International Management Final. Case Analysis of Target's expansion into the Mexican market.

1. Group 7
By Andrew Hoffert, Vanessa Gross, Tanner Green
Kenneth Griffith, Elman Ilyayev
M G T - 4 1 9 0
4 / 2 6 / 1 4
Target to Expand Internationally to Mexico

2. Target-Mexico |2
Table of Contents
Executive Summary...................................................................................................3
Target History ...........................................................................................................3
Product Description..........................................................................................................4
Services.............................................................................................................................5
Operations Size & Scope of Organization.........................................................................5
Expansion Market .....................................................................................................6
Why Mexico?....................................................................................................................6
Demand for Product................................................................................................................ 7
Market Growth Rate ............................................................................................................... 7
Raw Material Access .............................................................................................................. 7
Labor Costs............................................................................................................................. 8
Availability of Skilled Workforce .......................................................................................... 8
Technology Availability......................................................................................................... 8
Country of Mexico Environment...............................................................................8
Economic..........................................................................................................................8
Political.............................................................................................................................9
Legal/Regulatory ..............................................................................................................9
Technological..................................................................................................................10
Culture ....................................................................................................................10
Power Distance ...............................................................................................................10
Uncertainty Avoidance ...................................................................................................11
Individualism-Collectivism .............................................................................................11
Masculinity.....................................................................................................................11
Materialism........................................................................................................................... 11
Values.............................................................................................................................12
Assertiveness ........................................................................................................................ 12
Future Orientation................................................................................................................. 12
Performance Orientation....................................................................................................... 12
Humane Orientation.............................................................................................................. 13
Entry Mode/Strategy Description............................................................................13
Goals and Concerns.................................................................................................14
Conclusion...............................................................................................................15
References ...............................................................................................................16

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Executive Summary
As we have all come to learn, making the decision as to whether or not to expand
an organizations operating capabilities internationally is a major undertaking involving a
wide ranging span of variables, factors and considerations that upper management must
take into account. Taking the big leap to open up your organizations doors in a foreign
land can almost be a scary thought if your organization has not adequately planned out a
detailed international expansion strategy that involves a thorough environmental
assessment of the country or region that you are planning on expanding into. There are
also numerous stories out there of major U.S. retailers that have tried to expand
aggressively on the global forefront and are have experienced difficulty identifying what
customers in different regions of the world really want and have ended up closing stores
in some regions, and shelving plans to expand into others.
The American discount retailer Target has a history of growth, expansion and
success within U.S. borders and has managed to develop a reputation that is synonymous
with a higher quality product offering and retail environment than that of their
competition. Target has taken a steady growth approach in regards to expansion within
the U.S. and by no means have they saturated this market with their retail stores. Target
stores are typically located in the metropolitan areas of larger cities and are currently
operating 1,778 stores in 48 states.
Current global economic trends indicate that a Target expansion into the Mexican
retail market may have beneficial outcomes for all parties involved. Throughout our
analysis of the potential feasibility of a Target international expansion into Mexico we
will first give you a brief history of how Target got to where they are today and the
different products and services that they currently offer. We will then give a breakdown
of the Mexican market explaining why this market is feasible including the potential
demand for Target products in this region as well as a political assessment of the region.
Other factors that we have included in our considerations for expansion into this
international market are the Mexican culture and values, our strategy for entering this
market, and Target’s goals and concerns for entering this market.
Target History
Target as organization has a long storied history that dates back to the very
beginning of the twentieth century. In 1902 it all started with George D. Dayton
becoming a partner in the fourth largest department store in Minneapolis, MN,
Goodfellow’s Dry Goods Company. The following year George takes over as sole owner
of the company and renames it Dayton Dry Goods Company. As President, George
Dayton stayed active in the management of the company for nearly forty years until his
death in 1938, when operations were then taken over by his son and grandsons who had
plans to make the store a nationwide retailer. By 1911 the company is growing rapidly
and is know simply as Dayton’s department store. Over the years the company grows to

4. Target-Mexico |4
open multiple stores in the suburbs of Minneapolis as well as expanding their product
offerings.
In the early 1960’s Dayton’s had plan to continue their growth and expansion by
creating a new discount chain retailer and on May 1, 1962, the brand icon that we all
know so well today was created, Target. The explanation behind the decision in choosing
this name was, “As a marksman’s goal is to hit the center bulls-eye, the store would do
much the same in terms of retail goods, services, commitment to the community, price,
value and overall experience” (Target, 2014). In 1966 Target opens their first store
outside the state of Minnesota in Denver, CO. and expands to three other major cities
shortly thereafter. Target also opens their first distribution center in 1969 in Fridley, MN
that would be responsible for supplying product to all of their store locations. We then
fast forward to 1979 where Target reaches the major milestone of achieving $1 billion in
annual sales revenue. By 1989 Target has retail stores open thirty-two states and they
continued to grow steadily to where they are today, on the cusp of international
expansion.
Product Description
As a discount retailer, Target offers a very wide range of products that can be
found in all of their store locations. These locations range in size and are anywhere from
95,000 to 135,000 square feet. They have also gained a reputation in the retail industry of
having higher quality product offerings in their stores than that of their main competitor
Walmart. Target offers thousands of different items and these products are broken down
into different departments. The major product departments provided by Target include:
 Clothing – men’s / women’s / kids’ / baby
 Home – bath / bedding / home appliances / home décor / home improvement /
kitchen & dining / storage & organization
 Patio – lawn & garden / outdoor décor / outdoor lighting / patio accessories /
patio furniture / fire pits & patio heaters / grills & outdoor cooking
 Furniture – bathroom furniture / bookcases / custom furniture / entryway
furniture / home office / kids’ furniture / kitchen & dining / living room / lounge
seating / patio
 Electronics – TV’s & home theatre / cell phones / iPad & tablets / iPod & audio /
computers & office / cameras & camcorders / video games / movie, music &
books / GPS & navigation
 Entertainment - books / movies / music / TV shows / video games
 Toys – action figures & playsets / arts & crafts / dolls / dress up & Pretend play /
games & puzzles / kids’ electronics / learning toys / outdoor toys / riding toys /
stuffed animals & plush toys / vehicles & radio control
 Sports – bikes / camping / exercise & fitness / game room / helmets & pads /
lawn games / pools & water slides / scooters, skateboards & skates / sports
equipment

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 Health – diet & nutrition / vitamins & Supplements / first aid / home medical
equipment / healthcare uniforms / medicine cabinet / oral care / personal care /
sexual health / shaving and grooming / pharmacy / optical / clinic
 Beauty – bath & body / fragrances / spa & message / hair care / oral care /
makeup /shaving & grooming / skin care / personal care
 Other – Grocery & essentials / luggage / musical instruments & karaoke / party
supplies & holiday / pets / school & office supplies / gift cards
Services
The typical services that are provided by Target are of an in-store nature and vary
depending on the location. These services include Target Optical, which offers eye
exams and prescription glasses and contacts. Target Clinic, which is a minor healthcare
clinic that provides the service areas of minor illness, skin treatments, minor injuries,
vaccinations, cosmetic prescriptions consultations, and wellness. Many locations also
have a Target Photo, which have the ability to provide a vast array of services in regards
to customers photo needs. Special delivery services are also offered for any large
products purchased in-store and all products purchased online. Another service this is
offered online is that of registry programs such as Club Wedd, Target Baby and Target
Lists. Target offers various warranty packages for many of their electronic product
offerings.
Operations Size & Scope of Organization
Target is headquartered in Minneapolis, MN and has regional offices in Dallas,
TX, Los Angeles, CA, and Philadelphia, PA. This organization also has approximately
twenty-seven distribution
centers spread throughout the
United States with locations in
twenty-three different states.
Target also has four-food
distribution centers
strategically located in
different areas of the country.
The company also operates
three-import warehouses and
three Target.com fulfillment
centers.
Employing more than 360,000 employees, Target currently operates 1,683 stores
in 48 states, including 239 SuperTarget stores, 1,519 pharmacies, 325 optical centers, 186
portrait studios, 916 Starbucks, 1,165 one-hour photo processing labs and 28 health
clinics. Target’s total store square footage is 222,420,000 square feet (Target, 2014). Of
these locations, there are two types of layout formats for the retail stores that include
General Merchandise stores that are typically one-level stores within major community or
regional shopping districts. This type of layout is Target’s most prevalent store format,
which is approximately 126,000 square feet in size. SuperTarget stores broaden the

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Target brand beyond clothing and home décor by providing customers with a pleasing
and convenient grocery shopping experience in addition to the traditional Target store
experience. SuperTarget offers a full grocery line, including a bakery and deli, meat and
produce selections. With an average size of 174,000 square feet per store, SuperTarget’s
mix of grocery and merchandise offers the convenience of one-stop shopping.
Expansion Market
Why Mexico?
Mexico has maintained its economic growth and has kept inflation rates under
control. The retail sales in the region have grown at a robust pace and the market growth
exceeded the GDP growth last year (Euromonitor, 2014).
Financing and consumer credits have emerged as important retailing tools in Mexico.
Several retailers are evolving into financing bodies by providing the options of deferred
payments at a cash price (Euromonitor, 2014). “Meses sin intereses,” or monthly
payments with no interest, has become a common practice in the market. Additionally,
retailers are looking to expand throughout the country while specifically targeting the
regions with heavy footfall
(Euromonitor, 2014). This has
reinforced the popularity of smaller
format and quick-stop stores, and
Target can easily adapt to this trend
with its CityTarget format. Along with
store expansion, department stores and
other grocery retailers are expanding
their product portfolios as well
(Euromonitor, 2014). This will be to
meet the customer demand and
outperform local retailers who offer
limited products. Since Target already offers a wide range of products, it is likely to
benefit from this trend.
Although the retail sales have grown strongly in the region in the last few years, they
declined unexpectedly during the initial period of 2013 (Cattan, 2013). Weak consumer
confidence due to the slowest economic growth since 2009 appears to be the reason.
Nevertheless, policy makers are likely to cut the interest rates in order to stabilize the
economic growth (Cattan, 2013). The region’s inflation rate could also come down to
2%-4% during the second half of the year, from 4.65% in April 2013 (Cattan,
2013). This should help the consumer confidence to a certain extent and support the
growth in retail sales.
The U.S. retail giant Wal-Mart has performed exceptionally well in Mexico with its
everyday low price strategy. Therefore, Target will have to rely on its price match
strategy to appeal to the region’s value-conscious buyers.

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Demand for Product
Mexico has a high demand for American-made products, and there is undeniably
a market niche that Wal-Mart has been consuming. Target can also provide and fill the
demand for American-made products to Mexico. Mexico became the second largest
purchaser of United States goods in 2011 and purchased billions in electronics,
transportation equipment, and machinery – and a good amount of jewelry, beer, and
cheese (Miroff and Booth, 2013). Mexico is undoubtedly presenting a high demand for
United States goods and is proving to become the largest purchaser and trader of U.S.
goods worldwide.
Market Growth Rate
The Gross Domestic Product growth in Mexico has been following the Latin
American trend-line, but has since surpassed and is ahead of the rest of Latin America.
Mexico has proved to keep the GDP
annual growth percentage in the
positive figures since the year 2010
(GDP Growth, n.d.). In 2011,
Mexico purchased $198 billion in
United States goods, which is a
substantial increase from the $41
billion in 1993 (Miroff and Booth,
2013). This leaves a lot of room for
Target to jump into the market, and
capitalize on the considerable
market growth that has occurred in
Mexico in the last couple of
decades. Mexico is currently the
second largest economy in Latin America, and has
steady growth rates from 1996 to 2012 on a quarter to quarter
basis of .76%, but Mexico’s GDP slowed in the last quarter of 2013 (Taborda,
2013).
Raw Material Access
The North American Free Trade Agreement, known as NAFTA, allows import
and export between North American countries without tariffs being applied. This makes
things a lot easier for Target, and was something that Wal-Mart did not have the pleasure
of having when they first entered the Mexican market. Wal-Mart has actually shifted
gears more recently to retail more American made products including socks, light bulbs,
candles, and other goods (Hagerty, 2013). This proves that raw material access is
efficient, and that Target could potentially have similar access to American made retail
products for resell in Mexico.

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Labor Costs
Labor costs in Mexico are essentially low. Recently Mexico surpassed China in
having hourly wages that were even lower there’s. Average wages in Mexico for a
manufacturing job are anywhere from $2.50-$4.50 an hour, wage stagnation,
unemployment, and inflation have assisted in diminishing the income level of 31 million
Mexicans (Yuk, 2013). This diminished income level provides cheap labor, at least until
the market can improve to better conditions again.
Availability of Skilled Workforce
Mexico’s labor force in 2012 made up 42.7% of the residents, about 47 million
skilled workers that has gradually been rising by nearly a million each year (Mexico
Labor Elections, 2012). There are sufficient amounts of workforces to fill the stores with
at tremendously low-income rates. If one plans to hire Mexican workers, it is essential
they be prepared for labor unions because about thirty percent of the workforce is already
unionized (Mexico's labor market and laws, 2006).
Technology Availability
When a person thinks about technology and retail stores, they tend to think of
online shopping. The technology has to be there in order for online shopping to work
resourcefully. Mexico’s online market is predicted to grow to $5.5 billion from $2.2
billion, a frequency growth of 150% (Andre, 2013). Mexico presently has the fastest
growing number of Internet users out of any country in Latin America, growing faster
than Argentina, Colombia, Chile, and even Brazil (Benítez, 2011).
Country of Mexico Environment
Economic
Making the move for Target into the Mexican economy would prove to be a
beneficial one in the
long run. “Data
showed factory
output, a component
of industrial
production, rose by
2.34 percent in
January compared
with the prior
month, its best
showing since
September 2012”

9. Target-Mexico |9
(Mexico Industry). This highlights the potential available in the Mexican economy that is
reviving itself from past economic hardships. The ability for improvement in an economy
on the uptake is extremely likely in this circumstance. To introduce a large retailer such
as Target would boost the economy to become even more efficient and self-reliant.
Another benefit of the economy in Mexico is that “Mexico exports mostly manufactured
goods and nearly 80 percent of its exports to the United States” (Mexico Industry). This
strategic advantage will automatically align the Target brand with the Mexican economic
system through experience gained from trading with Mexican manufacturers.
Political
The political situation is somewhat similar to that of the United States, in that they
elect a president for a term. “The executive wing of power is in the hands of the President
of Mexico who is elected for a fixed six-year term with no provision for reelection.
(Mexico). Although there is no ability of reelections like the United States, the term is
slightly longer and “the president also enjoys the power to issue decrees that have the
effect of law” (Mexico). This is something to be considered as a benefit to help stray
from corruption. Allowing the president the power to issue a new law helps to protect
businesses that may otherwise become the victims of corruption in the local government.
Although corruption has been a large problem in the past, there is still hope for the
international businesses under an honorable, business advocate as president. Along with
protection by the executive branch, the income taxes are much lower in Mexico than in
the United States for corporate entities. “The top individual income and corporate tax
rates are 30 percent. The corporate income tax is set to decline to 29 percent in 2014 and
28 percent in 2015” (Index).
Legal/Regulatory
“Mexican trade policy is among the most open in the world. Mexico has signed
twelve trade agreements, with forty-three nations, putting ninety percent of its trade under
free trade regulations” (Deresky, International Management:Managing Across Borders
and Cultures). Allowing exports and imports free of trade regulation would be a great
benefit to have as a multinational retailer. This would render the ability to ship and
receive resources and products easily without the burden of high costs. Target is a
company that makes some products in house; however the majority of the products that
are sold are purchased first through the manufacturer. Without free trade regulations, this
would normally be seen as somewhat of a burden because some manufacturers may be
located in several different countries. “The overall start-up process has been simplified,
and no minimum capital is required. Launching a business takes six procedures and six
days on average” (Index). Having a simplified start-up process means more money saved
for Target. Most countries offer a much longer, labor-intensive process, which eventually
costs the entity more money in start-up costs. The strategy would be to have a quick
entrance that would allow time to adjust to the market and prepare for more competition
from other international companies.

10. Target-Mexico |10
Technological
“Of all developments propelling global business today, the one that is
transforming the international manager’s agenda more than any is the rapid advance in
information technology” (Deresky). For any international business that wants to succeed,
there must be a significant amount of technology involved in the entire process. Although
the technological advancements in Mexico are not considered to be extremely ahead of
the competition, there remains the strategic advantage of its potential availability. “While
Mexico lags behind many more
technologically developed
countries in terms of educational
programs and research, it is a
definite leader in Latin American
due to its development of science
and technology programs in the
20th Century” (Alvin Heng). The
potential of a country with
technology ahead of its closest
neighbors can allow for further
advancement into the same area as
more developed countries. The
fact that a country can become much more advanced than the countries that surround it
shows that there is easier access to information technology than the other countries. This
advantage will also decrease the amount of competition due to the lack of surrounding
countries to begin business in.
Culture
Power Distance
The first value dimension is the level of acceptance by a society of the unequal
distribution of power in institutions (Deresky, 2011). Inequalities in the workplace are
normal, however the extent to which a subordinate accepts the unequal power is societal
determined. According to Hofstede’s power distance index, which measures the extent to
which the less powerful members of organizations and institutions accept and expect
power to be distributed unequally, Mexico scored an 81. This means that Mexico displays
a high power distance. It is a hierarchical society in which employees acknowledge their
boss’s authority, respect their position and seldom bypass the chain of command. In a
hierarchical society, subordinates expect to be told what to do and the ideal boss is a
benevolent autocrat

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Uncertainty Avoidance
Uncertainty avoidance is the second value dimension; it refers to the extent to
which people in society feel threatened by ambiguous situations (Deresky, 2011). When
countries have a high level of uncertainty avoidance they tend to assure strict laws and
procedures are in place to make certain their people adhere closely and overcome a strong
sense of nationalism. Countries that have lower uncertainty avoidance nationalism is not
as pronounced and protests and other such activities are more acceptable. In those
countries that portray lower uncertainty avoidance company activities are less structured
and less formal. Managers are known to take more risk and high job mobility it much
more common. According to Hofstede’s scale Mexico scored an 82 and thus the Mexican
culture prefers to highly avoid uncertainty. The Mexican culture has a high emotional
need for rules, even if they appear to not work. They believe that time is money and
therefore have an urge to be busy and work hard, precision and punctuality are the norm.
Individualism-Collectivism
Individualism is the third of Hofstede’s value of dimensions; it is the tendency of
people to look after themselves and their immediate families only and to neglect the
needs of society as a whole (Deresky, 2011). According to Hofstede’s scale, Mexico
scores a 30 and is considered a collectivistic society. Loyalty is paramount, and for the
most part it over-rides societal rules and regulations. The society fosters strong
relationships where everyone takes responsibility for fellow members of their group. In
this type of society hiring and promotions practices are based on paternalism rather than
achievement or personal capabilities, which in an individualistic society would be
favored.
Masculinity
Masculinity, the fourth dimension, is the degree of traditionally “masculine”
values assertiveness, materialism, and a lack of concern for other that prevails in society.
In this dimension Mexico scores a 69 and thus is considered a masculine society. People
that are living in masculine countries tend to “live in order to work” (Deresky, 2011).
Managers are expected to be decisive and assertive, the emphasis is on equity,
competition and performance, and conflicts are resolved by fighting them out. Women in
Mexico are generally expected to stay at home and raise a family.
Materialism
Materialism has been identified as highly relevant for consumer behavior and
therefore has been investigated extensively. Although the Mexican culture consists of
hard workers, they believe leisure is more important than work. Work is only a means to
support themselves and family. They possess a positive attitude and have a tendency
towards optimism. Most of the time they act as they please and spend money as they
wish. The Mexican culture is very impulsive and materialistic.

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Values
Cultural values are a society’s ideas about what is good or bad, right or wrong,
such as the widespread belief that lying or stealing is immoral and unfair. Values
determine how individuals will probably respond to any given circumstance (Deresky,
2011). When considering different cultural value dimensions, it is important to
understand that most of the variations between cultures are a result from underlying value
systems in which people behave differently under similar circumstances. According to
the GLOBE cultural dimensions study Mexico is included in the sub-group Latin
America along side nine other countries including Brazil, El Salvador and Venezuela.
Assertiveness
This dimension refers to how much people in a society are expected to be tough,
confrontational and competitive versus modes and tender (Deresky, 2011). In
assertiveness, Mexico scored in the higher end of the assertiveness range in societal
practices of this value and was ranked second highest among the countries in its Latin
American sub-group. It can thus be determined that Mexican cultural has a middle of the
road can-do attitude and often times have a moderate amount of sympathy for the weak.
In comparison to the United States, Mexico was in the same grouping of higher scores in
this cultural dimension.
Future Orientation
Future orientation is the dimension
that refers to the level of importance a
society attaches to future-oriented
behaviors such as planning an investing in
the future (Deresky, 2011). In looking at
this Mexican societal value, they tend to
score moderately high in future orientation
and this implements that there is a greater
importance placed on long term planning
and less emphasis placed on short term
gratification. Mexico ranks the highest
among Latin American countries in the
category and is ranked only slightly
behind the U.S. in this category.
Performance Orientation
The performance orientation dimension measures the importance of performance
improvement and excellence in society and refers to whether or not people are
encouraged to strive for continued improvement (Deresky, 2011). When assessing where
Mexican society falls when considering this vale, it can be determined that Mexicans
practice a moderate amount of performance orientation in their country. Their societal
practice score for this value ranks them third out of the other Latin American countries,

13. Target-Mexico |13
but noticeably lower than that of the U.S. This suggests that Mexican culture often times
holds other priorities such as tradition and family ahead of performance.
Humane Orientation
This dimension measures the extent to which a society encourages a rewards
people for being fair, altruistic, generous, caring, and kind (Deresky, 2011). Mexican
society practice a moderately low amount of humane orientation suggesting they focus
less on sympathy for the weak and are moderately friendly, tolerant, and place a little less
value on harmony. This also states that in Mexican society, there is slightly more
importance placed on power and material possessions as well as self-enhancement.
Mexico scored fifth in humane orientation out of the ten Latin American countries and
had a very similar score to that of the U.S.
Entry Mode/Strategy Description
Target Corporation is one of the ten largest retailers in the United States by sales.
As of January 2013, it had generated revenues of over $70 billion and had approximately
1,778 stores in operation (Crane, et al., 2014). Due to its sheer size, it is clear that the
Target Corporation would need to further its reach outside of the U.S. or risk
cannibalization of sales due to overexpansion (Crane, et al., 2014). In March of 2013,
Target did just that by acquiring the locations of 220 Zellers Stores – a similar yet ailing
Canadian discounter. It was predicted that the new locations would be a success, as the
Target brand is considered very popular among Canadians. However, due in part to
supply-chain issues, currency fluctuations, and contractual stipulations with American
suppliers, Target is expected to suffer a $800 million to $900 million loss (Austen, 2014).
Because of this experience I believe that Target will learn how to better deal with its
foreign operations and approach new foreign investment opportunities with a much more
careful entry.
Because of the ease of bi-lateral trade created by
the enactment of NAFTA in 1994, it makes strategic
sense to further global operations by establishing a
presence in Mexico (The United States Commercial
Service, 2013). However, due to the cultural and
economic differences between Mexico and the U.S.,
Target must implement a wholly different strategic
approach to entry than attempted in Canada. In this
case, I personally believe that Target should enter the
market via joint venture, which “reduces the risks of
expropriation and harassment by the host country”
(Deresky, 2011). This is exactly what Wal-Mart, who
was incredibly successful with its internationalization
operations in Mexico, did when they entered the
Mexican market via a joint venture with Grupo Cifra.

14. Target-Mexico |14
Wal-Mart started its global operations in 1991. After a successful launch into
Canada, it planned on making the move into the Mexican market but felt that it lacked the
vital competencies and resources required of a start-up operation (Gupta & Govindarajan
, 2002). Thus, they formed a 50-50 joint venture with the largest retailer in Mexico –
Grupo Cifra. Wal-Mart would develop and support the infrastructure while Cifra utilized
its own suppliers and oversaw the day-to-day operations. To date, Wal-Mart México y
Centroamérica, otherwise known, as “Wal-Mex” has become the biggest player in the
industry, outsizing the next three biggest competitors combined and outpacing sales
growth in the U.S. market (Bussey, 2006).
If Target is to be successful in its Mexican expansion operations, it needs to use
Wal-Mart as the benchmark, and then, through internal and external assessments, tailor
its strategy their own. According to Kenneth Fox, in his article: Learn to Expect the
Unexpected in Global Retail Expansion, “Retailers that seek future international growth
need to avoid repeating prior mistakes from others who came before them. Even the most
successful and largest global retailers have encountered unanticipated problems in global
markets that could have been identified and prevented prior to their launch” (Fox, 2011).
It has been shown that in the market of which both Target and Wal-Mart share, a joint
venture would seem to be the best entry candidate.
The advantages of the joint venture, according to (Deresky, 2011) would include
insider access to markets, shared cost and risk, and synergies between the two firms by
leveraging each other’s skill bases, technologies, and local contacts – an overall agreeable
situation.
Goals and Concerns
In the case of internationalization, increased profits and market share due to the
expansion into underserved markets tends to be a common goal, as well as creating
economies of scale by increasing distribution across more sites. In the case of Target’s
expansion into Mexico, it would not only strengthen Target's market position, but also
dilute its business risk arising out of limited geographic presence (Market Line, 2014).
The expansion would also help to alleviate the cannibalization of sales it is currently
experiencing in the U.S. due to market saturation and domestic overexpansion factors
(Crane, et al., 2014). Other goals of Target’s expansion include gaining valuable
experience into expanding into a global marketplace, which will undoubtedly be of value
when further ventures are sought.
Before Target can accomplish any of the aforementioned goals, it must determine
with whom to enter into an IJV. Controladora Comercial Mexicana would be a stellar
choice as they are the second largest retailer in Mexico and one of Wal-Mex’s top
competitors. They operate more than 200 stores located throughout the country with their
aim to serve all consumer groups through seven different store formats via: Mega,
Bodega Comercial Mexicana, Sumesa, City Market, Fresko and Alprecio brands
(Controladora Comercial Mexicana, 2012). This venture would allow Target to maintain

15. Target-Mexico |15
its comparative advantage as a higher quality, hypermarket alternative to the competition,
as well as better compete in the grocery and market category. It would give CCM access
to Target’s infrastructure capabilities, and Target access to CCM’s local supply chain
with each benefiting the other.
Major concerns
would arise with
Target’s entry into
Mexico if a
mutually beneficial
joint venture could
not be attained.
The Mexican retail
market is already
fairly developed
and considered
saturated by U.S. standards (Mun & Yazdanifard , 2012). It would greatly increase the
chances of Target’s operational failure if they entered via turnkey operations or
greenfield operations especially as this would expose them to the full range of risk
(Deresky, 2011).
Conclusion
It has been determined through a careful examination of not only the potential
market demand for target retail products in Mexico, but also both the political and
economic environment of the country, that it would be an appropriate action to proceed
with Target’s international expansion plans for this region of North America. In
analyzing the culture and values of the Mexican people, we found that while certain traits
and habits are more distinguished and prevalent in Latin America, for the most part, they
are not a far stretch form what we as an American society has a good understanding of.
All of these factors considered, we feel that a Target expansion into the country of
Mexico would be a mutually beneficial venture for all parties involved.

16. Target-Mexico |16
References
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