Strategic Management Assignment Essay Example

that Carrefour should divest from certain markets. However, their proposal to sell off operations in Brazil or China would be insignificant. By retreating from Russia, Carrefour indicated a focus on its core business to shareholders. The failed acquisition of Seventh Continent, a major Russian retailer facing margin calls, may have influenced this decision. Carrefour had offered over $1 billion for the acquisition but realized it could not gain a substantial share of the Russian market through organic growth alone. This highlights both the potential challenges of doing business in Russia and Carrefour's own strategic considerations. Russia is known for high corruption levels within the retail sector; therefore, Carrefour found it unsustainable to operate without a local partner who could navigate these unique challenges and ensure that potential profits outweighed risks involvedCarrefour's assessment of their endeavors in Russia can be examined utilizing diverse analytical frameworks, such as the star analysis global competitive strategy. This framework enables crucial discussions and case analysis to determine Carrefour's achievements in Russia. The star analysis aids the company in comprehending how to structure their thoughts and knowledge regarding geography and international business. It also assists international business managers in formulating a competitive strategy based on five major factors that contribute to the firm's advantage over competitors. The success of the grocery store chain is determined by its home country, France, while facing initial challenges due to existing competitors within the same industry in Russia. France also serves as Carrefour's supplier country with limited commodities sourced from Russia due to its constrained production capabilities. Consequently, Carrefour enjoys an advantage when entering this market and ensuring survival. There exists a significant opportunity for

the firm to capitalize on importing basic necessities and generating profits. Additionally, evaluating specific customer needs in each respective country is pivotal for implementing a successful global competitive strategy.Russia is an ideal market for Carrefour to enter due to its large population and high demand for food. However, it is important to consider that competitor countries may have cheaper commodities compared to France. Countries closer to Russia have the advantage of being able to supply goods at a lower cost. While competitor countries may not be located outside of Russia, retailers within these countries can pose significant competition, especially if protected by their country's trade practices. Locally produced foods are fresher and preservative-free, making them more attractive to the local market. Additionally, these foods tend to be cheaper due to lower production costs. The market for goods is also influenced by a country's relations with neighboring countries. Carrefour gathers data from target markets like Russia in order to analyze and design a competitive strategy, considering factors such as labor cost, available technology, and the political/legal/regulatory climate. These factors play a crucial role in Carrefour's global competitive strategy analysis as they offer grocery products which are considered essential necessities.However, Carrefour's business faces competition from substitutes such as imported foods, which can have a negative impact. It is important to note that this analysis method does not fully reflect the reality and does not account for any deviations caused by natural or human-made events that could affect the business. Despite this limitation, the analytical framework provides insights into expected outcomes and is beneficial for business planning. Another significant strategy is the concept of global added value, which

considers all associated expenses in trade benefits. This advantage is particularly important for global businesses like Carrefour that operate in multiple countries. The costs involved in this business include transportation, storage, labor, and other expenses. The strategy to create and capture global added value is outlined in this global competitive strategy analysis. The analysis identifies five major gains from trade for Carrefour. Various analytical frameworks relevant to businesses are discussed in the text, including the preference for product variety and production economies of scale. This framework takes into consideration the demand for certain products and the supplier's ability to provide them in large quantities at a profitable margin. The supplier should evaluate productivity, wages, and other production-related factors to determine their advantagesIn addition, it is important to consider the availability of technology and innovation. However, this framework lacks specific information and does not prioritize the role of demand and supply. Another mentioned analytical framework is the G5 competitive strategies. The global platform strategy focuses on connecting and understanding interconnected markets. The global network strategy involves establishing effective communication systems with other countries for trade facilitation. The global entrepreneur strategy involves identifying profitable opportunities. Lastly, the investment strategy involves investing funds into specific projects for business ventures.

Carrefour's failures in relation to their strategies were due to competition and market rigidity. Carrefour has identified Russia as a potential expansion location due to its adverse climate conditions, proximity to countries with better weather for increased productivity, and stable food supplies from France. The target market for Carrefour is Russia because there is higher demand than what they can currently supply. Competitors within Russia have limited variety, so integrating

economic and geographical forces through market analysis aims to achieve a competitive advantage in these markets under the global competitive strategy approach.The success of the strategy for Carrefour is reliant on various factors. If one area fails, it can result in the failure of the entire investment. To thrive globally and have a strong market position, Carrefour must understand all aspects of its operations. There are numerous factors that determine business success, and accurately predicting future changes is impossible. Therefore, businesses must anticipate and adapt to potential significant changes.

Carrefour successfully navigated global markets by leveraging several competences to overcome challenges and intense competition. One key advantage was its ability to capitalize on economies of scale. With a substantial operating capital, Carrefour could buy goods at cost-effective prices through bulk purchases. This allowed them to negotiate lower prices with suppliers and generate profit per item despite selling in large quantities. As a result, Carrefour could offer products at significantly lower prices, leading to increased sales and higher profits.

These profits were reinvested into establishing new stores both domestically and internationally. Expanding their presence allows the chain store to reach a broader range of customers.The chain store chooses to decrease its prices in order to increase the quantity of units sold. This results in higher profits because of the large number of items sold, rather than a large profit margin between buying and selling prices (Rugman & D'Cruz, 2000). With a total of 15,430 stores worldwide by September 2008, this chain store can earn minimal profit per item and still remain a top earner. This is advantageous when competing against other market players and attracts more customers, even

in new markets. Moreover, as the chain store expands its operations, it gains more customers in these new markets while diminishing sales for competitors. Carrefour also benefits from their expertise in conducting market analysis before investing in potential markets (Fernie, 2005). With their size and resources, they can employ skilled business analysts who thoroughly assess potential markets and provide assurance of business survival if the company decides to establish a presence there. However, this strategy did not work well in Russia due to the inability to predict all potential negative changes in the market.However, Carrefour achieved a high success rate in other markets by surveying and seizing opportunities. By leveraging its reputation, the chain store can benefit in all markets as it aimed to be a top three operator in each one, attracting more customers. Their successful strategy involved buying out top retailers in each country they invested in, allowing them to capitalize on these retailers' reputation before fully taking over. Building reputation and maximizing sales through the trademark is key, and indirect advertising through corporate social responsibility can further boost the chain store's reputation (Rugman & D'Cruz, 2000). The promised corporate social responsibility activities may also secure preferred locations for the chain store in cities with suitable land size, as local councils may be enticed. This is crucial because the chain store requires a large building area and facilities like parking lots. However, the chain store overlooked the impact of cultural differences on business operations across different locations. Cultural differences often determine a business's performance in various markets, making it common for foreign-owned businesses to struggle compared to those owned by local investors. To

overcome this discrimination, Carrefour should implement strategies that respect and understand different cultures.By implementing corporate social responsibility practices, as demonstrated by the chain store's actions in Russia (Fernie 2005; Kobrak 2002), positive relationships with local communities can be fostered. This not only serves as an icebreaker and a display of respect between the business and the community but also establishes the necessary balance of mutual respect. Once locals feel acknowledged and appreciated by foreign entities, it becomes easier to attract them as new and loyal customers for the business. Additionally, it is advisable to establish a relationship with an existing operator in the foreign country who can act as a mentor figure, facilitating the development of lasting connections between foreign investors and local communities (Kobrak 2002). This approach allows Carrefour to gain a deeper understanding of cultural beliefs, enabling them to exclude any items that may go against these beliefs from their product offerings. Understanding what is socially acceptable or unacceptable in different locations is crucial since even one culturally inappropriate item can potentially harm the entire business. By utilizing existing operators in foreign markets, Carrefour stands to benefit greatly by learning about undesirable aspects specific to each country (Kobrak 2002). Before venturing into foreign markets, conducting thorough research on cultural values is essential for Carrefour to avoid overlooking any beliefs or practices that could impact their investment.Multinational companies such as Carrefour recognize the importance of understanding cultural dimensions in different countries to achieve better international expansion results. As a global business, Carrefour must consider not only its current locations or primary markets but also the entire world, making it a multinational company within the

context of globalization efforts. Embracing globalization allows Carrefour to improve supply chains, transform costly workforces, and explore potential markets, giving it a competitive advantage in the global market. However, operating in foreign countries brings challenges like legal, cultural, economic, and political difficulties. Among these challenges, cultural changes are particularly significant for running a multinational business. Kobrak (2002) defines culture as a comprehensive concept that encompasses knowledge, beliefs, artistry, morals, laws customs and other capabilities and habits acquired by individuals as members of society. This definition emphasizes that different countries have their own unique national tastes,value standards,and cultural preferences.These factors strongly influence various aspects of management in multinational companies,such as marketing management alliances management,and human resource managementCarrefour, as a multinational company, must take into account these cross-cultural matters in order to effectively run their multinational business. This is because varying national cultures result in distinct consumer behaviors.