- July 31, 2012
- Posted by: essay
- Category: Free essays
Carrefour and Wal-Mart are leading retailers in the international market. In fact, these companies are the largest world retailers which, in the course of their development, have eventually confronted each other in the competitive struggle. In fact, the growing competition among the retailers is a general trend that has been observed in the international market since 1990s. Even though the competition always existed between the retailers but the last couple of decades was characterized by the growing market expansion that lead to the growing efforts of both companies, Carrefour and Wal-Mart to gain a larger share of foreign market. It is by the late 1980s both companies redirected their attention from national markets, namely that of France and the USA, to international markets because they have gained the leading position on the national level and the further growth was simply impossible without international expansion.
At the same time, in the process of entering new markets both companies naturally faced a strong opposition from the part of local companies as well as other retailers that also attempted to gain leadership in retailing. As a result, the market expansion became a very complicated process that needed substantial resources and the application of effective strategies to gain the advantageous position. In this respect, the policy of mergers and acquisitions became one of the most effective ways by means of which both Carrefour and Wal-Mart attempted to improve their performance and strengthen their position abroad.
However, the decision of Wal-Mart to enter European market was probably the determinant factor that made the clash of two giants, Carrefour and Wal-Mart, practically inevitable. In this regard, even such large retailers as Promodes became subjects of a particular attention of Carrefour and Wal-Mart in their competitive struggle. To put it more precisely, by means of the acquisition of Promodes, Carrefour attempted to stop the rapid penetration of Wal-Mart into European market, which Carrefour traditionally viewed as its basis. At any rate, the position of Carrefour in Europe was historically very strong. On the other hand, if Carrefour failed to acquire Promodes, there would be a risk of the similar effort from the part of Wal-Mart and the success of the American company in this effort would practically guarantee Wal-Mart hegemony or, at least, consistently more advantageous position compared to its major competitor Carrefour, while the success of Carrefour strengthened its position in Europe and opened new perspectives for the further international markets expansion.
Nevertheless, it should be pointed out that the acquisition of Carrefour is accompanied by certain problems, among which it is possible to name the necessity of the restructuring of the company and the resistance of local political forces and business partners, especially in Spain and Portugal to accept the alliance Carrefour-Promodes. As a result, the future of Carrefour-Promodes seems to be uncertain and, therefore, it is necessary to carefully analyze the current opportunities and potential of Carrefour and Wal-Mart in their competitive struggle because it is the struggle between these two largest retailers will, to a significant, extent define the situation in the world market.
The mission and vision of companies
At the same time, in order to better understand perspectives and potential of both companies, Carrefour and Wal-Mart, it is primarily necessary to clearly define their missions and visions, which will actually define the further strategic development and practical steps the companies will undertake in their struggle. In this regard, it should be pointed out that the mission and vision of both companies are, to a significant extent, similar. In fact, such a similarity is quite natural since both companies develop in the similar way and, therefore, they have similar mission and vision.
Nevertheless, it is possible to speak rather about strategic similarity, while tactical and technical details of the mission and vision of companies may differ. In this respect, it should be said that both companies, Carrefour and Wal-Mart position themselves as large multinational retailers which operate worldwide. At the same time, it is obvious that the position of Carrefour in Europe as well as in Asia and partially in Latin America are very strong, while Wal-Mart is traditionally viewed as an American company, though its position in America is very strong. To put it more precisely, the company is the national leading retailer in the USA and Latin America is one of its major target markets where the company has strengthened its position since the beginning of its international market expansion. For instance, its first significant international success is closely intertwined with its successful attempt of entering Mexican market. Consequently, the company may be viewed as the company that is mainly orientated on American markets. In this regard, the position of Carrefour is particularly strong in Europe.
As a result, Wal-Mart views its domination in the US and other countries of American continents as its main concern in its future development, while Carrefour attempts to secure its position on European market, which practically became the domestic market for Carrefour, not in the last turn due to the growing economic and political integration of countries of the EU. On the other hand, such geographical and economic differences in mission and vision of both companies also reveal the difference in their vision of their future development.
To put it more precisely, the companies have a different view on its further market expansion, which is their major strategic goal. In this regard, it should be said that Wal-Mart views European and Asian markets as particularly perspective for its international market expansion, while Carrefour, in contrast, along with attempts to maintain its positive performance in Europe, attempts to strengthen its position in Asia and penetrate American market, though its efforts to enter the US market in 1980s were not very successful.
The strategic goals and objectives of companies
Obviously, the mission and vision of companies define their strategic goals, which are highly dependent on the vision of the future perspectives of both companies. In fact, the strategic goals and objectives of both companies are basically associated with the ongoing international market expansion. At the same time, it is necessary to emphasize that the market expansion is not the only goal Wal-Mart and Carrefour attempt to meet. It is worth mentioning the fact that both companies are conscious of the necessity of getting a strategic advantage compared to their major competitor. In other words, they perfectly realize the inevitability of the growing confrontation between Wal-Mart and Carrefour. Consequently, on developing the strategy of their development both companies should take into consideration the potential problems and risks associated with such a confrontation. In this regard, efforts of Carrefour as well as attempts of Wal-Mart to enlarge their presence in European market as well as in other parts of the world by means of mergers and acquisitions indicate to the fact that the major strategic goal of both companies is to take initiative and gain the leading position in the struggle for international market.
At the same time, it is obvious that after the recent acquisition of Promodes, Carrefour will inevitably face the problem of restructuring and actually this process has already been launched. In such a context, the company will naturally need to solve the problem of the most effective restructuring that means that the fast and effective merger of Carrefour and Promodes is one of the major strategic goals of the company. In fact, the success of this process may, to a significant extent, define the future position of Carrefour not only in Europe but also in the world market.
Furthermore, both companies, Carrefour and Wal-Mart, should also focus on the quality of their products and services. In the contemporary business environment customer satisfaction plays a very important role and, therefore, such large companies as Carrefour and Wal-Mart cannot ignore this factor. As a result, both companies should target at the attraction of a larger number of customers and development of customers’ loyalty to their brands, that is particularly important in the situation, when the competition between Wal-Mart and Carrefour will grow stronger that is highly probable and it will more likely to occur in the nearest future, since even at the present moment, their rivalry is very significant.
Strategies of companies
Taking into consideration strategic goals of companies, it is possible to define the major strategies they use and they will use in the future. In this respect, it should be said that strategies implemented by Carrefour and Wal-Mart are defined by their strategic goals, their current needs, and changing business environment. Obviously, the development of companies within the last couple of decades has proved the fact that the penetration of companies into new markets may be very effective and, in actuality, such a strategy can be the basis of the growth of companies and their successful market performance. In this regard, it is worth mentioning the fact that Carrefour, at the present moment, is mainly orientated on foreign market, while a couple of decades ago its operations were mainly concentrated in France. In contrast, nowadays, the main part of its operations occurs in international markets, abroad, while France is rather a traditional market where the position of Carrefour remains unbeatable. The same may be said about the position of Wal-Mart in the US, though American market still remains very significant for the company and may be viewed as the basis due to which the further international market expansion is possible.
However, in the course of the development of Wal-Mart the role of American market will gradually decrease, especially if the company meets its strategic goals of gaining a larger share of European market, as well as Asian one, where Wal-Mart has already achieved significant success in China, a very perspective country for the development of business in Asian continent.
At the same time, it is also necessary to remember about the strategies of management of both companies. In fact, being multinational companies, Carrefour and Wal-Mart naturally tend to decentralization. This means that their stores have quite a large autonomy in terms of their functioning, but, nevertheless, each store should meet standards of Carrefour and Wal-Mart. However, speaking about the management of both companies, it should be said that there is a substantial difference between Wal-Mart and Carrefour. To put it more precisely, Wal-Mart traditionally paid a lot of attention to its associates and, as the matter of fact, the company was viewed as a family, where each member was respected and had large opportunities for the professional growth and success along with high autonomy. In contrast, Carrefour, even though it provided a large autonomy to its store managers, still did not provide equal opportunities for the career growth of its managers. What is meant here is the fact that the company primarily focused on good performance and not on precise performance. As a result, managers of Carrefour’s stores operating in “good”¯ markets have consistently better opportunities and are more rewarded than managers of stores that are operating in “bad”¯ markets. In such a situation, it is possible to speak about the existence of certain misbalance within Carrefour and the company apparently needs to change its strategy. Otherwise, it risks to lose really perspective managers that are currently working in a worse market environment and do not meet the company’s standards of successful managers, which, though, do not assess adequately their professional qualities and their real perspectives.
Resources and capabilities of companies
Speaking about resources and capabilities of Wal-Mart and Carrefour, it should be said that the company have ample opportunities and sufficient resources to maintain the leading position in the world market. It is important to underline that both companies are well-known and recognizable in many countries of the world. This is why it is possible to speak about a significant brand value in company assets. In other words, the role of brands in the market value of Carrefour and Wal-Mart is very important. In this respect, it should be said that Wal-Mart always focused on the quality and customer satisfaction and the same may be said about Carrefour. As a result, both brands are currently associated in the consciousness of customers with quality and the strategic orientation on customer satisfaction will, in all probability, increase brands’ popularity and, therefore, market value of both companies.
Furthermore, Carrefour has about 9,000 stores in 21 countries of the world, and its combined net sales exceed $49 bln, while Wal-Mart had more than 2,000 stores at the early 1990s, worth more than $73 bln, while at the present moment the number of stores has increased and now it exceeds 3,500 stores operating in three continents. At the same time, both companies are basically concentrated on four continents Europe, Asia, North and South America.
Also, it should be said that both companies, being largest retailers, traditionally have the stable demand and due to the existing logistics they can supply their customers with the products they need. Due to the high turnover of products both companies can exploit their leading position in the market and implement the strategy of discounting to the extent that they effectively implement such strategies as “everyday-low-prices”¯ as well as they increase the turnover of products due to the implementation of hypermarket strategy.
On analyzing the chain value of Carrefour and Wal-Mart, it is necessary to underline that both companies attempt to minimize the price their customers have to pay and the discounting mentioned above plays a very important role in the struggle of companies for customers’ interest and loyalty. At the same time, logistics affect considerably the chain value of both companies since they operate worldwide and need to supply products to all their stores in different parts of the world. In this regard, in order to minimize costs, companies attempt to use local resources, while Carrefour heavily rely logistics on vendors. In such a way, the company attempts to save costs and increase the effectiveness of logistics. In contrast, Wal-Mart develops effective logistic system through the implementation of newest technologies which facilitate the delivery of products and their stable supply and, simultaneously, decrease costs.
Thus, due to the minimizing costs, both companies can maximize their profits, but, under the impact of growing competition and the increasing discounting they cannot fully benefit from saving costs.
Analysis of Wal-Mart and Carrefour
The PEST analysis of both companies shows that Wal-Mart seems to be in a better position than Carrefour. To put it more precisely, the company basically operates in countries with stable political situation, since American and European market are characterized by political stability and predictability, while the significant political impact in Latin America secure the position of Wall-Mart in these countries. As for Carrefour, it is currently facing the attempts of revision of its merger with Promodes and the political pressure is particularly strong in Spain and Portugal where interests of Promodes’ business partners are affected. At the same time, Europe at large naturally opposes to the possibility of the monopolization of European market by Carrefour. In this respect, political pressure is closely intertwined with economic problems Carrefour faces in Europe. Nevertheless, its economic perspectives are quite good since the company still has the leading position in Europe, in many countries of Latin America and it started expansion in Asia. As for Wal-Mart, the economic situation is also quite profitable for the company though it faces a strong resistance in Europe from the part of local retailers, especially Carrefour. In this respect, it is also necessary to take into consideration social factors since, for many Europeans, Carrefour is closer than the American company because they get used to Carrefour and have positive experience and, what is more, Carrefour is a source of work for many Europeans. At the same time, Wal-Mart is positively accepted in the US and Latin America. In fact, Latin America and Asia are market which positively accept both companies because they contribute to social stability in these countries since they bring new jobs and new standards of services. As for technologies, it should be said that Wal-Mart is in an advantageous position because the introduction of new technologies is historically one of the priorities of the company, while Carrefour dos not view it as its priority, though its current technological develop is quite high.
In conclusion, it should be said that the further development of Carrefour and Wal-Mart will inevitably lead to the strengthening of the competition between both companies. However, it is possible to recommend to both companies to pay more attention to Asian market since the competition on European market is very serious. Consequently, while focusing on the struggle for European market they can lose Asian market, which could be occupied by their smaller rivals. At the same time, gaining a larger share of Asian market can give either company a strategic advantage in global terms because this continent is progressing rapidly and its economy develops dynamically.