Sonae SR’s International Expansion Strategy Technology • Increase need for productivity •...

Sonae SR’s International

Expansion Strategy QUT CONSULTING

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

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 Factors

QUT Consulting

Factors Why is this important? Impact

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

QUT Consulting


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


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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


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:


expansion strategy

QUT Consulting

Focus on penetrated

markets

Expand into Indian

market

South East Asian

Expansion

1 2 3





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


expansion strategy

QUT Consulting

Focus on penetrated

markets

Expand into Indian

market

South East Asian

Expansion

1 2 3





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 & Implementation Plan

QUT Consulting

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

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Rare Unlikely Possible Likely Certain

5% 5-15% 15-50% 50-75% >75%

1 1

Risk Analysis

# Risk

Initial

Score Mitigation

Residual

Score

1


unprofitableHigh



2


volatile marketHigh



3





4





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Risk Analysis

# Risk

Initial

Score Mitigation

Residual

Score

1


unprofitableHigh



2


volatile marketHigh



3





4





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2 3

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Risk Analysis

# Risk

Initial

Score Mitigation

Residual

Score

1


unprofitableHigh



2


volatile marketHigh



3





4





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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

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




ERP Efficiencies

Distribution Centre

Philippines




ERP Efficiencies

Distribution Centre

Philippines

Thailand Indonesia

Malaysia

126%

Financial Analysis - EBITDA


Spain online

Efficiency gains



Spain online

Efficiency gains Infrastructure Costs

Philippines



Spain online

Efficiency gains Infrastructure Costs

Philippines

Thailand

Indonesia

Malaysia

Twofold

Growth

Call to action

QUT Consulting

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

Call to action

Sonae SR: The New Age Portuguese Explorer

QUT Consulting

Diverse Driven Dedicated

Sonae SR’s International Expansion Strategy Technology • Increase need for productivity •...

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