Case Study Of Carrefour In Russia
Why invest in Russia?
Russia has a population of 145million and by 2012 became Europes fastest growing consumer economy, expecting to overtake UK and Germany by the end of 2014.
The retail market in Russia was expected to grow to $745billion in 2013.
Russia has witnessed large growth in its retail industry due …show more content…
Russia 's growth in Retail has been mainly in areas such as Supermarkets, electrical stores and Fashion retailers, all part of Carrefour 's product range.
Carrefour found it extremely difficult to conduct business with the existing level of bureaucracy in Russia. This meant that even the smallest of tasks required a lot of time and effort due to government delays and procedure.
There is a high level of corruption present in Russia, companies have to bribe the authorities to get certain jobs done.
MNC 's are required to hire "Krisha 's", which are local firms, to handle payments and enabled the MNCs to run smoothly.
Carrefour 's bid to purchase 'Seventh Continent ', another major retailer in Russia was rejected.This became a matter of concern as it 's goal was to become the leading retailer in Russia which required that it acquires other major retailers.
Critically analyze the Russian retail market in light of Porter’s five forces model. Do you think the market is lucrative enough to attract more foreign players? Explain.
In 2011, Russia’s retailing industry valued US$480 …show more content…
During the global economic crisis of 2009, Carrefour opened its second store in Russia.
•It was announced that the crisis would not change Carrefour’s plans knowing very well that Russia was under recession for the first time in a decade, however Carrefour eventually pulled out of Russia again in 2009.
Russia’s market is indeed lucrative and has limitless growth potential enough but due to high local competition, poor levels of government legal control and difficulty in acquiring a local player or partner, foreign players such as Carrefour may reconsider investing in Russia.
Being patient and determined is often fruitful but not always worthwhile in certain scenarios.
Analyzing Russia against Porter 's 5 Forces
Power of Suppliers - Limited - Large number of suppliers - substitutes of similar quality available - cost of shifting suppliers is low unless the product or service is unique.
Power of Buyers - Substantial - Large number of consumers due to large population - extremely price sensetive - trend