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Chapter 5

RMG 200 Chapter Notes - Chapter 5: A Global Threat, Franchising

Retail Management
Course Code
RMG 200
Ken Wong

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Chapter 7
Global Growth Opportunities
Retailers engaged in international ventures for many reasons:
Saturated home marketplace with no room to grow
Highly competitive marketplace
Aging population that spends less and saves more
Economic recession, which limits consumer spending
High operating costs including staff wages, rental costs, and taxes
Restrictive policies on retail development
Shareholder pressure
Key to success in Global Retailing
Globally sustainable competitive advantage
o Most successful when the expansion opportunity is consistent with the retailer`s core
bases of competitive advantage
o To recognize cultural differences and adapt their core strategy to the needs of local
o Long-term commitment and considerable upfront planning
o Retailers use production facilities located in developing economies for much of their
private-label merchandise because of the very low labour costs in these countries
o Other costs from sourcing include foreign currency fluctuations, tariffs, longer lead
times and increased transportation costs
International Market Entry Strategies
- Direct Investment
Involves a retail firm investing in and owning a division or subsidiary that builds and
operates stores in a foreign country
Highest level of investment and exposes to significant risks but has the highest potential
Retailer has complete control of the operations
- Joint Ventures
Is formed when the entering retailer pools its resources with a local retailer to form a
new company in which ownership, control and profits are shared
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