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Carrefour's Misadventure in Russia

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on 28 April 2015

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Transcript of Carrefour's Misadventure in Russia

Russia's growth in Retail has been mainly in areas such as Supermarkets, electrical stores and fashion retailers; Carrefour's product range.
Carrefour's Misadventure in Russia
1. Background of Carrefour
Carrefour was founded in 1960.
International Expansion
The largest country in the world, nearly 144 million people as of 2015.
As of 2009, Russia was Europe’s fastest growing consumer economy and by 2012. The retailing industry in Russia was valued at US$ 480 billion.
5. Why Carrefour failed in Russia
2. WHY
RUSSIA?
Carrefour’s failure to acquire Seventh Continent was the main reason for its exit. Without Seventh Continent, Carrefour did not find enough scope to grow in the country, though the market was highly lucrative.
Failure to acquire Seventh Continent
Unpredictability and unreliability
Non-Russian companies found it very difficult to do business in the country, due to the high degree of bureaucracy existing there.

Insufficient management talents
Investors faced in Russia was the crumbling infrastructure
References
French Retailer to Close Its Russia Stores
http://www.nytimes.com/2009/10/17/business/global/17carrefour.html?_r=0
Russia's Retail Revolution
http://www.managementtoday.co.uk/news/812968/russias-retail-revolution/
Carrefour beats hasty Russian retreat
http://www.ft.com/cms/s/0/97c7805a-b9c2-11de-a747-00144feab49a.html#axzz3DGydUz2a
Carrefour to exit Russia, hit by challenging markets
http://www.reuters.com/article/2009/10/15/carrefour-idUSLF66210620091015
Carrefour says looking at acquisitions in Russia
http://www.reuters.com/article/2009/09/10/carrefour-russia-idUKLA72629520090910
Mapped : Where Russia Stashes Its Cash
http://www.thedailybeast.com/articles/2014/03/19/mapped-where-russia-stashes-its-cash.html





1. The background of Carrefour

2. Information about Russia

3. Opening stores in Russia

4. What factors influenced on Carrefour exit from Russian market?

5. Why Carrefour failed in Russia

6. Case study questions

7. Summary


Outline :

Inna Syrkina | Michelle Leng | Chris Du
The retail market in Russia was expected to grow to $745billion in 2011.
About 14 of its cities had a population of over 1 million and were expected to account for 60% of the retail growth in the country by 2012.
Largest retailer in Europe
15,430 stores worldwide.
Carrefour has branches located in Europe, Latin America, Middle East and Asia.
3. Opening stores in Russia
First store
Second Store
The first store
Located in Filion Shopping Mall
8,000 square meters
58 checkout counters & 450 staff
It sold 15,000 food items and 30,000 non-food items
It invested € 8.8 million on its first store
The 2nd store
Opened on September 10, 2009, at Krasnodar in South Russia.
A sales area of 8,500 meters
Employed 350 people
Carrefour invested € 8 million
Unpredictability and unreliability – including tax authorities and the judiciary.
Finding the right people to fit into retail roles was also a major challenge
Though the country’s education system was highly sophisticated, it churned out more scientists than management graduates.
- Carrefour had spent more than three years studying and understanding the market. However,

- Carrefour should not be expecting results in such a short time

- Failure to attain leadership position in other countries
they are operating and given others retailers
opportunity since there is less competition
Summary
Analysis of the european top retailer Carrefour expanded it international store in Russia.
Russia the Europe's fastest growing consumer economy provides potential opportunity to Carrefour.
Explained the reasons why Carrefour exited Russia suddenly and what caused it failed in Russia.
Carrefour was also caught up in bureaucratic hassles as its first store in Moscow could not get a license to sell alcohol, which cost it almost 15% of the stores’ revenues.
According to Jamie-Vazquez, analyst at JPMorgan Chase & Company in London
“Stores in emerging markets are the only ones doing well and offering good growth prospects, so selling them makes no since other than making short-term financial gain".


Do you agree with this statement ? Take a stand and justify it.

Case study question
2
This statement can be agreed with for various reasons which are:
Analysts claim that reasons given by Carrefour are not valid
Evaluate future possibilities
Russia is now the second largest retail market after France
Experts claim it took retailers several years to establish themselves in new markets.
1
Case study question
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 ?
Russian retail market is lucrative enough to attract more foreign players.
References:

-French Retailer to Close Its Russia Stores
http://www.nytimes.com/2009/10/17/business/global/17carrefour.html?_r=0

-Russia's Retail Revolution
http://www.ft.com/cms/s/0/97c7805a-b9c2-11de-a747-00144feab49a.html#axzz3DGydUz2a

- Carrefour to exit Russia, hit by challenging markets
http://ww.reuters.com/article/2009/10/15/carrefour-idUSLF210610620091015

- Carrefour says looking at acquisitions in Russia
http://www.reuters.com/article/2009/09/10/carrefour-russia-idUKLA72629520090910

- Mapped: Where Russia Stashes Its Cash
http://www.thidaillybeast.com/articles/2014/03/19/mapped-where-russia-stashes-its-cash/html





Perception of International Expansion

Porter’s five forces model
The largest country with a big population base
Europe’s fastest growing consumer economy
Country's retail industry began to grow after 2004
High oil price leads to strong economic growth in the market
Carrefour's revenues were at € 108 billion for the year end of 2008.
is a framework for industry analysis and business strategy development. Five forces determine the competitive intensity and attractiveness of market.
Porter 5 forces analysis
Full transcript