Carrefour Analysis Porter Model

3. Real cases in relation to Porter’s model The Carrefour case Founded in France in 1960, Carrefour is the largest retail company in France and seventh in the world. Carrefour operates in a variety of retail formats such as mini-markets, automotive centres, supermarkets, and warehouse stores. However, its main emphasis is hypermarkets which sell various goods including food, clothing, consumer goods and household appliances. These stores have a large open marketplace atmosphere and provide excellent prices. This formula has proved to be a successful format; however, Carrefour’s domestic expansion was restricted by French legislature. The limitation on hypermarket development led to Carrefour’s international expansion through profitable joint ventures. Carrefour has strong experience and capabilities in operating on a global level as a high degree of profits are internationally generated. Also, they have the ability to operate on low profit margins. Historically, they have differentiated themselves in the hypermarket sector by focusing on cost leadership, multi-specialisation and private labels. Carrefour has 119 stores in France, 96 stores across the world and a number of regional distribution centres (physical resources). The company’s philosophy has been one of decentralisation, while the human resources department has acquired a vast amount of knowledge, experience and skills in operating within international markets, in strategic alliances and operating on low profits. Carrefour has a number of intangible resources including a good corporate image and a strong private label. The value chain analysis (Figure 4) assesses Carrefour’s competencies through the examination of its primary and support activities. This analysis concentrates on inbound and outbound logistics, the marketing and sales of the company. In terms of procurement or inbound logistics, Carrefour concentrates on host country purchasing. This can benefit the company as purchases will be made in the same currency as sales allowing the company to meet local government regulations or standards. However, it may prove to be a disadvantage to the company if raw materials may be acquired at a cheaper price from outside the country. Regional distribution centres facilitate the gathering and distribution of merchandise to the stores. The centres facilitate inbound and outbound logistics. As it pertains to marketing and sales, Carrefour operates and is experienced using heavy promotion in international markets. This indicates experience with marketing products within different countries and cultures. Carrefour lagi

The chief executive of Carrefour is staking the future of the giant French retailer on a simple strategy: strengthen at home, then either dominate or withdraw abroad. The chief, Lars Olofsson, joined the company at the start of 2009, when it was going through a period of upheaval. Market share had slipped at home, shareholders were uneasy and the group had lost focus on core clients, while pursing a haphazard international expansion. Mr. Olofsson, a Swede who speaks fluent French, was brought in to replace José Luis Duran by the retailer’s largest shareholders, including the prominent businessman Bernard Arnault. Mr. Olofsson came from the Swiss food giant Nestlé.

“Carrefour had lost track of being client and consumer focused and lost a certain track of price competitiveness,” Mr. Olofsson said during an interview this week. Just after taking the helm, he initiated what he called a “reset” in the core markets of France, Spain, Belgium and Italy. That meant focusing on re-branding and refurbishing stores, automating checkout lanes at hypermarkets, introducing recession-friendly value brands, overhauling the information technology systems and better leveraging its huge buying power to improve price competitiveness. The process was expensive and dented 2009 results: net profit plunged to €385 million from €1.3 billion a year earlier, and consolidated net sales slipped about €1 billion, to €86 billion. Last year, market share in France crept up for the first time in three years. “In 2010 we should see the fruits of that work coming through — in sales and profitability,” Mr. Olofsson said in his office overlooking the Seine. “All this puts us in a better position for the future.” As the ship steadies, he plans to invest further in China, Brazil and India. But where prospects are less certain, the group may scale back. “If you cannot become leader, sooner or later you will have a competitive problem,” he said. “If ever I have an offer in markets where I don’t believe we can become leader, I’m prepared to have a look at it.” Carrefour did this before Mr. Olofsson took over, leaving Japan, Switzerland and Mexico. Under his leadership, it has also pulled out of Russia, and scaled back in southern Italy, Portugal and Belgium, where he has just signed a deal with unions to allow for job cuts and the sale of some stores. Next up could be Thailand, where, “we were the pioneer, but we didn’t concentrate our efforts, and we lost leadership,” he said. Created in 1959, Carrefour is synonymous with hypermarkets, having opened the first such store in Sainte-Geneviève-des-Bois, south of Paris, in 1963. The company has expanded through acquisitions, mergers — notably with the French group Promodès in 1999 — and organic growth. Now, it really does have scale. It is the second-largest retailer globally by sales, behind WalMart Stores, and the largest in Europe, with a range of formats from hypermarkets to hard discount and local convenience stores. It has more than 15,500 stores — company-owned or franchises — employing 475,000 people, and it operates in 34 countries. More than 57 percent of its sales come from outside France. “There’s no distributor in the world that has that kind of geographical footprint,” he said.

But Mr. Olofsson still has plenty of work to do. In a recent opinion poll by Posternak-Ipsos, which tracks the image perception of the largest French companies among consumers, Carrefour ranked 19th, behind its main rivals Intermarché, Auchan, Leclerc, Casino and Système U. “It’s fair to say their position as a national treasure has diminished,” said Bryan Roberts, head of research at Planet Retail in London. That, he said, was mainly the result of rivals’ aggressive pricing. Mr. Roberts emphasized that, befitting its huge size and the continued slow recovery in Europe, Carrefour’s improvement would be gradual. Mr. Olofsson was also cautious in his optimism. “France has been a stable market in terms of consumption for quite some months,” he said. “I don’t see any reason why this should change significantly in the six coming months.” In the longer term, the revenue driver will be emerging markets. Carrefour opened in China in 1995 and has experienced almost seamless growth even though some stores were affected by a backlash after the Paris leg of the Olympic torch relay for the 2008 Beijing Games was disturbed by pro-Tibetan demonstrators. “That crisis is very much behind us, and Carrefour has probably come out even stronger than we were before,” Mr. Olofsson said. “We have a solid profitability and we’ll open as many stores as we can, keeping the quality that we offer.”’ He described himself as “open” to acquisitions in China and unperturbed by fears about a downturn driven by a weaker real estate market. The company leases most of its sites. Like Wal-Mart, Carrefour has also been trying to weave its way through labyrinthine regulations for a toehold in India. It is set to introduce a cash-and-carry store there in weeks or months, and a second around the turn of the year. It will then seek to open its own stores with an Indian partner. How important could that market become? “Short term: not important at all. Medium term: very little. Long term: might be very important. It’s a huge market but modern retail is new to India,” he said. Mr. Olofsson can also see the day when Brazil overtakes Spain as the company’s No.2 market, behind France. What of the largest overall market, the United States? Carrefour opened a handful of hypermarkets there, notably in Philadelphia and New Jersey, around the early 1990s. But the plug was pulled quickly as U.S. consumers spurned the hypermarket model. Tesco, the largest British grocer, entered the United States in 2007 and has also had a tough time penetrating the competitive market.

“They have a lot of courage, I wish them good luck,” Mr. Olofsson said. “I’m not excluding the U.S. market one day. However, today my absolute priority is France and the countries around us — we still have synergies to capture.” “Once our home base is in order and strong — like Wal-Mart in the U.S. — that’s when you can start thinking really about your strategy on a large scale.” Toward the end of the interview, Mr. Olofsson took a moment to reflect on a European passion: the impending soccer World Cup. Carrefour, sponsor of the French team, has started a promotion to refund the cost of some flat-screen televisions here if the national team wins. A calculated risk? France appears to be struggling for form, while the team of Spain, Carrefour’s next market, is looking sharp. “Our people in Spain said: ‘There’s no way we can do the promotion in Spain, it will cost us too much, Spain’s going to win,”’ he joked. “So that’s why the promotion is only for France.” Lagi...

Carrefour continues to be one of the most talked-about retailers across the world. Not only due to its large size as the world’s second largest retailer and the number one in Europe, but also for the strategies it has been implementing over the past 24 months: new formats launched (Carrefour Planet, Carrefour Express and Carrefour Market across Europe and more recently Carrefour City-Contact in France), new purchasing framework (Business Development Program), new organizations and management teams.