Retailing was once a stay-at-home sector. A few retailers, such as Benetton and IKEA, seemed to travel well, taking their distinctive brands far and wide. But most were content to grow at home. Universally appealing product assortments are difficult to create, and far-flung, people-intensive retail operations are tricky to run. In consequence, the industry has remained more local and less concentrated than almost any other (Exhibit 1).

Since the mid-1990s, however, retailers have come under intense pressure from their shareholders to grow farther and faster, expressed in high share prices (Exhibit 2). That development prompted several retail groups to accelerate their overseas growth (Exhibit 3). Most of them were grocery and general-merchandise chains, including Carrefour (based in France) and Wal-Mart (the United States), and clothing chains, such as H&M (Sweden) and Zara (Spain).¹

Now, however, shareholders insist that retailers deliver not just instant sales growth from their foreign ventures but also substantial synergies and thus more profits. Yet creating value from dispersed retail operations is still difficult. For the past two years, we have examined the way international retailers manage their operations overseas. Successful companies seem to fall into one of three distinct models: replicators, performance managers,...