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METRO GROUP : ANNUAL REPORT 2010 : BUSINESS
→ GROUP MANAGEMENT REPORT : 11. RISK REPORT
Constantly shifting consumer behaviour and customer
expectations pose a risk and an opportunity – especially in
the face of demographic changes. Continuously adapting
and optimising merchandising concepts is imperative. To
recognise market trends and changing consumer expectations
early on, we regularly analyse internal information
and selected external sources. The Group’s own market
research uses quantitative methods such as time series
analyses and market trend forecasts based on the analysis
of internal sales figures and market research. The time
series analyses also include the observation of product
segments on the market over a certain period of time. Our
sales divisions initially examine the practicability and
acceptance of innovative concept modules in test stores
before introducing them systematically and swiftly in other
stores. Continuous fund allocation allows for the optimisation
of merchandising concepts and the modernisation of
stores. These measures help all sales brands to secure and
expand their competitive strength.
within the framework of our sustainability strategy, we are
also working to ensure the future viability of our company.
Additional information on this strategy can be found in the
chapter Sustainability Management on pages 105 to 109.
Strategic company risks
International expansion
we consider the setting-up and expansion of our presence
in the major growth regions of Eastern Europe and Asia as
critical investments in the future of our company. By entering
these markets, we are exploiting our entrepreneurial
opportunity to profit from the rising purchasing power of
millions of consumers.
Our international position requires us to address possible
economic, legal and political risks. The situation in individual
countries can change rapidly. Unrest, changes in political
leadership, terrorist attacks and natural disasters can
endanger METRO GROUP locations in the affected country.
we insure ourselves as far as possible and to the appropriate
extent against business interruptions that, for example, are
the result of political unrest. At the same time, the internationalisation
of our business provides us with the opportunity
to offset the economic, legal and political risks as well
as fluctuations in demand in individual countries.
To limit the risks of expansion as far as possible, we plan
each market entry meticulously. we identify the risks and
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opportunities by conducting feasibility studies. we only
enter new markets when the risks and opportunities are
deemed to be manageable.
The risks of market entry can also be minimised by forging
partnerships with local companies. These businesses know
the legal, political and economic environment of the respective
expansion countries. A current example of this practice
is the partnership that Media Markt and Saturn formed with
the company Foxconn in order to enter the Chinese market.
we anticipate that the economy will continue to recover in all
the regions that are relevant to METRO GROUP. however, forecasts
about the course of recovery always entail a certain
degree of uncertainty. Even though we base our expansion
decisions on the best available information, we cannot rule out
the possibility that the growth momentum in individual countries
will fall short of our expectations in the coming years.
Locations
In all countries, we select the location of our businesses
based on the findings of an intensive review. with each new
opening, however, the risk that the business will receive less
customer acceptance than planned still remains. Moreover,
sales could also decline at existing locations. The reasons
for this could include changing demographics over time or a
change in the competitive situation. Because we continuously
monitor the profitability of our stores, we can recognise
negative developments at individual stores and locations
early on and react quickly. If the measures taken to
counter these developments do not lead to success and if the
situation at the respective location is not expected to improve
over the long term, we will divest of the store or location as
part of the optimisation of our network of locations.
Portfolio changes
In past years, the portfolio of METRO GROUP has continuously
been optimised. All portfolio changes and the strategic
and investment decisions related to them focus on value
creation for the Company. As a result, risks associated with
changes in the portfolio are minimised.
Internet retail
In addition to international expansion, Internet sales are an
important factor and, at the same time, an opportunity to
secure the future success of METRO GROUP. In retail today,
online sales play an increasingly important role. we expect
this development to continue. That is why it is imperative for