THE CARREFOUR AND TESCOSWAP DEAL

TO BE PRESENTED BY:

LAV JAINM BHUSHANMAYANK GOELMAYURI JAINMEENAL JAIN

ABOUT

Started in 1960 by Marcel Fournier and Louis Defforey in France. By 1971 count of stores increased to 16 with other 5 stores that were operated through franchises. First international venture in Belgium and first venture outside Europe was in Brazil. Entered US markets in 1988. In 1992, reported sales of €17.86 billion and net income of € 271 millions.

ABOUT By mid 90’s its operations were spread across Italy, Spain, Turkey, Greece, and Portugal.By 1997, 60 stores were opened in South America and also entered Saudi Arabia, Japan, Algeria, UAE and other countries.In the process they acquired Comptoirs Modernes SA, having 790 supermarkets and Promodes which had several hypermarkets, supermarkets and discount stores.Now it is second largest retail chain in the world with more than 12000 in operation and consolidated net sales of € 77,901 million.

ABOUT

Established in 1919 by Jack Cohen and TE Stockwell in London, UK.The stores were small and ill equipped initially.Competed only on price and had mediocre quality products.Went for a revamp in mid 70’s and focus shifted to customer service and quality and wider product portfolio.In 1979, its annual turnover crossed € 1 billion.It expanded into other European markets like Ireland, France and others.

ABOUT

But could not sustain itself due to competition in those markets.Sold its French operations to Promodes.In 1990’s started with loyalty cards, internet shopping and mobile phone services that helped them regain their position in the market.By 2007, Tesco recorded sales of € 46.61 billion, and PAT at € 2.6 billion.

TESCO AND CARREFOUR ANNOUNCE SWAP

Sep 30, 2005, Tesco and Carrefour signed a sale and purchase agreement.

Tesco acquired Carrefour’s stores in Czech Republic and Slovakia.

Carrefour would get Tesco’s stores in Taiwan.

Both companies are strengthening their respective positions through this unique deal.

Taiwan did not face any regulatory hurdles. European Commission gave approval to the

swap in Czech Republic. Antimonopoly office kept the deal on hold for

several months Due to activities of the two stores being

overlapped. Deal could affect the consumers, suppliers

and competitors adversely Ultimately Slovakian Antimonopoly office

refused to grant permission for the acquisition because of the fear of establishing a monopoly by Tesco stores in Slovakian market.

TESCO AND CARREFOUR SWAP STORES

• Two of the world’s top retailers entered into a deal of swapping their stores in some countries.

• UK-based TESCO and France based CARREFOUR.

Reason for the Swap Deal-• TESCO entered Taiwan in 2000,

could not withstand the competition.

• CARREFOUR was struggling to gain market share in Czech Republic and Slovakia.

• New Break through will facilitate the two groups Healthy Operations.

AFTER THE SWAP

Tesco• Changing Strategies - Spread Slowly.

• Achieving Economies of scale regionally.

Carrefour• Changing Strategies -Establish a presence before competitor arrived.

• Exit from the market if could not achieve a leading position within a certain span of time.

Tesco

•Tesco became the fourth largest retail chain in the Czech Republic .•With 38 outlets and an estimated market share of 10-15 %.

Carrefour

•Carrefour outlets in Taiwan increased to 44 .•Company integrated the operations of Tesco within two months.

IN

TAIWAN

CARREFOUR

Decided to enter Asia.

Found Hong Kong , Singapore & South Korea to small for its operation.

Chose Taiwan, & entered as per the regulation.

TESCO

Entered Taiwan at the time of recession.

Not able to find right locations for their stores.

Could not achieve desired scale of operation.

Market share was only 2.93%

IN

CZEcH

RepUbLIC

&

SLOVAKIaCARREFOUR

Entered Czech in 1998.

Introduced the concept of seasonal rotation & offered 60000 products.

Ranked 8th in terms of sales.

Considered up market store, offering premium products.

Expansion was too slow.

TESCO

Entered in 1996, by acquiring 13 stores from K-Mart.

Got experienced employees, suppliers & customer.

Introduced private label products.

Expanded in high speed.

Stores opened for 24 hours.

What was the rationale behind Tesco and Carrefour deciding to swap their stores in the Czech Republic, Slovakia and Taiwan?

How does the deal fit in the international expansion strategies of both the companies? Discuss.

Question 1

Tesco took over Carrefour’s 11 stores in Czech Republic and 4 in Slovakia.Carrefour took over 6 stores and 2 Tesco sites in Taiwan.Carrefour entered the Czech Republic and Slovakia in 1998 but failed to gain market share whereas Tesco performed well.Carrefour’s first store opened in 1989 in Taiwan and doing considerably well than Tesco.

ANSWEr

ANSWEr

Expansion Strategy:

Carrefour: To spread to different countries and establish a presence before competitors arrive and then build the business. Also to exit from the markets where it failed to achieve a leading position within a certain span of time.

Tesco: To spread slowly, initially taking on one market in a region and then entering neighboring countries. It achieved economies of scale regionally by sharing of resources in the adjacent countries.

QUESTION

2

Do you think swap deal would help both companies in achieving scale economies? Discuss.

Thank you