Case Study On Carrefour Strategic Plan

Abstract

Studying business strategy is very important to analyze organization performance, this article studies Carrefour's business strategy to achieve a competitive advantage over other competitors.

The article introduces this analysis through explain porter's generic business strategies and explaining each strategy and when this strategy works well to achieve organizational objectives.

The article stated the main questions that need an answer when analyzing an organization's business strategy sample of questions what strategies and how to be executed and after execute how those strategies help Carrefour to achieve competitive advantages.

The article explains promotion and Corporate social strategies and how these strategies help the organization to increase the overall performance.

The study explained in detail how the cost leadership strategy correlates with competitive advantages then introduce the strategy in detail.

an additional finding of this study is to know how Carrefour applies a focused differentiation strategy of custom products.

Purpose of the study

This case study examines the competitive strategy for Carrefour group, Carrefour follows two generic strategies cost leading strategy and focused differentiation strategy.

Introduction

An organization needs to select a suitable business strategy that achieves a high competitive advantage and the result of this step positive impact on organization revenue and profit.

Michel Porter introduces many frameworks that serve business strategy and one of these frameworks was generic strategies that can formulate four strategies [Cost Leadership, Focused Cost Leadership, Differentiation Leadership, Focused Differentiation Leadership].

Each strategy has a situation that can fit with organization needs, in this study the author refers to results collected by (Subrahmanyam & Azad, 2019) surveys to analyze suitable business strategies. The study concludes that the more fit strategy is the cost leadership strategy.

Background

Carrefour is a leading retail supplier company that offers services to customers in hypermarkets as well as in supermarkets (Carrefour express in certain countries). The company was established in 1959 in France through a partnership between its founder Marcel Fourier and Bdein-Defforey food wholesaler.

Under this partnership, the company starts to operate in France by launching the first supermarket in 1960 then launching the first hypermarket in 1963, at 1966 the company starts to brand its logo, and this is the same logo still used nowadays (Carrefour, 2021c). After this date, The Company goes into an expansion and growth process to operate outside France in other countries in Europe and then to other countries over the world.In 1995 under the exclusive merchandise agreement between UAE businessman Majid Al Futtaim and the Carrefour group located in France, The agreement includes fully operating Carrefour hypermarkets and supermarkets in 30 countries across Asia, Africa, and the Middle East.

Research objectives

The study mainly answer the below questions:-

-?????????What strategies were applied in the Carrefour group?

-?????????How does Carrefour execute these strategies?

-?????????How do these strategies help the organization to compete with its rivals?

-?????????How does Carrefour manage promotions and advertising to have a competitive advantage?

-?????????How is Carrefour strategy is ethical strategy?

-?????????What is Carrefour's after-sale strategy?

Literature Review

Generic strategies composed by Michel porter Harvard Professor to address strategies that organizations can execute to increase their competitive advantage, porter divided strategies into two dimensions scope and source.

Source divided into two types cost and differentiation, when Strategy depends on a source to lie on cost the organization adds competitive advantage based on product cost goods to consumers. Strategy is differentiation when the organization adds a competitive advantage based on product features.

The scope can be broad (none focused) when targeting a large scale of consumers or can be narrow when focused on a small segment of consumers(Valipour et al., 2012).

Figure 2porters generic strategies (Porter, 1985)

Cost Leadership strategy

In this strategy, the organization work on its supply chain to perform good lean management to eliminate all unwanted activities during production or the retail process.

Organizations also do more effort with the supply process to purchase products with the lowest cost to be able to present for consumers with competitive cost.

How this strategy works well:-

-?????????This strategy works well when it is hard to have a competitive advantage based on product differentiation.

-?????????This strategy works well when the cost of a shift from company product to rivals products is small.

Differentiation strategy

In this strategy organization, the origination work with its supply chain to get a competitive advantage through its unique product features over other market rivals. This strategy target to increase customer loyalty by serving them and always being above the customer expectations in product features or quality.

When differentiation strategy works well:-

-?????????When there are many chances to differentiate products through their features

-?????????when there is diversity in customer needs

Differentiation strategy can be achieved on a product level, also on customer service level and it can be achieved on the whole brand itself.

Focus strategies

Focus strategies apply the previous two strategies but on the narrow scope or specific segment instead of applying strategies on all customer segments. This straggles works well when there is a wide range of customer preferences and the other competitors not offering the right products to satisfy customers’ preferences.

The disadvantage of these strategies is that they are lack mass production and don’t help organizations to take huge market share.

Carrefour strategy

As per (Subrahmanyam & Azad, 2019) study about Carrefour strategy, the authors did a real questionnaire for 120 random Carrefour customers and after quality filter the summarized the 96 correct questionnaires collected to find the coloration between low-cost strategy and competitive advantage, also to find the coloration between differentiation strategy and competitive advantage.

Figure 3Carrefour strategy coloration analysis (Subrahmanyam & Azad, 2019)

(Subrahmanyam & Azad, 2019) find the result summarized in figure 3, that both strategies collate with competitive advantages with a value above 0.5 that means both strategies can work efficiently.

Coloration between cost leadership strategy and competitive advantage is 0.723 on the other hand coloration between differentiation strategy and competitive advantage is 0.628 this will lead us that cost leadership strategy is more efficient than differentiation strategy to gain competitive advantage in Carrefour.

Carrefour cost leadership strategy

As per (Carrefour, 2020) Carrefour follows the strategy that always reduces management and operation costs and moves to digital transformation to make cut cost.

In addition, produce branded items for Carrefour with very competitive costs that make it possible to offer this item in the market with very competitive cost.

Carrefour builds a strong partnership with their supplier network that grantee to receive goods at the lowest cost this competitive price depends on carrefour's big purchase power from suppliers.

Carrefour can introduce competitive prices to customers and the study check sample of products on an e-commerce store for Carrefour UAE and the same items on the Lulu e-commerce store.

Table 1Price comparison on sample product between lulu and Carrefour (Carrefour, 2021b)

Carrefour's strategy ensures that the company has a business model to support food transition for all with good quality and competitive prices.

Figure 4Carrefour business model

Carrefour Promotion strategy

Promotion is a powerful tool to increase organization sales that lead to increased profit, Carrefour follows a good strategy to promote their products.

Carrefour UAE makes a promotion campaign every 10 days that offer on average 30 to 40 percent discount on retail price.

Carrefour UAE has a unique loyalty program called Share that enables the customer to collect points on every purchase and give the customer the ability to redeem these points in all Majid Al Futtaim malls shops (Sharerewards, 2021).

Carrefour UAE has a visa card called Najm (Najm, 2021) that gives 4% cashback on each purchase this cashback percent encourages customers with high competitive value (Ivypanda, 2019).

Carrefour focus differentiation strategy

The study introduced that Carrefour depends mainly on cost leadership strategy because it can achieve more competitive advantage but also Carrefour applies differentiation as a secondary strategy in narrow scope to satisfy certain customer segments.

The company applies this strategy to certain departments like organic food that low-cost strategy will not work.

Carrefour Corroborate social responsibility ?

Carrefour got a good rank in the Dow Jones Sustainability World Index (DJSI) to be one of the top five retailers. In addition in Carbon Disclosure Project (CDP) Carrefour was able to complete the required Responses.

Figure 5Carrefour CSR rating (Carrefour, 2021a)

Carrefour CSR efforts include-

-?????????encourage customers to use packages that protect the environment and?environmental sustainability

-?????????Helping to tackle climate change

-?????????Being involved in solidarity

-?????????give women equity in benefits and managerial positions in employment

Carrefour after-sale strategy

Carrefour follow a flexible strategy for after-sale support to make the customer comfortable, the customer can return purchases within 7 days and take money back and here there are two advantages:-

-?????????Customer takes money as cash and has options to buy what he wants from the same shop or another and this makes the customer comfortable when he buys.

-?????????The customer is free to tell reasons or no when he return purchases.?

For home appliances such as electronics Carrefour, also follow an easy flexible strategy over other competitors since the company, give a free warranty for one year and give the customer the ability to extend the warranty up to three years with an added advantage to customer to replace not repair with a new item.

Recommendations

Carrefour mainly depends on cost leadership strategy and this strategy has a drawback when other completers can replicate the process to reach the same low-level cost, the study recommends and emphasizes having continuous planning aim to have untraditional ways over reducing the cost.

Untraditional ways will take some time to be replicated by competitors that will increase Carrefour's sustainability and market share.

Conclusion

Carrefour is a leading retailer company that serves customers and this study introduces in detail the completive strategies implemented in Carrefour to have a high competitive advantage.

Porter generic strategies are power full strategies that increase competitive advantage for any organization; the strategies can depend on cost or product differentiation. Carrefour takes advantage of cost leading strategy over the differentiation strategy. By comparing a sample of prices for Carrefour and another competitor the comparison show Carrefour always, provides better prices.

Carrefour has a good promotion schema that provides a campaign every 10 to give discounts on average +30 percent.

In addition, Carrefour has a good strategy to achieve high ranks on world corporate social responsibility that is assessed by depending on organizations like CDP and DSJI.

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Disclaimer?

The study is part of assessments for an MBA program and all details that are included on the study are based on referencing previous studies or based on information gathered from available sources mainly from the company website.

The list of references is available in the references section anyone who finds that the reference is not valid has to share the evidence and I will update the study based on the new evidence. ?

References

Carrefour. (2020). Carrefour Strategy. https://www.carrefour.com/en/group/strategy

Carrefour. (2021a). Carrefour’s CSR performance. https://www.carrefour.com/en/csr/performance

Carrefour. (2021b). Food Cupboard. https://www.carrefouruae.com/mafuae/en/Food-Cupboard/c/clp_F1700000

Carrefour. (2021c). Key dates IN CARREFOUR GROUP’S HISTORY. https://www.carrefour.com/en/group/history

Ivypanda. (2019). Carrefour UAE Marketing Strategy Report. https://ivypanda.com/essays/carrefour-uae-marketing-strategy/

Najm. (2021). about-us. https://www.najm.ae/about-us/

Porter, M. E. (1985). COMPETITIVE ADVANTAGE Creating and Sustaining Superior Peifonnance. In Creating and Sustaining Competitive Advantage: Management Logics, Business Models, and Entrepreneurial Rent. https://doi.org/10.1007/978-3-319-54540-0

Sharerewards. (2021). Using SHARE. https://www.sharerewards.com/en/using-share

Subrahmanyam, S., & Azad, S. (2019). Carrefour’s Competitive Strategy- Cost Leadership and Differentiation: A Case Study. Pacific Business Review International, 11(8), 137–145.

Valipour, H., Birjandi, H., & Honarbakhsh, S. (2012). The Effects of Cost Leadership Strategy and Product Differentiation Strategy on the Performance of Firms. Journal of Asian Business Strategy, 2(1), 14–23.