In the past ten years, the world’s economy has experienced accelerated levels. Saturation and restrictive planning let the developed markets have prompted operators to look abroad for growth opportunities.
In order to gain the maximum profit form foreign markets, it is essential for global retailers to understand their consumer behaviour as well as the economic and political environments in their regional markets.
4.1 Global consuming
At the end of 2001, global retailers were grappling with significant changes in consumer fundamentals. In today’s global consumer markets, there are varies elements of commonalities and differences exist. On the global scale, trends influencing the consumption behaviour can be cited as follow: increase in GNP in capita per capita; steady rises in life expectancy; rapid increase of literacy and education levels; growth in industrialization and urbanization among developing countries; increase in share of manufactured exports by newly industrialized countries; advances in transportation and expansion in world travel.
Leading global retailing companies such as Carrefour, Ahold, Auchan, Wal-Mart have to identify and meet the needs of the global segmented consumer market.
By the increase of purchasing power all over the world, and the establish of the EU, both traditional supermarkets and department stores were not able to meet the consumer’s requirements, a more convenient way for shopping, a ‘one-stop’ shopping and shopping as leisure. Consequently, huge mass retailers emerged by providing customers with high buying quantity at low cost, the hypermarket format.
Today, most leading international retailers consider hypermarket as it key strategic format for their worldwide expansion. In the past five years, the total number of food related stores developed by international operators has increased by 23%. Since 1997, the number of hypermarkets / warehouse club has increased almost double, form 2788 to 4190 worldwide. (see Appendix?)
What are the secrets to success, there is no single formula. Use time as a critical strategic component and the flexibility of their strategy during implementation.
When Carrefour entered the US, they did not achieve their high expectation. One of the reason is the biggest competitor Wal-Mart, another reason is that they did not understand the consuming format in US, they did not localize their strategy. Americans were used not only to a wide merchandise, and low prices, but also the convenience of shopping without having to drive distances for making their purchases. Whereas, in Asia, Carrefour achieved big success, they adopt the localization strategy.
In China, firstly they localized their name from ‘Carrefour’ to ‘???’. Similar pronunciation, it means, a happy lucky family, which has a huge impact on consumers. They segmented the Chinese market geographically. They understood the local consumers price sensitivity, they lowered their price in order to achieve much more quantity of purchasing. In Indonesia, Carrefour has put it as a key management positions and give them intensive training, and localize their stores display, knowing that local consumer like eating fresh seafood instead of the frozenness.
As for Wal-Mart, they expand their market in Mexico, which is a market with huge potential, they build large parking space only to realise that many consumers do not drive cars. They normally travel by bus and had to walk across the large parking space with heavy packages, Wal-Mart responded by introducing bus shuttles for customers.
Localization is the key factor for acceptance and success of an international company/brand. It is important to speak to the customers and clients in their own language and culture. The particular concept has developed by leading global brand: ‘Think Local, Act Local. Going Global, has to be going local’.
4.2 Regional Market (Europe, Asia)
The greatest opportunities for Wal-Mart, Carrefour, Ahold, Metro, Auchan and all the other global retailers come from Asia.
Asia with 3 billion consumers and some of the most populous countries in the world, Asia remains an attractive region for 2003.
China, with 1.25 billion people, GDP growth of 10% and nearly 13% per year increase in retail space, continues to attract global retailers. Particularly mainland China. As it is a emerging nation, with its unique features of its economics structure, more than 300 global retailers have invested in the market. In one of the major economic events in 2001, China was voted into the world Trade organization. This should eventually lead to strong increase in trade for world’s economies, which benefit many global retailers.
Carrefour is consolidating its positions by setting up purchasing centers in 11 Chinese cities. Ikea opened in Beijing May 2003, and Tesco is planning to expand in the market.
However, there are certain issues that foreign investors are facing, is that state owned local players are gaining strength. The Shanhai local government pressured 3 shanghai based retailers: Yibai, Lianhua, and the Huanlian, into forming a joint holding company, the Bailing Group. The holding company’s ambitious objectives include leading industry consolidation and enabling sustainable leadership of local state-owned retailers. Such move will raise entry barriers for private and foreign investors and create potential advantages for local state-owned retailers.
South Korea has recovered economically for its 1998 crisis; GDP growth by 6% in 2002. Wal-Mat almost doubled its store count from 6 to 11 and plans to open even more stores in 2004.
Japan, the world’s second biggest market after the US tremendous oppourtunities of global companies to penetrate it . Although entering Japan is not easy, due to the restrictive plan which complicated supply chain structure and lack of Japanese 10 years recession is no doubt deterring a number of operators.
Eastern Europe, a fast growing region with regional output growth of more than 3%, and most countries are on track to join the Europe Union by 2010. The top ranked country, and the one commanding the highest score increase this year is Russia. With a inflation forcast at 16% for 2003, versus 84% in 1998. and GDP growth of 4 to 5% a year, Russia has become economically stronger. As a emerging market, the retail density is very low, only 6 international players have settled there. This region has a huge potential for global retailers. In Russia, there are 143 million population, according to official Russian statistics, Russians spend up to 80% of their income on consumer good. Auchan an Metro has already settled their expansion in Russia, Wal-Mart which sent a delegation to Russia in 2002 to check out the possibilities. However, foreign retailer still face many issues in Russia, Metro and Auchan have been accused of unfair competition by local retailers.
Hungry is the most prosperous economy in the region after Poland and Czech Republic. The country will join the EU in 2004. which make the region more attractive to global retailers.
As the merger of European Union, the biggest single market in the world. All the global retailers are try to gain maximum profit, In 1997, Wal-Mart completed of Wertkauf a 21-store German hypermarket chain. In 1999, Wal-Mart announce a $10.8 billion turnover in EU. Britain’s third largest super market chain, Asda with 232 stores in England, Scotland and Wales.
As Carrefour, it is already became the biggest grocery retailer in EU. Ahold recently has began their expansion in Spain. In Italy, with just seven top 30 retailers operating in its territory, all of which are constitutes the exception between the major countries of Europe, due to restricted government policy and onerous bureaucracy impeding store development.
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