The Internationalisation of Retailing

G. Akehurst, Nicholas Alexander, G. Akehurst, Nicholas Alexander

• Publisher: Routledge
• Year: 2013
• Print ISBN:
  9780714641744
• eBook ISBN:
  9781136304835
• Topic: Business
• Subtopic: Business General
• Index: Business

The large retail enterprise which does not think on an international basis faces marginalization by competitors building international operations. Here, management researchers in the areas of international retailing offer an insight into the mechanisms of the internationalization of retailing.

Reciprocal Retail Internationalisation: The Southland Corporation, Ito-Yokada and 7-Eleven Convenience Stores

Leigh Sparks

Retail internationalization has become a focus of research activity in recent years. This research has become perhaps both more broad and deep than previous research, reflecting the changes in retail internationalisation itself. There remain, however, fundamental issues about the process and nature of retail internationalisation. This paper examines initially the internationalisation of a concept - the 7-Eleven convenience store - from the USA to Japan. This concept has been subsequently 'Japanized' as the convenience store sector in Japan grew rapidly and successfully. The new approach to convenience stoers has now been re-introduced into the United States through the agreed take-over of The Southland Corporation by its original Japanese franchisee, Ito-Yokado. This process of retail internationalisation is analysed and described and placed into the context of current conceptualisations on retail internationalisation.

Retail internationalisation has received increasing research attention in recent years. Dawson [1993, 1994] provides a thorough review and incisive assessment of the state of this body of knowledge. Brown and Burt [1992], in a special issue of the European Journal of Marketing devoted to international perspectives on retail marketing, have assembled a collection of papers which also provides an introduction to the literature, approaches and problems in this area. They conclude:

What exactly is meant by retail internationalisation? What do retailers actually internationalize? Is it management expertise and management systems? Innovative forms of trading? Or unique retail brands? Clarification of this definitional issue will allow us to assess whether retailing faces genuinely unique problems or whether it simply faces the same problems as other industrial sectors which internationalize [Brown and Burt, 1992: 80].

There seems to be a crisis of confidence about our conceptualisations of retail internationalisation [see also Pellegrini, 1994], This is due to a lack of understanding perhaps of the breadth of the processes undertaken, an overconcern with the monitoring of activity and simplistic conceptualisations and an unthinking borrowing of conceptions from outside retailing. It is argued here that retail internationalisation is a complex and frustrating topic that requires a deeper understanding of company operations, practices and history for our conceptualisations to be useful. It is further recognised that the variations in retail internationalisation are considerable and that at the moment we have not fully understood all the issues and aspects involved.

This belief is illustrated by the examination of the internationalisation of particular businesses. For example, the Southland Corporation developed the 7-Eleven convenience store chain in the United States in the 1940s, and became highly successful. In 1973 the company signed a franchise (area license) agreement with Ito-Yokado in Japan, which set up Seven-Eleven Japan Co. Ltd to develop a 7-Eleven convenience store chain in Japan. The development of the convenience store operations and their parent companies then began to diverge as operational practices changed. At the same time as the core convenience store market in the United States matured and then stagnated under competitive pressure, so the Japanese convenience store market expanded and boomed. After a disastrous management leveraged buy-out in 1987, The Southland Corporation emerged from a pre-arranged Chapter 11 bankruptcy with 70 per cent of the company owned by Ito-Yokado and Seven-Eleven Japan Co. Ltd. As Kaletsky [1990] notes, 'what could be more appropriate than Southland being rescued from the consequences of Wall Street's blunders by its own better-financed franchise in Japan'. From being franchisees in 1973 with no stores, the Japanese now control the entire company [Sparks, 1994]. At the same time, the Japanese, through an operational mission supported by extensive use of technology and advanced systems, have redefined the convenience store operation. This 'new model' convenience store system is now being introduced to the United States in an attempt to revitalise the performance of The Southland Corporation [e.g., Suzuki, 1991].

The brief history above raises questions about the conceptualisation of retail internationalisation, given the changes in ownership, business method and operations. Questions concern technology transfer issues, the role of franchising, knowledge transfer, business control and the direction of various flows of money, risk, knowledge, formats and information. Here, it is suggested that in addition to general assistance to deepening and broadening our conceptualisations, the case describes a process best considered as one of reciprocal retail internationalisation. The aim of the paper is therefore to examine the questions around retail internationalisationvia a case study and to use the study to enhance our consideration of retail internationalisation. To meet this aim, the basic structure of the paper is divided into a review of retail internationalisation conceptualisation, a case on the Southland Corporation, Ito-Yokado and 7-Eleven convenience stores, and discussion and conclusions drawing out the lessons and implications of the case study for the understanding of retail internationalisation.

Conceptualising Retail Internationalisation

One of the characteristics of the literature on retail internationalisation is the way in which ideas and approaches have been borrowed from other subject areas or sectors. Whilst such borrowing can be productive and highly useful, there are questions raised, as for example over whether the internationalisation of retailing is different to the internationalisation of manufacturing. It has been argued that retailing is now radically different and has therefore to develop its own approaches:

The balance between centralized and decentralized decision-making, the relative importance of organisation and establishment scale economies, the degree of spatial dispersion in the multi-establishment enterprise, the relative size of establishment to the size of the firm, the relative exit costs if decisions are reversed, the speed with which an income stream can be generated after an investment decision has been made, different cash flow characteristics, the relative value of stock and hence importance of sourcing; all these items, and others, serve to differentiate the manufacturing firm and the retail firm not least in respect of the internationalisation process [Dawson, 1993: 28].

Despite this, however, the development of retail internationalisation concepts is heavily biased towards approaches drawn from production sectors and international business studies.

Davies and Fergusson [1994] have categorised five different conceptual strands to retail internationalisation, as identified in Table 1. It is possible to make two points from the table. First, whilst the segmented nature of the table may be considered as a categorical artifice, it is also a reflection of the approaches that have been taken in the literature. Much of the work, for example, has been in categorising various factors or in applying the value chain or the eclectic paradigm to the retail sector and/or a particular company. Whilst the broad complexity of retail internationalisation is recognised, in the main the research has been focused in discrete areas. Secondly, the derivations of the various conceptual strands are identified as

TABLE 1
APPROACHES TO INTERNATIONAUSATION CONCEPTUAUSATION

TABLE 2
UNDERSTANDING RETAIL INTERNATIONALISATION

being manufacturing rather than service or retail based. In all cases the basic approach has been identified in other sectors before attempts have been made to apply the ideas and concepts to retail internationalisation. These in turn raise two further issues: the extent to which the direct implantation of such concepts into retailing can be sustained; and the breadth of our conceptualisation of retail internationalisation.

Several authors have made these points before, often in the context of reviewing the application of one concept into retailing. Some of these authors are indicated in Table 1. In particular, and with a more general focus, Dawson [1993, 1994] has provided a wide-ranging review of the form and extent of retail internationalisation, and has criticised the simplistic concept adoption that has characterised much of the academic literature. He identifies the key features of retail internationalisation as the need for adaption of management practices and processes in response to the cultural character of the host country, the role of individual entrepreneurs in taking an international perspective and the lack of knowledge by retailers of the impact on and value of the firm of the process of internationalisation.

The second problem noted above, of the too narrow perspective of the scope of retail internationalisation, has also been addressed by Dawson [1993]. Table 2 is adapted from the structure of his work and sets out a broad listing of possible components of retail internationalisation. If we are to understand retail internationalisation then we probably should be endeavouring to understand the activities in the table, possibly on a firm-specific basis. It is intended to use this framework in the study of Seven-Eleven Japan below.

The importance of Dawson's conceptualisation lies in its breadth. At the starting point is the idea that retail internationalisation has various dimensions. The main focus of these has been on the physical store opening activity of retailers, but, as Table 2 makes clear, there are many more dimensions and components to retail internationalisation than store openings alone. For example, Section A in Table 2 suggests that there are financial, consumer and managerial aspects to internationalisation that can operate independently of any retail store openings. These less tangible or indirect retail international dimensions form a backcloth to any decision to internationalise stores, and may be the only, or the prerequisite international activity in some cases. There may of course be barriers to such activities as there are for store openings [Davies 1993, 1995].

Arguably the most common form of retail internationalisation is the international sourcing (Section B) of products and the development of mechanisms for ensuring the supply of appropriate products. There are again a variety of approaches and companies develop networks of their own or with collaborators. Whilst products are the main preoccupation of these buying operations, services and other information based sourcing may also be undertaken.

There are then the retail operations themselves (Section C). This has been the main focus of the previous research on retail internationalisation [Burt, 1993: Pellegrini, 1994]. This research has focused on the reasons and dimensions of the store-based internationalisation as well as describing and quantifying the extent and directions of the activity. Attempts have then been made to link this description to the various theories and conceptualisations identified earlier (Table 1).

In one sense, the retail activity in terms of market entry is a realisable and tangible outcome of the retail internationalisation process. There are other outcomes as well, including measurable 'success or failure' of the

TABLE 3
ADVANTAGES AND DISADVANTAGES OF ALTRNATIVE MECHANISMS TO ESTABLISH INTERNATIONAL OPERATIONS

activity internationalised. This process of transfer can include formats and ideas from all aspects of retail internationalisation as well as less visible dimensions such as management expertise (Section D).

The discussion above and lable 2 on which it is based, emphasise the very broad nature of retail internationalisation. Whilst store openings are the main focus of previous attention, it is argued here that a much broader conceptualisation of the dimensions of retail internationalisation is needed. We can highlight the important areas of non-store activity, ideas, expertise, sourcing and the learning process in terms of outcomes from retail internationalisation.

This broad view of the topic should not preclude debate on market entry and physical internationalisation, however, although the boundaries here can be blurred as well. For example there are a variety of possible entry mechanisms for a business establishing international operations. These range from the direct involvement of a business in expansion using their own operations to less direct involvement through non-controlling interests. Table 3 provides details of some of the possibilities. As the level of direct involvement declines down the table, so the level of knowledge transfer or borrowing increases. At the mid-point of the table is a franchise style agreement, which provides normally for some direct involvement (financial, managerial, product), yet also often allows local running and development of the operation. The interplay of information and business transfer...

Table of contents

• Cover
• Title
• Copyright
• Contents
• The Internationalisation Process in Retailing
• A Conceptual Model of Strategic Considerations for International Retail Expansion
• Towards a Taxonomy of International Retail Alliances
• The Changing Process of Internationalisation in the European Union
• Reciprocal Retail Internationalisation: The Southland Corporation, Ito-Yokado and 7-Eleven Convenience Stores
• The International Activities of Japanese Retailers
• Differences between International and Domestic Japanese Retailers
• International Comparisons of Supply Chain Management in Grocery Retailing
• The Planning Implications of New Retail Format Introductions in Canada and Britain
• Retailing in Canada and the United States: Historical Comparisons
• Consumer Behaviour Convergence in the European Union
• The Internationalisation of Retailing in the Czech and Slovak Republics
• Developing a Framework for the Study of the Internationalisation of Retailing
• Notes on Contributors