Corporate Social Responsibility (CSR) is universally recognized and integrated into international business strategies since 2009. The 2014 Canadian government's expectations promote Canadian values, utilizing the highest ethical standards in their operations, ensuring Canadian companies doing business internationally, are recognized as ethical and responsible. Further, it also ensures that businesses that are based abroad but operate in Canada, conduct themselves in a similar manner.
One business that recently entered and promptly left the Canadian marketplace is the American based business Target. This store's Canadian subsidiary, Target Canada, entered the marketplace with the purchase of a Canadian discount chain in 2011, beginning operations in March 2013. In January 2015, Target Canada filed for bankruptcy and closed all stores in April 2015 with a loss of $2.1 billion. While the financial requirements of “setting up” business in Canada was more costly than the Target and Target Canada executives may have anticipated, the Canadians' response to Target's leaving included statements to the effect that, Target Canada did not understand Canadians who pride themselves in not being Americans. This article discusses CSR as practiced in Canada and the rejection of businesses that adhere to a non- Canadian identity while operating in Canada.
Corporate Social Responsibility (CSR) is widely recognized and integrated into international business strategies due to both public pressure and governmental regulations. One country, where CSR is an expected component of corporation is Canada, where the Canadian government's expectations promote Canadian values utilizing the highest ethical standards in their operations, ensuring Canadian companies doing business internationally, are recognized as ethical and responsible (Foreign Affairs, Trade, and Development Canada, 2015) . As business conducted in Canada may not remain solely in Canada, the Canadian government also ensures that businesses that are based abroad but operate in Canada, conduct themselves in a similar manner to those based solely in Canada. It is further expected that, all businesses coming to Canada but based elsewhere in the world, will comply with the expectations and regulations concerning CSR formulated by the governments (Foreign Affairs, Trade, and Development Canada, 2015).
This document reviews the literature regarding the legal and regulations concerning CSR in Canada, as enacted by the different levels of government and how this concept may vary by culture. It also reviews the factors affecting CSR, that may vary between the country of origin and the country into which the business plans to enter. Acknowledging the variance in CSR, the author examines the entry into Canada by an American firm, Target. The implications of Target's level of compliance with the Canadian understanding of CSR partially explains the demise of Target Canada after a very brief period, beginning with the announcement of a $1.85 billion deal, that would see stores opening in the spring of 2013 and ending with the announcement of the full exit in January 2015 (Target Canada timeline, 2015). This article will conclude with the implications of this failure for other businesses, including Canadian businesses, operating in Canada.
Corporate Social Responsibility (CSR) has a lengthy history. Carroll (2008) has traced the history of CSR from the initiation of social responsibility in the mid-to-late 1800's, with the changing mind-set of the Industrial Revolution. By the turn of the century, the changing expectations of society brought CSR into academia in the 1930's and 1940's and into social consciousness in the 1950's and 1960's (Carroll, 2008). The emergence of CSR from the 1950's to today is categorized into time periods (Murphy, 1978), being: 1953 to 1967 is a period of awareness; 1968 to 1973 is classified as a period wherein the public brought forward issues; 1978 to present date is called the responsiveness period when business began to recognize the need for social responsibility and introduce this concept into operations. Throughout these periods, CSR's definition has morphed to include multiple aspects of business including the composition of boards of directors, the integration into the Codes of Ethics or Conduct to guide practices within a company, the inclusion of human and civil rights, the concern with the environment, and more. Authors, such as Carroll, (1991) have developed frameworks visually representing the inclusiveness and complexity of CSR as a concept using a pyramid (Carroll, 1991), intersecting circles (Schwartz & Carroll, 2003), and concentric circles (Committee for Economic Development, 1971). The concept of CSR, however, remains consistent with Carroll's (1991) inclusion of philanthropic, ethical, legal, and economic concerns (Geva, 2008). While this application of CSR is purported to hold true regardless of the variances in ethnography, the understanding and application of CSR is not universal nor is it enforced uniformly across industries and nations.
New researchers and authors publish new definitions such that business ethics, sustainability, environmental concern, governance, fiscal and operational accountability, corporate citizenship, and other factors are now included in the comprehensive definition of CSR. In fact, a leading firm working with social responsibility lists 25 areas in which, they work with corporate social responsibility (Business for Social Responsibility (BSR), 2015). BSR (2015) defines CSR as “a comprehensive set of policies, practices and programs that are integrated into business operations, supply chains, and decision-making processes through the company” (BSR Staff, 2004, p. 2).
According to the definition by BSR (citation), CSR includes the values, roles, and initiatives that go above and beyond those required by law or regulation, including “operating in an economically, socially and environmentally sustainable manner, that is transparent and increasingly satisfying to its stakeholders” (Katsoulakos, Koutsodimou, Matraga, & Williams, 2004, p.1). CSR initiatives can incorporate “investors, customers, employees, business partners, local communities, the environment and society” (Katsoulakos et al., 2004, p.1). Furthermore, this CSR definition mandates business to take responsibility for the present or future wellbeing of the environment and population in which it operates.
CSR today is understood by many to be mandatory for the business to be successful. For example, the European Union has mandated, with Directive 2014/95/EU that companies report “risks and outcomes as regards to environmental matters, social and employee aspects, respect for human rights, anticorruption and bribery issues, and diversity in their board of directors” (European Commission, 2015, p. 1). In June 2015, the government of Canada announced mandatory CSR reporting standards in specific sectors (“Corporate Social Responsibility”, 2015), but not universally. However, the Canadian government recognizes the value of this reporting as a means to improve competitiveness and efficiency, using the inclusiveness of CSR as a strategic tool (Strategic Policy Sector, 2014). Further, the Canadian government promotes CSR as a means for organizations to succeed, specifically through the encouragement of shared values and social license (Foreign Affairs, Trade, and Development Canada, 2015). Industry Canada (2011a) , a federal governmental department, sees CSR as a necessary component within business that enhances innovation, productivity, and competitive advantage, all necessary steps for the survival of industry in Canada. In order to achieve this, the Canadian government foresees CSR as supporting operational efficiency gains, improving relationships among partners and consumers, decreasing the risk to all stakeholders, and enhancing relationships with all stakeholders, thereby improving relationships and increasing brand value (Industry Canada, 2011a). That is, the local communities and economies benefit simply because, it makes good business sense to incorporate CSR philosophies and practices into operations and investments both in Canada and abroad. These benefits are supported by others. In a research article in Forbes, CSR was found to increase the happiness of employees (51 of 59) and improve the quality of the employees due to being able to attract better talent (45 of 59) (Thorpe, 2013). As more Canadian companies adopt CSR as a practice and not simply as a marketing tool, Canadians are finding that, not only does CSR benefit the global community (as in the Royal Bank of Canada's participation in the Blue Water Project) but CSR results in financial gains for the company, via increased employee loyalty, less turnover, and technological innovation, that creates competitive advantages, and attracting better qualified employees as well as benefiting the community, with a stronger focus on environmental concerns and a shared concern for the citizens (Boundless, 2015; Electro-Federation Canada, 2014).
Similar to the definitional understanding of CSR, the adoption, utilization, and adherence to CSR varies among nations due to variance in cultures. The government of Canada defines Corporate Social Responsibility in a number of different ways, including “the voluntary activities undertaken by a company to operate in an economic, social and environmentally sustainable manner” (Foreign Affairs, Trade and Development Canada, 2015, p. 1) and “a company's environmental, social, and economic performance and the impacts of the company on its internal and external stakeholders” (Industry Canada, 2015,Definition of CSR, p. 1). Another wholly owned government agency, the Business Development Bank of Canada (BDC) also examines the economic, social, and environmental aspects of CSR, specifically for organizations and initiatives, that support entrepreneurs in their interactions with employees, stakeholders, and communities to work toward solutions of social problems (BDC, n.d.-a). The BDC (BDC, n.d.-b) further states, donating money is insufficient. Instead, the BDC defines the core of corporate social responsibility as, ensuring every individual in the organization as well as every supplier of products and services is accountable to behave in manners that are in accordance with ethical and responsible behavior.
The Canadian government also includes sustainability in both development and application within organizations, particularly in the economic, social, and environmental arenas, or what is known as the triple bottom line (Labour Program, 2015). This supports the International Labor Office's (2001) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy in the social and economic arenas of CSR. Further, the Canadian government recognizes the value and work of the United Nations Global Compact (United Nations, n.d.), in adherence to the ten principles within the framework of the Canadian implementation of CSR.
These guidelines are not solely under the Canadian federal government's purview. Canada is a nation with ten provinces and three territories. Each provincial and territorial government has different responsibilities, defined by the Constitution (The three levels of government, n.d.). Thus, CSR is subject to each governmental level's purview. For example, the federal government is responsible for external relations, meaning that foreign companies may have responsibilities to this branch of the government. The administration of justice, property and civil rights, natural resources, the environment, and social issues such as social assistance are governed by the provincial and territorial governments. Municipal governments are responsible for economic development. With three layers of government, adding to the complexity of corporations complying with CSR regulations and mandates (see Centre for Excellence in CSR, (n.d.), for specific regulations and acts for each province and territory), corporations entering and fostered in Canada are expected to comply with each governmental level's expectation, regardless of their compliance with regulations outside the domain of Canada. Despite this complexity, the government of Canada has vowed to protect the 'Canada brand' of social responsibility (McCarthy, 2014).
While Canadian government expect Canadian corporations conducting business in accordance with CSR regulations and guidelines, they also expect foreign corporations to abide by the same CSR regulations and guidelines while directing and overseeing the business in Canada. As such, the Canadian government offers mechanisms designed to assist corporations' dialogue with communications in accordance with the Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises (NCP) (Foreign Affairs, Trade and Development Canada, 2015) to ensure the ease of foreign corporations entering Canada, utilizing standardized multinational practices (OECD, 2011). While this document does not specifically detail CSR activities and guidelines, it does specify guidelines for corporate governance, corporate citizenship, social responsiveness, good practices, and good business and employee conduct, particularly in the General Policies (OECD, 2011, p.19-26), all of which can fall under the purview of CSR.
The governmental guidelines for Canadian CSR practices extend beyond the OECD documentation to include voluntary dispute resolution mechanisms, anti-corruption and anti-bribery efforts, transparency, conflict-sensitive business practices, and specific industry guidelines, notably for the extraction and retail garment industries (Foreign Affairs, Trade, and Development Canada, 2015) . Further, Industry Canada (2011b) has developed in collaboration with Canadian Business for Social Responsibility (n.d.), a “check list” and “assessment tool” to facilitate the adoption and implementation of CSR by both Canadian and foreign corporations operating in Canada. These checklists and assessment include a review of the corporation's vision and strategy, the corporations' oversight and accountability mechanism, the risk identification and management, the board of directors' composition and expertise, and mechanisms for external disclosure (Industry Canada, 2011b). Such steps are offered to assist corporations entering the Canadian market to understand not only their own organization, but the governmental guidelines and expectations, leaving no doubt as to the Canadian government's expectations for all business conducted in Canada.
Entering Canada as an American business is made more complex by the differences between the American and Canadian cultures, necessitating cross-cultural awareness. Cross-cultural awareness mandates an awareness of our own values, beliefs, and perceptions in addition to a willingness to learn, without judgment, those held by people in another culture (Gupta & Govindarajan, 2002; Hunter, White, & Godbey, 2006). Without crosscultural awareness, individuals and businesses can misunderstand the verbal and non-verbal communication, habits, patterns, values, and other aspects of reality. Because humans unconsciously believe theirs is correct, whereas behaviors and patterns arising in other cultures are perceived as incorrect. This is particularly true for Americans, who tend to have an ethnocentric mindset (Arnett, 2008; Lee, Hong, & Lee, 2003; Henrich, Heine, and Norenzayan, 2010). Thus, to ensure success in crossing boundaries or encountering someone from another culture, the differences need to be explored and understood (Standifer, Raes, Peus, Passos, Santos, & Weisweiler, 2015).
While both Canada and the United States are home to many nationalities, Canada openly endorses the retention of culture by immigrants while the United States perceives itself as a “melting pot”. That is, the United States assumes and endorses everyone coming into the country adopts the American culture. Being aware of differences in cultural values and norms is mandatory for the achievement of business-related goals in a new country. Therefore, cross-cultural competence originates in cross-cultural awareness, and is another key element to CSR that some businesses crossing borders may neglect. Cross-cultural competence is defined as or the ability to understand the differences in behaviors, language, customs, attitudes, ideation concerning time, public and private roles, and other beliefs in one country as opposed to the home country.
Cross-cultural competence is a well understood concept in many disciplines such as language, sociology, and psychology among others. However, it was not demonstrated in the movement of Target into Canada. Canadians and the government expected Target, an American company to comply with the Canadian standards of CSR, including awareness of cross-cultural similarities and differences. The multiple ethnicities and cultures in Canada will also be found in America. However, America does not recognize the enclaves of people sharing a nationality or ethnicity in one neighborhood (Ethnic Enclaves, n.d.), the difficulties in schools, where international students frequently are not befriended by American peers (Stahl, 2012), and in occupations where people of certain races and/or ethnicities are found in greater numbers than in the general population (Xie & Gough), 2011). This reality did not prepare Target to enter the Canadian marketplace.
Target Corporation is an American owned department store, first opened in Roseville, Minnesota, in 1962 (Target Corporation, 2015a). The newly founded store emerged as a discount retailer, initiated by the Dayton Company, in response to the social movement towards mass marketing, for value-oriented shoppers (Target Corporation, 2015d). The financial highlights report 1.9 percent growth in 2015, with a five-year Compound Annual Growth Rate of 2.7 percent (Target Corporation, 2015b). However, in Net Earnings in Millions, Target indicates a 2014 growth of negative 9.1 percent despite the total revenues in millions, increasing 1.9 percent, and in the Earnings Before Taxes, Target Corporation's growth in 2014 is negative 12.3 percent (Target Corporation, 2015c). This negative growth may indicate, in part, the financial fall-out of Target's failure in Canada.
Target Corporation actively follows the U.S. Department of State definition of Corporate Social Responsibility (U.S. Department of State, n.d.);. The United States has a number of offices through which CSR is encouraged, including the Bureau of Economic and Business Affairs (EB), that targets its efforts toward the adoption and implementation of exemplary corporate policies in corporate citizenship and human rights (United States Department of State, n.d.). Much of the EB's guidelines comply with the framework structured by the Organization for Economic Cooperation and Development Guidelines for Multinational Enterprises and the U.S. National Contact Point for the Guidelines (United States Department of State, n.d.). In proclaiming its CSR activities, Target is also subject to the Bureau of Democracy, Human Rights, and Labor offices of the International Labor Affairs, Internet Freedom, and Business and Human Rights efforts to implement the United Nations Guiding Principles on Business and Human Rights and the EB's guidelines on intellectual property, particularly when expanding across national borders (United States Department of State, n.d.). This is particularly important in the examination of Target's CSR activities because, in 2014, Target dropped health insurance for part time employees working less than 30 hours per week in the United States (Wayne, 2014), in breach of the United Nations Guiding Principles on Business and Human Rights. Both while operating in the United States as well as ventures across borders, Target is responsible to the Bureau of Energy Resources and the Bureau of Oceans and International Environmental and Scientific Affairs for their use of energy and their impact upon all aspects of the environment (United States Department of State, n.d.). The Office of Global Youth Issues oversees Target's employment of youth, including retention, skills training, job creation, and youth focused CSR programs (United States Department of State, n.d.) . This is particularly important because some part time employees are youth looking to earn money to pay for higher education. However, according to Target, the median age of target employees in the United States is 41, with approximately 57 percent having completed college (Target Brands, Inc., 2015a). This indicates that perhaps the majority of workers are not youth despite the retail industry's demographics employing a slightly younger population of workers. According to The Aspen Institute (n.d.) cashiers, stock clerks and order filers, those who were earning under $10 per hour, with women and minorities, over-represented in these positions. This flies in the face of the Target's Minority and Women Business Development program, initiated in 1988 (Target Brands Inc., 2015b).
While not all of Target Corporation's CSR activities were initiated by Target, the Corporation's willingness to become involved and stay involved with many socially responsible activities, indicates their awareness of the individual beyond their shopper in the United States and beyond their corporate offices. Target promotes its areas of commitment as education, sustainability, health and well-being, team members responsible sourcing, safety and preparedness, and volunteerism. To do this, Target Corporation support grants for education, the arts, and public safety, sponsor events in primarily larger centers such that, entrance is free or reduced pricing, partners with agencies such as FishWise, Alliance to Make US Healthiest, Federal Emergency Management Agency, and Sustainable Apparel Coalition (Target Corporation, 2015e).
Early in their history, the founding company of Target Corporation displayed many of the attributes of CSR, including instituting an Earth Day in 1970, in which they distributed pine trees to guests and employees (Target Corporation, 2015d). In 1973, the Holiday Helpers program, event was designed to assist senior and disabled consumers with the provision of personal shopping assistance (Target Corporation, 2015d). By 1983, President Ronald Reagan awarded the founding company (Dayton-Hudson Foundation), the President's Committee on the Arts & Humanities Medal of Honor, for community giving and social welfare (Target Corporation, 2015d). Despite changes in the Board of Directors, Target continued to explore initiatives that today would be considered CSR in their 1989 sponsorship of the International Trans-Antarctica Expedition, which resulted in tremendous environmental and scientific learning tools for classrooms (Target Corporation, 2015d).
By 1996, Target partnered with the National Park Service and the National Park Foundation to restore the Washington Monument in a donation of money and assisting in enlisting a renowned architect and designer (Target Corporation, 2015d). In 1997, Target's Good Neighbor program won a President's Service Award from President William J. Clinton, for its outstanding corporate volunteer efforts and began supporting education, through the Take Charge of Education initiative (Target Corporation, 2015d). At the end of the last century in 1999, Target funded the construction of Target House, a home-away-from-home for families of children going to St. Jude's Children's Research Hospital in Memphis, Tennessee (Target Corporation, 2015d). This house has been constructed and continues to operate in 2015. By 2005, Target funded Law Enforcement Grants to help fund equipment, training, and programs to enrich community safety (Target Corporation, 2015d). In 2007, Target celebrated sixty years of giving five percent of its income to local communities, that giving continues (Target Corporation, 2015d). In 2008, Target's School Library Makeover Program partnered with the Heart of America Foundation to remodel libraries, donate more than one million books, and encouraged thousands of hours of volunteer hours (Target Corporation, 2015d). This program continues, with Target announcing the goal of one billion dollars by the end of 2015 and 1.5 million books donated (Target Corporation, 2015d). By 2013, Target had begun to notice the working conditions of some of its suppliers by joining with other North American retailers in the Alliance for Bangladesh Worker Safety (Target Corporation, 2015d). In the same year, Target introduced the Target sustainable Product Standard to standardize the definition and qualifications of categorization of sustainability for products (Target Corporation, 2015d). Following the data breach, Target continued with CSR activities including the collaboration with the Major League Baseball association, to celebrate the outstanding teachers and students in the United States in 2014 (Target Corporation, 2015d). Also in 2014, Target openly supported marriage equality prior to the legislation of equality (Target Corporation, 2015d). Also in 2014, Target Corporation partnered with “TOMS” to support the TOMS initiative to donate one pair of shoes for every pair of TOMS shoes purchased (Target Corporation, 2015d).
This demonstrates that undoubtedly Target has a significant impact on the communities wherein it operates. But in their attempt to expand, their application of CSR became questionable.
There are a number of considerations that must be reviewed by a business, prior to making the decision to enter a market. For a home market, many of these considerations are known, such as the tax structure, the standard of living, the attitude of the population concerning your products or services, among others. However, these aspects are typically not well known when moving into another country. Crossing international borders is further complicated when purchasing another business in order to expand, even if the business is similar. Another complicating factor includes the national culture's influence on the entry and acceptance of a business from one culture into another culture, thus requiring cross-cultural competence. In business, the PEST or PESTLE analysis of major issues examines Political, Economical, Sociological, Technological, Legal and Environmental aspects, is well known as a foundation.
These elements must be considered, including the ability of channel partners to similarly move across borders and the costs that must be incurred in doing so. The difficulty with channel partners and shipping goods into Canada was not considered by Target in their planning, as evidenced by the bare shelves and inability to forecast, when products might be available for consumers. Another element not considered by Target included the willingness of the local population to accept the smaller selection of products offered at a higher price than available in the United States. While many of the products sold by Target in the United States are purchased by Canadian cross-border shoppers, the availability of many of these products in Canadian stores was uncertain or absent due to problems with Target's supply chain (“Lessons from the greatest supply chain”, 2015). Similarly, the costs and time before balancing the budget were not considered as evidenced by the reports of more than $4 billion spent simply to set up the stores and the $2.5 billion losses in the short tenure in Canada (Ziobro & Trichur, 2015). Profitability was not expected by Target before 2021 (Ziobro & Trichur, 2015), if operations were successful. This leads one to consider the fate of the CSR promises before 2021.
Canadian culture and socio-demographics are different from the United States. Canada, by the nature of the more socialistic legislation and belief structure, appear to care more about their fellow human. Such a caring attitude is evidenced by the variances between Canada and the United States, including the higher satisfaction with life according to the 2015 Better Life Index, wherein Canada has a better employment rate (72 in Canada to 67 in the USA), job security (6.4 in Canada and 5.9 in the USA), long term unemployment rate (0.9 in Canada to 1.91 in the USA), air pollution (15 microgram per cubic meters in Canada to 18 in the USA), water quality (91 in Canada to 85 in the USA), civic engagement (10.5 in Canada to 8.3 in the USA), life expectancy (81.5 in Canada to 78.7 in the USA), employees working long hours (3.94 in Canada to 11.3 in the USA) (OECD, 2015). This index indicates a different working environment in Canada than in the USA, a factor that Target did not consider, when it transferred its operational model across the border unchanged.
The increased participation in civic engagement in Canada certainly applies to the application of CSR. For example, the verbiage from Target about adherence to CSR has not come to fruition. Target's CSR focus on sustainability of reducing emission by 10 percent per square foot by 2015 has only reached 7.1 percent reduction by mid-2014 (Ward, 2014). Similarly, Target has announced a plan to achieve a 20 percent reduction in operating waste by 2015, but as of 2014, Target recorded only a 0.9 percent reduction, far short of its promise in contravention of its CSR initiatives (Ward, 2014). These failures could be predicted by Target by examining the variance in the rankings in the OECD Better Life Index (2015).
When reporting CSR, Target joined the USA and Canadian stores together in their annual reports, offering Canadians a very little evidence of CSR activities in which, Target Canada participated. Canadians are proud of their country and like to be seen as independent of the United States. Without understanding Canadians, Target reported its annual progress on a global level insinuating the stores in Canada were insignificant (Target Corporation, 2015b). This failure to acknowledge the Canadian stores breached Target's CSR initiative in not understanding that cross-cultural competence allows each culture to remain proud, without diminishing or ignoring the culture in light of alliances or dealings with another culture. By not recognizing Canada as a unique culture, Target failed to attract consumers endangering itself by not remembering the triple “A”: acknowledge, appreciate, and accept (Arcuri& Ulrich, 2007) .
Target is American owned and has stayed in the United States. With the largest percentage of the Canadian population (estimated to be 75 percent living within 161 kilometers of the US border by National Geographic (2015), cross border shopping is popular. While cross border shopping is partially dependent on the value of the Canadian dollar, substantially cheaper prices in the United States make a quick trip across the border, especially for those living close to the border or ecommerce for those living farther away, a fact of life particularly during economic struggles (Christmann, 6 Sept. 2015). A marketing research firm, Borderfree (2015), cites more than 23 million Canadians, including multiple visits by one individual as separate occurrences, visit the United States annually due to the proximity, lower prices, and relatively low import duties.
While price is tied to the value of the dollar, price is a consideration. Not all differences in price can be attributed to the value of the dollar. For example, many products are substantially lower priced in the United States due to the Canadian government's interference in the market, with market controls such as the Canadian Dairy Commission that imposes quotas, the dispersal of the population adding transportation costs, higher labor costs resulting from social legislation such as health care, higher energy costs, and less competition. Other factors such as, the difference between the Federal Drug Administration having different regulations for food additives than the Canadian Food Inspection Agency also reflect differences in the country's values, potentially increasing costs and prices.
To facilitate lower costs for Canadian shoppers, Target decided to enter the Canadian retail marketplace, making the announcement in January 2011 that Target Corp was purchasing the HBC leases of Zellers stores, for the opening of its stores in February 2013. This not only gave shoppers advance notice, but it gave notice to the competition. This notice gave the competitor WalMart, two years to build stronger brand awareness and develop plans to defeat the new-comer.
Another challenge came with the leased takeover of the physical locations of many of the Zellers stores, which were in less than ideal locations. These stores were constructed in new neighborhoods, but after years of operations, many of these stores were no longer in optimal shopping centers. Instead, the neighborhoods had grown and developed, often leaving the shopping center away from the normal traffic flow and insufficiently large to be attractive for many (Peterson, 2015). Coupled with the difference in the sales floor configuration meant, people simply were not attracted to the stores, and may have in fact diminished the general public's perception of the store (Wahba, 2015).
Other problems were presented to Target, perhaps without Target's awareness. One of these problems was in regards to the differences between Canadian and American shoppers. The median age of shoppers in Canada is 41.7 years, and 85 percent are women (Borderfree, 2015). This compares with the average age of the Target shopper in the United States at 25 to 44 and primarily women (Peterson, 2014). Canadians are also active in e-commerce with retail sales in Canada approaching $21.6 billion in 2013 (with a population of approximately 35 million, averaging $617 per person), expecting to almost double by 2018, with a third of the online shopping going to the United States (Borderfree, 2015). American e-commerce retail sales was $236.9 billion in 2014, meaning the average spent per person is $743 (Statista, 2015). Furthermore, the personality of Canadian shoppers varied, resulting in Canadians citing Target as haughty, over ambitious, and presumptive of Canadian support without the Canadian buy-in (Investopedia, 2015). This indicated Target's failure to understand the people, the expectations, and the shopping patterns in the country into which they were expanding, regardless of the physical proximity.
Other problems arose with the Target entry into Canada. While it took approximately two years between the announced decision and the actual store opening, Target apparently misjudged the Canadian reaction to their lay-off of the 27,000 workers previously employed by Zellers, the store Target leased in its international entry (Kopun, 2015). These individuals were not immediately rehired, but were terminated with the minimum severance pay (Kopun, 2015). Applicants were then told, wages would be decreased to minimum level, a level below the living wage in most provinces (Living Wage Canada, 2015a). Minimum wage in Canada is determined by the province (see Minimum wage in Canada, 2015). For instance, the living wage in Toronto and the immediate area is $18.52 per hour (Living Wage Canada, 2015b) , whereas the Target stores paid hourly rates of $10 to $14.32 for cashiers, $9.64 to $16.75 for human resource assistants, $9.33 to $15.37 for merchandisers (PayScale, 2015). While some of these are higher than the average wage in the United States, they do not meet the living wage. It was clear that, the wages offered in Canada were below poverty level for this region in Canada, a breach of Target's own ethics. This failure to pay above basic minimum wage was not reflected in the prices, which were substantially higher in Canada than in the United States. Canadians understood that goods sold in Canada will have higher prices due to many factors, including: the value of the dollar, country of origin effects, the lower strategic value manufacturers place on the Canadian market, smaller distribution and supply channels, governmental tariff differences, and higher underlying costs of doing business in Canada (Gordon, 2011). However, Canadians rejected the prices at Target Canada due to the more abundant offerings of the American stores as well as other incentives such as, item discounts and sales. Other concerns included the restocking problems and the bareness of the shelves, counteracting any advantage even if the prices and deals were identical (Kopun, 2015). The government allows individuals to bring into Canada goods to the value of $200 CAD, if an individual is absent for more than 24 hours, and $800 CAD, if an individual is absent for more than 48 hours (“Duty free limits for Canada, 2015). This makes the availability and pricing of goods important in an American store operating in Canada. These differences between Target stores in the two countries encouraged shoppers to travel across the border to shop.
Target Corporation has published a Corporate Responsibility Report, since 2007. This report supplanted their Community Involvement Report, which can be traced back to the first edition in 1969. In 2011, the first CSR report to mention Canada states, Target had headquarters located in the United States and Canada, despite the fact there was no distribution center or store in Canada at that time, and none contemplated until 2013 (Target Corporation, 2012). However, Target Canada was involved in Canada with the purchase of leasehold interests (Target Corporation, 2012).
Target Corporation's 2012 Corporate Responsibility Report indicates the CSR activities, which included building a strong Canadian team, pursuing Leadership in Energy and Environmental Design (LEED) certification, and engaging communities in Canada, and building “an environment, where everyone feels welcome, respected, and valued” (Target Corporation, 2013, p. 3). Further, this report again cited headquarters in Canada and three distribution facilities in Canada to support the stores that were scheduled to open in 2013. In this report, Target stated, they will increase the engagement with Canadian stakeholder groups, as they open stores in Canada (Target Corporation, 2013, p.9). Part of this engagement looked at reusable bags that would be sold in the stores, compliance with the LEED construction of their contemplated stores in Canada, and the development of public safety partnerships and programs to both enable global growth for Target as well as to promote strong communities (Target Corporation, 2013). While promising to donate a five percent of the profit to the causes for children and families in need in communities, wherein the stores are located, no stores were opened for the 2012 CSR report. However, upon the opening of their headquarters in Mississauga Ontario, Target did donate $125,000 USD to the United Way of the Peel Region, with a promise to maintain that relationship as well as authorizing a two day event, whereby more than 500 Target Canada staff volunteered more than 2400 hours (Target Corporation, 2013).
Within the CSR report covering 2013 to 2014 (Target Corporation, 2014, p.67), there are reports of 62 human rights reviews for the 124 stores and headquarters, or 2.01 percent of the total, the second highest to operations in the United States where, there were 1,060 operations subject to human rights reviews over 1,799 stores and 38 distribution centers. The report covers the time period, when majority of the stores in Canada were open. The report brings into question the factual operation of CSR in the Target operations, outside the public domain including donations of time and money. While working hard to tell the community of the application of CSR by Target, it appeared that Target lapsed in its application of CSR initiatives within its stores.
The short tenure of Target in Canada is attributed to many things, including an inadequate supply chain, selection of older locations in out-of-the-way shopping centers, empty shelves, among other reasons, a reason that comes to many Canadians' minds is the failure of Target Canada to understand and respect the Canadian consumer. The lack of sufficiently thorough planning may not be unusual for Target Corporation. While Target operates in the United States, its record is not spotless. The Better Business Bureau dealt with a close 697 complaints in the last twelve months in the United States alone (Better Business Bureau, 2015). There are reports that a Target has recently violated the rights of workers with their anti-union tactics (Both, 2011) including closing stores where, there was potential unionization activity or employee complaints.
Target was met with former Zellers employees at the 10 of June 2013, in a annual general meeting in which, Target was asked about the administration's firing of Canadian workers with the potential of resuming employment, but with lower pay (United Food and Commercial Workers Canada, 2013). Other topics of interest at this meeting included the reluctance of Target Canada to comply with the federal regulations requiring voluntary compliance with rules regarding ethical sourcing of foreign goods (United Food and Commercial Workers Canada, 2013) .
On December 11th 2014, Target was cyber attacked, resulting in a security breach that was not disclosed to the public until December 15th 2014. This security breach exposed up to 70 million customers (Yang & Jayakumar, 2014), which later increased to 110 million customers (Harris & Perlroth, 2014) to identity theft, monetary theft, and potential credit abuse. Target's security breach resulted in not only harm to the individual customer, but financial costs to the credit card companies and banks that have to re-issue the cards, while explaining withdrawal limits to the angry consumers. With that, a four day interval between the discovery by Target and their disclosure, the dissatisfaction of both financial institutions and customers increased.
As Target contemplated moving into Canada, a move that took years, there was ample time to consider the differences between Canada (as a new entry country) and the United States (their home base). For example, in 2014, the average monthly disposable income in Canada is $2,773.50, whereas it is $3,258.85 in the United States (NationMaster, 2015). This means, there is approximately $500 less in the disposable income for Canadians. Part of this is an increase in taxes imposed by the government, while another part of this financial disparity is the higher prices incurred in many product categories due to the importation of these goods from countries, wherein the Canadian dollar has diminished in value. Thus, as Target Canada raised prices, they priced themselves out of the market by offering similar products to other discount retailers, but at higher prices. Considering Target is aware of CSR in its corporate operations, one has to wonder why this lapse in judgment occurred.
While many Canadians cross-border shop at Target in the United States, Target seemed to rarely take the time to get to know Canadians. For example, legislation in Canada encourage individuals to retain their ethnic heritage, while the United States expects people to drop their ethnicity at the border and act/think/behave as other Americans (Sidanius & Petyrocik, 2001). Other differences between Americans and Canadians include the sense of individualization (The Hofstede Centre, n.d.). Canadians recognize the country has limits by and under which it must operate. For example, Canadians employ more self-deprecating humor, not often found in conversation with Americans (Lulic, 2014). The United States was once the powerhouse of the world by military strength, economically, culturally, and by many other aspects. However, with the introduction of the internet and the increasing mobility of the global population, other countries are now closing the economic, knowledge, practical, and other gaps between themselves and the United States. Today, the United States has high obesity rates, low literacy standards, high health care costs, a decreasing labor force, and increasing wealth gap, an eroding middle class, and decreasing exports in materials and intellectual goods (Lulic, 2014). On the other hand, Canadians believe they are less ignorant than Americans, better tempered, perhaps, smarter, believe in peace keeping not policing, but have a serious inferiority complex concerning their country's place in the world (Lulic, 2014). Other differences noted include, the greater opportunity for Americans to accumulate wealth potentially accessing richer resources to build that wealth, while Canada has a belief in helping others to help themselves, lending to a more social environment (Alvaredo, Atkinson, Piketty, & Saez, 2013). Legal differences would also be reflective of the expectations of Canadians. A large difference would be the acceptance of guns in the United States and the restriction of guns in Canada. While these differences may indicate differences, they must be examined in more depth to determine how the culture of Canadians must be accounted for if a company chooses to move to Canada.
Target filed a $1.6 billion write off on its American taxes due to its failures in the expansion into Canada (“Target claims $1.6 billion”, 2015). Further, Target continues to dispute money owed to Canadian landlords and suppliers (“Target claims $1.6 billion”, 2015), further reinforcing a negative perception of American stores in Canada. This is a lasting reminder of Target's unwillingness to accept responsibility for their failure on many fronts, including the responsibility to pay their debts.
As Target moved into Canada, they brought with them their belief in and practice of corporate social responsibility. This speaks well to their understanding of the importance of consumer receptiveness as crucial within internationalization (Alexander, Doherty, Carpenter, & Moore, 2010). While they donate their employee’s time as well as funding for social causes, Target clearly does not apply this philosophy universally. In Canada, those inside the corporation, experienced this as detrimental, and while Canadians are often seen as quiet, Canadians started to demand that Target do what they say they are going to do. Target's failure to live up to their CSR and operational promises was self-defeating in Canada, resulting in their exit.
CSR is crucial in today's business environment. Increasingly, the community demands businesses to be responsible and ethical. CSR is recognized as one of the primary means to accomplish this. But due to the variance in cultures, CSR practices may be different from one location to another. While Canada is a multiethnic country, the understanding of CSR as necessary for any business to survive in the community is well recognized. The Canadian government has not specifically legislated CSR in all industries, but if the industry wants to succeed, the Canadian population wants to see the corporations performing responsibly and ethically.