This website uses cookies to ensure you have the best experience. Learn more

Carrefour Case Essay

1697 words - 7 pages


Carrefour S.A. (Carrefour) is a retail corporation located in France. Carrefour is Europe’s largest retailer, with 5,200 stores and revenues of €53.9 billion. Over the last four years they have been growing thru acquisitions, mostly outside of France.

Company History

Carrefour is responsible for introducing the hypermarket to Europe in 1963. A hypermarket is a mega-store, similar to that of a Wal-Mart. They started in small French towns, but by 1969 expanded to Belgium. In 1975, they opened their first store outside of the European continent, they had expanded to South America’s largest country, Brazil.

Carrefour’s strategy until 1998 was to grow ...view middle of the document...

Why isn't the swiss franc issue @ 3.625% coupon the obvious choice for debt financing?

• Do not hedge 100% of your currency exchange rate risk in a foreign currency because you would be adding risk, not hedging against it

• Other things need to be considered and factored into the decision

o Carrefour will be holding its debt in Swiss Francs, but its cash flow will primarily be in Euros, so if the value of the Swiss Franc increases against the Euro, this can offset the favorable rate

o Need to take into account the spot and future exchange rates of the Euro to the Swiss Franc

• It is also not the obvious choice because of the types of bonds that Carrefour will use to raise long-term debt, but since the Eurobond is the best option, this is not a factor. It would be an issue if Carrefour obtained debt thru Yankee Bonds and Straight Debt.

4. What can a firm do to manage the exchange rate risk of foreign currency borrowing?

• Hedge against the foreign exchange rate risk

o The currency that the debt is denominated in should be hedged against

o Carrefour debt is in Euros, they can hedge this by hedging this against the lower rate Swiss France

Hedging against currency exchange rate risk theory

Investment portfolio theory (Modigliani and Miller) suggests that investors are able to diversify by themselves and that there is no need for companies to hedge by them. However in reality, manager’s own holdings may not be well diversified. Their stake in their company could make them vulnerable and thus make them reluctant to take risk. Therefore this rationale induces managers to reduce idiosyncratic risk related to their company. Hedging and diversification are among the tools which managers use to diminish that risk. That being said, Multinational firms should try to hedge their foreign exchange rate risk. Foreign exchange rate risk is an important component of total risk management approach along with other market risks such as interest rate and commodities exposure. Foreign exchange rate risk may create operational, transactional and economic exposure for the company.

Failure to hedge proper amount could lead to volatile earnings. Proper amount in this context is crucial. Over hedging such as undetermined future commitments or receipts might lead to increase exposure and risk. Under-hedging, on the other hand, may not be able to provide total protection for the exposure.

Separately, without hedging, managers would not be compensated solely based on their performance. Management’s efforts would be watered down by the loss or gain from foreign exchange rate. Gains and losses from foreign exchange in earnings figure may result to ineffective corporate incentive and monitoring.

Hedging, moreover, allows safe of mind. Management and Board do not need to worry about the direction of the rates. They can focus on their operations and be more productive.

Companies should...

Other Papers Like Carrefour Case

Carrefour Misadventure in Russia Essay

4456 words - 18 pages Master of Business Administration Strategic Management Carrefour Misadventure in Russia Supervised By John Kalmus Submitted By STU 22782 Submitted To IBAM Word Count 3898 Submission Date 22 January 2011 Carrefour strategy is comprised of following components • Organic, Sustainable and Profitable growth • Fast return on capital employed • Market Leadership through • Acquisition Carrefour started business in

Carrefour China and the Olympic Torch Relay: Managing Corporate Crisis Amid Evolving Expectations of Multinational Firms

575 words - 3 pages Self –Evaluation:Characteristics of Effective Leadership The questions below relate to characteristics of effective leaders. Use the questions to evaluate whether you possess these characteristics . Use the results to see where you might focus to strengthen your leadership skills. |Characteristics of Effective Leaders |Yes |No | |Caring

Pestle Analysis

1506 words - 7 pages , 2012) In order to complete this project; Carrefour has to answer following questions: * What is the group that Carrefour’s project will impact? (Brett) * What are the training needs of that group? (Brett) * What is the make up and morale of your project team? (Brett) Carrefour should refers to Costco’s case study to influence his project by: 1. Empowering local management (kwintessential, 2011) 2. Listening to the

Exam Instruction

1528 words - 7 pages Examination instructions to Students Subject: Bus 317 Strategic Management Please read these notes carefully: 1. The examination will be based on the following case Cochlear via the LMS site for BUS317. 2. You are expected to read the case in detail AND update the information i.e. you are required to know the competitive situation and the internal functioning of Starbucks to October 2013. 3. You are allowed to prepare a

Mis Assignment

1727 words - 7 pages bnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnm MIS Assignment 4/12/2014 [Type the author name] | 871387 | MIS | Assignment | | | 4/12/2014 | Contents Executive Summary: 2 Introduction: 2 Carrefour Mission: 2 Carrefour Vision: 2 Case

Alternative Expansion Plan for Promodes

2215 words - 9 pages An Important Juncture As a member of the Halley family and the chairman of one of the top French retailers, Promodes, Paul-Louis Halley witnesses the $16.6 billion takeover of his family’s firm by its long time competitor Carrefour, on January 25th, 2000. This merger, prompted by growing threats from foreign retailers, will establish Carrefour as the top European retailer. Although these two firms have a long history of rivalry and

Walmart China Issues

5080 words - 21 pages the illegal income. Their ill-gotten money will be confiscated and those that cannot calculate their illegal income will pay a fine of up to 500,000 yuan.($75,987). Carrefour offered to refund customers five times the difference between the price charged and that on the label. And, Wal-mart claimed the company will strengthen its price monitoring as the Spring Festival approaches. One case was found in the Carrefour store in Tianheyuan Village in the city. A kind of rubber gloves was sold for 0.4 yuan (about $0.06) higher than the price on the label here.


1564 words - 7 pages -­‐carrefour-­‐tesco-­‐ metro-­‐successful-­‐global-­‐growers-­‐what-­‐can-­‐we-­‐learn-­‐from-­‐them/     Mayer,  H.  (2011)  Corruption  halts  IKEA  in  Russia.  The  Age.  Retrieved  2014-­‐08-­‐18  from­‐halts-­‐ikea-­‐in-­‐russia-­‐20110306-­‐ 1bji5.html       Nikishenkov,  O.  (2010)  IKEA  case  exposes  bribe  culture  in

Wal-Mart in China

4845 words - 20 pages away from large-scale acquisitions. Carrefour was mainly trying to localize and do things “the Chinese way” by encouraging local branch decision making, building local supplier contracts, stretching local rules and regulations, and using local promotion marketing schemes. Wal-Mart was more focused on doing things the American way – the way that made Wal-Mart what it is today in the American market. This contributed to the fact that Wal-Mart has

Walmart Case

552 words - 3 pages located to minimize transportation and related costs. Strategies to Confront Wal-Mart Threat (based on the 4 key success factors in Strategy) 1. Long Term Objective a. Company´s mission, in our case Carrefour´s mission. 2. Knowing our limitations a. We might not have the same budget as WM but we can compete on quality, service, and convenience. 3. Knowing our competition (WAL-MART, environment) a

Tyre Industry

853 words - 4 pages NAME - NISCHAY SAXENA REGISTRATION NUMBER - 1420023 SECTION – F2 SUBJECT – BUSINESS ETHICS SUBMITTED TO – PROF. JEEVANANDA S CASE – FIRE IN A BANGLADESH GARMENT FACTORY Fire in a Bangladesh garment factory Introduction This case talks about fire in a garment factory which was located near capital Dhaka in which 112 people were killed and several hundreds were injured. This happened in November, 2012. The main reason for the

Related Essays

The Summary Of Carrefour Case Essay

572 words - 3 pages SUMMARY OF CARREFOUR Carrefour S.A. was Europe’s largest retailer. In the past, Carrefour management had generally financed company growth through securities denominated in the currency of business operation. Carrefour considers borrowing in British pounds sterling in order to take advantage of a borrowing opportunity in that currency. With a debt-financing requirement of EUR750 million, the bond issue would be one of Carrefour’s largest

Carrefour Stores Essay

1341 words - 6 pages CARREFOUR STORES * The Carrefour supermarket company is set up by the Fournier, Badin and Defforey families who run a discount supermarket in Annecy. * Hypermarkets, supermarkets, convenience stores, cash & carry e-commerce. * Carrefour has all the resources to cater to the different needs of its customers – whether they live in an urban or rural environment, whether they be private or professional clients, in France or abroad

Carrefour Essay

526 words - 3 pages CARREFOUR Carrefour is one of the leading retailers in France. In its financial statement for its 2003 accounts (Les Echos, March 4th, 2004), Carrefour defined its overall objective as being “profitable growth”. Indeed, the group will have to boost sales, as competition is especially fierce in this sector, but this cannot take place to the detriment of margins. This objective can be separated into three subsections of performance

Carrefour Essay

1142 words - 5 pages I. BACKGROUND Carrefour has first introduced the concept of hypermarket in the small French town of Sainte-Genevieve-des-Bois in 1963. It is an all in one shopping store that combines the supermarket, drugstore, discount store, and gas station. In the retail industry, where the competition is tough, it is only normal to see mergers and acquisitions between big companies and small-time businesses. The most notable mergers are with