RETAIL MANAGEMENT

CASE STUDY: The Biggest Supermarket Retailer You Have Never Heard Of

PRESENTED BY :Rajdeep Laha Calcutta Business School PGDM 2010-2012(Term V) Roll No :- 10011 FACULTY :PROF. Sharad Ghai

 What are the advantages and disadvantages of the growth strategies pursued by Ahold, Carrefour, and Walmart?

Answer: The business strategies and growth strategies followed by the retail giant Ahold is totally different to that of Walmart and Carrefour and can be considered as almost opposite to each other in terms of their business plans and policies. The main strategy of Ahold is to maintain a multilocal, multiformat, multichannel aspect of its entire operations throughout the world. Their first and foremost culture is to be a local operating company where their customers perceive them as the local guy. Most of their customers all over the world hardly know that their local retail store belongs to a part of global retail giant. Whereas Walmart and Carrefour have the strategy of maintaining a same global brand throughout the world having the same strategies, style of operations, supply chain and human resource management. They use their names in most of stores all over the world and to that extent they even have identical store layouts throughout the world. While Ahold main business is food retail, Walmart and Carrefour does business in not only in food but also general merchandise. While Ahold follows an inorganic growth strategy mostly through mergers and acquisitions, Walmart and Carrefour have an organic growth strategy by opening their own stores throughout the world. Even if they acquire any organisation they change its name to its own whereas Ahold does not change the name of the local brand. So we see that following two distinctly different strategies the organisations have very successful, while Walmart and Carrefour are the 1st and 3rd largest food retailer in the world, Ahold have manage to become the 2nd largest food retailer. Therefore on the basis of their different strategies we can chalk out certain advantages and disadvantages of both the types which are discussed below. Advantages in Aholds growth strategy: Because of their inorganic growth strategy, their growth is very fast and rapid which provides them with much more quicker returns thus minimising the payback period and the risk is also much lower because they acquire an already running business and ready infrastructure. Their acquisition strategy helps in quicker access to new markets and their holding the local brand name ensures the customer base is intact and thus helps in customer retention. Since they do not change the local name they may not face any difficulties due to cultural differences and diversification and the most of the customers are unaware of the acquisitions. It helps in maintaining their local guy image. Whenever they acquire any organisation they not only acquire its name but also their management style, infrastructure, technology, human resource, the distribution channel etc. So they get all this without paying anything for it. Since they do not change the brand name the marketing activities cost and sales promotion and advertisement cost also turn out to be very low.

Page | 1

 It also helps to bring the best of all the brands under one roof be it in their management style or supply chain or logistics; it helps them by sharing of ideas from different sources. Because of their unique format their product lines and mixes are more flexible catering to the needs of the local customer in much more efficient manner. One of the major advantages of their format is that if any brand or store under them fail or get involved in any sort of scandals only that brand name may have any substantial damage and not the whole holding group because most of the time the customer are unaware of the parent company. Disadvantages in Aholds growth strategy: Most of the investments require a large sum of money because of their acquisitions, they need to shell out a large chunk of money at one go. Since they do not actively promote their brand they do not have any sort of brand awareness or brand recall in the minds of the customers as the customers are not aware of their name even though they are 2nd largest food retailer in the world. There may be some problems in case of acquisitions if the host company feel that the acquisition is not in line with their interest or the employees of that organisation feel that they may be down sized or there may arise any sort of cultural differences The management of the various brands under them may get complicated at times and difficult to manage. Advantages of Walmarts and Carrefours growth strategy: Since they mostly rely on organic growth they have a strong and robust business strategy because it is same all over the world and even if they acquire any company the strategy remains the same. A true and strong global brand in terms of its presence in the minds of the consumers because the consumers are aware of the brand and hence can relate to it. They believe in totally killing the competition by taking away the name of its competitors and thus become the global giant. They follow a uniform work culture all over the world thus ensuring much fairer and transparent management practises. They operate in large economies of scale thus providing the customers with better quality products at much more cheaper rates. Their style of operation is same is all the countries in respect of their infrastructure, technology, supply chain and logistics etc. Disadvantages of Walmarts and Carrefours growth strategy: Because of its organic growth strategy it has a longer payback period and high risk factor whether the business will flourish or not in a new country. They need to create a whole new customer base whenever they venture into an unknown territory and thus adds up to the overall risk factor.

Page | 2

 For creating that customer base they need spend a whole lot of money on marketing activities and on other sales promotion activities and advertisements. They need to create new distribution channels and build a good rapport with the suppliers in order to ensure high quality product at a cheaper rate. Because they maintain a same work culture all over the world they also have to train their staff in accordance with that which would incur a training cost keeping in mind the cultural diversity of a particular area or country. They also may face problems due to cultural differences and diversifications where both the employees and consumers are not comfortable with their organisation work culture. They have big problem of running into huge controversy if a single store anywhere in the world gets involved into any sort of scam or scandal because of the brand name attached to the stores all over the world.

Should Ahold use its name on all of its stores like Walmart and

Carrefour? Why or why not?

Answer: Ahold may or may not use its name on all of its stores like Walmart and Carrefour depending on certain factors. Factors why they should use the brand name: To build the brand image and identity in market by using a common name across all nations with better brand recall and awareness and thus creating a strong global brand It will help them to enhance their market share by increasing the customer loyalty toward the brand and help in creating customer value by customer retention. A global brand will certainly attract more investment from shareholders from all over the world thus adding value to the company. It will help them to enter new markets like India and other emerging markets and create new customer bases and help them in global expansion and market penetration. It will help them to build good customer relationship and attract new employees and customers because of better communication between the brand and the customers. A strong brand name will build trust based relationship with consumers maintaining a constant brand promise throughout the global market. A global brand name may be very useful in segmentation, targeting and positioning techniques. A global brand will present a much fairer and transparent picture of the work culture and management practices followed by the organisation in the minds of the consumers.

Page | 3

 If they use the same brand name all over the world they can even develop their own private label brands

Factors why they should not use the brand name: Aholds main strategy was always to be projected as the local retail store and thats how they wanted their customers to perceive them and that is the main reason that all their acquisitions did not bear their name instead they kept brand name of the existing business. Their current strategy has been very successful till now so why change it now. Their main business model of is based on the idea of Multichannel, Multi-format and Multi-local which helped them in attaining greater customer flexibility in terms of wider product mix and product line and also cater to the localised need of the customer. So changing their strategy might hamper their business model. The emergence of the Ahold as a brand name for all their brands will certainly attract a lot of customer attention because the customers were simply unaware of the brand name creating a lot of confusion in their minds. This might have a positive or negative impact which may harm the overall business growth The emergence of the Ahold as a brand name for all their brands may also a lot of problems due to cultural differences and diversifications because till now which was the customers local brand may suddenly turn into a foreign brand making the customer nervous about the brand. There may also be problems related to different organisational cultures in the minds of the employees as well as the customers. Also simply adopting a new business strategy is itself risky enough because in the first place they have been quite successful using their old tested and tried strategy and there is no guarantee that new strategy will reap positive results.

What are the advantages & disadvantages of Walmarts and Carrefours more centralized decision making compared with Aholds decentralized decision making?

Source: www.tutor2u.net and wikianswers.com

Page | 4

Answer: Advantages of Centralized Decision Making for Walmart & Carrefour: There is uniformity throughout the organisation in managing the store as well as pattern of day to day management is highly standardized thus ensuring there is minimal risk of discontent between various parts of the organization. Due to a single vision and mission of the head of the company, the organization can work towards the goal in a much better way, which would not be possible in a decentralized organization due to individualised goals of each department. Easier to implement common policies and practices for the business as a whole. Prevents other parts of the business from becoming too independent. Easier to co-ordinate and control from the centre e.g. with budgets, plans and policies. Economies of scale and overhead savings easier to achieve. Greater use of specialisation in every aspect. Quicker decision-making (usually) easier to show strong leadership. Disadvantages of Centralized Decision Making for Walmart & Carrefour: Lack of authority down the hierarchy may reduce employee motivation making employees feel alienated or isolated from the management. More bureaucratic often extra layers in the hierarchy. Time for rapid action is extremely slow in this type of system during crisis situations Organizations tend to be rigid, non-flexible and less adaptive to changing times, tastes, and preferences of the customer. Centralized system is a hindrance to open communication within the company Local or junior managers are likely to much closer to customer needs.
Customer service does not benefit from flexibility and speed in local decision-making.

Advantages of Decentralised decision making for Ahold: Relieves the top management from dealing with the mundane day to day issues, so that they can concentrate on the complex strategies that are faced by an organization. Since many of the decisions have to be made by lower level managers, this not only gives them a chance to display their decision-making skills, but also gives them the experience they would have missed in a centralized organization. The increased responsibilities of the lower level managers, increases their enthusiasm for work and should increase employee and staff motivation.

Page | 5

 Decentralization has more scope for diversification making an organization more flexible to minor changes. Decision-making at lower levels for certain problems is better, as the lower level managers have a more in-depth knowledge of the situation, and can hence handle it better as they are more able to respond to local circumstances. Decisions are made closer to the customers ensuring improved level of customer service. Consistent with aiming for a flatter hierarchy. Good way of training and developing junior management.

Disadvantages of Decentralised decision making for Ahold: The plans and policies taken by the company will not be implemented uniformly throughout the organization due to decentralized decision-making which is not necessarily strategic. Lower level managers may make decisions without fully understanding the "big picture." While top level managers typically have less detailed information about local operations than the lower level managers, they usually have more information about the company as a whole and should have a better understanding of the company's strategy. In a truly decentralized organization, there may be a lack of coordination among autonomous managers. This problem can be reduced by clearly defining the company's strategy and communicating it effectively throughout the organization. It becomes more difficult to ensure consistent practices and policies as customers might prefer consistency from location to location. Lower-level managers may have objectives that are different from the objectives of the entire organization. To some degree, this problem can be overcome by designing performance evaluation system that motivates managers to make decisions that are in the best interests of the organization. In a strongly decentralized organization, it may be more difficult to effectively spread innovative ideas. Someone in one part of the organization may have a brilliant idea that would benefit other parts of the organizations, but without strong central direction the idea may not be shared with, and adopted by other parts of the organization. There may be some diseconomies of scale e.g. duplication of roles. Who provides strong leadership when needed (e.g. in a crisis)? Harder to achieve tight financial control risk of cost-overruns.

Page | 6