Identification of Symptoms
Already established branded competitors in major cities
Failed acquisition with Seventh Continent
Not in ideal locations
Limited market growth due to antitrust laws (25% market share cap) Expensive warehouse rental space
Bureaucracy and political barriers to entry
Difficult and confusing government regulation
1. Carrefour failed in creating brand recognition and familiarity within Russia. 2. Carrefour did not allow ample time to gain the expected market share in Russia. 3. Carrefour’s first three store locations in Russia were not in ideal areas.
To establish a loyal following of customers and increase market share, Carrefour needed to develop brand recognition within Russia in a very short time. Since the brand was relatively unknown throughout the country and only had three stores by the time it exited, consumers did not have time to understand what Carrefour offered, why Carrefour was different and even recognize the company’s logo. If Carrefour would have been successful in acquiring Seventh Continent, this brand recognition could have been much easier to develop since Seventh Continent already had an established relationship with the local population. In addition, Seventh Continent could have provided Carrefour with the knowledge of domestic business relations (e.g., local vendors and suppliers, local laws, customer preferences), knowledge that would only come from a company who is already successful in that market.
Another problem was Carrefour’s decision to pull out of the Russian market within four months of entering, not allowing ample time to gain market share. From a business perspective, a short-term goal is something that can be measured within 12 months, but Carrefour made the decision to exit Russia after only one quarter of results. This could have been justified if Carrefour did not spend three years performing extensive research on the Russian market and how to be the most successful. The decision to exit the country in such a short time contradicts the research findings and initial business strategy developed from these findings.
From another perspective, Carrefour stating that it was unable to gain market share is an invalid claim. According to the Harvard Business Review, market share is more easily attained on items that are infrequently purchased, not ones that are frequently purchased. Carrefour cited that the first store attracted a majority of food shoppers, specifically people who were looking for bread. “Frequently purchased products are generally low unit-value items such as foods or industrial supplies. The risk in buying from a lesser known, small-share supplier is lower in most cases, so a purchaser can feel free to shop around” (Buzzell). Therefore, the ability to seize market control would certainly take much longer than four months.
A third problem was the Carrefour’s first Russian stores were not in ideal locations. For example, the first location in Filion Shopping Mall was difficult to get to, was not prominently visible within the mall, and catered to lower-income families. While many of Carrefour’s products are targeted to lower-income families, this group does not have disposable income to make larger purchases and become long-term, regular customers that can help increase Carrefour’s market share.
Identification and Evaluation of Alternatives
Problem: Carrefour failed in creating brand recognition and familiarity within Russia.
1. Acquire a local partner (other than Seventh Generation).
Pros: By acquiring a local partner, Carrefour can gain extensive knowledge of domestic business relation. Also, a partner would have an established presence in Russia including different licenses and a local workforce.
Cons: As Carrefour experienced with Seventh Generation, acquiring a local partner can be very risky and expensive. Also, the two business cultures and ideals...
Cited: Buzzell, Robert, Bradley Gale and Ralph Sultan. "Market Share-A Key to Profitability". Harvard Business Review. Jan. 1975. Web. 7 Mar. 2015.
Deresky, Helen. International Management: Managing across Borders and Cultures : Text and Cases. 7th ed. Upper Saddle River, N.J.: Prentice Hall, 2011. Print.
Omair, Muhammad. "Carrefour Misadventure in Russia." Strategic Management (2011). Print.
"Long-Term and Short-Term Goals". Minnesota State Colleges and Universities. 2015. Web. 7 Mar. 2015.
"Retail Chains ' Race for Russia." Knowledge@Wharton. University of Pennsylvania. Web. 17 Mar. 2015.
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