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Changellenge | Cup Kazakhstan 2016 | Leroy Merlin case | 1st place

Adaptaion of Leroy Merlin Concept to the Kazakhstani Market
Solved by Crea' ture team
-Araylim Abetayeva
-Zhiger Kairatuly
-Rassul Abdullayev
-Pak Karina

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Changellenge | Cup Kazakhstan 2016 | Leroy Merlin case | 1st place

  1. 1. Hyper solution for hyper market
  2. 2. The following strategy would help to gain the market leadership by 50% by 2022 and enter Top 5 employers of Kazakhstani labor market.2 Purpose Solution EffectPremises Purpose Solution Result Undeveloped DIY modern trade market, low level of competition Growth tendency in construction of new households Discounters are becoming popular among the consumers Although the income is growing consumers are price sensitive Development of new strategy to enter the Kazakhstani DIY market E-commerce Omni channel strategy EDLP Strategy (Russian adaptation) Service-oriented marketing strategy Location & branches Leader of the market in 5 years Leroy Merlin in Top 5 HR Brands Premises Purpose Solution Result
  3. 3. Excellent Service High Prices Stroy cityStroy city KurdasTastak Kenzhehan Sauran Low Prices Low Service B) According to Perceptional Map there is opportunity niche for business with excellent service and low prices which Leroy Merlin could take. D) Monthly earning in accordance to Minimum monthly wage is increasing as well as the population of Almaty , thus we assume that purchasing power is increasing as well. a) Economic situation b) Perceptional map c) Production d) Power of buyers 3 A) According to real estate exploitation, GDP and materials’ production growth, the niche of DIY market in Kazakhstan is profitable from the economic point of view. 0 400 800 1200 1600 2010 2011 2012 2013 2014 2015 2016 0 50000 100000 150000 0 20 000 40 000 60 000 80 000 2010 2011 2012 2013 2014 2015 2016 Monthly earning used in consumption in Almaty, tenge Minimum Monthly wage , tenge 1,2 1,4 1,6 1,8 2013 2014 2015 2016 Population of Almaty, mln ppl C) Leroy Merlin can cooperate with local companies which produce dry mixes and paints, but import decor and electrical goods from Russia and Turkey Constriction materials Kazakhstani Market Abroad Market Dry mixes LLP "BIG-ELIT" , LLP KAZGER, LLP «Cement factory «Semey» Paints LLP "Concern Bakarassov", LLP "Sagan Colour", LLP «Alina Trade», LLP "SMASH LTD" Decor Fibradecor company (Russia), companies in Turkey Electrical goods JSC «Prosvet», Electron company, JSC «TECHNO-AS" Current Kazakhstani market situation have an entry opportunity for Leroy Merlin hypermarket in terms of economic and demographic situation, reliable suppliers and perfect competition. Source :
  4. 4. a) EDPL strategy b) Segmentation 4 Kazakhstan lacks of DIY markets in the Self Service Format, where 12 DIY markets for 1.6 million of people. Moreover, due to economic recession a buyer will more likely find a discounter rather than change the brand. We propose EDLP and service oriented strategies to gain the market. A) 58% of consumers will switch to discounter, 25% will likely switch to another brand, 17% will likely to do both.91% is looking at prices and 62% is looking for different types of promotion Premises to go with EDLP strategy in Kazakhstan: •Price sensitivity in choosing the market place •Small share in DIY modern trade market gives an opportunity to gain the market share from traditional trade market B) Customer Segmentation by Life Cycle Young families 25-34: renovation in their new apartments: main categories: Renovation, Construction materials. Characteristics: high price sensitivity, low income Adult families • 35-54 repeated renovation: • main categories Renovation, Construction materials, Interior. • Characteristics: middle level of income, high assortment sensitivity37% Families • 55+: have a summer cottage: • main categories: Renovation, Garden. • Characteristics: middle level of income, high price and assortment sensitivity B2B • Legal entities: • Constriction brigades, corporative tenders • Main Categories: all • Characteristics: Large quantity, long term, wholesale prices 30% 37% 20% 13% C) Key concepts Consumer insight Solution Effect "Time is money" Increased level of service: Every shelf will have a button to call the consultant Increased level of satisfaction by means of reducing waiting time "Consumers go online" Omni channel Strategy: every consumer start the purchasing process online and continues offline Unique customer experience "Space optimization" Store space optimization for every member of the family: kids corner, products by categories Increased level of loyalty D) Hypermarkets chain in order to gain the biggest part of DIY market share in 5 years Leroy Merlin is planning to open 3 hypermarkets in the most developing regions of Almaty •Ryskulov st.- Momoshuly st •Tole Bi st- Rozybakiyev st •Kuldja tract Locations: c) Key concepts Source: Nielsen Central Asia; d) Chain
  5. 5. a) Dynamics b) Opportunities c) Omni-channel strategy 5 A) Dynamics of the market and number of customers shows the prospects of e-commerce market. B) E-commerce gives new opportunities to increase market share of customers, number of frequency of visits and average bill as well. C) Omni-channel strategy would improve customer experience, sales, loyalty and business performance. Turnover in e-commerce market *compared with 2014 * 8 bln 312 mln tenge 11 bln 339 mln tenge +36%2014 2015 30% 57% 13% Current customers Potential customers Other Customers of e-commerce market Additional communication channel with clients Increase of customers engagement Creation of online sales channel Increase in number of purchases Increase frequency of online visits Increase of average bill 1) Ekaterina thinks about repairing her room 2) She opens Leroy Merlin web site 3) Makes photo of her room 4) Chooses wallpaper 5) looks through the base of foremen and choses one of them (optional) 6) Goes to Leroy Merlin hypermarket 7) Evaluates her choice 8) Meets with the foreman (optional) 9) Confirms & makes a payment for the order 10) Happy Ekaterina LM Using e-commerce would increase sales of Leroy Merlin as well as improve customer experience and brand awareness.
  6. 6. a) TOP 3 HR Brands b) HR Strategy c) Talent Acquisition d) Talent Development 6 Kazakhstani labor market feels the economic recession as hard as other industries and currently HR market is focusing on three global trends: Optimization of resources, rewards and recognition, talent development. Following strategy will provide Leroy Merlin a leadership position within Top HR brands by 2020. A) TOP 3 HR Brands 2015 and their projects: BI Group "We build the foundation of the future today": BI-Intern, BI-Magistrant, BI-Bolashak, Corporate university of BI Group Borusan Machina "Continuous Improvement Board": a tool for improvement of everyday corporate and social processes Algeum Electric "A schoolboy - a student - an employee": a program aimed to raise a future professional core in the energetics. Gain 50% DIY market share within 5 years by means of acquisition of qualified talented employees and their everyday development. B) Leroy Merlin HR Strategy Recruitment criteria based on company values and TOP 10 skills 2020 according to WEF: Organizational structure: Control GM Board of Directors CMO CFO HRM Supply Chain HRBP HR Admin Corporate Internal affairs manager Recruitment Manager (outsourced) 1 year LM France or Russia MT, within 5 years -> Local Board of directors C) Talent Acquisition 1 2 3 45 6 7 8 Young talented employees: Qualified talented employees: •Short term project internship program for students: feel the business process •University lectures on Retailing in the format of simulation •Qualification improvement trainings Optimized Recruitment process: CV screening SHL test Phone Interview Assessment center Interview with LM D) Talent Development - Raise a future leaders of the industry Trainings Rewards and recognition Mentorship Involvement programs On-boarding program (understanding of business process,), Soft skills development (Top 10 skills of the future) Hard skills (every month professional trainings) Personal development plan, monthly 1-2-1 meeting with line managers on achieving KPI, buddy program "Reward your colleague program" Sources: • Quick bite of different department, • Three-days team strategy development program (each employee on every level have an opportunity to get involved in the everyday operations improvement process)
  7. 7. d) HR a) Chain Development b) Risk Matrix 7 Investment =17,7 Payback back period years A) Chain Development Plan: 2016- 2020 Supply Chain Department Each department 5 year strategy development Supply Chain Planning Sourcing and procurement Supply chain execution Marketing Department Analysis of the market Assortment & Matrix Development based on the needs on customers Omni-channel Development Marketing communications strategy Finance Department Financial Model Development Implementation HR Department Recruitment Trainings development Corporate Reputation Strategy Implementation Business Development Department Construction of first store in 2016 Construction of 2 other stores in 2018-2019 Sales Operations Department CRM management system Supply Chain management system Channel Operations management B) Risk Matrix c) Assumption C) Pay Back Period Timely strategy plan execution with careful monitoring of risks would help to pay off within 17 years EBIT (taking 20% of revenue) Tax(CIT- 20%) Cash flow from operating activities from 1 factory 10 000 000 000 187 756 800234 696 000 46 939 200 563 270 400 17 780 Average number of sales(per month) * Average bill =5 500 9 779 0000 Revenue in 1 month in year from 3 markets Cash Flow / Low HighMiddle LowMiddleHigh Probability DegreeOfInfluence Financial Legal Organizational Reputational Macro environmental 1 2 3 4 5 14 52 3
  8. 8. Bachelor of Business Administration Exchange semester in Corvinus University of Budapest, Hungary «Kazenergy» scholarship holder Winner of «Damu» start-up project competition Internship in Dostyk Hotel, Almaty Office Assistant, Financial Aid Office, KIMEP University Volunteer of «AIESEC» International Student Organization Volunteer of «Y-PEER KAZAKHSTAN» International peer education network Crea’ture Bachelor of Business Administration President Scholarship holder Marketing manager, Crystal Spring, Almaty, Kazakhstan 2nd place ISPRO olympiad 2013, Jakarta, Indonesia 1st place International Math Olympiad 2014, Moscow, Russia 3rd place Regional Geographic Olympiad 2014, Astana, Kazakhstan Bachelor in Economics and finance Development Manager, Retail Consulting, Almaty, PR Specialist, AGT Kazakhstan, Almaty Digital Intern, Buzzon Digital Agency, Almaty 2nd place Changellenge Case Competition 2014 Organizer of Astana Economic Forum, Astana Graduate, KIMEP University Bachelor of Business Administration Marketing & PR University, EUROBAK, Almaty Internship in Microsoft, Almaty Volunteer of «AIESEC» International Student Organization Internship in Kommest-omir, Almaty We Create the Future
  9. 9. APPENDIX 1 The risks associated with implementation of the suggested strategy are evaluated and ranked by the probability of occurrence and the expected influence to the business. Unstable economic environment, inflation Increasing taxes for imported goods Challenging process of implementation of innovative HR strategy Outflow of loyal clients Decrease of income of population, outflow of clients to markets Risk analysis Low HighMiddle LowMiddleHigh Probability DegreeOfInfluence Financial Legal Organizational Reputational Macro environmental 1 2 3 4 5 14 52 3
  10. 10. 2016- 2020 Supply Chain Department Each department 5 year strategy development Marketing Department Finance Department HR Department Business Development Department Sales Operations Department Demand Planning and Forecasting Supply Network Planning Inventory Planning and Optimization Logistics Planning Warehouse Management System Transportation Management System Inventory Management System Supplier Relationship Management Supplier Integration Contract Management Financial Model Development Implementation Analysis of the market Consumer Behavior Analysis Assortment & Matrix Development based on the needs on customers Shelving & Merchandising Strategy Development Omni-channel Development Marketing communications strategy Development of Web-site Optimization of pre-delivery and delivery processes Technical support Test implementation & bug fixing Recruitment Trainings development Corporate Reputation Strategy Implementation Talent Development Programs Design Talent Development Programs Implementation Construction of first store in 2016 Construction of 2 other stores in 2018-2019 CRM management system Supply Chain management system Channel Operations management APPENDIX 2 Chain development plan
  11. 11. Key features Strength Weakness Location 12 months, Stroymart, Baumarkt, Salamt, Tastak, Kenzhekhan Comfort, Kurdas-7 Price Kurdas-7, Kenzhekhan, Sauran, Tastak 12 months Assortment 12 months, Salamat, Armada, Tastak Sauran, Stroymart Infrastructure 12 months, Stroymart, Baumarkt, Salamt, Tastak, Kenzhekhan Comfort, Kurdas-7 Brand Identity Comfort, Tastak, Kurdas-7, Salamat, 12 months Sauran Service 12 months, Comfort, Stroymart, Armada, Tastak, Sauran, Kenzhekhan, Kurdas-7, Baumarkt, Salamat, StroyCity E-commerce 12 months, Comfort, Stroymart, Baumarkt, Salamat, Armada StroyCity, Kurdas-7, Kenzhekhan, Sauran, Tastak APPENDIX 3 Competitive analysis