying the overall situation of the market. The competition is not limited to these international giants as there are many other national and international retailers that have taken the market share of the industry. Therefore, the competitive rivalry in the retail market of the US is intense.
Bargaining Power of Buyers
The US retail industry has a number of stores and the customers can buy from those stores without having extra cost or benefit. The cost and offerings for purchasing those stores are not radically different which keeps the control high for the buyers. The retailers are almost selling the same products but their offerings in terms of service and pricing are little different. The switching cost of the customers is also low from one retailer to another which further increases the power for the buyers in the retail industry of the US. The facility of e-retailing has further increased the convenience of buyers for getting the product from different suppliers (Bronnenberg & Ellickson, 2015). Therefore, the bargaining power of buyers is high in the retail market of the US.
Bargaining Power of Suppliers
The suppliers of the products sold by the US retailers are either the manufactures of the products or the traders dealing in particular products. The number of suppliers for retail products is high in number for companies. The billion-dollar sales of the companies make the supplier dependant on the retail giants to stay competitive and keep growing. To get a contract from the retail companies, suppliers offer different terms to the companies (Selwyn, 2013). All of the situations go in the favor of companies that lead the company to bargain with strength and dominance. Therefore, the bargaining power of suppliers is high.
Threat of New Entrants
The retail business can be started from a local small level and the concept of a convenience store is the concept of starting the retail at a small level. Although this type of retail typically involves the grocery items it still comes under the category of retail. It means that it is possible to start a retail business at a small level without having massive capital. The legal requirements for starting a retail business are not high and it is not a business that requires unique skills. The continuous growth of the retail industry of the US is another invitational factor in the retail industry (Handa & Grover, 2012). Keeping in view the favorable factors in the retail industry, it is safe to say that the threat of new entrants is high.
Threat of Substitutes
The threat of substitutes for the retail industry is low because retail is a need and the products are not possible to be sold out without retailers. The form of retailers can be changed as the emergence of e-retailing has impacted the physical retailing but the substitution for retailing has not produced yet.
References
Bronnenberg, B. J., & Ellickson, P. B. (2015). Adolescence and the path to maturity in global retail. Journal of Economic Perspectives, 29(4), 113-34.
Handa, V., & Grover, N. (2012). Retail sector in India: Issues & challenges. ZENITH International Journal of Multidisciplinary Research, 2(5), 244-264.
Selwyn, B. (2013). The global retail revolution, fruiticulture and economic development in north-east Brazil. Review of International Political Economy, 20(1), 153-179.
Statista. (2020). Total revenue of Target in the United States from 2012 to 2025(in billion U.S. dollars). Available at: https://www.statista.com/statistics/299541/revenue-of-target-worldwide/
Tyler, J. (2018). These are the 20 biggest retailers in America. Business Insider. Available at: https://www.businessinsider.com/biggest-retailers-in-america-based-on-sales-2018-8