CARREFOUR: CROSSROADS AT A CROSSROADS CASE STUDY

Question 1: Based on this Carrefour case, discuss the factors/considerations that are
usually considered in expanding business overseas.
The French retailer Carrefour a global company has been struggling constantly to
improve its international presence. In 2011, it had more than 15,000 stores and about
475,000 employees, selling a combination of food and non-food items. But even with
such varied portfolio statistically the company showed uneven growth from 43 different
regions at which it operated. In light of Carrefour an MNC usually consider following
factors to ramp up international presence and expand business overseas.
1.
Prioritization of Country for future expansion. In most cases MNCs maintain a
strong home base of operations and in Carrefours case it was France. Hence for any
MNC maintaining leadership in home country becomes first priority. The second is to
maintain growth or improve performance in countries with similar buying habits,
culture and having neighboring boundaries such as Belgium, Italy and Spain. And third
priority is to establish operations in countries with strong growth potential in case of
Carrefour it was Brazil, Russia, India and China. The lowest priority is made up of other
countries. The prioritization of countries will definitely change based on economic
growth and characteristics of business itself.
2.
Strong decision on non-profitable markets.
An MNC must constantly
evaluate market conditions and make quick decision with underperforming stores and
countries. In case of Carrefour it sells such stores and moves away from countries that
offer less potential profits by placing capital elsewhere. For example, shifting capital
from South Korea and Slovakia to Poland and from Thailand to strengthen domestic
market.
3.
Diversification of distribution channel.
Carrefour performed its operations
through different types to stores: hypermarkets, supermarkets, hard discount stores,
cash-and-carry stores and convenience stores. Its hypermarket accounts for largest
portion of sales, retail space and number of countries with retail operations.
Supermarkets carry less variety than its hypermarkets, and its hard discount stores and
cash-and-carry stores carry even less. Such diversification allowed Carrefour to
strategically place its hypermarkets as country owned outlets while franchise
convenience stores (more than 95%).
4.
Early market entry. Carrefour introduced hypermarket concept to French
household when they started possessing cars, large refrigerators and higher disposable
incomes. They also introduced free car parking, which as a value addition to customers
moreover more women were working and they wanted one-stop shopping for the week.
But in case of Mexican, Japanese, Korean and Chilean markets the entry was late and

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subsequently sold its operations. Therefore for an MNC to be successful in global scale it
is advantageous if the company can tap into the economy while it is growing and
thereby set a trend for customers to follow its footsteps.
5.
Understanding of local market needs. Carrefour was very successful in
understanding needs of French, Belgium, and Spain people as they have similar
economics and culture. But even after becoming first in South Asian countries it lacked
sufficient understanding of their different market needs. It is imperative for an MNC to
have local knowledge of market trends, supplier behavior, laws and regulations, etc. in
order to gain sufficient foothold in target country.
Question 2: Does Carrefour have any guiding principles in its international expansion?
Explain.
Carrefours guiding principles for international expansion is countrys economic
evolution. The company tends to start with a developing country at the bottom of the
economic curve and grow within the country at the top of the curve. This provides two
substantial benefits: satisfy customers immediate needs and transition the customer
towards own products gaining favorable position over others. Once Carrefour decided
to internationalized its first foreign entry it was a partnership with Belgium and its first
fully owned foreign store was in Spain, both countries has customers who were going
through lifecycle changes similar to French people.
These success stories claims that following a country from early stages of economic
growth provides a customer base that can attribute to the expansion of the MNC.
Generally in new countries an MNC need to be first in any venture for the first win. In
case the MNC becomes 3rd or 4th the chances of success are slim at best. When an MNC
deviates from such principle it is more likely to fail. Carrefour expanded unsuccessfully
into the United States and United Kingdom after both countries had gone through
economic transitions and other distributors had already satisfied the customer base and
changed their needs to own favor.
Question 3: What will be your suggestions to Carrefour to have its significant presence in
the USA and the UK?
1.

Failure factors.
a.
Excess time spend at hypermarket at United States customers simply
have not wanted to spend the time shopping as they have to walk long distances
before reaching even the first aisle.
b.
Less choice from different distributers at United Kingdom consumers
preferred to shop for durables in city centers where they could compare
different distributors offerings.
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2.

c.

Presence of well established competitor like Wallmart.

d.

Failure to find a valuable partner with local operating needs.

Suggestions.
a.
Carrefour depends on locally produced goods for about 90% of its sales,
using manufactures trademarks or no trademarks at all allowing consumers to
easily compare prices of most Carrefour products. This requires the MNCs to
have a trusted and viable local partner, which can be done through International
Joint Ventures.
b.
Expanding to too many countries via acquisitions may put additional
burden on the company rather expanding to fewer countries and building a
strong presence in each one may be more viable.
c.
Carrefour recently pushing global purchasing, a commodity from an
exceptional supplier from other countries are made available to stores in other
countries. This will have a unique effect in UK and US as they will have the best
global value for any product.
d.
In US and UK concept of hypermarket may seem to be less popular than
supermarket thus Carrefour needs to carefully evaluate consumers choice so that
they can have a satisfied shopping experience.
e.
In order to build a strong presence Carrefour needs to roll out all types of
diversified channels in US and UK rather than sticking to only hypermarket
concept. In case of supermarket Carrefour can go for IJV or own totally while
other low intensity channels can be done thorough franchising.

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