Retail value chains: extension and development into transition economies: Stockmann in Estonia and Latvia

Abstract

Purpose – In the area of international retail expansion the most challenging issues that firms struggle with are: which countries to expand to; which order to do it; and what are the retail drivers that can be readily exported to the new market versus which have to be market specific? The purpose of this paper is to look at one specific retailer and review how they have addressed these questions.

Design/methodology/approach – The approach used is based around a case study of the expansion of the Stockmann department store into Estonia and Latvia. Using the findings of empirical research, qualitative and quantitative, the research shows how Stockmann has both built upon and exported its original home strengths while also focusing on which drivers had to be tailored to the local marketplace.

Findings – The case study found that there are some differences between the performances of Stockmann across the two Baltic countries, but the level of performance is quite high in most areas of retail operations. This supports the position that a multinational can successfully expand in diverse markets. In other words, although there are minor issues, on balance the regional versus country specific issues have been substantially resolved. Even national issues like skilled labour shortages and developing good practices for handling returns have been resolved at a medium level. Areas for improvement were in pricing and handling merchandise returns.

Research limitations/implications – The findings are limited to one case study, of one retailer, and the fact that the study was over a defined period. This is a general limitation of case studies, but the use of multiple research methods, and methodologies helped to strengthen the research findings and interpretations.

Practical implications – This study has presented the retail value chain as a model consisting of three main drivers: service; retail operations and country of origin aspects. The three constructs were found to be valid representations, enabling an assessment of a retailer's performance in multiple countries. The lessons drawn indicate that a business model used in the home country can be a powerful integrating and controlling tool for managing the multinational expansion, but that there is also a need to include consumer perceptions and evaluations of retailer performance. These operational measures continue to represent one of the best sources of data in understanding a retailer's performance, in both developed and converging countries such as Estonia and Latvia.

Originality/value – This paper presents a useful case study of a retailer that has expanded from its home base into a number of countries, all of which fall into the category of transition economies, and adds to the literature covering expansion into transition economies, which is a little known field in terms of the expansion of one's value chain or value proposition