Retail Doesn't Cross Borders by Marcel Corstjens and Rajiv Lal: Article Review

“Retail Doesn’t Cross Borders” by Marcel Corstjens and Rajiv Lal discusses the trials and tribulations that grocery retailers face when expanding into global markets. The article first covers how immense pressures for growth drive many grocery retailers into internationalization before they are ready or prepared for such an expansion. Due to this unrelenting pressure, many plans to globalize end in failure because of lack of preparation and planning for long run success. In fact, an econometric study has even shown that globalization does not help retailers meet financial goals especially in the short run. If the end goal of a retailer is increased revenues and profits, than globalization should only be considered as a long term part of that plan. There are three factors in particular that stand out when grocery retailers are making the decision on whether or not to globalize their concept. Those factors as discussed by Corstjens and Lal are many barriers to entry, the need for long-run strategy due to high fixed costs and low margins and lastly, the challenge of local competitors that better understand the country’s culture and identity. Despite these factors however, there are still great opportunities overseas and retailers should not be discouraged as long as they apply four rules. Those rules as detailed in the article are:

1. The Home Market is the Linchpin of Globalization
Retailers must not divert too much attention from their home base where they are already successful.
2. Always Bring Something New to Market
A retailer must be innovative and offer a new angle or competitive advantage such as Germany’s Aldi grocer that is a “hard discounter”.
3. Differentiation is More Important than Synergies
Retailers have to find synergies that contribute to the consumer offering instead of conflicting with it.
4. Timing is Critical
Entry into the international market must not be too early or too late; there is a window of strategic opportunity that the best marketing departments are able to identify.

Surprisingly, despite the fact that grocery suppliers have smaller growth rate expectations than grocery retailers, grocery suppliers find themselves outperforming grocery retailers in the global market. The lesson to take away from this is that retailers could learn about how to succeed internationally by looking to suppliers for strategy ideas. As grocery retailers continue to struggle to obtain success globally, it is pertinent that they remember to continue to grow their home markets through growth of existing formats, expansion into new formats and leverage of their brand. Many concepts from Corstjens’ and Lal’s article align with topics discussed in Chapter 13: Global Marketing from “A Preface to Marketing Management by J. Paul Peter and James H. Donnelly, Jr. This chapter talks of Michael Porter’s diamond of national advantage that highlights four factors that determine the likelihood of success in a foreign country. Those factors are factor conditions, demand conditions, related and supporting industries and company strategy, structure and rivalry. An excellent example from the article that touches on Porter’s fourth factor is how Wal-Mart failed in Germany partly due to their drastically different people policy compared to the high-wage German labor force. Another topic that the text discusses that connects with the article is factors that are conducive to global strategy. One in particular that is mentioned falls under market factors and concerns the homogeneity of market needs. The article brings up the point that one of the greatest challenges to the grocery retailers when expanding globally is heterogeneity of local tastes and how that impacts global supply chain management. One final topic connecting the article to the text is the importance of long-term planning for long-term success. To expand upon this topic, the text talks about programming for global marketing including many components including research, product strategy, distribution strategy, pricing strategy and advertising strategy. With this many components needed for a successful globalization project, it is clear that retailers who rush the process will more than likely fail. Corstjens and Lal state that “because of the unrelenting pressure to grow, many globalization gambits are opportunistic and jeopardize carefully crafted long-run strategies.” Today’s global economy is more competitive than ever and pressures to grow and increase shareholder wealth exists in all corners of the world. With this challenging environment, grocery retailers cannot afford to ignore the possibility of global expansion. The choice not to could be the last choice an organization makes as its adversaries take advantage of the strategic window of opportunity for globalization and as a result beat out their competitors. The article mentions Target and Kroger as two large retailers that may have missed their window to look to overseas growth opportunities. Technology has made communication between countries easier than ever before and with this advancement comes a slight lowering in the barriers to entry of foreign markets. Despite the connection between people due to technology, citizens are more apt than ever before to ensure their cultural identities and beliefs remain intact and do not get lost jest because of globalization. The pride exhibited by individuals for their country should not discourage grocery retailers to avoid global expansion, but instead should motivate them to rise to the challenge of understanding their target market better so that they may excel at serving international customers.
References

Corstjens, M. and Lal, R. (2009). Retail Doesn’t Cross Borders. Harvard Business Review,
May Edition, Article 43, 174-179.
Peter, J. P. and Donnelly, J. H. (2013). A Preface to Marketing Management. New York, NY: McGraw-Hill.

References: Corstjens, M. and Lal, R. (2009). Retail Doesn’t Cross Borders. Harvard Business Review, May Edition, Article 43, 174-179. Peter, J. P. and Donnelly, J. H. (2013). A Preface to Marketing Management. New York, NY: McGraw-Hill.