a) Extent of Internalization in Global Retailing
The global retail industry has come a long way emerging from a modest beginning to an industry in which the world wide retail sales are valued over $7 trillion, with the top 200 retailers contributing over 30% of the total worldwide demand. Global retail sales are influences by the consumers’ ability (disposable income) and consumer confidence (willingness) to purchase. As such, some of the positive forces at play in the global retail consumer markets at present include such forces as high rates of personal expenditures, reduced unemployment rates, low interest rates, as well as low inflation in many countries across the world. On the other hand, the negative forces that hold global retail sales back include weakening consumer confidence and the effects of the global financial crisis (Varley 2001).
Over the years, internationalization in global retailing has seen top retailers expand their geographical scope of especially their sourcing operations, and in so doing establishing purchasing networks to get a variety of good for both domestic and international markets. As such, understanding the impact of internationalization in global retail is important not only to the leading retailers and their employees, shareholders and rivals, millions of consumers that are experiencing a dramatic shift in their traditional modes of shopping but also for the firms and workers that are involved in lots of reconfigured supply chains, as well for the states and institutions that face the challenge of managing the rapid transformations in the international retail operations.
International Retail Operations
International retail operations refer to the operation, either by a firm or an alliance, of shops, or other kinds of retail distribution, in a number of countries. These international operations can be met through a several varied organizational structures with some firms adopting varied approaches for varied markets. The reach of internationalization in global retailing is so wide that retailers are currently engaged in a number of different international activities. One of the main activities in global retailing is the global sourcing of products where retailers bring together varied assortments from a wide range of sources. Globalization in global retailing has enabled retailers from one country to borrow ideas together with management systems from retailers from other countries. In this respect, there is little secrecy about as well as no copyright on a number of aspects pertaining to the operation of a shop (Varley 2001). Similarly, consumers today have the freedom to move across borders either physically or virtually in search of better offers meaning that even the strongest retail systems, the likes of Andorra, are greatly dependent on foreign consumers.
It is also evident that internationalization in global retailing has had great impact on even the internal operations of firms in the industry. For instance, majority of the leading retailing firms have resorted to recruiting retail managers from other countries who bring with them fresh ideas along with new retailing methods that serve to benefit the firm. In addition, it is apparent that the funding of retailing has become increasingly international because large retail firms are raising finance for developments and seek more funds from international financial institutions such as the International Monetary Fund and the World Bank. In the process of selling produces and running shops in more than one country, leading retailers undertake foreign investment, participate in licensing agreements, export produces, involve in joint ventures together with operational alliances.
Internationalization in global retailing is a more challenging and complex endeavor as compared to manufacturing, for example. Retailers wanting to go international often have to deal with the challenges of developing and managing a set of store in the foreign markets. This often translates that traditional exporting strategies cannot be relied upon to deliver great business in the new market. To this effect, there is a host of activities that a retail firm seeking to play on the international scene must first fulfill. These include the challenging process of recruitment of staff, education of the staff, contacts with both local and national institutional players, development of property among others. This necessitates the need to put into place a strategy, especially on how to share knowledge.
Globalization has seen more and more retailing firms particularly from emerging markets increase their efforts to integrate into the competitive global economy and have begun to invest aggressively posing great challenge to the established global retailers such as Wal-Mart, Carrefour, and The Home Depot. The increased competition among the retailing firms has been to the benefit of the consumers in terms of reduced prices and quality products. The increasing participation of retailing firms from emerging economies has been due to the rapid pace of development together favorable government policies relating to economic liberalization. Furthermore, there is increased research particularly in the international business discipline and more studies about the emerging markets (Varley 2001).
According to theoretical models of industrialization in retail, the source of competitive advantage at the disposal of a retailer is defined by the firm capabilities along with resources embedded with a class of domestic environmental factors which may be influenced by the foreign environment whilst expanding internationally. Though retailers from emerging countries are faced with challenges of limited resources and capabilities for international expansion, several such retail firms have been able to expand regionally and thus compete successfully with leading companies from developed markets. A good example is Chilean retailers in the Latin American region that has held off competition from Wal-Mart, Carrefour, and Home Deport.
b) Internationalization in the manufacture of aircraft engines for civil aviation
Globalization or internationalization has had great impact in the field of manufacture of aircraft engines purposed for civil aviation. With increasing globalization and rapid development of technology, civil aircraft manufacture is indeed undergoing profound transformation which is influenced by a combination of both domestic and international circumstances (Bruce et al 2004). The manufacture of aircraft engines for civil aviation has become a key element in the economies of almost all nations across the world. The internationalization of the manufacturing of the engines has created much business for participating countries. Aircraft engines contribute a significant percentage of national sales of all manufactured durable goods, particularly exports of military aircraft. The aviation industry is a vast one and consists of large commercial transports, regional transports, rotorcraft, and business aircraft, not to forget the light piston aircraft. It is also apparent that globalization has rendered the civil aviation industry such a key part of countries’ industrial structure because of its great contribution to foreign exchange or trade. It also serves as a symbol of technological strength of a country to other countries across the globe.
In addition, the internationalization of aircraft engines for civil aviation has gone a long way to play a unique role in matters of national security. Manufacturing countries are increasingly outsourcing personnel that develop designs and production techniques for new military aircraft so as to keep them in a state of increased readiness in line with the demands of the civil market. As such, there is increased competitions among engine manufactures in different nations and the competition and requirements of the civil market serve to inspire technological together with product advances.
In general, aircraft engines in themselves represent the most demanding of entire sealing environments, through the ultimate seen in safety-critical requirements. Internationalization of engine manufacture has made aircraft engine manufacturers to design seals with ability to hold up extremes of pressure and temperature in those regions where there is frequent exposure to high humidity, powerful high frequency vibration having exceptionally destructive chemicals, strong friction, lubricants and media. As such many aeroengine designers are taking great caution not to endanger component failure as well as for sealing parts. To this effect, the civil aviation aircraft manufacturing is among the chief players for market globalization. This is particularly the case because aircraft customers from varied countries have nearly identical needs for the product itself besides seeking out the entire world of suppliers (Varley 2001). However, the competitive globalization drivers are maximum for civil aircraft engines owing to the fact that the industry has not only extremely high exports and imports but also great number of internalized competitors from different countries and continents. The great cost aircraft engine manufacture in civil aviation drives companies to try and amortize the expenses across their markets around the world (Bruce et al 2004). Furthermore, great levels of internalization in the industry is shown in the aspect that there use of a single currency, the U.S. Dollar, for almost all trades pertaining aircraft engines across the globe.
Successful international strategies
Players in global retailing industry either adopt a global strategy for their businesses or a multinational strategy for their international operations. A global strategy employs a successful retail formula present in a domestic retail market and then reproduces it across the world. A global strategy greatly focuses on market similarities. On the other hand a multinational strategy entails putting up retail outlets which are owned or partially belong to the domestic retailer but are well adapted to the local market. The multinational strategy concentrates on market differences. Majority of successful global retailers make use of both strategies. This is because relying on the global strategy alone would often render the retailer incapable of reacting to local market opportunities and threats. This translates that immediately the novelty value of the new retail strategy has worn off, the technique becomes tired and sits vulnerable to local competition. However, retailers in both industries often opt for a global strategy as a way to maximize their profitability through maintaining of a high degree of control over their store networks located in foreign countries. Retailers in these two industries who often make use of the global strategy are those that have a unique brand identity or product range (Varley 2001).
Comparatively, a multinational strategy takes quite long and requires more investment from the mother company. As such, a significant amount of market research is necessary, followed by a planning and implementation program that call for new skills and approaches in the entire organization. With this strategy, it may be difficult to achieve scale of economies considering the diverse marketing techniques and product tailoring to individual markets that must be done. Nonetheless, the international strategy has the great advantage of much opportunities for transfer of experience and knowledge. It adoption aims to offer flexibility through such means as retention of a basic trading image or concept across a wide range of geographically dispersed markets. This strategy is also best placed to respond to the conditions of the local market as well as the varied expectations of the local customers. One of the best examples of global retailing companies that use this strategy is Carrefour which has had great success in international trading for a number of decades (Bruce et al 2004).
Other global retailers employ the international investment strategy, which entails the transfer of capital from a country to another with the goal of acquiring total share or part-share in another operating company. This is a strategy that is most popular with firms during their initial stages of the international involvement with the aim to diversify their businesses. The driving forces for this is reasons relating to financial and political risk, need to gain fast market share in countries in which the organic development of a series of outlet would entail high risk and high cost. Furthermore, it is motivated by the need to obtain trading advantages related to the specific market.
Another strategy that is used by many of the successful international retailers in both industries is the transnational approach. This one combines global operational efficiency while making sure that it responds to national needs, opportunities and limitations.
Importance of Joint ventures
A joint venture or a strategic alliance refers to an agreement between companies to do their business together I ways that exceed normal company-to-company operations though do not amount to a merger of a complete partnership. The formal agreements could consist several contracts where the parties involved may exchange equity or even contribute capital so as to result in joint venture corporation (Varley 2001). Such strategic alliances are fast becoming popular in both the global retailing and aircraft engine manufacture industries. If the joint venture is appropriately implemented, it has the potential to dramatically improve a firm’s operations together with its competitiveness on the global arena. Firms in these two industries are opting for joint ventures mainly for purpose of obtaining technology, reduce their financial risks, gain access to particular markets, to ensure or achieve competitive advantage as well as reduce their political risks. It is often very appealing for companies to establish a joint venture with a company that is already existing in a new market as opposed to starting from scratch one-by-one. In this respect, partnering with an established international company often makes the process of expansion into new markets much easier and less stressful for a company. Joint ventures are also favored by firms in both industries because of the need to have the technology required to effectively compete in the international markets. Companies are teaming up with appropriate international companies so as to pool their resources and offer the needed technology together in a cost-effective manner (Bruce et al 2004).
Finally, joint ventures are also of great benefit to these firms in the sense that they enable firms to outsource their business functions such as marketing, accounting, and sales to a company which best placed to handle such functions at relatively cheaper cost.
Reference:
Bruce, Margaret, Moore, Christopher, & Birtwistle, Grete. International Retail Marketing: A Case Study Approach. London, Routledge, 2004.
Varley, Rosemary. Retail Product Management: Buying and Merchandising. London, Routledge, 2001.
