A Comparative Study of Asia Strategy: Wal-Mart Versus Carrefour Essay

Wal-Mart, the number one retailer in the world, persistently maintain three fundamental beliefs—respect everyone, total-solution service, and in search of highest quality—to shape their unique corporate culture. They insist lowest price every day, carry out total solution services, effectively control the cost of global logistics, fully leverage information technology to become e-company, powerfully motivate employees to work and share knowledge and adopt a play-safe strategy in internationalization.

As for the number two player—Carrefour, they provide customers with one-stop shopping, lowest price, fresh products, self-served shopping in a hypermarket with free parking lots. In contrast to Wal-Mart’s internationalization strategy, Carrefour expands to foreign markets faster and more flexible than their counterpart. This study investigates the configuration in Asia, marketing service, product procurement, logistics management, digitalization and human resource management of Wal-Mart and Carrefour. The authors then propose strategic implications for global retailers to increase their management effectiveness and efficiency.

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Introduction Wal-Mart founded by Sam Walton adopted circumventing strategy by starting her operations in small towns and then expanding to bigger cities. She maintains 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. She has branches in Canada, Mexico, Brazil, Argentina, Porto-Rico, UK, Germany, South Korea and Mainland China.

Currently, she employs more than 1. 3 million staff. In 2001, her sales reached more than 217 billions and won the title of biggest enterprise in the globe. On the other hand, Carrefour initiated the idea of “hyper-market” in 1959 that stressed mass-sales, low 914 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. She started public offering in 1970, acquired 45 shops in Europe in 1991, and merger with Promodes in 1999.

At last, she had 9,225 stores and more than 340 thousand employees. The sales reached 78 billions and made her as the largest retailer in Europe and the 2nd largest in the world. As for their operations in Asia, Wal-Mart had established her footholds in Thailand, South Korea, and China. By contrast, Carrefour had extended her 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.

This study focuses on the comparisons of Asia strategies of Wal-Mart and Carrefour to serve as management references to other retailers. Configuration in Asia Accompanied by the increase of purchasing power in Asia since 1980, both traditional supermarkets and department stores were not be able to meet the requirements of one-stop shopping and shopping as leisure. Consequently, huge mass retailers emerged by providing customers with buying large quantity at low cost and one-stop shopping. Makro from the Netherlands first entered Taiwan and quickly captured more than 30% market share in 1989.

Then Carrefour established a joint venture with Presidential Enterprise Corporation in Taiwan followed Makro’s path by providing free parking, fresh and full range products at low price to customers. Carrefour started her operation in big cities and knew the purchasing power there. Owing to the restriction of setting-up of mass retailers in France, Carrefour was forced to go overseas and built her first store in Spain. Then she moved to other parts of Europe, America, and Asia that accumulated herself with plenty internationalization experiences.

Those experiences enable Carrefour to win over Wal-Mart to hold leading position in emerging markets. Carrefour entered Taiwan in 1989 and had 27 stores nationwide in 2001. She went to Malaysia in 1994 and had 6 stores there in 2001. Followed by Mainland China in 1995, Carrefour had built 27 stores there in 2001. Up to 2001, Carrefour had 15 and 22 stores in Thailand and South Korea (both served in 1996), respectively. Then she penetrated in Singapore in 1997, Indonesia in 1998 and Japan in 2001 where Carrefour had 1, 8 and 3 stores respectively in 2001. By contrast, Wal-Mart internationalized slower than Carrefour.

The former began overseas operations to Canada, Mexico, Europe and Asia in the middle of 1990. In addition to her breakthrough in Thailand and South Korea, Wal-Mart also targeted China as the most promising market and started operating her 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. She also takes China as one of her critical procurement center and more than 90% of their products sourced there to serve 915 customers’ needs in the whole world.

Wal-Mart chose Shang-chuin city as their door into China because the later locate close to Hong-Kong that is the door to outside world and the city government provided her with preferential tax treatment. Consistent with her circumventing strategy, Wal-Mart was able to develop her territories by first entering South regions to accumulate operating experiences and cultivate talents and then further expand to other bigger cities in China. As for Carrefour, she had 27 stores and employed 16 thousand residents there in 2001. In the near future, Carrefour plans to build 10 stores per year and move to western parts of China.

In a summary, Carrefour established stores in 15 cities first and then integrated them to gain economies of scale and scope. Marketing and Service Strategies Wal-Mart built differentiated business departments to serve different market segments. They included supermarket (1,294 stores in 2001), one-stop shopping store with entertainment facilities, so-called Sam’s Club member warehouse, (528 stores), discount store targeted family (2,348) and small scale stores selling foods and related stuff (19). Wal-Mart has discounted stores in Canada and Mexico. As for Asia operations, she 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, her high quality at low price offerings has won herself 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—to entirely implement her humane service.

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. Meanwhile, to decentralize authority of set-up branches to link with community development that finally leads the increases of local tax, employment and further prosperities of communities.

Carrefour decides to set up a new store after the investigations of location, store space and neighboring purchasing power. For example, she 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 her rivals like Makro. At the 2nd stage, Carrefour focuses on customers, personnel training and market channels. She gradually 916 enhances service quality, product innovation and emphasizes personnel cultivation.

She 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. Because 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, she 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. Sourcing Strategy Wal-Mart is less experienced than Carrefour in foreign market expansion. The former adopts both the practices of localization and centralization. Headquarters integrates resources around the globe and distribution system and also invents the technique of cross docking to achieve the objective of every day low costs.

Localizing their sourcing in Asia enable Wal-Mart to meet needs of local customers and reduce lead-time and delivery cost. Wal-Mart also builds international procurement headquarters that provides sourcing information of local retailers and centralizes sourcing practices and then directly distributes goods to each distribution center. Carrfour always emphasizes the competitiveness of sourcing and the turnovers of commodities. They exploit the potentiality of economies of scale and accommodate local differences of customer preferences.

For local sourcing, fresh fish meat for example, is to achieve the objective of quick response (Lhermie, 2001). Although Carrefour also starts to centralize sourcing operation, suppliers still use to deal with local stores directly. Carrefour has their products sourced locally more than 95% in China since their entry in 1995. They build global procurement centers, coordinated by Shanghai and Hong-Kong, in big cities that are directly responsible for headquarters in France. China has become the biggest procurement center in Asia that procures more than 1. billion dollars currently. 917 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. % 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 (Margolies, 1995). 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 18 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 his 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. 9.

Social responsibility: Wal-Mart sponsored “United Way” activities, assisted children hospital to make “Children Miracle” TV program. They spent 190 million dollars in these social welfare activities in 2001. 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. As for their social responsibilities, Carrefour promotes physical education activities such as Marathon run and environmental protections. They actively work with local governments or other non-profit organizations to reduce pollutions from packaging globally. Carrefour and Chinese Packaging Corporation initiated “green packaging joint actions” in 2002. Carrefofur further requested all their stores in the world to make less use of plastics in packages and won the reputation of the model in retailing industry.

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 919 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. Take Taiwan as an example, they chose industrial and commercial parks to develop their own shopping centers or integrate existing spaces of stores ready for rent just like departments. Implications to World Retailing Industry Further expand Asia market

The greatest business opportunities come from Asia, Mainland China in particular, in the 21st century. It also generates great potentiality to the globalization of retailing industry (Yip, 1995). More than 300 global retailers such as Wal-Mart, Carrefour, Metro, Makro and others have invested 2 billion dollars in the whole China. Any new entrants to this emerging market, they have to recognize the unique features of its economic structure from the co-existence of four different industries—agriculture (50% of total employment), industry (23%), service (22%) and knowledge (5%).

With the understanding and knowledge of local market, regulation, consumer behavior and social custom, new comers could therefore penetrate China by combining well-renown brand, chain store, professional management team and appropriate localized practices to create maximum benefits. Greater chain-store system It is essential for chain-store retailers to have greater space supplied with many various choices to meet the expectation of one-stop shopping for customers. With more stores easily accessible for customers, the exposure of brand could also exploit the externality from the widespread of stores.

Basing on advantages built from operating worldwide, new entrants could learn from Wal-Mart and Carrefour to replicate and modify their business model to generate success. Through the sharing management know-`how among all member companies under one common brand, operating cost and uncertainty could be reduced and further strengthen their competitive advantages. 920 Flexible procurement Taking warehousing and transportation cost into account, global retailers could follow Wal-Mart’s model to establish global procurement center to leverage the economies of scale.

Meanwhile, to meet various local needs, it becomes important to customize product offerings by increasing local procurement. Furthermore, basing on the law of 20/80, retailers have to analyze profit margin and turnover of products and then focus on higher ones. Also try to increase the proportion of own-branded manufacturing products to achieve higher profit. Information Technology Utilization The widespread adoption of information technology within and across companies could increase operation efficiency and strengthen flexibility.

Linking vertically from suppliers to retailers by electronic data interchange (EDI) grounded on internet architecture, both of them could share the information of supplies, sales and stock. Facilitating by the adoption of systems of supply chain management, enterprise resource planning, and customer relationship management, cooperation among allies could be further deepened and tightened (Johnson & Wood,1996 Keah & Handfield,1998). Besides, retailers could combine sales channels of physical stores and virtual ones to wide their accessibilities to potential customers.

The virtual shops could not only increase potential sales, but also accumulate market information for further investigation. Finally, by the widely adoption of information technology could enable retailers transformed as intelligent businesses. In search of innovation For retailers to hold opportunities from globalization (Lovelock & Yip, 1996), they could follow operation mode of Wal-Mart and Carrefour to integrate flows of products, materials, information, people and finance. With the integrations of various flows among partners, operating cost could e reduced and efficiency of resource-utilization could be increased at the same time. To gain competitive advantage, companies have to build-up reputations with high brand equity and unique business models (Lewision, 1997). The following tactics could be considered as viable alternatives. In addition to better location and unique building architecture design, retailers could aim to design smooth layout within a store, professional outlet management and provide many choices of product portfolio (Stern, El-Ansary Coughlan,1996).

Moreover, by using flexible marketing activities and friendly service quality (Fitzsimmons & Fitzsimmons, 1998), companies could hopefully increase customer satisfaction and loyalty (Terpstra Sarathy,1994). 921 Shape humane culture That most retailers prefer on-going promotions to attract new customers and retain old ones is totally different from everyday low price and no price promotion practices of Wal-Mart. An open and tolerating culture of Wal-Mart could endure over time because managements treat employees as their partners.

They show respect each other and share both profit and knowledge that lead to the creation of a harmony organizational climate. Therefore, companies ought to develop themselves not as a workplace but a learning institution to further the practices of knowledge management. By establishing knowledge management system, knowledge could be repeatedly utilized to generate economies of scale and reserved within a firm easily accessed internally.

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