PRAKTIKER ROMANIA – Major Group Activity

 Key Facts:
 Member of Praktiker Bau- und Heimwerkermarkte Holding
AG operating 425 stores in 9 European countries;
 Since 1996 part of METRO Group;
 2007 Group revenues reached 3.95 billion euros;
 Market targeted: Do It Yourself (DIY);
 In Romania Praktiker is the market leader in terms of
revenues (265.4 million euros in 2007) and operates 24
stores (last store opened in Buzau on oct. 24th)

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 Mission Praktiker

To become the trend-setter in the market by creating and

sustaining competitive advantages through:
 Development of a premium brand in the market
 Anticipation of the customer needs
 Professionalism and competences of the people
 Constant optimization of the commercial margin, product and
customer portfolio
 Providing product and services innovation

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Organizational Chart – Praktiker Romania

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 PEST analyze
Factors
Social - Population
density and growth
Economic outlook
Political outlook
Source: INNSE, CNP, Intellinews
Key Findings
 Negative birth rate for 15 years
 Age segment 30-55 represents
35.7%
 Occupied population 58%, to reach
Lisbon 2010 target of 70%
 Unemployment rate moderate, 0.55
Mio unemployed persons registered
 International financial crises affect all
investments especially in construction
field
 Increase of interest rates for house
loans
 Depreciation of local currency after a
few years of appreciation
 Political: instability of ruling coalition,
new government after elections
possible
Implications for Praktiker
 Potential customers of construction
companies
 Increase of life standard-→increase
of consumption
 Civil and industrial projects are
blocked -> decrease in consumption
 Decrease of housing loans→
decrease of housing demand
 Higher costs for loans and materials
imported -> decrease in consumption
 Infrastructure projects and projects
developed by state owned companies
could be stopped or postponed
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 PEST analyze
Factors Key Findings Implications for Praktiker
Construction -  Segment increased by 19,3% in  Infrastructure →Increase
Infrastructures 2008, major investments further consumption
expected in infrastructure
 Civil construction increased due to
residential constructions, houses and  New entrants in DIY → increased
office buildings, commercial buildings competition
and increases in the hydro-technical
sub-segment (2005 - 2008 floods).
 Major investments in residential are
expected to be blocked or postponed  Decrease consumption and
increased competition
Legislation and  taxes could be increased in order to  Population incomes will decrease ->
Regulations help the state budget decrease consumption
 Traffic restriction in big cities
 Bad debtors law frame (enforcement)
 New improvements from the new
Fiscal Code are expected

Source: INNSE, CNP, Intellinews 5

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 Macroenvironment impact on Praktiker
Negative Somehow Neutral Somehow Positive
Drivers negative positive

Foreign investments
GDP
Inflation & exchange rate
Consumption
Residential projects
Legal frame

Threats Opportunities
area area

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 Market Forces impacting Praktiker
Competitors Influencers
Bricostore, Baumax, e.g. Government,
Hornbach, Ambient, Obi… Specifiers, Architects

Praktiker

Suppliers Customers
Building materials e.g. masons, homeowners, small and
producers, importers medium construction companies

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 Market force’s impact on Praktiker
Negative Somehow Neutral Somehow Positive
Drivers negative positive

Competitors
Influencers
Suppliers
Customers

Threats Opportunities
area area

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 Competitors impact on Praktiker
Negative Somehow Neutral Somehow Positive
Drivers negative positive

Pricing
Products & Services
Distribution
Promotion
Peoples

Threats Opportunities
area area

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 Operational results effectiveness
Low Somehow Fair Somehow High
Drivers low high

Net Profit contribution

Main KPI’s

Market share
Turnover

Weaknesses Strengths
area area
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 Opportunities
1st
priority
■ Niche
market
■ Product
branding ■ Market
growth
■ Legal
frame ■
Competitors
Probability

■ End users
supply
limitations
technical
support
2nd
priority
■
■ Floods Infrastructure
■ GDP

■ Imports

3rd
priority

Impact 11
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 Threats
■ 1st
■ ■ priority
Substitutes
Competitors competitors
Grey market marketing network
■
effort
Competition
pricing
■
■ Traffic Competitors
restrictions product
portfolio
Probability

■ Cost of
■ ■ Customers loans
Competitors expectation
distribution s
2nd ■ Pricing
priority limitations

■ Suppliers

■
Influencers

3rd
priority

Impact 12
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 Strengths
■ Tunover
development
■Praktiker
network
■ Market
share
■ Credit
management 1st
priority
Probability

■ Brand
2nd positioning
priority

■ Training

■ New
Markets
(Services)

■ Customer
base
3rd
priority

Impact 13
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 Weaknesses
■ Pricing
1st
■ Control
■ Customer priority
complaints effectiveness ■ Product
■ management ■
Recruitment Distribution
■ Customer
■ Systems satisfaction
limitations

■ Product
portfolio
Probability

■ Technical
services 2nd
priority
■ Market
development

■ Market
research

■ Promotional
activities (other than
events)
■ Suppliers

3rd
priority

Impact 14
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 Objectives 2009
As a result of the PEST & SWOT analysis, relevant objectives are set.
Two types of objectives need to be considered: strategic frame and
strategic objectives:

Strategic Frame Strategic Objectives

Strategic frame defines which
products to sell in which markets:
 existing products in existing markets
(market penetration or expansion)
 new/related products for existing
markets (product development)
 existing products in new/related
markets (market development)
 new/related products for new/related
markets (entry into new markets).
For each product we have to
set one of the following
options:
 build sales and market share
 hold
 harvest (improve profit
margins)
 divest (drop or sell product).

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 Strategic frame 2009
Traditional
markets

Market expansion Product Development

(existing products, existing markets) (new products, existing markets)
 Renewable Energy for Home based on
agreement with bank for financing programs

•
to customers Guvernamental programes in place

Increase market share for heavy construction Thermical Insulation for homes Program

• • •
naterials (steel, cement, bricks) Technical Support

Sell packages not products Develop IT programs to help the customers
make a cost calculation
Transport service

• •
Loyalty programs for customers
Growth Innovation

Market Development New markets

(existing products, new markets) (new products, new markets)
Corporate

• •
Distribution New concept : ecologic house (agreement with
• •

Franchise new specialised suppliers

Niche
markets 16
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Ways to increase profitability

 Market development - new corporate Business Unit

 Lower the operating costs

 Outsourcing
 Develop new products based on government programes
 Renewable Energy Devices (solar and eolian power
devices)
 Thermal Insulation Program for houses – create a B.U. To
access this opportunity

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New Corporate Business Unit
 Romania has a poor, sub EU level of public sector
development and repair of construction in the public
sector
 Great and urgent demand of investment by the
government in health, education, public administration
infrastructures
 Governmental projects such as construction of 32 brand
new hospitals – Ministry of Health
 Several local mayoralty’s project

 General expectations that in the near future, Romania

will be a construction site
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SWOT Praktiker Corporate B.U.
 Strength
 powerful brand with good perception in the market
 excellent territorial spread
 know-how in the construction material business
 high purchasing power
 large range of products sold
 Weakness
 large corporation, low flexibility
 low appetite for risk (commercial credit is a risk)
 no logistics
 low experience in B2B sales
 Opportunities
 world financial crisis (smaller competitors will disappear)
 large customers need excellent expertise, supply in wide range
 low cost of initial implementation
 TARGET: only PREMIUM customers such as big construction companies or project
developers
 Threats
 financial crisis

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Action Plan Corporate B.U.
 ACTION PLAN
 Sales staff: 1 sales manager 7 area sales managers 24
key accounts managers (present in each store)
 Logistics: rented for the beginning, operational lease later
according to development
 Commercial Credit Insurance contract concluded with one
of the major companies for credit risk coverage Euler
Hermes or Coface Romania
 Acquisition and implementation of invoicing software for
strict control over sales and credit granting

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Lowering Operating Costs - Outsourcing
 Outsourcing for Staff and Entry Level Positions

 Labor cost increased significantly in Romania, who now exceed the level
of traditional off shore market.
 Political and economical environment in Romania is good for
outsourcing.
 Human resources generate problems to companies in Romania
because:
- 49% - missing qualify staff
- Staff migration
- Unrighteous employees’ demands.
- Today, outsourcing is an option for cost optimization and strategically
management

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Lowering Operating Costs - Outsourcing
 outsourcing for IT
 IT employee doesn’t mean only salary cost, but also
indirect costs
 Indirect cost can be up to 142.3% of net monthly value
 Services that can be outsourced are:
- internet administration, e-mail administration, web site
administration,
- maintenance for cables, switching and wireless,
- Maintenance for data bases, back-up,
- IT security, monitoring, IP telephony

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Lowering Operating Costs - Outsourcing
 outsource the processing of suppliers’ invoices
 The activity to process the suppliers’ invoices and the documents
involved in acquisition process are activities for long time and
this require an important volume of documents.
 Automating and outsourcing those processes will increase
productivity and will reduce costs.
 Using this solution, the cost for Financial Department’s personnel
will decrease with 25%.
 Using automatic processing the cost will be 80% less.
 The profit will be from:
- increasing payment accuracy,
- improving the control and the audit process,
- decreasing cost for storage.
- Manual processing can generate the following problems: losing
documents, delays, errors.
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Lowering Operating Costs - Outsourcing
 outsource the management of Auto Park
 The operational leasing means a long time leasing contract for autos.
 The financial advantages are:
- low costs,
- fixed installments,
- good predictable cash flow.
- total deducting costs,
- no unpredictable repairs and maintenance.

 “If you deprive yourself of outsourcing and your

competitors do not, you’re putting yourself out of
business” (Lee Kuan Yew)

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