Localization Strategy of Transnational Retailers in China
Abstract & Key Words Abstract: As one of the world’s largest consumer markets, China is of strategic importance to transnational giant retailers. Yet, unique Chinese cultural, business, and political environments have posed great challenges to transnational retailers operating in the Chinese market. Based on the fact that the localization strategy is critical for the success of retailing operations in China, it is necessary to diagnose localization blunders of transnational retailers. Therefore， the aim of the present study is to work out a high-level plan of successful localization strategies. By analyzing the status quo of Chinese retail market and the current situation of transnational retailers in China (including the case study of Carrefour), this paper explores how consumer behavior, culture and government roles can affect the localization strategy and creates a list of formats for successful localization strategies. The paper proceeds in four sections. First, the concept of retailing localization (3 layers of localization) is introduced as an antidote to the deficiencies of the prevailing study approaches to transnational retailing. One background sections then follow. While the first part charts the status quo of Chinese retailing market and the rapid growth of transnational retailing, the second profiles the opportunities and threats transnational retailers face in the process of localization. Then, by studying the case of Carrefour (China), the strategy analysis of localization in China for transnational retailers is profiled, including the analysis of the 3 layers of localization – namely localizing the strengths, localizing the products and operational system (4Ps) and localizing management and corporate cultural (PEP). Finally, the wider implications of this study for transnational retailers in the process of localization are put forward in the concluding section.
1. Introduction 1.1 The Problem and the Study Objective Admit it or not, the relationship between transnational giant retailers and China has become a love-hate one. On one hand, China is virtually any retailer’s largest opportunity for growth in the 21 st century. With its booming economy, fast growing domestic markets and untapped talent base, China offers massive business opportunities and great strategic importance for retail companies all over the world. ★ A large and growing consumer base of 1.3 billion people. ★ National retail sales reached some 837$ billion in 2005 with an increase of 12.9% over 2004 ★ It is estimated that national retail sales will exceed some 1250$ billion in 2010. Source: http://www.shbiz.com.cn/cms.php?prog=show&tid=33431&csort=1 On the other, China’s unique cultural, business, and political environments pose significant challenges to transnational retailing operations that require a high degree of localization. Based on the fact that the localization of retailing is much more complicated and comprehensive than other industries, retailers usually find themselves puzzled and bewildered 1
in China. Indeed, many retailers have fallen prey to these challenges in the past 10 years of operations in China. Others have been undergoing extreme hardships in the process of localization. The concrete causes of their problems vary. However, one common underlying characteristic is that they all, to some extent, failed to conduct successful localization strategies. The initial objective of this paper is to look at the problems retailers have encountered and explore the flaws in their localization strategies. The present study has one more objective: to work out a solution to a practical problem about how the transnational retailers can deal with the socio-cultural differences in China and conduct successful localization strategies. On the surface, these challenges appear difficult to overcome; yet, when we study the case of the multinational retailing corporations...
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