Competitive Environment Analysis in Global Retail Companies Operation Strategy: A Data Envelopment Analysis (DEA) Based Approach

This research aims to  find out the most competitive retail company operating in current global market based on the perspective of efficiency. A well-performed company is the company that is efficient in its operations. By using Data Envelopment Analysis (DEA) approach, this research differs from prior research because we used multivariable inputs, namely: asset, operational expense and the number of employees. The output variables used in this research are: total revenue, net profit, return on equity (ROE), return on assets (ROA), return on investment (ROI), dividend yield ratio and asset turnover ratio. The analysis results shows that six retail companies are “efficient” in its operation (efficiency score of 1.00), namely: Carrefour, Costco, Kroger Company, Home Depot Inc, JD.com Inc Adr and Alibaba Group Holdings Ltd ADR. Therefore, these companies are considered the most competitive in its operation strategy in the current global market, whereas there are four retail companies falls into category of “inefficient” (efficiency score < 1.00), namely: Walmart, Amazon.com Inc, Tesco PLC and Walgreens Boots Alliance Inc.


Introduction
Retailing serves the selling of goods and services toward the consumers, both for household and personal consumption. There are various types of goods available in retail shops, including: food, clothes, electronics, drugs, books, and many others (Marketos & Theodoridis, 2006).
Retail industry has a long process of supply chain, starting from supplier, importer, producer, distributor, wholesaler, and retailer. Thus the retail store is at the very end of the supply chain. Based on its supply chain, retailer directly interact with the end-consumers. Advances in information technology have been applied in this sector, both for data management, supply chain, and also in terms of marketing strategies. As the result, the consumers can enjoy a quick and quality services.
The retail industry is one of the sectors that is most sought after by capital owners. With a high level of sales, they managed to reap relatively large profits at the end of each year. One of the reasons is because this industry usually provides essential goods for the needs of the community. In 2019, Walmart as a giant retailer, ranked first in the largest revenue, amounting to US$ 127,991 million, followed by Amazon and Carrefour, each of which managed to record revenues of US$ 87,436 million and US$ 41,611 million.
Regarding the top three retail companies which managed to record the largest revenue in 2019, we will briefly review the company's profile. The first is Walmart; the largest retail company in the world headquartered in Bentonnile, Akansas, United States. The company was established on July 2, 1962 by Sam Walton. Currently, Walmart has 11,690 outlets worldwide employing 2,200,000 employees. The second is Amazon; This e-commerce company based in Seattle Washington was established by Jeff Bezos on July 5, 1994. The company, operating under amazone.com, has separate retail websites in various countries. For example, for India, the website name is Amazon.in, and so on. Amazon has 534 outlets around the globe, employing 798,000 employees. The third is Carrefour, a retail company headquartered in Boulognr-Billancourt, France. Established on January 1, 1958 by Marcel Fournier, Denis Defforey, and Jacques Defforey, Carrefour now are operating in America, Asia, and Africa. Carrefour has around 11,935 outlets worldwide and now employs 321,383 employees.
One interesting thing to note is that in terms of its revenue, Alibaba was ranked tenth in 2019 as the company managed to make a profit of US$ 7,397 million. This means that of the top ten retail companies operating in the global market, Alibaba has been ranked first in terms of profitability. Alibaba is an e-commerce giant headquartered in Binjiang District, Hangzhou, China. The company, founded by Jack Ma in 1999, now employs 116,519 employees. The top ten global retail companies based on revenue in 2019 are presented below. In this regard, the researchers conclude that it is very important for company managers to conduct an environmental analysis to maintain a sustainable competitive advantage, including retail industry sector. In line with what Birkinshaw, Morrison, & Hulland (1995) suggest, that the analysis of the competitive environment is very important for corporate strategy, business strategy and competitive strategy in the global market. This statement also supported by Ward & Duray (2000) and Gong (2013), who emphasized that analysis of the competitive environment is very important for decision making in global retail organizations.
Previous research on the importance of analyzing the competitive environment for companies in an industry has been carried out using a variety of methods, both using qualitative and quantitative methods, some of which we present in the table below.

Global retailing industry
In this study, we conduct an analysis of the competitive environment through an efficiency perspective. Retail companies that are considered the most competitive are those who are most efficient in their operating strategies in a global market environment. We measure it with the Data Envelopment Analysis (DEA) approach.
To the best of our knowledge, this research is different from the previous mentioned researches , especially in terms of the measurement approach used. Although some previous studies as shown in the above table also have used the DEA approach, the input and output variables are different. As research by Ko et al. (2017), the input used in its DEA model is: store size, number of items, number of employees and rental costs. While the output used is sales revenue and number of customers.
As research by Liu et al. (2018), the input used in tis DEA model is: outlets, warehouses, supplier and inhabitants. While the output used is market concentration, consumer spending and market share. As research by Gong et al. (2019) the input used in its DEA model is: supply chain coordination and sustainability level. While the output used is: cost competency, flexibility competency, social competency, environmental competency and business performance. This research is different from the previous researches since in this research we used multiple input variables, namely: assets, operating costs and number of employees. We also use multi output variables, namely: total revenue, net profit, ROE, ROA, ROI, dividend payout ratio and asset turnover ratio.
Based on the gap research we feel it is very important to conduct this research, with the aim of: first, to find out the most competitive retail companies operating in today's global market environment, viewed from an efficiency perspective. A wellperformed company is the company that is efficient in its operations. Second, trying to give a picture of solutions to companies that are not yet competitive/efficient, on how to improve their performance.

Literature Review 2.1. Competitive Environment Analysis
Basically, strategic management is about how to obtain and maintain competitive advantage. This term can be interpreted as anything that can be done much better by a company when compared with rival companies (David & David, 2017). In strategic management theory, it is emphasized that to be able to maintain its competitive advantage, organizations must adapt to their environment. This has long been echoed by Ginter & Duncan (1990), that environmental analysis is an integral and very important part of the strategic planning process itself. Furthermore, David & David (2017) stated that one important part of the analysis of the external environment is identifying competing companies, determining their strengths, weaknesses, capabilities, opportunities, threats, goals and strategies. Wheelen, Hunger, Hoffman, & Bamford (2018) assert that it is essential for the managers to understand the environmental context in which their organizations compete before formulating business strategy. It is impossible for companies to design strategies without a deep understanding of the external environment. Wheelen et al. (2018) further explains that environmental scanning is a comprehensive term that includes monitoring, evaluating, and disseminating information relevant to the development of organizational strategy. After management has captured all aspects of the external environment that have an impact on the business, then the company's competitive advantage can be determined.
Industry is defined as a group of companies that produce similar products or services, such as soft drinks or financial services. Conducting an analysis of stakeholder groups in an industry is very important, for example an analysis of suppliers and customers in the environment of a particular company is part of the industry analysis.
Meanwhile Hitt, Ireland, & Hoskisson (2017) explained that to achieve strategic competitiveness, companies must formulate and implement a value creation strategy. Strategy is a set of commitments and integrated and coordinated actions designed to exploit core competencies and gain competitive advantage. However, to achieve competitive advantage, the company must be responsive to the changing environment. In fact, even adapting to the local environment, sometimes companies have to make big changes. One of the companies which adopted and demonstrated this strategic is Abibaba, which has now become a leader in its industry as one of the most successful online sales facilitators in China and is striving to become a successful global business.
According to Hitt et al. (2017) a company achieves competitive advantage when they are able to implement strategies that create superior value for customers and cannot be duplicated by the competitors or are too expensive to emulate. However, it is important to note that there is no permanent competitive advantage in the company.
In 1997, Russo & Fouts conducted a research on the relationship between the company's environmental performance and the level of profit generated (profitability). The results indicate that: a) a high level of environmental performance is associated with increased profitability; b) the greater the company's growth, the greater the positive impact of environmental performance on company profitability. Russo & Fouts (1997) links corporate environmental performance with three aspects, namely: a) physical assets and technology; b) human resources and organizational capabilities; and c) intangible resources. Where intangible resources are the reputation of leadership in caring for the environment, so that ultimately it can increase sales among customers who are sensitive to the problem (environment) (Russo & Fouts, 1997).
A research by McKinsey & Company in 2011 found that an analysis of the external environment was the most important information for executives to consider when developing company strategies. The results prove that there is a positive relationship between environmental analysis and profit (Wheelen et al., 2018). Golovko & Valentini (2011) found out that internal environmental factors, in this case innovation has a positive effect on company growth. Other research by Pang et al. (2013) shows evidence that environmental factors such as market share, rural populations and politically divided governments have a moderate effect on the relationship between information technology and administrative efficiency, and several environmental factors that are treated as control variables in their research, such as population, household income and gross domestic product (GDP), also have an influence on operational efficiency.

Data Envelopment Analysis (DEA)
DEA has been widely studied, used and analyzed by academics who understand linear programming. DEA was developed to measure organizational performance. This technique has been used successfully to assess the performance of a number of organizations that use a variety of similar inputs and also produce the same variety of outputs. The efficiency measured in DEA is known as Decision-Making Unit (DMU). Jadi DEA measures how efficient a DMU is in using available resources to produce a set of outputs. Linear programming is the underlying methodology that makes DEA very powerful when compared to other alternative productivity management tools. DMU can include manufacturing units, large organizations such as universities, schools, bank branches, hospitals, police stations, tax offices, companies and so on. The DMU performance assessed in DEA uses the concept of efficiency or productivity, which is the ratio of total output to total input. The best performing DMUs are given an efficiency score of one or 100 percent (Ramanathan, 2003).
Taylor III (2016) also states that DEA is a linear programming application that compares a number of service units of the same type, such as banks, hospitals, restaurants and schools based on their inputs and outputs. The results of the model solution indicate whether certain units are less productive, or inefficient, compared to other units. For example, DEA has compared hospitals where input includes hospital beds and staff size and output including patient days for different age groups. Liu et al. (2018) explain that DEA is an important non-parametric method in management of production and operations. As an optimization method, DEA enables multi-input, multi-output measurement of the relative performance of production units and has been widely used to assess operational performance in various industries.
In the classical DEA model there is an implicit assumption that all inputs and outputs are 'discretionary variables', which can vary depending on the policy of the company manager. The non-discretionary DEA model seeks to overcome the problem of input from the external environment. Input 'non-discretionary variables' (Cooper, Seifod, & Tone, 2006), such as economic and environmental factors, are where companies do not have the ability to decide or adjust according to their own discretion or judgment. Such inputs are important to be taken into account from the industrial environment when we evaluate operational efficiency, especially in retail companies.

Operational Performance
Many researchers in the operations management community are interested in evaluating the performance of retail companies and assessing the impact of improved operations, both on operational performance and on financial performance.
Most retail company performance measurements use a number of financial measures, such as return on investment (ROI), return on asset ROA), or return on capital employed (ROCE) (Panigyrakis & Theodoridis, 2007). Meanwhile according to Liu et al. (2018), retail company performance can be seen through its level of productivity, such as: inventory turnover ratio, accounts receivable turnover ratio, total assets or current assets turnover ratio, gross margin, and long-term stock returns. Many researchers criticize such performance measurement models, because they fail to measure various dimensions of performance. Explicitly, there is still limited research that considers aspects of the competitive environment and operating strategies in global markets relating to the operating efficiency of retail companies.
In fact, for it is very important for retail company to do environmental analysis both internal and external. It is important to note that retail companies in their operations rely on their supply chains, where they will face strong pressure from various stakeholder groups, such as end customers, industrial customers, suppliers and financial institutions (Hendricks & Singhal, 2005).
Retail companies operating in various regions will certainly develop diverse business models that are in accordance with the characteristics of consumers in the region. They also must adjust to the diversity of policies, culture, legislation and politics in the area. As a result of the diversity of such treatments, it may produce varying levels of efficiency from each retail company. This is consistent with the statement of Slater & Narver (1994), that the competitive environment in various regions affects the operational efficiency of retail companies.
Nowadays, globally integrated retail companies operate in a highly competitive market environment. The operations strategy can be carried out by importing governance management from home countries or mimicking the governance management practices of successful local companies. It can help them carry out their responsibilities, make it easier to make relevant decisions so they can be efficient in operations.
Measuring the performance of retail companies is a complex phenomenon (Liu et al., 2018). Researchers often face difficulties in trying to get accurate financial performance measures. The most common problems are information sensitivity and the unavailability of information for the public. However Panigyrakis & Theodoridis (2007) has measured the business performance of retail companies (supermarkets) in Greece, using two dimensions, financial performance and non-financial performance. Financial performance is measured by four indicator; total sales, growth rate of sales and gross margin and Non-financial performance is measured by three indicators; market share, space productivity and stock age. The findings indicate a positive relationship between market orientation and the performance of retail companies. In other words market orientation is an important determinant of company performance. Market orientation is defined as the company's ability to understand customers, competitors and environmental factors in a sustainable manner that enables them to act according to current market trends.
Meanwhile Johlke & Iyer's research (2013), regarding the performance of retail companies in the United States proves that employee ambiguity towards customers and external customer mindset sets are related to sales performance. Mertens, Recker, Kummer, Kohlborn, & Viaene (2016) conducted a research on constructive deviance as a driver of performance in retail companies. The study was conducted on food retail stores operating in Australia. The results prove that constructive deviance that occurs in retail companies can improve organizational performance. Therefore the application of constructive deviance as a strategic tool in retail companies can be considered. Constructive deviance is deviant behavior carried out with positive intentions that aim to provide positive or beneficial results for the organization without harming other parties or violating norms at a higher level.

Research Method 3.1. Research Object
This research focuses on the top ten retail companies operating in the global market, as presented in the table below.

Research Variables and Data Collection
There are three input variables used in this study, namely: assets, operating costs and number of employees. In addition there are seven output variables used, namely: total revenue, net profit, return on equity (ROE), return on assets (ROA), return on investment (ROI), dividend payout ratio and asset turnover ratio. Data was obtained from financial reports published on the investing.com website. We focus on the financial statements of the top ten retail companies operating in the global market. The operational variables in this research are presented in the table below. The higher the ROI of a business segment, the greater the profit generated from each dollar invested in its assets. ROI is measured in percentage (%).

Dividend yield ratio
Dividend yield ratio is used to measured rate of return (only in the form of cash dividends) received by the investor who purchase ordinary stock at the current market price. Dividend yield ratio is calculated by dividing the dividend per share with the market price per share. This ratio is measured in percent (%).
[9] Ratio Asset turnover ratio Asset turnover ratio is defined as sales divided by total assets. This ratio shows how many sales are generated from each dollar of company assets. This ratio is measured in percent (%).

Data Analysis
Data Envelopment Analysis (DEA) approach is used for data analysis in this reserach. DEA is a linear programming application that compares a number of company units in the same industry. The results of the model solution provide an indication whether a particular company is less productive or inefficient, compared to other units (Taylor III, 2016, p.164). According to Storto (2013), DEA has the advantage as it is able measure multi-variable input and multi-variable output. In this research, Ten retail companies operating in the global market are treated as a decision making unit (DMU).
The formula used to calculate unit efficiency (Ragsdale, 2008, p.103-104;Ragsdale, 2018, p. 107-108) is as follows: (1) Where: Oij = the value of unit i on output j Iij = the value of unit i on input j Xj = non-negatif weight assigned to output j Yj = non-negatif weight assigned to input j nO = the number of output variables nI = the number of input variables Objective function: (2) Constraint function: ∑ =1 ≤ 0 Where k = 1 (4) The weighted input weight for the unit under investigation (unit i) must be equal to 1 (one), then: ∑ =1 = 1 (5) To provide accurate results, in solving this problem we use the parameter solver tool available in Microsoft Excel. Macro facilities found in Excel were also used so that the calculation can be conducted simultaneously. The efficiency score of a DMU must be less than or equal to one (≤ 1.00). If the score isequal to one (= 1.00), then the DMU is said to be 'efficient', or has 'good performance'. Whereas if the score of DMU is less than one (<1.00), then the DMU is said to be 'inefficient', or has 'poor performance'.

Results
This research uses three input variables, namely: total assets, total operating costs and number of employees. In addition, there are seven output variables used, namely: total revenue, net profit, ROE, ROA, ROI, dividend payout ratio and asset turnover ratio. Data of input variables and output variables used in the analysis are presented in the table below.  For information, some of the companies in this research presented their financial report in different currencies other than United States Dollar (USD) . Tesco PLC presented their financial report in Great Britain Pound (GBP), Carrefour SA uses Euro (EUR), JD.com Inc. Adr and Alibaba Group Holdings Ltd. ADR uses Chinese Yuan (CNY). Therefore, for uniformity we converted the currencies into United States dollars (USD) using a currency converter (investing.com, 2020e). By using this tool, currency conversion can be done retroactively in accordance with the date of the company's financial statements, which are at the end of 2019.
To evaluate the efficiency of retail companies from unit 1 to unit 10, we formulated a linear DEA program with the implementation of the model as follows: To solve this complex problem, we used parameter solver tool and macro facilities found in Microsoft Excel for data processing. The results of data processing as shown in the table below.

Discussion
Based on table 7 above, we obtained the information that from the top ten (top ten) retail companies operating in the global market, there are six companies that are efficient in carrying out their operations, thus the companies are considered to be the most competitive company in the global market, They are: Carrefour, Costco, Kroger Company, Home Depot Inc., JD.com and Alibaba Group Holdings Ltd. While the remaining four companies, namely: Walmart, Amazon.com, Tesco and Walgreens Boots Alliance are considered to be inefficient in conducting operations in the global market. Thus it can be concluded that the companies are less competitive.
Although retail companies such as Walmart has the largest total revenue and Amazon.com has the second largest total revenue, the results of the model solutions show that they are inefficient. That is because they are unable to utilize available abundant input resources to produce maximum output.
Below we outline the DEA's suggestions for these inefficient retail companies to be more competitive in the global market environment, which can be seen from the composite value and sensitivity report.  Inc., it is recommended to decrease the number of inputs and increase a certain number of outputs, sequentially shown below this. 1.73 2.80 1.07 Based on the sensitivity report, for Walmart, Amazon.com, Tesco and Walgreens Boots Alliance to be "efficient", It is suggested for these companies to increase their output. There are two options available for Walmart. They are either increasing output by 159.52% when referring to DMU 3 (Carrefour), or by 226.33% when referring to DMU 8 (Home Depot). For Amazon.com there are four options available. They are either to increase output by 101.04% when referring to DMU 5 (Costco), or by 120.43% when referring to DMU 8 (Home Depot), or by 26.73% when referring to DMU 9 (JD.com), or by 47.19% when referring to DMU 10 (Alibaba.com).
In addition, Tesco has four options available. They are either increasing output by 18.10% when referring to DMU 3 (Carrefour), or by 25.61% when referring to DMU 5 (Costco), or by 80.33% when referring to DMU 8 (Home Depot), or by 4.06% when referring to DMU 9 (JD.com). For Walgreens Boots Alliance there are three options available. They are either to increase output by 63.93% when referring to DMU 5 (Costco), or by 22.90% when referring to DMU 8 (Home Depot), or by 21.01% when referring to on DMU 10 (Alibaba.com).

Conclusion
The analysis results shows that from top ten global retail companies operating in current global market, six retail companies are "efficient" in its operation (efficiency score of 1.00), Namely: Carrefour, Costco, Kroger Company, Home Depot Inc, JD.com Inc Adr and Alibaba Group Holdings Ltd ADR. Therefore, these companies are considered the most competitive in its operation strategy in the current global market, whereas there are four retail companies falls into category of "inefficient" (efficiency score < 1.00), namely: Walmart, Amazon.com Inc, Tesco PLC and Walgreens Boots Alliance Inc. It is implied that these companies were unable to utilize their resources (input) to produce maximum output.

Research Limitations
This research has limitations since a number of inputs such as: number of outlets, number of product items sold and number of suppliers have not been included in the analysis. In addition, a number of non-financial performance outputs such as: market share, customer satisfaction and number of customers have also not been included in the analysis. That is because the authors are having difficulty to obtain these data. It is expected that the limitation of this research can be refined further by future researchers, and it is possible for the next researcher to increase the number of years of observation to a minimum of five years.