The International Divestment Activities of European Grocery Retailers

doi:10.1016/j.emj.2004.09.007

European Management Journal Vol. 22, No. 5, pp. 483–492, 2004

� 2004 Elsevier Ltd. All rights reserved.

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0263-2373 $30.00

The InternationalDivestment Activities ofEuropean GroceryRetailers

STEVE BURT, Institute for Retail Studies, University of Stirling

JOHN DAWSON, University of Edinburgh Management School

LEIGH SPARKS, Institute for Retail Studies, University of Stirling

Internationalisation by retailers is a major corpo-rate strategy and has become a substantive researchfocus for retail academics in Europe. The majorityof research has concentrated on the expansionistdimensions of this activity. Only recently has atten-tion turned to the role and importance of divest-ment and exit within the internationalisationprocess. Drawing on a database recording interna-tional activity by European based grocery retailersover the past fifty years, this paper aims to establishthe general characteristics and patterns of divest-ment activity in this sector. Over 270 divestmentactivities have been identified. The geographical,temporal, entry mode and format related dimen-sions of this activity are explored.� 2004 Elsevier Ltd. All rights reserved.

Keywords: International divestment, Grocery reta-iling, Europe, International strategy

Introduction

The strategy of internationalisation is widely used bythe major retailers. All the major European retailershave developed their international presence overthe last decade. North American based firms havebeen less active in this regard but nonetheless severalof the major American retailers now have a substan-tial international operation. Until recently the focusof research into retail internationalisation has beenon corporate growth and expansion (Leknes andCarr, 2004). The increased number of internationalactivities, and the attention given to these in both

European Management Journal Vol. 22, No. 5, pp. 483–492, October 2004

the trade and popular press, has created a perceptionof continual market entry and success. In the re-search that has monitored and described the retailinternationalisation process, common themes haveemerged. These are the:

v motives for internationalisation (e.g. Alexander,1990; Williams, 1991, 1992);

v geographical spread of activity, incorporating thedirection and sequence of market entry and con-siderations of cultural affinity (e.g. Hollander,1970; Kacker, 1985; Burt, 1991; O’Grady andLane, 1996; Evans and Mavondo, 2002);

v selection of entry methods exploring issues ofrisk and control (e.g. Treadgold, 1988; Tread-gold, 1990; Quinn, 1998; Gielens and Dekimpe,2001).

Following these considerations of the patterns in-volved, attempts to classify retail internationalisationhave combined the geographical spread of invest-ment with broader managerial concepts, for examplecorporate culture and management style (Helferichet al., 1997; Alexander and Myers, 2000), and the de-gree of market responsiveness and operational adap-tation (Salmon and Tordjman, 1989; Simpson andThorpe, 1995; Dupuis and Prime, 1996; Goldman,2001). Most of this work has drawn on established is-sues in international management and marketing.The emphasis has been on describing apparent suc-cess factors or drawing implications from descrip-tions of successful international expansion.

As research activity has considered the outcomes ofretail internationalisation, so its role as an agent of

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THE INTERNATIONAL DIVESTMENT ACTIVITIES OF EUROPEAN GROCERY RETAILERS

change and the impact on (and of) host environmentshave received more attention (Arnold and Fernie,2000; Dawson, 2003). Consideration of the role of ser-endipity and chance as an influence on the post-entryinternationalisation process (Dawson, 2001) and theimplications of international activities for organiza-tional learning have encouraged a broader view ofthe international experience, and a search for deeperexplanations of the process. In general, studies havemoved from describing the ‘‘what’’ and ‘‘where’’ ofretail internationalisation to attempts to explain the‘‘how’’ of the internationalisation process.

This internationalisation process for most retailers in-cludes divestment. There are many cases, some veryhigh profile, of international failure, divestment andexit by retailers. Although implicit in some earlierstudies, research on retail divestment per se is limited,and has been framed within the context of failure(Alexander and Quinn, 2002; Burt et al., 2002; Burtet al., 2003; Wrigley and Currah, 2003). This is anintuitively appealing starting position, but not alldivestment is an outcome of failure. Divestmentmay also occur for proactive or positive reasons.Changing corporate strategies, alternative opportuni-ties and changes in resource availability determinethe shape and geographical location of activitiesand affect the nature of the international investmentand divestment process.

International divestment, or de-internationalisationin general has been reviewed by Benito and Welch(1997). They suggest that divestment can be consid-ered from three perspectives. The economic perspec-tive considers exit activity as a rational response tochanging economic circumstances and returns. Thestrategic management perspective considers divest-ments within corporate portfolios and in relation tobusiness life cycles. Finally the internationalisation-management perspective considers de-internationali-sation to be a reversal or mirror image of the interna-tionalisation process. Others (e.g. Pabmanathan,1993) have added a financial perspective in whichdivestment from costly or underperforming activitiesincreases the value of the firm.

Specifically, Benito (1997) identifies four groups offactors that influence general divestment decisions:the economic, competitive, political and social stabil-ity and predictability of the host environment; theperformance of the international operation over apre-determined time scale; the strategic fit betweenthe domestic and international operations; andfourthly, the governance issues of managerial capa-bilities and competencies in non-domestic markets.

In terms of retailing, Burt et al. (2003) have sought toclarify and define the various outcomes from interna-tional retail failure. Divestment was defined as ‘‘theprocess of resource allocation that reduces presencein a foreign market’’, and was considered to lead tothree options. First, at the channel level, divestment

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may entail the closure of a number of sales points.This involves the cessation of trading, by a firm, fromone or more retail units in the host market. In thiscase, the firm will continue to trade in the foreignmarket but with a reduced intensity. Secondly, atthe level of the firm, organisational restructuringmay take place. This entails a change in the controlmechanisms of the resources of the firm. The retailerwill again maintain a trading presence in the hostmarket, but through a different organisational form,involving a reduced resource commitment—forexample a reduced shareholding, taking a joint ven-ture partner or switching to a franchise operation.A third divestment option is to exit, in which the firmwithdraws totally from an operational presence inthe foreign market. A range of exit options exists,including the sale or liquidation of store assets, tostore swaps and bankruptcy.

The purpose of this paper is to explore the generalcharacteristics and features of divestment activities,as defined above, within the international activitiesof European grocery retailers. An initial analysis ofa dataset containing details of a range of internation-alisation activities is presented. We then identify thegeneral characteristics of divestment within theframework of the common themes explored in exist-ing retail internationalisation literature, namely thegeographical and temporal patterns, and the per-ceived risk of investment in markets, entry mecha-nisms and specific retail formats. Through this, weaim to establish the basic characteristics and patternsinvolved within a major retail sector. This providesthe foundation for further research and more de-tailed considerations of the processes of internationalretail divestment and adds to the knowledge base onthis under-researched topic.

The Dataset

A dataset recording international activity by Euro-pean based grocery retailers has been constructedfrom an extensive range of international sources,including trade press, corporate communications,market research reports, business biographies, websites and annual reports.1 This exercise has beenongoing for over twenty years. The data have beenused previously to report on international expansion,country selection and entry mode (Burt, 1991), andhave now been updated to record activity to January2004. The dataset currently records over 1200 inter-national actions, categorised into four broad themesbased on the principal purpose of that action:

v entry actions record the move into a non-domes-tic country by a retailer. These may occur via arange of entry mechanisms from acquisition, tojoint venture and organic expansion;

v consolidation activities capture further internalisedinvestment either directly in, or very closelylinked to, the original entry activity of the inter-

pean Management Journal Vol. 22, No. 5, pp. 483–492, October 2004


nationalising retailer, for example an increasedshareholding in the existing activity, the addi-tion of franchising alongside company ownedstores, or the launch of a second distinctive for-mat levered off the initial investment (butexcluding organic growth on a store by storebasis);

v growth actions record externalised expansion ofthe operating network within an existing foreignmarket. Typically these activities compriseinvestment external to the internalised entryvehicle, for example the acquisition of othercompanies, formats or significant store portfo-lios in the foreign market;

v divestment activities, that encompass the threeforms presented earlier: closure, organisationalrestructuring and exit.

The dataset is limited to activity for general groceryretailing. This includes cash and carry activities, asdespite technical definitions in many markets thecustomer base for cash and carry retailers includesa substantial proportion of end consumers, and thewholesaler based origins of some acquired compa-nies in certain markets includes this type of activityas an integral part of the investment portfolio. Forthe purposes of this paper, speciality food retailingactivities (e.g. butchers, chocolate shops, frozen foodstores) are excluded.

Divestment Activities: Volume and Type

Table 1 illustrates the frequency of each type of inter-national action from 1950 to 2004. Over 21% of the re-corded actions involved some form of divestment.Clearly divestment forms an integral part of theinternationalisation process, and so its omission thusfar from the research agenda is surprising. As notedin the previous section the database draws on manysources, but it is acknowledged that it is unlikely tobe complete. It is probable that, of all the varioustypes of activity, divestment is the most likely to beunder-recorded with firms, having a concern overtheir image, more likely to not report divestmentthan entry and growth.

All of the divestment activity recorded in the data-base occurs from the early 1970s. The lack of any re-corded divestment activity before this reflects the

Table 1 International Activity by European Grocery

Retailers, 1950–2004

Type of Activity Recorded Actions Percent

Entry 483 38.4

Consolidation 190 15.1

Growth 315 25.0

Divestment 271 21.5

All Actions 1259 100


relatively later internationalisation of ‘‘mainstream’’grocery retailing compared to the non-food sector.Additionally, some earlier events such as JuliusMeinl’s moves within Central Europe and ThomasLipton’s withdrawal from the former British Empirepre-date the timeframe of the study. Within the ter-minology of the divestment framework suggestedabove, the majority (177 actions—65%) involve countryexit by the initial investor. The country exit categoryincludes total exit from a country, for example Carre-four’s withdrawal from Germany in 1979 and Sains-bury’s exit from Egypt in 2001, but also exit in whichthe investment remains under non-domestic control.Typical examples of this type of exit are Karl Wla-schek’s sale of its Billa operations in the CzechRepublic, Hungary, Italy, Poland and Slovakia toRewe in 1996, Promodes’ disappearance from severalmarkets following the merger with Carrefour in 1999,and SHV’s sale of its European Makro Cash and Car-ry operations to its long term joint venture partnerMetro in 1997. In all these cases the original entrantexited from international activity, although theinvestment remained in non-domestic hands. Coun-try exit also includes cases where a firm has exited,re-entered and exited again, for example Carrefour’sexperiences in the UK.

The closure category (51 actions—19%) includes thesale of a subsidiary, withdrawal from a format andstore closures, but with the original operator remain-ing in the market. Illustrative of the first of these sub-categories, are the Delhaize Group’s withdrawalfrom its Cub store (Super Discount Markets) opera-tion in 2001 and Ahold’s sale of Golden Gallon in2003, both in the USA. In each case a subsidiary ex-ited, but both parent companies remained active inNorth America. Closure of a format is typified byTengelmann’s withdrawal from supermarket retail-ing in Austria in 2000 and Hungary in 2003, whilstretaining their Plus discount stores in these markets,and Jeronimo Martins recent focus upon its Bied-ronka discount stores in Poland following the saleof its hypermarkets to Ahold in 2001 and its Cashand Carry operation to the management in 2003. Fi-nally, store closure includes Carrefour’s decision tosell three hypermarkets in Mexico in 1998, and thestore disposals during 2001 forced by Spanish com-petition authorities following the merger with Pro-modes. Owing to the way that store closures are(not always clearly) reported, it is probable that thisfinal sub-category is under-represented in thedatabase.

The third form of divestment, organisational restruc-turing (43 actions—16%), includes any action that di-lutes the degree of control in the existing investment.Typically this includes the move from full ownershipto joint venture status, for example the Delhaizegroup’s realignment of its holding in PG of Francein 1997. Such activity may ultimately lead to countryexit. The dilution of control may occur also with areduction in shareholding as growth takes place, as

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for example the reduction of Sonae’s stake in its Bra-zilian investment vehicle, SBD, following the link upwith Nacional in 1999 or the dilution of ICA-Ahold’sshare in various operations in the Baltic following theformation in 2003 of a joint venture with the Finnishgroup Kesko. A further example is the listing of aninternational subsidiary on the local stock exchange,as in the case of both Carrefour and Promodes inSpain. The diverse nature of this sub-categoryemphasises the multi-faceted nature of divestment,as many of these ‘‘divestment’’ actions can be relatedto expansion activities (raising capital or fundinggrowth) or to the requirements of public policyrather than as an outcome of failure andretrenchment.

Divestment Activities: Characteristics and Patterns

From 1970 to 2004, in general grocery retailing, 64European based companies have been involved inexiting international activities. Firms based in eachof the Western European markets have been in-volved. This emphasises the centrality of divestmentwithin the retail internationalisation process. Inevita-bly given the increase in international activity byEuropean based grocery retailers, the number ofdivestment actions has increased over time (Table2). Although organisational restructuring activity(ORS) has taken place with regularity over the pasttwenty years, there has been a noted increase in thoseactivities representing withdrawal from either aspecified activity or a country. Organisationalrestructuring activity is itself often a precursor toeventual exit with 40% of these activities ultimatelyleading to country exit. This emphasises the issueof relationships between different forms of interna-tional activity, and the need in future research to ex-plore the process in a holistic manner, rather than asa series of discrete events.

The increase in divestment activity is most noted inthe case of country exit with 121 country withdraw-als during the last decade. Although there is a clearincrease in divestment activity in recent years, andit is this activity that has caught the attention ofresearchers, the steady volume of exit activity duringthe late 1970s and 1980s shows that, as in the case ofexpansionist activity, divestment is not a new phe-nomenon. These earlier exits record the initial adjust-ments to international activities by the hypermarket

Table 2 Type of Divestment Activity Over Time, 1970–200

Pre 1974 1974–1978 1979-1983 1984–

Exit Country 2 4 8 11

Closure 1 1 5

ORS 1 1 9

Total 3 5 11 25

* Total includes 3 undated

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pioneers, Carrefour and Euromarche, but also in-clude some ‘‘forgotten’’ ventures such as Migros saleof its Turkish activities in 1975 after 21 years, Den-ner’s brief foray into Austria (1974–79), Wertkauf-Mann’s excursion into the USA (1975–82) and Pam’sactivities in Britain (1976–87), as well as the first (lessthan successful) forays into Spain by Ahold (1975–85)and Ireland by Tesco (1975–86). This list of earlydivestments provides a diverse mix of companies,countries, store formats and motivations for futureresearch.

Almost two-thirds of divestment activity entailscountry exit. Figure 1 shows spikes in exit activityin 1991 (13 country exits), 1996 (21), 1997 (26), 1999(27) and 2003 (15). Typically in these years, exit activ-ity is boosted by a major acquisition or withdrawalcovering multiple markets, for example the acquisi-tions of Euromarche by Carrefour in 1991, Billa byRewe in 1996, Makro’s European operations by Me-tro in 1997, Promodes by Carrefour in 1999, andAhold’s attempt to disentangle itself from financialscandal in 2003. Although these large scale multi-market activities boost the frequency count, typicallyanother six or seven companies are involved indivestment activities in the same year. There is asteady underlying volume of divestment activity.

Consolidation processes are underway both atdomestic and international levels, as shown by thesemultiple-divestment activities. The absorption ofcompanies represented in several countries, ratherthan a single market, provides further complexityin managing (expanding and re-aligning) the interna-tionalisation process. Carrefour’s integration of Pro-modes entailed international activities acrossseveral countries and also involved several formats.The process of merging the two companies was moredifficult than envisaged with a subsequent impact,albeit short term, on performance. In contrast, Me-tro’s absorption of SHV’s Makro operations in Eur-ope, in which they already held a significant stakeand enjoyed operational synergy, was a smootherintegration.

One established theme in the literature on retailinternationalisation is that some markets are morerisky than others. This has typically been related tothe concepts of market proximity and psychic dis-tance, and is believed to influence the patterns ofexpansion and methods of market entry. Although

3

1988 1989–1993 1994–1998 1999–2003 Total

28 66 55 177*

6 18 21 51

11 12 9 43

46 95 93 271*


0

5

10

15

20

25

30

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Year

Num

ber

Figure 1 Country Exit Actions by Year, 1970–2003


the psychic distance concept is not explored in thispaper, some indication of these ‘‘more difficult’’ mar-kets can be gained. The assumption is that these mar-kets will exhibit higher divestment rates. Over theperiod under investigation, European based groceryretailers divested from 55 different internationaldestinations.

Given the geographical spread of internationalisa-tion, the frequency of investments and divestmentsper country is in some instances very low. This limitsmeaningful analysis. In general the volume of divest-ment actions mirrors the volume of entry actions, asclearly there has to be something from which to di-vest. Table 3 identifies those markets with more thanten divestment activities. These countries represent amix of those that are perceived either as offering sig-nificant growth opportunities, perhaps most easilyarticulated as possessing less ‘‘developed’’ retail sys-tems in southern and central Europe, or large marketsize, typified by the presence of this list of the USAand Germany.

Table 3 Divestment Activity by Country*, 1970–2003

Country Total Divestments Exit Coun

USA 34 15

Spain 33 20

Italy 22 12

Poland 17 11

Germany 14 8

Portugal 11 7

Austria 10 5

Total all countries 271 177

* Countries experiencing 10 or more divestment activities


Taking the volume of divestment activity as a proxymeasure of risk, some of the ‘‘most risky’’ countriescome as no surprise. The USA and Germany arewidely regarded as having highly competitive, if dif-ferent, grocery markets. Italy has been regarded as afrustrating market for expansion, due to legislativeconstraints on store opening. The divestment (partic-ularly exit) activity in Spain and Poland might be ex-plained as a consolidation of grocery retailing. Inthese markets the combination of relatively large sizeand the fragmented nature of domestic competition,have attracted a substantial number of international-ising retailers, although during different decades.

From the larger dataset covering entry, consolidationand growth activity it is possible to match the num-ber of entry activities with the exit activities in thosecountries concerned, to provide an indicative exitrate. In the 55 countries experiencing exit activity,398 entry actions are recorded. This provides anindicative exit rate of 44.5%. This measure, presentedby geographical region in Table 4, suggests that the

try Closure Organisational Restructuring

13 6

8 5

7 3

4 2

4 2

2 2

2 3

51 43

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Table 4 Indicative Exit Rate for Specified Regions

Region Entry

Activities

Exit

Activities

Exit Rate (%)

Europe Northern 69 26 37.7

Europe Southern 86 49 57.0

Europe Central 87 30 34.5

Europe Eastern 11 3 27.3

Europe Western 27 14 51.9

Asia 38 15 39.5

America South 22 9 40.9

America North 22 15 68.2

Other 36 16 44.4

Total 398 177 44.5

Table 5 Length of Time in Market before Country Exit,

Selected Markets*

Country Country

Exits

(Total)

Country

Exits

(Dates Known)

Average

Time (Years)

All countries 177 168 7.1

Germany 8 7 10.7

Spain 20 19 9.8

Italy 13 10 9.4

USA 15 14 9.0

UK 7 7 8.9

Poland 11 11 5.2

* Markets with more than seven country exit actions


highest apparent exit rates are found in North Amer-ica (68%) and Southern Europe (57%), although thevolume of entry activity is four times greater inSouthern Europe. The ‘‘least’’ risky markets on thebasis of this measure would appear to be the formercommunist bloc markets of Central and Eastern Eur-ope. Although patterns appear from this analysis, itshould be recognised that these regional constructsare comprised of vastly different sizes of markets,volumes of activity and histories of internationalisa-tion. It should also be emphasised that the relative re-cency of entries into Central Europe might suggestthat there has been little time as yet to make deci-sions on whether to remain or exit.

To illustrate the latter point, the former communistcountries within the Central European group sawthe same number of entrants as those in SouthernEurope, but have a much lower exit rate. One inter-pretation of this is that these may be less risky mar-kets. Alternatively it may simply reflect the timingof the study, as European grocery retailers have beenactive in Spain since the early 1970s, whereas interna-tionalisation into Central Europe is a relatively recentphenomenon, occurring primarily over the past dec-ade. Consequently, consolidation activities are wellunderway in countries in the South, but are just start-ing in the former communist countries. The indica-tive failure rates for individual countries wouldseem to echo this point. Of the thirteen countriesexperiencing exit with over ten entrant activities,those with the lowest indicative failure rates arefound in Central Europe: the Czech Republic (18 en-trants and 33% failure rate); Hungary (14% and 36%)and Slovakia (12% and 33%). This consideration ofdivestment at the country level again points to theimportance of divestment as an integral part of thewider internationalisation process, and to the needto consider the timing and context of divestmentactivity.

Other characteristics of divestment relevant to ourunderstanding of the process are the length of timein a market before divestment occurs, the role ofthe original entry mechanism, and the type of format

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operated internationally. Implicit from the study ofthese themes within existing research on retail inter-nationalisation is the belief that certain markets, en-try modes and formats are more vulnerable todivestment than others. For the majority of thedivestment actions recorded (262 of the 271), an entrydate can be paired with the divestment action, thusallowing the length of time in the market beforedivestment to be calculated. For all categories ofdivestment the mean length of time in the market be-fore divestment is 7.1 years. The corresponding fig-ures for both country exit and closures are 7.4years, whilst that for organisational restructuring islower at 5.8 years. The mean figure of just over sevenyears suggests that international activities are given asubstantial period of exposure, over several planningand budgeting cycles, in the foreign market beforedivestment occurs. The overall figures, however,hide significant variations by country. Table 5 showsthe average length of time before exit for those mar-kets with the largest number of paired entry-exit ac-tions. The relatively shorter duration for Poland,compared to the longer established internationalisedmarkets, may again reflect the more recent entry intoPoland. Alternatively, it may be that in more recentyears divestment decisions are being made soonerthan in the past.

Inevitably these average time periods, particularlywhen considered at the national level with relativelyfew observations, distort the full picture. Whilst thenational averages shown in Table 5 suggest thatinvestments are given a reasonable amount of timebefore exit occurs, the departure of a long establishedinternational operator from a national market canskew the mean. As Figure 2 shows, most country ex-its occur between four and six years after entry. Fur-ther, over 50% of exit actions occurred within fiveyears of entry, and twenty-one investments lastedone year or less. In contrast, there are also a relativelysmall number of long established exits, with interna-tional operations lasting for twenty years or more be-fore divestment. These are spread across a range ofnorthern or established western European markets.Seven relate to Makro’s withdrawal from parts ofEurope. Given the relatively small number of exits


0

5

10

15

20

25

33 32 31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0Number of Years

Freq

uenc

y

Figure 2 Length of Time in Market before Country Exit


in many countries, these divestments disproportion-ately influence national level figures.

Research into retail internationalisation recognises arange of entry modes, each representing a differentdegree of managerial control and resource commit-ment. Although not always in the hands of the inter-nationalising retailer, the choice of entry mode alsoacts as a mechanism to counter risk within somemarkets and to manage the speed of expansion. Itis commonly argued that in most retail sectors, par-ticularly grocery, mechanisms allowing higher de-grees of control (i.e. ownership) are preferred. Thepairing of the original entry mode with exit actionssheds some light on the level of apparent risk associ-ated with specific entry mechanisms, although itshould be recognised that owing to consolidationand growth activities since entry the original mana-gerial control mechanism may have changed. Table6 shows that most country exits relate to activitieswhich were originally derived from joint ventures(34%) or acquisition (29%).

When exit activities are then related to the entrymodes used by all European grocery retailers enter-

Table 6 Divestment by Original Entry Mode: Exit Rate

Original Entry Mode Paired Exit

Country Activities

% of Tota

Acquisition 52 29.4

Joint venture 60 33.9

Organic growth 39 22.0

Franchise 8 4.5

Affiliation/Alliance 10 5.7

Unknown 8 4.5

Total 177 100


ing these markets, apparent exit rates for the respec-tive entry mechanisms can be generated. Thismeasure suggests that (albeit based on low numbers)entry mechanisms such as franchising and otherforms of affiliation or alliance have very high exitrates, and that of the three most common entry mech-anisms, joint venture entry has an exit rate of over53%, whilst organic growth provides the greatestchance of survival in the market.

A final theme is the role of store format in the inter-nationalisation process. When divestment decisionsare categorised by the major store format, the major-ity of divestments involve supermarkets, followed byhypermarkets (Table 7). In the case of closure actions,the proportion of the total accounted for by discountstores reflects significant divestment activity as anumber of operators reconfigured their operations,divesting themselves of discount stores. Again, thescale of some of the multi-country withdrawals alsohas a significant impact on these figures. The major-ity of Cash and Carry exits took place in the 1994 to1998 period, due to the Makro withdrawal, Karsten/Maxa’s retreat from a number of former communistmarkets, and the start of Booker’s withdrawal from

l All Entry

Actions to Exit Countries

Exit Rate by

Entry Mode (%)

112 46.4

113 53.1

133 29.1

13 61.5

14 71.4

13 61.5

398 44.5

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Table 7 Divestment by Store Type, Percentage of Total in each Divestment Category

Store Type Total Exit Country Closure Organisational Restructuring

Supermarkets 42.4 41.8 43.1 44.2

Hypermarkets 24.0 24.9 21.6 23.3

Cash & Carry 14.0 17.5 3.9 11.6

Discount Stores 9.2 6.8 19.6 7.0

C-store/Petrol Station Stores 1.5 0.5 5.9 –

Mixed/Not Clear 8.9 8.5 5.9 13.9

Total 100 100 100 100

Frequency 271 177 51 43


the international stage. Similarly, high levels ofhypermarket withdrawal in the 1989 to 1993 periodreflect the disappearance of Euromarche as an inde-pendent entity and the retreat from the USA by anumber of French hypermarket operators (with Ar-laud, Euromarche, Carrefour and Leclerc all with-drawing during this five year period). Finally, inthe 1999 to 2003 period, the Promodes merger has asignificant bearing on the figures in a number of storetypes.

Conclusions

It is evident that retailing is no longer a domesticactivity for many firms in the sector. The increasein international activity is considerable. The substan-tial rate of increase of activity means that the mana-gerial processes are developing at a faster rate thanthe research being undertaken. Whilst some attemptsto model the processes of retail expansion are under-way there are, as yet, few attempts to model divest-ment, despite it being an important and integralpart of the totality of retail internationalisation.

This initial exploration of the characteristics and pat-terns of international divestment by European basedgrocery retailers, clearly indicates the importance ofresearching divestment in our attempts to under-stand the retail internationalisation process. Thelarge number of companies and countries involved,and the volume of divestment activity relative toother internationalisation actions confirms the grow-ing view that divestment, in all its forms, plays animportant role in the wider internationalisation proc-ess. For example, within the first three months of2004 divestment announcements have includedDelhaize’s closure of 34 Kash n Karry stores in theUSA as part of a re-branding exercise, SHV’s saleof Massmart in South Africa, Ahold’s withdrawalfrom Thailand and Argentina, the sale of the Brom-preco chain in Brazil and the Ahold-ICA operationin Denmark, and Sainsbury’s withdrawal from inter-national grocery retailing through the sale of Shaw’sin the USA.

Analysis of this grocery sector dataset reveals anumber of basic characteristics and patterns. Whilst

490 Euro

divestment takes several forms, the majority ofdivestment activities entail country exit by the inter-nationalising retailer. As with retail internationalisa-tion itself, divestment is not a new phenomenon.There has been a steady volume of divestmentactivity since the mid 1970s, although the volumeof activity, particularly exit activity, has increasedsubstantially in the last decade. A feature of this in-crease has been the withdrawal of a number ofestablished companies from multiple markets, astheir activities are absorbed by other internationalretailers. This represents a market consolidationprocess at the international level. When exit activi-ties are related to entry activities, an indicative exitrate of 44% is found over the period since 1950. Thehighest exit rates are found in North America andSouthern Europe. The lowest rates occur in the for-mer communist bloc markets of Central and East-ern Europe, although the volume and timing ofinternational activity may have a bearing on suchrates. The length of time that a retailer is presentin a host market before divestment occurs variesconsiderably, but in general terms most exits occurwithin four to six years of entry, and the majorityof exits occurred within five years of entry. Mostexits occur to operations originally established byjoint venture or acquisition, and exit rates are par-ticularly high for those ventures initiated by fran-chising and other forms of affiliation and alliance.Of the more popular entry routes, operations estab-lished through direct store openings would seem tohave the greatest chance of survival, whilst opera-tions initially established by joint venture have anexit rate of over 50%. This paper reports researchthat is a first stage of a deeper analysis of interna-tional retail divestment. As with research into retailinternationalisation we have started by measuringthe level and type of activity, within one retail sec-tor. As such we have treated divestment, and par-ticularly exit, as a series of discrete events tomeasure patterns and characteristics. Our approachhas been framed in the themes explored in theretail internationalisation literature, namely consid-eration of the geographical, temporal, entry modeand format related dimensions. From this initialanalysis a series of event based patterns haveemerged, and inter-relationships between theseevents and other expansion related events havebeen noted.



The next step for research into international divest-ment is to consider the process and particularly thelinkages between events and how firms functionand behave. There is also scope for research that ex-plores if there is a sequence of divestment activitiesand whether this is different by entry mode. A fur-ther step would be to explore the impacts of divest-ment on the wider retail environment, includingeffects on vertical and horizontal competition andon consumer and social values. This paper is limitedto the grocery sector and to European based firms sofurther research on the non-food sector and on firmsbased in other continents is also needed. Patternsmay be different for non-food retailing because thereare major contrasts between food and non-food sec-tors in terms of international market entry. Patternsmay also be different for North American and Asianbased firms given that the patterns of internationalexpansion have been different for these firms.

Note

1. As with any dataset compiled from secondary sources the dataare ultimately dependent on the vagaries of the original sources.Owing to the way these events are reported over time it is likelythat omissions may occur in recording earlier activities and incertain categories of divestment activity. Similarly the dates thatevents are announced and enacted may not be simultaneous,and details of the scale of divestments (in terms of storenumbers) are not always reported. This under-reporting hasimplications for the types of analysis that can be performed.Nonetheless, the range of sources and triangulation involved,and the length of time over which data have been compiled,gives us confidence in the robustness of the dataset and a beliefthat the dataset approximates closely to a total population ofevents.

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STEVE BURT, Institutefor Retail studies, Univer-sity of Stirling, StirlingFK9 4LA. E-mail:[email protected]

Steve Burt is Professor ofRetail Marketing at theInstitute for Retail Stud-ies, University of Stirling.His research interestsinclude various aspects ofthe retail internationalisa-

tion process, comparative retailing, structural changein retailing and retail branding.

JOHN DAWSON, Uni-versity of EdinburghManagement School, 50George Square, EdinburghEH8 9JY. E-mail:[email protected]

John Dawson is Professorof Marketing at the Uni-versity of EdinburghManagement School andVisiting Professor atESADE Barcelona and

UMDS Kobe. His research interests include retail andinternational marketing, and the transfer of managerialknowledge.

LEIGH SPARKS, Insti-tute for Retail Studies,University of Stirling,Stirling FK9 4LA. E-mail:[email protected]

Leigh Sparks is Professorof Retail Studies, Univer-sity of Stirling where hisresearch concentrates onaspects of retailing, espe-cially structural and spa-tial change. He is

currently Director of the SHEFC—funded Centre forthe Study of Retailing in Scotland.


492 European Management Journal Vol. 22, No. 5, pp. 483–492, October 2004

Documents

The International Divestment Activities of European Grocery Retailers