Strategic Management

In the mid-1990s, the French government passed legislation requiring food wholesalers

to offer the same prices to all retailers. The goal was to protect food producers and

by preventing big chains from leveraging their size to extract deep discounts from wholesalers but the law created an opening for discount chains, which skirt the restrictions by stocking private-label brands that aren't sold anywhere else. Some of those items are priced 40% below comparable products at Carrefour. Carrefour prides itself on its focus on price competitiveness. However, due to these discount retailers the company is suffering from a poor price image in its

domestic market. The company has already cut its prices significantly during 2004

and any further price cuts will adversely affect the company's already declining profit

margins. Europe (including France) is the primary market for Carrefour, accounting for 86.4% of

the company's revenues. The market has been witnessing an increase in labour costs. During the year ended September 2004, average labour costs in Europe had increased

by 2.4%. An increase in labor costs in its most significant market can adversely impact

Month-on-month sales and profits at Eurozone retailers have been continuously falling

during the second half of 2004 and the first two months of 2005. A further fall in

Eurozone