Metro Ag.

Group (abbreviated as Metro hereafter) is a world leading international

wholesaling and food retailing company, headquartered in German, operating in 35
countries across Europe, Asia and Africa. According to the annual report, it had a
satisfactory financial year, with an increase of 0.7% on the like-for-like sales, at €36.5
billion.

Following the company’s vision to ‘deliver sustainable solutions with superior added
economic value for independent entrepreneurs.’ (Metro, 2019), the group has been
engaging in strategic reform since 2015, to focus on the core business in the retail
industry. The divestment of the department store chain and the hypermarket segment,
and the acquisition of other operations are two consequences of the strategic reform.
There is a reasonable level of diversification within the group, with different functions
complement the core business at retailing. The corporate’s portfolio includes a wide
range of services, including the Cash& Carry, and Metro real in the retail industry,
also the specialised delivery service, with three divisions, namely, Classic Fine Foods,
Rungis Express and Pro à Pro. The strategic reform also includes the development of
an entrepreneurial incubator firm, the Metro accelerator, aiming at helping small-to-
medium sized entrepreneurial firms to grow. In addition, Metro also owns four service
companies to support different functions within the group, in the areas of real estate,
logistics, information technology and advertising.

This strategic transformation is in line with Hamel and prahad’s proposition that
business should leverage the shared technical or operational competencies to improve
their core competencies (Campbell et al., 2000). This work is based on this strategic
context, to analyse the rationale and implication of this strategic change on Metro’s
core business segment, the cash & carry business. How the metro group co-ordinate
different businesses to achieve synergies and create value will also be discussed.
Since Metro is an international corporation, this work will also discuss its
international operation strategy. Metro China is selected as the illustrative case.
Chinese customers have high purchasing power, and it is perceived as an important
overseas market with 94 stores in China, out of 140 total stores in the Asia Pacific
(Metro, 2018). However, recently, Metro is planning on selling its Chinese business

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as a whole and exit the Chinese market (Weiss and Henning, 2018). This piece of
work will attempt to depict the reasons for this strategic move. Reflecting on the
analysis and identified reasons, this work will also provide strategic recommendations
for both Metro’s domestic and international operations.

plan of analysis, and tools

The summative assignment will assess the organisational environment from different
levels. To understand the Macro-environment, the PESTLE analysis will be applied.
A selective summary is listed in the table:
Political The stable political situation in Germany
Economical Global economic growth
Social More emphasis on quality of life
Technological E-commerce
Legal Taxation, hygiene requirements
Environmenta Environmental deterioration calls for sustainable business
l practices

The five forces analysis will also be applied to look at the micro industry level factors.
The grocery retail industry has a high level of rivalry, that Metro facing not only the
direct competition from competitors with a similar strategic focus on wholesaling,
such as Sam's club (owned by Walmart) but other domestic and international indirect
competitors, such as Aldi, Walmart and Carrefour targeting mass population. The
threat of new entrant is relatively low, given the required resources investment to
build up the economies of scale. There is a range of substitutes, apart from purchasing
from the physical store, customers could purchase from online retailers. Customers
have medium bargaining power, given the number of retailers in the industry.
Suppliers have medium bargaining power because many retail businesses are
increasingly engaged in vertical and horizontal integration in the supply chain, e.g.
developing private label brand and retaining services such as logistics, marketing in
house.

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Therefore, there are both opportunities and threats. The opportunity arises from the
demand for high-quality ingredient and services from businesses, especially in the
hospitality industry. However, there is also a threat of losing customers to
competitors, since the core products are in nature very similar. Hence, Metro Cash &
carry adapts a differentiation strategy and place great emphasis on maintaining
customer relationship and sustainable business practice. Metro cash and carry adopts a
blue-ocean strategy. Avoid competing in the daily grocery market, but aims at
fulfilling the corporate, professional customers’ needs better. Build on this strategic
focus, Metro create value by managing and coordinating both the primary activities
and supporting activities in the value chain. These activities will, in turn, be analysed.
Metro China’s operation will be discussed, with reference to the PESTLE and Five
forces analysis on Chinses market and porter’s diamond framework (Porter, 1990) to
evaluate China’s national attractiveness.

The next level of analysis focuses on the company’s resources. This section will
discuss how the possession and exploitation of both the tangible such as the financial
capital and intangible resources, such as knowledge, brand reputation etc. contribute
to the competitive advantages. key financial indicators including the ROE, gross
profit margin, ROI, etc., to illustrate whether Metro has a competitive advantage over
the competitors.

The strategic fit between the current strategy and Metro’s strategic goal will also be
analysed. Metro’s Cash and carry business will be positioned on the BCG’s matrix, as
well as the market share matrix. Ansoff market options matrix will then be applied to
identify and discuss market options. The framework mentioned above are all well-
received, long-established models, however, they do have some limitations, which
will also be discussed in the final work. Suggestions will then be made based on the
analysis, the intended information source to be employed will include different market
research databases, such as Mintel, Marketline, the company's website, financial
times, the united nation and world-trade organisation, etc. These credible information
sources will provide information on the company's performance, the industry as well
as other information regarding the analysis, such as the economic and political

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situation of the world. Besides, the textbook, together with a wide range of papers will
also be consulted to provide theoretical support.

References:
Weiss, R. and Henning, E. (2018). Metro Is Weighing a Stake Sale, Partner for China
Operations. [online] Bloomberg.com. Available at:
https://www.bloomberg.com/news/articles/2018-09-14/metro-is-said-to-weigh-stake-
sale-partner-for-china-operations [Accessed 12 Jan. 2019].

Metro AG (2018). Consolidated financial statements of METRO AG 2017/2018.

Metro AG.

AG, M. (2018). Company Structure. [online] Metroag.de. Available at:

https://www.metroag.de/en/company/company-structure [Accessed 12 Jan. 2019].

Campbell, A., Goold, M. and Alexander, M. (1995) ‘Corporate Strategy: The Quest
for Parenting Advantage’, Harvard Business Review, 73(2), pp. 120–132. 

Porter, M. (1990). Competitive Advantage of Nations. Competitive Intelligence

Review, 1(1), pp.14-14.

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