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BIOGRAPHYYuan Yuan Hu is a lecturer in Accounting at Massey University, New Zealand. She has research interests in the areas of corporate social and environmental reporting, corporate governance, and performance management systems. Yuan Yuan Hu is the corresponding author and can be contacted at School of Accountancy, Massey University, Palmerston North, 4442, New Zealand.
Yanhui Zhu is a senior lecturer in Accounting, Economics and Finance at University of the West of England, United Kingdom. Her research interests include financial econometrics, asset pricing, commodity market and corporate social responsibility. Yanhui can be contacted at Department of Accounting, Economics and Finance, Faculty of Business and Law, University of the West of England, BS16, 1QY, United Kingdom.
Yuxiao Hu is an associate professor in International Business College at Shenyang Normal University, China. Her research interests include banking, Chinese finance and corporate social responsibility. Yuxiao can be contacted at International Business College, Shenyang Normal University, No. 253 North Huanghe Street, Shenyang, 110034, China.
GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 197 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1
This paper investigates the localization process of FamilyMart in Thailand using a convenience store business model and applying the dynamic capabilities concept. This study’s research method uses survey analysis, with data collected through frequent interviews with company executives in Japan and Thailand between 2013 and 2015. The results of this study show that FamilyMart could not reach break-even point in Thailand until 2009 due to financial risks, political instability, and lack of a suitable local partner. The requisite dynamic capabilities were gradually formed through experience, learning, and organizational restructuring. Eventually, in 2012, FamilyMart found a good local partner in Thailand, Central Group, and successfully transferred its expertise and know-how to the Thai market.
JEL: M16, M31 KEYWORDS: Convenience store; Retail Internationalization; Localization; Dynamic Capabilities
INTRODUCTIONThe major convenience store chains in Japan are shifting their focus to overseas markets as the domestic market shrinks. Although many of these chains are managed by local joint venture companies, there are surprisingly few profitable Japanese convenience store chains. By the end of July 2015, Taiwan, Thailand, and China’s FamilyMart chain was one of the few successes. Author (2015) investigates the localization process of Taiwan’s FamilyMart, and Thailand’s FamilyMart is another case study that provides a deeper understanding. However, FamilyMart reached a break-even point following 16 years in Thailand and only six in Taiwan. This indicates that differing markets and influence factors affect the results of convenience store internationalization. This paper investigates the localization process of FamilyMart in Thailand using a convenience store business model and applying the dynamic capabilities concept. This paper discusses how Japanese FamilyMart transferred its expertise and know-how to the Thai market and demonstrated other success factors that were critical for the convenience store’s internationalization.
Studies relating to Japanese convenience store operations in East Asia are rare. Kawabata (2000; 2006) and Kawabe (2006) assessed FamilyMart, but these studies focused primarily on operational development before 2006. The first study on the localization process of FamilyMart was conducted by author 2009 in China (Author, 2009). The recent study was represented by author 2015 in Taiwan (Author, 2015). This paper proposes a new model titled the “convenience business system (model)” to investigate the localization process of convenience store chains. The “convenience store business system” consists of six elements in three categories: (1) Front system: retail mix, service, quality, and cleanliness (S&QC), and store development strategy, (2) Store operation, (3) Background system: merchandise sourcing system, and merchandise supply system (distribution system and information system). Author (2015) suggests that a five-point summary explains FamilyMart’s critical success factors in the evolution of Japanese convenience stores. Thus, these five-point critical success factors are included in the proposed “convenience business system (model).” The definition of dynamic capabilities is “the firm’s ability to integrate, build, and GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 198 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 reconfigure internal and external competences to address rapidly changing environments” (Teece et al., 1997). Dawson and Mukoyama (2015) proposed using the dynamic capabilities theory to study retail internationalization. Cao (2011) demonstrated the dynamic capabilities through case studies on large store chains, and Frasquet et al., (2013) focused on the fashion apparel sector.
DATA AND METHODOLOGY
This study’s research method uses survey analysis, with data collected through frequent interviews with company executives in Japan and Thailand between 2013 and 2015. Additionally, historical information from newspapers and magazines, FamilyMart corporate news releases, public websites, and other corporate documents are utilized.
RESULTS AND DISCUSSIONMarket Entry Stage (1992 To 1998) Thailand’s (Siam) FamilyMart was established in 1992 as a joint venture between Japan’s FamilyMart (30%), Japan’s Itochu Corporation (10%), Thailand’s Robinson & Co. department stores (40%), and Saha Group (20%). Thailand was the first Southeast Asian country that FamilyMart entered. Therefore, FamilyMart conservatively limited the capital to one hundred million Baht (about 318 million yuan) and operated only five stores in the first two years. As a result, the transfer of the six elements of the “convenience store business system” was “weak” in the background system and “fairly weak” in the store operation and front system. This was the initial stage of FamilyMart’s internationalization. “Groping” and testing the possibility of the market were features of this stage. The overseas business experience within the company was limited, and the dynamic capabilities for internationalization only came from related experience within Itochu Corporation and shared connections (See Table 1).
Table 1: Transferring the “convenience store business system” in the market entry stage
The First Stage of Growth (1999 to August 2012) In July 1997, the operating rights of Thailand’s FamilyMart was transferred from the local partner to Japan’s FamilyMart, since the local partner suffered a business decline due to the financial risks in Thailand. In 1999, Thailand’s FamilyMart increased their capital investment and established a subsidiary titled SFM Holding Co., Ltd. in Thailand to meet the legal requirements for foreign investment. The transfer of the Japanese convenience store business system in the first stage of growth occurred in the following steps.
First, Thailand’s FamilyMart began to sell box lunches to improve the merchandise sourcing system.
Second, a distribution subsidiary was established and a point of sale (POS) system was introduced to improve the merchandise supply system. Additionally, S&QC was also improved. As such, the background system was improved from being “weak” in the market entry stage to “normal” in the first stage of growth through a deeper understanding of the local markets. However, the store operation temporarily became “weak” due to the company’s rapid expansion of stores that could not be supported by the employee’s education.
GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 199 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 Eventually, this recovered from “weak” to “normal” following a revised strategy. The same situation occurred with the front system (See Table 2). In the end of 2003, a "Pacific Rim Initiative" strategy had been established for the future growth of FamilyMart by the new president Mr. Ueda. Concurrently, overseas business was positioned next to domestic business within the company. Through learning and experience, FamilyMart deepened their understanding of the local markets, which was one dynamic capability formed during this stage. In Thailand, a dynamic capability resulted from twice overcoming the risk of bankruptcy in 1997 and 2005. Finally, Thailand’s FamilyMart reached a break-even point in 2009.
Table 2: Transferring Levels of the “Convenience Store Business System” in the First Stage of Growth