Business Strategy of Carrefour Analysis

Table of Content

The rapid growth of emerging market economies in Asia have seen a marked increase in disposable incomes leading to a considerable increase in confidence and consumption. The Asian Financial Crisis in 1997-98 that caused abrupt withdrawal of international capital proved to be a temporary setback and ground has been regained where it had been lost. Today, Asia shines in the global economic landscape and looks set to take over the U. S. as the new engine of growth in the global economy.

In a growing economy, convenience matters and higher education as well as urbanization have lead Asians to embrace Western brands with gusto. The stores with the biggest advantage in terms of consumer preference are those with a wide variety of products to offer as was the case with hypermarkets, supermarkets and online retailers. Nevertheless, many countries in the region and elsewhere are experiencing severe economic difficulties as a consequence of the current turmoil in the world’s financial markets. The spillover effect of this turmoil has not spared the retail industry.

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A decline in foreign investment and a possible increase in unemployment or political turmoil in neighboring countries will all affect disposal incomes negatively among Asian consumers and certainly undermine retail sales negatively. However, times of great challenges are also times of great opportunities. In the midst of great uncertainty and increasing volatility in the overall business climate, Carrefour, the world’s second largest retailer aims to accelerate growth. Through a strategic lens, we seek to review and identify the various key areas that Carrefour need to focus so as to gain a stronger foothold in Asia. The Research Background The purpose of the assignment is to analyze the business environment of Carrefour and ensure strategic integration of its people and policies with the aim of bringing more clarity to the company’s marketing objectives and business strategies in Asia. As such, we conducted in-depth research to gather as much up-to-date data and information as possible to provide a solid and detailed analysis as well as comparison of Carrefour against the leading players in the retail industry in Asia.

Currently Carrefour operates in China, Taiwan, Thailand, Malaysia, Indonesia and Singapore. Carrefour can capitalize on their established reputation and built more new outlets in other different countries of Asia. Hypermarkets are getting more and more popular in Asia, it is important for Carrefour to develop sustainable competitive strategies that will attract more customers and the customers will keep going back to Carrefour. Sales in Asia currently accounts for 7% of Carrefour annual revenue for the year ending 2008 . As Asia’s economy is developing, people have higher spending power and they see the convenience and convenience of purchasing in a hypermarket. Carrefour should expand more rapidly and gain a bigger market share. Competitors are advertising aggressively in establishing their brand and creating awareness in the consumers mind. Competition is intense in all regions. – Timing for entering a new region, customer oriented service, locations of the hypermarkets are the core values that determines the success of the hypermarket – Due to the current economic slump, consumers purchasing power have dropped and these might affect Carrefour’s business, however it might be a blessing in disguise as consumers are constantly looking for cheaper alternatives and cut down on other forms of spending but instead purchase more necessities from a hypermarket Direct competitor environment Issues Justification Carrefour’s competitors – Carrefour current biggest competitors are hypermarket/supermarkets operators like Wal-Mart, Tesco and local retailers – What are their strategies – All the hyper markets compete in low prices, Wal-Mart has a strategy of acquisition of local firms and an offer of everyday low price as they purchase directly from factories, they demand high price reductions and as they are the world’s top retailer, suppliers often give them low prices. – Tesco has a strategy of partnership and they partnered with Shanghai Hymall Commercial Retail Group in order to gain a substantial presence in China. – Local operators formed mergers between each other to fend off foreign retailers. – Strengths and Weakness- Walmart and Tesco are both financially strong as they are internationally well known. They are able to import more international brands.

Use excess cash flow from Carrefour’s Europe and invests for marketing or market growth in Carrefour’s France since they are in high market growth rate position. Carrefour’s Asia and Latin America should research on competitors with potential for growth and launch an acquisition to increase their overall market shares. Carrefour’s Asia should cut cost by closing the non-performing outlets like Carrefour’s Japan to conserve cash and maintain healthy cash flows. Carrefour’s France must maintain its market leadership and reinvest the profits into further business growth Investing in Research and Development by Carrefour’s Europe to achieve operational excellence and maintain profitability.

The key issues affecting Carrefour are price concerns, ever-changing consumer tastes and preferences, market saturation and intense competition. Hence Carrefour needs to build its reputation as a low price and responsible company that is attuned to consumer preferences and lifestyle needs to differentiate itself from close competitor like Wal-mart. This help to market Carrefour as the preferred retailer wherever it operates. Some of the factors that have enabled Carrefour to stay ahead of competition so far are brand equity, diverse products, excellent service, and strong international presence. However, the retail industry is highly dynamic with strong competitors offering products and services that are similar.

Carrefour is conveniently located in city centers or shopping malls close to residential communities and also offer free shuttle services. Carrefour can give a total new and unique shopping experience to its customers, as restaurants, cinemas, department stores, and coffee shops are often located on the premises of Carrefour, allowing customers to plan other leisure activities around shopping. Carrefour formula for success is to bring freshness, varieties at low prices. The operational models requires high volume purchasing of supplies that contribute to Carrefour high bargaining power to achieve low costs and thus delivering low prices to the consumers.

Due to its hypermarket concept, Carrefour has an extensive range of “localized” products which local customers can enjoy great convenience of one stop shopping for various products at low price. With better strategic management and focusing on the customer necessities and products would make Carrefour more resistant towards vitalities and even achieve strong Brand awareness. The good locations of Carrefour further enhance the convenience for the customers, it increases market share. Due to hectic lifestyle of Asians, convenience is an important factor or consideration for the customers, as they do not want to spend long time on the transport to somewhere remote for just some items. Carrefour attracts shoppers into the store with its low price strategy than its competitors.

However, risk related to fixed import transactions is hedged via forward currency purchases. Investments planned in foreign countries are sometimes hedged by options. Local financing operations are generally conducted in the local currency. The maturity of foreign-exchange transactions is less than 18months. Human Resource Management in Asia It is important for Carrefour to understand the legal framework such as labour law, employee welfare and potential issues in the human resource management as they expand in Asia. Defined-contribution schemes are systems whereby the company makes periodic fixed contributions to external benefit agencies that provide administrative and financial management.

These schemes free the employer from any further obligation, with the agency taking responsibility for paying employees the amounts owed them (basic Social Security pension schemes, complementary pension schemes and pension funds with fixed contributions). 3. Risk Management in Asia The monitoring and control of decentralized risk exposure depends on local managers in the Asia countries, who are as close as possible to the risks involved in the activities they perform or supervise. The process of drawing up a strategic plan offers a chance to take stock of the principal risks and outside opportunities. Monthly performance reviews contribute to detection of risk’s appearance and occurrence. In their role as guarantors and promoters of progress, support services may identify risks and suggest action plans to line managers with a view to controlling them.

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