Written by Chipo Mapungwana
Retailers, compared to other industries have been especially late in entering global markets. Many retail brands , even the larger ones have largely confined themselves to their home markets because of the belief that the retailing business did not possess the conditions appropriate for internationalisation. Global retail brands viewed the differences in consumer behaviour, local competition, operational challenges and government protectionism and supplier unavailability as major deterrents to internationalisation.
Factors influencing internationalisation of retail brands
Internationalisation of retail brands has changed in the last 20 years because of:
- access to and changing information technology which now enables retail brands to control foreign operations.
- global sourcing which has created the possibility of economies of scale and availability of international suppliers.
- emergence of global consumers creating the need for supply of global brands.
- growing brand conscious and quality sensitive middle and upper classes in many countries
Why Global Brands are coming your way!
- They want to expand into markets with higher growth rates
- They are facing limited opportunities in their domestic markets through saturation, and excessive competition.
- They can afford new and innovative retailing technologies.
- In Europe, they are facing recessionary pressures.
- They have stronger marketing orientation, are bigger and have accumulated experience over many years.
A Brief about Wal-Mart
- Started in 1962
- Biggest retailer in the World
- Operates four store formats including, discount stores, supercentres, warehouse clubs, deep discount outlets.
- Implements four strategic pillars including: cost leadership, customer orientation, logistics and information technology.
- As of July 2012, had 2 million staff members
- Has 4253 stores around the world
- Sales exceed US$405 billion, more than the GDP of many countries
- Serves 100 million customers a week.
Why Global Retail brands give local retailers the shivers?
- The sheer size of global retailers in most cases is such that local retailers can not compete on fair ground.
- Global brands have set their minds to international expansion in order to keep their growth momentum.
- Global retailers are great at research and they target markets that have many of the following characteristics: fragmented local retail industries, dormant competition, underserved customer segments, traditional retailing practices, high margins and unsatisfactory customer service.
- Local customers in many countries that are targeted by global brands are price sensitive and welcome retailers that can offer them quality products at lower prices.
- Global brands have the muscle to control suppliers and many local suppliers want to do business with them.
Competing against Global brands: How Brazilian retailers dealt with Wal-Mart onslaught
Neutralise the competitor’s action by:
- putting pressure on suppliers not to sell to the new, foreign competition .
- self-regulation of the retail sector , thus reducing predatory pricing
Establish competitive advantages by:
- changing retail practices through the adoption of technologies, improvement in service and greater efficiency.
- enhancing management professionalism and training staff.
- hiring experienced executives
- learning from retailing brands in other countries and markets
- adopting I.T. technologies to increase efficiencies
- increasing investment in logistics , a competitive advantage of Wal-Mart.
- increasing retail store areas to take advantage of scale economies to sell at lower prices.
Redefine the Market by:
- expanding presence in the domestic market through opening new stores and in new geographical areas.
- concentrating on key markets by focusing on key locations and servicing those markets well.
- adopt niche strategies by competing through service, new selling channels such as online selling or unique products.
- expand regionally or internationally
Change ownership by:
- associating local brands with a foreign retailer in order to increase size and get a stronger market position.
- acquiring smaller stores in order to increase market share.
While each country and sector will have its own way of protecting itself, there is no getting away from global expansion and from global companies knocking and find their way into local markets. How you prepare your company for the competition will determine whether or not your organisation will survive. On the other hand, seeing how other companies have handled new markets will also enable companies to enter the global arena and compete with foreign companies in new markets.
For Branding consulting contact Chipo at email@example.com