Carrefour's Strategies in China
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Case Code: BSTR246 Case Length: 30 Pages Period: 1995-2006 Pub Date: 2007 Teaching Note: Available |
Price: Rs.500 Organization: Carrefour Industry: Retail Countries: China Themes: International Business, Globalization Business |
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. For international expansion, Carrefour adopted the route of forming alliances with local partners. Its first international venture was in Belgium, where it opened an outlet in association with Delhaize Fréres-Le-Lion , in 1969. Carrefour expanded its operations outside Europe by opening a hypermarket in Brazil in 1975.
In 1978, Carrefour developed a hard discount store format, under the banner Ed in France (Refer to Exhibit III for different banners of Carrefour)...
Carrefour in Asia
During the late 1980s, the economy of several Asian countries like Taiwan, Singapore, South Korea, Thailand etc. was rapidly growing. 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......
Entry and Expansion in China
Carrefour identified China as one of the most important foreign markets, after the country partially opened its retail sector for foreign investments in 1992. Carrefour 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....
The Strategies
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....
Opening New Stores
Carrefour planned the expansion of its operations in China in a systematic manner by establishing regional offices. For instance, the headquarters of the East China region in Shanghai took care of expansion activities in that region. The headquarters of the Northwestern region was located in Xinjiang and it was responsible for expanding business in that region....
Store Management
As a part of its global strategy, Carrefour had decentralized its operations, giving full freedom to store managers to operate their stores. Decentralization was one of the important factors for Carrefour's success in international markets, with store managers being empowered to take decisions according to the local traditions and customs....
Supply Chain Management
The supply chain system that Carrefour had in China was quite flexible. According to Christophe De Nays Candau, In-charge of Organization, Systems and Supply Chain in Carrefour, China, "It's (supply chain system) highly fragmented, so we have to keep our flexibility. We still use the bike if it's the lowest cost and most efficient."
Carrefour procured most of the goods from within China to cater to its local operations. Since its initial years of operation in China, about 85% of the stock sold was procured locally. This helped Carrefour maintain lower prices compared to other foreign retailers, who sold imported products...
Localization Strategies
Carrefour believed that its stores should reflect the local environment and complement the local culture. The western style hypermarket was customized by Carrefour to effectively cater to the needs and preferences of Chinese consumers (Refer to Exhibit X to see a few visuals of a typical Carrefour hypermarket in China)...
The HR Practices
Though Carrefour had expanded its operations all over the world, the organization remained lean as several of its key functions were decentralized. The headquarters had a staff of only about 20, with around 10 people involved in the HR function...
The Challenges
Industry analysts opined that customizing its store formats to suit local needs had been Carrefour's main strength and this had helped the company penetrate large and tier II cities in China. Despite rapid growth, Carrefour's share in China was only at around 1.5% of the organized retail market...
Exhibits
Exhibit I: Top 25 Food Retailers in the World (December 2005)
Exhibit II: Retail Industry in China (2006)
Exhibit III: Carrefour's Banners
Exhibit IV: Carrefour - Consolidated Store Network (December 2005)*
Exhibit V: Carrefour - Consolidated Net Sales per Format/Region (2005)
Exhibit VI: Regulations in the Retail Industry in China: Pre and Post 2004
Exhibit VII: Carrefour - Hypermarkts in China (October 2006)
Exhibit VIII: Carrefour - Private Label Products Sold in China
Exhibit IX: A Note on Supply Chain and Logistics Network in China
Exhibit X: Visuals of a Typical Carrefour Hypermarket in China
Exhibit XI: Wal-Mart in China
Exhibit XII: China - Spread of Competitors by Region* (March 2006)
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