The Marketing Book 5th Edition

Reduced

flexibility:

inability to

‘act local’

Drain domestic

business:

destroy

shareholder

value

Ability to

make

acquisitions

Reinforces

domestic

business:

increases

market value

Improve

performance

Underperform

in new

markets

Strong

domestic

performance

Greater

cash flow

Over-extended

financial and

managerial

resources

Increased

business

complexity/

diversity

Transfer

best practice

Retailing 801

from a very modest initial acquisition.
Examples include Woolworths in the UK and
Laura Ashley in the USA.
2 Acquisition, providing a quick entry route but
at a cost, not least because companies available
for acquisition may well be in financial difficulty.
The approach has been used by many UK
retailers, including Marks & Spencer’s North
American acquisitions, which the company
subsequently disposed of.
3 Franchising, avoiding much of the risk and
demands upon capital; especially appropriate
where a retailing concept can be readily
exported. Notable examples include Italian
manufacturer/franchiser Benetton, with over
6000 outlets in over 80 countries.
4 Joint venture, reducing time, cost and risk of
entry by working with a partner already
familiar with the market. In spite of their
benefits at the outset, many joint
ventures/partnerships have been terminated,
having not met expectations.
5 Concessions (shops in shops), a relatively low
cost/risk approach to exploring new markets,
used for example by Burton in Spain and
elsewhere.

The internationalization of retailing has pro-

duced very diverse styles of operation, ranging

from global to multinational. Global retailers

such as Benetton vary their format very little

across national boundaries, achieving the great-

est economies of scale but showing the least

local responsiveness. Multinationals, on the

other hand, tend to develop or acquire a

diversity of formats internationally, usually

achieving rather lower benefits from integra-

tion. A middle course may be termed ‘transna-

tional’ retailing, whereby the company seeks to

achieve global efficiency while responding to

national needs, opportunities and constraints.

This approach may be seen as more closely

aligned with the trend towards greater local-

ization within domestic markets.

The experiences of many international

retailers illustrate that formats that work well at

home do not always work well in foreign

markets. Sometimes, the increased complexity

over-extends the company’s financial and man-

agerial resources, making it less reactive to local

conditions. Figure 30.11 illustrates how retail

internationalization can result in either a

vicious or a virtuous spiral of events.

Figure 30.11 Vicious or virtuous spirals
Source: Adapted from IGD (1999).