Case Study: Carrefour Misadventure In Russia
In today’s global market business has to make an important strategic decision where to locate their operations because location greatly impact both fixed and variable costs. The global market has enable outsourcing which has become a prominent strategic for many companies to enter new markets, extent to different consumers and increase profit margins. The case “Carrefour Misadventure in Russia” makes it clear that companies seeking to expand outside of the home country need to invest a great deal of time and resources exploring both the opportunities and challenges which provides the business successful strategy to gain market shares in foreign markets. An enormous amount of such opportunities and challenges are explained in this …show more content…
Even thou the percentage of food market increase year-by-year, Russian customers believes the food they buy in unbranded shop is not the same as the one retail stores sell.
Intensity of competitive rivalry
The rivalry in Russia is extremely high due to the elevated concentration ratio in the cities where the income per capita is higher, which is the case for St Petersburg and Moscow. In these cities, entrance is expensive and being in a good location is difficult which results in higher fixed cost. Also, cost are driven by level of advertising expense and degree of transparency for new competitors.
Carrefour ran into a bulk of problems when expanding into Russia due to the competition from other rivals. As a result of coming into the market late, Carrefour’s competitors had already advanced in the market before their first store opened. At this point it was too late for a foreign company to enter the market, primarily because of the high barriers to enter the country stemming from Russia’s highly bureaucratic government. (Deresky, …show more content…
The high debt burden of the local retailers and lack of credit to retailers purposed with carrying out the acquisitions proved to be of too much disincentive to Carrefour (Deresky, 2014). Deciding to pull out of Russia early was likely the best option for the company. The challenges they were facing were far too rigorous for Carrefour to continue doing business in an environment that exerted so much hostility. This threatening environment and the strength of the domestic discounters made penetrating Russia’s market too large of an obstruction to overcome without acquiring a local player to help them