A comparative study of Wal-Mart & Carrefour – Strategies in Asia

Sirish Mellacheruvu

Came across an interesting article. Thought i should share it with you...
This has been written by a couple of chinese authors. I have tried presenting a gist of it

Wal-Mart was founded by Sam Walton adopted a circumventing strategy by starting their operations in small towns and then moving on to bigger cities. They maintain lowest price everyday and promises customer satisfaction together with high quality suppliers’ cooperation and prompt delivery to grow continuously at marked rates. Public offering begun in 1970, Wal-Mart then extended operation around the States and further expanded across borders. Wal-Mart today has branches in Canada, Mexico, Brazil, Argentina, Porto-Rico, UK, Germany, South Korea and Mainland China. It employs over 1.3 million employees in the US alone and has sales of 315,654.0 $ millions and profits of over 11000 $ millions. An of course the big fact that it always ranks in the top 5 listing of Fortune.

On the other hand, Carrefour initiated the idea of “hyper-market� in 1959 that stressed mass-sales, low delivery cost and discount everyday to achieve high rotation. Other key success factors include one-stop shopping, low selling price, freshness, self- service and free parking. It went public in 1970. Latest it has 12028 stores and more than 440 thousand Employees. The sales reached 78 billions and made it as the largest retailer in Europe.

As for their operations in Asia, Wal-Mart had established its footholds in Thailand, South Korea, and China. By contrast, Carrefour had extended it services to Taiwan, Malaysia, China, Hong-Kong, South Korea, Singapore, and Indonesia. Compared with westerns, Asia customers tend to buy impulsively rather than as planned and concern more price than package.

Strategies in Asia:

The increase in buying power in Asia since 1980, lead to both supermarkets and the hypermarkets, not being able to meet the requirements of one-stop shop buying and shopping as leisure. Consequently large number of mass retailers emerged providing customers with the price advantage on buying more and one-stop shopping .

Carrefour moved into markets like Spain, other parts of Europe, America etc that helped to accumulate a lot of international experiences. These experiences enabled it to win over Wal-Mart in emerging markets like China.

In contrast, Wal-Mart internationalized slower than Carrefour. But Wal-Mart also targeted China as the most promising market and started operating its first store in Hsang-chuin city in 1996 by supplying full range offerings and friendly service to win customers’ trust. At present, Wal-Mart has invested more than 1 billion dollars and employed more than ten thousand employees. It also considers China as one of its critical procurement center and more than 90% of their products sourced there to serve customers’ needs in the whole world

Marketing and Service Strategies

Wal-Mart built differentiated business departments to serve different market segments. As for Asia operations, it mainly uses supermarkets supplemented by warehouses. The major factor of Wal-Mart’s success is built on “lowest price everyday� practice that significantly reduces searching cost. Further, its high quality at low price offerings has won the reputation of high value-added company and loyalty of customers. Therefore, Wal-Mart could reduce expenses on advertisements and promotions and also increase turnovers of products. Wal-Mart always believes that customers always come first. Even in Asia, all employees follow three management philosophies—respect everyone, serve customer, and search for perfection. They fully carry out the practices of 8 teeth smile, ten-foot rule, and sundown rule; provide 95% products as a minimum for 95% of time. All these practices have become the benchmark of the retailing industry.

Carrefour adopts two-stage philosophy both in France and Asia to achieve stable growth. At the 1st stage, to enable branch stores to smoothly operate as fast as possible and to maintain high turnover. Carrefour decides to set up a new store after the investigations of location, store space and neighboring purchasing power. For example, it built a whole-selling or green store in industrial region and a general retailing or blue store in residential ones in Taiwan. By adopting this strategy, Carrefour could capture both big and small accounts in one shot and then grow much faster than its rivals like Makro.

At the 2nd stage, Carrefour focuses on customers, personnel training and market channels. It gradually enhances service quality, product innovation and emphasizes personnel cultivation. It further adopts strategic alliances to develop private label products to supply more offerings so as to meet the needs of one-stop shopping. At the same time, utilizing the system of commerce automation to centralize the purchasing matters of all stores, Carrefour could coordinate orderings, stock management and data processing for better control and decision-making.

In a summary, the key success factors for Carrefour are: one-stop shopping, extremely low prices, full range of choices, self-service, free parking. To Carrefour, price does not equal to competitive advantage but an essential means to survival. To maintain lowest price reputation, Carrefour keeps reminding customers to refund if they buy more expensive in order to comfort their purchases. To meet the nature of impulse purchase of customers in Asia, Carrefour chooses mass-selling, low delivery cost and promotion to attract and retain their buying. On the other hand, Carrefour also follows flexible pricing to reflect the differences of local markets. Weekly purchase has become part of daily life for customers in Asia; Carrefour provides wider shopping space and parking lot to make customers’ buying more convenient. In addition, it delegates each stores, as profit centers, to decide what to purchase, pricing and promotion strategies and constantly stresses discount everyday that is very different from that of Wal-Mart’s.

Physical Distribution and Digitalization Strategies

Wal-Mart has spent more than half billion dollars in information technology facilities to connect their worldwide stores with headquarters. Meanwhile, they request suppliers to adopt electronic data interchange system. With this system in place, Wal-Mart can transfer information swiftly and has saved three fourth stock-holding costs. Further, headquarters can finish stock-taking of each item for more than 4,000 stores in the globe within an hour. At present, each store sends information to his suppliers via internet and have products replenished in on-average two days versus five days of their rivals (Huey & Walton, 1992).

Comparing with Carrefour, Wal-Mart has a complete storage management system. Their transportation and logistics system, especially cross docking, are well known. This method enables Wal-Mart to replenish goods twice a week (once bi-weekly to their rivals) and reduce storage space and delivery time. As a result, Wal-Mart can reduce stock-carrying costs and transportation and therefore increase profitability by 2.5% compared with their competitors (Stern & Stalk, 1998).

Wal-Mart cooperates with NCR to construct quick response/efficient consumer response system (QR/ECR) to strengthen the supply and replenishment of each store. At the beginning, Wal-Mart has 7,000 gigabytes data that have been increased to 10 terabytes at present that make their commercial data bask as the largest one in the world. This QR/ECR system effectively facilitates the information exchanges among suppliers, Wal-Mart and their stores that substantially increase operational efficiency, customers’ satisfaction and profitability. Wal-Mart also has 6-channel satellites to do teleconferences and videoconferences to communicate with their stores and demonstrate their new products. Wal-Mart also cooperates with IBM to set a brand new on-line shopping site named Walmart.com. This site provides full range products from low to high price items. As for physical distribution, Wal-Mart allies with local retailers for customers to take what they have purchased at the website. In contrast, Carrefour, Sears and Oracle jointly built “global net exchange� supply-chain e-commerce system in 2000. Globally, more than 50 thousand suppliers conclude transactions electronically amounted to 80 billion dollars annually. Carrefour’s website in France had markedly started to provide foods, banking, touring, and win services at the end of 2000. Further, they will invest one billion Euros in develop their internet businesses in three years.

Human Resource Management Strategy
To treat customers friendlily, reduce cost, and educate employees are consistently practiced in Wal-Mart both in the States and Asia. To treat new comers in the company fairly, make them perceive responsibility and participation and share information, the following enlightenment and inspiration measures are undertaken.

1. Education and training: Through learning by doing with superiors in the first 16 weeks, new staff can accumulate experiences and skills. They can also take courses supplied in the Wal-Mart Institute and have job rotation opportunity to enrich their expertise.

2. Regularly announce performance: Each store has to announce its profit, purchasing, sales and percentage of discount regularly to make all employees informed.

3. Profit sharing: Employees who has worked in Wal-Mart for more than one year and worked over than 1,000 hours are eligible to this profit-sharing scheme.

4. Stock option: Allow employees to buy Wal-Mart stock at 15% off the market price

5. Benefit-sharing from reduced depletion: If depletion of stocks could be controlled within the limit of target, each employee will be awarded maximum 200 dollars.

6. Motivate and challenge his/or her partners for better ideas everyday.

7. Cultivate employees with ambitions to become a leader of stores within a store.

8. Assist employees to conquer operational difficulties in pursuing their goals.

In contrast to Makro’s localization strategy, Carrefour stresses more on the hand-down of corporate heritage. In the early stage of foreign market entry, Frenchmen take the positions of top-level management constantly to infuse management philosophy of “serve customers� and “action orientation� into each store overseas. When walk into any stores of Carrefour, you will see many staff walk around to replenish stocks all the time. The manager in charge of a store also wanders around the store once it is open.

Comparison of Strategies

From the comparisons of strategies in Asia of Wal-Mart and Carrefour, this study summarizes the common and different part of their strategies. They all adopt the same strategies in the following practices.

Firstly, both stress the culture of humane and provide employees with best career planning, education, training and incentives.

Secondly, supply products at lowest price but highest value-added every day to reduce the searching cost and build trust and loyalty of customers.

Thirdly, localizing sourcing to reduce transportation expense and exploit economies of scale.

Fourthly, emphasize the creation of friendly atmosphere at every store where employees wander around to replenish goods and see if any assistance required.

On the other hand, differences in Asia strategy are reflected in the following facets.

First of all, Carrefour internationalized earlier than Wal-Mart, the former established as many stores in big cities as possible but the latter adopted “circumvent cities from countries� strategy to steadily cultivate talents and accumulate experiences.

Secondly, Wal-Mart emphasizes “lowest price every day� to win the best corporate image but Carrefour focus on “discount every day� to attract customers to buy impulsively.

Thirdly, basing on the concept of “every day low costs� (EDLC), Wal-Mart implement cross-docking technique simultaneously to increase operational efficiency and control cost in global logistics. Carrefour, on the other hand, can only rely on the flexibility from local procurement of individual stores to exploit the benefits of localization because they do not yet established global logistics system.

Finally, Wal-Mart has various stores that include American discount store, supermarket, Sam’s Club membership warehouse, and drugstore by the streets based on the characteristics of customers. As for Carrefour, most of their stores are discount ones but they also develop a mixed strategy nowadays.


Conclusion

With these big guns planning their entry into India, it is good to know the way these companies operate and the benefits that retail professionals would be gaining in near future.