international retailing.ppt

INTERNATIONAL RETAILING

1. INTERNATIONAL RETAILING

2. InternationalRetailing
•Retail internationalization is the transfer of
retail operations outside the home market. It
involves the international transfer of retail
concepts, management skills, technology and
even the buying function.

3. International Retailers
Retailing is becoming a worldwide business, as more retailers are
seeking development by extending their operations to other
regions. The large retail companies are becoming more
worldwide in the geographical scope of their operations.
Amway, Avon, Ace Hardware, and Indicted (Zara) are the few
examples which have run their business in more than 20
countries. The share prices of the international retailers are
rising because they are developing at a faster rate.

4. Reason for Internationalization of retailing
Hollander proposes five reasons for retail
internalization.
1. Inadvertent internationalization,
2. Non-commercial motives,
3. Commercial objectives,
4. Government regulations,
5. Capitalizing on existing or potential sales
opportunities.

5. Inadvertent internationalization
•Inadvertent internationalization is due to political instability.
•Sometimes, changes in the demarcation of national borders
take place. This may mean a retail company is operating in a
different market although its stores have not physically
moved. Changes in Eastern Europe are the examples of this
kind. The retailers entered in Czechoslovakia. Within a year it
found itself operating in two district markets, the Czech and
Slovak republics.

6. Non-commercial reasons
Non-commercial reasons of political, personal, ethical or social
responsibility have motivated retailers to move into foreign
markets.
For example, retailers foray into markets for reasons of social
and environmental responsibility. Notably, the Body Shop's
"trade not aid” sourcing policy helped develop infrastructures in
order to stabilize economics.

7. Commercial objectives
It include entering the market which gives retailers competitive
edge. Gaining important market knowledge before moving in on
a larger scale learning about innovations may be other
commercial objectives of retail internationalization.

8. Government regulations
Government regulations influence the choice of market by
retailers. It is not a prerequisite to internationalization. Retailers
prefer the markets with fewer restrictions on their growth.
Severe regulations at home push retailers into the international
arena.
Loi Royer in France severely restricted the development of large
out of town stores. As a result, the French hypermarkets turned
to less restrictive markets to continue their expansion.

9. Growth potential:
Retailers seek the best growth potential possible. If they
perceive profitable opportunities in overseas markets, they are
likely to capitalize on them.

10. Market Entry Strategy For
International Retailing
Market
Strategy
Meaning Advantages Disadvantages
1. Acquisition Taking over a retail
company
already established
in the
market.
Fast substantial
market presence.
High costs and
risks.
2. Joint ventureEstablishing a
company with
a partner, most
usually one
which is indigenous
to the
market or has
experience of
operating there.
Each brings own
skills,
market knowledge
and format
experience.
Clash of
company
cultures
possible.

11. Organic
growth
Opening new
outlets using
existing brand or
creating a
new brand.
International
process,
can learn and
adapt.
Slow growth,
delayed returns
on investment.
Share holding Acquiring shares of
a retailer
already operating in
the
chosen market
Reduces risk, can
learn about
company
from the inside and
decide whether to
invest.
Culture clash
between teams
of
management.
Franchise Allowing
entrepreneurs to
open outlets under
a single
brand which are
operated
under certain
controlled
conditions.
Very fast and low
cost
way to roll out
stores.
Limited control,
needs suitable
franchises.

12. Factors involved in International
Retailing
A careful examination of the definition for
international retailing reveals certain concepts
which are key to the process of international
retailing. These include operations, concepts,
management expertise, technology and buying.

13. 1. Operations
•Retailinternationalizationistheexpansionofaretailer’soperationsintoa
foreignmarket.Thestoreformatmayormaynotbesimilartothatinthe
homemarket.Identicaloperationsmaywelltradeunderadifferentbrand
thanthatoperatedinthedomesticmarket.Thisdecisionislargely
dependentuponthemethodofmarketentry.Ontheacquisitionofa
foreignretailoperation,thenewownermayretaintheoriginalbrandifit
isarespectedbrand.
•Forexample,in1999Wal-Mart(theretailgiant)boughtUKgrocerychain
ASDAandretainedtheoriginalASDAbrand.Whenaretailerentersanew
marketbyfranchise,itmaytransferanestablisheddomesticbrand.
Sometimes,anewforeignbrandisperceivedasmorefashionablethanits
competitors.

14. 2. Concepts
•Retail concepts lay emphasis on innovations in the industry.
The self service concept first emerged in California in 1912.
Later, the concept was followed in a number of international
markets in the next two decades. Similarly, the convenience
store format which originated in USA in 1920s was taken up in
Europe in the 1970s. Now, the focus in on globalization. The
retail concept currently by operated by retailers may also
become successful in a foreign market.
•The internationalization of “the body shops” popularized the
idea of environmentally sensitive products. The success of
such concepts have been adopted by competitors spawning of
similar retail offers in natural toiletries and cosmetics.

15. 3. Management expertise
The transfer of concepts is linked with the internationalization of
management expertise. This encompassed the
internationalization of skills and techniques used in the
management of the business. Formation of alliances is an
important means of transferring management functions. Retail
alliances are prompted by operational synergies, buying
economies of scale, increased retailer power over manufacturer,
the development of retailer own labels and joint defense
building against the market entry of foreign competitors.

16. 4. Technology
Retailers who operate internationally require the use of technology advances. Use IT in
central management of retail operations has improved its decision making in areas such
as finance, personnel and logistics. Technologies such as EPOS (Electronic Point of Sale)
are also used at operational levels of retail stores.
Generally, internationalization will employ relatively advanced technology. It is
preferable for retailers to move into a market where they have a technological
advantage. Technological advantage in turn, would confer a competitive advantage over
indigenous retailers.
5. Buying
The proportion of consumer expenditure on retail is considerably important. As the
population becomes more wealthy a greater proportion of income is spent on non-
essentials. Only a small percentage of total spend goes on food and clothing. A higher
share of spending power is directed towards non-essentials such as holidays and leisure
activities. In retail operations the function of buying is indeed sourcing. Sourcing has
had the greatest impact in terms of internationalization.
Alliances are formed to attain efficiency and leverage in sourcing. International retailers
use their collective influence with suppliers to reduce prices and improve quality. For
example, the European alliance EMD has stated exerting the combined purchasing
power of its members as its primary objective.