Abstract
Understanding a business; its strengths and challenges demands an inclusive study of the various aspects of the business. Components of the business often work together, under a strong management to ensure success of the business. Growth begins with management, understanding the nature, type and structure of management. Of the three kinds of management, the case study has proven that Carrefour has its focus on top management. This means that the top management has highly skilled and uniquely talented individuals. Their functions vary but essentially revolve around planning and decision making.
The culture of the organization provides a competitive advantage. It revolves around being hardworking and putting the customer first. Employees are expected to arrive early to work, and anticipate the client needs. Training of employees and horning of skills revolves around ensuring customer satisfaction. The result is that Carrefour has the largest market share which so far has been easy to maintain.
The study includes recommendations that can be made to change the various loopholes identified in components such as effectiveness of the management style. The competitive strategy employed by the company needs to improve and change to incorporate the market changes. The issues presented in the paper, uphold the belief that the retail giant has vested carefully and strategically in all aspects of the business. It is for this reason that competitors have benchmarked against Carrefour. Its values, customs and even culture of the organization have become the centre upon which various retail organizations have built their reputation. None of the components of the business has been undermined even with the increased growth, popularity and expansion of the target market.
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Introduction
Managers are a vital part of any growing business. The success of the business depends on the ability and skills of the manager. A manager is equipped to apply the knowledge they posses to ensure growth and success of the business. Good managers are able to make the right decision at the right time thereby placing the business in the right path. Further, they anticipate the future needs of the business and therefore plan for the same. Today, managers are not just plain mangers but rather strategic planners, and thinkers. They act as the bridge between the business protecting it from any threats and harm.
Carrefour management has played a vital part in growing the business in the past. However, recent neglects and ignorance has cost the business some vital turnabouts. The problem is not in the business structure itself but rather seems to lie in the management. When the business management is weak, the business becomes prone to various threats. Such threats are not planned for, neither are they anticipated and could therefore cause serious damage. Not many businesses take seriously the management structure. For Carrefour, understanding the vitality and effectiveness of the management structure is vital in ensuring prosperity and growth. For purposes of future planning, there is also need to see the challenges presented by the management structure. As with every business, a careful analysis of the management, its current state and expected future state will only strengthen the business.
Based on the core values of the business, the management structure and other vital characteristics; the management can be easily improved and restructured. As one of the biggest retail companies, the strength of the business lies in strategic planning and management.
Managers are the essence of any organization. They have the task to coordinate the work within an organization and make sure that the job is done in the best possible way. However, there are different functions that managers do and different roles they play in order to assure the profits of an organization. Nevertheless, there are different levels of management:
- Top Managers: These kinds of managers have the responsibility of making the organization’s important decisions. Moreover, they make decisions that define the long-term objectives and their plans will affect the entire organization.
- Middle Managers: Those managers’ help in integrating the plans from the top managers and then converting them into tangible activities and actions. In addition, they work as the connection between top managers and lower managers. Finally, they supervise and oversee the work of the lower managers to make sure that the work is done as planned.
- First Line Managers: They are considered the lower level managers their main mission is to supervise the day to day operations and make sure that the non-managerial employees and doing their job in the best way to translate the organization’s vision and goals.
Therefore, after meeting with the Carrefour management we asked them which one of those three managerial levels they think is the most important. As expected, they answered by emphasizing the idea that all levels are important and combining the three levels will help do the job in more effective and efficient way. Since the top managers will decide on the plans and objectives, then the middle managers will transfer those plans into activities that will help in achieving the goals, and finally the first line managers will implement those activities and make sure that the desired outcome will be achieved.
However, they thought that top managers are the most important managerial level since they come up with reasons that the organization is operating and they are taking the bigger risk by solving unusual problems.
On another questions, we asked one of the managers how you define a good manager. And he said that a good manager who would keep everything simple and that he do not complicate the job procedure. In this way the manager will be able to control his/her employees in a better way and will show them that he/she trust them which eventually will motivate them to do a better job.
Efficiency VS Effectiveness
Getting the job done in an effective and an efficient way is the optimal goal that all organizations are seeking. Moreover, effectiveness is doing the right things to attain the organization’s goals. However, efficiency is doing things right which means not only to do whatever it takes to attain the organization’s goals but also to lower the costs.
Carrefour is one of the largest retailer’s around the globe. Since their main goal is to provide their goods to all customers with lower prices they would need to control their resources and make sure that their costs will not be greater than their profits. Moreover, in order to achieve their goals they will need to make deals with their suppliers in order to attain their goals. Therefore, they would need to be both efficient and effective in their job.
Nevertheless, Carrefour thrives for being more efficient in their job. For example, their employees must come early to the store in order to prepare for their customers and keep the customers relationships high. Moreover, in order to control their costs, Carrefour has their own private label that produces almost 5% of their product. Such private label helped Carrefour in lowering their costs. Finally, their deals with their local suppliers and the low costs they pay on advertisements helps in keeping them lowering their costs and achieving their jobs efficiently.
Cultures
One of the most important factors that distinguish organizations from each other is the culture within an organization. Therefore, Carrefour is one of those organizations that are culturally different from their competitors. At the beginning, once the new person is employed they go under a three months practice by Carrefour professional staff where they will learn history of Carrefour, the way Carrefour operate, and all the values shared within Carrefour. However, there are different occasional parties that are coordinate to all employees to join and have fun as one family. Finally, inside Carrefour’s offices there are pictures hanged on the wall that influence employees and remind them of their values that is shared and developed by Carrefour. All of those methods and values shows how the culture of Carrefour is descriptive, perspective, and shared within the company.
Examples of Carrefour’s values:
- “We fully accept the consequences of our actions toward customers, our company and employees, institutions and environment”.
- “We respect our employees, suppliers, and customers”.
- “We express solidarity within our group, regardless of our profession, function, department of the store”.
- “We support progress and the development of new technologies to serve the needs of people”.
- “We apply fair trade practices by promoting the sharing of values”.
Carrefour is an expanding company opening branches all over the Middle East and is currently expanding from the Middle East. Carrefour is a known company all over the Middle East (Saudi Arabia, Syria, Lebanon, Iraq, Pakistan, Egypt, Jordan, Oman, UAE, Kuwait, Bahrain, Iran, and Qatar), Georgia, Armenia, and Kenya.
There are several entry modes used by companies when opening branches in new countries. Some of which are exporting/importing, franchising, licensing etc. Carrefour uses the franchising method. Franchising is a form of business organization in which an already existing firm with prosperous products and services (known as the franchisor) forms a relationship with other businesses (known as the franchisees) that operate under the franchisor’s trade name and guidance. Carrefour is open in several countries; therefore they let their trade name to be used under their guidance and control. This entry mode is selected because it is the best suited to allow Carrefour to be a renowned international business. By using franchising, Carrefour is now known is almost all of the Middle East and is currently expanding from the Middle East and is very successful in Pakistan. It has effectively opened in Georgia and Armenia.
Since there are foreign branches, the main headquarters of Carrefour (located in Dubai) send out employees to work in these countries. The employees undergo a three-month training, and are then sent to different countries to work in Carrefour. In other words, Carrefour recruits workers globally.
In Carrefour there is an evident hierarchy used for when decisions are being made. The decision makers approach their choices rationally. The main goal of the company is to have lower prices than their competitors, be consistent, and make value-maximizing choices. The managers making the decisions approach it in an objective fully logical way. The problems that occur are carefully defined and all the possible ways to solve the problems are well thought of.
Since Carrefour is a well-established company that had been running for many years, most of the problems encountered are already familiar, rarely are they blind-sided by a problem and rarely do they tackle unusual problems. The decisions made in the company are based upon the company’s interest rather than personal interests, so the alternative that will maximize outcomes and produce positive results will be the selected alternative.
Like any other company, Carrefour has a set of policies and rules. Policy is a general guideline used to approach a structured problem. Rules are what limit a manager or employees on what he/she can or cant do. Policies and rules are highly respected and followed by the managers and workers of Carrefour. They use standard management. A clear set of rules and the top managers for the workers to strictly abide set policies. Status Que is maintained. Innovation isn’t something encourage by the company as creativity isn’t needed. The goal is clear and simple, have the lowest prices in the market. If risks are to be taken, it is mandatory for them to be measurable. Since the company is well established, it is rare to encounter any unusual problems.
There are several corporate strategies a company can follow, such as growth, stability, and retrenchment. Carrefour uses the growth corporate strategy. There are several growth strategies: diversification, unrelated diversification, concentration, and integration. Concentration is when a company focuses on a product line and increases the products offered. There are two types of integration, vertical integration (which has two parts) and horizontal integration. Backward vertical integration is becoming self-supplier and forward vertical integration is eliminating any intermediaries. Horizontal integration is making alliances in the same market to reduce the number of competitors and increase competitive strengths.
Diversification is split into two parts, related diversification and unrelated diversification. Related diversification is expanding by combining with companies that sell the same product as you whereas unrelated diversification is combining with unrelated industries to gain higher financial returns. Carrefour used unrelated diversification to grow. When one walks into Carrefour, products of all kinds are displayed. Carrefour sells everything from food to electronics and everything in between. Recently iPads are being sold in Carrefour. When a company sells more than one kind of product, more customers will be attracted to the place resulting in higher financial returns. Several companies make contractual agreements with Carrefour in order for Carrefour to be authorized to sell their products. In this way Carrefour’s product portfolio is varied and huge, so it targets more than one market and customer segment.
Carrefour presently holds 35% market share in UAE. This is considered to be a successful fruitful business. It has a high market share and high market growth, which, according to the BCG matrix, is considered a star. Carrefour is expected to experience positive growth and high financial returns.
Competitive strategy:
Competitive strategy is mainly the method that the organization is willing to apply in order to gain competitive advantage in the market. Each business different competitors and customers therefore, they will need to implement the most suitable strategy in order to gain this competitive advantage and higher market share.
There are three different competitive strategies, which are:
- Cost leadership strategy: it is when the organization is seeking to offer their products in lower prices comparing to their competitors.
- Differentiation strategy: is attracting consumers but offering unique products that will distinguish the organization from their rivals.
- Focus strategy: you can define this strategy as choosing one of the previous strategies (Cost leadership strategy or Differentiation strategy) and then implementing it only on specific targeted consumers which also known as segment of the market.
Moreover, Carrefour is one of the largest retailing businesses around the globe. Furthermore, after meeting with couple of their managers we have been informed that Carrefour is ranked the first retailing business in the Middle East and ranked the second globally after Wal-Mart. Nevertheless, Carrefour is using the cost leadership strategy by providing the cheapest prices on their items to all customers. Basically they offer all consumption products and by providing the lowest prices on those kind off products there are making sure to gain a competitive advantage against their rivals. On the other hand, customers are the most important factor in any business and they have good bargaining power and Carrefour trying to lower this power and obtain more customers by providing the best quality with lower prices.
SWOT Analysis:
The SWOT analysis is one of the important analyses that any organizations do before deciding on formulating a business strategy. The SWOT analysis consists of two analyses:
External Analysis: Is the study of the environment of the organization and basically viewing the Opportunities (O) that the organization can use to increase their productivity/profits. Also, the external analysis helps you in defining the Threats (T) from outside that might affect the organization’s goals.
Internal Analysis: Is studying the organization from within. In this part of the SWOT Analysis the organization will be trying to measure the capabilities and Strengths (S) of the organization. Moreover, they try to define the Weaknesses (W) in the organization that might lead the organization to lose the competitive advantage or not get to it anyways.
After interviewing the couple managers of Carrefour and discussing the SWOT Analysis we have learned the following about Carrefour’s own SWOT:
Strengths: Carrefour are the leaders in the UAE market with 35% market share, they are number two globally, and number one in the Middle East.
Weaknesses: The managers think that they consider organization is expanding in fast rate but they do not have the sufficient resources to control their huge expansion.
Opportunities: After successfully opening different branches around the world, the managers think that have a great opportunity in keep opening new branches and keep on expanding their brand name.
Threats: The main threat to Carrefour is considered the large amount of competition locally wither it is from Co-op, Spinneys, or new entrants to the retailing business. However, they are also considering the strong competition globally from Wal-Mart.
Organizational Structure and Design:
Organizational structure is the arrangement of tasks and jobs within an organization to make sure that the most efficient and effective outcome is achieved. Moreover, there are six factors that influence the organizational structure:
- Specialization: Each employee or group of employees have a specific task that they can do in the best way.
- Departmentalization: Dividing the organization into divisions that focus on specific tasks, which can be classified as functional, geographical, product line, process, or by customers.
- Chain of Command: Clear line of authority from the top management to the lower levels in the organization.
- Span of control: Refers to finding the number of employees that can be supervised efficiently and effectively relative to the number of managers.
- Centralization: Is concerned with the involvement of lower level management in making decisions.
- Formalization: Means that there is a specific rules and procedures to guide the employees to accomplish the organization goals.
However, depending on the previous factors an organizational design will be formed and they are either Mechanistic or Organic organizational design.
The Mechanistic Design characteristics are: high level of specialization, specific departments, clear chain of command, narrow span of control, centralization, and high formalization. However, the Organic Design is the opposite of the mechanistic design. Nevertheless, Carrefour employees have specific tasks and rigid rules to do their job. The decision-making is generally centralized to top management and there is a clear chain of command in the organization.
Despite that the environment of Carrefour is considered dynamic and complex. Another factors that affect the Carrefour’s organization design such as: size of the organization, routine procedures, limiting innovation and risk taking, cost control and the factors we discussed previously. We came to conclusion that Carrefour has a Mechanistic organizational design.
Changes:
Changes within an organization are a critical part and managing organizations. Usually, organizations tend implement changes on either external or internal environments that have mainly direct effect on the organization. Carrefour has a very dynamic environment and needs make non-critical changes very often.
External changes focuses on the outside environment and trends happening outside the organization and have a direct impact on the organization. For example, when Carrefour is willing to open new branches in other countries they are going to make changes to fit with the countries governmental laws and the economic situation in that country.
Internal changes are basically the changes in the way that the organization does stuff within itself. Such changes could be as big as changing the organizational strategy or structure and can be simple as changing few work procedures.
However, we asked Carrefour managers about three important types of changes that all organizations have to do it in some point. First of all, structural changes which is alterations on the arrangement of tasks in the organization to make sure that the outcome is the best possible outcome. Second of all, changes on the technology or the work procedures or equipment. Finally, changes on the human resources, which is changing the attitudes, expectations and behaviors of the employees in the organization.
Moreover, after explaining the three types of changes we have been informed that structural and technological changes do not happen very often. Most of the time such changes happen almost after five years of operation. On the other hand, the human resources changes happen very often.
Finally, we triggered the question do your employee’s resists changes and if yes how do you deal with it? Surprisingly, the answer was that most of the time employees do not resists changes and they support and are willing to do their best to adapt to the changes as soon as possible. However, if some of the employees had a problem regarding the new changes Carrefour management will communicate with those employees and try to educate them on why such changes will be better for both the employees and the organization. Moreover, the management will try to involve those employees and make them participate in order to convince them about the new changes. However, as the general manager Mohammad Al Assaf emphasized on the management only discusses and try to solve “Professional factors” that caused the employees resistance.
Every business in the world faces problems of all kinds; whether it is a structured problem or and unstructured one. There is a difference between these two types of problems. First, structured problems are problems that are familiar and have clear goals. The information about these problems are available and easily accessed. First level managers often deal structured problems because these problems are quite repetitive and clear. The decision of solving these problems, also known as programmed decisions, is based on rules, procedures, and policies.
On the other hand, unstructured problems involve unclear, unusual, and new problems that a company may face. The information about these problems are not available; therefore, these kinds of problems require critical thinking in order to make a unique and wise decision, also known as programmed decisions or custom-made decision, in solving these unstructured problems. Upper-level managers need to be creative in dealing with unstructured problems that have undefined goals.
Carrefour is a huge company that lasted over 60 years. The manager states that unstructured problems are were faced in a usual sequence in the midst of Carrefour’s history, however, recently the company is not facing unstructured problems, because after this deep history and years of experience, Carrefour realizes and recognizes a lot of kinds of problems that were once unstructured. The managers developed procedures to these particular problems to rely on. Besides, Carrefour develops and nourishes in a stable environment in which they can get in control of a lot of situations after long years of experience.
Innovation and creativity are factors that relate to most of the organizations in the world. Creativity is defined as the ability to combine ideas, develop them, and decorate them in a unique and outstanding way to help the organization have methods and factors that make the working environment unique and stand-out among the outsiders such as new entrants and competitors. Innovation is a result of creativity and the outcome of the creative thinking. Creativity and innovation allows the company to take risks after long studies and deep analysis to become singled-out of other competitors in the industry.
As for Carrefour, innovation and creativity play a major role in there. The managers believe that their employees are people with creative ideas that should be brought into the table and be used if the results were possibly effective and efficient. “We believe that innovation is what keeps the business running, because if we stop having creative ideas, others will. That’s why we have to keep up these unique ideas to help us become different in the industry. Of course, we do not lock our employees’ creativity to not be out there. We actually believe that not only managers come up with creative ideas, but employees should be given the chance to bring new ideas to the table, to be heard, and to be taken into consideration and process after we make careful studies about it”.
One of the creative ideas was implemented in Carrefour, university branch in Matajer Sharjah. Students in the universities face troubles in terms of food, as there are fast food restaurants mostly around them. A thoughtful idea was to hire an excellent chef to cook daily different meals that are related to Arab food. The results of that idea were good, since students now have the chance to eat different kind of food around. After the success of this idea, other restaurants opened around the university that have the same process as Carrefour’s, yet in a different way, different varieties of food choice, and, of course, unique chefs. These new restaurants are, for instance, Breakpoint, Abella, and Grab N Go.
After creative ideas, standout performances, and potential improvements, there are rewards systems that are provided to help motivate employees to stand tall in improvement and to give a sense of satisfaction inwards and self-recognition and great reputation outwards. There are different types of rewards. First, intrinsic rewards are intangible rewards such as self-satisfaction and sense of achievement. The intrinsic reward is related to the person involved in making an action that helped other people or an action that was right which resulted in feeling satisfied inside. On the other hand, extrinsic rewards are tangible rewards that are seen by not only inner self, but also by others based on a specific achievement or certain accomplishment. For instance, there are certificates or trophies symbolized as a reward to someone who has done an achievement and a great job. Other examples of extrinsic rewards are such as monetary rewards, also known as bonuses, or vacation days.
The managers in Carrefour definitely hand out rewards to their employees after a recognizable improvement or a creative idea that helped to improve the company. Managers in Carrefour rely on both at different situations. When an employee contributes in a certain task that is off of the employee’s field, there are compliments and thanks notes that are given to the employee after finishing the task; therefore, that is considered as an intrinsic reward that help to motivate the employee. Plus, there are bonuses and an applauding recognition among other workers to a specific employee after making an outstanding achievement or creative idea that helped the Carrefour have greater reputation. The managers in Carrefour rely best on bonuses to the employees as an extrinsic reward.
Conclusion
The components of business that model the retail giant have proven to be the strength of the business. The components drive a specialized focus, both internally and externally. Internally components such as management structure and culture of the organization assist the business to rethink its leverage. They help to bring a stronger foundation upon which the business can be grown and expanded. The internal components take advantage of the assets and capabilities of the business to give itself some leverage against competitors. With a strong management, an exciting business culture; competition becomes less of a concern and more part of planning and strategizing. External components such as the competition and market advantage help the business to look for and find other capabilities that are not present internally. This includes the required talent to grow the business and other specialized sources. Combined these components allow the business to redefine their competitive position in the face of an industry that is constantly undergoing changes; while at the same time allowing the business to take advantage of the benefits of scale, efficiency and flexibility.
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