International Journal of Retail & Distribution Management

International retail divestment activity

Nicholas Alexander Barry Quinn and Patricia Cairns

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International retail divestment

activity

International
retail divestment
activity

Nicholas Alexander
School of Management and Business, University of Wales,
Aberystwyth, UK, and

Barry Quinn and Patricia Cairns

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University of Ulster, Coleraine, UK

Abstract
Purpose The research presented here initiates the process of the detailed analysis of international
retail divestment activity through the identification of the volume of global divestment activity and the
characteristics of that activity during the timeframe of 1987-2003.
Design/methodology/approach The methodology followed here is essentially historical in
nature and draws on a wide range of contemporary periodicals, reports and other sources.
Findings The paper reports findings on: the form and extent of divestment activity; the year of
divestment; divestment by retail sub-sector; divested chain size; length of time spent in the market of
divestment; divestment by retail sub-sector; and the market of origin of divesting retailer.
Originality/value This paper provides an initial indication of the volume and nature of
international retail divestment in the period considered. Such material has not been available
previously. International retailing research has primarily focused on the internationalisation process
rather than retail divestment from international markets. However, divestment from international
markets is an issue of increasing importance within the competitive global environment. Previously
research into retail divestment has focused on individual company experience. For the first time, the
research presented here attempts to build a picture of the scale and dimensions of international retail
withdrawal. The paper shows that patterns of international divestment are discernible.
Keywords International business, Retailing, Divestment
Paper type Research paper

Introduction
International retailing has attracted considerable research attention since the
resurgence in international retail activity in the mid-1980s (Alexander, 1997a) and
since the change in the intensity of that activity since the mid-1990s among the worlds
largest retailers (Wrigley, 2000a). While it would not be true to suggest that the retail
internationalisation process is fully understood, and a considerable amount of work
remains to be done, a broad understanding of the process and the determinants of that
process have been identified, considered and continue to be discussed in an ongoing
debate. In all this intellectual activity, however, international retail divestment has not
attracted the attention it undoubtedly deserves (Alexander and Quinn, 2000, 2001,
2002; Burt et al., 2002, 2003; Wrigley and Currah, 2003). In a rush to identify, if not
accentuate the positive, the negative aspect of internationalisation has remained
incidental to the main thrust of debate. This situation is perhaps not altogether too
surprising given that potential studies may be hindered by the reluctance of retailers to
discuss the perceived negative consequences that may result from divestment.
Nonetheless, while successful international activity may act as the catalyst for further
international activity, it may be argued that retail companies may learn particularly

International Journal of Retail &

Distribution Management
Vol. 33 No. 1, 2005
pp. 5-22
q Emerald Group Publishing Limited
0959-0552
DOI 10.1108/09590550510577101

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valuable lessons from their own divestment experiences and indeed the divestment
experiences of other companies.
In recent years, international retail divestment has begun to attract some attention
in its own right (Alexander and Quinn, 2000, 2001, 2002; Burt et al., 2002, 2003).
Previously divestment was essentially considered in the light of the
internationalisation process rather than as a research issue in itself. Divestment
activity had been remarked on in several studies over the years and divestment
activity noted (Burt, 1993; Knee, 1993; Corporate Intelligence Group, 1996). However,
the extent and patterns of divestment have not been considered in themselves. Recent
work (Alexander and Quinn, 2002; Burt et al., 2002) has noted and discussed this
lacuna in the literature and attempted to rectify this situation through consideration of
individual case studies. However, a detailed study of the volume, direction and
characteristics of divestment has not been undertaken. Indeed, the closest the literature
comes to providing an indication of such patterns of divestment is Godley and
Fletchers (2001) work on international retailing investment in Britain. They achieved
this by virtue of the fact they identified the date of investors exit from the market as
well as their date of market entry.
The research presented here attempts to begin the process of divestment analysis
through the identification of the volume of global divestment activity and the
characteristics of that activity during the timeframe of 1987-2003. This study focuses
on the markets of divestment, origins of divestment and the retail sectors and players
involved. The methodology followed here is essentially historical in nature and draws
on a wide range of contemporary periodicals, reports and other sources. The results
presented are exploratory, but they should nonetheless provide an initial indication of
the volume and nature of international retail divestment in recent years. In identifying
some initial characteristics of retail divestment, the paper will highlight directions for
further research.
Retailer divestment
The increasing importance of international retail activity is illustrated by the growth in
the number of books (McGoldrick and Davies, 1995; Alexander, 1997a) and special
journal issues devoted to the subject (Brown and Burt, 1992; Alexander and Doherty,
2000; Fernie, 2002). This interest has mirrored retailer investment patterns. The growth
in international activity gathered momentum in the 1990s, with firms extending their
international activities and other firms joining the group of international retailers for the
first time. However, internationalisation does not always follow an upward growth
trajectory, and divestment and exit strategies play an integral part of retailers
international expansion. Recently the literature has reflected this reality, authors such
as Alexander and Quinn (2002), Burt et al. (2002, 2003) and Palmer (2002) have provided
examples of retailers exiting international markets, or at least reducing their presence in
the international marketplace, across various decades, retail sectors and global markets.
It is interesting to observe the recent emergence of studies that have focused
specifically on international retail divestment. Alexander and Quinn (2002), Burt et al.
(2002) and Palmer (2002) have undertaken case studies of company activity in order to
develop understanding of divestment issues. These authors have considered
divestment from several differing perspectives. Alexander and Quinns (2002)
discussion of several cases of retail divestment was presented within the framework of

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the broader management literature. This framework incorporated the various

dimensions of divestment activity, including decision, process, effect, and retailer
response to divestment. Alexander and Quinn (2002) argued that withdrawal from the
international market does not always occur because of any inherent weakness in the
international capabilities of the retailer, but may be due to other strategic reasons. The
authors also highlighted the need for researchers to consider not only the divestment
process itself but also the retailers strategic response to international divestment.
Developing this theme, Palmer (2002) examined the subject of divestment within the
overall context of corporate restructuring and synthesised the various types of
corporate restructuring discussed in the literature with respect to divestment:
.
financial restructuring (changes in governance structures, firms relationships
with shareholders and the financial markets);
.
portfolio restructuring (mergers, acquisitions, alliances and joint ventures);
.
organisational restructuring (changes in the company structures, processes or
personnel); and
.
multinational and spatial dimensions of restructuring (changes throughout the
companys international operations).
Palmers (2002) study also builds upon earlier work undertaken by authors (Clark and
Wrigley, 1997; Wrigley, 1999a, b, 2000a; Wood, 2001, 2002) who considered divestment
from the financial restructuring perspective. These authors have examined the exit
process within the context of non-recoverable sunk costs and as part of the broader
macro regulatory changes surrounding financial investment instruments and US
investment regulations. This research has shown that in some circumstances divestment
may be an inevitable part of the internationalisation process for those seeking to
diversify into, and develop a major presence through acquisition in another market.
Recent work undertaken by Burt et al. (2002 2003) has conceptualised market exit or
withdrawal in terms of failure and has utilised the industrial organisation (IO) and
organisational studies (OS) perspectives to examine causes of organisational failure. Burt
et al.s (2002) case study of Marks & Spencer considered divestment in the context of the
organisational-wide failure of the company. They argued that a lack of
internationalisation strategy, a mismatch between the UK success factors and those
required for international success, and finally the lack of experience of decentralised
management needed to understand and develop the international businesses all played a
role in the divestment of Marks & Spencers international operations. Burt et al. (2003)
developed the failure theme by conceptualising the various actions that are always a
response to failure in international retailing divestment, closure, organisational
restructuring and exit. The conceptualisation of market exit in failure terms can be seen
in several earlier studies and particularly in the work by Hildebrand (1989) on the
problems encountered by Canadian retailers entering the US market. The problems
encountered by retailers in their forays into international markets have been highlighted
by several authors (Burt, 1986, 1994; Alexander, 1990; OGrady and Lane, 1996).
Understanding of this complex and multifaceted subject area is only really now
being developed. Recent studies have helped to refine the terminology and also to
highlight the broad parameters of activity, but what do we know about the scale and
scope of retail divestment activity? Several previous studies have provided some
indication of the extent of divestment activity. Burt (1991) examined the international

International
retail divestment
activity
7

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activities of European grocery companies during the period 1950-1990, identifying 46

market withdrawals and reductions in the shareholdings held in foreign companies. In
a study of international retail movement during the 1991-1993 period, Knee (1993)
identified 35 cases of market withdrawals. The Corporate Intelligence Group (1996)
report on UK retailers cross-border activities identified a substantial number of
British retailers, 42 in total, who in recent years had withdrawn from international
markets. While these studies provide very useful analyses of the nature and extent of
market divestment at various points in time, divestment was not the main focus of the
research. Recent work by Godley and Fletcher (2001) has taken a more focused
approach and produced some valuable data on non-UK retailers divestments in the UK
market. Their work has shown the increasing levels of divestment activity in the late
twentieth century as a result of increased inward investment during the same and
earlier periods. There is now a clear need to establish much greater understanding of
the extent and form of retail divestment activity, the countries and sectors involved,
and the patterns of activity that emerge over time. This paper represents an initial
attempt to provide this understanding by reporting the findings from a study into
global retailer divestment activity over a given period. The paper presents the
preliminary analysis of results from a database of international retail divestments
during the period 1987-2003.
The database
The aim of this study was to build a database of retailer divestment activity during the
years 1987-2003. We use the term divestment here to describe company actions
resulting in a reduced presence in a foreign market. This may take the form of closure
of stores, sale of store chain, termination of a business contract/agreement (joint
venture, franchising and so on), or organisational restructuring in the form of changing
from corporate ownership to a franchise or licensing or distribution agreement.
Divestment may or may not involve market exit. Various details of divestment activity
were collected as follows:
.
company and product sector;
.
market of origin;
.
date of divestment activity;
.
market of divestment;
.
extent and form of divestment; and
.
length of time in the market.
The 1987-2003 timeframe was chosen as it reflects an active period of
internationalisation activity for retail companies and thus presents the opportunity
of exploring divestment activity. The mid-1980s saw a resurgence of international
retail activity, as Burts (1993) research shows. Thus, by the end of the 1980s the
population of internationally active companies had increased considerably. The
volume of activity in the 1990s was therefore far higher than it had been in previous
decades. Consequently, the decade provides an opportunity to investigate the
characteristics of divestment activity across a number of markets and sub-sectors.
Therefore, in this paper, in order to present an initial interpretation of the database our
consideration of market divestment characteristics will focus on the period 1991-2000

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and compare the five-year period 1991-1995 with the five-year period 1996-2000. This
approach accords with the arguments presented by Wrigley (2000a) with respect to the
change in intensity of international activity around the mid-1990s.
The methodology followed here is thus essentially historical in nature. Although the
period under consideration for this initial survey is comparatively recent, the problems
of research remain the same as those for an earlier period, had one been chosen. As
Alexander (1997b) has noted, data gathering in an historical research framework must
draw on a wide body of sources and evaluate the comparative value of those sources.
Consequently, the process of data gathering is more circular and less strictly
delineated as it is in the social sciences (Alexander, 1997b, p. 395). Therefore, to use
Godley and Fletchers (2001, p. 39) words, the results presented here are the result of
exhaustive searches of historical sources. The sources used for these searches were
chosen in order to provide a degree of consistency.
As with Godley and Fletchers (2001) work on international retail activity in Britain
in the nineteenth and twentieth centuries, the data presented here are drawn from a
miscellany of contemporary periodicals, reports and other sources. Initially, electronic
sources such as Emerald and ABI Inform were used and this was expanded to a
systematic review of past editions of a wide range of retail related publications. In
particular, Retail Week publications from the early 1990s to the present day were used
to provide a common source of material for developments over a given period of time.
This material was then supplemented with other paper-based reports such as those
produced by Retail Intelligence and other material such as the European Retail Digest,
International Retail Monitor 1992-2003, the Retail News Letter, Retail Co-op Review, and
various Financial Times publications.
Analysis of the data was completed in a number of stages. First, items of
information were recorded and coded, and from this frequency tables were constructed.
A more detailed examination of the data was achieved through cross tabulations.
Before presenting the initial results from this study, it is important to highlight the
limitations of the dataset at this stage. With this type of study it is inevitable that some
examples will not be included. No data set of this nature could ever claim to be
complete. A study of this type is reliant on the sources identified and chosen. The
historical process of data gathering must always confront the likelihood of further
material becoming available in the course of time. Indeed, this is to be welcomed and
embraced. For example, in this study, it was difficult to complete a full picture of all the
aspects of divestment activity that we sought to investigate due to limited information
on particular variables and conflicting reports from various sources. Finding full and
consistent data on announcement dates and actual date of activity proved problematic.
To overcome this limitation, the study concentrated on the year(s) of divestment rather
than the dates within that year(s). Details on store closures were not well covered in the
sources used, and thus the results largely refer to more visible forms of divestment
activity such as chain disposals and termination of partnerships and agreements in the
marketplace (for example joint ventures, franchising, concessions). Finally, while the
data compiled includes global retail data, much of the source material consulted was
UK based and thus the results may be biased towards UK retailer divestments and, in
particular, the more familiar names associated with retail expansion.
The paper now reports the preliminary analysis of the database.

International
retail divestment
activity
9

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10

Results
The results highlighted 167 cases of retail divestments during the period 1987-2003, of
which 153 could be unequivocally attributed to a single year. Overall, the results
suggest that divestment activity has increased throughout the period. It would appear
that as more retailers enter international markets there has been a reciprocal increase
in the number of retailers divesting from those markets. In the period 1991-2000, the
first five years of the period (1991-1995) saw 38 retailers divest interests in
international markets; whereas in the later five-year period (1996-2000), 78 retailers
made divestments from international markets. During this time British retailers such
as Laura Ashley, Wickes, Boots, Virgin, Next and Marks & Spencer were all involved
in multiple divestment activities. French retailers were also prominent in divestment
terms (Carrefour, Promodes, Auchan and Sephora) and were involved in multiple
divestments of their operations from other European destinations. This lends empirical
support to the observations of Alexander and Quinn (2002) and Burt et al. (2002, 2003)
on the increasing levels of retailer divestment activity. These increasing levels of
divestment activity should be considered in the context of the upsurge in expansion
activity witnessed in the late 1980s, early 1990s and the increase in the intensity
(Wrigley, 2000a) of activity from 1995.
While the majority of these divestments have led to market exit, in many cases a
presence in the marketplace was maintained. Of the 153 divestments attributable to a
single year, 99 were cases of full market exit while 54 cases did not result in full market
exit (Table I). Table I indicates the form of divestment. It can be seen from Table I that
the vast majority of divestment activity has occurred through the sale or closure of
store chains. A much lower number of divestments took the form of store sales or
closures and the termination of contractual agreements, namely joint ventures and
franchising. The results highlighted a relatively small number of cases where
companies reduced the size of their involvement and moved away from full ownership
towards lower control/risk forms of operation such as franchising, licensing and
distribution agreements.
During the period 1991-2000, retailers from different markets of origin shared
similar patterns of market divestment as Table II indicates. Indeed, relative levels of
market divestment were remarkably similar for retailers based in the UK, Europe and
North America. The exception to the pattern was divestment activity by Asian
retailers, where withdrawals occurred only in the second half of the decade. This may

Form of divestment

Table I.
Form and extent of
divestment activity

Chain sale/closure
Store(s) sale/closure
Termination of agreement
Sale of financial interests
Downsizing of interest (e.g. from direct
ownership to franchise)
Total

Extent of divestment
Cases Market presence maintained Market exit
107
21
10
6

39
6
2
1

68
15
8
5

5
153

5
54a

99b

Notes: a The form of divestment in one case could not be identified; b The form of divestment in three
cases could not be identified

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be explained in part by the financial and economic crises in Asia that occurred within
the later period. UK retail divestments were proportionally high compared to Europe as
a whole and particularly so in relation to retailers from countries such as France. There
are several possible explanations for this. As noted in the methodology section, there is
a danger with these results of a bias towards UK retailer activity. However, other
explanations may also be taken into account. First, there were several major cases of
British retailers undertaking multiple divestment activities at this time. In the early
part of the decade in particular there was a major economic recession in the UK, which
could partially explain their higher level of divestment activity compared with other
geographical regions.
This pattern of divestment was also evident with respect to the markets from which
retailers divested operations. As can be seen from Table III, although divestments from
the Americas were evenly spread across the decade, divestment was much heavier in
other global markets in the second half of the decade. The figures for Asian
divestments increased during this period, a reflection of the increased patterns of
investment in the region at this time.
Within the European market, perhaps not surprisingly, divestment activity was
particularly pronounced in those markets that have proved attractive in terms of
foreign retail investment, that is France, Germany, The Netherlands and Spain.
The greater divestment levels recorded in the second half of the decade 1991-2000
was also evenly spread across different sub-sectors (Table IV). While clothing
accounted for the higher number of divestments over the period, all the sectors
recorded remarkably even patterns of divestment. Within the food sector, high levels of
divestment activity were recorded around the mid-1990s as companies such as
Promodes and Thorntons all undertook multiple divestments during that time.
This general pattern of divestment was also maintained where divested chains were
between one and 40 units in size (Table V). However, this pattern was not maintained
1991-1995

1996-2000

UK
Europe
North America
Asia
Total

18
13
7
0
38

36.0
34.2
36.8
00.0
32.8

32
25
12
9
78

64.0
65.8
63.2
100.0
67.2

50
38
19
9
116

100
100
100
100
100

1996-2000
%

10
60
32
13
1
116

100
100
100
100
100
100

UK
Europe
Americas
Asia
Africa
Total

2
17
16
3
0
38

1991-1995
%
20.0
28.3
50.0
23.1
00.0
32.8

n
8
43
16
10
1
78

11

1991-2000

Market of origin

Market of divestment

International
retail divestment
activity

80.0
71.6
50.0
76.9
100.0
67.2

Table II.
Year of divestment by
market of origin

1991-2000

Table III.
Year of divestment by
market of divestment

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12

by divestments where chains were over 40 units in size. This may suggest that when
international chains reach a certain size and hence significance to the parent
organisation, they are less prone to divestment initiatives prompted by short-term
environmental changes.
Table V clearly suggests that the overwhelming majority of divestments involve
relatively small store chains. Of the 75 divestments identified by store size in the period
1991-2000 well over half (57.3 per cent) involved store chains of 20 units or less, nearly
three-quarters (72 per cent) were of 40 units or less. This raises questions with respect
to the nature of the divestment process. Where large chains are the focus of divestment,
given the commitment to large operations noted above, there is the likelihood that
divestment of those operations is the product of financially weak firms (Duhaime and
Baird, 1987). Therefore, given the very high volume of small divestments identified in
the table, this may indicate strategic realignment rather than market failure and
financially weak parent companies.
The general pattern of divestment was also maintained where divested chains were
divested within ten years of establishment (Table VI). However, this pattern was not
maintained where divested chains had operated for more than ten years. The majority
of the recorded cases involved divestments where the company had been operating in
the market of divestment less than ten years. Despite the fact that the numbers in this
1991-1995

Table IV.
Year of divestment by
retail sub-sector

1996-2000

Clothing
Food
Dept and variety
Other
Total

10
10
5
13
38

27.8
32.3
27.8
41.9
32.8

26
21
13
18
78

72.2
67.7
72.2
58.1
67.2

36
31
18
31
116

100
100
100
100
100

Number of stores

1-20
21-40
41-100
Over 100
Total

15
4
5
6
30

34.9
36.4
55.5
50.0
32.8

28
7
4
6
45

65.1
63.6
44.4
50.0
67.2

43
11
9
12
75

100
100
100
100
100

Number of years

,3
4-10
.10
Total

8
5
6
19

34.9
36.4
46.2
35.9

12
15
7
34

65.1
63.6
53.9
64.2

20
20
13
53

100
100
100
100

1991-1995

Table V.
Year of divestment by
divested retail chain size

1996-2000

1991-1995
Table VI.
Year of divestment by
years in the market of
divestment

1991-2000

Sub-sector

1991-2000

1996-2000

1991-2000

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table are relatively small, the results would again suggest that as commitment to the
market grows, divestments are less likely to occur as a result of short-term
environmental or operational issues.
Overall, 167 divestments were identified for the period 1987-2003. Not all of these
divestments could be accurately ascribed to a single year. However, it was possible to
consider these 167 divestments with respect to their retail sub-sector and the market
from which divestment occurred. As Table VII illustrates, divestment activity by retail
sub-sector varied considerably by market of divestment. In the UK, divestment by
clothing retailers was particularly evident while in Europe other store types saw higher
than average levels of divestment. In Asia, it was food retailing that contributed a
particularly high number to the regional total.
In Table VIII, the 167 divestments are broken down by the divesting retailers
domestic market and the retail sub-sector of the divestment. Here European retailers
experienced the highest levels of divestment in the food sector, while UK divestments
were more likely to occur in the clothing and other non-food sectors. Asian department
and variety store retailers saw a disproportionately high level of divestment.
In Table VIII, UK retailers account for 71 cases of divestments. Of these
divestments, the clothing sector had made the largest contribution with 25 cases of
divestment. This is due to groups such as Storehouse and Arcadia who contributed
significantly to levels of divestment in the early 1990s. At that time, both companies
operated a number of different fascias in international markets. Consequently, they
contributed multiple divestments. Other clothing retailers such as Next, Laura Ashley
and Country Casuals were also prominent in the list of divesting organisations. White
(1995) has observed that a high proportion of UK clothing companies has been

Market of divestment

Food
n
%

Clothing
n
%

Dept and
variety
n
%

UK
Europe
Americas
Asia
Africa
Total

4
16
14
9
1
44

6
28
16
2
0
52

1
10
7
6
0
24

0
29
12
5
0
47

36.4
19.3
28.6
41.0
100
26.4

Food
Market of origin

UK
Europe
North America
Asia
Total

6
27
8
3
44

8.5
45.8
30.8
27.3
26.4

54.5
33.7
32.6
9.1
0.0
31.1

9.1
12.1
14.3
27.3
0.0
14.4

Clothing
n
%

Dept and
variety
n
%

25
15
9
3
52

14
4
2
4
24

26
13
7
1
47

35.2
25.4
34.6
27.3
31.1

19.7
6.8
7.7
36.4
14.4

Other
%
0.0
34.9
24.5
22.7
0.0
28.1

Other
%
36.6
22.0
26.9
9.1
28.1

International
retail divestment
activity
13

Total
n

11
83
49
22
1
167

100
100
100
100
100
100

Table VII.
Market of divestment by
retail sub-sector

Total
n

71
59
26
11
167

100
100
100
100
100

Table VIII.
Market of origin of
divesting retailer by retail
sub-sector

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14

Table IX.
Time spent in market
before divestment by
retail sub-sector

unsuccessful at cross border retailing and that it was a theme of UK cross border
failures. These figures support his observations.
The department and variety sector was relatively well represented amongst UK
divestments due to Marks & Spencers international closures. The food sector in the
UK has not seen particularly high levels of internationalisation and therefore
contributed relatively few divestments. In contrast, however, European retailers have
seen much high levels of internationalisation in the food sector and consequently have
registered far higher levels of divestment.
Table IX considers time spent in a market before divestment against the retail
sub-sector of the divested business. The figures derived produced some interesting and
contrasting figures. Food retailers were relatively swift to divest interests as were
retailers in the other non-food sub-sector. Indeed, 85 per cent of food retail divestments
recorded in Table IX occurred within ten years. In contrast 31.1 per cent of clothing
retail divestments occurred after ten years in the market while this figure rose to 46.7
per cent for the department and variety store sub-sector. The figures for the food sector
may be explained to some extent by food retailers relationship with the financial
markets (Wrigley, 2000b; Palmer and Quinn, 2003; Wrigley and Currah, 2003). In
particular, Palmer and Quinn (2003) noted how publicly quoted food retail
multinationals, especially those with relatively little international experience, are
faced with enormous short-term performance pressures from the financial institutions.
Disappointing performance in international markets may force such retailers to
respond quickly to shareholder concerns through divestment activity.
The other non-food sector produced figures suggesting a strong willingness to
divest at a very early stage. This group included specialist retailers merchandising
music, jewellery and DIY goods. These retailers had developed relatively small
operating bases in their international markets, which could give an indication why
these operations were divested after a short period of time. This would imply that the
smaller the store base, the greater likelihood of early divestment. If problems occur
domestically, internationally or both, the smaller store bases may be divested first
because of their relative level of importance to the key strategic objectives of the core
business. This is supported by the results presented in Table X.
Table X shows that the majority of divestments irrespective of sector involved the
divestment of store bases of 20 stores or less. This was true across all sub-sectors. Food
retailers were the group that had the highest percentage of divestments in the 100 plus
category. Given the nature of food distribution this is not surprising. Likewise given
the nature of the sub-sector it is not surprising to see a high proportion of clothing,
department and other non-food retail divesting chains of one to 20 units rather than
chains in the high categories. For example, department store operators such as Sogo,

Years in market

Food
n
%

Clothing
n
%

Dept and
variety
n
%

,3
4-10
.10
Total

9
8
3
20

5
6
5
16

3
5
7
15

11
8
2
21

45.0
40.0
15.0
100

31.1
37.5
31.1
100

20.0
33.3
46.7
100

Other
%
52.4
38.1
9.5
100

n
28
27
17
72

Total
%
38.8
37.5
23.6
100

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Daimaru and Galeries Lafayette had very small operational bases. Nevertheless, the
limited size of many divestments raises questions concerning the development of
international operations, commitment to individual markets and ultimately market
selection.
Evans et al. (2000) have discussed how a retailers country of origin affects the way
in which decisions are made. Likewise, it has become something of an accepted truth of
internationalisation that UK retailers are more inclined to divest from or exit markets
at an earlier stage than their continental European competitors. However, Table XI
suggests that assumptions about markets of origin may need to be reassessed. Here the
results would suggest that UK retailers are less likely to opt for early divestment than
their European counterparts. While further research would be required before
differences in national divestment rates could be established, the figures presented here
suggest that accepted beliefs need to be investigated further.
As Table XII indicates, Europe was also the market where investments were the
shortest lived, which suggests short-term border-hopping activity. Conversely,
divestments from the UK tended to occur after a longer operational period, which
suggests a firmer initial commitment to operating in the market. The Asian market also

Number of stores

Food
n
%

Clothing
n
%

Dept and
variety
n
%

1-20
21-40
41-100
100+
Total

18
5
4
8
35

17
5
2
5
29

13
2
2
2
19

16
2
3
4
25

51.4
14.3
11.4
22.9
100

, 3 years
%

Market of origin

UK
Europe
North America
Asia
Total

12
12
4
0
28

35.3
66.7
28.6
00.0
38.9

,3 years
%

Market of divestment

UK
Europe
Americas
Asia
Africa
Total

2
12
6
6
2
28

28.6
42.9
24.0
60.0
100
38.9

58.6
17.2
6.9
17.2
100

68.4
10.5
10.5
10.5
100

Other
%
64.0
8.0
12.0
16.0
100

64
14
11
19
108

59.3
13.0
10.2
17.6
100

.10 years
n
%

13
4
6
4
27

9
2
4
2
17

34
18
14
6
72

100
100
100
100
100

26.5
11.1
28.6
33.3
23.6

.10 years
n
%

2
13
9
3
0
27

3
3
10
1
0
17

7
28
25
10
2
72

100
100
100
100
100
100

42.9
10.7
40.0
10.0
00.0
23.6

Table X.
Number of store units
operational in the market
before divestment by
retail sub-sector

Total

4-10 years
n
%
28.6
46.4
36.0
30.0
00.0
37.5

15

Total
n

4-10 years
n
%
38.2
22.2
42.9
66.7
37.5

International
retail divestment
activity

Table XI.
Time spent in market
before divestment by
market of origin

Total

Table XII.
Time spent in market
before divestment by
market of divestment

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Table XIII.
Time spent in market
before divestment by
number of store units in
market of divestment

appeared to have been host to a relatively high number of short-term investments. This
may in part be due to the cultural and physical distance from the home market. In this
period, Western European retailers such as Boots and Sephora had to divest their joint
ventures from Asian markets after encountering problems in attempting to transfer
their retail concepts over long geographical and cultural distances. However, given the
financial and economic crises that occurred in the region and its impact on
international retailing (Alexander and Myers, 1999) during the period covered by this
research, it is not surprising that investments in the region would be limited in
duration.
The American pattern was very similar to the pattern of divestments from the UK.
Retailers such as Storehouse, Dylex, Marks & Spencer and Kmart spent substantial
time in the North American markets before divestment. Marks & Spencer, based in the
UK, persevered for an extensive period of time with chains such as Peoples and
Allairds in Canada. Likewise, Kmart had spent over 34 years in the Canadian
marketplace before divesting its operation.
UK retailers made the African divestments recorded in the table. Wickes and
Sainsbury made international moves into culturally distant markets that hindsight
would suggest they did not fully understand. As the table indicates, these investments
were short lived.
The number of operational units established in a market before divestment might
reasonably be expected to increase the longer the period of the investment in the
market. This was generally the case with respect to the 59 cases of divestment
identified in Table XIII. That is, 48.6 per cent of chains in the range one to 20 units were
divested in the first three years, whereas 54.5 per cent of chains with more than 100
units were divested after ten years.
The longevity of retail operations is brought into sharp focus by these figures.
Overall, three-quarters (76.4 per cent) of all divestments occurred within ten years.
Over one-third of these (38.9 per cent) were in the first three years. While this might be
somewhat inevitable given the recent increase in international retail activity, it is also
indicative of the speculative nature of some international retail investment and the
surprising speed with which decisions to enter a market are reversed. International
retailing is by its very nature long term and cannot be expected to reap the greatest
rewards immediately. These figures therefore beg an important question with respect
to the market selection and partner selection procedures associated with retail
internationalisation.
Table XIV shows how markets of origin were important as far as size of divestment
was concerned. Again broadly similar patterns were discerned, although particularly
, 3 years
%

Number of stores

1-20
21-40
41-100
100+
Total

17
1
2
2
22

48.6
12.5
40.0
18.2
38.9

4-10 years
n
%

.10 years
n
%

15
3
2
3
23

3
4
1
6
14

35
8
5
11
59

100
100
100
100
100

42.9
37.5
40.0
27.3
37.5

8.6
50.0
20.0
54.5
23.6

Total

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high levels of divestment of large chains emerged with respect to North American
retailers, while Asian retailers divestments were mostly of limited chain size.
Table XV illustrates the level of chain size by area of divestment. Again patterns
were broadly similar, although, the USA was home to a higher proportion of large
divestments. This clearly reflects the size of the market and may imply that investment
in the market by many retailers cannot simply be seen as a minor internationalisation
exercise and most involve greater levels of commitment.
Table XVI shows the relationship between market of origin and market of
divestment. The table shows high levels of divestment activity in all European
markets, including the UK, and the high levels of divestment by European retailers.
Divestment in the US market is also well represented whereas divestment from Asia
and Africa is less well represented. This reflects international activity over the last two
decades. Focusing in particular on the case of UK retailer internationalisation, the table
highlights the relationship between investment and divestment. The table shows that
63 per cent of UK retailers divestments (45 cases) were in European markets, which
reflects UK retailers tendency to expand within the European marketplace. Within
1-20
Market of origin

UK
Europe
North America
Asia
Total

26
25
8
5
64

57.8
65.8
42.1
83.3
59.3

7
5
2
0
14

21-40
%
15.6
13.2
10.5
00.0
13.0

1-20

21-40
%

41-100
%

5
3
3
0
11

11.1
7.9
15.8
00.0
10.2

41-100
%

7
5
6
1
19

15.6
13.2
31.6
16.7
17.6

45
38
19
6
108

100
100
100
100
100

100+
%

8
47
34
17
2
108

100
100
100
100
100
100

UK
Europe
Americas
Asia
Africa
Total

6
31
15
11
1
64

75.0
66.0
44.1
64.7
50.0
59.3

1
5
5
3
0
14

Market of origin
North
Europe
America
n
%
n
%

6
29
16
8
0
59

3
4
0
4
0
11

UK
Market of divestment

UK
Europe
Americas
Asia
Africa
Total

0
45
17
7
2
71

00.0
63.4
23.9
9.9
2.8
100

10.2
49.2
27.1
13.6
00.0
100

0
4
5
1
1
11

2
5
16
3
0
26

00.0
8.5
14.7
5.9
50.0
10.2

7.7
19.2
61.5
11.5
00.0
100

n
1
7
9
2
0
19

17

Total

Market of divestment

12.5
10.6
14.7
17.6
00.0
13.0

100+

International
retail divestment
activity

12.5
14.9
26.5
11.8
00.0
17.6

Asia
%
27.3
36.4
00.0
36.4
00.0
100

Table XIV.
Units at divestment by
market of origin

Total

n
11
83
49
22
2
167

Table XV.
Units at divestment by
market of divestment

Total
%
6.6
49.7
29.3
13.2
1.2
100

Table XVI.
Market of origin by
market of divestment

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18

Europe, UK retailers encountered problems in a number of markets: France, Germany,

The Netherlands and Spain. These divestments involved a number of high profile
retailers, including Virgin, Tesco, Laura Ashley, Argos and Texas. British retailers
difficulties in the US market are again highlighted in these figures. This involved
retailers such as Laura Ashley, Dixons and Marks & Spencer. Corporate Intelligence
Group (1996) has commented that the record of UK retailers overseas acquisitions is
not a successful one which was largely due to the late 1980s rush to America. These
results suggest that British divestments may have been a direct consequence of this
rush to the USA in the late 1980s. The cases of British retailer difficulties in the US
market are well documented and have been largely attributed to a lack of
understanding of this extremely competitive marketplace.
Discussion
Divestment may essentially be conceptualised as the product of factors and stimuli
external to the firm involved or internal to that organisation. These factors may in turn
be conceptualised as encouraging divestment or discouraging it. That is, deteriorating
trading conditions in a market, such as an Asian market of the mid-1990s, might
encourage a divestment decision. Conversely a large chain that has been operational in
an international market for some time might not be divested because of the
management commitment to that operation and its integrated relationship with the
operation in the market of origin.
Burt et al. (2002) suggest that this may be seen in terms of the IO perspective, where
they cite Lippman and Rumlett (1982), Jovanovic and Lach (1989) and Frank (1998),
and the OS perspective, where they primarily cite Cameron et al. (1998). That is, the IO
perspective locates the cause of failure in the external environment (Burt et al., 2002,
p. 197) while OS places more emphasis on internal factors (Burt et al., 2002, p. 197).
It is noteworthy that while chains of 40 units or less conformed to the general
pattern of divestment recorded for the period 1991-2000, chains of 41 units or more did
not (Table V). As noted above, this suggests that larger international chains may be
somewhat immune to divestment decisions brought about through consideration of
short-term environmental changes. Likewise, operations with some longevity in the
market would appear to be somewhat less vulnerable to short-term decisions as
commitment to the market grows amongst managers over time. This would suggest
that the importance of barriers to market exit noted by Alexander and Quinn (2001)
have influenced divestments recorded here. If this is the case, then this would also
provide support for the assertion that the OS literature noted by Burt et al. (2002), with
its emphasis on internal factors as determinants of divestment decisions, has a
contribution to make.
However, it is also clear from the results presented here that the volume of
divestment activity is by no means stable. The years 1996-2001 saw a considerable
increase in the number of divestments identified (Table II). Likewise, it is evident from
the results that divestment occurs at different rates in different markets or regions
(Table III). However, divestment by market of origin conforms to broader patterns of
divestment except where major economic crises have occurred (Table II). This suggests
that environmental conditions may encourage divestment. That is the market of
investment may become less attractive and divestment consequently occurs.
Conversely, markets of origin pass through periods of domestic financial crises and

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international divestments are prompted because of the poor economic and trading
conditions in the domestic market.
This issue requires further consideration. However, it is clearly beneficial to think in
terms of external and internal factors. Therefore, the conceptual objective for the
de-internationalisation process will be somewhat similar to the conceptualisation
already attempted with respect to the internationalisation process. Thus, as Alexander
and Myers (2000) note with reference to Vida and Fairhursts (1998) model for the
internationalisation process, the internationalisation process is reiterative where
changes within the organisation are continually grounded within the context of
changes in the marketplace (Vida and Fairhurst, 1998, p. 343). Thus for Alexander
and Myers (2000, p. 341), the process of retail internationalisation has to be viewed not
only as a company-based management process but as a market based process. That
is, where the random and incremental factors that determine the process of
internationalisation are company specific, but they occur within an environment that
will support such developments (Alexander and Myers, 2000, p. 347). Taking this
point further, the company-specific factors that determine the process of
internationalisation within an environmental context will, logically, also determine
divestment as much as they determine reengineering of operations or further
extensions of those operations. This being the case, it may be argued that divestment
should be considered in the light of both internal and external factors and that these
broad headings might usefully define further research in this area.
The results from this study illustrate the various forms of divestment activity that
retailers are involved in, ranging from store closures through to chain sale. Divestment
activity may or may not imply market exit. The reduction in the retailers market
presence and indeed its exit from the market raises questions about the decision to
move into the market in the first place. The implication is that a reduction in activities
and market exit is tantamount to failure. However, this need not be the case.
Divestment activities and market exit may also be seen as a proactive rather than a
reactive strategic decision to free-up resources for use in other parts of the world. Thus,
while Tescos withdrawal from Ireland in the 1980s may be seen as a reaction to
negative experiences in the market, the companys withdrawal from the French market
in the 1990s may be interpreted as a redirection of resources to markets with greater
long-term potential for the organisation.
Terminology is therefore important in this context. Recent studies have highlighted
the need for a vocabulary and terminology to conceptualise the process (Burt et al.,
2003; Wrigley and Currah, 2003). Wrigley and Currah (2003) suggested that divestment
and exit should be examined in the broadest possible fashion. Burt et al. (2002) used
the word failure to describe market exit, although as Burt et al. (2002) note,
Alexander and Quinn (2001) used the term divestment. The word failure has a very
clear negative implication, while divestment may be considered less pejorative.
Given that the research presented here showed that the overwhelming majority of
divestments involved relatively small store chains, and in a significant number of cases
a presence maintained within the market, the use of the term divestment may well be
more appropriate than failure. If many of the retail market exits are small in size this
may imply, as Duhaime and Baird (1987) suggested in a broader context, that these are
associated more with restructuring and sound financial management of assets rather
than crises and failure. Indeed, it may even be argued that the closure of small

International
retail divestment
activity
19

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20

experimental operations in international markets might be positively interpreted as

part of a learning experience in the international environment.
Burt et al. (2002, p. 197) recognized there will have to be theoretical debates about
the appropriate terminology used when considering retail market withdrawal. The
results presented here suggest that that debate would be an extremely valuable one.
Just as the debate on the motives for internationalisation has involved the assessment
of proactive and reactive reasons behind international retail activity (Alexander, 1995)
so it would be useful to explore the undoubtedly varied and complex reasons for the
scaling down of market activity.
Conclusions
This paper has provided an initial indication of the volume and nature of international
retail divestment in recent years. The results presented here are preliminary findings
from a database that will continue to be developed, refined and extended over a longer
period. Nevertheless, the picture that the data have provided helps further to develop
and refine research questions and objectives. The first and initially the most crucial
questions relate to the mechanisms that facilitate or inhibit divestment decisions. The
data here illustrate patterns of activity, but they do not explain why that activity is
taking place. This issue should be addressed through in-depth and longitudinal case
studies of divestment activity to explore the organisational processes influencing the
divestment decision and also the effect of changes in the broader macro environment.
In this, research could address the important questions relating to the issue of failure or
strategic realignment. Is divestment occurring because of company or market failure?
Similarly, to what extent do companies undertake divestment activity as a strategic
tool to develop their international presence further? This research should examine the
issues across markets and product sectors. Emergent findings should then shed further
light on the most appropriate literatures and concepts for explaining the particular
characteristics of retail divestment activity. The insights to be gained from this
developing research agenda would be of major interest to academics and practitioners
alike.
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