School of Management
Royal Holloway, University of London
Multinational Retailers in the Asia
Pacific
Dr Jos Gamble
Multinational retailers in the Asia Pacific
This report was prepared by:
Jos Gamble at the School of Management, Royal Holloway
27 April 2007
Address for correspondence:
Dr Jos Gamble
School of Management,
Royal Holloway, University of London
Egham, Surrey TW20 0EX
United Kingdom
Tel. +44(0)1784 414094
Fax +44(0)1784 4276100
[email protected]
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Multinational retailers in the Asia Pacific
Acknowledgments
This research was funded by the ESRC/AHRC under its Cultures of
Consumption programme award number RES-143-25-0028 for the project
‘Multinational Retailers in the Asia Pacific’, from 1st April 2003 to 30th April
2007. I would also like to thank earlier support from a British Council China
Studies Grant, the Daiwa Foundation, the Japan Foundation Endowment
Committee, and Royal Holloway for ‘pump-priming’ that was essential to the
success of this project. I would like to express gratitude to all those
companies and individuals who gave their time so generously. Many thanks
also to Qihai Huang, for being such as conscientious, hardworking and
resourceful Research Assistant. I gratefully acknowledge the assistance of
Melissa Schroder in the preparation of this report.
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Multinational retailers in the Asia Pacific
Preface
This report has been prepared for both practitioners and academics. In
undertaking this task, there is the risk that neither group is fully satisfied.
While academics would like to see far more engagement with academic
debates, practitioners are inevitably more concerned to understand the
implications for business in China.
In terms of style, the approach has been to use plain English with as little
academic jargon as possible. At the same time, it is hoped that academic
readers will find the contents thought provoking and sufficiently interesting
to be encouraged to read the more conventional academic papers that are
referred to in the text. The contents are presented as clearly as possible,
with every attempt made to reduce the number of unnecessary qualifications
while still presenting an accurate account of the findings.
This project has amassed a vast amount of data, both qualitative and
statistical. Several papers have already appeared in academic books and
journals and more are underway, with others planned in the future. This
work will keep my former research assistant, Qihai Huang, and I busy for a
long time to come. A book, based on the findings, will be published by
Palgrave press. This report can do no more than present a ‘taster’ of the
various project themes and findings.
Although this is not a consultancy report, the final section highlights
managerial implications of the findings. This might be rather presumptuous;
however, the intention is to indicate some useful lessons that have been
garnered from the research. The implications might be ‘old hat’ for
companies already well established in China, but might be useful pointers for
firms at an earlier stage of engagement with China.
I would very much welcome comments and suggestions on this research,
both from academic colleagues and from those in the case study companies.
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Multinational retailers in the Asia Pacific
Table of Contents
Acknowledgments............................................................................................... iii
Preface ................................................................................................................ iv
Chapter 1. Introduction to the Research ............................................................ 1
Key Findings .................................................................................................... 1
Aims and Objectives ........................................................................................ 2
Methodology ..................................................................................................... 3
Structure of the Report .................................................................................... 5
Chapter 2. China’s Economic History and Development of the Retail Sector .. 6
China’s Economic System under Mao Zedong ................................................ 6
China’s Economy in the Reform Period .......................................................... 8
China’s Entrance into the WTO ..................................................................... 10
Chapter 3. The Landscape of Foreign Retailers in China ............................... 13
Chinese Consumers ....................................................................................... 18
Chapter 4. Results From the Research............................................................. 20
Transferring Parent Country Human Resource Management Practices to
China ............................................................................................................... 20
Local Employees’ Reception of Imported HRM Practices ........................... 25
Notions of the Consumer ............................................................................... 27
Concluding Comment: ........................................................................................ 31
Messages for Policy and Practice .................................................................... 32
References ......................................................................................................... 33
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Multinational retailers in the Asia Pacific
Chapter 1. Introduction to the Research
Rising prosperity and a rapidly commercialising economy have transformed
China into the world’s most important emerging market. Multinational retailers
have rapidly built up their presence since foreign participation in the sector
was permitted in 1992. This study explored the extent to which retailers from
the UK and Japan transferred their parent country management practices and
retail concepts to Chinese subsidiaries and how local employees and
customers responded to them. The research indicated that these multinational
firms have largely transferred their home country business practices to
China, it appears, with considerable success. Further, the project has shown
that Chinese consumers have widely embraced imported retail concepts.
Key Findings:

Although analysts often advise foreign investment enterprises to adapt
to local human resource management practices, in their Chinese
subsidiaries both the Japanese and UK retailers in the study tended to
mirror their parent country HRM practices.

Employees surveyed in the Chinese subsidiaries, and especially in UK
owned stores, reported strong levels of approval for the imported HRM
practices.

Local labour markets constitute a greater barrier to the transfer of
parent company management practices by foreign firms than cultural
differences.

Foreign investment in a sector often characterised as providing
deskilled jobs with minimal opportunities provides meaningful work
and opportunities to upskill.

Japanese retailers in China have not expanded as rapidly as retailers
from the US, France and the UK even though, in some cases, they
began operations earlier. In part, at least, this is because their
operations are more dependent on expatriate managers.
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Multinational retailers in the Asia Pacific

Chinese customers have rapidly become accustomed to imported retail
formats and can be extremely demanding with respect to price and
customer service.

These customers have higher expectations and are more demanding of
foreign firms than they are of locally-owned retailers.

Interactions between customers and sales staff remain embedded in
specific institutionally, culturally and historically influenced patterns of
behaviour.
Aims and Objectives:
The overall aim of this project was to investigate and analyse the transfer of
management practices and retail concepts from multinational retailers based
in the United Kingdom and Japan to their subsidiaries in China. In addition,
the project aimed to analyze the ways in which Chinese employees and
customers respond to these practices and concepts. More specific aims and
objectives were to:

Provide data to make an innovative contribution to the debate on the
transfer of business systems. Japanese and UK firms were selected for
the research since they have been shown to possess quite different
business systems, with contrasting approaches to human resource
management.

Provide a substantial and valuable body of knowledge on the economically
and socially significant retail industry and its operations in a region that
constitutes a vast and growing consumer market: Japan is the world’s
second largest consumer market and China the largest and most rapidly
growing emerging market.

Make a contribution to policy and practice – comparative study of
companies from three different countries can provide indications into
what constitutes 'best practice' human resource management as well as
insights into marketing strategies for China and Japan.
The research documented and analysed differences between the business
structures, management practices and retail concepts of retailers from the
UK and Japan. It indicated the extent to which firms transfer their home
2
Multinational retailers in the Asia Pacific
country management practices and retail concepts to their operations in
China, and the degree to which these practices are influenced by specific
institutional and cultural factors in the host country.
The research also investigated Chinese employees and customers' reception
of transferred practices. China's rising popular consumerism has been
accompanied by substantial shifts in both notions and expectations of ‘the
customer'. This research explored the impact of multinational retailers and
sought to answer questions such as, ‘How do Chinese customers perceive
the relationship between themselves and stores?’ Is this changing? To what
extent does 'Britishness' or 'Japaneseness' permeate and trickle down firms'
hierarchy and then to local customers?
Methodology
The project produced detailed, qualitative and contextualised case studies of
workplaces in multinational retailers. Although other firms were included, the
most intensive research was undertaken at four key firms: one firm from the
United Kingdom and three firms from Japan. The basic strategy was to select
multinational retail firms that operated in both the home country and China;
the greater number of Japanese firms reflects the closer engagement of
retail firms from that country in China compared to UK firms.
The four main firms are anonymous in accord with guarantees provided to
them. The UK firm is involved in the sale of home decoration products, one
Japanese firm is a department store, while the other two are general
merchandise stores (the lowest floor is devoted to food and the remainder of
the store to clothing and other products).
Much research on the transfer of organizational practices explores only one
level of firms’ activities, for instance, only expatriates and/or only
managerial staff. The aim in this study was to include as many levels as
possible: home country headquarters; home country store managers; home
country store non-managerial employees; overseas regional headquarters;
overseas subsidiary store managers; and overseas subsidiary store nonmanagerial employees from a range of departments and all levels of the
hierarchy.
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Multinational retailers in the Asia Pacific
Research at stores and headquarters offices in Japan and the UK provided
the basis to understand parent country practices, while the bulk of the field
research was undertaken at six locations in China (Shanghai, Beijing,
Chengdu, Tianjin Shenzhen, Suzhou). Given China’s vast size and the
potential for regional differences, these locations were selected to include
points north, south, east and west. In several cases, repeat visits were made
to stores and headquarters.
In the UK and Japan, data was collected through survey-based
questionnaires given to retail stores’ employees and interviews with
employees, managers, business organisations, trade unions, research
institutes, and academic researchers. In addition to the four core case study
companies, research was undertaken at a further four retail firms in Japan.
Research in China included:

The four core case study companies: six UK-invested stores and eight
Japanese stores. In China, over 200 interviews were conducted in these
firms with expatriate managers and local staff from all levels of their
hierarchies.

Case study research at a further 14 stores in China, including stateowned enterprises, private firms, Taiwanese-owned firms, German,
Swedish, and French firms. In such cases, the number of interviews
conducted ranged from one to thirty two.

Interviews were conducted at government departments, consumer
associations, consular offices and embassies, and with local researchers
and consumers - both individually and in focus groups.

Over 2,200 survey questionnaires was collected, including almost 1,000
from the four main case study firms (in both China and Japan).
Interviews were semi-structured, that is, a standard set of questions was
used to ensure comparability, but space was permitted to follow up
digressions and new avenues that opened in the course of interviews.
Interviews with Chinese staff were conducted on a one-to-one basis by the
researcher. Interviews with Japanese staff were conducted in a variety of
languages: in Chinese on a one-to-one basis; in Chinese via a ChineseJapanese interpreter; in English on a one-to-one basis; and in English via an
English-Japanese interpreter. In the majority of cases, interviews were not
4
Multinational retailers in the Asia Pacific
recorded since this might affect interviewees’ willingness to talk openly –
especially in China – but, instead, transcribed directly during the interview.
A research assistant, funded by the project, trained and operated as a sales
assistant in one of the UK retailer’s China subsidiaries for a period of three
months in order to better understand whether, how, and with what
consequences ‘British’ approaches to employees and customers are diffused
to China.
Structure of the Report
The following chapter provides a brief overview of China’s economic history
and the development of the retail sector both under Mao Zedong and in the
reform era. This chapter ends with an overview of the impact on the retail
sector of China’s accession to the World Trade Organization. Chapter 3
examines the ‘landscape’ of foreign retailers in China, with short
introductions to the major multinationals in that country and brief comments
on Chinese consumers. Chapter 4 presents some of the results from the
research with a focus on the following: the transfer of parent country human
resource management practices to China; local employees’ reception of
imported HRM practices; and notions of the consumer. These are followed
by a short concluding comment. The report ends with some messages for
policy and practice.
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Multinational retailers in the Asia Pacific
Chapter 2. China’s Economic History and Development of
the Retail Sector
China’s Economic System under Mao Zedong
Before outlining the findings of the research, it is helpful to have a basic
understanding of modern China’s economic history and the development of
the retail sector. The success of China’s economy is a quite recent
phenomenon. A brief introduction to the economic background can answer
why it has only been in the recent past that China has become a major player
in the global economy.
In the thirty years before economic reforms began in 1978, China’s economic
system was a command economy in which the government (in this case the
Chinese Communist Party) controlled and regulated all factors of production.
The government decided what should be produced, and controlled the
production methods of enterprises. As Nolan and Wang observe, during the
Maoist period, the state destroyed the central idea of capitalist industry - the
competitive firm; instead they attempted to run the whole economy as a single
factory based on administrative orders rather than competitive struggle
between firms.1
From 1931 to 1976 Mao Zedong served as Chairman of the CCP. Mao
structured China’s government and economy under the Stalinist model,
emphasizing heavy industry, agriculture, and industrial construction. What
remained of private industry and commercial activity after the Communist
takeover in 1949 was absorbed into its command economy. Jobs were
assigned by the state and the freedom to make hiring decisions independent
of state purview did not exist.2
China’s economy suffered from its lack of connection with the outside world.
This, alongside China’s fear of foreign aggression and the rural guerrilla
experience of the Communist Party, lay behind a policy of local selfsufficiency. While much of the rest of the global market, and particularly East
Asian countries such as Japan and South Korea, made huge advances in
technology, trade, and business China remained largely isolated behind its
1
Nolan, P. and Wang, X. (1999) ‘Beyond privatisation: institutional innovation and
growth in China’s large state-owned enterprises’. World Development, 27, 1, 180
2
Guthrie, D. (1999) Dragon in a Three Piece Suit. Princeton, Princeton University Press
6
Multinational retailers in the Asia Pacific
closed doors. It was not until 1978, under the reform movement initiated by
Deng Xiaoping, that China would again allow foreign trade and foreign direct
investment.
Under the Maoist regime, various political campaigns were ignited to mould
China and its people into the Communist ideal. These included, for example,
the Three Antis (1951) and the Five Antis (1952) campaigns which sought to
disband the private sector.3 David Goodman comments that from mid-1950s:
‘conspicuous consumption and individual wealth creation were largely
regarded as hostile acts by the CCP.’4
Subsequent campaigns such as The Hundred Flowers Campaign (1956), the
Great Leap Forward (1958-60), and the Cultural Revolution (1966-76) are
widely considered to have had a negative effect on China’s economy. Such
campaigns tended to produce the opposite of Mao’s stated intentions and his
apparent hope that:
‘the intensive marshalling of China's energies would draw manual and
mental labor together into a final harmonious synthesis and throw a bridge
across the chasm of China's poverty to the promised socialist paradise on
the other side.’5
Mao’s hopes of using these mass movements to reform the country instead
‘degenerated into violence, factionalism and chaos.’6
For much of the Maoist era the stress was on the development of heavy
industry, with consumption being deferred, an economic policy backed up by
an austere, puritanical ethos that strongly discouraged conspicuous
consumption. This was felt most strongly during the Cultural Revolution
(1966-76).
Under China’s centrally planned economy and the shortage of consumer
3
Teiwes, F.C. (1993) ‘The establishment and consolidation of the new regime, 19491957’ in The Politics of China, 1949-89. Cambridge, Cambridge University Press, 187204
4
Goodman, David S.G. (1996) ‘The People’s Republic of China: the party-state,
capitalist revolution and new entrepreneurs’, p.225–42 in R. Robison and D.S.G.
Goodman (Eds) The New Rich in Asia: Mobile Phones, McDonald’s and Middle Class
Revolution. London: Routledge, 227
5
Spence, J. http://www.time.com/time/time100/leaders/profile/mao2.html
6
MacFarquhar, R. (1993) ‘The Succession of Mao and the end of Maoism, 1969-82’ in
The Politics of China, 1949-89. Cambridge, Cambridge University Press
7
Multinational retailers in the Asia Pacific
goods that subsequently plagued Chinese households, retailing was a passive
activity, limited to the distribution of basic necessities to consumers. Stores
responded to administrative decisions rather than consumer preferences.
The idea of appealing to and tailoring products to consumer tastes did not
reappear in China until the late 1970s and early 1980s.
By the 1970s, Mao’s economic policies were widely considered to have
failed – although the system was not wholly unsuccessful: in the period
1960-1981 annual growth of per capita GNP averaged 5%.7 Additionally,
industrial workers enjoyed secure employment with good social welfare
provision. However, there had been ‘the absence of any significant
improvement in mass consumption standards for more than two decades.’8
People’s living standards were often no better than they had been in the
1950s. For example, per capita grain availability in 1977 was no higher than
in 1955, barely allowing the Chinese diet to meet basic dietary needs. The
average housing space per resident was only 3.6 square metres.9 It was
under these social and economic circumstances that Deng Xiaoping
succeeded Mao as China’s next leader.
China’s Economy in the Reform Period
Deng Xiaoping served under Mao as a senior member of the CCP. In January
1975, he was granted control of economic affairs. During the early years of
the Cultural Revolution (1966-76), he was criticized as a ‘capitalist roader’;
his actions once in power provided ample evidence that this assessment had
been correct. Unlike Mao, Deng recognized the importance of focusing on
material incentives in order to spur China’s economy forward.
Deng is credited with setting in motion policies that have changed
significantly the direction of China’s economy. The first reforms took place
in the agricultural sector where the commune system set up under Mao in
the late 1950s was dismantled within a few years.
From 1979-1984, there was growing prosperity in many rural areas and
rural residents began to engage in the development of small-scale industries.
7
Nolan, P. and Ash, R. (1995) ‘China’s economy on the eve of reform’. China Quarterly,
144, 981
8
Ibid., 984
9
Pyle, D. (1997) China’s Economy: From Revolution to Reform. Basingstoke, Macmillan,
24
8
Multinational retailers in the Asia Pacific
An increasing number of rural residents began to look beyond largely
subsistence level farming and to undertake the supply of consumer goods
and investment goods in the agricultural sector. The restoration of private
plots, the revival of free markets, and the return to limited forms of private
‘ownership’ of the means of production were significant developments in
China’s transformation toward a market economy.
In 1978, a key policy shift took place that would steadily bring about a
transformation of China’s economy: the implementation of the ‘Open Door
Policy’. Deng Xiaoping and his key advisers recognized the vital role that
foreign trade and investment could play in China’s economic development. By
allowing foreign investment through joint ventures and cooperative licensing
agreements, Deng also believed that international competition would, ‘force
Chinese manufacturers... to improve the quality of their products and be
responsive to the specific requirements of customers.’10
In the late 1970s, China established four Special Economic Zones (SEZs).
Within these zones, Zhuhai, Shenzhen, Shantou and Xiamen, foreign direct
investment was enticed to invest with favourable tax, profit repatriation, and
other provisions for foreign investors. Further, Deng reformed how state
owned enterprises (SOEs) operated.
Under Mao’s regime, workers employed in SOEs had a de facto tenure for
life, a benefit commonly known as the ‘iron rice bowl’. In the mid 1980s, the
labour contract system was introduced to remove this obligation of life
employment. Under the contract system, enterprises were granted more
freedom in hiring practices. Also, newly hired employees had to sign a
contract, specifying the duration of the period in which they would work, as
well as responsibilities, benefits, and wages. Now, China’s workers are
increasingly employed according to their performance.
SOEs share in the economy has steadily declined, from nearly 76% of total
industrial output in 1980 to just 28.5% in 1999.11 Meanwhile, that of private
and foreign invested enterprises rose from 0.5% to 36.4% between 198097.12 According to the Hong Kong Trade Development Council, the private
10
Shirk, S. (1993) The Political Logic of Economic Reform in China. Oxford, University
of California Press
11
Zhu, C.J. and Nyland, C. (2004) ‘Marketization and social protection reform: emerging
HRM issues in China’. International Journal of Human Resource Management, 15, 4, 860
12
Smyth, R. (2000) ‘Should China be promoting large-scale enterprise groups?’. World
Development, 28, 4, 724
9
Multinational retailers in the Asia Pacific
sector may have reached 61% of national GDP by the end of 2000, although
the percentage varies hugely from one part of China to another.
Despite this, SOEs remain a significant part of the economy. For example, in
2003, SOEs were reported to employ half of China’s 750 million workers and
to control 57 percent of its industrial assets. Further, SOEs control many
crucial industries such as financial services, power, and telecommunications.
The Chinese banking system has continued to support failing SOEs in large
part to help maintain employment.
Despite the overall successes of the open door policy, throughout the 1980s
and early 1990s the CCP continued to debate whether China should continue
‘opening up’ or be ‘self reliant’. These debates created concern among
foreign investors that China’s door may close once again. This concern
increased during the late 1980s, following the violent suppression of
demonstrations across China.
From 1989 until early 1992, China appeared to be set upon a more
introspective and conservative path of economic development. However,
during early 1992, Deng embarked on a highly publicised ‘tour’ of China’s
southern provinces and successfully re-energised economic reform and the
investment environment. Since that time, it has become increasingly unlikely
that China will ever fully close out the outside world again. In 1992, a record
number of foreign invested projects were allowed into China.
China’s Entrance into the WTO
The reforms promoted by Deng were effectively sealed by China’s accession
to the World Trade Organization in 2001. WTO accession provided an
important spur to foreign involvement in China’s retail sector. Since
admission, many of China's long-standing market barriers and trade
restrictions have come down. China has gradually opened its vast and
domestically dominated retail market to the outside world. The following are
some of the most important changes for the retail sector.
Under the WTO agreement, China lifted the joint venture restrictions on
large department stores and almost all chain stores. The 20,000 square
metre size restriction for foreign owned chain stores was also eliminated.
Restrictions on geographic, quota, and retail formats were also lifted. The
only exception being for chain stores with over 30 outlets selling or
10
Multinational retailers in the Asia Pacific
distributing restricted items such as motor vehicles and chemical
fertilizers.13
China allowed foreign business to form wholesale joint ventures to distribute
both imported and domestically produced products. Geographic restrictions
have been lifted from these foreign firms. Foreign firms can now use their
own services such as storage, warehousing, packaging, and advertising thus
improving their access to Chinese markets and its consumers.14
Prior to this time, only 20 foreign invested retailers were approved by the
central government, mostly established multinationals such as Wal-Mart
(US), Metro (Germany), Makro (Netherlands), Ito Yokado (Japan) and Jusco
(Japan). Now another 277 retailers have been approved. The previously
established retailers now have almost all restrictions lifted from them
allowing them to expand their existing operations.
With the ongoing reception of franchising, China is expected to have more
franchises in 10 to 15 years than any other country in the world. Companies
such as Starbucks, KFC, and Kodak have already expanded rapidly as
franchises in China.
China has implemented its own strategies to face the large increase in
foreign competition coming as a result of its entrance into the WTO. Chinese
retailers have pooled together their resources to with the intention to create
large domestic firms capable of defeating or matching foreign retailers. By
pooling resources and improving the quality of their goods and customer
service, these domestic retailers believe they can compete against the
recently arrived foreign competitors.
13
China’s Retail Market (2001) British Chamber of Commerce in China, HSMO, 15
14
Ibid., 4
11
Multinational retailers in the Asia Pacific
Table 1 - Summary of Landmark Policies and Reforms
1978 – The Open Door Policy
1979 – Foreign Joint Venture Law
1979 – Special Economic Zones
(SEZs) established
1984 – Major expansion of Open
Door Policy
Mid-1980s – Labour Contract
system
1986 - Law on Enterprises
Operated Exclusively with Foreign
Capital
1992 - Provisions on Foreign
Investment in Retailing
1993 – Company Law
1999 - National People’s Congress
upgrades role of private sector in
the constitution
- Holiday Economics Policy
2001 – China becomes a member of
the World Trade Organization
(WTO)
Initiation of the open door policy
signifies China’s entrance into the
global market.
PRC allows foreign companies and
enterprises to establish joint
ventures with Chinese companies
and enterprises.
Areas set up to attract FDI by
offering tax breaks and profit
repatriation.
Policy extended to 14 coastal cities
and 24 inland cities.
Began a new system in which
enterprises are only responsible to
workers for as long as the contract
specifies.
Wholly foreign-owned enterprises
allowed in some circumstances.
State Council approves major cities
and the SEZs to allow foreign
investment in retailing.
Private, collective and state
enterprises are now legally allowed
to exist autonomously.
- Henceforth private sector to be
considered an ‘important part’ of the
‘socialist market economy’.
- Labour and May Day holidays
extended to promote consumer
spending.
Long-standing market barriers and
trade restrictions removed.
12
Multinational retailers in the Asia Pacific
Chapter 3. The Landscape of Foreign Retailers in China
Since 1992, when foreign retailers were again allowed into China, several
firms have rapidly expanded their operations in the country. International
retailers such as B&Q, Wal-Mart and Carrefour have brought Western style
aesthetics, ideas, and tastes.15 Not only have they had an impact on
consumers’ tastes and spending, they have also begun to affect the
organization and structure of local retail markets.
Despite these changes, total retail sales in China still account for a relatively
small proportion of the economy when compared to developed economies. In
addition, the retailing industry is still highly fragmented. Of the top 100
retailers, 45 are state-owned, 32 private-owned and 23 foreign-owned.
More active participation from foreign retailers occurred after China opened
the sector to 100% foreign investment in 2004 in accordance with its WTO
comittments. Since foreign players no longer need to have local joint
ventures, many retailers are likely to buy back shares from local partners. 16
A small but steadily growing body of work explores Chinese retail sector and
consumers.17
To set up operations in China, foreign multinationals have faced many
15
Garner, (2006) The Rise of the Chinese Consumer. Chichester, John Wiley & Sons, 84
Euromonitor International (2006) ‘China-Retail’. Euromonitor International: Country
Market Insight. September, 6
17
Beyond those produced by this study useful references include: Dawson, J.,
Mukoyama, M., Choi, S.C. and Larke, R. (Eds) (2003) The Internationalization of
Retailing in Asia. London, Routledge; Goldman, A. (2000) ‘Supermarkets in China: the
case of Shanghai’. International Review of Retail, Distribution and Consumer Research,
10, 1, 1-21; Goldman, A. (2001) ‘The transfer of retail formats into developing
economies: the example of China’. Journal of Retailing, 77, 2, 221-242; Letovsky, R.,
Murphy, D.M. and Kenny, R.P. (1997) ‘Entry opportunities and environmental constraints
for foreign retailers in China’s secondary cities’. Multinational Business Review, 5, 2,
28-40; Taylor, R. (2003) ‘China’s consumer revolution: distribution reform, foreign
investment and the impact of the WTO’, Asian Business and Management, 2, 187-204;
Wang, S. and Zhang, Y.C. (2005) ‘The new retail economy of Shanghai’. Growth and
Change, 36, 1, 41–73
Studies on Chinese consumers include: Croll, E. (2007) China's New Consumers.
London, Routledge; Davis, D.S. (Ed.) (2000) The Consumer Revolution in Urban China.
Berkeley, University of California Press; Gamble, J. (2001) ‘Shanghainese
consumerism’. Asia Pacific Business Review, 7, 3, 88-110; Gerth, K. (2003) China
Made: Consumer Culture and the Creation of the Nation. Cambridge, MA, Harvard
University Asia Center.
16
13
Multinational retailers in the Asia Pacific
difficulties.18 In part, this is attributed to the dominance of the CCP and the
mixing of ‘business relations with state interests.’19 However, some of the
following multinationals have become major players in China’s retail market:
 Carrefour – A French owned company formed in 1959 and now the
largest hypermarket operator in the world. Following its merger with
rival Promodes in 1999, Carrefour became the world's second largest
retail group, behind America's Wal-Mart, and the market leader in
Europe. Carrefour is the number one foreign retailer in China in terms
of the number of stores it operates, ahead of Wal-Mart. At the end
2006, Carrefour reported operating 90 hypermarkets, 8 supermarkets
and 255 hard discount stores in China – a dramatic increase of 34
hypermarkets, 2 supermarkets and 91 hard discount stores in less than
2 years.20 This recent progress came despite the Chinese government
having prohibited further Carrefour expansion in 2001.
Carrefour’s Expansion Comes to a Halt
In 2001, the Chinese government stopped the expansion of Carrefour stores,
citing that they did not have the correct approvals from Beijing and
according to the rules at that time had too large a stake in their stores.
Carrefour’s expansion and development in China was halted for 18 months
while negotiations between the Chinese government and Carrefour were
undertaken.
Source: ‘Lessons from a Global Retailer: An Interview with the President of
Carrefour China.’ The McKinsey Quarterly, 2006 Special Edition
 Wal-Mart – A U.S.-owned company formed in 1962. In 2005, WalMart’s annual revenues of $315bn were roughly equal to those of the
next four global retail groups combined. In 1996, Wal-Mart opened its
first supercentre and Sam’s Club in Shenzhen, Guangdong. Until late
18
Foreign firms in many sectors have found China a difficult place in which to operate,
see Studwell, J. (2003) The China Dream: The Elusive Quest for the Greatest Untapped
Market on Earth. London, Profile Books
19
Au-Yeung, A. and Henley, J.S. (2003) ‘Internationalisation Strategy: In Pursuit of the
China Retail Market’. European Business Journal, 15, 1, 22
20
Carrefour (2006) ’Integrated Number of Stores Report’
http://www.carrefour.com/english/groupcarrefour/parcenseignes.jsp (January 25, 2007)
14
Multinational retailers in the Asia Pacific
2004, Wal-Mart’s development in China had been mostly limited to the
eastern and southern seaboards. However, under WTO agreements,
Beijing allowed foreign retailers to expand outside provincial capitals
and special economic zones from December 2004. As of January 2007,
Wal-Mart operates 66 supercentres, 3 Sam’s Clubs and 2
neighbourhood markets in China.21
Wal-Mart Faces the All China Federation of Trade Unions
In November 2004, the world’s largest retailer Wal-Mart stated that the
company would be in full compliance with Chinese law, and that it would
allow voluntary action of its associates to unionize under the Federation. The
world's largest retailer, Wal-Mart has always been resistant to unionization
in its stores around the world. As its business in China expanded, the chain
store was pressured by the official All China Federation of Trade Unions to
establish union branches in its stores.
 Metro – The Metro Group is Germany's largest retail group, formed in
1996 out of the merger of three separate companies. It is the country's
biggest grocer and electronics retailer, and operates around 2,440
wholesale warehouses, hypermarkets and department stores in 30
countries. It is currently the third largest retailer worldwide. Nearly
half of its 270,000 employees work outside Germany. Metro started
operations in China in 1995. Since that time, Metro has opened a
further 31 stores in 27 cities.22
 Ito-Yokado – Ito-Yokado Group was established in 1958 and is Japan’s
largest retail group, operating over 9,700 7-Eleven convenience
stores and more than 900 superstores, supermarkets, discounters and
specialty stores in Japan. Ito-Yokado opened its first store in China in
1997. According to the latest released figures, Ito-Yokado operated
seven chain stores in China at the end of 2005.23
21
Wal-Mart (2007) ‘China Fact Sheet’
http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=375 (January 25, 2007)
22
Metro Group (2006) ‘Global Locations of the Metro Group.’ September 30.
http//www.metrogroup.de/servlet/PB/menu/1011895_12/index.html (January 25, 2007)
23
Ernst & Young (2006) ‘Retail Revolution – A Look at Mergers and Acquisitions in
China’s Retail Industry.’ September, 2
15
Multinational retailers in the Asia Pacific
 B&Q – Kingfisher plc is Europe’s leading home improvement retail group
and the third largest in the world, with nearly 650 stores in 11
countries in Europe and Asia. Its main retail brands are B&Q,
Castorama, Brico Dépôt and Screwfix Direct. The group's leading
brand, B&Q, initially entered the Asian market through a joint venture
in Taiwan in 1996 and expanded into mainland China three years later.
B&Q is now the number one home improvement retailer in China. At
the end of 2006 they had a total of 48 stores in mainland China and a
further 20 in Taiwan. Their flagship Beijing subsidiary is the largest
B&Q store in the world.24
 Tesco – Tesco was formed in 1924 and today is the UK's largest
retailer. The company embarked upon a plan to expand its presence in
China, eventually entering the country at the end of 2004 by paying
£145 million for a 50% holding in Ting Hsin's Hymall, which operates
hypermarkets in Shanghai and North East China. In December 2006,
Tesco paid a further £180 million to increase its holdings in Hymall
from 50% to 90%. At the end of 2006 Hymall operated 39
hypermarkets in China.25 In January 2007, Tesco opened its first ownbrand supermarket in China.
 Aeon - AEON is a Japanese owned retailer that operates drug, clothing,
and general merchandise stores, in addition to supermarkets and other
specialty shops. In September 2004, AEON became the first Japanese
associated retailer in China to gain approval as a wholly-foreign
owned subsidiary. As of March 2005, AEON operated 10 general
merchandise stores in China and one major shopping centre.26
China constitutes an increasingly significant market for foreign retailers and
offers significant growth potential. Aside from some of the difficulties that
foreign retailers have encountered since entering the Chinese market, they
have also benefited greatly from this emerging consumer market. This new
market is attributed to the country’s fast developing economy, a growing
24
Kingfisher (2006) ‘Annual Report 2005/06.’
http://www.kingfisher.com/managed_content/files/reports/annual_report_2006/index.asp
?pageid=58 (January 25, 2007)
25
Tesco (2006) ‘Annual Report and Financial Statements – 2006’
http://www.tescocorporate.com (January 25, 2007)
26
Jusco (2005) ‘Aeon Stores Corporate Profile.’ http://www.jusco.com.hk/chi/index.html
(January 25, 2007)
16
Multinational retailers in the Asia Pacific
middle class, and consumers increasingly purchasing products that go
beyond basic necessities.27
The Chinese government has also increasingly recognized the necessity to
stimulate domestic consumption as a means to ensure continued economic
growth.28 In 2002, the National People’s Congress designated the expansion of
domestic demand as ‘a long-term strategic principle’. This approach is
intended to help reduce the heavy reliance of China’s export industry on
American consumers. One policy implemented to raise consumption is
‘Holiday Economics’, the lengthening of the May Day and Labour Day
holidays.
In addition, the Chinese government has made additional concessions in the
last 2-3 years that have created more possibilities for foreign retailers. As
noted above, in December 2004, China finally permitted foreign retailers to
establish solely owned outlets. The removal of geographical constraints will
allow other global players to plan expansion strategies in China. China now
allows foreign retailers to enter into more cities as well as its inland regions.
Initially, many domestic retailers in China may face stiff competition from the
inflow of foreign retailers. These foreign retailers bring time-tested
management styles that are new to China’s domestic retailers. However, as
these domestic retailers adapt to new conditions they may adopt ‘new
management styles, probably Sino-foreign hybrids, focusing on better
customer service techniques and quality.’ 29 Eventually, it is hoped, these
foreign inputs will aid China as it seeks to develop its own multinational retail
firms.
27
Ness, A. (2005) ‘China’s Growing Attractiveness to Global Retailers: Strategies for
Retail Expansion in China’. European Retail Digest, 47, 58-63
28
Croll, E. (2007) China's New Consumers. London, Routledge
29
Taylor, R. (2003), ‘China’s Consumer Revolution’, 201
17
Multinational retailers in the Asia Pacific
Chinese Consumers
Today’s Chinese Consumers:
‘China has gone from a time when stores selected customers, to an era
where customers select the store.’ (Managing Director of a Japanese retail
company)
‘During induction training we’re told two rules. Rule One, the customer is
always right. Rule Two, when the customer is wrong refer to Rule One.’
(Checkout Assistant in a Japanese subsidiary)
Source: Gamble, J. (2006) ‘Consumers with Chinese Characteristics? Local
Customers in British and Japanese Multinational Stores in Contemporary
China’, 175-198
A Japanese subsidiary’s checkout assistant who had previously worked in a
state store remarked:
‘At the SOE we didn’t emphasise customer service, here it’s what we
stress the most. Here customer service is number one. People there
were lazy, we often ignored customers. The atmosphere wasn’t good,
because of the poor management style. The supervisors and managers
stayed in their offices reading the newspaper and didn’t come out, not
like the leaders here.’
Before the reform era in China, customer choice was severely restricted and
limited to state-owned stores. These stores offered poor customer service
and sold the same limited range of products at the same prices so there was
little incentive for customers to compare stores. Maoist ideology and socioeconomic policies precluded the emergence of popular consumerism: incomes
were low and egalitarian, there was reliance upon payment in kind, and there
was a limited choice of consumer goods. From the mid-1950s, conspicuous
consumption and individualism were frowned upon by the state, creating an
era of ‘conspicuous non-consumption’.30 Stores offered the same range of
30
Gamble, J. (2001) ‘Shanghainese consumerism’. Asia Pacific Business Review, 7, 3,
88-110
18
Multinational retailers in the Asia Pacific
products at the same prices, with little incentive for either store managers or
employees to seek to attract customers or raise sales volumes.
Since the Maoist era, the inflow of foreign companies, products and
personnel has steadily grown. The state’s legitimacy has become deeply
entwined with the ability to deliver improving living standards and there has
been a marked shift from deferred gratification to an emphasis on
consumption and material rewards in the present.
Since 1992, many of the factors that prevented the emergence of a popular
consumer society have been radically changed or at least undermined. Income
levels have generally risen, a new wealthy stratum has emerged, a far greater
range of consumer products is available, and there is now fierce competition
amongst both producers and retailers. The increased availability and
widespread affordability of consumer products has been a part of Chinese
life and in many senses serves as the benchmark of China’s post-Mao
economic development.31 China can be characterized as undergoing a
transition from a production-driven economy to a consumer-led economy. In
China today, retailers must compete to attract and retain customers.
China’s GDP has grown by an average of 9% per annum since 1994, with
2004 constant value GDP more than double that of 1994. This growth drove
up retail sales of consumer goods by 13% per annum over the same decade.
China’s rising popular consumerism has been accompanied by substantial
shifts in both notions and expectations of the ‘customer’.
31
Gamble, J. (2003) Shanghai in Transition: Changing Perspectives and Social Contours
of a Chinese Metropolis. London, RoutledgeCurzon
19
Multinational retailers in the Asia Pacific
Chapter 4. Results From the Research
Although much research has been carried out on multinational manufacturing
companies in China, research on the transfer of human resource management
techniques in the retail sector has largely been ignored.32 This project was
undertaken to explore this topic.
The research documented and analysed differences between the business
structures, management practices, and retail concepts of retailers from Japan
and the UK as well as local Chinese firms. The research also investigated
Chinese employees and customers' reception of transferred practices.
Foreign multinational retailers have introduced novel and qualitatively
different approaches to customer service into China. Multinationals have
been at the forefront of the development of a consumer culture and the
emergence of a consumer consciousness that includes customer rights.
Foreign retailers have introduced the notion of systematic customer service
training for store staff and local consumers tend to have higher expectations
of customer service and product quality in foreign stores compared to
domestically owned stores.33 At the same time, there are indications that
consumers differ cross-culturally. This was evident in the observation of a
UK expatriate manager at a UK invested store in Shanghai who found that,
‘selling here is much more used to negotiating’.
Transferring Parent Country Human Resource Management
Practices to China
The findings indicate that the multinationals in this study have generally
sought to transfer their human resource management practices to China.
There are, though, exceptions to this general picture.
Contrasts between Japan and China are particularly interesting. Even though
these two countries have different political, social, and economic systems,
32
Although see, Gamble, J. (2003) ‘Transferring human resource practices from the
United Kingdom to China: the limits and potential for convergence’. The International
Journal of Human Resource Management, 14, 3, 369-387
33
See also, Chaney, I. and Gamble, J. (forthcoming) ‘Retail store ownership influences
on Chinese consumers’. International Business Review
20
Multinational retailers in the Asia Pacific
there are some notable parallels between them. The retail sectors in both
countries were largely closed to foreign competition and new domestic
entrants until the early 1990s. Until quite recently, at least, both Japan and
China shared a labour system ideal that provided workers with lifetime
employment and extensive welfare benefits, although these were usually
only available to those in large firms. Similarly, Chinese and Japanese
business hierarchies tend to link salaries to employees’ needs rather than
their contributions to the firm.
In both China and Japan, ‘traditional’ models of employment practices,
including lifetime employment and minimal reward differentials are under
pressure.34 As one Japanese executive reflected on the passing of seniority
pay in his home company, ‘the time has gone where if you stay longer you
get more.’
Both countries could be described as in a transitional phase: Japan from a
highly regulated market economy and China from a socialist planned
economy. Arguably, HRM practices in China have been accelerating most
rapidly away from this model.35 Divergences in income, for instance, have
widened sharply at both the firm and the macro level. By contrast, Japan has
witnessed marginal changes in labour management systems with relatively
slight shifts in its deeply entrenched socialist-style ethic.36
Both the Japanese and UK retailers transferred HRM practices from their
parent country.37 There were also notable differences between the Japanese
and UK subsidiaries, such as the former’s greater use of expatriates in
senior management positions. This reliance on expatriates may have stunted
growth. After the first year of operations, the UK firm’s subsidiaries relied
entirely upon local Chinese managers at store-level. This firm has
34
Ding, D., Goodall, K. and Warner M. (2000) ‘The end of the “iron rice-bowl”: whither
Chinese human resource management?’. International Journal of Human Resource
Management, 11, 2, 217-236
35
Benson, J. and Zhu, Y. (1999) ‘Markets, firms and workers in Chinese state-owned
enterprises’. Human Resource Management Journal, 9, 4, 58-74
36
Dalton, N. and Benson, J. (2002) ‘Innovation and change in Japanese human resource
management’. Asia Pacific Journal of Human Resources, 40, 3, 345-362
37
On the Japanese firms see Gamble, J. (2004) ‘Turning Japanese? Chinese workers in
multinational retail firms from Japan’. Multinationals and the International Diffusion of
Organizational Forms and Practices conference, Barcelona, 15-17 July. On the UK firm,
see Gamble, J. (2006) ‘Introducing Western-style HRM practices to China: shopfloor
perceptions in a British multinational’. Journal of World Business, 41, 4, 328-343
21
Multinational retailers in the Asia Pacific
experienced far more rapid expansion than Japanese counterparts who have
been established at least as long in China.
Cultural Distinctions – Not Just Between East and West:
‘Usually it is said that there are eastern and western cultures, but actually
there are very big differences between Japanese and Chinese culture.
Japanese style is very detailed (xi), this can lead to friction.’ (Chinese
manager at a Japanese owned store)
‘The workforce is different; we cannot expect the same diligence as in
Japan. Vendors are different; it is common that they don’t keep their
promise. Customers are different; they do not know what a good consumer
is.’ (Japanese executive)
‘We give workers a manual, the same as at McDonald’s. Without a manual it
would be a big mess. New employees can see the manual and know what to
do. So, in China work “know-how” is in the manual; in Japan work “knowhow” is in the people, not the manual.’ (Deputy General Manager at a
Japanese owned store)
Source: Gamble, J. (2004) ’Turning Japanese? Chinese Workers in
Multinational Retail Firms from Japan’, 1- 23
In addition, the Japanese approach to customer service was more regimented
and detailed than the UK stores. Employees in stores from both nations
tended to describe customers as ‘friends’ or akin to ‘family members’.38
Among the Japanese store employees there was also a tendency to depict
customers as ‘guests’, a description not heard in the UK owned stores. This
difference could be the result of the Japanese firms placing stronger
emphasis on customer service than their UK counterparts.
One dimension not replicated in China was the Japanese male-dominated
management structure. In all the Japanese stores surveyed, much higher
percentages of female supervisors were reported in China compared to Japan
where proportions of females in supervisory and managerial roles was
38
Gamble, J. (2006) ‘Consumers with Chinese Characteristics? Local Customers in
British and Japanese Multinational Stores in Contemporary China,’ in F. Trentmann (Ed.)
The Making of the Consumer: Knowledge, Power and Identity in the Modern World.
Berg Publishers
22
Multinational retailers in the Asia Pacific
extremely low. Another dimension of personnel management that was rather
different for Japanese firms in China was a greater emphasis on monetary
incentives and sanctions. These policies were less evident in the parent
company’s stores in Japan. This was rather an ironic situation for
multinational firms from a nominally capitalist country operating in a
nominally socialist country.
The Japanese firms transferred a weak form of the commitment to long-term
employment, an aspect that meshed with recent historical practice in China
but is contrary to emergent norms. In other cases, some features matched
current trends in the host county, such as the introduction of performancerelated pay. This same trend was evident in Japan itself, but the absence of a
constraining union voice probably permitted its more thoroughgoing adoption
in China.
Some transferred practices were innovative in the Chinese context, such as
Japanese style customer service. For instance, a Japanese store manager
stated:
‘We need to constantly think, what do Chinese think and need? We need to
understand Chinese habits and customs and to bring the good Japanese
ones and mix these with the good Chinese ones and create something
new.’
There were rather unsuccessful attempts to replicate Japan’s internal labour
markets based upon recruitment of graduates for lifetime employment. One
store, in particular, that attempted this found that almost all the carefully
selected and trained staff left within a few years for other opportunities.
While the UK retail firm transferred most of its parent country HRM
practices to China, in one significant regard it followed local practices. This
exception refers to the host country practice of using large numbers of
vendor representatives, sales staff who work for product suppliers instead of
the retail stores.39
39
Gamble, J. and Huang, Q. (2009 forthcoming) ‘One store, two employment systems:
core, periphery and flexibility in China’s retail sector’. British Journal of Industrial
Relations, March.
23
Multinational retailers in the Asia Pacific
Table 2 Employment contrasts between Japanese and UK firms’ subsidiaries
UK style HRM in China subsidiaries:
Japanese style HRM in China
subsidiaries:
Employment practices:
- ‘Grass Roots’ in house
consultation system introduced.
- Open and consultative
management interaction.
-Wore single status uniforms and
used first name terms.
Employee training and customer
service:
- Hired and employed those that
held customer service in high
regard.
- Use of role play training to teach
customer service interaction.
- Encouraged customers to make
written comments and suggestions.
The employees:
- Worked longer hours on average
than at previous SOE jobs.
Adaptations in China subsidiaries:
Employment practices:
- Greater use of expatriates.
- Strict rules and regulations.
- Relatively slow promotion.
- Expectation of long-term
employment with strong internal
labour market
Employee training and customer
service:
- Hired and employed those that held
customer service in high regard.
- Vigorous training and outlines for
customer service interaction.
- Use of job rotation for floor staff.
- Encouraged customers to make
written comments and suggestions.
The employees:
- Worked longer hours on average
than at previous SOE jobs.
Adaptations in China subsidiaries:
- Employed more staff in China
- Employed more staff in China
- Displays more elaborate than in
UK parent stores.
- More female supervisors in China
subsidiaries than in Japan
- Used vendor representatives in
their China subsidiaries.
- Greater stress on monetary
incentives and sanctions than in
Japan.
- Faster promotion than in Japan.
- More frequent promotion than in
the UK. Used ‘fast-track
management’ scheme to qualify
employees to become supervisors
and managers quicker.
Sources: Table constructed from various articles based on the research.
24
Multinational retailers in the Asia Pacific
The project studied the labour divisions in sales-oriented work and the
relationship between ‘vendor representatives’ and store employees in the
same workplace. In contrast to store workers, vendor representatives
usually enjoy less job security and fewer welfare benefits, but play a major
role in sales and store atmosphere. Vendor representatives possess indepth, hands-on knowledge of the product, thus being able to answer
customer questions with ease. The co-existence of these two types of
workers could complicate relationships, both between co-workers and
between workers and managers, and could also undermine customer service.
Such employment arrangements tended to create dilemmas that run counter
to the UK company’s goals and strategies.
The findings indicate that while it is possible to transfer culturally innovative
practices, those that run counter to institutional features - such as the nature
of local labour markets - are much harder to implement.40 Thus firms were
able to transfer cultural practices such as Japanese style customer service,
even though bowing in particular was antithetical to local norms and
possessed the potential to arouse latent resentment against Japan. In
contrast, an uncontroversial practice such as a Japanese company’s hiring of
graduates to train as a new management cadre foundered on China’s
different institutional soil.
The impact of multinational retailers on local employment practices is also
noteworthy. Unlike most factories and offices, retail companies such as these
are particularly open to the public and competitors’ scrutiny. Some
competitors have readily copied their practices and procedures: for example,
expatriate managers noticed that SOE floor managers now performed more
regular floor inspections and local stores no longer permitted their staff to
eat meals while on duty.
Local Employees’ Reception of Imported HRM Practices
‘The management approach is completely different to my last work unit
(danwei). There everything depended on guanxi (personal connections)
and ‘human feelings’ (renqing). Here it depends on your brain and your
own efforts.’ (Showroom customer assistant at a UK owned store)
40
For further discussion, see Gamble, J. (2004) ‘Turning Japanese?’
25
Multinational retailers in the Asia Pacific
Employees noted that they appreciated how these firms provided a more
consultative HRM regime than state-owned enterprises.41 This was
particularly evident for the UK firm. Further, employees appreciated that in
most instances a clear and long-term company management strategy was
communicated to the workforce, something few had experienced in SOEs.
In the past, Chinese employees working for SOEs noted that their appraisals
and promotions were based more on guanxi, or personal ‘connections,’ rather
than on output and performance. The relative lack of guanxi biases in
Japanese and the UK firms was one factor that attracted employees to work
in these foreign firms.
Working in foreign firms versus local companies:
‘There’s a big difference to my old firm [a local factory], there it was like
being a machine. Here my ability to express myself has increased, as each
customer is different.’ (Paint department customer assistant in a UK owned
store)
‘Because it’s a foreign firm you can learn a lot, so I should be able to
improve myself. In a state-owned enterprise you couldn’t learn this kind of
knowledge.’ (Fish counter assistant at a Japanese store)
Source: Gamble, J. (2006) ‘Introducing Western-style HRM practices to
China: Shopfloor perceptions in a British Multinational’. Journal of World
Business, 41, 4, 328-343
Interview and survey evidence also indicated that most employees believed
that their current jobs would help them improve their skills level,
contradicting widely held expectations that most retail positions constitute
dead-end ‘McJobs’.42 This might, in part, be related to Chinese employees
apparently strong desire for self improvement through education and
training:
‘In the UK it’s about money, not learning about the job. In China they want to
know everything… Everyone in China wants to learn, and this is central to
the business’. (Expatriate project manager in a UK owned store)
41
Gamble, J. (2006) ‘Introducing Western-style HRM practices to China’
Gamble. J. (2006) ‘Multinational Retailers in China: Proliferating “McJobs” or
Developing Skills?’. Journal of Management Studies, 43, 7, 1463-1490
42
26
Multinational retailers in the Asia Pacific
Employees’ Perceptions of Skills Development
Almost 86 percent of the employees working for these multinationals
believed that they could learn a lot from their jobs. They believed the skills
and knowledge they learned from these firms would help them in the future:
‘I joined [store’s name] because I like challenge. I wanted to see if I could
get used to a different job. I felt that Japanese management was strict and
modern, and it would be good for me and my future development.’ (Checkout
assistant in a Japanese owned store)
‘As [the UK store] grows I can increase my quality (suzhi), in the state
enterprise I didn’t learn anything.’ (Gardening department customer assistant
in a UK owned store)
Source: Gamble. J. (2006) ‘Multinational Retailers in China: Proliferating
“McJobs” or Developing Skills?’. Journal of Management Studies, 43, 7,
1463-1490.
The research exposes some of the often baseless mystique and mythology
surrounding human resource management in China. The message is a simple
one, reflected in advice given by a senior expatriate manager who described
his approach as ‘managing fairly and getting the best out of people.’ While
some adaptation to local conditions might be necessary, time-tested
management practices translate remarkably well across cultures. Rather than
struggle to develop complex adaptations to the Chinese environment, firms
would be better advised to hone and refine their existing managerial
practices and technical expertise.
Notions of the Consumer
‘In China, if somebody spends one yuan, they want one thousand yuan of
service.’ (Receiving Section supervisor)
China’s retail market has rapidly become extremely competitive, with
competition between state-owned and private stores and foreign entrants. It
was difficult for the multinationals to compete on price alone. Profit margins
were already lower than in Britain and Japan, while competitor state-owned
27
Multinational retailers in the Asia Pacific
stores had soft budget constraints and small-scale family-run stores could
operate with low overheads. Initially, at least, the multinationals were able to
differentiate themselves from local competitors through imported
technologies and practices such as product displays, use of bar codes, and
return policies. However, the advantage gained was often short-lived, as
rivals rapidly copied and adapted these features.
Customer service was crucial to the firms’ success and a form of
differentiation that was difficult to replicate. Both the Japanese and UKinvested stores sought to transfer and implement their parent country visions
of the consumer and of customer service.43 These notions were underpinned
by an array of human resource management practices, including selection
and recruitment of those with customer-orientated values, as well as
training, discipline, and incentive strategies.
The notion of the ‘ideal’ employee varied, a local HR manager at one
Japanese firm offered a particularly negative account of recruitment criteria:
‘It’s easy to find recruits, but hard to find suitable recruits. They need to
be able to endure hardship (chiku) and be obedient (fucong). It’s no good if
they have their own ideas, also they need to be able to cope with
pressure.’
The form of customer service considered appropriate depended upon the
firm and the specific job role. However, in general, it required employees to
process product knowledge, to provide emotional labour, and to utilize
appropriate social skills.
Customer Service:
The Japanese stores’ approach to customer interactions was more
prescriptive and detailed than the UK stores. Training included memorizing
scripted polite phrases, bowing, and smiling.
The UK stores’ training included the use of role-plays in order to convey
customer-oriented values. The emphasis was upon adapting interactive
behaviour used in everyday life rather than repetition of set phrases.
43
Gamble, J. (2006) ‘Consumers with Chinese Characteristics?’
28
Multinational retailers in the Asia Pacific
Consumers are an increasingly important member of a rapidly changing
Chinese society. Both the Japanese and UK firms built on this idea,
transferring the idea of the ‘sovereign consumer’ into these multinational
subsidiaries.44 The status of the consumer has been enhanced in recent
years, as quotes from managers and workers in UK owned stores indicate:
‘The customer is king and the king can do whatever he wants’ (Store
Manager)
‘Some employees get upset by customers. I tell them not to argue with
customers as, after all, the customer is god’ (Flooring and tiles department,
deputy supervisor)
‘We’re patient with the customers, as the customer is god. Even if the
customer is unreasonable, we’re still patient’ (Decorative materials, deputy
supervisor)
‘Once I argued with a customer, then I controlled myself and walked away, as
the customer is the emperor and is always right. When you’re wearing this
uniform even if they’re wrong, they’re still right’ (Decorative materials,
customer assistant)
Both the UK and especially the Japanese stores recruited and trained
employees to hold customer service values as the most important part of
their jobs. In the case of shopfloor workers, many said that they appreciated
the consumer friendly practices that management stressed. Shopfloor
workers in all the firms frequently stated that they created worthwhile
relationships with customers. By helping to create a basis of trust,
meaningful relationships between customers and workers could also play a
crucial role in transactions.
Relations between staff and customers present a microcosm of human
relations outside the workplace; trust, for instance, must be built in similar
ways. Both parties sought to create or at least replicate generally
understood, valued, and accepted categories of interaction. These findings
indicate how both customers and sales staff remain embedded in historically
influenced institutional and cultural contexts.
44
Gamble, J. (2007) ‘The Rhetoric of the Consumer and Consumer Control in China’.
Work, Employment & Society, 21, 1, 7-25
29
Multinational retailers in the Asia Pacific
Differences between the relationships with customers in the UK subsidiary
stores and Japanese stores were dependent upon a range of factors, such as
the duration of customer contact and nationality of store ownership. In the
Japanese stores, workers were expected to bow and welcome each
customer, reflecting the belief that consumers should be treated as guests
and family members. Such consumer-deferential attitudes appeared less
prevalent in the UK stores. As one Chinese personnel manager employed in a
Japanese owned store stated:
‘In Japan they put the customer first, but in China to put the customer first
is a new concept. The Japanese stress customer service, standing in the
customers’ viewpoint. Before, at Chinese stores, staff ignored customers.
Each time we get paid, they tell us the customers pay this salary.’
With respect to store design, the UK stores in particular did not replicate
exactly their parent country store layouts. Instead, they had been prompted
by customer demand to arrange displays in their China subsidiaries by brand
name rather than product function.
The findings suggest that Chinese consumers have benefited from increased
competition between both local and multinational firms. Customers in
foreign-owned retail stores readily, sometimes aggressively, assert their
rights as consumers.45 The demanding nature of Chinese customers can be
attributed to factors such as: the low-trust retail environment; poorly
developed consumer law and means of legal redress; and the absence of
recognizable quality standards and the independent organs of civil society
that are taken for granted in Western societies.
Local consumers’ higher expectations of foreign-owned stores provide a
fertile basis to strengthen notions of the consumer as citizen. Chinese
consumers have asserted the right to consume goods, receive customer
service of improving quality, and demand accountability from these firms.
Such experiences may have analogies in the political sphere, and it is
perhaps from such quotidian encounters that deep-rooted social changes
may develop.
45
Gamble, J. (2007) ‘The Rhetoric of the Consumer and Consumer Control in China’, 193
30
Multinational retailers in the Asia Pacific
Concluding Comment:
To avoid personnel difficulties in their overseas subsidiaries, many analysts
advise multinational firms to customize their management practices to fit
local norms. However, both the UK and Japanese retailers in this study
transferred to China largely unmodified versions of their home country
management practices and retail concepts.
Overall, employees reported high levels of satisfaction with these foreign
retailers’ human resource management techniques. However, these positive
evaluations may diminish over time as the newness of the experience wears
off. The sustainability and efficacy of the imported HRM practices will be
tested in the event of a business downturn, or a slower pace of expansion
when employees’ expectations for individual advancement are less likely to
be fulfilled. Despite these caveats, while some adaptation to local conditions
might be necessary, time-tested management practices appear to translate
well across cultures.
31
Multinational retailers in the Asia Pacific
Messages for Policy and Practice

While some adaptation to local conditions might be necessary, proven
management techniques translate remarkably well across cultures. Rather
than struggle to adapt to the Chinese environment, multinational firms
would be better advised to hone and refine their managerial skills and
technical expertise.

The use of too many expatriates may hinder the growth and development
of foreign subsidiaries in China. It was noticeable that, even though they
had sometimes begun operations in China earlier, the more expatriate
dependent Japanese retailers have been outpaced by retailers from
France, the UK, and the United States that generally operate with either
one or no expatriates in their stores.

Some adaptation to local conditions might be necessary, but choosing
which local practices to adopt should be handled carefully. The UK and
Japanese retailers all followed local practice in their use of large numbers
of vendor representatives, sales staff who work for product suppliers
instead of directly for the stores. Vendor representatives and regular
store staff work alongside each other, but operate under markedly
different employment relationships. This dualistic system can create
complex and fractious relationships between the two sets of workers and
this can, in turn, undermine customer service.

Chinese workers who join foreign subsidiaries can be extremely ambitious
and expect rapid promotion. It is important to communicate clearly the
possibilities for training, promotion and career development. It is also
important to develop retention strategies for key staff.
32
Multinational retailers in the Asia Pacific
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