Subject matter: HBR Reflection
Retail Doesn’t Cross Borders
-Here is why and what to do about it-
The article at hand "Retail Doesn't Cross Borders- Here's why and what to do about it" written by Marcel Corstjens, the Unilever Chaired Professor of Marketing at Insead, and Rajiv Lal, the Stanley Roth Sr. Professor of Retailing at Harvard Business School, was published in the Havard Business Review of April 2012 on the pages 104-111 and deals with the issues of expanding abroad for international grocery retailers and the resulting problems they have to face.
In the beginning of their article they state that economical recession in the U.S. And Europe lead easily to focussing on feasible emerging markets in the developing world The opinion that globalisation is not a receipt for growth and emerging sales rates. Corstjens and Lal put the focus on grocery retailers and got the result that within a few exceptions the retailers have not gained any growth by expanding abroad. They stress that the lack of a close connection to the retail market abroad and the dominating local players made it difficult for emerging grocery retailers to find a place in the market. Some retailers found new strategies in order to emerge domestically as well. They express many reasons for expanding which varies, but Cortjens and Lal point out that the main goal is growth. By stating that many companies are lead by opportunistic decision making, which threatens the long-run strategies. As an example, the expansion of Wal-Mart in the UK in 1999 is given.
As a reason of failure abroad the authors state out the possibility of different consumer tastes in the host countries especially in food products. In contrast to this, it is mentioned that worldwide suppliers made their success in globalisation. So must be another factor due to establishing a brand abroad. Facing the financial impact of globalisation the authors emphasize that the degree internationalization does not have an effect on the retailers' growth rate and therefore also not on the profit margin. Growing Revenues can just be achieved by organising a long-term strategy for globalisation. Besides those aspects there are also a few barriers, which a company has to manage in consideration of entering a new market, such as overtaking local competitors, absence of fitting properties and local based retailing market. In some cases there are even laws which protect the local economy. Another mentioned issue is that productivity investments and investments in suppliers will only pay off if there is a huge amount of stores. The different target groups for suppliers and global retailers are also crucial for the success abroad. While suppliers like Mars can focus on a single target group, the retailers have to please all customers' demands.
At the very end of the article Corstjens and Lal set up four rules how retailers can gain success in globalisation. The first thesis is that the domestical market is essential for a company's success in expanding abroad. Second, firms have to be innovative in entering in global markets. For example Aldi's slow expansion into the US, Europe and Australia as a "hard discounter". The following third statement underlines that retailers should rather highlight their strength and not adapt to existing branches than putting all their efforts in a good internal organization structure. As the last rule the authors single out that the perfect timing is one of the main points of being successful abroad. They relate to different examples of failure because of having made decisions at the wrong time. In their final conclusion they state, that the number of countries a company is acting, is not a factor of international success. Corstjens and Lal give an advise to grocery retailers concerning setting the focus on possibilities to expand through organisational effectiveness in a limited environment, than deciding to expand geographically as far...
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