Retail Internationalisation Essay
- Length: 6 pages
- Sources: 15
- Subject: Business
- Type: Essay
- Paper: #16378109
Excerpt from Essay :
Retail internationalisation is much more than the opening of stores abroad. Provide a critical review of this statement.
Retailers will often saturate a region and see the need to expand their customer base to others. This is generally uncomplicated if the new customer base is within the same national region, but it can be very problematic if the retailer is trying to move to a new country. Different issues arise that were not issues within the original country. Even when the move is to a country that speaks the same language as the original, local customs can cause unforeseen problems. As the statement above mentions, there is more to a move than just opening a store in a new country.
Not understanding the customer base is the initial problem. A retailer cannot think that its new clients will shop exactly like their established ones (Bruce, Moore & Birtwistle, 2004). New customers may want the selection that a new retailer can offer, but they will also require products that the company may not have considered (Kostova, 2008). Local retailers have the advantage of a lifetime of personal study in the local culture.
Many companies have been successful in new markets for many years because they have taken the time to examine the market minutely and discover its intricacies. Retail has had a much more difficult time with internationalization because it is easy for a local retailer to mimic the products and successes of a foreign one (Howard, 2004). However, the transfer of knowledge that comes with performing a particular function over a long period of time is something that local businesspeople may not have (Dawson, Larke, & Mukoyama, 2006).
This is most evident in countries which do not have the advantages of the type of retail that an existing foreign company may already have (Burt & Sparks, 2002). A set design and a known brand can be very attractive to local customers who have started to realize an increase in wealth. These consumers may want what another group, which they consider more fashionable, are already able to buy. Affluence of a region can significantly change the way that the consumers buy. As happened in the U.S., consumers that are given more choices because of increased wealth, want increased choice in their buying options.
The company that wishes to invest in a new market would do well to examine how other companies in the region have been successful. By paying attention to unique demographics, challenges to supply, local regulations, and other similar challenges, a company is going to increase its ability to conquer a new market. Following the successful plans of other foreign retailers in the area may be the best way to be equally successful.
2. Provide a critique of the various methods of market entry that are available to the internationalising retailer.
A retailer has to understand that the market for their products may not be as strong as it was at home. They must make sure that they understand what local customers want before they can grow into a new area. This is particularly true of a new national location. Growth can only occur if the retailer has a detailed plan of how they can enter the market (based on what they can offer that is new to the local customers), and how they can grow from an original base.
One of the first opportunities that a new business may have is via foreign direct investment. The reason that this may be a good first step is that a retailer can invest in a local company and utilize a known brand vice trying to foist their products and name on the new national customer. Of course this is just one method. As the company becomes more familiar with the territory and what the customers want they can move their own brand into the nation. Of course, the laws that govern commerce in every country are slightly different, and the new rules must be adhered to. A company may be able to use a different method of foreign direct investment, but gradual inroads have most often been the most successful (Bhandari, 2010).
One company, Wal-Mart has been trying to expand its market base for many years. They realize that their ability to expand further in the United States is limited, so they are looking to appropriate foreign markets (Ailawadi, Zhang, Krishna & Kruger, 2010). In one instance they partnered with a local British retailer for a number of years, so that they could get to know the British consumers better. Eventually, Wal-Mart bought the British retailer, Asda, because its "imitation of aspects of Wal-Mart's operation and format meant that it became an attractive acquisition" (Howard, 2004). This method has served large retailers such as Wal-Mart and The Home Depot well (Ailawadi, Zhang, Krishna & Kruger, 2010).
Other methods of market entry such as licensing or franchising are also possible. McDonald's success in the U.S. market would not have been realized unless they had decided to sell franchises. The same has worked for them overseas. McDonald's has been able to use local business people, who understand the local market, to enhance their presence in foreign markets. Licensing of products to a foreign retailer also works for the same reasons. Local individuals understand what local customers want. By paying a licensing fee the local retailer can use the power of the international company to lend credibility to its brand. Thus, the agreement works for both parties.
3. Provide a critique of the various structures that exist in order to support the retail buying function.
Most retailers require a vast number of products readily available to consumers. All customers will have a choice of who they buy from, and they will choose the retailer who has the product available to them immediately. Also, that customer is much more likely to patronize that store in the future also (Knell, 2010). For this reason, the buying function of a retailer is probably the most important function of the store.
The buyer has to look at the objectives of the store, what merchandise research has shown local customers want, and they must stay within the budget that they are given. The simple objective is to get as many people into the store as possible. Of course this can happen via advertising gimmicks, but the most successful way to gain a loyal customer is to consistently give them the products that they want. The objective can involve low prices, specialty products (such as The Home Depot or Michael's), or the retailer can have services that it provides which make up its core business. The merchandise that the retailer selects has to follow the company's stated objective, but it must always be a proven seller also. All retailers have metrics that they use to determine if a product is selling as it ought to. Where the product is placed in the store and how it is merchandized play a large role in whether it will sell, but sometimes people are simply attracted to a product because of advertising or packaging. The buyer must always be aware of product trends. Finally, the buyer has a budget that they must meet. The retailers shelf space costs a certain amount of dollars every month. The buyer must make sure that they are paying for that shelf space with the products that they have available. If not, they need to shift products.
If a retailer has multiple locations within a geographic boundary they can also use the other stores to satisfy a customer's needs. They can do this by having a product sent to them, or they can send the customer to the other store in order to satisfy the consumer.
A buyer also has to have a good relationship with its suppliers. Many large retailers sell shelf space to vendors. These vendors decide where they want their products and they can put what they want to sell in that space. This takes some of the pressure off of the retailer. However, they need to partner with the vendor to make sure that the right products are available to maintain their reputation with the buying public.
4. Retail design is influenced by context. Considering a variety of sectors, how might such conceptuality be manifest?
There are many different design criteria that must be taken into consideration when trying to sell a particular retailer. Totality, time, value, resource, synthesis, iteration, relationship, competence, and service are all features of the retailer that effect its bottom line.
Totality is how the overall product fits together; it is a marriage of form and function (Bruce, Moore & Birtwistle, 2004). All of the features are considered. When a retailer opens their doors, they may not consider that the employees are as important to the design of the store as the marquee. However, how the employees of a store look influences the buying decisions of the customer. This is the same for such areas as clean bathrooms and…