Company overview
Carrefour is a multinational group of company incorporated in 1958 by three entrepreneurs namely; Denis Dofforey, Marcel Fournier and Jacques Dofforey. The group started its operations in the home country France as retail hypermarket specialized in the food stuff. The company has been operating for over five decades in Europe without expanding in other continents. The company over these years remained constantly stagnant in growth and it is around 2007, the management reviewed its operational and marketing strategies and started other branches in other continents (Carrefour, 2020).
The global advancements in technology, marketing and brands development has enabled the company to venture in other countries like china, brazil, Lebanon, Belgium etc.
Currently, the group is run by sixteen members board of directors led by the chairman Mr. Alexander Bompard. The board is comprised of both independent and dependent directors enabling the board to form specialized board committee to foresee the running, management, and implementation of the mission strategies of the group. The committees established under the board include the audit committees, remuneration committee, governance committee, corporate social responsibility committee and the strategic committee (Carrefour, 2020).
Strategic Growth and Mission of the Group
The group has endeavored to create the strategic plan dabbed Carrefour strategic plan 2022 with its core mission in streamlining the organizational structure in order to enhance the customer satisfaction, crating better product to enhance the competition position in the food retail sector, enabling an efficient e-commerce channel to become a leading player in the market and creating excellent service and quality in food retail sector (Carrefour, 2020).
In realization of the above strategic plan, the group has set aside the finance to cater for the expansions in other jurisdictions.
Based on the experience of other branches operated by the group, the group has experienced rapid growth due to the untapped opportunities in the food retail sectors in the developing countries. In the wish list of the countries that the group want to open branches is Nigeria. The legal and statutory, economic, market, consumer and risk analysis factors have been analyzed as under.
Legal and Statutory Requirements
Among the considerations that the management of carrefour will consider when investing in Nigeria is the legal requirement required for a foreign owned entity.
One of the requirements carrefour is required is to register with the Nigeria corporate commission. The commission requires foreign companies to have a minimum share capital of N 10,000,000 (Ten million Naira). The process of registering with the commission takes approximately two to four weeks. The company is also required to obtain the tax identification number and register the value added tax obligation and income tax obligation with the federal Inland Revenue service. This is very critical to the company as the companies in Nigeria are the agent for collecting tax on behalf of the federal inland revenue service.
Thirdly, the company is required to register with the Nigerian investment council. This body is established in Nigeria by the federal government of Nigeria to ensure the foreign investing company is compliant before starting the operation in Nigeria. The council requires the foreign company to provide the details of the founders of the companies, the data about the company, the tax details, and the banking details. The council is mandated to monitor, encourage, and promote direct foreign investment in Nigeria
Fourthly, the company is required to open the domicile bank account with the commercial bank. The bank details enable the company to obtain certification of the capital importation which certifies that the share capital funds have been received in the bank account. Further, the bank account is also important when the company want to repatriate back the profits into their parent’s country.
Lastly, the company is required to obtain the business permit. The business permit is issued by the Nigerian ministry of internal affairs. The business permit is a one of the requirement before starting the business since it’s a precondition for the company to obtain before the company start the process of applying the work permits for its foreign workers and also the expatriate quota.
Economic and Market Viability
One of the promising economies to venture in Africa is Nigeria. According to the economic survey, Nigeria economy is enviable due to the gross domestic growth rate of over ten percent. The growth margin is an indication of a growing economy and hence availability of viable untapped growth. Secondly Nigeria is enriched with oils and petroleum products which is the key driver of the Nigeria economy. This translate to significant foreign exchange reserve hence Nigeria economy being cautioned against the global economic shocks perhaps experienced in other countries.
Another important aspect of Nigeria viability is the ever-increasing population enriched with different populations demographics of young middle-class income earners. This populations are most likely not attached to any brands as this population will be attracted by the emerging new trends in the market. The increasing young middle-income population has immensely contributed to growth in telecommunication and banking industries in recent years. With this prospect, the next anticipated sector to experience rapid growth is the untapped food retail sector due to the rural urban migration experienced by the ever-increased young middle-income earners.
Another population demographic is the presence of working women who are on the rise. This category of population prefer purchase for convenience and time saving as they work far from home and prefer to purchase out rather than the traditional ethnic food stuffs.
Consumer Analysis
Customer differentiation. - customers in different cities of Nigeria are indifferent depending on their beliefs, culture, purchasing power, brand loyalty among others. These factors enable the group to strategically position itself in the cities, as well as determine the number of city branches it should operate.
Price consideration- Most Nigerians are more sensitive to price as most are low income earners and most have informal employment. Carrefour is well known for its cheapest prices on its products and these class of customers who are sensitive to price can be absorbed by the group hence they are a target (Nandonde, 2019).
Brand loyalty- Customers feel attached to different brands and Nigerians like to feel attached to specific brand. In other cities, customers feel attached to local brands hence multinational entities might experience customer rejection hence market penetration becomes harder for the product to sell in these cities.
Product convenience. - Most of the working young middle-income earners prefer to purchase in modern stores irrespective of the price (Nandonde, 2019). This class of customer prioritizes the new customer experience like the one offered in mall and like to purchase all their items under one roof.
Media advertisement- Significant number of Nigeria population has access to one or more source of the media. The advertisement media opted by the group has direct impact on the company product depending on the target consumer and believe of the customer towards the product being advertised.
Market Penetration
Any market penetration strategy adopted by the company depends on several factors that a company should consider before entering into the market. The factors should always be based on the risk assessment, barriers, and market dynamics. Among the external factors the company should consider are economic barriers, political barriers, social cultural related barriers, industrial based barriers, environment, and the competition barriers. The internal barriers based on the risk assessment that the company carries mainly are operational and financial barriers.
Carrefour has the financial muscle to enter the Nigeria market owned subsidiary. Carrefour has the capacity to enter into the market directly since the retail food sector doesn’t have a formal retail business, there exists untapped market mostly in northern Nigeria, most of the customers are optimistic and aspire new foreign brands, there is urbanization movement by the well informed middle income labor force, the development of new mall hence targeting the upper consumers in malls who shop for convenience and the availability of enough market size for emerging middle income class.
Based on the market gaps, the company will provide foreign direct investment to the Nigerian federal government. Carrefour has adequate resources to enter Nigerian market as a fully owned subsidiary. The whole owned subsidiary will have direct control of its operations and finances. Carrefour based on the market survey and analysis might opt to operate small branches as they study the market trends and pattern (Nandonde, 2019). This will reduce the risk involved in operating many branches which might be unprofitable due to high cost outlay, distribution infrastructure inefficiencies, harsh economic and trading environment and security threats mostly exhibited by the unlicensed militia like Boko Haram.
Risks and Mitigation
The most underlying risk of doing business in Nigeria is the registration process, clearing of the imported goods which takes more than a month and day to day management of the business due to compliance with the regulatory bodies. The ease of doing business in Nigeria has not been easy due strict compliance regulations. Carrefour will need to apply high level professionalism and diplomacy. Also, the company will need to monitor its stock level considering the ordering and clearing days of the cargo to avoid running out of the stock.
Another risk that carrefour faces in establishing its business in Nigeria is lack of available space and strategic site locations as there are a few malls in town as the real estate is growing. Moreover, the available spaces are much expensive and might be unprofitable to the company if the site is not conducive to recover the rent. To mitigate this risk, the company might be forced to engage the registered real estate agents and market research firms who will help in identifying suitable locations for doing business.
Also, the company is faced with the risk of not getting the rightful skilled workforce who might need to be trained in line with the company culture and policies. To mitigate this, the company might be forced to set up career development programs which might be unforeseen additional cost to the company. Also, the company may employ its other foreign workers in the branches. The company might be faced with the risk of navigating the Nigeria market as the company will enter the market directly as wholly owned foreign entity. To mitigate this the company might be forced to form partnerships with local companies in order to attach the brand in the partnership.
The company is also faced with the risk of operating on economies of scale. The company will need to refine the mode of operating and to mitigate the risk associated with operating on large scall, the company will need to operate a few profitable branches and later it can increase its branches as market expands.
Benefit that accrue Nigeria because of Carrefour
· Nigeria will benefit from foreign direct investment since Carrefour is a foreign company. The profits generated by the company are utilized in Nigeria to boost the gross domestic product, hence stimulating economic growth.
· Carrefour will bring in new expertise that Nigeria economy and citizens did not have. For example, local Nigeria entrepreneurs will get new business ideas on how to run and operate big multinational retail food outlets like Carrefour.
· Carrefour will create much needed employment opportunities for Nigerian citizens. The educated graduate will be absorbed in the labor market hence Carrefour will reduce the unemployment level in Nigeria.
· Carrefour will offer the Nigerian market with new products therefore leading to market growth since other retail outlets will try to offer different products in the market.
Recommendations
Carrefour has the potential to tap into the leading economy in Africa. The promising prospects of the food retail sector in Nigeria and the immense investment the Carrefour is undertaking globally, will see the company becoming the leading global retail food leader. The company has established the four pillars; gaining in productivity to reinforce attractiveness, making eating better and accessible to everyone, employing a simplified change and open organization and becoming a leading online food shopping market. The company has a clear roadmap in realizing the 2022 mission.
With the emergency of Covid-19 Pandemic which has disrupted the way people relate, trade, and interact, Carrefour investment in Nigeria is ‘A BUY ‘since people has turned into online shopping and the company has the capacity, customer reliance and experience to tap into the untapped market potential in Nigeria.
Carrefour is a multinational group of company incorporated in 1958 by three entrepreneurs namely; Denis Dofforey, Marcel Fournier and Jacques Dofforey. The group started its operations in the home country France as retail hypermarket specialized in the food stuff. The company has been operating for over five decades in Europe without expanding in other continents. The company over these years remained constantly stagnant in growth and it is around 2007, the management reviewed its operational and marketing strategies and started other branches in other continents (Carrefour, 2020).
The global advancements in technology, marketing and brands development has enabled the company to venture in other countries like china, brazil, Lebanon, Belgium etc.
Currently, the group is run by sixteen members board of directors led by the chairman Mr. Alexander Bompard. The board is comprised of both independent and dependent directors enabling the board to form specialized board committee to foresee the running, management, and implementation of the mission strategies of the group. The committees established under the board include the audit committees, remuneration committee, governance committee, corporate social responsibility committee and the strategic committee (Carrefour, 2020).
Strategic Growth and Mission of the Group
The group has endeavored to create the strategic plan dabbed Carrefour strategic plan 2022 with its core mission in streamlining the organizational structure in order to enhance the customer satisfaction, crating better product to enhance the competition position in the food retail sector, enabling an efficient e-commerce channel to become a leading player in the market and creating excellent service and quality in food retail sector (Carrefour, 2020).
In realization of the above strategic plan, the group has set aside the finance to cater for the expansions in other jurisdictions.
Based on the experience of other branches operated by the group, the group has experienced rapid growth due to the untapped opportunities in the food retail sectors in the developing countries. In the wish list of the countries that the group want to open branches is Nigeria. The legal and statutory, economic, market, consumer and risk analysis factors have been analyzed as under.
Legal and Statutory Requirements
Among the considerations that the management of carrefour will consider when investing in Nigeria is the legal requirement required for a foreign owned entity.
One of the requirements carrefour is required is to register with the Nigeria corporate commission. The commission requires foreign companies to have a minimum share capital of N 10,000,000 (Ten million Naira). The process of registering with the commission takes approximately two to four weeks. The company is also required to obtain the tax identification number and register the value added tax obligation and income tax obligation with the federal Inland Revenue service. This is very critical to the company as the companies in Nigeria are the agent for collecting tax on behalf of the federal inland revenue service.
Thirdly, the company is required to register with the Nigerian investment council. This body is established in Nigeria by the federal government of Nigeria to ensure the foreign investing company is compliant before starting the operation in Nigeria. The council requires the foreign company to provide the details of the founders of the companies, the data about the company, the tax details, and the banking details. The council is mandated to monitor, encourage, and promote direct foreign investment in Nigeria
Fourthly, the company is required to open the domicile bank account with the commercial bank. The bank details enable the company to obtain certification of the capital importation which certifies that the share capital funds have been received in the bank account. Further, the bank account is also important when the company want to repatriate back the profits into their parent’s country.
Lastly, the company is required to obtain the business permit. The business permit is issued by the Nigerian ministry of internal affairs. The business permit is a one of the requirement before starting the business since it’s a precondition for the company to obtain before the company start the process of applying the work permits for its foreign workers and also the expatriate quota.
Economic and Market Viability
One of the promising economies to venture in Africa is Nigeria. According to the economic survey, Nigeria economy is enviable due to the gross domestic growth rate of over ten percent. The growth margin is an indication of a growing economy and hence availability of viable untapped growth. Secondly Nigeria is enriched with oils and petroleum products which is the key driver of the Nigeria economy. This translate to significant foreign exchange reserve hence Nigeria economy being cautioned against the global economic shocks perhaps experienced in other countries.
Another important aspect of Nigeria viability is the ever-increasing population enriched with different populations demographics of young middle-class income earners. This populations are most likely not attached to any brands as this population will be attracted by the emerging new trends in the market. The increasing young middle-income population has immensely contributed to growth in telecommunication and banking industries in recent years. With this prospect, the next anticipated sector to experience rapid growth is the untapped food retail sector due to the rural urban migration experienced by the ever-increased young middle-income earners.
Another population demographic is the presence of working women who are on the rise. This category of population prefer purchase for convenience and time saving as they work far from home and prefer to purchase out rather than the traditional ethnic food stuffs.
Consumer Analysis
Customer differentiation. - customers in different cities of Nigeria are indifferent depending on their beliefs, culture, purchasing power, brand loyalty among others. These factors enable the group to strategically position itself in the cities, as well as determine the number of city branches it should operate.
Price consideration- Most Nigerians are more sensitive to price as most are low income earners and most have informal employment. Carrefour is well known for its cheapest prices on its products and these class of customers who are sensitive to price can be absorbed by the group hence they are a target (Nandonde, 2019).
Brand loyalty- Customers feel attached to different brands and Nigerians like to feel attached to specific brand. In other cities, customers feel attached to local brands hence multinational entities might experience customer rejection hence market penetration becomes harder for the product to sell in these cities.
Product convenience. - Most of the working young middle-income earners prefer to purchase in modern stores irrespective of the price (Nandonde, 2019). This class of customer prioritizes the new customer experience like the one offered in mall and like to purchase all their items under one roof.
Media advertisement- Significant number of Nigeria population has access to one or more source of the media. The advertisement media opted by the group has direct impact on the company product depending on the target consumer and believe of the customer towards the product being advertised.
Market Penetration
Any market penetration strategy adopted by the company depends on several factors that a company should consider before entering into the market. The factors should always be based on the risk assessment, barriers, and market dynamics. Among the external factors the company should consider are economic barriers, political barriers, social cultural related barriers, industrial based barriers, environment, and the competition barriers. The internal barriers based on the risk assessment that the company carries mainly are operational and financial barriers.
Carrefour has the financial muscle to enter the Nigeria market owned subsidiary. Carrefour has the capacity to enter into the market directly since the retail food sector doesn’t have a formal retail business, there exists untapped market mostly in northern Nigeria, most of the customers are optimistic and aspire new foreign brands, there is urbanization movement by the well informed middle income labor force, the development of new mall hence targeting the upper consumers in malls who shop for convenience and the availability of enough market size for emerging middle income class.
Based on the market gaps, the company will provide foreign direct investment to the Nigerian federal government. Carrefour has adequate resources to enter Nigerian market as a fully owned subsidiary. The whole owned subsidiary will have direct control of its operations and finances. Carrefour based on the market survey and analysis might opt to operate small branches as they study the market trends and pattern (Nandonde, 2019). This will reduce the risk involved in operating many branches which might be unprofitable due to high cost outlay, distribution infrastructure inefficiencies, harsh economic and trading environment and security threats mostly exhibited by the unlicensed militia like Boko Haram.
Risks and Mitigation
The most underlying risk of doing business in Nigeria is the registration process, clearing of the imported goods which takes more than a month and day to day management of the business due to compliance with the regulatory bodies. The ease of doing business in Nigeria has not been easy due strict compliance regulations. Carrefour will need to apply high level professionalism and diplomacy. Also, the company will need to monitor its stock level considering the ordering and clearing days of the cargo to avoid running out of the stock.
Another risk that carrefour faces in establishing its business in Nigeria is lack of available space and strategic site locations as there are a few malls in town as the real estate is growing. Moreover, the available spaces are much expensive and might be unprofitable to the company if the site is not conducive to recover the rent. To mitigate this risk, the company might be forced to engage the registered real estate agents and market research firms who will help in identifying suitable locations for doing business.
Also, the company is faced with the risk of not getting the rightful skilled workforce who might need to be trained in line with the company culture and policies. To mitigate this, the company might be forced to set up career development programs which might be unforeseen additional cost to the company. Also, the company may employ its other foreign workers in the branches. The company might be faced with the risk of navigating the Nigeria market as the company will enter the market directly as wholly owned foreign entity. To mitigate this the company might be forced to form partnerships with local companies in order to attach the brand in the partnership.
The company is also faced with the risk of operating on economies of scale. The company will need to refine the mode of operating and to mitigate the risk associated with operating on large scall, the company will need to operate a few profitable branches and later it can increase its branches as market expands.
Benefit that accrue Nigeria because of Carrefour
· Nigeria will benefit from foreign direct investment since Carrefour is a foreign company. The profits generated by the company are utilized in Nigeria to boost the gross domestic product, hence stimulating economic growth.
· Carrefour will bring in new expertise that Nigeria economy and citizens did not have. For example, local Nigeria entrepreneurs will get new business ideas on how to run and operate big multinational retail food outlets like Carrefour.
· Carrefour will create much needed employment opportunities for Nigerian citizens. The educated graduate will be absorbed in the labor market hence Carrefour will reduce the unemployment level in Nigeria.
· Carrefour will offer the Nigerian market with new products therefore leading to market growth since other retail outlets will try to offer different products in the market.
Recommendations
Carrefour has the potential to tap into the leading economy in Africa. The promising prospects of the food retail sector in Nigeria and the immense investment the Carrefour is undertaking globally, will see the company becoming the leading global retail food leader. The company has established the four pillars; gaining in productivity to reinforce attractiveness, making eating better and accessible to everyone, employing a simplified change and open organization and becoming a leading online food shopping market. The company has a clear roadmap in realizing the 2022 mission.
With the emergency of Covid-19 Pandemic which has disrupted the way people relate, trade, and interact, Carrefour investment in Nigeria is ‘A BUY ‘since people has turned into online shopping and the company has the capacity, customer reliance and experience to tap into the untapped market potential in Nigeria.
