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Target Corporation

  1. Distance Still Matters: Pankaj Ghemawat The hard reality of global expansion. Does distance represent risks and costs? And how can companies overcome these risks or limit them? Topic: Theoretical perspective Tajudeen Ogunsola Case study – Target Corporation MOMN009H7: International Business Strategy (MSc. Module) Case studies
  2. 1 Agenda Pankaj Ghemawat Professor of Global Strategy, Harvard Business Review Journal Article Titled ‘Distance Still Matters’ (2001 ) MOMN009H7: INTERNATIONAL BUSINESS STRATEGY Addressing: ’Distance Still Matters:TheHardRealityofGlobalExpansion’Debate 1. Does distance represent risks and costs? And how can companies overcome these risks or limit them? 2. “Distance” as a concept. 3. Impact on a firm’s business vs. Risks and costs associated with distance. 4. Addressing the questions. 5. Measuring the impact of distance. 6. The idea in brief. 7. Case study: Target Canada Market Entry. 8. Conclusion
  3. Does distance represents risks and costs? And how can companies overcome these risks or limit them? Case study: Canada Market Entry 2 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
  4. “DISTANCE” as a Concept” Pioneering new territories Is technology and geo-economics reshaping our lives? Should we prepare ourselves for this flat world? “The world is flat” Thomas L. Friedman, April 3, 2005 “The world is round” Christopher Columbus, 1492 3 Presented by: Tajudeen Ogunsola MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
  5. Does distance represent risks and additional cost? YES! RISKS AND COSTS ASSOCIATED WITH IMPACT ON A FIRM’S BUSINESS. Unplanned costs Unanticipated legal liabilities/political RED tape Unforeseen regulatory nightmares Cultural complexities Language barriers Social issues 1 Ghemawat, et la, 2001 2 Shenkar, et la, 2012 6 Zaheer, Schomaker and Nahum., et la 2012 Chuck Leddy, 2013 4 Shenkar 2 states, "the pivotal to representing market challenges [is] risks and additional costs are within this context". Telefónica's 20-Year Gamble Pays Off MOMN009H7: INTERNATIONAL BUSINESS STRATEGY Impact On A Firm’s Business vs. Risks And Costs Associated With
  6. Does distance present risks and costs? 5 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY 1 01 Yes, but no difference to home market Many do not know whether to invest in other countries, but there are similar risks if they stay at home 02 New market requires new resources Structure: requires time, resources and people who understand the landscape and ongoing monitoring of operations 03 Expose of host country assets to elasticity risk If you invest in another country, you expose your other host country's assets immediately to the elasticity of the risk in the other country. 04 Costs is overcome if firms prof Additional costs are ultimately overcome if a company becomes profitable in another country. Costs are overcome via investment agreements; investment acquisitions; government trade levies and taxes. 05 Staying locally = “industry cluster” Staying locally ensures you remain part of your “industry cluster” Example Technology companies like Google, Facebook, or Apple have a headquarters in London (where the UK government is trying to drive innovation in this sector). And how can companies overcome these or limit them?
  7. Measuring the Impact of distance 6 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
  8.  Cultural, administrative (political), geographical and economic factors can measure distance  .Companies MUST conduct extensive research before entering the market to assess the risks and costs.  Managers MUST align the distance of the country to the company market (product / services) and determine if the company can create added value there. Achievement The idea in Brief: lesson learned from market entry failures that supports Ghemawat ideas.  "DISTANCE" affects a company negatively or positively.  For example, there is a positive relationship between economic size, trade or a negative relationship between distance and trade1. Distance Impact Trade Trade flow theory of gravity The outcome of distance 7 “…distance’ strongly represents risks and costs" and how much certain distance variables will affect trade10. Source: Jeffrey Frankel and Andrew Rose15 Thomas L. Friedman10 Pankaj Ghemawat 11 Measuring the impact of distance In summary; MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
  9. Case study 1: Target Corporation Objective 8 1). Acquire 124 former Zellers stores across Canada in 2011. 2). Convert stores to Target and enter market in a blitzkrieg of expansion to deliver profitability in 2013. Est. 1902–61 as the Dayton Company Founder: George Dayton Brand: Target Group Origin: USA Market objective: Canada market entry Niche: Low-cost fashion retailer Goal: Launch over 130 stores within four years Global position: Second largest discount retailing store behind Walmart in America. Headquarters: Minneapolis, Minnesota, USA Chief Executive Officer: Brian Cornell (12 Aug 2014) Revenue: $69.5 billion USD (2016) Number of locations: 1,828 Subsidiaries: Shipt, DermStore, Target Sourcing Services Target Corporation – Canadian Market Entry Limit or avoid risks and costs before expanding Lesson Learned – Choose new markets wisely Challenge: 1. Poor pricing alignment 2. Slow to launch Market implementation 3. Purchased Canadian stores in low foot-traffic location. Lost revenue: $4 billion The CAGE Distance Framework Theoretical perspective: stores locations are not within shopping distance. Geographically perspective: inconvenience to far Cultural perspective: too cold and snowy during the Canadian winter Economic perspective: Invested too much in the renovation, resulting in increased financial pressures for early success. Social perspective: customers were unsatisfied with the store layout, its aesthetic appearance and distance to the stores. Conclusion: ‘distance still matters’ “…as financial implication can be devastating’11. Dissatisfied with the long distance to stores, customers avoided shopping at Target, hence the decline in Canada. But Target should have analysed why Zeller's stores were for sale. MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
  10. Conclusion: Target Corporation 9 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY It is impossible to avoid all types of risks or limit financial losses. Ghemawat suggests that companies go beyond the "norm" of traditional market analysis to make more informed and precise decisions for market expansion. Risk & costs are inevitable for market expansion Target Corporation's case study exemplifies that distance still matters when companies enter markets. Challenges faced by the company, which demonstrated distance (America from Canada), did not fit into Canadian consumer culture. Target lost $4 billion in revenue due to "geographic" distance and the impact of distance on market expansion. Distance represents risks & costs
  11. References [1]P. Ghemawat, "The Cross-Border Integration of Markets and International Business", SSRN Electronic Journal, 2001. [2]O. Shenkar, "Beyond cultural distance: Switching to a friction lens in the study of cultural differences", Journal of International Business Studies, vol. 43, no. 1, pp. 12-17, 2012. [3]"Business Opportunities and Risks: Plan Before You Expand Overseas", National Center for the Middle Market, 2018. [Online]. Available: plan-before-you-expand-overseas. [Accessed: 16- Jan- 2018]. [4]M. Alexander, "When you shouldn't go global (companies' ill-fated globalization strategies)", Strategic Direction, vol. 25, no. 5, 2009. [5]J. Dunning, "Location and the multinational enterprise: A neglected factor?", Journal of International Business Studies, vol. 40, no. 1, pp. 5-19, 2009. [6]S. Zaheer, M. Schomaker and L. Nachum, "Distance without direction: Restoring credibility to a much-loved construct", Journal of International Business Studies, vol. 43, no. 1, pp. 18-27, 2012. [7]B. O'Brien, "4 lessons learned from famous market entry failures - Trade Ready", Trade Ready, 2018. [Online]. Available: lessons-learned-famous-market-entry-failures/. [Accessed: 16- Jan- 2018]. [8]"Forbes Welcome",, 2018. [Online]. Available: can-be-managed/#7c0c3a543acb. [Accessed: 18- Jan- 2018]. [9]D. Chatterjee, "Morgan Stanley values STAR TV at $11.2 billion",, 2018. [Online]. Available: stanley-values-star-tv-at-11-2-billion-115082900813_1.html. [Accessed: 18- Jan- 2018]. [10]T. Friedman, "It's a Flat World, After All",, 2018. [Online]. Available: [Accessed: 18- Jan- 2018]. [11]P. Ghemawat, "Distance still matters. The hard reality of global expansion.", Harvard Business Review, no. 0, 2001. [12]P. Ghemawat, "The world is still round - like a soccer ball: redefining global strategy", Strategic Direction, vol. 24, no. 3, pp. 3-5, 2008. [13]R. Thakur, "Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter Pankaj Ghemawat", Paradigm, vol. 12, no. 1, pp. 106-108, 2008. [14]J. Frankel and A. Rose, "An Estimate of the Effect of Common Currencies on Trade and Income", SSRN Electronic Journal, 2001. [15]P. Ghemawat, "Competition and Business Strategy in Historical Perspective", Business History Review, vol. 76, no. 01, pp. 37-74, 2002. 10 [30] House R.J. et al. (eds.), Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies. Thousand Oaks, CA: Sage, 2004. [16]O. Shenkar, "Cultural distance revisited: Towards a more rigorous conceptualization and measurement of cultural differences", Journal of International Business Studies, vol. 43, no. 1, pp. 1-11, 2012. [17]D. Dow and A. Karunaratna, "Developing a multidimensional instrument to measure psychic distance stimuli", Journal of International Business Studies, vol. 37, no. 5, pp. 578-602, 2006. [18]G. Hofstede and G. Fink, "Culture: organisations, personalities and nations. Gerhard Fink interviews Geert Hofstede", European J. of International Management, vol. 1, no. 12, p. 14, 2007. [19]S. Sakarya, M. Eckman and K. Hyllegard, "Market selection for international expansion", International Marketing Review, vol. 24, no. 2, pp. 208-238, 2007. [20]N. Dawar and J. Ramachandran, "Defending Turf: Marketing Strategies for Emerging Market Companies", SSRN Electronic Journal, 1998. [21]M. Hitt, M. Dacin, E. Levitas, J. Arregle and A. Borza, "PARTNER SELECTION IN EMERGING AND DEVELOPED MARKET CONTEXTS: RESOURCE-BASED AND ORGANIZATIONAL LEARNING PERSPECTIVES.", Academy of Management Journal, vol. 43, no. 3, pp. 449-467, 2000. Reference for Figure/tables [22]Lorraine Eden, , Stewart R Miller, (2004), DISTANCE MATTERS: LIABILITY OF FOREIGNNESS, INSTITUTIONAL DISTANCE AND OWNERSHIP STRATEGY, in Michael A. Hitt, Joseph L.C. Cheng (ed.) "Theories of the Multinational Enterprise: Diversity, Complexity and Relevance" (Advances in International Management, Volume 16) Emerald Group Publishing Limited, pp.187 – 221 [23] House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (2004). Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies. Thousand Oaks, CA: Sage Publications. [24] Sema Sakarya, Molly Eckman, Karen H. Hyllegard, (2007) "Market selection for international expansion: Assessing opportunities in emerging markets", International Marketing Review, Vol. 24 Issue: 2, pp.208-238, [25]Porter, M.E. 1985. Competitive advantage: creating and sustaining superior performance: with a new introduction. New York: The Free Press [26] Porter, M.E. 1980. Competitive strategy: techniques for analyzing industries and competitors: with a new introduction. New York: The Free Press [27] Chuck Leddy, 2013, Business Opportunities And Risks: Plan Before You Expand Overseas Source: (National Center for the Middle Maket, 2018) [28] Dawar, N., Frost, T., ‘Competing with Giants: Survival Strategies for Local Companies in Emerging Markets’ MARCH–APRIL 1999 ISSUE [29] Brent Adamson, Matthew Dixon and Nicholas Toman (2013)Dismantling the Sales Machine FROM THE NOVEMBER 2013 ISSUE HTTPS://HBR.ORG/2013/11/DISMANTLING-THE-SALES- MACHINE MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
  12. Case study – Pankaj Ghemawat article on Distance Still Matters: The hard reality of global expansion. MOMN009H7: International Business Strategy Thank you! Q&A Tajudeen Ogunsola