PRAKTIKER 2008

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08.04.23Filename.ppt

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



positivePositive

Competitors

Influencers

Suppliers

Customers

Threats area

Opportunities area

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Competitors impact on Praktiker



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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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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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

PRAKTIKER 2008

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