CARREFOUR IN ASIA
Carrefour operates in 29 countries around the world. World population is rising, geographic distribution of populations is shifting, world population is aging rapidly, ethnic mixes in developed countries are changing rapidly, and average household incomes are increasing.
The demographic environment presents both opportunities and threats for Carrefour. Increases in population size and household incomes help to expand the market in which Carrefour operates. However, changes in the geographic distribution of populations, due to technological advances in communications, may cause difficulties for Carrefour in determining profitable locations for new storefronts.
In 2004, there was substantial economic growth due to near-record low interest rates in the United States, resulting in substantial growth in global trade. This growth was tempered by high oil prices.
The economic environment presents both threats and opportunities for Carrefour. Growth in global trade presents opportunities for Carrefour in identifying new products and services to offer to its customers. High oil prices, however, threaten Carrefour’s profitability by increasing the costs of transportation for goods destined for Carrefour’s warehouses and storefronts.
1.3. POLITICAL/ LEGAL
Later on, it worked with financial or industrial partners only when national regulations made it necessary, as in China, Thailand, Malaysia, and Indonesia. Foreign ownership laws in Thailand allowed foreign companies – except American companies - to hold no more than 49 percent of the shares. Carrefour argued that this law would favor its rival, Wal-Mart. When the Central Retail Corp. sold its 40 percent shareholding in 1998, this law made it impossible for Carrefour to purchase the shares.
All products within its stores were “halal” in compliance with prevailing food requirements. Since 1992, foreign participation in retailing had been permitted through joint ventures with Chinese companies. In 1999 China’s central government ruled that foreign companies could not own more than 65 percent of any retailing enterprise in China.
Subsequently, the SETC (State Economic and Trade Commission) threatened to shut down all the stores if Carrefour did not comply with central government regulations. In 2004 China announced that it would honor its pledges to open the booming retail sector to foreign players such as Wal-Mart and Carrefour, abolishing joint-venture requirements before the end of the year. Beijing also promised to end restrictions on the location and number of foreign-owned chain stores.
The company’s aim is to operate 70 hypermarkets in a few years’ time, but political risk remains high in China. Instead, local distributors launched lawsuits against Carrefour as the company opted to purchase directly rather than conform to the long-established distribution channels.
The political/ legal environment presents a threat for Carrefour. The differences in the political/ legal environment across regions make it difficult, and sometimes costly, for Carrefour to comply with government regulations. Political risk in some countries remains comparatively high as does the threat of lawsuits from competitors, distributors, and consumers.
New markets had seen dramatic changes in consumer buying habits, coupled with high growth in per capita GNP, suburbanization, greater participation of women in the labor force, and a large increase in the ownership of cars and refrigerators. The continued growth of suburban communities abroad is another major socio cultural trend. Asian customers still tended to shop daily at wet markets or “mom & pop” stores.
Moreover, impulse buying was on the rise and replacing necessity purchasing. Shopping as a form of leisure was an increasing...
References: Gehlen, C., Jones, N., & Lasserre, P. (2005). Carrefour in Asia. INSEAD.
Hitt, Ireland, Hoskisson. (2008). Strategic Management: Competitiveness and
Globalization (Concepts and Cases). (8th ed.) Mason, OH: Thomson Higher
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