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CUSTOMER SOLUTIONS NEXIUM CUSTOMER SOLUTIONS "El Centro Virtual de Experiencias de Internacionalización" (The On-line Centre for International Business Cases) is the result of the collaboration of the Spanish Institute for Foreign Trade ICEX and AEEDE, the Spanish Association of Business Schools , which includes eleven leading Business Schools. The aim of this project is to promote the internationalisation of Spanish SMEs, drawing on the academic rigour of the business schools that have participated in this project.
This centre presents case studies of Spanish companies that are successful internationally.
These case studies can be found on the ICEX webpage and appear in a multimedia format that includes discussion forums and articles that create awareness of the key issues involved in inter- The success stories chosen represent a broad sample of sectors and geographical areas and show the globalisation process that some of our companies have gone through. The company profile shown here is that of an SME multinational which has become a reference point in its sec- tor, basing its international penetration strategies on factors as diverse as marketing, manage- ment, financial liquidity and its business alliances.
This pioneering project, in Europe and throughout the world, serves to promote and diffuse a comprehensive entrepreneurial culture among SMEs. It promotes the integration and association between universities and businesses, facilitates dialogue and the exchange of knowledge betwe- en experienced businesses and those that are beginning to take their first steps in international markets. It also emphasises the importance of human capital in medium and long term business Nexium Customer Solutions is a Spanish SME company, specialized in software development and consultancy for the FMCG sector. This case study exposes its internationalisation process.

Nexium Customer Solutions is founded in 1997 with the company objective to create high- value software tools for Category Management and Trade Marketing. From the beginning this offer was 100% directed to the Fast Moving Consumer Goods sector (manufacturers and 1 retailers).
When the company celebrated its 10th anniversary, it had gone through three stages of deve- lopment and organic growth: 1. - Initial stage of foundation and the development of its products and services.
2. - Period of growth and consolidation within the home country (Spain).
3. - Internationalisation process.
1.-The initial stage (1997 – 2000) comprehended the period of design, development and tes- ting of the software solutions, as well as the creation of a valuable commercial argument that was to be the basis of long term market success. Aiming at the highest quality standards, Nexium applied the recommendation of the international initiative "Efficient Consumer Response" in all its software developments.
2.-The growth period (2001 – 2005) was focused on the commercialization of the software in the local market, however, there were two secondary objectives.
Strengthen the position in the Spanish market and gain momentum through successful pro- jects in national and multinational clients. Leveraging these success stories would become of vital importance throughout the internationalisation process.
Generate sufficient cash flow to be able to invest in the internationalisation of the company.
By then, the objective of the five founding partners, all of them professionals with brought experience in the FMCG and software development sector, was neither to involve risk capital companies nor other financial support in such an early stage.
(See Appendix 4- 7: evolution of various indicators: turnover, work force, cost structure).
When reaching the end of this stage, the company had drawn several conclusion about the market and its most important tendencies. More and more, clients expected a highly perso- nalized and flexible service that would adapt to its particular needs, projects and budgets in each moment. In addition there was a perceptible trend of outsourcing of professional soft- ware services, due to the fact that companies would prefer flexible consultancy formulas to investing in software license acquisition. Therefore, in 2005 Nexium decided to create a new business unit dedicated to consultancy services.
3. - The internationalisation process was finally tackled in 2006. Its initiation coincided with the achievement of leadership in the Spanish market of Space Management Software* (MSA), NEXIUM CUSTOMER SOLUTIONS having implemented more than 500 licences. Turnover was growing at a 75% rate yearly and also the workforce had been increased notably. After some organizational changes and the creation of the international department the first internationalisation plan is defined, respon- ding to two mayor tendencies: Increase of the external demand: more than ever the company was contacted for information on its products and services from other markets, mainly via internet.
Internationalisation of the services: The implementation of software in the Spanish business units of multinational companies had created word of mouth, success stories were presen- ted at international level and the first contracts for being a software provider at a global level were signed.
So far, we can highlight that between 2004 and 2007 Nexium not only went through a period of dynamic growth at local level, but also gradually entered the international markets, both dri- ven by its own initiative and the natural evolution within multinational clients like: (Chart 1: Nexium's clients by sector).
NEXIUM CUSTOMER SOLUTIONS As for the international experience, there were still many questions to be resolved.
Nevertheless, the success in the Spanish market had revealed that selling software to the big FMCG players needed to be more that just another program in their system. Nexium's soft- ware solutions were to be the best friend of each and every sales or trade manager by opti- mizing, facilitating and empowering his daily work.
"After a couple of hours behind the computer, we have all the information of the world, but we have still limited knowledge".
Kjell Nordström, Karaoke Capitalism (2003), p.29. This quote of Kjell Nordström reminds us the using information technology for mere data crunching that does not increase our knowledge per se. We need something more to create knowledge and value from data: the key is in the interpretation and application of the infor- mation to solve real business questions. It's not about working the data; it's about making the data work for you.
To conclude, we can identify three quality objectives that would be critical for Nexium's inter- nationalisation process: Add value to commercial processes, by offering a highly flexible and personalized service based on professional experience and excellence.
Guarantee maximum simplicity in software handling, and enable each user to carry out powerful analyses after shortest training times.
Offer an in-depth preparation that goes beyond a mere training of the software usage, capa- citate the users and equip them with the necessary resources to obtain real knowledge of their market, commercial levers and negotiation.

Everything You Need To Know

NEXIUM CUSTOMER SOLUTIONS Nexium Customer Solutions is a very young enterprise; with the majority of their employees being in their 20s or 30s. Nexium was founded by five partners, at a point when all of them had gained profound professional experience in the FMCG sector and programming, namely in executive positions in the commercial and trade departments of big multinational players.
"Our mission is to create value by means of consultancy and the development oftechnological solutions in the area ofTrade Marketing, CommercialDevelopment and Supply Chain" The work philosophy and company mission is based on five pillars: (open dialogue: "Our mis- sion is to create value by means of consultancy and the development of technological solu- tions in the area of Trade Marketing, Commercial Development and Supply Chain, Alberto Rodríguez de Lama, Managing Director Nexium). This is based on: EXPERIENCE: Contribute real knowledge in daily processes of sales, purchasing and trade department of FMCG companies arising from the personal experience of Nexium's professio- nals. Improve these processes by means of technological solutions of the latest generation. ENGAGEMENT: The working culture at Nexium involves a total commitment with the client and a constant alignment of objectives before, during and after the project. This ensures trust and long-term business relationships with the clients.
ACTION-FOCUSED: Together with the client the consultancy results are translated into dis- tinctive processes and tools, as well as implementation guidelines. Therefore, strategies turn into real action plans that add value and increase productivity.

NEXIUM CUSTOMER SOLUTIONS 360º HOLISTICITY: Nexium in able to offer services and solutions for any new and unforese- en issue in commercial development due to a highly integrated and applied vision.
INNOVATION: Nexium constantly invests in advancing development skills in order to be able to offer cutting-edge technology to its clients.
The slogan used in the 2006 Christmas mailing reflects what can be called typically Nexium: The main success drivers of the company is the powerful combination of a real commitment with the clients and a powerful set of software tools that add tangible value to business pro- cesses and projects are.
Being a SME Nexium is eager to fully leverage the knowledge acquired by its consultants throughout their professional experience. Regarding the many functions they cover the employees become real generalists; nevertheless, they specialize in a certain business unit.
That is, they both work on consultancy projects (e.g. an mix optimization by means of the tool AT Pro) and provide training and services once the software has been installed in the client.
The internationalisation would be carried out having in mind the recreation of Nexium's suc- cess formula in the international markets.
Did you know that a software company that develops their own tools and applies an ambi-tious quality management process needs more than one year to train a software engineernew hire? What does this mean for an SME that is growing at over 50% a year? How muchmoney do you think Nexium invested in R&D during the first years after its constitution? € 4 million. When we think of software business we often imagine some kind of Silicon Valley, with hun- dreds of programmers that live a virtual life without any connection to the real world outside.
Nexium needs to be very different. The product is nearly entirely determined by the practical needs of a very specific group of professionals: Key Account Managers, Trade Marketing Directors, POS Managers, purchasing and sales managers.
What do you think: What are the main priorities and criteria applied by the target group ofusers when evaluating Nexium software? Have in mind the job profile of the users, the weeklyreporting systems established in FMCG companies and the daily usage of information in thiskind of position.
As you might have concluded already, Nexium should not offer a merely technological pro- duct. The target user generally doesn't have a broad technical background, nor will s/he invest a lot of time in learning how to use the program. Nexium became the favourite provi- der of software solutions for the FMCG companies mainly because it had understood this need and invested a lot of time in the development of user-friendly, yet powerful tools that NEXIUM CUSTOMER SOLUTIONS were fully designed to meet the needs of their clients. Another peculiarity of the software business, most notably companies as specific as Nexium, is that it requires some specific needs of human resources management: - Initial training period for software engineers: one year.
- Constant maintenance and updates of the programs (the more program one offers, the more resources will be dedicated to maintenance and updates).
- 1 year of initial training for software developers.
- Need for consultants qualified in the use of the software and who know how it is applied daily by the final user. They must also be familiar with the most important issues the client faces, in order to detect new sales opportunities.
- Need to count on consultants trained in the fields of managing and applying everyday systems for the final client, that they are trained in client needs so that they can identify opportunities to sell. - The international client portfolio requires the ability to provide multilingual customer ser- vice by mail and telephone, at least in English.
Many of the clients in the Spanish market had been captured due to the extended network and experience that the partners had established while they were working themselves for several consumer goods companies.
These are some of the reasons that show why the search for qualified personnel therefore has always been of strategic importance for Nexium. The software engineers are mostly hired directly after graduation from specialized information technology schools, in order to train the young professionals in specific areas of development. The consultants are expected to bring along work experience in the FMCG and retail industry, market research institutes or compa- nies similar to Nexium. In order to get in contact with possible future employees of this profi- le Nexium has established close contact to universities, business school master programs.
Discuss: In case you wanted to open an office in a foreign country ¿How would you searchfor such a specific profile in the international markets? CHARACTERISTICS OF THE PRODUCT AND BUSINESS UNITS
In 2006, a structural reorganization of the company creating six highly specialized business units puts the company focus even more clearly on its expert knowledge in commercial rela- tions optimization: Figure 1: Business Units Nexium (for a detailed description click on the different BUs).
Nexiums tools are used exclusively in the commercial departments of companies that produ- ce and/or distribute products to be sold in diverse consumer retail channels. That includes manufacturers and retailers of food, beverages, home care, health and beauty, up to applian- ces and do-it-yourself stores.

NEXIUM CUSTOMER SOLUTIONS In general, the software is designed to analyze, integrate and organize different data sources and support strategic and operative decision taking. They cover processes like: sales trac- king, mix* management, new product launch implementations, promotional management, commercial negotiation, sales forecast, store visit planning, information flow, etc. the final objective is the optimization of the commercial value chain.
Each business unit is lead by a team of director, senior consultant, junior consultant and one or more software engineers (depending on the development complexity). They offer a product portfolio of two to five standard products and ad hoc developments that are developed to meet specific client needs.
Talking about the internationalisation of software: What kind of difficulties would you expectwhen trying to sell a program developed in Spain to other markets? What would you do toavoid problems? From the very beginning Nexium had the ambition to become an international company and already the first programs were provided with an ingenious multiple language system. With just one click in the configuration menu the users can change the language of the software during their work session. Due to this special language system the adaptation of the softwa- re to other languages is just as simple. All wording that needs to be translated is included in one single text file that can be easily handled for translations at low cost and time. Apart from three days of translation costing about 1.000€ per program the adaptations do not require further investment. Most important – the translations so not affect programming itself. However the updating of the user manuals does require some special attention. Their trans- lation often requires the collaboration of a software engineer, a junior consultant and a trans- lator. Given the quick succession of innovations the company has a constant need to upda- te and re-write user manuals nevertheless this job is not covered by a certain person in char- ge, but split between the consultants.
Another important activity that a technological product entails is the maintenance. In general it is divided in two areas: Technological maintenance: the updating of the programs in order to guarantee its compati- NEXIUM CUSTOMER SOLUTIONS bility with the current operating systems and to incorporate new functionalities. Nexium com- mits to developing a new version per program and year, "new" meaning that it includes one mayor innovation and/or improvement. Little sub-versions are provided constantly throughout the year, adding ready-made and tested small features or amendments that are a preview of the upcoming version. In case an error is found, a debugged version is provided on the spot (within less than 24h).
Help-line Service: Each license includes the right to access an additional support service for users where usage questions can be clarified via telephone or email. Nexium commits to pro- viding an immediate reply by phone or in maximum 8 hours via email (having users in North and South America implies a time difference of up to 9 hours).
Providing truly user-friendly and stable programs is the key to guaranteeing the maintenance of this service. In general, new users might need more intense guidance during the first weeks nevertheless they normally do not need further help after the initial training.
What characteristics of the programs are essential when a company of 30 persons is to pro-vide a world-wide user help-line, without having a call centre or specific personnel for thistask? Do you think it's possible? Although Nexium never had problems in maintaining the help-line to Spanish users the board of directors was very aware of the risk of collapsing the service when approaching internatio- nal markets, both due to language and capacity restrictions. Certain measures were to be taken to avoid this loss of quality in service. Nexium had to decide which part of the portfo- lio would be offered at an international level and how this additional demand would be han- dled internally, given two mayor restrictions: Nexium's employees, both in programming and consultancy, are normally working at their full capacity and can not easily assume additional tasks.
The learning process needed to prepare employees for the many functions of their jobs, cau- ses a prolonged period until new incorporations are fully serviceable. We will come back to this point later.
Nexium has always had a highly applied approach mainly caused by the fact that both direc- tors and consultants are professionals with personal working experience in the FMCG sector and specifically in leading positions of Trade Marketing, Category Management and Market Research. Although Nexium defines itself as a "consultancy company" it does not cover stra- tegic consultancy topics, where the final product uses to be a catalogue of recommendations that need an additional implementation process. Due to in-depth knowledge about the rea- lity of its customers, Nexium is positioned as a technological partner who provides not only the recommendation of processes but also tangible technological solutions that can solve nearly any commercial development issue. (See appendix 10: Nexium's successful cases in "The company commits to adding realand measurable value to both recurringprocesses and one-time projects of itsclients." The company commits to adding real and measurable value to both recurring processes and one-time projects of its clients. The software solutions are just one of many tangible forms that represent this added value, amongst others we could mention the technological rigour, the creation of a new work philosophy, a new approach to justified and supported decision- taking, the unification of the language used by the different players of the FMCG sector, etc.
Between all the available software solutions the market offers, Nexium is specialized in a very specific segment. This niche covers the demand for technological solutions adapted to the needs of distributing of manufacturing companies of consumer products, that is, offering spe- cial functionalities for commercial management and the treatment of any kind of sales data other commercial indicators.
NEXIUM CUSTOMER SOLUTIONS Traditionally this demand had been satisfied by two types of companies, normally huge mul- tinational players: Technology companies with a wide range of solutions but low personalization of the tools and little emphasis on local service and close contact.
Consultancy and market research companies that had detected this specific need in existing clients and started working in related projects without being specialists in the area in order to complement their portfolio of services and/or get access to a new type of clients.
Therefore a main point of differentiation of Nexium versus the competitors is its hyper-specia- lisation and flexibility, both in their tools and in their services. This competitive advantage is reflected in the following characteristics: - A highly specialized portfolio of latest technology products, targeted at a single sector and a single type of client.
- A highly efficient and immediate customer service of real proximity. - Professional services provided by experts. - Constant innovation and a high level of R&D investment.
- A direct and personal connection of trust with the client.
- Constant innovations, due to high levels of investment in R+D.
- A direct and immediate response to software adaptation petitions.
Discuss if the internationalisation is viable. Is it possible to recreate the Spanish successmodel in international markets? Do you think Nexium will be forced to reduce its high level ofproximity and personalization at accumulating more and more clients? NEXIUM CUSTOMER SOLUTIONS Did you know that MSA, the planogramming tool and best selling product of Nexium, is com-patible with all mayor competitive planogramming solutions? It actually is, because Nexiumthinks that every user should be able to work Category Management projects in collaborationwith other companies, even if these are using competitive planogramming software.
For Nexium the internationalisation was a necessary step to adapt the company structure not only to its international client portfolio and the increasing demand received from foreign coun- tries but also to the pressure coming from international competitors. The sector of commer- cial development software is dominated globally by multinational companies that have ope- rations in countries all over the world. These competitors could become a threat to long-term retention of the international clients of Nexium, counting with a more sophisticated and exten- ded infrastructure to support global networks of offices.
Get to know the main competitors of Nexium: (Appendix 1: Nexium's Competitors, 3 sec- tions: JDA, AC Nielsen, and IRI).
In the Spanish home market, Nexium applies a model of direct sales led from the Madrid headquarter. In 2007 an additional office is opened in Barcelona with the objective to be in close proximity to the numerous and important clients based in Catalonia and to reduce wor- kload in the Madrid office.
The centre of excellence for software development is located at the headquarter in Madrid, as well as the majority of the employees. The board of directors actively promotes a constant exchange between the software engineers and the consultants. Hereby the market needs and trends that are detected by the consultants in their meetings with the clients inspire new development ideas to be translated into new products.
The sales approach is direct and consists of various parts: First contact: In general the directors of the business units initiate the contact to the poten- tial clients by means of personalized presentations of the products and services provided by Test pilot. It's a common business practice to offer the elaboration of a test pilot based on real client data, studies that are conducted by the consultants specialized in the respective tools in close collaboration with the future users.
Sale: If the case of mere license sales, the training and further post-sales tracking are provi- ded by the consultant, while the technical questions will be resolved by the software engine- er in charge of the tool. In respect to the consultancy projects the directors would be in char- ge of pricing, budgets and project management while the consultants develop the projects.
Tracking: Any interaction with a client can be the source of new business opportunities; the- refore a detailed tracking of the project and further needs of all clients is integral part of the sales process.
NEXIUM CUSTOMER SOLUTIONS "Nexium sponsors national TradeMarketing and Commercial DevelopmentEvents where new technologies, trendanalysis and business practices arebeing exposed." The main marketing strategy of Nexium covers seminars and trade shows using related events strategically to create an image of trust amongst the target group. Nexium maintains direct contact to local business associations of the Consumer Goods sector to directly influence in the organization of the events, always pushing for high quality in speakers and audience. Apart from attending all mayor European events in order to network with key deci- sion takers, Nexium sponsors national Trade Marketing and Commercial Development Events where new technologies, trend analysis and business practices are being exposed.
Hereby Nexium was able to establish its name as a well-known real reference amongst the marketing, trade and sales directors of manufacturing and retail companies.
As mentioned before the international expansion of Nexium was actively promoted as of 2006. It's important to know that even before this date Nexium was realizing between 10 and 20% of its turnover outside the Spanish territory. These sales were generated in multinational companies that decided to reapply Spanish success projects at an international level. As is to be expected, these punctual sales did not follow any strategic path, nor were they stable sources of income. In order to set up the international business as a future pillar of the company, Nexium needed to secure a sustained growth level.
When creating the international department, the first task consisted in finding the ideal busi- ness model and several preliminary conditions were defined: Use of the same pricing model as in Spain, charging an initial license and annual maintenan- ce fee, the second being a fixed percentage of the acquired licence price to cover ongoing NEXIUM CUSTOMER SOLUTIONS service as a stable source of income.
They opted for the same billing model used in Spain- divided in the sales of licensees and maintenance, which requires an annual payment of a fixed percentage of the price of the acquired license. The maintenance assures long term predictable cash flow to maintain Nexium's growing structure. Various business model theories were evaluated for advantages and disadvantages: Business model by level of implication and control by mother company: Comercial explotation / distribution rights Market entry by jeans of a coloboration with big enterprises % of sales plus fixed quantlly base don costs Contract on internacional agent Distribution for a wide distance, independent agents, without any dan- • Commercial representation: For the clients made in the own name or in the name of the company Relaciones comerciales establecidas con Milenium • Participation in Start-Up Outline 1: Business models according to a matrix.
Opening branch offices seemed to be the ideal model to replicate Nexium's success in foreign markets. Nevertheless, Nexium did not want to lose the financial stability that had been rea- ched in the Spanish market where growth had been 100% organic. Without taking on debt, the rate of opening branch offices would not be high enough to reach the target growth.
"Profile of the local partner very similarto the Spanish founding partners ofNexium: excellent professional experien-ce in the FMCG sector, existing networkof contacts, with a clear vision and realentrepreneurship." NEXIUM CUSTOMER SOLUTIONS It was decided, that the first foreign business unit would be opened as a test and learning model for the future expansion. The branch office was opened in the proximity market Portugal with the following characteristics: - Office led by a local entrepreneur having a participation in the new business of 40%.
- Profile of the local partner very similar to the Spanish founding partners of Nexium: excellent professional experience in the FMCG sector, existing network of contacts, with a clear vision and real entrepreneurship.
- Initial direct support provided by the directors and consultants of Nexium, both in the customer acquisition and the roll-out of the first projects.
The Portugal experience has been very positive. The first year was mainly dedicated to acqui- re new customers and create word of mouth amongst the target group, covering all costs with a loan from the Spanish home office. The second year the first consultant was incorpo- rated to support the director and enable the company to offer both licenses and consulting services. The third year, the Portuguese office generates a constant and sufficient cash flow to be completely independent from the headquarters. After three years in the market the tur- nover amounts to 300.000€.
After the implementation of the international department in Spain, the initial strategic plan included the following topics: 5-year turnover objectives - Definition of the products to the exported.
- Price list.
- Identification of target markets and priorities.
- International business model.
- Definition of the international partner profile.
The international department covers the implementation of this plan. Today one manager is exclusively dedicated to its roll-out, receiving direct support by one of the founding partners Market segmentation and priorities One of the consequences of the limited resources of Nexium was the need for setting clear target markets priorities. In order to maximize the efficiency of the project, a trial and error approach was not an option thus the markets selected for the expansion had to be selected NEXIUM CUSTOMER SOLUTIONS An important indicator for the potential of Nexium's products is the sophistication of the FMCG sector. Concepts like Category Management* and ECR* essential for triggering the demand for respective software solutions, do only evolve in collaborative business environ- ments between manufacturers and retailers. The more concentrated and complex is the sec- tor, the more effort is put by both players in improving the management and efficiency of the commercial practices. Collaboration and data exchange increases and thereby the possibi- lity to perform in depth analysis of sales and consumer indicators.
THE GROWING COMPLEXITY OF THE GLOBAL MARKET 1. Customers are more connected, informed and discerning.
2. Private Label products gain real brand status.
3. Constant innovation and shorter product lifecycles demand decreased reaction time.
4. Vertical integration in the retail business (Private Label manufacturing).
5. In the global market, competition intensifies.
6. Mass merchandisers in FMCG markets are powerful players.
7. Consumerists, ecologists and other stakeholders represent a growing force.
8. Disruptive innovations upset traditional market boundaries.
Chart 2: Consequences of the growing complexity1 THE GROWING POWER OF GLOBAL FMCG RETAILERS 1. High concentration level in the FMCG distribution sector.
2. Sophistication of the private brands policies of large retailers.
3. Development of centralized warehousing and delivery systems.
4. Generalization of centalized marketing information systems.
5. Development of electronic commerce(home delivery).
6. Aggressive internationalization strategy.
Chart 3: Consequences of the concentration in commercial distribution2 In summary, an increasing complexity of market structures drives FMCG players to increase productivity and efficiency in commercial processes by means of technologic solutions, which Índice de concentración/ internacionalización Nº competidores directos (oferta de software + servicios) 11 (Klee Group, FDV Concept, BCMW, JDA/Kalista, Apollo, Nielsen, CAS HQ, Metricam, Atout merchandising, Cosmic, Retalix) 7 (Nexium, Diamond, Klee, JDA, Apollo, Nielsen, Softsolutions) 7 (JDA, Nielsen, Apollo, Solquest, Mercoline, CAS HQ, SAS) (mercado sin transparencia suficiente) 5 (XTel, JDA, Apollo, Nielsen, Retalix) 2 (Apollo, Nielsen) Table 1: commercial concentration and competition in the software market.
Source: Concentration index taken from Planet Retail, October 2001, Nb. of competitors, own survey.
1. Lambin's own adaptation, 2006 (Advanced Marketing, Universidad de Milan).
2. Lambin's own adaptation, 2006(Advanced Marketing, Universidad de Milan).
NEXIUM CUSTOMER SOLUTIONS raises the demand, offer and competition in the software market.
The market segmentation was also affected by the following characteristics of the dynamics in Nexium's market niche: Their need for an efficient Category Management System is highly related to the competition in the FMCG business of the different countries.
The presence of multinational companies drives the spread of this ECR working philosophy and the willingness to invest in related technologies.
Another important element was discovered when analyzing the North American market, and eventually led to the conclusion not to opt for an entry in the region. Apart from the fierce competition (like e.g. JDA) there are many regulations and restrictions in the software market in terms of programming requirements, official quality seals and existing patents. The effort necessary to get ready for a market entry of such dimensions was evaluated as excessive for the current company structure and size of Nexium.
A last point to be considered in relation to the market selection is the management style of Nexium. Influenced by Spanish culture the customer contact is very close and personal, yet always professional, creating a base of trust that is essential for the strategy of organic growth in existing clients.
What about markets where it's not personal relations that play an important role in the B2B interactions, but rather a more distant and rational style? Might the famous prejudice of "Spanish fiesta, siesta and unpunctuality" influence the perception of the company's compe- NEXIUM CUSTOMER SOLUTIONS Analyzing and summarizing the situation in different countries, two opposed scenarios were identified that differentiated European countries and emerging markets.
High concentration in retailers Low or moderate concentration Many multinational companies Few dominant players, high fragmentation Competition and need for profitability Competition is starting to increase, local companies not necessarily increase in the FMCG sector prepared for facing international competitors Collaboration between retail and sup- None or little collaboration Category Management as a reality Category Management mainly unknown National and international competitors of None or Little representation of competitors.
Nexium are present in all markets. Table: Qualitative comparison Europe vs. Emerging Markets. The emerging markets show an increasing demand for technology and present a constantly growing potential. Nevertheless Nexium's executives considered that the risk of entering emer- ging markets should be diversified by the presence in more mature European markets obtaining a balance between both market types.
The Latin and Central American countries seemed to be the destination par excellence for the international expansion, considering the cultural proximity and common language as a real competitive advantage. LEARN ABOUT A FIRST EXPERIENCE
The first opportunity to enter in one of the priority markets identified by Nexium was the con- tact to a Mexican entrepreneur. To replicate the Portuguese success story, Nexium considered opening a pilot office in Mexico City. The local contact was considered appropriate due to his broad professional experience in the target sector. A qualitative market study, conducted by means of interviews with potential clients revealed the following facts: - Category Management is not a common concept amongst the target, but there is high inte- rest in new management formulas coming from Europe/the USA.
- Technological solution like Nexium's are practically nonexistent and unknown.
- In general there is little trust in supporting young software companies due to negative conno- tations of instability, technical complication and the piracy threat.
- It is difficult to obtain financial support when opening a new business.
NEXIUM CUSTOMER SOLUTIONS - Reaction and decision times are long, requiring a lot of time and patience.
Nexium eventually decided not to open the planned pilot with this partner. The main reason was that his ideas were very different from the philosophy lived at Nexium where personal initiative and implication are key. He on the contrary was not interested in a "hands-on" approach as saw himself in the role of the director, strategic thinker, not as someone really knowing every little function of the tools, giving trainings and providing customer service.
Nexium demands a multifunctional approach of all directors, challenging them to gain a deep understanding of the products, their handling and application. The aim is to reduce functio- nal hierarchies that reduce the acquisition of a 360º understanding of the client needs and the most appropriate services in each case. Nevertheless Mexico was not discarded as a poten- tial destiny for international expansion.
Discuss the possible impact that this experience might have had in the internationalisation process of Nexium.
When the Portuguese office was opened, Nexium had not applied any market specific pri- cing adaptations. What first seemed a lack of strategy in the beginning, turned out to be a right decision. The first transactions with clients showed that in comparison to Spanish buyers the price sensitivity in Portugal was much lower.
Nevertheless, if Nexium was to enter in emerging and European markets at the same time, the need for a market specific pricing was obvious. Various possible tactics were evaluated: - Price Leadership.
- Leadership in product and service.
- Market and/or client specific adaptations.
The first would mean the establishment of highly competitive prices and a sufficiently higher volume of sales to cover costs and some small margins. Due to its small SME structure and its relatively low costs, Nexium's situation in 2005 seemed ideal for this type of strategy.
"Their leadership in products and servi-ces that had a competitive price butwere not aggressive would lead to a dif-ferentiation for tools that performed bet-ter in ease of use and customisation." NEXIUM CUSTOMER SOLUTIONS Their leadership in products and services that had a competitive price but were not aggres- sive would lead to a differentiation for tools that performed better in ease of use and custo- misation. The level of technological development and the capacity of the software did seem to meet the requirements of the strategy. At the same time it was not only necessary to invest in a commercial network but also in business consultants.
The mixed strategy would need a more timely treatment and a more thorough analysis of the different countries or even the different clients in each country to find the most appropriate price equilibrium for each case.
3 1. Which business model should Nexium apply in order to increase its presence in internatio- 2. Which indicators would you use to identify the target markets? 3. The product mix should be the same for all markets or adapted to the local demand? 4. How could Nexium ensure that the services provided in the foreign markets resemble as much as possible the working philosophy and service level offered in Spain? 5. From the data provided in the attachment "Global Retail Concentration", which emerging markets can be considered as good opportunities for a market entry in the near future? 6. Supposing that Nexium has decided to go with an international business model based on strategic collaboration with other companies/entrepreneurs. What kind of commercial partners should Nexium look for? How could they find these potential partners? 7. Considering the information given on the Nexium website and the attachment "Product over- view", which tools and/or serviced from the actual portfolio are the most adequate to be sold via external distributors/partners? 8. Design a pricing policy for the case that Nexium sells products via international distributors.
Take into account the current price list, the maturity of the target market and leave an attracti- ve margin for the distributor.
4 1. After opening the first Hispanic markets imagine Nexium before the decision to enter less known territory. What do you think: Which continent will be the next? Will the company be able to manage an expansion to the US? Or maybe Asia or India? Or do you think they will choose safer ground, approaching Eastern European countries in a proximity model? 2. After the first backlash suffered when trying to open the pilot office in Mexico (See "Market Segmentation and priorities") Nexium posed the following question: Should we keep on gro- wing with company owned branch offices or rather bank on external distributors and part- ners? Knowing the restricted human resources and 0% leverage policy (no external debt) of the company, discuss the advantages and disadvantages of these business models and other alternative actions.
3. Based on the information you have been working on in this case, give and estimate: Which percentage of total turnover might the international business represent 5 years from now (moment described in the case)? NEXIUM CUSTOMER SOLUTIONS An interview with Alberto Rodríguez (CEO) and Eva Herber (Responsible for Nexium's inter- national development). They are going to answer the following questions: Why and for which reasons did Nexium decide to expand abroad? What has been the most positive experience in the internationalisation process? Alberto Rodriguez, one of the co-founder of the company and head of the Category Management business unit is today the Managing Director of Nexium. Before, Alberto had been working in several leading positions in consumer goods companies like e.g. as Trade Marketing Director in L'Oréal and Sales Director in Kraft.
Eva Herber is the International Development Manager of Nexium. After finalizing her studies of International Business at ICADE she worked as Assistant Brand Manager at Procter & Why did the company decide to approach the process of international expansion? Alberto Rodríguez: The idea to expand our business to other markets was there from the beginning. Nevertheless, the final push came from our clients. We were working with interna- tional subsidiaries of multinational companies and when we were finalizing the first success- ful projects they started to talk about Nexium in their international meetings. Before we even realized what was happening our software had been installed in over 40 countries. The rea- son to consider going abroad was that our business is very much based on a direct contact with the client and it's impossible to maintain that at long distance. Therefore we decided to create an international department and begin to develop the internationalisation in a more strategic and organized way.
Which business model are you implementing to cover the international marketplace? Eva Herver: We have established two different models to adapt to different market characte- ristics and also the different business partners we have found. On one hand we have opened branch offices in Portugal and France, on the other hand we have entered collaborations with other independent companies that distribute the software for us.
The subsidiaries have been opened in proximity markets that we know quite well. It helps us to reapply the knowledge we achieved in the Spanish market and we got quite involved in the beginning. We think the experience helps a lot to approach the first clients, so we travel a lot to support the local partner in the first presentations, the quotations, etc. The idea is to trans- mit our Spanish business model.
In Italy and Greece this model could also work, but for the moment we are collaborating with a local company that is very well established in the sector. We wanted to leverage the oppor- tunity to collaborate with them, that's why we are not pursuing the idea of a subsidiary in Italy.
But maybe one day both company end up in a joint-venture, we could consider that.
With the collaboration model we cover remote markets like Chile, Mexico, Ecuador and South Africa. We found some interesting opportunities to partner with local companies that have a complementary business to ours, approach a similar target and were already operating in the market. Of course this model needs much less direct implication from our side, but at the NEXIUM CUSTOMER SOLUTIONS same time you can influence less. The distributors all have different sales arguments to sell the tools and after one year of operations some really work well but others are having a slo- wer start. We should not forget that everything is very recent for all of us.
What are the criteria you apply to select a distributor? EH: There are three important factors: First of all it's fundamental that the company knows the consumer goods industry in the local market. They need to be very clear on the current issues that manufacturers and distributors are struggling with in their day to day. They should talk the language of the client and know what's interesting for them. Only like this they will be able to create an interesting and rele- vant approach, not only offering a software tool but a real solution to their current issues. The second requirement is related to their own business and the clients they serve. The com- pany should have a very similar target group only like this it will be really interesting on the long run to add our product to their portfolio. Maybe they should not serve the same depart- ment so that the product end up competing for budgets, but to work with the same sector is important. If the additional product line helps to create a stronger link to their own existing clients, they will dedicate much more resources and effort to selling them. It's in their own interest, it's more than an extra source of income and that's beneficial for the whole partners- The third is much more intuitive, I'm talking about trust. Many time we did not have a lot of time to get to know each other, but there are details and impressions that can give you a very good idea of who this person will interact with clients and with yourself in the future. There's the enthusiasm about the common project, the competence s/he inspires, the work philo- sophy, the personal interaction and many more indicators. It's just a mix of many impressions but finally it is this gut feeling that will convince you (or not) to work with that partner in the What is the most positive side-effect of the internationalisation process? AR: For us it's like passing a higher level of exam with our tools. The multinational companies have very elaborate supplier validation processes and it was good for us to go through these (sometimes hard) evaluation procedures. Also the kind of application they are looking for is surprising from time to time, so we end up testing our own strengths and flexibility as well as learning about weaknesses. In Spain we have a very good standing, the clients are very happy with us and this situation is wonderful, but it's also dangerous. You might become too complacent and suddenly you fall behind. Being present at an international level forces us to be dynamic and alert.
At a business level it has been very interesting as well as we were able to penetrate new mar- ket segments that we were not able to enter in Spain. In the future we can leverage these experiences to contact similar companies in our home market.
If your growth at international level continues like this, what changes are you expecting to happen in the company? AR: I think the most important change to happen is an increased number of employees in our NEXIUM CUSTOMER SOLUTIONS headquarters that are fully dedicated to international projects, both the number of consultants and software engineers. For the moment we would not be able to cover that increase in demand of services but we know that outsourcing is an important topic so we are consi- dering to include services in our international portfolio. Apart from that the international department would pro- bably need to grow in order to ensure the knowledge transfer and contact between Nexium and its partners.
We accumulate so much knowledge in Spain we really should need it to create synergies, so that some of our partners does not have to reinvent everything when it's the first time he is facing a certain type of issue. Apart from that a project made in South Africa could just be the crucial proposal that our partner in Mexico is developing. Guaranteeing this flow of information is the responsibility of our international department: create materials, success stories, case studies, newsletter, events, etc.
When we look at the revenues of Nexium there is a date that calls the attention: even before 2006, the year of the creation of the international department, international revenues amoun- ted to 17 to 23%. Could you explain this? EH: This is due to the projects in international clients we mentioned before. For example, we created an ad hoc tool for a multinational company. The initial development was created and invoiced to the Spanish Business Unit and the headquarters of the company but then the pro- ject was expanded to many different countries. By accumulating several similar cases we rea- ched these relatively high percentages of "passive" internationalisation.
Nevertheless these sales were mere consequence of doing a good job with the locals we had not planned strategically to sell licenses in Finland, Russia or Japan which is what we ended up doing. The distances make is very difficult to provide the service level we think is neces- sary to satisfy the needs of our software clients therefore it was absolutely necessary to go international as a company. NEXIUM CUSTOMER SOLUTIONS Efficient Consumer Response, see attachment "What is Efficient Consumer Response" Space Management: Refers to the strategic management of the shelf space available in a store for the exposition of the products by means of planograms. The objective is to optimi- ze variables like space profitability, product rotation, out-of-stocks and the coverage of the demand. Space management requires and active collaboration of manufacturers and retai- lers and is an important pillar of Category Management.
Category Management A process of collaboration between manufacturers and retailers to manage the product cate- gories as business units in order to improve results and increase value for the end consumer.
See attachment "Category Management FAQ" Representation of the fixtures and shelves of a store that recreates the real situation by means of product images, showing the quantity of exposed products, the placement area and mer- chandising criteria that have been applied to organize the different brands and segments on the shelf. Crossing this "picture" with sales and consumer data enables Trade Marketing managers to analyze financial and commercial criteria to improve the implementation.
Creation and analysis of planograms by means of software tools - one of the related services that Nexium offers to clients. The total range of products offered in self-service stores (supermarkets, hypermarkets…).
Normally the mix is divided in several product families/categories that are exposed in the same area of the store. Depending on the store format the mix differs in width (of different product categories being offered) and depth (number of products offered within each cate- gory). Specialized stores have a very deep mix in a reduced number of categories, whereas supermarkets offer a wider range of different categories with a smaller number of different products in each category.
NOTE: A detailed description of the different tools, their functions and scopes of use cans be seen in the following webpage: in the "solutions section".
NEXIUM CUSTOMER SOLUTIONS - - Information on the sector: - Spain: (search for articles published in CODIGO 84) - International: - International: - NEXIUM CUSTOMER SOLUTIONS APPENDIX 1: NEXIUM'S COMPETITORS
JDA is an American software company, listed at the New York Stock Market and is the glo- bal market leader in the segment of merchandising and supply chain software. With over 5.500 clients, JDA is present in more than 60 countries and counts with a network of 150 partner companies. In 2006 its total revenues amounted to 277,5 million dollars, $49 million coming from license sales and $129,3 from maintenance fees. Eight business units offer a vertical service to various industries, although historically the focus is on the retail and manu- facturing industry.
In Spain JDA had always been the biggest competitor of Nexium, nevertheless due to the negative trend of sales development, in 2006 Nexium pulled up to equal the revenues and finally gained market leadership in 2007. The products that compete directly with the Nexium offer are grouped in the business unit "Demand & Supply Optimization". JDA not only offers their own developments, but has acqui- red two software companies called Intactix and Manugistics to complete their portfolio. Efficient Item Mix by Intactix (vs. Nexiums AT Pro Mix Targeter Professional).
Space Planning by Intactix (vs. Nexiums MSA Merchandising & Space Advisor).
Floor Planning by Intactix (vs. Nexiums SPD Store Plan Designer).
JDA Promotions optimization (vs. Nexiums EPM Efficient Promotions Manager).
JDA Demand by Manugistics (vs. Nexiums NFC Futurecast).
In total the company offers 35 different standard solutions on their website. (LINK to: Being a multinational company, JDA has clear advantages over Nexium in terms of potential investments, the acquisition of other companies and human resources. Nevertheless given the size of the organization, JDA cannot offer neither the direct contact to the clients, nor match the flexibility and agility of a SME.
Do you think that users having a technical issue with one of the JDA program, will be able totalk to the software engineer who created the program who will know how to solve the pro-blem in an instant? In Nexium "it's possible"! Most people know AC Nielsen as a global leader in market research, retail panels and the famous home scan. The company is present in over 100 markets and is part of a global group that reached global sales of 2.360million€ in 20063 . Nevertheless, few people know that the division Merchandising Services offers a technological suite for merchandising: the Spaceman Suite.
3. Financial Statement 2006, The Nielsen Company, p.70. Refers to the results in 2006 befo-re and after the acquisition of Nielsen by Valcon Acquisitions, from the business unit "Marketing Information" that includes its "Retail measurement" services. These are Nexium's competitors.
NEXIUM CUSTOMER SOLUTIONS The suite had been developed by a company called Logistics Data Systems that was acqui- red by Nielsen by the end of the 80s. Being the first Space Management tool on the market, Spaceman was a sound success and become the first gold standard in merchandising soft- ware. Nevertheless, the core business of Nielsen is market research, so gradually the cons- tant investment necessary to maintain development and innovation in the software business was reduced.
Due to the development of more and more competition in the segment and the consequent loss of its unique position, AC Nielsen did not only reduce its investment in technological development of Spaceman but also decided a drastic price cut.
1 License of Spaceman Table 2: Spaceman's price index.
Low prices have become the own real competitive advantage. Nielsen offers Spaceman as part of an integrated package of services in order to create loyalty of retail and manufacturer clients for their core business.
Imagine the following situation. You are consultant at Nexium. After long hours of preparationof a software bid in a new client, you finally receive their decision. The users preferred yoursolution by far, but nevertheless the project will be given to another competitor due to hispackage offer they made, including other services. What strategic conclusion could youextract from this? OUR CONCLUSIONS: Although Nexium plays in a very specific market segment, this doesnot mean that selling only one product or one product line is enough to be competitive. Toreally cover the whole demand of the target group Nexium had to diversify the offer within theniche, including related services and other product lines. Apart from all the reductions in quality and innovation, Spaceman still has very many key clients of the market, especially in the retail sector like for example Carrefour and El Corte Inglés. In the early days of Spaceman, these companies invested a lot of time and money in the initial implementation of the tool and adapted their IT systems to its processes and data requirements. Although nowadays there are much more powerful and competitive tools on the market, AC Nielsen can maintain these clients, as the effort necessary to make a system change would be very high for them.
These experiences of software implementations, have led to the fact that today it is seen as a competitive advantage being able to offer products that adapt to the systems and require- ments of the clients, instead of asking the client to adapt its systems to the software. This is just what Nexium does.
Information Resources Inc.
The last important competitor we should mention at this point is Information Resources Inc., an American company of market research, consulting services and related technological pro- ducts with presence in all mayor European markets (Germany, France, UK, Spain, Italy and the Netherlands).
NEXIUM CUSTOMER SOLUTIONS IRI claims to be world leader of market information Solutions, based on the fact that 95% of all manufacturing and retail companies of the Global Fortune 5004 index are working with As a specialist in market research in consumer goods markets, IRI followed AC Nielsen's stra- tegy and expanded its business into the area of space management tools buying an existing software suite called Apollo.
As IRI did not cut down development efforts after acquiring the programs but kept striving for innovation and new functionalities Apollo is quite a powerful tool box and a serious competi- tor of Nexium. Although their market entry was more difficult being the second company with the same profile in the market Apollo has reached high market penetration both in the US and Europe. Concerning Europe, their success was varying from country to country, which can be explained by the different distribution strategies the company had selected. In countries where IRI went for direct distribution via own offices they were able to reach leading positions and a portfolio of important clients (e.g. Italy and France), whereas the model based on independent distributors was not as satisfactory (e.g. in Spain).
Links to the help Web site: Total Store (vs. Nexium Store Plan Designer): Space Management (vs. Nexium Merchandising & Space Advisor): APPENDIX 2: DEVELOPMENT OF VARIOUS INDICATORS 2004-2007
Table: Development of various indicators 2004 - 2007.
4. Annual ranking published by FORTUNE magazine listing the world's biggest public and private companies by yearly reve-nues. The ranking only includes companies with revenues exceeding 1o billion USD like for example WalMart, Carrefour, Procter & Gamble, Nestlé, Coca-Cola etc.
Table: Turnover Nexium 2003 – 2007.
*estimation for year ending in 2007.
Table: Headcount development.
Evolution number of employment.
The evolution.
Natural process.
DEFINITION: Category Management "A process of collaboration between retailers and manufactures that enables them to mana- ge product categories like separate strategic business units in order to improve results and create value for the consumer." ECR Committee 1992.
What is Efficient Consumer Response? It's a strategic model defined by a collaborative approach between retailers and suppliers with the aim of providing value for the consumer and a greater global efficiency in the distribution process. It requires a high degree of commitment between both parties since this goes beyond the traditional boundaries of price negotiations and hence eliminates the barriers which creates costs and reduces the value delivered to the consumer.
The objectives of ECR are: - Maximize consumer satisfaction.
- Minimize costs and streamline the distribution process.
- Reduce inventory levels.
ECR is a process of continuous improvement, where the organizations and its commercial partners, progressively implement ECR strategies, firstly through pilot tests, and later through an increasing number commercial collaborations.
The strategies optimize different levers in the value chain in order to improve the process, from the manufacturing stage to when it is in front of the consumer. These are classified into four types: strategies for demand management, supply chain, enablers and integrators.
.3: ECR strategies that optimize the demand and supply levers.
NEXIUM CUSTOMER SOLUTIONS Demand Management Includes everything associated with understanding and managing, the demand for products and services.
It translates into the concept of Category Management defined as a collaborative process between manu- facturer and retailer whereby they treat each category as a strategic business unit with the aim of maximi- zing the value created for the consumer. It implies a direct impact on the level of consumer satisfaction, sales growth, and market share for the organizations involved.
Supply Chain Management This is focused on three different concepts, each of which covers a different need for the efficient flow of goods through the Chain.
Enablers are focused on development of product identification, data management and processing capa- bilities that are needed to permit accurate and timely communication and registration of goods flow bet- ween trading partners. Examples of enablers includes category management software, EDI, Data ware- housing, etc.
The new Integrators domain in the ECR Scorecard adds truly integrating concepts to the ECR platform.
Two concepts have been defined, the first one being Collaborative Planning Forecasting and Replenishment that is the ultimate Responsive Replenishment facilitator starting with specific partners. The second concept is E-Business, Business to Business that explores new ways of doing business using public standard-based networks.
What are the benefits of the ECR initiative? - Higher sales.
- Optimization for the sales force.
- More efficient promotions. NEXIUM CUSTOMER SOLUTIONS The role of Nexium Customer Solution in the ECR initiative: - Provider of integrated technology solutions for both suppliers and retailers - Development of category management tools based on ECR concepts and r - Range Optimization (ATPRO) - Space Management (MSA) - Promotional Planning (NPP) - Optimizing Promotions (EPM) - Consultancy services and development of tools focused on optimizing the - Role of an enabler - Standardization of information through commercial software - Integration of data or services (Data sharing) and tools (MDI) - Better space management. - Improved availability and mix.
- Lower prices.
- Fresher and better products.
- Sales more in line with consumer demand.
Supply Chain Management - Greater flows, lower stock.
- Increased level of service providers.
- Trust and collaboration between commercial partners.
- Better time management for buyers and sellers.
- Lower operational costs (working capital, management, distribution, storage, etc.). Enablers / Integrators - Standardization of procedures.
- Data integration.
- E-commerce.
1.What is the relationship between Category Management and ECR? ECR´s strategies of demand and supply help develop tools (such and EDI) and models for joint collaboration between retailers and suppliers (as is Category Management). Category Management is a process that offers the benefits of the four part ECR strategy (Range mix, Promotions, New launches, and Efficient replenishment).
2. Who should engage in Category Management, the manufacturer or the retailer? Category Management is a process of optimizing space, price, promotions and the supply chain. Decisions that are typically taken by the retailer. However the aim of category mana- gement is to understand the final consumer in order to better serve their needs.
NEXIUM CUSTOMER SOLUTIONS Since the knowledge both parties have on the final consumer is complementary, it is impor- tant that both collaborate to create a joint vision for the category and the tactics and strate- gies that result.
3. What quantifiable benefits does Category Management offer? The benefits of Category Management are the following: - Greater consumer satisfaction.
-Lower marketing and system costs due to increased productivity and non-confrontatio- nal approach to the negotiation process.
- Increased productivity in management practices when using tools that aid with strategy and the day-to-day decisions.
- Better planogram, promotions and mix that result from the collaborative strategic deci- According to ECR category Management can offer: Increase in sales and margin Increase in stock returns Decrease in inventories Labour efficiency According to a survey carried out by Roland Berger & Partners Group in 45 Category Management projects around the globe, the average benefits have been: - A 13% increase in retail sales.
- Increase of 17% in the retailers gross margins. -12% increase in manufacturer sales.
4. Who benefits most from Category Management the manufacturer or the retailer? Both -The main beneficiary is meant to be the final consumer which is the common goal that both retailers and suppliers share.
-However both retailers and suppliers benefit from this process since they develop a more collaborative, stable and long term relationship.
-In addition operational execution is consistent with the strategies of both parties.
5. Is it necessary to have a space management programs in order to develop Category Not necessarily. Category management offers an ample methodology to improve the perfor- mance of a category, in terms of mix, promotions, price and also space. However using com- puter programs to manage these factors can deliver multiplying effect in terms of efficiency.
In addition it standardizes the criteria and language used within and between organizations offering a standardized approach to the process.
NEXIUM CUSTOMER SOLUTIONS Nexium's role in Category Management: Provider of technological tools that support manufacturers and distributors in managing Offers comprehensive consulting services, such as mix optimization, improvement of the implementation and use of the shopping space, store design, analysis of promotions, nego- tiation of the introduction of new launches etc. Example of the application of Nexium's tools: In a demand management optimization project it is recommended to start with the analysis of the layout of the shop, the mix and the exhibition space de of this mix and adapt it to the basis of various economic variables. To do this Nexium applies the following tools: SPD, AT Pro and MSA. Then we could analyse the promotions (with EPM) whose behaviour and suc- cess is highly influenced by the first three leverages. However, only clients with a sophistica- ted level in their management processes and data tracking can systematically analyse some- thing so as complex as promotions. The implementation of the NPP tool helps in gathering all the necessary data which would otherwise not exist).
Sales Intelligence Table 3: Characteristics of the tools per business .
RELEVANCE FOR THE CASE: The picture of evolution in Latin American retail and consumer goods industry can be pictu- red by looking at the size and influence of their grocery retailers. The presence of internatio- nal players and big local chains drives the sophistication of business practices and therefore the demand of technological solutions like the ones Nexium provides.
The following extract provides an approximate picture on the driving forces of retail develop- ment in Latin America and might be used as an indicator of internationalisation opportunities PRESS RELEASE - For Immediate Release Top 20 Grocery Retailers in Latin America, 2004 MEXICAN RETAILERS OFFER AN UNEVEN PICTURE Despite continuous efforts from the three main local Mexican players Soriana, Comercial Mexicana and Gigante to neutralise Wal-Mart's increasing weight in the Mexican retail scene - as evidenced by the Sinergia buying group set up by the local retailers two years ago - no significant results in terms of competitiveness have been achieved so far. In fact, Comercial Mexicana and Gigante posted very modest sales results in 2004.
However, not everything is bad news for the Mexican retailers. Soriana, for example, has firmly consolidated itself as the largest local retailer in the region, with sales of almost USD4 billion, 13.9% higher than in 2003. The retailer opened a total of 24 large stores during 2004 and is to spend up to USD350 million this year to open further new units, some of which will be outside the group's traditional base of northern Mexico and closer to the country's cen- tre where arch-rival Walmex dominates.
The smaller Oxxo and Chedraui are also two clear examples of fast growing retailers. Oxxo is the largest convenience store operator in Latin America and the fastest growing retailer from the Top 30 in terms of organic growth. The retailer posted a net sales increase of 23.9% to MXP22.8 billion (USD2,019 million) in 2004, with like-for-like sales growing by 8.9% over the same period. By the end of last year, the retailer operated 3,466 OXXO stores nationwi- de, an increase of 23.9% from 2003. As for Chedraui, this retailer has grown significantly in the past years, and its acquisition of the 31 hypermarkets operated by Carrefour in Mexico promise to continue speeding up the growth of a retailer with serious aspirations to compe- te head-to-head with the big players.
CHILE PLACES THREE RETAILERS WITHIN THE TOP 10 Chilean department store operator Falabella is a real rising star, as it entered the ranking in sixth position following its USD62.5 million takeover of local superstore chain San Francisco, a move that marked Falabella's debut in the grocery business. However, although San Francisco was the fifth-largest retailer in Chile, this supermarket chain, like all Chilean grocery retailers, ranks far behind market leaders Cencosud and D&S in terms of size, and Falabella NEXIUM CUSTOMER SOLUTIONS will probably end up having to buy at least another chain if it wants to make a genuine impact in the market. The obvious candidates are Unimarc, Monserrat and Montecarlo, all of which are a similar size.
As for D&S and Cencosud, both retailers have continued generating aggressive growth rates, both in Chile and beyond. Cencosud has continued strengthening its position in South America, carrying out a string of acquisitions (Las Brisas and Montecarlo in Chile and Disco in Argentina). This has propelled the retailer to the top of the local retailers in the South Cone, with estimated sales for 2005 of around USD3,500 million.
D&S's growth has been driven by store expansion, the acquisition of the Carrefour network, a new every day low price strategy and the development of its financial services offer. Thus, the retailer has recently set up its Presto Servicios Financieros subsidiary, which provides financial services such as consumer credit, insurance and travel services. However, despite D&S's notable growth, the retailer's performance is being hindered by the implementation of its low price strategy, which is beginning to seriously affect profits. The group's poor perfor- mance has also been attributed to the costs of unification of the retailer's banners under the Lider brand, which brought an end to the Ekono and Almac supermarket fascias. Both the low price strategy and the adoption of the Lider brand are intended to reduce costs and improve efficiency, but it still remains to be seen whether D&S will be able to effectively utili- se these measures to improve results.
Other retailers worth keeping an eye on further down the ranking are local retailers Coto from Argentina, Peru's Wong and Olimpica from Colombia. Coto is taking advantage of Argentina's economic recovery, opening new stores and increasing sales. Thus, the retailer posted a 2004 increase of 13.8% to USD853 million, and is positioned as the third-largest retailer in Argentina. Coto plans to open around 30 new stores this year, but only if the retai- ler manages to access the necessary financial backing to fund the openings.
As for Wong, the retailer ranks 22nd in the Top 30, and stands firmly as the leading retailer in Peru. Wong posted a gross sales increase of 10% during 2004 to USD718 million and plans to increase sales by 20% during 2005 to USD850 million. The retailer is making an important effort to improve and modernise its stores (the last move was the rebranding of all E.Wong superstores into the new Wong corporate fascia in June 2005), helped by a favourable eco- nomic environment in Peru. The retailer is also diversifying into new formats, namely Eco dis- count supermarkets and American Outlet non-food discount stores, with which the retailer wants to gain market share in Peru.
Lastly, Colombia's Olimpica seems to be the most ambitious retailer of the lot. The retailer posted a 18% sales rise in 2004 to USD563 million, and has initiated an expansion process that is going to see the retailer's position reinforced in Colombia and abroad, as the company wants to operate in different neighbouring countries such as Ecuador and Panama in the medium term. So far, Olimpica has recently acquired 50% of Costa Rican retailer Megasuper, becoming one of the few international South American retailers.
NEXIUM CUSTOMER SOLUTIONS Latin America: Top 20 Grocery Retailers, 2004 Country of Origin Net Sales*(USD mn) 9 D&S (Distribucin y 16 Modelo Continente 17 Safeway (Casa Ley) 18 Lojas Americanas Notes: e-estimate.
* Net sales of the international retailers only reflect the retailers' shareholdings in the Latin American countries where theyoperate, while retail banner sales reflect total sales of the retailers' operations and shareholdings in the region.
** CCM is engaged in a 50:50 joint venture with Costco Wholesale Corporation to operate Costco warehouse stores inMexico, and therefore 50% of Costco sales have been consolidated into CCM's net sales. However, these have not beenattributed at Retail Banner Sales level, since Costco also appears in its own right in the ranking.
Source: Planet Retail Ltd - Looking forward to 2009, Latin America's top retailers will be roughly the same as today. Wal- Mart will continue to dominate the ranking, largely due to its continuous expansion in Mexico and to a certain extent also to its Brazilian operations. Carrefour is likely to consolidate its second position thanks to a strong expansion drive, particularly in Brazil and to a much les- ser extent Colombia. Mexican retailers will keep their pre-eminent positions in the ranking, as the local economy NEXIUM CUSTOMER SOLUTIONS continues to grow and rising consumer spending finds its way into stores.
Chilean retailers Cencosud and D&S are bound to strengthen their positions in the ranking, helped by aggressive expansion, particularly Cencosud, which will climb to fifth position. As for Falabella, it is likely to fall from the fifth to the 10th place, as its limited grocery operations will act as a brake on further growth.
Depending on the extent of the economic recovery during the next years, the slow but relen- tless concentration process will continue, together with an increasingly larger modern grocery distribution sector, particularly in the so-called engines of the region: Mexico, Brazil and the Source: Planet Retail Ltd - APPENDIX 9: CONCENTRATION IN THE MASS CONSUMPTION SECTOR
Relevance for the case: Nexium Customer Solution provides technological solutions to help manufacturers and retail to improve their performance in increasingly complex and concentrated environments.
Therefore the respective indices can be helpful to determine future growth potential as well as understand why certain markets have higher demand for Nexiums software solutions than As an example France, being one of the most concentrated markets in Europe is the leading country in Merchandising and Category Management topics, resulting in high demand for technological solutions in consumer goods companies.
Global Retail Concentration Release date: 8 October, 2001 For more than 10 years, Planet Retail has closely followed the activities of the world's largestinternational grocery retailers. Using our extensive global retail database, we have developeda unique index that measures the level of internationalisation that individual countries haveachieved. The index is based on the total number of international retailers who have openedstores in each country and can be used to measure the degree of popularity and the growthpotential in retail markets across the world. Whilst countries such as France, Poland, Spainand Germany are well populated with international retailers and therefore unlikely to see sig-nificant growth levels, there is plenty to play for in other areas of the world. The battlegroundsof the future are likely to be fought in markets such as China, Russia, India and Japan, whilstfurther development in the Middle East and Africa is being put on hold as long as the politi-cal scene is clouded with uncertainty.
In the past 10 years, the world's economy has experienced accelerated levels of globalisa- tion, and the retail industry has been no exception. Saturation and restrictive planning legis- lation in developed markets have prompted operators to look abroad for growth opportuni- ties. Variables such as a growing population, expanding income, fragmented retail markets and changing shopping patterns have all encouraged retailers to enter foreign markets. Furthermore, the necessity to achieve economies of scale via growth in order to become NEXIUM CUSTOMER SOLUTIONS more competitive and successful, together with the advantage of avoiding local economic downturns by being present in different markets and regions, is prompting retailers to expand and internationalise further. An analysis of the Planet Retail Database, which tracks the Top 30 International Food Retailers, gives us a picture of which countries have been the most widely exploited by inter- national retailers. Western Europe and United States are without doubt the two areas where most companies operate. This is understandable, since the vast majority of the Top 30 origi- nate in this area, which also generates around 43% of the world's GDP.
35 Most Internationalised Countries Number of International NEXIUM CUSTOMER SOLUTIONS Republic Of Ireland * Planet Retails Internationalisation Index has been generated by identifying the total number of retailers in each market and indexing this against the average. It is only based on those countries where stores have opened and does not include countries with stores in the pipeline.
Source: Planet Retail - LEVELS OF INTERNATIONALISATION France, with 14 international grocery retailers, has the largest presence of international ope- rators across the world, with an index of 356. However, with 80% of the French grocery mar- ket captured by five French operators, there has been little scope for extensive international presence. Nevertheless, German operators in particular have exploited a gap for hard dis- counting which was largely neglected by domestic operators in pursuit of hypermarket deve- Carrefour is the biggest French grocery retailer and the second biggest in the world. After Marks & Spencer, the company is the second most international operator, with a presence in 28 countries. Once Marks & Spencer withdraws from most Western European countries and the US, Carrefour will be the most expansive international player. Outside the Triad (United States, European Union and Japan), Poland has emerged as the country with the most internationalised retail market, with 13 of the Top 30 companies ope- rating there. Undoubtedly, Poland has been experiencing a huge transformation since the fall of the wall. The country has adapted well to the market economy, and at the moment enjoys one of the fastest economic growth rates in Europe, with 4.3% growth estimated for 2001 and 4.6% for 2002, well ahead of most European economies.
Furthermore, with around 38 million inhabitants (similar to Spain), it is a big and well popula- ted country by European standards. It is also one of the countries set to accede to the European Union in the next phase of expansion. Combined, these factors have made Poland a key target for expansion in Eastern Europe. Retailers, especially the Germans and the French, have rushed to control a market from which local operators have effectively been Spain is the third most internationalised market, with total sales from the Top 30 of USD29 billion in 2000. Since the mid seventies, the country has been a strategic market for Europeans, from France and Germany in particular, to the point of being the second most NEXIUM CUSTOMER SOLUTIONS important market both for Carrefour and Auchan. Retailers have been attracted by its size in terms of per capita income, its fragmented market (dominated by independents and regional chains), its relaxed planning environment and changing social patterns underpinning demand for modern, superstore retailing. In addition to the French and Germans, it has also acted as a magnet for Dutch chains Laurus and Ahold, Modelo Continente (Portugal), and Marks & Spencer (UK).
The United States, with an index of 280, is another country which has been widely exploited by international retailers. In this case, the very size and importance of the biggest retail mar- ket in the world justifies that presence, commanded by Wal-Mart, which ranks first in the world and alone accounts for almost 2% of global retail sales.
At a time when the US economy is on the verge of recession, Wal-Mart is motoring ahead with the most aggressive expansion programme in its history. By the end of the fiscal year, the company will have added 3.7 million square metres of new retail space, a 9% increase over last year's total expansion. With a presence in 10 markets, Wal-Mart is the most inter- national American retailer. However, it lags behind other international players such as Carrefour and Ahold, with international sales still representing a relatively small proportion of total sales (around 20%). Generally speaking, American retailers have shown a far less aggressive attitude towards expansion abroad than their European counterparts. Most American retailers only have a regional presence and still have a lot to play for in their domestic market. Despite its attrac- tions, the US is a difficult market to penetrate with takeovers of existing companies tending to be a more successful entry strategy than organic development.
International Retailers in the United States in 2000 Country of Origin Turnover (USD mn) Number of Stores Delhaize "Le Lion" Source: Planet Retail - Other major European markets such as the UK, Germany and smaller countries like Portugal, NEXIUM CUSTOMER SOLUTIONS the Czech Republic and Belgium also have a high presence from the Top 30 retailers.
Germany is the fourth most internationalised market, and is also the base for six Top 30 retai- lers, including Metro, which is present in 22 countries. Italy, with just seven Top 30 retailers operating in its territory, all of which are French and German, constitutes the exception between the major countries of Europe, due to restrictive legislation and onerous bureaucracy impeding store development.
Other examples of heavily internationalised countries are Thailand and Taiwan, both with 10 of the Top 30 retailers. Thailand has historically adopted a fairly liberal policy towards attrac- ting foreign companies and encouraging store development. However, this could change because pressure from local retailers is prompting the government to tighten retail regulations regarding opening hours and store development.
TOP 30 International Grocery Retailers by Turnover No. of countries Country of Origin Delhaize "Le Lion" NEXIUM CUSTOMER SOLUTIONS El Corte Inglés Dansk Supermarked Modelo Continente Source: Planet Retail - Latin America, which is finally beginning to enjoy a relatively long period of economic growth and enjoys a considerably sized middle class, is becoming an important region for retailers to target. An example of this importance is the fact that Brazil, Argentina and Mexico rank within the top 25 most internationalised markets. Companies like Ahold, Carrefour and Casino alre- ady have a significant presence in the area. French retailers have been particularly success- ful at penetrating these countries, possibly due to a greater understanding of local cultures and lifestyles.
Russia will see a rise in its degree of importance over the next few years as retailers amass around the capital. Auchan is planning to open its first hypermarket in Moscow next year, Edeka has received planning permission to develop a hypermarket-anchored shopping mall in the city, whilst Metro has announced the development of a chain of up to six Cash & Carry stores in the greater Moscow area by 2005.
* This article is extracted from the report 'Global Retail Concentration', a full copy of which is available from Planet Retail. APPENDIX10: NEXIUM'S SUCCESSFUL CASES IN SPAIN
Nexium's successful cases in Spain Category Development Project. To create a homogenous and integrated system bet- ween the Coca-Cola management and Spanish bot- tlers to offer Category Management services to their clients. To increase the number of categories for soft drinks in each store.
NEXIUM CUSTOMER SOLUTIONS Adapting mixs and space to the requirements of each store. Collaboration between Producer + Bottler +Distributor. Joint growth.
Sharing information. Developing software for Key Account.
To develop a new tool that will optimize and harmonize client's strategic planification by using cutting edge .
Unifying the methodology used by the entire commercial team. Ability to translate client language into the financial language of HESA.
Unification of the account plans to generate HESA commercial plans. Monthly follow up of account objectives. Development of personalised software at international level.
Mix analysis.
Promotion Analysis.
Develop tools that allow for international implenmentation of a uni- fied process that analyses mixsand promotions.
Taylor made solutions. Unifying the method.
Simple and efficient solutions. Work in the same direction. Shared global knowledge. Developing an integrated solution for the management of point of sale.
Develop tools that allow the comercial team tha visits the points of sale to analyse the mix, with guides and establishe d processes cand optimi- zing the flow of information between the head offi- ce and the point of sale. To act in the most coordinated and efficient way towards a common goal.


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