sonae sr’s international expansion strategy technology • increase need for productivity •...
TRANSCRIPT
Overview
Your current challenge
Imagine this future…
External influences & internal capability analysis
Options
Recommended strategy
Implementation Plan
Financial Analysis
QUT Consulting
Introductions
QUTC’s Senior Consulting team:
Justin Bindman
Arbess Balbarias
Sarah Goulding
Cameron Jones
QUT Consulting
Your company’s current needs
Need overall profitability by 2017 & breakeven in Spain
Sonae SR needs to be a big driver for the company
internationally
Need to tap into middle income consumers in
emerging markets
QUT Consulting
Your biggest challenge
Where does Sonae SR focus its efforts to achieve
& maintain profitability?
You know you want to expand internationally –
but how, when and where?
QUT Consulting
Issues & Consequences
QUT Consulting
ISSUES CONSEQUENCES
European market
uncertainty
(Worten only)
Unsuccessful with
franchises
Lack of knowledge of
Indian (and broader SE
Asian market)
Unpredictable financial
performance – loosing
money in Spain
Capital intensive to
setup
High potential to fail;
pitfalls and mistakes
Fleeting
window of
opportunity –
NOW is the time
to make the
right decision
Imagine this future…
QUT Consulting
Sonae SR is the
company’s
leading profit
generator with a
global presence
175%
revenue
growth
Double
EBITDA
Profitability
in Spain
Our strategy for you
Sonae SR: The New Age Portuguese Explorer
QUT Consulting
Diverse Driven Dedicated
External Influences
QUT Consulting
Drivers
Technology
• Increase need for
productivity
• Increase in
eCommerce
• Transactional costs
are reducing
Economic
• Emerging middle
class countries – esp.
Asia & India
• Generally higher
GDP in SE Asia
• Stagnant growth in
EU
Social
• Increasing
awareness of global
brands
• Increasing popularity
in active wear
(Fashion meets
fitness)
External Influences
QUT Consulting
Factors Why is this important? Impact
Increasing success in JV with development stores
Successful, repeatable business model
Risk minimisation, lesser cost
Foreign expansion Diversification Potential for higher margins
Use of eCommerce Channel to customers Reach more customer segments (young, middle aged)
Competitor presence locally & Internationally
Market saturation Reduction in margins
External Influences
QUT Consulting
Factors Why is this important? Impact
Increasing success in JV with development stores
Successful, repeatable business model
Risk minimisation, lesser cost
Foreign expansion Diversification Potential for higher margins
Use of eCommerce Channel to customers Reach more customer segments (young, middle aged)
Competitor presence locally & Internationally
Market saturation Reduction in margins
External Influences
QUT Consulting
Factors Why is this important? Impact
Increasing success in JV with development stores
Successful, repeatable business model
Risk minimisation, lesser cost
Foreign expansion Diversification Potential for higher margins
Use of eCommerce Channel to customers Reach more customer segments (young, middle aged)
Competitor presence locally & Internationally
Market saturation Reduction in margins
External Influences
QUT Consulting
Factors Why is this important? Impact
Increasing success in JV with development stores
Successful, repeatable business model
Risk minimisation, lesser cost
Foreign expansion Diversification Potential for higher margins
Use of eCommerce Channel to customers Reach more customer segments (young, middle aged)
Competitor presence locally & Internationally
Market saturation Reduction in margins
Internal capability analysis
Capabilities
Valuable Unique Organised
to expand
Operational & Management Efficiency
Purchasing & logistics
Information communications
technology (online sales & marketing) Dedicated workforce
Capital-light business model
QUT Consulting
Lens #1: European
Areas for
capability
growth –
Online
capability
Internal capability analysis
QUT Consulting
Lens #2: South-East Asian
Areas for
capability
growth –
Logistics, IT
& Workforce
Capabilities
Valuable Unique Organised
to expand
Operational & Management Efficiency
Purchasing & logistics
Information communications
technology (online sales & marketing) Dedicated workforce
Capital-light business model
Options for your international
expansion strategy
QUT Consulting
Focus on penetrated
markets
Expand into Indian
market
Expand into India as a platform for South East
Asian Expansion
1 2 3
Options for your international
expansion strategy
QUT Consulting
Focus on penetrated
markets
Expand into Indian
market
South East Asian
Expansion
1 2 3
EXISTING: Portugal, Spain &
expanded growth in Middle East
Known brand, customers
Lower revenue potential Not aligned with company
goals
Detail:
Benefits:
Risks:
Options for your international
expansion strategy
QUT Consulting
Focus on penetrated
markets
Expand into Indian
market
South East Asian
Expansion
1 2 3
EXISTING: Portugal, Spain &
expanded growth in Middle East
Known brand, customers
Lower revenue potential Not aligned with company
goals
Detail:
Benefits:
Risks:
NEW: Indian expansion EXISTING: Focus on Spain –
breaking even in Worten
Potential for signficant expansion in Indian market
New emerging market Indian business context is
difficult to penetrate
NEW: South-East Asian expansion
EXISTING: Focus on Spain – breaking even in Worten
Potential for significant
expansion in SEA market Narrower cultural gap
New emerging market
Options for your international
expansion strategy
QUT Consulting
Focus on penetrated
markets
Expand into Indian
market
South East Asian
Expansion
1 2 3
EXISTING: Portugal, Spain &
expanded growth in Middle East
Known brand, customers
Lower revenue potential Not aligned with company
goals
Detail:
Benefits:
Risks:
NEW: Indian expansion EXISTING: Focus on Spain –
breaking even in Worten
Potential for signficant expansion
New emerging market Indian business context is
difficult to penetrate
NEW: South-East Asian expansion
EXISTING: Focus on Spain – breaking even in Worten
Potential for significant
expansion in SEA market Narrower cultural gap
New emerging market
Our recommended strategy
QUT Consulting
South East Asian
Expansion
3
EXISTING
MARKET
NEW
MARKET
ERP
Online platform
Advertising
Distribution centre
HRM
Head office
Country specific
expansion
Over 5 years: 2016-2020
Growth in existing and
new markets
Risk Analysis
# Risk
Initial
Score Mitigation
Residual
Score
1
Spanish market remains
unprofitableHigh
Launch online platform. Develop
ERP to gain efficiencies. Low
2
Entering into emerging
volatile marketHigh
Diversify expansion into multiple
countries in a staged approach.Low
3
Indian market penetration
present difficultiesHigh
Expand into other countries first -
don't expand here for now.Low
4
Missed opportunity of
remaining in current High
Expand into these markets to gain
market share opportunity.Low
>$
10
0M
$1
0M
-
10
0M
$5
00
k-
$1
0M
$1
00
k-
50
0k
<$
10
0k
Rare Unlikely Possible Likely Certain
5% 5-15% 15-50% 50-75% >75%
1 1
Risk Analysis
# Risk
Initial
Score Mitigation
Residual
Score
1
Spanish market remains
unprofitableHigh
Launch online platform. Develop
ERP to gain efficiencies. Low
2
Entering into emerging
volatile marketHigh
Diversify expansion into multiple
countries in a staged approach.Low
3
Indian market penetration
present difficultiesHigh
Expand into other countries first -
don't expand here for now.Low
4
Missed opportunity of
remaining in current High
Expand into these markets to gain
market share opportunity.Low
>$
10
0M
$1
0M
-
10
0M
$5
00
k-
$1
0M
$1
00
k-
50
0k
<$
10
0k
Rare Unlikely Possible Likely Certain
5% 5-15% 15-50% 50-75% >75%
1
2
1
2
Risk Analysis
# Risk
Initial
Score Mitigation
Residual
Score
1
Spanish market remains
unprofitableHigh
Launch online platform. Develop
ERP to gain efficiencies. Low
2
Entering into emerging
volatile marketHigh
Diversify expansion into multiple
countries in a staged approach.Low
3
Indian market penetration
present difficultiesHigh
Expand into other countries first -
don't expand here for now.Low
4
Missed opportunity of
remaining in current High
Expand into these markets to gain
market share opportunity.Low
>$
10
0M
$1
0M
-
10
0M
$5
00
k-
$1
0M
$1
00
k-
50
0k
<$
10
0k
Rare Unlikely Possible Likely Certain
5% 5-15% 15-50% 50-75% >75%
1
2 3
1
2
3
Risk Analysis
# Risk
Initial
Score Mitigation
Residual
Score
1
Spanish market remains
unprofitableHigh
Launch online platform. Develop
ERP to gain efficiencies. Low
2
Entering into emerging
volatile marketHigh
Diversify expansion into multiple
countries in a staged approach.Low
3
Indian market penetration
present difficultiesHigh
Expand into other countries first -
don't expand here for now.Low
4
Missed opportunity of
remaining in current High
Expand into these markets to gain
market share opportunity.Low
>$
10
0M
$1
0M
-
10
0M
$5
00
k-
$1
0M
$1
00
k-
50
0k
<$
10
0k
Rare Unlikely Possible Likely Certain
5% 5-15% 15-50% 50-75% >75%
1
2 3
4
1
2
3
4
Implementation Plan
Phase I Phase II
Break Even Build
2016 2017 2018 2019 2020
Develop ERP system for entire company€ 1,500,000.00 € 1,500,000.00
Develop online platform for Spain region€ 1,100,000.00 € 1,100,000.00
Advertise online platform in Spain€ 650,000.00 € 650,000.00 € 3,250,000.00
Distribution Cenre Construction€ 7,500,000.00 € 2,500,000.00 € 10,000,000.00
Human Resource Management€ 1,500,000.00 € 500,000.00 € 2,000,000.00
Head Office Development€ 500,000.00 € 500,000.00
Phillipines Department Store€ 100,000.00 € 100,000.00
Thailand Department Store€ 100,000.00 € 100,000.00
Indonesia Department Store€ 100,000.00 € 100,000.00
Malaysia Department Store€ 100,000.00 € 100,000.00 € 12,900,000.00
€ 3,250,000.00 € 9,600,000.00 € 3,100,000.00 € 100,000.00 € 100,000.00
Tactic Cost Strategy Cost
Total € 16,150,000.00
20.1%
79.9%
Phase III
Expand
Spain
International
Strategy Tactic
Implementation Plan
Phase I Phase II
Break Even Build
2016 2017 2018 2019 2020
Develop ERP system for entire company€ 1,500,000.00 € 1,500,000.00
Develop online platform for Spain region€ 1,100,000.00 € 1,100,000.00
Advertise online platform in Spain€ 650,000.00 € 650,000.00 € 3,250,000.00
Distribution Cenre Construction€ 7,500,000.00 € 2,500,000.00 € 10,000,000.00
Human Resource Management€ 1,500,000.00 € 500,000.00 € 2,000,000.00
Head Office Development€ 500,000.00 € 500,000.00
Phillipines Department Store€ 100,000.00 € 100,000.00
Thailand Department Store€ 100,000.00 € 100,000.00
Indonesia Department Store€ 100,000.00 € 100,000.00
Malaysia Department Store€ 100,000.00 € 100,000.00 € 12,900,000.00
€ 3,250,000.00 € 9,600,000.00 € 3,100,000.00 € 100,000.00 € 100,000.00
Tactic Cost Strategy Cost
Total € 16,150,000.00
20.1%
79.9%
Phase III
Expand
Spain
International
Strategy Tactic
Financial Analysis - Overview
Turnover - As Is $1,290,000,000 $1,328,339,161 $1,368,189,336 $1,395,553,122 $1,416,486,419 $1,430,651,283 $1,459,264,309
Turnover - Proposed $1,290,000,000 $1,328,339,161 $1,381,472,727 $1,436,731,636 $1,494,200,902 $1,568,910,947 $1,647,356,494
Turnover Growth % - Proposed 103% 104% 104% 104% 105% 105%
Turnover Growth % - As Is 103% 103% 102% 102% 101% 101%
Turnover Difference $13,283,392 $41,178,514 $77,714,483 $138,259,664 $188,092,185
Attributed to
Spain $13,283,392 $14,288,899 $14,345,699 $17,546,332 $19,546,788
Phillipines $26,889,615 $29,665,787 $34,454,787 $36,455,243
Thailand $33,702,997 $40,567,687 $42,568,143
Indonesia $45,690,858 $47,691,314
Malaysia $41,830,698
Invested Capital - As Is $116,000,000 $460,000,000
Invested Capital - Proposed $116,000,000 $460,000,000 $3,250,000 $12,100,000 $100,000 $100,000 $100,000
EBITDA (M) - As Is $15,000,000 -$9,000,000 -$9,270,000 -$9,455,400 -$16,622,274 -$23,954,040 -$21,523,910
EBITDA (M) - Proposed $15,000,000 -$9,000,000 $10,033,392 $834,727 $12,135,433 $27,606,532 $36,668,809
Expenses - As Is $1,275,000,000 $1,337,339,161 $1,377,459,336 $1,405,008,522 $1,433,108,693 $1,454,605,323 $1,480,788,219
Expenses - Proposed $1,290,000,000 $1,328,339,161 $1,371,439,336 $1,438,396,909 $1,496,032,785 $1,555,974,097 $1,626,092,931
Financial Analysis – Revenue & Expenses
Phase I Phase 2 Phase 3
Online Spain Marketplace
ERP Efficiencies
Financial Analysis – Revenue & Expenses
Phase I Phase 2 Phase 3
Online Spain Marketplace
ERP Efficiencies
Distribution Centre
Philippines
Financial Analysis – Revenue & Expenses
Phase I Phase 2 Phase 3
Online Spain Marketplace
ERP Efficiencies
Distribution Centre
Philippines
Thailand Indonesia
Malaysia
126%
Financial Analysis - EBITDA
Phase I Phase 2 Phase 3
Spain online
Efficiency gains Infrastructure Costs
Philippines
Financial Analysis - EBITDA
Phase I Phase 2 Phase 3
Spain online
Efficiency gains Infrastructure Costs
Philippines
Thailand
Indonesia
Malaysia
Twofold
Growth
Call to action
Sonae SR needs to be the driver for international success
Known deficiency in IT Capability -> ERP System & Online platform
Substantial set up costs to enter new market in SE Asia
BUT – potential for substantial returns is high
With this strategy, you can achieve 175% revenue growth, double earnings AND achieve profitability in the Spanish market
QUT Consulting