Strategic Expansion: The Business Case that Drove Our New Zealand Success
Problem
Company Overview: The company, a global leader in the building materials industry, sought to expand its market presence into New Zealand from Australia. The primary challenges included:
1. Market Penetration: The company had less than 1% market share in New Zealand, largely due to supply chain limitations and reliance on an exclusive distributor perceived as a competitor by other retailers.
2. Growth and Demand: Despite a highly attractive market with significant growth potential, the company’s products were not being aggressively marketed, leading to underperformance in sales.
3. Operational Risks: The existing distributor had not prioritised the company’s products, restricting growth and market penetration.
Solutions
Evaluation of Market Entry Options: Stoke Consulting was engaged to evaluate the best market entry strategy for the company. The following options were considered:
1. Form a Joint Venture:
- Partner with the existing distributor to create a new entity that would focus on the company’s products.
2. Create a 100% Owned Subsidiary:
- Establish a fully owned business in New Zealand, managing all operations directly.
3. Do Nothing:
- Continue with the current arrangement without any changes.
Recommended Solution: After thorough analysis, the recommended solution was to form a Joint Venture with the existing distributor and have controlling shareholding with future buy out options. This option was chosen based on its potential for robust financial returns, operational efficiency, and alignment with the company’s long-term strategic goals.
Risk Mitigation Strategies: A detailed risk analysis was conducted to address potential issues such as relationship breakdowns and operational inefficiencies. Mitigation measures included:
- Establishing clear governance structures and reporting mechanisms.
- Developing transparent agreements to manage cost splits and responsibilities.
- Implementing robust performance management systems for key personnel.
Outcomes
The capital expenditure was approved by the Global Board. The Joint Venture was operational within four months, with clear performance targets and milestones.
Key Benefits:
1. Increased Market Share: The Joint Venture aimed to significantly increase market share in New Zealand by leveraging the local partner’s market knowledge and existing infrastructure.
2. Operational Synergy: The partnership allowed for better resource utilisation and shared operational costs, enhancing overall efficiency.
3. Financial Performance: The investment delivered a strong internal rate of return with a relatively short payback period, ensuring long-term profitability and growth.
Conclusion: This case study highlights Stoke Consulting’s expertise in crafting strategic business cases and recommending optimal market entry solutions. The successful execution of the recommended strategy is helping to secure the company’s growth and market leadership in New Zealand, reinforcing its competitive edge in the construction materials industry.
The investment in Stoke Consulting yielded exceptional returns:
- Payback Period: The engagement paid for itself in just 2 months.
- First-Year ROI: A revenue impact of $1.9M with a strong net margin significantly exceeded the consulting investment.
- Long-Term Value: The operational improvements and market positioning continue to drive ongoing profitability and market expansion.
Could your company benefit from assistance in evaluating and planning geographic or new product expansion and commercialisation? Stoke Consulting can help. Contact us today
Chris Read
Stoke Consulting
Leveraging his extensive leadership and entrepreneurial background, Chris consistently leads high-performing teams of leaders to outstanding business achievements. He excels in unravelling the intricacies of challenging business scenarios, crafting strategic plans and business cases while fostering deep trust including during executive coaching. This comprehensive and high integrity approach significantly elevates business performance for his clients, helping them to exceed expectations. Chris’ experience includes successfully leading multiple $1B+pa businesses with full P&L responsibility across nine countries and 800 reports to starting, building and selling his own e-commerce business, all the while building high performing teams of leaders.
