Carrefour India

Introduction

Carrefour is known to be a huge brand-retailer worldwide after Wal-Mart. For several

years the company has been trying to penetrate the Indian retail market because India

is known to possess the largest retail market in the world. India has a massive

population of 1.22 billion and its known to be the second in the world with a population

of over 200 million of people who are middle class and has a continual rise in house

hold (Indiaolinepages.com, 2012). Its GDP rate is about 10 percent, 8 percent

employment and the annual growth rate of the industry is 25 percent . With regards to

that, this makes the Indian’s current market to be lucrative, attractive and pose potential

for big retailers such as Carrefour to enter and invest. However, there are some certain

problems that Carrefour will face when trying to enter the Indian market.

WORKINGS OF CARREFOUR IN JAPAN, CHINA

Despite the fact that Indian retail industry is huge, it is much unorganized and made up

of small stores and housing stores. Often this is would be an advantage for a large

retailer like Carrefour, but the retailer needs to proceed cautiously when trying to initiate

hypermarkets to India‘s culture. Carrefour has gone through a huge failure and success

in some Asian markets before, especially in China & Japan. In japan Carrefour

company failed to adhere to Japanese‘s culture but rather they became completely

ignorant. Baek (2005) noted that, Carrefour japan lacked the inability to grow its

business, could not find space enough in the real estate to build its large stores and had

trust issues with its consumers. As result of this failure, Carrefour incurred costs close to

300 million dollars.

Even though Carrefour failed in Japan it was successful in China. In 1995 Carrefour

managed to enter the Chinese market when the retail sector was opened partially by the

government. (Wrigley 2009, p.50) explained that, “Through localization policy and

government marketing, Carrefour became the largest foreign retailer in China.” The

retailer translated its name into Chinese name and characters which implied the

company s respect toward the local culture thus massive success in China. Furthermore

Carrefour met its consumer‘s needs and knows that people want a company that is

familiar, friendly and does satisfy the local tastes. Also the company does offer its

merchandise through traditional Chinese such as customers pulling fresh produce for

themselves. Another aspect that has contributed to Carrefour‘s success is, its ability to

offer low-cost discounts being the most crucial offer to the price conscious consumers.

KEY ISSSUES THAT AFFECT ENTRY STRATEGY INTO INDIA

Analyzing from the experiences of Japanese and Chinese Asian economies, it would be

wise for Carrefour to consider its failures and success and incorporate them to enter the

Indian market. Therefore Carrefour can enter India with someone who know the culture

and can assist the retailer to get a real estate through joint venture wholesaler. Also the

laws of entering the retail markets should be considered as in India foreign companies

cannot simply enter the market and set up a store anyhow. Huge companies such as

Wal-Mart and Carrefour do offer consumers a wide range of goods at low prices

therefore Carrefour would have to change their way of doing or conducting business if it

starts operating in India. Another major issue that Carrefour might face in India is

terrorism. India is regarded to be one of the most of the terror afflicted countries the

United States. Dale (2009, p.69) Lots of people are often killed during terrorist activities

on yearly basis and these attacks are fueled by poverty therefore, if Carrefour‘s targeted

customers are middle class then it could become targets. If Carrefour enters the Indian

market then it may encounters problems such as inflation, scarce retail space and

terrorism but I perceive the major issue at hand is the law that hinders them and all

other foreign business that are willing to settle up their retailers in India. Looking at the

fact that the whole country is composed of middle class individuals is basically being

denied access to Carrefour. Hence, to enter this market Carrefour should partner up

and operate joint venture only. According to research, there is an indication that Indian

people, particularly young people reckon a wide selection, loyalty programs and easy

access. All these things Carrefour has offers but it cannot do due to limitations of laws

that hinders foreign direct investment in India‘s market.

ENTRY MODE

Several factors need to be considered by Carrefour in the entry process such as market

size and growth, risk, government regulations, local infrastructures, flexibility and

company objectives. Carrefour needs to regard a dynamic entry mode that will assist

them to gain a competitive advantage in India. There are lots of entry modes available

such as internet, licensing, strategic alliances, exporting, international agents and

distributors, joint ventures, overseas manufacturing and international sales subsidiaries.

However, the entry mode used by retailers is often strategic alliances and joint ventures

therefore for Carrefour to enter India will recommend joint ventures as an entry mode.

The reasons being, joint ventures will provide it a chance to reduce the risks during the

period of startup and entry. The retailer would able encounter growth and better

operations within the region because the joint venture partner chosen would be having

experience about the market. Carrefour can be a joint venture with Reliance industries

limited under the Reliance Retail sector which is a conglomerate with lots of experience

in the Indian market and has been ranked 99th in the Fortune Global 500 list of the

biggest companies in the world With such joint venture (Pradhan, 2006).Carrefour will

have to align its market to the Indian market by adjusting their products to meet the

social –cultural norms of the market.

Joint ventures would be appropriate for Carrefour India as the market is protected and

governed by the law (Tschoegl ,2011).For example, the government only allows multi-

brand retailers to penetrate the market through franchise. 51 percent FDI is given to

single brand retailers, cash and carry 100 percent and zero percent is allowed in multi-

brand retail is presently allowed. With this venture, it will allow penetration of protected

markets, it lowers production costs and Carrefour would gain advantage of accessing

markets and distribution with joint venture. Another advantage for Carrefour would be

sharing risk and high research and development costs. Joint venture also allows the

company to keep their company’s affairs separate from other activities of those

involved. Therefore Carrefour can be able to enter Indian and still keep its issues to

itself without the interference of the law. Also the company would be able to build long

term relationship that can benefit them when doing projects. Also entering through joint

venture allows Carrefour to have contact with the local suppliers and the government

officials in India thus easier and smooth operation off the business.

INTERNATIONAL CORPORATE LEVEL STRATEGY

TRANSNATIONAL STRATEGY

(Elsrner & Swoboda, 1212, p.114) stated that, “In Asia, Carrefour still has to achieve

both global efficiency and local responsiveness in the markets.” Due to increased

global competitors they encounter the company has to hold the costs down and also

meet the demand of extremely different set of cultures, local tastes and buying patterns.

Investing in India would require Carrefour to perform cross training for foreign

managers, with local managers to assist in increasing local responsiveness. Carrefour

incorporates both multi-domestic and global strategies thus the use of transnational

strategy does explains why Carrefour has been successful in most cases, despite

Japan when opening new retailers in other countries. As result the strategy would work

well in the process of entering the Indian market since it has been adopted well before.

PEST

ECONOMIC

Economic environment outlines all the threats and opportunities of Carrefour. In 2007

the economy of India has boosted up to U.S1.1 trillion and it was the third largest in the

Asian economies. The nominal GDP capital is also constantly growing at the rate of

$1096. Despite the lower rates of country s average per capital income there is a

continuous growth in the middle and upper classes. Also there is an increase in private

consumption of 8.3 percent in the fourth quarter I the 2007 fiscal year. Even though

Indians are enjoying an uprising prosperity there has been uneven distribution of wealth.

However part of the population amounting 25 percent still live below the poverty line and

the current unemployment rate is 9.8 percent. For the past four decades India had a

high steady fiscal deficit plus the cash deficit has been there for the past 20 years

ranging from 2 percent to 4 percent of its GDP. India has a lower ratio of exports to

GDP amongst the Asian countries and this suggests that India has a low interdependent

ratio. The industry sector comprises of 55 percent GDP from service sector, agricultural

sector accounts 17 percent and industrial sector accounts 28 percent. In terms

employment the agriculture sector offers 52 percent, the service sector contributes 34

percent and industrial sector provides 14 percent of employment.

Technological

Technology is the most crucial aspect of the macro environment and it is the leading

force behind the development of lots available products and services in the market

today. India is effective on the IT sector and software has been the main drive of

businesses and has grown over 50% yearly. Thousands of business are has been

established since 1999 in India and labor has increased therefore Carrefour can take

advantage of that. Skilled labor would contribute to fast and efficient services and thus

increased sales. In India there is a readily available information offered the government

agencies and business consultants therefore carrefour can gahther information on

how to enter the Indian market.

REFERENCE LIST

Baek, J. (2005). The Case of Toys “R” Us and Carrefour in Japan. Journal of Global

Marketing. 18 (1-2), p151-166.

Dale, M. (2009). Religious Suicide in Islamic Asia Anticolonial Terrorism in India,

Indonesia, and the Philippines. Theory, Culture & Society. 32 (3), p64-112.

Elsner. S & Swoboda, P. (2012). Preferences and Performance of International

Strategies in Retail Sectors: An Empirical Study. ScienceDirect. 6 (2), p112-987.

Wrigley, N. (2009). Organizational Challenges and Strategic Responses of Retail TNCs

in Post-WTO-Entry China. Economic Geography. 85 (1), p49-90.

Pradhan, S (2006). Retailing Management 2E. 2nd ed. London: Tata McGraw-Hill

Education. p65-110.

Tschoegl , E. (2011). International Retail Banking as a Strategy: An Assessment.

Journal of International Business Studies,. 18 (2), p67-88.

http://www.indiaonlinepages.com/population/india-current-population.html