INBS 440-01

Royal Ahold Case Study

1) Explore the financial regulations of which Ahold fell foul in the US and
discuss the implications of his failure to adhere to regulations on the future
development of the company.
Last April a 36% rise in 2001 net earnings was transformed into an

85% plunge in profits when generally accepted accounting principals were

applied. But that Monday, US earnings had been overstated by US$500

million and had questionable transactions uncovered in Latin America. It was

Ahold’s US Foodservice division where the inflated earnings had been

reported. Potentially illegal transactions at its Disco subsidiary in Argentina

and the disconsolidation of three other subsidiaries were also cause of

serious concern. Many commentators at the time focused on the relatively lax

corporate governance regulations in the Netherlands, where shareholders

are often treated in a “cavalier fashion.” In the case of Ahold’s Stop & Shop

acquisition, the FTC ruled that, in certain locations, some stores would

overlap with an existing chain owned by Ahold, namely Edwards. In order to

promote competition and ensure Ahold did not develop a monopoly-type

situation, Ahold had to divest some stores from its portfolio.

2) The US is a vibrant economy for the development of an international retail

operation, but regulation of the retail environment is stringent. Provide a
critical evaluation of this statement.
Any retailer entering the US via acquisition or merger will be subject

to the FTC regulations. Planning regulations, particularly for the larger big

box retailer, is also a major challenge worldwide. When it comes to

manufactured products such as computers and cosmetics, the global

 marketplace is playing a big role in turning one jurisdiction’s more stringent

standards into industry standards because it’s often too costly to make

different versions of the same product for different markets. Similarly,

individual US state policies restricting chemicals not regulated comparably at

the federal level have motivated companies respond with new formulations

that end up being sold nationwide. Since retail is such a broad topic, ranging

from retail food to clothing, each of them faces its own unique regulatory

challenges such as minimum wage and overtime pay. Like it does with all

sectors, government regulation adds compliance costs and possible legal

liabilities to the retail sector. Retailers pay the highest tax rates in the US,

even though they’re not technically considered a regulation.

3) Investigate Ahold’s internationalization outside the US and discuss how the

regulatory environment has impacted the development of Ahold as an
international retailer.
Royal Ahold operated more than 4000 groceries in 27 countries with

net sales of US$ 59.3 billion. Ahold’s entry strategy in Latin America relied

strongly on partnerships. To enter Chile, Ahold partnered with Velox Retail

Holding. However, during 2003, Ahold disclosed accounting irregularities of

US$ 900 million and withdrew from Latin America (Journals of Business

Research 2005). Ahold takes a structured and consistent approach to risk

management and internal control by aligning strategy, policies, procedures,

people, and technology to manage the uncertainties that the company faces.

In the US, their corporate affairs activities are conducted through

Government Affairs function, which represents the interests of the business

to legislative and regulatory bodies at the federal, state, and local level.

Outside the US, in Europe, Corporate affairs manage and maintain a dialogue

with European and Dutch governmental, political, and industry associations

(stakeholder engagement 2016). Leading international food retailers

Delhaize Group and Ahold entered into an agreement to merge. The

combined company now named Ahold Delhaize, will have a portfolio of

strong, trusted local brands with more than 375,000 associates serving more

than 50 million customers every week in the US and Europe. It will have

enhanced scale across regions, market-leading retail offerings to serve

customers’ changing needs, and a strong financial profile fro which to fund

innovation and investments in future growth (Ahold and Delhaize announce

intention to merge 2015).