Case Study: market entry strategy
- Selection of slides
1
Objective of the collaboration
•
Situation: ‘The Client’, global HVAC manufacturer would like to evaluate the
market potential for their products in Brazil.
•
In this sense, the overall aim of the collaboration would be:
1.
To help ‘The Client’ identify and evaluate the main opportunities for its
products in terms of positioning, revenue sources, geography and
channels
2.
To help ‘The Client’ identify the best entry strategy
3.
Develop entry strategy and business case
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
2
Proposed methodology
BMC proposes a five step methodology
Analysis of the Brazilian
market
Product portfolio
definition for
Brazil
Definition
channel,
manufacturing
and after sale
strategy
Definition of
Business model
and Action Plan
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
3
Example of output: analysis of competitive landscape
Positioning, market share and strategy of each competitor is different in the Brazilian market
Positioning and share by brand
High
ROS: 8-12%
ROS: 10-15%
Compet1
Compet3
Positioning
Compet6
Compet4
Compet7
Compet2
Compet5
Compet8
ROS: 0-6%
Low
0.1
Low
0.2
ROS: 6-10%
0.5
Relative share
1
2
2.5
High
Source: Emerging markets information services, BMC estimates. Note: ROS=EBIT/Sales
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
4
Example of output: positioning alternatives
To achieve the desired long-term positioning, the Client has 2 entry options:
The Client entry strategy: Positioning
High
Positioning
ROS: 8-12%
ROS: 10-15%
Entry1
Haier
Entry2
ROS: 0-6%
Low
0.1
Low
0.2
ROS: 6-10%
0.5
Relative share
1
2
2.5
High
Source: BMC. Note: ROS=EBIT/Sales
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
5
Example of output: manufacturing options – gross margin entry 2
Gross margin for manufacturing options 1 and 2, following entry strategy 2 are negative for almost
the entire product range
Product series A
Product series B
Product series C
1. Import finished product
8.3%
-22.2%
-25.3%
-26.3%
-17.1%
-10.9%
-12.1%
-10.9%
-1.1%
-8.1%
-10.1%
3.7%
-4.6%
-27.0%
2. Assemble in AAA
3.7%
-9.1%
-36.4%
-24.1%
-38.1%
-37.5%
-32.5%
-26.2%
-26.6%
-23.6%
-14.4%
-18.6%
24.4%
23.0%
-0.2%
-11.8%
3. Assemble in BBB
11.0%
10.3%
10.3%
17.7%
12.1%
17.1%
17.0%
18.3%
27.7%
27.3%
36.9%
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
33.7%
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Example of output: entry options – geographical approach
When it comes to the geographical approach, a three phased entry strategy is recommended…
Phase 1
Phase 2
Phase3
North (X)
North (X)
North (a)
North East (X)
North East (a)
North East (a)
Mid West (X)
Mid West (X)
Mid West (a)
South East (a)
South East (a)
South East (a)
South (a)
South (a)
South (a)
Market covered:
72-78%
Market covered:
85-90%
Market covered:
100%
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
7
Example of output: business case – P&L
P&L (,000
P&L (,000
USD)USD)
2013
2013
2014
2014
units)
Units Units
Sold Sold
(,000(,000
units)
00
8 8
Sales Sales
00
3,322
71,846 71,846
71,846
3,322 17,765
17,76548,45148,451
Cost
of Goods
Cost of
Goods
SoldSold
00
-2,680
-57,720 -57,720
-57,720 -57,720
-2,680 -14,323
-14,323-38,988-38,988
COGS Brazil
COGS Brazil
00
-2,680
-2,680
-14,323
-57,720 -57,720
-57,720
-14,323 -38,988-38,988
-57,720
Margin
GrossGross
Margin
Margin
Gross Gross
Margin
(%) (%)
SG&ASG&A
00
642642 3,4423,442 9,462 9,46214,126 14,126
14,126
19.3%
19.7%
19.3% 19.4%
19.4% 19.5% 19.5%19.7% 19.7%
-5,297
-7,523
-5,297 -5,759
-5,759 -7,035-7,035-7,523 -7,523
14,126
19.7%
-537
-537
Operations
Operations
-41
-41
-520-520
Selling expenses
Selling expenses
Administration and overhead
Administration and overhead
-117
-117
-380
-380
-3,948
-3,948
-828
-828
EBITDA
EBITDA
EBITDA (%)
EBITDA (%)
Depreciation
Depreciation
EBIT
EBIT
Corporate tax
Corporate tax
NOPAT
NOPAT
-537
-537
0.0%
0.0%
-537
-537
0
0
-537
-537
20152015 2016 2016 2017
40 40
-833 -833
110 110 162
-842
-842 -850
-3,262
-4,398
-4,737
-3,262
-4,398
-1,663
-1,795
-1,936
-1,663
-1,795
-4,655
-2,317
2,427
6,603
-4,655
-2,317
2,427
-140.1%
-13.0%
5.0%
9.2%
-140.1%
-13.0%
5.0%
-300
-300
-300
-300
-300
-4,655
-2,617
2,127
6,303
-4,655
-2,617
2,127
0
0
0
-156
0
0
0
-4,655
-2,617
2,127
6,147
-4,655
-2,617
2,127
2018
2017
2018
162162
162
-850 0
0
-4,737
-60
-1,936
6,603
6,603
9.2%
9.2%
-300
-300
6,303
6,303
-1,576
-156
4,727
6,147
71,846
-7,523
0
0
-60
6,603
9.2%
-300
6,303
-1,576
4,727
Source: BMC analysis
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
8
Example of output: business case – balance sheet
P&LUSD)
(,000 USD)
BS (,000
2013
2013
2014
2014
2018
2017
00
FixedSales
Assets
00
3,322
71,846
3,000 17,765
2,700 48,4512,40071,846 2,100
1,800
Facility & machinery
0
3,000
3,000
-2,680
-14,323
-38,988 3,000-57,720 3,000
-57,720
3,000
Depreciation
COGS Brazil
00
-2,6800
-1,200
Current
Assets
Gross
Margin
Inventory
Gross Margin (%)
00
2,506 3,4428,342 9,46220,603
642
14,126 24,017
14,126
1,952
6,369
15,220
18,030
19.3%
19.4%
19.5%
19.7%
19.7%
Raw material
SG&A
Work in progress
Operations
Finished products
Selling expenses
Debtors
Administration and overhead
Cash
EBITDA
EBITDA (%)
Liabilities and Equity
EquityDepreciation
CapitalEBIT
Retained earnings
Corporate tax
Current year earnings
NOPAT
Financial liabilities
0
0
-537
0
-41
0
-117
0
-380
0
-537
0.0%
0
-537
0
-537
00
-537
-537
537
965
-5,297
585
-520
402
-3,948
554
-828
0
4011,042 110 23,003162 26,117
162
2018
AssetsUnits Sold (,000 units)
Cost of Goods Sold
85,506
20152015 2016 2016 2017
-14,323-300 -38,988 -600-57,720
2,628
5,836
-900
-57,720
5,836
-5,7591,592 -7,035 3,535-7,523 3,535
-7,523
-833
-842
-850
2,148
5,848
-3,262
-4,398
-4,737
1,974
5,383
-1,663
-1,795
-1,936
0
0
8,658
0
0
5,987
-60
0
-4,655
-2,317
2,427
6,603
6,603
-140.1%
-13.0%
5.0%
9.2%
9.2%
5,506
11,042
23,003
26,117
-5,191 -300-7,808 -300 -5,681-300 467-300
0 6,303
-4,6550
-2,617 0 2,127 0 6,303
0-537
-4,655
0 -5,191
-2,617
0 -7,808 -156
25,817
24,017
18,030
5,836
3,535
8,658
5,987
0
25,817
5,194
0
-5,681
467
2,127
6,147
4,727
-1,576
-4,655
-2,617
2,127
6,147
4,727
10,697
18,850
28,684
25,650
20,623
Group Loans
537
10,697
18,850
28,684
25,650
20,623
Creditors
0
0
0
0
0
0
Working Capital needs
0
2,506
8,342
20,603
24,017
24,017
Source: BMC analysis
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
9
Deliverables
The outcome of the study included the following deliverables:

Detailed analysis of the Brazilian market for HVAC

Analysis of the Client‘s main competitors, in terms of:

Product range, commercial network, services, pricing strategy…

Definition of product portfolio and pricing strategy for different market entry positionings

Evaluation of importing option compared to locally assembling or manufacturing options, in
terms of:

Inital investment, tax regulation, profitability, timing

Set up of potential scenario based target sales in 3-5 years

Development of business plan, detailing resources needed, cash flow projections and ROI
projections

Recommendation of best approach to enter the Brazilian market

Development of action plans necessary to achieve the targets
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
10
Project outcome
BMC helped The Client decide whether or not to proceed with the market
entry operation in Brazil and the best approach for it:
•
Proving The Client the operation would be bring value to their
Corporation
•
Presenting alternative brand positionings, with recommendations
regarding commercial strategy and manufacturing strategy
•
Building up a business case valuating several scenarios and concrete
action plans for the targets set
This presentation has been elaborated by BSRIA Management Consultancy (BMC) exclusively for the use of its client, and will not be used without written consent of BMC
11
Old Bracknell Lane West
Bracknell Berkshire RG12 7
AH
Paseo de la Castellana 127,
1A
Madrid 28046
United Kingdom
Spain
+44 (0) 1344 465600
+34 91 185 42 37
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