It was somewhat disheartening to see the always candid Gerry Harvey (Australia’s richest retail tycoon) lamenting the poor performance of his firm, Harvey Norman, in Ireland. A big box retailer of home electronics, furniture and white goods, Harvey Norman is one of the few Australian retailers to venture off shore in recent years (see my discussion of the few in a chapter I wrote last year for a book called The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation).
The firm has chosen an odd mix of locations – Singapore, Malaysia, Ireland and Slovenia (along with the obligatory NZ). The international adventure now makes up 24 percent of the business on a simple store count basis. As these stores are all company owned, whereas 98 percent of the Australian stores are franchised, they represent (potentially) a more significant source of revenue. The simple reason for the dramas is that the Irish economy is faring a lot worse than Australia. However, there are still question marks over Harvey Norman’s ability to build sufficient competitive advantage in its international operations.
In Australia the firm benefits from enormous economies of scale in both purchasing and marketing (the firm is one of the biggest media spenders in the country). Also, it utilises a distinct within store franchising system. A given store might include a furniture franchisee, a white goods franchisee, an electrical goods franchisee and a computer products franchisee. This allows appropriate specialisation from sales (and purchasing) staff and offers the usual motivation benefits of entrepreneurial franchisees. The Australia operations also has a nice side-business in property management and leasing.
It looks like very few of these competencies have been transferred offshore, with all stores company owned, and limited scale in a given country (beyond NZ). With troubles in the retail market at home, and Harvey Norman much more exposed to consumer timidity than their upstart competitor JB Hi-Fi (who sell a lot more software such as DVDs, video games and CDs rather than big-ticket hardware like TVs), it is hard to see Gerry and co diving into more international expansion any time soon. Looks like the paucity of Aussie internationalisers may continue, at least in the retail domain.
Tags: Australia, big box, economies of scale, electronics, franchises, franchising, Gerry Harvey, Harvey Norman, homewares, International business, International retailing, Internationalisation, Ireland, JB Hi-Fi, Malaysia, retail, Singapore, Slovenia