Ebook Retail internationalization: Analysis of market entry modes, of transfer and coordination of retail activities

Ebook Retail internationalization: Analysis of market entry modes, of transfer and coordination of retail activities investigates various strategies in the area of going and being international of retail firms which is of undisputable relevance due to the fairly narrow research status and the increasing internationalization of retail activities. Đề tài Hoàn thiện công tác quản trị nhân sự tại Công ty TNHH Mộc Khải Tuyên được nghiên cứu nhằm giúp công ty TNHH Mộc Khải Tuyên làm rõ được thực trạng công tác quản trị nhân sự trong công ty như thế nào từ đó đề ra các giải pháp giúp công ty hoàn thiện công tác quản trị nhân sự tốt hơn trong thời gian tới.

Introduction

Relevance and Focus

Retail internationalization is not a recent trend, with historical evidence of Dutch and English trading houses engaging in international trade as early as the Middle Ages Notably, during the industrialization era, the first foreign direct investments (FDI) in the British retail market were recorded However, the modern phase of retail internationalization commenced after World War II, as demonstrated by the market entries of the 18 largest grocery retailers globally.

Figure A-1: Accumulated Market Entries of the 18 Largest Grocery Retailers Worldwide Source: Planet Retail (2011a)

Spar began its international expansion in 1947, becoming one of the first major grocery retailers to enter foreign markets In contrast, competitors like Aldi and Metro ventured into internationalization in the 1960s, while Delhaize, Ahold, Carrefour, and Tengelmann followed suit in the early 1970s Auchan, Costco, and AEON joined the trend in the early 1980s, marking a significant shift in the global grocery retail landscape.

S Elsner, Retail Internationalization, Handel und InternationalesMarketing / Retailing and International Marketing,

At the end of the 1980s, following the fall of the Iron Curtain, European markets experienced increased liberalization This shift allowed retailers like Tesco to expand internationally, although some did not enter their first foreign market until the 1990s.

Today, many of the well-known retailers worldwide realize a significant proportion of sales from international operations (Swoboda, Foscht and Pennemann 2009)

In 2011, major grocery retailers like Wal-Mart, Carrefour, and Metro topped the sales chart, while non-food retailers such as Inditex and H&M in fashion, along with Groupe Aedo and Kingfisher in DIY, followed suit This highlights the high level of internationalization among leading retailers in both the food and non-food sectors, with grocery sales significantly outpacing those of electronic and fashion retailers, which account for only about a quarter of grocery sector sales.

Smaller retailers like OBI, Douglas, and Decathlon are also expanding internationally, operating in nearly a dozen foreign markets This trend aligns with a Deloitte report indicating that 147 of the top 250 retailers, or nearly 60%, have ventured into foreign countries.

Table A-1: Total Sales of the Worldwide Largest Food and Non-food Retailers in 2011 Source: Own creation

Walmart leads the retail market in the US with significant sales figures, followed by major players like Carrefour in France and Metro Group in Germany In the UK, Tesco and Aldi are notable competitors, while Hennes & Mauritz represents Sweden's strong retail presence Costco and the Schwarz Group also contribute to the competitive landscape in the US and Germany, respectively Other key retailers include Inditex from Spain, Rewe Group from Germany, and Marks & Spencer from the UK In France, Auchan and E.Leclerc are prominent, while Seven & I from Japan and Intersport from Switzerland add to the diversity of the market Overall, these companies showcase a varied and competitive retail environment across different countries.

Delhaize (BE) 2.0 21.0 1 11 77.0 Body Shop (GB/ FR) 0,8 1,3² 20 62 61.4

1 'DWD 2 Data of 2010; n.a = not applicable

Retail internationalization can be categorized into two main areas: the internationalization of sourcing operations, which involves importing products from abroad, and the internationalization of sales operations, focusing on distributing products in foreign markets This article emphasizes the latter, as it is crucial for the economic viability of retail firms According to Dawson (1994), retail internationalization encompasses all activities related to selling products and operating stores in multiple countries through foreign direct investments or various shared operation modes.

Retailers require specific investigation due to their distinct nature compared to the manufacturing sector, influencing their internationalization decisions Burt and Carralero-Encinas (2000) highlight that established theories from manufacturing have limited applicability in retail, while Dawson (1994) cautions against transferring findings from manufacturing to retail contexts Unlike manufacturers, retailers primarily focus on distributing manufactured products to end-customers, which underscores their essential role in the market (Rosenbloom).

In retailing, the proximity of production and consumption is crucial, compelling retailers to offer services near their customers This fundamental aspect leads to significant differences in the internationalization of retailing, particularly in marketing, management, and financial strategies.

Retailers operate in diverse cultural environments, necessitating adaptation to meet the unique needs of end-customers (Vida, Reardon, and Fairhurst 2000; Bianchi and Ostale 2006) A notable example is IKEA, the Swedish retail giant, which introduced assembly and delivery services to accommodate Chinese customers unfamiliar with self-assembly furniture (Burt, Johansson, and Thelander 2011).

Retailers face significant challenges in managing diverse stakeholder groups, including employees, suppliers, governments, and local competitors, particularly in culturally distinct markets Research by Wong and Hendry (1997) highlights that Japanese retailers' structured employment systems can lead to dissatisfaction among local employees in Hong Kong The reliance on expatriate managers and the introduction of new retail technologies contribute to the deskilling of local staff, resulting in feelings of underutilization.

To effectively reach end-customers, retailers must develop an extensive store network characterized by a wide spatial distribution of locations in international markets.

Leknes and Carr 2004) Thus, retailers require a large amount of capital to finance their internationalization efforts For example, Bianchi and Ostale

(2006) report that Carrefour, as one of the leading international grocery retailers, operates more than 9,000 stores abroad

Retail internationalization faces two primary challenges: the act of entering foreign markets and the ongoing process of becoming truly international A crucial aspect of this process is the selection of market entry modes, which significantly impacts performance outcomes and is often difficult to alter once established.

The successful transfer and implementation of retail formats are crucial for international retailing Helfferich, Hinfelaar, and Kasper (1997) emphasize that the ability to transfer a retail format from one country to another is a key aspect of global retail operations Despite the extensive research on this topic, challenges remain in effectively managing different retail formats in foreign markets.

Despite the significance of retail internationalization highlighted in previous research, most studies have relied on small-N research designs, such as case studies As a result, the current understanding of decision-making processes in this context remains limited, with only a handful of studies exploring how these decisions are effectively made.

Research Gaps and Questions

2.1 Main Decisions on Retail Internationalization

The article discusses key decisions in retail internationalization, categorizing them into basic orientations and market-oriented decisions that can lead to either success or failure in foreign markets, influenced by both internal and external factors This thesis specifically examines market-oriented decisions, including market entry, market operation, and the organization and coordination of international retail activities, while acknowledging that market selection has been extensively studied by Swoboda, Schwarz, and Họlsig (2009).

Research in manufacturing firms has overshadowed the exploration of retail firms, resulting in limited attention to the latter This literature review presents a chronological overview of existing studies, highlighting their research questions, theoretical frameworks, empirical contexts, and key findings An in-depth analysis of both empirical and conceptual studies is conducted, culminating in a conclusion that outlines the current state of research and identifies existing gaps in the literature.

Figure A-2: Overview of Retail Internationalization Decisions Source: Adapted from Swoboda, Zentes and Elsner (2009)

2.2 Literature Review 2.2.1 Retail Market Entry Mode Choice

Retail market entry modes, as defined by Root (1995), refer to the institutional arrangements retailers adopt when entering foreign markets for the first time to execute their marketing strategies It is essential to differentiate these entry modes from foreign operation modes, which pertain to the ongoing methods of conducting business in international markets.

Market operations (incl retail format transfer)

Context factors (internal and external)

Introduction 7 modes employed beyond of the initially used entry mode, i.e., when the retailer has already been operating for a certain length of time in a foreign country (Benito, Petersen and Welch 2009) In general, retail market entry mode choice encompasses the area of conflict between the use of full- or shared- controlled modes, i.e., operating in foreign countries alone or in a partnership with others Accordingly, the most important retail market entry modes can be ranked in descending order according to the degree of control as wholly owned subsidiaries, mergers and acquisitions, joint ventures, franchising and licensing agreements and minority stakes with various advantages and disad- vantages that have been analyzed frequently in previous research (Doherty 2000; Moore, Doherty and Doyle 2010; Swoboda and Schwarz 2006) Accord- ingly, selected studies are reviewed in the following that address the choice between these entry modes (Table A-2) 1

Author(s) and year Research question Theory/ framework Empirical basis/ sector/ method Core findings Empirical Studies

Examination of fashion retail entry mode choice

Transaction cost theory, bargaining power theory, resource based view and internationalization theory

Italian fashion retailer in China/ case study (N=1)

- Firm-specific, country-specific and market-specific factors that influence the choice of fashion entry modes

- Use of full control modes is suggested in order to be successful when asset specificity, brand equity, international experience and market potential are high

- Shared-controlled modes are suggested when financial capabilities are low and host country risk, cultural distance, government restrictions and market compe- tition are high

Investigation of the antecedents and performance outcomes of psychic distance

Concept of psychic distance Primary data/ worldwide non- food retailers/ structural equation modeling (N2)

- Entry modes used in psychically close markets: greenfield ventures (29%), acquisitions (27%) and joint ventures (21%); psychically distant markets: joint ventures (46%) and franchising (23%)

- High control entry modes are favored by retailers with centralized decision-making and a large psychic distance; experience has no significant effect

- High control entry modes including wholly owned subsidiaries are strategically more effective than low control entry modes

- Entry modes have no significant impact on financial performance

Identification of the entry modes of international food retailers and how these are used for market penetration

Entry modes according to Root

Primary data/ international food retailers/ factor analysis, cluster analysis, analysis of variance, fre- quencies (N%)

- The use of Root’s (1995) generic market entry strategies, including opportunity-seeking, acquisition, franchising and joint ventures, depends on geographical and cultural distance

- Use of entry mode differs depending on the availability of internal resources

Research focusing solely on a single entry mode—such as organic growth, mergers and acquisitions, franchising, joint ventures, or flagship stores—has been excluded due to its limitation in considering the broader context of institutional arrangements These studies, while valuable, only address the choice of one specific entry mode and fail to explore the comparative analysis of different options, resulting in a narrow perspective.

Author(s) and year Research question Theory/ framework Empirical basis/ sector/ method Core findings Empirical Studies

Examination of determinants that explain entry mode choice

Combination of internationalization theory according to Johanson and Vahlne (1977), network theory according to Welch and Welch (1996) and born-global approach according to Sharma and Blomstermo (2003)

French specialized retailers/ case studies (N=6)

- Dissemination of risk, control, flexibility and resource commitment as the most important characteristics to differentiate between retail entry modes

A marketing policy encompasses the marketing program and the company's profile, which includes its experience and financial resources Additionally, the characteristics of the host country's market, particularly its attractiveness, are crucial determinants influencing the choice of foreign entry modes.

- Determining factors are reinforced by motives for internationalization and relationship networks

(2001) Impact of opportun- ism and strategic planning in the entry mode choice process

Western Europe- an retailers/ case studies (N=5)

- Since the mid-1990s the strategic choice for internationalization has been removed and every large retailer is nowadays forced to internationalize

- Shift from a planned entry mode choice to the leverage of opportunities

(2000) Explanation of entry mode choice in the retail fashion sector

- Entry mode choice is not predetermined but rather develops over time

- Franchising is the predominant entry mode used in the retail fashion sector

- Contrasting with previous research of Burt (1993), fashion retailers shift with increasing experience from full- to shared-controlled modes

- In the course of time, entry mode choice is dependent upon historical, experiential, financial, opportunistic, strategic and company-specific factors

(1999) Explanation of entry mode choice Transaction cost theory, agency theory

UK, USA and Sweden/ case studies (N=7)

Retailers often prefer internalization to minimize transaction costs associated with their significant intangible assets, like retail formats This strategy typically leads to the establishment of wholly owned subsidiaries or the pursuit of acquisitions.

- Similar to franchise retailers, such as Benetton and Body Shop, master franchise agreements reduce costs for negotiating, monitoring and enforcement of contracts

Strategic choices of global retailers OLI paradigm of

Dunning (1988) emphasizes that wholly owned subsidiaries are strategically utilized based on ownership advantages, including distinctive retail brand concepts and unique capabilities Additionally, internalization advantages, such as managing high contractual risks, play a crucial role, alongside the availability of essential resources and experience.

- Franchise agreements are used depending on pio- neering advantages, such as rapid expansion Huang and Sternquist

How have retailers to conform to the external and internal institutional environment by the choice of retail entry mode?

In nations characterized by stringent regulatory constraints, retailers tend to prefer shared-controlled modes of operation This contrasts with host countries that have inducement governance, where retailers are more inclined to adopt full control modes.

- Small cultural distance and retail market distance between home and host countries lead to full control modes

- High similarities between the current and previous market entries result in use of the same market entry mode or the entry mode used most frequently in the past

Conceptualizing of the process determining market entry method

None Conceptual - Choice of retail market entry mode is dependent upon the external market environment and the internal retail environment

- Both are not static but change over time Alexander and Lock- wood

Comparison of internationalization in the retailing and hotel sectors

None Conceptual - Management contracts as important entry modes in the context of the hotel sector

- Non-food retailers favor organic growth and franchising in contrast to food retailers who prefer acquisitions and develop operations organically

- Franchising is widely used in the hotel as well as in the retail sector

Table A-2: Selected Studies concerning Retail Entry Mode Choice Source: Own creation

Doherty (1999) was among the first to empirically analyze entry mode choice, using transaction cost and agency theory to identify the conditions under which retailers select specific entry modes Retailers often prefer full control modes when they possess significant intangible assets in their retail formats, as this helps safeguard their resources from opportunistic behaviors Expanding on this, Doherty (2000) examined the entry mode decisions of seven UK-based fashion retailers, revealing that the choice of entry mode is heavily influenced by the firm's internal characteristics, which evolve over time Key factors affecting retail entry mode decisions include historical, experiential, financial, opportunistic, strategic, and firm-specific elements.

Entry mode choice for retailers is primarily influenced by opportunities in host markets rather than rigid strategic planning, as highlighted by 2001's findings on Western European retailers in Poland Picot-Coupey (2006) established a conceptual framework based on six case studies of French retailers, identifying internal firm-specific and external host country determinants as key factors, moderated by motives for internationalization and relationship networks Lessassy and Jolibert (2007) expanded this research by examining initial market entry modes for international food retailers, emphasizing the importance of aligning resources with the chosen entry mode for successful market penetration A significant contribution from Evans, Mavondo, and Bridson (2008) analyzed 102 retailers and revealed that high-control entry modes are influenced by centralized decision-making and psychic distance, while extensive international experience does not significantly impact entry strategy Their findings suggest that high-control entry modes are strategically more effective than low-control modes due to minimized coordination costs.

Recent research indicates that firm performance is not solely reliant on high-control entry modes, suggesting that companies may favor low-control options A significant study by Lu, Karpova, and Fiore (2011) examined the entry of an Italian fashion retailer into the Chinese market Their findings highlight the influence of various firm-specific, country-specific, and market-specific factors on the selection of foreign market entry modes, ultimately proposing a conceptual framework for future research in this area.

Further research highlights the empirical findings on entry mode choices in retail internationalization Alexander (1990) reveals that nearly 50% of the 80 retailers studied favor organic growth or acquisitions Burt (1991) analyzes 210 international expansions by European grocery retailers, confirming a preference for internal growth, acquisitions, and majority stakes, with joint ventures as a secondary option In a later study, Burt (1993) suggests that British retailers should initially adopt low resource commitment entry modes before transitioning to higher commitment strategies over time Vida (2000) reinforces this by examining 80 U.S retailers, indicating a preference for wholly owned subsidiaries and majority stake joint ventures over minority stakes and licensing Samiee, Yip, and Luk (2004) explore eight retail market entry modes, specifically in the context of the Chinese market Roberts (2005) finds that Auchan's wholly owned hypermarket format thrives in Russia, whereas acquisitions and joint ventures are deemed risky and less successful Lastly, Hutchinson, Quinn, and Alexander (2006) conclude that SME retailers face limited entry mode options due to resource constraints, leading them to avoid higher commitment strategies and franchising, which is more suited for larger firms.

Introduction 11 retailers with established retail brands Instead, such entry modes as licensing or wholesaling are preferred by SME retailers

In addition to empirical research, significant conceptual insights have been offered in the analysis of entry modes in the hotel and retail industries Alexander and Lockwood (1996) highlight the various entry strategies utilized in these sectors, illustrating their relevance through specific examples They emphasize that all entry modes play a crucial role in the success of businesses within both the hotel and retail sectors.

In 2004, it was established that the selection of a retail market entry method is primarily influenced by the unique resources and capabilities of a firm, along with the prevailing environmental conditions.

Structure of and Contributions by the Studies

3.1 Study 1 – Retail Market Entry Mode Choice

This study explores the selection of retail entry modes, which are essential organizational arrangements that facilitate a firm's resource entry into foreign markets (Root 1995) The choice of entry mode is crucial as it significantly impacts performance (Brouthers 2002; Brouthers, Brouthers, and Werner 2003) and is challenging to alter once implemented (Pedersen, Petersen, and Benito 2002; Swoboda, Olejnik, and Morschett 2011) While numerous studies have focused on manufacturing contexts, this research aims to fill the gap in understanding retail entry strategies.

Recent literature reviews highlight that there are 200 antecedents affecting entry mode choices (Brouthers and Hennart 2007; Canabal and White 2008; Morschett, Schramm-Klein and Swoboda 2010) Most previous studies suggest that firms strategically select entry modes to improve competitiveness, efficiency, and resource control (Brouthers, Brouthers and Werner 2008) However, Anderson and Gatignon (1986) noted that only a minority of firms exhibit this strategic behavior, with many relying on historical decisions This study examines how retail firms' past decisions influence their choice of entry modes, particularly focusing on the impact of institutionalized entry modes on subsequent selections.

Thus, this study addresses the gap between the entry mode actually chosen and the entry mode that has been used predominantly in the past

The literature often overlooks the influence of past decisions on entry mode choice, particularly in retail, despite its established relevance for service firms While research on retail entry modes remains limited, few studies have empirically explored how previous entry modes affect future choices, especially concerning the impact of institutionalized entry modes Understanding this dynamic is crucial, as retailers are likely to favor entry modes they have utilized in the past, shaped by external pressures and internal capabilities Therefore, this article aims to investigate the relationship between historical entry modes and subsequent choices in greater detail.

- To what extent can entry modes that have been used predominantly in the past predict a subsequent entry mode choice?

This study explores how external regulative and normative pressures in a host country, along with the internal capabilities of retailers, influence the relationship between institutionalized entry modes and subsequent entry mode decisions.

The conceptual framework of the first study is based on three key aspects, primarily focusing on how the choice of market entry mode is largely shaped by previously utilized entry modes These entry modes are categorized as institutionalized, specifically referring to full- and shared-controlled entry modes that have become standard practices over time.

This study utilizes institutional theory, which posits that justified actions become widely accepted practices over time (Zucker, 1977) It suggests that retailers may need to adjust their established practices when significant disparities exist between their home and host countries' political and cultural contexts Consequently, external institutional pressures can compel retailers to modify their entry strategies Additionally, the effectiveness of an institutionalized entry mode can be strengthened by firm-specific capabilities.

Introduction 33 pabilities Thus, this study refers additionally to the resource-based view (RBV) by arguing that accumulated international knowledge, including international experience and internationalization speed, facilitates the use of an institutionalized entry mode In conclusion, institutional theory and the RBV are combined as requested by Meyer et al (2009) and Brouthers, Brouthers and Werner

(2008) and serve, therefore, as the theoretical underpinning of this study

A longitudinal dataset was established using secondary data from publicly available databases to empirically analyze the conceptual framework related to the institutionalized entry mode of the world’s 30 leading grocery retailers from 1960 to 2007 This method facilitates the examination of inter-temporal variations while ensuring accurate and objective documentation of data To evaluate the proposed relationships, a binary logistic regression analysis was conducted, accommodating the dichotomous nature of the dependent variable and enabling the exploration of moderating effects from both external and internal environmental boundary conditions.

This study enhances the international business literature, specifically focusing on retail internationalization, by addressing gaps identified in earlier research It offers valuable methodological insights into the selection of retail entry modes, analyzing over 300 market entries for the first time Additionally, it answers calls from previous researchers to examine how market entry mode choices evolve over time, contributing to a deeper understanding of this dynamic field.

Brouthers and Hennart 2007; Canabal and White 2008) From a theoretical perspective, this study combines institutional theory with the RBV and therefore provides a sound theoretical underpinning for the relationships analyzed

The integration of internal and external regulative and normative institutions is evolving, particularly in the retail sector This article examines how these institutional pressures influence entry mode decisions, building on the conceptual framework proposed by Huang and Sternquist.

(2007) The results provide a more realistic view of how retail entry modes are actually chosen by confirming that retail entry mode choice is influenced more

Institutionalized entry modes evolve over time, contrasting with the previously held belief that companies make deliberate decisions to choose various entry modes based on specific situations.

This study examines the effective transfer of retail formats from retailers' home markets, emphasizing the integral components of the retail value chain It highlights both the internal processes, such as marketing and supply chain activities that remain unseen by end customers, and the external marketing programs that are directly visible to them.

Research indicates that retailers often standardize their practices for their home markets or adapt them to fit local environments (Goldman 2001; Jonsson and Foss 2011) Striking the right balance between the cost savings from standardization and the advantages of local adaptation is crucial for gaining a competitive edge (Douglas and Wind 1987) Conversely, misjudging the level of standardization can result in resource wastage and a heightened risk of market failure (Goldman 2001).

The debate over standardization and adaptation in retail has persisted for over 50 years, with more than 300 scholarly contributions highlighting the complexities between retailers and manufacturers Despite this extensive discourse, the effective transfer of processes and marketing strategies remains underexplored There is a lack of understanding regarding the standardization of retail format elements, their interrelationships, and their impact on performance across different countries As retail internationalization continues to rise, the need for standardized processes becomes crucial for operational efficiency, while retailers must also adapt their offerings to meet local consumer demands and preferences.

Introduction 35 cond, although previous research suggests that certain retail format elements have to be distinguished into core and peripheral elements (Carman and Langeard 1980; Kaufmann and Eroglu 1999), no study known to the author has yet investigated which elements of the retail format belong to the group of core and which to the group of peripheral elements and how these elements influence successful retail format transfer In conclusion, the following research questions emerge:

- Whether and which process and marketing program elements are standardized or adapted and how both internal processes and visible offers interact?

Further Remarks

The three studies focus on the internationalization of retailing, examining both the processes of entering new markets and maintaining international operations Each study is structured to address specific research questions related to these themes, providing insights into the dynamics of global retail strategies.

- theoretical background and conceptual framework,

- empirical study, including sample design, measurement, method and results,

- discussion and conclusions, as well as limitations and directions for further research

The research structure remains consistent regardless of the exploration of each research question Additionally, it is unaffected by the methods used, whether employing binary logistic regression with secondary data in the first study or utilizing structural equation modeling with primary data in the second and third studies.

The research questions are grounded in a robust theoretical framework, utilizing institutional theory and the Resource-Based View (RBV) in the first study, the Framework for Financial Reporting (FFR) and the Protection Motivation Theory (PMT) in the second study, and focusing solely on PMT in the third study.

The article discusses foundational theories in traditional management research, highlighting the institutional theory initially proposed by Meyer and Rowan in 1977 This theory was subsequently expanded upon by key scholars such as DiMaggio and Powell in 1983, Zucker in 1983, North in 1990, and Scott, emphasizing the evolution and significance of institutional theory in management studies.

(1995), and claims that institutions from the external and internal environment impose isomorphic pressure to which organizations respond to gain legitimacy

The Resource-Based View (RBV), introduced by Wernerfelt in 1984, posits that organizations act as social entities influenced by their internal resources, which serve as core capabilities for achieving a competitive advantage While the external environment presents uniform opportunities and threats for all firms, those with significant internal capabilities can make strategic decisions that foster sustainable advantages The Framework for Replication (FFR), based on the work of Winter and Szulanski (2001) and Jonsson and Foss (2011), emphasizes the importance of replicating successful concepts while allowing for local adaptations to effectively transfer business models internationally Additionally, the Product-Market Theory (PMT), proposed by Samiee and Roth (1992), suggests that firms can achieve their primary goals through economies of scale or market segmentation, indicating that the optimal organizational strategy may vary depending on the relative benefits of these approaches in different contexts.

Chapter E summarizes the research and managerial implications derived from the detailed exploration of the research questions presented in chapters B, C, and D Additionally, it highlights potential avenues for further research based on the findings of all three studies.

Study 1 – Effects of Institutionalized Entry Modes on

Introduction

The choice of a foreign market entry mode, i.e., an institutional arrangement that makes possible the entry of firm resources into a foreign country (Root

The choice of foreign entry mode is a pivotal decision that significantly influences performance and is challenging to alter once made This topic has been extensively studied, with over 200 antecedents analyzed through various theoretical frameworks, highlighting its complexity and importance in international business strategies.

Research by Morschett, Schramm-Klein, and Swoboda (2010) suggests that firms often make entry mode choices to enhance competitiveness and control over resources (Brouthers, Brouthers, and Werner 2008) However, Anderson and Gatignon (1986) highlight that many firms rely on historical decisions rather than deliberate strategies This study examines how past decisions influence current entry mode choices, particularly focusing on institutionalized entry modes It aims to bridge the gap between predicted and actual entry modes used by firms, as discussed by Brouthers and Hennart (2007).

Previous research has extensively explored how past decisions influence future strategic behaviors (Amburgey and Miner, 1992) The significance of these past decisions on subsequent entry mode choices is well-established, often serving as a control variable in cross-sectional studies, although findings have yielded mixed results (Sanchez-Peinado, Pla-Barber, and Hébert).

Despite the limited empirical analysis of this phenomenon, several studies have explored its implications Two studies focus on mode inertia, highlighting the impact of past mode decisions on repeated entries within the same host country (Yiu and Makino 2002) and across different host countries (Lu 2002) Additionally, three studies examine the role of organizational learning through the lens of transaction cost theory (Chang and Rosenzweig 2001) and the resource-based view (RBV) (Padmanabhan and Cho 1999; Sanchez-Peinado).

Benito, Petersen, and Welch (2009) identify mode inertia, mode learning, and mode dynamics as key concepts in understanding entry modes in foreign markets Mode dynamics involve changes in foreign operation modes within a host country (Swoboda, Olejnik, and Morschett 2011) While mode learning encompasses the intentional efforts of firms based on past experiences, Anderson and Gatignon (1986) suggest that entry mode decisions can also occur without conscious evaluation, as habitual behavior often overrides decision-makers' awareness (Grewal and Dharwadkar 2002; Oliver 1996) Additionally, institutional theory highlights how internal isomorphic pressures influence managers to adhere to established institutionalized decisions across various host countries.

Lu (2002) Because the interdependencies of past decisions with the external and internal environments are neglected, two research gaps emerge

There is a significant gap in empirical research regarding the predictive power of institutionalized entry modes, such as full- and shared-controlled entry modes, on subsequent entry mode choices and the stability of this relationship over time Institutional theory serves as a suitable framework for exploring these dynamics, highlighting the impact of internal and external isomorphic pressures from regulative and normative institutions in the host country The relationship between institutionalized entry modes and future choices may weaken due to external pressures compelling firms to adapt, known as institutional duality, while it may strengthen when a firm's internal capabilities support the use of established modes Both scenarios are crucial for understanding entry mode choices and necessitate thorough analysis A combined theoretical approach is essential, as institutional theory elucidates the effects of isomorphic pressures on entry mode selection, while the Resource-Based View (RBV) addresses the economically justified aspects of capabilities.

Study 1 – Effects of Institutionalized Entry Modes on Entry Mode Choices 43

While prior research has largely focused on manufacturing firms, this study emphasizes the unique characteristics of service firms, particularly in the retail sector, which require local adaptation and the establishment of store networks abroad The choice of entry mode is crucial for retailers due to their significant reliance on the host country's external environment and their substantial resource demands for international expansion Therefore, institutional theory plays a vital role in understanding the interplay between institutionalized entry modes and their impact on subsequent mode choices, influenced by both external and internal factors.

This study aims to investigate the extent to which past entry modes can predict future entry mode choices Additionally, it explores how external regulative and normative pressures in a host country, along with the internal capabilities of firms, influence the relationship between previous entry modes and subsequent choices.

This study enhances the international business literature, particularly in relation to institutional theory and service industries, by addressing key questions Methodologically, it answers calls for the application of panel data in entry mode research, providing deeper insights into entry mode choices over time, as highlighted by previous scholars such as Andersen (1997) and Canabal and White (2008).

From a theoretical perspective, this study responds to the call of Meyer et al

(2009) and Lu (2002) to investigate the extent to which internal institutions influence variations in entry mode choices According to Huang and Sternquist

In 2007, the study examines how internal and external institutional pressures influence entry mode choices in retail It introduces a novel framework that combines regulative and normative institutions, highlighting how internal pressures serve as precursors to entry mode decisions while external pressures play a moderating role in this relationship, reflecting the concept of institutional duality.

Furthermore, this study combines institutional theory with the RBV by analyz-

This study explores how firm-specific capabilities influence the relationship between institutionalized entry modes and subsequent entry mode choices It highlights that retail entry mode decisions are often shaped by institutionalized entry modes over time, rather than being the outcome of deliberate and conscious choices, challenging previous assumptions based on transaction cost analyses.

The study begins with a review of the institutional theory literature on entry mode research because this theory represents the theoretical foundation

This study deduces and empirically tests a series of hypotheses using panel data from 309 market entries by world-leading retailers between 1960 and 2007 The findings are presented and discussed, along with the limitations of the research.

Literature on Institutional Theory in Entry Mode Choice

Previous studies on institutional predictions regarding entry mode choice are limited and differ from research focused on identifying the most efficient entry mode, which typically examines only the external institutional environment.

The literature on institutional theory and foreign entry mode choices examines four key aspects: the influence of internal institutional pressures, the impact of external institutional pressures, the relationship between internal and external pressures, and research that integrates institutional theory with the resource-based view (RBV).

Huang and Sternquist (2007) highlight that prior market entry modes influence future choices, a concept supported by Lu (2002), who empirically demonstrates that increased frequency of a specific entry mode leads to its repeated use in subsequent entries Lu's findings reveal that intra-organizational mimetic behavior within multinational enterprises (MNEs) significantly impacts entry mode decisions more than inter-organizational mimicry Additionally, Yiu and Makino (2002) advocate for the consistency of using the same institutionalized entry mode by MNEs when making sequential market entries into the same host country.

The authors highlight how historically prevalent entry modes significantly impact future mode selections, stressing the role of internal institutional pressures that contribute to the persistence of these historical norms in entry mode decisions.

Numerous studies emphasize the significance of external institutional pressures as key factors influencing entry mode choices Research by Xu, Pan, and Beamish (2004) highlights the impact of regulative and normative distance, while Meyer and Nguyen (2005) focus on variations in economic institutional factors Uhlenbruck et al (2006) examine the influence of pervasive corruption in governments, and Estrin, Baghdasaryan, and Meyer (2009) analyze institutional distance Furthermore, studies by Xia, Tan, Tan (2008) and Chan and Makino contribute to understanding these dynamics in relation to entry mode decisions.

Research from 2007 highlights the influence of inter-organizational mimicry and host country dynamics on business strategies Studies integrating transaction cost analysis (TCA) with external institutional pressures—such as country risk, legal restrictions, and intellectual property protection—reveal critical insights Factors like progress in institutional reforms, political constraints, corruption, and cultural differences also play significant roles A key finding across these studies is that regulatory and normative pressures in host countries compel firms to opt for entry modes that require lower resource commitments.

Xu and Shenkar (2002) and Huang and Sternquist (2007) explore the interplay between internal and external institutions in determining entry mode choices, a concept known as institutional duality Despite this, empirical research on the relationship between these institutions remains limited, often treating them as direct antecedents For instance, previous studies have analyzed entry mode choices within a single country by examining factors like past entry modes and cultural distance (Chang and Rosenzweig 2001), as well as regulatory institutions (Yiu and Makino 2002) Additionally, research has looked at various countries, focusing on internal cognitive structures, regulative risks, and cultural distance (Chen et al 2009), along with entry mode changes influenced by internal pressures and governmental regulations (Puck, Holtbruegge, and Mohr 2009) Estrin, Baghdasaryan, and Meyer (2009) are among the few to investigate the indirect relationships between internal and external institutions, revealing a converted U-relationship.

Research by Schwens, Eiche, and Kabst (2011) highlights the impact of institutional distance on the entry mode choices of SMEs, specifically examining the interplay between informal institutional distance and formal institutional risk within a transaction cost analysis framework The findings consistently suggest that internal institutional isomorphism leads to persistent entry modes, while external institutional pressures drive firms towards entry modes that require lower levels of resource commitment.

On the basis of the RBV, some studies address various antecedents, primarily those with direct effects rather than moderating effects, of entry mode choice

Mutinelli and Piscitello (1998) highlight the significance of international knowledge as a crucial capability for multinational enterprises (MNEs), suggesting that greater knowledge accumulation enhances the likelihood of adopting full control modes Integrating institutional theory with the resource-based view (RBV), Oliver (1997) illustrates how capabilities are influenced by both internal and external institutional contexts Brouthers, Brouthers, and Werner (2008) provide empirical evidence that as institutional distances related to social norms, legal frameworks, and country risks diminish, firms with limited specific resources transition from shared to full control modes Additionally, Meyer et al (2009) demonstrate that in environments with robust local institutions, foreign entrants with a significant need for intangible resources prefer acquisitions and joint ventures over greenfield investments Overall, this research underscores the necessity of incorporating institutional reasoning into the RBV to better understand how external institutions affect entry mode decisions.

Theoretical Foundation

Scholars have explored entry mode decisions through various frameworks, including Transaction Cost Analysis (TCA), the OLI paradigm, internationalization theory, the Resource-Based View (RBV), and institutional theory This article examines two key research streams: first, how established entry modes influence future entry mode selections, and second, the impact of external and internal factors on this dynamic By focusing on institutional theory and the RBV, the study enhances the understanding of these relationships.

Study 1 – Effects of Institutionalized Entry Modes on Entry Mode Choices 47 regarding the procedural character of entry mode choices (Kostova 1999; Pen- rose 1995) and thus overcomes the main limitation of the most frequently employed TCA in entry mode research (Jones and Coviello 2005; Williamson

Institutional theory examines how established entry modes impact the choice of entry strategies and the role of external institutional pressures In contrast, the Resource-Based View (RBV) focuses on the effects of internal firm-specific capabilities, which are often overlooked by traditional institutional theory.

Institutional theory views organizations as social actors influenced by their internal and external environments, shaped by historical structures, standards, and practices (DiMaggio and Powell 1983; Meyer and Rowan 1977) These institutions create isomorphic pressures that organizations must navigate to achieve legitimacy Scott (1995) identifies three key factors of institutional pressures: internal cognitive pressures, external regulative pressures, and external normative pressures Organizations that fail to address these pressures risk potential failure in the global market (Brouthers and Hennart 2007).

Internal cognitive pressures, rooted in Stinchcombe's imprinting concept, suggest that justified actions become habitual and are increasingly adopted over time Consequently, institutionalized actions, like entry modes, tend to be uniform and resistant to change in future decisions External regulative pressures involve the enforcement of formal rules, while external normative pressures encompass informal norms and cultural values From both sociological and economic perspectives, these external pressures significantly shape organizational decisions, as the institutional environment differs across countries This leads to institutional duality, where decision-makers may rely on past institutionalized actions for internal legitimacy, yet may also adapt to external regulative and normative influences.

The Resource-Based View (RBV) emphasizes the significance of internal firm-specific capabilities in determining the choice of institutionalized entry modes in foreign markets It posits that a firm's strategy is influenced by its resources and capabilities, which develop over time Scholars suggest that the decision to enter a foreign market hinges on the ability to leverage existing capabilities abroad or to acquire new resources from the target market Firm-specific capabilities are essential inputs for strategy formulation and execution, enabling firms to adopt specific strategies and institutionalized entry modes Moreover, the accumulation of international knowledge is vital for multinational enterprises (MNEs), as it enhances organizational routines and reinforces the preference for institutionalized entry modes.

Conceptual Framework and Hypotheses Development

This study proposes a conceptual model illustrating the relationships between market entry modes and organizational imprinting effects It suggests that the choice of entry modes is largely influenced by institutionalized practices, which are affected by external regulative and normative pressures As firms navigate these pressures, they adapt their entry strategies within different countries Additionally, firm-specific capabilities, such as accumulated international knowledge and experience, enhance the effectiveness of institutionalized entry modes, ultimately shaping their internationalization strategies.

Subsequently, each relationship is discussed from a theoretical perspective, and empirical evidence for the assumptions is also provided in the retail context

Figure B-1: Conceptual Framework Source: Own creation

4.1 Institutionalized Entry Mode and Subsequent Entry Mode Choice

The evolution of entry modes is crucial for understanding institutionalized entry modes and their impact on subsequent choices Benito, Petersen, and Welch (2009) highlight the distinction between mode learning and mode inertia, emphasizing the significance of initial entry mode selection and mode dynamics in foreign operations Research indicates that mode learning, derived from experiences, routines, or competencies, aligns with resource-based reasoning, suggesting that firms select entry modes where they have accumulated substantial resources, such as knowledge (Padmanabhan and Cho, 1999) Alternatively, transaction-cost reasoning posits that firms opt for entry modes with the lowest transaction costs, including opportunity costs (Chang and Rosenzweig).

Previous research indicates that habitual behavior can override the conscious awareness of decision-makers Consequently, this study posits that entry mode decisions are influenced more by cognitive constraints than by deliberate reasoning.

Choice of market entry mode

Firms often rely on established entry modes due to habitual behaviors and inertia, leading to a preference for familiar methods over exploring alternatives Over time, these decisions become ingrained, with managers justifying their choices by stating, "we have always done it this way" or "that's just how things are done here." This phenomenon, as outlined by institutional theory, indicates that organizations tend to adopt existing institutionalized practices in their future entry mode decisions.

699–700) According to Lu (2002), this organizational imprinting phenomenon is understood as intra-organizational mimic behavior and can, therefore, be described as institutionalized entry modes

Research indicates that multinational enterprises (MNEs) often rely on historically established entry modes in the same host country, highlighting the impact of historical norms on institutional persistence (Yiu and Makino, 2002) Lu (2002) notes that manufacturing firms exhibit intra-organizational mimicry during initial market entries, while Sanchez-Peinado, Pla-Barber, and Hébert (2007) find this behavior absent in capital-intensive service firms In the retail sector, Huang and Sternquist (2007) assert that established retail entry modes can shape future entry mode decisions, as global retailers like The Body Shop and Wal-Mart prefer consistent shared or full control entry strategies for their subsequent market expansions.

Hypothesis 1: Institutionalized entry modes enhance the propensity to use the same market entry mode in subsequent initial market entries across countries

4.2 Moderating Effects of the External Institutional Environment

Institutional theory indicates that external regulative and normative pressures significantly impact the relationship between established entry modes and subsequent entry mode decisions This influence is particularly critical for international retailers, who face various regulative pressures, such as political and legal requirements, as well as normative pressures, including culture-specific consumer behaviors, due to their local market presence.

Study 1 – Effects of Institutionalized Entry Modes on Entry Mode Choices 51 presence with store networks abroad (Bianchi and Ostale 2006) Because retailers evaluate external environments prior to market entry, the regulative and normative distances between the home and host markets may be particularly relevant (Kostova and Zaheer 1999) Consequently, retailers may maintain an entry mode that was predominantly used in the past until regulative and normative distances force them to depart from such an entry mode Accordingly, this study focuses on the political and cultural distance

The regulative environment defines the rights necessary for conducting business in new markets (Yiu and Makino, 2002) Firms must adapt to these regulations, and significant differences between the host and home countries complicate the transfer of strategic routines, potentially leading to conflicts (Kostova, 1999) Consequently, substantial political disparities may compel firms to select alternative entry modes rather than established ones Conversely, minimal political distance allows firms to opt for institutionalized entry modes, as they are seen as legitimate from a regulatory standpoint.

The literature review highlights the moderating influence of political distance; however, this effect is not observed in the context of institutionalized entry modes, as noted in studies by Brouthers, Brouthers, and Werner (2008) and Meyer and Nguyen (2005) Additionally, the findings from Xu and Shenkar further emphasize this distinction.

Research by Xu, Pan, and Beamish (2004) indicates that as political distance increases, firms tend to adopt shared-controlled modes to mitigate the risk of institutional conflicts Conversely, Kostova and Roth (2002) argue that higher political distance leads firms to favor greenfield investments, which facilitate the transfer of business practices In both scenarios, firms can secure legitimacy in the local environment by deviating from established entry modes—opting for shared-controlled modes in the former case and greenfield investments in the latter Therefore, the growing political distance significantly influences the relationship between institutionalized entry modes and the subsequent choices firms make regarding their entry strategies.

Schwens and Kabst (2009) highlight that increased political uncertainty raises the likelihood of altering entry modes for subsequent market entries This is particularly relevant in the retail sector, where political distance plays a crucial role, as retailers must navigate these uncertainties effectively.

Retailers must navigate strict regulations regarding land planning, pricing, and store operating hours, leading them to adopt entry modes that require significant resource investments, particularly as local governments seek to attract foreign direct investment (FDI) For instance, major retailers like Tesco have had to form joint ventures with local partners when entering markets in China and Thailand Consequently, it is concluded that retailers with diverse institutionalized entry modes often adjust their strategies in response to the political distance and regulatory environments of their host countries.

Hypothesis 2: The impact of an institutionalized entry mode on the choice of subsequent entry modes will be weaker with a greater political distance between the host and home countries

Cultural distance between a host country and a home country refers to the normative institutional environment that firms must navigate to meet local societal expectations (Yiu and Makino, 2002) Institutional theory suggests that significant cultural distance hinders multinational enterprises (MNEs) in transferring strategic routines internationally Consequently, firms facing high cultural pressures may opt for entry modes that deviate from the established institutionalized practices Conversely, when cultural distance is minimal, firms are more inclined to adopt institutionalized entry modes, as these approaches are culturally legitimate.

Research indicates that cultural distance has ambiguous direct effects on entry mode choice, suggesting it should be viewed as a moderating factor Studies by Xu and Shenkar (2002) and Xu, Pan, and Beamish (2004) demonstrate that as cultural distance increases, firms tend to opt for shared-controlled modes, as lower ownership makes local branches appear less foreign Conversely, Estrin, Baghdasaryan, and Meyer (2009) highlight that the impact of cultural distance continues to evolve with increasing levels.

Study 1 – Effects of Institutionalized Entry Modes on Entry Mode Choices 53 tural distance, firms choose full control modes because these modes are less concerned from difficulties in management collaborations due to different norms, values and beliefs in organizational cultures and management styles

Empirical Study

To test the hypotheses, a panel data set utilizing secondary data was employed to analyze causal relationships over time, ensuring the availability of accurately, objectively, and contemporaneously documented information A sample of grocery retailers was selected for this analysis.

The grocery sector is the largest retail market, attracting diverse consumer segments and offering a wide range of products, both food and non-food, unlike specialized retailers This study analyzed the foreign market entries of the top 30 global grocery retailers, excluding those with minimal international sales or presence The research focused on 309 market entries across 82 countries from 1960 to 2007, highlighting the initial establishment of local store-based operations by these retailers in previously unserved host countries.

Rank in world according to sales

Retail firm Founding year Start of internationalization (first market entry)

Country of origin Total sales in bn

No of served foreign markets in 2007

Number of initial foreign market entries

Excluded with foreign sales less than 1% such as Kroger (Rank 7), Target (8), Walgreens (11), CVS (14), Supervalu (26), Wesfarmers

(27), Sainsbury (28), Migros (30) or only one foreign market such as Sears (16), Safeway (18), Woolworths (24), specific history of expansion Seven&I (10)

Table B-1: The World Leading Grocery Retailers in 2007 Source: Planet Retail (2008)

Data for all variables were collected at the time of market entry, as Brouthers and Hennart (2007) emphasize that analyzing entry mode decisions during their occurrence is most effective This approach allows for a real-time analysis rather than a retrospective one, typical of cross-sectional research designs Firm-specific data, such as employee numbers, were sourced from annual reports, while details on the year of market entry and entry mode choices were obtained from the Planet Retail database, which covers corporate-level data across 211 markets Additionally, country-level data were gathered from publicly available resources, including the World Bank, Globe study, Macro Data Guide, Nationmaster, and the United Nations World Urbanization Prospects.

5.2 Measurement of Variables 5.2.1 Dependent Variable

This study emphasizes the significance of control in entry mode research, highlighting the distinction between full-controlled and shared-controlled entry modes (Ekeledo and Sivakumar 2004; Canabal and White 2008) Full control modes, represented by wholly owned subsidiaries and acquisitions, contrast with shared-controlled modes like joint ventures, franchises, licenses, and minority stakes (Herrmann and Datta 2002; Tan, Erramilli, and Liang 2001) The results remain consistent even when excluding acquisitions and franchising/licensing, as these may not align with traditional entry mode choices The data reveals a distribution of 213 full-controlled and 96 shared-controlled entry modes, consistent with earlier findings in the service sector (Sanchez-Peinado, Pla-Barber, and Hébert 2007).

The institutionalized entry mode, historically prevalent in the retail sector, has been analyzed by Huang and Sternquist (2007) and further explored by Lu (2002) and Yiu and Makino (2002) for manufacturers, focusing on the ratio of full entry methods utilized.

58 control modes to the total number of entry modes used for the same company in its host countries (Table B-2)

No Variable Description Scale Item charac- teristic Sources

1 Entry mode Shared- vs full control modes

Percentage of previous market entries that were full control modes

Continuous 0 - 1 Huang and Sternquist (2007); Lu

Distance in Globe dimensions between home and host country according to Kogut and Singh (1988)

Continuous 0 - Estrin, Baghdasaryan and Meyer

Number of years since the first market entry

Continuous 0 - Blomstermo, Sharma and Sallis

Number of market entries divided by the number of international experience

Continuous 0 - Chan, Finnegan and Sternquist

7 Firm size Number of employees per

Continuous 0 - Brouthers, Brouthers and Werner

8 Market size Host country GDP per 10 bn Continuous 0 - Barkema and Vermeulen (1998)

9 Market growth Percentage annual development of GDP

Ratio of FDI over GDP Continuous 0 - Contractor and Kundu (1998);

Percentage of urbanization Continuous 0 - 1 Alon and McKee (1999)

12 Corporate dummy No corporate vs corporate of investigation

Dichotomous 0/1 Beck, Brüderl and Woywode

13 Country dummy No country vs country of investigation

Dichotomous 0/1 Beck, Brüderl and Woywode

Table B-2: Measurement of Variables Source: Own creation

Political distance was measured by employing the political constraint index

The POLCONV index developed by Henisz (2000) is a comprehensive measure of the political environment, as noted by Jiménez (2010) This index evaluates the political landscape of various countries by considering independent institutional actors with veto power, providing annual calculations from 1960 to 2007 (García-Canal and Guillén, 2008).

The political index measures the degree of institutional veto power, ranging from 0 for dictatorships to 1 for democracies To assess the political distance for market entry, the political constraint values of the home and host countries are subtracted from each other, following the methodology proposed by Berry, Guillén, and Zhou (2010).

The cultural distance between home and host countries was assessed using the Euclidean distance derived from the Globe study dimensions, which focus on cultural aspects as per institutional theory This analysis, as noted by Schwens, Eiche, and Kabst (2011), utilizes "practice" indices that are more effective for examining cultural influences in organizational settings For grocery retail firms, measuring this cultural distance is crucial, as market entry decisions are predominantly made at headquarters rather than by local entities.

International experience is defined by the duration between a company's initial foreign market entry and its subsequent market engagements This metric is crucial for understanding entry mode choices within the broader context of internationalization strategies It highlights how international business operations can be effectively utilized, developed, and adapted across different markets.

Internationalization speed in the retail sector was assessed using the methodologies of Vermeulen and Barkema (2002) and Chan, Finnegan, and Sternquist (2011) This measurement is based on the average number of market entries per year, calculated by dividing the total number of foreign markets a retailer operates in by the number of years they have been active internationally This approach highlights the rate at which retailers accumulate foreign market entries over time, distinguishing it from the broader concept of international experience as outlined by Erramilli (1991).

In conclusion, higher computed values indicate a greater number of markets entered per year

This study accounts for various factors including firm size, market size, market growth, openness to foreign direct investment (FDI), industrial development, and specific firm and country characteristics However, additional home country factors were not included, as they are already reflected in the broader measures of political and cultural distance, and their addition would yield only minimal improvements in the analysis.

The study highlights a significant enhancement in explanatory power, as noted by Brouthers and Hennart (2007) Firm size, a crucial resource influencing retail firms' entry mode choices, was accounted for in the analysis This factor is quantified based on the total number of employees, following the methodology established by Brouthers, Brouthers, and Werner (2008).

Market size and growth are critical factors influencing market attractiveness and entry mode choices, with GDP serving as a key indicator (Barkema and Vermeulen 1998; Henisz and Delios 2001) Previous studies highlight the significant impact of market growth, measured by GDP development percentage, on entry strategies (Agarwal and Ramaswami 1992; Herrmann and Datta 2002) Additionally, the openness to foreign direct investment (FDI), represented by the FDI to GDP ratio, plays a vital role in this decision-making process (Contractor and Kundu 1998; Johnson and Tellis 2008) Furthermore, the degree of industrial development, assessed through urbanization percentage, also influences entry mode choices (Alon 2006).

To mitigate biases arising from unobserved firm heterogeneity, Beck, Brüderl, and Woywode (2008) along with Snijders and Bosker (1999) advocate for the use of fixed effects Consequently, firm dummy variables were incorporated to address higher-order effects related to the 18 retailers studied, as noted by Vermeulen and Barkema (2001) This methodology was similarly applied to four countries that recorded over ten market entries.

A binary logistic regression analysis, commonly used to explore market entry mode choices (Canabal and White 2008), was conducted after performing an outlier diagnostic to prevent biases from extreme values Eight observations were removed for exceeding the standardized residual cut-off of 3.0 and Cook’s distance threshold of 1.0 (Cohen et al 2003) Additionally, all variables were z-standardized to mitigate multicollinearity in models featuring complex interaction effects (Aiken and West 1991; Brouthers and Brouthers 2003) As shown in Table B-3, the correlations among the variables were analyzed.

Study 1 – Effects of Institutionalized Entry Modes on Entry Mode Choices 61 low the recommended threshold of 0.7 (Anderson, Sweeney and Williams

Discussion

This study examines the influence of an institutionalized entry mode on the choice of a subsequent entry mode and, therefore, not on the choice of the

Due to the limitations of the firm dummy approach, the findings were further validated using binary logistic regression based on Generalized Estimating Equations as proposed by Liang and Zeger (1986) The results, which are detailed in Table Appendix-3, show consistency with the initial findings.

Study 1 – Effects of Institutionalized Entry Modes on Entry Mode Choices 69 most efficient entry mode (Sarkar and Cavusgil 1996) Furthermore, the moderating effects of the external institutional environment and of firm-specific capabilities are analyzed in the context of international retailers because retailers are strongly dependent on the external institutional environment, given their local business and the intangible capabilities within the internationalization process Such a specific context can be considered as strength of this study because this context addresses a seldom-investigated part of the service sector, or it can be viewed as a weakness because the generalization may be limited However, this under-researched area regarding the effects of institutionalized entry modes is relevant because entry mode choices are known to be critical decisions with respect to international expansion With respect to institutional theory, the results strongly support the argument that past decisions influence subsequent entry mode choices Moreover, external institutional factors, i.e., political and cultural distance, force firms to adjust their institutionalized entry modes Empirically, regulatory pressures have a negative moderating effect on the relationship between the institutionalized entry mode and subsequent mode choices With respect to the RBV, internal capabilities, such as international experience and internationalization speed, reinforce this behavior These observations provide two major research implications and conclusions for managers

The findings highlight the significant impact of institutionalized entry modes on future entry mode decisions over time, as emphasized by Huang and Sternquist.

Institutionalized entry modes effectively explain the dynamics of entry mode choices in various countries within the retail sector, as concluded in a 2007 study This insight builds upon the research conducted by Canabal and White.

This study employs a panel approach to offer a realistic perspective on the dynamic process of entry mode selection, contrasting with the typically static studies on entry mode choice By extending previous research, it highlights the significance of both external institutional pressures and the often-overlooked internal institutional factors in the decision-making process.

The findings align with earlier research on sequential market entries into a single host country (Chang and Rosenzweig, 2001; Yiu and Makino, 2002) and on market entries across various host countries (Lu, 2002).

In the retail sector, institutions play a crucial role as they define 'the rules of the game,' significantly influencing the selection of foreign market entry modes (North, 1990; Meyer and Peng, 2005) The ongoing measurement of intra-organizational behavior reveals that these actions often become normalized over time Therefore, additional research into the development of institutionalized entry modes is essential, as these modes can be shaped by both institutional pressures and experiential learning (Benito, Petersen, and Welch).

2009) and thus strategic decisions Hence, this study calls for research about the antecedences and differences of entry mode evolution, e.g., mode inertia and mode learning

The study investigates the moderating role of external institutional pressures and internal capabilities on the relationship between institutionalized entry modes and subsequent mode choices Findings reveal that firms often deviate from their established entry modes in politically distant countries, highlighting the concept of institutional duality, where foreign subsidiaries face competing pressures from both organizational and local institutional contexts The research indicates that internal pressures significantly influence entry mode decisions, while external institutional pressures can counterbalance this effect However, the study is limited to only two specific regulative and normative variables, suggesting the need for further exploration of additional proxies that may yield different insights Notably, as firms gain international experience and increase their pace of internationalization, the reliance on institutionalized entry modes strengthens, demonstrating the compatibility of the Resource-Based View (RBV) and institutional theory, where enhanced intangible resources facilitate the effective use of these modes and the attainment of internal legitimacy.

This research is among the first to explore the interplay of external and internal institutional pressures on organizational legitimacy Findings indicate that external pressures tend to diminish the impact of internal pressures, with firms favoring institutionalized entry modes in politically stable countries while deviating from this approach in hostile environments Although the study did not confirm the moderating effect of cultural distance, it suggests potential for further investigation using specific cultural measures Additionally, while the impact of entry mode on performance was not the focus here, previous studies indicate that theoretically grounded entry modes generally yield better outcomes Thus, it can be inferred that an entry mode tailored to both external and internal environments is likely to be more effective than one lacking legitimacy and alignment with internal capabilities.

Thus, research regarding the performance effects of institutional duality may be promising

The findings highlight that international experience and the speed of internationalization significantly influence firms' entry mode choices, indicating a strong alignment between these factors and existing theories This suggests that firms are likely to adopt consistent entry modes rather than varying them based on efficiency Additionally, international experience and rapid internationalization enable firms to leverage organizational routines, facilitating economies of scale and helping to navigate external institutional challenges However, this study reveals that only higher levels of international experience and internationalization speed yield such outcomes, pointing to a potential area for further research.

This study offers valuable insights for managers by examining the perspectives of expansion managers on entry mode choices in retail firms, while also emphasizing the significance of moderating effects in these decisions.

Expansion managers in multinational corporations (MNCs) are acutely aware of their established entry modes They adhere to internal isomorphic pressures, which guide them in the complex decision-making process of choosing entry modes This often leads to a decision-making heuristic that favors ‘efficiency-satisfying’ solutions over ‘efficiency-maximizing’ ones, ultimately saving both time and effort.

Managers recognize that institutionalized entry modes can be effective for international expansion, but it is uncertain if they will base their market selection solely on this efficiency The choice of entry mode influences the criteria and processes used in selecting countries, potentially leading to a standardized approach However, this raises a critical question: will managers prioritize the most promising markets or those that align with their chosen entry mode? This distinction is crucial, as selecting less attractive markets based on entry mode can disadvantage them compared to competitors who first identify the most appealing markets and then determine the best entry strategy Therefore, it is essential for managers to understand that the choice of entry mode significantly impacts long-term foreign performance, and that market selection and entry mode decisions are separate yet interconnected processes that affect international success.

Huang and Sternquist (2007) emphasize the importance for retailers to recognize institutional pressures to effectively navigate their strategic environment, although practical management of these pressures may be challenging The study highlights key factors influencing the reconsideration of institutionalized entry modes, noting that regulatory institutions can be assessed before making mode decisions and should be integrated into market selection models In contrast, normative institutions are often more difficult to evaluate beforehand The significance of these factors and the chosen entry mode may vary based on a firm's internationalization speed, flexibility, and specific motivations for entering a new market, such as targeting high-potential markets versus peripheral ones Consequently, managers must possess a comprehensive understanding of the complexities involved in international expansion, including market selection, entry strategies, and market servicing.

In conclusion, this study acknowledges certain limitations, particularly the restricted generalizability of its findings due to the focus solely on grocery retailers Consequently, results may not be applicable to specialized non-food retailers or businesses in different sectors, highlighting the need for further research in these areas.

Theoretical Foundation and Conceptual Framework

Scholars have explored format transfer through various lenses, such as grounded theory, the integration-responsiveness (I-R) framework, and the replication-as-strategy approach This article addresses two key research streams: first, it examines which process and program elements are standardized or adapted and their interactions; second, it evaluates the performance effects of these designs Our focus is on the learning-based flexible format replication (FFR) approach and profit maximization theory (PMT), as discussed by Jonsson and Foss (2011) and Samiee and Roth (1992).

Utilizing both theories enhances the discourse on format transfers, particularly for retailers that are rapidly expanding internationally by transferring established format elements from their home markets to host countries Consequently, we apply FFR to assess the level of standardization and the relationships involved.

Study 2 – Transferring the Retail Format Successfully into Foreign Countries 79

Supply chain processes (standardization degree)

Core elements Performance in a host country

Supply chain processes (standardization degree)

The article argues that there are more standardized core elements compared to peripheral elements in the context of performance in a host country This allows for advanced insights into the relationships between processes, programs, and their impact on performance By utilizing Performance Management Theory (PMT), the study explores how internal processes and visible marketing offers correlate with performance The proposed theoretical framework indicates that the level of standardization in processes is linked to that of marketing programs, both of which influence performance outcomes in a given country Notably, the framework highlights that the relationships between core elements and peripheral elements with performance differ significantly.

Figure C-1: Conceptual Model Source: Own creation

FFR emphasizes the importance of understanding core and peripheral elements in format transfers, driven by market-based learning According to Winter and Szulanski (2001), organizations can identify these core business elements by creating a comprehensive information set that accurately specifies the essential, replicable features of a business model and its optimal application.

Core elements are essential for establishing significant values and creating routines that remain consistent over time These routines facilitate large-scale replications, enable quick leveraging of resources, and support knowledge transfer while remaining less visible and imitable by competitors As a result, retailers can strategically outline routines for international expansion, such as selecting preferred store types or formats.

Jonsson and Foss (2011) emphasize the importance of market-based learning for retailers, particularly in the context of internationalization into diverse environments Their research highlights that while retailers frequently adapt peripheral elements, such as product assortments, they tend to maintain core elements, like operational procedures, with minimal changes over time This study also illustrates the path-dependent learning processes that vary across different host countries Utilizing FFR, the authors provide a theoretical framework that supports the distinction between core and peripheral format elements, reinforcing earlier classifications by Carman and Langeard (1980) and Kaufmann and Eroglu.

Strategic evaluations by firms and market-based learning are crucial for understanding core and peripheral elements, which include complex demand- and supply-side factors, as well as offers, processes, and firm culture Identifying these elements can be challenging, as noted by scholars such as Goldman (2001) For further clarification, Table C-1 provides illustrative examples of these concepts.

Marketing program Marketing processes Supply chain processes

- Store layout and store design

- Procedures of market and trend analysis

- Procedures of store location planning

- Procedures and systems for CRM

- Purchasing systems/procedures (e.g., direct store, central)

- Facility planning processes (location and design of logistics facili- ties)

- Sales promotion and POS marketing

- Standard operating sales procedures (incl personnel planning in stores)

- Processes of category composi- tion

- Cost and price calculation procedures

- Processes of sales planning and monitoring

Table C-1: Possible Core and Peripheral Program and Process Elements in Retailing Source: Own creation

Multinational retailers, like global firms, can successfully adapt their format elements to local markets after a standardized entry into different countries This approach allows them to cater to local preferences and enhance their competitiveness.

Study 2 – Transferring the Retail Format Successfully into Foreign Countries 81 tines before entry or, as a result of market-based learning, may later search for standardizable elements that they can use to gain advantage across countries

FFR offers essential theoretical insights into the connections between standardized process and program elements, indicating that both standardized core elements and customized peripheral elements positively influence retail performance.

PMT provides insights into how the standardization of processes and marketing programs impacts performance, emphasizing that a firm's primary goal is profit maximization through cost reduction and increased sales By examining the relationship between process standardization and performance, PMT highlights the balance between globalization and localization in retail strategies Standardizing processes across countries allows retailers to achieve economies of scale, lowering costs and boosting profits while maintaining sales levels Moreover, adapting offerings to meet local customer needs can enhance sales and overall performance, as tailored marketing programs address specific market demands However, it is crucial to balance the standardization of core elements with the adaptation of peripheral aspects of retail formats to optimize outcomes.

Literature Review and Hypotheses Development

This section outlines the hypotheses derived from the study, offering a comprehensive overview of previous research on two key areas: the interaction between retailers' process and program elements, and the correlation of these elements with performance outcomes Additionally, we examine the proposed relationships, supported by both theoretical frameworks and empirical data.

3.1 Relationships between Processes and Marketing Program Elements

Effective marketing and supply chain processes are crucial for retailers, as landed costs represent a significant portion of total expenses (Einarsson 2008; Mentzer, Min, and Zacharia 2000) Research highlights the connection between process design and market offerings, with studies by Christopher, Lowson, and Peck (2004) and Tokatli (2007) emphasizing the importance of market analysis and store layout in Zara's strategy Additionally, Tesco exemplifies how supply chain efficiency influences market offerings, including product assortment and pricing (Ganesan et al 2009) Overall, processes significantly impact market offer design, particularly in areas like promotion planning and logistics, supported by advancements in low-cost computing and retail data availability (Bourlakis and Bourlakis 2001; Griffith, Chandra, and Ryans 2003).

The existing literature presents mixed findings on the standardization of retail format elements and their interrelationships, highlighting a tendency among firms to favor consistent processes and tailored offerings It has been suggested that manufacturers often standardize or adapt their processes and offerings in line with global or multinational strategies In contrast, research by Chandra, Griffith, and Ryans provides additional insights into these dynamics.

(2002) and Manrodt and Vitasek (2004) assume that MNCs benefit from im- plementing standardized processes across countries and adapted marketing

Study 2 – Transferring the Retail Format Successfully into Foreign Countries 83 programs in a specific country Standardized supply chain processes in retail have also been addressed The literature shows that these processes determine offers (e.g., Bourlakis and Bourlakis 2001; Currah and Wrigley 2004;

Research by Tacconelli and Wrigley (2009) aligns with the premise that multinational corporations (MNCs) standardize internal processes to enhance efficiency, leveraging economies of scale and coordination benefits Goldman (2000) highlights that while retailers often standardize their internal processes, they differentiate between core and peripheral elements in this evaluation Retailers typically standardize core supply chain processes while allowing peripheral elements to vary by country To deepen our understanding of international retail format transfer, it is essential to explore the relationships between core and peripheral processes and marketing program elements, focusing on three key relationships: 1) core processes with core marketing programs, 2) core processes with peripheral marketing programs, and 3) peripheral processes with peripheral marketing programs It is assumed that retailers’ core elements are more standardized compared to their peripheral counterparts.

3.1.1 Core Processes and Core Marketing Programs

The core elements of retail formats can often be replicated without significant changes, benefiting from large-scale effects, rapid leveraging, and extensive know-how This standardization is prevalent among global retailers, who typically aim to maintain these elements before or after market entry, although adaptations based on market learning may occur slowly Research indicates that store format elements that are familiar to the parent company yet new to the host market tend to be the most successful As a result, many retailers strive to standardize their core processes and marketing strategies across different countries.

Achieving a competitive advantage is closely linked to the degree of standardization in core processes and core marketing program elements Empirical evidence from existing literature supports this positive relationship.

Research shows that standardized core marketing processes, such as store layout development and location planning, positively influence store layouts and locations globally Examples from companies like Zara and Tesco, along with findings by Hernandez and Bennison (2000), emphasize the importance of know-how and cost advantages in store location decisions Jonsson and Foss (2011) further demonstrate that the standardization of store layouts in international markets is affected by these related processes Additionally, standardized supply chain processes, including purchasing and logistics, are linked to specific store types and locations, with discounters and hypermarkets exhibiting distinct purchasing and logistics strategies, whether concentrated or decentralized.

More generally, studies indicate that standardized supply chain processes serve as a platform for retailer offers (e.g., Bourlakis and Bourlakis 2001;

Currah and Wrigley 2004; Tacconelli and Wrigley 2009)

Most retailers are likely to standardize their core processes and marketing program elements to leverage benefits such as large-scale operations, local expertise, and cross-country advantages This suggests that a greater degree of standardization in core processes is positively associated with the standardization of core marketing elements.

Hypothesis 1: The higher (a) the degree of standardization of core marketing processes and (b) the degree of standardization of core supply chain processes, the higher the standardization of core marketing program elements

3.1.2 Core Processes and Peripheral Marketing Programs

If the core processes of a retail format are mostly transferred unchanged, the question is how they are related to peripheral, less adapted marketing program

Study 2 – Transferring the Retail Format Successfully into Foreign Countries 85 elements that are defined as low-level and to product-related features such as assortment, price and promotion One must address the possibility that some retailers consider processes to be the template for their retail format and therefore to be a foundation for internationalization, determining their peripheral local offers on this basis The established processes thus determine more flexible offers (Kaufmann and Eroglu 1999) In addition, it is possible that previously adapted core processes (e.g., those put in place after the acquisition of a competitor abroad) will eventually be standardized (e.g., by assuming economies of scale in purchasing across countries or due to market-based learning)

In both scenarios, a positive correlation can be anticipated between core processes and peripheral marketing program elements Core processes not only establish a foundational platform but also set boundaries that influence the design of marketing program elements, suggesting an inherent positive relationship between the two.

The literature highlights the connection between core processes and marketing strategies, yet lacks empirical analysis For instance, effective marketing processes, such as standardized market analysis and customer relationship systems, shape product assortments tailored to local needs, as seen at Tesco (Coe and Lee 2006) Similarly, standardized marketing approaches inform product assortments and pricing across different countries, exemplified by Zara (Tokatli 2007) Retailers like Zara and IKEA maintain consistent supply chain processes when entering new markets, as these processes are integral to their format strategy In contrast, Wal-Mart sought to leverage its purchasing and logistics expertise through mergers and acquisitions in countries like Germany, the United Kingdom, and Japan (Colla and Dupuis 2002).

In conclusion, we theorize that the majority of retailers will standardize their core processes, which in turn will shape the design of their peripheral marketing program elements.

Hypothesis 2: The higher (a) the degree of standardization of core marketing processes and (b) the degree of standardization of core supply chain processes, the higher the standardization of peripheral marketing program elements

3.1.3 Peripheral Processes and Peripheral Marketing Programs

Theoretically, peripheral retail format elements represent the ‘flexible’ aspect of the FFR approach for responding to the idiosyncrasies of the host country

Empirical Study

In-depth face-to-face interviews were conducted with international retailers from Austria, Germany, and Switzerland to ensure a culturally homogeneous sample This targeted approach not only enhances the relevance of the findings but also improves the generalizability of the results by including firms from diverse backgrounds.

To ensure measurement invariance, a sample of 758 retail chains was selected from the commercial Hoppenstedt database, specifically from the G52 section, which covers "Retail trade, except of motor vehicles and motorcycles" (Hult et al 2008; Schilke and Goerzen 2010) Retailers lacking international sales in at least two countries were excluded, and national retail associations were consulted to verify the completeness of the sample Ultimately, this rigorous process resulted in a potential sample of 193 firms.

CEOs were personally informed about the study, with interview requests sent to the retailer's headquarters through postal mail, followed by electronic mail and phone calls two weeks later A total of 65 retailers declined to participate, citing their policy of not sharing information with third parties, while others did not respond to the outreach attempts.

126 managers (53% CEOs/ heads of chains, 47% expansion managers) from

102 retail chains were available for interviews at their headquarters in the year

In 2010, we achieved a notable response rate of 53%, likely due to the convenience of the interviews and the respondents' keen interest in retail internationalization (Evans, Mavondo, and Bridson 2008) The average retailer in our sample reported total sales of €5,772 million, employed 25,508 individuals, and derived 41.6% of their sales from foreign markets, operating in an average of 19.1 countries with 23.7 years of international experience These statistics suggest that these large retail firms share similarities with internationally operating retailers from other nations.

Each interview lasted around 120 minutes, during which respondents evaluated their experiences in two countries where they had operated for at least five years, ensuring sufficient market-based learning post-entry This five-year timeframe was selected based on pre-test findings to maintain consistency in analysis The chosen countries had to have fewer than 100 foreign retailers to mitigate external environmental influences Following Evans and Mavondo's (2002) methodology, respondents identified one country with a similar business and cultural environment (psychically close) and another with significant differences (psychically distant) Their selections were assessed using ten items measuring business and cultural distance, as outlined by Evans and Mavondo (2002).

Study 2 – Transferring the Retail Format Successfully into Foreign Countries 93 mean value differences between the two country groups (p < 001) and no differences within the country groups were reported for each item The close- country group primarily includes Western European countries, whereas the distant-country group primarily includes Eastern European and Asian countries (Table C-2) Thus, we acknowledge this procedure as the best available and most appropriate way of ensuring similar areas of analysis and strengthening the robustness of the results (similar to O'Grady and Lane 1996) We have not formulated hypotheses regarding country group differences because of a weak theoretical and empirical basis for those differences concerning the analyzed relationships

Mean value Std Close country 1 Distant country

Number of total sales in m € 5,772 10,371 Western Europe 85.3% Eastern Europe 46.1%

Sales abroad in % 41.6 25.9 Eastern Europe 11.8% Asia 31.4%

Number of employees 25,508 56,268 Other 2.9% Americas 17.6%

Number of operating countries 19.1 23.5 Entry modes

International experience in years 23.7 17.1 WOS 62.8% WOS 54.9%

Country experience in close countries in years 19.5 14.1 Franchising 16.7% Franchising 22.5%

Country experience in distant countries in years 10.9 5.2 M&A 13.7% M&A 11.8%

Retail sector 39.2% food Joint Venture 3.9% Joint Venture 5.9%

N2; Country of origin: German = 80.4%, Austria = 11.8%, Switzerland = 7.8%

When evaluating our company's operations over the past five years, we have chosen Germany as a psychically close country due to its similar legal, political, economic, business, and cultural environment compared to our home country In contrast, we selected Brazil as a psychically distant country, characterized by distinct business and cultural dimensions Our analysis, based on the framework established by Evans and Mavondo (2002), reveals significant mean value differences across ten critical dimensions, with all differences reaching a p 50 ) ItT C (>.50) KM O (X²) (>.50) Facto r- lo ad in g PLS Indi cator re liabili ty (>.30)

A VE (>.50) Composi te re liabili ty (>.60) Cr onbach’ s al pha (> 60 /.70)

Me an values MV M V 1 diff 3 EF A (> 50 )

ItT C (>.50) KM O (X²) (>.50) Facto r- lo ad in g PLS Indi cator re liabili ty (>.30)

AV E (>.50) Composi te re liabili ty (>.60) Cr onbach’ s al pha (> 60 /.70 ) Cl ose countri es Di stant countri es C o re ma rket in g p rocesses 1 768 (316.93)

Discussion

This study investigates how retail formats are adapted or maintained when entering foreign markets, focusing on the interaction between internal processes—such as marketing and supply chain—and retailer performance As retailers increasingly target promising international markets, they face challenges in adapting their offerings and standardizing key processes to attract local customers and enhance efficiency This under-researched area highlights the importance of understanding these dynamics, as previous studies have not provided conclusive insights.

Study 2 – Transferring the Retail Format Successfully into Foreign Countries 103 indicate which program and process elements of a retailer’s format, and therefore of the value chain, should be transferred unchanged or adjusted (Alexan- der 2008; Goldman 2001) and whether and how those elements in general and core and peripheral elements in particular drive performance abroad (Colla and Dupuis 2002; Jonsson and Foss 2011) Therefore, our study was governed by an attempt to identify the processes that are of paramount importance for retailer efficiency and the design of local offers Our study was also guided by the aim of investigating more or less standardized core and peripheral format elements

This article identifies two key marketing program elements that influence a firm's performance in foreign markets: core elements, which include the unchanged transfer of format types, store locations, and layouts, and peripheral elements, which encompass adapted assortments, promotions, and pricing The degree of standardization in marketing programs plays a crucial role in retail performance, with retailers adopting a hierarchical approach to format transfer While some peripheral elements are adapted to local environments, core elements remain standardized across retail formats Interestingly, the findings reveal that retailers tend to standardize format elements more than previously anticipated, with only a limited number of elements undergoing significant adaptation, demonstrating stability in both geographically close and distant markets These insights offer valuable theoretical implications and practical recommendations for retail managers.

Our research reveals that the elements of processes and marketing programs are both standardized and adapted, highlighting their interdependent design We will elaborate on two key conclusions drawn from these findings.

This study explores the relationship between marketing and supply chain processes and their impact on marketing programs aimed at improving retailer performance It addresses the need for further investigation into critical processes that influence retail success.

Market analyses and logistical procedures are crucial for enhancing retailer efficiency and shaping competitive offers, highlighting notable distinctions between foreign and domestic retailers Our findings align with previous research that identifies these processes as key determinants of retail offerings.

In investigating retailers' format transfers, it is essential to consider both efficiency and determinant arguments, highlighting the importance of process elements We suggest initial distinctions between process elements, process-offer relationships, and marketing and supply chain processes However, a more detailed examination of these factors is necessary for a comprehensive understanding.

This study proposes an important differentiation between more standardized core elements and more adapted peripheral elements within format transfer

Previous literature has highlighted the need for differentiation among retailers, but this study offers compelling empirical evidence that most retailers standardize certain elements while adapting others, regardless of geographic proximity Notably, this research reveals a hierarchical behavior among retailers, aligning with recent findings The novel insight that many retailers standardize aspects of their offerings and processes challenges the assumption that standardization and adaptation occur consistently across international retailers Therefore, understanding the degree of standardization in visible offerings and internal processes is crucial, as it can facilitate the identification of internal consistencies within a retail format.

Discounters, category killers, and specialty stores each showcase unique combinations of location planning, logistics, and store layouts, as seen in retailers like Aldi, Best Buy, and The Gap These retailers often implement strategic plans or market-driven routines to effectively internationalize these fundamental components.

The identified standardized format elements may not be explicitly categorized as core or peripheral; however, the empirical findings provide a useful approximation of these classifications for future research.

Study 2 – Transferring the Retail Format Successfully into Foreign Countries 105 differentiation emphasizes the varying importance of these elements, which may be used, for instance, to compose indices for categorizing of format strategies (Goldman 2001)

To improve understanding of international retailers' performance, which has been explored in only seven studies, this article investigates the mediating effects of core and peripheral marketing program elements on the relationship between marketing, supply-chain processes, and success in foreign markets In addressing the second research question regarding the impact of standardized versus adapted processes and marketing programs on performance, we draw two significant conclusions Given the limited existing research, this analysis is presented descriptively.

Successful retail firms often achieve their goals through a strategic mix of standardization and adaptation of marketing program elements, as highlighted in our study This approach is effective in both geographically close and distant markets While we acknowledge that certain boundary conditions, such as internal and environmental factors, were not examined, our findings indicate that successful retailers maintain consistent core marketing elements—like store types, layouts, and locations—while adapting peripheral aspects, including product assortments, promotions, and pricing This dual strategy fosters reproducible routines and enhances market-based learning, enabling retailers to effectively respond to local market conditions.

This study enhances the existing retail literature on peripheral marketing elements by demonstrating the significance of adapting these elements to meet local customer needs While previous research has highlighted the importance of peripheral adaptations, our findings reveal that standardized core marketing elements also play a crucial role in driving performance Notably, these standardized elements contribute even more significantly to overall performance, suggesting that their impact transcends local market variations This phenomenon may be attributed to retailers' preferences for specific store types or routines, especially when all potential location types are already utilized within the host country.

The literature on FFR highlights that both core and peripheral market offerings significantly impact performance within a country Additionally, systematic evaluations and market-based learning by retailers are crucial factors influencing firm behavior in specific markets Our research reinforces these findings through a representative sample of non-global retailers.

Study 3 – Successful Organization and Coordination of

Literature Review

The extensive research tradition examining marketing program standardization and organizational structure highlights their significant influence on foreign performance outcomes.

The literature review is organized into three key sections: first, it examines studies that analyze the effect of marketing program standardization on foreign performance; second, it explores research focused on the influence of organizational structure on performance outcomes.

The article examines 114 studies on how various factors influence foreign performance, while also highlighting three studies that analyze the simultaneous effects of these factors Additionally, it differentiates the findings between the manufacturing and retail sectors.

2.1 Impact of the Degree of Marketing Program Standardization on Foreign Performance

In the manufacturing sector, research by Samiee and Roth (1992) indicates that standardization does not necessarily yield higher profits for US business units Cavusgil and Zou (1994) found mixed results, suggesting that while product adaptation positively influences export performance, promotion adaptation has a negative effect Baalbaki and Malhotra (1995) argue against a fully standardized marketing program, advocating for differentiation among marketing elements Shoham (1999) highlights that product adaptation boosts short-term performance, while promotion adaptation benefits both short- and long-term outcomes, with standardization of distribution and pricing consistently enhancing performance Albaum and Tse (2001) reveal that marketing program adaptation does not directly impact performance, but rather affects it indirectly through competitive advantage, indicating that aligning competitive advantage with marketing adaptation can lead to improved performance.

Numerous studies highlight the advantages of standardizing marketing programs, with Zou and Cavusgil (2002) introducing the global marketing strategy (GMS) concept, which positively influences global strategic and financial performance, particularly through product and promotion standardization Additionally, Katsikeas, Samiee, and Theodosiou (2006) emphasize that optimal performance is achieved when there is a strategic alignment between the level of marketing strategy standardization and the surrounding environment, as evidenced by their research on US, Japanese, and German multinational corporations in the UK Thus, greater similarity between home and host country markets enhances marketing effectiveness.

Study 3 – Successful Organization and Coordination of International Retail Activities 115 tries are, the more beneficial is the use of a standardized marketing strategy

Chung (2009) highlights that product and promotion standardization positively influences market share among MNCs in Europe, although it does not necessarily lead to increased profits or sales growth Schilke, Reimann, and Thomas (2009) further emphasize that standardizing marketing programs is advantageous, particularly for larger firms with homogeneous products that adopt a cost leadership strategy and have substantial global market presence Their findings indicate that product standardization yields the highest success, followed by promotion and channel structure standardization Conversely, Vrontis, Thrassou, and Lamprianou (2009) argue that complete standardization is impractical due to market heterogeneity, suggesting that while standardization should be maximized, adaptations are essential where necessary Overall, research consistently shows that a higher degree of marketing program standardization correlates with improved international performance, yet highlights the importance of strategic adaptations.

The retail sector demonstrates that standardization can lead to success even in culturally specific industries, as evidenced by IKEA's achievements (Mồrtenson, 1987) Dupuis and Prime (1996) found that while Carrefour's general retail format should be maintained, it must be tailored to local conditions for success, highlighting its failure in the USA versus its success in Taiwan due to necessary adaptations McGoldrick (1998) emphasizes that even successful domestic retail formats require adjustments when entering foreign markets Furthermore, McGauran (2001) suggests that marketing adaptations are essential for retailers in cities like Paris and Dublin, due to varying local tastes and competitive landscapes Lastly, Burt et al (2005) illustrate that British retailer Boots experienced failure abroad, reinforcing the importance of local adaptation in retail strategies.

The 116 tail format is widely accepted in the domestic market, highlighting the necessity for adaptations in retail strategies when entering foreign markets Research by White and Absher (2007) reveals significant differences in store decision criteria between consumers in EU founder countries and those in Central and Eastern Europe, emphasizing the need for tailored marketing programs to address cultural variances Additionally, Evans, Mavondo, and Bridson (2008) examine the relationship between marketing program adaptation and financial performance among 102 international retailers, unexpectedly finding that greater standardization of marketing efforts correlates with improved financial outcomes.

A case study analysis of the fashion retailer Per Una in the UK and Taiwan indicates that success can be achieved through the standardization of product design, brand image, store layout, logistics, and customer relationship management, while prices, product assortment, and advertising should be adapted to enhance profitability Similarly, research on IKEA reveals that while the marketing program is primarily standardized, necessary adaptations are made This contrasts with traditional international business literature, as retail studies underscore the significance of marketing program adaptation alongside standardization, exemplified by Jonsson and Foss's concept of 'flexible replication.' However, aside from Evans, Mavondo, and Bridson's work, most studies rely on case studies, highlighting the need for more generalizable findings in the retail sector.

2.2 Impact of the Organizational Structure employed on Foreign Perfor- mance

Research on how organizational structure affects foreign performance in the manufacturing sector is a blend of conceptual and empirical studies, which will be categorized accordingly in the following sections.

Study 3 – Successful Organization and Coordination of International Retail Activities 117

The impact of organizational structure on performance has been explored since Dalton et al (1980), who found no consensus on the effects of formalization and specialization but noted that centralization negatively affects performance Govindarajan (1986) further analyzed decentralization's role in strategic business unit effectiveness, concluding that centralization enhances performance when interdependence between headquarters and subsidiaries is high, especially for low-cost units, while decentralization benefits differentiation-focused units Chang and Harrington (2000) posited through computational simulations that decentralization thrives in heterogeneous markets with consumers less sensitive to store practices and in stable environments, whereas centralization is preferable in homogeneous markets with sensitive consumers and during turbulent conditions.

Research indicates that the organizational structure significantly influences foreign performance Miller (1987) analyzed 97 manufacturing firms and found that aligning the degree of centralization in decision-making with the strategy-making process enhances performance Similarly, Nohria and Ghoshal (1994) examined subsidiaries of 54 multinational corporations and concluded that a decentralized and informal structure is more effective in complex external environments They also emphasized that a proper fit between organizational structure and the internal conditions of subsidiaries contributes to improved performance.

Research from 2003 involving 274 Chinese state-owned enterprises indicates that centralized decision-making and formal control enhance performance Conversely, a high degree of decentralization, when combined with formal control, positively influences market orientation Additionally, a study by Auh and Menguc in 2007, which analyzed 260 large Australian companies, reveals that centralization negatively affects customer orientation.

Formalization enhances the effect of customer orientation on a company's performance by establishing clear rules that reduce redundancy and confusion regarding customer-focused practices Additionally, Chung (2008) demonstrates this relationship through his analysis.

A study of 78 New Zealand companies operating in Europe reveals that decentralized decision-making enhances profitability, while centralized decision-making fosters higher sales growth and profit, particularly in environments with limited local knowledge Overall, research in the manufacturing sector indicates that a high level of centralization, especially when paired with formalized processes, is associated with improved performance outcomes.

Final Remarks

Discussion and Conclusions

Since the 1990s, retailers have experienced significant growth, yet their international expansion faces unique challenges due to the locally-focused nature of the retail sector, contrasting with the internationalization processes of manufacturing firms, as highlighted by El-Amir and Burt.

In 2008, Sainsbury’s attempted to penetrate the Egyptian market by introducing a modern retail format characterized by low prices and high-quality products However, the company underestimated the socio-economic norms of Egyptian consumers, leading to issues such as theft and fraud, as customers opened packages to test products before purchasing This case highlights the importance of understanding local market dynamics for international retail operations Moreover, the existing literature primarily focuses on manufacturing firms, leaving a gap in research regarding retail firms Consequently, exploring the unique challenges and characteristics of the retail sector is crucial for both managerial and academic perspectives in the context of increasing internationalization.

Exploring retail internationalization is crucial for both research and management, highlighting significant issues in this field Key research questions focus on three main areas: the selection of retail entry modes, the transfer of retail formats, and the organization and coordination of international retail activities These aspects are essential for understanding the processes of entering and operating in international markets.

Retailers face a complex decision when selecting their entry mode for international expansion, particularly when navigating the conflict between full-control and shared-control strategies Their choice is significantly influenced by both internal factors, such as organizational capabilities and resource availability, and external factors, including market conditions, regulatory environments, and cultural differences Understanding these dynamics is crucial for retailers aiming to optimize their international market entry while balancing risk and control.

(2) How can international retailers during the being international transfer their retail format successfully to foreign countries by standardizing or adapting the internal and external elements of their retail format?

(3) How can international retailers during the being international successfully coordinate the implementation of their retail marketing program to culturally different countries?

The core results of these general research questions provide new insights for each domain and can be summarized as follows

Study one explores how retail entry modes are selected, focusing on the conflict between full- and shared-controlled modes, grounded in institutional theory and the Resource-Based View (RBV) It finds that past institutionalized entry modes significantly influence future choices, although this effect diminishes with increasing political distance between home and host countries While institutional theory suggests cultural distance could also impact entry mode selection, this study did not find significant evidence for that hypothesis, likely because entry mode decisions are typically made prior to market entry Conversely, the internal environment enhances the use of institutionalized entry modes; the study confirms that internal capabilities, such as international experience and the speed of internationalization, positively influence this choice Ultimately, the selection of retail market entry modes is primarily driven by habitual behavior.

Final Remarks 149 correspondence with the increase in internal capabilities, but is forced to change by the boundary conditions of the external institutional environment

Study two addresses the successful transfer of retail formats abroad by examining the balance between standardization and adaptation of retail elements through the FFR approach and PMT It categorizes retail formats into internal processes and external marketing programs, positing that efficient internal processes are crucial for success while external programs attract local customers Each category is further divided into core and peripheral elements, which positively influence each other The PMT suggests that standardizing internal processes and core marketing elements enhances economies of scale, while adapting peripheral elements boosts local sales, essential for addressing local market nuances Findings indicate that internal processes indirectly affect performance through core and peripheral marketing elements, with performance benefiting from standardized core elements and adapted peripheral elements Additionally, the results show consistency in the transfer of retail formats across both psychically close and distant countries.

Study three addresses the successful implementation of retail marketing programs within organizational structures across both psychically close and distant countries, focusing on international operations and utilizing the principles of the Protection Motivation Theory (PMT).

In the context of retail strategy, it is beneficial for retailers operating in psychically close countries to adopt a standardized marketing program characterized by formalized rules and procedures, coupled with decentralized decision-making Conversely, for psychically distant countries, an adapted marketing program with less formalization and centralized decision-making is more advantageous This approach allows retailers to leverage the benefits of global integration and local responsiveness effectively in both scenarios, with research confirming the proposed relationships for psychically close countries.

In the context of psychically distant countries, a greater level of standardization in marketing programs correlates with improved performance in the host country, while the degree of formalization of rules and procedures shows no significant effect on foreign performance.

Retailers often implement standardized marketing programs from their home markets in both nearby and distant countries, suggesting that the advantages of economies of scale can surpass the potential for increased local sales in more distant markets While the estimated beta coefficient indicates a positive trend concerning the degree of formalization, its statistical insignificance may be attributed to the limited sample size.

In summary, the key findings offer valuable insights for both research and practical applications The following section outlines the theoretical and managerial implications, while also identifying potential avenues for future research.

All three studies provide research implications from different angles Each is addressed in the following within the domain of each study

A study examining entry mode choices through the lens of institutional theory and the Resource-Based View (RBV) reveals three key implications Notably, it offers a unique methodological approach to understanding how foreign entry modes evolve over time.

This study utilizes a longitudinal data set to examine the factors influencing entry mode decisions, aligning with institutional theory and addressing calls for temporal analysis of entry mode choices It uniquely considers all dimensions of institutional theory as interrelated, highlighting the concept of institutional duality—where internal and external pressures may conflict Additionally, the research integrates institutional theory with the Resource-Based View (RBV), demonstrating their compatibility by linking capability enhancement with habitual behavior over time, influenced by the external institutional context.

This study builds on the research of Huang and Sternquist (2007) by offering new insights into how institutional theory informs entry mode choices in retail By utilizing a robust dataset of over 300 international market entries by grocery retailers, this research enhances and validates previous findings in the field.

This study investigates the successful transfer of retail formats using the FFR approach and PMT, revealing significant research implications It identifies key elements of retail marketing programs and highlights the importance of both internal supply chain processes and external marketing strategies visible to customers By addressing these dual aspects of retail formats, the research aligns with previous studies that emphasize the need for a comprehensive understanding of both internal conditions and external marketing efforts (Goldman 2001; Jain 1989; Walters 1986) The findings confirm that effective internal processes are essential for a successful external marketing program.

Tiêu đề	Retail Internationalization Analysis of Market Entry Modes, Format Transfer and Coordination of Retail Activities
Tác giả	Stefan Elsner
Người hướng dẫn	Professor Dr. Prof. h.c. Bernhard Swoboda, Professor Dr. Thomas Foscht
Trường học	Universität Trier
Thể loại	dissertation
Năm xuất bản	2012
Thành phố	Trier

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Số trang	216
Dung lượng	2,63 MB