Financial Hazard

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Foreign retailers that have made an impact on the UK market in recent years include Aldi, the German discount food retailer and Toys “R” Us from the USA. Each of these retailers has found new methods of presenting old products to the British people and, in the case Toys “R” Us, have become real threats to their British rivals.

A manufacturer may elect to make a single standard item for all its markets (for example Coca Cola) and profit from the economies of scale. But the retailer may be obliged to offer a variety of products made to different specifications in all its foreign markets. The retailer is thus unable to benefit from the purchasing power of supplying standard items in its retail outlets world-wide.

However, the experience of retailers overseas will depend on the sectors in which they operate. In its global operations, Toys “R” Us duplicates marketing strategies that have worked in the US, under the assumption that children are essentially the same everywhere Fast-moving consumer goods, including personal care products, have traditionally been prone to stringent health and safety legislation, often necessitating modifications in order to satisfy national tastes.

However, the ecologically sound principles of the Body Shop and the increase in environmental awareness encouraging consumers to question the composition of products, has facilitated the company’s growth. Its products are “perceived” as universal because they are “natural” and not tested on animals. Hence, unlike less focused retailers such as Marks and Spencer and Storehouse, the Body Shop can appeal to a specific “international” customer and sell the same product in all its overseas markets without modification.

The Body Shop manufactures and markets naturally-based skin and hair care products. It is a highly-focused niche targeted at the environmentally and ecologically conscious international consumer. In the niche market chosen by the Body Shop, the impact of culture is greatly reduced when compared with other retailers supplying mixed goods. Conclusion Businesses of all sectors need to fully evaluate and understand the nature and habits of foreign markets in their efforts to undertake overseas expansion.

This is even more of a necessity in retailing which has to cater directly to a multitude of needs and tastes. Hence a retailer expanding abroad must possess characteristics similar to those of a chameleon in order to blend in with local customs and be fully accepted. The rush by many retailers to internationalize during the boom years of the 1980s led a number of them to employ market entry and development strategies, which, in retrospect, were inappropriate both to the organization and/or the nature of the foreign markets.

Whether these retailers have persevered with their internationalization strategies unchecked or with modifications, their experiences in overseas markets have highlighted the importance of culture, and the need to select the most suitable market entry method. In overseas markets, the retailer is inevitably confronted with a range of unfamiliar obstacles both internal and external to its organization.

The accepted norms of a country impact upon the nature of the product the retailer can offer and the way in which the goods may be presented to the foreign public. International retailing is extremely complex as no two countries have perfectly converging characteristics. Retailers need to acquire a thorough understanding of the implications and effects of local cultures on their foreign operations.

Culture is the basis for nations’ behaviour patterns, tastes, values and laws. In order to unravel the peculiarities of overseas markets, the retailer has to conduct a careful cultural assessment. The information gathered should then govern all aspects of foreign market strategies. A retailer incapable of comprehending the cultural subtleties of foreign cultures has to contend with complications arising from well-intentioned but inappropriate strategies.

The implications of culture on the survival of the overseas retailing venture are numerous because culture is all-pervasive and retailers are obliged to conform to the social norms of every country entered. Failure to understand and adhere to regulations dictated by local tastes and values leads to the alienation of both consumers and local authorities. A detailed cultural assessment is a prerequisite for the smooth introduction of a novel retailing concept or establishment in foreign markets.

A number of experienced retailers have fallen victim to the dilemma presented by divergence in cultural characteristics. A retailing formula successful in country A may not necessarily be accepted in country B, even if both countries share a common heritage and/or language. Culture is thus a major barrier to foreign market entry for the retailer because social norms and values alter continuously and even the slightest errors in cultural assessment could prove catastrophic to the international retailer.

Reference

1. Anderson E J and Coughlan A T (1987) “International Market Entry and Expansion via Independent or Integrated Channels of Distribution” Journal of Marketing, Vol 51, January: pp 71-82 2. Buzzell and Quelch (1990) “International Marketing Management” Addison-Wesley Clutterbuck D (1980) “Breaking through the Culture Barrier” International Management, December: pp 41-42

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