Carrefour's Retreat from China
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Case Code: BSTR593 Case Length: 14 Pages Period: 1995-2019 Pub Date: 2019 Teaching Note: Available |
Price: Rs.400 Organization: Carrefour S.A Industry: Retailing Countries: China Themes: Market Entry & Exit, International Operations, Technology in Healthcare, Strategy Formulation |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Carrefour in Asia
During the late 1980s, the economies of several Asian countries like Taiwan, Singapore, South Korea, and Thailand were growing rapidly. 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 Enterprise Corporation . Initially, Carrefour aimed to build a hypermarket of 10,000 square meters, similar to its hypermarkets in France. On studying the Taiwanese market, however, Carrefour realized that the store format which had been successful in other parts of the world would not flourish in Asia as the Asian retail markets were different from the other markets in terms of the layout of the stores, the products offered, the frequency of shopping, and the price sensitivity of customers. Carrefour decided to adapt the stores, the products, and management culture to suit the local environment...
Entry and Expansion in China
Carrefour identified China as one of the most important foreign markets, after the country partially opened its retail sector to foreign investments in 1992. The retailer entered China in 1995 by forming a joint venture with the Chinese management consulting firm Zhong Chuang, and established a firm called ‘Jia Chuang’, in which it held the majority of shares. During that time, consultancy firms in China were not allowed to invest in any other business so Zhong Chuang set up another company, Chuang Yi Jia, as a commercial enterprise....
The Localization
While most of the global retailers and consumer product companies considered China to be a single huge market, Carrefour adopted a different approach. It considered the country to be comprised of several small markets. The company approached these markets with flexible procurement, store management, marketing, and service strategies. Since the initial years of its operations in China, Carrefour concentrated on keeping the prices low due to the fact that for Chinese consumers price was an important factor while deciding to buy products. This made its hypermarkets very popular among the Chinese consumers...
The Challenges
Carrefour faced several challenges in China. Its procurement policy, under which the individual store managers and department heads were free to decide on the merchandise to be purchased for their stores, came under the scanner of experts. The policy was believed to be the reason for the widespread corruption reported in several stores...
Carrefour's Exit and Way Forward
It was not only Carrefour, but also several other foreign players in China who were reconsidering their strategies and struggling to decide whether they should continue to expand in China, where profits were meagre, or cut their losses and focus on unexploited markets instead. Carrefour's deal with Suning had put an end to its initial talks to sell a minority stake in its China business to Tencent. "The talks that have started since January 2018 for the sale of a minority stake (in Carrefour China) to Tencent are over," a Carrefour spokeswoman said, but she mentioned that a strategic business partnership with Tencent would be continued...
Exhibits
Exhibit I: Carrefour – Entry into Asia
Exhibit II: Consolidated Key Financials of Carrefour S.A
Exhibit III: Carrefour Net Sales by Country
Exhibit IV: Top 10 Retailers with Largest Market Shares In China - 2018
Exhibit V: Foreign Supermarket Chains Exit from China
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