the relocation of … in china -...

Student Number: 0714759

Abstract

More and more enterprises want to invest in foreign countries in order to remain

competitive. China is a country highly appreciated in particular thanks to its power in

the global market and its rapid growth.

In fact, in recent years, China has evolved very rapidly. It is developed in many areas.

For this reason, many companies such as Carrefour have come to invest in China.

Carrefour, French retailer, is the first in Europe and second in the world after Wal-Mart.

It is the first foreign distributor has to have invested in China.

This theory allows us to understand the process of Carrefour. Understanding how and

why the group wanted to invest in China. Therefore, it explains the internationalization

of Carrefour in China.

Moreover, it is necessary to ask a question which will be answered thanks to the

development of the essay.

This research question is:

How Carrefour became the first foreign retailer in China?

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Then, in order to be more accurate, in the different part of this dissertation, it is

important to study:

• How Carrefour is passed from a family company to a multinational company?

• How Carrefour arrived in China?

• What is the Chinese market currently?

• What is the macro environment of the Chinese market?

• What is the position of Carrefour in China?

• How Carrefour differentiates its company compared to the others?

To conclude this abstract, it is necessary to make clear the course of this essay. So, at

first, there will be a presentation of the Carrefour and of the Chinese Market in the

background. After there will be a literature review witch explains different point of

views of authors concerning the subject. Then, there will be a methodology to explain

the main body. Finally, the main body with different tools and a conclusion of this essay.

In order to understand the subject better, we have needed a research question but also

some aims.So, the aims of this study are:

• Analyse of Carrefour

• Understand the structure of the China Market

• Identify the behaviour of Carrefour in China

• Understand how Carrefour became the first foreign retailer

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INTRODUCTION

At first, it is important to beginning by a background in order to understand better the

Chinese market and the current situation of Carrefour and so understand the subject

better.

Background

At first, it is important to define the retailing. This is the fact for a company to sell

products food or non-food to customers in a fixed place in order to earn money and

generate profits.

Retail establishments are often called shops or stores. Retailers are at the end of the

supply chain. Manufacturing marketers see the process of retailing as a necessary part of

their overall distribution strategy.

There are many formats of stores. The most important is the hypermarket. In fact a

hypermarket is a large retail (minimum floor space of 2500 square metres in France),

selling both food and non-food items. It is characterized by an optimized cost structure

compared to other forms of smaller businesses (supermarkets, convenience, grocery ...).

Concerning the market of retailing, there are 60 million potential customers in France

and 1,3 billions in China. This will be the first reason of investing in Carrefour in China.

Carrefour is a French retailer created in 1959 by Marcel Fournier and Louis Defforey.

This company is famous in the retail world thanks to its hypermarket’s creation in 1963.

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Carrefour opened its first foreign store in Belgium in 1969. In 1989, Carrefour was the

first to internationalize its business in Asia (Taiwan). In 1995, the group developed its

business in China. Finally, in 1999, Carrefour merged with Promodes in order to create

the first European group: “Groupe Carrefour” and to become the second global group

after Wal-Mart, a big American retailer. (www.carrefour.com)

It is a multi-format group. It operates four main grocery store formats: hypermarkets,

supermarkets, hard discount and convenience stores. Then finally, Carrefour sells thanks

to its website: "www.carrefour.com". So the repartition of its different stores in the

world is:

Hypermarkets: “choice and quality for everyone”

1108 stores like Carrefour, Atacadao

Supermarkets: “the prices people want, close to home”

2 659 stores like Carrefour Express, Carrefour Bairro, Champion

Hard discount: grocery products at low, low prices

5 907 stores like Dia, Ed, Minipreço

Convenience stores: just what you need, right next door

4 748 stores like Marché Plus, Shopi, 8 à Huit, Sherpa

Proxi, Express, Di per Di, 5’marinopoulos

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E-commerce like Ooshop, Boostore, Carrefour Online

Finally, Carrefour has realized a turn over of 92,24 billions of Euros in 2006 and it

wants to develop its growth rapidly and wishes to sell more and more.

Its turn over is distributed among:

58,7 % in "Hypermarkets"

23,8 % in "Supermarkets"

9,5 % in "Hard discount"

8 % in "Convenience stores"

For that, the group proposes lots of product adapted for its client. More than 3 billion

customers buy at Carrefour each year. (ibid)

The French retailer is located in 30 countries, in 3 continents: Europe, Asia and

America. It generates more than 52% of its turnover outside France. From abroad, the

Group has a strong development potential in the future. With more than 456000

employees, including 140000 in France, the Carrefour group is the 9th global private

employer and the number 1 in France. In 2006, it recruited 86000 new employees

worldwide, and provides 15000 recruitments in France in 2008. (ibid)

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Carrefour has a few big competitors in the world. The most important is

"Wal-Mart", an American company, which is the world leader in the distribution.

However, it is present primarily in the United States and in Mexico. In Europe, Wal-

Mart is present in the United Kingdom via ASDA and has retired from the German

market. There are some markets where competition with Carrefour is real, notably

Brazil and especially China. (Report: Carrefour S.A in “Business source premier”

digital library)

"Tesco" is a leading European distributor with Carrefour. Its principle market is the

United Kingdom, where it is the leader. Tesco is in direct competition with Carrefour in

China, Thailand, Malaysia, Turkey and Poland.

"Metro AG", a distributor of German nationality, mainly on the wholesale market

professionals (cash & carry). It is present in supermarkets and via Extra hypermarkets

under the banner Real, Germany and Eastern Europe and also in China.

"Auchan", the French group isn’t only a strong competitor in France, but is also

present in many countries in the world (Spain under the Alcampo, Italy, China, Morocco

and Russia, to cite only the most important)

In most countries where it is present, Carrefour is facing local competition. In France,

its traditional market, and its main competitors which are Auchan, Casino, E. Leclerc,

Les Mousquetaires, Système U and Cora.

The first three also have a strong presence outside France. (ibid)

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China is in full expansion and it’s very interested to understand why a firm like

Carrefour wants to invest in China and no in other country less prize by the competitors.

So, concerning China, it is an encouraging country. In 1992, it opened its barriers of

market. The foreign companies can also invest in China but they must collaborate with a

Chinese company. So it is a joint venture with the competitors. Fortunately after its

adhesion of OMC, China was engaged to change its policy concerning the trade

(importation and exportation) (www.business-in-asia.com).

So in 2004, it changed its policy and opened its doors completely. At that moment, the

foreign companies could have invested in China as they wanted. This changed in order

to help the growth of the economy and develop the country. China is very interested by

its number of customers, its labour cheaper and its development. (ibid)

Carrefour is the overseas group number 1 in China and the fifth including the local

retailers with a turn over of 2 billion Euros. In 2006, it controlled 338 stores. Moreover,

the customers are estimated to 188 millions.

(www.expension.com)

The Chinese name of Carrefour was transcribed from the French pronunciation: (pinyin:

jiā lè fú) which means "happiness of the family." (asie.atelier.fr)

Finally, Carrefour, after the changes in 2004, has continued its expansion more easily,

and has opened more and more stores in China.

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http://www.business-in-asia.com/

http://www.business-in-asia.com/


The Internationalization of Carrefour in China

Literature review.......................................................................p.10

Methodology.............................................................................p.23

Carrefour in International context

The success of Carrefour in France..................................p.25

Carrefour in direction of an International strategy..........p.27

Carrefour arrive in China.................................................p.29

Analysis of the China Market

Definition of the Chinese Market....................................p.33

Competitor analysis.........................................................p.34

Demand in China.............................................................p.36

PEST analysis..................................................................p.38

Carrefour in China

Marketing Mix.................................................................p.42

PORTER..........................................................................p.46

SWOT Analysis...............................................................p.50

Conclusion.................................................................................p.51

References.................................................................................p.55

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LITERATURE REVIEW

The literature review is an overview of the topic.

In this part of the thesis, various academic articles will be discussed, explained and

criticized. Indeed, in agreement with the subject, the various pieces will be used to

understand better the current situation with regard to internationalization. But also

receive news of the market in China and the environment of foreign retailers in China.

Thus, through these articles, the various viewpoints will be discussed and compared

with others.

First, the definition of the various terms of the issue of research is needed.

The establishment of a society is for a company to locate in a new country, the "host

country" in order to develop its customer base and its market share at the international

level.

China is seen as an important strategy for retailers who want to develop a strong

international network, in order to strengthen their bargaining power over suppliers and

strengthen their position in the global market. The accession of China to the World

Trade Organization in December 2001 has been accompanied by promises of removing

all restrictions on foreign direct investment in the retail sector.

Finally, Carrefour is a French distributor who wishes to develop its market share and

develop its brand in China.

Today, more and more companies want to expand their market share and build their

businesses around the world. But some countries are more promising than others.

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At first, Au-Yeung and Henley (2003) explain that the international firms have many

reasons to go into business in China. In fact, after an interview with eight retailers in the

world, they discovered that the changes in purchasing power and the prospect of

increasing profitability are the main engines.

Then, they said, domestic markets are often saturated (e.i UK), so they want to have an

international image and a corporate goal of becoming a major global retailer. In

addition, some retailers believe that national boundaries are ignored in the endless

search for opportunities to make money. Indeed, the main desire of a company is to

create benefits if the domestic market is saturated, they need to internationalise. And

often, retailers will investigate very well on the market needs and if it is quite

promising, they are going to settle in the country. This is the case with China. In detail,

the different retailers are attracted by the potential of consumption of 1.3 billion people

in China and the rapid economic development. Indeed, each year, the growing

population and more and more people can buy into these companies.

In addition, three of the eight retailers have also recognized that supply is a major

reason for investing in China. A European dealer said that the China goods were valued

at 400 million per year. A Japanese retailer has also confirmed that China is a major

supplier of their business in Japan. Seeing that retailers are using products from China,

it is easier to locate their business in China directly, in order to be near to their suppliers.

Finally, the entrepreneurs said they had always wanted to contribute to the

modernization of China and the retail distribution of the industry.

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Both authors explain that it is important to note that there are many reasons for the

foreign companies. So this justifies the number of new companies who want to enter the

Chinese market.

Then, despite the different motivations for investing in China, there are some problems.

We can see that, thanks to a report by Li & Fung Research Centre (2004), China has the

largest potential consumer market in the world. Indeed, in the year 2003, China had a

population of 1.3 billion and a growth rate of 9.1% in retail sales of consumer goods.

China is very optimistic for many foreign investors. Although they represent only a

small portion of the current market in

China, they are growing fast and steadily.

The foreign retailers have established a strategy during their introduction in the Chinese

market. Indeed, they tried to market occupied major cities and only after the vicinity.

After the policy change in 2004, it is a risk to take the market to local retailers both in

large cities than in smaller ones. That is why, at this time, local retailers were very

worried. They allege that the foreign retailers are not true and that they have entered

China illegally before 2004.

In fact, before 2004, foreign retailers must have official approval from the regional and

central government. But more often, it was only the approval of the regional

government. Thus, it has created tensions between the rivals. For example, in the year

2002, 300 foreign retailers have opened stores in China, while only 56 of them had

received the approval of the central government.

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For example, Carrefour was charged with an offence under the regulations imposed on

foreign retailers. According to the report, Carrefour has opened many stores in China,

but it had never formally requested to the central government for the right to open these

stores.

Thus, Carrefour had to give explanations to government and answer for its actions.

A second problem exists concerning foreign retailers. Indeed, they are accused of

exploiting suppliers and employees through their power. Walt Mart is already worrying.

It imposed the low pay and long working hours for its employees. In addition, with

regard to suppliers, it was charged with enjoying its powers to impose the low of prices.

But, by law, the retailer is entitled to claim rebates. And at the root of the plight of the

workers is actually an overabundance of manpower and complicity on the part of the

Chinese government.

The second part of the Li & Fung Research Centre explains the impact of the arrival of

foreign retailers in China. Competition in the retail market of China intensified with the

arrival of foreign retailers. As a result, local retailers are increasingly threatened.

According to the author, in the future more than half of China on retail markets will

eventually be controlled by three to five multinational retail giants. We do not know if

this possibility exists, but the threat of small retailers is real.

Fortunately for them, they have a big advantage. They know the expectations of the

Chinese. In addition, multinationals are focused solely on large and medium-sized

cities.

In smaller towns and villages, local retailers are established.

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However, some threat persists on the power of multinational corporations. Indeed,

because most of the goods are made in China, foreign retailers will quickly control the

distribution channel and increasingly they are going to impose their prices.

Thus, in order to understand better the reasons for a company to get a foothold in a

country like china, we are going to discuss the advantages and drawbacks of

internationalization in the first part of the main body.

Secondly, Lowther Betsy (2004) explains that when China joined the World Trade

Organization in 2001, it was engaged to change its policy concerning the entry of

foreign retailers. Indeed, before the foreign retailers had to cooperate with Chinese

retailers and they were limited of a few stores in big cities only. They couldn’t set up

their companies as they wanted. Thus, when a retailer found a Chinese retailer, it

wanted to keep this partner.

After three years, China lifted its restrictions, thus, that allowing the retailers to enter

and expand in the market much more easily. In order to ease the access, China removed

lots of red tape. Therefore, from a legal perspective, since this change, foreign investors

in the Chinese retailing business are now on equal footing to that of Chinese companies.

They can set up company easily.

Besides, according to the point of view of the author, this modification of the policy

could bring about facilities for the smaller retail ventures also, such as boutiques

because they didn’t need to have a big capital.

Furthermore, she says the competition for the Chinese retailers is going to be more and

more severe. Thus, the Chinese government has decided to propose favourable bank

loans to try to help the Chinese companies to stay in competition.

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Finally, she explains China's recent building boom especially in its major cities, retailers

are now finding more location options from which to choose.

In construction-heavy Beijing, for instance, developers are eagerly tearing down

dilapidated structures in the city's downtown to make room for more commercial spaces

with central locations.

Then, concerning the Chinese market after the change of policy in 2004, the foreign

retailers had to adapt their habits to the Chinese customers. Thanks to Gamble (2006),

we can understand the change of behaviour. At first he says that for the foreign

companies, the Chinese’s have more expectations concerning the customer service and

have more requirements than that of local companies.

For example the Chinese are very particular about the quality, the composition of the

product and also the origin of the product. The demanding nature of Chinese customers

can be attributed primarily to the low-trust retail environment.

Consumer law and means of legal redress are poorly developed in China. There is also

little of recognizable quality standards, and independent organs of civil society that are

taken for granted in Western societies such as consumer organizations.

He describes in a little more detail the role of the customer service. Indeed, the Chinese

market is very competitive between the stores belonging to the State, the private stores

and the foreign stores.

What is more, it is very difficult to rival for the foreign retailer, only thanks to the price.

Indeed, the local retailers are already habit to have a low margin. In consequence, it is

difficult for the foreign retailers to differentiate. That’s why the international retailers

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are very quickly differentiated thanks to the importation of technologies and practices

such as product displays, use of bar codes and returns policies.

However, the advantage gained was often short-lived, as rivals rapidly copied and

adopted these features. Therefore they can't conserve their competitive advantages. So

they must search always a new strategy. And the foreign retailers have found a new

idea.

These companies have intensified the customer service. Crucial for the success of a

company, this advantage is very difficult to copy. As a result, the foreign retailers have

developed the training of the employees in order to they know perfectly the product, to

have good contact with the customers and to listen to their requirements. As a

consequence, training and development of competences are becoming the key word for

the multinationals.

Therefore, in order to better explain the current Chinese market, the analysis of the

competitors and of the demand are going to be realised in the second part of the main

body. Indeed, thanks to the framework PEST, it is easier to understand the macro-

environment of the Chinese Market.

Finally, Khavul (2003) explains that there are three elements for a success of a company

which is set up in another country. With a company located in a country like China, it

must learn to know the needs and the expectations of the customers. Therefore, it must

know the attitudes of their competitors. This learning of the market allows improving

the capacity of the company and so generates profits.

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The advantages for the multinational are that network affiliate and partnership network

abroad. At first, there is a traditional theory of international trade which explains that for

a success setting up in a country like China, the company must not to be too young and

too old. Indeed, if the company is too old, it will be not able to react to the new

demands or problems. As it is already habit in its origin country, it will be not able to

integrate in the host country. In contrary if the company is too young and is not mature

it will be not able to face the difficulties. Thus, there is an optimum age for a company

which is set up in a foreign country. If a company has an optimum age, it creates rapidly

benefits.

Always according to her, there is a second theory concerning the resource which can be

engaged in the setting up of the company. The quantity of resource is link with the

mature of the company because if the company is mature, it has many resources

financial and other.

Thus, she thinks that the engagement of resource for the internationalization is a balance

between the success and the survival of the company. That is to say depending the

amount invested either the firm survives, or it is a success and it generates lots of profit.

Finally, she gives a last theory concerning the network. Indeed, the firms which have a

network or which create rapidly a network in the host country, have more chance to

arrive create profits and so to gain more and more market shares. A network is a set of

loyal suppliers, customers, partnerships and shareholders. Those allow assuring the

perenniality of the establishment.

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However, according to a report published by the central of union of Hong Kong (2004),

there are some problems concerning the Chinese Market since the entry of foreign

capital.

In general, when countries want to undertake economic reforms in order to strengthen

the country's competitiveness, growth and prosperity, they can either take what is called

a "high road" or "a service road."

If they take the « high road », the competitiveness is based on the quality of

infrastructures, public services, the environment and the protection social system, the

condition of labour, the work market, the technology and innovation. But also they can

choose the independent union who can represent the employees and support their

demand.

Contrary, the “service road” is based on the demolition of the public sector, the

exploitation of the environment, rejection of the protection social system, the pressure

on the employees, introduction of flexibility instead of security, constant reduction of

price and ban of union.

The China master the second way perfectly. Its image of the first manufacturer in the

world is not due to the good quality of its production, but rather to the fact that the

country produces low-cost, it provides an environment and a relatively stable currency,

and a reliable workforce, docile and efficient. Clearly, the situation is made possible

through the strong discipline that the government realises and the weak presence of

unions.

There are the foreign retailers who ask for low cost products. Thus, to have low cost

products, the Chinese are paid almost nothing. Taking the example of Wal Mart who

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asks to its Chinese supplier “Surely Huang” to produce cheaper and cheaper. This

company is obliged to obey because it is threatened by the giant.

A certain pressure is present in the Chinese Market.

The Chinese government is the precursor of this pressure because it wanted the profits,

the growth, and the economic development before the population, social progress and

the human dignity.

The most important change after the reforms has been the restructuring of the

companies owned by the State. Indeed, these companies have become private firms.

That had created lots of unemployment. In reality, since 1995, the number of State

society had been reduced to (300000 to 150000 units) which provoke the

unemployment of 53 million workers. During the same time, the employment in the

private firms had created 16 million employees. But, it stays at this time 43 million of

unemployed.

Therefore, lots of companies have been created but few of these offer good conditions

of work concerning the wage, the hours of work the environment, the social protection.

Thus, the workers are in a delicate situation with little unions to help them. Thus, the

author has presented the difficulties of the workers in China.

In order to explain more in detail these theories, in the third part of the main body, there

will be an application of the tools Marketing Mix, Porter analysis and Swot analysis.

To conclude for this literature review, we can see that because the national markets are

often saturated, the companies have wanted to spread in international market. Attract by

a potential of consumer (more 1,3 billions), China is becoming the target of

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multinationals. Thus, more and more of foreign companies come in to establish their

firms in China. Even if they are minority compared to the local retailers, they are more

and more present. However, as said by a report of Li & Fund, lots of companies have

invested in China before 2004 and in an illegality. So this, has created conflicts with the

local retailers who have fear for their market share.

The foreign retailers also have a problem with the suppliers and the workers who claim

their exploitation. We can so conclude for this theory that China has a potential to

welcome the foreign retailers and create a growth but that creation will be a severe

competition. Therefore, the local retailers, the suppliers and the workers feel ridiculed

by newcomers.

Concerning the second theory of this literature review, that is to say the opening of

China Market, we can notice that there was lots of change. Indeed, since the

cancellation of restrictions in 2004, enormously of foreign retailers are becoming

established in China. They have the same statues as the Chinese retailers because they

can create their firms in legality and to be in competition with the local retailers but with

famous products of their brand. It is a success for them. But we can see thanks to

Gamble that the Chinese are more worried and that they want a good customer service.

This is the success of the multinational because this service can’t be copy by the

competitors and it is a competitive advantage.

Finally concerning the last theory, Khavul has demonstrated that a foreign retailer must

be an optimum age to establish, a good level of resource engaged. But also a network to

help them during the first years.

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Unfortunately, in keeping with the central of union in Hong Kong, there is a problem

concerning the workers. The foreign retailers demand always low cost products, but that

is why the workers are paid few in a parallel to the development of China.

We can conclude this literature review saying that the internationalization of the foreign

retailers in China is fruitful for them and for China. China is a gold mine for them. But

there are two negatives side especially concerning the competition, the workers and the

suppliers who are threatened by the giants of retailing.

Thus, in the main body, we are able to see more in detail the different elements

presented in this literature review.

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METHODOLOGY

In the first part of the main body, there will be an explanation of the success of

Carrefour in France. Then, the change of Carrefour in international firm will be

explained. Finally, there is an analysis of Carrefour, when it was established in China.

In the second part of this dissertation, an analysis of the China Market will be realised.

Indeed, thanks to a definition of the market, an analysis of the competitors of Carrefour

and finally an explanation of the demands, we are able to better understand the Chinese

Market. Therefore, thanks to the framework PESTEL, it is going to be easier to

understand the environment of China with its Politics, Economic, Social, Technologic

issues.

In the third part, the Marketing Mix analysis is going to allow to understand what

«Place", "Price", "Promotion" and "Product" for Carrefour means when it was

established in China. Then, the PORTER framework is going to help to analyse the

forces of the different participant of the market around Carrefour. Finally, there will be

an explanation of the Carrefour Company environment in intern and extern, thanks to

SWOT analysis. These frameworks will be used because they are very important when

there is an analysis of a market. They are complete and necessary for a good analysis.

Moreover, there are two types of data. At first, Primary data are data collected and

assembled specifically for the research project.

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At contrast, Secondary data are data that have been previously collected for some other

project (Zikmund, 2003).

For my study, I will use secondary data available on internet, books, magazines, ect… in

order to understand better the subject and the retailer market.

Moreover, in order to explain the internationalization of Carrefour in China, I am going

to search information about my subject and analyse it.

Indeed, I will collect, analyse, and interpret information thanks to data which are found

in websites. So, it is rather a phenomenological methodology.

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The success of Carrefour in France

Since it started, Carrefour has known different situations. After a slowdown in the

growth of the group in the early 1980's, the owners of Carrefour decided in 1985 to

appoint for the first time a leader outside the group, Michel Bon. He became CEO in

1990.

Carrefour has permanently changed the profile of a large family business in direction of

a large French company. He chose to invest abroad in order to develop its market.

(Reports of Carrefour S.A in “Business source premier” digital library)

Michel Bon left the group in late 1992 and was replaced by Daniel Bernard, which put

an end to some diversifications of the group in order to focus better on the heart of

trade.

But, at the end of the 1990's, Carrefour was too focused on its development abroad. He

didn't see the threat which there was in the area of France, the main contributor to its

turnover. (ibid) Because of the low price competitive on the French market, the group

lost market share and therefore sales and benefits.

Thus, the group published deemed unattractive results and gradually lost the trust of

financial markets during the first years of the 2000 decade.

In fact, in early 2005, the group lost its market valuation. Thus a rumour has circulated

on the fact that Carrefour could be the subject of a takeover bid by its rivals Tesco or

Wal-Mart. (ibid)

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In 2005, Daniel Bernard was replaced by Jose Luis Duran.

This new CEO chooses to change strategy and allow Carrefour to bolster its French

market. Since, Carrefour French has had good health and the group was able to develop

its abroad market but paying attention to its national market. Indeed, concerning the turn

over of 2007, Carrefour realised a rate of growth of 4%, only in the fourth term in

France. (ibid)

Finally, the French market of retailing is good. The French food retail industry

generated total revenues of $237.1 billion in 2006 that is to say a compound annual

growth rate (CAGR) of 0.8% for the period of 2002-2006.

The food retail market consists of the total revenues generated through food sales from

supermarkets, hypermarkets, discounters, convenience stores, independent grocers and

all other retailers of food. (Report of Food retail in France “Business source premier”

digital library)

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Carrefour in direction of an International strategy

From the end of 1980’s, Carrefour decided to develop its international strategy. Thus,

the group has located to Taiwan in 1989 and in Greece and in Turkey in 1991. Daniel

Bernard has decided to open new stores around the world. Under its mandate, the group

has taken its truly international dimension and has entered:

• Italy and Turkey, in 1993

• Mexico and Malaysia, in 1994

• China, in 1995

• Thailand, South Korea and Hong Kong, in 1996

• Singapore and Poland, in 1997

• Colombia, Chile and Indonesia, in 1999

So during the 1990’s, Carrefour has opened stores in new counties.

Since 2005, the new CEO, Jose Luis Duran has announced the sale of many activities

located in deficit countries or where the group didn’t have sufficient power to

concentrate the company in famous countries. For example, Carrefour has left Mexico,

Japan and the Czech Republic. However, the group has been strengthened sharply in

some countries, including China, Turkey and Brazil, where it is accelerating the opening

of new stores. In this way, the group favours some countries target rather than disperse

its investments. (www.carrefour.com and Report of Carrefour S.A of “Business source

premier” digital library)

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In order to establish a company in a country, there are different ways and different

motivations. We can see the different ways to introduce a country with the intention of

creating a growth:

- Growth by integration

- Growth through diversification

- Growth by acquisition

- Growth by alliance

Concerning Carrefour, it used to establish stores in other countries like China a

diversification strategy and particularly geographic diversification. Indeed a

diversification strategy is able to realise for different reasons:

• Ensure growth

• Reduce dependency on the market, the product

• Bypass or anticipate structural difficulties in its market

• Seizing an opportunity...

In order to realise a geographical diversification, it is necessary to have dominant

position of the company in its market.

However that supposes a target market growth or high-potential. But that demand is also

a development of skills and know-how. And finally, material and financial resources.

(marketing.expert.free.fr)

Indeed, in the case of Carrefour. It is the number one in Europe. The turn over of

Carrefour in Europe is 33 221 billion Euros. It would like to develop its market. There is

a big potential in China and the company has the sufficient resources.

(www.carrefour.com)

26

http://www.carrefour.com/


Carrefour arrive in China

In keeping with the two first articles of the literature review, the following explanations

explains in more details the advantages and drawbacks for a foreign retailers to

established in China.

Beginning by the different advantages:

At first, the company can have a branch directly in the country. This allows being

reactive because when there is a change of consummation or a change of habits, the

company can adapt its products and its services.

Secondly, the research of new market with new customers and new habits is also very

interesting for a company. Carrefour is very motivated by a market like China because

there are lots of potential customers and it is a real challenge.

With the evolution of Chinese population since 1961, we can notice that when Carrefour

arrived in China in 1995, the population was in full expansion. And more and more

people become potential customers in a market in full expansion too. Indeed, since the

1990’s, lots of companies are interested by China and its number of people but also its

important growth. Carrefour is established around the world. But China has a

population of 1 321 290 000 in front of India and US, and it is a promising country.

(www.populationdata.net)

Indeed, the number of workers is very important. But also the number of customers is

unique in the world. So, all the foreign retailers are attracted by this country.

27


The establishment of Carrefour in China is a real opportunity to create growth and to

develop the turn over of each store to open.

Therefore, the labour is really cheap and this is very interesting for Carrefour because it

can at this moment have a more important cash flow and thus to invest in

communication or invest in a new store. (www.chine-informations.com)

Establishing a company in an emergent country is a risk but when it has good

perspective, this can be a very good opportunity. But the problem is the spread of

competition.

The power of consummation is low in China for this moment but there are real

expectations compared to the expansion of the population. Chinese Consumers have a

lifestyle and behaviour differently depending on the region. The main expenditure items

are food, transport and communications, entertainment and education. According to the

World Bank, household consumption expenditure Chinese were US $ 694.5 billion in

2004. The Chinese household consumption increases by an average of 6 to 7% per

annum.

However, according to the Chinese Statistics Office, the average spending per capital

consumption was 1,016 Yuan (a little over 100 Euros) in September 2005. The amount

varies by region; it is highest in Shenzhen (2,611 Yuan), Shanghai (1,403 Yuan) and

Hangzhou (1,343 Yuan). So it is very little but Carrefour adapts its price depending on

level of life of its customer.

28


However, Chinese employee earn an average of 260 € (2700 Yuan) per month with a

minimum of 62 € (640 Yuan). And yet, in the countryside, some arrive just to "win" 30

€ / month (308 Yuan). (www.chine-informations.com) But, life in China is relatively

inexpensive. The food, clothing, transport and so on cost hardly anything.

So, Carrefour must to adapt its price. But on the other hand the production of its China

product is also inexpensive. So it is always a winner.

Finally, the Chinese gross domestic product in 2006 was officially estimated at the

equivalent of 2,685 billion US dollars and per capital GDP would have for the first time

exceeded $ 2,000. (www.questionchine.net) However, the evolution of the GDP had

varied since 1993 to 2006. Appendix 1

So, we can notice that the company creates wealth but that don’t change the wealth of

population.

Then there is a very important creation of employee. Indeed, the creation of company

creates whenever employment.

With more than 456000 employees, including 48687 in China, the Carrefour group is

the 9th global private employer. In 2006, it recruited 86000 new employees worldwide.

(www.carrefour.com)

Therefore, the fact to establish companies in a country like China allow this country to

earn wealth and investment income. Indeed, more are foreign retailers, but the country

can to develop and earn money.

29


Finally, the presence of Carrefour in China directly brings obvious advantages, such as

reducing delivery times, the ability to offer competitive prices; transport costs and

allows gains on production costs.

Then the different disadvantages:

Under a new reform introduced on 01 January 2007, foreign companies are now

imposed at the same rate as Chinese companies; that is to say between 24% and 28%.

The tax holidays were eliminated, as well as the preferential tax rate for companies

investing in special economic zones. By contrast, a tax regime favouring certain types

of industries or regions is likely to be introduced following the reform. (www.chine-

informations.com)

So the companies don’t go in China in reason of its tax system because it isn't

beneficial.

However, the workers are often few qualify. So the quality of work is sometimes

insufficient. The workers are exploit by the companies (foreign or not). Lots of

companies are established in China for the low wages. But the workers are more and

more exploited and they have very little associations to help them.

The government prefers to earn money and to develop its country. But the potential

problem is the power of consummation because if the country develops, the social

classes are going to be more and more different. This is going to create a problem within

the population. (www.icftu.org)

30


Analysis of the Chinese Market

Definition of the Chinese Market

This consists of the sale of goods or merchandise from a fixed location, such as a

department store, in small individual lots for direct consumption by the purchase.

Purchasers may be individuals or businesses. In commerce, a retailer buys goods or

products in large quantities from manufacturers or importers, either directly or through a

wholesaler, and then sells smaller quantities to the end-user.

The food sector had a very strong growth in recent years. Indeed, the compound annual

growth rate (CAGR) was 10.6% for the sum of 377 billion dollars in 2006. In

comparison, Japanese and Indians have had respectively over the same period, revenues

of 332.1 billion and 168 billion dollars.

However, the performance of the industry will certainly slow down according to

economists, with a CAGR of 8.8% and revenues of 574 billion dollars planned between

2006 and 2011.

China is the country most vendors and creates 37.5% of total revenue in the countries of

the Asia Pacific. (Reports of Retail Food in China “Business source premier” digital

library)

Then, the format of stores that generated the most turnovers, ie 132.9 billion, is the

supermarket. In vogue at the moment in China, the supermarket achieves the equivalent

of 35.2% of Chinese food market. (ibid)

31


About the third and fourth articles in the literature review, it is necessary to explain in

more detail the Chinese market. Thus, for this reason, the following is a presentation of

the analysis of competitors, an analysis of the demand and an application of the tool

PEST analysis.

Competitor analysis

The Chinese market has a large number of Chinese food distributor and non-Chinese.

Indeed, Carrefour has a large number of competitors. Wal Mart, an American distributor

has 55 stores and a turnover of 307 million Euros in China for the moment. But, in the

end of 2007, it has buy 35% of actions of the Giant Chinese retailer "Trust Mart". This

participation enables Wal-Mart to grow its network of 101 Chinese stores and 16

additional cities. Thus, Wal-Mart begin to catch up with Carrefour. And normally in

2010, it should buy the totality of action of Trust Mart and it sould become the first

foreign retailer in China. So, Carrefour is the first foreign retailer in China for the

moment but if it does nothings, it will lost its first place.

Then, there is Tesco, the No. 1 distributor of UK, also decided to locate in China.

Finally, Auchan and Metro are also members of the competitors of Carrefour in China.

(Source: chapter 13 of the book “The rise of the Chinese consumer” (2005))

Therefore, Carrefour must also deal with many local competitors who hold a majority

market. One of the most important is Bailin Shanghai, which has 5000 stores and a

turnover of 6.2 billions Euros. (www.fiducia-china.com)

There is the top Mainland Chain Store Operators in Appendix 2.

32


Since that foreign retailers have settled in China (1995 to Carrefour) the rate of

penetration is very strong. This means that the number of settlements since the last

decades has been significant.

The problem for foreign retailers is the fact that the Chinese are very attached to their

traditional businesses. The foreign retailers must offer the same products at the same

price or less. Thus, they can expect to compete with the local traders. Gambling view, in

recent years Carrefour adapts its stores to Chinese customers. For example, customers

can buy egg "bulk" but also buy their fish directly sin in the basins by the consumers

themselves ect ... (www.carrefour.com) There is a constant war between the different

traders. But this will only escalate because the foreign competition is becoming

increasingly important and ferocious.

Finally, there is another important point regarding the distribution networks. In fact,

traditional traders already have their own suppliers and trust is installed. Thus suppliers

may choose to select only the local retailers (seen their impressive number). Regarding

Carrefour, there is no real threat because with a high purchasing power, it is too

important for suppliers. Especially since the Chinese appreciates Carrefour. Indeed,

Carrefour has a good network in China.

Finally, until now, the competition in the countryside is low. First, since foreign firms

are not yet implemented. But also as agricultural production is still very important and

rural population lives primarily with these productions.

33


Demand in China

The demand is characterized by the number of potential customers, the target,

expectations of the target and finally his interest in a store more than another.

There are over 1.3 billion potential customers in China. Appendix 3

Thus, the demand is very important especially in big cities.

Consumers spend Chinese loan of 30% of their total revenues in the diet. Thus, they are

demanding in terms of prices because they want value for their money.

Carrefour's success is due to the respect of the food habits of the Chinese population.

The consumption habits of Chinese are different from the country of Europe for

example, with a high percentage of fresh products in the basic food basket, and a high

frequency of purchase. (www.carrefour.com)

Carrefour offers a wide variety of local products, often cheaper than in the traditional

stores.

The retailer knows that his ability to adapt to a customer is a demanding part of the keys

to success.

But the problem remains the differences in classes. Indeed, a minority of the population

can afford to buy products that are more high-end, but millions of Chinese have had

barely enough to buy food at their convenience.

The criteria for selecting the most important are the price and service providers. Broadly

speaking, the Chinese attach great importance to the search for information on a product

34


before buying it. They are curious compared to the nature and composition of the

product, particularly with regard to foreign products. (www.laposte-export-

solutions.com)

Finally, like said before, Chinese customers prefer traditional retailers. But gradually,

the foreign retailers like Carrefour wins market share and proposed the same things that

the local retailers. So, the competition is very severe and nothing is play.

PEST

PEST analysis is concerned with the environmental influences on a business. The

acronym stands for the Political, Economic, Social and Technological issues that could

affect the strategic development of a business. Thus, always connected with the third

and fourth items, the tool PEST allows to analyse the macro-economic environment of

China.

At first, concerning the aspect Political:

The Chinese government is implementing various strategies to reduce pollution. Thus,

Suisheng Zeng, head of the economics of laws and regulations of Shenzhen has

proposed for his city to establish a law prohibiting the distribution of plastic bags by

traders. If this legislation is promulgated in this city, the other Chinese cities could take.

If traders don’t respect the law, they must pay a fine of 5000 Yuan (667 dollars).

(www.atimes.com)

Since the Chinese government exports productions, there were several quality problems.

Thus, the government has introduced few controls of exported products but also

products consumed within the country.

35

http://www.atimes.com/


Li Chuanqing, director of the State Bureau of Quality and Technical Supervision of

China, said that compared with the revised law on product quality (2000), any person

selling infringing items or of inferior quality will be severely punished.

The revised law further defines the responsibility of the State to improve the quality of

products and corporate responsibility, which must accept the supervision of the quality

of services.

China has launched a series of repression on counterfeit products of low quality in

recent years. However, the production of poor quality remains a serious problem in

China. (www.english.people.com.cn)

Then, about the second aspect: Economic

During 1990's, the Chinese state has privatized many of its company, and this has

created a significant number of redundancies. That is why since 2002, the Chinese

government has implemented a policy conducive to employment.

Thus, the unemployment rate is stabilizing now between 4 and 4.3% of the active

population in China. A low rate result of rapid economic growth.

In addition the working population grew by 6.6 million people between 2002 and 2006.

(www.chine-informations.com)

However, China has continuously evolved over half a century. The new stability in the

country has led to economic growth and social progress. According to the National

Bureau of Statistics, China's GDP grew at an annual rate greater than 9% since 1979,

reaching 13651,5 billion Yuan in 2004, nearly double that of 1998. (10 Yuan = 1,4

dollars)

36

http://www.chine-informations.com/

http://www.english.people.com.cn/


China produces enough to feed one fifth of the world's population while the area of the

country only account for 7% of the world total.

Thanks to increased governmental agreements and efforts of various social groups,

China has reduced its rural population living in extreme poverty from

250 million in 1979 to 26.1 million in 2004.

So, thanks to these changes, the population can consume more and more because it is

less poor. (www.chinafrique.com)

Concerning the Socio-Demographical context:

Currently in China, employees and the poor, who constitute the majority, can only

support their families. The costs of housing, medical services and education amounted

to a very high level, which has an effect on consumption.

There are 20% of Chinese who would have 80% of the rich of the country. The reality

worried the government and so it has decided to encourage the consumption of the

inhabitants. (ibid)

Today, it recognizes that low income is the major reason for a low consumption rate.

Thus, in 2006, agricultural tax has been abolished. The educational costs of compulsory

nine years were removed in the countryside. A new cooperative medical system has

been put in place in 60% of rural areas, in order to increase the incomes of farmers.

As for the urban areas, minimum subsistence level has been raised. The system of

minimum wages is strictly applied in enterprises.

37


In addition, the government wants to invest in the fight against unreasonable prices in

the areas of education, health. In addition, it has planned to improve the political

consumption of housing and food, and to encourage the consumption in culture and in

tourism. (www.chinafrique.com)

Finally, about the Technological aspect:

With the following graph, we can be noted that China has evolved considerably over its

virtual marketplace. In the first quarter of 2006, e-commerce accounted for a turnover of

85.76 million Euros according to Analysis International. The institute estimated that the

market for e-commerce has its progression to the efforts made by the merchants on

online marketing and logistics. However it estimates the number of online buyers to to

40 millions in 2004. (www.chinafrique.com)

Source: Analysis International, 2006

During many years the development of the software market in China was almost

insignificant in due to weak demand, too much fragmentation of local societies and the

importance of piracy. While some of these problems exist today, a strong political will

and the continued creation of innovative firms and foreign investment has enabled the

38

http://www.chinafrique.com/


sector to experience a real development. Thus, the local retailers premise was forced to

obtain software in order to be able to compete with foreign companies in terms of

supply and sales, for example. (www.missioneco.org)

Carrefour in China

Finally, in order to understand the running of Carrefour in China, it is necessary to use

tools. Indeed, in relation with the explanations of the two last articles of the literature

review, the tool Marketing Mix is going to allow understanding of the behaviour of

Carrefour in the Chinese Market.

Marketing Mix

The marketing mix or "plan de marchéage" in French means the coherent set of policy

decisions of product, pricing, distribution and communication of a product or a

company brand.

Carrefour has played a major role in the changes that have revolutionized the retail

industry in China. Based on its experience in international markets, it has introduced

some of its global best practices in the Chinese market. Carrefour adopted a

decentralized management structure, according to which all managers of its stores in

39

http://www.missioneco.org/


China run stores in complete freedom. Carrefour sells its own branded products, and

designs its stores according to the habits of Chinese customers. In predominantly in

sourcing local products, it can ensure their freshness and the quality for Chinese

consumers.

At first, one of the different elements of the marketing mix is the Price. Indeed, we can

ask if the price will be the same in China and in France.

The power of consummation isn’t the same in China than in France. Indeed, the French

have the high wages so they are able to spend more money. So the price is of course

much cheaper. But almost all the products sold by Carrefour are products in China, so

the production is also much cheaper.

Therefore, Carrefour must to adapt compared to the local retailers. Indeed, because they

have an advantage concerning the customers, Carrefour must differentiate its stores.

That’s why, Carrefour proposes the same price or price cheaper that this competitors. It

can do because it has experience and it knows how to do economy of scale.

The second term of the marketing mix is the Place. So, where Carrefour is setting up to

sell more and more? Where is its strategic situation?

Carrefour sells often in the big cities and in the coastal cities.

(www.chinatoday.com)

40


However, the Carrefour supermarkets in 2004 were present in twenty-two cities in

China. There is a central purchasing Carrefour in 10 Chinese cities and the headquarters

procurement Carrefour-China is in Shanghai.

Its sales network covers nearly all of China economically developed. (www.amb-

chine.fr)

However, the countryside is for the moment very little used by the retailing industry and

so, by Carrefour. However, according to M. Legros CEO of Carrefour Chine: "Since the

beginning, there has grown both on the rich coasts and at the same time on the interior,

where the development of urbanization is the strongest, which allows us to build the

growth of tomorrow" (www.france24.com).Thus, Carrefour is present where there is the

demand and where its competitors are in order to compete with them.

Then, there is the third aspect: Promotion

Carrefour uses different ways to promote its image and its product. First, because

Carrefour was the first to establish foreign stores in China, the Chinese have been

interested directly during its set up. Then, it is the “bouche à oreille” in French, that is to

say, when a store is well, the Chinese know how to diffuse this information. The

reputation of Carrefour was realised in this way.

Because the Chinese teenagers use the internet a lot, it is a good strategy for Carrefour

to set up a website to sell its product. Indeed, the teenagers influence a great deal the

purchases of their parents.

Then regularly, Carrefour proposes promotion of its products. That is to say, during a

day, certain products are cheaper. The Chinese are very interested by this system

41


because the majority of Chinese hasn’t lots of money. Thus, they profit from these days

to realise their purchases.

And, Carrefour realises advertising in favour of its customers but the competitors realise

this strategy also.

Finally, it is important to explain the last aspect, the Product:

In all stores, Carrefour proposed a large product range with different prices. Indeed,

Carrefour has its own product “Marque Carrefour”, but also low cost products and

brand name products (Nestlé, Kellogg’s…). This satisfies all the demands of the

customer.

In response a rich class is developing; Carrefour has also begun to offer products much

more high-end, as imported cosmetics, in addition to milk products or to foreign wines

and spirits. (www.carrefour.com)

Concerning the habit of Chinese, Carrefour adapts its products. Indeed, the

consummation of Chinese is particular and Carrefour has understood. The concern

nutritional of the Chinese is always taken seriously. Thus for them, if the food is good,

they can not be sick.

That's why, the products like the rice, the fish and the soya are very important in their

consummation. Thus, Carrefour proposes these products among lots of other.

Finally, Carrefour has a presentation of its products very well compared to its local

competitors. Indeed, it has a presentation clearer, more cheerful and more attractive.

(www.chinatoday.com.cn)

42


PORTER

Always, in accordance with the two last articles of the literature review concerning the

running of the foreign retailers, it is necessary to use the framework: Porter's 5 forces

analysis.

Indeed, this tool summarizes the factors affecting a company's performance by five

forces:

• The bargaining power of customers

• The bargaining power of suppliers

• The threat of potential entrants

• The threat of substitutes

• The intensity of competition

In the case of Carrefour, the analysis of these five forces allows for the group to know

the key to success factors in its industry. In other words, the strategic elements that

should be controlled in order to obtain a competitive advantage.

The power of customers:

Since 1960, the population has almost doubled. The Chinese are now more than 1.3

billion. The fact that China has developed, the standard of living has also evolved.

Unfortunately, for 80% of the Chinese, their wages were only enough to feed their

families despite the low cost of living. In addition there are large gaps between socials

classes so it is difficult to give a real purchasing power. Thus, we can say that by the

43


number of inhabitants, consumers have a lot of power but seen in their wages, it is not

really the case. (www.chinafrique.com)

Finally, some experts believe that Carrefour's success can be attributed to the fact that it

has already established a stable consumer group.

The power of suppliers:

80% of the products sold in Carrefour hypermarkets China are purchased from more

than 22300 local suppliers. (www.carrefour.com)

Indeed, after 13 years of setting up, Carrefour has a large network of point of purchase.

The power of suppliers is fairly low because Carrefour is the 2nd in the World and the

1st foreign retailer in china, thus, it is vital for Chinese suppliers.

It enables its Chinese suppliers to sell their products across China and realised

advertising. (The products sold by Carrefour China are virtually all made in China)

The threat of entrants:

The arrival of new competitors is limited since the major groups worldwide are already

established in China (Wal Mart, Metro ...). However, since the opening of barriers in

2004, many foreign companies have a real desire to establish business in China.

However, in order to compete with Carrefour, they need maturity. But also, a lot of

experience, a significant capital, the ability to provide the low-price with the quality of

products, and finally, a good knowledge of the market.

The threat of substitutes:

44


The main threat of substitutes is the local retailers in China who still very appreciated

by the Chinese customers. There are also the online retailers. But these ones with their

opening hours, their proximity and their easiness of purchase are a low threat.

Indeed, Carrefour has also a variety of product, low costs. But also, proximity with its

different formats of stores around the country and its famous website in Pekin for the

moment. But, this site could be spread in all the cities because it is a real success.

The competitive rivalry:

There is a very large competitiveness in the Chinese market retailer. Indeed, there is a

fierce war between Carrefour and its foreign rivals (WalMart and Metro), but also with

its Chinese rivals which have decided not to stay without doing nothing.

Indeed, according to Eric Legros, executive director of Carrefour China, “What makes

the competitiveness of the Chinese market is that in China there is a lot of local

distributors who are extremely powerful. We must not forget that a local distributor,

which dominates in the Beijing area, is working on a market as large as Spain"

(www.france24.com)

Thus, we can deduce that the foreign competitors are a threat to Carrefour because, like

seen previously, the first retailer in the world "Wal-Mart" is going to maybe take the

first place of Carrefour in China. Carrefour is also impress by the local retailers because

they are in their country and the consumers are in the habit of buying in their stores.

But, Carrefour is confident about its quality of products and of services that can make a

difference with its competitors.

45


The SWOT

Finally, thanks to the SWOT framework (Strengths, Weaknesses, Opportunities and

Threats); it is possible to carry out an analysis of internal and external business.

Following the ideas of the last two articles, this framework is going to allow

understanding of the internal and external environment of Carrefour, a successful

example of a foreign retailer in China.

Opportunities of the retail market Threats of the retail market

- Opening market since China's accession to the

World Trade Organisation in December 2001

- Very important choice of product for the

customers

- High number of customer

- Important purchase frequency

- The wages is very low cost for the retailer

- The severe competition between the retailers

- The costumers are distrustful compared to the

products of foreign retailers

- The local retailers copy the foreign retailers about

their strategies

- Low power of consumer

- Adaptation continue of the Chinese market for the

foreign retailer

- Frequent lapses in product quality in China so

affectation of the operations of the company, but

also its brand image and consumer perception

- Lack of capabilities of the Chinese employees

Strengths of Carrefour Weaknesses of Carrefour

- Carrefour is the first foreign retailer in Asia

- Carrefour is the second retailer in the world

- The teenagers appreciate the European products

- Good adaptation of the Chinese Market because

it is in Chine since 1995

- Sell online with its website

- A good presentation, clearer, more cheerful and

more attractive of the product

- A wide range of formats enables Carrefour to

serve multiple customer segments

- The giant Wal-Mart can take the first place of

Carrefour in 2010

- Important competition with the local retailers

CONCLUSION

46


In order to finish this study, it is necessary to conclude with a summary of the different

reasons for whereby Carrefour became the first foreign retailer in China.

First, as explained in the Background, Carrefour is a very famous retailer anywhere in

the world. It is the first European and the second worldwide. Carrefour was the first to

invest in China above all its competitors. This is the first reason for whereby Carrefour

is the first foreign retailers in China. Indeed, very soon the Chinese will be accustomed

to shop in these stores.

The second reason is undoubtedly the expansion of China. Indeed, the past 20 years,

China has grown very rapidly with a population of over 1.3 billion of people.

Carrefour has taken root in China in 1995; China has since changed its policy of trade

following its accession to the WTO. Thus, foreign companies can develop much more

freely without restriction. Carrefour has only grown since his arrival in China. Thus, it

has more than 340 stores.

The third reason is that Carrefour wanted to very quickly have an international strategy.

As soon the late 80's, CEO has decided to internationalise their stores. Carrefour is

exported over three continents (Asia, South America and Europe). After a few years the

group has decided to focus only on the promising countries like China rather than

disperse investment. For example, Carrefour has developed and strengthened its leading

foreign position in China.

The fourth reason is that Carrefour has successfully adapted to Chinese consumers.

Indeed, it has successfully adapted to the habits of consumption, frequency of purchases

47


and also to the levels of consumption of Chinese. For example, Carrefour has adapted

its products, its presentation of products but more importantly prices at the request of

Chinese. Regarding commodity prices, the group was able to afford to lower prices saw

the price of labour and goods.

The fifth element of success is undoubtedly the differentiation of the group over

competitors. Indeed, Carrefour emphasizes customer service that the Chinese are not

used to having in other stores. In addition, the group is very well placed in terms of

price compared to its competitors. Finally, Carrefour has a very good distribution

network which facilitates competitive advantage.

The sixth reason is that Carrefour has been able to develop throughout China. Indeed,

the group has been able to develop in areas such as wealthy major cities and coastal

regions. But also further inland where the development of urbanization is booming.

Carrefour is here where the demand is and this places it in front of its competitors.

The seventh and last reason is that Carrefour offers a wide range of products at all the

prices so it can meet any demand from China.

With these seven points, Carrefour has managed to make the difference to be No. 1

today of foreign retailers in China.

Unfortunately, there are some elements which Carrefour must be careful in order to

remain the leader in the competition.

48


Firstly, there is fierce competition in China and Carrefour must be very vigilant. Indeed,

the Chinese are still very attached to their local shops. In addition, the large groups such

as Wal-Mart and Tesco are very powerful, Carrefour must always be wary. Indeed, its

principal competitor in the world "Wal-Mart" risk to take its place. Indeed, thanks to the

purchase of Trust Mart action, Wal-Mart can become the first foreign retailer in China.

So, Carrefour must react in order to keep its place. Either, it buys other giant of Chinese

Market, or it opens lots of stores before 2010. But that is going to be very difficult

because the group hasn't many times in order to counterattack.

Secondly, the rural Chinese are hardly exploited by the big group. But the small retailers

are in and they have a loyal clientele. Thus, while Carrefour wants to satisfy the entire

population, it must also invest in smaller cities that will become certainly one day, the

very big cities.

Thirdly, regarding the problems of workers, it's a real concern. At first, wages are low

despite an increase which isn’t for everyone. That is not enough given the scope of

growth. Thus, there is a risk of revolt. Moreover, the quality of work is often seen

insufficient because the workers are unskilled; it can have an impact on sales of the

group.

So, Carrefour has a very good future in China. Being well established, it has all the

chances to remain leader but it must react about its competitor Wal-Mart and still

remain careful concerning the few points seen just before.

49


REFERENCES

Website references:

Background

Business in China, 2005. Information about the food retail in China [online] Available

at: http://www.business-in-asia.com/china_retail.html [Accessed 25 September 2007]

Group Carrefour, 2007. Information about the firm Carrefour [online] Available at:

http://www.carrefour.com/ [Accessed 25 September 2007]

L'Atelier BNP Paribas, 2006. Information about the name of Carrefour in China

[online] Available at: http://asie.atelier.fr/marketing/article/carrefour-lance-le-service-d

%E2%80%99achat-en-ligne-en-chine [Accessed 25 September 2007]

L'Expansion.com, (2006) Carrefour prêt à contrer Wal-Mart en Chine [online]

Available at: http://www.lexpansion.com/economie/actualite-entreprise/carrefour-pret-a-

contrer-wal-mart-en-chine_117291.html [Accessed 27 September 2007]

50

http://www.lexpansion.com/economie/actualite-entreprise/carrefour-pret-a-contrer-wal-mart-en-chine_117291.html


http://asie.atelier.fr/marketing/article/carrefour-lance-le-service-d%E2%80%99achat-en-ligne-en-chine

http://asie.atelier.fr/marketing/article/carrefour-lance-le-service-d%E2%80%99achat-en-ligne-en-chine


http://www.business-in-asia.com/china_retail.html


Main Body


Chine information, 2008. Cinq questions sur la fiscalité en Chine [online] Available

at:http://www.chine-informations.com/guide/cinq-questions-sur-la-fiscalite-en-

chine_1705.html [Accessed 05 January 2008]

David Houstin (2007) Les salaires en Chine [online] Available at:

http://www.chine-informations.com/guide/les-salaires-en-chine_1834.html [Accessed

25 October 2008]

Group Carrefour (2007) Information about the internationalization of Carrefour

[online] available at:

http://www.carrefour.com/cdc/voyage-interactif/

http://www.carrefour.com/cdc/groupe/notre-actualite/ouverture-du-1000eme-

hypermarche-dans-le-monde.html [Accessed 25 September 2007]

Group Carrefour (2007) Ventes annuelles TTC [online] Available at:

http://www.carrefour.com/docroot/groupe/C4com/Pieces_jointes/CA/CARREFOUR

%202007%20T4%20CA%20F.pdf [Accessed 15 October 2007]

La poste (2007). Information about the consummation behaviour of the Chinese [online]

Available at: http://www.laposte-export-solutions.com/fr/marches/fiches-

pays/chine/consommation [Accessed 06 October 2007]

Marketing expert (2007) Information about the strategy of diversification [online]

Available at: http://marketing.expert.free.fr/triptyques/MARKETING

%20STRATEGIQUE/strategiescroisconc.ppt#328,19,STRATEGIE

%20%20D'ACQUISITION [Accessed 06 October 2007]

51

http://marketing.expert.free.fr/triptyques/MARKETING%20STRATEGIQUE/strategiescroisconc.ppt#328,19,STRATEGIE%20%20D'ACQUISITION



http://www.laposte-export-solutions.com/fr/marches/fiches-pays/chine/consommation

http://www.laposte-export-solutions.com/fr/marches/fiches-pays/chine/consommation

http://www.carrefour.com/docroot/groupe/C4com/Pieces_jointes/CA/CARREFOUR%202007%20T4%20CA%20F.pdf

http://www.carrefour.com/docroot/groupe/C4com/Pieces_jointes/CA/CARREFOUR%202007%20T4%20CA%20F.pdf

http://www.carrefour.com/cdc/groupe/notre-actualite/ouverture-du-1000eme-hypermarche-dans-le-monde.html

http://www.carrefour.com/cdc/groupe/notre-actualite/ouverture-du-1000eme-hypermarche-dans-le-monde.html

http://www.carrefour.com/cdc/voyage-interactif/

http://www.chine-informations.com/guide/les-salaires-en-chine_1834.html

http://www.chine-informations.com/guide/cinq-questions-sur-la-fiscalite-en-chine_1705.html

http://www.chine-informations.com/guide/cinq-questions-sur-la-fiscalite-en-chine_1705.html


Population data (2007) Information about the Chinese population [online] available at:

http://www.populationdata.net/palmarespays.php [Accessed 28 October 2008]

Analysis of the Chinese Market

China Business (2007) Information about the shopping bags supplied by retailers

[online] Available at: http://www.atimes.com/atimes/China_Business/IL08Cb01.html

[Accessed 15 December 2007]

Chine Information (2008) Hausse du salaire moyen des travailleurs urbains en Chine

[online] Available at: http://www.chine-informations.com/actualite/hausse-du-salaire-

moyen-des-travailleurs-urbains-en-chine_8977.html [Accessed 10 April 2008]

Chine Information (2007) La Chine annonce un taux de chômage aux alentours de 4%

[online] Available at: http://www.chine-informations.com/actualite/la-chine-annonce-

un-taux-de-chomage-aux-alentours-de-4_7565.html [Accessed 10 December 2007]

Chine information (2008) La distribution en Chine [online] Available at:

http://www.chine-informations.com/guide/la-distribution-en-chine_1580.html

[Accessed 20 January 2008]

China Radio International (2004) Le secteur de la distribution cherche un

développement dans la concurrence et la réorganisation en Chine [online] Available at:

http://french.cri.cn/1/2004/12/28/[email protected] [Accessed 10 February 2008]

Cogez, D., (2007) Les grandes manœuvres de la grande distribution [online] Available

at: http://www.chinatoday.com.cn/lachine/2004/0402/05.htm [Accessed 20 January

2008]

Le Journal du Net (2008) Asie : Le marché de l'e-commerce [online] Available at:

http://www.journaldunet.com/cc/04_ecommerce/ecom_marche_asie.shtml [Accessed 03

March 2008]

52

http://www.journaldunet.com/cc/04_ecommerce/ecom_marche_asie.shtml

http://www.chinatoday.com.cn/lachine/2004/0402/05.htm

http://french.cri.cn/1/2004/12/28/[email protected]

http://www.chine-informations.com/guide/la-distribution-en-chine_1580.html

http://www.chine-informations.com/actualite/la-chine-annonce-un-taux-de-chomage-aux-alentours-de-4_7565.html

http://www.chine-informations.com/actualite/la-chine-annonce-un-taux-de-chomage-aux-alentours-de-4_7565.html

http://www.chine-informations.com/actualite/hausse-du-salaire-moyen-des-travailleurs-urbains-en-chine_8977.html

http://www.chine-informations.com/actualite/hausse-du-salaire-moyen-des-travailleurs-urbains-en-chine_8977.html

http://www.atimes.com/atimes/China_Business/IL08Cb01.html

http://www.populationdata.net/palmarespays.php


Mission économique (2006) Le marché des logiciels en Chine [online] Available at:

http://www.missioneco.org/chine/documents_new.asp?V=3_PDF_122907 [Accessed 20

December 2008]

People’s Daily (2000) New Product Quality Law Implemented in China [online]

Available at:

http://english.people.com.cn/english/200009/01/eng20000901_49543.html [Accessed

15 February 2008]

Xinzhen, L., (2008) “Information about the consumption in China” [online] Available

at: http://www.chinafrique.com/zf-2005/2006-03/2006.03-bus-5.htm [Accessed 10

January 2008]

Carrefour in China

Ambassade de Chine (2004) L'odyssée de Carrefour en Chine : réussir n'est pas chose

aisée! [online] Available at: http://www.amb-chine.fr/fra/zfzj/t97681.htm [Accessed 02

April 2008]

Xinhua News Agency (2003) Carrefour Opens Most Stores in China [online] available

at: http://www.10thnpc.org.cn/english/BAT/53376.htm [Accessed 15 March 2008]

Information about Carrefour


http://www.challenges.fr/recherche/20070125.CHAP1008053/un_conquistador__lassaut

_de_la_chine.html

53

http://www.challenges.fr/recherche/20070125.CHAP1008053/un_conquistador__lassaut_de_la_chine.html

http://www.challenges.fr/recherche/20070125.CHAP1008053/un_conquistador__lassaut_de_la_chine.html


http://www.10thnpc.org.cn/english/BAT/53376.htm

http://www.amb-chine.fr/fra/zfzj/t97681.htm

http://www.chinafrique.com/zf-2005/2006-03/2006.03-bus-5.htm

http://english.people.com.cn/english/200009/01/eng20000901_49543.html

http://www.missioneco.org/chine/documents_new.asp?V=3_PDF_122907


http://www.icmrindia.org/casestudies/catalogue/Cases%20in%20other

%20Languages/OFBSTR246.htm

Information about the competitors of Carrefour in China

http://www.fiducia-china.com/Information/Newsletter/68-1407.html

http://www.lexpansion.com/economie/actualite-entreprise/carrefour-pret-a-contrer-wal-

mart-en-chine_117291.html


http://www.france24.com/fr/20080221-carrefour-wal-mart-font-guerre-chine-

distribution

Information about China

http://www.chinaeconomicreview.com/realestate/2006/11/26/five-years-is-a-long-time-

in-real-estate/


http://www.chine-informations.com/guide/evolution-du-pib-chinois-1993-

2006_1634.html

http://www.questionchine.net/article.php3?id_article=2265

http://www.populationdata.net/pays/asie/chine.php

Books/Reports:

McMillan K. and Weyers J. (2007) “How to write Dissertations & Project Reports?” Pearson Education Limited

Background

Reports

54

http://www.populationdata.net/pays/asie/chine.php

http://www.questionchine.net/article.php3?id_article=2265

http://www.chine-informations.com/guide/evolution-du-pib-chinois-1993-2006_1634.html

http://www.chine-informations.com/guide/evolution-du-pib-chinois-1993-2006_1634.html


http://www.chinaeconomicreview.com/realestate/2006/11/26/five-years-is-a-long-time-in-real-estate/

http://www.chinaeconomicreview.com/realestate/2006/11/26/five-years-is-a-long-time-in-real-estate/

http://www.france24.com/fr/20080221-carrefour-wal-mart-font-guerre-chine-distribution

http://www.france24.com/fr/20080221-carrefour-wal-mart-font-guerre-chine-distribution




http://www.fiducia-china.com/Information/Newsletter/68-1407.html

http://www.icmrindia.org/casestudies/catalogue/Cases%20in%20other%20Languages/OFBSTR246.htm

http://www.icmrindia.org/casestudies/catalogue/Cases%20in%20other%20Languages/OFBSTR246.htm


Carrefour S.A in “Business source premier” digital library

“L’Essentiel 2007” by Group Carrefour

Literature review

Reports

Au-Yeung A. & Henley J. (2003) “Internationalisation strategy: in pursuit of

the China retail market” European Business Journal

Gamble J. (2006) “Multinational Retailers in China: Proliferating

‘McJobs’ or Developing Skills?” Business Source Premier (Digital Library)

Khavul S. (2007) “Learning during and after internationalization by

entrepreneurial firms from emerging economies” Business Source Premier

(Digital Library)

Li & Fung Research Centre (2004) “The Growing Power of Foreign Retailers in

China” Business Source Premier (Digital Library)

Lowther, B. (2004) “China to Kick off a retail Revolution”

Business Source Premier (Digital Library)

Book

Central of union of Hong Kong (2004) “A QUI PROFITE LE MIRACLE? Ou

comment les travailleurs chinois payent le prix fort du boum économique de

leur pays ?

Main Body

Reports

Carrefour S.A in “Business source premier” digital library

Food retail in China in “Business source premier” digital library

55


Food retail in France “Business source premier” digital library

Books

Cabestan J.P. and Choukroune L. (2002) « L’accession de la Chine à l’OMC :

un tournant historique ? »

Confédération Internationale des Syndicats Libres (2005) « A QUI PROFITE LE

MIRACLE? Ou comment les travailleurs chinois payent le prix fort du boum

économique de leur pays ? »

Garner J. (2005) “The Rise of the Chinese Consumer”

Johnson G., Scholes K. and Whittington R. (2006) “Exploring Corporate

Strategy” Pearson Education Limited

Shuming B., Shuanglin L., Changwen Z. (2006) “The Chinese Economy after

WTO Accession”

APPENDIX

Appendix 1

56


Evolution of the GDP between 1993 and 2006

Source: www.chine-informations.com

Appendix 2

57

http://www.chine-informations.com/


Top Mainland Chain Store Operators (ranked by sales)

Source: www.fiducia-china.com

58

Rank Chain storesSales in 2004 (Bil. Euro)

% increase 2003/04

1 Shanghai Bailian 6.20 22.52 GOME Electrical Appliance 2.19 34.33 Dalian Dashang Group 2.11 27.04 Suning Appliance 2.03 79.65 Carrefour (China) 1.49 20.9... ... ... ...7 China Resources Suguo Supermarket 1.27 44.9... ... ... ...14 Yum! Brands 1.09 26.215 China Resources Vanguard Supermarket 1.02 6.7... ... ... ...20 Wal-Mart China 0.70 30.5... ... ... ...23 Metro Group 0.58 13.2

http://www.fiducia-china.com/


Appendix 3

Evolution of the population from 1961 to 2003

Source: http://fr.wikipedia.org/wiki/Image:China-demography.png

59

http://fr.wikipedia.org/wiki/Image:China-demography.png

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