Carrefour Hypermarket in the United Arab Emirates - Case Study Example

Strategy Evaluation: Carrefour Hypermarket in United Arab Emirates Name Professor Course Date Company Description It is sometime termed as the UAE’S most dynamic, fastmoving and exciting hypermarket chain in UAE. Carrefour is a French origin hypermarket. In UAE Carrefour is jointly owned by Majid Al Fttaim. The company offers shoppers high quality goods and service. It stocks over 100,000 different varieties of goods and services. To improve the shoppers experience, and increase its customer base, Carrefourprovides free parking, their employee are Fridley, provide top brands, and best quality goods at relatively lower price. The company has multiple checks out to reduce ques in their stores. Carrefour working hours is from 9am to 12pm. Most of the Carrefour hypermarketsare arranged into five sections that is consumer good, light household, heavy household, foods, and textile. Carrefour hypermarkets acceptdifferent type of currencies ranging from UAE Dhs, US dollars, Omani riyals, Kuwait dinars,and Euros. Carrefour is one of the largest retailers in the world that deals with hypermarkets and discount stores. The company headquarter is in Paris France. The company was started in 1959 in France and opened its first store in 1960. Through 70s and 80s, the company experienced massive growth both in France and in other countries of Europe such as United Kingdom. Through this period, the company diversified into other services such as car service insurance services among many others. In year 2000, the company merged with Promodes. This merger, was very crucial to it growth enabled the company to gain access to many market from different part of the world. Since then the company has been involved in other acquisition, partnership especially when entering new markets, which has drastically increased its market share (Tamim, 2013). Carrefour offers groceries and consumer goods at the retail level in through hypermarkets, supermarkets, and discount stores. In addition, the company also uses convenient stores to reach to their customers. Hypermarkets are the key to success of the Carrefour. As mentioned earlier their hypermarket offer a wide variety of goods and services all under one roof at a relatively low price. Carrefour is one of the companies that pioneer the ideal of hypermarket; this has given it a competitive advantage over its competitors interm of operation. Over time, the company has developed its own portfolio of brands. This has enabled the company to offer goods and services at a relatively low price all under one roof. Moreover, the company has created a strong brand and value. This has given it global recognition and enabled it to increase its sale worldwide. The company entered the UAE (in Dubai) market in 1995 as a joint venture with Majid Al Futtaim. Since then the company has opened numerous other stores in Dubai and other major cities (Smith, & Cockburn, 2014). Currently Carrefour is the second largesthypermarket chain worldwide falling behindWalmart. It operates a total of 10036 stores in the world. All it s three format- hypermarkets, super markets and convenience stores posted a resilient performance in a challenging environment. It offers an average surface of 8400 square meters stores filled with over 100000 food and non food items. In 2014 the company operating profit rose by 6.7 percent to $ 3.37 billionwhile it net earning slightly slipped by 1.5% to $ 24 billion. In year 2014, the company opened 142 stores eight of which were in the Middle East region. In UAE, Walmart, Lulu, and United hypermarkets are its major competitors UAE retail industry analysis The UAE retail sector is expected to grow by over 33% in 2015. The projected growth is attracting investment into other gulf countries such as Oman, Kuwait and Saudi Arabia. UAE has earned reputation as a successful global and luxury retail brands. As a result it attracts wealth visitors from all over the world. Appendices A show some of the macroeconomic environment influencing UAE macro climate. As the consumer purchasing power continue to grow, as well as growing young brandy savvy population, Dubai and the least of UAE, will continue to among the most attractive retailers hub in the world. This is the reason why more investments on tourism and retail industry is expected this year. In fact leading retailers suchas lulu hypermarket, has already committed $817 million to invest in their Dubai portfolio. The leading retailers across the world are struggling to enter the gulf countries market. This is a good signs of expected future development. The real GDP of UAE increased by 4% in 2014, up from only 2 % in 2010. Moreover the consumer disposables income is expected to rise in 2015. The implication of this is that, consumers in the UAE more confidence in spending. Internet retail is also driving retail industry growth in UAE. Internet penetration reached 22% by the end of 2014. As the life get busier, and internet payment get safer the retailers need to maintain a strong online presence to cater for online consumers In 2014, the grocery retailers accounted for 44% of the total values in retailing 2014. During the same period the value of share of non-grocery specialist declined by 1%, this id due to emergency of more competitive prices from different retailers. Population growth, tourism, increased income, convenient trends continues to drive the growth of the retail industry. However the government restriction that is aimed to protect consumers from the inflation restricts the growth of consumer markets. Industry over view In the past two decades, the retail market in UAE hasdrastically grown. Each year, new state of the art stores are added d to the countries retail map. This creates more competition to the existing markets. The introduction of hypermarket and superstores is reshaping the retail sector in the country. In the last five years the hypermarkets opening in the country has increased by 150%. Superstore and supermarket opening only grew moderately by 15% and 13% respectively. This is an indication of the market direction and the strength the investors hold on megastores. Other than Carrefour, other major hypermarkets in the country includeLulu, Wal-Mart, United, and Spinners. According to current market research, the annual value of the UAE retail market is $2.5 billion. The estimated annual growth in the retail sale in the country is 5-10%. In UAE, the growth of the mega stores is concentrated in three largest cities that areSharjah, AbuDhabi, and Dubai. These three cities are home to nearly 75% of the country’s population. In the country, hypermarkets, superstores, supermarket accounts for 50 % of the entireretail sale. Small sized groceries and convenience stores account for the other 50%. Carrefour in UAE As mentioned earlier, Carrefour entered the UAE markets in 1995 aftercarryingout a market analysis to identify the barriers such as government regulations and culture that might affect the introduction of their brands. In 1970s to 90s sheik Rashid, engineered the rapid growth of the Dubaieconomy through diversification from oil strategies. His son, sheik Maktoum bin Rashid took the role in the 1990 and perused free, technology , transport and tourism transforming Dubai into modern city. Other than diversification, other factors that fueled the rapid growth of Dubai’seconomy include strategic location, political stability, and businessfriendly climate (Ushakov, 2012). This development attracted Carrefour and other multinationals in Dubai markets. From the time the company entered the UAE, it employed differentstrategies, whichenabled it to grow rapidly. For instance, Carrefour entered the market through joint venture. As a result, the company enjoyed favorable. In addition, the move saw the company own some strategically located malls owned by the partners. Since then, the company market shares have continued to grow. TheRetail Industry Trends in UAE The key growth drivers includepopulation increase. According toSiddique (2014),the gulf region population is estimated to grow by 2.9% between 2013 to 2018. Population growth coupled with the progressive and adaptive lifestyles to modern retailing concepts continues toincrease the customer base. Moreover, the countries per capital continue to grow this means the population spending power has increased(Lin, & Farrell, 2015). Strategy Evaluation The company mission includes to become the market leader; offer best practice for high quality product and service;and to improve customers’ quality of life. Its goal includes, to become the preferred retailer in the region, anticipate and satisfy their customer needs, be the best employer and to continue growing profitably. Carrefour current strategies The following factors enable the company to grow and sustains it growth. 1. Customer oriented culture- the company believes that by getting to know their customer they will be able to serve them better 2. Innovation- regaining initiative and intensify the online operations 3. Transformation – the company is constantly looking for war of increasing their agility, execution quality, and competitiveness. Carrefour strategies in 2014 were to sustains its low price strategies, increase its customer base,and open new stores. Its strategies can be grouped as follows. Marketing and service strategies: with regard to marketing and services, Carrefour adopts two stage strategies, the first stageenablesbranch store to run smoothly and operates faster. It decentralizesthe authorities to new breaches to allow them to link up quickly with the customers. By adopting this strategy, Carrefour is able to capture new markets much faster than its competitor is. At stagetwo, the company concentrates on the customers, personnel training and marketing the channel. The company achieves this by enhancing on the service quality, product innovation, and emphasize on personnel cultivation. In addition, the company adopts strategic alliance to developprivate label products so as to meets onestop shoppinggoals (Song, 2012). In other words,Carrefour success factors are a one stop shopping, low price, full range of choices,self service free parking. Carrefour chooses mass selling, low deliverycost and promotion to attract and retains is customers. Inaddition, the Carrefour delegates each store as profit centers give it authority to determineits pricing and promotion strategies(Ezziane& Al Shamisi, 2013). Sourcing strategy:Carrefour emphasizes the competitive of sourcing and turnover of the commodity. They exploit the potential of the economics of scale and accommodate local difference of customer’s preferences. For local sourcing, fresh fish and meat is for instance to is to achieve the objective of quick response. Although there aresome sourcingoperations that are centralized, most of the suppliers deal with the local stores directly. Physical distribution and digitization strategies:Carrefour sears and oracle jointly built global net exchange supplysystemas early as 2000. Globally more than 50,000 associates carry out transaction electronically translating to$80 billion in saving. In addition, Carrefour is developing their internet business. Human resource management strategies: To treat the customers friendly, reduce cost, and educate employees is one of the cultures of Carrefour. Carrefour takes a hand down cooperate heritage. This means that, during the early stages of entering a market,Frenchmen takes the position of top-level management and infuse the culture of serve customers and action oriented. Employees in the stores are constantly replenishing the stocks. The store manager also wanders around to see everything is done. As part of its social responsibility, Carrefour promotes education activities and work with local government and nongovernmental organization to protectenvironment. Analysis Internal analysis This involvesaccessing the strengths and weakness of the organization. Thestrength refers to action or activities that the organization performs well. It also includes availability of the resources to implements its strategies. Strengths 1. The company has good reputation and stronger brand value. It has been able to establish good relationships with its customers; this has made it one of the top hypermarkets not only in UAE, but also in the whole region. 2. The company has set up stores in convenient locations. Most of its hypermarketsare located in big mall in cities. According toUshakov (2012), Carrefour was ranked second in term of convenient location in UAE. 3. Carrefour has numerous strategiccollaborations with manufactures, whichenable it to store wide varieties of goods and services encouraging aone-stop shopping and to sell good at a relatively low price. 4. Carrefour has been making profits in UAE, thus they have resource to implement their strategies. Weakness 1. As mentioned earlier about 80% of the food substances in their stores are imported. Their prices are thus relatively higher, leading to low purchase. This has potential of deterring customer. Moreover, it may result to customer shopping some good and services that their stores and others elsewhere, thus hindering the attainment of the goal of one stop shopping. 2. Most of its stores are characterized with long queues towards the cashiers. This is a disadvantage as it is likely to ruin the customers’ experience if they spend more time than planed in the stores due to queue. 3. Most of the Carrefour stores open at 9: 00 am and close at 12 pm and not 24 hrs External analysis This involvesanalyzing the industry environment. In this regard,an opportunity is positive trend in the industries while threats are trends that are likely to have negative impacts on the company strategies and attainment of their goals. Opportunities 1. Growing customer base. The population of UAE is estimated to grow by 2.9% between 2013 and 2018. The continued economic growth will raise the percapital income and thus the spending powers. In addition, the absence of income tax and high public spending helps to boost the spending power of the population. Moreover,UAE is the leading tourist destination in the region. 2. The use of internet is growing in UAE, thus the concept of online business is thus gaining momentum. Thus, it is expected that if the company formulates strategies of digitization it sales are likely to grow (Steven, Appelbaum, Michel, and TerryGilliland, 2011). Threats 1. Competition. The completion in the UAE is stiff. Other hypermarkets that are performing well in this market include, Walmart, Lulu,Spinney,and United hypermarket. In particular,Lulu is seen as more traditional store to local customers. Moreover, luluhypermarkets practicesimilarstrategies thus threat to the growth and existence of Carrefour. This is likely to slow down the growth of Carrefour market share in UAE. 2. Inflation; Due to rapid growth high demand and low supply and the decline of the US dollar, the countries inflation has been going upwards. Data from recent study indicates that inflation in UAE, stand at 3%. Inflation increase cost of production and endup reducing the profitability. Discussions Competitive advantage of Carrefour:Some of the Carrefour competitive of the company includes its ability to offer a wide variety of commodity all under one roof. Second, the company has a strong brand that is well known for its quality and value. Third, the company has developed it own portfolio of products which enables it to offer goods at a relatively low price. From the analysis of the Carrefour, we can conclude that the Carrefour strategies if implemented will lead to even better performance in the UAE market. The demand for their products and services will increase as the population increases. The company has a potential of increasing the revenue and thus the profit with its current markets and with its current products and as population buying power increase. In addition, it is important to have adequate resources to implement their strategies. However, it is important to note that the today markets are continuously changing(Mutebi, 2007). Therefore, the company should continue to be innovative and flexible. Carrefour should be ready to change its strategies as the market changes. Furthermore, the company should diversify its products and services even more. This willenable attainment of one stop shopping goal as well as increase their customer base. Although Carrefour is known for offering high quality product at a low price, the price of some of its product are still high. This is one of the weaknesses, which can hinder in market penetration. The company needs to revise such pricestoincrease their competitiveness. Most importantly, the company should continue carrying out marketresearch to identify the trends and adjust accordingly. References C.M. Siddique. (2014). Impediments to market orientation: An exploratory study of retail SMEs in the United Arab Emirates. Education, Business and Society: Contemporary Middle Eastern Issues. 7, 33-56. Ezziane, Z., & Al Shamisi, A. (2013).Improvement of the Organizational Performance through Compliance with Best Practices in Abu-Dhabi. International Journal of IT/Business Alignment and Governance (IJITBAG). 4, 19-36. Hussain, S., &Tahboob, Z. (2007).Arabian Gulf Development Internet and Innovation Dynamics.545-551. Lin, X., & Farrell, C. (2015). ???Home Base???and the Brand Globalization Strategies of Emerging Market Multinationals. Mutebi, A. M. (2007). Regulatory Responses to Large-format Transnational Retail in South-east Asian Cities. Urban Studies. 44, 357-379. Smith, P. A. C., & Cockburn, T. A. C. (2014). Leadership in the Digital Age Song, W. (2012).Achieving Competitive Advantage through Innovation. Steven H. Appelbaum, Michel Roy, & Terry, G. (2011). Globalization of performance appraisals: theory and applications. Management Decision. 49, 570-585 Tamim, R. (2013). Technology Integration in UAE Schools Ushakov, D. S. (2012). The State Economical Regulation Practice Modernization in Terms of Business Digitalization Appendices Macroeconomic indicator: UAE Indicators unit 2013 2014 2018 GDP growth at constant price % 5.2 4.3 4.5 GDP per capital constant price AED 120,393 121,889 129,517 GDP per capital PPP US$ 63,181 65,037 74,731 Population 000 9 9.3 10.4 Inflation % 1.1 2.2 4.0 International tourist M 11.3 12.2 19.6 B: comparison of GCC countries Countries Market attractiveness Country risks Market saturation Time pressure GRD score 2014 rank UAE 98.5 82.3 17.5 43.8 60.5 4 Kuiwait 787.8 72.6 32.9 31.7 54 8 Saudi Arabia 72.3 67.3 29.5 27.4 49.1 16 Oman 75.1 79.1 27 11.1 48.1 17 Read More