Answer the following.
Activities/Assessments: A Case Carrefour, Tesco, and Wal-Mart: The Globalization Pains of the Retailing Industry The Economist Newspaper Limited, London (2005). What the world needs now? selling 29 hypermarkets in Mexico after troubles there. Jose Luis Duran, the firm's former finance "This is still today a local industry," says Sir Terry director who became chief executive in February Leahy, boss of Tesco. On April 12, his British after controlling shareholders forced a boardroom supermarket chain said that underlying group reshuffle, says it is likely that Carrefour will quit pre-tax profit in the year to February 26 rose by any overseas market in which it cannot become 21 percent to $2 billion (US$3.8 billion). With sales one of the top-three retailers. Tesco has also had up by 12 percent to $37 billion, Tesco confirmed a few problems overseas: for instance, facing its place as the world's third-largest retailer, after strong competition from discount chains in some America's Wal-Mart and France's Carrefour. central European markets. Even so, Tesco's total Now Sir Terry is pushing Tesco's international international sales grew by 13 percent to, 27.6 bil- expansion even harder - a risky business for all lion in 2004. Some 60 percent of its overseas retailers. investments are in Thailand, South Korea, Ireland, "Despite globalization, local differences still and Hungary, generating together a return on hold sway over mass retailing," says Sir Terry. investment of over 15 percent. Last year it bought "What works well in one country does not neces a 50 percent stake in a Chinese supermarket chain sarily work in another." What this means, he cau- to extend its presence in what many retailers see tions, is that building a global retailing business as Asia's most promising market. Its biggest chal- could take "decades of work." The pitfalls are lenge abroad is to expand beyond hypermarkets numerous, as many of his rivals already know to into smaller convenience stores, as it has done to their cost. great effect at home. When retailers achieve a Wal-Mart, which dwarfs everyone, with US$285 dominant position at home, the appeal of growing billion of worldwide sales last year, is also expand- overseas can seem strong - not least because ing overseas. It is doing well against Tesco in they may face a domestic backlash against their Britain through the Asda chain, which it bought in size. Tesco, with almost 30 percent of Britain's 1999. But in Germany Wal-Mart is struggling grocery market, has recently found itself having against even more aggressive discounters, such to defend itself against criticism, just as Wal-Mart as Aldi. In Japan, Wal-Mart has a controlling stake is doing in America. To continue growing at in the Seiyu retail chain, but losses there have home, Wal-Mart is trying to expand into some been growing. Wal-Mart's policy of "everyday low areas where it is less welcome, such as unionized prices" is proving hard to sell to the Japanese, states and places (such as New York City) that who often associate low prices with poor quality. dislike giant superstores. In America (but not With operations in some 30 countries, Carrefour is always overseas), Wal-Mart is a nonunion firm. the most international of the supermarket chains. This week, a union filed a complaint with the gov- Last month, it announced a 15 percent fall in net emment urging an investigation into allegations - profits in 2004, to 61.4 billion ($1.8 billion). This disputed by Wal-Mart - that Thomas Coughlin, a was partly because of a charge it took on selling former Wal-Mart executive and friend of the firm's its stores in Japan, which it has decided to quit late, legendary founder, Sam Walton, violated after four years of struggle. Carrefour is also federal labor law by financing antiunion activities. With such headaches at home, it is hardly Discussion issues surprising that even the world's biggest retailer finds it hard to deal with the many local diffi- In the face of globalization, what are the vari- culties that beset shopkeepers who venture ous responses used by the retailing industry? abroad. 2 How does the international business environ- ment impact on the effectiveness of these responses
