Carrefour Market

Background
A French international hypermarket chain. Headquartered in Levallois-Perret-France. 1-Size, 2-revenue, 3-profits. 11,000 stores. More than 30 countries and areas. Over 495,000 employees (2009).

History
The Carrefour company is created by:
Marcel Fournier Denis Defforey Jacques Defforey

The first Carrefour store opened on 3 June 1957, in suburban Annecy near a crossroads (carrefour in French). The group was created by Marcel Fournier Denis Defforey and Jacques Defforey and grew into a chain from this first sales outlet In 1999 it merged with Promods, known as Continent, one of its major competitors in the French market. The first hypermarket was opened on 15 June 1963 in Sainte-Genevive-desBois, near Paris in France In April 1976, Carrefour launched a private label Produits libres (free products -- libre meaning free in the sense of liberty as opposed to gratis) line of fifty foodstuffs, including oil, biscuits, milk, and pasta, sold in unbranded white packages at substantially lower prices In 1989, Carrefour became the first international retailer to establish a presence in Asia when it entered Taiwan through a joint venture with Uni President Enterprises Corporation In 2007, expansion accelerated outside France, particularly in Asia, with the building of 36 new hypermarkets, including 22 in China - where the Group broke its record for store openings in a one-year period

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Carrefour Group:
It is the world leader in distribution. The Carrefour group currently has over 15,500 stores, either company-operated or franchises. An international retailer With a presence in 35 countries, over 56% of group turnover derives from outside France. Promots the growth of local economies. The Carrefour Groups neighborhood stores, in the heart of French cities Hypermarkets: the appeal of the new (Choice and quality for everyone)

Supermarkets under the Carrefour banner (The prices people want, close to home )

Hard Discount: low prices year-round (Grocery products at low, low prices )

Convenience stores: always attuned to customer needs (Just what you need, right next door )

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The worldwide expansion

The worldwide expansion of Carrefour is the result of a structured approach. Since 1999, the group has drawn on its developments and acquisitions in its various businesses to implement a specific strategy, the so called multi format approach. Over and above the synergies between the formats, this process creates an impetus for international expansion. The establishment of hypermarkets in a particular country makes it possible to put in place the tools and processes necessary for further development (relationships with suppliers, logistics, marketing, etc.). The offer can then be extended progressively by setting up supermarkets and hard discount stores and, when the country is sufficiently mature, convenience stores. The multi format strategy thus leads to growth in global sales, improved purchasing conditions and, of course, an increased market share in the countries concerned. The multi format approach is an essential means of securing market share in the various countries. Carrefour tries to respond to the specific needs and shopping habits of local customers. The multi format approach contributes to the rapid expansion of the group. It enables Carrefour to transfer retail brands, while respecting the development of the trading structure of a town, region or even more common an entire country.

SWOT Analysis
Carrefour distributes groceries and consumer goods in 29 countries through more than 10,000 stores. The company operates primarily in three formats, namely hypermarkets, supermarkets and hard discount stores. As the second largest retailer in the world the company enjoys a strong brand image and economies of scale yet the company has seen stagnating sales in its domestic market of France in the last year.

Strengths
1. Market leader Carrefour is the largest retailer in Europe and the second largest retailer in the world. It is also the largest super-market chain in Europe. The company operates primarily in three formats namely hypermarkets, supermarkets and hard discount stores. The companys 6546 stores include 794 hypermarkets, 1495 supermarkets and 3888 hard discount stores besides 194 convenience stores, 175 cash and carry stores along with some mini markets and food service stores.
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2. Aggressive marketing and adaptable business model Carrefour concentrates on sustainable local development by means of providing professional training to its workforce to cater to the local market. Its retail formats are easily adaptable in its various markets. The company has time and again displayed its ability to adjust its retail formats to suit the dynamics in a particular market, and this, coupled with its aggressive marketing ability, has helped the company grow in new markets. 3. Brand recognition Product positioning is thoroughly planned in each of Carrefours stores and this has ensured good brand recognition in all markets in which it operates. Carrefour operates its stores under 17 banners, including hypermarkets (Carrefour), supermarkets (Champion, GB, GS, Norte), convenience stores (8 Huit, SHOPI, March Plus), hard discount stores (Dia%, Ed), cash-and-carry stores (Promocash), mini markets (PROXi) and food service stores (Prodirest). Besides retailing the branded products of renowned suppliers in its markets, the company sells products under many of its own brands including Destination Saveurs, Firstline, Produit Carrefour, Reflets de France, Topbike, Filire Qualit Carrefour, Carrefour Bio, GB Bio, TEX, Souvenirs du Terroir, GB, GS, Escapade Gourmandes, Neufunk, Boutchou, Cicrone and Dia%. The company can boast of 90% brand recognition rate, with its own branded products accounting for 18% of its worldwide sales. The brand salience for the company is high. 4. Focus on competitive prices In each of its store formats, Carrefour maintains a strong focus on competitive pricing. In the hypermarkets segment, over three quarters of the companys stores offer the lowest or the second lowest prices versus their local competitors. The same is true for the companys supermarkets and discount-stores. During 2004, the company significantly reduced its prices, mainly in dry grocery products. Carrefours continued focus on offering competitive prices to customers has helped the company sustain its leadership position in a highly competitive industry. 5. Increasing cash flow from operations For fiscal year 2004, Carrefours cash flow from operations was E4.2 billion, an increase of 13.1% over 2003. The free cash flow for the company was E1.7 billion, 62.0% higher than 2003. The increase in operating cash flows was primarily attributable to the increase in cash generated from the change in working capital. The companys ability to generate higher cash flows from its operations suggests increasing operational efficiency.
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Weaknesses
1. Stagnant sales in France France, Carrefours largest geographical market, accounted for 49.1% of the total revenues in the fiscal year 2004. However revenues from this market grew by a mere 0.1% during 2004. This is largely as Carrefour has a relatively poor pricing image amongst consumers in France. The company has tried to address this during 2004 by cutting prices in all its stores, especially for dry grocery products. However, the company continues to witness stagnating sales in its domestic market. Carrefours French market share has slipped, hurt by competition from closely held companies such as LeClerc at a time when the French government is pushing retailers to cut prices. 2. Declining profitability The operating profit of the company during fiscal 2004 was E4.9 billion, an increase of 0.9% over fiscal 2003. Net profit was E1.4 billion during fiscal year 2004, a decrease of 14.8% from 2003. The operating margin of Carrefour fell from 6.9% in 2003 to 6.8% in 2004. The net margin of the company has declined from 2.3% in 2003 to 1.9% in 2004. The largest decline in profits was experienced in the companys domestic market, France. The companys ability to invest in further growth is inhibited by declining profits. 3. Losses for Ooshop.com Carrefour operates its online shopping business, Ooshop.com, in both France and Spain. It is estimated that the business has accumulated losses in excess of E17 million, despite sales of more than E50 million. Carrefour intends to sell Ooshop.com. However, the company has declined all offers it had received as it did not believe that the offers reflected the true value of the business. In times when internet shopping is gaining popularity, the companys inability to profitably run Ooshop is a burden on its bottomline.

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Opportunities
1. Strong growth potential in Asia In Asia, Carrefour currently operates only through hypermarkets. Given the high population in Asian countries and growing local demand, there is considerable opportunity to add other formats such as supermarkets and hard discount stores. The companys has large plans to penetrate the growing Chinese market. There is considerable growth opportunity for the company in the Asian region. 2. New stores Carrefour bought 26 stores in Greece from Xinosin in July 2004. T hese included eight supermarkets and 18 convenience stores. The company also acquired 12 hypermarkets in Poland from Ahold in November 2004. In 2005, the company plans to open 15 new hypermarkets in China, seven in Brazil, six in Colombia, five in Indonesia, four in Thailand and three in Poland (in addition to the 12 acquired from Ahold). In total, the company is expected to open 70 hypermarkets, 140 supermarkets, 620 hard discount stores and 275 convenience stores during 2005. These new stores should help the company attract a larger number of customers and thereby boost revenues. 3. Agreements with Coop Atlantique, Hyparlo and Finiper In November 2004, Carrefour reinforced the position of its Ed discount retail chain in France through a franchise agreement with Coop Atlantique. Later, in January 2005, the company strengthened its partnership with the Groupe Hyparlo by taking a 50% stake in Hofidis, the holding company which controls the group. Carrefour continues to retain its 20% direct stake in Hyparlo. Later, in March 2005, Carrefour also announced an agreement where it would become the majority shareholder in its Italian partner Finiper. The company already owns 20% of Finiper and it reached an agreement with Marco Brunelli, the main shareholder in Finiper, whereby Carrefour has an option to buy 31% while Brunelli has an option to sell about 80% of Finiper (which operates 24 hypermarkets in Italy). The new agreements will help Carrefour expand its footprint across Europe, its primary market.

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Threats
1. Stiff competition from discount retailers in France Stifling Government regulation is the main cause of Carrefours troubles in France. In the mid-1990s, the French government passed legislation requiring food wholesalers to offer the same prices to all retailers. The goal was to protect food producers and mom-and-pop stores by preventing big chains from leveraging their size to extract deep discounts from wholesalers, la Wal-Mart. But the law created an opening for discount chains, which skirt the restrictions by stocking private-label brands that arent sold anywhere else. Some of those items are priced 40% below comparable products at Carrefour. Carrefour prides itself on its focus on price competitiveness. However, due to these discount retailers the company is suffering from a poor price image in its domestic market. 2. Increasing labor costs in Europe Europe (including France) is the primary market for Carrefour, accounting for 86.4% of the companys revenues. The market has been witnessing an increase in labor costs. During the year ended September 2004, average labor costs in Europe had increased by 2.4%. An increase in labor costs in its most significant market can adversely impact Carrefours bottomline. 3. Poor retailing outlook in the Eurozone Month-on-month sales and profits at Eurozone retailers have been continuously falling during the second half of 2004 and the first two months of 2005. A further fall in Eurozone retailers profit margins was witnessed for the tenth consecutive month in February 2005. Retail chains have had to offer discounts and other promotions in an attempt to revive flagging sales, undermining their margins in the process. Increased purchase prices have also added to the pressure on margins. Average purchase prices in the sector have risen sharply during the seven months in February 2005, driven up by rising raw material prices and higher transport costs. Not only have sales figures for most retailers in the Eurozone declined, they have been below targets for most stores leading to rising inventories. If the trend continues, it could cause a significant dent in the profits of large retailers like Carrefour, for whom Europe is the primary market.

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PRODUCTS AND SERVICES ANALYSIS

The company recorded revenues of E72.7 billion during the fiscal year ended December 2004, an increase of 3.1% over 2003. For the fiscal year 2004, revenues from France, the companys largest geographical market, accounted for 49.1% of the total revenues. Carrefour generates revenues through its four business divisions: hypermarkets (57.9% of total revenues during fiscal 2004), supermarkets (18.3%), hard discount stores (8.1%) and other stores (15.7%).

1. Revenues by Division
During the fiscal year 2004, the hypermarkets division recorded revenues of E42.1 billion, an increase of 1.2% over fiscal 2003. The supermarkets division recorded revenues of E13.3 billion in 2004, an increase of 4.7% over fiscal 2003. The hard discount stores division recorded revenues of E5.9 billion in 2004, an increase of 20.4% over fiscal 2003. The other stores division recorded revenues of E11.4 billion in 2004, an increase of 0.9% over fiscal 2003.

2. Revenues by Geography
France, Carrefours largest geographical market, accounted for 49.1% of the total revenues in the fiscal year 2004. Revenues from France reached E35.7 billion in 2004, an increase of 0.1% over fiscal 2003. Europe (excluding France) accounted for 37.3% of the total revenues. Revenues from Europe (excluding France) reached E27.1 billion in 2004, an increase of 6.3% over fiscal 2003. The Americas accounted for 6.6% of the total revenues. Revenues from the Americas reached E4.8 billion in 2004, an increase of 2.2% over fiscal 2003. Asia accounted for 7.0% of the total revenues. Revenues from Asia reached E5.1 billion in 2004, an increase of 10.0% over fiscal 2003

Corporate level international strategies

Type of corporate strategy selected will have an impact on the selection and implementation of the business-level strategies. Some corporate strategies provide individual country units with flexibility to choose their own strategies Others dictate business-level strategies from the home office and coordinate resource sharing across units

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Three corporate strategies:

1. Multi-domestic strategy 2. Global strategy 3. Transnational strategy 1. Multi-domestic strategy Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets Business units in each country are independent of each other Focus on competition in each market Prominent strategy among European firms due to broad variety of cultures and markets in Europe 2. Global strategy Products and standardized across national markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent Emphasizes economies of scale Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (which also makes it difficult to manage)

3. Transnational strategy Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness Must pursue organizational learning to achieve competitive advantage Nonfood products were later added to Carrefour line of products. In 1963 Carrefour opened its first hypermarket in France outside Paris selling food and nonfood products at discount prices, and providing parking for 450 cars. The high degree of consumer acceptance can be attributed to convenience and price. The hypermarket strategy proved to be very successful and from 1965 and 1971 sales grew in excess of 50% and nonfood items accounted for 40% of total volume. In 1970 new stores were opened with selling area as large as 25,000 sq m. Carrefours strategy was to build its store outside of towns in location where highways provided easy access and land could be acquired very inexpensively. The combination of low-cost land and inexpensive construction gave Carrefour a total investment per square meter of selling space equal to about one third of traditional supermarkets.
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 Another strategy was a decentralized management. Each store manager had high decision-making power to operate their stores, which make decisions faster, more dynamic, and the daily store management more efficient. Plus, manager could customize its store to suit local needs better. The decentralized operations were a key success factor underlying Carrefours national achievements. By 1971 the growth of discounted retail stores face a huge problem in France, 40% of small shopkeepers had disappeared due to the growth of big retailers and small shopkeepers had a significant

Business Challenge
To maintain its leadership in the increasingly competitive retail grocery industry, Carrefour sought to gain more control over its marketing processes and more effectively leverage its business intelligence - with the ultimate aim of strengthening customer loyalty.

Solution
Carrefour teamed with IBM and its partners to put in place a groundbreaking in-store promotion system across its supermarket and hypermarket stores operated entirely by Carrefour - that enables the planning and execution of more targeted campaigns, with more rapid feedback as to their effectiveness.

Done BY:-

Muhammad Mahfouz Al-Zubair

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