Strategic Management - Carrefour SA - Case Study Example

Strategic Management Contents Introduction 3 Discussion 3 Strategic Position 3 Mission, Goals, Objectives and Core Values 4 Market Segmentation 4 Customer’s Needs and Expectation 5 Internal Environment 6 Important Factors for Future Strategic Direction 6 External Environmental Analysis 7 Application of Porter’s five forces model on Carrefour 8 Application of Porters Three Generic Strategies and Ansoffs Product Market Growth Strategies on Carrefour 10 Future Strategic Options 12 Conclusion 12 References 14 Introduction Strategic management is the comprehensive collection of ongoing processes and activities that an organization uses to coordinate its aligned resources and actions with vision, mission and strategies. It is a systematic analysis of some factors which are associated with a particular business organization and the factors are related with internal and external environment of that business. Strategic management can help to do optimum management practices in an organization and also can maintain the customers and competitors of that organization in an efficient way. In this essay the selected organization is Carrefour S.A. which is a multinational retailer supermarkets headquartered in France. It is the fourth largest retail group in terms of revenue in the global retail hypermarket market. It has expanded its business activities not only in Europe but also in Asia, North America, China, Saudi Arabia and so many other countries in the world. Discussion Strategic Position According the company’s annual report 2013, this can be stated that the organization has achieved dynamic growth and volume of sale has been increased in a significant way in both domestic market and international market. In the emerging economies the company’s recurring operating income has been increased by 8.5% at constant exchange rates. In the same year debt was reduced by € 203 million, net debt to EBITDA ratio was improved by 10%. The organization has also increased its amount of investment in business and the investment grew by 44%. All the above mentioned information indicates that the company is belonging to a satisfactory position and the management can observe more percentage of growth in the future days. Rebranding and decentralization of business activities are helping this organization to get the stable position in the international market. No divestment of property unit and cutting head office cost are some key strategies adopted by this organization (Feinberg, Kinnear and Taylor, 2012). Mission, Goals, Objectives and Core Values Carrefour is totally focused on fulfilling the expectation level of customers. They always try to offer products at the best prices to their loyal customers. The organization is involving to set up a benchmark in modern retailing in each of the markets where they are operating business activities. They are also trying to provide best merchandise facility and pleasant shopping experience to the buyers. As a good corporate citizen and socially responsible economic actor, the company is providing deep commitment to the community (Hutt and Speh, 2012). The organization believes some core values in their business practices. These values are togetherness, bold and passionate. It has created such a creative atmosphere inside the stores which will stimulate the urge of customers for doing their shopping activities again and again. Again the customers are always getting support from the sales personnel in case of any troublesome situation. High quality performance and enthusiastic behaviour of the staffs and employees help the organization to provide best quality services to the customers (Ferrell and Hartline, 2012). Market Segmentation Carrefour basically serves its products or services in the retail market. Main target market for running its business operation is UK market and within UK market they are focusing mainly the retail market of France. The management of this organization believes that if they can achieve maximum market share in domestic market then they will be able to capture other’s countries market share after not facing any kind of losses. Stable business in domestic market will encourage them and enhance their risk taking ability into a new market. Such geographical segmentation will help for market penetration (Duhaime, Stimpert, Chesley and Chesley, 2012). Population in UK is approximate 63.23 million as per the data of the year 2012. Maximum percentage of this population is adult and they are the target customer of this company. Therefore, this can be observed that the age group of target customers is 15 to 65 years. Apart from the main focus group the company is also targeted the age group of 0 to 14 years by offering baby food, toys, books, prams etc (Klein, 2013). Customer’s Needs and Expectation The organization has categorized their customer base according to their need and expectation. These categories are finer food consumers, price sensitive, traditional, modern vale, health conscious customers etc. The people in UK are already very health conscious and they have changed their food habits to get health related advantages. Therefore, they will buy such kind of products which will help them in their health consciousness (Batra and Kazmi, 2009). After the three years down the line the percentage of health conscious customer will increase than the normal traditional customers in the market. After keeping in mind all these facts the company has launched organic food products especially for health conscious customers and such food products are made by no preservatives and high quality fresh ingredients. Through this way Carrefour can be able to meet the expectation and demand of customers (Griffin, 2010). Internal Environment An organization’s internal environment generally indicates the strengths and weaknesses of that business entity. The strengths of Carrefour are as follows. Carrefour is one of the largest hyper market chains in United Kingdom and it has strong brand image in the international and domestic retail market. The company has sufficient financial power to handle any kind of risk factors which are associated in business activities. The strong financial position also helps the company to expand its operation in new market and in more than one country in the world. Carrefour can provide hard discount rate on its offered products to the customers. The company is maintaining high quality on their offered products and also concerned about the health conscious customers (Böhm, 2009). Presently this organization has more than 9, 500 stores in the whole world. It has strong presence in global market. Carrefour has launched own private label brands in the market. Weaknesses of this organization are labour related problems, weak position in the Middle East countries and Asian countries, poor performance in the e-commerce sector. Customers are mostly influenced from the activities of this organization and for that reason this company has a strong customer base in the international market (Pahl and Richter, 2009). Important Factors for Future Strategic Direction Future strategic direction of a company will depend on some factors which are innovation, communication, strategic planning, culture of the organization and managerial ability. In case of above mentioned company, it is observed that the attitudes, beliefs, values and behaviours of employees create a unique organizational culture. These are very much helpful for future prospects of this business. Again the management has such qualities to manage risk factors which are associated in business. Innovative products and two way communication system will also help in future strategic direction of this organization (Luther, 2011). External Environmental Analysis Carrefour a French retail group competes in the marketplace on the basis of customer experience, price and convenience. It has its operations spread across 34 countries which make the company subjected to external environmental influences. PEST analysis states the factors that have an influence on operations of the company. Political instability in regions of Middle East affects the oil prices which in turn results into increased distribution and product costs. This increase in overall costs reduces the profit margins of the company. The developing economics has posed a barrier for FDI in order to enhance growth of the domestic retail industry (Johnson, Whittington, and Scholes, 2011). This would affect the company in terms of exploring new markets and gaining high profit margins. However the political conditions appear to be major threats for the company. Economic aspect of the framework states that Euro devaluation will make importing and FDI expensive for majority of the European business. Carrefour is subjected to this economic turmoil that is likely to disrupt its entire business process. In context of consumer expenditures the middle class segment of Asian market accounts for €3.06 trillion annually (Kapferer, 2008). This is an opportunity for the company as it can expand on its market share. The social aspect states that in present scenario customers are more conscious towards their health as well as environmental health. Carrefour would be positively affected by such a scenario as it possess its organic product line and even are involved in fair trade practices. It has been able to significantly reduce energy consumption by 12.8% in recent years. The middle class segment of Asian market is economically becoming stable and hence there is an increasing demand for products with high protein content (Neil, 2010). This in turn has resulted into increased prices of food products. In technological aspect the social networking sites is a platform that helps business to communicate with customers in order to increase brand loyalty. Twitter is a medium which can be used by the company to spread awareness about special deals and Facebook can be utilized to develop communities. The main drivers for change are increasing competitive, evolution of technology based applications, increasing consumer market demand and untapped opportunities in developing markets. Major opportunities facing Carrefour are the growing demand in Asian market and South American market. This increase in demand is well aligned with its product line. The major threat facing Carrefour is shift in consumer preferences towards small domestic stores. Another threat is European market depression which is responsible for 69% of the firm’s revenues. Application of Porter’s five forces model on Carrefour Porter’s five forces model describes the industrial forces that affect business operations both positively and negatively. Figure 1 illustrates the model. Figure 1: Porters Five Forces Model (Source: Porter, 2008) The food retail industry in 2009 possessed total revenue of $4.4 billion and this is supposed to increase to $5.9 billion in the current financial year. As per revenue margins the largest players of this industry are Wal-Mart, Carrefour, Tesco and Metro AG. The bargaining power of suppliers is low for Carrefour as it encompasses a large chain of suppliers who competes amongst themselves giving an opportunity to the company to achieve best prices. Bargaining power of buyer is relatively high as consumer preferences guides the entire operations of the company. Intense competition gives an advantage to customers to choose from wide range of brands. This is majorly because switching costs for the customers are very low and this puts excessive pressure on the companies. The threat of substitutes for the company is moderate. Fast food chains and restaurants pose a major threat for the company. In certain scenario this option appears to be appealing for the customers but its high cost makes it not a permanent option for the consumer market. Threat of new entrants is moderate as barriers are low for small retail shops and on the contrary these shops are in no direct competition with Carrefour (Mcfarlin and Sweeney, 2008). However the intensity of rivalry in the industry is high as switching costs of buyers is low and similar products are offered by all the players. They majorly compete on prices but increased food cost makes it impossible to maintain low prices by the retail companies. The basis of competition might get affected by economic conditions of consumer market. Customers in the present scenario are more aligned towards product quality then price. Thus in such case retail companies need to change their focus towards maintaining high quality then to reduce price (Madaan, 2009). The two forces that need to be monitored appropriately is bargaining power of buyers and industry rivalry. This is because any strategic moves made by other players may affect the market share of the company and if it is not able to meet customer demand then its profit margins would be affected. Application of Porters Three Generic Strategies and Ansoffs Product Market Growth Strategies on Carrefour Porter’s generic strategies state the different methods through which a company can gain competitive advantage in the industry. The entire operations of Carrefour can be divided into four segments such as hypermarkets, grocery stores, discount stores and convenience stores. Each of these segments has a specific business strategy and different target market. Figure 2 illustrates application of Porter’s generic strategies on Carrefour- Figure 2: Generic Strategy (Source: Jeffs, 2008) Figure 2 states that for its different business segment there is a specific competitive scope and competitive advantage. Discounts stores ‘Dia%’ utilizes overall low cost leadership strategy in order to target those customers who are price conscious. Carrefour City and 8A Huit are convenience stores which incorporates differentiation strategy through its innovative products that offers value for money to customers (Sekhar, 2009). Carrefour market and Carrefour which are grocery markets and hypermarkets respectively has adopted the focused strategy but the major goal of these two segments is to remain cost focus. Hence, it can be stated thee major business strategy is to offer low prices to its customers while maintaining quality. Ansoff matrix highlights the various growth strategies that are adopted by the company so as to sustain in the highly competitive market. Figure 3 elaborates the different approaches present in the matrix. Figure 3: Ansoff Matrix (Source: Keller, 2008) The business strategy that is presently used by Carrefour is of market development. It focuses on developing countries where it can gain desirable market share through existing product line. The company aims at spreading the brand name across the globe (Onkvisit and Shaw, 2009). Though the risk remains high in terms of entering new market but the opportunity offered by untapped market is prime focus of Carrefour. Future Strategic Options Carrefour has been able to create strong brand presence in its operating regions. The company is able to mitigate risks due to its strong financial strength. It needs to explore on its strength to strengthen its brand position and to expand on its markets share. The first strategic option that is available to the company is to enter into new markets such as South American or Asian markets. In these regions the demand is high with stable economic conditions. Thus if the company enters into new markets then it would help it to reduce dependency on European markets. The company even has past experience with Asian markets which can be utilized for future extension of operations in this region. The next option that is available to the company is innovate certain features in its stores or implement differentiation strategy. This can be done through offering value added services to its customers and designing some new products completely under brand name of Carrefour. The third option that the company has is to invest more in its stores in Brazilian market where it possess a strong brand presence. Carrefour performs well in this market in comparison to its competitors. In order to implement these strategic options the company should be financially capable enough to address operational risks. On the other hand if new products are launched then there would be certain unrest within the organization which needs to be effectively resolved by management. Conclusion From the above detailed analysis, it can be concluded that Carrefour has established a meaningful and clear strategic planning process and engaged all levels of employees to ensure success. The company has to face some political factors such as open market system, trade regulation, modernization; some economic factors such as economic growth, taxation etc. The company has several strength factors and getting more than one opportunities from the market place. But this also can be observed that there are some weaknesses and threats also in its business activities. Strong competition in the market also creates some problematic situation to run its business activities in a smooth way. But at last one fact is clear about this organization that it has achieved one of the leading positions in international retail market business. References Batra, S. And Kazmi, S. 2009. Consumer Behaviour-2nd. New Delhi: Excel Books India. Böhm, A. 2009. The SWOT Analysis. Germany: GRIN Verlag. Duhaime, I., Stimpert, L., Chesley, J. and Chesley, J. 2012. Strategic Thinking: Today’s Business Imperative. London: Routledge. Feinberg, F., Kinnear, T. and Taylor, J. 2012. Modern Marketing Research: Concepts, Methods, and Cases. Boston: Cengage Learning. Ferrell, O. and Hartline, M. 2012. Marketing Strategy. Boston: Cengage Learning. Griffin, D. 2010. Business with a Purpose: Starting, Building, Managing and Protecting Your New Business. New York: Easy Brain Labs Inc. Hutt, M. and Speh, T. 2012. Business Marketing Management: B2B. Boston: Cengage Learning. Jeffs, C. 2008. Strategic Management. Los Angeles: SAGE. Johnson, G.,Whittington, R., and Scholes, A. 2011. Exploring strategy. UK: Financial Times Prentice Hall. Kapferer, J. 2008. The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term. London: Kogan Page Publishers. Keller, P. 2008. Strategic Brand Management. New Delhi: Pearson Education India. Klein, H. 2013. European Retail Research: 2012, Volume 26, Issue II. New York: Springer. Luther, W. 2011. The Marketing Plan: How to Prepare and Implement it. New York: AMACOM Div American Mgmt Assn. Madaan, V.S. 2009. Fundamentals of Retailing. New Delhi: Tata McGraw-Hill Education. Mcfarlin, D. B., and Sweeney, P. D. 2008. International Management. New Delhi: Dreamtech Press. Neil, B. O. 2010. Acting as a Business: Strategies for Success. New York : Random House LLC Onkvisit, S., and Shaw, J. 2009. International Marketing: Strategy and Theory. New York: Routledge. Pahl, N. and Richter, A. 2009. Swot Analysis - Idea, Methodology and a Practical Approach. Germany: Books on Demand. Porter, M. E. 2008. Competitive Advantage: Creating and Sustaining Superior Performance. New York : Simon and Schuster. Sekhar, G. 2009. Business Policy and Strategic Management. New Delhi: I. K. International Pvt Ltd. Read More