https://eprints.qut.edu.au/8951/1/8951.pdf

Lessons learned from unsuccessful internationalization attempts: Examples of multinational retailers in Chile

Do international entry decisions of retail chains matter in the long run

Growth is one of the most compelling goals of managers today. This paper addresses the following questions about the international growth of new products in Europe: Does the pattern of growth differ across countries? If so, does culture or economics explain the differences? What are the implications of these results for new product strategy? The results show that the pattern of growth differs substantially across European countries. These differences are explained mostly by economic wealth and not by culture. The study addresses the implications of these results for: (a) the choice of a waterfall versus sprinkler strategy for the introduction of a new product; (b) the global versus local marketing of a new product; and (c) managing a firm's expectations about new product growth.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID904138_code117251.pdf?abstractid=904138&mirid=1&type=2

Understanding and Managing International Growth of New Products

Understanding and managing international growth of new products

This paper examines the managerial issues involved in executing technology-based projects that span international borders. The results of a bilateral comparative field study, conducted in Brazil and the United States, show that in spite of considerable social and cultural differences between two international operating environments, successful integration of multinational projects may not require fundamentally different management approaches. This, however, does require strong senior management support and efforts in developing effective organizational linkages and alliances. Managers must need to have focus on cross-boundary relationships and fine-tune their people skills to deal effectively with complex forms of negotiations, delegations, and commitments in systems which are often weak on formal command and control.

Managing technology-based projects in multinational environments

A "virtuous cycle" of self-reinforcing benefits will permit certain companies to redefine--and control--the industry I Even so, retailers still have enough time to build cross-border positions and local-market defenses For years, as leaders in many industries expanded abroad, retailers stayed at home. The exceptions were mostly European companies that had exhausted opportunities to grow in their relatively small domestic markets. As recently as 1996, foreign sales accounted for only 12 percent of the turnover of the world's top five retailers--a percentage far exceeded in industries as diverse as entertainment (34 percent), aerospace (35 percent), banking (48 percent), and petroleum refining (66 percent). Indeed, from 1990 to 1995, when other industries were sharply increasing the proportion of sales they transacted abroad, the mix of retailing stayed more or less unchanged. But the business is now following the lead of other industries by globalizing, chiefly because of an expanding consumer arena, technological advances, deregulation, and the retailers' need to grow. The prime movers in this process, such as Carrefour, Wal-Mart, and Ahold, are helping to create new rules for retailers in general--expansion minded or not. When Wal-Mart, for example, bought two German retail chains within six months, it became the fourth-largest owner of hypermarkets in Germany and restructured the market there. As global forces gather momentum and reshape the competitive environment, successful global players are going to create a "virtuous cycle" of self-reinforcing benefits that will give them the ability to redefine the economics of the retailing industry and, ultimately, to establish strategic control around the world. A quick catch-up Unlike companies in other industries, retailers have not been able to travel light: those seeking to establish new markets abroad must find suitable high-quality sites, develop distribution support systems, and deal with the complexities of local zoning regulations, tariffs, and quotas, as well as understand local tastes and manage local labor forces. Combine these difficulties with the intrinsic complexity of retailing--hundreds of stock-keeping units, rapid price changes, and the constant threat of product obsolescence--with the minimal incremental scale benefits retailers can achieve if they are already big, and it is clear why most US retailers have restricted their growth to North America and most of their European counterparts have stuck to Western Europe. Nonetheless, rising incomes and improvements in infrastructure are enlarging consumer markets around the world and accelerating the convergence of consumer tastes. The Internet is making customers more accessible, while computers and videoconferencing are cutting the cost of doing business far from headquarters. At the same time, deregulation, the dismantling of trade barriers, and the single European currency are--albeit slowly--generating unprecedented levels of mergers-and-acquisitions activity among retailers in Asia, Europe, and North America. While the barriers to globalization have fallen, so have the growth rates of retailers in the United States and Europe. Since retailers are already consolidating in their domestic and regional markets (Exhibit 1), the next step is to look farther afield, as Wal-Mart, Carrefour, and Ahold have already done. Wal-Mart, based entirely in the United States until 1991, now has more than 700 stores in Canada, South America, Europe, and Asia--mostly gained through acquisitions. Carrefour, which has been playing the international game for upward of 30 years, built strong store networks across three continents. Ahold has bought businesses in more than ten countries in the past five years. Not surprisingly, two of these three companies are European retailers that have gained cross-border experience on the Continent and now seek to apply their skills in more distant markets. …

Retailers to the world

Huge markets await, but profit formulas often get distorted * What won't work: a standalone approach, inflexible purchasing, and 100% ownership * Three new expansion strategies Trends in retailing reverberate far beyond the confines of the industry. Many commentators look to retail sector performance as an indicator of general economic well-being. The issues retailers face and what they do about them trickle down into almost every facet of any business that ultimately sells its products to consumers. At packaged goods, pharmaceutical, appliance, electronics, and apparel companies, key activities like category management, logistics, and new product development are all closely tied to - and often designed in conjunction with - the strategies and processes of retailers. One of the most problematic trends in today's retail industry is globalization. Given the substantial productivity advantages enjoyed by the world's best retailers, opportunities to move successful and innovative formats abroad would appear to be boundless. But experience suggests otherwise. The global arena has proven extraordinarily difficult for many retailers over the past two decades. The reality is that certain structural characteristics make it harder for retailing to operate across distinctive national markets in comparison with other industries such as car making, steel, or computers. As a result, few companies have succeeded in globalizing, and many barriers remain. All the same, the opportunity is sufficiently compelling to warrant further attention. Challenges and hurdles The challenge of global retailing begins with the consumer. Retailers' performance in local markets will be highly sensitive to variations in consumer behavior. Entrants in such markets as Thailand and Indonesia will find pronounced differences in consumer tastes, buying habits, and spending patterns from one country to another. Accommodating these differences means tailoring the merchandise offering along dimensions such as color, fabric, and size for apparel; brand and sport for toys and leisure goods; and flavor for candy and snack foods. Yet the very changes that are needed to satisfy consumer preferences may hamper an entrant's efforts to leverage its global sourcing scale and stay competitive on cost with local retailers. Other problems retailers will encounter when operating internationally include shortages of key resources such as land and labor; unfavorable tax and tariff structures; restrictions on trading hours and foreign ownership; and impenetrable established supplier relationships. Such hurdles will be only too familiar to any company that has attempted to compete outside its home market. Market differences like these mean that a retail profit formula can get distorted overseas in all kinds of ways, to the point where it no longer resembles the original domestic formula. One US specialty retailer enjoyed superior sales productivity and gross margins in its new European stores, yet was unable to drop as much profit to the bottom line [ILLUSTRATION FOR EXHIBIT 1 OMITTED]. It found that its productivity and margin gains were not high enough to cover greater operating expenses in areas such as real estate and labor and still deliver comparable profit levels. As a result of these distortions, international value creation is difficult to achieve, and even more difficult to sustain. If we look at the return on capital for the foreign operations of three international retailers [ILLUSTRATION FOR EXHIBIT 2 OMITTED], we find it is below their estimated cost of capital (calculated as a corporate weighted average). Moreover, the foreign returns are fairly volatile, probably reflecting both the risks that come with operating across borders and the various financial tradeoffs that these companies have made over time. Progress to date Though these hurdles have slowed the globalization of the retail sector, many participants have ventured overseas in the past 20 or so years. …

Global Retailing: Tempting Trouble?

How to make renewal successful Successful retailers view renewal as a significant undertaking that differs in several ways from performance improvement or new concept development. To start with, it does not mean executing the existing concept more effectively, but rather repositioning the idea to address shifts in customer needs. It will probably alter the customer base - by, for example, focusing on serving the 15 percent of customers who account for 30 percent of revenue under the existing concept so that they account for 70 percent under the new concept. Renewal is also likely to involve asset changes. A retailer might find some of its stores do not work with the new concept; some might need to be closed while others are remodeled. And line managers might have to be moved from their jobs. In three of the cases we studied, up to a third of store managers and more than half of senior managers were replaced [ILLUSTRATION FOR EXHIBIT 3 OMITTED]. At the same time, renewers do not have the freedom that comes with developing a concept from nothing; they have to start with an existing brand, customer group, asset base, and frontline salesforce and somehow transform them. Yet despite the complexities of renewal, a number of retailers have managed it. One recent sample of successful renewers generated an average return on capital invested of 25 percent [ILLUSTRATION FOR EXHIBIT 4 OMITTED]. Rethinking the concept Renewal begins with examining the existing concept to identify strengths to exploit and shortcomings to address. The good news is that a retailer does not have to start from scratch to get growth from a mature concept. There can be strengths even in dire situations. Kohl's, for example, looked like any other US regional discounter in the mid-1980s. It had built a relatively profitable, low-priced range of clothing and general merchandise. But as Wal-Mart began to expand, Kohl's was threatened. Many other retailers responded to Wal-Mart by moving up market. But Kohl's strengths were tight operating disciplines and a lean cost structure which, while no match for Wal-Mart, gave the company a notable advantage over some department store chains. It was able to use these strengths to reposition itself in the gap between the two, combining a department store feel (parquet floors, recessed lighting, well-known national brands) with a near-discounter price and cost structure. As a result, Kohl's increased sales productivity and earnings during a period when many other regional discounters went bankrupt (Exhibit 5). [TABULAR DATA FOR EXHIBIT 5 OMITTED] Rethinking a concept in this way involves four elements: 1. Understanding the building blocks of renewal. Many retailers believe quantitative analysis and market research get in the way of creativity. Yet most effective renewers start by developing a solid fact base about the potential building blocks of renewal - customers, brand image, competitors, and capabilities (see text panel) - because they know that understanding them will reveal opportunities and identify distinctive strengths to work on. One gasoline retailer studied the shopping patterns of hundreds of consumers. As well as highlighting the occasions that brought customers to the retailer's sites (journey to work in the morning, school run in the afternoon), the analysis revealed other stops made on these trips (to pick up dry cleaning or visit the bank) [ILLUSTRATION FOR EXHIBIT 6 OMITTED]. The retailer was then able to decide how it could use its numerous superior locations to take a greater share of wallet by offering selected convenience goods and services. Scrutinizing competitors can throw light on important factors. One multi-category retailer wanted to know why its main rivals had higher revenues per store. It used market research to determine their market penetration (the share of potential customers in a market who visit a retailer) and the frequency of customers' visits; it also visited competitors to estimate the size of a typical customer's basket of goods. …

Kathleen McLaughlin

Papers

Retailers to the world

Global Retailing: Tempting Trouble?

The Art and Science of Retail Renewal