Report: Carrefour's Internationalization in the Asian Market

This report provides an in-depth analysis of Carrefour's internationalization strategy, particularly its expansion into the Asian market. It begins with an executive summary highlighting Carrefour's global presence and early international ventures, including its entry into Taiwan in 1989. The introduction establishes Carrefour's position as a leading global retailer and its adaptation to local cultures. The report then details Carrefour's internationalization strategy, emphasizing its flexibility and adaptation to local markets, particularly in Asia. It explores service, marketing, sourcing, distribution, and human resource management strategies. The report also addresses the challenges Carrefour faced, including competition and market differences. It examines the company's approach to geographic diversification, its global and local marketing strategies, and its localized supply chain. The report concludes by highlighting Carrefour's best practices in the Chinese market, including decentralized management and localized product offerings, providing a comprehensive overview of the company's successes and struggles in the Asian retail landscape.

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Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................3
Internationalization strategy in Asian market............................................................................5
Challenges faced while expanding in the Asian market..........................................................10
Conclusion................................................................................................................................12
References................................................................................................................................13
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Executive Summary
Carrefour is one of the leading French retail store with a global presence. It was started in the
year 1959 with its creation of hypermarkets in 1963. The company opened its first foreign
store in the year 1969 in Belgium and internationalize its business for the first time in
Taiwan, Asia in the year 1989 and further expanded its presence in China and other Asian
locations. It merged with Promodes to create the first European group named Groupe`
Carrefour and became the second global retail group after Wal-Mart. Groupe Carrefour
operates as a multi-group format with five key grocery store formats, namely, supermarket,
hypermarket, hard discount, convenience stores and E-commerce. Carrefour expanded into
major three geographical areas which are, Europe, Latin America and Asia. While expanding
internationally, the company brought in a lot of improvements along with an aggressive price
reduction for attracting new customers.
The emerging market is mostly represented by the Chinese market and considering the
expansion plans and internationalization, Carrefour viewed the Asia-pacific region with high
abilities where the company could increase its activities and revenue. Their expansion plan of
internationalization focussed on a few main emerging markets of Asia, which are the ones
that possessed growth opportunities, required retail structures. As a part of a company’s
marketing strategy, Carrefour increased its number of international stores through price
reduction for strengthening its position. Their key goal is to build up the company’s brand
across the globe. The major challenges faced by the company while expanding globally was
in the Asian market.
The essay provides a brief introduction to the company and analysis its internationalization
strategy when the company decided to expand its base to different geographies including the
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Asian market. The document later covers the various challenges it faced while expanding in
Asia and then provides a conclusion.
Introduction
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
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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.
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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
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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.
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
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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.
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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.
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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).
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Challenges faced while expanding in the Asian market
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
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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).
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
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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.
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References
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http://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),
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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:
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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
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class-companies-in-developing-countries
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Circled Strategy Pay Off, Available at: https://www.managementtoday.co.uk/carrefour-asia-
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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
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Carrefour, Available at:
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