Analysis of the Business
By Rafael Cruz
Company Snapshot
 Carrefour S.A. is a French retail group
that was founded in 1959.
 Carrefour competes against its rivals on
the basis of price, convenience, and
customer experience.
Company Snapshot
 Carrefour is the second largest retailer in
the world and its aim is “to become the
preferred retailer” in all of its formats:
 Hypermarkets
 Grocery Stores
 Hard Discount Stores
 Convenience Stores
Company Snapshot
Carrefour operates 15,661 stores in 34
countries and had sales of €85.36 billion in
2009.
Sales By Region
Asia
Latin 7%
America
14%
Europe
(excluding
France)
36%
France
43%
PEST Analysis
Political Aspect
 Political unrest in The Middle East is
causing oil prices to increase.
 This could cause product costs and
distribution costs to rise which would
result in decreased profits.
 Developing economies have placed
restrictions on FDI to protect their
domestic retail industries.
 These are both threats to Carrefour.
PEST Analysis
Economic Aspect
 The current devaluation of the Euro will
make FDI and importing more expensive
for European businesses.
 This is a threat to Carrefour.
 The rising Asian middle class accounts for
approximately €3.06 trillion in annual
consumer expenditures.
 This is a potential opportunity for
Carrefour.
PEST Analysis
Social Aspect
 Consumers are more conscience of their
health and the health of the environment.
 This is an opportunity for Carrefour
because it has its own line of organic
foods and it stocks fair trade products.
 Carrefour has also reduced its energy
consumption and the amount of
disposable plastic bags used by 12.8%
and 53.8% respectively.
PEST Analysis
Social Aspect
 The Asian middle class is becoming more
prosperous and as a result has shifted its
diet to include more protein.
 This is a contributing factor to rising
food prices.
 This poses a threat to Carrefour.
PEST Analysis
Technological Aspect
 Social networking sites provide an
opportunity for businesses because they
can be used to increase customer loyalty
to their brand.
 Twitter can be used to inform
customers of special deals at Carrefour
stores.
 Facebook can be used to create a
community for loyal Carrefour
customers.
PEST Analysis
Summary
Factor
Trend
Political
Unrest in The Middle East . Threat
FDI restrictions in developing
economies.
Threat
Economic
Evaluation
The devaluation of the Euro. Threat
The rising Asian middle class. Opportunity
Impact Rank in
(1=low; terms of
5=high) importance
3
3
4
4
1
5
Social
Consumers more conscience
Opportunity
of health and environment.
Change in Asian middle class
Threat
diet.
3
2
Technological
The use of social networking
Opportunity
to increase loyalty
2
4
Industry Analysis
Food Retail
 The global food retail industry had total
revenues of $4.4 billion in 2009 and is
expected to grow to $5.9 billion by the end
of 2014.
 The major players in this industry, in
order of annual revenue, are Walmart,
Carrefour, Tesco, and Metro AG.
Industry Analysis
Power of Suppliers
 Carrefour purchases from a large group
of suppliers.
 This forces the suppliers to compete
against each other giving Carrefour the
ability to negotiate the best price
possible.
The power of the suppliers is low.
Industry Analysis
Power of Buyers
 The preferences of the buyer dictate
what Carrefour must place on its shelves.
 The switching costs for the buyer are
very low.
 Carrefour has a frequent shopper
program in an effort to increase the
switching costs.
 Overall the buyer power is high.
Industry Analysis
Threat of Substitutes
 Restaurants and fast-food establishments
pose a threat to Carrefour.
The convenience of this option makes
it appealing to consumers.
The relative high cost prohibits most
consumers from using this option as a
permanent alternative.
 The threat of substitutes is moderate.
Industry Analysis
Threat of New Entrants
 The barriers to entry are relatively low
for a small food retail shop.
 While these small shops are not able to
compete directly with Carrefour, in large
numbers they do have the ability to
decrease Carrefour’s market share over
time.
 The threat of new entrants is moderate.
Industry Analysis
Intensity of Rivalry
 Due to the low switching costs of the
buyers and the similar product offerings
between the industry rivals, competition is
based mainly on price.
 With rising food costs, efforts to
maintain low prices could put a strain
on profit margins.
 The threat created by the intensity of
rivalry is very high.
Industry Analysis
Summary
Factor
Evaluation
Power of Suppliers
The supplier power is low since Carrefour purchases from several
different suppliers.
Power of Buyers
The buyer power is high due to low switching costs.
Threat of Substitutes
The threat of substitutes is moderate.
Threat of New Entrants
The threat of new entrants is moderate since small specialty
shops can erode Carrefour's market share over time.
Intensity of Rivalry
Intensity of rivalry is very high because competition is based
primarily on price and the consumer switching costs are low.
Conclusions Thus Far
 Rising oil prices pose more of a long term
threat. Carrefour can absorb any losses in
the short term but it will eventually have
to invest in further improvements to its
distribution channel.
 The continued devaluation of the Euro
could have a large impact on Carrefour’s
decision to expand further into
international markets.
Conclusions Thus Far
 Carrefour’s rivals pose the biggest threat
to its business.
 Since competition is based mainly on
price, Carrefour should focus its efforts on
strengthening its brand and building
relationships with customers, thereby
increasing the switching costs for the
customer.
Carrefour’s
Key Competitors
U.S. Retailer
 Targets lower and middle class consumers.
British Retailer
 Targets middle and upper middle class
consumers.
German Retailer
 Targets business consumers as well as
lower and middle class consumers.
Strategic
Business Groups
 In the Food Retail Industry there are five
primary formats:
Hypermarket
Grocery Store
• Large retail
space with a
mix of food
and nonfood items
• Large retail
space selling
primarily
food items
Hard
Discounter
• Small retail
space selling
food items
at a deep
discount
Convenience
Store
• Very small
retail space
with a
limited
selection
Cash & Carry
• Retail space
selling
wholesale
food items
Generic Strategies
of the Competition
Broad
Narrow
Competitive Scope
Competitive Advantage
Low Cost
Higher Cost
Core Competencies
of the Competition
Every Day Low Prices
An efficient distribution system allows them
to be the low price leader.
Customer Experience
One way Tesco enhances customer
experience is through the use of its
Clubcard which allows customers to
accumulate points that can be
redeemed for store vouchers.
Very Strong Cash & Carry Business
Assumptions
of the Competition
 Customers purchase based on
price and therefore want the
lowest price possible.
 Customers will overlook
price if the experience is
enjoyable.
 Product offering must be
expanded to appeal to a broader
market.
Resources
of the Competition
 An extremely efficient
distribution channel as well as
being the #1 retailer in the world.
 A loyal customer base
and the #2 retailer in
terms of profit.
 A strong wholesale arm that gives
it the financial stability to expand
into new markets.
Financial Comparison
of the Competition
Walmart Carrefour Tesco
Annual Revenue (€bn)
Revenue Growth
Net Income (€MM)
Percent International Sales
€
290 €
0.9%
€ 10,187 €
86 €
-1.2%
Metro AG
63 €
5.6%
494 € 2,336 €
66
-3.6%
383
24.7%
21.8%
31.1%
4.5%
Global Market Rank
(revenue)
1
2
4
3
Global Market Rank (profit)
1
3
2
4
Market Breakdown
Food Retail
Customer
Location
Urban
Suburban
Customer
Type
Rural
Individual
Business
Customer
Income Level
Lower
Middle
Affluent
Market Breakdown
 There is a food retail format to appeal to
each type of customer.
Hypermarket
Grocery Store
• Suburban
• Lowermiddle class
and up
• Urban and
Suburban
• Lowermiddle class
and up
Hard
Discounter
• Urban
• Consumers
that do not
have a lot of
money to
spend.
Convenience
Store
• Urban and
Suburban
• Willing to
pay more
Cash & Carry
• Appeals to
the business
to business
market
Brazilian Market
 The food retail market in Brazil is worth
approximately €177 billion and is growing
at a rate of 17.9%.
 Food retail accounts for the majority of
Brazilian retail spending.
 There is a current shift towards non-food
spending that is forcing grocery chains to
carry more non-food items.
Brazilian Market
 Income levels have been steadily
increasing which has resulted in a “new
middle class” (approximately 100 million
people) which is driving retail spending.
 Brazil is considered to be an entry point
to the South American market.
 Brazil will be home to the 2014 World
Cup and the 2016 Olympic Games which
will boost the country’s infrastructure.
Russian Market
 The food retail market in Russia is worth
approximately €222 billion and is growing
at a rate of 20.5%.
The growth rate of household income and
disposable incomes has declined.
 The Russian Middle class is comprised of
roughly 19 million individuals.
Indian Market
 The food retail market in India is worth
approximately €217 billion and is growing at a
rate of 7.7%.
Approximately 140 million Indians earn
€13,000 per year making them middle class.
 The standard of living in India is improving
and the Indian population is becoming
accustomed to western culture.
 The Indian retail market is still not fully open
to foreign competitors.
Chinese Market
 The food retail market in China is worth
approximately €255 billion and is growing at a
rate of 6.8%.
The per capita disposable income in urban areas
has tripled in the last 10 years to approximately
€2,300 which means that approximately 175
million Chinese are considered middle class.
 Living standards have increased leading the
Chinese people to pursue a higher quality of life.
 The Chinese people spend approximately 41%
of their income on food.
BRIC Comparison
Brazil Russia India China
Size of Market (€bn)
€ 177 € 222 € 217 € 255
Market Growth Rate
17.9% 20.5% 7.7% 6.8%
Growing Middle Class
Yes
Yes
Yes
Yes
Market Open to Foreign Competitors Yes
Yes
No
Yes
Population Size (MM)
143
1,170 1,300
191
Social Media
 Social Media can be used by businesses
to increase customer traffic by alerting
customers of special deals in local stores.
 This use of Social Media has become
very popular with the people of Brazil.
Conclusions Thus Far
 Walmart has established itself in the
marketplace as the low price leader and
will be very difficult to compete against on
price alone.
 Tesco has shown that a differentiated
approach is successful in amassing a loyal
following.
 The Cash & Carry arm of Metro AG is
strong enough to support its efforts to
expand into new markets.
Conclusions Thus Far
 Each of the BRIC countries has
experienced tremendous growth over the
past several years and is forecast to
continue to grow steadily.
 Brazil seems to be a very attractive
market since it can be used as an entry
point into the rest of South America.
 Regulations in India still prevent foreign
competitors from entering the retail
market but reforms are underway.
Business Model
Purchasing
• Carrefour
purchases in
large
quantities
and at
reduced
prices from
producers
and
wholesalers.
Distribution
• Carrefour
has an
efficient,
cost saving,
distribution
channel to
distribute
the goods to
its stores.
Retail
• Carrefour
passes the
savings on
to the
consumer in
the form of
lower
prices.
Performance
 While sales have been increasing, profits
have been decreasing since 2007.
 In the past, Carrefour has been known
to maintain prices even though costs
are increasing.
Net Sales (Billions)
Profit (Billions)
90
2.5
85
2
80
1.5
Net Sales
Profit
75
1
70
0.5
65
0
2004
2005
2006
2007
2008
2009
2004
2005
2006
2007
2008
2009
Distribution of Sales By
Format
 Revenue contributions from
hypermarkets and grocery stores has
increased.
 These two store formats comprise the majority of
Carrefour’s retail stores.
Hypermarket
Grocery Store
63.0%
25.0%
62.0%
20.0%
61.0%
60.0%
15.0%
59.0%
58.0%
10.0%
57.0%
56.0%
5.0%
55.0%
54.0%
0.0%
2004
2005
2006
2007
2008
2009
2004
2005
2006
2007
2008
2009
Distribution of Sales By
Format
 The hard discounter segment has seen a
3% increase over the past several years.
 There has been an 11% decrease in the
contribution of convenience and cash &
carry formats.
Hard Discounter
Other
12.0%
18.0%
16.0%
10.0%
14.0%
8.0%
12.0%
10.0%
6.0%
8.0%
4.0%
6.0%
4.0%
2.0%
2.0%
0.0%
0.0%
2004
2005
2006
2007
2008
2009
2004
2005
2006
2007
2008
2009
Distribution of Sales By
Region
 Sales in the European market have been
in decline. The current depressed state of
the economy is a contributing factor.
 69% of Carrefour’s annual sales are generated in
Europe.
France
Europe (excluding France)
52.0%
39.0%
38.5%
38.0%
37.5%
37.0%
36.5%
36.0%
35.5%
35.0%
34.5%
34.0%
50.0%
48.0%
46.0%
44.0%
42.0%
40.0%
38.0%
2004
2005
2006
2007
2008
2009
2004
2005
2006
2007
2008
2009
Distribution of Sales By
Region
 Sales in the South American and Asian
markets have been increasing.
 Growth in these regions is an opportunity for
Carrefour to increase its market share and decrease
its reliance on the European market.
South America
Asia
16.0%
8.0%
14.0%
7.0%
12.0%
6.0%
10.0%
5.0%
8.0%
4.0%
6.0%
3.0%
4.0%
2.0%
2.0%
1.0%
0.0%
0.0%
2004
2005
2006
2007
2008
2009
2004
2005
2006
2007
2008
2009
Key Assets
Assets
2008
2009
%Δ
Goodwill
€11.3B
€11.5B
2%
Fixed Assets
€14.8B
€15B
1%
Investment Properties
Receivables
€346MM €455MM 32%
€2.9B
€2.2B
24%
Cash & Cash Equivalents €5.3B
€3.3B
60%
BCG Matrix
Stars
Question Marks
Cash Cows
Dogs
Market Growth Rate
High
Low
High
Relative Market Share
Low
Value Chain Analysis
 Primary Activities: The two most
important are Marketing and Sales as well
as Service.
 Carrefour is a one-stop-shop for all of the consumer’s
shopping needs but Carrefour is not perceived to have the
lowest price. Providing an excellent customer experience is
how Carrefour maintains market share.
 Secondary Activity: The most important
is procurement.
 Maintaining a relationship with many different suppliers
and negotiating for the lowest price.
SWOT
Strengths
Extensive network of suppliers
Brand is ranked in the top five of
most valuable retail brands
Very successful private label brands
Opportunities
The growing Asian market
The growing South American market
Weaknesses
Not keeping up with competitors'
investment in Brazil.
Losing market share in European market
Threats
The depressed European market
accounts for 69% of revenues.
Consumer preferences are changing
toward smaller local stores.
Generic Strategy
Broad
Narrow
Competitive Scope
Competitive Advantage
Low Cost
Higher Cost
Grand Strategy
 Carrefour aims to be “the preferred retailer” in
all of its formats.
Carrefour will divest from a market when it is not among
the top retailers.
Examples include Mexico, Russia, Japan, and South
Korea.
 Carrefour has been successful in entering
new markets by forming a joint venture
with an existing operator.
This allows Carrefour to gain information on the shopping
habits of the local consumer to ensure a successful store.
Recent Strategic Moves
 Carrefour has been in talks to sell its Dia %
brand as well as its real estate arm.
 This will give Carrefour cash that it can invest in new
markets.
 Carrefour is introducing Planet Carrefour which
is a very large hypermarket that offers customers
services such as cooking classes and snacking
areas.
 Carrefour is trying to gain lost market share by improving
the customer experience.
Conclusions
 Selling the Dia % brand will narrow
Carrefour’s target customer base which
will allow it to better serve its current
customers.
 Expanding further into the Asian and
South American markets will decrease
Carrefour’s reliance on the European
market.
Conclusions
 Carrefour has strong brand recognition in
Brazil which gives it an advantage over its
competition. By investing in its stores,
Carrefour can regain lost market share.
 Asia shows promise for Carrefour.
Carrefour has already had success and
failure in Asia. Carrefour can use what has
worked in past Asian ventures to expand
its current operations.