Country and firm level factors in international retail expansion

Abstract

PurposeThe purpose of this study is to investigate firm‐ and country‐level drivers of retail performance.Design/methodology/approachA database of the top 200 global retailers was primarily constructed from the 2005 Global Powers of Retailing data. Regression was used to test the hypotheses.FindingsThe predictors are able to explain firm level variations in sales growth, but not ROI. While retailers' sales growth is positively related to expansion speed, it is negatively related to number of retail formats and number of countries of operation. Moreover, retailers who choose to expand into a host country that is less developed, with relatively high disposable income, tend to be more successful than others.Research limitations/implicationsThis study is focused on the foreign expansion process and characteristics of the top performing retailers and their first foreign expansion destination.Practical implicationsFindings reflect differences in internationalization strategies of top retailers. Findings also provide guidance for companies who already have foreign subsidiaries, and for those who are interested in opening new markets.Originality/valueThis paper examines the impact of the economic characteristics of the first host country entered and firm level resources and capabilities on two measures of firm performance. Empirical tests of the impact of retail portfolio management capabilities and international market portfolio management capabilities on retail sales growth are offered.