Reverse internationalization in retailing: Analysis of divestment and restructuring activities of Finnish retailers in Baltic states and Russian Federation

Abstract

Internationalization of retailers is becoming constantly more common in terms of sales growth and number of foreign operations. For instance, market selection, operation strategy, as well as methods of entry and penetration have been studied widely in the context of international retailing, but at some level the antecedents, pre-conditions and drivers for reverse internationalization including divestment and restructuring activities have not received the same amount of attention.

The purpose of the study is to examine pre-conditions, antecedents and drivers of reverse internationalization in the field of international retailing. Theories of retail internationalization and international retail divestment and restructuring theories as a part of reverse internationalization are applied to find out why international retailers end up in reverse internationalization. Qualitative case study was conducted to examine the development of dynamic competitive strategies, including divestments and restructurings, of three Finnish retailers in the Baltic states and Russian Federation.

The findings of the study suggest that divestment and restructuring activities should not be seen only as failures, but often as a part of strategies to refocus on core business and to reallocate resources for instance to searching of new market opportunities. In addition, interrelation between the performance in the domestic and foreign markets is strong. Strong position in the domestic market enables ability to survive from challenging times in foreign markets, while simultaneously cumulative challenges in many markets may force retailer to readjust and refocus their strategy. In the end, results also indicate that reasons for reverse internationalization may be more probably related to internal factors rather than external shocks or crisis in the market. Not only academics, but also retail professionals may benefit from the results of this study in planning of their internationalization to new markets.