#67 What is it with global retailers?
In a recent post, Australian business blogger Andre Sammartino reports that South African grocer Pick’n’Pay has sold off its Franklins supermarkets (”Australia’s Original Discount Grocer”) to the biggest Australian grocery wholesaler Metcash. It’s not the first time that Franklins has been sold off after a somewhat unsuccessful takeover. In the late 1970s Franklins was sold to Dairy Farm International who then put it on the market again in 2001 (which was when Pick’n'Pay acquired it). Ironically, Franklin’s new owner Metcash was once South African-owned itself. Besides the mere fact, the interesting observation is the striking frequency with which retailers fail in international markets – WalMart in Germany (and some other countries), Marks and Spencer in the United States (and Hong Kong), Home Depot in Chile, The Gap in Germany, to name but a few. And even more interesting is the question why that is. Using common concepts from the strategic management literature, we could say that it’s either that those companies have not been ready for the markets or that the markets haven’t been right for those companies. The former fits nicely with the structure-conduct-performance (SCP) paradigm. The SCP, in essence, says that it’s all about figuring out how the industry you’re in works and then finding your spot and the selecting an appropriate strategy. Performance will result almost automatically. Assuming that global retailers know how their industry works (even in distant country markets), they must therefore simply have picked the wrong strategy (or executed it poorly). Or, in other words, they may simply not have been ready for the challenges presented by those markets. Under the resource-based view (RBV), we might assume that some of these global retailers possess unique resources and capabilities (that according to the theory should lead to superior performance), but failed to select those markets where these would actually be advantageous. Instead, they chose markets in which their resources and capabilities were not useful or even harmful to their success. So, if you are a retailer and you like theory: next time, do your homework! And if you’re a retailer and you’re more hands-on: well…. do your homework!
Tags: Australia, Chile, Gap, Germany Marks and Spencer, Home Depot, Metcash, Pick'n'Pay, RBV, retail, SCP, South Africa, USA, WalMart
September 4th, 2010 at 11:27 pm
I find this interesting that the large organizations mentioned, Wal-mart, Marks and Spencer, Game, and Home Depot, have failed in global markets. One would think large businesses that want to venture in foreign market would gather a plethora of market intelligence and market research before making this large leap. It seems that there was little thinking outside the box and the thought process that, “local market strategies would work in all other geographic markets.” This is clearly obvious from the listed companies. When venturing into foreign markets, organizations need to think outside the box to discover what specific geographic markets demand. A sweater that sells great in Canada will not have the same sales results for a global market such as Ecuador. A lesson from real estate can be applied to retailers’ international aspirations,”Every market is different.” With these simple words, executives can realize that demand for differentiated products are not the same in the global market.