Case study:

Carrefour China, buildung a

greener store

Group 8:
Rafael Zielinski
Adrian Flohr
Clement Moine
Emma Lundgren
Laura Olive Lago
David Monaco is the asset and construction director of Carrefour China. He
wants to introduce a project called „Green Store“ in China. The following
report discuss this project by four questions.

1. As Monaco, how would you size up the situatuion? What are the
major issues for Carrefour China? What are your key concerns about
the green store project?

With 220 stores and a rapidly growing emerging Carrefour is one of the five
major, in terms of markets shares, food-retailers in China. In a global
perspective Carrefours is the second largest retailer in the world. Though,
being a significant market player does not mean that revenues flow in to the
company on a regular and safety basis, especially not in a environment that is
under a constant change. In the recent years many companies around the
world have faced an increased pressure from both the society and their
customer to take responsibility for the environmental issues which their
business causes. Carrefour is not an exception, so in order to continue
competing on the global market the company needs to adapt to this changed
demand. For Carrefour the growing concern for environmental questions
should not be seen as just an obstacles that is going to be expensive to
replay, but it should also been seen as an opportunity. The company has
already made some successful local activities with sustainability in mind. More
activities and operating actions are planned, under construction or calculated.

In the beginning of Carrefours development the company operated in an era

with many expansions. A lot of project with opening new stores were
managed at the same time. The rapidly growth of stores and the decentralized
responsibility for each store to a specific store manager made the process
quiet uncontrolled. The various shop owners competed against each other to
see who could reduce the construction costs most. Together with a careless
handling by both personnel and customer of the stores equipment led to
destruction and a need for reparation. When Monaco entered the company he
made some changes in order to create a more standardized expansion
process. He managed to lower the averaged cost of store opening, but is now
up for a new challenge. In order to both satisfy the society’s demand for
sustainability and to create sustainable and economic efficient solutions for
the company Monaco must decide in what degree the environmental aspect
should be considered in future developments. Monaco’s idea is to create a
concept with a greener store in which energy conservation is the highest
priority.
According to the success of the environmental actions that have already been
done by Carrefour this concept could become a competitive advantage. In the
long-term the reduced energy consumption and the reduced replacement cost
for unsustainable equipments should also provide economic benefits. Despite
this there are some factors that could adventure the success of the greener
store project.

There is always a question about costs when calculating a new project.

Replacements of current equipments or systems and investments in new
ones are an expensive operation. To succeed with a project it is important that
the customers value the attributes that the projects add to the product
(Lasserre 2012, p. 13). People around the world pay more or less attention to
environmental questions. If the Carrefours customers do not value this kind of
investments the payoff in increased sales will probably not occur. In that case
there should arise a situation where is a lack in the fit between strategy and
culture. A standardized global model would therefore be unsuccessful.
Monaco is also worried about how the customers would react on these kinds
of actions. There is always a risk that people think Carrefour is trying to
produce a picture of the company as a responsible player that does not match
the reality. Furthermore the competition in China is huge. Perhaps work must
be done in a cheap, quick and environmentally destructive way in order to be
able to compete on the market.

2. Evaluate the options for the green store? What level of LEED
certification, if any, should Carrefour seek for this store?

The main problem of creating a green store is that there are no certain steps
to follow if you want to go ’’green’’. In the last years the importance of
sustainable development grew. Customers and anti-globalization
organizations are paying more and more attention to sustainable
development, because for example the carbon dioxide emissions increased
100% over the last ten years in China (Lassere: Global Strategic
Management, page 431).

So why do Carrefour need the green store? First they can reduce the
consumption of energy which gets very expensive and Carrefour can
decrease the cost for maintenance and operations. Second they can lure the
potential costumers which care about the environment. How can Carrefour
show that they care about the environment? One option is the LEED
certification. Every Carrefour store could reach the basic certificate without
any problems and extra costs, but that should not be the goal, because it
would look like they do only the needful things to get positive attention. If they
want to get the LEED certificate, they should stand out of the mass. On the
one hand the LEED certification is a very popular rating system and it’s easy
to compare Carrefour to other companies , but on the other hand there are
some negative aspects which play an important role. First it is based on the
American law and there exists the risk that the Chinese government creates
their own standards. Furthermore many points from the LEED certification are
hard to proof or realize e.g. an upgrade of water effiency with the use of for
example rainwater. That is a big economic risk for the reason that it’s very
cost-intensive and the possibility of losing the money when the Chinese law
will be too harsh. Instead of getting the LEED certificate Carrefour could
invent their own green standards.

One possibility is the pollution prevention instead of pollution control (Hart:

Beyond Greening: Strategies for a Sustainable World, page 8). They could
use recycled material to build shopping trolleys or they could offer a reuse
station for cooking oils. Another point is that Carrefour produces many
products on their own, so they have the possibility to design them
environmentally friendly. They have the opportunity to use and sell products
that are easy to recycle. (Hart: Beyond Greening: Strategies for a Sustainable
World, page 8). By the way Carrefour had many local environmental sucesses
e.g. the Greenlight Award in Italy , but now it is the challenge for the corporate
sustainability department to combine the local strategies to one global
strategy.

All in all sustainable development is important for customers and profit on the
long-term is essential for survival. If Carrefour wants to make profit, they have
to invest money in green strategies sooner or later, but in our opinion the
LEED certificate is not necessary. The costs are greater than the benefit
(homo oeconomicus). Carrefour should expand their prooved strategies e.g.
make deals with electronic savings companies such as Schneider or use their
latest technologies like hcf3 refrigerators in Southeast Asia. First they should
implement a green strategy in their shops before they are going to open more
stores. Investing money in the green strategies is an investment in the future.

3. What actions do you recommend for Monaco? How might he ensure

that his approach will not disappear over time, even if he is moved
elsewhere in Carrfour?

First of all, he has to build a very positive image of the brand with a clever
marketing strategy and positioning. When the image is fixed in the mind of the
society, it is very hard to change it. Of course, it is not easy to do it, but he
should invest in advertising campaigns to promote the quality of their products
(fresh food) and the ecological and sustainable image that he would like to
carry. Thereby offering each consumer an unique consumption experience
that they will remember and share.

What would be possible options to do so? As written in the text he has to

standardize all the shops with a global sustainable and green management
strategy. He can do so through investments in environmental-friendly and
energy saving equipment (lighting, air conditioning system, central
refrigeration system, system control of temperature and humidity …) in each
store all over the country. If all the stores are standardized, it should be
difficult to change all of the equipment and to build another strategy.

He can also establish another sustainability department in Beijing which can

control and manage the sustainable strategy in cooperation with him. Like
that, Monaco can monitor the development and give new instructions every
time he wants an advancement of his strategy even if he will work in another
department in the future.

Finally he has to watch the competitors in order to be different and special.

Like that Carrefour is able to build an image that customers can identify with
themselves to the store. Furthermore he can anticipate potential innovations
or changes in competitors’ strategies.

4. As Monaco’s boss, do you think the green store initiative is the best
use of his limited time and resources? Is China the right place for
Carrefour’s Green Store?

Environmental issues are not merely just currently problems, but rather one of
the key topics in the future. Due to a constantly growing world population,
increasing economies and limited natural resources, higher demand for
energies, water supply problems and, because of growing Global emissions of
carbonat dioxide, a higher global warning effect are expected (Lasserre 2012,
p. 464/465). Sooner or later changes must be done which lead to the path of
sustainability and environmental-friendly companies. As a big global company
and retailer, Carrefour stands in the center of public’s attention which expect it
to take care of these topics. Therefore we think the green store initiative which
is supposed to reduce consumption of nonrenewable energies and work with
environmental-friendly equipment is a very good use of the company’s limited
resources. Furthermore modern energy-saving equipment would initially
increase construction costs in the present but reduce long-term operating
costs significantly in return. As a result Carrefour has the opportunity to get
competitive advantages not only by lowering costs but also by an edge in
being environmental responsible compared with its competitors.

China is rated as an emerging country and belongs to the emerging giants:

Brazil, Russia, India, China, and South Africa (BRIC). These countries
distinguish through a high economic growth, an increasing development of a
middle class, a high degree of infrastructure investments and the opening of
their market to international trade and investment (Lasserre 2012, p.
400/401). On that account China establishes a unique opportunity to test the
Green Store, because there are a lot of possibilities to develop and expand
the project. In contrast to this there are several risks as well like competitive
risks (import protection, corruption) and operational risks (regulations).
Carrefour cannot be sure if the Chinese Government is not going to pass a
law with stricter environmental standards than the existing guidelines in the
United States (LEED, etc.) and the European countries for example.
Alternatives could be other emerging countries especially different BRIC
states. Depending on the country the scope of opportunities like economic
growth and risks like regulations varies. The choice of the country should be
made after evaluating both aspects.

In our opinion China is a good choice to try the green store initiative, because
of the possibilities the high economic growth and huge human capital offer.

Summary/Reflection

The reflection on this article deals with responsibility for environmental

problems from a business vision. The green concept store should be a
competitive advantage for the company. The company should increase sales
and reduce costs, obtaining long-term economic benefits. To be successful
with the project, the strategy must match the with the culture.
Carrefour should focus on creating their own green standards. Consequently
propose new business visions. Invest resources in the creation of green
strategies is a successful differentiation strategy. Carrefour should
standardize all stores with a global sustainability strategy. Therefore, to get
different results should improve corporate sustainability department.
Finally if Carrefour wants to be better than their main competitors, the
company must innovate in some internal and external aspects. It has to
introduce structural changes in the area of business to improve profitability
and to offer better services to their customers. The Chinese market is one of
the most potential market. This allows it to be the right place for Carrefour's
Green Store.