International market expansion of retail networks: Determinants of market entry failures

Abstract

What causes an international retailer to divest from a specific country or region? The answer to that question is not consistent and retailers are usually left in the dark due to lack of definite frameworks to help them make appropriate foreign market entry decisions. Failure is a common and costly occurrence in international retailing and in a time of increased economic uncertainty this may have a dramatic impact on the overall organization. The purpose of this article is to investigate the determinants of market entry failures in emerging markets. Based on a sample of 112 cases, exploratory results show that time of entry, brand penetration, entropy level and local store density are strongly correlated to failure or success of an international retailer in emerging countries. Additionally, preliminary results in term of market entry mode choice tend to show that governance modes with low level of control such as franchising, licensing or minority joint ventures may be the best market entry choices for international retailers expanding into emerging countries.