Carrefour

Carrefour RetailBy: Aamir Ansari

Background

A French international hypermarket chain

Headquartered in Levallois-Perret-France

11,000 stores

More than 32 countries and areas

Over 495,000 employees (2009)

Sales: 112.245 billion euro in 2010

4 store formats

- Hypermarkets- Supermarkets- Convenience - Cash&carry

History

The Carrefour company is created

by:

- Marcel Fournier

- Denis Defforey

- Jacques Defforey

History

•Carrefour opens its first supermarket in Annecy, Haute-Savoie

• Promodes is created by a merger

History

Carrefour invent a new

store concept:

theHypermarket

History

•Carrefour introduces “produits libres” -unbranded products but “just as good and cheaper”

• Carrefour gets listed on the Paris stock exchange

History

•Carrefour brand-name products are introduced.

•Launches Carrefour insurance service

History

•Carrefour creates “filiere quality systems” -guarantees product origin and traceability

•Takes a controlling stake in ComptoiresModernes

•Carrefour and Promedes merge

History

Carrefour group adopted

a new governance

structure with leading to a

more fluid and effective

operation able to respond with greater speed.

History of Global footprint

1969- the first overseas hypermarket was built in Belgium.

1973- hypermarket in Spain

1975- hypermarket in Brazil

1982- hypermarket in Argentina

1989- first hypermarket in Asia, in Taiwan

1990- first hypermarket in Philadelphia, United States

1991- second hypermarket in New Jersey

1993- first hypermarkets in Italy and Turkey.

1994- first hypermarkets in Mexico and Malaysia

1995- first hypermarket in China mainland

1996- hypermarkets in Thailand, Korea, and Hong Kong

Corporate Structure

Lars Olofsson

CEO and Chairman of Carrefour

Noël PRIOUX, Executive Director

France

Thierry GARNIER, Executive Director China and Taïwan

Eric LEGROS, Executive Director

Group Merchandise

José Carlos GONZALEZ-

HURTADO, Chief Commercial

Officer

Pierre-Jean SIVIGNON, Chief Financial Officer

Financials

Year Revenues Profit

2008 89 billion Euros 382 million Euros

2009 87.2 billion Euros 385 million Euros

2010 87 billion Euros 1.87 billion Euros

Overview of Carrefour

Primarily a hypermarket, but also operates supermarkets, hard discounts, convenience stores

No. 1 retailer in Europe and China in terms of size

Reputation of variety, freshness and low price

Threat of New Entrant - Low

Barriers to entry :

1) Product differentiation –All consumer goods under one roof

2) Economies of scale -Operates 10,378 stores in 29 countries

3) Switching Costs - Promotions, discounts, partnerships, credit program increase switching costs for consumers, suppliers, and partners alike

4) Access to Distribution Channels – Very difficult for new entrants to get access to new channels

Expected Retaliation - Vigorous retaliation can be expected when the existing firm has a major stake in the industry, when it has substantial resources, and when industry growth is slow or constrained

Power of Suppliers - Low

Supplier groups are less concentrated

Many substitutes available to the firm

Retail giants important for supplier groups

Minimum threat of forward integration from suppliers

Power of Buyers - Average

Buyer’s are very important to the retail industry

But no single buyer purchases enough to impact the industry

Important to know buyer’s taste and preferences

Special promotions and discount decrease buyer’s power

Threat of substitutes

This depends on region or country of operation

Generally low – promotion and services increases switching costs – tailoring to local needs

Culture dependent – Mom and Pop store more popular in Asian countries

Intensity of Rivalry -High

Numerous or equally balanced players

Rapid Industry Growth

Storage Costs and Fixed Costs

High Strategic Stakes

High Exit Barriers

Key Success factors

A hit with customers:

One-stop shopping

Extremely low prices

Full range of choices

High quality of products

From a business perspective:

Seamless capture of international markets

Resource integration

High level of local sourcing

Business Level Strategy

Hypermarket – Less cost, more variety of products, low to mid level quality

Supermarket – Low cost, one stop shop for household’s needs

Hard Discounts – Lowest cost, products with high shelf life and bulk buying

Free Shuttle Services – Differentiation, increasing the reach of products

Child Play Areas, Home Delivery, Cultural Center, Free Credit, Themed Corners

Corporate Level Strategy

Value Creating Diversification

Economies of scope:

Sharing Activities

Transferring Core Competencies

Market Power – Vertical Integration

Financial Economies – Efficient Internal Capital Market Allocation

Value Neutral Diversification – Low performance, Uncertain Cash Flow, Synergy

International Level Corporate Strategy

Transnational Strategy – Global efficiency and local responsiveness. Combination of multi-domestic and global strategy.

Entry Mode – Initially Strategic Alliance, later on wholly owned subsidiaries

1) Largest hypermarket chain in terms of size

2) Second highest revenues

3) Joint ventures in various countries

4) Strong private label

1) High operating expenses

2) Weak positioning in Asia and middle east

3) Expansion plans taking too much time

4) Poor E-commerce performance

1) Joint ventures and acquisition for more expansion

2)Discount stores development

3) Improve sale performance

4) R&D in marketing

1) Walmart’s low prices biggest threat

2) New players/ Local players in the industry

3) Less knowledge of Asian countries

4) Slow expansion outside France

SWOT

Current Challenges faced

In China

Govt. has stopped preferential treatment

Rental prices high in Tier I cities

Expansion plans halted

In Europe

Fall in operating profits

Non food spending down by 10%

Overall sales down by 4.4%

Recommendations

Continue the practices that have been successful

Leverage knowledge of international market and expand into emerging economies

Find innovative ways to improve products and services

Be vigilant about threats to its operations