Compare and contrast the strategies of Carrefour and Wal-Mart in the Chinese market
A recent article (Liu Jie, 2008) revealed that restrictions on business numbers, geographical positions and stockholders have been gradually diminished, which can be regarded as a supplement to promises to WTO. As a consequence of market liberalization, foreign retailers have gained rights to compete with domestic companies in Chinese market. Over recent years, Chinese market has appealed the booming entry to external retail chains and has become a fierce competition region for both foreign and internal companies, including Carrefour and Wal-Mart. Carrefour and Wal-Mart are well known worldwide largest retail giants recognized as France and America based companies respectively and are battling for the reputation of being the largest foreign retailer in Chinese market with increasing amount of outlets and sales( Moreau and Raphael ,2008). The purpose of this essay is to compare and contrast tactics of Carrefour and Wal-Mart in Chinese market.
Expansion to Second -tier cities
Having faced saturation of marketplaces in first –tier cities, such as richer coastal districts, both Carrefour and Wal-Mart adopted the strategy in 2007 of expanding their hypermarkets into interior regions in China where market development potential and urbanization trend are highly evaluated(Liu Jie, 2008). For instance, stores of Carrefour in second-tier regions account for almost 40 percent of its entire amount, which illustrates enormous purchasing power in second-tier cities in Chinese market. In addition, Wal-Mart initiated the expansion to less prosperous regions in Nanchang in 2003 and operated the 100th superstore worldwide in central province of Henan in 2006. Hence, it seems that this strategy displays a satisfying growth opportunity for the foreign retailers in Chinese market.
Different from typical domestic operating channel, notably as supermarkets, Carrefour, like Wal-Mart in China selected hypermarket as their format which accommodates consumers to combination of general shopping and entertainment activities. Instead of fragmented channels, the hypermarket format is more concentrated and forms multinational chains (Moreau and Raphael, 2008). As a satisfying consequence, rapid growth of sales in 2002 and 2007 has demonstrated that it is a moderate strategy. This may be influenced by costumers’ changes of consuming habit in urban community preferring wider shops and by increasing amount of private cars. Taking Wal-Mart for example, high percentage of its outlets are located in surrounding areas of cities or towns in which consumers have no necessary to worry about parking facilities. On the other hand, Carrefour simultaneously chose the discount format by starting smaller outlets. However, this multi-format strategy seems inefficient as shortage of customer appeals in private label, which simply obtains lower margins.
Eye on medicine retail
Carrefour and Wal-Mart are similar in that they both have ambitions to expand to non-food commodities for the purpose of generating profits by accelerating their product ranges. The reasons are probably that both of them are retail giants which have economic strength as well as various distribution channels. Both Carrefour and Wal-Mart are concerned with medicine retail business, which is a common phenomenon in Chinese market. Because categories of medicines are merely restricted to over-the –counter(OTC) medicines, they are normally supplying medicines to pharmacies at present(Xin hua 2005). As a consequence, competition will be intensified and market will be further regulated in Chinese market with the entry of foreign hypermarket operators.
Organic expansion versus large-scale acquisitions
As Moreau and Raphael(2008) discussed that Carrefour, like Wal-Mart is continuing its intended expansion strategies in Chinese market and expecting continuing satisfying revenue growth...
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