A Strategic analysis of Metro wholesale

business in China
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Executive summary
Metro Ag. is a world-leading wholesale business established in Germany, with operations in
different parts of the world. This report performs a strategic analysis on the Metro Ag’s
wholesale business segment in China, a market of great strategic importance given the large
population and fast economic development. This report evaluates Metro China’s macro and
micro-business environment, also its resource and capabilities by applying various tools,
including PESTLE analysis, five forces, VRINE framework and SWOT analysis. The
research indicates a high level of strategic fit of Metro China’s differentiation focus strategy
with the environment and resources, and the appropriateness of its emphasis on providing
value-adding services. However, there are also some challenges in the business environment,
and Metro China also has some weaknesses, which may hinder the business’s growth
prospect. Drawing from the analysis, the reduction of operation cost, maintenance of service
excellence and further market share development are crucial for Metro to win and strategic
recommendations on how to achieve these goals were made.

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Table of contents
Executive summary..................................................................................................................2
1. Introduction..........................................................................................................................4
1.1 Company overview..........................................................................................................................4
1.2 Aim of the report and Structure.......................................................................................................5
1.3 Methodology....................................................................................................................................5
2. Strategic Context..................................................................................................................6
2.1 Macro-environment: PESTLE analysis............................................................................................6
2.2 Micro-environment: Five forces analysis.........................................................................................7
2.3 Internal analysis: Resource and capabilities...................................................................................10
2.4 Financial analysis..........................................................................................................................12
3. Strategic content.................................................................................................................13
3.1. SWOT analysis.............................................................................................................................13
3.2. Strategic choices...........................................................................................................................13
4. Strategic process.................................................................................................................14
Recommendations...............................................................................................................................14
5. Conclusion...........................................................................................................................15
6. References...........................................................................................................................16

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1. Introduction
1.1 Company overview
Metro Ag. Group (abbreviated as Metro Ag. hereafter) is a world leading wholesaling
business headquartered in Germany. It has a wide geographic dispersion, with presence in 35
countries across Europe, Asia and Africa (Metro, 2018). Metro Ag’s vision is to ‘deliver
sustainable solutions with superior added economic value for independent entrepreneurs.’
(Metro, 2019).

Metro in China
Given the high speed of economic development, and the large population that accounts for
19% of the world population (United Nations, 2019), China is a must-win market with a large
potential (Liu et al., 2010) for international businesses. Metro Ag. has invested extensively in
the Chinese market. Metro China has expanded rapidly since it first entered China in 1996,
now operating 94 stores in China, out of 140 total stores in the Asia Pacific (Metro, 2018),
highlighting the strategic importance of Chinese market for Metro Ag. Therefore, the Chinese
business segment is selected as the focus of this report.

Before Metro’s entrance, there was many institutional voids in China (Tsui et al., 2004), such
as the underdevelopment of capital market and trade law and regulations (Khanna et al.,
2005). The purchasing process was not transparent, and frequently involves corruption,
diminishing businesses' profitability, giving rise to a large segment of unfulfilled corporate
customers. Metro spotted this market gap. The corporate customers are price sensitive,
meanwhile, demand a reliable supply of high-quality products, and Metro China's aimed to
fulfil their needs. According to Porter (1985), the competitive advantage comes from the
positioning on the market and businesses could adopt one of the four strategic choices,
namely, differentiation, cost-leadership, cost focus and differntiation focus strategy to win.
Metro China adopts a differentiation focus strategy. The business primarily targets corporate
customer segment, including restaurants, hotels, catering businesses, independent retailers,
and authorities (Metro, 2018). The business differentiates itself from the competitors by
making great efforts to add value by providing additional services.

Metro China operates a members-only policy, customers need to register as members to shop
at Metro, and their purchases are automatically recorded. This practice enables Metro to gain
first-hand information to understand the market trends and customers' needs better, and
supports the provision of consulting service to customers, which is a unique selling point of
Metro. The business model enabled Metro to become the pioneer in wholesaling in the
Chinese market, gain brand awareness and achieved fast expansion. However, its growth rate
is slowing down in China recently (Metro, 2018).

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1.2 Aim of the report and Structure
This report aims to evaluate the strategic fit of Metro’s wholesale business segment in China,
to evaluate whether its strategy successfully aligns with all relevant factors, both internally
and externally (Scholz, 1987) and creates value. This work is structured according to the
exploring strategy model, which proposes the context, content and process are three crucial
factors in strategic planning (Johnson et al., 2011). Following this introduction, Metro’s
strategic context will be analysed from both an external and internal perspective. The
information extracted from the analysis will be used to comment on Metro’s competitiveness
and the level of strategic fit. Acknowledging the recent performance drop of Metro China,
this work will also identify Metro’s weaknesses. From the analysis, strategic choices to
increase and sustain Metro’s competitiveness in China will be presented and evaluated based
on their suitability, feasibility, acceptability. The last section concerns the strategic process.
Recommendations on how Metro can successfully implement the most appropriate strategy
will be proposed, followed by a conclusion.

1.3 Methodology
Several frameworks drawn from literature, and secondary data from databases such as
Marketline, the company’s website will be used to assist analysis. A summary of the
advantages and limitations of the tools is presented below. Despite their limitations, the
application of the frameworks is still justifiable because they are widely-received and are
very popular in business studies (Carpenter and Sanders, 2013; David, 2009). Further
justification for using each tool will be discussed in the respective section.

Table 1. Analysis tools

Tool Advantages limitations
PESTLE - Provide a direct overview of the - Too general. Do not highlight insights
opportunities and threats (Carpenter that are most relevant to the business
and Sanders, 2013) (Carpenter and Sanders, 2013).
- Easy to apply - The external environment is constantly
changing but this framework is static.
(Burt et al., 2006)
Porter’s - An easy to apply tool to help the - Static tool that does not take account
five forces business to understand the industrial of the possible relationship and
environment. (Carpenter and interaction between the industry
Sanders, 2013) forces, PESTLE factors and firm’s
resources (Grundy, 2006).
Resource- - Help the business to understand its - Does not differentiate strategic
based resource and capabilities to exploit assets from non-strategic assets
view them to create sustainable (Priem and Butler, 2001).
competitive advantages (Barney,
1991)

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SWOT - A good tool to summarise the - Lack of prioritisation of factors
analysis findings of the more thorough (Kotler, 2000).
analyses from the above - Too general, lack of thorough
frameworks (Johnson et al., 2011). analysis with the support of data
(Hill and Westbrook, 1997).

2. Strategic Context
2.1 Macro-environment: PESTLE analysis
PESTLE analysis stands for the analysis on the Political, economic, social, technological,
legal and environmental factors. It is a widely applied tool in strategic management because
these external factors have an impact on many other aspects of the businesses, including the
industrial environment, operation management, marketing, and determine the potential
opportunities and threats. It is therefore important for international businesses like Metro to
understand and align strategy with the local environment. Table 2 summarises some
important points.

Table 2.
Factor Analysis
Political - China has a strong political relationship with many countries, including
Germany, Metro’s home country. China recently signed a cooperation
agreement with the Federation of German-China Friendship Association
(FGCFA) to further promote friendship and cooperation (Chinese
People’s Association for Friendship with Foreign Countries, 2018).
- There is a trade dispute and political tension between China and the US.
The two countries are under negotiation, but the outcome is yet not clear.

Economic - China has a favourable economic condition. The GDP increased by 9.7%
in 2018 (National Bureau of statistics of China, 2019), So Chinese
customers have high purchasing power.
- The Chinese government has an initiative to promote the sustainability
of economic growth. One practice is to promote the growth of the
service sector to replace the dominance of the manufacturing sector
(Marketline, 2018). This is illustrated by a 10.3% growth in the total
economic value added by tertiary sector (National Bureau of statistics of
China, 2019), and that 50.3% of economic output is generated by the
service sector (Marketline, 2018).

Socio-cultural - People are more materialistic, emphasis enjoyment at the moment

compared to the past (Liu et al., 2011). Travelling and dining out in
popular restaurants have become popular hobbies (Li, 2009).
- There is a shift in consumers’ preferences of purchasing from the brick

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 and mortar store to online platforms.
Technological - As a result of internet penetration and the development of many local
and international online shopping platforms (Kawk et al., 2019), China’s
e-commerce experienced a rapid growth and is now very prosperous.
Environmenta - China is ranked as the third largest country in the world (Maps of world,
l 2018). With the favourable weather and soil conditions, it has a
prosperous agriculture industry.

Legal - Stricter regulations to reinforce corporate social responsibilities,

including environmental protection, supply chain management,
employee welfare (Lau and Liang, 2014).

The relative importance of the PESTLE factors is determined by the characteristics of the
business, but the factors are more or less interrelated (Carpenter and Sanders, 2013). For
Metro, the economic and social factors are considered as the key drivers for change, that are
likely to have a huge impact on Metro’s strategy formulation and implementation (Johnson et
al., 2011). The government’s initiative to promote the development of service industry and
the economic growth and the social-cultural shift toward consumerism increase demand of in
the hospitality industry, providing growth opportunity for the hotels, restaurants, which are
Metro's target customers.

The environmental and legal factors are the other two factors need to be considered. The
company endeavours to fulfil corporate social responsibility, not only to pay taxes and obey
laws but also investing in sustainable energy, reducing carbon emissions and closely
monitoring the supply chain to ensure sustainability (Metro, 2019). Since the China-German
relationship is relatively stable, the political factor is less important. Although the ambiguity
of the China-US trade negotiation adds some complexity on the economic factor, this mainly
impacts on businesses from the US, and not so much on Metro. Lastly, since Metro is in the
wholesale industry, and sell primarily physical products, the Technological factors are
relatively less relevant for Metro, although technological development has dramatically
promoted the online-shopping.

From the PESTLE analysis, the macro environment in China is favourable for Wholesalers,
with a high growth potential. Therefore, Metro China’s focus on serving corporate customers
is justifiable, indicating a high level of strategic fit. However, although PESTLE is a useful
framework, it does not capture the conditions of the specific industry. Businesses cannot
exert control over these factors (Yüksel, 2012), so the PESTLE analysis may easily become a
categorisation of facts with relative less value in making strategic choices (Yüksel, 2012).
Therefore, it is frequently advised to use this tool in conjunction with other frameworks to
provide a more comprehensive picture (Morrison, 2015).

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2.2 Micro-environment: Five forces analysis
The industry structure is an important determinant of a business’s profitability, and the
strategic decisions (Porter, 2008). According to Porter (2008), the underlying structure and
the competition of an industry can be analysed by five forces, as illustrated in the figure
below.

Source: Porter (2008)

Similar to the PESTLE framework, the five forces analysis also concerns the external
environment of a firm. The industry environment is considered as a reflection of the PESTLE
factors (Johnson et al., 2011), but unlike the PESTLE factors, it is possible for businesses to
influence the industrial structure, and shape the competition (Porter, 2008). Hence, these two
tools are frequently applied together to complement each other.

For most industries, the Rivalry among competitors is the most influential force among the
five (David, 2009), and is also the case for Metro. The competitiveness of a firm is the central
issue of strategic management and is a crucial factor of whether a business can win (Shimizu,
2012). This section evaluates the competition in the wholesale industry and Metro’s
competitiveness.

Rivalry among existing competitors：

The rivalry in the wholesale sector is very intense. The change in the economic and social
environment in China increase the attractiveness of the wholesale industry. Meanwhile, the
high fixed cost in the sector of building inventory and acquiring land create high exit barrier
(Porter, 2008). Hence, the competitors are all determined to win. Metro is under the
competition from both direct and indirect competitors. The major direct competitor Is Sam’s

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club, which is the wholesale sector of Walmart, an American retailing and wholesaling
business. Like Metro, Sam’s club also operates a membership policy, selling a large variety
of imported products and private label products in large bulks. Hence, the two businesses are
considered to be in the same strategic group. Sam's club is targeting more on individual
customers as compared to Metro, but it also has a department targeting corporate customers
to compete with Metro. The similarities between Sam’s club and Metro bring significant
threat to Metro. This threat is further intensified by the high number of sales units Walmart in
China, with 439 in 2016 (Walmart, 2019). Although of which only 13 of them are Sam’s club
that directly competes with Metro, the retail unites helps build brand awareness for Walmart,
and attract customers to Sam's club, eroding Metro’s market share. Moreover, Huarun wanjia,
which is a Chinese retail business, also has a bulk purchase department to serve corporate
customers.

Threat of substitute product/ services

As a result of technological development, China’s e-commerce has grown rapidly (Kwak et
al., 2019), which lead to the rapid development of substitute service in the wholesale
industry. Instead of purchasing from the brick and mortar stores, corporate customers can
choose online channels. Alibaba is one example. It is an international online business to a
business platform connecting manufacturers and corporate customers in over 240 countries
(Anwar, 2017). Without the added profit margin for wholesalers, customers can get a lower
price by order from the manufacturer, and they can have products delivered at the door. The
lower cost and greater convenience attract customers to online platforms, diminishing the
market demand of the physical wholesale stores. The company admits in the annual report it
lags a little in developing the online service, and is aiming to invest more on this aspect, but
some customers have already been poached by the online sellers. This should alarm Metro of
the danger of failure to follow the trend.

Bargaining power of customers

The high rivalry in the industry, availability of the substitute service and the low level of
differentiation among propositions give customers high bargaining power. There is a surplus
of supply over demand, given the intense rivalry in the industry and availability of substitute
service. These factors result in a low switching cost for customers. Hence, it is important for
Metro to understand the needs and wants to retain customers. Metro’s performance on this
aspect is good, as it increases the customer switching cost by offering value-adding
customised service.

Bargaining power of suppliers

The suppliers have medium bargaining power. For Metro, the quality of products is crucial.
The company operates six purchasing centre in different parts of the world, with each of the
division specialising in one product category according to the local resources and core
competencies (Metro, 2019). It is important for suppliers to be reliable and dependable,
which gives them some power. However, given the large scale of the purchase order from
Metro, suppliers, especially the small and medium ones are dependent on Metro, which

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diminishes their power. The development of a range of private label further shifts power
towards Metro.

Threat of new entrants:

The need for scales and experience in the wholesale industry and access to supply chain build
up a high entrance barrier (Porter, 2008). The wholesalers compete on economies of scale to
offer low unit price, requires large store for product display and rely on a consistent supply of
quality goods. Therefore, threat of new entrant is relatively low for long-established
businesses with large scale like Metro.

From the analysis, it can be concluded there is a high competition in the wholesale industry.
The threat mainly come from the aggressive competitors and online substitutes. Although
Metro’s focus differentiation strategy helps it ease some of the threats, it is important to stay
alarmed and make continuous improvement in a highly competitive environment.

2.3 Internal analysis: Resource and capabilities

The above analysis is based on an external view of strategic thinking, which argues that a
business’ profitability is primarily determined by the external environment (Johnson et al.,
2011). This argument, however, has been contradicted by researchers advocates the resource-
based view (RBV), who believe a business’s performance is determined by its resource and
competences rather than the industry (Rumelt, 1991) and is the differentiation on the
resources that produce competitive advantages (Wernerfelt, 1984). Although the RBV takes
an opposite internal approach, a company’s resources are influenced by the general
environmental changes and the exploitation of resources provide opportunity to change
industry structure. For example, the possession of some key assets, including financial
capital, established logistic chain and management know-how enable the company to be a
market leader in the industry, hence preventing new entrants from entering the wholesale
sector. Moreover, the appropriate resources and capabilities including experience, managers’
insight and intelligence (Barney, 1991) are crucial to a business’s success, and the availability
and cost of such resources is partically determined by the quality of education, competition
on the job market, which are determined by the economic condition in a country. Therefore, a
resource analysis is also a useful framework to complement external environment analysis.
The below table summarises Metro's resources:
Table 3.
Valuable Rare In-imitable Non- Exploitable
substitutable
Tangible Y N N N Y
resources:
Cash, real estate,
equipment

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Brand name Y Y N Y Y

Well-established Y Y N N Y
Network

Experience and Y Y Y Y Y
capabilities in
providing high
standard value-
Adding services
Y-Yes
N-No

There are a large variety of resources, from tangible, intangible resources to capabilities.
However, the possession of resources does not necessarily contribute to the sustainable
competitive advantages (Barney, 1991). To achieve sustained competitive advantages, the
resource should be VRINE, which is the abbreviation of valuable, rare, inimitable, non-
substitutable (Barney, 1991) and exploitable (Carpenter and Sanders, 2013).

As part of the Metro AG group, Metro China benefits from the support from the corporate
parent, and this is a source of competitive advantages. Being a well-established corporate,
Metro AG can provide rich financial support, which gives Metro China competitive
advantage over other smaller competitors. However, the tangible resources, although valuable
and exploitable, can also easily be acquired by competitors, so they do not contribute to
sustainable value creation. The resources that have more strategic importance are the
intangible resources provided by the corporate, including access to human capital,
management practices, reliable supporting services such as delivery, marketing, information
technology, which are not readily available to other smaller wholesalers in the market, and
can be perceived as a source of sustainable competitive advantages.

However, Metro’s main competitor in China, Sam’s club, also has the support from the
Walmart group, which is also rich in resources. The indirect competitor Alibaba, which is
also part of a highly diversified and successful business group. Therefore, the resources
generated by corporate synergies are not perfectly inimitable and insubstitutable. In this
situation, the resources that most closely resemble VRINE resources are Metro’s experience
and competence in designing and delivering value-adding services.

Leveraging resources including network, physical assets and management skills, Metro
China creates value by achieving service excellence, which is the main source of
differentiation. Apart from selling products, the business also has a consulting service,

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providing customised solutions on issues such as product assortment, marketing and sales to
increase the corporate customers’ competitiveness (Metro, 2019). Another example is Metro
China’s catering academy. The below figure provides some information on the catering
academy.

Source: Metro’s catering academy, 2019

Metro offers several training courses, providing opportunities for customers to learn from
experts, and practice using recommended products that can be purchased from Metro (Metro,
2019). This value-adding service requires numerous intangible resources, and these are
considered VRINE resources. Some examples are the knowledge and expertise of experts to
provide business solutions to customers, professionals to teach the courses, and the social
relationship with the government to get licenses, acquire land to establish the catering
academy. The social complexity, arising from multiple stakeholders and social relationship
involved in providing the service makes It hard for competitors to imitate Metro’s strategy,
hence contribute the sustainable competitive advantages (Barney, 1991).

2.4 Financial analysis

A business’s performance is reflected on its financial statements (Bamber and Parry, 2014);
hence a brief analysis of Metro's 2017/18 financial statement was also conducted. The
company reported a with an increase of 0.7% on the like-for-like sales, at €36.5 billion for the
2017/18 fiscal year (Metro, 2018). However, despite the increase in sales revenue, its
operating margin dropped from 3.3% to 2.3 %. This indicates a drop in operational
efficiency. It has a current ratio of 0.8, significantly lower than the industrial average of 1.2
(Marketline, 2018). Similarly, its return on equity was also lower than the industrial average,
10.3% contrasted to 15.6% (Marketline, 2018). It is worth clarifying that this comparison of
figures has limitations since it is not on the performance of the specific wholesale business
sector and not the specific Chinese market, due to unavailability of more detailed financial

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statement. But this provides an overview of the group’s financial performance. The financial
situation has an impact on the corporate strategy planning and indirectly on the business level
strategy, since strategic decisions frequently involve the strategic alignment at the corporate
level, business level and operational level (Shimizu, 2011).

3. Strategic content
3.1. SWOT analysis
This section presents a SWOT matrix to summarise the above analysis. SWOT stands for
strength, weaknesses, which are identified through internal analysis, and opportunity and
costs, which are identified through the external analysis (David, 2009). The SWOT analysis
is a useful tool to help managers understand the relationship between each factor, and make
strategic decisions (Marshall and Johnston, 2019). A set of strategic recommendations will be
made based on four aspects: Strength-Opportunity, Strength-Threat, Weakness-opportunity,
Weakness-Threat.
Table 4.
Strength Opportunities
 Superior capabilities and experience in  The government’s support of the service
providing services to corporate customers industry in China
 Strong network with supplier, both local  Customers value the quality of life
and international sourcing
 Support from corporate parent

Weaknesses Threats
Higher operational cost as compared to  Intense competition from Sam’s club
online business-to-business platforms  The advent of local e-commerce Business-
Low liquidity to-business platforms, such as Alibaba
shifting of customers preference to online
purchase

3.2. Strategic choices

Strength-opportunity:
Proposition 1: With the rich resource base, and the favourable external environment, it is
possible for Metro to adopt a market penetration strategy to capture more market share of the
existing wholesale market with the same set of offerings (Ansoff, 1965).

Strength-threat:
Proposition 2: To reinforce Metro’s strength in providing service to corporate customers.
Some possible practices are investing more in talent recruitment, bringing in more fresh
ideas. It could also spend more resources on human resource management, such as improving

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reward systems, training, motivate employees and prevent the loss of the valuable human
capital.

Weakness-opportunity
Proposition 3: The financial situation may hinder Metro’s growth. Hence, Metro should make
efforts to improve the operation performance and current ratio. Metro could divest from
assets that are not generating value to reduce current liability, and cut labour expenses to
address these issues (Bamber and Parry, 2014).

Weakness-threat
Proposition 4: The weak financial situation diminishes Metro’s competitiveness, since it
prevents the company from investing in the value-adding activities such as talent recruitment
and training and information technology development. Therefore, as mentioned in
proposition 4, Metro should improve the financial situation. Metro should invest more in
developing the online-platforms to respond to the change in consumer behaviour.

4. Strategic process
Recommendations
After the identification of possible strategic actions, prior to the implementation, it is
important to consider the suitability, feasibility and acceptability of a strategy (Johnston et al.,
2011). The definition of each criterion is presented in the table 5.

Table 5.
Suitability Whether a strategy fits with the business's goal and external environment
Feasibility Whether the business has the resources and capabilities
Acceptability The level of anticipated return of implementation
Source: Johnson et al., 2011

The first proposition could be implemented by openning more physical stores to increase
geographic reach of customers as suggested by Chandler (1962). This seems to fulfil all
criteria at first glance. It is suitable, as it is aligned with the external environment and the
corporate strategy, feasible, with Metro’s established resources and capabilities and
acceptable, given the high market potential. However, the interaction between the SWOT
factors needs to be taken into consideration. Acknowledging the low cash ratio and high
operational costs, it is not sensible to continue to invest in large physical stores, which will
generate large overhead from land acquisition, utility bills, and labour costs.

To exploit the opportunities in the external environment, an alternative strategic

recommendation is for Metro to reorganise resources, and shift focus from physical stores to
online platforms as suggested in proposition 4. Metro has a large number of physical stores in

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China, but this is no longer necessary given the advent of the internet. Metro could rank the
stores by performance. The stores at the bottom of the list should be shut down to divest
resources and invest in other aspects, for example, the online platforms development
suggested by proposition 4. Another option is to open up some transportation hubs. The hubs
could support the operation of online platforms by performing at distribution centres. They
could also serve as click-and-collect points for customers to self-pick up pre-ordered items.
Hubs require less investment and generate less overhead as they do not require high
inventory, land area and staffing. By replacing warehouse stores with hubs, Metro could hit
two birds with one stone: reducing the operational cost while providing convenience to
customers. The liquidity issue could also be addressed, since selling off properties can bring
in cash. Although the change in the strategic focus require development of new capabilities,
such as IT expertise, new logistic management system and supply chain management
practice, Metro China has the appropriate resources to implement the strategy. Apart from the
tangible resources, another resource comes from the synergy effects within the Metro Ag
group. Metro Ag’s portfolio includes a wide range of supporting services. The group owns
many service companies to support different functions within the group, in the areas of real
estate, logistics, information technology and advertising. This can bring large return since it
better caters customers’ needs.

Given Metro’s strength in providing services, it should also invest more in this aspect to
further differentiate itself to sustain competitive advantages (Wernerfelt and Karnani, 1987).
To achieve this, it is also important for Metro to further develop and retain the VRINE
resources, which are the experience and capabilities to achieving service excellence. Human
resources are hence significant to Metro, as the employees' intelligence, knowledge and
experience are at the core of service delivery. Metro should make an effort to develop and
retain the human capital. Some possible practices are improving reward systems to better link
performance with pay to motivate employees and increase empowerment and engagement.
invest in training to make employees feel the organisation values them, and more
importantly, creates a culture that fosters innovation and creativity (Wilkinson et al., 2016).

5. Conclusion
From the above analysis, it can be concluded there is a level of strategic fit between the
business's strategy and the external environment and internal environment. The high rate of
economic growth and a stable political environment made China a favourable market for
wholesale business. Metro China made the right decision to adopt a focusm strategy, and
differentiate itself by providing unique value-adding service to corporate customers. It has the
VRINE resources, which are the specialties and experience on providing business solutions to
help them serve the target customers better than competitors, so there is also a fit with the
internal resources. However, the wholesale industry is at the maturity stage, with intense
competition, low growth and little differentiation of offerings, which may be the reason

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behind the performance drop. The major challenge facing Metro China is the competition
from Sam’s club, with have a similar business model and also rich in resources and
capabilities, diminishing Metro’s competitive advantages. Another significant challenge is
the advent of online wholesale platforms, as a result of the rapid information technology
development In China, which may hinder Metro’s growth.

In the present dynamic business environment, competitors continuously monitor and react to
one another (Smith et al., 2001) constantly changing the industrial structure. It is not the
absolute competitive advantages that matter the most, but it is the ability to create and
maintain relative strength to competitors that the lead to positive performance outcome
(Wernerfelt and Karnani, 1987). Therefore, businesses should make efforts in developing and
more importantly, maintaining its strength to differentiate from competitors (Sirman et al.,
2010).

Metro should pursue growth in the Chinese market, but the direction of expansion should be
on developing online platform and maintaining the excellence on service delivery. This will
help Metro to address weaknesses on high operational cost and low liquidity, menwhile
reinforce its strength at providing excellent value-adding service to corporate customers. To
achieve this, Metro should make more effort in developing and exercising the dynamic
capabilities, to reorganise resources, renew capabilities, engaging in organisational learning,
establishing and benefiting from networking (Teece et al., 1997). The recommendations made
in the previous section are complied with the corporate’s vision to better serving the
corporate customers, have the potential to generate value, and Metro have access to the
essential resource and capabilities, In addition, for an international business like Metro, the
changes in the host country can have significant impact on business operation, so constant
monitoring of environment and proactive measures are also crucial to business success, to be
able to respond to the changes in a timely manner(Johnston et al., 2011).

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