Carrefour Company Analysis - Assignment Example

Full Topic: Carrefour Company Analysis Introduction New business giants invent new business models–or strategies–for selling as markets globalise, competition intensifies, and both consumers and investors become more demanding. The current study examines the business strategy of Carrefour which is listed as the Europe’s leading retailer and the second-largest in the world followed by Wal-Mart. Carrefour was founded by Fournier, Badin and Defforey, two families who ran a discount supermarket in Annecy, France in 1959. Creating, acquiring and operating, in France and abroad, stores for the sale of all items, products, food and merchandise and, secondarily, providing within the said stores all services that may be of interest to the customers was the purpose of establishing Carrefour (2012, p.272). This multi-format, multi-channel and multi-local group comprises of 9,994 stores which operates in thirty three different countries. Followed by the first hypermarket which was opened in 1963 in Sainte-Geneviève-des-Bois (Essonne), the company out-sourced in 1973, starting business in Spain (2012, p.05). During the consecutive years Carrefour expanded throughout the Europe, America, Middle-East and Asia and currently, more than 10 million customers annually visit Carrefour stores while 25,000 suppliers provide fresh food, grocery and other items such as small house-hold goods, textiles, home appliances (photo equipment, DVDs, sound and multimedia equipment) to its stores which are established worldwide. The objective of the current study is to analyze the activities and strategy of Carrefour which leads to its competitive advantage in the market and adopt Porter’s five forces competition theory model (Carrefour, 2012). Market Position and Capabilities of Carrefour The principal risk factors in the industry have been identified and categorized by Carrefour. These risk factors include, 1) business environment: Political and social environment, Economic environment and market volatility, Environment, pressure and regulatory changes, Changes in the sector and the competitive Environment, Natural disasters and climate change, Terrorism and crime 2) strategy and governance: Strategy definition, adjustment and implementation, Compliance and fair practices, Corporate responsibility, Environment, Disputes/Litigation 3) operations: Relevance and performance of economic and business models, Operational and financial control of growth and expansion, Partnerships and franchising, Control of the supply chain, Product quality, compliance and safety, Safety of people and property, Human resource management, Continuity, integrity and confidentiality of information systems and Control and valuation of assets and 4) financial: Market risk, Liquidity risk, Interest-rate risk, Foreign-exchange risk, Equity risk, Quality of financial management, budgets and reporting and Credit risk. Carrefour has articulated specific strategies under each of the above aspects to remaining its competitiveness in the market (2012, pp. 116-123). When articulating new business strategies the firm is seen as a pool of scarce and valued resources and capabilities that are leveraged via a particular business model, high returns are believed to come from challenging industry wide assumptions and not adopting the same policies as everyone else, inspiration comes from customer dissatisfaction, and boredom, radical, discontinuous change creates more value than incremental improvement in operational effectiveness and strategy focuses on shaping some aspect of the future environment (Styles and Goddard, 2004). The figures show that this group is competent in both the supply chain management (business competency) and environmental management (social competency) example, its annual net sales amounts approximately 76,789million Euros of which forty-six percentage proportion is generated in France, twenty-seven percentage proportion in Belgium, Spain, Italy, Poland, Romania and Turkey, nineteen percentage proportion in Latin America (Argentina and Brazil) and eight percentage proportion in Asia (China, India and Taiwan) (2012, p.07). These figures are illustrated in Figure 01 below. Figure 1: Percentage Proportion of the Net Sales Worldwide The proceeding chapters describe how Carrefour’s adopts Cost Leadership, Differentiation and Niche strategies to gain competitive advantage in the market. Multi-Format and Multi-Channel Stores Carrefour stores operate in a range of different formats and channels namely, hypermarkets, supermarkets, convenience stores, cash and carry stores for professionals and hypercash stores which are specifically designed to address the requirements of different consumer segments. Some of the formats are designed by vertically integrating the stages in the value chain example, Hypercash stores combines the benefits of Cash and carry stores (wholesale) and convenience of hypermarkets (retail). By creating specific investment between stages helps firms to internally exploit their pool of knowledge and capacities, and to guarantee quality of inputs and services employed. High level of vertical integration is not recommended to the firms operating in industries where high demand fluctuations may occur (Díez-Vial, 2007). However, the low market demand elasticity in the retail industry is favorable for Carrefour in its vertical integration process. Carrefour has also designed stores for achieving the competitive advantage by differentiation in a narrow part of the market example, Montagne stores for the shoppers in ski resorts. Moreover, a number of banners have been established to implement the Niche strategy in the company. The store types of Carrefour are further described below (2012, pp.8-14) Supermarkets Supermarkets are considered as the leading grocery format of Carrefour. It had 3,454 supermarkets under Group banners and 1,538 consolidated supermarkets throughout the world by the end of 2012. These modern and welcoming stalls provide fresh products, a selection of non-food products at competitive market prices (Carrefour, 2012). Hypermarkets Carrefour’s hypermarkets feature a very wide range of food (groceries and fresh products) and non-food products (clothing, electronic goods and decorative products). Broad selections of competitively-priced products that are suited to various consumer habits are available at these stores. In 2012, Carrefour had 1,366 hypermarkets throughout the world and introduced the “Lowest Price Guarantee” campaign which is an initiative designed to offer the most competitive prices in the market (Carrefour, 2012). Convenience stores Carrefour had 5,010 convenience stores in 2012, established under a number of different franchise banners which give a clear idea of their purposes example, Express: for daily purchases, City: features a range of ready-to-eat products aimed at urban dwellers in a hurry, Contact: everything a rural family needs and Montagne: for shoppers in ski resorts. Carrefour is currently expanding the network of convenience stores for facilitating a convenient and close to home, everyday shopping experience to its customers. Long opening hours and providing a wide range of products and services is considered as important aspects of convenience stores (Carrefour, 2012). Other types Cash and carry stores provide a range of food and nonfood products at wholesale prices, together with bespoke services to caterers and food businesses. Major-brand products, own-brand products, fresh products and products intended to be resold to grocers can be found in these stores. The product range includes specific items useful for catering such as assembly and hygiene products, crockery are available in cash and carry stores. At the end of 2012, Carrefour had a total of 164 cash & carry stores. Hypercash stores are designed to combine the benefits wholesale and convenience of hypermarkets. The Group is currently increasing the number of hypercash stores worldwide. At the end of 2012 Carrefour had 23 consolidated cash & carry stores. The products presented on pallets and sold in large quantities at wholesale prices at these stores are used by both the professionals and individuals. Carrefour’s franchised partners include Atacadão in Brazil, Label’Vie group in Morocco and the GrossIper in Italy (Carrefour, 2012). Conclusions Carrefour adopts a combination of business strategies. Mixture of the cost leadership, differentiation and niche strategies has been used by Carrefour to gain the competitive advantage in the market and sustain the long term growth of the business. The company is engaged in selling Local products, Everyday products, Non-food products and Commercial services ranging from financing solutions to leisure activities, or from health and beauty care products to petro which are made available through specifically designed retail and online stores. The aim of the specific stores has been clearly articulated by establishing a number of banners. The company has successfully identified and articulated the strengths, weaknesses, opportunities and environmental threats, and incorporated those factors in business management decision making. In addition, emphasizing the locality of products and targeting customer groups in specific geographic locations enables the company to gain competitiveness in the market. Moreover, strategic leverage, out-sourcing and acquisition helps Carrefour in increasing the market share in the world. References Carrefour, 2012. 2012 Registration Document, Annual Financial Report. Emile Zola: Carrefour Díez-Vial, I. 2007., Explaining Vertical Integration Strategies: Market Power, Transactional Attributes and Capabilities. Journal of Management Studie,44(6), pp.1017-1040. Styles, C. and AU - Goddard, J., 2004. Spinning the Wheel of Strategic Innovation. Business Strategy Review, 15(2), pp.63-72. Read More