Case Study (carrefour & Tesco Swap Deal)

THE CARREFOUR AND TESCO SWAP DEAL

TO BE PRESENTED BY: vLAV JAIN vM BHUSHAN vMAYANK GOEL vMAYURI JAIN vMEENAL JAIN

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

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

ABOUT ØEstablished in 1919 by Jack Cohen and TE Stockwell in London, UK. ØThe stores were small and ill equipped initially. ØCompeted only on price and had mediocre quality products. ØWent for a revamp in mid 70’s and focus shifted to customer service and quality and wider product portfolio. ØIn 1979, its annual turnover crossed € 1 billion. ØIt expanded into other European markets

ABOUT ØBut could not sustain itself due to competition in those markets. ØSold its French operations to Promodes. ØIn 1990’s started with loyalty cards, internet shopping and mobile phone services that helped them regain their position in the market. ØBy 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

 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

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. 

After the Swap

I N Taiwan at the time of Asia. recession.  Found Hong Kong  Not able to find , Singapore & right locations for South Korea to their stores. small for its  Could not achieve operation.  Chose Taiwan, & desired scale of operation. entered as per the  Market share was regulation. only 2.93%  Decided

to enter

CARREFOUR

 Entered

TESCO

T A I W A N

I N

 Entered

Czech in

1998.  Introduced the concept of seasonal rotation & offered 60000 products.  Ranked 8th in terms of sales.  Considered up market store,

CARREFOUR

 Entered

in 1996, by acquiring 13 stores from KMart.  Got experienced employees, suppliers & customer.  Introduced private label products.  Expanded in high speed.  Stores opened for TESCO

C Z E c H R e p U b L I C & S L O V A K I a

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

Q u e s t i o n 1

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

A N S W E r

Expansion Strategy: vCarrefour: 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. vTesco: 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

A N S W E r

2 Q U E S T I O N

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

Thank you