The Strategic Underdogs Innovative Chinese Retailers Overtaking Foreign Competition

The last two decades witnessed the rise of Chinese indigenous firms as powerful players in the global market.Therefore,exploring their catch-up process has become one of the emerging themes attracting research interest from academia.However,most of the extant studies have restricted their research scope to manufacturing firms in the sexy high-tech sector,and cases from services,especially retailing,have been under-researched.Which is,in fact,peculiar considering how research on local retailers' success has crucial implications for the question of how Chinese indigenous firms gain their competitive advantage over multinational companies.This is because,being in one of the industries which are fully open to foreign investment,local retail firms that are latecomers in the market have experienced fierce competition pressure from their foreign-invested and highly experienced counterparts,aeTherefore,there are two main topics of research relevant to this subject,and thus form the spine of this thesis:The first one focusses on how local firms succeeded in catching up with forerunners.The pre-existing research on this topic is,as mentioned,ample but almost exclusively limited to forerunners in the manufacturing industry,and written out of a technologic perspective.It would be inappropriate to focus heavily upon them,as the unique natures of retailing and manufacturing are hardly compatible.However,these studies also contain non-technical ana more generic findings and conclusions.These are taken into account where appropriate.Coming forth out of research as contributing factors;differentiation(finding of niche-markets);the size of the market;embeddedness into the local network;latecomer's advantage.The second topic relates to concepts of service innovation and what their characteristics are in service industries.The particular nature and characterizes of service innovation are already revealed in past service innovations studies.In addition,although authors claim that there are significant differences in innovative behaviour among different service subsectors,these existing studies provide a good departure point to explore retail innovation.Coming forth out of these studies as characteristics and tendencies;incremental rather than radical change;most likely in non-technological dimensions;inter-firm collaboration and partnerships;largely dependent on human resources.Given that the topic being studied is rather new and the research questions of this paper are difficult to answer by statistical methods,a qualitative,exploratory method was used.More specifically,to investigate the innovative strategies of late-coming local retailers in their competition with foreign retailers in the domestic market and the underlying factors that facilitate such strategies a rich,in-depth examination was needed and therefore the multiple case study approach was adopted,guided through an analytical framework.Innovative measures on retail format,activity and governance dimensions of three leading local retailers in China were investigated using this in-depth case study approach.After each case is studied on the three dimensions,a cross-case analysis was conducted using thematic analysis to examine their innovative strategies and to explore their sources of innovation.The three cases shared notable similarities in their strategies that are in sharp contrast to those of foreign retailers.Based on these criteria,three very successful late-coming local retailers that are strong enough to,Yong Hui(Y.H.),Better Life Commercial(B.B.G.)and Ren Ren Le(R.R.L.)were selected to be the case companies or this study.Figures indicate that these three firms are good candidates representing late-coming domestic retailers that are strong enough to compete against foreign MNC's.As young companies with less than 25 years of history since inception,all three firms have achieved excellent performance that enables them to be listed on a stock market and to be ranked on the China's Top 100 Retailers ranking.On the retail format dimension,they have all achieved differentiation by formulating niche strategies and succeeded in creating a strong reputation among customers and retaining the same.On the retailing activities dimension,they have all developed a profit-making model through unique supply chain management and stressed construction of logistics centres and operational standardisation.On the governance dimension,they have established an efficient incentive and reward mechanism to motivate employees and encourage innovative practice.They have also built long-term collaborative relationships with their suppliers.Based on these three cases,it is also found that local embeddedness,latecomers' advantages,business agility and a risk-taking entrepreneurial mentality are the crucial factors behind the generation of efficient innovations of China's local retailersWith these findings,this paper has extended and enriched existing knowledge on latecomers'catch up and service innovation.It has constructed an analytical framework for retail innovation by building on relevant attempts in the existing literature.A theoretical framework that explains how indigenous Chinese retailers have managed to successfully compete with foreign retailers in China using innovative strategies has also been established based on empirical data.