Carrefour China Article Analysis

Declaration:
I have done this test to the best of my ability, without using any unfair means .
Name:M.Siddharth Raman

Roll No. WPM14SID

1.
a) Carrefour did some amount of preparation for the Chinese market, by attempting to learn from what they
did in Taiwan. Explain, for each of these, what lessons they took. Illustrate with examples.
(i) Business lessons
(ii) Staffing and people
(iii) Understanding local consumers and consumer taste
(iv) Regional differences
(b) Was Carrefour right in using Taiwan as a market to learn China? Why do you say so?
A1a)
(i) Business Lessons

Ability to adapt to change was a key learning. While Carrefour had large format retail back home in
France, their foray into Taiwan was in a relatively smaller format. This taught them that it was
necessary to adapt to regional needs unlike their competitors who adopted a one size fits all format
across geographies.

Another aspect was the Chinese way of business dealing where a negotiated contract had a very fair
chance of being dishonored. The renegotiations had to be conducted with patience and this also led to
developing skills in uncertainty management.

Development of local business partners as a way of doing business also emanated from their first store
in Taiwan.

(ii) Staffing and people

The greatest advantage Carrefour had when expanding to other markets within China was the
availability of a talent pool. The business in mainland china was developed by a pool of 25 people
from Taiwan who understood the Carrefour and Chinese way of working. This helped Carrefour
establish the much needed local connect.

(iii) Understanding local consumers and consumer tastes

The concept of a fresh market format within a hypermarket had its origin in Carrefour Taiwan. Their
visit to local stores led them to deviate from an established frozen food offering or dead stock offering
to a live counter offering.

(iv) Regional differences

Product offering mix was a learning that Carrefour learnt from their experience in Taiwan. Consumer
electronics for example very diversified across geographies. While high end luxury goods sold in
mainland cities, the middle and western Chinese cities preferred less advanced and less expensive
products.

The same applied to meat products, bakery items and also in selection of local business partners. The
appreciation of the need for regional differences stemmed from their learnings in Taiwan.

A1B)
Though starting business in Taiwan might have had its own disadvantages in terms of a smaller market etc. I
believe their foray into Taiwan as the first market did more good than bad for Carrefour. They would have
started off with a hypermarket similar to the ones back home in France or UK had they forayed into a
mainland city. However, their foray into a smaller market taught them to adapt and handle changes much
better than a tried and tested format.
They also had the advantage to gradually scale up after understanding the business completely. This would
not have been possible in a larger market as they would have had to start with a larger format and hence
managing the learning curve would not have been as smooth.
2. How did Carrefour amend its offering to meet the demands / needs of the Chinese market?

Change in product offering mix was necessary as even in electronic goods, the proportion of
affordable vs luxury products had to be modified between the urban and rural areas. Modifications to
suit local needs became essential.

The meat products segment delivery of seafood had to be adapted to regional tastes. From live
counters near the coast to frozen offerings at inland cities, adaptation was necessary across regions.

Staying ahead of the curve by introducing new products was also necessary. The other retailers were
quick and copying and hence Carrefour had to keep innovating to stay ahead. This was evident in the
way they brought in the bakery segment within the hypermarkets but failed to bring in local products
thereby eroding the first mover advantage.

Continuous customer friendly strategies like introducing loyalty cards and credits for purchase was
also a necessity that Carrefour did not concentrate in other markets.

Employee retention was a major necessity in China as talent building became essential for survival.
Hence, they came up with a training institute with retention and severance terms for the people they
trained. This ensured that they had a healthy pipeline of employees whenever they expanded.

They had to introduce new formats like seven eleven stores, convenience stores etc. and had to do
away with supermarkets which was a staple in their American and French markets.

Co-development by growing with the help of regional business partners which the Chinese market
taught Carrefour.

Their business strategy also has been to concentrate on being the leader in the top 5 cities, be in the
top two in 30 more and leave the rest untouched. Growth has been steady.

Another key learning was to do well with existing logistics as it was not as advanced in the western
nations. Hence, adapting with existing infrastructure was a challenge that they had to surmount in
China.

Finally, Carrefour viewed China as multiple markets rather than as one as they adapted to suit each
and every local need rather than a one size fits all strategy.

3. What does Mr. Chereau mean when he says We (Carrefour) try to be a Quarter Hour ahead of the
customer ?

Mr.Chereau meant that though it was necessary to stay ahead in the learning curve and keep
innovating constantly, the innovations had to be incremental and not exponential.

A case in example was the introduction of wine into the Chinese market. China, not being a traditional
market for wine, was gradually introduced to the concept of consuming wine with food.

The customers were gradually sensitized and educated about the various wines and at the opportune
moment, exposed to wines from across the world.

Had wine been introduced suddenly, it might have met with resistance and a new market segment
could never have been captured.

Hence, even while keeping an eye out for new segments and expanding markets, it was necessary no
to move too far ahead of the customers needs.

4. If Carrefour had to make an impression on the Indian consumer, what would the main areas about the
Indian consumer that they would need to consider and how, in your opinion would these need to be
handled. (Some typical areas to set you thinking : the Indian consumers need for fresh food, the need to
touch and feel produce, the monthly spending pattern , women being the prime target ,purchase behavior
and the influence of the youth, the impact of fashion , fads, segmenting the consumer, store location )
Explain your ideas with examples.

With retail outlets like Pazhamudhirsolai mushrooming in multiple localities, the need for freshness is
evident among Indian customers. Thus Carrefour can have fresh food counters displayed prominently
in their outlets.

The need for touch and feel is understood by comparing the fruits and vegetable sections in
supermarkets vis a vis retail outlets like Pazhamudhirsolai. Turnover of fresh produce is much higher
in retail outlets catering specifically to them rather than in supermarkets where the produce is packed
in plastic wraps. Also, the Indian women still tend to buy produce pushcarts selling vegetables rather
than from supermarkets.

The table below indicates the monthly spending pattern as on 2005 and as predicted during 2025.Its is
evident that there is going to be a decline in food and beverages spending and an increase in
healthcare and communication expenses. Hence, stocking of appropriate products would be necessary.

Indians typically need the stores located within a short distance and hence foreign formats of locating
stores outside the city would be difficult. Availability and rates for large spaces within the city might
prove to be a challenge. However, the store must have sufficient car parks and must be in prominent
places to generate footfalls.

The graph below indicates the demographics of the Indian consumer. The 30-45 age groups constitute
about 25% of the population. Hence, products to target the segment like apparels; electronics etc. have
to be offered with multiple variants. These would typically be the young family working class
professional who would be able to spend more and would want an upgrade into the luxury segment
lifestyle.

The graph below indicates the spending preferences of the women consumer. We can observe that
they take a greater inclination towards offers, impulsive buying and recreational shopping. They also
prefer loyalty programs. Thus, with increasing working women in its demographics, Carrefour would
need to take cognizance of the below patterns while opening a retail outlet.

The table below indicates the private labels by some of the top retailers. It definitely seems to catch on
quite well and Carrefour might be at an advantage to start a private label for apparels.

Finally, organic foods, health & fitness, ethnic wear are some of the fads that are catching on and this
might be the right time to cash in on them.