University of Chicago
Type of paper: Thesis/Dissertation Chapter
Contrast of Carrefour and Wal-Mart
Since the American entrepreneur, Clarence Saunders, opens his first Piggly Wiggly store in Memphis, Tennessee, in 1916, the concept of self-service store has swept the globe. With the largest population in the world, China is expected to be the world’s biggest retail market which is now already the world’s fastest-growing market. ( Anon, 2011:1) As the world’s first and second largest retail groups, Carrefour and Wal-Mart are one their way piling in. However, with 5000 years of traditional history and 30 years of planned economy, china has already formed its own market tradition.
Though, the two giants both need to face the special Chinese market, in some aspects, they use different strategies and have different market feedback. This essay will illustrate the similar strategies the two retail groups have been using and also analyze the ways they use to adapt to the Chinese market differently. To begin with, for opening the Chinese market, Carrefour and Wal-Mart both choose to cooperate with the local commercial. $1 billion was given to Wal-Mart’s 100 hypermarkets’ supply chain, ranging from food to electronics (Shu-Ching, 2010, P. 1). Similarly, Carrefour also tried to adapt to local conditions, i. . cooperate with Lianhua Supermarket Company in Shanghai. The reasons why they cooperate with local partners is not just because of the legal considerations, but also to have a deep understanding of the difficult and complex Chinese market (Peter, 2006, P. 6).
Nevertheless, they use different strategies according to different company development plan. Wal-Mart focuses more on the long term partnership nationally or even internationally. Considering the different regional culture and local policy, Carrefour changes partnerships by local markets (Peter, 2006, P. ). Furthermore, Carrefour adopts different strategy throughout all its global market, focusing on locally sourced products, as well as its local management teams, which are almost comprised of domestic employees to be more familiar with the local tastes. Also, on purchasing larger market shares, expansion strategy is common used by the two retail market giants. Since Carrefour opened its first store in china in 1995, it has already operated 73 hypermarkets in 29 cities which makes about $2 billion profit (Peter, 2006, P. ).
Likely, 338 shops in 124 cities makes Wal-Mart $7 billion annually which is just a little bit lower than whole Carrefour shops’ profit (Anon, 2011, P. 2). Moreover, they both regard second- and third-tier cities as a good growth opportunity, and have already built shops in western cities which are not so developed. Even though, they perform different strategies in expanding their market. Firstly, Wal-Mart aims at making central distribution center, while local distributors are more considered by Carrefour.
Secondly, hypermarkets often constitute larger shopping and entertainment complexes, therefore, a large amount of Carrefour stores are built at the city center for customers to go by foot or by bike. Comparing to this, edge-of-town is where Wal-Mart outlets often located, where customers can have large parking facilities or even shuttle bus provided (Moreau, 2008, P. 1). Last but not the least, Carrefour builds its stores based on the organic expansion primarily. By contrast, Wal-Mart combines organic growth with large-scale acquisitions, which leads to its Chinese revenues doubled.
Lastly, to perform well in Chinese tradition market, Carrefour and Wal-Mart both have their changes in shops and marketing. On the one hand, for saving a million yuan in electricity and water costs, two retail chains’ common aim is to achieving “zero-carbon” stores by next year, which forces them to open a range of new energy saving stores in China, such as using waste gas to heat water and fluorescent lights, making use of natural lighting and integrating energy-saving technologies (Anon, 2009). On the other hand, to discover new growth areas in retail profit, selling medicine has been put on the agenda.
The two giants have already been in close contract with the Ministry of Commerce on the medicine retail business and affirming that world’s largest retailer’s distribution network will be covered by medicine sales (Anon, 2005). Although there are a lot of similar strategies in market development, the two retail groups also have their different development focus. In the first place, Wal-Mart awards its employees based on profit-sharing stock, which will improve employees’ skills, trust and constant work, while Carrefour focus more on salaries.
In addition, Carrefour adopted a multi-format strategy, i. e. open smaller outlets in the discount format to create another profit growth, while Wal-Mart develops its presence in the hypermarkets format exclusively (Moreau, 2008, P. 3). In details, proved to be a dynamic format competing against hypermarkets operators, department stores get a CAGR increase of 9%, 2002-2007. Therefore, department stores sales continue to be boosted by the expansion period decided by Carrefour (Moreau, 2008, P. 2).