Porter’s Five Forces – Target
| Industry force | Strength | Provide a justification for your determination with examples | ||
| High | Medium | Low | ||
| Example | x | This is why I believe it is medium. | ||
| The threat of new entrants | X | The threat of new retail entrants is high. While there are considerable obstacles to entry in the retail business, such as the requirement for large financial investment, established supply chain networks, and brand recognition, there are still chances for new players, particularly in the internet realm (Alkhurshan & Rjoub, 2020). E-commerce platforms have reduced entrance barriers, allowing smaller merchants and direct-to-consumer firms to compete with larger, more established shops like Target. Furthermore, the retail industry is dynamic and ever-changing, attracting creative entrepreneurs with the potential to disrupt the market. Target relies on its economies of scale, extensive product range, and widespread presence. It invests in e-commerce capabilities and customer loyalty programs to retain a competitive edge. Additionally, brand recognition and customer trust built over years of operation serve as a deterrent for potential new entrants. An example of how the threat of entrants can be strong in the market position held by Amazon. Upon entering the market using the E-commerce channel, it was able to bring significant competition. The technological channel is still open to new entrants. | ||
| Power of buyers | X | The power of buyers in the retail industry, including Target’s customers, is high. Consumers have access to vast information and numerous options, enabling them to compare prices and switch brands easily. Low switching costs and the prevalence of price-comparison apps further empower buyers to demand competitive prices and high-quality products. Target focuses on delivering value, customer satisfaction, and unique offerings. Loyalty programs, personalized promotions, and exceptional customer service help cultivate customer loyalty, reducing the likelihood of customers switching to competitors. All these measures are aimed at reducing the power of buyers. However, the power will remain significantly high because of the low switching costs from one brand to another. For example, a customer incurs zero costs in accessing different retailers within the same city and, thus, zero costs of switching allegiance. | ||
| Power of suppliers | X | Target’s power of suppliers is moderate. As a large retailer, Target possesses some leverage in supplier negotiations, enabling it to secure competitive pricing and favorable terms. However, certain brand-name suppliers might still have some power due to their popular products and customer demand. To mitigate supplier power, Target maintains a diverse supplier base and seeks exclusive deals with key suppliers. It also builds strong relationships with suppliers, ensuring a stable supply of products and favorable terms. Further, switching costs from one supplier to another are relatively low. According to Astuty et al. (2021), switching suppliers frequently can impact product and service quality. Therefore, suppliers have some strength making the force have a moderate impact on Target. For example, the company has few suppliers of technological products and thus cannot afford to switch frequently from one to another. | ||
| Power of substitutes | X | The power of substitutes for Target is medium. The retail industry faces constant competition from online retailers, specialty stores, and discount stores offering similar products and convenience. The increasing trend of online shopping and delivery services poses a considerable threat to traditional brick-and-mortar retailers like Target. To counter this force, Target must continue investing in its e-commerce capabilities, offer unique in-store experiences, and enhance its omnichannel strategies to keep customers engaged. The force is medium because each market participant can use the channels others use during the business. For example, if Target finds customers are finding substitutes in online channels for products, it can also offer these channels to its customers. | ||
| Rivalry among competitors | X | The rivalry among competitors in the retail industry is high. Target faces fierce competition from other major retailers and niche players in various product categories. Price wars, promotional strategies, and product differentiation are common tactics used by competitors to gain market share. To thrive in such a competitive environment, Target must focus on its core strengths, differentiate its offerings, and build strong brand loyalty among customers. The force’s power is deemed high due to the freedom of entry and exit, which has prompted many sellers to operate within the industry. For example, the industry has more big rival competitors like Walmart, Costco, and Amazon. | ||
| Complementors | X | Complementors are entities whose products or services enhance the value of a company’s offerings. In the case of Target, suppliers of complementary products, such as branded consumer electronics, apparel, and home goods, act as complementors. These companies can significantly impact Target’s performance by providing popular and in-demand products that attract customers to their stores. Target can benefit from strong relationships with complementors, as it creates a mutually beneficial ecosystem. On the other hand, Target’s success and the volume of products they buy also positively impact their complementors. Thus, a collaborative and symbiotic relationship between Target and its complementors can create a win-win situation for all parties involved. Notably, this additional force to the five forces has a low strength of influencing operations because it is based on mutual benefits for each other, and the company is not in any competition with its complementors. | ||
References:Alkhurshan, M., & Rjoub, H. (2020). The scope of an integrated analysis of trust switching barriers, customer satisfaction, and loyalty. Journal of Competitiveness, 12(2), 5. Astuty, W., Zufrizal, Z., Pasaribu, F., & Rahayu, S. (2021). The effects of customer relationship management, human resource competence, and internal control systems on the effectiveness of supply chain management in the Indonesian public sector. Uncertain Supply Chain Management, 9(3), 595-602. |
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Question 
Porter’s Five Forces – Target
Complete the table below. For the company, you’ve decided to assess in week 1 and determine the strength of each of Porter’s Five Forces and of the complements.
Justify your determination with examples.
The company I am using for this assignment is Target
| Industry force | Strength | Provide a justification for your determination with examples | ||
| High | Medium | Low | ||
| Example | x | This is why I believe it is medium. | ||
| The threat of new entrants | ||||
| Power of buyers | ||||
| Power of suppliers | ||||
| Power of substitutes | ||||
| Rivalry among competitors | ||||
| Complements | ||||
| References: | ||||
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