Retail Stratgey Case Study: Carrefour - Assignment Example

?Carrefour Executive Summary This is a case study of the current operations of Carrefour. This is an international retail organization operating in more than thirty countries. This study considers these organization’s retail strategy development, relationship marketing, and customer loyalty, international, supply chain management, information technology, store location, layout, financial aspects, and buyer power. Throughout this case study, Carrefour’s strategy is considered to show how it has earned its success in its line of operation and how it has maintained its competitive advantage. At the end, we will give strategic recommendations advice, which can give the organization more success. Introduction Carrefour is the second largest retailer in the world and the largest in Europe. The group currently operates in 32 countries of the world, mainly in Europe Asia and Latin America. It achieved this position in 1999 when it merged with French retailer, Promodes (Dawsonet al. 2006). It is a molt-format group operating hypermarkets, supermarkets, discount stores and convenient stores, but the hypermarket is the core format in almost every market of its operation (Dawson et al. 2006). This organization’s main competitor is Wal-Mart, which is the largest retailer in the world (Hitt et al. 2009). According to Hitt et al (2009), it tries to establish as many stores as possible in major urban areas to achieve economies of scale. Carrefour has continued to expand opening new stores and entering into new markets a process, which might make it the leading retail outlet in the world some years to come. Findings Retail strategy development According to Collins and Ruksad (2008), the three basic elements of a strategy statement are objective, scope, and advantage. The objective of Carrefour is to develop a business that can generate growth while responding to the changing lifestyle of its customers, the expectation of the civil society and major economic, social, and environmental challenges. The scope of a business consists of customer, geographic location, and vertical integration (Cillis & Ruksad 2008). The of this business is hypermarkets, supermarkets, discount stores, and convenience stores operating targeting all kinds of customers in several countries (Strategic positioning). The advantage of Carrefour is achieving low prices while maintaining high-quality brand (Hitt et a. 2009, 76). Mission statement A mission statement is a statement of values, which spells out the underlying motivation for being in business and the contribution that your business makes to the society. The mission of this business is providing quality products to customer at competitive prices (Hitt et al. 2009, 76). Its main goal is to be among the top three retail outlets in each of the country in which it operates. Analyzing the environment Analyzing the environment involves looking at various aspects of the environment you operate in and trying to understand how it affects your operation. Through analyzing the environment this organization comes to know various needs and characteristics of its target customers in the areas they operate which in turn helps it to adjust its services to suite them. To achieve these, the organization involves both internal and external specialists. Competitive industry model A competitive industry model has a large number of buyers and sellers, each of which buys or sells a small proportion of the total industry output. It has also a production of uniform products and services and complete relevant market information by all organization operating independently on this line of industry. It has also free entry and exit from the market. Carrefour operates in such kind of a market, which makes pricing of its products more difficult. It has a demand curve that approaches perfect elasticity at the market price. This organization cannot sell its products at a higher price because it will lose customers and at low prices because it might make losses (McGuigan et al. 2010). Making strategic choices Due to the complexity of the market in which this organization operates, it has to make various strategic choices. Making strategic choices comprises making strategic problems and interaction to the units of analysis, organizing research on strategic interactions and analyzing strategic problems. This sharpens the logics of various theories applied making choices, organizes the ways of thinking the people who make choices and breaks down the usual ways of operation that might have become counterproductive (Lake & Powel 1999). This organization’s making of strategic choices is what has made it to remain strong in an environment, which is very competitive. Analyzing the macro/micro environment Analyzing macro environment is looking at the broad (macro-level) factors like the political situation, legal, economic, social, cultural, and technological dimensions that may affect operation of the organization. Analyzing microenvironment is looking at the narrow factors like product or market of interest that affects the way the organization operates (De Mooij 2004). This organization does both the above analysis to make sure that the places they operate are favorable to their operation. Competitive industry models (macro) Competitive industry model in the macro level is similar to the one in the micro level. It involves every key player being allowed to make his choices of how to survive in the business. In this kind of model like in macro level one can neither set his prices too high not too low. If one put his prices too high, he is likely to lose customers and if he sets them too low, he is likely to make losses. Therefore, strategic choices are required for an organization to remain in business. Making strategic choices In the macro-level the organization need also to make strategic choices in order to remain in business. Some of the strategic choices that Carrefour makes are ensuring that their prices are slightly lower than those of their competitors in almost all their outlets while maintaining the quality of their products. To achieve this, the organization chooses to lower its cost of operation throughout its outlets. Porter’s generic strategies Overall cost leadership This organization implements an overall cost leadership strategy of lowering its cost of operation below the cost of competing organizations. This enables this organization to sell its products at low prices and still make profits. This gives it a competitive advantage over other organizations operating in the same line of business (Griffin 2010). Differentiation Carrefour on its effort to distinguish itself from its competitors pursues a differentiation strategy through maintaining high quality of its products and services. The quality products and services it provides its customers with give them a good reputation among its customers. Due to these its customer in some parts of the world are willing to pay more to obtain the extra value they perceive. This enables it to lower its prices in other part and yet remain in operation (Griffin 2010). Focus This is concentrating on a specific regional market, product line, or group of buyers. Either it may remain as differentiation focus for differentiating its products or an overall cost leadership focus in which the organization manufactures and sells its products at lower cost in the focus market (Griffin 2010). Carrefour applies both the differentiation focus and the overall cost leadership focus. This makes it to have a very big advantage over its competitors. Relationship marketing and customer loyalty According to Hennig-Thurau (2000), the seven key principles of relationship marketing are individualization, information, investment, interactivity, integration, intention, and selectivity. Customer’s loyalty, both as an attitude dimension and as a behavioral dimension, is something that the organization strives to attain (Hougaard & Bjerre, 2003). Carrefour implements almost all the seven key principles of relationship marketing in its operation. 4Principles and 4Relationships As Dogra (2007) state, the 4Ps of marketing are Product, Price, Promotion, and Place. The organization ensures that it has provided customers with quality product on very competitive prices. It also ensures that products are put in a place where customers can access and buy them. In addition, it makes sure that it informs its customers and the public about its products and promotions. According to Cristol & Sealey (2000), the 4Rs of marketing strategy are replaced, repackage, reposition, and replenish. Carrefour has always been making sure that it develops and positions products as replacement either for multiple or complicated products. It has also been bundling together a number of its products or services that were previously available from multiple sources. In addition, it has been providing a readily available continuous supply of zero-defect product or service to existing customer base at acceptable price points and lastly it always places a product in a place where a customer can easily find them. Loyalty ladder Customer loyalty is not achieved just once; it requires movement through a number of stages on the loyalty ladder. The customer loyalty ladder starts with a prospect who grows to become a customer after the first purchase. Later the customer becomes a client after a repeated purchase who later becomes a supporter or advocate after several repeated purchases. Lastly, supporter after advocating for the organization’s products grows to become a partner (Sahaf 2008). This organization has implemented several strategies to try to gain customer loyalty one of such strategies is the use of card points’ scheme. Loyalty measurement There are several measurements of loyalty. The most common measure is the patronage ratio. This is the purchase of the same products from the same supplier. Another measure is switching ratio, which are successive purchases from the same supplier. There is also the budget ratio which is the proportion of customer spend in the sector from preferred supplier. In addition to this, there is the cards points’ scheme, which involves issuance of point on purchased goods and redemption of points for goods. Lastly, there is the Lifetime Value (CLV) of the contributions of all customers to profit and overheads of the organization. Carrefour applies all these measure to determine the loyalty of its customers Transactional marketing This was the traditionally used kind of marketing. In this kind of marketing a purchase of a product by a customer does not forecast the probability of a future purchase. Also in this kind of marketing, the customer does not climb the loyalty ladder despite the number of purchases that he might make since the marketing process ends just after the sale of a product (Berndt & Brink 2004). This organization does not use this kind of marketing. Instead, it uses the relationship marketing strategy. International A definition International means operating or being found in more than one country. According to Czinkota & Ronkainen (2007), international marketing contains the freedom of unlimited growth potential. When an organization becomes international, it gains this freedom. Carrefour operates in 32 countries of the world thus; it is an international retail organization and hence has this freedom. International retail process This is the process of operating retail outlet in several countries. The retail organization might have expanded from its mother country due to either search for market or a search to become more efficient. The international retail processes can involve exports, imports, or investing. The process of investing in the context of international retail process involves setting up of a retail outlet in another country (Grunig& Morschett 2012). The international retail processes of this organization are importing and investing. This organization continues to set-up new retail outlet in countries where it is not yet in operation. Dimension of internationalization According to Fernie (2005), exploring the dimension of going international, how they shape or form the strategic decision, and making process can improve the knowledge of the decision makers thus preventing them from making errors in their decision about internationalization. The dimensions of internationalization are operations, concepts, management expertise, technology, and buying. Carrefour has several outlets operating in a similar way in different countries and it transfers retailing concept, which do not depend on domestic market to its new markets. It has also internationalized it skills and techniques and it practices transfer of experts from one nation to another. In addition, it uses high level of technology, which simplifies its operation thus giving it a competitive advantage. Lastly, it has increased efficiency in the supply chain through international trade. Influence on international retailing Several factors influence international retailing. Some of these include social geography, physical factors, political factors, structural factors, cultural factors, and economic factors. Carrefour through macro and microenvironment analysis understands these factors very well and is able to use them on its advantage. Simpson and Thorpe’s PLIN Model (1995) Models available in the process of retail internationalization are used in the basis of need, market environment, competition, and the company’s internationalization style. The most common conceptual model is PLIN (product, lifestyle, image, and niche). According to Rugman (2004), this model found by Simpson and Thorpe in 1995 is a simplistic investigation of category classification, merchandize offering, Lifestyle pattern of consumers; a retail image based on positioning and niche strategy within the area of differential advantage. Supply chain management A definition According to Marquez (2010), the concept of supply chain management refers to the means by which the organization engages in creating, distributing, and selling its products and services. It is unavoidable for any business, which aims to deliver more value in new ways, to be faster to market, to be more flexible in response to demand changes, and to lower cost its cost of operation. Physical distribution Physical distribution of products and services is an essential element of a supply chain. Carrefour ensures that its products are moved from one destination to another in the safest possible way. This ensures that quality is not lost in that process thus enabling its customers to enjoy quality products although they are mile away from where they are produced. They also use the safest and quickest means of transport. These means of transport depends of the type of product being transported. In choosing the mean of transportation, the organization makes sure that products reach customer in good conditions. Issues Like other international retail organizations, there are several issues, which affect the supply chain of this organization. These include product design, network design, logistic management, customer service, and others. Some of the products design that this organization deals with can only be handle in a specific manner or else quality will be lost. The network design its supply chain is complicated thus requiring expert to implement and its logistic management is expensive due to its size (Marquez 2010). Push or pull SCM Push supply chain management is one, which uses the push process strategy. This kind of supply chain management makes stock to be based on downstream orders rather than end demand and pushes products into the marketplace. Pull supply chain management on the other hand uses the pull process strategy where actual end demand drives production. In most supply chains like the one for Carrefour a mixture of push and pull, strategy is used to manage the conflicting objectives of efficiency and responsiveness (Bidgoli 2010). Information technology According to Kharana (2010), the application of information technology to business management is called Management Information system (MIS). This is very important in the current ways of operation of any kind of business. This technology makes management easier thus lowering the costs of operation. Carrefour is one of the organizations, which use highest levels of information technology in their management. These ways ranges from customer service delivery to communication between various organs of the organization. This is actually, what has given this organization a very big competitive advantage over its competitors. Store location and layout Most Carrefour stores are located in places of settlement where the population density is very high. This makes them accessible to a large number of customers. In the case when they are far from settlement areas, they are constructed with a large parking area and very close to the main roads. This makes sure that it is accessible to customers who use their cars and those who use commuter vehicles. The layout of this organization’s retail outlets is pleasing and enables customers to get what they want without much delay. They are organized in department thus when one needs something he only needs to go to the department where it can be found. They also have employees who can guide a customer to where he can obtain the product he wants. They operate on self-service principle thus a customer need only to pick the product he wants and pay for it in the counter. Financial aspect and buyer power This organization makes large volume sales in also its outlets in different countries. This is due to the number of customers that visit them on daily basis. As a result, the organization has very high profit margins. These large profit margins enable Carrefour to lower its prices and remain profitable. The organization also maintains a very good buyer supplier relationship, which ensures that the quality of its supplies is high and the price is discounted. This in return lowers its cost of operation thus enabling it to sell its products at lower prices Conclusion Carrefour has an ability to reduce its cost of operation. This gives it a competitive advantage, as it is able to lower its prices while maintaining the quality of its products. This has also helped it to build a strong customer base. The company achieves this by its team of employees who understand its objective and core values very well. This organization implemented several strategies, which have enabled it to stand strong in the market. Carrefour also does a thorough market analysis and environment analysis before into any market. Of late, it analyzed the Indian market thoroughly before entering. This minimizes its chances of making loss. It has also maintained a good relationship with its customers and suppliers. This has helped it to gain customer’s loyalty thus maintaining a large market share. This has also enabled it to run profitably in a very competitive environment. Recommendations Due to its competitive advantage of having low prices while maintaining the quality of their product, Carrefour should plan to get into the African market. In this market majority of people go for places where products are cheaper. Therefore, if Carrefour gets into this market they are bound to succeed. Carrefour also should consider venturing into the wholesale business. Given the customer loyalty they have gained and their ability to sell their products at a lower price. This can enable them to sell their product also to other retailers and still make profit. 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