Strategy and Target Canada

It seemed like such a good idea.  A brilliant “strategy.”  Target, a smart, successful, well-run company by any measure was moving north to Canada.  Their basic reason for expansion – to grow revenues significantly they have to grow their footprint (or floorplate).  Adding a few stores here and there in the US would be marginal.  In Canada, they could move quickly, bring their well-respected value proposition to customers who already knew them, and get a jump start in a friendly place on their international expansion plans.

What could be better?

Well. We know how that worked out.  Only eighteen months after opening their first store, and after spending about 7 Billion to get going, they announced a total exit, via bankruptcy, and closed 133 stores.  The CEO announced that they could see “no path to profitability before 2021.”  The CEO, by the way, is new – he replaced the former CEO who was on watch during the expensive and frustrating expansion into Canada, and who got side-swiped by a massive IT breach that released millions of customers’ credit card data.

So what really went wrong? Pretty much everything. From the beginning they changed their supply chain systems and couldn’t keep the shelves stocked.  They started in former Zeller’s locations, and the smaller store format led them to have less selection.  Prices were reportedly out of whack relative to the same goods in US stores.  Consumers, even ones who like Target, seemed to be frustrated. 

But Target’s smart, right? They replaced some of the team, including the Executive responsible for Canada.  They bore down and focused on the nuts and bolts of retailing, which they really do know.  And by all accounts, were starting to make progress.

Which is what made the news so shocking.  Pulling the plug completely seemed radical. But if it is as the CEO suggested, with no profits in sight for five or six more years, then the fault for that has to be laid at some of the big early decisions.  A huge investment hole that was too big to dig out of. Maybe the wrong footprint of store.  Maybe too many locations that weren’t good enough. 

These questions are critical strategic choices.  We spend a lot of time with Boards and Executives worrying about how to develop good strategy – and execute it well.  And monitor it.  And manage it.  And limit the downside risk.

We describe strategy as, among other things, setting the direction (in this case Canada). We describe the risk management piece as knowing what can go wrong. 

Target will be a case study in how not to do international expansion for a long time. 

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