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GGR252H1 (6)
Chapter 1

GGR252 Chapter 1

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Department
Geography
Course
GGR252H1
Professor
Stephen Swales
Semester
Winter

Description
CHAPTER 1 – FOREIGN RETAILERS IN CHINA: STORIES OF SUCCESS AND SETBACKS Introduction - Transnational corporations (TNC) o Retail corporations, mostly in Europe and North America, sought to acquire others in order to consolidate resources and markets o Active in mediating produce-consumer relations (e.g., creation of new, and re-configuration of existing, retail spaces to induce consumption) - Retail internationalization o Saturation of home markets o Exploration of foreign markets inAsia and Latin America o Migration of retail capital across national borders o Development of retail spaces in foreign consumer markets o Dawson’s four-phase model  Stability • There is considerable fluidity as the firm familiarizes itself with the new market  Consolidation • The firm adjusts to new conditions, consolidating its position  Control • The firm will attempt to exert control over vertical and horizontal channel relationships  Dominance • Once the retailer becomes established in the new market, mature strategies seeking market dominance are applied o Influenced by firm characteristics (e.g., resource availability and commitment, differential advantages) and external retail environment (e.g., market conditions, consumer affluence, cultural preference, competition, regulation) - China o New frontier for many international businesses o Offers both a massive source of cheap labour and a market of mass consumption o Largest emerging market in the world of 1.3 billion consumers Recent Changes in Market Conditions and Elimination of Unconventional Trade Barriers - Two benchmark indicators of consumer market size o Population size o Per capita income - Foreign retailers entered China in 1992 to experiment, but their first stores did not open until 1995 o Chinese government confined the experiment to 11 cities in the east coastal region o China was admitted to the WTO in 2001  China was required to remove all remaining trade barriers and open its retail market completely within three years o China shifted to regulating foreign retailers by legal means (e.g., planning legislations)  Future retail establishments must conform to municipal plans and local land use bylaws  Land use rights must be publicly bid on  Large facilities that are 10,000 m or more must go through a public hearing process  Foreign-invested enterprises must accept and pass annual inspections with audited financial reports Market Penetration and Performance of Foreign Retailers - Two indicators of success of foreign retailers o Degree of market penetration  Number of stores  Geographic distribution = a wider geographic distribution indicates success over local protectionism and cultural barriers o Level of business performance  Total sales, but retailers with high sales volumes may not yet be profitable  Profit levels, but not readily available - Three groups of major foreign retailers o Western retailers (include both North American and European retailers)  Achieved higher levels of market penetration in China than other foreign retailers  Market penetration has taken place in two directions simultaneously • From the eastern coastal region to the western interior • From large urban centres (mainly provincial capitals) to second and third-tier cities  E.g., Wal-Mart, Carrefour, Metro, Auchan, B&Q have high market penetration  E.g., Ikea, Makro have limited market penetration  High total sales, but only higher per store sales than SoutheastAsian retailers o Japanese retailers  Among the earliest foreign entrants to China’s retail market  Expansion has been much slower and geographically limited  E.g., Jusco, Isetan, Iro Yokado, SOGO, Daiei, Lawson  Low total sales, but highest per store sales o Southeast Asian retailers  Have been able to capture a much larger market share in China than the Japanese retailers  E.g., Trust-Mart, RT-Mart, Hymart-Hymall, Lotus, E-Mart are all hypermarket operators  High total sales, but lowest per store sales Examination of Corporate Strategies - Every growth strategy must be built on the following pillars in order to maintain a competitive edge: o The retailer must offer a competitively superior produc
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