BUSINESS ENVIRONMENT

DR. SANJEEV PRASHAR

CARREFOUR
THEME FOR DISCUSSION
The strategies of large retail chains: There are the following types of retailers by marketing strategy: Department stores - very large stores offering a huge assortment of "soft" and "hard goods; often bear a resemblance to a collection of specialty stores. A retailer of such store carries variety of categories and has broad assortment at average price. They offer considerable customer service. Discount stores - tend to offer a wide array of products and services, but they compete mainly on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands. Supermarkets - sell mostly food products; Warehouse stores - warehouses that offer low-cost, often high-quantity goods piled on pallets or steel shelves; warehouse clubs charge a membership fee; Variety stores - these offer extremely low-cost goods, with limited selection; Demographic - retailers that aim at one particular segment (e.g., highend retailers focusing on wealthy individuals). Mom-And-Pop: is a retail outlet that is owned and operated by individuals. The range of products are very selective and few in numbers. These stores are seen in local community often are familyrun businesses. The square feet area of the store depends on the store holder. Specialty stores: A typical specialty store gives attention to a particular category and provides high level of service to the customers. A pet store that specializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. For example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products in the respective stores. General store - a rural store that supplies the main needs for the local community; Convenience stores: is essentially found in residential areas. They provide limited amount of merchandise at more than average prices with a speedy checkout. This store is ideal for emergency and immediate purchases. Hypermarkets: provides variety and huge volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats. Supermarkets: is a self service store consisting mainly of grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP
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strategy for pricing. The supermarkets can be anywhere between 20,000 and 40,000 square feet (3,700 m2). Example: Carrefour supermarket. Malls: has a range of retail shops at a single outlet. They endow with products, food and entertainment under a roof.

I.

Retail pricing: The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount (or percentage) to the retailer's cost. Another common technique is suggested retail pricing. This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer.

II.

Sales techniques: Behind the scenes at retail, there is another factor at work. Corporations and independent store owners alike are always trying to get the edge on their competitors. One way to do this is to hire a merchandising solutions company to design custom store displays that will attract more customers in a certain demographic. The nation's largest retailers spend millions every year on in-store marketing programs that correspond to seasonal and promotional changes. As products change, so will a retail landscape. Retailers can also use facing techniques to create the look of a perfectly stocked store, even when it is not.

III.

Customer service: Customer service is the "sum of acts and elements that allow consumers to receive what they need or desire from your retail establishment." It is important for a sales associate to greet the customer and make himself available to help the customer find whatever he needs. When a customer enters the store, it is important that the sales associate does everything in his power to make the customer feel welcomed, important, and make sure he leave the store satisfied. Giving the customer full, undivided attention and helping him find what he is looking for will contribute to the customer's satisfaction. Q. 1) What external factors might affect the development of Carrefour in the Indian market? ANS: Two sets of factors lead firms to consider the possibility of operating outside their home market: organizational factors arising from within the firm, and environmental factors which are outside the firms control.
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DR. SANJEEV PRASHAR

Political and legal factors: In India there is a political triangle which consist of the municipal corporation which belongs to congress, the other is MLA which belongs to and BJP and MP which belongs to the national congress. The congress political people are having contacts with common people and not much concerned with merchants but contradictory to this that the BJP they are having more concern about merchants of the city. The mixed reactions of the party and politics lead to provoke the people against any measures of the ruling government if their interests are not met. Socio-cultural factors: Even the middle class has grown in an exponential rate over the years, but not the mentality of the Indian consumers. The display of commodities and openness is sometimes not taken in good note by the customers, specifically in the garments section. Fierce Competition from Local Competitors: The retail arms set up by other Indian industrial groups, like RP Goenkas Spencers and the TatasStar Bazaar, Biyanis Big Bazaar, Aditya Birla Retail have very strong roots in the Indian retail business. Any Foreign Direct Investment in the Retail Business wont be so easy without a strong tie up Partner. Infrastructure: The various impediments on the ground in terms of very high rentals and poor infrastructure may obviously put a dampener to the Carrefours plan of setting business in India. Consumer Buying Behavior pattern: Most people (70 per cent of the consumers) shop at both local grocery shops and supermarkets despite growing inroads of organized retail. India is in the growth phase of retail evolution and though opportunity for modern retailing is in the urban areas, but it will take time for big time retailing and independent sector continues to dominate sales. Complexity of Selling directly to the consumers: Although India allows foreign retailers to sell directly to other retailers or institutions, it bars them from selling to individuals (consumers). Foreign investment is prohibited in multi-brand retailing. The franchise route, where a foreign retailer appoints an Indian firm as a franchisee is one way in which companies such as Carrefour can operate in India. But many of the international retail executives, who came to India to manage its new supermarket chains, handed in their papers and flew home.
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VII.

Public opposition to chain stores: Indian politics has been driving most regulatory reforms to date, and that seems unlikely to change in the next few years. Indias 12 million mom and pop retailers are at the heart of the debate. Domestic and foreign retailers with sweeping plans to set up nationwide chain stores are on one side, small shopkeepers and unions who fear being crushed by these emerging supermarkets are on the other.

Q. 2) What is the strategic aim of Carrefour on the Indian market? ANS: Carrefours strategy in India is aimed at achieving organic, sustained, profitable growth in excess of the broad market growth rate. The recent opening of second wholesale cash and carry store in India demonstrates Carrefours interest which is to develop in major emerging markets which offers a high potential and holds important growth opportunity. Q. 3) What strategies does Carrefour use to achieve its strategic aims? ANS: The strategies used by Carrefour to meet its strategic aim of starting retail operations in India are as follows: I. SUPPLY CHAIN STRATEGIES Carrefour mostly uses 'direct procurement strategy' in the markets it operates. It sources 90-95 per cent of the products on its shelves locally, depending on the country in markets such as Brazil, Argentina, Colombia, Italy and Greece. This helped Carrefour to maintain lower prices compared to other foreign retailers, in international markets. And India is no exception to its strategy. Carrefour currently works with about 90 suppliers/ farmers in Uttar Pradesh, Andhra Pradesh, Delhi, Punjab and Haryana; directly dealing with the farmers for quality production and effective supply chain management. The various products being exported from India include organic clothing, fruits and vegetables to Europe, UAE, Indonesia, Europe, Thailand, Singapore and Malaysia. Carrefour exports goods worth $ 170 million (Rs 782 crore) from India. It also keeps its supply chain very economical and flexible. It uses vehicle from trucks to bikes depending on the need, area to be covered and cost, says a former Carrefour employee. II. DISTRIBUTION CENTRE IN STRATEGIC LOCATIONS It will set up classic distribution centres at strategic locations to cater to its surrounding retail operations. This would require investments in terms of real estate, assets and cold infrastructure, etc., whether directly or indirectly through third parties. Thus, ensuring efficient and fresh supply of food products to consumers.
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III.

LOCALISATION Localization has been the biggest strength of Carrefour in the countries it operates -- from local tie-ups to hiring local executives to run stores, local sourcing to merchandising, they do it well,'' says Purnendu Kumar, associate vice president of Technopak Advisors, a business consultancy. It designs stores and launches private labels to suit Indian consumers and each store runs independently. It hires local people in key positions and keeps the staffing lean. Since their hypermarkets are large, they hire qualified professionals to run it and give them as much freedom as possible, thereby each store manager ends up running a store like a CEO,'' says Hemant Kalbag, partner and vice-president at business consultancy AT Kearney. Each store manager could take decisions depending on the local traditions and customs. Since retail activities are all about contact with people, the group consistently emphasizes local recruitment plus management and staff training on the job wherever they work,'' says the Carrefour group's website. Also, the procurement would be local and across almost all categories, ranging from all kinds of foods, packed or loose, all non-food categories and even from very small business units from different parts of India.

IV.

CASH & CARRY (C&C) OUTLETS Carrefour's cash and carry operations shorten/optimize the supply chain and eliminate the high costs associated with a fragmented supply chain. It also cuts costs and wastages by building modern trade infrastructure and implementing modern IT-based systems, which improves efficiency.

V.

LOGISTICS Carrefour facilitates the development of a modem and refrigerated transportation system through its logistic partners that enables its local partners in small agribusiness, farmers to provide fresh, high-quality products without any distance barrier.

VI.

STORE OPENINGS Decentralization is another key strategy of Carrefour. In China, all foreign retailers followed the centralization policy, with one headquarter controlling the operations of all stores in the country, Carrefour did exactly the opposite. It set up regional offices in each of the Chinese provinces and that office took care of shops in that particular region.

VII.

RESEARCH
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The retail giant is doing its homework well. They have hired a lot of people in the National Capital Region where the staffers' job is just to check the varieties of different products available in the stores of Indian retailers, their pricing and so on. They want to be the best in offering and pricing when they enter'' says a former Carrefour executive who did not want to be quoted. Q.4) What are Carrefours strengths and weaknesses? ANS: Strengths: -- World's second biggest supermarket group by sales - strong brand image -- As a supplier to India's independent sector, Carrefour has access to large customer base -- Good network of distributors -- Early mover into India - as early as 2007 -- Focus on competitive prices/discount prices. Weaknesses: -- Not so much patience as Indians have -- Indians have better understanding of culture, shopping habits of consumers -- Cannot have complete ownership, will have to play according to partner's opinions.

Q.5) What kind of recommendations would help Carrefour to achieve its strategic objectives? ANS: Entering an emerging market like India would require a long-term approach. By patiently considering the right franchise partner in India, Carrefour can limit its risk, particularly given the uncertain legislative environment. This approach fits well with the Carrefour business model to drive profits through long-term brand awareness. Worldwide, Carrefour utilizes localization strategy that focuses on establishment of a comfortable position through a viable local partner. Current trends suggest Indias strongest population growth segment, the middle class, favors global retailers. The right choice of franchise partner will be critical to Carrefours successfully entry into this potentially very lucrative market. Until a suitable franchise partnership has been established, a short-term means to achieving consumer acceptance and brand awareness can be achieved via the cash-and-carry business and an Internet retailing strategy. Carrefour has already opened 2 wholesale cash-and-carry stores in India one in New Delhi and the other one in Jaipur which focuses on sales to
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unorganized smaller independent retailers in the city as well as in the state while an Internet retailing strategy can target the middle-income segments, which are more inclined to favor global retailers. Supplier power can be achieved by utilizing the local farmer cooperatives into a supplier network in order to incorporate local culture and customs into brand identity. India represents a very important emerging market where Carrefour can continue to create value for the consumer and the key to Carrefours success will be finding suitable local partners that are a strategic fit.
SUBMITTED BY: Amitava Manna (11DCP007) Amritanshu Mehra (11DCP008) Ashwath Rao (11DCP015) Ravi Gupta (11DCP038)