Carrefour Draft

Case Context

Charts

Problem Statement

Given the current government restrictions on the hypermarket industry, what are the strategies that Carrefour should employ in order to finance the growth of both wholly owned stores and affiliates while preparing for further expansion?

Assumptions:

1. The point of view of the management of Carrefour was used.

2. Time frame: 1971

3. Revenues come from sale of merchandise only

AOC

EXTERNAL

-current competition

- government policies

-pressure groups

INTERNAL

-joint ventures and franchises

- core competencies

a. convenience

b. cost leadership (price)

ACA

Equity Financing

Liability Financing

1. Conservative Strategy (long term borrowings to finance both short term and long term operations)

Pros: less risky

Cons:

2. Aggressive Strategy (short term borrowings to finance both short and long term assets)

3. Matching Strategy (long term borrowings to finance long term assets and short term borrowings to finance short term and seasonal assets)

ANALYSIS

S:

* Established hypermarket

* First mover advantage

* Convenience and price

* Strategically located

W:

* Lower net profit margin compared to other traditional outlet

* Low liquidity

* Takes longer time to take for joint ventures and franchises to achieve the same growth as wholly owned stores

O:

* Opportunity to grow and expand

T:

* Government restrictions

* Current rivalry/competition (inside and outside France)

* Pressure groups (independent shopkeepers)

* Near saturation point (selling area)

BCG matrix: star cash cow

Wholly Owned

G* vs actual growth: actual growth>g*, needs financing

How?

1. increase m – vertical analysis, increase prices but less than that of competitors |

2. decrease d – connected to the first |

3. increase A by increasing L |

4. decrease E or constant |

5. increase S – increase prices but less than competitors |

EFR

Pros...