Case Summary

Metro Cash & Carry (MCC), a division of the German retail giant Metro AG, entered the
Indian market in 2003. MCC's entry into the market was marked by some challenges,
including a lack of infrastructure and local regulations. However, MCC overcame these
challenges and achieved success in the Indian market.

MCC opened its first store in Bangalore, India, in 2003, and it was an instant success. The
store catered to the needs of small and medium-sized enterprises (SMEs) and offered a wide
range of products at competitive prices. MCC's success in Bangalore prompted it to consider
further expansion in India. MCC faced some challenges in expanding to other parts of India,
including high real estate prices and local regulations.

MCC's success in India was also due to its innovative approach. For example, the company
had to adapt to the local market by offering a credit system that was tailored to the needs of
SMEs. Additionally, MCC used its global network to source products at competitive prices,
which allowed it to offer products to Indian consumers at prices that were lower than those of
its competitors.

MCC also had to deal with some negative publicity in India. Some critics accused the
company of not complying with local regulations and of putting small retailers out of
business. However, MCC worked to address these concerns by engaging with local
authorities and by taking steps to ensure that its operations were fully compliant with local
regulations.

Despite these challenges, MCC continued to grow and expand in India. The company opened
new stores in other parts of the country, including Kolkata and Hyderabad, and it considered
using innovative formats, such as multistory stores, to overcome high real estate prices. MCC
also invested in local agriculture and worked to develop the supply chain in India.

Overall, MCC's success in India can be attributed to its innovative approach, its ability to
adapt to local market conditions, and its focus on serving the needs of SMEs. While the
company faced some challenges, it was able to overcome them by engaging with local
authorities and by taking steps to address concerns raised by critics.

Qno.1- What have been MCC's key competitive advantages as it has moved into the
emerging market?

 Ans.- Metro C&C model

 Exploiting capabilities - RAT Test

RELEVANT :

 In the 1990s China relied mainly on wholesale markets for fresh food items and some
processed foods. The use of centralized warehouses for easily stored processes foods
and nonfoods was increasing
 An inefficient distribution system and restrictions on interprovincial trade resulted in
a situation where 90-95% of all food products sold were made in China
APPROPRIABLE:

 Metro has formed a 60/40 JV with the Jinjiang group, a large state-owned enterprise
with a nationwide presence and good ties to China’s central government agencies.
Later, China allowed metro to increase its ownership stake to 90% of the JV. – a
barrier for competitors

TRANSFERABLE:

 Metro C&C had challenges setting up their stores in China – The entrepreneurial
mindset of the Chinese, real estate issues, educating the customers about their value
proposition
 However, they have overcome all these problems and were able to set up stores in the
basements of large buildings, dedicating 25 people per store to educate customers.

Creating new capabilities:

 Metro took over Makro, a cash and carry chain set up by a 100-year-old coal trading
company. Impressed by the Metro C&C model, they set up similar stores called
Makro, in countries that did not compete with Metro across Europe, South America,
South Africa, and Asia. The company benefitted from Makro’s international expertise
and experience

Qno.2- What role did institutional context play in challenging MCC's wholesaling
format in Russia, China, and India?
Ans.-
INSTITUTIONAL CHALLENGES FOR MCC IN RUSSIA-
POLITICAL-

 Invited by the government to create taxable income, transparent distribution channels

MCC had to deal with corruption and bureaucracy at all levels
 Land unavailable due to government leases for real-estate

ECONOMIC-

 Lack of infrastructure and absence of central highway system

 Had to invest a lot in logistics (travel 4 days for 2700kms to reach company hub)
 WTO accession would increase competition in retail
 Decline in population by 50% by 2050
INSTITUTIONAL CHALLENGES FOR MCC IN CHINA-
POLITICAL-

 Fresh negotiations in each political network for each new market

 Had to show the benefits for the local area to provincial heads

ECONOMIC-

 Poor distribution system

 Widespread spirit of entrepreneurship and high competition from local retailers
 High land prices

SOCIAL-

 Cultural gap between German model and Chinese expectations

 High customer education required
 Contact and Educate about value preposition
 Differences in tastes

INSTITUTIONAL CHALLENGES FOR MCC IN INDIA-

POLITICAL-
 Barred from purchasing fresh fruits and vegetables directly from farmers
 Democracy permits multiple parties to co-exist - regular amendments in laws and lack
of coordination in both levels
 Decision making in different levels with different lists (central and state)
 Protests, accusations, defending as wholesaler in courts

ECONOMIC-
 No cold storage infrastructure
 Supply chains between rural and urban areas are weak
 Imposing minimum quantity purchase requirements
 High real estate costs

Qno.3-What would you recommend to MCC's management towards strategic expansion

and public relations in India going forward?

Ans.-

Based on the information provided in the article, here are some recommendations for Metro
Cash & Carry's management toward strategic expansion and public relations in India going
forward:

Strategic Expansion:

 Consider opening more locations in other metropolitan areas such as Kolkata and
Hyderabad.
  Explore different formats, such as a vertical (multistory) store, to compensate for high
real estate costs.
 Capitalize on the high margins on fresh produce by investing in the agricultural
supply chain to bypass middlemen.
 Set up high-tech, temperature-controlled warehouses across the country to sort and
grade fruits and vegetables, and establish precooling centers to prevent early rotting.
 Create rural business hubs to function like mandis, with the company as the sole
buyer.
 Focus on delivering reliable electricity, water, and public transportation, especially in
cities where property taxes are not effectively levied and collected.

Public Relations:

 Ensure compliance with all central and state-level statutes to avoid accusations of
non-compliance with local regulations.
 Continue discussions with the government to resolve any compliance issues related to
stocking agricultural commodities in distribution centers.
 Build strong relationships with local businesses and investors, potentially through
partnerships and alliances.
 Communicate the benefits of the C&C concept to the Indian market and address any
concerns or criticisms that arise.
 Demonstrate a commitment to the local community through corporate social
responsibility initiatives, such as job creation and sustainability efforts

Based on the information provided in the article, here are some recommendations for Metro
Cash & Carry's management toward strategic expansion and public relations in India going
forward:

Strategic Expansion:

 Consider opening more locations in other metropolitan areas such as Kolkata and
Hyderabad.
 Explore different formats, such as a vertical (multistory) store, to compensate for high
real estate costs.
 Capitalize on the high margins on fresh produce by investing in the agricultural
supply chain to bypass middlemen.
 Set up high-tech, temperature-controlled warehouses across the country to sort and
grade fruits and vegetables, and establish precooling centers to prevent early rotting.
 Create rural business hubs to function like mandis, with the company as the sole
buyer.
 Focus on delivering reliable electricity, water, and public transportation, especially in
cities where property taxes are not effectively levied and collected.

Public Relations:

 Ensure compliance with all central and state-level statutes to avoid accusations of
non-compliance with local regulations.
 Continue discussions with the government to resolve any compliance issues related to
stocking agricultural commodities in distribution centers.
 Build strong relationships with local businesses and investors, potentially through
partnerships and alliances.
 Communicate the benefits of the C&C concept to the Indian market and address any
concerns or criticisms that arise.
 Demonstrate a commitment to the local community through corporate social
responsibility initiatives, such as job creation and sustainability efforts