Global Business Management

1. 1
Ioannis Mikedis
Hamid Modaressi
BUS 685 – Winter 2014

2.  This case is about the unsuccessful attempt by
Carrefour to enter the Russian market.
 After significant investments
 After serious efforts to acquire a local market leader
 After only the passing of a few months
 Carrefour suddenly announced it is
withdrawing from all the efforts in Russia and
is selling the business.
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3.  Founded in 1960 in France
 Marce Fournier- Textile Retailer
 Louis Defforey- wine and food wholesaler
 1963 - Started entering International Market
 1970 - Paris stock exchange
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4. Year Country
1969 Belgium
1973 Spain
1975 Brazil
1982 Argentina
1989 Taiwan
1991 Greece, Cyprus
1992 Portugal
1993 Italy, Turkey
1994 Mexico, Malaysia
1995 China
1996 South Korea, Thailand, Hong Kong
1997 Singapore, Poland
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5. Year Country
1998 Chile, Colombia, Indonesia
1999 Czech Republic, Slovakia
2000 Japan, Dominic Republic
2001 Romania, Switzerland
2002 Egypt
2004 Saudi Arabia
2005 Algeria
2006 Cyprus
2007 Jordan, Kuwait
2008 Bahrain
2009 Iran, Syria, Morocco, Bulgaria, Russia
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6.  Mexico 1994-2006
 South Korea 1996-2006
 Hong Kong 1996-2006
 Chile 1998-2006
 Czech Republic 1999-2006
 Japan 2000-2006
 Switzerland 2001-2007
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7. Rank Company Country Retail Sales
(US$ Millions)
1 Wal-Mart Stores Inc. USA $374,526
2 Carrefour SA France $112,604
3 Tesco Plc UK $94,740
4 Metro AG Germany $88,189
5 The Home Depot Inc. USA $77,349
6 The Kroger Co. USA $70,235
7 Schwarz Unternehmens Treuhand KG Germany $69,346
8 Target Corp. USA $63,367
9 Costco Wholesale Corp USA $63,088
10 Aldi GmbH & Co OHG Germany $54,847
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8.  Hypermarkets
 Wide range of food and non-food products
 Offers: 80,000 items
 Floor area: 5,000 to 20,000 m2
(4 football fields)
 Supermarkets
 Wide range of mostly food products
 Offers: 10,000 items
 Floor area: 1,000 to 2,000 m2
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9.  Hard Discount Stores
 Products at low prices
 Offers: 800 items
 Floor area: 300 to 800 m2
 Convenience Stores
 Cash-and Carry/Food Services
 Wholesale and retail self-service
 Food products for businesses
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10.  2008 retailing industry in Russia was valued at
$480 Billion
 27.5% growth over the previous year
 Growth was attributed to high oil prices
 Strong economic growth in the market
 Food retailing accounted for 45.3% of the total retail sales
 2009 Russia was Europe's fastest growing
consumer economy
 2012- It was expected to over take UK and
Germany in retail sales (2nd
largest after France)
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11.  2002 – People spend 94% of their monthly
earnings
 Unlike US, they were free of mortgages and
lived with Family.
 14 of its cities had a population of over 1
Million
 2001 income US $1185  2007 income US
$4803
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12.  Mid 1990s Carrefour showed interest in Russia
 Opened a representative office in Moscow
 Finalized two locations
 Pulled out during the 1998 crises (food cost went up
by 100%)
 2006- started contemplating an entry into
Russia
 A delegation from Carrefour toured across Russia
looking for locations
 2007- After studying the market Carrefour
announced intentions to enter Russia.
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13.  2007 – Start the ground work for entering
Russia
 June 2009 – 1st
store opened in Russia (a second
store shortly after)
 October 2009 – Before opening the 3rd location
Carrefour announced exiting Russia
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14. Country Sales (In € Millions) # of Stores Per store (in €
Millions)
France € 47,119 5,517 € 8.5
Spain € 15,527 3,073 € 10.32
Brazil € 8,218 536 € 15.3
Italy € 7,806 1,608 € 4.85
Belgium € 5,269 627 € 8.4
Partners
Franchises
€4,904 267 € 18.4
Greece and
Cyprus
€2,944 888 € 3.31
Romania € 1,190 41 € 29
Singapore € 94 2 € 47
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15. 15

16.  To be one of the top three players in terms of
market share.
 Establish the brand quickly
 Secure a return on investment
 To make local acquisitions
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17.  1st
Store: Filion Shopping center
 2 floors, 8,000 m2
. 450 Employees
 Sold 15,000 food, 30,000 non food
 Invested € 8.8 Million
 Entertained by mime Artists, musicians, dancing
troops, etc.
 2nd
Store: Krasnodar (south of Russia)
 8,500 m2
, 350 Employees
 Invested € 7.8 Million
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18.  Made a binding offer to buy Seven Continent
for $1.25 billion
 Seven Continent 2008 Turnover was $1.4
billion. In June went into debt restructuring
and the deal was off.
 “The time was not right to sell a well-
performing asset”.
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19. 19

20.  Major Retailers in Russia
 X5 Retail Group $9B
 Magnit $5B
 M. Video $2.7B
 Kopieka $2.0B
 Lenta $2.0B
 Dixy Group $1.5B
 Seven Continent $1.4B
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21. 21

22.  The relative level of global and local competition
already in the industry
 The relative ease with which new competitors may or
may not enter the field – level of threat of new
entrants
 How much power the buyers have within the
industry
 The level of bargaining power of suppliers in the
industry
 The level of threat of substitute product or services or
new innovations
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23. Competition New
Entrants
Power of
Buyer
Power of
Supplier
Substitute
services
High Medium High Medium Low
X ≈ √ ≈ √
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24.  Carrefour core strategies were solid and proven
country after country
 Failure of accomplishing the top three leading
position
 Failure to enter the market through a significant
local acquisition
 Shortsighted board forcing a panic response
 Four years of efforts to evaluate the Russian
market and make a move were scrapped.
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