Foreign Market Entry Strategies and Operations of International Retailing Industry - Research Paper Example

Research Report: Foreign Market Entry Strategies and Operations of International Retailing Industry Contents Introduction 3 Literature Review 3 Research Objective and Research Question 7 Research Methodology 7 Data Collection: Secondary Data 8 Research Approach: Qualitative Research 8 Research Design: Deductive Approach 9 Sampling 9 Research Technique: Exploratory and Constructive Research 9 Research Philosophies: Positivism 10 Ethical Consideration 10 Limitation of the Research 10 Project States and Annual Completion 11 Reference List 12 Appendix 14 Introduction Retailing industry is considered to be one of the most diversified industries in the world, contributing a large chunk to the aggregate revenue received by the world economy. In this era of contemporary business and global integration, retailing is considered to be an international phenomenon (Larimo, 2013). The retailing industry, specific to the countries from various corners of the globe has shown marked expansion especially during the last two decades of the twentieth century. Such internationalization has been possible based on a large number of activities such as acquisition of raw materials from the best sources in the world, relying on the internationally integrated supply chain management, emergence of e-retailing as well as establishing virtual and physical retail outlets in various part of the globe, employment of cheap labour from the emerging economies and utilization of foreign capital, innovative ideas and information (Hill, 2008). All such activities have enabled the retailing industry to optimize its cost consideration and at the same time, maximize the sales volume through assimilating the consumers throughout the world; hence, accelerating the path for rapid internationalization. Wide-spread operation of multinational companies and presence of their subsidiaries in various corners of the globe has facilitated the retail companies to include wide range of international consumer group in their customer guess. From this discussion, it is prominent that incorporation of all such international variables in the production and distribution function of business has aided the essentially domestic retail firms to expand internationally and establish their existence in the foreign markets as well. Such initiative has made it difficult to distinguish the retail companies on the basis of their regional identity (Gielens and Dekimpe, 2007). Therefore, objective of the research paper will be to explore the foreign market entry strategies and operation of the international retailing industry. For the purpose of analysis, a detailed investigation will be carried out in order to identify the functions and key variables that have contributed sufficiently to the path of expansion towards internationalization. Literature Review As a positive consequence of massive expansion of globalization and diminishing restrictions on cross-border trade, the concept of internationalization has gained considerable attention, especially in the retailing industry. According to Dawson, Larke and Mukoyama (2004), experiencing the immense opportunities in the global retail market, a large number of market players are considering to enter the global retail business platform in order to capitalize the high sales potential through integrating customers from different parts of the globe. However, Findlay and Sparks (2002) are of the opinion that such internationalization of business and foreign market entry involves high degree of risks. Therefore, according to them, in order to achieve the desired return on investment from the international business, the retailers should formulate well-structured foreign market entry strategies, taking into consideration the overall business interest. Evans & Company Consultants Inc. (2011) has identified a set of parameters, depending upon which the retailing companies that are willing to expand their business in international arena can develop their plan for expansion. According to the consultant’s report, such retailing companies must identify the opportunities and requirements lies in the foreign market and accordingly assess the expertise of the particular company to understand whether it possess the skill requirements and facilities to justify their wish for international expansion. The companies should also take into account the cultural differences and existing level of competition in the target market and subsequently should judge their capabilities to compete in such marketplace and to produce diversified products and services in order to satisfy the foreign customers with the products of their own preferences. As different countries incorporate different economic and political structure, the trade regulations appear to be highly different in various countries. Therefore, before deciding upon the entering any foreign market, the trade regulations must be evaluated well in advance. Moreover, the retail companies must possess strong supply chain and logistics system so that they can maintain the process of resource procurement and distribution of finished products in efficient way. Apart from that, the companies should also concentrate on evaluating the prevailing business process and degree of technological inclusion in the target foreign market in order to decide on whether they should standardization their own production and distribution process or adapt the existing business process for enhancing profitability. Based on such parameters, Welch, Benito and Petersen (2008) have facilitated the retailing companies with five distinct modes of foreign market entry, following which the retail business organizations can achieve stability in their international business and long term success. According to them, when a company chooses to expand in foreign market, such expansion comes under the strategic growth plan of the organization. Moreover, due to the existence of cultural differences, variation in business regulations and many other complexities in social, political, economic environment it becomes important for the international player to seek assistance from some local players who can acknowledge the international business entity regarding the existing practices in retail industry, source of raw materials, distribution channels and customer preference and many more. In this regard, Li and Frydrychowska (2008) suggested that retail business organizations can enter the foreign markets through establishing joint ventures with the existing retail unit in that region. Such partnership with suitable trading associates will enable the foreign brand to gain leverage in the presence of the local companies and the local company will also enjoy the advantage of maximising sales through enhancing its product portfolio and capturing attention of a large chunk of consumers due to amalgamation with a foreign brand. However, while planning for engaging into joint venture, the retail organizations should keep it in mind that though joint venture takes into consideration the business interest of both the parties, long term success of such venture depends upon relationship between the two. Welch, Benito and Petersen (2008) have suggested the retail industry to run expansion program based on the franchise model. According to them, franchise model is the most favoured when the industry players consider the urge for internationalization. Retail industry is not an exception. In this mode of entry, local business entities are provided the licence of offering foreign brands to the customers. The local players are also facilitated with ideas for running brand promotion and marketing activities from the foreign brand. In this way, the foreign brand gains an insight regarding the demand of their products and services based on which they can plan for further penetration. Success of franchise model depends upon identification of right local partner which is efficient enough to promote and sale the products of foreign brands effectively. In the view of Tamer (2009), if the retail entity is strong enough both financially and operationally, the business organization should opt for merging or acquiring with a local company in order to gain the access of whole business process of acquired company. The process of merger involves buying out a part of an existing business, keeping the identity of that organization alive, whereas, acquisition process indicates purchasing the company as a whole and taking control over the existing infrastructures, sales network, distribution channels, technological consideration, human resource and all other aspects. However, as merger or acquisition involves huge capital investment, the foreign companies must appoint merchant bankers to calculate the synergy and efficiency that they can experience from such organic growth of the organization. Leelapanyalert and Ghauri (2006) have identified more ideas for entering the foreign market in a calculative manner. They are of the opinion that those retail companies that are in the initial stage of expansion and possess minimum knowledge and experience regarding internationalization of business and the process change required for this, can start their internationalization through investing in an existing organization of the target market. Though such investment will facilitate the international retail player with a minority stake of the foreign business with no direct control, the foreign retail will gain an insight regarding the size and scope of the target market, nature of operations, best practices in the production of distribution etc. based on which the foreign retailer can built their strategies for further expansion. Another strategy of foreign market penetration is rightly identified by Gielens and Dekimpe (2007) that is most suitable for the retail industry, more specifically for the fashion brands in apparel segment. This method indicates setting up of one or two stores in the foreign retailing marketplace, after extensively analysing the growth prospect and attractiveness of the market. Opening up such flagship store in the prospective international retailing market can prove to be cost-effective and at the same time, beneficial for the brand as it will be able to run promotional activities and create awareness among consumers with limited exposure to risk. This strategy is considered under internal expansion in which the foreign company gets a firsthand feel of the target market as well as the nature of international operations existing in the market. However, according to Alexander (2009), international expansion strategies and entries in international retailing industry involves considerable uncertainties in terms of complex customer specifications, ambiguity in timely resource procurement and demand consideration due to international integration of customers, suppliers and distributors. Therefore, the process requires managerial intervention and participation of leaders who are having sufficient experience in the international retail market and are capable of implementing the process of internationalization in efficient manner. Coupey, Cliquet and Burt (2014) are also of the opinion that such expert intervention holds utmost importance in internationalization process because deciding upon a large number of factors such as the entry timing in the international market, size of market intercession, incorporating the best suitable strategies depending upon the strategic decision taken by the competitive firms, ensuring reliable and economical source of materials required etc. The managers are also expected to assess the international industry practices and accordingly implement such practices into the retail organization so that they can easily adapt the business process maintained in international context and incur efficiency in their international operations. Dawson, Larke and Mukoyama (2004) also have rightly identified the importance of such managerial control on internationalization of retail industry. According to them, as the organizations involved in planning for penetrating in international market will have to extend their operations to a very large scale, integrating multiple functions of international business, if the process fails the detrimental effect will let the organizations suffer for a long enduring period of time. Research Objective and Research Question Though internationalization of business has started taking place since when the process of liberalization had opened the economies of mainly large countries, loosening the trade barriers to a great extend, the international expansion of retail industry is comparatively a new trend. Objective of the research is to identify the chief motivation behind such sudden acceleration of the process of internationalization in retail industry. Therefore, the research paper will aim to identify the rationale behind the following questions: What are the motivating factors that have accelerated the pace of internationalization of the retailing industry in the last decade? How the overall performance of the retail industry has been affected by such process of internationalization? Which countries have gained sufficiently due to the internationalization of retail industry? Does such internationalization process pose considerable challenges to the small scale market players in retail industry? And finally, Examining the losses encountered by multiple retail organizations due to their operations in foreign market, can it be inferred that the process of internationalization is not suitable for all retail firms, considering their size and capabilities and it is only profitable for giant retail businesses? Research Methodology Research methodology indicates the systematic approach of examining the acquired data and information, collected for analysing the research objective and subsequently arriving at a realistic elucidation of the research problems (Denscombe, 2012). Research methodology also enlightens the research regarding the nature of data collection and helps him to incorporate the research approach, research technique and paradigm that will be best suitable for conducting the research (Corbin and Strauss, 2007). In the next segment, a detailed research methodology will be presented, indicating the pathway to carry out the research. Data Collection: Secondary Data In order to identify the foreign market intervention strategies of the retailing industries, it is impossible to collect data from primary sources because no business organization will be willing to disclose their expansion and internationalization strategies directly to any individual (Glaum and Oesterle, 2007). Therefore, the research will be based on the data, information and statistics collected from the secondary sources. Secondary sources of information can be accessed from various books, journals, newspaper, magazines, industry reports and statistics published by internationally recognized authorities (Denscombe, 2012). Acquisition of such data will provide the researcher a clarity regarding the global retailing industry and its process of internationalization. Moreover, as the secondary data is designed on the basis of primary data only, authenticity and consistency of such secondary data can be ascertained which in turn ensures the quality of the research paper (Corbin and Strauss, 2007). Research Approach: Qualitative Research Once the data and information has been collected from bona fide secondary sources, it becomes necessary to decide upon the research approach to be incorporated in order to analyse the procured information extensively (Glaum and Oesterle, 2007). As the strategies of internationalization and foreign market entry of the globally integrated retailing industry is a qualitative aspect, qualitative research approach will be adopted in order to derive the intrinsic rationale behind the obtained research question (Creswell, 2013). Such approach also tends to analyse the contradictory arguments proposed by various researchers. More explicitly, qualitative research strives to conduct an in-depth study of the materials collected to surface the pattern of the research agenda. Considering the particular research objective, in order to identify the strategies adopted by global retailing industry for their international expansion, the researcher will be able to conduct an in-depth study based on the elementary information received and will be able to draw independent conclusion irrespective of the influence of any pre-determined hypothesis, such as in case of quantitative analysis (Corbin and Strauss, 2007). However, a survey will be conducted through an open-ended questionnaire format in order to capture the outlook of the chief executive officers of retailing industries regarding the research objective. The insight of such managers will be expressed in numerical way, through graphical representation of the obtained information. Research Design: Deductive Approach Research designing can be done in two ways. Inductive research design aids the researcher to develop the research specific ideas based on the theories and general consciences. However, such bottom-up approach provides an indistinct idea about the research objective and involves uncertainty as well. Therefore, this research paper will follow deductive approach of research design (Creswell, 2013). This is a top-down approach that involves study of the theories and conceptual framework, specific to the research objective only and consequently helps the researcher in drawing logical inferences to the research questions (Corbin and Strauss, 2007). Moreover, as questionnaire survey will be conducted to obtain information regarding internationalization of retail business, deductive approach will lead to disclose the information provided by the respondents rationally. Sampling Sampling is a statistical method in which an individual set of respondents are drawn from a large population in order to understand the view of the entire population. Sampling process is cost- effective and time- saving as compared to the process of studying the whole population (Glaum and Oesterle, 2007). Considering the research regarding enquiry of the process of internationalization of retail industry and the strategies formulated by foreign firms to enter international market, the outlook of 100 international managers engaged into retail business has been captured (Creswell, 2013). Research Technique: Exploratory and Constructive Research The concept of internationalization of retailing industry is comparatively contemporary in the global business framework. In fact, researchers associated with this field of study are coming up with newly innovative ideas and concepts such as establishing strategic partnerships with foreign brands and product penetration in international market with the help of E-commerce and virtual stores etc., incorporating which more and more retail companies are participating in the process of internationalization and enjoying huge benefits arising out of it (Denscombe, 2012). Hence, exploratory research technique will be incorporated in the realm of theoretical knowledge and conceptual framework in order to derive whether all the business firms within the retail industry across the globe are being able to take full advantage of internationalization. The research technique will also facilitate the industry through highlighting the scope for improvement in the context of internationalization that has still been untapped by the industry. Constructive research will assist the industry to identify the existing problem regarding the internationalization and foreign market entry modes and acknowledge them with various innovative strategies that will help the industry to overcome such complexities (Creswell, 2013). Research Philosophies: Positivism Under the research epistemology, research paradigm specifies the significances and relevance of the theories and conceptual framework discussed in the literature review section as well as application of such theoretical concepts in global practical retailing industry. Excellence of positivism research philosophy lies in its effort to derive the association between the research objective and extent of application of theoretical framework in order to satisfy the research objective (Denicolo and Becker, 2012). Considering this research paper in particular, positivism facilitates the researcher to methodically study the obtained information regarding the key drivers of retail internationalization and its other aspects such as penetration strategies of foreign retail market. Such comprehensive study will enable the researcher to obtain an explicit insight regarding the research objective (Popkewitz, 2012). Ethical Consideration While conducting the research, the researcher will guarantee for complying with practical security measures and keeping the privacy and confidentiality for the data sources. The researcher will also conduct the research with honesty and integrity, keeping in mind the core objective of the research and the issues associated to intellectual property rights (Denicolo and Becker, 2012). Limitation of the Research Though the research concentrates on a vital contemporary issue i.e. internationalization of retail industry, certain factors associated with the research work induces the research to suffer from certain limitations. The research deals with questionnaire survey; however, it is impossible to contact international retail managers and conduct questionnaire survey for collecting information regarding their views related to internationalization and foreign market entry (Alexander and Dhumale, 2012). Moreover, as the process of internationalization comes under corporate strategy and involves decision making of top level managers, it also becomes difficult to extract information from the management level of multinational retail organizations. Therefore, the researcher will have to rely on external vendors for collecting secondary data which may impair the quality of research. Project States and Annual Completion In order to carry out the research in a systematic way, it is very important to structure the project stages and define the expected time frame required to complete the project so that researcher can keep a track on the progress of the research work and accordingly finish work within the pre-determined time period. Based on the expectation that it will take three months to complete the entire research work, it is anticipated that the researcher will take one month to identify the research area and prepare the research proposal (Denicolo and Becker, 2012). Once the research proposal is accepted, collection and analysis of secondary data will take another one month of time. Finally, one more month will be required for drafting the paper on the basis of an in-depth analysis and findings of the researcher and submitting it for further review. The cumulative timeframe required for the project is presented by the Gantt chart (Glaum and Oesterle, 2007). Reference List Alexander, K. and Dhumale, R., 2012. Research Handbook on International Financial Regulation. Cheltenham: Edward Elgar Publishing. Alexander, N., 2009. Retailers and International Markets: Motives for Expansion. International Marketing Review, 7(4), pp. 23-56. Corbin, J. and Strauss, A., 2007. Basics of Qualitative Research: Techniques and Procedures for Developing Grounded Theory. California: SAGE Publications. Coupey, K. P., Cliquet, G. and Burt, S. L., 2014. Retailers׳ expansion mode choice in foreign markets: Antecedents for expansion mode choice in the light of internationalization theories. Journal of Retailing and Consumer Services, 21(6), pp. 976–991. Creswell, J. W., 2013. Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. California: SAGE Publications. Dawson, J., Larke, R. and Mukoyama, M., 2004. Strategic Issues in International Retailing. London: Roultedge. Denicolo, P. and Becker, L., 2012. Developing Research Proposals. London: SAGE Publications. Denscombe, M., 2012. Research Proposals: A Practical Guide: A Practical Guide. New York: McGraw-Hill Education. Evans & Company Consultants Inc., 2011. International Retailing and Market Entry Strategies. [Online] Available at: [Accessed 11 May 2015]. Findlay, A. M. and Sparks, L., 2002. Retailing: Comparative and international retailing. London: Taylor & Francis. Gielens, K. and Dekimpe, M. G., 2007. The Entry Strategy of Retail Firms into Transition Economies. Journal of Marketing, 71(2), pp. 196-212. Glaum, M. and Oesterle, M. J., 2007. 40 Years of Research on Internationalization and Firm Performance: More Questions than Answers? Management International Review, 47(3), pp. 307-315. Hill, C., 2008. International Business: Competing in the Global Market Place. Strategic Direction, 24(9), pp. 132-145. KPMG, 2013. 2013 Retail Industry Outlook Survey. [PDf] Available at: [Accessed 11 May 2015]. Larimo, J., 2013. Market Entry and Operational Decision Making in East-West Business Relationships. London: Roultedge. Leelapanyalert, K. and Ghauri, P., 2006. Managing International Market Entry Strategy: The Case of Retailing Firms. International Marketing Research, 17(3), pp. 193 – 215. Li, J. and Frydrychowska, M., 2008. The International Expansion of a Multinational Company. International Business and Entrepreneurship, 2(1), pp. 6-21. Popkewitz, T. H., 2012. Paradigm and Ideology in Educational Research. London: Routledge. Tamer, C., 2009. International Business: Strategy, Management, and the New Realities. New Delhi: Pearson Education India. Welch, L. S., Benito, G. R. G. and Petersen, B., 2008. Foreign Operation Methods: Theory, Analysis, Strategy. Cheltenham: Edward Elgar Publishing. Appendix Questionnaire Survey: Open-ended Questionnaire 1. Since how many years you are into retail business? 2. Who is the strategic decision making authority in your retail organization? 3. Have you ever considered the scope of expanding business in the international market? 4. What are the difficulties you have faced or you think that you are going to encounter while entering into foreign market? 5. Which option do you think will be more profitable for your retail business? Entering into foreign market of developed market where consumers already have an idea about retail products or penetrating into an emerging market, where it is required to drive massive awareness promotion regarding foreign retailing goods? 6. Adaptation or standardization: which option do you think will be best suitable for internationalization of retail business? 7. Being a retail manager, what is your suggestion for medium and small retail businesses regarding internationalization? 8. According to your opinion, what are the most important factors that has driven the internationalization of retail industry as a whole so fast during the last decade? 9. Some researchers are of the opinion that the domestic retail business have considerably hampered due to the rapid of internationalization of retail industry. Do you agree? 10. Have you noticed the changes in sales volume and profitability in the post-internationalization period of your retail organization? If yes, are such changes positive or negative? Read More