Paper Number: P1068
A Study of Multinational Retail Companies Expanding in
Southeast Asia from Regional Strategy Perspective: The
Regional Retailers
Taichiro Sahara
Iwaki Meisei University
Japan
Paper Number: P1068
A Study of Multinational Retail Companies Expanding in
Southeast Asia from Regional Strategy Perspective: The
Regional Retailers
ABSTRACT
As the world has become borderless, the retail markets around the world have been
internationalized. The players in grocery markets could be global retailers deploying their
business worldwide such as Walmart, Carrefour, and Tesco. Also the players could be the
local retailers in each country. But there are others. They are multinational retailers
conducting the business in limited region. This paper calls them Regional Retailers, and
focuses on the cases of Regional Retailers conducting their grocery business in multiple
countries in Southeast Asia region. With review of retail internationalization strategies from
both standardization and adaptation perspectives, this paper emphasizes regionalization.
Keywords: Retail Internationalization, Multinational Retailers, Regional Retailers, Market
Entry to Southeast Asia
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1. INTRODUCTION
As growth of GDP per capita has continued in Southeast Asian countries since 2000, those
countries have been considered not only the production center for multinational
manufacturers but also consumption center for multinational retailers. Since the population
volume of middle income class has increased in the countries, the market entries by
multinational retail companies to the Southeast Asia have been remarkable. On the other hand,
the Southeast Asian countries respectively have different factors such as economic status, race
structures, religions, languages, government systems and regulations; thus, it could be
described that Southeast Asia market is a combination of fragmented market in each country.
Additionally, within the retail business categories, the grocery business is much more closely
related to local food-culture and lifestyle than other retail categories such as appliances and
apparel. This paper focuses on the grocery markets in Southeast Asia in order to investigate
how the multinational retailers have approached such local grocery markets, and to apply the
conceptual framework for creating better understanding of retail internationalization. For
multinational retailers, it would be the key to success how they consider the strategy to adapt
themselves into the grocery market consisting of local distinctiveness in each Southeast Asian
country.
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Figure-1. Growth of GDP per capita in Asian countries
Source: IMF World Economic Outlook Database, October 2014.
2. LITERATURE IN RETAIL INTERNATIONALIZATION STRATEGIES
2.1 Standardization and adaptation
Standardization and adaptation have been discussed for the decades in retail
internationalization strategy research. Waldman (1977) suggested that global retailers face
two potentially conflicting forces. One is the need to adapt the local market conditions so as
to create better consumer satisfactions. The other is the desire to utilize the organizational
resources so as to create the benefit from the economy of scale. Global strategies taking
advantages of economy of scale based on standardization and multinational strategies
adapting local market conditions have been discussed overtime. Buzzell (1968) described the
importance of balancing between the advantages of standardization generating economy of
scale and the necessity of addressing the nature of heterogeneous local market. On the other
hand, Levitt (1983) claimed that global strategies will replace multinational strategies because
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the consumer needs and expectations around the world will be more homogeneous. Salmon
and Tordjiman (1989) categorized the pattern of internationalization strategy of retailers into
those two types, basically standardization referring to replicating the same retail format
worldwide and adaptation referring to adjusting the retail format to local condition. Then, they
indicate the strategies that the multinational retailers should install depend on the type of retail
business. The specialty stores retailers such as Bennetton and Laura Ashley were listed as
examples for standardization strategies and grocery retailers such as Carrefour and Auchan
were listed as examples for adaptation strategies. Their study could explains why the
internationalization of specialty store retailers started earlier than that of grocery retailers
because specialty store retailers could immediately replicate the same retail format to targeted
market in other countries.
Although the discussions regarding standardization and adaptation have been a key topic for
internationalization strategies for the retailers, some researches have questioned this type of
discussions.
Oishi
(1997)
reviewed
the
details
of
discussion
regarding
standardization/adaptation and pointed out the insufficiency as framework because it is based
on only two extreme options, whether standardization or adaptation. Some researches which
support standardization claim that the real standardization strategies mean the strategies
which could adapt any market environment. Kawabata (2005) criticized and pointed out there
is a confusion regarding the use of terminology.
2.2 Regionalization
While the discussion of standardization and adaptation, Rugman (2000), Rugman and Grid
(2003), Rugman and Verbeke (2004) regarded the global strategies deploying standardization
as a myth by describing the fact that the multinational retailers have operated their businesses
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on regional basis, such as America, Europe, and Asia. Based on their researched, they
discussed the importance of the regional strategies, which is the strategies balancing
integration and local market adaptability on regional basis.
Then, how the multinational grocery retailers actually conduct their business in multiple
countries in focused region? Retail internationalization process studies have indicated the
critical function of regional headquarters. Yahagi (2007) studied Tesco’s businesses in Asia.
Tesco firstly entered Thailand market in Asian region. The headquarters in Thailand not only
have managed the businesses in Thailand, but also functioned as Asian regional headquarters
by providing the best practices to subsidiaries in other Asian countries. Maruya (2014)
discussed Walmart’s case of entering South American markets. It described headquarters in
Mexico developed the discount store type retail format by responding local market needs, and
they also have provided the retail format as the best practice to the subsidiaries in Argentina.
In this case, headquarters in Mexico have also functioned as South American regional
headquarters. AEON, the Japanese grocery retailer, revealed its 3 year strategies targeting
Asian markets. They clarified that Malaysia would be the headquarters to conduct the
business in Southeast Asian region.
As mentioned, regional headquarters which could lead and provide the best practice to the
subsidiaries within the region have taken the critical roles for multinational grocery retailers.
Based on this discussion, the hypothetical model of regional strategy could be created as
Figure-2.
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Figure-2. Regional strategy model framework of multinational grocery retailer
Multinational Grocery Retailer
Region X
Country L
( Headquarters in Region X )
Country M
Country N
3. REGIONAL RETAILERS IN SOUTHEAST ASIA GROCERY MARKETS
In Southeast retail markets, there have been both global retailers deploying their business
worldwide with the same store banner such as Tesco, and local retailers conducting business
in their nation. However, there are some other retailers belong to neither of them. They are
multinational retailers operating their businesses mainly in Southeast Asia region. In this
paper, they are called Regional Retailers in Southeast Asia grocery retail markets. They could
roughly divided into two categories based on their origin. One is Asian group such as Dairy
Farm, CP, and Lion. The other is European group such as Casino. As Table-1 shows, while
Lion has operating only department stores, the others have operated multiple retail formats in
several countries in Southeast Asia. Since Dairy Farm has deployed more and various retail
formats in Southeast Asian countries than others have, their businesses will be focused in the
next section.
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Table-1. Retail businesses by major regional retailers in Southeast Asia region
Dairy Farm Group
(Hong Kong)
Singapore
Malaysia
Indonesia
Cold Storage (SM)
Giant (HM)
7-Eleven (CVS)
Giant/Cold Storage (SM)
Giant (HM)
Hero/Giant (SM)
Giant (HM)
Starmart (CVS)
Thailand
Vietnam
Philippine
Myanmar
Brunei
Cambodia
Giant (HM)
CP Group
(Thailand)
CP Fresh Mart
Lion Group
(Malaysia)
Casino Group
(France)
Parkson (DPT)
Centro (DPT)
7-Eleven (CVS)
CP Fresh Mart
CP Fresh Mart
Parkson (DPT)
Big C (HM,SM)
Big C mini (CVS)
Big C (HM)
Big C Express (CVS)
Rustan's/Wellcome (SM)
Parkson (DPT)
Giant (HM/SM)
Lucky (SM)
*HM=Hypermarket, SM=Supermarket, CVS=Convenience Store, DPT=Department Store.
CP Fresh Mart is a small size food store.
Source：Annual reports, websites, and news releases.
4. DAIRY FARM’S RETAIL BUSINESSES IN SOUTHEAST ASIAN COUNTRIES
Dairy Farm International Holdings Limited was incorporated in Bermuda islands. It has been
part of Jardine Matheson Group and listed in London Stock Exchange. As Table-2 shows,
Dairy Farm Group have deployed supermarkets, hypermarkets, and convenience stores
around Southeast Asian region. The operations of those grocery businesses have been
managed through the area offices controlled by Dairy Farm Management Service Limited
located in Hong Kong.
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Table-2. Dairy Farm’s grocery retail outlets history in Southeast Asia sorted by retail format:
2008-2014
Year
2008
2009
2010
2011
2012
2013
2014
Format
Singapore
Malaysia
HM
7
7
7
7
8
8
8
SM
91
95
105
111
115
116
115
CVS
435
484
549
561
570
537
493
HM
44
51
67
71
75
78
78
SM
65
69
75
73
73
72
78
CVS
Indonesia
Vietnam
Philippine
-
Cambodia
-
-
-
-
-
HM
26
35
38
39
46
51
55
SM
108
113
120
131
142
158
165
CVS
116
124
125
132
151
157
134
HM
-
1
1
1
1
SM
3
3
3
2
-
-
-
-
-
-
CVS
-
-
-
-
HM
-
-
-
-
10
12
13
SM
-
-
-
-
23
32
38
CVS
-
-
-
-
HM
Brunei
-
1
1
-
-
-
1
1
1
1
1
2
2
2
2
1
SM
-
-
CVS
-
-
-
-
-
-
-
HM
-
-
-
-
-
-
-
SM
-
-
-
-
CVS
-
-
-
-
7
-
12
-
11
-
*HM=Hypermarket, SM=Supermarket, CVS=Convenience Store.
Source：Dairy Farm International Holdings Limited annual reports 2012-2014.
The group has grown by acquisitions and increased their retail outlets. It acquired Cold
Storage in Singapore in 1993, Giant in Malaysia in 1999, and IKEA’s Hong Kong and Taiwan
businesses in 2002. According to the annual report of Dairy Farm International Holdings
Limited in 2014, the consolidated sales was about 13.1 billion US dollars and the total retail
outlets including food services such as restaurants were 6,101. While it has expanded the
number of retail outlets in Southeast Asian countries, it has also been continuing to invest in
the development of the business with standardization of its retail process and systems, the
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improvement of supply chain management, and the expansion of its offering of private label
products. For example, during the year 2011, Dairy Farm group implemented SAP
merchandizing systems in Indonesia, following a similar introduction in Malaysia in 2010.
As showed in Table-1 in the previous section, major Regional Retailers operating businesses
in countries in Southeast Asia region. And retail market in Vietnam, all of them have been
competing each other and also global and local retailers. In such competitive market, Dairy
Farm has opened Giant, its hypermarket retail format, in Crescent Mall located in Ho Chi
Minh City in the year 2011. The business hour of Giant is from 8:00 am to 10:00 pm. The
marketing concept of Giant is merchandizing to provide one-stop shopping opportunities, and
is driven by EDLP (Every Day Low Price) price policy to respond consumers’ expectations.
Also, the number of Guardian health and beauty stores which primarily merchandise health
and beauty care products has increased from 11 stores in 2012 to 25 stores in 2014. On the
other hand, all of three Welcome, the supermarket store in Vietnam, have been closed in 2012.
As Table-2 shows, it could be clarified that the concentration of the retail formats by Dairy
Farm has been different from countries. For example, the number of convenience stores in
Singapore has decreased from the year 2012, but it has increased in Indonesia since 2008 until
2013, although it decreased in 2014. In Malaysia, while the number of supermarkets has
increased by 7 stores from 2008 to 2013, the number of hypermarket has increased by 34
stores in the same time period.
Dairy Farm Group has managed its retail businesses in Southeast Asia through Dairy Farm
Management Service Limited in Hong Kong. It has taken the role of regional headquarters to
manage retail businesses in Southeast Asia. Under its management, multiple retail formats
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have been operated to respond each local market conditions which consist of economic status,
race structures, religions, languages, government systems and regulations and others. On the
other hand, the investment has been continued to standardize retail process and systems, and
to improve supply chain management.
Dairy Farm has been deploying retail businesses not only Southeast Asia, but also other part
of Asian countries such as China, Taiwan, and India. Yet, it could say its major focus would
be Southeast Asian region since its retail businesses have been concentrated in countries in
Southeast Asia; therefore, Dairy Farm could be categorized as Regional Retailer focusing on
Southeast Asia region.
From the discussions in previous two paragraphs, and based on the framework showed in
Figure-2, Dairy Farm’s regional strategy could be described as Figure-4.
Figure-4. Dairy Farm’s regional strategy model
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5. CONCLUSIONS AND DISCUSSIONS
The retail internationalization literature has tended to focus on cases of global retailers doing
business worldwide and has less likely focused on other multinational retailers which have
experienced their businesses expansion in limited region such as Southeast Asia. In this paper,
based on the discussions in the literatures regarding retail internationalizations, the framework
of regional strategy model and concept of regional retailers were developed. Following that,
cases of Dairy Farm which could be categorized as Regional Retailer conducting grocery
businesses in multiple countries around Southeast Asia region have been reviewed. Lastly its
internationalization was viewed through the framework of regional strategy model. Since this
paper takes a role of a very first step and preliminary research based on secondary sources,
there are many challenges to verify the reginal strategy model. Of course, to research Dairy
Farm’s retail format operation further to clarify how it has approached the local consumers in
each country is vital. Also, the researches and investigations regarding other Regional
Retailers are critical. The contribution of this paper is suggesting to apply the conceptual
framework of regional strategy model for the better understanding of the retail
internationalization, from not standardization or adaptation perspectives, but regionalization
perspective.
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