Carrefour's Exit from Japan


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Case Details:

Case Code : BSTR185
Case Length : 16 Pages
Period : 2000-2005
Organization : Carrefour
Pub Date : 2005
Teaching Note :Not Available
Countries : Japan
Industry : Retail

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Our objective is to make sure that Carrefour leads in pricing and wins market share everywhere we have chosen to do business." 1

- Jose Luis Duran, Chairman of Management Board, Carrefour in 2005.

"Let's be honest, Japan was a short, expensive adventure for us." 2

- Jose Luis Duran, CEO, Carrefour in 2005.

Introduction

On March 10 2005, French-based Carrefour SA (Carrefour), the second largest retailer in the world and the #1 retailer in Europe, announced its exit from the Japanese market. It decided to sell its wholly-owned subsidiary Carrefour Japan to Aeon Corporation (Aeon) Japan's largest retail chain.3

Aeon would acquire all the eight hypermarkets of Carrefour Japan. Carrefour said that the sale was part of the divestment strategy to get rid of under-performing assets (Refer Table I for Business Priorities in 2004). With the announcement to exit the Japanese market, Carrefour joined other foreign retailers like OfficeMax, Sephora, and Boots, who had exited the Japanese market earlier. Carrefour entered Japan in 2001 as part of its expansion strategy in Asia. By 2004, the company managed to open only 8 stores out of 13 stores planned. The 8 stores had sales of € 326 million and posted a loss of €235.9 million in 2004. Analysts commented that Carrefour failed to attract the Japanese customers since the time it entered the Japanese market.

They cited various reasons such as the consumer behavior of Japanese, the changing fashion trends in Japan, not having a Japanese partner, and the loss of trust in the company and its brands, for the company's failure in Japan.

Background Note

In 1959, Marcel Fournier and Louis Defforey established the first Carrefour (means crossroads in French) retail store at the convergence of five roads in Annecy, near Paris in France. In 1963, Carrefour opened its first hypermarket in Sainte-Genevieve-des-bois in France. The hypermarket had a floor area of 2,500 square meters, 12 exit points and 400 parking points. Carrefour started its first global venture in 1969, by opening a hypermarket in Belgium under the banner 'Champion'. In 1970, Carrefour began to be listed on the Paris stock exchange. In 1972, the company opened its first stores in the UK and Italy.

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1] Carrefour News (Annual General Meeting, 2004), www.carrefour.com, May 2005.

2] "Carrefour Exits Japan and Mexico," www.news.bbc.co.uk March 10, 2005.

3] As of 2004, Aeon had more than 1,000 general merchandise stores and supermarkets in Japan. It is headquartered in Chiba, Tokyo.

 

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