The Factors Influencing Retail Internationalization - Marks and Spencer - Case Study Example

Introduction Retailers have increasingly been moving towards internationalisation of their business operations over the last few decades. There happen to be several factors behind this increased retail internationalisation. However, it mostly happens when retailers do not get favourable environment in the home market. Environmental factors prevailing in the foreign markets also attract retailers to internationalise their operations. The increased internationalisation of UK clothing retailers reflect several factors existing in domestic and foreign market. There are a number of well known and established retailers that have expanded their operations to one international market to another in search of better opportunities. Retailers like Marks & Spencer, Next, Arcadia, Debenhams, Asda, Tesco, Bhs, New Look and John Lewis are very famous in the UK for clothing retail internationalisation. This paper evaluates the leading factors behind the internationalisation of retailers in the UK from clothing perspective. It also provides the major reasons causing these retailers to move beyond the domestic market and seek opportunities internationally. Factors Promoting Retail Internationalisation Retailers around the work have been increasingly moving towards internationalisation in search of better business opportunities. This is ion particular on the rise among UK retailers that have moved towards foreign markets at a fast rate over the last few decades. Retail internationalisation is important for getting concept, sourcing and operational development. It further provides remarkable chances to grow and shine. Due to internationalisation, accumulation of information also takes place. It is very difficult to get all these facilities without moving outside (Akehurst and Alexander, 1996). There happen to be several factors that either push companies from domestic market or pull them towards internationalisation. These factors could be in the form of restrictive environment, saturated market and high competition in home market. Most importantly, the growth opportunities in the international market along with less intense competition and cultural proximity, greatly attract retailers to new foreign markets. Companies go for retail internationalisation because of its advantages. The retailers that have gone for internationalisation and opened their branches or franchise or export in foreign countries gain several benefits. They learn a lot about the particular market, they build up their source and take the technological and other advantages to grow and survive in the market. One of the reasons behind a company to go overseas market is the unavailability of growth opportunities in the home market. (Treadgold, 2000) The companies limited to the domestic market do not advance in the business in the same manner as compared to those that tend to go abroad. Debenhams, one of the leading international clothing retailers in UK, has achieved potential growth over the last four years. The company went for internationalisation for growth and prosperity. The company had been facing difficulties in the hometown. It started to internationalise from 1990 and entered into the Middle East market and then went to Malaysia and Hungary etc. during the period of internationalisation the company achieved remarkable success (Jones, 2003) Push factors influencing retail internationalisation are the facilities that are not available in the hometown. These factors may be cheaper labour, land or the opportunities, which are not available in the local markets. The other factors may be the market conditions i.e. regulatory environment, political and economic conditions etc. in which the survival of an organisation is difficult (Dawson, 1994). The firms doing business in the international market are mostly in search of place where the business could maximise its profits with minimum risk and investment. The motive behind different retailers to enter into various markets may be different, depending on the retailer and the market the business intends to move to. The reason behind the internationalisation of Marks and Spencer was probably the push factors including unsuitable restrictions and competitive market in the UK. M&S jumped to Canadian market in 1972 to get a congenial environment where the company could freely achieve the determined goal of the business. Further, the role of pull factors should also not be ignored. Canadian market was having much economic stability and the cultural proximate between two countries. The company could see the potential of US market and moved to US market as well. Marks&Spencer, one of the leading UK clothing retailers, has not stopped and continued its journey of internationalisation in American and European countries. Local retail companies move towards the international market due to keen competition within the hometown. They try to seek global markets where competition is comparatively low and they could earn maximum profit. There is also an example of Marks and Spencer, one of the famous clothing retailer of UK, that has also made its brand internationalised and opened its various braches outside the UK (Alexender, 1990). The companies working in highly competitive environment have lesser chance to earn larger profits so they tend to go abroad as to earn maximum profits. The place where they could find a less saturated market with less severe competition or there is no similar quality product available in the market. There are a number of marts and brands that have opened their branches internationally, for example Tesco plc, after observing the growth and high earning potentials in Korean market. Tesco moved out to the Korean market and started opening retail clothing stores (Donegan and Larke 2003). Push and pull factors are constantly encouraging organisations to move to international market. The potential in the international markets and unfavourable factors of the domestic market motivate retailers to internationalise their business. It does not only give a better place for a business to survive but also provides substantial growth opportunities (Akehurst and Alexander 1996). A business either big or small is always in search of better place and atmosphere, where things are more convenient and favourable. Push factors are the elements which push away a business from domestic market to international market whereas pull factors attract retailers of domestic market to get internationalised. If a retailer seeks a place where things are appropriate and an environment does not need much adaptation. If a UK retailer goes to the countries where the cultural environment is same as in the homeland i.e. Ireland, France etc the retailer would find less difficulties in running chain stores. The stages which lead retailers to move to international markets are reluctance, caution and ambition. The retailer while facing these stages and conditions becomes keen to internationalisation. The retailer when observes a lack of potential in the existing market starts moving to the markets which are relatively closer to the domestic market. Growth opportunities in the domestic country push the retailers to meet the global markets (Moore, Fernie and Burt, 2000). For the growth of business certain elements are inevitable i.e. favourable business environment etc. Push factors play an important role in order to make a retailer internationalise. These factors can also be in the form of restricted opportunities in the home market in many ways, for instance, keen competition in the domestic market and unfavourable rules and regulations that are against the interest of business. Most of the UK based retailers have also internationalised for the reason of better potential in the market abroad. The opportunities they have in the targeted market do not exist domestically. They sense the growth chances in these markets. The working conditions i.e. economic and political stability are much supportive than the home market. The international retailers of UK went to other markets not only to grow their business but also to learn the international market strategy. Many UK companies like Marks&Spencer, Next, Arcadia, Debenhams, Asda, Matalan, Tesco, Bhs, New Look and John Lewis have followed the same strategy for retail internationalisation. Williams also illuminates that "the major motives behind the RI of UK-based international retailers originate from a perceived internationally appealing and innovative offering and growth orientated and proactive motives." (1992, p. 279). A huge amount of profit is achieved through international retailing because of many reasons, for instance, better conditions in the form of government support and low competition for the business. Williams (1992) suggests that there are five factors or motives for the spread of retail internationalisation. Motives may be growth oriented i.e. the retailers want the maximum growth and profit and they want to get the full advantage of opportunities offered by the environment. The main motive of retail internationalisation is to earn high profits through increase in sales of goods and services. To earn more profits, firms go for underdeveloped markets where these goals could be achieved. The second motive behind a firm to get involved in retail internationalisation could be the limitations of domestic markets. These limitations can be in the form of high competition and market maturity etc. Another motive of it could be the international market segments. The fourth motive behind it could be the direct proposal from retailers outside the country, idle resources and low rate of shares. The fifth motive that could be behind internationalisation of retailing is the technical awareness of retailing. The organisations when go outside for business learn many new and knowledgeable things from the market. Although a very small number of organisations tend to go for internationalisation, most organisations that go for it remain successful in achieving their motives. Retailers generally move to international markets have certain business motives which are available in the domestic market or the goals could be achieved more abruptly in the international market. Some countries especially adopt certain tactics and build an environment that could attract investment from foreign countries. Internationalisation of retailing also gets encouraged by removal of obstacles in the targeted markets. Countries remove several barriers in order to attract foreign companies' investment, for instance by starting the process of privatisation etc (Dawson, 2001). These barriers may be removed in several manners like the reduction in taxes or appreciation of foreign investment and providing various facilities to overseas investors. A retailer when sees that the barriers have been removed by the government and now it is invited at the focused market, they would be tempted to enter into that market. The retailers have a desire to get associated with the markets where greater opportunities are availa1ble. They enter in the market when it is comparatively easy to take maximum advantage of these opportunities. They do not appreciate to enter in the market where they find barriers in their way. It must be having minimum competition and a larger population. The retailers will tend to enter in the market where the risk factor is on the minimum level. They need assurance that the market they are moving to is completely secure for the business and the conditions are suitable as well. Retailers prefer to enter in the market where they find political stability, economic stability and cultural proximity. Alexander suggests that "retailers will often confine their operations to a relatively limited and comparatively safe collection of markets." (1997, p. 37) It is because of the fact that retailers select the best suitable markets for their businesses considering all the important factors like regulatory environment, market competition, business risks and economic conditions. Conclusion This paper elaborates the factors influencing retail internationalisation. The retailers move on to the overseas market to seek growth opportunities. They try to find out the markets which have full potential and where they could find regulatory, political, economic and cultural environment that are not available in the local markets. Restrictive environment in the home market also compels retailers to move to international markets. Retailers are mostly attracted to international markets having proximity to home market in terms of culture; else it would need much adaptation which in result would create more difficulties. Keen competition in the domestic market also makes a retailer to find a market where the competition is limited and opportunities for growth are relatively greater. The clothing retail internationalisation also happens for the same purpose. The retailers of different countries including UK have internationalised due to push and pull factors. The main reason behind the internationalisation of clothing retailers in the UK like Marks&Spencer, Debenhams and Tesco is mainly the lack of growth opportunities in home market and prospects of opportunities in the targeted market, most important being a less competitive environment. References Akehurst, G. and Alexander, N. (1996). The Internationalisation of Retailing. 1st ed. Frank Cass Alexander, N. (1997). International Retailing. Blackwell Publishing, UK Alexender, N. (1990). Retailers and International Markets: Motives for Expansion. International Marketing Review, 7(4) pp. 75-85 Dawson, J (1994). Internationalization of retailing operations. Journal of Marketing Management, 10(4), pp. 267-282 Dawson, J. (2001). Strategy and Opportunism in European Retail Internationalization. British Journal of Management, 12(4) pp. 253-266 Donegan, G.W. Larke, R. (2003). The Internationalisation of Retailing in Asia. Routledge, UK Jones, G. (2003). Middle East expansion- the case of Debenhams. International Journal of Retail & Distribution Management, 31(6/7), pp. 359-364 Moore, C.M., Fernie, J. and Burt, S. (2000). Brands Without Boundaries: The Internationalisation of the Designer Retailer's Brand. European Journal of Marketing, 34(8), pp. 919-937 Treadegold, A. (1990). The Developing Internationalisation of Retailing. In Moore, C.M., Fernie, J. and Burt, S. (2000). Brands Without Boundaries: The Internationalisation of the Designer Retailer's Brand. European Journal of Marketing, 34(8), pp. 919-937 Treadgold, A. (2000). The developing internationalisation of retailing. International Journal of Retail and Distribution Management, 18(2), pp. 4-11. Williams, D.E. (1992). Motives for Retailer Internationalization: Their Impact, Structure and Implications. Journal of Marketing Management, 8(3), pp. 269-285 Read More