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Praktiker SWOT and Pest Analysis
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PRAKTIKER ROMANIA – Major Group Activity
Key Facts: Member of Praktiker Bau- und Heimwerkermarkte Holding
AG operating 425 stores in 9 European countries; Since 1996 part of METRO Group; 2007 Group revenues reached 3.95 billion euros; Market targeted: Do It Yourself (DIY); In Romania Praktiker is the market leader in terms of
revenues (265.4 million euros in 2007) and operates 24 stores (last store opened in Buzau on oct. 24th)
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Mission Praktiker
To become the trend-setter in the market by creating and sustaining competitive advantages through:
Development of a premium brand in the market Anticipation of the customer needs Professionalism and competences of the people Constant optimization of the commercial margin, product and
customer portfolio Providing product and services innovation
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Organizational Chart – Praktiker Romania
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Factors Key Findings Implications for Praktiker
Social - Population density and growth
Negative birth rate for 15 years Age segment 30-55 represents 35.7% Occupied population 58%, to reach Lisbon 2010 target of 70% Unemployment rate moderate, 0.55 Mio unemployed persons registered
Potential customers of construction companies Increase of life standard-→increase of consumption
Economic outlook
Political outlook
International financial crises affect all investments especially in construction field Increase of interest rates for house loans
Depreciation of local currency after a few years of appreciation
Political: instability of ruling coalition, new government after elections possible
Civil and industrial projects are blocked -> decrease in consumption
Decrease of housing loans→ decrease of housing demand
Higher costs for loans and materials imported -> decrease in consumption
Infrastructure projects and projects developed by state owned companies could be stopped or postponed
PEST analyze
Source: INNSE, CNP, Intellinews
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Factors Key Findings Implications for Praktiker
Construction - Infrastructures
Segment increased by 19,3% in 2008, major investments further expected in infrastructure Civil construction increased due to residential constructions, houses and office buildings, commercial buildings and increases in the hydro-technical sub-segment (2005 - 2008 floods). Major investments in residential are expected to be blocked or postponed
Infrastructure →Increase consumption
New entrants in DIY → increased competition
Decrease consumption and increased competition
Legislation and Regulations
taxes could be increased in order to help the state budget Traffic restriction in big cities Bad debtors law frame (enforcement) New improvements from the new Fiscal Code are expected
Population incomes will decrease -> decrease consumption
PEST analyze
Source: INNSE, CNP, Intellinews
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Macroenvironment impact on Praktiker
DriversNegative Somehow
negativeNeutral Somehow
positivePositive
Foreign investments
GDP
Inflation & exchange rate
Consumption
Residential projects
Legal frame
Threats area
Opportunities area
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Market Forces impacting Praktiker
Praktiker
Competitors
Bricostore, Baumax, Hornbach, Ambient, Obi…
Influencers
e.g. Government, Specifiers, Architects
Customers
e.g. masons, homeowners, small and medium construction companies
Suppliers
Building materials producers, importers
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Market force’s impact on Praktiker
DriversNegative Somehow
negativeNeutral Somehow
positivePositive
Competitors
Influencers
Suppliers
Customers
Threats area
Opportunities area
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Competitors impact on Praktiker
DriversNegative Somehow
negativeNeutral Somehow
positivePositive
Pricing
Products & Services
Distribution
Promotion
Peoples
Threats area
Opportunities area
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Operational results effectiveness
DriversLow Somehow
lowFair Somehow
highHigh
Net Profit contribution
Market share
Turnover
Strengths area
Weaknesses area
Main K
PI’s
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OpportunitiesP
rob
abili
ty
Impact
■ Infrastructure
■ Competitors
supply limitations
■ Product branding
■ Niche market
■ Imports
■ Floods■ GDP
■ Legal frame
■ End users technical support
■ Market growth
1st priority
2nd priority
3rd priority
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ThreatsP
rob
abili
ty
Impact
■ Pricing limitations
■ competitors
network
■ Suppliers
■ Traffic restrictions
■ Cost of loans
■ Competition
pricing
■ Customers expectation
s
■ Influencers
■ Competitors distribution
■ Competitors
product portfolio
■ Competitors
marketing effort
1st priority
2nd priority
3rd priority
■ Substitutes
Grey market
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StrengthsP
rob
abili
ty
Impact
■ Tunover development
■ Customer base
■ Credit management
■ Brand positioning
■Praktiker network■ Market
share
■ New Markets
(Services)
■ Training
1st priority
2nd priority
3rd priority
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WeaknessesP
rob
abili
ty
Impact
■ Systems limitations
■ Product portfolio
■ Distribution
■ Market development
■ Control effectiveness
■ Suppliers
■ Technical services
■ Promotional activities (other than
events)
■ Customer satisfaction
■ Product management
■ Market research
■ Customer complaints
■ Recruitment
■ Pricing1st priority
2nd priority
3rd priority
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Objectives 2009
Strategic Frame
Strategic frame defines which products to sell in which markets:
existing products in existing markets (market penetration or expansion)
new/related products for existing markets (product development)
existing products in new/related markets (market development)
new/related products for new/related markets (entry into new markets).
Strategic Objectives
For each product we have to set one of the following options:
build sales and market share hold harvest (improve profit
margins) divest (drop or sell product).
As a result of the PEST & SWOT analysis, relevant objectives are set. Two types of objectives need to be considered: strategic frame and strategic objectives:
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Strategic frame 2009
Market Development(existing products, new markets)
• Distribution• Franchise
Market expansion(existing products, existing markets)
agreement with bank for financing programs to customers
Increase market share for heavy construction naterials (steel, cement, bricks)
Sell packages not products
InnovationGrowth
Traditional markets
Niche markets
Product Development(new products, existing markets)
• Renewable Energy for Home based on Guvernamental programes in place • Thermical Insulation for homes Program • Technical Support• Develop IT programs to help the customers make a cost calculation• Transport service• Loyalty programs for customers
New markets(new products, new markets)
• Corporate• New concept : ecologic house (agreement with new specialised suppliers
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Ways to increase profitability
Market development - new corporate Business Unit
Lower the operating costs Outsourcing
Develop new products based on government programes Renewable Energy Devices (solar and eolian power
devices) Thermal Insulation Program for houses – create a B.U. To
access this opportunity
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New Corporate Business Unit
Romania has a poor, sub EU level of public sector development and repair of construction in the public sector
Great and urgent demand of investment by the government in health, education, public administration infrastructures
Governmental projects such as construction of 32 brand new hospitals – Ministry of Health
Several local mayoralty’s project
General expectations that in the near future, Romania will be a construction site
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SWOT Praktiker Corporate B.U. Strength
powerful brand with good perception in the market excellent territorial spread know-how in the construction material business high purchasing power large range of products sold
Weakness large corporation, low flexibility low appetite for risk (commercial credit is a risk) no logistics low experience in B2B sales
Opportunities world financial crisis (smaller competitors will disappear) large customers need excellent expertise, supply in wide range low cost of initial implementation TARGET: only PREMIUM customers such as big construction companies or project
developers
Threats financial crisis
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Action Plan Corporate B.U.
ACTION PLAN Sales staff: 1 sales manager 7 area sales managers 24
key accounts managers (present in each store) Logistics: rented for the beginning, operational lease later
according to development Commercial Credit Insurance contract concluded with one
of the major companies for credit risk coverage Euler Hermes or Coface Romania
Acquisition and implementation of invoicing software for strict control over sales and credit granting
PRAKTIKER AUDIT
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Lowering Operating Costs - Outsourcing
Outsourcing for Staff and Entry Level Positions
Labor cost increased significantly in Romania, who now exceed the level of traditional off shore market.
Political and economical environment in Romania is good for outsourcing.
Human resources generate problems to companies in Romania because:- 49% - missing qualify staff
- Staff migration
- Unrighteous employees’ demands.
- Today, outsourcing is an option for cost optimization and strategically management
PRAKTIKER AUDIT
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Lowering Operating Costs - Outsourcing
outsourcing for IT IT employee doesn’t mean only salary cost, but also
indirect costs Indirect cost can be up to 142.3% of net monthly value Services that can be outsourced are:
- internet administration, e-mail administration, web site administration,
- maintenance for cables, switching and wireless,
- Maintenance for data bases, back-up,
- IT security, monitoring, IP telephony
PRAKTIKER AUDIT
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Lowering Operating Costs - Outsourcing
outsource the processing of suppliers’ invoices The activity to process the suppliers’ invoices and the documents
involved in acquisition process are activities for long time and this require an important volume of documents.
Automating and outsourcing those processes will increase productivity and will reduce costs.
Using this solution, the cost for Financial Department’s personnel will decrease with 25%.
Using automatic processing the cost will be 80% less. The profit will be from:
- increasing payment accuracy,
- improving the control and the audit process,
- decreasing cost for storage.
- Manual processing can generate the following problems: losing documents, delays, errors.
PRAKTIKER AUDIT
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Lowering Operating Costs - Outsourcing outsource the management of Auto Park
The operational leasing means a long time leasing contract for autos. The financial advantages are:
- low costs,
- fixed installments,
- good predictable cash flow.
- total deducting costs,
- no unpredictable repairs and maintenance.
“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business” (Lee Kuan Yew)
PRAKTIKER AUDIT
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