Carrefour SA is a French worldwide chain of hypermarkets that has its head quarters in Levallois-Perret in France. Carrefour in the biggest hypermarket chain worldwide size wise and the second biggest retail chain with regards to revenue after Wal-Mart. The supermarket chain has operations in Europe, China, Brazil, Argentina Dominican Republic and Columbia and also has some supermarkets in Asia and North Africa ( Spulber, 2007).
Corporate structure of Carrefour
Carrefour has a hierarchical arrangement with much practical managerial organizational configuration. The arrangement is planned that the Chief Executive Officer is the highest individual in the hierarchy and under him is the Chief Finance Officer (CFO), the Director of Marketing and Merchandise and the Director of Organization and Systems. The Chief Finance Officer exists between the operational divisions. Below the functional divisions are the directors of each specific worldwide zone or region where Carrefour has branches. Just below the director of each zone there is the expanded committee that is comprised of director of particular countries.
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The structure works well for Carrefour, by entrusting to the major operations of large corporation, the capacity to deal with the necessary transactions needed by each division. The structure also permits each function to understand the transactions of other divisions and enable them evaluate better how each division is performing with regard to other divisions. This permits more standardized means of harmonizing the operations of each division, minimizing confusion and overlapping responsibilities.
Carrefour opened it first hypermarket store in Japan in December 2000. The hypermarket was located in the suburbs at Makuhari with a 12 000 square meters of sales space (Spulber, 2007). The hypermarket chain also opened eight more supermarkets chains in Japan in 2003. Carrefour, which controls about 5300 outlets world wide believed that there was enough demand open additional supermarkets in Japan by 2004. After operating eight supermarket in Japan by 2003 Carrefour started to make huge losses and announced its exit out of Japan by 2005 (Duran, 2005). Among the reasons cited for Carrefour exit from Japanese retail market were consumer attitudes of Japanese, not having a Japanese partner, changing fashions in Japan and loss of trust of Carrefour and its brands in Japan. According to, (Goda, 2005), Carrefour decided that it was to sell all its eight hypermarkets in Japan in December, 2004 to a large supermarket chain such as Wal-Mart and Aeon. On the contrary, (Goda, 2005), claims that the reason for Carrefour exit form Japan was due to as a result of poor growth in France. The poor operations in France had been caused by increased rise in casinos discounted stores and decline in hypermarkets therefore affecting Carrefour’s competitive strength. By returning back funds on non-strategic business activities in Japan and other countries, Carrefour had planed to develop its economic standing and better its competitive edge through seriously investing in its operations in China and France.
According to (Taniguchi, 2006), the profits and accounting results for Carrefour were not publicized, although, total sales for the eight stores for 2004, led to a loss of 235.9 million Euros. Goda, (2005), confirms that Carrefour had planned to open 13 new hypermarkets in 2003 in order to counterbalance the loss by increasing sales but failed to open due to lack of space. After seeing no improvement in its profits, Carrefour decided to sell its Japanese assets for 44 billion yen.
Among the factors that forced Carrefour out of Japanese market include; lack of capacity of Carrefour to answer to the requirements of Japanese customers. According to (Goda, 2005), in Western business practices like those of Wal-Mart are driven by large scale marketing within the stores and using huge quantities purchase savings that are created to make possible “Every day low Prices.” Nevertheless, Japanese consumers desire new items and purchase large quantities of items yearly with sales trends bound to vary nearly quickly with great regional differences. Carrefour was not capable of meeting the needs of this market and customer with its capacity during that period.
In addition, in its decline and withdrawal, Carrefour was not capable of extending its business by opening new stores by taking on the Japanese market solely. However, Wal-Mart and Tesco are still competing in Japanese market by joint ventures with Japanese retailers thus gaining assistance in opening operations at existing hypermarkets together with purchasing hypermarket properties. On the contrary, as a result of its decision to decide to do it alone without partnering with any retailer within Japan, Carrefour witnessed problems in seeking for real estate with enough space to erect megastores, and was not capable of attaining its goals of thirteen stores within Japan.
Among other factors that led to Carrefour exit from Japan, was lack of trust by Japanese consumers. According to (Goliath, 2007), after being caught of mislabeling low standard Japanese pork as American high quality produce in March 2004, Carrefour was reprimanded by the Japanese Ministry of Agriculture. To make matters worse, Carrefour was caught in another case in October 2004, in which it was sued with the same authority for selling expired ham products. According to (Goliath, 2007), it was unearthed that the check sheets to verify labeling information had been wrongly filled- which was a shortcoming that could have been dealt with in the earlier occurrence. This resulted to a big drop in trust of Carrefour hypermarkets brands by the Japanese consumers.
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The failure of Carrefour in Japanese retail market was solely as a result of shortcomings in sales, marketing tactics and the quality of management. The supermarket chain also failed to expand as a result of its fall in recognition tastes as compared with other Japanese single stores that provided a wide range of products ranging form fresh meat products to daily products, electronics, clothing and home appliances. In addition, there has been a major shift in buying choices of tough Japanese consumers moving from multi-dimensionally, from hypermarkets that differentiate on products to stores that differentiate in services and from general retail outlets to specialty outlets and form brick and mortar to internet and online shopping. Besides, there has been a major generational change with regards to distribution, whereby General Merchandise Store’s model that used to handle the biggest distribution network of goods in the 1970s and 80s is nowadays being disregarded by Japanese consumers. In the case of Carrefour, Japanese consumers could no longer spend their time and endeavor to shop in supermarkets that do not other advantage rather than one-step expediency shops offer and did not appeal on products.
Carrefour had announced its exit from Japan market and decided to sell its shares to a Japanese largest supermarket retailer Aeon Co, by retaining full rights ton the Carrefour brand in Japan. Carrefour had only entered into Japanese market four years previously with the hope of enticing the Japanese consumers, by providing, more sophisticated image and more worldwide groceries than their customary Japanese stores. Carrefour failed to overcome Japanese and poor spending by Japanese consumers.
Carrefour and Aeon entered into a strategic partnership in Japan in which Carrefour sold eight of its hypermarkets to Aeon representing net sales. The two supermarkets had agreed to enter into a partnership covering the use of Carrefour brand within Japan, Cooperation on selected business ideas and the sale of Carrefour private label in Carrefour hypermarkets within Japan. In addition Aoen will be able to market labels like “Reflets de France” within its branches. According to (Shriver & Humbert, 2005), the goal of Aoen and Carrefour was to develop and make the hypermarket layout stronger in Japan through coalition of the top Japanese retail hypermarket and the second largest world wide retailer. The sale of Carrefour in Japan was part of the programme announced by the Carrefour hypermarket in September 2004 to rid off the non -strategic business activities.
According to (Dawson, 2005), the exit by Carrefour in Japan should not be viewed to be a victory by Japanese distribution methods in a better method than multinationals. Carrefour could have lost the business in Japan, although it is still the second leading retailer worldwide and also presently the most successful competitor in Chinese market. The distribution is currently worldwide and Japanese brands like Aeon and Ito-Yokado are particularly small that are ranked 24th and 25th worldwide when compared to the leading competitors globally in regard to sales. Goda, (2005), maintains that Japanese distributors are lagging behind in development of competencies to facilitate them to become more effective, more universal and develop new markets and new formats. This latest Carrefour development, together with the shift in delivery channels within Japan, and worldwide competition, will pressurize Japanese distributors to take critical move to deal with these challenges.
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