sonae sr international expansion · growth across entities sonae sr accounts for 24% of turnover...
TRANSCRIPT
Sonae SR
International Expansion
Signal Consulting
Kate Boland | Nick Lane | Greg Piercey | Stephanie Daley
Memorial University
Agenda
Problem Statement Kate
Key Issues
Objectives
Recommendation
Analysis Nick
Alternatives Greg
Implementation Stephanie
Risks and Mitigations Kate
Questions
Problem Statement
What approach should Sonae SR
take to international expansion to
fuel profitable growth?
Key Issues
Mixed results of franchising model
Variable profitability across store concepts
International IT system lacking
Brand building challenges
Objectives
Rapid Growth
New Market Penetration
Balance Risk and Return
Overall International Profitability
Recommendation
Procced with an
aggressive franchising
plan to expand Zippy to
new markets.
Analysis
Sonae financial performance
Relatively stagnant
growth across
entities
Sonae SR accounts
for 24% of turnover
International
expansion to fuel
this growth
€ 1,626
€ 579
€ 63 € 119
€ 1,633
€ 582
€ 64 € 124
Sonae MC Sonae SR Sonae RP Sonae IM
Sonae turnover breakdown by entity
Revenue (1H 2014) Revenue (1H 2015)
2014 - 2015 growth
Sonae MC 0.4%
Sonae SR 0.5%
Sonae RP 1.6%
Sonae IM 4.2%
Sonae SR
Diversified:
590 locations
Four store
concepts
EBITDA margin
negative YoY
Strengths in:
Own brand development –
28% of turnover
Operations and management
Talent / management
Areas for improvement:
IT / technology
Establishment of more
partnerships
Same store sales trend – Sonae SR
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Same store sales - growth rates by quarter
Portugal International
“Stores outside Spain are
profitable”
The four store concepts
185
81
113
38 44
36
11
82
Worten Sport Zone MO Zippy
Store locations by concept
Portugal International
29% of Sonae SR’s
locations are
international
Zippy is the most
international store –
68%
Largely due to single
franchise contract
The four store concepts
Worten
• Electronics and home appliances
• High market share required
• Accounts for 68% of revenue and
profit
• Struggles with international
expansion
• Brands not its own
• Requires large investment
• Online retail competition
• Spain stores 3x the size
The four store concepts
Sport Zone
• Sporting goods retailer
• Already achieved profitability in Spain
• Utilizing modified store concept in India
• Has begun launching franchised stores
• Desirable locations and wide selection
The four store concepts
Zippy
• Children’s merchandise
• All products sold are own brands
• High-quality offerings – profitability
• First store concept to franchise internationally
• Proven to succeed as a franchise model with Alhokair
• Failed franchises due to lack of local talent
The four store concepts
MO
• Fashion clothing store
• International expansion began in 2013
• Problems differentiating products
• Aimed at smaller towns and suburbs
• Generally low-priced offerings
Alternatives
Expansion Strategy Alternatives
Organic growth
Acquisition
Franchise / Joint Venture
Expansion Strategy Comparison
Organic Acquisition Franchise / JV
Rapid Growth - + + New Markets + + +
Balance Risk /
Return - - + International
Profitability + = +
Store Concept Alternatives
MO
Worton
Sport Zone
Zippy
Store Concept Comparison
Mo Worton Sport Zone Zippy
Owned Brands + - = + Proven Success = - + + Differentiation - - + +
Recommendation
Procced with an
aggressive franchising
plan to expand Zippy to
new markets.
Implementation
A Zippy
Growth Strategy
Implementation
Short (6 Months)
Improve IT, Branding & Sales
Acquire Zippy Partners & Franchisees
Medium (7 Months +)
International Zippy Store Roll Out
Long (24 Months+)
Focus on Growth of Sport Zone
Key Success Factors
Leverage operations strength
IT to fuel profit
Sales force
capability
Build a global brand
Talent Plan
Zippy Expansion Team (25):
Logistics, IT, Marketing, Sales
13 New hires for Sonae SR International
IT (5)
Sales (5)
Marketing (3)
IT Improvements Consolidate
& mine international
sales data
Leverage store
management capacities
Improve inventory
management & pricing
Powerful Partnerships
Dedicated sales force
Contacts in the target business communities
Ease of access online
Building a Global Brand
Experienced International Brand Manager
Experience with Carters
Refine brand & materials
Maintain consistency
Do not amend name
Advertising that reinforces quality
Put Some Zip in Your Portfolio
Be the first to bring the next global brand to your
market with Zippy Children’s Clothing and
Merchandise.
Fastest growing children's brand in Europe
Fueled by global management expertise of
Sonae
Country and partner selection process
Country selection
Partner selection
Executive and Board
decision
Population, birth rate,
economic growth, income
and income growth
Financial health, available
capital, proven history,
assets / network
Final decision made by
Executive and Board
Initial analysis points to China, India, and Mexico as country options
International Operations
Growth through Zippy Franchisee & Partnership
Focus on profitability of problem stores using
new IT systems
Stop expansion of Worton in Spain
Opportunity to leverage floor space for other brands
Budget
2016 2017 2018
Talent
Zippy $1.3 $1.3 $1.3
Sport Zone $1.3
Technology $2 $1
Sales & Marketing $1 $0.5 $1.0
TOTAL $4.3 $2.8 $3.6
Budget in Millions (EU)
Funded by debt.
What Success Looks Like
-5
0
5
10
15
20
2016 2017 2018
EBIT
DA (
Million E
uro
)
EBITDA from New Zippy Franchises
Low Profit
Expected Profit
High Profit
0
20
40
60
80
100
2016 2017 2018
New Zippy Store Franchises
India
China
Risks and Mitigations
Risks and Mitigations
Risks
Zippy Brand
Regulations
Talent
Probability
Med
Med
Low
Mitigation
Sportszone earlier
Further diversification
Further recruitment
Conclusion
•90 stores in 3 years Rapid Growth
•China, India New Market Penetration
•Capital-light model Balance Risk and Return
•IT enhancements Overall International Profitability
Questions