How To Seize a Window of Opportunity: The Entry Strategy of Retail Firms into Transition Economies
AbstractIn most western countries, grocery retailers are faced with maturing domestic markets with a year-to-year sales growth close to zero. Moreover, most Western-European markets are characterized by a high concentration rate, with a combined market share of the top five players easily exceeding 70%. One important outcome of this evolution has been a growing interest in cross-border initiatives. However, even though the industry gained importance, retailers are still struggling to develop the competencies to compete and survive in this new, more global, arena. In this paper, we study entry investments into Central and Eastern-European transition economies to unveil when, to what extent, and to which retailer the strategic window in these different markets opens. We develop and empirically test a set of hypotheses on factors that affect (1) the speed (timing) and (2) size of retailersâ€™ decisions to enter Central and Eastern European markets. A conceptual framework is proposed which looks at strategic decisions through the option lens. This perspective offers an economic rationale for the behavioral process of major resource allocations. The resulting hypotheses are tested, using a joint hazard/poisson-regression framework, on a data set covering all entry decisions of the top 75 European grocery retailers towards Central and Eastern Europe. We find that in these transition economies important legitimization effects can be derived from rivalsâ€™ actions. Especially the moves, made and anticipated, by home rivals are carefully monitored. This reflects the idea that retailers are motivated not only by the chance of creating value in these new markets, but also by the fear of being left out.
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Bibliographic InfoPaper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2004-038-MKT.
Date of creation: 10 Sep 2004
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retailing; transition economies; entry decisions; international expansion;
Other versions of this item:
- Katrijn Gielens & Marnik G. Dekimpe, 2004. "How To Seize a Window of Opportunity: The Entry Strategy of Retail Firms into Transition Economies," LICOS Discussion Papers 14604, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
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