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Metro Case Study

2588 words - 11 pages

Metro Cash & Carry

A German Wholesaler’s foray into the Indian Markets

Case Analysis

Table of Contents
S No. | Topic | Page No. |
1 | Introduction | 3 |
2 | China | 5 |
3 | China – Challenges | 5 |
4 | Russia | 6 |
5 | Russia – Challenges | 6 |
6 | India | 7 |
7 | India – Challenges | 8 |
8 | Recommendations | 9 |
9 | Conclusion | 9 |
10 | Appendix A | 10 |

Introduction & Business Model

The Metro Group is one of German’s largest trade and retail group player which. It is divided into four major business units:
1. Real/Extra - an everyday retail supermarket
2. Kaufhof - an up market department store chain
3. Media Market/Saturn - ...view middle of the document...

ECO (2,500 to 4,000 Sq Metres) – This was the smallest of the three and was set up primarily in France, Japan and Italy.

The arrangement of food items present was on the basis of the size of the store. Another important aspect of their business was the Metro Buying Group. The Metro Buying Group (MGB) was responsible for negotiating with the suppliers on the large scale regarding the prices, Inventory and merchandising activities.

Metro C&C realized the importance of international expansion from the get go and after the initial expansion around Europe in the late 60’s and 70’s, they moved into farther territories in the 90’s (Appendix A – Figure 1 details the time of entry of Metro C&C around the globe). This forward thinking often gave them a first mover advantage.

Metro C&C emphasised on understanding the local cultures before entering a new geography. They conducted a multi-step feasibility analysis to identify potential candidates. This also allowed them to analyze the host country and evaluate their own strategy for entering the particular market. They were fast movers and quickly adapted to the local environment. The format of the feasibility study is detailed in Appendix A – Figure 2.

Metro’s international outlook was also reflected in their management staff. Majority of the Metro managers worked outside their home country and their composition of country management teams composed of various nationalities as clearly shown in Appendix A – Figure 3

Metro scored over the hypermarkets & other small food distributors as they offered an assortment of goods to the retailers at competitive prices. It also helped the small producers to manage their inventory in an organised manner and also makes the distribution channel more profitable.

China
From the 1950s to 1970s, Chinese government entities procured, distributed and sold all agricultural commodities. Even in the mid 1990s, most of China’s national and provincial level wholesalers were state owned enterprises. Retails outlets tended to procure most of the products locally due to China’s poor distribution system and a tendency for local governments to protect local producers and manufacturers.

Due to the large untapped market, Metro made its first foray into China in 1996 by setting up a store on the outskirts of Shanghai. They were required by the central government to take a local joint-venture partner to enter China and hence formed a 60/40 joint venture with Jinjiang group. Jinjiang group was a large state owned enterprise with a nationwide presence and good ties with government agencies. China’s accession to the WTO in 2001 required China to open its retail market to foreign investors and in December 2004, China allowed Metro to increase its ownership stake to 90% in the joint venture. However due to the close relationships Metro had built over the years, Metro chose to maintain its ties.

Challenges
By 2005, China’s central government had...

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