Strategic Management
Strategic Management
In the mid-1990s, the French government passed legislation requiring food wholesalers
to offer the same prices to all retailers. The goal was to protect food producers and
by preventing big chains from leveraging their size to extract deep discounts from wholesalers but the law created an opening for discount chains, which skirt the restrictions by stocking private-label brands that arent sold anywhere else. Some of those items are priced 40% below comparable products at Carrefour. Carrefour prides itself on its focus on price competitiveness. However, due to these discount retailers the company is suffering from a poor price image in its
domestic market. The company has already cut its prices significantly during 2004
and any further price cuts will adversely affect the companys already declining profit
margins. Europe (including France) is the primary market for Carrefour, accounting for 86.4% of
the companys revenues. The market has been witnessing an increase in labour costs. During the year ended September 2004, average labour costs in Europe had increased
by 2.4%. An increase in labor costs in its most significant market can adversely impact
Month-on-month sales and profits at Eurozone retailers have been continuously falling
during the second half of 2004 and the first two months of 2005. A further fall in
Eurozone