Case 7 Ahold: The Biggest Supermarket Retailer You Have Never Heard Of
1. What are the advantages and disadvantages of the growth strategies pursued by Ahold, Carrefour, and Wal-Mart?
Global Expansion (1970’s—Spain, Portugal, United States; 1990’s—Central Europe, Latin America, Asia)
Pro: High penetration in U.S. market.
Con: Low penetration in its mother continent.
The profit margin for Ahold’s U.S. division is 5.7 percent, while the profit margin for the European division is only 3.9 percent of sales.
Pro: High international experience. 34 years since the first acquisition in the United Sates, Bi Lo.
Pro: “No other European retailer has been as successful in entering the U.S. market as Ahold.”
Pro: E-commerce. Peapod—one of the first Internet grocers.
Pro: Product expansion. (Grocery store in 1887 to liquor and cosmetic store in 1970’s)
Acquired many consumer brands.
1977—formerly owned Bi Lo, a South Carolina— based grocery store chain operating about 450 stores, Stop & Shop with 320 stores;
1999—U.S. Foodservices, America’s second-largest supplier of ready-made meals, prepared foods, and ingredients to restaurants, hotels, and other institutions; 2000—acquired majority stake in Peapod
Pro: Continuous Growth.
Con: Holds too many brand names. Leads to customer confusion (Stop & Shop; Giant-Landover; Giant-Carlisle; Martin’s; Peapod; etc.)
Wal-Mart & Carrefour
• Global Branding.
✓ Only use one brand name. Avoids confusion. Creates loyalty. • Large discount department store. Attracts more patrons.
• Low penetration in E.U.
← Lack of international experience.
2. Should Ahold use its name on all of its stores like Wal-Mart and Carrefour? Why or why not?
Yes, Ahold should use its own name in all its stores.
• It improves brand awareness of customers.
✓ Brand recall
✓ Brand recognition
• It creates corporate identity.
• Evoke loyalty.
• Increase market share.
• It helps in developing own private label brand. • It helps in penetrating a market.
• Establish corporate consistency.
3. What are the advantages and disadvantages of Wal-Mart’s and Carrefour’s more centralized decision making compared with Ahold’s decentralized decision making?
Ahold’s Decentralized Decision Making
|Advantages |Disadvantages | |Allows organizations to take advantage of division of labor by |Lower-level managers may have objectives that are different | |sharing decision-making across the organization. |from the objectives of the entire organization. For example, | |Empowers employees and allows them to improve their performance by|some managers may be more interested in increasing the sizes | |being able to act to improve deficient or inefficient areas |of their departments than in increasing the profits of the | |immediately without approval from the top of the organization. |company. | |Allows the managers of business areas to actually use their first |There may be a lack of coordination among autonomous | |hand knowledge and experience to improve their areas. |managers. | |Top management is relieved of much day-to-day problem solving and |It may be more difficult to effectively spread innovative | |is left free to concentrate on strategy, on higher level decision |ideas. Someone in one part of the organization may have a | |making, and coordinating...