International Expansion Of Hudsons Bay - Case Study Example

International Expansion Of Hudson’s Bay International expansion for a company issues as a nifty initiative in a bid to seek novel business opportunities. For a company to be successful, it also needs to identify less profitable areas and cut them off while capitalizing on the areas that are promising, such as international expansion. However, it takes hefty understanding of the opportunities presented in the international market for a company to reap from international expansion. It is overly salient for a company to analyze the differences between the stateside market and the foreign market that a company proposes. Appreciating and respecting these differences in the markets can take a company a long way in its bid to take advantage of new business opportunities as well as the general expansion. For instance, a product design that comes forth as appealing to customers in the U.S. may not necessary charm customers in Africa owing to the differences in culture between the two markets. Failure to assess and understand the differences between markers can be disastrous. This was the case for Wal-Mart after it had to close down over 100 stores in Germany following grand losses brought about by the failure to understand the difference between the shopping habits in Germany and the U.S., its location. It is against this backdrop that it emerges as a matter of indispensability to analyze the decision of Hudson's Bay, based in Toronto, Canada, to acquire Galeria Kaufhof, based in Cologne, Germany, as a move to penetrate the Germany and Belgium market (Mahadevan, 2015). In this discussion, the factors that Bay ought to take into consideration in developing a future strategy for the newly acquired division will be delineated as well as a discourse of whether expanding to the Canadian and the U.S. markets is heady and the differences between the Canadian, German, and the Belgian markets. Hudson’s Bay needs to consider a set of factors in developing future strategies for the novel division Kaufhof. To begin with, the cultural differences between Canada and Germany and Belgium are very critical. Bay relished a degree of success back home in Canada as well as the U.S. owing to the fact that these two nations share quite a great deal in terms of culture. However, the culture of Germany and Belgium varies widely with that of Canada and the U.S. Culture influences the buying behaviors of consumers and, therefore, Bay ought to respect the local culture of Germany and Belgium. For instance, Bay should ensure that the department stores developed in the Germany and Belgium markets align to the needs of the customers in the respective markets. It would be inappropriate for Bay to establish high-end department stores in these novel markets, Germany and Belgium, just because it was successful in the U.S., the first international market that Bay expanded to. The cultural differences should not be underestimated because the essence of international expansion is to serve the local market of a different country. As such, it would be much beneficial for Bay to invest colossal amounts of money to understand and, for that reason, be able to tailor the department stores into the needs of the local customers. Pretermitting cultural differences can be catastrophic and Bay may not be successful in its bid to expand internationally as it was the case for Wal-Mart. Drawing from the criticality of cultural differences, Bay should also consider the mode of penetrating the market. In expanding into international markets, companies have the option of either entering alone or through joint venture with a local partner. The latter is less risky as compared to the former since local partners are perceptibly conversant with the target market, in terms of the culture and the needs of the market. As such, penetrating through a joint venture is the best alternative in expanding internationally. However, in light of Bay’s expansion into the Germany and Belgium markets, it acquired an already established firm, a move that suggests entering the market alone. Even so, this does not imply that Bay will fail in its mission to expand into the target market. Absorbing the entire management as well as the workforce of the firm acquired in the foreign market can serve as a counter-mechanism against the risk of entering alone in a foreign market. For instance, the executives of Bay have meticulously indicated that Kaufhof will not be revamped into different brands; rather, the German chain will uphold its brand name. Besides, the head office will remain at Cologne. More importantly, the current team of Kaufhof will be retained and no employee will be laid off following the acquisition. The essence of this initiative, which is a critical part of the acquisition deal, is to tap the local knowledge among the Kaufhof’s team to conquer the German and Belgian market (Austen and Bray, 2015). Intrinsically, the mode of entry is a very salient issue to consider in formulating Kaufhof’s strategies not only during the onset period of the expansion but also in the future. Additionally, Bay ought to regard the competition issues in the German and Belgium markets in making future strategies for the new Kaufhof division. The international expansion of a company can be primed by a gap in the target market. However, when the target market is rife with competition from well-established companies, a decision to expand to such markets is necessary after regarding the competition aspect. In the case of Bay, the task of going about the competition issue is even difficult than it can be anticipated. First, Bay faces stiff competition from Karstadt, which also had an interest in Kaufhof, and since Bay won the bid, Karstadt will ensure that it put in place measures that will enable it outstrip Bay, which is a foreign entrant into the Germany market (Cole, 2015). Secondly, the Germany and Belgian department-store business has been struggling to compete against the malls and online shopping. Bay will not only compete with players in the department-store industry but also malls and the fact that customers are dislodging their businesses into online shopping platform to save on rent costs issues a challenge to Bay. The trend of Kaufhof to close at least one store every year over the recent years manifests this behavior. It has reduced its department stores in Belgium to 16. Even though Kaufhof has been making profits, the decline of the department-store business over the past three decades has had a significant effect on its performance (Marotte, 2015). Given this, Bay should consider the competition in Germany and Belgium in the course of making future strategies on the new acquisition. Alternatively, Bay should consider expanding in to the Canadian market, where it is based, as well as the U.S. market. The departmental stores of Bay have been successful in the Canadian and the U.S. markets. For instance, Saks Fifth Avenue chain has intensified the presence of Bay in U.S. However, it is still possible for Bay to expand further in these markets by integrating Topshop and Topman stores in their large stores. Even so, the Canadian expansion should not match the U.S. expansion because the U.S., despite Bay’s strong presence, Bay has not fully conquered the U.S. market (Austen, I. & Bray, 2015). Perhaps, Bay should increase its presence in the U.S. by 50 department stores whereas 20 department stores are adequate for the Canadian market. Canada, Germany and Belgium have different cultures that influence the buying behavior of consumers. For instance, it is the culture of Canadian consumers to purchase locally made merchandise. Besides, consumers in Canada have a strong desire for customized goods. Moreover, owing to the fact that Canadian incomes are moribund, consumers are cautious about spending and, therefore, price discounts are more appealing to them. On the other hand, German consumers are increasingly environmental conscious and hence prefer eco-friendly products. As such, the mode of communicating and packaging the products is a matter of critical. In addition, German consumers are known to be thrifty, especially when purchasing beverages and food. However, Germans prefer to allocate most of their income to travelling (Lawton, 2011). Nonetheless, Belgians ascribe much importance to personal looks and spend whichever amount it takes to appeal and make a positive impression to others. What is more, Belgians prefer to continue buying from brands that they are accustomed to rather than novel brands (Goedertier, 2010). Given this differences in culture, bay should tailor the department stores to the specific needs of each country by retaining the workforce and brand names. Besides, Bay has to conduct further research to understand the needs of each target market. The aspect of business ethics also presents a disparity between Canada and the Germany and Belgium. The business ethics in Canada is not up to bar since there have been a scores of complaints about the wrongdoings in the workplaces, including cooking of financial results, fraud and bribery. In essence, ethical standards are compromised to achieve the desired results (Taboola, 2013). All the same, this is not the case for Germany, where thoroughness is synonymous with the desire to produce good results. Besides, directness is preferred over bluntness when it comes to business matters in Germany. In addition, formality is a feature that is pertinent with the business practices of Germany (Fernandez, 2015). On the other hand, Belgians have to take time to develop trust and business dealings are often bureaucratic. Unlike Germany, excessive directness is simplistic in Belgium. To boot, Belgians engage in long discussion before reaching business decisions to endure that all alternatives are considered. Given this, it is uncontestable that the three countries stand on different stances I terms of business ethics (Kwinttessential, 2014). As such, Bay should consider having employees from the locality to work in their department stores to avoid the conflict in the business ethics adopted by each country. The political outlooks of the three countries are not identical either. A federal election will take place in Canada in October 2015 over and above the several parliamentary scandals raveling out. Conversely, Germany is enduring a grand coalition that will culminate its four-year term in 2017. Besides, a foreign policy is more assertive in Germany. In light of Belgium, the dominance of Flemish parties has the effect of bringing about inter-communal tensions. In addition, trade unions and opposition socialists (Zilio, 2015) will pass up the fiscal consolidation agenda of the Belgian government. The impact of the political outlook on business is vital, and given these disparities in the political outlook of the three countries, it is highly recommended that Bay should assess the political environment of each target market separately and align its strategies in each market to the anticipated turn of events. References Austen, I. & Bray, C. (2015, Jun. 15). Hudson’s Bay to Buy Galeria Kaufhof Stores in $3.2 Billion Deal. The New York Times. Retrieved from http://www.nytimes.com/2015/06/16/business/dealbook/hudsons-bay-to-buy-galeria-kaufhof-stores-in-3-2-billion-deal.html Cole, R. (2015, Jun. 15). Hudson’s Bay Deal Looks to Have Benign Financial Consequences. The New York Times. Retrieved from http://www.nytimes.com/2015/06/16/business/dealbook/hudsons-bay-deal-looks-to-have-benign-financial-consequences.html?_r=0 Fernandez, C. (2015). Business Etiquette and Values in Germany. InterNations. Retrieved from http://www.internations.org/germany-expats/guide/15987-jobs-business/german-business-culture-15990/business-etiquette-and-values-in-germany-2 Goedertier, F. (2010). Buying behaviour of Belgian consumers in times of crisis. Vlerick. Retrieved from http://www.vlerick.com/en/research-and-faculty/knowledge-items/knowledge/buying-behaviour-of-belgian-consumers-in-times-of-crisis Kwinttessential. (2014). Belgium - Language, Culture, Customs and Business Etiquette. Retrieved from http://www.kwintessential.co.uk/resources/global-etiquette/belgium- country-profile.html Lawton, C. (2011, Dec. 23). German Consumers Stay Resilient. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB10001424052970203686204577114392482151450 Mahadevan, N. (2015, Jun. 15). Hudson’s Bay to Buy German Department Store Chain Galeria Kaufhof from Metro. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/metro-sells-galeria-kaufhof-for-3-17-billion-1434346794 Marotte, B. (2015, Jun. 15).For HBC shareholders, a risky move in Germany. The Globe and Mail. Retrieved from http://www.theglobeandmail.com/try-it-now/try-it-now-inside-the-market Taboola, G. (2013, Jul. 7). Canada's Business Ethics under Scrutiny: 4 In 10 Have Witnessed Wrongdoing. Huffington Post. Retrieved from http://www.huffingtonpost.ca/2013/07/07/business-ethics_n_3558228.html Zilio, M. (2015). Outlook 2015: What to expect in Canadian politics. BNN. Retrieved from http://www.bnn.ca/News/2015/1/4/Outlook-2015-What-to-expect-in-Canadian- politics.aspx Read More