Expansion Process of Skypro Footwear to the Russian
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A Work Project, presented as a part of the requirements for the award of Masters Degree in Management from the NOVA – School of Business and Economics EXPANSION PROCESS OF SKYPRO FOOTWEAR TO THE RUSSIAN MARKET OLGA DRYUCHENKO Nº2616 EXHIBITS A project carried out on the SME Competitiveness: Internationalization Strategy Field Lab, under the supervision of: PROFESSOR SÓNIA DAHAB January 2017 Table of Exhibits Exhibit 1 – Skypro’s footwear characteristics ........................................................................... 3 Exhibit 2 - Distribution of Skypro sales by geography and market segment ............................ 3 Exhibit 3 - Skypro’s Organization Resource Platform .............................................................. 4 Exhibit 4 – VRIO framework analysis ...................................................................................... 5 Exhibit 5 - Value Chain ............................................................................................................. 6 Exhibit 6 – Criteria for Russian Market Attractiveness ............................................................ 8 Exhibit 7 - PESTLE framework analysis ................................................................................. 9 Exhibit 8 - Top 15 Russian Airlines ....................................................................................... 11 Exhibit 9 - Estimation of number of pilots and cabin crews of the companies with more than 1% market share ....................................................................................................................... 12 Exhibit 10 - TOWS Analysis ................................................................................................... 13 Exhibit 11 - 4M’s analysis – Memo ........................................................................................ 15 Exhibit 12 - Estimation of the costs of participation in Obuv’ Mir Kozhy fair ...................... 15 Exhibit 13 - Financial Projections ........................................................................................... 16 Exhibit 1 – Skypro’s footwear characteristics Exhibit 2 - Distribution of Skypro sales by geography and market segment Sales Jan- Jun 2016 by geographic market Sales Jan-Jun 2016 distribution by market segment 3.4% 10% 14% 77% 97% National Market Comunity countries (PALOP) Extra comunity countries B2B B2C 3 Exhibit 3 - Skypro’s Organization Resource Platform Competences Specialized Assets Architecture of relationships Know-how of footwear making: Reputation and brand image: Important network of partners: Skypro operates in one of the 3 countries Skypro holds several awards and supplies Skypro possesses a large network of with the biggest know-how in footwear its product to worldwide recognized institutional partners which assist in making and with long centuries tradition airlines, such as Etihad. It has a long list product improvement and quality control. of shoe crafting. of clients who trust their crew’s comfort to Skypro. R&D skills and in house design: Unique technologies: Large international network: The firm researches and develops in- Unique technologies and innovative Skypro has innumerous business partners house the footwear latest comfort materials are used in order to make who promote the brand and the product. features. outstanding comfort footwear. CRM: Bimodal operations: Direct access to raw materials: The relationship with the clients is Company’s sales streams come from A large list of suppliers enables the carefully taken care of, and it extends direct contracts with corporate clients but company to rapidly assess the necessary from the initial contact to after sales also via on-line shop, which extends the inputs for products with the best quality. services, resulting in a long lasting potential clients’ number. relationship via specialized channels. Change management: The company effectively adjusts its self to the needs of the market and performs the necessary corporate changes in order to secure the success of the business. Quality control: Five steps quality control if performed in every stage of production which is scrutinized until the product is assembled with perfection. 4 Exhibit 4 – VRIO framework analysis Resources/ Capabilities V R I O R&D skills and in-house design: Yes - - - Change management: Yes - - - Competitive Direct access to raw materials: Yes - - - Parity Bimodal operations: Yes - - - CRM: Yes Yes - - Quality control: Yes Yes - - Large international network: Yes Yes - - Temporary Advantage Important network of partners: Yes Yes - - Reputation and brand image: Yes Yes - - Know-how of footwear making: Yes Yes Yes - Unused Competitive Unique technologies: Yes Yes - Yes Advantage Key: V – Valuable R - Rare I – Imperfectly imitable O – Organizationally embedded 5 Exhibit 5 - Value Chain All the following calculations of the value chain were performed using the accumulated balance sheet updated up to the second half of 2016, courteously provided by Skypro. The correspondent items were distributed by each of the components of the value chain and their totals were divided by the revenues in order to determine their percentage weight. The next page contains the detailed information about all the items included in each primary and support activity. All the calculations were made in euros. Hence, the value chain turned up to be the following: Firm infrastructure – 4% SUPPORT Human Resources Management – 0.69% ACTIVITIES Technology – 2% Procurement – 1% MARGIN 19,28% Inbound Outbound Marketing Operations Service PRIMARY Logistics Logistics & Sales ACTIVITIES 64,4% 0,003% 1% 2% 5,3% 6 Inbound logistics Firm Infrastructure Other rents 456.00 Electricity and water 411.02 HR logistics and 17123.29 Bank expenses 1,718.98 operations Management and accounting 3,600.00 Total 17,579.29€ Headquarters rent 2,690.10 % 0.9% Oeiras' office rent 9,000.00 Operations Technological support services 2,119.98 CMVMC 1,292,775.64 HR general management and 32,024.47 finance Total 1,292,775.64 Medicine, health and safety at 60.00 % 64.6% work Tools and utensils 6,347.70 Outbound Logistics Office supplies 1,272.76 Fuel 2,564.99 Comission on Explorer 15,000.00 Transport of goods 31,563.87 Comission on Explorer 4,999.98 Tolls 983.65 transaction Packaging material 3,853.28 Cleaning 282.77 Total 38,965.79 Total 79,527.76 % 1.95% % 4.0% Marketing and Sales HRM Marketing 6,112.66 HR 6,797.031 Marketing 3,231.00 Bonuses and Commisions 414.06 Marketing 9,343.66 Other remunerations 1,304.51 Events and Fairs 14,319.65 Allowances 2,399.57 Advertising 5,294.48 Insurances for accidents at work 602.16 Propaganda 405.00 and illness Other HR costs 2,384.77 Other Adds 4,139.48 Total 13,902.10 Travel outside national 15,987.77 territory % 1% Travel- hotels 163.00 Technology Roads 174.00 Chemical experiments for product 942.99 HR Marketing and 43997.7063 development commercial IDT 14,375.53 Skypro communication 11,687.40 HR IDT 24,711.13 Total 105,512.15 Total 40,029.65 % 5.3% % 2.00% Service Procurement HR customer assistant 5927.8 Trips and accomodation 18,439.04 Total 5927.8 Total 18,439.04 % 0.00296 % 1% 7 Exhibit 6 – Criteria for Russian Market Attractiveness Criteria Indicator Unit Year Source Result Market size Number of pilots and flight attendants, estimated1 people 2016 Annual Reports of the 36 322 estimated Airlines Market growth rate Real GDP growth rate 1.4% estimated 2017 % The World Bank: GDP growth (annual %) Country Economic Index of Economic Freedom Overall risk score in 2016 Heritage Foundation – 50.6 Freedom Rating points Ranking Market receptivity Imports of goods and services percentage of GDP (Imports of % 2015 The World Bank: 21.2% to imports goods and services represent the value of all goods and other Imports of goods and market services received from the rest of the world) services (% of GDP) Trade (% of GDP) Trade is the sum of exports and imports of % 2015 The World Bank: Trade 40.3% goods and services measured as a share of gross domestic product (% of GDP) Country Risk Country Risk Indicator Scale 2015 Country Risks C Rating A1,A2,A3,A4,B,C,D Assessment 1 Estimation was based on the assumption that Skypro’s targets largely recognized Airlines with a fleet of 30 and more airplanes. Hence, some of the bottom 10 Airlines from exhibit X were excluded taking into consideration that Aeroflot reemployed part of Transaero employees and it is also integrating Pobeda in the group. Other airlines information was not available. Exhibit 7 - PESTLE framework analysis Political The recent events involving Russia and Ukraine had a strong effect on foreign business. The sanctions upon the country turned it towards the domestic market due to the prevention of trade with an ensemble of partner countries. As an effect on the airline industry, the number of domestic flights increased due to the refusal of the Russian flights by international partners. It also boosted ever further the protectionism of the market and the burden of the taxes and legal procedures towards foreign importers. Hence, the competition tightened and the domestic businesses was taken as priority. Moreover, the scale of the country gives space to arbitrary decision making performed by regional authorities and brings extra barriers to business establishment and negotiation. Furthermore, a globally negative image of the country is still representing a political risk for the new coming businesses. Economic The steep drop in the GDP and the devaluation of the currency are mirrors of the downstate