Still, the Otto Group has received much acclaim for its innovations in the retail arena. For example, according to a Microsoft case study, Otto was the first company (1) to use telephone ordering, (2) to produce a CD-ROM version of its catalog in the 1990s (to deal with slow dial-up connections), and (3) to build one of the largest collections of online merchandise, at .“Microsoft Case Studies,” Microsoft, accessed August 20, 2010, Case_Study_Detail.aspx?CaseStudyID=200504 ; and “Otto Group: OTTO,” accessed February 7, 2011, . So the Otto Group may have other innovations planned for Field & Stream. But the US fashion market is saturated with competitors. As WWD reported, Otto may do better to focus on growing its own retail brands and utilizing its impressive in- house manufacturing and logistics divisions, which are now Otto’s fastest- growing segment.Thomas Brenner, “Otto Group: A German Giant Tiptoes Back to the U.S.,” WWD , April 14, 2010, accessed February 7, 2011, 2010-04-14?id=3036440&date=today&module=tn/today#/article/retail-news/ otto-group-a-german-giant-tiptoes-back-to-the-u-s- -3036500?navSection=issues &navId=3036440 . Otto could use these divisions to build other retail operations—while keeping a low profile, of course. Chapter 8 International Expansion and Global Market Opportunity Assessment 398
Opening Case Exercises (AACSB: Ethical Reasoning, Multiculturalism, Reflective Thinking, Analytical Skills) 1.How do non-German markets figure into the Otto Group’sstrategy? 2.What do you think the firm has had to do to plan for this level ofinternational expansion? 3.Which country-entry modes does the firm appear to prefer? Doesit vary these modes? 4.After the Otto Group failed in its first effort to enter the US marketwith Spiegel, why would it try again? 5.How does this latest effort to enter the US market differ from itsprior attempt?
1. Learn about the rationale and motivations for international expansion. 2. Understand the importance of international due diligence. 3. Recognize the role of regional differences, consumer preferences, and industry dynamics. The Why , Where , and How of International Expansion The allure of global markets can be mesmerizing. Companies that operate in highly competitive or nearly saturated markets at home, for instance, are drawn to look overseas for expansion. But overseas expansion is not a decision to be made lightly, and managers must ask themselves whether the expansion will create real value for shareholders. Companies can easily underestimate the costs of entering new markets if they are not familiar with the new regions and the business practices common within the new regions. For some companies, a misstep in a foreign market can put their entire operations in jeopardy, as happened to French retailer Carrefour after their failed entry into Chile, which you’ll see later in this section. In