SONAE SR

International Plan

How to do internationalization the right way!

FIA CONSULTING GROUP

WE ARE FIA CONSULTING!

• Ivan Salles: Finance

• Gino Olivato: Management

• Camila Silvestre: Compliance & Risk Mitigation

• Lucas Lobo: Marketing and Communication

Agenda

Challenge Proposal Assumptions

Financial Analysis

Implementation Plan

Risks & Mitigation

Summary

What is the Challenge?

• How should the internationalization process for SONAE SR be structured?

• Portuguese & Spanish Markets

• Turkey

• Emerging markets

• How should the company balance itself between organic and capital-light

growth?

• “But just how to go about internationalization the right way, where to go, and how to

go there, and when to go.”

1959: Founded

1980: Diversification

1990: Internationalizati

on

2000: Spin-offs

2008: Sonae

SR goes internati

onal

2013: Telecom Expansi

on

2014: Sport Zone,

Worten, Zippy

2015: Founder resigns

STRENGTHS:

• Store and management operations

• Logistics and purchasing

• Great knowledge of Portuguese market

• Strong ability to adapt to new business models

• Ability to accommodate new business partners

WEAKNESSES:

• Need to develop more partnerships

• Franchise attractiveness

• Negotiation skills for agreements in more markets

• Brand development and marketing efforts

• IT systems

OPPORTUNITIES:

• Emerging markets avid to purchase fashion items

• Success of store-in-store, joint-venture and

franchise models in certain markets

• Brand and product adaptation for new markets

due to strength of products in home market

THREATS:

• Economic instability and recession

• Current business models in select markets are

ineffective and are draining the company’s capital

The Proposal

• Internationalization based on the Uppsala model to identify the necessities

of each brand and market;

• Development of design and IT centers to work on brand and product

development;

• Development of a new attractive franchising system;

• Reorganization of current international operations.

BRAND PORTUGAL SPAIN DEVELOPED

MARKETS

EMERGING

MARKETS

WORTEN Organic Joint-Venture Joint-Venture N/A

SPORT

ZONE Organic Franchising Joint-Venture Store-in-Store

ZIPPY Organic Franchising Franchising Wholesale &

Franchising

MO Organic Franchising Franchising Wholesale &

Franchising

Worten

• Maintain organic growth in Portugal due to high acceptance and great results

• Migrate to joint-ventures in Spain to mitigate risks and reduce control issues

• Only 10% of Worten’s products are their own brand

• Develop a more robust IT system to connect their logistic centers and to better serve their online services

• Use joint-ventures in select markets that have little barriers with third-party products

• Do not enter emerging markets for the moment due to risks

Sport Zone

• Maintain organic growth in Portugal

• Switch to franchising in Spain to reduce capital costs and to make operations

more efficient and strategic

• Use joint-ventures in developed markets to propose brand awareness

• 50% of Sport Zone’s products are third-party

• Use Store-In-Store operations in developing markets to propose brand

awareness and connection to local successful brands

Zippy & MO

• Maintain organic growth in Portugal

• Work with franchising in Spain and developed markets

• Both brands work with 100% in-house products

• Franchise in select emerging markets in which strategic alliances are already

formed or are easier to create

• Use wholesale for select emerging markets in which the alliances are harder

to form

The Design & IT Centers

• TOC (Technology and Operations Center) in Portugal to develop the core

products and technologies

• Smaller TOCs in select markets in order to fit the IT and product

modification needs

TOC Center Portugal

Local TOCs Local

Operations

The New Franchise Model

• Based on mutual exchange, the

new franchise model will depend

on cooperation to achieve a

common goal!

• Franchisees will work closely with

Local TOCs to better tailor their

offers to their respective markets

TOC Portugal

Local TOC

Franchisee

Local TOC

Assumptions

• Retail Market will grow 40% in the next five years

• We are going to invest 440 M Eur in 5 years

• There will be no product rejection in emerging markets

Financials

* Not considered NOS Sonae Serra + Others

Financials

* 2015 was based on twice the turnover of 1H15

** 2016 forward are based on assumption growth

Implementation Plan

• Create Technology Operation Center in Portugal to integrate IT information

• Create Marketing and Researching Center in emerging countries: South

Africa, Slovenia, Korea, Peru, Australia

• Investing in R&D for key own products with the Researching Center

information

Develop TOC Portugal

Identify TOC locations and

markets

Establish local TOCs

Collect Information

6 months 9 months 6 months 6 months

Timeframe

Risks and Mitigation

• Cultural differences and barriers in forming strategic alliances

• Invest in different market approaches

• Invest in solid alliances with cultural knowledge

• Governmental barriers

• Monitoring each market closely

• Advocacy investment if needed

• Political and economic instability

• Diversification of incomes and markets

Summary

• Internationalization based on the Uppsala model to identify the necessities

of each brand and market;

• Development of design and IT centers to work on brand and product

development;

• Development of a new attractive franchising system;

• Reorganization of current international operations.

Thank You! Merci!

FIA CONSULTING GROUP