FOOD RETAILING INDUSTRY

Globalisation and Its Impact on Food Retailing Industry



Globalisation and Its Impact on Food Retailing Industry

Introduction

The globalisation literature has developed along three lines of investigation. International trade economists' arguments centre around the growing importance of international trade and its role in promoting economic growth (e.g., Brainard and Perry, 1995). International business economists take a different perspective, recognising the importance of multinational enterprises (MNEs) in both trade and foreign direct investment (FDI), and arguing that a truly integrated (global) economy is one in which firms make production and distribution decisions without reference to national boundaries.

'The terms "international" and "global" are not used synonymously. Internationalisation refers simply to the extension of activities across national boundaries; globalisation involves more than this and is qualitatively different. It implies a degree of purposive functional integration among geographically dispersed activities' (Dicken, 1994). According to this view, trade is a form of internationalisation, whereas the activities of MNEs can represent true globalisation. A third view comes from the marketing profession, which views globalisation in terms of consumer markets and addresses the question of whether consumer markets are converging and the extent to which this enables firms to use global marketing strategies to target consumers (Kaynak, 1994, pp. 209-232).

The three views on globalisation are, in fact, related: a true global economy would see MNEs targeting homogeneous global consumer segments with manufacturing located so as to minimise production and transportation costs, which, for most products, in a world free of trade barriers, would result in high levels of international trade, based on principles of comparative/competitive advantage. It is worth remembering at this early stage that many finished food products are bulky and perishable, making transport costs high. Thus, even if consumers were globally homogeneous, markets could remain regional or national (with little trade and divergent prices). On the other hand, supplying ingredients for assembly into final foods is an increasingly important business. This business could be global even if consumer markets for final foods remained fragmented.

The intention in this paper is to take an overview. Much of the literature and debate concerns non-food industries such as automobiles, electronics and Pharmaceuticals, so the intention here is to deduce its relevance to the food industry by confronting it with food industry data, particularly from Western Europe. Globalisation of consumer markets and of producer markets are discussed separately (the latter to include trade and FDI). Implications for policy and for food companies are tentatively presented.

Globalisation of Consumer Markets

The main issue in the globalisation debate from the consumer market perspective is the extent to which consumer demands and preferences are converging internationally. This is of importance to providers of goods and services: the more alike markets are, the more homogeneous the marketing mix can be which firms use to target those markets; no need for costly product modifications to satisfy local tastes; no need to develop different advertising/promotion strategies (even Coca-Cola modifies its product and advertising approach to avoid 'culture-clash': Blackwell et al., 1994); no need to develop products suitable both for ...