Free Business Dissertations - Introduction International Expansion For The Retail Industry Is A Scope For
Introduction
International expansion for the retail industry is a scope for retail industry to grow when it is facing excess capacity, slow growth, regulator, pressure and price conscious consumers. There are many examples of the failure of expansion of retailers when they expanded into the global market but there are many successes too. These successes are still fueling retailers to go global. The new markets hold a lot of promise with increased income, liberalization and spending power of consumers while domestic markets are saturated and growing very slowly. Finally, recent successes pave the way for more astute investing in the future (, 2004). But the retail environment continues to be challenging with competition coming from all fronts putting pressure on prices. The overseas market allows the sourcing of a wide range of products from various low cost places. For many U.S. retailers, the initial impetus behind globalization was on finding low-cost production sources, and it is in this area where several companies excelled.
Globalization Drivers
YIP suggests that there are four globalization drivers: market, cost, government and competition (Yip, 1995). The retail industry is inflamed by these four forces. The retailers are expanding to other markets where they can grow at an extraordinary rate with rising income of these people creating large scope for investment. The retailers are also finding low-cost production scale. Yip further comments that globalization can yield economies of scale and scope in RSD, Manufacturing and marketing (YIP 1995). Retailers are finding China as a major supplier of low-cost goods with improving quality. The government is opening the retailing market for foreign players and creating opportunities for global players. Liberalization in Russia, East European countries and China are new markets for retailers to expand their business as liberalization are the norm of today’s economic policy. More recently, U.S. retailers are looking to globalization as a source for new customers and as a means to keep their selling avenues open and merchandise fresh and relevant to the consumer (Deolitte, 2004).
Tesco also sources its products from international manufacturers to reduce the cost and offer products at competitive prices. Tesco has expanded its business beyond the UK when it saw opportunities in the overseas market. It has been successful in opening outlets in Central Europe and Asia. The increasing scale of operations significantly increases their efficiency and generates profitability. They always plan to operate on a global scale having an ambition of becoming a truly international retailer.
Porter’s Five Forces Model
Competition in the domestic market is putting pressure on profit margins for retailers and forces retailers to go beyond their domestic market. It is well explained in Porter’s five forces model how competitive forces are shaping industry fortunes.
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