Carrefour's Exit from Singapore
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Case Code: BSTR439 Case Length: 12 Pages Period: 2013 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.400 Organization: Carrefour SA Industry: Retail Countries: Singapore Themes: International Business, Globalization |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Going Global
Carrefour started making efforts to enter international markets after a law was passed in France in 1963 to restrict the development of large stores. It decided that for its international expansion, it would adopt the route of forming alliances with local partners. Its first international venture was in Belgium. It opened its first outlet in association with Delhaize Frères-Le-Lion in 1969. In 1975, it entered Brazil. In 1978, Carrefour developed the hard discount store format under the banner Ed in France. The store offered a limited range of products at very low prices. By 1985, Carrefour was operating in ten countries and had introduced private label products that were priced 10-20% lower than branded products and were of superior quality...
Carrefour in Asia
During the late 1980s, the economies of several Asian countries like Taiwan, Singapore, South Korea, Thailand, etc. were booming. In order to reap the benefits of this growth, Carrefour started its Asian operations by entering Taiwan in 1989. It established a joint venture with Uni President Enterprises Corporation at Taiwan. Initially, Carrefour planned a hypermarket spread across 10000 sq. meters, similar to its hypermarkets in France. But on analyzing the Taiwanese market, Carrefour realized that Asian markets were entirely different from other markets in terms of store layouts, products offered, and frequency of shopping. Also, the customers were highly price sensitive. So Carrefour decided to adopt the kind of store layouts, products assortment range, and management culture that would be suitable to the local environment...
Carrefour in Singapore
Because of the differences in the currency exchange value between the Malaysian Ringgit and the Singapore Dollar , Singaporeans often shopped at Malaysia. Carrefour noticed that a huge number of customers from Singapore visited its stores located in Kuala Lumpur and Johor Bahru in Malaysia. The Johor Bahru store attracted around 2000 Singaporeans every week, and they accounted for 40% of the weekend sales in the stores. This made Carrefour open another store in the area. Carrefour then decided to study the Singapore market. The study showed that compared to the people of other Asian countries, the disposable income levels of the Singaporeans were high, and the market had a lot of potential. In mid-1996, Carrefour announced that it would venture into Singapore. But industry insiders questioned Carrefour's decision to enter a highly saturated and high cost market...
Failure to be Among the Top
In 2010, Carrefour planned to exit a few South Asian markets. It, however, decided to retain its presence in Malaysia and Singapore. Forty-two stores in Thailand were sold to another French retailer Casino Guichard Perrachon SA, which had operations in Thailand. The then CEO of Carrefour Lars Olofsson announced, “We have decided not to sell our operations in Malaysia and Singapore because their market position and their growth prospects are consistent with our strategy.” He also said that emerging markets would be a major engine for growth for Carrefour. At the same time, he announced that Carrefour would exit the countries where realistic prospects of becoming the market leader were not present...
What Went Wrong...?
Though Carrefour was successful in attracting customers, it found it more difficult to retain them. It soon found that customers preferred convenience and proximity as they shopped often, and were very price conscious. The retail market was saturated with several local players already having a formidable presence. According to Sonya Madeira (Madeira), managing partner, Rice Communications , the main reason for Carrefour's failure in Singapore was low product differentiation. She said "Low product differentiation means that shoppers can get similar products quite easily elsewhere, and so make purchase decisions based on convenience and price"...
Carrefour Exits South East Asia
Carrefour's performance in several Asian markets did not live up to its expectations. It incurred losses on several ventures. Carrefour group sales in 2012 were €86.6 billion and its revenues kept declining since 2007. The net debt value of the group as of December 2012 was € 4620 million. In many of the Asian markets, Carrefour failed to position itself among the top retailers. Subsequently it made an exit from several Asian countries that included Japan (2005), South Korea (2006), Thailand (2010), and Malaysia, Singapore, and Indonesia (2012)...
Exhibits
Exhibit I: Carrefour Stores across the Globe as of 2012
Exhibit II: Carrefour Global Operations
Exhibit III: Financial Summary of Carrefour for 2011 and 2012
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