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<strong>METRO</strong> <strong>AG</strong>’s strategic environment<br />
Never in its history has European trade faced<br />
so many and such great challenges arising<br />
simultaneously:<br />
As a result of drastically changing world economic<br />
conditions, consumer demand will stagnate<br />
in West European countries for years to<br />
come and even decline in some sectors. Nevertheless,<br />
those trading companies in particular<br />
that have devoted themselves to a policy of<br />
internationalization will further expand their<br />
respective market shares at domestic level.<br />
At the same time, spending power in the newly<br />
industrialized countries including Eastern<br />
Europe will rise overproportionately in the coming<br />
decades owing to the changed global economic<br />
environment, and markets will open up<br />
to modern forms of trading. A dynamic transfer<br />
to these emerging markets of the progressive<br />
types of trading outlets found in industrialized<br />
countries has begun; in the most attractive<br />
of these the battle for first-class locations is<br />
already in full swing.<br />
The change in customer behavior at all levels<br />
poses another great challenge. Customers are<br />
becoming more critical and demanding with<br />
regard to quality, and rising price transparency<br />
is heightening their price awareness. On the<br />
other hand, demand for a shopping experience<br />
is growing among certain target groups.<br />
Sluggish buying potential, intensifying competition<br />
and growing price awareness among<br />
consumers are forcing the trade to take completely<br />
new rationalization measures cutting<br />
across company boundaries, measures which<br />
have assumed a specific shape within the “process<br />
chain optimization“ concept.<br />
4<br />
Last but not least, the further development of<br />
multimedia products and services will have a<br />
lasting impact on the situation in the over-thecounter<br />
trade.<br />
Strategic positioning of <strong>METRO</strong> <strong>AG</strong><br />
How will <strong>METRO</strong> <strong>AG</strong> position itself in this<br />
environment in future so as to bring about<br />
a sustained medium-term enhancement in<br />
shareholder value?<br />
<strong>METRO</strong> <strong>AG</strong>’s whole trading portfolio is subject<br />
to an ongoing and far-reaching optimization<br />
process. In this respect, we will continue consistently<br />
to restructure domestic outlet chains<br />
in order to fully exploit the <strong>Group</strong>’s earnings<br />
potential. The Department Stores and Hypermarkets<br />
divisions provide classic examples of<br />
successfully improved cost and earnings structures<br />
in 1996.<br />
As part of a more extensive optimization of<br />
<strong>METRO</strong> <strong>AG</strong>’s portfolio, we have made a decision<br />
to sell off within a disinvestment program,<br />
certain sections of the Company or fringe activities<br />
that have repeatedly been unprofitable. In<br />
1996, this included parts of the Food Stores &<br />
Discounters division (Bolle, Schätzlein) and, as<br />
of December 31, 1996, the sale of the wholesale<br />
delivery business of the BLV <strong>Group</strong>. The majority<br />
holding in ITC Immobilien Team Consulting<br />
GmbH as well as Mac Fash Textilhandels GmbH<br />
were disposed of in 1997. Where necessary, we<br />
shall in future continue our disinvestment policy<br />
in less promising sectors and in such areas<br />
that do not form part of our core business activities<br />
or have repeatedly generated a belowaverage<br />
rate of return on the capital employed.
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