Introduction:

It is observed that the pace of retailers’ internationalization has been increasing significantly

during the couple of years. It is obvious from present literature that the retailers do not only

internationalise as a reaction to decreasing sales or reduction in the local market share. There

are a large number of factors that are probably to play a function motivating both the decision

as well as the business strategy accepted in overseas markets (Evans et al, 2007). Now the

internationalization of retailing has reached such a phase that requires further review of the

hindrance to internationalization and the extent to which retailers design their international

strategy. A considerable research is also accomplished in this regard (Alexander, 1990;

Hutchinson et al., 2006, 2007; Quinn, 1999; Vida and Fairhurst, 1998; Wrigley et al., 2005).

All these concerns that business situation in the international market has amended

significantly especially during some previous years. There are so many reasons behind this

aspect such like advanced technology, limited growth opportunities and the decline in

domestic market. Moreover, the inclination of retailers towards deliberation of possession in

the retail sector has changed the background of international retailing.

Internationalization means centralization of management and spreading out using an

analogous perception overseas. The international retailers mainly overlooked regional and

national distinctions. International retailers develop to the markets which contain a fragment

of customers that will consider their businesses constructively (Park and Sternquist,

2007). Because of the uncomplicated duplication of previously established formula, the

global retailer is now skilled to quick growth (Salmon and Tordjman, 1989). Among their

developed understanding and aptitude, international retailers are forcefully growing and the

global market has become much homogenized that retailers can sell their indistinguishable

offerings all over the world by standardized marketing activities (Hamel and Prahalad, 1985).

1

Experiential studies disclose that companies among universal strategic driving force tend to

favour an advanced equity mode of entry (Harzing, 2002; Rajan and Pangarkar, 2000).

Exploring the impact of tactical factors on global entry method option, these studies created

proof that companies with a universal strategy favoured a wholly owned subsidiary.

However, franchising has been broadly used as a substitute way for international retailers

(Park and Sternquist, 2007). Albeit latest studies inside the retailing division have

focused on global features of retailing, for example enthusiasm towards globalization

(Alexander, 1996), determinant of worldwide participation (Vida, 2000; Vida et al., 2000),

but study on entry method strategy is almost missing, excluding a small number of studies

(Doherty, 1999, 2000; Palmer and Owens, 2006; Petersen and Welch, 2000). Generally,

global franchising literature has determined the inspiration to internationalise, the degree and

course of movement, means of global franchising and to a minor area, functioning concerns

such like command, support and adjustment (Aydin and Kacker, 1990). This piece of study

has determined the firms that are basically built around development throughout

internationalising the home franchise business (Christiansen and Walker, 1990; Kedia et al.,

1994). On the other hand, this literature did not concentrated on the particular temperament of

the internationalisation of retail organizations utilizing franchising as a global entry mode,

whether they franchise nationally or not (Doherty and Alexander, 2005). But, since

elaborated by Moore et al. (2004), study on command and control in the perspective of global

retailing remains at an early stage rather than its fundamental significance in the global retail

franchising practice. The impression of power is believed to be central to understanding the

ways through which one channel element can alter or amend the performance of a different

member inside its channel of circulation (Hunt and Nevin, 1974).

This theory of managing is more difficult through internationalising the channel consequently

in global retail franchising it is essential that retailers use means so they can manage

2

franchisees and usage of the brand name in distinct markets. Accordingly, the present study

contributes to the research through covering results from a qualitative study of global retailer

that scrutinized the means through which retailers organize their worldwide retail businesses.

International retailers are along with the largely flourishing and creative of global retailers

(Dawson, 1994; Doherty, 2000; Moore et al., 2004) and the globalisation of this division is

focussing growing attention to research (Moore et al., 2000; Doherty and Alexander, 2004).

The mainstream of this paper highlights the significance of external forces in motivating

global development and the possibility of adopting a specific business tactic. It will also be

analyzed during the course of time whether the inspirations and obstacles to international

retailing and the inclination for standardisation or adjustment have transformed through the

environment (Evans et al, 2007). Along with concise literature review of significant research

on global retailing, worldwide retail franchising and domestic franchising will also be

determined.

Internationalization of retailing:

Bearing in mind the growing stage of worldwide actions by retailers because they look for

prospects in new geographical markets, it is not amazing that there has been a proportionate

increase in educational attention on international retailing. A significant study has been

reviewed in the modern texts available on the theme of global retailing (Alexander, 1997;

Sternquist, 1998). During the recent age there has been substantial attention in the

globalisation of retail functions from both practitioner and scholastic equally (Dawson,

1994). Therefore, a well recognized understanding currently exits covering such arguments as

the purposes for global growth (Alexander, 1990), the degree and course of global retail

action (Pellegrini, 1994; Sternquist, 1997) and individual organization skills (Clarke and

Rimmer, 1997). When we consider the entry mode options accessible to international

retailing firms, franchising has demonstrated as a progressively more accepted form of

3

operation in the current period (Burt, 1993). Franchising can explained as a large diversity of

business activities, however the modern franchise structure generally in exercise is called as

the business format franchising (Quinn and Doherty, 2000). Franchising has previously been

a preferred approach of development among service sector organizations, predominantly the

business of fast food restaurants (English and Willems, 1992).

Although, a varied array of retail companies is now conscious about the benefits for global

expansion which the strategy for franchising may possibly bring. So, this approach was

implemented by niche retailers suck like Benetton and Body Shop and some others such like

GIB (Belgium), Casino (France) and UK stores, for example, Marks & Spencer and BhS,

everywhere it was used as the only sort of entry methods (Quinn and Doherty, 2000). It is

also observed that global retailers are progressively more using franchising as a method of

business in overseas markets, but the researchers has merely started to scrutinize international

franchising inside the framework of internationalisation retailing (Sanghavi, 1991; Doherty

and Quinn, 1999). Apart from the effort of Doherty and Quinn (1999), there is no any

significant hypothetical examination or clarification of global retail franchise practice.

International and domestic franchising:

Unlike the domestic franchising, the international franchising has got inadequate educational

interest. But, the research work primarily obtained a behavioural perception, exploiting the

exporting and worldwide marketing literature (McIntyre and Huszagh, 1995). Furthermore, in

spite of the development in the practical utilization of franchising for global retail

organizations, consideration to the globalisation of retail franchising has been comparatively

inadequate (Manaresi and Uncles, 1995). The research for global franchising has been

subjugated with studies that observe how the companies which fabricate home franchising

businesses consequently take their experienced franchising businesses into the worldwide

4

market (Sashi and Karuppur, 2002). Research on international franchising has also studied a

variety of problems from the modes that franchisers use to develop globally (Mendelsohn,

1992).

While international retail franchisers seek a franchisee margin and payment in return for the

sale of a product in that particular store through their retail company’s store and brand

franchising concept. The issues that have been addressed within the increasing literature of

franchising international retailing are comparatively narrow (Doherty, 2006). It is also

observed that entry method choice of global retailers from the transaction point of view of

expenditure and agency theory. The researcher here argued that agency theory can assist in

describing why global retail organizations decide licensing and franchising at what time of

entering global markets (Doherty, 1999). Whereas another writer has presented an in depth

review of the merits and demerits of entry modes for the global retailers and his effort is

explanatory that does not use primary research (Dawson, 1994).

When we search literature, we can find that the work on globalization of United States

franchising is overwhelmed the literature. Furthermore, understanding in this piece of

research is the perception that franchisors are globalizing the previously tried and

experienced franchise conception. Some researchers also probing the features that may

manipulate a previously practised franchise company to globalise its franchise perception. It

is also emphasized that usually retailers do not prefer to franchise in the home market and

hence, they utilize franchising simply to go for globalization (Quinn and Alexander, 2002).

Considerably, no any particular work on this perspective is emphasized on the worldwide

franchising actions of retailers. literature review has exposed that despite a range of problems

have been concentrated on the field of global retail franchising except no any work has

scrutinized practically about the concern what stimulates retailers to globalize by using

5

franchise approach, regardless of this being a repeated argument of majority of the global

franchising study.

International retail joint venture:

Another most commonly used method of internationalization is the international joint

venture. Study of global retail literature shows that global retail joint venture action remains

least discovered part, not slightest than the expressions which must be used to explain this

experience. On an inspection level, nominal research has conducted to the level and extent of

global retail joint venture activities. In the period of 1980s, research explained the evident

function of global retail joint venture along with ‘encourage internationalists’ on that time

(Treadgold, 1988). In around more than three decades global retail joint venture demonstrated

accepted, mostly in 1960s (Burt, 1993). Many studies of global retail movement in some

countries also acknowledged significant improvements in joint venture activities throughout

the early 1990s. A study also established that a considerable altitude of global retail joint

venture departures happened in the grocery retail sector of the Europe (Burt et al 2004).

Internationalization of the retail joint ventures is defined in the most comprehensive manner

that the company which enters in the international retailing contributes mutually in the

process of entrance among another company with the effect consequential to the new

business (McGoldrick and Ho, 1992). This particular definition Highlights the infant or the

new firm but ignores describing among the different levels of joint venture possession

composition, the quantity and nature of the colleagues concerned, and how they will modest

and figure its improvement. In contrast, another researcher described that ‘joint venture is not

simply a combined possession, but it is also said to be a give and take progression that stands

on the replace of resources’ (Hyder, 1999). On the other hand, joint ventures offer chances

for the firms to exchange knowledge that has become communally surrounded during the

6

passage of time. Ultimately, this definition presents little implication of the types of joint

venture movement.

Instead, a long array of defining the concepts of international joint ventures is also available

in the academic literature. For example, joint venture is defined as ‘a company that has more

than single parent’ in conjunction with the global complication that ‘one partner may be

situated out of the country in which joint venture will happen’ fetch to joint ventures (Zhang

and Rajagopalan, 2002), to the existing equity viewpoint in which every partner have at least

five percent as a compulsory situation (Beamish and Kachra, 2004). Such a long array of

definitions in the academic literature possibly replicates the appearance of the joint venture

trend. In this regard some other researchers have recognized the causes establishing joint

ventures, but these writers did not investigate these inspirations in more details. For example

getting hold to new geographical markets (Dawson, 1994), helping resolve tricky problems

and employing management (Knee, 1993), getting entrance to the entrepreneurial talents to

obtain retail units and to ease site gaining (Dawson and Henley, 1999), creating a retail trade

name and store representation in a new market (Burt and Sparks, 2002), protecting national

political and trade situation control and starting associations with family owned companies

with powerful retail operation identification (Wrigley and Currah, 2003).

This restricted outline of the enthusiasm for starting global retail joint ventures recommends

that there is still a need for a strong and deliberate debate on the context of motivation of

global retail joint venture. After acceptance of this statement that still fewer is identified

about the sudden pressure of global retail joint venture practice, then it will eventually be

helpful to think about the related influences of worldwide retail situation on global joint

venture creation.

Internationalization through wholly owned business subsidiary:

7

This is another form of entry mode discussed in the literature. As compared to the

international franchising, wholly owned entry approach permits for superior

participation/management and income than that of franchising, whereas franchise is valuable

because it decreases the investment needs for the persons who franchise. Management refers

to the ability to influence or guide the actions or functions of an overseas subsidiary, while

participation refers to the extent of particular market professional and economic resources

dedicated to an overseas subsidiary through a company (Erramilli and Rao, 1990). Here the

participation is compatible to the control due to the very tough relationship between a firm’s

extent of participation in an overseas subsidiary and the control of the company’s subsidiary

(Anderson and Gatignon, 1986). Hence, it is argued that the more participation the

international retailer get, the more the probability that retailer will adopt the entry method of

wholly owned business. In addition, the advanced information diffusion danger the

international retailer observes, the further the retailer will desire to choose the wholly owned

business method of entry.

The existing resources to the international retailers are varied across companies and

improperly mobile. Moreover, the resources are constantly collected and their accessibility

and capability depends upon the culture or country. The resources suck like finance,

knowledge and professional resources possessed by an international retailer could be

accessible or adequate for launching a full possession of subsidiary in an overseas market, but

at the same time, these assets might not be sufficient for entering the overseas market through

wholly owned business method (Park and Sternquist, 2007). In case quick growth is required,

the retailer can exercise the joint ownership methods of entry in order to attain balancing

resources. Studies also sustained this interpretation through a judgment that companies

inclined to decide joint ownership mode of entry to obtain required resources (Delios and

Beamish, 1999). It is also believed that due to the shortage of expected or forecasted

8

resources, a lot of international retailers with modern thought may have to rely upon

franchising method for quick growth in the worldwide markets, although the retail assets of

them persuade the complete control of the entry method. In case the retailers are affluent in

relational and lawful resources, an international retailer will desire to choose contractual

method of entry since they previously contain the proper resources for adopting contractual

entry method and might sustain nominal costs throughout market entry.

Internationalization through licensing:

Licensing explains the rules and policies that restrict the service prerequisites to persons or

entities that fulfil the criterion established by the state. Regardless of argues that licensure

enhances the value of service, the results of licensure on utilization excellence is unclear. The

statement that the service supplier aggressively encourage licensing usually took to the doubt

that licensing rewards them at the cost of service providers (Svorny, 1999). Rubin (1980)

explained the past examples in western regulation that provide direction to recent licensing

regulations not only in United States but also other European countries. Most of the practice

in licensing agreements is found in pharmaceuticals and physicians. Practise to give license to

the physicians was started in the US when the American Medical Association was established

in 1846 and until that period of time the entry into the industry was almost unobstructed

(Hogan, 1983). Texas was the very first country to pass licensing regulations in the US in

1873. As compared to the other entry methods, licensing increased the cost of entry because

it requires investment from one class to the other. Licensing also requires substantial training

and education. It can also be mandatory for the participants to take and accomplish a

qualified program that contains particular time and content features. The unambiguous

expenses of that investment comprise the costs for books and education, except the major

expenditure is typically implicit that means the opportunity cost of time suffered by applicant

(Svorny, 1999).

9

Supporter of licensing usually argued that customers have inadequate knowledge to decide a

suitable choice from the suppliers available to them. This type of knowledge is considered to

be asymmetry by some firms to be curiously powerful in the markets of health care,

mitigating entry obstacles in the medicine market (Trebilcock, 1976). Many researchers

blamed that licensure does not generally provide quality services. Study of consultant quality

revealed huge proportions of persons in the market who do not meet principles set by the

researchers. The results from these studies disclosed that licensure failed to guarantee the

quality of service (Hogan, 1983).

Enthusiasm for going global:

The forces that motivate the retailers to globalize their businesses have been sorted in

different behaviours most popularly include internal and external motivations (Vida and

Fairhurst, 1998), proactive and reactive forces (Wrigley et al., 2005) and push and pull forces

(Alexander, 1997). Reactive and push motivations are normally related to negative

characteristics in a home market, whereas proactive and pull forces are normally correlated to

positive features of the offer or the overseas market. Overall, drivers of global retailing have

included both the external as well as internal forces suck like resources, organization

attention and proficiency, corporate culture and comparative advantage of the retail and even

some environmental forces such like dimension of the overseas market, political, social and

economical circumstances in home as well as overseas markets, diffusion of the home market

and actions pursued by the rival firms (Alexander, 1997; Moore et al., 2000; Salmon and

Tordjman, 1989).

On the bases of conventional assumption, it was believed that companies started with a solely

domestic focal point and then due to the diffusion in the home market or voluntary attention

from overseas markets, started to develop increasingly (Nordstrom and Vahlne, 1994). This

10

recommends that retailers could simply follow global development once they had used all of

the chances for expansion in the home market. However, it is also obvious that numerous

retail companies together with UK based companies Debenhams and Tesco, all together

practise both home and global expansion opportunities. The Uppsala model of globalisation

too recommends that the globalisation of any company is an incremental method in which

companies primarily go into the markets that seem psychically identical and consecutively

grow into further remote overseas markets. The statement that the emotional closeness of

overseas markets to the home market discloses growth decisions have been confronted

through the effort of Evans et al. (2000).

The environment in home market is much important in retail globalisation as study in the

previous decade has shown a rising drift to the control of proactive external and internal

forces. It is also significant to reintegrate these forces as sole opportunities, forecasting for

expansion, size of the market and the exceptionality of the retail offer (Alexander, 1997).

It is found in a review of retail companies that the volume of the foreign market, niche

opportunities and stage of economic richness were the largely quoted forces of motivating

retailers towards globalisation. Most considerable determinants of global retailing include

knowledge of the global market, company’s experience of internationalization, size of retailer

and behaviour of the management. This viewpoint of the comparative advantage is also

dependable with Sternquist’s (1997) function of Dunning’s diverse structure to describe retail

globalisation.

It is also found that the shift from private possession to public possession of fashion design

houses was associated with the finances mandatory to utilize the global potential of their

brands (Moore et al, 2000). The international demand of the brand name provides motivation

to the higher management to discover the chances that are there in overseas markets. The

11

individuality, individual dealings and worldwide image of the retailers are used to be

influential in the choice of going global.

Barriers to the internationalization of retailing:

Along with the discussion on motivation for global retailing a plenty of concentration is also

required to the barriers of globalization. Barriers to global retail growth have been

characterized in two groups that include the forces that obstruct the beginning of overseas

expansion and barriers to the globalisation course of action. The initial group of forces

frequently exist in the company and relay to a shortage of finance, information and overseas

market relations adding up to management’s approach to overseas growth and the awareness

of risk linked to globalisation (Salmon and Tordjman, 1989). In addition five hurdles to the

globalisation have been recognized that include fiscal obligation, density of global markets,

market knowledge, management assets and control of brands. Most of the forces therefore

ease the SME retailers to critically consider the global extension as a potential tactical

direction (Hutchinson et al, 2006). This progression of barriers usually highlights the further

environmental features.

The available literature on global retailing has also discovered these forces as the inhibitors to

the range and speed of overseas market growth and these forces include complexity in

distribution activities, variations in foreign exchange rates, government rules and political

and economic insecurity (Alexander, 1997; Vida and Fairhurst, 1998). The increasing activity

of study in the field of global retail divestment has already recognized a series of forces that

hamper the globalization process. Another research work also emphasized a structure

comprising of four forces that play important part to the collapse of global retail process.

Collapse in a specific market is linked to the stability and threat of the overseas markets, the

failure to move functioning methods and practice to the overseas market, competitive

12

malfunction involves the deficit of the retail procedure as compared to the rival firms, and the

firm’s collapse that relates to the home market which is the consequence of problems in the

domestic market (Burt et al., 2003).

Barriers in global retailing have also been correlated to the complexity faced in the home

market and the consequential attention to the resources available to firm’s management.

Potential weaknesses in the higher management executives with proper understanding and a

shortage of commitment to the overseas businesses are also acknowledged as crucial forces in

global retail barriers (Burt et al., 2002). According to the above literature divestment is itself

the most important concern among the retail collapse, moreover, the problems that participate

to a proposed divestment decision could be believed as the barriers to more global

development. The problems faced by the overseas market as well as the home market can

delay the tempo of market saturation and can also slow down the company’s capability to

penetrate in the succeeding markets.

Some studies also suggest that there are some factors that can play role in restraining as well

as accelerating the activities of globalization. Spiritual distance, for example, is usually

analysed as a restraining force where companies at their premature phase of globalisation are

unwilling to penetrate in markets which are diverse as compared to their home market. It is

also argued that the observation of variation can persuade the firms to enter the market. It is

recognized to the aspiration of retail companies based in aggressive and established markets

to search for the chances in least urbanized markets (Evans et al. (2000). Some forces can

perform double functions. Another study shows the character of investment banks which they

performed in the procedure of global retailing. In this study it is observed that the banks can

limit the growth actions of the retail companies, however they can as well perform as a

channel to support retail globalisation. It can essentially be classified as the obstacles or the

driver, however the existing study has inclined to generalize the functions performed by the

13

internal and external forces. Likewise, it is believed in the future that the barrier to retail

globalisation will vary in terms of their importance and affect as environment gradually

revolutionized, firms develop and executives discover from their earlier mistakes.

Conclusion:

To sum up, it is clear that the international retailer who has exceptional abilities is thought to

recognize more rewards as compared to the retailers who have exceptional ideas. The

retailers who have considerable abilities to manufacture and control their products are

believed to support wholly owned subsidiaries for international development (Park and

Sternquist, 2007). Throughout analysis a series of environmental and organizational forces

have also been identified to stimulate the option of franchising to enter the global market as

fashion retailers. The economic benefits of franchising, unlike the other substitute entry

modes of globalization are revealed to be important while making a choice .But in contrast if

a retailer has sufficient relationships and lawful resources and missing adequate finances, he

will go for franchising. And licensing is thought to be the most risky because it requires

education and coursework and involved an absence of quality assurance (Svorny, 1999). This

paper also revealed that most of the qualified retailers in global environment encouraged the

companies to support their global strategy regarding franchise method when they go global.

That is why the global retailers believe that franchising suggests a helpful way to tackle

majority of the complications faced in international business. Though, this document clarifies

the forces that inspire the retailers to go for franchising globally. It is also obvious that the

appearance of franchising has happened many times due to these forces (Doherty, 2006).

When we talk about the motivating factors for the internationalization of retailing, the main

force for retail globalization is found to be the income growth. Although, growth is also

recognized as a most important pull factor for the global retailing (Alexander, 1990). Growth

14

by global extension was given the first priority in reaction to the diffusion of home market.

On the other hand, international expansion is also viewed as part of the practical business

attitude for continuously looking for recent chances to enhance turnover effectiveness. These

views also support the categorization of global fashion retailers (Wrigley et al. 2005).

The study also revealed that the hurdles to launching the global retailing usually exist inside

the company itself. Shortage of supervision and devotion, narrow global professional

understanding and inadequate communications are the most common problems which stop

the companies to develop business activities into more overseas markets (Evans et al. 2007).

It is amazing that the unstable political and economical factors of several global markets are

not acknowledged as a most important obstruction to overseas expansion. But the legal

environment appeared to be crucial because it can discourage an entry into a specific market

as well as can obstruct the entry to overseas market.

Finally, this paper also highlighted the problems faced by the retailers during their activities

of going global. Retail firms come across a series of challenging matters in organizing the

joint venture with global partners. The most important discussion is associated to tactical and

operational problems, organizational associations, required financial resources and

incompetence of the partnering firm. Hence, some additional issues have also been analysed

by Owens and Quinn (2007) that includes the variations in the corporate and national culture,

the instant and proper execution of the retailing procedure and some environmental factors.

The study overall highlighted the main differences and importance of different entry modes

that are available for the retailers seeking for going global. Another aspect covered in this

paper is the problems faced by the international retailers during their globalization procedure.

Additionally, owing to the long array of barriers, motivations suck like international

expansion and global recognition as well as growth in the firms’ profits at large augmented

the enthusiasm of retailers to enter the overseas market.

15

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