Enormous Potential, Enormous Risks - Mass Retailing in Asia

Asia as a whole is the world's most coveted market for multinational retailers. For more than a decade, competition for this rapidly growing and, in many areas, still very underdeveloped market has been fast and furious. Almost every large Western or Japanese chain, however, has been forced to make major strategic shifts when initial assumptions ran up against specific realities - occasionally at considerable cost. Emeritus Professor of Strategy and Asian Business, Philippe Lasserre, offers a comprehensive pair of case studies on the recent Asian experiences of the world's biggest players in retailing.

by Philippe Lasserre
Last Updated: 23 Jul 2013

Asia as a whole is the world's most coveted market for multinational retailers. For more than a decade, competition for this rapidly growing and, many areas, still very underdeveloped market has been fast and furious. Almost every large Western or Japanese chain, however, has been forced to make major strategic shifts when initial assumptions ran up against specific realities - occasionally at considerable cost.

Emeritus Professor of Strategy and Asian Business Philippe Lasserre offers a comprehensive pair of case studies on the recent Asian experiences of the world's biggest players in retailing. Typically, they have tried both to exploit the best features of their existing global networks, while still maintaining enough flexibility and open-mindedness to respond adequately to conditions in individual Asian markets.

In the author's view, the main failing of many retailers when trying to prosper in much off Asia is an assumption that their already global scale should in itself guarantee an ability to cope in new environments. Adaptive capacities are generally far more important -- especially if most sourcing is done locally, as is mostly the case with foodstuffs or other perishables.

Lasserre explains why mass retailing in Asia is such a seductive proposition for global retailers. In addition to the region's far higher economic growth rates and burgeoning middle classes, penetration rates for hyper- and supermarkets are still very low in most countries and, moreover, are also still quite fragmented. Other societal developments - such as a big increase in car ownership, professional women, and urbanisation - also favour big shopping outlet growth.

Major Asian markets

The author provides a thorough overview of recent developments in several Asian nations, ranging from mature or relatively advanced markets (Singapore, Hong Kong, Japan, South Korea, Taiwan) to developing countries (China, Thailand, Malaysia, Indonesia, India, Vietnam). The overall picture that emerges is of a region of enormous potential and often equally enormous risks. It may be clear why introducing developed nation-style retailing may run into an array of obstacles in poorer countries.

But Lasserre also examines the often disappointing returns for Western hypermarket chains in Japan in the past decade. He also analyses what may seem paradoxical developments, such as how leading European retailers Carrefour managed to enjoy far better than expected growth in Indonesia during that country's worst economic crisis in recent memory.

The (A) case concludes with extensive data on recent retailing activity in Asia, together with economic and demographic indicators reflecting the remarkable transformations within the countries under consideration. Particular attention is paid to developments and issues affecting foreign retailers in China.

The (B) case provides a more in-depth assessment and data on the top multinational retailers that now have a substantial presence in several Asian markets, including Wal-Mart, Carrefour, Tesco, as well as Japanese, Dutch and German chains.

INSEAD 2005

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