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Case in: EXC 3602 International marketing

(Process evaluation: 80% part of EXC 3602)


Posted date: 17.02.2015, kl 00:00
Due date: three days before the case presentation, at noon.
Total number of pages: 47 pages
Case 1: Aurora Light facing their first export venture
side 2
Case 2: Yara International
side 11
Case 3: Ronstan sailing around the world
side 19
Case 4: Orkel what now?
side 30
__________________________________________________________________________

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Case 1: Aurora Light facing their first export venture


by Prof. Carl Arthur Solberg, BI Norwegian Business School. Carl Arthur Solberg

Although the background of the story is real, facts have been changed, in order to disguise
the real company. Any resemblance in any company with the persons mentioned in the case is
coincidental.

"This is a real mess!" Mrs. Sunhill had problems of hiding her temper when she confronted
her marketing manager Mr. Mark Salsbury with a letter received the same morning from their
Italian agent, Mr. Antonio di Napoli. Mr. di Napoli had in fact informed Aurora Light AS that
he ended the contract they had entered into a year or so earlier, and he asked for 600.000 Euro
in indemnities. And, if this was not enough: Their representative in Newcastle, GB-Lite, had
insisted on more changes to be made on the products, in order to satisfy the requirements of
the British market. According to Mr. Counting, Aurora Light's financial officer, additional
adaptation costs would increase the end price to an unbearable level, making redundant all the
efforts put into the British market.

They were lucky to have a good grasp of the Norwegian market, to at least sustain the costs
incurred during the introduction to the new markets. In fact, they were holding a good 25-30%
of the home market, with sales approaching 140 million NOK last year. They felt well
entrenched in the market place with good relations to the distribution channels and a
technological advance to the competitors. Although the profitability was not up in the sky, the
return on sales showed a sturdy 2-6% per year over the last couple of years, and annual net
profits were in the three to six million NOK range. Besides the Norwegian archrival, LightTech, these latter consisted of companies mainly from Sweden and Germany. Typical for this
industry, has over the years been the dominance of the national companies in each market,
Norwegian companies dominating the Norwegian market, Swedish companies in Sweden and
so on and so forth. The major reasons for this industry structure were the local design and
technical standards, and the multitude of different contractors and distribution channels in the
national markets.

However, the industry was gradually being consolidated, lead by the proactive strategies of
the French Schneider Group. Schneider had in fact initiated an acquisition campaign in
Europe and controlled their Norwegian competitor as well as this latters partner in Finland.
They were also dominant in France and Germany and other countries on the continent. So far
their Norwegian competitor had kept their independence and there were few signs of one
European design of the products. Rather on the contrary: electrical fixtures still had
conspicuous features of being local products.

The background for the export adventure was to anticipate what had to come: the emerging
industry concentration in Europe, and the ensuing inroad of new competitors into the
Norwegian market. So, they started to investigate different avenues for exporting. After some
discussions with people in related businesses and Innovation Norway the Norwegian Trade
and Industry Promotion Agency, and some research on statistics and magazine articles, they
decided to approach the following countries in the EU: Great Britain, Denmark, Italy, France
and Germany. France and Germany were rapidly excluded given the prominent presence of
the mother company of their Norwegian competitor. The markets in Great Britain and Italy
were deemed to be the most interesting ones and Mr. Salsbury was assigned the task to
identify possible candidates for representation in these two markets.

After some investigation - partly through small advertisements in trade magazines, and partly
with the assistance of the local representatives of Innovation Norway - they ended up with a
long list of candidates in each country, most of which seemed quite serious and capable. They
were of the most diverse types of companies, anything from the "one man show"-company to
large, established import firms. Mrs. Sunhill expressed some doubt as to what kind of
company they ideally should tie up with. On the one hand, a large and well introduced
importing company with an established network of wholesalers and customers would
facilitate the task. One major disadvantage with this kind of solution was of course that such
a company could be too big for Aurora Light, and Aurora Light would only be a small and
insignificant supplier to the larger company. On the other hand, "the eager beaver" solution
had its clear advantages in the amount of attention the agent could bring to Aurora Lights
products. After endless discussions on the pros and cons of each alternative, Mrs. Sunhill
decided to try both.

The British market


In the UK they started discussions and negotiations with a company well entrenched in the
business, GB-Lite. This company had been importing electrical fixtures and equipment ever
since the early sixties, and - out of their base in Newcastle, they had developed a large
network of retailers especially in the North East region of England. This company was chosen
among all the other for two reasons: 1) the Managing director, Mr. Jones, seemed to go easily
along with both Mrs. Sunhill and Mr. Salsbury; 2) GB-Lite had shown a spectacular ability to
yield good financial results. With a yearly sales of 34 million GBP and a sales staff of
between 18-20 people, they were regarded as a solid potential partner.

The contract negotiations, however, were a new and unexpected experience for both Mrs.
Sunhill and Mr. Salsbury. In the introductory phases of their negotiations, they had met with
Mr. Jones alone, who gave a refreshing impression of a professional manager, quite unlike the
stereotype picture one typically has of established British companies. When they met to
negotiate the details of the agency contract, Mr. Jones was joined in by three other men: Mr.
P. Halloway, Mr. Jones' partner in GB-Lite, Mr. A.G. Ressing their sales manager, and finally
Sir John Lawson, their lawyer. The four were all equipped with a 10 page sample, standard
contract which they would like to use as a starting point in their further discussions with
Aurora Light. Sir John politely presented the details of its content to the two representatives
of Aurora Light.

Mrs. Sunhill was quite astounded. This was very different from the relaxed meetings they had
previously held with Mr. Jones. During these meetings they had discussed things like
commission and sales volume and had reached a general agreement on these issues. Our
friends from Aurora Light thought that the contract negotiations were a mere formalization of
this discussion. Instead, they were met with a long range of requirements:

Develop an English version of their product catalogue, manuals and service


instructions.

Transfer for one week in Newcastle a product engineer in order to train the sales and
service people involved in the project.

Send GB-Lite within three weeks a complete set of demo-models.

Take the responsibility of spare parts and the most popular models in a warehouse
facility in the outskirts of Newcastle.

Maximum delivery time to be one month.

Authorize GB-Lite to grant price discounts, accept returns and extend credits of more
than 4 months when deemed necessary.

Contribute at least 90 000 GBP to the introductory advertising campaign, and further
pay 25% of any advertising programs in the future.

Mrs. Sunhill did not find any clause in the suggested contract that really committed GB-Lite
in any significant way, and she and Mr. Salsbury had a hard time introducing terms like:

Minimum sales the first year of 100 000, to be increased to 1 000 000 after two
more years.

A guarantee of not extending credits or pursuing sales to customers who have


exhibited a notoriously bad credit record.

Changes in prices and terms of payment should be submitted for approval in Aurora
Light before being granted.

These "concessions" from the GB-Lite team, did not go without the inclusion of a major
clause stating that GB-Lite is entitled to a compensation of 80.000 if any of Aurora Lights
commitments were breached. This was a bitter pill to swallow, but Mrs. Sunhill and Mr.
Salsbury accepted it because they were quite confident that they would be able to -putting
some extra effort to the job - comply with the clauses. And the British, on their side were
quite stubborn on this clause if they were to soften their stance on the issues put forward by
Aurora Light.

Back home again, our friends in Aurora Light started to fulfill their commitments. They had
the brochures and manuals translated; Mr. Prodding, the development manager of Aurora
Light, was sent over to train the sales and service people; arrangements were made to rent
storage space and transfer spare parts and demo models. And finally, GBP 90 000 was
transferred to GB-Lite's account in Barclay's Bank, the Newcastle branch, to comply with
GB-Lite's requirement on advertising expenditures. At the end of this "exercise" more than
NOK 1 300 000 was spent on the British market introduction. Mr. Counting achieved after
lots of persuasion an extension of the credit line with the local bank, and submitted a request
5

for support on part of the money (translation, advertising budget, training program), to
Innovation Norway. After one month of hard work, they could start "breathing normally" and
wait for orders to come.

The Italian experience


The Italian experience was quite different. Mr. Salsbury received a telephone call from a
certain Mr. di Napoli, calling from the Oslo Airport, Gardermoen. He had just landed and was
together with his wife for two weeks of summer holiday. Norway was such a different country
and he and his wife were in for a new kind of "experience". He referred to the ads about
representation and would like to "poke his nose" in any time during the next two days to
discuss the prospects for a deal.

Antonio di Napoli happened to be a charming and also knowledgeable man who could refer to
a long list of references of sales assignments in Italy. He had in fact worked in the electro
fixtures industry for several decades and knew the members of the dealer network better than
his own cousins! After a visit in the factory, and a review of the products, their newly won
friend expressed great interest in being assigned the agency for all of Aurora Light's products
in Italy. At the end of a couple of hours discussion, they agreed to the main points in a
contract to be signed when di Napoli passed by on his way back to Italy after his holidays in
Norway, a week or so later. He had in fact accepted the idea of Mr. Counting to have his
references checked before any contract was to be signed. Mr. Salsbury was sitting on the
phone the next couple of days checking Mr. di Napoli's reputation. He also doublechecked
through Innovation Norways Milan branch. All references recommended Mr. di Napoli
without any reservation and Mr. Salsbury was confident they had come across the right man
for the job. Mr. Counting was somewhat more doubtful: what about all the others on the list?
"We haven't even bothered to look at the list!" he exclaimed. But he was overrun by Mrs.
Sunhill and Mr. Salsbury who both felt convinced that he was the man. Besides, he spoke
very good English, and that was not commonplace in Italy, not even within the business
community.

Next Tuesday, they signed a contract with the following terms:

di Napoli would get the exclusive rights to represent Aurora Light's products in Italy.

He committed himself to sell for at least 500 000 Euro the next year, increasing to 1.2
million the year after and finally reaching and 2.5 million after four years of operation.

Furthermore, he was granted a commission of 10% of the total sales.

Finally, the two parties were committed to develop a good spirit of cooperation.

No mention was made to advertising expenditures. In fact, Mr. di Napoli did not place any
importance on advertising. "What matters", he said, "is a good network and personal selling.
Then the rest comes by itself. Mr. di Napoli even agreed to come by himself to Norway for
an introduction into the technical parts of the product offering, disbursing all the travel
expenses out of his own pocket.

Business as usual?
After half a year, approaching Christmas, the status of Aurora Light's export efforts was as
follows:

In the UK trial orders started to come in already two weeks after the first "introductory
month" (when all the preparatory work had been done). GB-Lite had in fact presented the
products on a local trade fair outside Newcastle, and received some noticeable interest from
one dealer. However, Mr. Jones reported that in order to push the sales, they had to grant
substantial price discounts, between 12 and 15%. Mr. Salsbury was not in doubt: "We have to
go along with these requirements, otherwise we will not get the products through the dealers
in the first place, and nobody will get to use them." This made sense, but both Mr. Counting
and Mr. Prodding were reluctant to do anything more for their British representative at this
moment: "Who do they think they are?" exclaimed Mr. Counting. "We have put almost one
and a half million NOK into the venture, and now they ask for discounts!" After one hour of
discussion they settled for a compromise: GB-Lite was allowed to grant 5-7% discount to
particularly interesting customers.

The reaction from Mr. Jones was what one could term a qualified acceptance. After some two
or three weeks' time, Mr. Jones returned with inquiries concerning "minor product
alterations", as he put it. "Our dealers find it difficult to achieve preference for your products
as they now stand and at the price that you quote, etc., etc." He finally suggested some
changes in the design of the products.

Mr. Prodding was out of his mind, and during their internal discussion of the issue, he
expressed a great deal of annoyance with the whole venture: "We have now ended up in
endless discussions with our British representatives on just about every tiny issue of our
marketing program, and they have not achieved a single major sale. In Italy we don't meet any
of these objections to what we can offer: both the price and the product are being accepted as
they stand, and Antonio has succeeded in getting our product introduced in at least 20 dealers'
network.' I think that we should start looking for a new candidate for our sales in the UK. I'm
fed up with these petty quarrels around details, which don't lead us to anything but higher
costs".
-0In Italy, things at first seemed to develop much more brightly. There was an endless stream of
orders, first small trial orders, but later on they amounted to much more than the amount of
sales agreed upon in the contract. Aurora Light was very happy and executed the orders as
they came in. "We certainly have found a good niche in Italy", Mrs. Sunhill stated at one
moment. But only a week later, Mr. Counting entered into her office and presented the last
quarter's book report. Only ten percent of all the invoices due from Italy had been honored! "I
don't like this", he grunted, "I really wonder what kind of customers our friend, Antonio, has
led us into".

"I can't understand this", Mr. Salsbury said, "Antonio reassured me about the solidity of his
customer base, and based on the references we have received, I find it hard to doubt what he
is saying". "That's all fine, Mark", the financial officer countered, "but I think that when
twelve out of our fourteen invoices have not been paid in time - and we have granted liberal
credit terms, one month - I think it is time to review our credit policies toward Italy".

Mr. Salsbury conceded that something had to be done and agreed to write an e-mail airing
Aurora Light's concern over late payments. The situation did not get less sour when they two
days later received a note from Banco di Milano, about Stella Lucia, their biggest account so
far in Italy, had filed in for bankruptcy. An inquiry from Mr. Counting to Innovation
Norway's local representative in Milan revealed that a good deal of di Napoli's customers did
not exhibit the world's best track record concerning timely payment. In his report the trade
officer added though that this is not unusual in Italy, and that Aurora Light had to be patient if

they wanted to retrieve their outstanding balance with their Italian customers. Mr. Salsbury
still tried to be polite and friendly when writing the mail:

From: msal@Aurora Light.no


Time: 06.11.2014, at 1433

To:
Re:

Anapoli@lucia.it
Late payment

HelloAntonio,
IhopeeverythingiswellinItaly.Herethesnowhasstartedtofallandhopefullythisyearwellhave
awhiteChristmas.IwritetoyouaboutthebankruptcyofStellaLucia,andwouldliketoaskyouto
doanythinginyourpowertoretrievewhatispossibletogetoutofwhateverisleftoftheirassets.
Wewouldalsoliketomentionthatwehaveexperiencedthatsomeofyourcustomersarenotvery
promptinpayingtheirdues,andasyoucertainlyunderstand,wearesufferingfromthis.

Untilthisdaywehaveliberallypaidthecommissiontoyouandwecertainlyintendtodosoalsoin
thefuture.However,wewouldsuggestthatthefollowingpracticesshouldbeintroduced:
1.AllnewcustomersshouldpaybyLetterofCredit,andtheestablishedslowpayersshouldalsobe
confrontedwiththisnewpolicy,untilwegettoknowthembetter.
2.Wewillnottransferanycommissiononsalesmadeuntilwereceivepaymentfromourcustomers.

Itrustyouunderstandthisandlookforwardtohearingfromyouinthenearfuture.

Bestregards,

Mark

The response was not very pleasant:


From: Anapoli@lucia.it
Time: 06.11.2014, at 1456

To:
Re:

msal@Aurora Light.no
Late payment

Mark
Referenceismadetoyourmailsome20minutesago,andcaninformyouthatIdon'tseehowIcan
workundertheconditionsstatedinthemail.IthoughtthatIhadtodowithprofessionalbusiness
people,butyoursuggestionsoncommissionpaymentandL/Csuggesttomethatwewillhave
problemsingettingalongindoingbusinessinthefuture.

IwillthereforebyDecember1ofthisyear,endourrelationshipandwillrequirethatyoupayafeeof
600.000Euroinindemnities.

AntoniodiNapoli

This was not nice music in anybody's ear, and Mrs. Sunhill concluded her intermezzo with
Mark Salsbury by calling the management team for a meeting to discuss the situation. She
introduced the issues as follows:

"Gentlemen, we have tried for one year to enter two export markets, with so far - I dear say very meager results. Off course we are newcomers, but what we now are into exceeds any
9

expectation of bad luck. The efforts we have put into this misadventure, runs up to a balance
of at least one and a half million NOK in the UK and outstanding debts of at least two and a
half millions in Italy, plus of course the indemnity hanging over us from Antonio. If this was
not enough, I'm afraid to tell you that our business in Norway has been suffering from this.
We have paid too much attention to our situation in our new markets and opportunities in
Norway have been left behind. I think time has come to look at our strategic position and
reassess the whole investment. This should be done, I think, before we discuss how to proceed
with Antonio and our British "friends" in the short term. I open the floor for comments.

10

Case 2: Yara International


by Prof. Carl Arthur Solberg, BI Norwegian School of Management, Oslo in cooperation with
Mr. Egil Hogna, Vice president Downstream, at Yara International, Oslo.

Note: this case has been developed for class discussion in international marketing and
management courses. Although the case describes a real life situation, certain facts have been
changed in order to conceal critical information. This does not however essentially alter the
issues raised in the case. For background information about Yara, please visit their home
page www.yara.com

NB! It is not permitted to contact the company or its employees when solving this case.

It had been a demanding week for Mr. Egil Hogna, Senior Vice President Downstream at
Yara International ASA. He had been travelling across Latin America visiting four countries
in six days and was now heading back home to the Oslo headquarters of the worlds largest
fertilizer company. This was his third trip to Latin America over the last four months since he
took over the job as SVP Downstream and he realised that they now had come to a crossroads on their market presence in Colombia. Mexico, Guatemala and also Ecuador were an
easy ride compared to Colombia. There they had already established a local presence through
their own sales office, and the visit there was more of a courtesy kind.

The story was however quite different in Colombia. Senr Cesare Gonzales, their local and most would say - very loyal and devoted distributor since the last 23 years was utterly
opposed to any of the solutions suggested by Yara to the dilemma that they were confronted
with. He could still hear the resounding mantra given by Mr. Gonzales: You are the
producers we are the marketers. He was so frustratingly stubborn and single minded You are the producers we are the marketers and Mr. Hogna slowly developed a sense of
antipathy for the guy they all worshipped only a couple of years back. Sitting back in the
business lounge at the Baranquilla International Airport, Ernesto Cortissoz, recollecting the
discussions over dinner the night before, he realised that he was about to change his mind
about their presence in Colombia, but that he would have a hard time convincing some of his
colleagues back in Norway of the necessity to shift to another operation mode in this
11

important market. He knew that at the Monday meeting next week he needed to persuade a
lot of people who were staunch supporters of Mr. Gonzales and of the idea of continuing with
him as their sole distributor in Colombia. Mr. Hogna was quite adamant that something had
to be changed, but he was still worried about the consequences and he was unsure of how to
tackle the marketing task in the wake of an indispensable and - he hoped - imminent break
out.

It was not easy. A lot was at stake. In fact, Colombia had over the last two decades evolved
into one of the most important markets for NPK fertiliser from their Porsgrunn plant in
Norway, taking about 10% of its total production of some 2 million tons of NPK and Mr.
Gonzales had been the key architect behind the success. Only China and Scandinavia were
larger markets for the Porsgrunn plant. You know Egil the local plant manager, Mr. Ola
Earthgood, had insisted before he left, we risk a 10% loss of our NPK output and that
represents a turnover of some USD 80 million. Were gonna have a hard time to find other
markets to offset such a loss, and in the long run we could jeopardise the viability of the plant
itself. It will take a nerve to challenge Mr Gonzales bearing this in mind..... And he was of
course right in that the profitability of the plant hinges on its utilisation rate and, as to make
matters worse, that the 2008-2009 financial crisis had made a big bite into both sales and
profits. Yara downstream activities were particularly hard hit by the crisis. For instance in
Latin America sales in 2009 fell one third from the year before a combined effect of lower
prices and lower volumes.

Only a few years earlier they were reluctantly accepting things as they were. Mr. Gonzales
had through his firm Ferticol SA developed Yara to be one of the major players in the
Colombian market achieving a market share of some 35-40%. His dealer network of some 80
dealers was well located in central agricultural regions of the country and represented the
upper crust of the industry. Their first contact originated back in 1986 at a trade fair in
Madrid, were Mr. Gonzales expressed interest in a presentation held by a Yara (then Norsk
Hydro1) agrochemical engineer. He was particularly impressed by the reported crop yields
provided by the Yara NPK prills. Actually, their product was in many ways different from
those of their main competitors at the time as they were producing compounds as opposed
the more generally used blends. One of the key differences between the two lies basically in

Yara International AS was spun off from Norsk Hydro in 2004. For the sake of simplicity we will in the
following use Yara as the name of the company throughout the rest of the narrative, even though Norsk Hydro
was the name of the company before 2004.

12

the fact that in the Yara product the three main nutrients of the fertiliser Nitrogen (N),
Phosphorus (P) and Potassium (K) were all present in each prill with equal parts in the
whole batch, whereas most of the competitors supplied a blend where the components
randomly were present with varying degree of concentration. Hence the yield was superior
with the Yara product and a lower dosage could be used than with that of the competitors. Mr.
Gonzales had indeed experienced the variance of fertiliser yields from his time in the
horticultural industry in Colombia. This experience would be a perfect background for him to
represent Yara in his country. A year later they were in business, at first only on an individual
purchase contract basis, but it evolved with time into a close distributorship relation, where he
de facto was their sole distributor in Colombia.

Their relationship was built on trust gained through a professional handling of business
matters and an evolving friendship between Mr. Gonzales and key personnel at Yara. Yara
was delivering good products at a slightly higher price than the general market price level for
blends, but Mr. Gonzales was able to communicate the higher product quality to the market
and therefore rapidly gained the commitment of the best dealers in Colombia. If there was a
problem in the delivery Yara would instantly give him accurate information; if he expressed
the need for extended credit terms it was granted at times it could go well beyond the
normal 90 days. Certainly, the then controller at the Porsgrunn plant, Ms. Peggy Credilane,
was at first not happy with this, but the upside was a loyal distributor and also a more rational
logistics solution (larger and fewer shipments), and if Yara needed to push product, Mr.
Gonzales would have available warehouse space as long as the credit terms were generous
enough.

However, the profitability of the Colombian operations was not among the best in the Yara
system rather it was ranking as a middle of the ground performer in their portfolio. If truth
be told, top management of Yara was already back in 1998-99 starting to ask questions about
the Return On Capital Employed levels of the Colombian venture. True, Mr. Gonzales had
managed to get a good grasp of the market, reaching almost 40% market share; true, the
Colombian market constituted a significant addition to the capacity utilisation of the
Porsgrunn plant, thereby securing essential scale economies and its competitiveness.
Nevertheless, some key people at headquarters in Oslo started to ask impertinent questions
about the potential for improved returns. First the then President Mr. Thorleif Enger
expressed concerns about the Colombian venture not yielding better results even after fifteen
years of operation: Yes - we do have a comfortable market position in Colombia, but things
have not really moved the last couple of years and our volumes and returns are not showing
any sign of improvement. And as the present CEO, Jrgen Ole Haslestad, was professing:

13

We need to get closer to the customer in order to understand what is happening in the market
and how the customers think. To that effect they established in 2001 a liaison office in
Bogot in order to get a better grasp of the market. Two people, one from headquarters in
Oslo and one local were hired to both overlook the market operations and to spot new market
opportunities in Colombia and beyond. This was not well viewed by Mr. Gonzales as he
persistently was telling his mantra (You are the producer I am the marketer), however he
acquiesced and acknowledged that as long as he was in command of the operative marketing
and sales programme he was not to be challenged by headquarters.

Concurrently with the decision to set up a liaison office, Yara eventually formalised the
relationships with Ferticol SA, as the uncertainty concerning the future was increasingly
worrying Yara management. Mr. Gonzales saw this as a clear advantage in that he secured his
position in a potential termination conflict. In fact with no distributorship contract until that
date, he believed that he still was to be regarded an agent by Colombian Code of Commerce.
This was only partly true, since he de facto was their distributor, buying and taking title to the
product rather than as in the agency contract acting on behalf of the principal, receiving a
commission or a fee. So for severance payment accruing to the agent, this was indeed a point
of uncertainty, since agent he was not. They settled for a severance payment of 1 million USD
in case of termination, whatever the cause of the contract cessation by Yara. At the same time
they also formalised the producer-marketer role distribution, so as to assure Mr. Gonzales of
his position in the value chain.

A year later in late 2002 - the expat head of the Bogot office, Mr. Ole Clerck, reported back
to headquarters that some of Ferticols local dealers expressed concern about being financially
squeezed and that some of them had been forced into bankruptcy by Mr. Gonzales. This was
possibly not a big surprise as the whole world was in financial disarray in the wake of the
bursting of the dot.com bubble that year. But it raised some eyebrows at headquarters when
they learnt that the credit line offered by Mr. Gonzales was only 30 days, whereas Ferticol was
often given more than 180 by Yara! It was only after they bought Kemira OYs fertiliser
business in 2007 that their suspicion was given real substance . In fact Kemira Growhow as
they now where labelled, had sales offices both in Colombia and Ecuador, and they reported
much higher returns than Yara in this latters relationship with Ferticol, and that came at much
lower volumes and only after 6-7 years of operation. It appeared that Ferticol not only
squeezed the dealers on credit terms, but also on price. So on 100 USD in the market the
dealers would typically only have a margin of some 15%, and Ferticol reaping the bulk of the
margin of some 30%, leaving 55% to Yara. This equation was quite different in the Kemira

14

case: roughly 20% at the dealer level, 20% at the local sales office level and 60% at producer
level.

Discussing the matter with Mr. Clerck during his last visit to Colombia, Mr. Hogna asked how
this could be: I mean, how can Cesare sit back with those profit margins at the expense of his
dealers, whereas most of the competition is operating with much lower margins? Mr. Clerck
offered the following explanation: You know Egil, Cesare has been very successful in
building an image of being the industry leader in Colombia. He has used our logo for what it
is worth: Yara and the Viking ship are basically seen as a household, local brand. And in
support of this Ferticol has over the years invested in a very competent sales force, with great
product knowledge and with frequent and close relations with their dealer network. And
remember, he added, Ferticol also has a wide product range, offering other products than
just ours, so many of their dealers have developed a certain dependence on Ferticol. Also
and lets not forget that Cesare has grown into an important figure locally in Baranquilla, not
that I make any allusion to any wrongdoing, but of course, when you are centrally placed in
the industry network, you find most of the time ways to improve your situation..... That was
indeed true: Mr. Hogna recalled the occasional receptions and cocktail parties held by Mr.
Gonzales at his residence outside Baranquilla, where he had the chance to meet local
figureheads and also some local horticultural leaders. These were useful inputs in his
formation of the total picture of the marketing situation. And indeed, at these occasions he
also got the opportunity to experience Mr. Gonzales devotion to Yara: in the middle of the
pear shaped swimming pool a mosaic blue and white Yara Viking ship gleamed from the
bottom. There was no doubt where his loyalties were....

Eventually, after years of hesitation and internal deliberations, in early 2009 Mr. Jrgen Ole
Haslestad suggested a solution to the dilemma: a joint venture initially to be owned 49% by
Yara and 51% by Ferticol, but with Yara to take a majority ownership after four years. They
also offered an unbalanced distribution of the dividend from the JV the four first years:
Ferticol 65%/Yara 35%. This proposal was advanced after several attempts had been made to
more closely monitor Ferticols marketing activities. But to no avail: Mr. Gonzales now 76
years old was the big boss, his producer-marketer mantra was constantly repeated and he
was uninterested in whatever change was suggested in the operating conditions of their
relationship. Two of his sons were involved in the discussions, but they were only regarded as
apprentices and were despite their age: 42 and 39 years - not given any decision making role
in the firm.

15

Back in Norway, Monday morning, 09:00 oclock meeting with top management of his
department. Mr. Hogna still a bit jet lagged felt well prepared for the discussion. Present: the
regional sales manager Latin America, Ms. Elfrida Rodrigues, Mr. Earthgood, and Chief
Legal Officer Mr. Trygve Faksvaag.

Mr. Hogna opened the meeting with a warm Good morning everyone. I hope that you have
had time to consider the facts of the situation in Colombia. It is not a straight forward
decision to take, and we need to make sure that all the aspects of the situation are properly
evaluated before we decide what to do. As far as I am concerned we have two major
alternatives: 1) stay with our present distributor, Ferticol, or 2) move all our importing
activities to the Kemira Growhow sales office, thereby riding on our market experience
acquired through their network and their operations in the market. In this latter case, we will
most likely change the name of our subsidiary to Yara Colombia Ltda. We may of course
also set up a totally new Yara sales office and let the Kemira brand sail on its own each
brand then will operate with their own distribution network and their own marketing strategy,
independently and side by side. This third solution will however meet resistance in the board
of directors, as the sentiment there is to rationalise rather than setting up double sets of sales
units abroad. If we continue with Ferticol, we need to try and persuade them to take a more
customer friendly stance toward their dealers. We all know that these lately have been under
financial pressure, both concerning credits and price and I think that with some patience and
some pressure from our side we may in the longer term succeed in that endeavour.

Remember that Mr. Gonzales is now soon 80, and his sons seem to be more willing to discuss
viable solutions with us than the old man, but we dont really know how long time it will
take before they will be able to take the helm. And we dont know how competent they are.
Ola Earthgood was the staunchest advocate of the status quo in the group and he reminded his
colleagues of the vulnerability of the Porsgrunn plant should the volumes drop. He has been
serving us pretty well after all. I agree that his pricing policies are dubious, and that our
margins could be better in that market, but on the other hand losing ten percent of our total
volume is much more serious. Even though we may take advantage of the Kemira Growhow
dealer network, that network is much weaker compared to our existing distribution. Not only
is it much smaller with their 35 dealers, but also it mostly consists of second tier dealers
compared to Ferticols structure. Elfrida Rodrigues filled in: and not only that, she said,
but rumours have it that the Russians are actively searching for new outlets in South
16

America, and if we cease our relationship with Senr Gonzales I am convinced that the two
will be in business in the course of less than one week!

The Russian fertiliser company, Acron - second only to Yara in terms of compound NPK
output, was one of Yaras main competitors in world markets. It was generally known that
they were about to review their own presence in Colombia, as they up till this date only had
occasional deliveries through direct sales to some of the larger dealers around Bogot based
on the dealers attempt to pressure Ferticol on price. Their product quality was, however, not
as good as Yaras, but they were indeed a serious player in the market. Mr. Hogna thought by
himself Well so much for Cesares loyalty.... Now that we plan to set up our own sales
unit the quality seems to be more than good enough, even for him .... He will have a hard
time biting his own words. As a matter of fact Cesare had always been dismissing Acron as
low quality supplier, and had gone to length to communicate this viewpoint to his dealers.
Mr. Hogna said: I agree that we are vulnerable since we do not have the direct link to the
dealers or to the end users. But that is one of the main problems that we want to address:
customer contact. And furthermore, our brand name is well known in the market, and if I am
not mistaken, a great deal of these guys would rather welcome us as their main supplier
instead of Ferticol. Cesares tough policy towards many of the dealers has given him a
reputation in the market that probably will help us retain a large part of them. And given a
properly conducted marketing campaign, I think we will be able to increase our market share
in the course of a couple of years.

This may be true, but we dont really know Ms. Rodrigues countered. One problem that
we are sure to encounter is the fact that we are culturally extremely far from Colombia. Of
course daily etiquette is relatively easy to learn even though there are lots of pitfalls even
here, but the mechanisms that follow in the wake of hierarchical rules and social network ties,
are something far less permeable. And these things are extremely important in B2B relations.
As far as I am concerned this will prevent us from an easy ride into the market. And I can say
this, Egil, since I am half Spanish, speak the language and feel that there are many things
going on there that I cannot fathom! Using a local figure to head the subsidiary is of course a
way around, but then again, we will still struggle with the problem of understanding and
interpreting the information that he might give us! It took us a long time to understand the
way in which Cesare was operating I say no more!

17

This was not the first time Mr. Hogna heard the cultural argument, and of course he was
aware of the problems: It is certainly true that we are way away from Colombia also in
cultural terms. And we have heard rumours of .. ehem... should we call it irregular business
practices. That has however not prevented the Kemira people to successfully penetrate the
market, and their top guy in Colombia was a Finnish expat. I dont think that we are any
worse than the Finns he said. To what Mr. Earthgood retorted Success is relative : the
Kemira Growhow brand sells possibly a fifth of our volume. Yes Ola, we all know that,
Mr. Hogna resignedly replied, but Kemira entered the market only ten years ago, in a
situation where we were already the market leaders and had captured the best dealers. And to
be true, I think that precisely this year is a good time to do the switch, since Colombia just
recently has entered into a new deal with the EU, which I am sure that will have an effect on
their agribusiness exports and thus boost the fertiliser market.

Mr. Faksvaag had been listening to the discussion, and many of the arguments were known to
him. However, he warned against a problem that was so far not given so much attention.
We dont know for sure, he said, but I have heard rumours of Mr. Gonzales registering a
trade mark that is profiling a Viking ship. Granted it has a somewhat different shape than our
logo, but possibly still similar enough to potentially confuse some of our end users when they
see the two products together. We need to look more seriously into that, and consider what
possible legal actions to take. I dont say that this should preclude any switch to fully owned
operations, but it might affect the way in which well approach our marketing in the wake of a
break-up.

The meeting was drawing towards the end and Mr. Hogna concluded: Well we all know
that we have different views on the situation. I will now, together with Elfrida and Trygve,
set up a PM to top management, where we discuss these matters more in detail, and outline
the consequences of the two alternatives, particularly with a view to the local marketing
effort. Thank you for your contributions.

18

Case 3: Ronstan sailing around the world


By A. Murray , Welch, Arambewela. ( 2011)

Revised twice by Lawrence S. Welch and Runar Framnes for use at BI Norwegian Business
School, last update February 2015.

NB! It is not permitted to contact the company or its employees when solving this case.

Ronstan International is an Australian company specialising in the production of high quality


fittings for yachts; and architectural products (various stainless steel applications such as
structural and aesthetic cables and rods, predominantly in the infrastructure and building
sector). For its type of marine hardware, Ronstan is the leading manufacturer in Australia and
second or third internationally, with about 10% of the global market after Harken in the
U.S.A. and Lewmar in the U.K., each producing a similar range of marine hardware. It has
been a successful exporter from Australia over many years, winning a number of government
sponsored export awards in recognition of its achievements. Ronstan was the 2009 winner of
the inaugural Australian marine industry export award. International sales in 1987/88 were
$2.75 million (AUD), which represented 30% of the company's total sales. Its overall sales
increased to about 15m in 1994, 27m in 2001, and +35m in 2011 - about 70% being foreign
sales. Ronstan has a strong identification with Australian participation in international
yachting contests such as the America's Cup and the Olympics. In 2010, Ronstan moved from
its original site into a specially built factory and office facility in the Melbourne suburb of
Braeside.

In 2012, Ronstan had about 175 employees in total. Turnover of staff is very low, team
atmosphere is strong, and the management team is stable its turnover is zero. Forty eight
of the current staff have been with the company for 25 years or longer. To build a cohesive
workforce, the new facility has a large, well equipped canteen with an outside eating area;
staff are not permitted to eat at their desks (a rule that applied to everyone, including the
Managing Director). This encourages intermingling of factory, office and managerial
employees. An indication of the companys ethos is the listing of all employees by name in its
official history published in 2003. Ronstan is currently a private company, with the bulk of
19

equity held by its managers (see Table 1 for the changes in the companys ownership over the
years). The current managing director, Alistair Murray, is a part of the shareholding group and
has been heavily involved in the development of Ronstans international operations: earlier as
export manager and later as general manager of Ronstan (US), and then Managing Director.
The Board of Directors of the company is composed of 4 people: a non-executive Chair, the
managing director and two other Ronstan executives (see organizational chart).

Table 1: Ownership changes


Year Event
1977

Ronstan acquired by Australian Reinforced Concrete

1980

ARC acquired by Humes Industries

1981

Humes Industries acquires Fico Marine, Ronstans main Australian competitor and merges it
with Ronstan

1985

Fortuna, a New Zealand conglomerate, acquires Ronstan from Humes Industries. Fortuna
had also acquired RC Marine, a New Zealand producer of marine hardware

1990

Fortuna goes into receivership, although Ronstan is trading profitably

1991

Syndicate of investors buys Ronstan, 10% held by company executives

1995

Ronstan acquired by UK company, Chemring

1999

Management buyout (buyback!) of Ronstan: ownership in the hands of 16 people, 14 of whom


work for Ronstan

2007

Ronstan owned by a private syndicate of 18 people, the majority of whom had participated in
the 1999 buy-out.

2012

The syndicate now comprises 15 people, with Alistair Murray still as the Managing Director

While there were steady increases in profit in the 10 years to 2007, the company has since
experienced a decline in total sales of about 20 per cent, attributed to the global financial
crisis and the strengthening of the Australian dollar. From late 2008 to 2011 the Australian
dollar rose by about 60%, however, during 2012-2014 the strengthening of the USD made the
AUD fall approx. 25% and restored a large part of Ronstans currency competitiveness.
Ronstan mainly sells into the marine products after-market (about 80%). About 20% of total
marine product sales are represented by the OEM market. Had the company been relying only
on boat builders, the downturn in the marine industry would have had serious consequences:
in 2009 sales of boats were down about 50%. The increased competitiveness and the high
Australian dollar made Ronstans home market attractive to their major competitor Harken
which was prepared to offer their products at prices 20 to 25% lower than Ronstan. In the
three years up to 2011, modest profits had been achieved as a result of significant cost cutting
20

including a reduction in staff numbers (25 employees), but since 2012 the tide has turned and
sales picking up. Exports are generally priced in Australian dollars.

The domestic phase origin and growth


The company was started as a backyard boat building project in 1953 by two partners, RON
Allatt and STAN Lenepveu in the Melbourne bayside suburb of Sandringham. Production was
mainly wooden hulled yachts but some stainless steel yacht fittings were also manufactured to
satisfy their own requirements and also the growing requirements of local yachtsmen. In
1960, a retail showroom, the Ronstan Marine Centre, was established.

The decision to leave the boat-building field and concentrate entirely on the manufacture of
fittings was taken in 1961. To remain as boat builders the company needed to convert from
wood to fibreglass construction due to the rise in popularity of this material. The capital
required was not forthcoming due to the government's credit squeeze at the time, but
sufficient capital for tooling and machines to make marine hardware on a production basis
could be raised in conjunction with the sale of the Marine Centre. This ability to mass produce
fittings gave Ronstan a significant advantage over the competition and in particular its major
Australian competitor Fico.

The off shore phase getting their feet wet


Up to this time Ronstan had given no particular consideration to the possibility of export but
in 1965 an order was received from Canada from a Canadian airline pilot who had become
familiar with the products on visits to Australia and who saw a potential for them in the
Canadian market. The trial consignment proved successful and the Canadian became the first
overseas distributor for Ronstan. The company realised that further expansion would be
greatly limited if it were to rely solely on the Australian market. Also the market was highly
seasonal which resulted in the need to retrench staff in winter, a procedure which the
company disliked. The opportunity to establish a distributorship in the U.S.A. arose through
an order from an American of Australian origin who was in contact with the Canadian
distributor.

Over a period of time the exports to these two markets grew on an ad hoc basis. Though
responsive to exporting, the domestic market was Ronstans primary concern. The lack of key
21

personnel with relevant international marketing experience at this time made it reluctant to
commit to servicing distant markets of which it had little knowledge. Consequently, no formal
plans were made to increase penetration of these markets or to attempt to enter other export
markets. However the Australian government's support for exports with export promotion
grants and market advisory services for which Ronstan qualified as a new exporter resulted in
a change of thinking. The success of more committed export efforts led, in 1970, to its first
export award. A further influential factor in setting Ronstan's course was the success of the
exporting activities of Fico, its main Australian competitor. Eventually, Fico was taken over
and merged into Ronstan.

The American experience


From the time of establishing the distributor in the U.S.A. in 1966, Ronstan was quite happy
with the progress made there. Sales grew steadily, mainly on the west coast, but in 1977,
without warning, sales suddenly dropped by 50% following strengthening of the Australian
dollar. As the distributor was independent, the company had neither control over the internal
working of the agency nor service to the trade, and therefore lacked the ability to deal with
problems that arose. Further, it had no real knowledge of the distribution system in America,
having relied entirely on the distributor to market the products there. At this stage Ronstan
was faced with the decision of whether to find an alternative distributor or to set up a
company owned and staffed operation. As Ronstan's marketing manager at the time said, "It is
difficult to recover or remedy the situation as you do not actually know the people who have
been buying your product from the distributor". The American market for marine hardware of
the type made by Ronstan was substantial (annual retail sales exceeding U.S. $60 million) and
competition was intense. Distributors required a stock turn rate of 4 to 5 times annually
otherwise they dropped the product. High standards of product, price, service and delivery
were required to maintain sales.

In view of the potential of the U.S. market and the success of the company's products up to
this time, it was decided to incorporate Ronstan in the U.S.A., setting up a subsidiary in 1978
with warehouse facilities and a comprehensive inventory, hiring staff and developing a total
service and promotion programme. The appointment of American sales staff who had a deep
knowledge of the nature and subtleties of the market was effective in increasing sales. These
sales representatives operated in a different manner from their counterparts in Australia, not

22

being actual employees of the company but representing several companies and selling on a
commission basis. It was found that the more time that could be spent with them in imparting
product knowledge the harder they would sell for the company.

This policy produced such successful results that in 1980 a second warehouse facility was
opened in California, which gave the company a presence on the west coast as well as the east
coast, the first warehouse having been established at Clearwater in Florida. Sales in the
U.S.A. continued to grow at a satisfactory rate, increasing from $1.53 million in 1982/83 to
$1.91 million in 1984/85, which represented 25% of total sales worldwide, until the fall in the
Australian dollar between June 1984 and June 1985 caused distribution costs in Australian
dollar terms to escalate sharply. As a result, Ronstan's parent at the time felt that the higher
distribution costs were unwarranted and was uncomfortable about involvement in offshore
investments. As a result, the two warehouses were sold to the former manager of Ronstan
USA and the American operation reverted to a distributor basis.

Developing other markets


Following its early success in the Canadian and American markets Ronstan began to
investigate the possibilities of other overseas markets, taking stands at major international
boat shows in Europe such as Hamburg, London and Genoa as well as exhibiting at the major
American boat shows in Chicago, Miami and Long Beach in California. The initial purpose of
these exhibitions was to attract interested parties who would be suitable for appointment as
distributors in the various countries, on the principle of one distributor per country.
Subsequent exhibitions were used to support Ronstan's international marketing effort. In 1970
Ronstan appointed its first European distributor in Switzerland, a market where there was no
local manufacture of similar products. This lack of local competition enabled Ronstan to
achieve a 50% share of the Swiss market whereas in other countries, where there are local
manufacturers, market penetration has been significantly lower.

A somewhat extreme example has been the French market, penetration of which has been
difficult for Ronstan. Indifferent performance from earlier distributors resulted in a less than
1% market share in the late 1980s. The French manufacturers held 95% of the market. These
manufacturers on the other hand made no international sales. To try and rectify this situation
Ronstan exhibited at the Paris International Boat Show in 1987 for the first time, which

23

resulted in interest being shown by four or five different companies. One of the interested
locals was chosen as a distributor for Ronstan, but after difficulties for about 2 years, a new
distributor was tried and sales began to take off. By 2010 France had become one of the
more important markets in Europe.

While the US has been the main market for Ronstan over many years, the position has been
changing in recent times, so that now Europe is roughly equivalent to the US. In Europe, key
markets are the UK, France, Germany, Denmark, Italy and the Netherlands. New Zealand has
been maintained as an important market for Ronstan products. While early penetration of the
Japanese market resulted in steadily increasing sales of marine hardware, this has stalled in
recent times. Asia in general has not proven to be a rewarding arena for Ronstans marketing
efforts on the marine side. The managing director commented that for a given amount of
effort there has not been the same return in Asia. The greater potential is definitely in the
architectural business. The marketing effort in Asia recently has been focused on
architectural products. As well, it has until recently achieved particular success exporting to
China a range of sophisticated components used in the manufacture of kite boards for sale in
world markets.

Ronstan has, like most other companies coming from a high cost country, experienced
copying and price pressure from low cost countries, making their management rethink future
position and strategy.

Ronstans MD commented in an interview in 2011: We have less and less of a commitment


to being a manufacturer. Were a marketer and ideas and solutions provider. We are not
committed to making things so if I could source anything that we could make for better quality
and a lower price, then we would do it. I dont want to commit to making something
inefficiently, and buying something for less is better than making something for more. And
with a high dollar Australian dollar we are going to be upgrading our sourcing activities
- we are going to be looking harder, challenging ourselves more because if we dont, then
were going to be beaten by the competition that does.

24

Products
The marine products market in which Ronstan operates is highly responsive to product
performance (racing and safety). The association with yacht racing has helped to enhance the
companys image as a producer of high performance equipment, and its products are sold at
premium prices. Ronstan has always had a strong emphasis on quality and been heavily
involved in product development. The MD has commented that product development,
continuous innovation, has been a cornerstone for us. Ronstan has sought to be at the leading
edge of technology, making a significant commitment to R&D. A major recent development
has been the patented Orbit range of ultra-light weight but high performance blocks which
won an Australian design award in May 2007. The R&D expenditure on this range was about
AUD $3 million. The new product was not only an improvement on the previous range but its
revolutionary design allowed significant cost reductions that resulted in a 25% reduction in
the equivalent retail price. Three new patents have been applied for in relation to the new
Orbit block series. The Ronstan trademark has been registered in all markets.

In early 2005 Ronstan began supplying pulley and block systems for kiteboards (e.g. for kite
surfing) to manufacturers in China they are the main manufacturers globally of kiteboards.
The systems allow greater control and safety of kite boards, particularly in large wind ranges.
This was so successful that Ronstan became the largest supplier globally of such kiteboard
systems in 2007. By 2011, volumes decreased, due to the manufacturers changes: they
simplified the boards, taking the blocks out of some of the kite boards so there is less need for
the Ronstan parts. The business is still going, but not at the same volume.

In the 1990s, Ronstan diversified its product range into the architectural/industrial area,
utilising its expertise in stainless steel technology (eg cables). Its products have been used in a
wide range of applications, such as building sites at Sydneys Darling Harbour, on American
jets during the Gulf War, and in over 60 cable-stayed suspension bridges worldwide since
1976. The MD explains that the architectural business is about selling solutions: We now
design projects from the ground up. The latest example is the Taronga Zoo in Sydney. The
chimpanzee enclosure is pretty much designed by Ronstan the mesh and cables and all sorts
of things so thats a landmark project for us.

25

The architectural products side of the business has been very successful in Australia: If an
architect thinks stainless steel cabling, it is Ronstan. We are the main player., and
increasingly so in other countries. According the MD, in 2011 this line of the business made
up about 25% of total sales. The main market is the domestic market.

We have the people to provide solutions domestically and are developing the same
capabilities in the U.S. now. Success is a long way off elsewhere we are only just getting
started now. Theyre the only two markets where were up and running. It is going well this
year, making up for what we are losing on the marine side so its been a good diversification
for us.

During the 1990s Ronstan expanded into importing activities, developing a portfolio of
products for which it acted as distributor, for example, lifejackets from New Zealand, and
rope from Austria: FSE Robline line from Austria, which is the best yachting rope in the
world, we have only had that for a few years as a distributor and they are so pleased with the
job we did that they have given it to us in America as well. We are now their American,
Australian and New Zealand distributors. Overall, the importing business is worth about 2530% (up from 15% in 2001). Apart from these imports, a very small proportion of
components (about 2%) is produced for Ronstan in China. In 2008, Ronstan entered into an
arrangement to sell a range of Puma sailing clothing. After an initial promising start in the
US, and to a lesser extent in the UK and Australia, Ronstan decided to drop this arrangement.
It was considered that Puma was not adequately developing its sailing product range, or
supporting Ronstans sales effort.

Foreign Acquisitions and Subsidiaries


In a change of strategy, Ronstan undertook acquisitions in 2001 and 2010 as way of
expanding into new, but related, product and market areas. Both were located in Denmark.
The 2001 acquisition, Frederiksen Boat Fittings, is a manufacturer of high quality hardware
for large racing sailboats with a worldwide reputation for making the worlds best big blocks .
It complemented Ronstans product range and lifted its overall global profile in the field of
marine hardware. . On taking over Frederiksen, there was considerable discussion within the
management group about whether to retain the Frederiksen brand, given its high profile and
reputation within the global market. However, it was decided to switch to Ronstan from the

26

outset. Now trading as Ronstan Denmark, it continues to manufacture its specialised product
range.

In October of 2010, Ronstan acquired Frederik Andersens Maskinfabrikk. Again, the


company will be renamed as Ronstan, but the Andersen brand will be retained. As the MD
explained, many years ago we thought of making their winches under licence. It is a very
good marriage. The number two brand in deck hardware is probably us and we didnt make
winches and the number three brand for winches in the world is Andersen but they dont have
deck hardware. Another advantage is both Danish acquisitions were located in the same
town. Were going to shut down Ronstan [the former Fredriksen] and move it into Andersen
because Andersens big enough to absorb both. The current MD of Ronstan Denmark is now
in charge of both operations. He is a Danish national and a shareholder. The original Danish
distributor, Palby Marine, remains as distributor to the after-market.

As well as its subsidiaries in Denmark, Ronstan operates through subsidiaries in the U.K. and
the U.S. In 2002, Ronstan set up a sales office and warehouse in the UK. Two of the Danish
staff were moved into this operation, and were joined by two of the staff from the original UK
distributor, Bainbridge International. The U.S. subsidiary (Ronstan International) handles
Ronstans business in the U.S, its largest foreign market. Its largest customer is West Marine,
the largest retailer of marine products in the US and Canada, with about 300 stores. Ronstan is
its No. 2 brand of yacht fittings. West Marine takes stock from the US subsidiary as well as
direct exports from Australia. From 1985 to 1992, Ronstan was represented in the US by an
independent distributor. As to why the company set up its own subsidiary in 1992, the
managing director explained:

Sales had started to slide and we were not doing [as] wellIt was the realisation that
nobody is as dedicated as yourself. That is what it really came down to ... We decided to
commit ourselves to the US market and the big commitment was putting me [Ronstans export
manager at the time] there. We incorporated and ended up buying his [the independent
distributors] business out and taking on his employees.

The current managing director of Ronstan spent four years in the US, from 1992-1996, setting
up the subsidiary and re-launching its marketing efforts. Since that time there has been

27

substantial growth in US sales. The US national in charge of the US subsidiary is one of the
15 shareholders that own Ronstan.

Distribution
A critical part of the export success of Ronstan has been its distribution network. It currently
has around 40 distributors, mainly in Europe (including Russia); as well as parts of Asia and
the Pacific islands; Canada, South Africa, Chile, Argentina and the U.S. Overall, with the
Australian base, they provide relatively widespread coverage of the global market for yacht
fittings. It is estimated that Ronstan products are sold into about 50 countries. Twenty of the
distributors have been with Ronstan for more than 20 years. The MD refers to the distributors
as a major strength, even though there are no formal agreements with them only handshake
agreements:

It is amazing the relationship with our agents. Talk about long standing. We have a fantastic
relationship with our distributors. We have some who have been with us for more than 35
years...I mean to stay with them. And we have a lot of success with themWe have spent a
fortune over the years [with them]...bringing them over here [Australia]. We have had a
program for years of bringing distributors over here at our expense. They are our friends, our
allies, our partners. Part of the familyIf we come out with a new product we have people
around the world who can hardly wait to get their hands on it. Without doubt our biggest
strength is our distribution. [Although] if we had lousy products, our distributors would lose
interest, its all part of the package.

The upper management group in Ronstan is heavily involved in foreign sales visits to
distributors, attendance at trade shows, and building and maintaining relationships with
customers. There is a core of 6 of us that travel a lot, and another 14 that swing in and out
of it. The managing director has been spending about 3 months himself on the road but
indicates he would like to reduce that commitment. It is a hard life. He has delegated a lot,
but is still an important face for the company and for many of the key relationships. He
stressed the importance of personal relationships. He added: It is the relationships with the
customers. They want to be dealing with us. It is not just showing your face, it is the market
intelligence, seeing what our competitors are doing, meeting the owners of the businesses,
rather than just dealing with them at the purchasing level, looking at the trends. To some

28

extent, the international travel and visits by other members of the management team are seen
to be part of building a broader set of strong personal relationships building up their
profile.

One of the problems in developing the non-marine side of the business is the existing
distributors of Ronstans marine products. While enthusiastic, even dedicated to marine
products, they have tended to be less inclined to push the architectural side of the business,
which of course requires the opening up of a new customer base, and requires new types of
expertise.

Your task:
Your task in this case is to analyze and discuss the companys approach to distribution. Howe
would you formulate the companys strategic problem? What solution would you use? Would
you change the current distribution strategy? Acting as a management consultant, outline your
recommendations for future international expansion of Ronstans marine division.

Figure 1: Organizational chart

29

Case 4: Orkel what now?


by Runar Framnes and Jon Bingen Sande, BI Norwegian Business School.

Note that some of the information in this case has not been confirmed by the company
(especially concerning internal organization and the details of the agreement between CNH
and Orkel). However, students should assume that all information provided in the case
document is correct, even if they have or find contradicting information elsewhere.

NB! It is not permitted to contact the company or its employees when solving this case.

Company history
Orkel (see www.orkel.no) is one of the many small and medium-sized export firms in
Norway. It is based, with all its activities, at Fannrem in Orkdal community. Orkel was
established 1949 by Johan Gjnnes. He started by purchasing a welder to make toys, such as
tricycles and chair sledges, for neighbors and friends. The firm became involved with
agriculture through the production of bicycle trailers, milk wagons and in 1966 a trailer
for farm tractors. The same year they started building their factory at Fannrem.

Over time, Orkel became a brandname in the market for agricultural equipment, known for its
high quality. More employees were hired and they built a nationwide distribution network.
Orkel started its first export venture in Sweden in the early 1980s, selling feeding cars
(Norwegian: frutlegger).
30

In 1986 they built their first Orkel round baler. The round hay bales opened the world for the
company, and in 1991 they got their first Japanese customers. Orkel export their balers and
compactors to approximately 40 countries around the world.

Products and production


Their current product portfolio includes:

Round balers

Compactors

Trailers for tractors

Motor snowplows

Mowers

AgriNIR forage analyzer (forage= plant material eaten by grazing livestock)

Rakes (for merging and distributing hay)

Orkel is a market leader with several of their products in Norway. They have a particularly
strong position with their trailers for tractors. Trailers, snowplows, mowers, AgriNIR and
rakes are mostly marketed in Norway and not abroad. Their goal is to become Norways
leading specialist on roughage (Norwegian: grovfr).

To realize position as Norways leading specialist on roughage they will in 2015 offer a full
line of grass-related products including mowers and rakes in addition to the round balers. The
round balers are primarily developed for Norwegian conditions, and are used to create round
bales of grass. Orkel emphasizes high feed quality, efficient harvesting and reliability as the
core attributes of their round balers. These attributes help their customers (i.e., farmers) in
improving profitability. Over the years, Orkel has implemented a number of innovations in
their round balers, including weighing systems and the use of broad plastic films to make
more compact and watertight bales. As noted below, while involved in product devlopement,
Orkel does not anymore produce the round balers at Fannrem. Instead the round balers are
produced by the company CNH, and marketed under the Orkel brand.

The new line of mowers and rakes will be produced by a Slovenian producer, SIP, but
marketed under the Orkel brand through Orkel Direkte.

31

The mechanical products are now complemented by the AgriNIR forage analyzer, which is a
portable system for analyzing fresh grass, silage (Norwegain: silofr), wholecrop (Norwegian:
helsd or helgrde), and total mixed ration (Norwegian: fullfr) developed by the Italian
company Dinimica Generale S.p.A. p. (http://www.dinamicagenerale.com/agrinir_analyzer).
The AgriNIR is an expensive suitcase (it costs NOK 200 000), but it can help farmers save
significant costs by analyzing fodder. Farmers will be able to take tests and get results
immediately, instead of waiting one or two weeks for laboratory results. The tests assesses
fodder quality on several important parameters, including dry matter, starch, crude protein,
and fiber. Such analyses help the farmer understand the quality of the inputs, and to determine
how he or she should combine different types of inputs in the livestocks fodder to optimize
production. Thereby it is also possible to prove fodder quality. Orkel believes that the
AgriNIR forage analyzer and their 30 years of experience in round bale production and
development puts them in a strong position in Norway as a specialist on roughage. The
AgriNIR further underlines how Orkel concentrates on helping customers to improve their
bottom line, by not only supplying machines, but also knowledge and solutions more broadly.

The major export product are the round balers and, in particular, the compactors: MP2000,
MC1000 and MC850. For students not acquainted with round baling and compactors, we
recommend the following Wikipedia article as a brief introduction:
http://en.wikipedia.org/wiki/Baler. Orkels youtube and vimeo channels are also illustrative:
https://www.youtube.com/user/orkel100/feed and https://vimeo.com/user2078576. The
following video with the MP2000 Compactor is particularly informative:
https://vimeo.com/66367228. This video provides statements from customers in the UK using
the MP2000 Compactor: https://www.youtube.com/watch?v=bgRSZFje68k.

The compactors are used to compress and create bales of a variety of bulk materials. A chief
difference between the round balers and the compactors is that the compactors handles shorter
materials and are not exclusively used for grass. The compactors reduce the volume of the
bulk materials by 60-70%, which reduces transportation and storage costs. The plastic film
covering the bales prevents moisture from penetrating into and out of the bales, which means
that bales can be stored outdoors. The MP2000 Compactor was originally developed for
compressing maize, but they soon discovered that it could be used to compress a number of
other materials as well. The compactors are therefore currently used for more than 25

32

different types of bulk materials. Example of bulk materials compacted by the Orkel
compactors include:

Waste materials: domestic waste, industrial waste, grape mark, paper/plastic, and auto
fluff.

Agricultural bulk materials: grasses, forage mixes, crimped grain, forage maize, and
manure.

Industrial bulk materials: sugar pulp, compost, peat, and cotton.

According to the UK distributor, K S Baling Ltd (http://www.ksbaling.co.uk/), companies that


have invested in the MP2000 Compactor baler have seen costs plummeting by 40%. Orkel is
currently the worlds only producer of mobile compactors that can be used to compress waste.

See http://www.orkel.no/products/compactors-en-GB/compactors/ for a more detailed


description of the compactors, and the following brochures for information about the MP2000
Compactor: http://www.orkel.no/assets/Produktinformasjon/Compactors/brochure-MP2000agriculture-english.pdf and
http://www.orkel.no/assets/Produktinformasjon/Compactors/brochure-MP2000-industrienglish.pdf.

Markets and demand


Although many of Orkels products are sold in Norway, 80% of their round balers and
compactors are exported. About 50% of the operating income in 2013 were from exports.
Orkels is represented in about 40 countries on 5 continents.

Orkel has experienced increased demand for their products in recent years, in particular the
compactors. For example, recent EU policies aim to minimize the depositing of waste in land
fillings, increase energy recovery, recycling, reuse and prevent waste the creation of waste in
the first stage. As a consequence of these policies Orkel was a few years ago contacted by
customers in Germany to help create solutions for efficient storage, logistics, and use of
waste. Waste materials such as paper, plastics and textiles can be used as fuel, but such use
typically requires storage and transportation of waste.

33

Orkel experiences high demand also in more traditional agricultural markets. For example, in
December 2012 Orkel received a 100 million NOK order from Advanced Machinery
Equipments Inc. (EMEI) in China to deliver 84 baling machines (Orkel MP2000 Compactor
Balor and GP1260 HiT round baler). EMEI will in turn deliver the machines to Shanghai
Dairy Group (SDG), a state-owned cattle feeding company in China with more than 30 000
milk cows. SDG will use the compactors to compress and package maize (i.e., corn) that will
be used as fodder. The principal advantage for them of using Orkels products is that it
maintains fodder quality, which in turn helps SDG in maintaining a high milk production
throughout the year. Orkel will deliver the 84 machine over a two-three year period.

The high demand also gives Orkel challenges. In fact, SDG wanted Orkel to deliver more than
84 machines, but CEO Jarl Gjnnes had to ask for a smaller contract because of capacity
constraints.

Organization
The Orkel system consists of the mother company, Orkel Holding AS, which is controlled by
various members of the Gjnnes family, and six wholly-owned subsidiaries:
1) Orkel AS,
2) Orkel Compaction AS,
3) Gjnnes Eiendom AS,
4) Orkel Direkte AS,
5) Orkel Development AS, and
6) Orkel EU Ltd.

Jarl Gjnnes is the CEO of Orkel Holding AS as well as all the subsidiaries.

Orkel AS and Orkel Compaction AS are the two main income generating subsidiaries. In
Appendix 1 we therefore include the accounting data for only Orkel Holding AS, Orkel AS
and Orkel Compaction AS. Orkel Compaction AS concentrates on production and distribution
of compactors, in particular the MP2000 Compactor. In 2013 the company (Orkel Holding
AS) had and operating income of 200 million NOK. Orkel Compaction AS had operating
income of about 50 million NOK, a sizeable portion of the companys revenues.

34

Export marketing is primarily handled by CEO Jarl Gjnnes and marketing manager Ragnhild
Borchsenius (see also: http://www.orkel.no/contact/sale-office-factory/ for a full overview of
the export marketing and sales organization). Gjnnes has worked in Orkel since he graduated
as a civil engineer within machine technology and product development in 1978. Borchsenius
was hired in 2014 with a background in agriculture. In contrast to the many engineers in the
company, she is trained as an agronomer from NMBU, and has for 21 years been working as
an advicer in Norsk Landbruksrdgivning (Norwegian Agricultural Extension Service) in SrTrndelag. Her specialty is roughage quality, giving her a strong understanding of customer
requirements within the agricultural sectors around the world.

In the past, Orkels export efforts have been characterized by little planning, the use of the
occasional reference, and word of mouth. Hence, the company has spread their activities to
many countries. As noted above, they are currently represented in about 40 countries. Orkels
web-pages list 26 agents and distributors around the world.

In Norway, Orkel sells most of their products through Orkel Direkte. They have a long-term
agreement with Felleskjpet concerning trailers for tractors (www.felleskjopet.no). In
addition they provide after-sales service through 15 service points around the country. See
http://www.orkel.no/kontakt/ for a full overview of employees in the sales, marketing, and
service.

Strategic partnership with CNH


In 2012 Orkel entered a long-term partnership agreement with CNH Global NV
(www.cnhindustrial.com), the world second larges producer of agricultural and construction
equipment (see Appendix 2 for the press release). CNH is a majority owned subsidiary of Fiat
Industrial S.p.A. (FI.MI). It produces and distributes New Holland and Case IH tractors,
combine harvesters, and tools, through more than 11 000 dealers in more than 170 countries,
and had annual sales of 17 billion Euro in 2011.

With this agreement, CNH acquired Orkels technology in the area of fixed chamber round
baler products, and Orkel became CNHs preferred engineering partner for the development
of high performance/heavy duty new generation of fixed chamber round baler products.
However, Orkel would still sell and market round balers and compactors for their own

35

distribution, and they will in addition produce round balers and equipment for round balers for
CNH for a certain period.

When Orkel entered the agreement CNH Orkel had about 40 employees involved in
production of balers (and 70 in total). However, they had to hire more personnel, both within
production and in product development. At the time of entering the agreement with CNH,
they had already hired three engineers and were planning to hire two to three more.

Part of the background for this agreement was that Orkel understood that it would become
increasingly more difficult as a small producer to survive the competition with the large fullline producers like CNH and John Deere. We needed a big brother to continue developing
ourselves and stay competitive Jarl Gjnnes said to the magazine Norsk Landbruk last fall.

Future development
Although Orkel continues to produce round balers, the agreement with CNH means that Orkel
in the near future will cease to produce round balers, also on behalf of CNH. Instead CNH
now produces round balers for Orkel1. They will continue to deliver rolls and shafts to CNH
as well as some specialty equipment that is not standard on the balers from Case IH and New
Holland. The partnership with CNH thereby frees up time and resources in Orkel, so that they
can concentrate on the compactors, including the MP2000 Compactor.

One of the most exiting projects concerns the use of MP2000 Compactor to package
wholecrop (Norwegain: helsd or helgrde). Wholecrop means that grain (Norwegian: korn)
or legumes (Norwegian: belgvekster) are harvested when they have reached the stage of
development when they are cheesy and ripe. In other words, if you squeeze a grain between
your fingers, you will not squeeze out any juice; instead you will see the cheesy white meat
inside the grain. The main difference between wholecrop and grass is that wholecrop contains
starch. Wholecrop consists of the entire plant, including the straw, blades and the grains, for
example from wheat, barley, peas, or beans. The reasons for using wholecrop as fodder is that
it combines fiber-rich roughage, with easily dissolvable starch from the grains, and easily
1

This is how we interpret a recent article in Norsk Landbruk by Jsang, which states that Orkels round balers
are no longer produced at Fannrem and that round balers are now produced on conveyer belts together with
red Case IH balers and yellow New Holland balers. Fannrem is Orkels only manufacturing facility, and Orkel
is clearly still marketing its own round balers. Being able to offer high-quality round balers is also important if
Orkel is to achieve a position in the Norwegian market as the leading roughage specialist.

36

dissolvable proteins from the silage (Norwegian: surfr or silo/silofr). However, there is
little research in Norway on the effects of using wholecrop or on how to package and store the
wholecrop. In 2014 Orkel conducted experiments together with Tine and Norsk
Landbruksrdgivning where the goal was to find out if using a compactor could further
improve fodder quality (compared with traditional means of treating wholecrop). The benefit
of using round bales is that they are more compact so that the fodder becomes less exposed to
air, which in turn should improve fodder quality and efficiency.

Another possibility may be within the bioenergy sector. During a meeting in the fall 2013
with representatives from Mre og Romsdal Biobrensel AS (MRBB)2 the Orkel CEO Jarl
Gjnnes was challenged to think in new directions concerning use of the products and a
possible partnership abroad. The meeting was primarily concerned with cooperation within
the agricultural market, where MRBB together with Swedish and British partners consider
bioenergy projects based on pellets produced from straw from food grains (Polen), rice straw
and cotton plants (Egypt), and sugar cane- and forest plantation waste (South Africa and
Mozambique). Orkels compressing and packaging technology could give significant
logistical cost reductions related to storing and transporting raw materials to the pellets
factories. MRBB has good contacts in Norad, Norfund, and the Ministry of Foreign Affairs,
and they believe it is possible to apply for and win funding from public Norwegian and
Norwegian initiated international programs that will help projects succeed that use and
develop Orkels technology further. Such projects could significantly increase sales of Orkels
machines.

Finally, it should be mentioned that Orkel has secured the rights to distribute the AgriNIR
forage analyzer in all the Nordic countries. As a start, they will market the AgriNIR to
consulting companies like Tine and Norsk Landbruksrdgivning (Norwegian Agricultural
Extension Service) and groups of farms operating together. In addition, they might find
customers among entrepreneurs who want to add an additional service for their customers.

Your task
Your task in this case is to analyze Orkels situation, using both information provided in this
case description as well as information available from other sources, to define the companys

The case author Runar Framnes is Chairman of the Board of Directors in MRBB.

37

strategic problem definition, and to suggest how Orkel should further develop and grow its
international presence. Although Orkel has developed favorably in recent years, they would
not be satisfied with stagnation. Instead they hope to continue to increase revenues and profits
both from domestic and export sales.

A few issues are likely to be of interest when formulating the companys strategic problem
definition and when developing the proposed solution for the company: In what markets and
segments should Orkel operate? How should they balance domestic and export marketing?
How should they be represented in those markets? Should Orkel get involved with more
partners? What products should they concentrate on in their domestic and export markets, and
how should they develop those products further? How should they communicate with their
customers? How should they price their products?

Practical information
Note that it is difficult to find more information about the internal resources and capabilities
of Orkel than already presented in this text. Therefore, we encourage you not to spend time
searching for more information about Orkel than you find in this document and in web-pages
linked to in this document.

However, you should try to obtain more information about Orkels international market
environment. http://faostat3.fao.org/home/E (statistics from the United Nations Food and
Agriculture Organization) is likely a useful resource. There you will find, for example,
information about the production and trade of a wide variety of agricultural products and
machinery. Other sources also exist, and we leave it up to you to judge what sources may be
useful and relevant. It is also a good advice to consider sources that tell you something about
buyer behavior within different markets and segments.

In this case, information gathering from external sources will be more important than in the
other cases. Note, however, that the main point of your task is not to gather information.
Instead, the main point is to get training in using theory to formulate and solve practical
business problems. Therefore, you have to strike a balance between searching for additional
information and analyzing the information that you already have, just like in the real world. If
you lack important information to make decisions, you have to make (realistic) assumptions.

38

References
Below follows references to some of the articles we used when writing this case.
Berge, Helene Cecilie, 2012. Orkel skal produsere CNH presser. Norsk Landbruk. March 9,
2012. URL: http://www.norsklandbruk.no/norsk-landbruk/orkel-skal-produsere-cnh-presser/
Jsang, Dag Idar, 2014. Pakker i helgrnne rundballer. Norsk Landbruk. September 10,
2014. URL: http://www.norsklandbruk.no/nyhet/pakker-helgrode-%E2%80%A8i-rundballer/
Jsang, Dag Idar, 2014. Jordnr innovatr. Norsk Landbruk. September 11, 2014. URL:
http://www.norsklandbruk.no/profilen/jordnaer-innovator/
Suljysen, Espen, 2014. Orkel lanserer komplett graslinje. Norsk Landbruk. August 22,
2014. URL: http://www.norsklandbruk.no/nyhet/orkel-lanserer-komplett-graslinje/

39

Appendix 1: Accounting data


All accounting data have been downloaded from Proff-forvalt. Students who want a
Norwegian-language version of the accounts may log in there (through the BI library) and
download the Norwegian version. All data (except number of employees) are reported in 1000
NOK.
We first report the accounting data for Orkel Holding AS, then the data for two of the
subsidiaries Orkel AS and Orkel Compaction AS (data for other subsidiaries are not
included). All subsidiaries are owned 100% by Orkel Holding AS.

Orkel Holding AS:


Results:
2008
Start date
End date
Total operating
income
Total operating
expenses

2009

2010

2011

2012

2013

01.01.2008 01.01.2009 01.01.2010 01.01.2011 01.01.2012 01.01.2013


31.12.2008 31.12.2009 31.12.2010 31.12.2011 31.12.2012 31.12.2013

140 941

157 320

123 793

147 919

157 167

200 054

128 527

149 060

122 490

144 126

146 940

173 123

Operating profit/loss

12 414

8 259

1 304

3 793

10 228

26 931

Total financial income


Total financial
expenses
Total/net financial
items

1 748

2 145

1 606

1 245

1 496

3 163

5 991

3 533

4 823

4 144

3 900

4 614

-4 243

-1 388

-3 217

-2 899

-2 404

-1 451

Ordinary result
before taxes

8 171

6 872

-1 913

894

7 824

25 481

Tax on ordinary result

1 443

1 736

-1 075

57

1 721

6 277

Ordinary result

6 728

5 135

-838

837

6 103

19 203

NET
RESULT/PROFIT
FOR THE YEAR

6 642

5 135

-838

837

6 103

19 203

Total transfers and


allovations

6 728

5 135

-838

837

6 103

19 203

40

Balance:
2008

2009

2010

2011

2012

2013

Total inventories fixed assets


Total fixed assets
Total financial fixed assets

3 141
20 019
0

1 922
18 445
1

5 526
17 482
1

6 416
16 983
6

0
18 570
6

0
20 046
65

Total fixed assets

23 159

20 368

23 009

23 404

18 576

20 111

Total inventories
Total receivable
Bank deposits, cash etc.

61 372
27 137
3 351

58 526
38 769
2 279

69 438
32 124
426

54 283
36 919
3 447

63 027
23 727
1 185

56 684
20 186
7 243

Total current assets

91 860

99 574

101 988

94 649

87 940

84 113

115 020

119 942

124 997

118 054

106 515

104 224

Total equity deposits


Total retained earnings
Minority after accrued equity

667
11 475
21

101
16 896
0

101
16 058
0

100
16 896

100
22 999

100
42 237

Total equity

12 163

16 996

16 159

16 996

23 099

42 337

Total provisions for liabilities


and charges
Total long-term liabilities

4 408
31 648

5 167
29 262

1 834
25 281

1 500
29 367

2 903
28 407

6 606
30 610

Total short-term liabilities

71 209

73 683

83 557

71 692

55 010

31 276

Total liabilities

102 857

102 946

108 838

101 058

83 416

61 886

TOTAL LIABILITIES AND


EQUITY

115 020

119 942

124 997

118 054

106 515

104 224

2008
70

2009
70

2010
70

2011
70

2012
70

2013
90

TOTAL ASSETS

Other information:
Employees

41

Orkel AS:
Results:
2008
Start date
End date
Total operating income
Total operating
expenses

2009

2010

2011

2012

2013

01.01.2008 01.01.2009 01.01.2010 01.01.2011 01.01.2012 01.01.2013


31.12.2008 31.12.2009 31.12.2010 31.12.2011 31.12.2012 31.12.2013
128 518

136 959

115 832

128 888

138 724

167 899

119 000

132 355

118 419

128 181

132 245

150 376

Operating profit/loss

9 518

4 604

-2 587

707

6 479

17 524

Total financial income


Other interest expenses
from group companies
Total financial
expenses
Total/net financial
items

2 087

1 436

1 601

987

1 165

1 481

23

48

148

61

4 587

2 413

2 445

2 473

2 330

3 070

-2 500

-977

-844

-1 486

-1 165

-1 588

Ordinary result before


taxes

7 018

3 627

-3 431

-779

5 315

15 935

Tax on ordinary result

848

1 015

-1 513

-263

1 205

3 982

Ordinary result

6 171

2 612

-1 918

-517

4 110

11 953

NET RESULT/PROFIT
FOR THE YEAR

6 171

2 612

-1 918

-517

4 110

11 953

600

0
540

-936

-576

-720

450

5 571

2 072

-982

59

4 830

11 503

6 171

2 612

-1 918

-517

4 110

11 953

Allocation dividends
Group contributions
Allocation other
equity/covering of
previous uncovered
loss
Total transfers and
allovations

42

Balance:
2008

2009

2010

2011

2012

2013

Total inventories fixed assets


Total fixed assets
Total financial fixed assets

0
1 754
11 582

0
1 390
10 261

4 348
1 073
8 855

5 982
694
63

0
1 198
1

0
1 772
3 365

Total fixed assets

13 336

11 651

14 277

6 739

1 199

5 136

Total inventories
Total receivable
Bank deposits, cash etc.

45 327
27 607
293

46 199
30 683
577

56 652
26 081
274

45 071
30 941
793

48 953
22 188
1 006

31 871
17 506
6 011

Total current assets

73 227

77 459

83 007

76 805

72 147

55 389

TOTAL ASSETS

86 564

89 110

97 284

83 544

73 346

60 525

Total equity deposits


Total retained earnings

500
15 872

500
17 944

500
16 962

500
17 021

500
21 851

500
33 354

Total equity

16 372

18 444

17 462

17 521

22 351

33 854

Total provisions for liabilities


and charges
Other long-term liabilities
Total long-term liabilities

2 804
13 179
15 983

3 685
11 527
15 212

577
9 905
10 482

351
8 882
9 233

1 858
7 464
9 322

5 712
7 430
13 142

Total short-term liabilities

54 208

55 455

69 340

56 790

41 674

13 528

Total liabilities

70 191

70 666

79 822

66 022

50 995

26 670

TOTAL LIABILITIES AND


EQUITY

86 564

89 110

97 284

83 544

73 346

60 525

2008

2009

2010

2011

2012

2013

68

69

67

64

77

87

Other information:
Employees

43

Orkel Compaction AS
Results:
2008
Start date
End date

2009

2010

2011

2012

2013

01.01.2008 01.01.2009 01.01.2010 01.01.2011 01.01.2012 01.01.2013


31.12.2008 31.12.2009 31.12.2010 31.12.2011 31.12.2012 31.12.2013

Total operating income


Total operating
expenses

22 719

25 515

20 524

32 048

33 727

51 224

19 472

22 223

16 822

29 462

30 431

42 105

Operating profit/loss

3 246

3 292

3 702

2 586

3 296

9 118

Total financial income


Other interest expenses
from group companies
Total financial
expenses
Total/net financial
items

1 445

758

18

272

507

1 912

78

35

22

29

18

712

554

1 848

748

1 035

714

733

204

-1 830

-476

-528

1 198

Ordinary result before


taxes

3 979

3 496

1 872

2 110

2 768

10 317

Tax on ordinary result

1 115

983

521

591

645

2 890

Ordinary result

2 865

2 513

1 351

1 519

2 123

7 427

NET RESULT/PROFIT
FOR THE YEAR

2 865

2 513

1 351

1 519

2 123

7 427

1 230

1 800

1 296

1 318

1 152

1 512

1 634

713

55

201

971

5 915

2 865

2 513

1 351

1 519

2 123

7 427

Allocation dividends
Group contributions
Transfers from share
premium reserve
Shareholder
contribution
Bonus issues
Allocation other
equity/covering of
previous uncovered
loss
Total transfers and
allovations

44

Balance:
2008

2009

2010

2011

2012

2013

Total inventories fixed assets


Total fixed assets
Total financial fixed assets
Other fixed assets

2 666
48
0

1 922
30
0

1 256
95
3

468
52
18

11
22
7 650

15
0
7 361

Total fixed assets

2 714

1 952

1 353

538

7 683

7 376

Total inventories
Total receivable
Bank deposits, cash etc.
Total current assets

16 044
9 747
3 036
28 827

12 224
8 946
1 599
22 769

12 203
14 310
126
26 639

8 988
10 687
2 627
22 301

13 858
5 449
154
19 461

24 607
7 838
1 182
33 626

TOTAL ASSETS

31 541

24 722

27 992

22 839

27 144

41 003

9 716
3 144

9 716
3 857

9 716
3 911

9 716
4 113

9 716
5 084

9 716
11 034

12 860

13 573

13 627

13 828

14 800

20 750

21

16

Total long-term liabilities

1 281

16

Total short-term liabilities

17 401

11 133

14 364

9 010

12 344

20 253

Total liabilities

18 681

11 149

14 364

9 010

12 344

20 253

TOTAL LIABILITIES AND


EQUITY

31 541

24 722

27 992

22 839

27 144

41 003

2008

2009

2010

2011

2012

2013

Total equity deposits


Total retained earnings
Total equity
Total provisions for liabilities
and charges

Other information:
Employees

45

Appendix 2: Press release concerning partnership


with CNH
Thu Mar 08 08:30 EDT 2012
CNH Announces Strategic Partnership with Orkel AS
For more information contact:
CNH Corporate Communications +1 (630) 887-3823
LUGANO, Switzerland -- (March 8, 2011) -- CNH, a global leader in the agricultural and
construction equipment businesses, today announced a long term strategic partnership with
Orkel AS, the Norwegian market leader in high performance fixed chamber round balers,
compactors and tractor trailers.
CNHs partnership with Orkel will involve several key collaboration areas to further reinforce
CNHs leadership in the agricultural business. CNH will acquire intellectual property rights
and tooling for Orkels fixed chamber round balers (FCRB) and Orkel will become CNHs
preferred engineering partner for the development of high performance/heavy duty new
generation of FCRBs.
This alliance brings together CNHs expertise in tractors, sprayers, combines, forage
harvesters and other agricultural equipment of all classes and power ranges with Orkels
leading technology in high performance fixed chamber round baler products.
"Our partnership with Orkel - a key player in the heavy duty fixed chamber round baler and
compactor sector - is a sign of CNHs intention to strengthen its presence in the Hay & Forage
business. This agreement brings CNHs product offering in line with market trends and
requirements to better meet the evolving needs of our global customers, said Richard Tobin,
President and CEO of CNH.
"We are very excited about the prospect of leveraging our market position for the benefit of
our customers in Europe and becoming CNHs engineering partner in the premium baler
segment," said Jarl Gjonnes, Owner and President of Orkel.
Orkel-CNH products will be sold under the Orkel, New Holland Agriculture and Case IH
brands through their respective dealer networks.
###
About CNH
CNH Global N.V. is a world leader in the agricultural and construction equipment
businesses. Supported by approximately 11,300 dealers in approximately 170 countries, CNH
brings together the knowledge and heritage of its Case and New Holland brand families with
the strength and resources of its worldwide commercial, industrial, product support and
finance organizations. CNH Global N.V., whose stock is listed on the New York Stock
Exchange (NYSE:CNH), is a majority-owned subsidiary of Fiat Industrial S.p.A. (FI.MI).
More information about CNH and its Case and New Holland products can be found online at
www.cnh.com.

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About Orkel
Orkel AS, based in Fannrem, mid Norway, is one of the largest manufacturers of farm
machinery in Norway. Round chamber balers, compactors, tractor trailers and snow blowers
are the main products. Orkel AS has a unique position on the domestic market, due to its long
and lasting service for the Norwegian farmer. Over the years, Orkel AS products have earned
a reputation of being top quality, and being well-fitted for the rough Scandinavian
demanding conditions. The company has been leading in the development of new products
enabling its customers to meet the challenges of the future. More information:
http://orkel.no/home/

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