China being a highly appreciated country for its power in the global market and its rapid growth, enterprises are keen to invest in it in order to remain competitive. In recent years, China has evolved and developed rapidly in many areas. For this reason, many companies such as Carrefour, a French retailer, have begun to invest in China, the first European company and second in the world after Wal-Mart to do so.
Understanding how and why retailers want to invest in China explains the internationalization of Marks & Spencer in this market.
Firstly, it is important to define retailing. And it can be defined as the sale of goods or merchandise from a fixed location such as shops or stores, also known as retail establishments. Retailers are at the end of the supply chain and manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy. There are many formats of stores, the most important being the hypermarket. A hypermarket is a large retail store (minimum floor space of 2500 square metres in the UK), selling both food and non-food items. It is characterized by an optimized cost structure compared to other forms of smaller businesses (supermarkets, convenience, grocery and so on).
Concerning the market of retailing, there are 65 million potential customers in the UK and 1.3 billion in China. This is among the first reasons for investing in China. It's very interesting to understand why a firm like Marks& Spencer wants to invest in China and not in other countries.
China being an emerging country, in 1992, it opened its market to foreign countries. The foreign companies could also invest in China and they collaborated with Chinese companies and this resulted in a joint venture with the competitors.
[...] Finally, Marks & Spencer is an English distributor who wishes to develop its market share and develop its brand in China. Today, more and more companies want to expand their market share and build their businesses around the world. But some countries are more promising than others. At first, Au-Yeung and Henley (2003) explain that the international firms have many reasons to go into business in China. In fact, after an interview with eight retailers in the world, they discovered that the changes in purchasing power and the prospect of increasing profitability are the main engines. [...]
[...] China has launched a series of controls to curb products of low quality in recent years and the production of poor quality goods remains a serious problem in China. (www.english.people.com.cn) Economic aspects: During 1990s, the Chinese state privatized many of its companies, and this has created a significant number of redundancies. That is why since 2002, the Chinese government has implemented a policy conducive to employment. Thus, the unemployment rate is stabilizing now between 4 and of the active population in China resulting in low rate of economic growth. [...]
[...] To conclude for this literature review, we can see that because the national markets are often saturated, the companies have wanted to spread in international market. Attract by a potential of consumer (more billions), China is becoming the target of multinationals. Thus, more and more of foreign companies come in to establish their firms in China. Even if they are minority compared to the local retailers, they are more and more present. However, as said by a report of Li & Fund, lots of companies have invested in China before 2004 and in an illegality. So this has created conflicts with the [...]
[...] Indeed, Marks & Spencer has a large number of competitors. Wal-Mart, an American distributor has 55 stores and a turnover of 307 million Euros in China currently and Carrefour, a French distributor, has 338 stores and a turnover of 2 billion Euros (2006); at present, it is the leading foreign retailer in China. But, at the end of 2007, Wal-Mart bought 35% of shares of the giant Chinese retailer "Trust Mart". This participation enables Wal-Mart to grow its network to 101 Chinese stores across 16 additional cities. [...]
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