Carrefour's Competitive Strategy-Cost Leadership and Differentiation: A Case Study

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Carrefour's Competitive Strategy- Cost Leadership and Differentiation: A Case Study

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Pacific Business Review International
Volume 11 Issue 8, February 2019

Carrefour's Competitive Strategy- Cost Leadership and Differentiation:


A Case Study

Prof. Dr. Satya Subrahmanyam Abstract


Department of Business & The aim of this study is to examine the competitive strategies-cost
Management TISHK International leadership and differentiation and its influence on competitive
University Erbil, Kurdistan advantage in Carrefour-Erbil. Both strategies are working to gain a
competitive advantage. The two sorts of the strategies are conflicting in
Ms. Sara Azad the execution process concerning, decision making, control system,
Department of Business human resource, information system and job design. These internal
&Administration TISHK International differences propose both strategies need opposing parts for market
University Erbil-Kurdistan study. The author utilized a survey as part of a quantitative technique in
research methodology; the survey was adapted from a different
academic source. The researcher distributed 120 questionnaires
randomly to customers who are visiting Carrefour in Erbil, but only 96
questionnaires gathered correctly. The findings revealed that cost
leadership is more effective in gaining a competitive advantage at
Carrefour Hypermarket and Carrefour supermarket.
Keywords: Competitive strategy, cost leadership, differentiation,
competitive advantage, Carrefour

Introduction
In today's competitive business environment, competitors are
expected they could be global businesses, domestic or international
competitors. A business selecting to serve the wide market and to
develop and grow benefit by less cost is known as a cost leadership
strategy, though businesses that pursue to gain benefit by utilizing
uniqueness is known as a differentiation strategy. For instance, the
world's top one business which is Wal-Mart is effectively and
efficiently applying only one strategy which is a low-cost strategy
(al2017). On another hand, many businesses had shown the
effectiveness and succeed with executing one of the strategies which
are a differentiation for instance Mercedes Benz. In this study, the
author attempts to analyze the comparison between cost leadership
strategy and differentiation strategy and its relationship with a
competitive advantage. Various academics and scholars refer to the
porter's generic strategy as being one of the greatest with significant
contributions to the strategic management literature. In order to
businesses gain greater income and outperform its competitors, they
should take a perfect selection or decision between a differentiation
strategy and a cost leadership to stop the essential contradictions of

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Pacific Business Review International

different strategies (Bertozzi, et al. 2017). Whether the Purpose of the Study
strategy of differentiation and cost leadership strategy is
The main of this article is to examine the competitive
equally effective is a far not as much of debated matter
though, as proven by the moderately some previous strategies-cost leadership and differentiation and its
studies and literature on the study. On the other hand, the influence on competitive advantage in Carrefour-Erbil.
cost is negatively related to the market share, this means Research Objectives
a lower cost of the product will have a positive influence
The followings are the main research objective:
on the market share. Differentiation and cost leadership
strategies are two common and widely used studies -To analyze the relationship between cost leadership and
within the strategic management field and have been competitive advantage in Carrefour.
broadly and generally debated. According to Porter -To analyze the relationship between differentiation and
(1985), each of these three generic competitive strategies
is a completely different way of creating a sustainable competitive advantage in Carrefour.
competitive advantage. Moreover, this confirms that a -To examine which strategy is more effective than others
low-cost strategy and differentiation strategy are two to gain competitive advantage at in Carrefour.
opposite strategies. The reason that this study Research Questions
concentrates on Porter's generic strategies framework, is
because porter's framework is directly linked with a Based on the above research objectives, the author stated
competitive advantage (Bayraktar, et al. 2017). the followings research questions:
A business should, consequently, make a decision either Research question one: is there a relationship between cost
selecting differentiation or low-cost strategy, moreover, leadership and competitive advantage in Carrefour?
several studies proved that businesses will be able to gain a Research question two: is there a relationship between
competitive advantage by employing only one of the
mentioned strategies. Moreover, businesses likewise can differentiation and competitive advantage in Carrefour?
implement focus strategy through focusing on a narrow Research question three: which strategy is more effective
segment and through highlighting either differentiation or in gaining a competitive advantage at Carrefour?
lower cost. The previous study proved that product Conceptual Framework
differentiation strategy is significantly related to market
share (Dombrowski, et al.2018). Research Model
Figure 1- Research Model

Research Hypotheses typically executed by businesses to reach and sustain


competitive advantage. Moreover, these three approaches
H1: There is a significant and positive influence of cost
are well-defined two separate measurements: scope and
leadership on competitive advantage in Carrefour. source of strategy. The source is a supply measurement
H2: There is a significant and positive influence of and concentrates on the core competency of the
differentiation on competitive advantage in Carrefour. company.Precisely, Porter determined two chief
Literature Review capabilities are the most important for instance product
low cost and product differentiation (Karyani & Rossieta,
Porter's Generic Strategies 2018). On the other hand, the scope is a demand
A Harvard professor Michael Porter has defined set tactics measurement which concentrates on the target. Porter's
generic approaches are shown in figure (1):
containing three overall sorts of of strategies that are

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Volume 11 Issue 8, February 2019

Figure 2- Porter's generic strategies

It has been proven by many academic scholars and Effectiveness and success might differ relying on the
previous studies that porter's generic strategy has a wellness of suit between the business and the chosen
positive influence on the company's profits. Moreover, strategy, this facilitates the business to make the correct
all generic strategies defined by porter (cost strategy, decision to adopt the right and effective strategy to gain
differentiation strategy and focus strategy) might not be competitive advantage. Business's success is depending
all three strategies may not be similarly effective and on choosing the strategy that properly and best fits the
successful for a business (Abdolshah, et al. 2018). business's resource and avoid competitors from replicate
This difference among all three generic strategies because of your strategy. These nonexclusive procedures are ways to
that the strategies vary on some of the dimensions and has
deal with outflanking contenders, and each includes a
recognizable course to execution advantage yet shares the
various needs, for instance concerning management style,
hidden rule that execution is at the core of any technique
organizational arrangement, human skills and capabilities,
(Kaya, 2015).
incentive policy and control system.
Porter's theory focusses on the best way to assemble the
Porter's strategy stays a standout amongst the most
practical upper hands of a firm through situating. It is, even
remarkable in the key administration writing has
more, a prescriptive model, where he sees the execution of a
overwhelmed corporate aggressive procedure throughout
firm is a component of two variables – industry structure
the previous 30 years. Porter (1980, 1985) contends that
and its market situating. The capacity to make benefit in
predominant execution can be accomplished in an
business relies upon how solid is its situation in the market.
aggressive industry through the quest for a conventional
The outside condition of the business or the determinants of
procedure, which he characterizes as the advancement of
the mechanical gainfulness can be dissected through his
a general cost initiative, separation, or centre way to deal
acclaimed 'Five Forces' hypothesis. It is critical that so as to
with industry rivalry.
be productive and be a victor, organization need to

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comprehend its vital position and settle on a few Cost Leadership Strategy
decisions (Asiedu,2015). In today's competitive business environment, many
As a standout amongst the most basic promoting companies are looking for the best method to gain a
components for both advertising professionals and competitive advantage; Porter's generic strategies
scholastics, the item technique is similar, if not increase, currently are appropriate and skilled to assist and aid as a
vital with regards to developing business sector firms' direction for worldwide business in defining the
fare business. Because of the basic job to an association's significant strategy to achieve its goals and reached the
prosperity, send out item procedure has drawn the maximum outcome (Pulaj, et al.2015). These included,
consideration of an extensive number of scientists as a yet were not constrained to, near preferences in
key determinant of fare execution. In spite of broad understanding nearby work advertise elements; one of a
investigation into the precursors and outcomes of fare kind access to other neighbourhood assets, for example,
item systems, the outcomes stay uncertain. arrive; and solid relations with their neighbourhood
On the off chance that a firm does not seek after one of governments that have consistently offered them
these system types, it will be trapped in-the-centre and particular asset get to (Klaas & Klein, 2017).
will encounter bring down execution when contrasted Businesses with these abilities are equipped for picking up a
with firms that seek after a nonexclusive technique competitive advantage by conveying indistinguishable items
(Tokman, et al.2016). These join with the scope of from the opposition at costs beneath the business normal to
market fragments focused to create three conventional accomplish a bigger piece of the pie, or that which
methodologies for accomplishing better than expected coordinate the business normal to increase higher
execution in an industry: cost initiative, separation, and benefits(Brenes, et al.2014).Therefore; the encouragement
centre or thin degree. of employing and applying low-cost strategy is the range to
The assortment on the nation and social dimension and the which businesses provide the low price of services or
different estimations of execution add greater intricacy to product in a competitive business environment.
the item execution relationship for global markets. The Cost leadership comparative to rivals is the subject
nonexclusive methodologies as created by Porte (1980; running over the entire general cost leadership strategy
1985) for accomplishing an upper hand position by an and the impartial is evidently general business cost
association are item separation and cost initiative. Item leadership (Salavou, 2015). In surviving writing, access
separation being the most generally utilized one of these two to minimal effort assets has been the most talked about
key typologies (Banker, et al.2014). preferred standpoint supporting firms' ease procedure in
He contended that cost administration and separation creating nations.
techniques are totally unrelated. Ongoing writings and In this way, the Cost Leadership Implementation
research thinks about having in any case, scrutinized this proposed show raises and distinguishes a basic key issue
thought perceiving the way that associations may seek after that needs administration consideration. It is obvious that
components of the two kinds of system. All things many businesses attempt to adopt price or cost provider
considered, past explores have demonstrated that some of of products with the greatest alleged values. A firm that
the assembling associations see the separation system as an has effectively accomplished a minimal effort position
increasingly imperative and unmistakable intends to will have the most reduced costs in respect to contenders.
accomplish upper hand in contract to a minimal effort
Every one of the rests of the variables gives a
technique. While different sorts of hierarchical systems have
progressively generous premise to a cost leadership
been distinguished throughout the years, Porter's
system, however, it is contended that each is controlled
conventional techniques remain the most generally bolstered
by industry structure. Before the development of the East
and recognized in key administration writing (Panwar, et
African Community, they had explicitly conveyed their
al.2016). A separation methodology includes the firm
making an item/benefit, which is viewed as extraordinary in
favourable position for the most part on their nation
some perspective that the client esteems on the grounds that
based minimal effort asset points of interest and related
the client's needs are fulfilled. Then again, cost advantages (Mani & Nandkumar, 2016).
administration accentuates minimal effort with respect to The factors in this structure are not estimated independently
that of the contenders (Porter, 1980; 1985). Porter (1985) in light of the fact that the factors in a single gathering can
contended that there are two bases of preferred standpoint a impact the other gathering variable and hence it has an
firm can have: ease or separation. effect on the result of the entire procedure.

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Volume 11 Issue 8, February 2019

At last, the centre technique includes focusing business administration system since it is reliant on elements
endeavours on a decided gathering of purchasers, item outside administration ability to control. It is likewise
section or geographic market. The key though is that cost imperative that the nature and communications of all
and cost are free decisions, and this system is centred on usage factors influence the procedure factors and thus the
expense. Economies that are free of scale can give the result(Lindstad, et al.2016).
strongest premise to a cost initiative technique. Moreover, According to Abdolshah, et al. (2018), to sustain in
when endeavouring to attain a generally low-cost strategy obtaining and gaining a position usually needs a high
position, low cost comparative to rivals is the subject of level of market share for instance easy access and
implementing the overall business strategy (Tan, 2017). availability of raw materials. Nearby firms in the East
According to Brenes, et al. (2014), the strategy of cost African district are not special cases. The cost leadership
leadership needs quality with price aggressiveness, procedure accepts that competitive advantage is the result
however, it is attempted by businesses to have a of creation techniques focused on having the most
competitive advantage by applying an effectively lower reduced assembling cost, to empower the firm to offer
cost compared with the competitors. A firm can utilize costs that are perfect or lower than those of rivalries.
such a situation to either bring down its costs and gain Differentiation Strategy
the piece of the pie and deals from adversaries or keep its
costs at the present market level and make moderately According to Dombrowski, et al. (2018) stated that
more benefit per unit sold. In this manner, the assembling differentiation applied when a product seems to be
needs can support one of the referenced techniques unique with high quality and standard. Differentiation
somehow or another(Asiedu,2015). involves distinguishing the service or a product provided
by the company, making something that is observed to be
The model adjusts the outside and inner elements that
unique in the market place. A rivalry is especially
impact on actualizing cost initiative system and it draws
exceptional in over-provided economies; rivalry will, in
consideration for organizations how completely execute
general, create between various item classes, which play
such technique. These can be gathered into three classes;
out a similar capacity with regards to complex needs.
access to crude materials, access to an item or process
Supply is unmistakably better than interest, in
innovation, and access to dispersion channels. Achieving
quantitative and subjective terms.
low-cost tactic normally needs aggressive cost decreasing
and above control, prevention of marginal purchaser It represents giving advantages of administrations and
accounts, and minimizing the cost of some fields, for items uniquely in contrast to contenders however at a
instance, advertisement, services, and research and similar cost or some of the time higher. Differentiation
development. Subsequently, such methodology is techniques are widely inclusivein market economies and
proposed to be exceptionally powerful as all components are overarching methods for getting a competitive
are focused just on the effect that it has on executing a advantage (Karyani & Rossieta, 2018).
cost administration system. Cost administration So as to execute the fruitful differentiation procedure, it
methodology looks to accomplish better than expected is important to recognize the key client first.
returns over contenders through low costs by driving all Furthermore, he stated that due to its required for
parts of exercises towards diminishing uniqueness differentiation and a high level of market
expenses(Abdolshah, et al. 2018). share don't usually move together. This system targets
The minimal effort system underscores having the most sections where customers esteem uniqueness and
reduced expenses, not really the least cost, in a market. separating characteristics of the acquired items.
The concentration of businesses execution of lower cost Differentiation could be according to numerous
strategy is on strict efficiency in all domains and cost fundamentals or aspects, comprising product features,
control. A firm endeavouring to understand a minimal reputation, networks, design, customer service and brand
effort technique should pressure assets that encourage image. In the event that contenders work in limited or a
proficiency. The separation procedure, thusly, can be
similar market section, it is reasonable to apply centred
outlined as offering items with uncommon or solitary
differentiation (Brenes, et al.2014).
credits in connection to those of contenders. Cost
leadership strategy procedures give points of interest by Writing in key administration gives a few characterizations
means of scale, proficiency and access to ease inputs. of business procedure that clarifies how firms contend in
Murray further contends that 'ineptitude, as a rule, is their significant market situations (Banker, et al.2014).
certifiably not a solid establishment for a supported cost Additionally, the measure of rivalry base is critical while

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executing the differentiation methodology. et al.2018).


An effective differentiation strategy should be according This area talks about how an association can break down,
to features that are not easy for rivals to imitate recognize, and create competitive advantages utilizing
(Dombrowski, et al. 2018). apparatuses, for example, Porter's Five Forces, three
There are clients with various inclinations available and nonexclusive techniques, and esteem chains(Klaas &
they have distinctive necessities as far as differentiation. A Klein, 2017).
company's uniqueness in an esteem movement is controlled Porter (1980; 1985) recognized three conventional
by a progression of fundamental drivers which are the techniques of cost authority, separation and core interest. So
hidden reasons why an action is extraordinary and without as to remain in front of rivalry, associations need to
which a firm can't completely create methods for making constantly grow new competitive advantages. It is along
new types of differentiation or analyze how supportable the these lines no assurance that the present competitive
current differentiation is. We contend that item advantage will do the trick later on. Competitive advantages
differentiation systems emphatically add to send out are regularly brief as contenders frequently look for
execution in universal markets, particularly during furious approaches to copy the competitive advantage. Porter has
cost rivalry (for instance, caused by minimal effort exhibited different hypotheses in his books and articles that
contenders entering worldwide markets) or diminished cost have been broadly recognized and that have picked up
aggressiveness because of large scale monetary conditions notoriety inside business writing. Increasing competitive
(for instance, conversion scale valuation for the exporter's advantage is basic for associations.
nation of origin) (Bayraktar, et al. 2017). Porter's theory invalidated the contention of all
Competitive Advantage organizations having a one of a kind technique while
fortifying that effective - and less fruitful - organizations
One of his most vital hypotheses concerns conventional
have to consolidate factors that decide or clarify their
business-level methodologies. (Dombrowski, et al. 2018),
dimension of execution(Klaas & Klein, 2017).
depicts nonexclusive techniques as the "predominant
worldview in the business strategy writing". Predominant Methodology
esteem (what purchasers will pay) comes from offering The aim of this study is to examine the competitive
lower costs than contenders for proportional advantages strategies-cost leadership and differentiation and its
or giving remarkable advantages that more than balance influence on competitive advantage in Carrefour-Erbil. Both
the more expensive rate (Porter, 1985). strategies are working to gain a competitive advantage. The
According to (Kaya, 2015), characterize competitive author utilized a survey as part of a quantitative technique in
advantage as 'an item or administration that an research methodology; the survey was adapted from a
association's clients esteem more exceptionally than different academic source (Furrer, et al., 2008 and Kinyuira,
comparable contributions from its rivals' (at the end of 2014). The researcher distributed 120 questionnaires
the day, you have something valuable (i.e. items, randomly to customers who are visiting Carrefour in Erbil,
administrations, capacities) that your rivals don't have). but only 96 questionnaires gathered correctly. The survey
was designed in two separate parts, the first part of the
The simple presence of competitive advantage gets
survey was regarding the participants personal or
underway imaginative advancements that reason points of
background information for instance participants' gender,
interest to scatter as contenders endeavour to even the odds
participants' age, participants' marital status, and
(Christiansen, 2001). The significance of competitive
participants' careerfurthermore, the second part of the
advantage and unmistakable abilities as determinants of a survey was designed into three separate sections to measure
company's prosperity has expanded colossally in the and analysis carrefour's cost leadership strategy and
ongoing past dependent on the conviction that central differentiation strategy and how they are related to
premise of better than expected execution in the long haul is competitive advantage. The total questions used in order to
an economically competitive advantage. The presentation of find whether cost leadership strategy works better than a
conventional procedures in 1980 propelled numerous differentiation strategy or differentiation strategy works
analysts to handle the hypothesis to discover supporting better than cost leadership strategy in order to gain a
proof. Much research was done inside a couple of long competitive advantage in Carrefour.
stretches of the presentation and along these lines
additionally, a significant part of the past research presented Findings
in this paper goes back to '80-'90s(Dombrowski,

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Volume 11 Issue 8, February 2019

Table 1-Reliability Statistics


Variables Cranach’s Alpha N. of Questions
Cost leadership .775 8
Differentiation .762 8
Competitive advantage .812 10
As the initial step of analysis in this study, the author leadership strategy were more than .7 and the result was
attempted to measure the reliability of the questions that .775.As for differentiation strategy, the findings showed
were applied to find whether cost leadership strategy works that; as for differentiation strategy it was found to be
better than differentiation strategy or differentiation strategy reliable since the value of all eight questions used to
works better than cost leadership strategy in order to gain a measure differentiation strategy was more than .7 and the
competitive advantage in Carrefour. However, as indicated result was .762. And finally, as for competitive
in table (1), the reliability for two independent factors that advantage, the findings showed that; as for competitive
each factor had 8 questions and a dependent factor that had advantage it was found to be reliable since the value of
10 questions, the findings showed that; as for cost all ten questions used to measure competitive advantage
leadership strategy it was found to be reliable since the were more than .7 and the result was .812.
value of all eight questions used to measure cost
Table 2-Correlation Analysis
variables Correlation Competitive advantage
Cost leadership strategy Pearson correlation .723 **
Sing. (2-tailed) .000
N 96
Differentiation strategy Pearson correlation .628 **
Sing. (2-tailed) .000
N 96
** correlation is significant at the level 0.01 level (2-tailed)

The researcher attempted to find the correlation between that there is a positive and significant correlation between
independent variables and the dependent variable. In this cost leadership and Carrefour's competitive advantage, on
research and as it can be seen in the conceptual framework the other hand the research attempted to find the correlation
in figure (1), we had two independent variables which are between differentiation and Carrefour's competitive
cost leadership and differentiation and on the other hand one advantage, it was found that the value P for differentiation
dependent variable which is a competitive advantage. The variable is .628** this value has two-tailed and is more than
findings of the correlation analysis showed that the P value .05 this indicated that there is a positive and significant
for cost leadership as independent variable is .723** this correlation between differentiation and Carrefour's
value has two-tailed and is more than .05 this indicated competitive advantage.

Table1- Multiple Regression Analysis

Unstandardized Standardized
coefficients coefficients
B Std. Beta t Sig.
Error
(constant) 19.197 .508 .9745 .000
Cost leadership .718 .03 .612 2.152 .000
Differentiation .608 .08 .713 3.452 .000
Dependent: Competitive advantage

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Pacific Business Review International

The researcher intended to find the measure the developed differentiation on competitive advantage in Carrefour.
research hypotheses as it can be seen in the conceptual For this reason, the researcher implemented multiple
framework in figure (1), we had two independent variables regression analysis to measure the research hypotheses,
which are cost leadership and differentiation and on the the finding of multiple regression analysis showed that
other hand one dependent variable which is a competitive the P value for cost leadership is .000 with the value of B
advantage. The developed research hypotheses are stated =.718, since this value is greater than .000 and .05 this
that; the first research hypothesis stated that there is a indicates that there is a significant and positive influence
significant and positive influence of cost leadership on of cost leadership on competitive advantage in Carrefour,
competitive advantage in Carrefour, and the second research as a result, first research hypothesis is supported. As for
hypothesis stated that there is a significant and positive the relationship between differentiation and competitive
influence of differentiation on competitive advantage in advantage, it was found that the P value for cost
Carrefour. For this reason, the researcher implemented leadership is .000 with the value of B =.608, since this
multiple regression analysis to measure the research value is greater than .000 and .05 this indicates that there
hypotheses, the finding of multiple regression analysis is a significant and positive influence of differentiation
showed that the P value for cost leadership is .000 with the on competitive advantage in Carrefour, as a result,
value of B =.718, since this value is greater than second research hypothesis is supported. The findings
.000 and .05 this indicates that there is a significant and revealed that cost leadership is more effective in gaining
positive influence of cost leadership on competitive a competitive advantage at Carrefour Hypermarket and
advantage in Carrefour, as a result, first research hypothesis Carrefour supermarket.
is supported. As for the relationship between differentiation Acknowledgements
and competitive advantage, it was found that the P value for
cost leadership is .000 with the value of B =.608, since this This research was supported by ISHIK University. I
value is greater than .000 and .05 this indicates that there is thank Dr. Fatih Cura, Dean of The Faculty of
a significant and positive influence of differentiation on Administrative Sciences and Economics and Mr. Karwan
competitive advantage in Carrefour, as a result, second Hushyar, Head of Business & Management Department
research hypothesis is supported. who provided insight and expertise that greatly assisted
the research, although they may not agree with all of the
Conclusion
interpretations/conclusions of this paper.
Porter's generic strategies might assist the business to Nobody has been more important to me in the pursuit of this
manage to gain and sustain the competitive advantage and project than the members of my family. I would like to
be better than other businesses in the industry. Through
thank my parents; whose love and guidance are with me in
creating a great number of products, the business will be
whatever I pursue. They are the ultimate role models. Most
able to take advantage of the economic scale. The aim of
importantly, I wish to thank my loving and supportive wife,
this study is to examine the competitive strategies-cost
Ms. Kumari, and my only wonderful daughter, Ms. Gnana
leadership and differentiation and its influence on
competitive advantage in Carrefour-Erbil. Both strategies Satya Sri, who provide unending inspiration.
are working to gain a competitive advantage. The two sorts References
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