International retailing

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International retailing

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International retailing

  1. 1. International Retailing Ajith V International Retailing , Term 4 2010
  2. 2. International Retailing  All the activities involved in selling products consumers for their personal consumption.  Hollander (1970) defined multinational retailers as ‘those firms that are in some way responsive to the headquarters (HQ) located outside the country, or colony, in which the retail sales are made’. Ajith V and services to final international International Retailing , Term 4 2010
  3. 3. International Marketing, Term 3 2004
  4. 4. what is that retailers actually internationalise
  5. 5.    Is it management expertise and management systems?. Innovative forms of trading? Or unique retail brands?. Ajith V International Retailing , Term 4 2010
  6. 6. Dimensions of Retail Internationalization International Marketing, Term 3 2004
  7. 7. Financial investments    The acquisition of shares in a retail company based in one country by an investing institution (such as a pension fund) that is based in another market. Cross-border shopping, which is often motivated by a consumer’s desire to acquire goods from an adjacent country that are perhaps scarce or more expensive within the home market. For example ,the movement of day-shoppers from the UK to France in the search of less expensive, good quality wines, illustrates this invisible form of internationalization in retailing. International Marketing, Term 3 2004
  8. 8. Retail Know – How   The managerial, which includes concepts, policies and systems, and the technical, which refers to matters related to location planning, visual merchandising, as well as buying and merchandising. The flow of expertise can be planned or unplanned. International Marketing, Term 3 2004
  9. 9. Transferable retail expertise    Store Formats. Management Ideas. Retail Technology. International Marketing, Term 3 2004
  10. 10. Internationalisation of Sourcing    The most common and widespread form of retail internationalisation Driven by the globalisation of manufacturer brands and/or the desire to source cheaper, but better value products from foreign markets, retailers are increasingly sourcing goods and services from markets other than the home market . Example : Mark and Spencer. International Marketing, Term 3 2004
  11. 11. LOCAL VS GLOBAL SOURCING  LOCAL    suppliers will be familiar with local tastes and preferences supporting local industries can help a retailer to integrate into new market economy GLOBAL      can help to develop an international outlook necessary to remain price competitive enabling technology has made global sourcing more viable for many consumers are becoming more ‘international’ in their product usage can be difficult to determine exactly where/how product is made
  12. 12. Why Global Sourcing    Cost. Market Differentiation. Push and Pull Factor. International Marketing, Term 3 2004
  13. 13. Push vs. pull   Push factors relate to those features of the home market that serve to make domestic buying problematic and less viable. Pull factors are those features of the foreign market that make sourcing from that market more attractive. International Marketing, Term 3 2004
  14. 14. International Marketing, Term 3 2004
  15. 15. Stages     The first stage involves domestic sourcing, combined with the use of wholesalers who supply products of foreign origin to the retailer. The second stage sees the retailer becomes more proactive in their international souring involvement in that they commission agents to source foreign products on their behalf. The third stage typically involves the establishment of a foreign buying office which acts as a link between the buyers based within the home market head office and the local suppliers in the foreign market. The final stage of development involves the creation of a worldwide network of buying offices that supply information on supplier opportunities, manage product quality within their precise region and manage the transportation of products from the supplier to the home market. International Marketing, Term 3 2004
  16. 16. Internationalisation of operations   The internationalisation of operations is the most visible dimensions of retail internationalisation. The internationalisation of operations can be described as ‘the operation, by a single firm, of shops or other form of retail distribution, in more than one country’. Dawson (1994) International Marketing, Term 3 2004
  17. 17. what is that retailers actually internationalise
  18. 18. The motivations for international expansion
  19. 19. Theories    Eclectic Paradigm proposed by Dunning(1981). International inducements(Hollander, 1970). Push and pull of retailer internationalisation. (Alexander, 1990) International Marketing, Term 3 2004
  20. 20. Eclectic Paradigm  Dunning identified three particular advantages which encourage foreign market participation.    Ownership-specific advantages. Internalisation advantages. Location-specific advantages International Marketing, Term 3 2004
  21. 21. Ownership-specific advantages   Ownership-specific advantages provide a firm with competitive advantage within a market because of their possession of certain tangible and intangible assets, such as unique products, company size or trademark protection, which are, at least for a period of time, exclusive or specific to the firm possessing them. The desire to maximise the ownership-specific advantages, then encourages the firm to use them itself rather than to sell or lease them. International Marketing, Term 3 2004
  22. 22. Internationalisation Advantages  The internalisation advantages are ultimately concerned with protecting against or exploiting market failure, and necessitate the extension of the firm’s activities through organic growth and vertical integration, rather than through the externalising of these assets through contracts with independent firms. International Marketing, Term 3 2004
  23. 23. Location-specific advantages  Location specific advantages related with the specific location. ( Cheap labour, import control) International Marketing, Term 3 2004
  24. 24.  Ownership and internationalisation advantages are related to location specific advanatges. International Marketing, Term 3 2004
  25. 25. Extension of theory to Foreign investment   Dunning makes no direct reference to retailers’ foreign investment. Dawson (1994) and Pellegrini (1992) have considered the applicability of the theory to the foreign direct investment of retailers, analysing in particular the three advantage categories within the context of retailing. International Marketing, Term 3 2004
  26. 26.  Dawson (1994) suggested that the ownership advantages of retailers can be readily found in their products, brands and refined sales methods (such as that undertaken by Benetton), but these advantages can be readily obtained through indirect financial agreements in the form of licensing and franchising. International Marketing, Term 3 2004
  27. 27.   Pellegrini (1992) maintained that while ownership-specific advantages are often linked to product differentiation, these advantages do not justify, in themselves, the decision to invest abroad when products can be so easily and profitably exported. Location-specific advantages, such as relatively lower fixed and variable costs, may justify why a product ought to be produced within another country; Pellegrini argued that this does not account for why the retailer should be directly involved in the retailing of that product given that there are many examples of retailers enjoying locational advantages through franchising and licensing, thus avoiding direct investment and other associated costs. International Marketing, Term 3 2004
  28. 28. International inducements     Hollander (1970) provided a comprehensive account of the motivations underlying a retailer’s decision to internationalise. Inadvertent internationalisation, which occurs as the result of political events, such as the annexation of a region after military action. Non-commercial motives, such as those associated with the advancement of social, ethical, personal or political beliefs. Commercial motives derived from the desire to exploit the opportunities available within a stable and economically attractive foreign market. International Marketing, Term 3 2004
  29. 29. Push and pull of retailer internationalisation   Alexander (1997) noted that push and pull factors have emerged as an important method for interpreting retailers’ motives for expanding into foreign markets. Growth, Environmental Factors International Marketing, Term 3 2004
  30. 30. Direction of International Expansion
  31. 31. Direction   Geographical and Cultural Proximity. Evolutionary pattern of international development (JohansonandVahlne, 1977;WeidersheimPaul et al., 1978; Cavusgil, 1982). International Marketing, Term 3 2004
  32. 32.  Evolutionary pattern typically entails an initial entry into markets perceived to be geographically and culturally similar to the domestic market in terms of language, political and trading systems, as well as social mores and traditions. As companies increase in their international trading experience, confidence encourages them to extend into foreign market previously perceived to be impenetrable and remote (Cavusgil, 1980; Welch and Weidersheim-Paul, 1980). International Marketing, Term 3 2004
  33. 33. Psychic distance  Psychic distance is predicated on the belief that a firm’s inexperience in foreign market exchange will encourage them to initially export to, and establish operations within, markets perceived to be psychologically proximate to the home market. International Marketing, Term 3 2004
  34. 34. Treadgold Stages     Reluctance Caution Ambition ‘The first stage begins with the admission of a lack of opportunity within the home market. As a result, foreign market entry is a reluctant requirement for corporate growth. At the second stage, the cautious retailer enters culturally and geographically close foreign markets. Experiential learning encourages the retailer to become more ambitious in their international aspirations, and their market choice is then based on the nature and extent of opportunities within the foreign market, rather than for reasons of cultural and geographical safety.’ International Marketing, Term 3 2004

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