Factors influencing International Growth Retailing

The factors influencing international growth retailing are elaborated below:

Operational Expansion – International growth retailing is the expansion of retailer operations into foreign markets. The store format may be the same or could differ from that in the home country. Similar operations may trade under a different brand name than the one used in the domestic market. This decision largely relies on the method of market penetration. On acquiring overseas retail operations, the new owner may retain the original brand identity if it is a reputed brand.

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For example, in 1999, the retail giant ‘Walmart’ acquired the British grocery chain ASDA and retained ASDA’s original brand name. When a retailer penetrates a new market by the franchise, it may transfer the brand if it is a respected domestic brand. At times, a newly launched international brand is interpreted as trendier than its competitors.

Conceptual Internationalization – Retail concepts emphasize industrial innovation. The concept of self-service first evolved in California in 1912. Later, the concept was used in many overseas markets for the next two decades. Likewise, the format of convenience store that emerged in the United States (US) in the 1920s was followed in Europe in the 1970s. The universalization of the ‘body shops’ popularized the notion of eco-friendly products. The success of such concepts has been deployed by competitors spawning the same retail offerings in organic cosmetics and toiletries.

Management Skills – The conceptual transfer is connected with the universalization of management skills. It is composed of the internationalization of skills/techniques used in business management. Forming mergers/alliances is an important means of transferring management roles. Retail alliances are induced by operational synergies, purchasing economies of scale, more retailer power over the producer, the formation of individual retailer labels, and unified defense against the entry of international competitors.

Foreign retail mergers are the direct result of increasing globalization. Effective management of alliances is based on communication, cooperation, combined productivity measures, and common goals.

Technological Advancement – Retailers who operate in overseas markets use advanced technologies. The IT (Information Technology) application has centralized the management of retail operations and improved the decision-making in personnel, logistics, and finance. Retailers prefer to move into overseas markets due to technological advantage. In turn, technological advantage offers a competitive edge over the indigenous retailers.

Buying Tendencies – The ratio of customer expenditure on retailing is significant. As higher incomes result in greater spending on non-essentials, and only a small percentage goes on necessities. In retailing, the buying function is sourcing. Sourcing has a huge influence in terms of internationalization. Alliances are formed to achieve efficiency and facilitate sourcing. The collective influence of the international retailers provokes the suppliers to reduce prices and improve quality.

Causes of International Growth Retailing
The five causes of international growth retailing are as follows:

Unpremeditated Internationalization – Unpremeditated internationalization is due to unstable political conditions. At times, changes in the demarcation of national borders may occur. It implies a retail company may operate in a different market, although there is no physical motility of the stores.

Non-Commercial Causes – The political, ethical, personal, or social factors have motivated retailers to expand into foreign markets. For example, retailers’ foray into such markets due to social and environmental responsibilities. The Body Shop’s ‘trade not aid’ procuring policy enabled the development of infrastructures to stabilize economies.

Commercial Goals – The retailers enter into the market to achieve a competitive advantage. Before moving on to large-scale learning about innovation, acquiring essential market information may be another commercial goal for international growth retailing.

Government Rules and Regulations – The government restrictions influence the retailer’s choice of markets. Though, it is not a pre-requisite for internationalization. Retailers tend to prefer markets with fewer impositions on their growth. Strict regulations in home countries push retailers into international markets.

Growth Prospects – Retailers seek the best growth prospects. If lucrative opportunities are interpreted in international markets, capitalizing on them becomes imperative.


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