Pestl Analysis for Target Corporation

PESTL Analysis

Political
The ever changing international political situation affects both domestic and international firms. International trade policies, political movements and global events all affect the manner in which firms operate within the market.
The general retail industry has greatly benefited from the liberalization of international trade. Europe and the United States comprise approximately 75% of the market of the general merchandise store sector. With the lowering of US tariffs and the ending of Europe’s Multi Fiber Agreement, these markets now benefit from the availability of low cost labor. Reducing labor costs lowers the product price allowing companies to offer lower priced goods while still maintaining a profit margin (Datamonitor, 2007). Economic
The global general merchandise store sector relies heavily on the United States for revenue. In 2006, the United States accounted for 40.5% of the value within the global industry (Datamonitor, 2007). Due to the lowering of trade barriers, the US market has experienced an increase in low cost goods from Asia. Lower prices encourage sales growth which increases revenue.
The current economic situation within the United States could pose problems for retailers operating within the country. The threat of recession looms over consumers who have increasingly become more frugal with their spending habits (Datamonitor, 2007). This shift to economic frugality benefits the firms implementing a price leadership strategy.
As the economy worsens the price of crude oil continues to rises. The changing cost increases a firm’s costs associated with energy, transportation, and raw materials. Logistical modifications must be made to accommodate the rise in oil prices (Datamonitor, 2007).
The price increase also directly affects consumers. Energy and transportation costs for consumers also rise. A greater proportion of disposable income must be allotted to cover these expenses (Datamonitor, 2007). Because of the deteriorating economic situation, firms must find ways to motivate sales.

Social
Understanding the consumer’s needs and desires is necessary for success in the general merchandise store sector. Failing to identify current social trends could potentially leave a company’s market share vulnerable to another firm addressing the demands of the customer.
Currently, the United States has an aging population. The baby boomer generation is nearing retirement age. Products and service catering to this group… In addition, a disproportionate number of shoppers within this industry are women. Approximately 80% of Target shoppers are female (need source). Since women do the majority of the shopping in these stores, it would behoove the firms to indentify the aspects of the firms which appeal most to the target market.
Lately, consumers have developed a one-stop-shop mentality; consumers want to find all the products they need at one location. To capitalize on this firms lure potential customers in with some low priced goods and increase revenue through the purchasing of other goods (Datamonitor, 2007).
As mentioned earlier, the economic downturn in the United States and the rising fuel prices change consumer spending habits. Decreased disposable income translates into less spending for many consumers (Datamonitor, 2007).

Technology
Technology has become a major driving force in the retail industry. Research has shown consumers in developed nations prefer a relaxed, uncomplicated shopping experience. With the proliferation of company websites, consumers can now peruse available products anywhere internet access is available (Datamonitor, 2007). Legal
Retailers operating within the United States are subject to the rules and regulations set by the legislature. Failure to comply with such legislation can result in a variety of fines and penalties. In 2006, Equal Employment Opportunity accused Target of racial biased hiring practices. The allegations centered on the denial of four black applicants seeking management level jobs. This failure to adhere to the proper hiring practices can produce negative publicity for companies (Datamonitor, 2007).