Definition of International Retailing

Ever since International Retailing started getting recognition in the industry, several academicians as well as Industry experts have tried to come up with exact definition.

The attempt to define International Retailing raised a legitimate question as to what exactly the retailers were internationalizing. Unless the correct fact was established, there could be no right definition. Some asked if the Companies internationalised their management systems, management expertise or the brands.

The famous International Business researchers Johanson and Wiedersheim-Paul who had studied the growth of Swedish Companies suggested that the term ‘International’ can be attributed to the Business orientation, the management style and orientation. They further elaborated that in the first instance the Companies began exporting products to other countries and further growth of business entailed setting up manufacturing facilities in the foreign countries. Though this might have been the trend seen in manufacturing organisations, the same has not been totally accepted in the retail sector.

Experts have questioned the validity of the concept with reference to the services sector. They argue that the manufacturing or the product sector can go international in a phased manner but the same is not the case with service sector. The nature of service sector being intangible and instantaneous, calls for full fledged operations of international standard to be setup at the time of opening up business in a foreign country.

Studying the nature of transactions and growth of internationalisation of other industries as well, the academicians have tried to see if the international business trends in terms of mergers and acquisitions, technology transfers as well as transfer of marketing and management skills and training etc are required to be included in the proposed definition of International Retailing.

When one refers to International Retailing, there are several dimensions of the trade that needs to be considered before attempting to come up with an apt description of the business. First and foremost is the invisible aspect of financial investments. Companies get into joint ventures and invest in the foreign retail company with or without management control. Secondly we must look at the areas where the retail company is transferring knowledge or processes to the new set up.

In retail sector there can be many aspects of retail business, the knowhow of which are transferred to the new establishment. The business model, the management and operational policies and processes, financial accounting systems, supply chain model as well as the retail store design and layout concepts, merchandising processes and more importantly the systems and processes that are used to manage multi retail stores and outlets can be transferred by the parent company to ensure an identical setup at the new location.

Marketing, brand promotions and customer management policies too will be shared to ensure standardisation of processes in all areas across countries. Most companies would insist on ensuring that the new foreign outlets follow the same operational, costing and accounting as well as reporting and measurement models as that of the parent company. The most important area that can be actually internationalised would be the sourcing function. Central Sourcing and vendor management from multiple countries for multiple countries is the strong feature that characterises the International Retailers.

Going by the above features, we can identify the International Retailers from that of the individual brands and other international traders.