Analysis of International Business Strategies in the Retail Industry

Bachelor Thesis, 2017

48 Pages, Grade: 1,0


Table of Contents

Table of Contents

List of Diagrams

List of Abbreviations

1. Introduction
1.1 Statement of the Problem and Ambition
1.2 Methodology and Research Concept

2. Terminological Fundamentals
2.1 International Business Strategy
2.2 International Retailer
2.3 Non-Food Retailer
2.4 Food-/Near-Food Retailer

3. International Business and Marketing Strategy
3.1 International Management Orientation
3.2 Integration-Responsiveness Framework
3.2.1 International Strategy
3.2.2 Multinational Strategy
3.2.3 Transnational Strategy
3.2.4 Global Strategy
3.3 Market Entry Modes
3.3.1 Export
3.3.2 Franchising
3.3.3 Joint Venture
3.3.4 Wholly-Owned Subsidiary
3.4 Marketing Concept
3.5 Performance Measurement

4. International Retail Industry
4.1 Characteristics of Retail Internationalization
4.2 International Business Approach
4.2.1 Influencing Factors on Strategic Orientation
4.2.2 Branch Specific Strategy Preferences
4.2.3 Strategic Orientation and Performance Potential
4.3 Market Entry Mode Investigation
4.3.1 Predominant Entry Modes
4.3.2 Market Entry Mode and Firm Performance
4.4 Format Transfer and Success Implications

5. Conclusion
5.1 Key Research Findings
5.2 Implications and Recommendations
5.3 Research Limitations
5.4 Directions for Future Research


Keyword Index

List of Diagrams

Figure 1 - International Business Strategies 9

Figure 3 - Strategic Orientation in Non-Food Retailing 17

Figure 2 - Strategic Orientation in Food-/Near-Food Retailing 17

Figure 4 - Foreign Performance Evaluation of Specific Retailers 20

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

Out of the 250 best global retailers, 66.8 per cent perform activities in foreign markets. On average these retail firms operate in 10.1 countries. At this point, many retail companies generate a considerable share of their revenue outside of the home market. For example the German discount retailer Aldi earns more than 60 per cent of its revenue from foreign operations.[1] Yet, the beginning of the progressive retail internationalization is not dated far behind. Following the internationalization process of industrial companies in the seventies, retail companies began to keep up with this dynamic development not until the nineties.[2] However, this late but fast proceeding progress led to a drastic shift in retail industry. Instead of small independent local shops, retail landscape is now shaped by large international multiple chain corporations. Associated with their growing power in the distribution channel, retailers are no longer just customers of manufacturers. They emerged as one of their strongest competitors.[3] But it also led to high concentrated markets with rising competition in the retail industry itself. In consequence, the importance of international operations in order to achieve sustainable growth and a competitive advantage further increases.[4] Yet, retailing companies with foreign activities are challenged with an increasing complexity and scope of strategic choices.[5] Those diverse strategic decisions are interdependent and therefore determine a retailer’s success in the foreign market. Though, depending on the decision for particular strategies, the performance of retail firm might vary in the scope of its internationalization process.[6]

1.1 Statement of the Problem and Ambition

The focus of the present study is to analyze which specific strategic preferences retailers pursue in the scope of their internationalization process. Furthermore, it is examined which strategies are most suitable to achieve foreign success. This occurs in regard of the food-/ near-food and the non-food retail branch. In the concrete context this research considers the basic strategic orientation of internationally active retail firms. In addition, the relation to the successful implementation of the market entry, as well as the market operation with regard to the marketing concept is investigated.

The conceptualization and theoretical analysis of international business strategy preferences and performances of retailers can occur on the base of diverse assumptions and concepts. For this paper the Integration-Responsiveness model, from the theory of the international management, is consulted. It forms the basic framework and central analysis level of this study, by conducing to the identification of the basic strategic orientation of an international retail company.[7]

As stated before, the degree of retal internationalization steadily increases. That is why the elaboration of this study is of high relevance. Though, due to the young history of retail firms, which pursue foreign operations, the literature mostly refers to manufacturing companies in analyzing international business strategies. This area of research has rarely been considered for the specific field of retailing. Although, Dawson emphasizes the necessity of a differentiated and explicit consideration of international retail companies, due to the unique characteristics this industry implies.[8] Alexander/Doherty contribute to this observation by examining specific retail internationalization theories, and providing a theoretical construct for the process of implementing cross-border activites.[9] Other studies solely focus on individual parts of the internationalization process. For example, Swoboda/Elsner analyze the internal firm side regarding the preferences and the success potential of the basic international strategic orientation of retailers. This study makes a great contribution to retail research in empirically testing the Integration-Responsiveness framework in this industry, for the first time. Yet, the examination does not provide any knowledge on the further implementation of this strategic framework in the scope of the market entry, or the operation within the foreign markets.[10] In contrast, Sternquist investigates the internationalization of retailers by mainly focusing on the market entry mode.[11] Also Elsner emphasizes market-oriented decisions in providing knowledge on the choice of entry mode, the format transfer and the coordination of cross-border retailing acitivites. Nevertheless, a relation of these topics to a firm’s inherent international basic alignment is not created in this study.[12]

In total the present literature, analyzing the internationalization of retail activities, mostly either focuses on internal firm aspects or the external market-oriented view. Merely the study of Schwarz creates a connection between the internal strategic orientation and the implementation of the strategic approach in regard of the retail format within the external market environment. Still, this study does not examine the market entry mode as the linking part between these two elements.[13]

The primary objective of this paper is to expand, the so far mostly on individual decisions related, findings on retail internationalization. Those insights on aspects like the basic international orientation or the market entry, shall be presented in a broad holistic scope. Therefore, this paper is supposed to reveal the causal relations between internal firm related and external market related aspects. In addition, the effect of these interrelations on a retailer’s foreign performance is investigated. This is to be exerted, starting from the basic international business approach, to the entrance of the foreign market and the design of the marketing concept in the host market. Within this observation, this paper provides knowledge on how retail firms preferentially proceed in the scope of their internationalization process. Furthermore, it outlines which strategies are most suitable to achieve foreign success in the food-/near-food and the non-food branch.

The core research question focuses the causal relations between the aspects of individual strategic decisions in a retailer’s internationalization process on the one hand, and the achievement of foreign retail success on the other hand. In order to reflect this research question a theoretical construct is necessary. This serves to conceptualize the connection between international strategic decisions and the foreign retail performance, as well as the clarification of elements which are related to these two determinants. All these aspects are focused by the present paper, including the therewith associated questions.

In reflexion of the objective of this research and the previous remarks, the following questions shall be answered in the scope of this examination:

01 Which specific strategic correlations can be conceptualized between the individual decisions in the scope of a firm’s internationalization process, on the basis of the Integration-Responsiveness framework?

02 Which characteristics specify retail companies and how do they affect concepts and strategic decisions in the frame of expanding retail activities to foreign markets?

03 Which preferences and foreign performance potentials can be recognized for retail companies in regard of the strategic orientation, the market entry mode and the transfer of the retail format and which role does the belonging of a retailer to a specfic branch play in this context?

04 Which recommendations can be derived for the praxis on the base of the study results?

These questions imply a certain approach of processing this analysis, which will be demonstrated in the next section.

1.2 Methodology and Research Concept

For the purpose of replying the defined questions and achieving the study objective, various steps of analysis are necessary. Hereby, the theoretical appraisal of the content in each step of analysis is based on a critical evaluation of present literature.

The secondary data for this paper comprises textbooks on the subject of international management and the specific area of the international retail industry. Besides, articles from journals in the field of retailing are consulted to underligne the reliability of this study. In addition, the Global Powers of Retailing Report 2017, from the auditing company Deloitte, is used to consign the analysis with numerical data. This serves to further verify the credibility of this paper. A comparative research design is devoted to explain tacit knowledge by comparing two specific retail branches.

The first chapter of this paper states the requirement of an integrated analytical approach, to examine the strategic characteristics of a retailer’s internationalization process. In addition, it reveals specific research demand, from which the objective and the research questions are deviated. These questions determine the further approach of the examination. The second chapter gives an overview of terminologies serving for a better understanding of the subsequent content.

The general theoretical framework to examine the international business strategies of retail firms, is captured in the third chapter. It gives an overview of strategic decisions which are of relevance when expanding business activities into foreign markets. It also addresses the first research question, which assumes a correlation of these strategic internationalization decisions on the base of the IR framework. The last section of this chapter defines key figures which are important to evaluate the foreign performance of retail companies, in the later process of this paper. In total, chapter three is supposed to create a connection between the research subject of international business strategies on the one hand, and the achievement of foreign success on the other hand.

The fourth chapter comprises the specific field of retail internationalization. It states the research findings, which are drawn upon the verfication or falsification of prior stated hypothesis. Firstly, specific characteristics of this industry are presented, to align the application of the IR framework from the international management theory to the specific field of retailing. Afterwards, several influences on the international strategic orientation of a retail firm are described. This part is followed by the key research results of this paper. In this main section, a strong reference to the praxis is created through the elaboration of the research findings on the basis of pracitcal examples from international retail firms. To ensure a precise examination result, also a subdivision into the food-/near-food and the non-food retail branch takes place. Section 4.2.2 analyzes the predominant international business approaches applied within these two branches. This is followed by the evaluation of the success potential of the diverse strategic international alignments, in the food-/near-food and the non-food sector. The appraisal takes place on the basis of relevant key figures from specific international retail firms. Section 4.3 conceptualizes the favoritism and the performance potential of individual market entry modes for the two specific retail branches. With reference to the IR framework and the international business approach, an examination of suitability for the different entry modes is outligned. The last section of the fourth chapter provides information on the prefered design of the marketing concept for the host market. This is followed by an elaboration of success implications, on how to support the firm perfomance with an appropriate foreign retail format.

An overview of the research results takes place in the fifth chapter of this paper. In particular, the connection between the interdependencies of the individual international business strategies and the achievement of foreign retail success is again presented. Based on the research findings pragmatic conclusions for the praxis are given. Remarks for future studies, in the area of international retail firms, conclude this paper.

2. Terminological Fundamentals

This study covers international business strategies in the context of international retailers, subdivided into the food-/near-food and the non-food sector. Definitions concerning these central components are provided below.

2.1 International Business Strategy

A strategy is defined as “a plan, method, or series of actions designed to achieve a specific goal or effect.“[14] Appropriately Perlitz states that a strategy in the international business context means to develop a general concept for foreign operations of a company. This concept is based on the competitive advantage of a firm, which either has a necessary or a usefuel function for the cross border activities of a company.[15]

2.2 International Retailer

According to Philip Kotler, retailing comprises all operations which are part of selling physical products or services to the end conusmers, for their personal use.[16] Thus, retail firms serve as the point of initial contact with the customer. Furthermore, retailers function as the sales market for producing companies, by distributing their products to the final consumer.[17] Yet, some manufacturing companies exerted a complete vertical integration of the retail function into their supply chain. Such companies are regarded as retail firms as well.[18] A retailer operating its retail activites in more than one foreign country, is considered as an international retailer.[19] This definition also implies the transfer of processes and strategies into the foreign market.[20]

2.3 Non-Food Retailer

A non-food retail company earns more than half of total sales from non-food or general merchandise goods. The most common retail formats in this branch are department stores, specialty stores, warehouse clubs and discount stores. A department store supplies a wide and deep variety of product categories. Whereas specialty stores focuse on having a deep assortment in one or more interrelated product groups. Warehouse clubs provide a large assortment of merchandise, but only in return of an annual customer membership fee.[21] Discount stores offer general merchandise in large volumes for lower prices.[22]

2.4 Food-/Near-Food Retailer

When the share of revenue from food items is most significant of the total revenue, a retailer is considered a food-/near-food retailer. Operating types mainly used are convenience stores, supermarkets and hypermarkets.[23] A convenience store is a miniature supermarket, which is open around the clock.[24] Supermarkets mainly offer groceries and household goods in high volumes.[25] A hypermarket is a large retail facility, trying to combine a supermarket and a department store.[26] Also of increasing importance are discount grocers, which provide a small assortment at low prices.[27] Food service retailers like restaurants, fast food chains or coffeehouses are not considered in this paper.[28]

3. International Business and Marketing Strategy

To start operations in foreign markets comprises a variety of strategic decisions for a company. Besides the choice of a market entry mode, the degree between standardization and differentiation, in regard of the international marketing strategy, needs to be determined. Also the question of centralization or decentralization of business operations needs to be addressed, when planning international activities.[29]

3.1 International Management Orientation

The appproach of a company to establish foreign activities strongly depends on its management orientation.[30] The EPRG framework, developed by Perlmutter, gives an indication on four different management orientations, in regard of a firm’s international alignment.[31]

Described as an ethnocentric orientation, is the approach of a company to focus on its home market. The needs of the domestic market are priority and activities in foreign markets are seen as subordinate. The headquarter of an ethnocentric company assumes that its way of doing business can be applied to all the international affiliates. That is why authority and decision making are highly centralized in the domestic headquarter.[32] For the most part, these companies only see the similarities in markets and therefore sometimes ignore business opportunities outside the home market.[33]

The polycentric concept is strongly diverse of the ethnocentric orientation. In polycentrism, firms are host market-oriented. The management believes that each market is unique and needs a different and individual business approach.[34] As a consequence, control is highly decentralized and the foreign subsidiaries are independent of the headquarter.[35] In conclusion, a polycentric company can be described as a decentral federation.[36] Business activites in the foreign markets are led by the respective local management, with local decision competence.[37]

An advancement of the polycentrism is the regiocentric orientation. Regiocentric firms see the world as a collocation of different regional markets, such as Europe, Africa or the Asian-Pacific area. These regions are segmented on the base of uniform patterns, in regard of economic, social, political and geographic characteristics.[38] Business acitivites and strategies are coordinated within, but not across, the regional markets.[39] This approach results in an integrated network of regional clusters. Meaning that the main activites and resources are not fully centralized in the headquarter, but still not completely decentralized into the single countries.[40]

The geocentric management orientation sees the whole world as one single market. Those companies aim to develop goals and strategies based on global requirements. Through the global integration of all business activites, country specific characteristics are broadly disintegrated.[41] The main resources are concentrated in the domestic headquarter. Also decisions are highly centralized in the parent company, which is why the foreign subsidiaries can not act autonomous. These rather serve as pipelines for the central headquarter.[42]

Each management orientation has a diverse view of on the world as a market place, which affects the organizational constitution of the company. While centralized structures are typically for ethnocentric firms, polycentric oriented companies pursue a strong decentralization. Regio- and geocentric oriented managements strive for an integrative approach on a regional or global scale.[43] Perlmutter states that different forces determine these management alignments, either promoting or preventing a globally integrated approach.[44]

3.2 Integration-Responsiveness Framework

Based on this assumption, Prahlad/Doz discuss various forces on international markets, which create a tension between the adaption to the local environment and a worldwide integrated behaviour. In general, it can be distinguished between governmental, market, cost, and competitive drivers.[45]

With the removal of trade barriers, the complexity of trading across borders has been reduced, which strengthens global integration.[46] In addition, customer needs became more homogeneous. This enables the sale of more standardized products. As a result, economies of scale and scope can be achieved. Yet, to facilitate a standardized production, technological norms need to be unified. Global competition is another force, which intensifies the requirement for the global coordination of a company. This is of relevance to ensure the competitiveness of a firm.[47] Despite more homogeneous demands, cultural diversity still is dominant, which is a major force for local responsiveness.[48] Different markets imply different competitive situations, which also aggrevates a global holistic approach.[49]

Based on the two dimensions of global integration and local responsiveness, Bartlett/Ghoshal provide a Matrix consisting of four different international business approaches.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1 -International Business Strategies

(Adapted from: Morschett/Schramm-Klein/Zentes(2015),...p. 32; Bartlett/Ghoshal (1989), p.438.)

It is distinguished between the international, multinational, transnational and global strategy.[50] These different strategies can be associated with the four management orientations of Perlmutter.[51]

3.2.1 International Strategy

The international strategy derives from an ethnocentric management orientation. This strategy is mostly applied in the beginning of an internationalization process. The companies only enter a few markets, which are similar to the domestic market.[52] Foreign activities are seen as a support for the parent company, to guarantee the domestic corporate success. The international operations are not systematically integrated into the parent company and are highly dependent on the headquarter’s capabilities. This strategy does not imply an adaption to specific conditions in the host country.[53]

3.2.2 Multinational Strategy

The multinational business approach is based on a polycentric management orientation.[54] It implies a strong consideration of the different conditions in each market.[55] Resulting from the strong local responsiveness, the individual market potential of the different countries can be exploited. Though, cost benefits are low due to the minimal possibility to obtain economies of scale and scope. The multinational strategy requires subsidiaries and mostly even own production facilities in each country. This results in a high resource expenditure.[56]

3.2.3 Transnational Strategy

The management of transnational companies often pursues a regiocentric orientation.[57] The transnational strategy relies on the idea to think global, but to act local. It tries to combine global efficieny with local responsiveness advantages.[58] The aspiration for scale effects along with local competitiveness imposes high requirements on the company. Additionally, high resources are essential to establish local subsidiaries, but also to ensure the efficiency of the entire company through standardization.[59] Because of the conflictory goals, the transnational strategy is very challenging, complex and cost intensive. But still more and more companies try to pursue this stratey, to equally profit from global integration and local responsiveness.[60]

3.2.4 Global Strategy

The global strategic approach originates from a geocentric basic orientation and thus disregards market specific conditions. Therefore, it is only appropriate for certain products and industries with a high potential for global integration and a low necessitiy for local adaption. The global strategy implies high economies of scale and scope and hence the most standardization advantages of all strategic approaches.[61] This global efficiency is of relevance due to the strong price competition in global business.[62] To realize scale effects, high quantities of sales and accordingly high investions in production and sales facilities are necessary.[63]

These four different types of international business approaches not only express a company’s strategic alignment towards foreign markets. They also determine the mode of entry a company chooses to enter international markets.[64]

3.3 Market Entry Modes

Building on the basic business orientation, the market entry mode needs to be adjusted with the decision for either advantages of standardization or differentiation. Furthermore, the desired degree of control and risk aversion is of importance.[65] In the following, four different market entry modes are distinguished, based on these criteria.

3.3.1 Export

To access a market by exporting means that a company’s production facility is either in the home market or in a third market and that the products are transferred to the host market. Therefore, exporting does not involve foreign direct investments. Companies can either choose to export directly or indirectly. According to the chosen type of exporting, control levels vary. Nevertheless, this entry mode includes the lowest degree of risk and resource commitment of all entry modes.[66]

3.3.2 Franchising

Franchising consists of a relationship between the franchisor, which is the company trying to enter a foreign market, and the franchisee. The franchisee is usually a small business owner in the host market. He pays an initial fee and royalties to receive necessary elements for establishing the entrant’s business in the foreign market.[67] This business package can include trademarks, business know-how, the design of the store and various further elements depending on the written agreement. The contract typically includes the business concept and determines the rather low degree of control for the franchisee.[68] Therefore, franchising provides limited risks, but also a fast market entry and a low capital requirement.[69] It combines advantages of international standardization with locally owned businesses. Certainly, the overall concept pursues a high degree of uniformity, which impedes local responsiveness. This is why franchising is mainly appropriate for companies following a global business approach.[70]

3.3.3 Joint Venture

A joint venture is a partnership between the home market company and one or more firms in the host market. Usually this partnership results in the foundation of a new company. For this reason, a joint venture demands high investments in the foreign country. This is associated with high risks resulting in a desire for more control. Still, many companies are prepared to give up a certain extent of control, in order to share the risks with the joint venture partner.[71] As a consequence though, a standardized way of proceeding is difficult to implement. That is why this entry mode mainly suits the multinational, but depending on the partner also the transnational basic strategy.[72] The partnership benefits from combining the company’s own capabilities with the local market know-how and the distribution network of the joint venture partner. Thereby, a high local market proximity is assured.[73]

3.3.4 Wholly-Owned Subsidiary

To join a foreign market with a wholly-owned subsidiary means to establish a legally independent company in the host market. As a consequence, high foreign direct investments are necessary. The market entry takes a long time, since all competences and and resources need to be reconstituted in the foreign country.[74] Also specific local problems can complicate the access, due to missing local knowledge. In return, the high level of control enables a fully implementation of a parent company’s strategies and goals in the host market.[75] This means, a wholly-owned subsidiary supports an internationalization approach, which pursues standardization or adaption.[76] Yet, it in the course of this entry mode, it should be considered that the reaction of the market players to a new competitior in the foreign market might intensify the competition sharply.[77] This situation could be avoided with an acquisiton. It is a market entry mode which also establishes a subsidiary, but by purchasing at least 50.1 per cent of another company in the host market.[78] The knowledge of those local firms is helpful for multinational oriented retailers to achieve a high local responsiveness.[79]

Each tactic to enter a market implicates different challenges, requirements, advantages and disadvantages. Still, they are not mutually exclusive and a company does not has to commit to one entry mode.[80]

3.4 Marketing Concept

Within the decision for a market entry mode, a company already, to a certain extent, positions itself in the area of conflict of standardization and differentiation. These two extremes are of special relevance for each single element of the marketing mix. Hereby, the product policy, the choice of the price level and the communication policy are the focus of the further consideration.[81] It is of high importance that the total marketing program is aligned with the overall strategy of a company.[82] Accordingly, the different international marketing strategies can be derived from the IR framework, or else from the international management orientation.[83]

The international marketing strategy is based on an ethnocentric management approach. It is assumed that the marketing concept is as successful in the host market, as it is in the home market, without any adaptation. This is why, this marketing strategy implicates a standardized approach.[84] Meaning that both, marketing processes and the marketing mix, are used undifferentiated in all countries.[85] The market offer, which was developed for the home market, is extended to the host market.[86] This also includes standarized campaigns and a consistent branding,[87] as well as fixed prices or a uniform formula to calculate the prices.[88]

The multinational marketing strategy derives from a polycentric management orientation. This strategy pursues maximal differentiation, which even may result in own production facilities and own product portfolios in each country.[89] But in any case, every market experiences an individual marketing program.[90] The product range and each good is adjusted to the local market conditions.[91] Marketing campaigns are differentiated and prices are individually established by the local subsidiary.[92]

The transnational marketing strategy combines a certain degree of adaption for various elements with standardized processes across borders.[93] Prices in transnational marketing are coordinated across different countries, to avoid resales of low price products in high price markets. Marketing campaings are standardized in regard of the communication theme, but locally adpated in the execution, by for example changing the language.[94] To sum it up, the headquarter develops broad guidelines for the marketing strategy. These guidelines are then adapted to each market, as much as necessary.[95]

The global marketing strategy aims to implement a unified marketing program. Pricing, distribution, promotion and product strategies are applied unmodified in each market, the company operates in.[96] This is why the market offer is developed for the market as a global unity or a unified global customer segment. This allows for an easy coordination of the international marketing processes.[97]

3.5 Performance Measurement

The prior quoted bundle of strategic decisions determines the performance of a company in its foreign activities.[98] Yet, single internationalization strategies do not generate a competitive advantage by oneself. Foreign success can only be achieved as long as all individual strategies are logically linked to another. In other words, the foreign performance of a company is determined by the successful implementation of the international business strategy, as a basis for all further decisions.[99] Indeed, which specific bundle of strategies and in particular which basic international strategy most likely leads to a firm’s success in its foreign operations, is not clear at this point. This has to be operationalized by measurable criteria.

The performance of a company can be scaled on the base of various indicators. For this paper though, only the success of a company’s international activities is of relevance. As a consequence the foreign retail revenue [100] is consulted as an important figure. Yet, it always is set in relation to the overall retail revenue of a company. This is of relevance in order to evaluate how prosperous a firm’s international activities actually are in comparison to its domestic operations. Companies based in a small home market can certainly more easily achieve a higher share of their foreign profits, than companies operating in a large domestic market. This is why the size of a firm’s domestic market needs to be taken into account. In addition, the international experience is considered, by reference to the number of countries a company is operating in. Also the beginning of a firm’s foreign activities is part of this consideration. This makes clear, if a company was able to achieve fast foreign success. Certainly, also the existence of failed international operations is an indicator of how successful a company is able to implement international activities. Though, it should be mentioned that failure might also lead to a higher success, as long as it involves a learning effect. In total, all these indicators are used to analyze the overall success of a retail company in its foreign operations, in the further course of this paper.

4. International Retail Industry

Self-explaining, retailing is not producing.[101] Theories of business internationalization are mainly related to manufacturing companies. Still they are commonly used to explain the process of transfering retail activities into foreign markets.[102] The rather young history of cross-border retailing, in comparison to the internationalization of production companies, explains this approach.[103] Nevertheless, strategic decisions within the internationalization process can differ, according to the individual characteristics of a specific industry. Therefore, it is necessary to investigate the specialties of the international retail industry, particularly in differentiation to the manufacturing sector.[104]

4.1 Characteristics of Retail Internationalization

Inernational retailers differ from international industrial companies in various aspects, affecting departments like the marketing and financing.[105]

Regardless the advance of a retailer’s internationalization, a retailer’s market is always local. Production companies can produce their products in the domestic market and export them to anywhere in the world. Whereas a retail firm has to be physically present in each market it is planning to operate in. This results in a direct contact with the customers. For this reason, a retailer is confronted with a stronger demand to consider local habits of consumption and cultural characteristics.[106] As a response to local conditions, an adaption of systems and processes is often necessary for retailing companies. In contrast, for large manufactering firms it is common to only implement certain product adaptions for various markets. This is caused by the fact that sales markets can be regarded as more unified across borders, than it is possible for retailers.[107]

Retailing implies different cost structures than in production. The share of costs of goods for resale is accounted by 80 per cent of the overall costs. This is significantly higher, as it is in the producing industry. In additon, retailers are often confronted with higher costs in foreign operations, which requires an exploitation of scale economies. This is aggrevated by the fact that a retailer typically has a large number of suppliers. Hence, the value in retailing is determined by the management of supplier relationships, to create an appropriate assortment. Whereas in manufacturing, value is generated through the physical creation of products.[108]

Varying in its physical form and providing a mix of different service attributes, the outlet is designed to be the retailer’s product. In comparison, a manufacturer’s factory is commonly not seen as its product.[109] Retailing usually implies a large number of outlets, characterized through a large physical dispersion. As a consequence retail firms are challenged by a complex coordination of their international operations. Whereas affiliates of industrial companies are mostly limited to a smaller, but bigger number of production sites.[110]

All these aspects differentiate the retail firm from the manufacturing company, especially in regard of the internationalization process.[111]

4.2 International Business Approach

Following up the characteristics of retail internationalization, particularly remarkable is the strong tension between global integration and local responsiveness. Having direct contact with customers, retail firms are demanded to flexibly react to local markets. But serving as a distribution channel for suppliers, coordination competences are required.[112] Before investigating the resulting prefered international strategic orientations of retailers, further impacts on these preferences have to be clarified.

4.2.1 Influencing Factors on Strategic Orientation

The degree of strategic global integration and local adaptation is influenced by continuous poltical, economic, social and technological changes.[113]


[1] Cf. Eng/Kalish (2017), p. 4,14.

[2] Cf. Schwarz (2009), p. 2.

[3] Cf. Kotler (2008), p. 383; Alexander/Doherty (2009), p. 3 f.

[4] Cf. Assaf et al. (2012), p. 10.

[5] Cf. Kutschker/Schmid (2008), p. 826 f.

[6] Cf. Swoboda (2012), p. 37.

[7] Cf. Schwarz (2009), p. 4.

[8] Cf. Dawson/Mukoyama (2006), p. 17 ff.

[9] Cf. Alexander/Doherty (2009), p. 3, 53.

[10] Cf. Swoboda/Elsner (2011a), p. 297 ff.

[11] Cf. Sternquist (2011), p. 3.

[12] Cf. Elsner (2014), p. 5 f.

[13] Cf. Schwarz (2009), p. 4.

[14] Wordsmyth Dictionary (2017).

[15] Cf. Perlitz/Seger (2003), p. 517.

[16] Cf. Kotler/Armstrong (2008), p. 367.

[17] Cf. Pradhan (2009), p. 4 f.

[18] Cf. Zentes/Morschett/Schramm-Klein (2017), p. 12.

[19] Cf. Baack/Harris/Baack (2013), p. 428.

[20] Cf. Liebmann/Zentes/Swoboda (2008), p. 15 ff.

[21] Cf. Madaan (2009), p. 49-52.

[22] Cf. Kotler/Armstrong (2008), p. 367.

[23] Cf. Madaan (2009), p. 47.

[24] Cf. Lamb/Hair/Mc Daniel (2009), p. 365.

[25] Cf. Kotler/Armstrong (2008), p. 367.

[26] Cf. Madaan (2009), p. 47 ff.

[27] Cf. Kumar/Meenakshi (2011), p. 441.

[28] Cf. Lamb/Hair/McDaniel (2009), p. 368.

[29] Cf. Schmid (2013), p. 13.

[30] Cf. Farrell (2015), p. 8 f.

[31] Cf. Perlmutter (1969), p. 12; Hollensen (2017), p. 20, qtd. in Chakravarthy/Perlmutter (1985).

[32] Cf. Hollensen (2017), p. 20 f.

[33] Cf. Keegan/Green (2017), p. 38.

[34] Cf. Keegan/Green (2017), p. 38 f.

[35] Cf. Hollensen (2017), p. 21.

[36] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 34.

[37] Cf. Camphausen (2007), p. 224 f.

[38] Cf. Paul/Kapoor (2008), p. 9 f.

[39] Cf. Farrell (2015), p. 9.

[40] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 34.

[41] Cf. Meffert/Burmann/Becker (2010), p. 70.

[42] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 33.

[43] Cf. Lee/Carter (2012), p. 529.

[44] Cf. Perlmutter (1969), p. 14.

[45] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 29 ff.

[46] Cf. Hollensen (2017), p. 25.

[47] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 30 f.

[48] Cf. Hollensen (2017), p. 26.

[49] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 32.

[50] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 32.

[51] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 36.

[52] Cf. Meffert/Burmann/Becker (2010), p. 67.

[53] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 33.

[54] Cf. Meffert/Burmann/Becker (2010), p. 68.

[55] Cf. Hollensen (2017), p. 21.

[56] Cf. Meffert/Burmann/Becker (2010), p. 68 f.

[57] Cf. Keegan/Schlegelmilch/Stöttinger (2002), p. 24.

[58] Cf. Keegan/Schlegelmilch/Stöttinger (2002), p. 12.

[59] Cf. Meffert/Burmann/Becker (2010), p. 71.

[60] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 34 f.

[61] Cf. Meffert/Burmann/Becker (2010), p. 69 f.

[62] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 33.

[63] Cf. Meffert/Burmann/Becker (2010), p. 70.

[64] Cf. Zentes/Morschett/Schramm-Klein (2017), p.165.

[65] Cf. Meffert/Burmann/Becker (2010), p. 175.

[66] Cf. Meffert/Burmann/Becker (2010), p. 176, 181.

[67] Cf. Grünig/Morschett (2012), p. 141.

[68] Cf. Hollensen (2017), p. 394 ff.

[69] Cf. Mühlbacher/Leihs/Dahringer (2006), p. 421.

[70] Cf. Zentes/Swoboda/Foscht (2012) p. 241 f.

[71] Cf. Mühlbacher/Leihs/Dahringer (2006), p. 422 f.

[72] Cf. Zentes/Swoboda/Foscht (2012), p. 240 f.

[73] Cf. Meffert/Burmann/Becker (2010), p. 185.

[74] Cf. Meffert/Burmann/Becker (2010), p. 187 ff.

[75] Cf. Camphausen (2007), p. 219 f.

[76] Cf. Zentes/Swoboda/Foscht (2012), 240 f.

[77] Cf. Camphausen (2007), p. 219 f.

[78] Cf. Meffert/Burmann/Becker (2010), p. 187 f.

[79] Cf. Shenkar/Luo (2008), p. 311.

[80] Cf. Meffert/Burmann/Becker (2010), p. 189.

[81] Cf. Lingenfelder/Düerkop (2013), p. 141.

[82] Cf. Schlegelmilch (2016), p. 14 f.

[83] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 481.

[84] Cf. Meffert/Burmann/Becker (2010), p. 67.

[85] Cf. Hollensen (2017), p. 494.

[86] Cf. Grünig/Morschett (2017), p. 187.

[87] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 491 f.

[88] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 487.

[89] Cf. Meffert/Burmann/Becker (2010), p. 68 f.

[90] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 482.

[91] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 485 f.

[92] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 488 ff.

[93] Cf. Grünig/Morschett (2017), p. 177 f.

[94] Cf. Morschett/Schramm-Klein/Zentes (2015), p. 488 ff.

[95] Cf. Hollensen (2011), p. 474.

[96] Cf. Farrell (2015), p. 286.

[97] Cf. Grünig/Morschett (2017), p. 187 f.

[98] Cf. Schmid (2013), p. 14.

[99] Cf. Schmid (2013), p. 14.; Zentes/Swoboda/Foscht (2012), p. 240.

[100] The retail revenue is part of the firm’s consolidated net revenue. It only implies the revenue from retail . ... ... operations including the turnover of services, such as repair and maintenance. (Cf. Eng/Kalish (2017), p. 40).

[101] Cf. Dawson/Mukoyama (2006), p. 17.

[102] Cf. Sternquist (2007), p. 44 f.

[103] Cf. Dawson/Mukoyama (2006), p. 17.

[104] Cf. Elsner (2014), p. 3.

[105] Cf. Elsner (2014), p. 3.

[106] Cf. Sternquist (2007), p. 6 f.

[107] Cf. Schwarz (2009), p. 13.

[108] Cf. Dawson/Mukoyama (2006), p. 20 ff.

[109] Cf. Dawson/Mukoyama (2006), p. 21.

[110] Cf. Schwarz (2009), p. 13.

[111] Cf. Dawson/Mukoyama (2006), p. 24 f.

[112] Cf. Morschett/Schramm-Klein/Zentes (2010), p. 49.

[113] Cf. Bartlett/Ghoshal/Birkinshaw (2004), p. 91.

Excerpt out of 48 pages


Analysis of International Business Strategies in the Retail Industry
University of Applied Sciences Kempten
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
634 KB
analysis, international, business, strategies, retail, industry
Quote paper
Katja Steinhauser (Author), 2017, Analysis of International Business Strategies in the Retail Industry, Munich, GRIN Verlag,


  • No comments yet.
Read the ebook
Title: Analysis of International Business Strategies in the Retail Industry

Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free