Demand Forecast for Carrefour
Carrefour is one of the leading hypermarkets in the United Arab Emirates. The firm has been successful in managing market competition posed by both local and international firms. Thomopoulos notes that the retail industry in this country is increasingly becoming competitive due to emergence of new firms (45). The management of Carrefour will need to develop an effective operational plan that will enable it to remain competitive in the market. To do this, it will need to prepare a demand forecast to determine how to plan for its activities. According to Altay and Adams, a firm can use a number of strategies to prepare a demand forecast (74).
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The two most popular strategies include determining population increase and changes in market size. The researcher will use these two strategies to forecast the demand in the retail market in which Carrefour operates. Data retrieved from Thomopoulos shows that the city of Dubai’s population has been increasing consistently since 2008 (42). The increase is associated with high rate of immigration into the city. The figure below shows the consistent increase in the city’s population.
The pattern above shows that the demand for products offered at Carrefour will increase due to consistent increase in the population of Emirati’s most popular city. It is a fact that these people will have to shop for various products, from basic needs to luxurious products. Smith warns that it is always dangerous to assume that an increase in population will automatically result into an increase in demand for products (78). It is, therefore, necessary to use an additional model that would confirm the estimations made through population increase. The researcher used a report by Chase which estimated the growth of United Arab Emirates’ market size from 2009 through to 2016. Their research focused specifically on the retail market (48). The figure below shows the findings of their research.
The findings from these two approaches of demand forecasting strongly suggests that the demand for Carrefour products shall increase by about 15% within the next one year. The operations manager will have to plan for this change in demand to ensure that this firm has all the necessary products that its clients will need within that period.
The demand forecast done above shows that it is very likely that the market demand for products offered by Carrefour shall increase within the next one year. In this operational plan, the researcher has identified operational issues that must be addressed in order to improve efficiency within the firm.
According to Billings and Jones, when planning for an expected increase in demands for a firm’s product, one of the issues that must be looked at is the product portfolio (112). The management of Carrefour will need to have a comprehensive analysis of the demands for the existing products and determine if there are changes that should be made. In its stores, this firm offers a wide range of products from electronics and furniture to foodstuff, stationery, beauty products, physical fitness products, and fixture and fittings among others. In this area, the operations manager will need to determine the trends in the market to identify products which are becoming popular and those whose popularity is going down within the Emirati market. Boston Consulting Group Matrix may help at this stage.
Table 1: Boston Consulting Group Matrix
|Stars(high market share, high market growth)||Question Marks (Low market share, high market growth)|
|CashCows (high market share, slow market growth)||Dogs (Low market share, low market growth)|
When reviewing its product portfolio, the matrix shown above may be of great importance. Based on the market trends, the firm will first identify products that fall under the category of stars. These are products which are becoming increasingly popular within the Emirati market. These products may include fashion wears, kitchen materials, electronics, or food items that the local community is popularly using.
The products should be made readily available at the stores. The management will need to identify reliable suppliers that will deliver these products to meet the increasing needs in the market. The second category of products falls under the quadrant of cash cows. These are products whose popularity has reached peak. Although the growth of their market is slow, they have a wide market share that earns the firm a lot of money. As Chase notes, cash cows earn a firm attractive income without the need to invest much in them in terms of advertisements of product redesign (48). The management will need to ensure that these products are also available in the market in quantities that reflect the estimated demand increase.
The next category of products falls under the category of question marks. These are products whose market growth is high, but their market share remains low. It means that although the product is relatively popular, the number of people who purchase the product regularly remains relatively low. As the name suggests, these are products that demands for some actions to be taken because of their low profitability despite their increasing popularity.
The management of Carrefour will need to identify these products when defining product portfolio for the forecasted period. Once they are identified, it will be necessary to redefine them to improve their appeal to a wider market. This may involve adding features that clients may desire in them. In case the products are manufactured by other companies and delivered to this firm as finished product, then the operations manager will need to communicate with the supplier so that the product can be redefined to make it more appealing to the local customers in United Arab Emirates.
The last category of products falls under the quadrant known as dogs. The name given to this quadrant clearly suggests the undesirability of products found here. These are products with low market share and low market growth. The name dog suggests that these products are more harmful to the prosperity of a firm than they are beneficial. At Carrefour, this category of products must be identified at all cost when defining the future product portfolio. These are products that may stay in the shelves for more than two months without being purchased. It means that they end up limiting shelf-space for other popular products in the supermarket. Having these products in the shelves only leads to a loss instead of creating profits for the firm. A good example of such a product may be a cathode-ray television set that has since been replaced by LED and LCD television sets. Such products should be eliminated from the shelves when introducing the new product portfolio.
Location and number of facilities
According to Smith, location means everything when setting a retail business (52). Dubai is currently the most populous city in the United Arab Emirates. Majority of the residents here are in gainful employment. It means that they spend most of their time at work, and have very little time to go shopping. Carrefour should be careful in when setting the location for its stores in case it plans to build new ones. They should be conveniently located, especially close to the bus or railway stations. This way, shoppers can easily get into the stores and make their purchases while waiting for their means of transport.
These shops will need to take advantage of the power of display to convince window-shoppers to get into the shop. Although they may not pick the item that is attractively displayed on the store, they may end up picking another item that they needed. The power of display may also encourage impulse buying, especially among the youth. Finally, the firm will need to have online stores where other shoppers who cannot make it to the stores can purchase products they need in an online platform. The focus is to ensure that customers from different categories will be catered for irrespective of their location in the country.
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Supply chain management, outsourcing partners
Supply chain management is a critical issue when planning for an increase in demand for a firm’s products. Carrefour does not manufacture most of the products in its stores. The firm relies on suppliers both locally and internationally to deliver products that it has in its stores. Most of the electronics come from Japan, China, the United States and Europe. These products must be available in various locations within the United Arab Emirates at the right time.
It may be challenging for this firm to organize for these products to be transported from their source point to the market where they are needed. To solve this problem, the firm may need to have outsourcing partners, especially transport companies, that will ensure that these products reach the stores of this firm at the right time, in the right quality and right quantity. Locally available products such as fresh vegetables can be sourced directly from the consumers. The management can form a strategic partnership with the suppliers to ensure that they deliver these products at the right time in all the stores of this firm.
The issue of logistics will be a concern because the forecast shows that this firm will need to move more goods from one location to another than it deed in the past one year. The management may address this issue in two ways. The first approach may be to purchase new vans and tracks that will be used to transport products from its warehouses to the stores. The vans will also be used to deliver products that are purchased in the online platform.
This strategy is capital intensive, but it gives the firm full control of the logistics management. The second approach may involve outsourcing this department to a trusted logistics firm. The contracted firm will coordinate very closely with the sales and procurement units of Carrefour to ensure that movement of goods from one place to another is done efficiently.
Carrefour produces some of the products within its stores. For instance, it has a unit responsible for baking bread, cakes, and other related products. Most of these products have a huge market share in this country and may be classified as cash cows. The forecasted increase in market demand means that the amount of these products should increase within the next one year. The production manager may restructure this department by hiring more employees and purchasing new production equipment to meet the expected increase in demand. The raw materials needed by this department must be come from very reliable suppliers who are known to deliver high value consistently. For other items manufactured by other companies and sold in this hypermarket, the management must be assured of their availability to avoid disappointing its loyal customers.
The increased level of operation that is expected within the next one year will come with additional risks. The risk of fire outbreak is real given that there is heavy use of electricity and that some of the products within the stores are explosive. There is another serious threat of terror. According to Jannie, terrorist groups, such as IS and Al Qaeda, are currently using a new strategy that targets shopping malls in major cities (52). It has been witnessed in Europe, North America, and Africa. The threat is real, and it can occur in Dubai. Carrefour as a firm has no capacity of deterring such terror threats. The only way of managing these risks is to take a comprehensive insurance cover for all the perceived risks which are beyond control of the firm.
The level of warehousing is equally expected to expand proportionately with the increase in sales. Some of the products sold at this hypermarket come from as far as North America. The cost of logistics is high, making it more convenient to transport them in bulk. When they arrive, the firm will have to find ways of storing them when the shelf-space is limited. The logistics department may need to expand the current warehouse space because of the expected increase in flow of products. It is not advisable to outsource warehousing services because this is a very sensitive department that cannot be entrusted to a third party.
Carrefour will use two main sales channels in the market to meet the needs of its clients within the country. The first channel will be through its brick-and-mortar stores which are strategically located in major cities in the country. The current outlets in Dubai and Abu Dhabi may be sufficient even if the number of clients increases as forecasted. The second strategy will be through online platform. This firm will need to sell its products through its website to online clients within the country.
Administration and Processes
The administration of this firm, especially in top managerial activities, will not experience major changes. The impact will be felt in operational processes where more human resource and machines will be required to meet the increased customer needs. Processes in the logistics, sales and marketing, finance, and warehousing departments will need more attention within the next one year. The firm may not avoid hiring more employees in these departments to undertake new tasks. At the point of sale and at the inspection areas, more machines will be needed to improve efficiency.
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Billings, Ruth, and Clive Jones. Forecasting Urban Water Demand. Denver: American Water Works Association, 2008. Print.
Chase, Charles. Demand-driven Forecasting: A Structured Approach to Forecasting. New York: Cengage, 2013. Print.
Jannie, David. United Arab Emirates yearbook 2005. London: Trident Press, 2013. Print.
Smith, John. United Arab Emirates: Selected Issues and Statistical Appendix. Washington: International Monetary Fund, 2011. Print.
Thomopoulos, Nick. Demand Forecasting for Inventory Control. Hoboken: Wiley & Sons, 2015. Print.