International Brand Strategy

A Guide to Achieving Global Brand Growth

Sean Duffy

• Publisher: Kogan Page
• Year: 2021
• ISBN:
  9781789666304
• Edition: 1
• Topic: Business
• Subtopic: Marketing
• Index: Business

In theory, the Internet allows all brands to market internationally. But in practice, most companies struggle to compete outside their home market. Written from a marketing practitioner's perspective, International Brand Strategy evens the playing field with clear, actionable techniques to guide any organization going through the process. This book helps companies build sales in foreign markets, but just as important it helps them thrive by maintaining price integrity and building brand equity at the same time. With the guidance provided in International Brand Strategy companies hit the ground running in foreign markets. This provides a competitive advantage from day one, empowers companies to avoid costly mistakes, and saves months of trial and error. The book lays out a unique methodology for managing brands abroad that can be implemented for any product in any market. These methods have proven their value for companies large and small across six continents. The book guides readers with pragmatic models and a wealth of examples from global companies such as Target Canada, Unilever and Apple. International Brand Strategy was written for those who are planning to enter a new market and for those who are already there but wish to improve their brand's performance. It helps the reader recognize some of the most common pitfalls and how to avoid them, provides practical tips to understand the dynamics of price, product and value from a foreign buyer's perspective, and defines a conceptual framework to assess and improve brand equity at home and abroad.

Part One: MANAGING MARKET COMPLEXITIES

Introduction

Missing the target

On the morning of 18 March 2013, an exuberant yet slightly haggard young man stood before a small group of hastily gathered reporters in the Devonshire Mall in Windsor, Ontario, Canada. Dressed conspicuously in a tan blazer, red tie and red-and-white striped shirt, he had invited the journalists to show off the new Target department store which, it had just been announced, would open the following day.

Founded in 1962, Target is one of the largest retailers in America, trading on the promise of ‘Expect More. Pay Less.’ On this particular morning, the retail giant was embarking on its first international venture into neighboring Canada. Leading the charge, and the store tour, was a 38-year-old American named Tony Fisher, Target Canada’s CEO.

The first three Canadian stores had opened two weeks earlier. The Windsor store was the fourth of a planned 124 Canadian stores to open over the next nine months. Already, it had been a rocky start for Target, and it showed in Mr Fisher’s frenetic replies to the reporters’ questions about everything from pricing and selection to empty shelves and unannounced openings.

As Tony Fisher began his tour that morning, something extraordinary happened outside. The temperature in Windsor, already at freezing point, plummeted to –18°C (0°F) in a matter of minutes. If a greater power were trying to give Tony Fisher and his employer a sign, it went unheeded.

Within 14 months, Tony Fisher and the US CEO who hired him would both be fired as a prelude to the announcement on 15 January 2015 that Target would exit Canada altogether. All told, 17,600 employees lost their jobs as Target closed all 133 Canadian locations. According to Canada’s Financial Post, the misadventure was estimated to have cost Target $5.4 billion CAD ($5.5 billion USD) in pre-tax losses.¹

Fortune Magazine concluded that ‘Target failed to entice shoppers in Canada, a country of 36 million people with a way of life similar to Americans’ but with habits different enough to make it a potential minefield for US retailers.’² As a primer on why brands fail abroad, Target Canada is a textbook example.

Success as a foregone conclusion

Target’s ill-fated launch in Canada has become a staple in any discussion of international marketing. This is partly because of how completely the endeavour failed, but mostly because it was so unexpected.

On paper, Target seemed to have everything in its favour. To start, Target’s birthplace and headquarters is in Minneapolis, Minnesota, just 360 kilometres (225 miles) from the Canadian border. It had a 50-year track record of sound business and, specifically, marketing decisions. With annual revenues topping $70 billion USD, Target had grown steadily across the US, becoming the second-largest discount retailer behind Walmart. The company demonstrated a deep understanding of its shoppers and impressive business acumen. With over 1,800 US stores, it was estimated that 75 per cent of the US population lived within 10 miles of a Target. It is understandable that it would consider expanding outside its home market.

Prior to 2011, Target had expressed interest in global expansion. Its main US rival, Walmart, had done so with stores spanning North and South America, Asia, Africa and Europe. Starting in Canada must have seemed like an easy first step for Target.

Target’s value proposition of a large selection at low prices seems like it would travel well. And it wasn’t as if Canadians needed to be educated about the Target brand. About three-quarters of the entire Canadian population live just 160 kilometres (100 miles) from the US border. As a consequence, almost 10 per cent of the Canadian population were already regular Target shoppers and many more knew of the brand. A survey conducted about eight months before Target’s Canadian launch showed that 83 per cent of Canadian shoppers were aware of the Target brand and four in five expressed an interest in shopping there.³

It’s uncommon for a brand to enter a foreign market with the advantages Target possessed. So how did things wind up going so poorly? The complete list of factors that have been attributed to Target’s failure in Canada is extensive. An overview of the top five reasons may give the flavour.

Compromised values

The whole foray seems to have been triggered by a real estate deal. Target had been eying Canada for years, but had rejected the idea of gradually building up stores in Canada. It wanted to enter with a national presence all at once. However, the amount of retail-friendly real estate required to do that in Canada is hard to come by. So when Target was given the opportunity to compete with Walmart in bidding for 220 leases across Canada from Zellers Inc (a failing Canadian discount retailer), it saw a clear opportunity to pursue its international ambitions. Seventeen years earlier, Target’s rival Walmart got its start in Canada when it purchased 122 stores from the Woolco division of Woolworth Canada.

Ironically, Zellers also had a similar start in 1931 when it took over the stores of the faltering US retailer Schulte-United. Zellers was more downmarket than Target, but unfortunately had adopted the same red-and-white corporate colour scheme. The Zellers stores were about half the size of Target stores, and many of them were located in areas that bore little resemblance to where Target situated its US stores.⁴ Despite all this, on 13 January 2011 Target’s CEO Gregg Steinhafel paid CAD $1.825 billion for the leases after Walmart passed on the deal.⁵

Once the leases were purchased, the clock was ticking. Steinhafel had committed the company to opening stores as quickly as possible to avoid paying rent on empty retail space. This resulted in the very ambitious plan to open 124 stores by the end of 2013 and to be profitable within its first year of operations. It took Target almost 20 years to reach 124 stores in the US. In Canada they gave themselves half as many months to do the same.

If there was one decision that sealed Target’s fate in Canada, it wasn’t that of purchasing the over-priced leases; it was the subsequent decision to, at all costs, avoid paying rent on vacant retail space. That priority overrode Target’s core business strategy and brand values, expressed in the company’s tag line ‘Expect More. Pay Less.’ The Target US brand had built enormous success with a single-minded mission: To provide an unequalled discount shopping experience to its guests. In allowing short-term financial goals to eclipse the company’s core values in Canada, Target unwittingly neutralized its only competitive advantage there. This is a good example of ‘be careful what you wish for’: Target got 124 stores open at all costs – a cost that included their customers and business.

Abandoning the corporate mission in pursuit of a financial objective in Canada was a seismic shift in corporate ethos for Target. No one ever came out and said as much, but they didn’t need to. It manifested itself in four years of myopic dedication to opening stores no matter what type of shopping experience they offered guests. Although Tony Fisher and others dutifully recounted the corporate line about putting shoppers first, it was clear that their focus was elsewhere – simply getting the stores to a minimally viable state so they could be opened.

Just three weeks after the Canadian launch, Tony Fisher spoke at the Canadian Club in Toronto. His speech provides insight into the organization’s priorities in Canada. He said, ‘Speed has been at the essence since we started this process because it was important to get stores open as quickly as possible so we could start providing a return on Target’s investment.’ He went on to say that one consequence of speed was, ‘We knew from the beginning we wouldn’t be perfect immediately, but our minimum expectation was to be very good.’ Mr Fisher admitted that providing a customer experience that was not up to Target’s usual standards was hard to get used to, but felt it was the best approach for Canada. Most of his 30-minute speech focused on the operational challenges of opening so many stores in so little time. Fretting over the finer points of shopper experience is a luxury when you’re wrestling with the nuts and bolts of building basic supply chain infrastructure.

The moment the Canadian organization prioritized opening stores ahead of delighting customers, the Canadian brand entered new territory veering sharply away from the American brand values and blazing its own path in Canada.

Technical difficulties

Modern retail depends on the interaction of many software systems to ensure an uninterrupted supply chain and positive customer experience. In the US, Target had developed its own proprietary software to order products from vendors, process them through warehouses, and get them onto store shelves in a timely manner. This system had been refined over decades and worked well in the US. But the system was never set up to work internationally. For instance, it was incapable of dealing with different currencies and languages. Given the ambitious deadline, there would not be time to adapt the system, so Target thought it could save time by buying new ‘off the shelf’ supply chain software for its Canadian operations.

Of course, the system had to be adapted to Target’s needs, manually populated with data on 75,000 items, and integrated with all Target’s other systems and processes – to say nothing of training. This would have been a challenge under any circumstance, but in this case no one in the organization had experience of using this new software. As a result, many mistakes were made. Product dimensions were entered in the wrong order, so height was mistaken for width or depth. Inches were used, which the system interpreted as centimetres. Items were entered with the wrong currencies, and much information was simply missing altogether. As a result, about 70 per cent of the data in the Canadian system was deemed erroneous compared to the typical 1–2 per cent in the US system.

The operational consequence of these mistakes was a highly dysfunctional supply chain. Joe Castaldo of Canadian Business magazine interviewed almost 30 former Target employees after the closure. His article, ‘The last days of Target’,⁶ provides an insightful, behind-the-scenes look at what went wrong. Castaldo summarizes the supply chain woes the company suffered from the moment it tried placing orders through its new supply chain software:

Items with long lead times coming from overseas were stalled – products weren’t fitting into shipping containers as expected, or tariff codes were missing or incomplete. Merchandise that made it to a distribution centre couldn’t be processed for shipping to a store. Other items weren’t able to fit properly onto store shelves. What appeared to be isolated fires quickly became a raging inferno threatening to destroy the company’s supply chain.⁷

Castaldo chronicles how other systems suffered a similar fate. Due to supply chain woes, bare shelves were the norm in Target Canada stores. This shocked consumers and was widely publicized in the press and on social media. At the same time, Target’s Canadian distribution centres were overflowing with products to the point where additional warehousing needed to be secured. That’s because another software system that controlled forecasting and replenishment of the distribution centres filled them with far more products th...