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Unit 3: International Retailing: Internationalization and Globalization

Kingfisher operates in a number of chains in sectors including DIY (e.g., B&O, Castorama) and Notes
electrical (e.g., Comet, Darty) but is divesting in general merchandise (e.g., Woolworth’s). It has
stores in numerous European countries as well as the far East, Canada and Brazil. The company
has also ventured into e-commerce. The advantage of this strategy is the array of opportunities
it offers; however, it also increases the problems associated with working in unfamiliar markets
and in unfamiliar sectors. A danger is that the company may lose direction. It is a strategy
perhaps more appropriate for experienced global companies.
The Internet is having a strong impact of traditional high street shops and diverting a significant
proportion of sales. The strongest Internet players tend to be retailers who operate online sales
in tandem with a high street brand, as customer loyalty already exists and these operators
already have extant logistical networks. Typically, online sales are highest in the run up and
aftermath to Christmas. Consumers prefer to shop online to avoid the chaos of the high street.

3.6 The Internationalization Process

The internationalization process includes some common Market-entry Strategies that are
discussed below:
1. Acquisition: Taking over a retail company already established in the market.
2. Joint Venture: Establishing a company with a partner, most usually one that is indigenous
to the market or has experience of operating there. 7-Eleven entered Japan utilising this
method, as it needed a partner that understood the complexity of the Japanese distribution
systems.

3. Organic growth: Opening new outlets using existing brand/fascia or creating a new brand.
4. Shareholding: Acquiring shares of a retailer already operating in the chosen market.
5. Franchise: Allowing entrepreneurs to open outlets under a single brand/fascia, which are
operated under certain, controlled conditions? US fast-food giants such as DFC, Burger
King and McDonald’s are key exponents of this approach. In the non-food sector, Benetton
is a good example.

Figure 3.2: Steps in International Retailing

Evaluation of Entry Methods

Conditions within a new market will shape the decision on how to globalise. In markets that are
economically and politically stable, retailers may feel it is safe to develop quickly by utilising
a high cost strategy such as acquisition. Entries through acquisition can have a higher post-entry
failure rate than entries through setting up new ventures. This is typically attributed to difficulties

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