Demonstrate the influence of environmental and behavioural factors on corporate size, structure and strategy.
Understand the processes of business planning and policy making and the reason for change over time.
Appreciate the effects of government policies towards monopolies and restrictive practices.
Carrefour is the second largest global retail supermarket after Walmart (Wang et al. 2012). In June 2012, Carrefour sold its Greek supermarket to its local partner as it failed to operate in that location. The political and economic turbulence in Greece made the organization to lose its position (Levesque July). Recently, Carrefour is trying to create its market in the UK. Therefore, a report will be provided listing out the macro and micro environmental factors that Carrefour needs to take care. How UK Government policies on mergers and acquisitions can affect their growth strategies of Carrefour in the UK will be explained as well and finally, how the management at Carrefour can use the Kurt Lewin Change Model of Unfreeze, Change and Refreeze to prepare their staff for the envisaged UK venture will be explained.
Macro environmental factors will be explained by PESTLE Analysis.
United Kingdom has one of the most stable democratic governments, which is decided by people’s vote (Watson 2016). Moreover, the government does not impose any controversial policies as they may fail in the next five years (Carter 2014). The government offers subsidies for new business, which indicates that Carrefour can establish their market in the UK (Baylis, Smith and Owens 2013). UK government is trying to entertain such organizations who manufacture goods within the country. Carrefour sells both local and foreign goods (Sase et al. 2015), which indicates that it will have least affect from the political scenario.
Positive economic growth measures the real GDP change in UK. GDP grew by 2.4% in 2014, which was 1.7% in 2013 (Martin et al. 2015). Peak to trough fall is estimated to be 6.0% in 2015, which indicates that people has higher ability to buy products that gives a positive demand of products (Paterson 2013). Carrefour is the supermarket and it has wide range of products from all categories, which will get huge response in UK market.
UK society has become too much health concern and people have the tendency to buy products from branded markets (Woolhouse and Wood). Carrefour is having great brand image in other nations, which will help in achieving the people’s attention for good quality products with reasonable price.
People in the UK are more attracted towards technical gadgets then television or radio (North, Baldock and Ullah 2013). Much of the companies are advertising through social networking sites and website advertisements. The usage of internet has raise by 43 percent from the last 8 years, which indicates that Carrefour can establish their market in UK.
Minimum wage will prove to a constraint for Carrefour in UK. This will increase the cost of sales, as the organization does not have any opportunity to supply and produce its goods outside of UK. Thus, the organization needs to bare a capital for its employees.
UK is becoming environmental concern with each year. It has taken the green concept and therefore, does not allow excessive usage of plastic materials (Webb et al. 2013). This may affect Carrefour as most of its products are packaged through plastic. This may increase the cost of goods specially in edible categories.
Figure 1: PESTLE Factors
(Source: Roggeveen, Nordfält and Grewal 2015)
Micro environmental analysis will be provided by SWOT analysis.
Carrefour falls under hypermarket category, which means this supermarket offers all types of products under one roof (Tang et al. 2015). Hypermarket has been the most profitable division in the UK since 2005. This supermarket has fulfilled its position in ‘cash cow’ segment, which means that internal revenue generation can support the establishment of new market in the UK (Roggeveen, Nordfält and Grewal 2015). Center of board catchment areas are chosen by Carrefour to engage consumers. It has the most convenient shopping model, as consumers are able to buy the preferences through one weekly trip in the supermarket (Parracho Sant’Anna, Angulo Meza and Otavio Araujo Ribeiro 2014). The organization has able to keep its total operational cost lower in other nations, which will surely create a tough competition in the UK market.
Carrefour is known for its own-branded products. The organization believes in an imaginary idea known as “products libres” (Piercy and Alexander 2013). This has led the price of products to settle down but most of the consumers are found to get dissatisfied with such products, which are from own-brand. Considering service, Carrefour has not able to satisfy its consumers unless it produced its own products. This has reduced price of products but in UK it may face lower cost cutting, as it has to maintain minimum wage (Wali, Wright and Reynolds 2014). Carrefour has violated the principle of good faith and fair-trading as it hiked the supply power, which suppressed the suppliers in China and Korea (Wood and Reynolds 2012). This negative reputation may affect its business in UK.
Global expansion and online stores are the factors, which will enhance the business of Carrefour in UK (Midmore 2015). Initially, in order to expand the market, Carrefour can take the help of e-commerce to market its products in the UK (Fuentes and Hagberg 2013). Moreover, being under international market, Carrefour has the opportunity to present the trendiest products in UK market, which will enhance mix and match of culture.
The most impactful threat will be from competition in the UK market. The retail giants such as Walmart and Tesco have already created their market in UK, and therefore market penetration may not be possible within next three years (Bui 2013). Moreover, employees in the organization feel about job security and hierarchical problems, due to which Carrefour may not able to retain its employees in UK market.
Figure 2: SWOT Analysis
(Source: Fuentes and Hagberg 2013)
According to Greve and Zhang (2016), ‘European Union Law’ is followed by UK law on merger control and the competences of issues fall under OFT jurisdiction. According to the merger law of UK, any kind of attempts that deal with merger and acquisition is confirmed with ‘ex ante’ prevention by ‘Court of First Instance’. On the other hand, Brueller, Carmeli and Markman (2016) pointed out that significant impediment to competition that is ruled by Court of First Instance helps in overruling the dominant position in the market. Furthermore, Ferris, Jayaraman and Sabherwal (2013) pointed out that “Herfindahl-Hirschman Index” calculates the density of the market before merger and acquisition but the problem of Oligopoly rises with such policy and therefore the market becomes conductive to collusion. The “City Code on Takeovers and Mergers” consists of non-statutory set of rules, which indicates that stakeholders of a merger company have to be treated equally. All such policies indicate that Carrefour will be able to get into merger and acquisition in future.
According to Siougle, Spyrou and Tsekrekos (2014), for an organization that needs to merge with other organization has to apply to the High Court regarding the fact that it has already completed all the legal formalities before merging. Brakman et al. (2013) pointed out that the court will ask for creditors that support the terms of merger. Therefore, it can be said that if Carrefour needs to allocate suppliers into its own jurisdiction, then it may need to take over its suppliers in UK. The UK government supports its local firms and at the same time believes in expanding the business in its home ground. Pearson (2014) pointed out that the UK government supports subsidy to the firm if it needs to take over other organization in terms of business expansion. Therefore, it can be said that if an organization does not have enough cash, then it can get assistance from the government for merging.
According to Ashfaq et al. (2014), the UK Merger Assessment Guidelines determines whether a firm needs to merge or it will be beneficial for the organization to continue its own business in future. Siougle, Spyrou and Tsekrekos (2014) pointed out that the assessment guidelines for merger and acquisition identifies the constraints between perceived potential entry and actual potential entry. This will be highly beneficial for an organization, as it will get to know whether it needs to takeover other organization. Often it is found that organizations do not understand the future political and economical scenario of a country, which will be addressed by the merger guidelines and help the organization to operate the most suitable business.
Carrefour will be able to expand its business in the most effective way in UK in future, as it will get the deepest assistance from the government in terms of merger and acquisition and subsidy as well.
According to Bartunek and Woodman (2015), Kurt Lewin Change Model is disintegrated into three stages, which are Unfreeze, change and Refreeze, but most of the organizations fail to formulate strategies in the change stage. On the other hand, Cummings and Worley (2014) pointed out that organizations fail to satisfy the change to its stakeholders after refreeze is initiated. Therefore, Carrefour needs to ensure that after the change management, the stakeholders do not get dissatisfied. The change management will take care of only the staffs as Carrefour is concerned with supply chain and not with manufacturing and hence, the organization will allocate people from local UK market.
The initial stage of Kurt Lewin Change Model is Unfreeze, where the organization will cease 25 percent of the operation for China supermarket. This is because Carrefour will transfer 15 percent of executives from China to the UK. Organization will not get enough experienced employees from UK local market and in order to reduce risk, it will need to transfer certain amount of employees. The sales operation will not be paused in China but operational function will be divided among rest 85 percent of the executives.
In the change stage, Carrefour needs to allocate new staffs for operating in new location and at the same time, it needs to transfer 15 percent of its employees from China to UK. This is because the organization needs to mix and match two different cultures with adequate amount of expertise knowledge. Business experts such as marketing executives, committees and directors will configure the staff management in UK market. On the other hand, supermarket sales staffs are to be allocated in two different segments. One segment will be for selling local items and the other segment will be for selling international products (i.e. these products will be not from local brands), which will be administered by local marketing executive. Such change will be highly effective as both lower level and upper level employees will get the assistance from higher management and better staff management will be done.
The last stage is the refreeze, where the organization will have to work with the entire changed working environment. The hierarchy will match up with the new management and flow of information from suppliers to marketing head and finally to retail inventory will be managed. The change management will be done in accordance to the historical data of working in different other nations and therefore, any further change will be initiated only after at least 18 months’ of operation in the UK. Therefore, it can be said that the change management will involve new staff recruitment from UK locality, who will only serve in sales department and experienced staffs will handle the administrative purposes.
Figure 3: Kurt Lewin Change Model
(Source: Bamberg 2013)
Conclusion
While concluding it can be said that Carrefour can establish its market the UK but it needs to think the methods of cost cutting and market entry strategy. This is because great retail giants Wallmart and Tesco are already present in UK hence it has to face a tough competition. It can even be concluded that Carrefour will get the government assistance in terms of merger and acquisition in UK, which will help in expanding its business in future. Carrefour needs to transfer employees from China market as most experienced employees are operating in that location, which may support business expansion in the UK.
While considering recommendations, it can be said that Carrefour needs to sell its products via e-commerce in UK, as the organization will be completely new in UK market. Initially, Carrefour needs to create its demand in the market and ensure consumer attraction, which will be only possible by online sales. The manufacturing unit needs to be established outside UK so that minimum wage does not affect the price of products. Finally, it is recommended that Carrefour needs to sell its own-brand products in UK so that initially the price factor does not prevent the consumer attraction.
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