Beruflich Dokumente
Kultur Dokumente
Strategic Management
STU 22782
Submitted To IBAM
• Acquisition
Carrefour started business in 1963 by introducing the idea of hyper market by providing thousands
of products under one roof. Soon after the success of hyper market Carrefour started targeting the
customers with discounted stores. Carrefour is now world Europe largest and world second largest.
Carrefour Major Merger and Acquisitions
• 2003 acquisition of Italian retailer Hyparlo which increased its stake in Colombia from 55 to
100
• 2005 sold $264.1 million assets to Tesco in Czech Republic and Slovakia
The company started its business in France and adopted the organic growth strategy as the market
was not saturated at that time and company was also not so much financially strong. The company
used its assets and sales to develop its position in market and after two years company was in a
position to move in international market. Carrefour’s adopted the organic growth strategy in France
until it was in position of acquire its competitor. The company acquired the French retailing group
Comptoirs Modernes in 1998 which make the company the leading retailer in the country. The
company get benefit of both strategies to become largest, after the regulations imposed by
government on hyper markets which are more than 780 in France, the organic growth has stopped
and now competition is only on price. Carrefour adopted the same strategy in Belgium, Spain, and
Italy. In 2000 Carrefour merge with Promodes to become largest retailing group in Europe and
second largest in world. Its acquisition in Italy, Spain, Belgium and Romania make it largest retailer in
those countries.
In every country where Carrefour entered it focused on organic growth or acquisition. If we analyse
the countries where Carrefour is operating, it was the first international firm to be in those countries
giving it competitive advantage over its competitors. Countries where market is not saturated or
small in size company tried to make it presence by using its brand, hyper, supers, discounted and
convenience stores , however the countries where Carrefour was unable to make its impression it
has straight away gone for acquisition.
Both of these strategies seems to be good, as in saturated and big economies like Brazil, China,
Russia and India it is very difficult for any company to establish its brand because there are lot of
local players there which have major hold of the markets example could be Russia where 13 major
national and international player are having only 12 % of the market. Secondly if company takes time
for building its brand for long time in such market, it might lose the opportunity cost for the time
and investment. So acquisition can be good strategy for expansion. When any company or Carrefour
goes for acquisition it captures its market share in less time and save investment in building
business, it may provide with the knowledge and the talent sharing as well, even companies like
Tesco and Wal-Mart are also doing merger and acquisition in different countries. e.g. Tesco have
acquired Carrefour assets in Czech Republic and Slovakia, Tesco joint venture in India for Cash and
carry business, Tesco in final deal with Carrefour for purchasing its assets in Malaysia, Singapore and
Taiwan. Wal-Mart is also doing strategic alliance to get hold of Chinese market. Even Wal-Mart was
planning to acquire kopeyka in Russia for its entry to Russian market however it entry was stopped
by X5 market leader of Russian retail by purchasing the company in $1.6 billion.
We can say that acquisition is good strategy for Carrefour in countries like China, Russia, India, or
Brazil which have many cities with population in millions or in market where it’s difficult to get enter.
However Carrefour was the first international retailer in China so it focused on organic growth and
kept it at 20% for 2008 but keeping in mind the small acquisition as well. So we can say that
Carrefour was quite successful in it strategy of organic growth and acquisition. Wherever it has
acquired companies it has achieved its strategy of organic, sustainable growth, with fast return on
investment and market leadership. However there are many countries where Carrefour failed like
Russia, South Korea, Japan, Slovakia, and Czech Republic, Malaysia, Singapore etc
There were many other factors which were cause of its exit from those countries. Still Carrefour has
sold it operations in that country to companies like Tesco, E-Led. We can assume that Carrefour
could have it strategy to test new markets get acquisition of local player if its not successful sell
those asset to other companies. Overall we can say that country where Carrefour was first to enter,
and their were organic growth and it can increase its market share by increasing sales it focused on it
and also kept the idea of acquisition in mind for getting market leadership, and Carrefour history
shows that it has achieved market leadership in 17 countries out of 30 in which it operates using
both strategies.
2. There are many framework, concepts and model which can be used to understand the business
environment. Some of these framework are ideal for macro while some for micro environment of
the business, some with factors related to the market and product, however the most important
thing is these help the strategist in designing the business plan for company and to analyse which
factors are likely to effect the business operations, its day to day activities and up to which extent.
During the analysis of environment strategist need to answer the most possible question which can
affect business some of these are as follow.
What are our Strengths, weakness and possible opportunities and threats
What are our core competences
Should we enter this market or not (suitability, feasibility and acceptability)
Is market really attractive for long term growth and profit
What are political, economic, social and technological issue which may effect our business
Who are buyers and what’s their preferences
Competitors, market saturation, substitute, suppliers, distribution
Our strategy new product, market segmentation, Merger, acquisition etc
PEST Analysis
Pest analysis is used to understand the impact of external factor which may affect the business. Pest
analysis helps the strategist to analyse extent to which these factor can be changed and how change
in these factors can affect our business.
Political
Bureaucracy
Complicated Legislative Framework
Red tape
Corruption (e.g. Carrefour agreed to pay 15 % of Moscow Store Revenue for getting alcohol
licence)
IKEA in legal issues
Economic
Socio-Cultural
Technological
Economic
Russia in 4 Bs
Retail Market
$480 Billion
Oil & Gas Based
Potential
growth Market
Political 1. Market
Leader or In Socio-Cultural
Bureaucracy Top 3
3. Low Price Big City
Complicated 4. Acquisition
Carrefour Business Objective Good Spending
Legislative of local
& Strategy Habits
framework Quality
player Own Houses
Red tape 2. Lasting
Corruption Profitable
growth
Technological
Less developed
infrastructure
Less innovation
The PEST analysis suggest that the Russian economy is amongst the big four, a country with
population of 142 million and 14 cities with more than 1 million population, Russian retail market is
approximately $480 billion. Economic conditions depict us that country is highly attractive. Country’s
economy is based on the oil and gas sector which has positive role on market growth. Overall it is
high growth country market for long term potential growth. People have spending power and they
spend 94 % of their monthly income and in Moscow spending is high as salaries are double here.
Market is less developed in term of technological, lot of innovation can be done if company have
latest technological that can be advantage for company. However the country has political problem,
its bureaucratic, companies will have to deal with the politician and bureaucracy which are doing
corruption e.g. IKEA involvement in legal matters and Carrefour’s Moscow store 15 % revenue for
alcohol licence. Country has complicated frame work and incident like red tape may prevent
companies from entry.
Porter 5 forces
Porter 5 forces model is based on competition and applied to industry. This model has 5 forces
which can affect the industry.
Rivalry
This factor show the competitive rivalry amongst the competitors, important things under
considerations here are
Buyer power can affect the industry, usually they have the power to change prices, and however
important points are as
Supplier Power
Suppliers have significant affect on the industry in term of providing raw material and can affect the
industry
Substitute option
Porter 5 forces for Russian industry suggest that there is strong rivalry amongst the competitor with
respect to price and differentiation so if company don’t have economy of scale or different product
or service to it will have very low power. Buyers have no power as they can’t affect the power, they
are huge in number in million and have limited option to switch. People prefer unbranded local item
or low price items. Supplier are also having less power as the market is saturated and there are lot of
suppliers and there is switching cost as well due to current market crises. New entry is also not easy
due to complicated legal regulation and corruption which can cost huge to organisation. However
there is space for substitutes, options are available buyers can switch to local streets shed, and
corner shop. So overall Russian retail market has 3 stars which is favourably good for investment.
It does not address political and legal factors which are very important
It can only be applied to industry as whole (e.g. retail industry but can’t be applied on
mineral water or food industry alone) which can effect the final results
It does not deal with Merger and acquisition which can be done to reduce or eliminate
competitive advantage
Ansoff matrix is useful tool which tell the company to analyse their strategy is rightly chosen for the
market and product. It has four sections in market penetration it is usually suggested that in order to
increase current product share. This can be done either by offering new product to its existing
customer for increasing market share e.g. Pepsi started Mountain Dew or company can target
competitors customer through marketing or can attract non-user customer by offering additional
benefits e.g. Tesco offer points through club card.
When company decided to be in current market with new product it requires product development
by adding new features to existing product e.g. mobile with new technology or offer different level
of products quality e.g. Tesco products with different quality level or need to offer completely new
product. When company decides to go for market development; which is bit risky company, need to
find new market segments, with new modes distribution and geographical areas.
The fourth option is diversification this can be done when you are trying to enter new market with
new product. Which is again involves risk as it completely new market with new products so
company usually go for strategic alliance e.g. Tesco with Indian company to start cash and carry
business or merger e.g. Orange and T mobile or acquisition Carrefour taking Ahold
Market
Current New
Product or Services
Conclusion
It is concluded that these tool are quite helpful when used together to evaluate the market position
and business environment. We can’t use these tools alone because some of these are addressing the
internal and external environment of business, few with market and product, and some of them with
the company strength and weakness. When these tools are applied alone they come up with some
limitations so in order to get the maximum benefits strategist uses combination of these tools to
clarify all the question before entering into the new market.
• Multi format strategy (Hyper Market, Discounted Stores, Super markets, Convenience
Stores, Cash and carry and food service)
• Business Intelligence
• Innovation
Carrefour is company with innovation and knowledge management, started business with
revolutionary style of hyper market by introducing the idea of self service and thousand of products
under one roof. Carrefour has successfully implemented its idea of hyper market in France in
addition to discounted stores and became the top leader in France. Soon after that it started to
expand in Europe due to its innovative ideas Carrefour became number 1 company in Europe and
second largest in the world. The company idea of multi format strategy was source of its competitive
advantage and same idea is now used in capturing the new market.
Carrefour has strong brand recognition and is working under different names and banners
worldwide. Carrefour’s has adopted the differentiating strategy by using its multi format strategy
(hyper, super, convince stores) which was key for its organic growth in France, when it entered in
Europe particularly in Belgium, Spain and Italy it was very successful due to its multi format strategy
and wide range of brands. According to Carrefour annual report (2008) its 74% of its sale come from
these four countries. Multi format business strategy is Carrefour major competence which has given
competitive advantage to the company in Europe, Brazil, US, China and other Asian countries.
Carrefour has also adopted the cost leadership strategy for its brands using its hard discount stores,
Carrefour is offering different brand at lowest prices as compared to its local and international
competitors. The company can sustain its growth by introducing new idea according to the needs
and wants of the customers. And for this company has introduced customer oriented strategy which
completely focuses on customer and building relationship with customer and making them loyal.
Carrefour is extending its product line by adding new products bringing more innovation to its multi
format business and now focusing on customer’s needs according to the cultures, preferences, and
lifestyle, which was neglected in past and was reason for its exit from different countries. Example
for this could be Euro monitor (2007 cited in Raphael 2008) states that Carrefour is more successful
than Wal-Mart in Urumqi China where Carrefour is not selling any pork meat as its Muslim majority
area, while Wal-Mart has adopted the unified strategy for whole China is now behind Carrefour.
Another example could be Carrefour shopping service though internet in Brazil and home delivery
service.
Carrefour is also manufacturing the local product in China and as Chinese people prefer fresh and
natural food so Carrefour is providing them with organic and fresh food from China. The company
can sustain its competitive position by using its convenient and hard discounted store by offering
unbranded products which are cheap, like in Russia people prefer to buy for outdoor market, street
stands, corner shops and unbranded products.
Carrefour is dealing with thousand of brands especially in the field of food the company in now
manufacturing its products in the same country. Thus building strong relation with the distributors
e.g. Raphael (2008) stated that Carrefour has secured 160 kilometre square farms in China where
more than 40,000 farmers can work for producing fresh food, reducing the risk of suppliers and
procurement cost as well so giving them competitive advantage over Wal-Mart. In the area of
distribution company has developed centralised distribution channel as China has no national logistic
service so again building competitive advantage over its rival. However there are some negative
things associated with Carrefour e.g. no equal employment opportunities in Russia and Korea, fail to
understand Russian market; property procurement was also not good in Russia (not prominent, not
easily accessible) etc.
Organisations are growing rapidly due to the globalisation resulting in different types of cultural
issues. Data monitor (2010) states that Carrefour is doing business in 30 countries with more than
15000 stores including 475,976 employees. It operations include different geographical areas of
world including Europe, Latin America and Asia. Since the company is running business in different
countries having different culture and lifestyle, which are causing cultural issues due to which
company is facing problems. Since the majority of Carrefour expansion is due to acquisition so it
makes more problems. For example in when one company is acquire other company, two different
culture comes together and if management is unable to cope with change in culture it leads to
serious issues. Second type of culture difference comes when Carrefour enters in new country its
people have different culture, different way of lifestyle, spending habits which if not understood by
company leads to serious threat to company.
e.g. Carrefour entered in South Korea and failed to establish due to cultural problem. According to
White Book - European Retailers in South Korea & China (2002) hyper market was doing well for
Carrefour, however South Korean were asking more than price, they were demanding for positions
in management. Same type of issue was seen when Carrefour entered in Russia. There was no
representation of Russian people in management; it is very difficult for the company to survive in
this situation. This was the common mistake in majority of Carrefour exits.
There are number of ways through which Carrefour can manage cultural issue. For example
Carrefour is providing job to Chinese, According to Raphael (2008) Carrefour entire team in China at
domestic level comprise of Chinese. Carrefour want to encourage knowledge transfer to local
subsidiary so that it could achieve goals easily, which were not achieved in Korea due to the absence
of Koreans in management teams. Carrefour has not sell pork meat in Chinese city Urumqi due to
the majority population of Muslims. This decision has made Carrefour as market leader in city as
compared to the Wal-Mart who has unified strategy for all market. Moreover Carrefour is providing
fresh and organic food to Chinese according to their culture and life style.
Carrefour can manage the external cultural clash of the organisation by researching and adopting
the local culture, recruiting local people and serving customer according to their lifestyle and
preferences. Like Tesco aims to recruit those people who know local community well so that they
can serve in good way. The internal cultural issues which arise when two companies merge together,
they also merges two culture and two different types of people. So if one group is going to dominant
other it will create problems. In order avoid internal clash Carrefour may adopt the equal
employment opportunity regardless of employee origin and may try to promote the fairness and
equity while restructuring positions and structure of organisation. Adams (1963) argued that people
tend to compare on basis of efforts and output and try to remove any inequity found.
There are some ethical issue which also arise due to the Carrefour expansion, e.g. Carrefour agreed
to pay 15% of its Moscow store revenue to get alcohol licence. Such thing can raise issue from stake
holder or share holders. Robbins (2003) argued that employees consider management as benchmark
if they are practising high ethical standards then they communicate ethical expectation. So if
Carrefour follows ethical guideline it can avoid problem and can set example for employees.
References
1. DATAMONITOR (2010), Carrefour Company Profile, Retrieved January 20, 2011, form
Business Source Complete (University of Wales).
2. Exit Carrefour, Economist (2010), [e-journal] 396(8701), p77-77. Available through Business
Source Complete (University of Wales) [Accessed 20 January 2011]
3. Moreau, R. (2008) ‘Carrefour and Wal-Mart’s differing expansion strategies in China ’, Retail
Digest, p42-45.
4. RUSSIA: RISK SUMMARY, Emerging Europe Monitor: Russia & CIS (2010), [e-journal] 14(4),
p2-2. Available through: Business Source Complete (University of Wales) [Accessed 20
January 2011]
5. White Book - European Retailers in South Korea & China (2002), South Korea Shows Tesco's
Strengths, Carrefour's Weaknesses, Retrieved January 20, 2011 from Business Source
Complete (University of Wales).
Appendix
BCG Matrix
BCG matrix has the similar idea to product life cycle and can be applied to business unit or product
portfolio and allows the firm to show its growth and market share in business.
Market Share
High Low
Market Growth Rate
Suitability
Feasibility
Is strategy is realistic
Do we have right skills, knowledge and core competence
Do we have financial resources
Is this strategy workable
Acceptability
Company only choose that project which are going to benefit it. Selection of the project is based on
the strategy, opportunities, market threat if the project is suitable and beneficial for company then
its feasibility and acceptability is checked by analysing that organisation can achieve this and do we
have resources and is it acceptable to all stakeholder, management and share holders.
Beneficial Harmful
Strengths Weakness
Brand Name To much rely on acqusiton
Brand Recognition No Russian at managerial level
Brand Leader in many countries
Goodwill
World Number 2nd Retail
Company
INTERNL
Opportunities Threats
China and other Asian markets Political condition e.g. in Russia
Russian market Low organic growth opportunites
Non Food business High acquisition prices
SEIM GE AOS
H Carrefour Entry
LE or Withdrawal ES MS
M Carrefour Exit
L ML H HILM
L M H
Company Strengths