Facilitating the role of a Strategic Management Analyst during business school studies; I developed an evidence-rich analysis of the potential for expanding and modifying Carrefour’s operations, strategy, and value proposition including: Locations for future expansion in China. Assessed how the different cities and regions affect the nature of retailing business operations within different geographic areas in China. Identified China’s comparative advantage; given its resources, current operations, competitive position; the strategic role of foreign production sites and competitor activity in the global marketplace.
Carrefour in China: Strategic analysis & Competitive Sustainability
1. CARREFOUR IN CHINA: PAST,
PRESENT & FUTURE
Opportunities, Strategies and Competitive Analysis for
Ensuring Carrefour’s Sustainability in the Future
Anitra N. Reaves
MGMT: 6673
Walden University
Dr. Claire Starry
2. CARREFOUR: EXECUTIVE SUMMARY
The Carrefour corporation is a French foreign owned retailing enterprise
that has been operating consumer retailing outlets in China since 1995
and has enjoyed great success in retailing operations in the region with
revenues of €2.6 billion as of 2014, (Roberts, 2015).
The company is facing changing market conditions, customer demographics, shifts in consumer
behavior and competition in its traditional market and operations platform in China.
This has inspired a strategic necessity for the retailing giant to rethink its operational strategies and
re-evaluate its competitive capabilities to increase its value creation capabilities and leverage its
core competencies in the region.
Carrefour has been successful creating a large, consistent and progressive value proposition in
China by focusing on maximizing the products, goods and services it provides, the markets that it
serves, its operations management model and its value chain infrastructure, (deKluyver, 2010), to
optimize its diverse composite of retailing operations across the country.
These traditional value creation activities are not sufficient to maintain Carrefour’s competitive
advantage into the future and I advise that the company must re-engineer some of its processes
and restructure its organizational strategies in certain areas to remain effective, efficient,
competitive and sustainable in the future which includes a commitment to a transparent Corporate
Social Responsibility framework.
Analysis Framework
3. CARREFOUR: EXECUTIVE SUMMARY
Strategy Mapping
As Carrefour carefully maps out its expansion strategy for operational growth,
enterprise profitability, market competitiveness and business sustainability; I will
show that Carrefour must consider its current overall “strategic discipline” (de
Kluyver, 2010); what it has learned as it has achieved economies of scale, and
what organizational strategies it will need to pursue in the region as it strives to
adapt to new market realities and evolve its competitive agility.
Target markets and entry considerations
To Strengthen its strategic focus in China; with respect to potential growth and
market optimizing strategies; the firm must evaluate which markets to enter,
what products to sell, which locations to establish operations, what comparative
advantages it has; at what degree of scale to enter, what stores to operate; and
with respect to an operational timeline for execution to best capitalize and
maximize its position as a multinational competitor in the region
Modes of Entry Considerations
The changing political environment has opened up opportunities for
Carrefour to be flexible in the ways in which it chooses to enter new
markets. I will make considerations with respect to entry modes that offer
the best advantage for Carrefour; including a careful analysis of the
benefits, and risks of vertical integration, collaborative partnerships and
outsourcing advantages and risks.
4. CARREFOUR: EXECUTIVE SUMMARY
Competitive Advantages and Core Competency Focus
In Carrefour’s persistent engagement of continuous improvement efforts; I
recommend that the firm examine the long term sustainability of its
competitive advantages, how to best leverage core competencies and how to
ensure its business model is flexible and adaptive enough to ensure these
advantages position the firm for effective performance and sustainability in its
supply chain relationships; both with suppliers and partners.
Supply Chain Management & Sustainability
I have concluded the Carrefour supply chain is a vital and integral component
to the current operational infrastructure and the future long term viability of its
expansion strategies. I recommended that the supply chain system be
examined to determine what logistical capabilities make the most sense to
pursue with respect to location , distribution channels and transportation; to
support
• Second tier markets, as the firm expands retailing operations from its
core historical focus in Northern & Eastern regions in China to a current
development strategy focusing on
• Development in the Southern and western regions of China, (Tao,
2007).
Cost Leadership
I advise that Carrefour evaluate how it can best optimize its Global
Procurement system and capabilities to “reduce operational costs, and
enhance its product line; increasing profitability.
5. CARREFOUR: P1 OPERATIONS STRATEGY: – CURRENT SITUATION:
Operations from 1995 - 2005
Carrefour’s historical operations strategies have been focused on targeting a
customer demographic representative of middle class Chinese consumers, in
urban centers in the Northern and Eastern regions of China. Carrefour has targeted
this consumer segment for its retailing market activities because of their purchasing
power and sought to leverage its capabilities to seize greater market share and
decrease the impact that local and international competitors could exert in the
market space.
Carrefour has consistently pursued growth in maximizing its market presence by
expanding its operational footprint opening stores around the region; following a
similar replicable strategy modeled after the Taiwan market (Shotter, Beamer &
Classen, 2008). As of 2015, Carrefour planned to open 15 hypermarkets with more
diversity in its store designs and types.
Since 2005 Carrefour has forecasted annual sales projections to increase at a rate
of between 25 to 30% through 2011. As of 2006 the retailer had 73 hypermarkets in
29 cities, ( Child, 2006). As of 2014 sales decreased for the company in 2014
representing a 5.3% decline, however progressive growth increased at 2.5%.
Increased focus on store type diversity; specifically proximity stores, e-
tailer options, extensive store re-designs through with plans to renovate 75 existing
stores in China (Zhuoqiong, 2015).
6. Integrated Store Concepts & Store Types Designs
Carrefour’s dynamic business model has given the company a unique
value proposition which enables them to offer
- One stop shop; ‘all under one roof’ product accessibility
- Unique product merchandising options
- Blending of western novelty and eastern tradition
CARREFOUR: P1 VALUE PROPOSITION – CURRENT SITUATION:
Market Segmentation strategies have been pivotal in Carrefour’s ability to
offer relevant products based on its strength in having local partners, a
successful business in Taiwan and a market localization capabilities, a wide
array of product offerings
.
This has positioned the firm to achieve more revenue growth with less
outlets than their China Resources Vanguard as of 2004 (Tao,
2007).
Economies of Scale
Carrefour’s has benefited from learning effects and experience curves as
a result if its
- Deep experience and broad expertise it has amasses over 20
years and it’s understanding of the local environment.
- Swiftness in the expedient manner it mitigates counter moves by
competitors (Tao, 2007).
7. CARREFOUR: COMPETITIVE ENVIRONMENT; GROWTH RATE
#1 China Resources Vanguard - China: 31 provincial
operations, Yuan 100, 400 Million; 6.7% year over year
growth & 4637 stores as of 2013
#2 RT Mart Shanghai Ltd – Taiwan: National
operations; Yuan 80 , 720 Million; 11.4% year over
year growth & 264 stores as 2013
#3 Walmart China Investment. Ltd – U.S: 21 provincial
operations; Yuan 72, 214 Million; 24.5% year over year
growth & 407 stores as 2013
#4 Lianhua Supermarket Holdings Co. Ltd – China
with 84% of stores in Eastern China; Yuan 68,
814.4 Million; 0.2% year over year growth & 4600
stores as of 2013
# 5 Carrefour China – France: National Operations; Yuan
46, 705 Million; 3.2 % year over year growth & 236 stores
as of 2013/14. Growth rate in 2014 2.5% (Zhuoqiong,
2015)
Carrefour has stiff competition in the hyper and supermarket consumer goods market and as of 2013
four other major competitors outpaced Carrefour in: Regional operations, Yuan sales, annual
growth rate and number of retailing outlets as illustrated below, Fung Business
Intelligence Center, 2015).
Retailing
Competitors
8. CARREFOUR: MODERNIZATION AND INDUSTRIALIZATION
Tradition & Change
Carrefour has been evaluating its operational strengths, weaknesses,
opportunities and threats and has examined what aspects of its business
models needs to change , which practices need to be abandoned and what
needs to stay the same, yet be refined to stay competitive in China.
Increased labor costs in the hypermarket & supermarket categories drove
55.9% of total costs off ALL companies surveyed in 2013 (Fung Business
Intelligence Center, 2015).
Environmentally Friendly Store Designs & Products
Increases in technological advantages have created opportunities for even
more diversified business models; with e-commerce, smaller formats, pick up
points, mobile apps and decrease of physical stores across the retailing
sector (Fung Business Intelligence Center, 2015).
Competition from domestic retailers
As of 2013; domestic retailers have enjoyed success in growth over foreign
retailers as a whole.
Fung ) “Carrefour in Asia is the weakest among all other regions in FY14,
with sales dropping 6.4% in China alone,” (p.6).
9. CARREFOUR EXPANSION STRATEGIES & CONSIDERATIONS:
LOCATIONS , TYPES OF STORES
Locations:
Carrefour should focus on further developing its retail operations in rural areas to
bring value and greater product accessibility and localized options to those rural
areas as well as more inland market development in the country.
Carrefour should continue to leverage its localization expertise and
organizational competencies in low cost, high quality consumer products to
better align itself, with shifting consumer behaviors and help drive choice in
these new consumer markets.
I am confident that Carrefour can increase its overall competitive advantage by targeting less
saturated areas with a smaller operational footprint; as well as continuing with its planned
expansions of hypermarkets in new areas within the country. Retail Analysis (2015) “As the
retailer is committed to meeting the demands of all its customers, it is focused on offering
diverse shopping channels. Carrefour continues to open hypermarkets in emerging cities of
China and invest in e-commerce, including click and collect that was launched in June.”
Convenience stores such as the ‘Easy Carrefour model would present a lower risk option for
developing second and third tier markets in rural and or locations that are not near ports or
major transportation routes which would be essential for large scale hypermarket operations
and also very costly.
10. CARREFOUR EXPANSION COLLABORATION:
I advise that a continued Collaboration Strategy
Will remain a competitive beneficial strategy going forward as Carrefour’s
expansion into new areas will rely on the similar capabilities and shared expertise it
has employed in existing markets to: Localize products & build strong partnerships
with local suppliers and to develop strong and efficient Supply Chains, and
maximize delivery of Carrefour’s commitment to; “Get involved at a local level in
the areas in which we operate, and to Support local sourcing, (Carrefour, 2012).
Historically Carrefour aligned with local partners as an entry strategy to circumvent
Chinese governmental controls which required foreign firms to be granted
nationwide licensing to operate in in the country. Licensing was a local advantage
and only local operators received licenses (Shotter, Beamish & Classen, 2008)
Collaboration In New Context – University Partnerships in China
Collaborative efforts will take on new value-added contexts that will strengthen
internal processes and build strategic capabilities in dynamic essential ways.
I believe these new collaborative contexts will be pivotal in building a sustainable
community of talent and shared perspectives, (Carrefour, 2012) “regarding
talent cultivation, recruitment, internship, and expertise sharing by inviting
researchers and executives to conduct lectures on the selected topics.
This is the biggest university partnership project of Carrefour China.”
11. CARREFOUR EXPANSION: FDI VS. OUTSOURCING:
While Carrefour does utilize outsourcing options in its global operations, no indication
or evidence of outsourcing activities or plans to outsource could be found regarding
the retailers operations in China.
Being that Carrefour engaged in sophisticated maneuverings to ensure that it could
establish wholly owned subsidiaries, retain tight control over its operations, its
establishment of global procurement centers, as well as its deep relationships with
local partners, suppliers and talent (local intellectual resources); I conclude that the
firm not consider outsourcing as beneficial to its operations in China at this time, and
therefore I do not recommended outsourcing as a strategic mode of entry for
expansion.
No substantial cost reductions or profit enhancements exist with an outsourcing
strategy. Carrefour’s value disciplines in operational excellence, product leadership
and customer intimacy informs that these core strategic competencies and capabilities
are something that the firm would not be wise to risk-- in the loss of quality products,
recruiting talent, or in its relationships. Outsourcing could pose risks with threats to
protecting intellectual property, as well as communication gaps. These types of Risk
can be significantly high in China. Therefore no substantial cost reductions or
profit enhancements exist with an outsourcing strategy.
I recommended and advise that an FDI strategy with collaborative relationships
are advantageous and the best way to go.
12. What makes Carrefour Unique:
Comparative Advantage
o Largesse of management and technical know how & experience
o Extensive supply of capital
o Substantial Influences along and within the Supply Chain
o Localization expertise, “thinking global, acting local,” (Xu, Xu & Liu. 2014.p.7)
Expedient response to market conditions and customer needs
o Regional procurement centers managed through its Global Procurement System
Competitive Advantages: Localization:
o Partners produce 95% of Carrefour’s products locally
o Leverages Supply Chain relationships and partners for logistical support from
o Suppliers for distribution, allowing them to reduce costs and capital tied up in standing
inventory in their own distribution centers..
This produces a cost-leadership advantage for the firm and reduces its operational cost
structure; allowing it to focus and allocate those financial resources elsewhere and return more
profit to shareholders.
CARREFOUR: COMPETITIVE & COMPARATIVE ADVANTAGES
Market Size and Growth Rate:
Currently in 2016; the company has created a 4-region divisional structure; with
operations in South, East, North and middle China (Daxue
Consulting, 2016).
Year over Year growth rate of 2.3% approximately as of 2013 for which the latest
year over year data is available ( Fung Business Intelligence, 2015).
14. CARREFOUR: SUPPLY CHAIN – PERTINENT ISSUES
Global Procurement Centers were primarily set up in the eastern and
south eastern regions of China comprising 11 in total in 2005.
These locations were chosen because of their proximity to ports for
import/export activities (Tao, 2007). This made sense when the companies
primary operations where in coastal areas in the north/east.
I conclude however; that this is concerning considering that the company
has since established operations in all regions of the country, with greater
focus on Southern and western areas of the country, and in areas closer
inland and/or in rural areas; thus presenting a logistical/distribution risk
such that organizational strategies will not be supported in the most
optimal manner, resulting in process inefficiencies, performance problems
and product delays and increased costs..etc .
To address this, I advise that Carrefour will need to create more
global procurement centers, or restructure existing centers
through consolidation of some existing centers concentrated in
the east to be able to facilitate procurement for new markets
where Carrefour will be expanding retailing operations
The Global Procurement System will need to be realigned and
updated to reflect these new centers and map them correctly so
that the communications, coordination and processing can be
congruent and performance effective.
15. CARREFOUR: SUPPLY CHAIN, PRICING,
SUPPLIERS & IMPLICATIONS
Carrefour enjoyed a advantageous and influential relationship and purchasing
position with its upstream and downstream suppliers. Some suppliers express
business partnerships and some suppliers express business relationships as it
understood that not all suppliers can be real partners.
Ackerman & Bidegraven (2007) “On the customer side, it means many of the
same things, only working in another direction. You need to know about their
strategies and directions, their event plans, and their needs for flexibility and
resilience. The collaborative planning, forecasting, and replenishment (CPFR)
process works both ways.”
Necessity to develop meaningful, trustworthy relationships with all supply
chain stakeholders is critical, as the quality of these relationships rather
upstream or downstream can increase Carrefour’s overall competitive
advantage, or conversely cause substantial problems. However, the
necessity to develop meaningful, trustworthy relationships with all supply
chain stakeholders is critical, as the quality of these relationships rather
upstream or downstream can increase Carrefour’s overall competitive
advantage, or conversely cause substantial problems.
16. CARREFOUR: SUPPLY CHAIN COMMUNICATIONS &
STAKEHOLDER ENGAGEMENT
Stakeholders
Suppliers
Supply Chain
Partnerships
Customers Supply Chain
Relationships
Communication
Information Systems
& IT
Integration/Alignment
Suppliers
High value
communication
Trust
Mutually –Beneficial
relationships
Customers
Strategy & direction
Their event plans
Capacities and Capabilities
Stakeholders Stakeholders
Ackerman & Bidegraven (2007
17. CARREFOUR: FINAL ANALYSIS: WHAT ARE COMPETITORS
DOING?
In my analysis; I have concluded that increased competition has driven the need for Carrefour to
develop new and innovative ways to deliver high quality low cost goods to consumers in the
Chinese market. While growth has been overall progressive; trending upwards, economic
challenges for the country of China has caused some segments of consumer confidence to
decrease; earnings have decreased in some markets affecting the extent of disposable and needed
income for Chinese consumers.
A changing competitive landscape, technological advantages and shifting patterns of consumer
behavior require that Carrefour re-engineer its business model to accommodate the challenges,
emerging threats and new market opportunities that exist in the Chinese retailing industry, both
internally with internal business processes and externally for the Carrefour customer.
Carrefour faces stiff competition from foreign and domestic firms of a similarly purposed retailing
structure in the region as noted in slide 7, Most notably Walmart and Lianhua
Walmart is Carrefour’s immediate largest and foreign competitor in China. Walmart has undertaken
a massive growth strategy via expansion with more than (Xu, Xu & Liu,2014) “390 stores, and
across 150 cities across the country as of February 2013, and has established relationships with
local suppliers to cooperative relations with nearly 20,000 suppliers, sales of products more than
95% of local products. Wal-Mart China pays attention to talents, encourage talents, especially the
cultivation and development of female employees, created nearly 100,000 jobs in the country. ,”
(p2).
18. CARREFOUR: FINAL ANALYSIS: WHAT ARE COMPETITORS
DOING?
Lianhua (n.d):
Lianhua Supermarket operates more than 4,500 supermarkets, hypermarkets, and convenience
stores in more than 20 Chinese provinces, making it the country's #1 grocery retailer. Its
segments operate under the brand names of Century Mart, Lianhua Supermarket, Hualian
Supermarket, and Lianhua Quik.
Since its IPO in 2003, Lianhua has been expanding rapidly in China's fragmented retail market.
In particular, it is focusing on building its hypermarket business to better compete with foreign
rivals, such as France's Carrefour, Tesco in the UK, and Wal-Mart. Lianhua is owned
by Shanghai Bailian Group, China's largest retailer.
China Retail News (2014) “Lianhua Supermarket said that due to the severe competition in the
retail market and the increase of costs, especially labor costs, the company's net profit
attributable to shareholders saw a year-on-year decrease over the first nine months of 2014.”
Best (2014) “Lianhua said "constantly rising costs" was one of three factors that has prompted
the retailer to look to "transform and upgrade" its business. As well as the pressure on costs,
Lianhua cited "the ever-increasing fierce market competition and changing structure of demand".
19. CARREFOUR: FINAL ANALYSIS & RISK
CONSIDERATIONS
As with any growth and expansion strategy there risks to any of the strategies the
Carrefour decided to pursue.
• Lack of proper planning, underdeveloped analysis of how to best serve the
inland, rural second tier and third tier cities.
• Poor logistical planning and support to facilitate getting merchandise to stores in
the most efficient manner
• Insufficient marketing strategy failure to localize properly and or corruption and
unethical practices in the supply chain.
• These potential threats can pose serious reputational, economic, financial risks
for Carrefour. If the firm does not engage and govern its corporate social
responsibility initiatives and standards with respect to how it treats all its primary
and secondary stakeholders, its commitment to environmentally sound best
practices, source supplier transparency, the ethical and proper treatment of
workers and the monitoring of GMO and fake foods that could end up in its
stores, Carrefour could find itself in a precipitous stage of decline.
• A multi-billion portfolio and a record of solid business performance
Is not indicative of future performance. To remain relevant and competitive
Carrefour must continuously work to refine and innovate its business model.
20. CARREFOUR: ANNOTATED BIBLIOGRAPHY
References
Child, P. N. (2006, October 25). Carrefour China: Lessons from a global retailer. In Forbes.com. Retrieved February 24,
2016, from Forbes, Inc website: http://www.forbes.com/2006/10/25/carrefour-china-chereau-qanda-biz-
cx_pnc_1025mckinsey.html
This article discusses the main competitive factors that Carrefour has undertaken in China as it has grown over 20 year
presence China, obstacles they have faced, plans for continuous improvement and best practices learn from the retailers
earlier entry in Taiwan. This article is relevant for understanding the opportunities, considerations and environmental
factors that have been integral in shaping the retailers operations infrastructure, strategic planning and solid market
performance in the region.
China Retail: Hypermarkets and supermarkets in China. (2015, February). In Jing Daily. Retrieved February 24, 2016,
from Fung Business Intelligence Center website: http://jingdaily.com/wp-
content/uploads/2015/07/china_dis_issue125.pdf
This study details a comprehensive report and analysis of a variety of retail focused factors in China's retail industry. The
study discusses the competitive environment, emerging trends and major players in the hyper market and supermarket
sectors and how they are innovating their brands, operations and offering to appeal to a more dynamic and
technologically focused consumer. This article is relevant as it highlights the strategies and plans companies are taking
to remain relevant, decrease their cost structure, mitigate the effects of a saturated competitive environment and best
practices that other similarly purposed firms can apply to their business models.
deKluyver, C. A. (2010). Strategic Management Collection. Fundamentals of global strategy: A Business model
approach. New York, NY: Business Expert Press, LLC.
This book discusses a broad composite of relevant factors, concepts and strategies that are required to understand how
to plan, develop, implement, execute, manage and measure a business and business performance abroad. This book in
general; as well as the specific citations I referenced contribute to providing evidence, support and or rationale for the
positions and arguments put forth in the project in regards to understanding and identifying what value disciplines are
and how they help to shape strategic disciplines of businesses. This was essential in defining Carrefour's operations
strategy and value proposition.
21. CARREFOUR: ANNOTATED BIBLIOGRAPHY
References
Is Carrefour in China implementing the right marketing strategies? (2016, February 23). In Daxue Consulting. Retrieved
February 24, 2016, from Daxue Consulting website: http://daxueconsulting.com/carrefour-in-china-marketing-
strategies/
This piece examines the marketing strategies and operational challenges that Carrefour is currently facing in China as
the retailer continues to see decreases in market share, the shifting demand from Carrefour hypermarket store concepts,
to more agile service frameworks; the performance challenges it has discovered in second and third tier cities, and the
future direction the firm is pursuing in closing the technological differential as it relates to making e-commerce
purchasing platforms available. This article is essential in understanding Carrefour's external environment, consumer
shifts and the changing needs of the Chinese consumer as it relates to the Chinese retail industry.
China Retail: Hypermarkets and supermarkets in China. (2015, February). In Jing Daily. Retrieved February 24, 2016,
from Fung Business Intelligence Center website: http://jingdaily.com/wp-
content/uploads/2015/07/china_dis_issue125.pdf
This study details a comprehensive report and analysis of a variety of retail focused factors in China's retail industry. The
study discusses the competitive environment, emerging trends and major players in the hyper market and supermarket
sectors and how they are innovating their brands, operations and offering to appeal to a more dynamic and
technologically focused consumer. This article is relevant as it highlights the strategies and plans companies are taking
to remain relevant, decrease their cost structure, mitigate the effects of a saturated competitive environment and best
practices that other similarly purposed firms can apply to their business models.
Martin, R. L. (2015, April 21). There are still only two ways to compete. In Harvard Business Review. Retrieved February
24, 2015, from Harvard Business Publishing website: https://hbr.org/2015/04/there-are-still-only-two-ways-to-
compete
This article discusses the two ways in which companies achieve and maintain a competitive advantage; which is through
cost leadership and strategic differentiation planning strategies.
22. CARREFOUR: ANNOTATED BIBLIOGRAPHY
References
Our commitments. (n.d.). In Carrefour. Retrieved February 25, 2016, from Carrefour website:
http://www.carrefour.com/content/our-commitments
This title page of the Carrefour official website, defines the specific parameters of the the company's Corporate Social
Responsibility platform and the specific commitments the firm makes to ensuring they are living up the best expression
and practices of stated values.
Roberts, A. (2015, July 15). Carrefour quarterly sales slow as Chinese revenue declines. In Bloomberg
Business. Retrieved February 24, 2016, from Bloomberg, LP website:
http://www.bloomberg.com/news/articles/2015-07-16/carrefour-quarterly-sales-decelerate-as-chinese-revenue-
declines
This article describes financial challenges that Carrefour corporation in China has been experiencing as a result of
changing economic conditions; decreased purchasing power of Chinese consumers and stagnant consumption activity.
Shotter, A., Beamish, P., & Klassen, R. (2008). Carrefour China, building a greener store. Richard Ivey School of
Business, 1-13.
This is business case study that examines an important sustainability measure that Carrefour China was considering in
its analysis build its first green store. Green building trends in China are reviewed.
Xu, L., Xu, Q., & Liu, X. (2014). Wal-Mart and Carrefour's Supply Chain Management Strategies in China. International
Journal of Business Management, 9(7), 155-161. doi:10.5539/ijbm.v9n7p155
This journal article discusses the competitive positions of Wal-Mart and Carrefour as foreign retailers operating China
and compares their unique value propositions, comparative advantages and strategic disciplines
23. CARREFOUR: ANNOTATED BIBLIOGRAPHY
References
Zhuoqiong, W. (2015, March 6). Carrefour to open 15 new hypermarkets in China. In China Daily.com. Retrieved
February 24, 2016, from China Daily website: http://www.chinadaily.com.cn/business/2015-
03/06/content_19734891.htm
This article discusses Carrefour's plans to build new stores in China, the changing purchasing habits among Chinese
consumers and plans for how the retailer will innovate new store design concepts and offerings.
Editor's Notes
Value Proposition: What are its core competencies (those things Carrefour does extremely well)l how effective are they and to what degree of efficiency are they employed to create, enhance or extend value to its customers, shareholders and employees, partners..etc (DeKluyver, pg 162).
Carrefour has been successful creating a large and steady customer market in China, by creating value for their customers
VVVVVV
BBBBBB
NNNNN
(Has Been) Carrefour has been successful in creating value for it’s customers by offering (ample stores, diversity merchandising experience, multi-channel accessibility including: hyper, ______
Current Value Prop: Which has given it a strong value proposition and a competitive positioning within its industry, sector and market in China.
As Carrefour strives to remain competitive in China it has to consider how the modernization and industrialization of China has created new opportunities for Carrefour to reach a wider market, with more state of the art products, good and services .
However Carrefour has new emerging threats in the competitive landscape from domestic retailers and an increasing changing market, customer and retailing landscape that it must continuously innovate and maximize its business agility to continue to remain ……. In the future
One stop shopping
Integrated merchandising concepts
Rich and expansive expertise as result of learning from deep experience from its decade of business operations in the country
Understanding of local environment
Swiftness of mitigating adverse market conditions of counter moves by competitors
Investment in Chinese management and staff leadership through its capability building activities, i.e training..etc
Punctuated international presence operating in more than 32 countries, and a community of talent resource of over 430, 000 management, employees and staff globally
Carrefour will focus on full implementation of its CSR Initiatives as established in 2012; committing to responsible decision making, protecting human rights, positive environmental impact in reducing waste, safe, high-quality and environmentally safe products, (Carrefour, n,d).
Carrefour’s Regional Effects on Retailing for offering comparative advantage, given its resources, competitive strengths
Increased competition has driven the need to evaluate the market and search for new viable opportunities as market saturation has limited growth in Urban areas and second and third tier cities.
There is not compelling requirement that Carrefour have a Local partner or collaboration in their expansion efforts, however they could benefit from logistical and transpiration expertise into rural areas…
Carrefour decided to implement a partnering tactic which enable the firm to be licensed under the administrative operations of its local partner which expedited permit issuances and the development, construction and opening of the new stores. Local Partners = Localization
FDI/Vertical Integration
Outsourcing: Limitations for supporting this kind of business level strategy (functional supports, R&D, Marketing, Sales) and for which aspects of the operation make sense.Conclusion: Use some of but not of the options and for which activities
Broker relationships with local partners strengthening its hypermarket stores and performance as that is a core business offering that have given Carrefour its unique positioning in the region over the last 20 years.
Carrefour’s value disciplines in operational excellence, product leadership and customer intimacy informs that these core strategic competencies and capabilities are something that they firm does not want to risk losing in loss of quality of products, recruiting talent, or its relationships that outsourcing could be brought into and pose risks; as well as communication gaps and intellectual property risks, which be significant high in China.
Why are there Rural Decreases in Sales?What can be done to mitigate these effects and inspire growth? (Logistics, transportation, types of products, types of local economy (farming vs 9-5 jobs) of the stores understand that and do they have products that have been localized to meet these needs. Or can they be developed in a cost effect and sustainable way?
Ackerman & Bidegraven (2007)
…Working relationships between suppliers and customers, which some like to call "partnerships." Calling business relationships "partnerships" doesn't make them so. Furthermore, there are limits to how many partnerships any company can effectively maintain. Certainly, you can't have partnerships with everyone in your supply chain, unless the chain consists only of you and two others. Still, it is important to maintain high-trust, high-communication, mutually beneficial relationships with key suppliers and customers, whether they're called partnerships or not.
The relationship with stakeholders both internal and external in essential in coordinating activities, negotiation price and for resolving conflict which is an inherent outcome of the communication exchange some times. Carrefour should proceed with some degree of caution as proceeds to aggressively optimize its cost structure within suppliers and to strive as much as possible to demonstrate its commitment to its CSR values which includes, (Carrefour, 2012) “ Conduct our business fairly and ethically, Create working conditions that are beneficial for everyone, Offer 100% of Carrefour product suppliers a sustainable development self-assessment tool to support them in their approach, [sic] and to continue to Support local sourcing.Intense consistent focus on the quality, comprehensiveness, frequency, channels, methods and purposes of communication are vital in keeping the value chain derived from source supplier relationships at an optimal level of effectiveness.
Quality of communication can assist in a process through greater clarity, planning and value-added feedback can be actionable and operationalized where needed, as well as ensure a consistent flow and deliver of materials and finished good from the foundation of the supply chain to the end point; the customer!
Carrefour would be advised to develop strategic and targeted operational communication plans to ensure all stakeholders receive the information, knowledge and messaging items that are relevant to the successful execution of their tasks and service level standards and agreements.
Continuous investments and improvements in technological resources that will aid in facilitating the transfer of information should be non-negotiable and be considered as mission critical assets of the Carrefour company, not just in the supply chain, but throughout the entirety of the organizational system.
Threats – In all of the emerging trends that other similar and top companies are doing, Carrefour is not, yet has plans to implement some. Carrefour should be more aggressive in its adoption of these kinds of strategies such as: - Launching Mobile Apps, development of private label and integrated online transactional programs (Fung Intelligence, 2015)
Competition has driven the need to evaluate the market and search for new viable opportunities as market saturation has limited growth in Urban areas.
Despite the fact that Lianhua is facing challenges related to sales and nearly 0% growth (Fung Business Intelligence); as evidenced on slide 7, domestic; Liauhua has a larger dispersed network of stores and domestic firms overall are presenting significant challenges to foreign firms and the large hypermarket and supermarket concepts. I am sure this is what is prompting large foreign retailers to adapt a smaller store and scale approach and looking for more opportunities inland within second tier and third tier locations as well as e-commerce options. Fung Business Intelligence (2015) “An attractive strategy for hypermarket and supermarket players has been to operate premium supermarkets to expand customer bases; yet, there are challenges. The actual growth of this type of supermarket has stablised after years of fast expansion, meaning that supply is gradually exceeding demand, especially in tier 1 cities,” (p.11)Fung Business Intelligence (2015) “Domestic retailers continue to grow while foreign retailers struggle Over recent years, domestic retailers have increasingly become the dominant force, while foreign retailers have been struggling. Several foreign hypermarket and supermarket operators have seen customer footfall shrinking and many existing stores continue to experience sales slowdowns. For example, sales performance of Carrefour in Asia is the weakest among all other regions in FY14, with sales dropping 6.4% in China alone,” (p.6).
What are other organizations doings (Compare and contrast slide to show similarities).
How does this improve Carrefour’s Value proposition?
How does this effect its ability to leverage competitive advantage over other retailers; foreign owned and domestic?
Risks
Why will these recommendations will be effective in addressing the most critical issues
Draw connections between issues addressed and recommended strategies. i.e .If we do this, then this will likely occur.
Risks