Page 60 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Unit 3: International Retailing: Internationalization and Globalization

Conditions Constraining the Global Development of Retailers Notes
1. Retailers have traditionally been perceived as operating in a localized manner and holding
limited market power, whereas many manufactures have long since had global presence.
2. While manufacturers have been characterized as large companies with sophisticated in
organizational structures, retailers have been perceived as small scale and unsophisticated
in comparison.
3. Manufacturers have established brands, while it is only recently that retailers have created
strong brand images capable of global transfer.
4. There has been a lack of understanding of the consumers in foreign markets.
Each of these structural shifts have allowed, or indeed promoted, the process of retail
globalization. The fact that retailers have grown in size and strength has given them the capability
to operate on global basis. Intrinsically linked to this is the dominance of the multiple
organizations. Their sheet size has given them the necessary financial resources and backing
required to move globally and as they have grown in size so they have developed in terms of
organizational structure. The multiples, therefore, have the management expertise and
sophistication, as well as being more likely to have access to sufficient capital, to operate globally
while smaller, more traditional, firms have not.
The first three structural changes listed below are prerequisites for global retailing on a mass
scale, but the fourth provides the prompt. If retailers are to continue to grow in a concentrated
market then they must look to diversify from their core activities. While some may allow a
strategy of diversifying their activities within the home market – for example, one of the largest
retailers in Germany, Rewe, operates a number of types of food store, from hypermarkets to
convenience stores, as well as DIY stores, Klee garden centers, idea and sconti drugstores, Frick
carpet outlets and Kressner clothing stores-other look to transfer their offer to a new market-for
example, US clothing retailers The Gap’s entry into Canada, Japan, France, Germany and the UK.
The type of decisions made, whether to globalize or not, will be based upon the following
strategic concerns, discussed in further details later in this unit.

The Strength of the ‘push’ Factors

1. Saturation of the home market or strong competition;
2. National economic recession or limited growth in consumer spending;
3. A declining or ageing population which will affect the market size;
4. Strict planning policies on store development which will constrain growth;
5. Operating costs which are considered too high (labor, rents, taxation);
6. Shareholder pressure to maintain profit growth and be seen to be doing something;
7. Inability to find any further competitive advantages in the home market.

The Strength of the ‘Pull’ Factors
Global opportunity due to the underdevelopment of some markets or weak competition within
them:
1. Strong economic growth or rising standards of living;
2. Population growth or rising standards of living;
3. A relaxed regulatory framework of employment and retail site development;

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