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Analysis: Failure of Carrefour in Mexico

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documents in English
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term papers
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11 pages
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  1. Introduction
  2. The Mexican economy and opportunities for implementation
    1. The General economic situation in Mexico
    2. Key figures of the Mexican economy today
    3. Opportunities for establishment of businesses in Mexico
  3. Carrefour : A group with an international standing
    1. A Presentation about the Group
    2. The internationalization of the group.
    3. What is the concept ?
    4. Internationalization with caution.
    5. The limits of internationalization
  4. Mexico: Is it a justified choice of location ?
    1. The implementation strategy of Carrefour Mexico
    2. Some numbers
    3. Competition in Mexico
    4. The business strategy of Carrefour in Mexico
  5. Findings and results of the establishment of Carrefour Mexico.
  6. The reasons for withdrawal
    1. A new business strategy
    2. Too much competition in this sector
    3. Low profitability on investments

In 1994, Carrefour opened its first store in Mexico. A little over ten years later, the largest French retail brand announced its withdrawal from the country. While the implementation was very successful in other Latin American countries such as Brazil, and Argentina, the company failed in Mexico. We will now observe the various aspects and features of the Mexican market and the strategy of Carrefour, to conclude with the reasons for this failure.

To look at the different opportunities available for implementing a French company, it is worth considering the Mexican economy in a comprehensive way.

In 2002, growth of the economy was negative for the first time in 5 years. After the peso crisis in 1995, Mexico recorded five years of successive growth, mainly driven by exports in the year 2000. The crises in Asia, Russia and Brazil have merely slowed the pace of growth. It has even accelerated in 2000 (+6.9%).

The intervention of international financial institutions of Canada and the U.S. (the economies of these two countries are linked to that of Mexico since it joined NAFTA in 1993), the fiscal austerity measures taken by the Mexican government, and Mexican exports stimulated by NAFTA ,allowed Mexico to emerge from recession in 1996. But this was done at the cost of increased social and regional inequalities and a decline in the purchasing power of the Mexican population. Poverty and crime have increased and the minimum wage is $ 90 per month.

Since the signing of NAFTA in 1994, Mexico has become a country which is increasingly attractive to foreign investors. The economy has thus opened up to investment, and the country is now seeing the establishment of foreign companies on its territory, as evidenced by the phenomenon of "maquiladoras". Mexico views foreign investors a source of additional income, and a way to use the cheapest labor available.

Foreign companies that decide to locate in Mexico contribute to the economic development of this country and enjoy exceptional opportunities for development.

Mexico is also a preferred area of establishment for these companies, since it is a sort of pivot between the North American (U.S. and Canada) and the South American continents. The fact is that moving to Mexico provides companies with the opportunity to reach new partners across the Americas.

Previously known as the Societe Anonyme (SA) Carrefour was founded in 1963 by the brothers Defforey and M. Fournier with capital of 1.8 billion Euros, , Carrefour is the largest French group in the area of trade and distribution, ahead of Auchan, Leclerc and Intermarche, and second largest worldwide after Wal-Mart.

The group now (counting the franchisees) has 731 hypermarkets, 2301 supermarkets, 3759 and 503 hard discount stores selling frozen foods. It employs 350,000 people worldwide.
In 2000 the group achieved a turnover tax of 78 billion Euros, with France contributing 43.9%, the rest of Europe 31.5%, Latin America 12.9% and Asia 6.3 %. In all, the group is present in 26 countries.

Tags: implementation of Carrefour Mexico, NAFTA, global retail market

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