INTERNATIONAL BUSINESS AND RETAILING
MODULEIII
INTERNATIONAL RETAILING
Retail internationalization is the transfer of retail operations outside the home market. It involves
the international transfer of retail concepts, management skills, technology and even the buying
function.
Based on this, a definition for retail internationalization can be as follows:
“the process of a retailer transferring its retail operations, concepts, management expertise,
technology and/or buying function across national’s borders”.
INTERNATIONAL RETAIL ENVIRONMENT: PESTEL ANALYSIS
On a global scale, the retail industry plays a significant role in determining the country's
GDP while having immense potential for future growth. The economic trends and technological
advances have prepared the market to fit multiple big retail giants while keeping a competitive
field for them. Different external factors impact the retail industry worldwide:
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1. Political Factors:
The political environment has huge implications. A pro-development and growth driven will
provide a more conducive environment for businesses to operate in. The regulations will be more
business-friendly and there will be a higher degree of incentives offered for those who want to
enter that market. The government will also try and streamline the bureaucracy of setting up office
operations and reduce red-tapeism.
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The government makes policies and regulations that businesses should comply with to
survive in the market. For example, India’s laws regarding Foreign Direct Investment are
complex for global retail operators to run their business.
Political stability in a country is one of the key factors that favor the growth of an industry.
If a nation is politically stable, the economy is supportive. If there is no political conflict,
businesses can seamlessly operate and have healthy competition.
In recent years, the retail industry has targeted the online audience to increase their
business. Though the physical stores are not under Government scrutiny, the accusations
of data breaching and antitrust issues have led the government to keep track of the storage
and collection of data by the retail companies. It has impacted the business of retail brands,
including Amazon and Wal-Mart.
2. Economic Factors:
Economic factors have a direct impact on the profitability of the retail industry. When the economy
is on the rise, the industry has the potential to earn a good profit. Here is how the economic factors
contribute to the business of the retail industry:
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The nation's economy immensely affects the business of the retail industry. Economic rise,
inflation, recession, and unemployment are some factors that can toll the buying capacity
of people.
As the recent economic reports suggest, there is a chance that the retail industry will grow
to 30 trillion USD by 2023. If the economy stays stable and the supply chains do not
experience any problems, it will have a chance of rapid growth.
The economy of a country influences the taste of the people. If the economy is stable, then
people tend to buy more items.
3. Socio-cultural factors:
Society and culture influence the shopping habits of an individual. Their gender, age, and
education level also affect their preferences. Here are some socio-cultural factors that impact the
business of the retail industry:
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The countries with a higher per capita income have more customers buying branded items
instead of looking for the prices. While the areas with people of middle and low-income
groups. The cost of the items plays a significant role.
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E-commerce gives an insight to the retail companies about the choice of a buyer. The
website stores the data based on a customer's buying habits and then shows the products
and offers based on their preferences.
There are multiple companies in the retail business, which makes it a competitive field.
The companies provide offers based on the local festivals or particular days of the month.
It brings in more customers to the stores, and the discounts and coupons lure people to
purchase more items.
4. Technological factors:
The modern retail industry is heavily dependent on technology because, besides physical stores,
applications or websites of the brands are also bringing in significant sales. It also allows them to
get an idea about the choice of the customers while stocking or releasing new products.
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The retail brands use technologically advanced software and hardware to offer customers
a user-friendly shopping spree. Besides that, the brands provide data security and a safe
payment gateway.
The internet connection has changed the whole business scenario for retail brands. The
brands can attain a smooth supply chain and logistic system using the internet. The
customers can order an item on the website then the retail shop can drop it at the nearest
pickup location or deliver it to their home.
The technological factors are a blessing for the big retailers, but this is not helpful to small
retail stores. Since they have limited investment, thus, developing a secured website with
AI-based advanced technology is not an option for them. As many customers prefer their
orders delivered at home, the small retail stores are at a loss.
5. Environmental factors:
The retail brand needs to bring small changes for sustainable business practices and eco-friendly
systems. It reflects their responsibility as a brand that wants to prioritize the environment.
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The retail brands selling food and items with a limited shelf-life must manufacture or stock
the items considering their expiry date. They should arrange the products according to their
batch number and expiry date to prevent wastage.
Retail brands can show their eco-friendly nature by preventing the wastage of energy. They
can limit electricity wastage and maintain cleanliness standards inside and outside the
stores while following the health standards of the local govt.
Plastic bags have become a big concern for environmentalists in recent years. Many retail
brands use recycle-able packaging, multi-use bags, and jute bags to decrease the pollution
caused by low-quality plastic packaging and its overuse.
6. Legal factors:
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There are different legalities that a retail store needs to abide by before opening a store. The need
to accept the terms and conditions set by the local law to avoid facing legal actions. Here are some
ways legal factors can impact the retail industry 
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Retail businesses must understand the taxation rules, tariff plans, and more when a retail
brand starts its business. If a company fails to follow them, there are chances that the
business will suffer a loss due to compensations and court cases, eventually being
compelled to stop its business.
Many retail companies export their products to customers all over the world. In that case,
the excise laws, regulations regarding export and import, and foreign investment laws can
impact the business.
The retail market is competitive, and the brands try to provide the customers with the
products at a cheaper rate than others. However, most countries have labor laws that talk
about their working terms. If a retail brand fails to abide by the labor laws, it may face a
ban or closure of operation as punishment.
INTERNATIONAL MARKET SELECTION
Once you have carried out a preliminary analysis of your company, the next step towards
internationalization is to choose the market(s) you want to focus on.
Selecting the right markets and learning how to reach out to them could determine the viability of
your expansion strategy. These markets will shape your international development, business
planning and growth potential.
Strategies for selecting international markets
Before you try to identify your target market, think of a number of suitable markets where your
product could work – then think about how you could serve each one.
No strategy is universally correct – it all depends on the type of business you are in and its
marketing environment. Base your strategy on the resources available and the lifecycle phase your
product has reached. A wide variety of factors will determine your choice of strategy.
1. Market concentration
Focus on a few select markets. This strategy will help you consolidate your company’s presence
in these markets, with the aim of securing constant sales growth.
Advantages:
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It will gain in-depth knowledge of each market and can design or adapt your products to
match
costs are reduced across logistics, management and operations management
it will dedicate more resources to market promotion
it will gain increased risk control of your international activities
2. Market diversification
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Introduce your product to as many markets as possible – perhaps with small shares in the majority
of your markets.
Advantages:
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possibility for rapid sales growth
you could sell at different prices and take advantage of the fluctuations in exchange rates
risk diversification
THE MAIN CRITERIA FOR SELECTING INTERNATIONAL MARKETS
We recommend conducting an initial global market selection process using the following criteria:
1. Environment and market analysis
Put together a short list of countries that present a good concentration or potential concentration
of your target market.
Analyse the variables for each country:
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GDP growth – including the country’s growth prospects for infrastructure and the demand
for tourism products
Country risk – including political or social unrest, insecurity and currency devaluations
Political factors – including the degree of political intervention in business decisions,
political and social stability, and possible alliances or trade agreements with your country
of origin
other factors – including geographic proximity, and the similarity to your source market
in terms of business and social culture
In this first stage of pre-selection, consider countries that interest you or have good market
potential. Next, rank the countries in order of:
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market appeal – including the demand for your product and the risks associated with it
possible operational difficulties – including market legislation, state-level protectionism,
the ease of doing business, procedures for starting a business, taxes, administrative costs,
and the intensity of local competition
2. Analysis of the competition
To analyse competition in your market:
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identify your main competitors and describe them
analyse their economic evolution and sales over the last 3 years
detect their distinguishing factors – including prices, channels, market maturity, financial
position, development potential and plans and/or expansion strategies
3. Distribution channels
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Track the supply chain of your product, from its origins to its final customer. Develop a clear idea
of the intermediate operators and their prices. Analyse the existing sales structure in the country
and how this could be adapted to your product or service.
There are a number of possible distribution channels:
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international distribution from your own market
a local distributor in the target market
your own commercial agent
the internet
a subsidiary or delegated company
the creation of a joint venture with a local partner
4. Demand analysis
You will need to analyze the current and potential demand of your product in its source market, as
well as its profile and expected evolution. This information should confirm that your pre-selection
process was successful and that your chosen markets are suitable for your product.
10 INTERNATIONAL MARKET ENTRY STRATEGIES
Market entry strategies provide businesses with a roadmap to enter into international markets.
Since there are many methods companies can use to sell their goods globally, they will choose the
best approach based on their goals and target market. Understanding market entry strategies and
their differences can help you decide which strategy offers the most benefits to your company.
Here are 10 market entry strategies you can use to sell your product internationally:
1. Flagship store
In retail business the designation of flagship is given to a retailer’s primary location, a store in a
prominent location, a chain’s largest store, the store that holds or sells the highest volume of
merchandise, a retailer’s most well-known location, a chain’s first retail outlet, a store location
with decor or merchandise mix that is distinctly different from the rest of the chain, or the store
location in a chain which carries the most high-priced merchandise catering to the most upscale
customers.
2. Exporting
Exporting involves marketing the products you produce in the countries in which you intend to
sell them. Some companies use direct exporting, in which they sell the product they manufacture
in international markets without third-party involvement. Companies that sell luxury products or
have sold their goods in global markets in the past often choose this method.
3. Countertrade
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Countertrade is a common form of indirect international marketing. Countertrading functions as a
barter system in which companies trade each other's goods instead of offering their products for
purchase. While legal, the system does not have specific legal regulations like other forms of
market entry do.
4. Licensing
Licensing occurs when one company transfers the right to use or sell a product to another company.
A company may choose this method if it has a product that's in demand and the company to which
it plans to license the product has a large market.
5. Joint ventures
Some companies attempt to minimize the risk of entering an international market by creating joint
ventures with other companies that plan to sell in the global marketplace. Since joint ventures often
function like large, independent companies rather than a combination of two smaller companies,
they have the potential to earn more revenue than individual companies
6. Company ownership
If your company plans to sell a product internationally without managing the shipment and
distribution of the goods you produce, you might consider purchasing an existing company in the
country in which you want to do business. Owning a company established in your international
market gives your organization credibility as a local business, which can help boost sales.
7. Franchising
A franchise is a chain retail company in which an individual or group buyer pays for the right to
manage company branches on the company's behalf. Franchising typically requires strong brand
recognition, as consumers in your target market should know what you offer and have a desire to
purchase it. For well-known brands, franchising offers companies a way to earn a profit while
taking an indirect management approach.
8. Outsourcing
Outsourcing involves hiring another company to manage certain aspects of business operations for
your company. As a market entry strategy, it refers to making an agreement with another company
to handle international product sales on your company's behalf.
9. Greenfield investments
Greenfield investments are complex market entry strategies that some companies choose to use.
These investments involve buying the land and resources to build a facility internationally and
hiring a staff to run it. Greenfield investments may subject a company to high risks and significant
costs, but they can also help companies comply with government regulations in a new market.
These investments typically benefit large, established organizations as opposed to new enterprises.
10. Turnkey projects
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Turnkey projects apply specifically to companies that plan, develop and construct new buildings
for their clients. The term "turnkey" refers to the idea that the client can simply turn a key in a lock
and enter a fully operational facility. You might consider this market entry strategy if your clients
comprise foreign government agencies.
INTERNATIONAL MARKET DE-ENTRY: DIVESTMENTS AND WITHDRAWALS
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