On page 119 of your textbook, refer to Sidebar 4-3 "A Retailer Loses Focus by Integrating Backward." Do you think Intermarche is taking the proper approach by integrating backwards? Why or why not? Explain your answer.
Sidebar 4-3 A retailer loses focus by integrating backward Intermarché is a large French grocery retailer, organized as an association of independent grocery store owners. It also was among the first French grocers to integrate backward into food production, and aggressively at that. Although the members (“adherents” under French law) are technically independent businesses, Intermarché is tightly managed. adherents are obliged to follow central initiatives and face restrictive contracts that make it difficult to exit the network. the chain is wrought by internal frictions though, largely because many adherents believe that management sacrifices their interests as retailers to a higher priority: production. One-third of the average store’s sales are of house brands, a fraction that has grown steadily. Some observers (and adherents) question whether consumers abandon Intermarché stores when they cannot find their preferred brands. perhaps some of the resources devoted to production should be going to matters more immediately relevant to a store owner, such as marketing, merchandising, and store renovation. As an example, Intermarché owns the largest fishing fleet in europe and proudly trumpets that distinction—though such tactics are precisely what many adherents resent. as one commented, about backward integration into fishing, it Gave us a real independence vis-à-vis the multinationals. It also permits us to have our own brands that are comparable to national brands. It’s a fabulous tool; we don’t want to break it, but rather to put it at the service of stores. We want to move from a situation where the points of sale are outlets for the factories to a situation where they are really at our service. Who cares if we are the #1 european fish producer? What we want to be is the #1 european fish market. Intermarché’s vertical integration backwards consumed management attention at a time when the core business—retailing—clamored for a return to the basics. In Sidebar 4-3 we consider how downstream channel members might falter when they vertically integrate with the goal of ensuring themselves sources of supply or to lock in outlets. Absent specificities, downstream firms will founder in a business they do not know or that might even conflict with their core business.
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