Why America’s Retailers Like Target Fail Abroad | CNBC Marathon

Summary

The script explores the challenges of global expansion for brands like Target and McDonald's, detailing Target's failed Canadian launch costing $4.1 billion due to supply chain issues and poor market understanding. It contrasts with Walmart's successful Canadian entry through strategic operations. McDonald's, once a symbol of Iceland's global integration, exited after the 2008 crisis due to high operational costs, while local and adaptive chains like KFC thrived. Harley-Davidson's struggle in India's vast motorcycle market is highlighted by high bike prices and strong local competition, despite the company's efforts to expand internationally.

Takeaways

• 🌐 Target's entry into Canada symbolized the country's integration into the global community and was an ambitious attempt to expand its brand internationally.
• 📉 Target's Canadian launch was fraught with issues, including empty shelves, poor atmosphere, and supply chain problems, leading to a $4.1 billion loss in one year.
• 🏭 Major supply chain issues, poor real estate decisions, and merchandising errors were key factors in Target's failure to resonate with Canadian consumers.
• 🚫 Despite initial excitement and curiosity from Canadians, Target's execution fell short of expectations, with many comparing it unfavorably to the American version.
• 🛑 Target's Canadian venture was abandoned in 2015, with 17,000 employees losing their jobs, marking a significant setback in the company's expansion strategy.
• 🍔 McDonald's struggled in Iceland due to the high operational costs and economic collapse in 2008, leading to the closure of all but one outlet.
• 📈 The economic downturn in Iceland made it unprofitable for McDonald's to maintain its outlets, as the cost of imported goods skyrocketed.
• 🍟 Other fast-food chains like Burger King and Pizza Hut also exited Iceland during the financial crisis, highlighting the broader challenges faced by imported food businesses.
• 🏍 Harley-Davidson faces challenges in the Indian motorcycle market due to high prices and strong competition from more affordable, locally preferred brands like Royal Enfield.
• 🌟 Despite a strong brand presence, Harley-Davidson's high-cost motorcycles are out of reach for the majority of Indian consumers, leading to low sales volumes.
• 🌏 Harley-Davidson is focusing on international expansion and product diversification to counteract declining sales in the US market.

Q & A

What was the initial reaction to Target's entry into the Canadian market?

Initially, there was excitement and anticipation for Target's entry into Canada, with consumers being curious and eager, as evidenced by long lines at pop-up shops.

What were some of the operational issues Target faced in Canada?

Target faced major supply chain issues, poor real estate decisions, and merchandizing errors, which left them unprepared and unable to handle the fallout effectively.

How much did Target's failed Canadian expansion cost them?

Target's failed Canadian expansion cost them $4.1 billion in after-tax losses for just one year.

What was the role of the 2008 recession in Target's Canadian expansion?

The 2008 recession influenced Target's decision to look northward for economic potential, as the US consumer economy was struggling to regain vitality.

Why did McDonald's fail in Iceland?

McDonald's failed in Iceland due to the high operational costs following the 2008 economic collapse, which made it unprofitable to maintain the business without drastically raising prices.

How did the economic crisis impact McDonald's and other fast-food chains in Iceland?

The economic crisis led to the closure of McDonald's and Burger King in Iceland, as their reliance on imported goods made it difficult to maintain profit margins without raising prices.

What is the current state of the motorcycle market in India, and what is Harley Davidson's position in it?

India is the largest motorcycle market in the world, but Harley Davidson has only a small slice of it, with sales declining in recent years due to high prices and competition from more affordable local brands.

What is the median price of a mass-market motorcycle in India, and how does it compare to the cheapest Harley Davidson?

The median price of a mass-market motorcycle in India is significantly lower than the cheapest Harley Davidson, which sells for about ₹578,700 or just over $8,000, roughly eight times higher.

What is the strategy behind Harley Davidson's international expansion?

Harley Davidson's international expansion is part of a strategy to revitalize its business and secure its future by targeting the growing motorcycle markets in Asia and increasing its international business to half of its total by 2027.

How has Target adjusted its strategy following the Canadian experience?

Following the Canadian experience, Target has focused on improving its US operations, investing in store remodeling, digital operations, and brand partnerships, while also enhancing customer experience with initiatives like drive-up returns and Starbucks integration.

What challenges does Harley Davidson face in expanding its presence in Asia?

Harley Davidson faces challenges in Asia such as entrenched local competitors, the need to offer more affordable bikes, and maintaining brand prestige while potentially sacrificing profit margins on smaller bikes.