Carrefour’s Internationalization Strategy
Discuss About The Belgium Internationalize Its Business Taiwan.
In the last five decades Carrefour group has built itself as one of the leading distribution groups across countries. It is the second largest retailer in the world and largest retailer in Europe. Carrefour group has more than fifteen thousand stores around the world and these stores are either company-operated or franchise. Carrefour is one of those early retailer, which expanded and globalized its business into Asian countries. Its first successful investment with expansion was in Taiwan in the year 1989. Since then the company has continuously opened multiple hypermarkets in various Asian nations. The company works with a motto of “We are global, we act local”, as it completely adapts to the country’s culture and environment. This has been the key to the company’s global success through adjusting and adapting its operations and business with its motto (Bell, et al., 2008).
Carrefour is the company that originated and popularized the concept of hypermarket where everything is available at one location, with discount prices, free parking and self-service by customers. Carrefour’s marketing strategy has helped it beat the competition, and its strategy has been to combine low prices of cash and carry store with the supermarket (Lasserre, et al., 2013).
The company’s internationalization strategy has helped it become the second largest retailer in the world after Wal-Mart. Carrefour’s internationalization strategy selects countries on the basis of the country’s market size, compatibility of operations and geographical proximity. Hence, the company first expanded into Belgium, Spain and Italy. Later Carrefour expanded its base in South America into Brazil and Argentina and then to South East Asia, where it first entered into Taiwan, then Malaysia, Thailand and Indonesia and China. The markets of each country has huge difference with the European market in terms of its retail market regulations on the basis of religion, taste and culture. Hence, in a lot of South Asian countries, the company faced huge problems to sustain and build its base for long-term. After incurring huge losses, the company had to change its internationalization strategy and wrap up its business from Hong Kong, Chile, Mexico, Japan, South Korea, Slovakia and Czech Republic. The objective of its new strategy was to keep up with the subsidiaries of first three distributors in a particular market and then the company got cautious with its international operations (Lasserre, et al., 2013).
With the increasing competition with strong players in the similar market and industry segment, Carrefour has to develop itself with effective international strategies that help it strengthen its leadership position in the Asian region. Hence, Carrefour expanded its floor area through acquisitions, opening new stores or through store enlargements. They even changed their prices through offensive price reduction. The company even adapts and builds new format store as required by the specific country. To succeed with this process, Carrefour needs to learn the cultures of Asian country so that they can attract customers in the specific region. With its existing high value brand image, the company is with an advantage to succeed in the Asian countries.
Internationalization strategy in Asian market
Carrefour’s key approach for internationalization strategy has been to adapt to the culture and environment of the respective region where it has plans to expand its base. Flexibility in its operations and strategy has enabled the company attain success in international locations. Comparing the Asian countries where Carrefour extended its services to the western countries, the customers in Asia are more impulsive buyers and are more concerned about the price than the package. When new competitors started entering the emerging markets, they started capturing the market share. Then in Taiwan, Carrefour established a joint venture with the Presidential Enterprise Corporation and followed the strategy of its competitor to offer fresh and full range products to customers at low prices with free parking. Because of various restrictions on the French market, the company had to expand overseas and then gained a lot of internationalization experiences. Post establishing itself in Taiwan, Carrefour opened its stores in Malaysia, followed by China in 1995 and then to Thailand and South Korea. Then the company entered the markets of Singapore, Indonesia, and Japan (Chinomona & Sibanda, 2013).
The company’s internationalization strategies were flexible and adaptable as per the country’s and consumer requirements. But still there were certain factors that raised challenges for the company to sustain in a few Asian markets. The company was still able to sustain itself in a few Asian countries like China, through its internationalization strategy and sustained its position of the second largest retailer in the world. Below is the brief description of its internationalization strategy that helped the company attain success in foreign lands.
Service and marketing strategies – The Company adopted a two stage philosophy in Asia and its base location in order to achieve a stable growth. The first stage enabled smooth operation of the branch stores for maintaining a high turnover. It also involves decentralizing authority for linking it with community development. Hence a new store is set up by Carrefour after location investigation, checking of the store space and purchasing power of the neighbourhood. The second stage involves focusing on the customers, trainings and market channels, through which the service quality is enhanced, innovation is brought about in the products and emphasizes on personnel cultivation. A strategic alliance is also made to build private label products for meeting the objective of a one-stop shopping. Carrefour also automates to centralize the purchases of all stores, order co-ordinations, managing the inventory, and efficient processing of data for better control and decision making.
Service and marketing strategies
The Asian customers do a weekly purchase, for which the company provides a wider shopping space with free parking, and various pricing and promotional strategies along with everyday discounts to keep attracting the customers. To handle the impulsive buying of Asian customers, it does mass-selling with low cost of delivery and a flexible pricing to reflect local market differences (Richard, 2014).
Sourcing Strategies – Carrefour sources most of its products locally and built global procurement centres that are responsible for all the procurement and sourcing. It exploits the economies of scale as well as accommodates the local differences.
Distribution and digitalization strategies – Carrefour in collaboration with Oracle and Sears built a global net exchange, e-commerce system for supply chain. This system helped in electronic transactions in the year 2000. Its website also started to provide banking, foods, touring and services and later the company had plans to invest high for growing its internet business.
Human Resource management strategies – The French people work with a management philosophy of serving customers and be action oriented. Hence, its stores always have people replenishing the stocks and manager taking a thorough round of the store. Carrefour manages its social responsibilities by promoting physical activities, environmental protection activities, takes efforts in collaboration with nonprofit organizations and governments to reduce pollution from the packaging, it uses minimal plastics in packaging.
Promotion strategies – Carrefour’s promotion strategies have been a mix of global standards and local innovative strategies. Its various promotion strategies were credit card strategy or the loyalty card strategy, everyday low cost on selected products or the aggressive pricing strategy, a product promotion week strategy, seasonal strategy, event promotion strategy, private brand promotion strategy (Khanna & Palepu, 2006).
The general strategies applied by Carrefour stresses on humane culture and provides the employees with education, training, incentives, career planning, etc. The company performs local sourcing to cut down on transportation expenses and achieve economies of scale. Always ensures that employees keep replenishing the goods and assist the customers with their requirements. On the other hand, the differences in the strategy of the company in Asia are reflected through, first, it was the first retailer to internationalize in Asian countries, it established maximum possible stores in the big cities of chosen countries for cultivating talents and gaining experience. Second different strategy of Carrefour is to provide a discount on a daily basis for impulsive buyers as compared to its competitors which focus on providing lowest price products. Thirdly, it exploited the localization benefits by relying on the flexibility of local procurement. Carrefour now also applies a mixed strategy like in Taiwan, it developed its own shopping center in commercial and industrial parks or even integrated rented store spaces like departments.
Sourcing Strategies
Different strategies and different motivations work for establishing a business in a foreign country. Different ways for achieving growth in an international location are by integration, through diversification, by acquisition, and by the alliance. Considering Carrefour, it used the geographic diversification strategy or growth. A geographic diversification strategy was applied to ensure growth, reduce marketing and product dependency, to anticipate market’s structural difficulties, and to seize an opportunity that came to it.
Carrefour’s everyday low cost of selected products strategy is its global strategy. But the company selects a product for a discounted price on a particular day on the basis of local factors and it is its local strategy. The coupon system is the company’s global promotion strategy. The company localized approximately 90% of its supply chain to reduce its operational cost and enable offering the lowest possible price to the customers (Colla & Dupuis, 2002).
Carrefour’s global best practices that it applied in Chinese market played a major role in bringing revolutionary changes in the retail industry. It adopted a decentralized management structure which made its store managers run the store with complete freedom. It sells its own branded products in China and the store designs are made in accordance with the Chinese customer habits. Carrefours sells its own branded products under its own policy. Procurement of its private brand products is achieved through getting production done by local manufacturers, gets its merchandise developed at its common buying centre that is in Hong Kong, and it imports its own brand products that are developed worldwide. The local manufacturing of its own brand products helps in providing locally preferences in the wide range of its products.
The marketing mix of Carrefour is very thoughtfully implemented. The price element is taken care of by proposing same or cheaper price than the competitors. It achieves economies of scale though local sourcing and procurement. The place element is taken care of by setting up its stores in big cities. It had its supermarkets in 24 cities of China in the year 2004 with a central purchasing Carrefour in 10 cities. The company’s sales network covered economically developed regions of China. Carrefour made the minimal utilization of the countryside. It makes its presence in the demand areas and where there are its competitors present. The third element of the marketing mix is the promotion, where different methods are applied by the company to promote its product and brand image. Carrefour sets up its website for selling products online as the Chinese people use a lot of internet. It also implemented various promotional schemes with specific low cost products on specific days, discount coupons, etc. The last element of the marketing mix that is the product was taken into consideration by proposing a wide range of products with different pricing. Along with its own brand product, the company also provided other low cos products and known brand products to satisfy customer demands (Lin & Liang, 2014).
Distribution and digitalization strategies
Carrefour applied a lot of internationalization strategies to attain success in each country where it expanded its presence. Carrefour successfully adapted itself to the specific Asian country’s economic culture. Still, the company faced a lot of challenges in the Asian countries, these challenges are in forming alliance partnership and impact of the alliance and partnerships on the store locations, challenges in the distribution and logistics due to under-developed infrastructure, influence of the local culture on supplier relationships, different consumer behaviour and effect of the behaviour on sourcing and procurement, another problem was the immaturity in the technological environment of a few Asian countries that restricted the sharing of information between supply chain partners. Such problems restricted the growth of Carrefour in the Asian market as compared to the local competitors (Zhang & Wei, 2015).
The company used strategic alliances to get an entry into unfamiliar new markets, and once it gained all required local knowledge and got familiar with the market, it developed its new wholly owned subsidiaries to rapidly expand its operations in the country. This strategic approach balances its risk with its ventures and with the low returns it gets from the strategic alliance. As this approach has resulted in success to Carrefour, it is recommended that the company makes use of this approach for entering into other new markets as well (Govindarajan & Gupta, 2002).
Despite of these challenges, Carrefour attained success in the Chinese market because of its knowledge and understanding of local policies of China. In earlier time, the key priority of Chinese government was export which made Carrefour switch its global sourcing strategy from South East Asia to China. This local sourcing strategy helped Carrefour in expanding within the country and gain supportive policies. Also, it focussed on adapting to the local and regional tastes. The company even had good knowledge of the consumer group as it conducted various studies to identify its customers and gained an understanding that most of its customers were from low and medium income urban residents. This resulted the company in implementing a low-cost strategy and shifting its sourcing to China. All these factors helped the company to successfully target its consumer group and gain visibility in the core market (Azuayi, 2016).
Another success factor in the Chinese market for the company has been localization of staff as Carrefour trains large number of managers on annual basis. It also sends its local managers to Europe for attaining knowledge and experience of overseas market. A thorough knowledge of China’s economic policies and local adaptation to various marketing strategies results in Carrefour being a true success story in China. The catalyst of its success can be the local staffing as it also helped the company in achieving sustainable growth in China. Carrefour’s strategy of cross training the expatriates with local managers helped it attain local responsiveness. Along with this most of the business operations in Asia require autonomy than the domestic ones. In the case of Carrefour, there is a combination of global and multi-domestic strategies which helped it get success in entering new countries (Limited, 2010).
Human Resource management strategies
Carrefour was the earliest retailer to enter the South East Asian market in the 1990s. But the later arriving competition extracted its market share. Like Tesco figured out what the consumers required and identified that the Thai shoppers travelled for miles by bus to purchase goods from the big box stores, it opened small stores in the rural areas. While Carrefour’s focus was all on the high spenders of Bangkok and did not shift from its hypermarket format. Now the strategy of Carrefour in Asian market is to sustain in China and Taiwan, get into local partnership in Indonesia (Cao & Jin, 2018).
Conclusion
Carrefour has been successful in positioning itself as a leader in the international retail industry. Their strategies have been successful because, the company has successfully been able to transfer competencies to its managers and employees across locations, they have successfully adapted to local cultures and required taste of consumers. Few of their strategies have even helped them change consumer buying habits and tastes. The company has successfully penetrated new markets aggressively and gained a large market share. Its flexibility in the strategy and operations helps the company to restructure due to legal requirements. Hence, despite of the challenges and problems the company faced at various Asian countries where it had to wrap up its operations, it should not leave or quit the practices that helps it gain success and profit. Carrefour should keep on leveraging its knowledge of international markets and keep expanding across geographies. It should learn from the difficult times of failures and remain vigilant to explore new ways and bring improvement in its operations, products, services and wherever required
References
Azuayi, R., 2016. Internationalization Strategies for Global Companies: A Case Study of Arla Foods, Denmark. Journal of Accounting & Marketing, Available at: https://www.omicsonline.org/open-access/internationalization-strategies-for-global-companies-a-case-study-of-arlafoods-denmark-2168-9601-1000191.php?aid=80434
Bell, D., Salmon, W. & Lal, R., 2008. Globalization of Retailing, Available at: https://www.people.hbs.edu/dbell/globalization_of_retailing.pdf
Cao, L. & Jin, Z., 2018. Business model innovation: How the international retailers rebuild their core business logic in a new host country. International Business Review journal, 27(3), pp. 543-562.
Chinomona, R. & Sibanda, D., 2013. When Global Expansion Meets Local Realities in Retailing: Carrefour’s Glocal Strategies in Taiwan. International Journal of Business and Management, 8(1), pp. 1-16.
Colla, E. & Dupuis, M., 2002. Research and managerial issues on global retail competition: Carrefour/Wal-Mart. International Journal of Retail & Distribution Management, 30(2), pp. 103-111.
Govindarajan, V. & Gupta, A., 2002. Taking Wal-Mart Global: Lessons From Retailing’s Giant, Available at: https://www.strategy-business.com/article/13866?gko=e19cb
Khanna, T. & Palepu, K., 2006. Emerging Giants: Building World-Class Companies in Developing Countries, Available at: https://hbr.org/2006/10/emerging-giants-building-world-class-companies-in-developing-countries
Lasserre, P., Gehlen , C. & Jones, N., 2013. Carrefour in Asia – Fifteen Years of Virtuously Circled Strategy Pay Off, Available at: https://www.managementtoday.co.uk/carrefour-asia-fifteen-years-virtuously-circled-strategy-pay-off/article/548080
Limited, T. E. N., 2010. Exit Carrefour: Carrefour is quitting South-East Asia, Its rivals are waiting to pounce, Available at: https://www.economist.com/node/17101193
Lin, M. & Liang, W., 2014. A Comparative Study of Asia Strategy: Wal-Mart versus Carrefour, Available at: https://pdfs.semanticscholar.org/289a/3a65590db9545554447928c64902345eaf9b.pdf
Richard, Q., 2014. Carrefour: a sucess story in China, Available at: https://moocgloba.skemapedia.com/?tag=carrefour
Zhang, L. & Wei, Y., 2015. Foreign Hypermarket Retailers in China: Spatial Penetration, Local Embeddedness, and Structural Paradox, Available at: https://www.researchgate.net/publication/281672488_Foreign_Hypermarket_Retailers_in_China_Spatial_Penetration_Local_Embeddedness_and_Structural_Paradox
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