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The present report is an analysis as to how the hypermarket chain-Carrefour has been using the product/market expansion grid in the market. The tool used to ascertain the same is Ansoff Matrix where the current and the new products are correlated with the current and the new markets. The reason for using the matrix is that it establishes the criteria required for increment in sales hence maximizing profits of the company. It helps the company analyze the changes it has made in recent times and the effective profits that it has made as a result of the same. As per the consequences it would be able to decide whether it should follow the same strategy or follow it up with changes. It has been found that Carrefour-UAE has been utilizing the strategies formulated by this Matrix to large extents but there are certain drawbacks which are at present hidden under the brand image that the company boasts of. We will thus see what strategies that the company has used are and how much it has been benefited by the same.
Carrefour is an international hypermarket chain that originated in the French territory in the year 1957. Right from the time of its foundation, the company has been on an expansion spree and today has its reach throughout the world. The company has a net annual revenue collection of 85.96 billion Euros and a profit of 385 million Euros annually as per 200 figures. It holds the distinction of employing 495,000 employees across the globe. As far as its reach in UAE is concerned, the company has its outlets throughout the nation. Some of the major cities which hold Carrefour outlets have been mentioned as follows: (Carrefour-UAE, 2010)
Ras Al Khaimah
Currently, the hypermarket chain is being managed by the Majid Al Futtaim (MAF) Group. Also, on account of this ownership, much of the Carrefour hypermarkets are located in the shopping malls of MAF. Apart from the usual Carrefour stores, there are also UAE Carrefour Express stores which have got limited range of products and varying prices as compared to the other hypermarkets of Carrefour.
The product expansion grid which is used by companies for obtaining a bigger share in the market has been given by Ansoff. The following diagram gives an illustration of the same. (Ansoff’s product / market matrix, 2010)
img006 thumb Intensive Growth Strategies: Ansoffs Product Market Expansion Grid
Here, the horizontal axis consists of the products which could either be current or new whereas the vertical axis consists of the markets which could either be current or new. Depending on the type of product and the type of market, one can devise a growth strategy as per the locality in context. As far as Carrefour in UAE is concerned, we can see the application of Ansoff’s Matrix in the following manner.
The first of the strategies is market penetration strategy. Under the strategy, Carrefour looks to continuously increase its sales and profits. The most efficient way of doing is this by luring competitors’ customers and making them loyal to Carrefour. The company has been using this strategy effectively by establishing itself as the lowest price hypermarket. It is an intangible asset that the company has considering the fact that there are other stores like Spinneys and Waitrose in UAE which offer certain products at lower prices than that offered by Carrefour, yet the company attracts more customers under the tag of lower prices. Also, the company has been able to maintain market penetration by expanding the realm of customers by having a core competency in providing everything at a single place at a reasonable price. So, even if the customers have to pay slightly more for the products that they get, this second attribute goes great guns in attracting more and more customers. This is more common in areas like Fujairah and Ras Al Khaimah. The reason for the same is that these places are smaller in size as compared to Dubai and Abu Dhabi where there is abundance of stores. So, with Carrefour operating in a single locality almost supersedes the requirements of any other. Another thing that Carrefour is very popular for doing is its branding. None of the other competitors in the market have a better brand image than Carrefour. As a result of this customer satisfaction becomes a major issue in increasing the number of customers. All the other competitors of Carrefour are still struggling for maintaining that brand image. This has given Carrefour a significant advantage of increasing its profits at regular intervals. Then marketing techniques like word-to mouth and viral marketing come into play where the company does not even need to put in any form of extra expenditure to allure customers. Also, the company keeps going on different schemes where the target is to get the old stock out at prices lower than their MRPs. This has also caused both the company and its competitors to benefit tremendously. (Intensive Growth Strategies: Ansoff’s Product-Market Expansion Grid, 2010)
The following diagram depicts market penetration strategy:
Here, we can see the idea behind market penetration. It is about taking the share of the competitors and using it to increase the sales and thus profits of one’s own company. We have also seen the various reasons which have guided Carrefour to success in this section.
The market development as a strategy is used when a company wishes to increase or add on a new market with the existing products that it has. In other words, the segmentation that it has done is further widened in this respect. This is one of the more risky of the strategies among those given by Ansoff. This is because, before implementing this strategy, Carrefour needs to cover some very significant questions. They have been mentioned as follows:
Would it be profitable to target a new market?
Would it require the company to increase the number of its products?
Has the company done enough research of the channels and the customers?
Also, has the company given enough focus on its competitors’ reach in the new market, the non-buying people in the current segment and the new segment as a whole?
As far as the analysis of Carrefour is concerned, the company has answered the first two questions by introducing the system of online availability of products which reaches a bigger market considering the fact that most of the consumers have been acquainted with technology and are ardent users of online purchasing in UAE. Also, the company offers free delivery in a number of regions for orders that range above 500 AED. Also, for orders less than 500 AED they charge a nominal amount of 12 AED. The company also keeps records of the sales of its competitors and so focuses highly on the non-buying in the current segment. Carrefour also considers regular market research to know their place in the market and hence make necessary improvements wherever necessary.
The following diagram illustrates the market development strategy followed by Carrefour:
Here, we can see that a computer is being used to cover the entire world which is an indication of online sales that Carrefour has very recently started to use.
The third strategy that is worked out under the Ansoff Matriz correlates new products in the current market. This is a form of experimentation where companies use their existing brand image to enter into a new product line hence increasing their total revenue. In this respect Carrefour has undergone a thorough market research so as to come up with either new products or introduce certain modifications so that they could be used in accordance with the desires of the customers on the broader front. The result of the research had to be such that it is feasible for the company to implement such changes or new product introduction. Once again with the current brand image that Carrefour has, it has introduced some new products into the market so that it could fulfil this objective. These products have been priced at different levels as per the store within the country. The products that are now sold at Carrefour UAE have been mentioned as follows:
Beauty and Personal Care
Car and Automotive Accessories
Cleaning and Detergent
Clothing and Fashion Accessories
Computers and IT Equipment
Do-It-Yourself products (DIY)
Electronics and Electrical Goods
Fresh Fruit and Vegetables and other Food Products
Frozen Food Products
Garden and Outdoor Furniture and Accessories
Groceries – the usual range although not as good as in France. Some differences compared to Spinneys, Choithrams, Park n Shop, or Waitrose – fewer western products. No pork products.
Home Appliances – fridges, washing machines, stoves / cookers, kitchen appliances etc
Home Furniture and Accessories
Healthcare and Pharmacy (some)
Mobile Phones and Accessories
Kitchen and Dining Ware
Television and Audio Products
Toys and Children’s Entertainment
Travel and Outdoor Goods
This covers a huge diversity and is consistently bettered in terms of variety at the existing stores itself as per the demands of the people of the nation. Also, the country is a big tourist hub which accounts for the fact that Carrefour introduces or modifies its current range of products as per the season and the type of tourists that are expected to be a part of the UAE tourism slot. This contains much of the product development that Carrefour undergoes.
The following figure depicts the product development strategy followed by Carrefour:
Here we can see that as per the market demands, the products are filtered and finally the most suitable products are made available to the market.
This strategy is amongst the riskiest of the strategies that a company could ever undergo. The reason for the same is that it talks about entering a new market with the new products. It is almost a combination of the two strategies of product development and market development which we have seen already. This strategy generally comes into play whenever there is a saturation of the market and a company is not getting the types of profits or revenues that it ought to be getting. There are a number of companies that follow this strategy but the case has been a little different for Carrefour. The company has not had much of a hand in this strategy except for the fact that when it went with the online market introduction of sales, it also started some modified product delivery so that the customers could have a customized experience of the products that Carrefour follows. The company has also followed this strategy in the past when it went with opening its stores at places like Fujairah. The reason for the same is that the market was a little more rural than the bigger cities like Abu Dhabi or Dubai. So, the company entered this new market with products that were more suited to the urban cities. But, because of the stupendous success that the company has received at its ends, it also plans to open new stores now at the other places which seem more remote than the others. The following diagram depicts the implementation of the diversity strategy:
As per the analysis of the Ansoff Matrix that we can see from the above explanations, one can see that Carrefour has made an attempt to increase its revenues hence the profits in all the possible manners whether with current or new products or within current or in new markets. This has made the company grow to the level that it is at present. The following table depicts the strategies that the company follows in all the four different ways:
One-stop place for commodities.
Use of Brand Image.
Introduction of new products.
Modification of existing products.
Customization at regular intervals.
Increasing diversities of products.
Online product availability.
Free Delivery of Products.
Consistent research to depict current market conditions.
Introduction of customized products in the rural market.
Increased reach of the stores.
Targeting tourists as per needs.
So, we can see that the company has been making exceptional progress in the market penetration strategy which calls for increasing the sales and thus profits within the existing market. The other strategies have been followed by Carrefour as and when the requirement for the same has been. This includes changes on account of season which invites a better degree of tourism to the customization as per the demands of the people of the country. Carrefour holds a distinction in displaying its products as per the expatriate population of UAE which goes over 80% mark such that people from all nationalities are able to find things that are suitable to them. The company uses imports and exports as and when required so as to provide all that it finds the customers would want. (Merecer, 1995)
We have seen that the Carrefour has been undergoing a large degree of advancements when it comes to implementation of the market penetration strategy. The company needs to make sure that it also proceeds similarly or on similar lines of progress to follow the other strategies. The reason for the same is that today is a fast and constantly changing environment. So, it would have to make even more changes or introduce greater diversities in its product range. For example Carrefour lacks in the clothes segment. The company should make it a part of the product development strategy so as to inculcate it in its line of business. There are a number of brands which do not need much of sales strategy, but only a mere display to play the trick for the company. Once, this is done, Carrefour would be better off in terms of its revenue collection. This would become more useful in the rural areas where the concept of one-stop shopping will come into play.
Another aspect where Carrefour needs to revise its strategy is in its pricing model. There are a number of products as mentioned in the hypermarkets which are sold at a price higher than that elsewhere. The company uses its reputation or brand image to make it effective but there are possibilities that the people might not be ready to pay the price. This can be a hindrance in the market penetration strategy where the company looks forward to increase the number of customers. Generally, the new customers would not be able to pay a higher price for the same product that they would have it cheaper at places they were initially purchasing from. This needs to be checked so as to be productive in the long run. Other than this, the company simply needs to continue its market research at constant intervals so as to find the new trends in the market and change accordingly.
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