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Q. How Carrefour has grown further?
In 1960, Carrefour opened its firstsupermarket in France. In 1963, Carrefour invented a new store concept—the
hypermarket. The hypermarket concept was novel, and revolutionized the way French people did their shopping. It
moved daily shoppingfromsmall stores to enormous stores where customers find everything they want under
one roof, in addition to self-service,discountprice,and free parkingspace.
International development of Carrefour
Year Country and mode of entry No. of
120 57(HM), 63(SM)
1973 Spain 2,241 162(HM), 96(SM), 1,972(HD),
11(CS)1975 Brazil—Carrefour’s first
hypermarket in the Americas
476 162(HM), 39(SM), 267(HD),
1982 Argentina 518 67(HM), 112(SM), 339(HD)
first hypermarket in
1991 Greece 544 31(HM), 209 (SM), 271 (HD),
33(CS)1993 Italy 494 66(HM), 236(SM), 178(CS),
14(C&C)1993 Turkey 578 22(HM), 125(SM), 431(HD)
1994 Malaysia 16 HM
1995 China 443 134(HM), 309(HD)
1996 Thailand 31 HM
1997 Poland 303 78 (HM), 225(SM)
1997 Singapore 2 HM
1998 Colombia 59 HM
1998 Indonesia 43 HM
2000 Japan 0
HM = hypermarkets
SM = supermarkets
HD = hard discountstores
CS = convenience stores
C&C = cash and carry stores
In 1995, Carrefour expanded its European hypermarket concept that ithad originally pioneered decades ago into
Dubai,United Arab Emirates. Followinga cautious country-by-country expansion strategy into Emerging Markets,
Carrefour sawpotential in the Dubai emirate. The emirate had a flourishingretail industry and exhibited strong
fundamentals in its flourishingeconomy. Carrefour’s objectivewas to find a mode of entry that would allowitto
reduce risk of failureand maintainingprofitability,whileoffsetting its longstandingglobal rival Wal -Mart.
Was UAE a favorablecountry to enter?
UAE presented many advantages for companies consideringmarketentry into Dubai in 1995. Despite a small
population relativeto other markets it served, UAE offered an unusual composition of Expatriates and local
residents in an economy with one of the higheststandards of livingand incomein the world. The market was
extremely business friendly with many advantages likezero corporate taxes in conjunction with very few barriers
to trade. It had superior transportation networks,a well-defined legal system, positiveretail conditions,strong
economic growth and low political,and transfer risks.
Carrefour’s mode of entry in UAE:
Carrefour reviewed the UAE laws and determined that a jointventure would be best to minimizethe risk of failure
whilehavinga qualified partner to aggressively seek growth and manage operations.It partnered in a jointventure
with Majid Al Futtaim, a pan-regional conglomeratewith retail experience in the Middle East. The jointventure
adapted to the market by changingthe placeof its stores to the shoppingmall,adapted its food to socio-cultural
norms, promoted mostly non-food items because of higher profitmargins,and was very careful in discounting
amidstinflation.The venture was successful for Carrefour given that it increased the number of stores opened in
Dubai and expanded to nearby countries.Ultimately, Carrefour was successful becauseitdeveloped a FirstMover
Advantage, it thoroughly adapted to the extent that it did not feel foreign to many consumers, and because of
Majid Al Futtaim’s aggressiveness in identifyingand pursuinggrowth opportunities.Carrefour faces two key
problems includingCustomer inconvenience and Dubai’s long-term macroeconomic challenges.To address these
challenges,Carrefour should seek to build new advantages through market positioning,strengthen its FirstMover
Advantage to limitcompetitive pressures,and build up specialty foods sections to better target expatriates.
Carrefour evaluated Dubai’s market benefits and risks aswell as themodes of entry and decided in 1995 to partner
with Majid Al Futtaim (MAF), a company owning and operating mall properties.The firstbenefit was that MAF
owned the high-traffic malls and properties thatwould be perfect for Carrefour’s location.Also,this could prevent
other largehypermarket chains fromentering the same malls,limiting directcompetition.Secondly, MAF had
operations throughout the entire MiddleEast, and this could potentially allowCarrefour to expand to other
countries in the MiddleEast under the same partnership.Thirdly Carrefour preferred Dubai as a firstmarket
because itis the most populated emirate in the UAE; Lastly,MAF had experience in venturing with foreign
retailers,and could handleCarrefour’s operations.By positioningitself correctly in Dubai,Carrefour could then use
the waterfall approach to enter the remainingsix emirates and capitalizeon the risinggrowth of standard of living
in the UAE.
Previous Foreign Entries: Lessons Learned:
Carrefour has a tradition of strongly seekinggrowth, particularly in EmergingMarkets where growth is higher than
in Developed markets. The company pursues a Waterfall Growth Strategy becauseit carefully chooses to expand
after feeling comfortable about success in thetarget market. Yet, despite this cautiousness,the company has had
to withdrawfrom markets where it has not achieved its growth objectives.”
First,in the 1980s Carrefour failed in the United States with only two hypermarkets. Its market entry in
Philadelphia was rough,with union antagonismprotesting the 335,000 squarefoot store and visiblepi cketlines
that bothered existingcustomers.After this difficultexperience,it opened a store in New Jersey in 1992 that was
much smaller and that resembled a warehouse with products that looked likethey originated from a supermarket.
But Carrefour conducted littleadvertisingto bringmore customers into its huge stores. Also,Wal -Martopened a
store nearby and Carrefour finally pulled outof the US. Ultimately, Carrefour lost$80 million on its failed US
expansion.Second, Carrefour failed in Japan becauseof Carrefour’s inability to answer the needs of Japanese
consumers,highlightingthe importance of pre-entry research.In addition,the company tried to enter alonerather
than working with a local partner in a jointventure. Consequently Carrefour sold its stores to the AEON group, a
Japanese retailingchain,to operate its stores under the Carrefour brand name. In addition,Carrefour withdrew
from Hong Kong in 2000 due to the difficulty in transferringthe concept due to the lack of retail spaceand Korea in
2006,largely due to intense competitive practices and poor performance.
Likewise, Carrefour uses both direct ownership as well as jointventures, depending on the market. Specifically,
markets considered difficultby Carrefour tend to be joint ventures.
Carrefour/Majid al Futtaim’s strategy was to adapt to the cultural importanceof shoppingmalls and createa “city
within a city”by being located insidea mall with entertainment centers, cinemas,food courts and other
convenience amenities. Hence, Carrefour decided to placeits stores in bigmalls in Deira City Centre Mall,Mall of
the Emirates, Al Mamzar Century Mall and Bur Dubai - Al Shindagha.Indeed this adaptation differed from
Carrefour’s standard location of a freestandingwarehouse-likebuilding.
The rationalebehind adaptingthe traditional hypermarketwas due to the factthat Dubai has a very strongmall
culture, owing largely to Dubai’s cultural dynamicsand harsh climate.First,the climatein Dubai is often so harsh
that going to the mall is oneof the few options to keep cool and entertained. Second, on a daily basisthe mall
provides an excitingexperience beyond the shopping.In Arab society,socializingwith family is paramount,and
malls provideculturally appropriateentertainment for long periods of time. Duringthe workday, Arab housewives
will often go to malls with their friends to socialize,and bringtheir young children to play with each other at
entertainment centers located on upper floors,whilemen are at work. Men will often go with their friends to
watch movies in cinemas located in the upper levels of the mall,and drink coffee with friends at cafes into the late
hours of the night. During the Friday and Saturday weekend, largeArab families pour into malls and spend many
hours there shopping,taking their kids to arcades,eatingat restaurants,stayingatmall hotels,walkingand
reclining.Despitespendinglong periods of time in the malls,many consumers only expect to window-shop and
leave without buying merchandise.Third, Dubai’s society has adapted to the convenience of being ableto get high
quality consumer goods in one mall.Fourth, Dubai’s society is very young and enamored by the popular brands,
found in malls.For many of these reasons,retailers mustoften accept malls as theplaceto locatetheir stores.
The other benefits of being located in shoppingmalls werethat Carrefour could expect even higher volume of
customers tricklingdown into the Carrefour stores. In addition,there was a largeenough retail spacein Dubai’s
malls for Carrefour to operate. Furthermore, Carrefour maintained its traditional bigsize,given that Majid Al
Futtaim owned two of the malls under consideration.As a result,Carrefour’s Deira City Center store became the
largeststore in Dubai.Nevertheless, by being located in central areas of Dubai,Carrefour had competition with
traditional,small retail stores thatwere located closer to the consumer. The importance of location in Dubai could
not be understated given Dubai’s traffic problems.
Dubai was a very international and diverseEmirate,particularly dueto the largenumber of foreign workers. As
such,Carrefour adapted by accepting foreign credit cards,the currencies of all GCC countries and international
currencies likethe Euro and US dollar.WhileCarrefour implemented bilingual signagein the stores,language and
cultural barriers werenot likely problems given that English was so widely spoken and consumers had experience
with Western products.
First,Carrefour had to adaptits merchandiseto the culture. For example, certain food nuances had to be
appreciated,such as the saleof halal food that lacked pork. Second, Carrefour had to adaptto the seasonality of
Dubai’s business cyclegiven that it was customary in Dubai’s culturefor people to take their summer vacations to
escape to cooler destinations.Third,Carrefour had to adaptto Islamic cultural holidayslikeRamadan and Eid,
which would build its peak sales.Duringthese holidays,Carrefour had to account for increased demand and plan
its supply accordingly to not disappointshoppers.Fourth,operating hours in Dubai had to accommodate Dubai’s
workweek from Sunday to Thursday,and the weekend from Friday to Saturday.
Carrefour did not adaptits promotional effort, which consisted of discountingcertain items.Majid Al Futtaim
handled local promotions,and coordinated some of these regionally with its stores throughout the Middle East.
Promotions were placed in printmedia and in-store,to attractmall-walkingtraffic.BecauseDubai was a society
emphasizingthe importanceof social relationship,Carrefour could reasonably expectthat consumers might
discusssomeof the deals.
Promotion was important in Dubai becauseof the high costof livingand high inflation.Dubai’sdemographics were
highly skewed. Around the time of Carrefour’s entry, only 17% of the population consisted of “Local Arabs”in
1998,while 85% were “Expatriate Asians”and 3% were Westerners. The Asian expatriatesegment had the lowest
disposableincome,but was a largesegment and was largely open to buyingWestern electronics and products.
Because of the importance of inflation and thesedemographics,Carrefour’s target segment mostly involved
Carrefour’s priceposition was as a discounter,and used pricingas partof its promotional effort. Because of its
strong brand name, Carrefour did not have to worry about brand dilution due to its discounted products.However,
discountingwas problematic in Dubai where inflation was sky high,and when fluctuations in inflation could erode
profits.Another pricingconcern was the food retail market was most competitive and thus profitmargins were
thin. Carrefour could sell non-foods,household goods and toiletries athigher margins.