Ahold is one of the world's largest grocery retailers, operating stores in 27 countries. It grew through acquisitions of store chains that it operated under the original names with local management. In contrast, Walmart and Carrefour expanded globally under a single name with centralized decision making. Centralization allows for consistent decisions and lower costs through bulk purchasing. However, decentralization allows Ahold to maintain local identities and cultures, keeping customer loyalty after acquisitions. Both centralized and decentralized structures have advantages, depending on a company's goals and market strategy.

1. CASE: 07
Ahold: The biggest supermarket retailer you have never
heard of.
Q: 1 what are the advantages and disadvantages of the growth strategies followed by
Ahold, Wal-Mart and Carrefour?
Ans:-
Headquarter in Netherlands; Ahold is one of the world's largest international rated grocery
and Food Service Company. At its peak on 2001, Ahold's reported sales and profits were 66.6
billion Euros and 1.1 billion Euros and it operated 5,155 stores in 27 countries with nearly a
quarter of million employees. Ahold was a family controlled business under the Heijn family,
which underwent a transition to a management controlled firm. We analyse Ahold's growth
strategy through acquisitions and its consequences. Over three generations of the Heijn
family, Ahold evolved from a single grocery store in 1887 to a food company with a
dominant position in the Netherlands. Starting in 1989, Ahold's ambition under professional
management was to be in the same league as Wal-Mart & Carrefour, the number one and two
internationally ranked retail companies. Ahold planned to accomplish this ambition by
maintain its dominant position in the Netherlands, developing a critical mass in the Us in
order to establish synergies at the widest possible level with Ahold USA, and considering
other international opportunities.
Ahold financed its expansions primarily with debt and outside equity. Ahold typically
paid cash for acquisitions through bridge functioning followed by an equity and debt issue
about four months later. Because the acquisitions immediately contributed to the earnings per
share, Ahold could sustain its 15% earnings growth target. Ahold's growth strategy differed
from that of Wal-Mart and Carrefour. Ahold grew via acquisitions of store chains and then
continued to operate these chains under their own name, local management and local identity.
Carrefour and Wal-Mart had very different strategies. Carrefour expanded both nationally
and internationally under one name with a large international presence. Although Carrefour
attempted to expand into US, it never succeeded. Wal-Mart also expanded domestically and
internationally under one name but has a relatively small presence outside US.
Ahold reaped a lot of benefits from the external growth strategy it followed. It generated
cost efficiency through economies of scale, enhancing the revenue through gain in market
share and generating tax gains. Ahold gained acquisitions of external knowledge capabilities,
resources, market access and brands. Ahold's synergies derived better corporate control on
the target firm because managers often have troubles abandoning old strategies and habits
that could be healthy for an organization. Ahold gained market power and generated value.
Ahold's newly generated shareholders created more value for it in US than in Europe. It
proved beneficial for Ahold as the acquisitions helped it to establish itself as a “local guy” in
the front of the retail chains it acquired.

2. Wal-Mart followed the internal growth strategy also referred to as organic growth which
focuses on making the core business better that is developing new products, increasing
efficiency, hiring the right people. External growth strategies create synergies and market
power but it can also destroy value if the management reinvests the firm's resources or free
cash flows in inefficient projects for their own personal interest. The absence of internal and
external oversight of management strategies could lead to consequences of bad acquisition,
accounting scandals and the loss of investor's confidence. Moreover high could pressure on
management to maintain growth level as well as giving management more discretion to make
poor acquisition that value growth over shareholder value. They go on to state that their result
is also inconsistent with the inability to sustain the firm's strategy of growth through
acquisition or the strategy is not going to be as profitable as expected. Alternatively internal
growth provides more cooperate to control encourages internal entrepreneurship and protects
organizational culture, but it is often a slower way of growth as compared to mergers and
acquisition, since it requires the development of new resources internally.
Therefore the managerial choices between these two types of growth strategies followed
by Ahold, Wall-mart and Carrefour, will have a consequent impact on the firm's operational
and market performance. However growing internally as well as externally has a significantly
positive effect on the abnormal returns of the firm. However the business risk associated with
each type growth varies, and depends on various determinants the industry or the economic
environment. Therefore the companies don't always have the choice of growth type they can
use since one type may b considerably more risky and expressive then the other in their
environment.
Q: 2 Should Ahold use its name on all of its stores like Wal-Mart and Carrefour? Why
or why not?
Ans:-
The name “Ahold” came to existence in 1973. “Ahold” does in fact signify the name “Albert
Heijn Holdings”, the founder of the retail giant. Since the mid-1970s, the company has
expanded externally by eventually buying chains in Spain, the United States, and Portugal,
and accelerating its acquisitions in the latter half of the 1990s in markets in Latin America,
Central Europe and Asia. The most important strategy that Ahold follows was not to use its
original name by replacing the retail chain it had acquired. It operates under 26 different
names across these places, for e.g. Bruno's in Alabama and Disco Stores in Argentina. We
believe that Ahold should stick to it years old policy of not adapting similar name all over the
world like Wal-Mart and Carrefour. The following reasons will justify the statement:
Ahold follows a straight cut strategy of being “multilocal, multiformat, and multichannel”.
For them the culture of the company as well as the culture of the local acquired company
stands first. They believe in blending in hence winning them the perception of the customers
as the “local guy” whom they could depend on whenever they wanted. Ahold's growth
strategy included acquisitions of retail chains across the world. Having acquired store chains
all over America, Ahold doesn't want to lose the customer's that existed before they entered

3. the old market. Changing the existing name that the store chain has carried for a long time
would lose the customers as they would think that the new store would not offer what they
wanted. The age old trust would be tarnished and customer's attitude towards the retail store
would be different. There would be changes in buying behaviour of the customers as they
would be able to relate so easily to the new name. Wal-Mart and Carrefour carry their names
in all the stores that they operate and all their stores look the same and have identical layouts.
As for Ahold they have an “out of the box strategy”. They have differentiated themselves and
operate in a decentralized module. Their stores range right from a tiny gas station outlets to
150,000 square foot hypermarkets. It is because of this strategy and offerings that Ahold
should retain its name.
Q: 3What are the advantages and disadvantages of Wal-Mart and Carrefour's more
centralized decision making compared to Ahold's decentralized decision making?
Ans:-
An organization has to make strategic and operational decisions. Where and by whom should
these decisions be made? And: how should the organization structure be adapted?
Centralization and decentralization are the two opposite ways to transfer the decision making
power and to change the organizational structure of the organizations accordingly.
The strategic purpose of Wal-Mart stores is to sell products every day at a lower price. Hence
in order to get the cheapest and greatest deals, the purchasing of the company is centralized
and all the transactions take place from the headquarters of Wal-Mart. The transactions are
directly between the manufacturers and the Wal-Mart. From the year 1992 the company
refused to negotiate with the representatives of the manufacturers. And to avoid dependence
on a manufacturer the company only allowed supplying more than 2.5%. Similarly for
Carrefour, it moved towards greater centralization in 2000, particularly in terms of
purchasing. Centralized purchasing helps them improve their competitiveness along with the
low price range. The advantages that the centralization reaps the two companies are:
Centralization can facilitate co-ordination. Wal-Mart operates all its stores from its
headquarters. Not only has it established cooperative transactions with its biggest supplier-
Procter & Gamble, but also resulted in faster refilling of products and goods that agree with
the need of the consumers, plus a lower cost of inventory. It ensures that decisions are
consistent keeping in mind the objectives of the company. When decisions are decentralized
to lower-level managers, they may take decision at variance with top-level manager's goals.
Major strategic decisions, for example are often centralized to make sure the entire
organization is pulling in the same direction. Centralization avoids duplication of activities by
various subunits within the organization. Wal- mart has centralized all purchasing decisions
at Arkansas, its headquarters. By wielding its enormous bargaining power, purchasing
managers at the head office can drive down the costs Wal-Mart pays for the goods it sells at
its stores. By centralizing power and authority in an individual or a management team,
centralization can give up top-level management the means to bring about the needed major
organizational changes.

4. Ahold's mode of decentralization draws them the following benefits:
While centralization over-burdens the top managers with the decision making authority,
decentralization gives top management time to focus on critical issues by delegating more
routine issues to lower-level managers and reducing the amount of information top managers
have to process, making them less vulnerable to cognitive biases. It provides a greater degree
of freedom and control over the work that has been assigned. The decentralization module at
organizations assigns the employees more responsibilities for their jobs in order to make
them work harder and increase productivity. Ahold experiences flexibility as its managers are
flexible to more rapid response to environmental change. In a centralized firm like Wal-Mart
or Carrefour, the need to refer decisions up to the hierarchy for appraisal can significantly
slow decision making and inhibit the ability of the firm to adapt to rapid environmental
changes. Thus at Wal-Mart although purchasing decisions are centralized so that it can realize
the economies of scales in purchasing, routine pricing and stocking decisions are
decentralized to individual store managers, who set prices and choose the products to stock
depending on local conditions. Decentralization can increase control. It can establish
relatively autonomous, self-contained subunits within the organization. By giving store
managers the ability to set prices and making stock decision, Wal-Mart's top managers can
hold local store managers accountable for its performance thus increasing the ability of top
managers to control the organization. Ahold's decisions making results are better. Decisions
are closer to the spot by individuals who have better information than managers several levels
up the hierarchy.
The choice between centralization and decentralization is not absolute. Frequently it makes
sense to centralize some decisions and decentralize others and depending on the type of
decision and the firm strategy.