Carrefour India

Introduction
Carrefour is known to be a huge brand-retailer worldwide after Wal-Mart. For
several years the company has been trying to penetrate the Indian retail
market because India is known to possess the largest retail market in the
world. India has a massive population of 1.22 billion and its known to be the
second in the world with a population of over 200 million of people who are
middle class and has a continual rise in house hold (Indiaolinepages.com,
2012). Its GDP rate is about 10 percent, 8 percent employment and the
annual growth rate of the industry is 25 percent . With regards to that, this
makes the Indians current market to be lucrative, attractive and pose
potential for big retailers such as Carrefour to enter and invest. However,
there are some certain problems that Carrefour will face when trying to enter
the Indian market.
WORKINGS OF CARREFOUR IN JAPAN, CHINA
Despite the fact that Indian retail industry is huge, it is much unorganized
and made up of small stores and housing stores. Often this is would be an
advantage for a large retailer like Carrefour, but the retailer needs to proceed
cautiously when trying to initiate hypermarkets to Indias culture. Carrefour
has gone through a huge failure and success in some Asian markets before,
especially in China & Japan. In japan Carrefour company failed to adhereto
Japaneses culture but rather they became completely ignorant. Baek (2005)
noted that, Carrefour japan lacked the inability to grow its business, could not
find space enough in the real estate to build its large stores and had trust
issues with its consumers. As result of this failure, Carrefour incurred costs
close to 300 million dollars. Even though Carrefour failed in Japan it was
successful in China. In 1995 Carrefour managed to enter the Chinese market
when the retail sector was opened partially by the government. (Wrigley
2009, p.50) explained that,
Through localization policy and government marketing, Carrefour became the
largest foreign retailer in China.
The retailer translated its name into Chinese name and characters which
implied the company s respect toward the local culture thus massive success
in China. Furthermore

Carrefour met its consumers needs and knows that people want a company
that is familiar, friendly and does satisfy the local tastes. Also the company
does offer its merchandise through traditional Chinese such as customers
pulling fresh produce for themselves. Another aspect that has contributed to
Carrefours success is, its ability to offer low-cost discounts being the most
crucial offer to the price conscious consumers.
KEY ISSSUES THAT AFFECT ENTRY STRATEGY INTO INDIA
Analyzing from the experiences of Japanese and Chinese Asian economies, it
would be wise for Carrefour to consider its failures and success and
incorporate them to enter the Indian market. Therefore Carrefour can enter
India with someone who know the culture and can assist the retailer to get a
real estate through joint venture wholesaler. Also the laws of entering the
retail markets should be considered as in India foreign companies cannot
simply enter the market and set up a store anyhow. Huge companies such as
Wal-Mart and Carrefour do offer consumers a wide range of goods at low
prices therefore Carrefour would have to change their way of doing or
conducting business if it starts operating in India. Another major issue that
Carrefour might face in India is terrorism. India is regarded to be one of the
most of the terror afflicted countries the United States. Dale (2009, p.69) Lots
of people are often killed during terrorist activities
on yearly basis and these attacks are fueled by poverty therefore, if
Carrefours targeted
customers are middle class then it could become targets. If Carrefour enters
the Indian market then it may encounters problems such as inflation, scarce
retail space and terrorism but I perceive the major issue at hand is the law
that hinders them and all other foreign business that are willing to settle up
their retailers in India. Looking at the fact that the whole country is composed
of middle class individuals is basically being denied access to Carrefour.
Hence, to enter this market Carrefour should partner up and operate joint
venture only. According to research, there is an indication that Indian people,
particularly young people reckon a wide selection, loyalty programs and easy
access. All these things Carrefour has offers but it cannot do due to
limitations of laws that hinders foreign direct investment in Indias market.
ENTRY MODE

Several factors need to be considered by Carrefour in the entry process such

as market size and growth, risk, government regulations, local

infrastructures, flexibility and company objectives. Carrefour needs to regard

a dynamic entry mode that will assist them to gain a competitive advantage
in India. There are lots of entry modes available such as internet, licensing,
strategic alliances, exporting, international agents and distributors, joint
ventures, overseas manufacturing and international sales subsidiaries.
However, the entry mode used by retailers is often strategic alliances and
joint ventures therefore for Carrefour to enter India will recommend joint
ventures as an entry mode. The reasons being, joint ventures will provide it a
chance to reduce the risks during the period of startup and entry. The retailer
would able encounter growth and better operations within the region because
the joint venture partner chosen would be having experience about the
market. Carrefour can be a joint venture with Reliance industries limited
under the Reliance Retail sector which is a conglomerate with lots of
experience in the Indian market and has been ranked 99
th
in the Fortune Global 500 list of the biggest companies in the world With
such joint venture (Pradhan, 2006).Carrefour will have to align its market to
the Indian market by adjusting their products to meet the social

cultural norms of the market. Joint ventures would be appropriate for

Carrefour India as the market is protected and governed by the law
(Tschoegl ,2011).For example, the government only allows multi-brand
retailers to penetrate the market through franchise. 51 percent FDI is given to
single brand retailers, cash and carry 100 percent and zero percent is allowed
in multi-brand retail is presently allowed. With this venture, it will allow
penetration of protected markets, it lowers production costs and Carrefour
would gain advantage of accessing markets and distribution with joint
venture. Another advantage for Carrefour would be sharing risk and high
research and development costs. Joint venture also allows the company to
keep their
companys
affairs separate from other activities of those involved. Therefore Carrefour
can be able to enter Indian and still keep its issues to itself without the
interference of the law. Also the company would be able to build long term
relationship that can benefit them when doing projects. Also entering through
joint venture allows Carrefour to have contact with the local suppliers and the
government officials in India thus easier and smooth operation off the
business.
NTERNATIONAL CORPORATE LEVEL STRATEGY TRANSNATIONAL STRATEGY

(Elsrner & Swoboda, 1212, p.114) stated that,

In Asia, Carrefour still has to achieve both global efficiency and local
responsiveness in the markets.

Due to increased global competitors they encounter the company has to hold
the costs down and also meet the demand of extremely different set of
cultures, local tastes and buying patterns. Investing in India would require
Carrefour to perform cross training for foreign managers, with local managers
to assist in increasing local responsiveness. Carrefour incorporates both
multi-domestic and global strategies thus the use of transnational strategy
does explains why Carrefour has been successful in most cases, despite Japan
when opening new retailers in other countries. As result the strategy would
work well in the process of entering the Indian market since it has been
adopted well before.
PEST ECONOMIC
Economic environment outlines all the threats and opportunities of Carrefour.
In 2007 the economy of India has boosted up to U.S1.1 trillion and it was the
third largest in the Asian economies. The nominal GDP capital is also
constantly growing at the rate of $1096. Despite the lower rates of country s
average per capital income there is a continuous growth in the middle and
upper classes. Also there is an increase in private consumption of 8.3 percent
in the fourth quarter I the 2007 fiscal year. Even though Indians are enjoying
an uprising prosperity there has been uneven distribution of wealth. However
part of the population amounting 25 percent still live below the poverty line
and the current unemployment rate is 9.8 percent. For the past four decades
India had a high steady fiscal deficit plus the cash deficit has been there for
the past 20 years ranging from 2 percent to 4 percent of its GDP. India has a
lower ratio of exports to GDP amongst the Asian countries and this suggests
that India has a low interdependent ratio. The industry sector comprises of 55
percent GDP from service sector, agricultural

sector accounts 17 percent and industrial sector accounts 28 percent. In

terms employment the agriculture sector offers 52 percent, the service sector
contributes 34 percent and industrial sector provides 14 percent of
employment.
Technological

Technology is the most crucial aspect of the macro environment and it is the
leading force behind the development of lots available products and services
in the market today. India is effective on the IT sector and software has been
the main drive of businesses and has grown over 50% yearly. Thousands of
business are has been established since 1999 in India and labor has
increased therefore Carrefour can take advantage of that. Skilled labor would
contribute to fast and efficient services and thus increased sales. In India
there is a readily available information offered the government agencies and
business consultants therefore carrefour can gahther information on how to
enter the Indian marke