International Business Strategy, Metro Cash & Carry

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After building a successful global operation including stores in Russia and China, Metro Cash & Carry (MCC) are struggling to transplant their business model in India.  This demonstrates the importance of local political backing in emerging markets and how a successful model (e.g. a political welcome and direct supply from farm to store) wasn’t followed.  Despite sales growth, expansion in India has been disappointing predominantly because of restrictions in buying directly from farmers and poor PR.

Analysis of MCC competitive advantage

Metro’s success has been built upon its home-grown business model, backed by having an ability to be first to market.  Utilising detailed market research to identify the needs of its customers e.g. catering for small businesses that can’t hold stock and therefore, providing a valuable service with useful opening hours, allowing sole traders the ability to pop in and out as his needs demand and offering ever expanding ranges of goods (rather than simply supplying cheap goods as other businesses-in-a-box have historically done).  This ability to expand products from dry goods to fresh fish and meat to commercial equipment has kept MCC ahead of its competitors. Its market development is based upon growing with the market and adapting quickly to market and cultural trends – expanding rapidly as the market grows.

MCC has developed a level of customer service that has redefined and personalised the otherwise anonymous wholesaler.  Despite not using traditional marketing functions, MCC, through the use of membership cards, has been able to capture customer details and buying habits and uses direct mailing techniques to personalise the way they interface with their customers, almost developing a “club”, thus expanding its market share through the use of data whilst keeping marketing costs low.  Human Resource costs are also kept to a minimum during initial launch by managers adopting a hands-on approach, working in check out if and when needs arise.

Business risk has been spread over many sectors rather than targeting one market (sales to private individuals). Selling to a variety of small and medium companies such as cafes, restaurants and hotels, MCC has protected its cash flow by opting for cash only sales and not providing credit facilities. This further enables the company to react quickly to market trends and to grow organically.  The company isn’t limited to organic growth however, having acquired Makro.

Having been challenged in various court cases, MCC has successfully defended its position as a wholesaler despite many accusations of being a retailer and therefore, being guilty of damaging local businesses.  MCC accepts that, on occasion, some individuals may purchase goods for private consumption, but the percentage of sales is low enough for it to defend its position.

MCC develops loyalty by sourcing locally and developing relationships with all aspects of its supply chain. By fostering local relationships, the company creates efficient supply chains and contributes to a general feeling of goodwill by investing in infrastructure and modernization in the community.

Defending its market position is possible providing the company continues to be first to market and has political support. Competition does develop as MCC enters new markets, but companies like Tesco always seem to lag behind MCCs speed (Bangalore being the possible exception – MCC was there first, but Tesco exploited opportunities better) and fail to market research as thoroughly (a recent example is Tesco’s failure to capture market share in the USA).  Metro keeps its overheads down and its cash flow up – an almost perfect business model and adds to its strength by developing enormous purchasing power via its centralised purchasing group. By constantly surveying its customers through its innovative membership scheme, Metro keeps its product lines current and relevant to its catchment area....
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