Carrefour

CARREFOUR

Carrefour is one of the leading retailers in France. In its financial statement for its 2003 accounts (Les Echos, March 4th, 2004), Carrefour defined its overall objective as being “profitable growth”. Indeed, the group will have to boost sales, as competition is especially fierce in this sector, but this cannot take place to the detriment of margins.

This objective can be separated into three subsections of performance: boosting sales, cutting costs, controlling the balance sheet.

Each of these aspects can be associated with specific action variables.

Boosting sales

The entire sector in France recently saw a wave of big mergers (Carrefour and Promodes, Casino and Leclerc for their logistics operations, Auchan and Mammouth). While external growth is still a potential action variable, mergers of this kind of scope cannot be carried out every day. This variable is rather intermittent.

The key performance driver is organic growth. This can take place through expansion abroad and boosting sales in France. Organic growth arises from opening new stores, but also developing sales in existing stores. With this in mind, the group’s strategy is clearly defined as a volume strategy, based on low prices and high volume. Differentiation strategies (setting itself apart through product quality and reliability, i.e. healthy, safe foods, etc.) would present two problems:

- The “mad cow” crisis showed that product quality depends largely on factors that the stores cannot control: at the height of this crisis, the affected departments posted sales up to 60% below objectives.

- A detailed analysis of consumer behavior shows that it is not as important to control the actual prices as it is to control the “price image”. That is, how customers perceive, more or less objectively, the group’s price positioning in comparison to its rivals. Some groups have an excellent price image, all the while maintaining higher prices than their competitors.

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