Running Head: CARREFOUR ENTRY INTO INDIA 1

CARREFOUR ENTRY INTO INDIA

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CARREFOUR ENTRY INTO INDIA 2

A company wanting to venture and expand globally is normally a huge challenge to
the management. It has to carefully think how it is going to enter into that potential market.
Several questions need to be addressed by the company like; how will the business model in
the new environment work? How different will the customers be? Does the culture vary
much? How will challenges be dealt with? These may be some of the questions Carrefour, a
French retailer, need to address in making a decision regarding its entry strategy into India.
This case study is aimed at evaluating Carrefour and its strategies to venture in India,
challenges and how the venture can prove to be a success.
Carrefour was developed in 1959 in France and operated in France during the first ten
years before venturing into Belgium in 1969 as its first international venture (Baek, 2005).
The company has continued expanding into the international market since then and is now
functioning in thirty four countries worldwide. Its three significant markets are Latin
America, Europe and Asia. Carrefour is the second largest group in the world after Wal-Mart
and the largest in Europe reporting revenue of 81.271 billion in the year 2011 ((Baek,
2005). Its success is attributed to its six major store models; hypermarkets, supermarkets,
convenience stores, hard discount stores, E-commerce and Cash and Carry. However, one
vital success comes from locally producing goods depending on the country.
India is known to be the second most populated country with a population of 1.22
billion people. Its GDP growth rate is about 10 per cent, employment reporting 8 per cent
while the industry growth rate in India is 25 per cent (Lapoule, 2010). This makes India an
appealing market for any international company that wants to venture globally. However
certain aspects need to be considered.
Carrefour has experience failure in the Asian market before including China and
Japan. In Japan, Carrefour was unable to cope with the peoples culture and became ignorant.
Baek (2005) cites that Carrefour was not able to grow its market in Japan because of its
CARREFOUR ENTRY INTO INDIA 3

inability to find space to build large stores and trust issues it had with its customers.
Consequently, it incurred a loss of approximately $ 300 million.
Despite its failure in Japan, it had massive success in China. When the retail sector
was opened by the Chinese government in 1995, Carrefour was able to penetrate into the
market. Wrigley, 2009 cited what made Carrefour become the largest foreign retailer in India
was because of its government marketing and localization policy. Carrefour used a Chinese
name to brand its company thus acknowledging and respecting the Chinese culture. Carrefour
was therefore able to meet its customers needs (Wrigley, 2009).
Before venturing into the Indian market, it is important for Carrefour to evaluate its
success and failures and incorporate them. Getting someone who understands the India
culture and assist in building a joint venture would be ideal (Tschoegl, 2011).
India is expanding city 2 and 3 and has the highest percentage in both clothing
/footwear and food and grocery sales. It is also an attractive and promising market for
merchandising companies (Lapoule, 2010). However, India has very strict rules concerning
foreign market entry. Companies cannot just enter and set up a store in India. Taxation and
other regulatory policies need to be considered. There seems to be a problem in India with
stores unavailability in ideal locations particularly in I cities and the rental costs are also very
high (Lapoule, 2010). Another issue Carrefour need to put into consideration is the terrorism
issue in India. According to Dale (2009), India is one of the most hit countries with terror and
most people die due to terror attacks on a yearly basis. This is mostly related to poverty in
India and if Carrefour is targeting the middleclass then it need to address this issue.
Another problem in India is associated with inefficiencies in the supply chain
management as well as high rates of shrinkages. These may hinder Carrefours success as the
costs seem to be very high (Tschoegl, 2011). Considering the international competition in
India of Walmart and Tesco, Carrefour need to evaluate these issues and come up with
CARREFOUR ENTRY INTO INDIA 4

reliable alternatives of entering the market. According to Lapoule (2010) the Indian people
especially the young ones identify with easy access, wide selection and loyalty programs.
Therefore, to enter the Indian market Carrefour has to form a joint venture and operate as a
franchise company in India (Lovelock, 1991).
Several factors have to be considered by Carrefour in its Indian market entry process
including growth, size of the market, government policies, flexibility, local infrastructure and
the objectives of the company. Carrefour has to evaluate an entry mode that could offer them
a competitive edge in India (Wrigley, 2009). Several entry modes are available including
licensing, strategic alliances, internet, international distributors and agents, exporting,
overseas manufacturing, joint venture and global sales subsidiaries (franchise). However, a
joint venture mode would be ideal for Carrefour. This is because forming a joint venture with
a local company like Pantaloons would enhance risk reduction during the set up and entry
phase (Pradhan, 2006).
Joint venture would be ideal for Carrefour as it is governed and protected by the law
(Kashani, 1992). For instance, only multi-brand companies are allowed to venture the market
through franchise, single brand retailers are given 51 per cent of Foreign Direct Investment
while multi- brand ventures are not allowed any FDI. Thus a joint venture would allow
Carrefour to penetrate protected markets, lower production costs and establish marketing and
distribution channels (Tschoegl, 2011). Another advantage is that Carrefour will be
diversifying risks by sharing liabilities. This will separate company affairs as a joint venture
with Carrefour affairs. There would also be increased synergies and financial resources.
Having contact with local suppliers and the government can enhance smooth running of the
business (Lovelock, 1991). However, a joint venture may delay decision making process,
increase risk of conflicts and limited life for the parties involved (Pradhan, 2006).
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Due to increased competition, Carrefour has to lower costs and at the same time meet
local demands, tastes and preferences. This would require of then opening up stores in Tier 1
and 2 cities and competing with local retailers like Big Bazaar, Reliance among others
(Pradhan, 2006). Localization would also be essential by hiring local staff, local
merchandising and sourcing. It will also be important to build up brand loyalty and awareness
(Kashani, 1992). Marketing can also be done by promotion offers like giving gifts and
coupons, home deliveries etc. Provision of extra services would also entice customers like
giving movie tickets, game zoning, parking fee criteria, and creating online presence.
Carrefour practices both local (e.g. offering a wide range of products, better infrastructure
and localization) and international (e.g. increased marketing, social networking,
decentralization and localization) competitive strategies which have proven a success
especially in Japan.
To sum up, the Indian economic environment outlines the potential opportunities and
threats Carrefour is likely to face in its attempt to venture into the Indian market. Despite the
Indias flourishing economy, about 25 per cent of the population live in poverty and wealth is
unequally distributed (Lapoule, 2010). There are various government policies and laws that
prove a challenge for foreign markets and companies need to evaluate the costs and benefits
of the industry venturing into the Indian market. Technology is highly advance in India and
companies can take advantage of the readily available information about the market and the
presence of highly skilled labour in India. Carrefour has several alternatives of entering the
market and joint venture, marketing and localization would be the best actions to take.
Reference list
Baek, J. (2005). The Case of Toys R Us and Carrefour in Japan. Journal of Global
Marketing. 18 (1-2), p151-166.
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Dale, M. (2009). Religious Suicide in Islamic Asia Anticolonial Terrorism in India,
Indonesia, and the Philippines. Theory, Culture & Society. 32 (3), p64-112.
Kashani, K. (1992). Managing Global Marketing. Boston, Massachusetts: PWS-Kent
Publishing Company
Lapoule, P. (2010). Carrefour and its competitors in India. Management Decision, 48(3), 396-
402.
Lovelock, H. (1991). Services Marketing (1
st
ed), Englewood Cliffs. New Jersey: Prentice
Hall.
Pradhan, S. (2006). Retailing Management 2E. London: McGraw-Hill Education.
Tschoegl, E. (2011). International Retail Banking as a Strategy: An Assessment. Journal of
International Business Studies. 18 (2), p67-88.
Wrigley, N. (2009). Organizational Challenges and Strategic Responses of Retail TNCs in
Post-WTO-Entry China. Economic Geography. 85 (1), p49-90.