RETAIL MMANAGEMENT

Global Sourcing and Retail Management

Global Sourcing and Retail Management

Introduction

During the late 1990s, the globalization of retail capital became an important phenomenon, dramatically altering both the commercial landscape and nature of consumer society in the emerging markets of East Asia, Latin America and Central and Eastern Europe. A relatively small group of retail transnational corporations (TNC), predominantly oriented around food and general merchandise, rose rapidly up the rankings of the world's largest industrial corporations. However, the emergence of the retail TNC attracted surprisingly little attention in the ever-expanding globalization literature.

Objectives of the paper

In this paper we engage

Conceptually with the retail TNC, arguing that both these positions are no longer sustainable, and

That the disconnection between these literatures is hampering our ability to comprehend and explain a profoundly important dimension of the emerging global economic landscape.

Another main objectives is to begin the process of moving retail TNC towards the centre of contemporary debates within economic geography

Analysis

Scoping and conceptualizing the retail TNC

It is important to begin our discussion by noting the sheer scale and scope of contemporary retail TNC. By 2003 there were 14 retailers each deriving over $10 billion of annual sales from international markets? Typically those firms had store networks across 10-30 countries—a level of internationalization comparable with many manufacturing sectors—and, in addition had extensive international sourcing networks. The transnational expansion of these firms had accelerated during the late 1990s when a small group of embryonic retail TNC—Carrefour, Wal-Mart, Metro, Ahold, Tesco, Auchan, Casino, Delhaize, Costco—mostly food and general merchandise operators (with the notable exception of IKEA), and dominantly European firms, began 'to leverage their increasing core-market scale and the free cash flow for expansionary investment which those markets provided, in order to secure the longer-term higher growth opportunities offered by the emerging markets'. The process was facilitated by access to low-cost capital. Debt financing for expansionary growth could be raised very cheaply in Europe and North America in the low-inflation environment of the late 1990s, and equity financing could also be secured with relative ease by firms whose global ambitions frequently translated into enhanced equity valuations. The process was also facilitated by policies of full or partial liberalization of retail sector FDI in many emerging markets.

In addition, retail TNC must deal with achieving embeddedness in a context where protection of knowledge is extremely difficult. Key parts of the competitive advantages retail TNC seek to transfer to their subsidiaries (notably retail format and store design, layout and ranging) are not protected by patent and copyright. Indeed, the open nature of the store and its retail offering implies that these features are inherently open to scrutiny and constantly at risk of imitation and appropriation by competitors. As a result, it is the process-based knowledge assets deployed behind the scene in the 'back region'—the intangible assets of management and IT systems, and of know-how in the form of expertise on logistics, supplier negotiations, private label development, real-estate strategy, customer relationship management, merchandising, and financial control (Doherty, 1999)—in which transferable ...