A market and network based model for retailers’ foreign entry strategies

Foreign entry in retailing involves a large number of challenges. Many have to do with building network relationships to actors on different societal levels – involving governments and international bodies as well as business partners. Another critical part is to understand the host market well enough to adapt the retail proposition in a sufficient way. This paper especially considers a retailer’s networking and market orientation activities. Networking is discussed on several levels – including international activities and specific business alliances. We also argue that market orientation has to be studied especially for each host market and not only on a corporate level.

Introduction: Retailing has rapidly become more and more internationalised. American and European firms are leading this development. The twenty biggest retail companies the year 2000 included ten American companies, nine European and one Japanese (Deloitte & Touche Tomasu 2002). In Europe, however, there is still a very strong dominance of European retailing companies. Wal-Mart as well as other American retailers investing in Europe has faced substantial difficulties, demonstrating that even for world leading retailers to enter a new foreign market is a complex and difficult challenge. When companies start operations in foreign markets, dissimilarities in the economic, political and legal environment, and the level of technology and culture create obstacles (Buckley and Ghauri 1999). On top of this, retailing is especially problematic and complex. Several authors have stressed this complexity and perhaps this is one reason why there is still no general framework developed especially for managing the complexities of retail internationalisation (Alexander and Myers 2000; Vida 2000). To a large extent, retailing have been studied based on the more general internationalization theories that are, in turn, developed mostly for large manufacturing companies (Alexander and Myers 2000; Dawson 1994; Hollander 2000; Pellegrini,
1994). Developing a comprehensive framework is beyond the scope of this paper, but the purpose is to discuss some critical dimensions in international retailing that need to be included in such a framework. We especially focus on networking and market orientation (MO), and suggest a model that highlights these aspects and their impact on retailer’s foreign entry.

Author: Ulf Elg,Pervez Ghauri,Rudolf R. Sinkovics

Source: Institute of Economic Research, Lund University

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