T ARGET Strategic Brand Alliance

A DMINISTRATIVE N OTES Pepsi Case Competition Retail Institutions trip Cost of trip = $35 Assignment details Group Formation Instructions for payment will be verified (direct billing option being explored)

C ASE Q UESTIONS List the criteria that you think Target should use in screening potential strategic brand alliances. Be as specific as possible. Propose a strategic brand alliance in a category where Target currently lacks one. Evaluate the pros and cons of the alliance from the perspective of both Target and the proposed partner. Are there any strategic brand alliances that Target should consider for its entry into Canada?

A BOUT T ARGET Size and Reach (2006 data) 1500 stores in 47 states $50 billion revenue (2006) Planned growth of 100 stores/yr Retail strategy mix (next slides) The Target Guest Descriptive demographics Trip frequency Trip duration Value Proposition Expect More. Pay Less.

R ETAIL S TRATEGY M IX - P RODUCT Category2006 Consumables32% Hardlines (Electronics, Sporting goods, Toys) 23% Apparel and Accessories22% Furniture and Home Décor19% Other4% Revenue$59.5 billion Goals: high quality unique style and design

R ETAIL S TRATEGY M IX Price Location Communication Operations Management

P OP -U P S HOPS

P OSITIONING M AP High Product Quality Appealing Atmosphere Target sees its points of differentiation as: Product quality Distinctively designed products Fresh energetic tone

S TRATEGIC A LLIANCES – T HE P ARTNERING P ROCESS Strategic Rationale Objective assessment of whether or not an alliance is the best choice for the organization Partner Selection Identification and ranking of potential partners based on rigorous criteria Negotiation Preparation and conduct of alliance negotiations on lasting relationship fundamentals Implementation Planning, supporting, monitoring and continuous learning for successful results Michael Kelly and Jean-Louis Schaan (2005) Strategic alliances that work: Should you build a strategic alliance?, Ivey Management Services, Richard Ivey School of Business, Version: (A) “A strategic alliance is a formal and mutually agreed to commercial collaboration between companies. The partners pool, exchange or integrate specific business processes for mutual gain. Yet partners remain separate businesses.”

A LLIANCES COULD BE WITHIN Design i.e.. - Research contract; joint research Purchasing i.e. - Joint purchases Production i.e. - Engineering contract; Subcontracting; Manufacturing agreements Marketing i.e. - Joint marketing; trademark license Distribution i.e. - Distribution agreements Target’s Alliances (case) Bose Calphalon Smith & Hawken Archer Farms California Closets Tupperware Target’s Alliances (case) Bose Calphalon Smith & Hawken Archer Farms California Closets Tupperware Other Target Alliances? (Annual Reports 2011&2012) Liz Lange Jason Wu Kid Made Modern Harajuku Mini Shaun White Jean Paul Gauthier Liberty of London Missoni Calypso St. Barth Sonia Kashuk (make-up) Other Target Alliances? (Annual Reports 2011&2012) Liz Lange Jason Wu Kid Made Modern Harajuku Mini Shaun White Jean Paul Gauthier Liberty of London Missoni Calypso St. Barth Sonia Kashuk (make-up)

T ARGET ’ S STRATEGIC GOALS Increase frequency of shopping trips among current customers (market penetration) Increase number of stores (market development) How can strategic alliances help Target accomplish these goals? Access to expertise Reduce risks Reduce costs

L IST THE CRITERIA THAT YOU THINK T ARGET SHOULD USE IN SCREENING POTENTIAL STRATEGIC BRAND ALLIANCES. B E AS SPECIFIC AS POSSIBLE Strategic importance Potential partners must help them meet their strategic goals Consider market penetration and market development goals. Can alliances help with either? Partner competencies What capabilities do partners bring to close the gaps in our strategy? i.e. - Product type/demand frequency, Design expertise, Production capacity, Delivery time, Distribution What partner needs the strengths we bring? i.e - Mass distribution in the US, image, awareness generation opportunities, promotional effectiveness Customer comparison Organizational size comparison Financial strength Experience with alliances Cultural fit 70% of alliance failures are due to soft or relationship problems (KPMG, 1998)

P ROPOSE A STRATEGIC BRAND ALLIANCE IN A CATEGORY WHERE T ARGET CURRENTLY LACKS ONE. E VALUATE THE PROS AND CONS OF THE ALLIANCE FROM THE PERSPECTIVE OF BOTH T ARGET AND THE PROPOSED PARTNER.

T ARGET C ANADA Are there any strategic brand alliances that Target should consider for its entry into Canada? Handout Consider the pros and cons of this alliance

P ROPOSED STRATEGIC BRAND ALLIANCE FOR TARGET Which product category? Why? Category *2011* Consumables32%24%25% Hardlines (Electronics, Sporting goods, Toys) 23%20%19% Apparel and Accessories 22%20%19% Furniture and Home Décor 19% 18% Other4%17% (Food and Pet Supplies) 19% Revenue$59.5 billion$67.4 billion$69 billion *Owned and exclusive brands = 1/3 revenue in 2010 and 2011

T ARGET – S OME I NTERESTING R EADS et-announces-full-list-of-canadian-store-openings- for-2013/ news/industries/consumer-goods/targets-friendly- invasion/ ets-hiring-boom-poised-to-roil-canadas-retail- market/ impress-customers-in-canada