Competitive Strategies Case Study

Carrefour in China: Savoring the Success

OR

Abstract:

Carrefour, the world’s second biggest retailer from France, initiated the idea of “hyper-market” in 1959, stressing the need for mass-sales, low delivery cost and everyday discount to achieve high sales turnover. The reasons for its phenomenal success throughout the world were the facilities it offered at its hypermarkets such as one-stop shopping, low selling price, freshness, self-service and free parking. By July 2006, it had 8,321 fully owned stores and more than 340 thousand employees worldwide. The sales reached 75 million euros and made it the largest retailer in Europe, the second largest in the world and largest foreign retailer in China. When it decided to enter China, a joint venture with Chinese retailer Lin Hua was formed and the first two stores were opened in Shanghai and Beijing in late 1995 . By October 2006, it operated 83 hypermarkets in 34 cities from Urumqi (in the Western reaches of the Middle Kingdom) to Harbin (near the Russian border) to Kunming (in the South) by 2006. Carrefour also operated the Champion supermarkets and Dia convenience stores. Its 2005 turnover was about 1.7 billion euros (US $2.2 billion) (including value-added tax), making China, Carrefour's fifth-largest market and by June 2006, was reporting a sales of 1259 million euros (US $ 1621 million) in mainland alone. Carrefour expected its sales in China to grow by 25 to 30 % annually over the next five years.

Carrefour planned its expansion based on two facts: growing Chinese retail sales, expected to grow by more than 11% per year to reach 10 trillion Yuan ($1.2 trillion; £680 billion) in 2010 and the increase in middle income households. Carrefour announced that almost half of the 100 planned hypermarkets would be built in Asia, and an average of 23 would be in China each year until 2007, to cater to this growing consumerism. The aggressive strategy was part of Carrefour's decision to strengthen its position in promising markets while abandoning loss making ones, put in place by its president, Jose Luis Duran, from 2005. It savored the success achieved in China by offering quality retailing experience and economy for millions of Chinese. Helping itself to grow among other foreign competitors by implementing ‘Very-Chinese’ qualities in its products, services, merchandising, prices and ambience, Carrefour had truly become a household name among Chinese retailers. It remains to be seen how it would face up to the challenges posed by local retailers who would aggressively compete for growing market share in the world’s fastest growing economy.

Pedagogical Objectives:

• The case anticipates familiarising the students on
• The retailing industry in China and its local players
• Carrefour’s stature in China as the leading foreign retailer
• Carrefour’s entry strategies
• Carrefour’s branding methods to suit Chinese tastes
• Carrefour’s growth strategies, its marketing, service, sourcing and HR policies
• How local retailers competed with Carrefour and what are the plans for future expansion

Keywords : Carrefour China; Carrefour; Retailing Industry in China; Entry strategy of Carrefour in China; Competitive Strategies Case Study; Growth strategy of Carrefour in China; Competition in Chinese Retailing; Challenges to traditional newscast; China Europe International Business School; Hypermarket in China; Gome & Shanghai Brilliance Group; Jean Luc Chereau; Carrefour Quality Line; Carrefour own brand; First line brand; Frenchtouch brand

Contents : 
Carrefour in China: Savoring the Success
China – A Difficult Market
Human Resource Management Strategy
Stores fully owned by Carrefour
Types of Carrefour markets
Political Map of China
Carrefour Hypermarket in China
Development of Brands in China by Carrefour
Growth in China’s Middle class Consumption