Research Project

"Comparison Success Factors Of Retail Store In

Pakistan over the global retail industry"

Submitted: Majid Nazir

Roll no: 18-NTU-MBA1-5032
Supervisor: Liaqat Ali Sab
Department: Management Sciences
Section: MBA (1.5) Years
Introduction:
Retailers, successful in their home country, are challenged, and sometimes fail, in
their expansion plans in the global market. For example, Target stores in the
United States have become the second biggest discounter behind the formidable
Walmart stores. Much of this success is attributed to the fact that Target built and
strategically marketed a brand around its name; thereby, differentiating the store
from its competitors (Barwise & Meehan, 2004). However, transferring the loyalty
and brand to other countries has not always been successful. Target, citing
profitability concerns, has closed its stores in Canada (Banjo, 2015). The failure
has been blamed on a lack of understanding in several areas, including consumer
preferences and supply chain operations (Banjo, 2015). Meanwhile, Target ’s
competitor, Walmart, is doing so well in Canada that more stores are being
opened. On the other hand, in 2016, Walmart closed its stores in Brazil (Farfan,
2016). Manufacturers and distributors, such as Kraft Foods, have also learned that
going global requires learning and adapting to new retail markets. Before ceasing
their operations in China, Kraft Foods did some homework and determined that
the Oreo cookie, so popular in the United States, simply did not meet consumer
preferences in China (Smith, 2012). By making some changes to the taste of the
original Oreo cookie as well as adding some altogether new flavors, Kraft
eventually found its niche. Since then, Oreo has become the top-selling cookie in
China (Smith, 2012). Based on current data, understanding ‘doing business ’ in
another country will become a priority. In fact, eighty percent of the companies
surveyed for the Wells Fargo International Business Indicator “all agreed that
United States companies should consider expanding THE RETAIL INDUSTRY:
EXPANDING IN THE GLOBAL MARKET 7 internationally for long-term growth ”
(Business Wire, 2015). As new markets emerge, the global market is changing
very fast. During the 90s, the European Community, the reunification of Germany,
and the growing economies of the Pacific Rim, offered opportunity to a wide
range of businesses, including retail. Going forward, China, Latin America, and
“the emerging market-based economies in Eastern Europe” will dominate the
global opportunities (Rajagopal, 2014, p. 135). Hence, the results of research are
relevant in that the decision to globalize may influence the retailer’s profitability
and growth (Wilson, 2010). According to Palmer (2017), there is a gap in the
literature regarding learning in retailers’ globalization. The overall objective of this
article is to fill some of that learning gap with research on the strategies used by
retailers in their globalization of their ‘brick and mortar’ stores. The purpose is to
identify the strategies that contribute to the success, or lack thereof, in the
retailers’ globalization efforts. The questions are: What are the strategies that
contribute to success in the globalization of the retailer’s ‘brick and mortar ’
stores? What are the strategies that contribute to failure in the globalization of
the retailer’s ‘brick and mortar’ stores?
Definition of Terms:
The main point of discussion is on the globalization of retail ‘brick and mortar
stores’ in “the market for the sale of goods or services to consumers rather than
producers or intermediaries” (The Free Dictionary, n.d.). Globalization is defined
as “the act of globalizing, or extending to other or all parts of the world; also
worldwide integration and development” (Dictionary.com, n.d.). A term used
interchangeably with globalization, internationalization, is defined as “the
growing tendency of corporations to operate across boundaries.” The term also
applies to marketing as “an approach to designing products and services that are
easily adaptable THE RETAIL INDUSTRY: EXPANDING IN THE GLOBAL MARKET 8 to
different cultures and languages” (BusinessDictionary.com, n.d.). From the market
viewpoint, the global market is the “activity of buying or selling goods and
services in all the countries of the world, or the value of the goods and services
sold” (Financial Times/Lexicon, n.d.). And, global marketing strategies are “based
on the region the company is marketing to” (BusinessDictionary.com, n.d.). 3.
Literature Review The global market has expanded exponentially since World War
II. The reason for this may be attributed to “a more open world economy, relaxed
trade and tariff barriers, growing customer needs, interdependency and inter-
communication factors amount countries” (Rajagopal, 2014, p. 126). Along with
the opportunity for growth and profitability in the retail sector, there is
substantial evidence that the retailer’s business functions and units, based on the
home country, may not be successful in the host country. Basically, the skills
required for the assessment and realignment to meet the needs of global
consumers is a challenge that many retailers find difficult (Rajagopal, 2014).
Moreover, the large multinational retailer may find more competition than
anticipated from small, local retailers. In some countries, such as India, consumers
preferred the social interaction that small store owners provide. Unlike their large
counterparts, the small retailers are likely to extend credit to their local
consumers (Khare, 2014, p. 11). To complicate matters, there are controllable as
well as uncontrollable factors in the global environment. These differ significantly
across borders and may require adjustments in several areas, including cost and
price structure; and the distribution infrastructure / logistics (Rajagopal, 2014).
THE RETAIL INDUSTRY: EXPANDING IN THE GLOBAL MARKET 9 From another
viewpoint, on-line shopping is on the increase; yet, literature on the strategies in
the globalization of the retail industry indicate the importance of the ‘brick and
mortar stores’. For instance, “in China, 45 percent of consumers make purchasing
decisions inside shops” (McKinsey & Company, 2013). The ‘brick and mortar
stores’ have also captured the attention of major manufacturers and distributors,
as well. “In India, Unilever delivers directly to 1.5 million stores” (McKinsey &
Company, 2013). Coca-Cola has also gone to great lengths to capture the
intricacies of retail globalization. To illustrate, in China, Coca-Cola “sells directly to
over 40 percent of its two million retail outlets” (McKinsey & Company, 2013). In
comparison, in Africa, Coca-Cola has developed a “network of 3,200 micro-
distributors” (McKinsey & Company, 2013). These entrepreneurial micro-
distributors use “pushcarts and bicycles to deliver to hard-to-reach outlets ”
(McKinsey & Company, 2013). On yet another note, several failures; i.e. Target in
Canada, Walmart in Brazil, and Tesco in the United States, indicate the
importance of beginning with an investment of time and money to understand
the new market areas. Then too, these same stores have had success in other
global adventures; i.e. Walmart in Canada; and Tesco in Eastern Europe and China
(Heffernan, 2013). In some cases, analytics have contributed to success. For
example, Tesco “has developed a full set of advanced analytics” to generate
insight on what works and what doesn’t (McKinsey & Company, 2013). In spite of
their due diligence in analyzing the market in the United States, “Tesco’s
American experiment, Fresh & Easy, has failed” (Heffernan, 2013). Walmart, too,
has always been considered a leader in analytics and customer understanding
(Ignatius, 2017). However, their CEO Doug McMillon, with tech teams in the
Silicon Valley, Bentonville, and India, the challenge is in getting employees to
work together to use that data to understand THE RETAIL INDUSTRY: EXPANDING
IN THE GLOBAL MARKET 10 consumers (Ignatius, 2017). That is, new markets
require retailers, their employees, and vendors willing to change established
habits, become digital, and lean into the future (Ignatius, 2017). The success in
one country and failure in another begs the question, what does it take to
understand global expansions in new markets? Researchers Clarke and Rimmer
(1997); and Palmer (2000) indicate the significance of learning for any
organization. Through understanding how learning influences retailers’ behaviors
in practice, they emphasize the importance that this learning then contributes to
avoiding repetitive, costly mistakes (Palmer, 2017). The importance of learning for
organizations is also researched by Peter M. Senge. In his well-known book titled
“The Fifth Discipline” (2006), Senge offers the argument that “the entire global
business community is learning to learn together, becoming a learning
community” (p. 4). The issues are sustained by the fact that “for many retailers,
going global represents the best path to long-term growth, and, eventually,
profitability as well” (Deloitte, 2012, p.1). Then again, in the global community,
where one retailer may have once dominated a vertical / horizontal market, there
are now dozens. Sometimes, duplicating the home country strategies globally
results in failure; indicating that which works well in one market may not work at
all in another. There are no guarantees for success as each retailer strives to
improve their market share with innovative strategies in several areas; such as
product lines, lower costs, and accessibility. More importantly, there are
important lessons that are often overlooked from prior experiences in retail
market entry and development (Palmer, 2017)
 "Critical Success Factors of Retail Stores Global”

Minimizing Operating Costs
Walmart is notoriously stingy when it comes to its treatment of its employees. Walmart
has been known to push wages down as far as legally possible. It offers low-benefit
healthcare plans to its employees and its executives do not enjoy the many perks
typically offered to high-ranking executives at other large corporations. These are ways
for Walmart to minimize operation costs and keep its overhead costs low.

Figure 1. Walmart Revenue from 2012 to 2017 in Billion $.

Leveraging Technology - The Barcode
By the early '80s, Walmart was one of the earliest to take advantage of the barcode to
increase efficiency at the checkout counter. The universal barcode system was first
developed by George J. Laure and offered a barcode that would be recognized by all
scanners. 

Advanced Supply Chain Management

Walmart is widely regarded as an industry leader in supply chain management. Aside
from leveraging the most up-to-date technological advances such as the barcode and
RFID, Walmart has pioneered a number of approaches that help it remain competitive in
the price war against its peers.
Walmart pioneered cross-docking in its supply chain strategy. Cross-docking refers to
the practice of moving products from a supplier or manufacturer directly to the
customer or the retail chain, with very little handling or storage. 

Dealing Directly with Manufacturers.

Beginning in the 1980's, Walmart made the key strategy shift to deal directly with
manufacturers.
Many large manufacturers and suppliers rely on Walmart for a big portion of their
revenue, some for more than 20 percent. Walmart as the leading retailer with its large
network of stores around the world has tremendous bargaining power against its
manufacturers and Walmart is very good at leveraging that bargaining power. 

Motivating the Associates.

Walmart employees are taught to follow the "ten-foot rule" which dictates that any
member of staff within ten feet of a customer must offer them assistance.

Conclusion:
Profit works agrees that having a motivated workforce is essential and anything that an
organization can do cost-effectively to increase employee motivation will return very
good rewards for the business. 
Retailing in Pakistan:
Introduction:
With the entry of Metro Cash and Carry in Pakistan, the local small retailers will
be striving for their existence. Retail sector of Pakistan is in a fix that is the
inevitable result of the Giants’ entry into the market. Similar to most other Third
World countries, retailing sector of Pakistan mainly constitutes small scale
businesses, meant basically for small entrepreneurs. Till late sixties, large scale
retailing institutions like Hyper Markets, Super Markets, Departmental Stores,
Discount Stores were non-existent in the country.

However, Utility Store (for service of government servants) and CSD (Canteen
Stores Department; an Armed Forces facility) are functioning since the time of
independence. The CSD still remains a mutual benefit store but utility stores have
been opened to general public. The chain of COOP store of Lahore, that made an
appearance in the early 1960s, was later taken over by Utility Stores Corporation
of Pakistan.

In the rural areas of Pakistan, the retailing still follows the same traditional
“HUTTEE” system — small shops which provide very necessary daily use items to
the locals. These days almost all grocery items, cosmetics, vegetable ghee, and
other essential items including shelf medicines are available on HUTTEES with
their increased sizes as well as improved layout plans, but back in the 50s and 60s,
very few items could be procured from these HUTTEES.

In the urban, more developed areas of Pakistan, almost all types of related outlets
exist. The introduction of sector wise markets in the very well-planned capital city
Islamabad rejuvenated modern retailing in Pakistan. Thereafter almost in all other
cities and new towns of Pakistan, where a new residential locality had to be
developed, special emphasis was given to planned retail markets. as most of the
retail trade in Pakistanis in the hands of private individuals and entities, this has
given rise to multi-layered supply chain comprising carrying and forwarding
agents, distributors, wholesalers and ultimately retailers.
IMPROVING REGULATIONS WILL ENCOURAGE GROWTH IN INTERNET
RETAILING:

The growth in internet retailing in the country has led the government to improve
its regulation of this channel. In 2018, preparation of a new policy was underway,
which will cover the enactment of essential laws regarding crucial areas such as
consumer protection, foreign exchange regulation, dispute resolution, licensing
requirements, the provision of safe and secure platforms for financial transactions
online, the simplification of import and export procedures and many more; all
with the purpose of facilitating e-trade.

AN OPTIMISTIC RETAIL INDUSTRY IS EXPECTED TO ATTRACT

INVESTORS:

Foreign brands are increasingly investing in Pakistan, with the improving security
and economic situation in the country acting as a major catalyst for investor
confidence. The influx of foreign players has greatly contributed to the growth of
several retail channels, including modern grocery retailers, non-grocery specialists
(especially health and beauty and apparel and footwear specialist retailers), and
internet retailing.

CONCLUSION:
Surge in global inflation, rise in oil prices, and soaring food costs have pushed
retail prices all around the globe, hence the aforementioned strategies might not
be feasible all at the same time but can come in handy in varying circumstances.
Retail trade in Pakistan has been one of the major contributors towards
accelerating the economic activity within the country. It can further be
strengthened if government intervenes and provides incentives to the local
retailers in terms of softening of price regulations and the like.
"Critical Success Factors of Retail Stores Pakistan”

Low Price:
Quality products are available at lowest possible prices.

After sales service:

Trained staff members always ready to provide after sales service to the valuable
customers.

Simple but comprehensive billing system:

Customer is easily scrutinizing their own stock using detailed computer-generated
invoice.

Value for money:

Metro is eliminating the distribution cost by buying directly by buying
manufacturer.

Promotional activities:
For promotional offer / schemes customer received on social media once in a
weak. email, SMS facility also available.

Free Parking:
Free parking for all customers.

Quality Guaranty:
Quality assurance department ensure the availability of high-quality goods.
Open for Continental hours:
Nonstop shopping available for late night e.g. 11 pm.

One stop shop:

More than 20000 food and non-food product offered under one roof to save your
time.
Stock availability:
Computerized goods management system (GMS) ensure availability of product's
on demand.
Services Offered:
Debit / Credit card facility
Problem Statement:
The present study attempts to minimize some of the problems which is occurring
to stable these factors.

Research Question:

Which factors effect to failure of the success of retails store.

Case Studies:

The following categories represent a few of the challenges for global retail
expansion. These are not presented in any particular order; however, it should be
noted that consumer preferences and logistics dominated as key issues to be
addressed. Directly related to those issues were real estate costs and location
that were, in large part, due to the national / regional differences. Moreover,
complex and, sometimes, vague, regulations and laws stymied several

global efforts.

Consumer Preferences:

Success:

Since 2003, the United States-based, Costco, has successfully expanded its
operations globally into several countries (Far fan, 2016). One successful
expansion is in Taiwan, where Costco’s “average annual gross sale per store is
greater than that of any other discount store retailer” (Yeh, 2010, p. 30). That
success is based, in part, on the alignment of their product selection with
consumer preferences. Their strategy emphasizes “leading domestic brands and

select international products” (Yeh, 2010, p. 28). With thirty-five of their products
imported, Costco Taiwan’s inventory “has a high percentage of foreign products ”
(Yeh, 2010, pp. 28-9). Conversely, when Carrefour, from France expanded into
Taiwan, a more localized product line was selected (Yeh, 2010). “With 90% of its
products and services from local suppliers”, Carrefour ’s stores in Taiwan are also
doing very well (Yeh, 2010, p. 33).
Recommendations for Future Research:

Consistent with researchers Dawson (2001) and Howard and Dragon (2002),
further studies on the conceptualization of the internationalization of the retail
industry are needed to “capture the multiplicity and difficulties in the retail
internationalization process” (Palmer,2017). A meta-analysis of existing studies to
clarify the identification and operationalization of concepts could be used to
develop a framework. Then, research could “explore the way in which

the retail firm reflects on individual decisions it has made, and how this might
influence their perceptions and actions” (Palmer, 2017). Studies that cover a wide
range of home / host countries, would offer a worldview of the issues. Specific
issues within those studies, such as logistics or consumer preferences, could be
compared across regions. The results of the comparative study might indicate
special circumstances per geographic location. The information could be used to
inform pre- as well as post-expansion decisions. Along with these
conceptualization issues, there is a lack of empirical research (Palmer,2017).
Overall, due to the lack of statistical power to detect small effects in the area of
business research, there have been an unacceptably high number of both Type
(incorrectly rejecting a true null hypothesis) and Type II (incorrectly retaining the
null hypothesis) error rates; both causing invalid inferences regarding real-world
effects (Ellis, 2010). The invalid inferences by researchers and readers regarding
the understanding and application of scientific and real-world

effects can be problematic for the retailers’ use thereof (Ellis, 2010).
Conclusion:

According to the 2013 McKinsey and Company report, “100 of the world ’s largest

companies, with headquarters in developed economies, derived just 17 percent

of their total revenue from emerging markets” (p. 48). The crux of the issue is that
those emerging markets currently “account for 36 percent of the global GDP and
are likely to contribute more than 70 percent of the global GDP growth between
now and 2025” (McKinsey & Company, 2013, p.48). That GDP offers potential
global markets for the retail industry. However, a prudent, learned approach in
the globalization of the retail industry is crucial to assure profitability. In essence,
there is no one reason as to why Target Canada closed its doors and Costco in

Taiwan is doing so well. The success, or lack thereof, is based on a number of

factors that are not readily available at first glance. Unfortunately, while some
tried and true formulas have worked very well; others have been known to falter
miserably, leaving a wake of empty stores and lost profits. Thus, it is best not to
assume that what works well in one home or host country will migrate well to
another location. Moreover, due to the evolving market, success requires due
diligence throughout the process of global expansion; and needs to be continued
even after the retailer has been established in the host country.
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