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Carrefour's Market Entry Into Dubai in 1995
I. Executive Summary
In 1995, Carrefour expanded its European hypermarket concept that it had originally pioneered decades ago into Dubai, United Arab Emirates. Following a cautious country-by-country expansion strategy into Emerging Markets, Carrefour saw potential in the Dubai emirate. The emirate had a flourishing retail industry and exhibited strong fundamentals in its flourishing economy. Carrefour’s objective was to find a mode of entry that would allow it to reduce risk of failure and maintaining profitability, while offsetting its longstanding global rival Wal-Mart.
Dubai presented many advantages for companies considering market entry into Dubai in 1995. Despite a small population relative to other markets it served, Dubai offered an unusual composition of Expatriates and local residents in an economy with one of the highest standards of living and income in the world. The market was extremely business friendly with many advantages like zero corporate taxes in conjunction with very few barriers to trade. It had superior transportation networks, a well-defined legal system, positive retail conditions, strong economic growth, low political, and transfer risks. Carrefour reviewed the laws and determined that a joint venture would be best to minimize the risk of failure while having a qualified partner to aggressively seek growth and manage operations. It partnered in a joint venture with Majid Al Futtaim, a pan-regional conglomerate with retail experience in the Middle East. The joint venture adapted to the market by changing the place of its stores to the shopping mall, adapted its food to socio-cultural norms, promoted mostly non-food items because of higher profit margins, and was very careful in discounting amidst double-digit inflation.