Research on the diffusion of organisational practices in multinational enterprises has focussed largely on manufacturing firms in economically developed countries. This paper explores the transfer of human resource management and customer service practices to China by Japanese multinational retail firms. Such firms face competing pressures, the imperative and potential advantages of implementing the default position of taken-for-granted, well tried parent country practices are set against the necessity to gain legitimacy in host environments and to meet the needs and expectations not only of local employees but also customers. The findings highlight the complexity of transfer and indicate that local labour markets constitute a greater barrier to diffusion than cultural differences between multinationals’ parent and host countries.