Multinational Retail Chains & the China Opportunity

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Excerpts

The retail industry in China was protected till the year 1991 and no foreign retailer was allowed an entry into the country. The industry till this time was dominated by local retailers. The retail sector was opened up on a trial basis in 1992, with foreign companies being allowed to operate in six cities...

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According to estimates by IGD, the global grocery retail market in 2007 was worth US$5,088 billion. China was the second largest grocery retail market by value after the US. So it was no wonder that some of the world's leading grocery retail chains including Wal-Mart, Carrefour, Tesco and Metro were present in the market. Carrefour and Wal-Mart entered China in the mid-1990s. Tesco entered China when the regulatory environment became more favorable..............

MNCs entering China have had to contend with certain challenges such as bureaucratic hurdles, resistance from domestic players, and lobby groups, corruption, political interference, etc., as is typical of any emerging market.........

It is generally acknowledged that the strategy for emerging markets has to be different from that for developed markets. This is crucial when operating in China where the business environment is quite challenging. Some of the implications for MNC retail chains operating in China are: » Choice of Entry Strategy...
» Choice of Growth Strategy...
» Willingness to Alter/Re-engineer Business Models...
» Balancing Global and Local Priorities...
» Training and Management Development...
» Capacity Development & Community Involvement
» Compliance...
» Long-term Orientation...

In essence, while the Chinese retail industry poses some serious challenges to the MNC retail chains, it also provides them with opportunities to grow at a sound pace. Cracking this market requires certain capabilities and may even involve re-engineering the globally successful business models of the MNC retail chains.....

Exhibit I: A Note on Regulations in the Retail Industry in China
Exhibit II: A Note on the Supply Chain & Logistics Network in China