RMIT BUSM1227: Carrefour's International Business Operations Analysis

This essay analyzes the international business strategy of Carrefour, a French multinational enterprise (MNE) operating in the food consumer products industry. The analysis begins with a company profile, highlighting its global presence and revenue. It then explores changes in the global econo...Read More

International Business 1
INTERNATIONAL BUSINESS (BUSM1227)
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Table of content
CARREFOUR.................................................................................................................................2
Company Profile..........................................................................................................................2
Changes in the Global Economy.....................................................................................................3
Host country analysis and MNE’s entry strategy............................................................................4
Comparing the national culture of the host country and the home country of your Carrefour.......5
Similarities and/or differences in national cultures impacted your company’s operation in the
host country?................................................................................................................................5
The Concept of Carrefour Company’s entry strategy and its benefits/pitfalls................................7
Alternative actions provided for Carrefour......................................................................................8
Social responsibility and action plans............................................................................................10
References......................................................................................................................................11
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CARREFOUR
Company Profile
Carrefour S.A is a French Multi National Enterprise that operates hypermarkets, supermarkets,
cash and carry stores, retails stores, convenience stores and e-commerce websites among others.
It is a leading food retailer with over 12000 stores all over the world.
Its first shop which was not a hypermarket was opened in the suburbs of Annecy City,
southeastern of France in 1960. Its first hypermarket was opened in June 1963. Before all these,
the Carrefour Group had been created by Jacques Defforey, Denis Defforey and Marcel
Fournier. It was the first group in Europe to open a department store, a large supermarket and a
hypermarket, all under one roof.
The retail outlet has grown ever since and operates in almost 40 countries mainly in Europe, Asia
and a few in Africa and USA. Its headquarters are in Boulogne-Billancourt, France. It currently
has a revenue of $91,955.20 ranking top 100, in the ‘Fortune Global 500’ 2019 list (Global,
2019). It has employed 363,862 workers who work had to make it a consistent global leader in
availing quality food daily, everywhere and at fair prices.
The corporation deals with a range of goods, mainly food products, groceries and general
household essentials such as home appliances, beddings, toiletries and apparel.
Changes in the Global Economy
 Globalization and International Business
 Technology and IB
 Inter-governmental organizations and IB
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 Globalization and International Business
In the early 21st century, globalization has become prominent at a high rate. Retailer companies
mainly from the Western developed countries have saturated their home markets hence they seek
to grow their market places into different nations. This is globalization which gives them access
to huge profits from the new customers and capital available in the global market.
Before a retailer moves to a foreign market, there are a few factors it needs to put into
consideration. Such are challenges like cultural and language differences. Opportunities is
another example where you research feasible markets for your food products (Anand, et al.,
2015). In this case, emerging markets with increasing growth rates, high income areas and vast
population and industrialized regions like China, would be great target markets. Other issues to
consider include best entry and growth strategy in the given market and active branding which
means effective advertising and distribution channels for your products to have a strong visibility
or presence in the new market.
 Technology and IB
In a fast changing retail environment, food and grocery store owners are keeping up by utilizing
technology to ease customer shopping experience and to streamline their trade operations.
Artificial intelligence (A.I) and smart shelf labels are some of the ways they are doing this. A
recent study concluded that in five or so years to come more than half of grocery buyers will be
online shoppers (Crowe, 2018). Shoppers should expect to have a whole new experience
courtesy of evolving technology.
For instance, Walmart is already using autonomous robots to look for items that are out-of-stock,
misplaced or with missing labels. Farmstead, a digital grocer is currently using A.I to calculate
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and estimate number of food orders to source from its local suppliers to avoid waste. Another
example is in the internet domain/spectrum where food stores and other retailers are using social
media platforms to market themselves, to receive orders and customer feedback, and are also
accepting online payment methods such as credit cards, M-Pesa and PayPal (McDunnigan,
2018).
Host country analysis and MNE’s entry strategy
UAE is an important host market of the Carrefour Group with almost a hundred outlets, that is,
hypermarkets and supermarkets combined. It is an active pro-business hub and is recognized
globally as the leading trading and financial center of the Muslim economy (UKESSAYS, 2016).
Comparing the national culture of the host country and
the home country of your Carrefour.
Similarities and/or differences in national cultures impacted your
company’s operation in the host country?
Nation culture can be defined as the general mental programming of persons of a given society
and it varies from one society or nationality to another (Hofstede, 2009). There are three main
cultural theories namely: Hall’s Analtytical Approach, Hofstede’s Cultural Dimensions and
Trompenaar’s Cultural Models. In business, these approaches or models are useful in better
understanding locals from various cultural backgrounds, this aids in working more effectively
with them. However, Hofstede recommends applying a model carefully and treating everyone as
an individual instead of stereotyping.
According to (Najm, 2015), on the basis of Hall’s analytical approach, Arabian culture (UAE
included) has a high context versus short context. This means the Islamic countries are
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characterized by long lasting relationships, verbal agreements and repel change, just to mention a
few. In terms of time, they have a strong polychronism culture meaning that engaging people and
finishing transactions is more important than just adhering to pre-set plans and schedules. In such
cases, people tend to not take appointments so seriously and they also change plans quite
spontaneously. Interestingly, France, the home country of Carrefour is also polychronic and a
fairly high context society, so the company did not have a hard time adjusting in terms of time
aspects. Though, being a huge international firm, it had to do formal written down agreements or
contracts with Majid Al Futtaim (MAF) (Chouhan, 2015).
Based on Hofstede’s analytical approach, UAE has a lower power distance where the less
powerful residents have an overall view of equality in their society. In terms of collectivism it is
a highly collective communal society where people are loyal to groups that take care of them. It
was therefore important for the Carrefour enterprise to understand that family and religious
groups, for instance, are highly regarded in this region and had to be handled carefully. In UAE,
there is high uncertainty avoidance where they have groups that tend to make their situations
remain constant to avoid unwelcome surprises. That is one of the reasons Carrefour had to
penetrate this market through a joint venture with MAF, a retailer that was well known and
trusted by the people. This really helped them gain confidence of the locals. They have a short
term orientation, that is, tradition, social hierarchy and social obligations are valuable aspects to
the residents. It is however a ‘masculine’ nation where people believe in achievements and
standing out. France on the other hand, is the opposite of UAE in all these Hofstede’s scopes.
During their entry, Carrefour therefore had to learn all the dynamics and adjust as fast and
seamlessly as possible in order to appeal to their new consumers.
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Trompenaars also came up with some dimensions to explain cultural differences. UAE for
example are more of a diffusion oriented society than a specific one meaning personal life and
work tend to overlap. Businesses like Carrefour can therefore be advised to establish cordial
relationships first before focusing on business goals. Just like France, UAE has an emotional
culture where people want and are permitted to express their emotions. In such places, it is
recommendable to build trust, develop a positive attitude and body language when dealing with
various stakeholders. Last but not least, France and UAE are ascription oriented cultures. This
means you are addressed according to who you are in society. Power, status and title matter more
than performance. Consequently, when dealing with the residents, use their specific titles where
applicable and people in authority should be respected more so when challenging their logic and
decisions.
The Concept of Carrefour Company’s entry strategy and
its benefits/pitfalls
International businesses can employ various types of entry strategies depending on which best
suits their business model, the host market and the one that offers maximum profits at minimal
risks. Some of these strategies include franchising, direct exporting, licensing, greenfield or
brownfield investments and joint ventures just to mention a few.
After carefully reviewing the UAE laws, Carrefour decided to open its first store there in 1995
through a joint venture with a regional conglomerate, Majid Al Futtaim (MAF), which had years
of retail experience in the Middle East community (Chouhan, 2015). Carrefour chose this entry
strategy to reduce the risk of failure through the advantage of having a trusted partner to seek
aggressive growth. The joint venture adjusted to the market by observing socio cultural norms,
offering discounts to customers in spite of inflation and moving its stores to shopping malls as
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UAE has a strong shopping malls culture (Begum, 2016). Normally, the MNE operates in
freestanding warehouse like buildings.
Other benefits that resulted from this joint venture are as follows. MAF were the owners of some
high traffic malls and other properties which acted as great locations for the MNE stores. MAF’s
ownership rights on these malls also prevented direct competition as other chain markets were
inhibited from operating within the same malls. This was great for business as they gained high
profits and managed to open more shops in UAE and neighboring nations. Carrefour also had the
‘first mover’ advantage over its long time major competitor, Wal-Mart (Bhasin, 2018). Thirdly,
MAF had the ability to identify and pursue opportunities of growth (Saadi, 2018). As a result,
they had operations throughout Middle East which meant that Carrefour could use the same
partnership to expand and set up stores in other Middle East countries. The global corporation
targeted Dubai as its first host country in UAE as it had the highest population, had an amazing
composition of expatriates and residents generally had high living standards. After positioning
itself stably in Dubai, it later used the water fall growth approach or strategy to expand in to the
rest of the six emirates. One stronghold of this firm is seeking aggressive growth and this has
really given it a competitive edge in the global economy.
There were few pitfalls or cons associated with the Carrefour – MAF joint venture. First their
stores, which were situated in the heart or center of Dubai faced some competition from the
smaller individual stores that were operating closer to the consumers.
Also, pricing was a bit of an issue. At the time Carrefour was entering UAE market, Dubai had a
high cost of living and even higher inflation rates. The firm was offering discounts frequently to
attract more clients but it was very difficult due to price fluctuations which affected their profits
negatively (Chouhan, 2015) . Food retail market was particularly competitive and yielded thin
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profit margins prompting the business to maximize on other household commodities such as
toiletries that had higher margins.
Alternative actions provided for Carrefour
First I would reinforce the corporation’s first-mover advantage to minimize competition
pressures and gain a monopoly sort of status. There are three ways to do this. One of them is
technological leadership. In this case I would spearhead intensive research to invent technology
that could offer sustainable cost merits to our firm. The other is consistent preemption of scarce
resources or assets where I would ensure we clinch and maintain as many attractive niches and
spaces (both geographic and product spaces) as possible. Since most markets have room for very
few profitable multinationals, this strategy would discourage entry of subsequent entrants. I
would also emphasize on living up to our clients expectation and satisfaction as a first entrant,
through delivery of quality, prompt services and fair pricing. This would enable the firm to keep
customer loyalty even in the event of late entrants.
Another strategy would be to create specialty foods sections to better cater for the expatriate
audience. Main clientele in UAE is the Islamic community which is a great audience. However,
their culture is quite different from the rest, food culture notwithstanding. For example, they do
not consume pork, their delicacies are heavily spiced, and dates are a common fruit for them, just
to mention a few. Muslims being a majority could cause a firm to overlook the interests of other
shoppers. Hence, I would be keen to research the backgrounds of all shoppers including the
expatriates, and ensure we stock food products that are favorable to all.
Previously, Carrefour has received more complaints from customers, suppliers and even warning
from the government, in several of its host countries. This is in comparison to Wal-Mart, its main
competitor (Jones, et al., 2009). On top of its overall cheaper product prices, I would insist on the
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need to build a rapport and maintain good relations with all our stakeholders. This is very
important for survival of any retailer whether local, regional or international. Besides it would be
bad for it to lose its suppliers and customers that they have worked hard to acquire and such
cases lead to closure of businesses.
Besides, I would focus on long-term plans or development strategies. This would establish
valuable resources that would in turn attain us a competitive advantage. An example is, instead
of launching more and more outlets, I would first facilitate creation of an integrated supplier
network for our sourcing and distribution needs. Another example would be to lay down a more
advanced information system to communicate with suppliers. This would save the company
significant costs. We would also be able to keep track of all communication records and this
would benefit the stock management of the firm in the long run.
Social responsibility and action plans
Based on your understanding of the course topic Stakeholders in International Business
and Responsible Management of MNEs, analyze how socially
(or environmentally) responsible your chosen MNE is and recommend feasible action plans
for the firm to tackle or address relevant social (or environmental) issues.
The objectives of Carrefour’s environmental responsibility strategies are grounded in four main
areas namely: handling wastage, planet biodiversity preservation, supporting Carrefour’s
suppliers and the men and women who make up Carrefour.
In 2017, the chain store finalized an environmental management policy which was based on the
fact that resources are limited and should be used sustainably to reduce environmental and
overall ecological footprint. The policy comprises of several areas of commitment, each with an
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objective, definition and coverage of the objective, clear means of implementation, follow up
procedures and reporting. Some of the focus areas are food and general waste management,
climate change, packaging, organic farming, apiculture and sea food products, and products that
contribute towards minimal or zero deforestation (target products here include paper, palm oil,
Brazilian beef and soy). Each area of commitment is allocated a team or committee that is
responsible and accountable for its implementation.
Carrefour has done an outstanding job in formulating a very viable CSR policy plan that is well
aligned to their business core or strategy. I would advise them to consistently strive to make their
mission on social responsibility a reality through active implementation.
Another thing I would recommend is, besides an integrated strategy that is acted upon on a day
to day basis, Carrefour should consider setting up actual events in their host communities (Jones,
et al., 2009). For instance, they could organize a food festival in a low income location, set up a
community / marine clean up or tree planting day, or even plan a marathon or a soccer game
where people pay a small registration fee and use the money collected to pay hospital bills for
locals who are financially challenged. The management could even go ahead and sponsor bright
students from under-privileged families. This would create a stronger bond between them and
their stakeholders, especially the public, thereby promoting customer loyalty. It would also be a
great means to identify and source for future employees (Ludema & Johnson, 2018).
References
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Jones, P., Comfort, D. & Hillier, D., 2009. Corporate social responsibility: a case study of the top
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