Sonae SR s International Expansion

Transcription

1 Sonae SR s International Expansion Presenting to Francisco Pimentel, Executive Director for International Development with Sonae SR Montreal, January 3, 2016

2 Driving Question Establish a further growth strategy for international business of Sonae SR Become profitable internationally Continue of Spanish business Product placement

3 Solution Preview Recommended Strategy 1 Pursue international growth in China and India with Fashion and Sports business 2 Implementation Actions Joint Venture and Franchise Deals Close unprofitable businesses in Spain Implement IT system Targeted Outcome 3 Increase international revenue by 33% in five years

4 Agenda Analysis of Status Quo Strategy Development Implementation Actions Future Outlook Conclusion

5 Aim of Sonae SR By 2017 Overall international profitability Break even in Spain

6 Sonae SR is Seeking Rapidly Growth in the Future Brands and Labels Sport Zone 18% of rev. Zippy 14% of rev. MO Worten 68% of rev. Own labels 28% of turnover Other labels Nike, Adidas, Samsung etc. Stores Square metres: 385, locations 417 locations in Portugal 53 in other countries Markets Portugal Spain Turkey Franchising: 22 countries Wholesale: 42 countries Sonae SR making up around 24% of total Sonae s turnover

7 Sonae SR s Way to the Current Situation Resources Strategies Actions Outcome Big holding in the back Core competencies: Logistics Purchasing Inventing business models The strategic alignment is capitallight International expansion Franchising, wholesale, joitventures Strong franchise business model Cooperation with Fawaz Alhokair Group in MENA Negative EBIDTA in international sales Mostly depends on spain Positive EBIDTA in Portugal Issues IT System More partnerships Fine-tuning of franchises Improve and strengthen competencies

8 Fashion Market in Developed Countries is Highly Competitive Customer needs Competitors Sonae s offers Markets High quality Fashionable Low prices High quality Boss, GAP Fashionable and low prices Inditex, Mango, H&M, Fast Retailing Focus on quality Low prices Spain Good as test market for fashion Loss market Portugal Saturated Nothing in between Competitors in every segments No differentiation Seek growth in emerging countries

9 Electronic Retail Market in Developed Countries is Highly Competitive Customer needs Competitors Sonae s offers Markets Service All in one Low prices Media-Saturn Best Buy Radio Shack Electronics and home appliances Only 10% own products Spain Loss market Portugal Saturated Nothing in between Strong competitors No differentiation Seek growth in emerging countries

10 Entering New Markets Needs a lot of Knowledge Knowledge Pricing Needs Trends Behaviour Local Possible ways Mergers Aqusitions Joint Ventures Franchise Markets South America Africa Asia Eastern Europe North America

11 Sonae SR is in a Comfortable Financial Position Decreased the debt acquired during the financial crisis in previous years For further investments, use the borrowing capacity

12 Sonae SR is the Second Profitable Business Unit of Sonae SGPS Turnover (in m Euro) and EBITDA Margin (in %) Sonae MC Sonae SR Sonae RP Sonae IM Turnover EBITDA Due to international expansion, Sonae SR will grow drastically in coming years

13 More than 70% of your Revenues are made in Portugal Turnover Sonae SR (in M Euro) Portugal International International business needs to be improved by growth in emerging markets

14 Wrap up New markets needs fundamental knowledge Spain remains a complicated market Strong financial position Growth in developing countries hardly feasible

15 Develop new markets with Sonae SR businesses Electronics Fashion Sports

16 Electronics business Worten Advantages Highest part of Sonae SR revenue Disadvantages Investment-intensive Fierce competition Problems to sell products via Amazon Lack of ability to franchise

17 Fashion business MO & Zippy Advantages Focus in brand and quality aspects Fastest growing children brand in Europe Substantial media attention Affordable products Disadvantages No profitable expansion in Turkey Closed franchised stores in Chile and USA

18 Sports business Sports Zone Advantages Winning industry awards for quality and performance Gaining international sponsorship deals Profitable in Spain Vary offerings and store concepts bz region Disadvantages Not a wide range of sports clothes Selling 50% of other brands

19 Critical Success Factors Criteria Electronics Fashion Sports Growing brand awareness Quality of products Competition Associated Costs

20 Critical Success Factors Criteria Electronics Fashion Sports Growing brand awareness Quality of products Competition Associated Costs

21 Markets Sonae SR can expand to Criteria Germany USA India China Price Index Birth rate Market growth Growing middle-class

22 Markets Sonae SR can expand to Criteria Germany USA India China Price Index Birth rate Market growth Growing middle-class

23 Markets Sonae SR can expand to Criteria Germany USA India China Price Index Birth rate Market growth Growing middle-class

24 Conclusion Establish a further growth strategy for international business of Sonae SR Become profitable internationally Continue of Spanish business Pursue international growth in China and India with Fashion and Sports business Product placement

25 Possible Market Entrance Strategies to develop in to new markets Possible Market Entrance Strategies Potential Markets Reason for Decision Joint Venture Franchise Organic M&A China Joint Venture for fashion and sports products India Franchise for fashion and sports Joint Venture no established distribution network Strong partnership needed for entrance Franchise One Sports shop available already Customer are aware of the new brand Market Entrance in correspondence with your strategic goal of capital-light investments

26 Close unprofitable businesses in Spain to increase your profitability # of stores Sports Zone Worten MO Zippy Stores in Spain Thereof profitable Stores you sell Key Facts Sell most of your stores in Spain to increase profitability Keep shareholders satisfied Reaching the goals you have set for your business Be Break-Even in Spain by

27 Integrate MO & Zippy in one store to build house of brands GiAFASHIONstore MO products Fashion & footwear for Women Men Children Zippy products clothes for babies Children equipment E n t r a n c e Provide one-stop shop for Pilot one store in the US market Buy all of your clothes and equipment in one store Find your fashionable clothes for your whole family in one-shop

28 Implement IT-system to oversee global operations to increase profit Integrate entire value chain from manufacturing to franchisee Enable franchisees to order on-demand and on short notice (stock up JIT) Decrease bullwhip effects along the value chain Approximately (initial) $ 25 million IT-system will decrease cost drastically along the value chain

29 Implementation Roadmap Develop growth strategy Set up Joint ventures Provide franchise Q Q Q Q Q Sell unprofitable businesses in Spain Search buyer Negotiations Final agreement Implement IT-system

30 Contingency Planning Contingencies Loss of Synergies Political Crisis Mitigation Sell businesses one-by-one, starting with the most unprofitable Build a diversified business in a variety of countries Economical Crisis

31 Future Projections International Revenue (In Million Euro)

32 Future Projections Spanish market will be break even in the short run due the sales of unprofitable stores Internationally profitable mainly due to the sales in Spain in 2017 Costs per Joint Venture 3 m Euro Franchise 1 m Euro Sales of stores increase short-term liquidity

33 Conclusion Establish a further growth strategy for international business of Sonae SR Become profitable internationally Continue of Spanish business Product placement Pursue international growth in China and India with Fashion and Sports business Joint Venture and Franchise Deals Close unprofitable businesses in Spain Implement IT system

34 Monday Morning Actions 1 Look for potential purchaser 2 Set up a project team 3 Contact banks