For years, as leaders in many industries expanded abroad, retailers stayed at home. The exceptions were mostly European companies that had exhausted opportunities to grow in their relatively small domestic markets. As recently as 1996, foreign sales accounted for only 12 percent of the turnover of the world's top five retailers—a percentage far exceeded in industries as diverse as entertainment (34 percent), aerospace (35 percent), banking (48 percent), and petroleum refining (66 percent). Indeed, from 1990 to 1995, when other industries were sharply increasing the proportion of sales they transacted abroad, the mix of retailing stayed more or less unchanged.

But the business is now following the lead of other industries by globalizing, chiefly because of an expanding consumer arena, technological advances, deregulation, and the retailers' need to grow. The prime movers in this process, such as Carrefour, Wal-Mart, and Ahold, are helping to create new rules for retailers in general—expansion minded or not. When Wal-Mart, for example, bought two German retail chains within six months, it became the fourth-largest owner of hypermarkets in Germany and restructured the market there.

As global forces gather momentum and reshape the competitive environment, successful global players are going to create a "virtuous...