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Emerald Article: Globalization's winners and losers: Lessons from retailers J.C. Penny, Home Depot, Carrefour, Ikea and others
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To cite this document: (2006),"Globalization's winners and losers: Lessons from retailers J.C. Penny, Home Depot, Carrefour, Ikea and others", Strategic Direction, Vol. 22 Iss: 9 pp. 27 - 29 Permanent link to this document: http://dx.doi.org/10.1108/02580540610686531 Downloaded on: 08-04-2012 References: This document contains references to 3 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 5097 times.
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etailers provide one of the most visual features of the increasingly global nature of business. Travel to almost any airport, then venture into the shopping malls in the city centers and the suburbs, or visit the big box stores on the edge of town and the facia boards on the front of the stores have a remarkable similarity the luxury brands at the airports, the fashion stores in the malls, the household goods at the edge. Their march forward can appear to be relentless. The truth is something more complex. Some win, some lose. The winners take the spoils, the losers can be taken to the brink. Retail stores are products of the communities they serve. Sometimes this translates, sometimes not. Sometimes companies adapt, sometimes they dont.
Marks & Spencers fortunes have revived, however this is centred on their home market of the UK. Their overseas adventures alone were not responsible to their earlier decline, but they did help make a bad situation virtually intolerable. By way of contrast, Swedish home furnishings giant Ikea goes from strength to strength. Their home market being small, internationalism was embraced from the early days. Success recipes from one company may not always work from another, yet there are general strategic lessons to be learned.
DOI 10.1108/02580540610686531
VOL. 22 NO. 9 2006, pp. 27-29, Q Emerald Group Publishing Limited, ISSN 0258-0543
STRATEGIC DIRECTION
PAGE 27
Carrefour, like J. C. Penny, made the mistake of entering the market without the benet of advice from a local partner.
3. Royal Ahold operated in Chile from 1997-2003 also. They partnered with Velox Retail Holding who had interests in both Chile and Argentina. Aholds withdrawal from Chile was prompted by massive accounting irregularities. With the Argentinean nancial crisis they had become responsible for Veloxs debts. Although operations had been devolved to Velox the result was still an unsuccessful one. 4. J.C. Penny withdrew from Chile by selling their business to a local competitor. They operated from 1995-2000. They too did not adapt to Chilean shopping habits, failing to meet local expectations in areas such as the sale of electricals. They had intended to operate ve stores, but had a series of problems, and only operated one in Santiago, which became logistically very expensive. They had centralized systems and didnt source any stock from Chile. The executive in charge was intelligent, but an American who only spoke English in a Spanish speaking country, making communication and understanding of customer needs difcult. The experiment didnt work. In international business the standardization versus adaptation debate is a vital one. Should businesses try to standardize operations with all of the benets of consistency and economies of scale that go with it, or should they adapt to local conditions and maximize their business performance in the local marketplace. For these retailers the message is one of adapt or, if not die, then face mounting losses and give up.
LOreal realize that to be lastingly successful they need to take the Chinese market seriously and invest, its size and growth meriting serious attention.
growing area. It is a market that didnt exist in any meaningful way fteen years ago, yet should be worth around $9.6 billion dollars by 2009. Fighting it out are LOreal of France, Shiseido of Japan, together with Estee Lauder of the USA. Proctor and Gamble are also there, dominating the cosmetics and toiletries sector, their Olay brand proving popular. The division line in the market is between fashion and tradition. They need to work hard, but the overseas big brands are differentiated enough to service the fashion sector, cloaked as they are in images of overseas glamour. The local Chinese competitors are best served to understand the customers and thrive in the traditionalist segment. LOreal realizes that to be lastingly successful they need to take the Chinese market seriously and invest, its size and growth meriting serious attention. Chinese researchers, primarily chemists, are stafng new laboratories in Pudong, China, as new pigments, waxes and oils are developed suitable for local people, their skin tones and aspirations. By way of contrast, tradition is strong, and maybe even becoming fashionable. Shanghai Herborist Cosmetics sees itself as Chinas Body Shop (the eco-friendly UK-based group now owned by LOreal). The big brand carve up is not a foregone conclusion. As the Chilean example shows, the local can strike back. All lessons in marketing start by stressing the needs to understand customers wants, needs and demands. While globalization brings complexity, this simple truth persists.
Comment
This multiple review article is based upon the following papers. Lessons learned from unsuccessful internationalization attempts: Examples of multinational retailers in Chile by Bianchi and Ostale in the Journal of Business Research provides an academic survey that focuses on the Chilean experience, but provides a number of truths about market entry and development that transcend the national context. Keywords: Retailing, International business, Chile, China Ikea: how the Swedish retailer became a global cult brand, published in BusinessWeek, provides journalistic rapportage, but does dig a little beyond the success story. Battle for the face of China by S. Prasso in Fortune is useful for its cosmetics industry focus, going beyond a general analysis into the dynamics of a fast-growing market sector.
References
Aron, R. and Singh, J. (2005), Getting offshoring right, Harvard Business Review, Vol. 83 No. 12, pp. 135-43, ISSN 0017-8012. Gaston, R.S. (2005), Outsourcing information services in investment banking, Business Information Review, Vol. 22 No. 4, pp. 263-8, ISSN 0266-3821. McClenahen, J.S. (2006), Hot! Hot! Hot!, IndustryWeek, Vol. 255 No. 1, pp. 23-6, ISSN 0039-0895.
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