Global Retailing Strategies¶
Organic Expansion¶
- Definition: A company uses its own resources to either build new stores from scratch on greenfield sites or acquire existing retail facilities.
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Example: IKEA's approach to expanding into new markets often involves constructing new, large-format stores which maintain the brand's uniform appearance and shopping experience globally.
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Advantages:
- Complete control over the retail experience and brand management.
- Ability to choose strategic locations that align perfectly with the company’s target market demographics.
Franchise¶
- Appropriate Strategy: Used when barriers to entry are low but the market is culturally distant, affecting consumer behavior or existing retail structures.
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Example: McDonald's in India adapted its menu and franchising strategy to suit local tastes and religious dietary restrictions, which helped to overcome cultural barriers.
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Advantages:
- Lower capital investment and risk for the franchisor.
- Leverages local operators’ market knowledge and established presence.
Chain Acquisition¶
- Definition: Involves purchasing a company that owns multiple retail outlets in the target foreign country.
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Example: Walmart's acquisition of Massmart, a South African retail chain, allowed Walmart to gain immediate access to multiple African countries.
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Advantages:
- Instant access to a broad network and market presence.
- Avoids the time and regulatory complexities associated with opening new stores.
Joint Venture¶
- Recommended Strategy: Best suited for entering culturally distant and difficult-to-penetrate markets.
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Example: Starbucks entered the Chinese market through a joint venture with local partners, which was crucial for navigating local regulations and market preferences.
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Advantages:
- Shared risk and investment with a local partner who understands the cultural and business environment.
- Increased likelihood of success through localized business strategies and consumer insights.
Summary of Global Retailing Strategies¶
The choice of strategy depends on various factors including market conditions, cultural distance, regulatory environment, and company resources. Organic expansion offers control but requires significant investment. Franchising can accelerate market entry with lower costs. Chain acquisition provides a quick market presence, while joint ventures offer a balanced approach in challenging markets.
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