Carrefour in Asia

CASE ASSIGNMENT
Having completed a full legal restructuring of its operations in China, Carrefour is
preparing for rapid expansion in the country. China has the region's highest GDP growth
rate, an enormous population, and disappearing trade barriers. Opportunities in the
country's booming retail sector require immediate attention for Carrefour to stake a
greater share of the market before other foreign competitors, who are amassing at the
borders, make headway.
Your management consulting firm has been retained to complete an assessment of
Carrefour's international strategy, particularly as it relates to the Asian region. Your
written report is due in two weeks, and you have been asked to present a ten minute
overview at the upcoming partner meeting.
Your report and overview should address the following key strategic issues:
1. Conduct a complete study of the external environment in Asia, and identify the
critical strategic factors in each of the following areas:
a. The General Environment
b. The Industry Environment
c. The Competitor Environment
2. Outline Carrefour's business and international strategies.
3. Complete a comparative analysis of the unique strategic approaches used in each of
the eight Asian markets where Carrefour competes.
4. Does the analysis reveal any commonalities in the Asian markets which would
provide a foundation for a regionally integrated strategy? What would be the benefits
of developing a transnational strategy?
5. Based on the analysis, what advice can you give Carrefour's management to improve
the company's successful expansion into China? Recommend an integrated and
coordinated set of commitments and actions which will exploit the company's core
competencies, sustain growth, and ensure maximum performance and value for
shareholders.

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Carrefour in Asia

STRATEGIC MANAGEMENT INPUTS

1. Conduct a complete study of the external environment in Asia, and identify the
critical strategic factors in each of the following areas:
The primary objective of studying the external environment is to identify opportunities
and threats that may impact the company's performance. An opportunity is a condition in
the general environment that, if exploited, helps a company to achieve strategic
competitiveness. A threat is a condition in the general environment that may hinder a
companys efforts to achieve strategic competitiveness. There are three important
dimensions to the external environment:

The general environment, which is grouped into six environmental segments:

demographic, economic, political/legal, sociocultural, technological, and global.

The industry environment, which is the set of factors that directly influences a
company's competitive behavior and determine the industry's profit potential: the
threat of new entrants, the power of suppliers, the power of buyers, the threat of
product substitutes, and the intensity of rivalry among competitors.

The competitor environment, which is monitored through a continuous process of

gathering and interpreting information about a company's rivals.

Analysis of the general environment focuses on the future; analysis of the industry
environment focuses on the factors and conditions influencing a firms profitability
within its industry; and analysis of competitors focuses on predicting the dynamics of
competitors actions, responses, and intentions. In combination, the results of these three
analyses influence the company's vision, mission, and strategic actions. The details of
each dimension of Carrefour's external environment are outlined in the tables below.
1a. The General Environment
Country
Taiwan

General Environment
Opportunity
HR hub for other Asian markets,
especially China
Untapped market space for
hypermarkets
Size, cultural diversity, enormous
population
Pilot departments to introduce new
product ranges, leading to cross-learning
and increase in size of new stores
Spared the Asian financial crisis so
consumption levels continued to
increase
Breeding ground for "lessons learned"
and application to other Asian countries

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Threats
Real estate prices "skyrocketed" forcing
smaller scale stores
in urban centers on two levels (instead of
one) and renting space
Local secret societies (need to negotiate
"protection")
Communication of English-speaking
employees
Culture gap source of misunderstanding
amongst mgmt

Carrefour in Asia
Country
South
Korea

Thailand

Indonesia

Malaysia
Singapore
Hong Kong

China

Japan

General Environment (cont.)

Opportunity
Threats
Liberalization of retail market in 1996
Asian crisis: quick recovery
Asian financial crisis had significant
impact
2001 began to restructure and
modernize existing stores
Similar to South Korea: crisis allowed
Asian crisis: quick recovery
expansion while costs were lower and
According to Thai law, foreign
competition reduced
companies, except American, could own
only 49% of the shares; Carrefour
argued this would favor Wal-Mart
Population: 202 million
Asian crisis: slow recovery
Took advantage of market crisis with low Major problems in financial sector
prices
including fragility and private sector debt
Before economic crisis experienced one
of the strongest
growth rates of all Asian countries
Population: 4 million
Not overly affected by Asian crisis (1999:
2% increase in GDP)
Asian crisis worked in Carrefour's favor
Severely impacted by Asian crisis; still
before 1998 (see 'threats'/Hong
had not returned to
Kong/industry environment)
"strong growth"
After 1999: Difficulty finding large sites
suitable for developing hypermarket
concept (to acquire significant market
share) so disposed of its four stores in
2000
2004: opens 42nd hyperstore in remote
Legal tribulation due to government
regions of China,
structure/control
served by 17 different bus lines
2000-2002: Not allowed to open any
Major exporters of Chinese products
stores & needed to
Participated in public welfare projects to
restructure (legal) existing outlet
contribute to local communities and
Religious reasons prohibited sales of
closely cooperated with local authorities
certain food items
Instituted numerous socialconsciousness programs
2004: Government abolished joint
venture requirements
Culture conflict between
Historically localized merchandise which
Carrefour/Japanese retail culture
wasn't successful in Japan but in 2003
Misconception about store's
recorded net sales of 225 million Euros
merchandise
2004: Asian Wall Street Journal reported
Failure to adapt to foreign market (I.e.,
Carrefour was planning to sell its eight
not French) resulted in poor
stores for "difficulties in acquiring real
performance, rectified in 2004 rectified
estateand lack of touch with Japanese
(I.e., "La Maison")
consumer tastes"

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Carrefour in Asia
1b. The Industry Environment
Compared with the general environment, the industry environment can have a more
direct effect on the companys strategic competitiveness and its ability to earn aboveaverage returns.
Country
Taiwan

South Korea

Industry Environmenta
Opportunity
HR hub for other Asian markets,
especially China

Liberalization of retail market in 1996

Local conglomerates raised stakes,
invested massively to protect local
industry but Asian crisis forced many to
file for bankruptcy -- gave Carrefour
opportunity to reinforce its position and
record first profit in 1997

Thailand

According to Thai law, foreign companies,

except American, could own only 49% of
the shares; Carrefour argued this would
favor Wal-Mart

Indonesia

Free credit campaign as incentives for

durable household goods

Malaysia

Aggressive growth in late 90's despite

market crisis
"Halal" food requirement compliance;
operated separate "non-halal" stores
outside "halal" catchment zone
Mature and sophisticated
Modified shopping habits and price
expectations among small populations

Singapore

Threats
Mom & pops are source of major
competition
Chinese are "difficult negotiators"
Managing the supply chain: Lacked rigor
and more flexible than Western
counterparts

Local suppliers resisted Carrefour's

methods

Hong
Kong (HK)

Supplier's concerns over retailers'

involvement worked in
Carrefour's favor

Rivalry before 1999: minimal; 1999:

Significant

China

Different market than Taiwan & HK:

Urban, increased consumption &
purchasing power
1995: Moved into this market
2003: top foreign retailer
2002/03: Stepped up expansion in bid
to move faster than competition
WTO entry of China impacted trade
In recent years Shanghai-based major
retailers started to defy foreign
competition

Different negotiation culture (as in Taiwan)

1999: Central government ruled foreign
companies could not own > 65% of any
retailing enterprise in China & had to sell
excess shares; in 2002 signed deal to sell
stakes to local partners
In Shanghai region: Carrefour, Makro,
Wal-Mart & Metro generate 1/3 of total
supermarket sales;
2002: Royal Ahold withdraws due to
competition
2004: Opened in remote region of China;
religious product (food) restrictions

Country

Industry Environmenta (cont.)

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Carrefour in Asia
Opportunity
Threats
Differ market intercultural and economic Limited space in homes so visit mkt on a
terms so postponed entrance until 2000 daily (v weekly) basis
when real estate prices were more
Sound marketing culture
affordable, loans more attractive and
Perfectionists
traditional clout of wholesalers had
been slowly reduced
Higher GDP and purchasing power
relative to other Asian markets
2002: Local player (I.e., Mycal)
bankrupted but retail sector crowded
and competition fierce
5 major general merchandise stores
chains remained
Mjr competitor, Ito-Yokada, did not
intend to open hypermarkets nor reduce
prices (I.e., directly compete)
Barrier to entry: network of multiple
layers of intermediaries
a
Asian financial crisis had major impact throughout entire region; strong contraction of economy
around 1998
Japan

An industry is a group of firms producing products that are close substitutes. In the
course of competition, the behavior of these firms influences each other's competitive
moves and the mixture of strategies used to pursue above-average returns. A variety of
factors influence the intensity of interfirm rivalry, and the table below identifies several
that exist in Carrefour's Asian markets. A consideration of these influences will impact
the company's competitive behavior and strategy design as it moves into China.
Intensity of Rivalry
Country

Existing Factorsa
Numerous
or Equally
Balanced
Competitors

Slow
Industry
Growth

High
Fixed
Costs
or High
Storage
Costs

Taiwan

2 retail
hypermarkets
Makro &
Carrefour

Yes/Nob

High

South
Korea

Yes

No

High

Thailand
Indonesia

No
No

Yes
Yes

Unkwn
Unkwn

Numerous
or Equally
Balanced
Competitors

Slow
Industry
Growth

Intensity
of Rivalry
(Cont.)

High
Fixed
Costs
or High

Low
Differentiation or
Switching
Costs
Probably
not depends
on
immediate
competition

High
Strategic
Stakes

High
Exit
Barriers

Yes location
related

Yes

No

M/H

Yes

H/L

Unkwn
No/Unkwn

H?
L?

Extremely
high
Unkwn
Unkwn

Low
Differentiation or
Switching

82

Measure
of
Intensity
(Low,
Mod,
High)

Existence
of a
Strategic
Group

Yes
Yes/Nod

No
Unkwn

High
Strategic
Stakes

High
Exit
Barriers

Existence
of a
Strategic
Group

Measure
of
Intensity
(Low,

Carrefour in Asia
Storage
Costs
Malaysia

Singapore

Hong
Kong

China

Entered
market in
1994 - Little
competition
until 2003
(I.e., Tesco)
1997:
Entered
mature
market
1999: Fierce
competition
began
In Shanghai
region:
Carrefour,
Makro, WalMart, Metro
generate 1/3
of total
supermarket
sales;
2002: Royal
Ahold
withdraws
due to
competition
2004: Opens
42
hyperstore in
remote
areas of
China

Mod,
High)

Costs

Unkwn

Unkwn

Yes

Unkwn

Unkwn

Unkwn

Unkwn

Extremely
high

Unkwn

No/Unkwn

Yes

Probably

Unkwn

Possibly

2000:
Left mkt

Unkwn

<1999: L
>1999: H

No

Unkwn

No

Yes/Nod

No

Yes

H;
Steadily
increasing

No

Yes

No

Yes

Japan

2002: Local
No
No
player (I.e.,
Mycal)
bankrupted
but retail
sector
crowded and
competition
fierce
b
No before Asian crisis/yes after (1997)
c
Until Asian crisis, then no
d
Related to immediate geographic proximity

1c. The Competitor Environment

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1994:
Extremely
low
2003:
Increased
/ strong
H

Carrefour in Asia
The competitor environment is the final dimension of the external environment requiring
study. Competitor analysis focuses on each company against which Carrefour directly
competes. Intense rivalry creates a strong need to understand each of the company's
competitors. In a competitor analysis, the firm seeks to understand the following:
What drives the competitor, as shown by its future objectives,
What the competitor is doing and can do, as revealed by its current strategy, and,
What the competitor believes about the industry, as shown by its assumptions.
Country
Taiwan
South
Korea
Thailand

Indonesia
Malaysia

Competitive Environment
Opportunity
By 2003 continued to operate 31 stores
in Taiwan and reinforce lead over Makro

Threats
Competitor: Makro

Fierce before 1996 Asian financial crisis

Local conglomerates, Makro, Costco,

WM and Metro

2002 offered number of sales

innovations including fresh
product concept
2003: #3 retailer in, but facing increased
competition

Singapore

#5 in food retail; adapted well to local

economic environment
Monthly theme promotions

Hong Kong
China

Japan

Used Taiwanese negotiators for its

suppliers
Retail scene differs substantially from
one store to another as well as
geographically
Mkt dominated by domestic chains (I.e.,
Lianhua) and hypermkts in "hands of big
international players"
In Shanghai region
2002: Local player (I.e., Mycal)
bankrupted but retail sector crowded and
competition fierce

STRATEGIC ACTIONS: STRATEGY FORMULATION

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Carrefour in Asia

2. Outline Carrefour's business and international strategies.

Each business must develop a competitive strategy focused on its own domestic market,
which includes business-level strategies and competitive rivalry and competitive
dynamics. International business-level strategies have some unique features including
the home country of operation (often the most important source of competitive
advantage) where the resources and capabilities established in the home country
frequently allow the firm to pursue its strategy into non-domestic markets. Of note is the
growth process; as a firm continues to grow into multiple international locations, the
country of origin becomes less important for achieving competitive advantage.
Business-level strategy. The basics of Carrefours concept are (1) one-stop shopping, (2)
low prices, (3) self-service, (4) quality products, (5) freshness, and (6) free parking.
Before entering a new international market, Carrefour analyzes local conditions against a
set of socio-economic criteria, of which the size and maturity of the market, the legal
framework, and the openness to foreign investors are major aspects. Basic details, such
as population, per capita GDP, transport networks, the level of motorization, urbanization,
and real estate prices, are also taken into account. However, Carrefour does not believe
only in extensive market research, but acknowledges the role that instinct plays in its
decision-making. Once the feasibility study is conclusive, Carrefour focuses on selecting
the format best suited to the particular market and adapting that format to local needs.
(This is discussed in more detail in below.)
Each new market brings its own specific challenges to recreate a virtuous circle of
freshness + variety + low prices high volume high bargaining power low costs
low prices. For Carrefour, price is not simply a competitive advantage but an essential
means of survival. In order to drive down prices in response to competition, while
maintaining high-quality brands, Carrefour advertises new promotions, discounts, and
guaranteed low pricing every day. Taking local constraints into account, Carrefour adds
new services in developing markets, such as free shuttle services for customers, play
areas for children, and home delivery.
In some markets, such as China, Carrefour has launched its own product line in home
appliances and spices. Because Carrefour operates on low margins (6.9 percent gross
margin and 2.5 percent net margin), the slightest improvement in these rates translates
into significant benefits to the bottom line. One important factor in cost management is
the company's sourcing strategy. In China, for instance, more than ninety-five percent of
its merchandise is locally sourced, with the remainder acquired through local importers or
the Hong Kong trading office. To support supply chain initiatives, Carrefour maintains
large regional procurement centers coordinated through Shanghai and Hong Kong which
support global operations.
The centralization of its IT systems and administrative procedures achieves further
savings for the company to keep costs low. Shared processes and systems increase
operational efficiency, and the introduction of international product ranges complements
a locally sensitive strategy.
While venturing into new markets, Carrefours human resource policy has relied on a
small number of expatriates executives with solid experience to adapt Carrefours
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Carrefour in Asia
retailing concept to local contexts. Primarily recruited in France, leaders are also selected
from other countries considered to be Carrefour strongholds, such as Taiwan.
As early as 1969, Carrefour was the first mass retailer to measure performance on the
return on invested capital instead of the classic concept of gross profit margin
traditionally used in trade. The pressure for sales and profit falls on department heads, as
each store has accountability as a profit center.
In China, Carrefour employs ninety-five percent of local Chinese managers and invests
heavily in their training. In 2002, Carrefour employed a total of 18,000 local employees,
and 1,000 Chinese department heads were trained in retail techniques and business
management.
It is noteworthy to recognize the change in Carrefours strategy as the company entered
Asia. Unprecedented in its history, Carrefour chose to locate its stores in urban, more
densely populated settings in many Asian countries. Carrefour has positioned its
hypermarkets as proximity stores rather than suburban stores, offering a limited product
range but producing greater volume. Carrefour is trying to establish as many stores as
possible in major urban areas in order to achieve economies of scale.
International Strategy. A company's international strategy can be a tremendous source of
strategic competitiveness and above-average returns.
A multidomestic strategy is an international strategy in which strategic and operating
decisions are decentralized to the strategic business unit in each country to allow each
unit to tailor products to the local market. It focuses on competition within each country,
assumes that the markets differ (requiring segmentation by country borders), and uses a
highly decentralized approach, allowing each division to focus on a geographic area,
region, or country. In other words, consumer needs and desires, industry conditions (e.g.,
the number and type of competitors), political and legal structures, and social norms vary
by country. With multidomestic strategies, the country managers have the autonomy to
customize the companys products as necessary to meet the specific needs and
preferences of local customers. Therefore, these strategies attempt to maximize
competitive response to the idiosyncratic requirements of each market.
The transnational strategy is an international strategy whereby the firm seeks to achieve
both global efficiency and local responsiveness. Realizing these conflicting goals is
difficult, with one requiring close global coordination and the other requiring local
flexibility. Integrated networks allow companies to manage their complex relationships
and connections with customers, suppliers, partners, and other parties more efficiently
rather than simply distant transactions. If effectively implemented, a transnational
strategy can produce higher performance than does the implementation of either the
multidomestic or global international corporate-level strategies.
Because differences in culture and institutional environments require companies to adapt
their products and approaches to local environments, more businesses are increasingly
using transnational strategies.
With Chinas entry into the WTO, the country was mandated to abolish its main trade
barriers, such as import taxes. However, nontariff trade barriers may still exist,
preventing the markets from full open status at this time. Although officially welcomed
to compete in its market, China's press often blames foreign retail operations for
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Carrefour in Asia
eliminating jobs and smothering the local retail industry. Recently, major Shanghai-based
retailers have begun to successfully stand up against foreign competition.
Although firms can realize many benefits by implementing an international strategy,
doing so is complex and can involve great uncertainty and multiple risks. Firms can
grow only so large and diverse before becoming unmanageable, or before the costs of
managing them exceed their benefits. Managers are constrained by the complexity and
sometimes by the culture and institutional systems within which they must operate.
Other complexities include the highly competitive nature of global markets, multiple
cultural environments, potentially rapid shifts in the value of different currencies, and the
instability of some national governments.
3. Complete a comparative analysis of the unique strategic approaches used in each
of the eight Asian markets where Carrefour competes.

Regional Strategic Analysis (SA)

Country
Taiwan

Mode of Entryb
SA/Partnership:

South Korea

OS

Thailand

SA

Components of Business Strategy

*President Group "dormant" partner; local food
& retailing conglomerate
Industrial and commercial parks to develop
hypermarkets
Capture big and small accounts: Wholesale
stores ("green stores") built in industrial areas
and general ("blue stores") in residential areas
Competition included Makro, Costco, Wal-Mart,
Metro
Local and foreign retailers had difficulty staking
out territory as local
conglomerates raised stakes and made
massive investments
Asian crisis forced local retailers to freeze
expansion plans; some filed for bankruptcy
working in Carrefour's favor
2 local partners
Asian crisis worked to benefit of Carrefour
Due to partnership expansion postponed and
reduced # of stores in 1999 from 5 to 2
Creative sales approaches
Laws related to foreign ownership created
challenges for Carrefour

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Carrefour in Asia

Country
Indonesia

Mode of Entryb
M: Promods

Malaysia

Singapore

OS?

Hong Kong

Not discussed

China

JV

Components of Business Strategy

Population: 202 million therefore attractive
market
Slow recovery from Asian financial crisis
(unlike South Korea & Thailand)
2003: leading hypermarket in Indonesia
1994: Little competition at market entry
Before Asian crisis experienced one of the
strongest growth rates in
all Asian nations
2003: #3 retailer in, but facing increased
competition from strong local and foreign
retailer (I.e., Tesco)
1997: Mature and sophisticated market at
entry
Able to modify shopping habits and price
expectations
Strong local competition
Not overly affected by Asian crisis
Able to adapt to local economic environment
Retail industry hard hit by Asian crisis
Price slumps; suppliers concerned over
retailers' insolvency worked in Carrefour's
favor
1999: Fierce competition and needed to
modify activities
Difficulty in finding suitable development
sites for hypermarket; in 2000 disposed of 4
stores

Since 1992 foreign participation allowed

through joint ventures with Chinese
companies
Strategy 1: Look for strong local partner
who could help overcome hurdles but
Carrefour keeps majority stake & assigns
non-operational role to partner
Partnered with Lianhua, one of two major
retailers
Used different partners in different provinces
2004: Government abolished joint venture
requirements
Japan
OS
"Swept into market with much fanfare and
little sensitivity to Japan's retail culture"
Oct 2004: Planning to exit market/sell 8
stores due to "difficulties in acquiring real
estate for new stores and the lack of touch
with Japanese consumers' tastes."
a
Modality: Exporting (E), Licensing (L), Strategic Alliances (SA), Acquisitions/Mergers
(A/M), New wholly owned subsidiary (OS)
b

Low cost strategy philosophy

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Carrefour in Asia
Type of Entry Characteristics
Exporting

High cost, low control

Licensing

Low cost, low risk, little control, low returns

Strategic alliances

Shared costs, shared resources, shared risks,

problems of integration (e.g., two corporate
cultures)

Acquisition

Quick access to new market, high cost, complex

negotiations, problems of merging with domestic
operations

New wholly owned subsidiary

Complex, often costly, time consuming, high risk,

maximum control, potential above-average returns

SUMMARY OF ANALYSIS AND RECOMMENDATIONS

4. Does the analysis reveal any commonalities in the Asian markets, which would
provide a foundation for a regionally integrated strategy? What would be the
benefits of developing a transnational strategy?
Carrefours strategies - including the urban location of stores due to population density,
offering a limited product range with greater volume sales per item, low pricing, and
daily advertisements - incorporate the six general environment conditions and reflect the
challenges of doing business in Asia.
Consequently, both multidomestic and transnational strategies must be considered, but
the ultimate decision between the two approaches may come down to business strategies
that address specific cultural issues and organizational structure/leadership styles. The
first matter relates to the country-of-origin (i.e., France relative to other Asian countries)
and relationship/networks; the latter affects the centralization/decentralization and power
bases.
Coupling the integrated network of the transnational strategy and Asian cultural styles,
especially as it relates to negotiation, must be heavily considered. In additional, the
department heads in Asia are much more autonomous than in France and are responsible
for recruiting employees and negotiating salaries.
Regional integration, although theoretically sound, might prove challenging in light of
the expansive geographical territory and population density. A cost benefit analysis
should be generated from the complete external environmental analysis (including
scanning, monitoring, forecasting and assessing) to determine which strategy is most
suitable. A full description of this process is detailed below.

Scanning the general environment, Carrefour can identify early signals of

potential changes that will impact its strategy and performance.

By monitoring, analysts can observe environmental changes to see if an important

trend is emerging from among those spotted by scanning.
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Carrefour in Asia

[Scanning and monitoring together will provide Carrefour with an important

means of importing new knowledge about markets and how to successfully
introduce new products and services. They deal with events and trends in the
general environment at a point in time.]

By forecasting, analysts can develop feasible projections of what might happen,

and how quickly, as a result of the changes and trends detected through scanning
and monitoring. Forecasting events and outcomes accurately is challenging, but
is important in order to adjust sales appropriately to meet demand.

The objective of assessing is to determine the timing and significance of the

effects of environmental changes and trends on the strategic management of the
company.

Regionalization. Regionalization is a trend that has become more commonly used to

compete in global markets. Because a companys location can affect its strategic
competitiveness, it must decide whether to compete in all or many global markets, or to
focus on a particular region or regions. Competing in all markets provides economies
that can be achieved because of the combined market size. By competing in risky
emerging markets, higher performance can result. However, a firm that competes in
industries where the international markets differ greatly (in which it must employ a
multidomestic strategy) may wish to narrow its focus to a particular region of the world.
In so doing, it can better understand the cultures, legal and social norms, and other factors
that are important for effective competition in those markets.
By choosing a region of the world where the markets are more similar and some
coordination and sharing of resources would be possible, the firm may be able not only to
better understand the markets in which it competes, but also to achieve some economies,
even though it may have to employ a multidomestic strategy.
Most large retailers are better at focusing on a particular region rather than being truly
globa1. Successful companies commonly focus much of their international market
entries into countries adjacent to their home country, which might be referred to as their
home region, and then enter regional markets sequentially, beginning in markets with
which they are more familiar. They also introduce their largest and strongest lines of
business into these markets first, followed by their other lines of business once the first
lines achieve success. And they usually continue to invest in the same area as their
original entry location.
Although the transnational strategy is difficult to implement, emphasis on global
efficiency is increasingly important, as more industries begin to experience global
competition. To add to the problem, an increased emphasis on local requirements means
that global goods and services often demand some customization to meet government
regulations within particular countries or to fit customer tastes and preferences. In
addition, most multinational firms desire coordination and sharing of resources across
country markets to hold down costs. Furthermore, some products and industries may be
more suited than others for standardization across country borders.
As a result, some large multinational firms with diverse products employ a multidomestic
strategy with certain product lines and a global strategy with others. Many multinational
firms may require this type of flexibility if they are to be strategically competitive, in part
due to trends that change over time.
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Carrefour in Asia
Although commonalities exist in the Asian markets, the diversity between the countries is
significant. Additionally, Western (or French) ways of doing business differ along several
dimensions, including political, legal and religious considerations. Both country and
local government officials decide which firms to invite into their market and the rules by
which they must abide. In many Asian countries contractual agreements are made with a
handshake, not the formal paper process found in European countries. Third, as seen in
Malaysia, some groups have special food requirements and regulate the handling of food.
Without a doubt, these factors pose major obstacles for non-Asian firms.
Regionalization seems like a logical strategy for Carrefour, given the aforementioned
factors. Although China is in transition, the current structure and history is such that
French and Western approaches to business may not be fully incorporated into todays
business negotiations and decision-making practices.
Although the transnational strategy brings greater challenges, in comparison to the
multidomestic or global choices, it is a good choice, offering the greatest benefits to the
company. The advantages include global efficiency and local responsiveness, which are
two important factors in Asia countries, as integrated networks are endemic and are likely
to result in increased relationships and higher performance.
5. Based on the analysis, what advice can you give Carrefour's management to
improve the company's successful expansion into China? Recommend an
integrated and coordinated set of commitments and actions, which will exploit
the company's core competencies, sustain growth, and ensure maximum
performance and value for shareholders.
Given Carrefours focus on selecting the format best suited to the particular market and
adapting to local needs, the process of scanning, monitoring, forecasting and assessing is
a powerful framework to direct the company's strategic decision-making. Collecting data
for each of these categories will allow for industry and direct competitor comparisons,
and provide data and information for making informed decisions.
Core competencies are based on sustaining a competitive advantage and effectively
managing the value chain. Carrefour's capabilities are valuable, rare, and costly to
imitate. And depending on the geographic market, they are generally nonsubstitutable,
indicating that Carrefour is likely to sustain a competitive advantage with above-average
returns in certain geographic areas, and a temporary competitive advantage with average
to above-average returns in others. (Refer to the above findings in the 1c. Rivalry Table.)
In addition value chain analysis will point to primary (inbound/outbound logistics,
operations, marketing & sales, and service) and secondary (firm infrastructure, human
resources mgmt, technological developments and procurement) activities through which
Carrefour can lower costs and add value for its customers.
The Chinese growth cycle is a mix of slow, fast and standard speeds. Given that
Carrefours competitive advantage is directly related to geographic regions/markets, a
targeted assessment and review of each market-type should also be conducted. As their
business model is valuable, rare, costly to imitate, and somewhat nonsubstitutable, it is
important to recognize the value of within each market condition. Although Carrefour is
somewhat shielded from the competition (despite direct competition from Wal-Mart and
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Carrefour in Asia
other hypermarkets, Aholds 2002 departure suggests some market shifts in Carrefour's
favor), local retailers might become strong alternatives to the low-cost hypermarkets,
especially for a population that values networks and family. Carrefour is in a position to
establish a strong market share to preempt the rise of local competitors, but should keep
its sights on their competitive behavior and strategies to effectively defend against them if
they begin to gain ground.

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