Retail internationalisation through M&As: a study of the talent challenge in a British-acquired Taiwanese-retailer in mainland China

Abstract

This study aims to add new knowledge to the emerging theme of retail internationalisation as a dynamic process rather than merely a market entry. Situated in the post World Trade Organization China where retail mergers and acquisitions (M&As) are permitted, this research explores via a case study, the talent challenges that emerged after an international acquisition in mainland China made by a leading British retailer of a previously Taiwanese-owned retail chain. By examining in depth the characteristics of a multinational expatriate-based management system as a product of M&A in this firm, the analysis identifies new strategic problems. This article shows that such talent challenges have been largely ignored as a strategic priority by this British retail firm in their post M&A transition. It opens up a promising perspective for researching other Western retail giants in their post M&As times in China, and thus for contributing further to the study of retail internationalisation as a process.

Keywords:

• retail internationalisation
• China
• Britain
• Taiwan
• mergers and acquisitions (M&As)
• talent challenge
• intra-firm cliques
• network

Acknowledgments

The author would like to express his greatest gratitude to the Journal Editors and particularly to Professor Leigh Sparks for bringing this paper into life. He also thanks the two anonymous reviewers for their very supportive and helpful comments on a previous version of the manuscript. The author would also like to thank the peer-reviewer and session audience for their useful feedback where an earlier version of the manuscript was presented at the EAERCD 2009 Conference in the University of Surrey. Special thanks shall also go to Dr. Jonathan Reynolds, the Academic Director, and Dr. Elizabeth Howard, the Emeritus Fellow in Retailing, both at the Oxford Institute of Retail Management, Oxford University, for their support and guidance in starting the research on the talent challenge in China retailing.

Notes

1. AT Kearney online source: ‘2006 Global Retail Labour Index’.

2. Taiwan is an island located in East Asia between the South China Sea and the East China Sea off the south eastern coast of mainland China. United Nations General Assembly Resolution 2758 of 25 October 1971 recognized the representatives of the People's Republic of China (PRC) as ‘the only legitimate representative of China to the United Nations’ and expelled the representatives of Chiang Kai-shek from the place which they unlawfully occupy at the United Nations (United Nations). The dominant political issues continue to be the relationship between Taiwan and China - specifically the question of Taiwan's eventual status - as well as domestic political and economic reform (CIA ‘The World Fact Book’). Disclaimer: The use of ‘Taiwan’ and ‘Taiwanese’ in this paper is for ease of referencing and ease for readers from outside the Chinese context only. This does not imply any political stance on behalf of the author.

3. Calculated according to statistics reported in Wang (2009, 64) ‘ Table 3 Major foreign retailers in China 2006’ (total sales based on 2004 data).

4. Pacific-Sogo entered the Taiwanese market in 1987, which was the first joint-venture after the deregulation of foreign investment. However, Taiwan's foreign investment administration restricted this joint venture in that the local company owns 51 per cent, while the Japanese partner possesses the remaining 49 per cent. But the overall department sector in Taiwan only contributes 5.9% to its national retail sales (Chang and Sternquist 1994).

5. Tesco, the supermarket chain, opened its first store in Taiwan in December 2000, following the purchase of a site from Makro, the Dutch group (Cohen 2000).

6. By the end of 2005, over 600,000 Taiwanese business people had invested in mainland China. In 2006 alone, Taiwanese paid over 4.4 million visits to China, with nearly 500,000 Taiwanese established residence in and around Shanghai (Deng 2008, 261).

7. Although Taiwan was not the only country in East Asia to have this dual identity, Thailand is also a retail internationalisation destination (e.g. Tesco in Thailand) and investor in China (e.g. Lotus in China).

8. Detailed discussion of ‘one mode network’ and ‘two mode network’ see Webster and Morrison (2004, 9).

9. Marx, Lechner, and Floyd (2006, 1) propose that there are four types of networks: (1) Relational embeddedness focuses on ‘the quality of relationships, including the level of trust and friendship. The focus is on dyads, and it represents the strength and cohesiveness of ties between units’. (2) Structural embeddedness refers to ‘the structure of relations around the focal unit and the configuration of ties that make up the unit's network’. (3) Positional embeddedness refers to ‘the position a particular unit occupies in a network, independent of the characteristics of its partners’. (4) Cognitive embeddedness refers to ‘similarity of mental representations, interpretations, mental models and worldviews between the focal unit and other units in the organization’.

10. ‘Military confrontations cannot be ruled out in spite of greater economic integration when future economic outlook between the two economies remains uncertain’ (Sam 2007, 69).

11. See Sesit (2003) for example, ‘Going Global: The Risks of Relying on China; If Economy Slows, Trading Partners Could Face Reality Check’, The Wall Street Journal, (Eastern edition). New York, NY: Nov 19, 2003. pg. C.14.

12. See http://en.wikipedia.org/wiki/Republic_of_China_presidential_election,_2008.

13. Online resource: http://www.chaoshi168.com/job/news/shownews.asp?NewsID=2436 [In mandarin Chinese].