Entry Mode Selection. A case study of an Italian Grocery Retailer and its Attempt to Access the Chinese Market

Abstract

In today’s globalized markets, companies seek new opportunities in developing countries. The most attractive markets are usually growing economies due to their great potentials, i.e. profitability can increase rapidly and markets might not have tight competition yet. However, when companies plan to invest in a new market, they face several issues such as the selection of the right entry mode as well as country specific factors, which might limit or inhibit their competitive advantages. This is what Conad, the second largest Italian retailer chain, is facing now that the Italian consumption of food and beverages is experiencing a significant slowdown due to reduced incomes in households in the aftermath of the global financial crisis. Due to internal stagnation, Conad chose to target China (as a potential attractive nation to internationalize its business activities. This thesis seeks to investigate which market entry mode should be undertaken by Conad. Moreover, this thesis presents an analytical approach, which could be used by other European grocery retailers willing to internationalize their activities towards China. New market trends in China have disclosed high prospects for foreign grocery retailers willing to exploit market potentials. Among several entry modes, this master thesis highlights the benefits associated with direct exports as well as wholly owned subsidiaries. Due to increasing pollution, which affects food safety, Chinese consumers are starting to appreciate imported food and foreign companies are currently facing the opportunity of rapidly implementing their businesses thanks to de-regulations, which took place in the last decade.