Advantages Of Extending Value Chains

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Unit 5 Seminar: Global Production Networks What advantages do large food retailers have in extending value chains to other countries? What problems might they face in doing so? In the economic globalisation, a small group of retailers have rapidly expanded their stores overseas beyond their core markets of North America and Western Europe through merger and acquisition activity which therefore gives them a high market position making them become dominant in the market in countries across East Asia, Eastern Europe and Latin America. Furthermore, these retailers have also been expanding the scale and geographical scope of their operations. Some of the advantages that they have experienced whilst expanding is their increased capitalisation, buying power, improvements in distribution and logistics systems and lower barriers to trade for commodities (Coe 2004). An example of a large food retailer is an American brand called Wal- Mart. Wal-Mart entered the German market in the late 1990’s as their international expansion strategy. Germany is the third largest retail market in the world after USA and Japan. Their intention was to become dominate in the market and become very successful. This is not only important to the organisation but because Germany provides a gateway to Eastern Europe Markets which is very beneficial. Wal –Mart was forced to purchase two weak chains which were interspar and wertkauf which also included other stores which were in various sizes. This made them at the bottom of the supply chain leaving the top five chains in the German food retailing market account for near enough 80percent of the overall sales. Other advantages are that large food retailers and the discount retailers learn to adapt and use the same strategies which have allowed it to be dominating in US market in international expansions. These strategies can have an
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