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The Internationalization And Globalization Of Retailing Marketing Essay

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5/12/16 Marketing Reference this

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Internationalization or globalization is almost the same which more shortly – of retailing. Definitional vagueness of this kind presents a substantial barrier to effective analysis. In meticulous, there is a propensity in some quarters to equate the internationalization of retailing with the founding of overseas retail establishments. Sternquist (1997: 263), for example, promoters that the term should just be functional to cases where the ‘retailer intentionally believe internationalization alternative as part of a largely market expansion strategy’. Others put forward a single all-inclusive definition of internationalization that makes it tough to disaggregate the different essential elements. Alexander (1997: 37) writes that, for example, internationalization of retailing is ‘the change place of retail management technology or the founding of international trading relationships, which bring to a retail organization a level of international incorporation which establishes the retailer within the international environment’. However, as many authors including Dawson (1993; 1994), Davies (1995) and McGoldrick (1995) have demonstrated, there are in reality numerous facets to retail internationalization. For Sternquist, deliberation of this extensiveness is an investigative flaw. However, it shall be dispute in this paper that it is a necessity for the effective representation of contemporary processes.

Figure 1: Facets of retail internationalization

Source: adapted from McGoldrick, 1995, Figure 1.1.

Following Dawson (1993) and McGoldrick (1995), we can set the limits of three key facets of retail internationalization (Figure.1) (methods of retail internationalization will be considered in a succeeding section). Firstly, the operation of overseas retail outlets is clearly a key full of life. As we shall see curtly, the enlargement rates and in general scale of such operations are currently mounting dramatically. As Figure 1 associates, the flip side in a foreign country expansion is the potential for amplified competition in the abode market from foreign operators. Secondly, international trading or sourcing is often termed ‘global trading or sourcing’ of products, is another important aspect of international spreading out. While international trading or sourcing is outlying from novel, big retail chains have immensely increased the geological scale of their sourcing systems over the last twenty years (although the real amount varies very much depending on the type of manufactured goods). This mirrors their augmented capitalization and purchasing power, improvements in circulation and logistics systems, and lower obstacles to trade for many manufactured goods. Thirdly, there are substantial sharing of management know-how among diverse home retail systems, in the course of intercontinental searches for innovative thoughts and technologies. Possibly, extensive variety of categories of know-how may be reassigned, counting store layouts, blueprint concepts (e.g. shows, interior outline), management equipments (e.g. output procedures), retail expertise (e.g. Electronic Point Of Sale (EPOS) systems) and consumer overhaul initiatives (e.g. repeated consumer programmes). These three spots still does not cover all diverse portions of retail internationalization. There are three other areas that are necessarily becoming significant – and on which there is comparatively modest investigation – are the international speculation prototypes of monetary bodies that put in retailing, rising altitudes of cross-border shopping and consumption, and the internationalization of support functions by retail TNC’s. An example of this last dynamic was Tesco’s announcement in July 2003 that it intended to shift 350 IT and finance jobs to a new business support centre in Bangalore, India, a city where the retailer already had a buying team stationed (The Guardian, 18 July 2003).

Who is internationalizing?

This is a rather more straight forward question to answer. Traditionally, due to its compassion to home customer markets, retailing is the activity that is carried out locally by the large domestic market. However, Wrigley (2000a) has graphed the appearance in the early 1990s of an Elite group of firms – mainly food retailers and/or general merchandisers – with substantial, and speedily increasing, international sales. As Dicken (2003) explains, a understandable sign of the speedy increase of these retail transnational corporations (TNCs) there was no retailers in the top 100 transnational corporation by 1993,but by 1999 there were four transnational corporation, to be precise Royal Ahold (The Netherlands), Metro (Germany), Carrefour (France) and Wal-Mart (USA). However, the globes largest retailers cannot just be compared to the foremost retail transnational corporation, which can be seen in tables 1 and 2 the world’s largest retailers in 2001, which are ranked by sales and share market capitalization, correspondingly. Table 1 tells us that out of top fifteen retailers ten of them have their headquarters in the United States of America. However, Wal-Mart has the widespread overseas operations, but mostly four of the US retailers obtain their returns exclusively from their local market itself, and two more of the retailers obtain their income from USA and Canada. Although share market capitalization is a further unpredictable calculate by its very nature, the facts in Table 2 again tell the importance of the huge US local market, with seven US retailers featuring.

Table 1: Top 15 retailers in the world, by 2001 sales

Rank

Name of company

Country of origin

Key formats

2001 sales (US$m)

1

Wal-Mart

US

Discount, hypermarket, supermarket, superstore, warehouse

217,799

2

Carrefour

France

Cash & Carry, convenience, discount, hypermarket, supermarket

61,565

3

Ahold

Netherlands

Cash & Carry, convenience, discount, drug, specialty, hypermarket, supermarket

57,976

4

Home Depot

US

DIY, specialty

53,553

5

Kroger

US

Convenience, discount, specialty, supermarket, warehouse

50,098

6

Metro

Germany

Cash & Carry, department, DIY, hypermarket, specialty, superstore

43,357

7

Target

US

Department, discount

39,455

8

Albertson’s

US

Drug, supermarket, warehouse

37,931

9

Kmart

US

Discount, superstore

36,151

10

Sears

US

Department, mail order, specialty

35,843

11

Safeway

US

Supermarket

34,301

12

Costco

US

Warehouse

34,137

13

Tesco

UK

Convenience, department, hypermarket, supermarket, superstore

33,614

14

J C Penney

US

Department, drug, mail order

32,004

15

Aldi Einkauf

Germany

Discount

31,310

Source: Stores/Deloitte Touche Tohmatsu, January 2003

It is more enlightening, however, to have clear picture of the retail transnational corporation overall overseas sales, as exemplify in Table 3. While this data dates from 1999 (the percentage of overseas sales information is harder to come by than that on overall sales), a number of annotations can still be made from this data. Firstly, it gives some glimpse of the level of international retail trade; over $10bn of sales has been derived by the eight retail giants each from the foreign markets in 1999, but since that time the numbers might have increased in most of the cases. Second, it gives us a clear picture and the possibility of international retailing, with many of the foremost retailers having businesses in 20-30 countries and the amount of internationalization equivalent with many manufacturing areas. Third, it discloses that the top retail transnational’s – with the vital exception of the world’s largest retailer by far, Wal-Mart – are European, or more accurately, British, French, German and Belgian. Fourthly, it shows that these top transnational retailers be inclined to be food retailers or general traders, rather than area of expertise suppliers. Since there is rapid growth in the late 1990’s has seen the coming out at the peak of this list of a select group of what Currah and Wrigley (2004) term ‘proto-global’ retail TNC’s decisively dedicated to international spreading out: in particular Wal-Mart, Ahold, Carrefour and a new and important addition to the list in Table 3, Tesco. Soon in the coming years there will be an addition and appearance of four to six new global retailers which is been viewed by the retail managers and analysts (Wrigley and Lowe, 2002).Lastly there is one more final point to keep in wits at this point is that nearly all retailers still highly depend on home revenues. But there are only four retailers listed in Table 3, i.e. IKEA, Delhaize, Ahold and Otto Versand – who are making over 50 percent of their sales transactions from overseas markets. In the above mentioned table the four proto-global transnational corporations, in 2001 had made the percentage of revenues home market were as follows: Tesco 85 percent, Wal-Mart 84, Carrefour 56 and Ahold 29. These figures also reflect the comparatively latest entry of Wal-Mart and Tesco into global markets. In 1990 both the retailers i.e. Wal-mart and Tesco had overseas businesses, in distinction to Carrefour and Ahold who had already started their international spreading out by 1990. What is more important here, however, is the current rate of growth of these overseas sales, a point to which we shall return shortly.

Table 2: Top 10 retailers in the world, by market capitalization, June 2001

Rank

Name of company

Country of origin

Key formats

Market cap. US$bn

1

Wal-Mart

US

Discount, hypermarket, supermarket, superstore, warehouse

230.2

2

Home Depot

US

DIY, specialty

118.4

3

Walgreen

US

Drug

41.8

4

Carrefour

France

Cash & Carry, convenience, discount, hypermarket, supermarket

38.3

5

Target

US

Department, discount

34.2

6

Lowe’s

US

DIY

28.0

7

Gap

US

Specialty

27.7

8

Safeway

US

Supermarket

26.6

9

Ahold

Netherlands

Cash & Carry, convenience, discount, drug, specialty, hypermarket, supermarket

26.3

10

Tesco

UK

Convenience, department, hypermarket, supermarket, superstore

25.0

Source: Wrigley and Lowe, 2002, Table 8.5.

Table 3: Leading transnational retailers, by overseas sales, 1999

Rank

Name of company

Country of origin

Key formats

1999 overseas sales (US$m)

No. of countries of operation

(2002)

1

Ahold

Netherlands

Cash & Carry, convenience, discount, drug, specialty, hypermarket, supermarket

23,854

27

2

Wal-Mart

US

Discount, hypermarket, supermarket, superstore, warehouse

22,731

10

3

Carrefour

France

Cash & Carry, convenience, discount, hypermarket, supermarket

19,678

32

4

Metro

Germany

Cash & Carry, department, DIY, hypermarket, specialty, superstore

17,665

28

5

Delhaize

Belgium

Cash & Carry, convenience, drug, specialty, supermarket, warehouse

14,807

11

6

Intermarche

France

Cash & Carry, convenience, discount, DIY, food service, specialty, supermarket, superstore

13,234

8

7

Tengelmann

Germany

Cash & Carry, discount, DIY, drug, hypermarket, specialty, supermarket, superstore

12,698

16

8

Otto Versand

Germany

Mail order, specialty

10,286

24

9

Ito Yokado

Japan

Convenience, department, discount, food service, hypermarket, specialty, supermarket, superstore

9,011

13

10

Aldi

Germany

Discount

8,485

12

11

IKEA

Sweden

Specialty

8,049

33

12

Kingfisher

UK

Department, drug, DIY, specialty

7,184

17

13

Rewe

Germany

Cash & Carry, discount, DIY, drug, hypermarket, specialty, supermarket, superstore

6,022

11

14

Costco

US

Warehouse

4,964

8

15

Pinault

France

Department, mail order, specialty

4,785

16

Source: Author’s calculations from http://www.siamfuture.com , ‘The World’s Top 100 Retailers’; Stores/Deloitte Touche Tohmatsu, January 2003.

Where and when does internationalization occur?

In this segment, we will tackle two of the key questions of Akehurst and Alexander’s at the same time, as they are without a solution to unravel. Figures 2-5 offer preliminary points for this scrutiny, showing the store distributions of the four leading international retailers recognized above in 2001/2002, as well as the geographical distribution of their income generated at that time. Keeping in mind the dispute made previously regarding the requirement for a wide approach to internationalization, it is not completely acceptable to base our scrutiny here purely on the distribution of overseas stores. It is more difficult to get data on international retailing of trade because it is les researched and more over it self- guarded by the retailer themselves, that’s why it is very complicated to get the data.

Figure 2: The global distribution of Ahold stores,

Source: Annual Report

Figure 3: The global distribution of Carrefour stores

Source: Annual Report

Figure 4: The global distribution of Wal-Mart stores

Source: Annual Report

Figure 5: The global distribution of Tesco stores

Source: Annual Report

In the (figure2) we can have a clear picture about Ahold the international retailer has a store network that encompasses operations in Western and Eastern Europe, North, Central and South America, Southeast Asia and according to their 2009 . Carrefour’s operations similarly span Europe, the Americas, East and Southeast Asia, in addition to a sprinkling of stores in the Middle East and Africa (Figure 3). Wal-Mart has stores in the Americas, Western Europe, East and West Asia (Figure 4), and Tesco (Figure 5) has stores in four markets in both Eastern Europe and East Asia in addition to the UK and Ireland. What these snapshots show, most importantly, is that international retail investment by these leading firms is not just occurring within and between the ‘core’ regions of North America, Western Europe and Japan, but is also encompassing a wide variety of countries in so-called ’emerging’ regions, namely Latin and Central America, East Asia and Eastern Europe. Moving below to other top transnational corporation retailers – including Metro, Auchun, Casino, Costco, Delhaize, Kingfisher, Makro and Metro – are also expanding their operations into Eastern Europe and East Asia in particular. Leading Asian retailers such as Aeon, Dairy Farm and Seiyu are also extending their operations across the Asia-Pacific.

We can be more specific about this geographic pattern of growth, however. Investment is not just pouring into these emerging regions evenly, but is targeted at specific national markets. In Latin America, much of the inward investment has been directed to Argentina, Brazil and Chile, in Eastern Europe to Poland, Hungary, the Czech Republic and to a lesser extent Slovakia, and in East Asia to Malaysia, South Korea, Taiwan, Thailand, and increasingly, China. This emerging geography is reiterated by Table 4, which illustrates the top 20 retail markets in terms of the number of foreign grocery retailers present. Ten of the listed countries are accounted for by Western Europe and the US, illustrating patterns of cross investment between the leading economies, much of which dates to the 1970s and 1980s (see below). The remaining ten are largely made up of the Eastern European and East Asian economies identified above, and Brazil. No less than 13 of the world’s top 30 grocery retailers had a presence in Poland by 2002. More anecdotal evidence suggests that there is overlap and interaction between this geography of retail outlets and the establishment of international sourcing operations. For example, many of the leading retailers now have buying offices in Hong Kong, to tap the Chinese and Southeast Asian markets for a wide range of non-perishable products.

But over what time period have these corporate geographies evolved, and how do they relate to previous phases of expansion? According to Akehurst and Alexander (1996: 208), ‘without understanding the historical processes which have brought about changes in international retailing, there is a considerable danger that conclusions will be time-specific and deeply flawed’. It is certainly true that retail internationalization is not a new phenomenon and its nature and intensity has varied since its initiation in the late 1800’s. Awareness of this historical trajectory is essential if one is to appreciate the magnitude of the step-change in internationalization that has occurred since the mid-1990’s, driven by the small group of elite transnational retailers introduced above.

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