Transcript Folie 1

An Enlarging Europe:
Chances for consultants
of the old and new member states
Dr. F. Arnulf Fleischer
Budapest, November 8-10, 2006
FEACO European Annual Conference 2006
DÜSSELDORFBUCHAREST BUDAPEST HAMBURG LONDON MOSCOW MUMBAI MUNICH NEW YORK SHANGHAI SINGAPORE VIENNA
Executive summary
Today’s and future Eastern European EU members are showing growing political
stability and economic growth prospects, an view supported by e.g. rating agencies
like Standards & Poor’s.
The Eastern European consulting market is in relation to the Western market still
small, but offers significant growth potential.
Medium-sized Western consulting companies have to rely on networking and
cooperation with local consultants in Eastern Europe to participate in the growth
prospects.
Major consulting services are related to market entry and penetration, relocation of
production facilities, efficiency improvements and restructuring.
A project example of a successful market entry project shows how the cooperation of
Eastern and Western consultants works…
…and it does work if there is a win-win situation.
Source: Droege & Comp.
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D&C: International offices for global delivery
Americas
Europe
Asia
Moscow
Market entry/
expansion
New York
Mumbai*
Shanghai
Singapore
Hamburg
London Düsseldorf Warsaw
Munich
Paris
Vienna Budapest
Bucharest
Typical project
areas
Global sourcing
Supply chain
strategy/relocation
Global organisation/
post merger
integration
Restructuring
subsidiaries
…
*opening Q4/06
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Development of Eastern European countries
Attractiveness
Factors
Socialism
Transformation
Development
Consolidation
EU Standard
Legal/
Economic/
political risks financial
stability
Market/
demand
Income level
Consumption
Penetration
Production
site
Wage level
Qualification
Supply chain
Competitive
intensity/
structure/
gap
Surplus
demand
Market
dynamics
Competition
Windfall
profit
Status of
Rough
development positioning
Source: Droege & Comp.
Eastern European
economies have to catch up
50 years of market development
Hungary
Bulgaria
Ukraine
Poland
Russia
Slovakia
Belarus
Czech Rep.
Romania
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Rating shows growing political/economic stability
Critical factors
• Quantitative/qualitative
(price index, GDP per
capita, real exports…)
• Political/institutional
credibility
• Transparency/predictability
of policy
• Vulnerability to internal/
external shocks
• Public/private sector debt
burden, recent debt
servicing
• Government contingent
liabilities
• Fiscal policy
Source: Droege & Comp.
Standard & Poor’s
rating
AA+
AAA
A/stable
Slovak Rep.
BBB+
BBB/positive
Bulgaria
BBBBB
B+
BBB-/stable
Romania
BB-/positive
Serbia
B-
January 09 00
01 02 03 04 05 06 07
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Eastern Europe is major target region for relocation
China
40%
Other Eastern
European countries
“New”
EU Members
34%
25%
“Old”
EU Members
12%
Other Asian
countries
12%
North America
11%
South America
8%
Germany
6%
Source: Droege & Comp. Relocation Study 2005
59%
Eastern
Europe
Major implementation
problems
Qualitative factors
underestimated
Potential risks not fully
considered
Insufficient information on
target country
Poor implementation
…
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From subcontracting to own business
Total
costs €
per
0.60 Germany
SAM*
Weakening cost
position will force
Eastern European
companies to invest
into own “added
value”
improvements
0.50
0.40
Spain
0.30
Italy
Portugal
Slovak
Rep.
Poland Hungary Turkey
Hong
0.20 Kong
0.10
Czech Croatia Romania
Serbia
Slovenia Rep.
Bulgaria Ukraine
Sri Lanka
Vietnam
Bangladesh
China
India
AAA
* Standard allowed minute
Source: Droege & Comp.
AA
A+
A-
BBB BB+ BB-
B
Chances for
developing
consulting
business and
services
Standard & Poor’s rating
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Size and distribution of European consulting market
62.9*
48.5
Bn € turnover
European
MC companies
47.5
46.5
47.5
2001
2002
2003
11.0
1994
Spain
France
11.0%
Italy
9.4% 3.2%
Netherlands
3.7 %
Other
9.2%
3.6%
Great
Britain
28.6%
31.3%
Germany
Eastern Europe
2004
2005
Russia
1.5%
Czech Republic
Hungary
0.6%
0.4%
Poland
Romania
0.4%
0.3%
Slovenia
0.2%
Bosnia
0.1%
Bulgaria
0.1%
Eastern European consulting market with still small but growing market share
Saturated Western consulting market forces consultants to go East and also
Western companies continue to position themselves in prospering Eastern markets
Source: Droege & Comp.
* incl. Russia (estimate)
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Holistic consulting approach for an enlarging Europe
SCM:
Logistics
Sourcing
…
Market:
Market entry
Market penetration
Innovation
…
Western consulting
presence Eastern Europe:
- Own Consultants on site
- Liaison office / Own subsidiary
- Cooperation/network
- Strategic alliance
- Joint Venture
- Acquisition
- Pan European Holding
Corporate fitness:
Cost reduction
Process optimisation
Lead time reduction
Outsourcing
…
Source: Droege & Comp.
M&A management:
Turnaround
Change
Integration
…
Facilities:
Production facilities
Sales infrastructure/
organisation
…
Management systems:
Leadership
Information
…
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Foreign direct investments: Chances for consulting
Market entry/penetration
high
Seed corn
acquisition, M&A
Foreign direct investments
Eastern Europe*
54.8
Bn €
medium
29.4 33.3
47.6**
25.9
Joint Venture
2001 2002 2003 2004 2005 2006
Licence
production
11.7
Sales subsidiary
low
Financial resources
Green field
46.4
Subcontracting
Export
6.1
Bn €
5.4
5.2
1.8
low
medium
high
Management/consulting
resources
Quelle:
FEACO, Droege & Comp.
Source: WIIW; Droege & Comp.
8.8
Bul- Czech Hun- Po- Ro- Russia
garia Republic gary land mania
*Central, Eastern and South Eastern Europe
**Forecast
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FDI: Example market entry…the classical approach
1
Market attractiveness
analysis
2
Market entry concept
3
Implementation of
market entry
Case study:
Market entry Romania for FMCG company
Consulting project with local cooperation partner
Source: Droege & Comp.
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Case study: Market entry Romania
Initial situation
• Client
Medium-sized market leader FMCG food (branded sausages)
• Major problems
Barriers to growth in current markets (domestic and EU export markets)
Customers get increasingly involved in Eastern Europe
Source: Droege & Comp.
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Case study: Market entry Romania
1 1
Marketattractiveness
attactiveness analysis
Market
analysis
• Approach
Market attractiveness analysis of 13 countries
Definition of evaluation criteria
Collection of data
Prio A
Evaluation with scoring model “Market Attrex©”
Prioritisation of countries
Determination of focus country
• Result
Prio C
Prio B
Romania selected for market entry
Source: Droege & Comp.
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Case study: Market entry Romania
Market entry concept (1)
2
Aspire market leadership
Objective
Acquisition or green field
Negotiations with local/regional
authorities
Selection
of location
Inspection of building land
Production
Sales
concept
Distributor
C&C
Traditional retail
Exploratory discussions with grocery
stores
Contact with distributors
Consumer
Source: Droege & Comp.
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Case study: Market entry Romania
Market entry concept (2)
2
Analysis of product range
accompanied with store checks
Market
positioning
Definition of pricing/branding strategy
GF
„Kaufmann“
Organisation
structure
Int. Services
N.N.
14
Controlling/
ReWe
5
Personal
1
Admin.
GF
„Country Manager“
Vertrieb
N.N.
Betrieb
9
KAM
Produktion
Innendienst
69
Labor
2
2
Analysis of national market leaders
81
4
Marketing
5
N.N.
1
Exchange of experiences with
investors
Lager/
Versand
10
Einkauf
1
Business
plan
Source: Droege & Comp.
Development of business plan
scenarios
Compilation of liquidity/finance plan
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Case study: Market entry Romania
2
Market entry concept (3)
Results
• Detailed market entry concept developed
• Top 10 local competitors evaluated
• Contact with acquisition candidates established
• Lists with top key accounts agreed
• Validation: Market leadership and EBIT of 8% possible
• Execution of due diligence of three acquisition candidates…
in parallel validation of green field engagement
Source: Droege & Comp.
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Case study: Market entry Romania
3
Implementation
Decision for green field investment
Reasons:
• First-class location with bright
prospects for further development
• Headquarters of top clients on site
• Significant support by local
administration
• Qualified workforce
• Favourable infrastructure
• …
Implementation elements
• Establishment of project organisation and
implementation timetable
• Search and selection of country manager
• Conception and establishment of production
facilities and local sourcing structure
• Establishment of sales organisation
• Engagement of third-party service providers
(PR, sales promotion, merchandising,
logistics etc.)
• Penetration of national branding strategy
(premium and standard)
• Development of assortment
• …
Source: Droege & Comp.
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East/West consulting: A win-win situation (1/2)
Benefits for Western consultants
Benefits for Eastern consultants
• Increase of international
competitiveness with growth
prospects
• Increase of local competitiveness
• Improved international reputation
• Development of new business
• Support internationalisation of
national clients
• Raised reputation
Strategy
• Access to international clients
• Access to local private and public
sector clients in Eastern Europe
• Access to local clients in new
industries and growing market
segments
• …
• …
• Regional competence
• Development of additional services
and products
• Local sectoral competence
• Cultural adaptability
• …
Source: Droege & Comp.
Competence • Access to best practice
• …
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East/West consulting: A win-win situation (2/2)
Benefits for Western consultants
Benefits for Eastern consultants
• Access to local network
• Cross-selling
• International connections
Network
• Cross-selling
• …
• …
• Interdisciplinary team building
• Interdisciplinary team building
• Language skills
• Training on the job
• Mixed calculation
• Access to well-educated local
consultants
Resources
• Qualification/know-how input
• …
• …
Source: Droege & Comp.
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