Journal of Business Strategy

Emerald Article: Foreign retailers in China: the first ten years Lisa Qixun Siebers

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To cite this document: Lisa Qixun Siebers, (2011),"Foreign retailers in China: the first ten years", Journal of Business Strategy, Vol. 33 Iss: 1 pp. 27 - 38 Permanent link to this document: http://dx.doi.org/10.1108/02756661211193794 Downloaded on: 09-11-2012 References: This document contains references to 30 other documents To copy this document: permissions@emeraldinsight.com

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Foreign retailers in China: the rst ten years

Lisa Qixun Siebers

Lisa Qixun Siebers is a Senior Lecturer in the Division of Marketing, Nottingham Business School, Nottingham Trent University, Nottingham, UK.

Introduction
Studying the experience of foreign retailers in the Chinese market during the period of its transition to a more open economy provides a deeper understanding of the retail internationalization process. It can help managers of retail rms to better understand how to be successful in China and other emerging economies. Chinas economy has been growing rapidly since 1978 when it began its move from a centrally planned to a market-based economy. With retail sales growth of about 13 percent per year, China became a most attractive target market for global retailers by 2005. By the end of 2005, over 300 foreign retailers had entered China to look for expansion opportunities as the restrictions were reduced and the Chinese economy grew. Box 1 summarizes the regulatory changes in China since the country opened its retail market. By 2006, most of the major foreign-invested retail chains were operating in China. The growth and dynamics in the Chinese market provide a unique opportunity to better understand the retail internationalization process. There are ve stages in this process, including pre-entry, entry, post-entry, assimilation and exit (Dawson and Mukoyama, 2006). Each of the different stages is characterized by different activities of the rm. The relationships between the stages of the process and the various forms of the process of retail internationalization are shown in Table I. Previous research has focused on pre-entry and entry stages of retail internationalization. Little has focused on post-entry internationalization of retailers. Foreign retailers entered China from the early 1990s and they are now at the post-entry stage of internationalization. Post-entry stage refers to the next stage after a retailer has completed its pre-entry and entry stages in a foreign market, when the retailer starts to expand in the host market, signaled by greater rate of expansion (Dawson and Mukoyama, 2006), when the rst moves are made to open the second or more outlets in another location. This paper aims to explain the factors that inuence foreign retailers expansion in China from one region to another in the rst ten years of operation. Based on empirical research, the ndings of this study indicate that foreign retailers apply six key strategies to expand in China: adaptation to the external environment, responses to psychic distance, establishment of business networking, localization, entry strategies into new regions and the application of local management team. The paper offers an exploratory framework, which presents the ndings and articulates the interdependent relationships of various factors that inuence retailer expansion in China. It helps managers of retail rms to better understand how to be successful in an emerging market.

The spatial and temporal scope of the paper

This project is supported by the National Science Foundation of China (70702001).

There are four signicant phases of changes of government policies that inuence the expansion process of foreign retailers in China (Wang et al., 2007). During the rst phase,

DOI 10.1108/02756661211193794

VOL. 33 NO. 1 2012, pp. 27-38, Q Emerald Group Publishing Limited, ISSN 0275-6668

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Box 1. Regulation changes in Chinas retail sector

B B

Before 1991: The retail industry in China was protected and no foreign retailers were allowed July 1992: Foreign retailers were permitted to enter China through Joint Ventures (JVs) with Chinese rms and were limited to setting up stores in special areas like Beijing, Shanghai and ve special economic zones. The authority to approve JVs laid with respective provincial governments. Mid 1998: The Chinese central government prohibited local governments from granting approval for foreign retailers to open new stores. June 1999: The Chinese central government liberalized the rules controlling foreign investment in retailing and wholesaling, but restrictions remained in place; foreign retailers were allowed to set up stores, but only if a 51 percent stake was owned by Chinese partners; franchising was prohibited and the import of goods by retailers was limited to a maximum of 30 percent of their annual sales in China. 2004: Major shifts eliminating the requirement for central government permission for foreign retailers to open stores in China and requirements for a minimum level of capital investment were eliminated; foreign retailers were permitted to open as many stores as they wanted and to operate their own distribution services and wholly-owned stores were now permitted.

(Sources: Wang et al., 2007).

Table I Activities illustrating the relationships between stages and form of process
Stage of process Functional operations Pre-entry Entry Post-entry Knowledge review; Market research Formula design Spatial operations Forms of process Temporal operations Extent of earlier operations Timing of entry Rate of expansion Structural operations Strategy evaluation Entry method; relations with suppliers Management of cost structure Creation of subsidiary company Sales of operation to other retailers

Local market research Market choice

Retail brand Network development development; knowledge transfer Social integration of rms Sales unit closures

Assimilation Exit

Trigger to establish independent rm

Source: Adapted from Dawson and Mukoyama (2006, p. 35)

from 1992 to 1994, foreign retailers passed through an experimental period. The Chinese State Council opened Chinas retail market to stimulate the development of tertiary industry. However, only six large cities (Beijing, Shanghai, Tianjin, Guangzhou, Dalian and Qingdao) and ve Special Economic Zones (Shenzhen, Zhuhai, Shantou, Xiamen and Hainan) were opened to foreign retailers, and each of those cities was permitted to have only one or two foreign retail rm(s), which had to be operated in joint ventures (JVs), with less than 50 percent of stakes held by foreign parties. Wholesaling was prohibited. Foreign retailers started to enter China, and the majority of them were from Southeast Asian countries such as Japan, Singapore and Hong Kong. The second phase, from 1995 to 1998, was the preliminary phase. In October 1995, the Chinese government took further step to open the retail sector. Beijing authorized foreign retailers to operate retail chains instead of opening single-store only. A partnership with Chinese retailers was required and the law specied the Chinese partner had to hold a majority of the shares. During this period the period of particular interest for this research (beginning in 1995), foreign retailers from Western Europe and the US began to enter China.

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The third phase was the development and adaptation phase, lasting from 1999 to 2000. In June 1999, the Chinese central government further liberalized the retail market. Retail rms were allowed to develop their businesses in all provincial capitals, capitals of autonomous regions, and municipalities as well as the Special Economic Zones. Joint Sino-foreign retailers were also allowed for the rst time to enter wholesale operations. Majority foreign ownership of up to 65 percent became legal for the joint-retail chains giving them the potential to purchase large quantities of made-in-China products and export them to other countries around the world. In April 2000, the Chinese central government decided to reduce or even allow the waiver of land transfer fees or land usage fees under specic circumstances. During this period, foreign retailers were not only developing and adapting in the Chinese market, but they started to develop more appropriate strategies for further expansion in China. Phase four started from 2001 onwards when China joined the WTO. During this period, foreign retailers began a phase of aggressive expansion in China encouraged by an increasingly open business environment. All the restrictions on foreign ownership and the number of branches that could be opened by foreign retailers were lifted by the end of 2004. Foreign retailers beneted from preferential treatment and faced fewer obstacles when operating in China. The focus of this paper on the period between 1995 and 2005 allows the author to analyse important expansion activities of foreign retailers from their entry into China to one year after all restrictions were removed. China is a vast country in which the various regions have distinctive characteristics. The huge scale of the country and the cultural differences between Chinas various regions make it more appropriate to view the country as a collection of markets. Studying the expansion of foreign retailers in China provides insight into some important factors inuencing international retailer expansion.

Terminologies used in this paper

Retailer in this study refers to multiple-product retailers, whose formats include hypermarket, supermarket, discount department store, Cash and Carry Warehouse retail store, membership stores and department stores. These formats represent the main foreign retail formats operating in China. Foreign retailers refer to non-Chinese retailers from developed economies, most frequently those from North America, Europe and developed Asian countries such as Japan. Expansion process refers to one of the growth activities at the retail rms post-entry stage in a foreign market. Post-entry stage refers to the next stage after a retailer has completed its pre-entry and entry stages in a foreign market, when the rm starts to expand in the host market (Dawson and Mukoyama, 2006).

Factors inuencing retail internationalization

Previous studies have examined various issues in the retail internationalization process, mainly focusing on the motives behind retail internationalization, market selection, entry modes, retail management considerations as well as the importance of location. Location has been identied as a key factor in retailing, and selecting location involves choice of markets (Eren-Erdogmus et al., 2010). The important considerations inuencing initial market selection include cultural proximity, geographical proximity, and the stage of development of retailing (Burt, 1993). Retailers consider political, economic, social and cultural issues for location choices (Sternquist, 1998), as well as entry mode selection (Erramilli, 1991). Moreover, customer characteristics, accessibility, competition, prestige and cost have been found to be important factors in selecting store locations (Pederzoli, 2006). Retailers tend to expand into geographically proximate markets in part because of benets of proximity for distribution. The logic is the same for international expansion within one state into geographically proximate regions. For a big nation, geographically close

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regional markets are more likely have similar cultures (Alexander, 1997). This is relevant to our study, which aims to analyze how retailers expand in a large collection of markets in a single country. Push and pull factors are key inuences on internationalization (Treadgold, 1990). Push factors refer to unfavorable home country characteristics such as restrictive regulations, competitive pressure, low economic status, an unstable political situation and/or limited resources that push rms to internationalize. In such a situation, rms tend to take reactive approach to internationalization. Pull factors refer to favorable host country characteristics such as reduced regulation, high growth potential, rapid economic development, a stable political regime and/or support that attract rms to enter and expand in a particular market. In this type of situation, rms tend to take a more proactive approach to internationalize into a new international market or expand in an existing international market. Foreign retailers expansion inside the Chinese market has been inuenced by both push factors and pull factors. On the one hand, competitive pressures in the existing regions have pushed retailers to expand; on the other hand, potential growth in other regions has attracted foreign retailers expansion. Firms characteristics have been frequently mentioned in the internationalization process. These mainly refer to rms resource commitment, competitive advantages (Vida and Fairhurst, 1998), and international experience (Evans et al., 2000). Decision-makers characteristics directly inuence rm internationalization. Decision-makers perception and attitudes, behavior, knowledge (Vida and Fairhurst), educational background (Leonidou et al., 1998), work experience and experience in the host market (OGrady and Lane, 1996), and leadership (Alexander and Myers, 2000) have been found to be key drivers for internationalization. The concept of psychic distance has also been developed in recent studies of rm internationalization. Psychic distance is dened as the distance between the home market and foreign market resulting from the perception and understanding of cultural and business difference (Evans et al., 2000, p. 377). The perception and understanding of cultural and business differences between home markets and foreign markets are inuential for rms performance, according to Evans et al. (2000). Psychic distance is linked to cultural distance (Hofstede, 1983; Lindsay et al., 2003) and business distance (Dupuis and Prime, 1996). The existence of psychic distance between home and host country does not necessary lead to poor performance, but perceived psychic distance is crucial. That is, perceived similarity between home and host countries may lead to poor operating performance and perceived greater psychic distance may contribute to better performance, as seen, for example, in Carrefours failure in the USA and success in Taiwan (OGrady and Lane, 1996). Thus, the responses to psychic distance are signicant for foreign retailers performance in the Chinese market (Siebers, 2011). In this regard, organizational change, leadership and innovative ideas may play important roles in retail internationalization. This is directly related to the learning experiences from retail operations, which differ strategically from one rm to another. During the learning process, psychic distance might be reduced and retailers become more localized. Multinational retailers learn more than global ones (Sternquist, 1998). There is clearly a temporal dimension in foreign retailers corporate learning activities (Currah and Wrigley, 2004). The different stages of learning process can inuence the process of internationalization. In summary, the literature on the retail internationalization process has covered four signicant determinants: location, push and pull factors, the rms characteristics and psychic distance. Previous studies placed emphasis on the factors related to the causes and consequences of international retailing activities. However, the interdependent nature of various factors needs to be better understood, with particular reference to an emerging market. This paper identies the factors that inuence the retail internationalization process in emerging markets and the relationships between these factors, using the example of China.

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Methodology and data

Choice of method This study employs a case study approach. The adoption of this approach is based on the function of the research questions that have been addressed. The drivers for expansion of international retailers are still understudied, and these issues require more theory building. A qualitative case study approach is particularly suitable when the aim is to understand the how questions in the decision making process (Eisenhardt, 1989). The case study research undertaken here serves to develop theory on the contingent factors that inuence the performance of post-entry rms. Research design and data collection Given the research questions and theoretical concerns in this paper, a multiple case research design has been adopted. Cases are treated as independent experiments for theoretical replication and pattern matching (Yin, 2003). Five retailers were chosen: Wal-Mart (American), Carrefour (French), Metro (German), Tesco (British), and Heivado (Japanese) with the following rationale: First, these retailers represent the major formats foreign retailers transferred into China: supermarket (Wal-Mart), hypermarket (Carrefour), and wholesale-club (Metro), mainly adopted by European and North American retailers, and department store (Heiwado), mainly adopted by Asian retailers (Wang, 2003). Second, the chosen cases include the four leading foreign retail giants in China: Wal-Mart, Carrefour, Metro and Tesco (Wang et al., 2007), and they are very large retail organisations by international sales worldwide (Dawson, 2007). Third, access was an important factor in selection of these cases. This UK based study on Chinas market by a native Chinese researcher beneted from having access to both Chinese and British managers from the ve companies mentioned above as well as other key experts in China. The overall research design allows the author to analyse what factors inuence foreign retailers expansion and improve our understanding on rm internationalisation for both successful and non-successful rms. Twelve in-depth interviews were conducted in 2005 with senior managers at regional and national levels who were responsible for or thoroughly understood the expansion decisions in China, The interview questions focused on chosen rms internationalization process in China from 1995. Moreover, expert views were sought from China Chain Store and Franchise Association (CCFA) and a major company supplying retailers. These senior managers were considered as elite informants of these companies (Yin, 2003). Interviews with Chinese managers and ofcials were conducted in Mandarin Chinese; those with foreign managers in English. The duration of each interview extended up to two hours. Note making and an immediate transcript were prepared immediately after each interview to ensure fresh memory of the conversations (Whyte, 1994). In pursuit of triangulation, the interview data were complemented by a wide range of secondary quantitative and qualitative materials, including articles in newspapers, statistical yearbooks, company websites, company reports and documents, website articles, press interviews, academic books and articles. These secondary data are explicitly cited in the following sections wherever used. Moreover, the author also visited each site of the selected rms to undertake observations and collect image evidence on location choices whenever possible. Data analysis was carried out by three main steps. Individual case analysis was conducted in the rst place (Yin, 2003) and then cross-case analysis was conducted (Eisenhardt, 1989). Next, member-check was applied by sending the case reports to the interviewees to verify the accuracy of the data (Morse et al., 2002). Finally, the case study reports were written up. Previous research literature on the retail internationalization process was used to guide the interpretation of the data. In the following section, the key themes are discussed. A synopsis of the expansion history of the chosen cases during the research period can be found in the appendix.

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Expansion strategies of foreign retailers in China

From the data analysis, four key factors that inuenced foreign retailers expansion in the Chinese market have been identied: adaptation to the external environment, responses to psychic distance, establishment of business networking and localization. Adaptation to the external environment Foreign retailers adapt to the Chinese environment in two ways in different circumstances. At rst, they followed and complied with most central government policies, particularly when deregulation of Chinas retail sector started from 1992. Once China opened its retail market completely in 2004, the foreign retailers took the second approach and moved to an aggressive expansion stage from one region of the country to another. As a Senior Manager of Metro claims, without Chinas WTO entry, none of the foreign retailers would have been able to expand in China. However, as the opening of the market benets all retailers, its signicance for competitive advantage is reduced as time goes by. Because the benets of deregulation are available to all competitors, foreign retailers are driven to take up proactive strategies on expansion. Foreign retailers sustain their unique competitive advantages such as keeping customer orientation and localization while pursuing expansion into new regions of the country. The spread of deregulation pulls foreign retailers to expand from their bases in East and South China, areas, which were opened up earlier to foreign retail businesses, and move into emerging regions such as the North, Northeast, and Middle China. Less developed regions such as West China also attracted retail giants from the end of 2004, when the Chinese central government announced its Go West policy that provides incentives (such as low tax and waives of rent of the land) to encourage business development in that region. Wal-Mart and Carrefour both opened stores in West China during this period. Foreign retailers prefer to implement the government policies that are benecial for their businesses; otherwise, they are more selective unless they are mandatory. In addition, political factors can act as barriers to foreign retailers expansion. For example, Heivado was unable to expand and its second store was forced to close because of political disagreements between national and local government leading to the failure in co-operation with the local partner. Foreign retailers tend to deal with local government strategically. In most circumstances, local government policies are more important than the central government policies for retail operations. Positive local government policies can pull a foreign retailer to expand into a particular region; while non-supportive or obstructive local government policies can push a foreign retailer to expand elsewhere. Wal-Mart was unable to open its rst store in Shanghai, in East China, due to the lack of the local government support, so the company opened its rst store in Shenzhen, in South China, instead. Wal-Mart has had signicant support from Shenzhen local government and therefore it has expanded greatly in the surrounding areas. Responses to psychic distance Psychic distance was neglected by foreign retailers that have less international experience at the early stage of their expansion in China because of a lack of knowledge to the market. However, psychic distance is gradually being recognised as a signicant factor for expansion. Particular examples are Wal-Mart, Metro & Heivado, which have less experience in the Asian Market, compared to Carrefour and Tesco, companies, which responded to psychic distance in China at the early stage of their expansion. Although foreign retailers tend to be ethnocentrically oriented with the intention of retaining their own culture and management styles, to succeed they must respond to psychic distance effectively and adapt to the host market management characteristics (Evans et al., 2000). Foreign retailers with more international experience tended to deal more effectively with psychic distance and expand more rapidly than their rivals (for example, Carrefour and Tesco versus Wal-Mart and Metro).

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Learning is important for retail internationalization. During the learning process, foreign retailers became more localized in China. They learned to collaborate with local partners and to use local management teams in management decision-making to help them understand the cultural and business differences between China and their home countries. Signicant business and cultural differences exist between China and more developed markets. Foreign retailers have had difculties understanding central and local government policies, business networking, and social and cultural issues in the local areas in which they are operating. In all the cases studied foreign retailers made incremental efforts to train a local management team and empower local Chinese managers in decision-making about the expansion process. Establishment of business networking Foreign retailers establish business networks in order to expand more rapidly. In China, local government policies are distinctive among the different cities and regions. Business networking also helps foreign retailers to understand local culture and to deal more effectively with local government. Guanxi networking is still a barrier between foreign retailers and Chinese governments. Foreign retail rms that have more international experience in Asian markets tend to deal with guanxi networks better, which contributes to their rapid expansion (Carrefour and Tesco, for example). However, foreign retailers that do not involve themselves in guanxi networking are seen as maintaining fair competition by the local government (Wal-Mart, for example), because they are not ofcially supposed to use networking parties to promote their business. Localization The ndings of the present research indicate that a higher level of localization reduces psychic distance and helps foreign retailers to better interpret institutional factors and market infrastructure, and to further enhance their core competences. The three main indicators of foreign retailers localization are: 1. retaining a local customer orientation; 2. strategic location choices; and 3. rapid adjustments to local culture and conditions. Retaining customer orientation. Foreign retailers intend to retain their customer orientation to expand in the Chinese market in two ways. Firstly, they retain a customer orientation by selling the right products. For example, they move the wet market into their supermarkets to meet the demand Chinese consumers have for products such as fresh and live sh. Due to cultural differences across the nation, customers in different parts of China have different preferences in products and tastes. The standard policy for foreign retailers is the tendency to sell the same sorts of products in all their stores as are sold in Western countries. Successful foreign retailers adapted their policies to offer in different stores across China a combination of standard and regional products. Secondly, foreign retailers have recognized the importance of adapting to the Chinese way of providing customer service. Unlike in Western countries where not many staff can be found on shop oors, in China they are expected to provide a larger number of employees on the shop oor to help customers, and they offer more product tasting sampling activities. In recognition of the habit of Chinese consumers who prefer to shop more frequently and buy smaller quantities, the Wal-Marts rst stop in Shanghai provides up to 50 small specially designed check-outs, so that customers can be served efciently. Strategic location choices. In consideration of the different characteristics of the various regions in China, foreign retailers location strategies are mainly inuenced by investigation and research, local government support, economic conditions, potential growth rate and the location of local partners. Foreign retailers spent signicant time researching the market before their expansion. Their research centred on the following factors: local government

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attitudes, characteristics of specic locations, local market environment, customer preferences and purchase capabilities, and competitors (Wal-Mart, Metro and Tesco for example). Gaining local government support is crucial in location strategy. At the initial entry stage, economic conditions are important considerations when making location choices (Sternquist, 1998). To achieve good protability under the restrictive location rules by 2004, foreign retailers opened their rst stores in well-developed regions, such as East China (Metro and Tesco), South China (Wal-Mart) and the capital Beijing (Carrefour). With Chinas retail market deregulated, gaining a greater market share has become more important. Foreign retailers started to expand strategically. Wal-Mart and Carrefour have taken proactive approaches to enter under-developed areas (such as West China and Middle China), and second-tier and smaller cities to increase their market share. Rapid adjustments. By considering specic locations in a particular city, some foreign retailers have made strategic decisions based on their international experience, and others made strategic changes through learning. For example, as car ownership is low in China, all the Carrefour stores were located in the center of cities on bus routes, with ample parking and waiting areas for taxis, bicycles and three wheeled cycles. In contrast, Wal-Mart did not choose good locations. By assuming the Chinese would follow Western shopping styles, most of the Wal-Mart stores were located outside city the center, and were not served by convenient transportation systems. Carrefour beneted from their previous experience in the Asian market, operating stores in Taiwan. However, Wal-Mart adjusted its location strategies by 2005 and started to opened new stores in walking streets (for example, in the shopping districts of Shenyang city in Northeast China and in similar locations in other regions such as Middle China. Free mini bus services from afuent suburban residential areas to their stores have been provided by both Wal-Mart and Carrefour. These changes demonstrate the strong sense of customer orientation of these foreign retailers.

Entry strategies into new areas Entry mode and the locations of the local partners inuence foreign retailers location choices in China. By 2004, the only entry mode that foreign retailers were able to choose was the JV (Wang et al., 2007). Foreign retailers claim that they enjoyed their partnerships with local rm and preferred to stay in their partnerships even after the restrictions on foreign retailers were lifted (Wal-Mart, Carrefour and Metro, for example). Foreign retailers expanded mainly around the areas where their partners are located. For example, Metro expanded in the Shanghai area rst and Wal-Mart expanded around the Shenzhen area rst as their local partners are located in those areas. Tesco entered China by acquisition in the late 2004, when foreign retailers had for the rst time freedom to choose their entry mode. At the entry stage, Tesco acquired a 50 percent share of Hymall stores, and immediately spread into East, North, Northeast and South China. By 2006, Tesco had a 96 percent share of Hymalls sales.

The role of local management team In China, having harmonious relationships with both central and local government is important for expansion (Wang et al., 2007). In order to better understand the local culture and business environment, foreign retailers use local management teams strategically to deal with local management issues. Foreign rms may pursue localized operational strategies and human resource management can be hybridized in Sino-foreign JVs (Chen and Wilson, 2003). Empowerment of local managers, who have knowledge of how to deal with business networking with local governments and to be involved in the decision-making process, is essential for foreign retailers successful expansion. Moreover, a local management team contributes to the establishment of business networking, which is important for the development of cooperative relationships with customers, suppliers and other stakeholders (Coe and Wrigley, 2007).

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Proposed framework and conclusion

The foregoing case studies of foreign retailers in the Chinese market during the rst ten years Chinas policies changes in the retail sector between 1995 and 2005 prompt a reection on the factors that drive retail expansion in an emerging economy, characterized by a combination of rapid, profound changing business environment and political stability (Sun et al., 2010). The chosen cases provide the evidence that some foreign retailers expanded more rapidly than the others and provide insight into the reasons for the differences in performance of different retailers. The more successful companies are characterized by their choice of a more exible management style and have richer international experience. The less successful ones are characterized by adopting more conservative management style and having less international experience. In this context, foreign retailers response to psychic distance is the key of retail internationalization. The factors identied in this paper and their relationships provide a comprehensive framework as basis for future investigation. Figure 1 presents a proposed framework that articulates the relationships of various factors inuencing retailer expansion in China. The major contributions of this research are indicated by bullet points in the framework. Psychic distance is the starting point of the framework. The responses of foreign retailers culture and management styles to psychic distance help to facilitate their internal drivers and further improve their interpretation to the external environment. This interpretation helps foreign retailers to develop better expansion strategies. During this process, the local management team plays a signicant role in shaping foreign retailers management style and leadership to handle the external environment. This expansion process will inuence foreign retailers internationalization process and further their performance. Such performance will in turn have impact on their internal drivers through the learning experience. This will further help to reduce psychic distance and improve their strategic responses to the external environment. This framework offers new insights into what factors inuence foreign retailers expansion into a host emerging market and the strategies for that inuence the pace of their growth. Understanding the interdependent relationships of these factors is crucial for success in international retailing. This study advances knowledge of some of the characteristics in rm internationalization. It provides an indispensible link between previous research that focuses on the pre-entry and entry stage of retailer internationalization and the future research which

Figure 1 An exploratory framework of retailer expansion in China

External Environment Adaptation to deregulation & government policies Market Entry Internal drivers Responses of foreign retailers culture and management styles to psychic distance Firm-specific factors Resource commitment Competitive advantages International experience Decision-makers characteristics Perception & attitude Work experience Leadership style

Expansion strategies Establishment of business networking Localisation o Retaining customer orientation o Strategic location choices o Rapid adjustment Entry strategies into new areas The role of local management team

Performance

Retail Internationalisation Process

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may focus on retailers performance. This improved theoretical foundation provides a good basis for future research on the process of rm internationalization in general. Keywords: Retail internationalisation, Expansion strategies, Post-entry, Localisation, Emerging markets, China The limitations of study call for more future research topics. First, the cases chosen are mainly from large food grocery retailers. Retailers from other business and formats may provide more insight. Second, this study focuses on Chinas market only. More country studies may bring more emerging themes on the retail internationalization process. Third, similar studies outside the retail industry may add value onto better understanding of the process post-entry internationalization.

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Appendix. Brief expansion history of the selected cases during the research period
Wal-Mart Wal-Mart was founded in 1962 by Sam Walton. It is the largest retailer worldwide operating 5,000 units in ten countries by the end of 2005. Wal-Mart entered China in 1996. They spent two years investigating the market from their headquarters in South China before nally deciding where to open their rst store. Wal-Mart was not allowed to open its rst store in Shanghai due to local governmental policies. They nally opened their rst store in Shenzhen through a JV agreement with the support of the local government (Chaturvedi, 2006). In 2004, Wal-Mart topped the China Business Competitiveness Index among commercial and trade rms. It has also established a good reputation in China; it procures over 95 percent of local products wherever a store is opened. It was ranked No. 1 under Good Credibility and Accurate and Prompt Payment for several years by CCFA. In addition, through its Global Procurement Centre in Shenzhen, the company purchases a high volume of merchandise in China to export to the rest of the world. It had 47 units in 22 cities in China by the end of 2005. Carrefour Carrefour was founded in 1959. It is the biggest retailer in Europe and the second biggest in the world. Carrefour has 11,000 units and operates in 30 countries worldwide. In 1995, Carrefour opened its rst hypermarket in China. Because Carrefour had experience of operating in Taiwan since 1989, they had accumulated a great deal of knowledge of Chinese consumers. They expanded quickly in China as soon as they entered the country. Carrefour

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opened its 60th store in Chongqing in 2005. By the end of that year, Carrefour had 70 stores in 27 cities in China. Metro Metro Group was founded in Germany in 1964. It is operating in 28 countries in the world and is the No. 1 Cash & Carry business worldwide. Metro entered China in 1995 as a JV with Jinjiang Group. Its rst store opened in Shanghai in 1996 and it was the rst JV, which gained permission from the Chinese central government to set up chain stores in all the major cities in China. Metro introduced a new retail format into China, and pays high taxes to the local government. Metro attracts many customers from outside the city and distributes local products to both domestic and international markets. By the end of 2005, Metro had 29 stores in China. Tesco Tesco is one of the leading international retailers in the world. The trading name of Tesco was used in the 1920s, since then it has expanded into different formats, markets and sectors. The principle business of the group is food retailing with over 2,500 stores worldwide. Tesco has opened stores in 13 countries worldwide. In 2004, after a three year market investigation, Tesco entered China by signing a 50:50 JV agreement with a Taiwanese supermarket (Ting Hsin), for its wholly owned subsidiary of Ting Cao, which owns the Hymall chain stores in China. Hymall was rst opened in 1998 and is a leading hypermarket, focusing on Northeast and East China. It had 25 stores before the JV with Tesco. By the end of 2005, Tesco and Hymall had 39 stores across China. Heivado The Japanese Department Store, located in the capital of Hunan province, Changsha, is the only Sino-foreign JV enterprise in Hunan province, Middle-South China. The rm was founded in 1998 by the cooperation of the International Economy Development Group, Hunan Province (40 percent), the Japanese Department Store Ltd (56 percent) and Japanese Xiaoquan Clothing Ltd, Co. (4 percent). The Japanese Department Store contributes to the commercial industry of Hunan province by providing a special transparent layout, a comfortable purchase environment and good customer services. When Heivado tried to expand in China, their second store encountered considerable problems and the expansion plan was temporarily suspended. Heivado only had one store in China by the end of 2005, which was the only one store that operates outside Japan.

About the author

Lisa Qixun Siebers is a Senior Lecturer in Marketing at Nottingham Business School, Nottingham Trent University, UK. Her research interests include rm internationalization and marketing strategies. She is the author of Retail Internationalization in China: Expansion of Foreign Retailers, published by Palgrave Macmillan. Lisa Qixun Siebers can be contacted at: Qixun.Siebers@ntu.ac.uk

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