Last week I discussed how important the right localization mix is for the success of a multi-national company that moves into a non-domestic country. Deciding on opening business in a new country is most likely part of a long term strategical plan, maybe a goal from a five or ten year company plan.

Tweaking the localization mix to get it right and be successful in the new market is tactical.

Another words, tactical is making short term changes to your long term strategy. A failing strategy can certainly cause a company to fail, and so can a tactical mistake or two. Failure can be pulling out of a market like Best Buy in China (see last week) or it could be a complete closure of a company like former United States #2 electronics chain Circuit City.

Circuit City was the #1 electronics chain in the United States for many years before Best Buy entered the market. Both Circuit City and Best Buy were large “big box” retailers. Best Buy started gaining ground on Circuit City in the 1990’s, yet Circuit City did not make any major changes to its strategy until it was too late At #2, Circuit City made the strategical move to open smaller concept stores and tactical moves including changing management, closing stores, and replacing long term store employees with new hires that need be trained by new management. This last one was a clearly a tactical move to save money in the short term. However, the effect on the long term viability of the company was fatal. Best Buy used a customer centric strategy that focused on customer service. This literally turned a Best Buy core competency into a massive differentiation over Circuit City. The Great Recession put the final nail in Circuit City’s coffin in 2009, but they started digging that hole many years prior.

Recently two multi-national retail behemoths from the United States have been struggling at home after each made a tactical change that didn’t work.

Wal-Mart decided to cut costs by eliminating thousands of SKUs to simplify their merchandise mix. Keeping prices low for its customers is the core strategy that Wal-Mart has been implementing since its inception. The cost cutting is in line with its strategy, however Wal-Mart’s same store sales have been declining since this tactical move began in 2009. The timing also coincided with the Great Recession, however Wal-Mart and low prices should have benefited from an economic downturn.



Target differentiated itself from Wal-Mart by creating a product mix of higher priced goods to go with low cost goods. Sales for Target fell sharply in 2008 and 2009 mirroring the economic downturn. So, Target decided to make the tactical move of adding lower profit food items to its stores to lure people in. Targets sales have improved, but are lower than they forecasted. People may be going to Target for food now, but they may only be purchasing lower revenue and small profit food items. Plus, Target had to make room for food by discontinuing higher revenue and profit items.

Circuit City’s tactical moves killed the company, Target has not changed its tactics yet, and Wal-Mart is making another tactical change by adding SKUs back to its mix and hoping customers will come back as well. Be cognizant of how your tactical moves will affect your strategy.


By Matt Flax – Senior Consultant at DragonGate.Asia



Sources;Data/Information Links:

Circuit City Liquidates
http://www.msnbc.msn.com/id/28691963/ns/business-us_business/t/circuit-city-liquidate-remaining-us-stores/

Wal-Mart US Sales Decline
http://www.standard.net/topics/economy/2011/04/11/wal-mart-fights-declining-us-sales

Target Criticized for Tactical Move
http://finance.yahoo.com/family-home/article/112885/target-retailer-cachet-wsj