5. Top 20 Retailers in the World Information source: GMID, Euromonitor Ranking Retailer Country of origin 2009 Sales ($millions) Type # of countries of operation % of sales in foreign countries 1 Wal-Mart Stores, Inc USA 163,532.00 International 15 13.9% 2 Carrefour Group FRA 52,196.10 International 40 37.70% 3 The Kroger Co USA 45,352.00 Single Country 1 0.00% 4 Metro AG GER 44,163.37 International 35 40.00% 5 The Home Depot, Inc USA 38,434.00 International 5 3.70% 6 Albertson’s, Inc USA 37,478.00 Single Country 1 0.00% 7 ITM Enterprises SA FRA 36,762.45 International 10 36.00% 8 Sears, Roebuck and CO USA 36,728.00 International 3 10.60% 9 Kmart Corporation USA 35,925.00 Single Country 1 0.00% 10 Target Corporation USA 33,702.00 Single Country 1 0.00% 11 JC Penney USA 31,503.50 Single Country 1 0.00% 12 Royal Ahold NET 31,222.15 International 12 76.40% 13 Safeway Inc. USA 30,801.80 International 8 10.80% 14 Rewe-Gruppe GER 30,567.69 International 18 19.70% 15 Tesco plc UK 30,404.40 International 14 10.00% 16 Ito-Yokado Co, Ltd JPN 30,237.57 International 2 29.80% 17 Edeka-Gruppe GER 30,002.57 International 2 2.40% 18 Costco Companies, Inc USA 26,976.45 International 8 18.40% 19 Tengelmann Warenhande GER 26,509.12 International 15 47.90% 20 The Daiei, Inc JPN 26,486.11 Single country 1 0.00%
6. Global Map of Tesco UK R.O. Ireland France Czech Republic Poland Slovakia Hungary Turkey Thailand Malaysia Taiwan Japan S Korea USA China Russia Greece Information Source: www.planetretail.net
7. 5 Oversea Market of Tesco Information Source: www.planetretail.net
8. Oversea Market of Tesco (Cont.) Information Source: www.planetretail.net
9. Oversea Market of Tesco (Cont.) 8 Europe +25% Asia +122% Information Source: www.planetretail.net
28. Video on the interview with the CEO of Wal-Mart, China (Ed Chan) http://www.mckinseyquarterly.com/Retail_Consumer_Goods/Sectors_Regions/Chinas_retail_revolution_An_interview_with_Wal-Marts_Ed_Chan_2459 International Expansion Opportunities
36. Foreign Retail Entries in China (Li and Wang, 2006) Retailer Country City Format Retailer Country City Format Yaohan Japan Shenzhen (1991) Department store Ahold Holland Shanghai (1997) Hypermarket 7-11 Japan Shanghai (1992) Convenience store Locus Thailand Shanghai (1997) Hypermarket Parkson Malaysia Qingdao (1993) Department store Trust Mart Taiwan Guangzhou (1997) Hypermarket Carrefour France Beijing (1995) Hypermarket Ito-Yokada Japan Beijing (1998) Supermarket Daiei Japan Tianjin (1995) Supermarket Ikea Sweden Shanghai (1998) Specialty Jusco Japan Guangzhou (1995) Department Store Rt-Mart Taiwan Shanghai (1998) Hypermarket Metro Germany Shanghai (1996) Warehouse Auchan France Shanghai (1999) Hypermarket Makro Netherland Guangzhou (1996) Warehouse B&Q U. K. Shanghai (1999) Specialty Wal-mart U.S.A Shenzhen (1996) Shopping center/ Sam’s club/ neighborhood store OBI Germany Wuxi (2000) Specialty Lawson Japan Shanghai (1996) Convenience store Otto Germany Shanghai (2000) Specialty Home Depot U.S.A Tianjin (2006) Specialty Best Buy U.S. A Shanghai (2006) Specialty
International retailing is the management of retail operations in markets that are different from each other in their regulation, economic development, social conditions, cultural environment, and retail structures. (Alexander and Doherty, 2009)
ITM enterprise SA is the largest supermarket group in France. Among the top retailers, around half are from the USA., 4 Germany, 2 France, 2 Japan, 1 Netherland. 6 are not international retailers. A large consumer market and relatively abundant land have kept many U. S. Retailers from seeking global expansion.
Tesco is used as an example of international expansion of retailers.
Top 3 in UK, Thailand, Slovakia, Poland, S Korea, Ireland and Hungary
Key Overseas Markets: South Korea, Ireland, Hungary, Thailand and China
In the 1980s, retail internationalization emphasized pushing factors. The foreign market considered were mainly North America, Euro, and Japan. In the 1990s, the foreign market entries were from developed countries to developing countries. Eastern Europe and China became the focus of retail internationalization.
Kmart expanded into Mexico after it lost the battle with Wal-mart in U.S.A in order to avoid the direct competition with Wal-mart. The Japanese department stores which expanded into other Asian countries are those unsuccessful in Japan. ” Don’t put all your eggs in one basket”. Internationalization might be a part of financial portfolio diversification strategies. Many developed countries have strict rules that limit retail expansion. For example, Japan’s Large-Scale Retail Store Law once requested that the opening of a new large store should be determined by small shops in the areas. Many European countries have similar laws to protect local small business. Many Japanese stores expanded into China in the early 1990s when domestic retail sales declined for 44 straight months. European governments have also passed strict zoning laws to preserve green spaces, protect town center, and inhibit the development of large-scale retailing in the suburbs.
Picture: customers from mainland were waiting to shop at LV store in Hong Kong. Because of too many customers, the store had to restrict the number of customers in the store. International expansion increases the sales area and the potential customer bases. For example, China is the most populous nation; household income and purchasing power are increasing; two-digit number economy growth; large emerging middle-class Retailers benefit from economies of scale in purchasing merchandise. The development of infrastructure and information technology makes the transmission of information, goods, and human resources easier. For example, after 2004, all restrictions on foreign retailers were removed in China. Some retail formats such hypermarket and convenient store are mature in developed countries. But they are innovative and have greater potential in developing countries. For example, hypermarket has been booming in China in recent 10 years. Convenient store is a “encouraged format” in Shanghai. Format: warehouse clubs peaked in popularity in the US in the late 1980s, but these formats are no entering asisan and south American market with great pizza.
After the tariffs are eliminated, competition becomes much more intense. All retailers compete with each other world-wise. Viewing multinational markets as one mass market is a dangerous assumption. For example, there are great geographic, cultural, and economic difference within China. Governments have diversified laws, policies, and regulations.
Market scanning: fundamentally a secondary data utilizing process that allows retailer quickly to assess the relative merits of a wide selection of different markets. Market research is more expensive in-depth process that uses secondary and primary data. Cultural difference is more important for multinational retailers than global retailers. Global retailers (e.g., Body Shop and Footlocker) will enter worlds cities, selling essentially the same thing they sell at home. Multinational retailers (e.g., Wal-mart and Carrefour) will initially enter countries that have smallest cultural difference to the home market, but over time they will expand to counties that are culturally distant. For example, before entering mainland China, Carrefour operated first in Taiwan to learn about Chinese culture. Geographic proximity: French retailers entered Spanish first. England Retailer use Ireland as the first market. U.S retailers entered Canada first. For example, Toys R Us and Costoco are important in Canada. Australia is a primary target of UK retailers. But They found that geographic distance is an important factors.
China has the biggest market size, followed by Russia.
All four countries have been experiencing significant market growth. Russia grew the fastest on average. But China and Brazil have stable two-digit growth rate. US and Europe GDP increase 3% or 1% in 2010
Concentration ratio is measured by the market share or a given number of firms in the industry. The most common concentration ratio is CR4. The market concentration ratios for Brazil 16%, Russia 10.4% China and India have the most fragmented retail market.
The market concentration ratios for India is 1.5%, China 3.5% The market is highly concentrated in U.S. Walmart, Kmart, and Target account for 85% of the sales of full-line discount stores. There is only one big category specialists in consumer electronics Best Buy left. Three dominant warehouse clubs’: Sams’ club, Costco, and BJ’s.
AT Kearney GRDI Global Retail Development Index (1) Political risk, (2) modern businises infrastructure/1000 person (3) number of international retailers, (4) time pressure retail squaire feet increase and GDP increase. Top 10 have good investment future; 11-20 have entry priority; 21-30 should avoid. The oil-rich middle east contries is explosive growth, thanks t largely urban population, and relative underrepnetrated oranzied retail market. Latin Americ, has shown resiliency throughout the downtown.
It compares this years’ opportunities with the past. A country’s window of opportunity opens when the government opens their doors to foreign investment, real estate is still inexpensive, modern formats are evolving, consumers are beginning to spend disposable income on branded products, and there is little competition. The window closes when completion is fierce, consumers desire more specialized retail formats, and real estate prices are high and still going up. A closed window can still mean there is solid retail entry potential , but retailer need to be more thoughtful about their entry strategy and operations in order to turn a profit.
Top 100 Chinese retailers took only around 10% of market share. Chinese retailers were all regional retailers. There was no national chain before market reforms. Chinese retailers are relatively small compared to international retailers. For example, China’s largest retailer-Bailian has a annual sales of 871 Yuan in 2007. It is equal to 12 days’ sales of Wal-mart.
Root (1987) defines an entry mode as an institutional arrangement that makes possible the entry of a firm’s products, technology, human skills, management, or other resources into a foreign country.
In 1999, it had entered all economic centers and east coast cities. It is 2-3 years earlier than Wal-mart and Metro. It used “faked” partner to enter some cities in order to grab the best location Forced to make adjustment by central government in 2001.
Each distribution center serves 100 shopping centers. Centralized management and transaction showed low flexibility. It lost Shanghai market because its bad relationship with Shanghai government. They strictly follow government policies and but do not have good relationships with some local governments. Corporate Culture of “Business is busines”. It didn’t charge slotting fees from its suppliers. However, it couldn’t get the lowest price from suppliers at the beginning.
There are many small Chinese suppliers with low IT knowledge. Buying directly from them is costly. Therefore, walmart does not only buy directly but also work with agent. It abandoned its reverse hierarchical diffusion strategy and begin open stores in downtown and urban areas. It decentralized its management a little bit and give more power to store managers on merchandising assortment and pricing, It provide price promotion to Chinese consumers. EDLP doesn’t work well in China China is No 1. Cell phone market, No. 2 gold product and automobile market, and No.3 luxury product market
Each distribution center can support 100 stores.
Although the benefits outweigh the drawbacks, there are some inherent winners and losers among countries engaging in multinational operations. Sometime divestment is caused by market failure, but in some cases it is a strategic move because of market and organizational environment reasons. Some U.K. retailers such as Marks & Spencer, Boots, and Arcadia focus their core retail business on their domestic market. They divested from certain international markets in order to refocus on UK market. Ahold divested from Poland and planned divestment from Slovakia, because Ahold is interested in only the markets in which they can be either the market leader or the hold o f the second largest market share. Divestment may take the form of closure of stores, sales of store chain, termination of business contract/agreement or organizational restructuring in the form of changing from corporate ownership to a franchising or licensing or distribution agreement.
Yaohan entered Shenzhen 1991. It targeted itself as small traditional grocery supermarket. This format is not innovative and difficult to survive in China. Ahold built a distribution center in Shanghai that could support 100 stores. However, it had only 50 stores in China, which couldn’t justify the high cost of the big distribution center. In addition, the undeveloped food distribution system in China and its weak partner (a district retailer in Shanghai) were the other reason that caused its failure.