Carrefour Case Study

Max Wilson

International Business

Case Study: Carrefour

Carrefour

1. What advantages and disadvantages would Carrefour likely have compared to domestic retailers where it operates?

Carrefour, unlike domestic retailers, is an MNE.  To become an MNE the firm must have a certain level of success, at least when speaking about large chains such as Carrefour.  This means there must be a high level of capital involved to support the expansion to other countries where as domestic firms may not have the level of capital support MNE’s can muster.  Another advantage an MNE has over domestic firms is that they can pull talent and resources from wherever they operate as opposed to just in the country where the domestic firm operates.  On the contrary, MNE’s have a harder time breaking into new markets, especially if there are competing domestic firms already established.  Without proper knowledge of the area and customs, MNE’s are at a huge disadvantage to domestic firms because they have to start brand new and establish themselves as equal or better than the homegrown domestic company, which will undoubtedly play up the fact that it is a domestic firm.  Another advantage for a domestic firm that an MNE like Carrefour would have to deal with is supply chain.  It is much easier for a domestic firm to find its resources as it has grown and started in that area already and has the knowledge to find whatever it needs.  MNE’s like Carrefour have to figure out how they are going to get what they need to operate at a high level from scratch.

1. Evaluate the reasons for following a geographic concentration versus diversification strategy as they apply to large retailers such as Carrefour.

For firms like Carrefour, expanding and establishing locations to operate in can be tricky.  Carrefour should follow a geographic concentration strategy as opposed to a diversification strategy for this reason.  When looking at Carrefour, they operate a very specific type of business that has certain requirements in order to be successful.  Carrefour needs a half a million households within a twenty minute drive of their hypermarkets in order for it to sustain profitable business.  This means that locations have to be relatively urban to support such a large store.  Anywhere else and there wouldn’t be enough people to purchase goods, or that there would be too many and no room for the actual store.  Their hypermarkets are 330,000 sq. ft. as opposed to normal supermarkets at 40,000 sq. ft.  Besides needed a specific location to be successful based on size and population, Carrefour has to target a certain type of customer, much like Walmart targets low to mid class. Carrefour is looking for areas that are expanding and improving economically.  A population that is working more and more, creating higher amounts of disposable income and fostering a need for “one stop shopping” is a crucial aspect of Carrefour’s business strategy.  If a diversification strategy were followed, there would be too much room for failure as the needs for Carrefour are so specialized.  Too rich a population and Carrefour isn’t appealing, too poor and Carrefour is out of reach.  If the area is too populated, the stores are too big and people want more specialized stores for ease of access and speed.  On the flipside, if there aren’t enough people around the Carrefour start to step on the toes of local small business’s which are usually supported by communities strongly.