The Co-operative Entering the French Market - Essay Example

The Co-operative (UK food retailer) entering the French market. Background of Co-operative Food, UK The Co-operative food UK retail is a subsidiary of the Co-operative Group. According to a press release by Barclays (2010), “The Co-operative Group stands apart from other major retailers in the UK as a business which is owned, not by a small group of shareholders, but by more than five million consumers.” Among all divisions and subsidiaries of Co-operative Group, Co-operative Food has been identified to be the largest division. Co-operative food has had the strength to stand the test of time and market instability as far as the food retail industry in the United Kingdom is concerned. This is because despite the frequent drop in share market stake for the food industry since 1950, Co-operative food has grown from strength to strength, becoming United Kingdom’s fifth largest food retailer as of now.(The Co-operative Group, 2010). As the years go by, Co-operative food has continued to be versatile in strategy and approach. The company has also placed itself in a position where it is benefiting fully from the advent of technology. For instance it is argued that “The Co-operative Food will become the UK’s first major grocery retailer to introduce contactless payment in its stores nationwide after joining forces with Barclaycard” (The Co-operative Group, 2010). As a business strategy, the company focuses its strength on growing its smaller retail shops and ensuring fair-trade. Overview of the French food market The decision as to whether or not Co-operative food should enter the French market is one that comes with a lot of considerations before drawing any conclusions. The first of such considerations is a thorough examination of the French Food Market to ascertain the viability of the French Food Market to contain not just Co-operative Food but any other food company. The French market is reputed for “better prices, finding more exotic items, and buying in bulk” (Mason, 2011). This means that the strength of the French Food Market hangs around the factors of price, variety and type of sales. Largely due to the fact that fair-trade is upheld and practiced in France, food producers barely have problems with the payment of deserving and fair prices for their food produce. This fairness is to a very large extent transferred to the larger France Food Market where the right of consumers to fair prices is always respected. To this effect, prices of goods are generally lower as opined by Mason (2011). What is more, France’s open market trade that is in place in France makes it possible for as many variety of food items as possible to enter the French market. To this effect, natives and foreigners (especially tourists) are offered an advantage of getting almost everything they want as far as food products are concerned. Lastly, both retail and wholesale food marketing are in full force in France. Mason (2011) notes that most of the whole sale and in some cases retail sales are done by the farmers themselves. This approach ensures that it is only quality and affordable food products that are sold in the French Food Market. Potential benefits for Co-operative Food entering France Once Co-operative Food, UK finalizes its decision to enter the French food market and indeed enters it, there are a couple of advantages and benefits that the company is sure to tap. In the first place, The US Commercial Service (2011) notes that “As the world’s fifth largest economy, centrally located within the European Union, there is strong competition for market share in all French industrial and service sectors.” The food sector is of course not left of such competition for market shares. From a myopic perspective, is may be tempted to think that if there is stiff competition for market shares, it means Co-operative Food would be going to face stiff competition. Rather, the strong or stiff competition for market shares referred to by the US Commercial Service reiterates the fact that with a perfectly working marketing strategy, Co-operate Food would be put in a position where its shares would be selling at very high prices – a phenomenon that ensures company growth. Already, it is estimated that Co-operative Food has one of the world’s largest owner base, who are all consumers. Higher market share price would therefore be in the interest of the company. What is more, the US Commercial Service (2011) notes that France “has substantial agricultural resources, a large industrial base, and a highly skilled workforce.” This is also likely to be another huge benefit for Co-operative Food. This is because the company would be put in a position where is would not have to always rely on importing finished or refined food products from the United Kingdom to France but rely on France’s rich agricultural base to set up their own production farms in France. With the advent of fair-trade all over Europe, this would ensure that the company earns deserving prices for their produce. The company would also not have to be relying on third party suppliers whose credibility cannot be ascertained. Then again with France’s large industrial base, Co-operative Food, UK would be in a position to divert some of its raw materials that are produced in its farms into other sections of the economy such as manufacturing. Finally with the kind of skilled labor that is talked about the US commercial Service, Co-operative Food can be assured of human capital and human resource for all its labor needs. This would indeed reduce the cost of importing skilled labor from the United Kingdom. Potential risk and de-merits associated with co-operative food entering France. The above advantages and benefits discussed above notwithstanding, Co-operative Foods, UK would still have certain factors to watch out for. These may be risks or demerits that the company would have to overcome rather than run away from if it wants to succeed in France. The first of such risks has to do with shifting a very large amount of the company’s revenue to starting a market force, whose success or otherwise cannot be predicted outright. This argument is against the backdrop that the company already be having long term strategic plans. If the decision to enter the France market is not part of such plans, it would mean that company would be altering its strategic plan; including the distribution of its worth. Internally, management of Co-operative foods must be ready to face opposition and perhaps organizational conflict for its decision to go ashore. This is because the company is not a limited liability company and so for such a decision as entering a new market, it would need majority decision among both share and stakeholders. Lastly, The Internationalist (2011) indicates that the France market is inherent to the fluctuations of interest and foreign exchange rates, stocks and commodities prices.” This means that the hope of relying on the France economy for funding the growth of the subsidiary in France might be a dream that may never be realized. Even if realized, the company would have to battle out with large interest rates. Conclusion Management of Co-operative Foods has been enlightened on what is at stake for them both positively and negative. Though there may be some risks and threats, Co-operative Food has certain competitive advantages it can depend on to succeed in the France Market. One of such advantages is the fact that the company has a parent company that can internally generate funds to cater for the immediate financing of the company even if the France economy cannot be relied on. REFERENCE LIST Barclays (2010). The Co-Operative becomes first major food retailer to roll out contactless technology. Accessed May 27, 2011 from http://www.newsroom.barclays.co.uk/Press-releases/The-Co-Operative-becomes-first-major-food-retailer-to-roll-out-contactless-technology-6ed.aspx Mason K. (2011). France for Foodies. Accessed May 26, 2011 from http://gofrance.about.com/od/travelbyinterest/a/francefoodies.htm The Co-operative (2010). The Co-operative becomes first major food retailer to roll out contactless technology. Accessed May 27, 2011 from http://www.co-operative.coop/food/whats-hot/Food-news/The-Co-operative-becomes-first-major-food-retailer-to-roll-out-contactless-technology/ The Internationalist (2011). Doing Business in France. Accessed May 26, 2011 from http://www.internationalist.com/business/France.php US Commercial Service (2011). Doing Business in France. Accessed May 27, 2011 from http://www.buyusa.gov/france/en/doingbusinessinfrance.html Read More