International Trade in Services.pdf - DSpace at Khazar University

Market Structure, Liberalization, and Trade 151
and consistency standards and the higher cost levels. In addition, retailers can
help create new business opportunities by branding certain products for their
social equity as a marketing tool, such as pineapple chunks, certain fruit juices,
wines, and coffee (Weatherspoon and Reardon 2003).
In meeting the demands of retail multinationals, only the farmers in developing
countries who are more well endowed with land, finance, management skills,
and education may succeed. They may be required to invest in cool sheds, refrigerated
trucks, irrigation equipment, greenhouses, and packing machines. Retailers
may not offer loans and may delay payments for up to 90 days after harvest. The
equipment of the farmers has to meet health and safety standards. This puts pressure
on governments to regulate supermarket development and implement policies
for assistance with training and capital to enable farmers to sell to the big
retail chains.
The impact of internalization on demand and supply
Nordås (2008) identifies three current trends in the retail sector that have a direct
effect on imports, that is, internalization, market concentration, and private
labels. Empirical results indicate that internationalization has stimulated the
international sourcing of consumer goods, including through developing countries
and particularly food products, but that this process has been reversed in the
case of private labels. High retailer concentration tends to be associated with more
diversified food imports, whereas, even though less concentrated markets import
more, the related food sourcing is based on fewer countries. It may be that the
largest retailers can absorb the cost of diversification in sourcing and in relying on
high-margin suppliers in the face of lower average margins because of lower tariffs.
These trends depend on how retailers are regulated; following trade liberalization,
lightly regulated countries, on average, increase their reliance on nonfood
imports by about twice as much relative to heavily regulated countries.
A limited number of multinationals are responsible for the major trends in
internationalization. The development pattern reveals that retailers that have
operations in more countries expand more quickly than those operating in only a
few countries. Retailers with operations in more than 10 countries show an average
profit margin of 5 percent; this is higher than the corresponding profit margin
of retailers operating in fewer countries (Deloitte 2008). This may arise because of
the expansion of operations in more rapidly growing and less saturated emerging
markets. The companies that have higher stock market capitalization in proportion
to the value of tangible assets reflect the success of their branding; specialty
apparel performs the best, followed by drug stores, cash and carry, and supermarket
retailers.