Carrefour in asia case analysis

Identify opportunities and threats in the general environments in Asia. You may choose to analyze the general environment country by country or to concentrate on major countries.
Define Carrefour’s international corporate-level strategy in Asia. Explain the rationale.
Complete a comparative analysis of the mode of entry used in each of eight Asian markets where Carrefour competes. Explain its rationale.
3 pages in length single-spaced with one inch margins all around and 12 point time new roman font.

Case 7 Carrefour in Asia Claudia Gehlen, Neil Jones, Philippe Lasserre INSEAD “China represents a huge market and now it has acquired its WTO membership. But there is no easy way to stand out a winner here. China is nearly as big as Europe and all areas differ from each other,” declared Jean-Luc Chereau, president of Carrefour China, at the opening of the first Carrefour store in Urumqi, Xinjiang province. The Urumqi hypermarket was the forty-second to be opened by the company in China where Carrefour was the leading mass retailer, despite mounting competition. History In 2003 Carrefour was the second-largest mass retailer in the world with net sales totaling €70.5 billion (US$84 billion) and net profits of €1.6 billion. It operated 10,378 stores in 29 countries and employed more than 410,000 people. Although primarily known as a hypermarket pioneer, Carrefour also operated supermarkets, hard discounts and other formats, such as convenience stores (see Exhibits 1 and 2). Exhibit 1 Carrefour’s Key Figures Employees Sales Area (m2) Annual Sales/m2 in Euros 2.3% 410,000 13,207 5,337 1,347 2.0 396,662 9,767 7,037 1,265 1.8 382,821 9,151 7,593 64,802 1,065 1.6 330,247 8,130 7,971 51,948 898 1.7 297,290 6,569 7,908 1998 27,408 647 2.4 132,875 3,721 7,366 1997 25,804 546 2.1 113,289 3,075 8,392 1996 23,615 476 2.0 103,600 2,727 8,660 1995 22,046 539 2.4 102,900 2,378 9,271 1994 20,778 324 1.6 95,900 2,129 9,760 1993 18,708 448 2.4 81,500 1,920 9,744 Year Revenue (in million euros) Net Income (in million euros) 2003 70,486 1,629 2002 68,728 2001 69,486 2000 1999 Net Profit Margin (%) Exhibit 2 Carrefour Formats Worldwide Sales (incl. taxes in million euros) Sales % of Total Sales Area (1000 m2) Sales Incl. Taxes/m2 in Euros 823 51,060 57.60% 6,985 7,310 Supermarkets 2,380 22,592 25.50 3,394 6,656 Hard discounts 4,456 6,692 7.60 1,459 4,586 6,010 Format © Don Hammond/Design Pics/Corbis Hypermarkets Other stores Total Number of Stores 2,718 8,229 9.30 1,369 10,378 88,572 100.00 13,207 Note: Those figures relate to all stores operated under Carrefour’s banner, including the franchises. Source: Carrefour Annual Report, 2003. This case was written by Claudia Gehlen, Research Associate, under the supervision of Neil Jones and Philippe Lasserre, both professors at INSEAD. It is intended to be used a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2005 INSEAD, Singapore. 73 Case 7 • Carrefour in Asia 74 It has always been significantly more international than most of its competitors (see Exhibit 3). Carrefour’s international operations are located in three major geographical zones: Europe and the Middle East, Latin America, and Asia. In 2003, 49 percent of its hypermarket revenues were derived from markets outside France (see Exhibit 4). In Europe and China, Carrefour is the number one retailer in terms of size. Carrefour developed the hypermarket concept of bringing nearly all types of consumer goods under one roof in 1959, when the Defforey and Fournier families created their first hypermarket in the suburbs of Paris. It built a reputation as the retailer that offered the most variety and freshness at low prices. For years its claim to fame was to offer a massive array of quality goods in one place, at reasonable prices rather than bargain-basement value. The retailer operated exclusively in France until the late 1960s before expanding into Spain, where under the name of Pryca, it became the country’s second-largest retailer. It then successfully entered Portugal, Argentina, and Brazil. However, in more mature markets its results were not so conclusive and it had to pull out of the United Kingdom, Switzerland, the United States, and Belgium (although it was later to reenter Switzerland and Belgium).