Histories, Issues and Strategies of the

Transcription

ISIS leads an international network of economic and university
partners with a common intention of cultivating a knowledge
base and building a structured expertise. Through continual
interactions with economic leaders, a community is created
around the reflection, diffusion and exchange of experiences
on the challenges and the methods of innovation in the service
economy.
The objective of our case studies is to provide this community
with analysis of the strategic decisions of companies, based upon
the subject of innovation in the service economy.
Histories, Issues and Strategies
of the Internationalization of French Companies
Histories, Issues
and Strategies of the
Internationalization
of French Companies
innovationandsociety.com
essec-serviceinnovation.com
ISBN : 978-2-36456-031-4
5€
N° 10 - November, 2011
Globalization and internationalization are terms that are
unquestionably at the heart of our economic and cultural reality
today, even if such phenomena are intertwined with both negative
and positive connotations. With the opening of trade borders and
the increasing feasibility of operating a business on a worldwide
scale due to technological advancement and changes in legislation,
the internationalization strategies of companies and their ability to
compete with global competitors has become a pivotal competency
to be mastered. This project, carried out by students, examines the
idiosyncratic strategies developed by French companies for their
expansion on the international market.
Under the direction of
Xavier Pavie
Avenue Bernard-Hirsch
BP 50105
95021 Cergy-Pontoise Cedex
France
Tél. +33 (0)1 34 43 28 29
essec-serviceinnovation.fr
Singapore Campus
100 Victoria Street
National Library Building # 13-02
Singapore 188064
[email protected]
Tél. +65 6884 9780
Fax +65 6884 9781
www.essec.edu
70, rue Cortambert
75016 Paris
of the Internationalization
of French Companies
The Institute for Service Innovation and Strategy
ESSEC Business School, founded in 1907, is one of the world’s top
management schools. ESSEC upholds a tradition of academic
excellence and continues to foster a spirit of openness in the fields
of economics, social sciences and innovation.
ISIS, The Institute for Service Innovation & Strategy, is a research
center within ESSEC Business School. Created in January 2004, ISIS
aims to generate, stimulate and promote innovation in the 21st century
knowledge and service economies, with a view to contributing
to responsible growth and organizational competitiveness. The
activities of the Institute are based on researching the mechanisms
of innovation, drawing from company best practices, assisting in
organizational and managerial change, and developing measurement
instruments for performance and for the creational capabilities of
teams.
partners with a common intention of cultivating a knowledge base
and building a structured expertise. Through continual interactions
with economic leaders, a community is created around the
reflection, diffusion and exchange of experiences on the challenges
and the methods of innovation in the service economy. The ‘Matins
de l’Innovation’ conference series, as well as other events, enable
this community to collaborate on the challenges and the methods
of innovation in the service economy.
The Innovation & Society association aims to encourage and
explore the innovator’s social responsibility, in both a physical
and moral sense. To achieve this aim, the association brings
together researchers, teachers, economic leaders, public affairs
representatives, and members of civil society to collectively
consider the different constituents of innovation; the mechanisms
and the stimulation of innovation; the evaluation of the economic,
social and societal consequences of innovation; and to research and
educate for innovation, through events and working groups. The
association ensures, through all of its endeavors, complete respect
of each individual’s personal principles and diversity of opinions.
of the Internationalization
of French Companies
Xavier Pavie
Under the direction of Xavier Pavie
An expert in operational, strategic marketing and innovation with
around 15 years of experience in major multinational industrial
groups, Xavier Pavie is now Researcher and Lecturer in innovation
and strategic management at ESSEC Business School. He holds
a doctorate from Paris Ouest University, a master in business
science as well as a master in philosophy. He is the Director of
the Institute for Service Innovation & Strategy. He teaches and is
also responsible for different undergraduate, graduate programs
and executive education programs.
This publication is from the Cases and Applied Research series.
CONTENTS
INTERNATIONALIZATION of services:
from a strategY to a necessity ................................................ 7
Notes on this publication....................................................................................... 11
SODEXO.......................................................................................................15
Who is Sodexo?......................................................................................................... 15
Key Dates and figures.........................................................................................15
Sodexo’s activities................................................................................................16
Swot of Sodexo......................................................................................................... 17
SODEXO: an ambitious internationalization strategy............................. 18
A history focused on international development................................. 18
Diverse internationalization strategies:
ambition and pragmatism............................................................................... 20
The workforce as the main internationalization driver.......................23
VEOLIA ENVIRONNEMENT.................................................................... 27
History....................................................................................................................27
Swot of Veolia environnement.......................................................................... 28
The internationalization strategy of Veolia environnement................ 31
Success factors......................................................................................................31
Hurdles to internationalization...................................................................... 33
The example of Veolia Environment Services in Chennai, India... 34
ORANGE.................................................................................................... 39
How can orange’s internationalization be explained?...........................39
The results of the internationalization, a couple of figures.................. 41
ORANGE’S expansion strategy: internationalization first....................42
Internationalization and innovation:
dynamic learning’s virtuous circle...................................................................45
A specific example of internationalization
and innovation: Africa............................................................................................47
ACCOR.........................................................................................................51
Introduction of accor Group............................................................................... 51
Swot of ACCOR........................................................................................................54
Internationalization of accor group: why?................................................... 55
History of Internationalization at Accor.......................................................56
Means used to internationalize Accor...........................................................58
ACCOR and its competitors.............................................................................. 60
Histories, Issues and Strategies of the Internationalization of French Companies
SOCIéTé GéNéRALE...............................................................................63
An international culture developed throughout history ......................63
The factors that led to the internationalization of the bank..............65
Société Générale’s globalization......................................................................66
The implementation strategy........................................................................ 66
The internationalization strategy chosen by Société Générale.... 68
Innovation helping internationalization: the african case....................69
6
CLUB MED.................................................................................................. 73
A successful internationalization of the service....................................... 73
The asian issue: developing an asia-focused strategy?........................ 75
The asian issue: obstacles that have
to be overcome in the future............................................................................. 76
Competition from international and local markets:
an incentive for innovation................................................................................. 78
EDF................................................................................................................81
The french and international energy market.............................................. 81
EDF: a key player on the international stage60.................................... 81
The deep transformation of the European and global
Energy market...................................................................................................... 83
The direct impact of market opening: What place is there for
competition?......................................................................................................... 84
EDF internationalization strategy: myth or reality?................................85
International expansion.................................................................................... 85
Snapshot of EDF global position.................................................................90
Stakes of Internationalization....................................................................... 92
The boundaries of EDF internationalization...............................................94
A drawback to France...................................................................................... 94
What’s next?.......................................................................................................... 94
RESPONSIBILITY AND THE INTERNATIONALIZATION OF
SERVICES...................................................................................................99
Internationalization: a responsible choice? ................................................99
A service is defined by a "customer experience": liability issues in
the export of this experience seen as unique........................................... 101
Internationalization of service: a cultural responsibility...................... 103
INTERNATIONALIZATION of services: from a
strategY to a necessity
The dominance in the media of the term “globalization” is
undisputed. It is an expression used to describe issues about
economics as well as politics and environment. Everyone
is aware of the fact that a significant event in one place
on the planet will have possible repercussions hundreds of
that mixes with other concepts such as internationalization,
which interests us here in particular.
The term of “globalization” can be historically dated back
to the first great maritime expeditions of the fifteenth and
sixteenth century of explorers such as Ferdinand Magellan
in 1522, which mark the beginning of the creation of colonial
empires. However, the use of the word “globalization”
appeared in France in the early 60’s in the field of economic
and geopolitical works in order to represent the expansion
of industrial markets as regards geopolitical blocs, during
the Cold War. Yet, it was during the 90s that the concept
as we know it today was established, from the theories of
the philosopher Marshall McLuhan on the emergence of a
“global village”. And nevertheless, the “promotion” of the
term is notably linked to the movement of anti-globalization
and alter-globalization activists who wanted to draw public
attention to the scale of the phenomenon.
thousands of miles away, so globalization becomes a term
7
If the debate is heated between the advocates of
globalization and its detractors, it is because for the former,
it is a necessary occurrence to enable Third World countries
to become industrialized and aid development, and not to
be merely exporters of raw materials. In addition, they add,
intercultural exchanges allow peoples to open their horizons
and understand the cultures, the existence of others, etc. For
its opponents, globalization is regarded as the deregulation
of national economies, excessive liberalization of trade, the
8
hegemony of large multinational companies, the normalization
of relationships, the loss of idiosyncratic cultural features, and
the emergence of a cultural standard.
Without taking sides in the debate we can only observe the
process of the opening of national economies in a market
that is distinctly global, which ensures interdependence
between people, deregulation, trade liberalization, relocation
of activity, fluidity of financial transactions, the development
of means of transport and telecommunications, etc. To
understand this, just look at your mobile phone to see the
evidence of the similarity of items sold, whether you are in
Asia, Europe or the United States.
However, if there is globalization, it should not be subsumed
under the concept of “internationalization” which can be
attributed also directly the remarks made against the first
term. In economics, internationalization is a strategy for
developing a business outside its original domestic market. It
may be manifested by the establishment of production units
in other countries or the conquest of several national markets.
The sociologist Guy Rocher also makes a clear distinction
between globalization and internationalization. For him,
internationalization refers to “various kinds of exchanges,
economic, political, cultural, between nations, to relationships
that result in, peaceful or confrontational, complementarities
or competitions. When we talk about globalization, it means
a different reality, which is a contemporary one: the extension
of these relations and the international and transnational
speed of transport and communications in contemporary
civilization.”
It’s interesting to pay attention to the etymology of
internationalization here. Internationalization comes from the
Latin inter, between, among, that has a sense of reciprocity,
and natio that underlines the birth, extraction, deriving from
natus, which means being born. Internationalization is the
action of internationalize and the outcome of this action.
Internationalize means to become international, concerning
several nations and countries. This does not mean uniformity
or standardization. The expansion may even be synonymous
with adaptation, development and change. And if in material
products and physical objects, a worldwide standardization
seems pretty realistic, this is not an evidence of strong service
economy at all.
Service is by definition immaterial, intangible, made
by
individuals, the standardization of services is the Grail that
all business sectors are looking for without ever successfully
exchanges across the world, reflecting the ever-increasing
9
reaching it. Obviously there will be attempts to implement
standards and wills of standardization. However, on one
hand, these theories will be confronted with their human
implementation; on the other hand, we may doubt the
good reception of the offered service. Indeed, we know the
importance of customer involvement in the construction of a
service, and the history of the internationalization of services
showed us numbers of failures when this dimension has been
neglected. Services can internationalize, but it is much more
10
difficult to globalize. When products are consumed, they
cannot be adapted to be permanently relevant. And if in the
beginning, the idea, the proposal emerges in a country, the
only possibility for it to expand to another country will take
into account the specifics of the latter.
The internationalization of French companies
How does France evolve in this context, more particularly its
corporate? France is considered too often as the country of
French companies with French capital only, producing only
in France and only exporting their own local production with
employees from its regions. However, in the last thirty years
and more intensively in the last fifteen, French companies
have dramatically internationalized with great successes.
Today, foreign shareholders have a significant presence in
the capital of French companies. Profits are now aggregated
from around the world. And for some of these companies, the
main source of profits comes from abroad.
This is remarkable with Schneider Electric, for example. Their
current growths is driven by the South Asian market, and
realize only 12% to 13% of its turnover in France, against 30%
in emerging countries, 25% North America and 32% in the rest
of Europe outside France. Their production still holds 60% in
euro area, but Schneider Electric plans to increase its share of
manufacturing in North America and in emerging markets to
be in line with its markets. In the “physical products”, Danone
against 42% in the rest of Europe, Asia 18% and 19% in the rest
of the world. Seb, medium family business, realize 27% of its
turnover in France, 30% in the rest of Europe, 13% in North
America, 6% in South America and 30% in the rest of the world.
Today the concerns of French leaders are about being
international. And if that is significant in the examples cited
above, it is even more important in the service sector which
is what we intend to study in this book.
XP
Notes on this publication
This publication is the result of students’work, during the
course of the internationalization of services of ESSEC
Business School. The objective is for students to question
the model of internationalization of major French companies.
What are the obstacles? What are the opportunities? The
challenge was to make students more aware of the issues
about internationalization through the study of French
companies of service.
has a turnover of only 21% out of its total sales in France,
11
The students’work which was exposed every week led to a
small summary in the following pages, to which we only had
to make minor changes. It necessarily leads to problems in
style, argument and construction, because writing an article
with sixty hands is not easy. However, we humbly hope
that this collective work of reflection helps think about the
internationalization of services issues.
This synthesis is divided into seven distinct chapters, each
12
containing a detailed analysis of one company. Sodexo
initiates this work, followed by Veolia Environment, Orange,
Accor and then Societe Generale, Club Med and finally the
energy company EDF. The fundamental conclusion chapter is
particularly focused on issues and questions of responsibility
that those companies carry in the internationalization.
We would like to thank all the students of the course that
participated in this collective work with commitment:
- Julia Biz
- Alice Bouis
- Dominique Brieger
- Lee Caragiale
- Antoine De Braquilanges
- Stanislas De Gabrielli
- Tanguy De labrouhe de laborderie
- Aude De poulpiquet de brescanvel
- Adrien De villoutreys de brignac
- Rachel Jacquet
- Constance Jeanperrin
- Laure Jullian
- Alexandra Kostakis
- Vincent Kreutz
- Pierre-Luc Lacoste
- Geoffroy Le picard
- Diane Leblanc
- François Lefebvre
- Sarah Masurel
- Stéphanie Mongay
- Michael Ohana
- Aurélien Pallain
- Aurélie Prenat
- Pierre-Antoine Remond
- Noham Selcer
- Jérome Tyl
- Marion Vernet
- Stanislas Miquel
13
14
SODEXO
Introduction
Which company is capable of taking care of all services during
a North Pole expedition or in a prison, of settling sustainable
service offer in an American Campus helping it to reach top
American rankings, of handling all services in a high quality
the demanding need of customers? This answer is Sodexo.
Sodexo is currently considered as the company in charge of
school cafeterias. Yes, indeed it is the world market leader in
food services, but the company has developed its activities in
many service sectors (food services, sterilization, sustainable
service offer, gift certificate, meal voucher etc.) and its clients
are as diverse as a school in the US, a prison in France, a
hospital in Saudi Arabia.
Who is sodexo?
Key Dates and figures
Sodexo was created in 1966 in Marseille (France) by Pierre
Bellon. It was called at the time Sodexho, for Société
d’Exploitation Hôtelière. It changed its name in 2008,
along with its logo and image, making it younger and more
attractive.
In 2010, Sodexo announced its ambition to provide global
solutions to improve Daily Life’s Quality. Jobs would then be
hospital in Germany and of creating new ones to respond to
15
organized by On-site Service Solutions, Motivation Solutions
and Personal and Home Services.
The same year, Sodexo’s CEO Michel Landel announced a
15.3 billion turnover, that is to say a 30% increase compared
to 2004. Sodexo remains number 1 worldwide for On-site
Service Solutions, with 379 137 employees across the world.
Half of Sodexo’s capital is public. The Bellon Family holds 37%
of it; the rest is divided into several share holders.1
16
Sodexo’s activities2
Sodexo’s mission is to improve the Quality of Daily Life
and contribute to the economic, social and environmental
development of areas in which the firm operates.
Sodexo’s comprehensive Service Solutions contribute
to improve the performance of 3 key bases of its
clients’organizations: their people, processes, infrastructures
and equipment. Thus, the company developed three Daily
Life’s Quality solutions:
• On-Site Solutions
The development of these solutions represents more
than 95% of Sodexo’s turnover. These Solutions deal with
services that range from foodservices to the maintenance of
scanners and laboratory equipment, and from construction
management to housekeeping and rehabilitation services
at correctional facilities. These services are available for
eight client segments: Corporate, Defense, Justice, Remote
Sites, Health Care, Seniors, Education and Sports & Leisure
among which the most important in terms of turnover remain
Corporate, Health Care and Education.
1 - Rapport Xerfi Sodexo, décembre 2010
2 - Site internet de Sodexo: www.sodexo.com
• Motivation Solutions
Motivation Solutions fall into three service categories:
-
Employee benefits, aimed at attracting and creating
committed employees.
- Incentives and Recognition, aimed at helping organizations
reach their objectives.
- Public Benefits, aimed at managing and controlling the
distribution of aid and public subsidies.
These services are aimed at answering to needs individuals
may face during all their lives. They are divided into four
categories: Childcare, Tutoring/lifelong learning, Concierge
and In-home senior care.
Swot of sodexo3
Strengths: Sodexo has a very large range of services, which
makes its offer very diversified. Moreover, it has a strong
structure, making it reassuring for shareholders. It is also
among the World leaders in Service Solutions, which gives
the company an important place in the service industry and
make it very attractive for investors.
Weaknesses: Sodexo’s activities are concentrated on already
mature markets as Western Europe and the USA (85% of the
firm’s turnover, and 40% only for the USA). This may be an
obstacle for future developments. Moreover, the company is
strongly dependent on its activity of On-site services, which
represents more than 95% of its turnover.
3 - Rapport Xerfi Sodexo Décembre 2010
• Personal and home services
17
Opportunities: There is a high growth potential in developing
countries (BRIC), because of their young population, the growth
of their middle classes etc. In developed countries, the ageing
population helps the resort to home services. Above all, the
outsourcing of services by companies has become a real trend,
which may increase the development of Sodexo’s activities.
Threats: Sodexo has to face a very strong competition on
its market, and moreover the current economic and social
tensions may lead to the loss of contracts with public
18
organizations.
SODEXO: an ambitious internationalization strategy
A history focused on international development
• Chronology
Sodexo, since its creation, has always had a strong will to
internationalize itself and expand worldwide. Here is a history
of how this happened4:
- 1971-78:
In 1971, the international expansion begins with a contract
in Belgium. Soon came along Italy and Spain. Still in the
1970’s, Sodexo developed the Remote Site Management
business, first in Africa, then in the Middle East.
In 1984, Sodexo is already present in 42 countries, mostly
thanks to organic growth.
- 1985-1993:
Sodexho establishes activities in the Americas (North
and South America), Japan, South Africa and Russia, and
reinforces its presence in the rest of Central Europe.
4 - Sodexo website: www.sodexo.com
- 1995
Sodexho becomes the world market leader in food service
thanks to alliances with Gardner Merchant in the UK and
Partena in Sweden.
- 1997
Sodexho joins forces with Universal Ogden Services, the
leading remote site service provider in the United States.
- 1998
48.4% of the outstanding shares. The new company is the
North American market leader for food and management
services.
- 2001
Sogeres (France) and Wood Dining Services (USA) join
Sodexho. Sodexho acquires 53% of the share capital of
Sodexho Marriott Services, which changes its name to
Sodexho Inc.
- 2008
Sodexo makes several acquisitions, particularly in
developed countries.
• Turnover split according to geographical zones
If we look at the repartition of Sodexo’s turnover on a global
basis, here is what we have5:
. Continental Europe: 37%
. Ireland and the United Kingdom: 8%
. North America: 38%
. The rest of the world: 17%
It appears that there is a strong domination of the European
and American markets, which can be qualified as mature
5 - Rapport d’activité du 1 semestre 2009-2010, Sodexo, 28/02/2010
Sodexho Marriott Services is created, with Sodexho holding
19
markets. As opposite to this statement, the weight of emerging
markets is still rather low in comparison. Nevertheless, we
have to notice that the tendency now is the development of
Latin America and Asian market.
Sodexo is nowadays a worldwide company, its presence in
80 countries accounts for its international orientation. Indeed,
Sodexo has a total of 380.000 partners, 34.000 sites and
50 million consumers on a daily basis, which makes the
company the 21st employer in the world.
20
• Internationalization is nowadays at the centre of Sodexo’s
objectives
What
is
really
interesting
to
emphasize
is
that
internationalization was not only part of the company’s
strategy since its creation, but it is now in line with Sodexo’s
objectives and ambition. The “Plan Ambition 2015” 6
which was decided in 2005 aims at making Sodexo the world
leader and expert in service solutions. To achieve this goal,
international deployment is central. Thanks to acquisitions,
partnerships etc… Sodexo wishes to capture part of the
785 billiard Euros constituting the world market for on-site
service solutions and motivation solutions (which is 50 times
the actual turnover amount of Sodexo).
Diverse internationalization strategies: ambition and
pragmatism
• R eason and means leading to internationalization
according to Pierre Bellon.
Sodexo’s internationalization strategy is very interesting and
Pierre Bellon’s words are the best way to introduce it.
6 - Rapport Xerfi Sodexo, Décembre 2010
According to him, Sodexo first thought of conquering foreign
markets because Sodexo realized that “France, being the 4th
world economic power, only had 60 million inhabitants, that
is to say less that 1% of the world population. The company’s
activity being directly linked to the number of inhabitants,
the major part of [Sodexo’s] potential of development was
therefore out of France”7.
Concerning the means at stake to lead this development,
Indeed, in his viewpoint, “the beneficial development of a
company is possible thanks to the courage, the energy and
the skills of the men and women who make the company live”4.
• What internationalization strategy did Sodexo choose to
go abroad?
Analyzing Sodexo’s strategy makes us indentify different
periods in this process:
- D uring approximately 40 years, Sodexo’s international
expansion relied on organic growth. Heavy investments
were made in numerous countries to develop facilities
management technical platforms. i.e. in 1971, the first
international contract was signed with a Belgium Hospital.
-
D uring the 1990’s, globalization appeared to be an
external factor of growth for Sodexo. Indeed, Globalization
led companies to focus on their core activities. As a
consequence Hotel industries gave up their catering
activities and Sodexo managed to seize this opportunity.
- For about 10 years, Sodexo has been leading a strategy
mixing organic growth on one side and acquisitions on
the other side. These acquisitions are mostly concentrated
7 - Sodexo Alliance, eating into a new market, Capser Van der Veen, Hester Duursema, Alex Van der Kooij, 22/06/2007
Pierre Bellon’s idea is clearly defined: employees are central.
21
nowadays in developing counties as the acquisition in
March 2009 of the Radhakrishna Hospitality Services
Group (RHSG) in India shows. There were also joint
ventures like the 2001 JV with Marriott International.
• What approach corresponds to Sodexo’s case?
Sodexo’s first approach was guided by the will to follow
outside of France some clients which were going abroad.
Then and quite soon, a second phase occurred, where
internationalization decisions were conducted by taking into
22
consideration:
- The dimension of potential markets.
- Their accessibility.
- The adequacy between the services offered and the local
cultural habits.
To conclude, Sodexo’s strategy has always been focused
on organic growth (new services, new markets), and was
completed by targeted acquisitions. This accounts for
Sodexo’s will to keep a strong capacity of control, even if this
can signify a higher cost of entry in the market.
The following graph sums up Sodexo international strategy:
The workforce as the main internationalization driver
• Sodexo’s paradox: brand management, white label and
notoriety?
At Sodexo the brand issue and the human resources
management are very close. To understand why we can start
by considering this paradox: Sodexo can be regarded in a
large part of its activities as a “white Label” and in the same
time Sodexo reaches record notoriety levels (even though the
mind)8 in France (more than 97%) and in countries where
the brand is present (more than 80%) moreover the brand
enjoys a very low turnover compared to its competitors. The
loyalty of Sodexo’s employees is 88% in a sector traditionally
characterized by a high turnover. How can we explain this
paradox?
• The main issue for Sodexo worldwide is the brand
management
The B to B positioning leads Sodexo to run an original brand
management: they do not communicate through traditional
media and do not have ambitious advertising campaigns…
To convince its potential clients, Sodexo’s main asset is
its workforce. As current brand manager David Nes said:
“Nobody is better positioned than staff to communicate the
history and values of the brand”. As proved by the brand
values (the respect of human being, its aspirations as well
as its differences) Sodexo believes that its core asset is its
employees. And that explains the key role played by Sodexo’s
employees worldwide to promote the brand and its culture.
8 - « La recette maison de Sodexo », 5/11/2009, www.strategies.fr
brand remains very close to the catering services in people’s
23
For instance in Turkey, every employee is trained to
pronounce “Sodexo” with the French accent because it is
important for the brand to remain linked to its French origins
as explains Esref Hamamcioglu, CEO Sodexo Turkey.
• S taff members are considered as brand managers
worldwide
97% of Sodexo’s workforce is in contact with customers.
Therefore employees are considered as a very powerful and
spread-out communication channel and this makes it crucial
24
employees being enthusiastic, highly motivated and proud
of working for Sodexo. Since the very beginning Sodexo’s
head of management recognized the importance of staff
member as brand ambassadors, this explains why Sodexo’s
management recently settled the “Brand Champion Program”.
Those 150 “brand champions” are trained across the world to
be in charge of brand visibility.
“We are a people business, by people and for people”,
Hans Rijnierse, CEO Sodexo Benelux
Sodexo’s potential development is 50 times its current
turnover. To realize this ambition, they settled 2 main
objectives concerning human resources:
- To have employee with the right skills in quantity
- To be regarded as one of the most appreciated employer
in the world by its collaborators. In 2010, 85% of Sodexo’s
employees considered Sodexo as a better employer than
its competitors.9
9 - Enquête d’engagement, 2010, http://www.inside.sodexo.com/fr/2-evoluer-avec-sodexo/1-mesurer-nos-progres.html
Conclusion
Since the very beginning Sodexo has led an ambitious
internationalization strategy and appears as a very successful
company today. The Sodexo case is very interesting because
it emphasizes the way service companies need to innovate to
expand their activities abroad. Sodexo has proved its ability:
- To innovate and create new solutions for every original
(sometimes extreme) situation (such as service on site for
- To adapt its activity to different markets and cultures
around the globe without giving up its brand culture,
values or tradition.
- To keep its employees committed to the brand9
These three points are crucial to understand the successful
expansion of Sodexo worldwide.
a North Pole expedition).
25
VEOLIA ENVIRONNEMENT
History10
Veolia, originally named Compagnie Générale des Eaux was
created in 1853 by the French emperor Napoleon 3 in order to
manage water supplies of the city of Lyon. The company’s first
goal is to improve water quality and accessibility. Seven years
activities in Paris. Quickly, the firm developed its business in
the French territory, facing no competitors. At the beginning
of the 1880’s, the CGE obtained its first contract out of France
in Venice (Italy). The company took advantage of the strong
position of France during the second half of the 19th century.
At that time, France is the second most powerful nation in
the world and has many business links with other European
nations and its colonies. Therefore, it is easier for the CGE to
win contracts in Italia, Portugal, Turkey.
However during the first half of the 20th century, the firm
refocuses its activities in France. The nation influence is quickly
decreasing. Furthermore, the tense international context is
not an incentive to conquer new markets. Consequently, a
large part of international contracts signed in the past are
not renewed.
At the end of the World War 2, the strong French growth
allows the CGE to extend its business without searching for
new opportunities abroad. This attitude is reinforced by over
cautiousness towards internationalization inherited from the
bad experiences in the past.
10 - Sources: Veolia Website.
after, the Compagnie Générale des Eaux (CGE) expanded its
27
At the end of the 60’s, and during the 70’s-80’s, the CGE
decided to launch massive buy-out of other companies. These
companies have already a strong foothold abroad. In few
years, the CGE bought among other the Compagnie Générale
de Chauffe (CGC), the Compagnie Générale Française de
Tramways (CGFT), the Compagnie Générale d’Entreprises
Automobiles (CGEA), the Montenay group and Soulier group.
The CGE wanted to acquire a critical size in the international
market. The firm took advantage of the wave of privatization
28
in the US (PSG in Miami) and UK (General Utilities) and
external acquisitions to expand its business abroad.
In parallel, during the 80’s and 90’s, the firm decided
to diversify its activities: waste management, energy,
transport but also broadcasting (Canal Plus in 1983) and
telecommunication (Cegetel in 1996 and SFR in 1997). In 1998,
the group adopted a new name: Vivendi. After the financial
crisis in 2000-2001, the group had to be divided, and Vivendi
Environment was created, regrouping former energy, water,
waste and transport branches. In 2005, Vivendi Environment
is renamed Veolia Environnement.
Swot of Veolia environnement
Veolia Environnement is today the world leader for
environmental services. It takes advantage of its position of
pioneer and of a structurally growing market but its branches
deeply suffered from the economic crisis in 2009 (turnover
fell down by 4,7%11). If it begins nowadays to turn the corner,
an analysis of its strengths, its weaknesses, the opportunities
11 - Source: Yahoo finance, key stats
it can benefit from the environmental market or the threats
on this one, can help us to understand its position and the
new challenges Veolia needs to take up.
• Strengths:
With a turnover of 34,6 billion Euros in 2009, Veolia is by
far the leader in the environmental industry. Thus, it can
benefit from its size to take advantage on competitors on
a market that requires a huge amount of capital to invest
tried and tested expertise. As a result, Veolia’s know-how is
unique and it would be difficult for newcomers to copy it.
In addition, we saw that Veolia was divided into 4 core
businesses: Water, property, energy and transport. Then on,
the group can make profit from the synergies developed
between all these poles (economy of scale because of
complementarities between its services). As a result,
Veolia Environment can propose a global service to local
authorities and thrive in countries where urbanization reveals
a new dynamic. Its international network has been strongly
developed up till now and the group also benefits from its
lead on this field. Veolia’s growth turns out to be structural
and virtuous (the more it grows, the more it will).
• Weaknesses:
Veolia’s growth is structural but also cyclical. Thus, for
example, its performance is sensible to variations in row or
recycled material valuation. It also depends on the standard
of domestic, industrial and household consumption, as
highlighted in 2009 during the crisis when the slack in
business affected directly Veolia’s turnover. Moreover, since
in. Moreover, its long-lasting history led Veolia to develop a
29
Veolia is positioned on a market that requires a lot of capital,
its investments may quickly become risky and the group
structurally demonstrates a high level of debt (up to 179%
since 200912). What’s more, if Veolia turns out to be very
competitive on its new markets, those who have already
come to maturity don’t allow them to expect a long-lasting
huge growth. That is a reason that led Veolia to think globally
and to develop its businesses abroad.
• Opportunities:
30
In spite of this limited expansion, Veolia’s activity is supported
by a structural and global economic growth, all the more
so as the environmental market will benefit from longterm potentialities. Indeed, world population will not keep
growing over the next decades and developing countries
are being more and more urbanized. This obviously results
in new potential consumers for Veolia’s activities (increase
in quantity of collected garbage, in needs of decent water…).
In addition, demand in environmental services has been rising
since NGOs and governments have become conscious of the
need to preserve our planet. In that way, sanitary regulation
has become stricter and stricter, and local authorities have no
other option but to rely on the expertise of private companies.
• Threats:
Nevertheless and may be paradoxically, this new consciousness
affecting also households is leading them to manage better
their consumption of water or waste. By then, individuals
tend to reduce local needs in environmental services…
Moreover, in spite of Veolia’s experience, competitors have
emerged (Suez Environnement, Firstgroup…). If Veolia still
12 - Source: Yahoo Finance, balance sheet
remains the only actor on the market owning its 4 expertise,
private consumers and local authorities have now the
possibility to put a downward pressure on prices…
The internationalization strategy of Veolia
environnement13
Nowadays, the Veolia group is a global actor in the
74 countries. The company‘s internationalization was due to
several factors:
- Historical reasons: during the 19th century, the CGE won
contracts thanks to the France’s influence over other
European countries and its colonies.
- Its position of foregoer and innovator, which has acquired
quickly a specific know-how.
-
Political reasons: the wish of French governments to
establish national champions and the wave of privatizations
in liberal countries during the 70’s and 80’s.
-
A round-turn in strategy and a wish to initiate an
international development through massive buy-outs
(CGC, CGFT, CGEA etc.) during the 70’s.
- A growth strategy targeting in priority the European Union,
the USA, Middle East and Asia.
Success factors
The Company has had to develop significant competencies
to manage successfully its internationalization strategy. This
success rests mainly on 4 dimensions:
13 - Sources: Veolia Website, Wikipedia and institut de l’entreprise (Les entreprises dans la mondialisation
Veolia Environnement).
environment sector and maintains a presence in more than
31
• Know-how
This is Veolia’s main asset. Competent people can efficiently
lead huge projects. This know-how is built on 150 years of
facility management. Each project consists in optimizing the
use of the existing and to reduce the possible energy losses such
as leaks. In this way they can free productivity gains, which can
be reallocated to other investments towards energy efficiency
and sustainable development.
• Adaptability
32
Veolia has learnt how to fit to its environment and to adapt
to local work conditions, cultural principles and technical
constraints. Adaptability leads the contract writing and demands
many discussions and studies. For example, in the Chennai case,
Veolia committed to picking up the garbage not only in the
evening as it should be, but also early in the morning. Merely
because inhabitants believed it was offensive in their religion to
take down the refuse in the evening.
• Human resources
Not only are people the innovation engine but also the
Company’s assets. Veolia takes care of its employees. They
can get a diploma at the Veolia Institute. Also, in terms of
management, Veolia always tries to appoint local people for
the management. Only a few expatriated people remain at
the top, in order to transfer experience and know-how. In the
long run those expatriates will be replaced by local people.
This is also the way Veolia thinks local. Veolia aims at infusing
its moral values and its company spirit and simultaneously
blending in the country.
• International Rivalry
Existing bilateral investment protection agreements between
countries provide Veolia with an independent international
referee when relationships turn out to be tense.
Hurdles to internationalization
• Country risk
While entering a foreign market a company should assess
of risks that could jeopardize the sustainability of the
contract. One of them, the country risk, consists in assessing
the political stability, the fiscal policy, the Ease of doing
business, the geographical distance with the HQ. Also,
another risk implied is the contractual risk that can exist in
some developing countries, as we will see with the example
of Veolia Environment Services in Chennai, India. Some
countries may be tempted not to extend a contract with an
international player in order to develop a local player using
the technology or knowledge brought by the foreign player
in the first place.
• Currency trade risk
While entering a market there is also monetary considerations
that need to be contemplated. While adapting to a local
culture, laws and taxes, one also have to use local currency.
As we evolve in floating currencies, it is a hard task for
companies to predict the value of a local currency and
therefore base investments on this data.
what could be called country risk. It includes various types
33
• Private/Public financing
For environmental infrastructures, private financing is higher
than the public one as the interest rate granted by national
or international finance institutions is lower for States than
private companies, as they represent less risk. That risk
difference is all the more true when you evolve in a poor
developing country.
• Full cost recovery
While entering a developing country, the pricing model must
34
also adapt to the local context. By going abroad, some of the
costs may be lower than on home ground. For example, labor
wages and taxes may be lower as the average salary reflects
the level of development of the country and the tax level,
the will of the government to welcome foreign companies.
But some of the costs may remain the same or even increase
while going international. Since massive infrastructure
investments need to be made, water supply for example,
and therefore how can a firm ask local customers to bear
those costs, especially in developing countries? Developed
countries have financed those investments through the State
and not through private funding. Hence the existence of the
world bank, of “sustainable cost recovery” policies.
The example of Veolia Environment Services in Chennai, India
To illustrate some of the features of Veolia’s international
strategy, let’s focus on Veolia Environmental services
(formerly Onyx) and its entry into the Indian market through
the example of Chennai, the fourth largest metropolitan city
in India, and the first city in India to contract out municipal
solid waste management (MSWM) services to a foreign
private agency.
Municipal Solid Waste Management (MSWM) is a challenging
problem for developing countries, and in 1996, the government
of Tamil Nadu (one of the Indian states) directed the
Corporation of Chennai to introduce private participation in
the collection of solid waste to enhance efficiency and quality
the same.14
In 1999, the city of Chennai launched an invitation to tender
for a seven-year long contract for the waste management
in an area where more than 2.25 million people lived, and
which required sweeping around 700 kilometers of Chennai’s
streets every day15.
Until 2000, municipal services would take care of it with low
productivity. Issues of security and efficiency were not dealt
with at all, and the garbage clearance was somehow insecure.
Three companies, including two local businesses, answered
the offer. With the commercial help of a local engineering
office with which it had already worked in the past, Onyx
set up an innovative yet cheap solution, which included work
standardization, security material for all the workers, and a
large communication campaign to inform local populations
about sanitary issues.
Despite some protests by conservancy worker unions, the
final contract with Onyx was finalized for privatization of
14 - Public, Private and Voluntary Agencies in Solid Waste Management, A Study in Chennai City by Krithika Srinivasan
15 - Veolia Environnement dans la mondialisation: Le contrat de propreté d’Onyx à Chennai (Inde) Veolia Environnement,
Université d’Automne 2003, Enseignants de Sciences Economiques et Sociales – Entreprises
of services and bringing in the extra resources required for
35
SWM in three zones for a period of seven years (2000-07),
and included collection, transport and disposal of the waste
at the disposal sites. This contract would even allow the City
to save some 10 million rupees a year16.
Operations started in March 2000. The contract implied some
specific details, concerning the creation of an engine shop
or the emphasis put on safety for workers. More precisely,
the company provided regular vaccines, uniforms, protective
36
gear and washing facilities to all its workers. Manual handling
of waste was prohibited, and training was given to workers
on safe driving, correct handling of equipment (to avoid
problems like shoulder or back pain)17. These improvements
in the nature of employment conditions are linked to the fact
that Onyx is a registered company, with an international image
to uphold. Also, Onyx benefited from its expertise in the field
of rationalization and mechanization of waste management,
and could apply its methods for modern garbage clearance
to the Chennai situation18.
Another part of the contract described the launch of a
communication campaign designed for local population in order to
inform them on the changes that Onyx’s arrival would imply, and
invite them to adapt to these new methods. To make it a successful
campaign, Onyx contacted local associations, and developed a wide
range of means to reach the population depending on targeted
groups: shows in the streets, demonstrations with local officials, TV
advertising, debates about hygiene organized in schools19.
Onyx’s was successful in the Indian market and this for
several reasons. First it accurately identified the local
16 - http://www.melchior.fr/La-mise-en-place-du-contrat-ON.4424.0.html
18 - Municipal Solid Waste Management In Chennai City, India, S. Esakku, A. Swaminathan, O.Parthiba Karhtikeyan, J.
Kurian and K. Palanivelu
population’s needs. Second it soon reached a high level of
satisfaction, thereby creating a feeling of legitimacy of its
presence, and raising the acceptance level. Finally, one of
the key elements of its success was the human resources
management, and especially the way Onyx dealt with local
cultural characteristics through human resources.
Concerning this last point, Onyx paid a special attention to the
hiring of local managers. This way, it could quickly develop a
local department for formation, even if international managers
regularly visited the Chennai offices20.
Also, to recruit workers, Onyx looked for help from a local
business that was specialized in these issues. Another
element to make Onyx’s presence legitimate was linked to
the terms of the contract which were very attractive. Finally,
Onyx put an emphasis on the quality of the training and of
the information that was delivered to employees. Through
this, Onyx made the bet that it would motivate and retain
them. Figures tend to prove them right, as the turnover rate
dropped from around 30% to only 7% in a few months21.
The majority of the residents across the three zones, which
were earlier serviced by the corporation, were of the opinion
that the private company’s performance in SWM was better
than that of the corporation’s. This was attributed to better
equipment, monitoring and supervision systems and more
stringent enforcement of performance norms for employees
in Onyx22.
20 - http://www.chennaibest.com/discoverchennai/citylifestyle/feature10.asp, interview of S.Vidya Swaminathan, of C.E.S.
Onyx
limitation of the number of expatriates, and encouraged the
37
However, there was also a feeling among residents that
Onyx’s performance has slipped over the years, with SWM
operations declining in quality. The main reason for this was
the political atmosphere which made the company to think it
would not be able to renew the contract.
This is why in 2007, at the end of the contract, Onyx lost the
major Chennai market even though its work had come in for
praise23. In August, JBM Finance Group took over from CES
Onyx for solid waste management in four zones24.
38
23 - “Contract with Onyx expires today”, Karthik Subramanian, The Hindu, Online edition of India's National Newspaper
(Feb 25, 2007), http://www.hindu.com/2007/02/25/stories/2007022518870300.htm
24 - "Onyx workers getting anxious about what’s in store”, Kannal Achuthan, The Hindu, Online edition of India's National
Newspaper (Aug 11, 2007), http://hindu.com/2007/08/11/stories/2007081159520300.htm
ORANGE
How can orange’s internationalization be explained?
France Telecom was privatized in 1998. Before that the
telecommunications were considered as an administrative
state service. Also until 1998, this company had a unique
market: the French one. The privatization of public services
to a European directive which aimed at making competition
mandatory in public services) and even global. The recent
internationalization of the telecommunications is partly
explained by this recent opening to competition that enabled
companies to capture new markets.
The privatization was synonymous to a new start for France
Telecom: a new ambition with significant financial means.
The goal of the company was to become the European
leader in the sector of telecommunications and to be an
incontrovertible actor in the world. France Telecom leaned
on its credibility thanks to:
- The reputation of the brand
- The experience of the company in the deployment of
infrastructures
As the other significant European operators, France Telecom
(that became Orange) tried to capture market shares in
developed countries but these markets were mature. It
was very hard and it needed important means to gain very
few market shares. In France, the penetration rate of SIM
was not specific to France but European (it was a response
39
cards was equal to 100% for the first time during the first
trimester 2011. These markets were not only soaked but even
threatened by the entrance of new operators (like Free in
France in 2012) and by the European legislation (for example
the cost of phone calls or SMS keeps decreasing). Then
Orange realized that it had to search for new growth drivers.
The company decided:
- To consolidate its positions in the developed countries.
For example in 2009 Orange and T-Mobile merged their
40
UK operations to create the largest mobile operator with
37% of the market.
- To look for new markets. Since 15 years, we have observed
the end of many situations of monopoly abroad, which
means the opening of many new markets. Maroc Telecom
was privatized in 2001, Türk Telecom in 2005 and Bénin
Telecom in 2011.
Finally Orange had to internationalize its services in order to
adapt itself to the needs of the consumers. The consumers
travel more and more for professional or private reasons.
They need to make phone calls from abroad or to foreign
countries. According to the ARCEP’s figures, the volume of
these communications has increased by 15% approximately
by comparing 2010 and 200925. To enable the consumers
to make these phone calls, the operators have to reach
agreements with foreign operators to use their networks. It’s
easier and cheaper when you own or have a participation in the
company you are dealing with. For example, Orange France
can have very competitive prices by Meditel (Morocco) and
25 - Observatoire trimestriel des marchés des communications électroniques en France -4e trimestre 2010 - résultats
définitifs
other companies like Bouygues Telecom could not obtain
such prices. In comparison with Orange, Bouygues Telecom
is a French company that is not internationalized at all and
as a result they have fewer solutions for the consumers who
travelled a lot.
The mobile section is located in 35 countries for private
individuals, that is 150 million customers (27 million in France
and 59 in Africa/Middle East). Orange is the fifth mobile
operator in the world. Even if the company is present in more
and more countries, still 49% of sales are made in France,
which means Orange’s internationalization is in progress but
not finished at all.
26 - http://www.orange.com/sirius/leaflet/beevirtua/beevirtua_fr.html#app=121&9557-source=xmlConfs/init.zip&adf3lang=fr&ccb3-pageId=8
The results of the internationalization, a couple of
figures26
41
42
ORANGE’S expansion strategy: internationalization
first
Orange has formalized its recent expansion strategy through
three successive plans27: Next (2006-2008), Orange 2012
(2009-2011) and Conquêtes 2015 (2011-2015). In each of these
plans, the emphasis is put on international development.
“Next” was the first step of a strategy based on the name
Orange, which was to become the commercial name for
all France Telecom activities by the end of the decade. It
included many acquisitions of companies in the world, in
order to find a place in new markets, and to make economies
of scale. The other point of the plan was a diversification of
the activities of the group both in France and abroad.
Orange 2012 was more innovation-oriented, with focus on
R&D and new technologies (creation of Technocenters, new
services offered). Another idea was to create a real structure
around the Orange brand, by optimizing the cost structure
and creating synergies between countries.
27 - http://www.xerfi.com
Conquêtes 2015 is the continuation of Orange 2012. One of the
four mainstays of the plan is to reach 300 million customers
worldwide by 2015, by consolidating its position in developed
countries (UK, Spain, and Switzerland) and by taking the lead
in fast-growing countries, particularly in Africa and Middle
East where markets are not yet taken by competitors.
As explained before, Orange’s internationalization strategy
is first based on the fact that the market in France is already
particularly in developing countries. However, France
Telecom, then Orange, has never developed any foreign
subsidiary from scratch. Most of the times, the company
buys an existing, already structured company in the targeted
country.
At the beginning of the 2000 decade, they operated a few
big acquisitions in developed European countries (Orange
plc in the UK, EresMas in Spain, Wind in Italy), countries that
are now considered as “milk cows” for the company.
Then they decided to focus on emerging markets like
Eastern Europe, Middle East and Africa, where they are now
positioning as the number one operator. In some cases, they
bought companies progressively, by first merging with the
foreign company, without taking completely control over
it (i.e. in Morocco in 2010). Recently Orange also created
some joint-ventures or partnerships with large companies in
already mature markets (Orange UK and T-Mobile, Orange
Suisse and Sunrise) in the context of the two strategic plans
at the end of the decade.
mature, and that new markets are still available outside,
43
In the end, one can say that Orange does not develop its
international network by itself. The company would rather wait
for any “good deal” to appear, using a kind of “opportunity
watch” more than acting ahead. Doing so avoids them to
take excessive risks; they benefit from the experience of local
actors who know the market and already have a name, and
in return they bring some expertise in marketing and new
technologies, as well as a strong financial structure. This
strategy allows Orange to strengthen its revenues, without
44
investing too much in a short period of time.
Another major point of Orange’s international development,
which makes the company a real “worldwide” firm, is
the branch called Orange Business Service. This branch
represents only 15% of Orange’s revenues, but if the brand
can claim a presence in “220 countries or territories”, that
is above all thanks to this entity, that groups together since
2006 all the services offered to other companies (and not
individuals) in the world.
Actually, in many cases Orange Business Services only
followed their customers in foreign countries, which forced
the brand into having at least a local office (i.e. in Asia
and North America particularly) in places where Orange
does not provide any mobile phone services. But with the
implementation of new, sophisticated offers and technologies
targeted at professionals, this branch could be an important
axis of international development in the future.
Internationalization and innovation: dynamic
learning’s virtuous circle
Innovation is one of Orange’s key factors to conquer new
customers in different markets and to differentiate itself from
its local competitors. Internationalization paved the way for
innovation, a strategic priority for Orange. Innovation was a
headline in the “Orange 2012” plan running from 2009 to 2011.
The agenda was to improve Research and Development and
Innovation is closely related to Orange international
panorama. Orange embraced a “global” strategy, anchoring
its innovation’s centers at the core center of its markets, while
enabling each entity to benefit from the group’s expertise
and the innovations’spreading from their birth places. This
strategy is highly pertinent if we take into consideration the
customers’base diversity from the UK to Sub-Saharan Africa:
wealth and development’s levels or the identification of
different needs call for appropriate solutions. Doing so, Orange
can reach and attract talented people from different regions
and canvass the world to take advantage of new opportunities
and tap into a huge number of innovations. As for today,
Orange teams all around the world pay special attention
to two main research axes: the speed increase of mobile
and home networks and Internet services’optimization. 28
In the meantime, Orange seeks to develop local partnerships
in distribution’s channels in order to share the costs and in
technologies in the networks and information systems’areas.
28 - http://www.xerfi.com
the new services’quality and technologic levels.
45
For instance, Orange contracted a partnership with China
Telecom dealing with the research and the development of
various technologies and uses.
In 2006, Orange created the Orange Labs dedicated to
research and development. Nowadays, they can be found in
a dozen countries, including China, Spain, the USA, Japan and
Poland. The Labs are in charge of marketing intelligence, new
innovations’findings and new opportunities’identification.
46
They are located in very different regions to feel the evolutions
and needs of the markets in which they are integrated. There
are three types of Labs: Orange Valley dedicated to Internet
service-linked innovations, the Explocenters that work on
identifying new development’s axes and the Techno centers
that are designed to launch on the market new products or
services. Techno centers can be found in London, Amman or
Abidjan.
Orange adopts a dynamic learning strategy that consists
in acquiring knowledge and innovating on various markets
to translate and transport these assets towards other
development centers. The innovation-internationalization
dynamic is a virtuous circle that increases and takes advantage
of the knowledge capital of the company as a whole. For
instance, Orange developed Orange Money targeting SubSaharan populations with a weak banking-system. That
solution of virtual purse and m-payment is now exported to
Eastern Europe.29
29 - http://www.orange.com/fr_FR/presse/dossiers/att00007834/DossierPresse_Orange_Innovation_AMEA_FR_091110.
pdf
Local specificities are often cultural and that factor is strongly
taken into consideration by Orange, the core-activity of
which is about communication and creating interactions
between individuals and between each one of them and the
world. Still in Sub-Saharan Africa, Orange developed specific
interfaces to open up remote people using dialects. Orange’s
core-business lies in the networks: internationalization and
openness to the world have incidentally always been at the
A specific example of internationalization
and innovation: Africa
With the progressive saturation of the European market,
Orange sought to develop its activities in other parts of the
world at the end of the 1990s. This need of internationalization
came well-timed because the agreement of the World Trade
organization on basic telecommunications signed into 1997
heralds the progressive deregulation in the telecommunication
in Africa. In fact the liberalization in telecommunication put
an end to the huge monopolies on the continent. It was the
beginning of growth perspectives for firms (like Orange) with
high competencies in network management.
Orange has well understood the high potential of growth
in Africa. It has used the same strategy of development in
new markets: joint-venture with a local actor or acquisition
of local firms. Orange adopted a pragmatic approach of
internationalization in focusing itself on the West African
30 - http://www.orange-innovation.tv/webtv/afrique-et-moyen-orient-terres-d-innovation-pour-orange/video-1354-fr
center of its offer.30
47
markets. These countries had their money, Franc CFA,
indexed to the Euro which limited the risks of inflation.
Moreover, Orange as a French firm has historical links with
these countries because of the colonization. From the middle
2000s, the company spread on the East of Africa with the
acquisition of new markets in Guinea, Guinea-Bissau, Central
African Republic, Niger, and Uganda.
The process followed in Africa is the same as in the other
48
countries: internationalization, then innovation. Orange’s
success in Africa relies mainly on its well-known competency
in the management of internet and telecommunication, and on
its huge power of marketing. African countries need to have
strong networks and cannot afford the necessary investment
to cover the country. Strong firms like Orange were able to
do so. Internationalization, then innovation. Africa is a typical
example of this process. The African countries have benefited
from the innovations developed in other development
centers. For instance, the system of e-learning developed
in France has been implemented in summer 2010 in Orange
Uganda and in Telkom Kenya (Orange’s subsidiary in Kenya).
Salaries can have access 24/24 hours and every day on the
platform which gives formation about office automation, life
skills and computing. Orange transfers innovation from a
country to another but also seeks to create innovation in its
new markets. For instance, a new group’s Orange Labs was
inaugurated in Cairo in Egypt in 2008.
We can say today that Orange is the leader in telephony
in Africa with 50 million subscribers in 15 countries. The
last acquisition of Orange in Africa, Uganda is a good
manifestation of this success. The market in Uganda is
promising with a penetration rate of the mobile phone less
than 27% for 30 million inhabitants. In 2009, Orange acquired
53% of the Ugandan telephone service provider31, Hits
Telecom Uganda. Orange has implemented a lot of innovative
cheap rates. In 2010, Orange was called best employer of the
year by the Ugandan Authority of Investment.
If we cannot deny the success of Orange in Africa, the
company suffers from negative aspects and threats in its
internationalization and development in Africa. First, the
process “internationalization first and innovation next” can
be a weakness toward its competitors. Historically, from the
beginning of its development in Africa, Orange has the same
competitors as in the European market. The British Vodaphone
is the main competitor on the African market. Contrary to its
competitors, Orange took its time to implement high-value
services like mobile. However Vodaphone implemented
this innovation of mobile banking earlier and pulled ahead
of Orange. Orange applied next its process in implementing
the mobile banking in Ivory Coast in 2008. Furthermore, the
competition took a step forward with the entrance of new
competitors from the BRIC (Brazil, Russia, India, and China).
Bharti Airtel, first Telco in India with 125 million subscribers
acquired the African assets of the Kuwaiti ZAIN and wants
31 - http://www.orange.com/fr_FR/presse/communiques/att00007798/print.jsp
offers: modernization of networks, a service of free recall and
49
to develop massively in Africa. The Russian Telco Vimpelcom
acquired the Egyptian Telco Orascom. China Mobile, the
Chinese Telco is also looking for opportunity to invest in
Africa.32
For the moment, Orange has developed low-value added
services to conquer new markets but took too much time to
reinforce its power of innovation in Africa. With innovation,
Orange will be able to offer high-value added services and to
50
cope with a new and stronger competition.
32 - http://www.afriqueexpansion.com/investissements-afrique/1977-telephonie-mobile-en-afrique-les-principauxoperateurs.html
ACCOR
Introduction of accor Group
The group was created in 1967 by two French, Paul Dubrule
and Gérard Pélisson, with the opening of the first Novotel in
Lille. The company is currently employing around 145,000
people and is settled in 90 different countries all around
with 4,200 facilities and 500,000 rooms across the globe. It
benefits from a rich and diverse portfolio of around fifteen
brands, from low-cost and standardized brands to luxurious
ones. We will dwell on it later as it is one of the major factors
that explain the strategy of internationalization. Moreover,
the group was founded on five key values that embody
the spirit and ambition of its creators which are innovation,
ambition, performance, trust and respect. Finally, the group
can capitalize on what we call “l’exception française” to
conquer new markets in its internationalization expansion33.
33 - Accor, l’aventure du Possible – Editions du Cherche-Midi
the world. The group is both a global and European leader
51
As
52
we can see above, the North Hemisphere represents the core
market of the group and in particular Europe and within it,
France. Indeed, it first expanded there and it now has 25% of
both the European and French hotel stock, 22% of the North
American one. On the contrary, it owns only 6% of both the
South American and African hotel stocks which are quite low
compared to the North both in market shares and in number of
rooms since the markets are still underdeveloped. Regarding
the Asian market, the market share is of 17% but has grown
over the last few years while the size of the market itself is
also increasing rapidly. Indeed, Accor has lately focused a
lot of its effort on the Asian market regarding the increasing
purchasing power of the populations and population growth
in these countries. It has been settling there through mediumhigh level hotel brands such as Pullman which mixes French
luxury with a pinch of local cultures.
As we already mentioned in the introduction, Accor owns a
rich and diverse portfolio of brands. If we take a closer look at
it, we can observe that each brand is positioned on a specific
segment in order to avoid cannibalization. One exception
stands for low cost and standardized brands as the revenues
are generated by quantity instead of prices so the company
is looking for high volumes. That could explain why there
are four brands in this segment. Thus, the Accor’s portfolio
services. For instance, Hotel Formule 1 hotels provide lowcost and standardized rooms for young moving people. On
the contrary, Sofitel hotels are only settled in the biggest
capitals across the world and resort to famous architects and
designers in order to build unique and prestigious facilities.
The brand “composes with elegance à la française, knowhow, refinement and the best of the local culture”34. For
instance, for the new Sofitel opened in Vienna last December,
Sofitel Vienna Stephansdom, the famous French architect
Jean Novel was in charge of the design while the threestars French Chef, Antoine Westermann runs the restaurant
located at the eighteenth floor of the building. So as Accor
covers the whole offer through its different brands, if it still
wants to grow, the only possibility left is to internationalize
and go abroad in order to avoid cannibalization.
What can be true here for all service firms but is even more
meaningful in the hotel industry is to secure the loyalty of its
customers and to facilitate their way of consuming services.
In order to do so, Accor has implemented a partnership
34 - Sofitel.com
covers the entire offer both in terms of prices and quality of
53
strategy with different travel companies such as AirFrance,
SNCF or Europcar to be able to accompany their customers
wherever they can go. This partnership strategy can result in
concrete applications for the customers such the smiles you
can collect through the purchase of train or plane tickets and
use as free nights in the partner hotels. For the company,
it can also have great financial consequences through the
creation of synergies with the partners such as the rise of
market shares, lower costs, increase of the brand reputation
54
and awareness, development of new services or at least new
ways to access them.
Swot of ACCOR
• Strengths
The group’s international presence (over 140 countries), its
age – company founded in 1967- its turnover (M€ 5,94835 in
2010) as much as its capacity, 4,229 hotels in 2010 - makes
it the world’s leading hotel manager. It has also a strong
position in the upper and middle range hotel scale range.36
• Weaknesses
The change in CEO in January 2011 and the absence of
declaration so far (due to August 24th) questions Accor’s
future strategy (pursuit or abandonment of Ariane 2015 plan).
The group is mostly implanted in Europe (50% of the total
capacity) and especially in France (25%).
• Opportunities
Accor should benefit from the revival of international tourism,
especially in south America (+7% in 201037), the separation
35 - 2
010 Accor press release (http://www.accor.com/fileadmin/user_upload/Contenus_Accor/Finance/
Pressreleases/2011/FR/20110223_cp_resultats_2010.pdf)
36 - http://ivythesis.typepad.com/term_paper_topics/2008/06/pest-ad-swot-a.html
37 - http://www.un.org/apps/newsFr/storyF.asp?NewsID=24243&Cr=tourisme&Cr1=
with Accor services and the cession of Lenôtre and solid
assets (hotels) enables it to focus on management and
franchise control of its capacities. The emergence of new
market (South west Asia and Latin America) offers growth
prospects that Accor managed to grab (1st hotel group in
South America38).
• Threats
This is a highly competitive sector (Hilton, Marriott
North America could be prejudicial. The Ariane Plan is very
ambitious and a failure could have negative consequences.
Internationalization of accor group: why?
The hotel industry is global by its nature. It follows its
customers no matter if they are tourists or business man and
regardless of their financial resources. Accord has a brand
for every type of customer and therefore has the means to
follow them wherever they go. But one has to make a choice,
and choose destinations. A short analysis will show the reality
of tourism activity.
Tourism is clearly an exceptional industry. Its growth in the
last century is remarkable: The number of international arrivals
has grown from 25 million international arrivals in 1950 to an
estimated 806 million in 2005, showing an average annual
growth rate of 6.5%39.
While the Americas (5%) and Europe (6%), are a little below
worlds average growth, the evolution is particularly strong
in Asia and the Pacific (13%) and in the Middle East (10%).
38 - http://www.directgestion.com/sinformer/filactu/10841-accor-hilton-cest-lamerique
39 - Word tourism organization 2011 (www. unwto.org)
International, Wyndham…), and the absence of Accor in
55
Interestingly, Europe’s and America’s share have declined
respectively by 10% and 13% since 1950.
Not only does the tourism industry grows at a fast pace, but
also some particular regions attract travelers. It follows that
it is in the best interest for global groups as Accor to develop
internationally and to pay great attention to “new entrants”
as Asia and Pacific. Internationalization is a way to follow its
customers, but also an opportunity to meet new ones with
a special cultural background therefore raising matters of
56
adaptation.
International tourism arrivals forecast 2020 (Word Tourism organization)
History of Internationalization at Accor
“Think without boundaries”: Open mindness being one of the
core values of the group, the fact that the founders rapidly
sought for ways to grow out of France comes at no surprise.
As a matter of fact, the internationalization of Accor could
be summed up as a story of patience, opportunities well
managed, and an eagerness to adapt to the local political,
legal and cultural environment.
The first step was made by creating Novotel International
(asset of 5 million Swiss francs) in Geneva as an answer to
exchange control issues which prevented from investing
outside of France. As show in the examples below, the story
of European openings began thanks to opportunities well
managed and the ability to adapt to local environment and
keep focused on European countries. In the late 1980’s, the
target was the American market. Since the end of the 1990’s,
the main concern is the Asia-Pacific area.
First move outside of France was all but not easy. The
model which was successful developped some issue in its
internationalization. Accor has to learn to adapt to local
specifies. In Switzerland for example, Accor began in the
1970’s to build a hotel next to the highway, it was never
finished. In Brussels a hotels’construction is blocked by
ecological activists because of its effect on landscape!
However, the work made by Accor team on adaptation to
local context is impressive. Novotel was launched in Poland
in 1974 after a deal with local communist authorities. The
manager, Robert Molinari, convince them by creating a local
franchise system. Accor made also a great work to take
the best part of each country. In Switzerland for example,
headquarter in the company is in Bussiny where taxes are
very low40.
Internationalization was also made through important
external development operations. In 1990, Accor made one
40 - L’urbanisation de Bussigny – Aurore Progin et Quentin Costa, 2009
practices. At the beginning of its internationalization, Accor
57
of its major moves with the acquisition of Motel6 in the USA
for $1,3Billion41. It allows Accor to become the first Hospitality
group in the world. In 1999, the company takes over Red Roof
Inn for $1,115 billion42.
All in all, in practice, internationalization was a tough process,
not only depending on founders will and capacity to adapt,
but also on their luck and management of opportunities.
58
Means used to internationalize Accor
Accor has decided to become a “pure player” in the hotel
industry, i.e. the strategy is, as a first move, to open 35 to 40
thousands new rooms per year from 2012 on. These rooms
would be managed according to three types of deals:
- Franchise: the hotel manager operates his hotel directly
under one of Accor’s brand and benefits from Accor
expertise. He has to pay franchise fee but receives,
in compensation, Accor’s expertise and services (a
centralized system of reservation, marketing forces etc.)
-
M anagement: Accor provides the hotel with its
management’s force – thus provides the same benefits as
franchise - but the hotel manager pays fee according to
the operating profit.
- Lease: either fixed or variable according to operating profit43
It has to be kept in mind that the firm’s plan is neither to
buy nor build hotels anymore. Accor only wants to be an
enterprise of service and is selling the hotels they have, in
41 - History of Motel6 – Fundinguniverse.com
42 - Marty Whitford, Red Roof purchase to propel Accor to No. 3 in guestrooms worldwide, 1999
43 - http://www.accor.com/fr/franchise-et-management/nos-contrats.html
line with the “plan Ariane 2015” which describes well Accor’s
strategy.
In order to make the most out of this strategy, it has been
settled that decentralization and adaptation had to be the
key-words of the plan Ariane. As decentralization is one of
the fundamental values of Accor’s, efficient partnerships have
been implemented, such as the one between Accor and the
Nayang School of hospitality in Singapore, or else in China
France to become “Ibis manager in China”.
Another type of action implemented is the adaptation of
high-quality hotel to local culture.
Indeed, as low-standard hotels, such as the one under the
brand hotel Ibis or Formule 1 are very standardized and
provide the same service all around the world, a brand such
as Pullman has a goal to provide the occidental comfort that
is expected, and in the meantime to be able to adapt itself to
local culture.
For instance, the Lijiang Resort & Spa, a hotel under the
Pullman brand in China offers the comfort expected, and
in the meantime provides customers with local food and
traditional NaXi-inspired designs, the region’s dominant
ethnic group.
Nonetheless, it must be noted that Accor’s CEO, Gilles Pélisson
has been dismissed and replaced by Denis Hennequin on the
15th of January 2011. Even though the broad lines of Accor’s
future development (less ownership, more management
and franchise contracts) will be maintained, his statement is
with the ministry of education: Chinese students are sent in
59
expected for the 24th of august and the clear strategy will
then be revealed.
60
ACCOR and its competitors
Hospitality is a very high competitive market, where
internationalization is a key factor of success. Many
companies get a significant part of their activities abroad,
but only five companies achieved to become truly global
player: Wyndham, Marriott, IHG (Intercontinental), Starwood
Hotels and Accor. Accor is the only European company from
this group; all the others are American groups. However, it
is the most internationalized: More than half of its revenues
are done outside from Europe, whereas its competitors are
much more dependant from their local American business.
Accor is also differing from its competitors with its low level
of activity in the extended-stay business, which is specific to
the American market.
These companies are acting on a worldwide level, and with
the same business segments (from low cost to luxurious
hostel). It is interesting to notice that they all follow a similar
strategy for their internationalization. It was done through a
limited number of brands (from seven for Intercontinental,
to 18 for Marriott). Each of them get a strong identity, and fit
a business segment. They also use the franchise agreement
to grow faster and adapt their hotels to local specificities.
Internationalization is in the heart of their strategies. For
example, 75% of the investments made by Marriott are done
abroad44. They are now focused on Emergent market and
new tourism area, specifically the Asia-Pacific area and to a
lesser extend in Brazil.
44 - Annual Report 2010
61
SOCIéTé GéNéRALE
Introduction
The Universal Bank model is at structuring the dual strategy
of internationalization of Société Générale:
-
Increasing the activity of Retail banking in emerging
countries
financial centers
To what extent is this model relevant?
A model praised for its robustness:
- It is based on the high profitability of the Investment
Banking activity, which has not been the case in the last
few years.
- In terms of service, the same brand Société Générale is
associated with two businesses fundamentally different. It
is difficult to justify this duality in times of economic crisis.
An international culture developed throughout history45
The internationalization of Société Générale began in the
1870’s, in the height of the first industrial revolution, in order
to handle the financing of international trade.
Its first London office was established in 1871 in order to handle
some proprietary arbitrage operations as well as accompany
its clients involved in Franco-British trade. Another relevant
example of this early internationalization is the implication of
the bank in the guano business. The role of intermediation
45 - All the figures in the first part are from Hubert Bonin, Sc. Po Bordeaux
- Increasing the activity of Investment Banking in major
63
played by Société Générale’s British branch proved vital in
the bank’s decision to partner the merchant bank Schröder in
financing the import of huge quantities (2 million tons in total)
of this natural fertilizer (collected from all over the coastlines
of Peru and Chile) into Europe. This role consisted in several
actions: the bank’s participation in forming the very capital
of the trading firm which was created for these imports; the
recurring credit line extended to it; the loans to the house of
Dreyfus which had also participated in the formation of this
64
company; the loans to the Peruvian government to ensure a
smooth running of these operations, etc. During the period
that the contracts were in force (between 1869 and 1875,
and 1882), some 10 to 15% of Société Générale’s assets were
involved. This business proved to be a blessing in disguise
and an object lesson in international business affairs. The
Bank learnt how to navigate through the legal subtleties of
international business, the trading of bills of exchange in the
heart of the City of London and the financing of international
trade.
The beginning of the 20th century sees an acceleration of the
internationalization of Société Générale due to the needs of
the second industrial revolution. The economic resurgence of
Europe and the rise of new transatlantic and Asiatic powers
justified the range and vigor of its international activities. This
explains the creation in 1934 of a “Foreign Department” under
the direction of Julien Chadenet. Despite this, till as late as
1940, when it finally opened its subsidiaries in Buenos Aires
and New York to try and make the most of changing tide of
money flows induced by WWII, Société Générale did not have
a single branch or office outside Europe. According to some
research, not a single document in all of Société Générale’s
archives hints at any effort towards supporting French trade
overseas by the means of a banking network. This trend will
be confirmed by the choice of a strategy of alliances abroad
The factors that led to the internationalization of the bank
Historically, internationalization is a way for the bank to follow
its clients abroad in order to finance their activity. But today,
internationalization is driven by the model of the Universal Bank.
Indeed, this model requires a growing Retail Bank in order to
support the financing of the Investment Banking activity.
Internationalization is also a way to pursue growth in an
increasingly competitive environment. First, the domestic
environment is saturated. Indeed, French retail banking is a
mature market, with a bancarisation rate of 99% and multiple
players in competition. Then, abroad, major French players
are competing with Société Générale. Last, as a public quoted
company, Société Générale is constantly threatened to be the
target of a hostile takeover. Size is a way to avoid a takeover
bid, and growth is thus necessary to achieve a critical size.
This ambition of internationalization is reflected in two
objectives listed in its 2010 Annual Report: to be ranked
among the 3 best banks in Eastern Europe and Russia; to be
ranked among the 5 best European Investment bank. These
that will be discussed further.
65
two objectives come together, and cannot be dissociated for
they are part of the project of building a leading Universal
Bank. It is also very interesting to note that a third objective
is to be the reference in terms of customer satisfaction
on the French retail banking market. Indeed, this focus on
quality of service is specifically concerning France, at a time
when Société Générale has announced the opening of 400
agencies in Africa. Quality of service may not be compatible
with this growth strategy.
66
Société générale’s globalization
The implementation strategy
There
are
two
major
possible
strategies
for
the
internationalization of a bank. The first strategy is to open
subsidiaries in targeted countries. This strategy allows the
company to keep a global control on direct management such
as the choice of employees and even the choice of customers.
However, this strategy has important inconveniencies
because it is a very long and expensive process.
This first strategy is the one HSBC chose from the beginning,
as they were able to benefit from a large amount of capital to
help them acquire subsidiaries all around the world. It helped
them to become a “world bank” in the mind of most citizens.
HSBC worldwide implementation
The second strategy is to create alliances with existing
banks in targeted countries. This second strategy has major
advantages as it allows a really quick implementation through
an existing network that already benefits from a clientele
portfolio.
This second strategy is the one Société Générale chose to
expand at the international level. Creating alliances with
banks’clientele and keeping the other banks’names helped
them being integrated more easily. Indeed, people tend to
be customers of banks from their home countries because
it seems to be easier to trust them and keeping the local
names help the banks to still look like national even if they are
now part of the Société Générale worldwide network.Société
Générale worldwide implementation
While adopting this strategy, Société Générale has managed
to open 3,817 agencies in 37 countries in Europe, Asia and
Africa.
banks in different countries allowed them to acquire the other
67
The internationalization strategy chosen
by Société Générale
Société Générale is extremely active in purchasing many local
banks abroad for either retail or investment activities. But the
company invests differently depending on the geographical
areas and the development growth of the markets.
• Developed countries and Asia
Société Générale acquires financing & investment bank
subsidiaries in developed or developing market places such
68
as Asia, Western Europe and the US in order to benefit from
the high expected growth on these markets. In those “mature”
countries, Société Générale supposes the management is
trained enough so they don’t necessarily need to replace
employees. But, as the network Société Générale wants to
create and bolster synergies between its subsidiaries, they
often appoint people in charge of supervision, risk control,
reporting as well as jobs dedicated to the detection of the
high potentials among employees. Those jobs are key to
reinforce relationship with the network. That’s the reason why
skilled expatriate employees should do it.
• Developing countries
When it comes to the retail bank internationalization, the
strategy seems to be largely influenced by the history of
the countries the bank comes from. Indeed, as France has
always had a strong presence in Africa due to “colonization”,
Société Générale is more likely to settle there. For the same
reason, English banks settled in Asia while Spain ones went
to South America and German companies went to Eastern
Europe. That’s why Société Générale paradoxically does not
have lots of choice. The major issues a bank faces to settle
abroad are the cultural differences and the different needs
of its customers, legislation requirements of the country and
intensity of the competition. At the local level, each country
has its specialties: for instance, the German people are more
likely to pay cash than the French customers. The bank must
adapt to these demands and sometimes it takes time (and
money) to adjust the bank know-how to the country habits.
close relationships with citizens and firms of the country of
origin.
In order to manage the purchased bank in developing
countries, they’ve invented the “rule of 4”; when they acquire
a bank, they spend 4 weeks to appoint top-management and
4 months to finalize appointments. As soon as the acquisition
is done, a pool of managers perfectly trained to these kinds
of assignments are appointed to the key jobs of the bank,
such as CEO and CFO of the subsidiary, human resources,
and risk control.
Innovation helping internationalization: the African
case
Historically, Société Générale has always been active in
Africa, since the first attempts to internationalize in Africa
started in 1909. Today, the bank is represented in 15 countries
on the continent, which stand for 20%46 of the revenues of
the “Réseaux internationaux” part. The objective is to open
480 new agencies by 2015: 380 in North Africa and 100 in
46 - Annual Report and Financial Statement 2010
We understand that it is easier to work in a country that has
69
Sub-Saharan Africa47. This could represent 1.7 million of new
clients. Société Générale could become the first private bank
in North Africa.
Société Générale has tried to design special services for the
African countries:
- No fees
- Sending money to family (partnership with Western Union)
- Purchasing property in Africa
70
The continent has strengths and weaknesses but also
opportunities to Société Générale:
• Strengths:
- People speak French.
- Young populations.
- Strong perspectives of growth for the African economies:
5% 48 on average per year on the continent.
• Weaknesses and opportunities:
- Low rate of use of the banking system49: 42% in Maghreb,
7% in Sub-Saharan Africa.
-
Lake of infrastructures and familiarity to the official
banking system (clients use few financing or banking
products, majority of deposit account).
- Parallel and informal economy.
How can Société Générale foster change among the population
by taking into account the access to new technologies. How can
Société Générale reach those clients? What is the alternative to
traditional banking services? Starting in June 2010, Senegal is
the guinea pig to Mobile Banking. The idea was simple: with
47 - Les Echos, 15/11/10, La Société Générale va ouvrir 480 agences en Afrique d'ici à cinq ans
48 - Wikipédia
49 - http://bpt2020.afrikblog.com/archives/2008/02/15/7966301.html
a population of 12.2 million inhabitants, 60% have a mobile
phone and only 7% have a deposit account50. Yoban’tel is a
new service of mobile banking available on every cell phone.
It allows clients to transfer money to another account or pay
bills by SMS and in the futures pay in a shop thanks to RFID.
From the beginning, Yoban’tel and Orange Money have been
competing to offer the best services at reasonable price.
Can we talk about a real strategy to internationalize? It
looks like the bank has developed pragmatically, considering
political evolutions and economic opportunities.
Société Générale needs to collect private savings in order
to develop its activity in corporate and investment banking,
hence a need to internationalize. However, one can note that
the objective of quality in terms of offer and client support is
only declared for France in the annual report!
All in all, there is a huge gap between the two jobs: retail
banking and corporate and investment banking
- From an HR point of view: you don’t recruit the same
profile and people.
- From a « marketing and communication » point of view:
it’s hard to justify to clients of retail banking that Jerôme
Kerviel lost 4 billion on the market.
-
From an economic point of view: profitability of the
corporate and investment banking is going to decrease
after the reinforcement of the regulation on equity and
considering new processes to control risk after the Kerviel
gate.
50 - http://www.dakaronline.net/lasquotidien-com-Yoban-tel-la-solution-par-telephone-mobile-de-la-SGBS_a5986.html
Conclusion
71
CLUB MED
Introduction
Founded in 1950, Club Med is a leading global market holiday
resorts. The group is now present on all five continents and
has 80 villages and a boat. To maintain its position as a global
specialist in all inclusive premium vacation, the group has
established three strategic thrusts:
unité : part en % du chiffre d'affaires total
(*) vente de villas à l'Ile Maurice
Traitement Xerfi (source Club Méditerranée, données 2009)
- Focus on the heart of business: the villages (sale of Jet
51 - XERFI/Entreprises – Club Med – Group Study, in french, « Montée en gamme des villages », 11/2010.
52 - XERFI/Entreprises – Club Med – Group Study, 11/2010.
73
Tours, Club Med Gym, Club Med World) 51.
- Upmarket (closing Oyyo Clubs, renovation or rehabilitation
of villages 4 and 5 Trident)
-
Real estate activity (sale of luxury villas under rental
management contracts)52.
Club Med was first expanded in Europe (1963), on the U.S.
market (1968) and finally in Asia and South America (1979).
A successful internationalization of the service
Répartition du chiffre d'affaires consolidé du Club Méditerranée par zone géographique
The group takes on a commitment to its customers to provide
the same quality of services and benefits throughout the
holiday villages. The quality of reception, accommodation,
food, planed activities, tours offered, is the same in all clubs. In
each village, the customer will find a friendly and multicultural
atmosphere in luxurious surroundings. In each village, the
customer can choose a wide range of possibilities and his stay
is totally personalized: the choice of means of transportation,
number of guests at the table, room size, and type of activities
74
(discovery and culture, spa, sports, nature).
Whether European or Asian Club Med’s customers seek
actually the same thing: the quality of service offered. The
high-end customers accept to pay more for any other vacation
resorts, but require a very high standard of quality.
An internal monitoring of the quality of services has been
introduced to ensure homogeneity throughout the network
of villages. Club Med has developed detailed procedures to
ensure homogenized services and harmony from one village
to another, but gives flexibility to the teams to encourage their
spontaneity, creativity and adaptation. These standards (the
« Quali Signs ») were written by more than 600 GO in the world.
They describe in terms of know-how and expertise the services
to be delivered. They are organized according to the specificity
of the customers for each type of services (accommodation,
dining, reception, bar, child care, sport activities, etc.). Mystery
visits conducted by an external provider allow a return on the
respect of the “Quali Signs” in each village.
A key aspect of the group lies in the friendly and welcoming
atmosphere that can be found by customers anywhere
in the world. This strong specificity of the group relies on
the presence and involvement of GO (Gentile Organizers),
but also on their integration values and high-end standards.
However, half of the 15,000 employees of Club Med are
composed of seasonal workers that have the nationality of
the host country, which makes more difficult the transmission
support its repositioning strategy, Club Med has developed
a specific program for recruiting talent, training and career
management. But one wonders whether these efforts
at human resources are sufficient to provide benefits
comparable to the prestigious hotel groups, and for the all
80 clubs in the world53.
The Asian issue: developing an asia-focused strategy?
At the moment, 26 villages are located in France or in
overseas territories (nearly a third of the group’s offer). The
group’s results depend largely on the strength of the French
market, where half of turnover is achieved.
But among the 60 million potential customers, studies
estimate that 26 million are in Asia-Pacific, China alone
accounting 12 million. Club Med has at the moment 10 villages
in the Asia-Pacific. Thanks to strong economic vitality of
the area, to work, to high-end villages and associated price
increases (+ 11% since 2003), Club Med recorded in the region
an increase in its turnover of 30% between 2003 and 2007.
53 - Website of Club Med, www.clubmed.fr, “a strong culture of quality and satisfaction”.
of values
and requirements of the group. Therefore, to
75
Levers for future development are multiple, such as
widespread Internet or the always longer lengths of holiday
stays (the trend is towards longer stays, but today the average
is 3.8 days, for about 1 week in Europe). These elements
suggest an upcoming positive evolution. Asia-Pacific is now
the driving force of growth of the Club Med54.
76
The Asian issue: obstacles that have to be overcome
in the future
Asia seems now to be the most profitable continent for Club
Med. But adaptation, and thus innovation, is needed to achieve
prosperity on the market. Some aspects of the Asian culture
are very different from the Western culture and the Asian
community is traveling always more outside the Asia-Pacific
(although these flows are still minority). For example, « do
nothing » is unthinkable in the traditional Asian culture and
Asians are thus particularly fond of “crazy” activities. But the
European families prefer the more traditional activities, such
54 - XERFI/Entreprises – Club Med – Group Study, in French, 11/2010 « Politique active sur le marché chinois » Annual report
2010 of the Club Med Group, « Development of Club Med in China ».
as evening shows or games that are practiced by the family.
Therefore the challenge is to find activities that appeal to
everyone, without complying too much with the expectations
of the Asians while ignoring the demands of European and
American “older” customers.
Asian customers are expecting very high quality products
and services: great locations, modern, luxurious, comfortable
team of organizers, personalized services, flexibility, quality
child care, etc… Asians are indeed accustomed to very high
standards. By studying the Club Med’s competitors in the
area we can see two types of actors: the global luxury resorts
(Hyatt, Four Seasons, etc…) and the local high-end actors.
More than 50 million Euros were invested to renovate the
villages in the Asia-Pacific and to bring them to the standards
of luxury villages. Special efforts are carried in China, where
a third agency recently opened in Guangzhou and the first
village « ski resort » in the Northeast, in Yabuli. To better
reach local customers, Club Med has formed an alliance with
the Chinese group Fosun, present in the pharmaceutical,
shopping centers, real estate, jewelry and steel. With a stake
around 25 and 35 million Euros, the group Fosun acquired in
June 2010 7.1% of Club Med55.
Club Med aims therefore to penetrate all markets, seizing
opportunities in developing markets and strong growth.
Unlike Pierre & Vacances, that became the leader by focusing
55 - XERFI/Entreprises – Club Med – Group study, in french, 11/2010 « Politique active sur le marché chinois ».
and equipped with the latest technology facilities, an involved
77
on the European market, Club Med has a much more global
vision of his internationalization.
However, this strategy creates additional constraints in terms
of knowledge of local competitors, difficulties to choose their
axes of differentiation and to understand deeply the needs of
their customers.
Since the promised customer experience is different,
combining friendliness and generosity with the quality of
high-end services, the satisfaction surveys conducted with
78
customers will determine whether the repositioning of the
group and its willingness to keep a strong presence across 5
continents is viable.
Even if the partnership with the Group Fosun was necessary
to support this strategy in Asia, Club Med always had financial
difficulties. Perhaps that the choice to close some resorts
and to keep ones that might have a big potential (in Asia for
example) could be an alternative strategy.
Competition from international
and local markets: an incentive for
innovation
Club Med is definitely not faced
with direct competition in terms
of positioning. Belambra or Pierre
& Vacances, which are the closest
French competitors in terms of resort
strategy, do not finally represent any
danger since Club Med is too originally
Hyatt has focused
its strategy on Asian
expansion.
Under
several brands (Hotels
& Resorts, Hyatt Place,
Hyatt Summerfield
Suites and Hyatt
Vacation Club), the
group has multiplied
its presence in China,
Indonesia etc...
positioned. These two groups are fully implemented in France
and actually never started an international expansion56, as
Club Med choose since his creation.
However, the Group is on a very competitive market57.
Competition, notably in Asia as we have seen, is situated on
the traditional luxury market with hotels like Hyatt, The Four
Seasons etc. Those hotels are not real competitors in the
destinations they target the same wealthy customers. Local
competition is rising too, with local institutions developing
high quality services and benefiting from a true knowledge
of the culture.
Therefore comes logically the need for innovation. In order
to satisfy demand and potential customers, and to remain
a leader figure in the hotel resort service, Club Med has
to adapt its strategy to face to the rise and success of its
competitors, and intensify innovation. Club Med’s two major
guidelines are then: innovation in the services offered in the
villages (renovation of the rooms with a move toward highest
standards, multiplication of very luxury apartment and houses
etc), and innovation in marketing (with the new ad campaign
for instance).
56 - XERFI/Entreprises (French), Résidences de tourisme et villages de vacances, 10/2010.
57 - Annual report 2010 of Club Med, « risks linked with competition ».
French or even European market, but when it comes to exotic
79
Conclusion
As a conclusion, Club Med’s major challenges for the 21st
century will be:
-
To know how to face the geopolitical instability and
environmental issues that affect the areas targeted by the
institution
- To handle their organizational challenge: to which extent
can Club Med serve such a top end clientele with such
significant volume of villages and infrastructures? That is
80
to say, to which extent can it survive its internationalization
through innovation?
EDF
The french and international energy market
EDF: a key player on the international stage58
On the 8th of April 1946, the law about the nationalization of
all French companies producing, transporting or distributing
electricity gave birth to the public organization known as
it has kept its hegemonic position over the French energy
market, for while EDF was not the only player on the French
energy market anymore, it remained the main player in each
step of the value chain (See Chart 1).
Chart 1:
In blue: regulated activities - In orange: unregulated activities
This success stems from two aspects of EDF: it is a service
provider, not just a supplier, and also an innovator. From
the beginning, EDF has tried to match its supply to the
whole national demand at a lower price, and to keep the
interest of the consumer in tune with the national economic
58 - Main source: EDF Website
EDF, which stands for “Electricité De France”. Ever since,
81
interest. Thus, French people have always perceived EDF as
a public service provider and not only as a power supplier.
EDF has met their expectations by enabling 90% of French
households to have access to electricity straight after WWII.
And ever since, EDF has not stopped offering new services:
on-line billing, energy consumption checks, adapted offers,
environmental-friendly policies (cf. EDF Foundation, created
in 1987) and so on. The second reason why EDF has stayed
at the top ever since its creation is, in our opinion, its ability
82
to innovate. It all started with the electricity meter. After
which, EDF developed new techniques to produce electricity:
after the 1973 oil price shock, EDF decided to pursue nuclear
energy, and announced the construction of 13 nuclear plants
within 2 years. It was the birth of EDF’s worldwide leading
nuclear expertise.
But EDF is not only hegemonic in France, it also proved to be
one of the top companies on the European energy market,
through its partnerships and subsidiaries among which EDF
Energy in the UK, Edison in Italy, SPR in Belgium. Moreover,
EDF is also one of the few key players in the global energy
market, as illustrated by the following figures (see Figures 1
below):
Figures 1:59
How did a national public organization become one of the
world-leading companies on the Energy market, a market
known to be territorial? Its technical expertise might not be
a sufficient explanation. To understand the causes of this
internationalization, we will analyze the deep changes of the
The deep transformation of the European and global
Energy market
The Energy market has thoroughly changed over the past
decades, through the deregulation of the energy markets
worldwide, especially in the EU, the skyrocketing demand
in emerging countries, the growing environmental “green”
concerns and the need for a sustainable and responsible
development, and lately the emergence of renewable or more
environmentally friendly energy sources, to name a few of
the main mutations. All these changes have helped foster
competition and alter the strategy of most energy companies.
The point we lingered on was the deregulation of EDF’s
historical market: France. The first European directives
concerning power were adopted in 1996 for electricity and
1998 for gas. The main steps of the market deregulation in
France concerned the following clients:
- February 1999: Customers over 100 GWh/year (20% of
the market)
-
M ay 2000: Customers over 16 GWh/year (30% of the
market)
59 - Présentation du groupe « Essentiel Groupe Slides » (voir annexes)
Energy market over the last few years.
83
- February 2003: Customers over 7 GWh/year (37% of the
market)
- July 2004: all professional customers (70% of the market)
- July 2007: Everybody (100% of the market)
Recently a new regulation has strengthened the competition
over the production. The NOME Law forces EDF to sell 25% of
its production to competitors at a regulated price. The price
was fixed at 40 € until December 2011 and 42 € thereafter,
84
according to EDF’s wish. But this decision is currently called
into question.
To what extent can we say that deregulation of the
French market has been the triggering factor for EDF
internationalization? Will EDF, which has always benefited
from public help and protection, succeed in this new
deregulated market?
The direct impact of market opening: What place is there
for competition?
In the 90s, EDF strengthened its internationalization policy to
prepare itself for the market opening, and to cap a possible
loss of market shares in France. But in fact, EDF’s position in
France was held and could hardly be impaired by the market
mutation. This could certainly not be the only explanation for
EDF’s internationalization.
It is true that when the market opened, new competitors
appeared: subsidiaries of electricity or gas companies
(Electrabel>Suez, GDF…), subsidiaries of local distribution
companies (Alterna…), and new companies (Poweo, Direct
Energie). The most threatening competitors are the latter
two: Poweo and Direct Energie. But according to different
polls60, those competitors remain unknown by almost 80%
of the population. 93% of all places still operate with a
regulated rate, or its equivalent (TARTAM). The difficulties
the competition is facing can be explained by EDF’s historical
place on the French market and the satisfaction of clients,
of communication concerning the possibility to change from
EDF to one of its competitors.
Thus, the threat of the market opening cannot be the only
explanation for EDF internationalization strategy. Let’s
investigate EDF’s position abroad so as to understand what
really triggered its internationalization and what its strategy is.
EDF internationalization strategy: myth or reality?
International expansion
The energy sector is probably one of the most powerful
sectors, due to its strong link with economic and political
challenges. Consequently, the energy sector has always
been considered highly important and strategic in a country’s
sovereignty. That is why, since its creation in 1946, it took
EDF a long time before it could internationalize its activity
outside of France. As a matter of fact, EDF’s ambition of
internationalization was only rendered possible thanks
to the new rules on the energy market deregulation. And
60 - CRE Web site
the protection of regulated rates for EDF, and finally the lack
85
very quickly, EDF’s main objective became the worldwide
expansion of its technical expertise and know-how to be
prepared for the opening of the already advocated Brussels
European.
It started in the early 1990’s, and European energy markets
began to open and a slow progress of deregulation forced
national monopolists to start thinking about competitors
and to accept open market economy rules. In this context,
86
EDF INTERNATIONAL, a company fully owned by EDF,
was created in 1992 whose main objective was to invest
in production capacities in Europe in the various activity
sectors of EDF. Its first foreign investments were directed
to a distribution company in Argentina where EDF would
obtain an interest in the capital of Argentinean distribution
and supply the company Edenor. The internationalization had
started and EDF clearly showed its interest:
- EDF International intervened in a country only if it was
desired, or at least acceptable
- EDF International did not want to hold a majority unless
the seller and the authorities accepted it
- EDF International most often created alliances with other
shareholders, preferably with local partners
- EDF International treated subsidiaries as active and able
minorities, and most often assumed the general direction
The growth was moderate in the middle 1990’s with controlled
investments in South Africa (1994), Côte d’Ivoire and Mali.
But the real expansion took place in Europe where EDF won
several tenders, examples of which are Sweden, Italy and
Hungary but also in Latin America with Brazil – privatization
of the distribution- and Mendoza – privatization of electricity
(1997). But the first considerable European acquisition
happened in December 1998, when EDF bought a 100%
of London Electricity (renamed EDF Energy in 2003). The
expansion continued in 2001 with the acquisition of 34, 5% of
German company EnBW and the acquisition of shareholding
12 countries (including France) through Europe and 12 other
around the world. Until the beginning of the 21st century,
EDF clearly showed its desire to acquire new markets and
internationalize its activity. Its strategy was to:
- Take strong positions in Europe in its various activities:
EDF has become an integrated European electrician.
-
Invest in profitable operations for the future (cost of
renewing the nuclear field) and the opening of the
European market.
But this strategy has not succeeded, neither chronologically
or geographically.
The chart below summarizes the main internationalization of
EDF during the 90s until the 21st century. There is no doubt
that the strategy of this French company was to acquire and
penetrate new markets in order to implement its know-how
and increase its potential of growth.
interest in Italian Edison. Currently, EDF’s presence covers
87
88
The consequences of this expansion seem, at the first sight,
to be positive. Indeed, in 2010, the group made 51% of its
sales in the international market; in other word, traditional
activities represented less than half of its revenues in the
French market.
2010 revenues of EDF, in billions of Euros:
While it is true that EDF greatly expanded its presence
worldwide, the company did not do so through organic
growth but through three different types of external growth:
The most commonly used form of expansion is the setting up
of subsidiaries thanks to a series of acquisitions and mergers.
EDF also uses BOT (Build, Operate, Transfer) concession
contracts to access to a market for a limited amount of time
and eventually building stable relationships with the country
and settling on a more permanent basis. Finally, joint-ventures
are used in highly regulated and strategic markets such as
the US and China, which allow EDF to enter the market while
sharing decisional power.
- EDF Energy61 is an illustration of EDF’s expansion through
merged with EDF but the life of EDF Energy, its subsidiary,
only began in 2002, when three energy companies –
SEEBoard, London Energy and SWEB – were brought
together. Since then EDF has continued acquiring and
merging with companies throughout the UK, the most
important of which was the acquisition of British Energy
in January 2009.
-
The nuclear power plant Taishan I 62 with its two EPR
reactors, which is currently in construction in the
Guangdong area in China, required EDF to enter into a
Joint Venture agreement. EDF’s stake in the Taishan
Nuclear Power Joint Venture Company Limited amounts
to 30% over a duration of 50 years giving the mother
company the rights to operate and supervise construction
alongside Chinese counterparts.
- The Nam Theun 2 63 hydroelectric power station is the
perfect illustration of BOT concession. In September 2002,
the Nam Theun Power Company (NTPC) was created in
Laos and the EDF Group held a 35% majority interest in
the company. In October the consortium led by EDF was
61 - " EDF Energy - Our History." Gas and electricity for your home and business, supplied by EDF Energy. N.p., n.d. Web.
29 May 2011. <http://www.edfenergy.com/about-us/about-edf-energy/our-history.shtml>.
62 - "EDF Asia." EDF A sia. N.p., n.d. Web. 29 May 2011. <http://asia.edf.com/activities/nuclear-52202.html>.
63 - "EDF Asie." EDF Asie. N.p., n.d. Web. 29 May 2011. <http://asie.edf.com/activites/hydraulique-46737.html>.
acquisitions and mergers. In 1998, London Electricity
89
granted a BOT concession, granted it a license to develop,
finance and operate the plant for 25 years.
Snapshot of EDF global position
Map 1:
90
As one can see on Map 164, EDF’s presence worldwide
mostly relies on its production activity. The engineering
expertise and its services are the two success factors of EDF
internationalization.
EDF’s engineering expertise covers many fields from hydraulic
dams like Nam Theun 2 in Laos, to nuclear plants and more
especially the new EPR projects in China, Italy or in the UK,
and to thermal power stations like Norte Fluminense in Brazil,
Phu My 2.2 in Vietnam or Sloe in the Netherlands.
But, EDF’s secret strength is also being a service provider and
not only a producer. Indeed EDF, since its creation in 1946,
64 - Source: EDF Web site
has maintained its ambition of being a public service company
and constantly worked to provide the end customer with a
safe, steady energy supply while finding new innovative ways
to decrease each customer’s consumption. One would think
that finding ways to lower the end customer’s consumption
is economically idiotic, but reducing the client’s consumption,
especially around peak hours would allow EDF to stop using
polluting and costly energy sources which are currently
Lately, EDF has taken it upon itself to help in the fight
against global warming by offering ever “greener” and
environmentally-friendly energy solutions such as the
new EPR reactors which barely emit carbon dioxide and
researching renewable energies thanks to its Energies
Nouvelles subsidiary.
EDF has also been helping countries in ensuring their energy
provision and optimizing their consumption. For example, in
Asian emerging nations such as China and Vietnam, which
are currently observing a shift in consumer power, energy
provision is critical and EDF has been aiding these countries
in building efficient and environmentally-friendly energy
solutions, in nuclear, hydraulic or coal, which will allow these
countries to pursue their growth. Some of these projects
such as the Nam Theun II hydroelectric power plant will not
only have a considerable impact on the area’s population,
but will also impact the ecosystem of the region. EDF has
worked hand in hand with government agents to provide
new homes and infrastructure (schools, electricity…) for the
needed to meet demand.
91
local population and also discuss ways of limiting the impact
on the fauna and flora of the region.
On a more individual scale, EDF has not only been delivering
electricity to the end consumer, but has also been trying to
educate him while finding innovative solutions to lower his
consumption. For example, EDF’s foundation “electricians
without borders” has been actively delivering electric projects
in impoverished parts of the world such as in Congo65 where
92
EDF built the awareness of the local population on electricity
consumption and on how to harness its power in a best
way. In developed countries such as Germany, EDF has
been developing intelligent electric meters and is currently
looking into smart grids, which allow and will allow the end
consumer to more and more informed decisions on his energy
consumption. In the UK, EDF has already developed the
Orchard program, which offers British population a simplified
means of payment and billing.
Finally, EDF’s internationalization has brought his own
employees into the foreground. With an ever growing
global market, EDF grants his employees a lot of mobility
within its subsidiaries worldwide, which is in accordance
with the evermore demanding expectations of an ever more
international staff.
Stakes of Internationalization
All in all, what are the real motivations for EDF’s international
expansion?
65 - "EDF - Congo, une odyssée solidaire - épisode 1." EDF - WebTV. N.p., n.d. Web. 29 May 2011. <http://webtv.edf.com/
index.php/video/congo--une-odyssee-solidaire---episode-1/426/solidarite---du-congo-a-haiti/30.html>.
As seen before, market deregulation cannot be the only
explanation but it was the first thing driving EDF abroad.
Although the company had lost only 7% market share by
201066, its internationalization helped curb and prevent the
losses. Furthermore, EDF had to take into consideration the
2012 opening to competition of water concessions that they
were the only one to manage until then.
financial profits. It was also a way for EDF to obtain intellectual
return on investment, by partnering with foreign firms: thus
they gained valuable knowledge about photovoltaic in China.
Moreover, by improving its international image and reputation,
EDF is able to attract the most talented employees in the
world.
But the main reason which led EDF abroad and gave them
enough credibility to step out of their French comfort zone
was their nuclear expertise. This leading position combined
with rising oil prices in 2004 allowed for substantial demand
from foreign countries.
However, for a few years now, we have observed a certain kind
of hesitation in the internationalization strategy of the EDF
group. Many elements have to be taken into consideration to
explain this change in the strategy. Can we already talk about
the end of internationalization or is it just a cyclical trend?
How can we understand the new positioning of EDF? We will
try to bring some new elements of response to explain this.
66 - Xerfi Entreprises, June 2010
Nonetheless, going abroad was not only motivated by
93
The boundaries of EDF internationalization
A drawback to France
In 2010, the energy price plummeted significantly. Therefore,
EDF had to make exceptional provisions of 2.9 billion Euros
in 2010 for “risk and valuation adjustments related to the
deteriorating market for electricity and gas”, thus leading
to a 74% decline in net profit group share that year67. To
make up for these losses, amongst other things, EDF let go
of its German subsidiary EnBW, and gave up EDF Energy’s
94
distribution network (UK).
Besides, after the Fukushima catastrophe, the world started
doubting nuclear energy more seriously. There is a global fear
of nuclear catastrophes and more and more countries are
turning to gas projects instead. Consequently EDF is slowly
divorcing many of its partners abroad, such as Constellation
Energy in the US.
Yet, what looks like an international debacle has allowed EDF
to reduce its debts by 20 billion Euros and it has not seemed
to threaten its position in France, where nuclear energy
remains strong and supported by the government.
What’s next?
What strategy is there for the future? It seems as though
many elements have come in the way of the expansion of the
first electricity company in the world. After bad experiences
and profitability issues in Latin America, EDF group redirected
its international strategy in 2005 to focus on European
markets and to deploy its nuclear activities and projects
on the international level. Even though its international
67 - Source: Le Figaro, February 2011
businesses are considered as complementary to its French
activities (International and other activities represent half of
the Group’s sales68), EDF is confronted with new destabilizing
factors.
First of all, the NOME law forced EDF to sell 25% of its
nuclear energy production to its competitors at a price not
satisfactory for EDF. The CEO Henri Proglio considers that a
the lobby and the competitors ask the government for a price
around 36 ¤ per MWh69. This law seems to be a clear Achilles
heel for the company which is not able to clearly map out its
strategy without knowing exactly at what price it is going to
have to sell its electricity.
Secondly, the nuclear crisis has very strongly impacted the
positioning of EDF. It entered the US market in 2005, with
Unistar Nuclear Energy LLC, a 50-50 joint venture with USbased Constellation Energy Group (CEG). The objective of the
joint venture was to build, own and operate up to four EPR
nuclear power plants in United States. But this cooperation
was broken off in 2010 and EDF is no longer the partner
of Constellation due to a misunderstanding on the nuclear
energy issue. A main actor in this latter sector, EDF has to
review its ambition after the Fukushima accident. Indeed, EDF
was planning to develop this sector in Italy through its Edison
subsidiary but recent negotiations do not seem to come to a
conclusion. Therefore, one can ask what future there can be
for EDF in the nuclear sector.
68 - Source: EDF Group, “2010 Document de référence”, in EDF Group: Results and Publications, 2010.
69 - Source: Investir, EDF, un prédateur idéal, February 2011
price under 42 ¤ per MWh is harmful for the company while
95
This nuclear crisis lead to the development of other energies
such as gas (and above all the exploration of shale gas), which
is not the main expertise of EDF. Indeed, countries such as
the USA are putting limits on the expansion of nuclear energy
and prefer the development of shale gas, considered less
risky and expensive.
Finally, a recent study showed that profits have taken a hit
thanks to international operations (74% drop in net income)
and exceptional provision of 2.5 billion Euros were added
96
to cover the risk of impairment of assets in the USA and
Italy70. Indeed, critics say that EDF went too fast and spent
too much on some acquisition: 10 billion Euros were spent
on Argentinean and Brazilian acquisitions; 5 billion Euros
were spent to acquire 55% of Constellation’s nuclear assets.
With this international expansion being encouraged by the
CEO, EDF has to face high debt but has yet to plan for the
renewal of the nuclear plants which will require considerable
investments. Furthermore, the specificity of the French
energy market does not help fund its international activity as
France offers the lowest energy prices in Europe. What can
be done to deal with this situation?
In order to reduce its debt and free-up more cash, EDF started
in years 2000 to withdraw from some of its subsidiaries. EDF
first decided to withdraw from Latin America where it was
implemented since the beginning of the 1990s. Moreover, as
was said before, EDF is since 2010 no longer a partner of
Constellation which shows the distancing of EDF from the
USA. The coup de grace came in 2010 when EDF decided
to sell its UK’s electricity distribution networks and sold its
70 - Source: Enjeux, Les Echos, Quelle stratégie pour EDF ?, February 2011
stake (45.01%) in EnBW. Who is next? Most likely Edison, the
Italian subsidiary of EDF, which is significant in size since its
acquisition in 2003, it also brought a number of setbacks to
the group. Caught in the middle of the gas market expansion,
Edison is now facing difficulties and EDF has had to take a
provision of 915 million Euros for its subsidiary. This could
be the prelude to a disengagement from EDF. Although the
French group is the majority shareholder, it has never had
was held in Italian hands.
The chart below summarizes the withdrawals of EDF since
the beginning of the 21st century. We can easily make a
parallelism between this chart and the earlier one: most of
the acquisitions made during the 90s were abandoned in the
later years of 2000.
much to say about the conduct of its subsidiary. The power
97
Conclusion
Regarding those elements, it is hard to define a precise
strategy for the group. Of course, according to Henri
Proglio, the CEO of the group and the web site, the strategy
of the group is clearly international and they are proud to
display their efforts in the development of their activities
all around the world. Being the First electric group, it has
to be international above all thanks to its nuclear expertise.
In a recent address, the CEO once again confirmed EDF’s
98
international ambition to its shareholders: after leaving
Germany and distancing itself from the U.S., the group now
wants to focus on emerging countries. In total, EDF wishes to
increase its production capacity to 200 gig watts by 2020,
which is 33% more than in 2010. Nuclear power must remain
a major focus, with the hope of a French-Russian cooperation
in Turkey. As M. Proglio said, “It will be a more open EDF
in the world with a production capacity increased by 50%
internationally and a strengthened position in high growth
countries”71. The position is clear.
However, the recent decisions of EDF - linked to political
decisions and external phenomena – have somewhat changed
the group’s strategy and positioning. We can say that for the
moment there are still certain incoherencies between the
speech made by the head of EDF and the reality of the action
actually made. Is EDF searching itself? The strategy is not as
clear as they pretend it to be and it seems that the group is
waiting for a clarification of the legislation and the future of
nuclear energy.
71 - Source: Les Echos, EDF affiche ses ambitions dans les pays émergents, 25/05/2011
RESPONSIBILITY AND THE
INTERNATIONALIZATION OF SERVICES
Introduction
It is impossible to study the modern economy without
noticing the growing service sector, and without noticing the
intrinsic tendency of this sector: internationalization. We will
of services has made and continues to do, we try here to
adopt a more theoretical perspective on what it represents,
and what responsibilities of various actors in this evolution.
Internationalization: a responsible choice?
To understand this question firstly it is necessary to cut it
into two completely opposite points of view: for example, a
major airline, Air France-type, it is almost mandatory for it to
internationalize as much as possible: Air France was created
in 1933 and inaugurated in 1946 the first flight to Paris - New
York72, a symbol of openness to the world. The aviation
sector is special, but for many others, internationalization is
an issue completely inevitable; a bank, for example: the image
of local banker, keeping money from its customers in a safe
fort is an undeniable reality in an era of economy, this image
is powerful in the U.S. (the symbol of the banking service
itself in the nineteenth century was mythologized in films and
American literature) but it is a reality all around the world. For
example, Credit Agricole, the "Green Bank", was created in
72 - www.airfrancelasaga.com
not try here to explain how, in fact, the internationalization
99
1894 and served on French territory exclusively for 85 years.
It was not until 1979 that the bank opened its first office in
Chicago. Today, the Group is present in 70 countries around
the world (2010 figures)…73
Leaders of the major utility companies in these sectors have a
responsibility to adapt to globalization, to integrate it. In 2011,
you cannot imagine a bank not allowing to withdraw money
abroad, or an insurance company which cannot ensure a trip
100
somewhere in the world.
However, and this is particularly important in France, we can,
as we said, adopt a different perspective face of globalization
of the service. Internationalizing a service means accepting
globalization as a whole, with its flaws. We know that in
France the question of relocations occupies an important
place in public opinion. Choosing to open is choosing to
be vulnerable to the “wild” nature of globalization (market
forces, the fittest, etc.).
Of course this issue is more crucial for the tertiary industry.
In this sector the responsibility of economic actors is
undeniable: In the early 90's, statistical comparisons were
made between the numbers of jobs lost since the early 70's
in manufacturing in the United States and Europe, and the
numbers of jobs created in these industries in Southeast Asia.
The convergence of these two statistics (6.5 million in both
cases74) is troubling.
However, the question arises the same way to the services:
in France, most switchboards of large companies have been
73 - L’histoire du Crédit Agricole: www.créditagricole.com
74 - Centre d’études stratégiques: « Mondialisation et délocalisations: état des lieux et stratégie », Dossier n°2, mai-juin
2006
outsourced to countries with inferior costs of labor, and other
activities are concerned.
Finally, the choice of internationalization, outside the possible
dismissal of employees in the medium term, the basic laws
of competition, represents a risk for a company. Wanting to
expand its market and thus increase its turnover, its economic
A service is defined by a "customer experience":
liability issues in the export of this experience seen
as unique
The customer experience is the set of emotions felt by a
client before, during and after buying a product or service.
The customer experience is a complex sum of heterogeneous
elements (your advertising, ambient point of sale, vendor
relationships, experience of use, customer relationship
support, etc…) Customer experience is obviously considered
a source of influence satisfaction and loyalty.
When we see this definition, we understand why the services
are clearly distinguished in the industry in the problems
posed by the internationalization of service for export; we
must export the "spirit" of it. There is a pattern of clear
responsibilities, someone must be able to define this "spirit",
the customer experience, and someone should be able to
reproduce. When the service is completely material and the
customer experience can be clearly defined, it is simple: for
weight is not always a good idea for a responsible leader.
101
example, FedEx provides a delivery service to individuals
and businesses. This service is highly internationalized, it
is material (delivery of parcels at the site said, in time) and
customer experience can be replicated (live tracking of
parcels in various stages of its delivery, is a simple logistical
problem). But when the service provided and the customer
experience is intangible, it becomes more complicated: for
example, the firm Subway sees itself as the direct competitor
of McDonald's (in number of outlets, Subway has also passed
102
Macdonald's this year75) by boasting of being a better service
(sandwiches made in real time, before the client by the
server, "sandwich artist" based communication campaigns)
and to have a "more sympathetic spirit" than MacDonald's,
where the server is an intermediary between the customer
and what it buys (in fact, MacDonald's makes its clients order
their lunch to automatic terminals in most of its restaurants,
which Subway will probably never do).
Subway in the case, one can see that overall it is a success,
but for example, in France, the export of this service is not
running well. We can say that those who have expanded this
customer experience are rather successful because it works in
most countries. So the cause of the problem must be found in
decisions taken by those who tried to bring Subway in France:
indeed, it is not really in French culture to assimilate in this
way the "spirit" of a large firm, and managerial employees for
their behavior fits with the idea that spirit76. Most employees
in France are like Subway employees of MacDonald's in
peak hours, sullen and unfriendly, unlike Subway in other
75 - Joe Bramhall in « Mcdonald’s corporation » Hoovers.com
76 - Official Subway restaurants site
countries (USA, other European countries, etc.) where there
is a creation (artificial of course) of a real relationship server/
client.
This problem is common to many services exported. The
person responsible for management in the country where
internationalization takes place plays a tremendous role as an
intermediary between the leaders, wishing to communicate
customer experience and employees supposed to reproduce
This is problematic for instance for the same group Club Med
shall provide a customer experience equivalent (ambient,
animators, quality, etc.) in Rio de Janeiro or in Phuket, 15,590
kilometers distant.
Internationalization of service: a cultural responsibility
Let us widen our discussion a bit: when a company plans
to export a service, it engages with her image of a country.
For example, in France, the film is now heavily subsidized to
continue to distribute worldwide the French cinema, and this
idea is not new. In the 1930s, Franklin T. Roosevelt said "Send
them the movies, the rest will follow." We can say that this
internationalization is responsible for a change and a global
flattening of the culture of every country in the world, the
famous "Americanization" of the world.
This pan-cultural internationalization should not be
overlooked. In beneficial, it allows Overall distribution of
the identity of a country. With luxury (which may very well
be considered as a service activity), France also maintains
the same experience in a completely different place.
103
a refined image worldwide. However, the almost complete
internationalization of these large groups (LVMH, Dior,
Chanel, etc.) and the fact that they now realize the majority
of their turnover abroad (USA, Middle East, Russia and now
China) makes them appear as unnatural in the eyes of their
country and their success with French buyers is very small,
such as telephone switchboards which we spoke earlier, that
relocated, reduce the value of the service provided to eyes
of many customers.
104
The cultural factor is important in these matters; Apple's
success is great because the company, through a very
successful
communication
looking
segments
(only
seemingly), has established itself as essential in globalized
Western imagination, a thing that American businesses use
to do very successfully (MacDonald's, Hollywood movies,
American music, etc.).
This is a crucial responsibility sociological claiming to have
this role in the export of a service…
In Western countries, the service sector employs between
70% to 80% of the workforce (77.6% in France79) and it is
no secret to anyone that this sector is becoming more
mobile and more international, especially with the boom
in telecommunications that has taken place for 20 years
(Internet, mobile phone, etc.). The actors of this development
have in their hands the instruments of change and influence.
This influence, and therefore the responsibilities that go with
it, go far beyond the physical setting of the economy. They
are ethical, sociological and cultural.
79 - OCDE’s website
Avenue Bernard-Hirsch
BP 50105
95021 Cergy-Pontoise Cedex
France
Tél. +33 (0)1 34 43 28 29
essec-serviceinnovation.fr
Singapore Campus
100 Victoria Street
National Library Building # 13-02
Singapore 188064
[email protected]
Tél. +65 6884 9780
Fax +65 6884 9781
www.essec.edu
70, rue Cortambert
75016 Paris
partners with a common intention of cultivating a knowledge
base and building a structured expertise. Through continual
interactions with economic leaders, a community is created
around the reflection, diffusion and exchange of experiences
on the challenges and the methods of innovation in the service
economy.
The objective of our case studies is to provide this community
with analysis of the strategic decisions of companies, based upon
the subject of innovation in the service economy.
of the Internationalization of French Companies
Histories, Issues
and Strategies of the
Internationalization
of French Companies
ISBN : 978-2-36456-031-4
5€
N° 10 - November, 2011
Globalization and internationalization are terms that are
unquestionably at the heart of our economic and cultural reality
today, even if such phenomena are intertwined with both negative
and positive connotations. With the opening of trade borders and
the increasing feasibility of operating a business on a worldwide
scale due to technological advancement and changes in legislation,
the internationalization strategies of companies and their ability to
compete with global competitors has become a pivotal competency
to be mastered. This project, carried out by students, examines the
idiosyncratic strategies developed by French companies for their
expansion on the international market.
Xavier Pavie

Histories, Issues and Strategies of the

Transcription

Documents pareils

Exploring the Internet and Internet Commerce Impact in the SME

toul-rosières photovoltaic power plant

program - Africa 2016

His rankings in the professional directories

Détail de l`offre : International business

His rankings in the professional directories

Société des Fonderies de Tréveray - SFT-HDI

André Mommen

Greetings from the University of Toronto Dermatology Program

Investor Day - Veolia Finance

Structure and evolution of supergranulation from local