Carrefour

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Sebastian Gomez, Xia Xia, Ray Chou, Sam Nora, Ivan Perkovic
Professor Nicholas Imparato
Final Memo
Team 1
Van Ness Cohort

Carrefour Managerial Issues

Introduction

Carrefour as of 2011 is the second largest retailer in the world when it is referred to its sales revenue, and is ranked third in the world when acknowledging the profit of this company. Carrefour is the largest retail hypermarket chain in the world, which has it’s headquartered in Boulogne Billancourt, France.

Problem Statement

Globalization today is the driving force behind many business endeavors. Company’s, in their never ending search for boosting the margins and increasing profits, have realized that one of the best ways to grow is to find new and unexplored markets. That is why over the past decades we have seen a rapid interconnection and interdependence of the economies of the world, meaning the companies of the world. Therefore, this is the very beginning of the many problems that Carrefour faces. In 1995, the company decided to enter the Chinese market. At the time it was immediately apparent that such a move is a risky decision simply because of the legislation, mandated by the Chinese government, that no foreign retailer can own more than 49% of the company, primarily meaning assets, when entering the Chinese market. Years later, China entered the WTO which has changed, but Carrefour’s problems were far deeper. In recent years Carrefour has suffered from rapidly declining market share, along with decrease in profit margin.

Recently Carrefour has been faulted upon fixing prices and discriminating on products, which they sell. Different stores around China have promoted discounted prices in different outlets within the country at prices that were even higher than original prices, and stated these prices as being discounted for. Further, Carrefour participated in fraudulent activities that derived from the fact that the company was trying to create a close relationship with few suppliers by accepting bribes from them so that they can supply their outlet. The Carrefour stores within China suffer a high amount of profit on sales commissions and entrance fees than compared to its other retail competitors, which implies that the supplier has a tense relationship with the retailer. Further relevant problems include severe lack of keeping pace with the industrial standards, primarily in terms of retail technology and market entry operations, all which have taken their toll on the competitive edge of the company, and allowed Carrefour rivals to take over their marketplace in China as well as worldwide. Some critics attribute it to poor management, while some go even further and blame the culture for all the troubles. One thing is certain, Carrefour must undergo heavy restructuring or at least change its current operations if they wish to stay in the Chinese market, and for that matter, remain competitive in the world’s marketplace in general.

Pestle Analysis

In terms of political situation, the same communist party has ruled China for several decades now. Many issues can be found when using the PESTLE approach. Back in 1995, when Carrefour first entered the Chinese market, it was immediately apparent that such a move is a risky decision simply because of the legislation. In 1995, the government set out a policy, which stated that no foreign retailer could own more than 49% of the company, which primarily meant assets. In other words, this ultimately meant that Carrefour’s investment is not quite secure, because opening a company in China means acquiring and investing in assets while at the same time the company is not being the proprietor of the investment it is making.

Additionally, the Chinese government seeks control of every business that lies within the country. Citizens have no freedom of speech to this day, and many entrepreneurs that work within this country say that running a business is similar. The...
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