Strategies of Japan Supermarkets in Hong Kong

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Strategies of Japanese Supermarkets in Hong Kong
Yukiko Kawahara Chinese University of Hong Kong and Mark Speece Asian Institute of Technology, Hong Kong Introduction As business becomes increasingly internationalized, it is no surprise that many large retailers have expanded beyond the borders of their own countries. In Hong Kong, which is an international city, many local retailers have expanded abroad, and many retailers operating in the territory come from Europe, North America, Japan, and other East Asian countries. Japanese retailers, in particular, have been very successful in Hong Kong, and Japanese supermarkets are a very important element of food retailing in the territory. Saturation of the home market is one common reason for expansion abroad. Saturation may occur either because retail activity has grown sufficiently that the market cannot support more retail stores in a particular product line, or because government regulation prevents further growth. Another common reason for expansion into other countries is that retailers may simply see excellent opportunities to fill a particular market niche in an attractive foreign market[1-3]. Japanese supermarkets in Hong Kong are all connected with department stores, and to some extent share their reasons for international expansion and their positioning in the local market. The first Japanese department store (Daimaru) appeared in 1960. Many others followed, both because Hong Kong was an attractive, rapidly growing market, and because expansion was difficult in Japan due to strong competition and regulatory constraints on opening new large stores. By the beginning of the 1990s, 11 major department stores were present with 14 stores, and Japanese stores had captured about 40 per cent of local department store sales[4,5]. International Journal of Retail & Distribution Management, Vol. 22 No. 8, 1994, pp. 3-12 © MCB University Press, 0959-0552

To a great extent, the Japanese supermarkets have followed the marketing strategies of the department stores to which they are attached. However, there are two major local supermarket chains, and several other smaller, though still relatively strong, local chains. Japanese supermarkets have had to define a somewhat more coherent niche marketing strategy than is the case for most of their department store parents. They have prospered, but not always the same way. Extensive interviews with Japanese supermarket managers have allowed us to identify at least three distinct strategies.

Japanese Department Stores and Supermarkets in East Asia
Strategies of Japanese supermarkets in Hong Kong are closely tied to the overall strategies of their parent department stores. Among stores in Japan, Larke[6] distinguishes two categories of department stores: traditional department stores and general merchandise stores (GMS). Most traditional department stores in Japan have long histories, and they remain among the strongest of all retail sectors in Japan on a sales per store basis. General merchandise stores, on the other hand, have become the strongest retail sector in terms of overall sales. Japan’s Large Store Law has greatly inhibited traditional department store expansion for many years. However, because of their location strategy, land prices also make it very expensive to develop new stores. These stores tend to be located in city centres, and many are located at major subway and metro stations. Among stores in Hong Kong, Daimaru, Sogo, Tokyu, and Seibu fall into this category, as well as several others that do not contain supermarkets. Most general merchandise stores started as discounters, but over the years they have



upgraded product quality and service so that now they are very similar to the traditional department stores. Now, most of them pursue value strategies, and some are reintroducing new chains of true discount stores. GMS...
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