Coping with Nonmarket Environment: a Brief Case Study of Carrefour in China

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Coping with Nonmarket Environment: a Brief Case Study of Carrefour in China Firms in the world today operate both in the market environment and nonmarket environment. While the interactions in the market environment are typically between firms and customers, employees, suppliers and providers for economic transaction and the exchange of property, those in nonmarket environment are normally intermediated by the public instructions (Baron 1995).In today’s fierce competing environment, it is not imprudent to argue that non-market environment plays an important, sometimes even vital, role in a firm’s success. A favorable nonmarket environment can boost the development of firms and a firm can also make “a concerted pattern of actions in the nonmarket environment to create value by improving its overall performance”, which is defined by Baron (1995, p.47) as nonmarket strategy. How well a firm frames its relationships with government, the public, stakeholders, media and public institutions may have direct impact on its overall performance. When the French retail giant Carrefour opened its first store in China in 1995, it was much welcomed by the Chinese government with its open door policy as an approach to attract foreign direct investment (FDI). Carrefour not only enjoyed preferential tax and administrative treatment, cheap land and labor(Zhang 2004), but the government has also worked hard to benefit the foreign companies with more convenient investment environment, including the reduction of delays in approving FDI projects and the expansion of and improvement of the physical infrastructure.(OECD, 2003). Under such circumstances, the initial success of Carrefour seemed almost effortless. According to Xinhua News (2003), Carrefour ranked No. 1 in terms of number of stores in China by March 2003. It had opened 28 stores in 16 major cities with sales network

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