Carrefour is an international hypermarket chain that originated in the French territory in the year 1957. Right from the time of its foundation, the company has been on an expansion spree and today has its reach throughout the world. The company has a net annual revenue collection of 85.96 billion Euros and a profit of 385 million Euros annually as per 200 figures. It holds the distinction of employing 495,000 employees across the globe. The company has its outlets throughout the world.
Carrefour in UAE :
In 1995, Carrefour expanded its European hypermarket concept that it had originally pioneered decades ago into Dubai,United Arab Emirates. Following a cautious country-by-country expansion strategy into Emerging Markets, Carrefour saw potential in the Dubai emirate. The joint venture by Majid Al Futtaim and Carrefour France has given an expansion to Carrefour outlets in UAE. Some of the major cities which hold Carrefour outlets have been mentioned as follows: (Carrefour-UAE as on2010)
Dubai, Abu Dhabi, Fujairah, Ajman, Ain, Ras Al Khaimah, Sharjah.
Executive Summary :
Currently, the hypermarket chain is being managed by the Majid Al Futtaim (MAF) Group. Also, on account of this ownership, much of the Carrefour hypermarkets are located in the shopping malls of MAF.
Carrefour reputation has been built, above all, on the quality and freshness of the products, customer service and competitive prices.
Carrefour’s Key to Success : Market Orientation
First of all, it is the all-in-one shop that sells everything from bananas to baby strollers at discount prices. As part of its Firm Specific Advantages, it is the global leader in hypermarkets having pioneered the concept, giving it significant advantages among its competitors in operating the concept.
Secondly, it has developed its private label portfolio of products that enables Carrefour to offer lower prices.
Third, it has a very strong brand for quality and value in markets, and as a result has gained global recognition, evident by its number two status as the world leader in the hypermarket segment.
Furthermore, Carrefour had developed significant First Mover Advantages in having been the first to enter into many emerging markets.
Carrefour has proved itself especially adept at entering developing market at an early stage. Carrefour’s approach is usually to establish a chain of hypermarkets and develop a range of own brands, and then introduce its supermarket or discount store formats. This gives Carrefour first-mover advantage in many markets.
World’s second largest retailer.
Most internationalised retailer.
Dominant (top three) position in 17out of 31 markets.
World leader in hypermarkets.
European leader in supermarkets.
World’s sixth largest discounter.
Early mover into many emerging markets.
Strong brand in many markets.
Enviable own-label portfolio.
Has consistently underachieved itsown ambitious growth targets inmany countries.
Failed to live up to pre-mergerexpectations in terms of projectedbenefits.
Still has an unwieldy portfolio of stores in some countries -e.g. Francand Belgium.
E-commerce development has beenlacklustre.
Dearth of localmanagement/expertise in somemarkets.
Organic expansion in existing markets.
Acquisition of vulnerable local players.
Entry into new markets, especially inAsia and South America.
Possible entry into selected Easternand Central European markets.
Launch and expansion of supermarketand discount store operations inmarkets where it already hashypermarkets.
Possible major acquisition in moremature market.
Continuing intensification of competition within more developedmarkets, especially in Europe.
Economic problems in South Americmay lead to downturn in tradingenvironment.
Ambitious international expansionplans of major rivals such as Wal-Mart andTesco.
Greater legislation in emergingmarkets to limit influence of foreign-owned large stores.
Potential hostile takeover due to lowshare price.
The entire growth strategies of any business depends on the implementation and analysis four strategies as suggested by Ansoff – Market Penetration, Market Development, Product Development and Diversifications.
Market Penetration : Market Penetration is the growth strategy which enable the business to focus on the process of selling of the existing products in the existing market. This can be noticed by companies applying cheap pricing policies, Advertising and better customer service promotion. This strategy involves smaller risk when compared to implementation of other strategies.
Market Development : This strategy focuses on the different actions of the business that seeks to sell its existing products in new market. This strategy focuses on extending their services in various parts of the world/ nation. This is a moderate risk strategy.
Product Development : This strategy pertains to growth strategies which aim to introduce new products in existing markets. This is a form of experimentation where companies use their existing brand image to enter into a new product line hence increasing their total revenue. This strategy involves moderate risk.
Diversifications : This strategy is amongst the riskiest of the strategies that a company could ever undergo. The reason for the same is that it talks about entering a new market with the new products. It is almost a combination of the two strategies of product development and market development which we have seen already. This strategy generally comes into play whenever there is a saturation of the market and a company is not getting the types of profits or revenues that it ought to be getting.
Lets discuss the growth strategies of Carrefour based on Ansoff matrix :
As per the analysis of the Ansoff Matrix that we can see from the above explanations, one can assume that if these strategies are implemented analysing the market situation from time to time, Carrefour can increase its revenues hence the profits in all the possible manners whether with current or new products or within current or in new markets.
We have seen that the Carrefour has been undergoing a large degree of advancements when it comes to implementation of the market penetration strategy. The company needs to make sure that it also proceeds similarly or on similar lines of progress to follow the other strategies. The reason for the same is that today is a fast and constantly changing environment. So, it would have to make even more changes or introduce greater diversities in its product range. For example Carrefour lacks in the clothes segment. The company should make it a part of the product development strategy so as to inculcate it in its line of business. There are a number of brands which do not need much of sales strategy, but only a mere display to play the trick for the company. Once, this is done, Carrefour would be better off in terms of its revenue collection. This would become more useful in the rural areas where the concept of one-stop shopping will come into play.
Another aspect where Carrefour needs to revise its strategy is in its pricing model. There are a number of products as mentioned in the hypermarkets which are sold at a price higher than that elsewhere. The company uses its reputation or brand image to make it effective but there are possibilities that the people might not be ready to pay the price. This can be a hindrance in the market penetration strategy where the company looks forward to increase the number of customers. Generally, the new customers would not be able to pay a higher price for the same product that they would have it cheaper at places they were initially purchasing from. This needs to be checked so as to be productive in the long run. Other than this, the company simply needs to continue its market research at constant intervals so as to find the new trends in the market and change accordingly.
Challenges faced by Carrefour in UAE Market :
The Dubai market of Carrefour faces considerable challenges.
First, competition is increasing, particularly in the food segment, which effectively reduces profit margins. While Wal-Mart and Costco are not considering the Middle East, other European hypermarkets are strategically entering the Middle East market.
The second challenge is chronic inflation. Due to rapid growth, high liquidity, high demand, low supply, and a currency peg to the recently declining US dollar, national inflation rates stood at around 13% in 2008, though economists expect actual consumer price inflation in Dubai to be at 20% per year. This inflation erodes revenues and rapidly raises costs of inventory and staffing.
Thirdly, the decline of the dollar versus other currencies can lower the value of revenues when repatriated to foreign countries.
Fourthly, the UAE government has recently implemented more difficult visa regulations. This makes it more difficult to attract skilled Asians and Westerners to help drive the economy’s growth.
Lastly, the region faces political risks from Iran, Iraq and from terrorism.
Promotional plans and marketing strategies to overcome these difficulties and hindrances :
To compete in the Dubai market, Carrefour MAF could follow several courses of action. Each focuses on improving Carrefour’s competitive advantages, market positioning and driving sales.
First, Carrefour could ensure that customers are not leaving its stores due to more convenient specialty stores located closer to customers. To do so, it would need to address the inconveniences coming along with the Carrefour shopping experience, especially related to Dubai’s traffic and transportation inconveniences. Among these are ensuring that there is sufficient parking and taxis as well as an effective traffic flow, especially during weekends and holidays. It could potentially do so by lobbying with the government for the taxi and traffic situation, and Majid Al Futtaim for parking issues because it runs the properties.
Secondly, Carrefour could seek new advantages to solidify position. Among these include positioning Carrefour as the place to go during economic turmoil. The rationale is that by attaching this perception to Carrefour’s brand, it is ensuring that customers associate Carrefour with savings and with rough economic times. In so doing, it can improve its performance in economic downturns. As such, by reinforcing this perception, Carrefour could potentially limit the effectiveness of direct European hypermarket competitors in Dubai like Geant and Union Coop.
Carrefour’s pricing strategy is also helpful in targeting this group because most expatriates work in Dubai to remit money home to their families. So Carrefour could become a great place to save money while not compromising quality. It could even develop to be a great place to buy gifts to send home. This effort could be supported by Word of Mouth promotional strategy, harnessing existing customers to tell their friends about the deals and quality at Carrefour.
Further marketing techniques adhering to Dubai’s cultural imperatives could include discount coupons, a customer loyalty card and a home delivery service to the expatriate segment. Home delivery service may be a viable option for Carrefour because it fits into the cultural context of Dubai. The service could take advantage of the lack of public transportation in Dubai, thus helping it to better reach a broader customer base. Ultimately by targeting the expatriate population, Carrefour could potentially continue to grow and hit the population of Dubai that is not included in the 689,000 citizens.
Choosing Majid Al Futtaim (MAF) was a good idea for Carrefour. It had an appetite for expansion and growth, and aggressively entered into other markets in the Middle East. The choice also prevented direct competition in the same malls owned by MAF. Furthermore, the joint venture’s adaptation to the local market ensured its success, given that many people of Dubai today consider the store as non-foreign and a part of life.