Would the results have been different if Target had chosen to expand to Spain instead of Canada? Why or why not?

Cognitive Bias & ERM Spring 2022 Workshop #2 Target's Canadian Expansion Rubric The workshops in Cognitive Bias & ERM are designed to evaluate student understanding of the challenges of decision-making under uncertainty in business; and, how behavioral economics helps identify weaknesses in and opportunities to improve the selection of risk options. Behavioral economics has proven useful in identifying examples where people routinely violate expected utility, knowingly and unknowingly. Teams are expected to identify instances of bias or errors in judgment described within behavioral economics (e.g. loss aversion, framing, endowment effects, etc.) and areas where well-executed VB ERM could improve outcomes. Grading will be based on how well the student applies behavioral economic theory and VB ERM principles in drawing appropriate conclusions from past real-world event to lead to bad behavior or decision-making. Case Introduction Your team is a leading global consultancy that combines behavioral science and sectorial expertise to drive successful behavior changes in organizations. Your rm was recently engaged by a growing mid-tier big box retailer based in the United States that is considering expanding to Europe. The company has seen good sales growth in the last 15 years, has a strong positive cash ow, and is eager to capture foreign markets. Given this critical juncture, the company's board of directors believes it would be beneficial to receive an external perspective on potential blind spots as they move forward on the company's international expansion plans. In that respect, your team has been tasked to assess potential behavioral challenges that may occur in strategic planning, business operations, and risk-based decisions on next steps and priorities. In particular, they would like you to use the example of Target's attempted expansion into Canada to provide lessons learned from a behavioral economics perspective that could help them navigate this exciting yet perilous time in the company's evolution. They have provided you with a brief history of that effort to start from. A Brief History of Target Canada The Target Corporation is one of the largest and most successful retailers in the United States. First established as a single store in 1962, target has since grown to become #37 on Fortune 500 list of largest US corporations by revenue, being the only meaningful competitor to Amazon and Walmart for online and instore sales. In 2013, Target had 1778 stores in the US, with 361,000 employees and $73 billion in gross revenue. With abundant assets and an established business model, Target looked to expand into the Canadian market, to serve as a springboard for future global expansion. Planning for the Canadian expansion began in January 2011, with the rst Canadian locations opening in March 2013 The expansion did not go as expected. Plagued by supply chain issues, in-store logistical challenges, unfamiliar customer dynamics, and inconsistent nancial circumstances, sales volumes and revenue were far lower than initially projected. By January 2015, internal estimated suggested that Target Canada would not be protable until 2021 at the earliest. Facing massive losses and unable to meet its payroll, Target decided to close all operations in Canada. By April 2015, all 133 locations had been shut down, almost 18,000 employees had been laid off, and Target's Canadian expansion attempt recorded a loss of $5.4 billion. The company's board of directors has asked you to deliver a report analyzing Target's attempted expansion into Canada from a behavioral economics perspective and provide an executive summary in Powerpoint no longer than 6 minutes summarizing your ndings as well as lessons learned when viewed through that lens. Your report and presentation should address the following: 1. What biases and incentives were present in Target Canada's management? How did they contribute to the expansion's failure? 2. There were known supply chain issues leading up to the scheduled opening of the Target Canada locations. What risks existed in opening the stores on schedule? What risks existed in delaying the opening until the supply chain issues were resolved? 3. Would a VB ERM model have helped in deciding how to proceed with the expansion? If so, what should they have modeled? If not, why not? 4. Would the results have been different if Target had chosen to expand to Spain instead of Canada? Why or why not? To get your team up and running, the following readings have been provided. You are highly encouraged to review other available materials on the rise and fall of Target Canada as well. https ://archive.canadianbusiness. com/the-last-days-oftarget-canada/ htt s://www.reuters.com/article/us-tar etcanada/in-su rise-move-tar et-exits-canada-and- takes-5-4-billion-loss-idUSKBNOKO1HR20150115 https ://digital.hbs.edu/platform-rctom/submission/targets-failed-entry-in-to-canada/