Strategic Decisions in Retailing
Abstract
Choosing where and how to expand internationally is one of the most critical strategic challenges faced by retail companies. This study focuses on the decision-making process behind foreign market entry, examining both the attractiveness of target markets and the role of distance—geographical and cultural—in shaping these decisions.
The paper applies spatial interaction and gravity models, particularly the Huff model, to analyze how retailers select foreign markets. Empirical evidence based on UK retail companies demonstrates that market size and purchasing power positively influence entry decisions, while distance acts as a limiting factor. Although geographical distance proves to be more influential, cultural distance also has a significant independent effect, especially during early stages of international expansion.
The findings highlight that experience reduces uncertainty and gradually changes the importance of decision factors over time. As retailers expand internationally, their strategies evolve, allowing them to operate across a broader range of markets with increased confidence and efficiency.
References
Dunning, J. H. (1988). Eclectic Paradigm of International Production.
Johanson, J., & Vahlne, J.-E. (1977). Internationalization Process Model.
Huff, D. L. (1964). Trade Area Analysis Model.
Kogut, B., & Singh, H. (1988). Cultural Distance Index.
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