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METRO GROUP : ANNUAL REPORT 2011 : BUSINESS
→ GROUP MANAGEMENT REPORT : 11. Risk REPORT
Retail business
The German and Western european retail industry, in particular,
is characterised by saturated markets, fast change
and intense competition. The resulting conditions can influence
business developments and represent natural business
risks. a fundamental business risk is consumers’ fluctuating
propensity to consume.
shifting consumer behaviour and customer expectations
pose a risk and an opportunity – especially in the face of
demographic change and increasing digitalisation. To
account for these factors, we continually optimise our merchandising
concepts and adapt them to our customers’
needs and consumption patterns. To recognise market
trends and changing consumer expectations early on, we
regularly analyse internal and external information. In the
process, the Group’s own market research draws on qualitative
market and trend analyses as well as quantitative methods
such as time series analyses or forecasts of market developments
derived from analyses of sales data and the results of
panel market research. 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 concepts in
test stores. only after a successful conclusion of these tests
will innovations be introduced systematically and swiftly in
other stores. Continuous fund allocation allows for the optimisation
of merchandising concepts and the modernisation
of stores. These measures help to secure and expand the
competitive strength of all sales brands. examples include a
distinct intensification of our online activities and multichannel
business, added delivery options, measures to strengthen
our own brands, investments in innovative sales formats and
the expansion of our sales activities. In this way, we can reach
customers even better and in a more targeted manner.
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 the 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 individ-
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ual countries can change rapidly. Unrest, changes in political
leadership, terrorist attacks or natural disasters can
endanger MeTRo GRoUp’s business 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. professional crisis management
allows for a fast response and crisis management.
at the same time, the international expansion 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 risks and
opportunities by conducting feasibility studies. We only
enter new markets when risks and opportunities are
deemed to be manageable. Risks can also be reduced by
forging partnerships with local companies. These businesses
know the legal, political and economic environment
of the respective country. 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 in the respective geography.
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 none
of the measures taken 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 to ensure the
permanent optimisation of our network of locations.
Portfolio changes
In past years, MeTRo GRoUp has continuously optimised its
portfolio. all portfolio changes and the related strategic and
investment decisions focus on value creation for the Company.
as a result, we can minimise risks associated with
changes in the portfolio.