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International Business BA Business Management Year 3

Internationalisation of Carrefour

Introduction

First Carrefour hypermarket opened in 1963.

Its concept is Everything under one roof. From 1978 greatest number of new Carrefour stores was established outside France (Brazil, China, Spain...) In 1988 Carrefour is the second largest retailer with 180 hypermarkets in the world.

Contents

I/ General informations about Carrefour

II/ Internationalization strategy of Carrefour III/ The strategy of diversification of Carrefour

IV/ The Strategy of Implementation

Conclusion

+ General Informations about Carrefour

Reason to extend outside France

Competition : High competition level : a lot of supermarket chain have the same offer : we can quote Auchan, Leclerc, Casino Government regulations

The Royer law : need of authorisations to open new supermarket, in order to regulate their expansion. (Stewart Howe, 2003). Protection of the small shopkeepers : different laws and regulations whose aim is to keep the supermarkets far to the town centres, where most of the small shopkeepers are presents.

+ General informations about Carrefour

Reason to extend outside France

Profitability : The group sees strong potential for further international growth. The French market is saturated, expand the brand outside the country was the solution found to improve the turnover. Developing competitive advantage : Become a global player permit to the company to gain a competitive advantage over its rivals.

+ General informations about Carrefour

Carrefour general priorities

France : keep its leadership, be careful to the competitors.

Western Europe : Belgium, Spain and Italy are the three European keys countries because they are borderer with France. The consumption habits are similar to between these countries, that facilitate their growth. Rapidly developing countries : The group is trying to strengthen its presence in China and Brazil, but also to enter in the Indian market. These countries are growing fast, and there are the great powers of tomorrow. Wal Mart is already leader in the Indian market, it is thus really important to Carrefour to enter on it.

Internationalization strategy of Carrefour

+ Internationalization strategy of Carrefour

Porter generic strategies

3 ways to develop a competitive advantage : Segmentation, Differentation, Cost leadership Segmentation :

Organisations can make use of the focus strategy by focusing on a specific niche in the market and offering specialised products for that niche. This is why the focus strategy is also sometimes referred to as the niche strategy (Lynch, 2003)

+ Internationalization strategy of Carrefour

Carrefours choice : Segmentation

Target countries with strong potential Abort unprofitable countries (eg, Slovakia, Switzerland, Portugal, Czech Republic, Mexico, South Korea and Japan)

+ Internationalization strategy of Carrefour

External growth theory

When a company increases its sales and profits by buying other companies, rather than from its own operations.
(Financial Times Lexicon)

+ Internationalization strategy of Carrefour

Carrefour application :

Absorption of local companies

Advantages :

Economy of scales, quick growth, avoid difficulties of entry on the market,

consummers confidence.

+ Internationalization strategy of Carrefour

Network theory

The network approach sees internationalization as a process of knowledge market that a company acquires through the establishment of relations with foreigners actors (Smarajit Ghosh, 2005). The networks then allow the establishment of trade between industry players and the production system in which resources are used.

+ Internationalization strategy of Carrefour

Carrefour application :

For example, actually, the Carrefour Group and Future Group, a major Indian distributor company are negotiating in order to create an alliance, which permit a better implantation to Carrefour in India, where its principal competitor, Wal-Mart, is the leader. This alliance would permit a better comprehension of the specifics needs of the Indian market, and thus acquire the necessaries knowledge. (Amrita Nair-Ghaswalla, 2010)

+ Internationalization strategy of Carrefour

Analysis

Carrefour understood that partnerships with different actors that are already present on foreign markets permit :

to gain time to reduce problems

The strategy of diversification of Carrefour

+ The strategy of diversification of Carrefour

The Ansoff Product-Market Growth Matrix

+ The strategy of diversification of Carrefour

Diversification

Diversification is the name given to the growth strategy where a business markets new products in new markets.
Why Firms Diversify

To grow

To more fully utilize existing resources and capabilities.

To escape from undesirable or unattractive industry environments. To make use of surplus cash flows.

+ The strategy of diversification of Carrefour

Horizontal or related diversification

Strategy of adding related or similar product/service lines to existing core business, either through acquisition of competitors or through internal development of new products/services.

+ The strategy of diversification of Carrefour

Horizontal or related diversification

Horizontal. or related diversification

Advantages

Opportunities to achieve economies of scale and scope. Opportunities to expand product offerings or expand into new geographical areas.

Disadvantages of related diversification

Complexity and difficulty of coordinating different but related businesses.

+ The strategy of diversification of Carrefour

Conglomerate or unrelated diversification

Firms pursue this strategy for several reasons:

Continue to grow after a core business has matured or started to decline. To reduce cyclical fluctuations in sales revenues and cash flows. Managers often lack expertise or knowledge about their firms businesses.

Problems with conglomerate or unrelated diversification:

+ The strategy of diversification of Carrefour

Carrefour activities
Conglomerate diversification petrol station travel agency Phone operator Carrefour.com (e-trade) Horizontal diversification Supermarket: Carrefour Market Hypermarket: Carrefour Small Shop-keeper: Carrefour City

+ The strategy of diversification of Carrefour

Diversification is the most risky of the four growth strategies since it requires both product and market development and may be outside the core competencies of the firm. In fact, this quadrant of the matrix has been referred to by some as the "suicide cell". The risks of diversification can be minimised by moving into related markets (Ansoff, 1989).

The Strategy of Implementation

+ The strategy of implementation

Theory

The marketing strategy of the group Carrefour is the combination of a marketing standardized with an adaptive marketing.

This marketing is based on the rule of Think global, Act local S, Walter (2004)
They produce products in a universal way and they adapt it locally

+ The strategy of implementation

Evidence

The group's strength lies in its ability to tailor store formats to the specifics of local demand in each country, region and town where it is present. A complementary mix of store formats also contributes to the group's success, allowing it to better meet the expectations of all Carrefour customers. The group proposes different products to meet a very diverse set of customer lifestyles but also best local products according to the culture of the country. For example in China, the department reserved to bikes holds an important place in stores because of the ascendancy of this means of transportation in the country. Carrefour is the first private employers in any country where it operates what allow to be sure that its strategy is always aligned with the specificities of the market.

+ The strategy of implementation

Analysis

The strategy adopted by Carrefour seems to be profitable. The group becomes profitable a little time after its presence on the new market (approximately 6 years).That is why Carrefour has taken the lead in France, Belgium, Spain, Greece and Cyprus and becomes the 2nd group in world after Wal Mart.

However the efficiency of this strategy tends to weak because the current competitive context and the various forms of protectionism do not allow the group Carrefour to finalize its development. We can quote the example of India which sets up barriers to protect the small shops but also the strong competition of Wal Mart on this Market.

Conclusion
Because of the high competition level in its country, Carrefour chose to extend outside France Priorities: streghten its presence in developing countries (China, Brazil and India) 3 ways to develop competitive advantages: segmentation, differentiation and cost leadership Carrefour buys other companies: External growth theory Conglomerate AND Horizontal diversification To summarize the Carrefours strategy: Think global, Act local

Bibliography
S, Walter (2004) "Think Global, Act Local", Luath Press Ltd., Edinburgh, Ansoff, I., Strategies for Diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957, pp.113-124 McDonald M., Market Segmentation: How to do it, how to profit from it, 2004, p 54-55

Cavusgil T., International Business: Strategy, Management, and the New Realities, 2008, p 111-124
Ball D., International Business: The Challenge of Global Competition, 2007, p 98-111 Wwww.entreprisesetstrategiesterritoriales.fr Wwww.Carrefour.fr Amrita Nair-Ghaswalla, Mar, 22nd, 2010, Times of India Smarajit Ghosh, 2005, Network Theory: analysis and synthesis Stewart Howe, 2003,Retailing in the European Union: structures, competition and performance http://lexicon.ft.com/term.asp?t=external-growth