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Analysis and strategy of the Carrefour Group

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  1. Introduction
  2. External analysis
    1. Definition of the industry
    2. Analysis of economic forces affecting the industry (PESEL)
    3. Industry Analysis: Porter's Five Forces
    4. Industry segmentation
  3. Internal Analysis
    1. Defining the Enterprise
    2. Resource Analysis
    3. Skills Analysis
    4. Balanced ScoreCard analysis
    5. Analysis of Corporate Governance
  4. Final analysis
  5. Conclusion

After its merger (August 1999) with Promodes, Carrefour has become the number one group of food distribution in Europe (with a market share of 10.5%) and world number two behind Wal-Mart (with a presence in 30 countries).

In terms of distribution format, Carrefour hypermarket operator is number one in the world, the first supermarket operator in Europe and the third operator in the world of hard discount stores. The group is either the leader or co-leader in each area where it is present and has particularly strong positions in France (24.4% market share), Spain (23.1%), Belgium (24.5%) and Italy (4.0%), and, in China, Taiwan and Indonesia, and Latin America (Brazil, Argentina and Colombia) it is number one.

Carrefour employs over 400,000 people in nearly 8,000 stores. Its turnover in 2007, excluding taxes, amounted to 82 billion, of which approximately 80% consisted of food products. In addition, the group is also present in some countries only through a network of franchisees (UAE, Qatar, Tunisia, Egypt, Saudi Arabia, Japan, Algeria etc.).

Its network consisted of 7916 wholly owned stores on June 30, 2008 (including 1,122 hypermarkets, 1744 supermarkets and 4780 hard discounters) with a further 7,214 franchisees and partners. In February 2005, Daniel Bernard left the group and lots of changes in the organization and management were carried out and approved by the general meeting of April 2005.

The group was therefore designed as a Supervisory Board and Management. The two key heads of the two governing bodies today are: Jose-Luis Duran, 44, in the group for 12 years, who took over the Management and enjoys a reputation in the financial community (ex-chief financial officer) and Amaury de Seze, 63, chairman of the Supervisory Board.

To provide an appropriate response to the expectations of its customers, Carrefour operates across multiple distribution formats, but always with a high share of food.

The strengths and weaknesses of the group are as listed below.

The strengths are: large size (no. 2 worldwide) and strong market share in areas where the group is present; clear strategy of conquest of market share, ambitious investment plan (investment growth of 10 billion euros in 2006-2008, opening 1.5 million new square feet a year, or nearly 10% of the surface sales) and strict policy of cost control; relay for international growth, which represents more than 50% of sales of the company (a bit less in terms of operating income), particularly through the liberalization of certain markets such as India; focus on areas where the company is strong; capital popcorn and recurrent rumors of hostile bids (Wal Mart and Tesco); generation of high cash.

The weaknesses are: competitive and difficult environment in Europe; including high pressure on prices and margins in France which represents nearly half of the group sales; duty of heavy investment for growth; repositioning strategy prices affecting operating margin; uncertainty about the success of the investment plan; exposure to emerging markets and foreign exchange movements.

Tags: Carrefour Group, strengths and weaknesses of the Carrefour Group, analysis and strategy of the Carrefour Group

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