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Unit 3: International Retailing: Internationalization and Globalization

Last year, India had 1,600 cafes, up from just 700 in 2007, according to Technopak Advisors, Notes
which expects India’s $170 million cafe market to grow 30 percent a year, adding up to
2,700 more outlets over the next five years.
“We’re going to move as fast as possible in opening as many stores as we can so long as we
are successful and so long as we are embraced by the Indian consumers,” said John Culver,
president of Starbucks China and Asia Pacific.
Unusually, the stores will be cobranded “Starbucks Coffee: A Tata Alliance.”
The companies will also develop a tea for the Indian market under the Tata Tazo brand.

Last January, Starbucks signed an agreement with Tata Coffee, a unit of Tata Global
Beverages, to source and roast coffee beans in India.
The alliance with Tata could help ease one of the main burdens for retailers in India: the
high cost of real estate.
Source: www.huffingtonpost.com

3.5 Retail Globalisation

A question fundamental to the discussion of retail globalization asks why retailers follow such
a strategy. Invariably operating in a new market is a high cost and high risk method of growth.
Indeed, it has been suggested, “Global retailing demands huge investment and gives no guarantee
of return” (quoted in Lamey, 1997).
While there are certainly successful global retailers, there are many examples of failure. Failure
is, undoubtedly, the result of a series of complex and interrelated factors. For example, although
a successful domestic retailer, Boots the Chemist has had a number of global ventures that it has
subsequently pulled out of. It has retreated from Canada, New Zealand, France and the Netherlands
and most recently its Japanese operation. It still has stores in Taiwan and concessions in Thailand.
Just because a retailer successfully globalizes into one market does not mean it can necessarily
repeat this success elsewhere. For example, Tesco entered Ireland in 1978 only to pull out in 1986
after incurring substantial losses. Tesco reentered the Irish market in the late 1990s and also
operates stores in Eastern Europe and Asia.
Growth Strategies

It is assumed that retailers want to grow their company, and then they have three options
(Pelegrini, 1994; Treadgold, 1991):

From operating their core offer in the home market they may choose to follow a strategy
of sectoral expansion, whereby they move into new formats, retail sectors or even outside
the retail industry.

The second growth strategy open to retailers is to remain with the core offer and to
transfer this is that they are experienced in the operation; however, they may need to learn
about and adapt to new market conditions.
The third method of growth is to use a combined strategy, whereby a company may move
away from its core offer and also globalise. Although this may balance the risks somewhat
it may mean the board lose focus. If this strategy is taken to its extreme, the company then
becomes a global portfolio or holding company.

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