Compare and contrast the strategies adopted by Wal-Mart and Carrefour in the Chinese market Wal-Mart and Carrefour are both the giants in the retailer industry in the world. They both have great economic power and a good reputation. As the economic globalization deepens, the two corporations have already entered into the Chinese market. According to McKinsey Quarterly (October 2009), Carrefour opened its first hypermarket in the capital city of China-Beijing in 1995 as a pioneer of foreign retailers. Wal-Mart followed, launched its first store in Shenzhen in the south of China.
China Daily, July 2008) However, during the period of the global recession, China’s economy has kept a stable growth. In addition to this, retail sales in China are 1 trillion and will have an annual growth of approximately 18%. Therefore China is no doubt the fastest-growing major retail market in the world. (The Economist May 2011) Thus the two giants both want to have a considerable large market share in China and this leads to a massive expansion of them.
Nonetheless, the two giants also met challenges ever during their expansion. Because of complex marketing environment and great competition from domestic retailers, Wal-Mart and Carrefour took several strategies. Some of the strategies were similar and some were entirely different. This essay will compare and contrast some of the strategies adopted by Wal-Mart and Carrefour. Wal-Mart and Carrefour both adopted the strategy to venture into second-tier cities during their aggressive expansion. Although the first-tier cities are of great significance to both retailers like Wal-Mart and Carrefour, the market has already been saturated. Then Wal-Mart and Carrefour turned their attention to second-tier cities to seek more opportunities.
They are expanding into second-tier cities located in less prosperous regions in central and western China. In the adoption of this strategy, Wal-Mart located its 100th hypermarket in Loudi, a city in Henan province, in 1997. It seemed that the new store opened in a pretty impoverished area of China. In December of the same year Carrefour opened a store in most western areas of China, Urumqi the capital of Xinjiang province. Actually, among Carrefour’s stores in China 40 percent are located in secondary cities. In order to catch up, Wal-Mart is also seeking for suitable second-tier cities to expand into. `Carrefour, Wal-Mart battle for market share in China’, 2008) The strategy to expand to second-tier cities suggests a market of great potential in the hinterland of China. Besides, the competition between the two giants is becoming more white-hot. Moreover, Wal-Mart as well as Carrefour planned to sell medicines in 1995. This is a strategy to expand the range of non-food products sold in the chain stores of the two retailers. The fact is that before 2005 over-the-counter medicine (OTC) had already been sold in Wal-Mart. Carrefour has not yet taken action to sell medicines but a similar plan has been reported.
As long as Carrefour gets permission from the State Food and Drug Administration it will begin to sell medicines in its chain stores. A pretty large number of distribution channels and strong economic power owned by Wal-Mart and Carrefour will help the promotion of the strategy. (`Wal-Mart, Carrefour eye medicine retail business’, 2005) The strategy indicates that Wal-Mart and Carrefour are on the way to enrich the types of products provided in their chains. This, in turn, can better meet the demands of Chinese consumers. To build up energy-saving stores in China is another similar strategy taken by Wal-Mart and Carrefour.
The strategy has two advantages. One advantage is to save the cost of each chain store. Specifically, by adopting this strategy the chains of Wal-Mart cost 23% less on electricity and 17% less on water annually. Carrefour, as an energy saver, also received a saving of one million Yuan from each chain store after taking the strategy. The great economic return has stimulated the two giants to speed up building energy-saving stores. Carrefour has invested 250 million Yuan as a start to take the strategy. As a result, its 136 stores were changed into energy-saving stores. 00% of Wal-Mart stores will also use the strategy at the end of 2012. (`Tesco, Carrefour, and Wal-Mart go green in China’, 2009) Another advantage of the strategy is to build up a good brand image by taking corporate social responsibility. Even though at the beginning, the cost to build up energy-saving stores is pretty high, the return is profitable in the long term. What’s more, the whole chain will be environmentally friendly. Although some of the strategies of Wal-Mart and Carrefour used were alike during their expansion in China, they obviously had adopted some different strategies.
One different strategy was related to format. Wal-Mart still focused on hypermarkets as they did in other countries as Moreau mentioned (2008), while Carrefour developed three different formats. They were Carrefour hypermarket, champion supermarkets, and Dia convenience stores. Compared with Wal-Mart’s strategy, it seems that Carrefour’s strategy performed better in China. Two formats had already achieved success in China and they would have a promising future as the president of Carrefour China said. (Child, 2006) Another difference in the strategy of Wal-Mart and Carrefour was the way to expand.
Large-scale acquisition along with organic growth was the choice of Wal-Mart in China. The purchase of the whole chain of Trust-Mart largely increased the size of Wal-Mart. The opening of 24 new stores enables Wal-Mart to double its number of stores in China during 2007. Unlike Wal-Mart, Carrefour put its main effort into organic expansion. In 2007 Carrefour opened more than 20 stores in China and claimed a growth of 20% every year. Essentially, the acquisition is a quick approach to expand in China in avoiding some constraints. But the worry from managers of Carrefour about integration may be a real problem. Moreau, 2008) In terms of distribution, Wal-Mart built central distribution centers. By contrast, Carrefour depended on local distributors. Both strategies have their advantages. Central distribution guarantees Wal-Mart to provide a unified service with good quality, whereas flexibility is the obvious advantage of Carrefour’s strategy. And flexibility helped the French corporation to meet the demands of local consumers. For Wal-Mart and Carrefour, both of the strategies have promoted their expansion in China. (‘Wal-Mart and Carrefour in China: Whose strategy is better, 2007)
Overall, Wal-Mart and Carrefour had both taken active strategies during their expansion in China. Some of their strategies were almost the same as they both intended to expand into second-tier cities, sell medicines, and build energy-saving stores. However, they had their own strategies referred to as a distribution, formats, and ways to grow. It is believed that only if the strategies were suitable for the Chinese market will Wal-Mart and Carrefour occupy more market share in the booming retail industry in China. Thus, there is still a long way to go to adapt to the Chinese market for the two giants.
- 21food (2009) `Tesco, Carrefour and Wal-Mart go green in China’, 21food [Online], (June 11th, 2009), http://www.21food. com/news/detail22071.html
- Child, PN (2006) `Lessons from a global retailer: An interview with the president of Carrefour China’, Mckinsey Quarterly [Online], (June 2006), https://www.mckinseyquarterly.com/Lessons-from-a global-retailer
- An interview with the president of Carrefour China 1799 China Invest (2005) `Wal-Mart, Carrefour eye medicine retail business’, China Invest [Online], (May 29th, 2009), http://chinainvest.com.n/E/invest/weekly/W20050530-01.html
- Economic Times (2008) `Carrefour, Wal-Mart battle for market share in China’, India Times [Online], (February 21st, 2008), http//articles.economictimes.com/2008-02-21/news/284568731wal-mart-vice-president-wal-mart-battle-retail-giants
- Liu. J (2008) `Smart market’, China daily [Online], (July 21st, 2008), http://www.chinadaily.com.cn/bw/2008-07/21/content 6862213.htm
- Mckinsey Quarterly (2009) `China’s retail revolution: An interview with Wal-Mart’s Ed Chan’ Mckinsey Quarterly [Online], (October 2009), http://www.mckinseyquarterly.com/Chinas-retail-revolution-An-interview-with-Wal-Marts
- Ed Chan 2459 Moreau. R (2008) `Carrefour and Wal-Mart’s differencing expansion strategies in China’ RETAIL IN PRACTICE Supplychainer (2007) `Walmart and Carrefour in China: Whose strategy is better’ Supplychainer [Online], (February 24th, 2007), http://www.supplychainer.com/50226711/walmart-and-carrefour-in-china-whose-strategy-is-better.php
- The Economist (2011) `Who will conquer China’s rampant retail market? Probably no one’, The Economist [Online], (May 19th, 2011), http://www.economist.com/node/18712457/print
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