The View Of Supermarkets In China

Abstract

The purpose of this report is to outline key success factors for multinational supermarket chains to compete and expand in China by critically reviewing cross 40 journal articles and few grey materials. The nature of this study is forward-looking orientated report which aims to disclose competitive-sensitive information and institution changes over a period of time, therefore, delivering forward-looking, practical implications for management.

Introduction

The view of supermarket has changed dramatically since the time when Chinese government opened its market and encouraged foreign companies to engage in the market. Multinational supermarket chains (MSCs) then answered the call, entered the market seeking for growth, and enjoyed the benefit of fast economic growth, but they do not have much market impact in China market (ref). China, indeed, is a unique market and a lot of dramatic political changes such as longer chairman tenure and economy restructure have been enacted in recent years. In this rapid-changing market, MSCs have been striving to understand the local market, but their performances in China are not as successful as their performances in other regions (DaxueConsulting, 2016). Furthermore, numbers of Chinese domestic giant retailers ally together through merger, acquisition and alliance for strategic purposes in recent years, implying that rivals of MSCs are becoming more competitive (Deloitte, 2015). Obviously, the continuous environment changes have designed to new challenges such as tensive competition and uncertainty, but it also encompasses unseen business opportunities.

Hence, concern arises that how MSCs adapt the changes and utilized uncertainty rooted in the changes as a pattern to leverage their competitiveness in an increasingly tense business environment? This topic is worth investigating and can be beneficial for all its stakeholders. First, the MSCs which have already engaged in the market are facing increasingly tense competition(ref). An up-to-date insight on the changing business environment and its trend is necessary for management purpose. On the other hand, domestic companies can obtain insight about their rivals, hence, adjusting their strategy to remain its competitive market positions. In addition, the industry has significant economic value for Chinese government, the study results can contribute to offering heuristic value to the government for making relating policies and regulations. Finally, I am personally interested in this industry and willing to involve in this industry in the near future. In the light of above background, this study aims at identifying and comparing critical success factors (CSFs) for MSCs to compete and expand its business in China. Four research questions relating to the topic were framed as follow.

What are unique characteristics of China market that might be opportunities or threats for MSCs?

What are key successful factors for MSCs which operate its business in China and other countries?

What is the future of China market that MSCs should expected?

In order to pursue the aim and answer above questions, the study reviews a broad range of literature, investigating the unique characteristics of China context, identifying factors that impact performance of MSCs, interpreting and synthesising the findings, and finally, proposing solutions-driven recommendations for MSCs to compete and expand in China.

Approach, Limitation, and Scope

The scope of the report was attempted to cover any existing retailing formats that primarily retail food and general consumptions at fixed point-of-sale location. Retailing format such as non-food retailing, online retailing, wholesales, and shopping centres are not included in this study. All literatures selected are peer-reviewed published journal articles and few grey materials are used to understand public thinking in regard to the topic. Most literature selected are recent 10 years, remaining articles are used to demonstrate changes and development of market environment. The specific articles selection process is illustrated in a form of charts and tables at the end of the report.

Over View of the Literature

A board range of factors that might impact performance of supermarket chains in China has been intensively discussed. These factors can be categorized into two themes: external factors and performance outcome, as well as internal factors and performance outcome. This categorization approach can demonstrate a straightforward outlook of CSFs of supermarket industry for management. When dealing with external factors such as competition, social, legal, and economic and political environment, MSCs have lesser or no control over these elements. By contrast, internal factors such as supply chain, choice of strategy, technology adaptation, transfer of knowledge and continuous learning are the inner elements that MSCs can monitor and control.

External Factors

Articles falling under this category mainly focus on macro business environment, the changes of the environment over a period of time, and opportunities and challenges arise from these changes. Consideration research effort have been devoted to macro environment and institutional environment, carrying out similar findings on most external elements. This part organized generally recognized views of external elements into 5 sub-sections and each sub-section presents one key aspect for MSCs to understand China market.

§ Economy: Recent developed studies including studies with a primary focus on economics or management perspective have a common agreement that China market is currently at a restructuring stage. The economy growth is expected to experience a gradual slow-down, however, the good sign for service-based businesses is that the economy is shifting from manufacture towards service by the effort of Chinese government. Under China industry classification, supermarket industry pertains to service industry and it can benefit from the economic shift.

§ Political: The government has considerable impact on the industry positively and negatively (Bronnenberg, 2013). The execution of policy is fast due to its centralised government structure. Few studies suggest that the central government is motivating development of retailing sector, policies established are benefiting to both domestic companies and MSCs. However, policies and regulations decisions made by the central government would experience execution obstacle in less-developed areas due to bureaucracy complying with the centralised structure. The phenomena is more notable in less-developed areas. Although it has been eliminating in recent years, a good relationship with local government is still critical for any multinational companies.

§ Social &Cultural: Notably, the perspective of standard of new generations is shifting from ‘plain living’ to ‘high-quality of living’. By this means, customers have higher perceptions towards goods quality, service quality and experience quality. However, the earlier studies support the idea that the price still remains decisive influence on purchasing behaviour and it is especially critical in less-developed areas. As the institutional perception changes, no recent studies tested the correlation between quality and buying decision, and the cost and buy decision. In addition, most studies generated data from well-developed regions. Therefore, the conclusion could not apply to less-developed regions in China.

§ Technology: Furthermore, various technologies have introduced in retail industry in China. The fast-growth economy and open attitudes of Chinese government motivated MSCs to enter the market and new technology emerges because of increasing tense competition. The focus of prior research with technology focus is on the information technology and supply chain tools and those are well acquired and established in China market. Recent researches on technology sectors mainly focused potential application of newly developed technologies such as big-data and artificial intelligence in retail sector. One general comments on technology research is that effective application of these technologies can help retailers to better understand customer groups and to provide superior experience. Researchers noted that studies on these newly emerged technologies remains challenging and a lot of areas demands future exploration. However, most studies solely focus on western countries, less attention was paid to Asia area.

§ Competition: Finally, most domestic retailers genetically focus on domestic market and currently do not have the ambition to expand to other countries, which is very different from western companies that aim for international expansion or within a born-global mindset. The concentration strategy helps the domestic companies developing expertise that enable them to precisely retain their targeted groups. Furthermore, the existing market players will continue to grow in its size. Mergers, strategic alliance and acquisition are common and should be expected in the future. The major purpose of these business activities is to reach economic of scale and integrate resource. One last intriguing finding is that numbers of retailing are emerging in unique formats which are hard to be classified. This is caused by three factors: increasing tense competition, technology advancement, and government encouragement. These newly emerged formats (Wang, 2010) usually are technology-based hybrids that blurry the line between online retailing and offline retailing.

China is in the stage of economic rebalancing, moving towards a consumption-driven economy and Chinese government establish a set of policies encourage development of retail sector. This implies new opportunities for retailers. Foreign and local firms alike continuing to expand into the market. As China’s retail sector continue to evolve, MSCs need to not only adapt local culture, but also find the path to adapt the changing institution.

Analysis of CSFs

The above section discussed the institutional environment and changes of the institutional environment under China context. This part aims at mapping the CSFs to the dynamic environment. What are CSFs that best fit into China dynamic environment? There are many excellent studies dealing with internal elements corresponding to performance outcome, having carried out a full-range list of internal factors that might impact MSC performance. In this part, these CSFs are classified into three sub-sections: stakeholder approach, strategy and management, and technology and innovation. This classification can effectively group critical elements within similar perspectives into different segments, which is convenient for understanding.