Metro Cash and Carry

Survival Mode

Given the circumstances in India, Europe, Russia, and China, Metro is on the verge of operating in survival mode. For starters, Metro derives only 4% of its revenues from outside eastern and Western Europe. Added to the fact that Germany, which accounts for nearly half of Metro sales, isn’t growing, one would speculate that Metro must capitalize on growth opportunities. As a matter of fact, Metro prides itself for capitalizing on early-entry growth.

Due to the battening down of hatches by the Russian government, Metro moved into a business-friendly atmosphere and capitalized from being one of the first of its kind in the market (Pg. 7 last paragraph). However, there is ample evidence suggesting early-entry growth in Russia is over. With land unavailable, increased competition due to accession to WTO, high logistics costs, and a declining consumer base population, there are several reasons to believe that Metro will deploy its capital to other markets.

The governments role in China was different than in Russia. In China, there was a move away from centralized deployment of resources to a local control of resources, whereas in Russia there was a move toward centralized deployment of resources and away from local control (Pg 7 last paragraph, Pg 5 paragraph 5). Therefore, successful growth in China is dependent upon Metros’ ability to adapt to local conditions. Some of those conditions include fierce competition, rising land costs, and cultural differences such as wholesale/private definitions. Evidence suggests Metro has not adapted to these local conditions extremely well. They have only opened 8 stores in 5 years in China, whereas they opened 25 in Russia over the same amount of time. Unfortunately, Metro appears to have failed at capitalizing on the transfer of power to local authorities.

Unstable control of government at the central and state levels has impeded growth in India. When Metro entered the Indian...