1 team 10 / january 2004 intake / hec mba lionel allouche, guy danon, bongani dlamini, gael...
TRANSCRIPT
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Team 10 / January 2004 Intake / HEC MBALionel Allouche, Guy Danon, Bongani Dlamini, Gael Rouilloux, Andrea Tommasoli
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Executive Summary - Key Takeaways
Local Management for local operations as a key success factor
18:8:08 (France : Israel : China)
=> Local Roots, Global Reach
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Electra in France When did it come to France?
Purchased Airwell in receivership at 1994 What is its business?
Worldwide air conditioning equipment manufacturing & Marketing.
What are its key figures? Worldwide sales: $632M in 2003 ($532M in 2002) Net income $11.9M in 2003 60% sales in Europe 10% market share of residential AC in Europe 4500 permanent employees 3 plants in Europe, 2 in Israel, 2 in China Publicly Traded company (ELEK:TASE) Elco Holding Ltd. subsidiary
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Why did it come to France?
Electra approach to international growth is through 50% of acquisitions and 50% of internal growth Electra penetrates markets of strategic interest through
acquisitions of local businesses operating in the air conditioning industry.
Where else did it consider? Electra simultaneously considered acquiring Seveso Clima (Italy)
Why was France a key target location? Dominant and well-established brand in western-European
markets. Attractive business opportunity. Entrance to Europe – aligned with company strategy.
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Company Values
Electra operates in an industry where acquisitions are a normal part of business Electra acquired the French businesses and did not try to
radically impose their values, management team and force integration in the global company.
The firm’s global approach is to leave the local management worldwide to the locals (=> Local Roots, Global Reach)
As a result, French workers did not experience a “culture shock” when their company was acquired
Company core values Market Leadership obtained via Cutting-edge Technology Innovation and quality Employees are company assets – laying out as a last resort.
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Company Values (continued)
How did company manage to instill its values in the French unit? Bankruptcy is a facilitator to open-mindness… Electra kept a French management and therefore did not try
to impose its values on the French company Still, Airwell was not left apart and Electra applied its
expertise and experience (e.g. efficient working processes, production expertise, IT solutions)
Only one expatriate sent to France: export manager. Belief that the transition process from Israeli-managed clients to French managed clients would be smoother.
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Company Values (continued II)
Real Case Buyout of the bankrupt = ensured no firing of employees. Within one year brought company from loss to profit. All employees who were sent on vacation – returned to work
after recovery.
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Company's clients
Who are the company's clients? Businesses and building
facilities owners.
Via Home appliance retailers, distribution companies, & air conditioning installation companies.
What are their expectations?
Cold air !!!
…and…comfort, reliability, quality of service All in low costs (…Chinese competition…)
Residential
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Company Products What products are produced in France?
Central air conditioning equipment – big, customized and added-value units.
Why are these products produced in France? Less seasonality on the big units demand accommodates
with France’s lack of flexibility. Big units are the highest added value products, and the ones
requiring customization. One of France’s advantages relies on its high-skilled employees that are a required resource for production of high added-value products.
These big and heavy units are mainly sold in Europe.Worldwide optimization of the transportation costs.
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How will a French presence help or hurt the company's ability to satisfy client demands? Worldwide optimization of production lowers production
costs. Central positioning in European market – closer to clients. Western European production – positioning of products.
Company's clients
Electra does not believe that the French presence will hurt the clients’ satisfactory level.
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Constraints in France
Labor High Cost of Labor
French labor costs 200%+ higher than Israeli ones and 2,000%+ higher than in China.
35-hour work week Required Electra to hire more temporary workers as it was too costly
or inflexible to hire full time employees (300) A limited amount of overtime is allowed to manage production
fluctuation – about 80 hours per employee per year “De Robien” regulation
Flexible authorized working hours : Less than 30 hours in low season Over 40 hours in peak season
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Constraints in France (continued)
Unionization Electra extensively used the Comité d’Entreprise in order to
communicate its acquisition strategy to the employees of Airwell
Cultural Differences Courtesy and behavioral Differences
(e.g. perception of the “Bastille day” !)
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Adaptation to France
Although being French, Airwell did not undergo significant changes with the core HR management and systems that were already in place
However, there were some adjustments that were made with new management in terms of: Compensation system : motivation through bonuses (up to
25% of yearly salary for the top 5% managers) Use of Expatriates: Electra is very careful to place French
managers in all positions that directly interface with either factory workers or government. The use of expatriates is limited.
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Key Benefit of Operations in France
Manufacturing Production facilities that already exist in France were put to
work as much as possible through overtime agreements
(Airwell moved from heavy loss to profit within one year!!)
Growth Additional production tool Access to European market
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Essential Advice
Before coming to France Hire the best consultants, perform a good risk assessment
and plan the “day after” team.
Adaptation while in France No attempt to get involved in the French culture, nor try to
change it (risky source of mistakes).
Future investments in Europe Get the best out of the people diversity, people are the
greatest asset.
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We Thank…
Mr. Eliezer BEN-MOSHE President
Mr. Avi SHAMIE Area Sales Manager
Mr. Jean Luc VIOLEAU European Division CFO