The Different International Strategies of European Grocery Retailers
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Karlstads universitet 651 88 Karlstad Tfn 054-700 10 00 Fax 054-700 14 60 [email protected] www.kau.se Faculty of Economic Sciences, Communication and IT Anne-Kathrin Meier Gildas Aïtamer The Different International Strategies of European Grocery Retailers - The Case of Groupe Casino and REWE Group - Business Administration Master Thesis Date: 2010-05-19 Supervisor: Per Skålén Karlstads universitet 651 88 Karlstad Tfn 054-700 10 00 Fax 054-700 14 60 [email protected] www.kau.se Acknowledgments This paper has been written with the encouragement and creative support of several other people to whom we would like to express our gratitude. The help that we received while working on and accomplishing our thesis made this experience more pleasant. We would like to thank our families and friends for the support and the advice during the last weeks. Special thanks go to our supervisor, Professor Per Skålén. His advice to our thesis during every stage has contributed to the accomplishment of our paper. His constructive feedbacks, his knowledge and experience as well as recommendations and patience, enabled us to carry out this research successfully. Finally we would like to mention here, that the constructive criticism and the experience we made has been beneficial for our team work and our research abilities. Anne-Kathrin Meier Gildas Aïtamer 2 Abstract The retail sector is at the forefront of internationalisation activities. It is especially the case for German and French retailers that operate respectively 27,8% and 20,6% of non domestic outlets in Western Europe. Stating this, the grocery retailers have also drastically changed their orientation, from domestic to multinational players since two decades: a relatively new and important subject that needs to be taken into account. Within this frame, Casino and REWE Group are good examples of internationalisation since both have the same size internationally but do not operate in the same area and do not seem to have the same strategy regarding their global activities. The aim of the research is to find outstanding characteristics in the internationalisation strategy of European grocery retailers, via the case of Casino and REWE Group. In order to illuminate this aim, Porter's (1980) ‘Structural Analysis of Industries’ is going to be used to the grocery retailing sector following a previous demonstration of Colla (2003) and other field- specific theories. After pointing out the similitude between the two companies in their domestic markets, several dimensions have been taken into account to analyse the differences when going international such as geographical spread, branding, channel selection, and ownership. We have identified two different internationalisation strategies, through the case of these retailers. Thus, we have drawn a dichotomy in the European food retailing industry internationalisation strategy between what we named ‘umbrella organisation’ and ‘unifying organisation’. The latter is characterised by a unified branding strategy, operating few formats, looking for full control of its operation abroad via direct takeovers or organic growth, and looking for harmonisation of its operations abroad. On the opposite, an umbrella organisation operates numerous banners abroad. It is mostly looking for a multi-format offer, enters countries via overtime capital acquisition and gives more independence to its affiliates worldwide. 3 Table of Content 1. Introduction ............................................................................................................................ 8 1.1 Background ....................................................................................................................... 8 1.2 Purpose ............................................................................................................................. 8 1.3 Critical Argument .............................................................................................................. 9 2. Theoretical Framework ......................................................................................................... 10 2.1 Theoretical Approach as a Basis for the Research .......................................................... 10 2.1.1 Structural Analysis of Industries .............................................................................. 10 2.1.2 Theory Adaptation to the Retail Grocery Sector ..................................................... 14 2.2 Internationalisation Literature Review ........................................................................... 16 2.3 Grocery Retailing Sector Insight ..................................................................................... 19 2.3.1 Different Formats in the Retailing Sector ................................................................ 20 2.3.2 The European Grocery Retailing Sector ................................................................... 21 3. Research Design and Method ............................................................................................... 23 3.1 Research Concept ........................................................................................................... 24 3.1.1 Case Study Approach ............................................................................................... 24 3.1.2 Deductive Approach ................................................................................................ 24 3.1.3 Qualitative and Quantitative Approach ................................................................... 25 3.2 Data Collection ................................................................................................................ 25 3.2.1 Secondary Data ........................................................................................................ 26 3.2.2 Sample ..................................................................................................................... 26 3.2.3 Nature of Data Collection ........................................................................................ 27 3.2.4 Categorisation .......................................................................................................... 27 3.3 Criticism and Limitations of the Sources ........................................................................ 28 3.4 Reliability and Validity..................................................................................................... 28 4. Empirical Approach ............................................................................................................... 29 4 4.1. Company Profiles – Groupe Casino and REWE Group ................................................... 30 4.1.1 Groupe Casino ......................................................................................................... 30 4.1.2 REWE Group............................................................................................................. 31 4.2 Operational Data Collection ........................................................................................... 32 4.2.1 Geographical Expansion .......................................................................................... 32 4.2.2 Entry Modes and Ownership Types ......................................................................... 37 4.2.3 Size and Product Range offered in the Domestic Market ........................................ 39 4.2.4 Format operated in the Domestic Market ............................................................... 42 4.2.5 International Performance ...................................................................................... 45 5. Analysis ................................................................................................................................. 47 5.1 Similarities in the Companies’ Domestic Markets .......................................................... 47 5.2 Different Expansion Phases in the Companies’ Internationalisation ............................. 48 5.3 Application of Porter’s Analysis within Industries .......................................................... 48 5.3.1 Relationship with the Parent Company ................................................................... 49 5.3.2 Brand Identification and Geographical Market Spread ........................................... 50 5.3.3 Channel selection .................................................................................................... 51 5.3.4 Forming Strategic Groups applied to the Case of Casino and REWE ....................... 52 5.4 Evaluation of Theoretical Statements ............................................................................. 53 5.5 Summing up of the Findings ........................................................................................... 55 6. Conclusion ............................................................................................................................. 57 6.1 Future Forecast ............................................................................................................... 57 6.2 Recommended Research ................................................................................................ 57 7. References ............................................................................................................................ 59 Appendix ................................................................................................................................... 65 5 Table of Figures Figure