Is Lithuania Attractive for Expansion of UMPI, and if so, What Strategies Should the Firm Use for Entering the Market with Focus on National Business Sector?
Lecturer: Jesper Pettersson Student: Aneta Chabibulina Class: Thaibm4a
Denmark 03/06, 2013
CONTENT LIST
EXECUTIVE SUMMARY INTRODUCTION LITERATURE REVIEW PROBLEM FORMULATION METHODOLOGY DELIMITATION INTERNAL ENVIRONMENT ANALYSIS Market Customer Group Customer Needs Value Chain Resources Capabilities Sustainable Advantages Core Competencies SUB CONCLUSION - STRENGHTS AND WEAKNESSES EXTERNAL ENVIRONMENT ANALYSIS Market Selection Criteria Macro Environment Lithuanian Market Micro Environment Entry Mode Analysis SUB CONCLUSION – SWOT ENTERING INITIATIVES ENTERING STRATEGIES Marketing Objectives Entry Mode Strategies Marketing Mix SUB CONCLUSION – STRATEGIES MAIN CONCLUSION REFLECTIONS REFERENCES APPENDICES
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EXECUTIVE SUMMARY For the report it is chosen to analyse Italian company possibilities to enter Lithuania, because of the knowledge of both markets. The report is focusing on UMPI, an Italian producer exporting mainly to Middle East, South America, and South-Western Europe. Currently UMPI is interested in entering the Baltic States, because of their quick economic growth in the recent years. The company sees Lithuania as its potential start country for entering the Baltics. The choice of the company was taken because of the mutual interest in collaboration. The industry of smart streets’ lighting control in which the brand is active, is a part of the young industry of Smart Cities, which started from United Arab Emirates and is spreading all over the world. As well Lithuanians show their interest in energy efficiency and innovations in the infrastructure. The report could be divided in two main parts. The first part is providing the analysis of UMPI entrance possibilities in to Lithuanian market, as well examination of the market attractiveness. The second part is revealing the objections and strategies proposed to UMPI in order to enter Lithuanian market. Between these two parts there is interlinking part where the potential initiatives are selected. Because of the dramatic globalization increase in the last period, many authors are proposing decisions and processes that companies should proceed through when going global. Summing up the factors that the authors are marking as most crucial, the people, managerial and financial resources are important for entering the foreign markets, but the intangible resources, such as innovation, know-how and reputation are the key factors for reaching competitive advantages. In order to understand the company’s internal strengths and weaknesses the report is based on the primary and secondary data. Unfortunately, the primary data about the potential customers in Lithuania was limited, and since the secondary data about the market and industry is providing quantitative data and the possibility to analyse the changes in the trends and could be assumed as sufficient, the external part of the report is based on it. Concluding it could be said that Lithuanian market should be very attractive to UMPI and it has high possibilities to enter it if the brand will change its attitude to foreign marketing and introduce pull activities building the brand awareness and informing the audience about UMPI solutions, in this way preparing the market for penetration activities.
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INTRODUCTION UMPI is an Italian company, exporting globally. UMPI’s mission is to supply smart systems for outdoor lighting and building automation, with the aim of saving energy, reducing overheads and improving efficiency and quality of service. The vision of the company is to consolidate its global position as benchmark in the provision of smart technologies capable of making a major contribution to improving quality of life. The company is actively expanding its market to Middle East, South America and SouthWestern Europe. Currently UMPI is interested in entering Baltic States, because of their quick economic growth in the recent years. The company sees Lithuania as its potential start country for entering the Baltics, therefore, the report will present an analysis if Lithuanian market attractiveness to the brand and will propose strategies that UMPI could develop in order to enter the market focusing on national business sector. The report will start from analysis of UMPI internal capacities for entering Lithuanian market and the threats and opportunities in this foreign market and in the industry of smart streets’ lighting control. There will be a focus on energy efficiency trends in the world and in Lithuania, the legislative and economic factors highly influencing the demand of lighting control and monitoring products. Afterwards the objections and the marketing strategies for implementation of the goals will be proposed.
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LITERATURE REVIEW Advances in transportation and telecommunications infrastructure are fostering globalization. In the recent years many companies were born or became global. Johanson and Vahlne already in the 70’ developed a model of the internationalization process of the firm. Hollensen is one of the recent authors addressing the globalization decisions and processes of companies in actual time context. The author emphasizes that companies have to have enough capacities for entering the new markets, because it is a very expensive process. The internal company resources’ importance is emphasized by several authors, such as Analoui, Barney and Davies. The company management style and the created atmosphere is highly influencing the employees’ job satisfaction, from which depends the work result and which consequently builds brand image. Blythe agrees that organizational culture is organization's personality witch shapes the actions of its members. Robbinson reveals the importance of the organizational behaviour in the global context. When the companies internationalize they have to become more aware of intercultural aspects, here the manager's set of personal beliefs and values can become very important when influencing the personnel attitudes if the manager has leadership qualities. Robbinson marks the crucial role of a manager defining the differences between a coordinator and a leader, which could be assumed as supporting McGregor Y theory, describing the Y type of manager who leads motivating its employees and who believes that they are enthusiastic and strive for best results. Amos agrees that if manager’s expectations are high, productivity is likely to be excellent. Davies emphasizes the importance of people, but Guerras and Navas argue that the intangible resources are most beneficial for competitive advantage, because they are the most difficult to copy. Barney suggests that resources and capabilities that are valuable, rare, costly to imitate and organized well by the firm are enabling it with sustainable advantages. Porter suggests analysing the company’s value chain in order to find the strengths and parts for improvement. Nevertheless, the company internal capabilities have to correspond to the market. Thus Hollensen stretches the importance of external environment analysis. Johanson and Vahlne warn that there can be cultural, psychic and geographic distance barriers when entering a foreign market. Hofstede emphasizes the importance of cultural difference barriers too. Porter supported by Hill and Peng reveals the importance of the industry threats and opportunities. After decision to go abroad, the company should plan its objectives and strategies that have to be consequent to the internal and external factors that will influence company’s entrance in the foreign market. Meyer proposes to set objectives specific and understandable to the employees, possible to measure after specified time period, relevant to the goals of the company and possible to achieve. Hollensen emphasizes on development of strategies as a “heart of the marketing plan”. Companies going abroad have to understand the growing interdependence of economic and cultural activities and adapt the way they think and act to the globalizing market. -4-
PROBLEM FORMULATION Main Question Is Lithuania attractive for expansion of UMPI, and if so, what strategies should the firm use for entering the market with focus on national business sector?
Sub Questions • • • •
What internal strengths and weaknesses would influence UMPI willing to enter Lithuanian market? What are the external threats and opportunities in the smart cities’ lighting control industry and in Lithuanian market? What should be UMPI’s initiatives for entering in to Lithuanian market? What marketing objectives should be set and what entry strategies should be developed for the first year moves in Lithuanian market?
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METHODOLOGY The report is based on the primary and secondary data, in order to receive both, quantitative and qualitative data. For analysis of UMPI absolute internal strengths and weaknesses, the primary and secondary data was used. Secondary data was collected from such sources as Citymatics (Bruni 2012), Operative Organization Chart (UMPI 2013), UMPI Elettronica Balance Sheets (UMPI 2010, 2011) and company’s internet site, and primary data was obtained by an interview to UMPI partnership manager. S. Pieroni in order to get a deeper understanding of the company. In order to examine Lithuanian market and industry factors relevant for UMPI it was used secondary data in order to obtain higher quantity and to follow the changes in the market. The sources used for acquiring secondary data were both quantitative and qualitative. For quantitative sources were used institutions providing statistics online, such as Indexmundi, Lithuanian Statistic Department, Lithuanian Central Bank, Swedbank, Foreign Policy, Net Index and Ministry of Transport and Communication, and for obtaining qualitative data were used documents publically provided on internet by European Commission, Lithuanian National Control, Constitution of Lithuanian Republic, Navigant Consulting, McKinsey and Co, as well articles in online magazines such as Delfi, Lithuanian Tribune, Business News etc. Unfortunately, the primary data was not attained because of the limited access. Additionally the report is based on results acquired by analysis using several models and frameworks. For examination of UMPI activities the Porter’s Value Chain Framework was used. In order to understand which resources and capabilities could be regarded as UMPI’s core values, the VRIO framework was implemented. The PEST framework was used for Lithuanian market examination, and Porter’s Five Forces – for Industry analysis. Concluding the analysis part of the report SWOT framework was implemented, and for pointing out the possible initiatives, the TOWS framework was used. In order to understand what strategies are needed, the objectives were set according to the SMART model, and the strategies were developed using the 4P’s model.
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DELIMITATION Although UMPI Group consists of several sub brands, the report will mainly concentrate on UMPI Elettronica, as this sub brand is responsible for marketing and sales, but other sub brands and the suppliers of UMPI will be examined in the internal analysis part. The report will be addressing UMPI’s entrance possibilities to Lithuanian just with one product – Minos System, not considering other products. The delimitation of other products is explained because of the company given priority to Minos System assumed as having strongest potential in the international market. Since the report’s main objective is to analyse UMPI’s possibilities to enter Lithuanian market and to develop marketing strategies specifically for this market, just aspects of general company’s strategies relevant to raised objectives of the report will be revealed. Although UMPI targets both individual and national business sectors, the report will focus just on the business to government transactions in order to not spread out too much. Because of limited access to the potential customers, the report will concentrate on factors that are absolute and assumed to be relative to the secondary data analysis results.
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INTERNAL ENVIRONMENT ANALYSIS In order to understand UMPI’s capacities to enter Lithuanian market, the report will start from analysis of the company’s internal environment. Additionally to the analysis provided below, the appendix 1 reveals information about company’s mission, product, brand structure and organization. According to Blythe (2008), the internal environment is as important as the external one, since “the organisation culture, rules, hierarchy, traditions will inevitably be a major component of the organisation’s public face”.
Market UMPI is an Italian company, already having experience in 20 other countries, such as: Spain, Switzerland, Austria, France, Czech Republic, Slovakia, UK, Greece, Brazil, Saudi Arabia and Emirates, etc. using agents and distributors. Thus the experience in foreign markets could be advantageous to UMPI when going into Lithuanian market.
Customer Group UMPI’s focuses on business-to-government (B2G) and business-to-business (B2B) commerce transactions. The target customers are municipalities, national corporates and private businesses. The company is as well seeking to cooperate with partners, such as system integrators, multi-utility, electricity and telecommunication companies in order to increase its possibilities to grow its market share.
Customer Needs UMPI considers customer needs and provides them with: control and easy management of outdoor and indoor utilities, saving of energy up to 45%, transparent maintenance and real time monitoring, respect to environmental requirements of Kyoto Protocol (to reduce emissions of greenhouse gases), quality and safety. As well, according to Bruni (2012), “it allows a short pay back of the investment and in the meantime creates financial resources”.
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Value Chain In order to understand UMPI’s internal strengths and weaknesses, it is necessary to analyse the company’s value chain. According to Porter (1985), value chain is “a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market”, and is used by breaking company’s activities down into strategically relevant pieces in order to detect the cost drivers and sources of differentiation. UMPI’s value chain developed according to Porter’s Value Chain Framework is visually represented in appendix 2. Porter (1985) reveals that in order to examine UMPI’s value chain, it has to be identified the sub activities for each primary activity and each support activity and links between the primary and secondary activities. The description and analysis of UMPI value chain is provided below.
Identification of Sub Activities for Primary Activities Inbound Logistics Direct sub activities. After the products are manufactured in the outsourced companies, they are delivered to UMPI’s warehouse by R. Muzzopappa. Indirect sub activities. R. Montali is managing storage force. Quality assurance sub activities. Testing of the materials and products arrived to the company and control of storage conditions is delivered by R. Pretelli. Operations Direct sub activities. UMPI is outsourcing its production in to two Italian companies located within half hour drive from the headquarters of UMPI. Indirect sub activities. Management of the production force is done by the outsourced companies’ managers. Quality assurance sub activities. Testing and control of quality are executed by UMPI’s quality control manager F. Grossi, who is in continues contact with the manufacturers and who checks the production and tests the products at the producers’ factories. Outbound Logistics Direct sub activities. UMPI has a little warehouse in its headquarters for keeping small quantities of products needed for potential sales that are projected by the sales personnel. The activities made at UMPI are preparing of pallets, collection of data about the wages, storing, etc.
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Indirect sub activities. The company is outsourcing the outbound logistics, and if the products are transported abroad, usually the distributors take responsibilities. Quality assurance sub activities. The packaging and storage control is delivered by R. Montali, for the transportation conditions is responsible the outsourced logistics companies. Marketing and Sales Direct sub activities. Marketing direct sub activities at UMPI are delivered by the marketing manager R. Villa and as well they are outsourced in to two communication agencies located in Milan in Italy. Both agencies are used to deliver the communication to through the Italian channels. One of the agencies is oriented on the radio, tv and magazines, another is focused on specific sectors, local print and daily newspapers. The marketing manager as well organises sport sponsorships and participation in events, trade shows and expositions in order to promote the brand and help the sales personnel to sell the products. The force of sales in UMPI is growing since last six years because of expansion of the market coverage. It is growing not just internally, but as well externally. The company is collaborating with international market local agents and distributors, thus the direct sub activities, such as direct e-mails and calls, meetings and presentations of the company, are shared. The technical commerce office is providing the company with presales activities. The office produces estimates and offers from the technical and commercial point of view, it proposes specific devises according to the needs of the customer, as well weights discounts and supports the area managers when meeting with the customers, explaining the products from technical side. Indirect sub activities. The marketing manager R. Villa coordinates preparation of tools supporting the sales, such as brochures, posters, business gifts, etc. The CEO of UMPI Elettronica G. Moretti is managing not just all the company; he controls directly the sales personnel. Before G. Moretti was working as sales director, but after his promotion in 2007 the vacancy remains open and is used as motivation for potential carrier growth of the sales personnel. The technical commerce office is managed by F. Franchi. The records of the customers are kept by the area managers. Quality assurance sub activities. The proofreading and editing of information on the internet site and in the brochures are made by the marketing manager R. Villa. The examination of the current situation of the customers’ plants is delivered by the personnel of the technical commerce office. Service Direct sub activities. Installation of the products is done by the local technicians in the foreign markets. The aftersales activities are performed by the office of technical assistance. UMPI has also call centre. Indirect sub activities. UMPI’s technical assistance office personnel teaches the local technicians how to install and maintain the products. Quality sub assurance activities. Technical assistance office checks if the products are installed properly and takes care of the activation of the plant. - 10 -
Identification of Sub Activities for Support activities Firm Infrastructure Direct sub activities. The management of UMPI gives a common strategy, budget and values, according to which all the companies activities, and thus all the other parts of value chain, are developed. UMPI Elettronica has monthly meetings, where the objectives and goals are set and the previsions are made. The budget is planed once a year in December for the coming year. Each area manager prepares a prevision of the budget with specifications of objectives and strategic decisions. Indirect sub activities. The president of Umpi Elettronica L. Cecchini together with the board of directors is managing the brand. Delegated administrator of Umpi Elettronica and Umpi R&D G. Moretti together with executive staff decides upon the business strategies, considering the objectives of the president and the board of directors and manages the employees under him partially directly and partially indirectly. Therefore UMPI could be regarded as a hierarchical organisation, where the management is top-bottom. The quality assurance sub activities. The quality control of UMPI is done by the presidents, boards of directors, CEO’s and managers. Human Resource Management Direct sub activities. Currently UMPI is searching for human resource manager; therefore the CEO G. Moretti is hiring the personnel. Indirect sub activities. The human resource management is as well delivered by the CEO G. Moretti. The human resource management has a power to add value to employee branding and company marketing, which UMPI exploits well. The satisfied and trained employees are bringing professionally high results and building a positive image to the company, thus it could provide a competitive advantage. Quality assurance sub activities. The training of new employees is delivered by current employees with experience in the actual topic. Technology Development Direct sub activities. UMPI’s one of the main values is product development, thus the technology development direct sub activities, such as research and technical consultancy, outsourced partnerships with universities and individual professionals highly skilled in engineering, are adding value to the operations. It is important to mention the system integration research and innovative solution development activities provided by F. Damiani who is part of Adria Energy. The research and development activities are contributing to marketing and sales as a strong competitive advantage. Indirect sub activities. The technology development is managed by the CEO of UMPI Elettronica G. Moretti and the CEO of UMPI R&D R. Olivieri.
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Quality assurance sub activities. A serious approach on prototyping and testing adds value to marketing and sales, as well as to operations and services. Procurement Direct sub activities. Since UMPI claims for high quality it purchases the raw materials for the production itself. The purchasing of raw materials is delivered by E. Feduzi, who is supported by R. Montali. Indirect sub activities. Since the production is outsourced the raw materials are managed not by UMPI. Quality assurance sub activities. These activities are as well delivered by the outsourced manufacturers.
Identification of Links All the value chain activities are important and interrelated with each other, thus from each activity depends overall company’s performance. The quality of the end product that the customer purchases depends from the quality of the raw materials, from the delivery and storage of these materials, as well as it is important the employees chosen from the HR management. The clearly communicated and shared goals and values, high job satisfaction brings to positive results of operations, sales etc. Mainly it depends from the HR management and firm infrastructure activities, nevertheless the quality of all the value chain activities are contributing to the atmosphere at work, to the rhythm of the pace of work and to final image that customer get when acquiring products and receiving services. Since UMPI is containing of several sub brands, from which one focuses on sales and marketing and others or production, research and technical services, the company understands that it is crucial to guaranty that these parts support each other. UMPI solved the issue of interrelation of two parts of the company by integrating the technical commerce office, performing as a presales office, next to the sales and marketing offices. All three offices work aliened in continues collaboration. The marketing manager R. Villa has a deep knowledge of the technical part, thus it is an additional advantage to the company. The manager of technical commerce office F. Franchi is an interface between UMPI Elettronica and UMPI R&D. He collects all the indications with the demands from the market provided by the sales managers, marketing manager, together with the engineers of his office and with the responsible of UMPI R&D they perform feasibility study, analysis for customization or development of new or specific product. After the preliminary study L. Grassi, the price manager, receives an estimate/quotation with all the costs and detailed information from UMPI R&D, then she elaborates the prices for the final customer and transmits all the information to Engineer F. Franchi and to the sales area manager responsible for the specific project and / or area. - 12 -
Resources The internal UMPI analysis will continue with analysis of the company’s current resources, which are the source of capabilities and are relevant for understanding of UMPI’s core values. According to Analoui (2003), analysing the firm’s internal environment is concerned with “identifying and developing the firm’s resources”. The resource he describes as an asset, competency, process, skill or knowledge controlled by the corporation. A resource he considers as strength if it provides competitive advantage. Barney (2006) reveals that resources are divided into tangible and intangible, and are “used to conceive of and implement strategies”. The author notes that “the firm possessing the valuable resources will likely gain a sustained competitive advantage”. According to Davies (2001), “the special resources that determine profitability” can be ”the physical assets, human capital, capabilities <…> routines, procedures <…> corporate cultures”, but “people are the paramount resource of all”. Below are presented UMPI’s resources.
Tangible Resources According to Guerras (2012), tangible resources are those company assets that have an actual physical existence and can be touched in a material sense. Although, the author warns, that their rapid depreciation and ease of imitation by competitors mean that they are seldom the basis of competitive advantage. Financial Resources UMPI sets stretched goals for improving its financial resources. The company reinvests the earnings back to business, and according to its Administrative Delegate G. Moretti, is projecting to grow 14 times within the next few years. The table below provides the most important data showing UMPI financial situation. (UMPI 2010 and 2011) Confidential Revenues EBIT Net Profit
2011 9,398,792 271,348 104,448
2010 7,715,372 278,657 124,357
2009 6,268,718 156,101 76,402
Physical Resources UMPI Elettronica has headquarters in Cattolica (close to Rimini) in a two-floor building of 1.500 square meters. The lighting plants in the area around the building and some streets in Cattolica are having UMPI Minos System installed, thus the company has possibility to demonstrate to customers its products while working, which contributes potential customer understanding about the advantages of the products and thus raises likelihood of selling the product. - 13 -
Additionally UMPI has available a business office in Rome of 150 square meters, which is situated in a central area, close to the Parliament, which enables the company to meet its potential and current customer in a prestigious place in the capital, thus it is as well possibly more comfortable place for customers than Cattolica, because it is in strategic area of Italy and as well close to one of the main airport of the country. Umpi R&D has a seat in Rimini of 180 square meters. Before it was sharing the space together with UMPI Elettronica in the headquarters in Cattolica, but in the last years it is transferred to Rimini in order to have an independent area for the researchers, to not be interrupted by sales managers and to have a more comfortable place for partnership projects with universities, etc. Human Resources Amos (2008) reveals that the managerial philosophies are “the manager's set of personal beliefs and values about people and work and as such, is something that the manager can control”. He believes that “if a manager’s expectations are high, productivity is likely to be excellent, and if the manager’s expectations are low, productivity is likely to be poor”. UMPI Elettronica, managed by G. Moretti, confirms Amos theory: the CEO is expressing his high expectations, thus the productivity is high. Other managerial philosophies are the X and Y Theories proposed by McGregor (1960). According to his X theory, people are lazy, passive, require direction, avoid responsibilities and seek the easy paths. Managers thinking like that believe that they have to be strong, make firm and clear decisions and control the employees with a system of punishments and rewards. Y managers believe that people are bright and creative, seek to have a meaningful work and need autonomy, they try to use human potential and to make work meaningful to their employees. G. Moretti is providing its managers with high autonomy; he appreciates creativity and leads motivating and encouraging enthusiasm. UMPI uses a successful strategy for employee management, where all the employees are provided with an opportunity of horizontal job rotation, when the employees try themselves in different positions until they find a position where they feel mostly motivated to work in. As stated by the company, “any single person can be promoted according to the achieved results, loyalty and commitment”. Therefore UMPI has high degree of employee job satisfaction, which according to Robbins (2012) brings better work results. The company internally has 64 employees and uses 143 more people externally in order to support UMPI, for example, in foreign countries, where the market could be better explored by local professionals. Organisational Resources As it is seen in the organization chart of UMPI (Apendix 1), the corporate consists of several parts working together for common goal. The job tasks are divided according to the specific of the sub brand.
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UMPI Elettronica is organized in the way that the sales department (export and area manager) report straight to the CEO G. Moretti. The company has internal meeting every month, every area and export manager presents monthly forecasts with the updated status of the negotiations, percentage of success and expected timing. UMPI schedules quarterly review of the budget. According to Blythe (2008), organizational culture is organization's personality witch shapes the actions of its members, the organizational climate he describes as overall tone of the workplace and the morale of its workers, the daily relationships and interactions of employees. The internal atmosphere at UMPI is positive. The company employs many young skilled people and experienced as well as elderly ones. The values of ethic and bringing improvement to the society are enthusiastically shared by the employees, who feel satisfied with their jobs and are eager to achieve positive results. According to the partnership manager S. Pieroni, “there is no competition among colleagues, only some positive ambition. All the people are very dynamic and aimed for results. Everyone knows exactly the priorities and the goals and work hard for that.” The employees are rewarded considering their personal accomplishments. There is a reward system for the managers as well. The managers have high level of autonomy in organizing their tasks, working trips and decisions, which have to match the planned budget. This strategy UMPI uses believing that autonomy of the managers is one of the conditions for achievement of the best results for the company. Robbins (2012) confirms that autonomy and rewards are increasing job satisfaction and thus influencing working performance positively.
Intangible Resources According to Guerras (2012), intangible resources are those assets that have no actual physical existence and are based mainly on information and knowledge. The author specifies that these assets are nonetheless acquiring increasing importance within the firm, since their specific characteristics can be used as competitive advantages. Technological Resources To achieve technological excellence in its strategic sectors, UMPI has built up consolidated relationships with research centres, universities and corporations, which according to UMPI marketing manager R. Villa, is done in order to create a network intended to “develop innovative ideas that could anticipate and satisfy future needs before they become necessities”. The company has UNI EN ISO 9001 Quality Management System certification. Innovation Every year a growing proportion of UMPI’s turnover is invested in the company’s vital core: its Research & Development department. The laboratory, with its highly qualified staff, is constantly engaged in experimentation, skill upgrading and training. Thus it could be assumed that UMPI has a customer oriented research culture, proposing innovative solutions that could improve the quality of their customer life. - 15 -
Reputation According to the Reputation Institute, a good reputation helps to stave off the effects of the crisis because that there is a strong correlation between reputation and the stock market value. UMPI’s constant commitment enabled the company to be appreciated by NGO’s. UMPI is chosen by Symbola, the Italian quality products foundation, as amongst the country’s leading manufacturers in terms of its innovative ideas with low environmental impact. As well it won several prestige awards: “Special Energy and Environment Award” at National Energy and Environment Congress organised by ENEA; “Sustainable Development Award” from Foundation for Sustainable Development, supported by the President of Italy; 1st Showcase Company Award for Good Practice in Sustainable Development” Province of Rimini; “Unicredit Banca Ok Italia Award” in “Local Internationalisation and Excellence” category etc. It could be concluded that UMPI’s “green thinking” is one of the key factors for building a positive reputation, and the high quality of the products and of the employees proves its customers that the positive reputation has a tangible support.
Capabilities After examination of the resources, it is relevant to point out the capabilities of UMPI. According to Barney (2006), “capabilities are a subset of resources that enable a firm to take full advantage of other resources”. UMPI’s main core value is innovation, thus research, product development and integration are the capabilities that increases other resources of the company, such as production and sales. In the last 5 years the company is increasing its sales development and from purely manufacture-focused company becomes a strong corporate selling its products internationally. The firm is developing partnerships with organizations, educational and governmental institutions as well as individual professionals that are increasing their strengths in the research and product development, marketing and sales. It could be assumed that sales and marketing are capabilities letting UMPI taking advantage of other resources, such as financial ones, which are increasing possibilities to invest money into research, buildings, skilled professionals, etc.
Sustainable Advantages Before deciding which of the resources and capabilities could be regarded as UMPI’s core values, it is necessary to evaluate if the capacities satisfy the criteria of sustainable competitive advantage.
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Barney (2006) advises to use the VRIO Framework tool (provided in the appendix 3) for analysing the sustainable advantages of a firm. As it is visualized in the table below, if the resources are valuable, rare, costly to imitate and if the firm is organized to exploit these resources, the firm “enjoys sustainable advantage”. The author suggests considering from the theoretical point of view, if the resource enables the firm “to exploit an external opportunity or neutralize an external threat”, and looking at it practically, if the resource results in “an increase in revenues, a decrease in costs, or some combination of the two”. Below is provided UMPI internal analysis implementing VRIO framework.
Value According to Barney (1991), the resource or capability is valuable to the firm if it works for mitigating a risk and using it for exploiting an opportunity. Research and Product Development Capability. One of the core values of UMPI is design of unique and innovative products that could anticipate and satisfy future needs of society. UMPI is aware of the opportunities of growing sustainability importance and the economic climate change, which foster demand for innovative solutions for saving energy. The increasing level of interaction between the business / government and the customer, use of electric cars and bicycles, the request of free Wi-Fi internet coverage in the cities and demand for other innovative solutions making life more comfortable provides UMPI with great opportunities to exploit. Sales and Marketing Capability. For mitigating the risks of entry and substitution, UMPI is partnering with institutions, companies and individual professionals who are served as representatives, sales agents and intermediaries, when in Italy and Spain the company uses event marketing, sport sponsorships and articles in addition. The company adds value to its sales while approaching each customer individually, proposing customized set of products. In each country the customer is communicating with local professional, who speaks the national language and knows the cultural attitudes, as well follows political and technological changes. In Italy the company’s marketing activities are very increased in the last period: it is organizing events and is active on local media – occasionally the articles are present in main Italian daily newspapers and the CEO G. Moretti is raising UMPI brand knowledge through participation in TV shows, thus the marketing capability in Italy is valuable. It is important to mention, that in foreign markets UMPI allows the distributor to develop these activities, and as the company agrees these activities are performed very rare and on modest basis (perhaps except Spain, where the relationship between UMPI and the distributor is long and strong), and thus potential of these capabilities is not exploited well.
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Rarity Barney (2011) explains that rare are those resources or capabilities that are unique among current and potential competitors. Research and Product Development Capability. UMPI designs unique systems providing innovative solutions, which distinguish the brand from its competitors because of the flexibility of the complectation, as well because the core value of the company is design of innovative, high quality products. UMPI’s unique products are its main strength, but the company should be aware of few competitors who offer substitutions for some of UMPI’s solutions. Sales and Marketing Capability. The company does not have a rare strategy for sales and marketing, although, it could be marked that it sponsors motto cross driver who is from Cattolica, which could be assumed that this choice could distinguish UMPI from its competitors if organized well and investing in it as a marketing strategy.
Imitability Barney (2011) points out that “firms with valuable and rare resources, which are hard to imitate by other firms, can gain the first-mover advantages in the market and can hence gain competitive advantage”. According to the author, the costs of imitation in order to gain the competitive advantage are usually high because of the “unique historical conditions, casual ambiguity, social complexity, patents”. Research and Product Development Capability. UMPI’s products are very expensive to invent and to design, because of the brain power, money, time, etc. invested into research and development. In order to avoid the imitation UMPI patents all the products. Sales and Marketing Capability. The company leverages its brand equity by gaining awards and certifications, being active on diverse Italian media channels. Therefore it would be expensive to imitate UMPI’s capabilities.
Organization According to Barney (2010), “management control systems include both formal and informal means to make sure that managers’ decisions align with a firm’s strategies. Formal control systems can consist of budgeting and reporting activities that keep top management informed of decisions made by employee’s lower down in the firm. Informal controls can include a company’s culture and encouraging employees to monitor each other.” Research and Product Development Capability. UMPI’s one of the main values is the high quality of the product. The company produces in Italy because it strives for the highest control of the production as possible. The company’s partnership manager S. Pieroni explains: - 18 -
‘We check and verify every single unit in order to be sure of the quality and the proper functioning. In this way we are confident and we can grant to our partners up to 10 years of warranty.’ Sales and Marketing Capability. As the company states, all the employees know and share the company’s values, thus the internal branding is contributing to all the value chain, which brings to a planned image of the company that the employees transmit to customers. As well the company communicates about its achievements of awards and patents on the company’s internet site and in the brochures, in order to form a positive brand image and subsequently to raise the brand equity. After examination of UMPI’s sustainable advantages it could be concluded that the company’s advantage of research and product development is valuable, rare, costly to imitate and organized, thus UMPI should enjoy this sustained advantage, if it keeps the secrets if product development well. The sales activities are valuable, but the marketing activities are valuable just in Italy. As well the brand is increasing its communication in Italy in order to make it socially and historically difficult to imitate the brand personality, thus it could be considered that the marketing activities are quite rare. The brand fosters partnerships thus it develops relationships over time, decreasing the possibilities of imitability from competitors. As well the motto cross sport sponsorship has a potential to make the company’s marketing advantages rare. But the organization of marketing activities could be considered as doubtful, since the company is organising marketing just in Italy. Concluding it could be summed that sales and marketing of UMPI could be regarded as pare, but if the company would develop its advantages making them rare and organising them well, it would have sustainable sales and marketing advantages.
Core Competencies After analysis of the sustainable advantages of UMPI it is possible to point out the core competencies of UMPI. According to Prahalad (1990), “a core competency is a specific factor that a business sees as being central to the way the company or its employees work”. The author reveals that the core competency has to be not easy to imitate, it should be possible to reuse for many products and markets, as well must contribute to the consumer’s experienced benefits. Currently UMPI’s core competency is research and product development, but as well the sales and marketing have potential to become core competencies if the brand will continue developing them.
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SUB CONCLUSION - STRENGHTS AND WEAKNESSES
After internal UMPI’s analysis it is relevant to mark the company’s absolute strengths and weaknesses, which are visualized below. Strengths Experience in global market; Collaboration with local agents and distributors; Trainings and skills’ upgrading; Satisfied, motivated and professional employees; Own research and development centre; Sustainable research and product development advantages; High control over production and sales; Strategic planning of sales; Strategic decision for partnership building and collaboration; Collaboration with research canters, universities etc. Awards, certificates and patents; Reinvestment of the earnings back to business; Good financial resources; Control of lighting and monitoring system of energy failures, defects in bulbs, etc.; White Papers; UNI EN ISO 9001 Quality Management System certification; Maintenance saving up to 20 -40% and energy saving 30 - 45%; Powerline use for building a network of applications for city services; Intelligent network technologies for reduction of power transmission disturbances; Reduced number of electric cabinets needed; Integrated services.
Weaknesses No experience in Lithuania; Low establishment of marketing activities in foreign markets; Not sustainable sales and marketing advantages.
UMPI’s Absolute Strengths and Weaknesses
One of UMPI weaknesses could be considered low establishment of marketing activities in foreign markets. Increase of marketing activities could augment the possibilities to sell, because the brand and product knowledge would be raised, which could pull the potential customers to search for the brand and the unique products the brand proposes to the market. Additionally it has to be mentioned that the sales and marketing advantages are not sustainable. A rare marketing strategy would distinguish the brand from its competitors and would raise the brand awareness, thus subsequently augmented brand equity would foster investors, partners and customers reliability, as well would raise possibilities to increase sales. Thinking about the brand’s strengths in an absolute matter is UMPI’s healthy approach to business, hence sustainable intensions of cherishing and training of its employees, producing products that bring to avoidance of wasted energy, and thus money, as well as reinvestment of money back to business, makes UMPI a strong and modern company having potential to grow. - 20 -
EXTERNAL ENVIRONMENT ANALYSIS
After the analysis of UMPIâ&#x20AC;&#x2122;s internal environment it is necessary to examine the external forces that influence UMPI in the market and industry.
Market Selection Criteria The external examination will start from short overview of the criteria that should be regarded when choosing a new market to enter. According to Johanson (1977), the international market selection of SMEs is based on the low geographic, psychic and cultural distance. UMPI headquarters are located in Cattolica in Italy, thus it is in more than 2000 km from Lithuania, and thus it could be considered as middle low geographic distance. In order to diminish the psychic distance UMPI collaborates with independent consultants, agents and distributors for lowering the uncertainty about foreign markets and perceived difficulty of acquiring information about them. The cultural distance it could be considered as middle high because Italy is one of the Southern Europe countries and Lithuania according to its culture more similar to the Scandinavian countries. (More about the Lithuanian culture it will be revealed in the Sociocultural Factorsâ&#x20AC;&#x2122; analysis) Willing to have better understanding with potential customers in foreign markets and provide higher availability, UMPI collaborates with local agents and distributors to lower and overcome the barriers of geographic, psychic and cultural distance.
Macro Environment The macro environment of the Lithuanian market will be examined revealing political, economic, socio-cultural and technological factors that are relevant for UMPI business to business.
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Political Factors First of all it is relevant to consider that Lithuania is a member of European Union, thus all the directives regard the country as well. The Energy Efficiency Directive (Energy Sector, 2012) adopted in 2012 promotes energy efficiency improvements in households, industries and transport sectors. As well it requests the public sector to play exemplary role and to communicate to consumers how much energy they consume. Lithuania incorporated the directive into the National Energetic Strategy which objective is to save 1.5% energy per year until 2020 with one of the main tasks – energy efficiency raise. According to the National Control Deputy N. Mickuviene, Lithuania needs to accelerate the search for energy efficiency improvement, which would augment Lithuanian energetic independence and would raise economic competitiveness, in the audit opinion 1.5% per year is not sufficient – in order to reach 9% of energy saving until 2020, it is needed to save until 5% per year. The deputy was concerned about vague involvement of municipalities until 2010. Thus, in her opinion, the increasing involvement from municipalities could be fostered by incorporating in Lithuanian law system the obligatory energy saving in municipalities (Lithuania Is Not Using 2011). Although the municipalities are reacting to the changes slowly, recently some of the municipalities showed improvements. The municipality of the capital Vilnius in June 2012 decided to renovate the lighting system in the city (Vilnius Is Going 2012), and in the end of May 2013 it will be decided the company that will implement it. UMPI is a supplier of Strabag, one of Europe’s leading construction groups, that is taking part in this tender together with other four competitors, thus if UMPI partner will be chosen it would foster the opportunities for UMPI entering into Lithuanian market. Nevertheless, UMPI is already using the advantages provided by the directive in several European Union countries, and thus even if not winning the tender it should still have many opportunities provided by the directive and Lithuanian National Energetic Strategy. In addition it should be added that the directive obliges energetic audit to the big companies, in order to manage their development plans, evaluate their possibilities to combined cycle production systems and possibility to acquire national orders (European Commission 2012), thus these companies have several interests for improving their efficiency, therefore UMPI entering Lithuania could have opportunities to sell its products to these companies. According to the chief of the Energetic Ministry department of Renewable Energy Channels and Energy Efficiency V. Sankauskaite, the industry and trade sector already in a period of crisis understood that investment into efficiency provides competitive advantage. She confirms that industry is continuously investing into efficiency, therefore, in her opinion; there is no need to persuade concerning the benefits provided by the energy efficiency (Efficiency – 6 Milliard 2013). Since large part of Lithuanian businesses is reaching for improving on energy efficiency, it could be made an assumption that especially the national corporates are in search for firms that could provide them with solutions. Therefore UMPI in Lithuania could find customers interested in their products.
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Most recent events confirm the importance of energy efficiency in EU. In May 2013 members of Central Europe Energy Partners (CEEP) signed the Vilnius Memorandum which promotes “efficient use of energy resources and strengthening of energy independence” and “emphasises the need to focus on additional infrastructure when creating the market” (CEEP Signs Vilnius Memorandum 2013). This factor could bring many competitors of UMPI to Lithuania, thus there would be not just opportunities but as well as threats. Therefore it is relevant to remember that the first entry has bigger possibilities because of the relationships, brand awareness and mutual trust established before the new comers arrive. The survey made by Baltijos tyrimai (Baltic Researches) ordered by LESTO (Lithuanian Distribution Network Operator) revealed that to Lithuanian citizens the high price for electricity is the major incentive to save energy (Efficiency – 6 Milliard 2013). According to the CEO of LESTO A. Tarasevicius, Lithuanian energy efficiency is almost twice smaller compared to Western countries; therefore there could be opportunities for UMPI in showing the way the efficiency could be augmented. Since UMPI targets governmental institutions it is important to consider current political power in the parliament. In the autumn of 2012 Lithuania had elected for the parliament for four coming years the Social Democrats. Between three directions that the party emphasizes on is “Green Growth” direction. Social Democrats claim: “Economic growth is delivered in the way that the nature is preserved, broadly used renewable energy sources and developed waste-free technologies – just this will guarantee our children and grandchildren inheritance of safe and healthy environment.” (The Long LSDP’s 2012) The “Green Growth” direction gives a potential opportunity to UMPI to find the customers in need for innovative sustainable energy and related cost-saving solutions in the urban infrastructures. General legal conditions in Lithuania are as well relevant, especially the public procurement law. The Lithuanian government is currently developing the law of public procurement in order to make it clearer and less time consuming, as well for raising of the little value purchase threshold twice (The Government Proposes 2013). Thus if the law will be accepted, UMPI will have easier conditions for doing business with Lithuanian national institutions. Furthermore, it is necessary to mention several significant factors of doing business with municipalities in Lithuania. First of all the budgeting system of municipalities has to be revealed. According to the Constitution of Lithuania (Constitution of Lithuanian Republic 1992) the state supports municipalities; each municipality has its own budget, which it determines and approves. Management and Public Administration Expert, Member of Parliament, Prof. K. Masiulis expresses his worries about the current order of financing of municipalities, which according to his opinion is not stimulating effective work: the municipalities are not motivated to collect more money than planned by central national power, because the unplanned money are redistributed to other municipalities that performed worse, in this way the poorest municipalities get bigger subsidies (Sodonis, 2013). Therefore, it could raise difficulties for UMPI while trying to motivate the municipalities to increase efficiency and thus use less money. - 23 -
Additionally, it is relevant to note that EU structural assistance for Lithuania for the period 2007-2013 is finishing, and until there is not known the size of the farther assistance and the programs in which it will be allocated, there is some uncertainty in the Lithuanian market for UMPI. But considering the EU directive of efficient energy use, it could be assumed that the sustainability and efficient energy issues will be addressed in the new programs as well.
Economic Factors To have a complete view, the economic factors of Lithuania should be regarded in the global context. According to Swedbank, the EU recession is expected to en in the second part of 2013, USA probably will have political tension because of deficit of the budget and roof of the debts and more than 80% of the world economy growth will be created by the developing countries. It is forecasted that in 2014 none of the EU countries will be in recession, but all the region growth will be very small and will not reach 1% (Swedbank: Global Economic 2013). As well it assumes that the global economy will grow until 3.4%, Sweden economy – a bit more than 2.5% and Baltic countries 4-5%, which is a huge growth comparing with other EU countries (Swedbank Economic Outlook 2013). In the appendix 4 is available the map showing European countries economic situation, where Lithuania is between most economically advantageous countries. The statistics of Lithuanian Gross Domestic Product per capita is showing a consistent growth, when from 2008 till 2012 the growth was of circa 18%. While in 2012 it was $ 20.400, the Central Bank of Lithuania is forecasting that the growth of GDP of 3.7% in 2012 will grow until 2.8% in 2013 and until 3.5% in 2014 (Lithuanian Economy Development 2013). In the chart in the appendix 5 is provided the Lithuanian GDP per capita statistic data from 2007 till 2011 (GDP per Capita n.d.). Additionally, it is relevant to mention that according to Foreign Policy Baseline Profitability Index (BPI), Lithuania is in the 16th place, when between first twenty there are just four countries from Europe. Next to Lithuania there are three other European countries: Estonia in the 12th place, Poland – 18th and Bulgaria – 20th. BPI assesses how local political and investment environment affects same investments in different countries. (Altman, 2013) The consistent economic growth especially in this period of recession in EU should be regarded as an opportunity for UMPI, since the power of buying especially of the national companies should be high. As well, when going to Lithuania UMPI should be aware that although Lithuania is a member of European Union, it has not Euro, but its national currency – Litas. Lithuanian Litas is pegged to the Euro at the rate of 3.4528 to 1. The Euro was expected to replace the Litas by January 1, 2010, but due to the rate of inflation and the economic crisis, this date was delayed for another four years until 2014. According to Swedbank, Lithuania is not applied for Euro yet, and as it
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shows the tendency of inflation, it would not meet the criteria this time too (Swedbank Economic Outlook 2013).
Socio-Cultural Factors Considering the socio-cultural factors, the society opinion about the energy is relevant. After the shutdown of the old nuclear power plant, Lithuania lost the energetic independence and got higher bills for electricity. Lithuania is targeted from two directions: building of the new nuclear power plant and development of the alternative â&#x20AC;&#x153;greenâ&#x20AC;? energy sources. Concluding, Lithuanian government, companies and individual people are demanding for saving costs, therefore UMPI has a big opportunity in Lithuania as a provider of solutions for energy saving. Moreover, it is relevant to mark, that Lithuanians have specific stereotypes about Italians. It is common to think that Italian companies as other companies from Southern European countries are slower than Northern ones and are less reliable when considering deadlines. But Italian companies proved themselves as reliable when talking about quality. Therefore the challenge to UMPI would be to prove that it is producing not just high quality products, but as well can respect the agreed terms. Besides, UMPI should be aware about the bureaucracy in the national institutions and corporates, which could be time and energy consuming, especially if not being proficient in Lithuanian language, but it could be regarded as an opportunity when knowing the procedures well. Further to this, in national institutions and companies the requested language is Lithuanian. Additionally, according to the Lithuanian Statistic Institute, in Lithuania first foreign languages spoken are English and Russian. While English is spoken by 30.4 % of the population, where almost half of it is by the age group of 15-29 years old, Russian is 63%, where one third of it is spoken by 40-54 years old. Language barrier could raise threats, if UMPI would not consider this factor when dealing with Lithuanian companies. (Population by Educational 2013) In addition, it is relevant to present the cultural dimensional indices revealed by Borker (2012) after examination of Lithuania according to Hofstedeâ&#x20AC;&#x2122;s (1980, 2010). In the table below are presented Lithuanian indices.
Country Lithuania
Power Distance 42
Lithuanian Culture Indices
Individualism vs. Collectivism 60
Masculinity vs. Femininity 19
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Uncertainty Long-Term Avoidance Orientation 65 82
Indulgence vs. Restraint 16
Power distance. Considering indices it could be marked that Lithuania has a low power distance, thus UMPI should consider this when dealing with Lithuanian employees and customers, especially because Italy is considered as high power distance country. Individualism versus Collectivism. The indices reveal that Lithuanians are individualists. Hofstede defines people from individualist societies as only looking after themselves and their direct family. The same approach is shared by Western countries, including Italy. Masculinity versus Femininity. The indices reveal that Lithuanian culture is feminine, witch, according to Hofstede, emphasises on quality of life. Uncertainty Avoidance. The indices show that Lithuania leans toward uncertainty avoidance, which could be managed by strategic implementations such as investment into long term values, which proposes UMPI. Modernized infrastructure with warranty up to 10 years, easier and cost-efficient maintenance, energy reduction and thus cost reduction and possibility to save the money for future, as well as control over the city, would lower the uncertainty over the future. Long-Term Orientation. The indices reveal that Lithuania emphasizes on traditions and saving for the future. Since Lithuania was touched from the recent economic recession, and before had several turn points during the 20th century, it is used to save and put the money aside in case of another unexpected crisis. Indulgence vs. Restraint. From the indices it could be assumed that Lithuania represents a restrained culture society that is convinced that free gratification of basic and natural human desires related to enjoying life needs to be regulated by strict norms. It could be assumed that Lithuanians are not into taking business risks and prefer clearly defined rules. Comparing Lithuanian with Scandinavian countries, Germany and Russia in the context of culture, the results provided by Borker (2012) show that Lithuania has 5 out of 7 similarities with Scandinavian countries, 3 â&#x20AC;&#x201C; with Germany and 1 â&#x20AC;&#x201C; with Russia.
Technological Factors The national energetic management in Lithuania is an important factor for UMPI to know, since UMPI is keen to build partnerships with the companies transmitting and allocating electricity energy. The electricity energy production and supply is proceeding in competitive conditions, and the electricity transmission and allocation are monopolized activities. From 2010 electricity energy demand was covered by Lithuanian Ignalina Nuclear Power Plant by circa 70%, now Lithuania purchases electricity energy from Russia. The transmitter, net operator, net owner, system operator and market operator is Lietuvos energija (Lithuanian Energy). The company transmits the electric energy through high voltage net. The allocation, net operation and national supply management activities are performed by LESTO. It allocates the electricity
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energy through low (0.4 kV) and middle high (until 110 kV) voltage nets. (The 2nd Audit Department 2011) Moreover a crucial factor for UMPI going into the new market could be the technical environment concerning the lighting management, installation and maintenance. In Lithuania each city is provided with technical support by companies specified in these fields, usually owned by municipalities. For example, firm serving Siauliai – Siauliu gatviu apsvietimas (Siauliai Streets’ Lighting), etc. The companies are having very long experience with municipalities, for example Siauliai Streets’ Lighting is collaborating with Siauliai municipality since 1986. (SGA 2009) Speaking about electricity energy, the quality of electricity transmission could be considered as well. Lithuanian electricity energy distribution network indicators are revealing the quality growth over the past years: in 2009-2010 unplanned transmission interruption level almost reached the old EU countries level, as well the level of importance of transmission interruptions in 2005-2007 was similar to the average level of the EU countries (Commission Approved n.d.). The charts are presented in the appendix 6. Likewise, the quality and speed of the internet is relevant, since UMPI products are organized in the way that the information from the system to the technicians can be transmitted through GSM, GPRS or Wi-Fi connection. According to Net Index, Lithuania has a third most fast internet download in the world (after Hong Kong and Taiwan) with a speed of 35.98 Mbps, it is second (after Hong Kong) for upload speed of 39.81 Mbps and 12th for quality taking index of 86.95 out of 100 (Net Index 2013). As well the coverage of the mobile connection is important. The most week signal of radio waves -95 dBm is covering 98.3-98.6% of Lithuanian territory, stronger signal of -85 dBm – 85.5-86.1%, and strong signal of -75dBm - 56-58.1% (Ikamas 2013). Considering the importance of UMPI online visibility for marketing activities, internet use on computers and mobiles should be regarded. Lithuanian market is very favourable for online marketing and commerce activities, because the internet use level in the country is very high. According to the Lithuanian Information Society Development Committee under the Ministry of Transport and Communications (ISDC), 25% of Lithuanians used mobile internet, 75% used computers and 73% used internet in 2012 (Lithuanian Information Society Development Committee 2013). Another relevant issue for consideration is transportation. There are several companies providing services of transportation from Italy to Lithuania. One of them is Adrem, which is one of the biggest Lithuanian logistic, transportation and warehousing company, having terminals in Milan, Vicenza and Prato. As well it could be noted Tempus, which is claiming for efficiency and delivering to Baltic countries and Russia, which could be relevant for UMPI in case of farther expansion in the neighbour markets. Traveling Italy-Lithuania-Italy is as well significant considering the meetings and presentations of the company. There are daily flights between Milan and Vilnius, as well Rome and Vilnius
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with Wizzair and Airbaltic flight companies, and the time of flight from Rome to Vilnius is approx. 3.5 hours, from Milan to Vilnius – approx. 2.5 hours.
Lithuanian Market Before analysing the industry, it is relevant to provide a short description of Lithuanian market. Thinking from the perspective of UMPI Lithuanian market could be divided into two segments – national and private businesses. The tendency of growing importance of energy efficiency provides the industry with wide opportunities. The market is not big but with high potential which is proved by constantly growing Gross Domestic Product. As well it is accurate to mention that there are two companies already established in Lithuanian market: local company IRTC and global corporate Schneider Electric.
Micro Environment Industry In order to understand the industry UMPI operates it is necessary to define it. The report will focus on intelligent lighting control industry related to Smart Cities concept, since UMPI Minos System allows monitoring and control of lighting points and provides additional values such as lighting energy efficiency, weather metering, transport control, surveillance etc. According to Navigant Consulting (2013), until 2050 the number of people living in cities from now will increase almost twice and will reach 6.3 billion. As well it predicts that by 2025 there will be 37 megacities with more than 10 million citizens, when 22 of those cities will be in Asia. It marks the impact of the expansion on the global economy, and reveals the growing demand for infrastructure and resources already forming a new way of thinking about city management and designed. Industry Drivers Demographics. Navigant Consulting reveals that the rapid growth of population in cities is the primary driver for incorporation of smart technologies in the infrastructure in order to improve efficiency and reduce costs. However, it warns that first to become smart cities are cities aiming to become successful and attractive. Environmental Pressure and Climate Change. According to Navigant Consulting, “cities are responsible for around 70% of global energy consumption and greenhouse gas (GHG) emissions”. It highlights important role played by organizations like the C40 Cities Climate Leadership Group (C40) showing how cities can play an essential role in addressing environmental issues. - 28 -
Economic Development and Regeneration. In the opinion of Navigant Consulting, “city leaders see sustainability as closely tied to the economic opportunities for their cities”, as well, consider the smart city concept as useful marketing tool and as tool for coordination of investment and innovation. Citizen Expectations. Navigant Consulting notes that city leaders face the challenges of matching rising citizen expectations with financial resources. It reveals that in North America and Europe because of the economic recession local governments have to increase the level of innovation in their service procurement and delivery as well in their use of technology to raise efficiency of their operational costs. According to Navigant Consulting, “technology has enabled new forms of communications about social issues between citizens – and between citizens and government”. Industry Challenges Developing Effective Financial Models. Navigant Consulting warns that funding is a critical issue for large-scale deployment of smart city solutions. It suggests that “development of a range of financial models that allow cities to invest in innovation will be crucial to the next phase of this market”. But it already notes citywide agreements with energy management companies that are already being developed for building- and public lighting systems improvements. Moving from Pilots to Large-Scale Deployments. Navigant Consulting is noting that there are many initiatives using a various technologies and focused on every aspect of city operations. But it marks, that “a city that finds a model for moving from pilots to large-scale deployments across a number of operational areas will have the right to be called the first true smart city”. Developing a Holistic View of the City. According to Navigant Consulting, Pilot projects can play as models of what can be achieved and it can accelerate the innovation, but they need to be integrated in the vision of the city. Improving Governance and Citizen Engagement. Navigant Consulting sees the little engagement of governance communication with citizens, and thus suggests that smart cities will need to increase the level of interaction because of the new communications models. Identifying the Customer. Navigant Consulting warns that “cities are not companies with clear leadership and well-defined decision-making processes”. It suggests that smart city industry participants will need to develop collaborations with government, local partners, international development agencies and other sponsoring organizations. Industry Opportunities Navigant Consulting regards the market in terms of the five “industries” that are core to the development of smart cities: smart energy, smart water, smart transportation, smart buildings, and smart government. It forecasts that the fastest-growing of these industries will be smart transportation, with a CAGR of 19.5% between 2012 and 2020, and by 2020, the smart transportation market related to smart cities will be worth $5.5 billion annually. - 29 -
According to Navigant Consulting, many cities in the world are interested in the vision of smart cities: “The large-scale infrastructure and urban development projects in China and India make them the most dynamic markets for large-scale city innovations. Brazil is also beginning to address many years of underfunding in its urban infrastructure. In the United States, stimulus funding has helped kick-start of a number of smart city projects, but few cities have developed a strategic view on integration across city operations. Europe, in contrast, has a well-defined vision for the role of smart cities within an overarching policy that covers environmental, economic, and social development. Yet, European cities face challenges in finding the funding to drive beyond the pilot stage.” Concluding, according Navigant Consulting forecasts, there will be made cumulative investment of over $117 billion in smart city technologies between 2012 and 2020 and smart city technology market will grow from $6.1 billion annually in 2012 to $20.2 billion in 2020, which represents a compound annual growth rate (CAGR) of 16.2%.
Porter’s Five Forces In order to analyse competitive forces in micro-environment it is common to use the Porter’s Five Forces model. According to Porter (1998), a strong competitive force can be regarded as a threat because it depresses profits, and a weak competitive force can be viewed as an opportunity because it allows the company to earn greater profits. Below is provided Porter’s Five Forces analysis of the industry. Rivalry among Competitors Hill (2012) refers rivalry as “a competitive struggle between companies in an industry to gain market share from each other”. The rivalry among competitors is high, because the global market has several huge players in the industry, such as Siemens, Echelon, Silver Spring Networks, Schneider Electronics etc. Threat of Potential Entry Hill (2012) reveals that potential competitors are companies that “are not currently competing in an industry but have the capability to do so if they choose”. According to McKinsey and Co (2012), lighting companies, especially fixture companies, start to see the smart lighting control area as one of the largest untapped opportunities in the lighting industry. Thus the threat is high, because in Lithuania streets lighting maintenance companies are owned by municipalities. Bargaining Power of Suppliers Peng (2009) reveals that the bargaining power of suppliers is “the ability of suppliers to raise prices and / or reduce the quality of goods and services”. The bargaining power of suppliers could be considered as low, because there are many manufacturing companies in the world. Because of the developing countries low cost offers the European manufacturers are not in the position to demand higher prices, and they have to adjust to the Purchasers needs. - 30 -
Bargaining Power of Buyers According to Hill (2012), “industry buyers may be the individual customers who ultimately consume its products <…> or the companies that distribute an industry’s products to end users, such as retailers and wholesalers”. He warns about few cases when buyers are powerful and the prices must be lowered. One of the cases is when “the supply industry depends on the buyers for a large percentage of its total orders”. Municipalities have high bargaining power, because they own the lighting plants, thus they and the government have a very high possibility to lower the prices. As well usually one of the main criteria of public purchasing is low price in relation to high quality. Threat of Substitutes According to Peng (2009), substitutes are “products of different industries that satisfy customer needs currently met by the focal industry”. The threat of substitutes is low, because smart street lighting control devise could be substituted just with switch off / switch on button. Although, the product could be considered from the perspective of the objectives of smart street lighting control which are: energy efficiency and maintenance efficiency. It could be assumed that LEDs could be substitution for energy efficiency, but usually both products are considered from complementary point of view.
Customer Analysis Between the factors influencing UMPI entrance in Lithuanian market, significant importance has the knowledge of its potential customers and their power of purchase. As it was mentioned in the internal analysis of UMPI, the company focuses on municipalities as a major part of their target group. Thus it is relevant to analyse which district is the major contributor to the GDP raise. According to Lithuanian Statistic Department, in 2011 38.1% thus major part of total Lithuanian GDP was created by Vilnius district, 19.6% in Kaunas district and 12.1 % in Klaipeda district. Comparing the GDP per Capita with average of total country, Vilnius (142.6%) and Klaipeda (108.9%) districts are best performing. (GDP 2012) In order to understand the economic situation of Lithuanian municipalities, the economic analysis of municipalities of five major cities was made. The table below represents their income and the national subsidy amount to each of them in 2012.
Thousand Lt National Subsidy Total Income
Vilnius City 467 387,2 994 646,2
Kaunas City 296 326,4 730 510,8
Klaipeda City 154 246,4 383 450,8
Income of Five Major Municipalities and National Subsidies to Them
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Siauliai City 121 764,4 264 196,0
Panevezys City 110 421,3 216 995,6
From the data provided by the National Statistic Department of Lithuania (National Statistic Department of Lithuania 2013) it could be assumed that major purchase power has Vilnius city municipality. Although, based on the analysis of activity of Lithuanian municipalities executed by Ministry of Internal Affairs (Biggest Armies 2013), it could be considered that the most rich and most economic independent is Neringa municipality. Combining the richness and the economic independence Palanga, Akmene and Varena municipalities could be marked. The table below visualizes the results. Placement I II III IV V VI VII VIII IX X
Municipalities with Biggest Budget Amount for each Citizen Neringa Birstonas Palanga Akmene Druskininkai Zarasai Varena Joniskis, Raseiniai, Ignalina Joniskis, Raseiniai, Ignalina Joniskis, Raseiniai, Ignalina
Municipalities with Biggest Economic Independency Neringa Palanga Akmene Klaipeda City Kaunas City Siauliai City Visaginas Kaunas Region Vilnius City Varena
Municipalities with Biggest Budget Amount for each Citizen and Municipalities with Biggest Economic Independency
It could be assumed that from the economic point biggest potential to buy have: Neringa, Palanga, Akmene, Varena, Vilnius City, Klaipeda City, Kaunas Region and Siauliai City. Albeit economic point of view is crucial, the demand level is important as well. In January 2013 Kaunas City municipality announced its intentions to modernize its electricity points (After Modernization 2013). In 2012 it had 25940 lighting plants (Kaunas Region Energetic Agency 2013). Another factor increasing UMPI possibilities to sell is the motivation of customers. Kaunas City municipality is a member of Energy Cities since 2009. Other Lithuanian municipalities signed the membership - Panevezys City, Anyksciai, Pakruojis, Silale, Silute and Vilkaviskis municipalities (Kaunas Region Energetic Agency 2013) - provide opportunities for the smart energy industry. As well Palanga municipality showed its interest in innovations (It Is Wished to Illuminate 2013). Palanga is a resort city in Lithuania very similar to Rimini in Italy. Currently there are no lighting plants along the seashore; therefore the municipality considers installation of plants in the main beach in 3 km length zone. The idea is to install hybrid plans using sun and wind energy, thus the municipality is considering sustainability issues. UMPI has an opportunity to supplement potential partnerâ&#x20AC;&#x2122;s plants with its products, providing them with possibility to increase energy efficiency, and thus sustainability. As well the municipality could be interested in additional assets of Minos Systems, which would benefit the security and communication issues highly important in the beach area. Currently the area is monitored by few lifeguards during the summer season, and for communication are used radio loudspeakers. - 32 -
Concluding, it could be assumed that Neringa, Palanga, Akmene, Varena, Vilnius City, Klaipeda City, Kaunas Region, Siauliai City, Kaunas City, Panevezys City, Anyksciai, Pakruojis, Silale, Silute and Vilkaviskis, as well Klaipeda City, Visaginas, Birstonas, Druskininkai, Zarasai, Joniskis, Ignalina and Raseiniai municipalities provide major opportunities in Lithuania. Lithuanian municipalities are presenting a large group of potential customers for UMPI, but national companies represent a significant importance as well. One of the main opportunities for UMPI in Lithuania would provide national company Lietuvos energija (Lithuanian Energy) which is the biggest electricity producer in Lithuania, uniting all national electricity production forces – Lithuanian Power Station, Kruonio Hydro Accumulation Power Plant and Kaunas Hydro Power Plant, as well it directly controls two companies – Kauno energetikos remontas (Kaunas Energetic Maintenance) and Energijos tiekimas (Energy Supply). The assets of the corporate are worth of 3.1 milliard Litas. (Lithuanian Energy n.d.) Nevertheless is important to consider LESTO as a potential partner. LESTO is Lithuanian distribution network operator, whose shareholders are national Lithuanian Visagino atomine elektrine (Visaginas Nuclear Power Plant) – 82.63%, German E.ON Ruhrgas International – 11.76% and others – 5.61%. The assets of the corporate are worth of 5.3 milliard Litas. (LESTO n.d.) As UMPI usually is building partnerships with the cities’ lighting maintenance companies, it is relevant to consider some of them in Lithuania. It is accurate to mention that many municipalities own maintenance companies in order to support them. One of the examples of cities’ lighting maintenance companies is Siauliu gatviu apsvietimas (Siauliai Streets’ Lighting). UMPI should be aware that it already uses a product that substitutes some advantages of UMPI Minos System. The company uses ESRI GIS data base enabling design and management of solutions through the application of geographic knowledge. In this system are fixated exact coordinates of plants, road signs, traffic lights, lighting line routs etc. The firm is owned by Siauliai city municipality. It maintains and repairs circa 115 thousand lighting plants. The plants are all around ten years old, with sodium vapour lamps of 250 W. (Siauliai Streets’ Lighting 2009) Another national company that could provide opportunities for UMPI is Lietuvos gelezinkeliai (Lithuanian Rails), managing Lithuanian rails and stations. Lithuanian Rails is managed by Lithuanian Republic Ministry of Transport, who has 100% stock of it. In 2011 the corporate earned 1 661 mln. Lt - 19.2% more than in 2010. (Lithuanian Rails n.d.)UMPI could collaborate with one of the five sub brands added to Lithuanian Rails in 2010 – Gelezinkeliu projektavimas (Design of Rails), which main functions are design and research projects in Lithuanian rails. Between the tasks are building, reconstruction and expansion of depots, stations, roads, communication and automation, as well as design and technical-economic projects. Lithuanian Rails have 107 stations and general track rail net lines of 1775.3 km. (Design of Rails n.d.) As well it is accurate to mention that Fegda, building roads and streets, airport and outdoor engineering nets in Lithuania, who just won the tender of Lithuanian Rails for preparation of - 33 -
Kaunas Public Logistic Centre Intermodal Terminal (Freight Transportation Management 2013). Although the capital of the company is 100% Lithuanian, in the last ten years it is collaborating with Scandinavian companies. In the recent period the turnover is between 80 and 200 mln. Litas. The company has high level of experience as general contractor and its engineers are able to manage its own projects as well as to coordinate the sub-contractor activity in big and difficult projects. (Fegda n.d.) The company could provide UMPI with opportunities to reach Lithuanian Rails and other national companies.
Key Success Factors According to Porter (1998), key success factors (KSFs) are competitive factors and attributes that affect every industry member’s ability to be competitively and financially successful. It could be assumed that the key success factors in international market according to the objectives of UMPI customers could be similar to the Lithuanian ones. Thus if the company corresponds to the main customer priorities - improvement of lighting plants energy efficiency, maintenance of cost-effective power grid operation, allowance of quick and effective maintenance of the plants and optimization of citizen services – it has high potential to succeed.
Competitor Analysis In order to understand UMPI advantages in the competitive environment in Lithuania it has to be reviewed how UMPI, IRTC and Schneider Electric solutions are matching the objectives of the potential customers. These companies are chosen because IRTC is a Lithuanian company with focus on Lithuanian market and Schneider Electric is global company already established in Lithuanian market, thus they would cover the same market are (Lithuania) and offer similar products. Table below illustrates UMPI, IRTC and Schneider solution match with potential customers’ priorities for smart streets lighting control.
UMPI IRTC Schneider Electric
Energy Efficiency Improvement + + +
Cost-Effective Power Grid + +
Effective Maintenance + + +
Optimization of citizen services + -
Review of UMPI, IRTC and Schneider Solution Match with Potential Customers’ Priorities for Smart Streets Lighting Control
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The table below presents the comparison according to the absolute strengths and weaknesses of UMPI, IRTC and Schneider Electric. UMPI
IRTC
Schneider Electric
Strengths
Weaknesses
Control of lighting; Monitoring system of energy failures, defects in bulbs, etc.; White Papers; UNI EN ISO 9001 Quality Management System certification; Maintenance saving up to 20 -40%; Energy saving 30 - 45%; Powerline use for building a network of applications for city services; Intelligent network technologies for reduction of power transmission disturbances; Reduced number of electric cabinets needed; Integrated services (meteorological and emergency call system, electric vehicle charging, air quality monitoring, hydrogeological instability monitoring, traffic flow and parking management, etc.) Control of lighting; Monitoring system of energy failures, defects in bulbs, etc.; 15 years of experience in Lithuanian market; Local company with low geographical, psychic and cultural distance; Exploitation saving until 20%; Energy saving until 30%
The brand not established in Lithuanian market; Italian brand exporting globally, with medium geographic and cultural distance, and high psychic distance
Control of lighting; Monitoring system of energy failures, defects in bulbs, etc.; 5 years of experience in Lithuanian market; Global company with Lithuanian branch with low geographical, psychic and cultural distance; White Papers; System for power transmission disturbances
The product of smart street lighting is launched in 2011 and there is no experience yet; No integrated services; No certification; No smart city applications; No system for power transmission disturbances No experience in Lithuanian smart street lighting control market; No integrated services; No smart city applications
UMPI comparison with IRTC and Schneider Electric (Sources: Bruni, F., Cavicchiolo, A., Magnaghi, G. and Piazza, F. (2012). Citymatics: The Minosâ&#x20AC;&#x2122; Revolution in Smart Cities. Art Valley Association, IRTC n.d. and Schneider Electric n.d.)
Summing up it could be assumed that UMPI has weakness of new comer in to the market that some competitors already know. As well the physical presence in the country possibly adds solidity to IRTC and Schneider Electronics. As it could be concluded IRTC being local company, and Schneider Electronic with local branch share the same cultural background as Lithuanian customers. But both companies have little experience in Lithuanian market with smart streets lighting solutions. As well it should be mentioned, that IRTC has very low experience in this solution at all. Although there are many strength factors shared between UMPI and its two potential competitors in Lithuania, UMPI stands out from IRTC and Schneider Electronics with its holistic view at the needs of a smart city and the integrity of its products and additional features.
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SUB CONCLUSION – STRENGHTS, WEAKNESSES, OPPORTUNITIES AND THREATS
After the identification of UMPI’s absolute and relevant strengths and weaknesses, and the opportunities and threats in the industry and in Lithuanian market, it is relevant to sum up the factors and prepare a SWOT analysis. Strengths Experience in global market; Collaboration with local agents and distributors; Trainings and skills’ upgrading; Satisfied, motivated and professional employees; Own research and development centre; Sustainable research and product development advantages; High control over production and sales; Strategic planning of sales; Strategic decision for partnership building and collaboration; Collaboration with research canters, universities etc. Awards, certificates and patents; UMPI’s solutions match with the needs of the market; UMPI sales managers are speaking Russian and English; Additional value of integrated services (meteorological system, emergency call management, advertising, electric vehicle charging, air quality monitoring, hydrogeological instability monitoring, traffic flow and parking management, smart traffic light management) Reinvestment of the earnings back to business; Good financial resources. Opportunities Energy Efficiency Directive; National Energetic Strategy; Vilnius Memorandum; High need for energy efficiency augmentation; Big companies are obliged to increase energy efficiency; Tender in Vilnius where UMPI’s partner Strabag is taking participation; Business understands that investment in energy efficiency provides competitive advantage; High price of electricity; Energetic dependence to Russia; “Green Growth” direction by the ruling party Social Democrats; Growth of sustainability importance; Growth of Smart Cities concept awareness; Growth of major interests in modernizing their cities; Growing need for interaction between the city and its citizens; - 36 -
Weaknesses No experience in Lithuania; Low establishment of marketing activities in foreign markets; Not sustainable sales and marketing advantages; Sales management is not speaking Lithuanian; The brand not established in Lithuanian market; Medium geographic and cultural distance and high psychic distance.
Threats Energy efficiency is not obligatory to municipalities; Current order of municipalities’ financing is not motivating them; Increased interest in Lithuanian market by UMPI’s competitors; EU structural assistance for Lithuania for the period 2007-2013 is finishing; Uncertainty about the currency change from Litas to Euros;
Simplified public procurement low; Additional government dotation to municipalities; EU funds for energy efficiency projects; Continues growth of GDP; Lithuania â&#x20AC;&#x201C; one of fastest growing countries in the world; Uncertainty avoidance; To Lithuanians important quality of life; Long term orientation; Low power distance; The quality of electricity is growing; Second highest internet speed in the world; Good coverage of mobile connection; High usage of internet; Several transportation companies from Italy to Lithuania; Daily flights connecting Milan, Rome and Vilnius; Potential development of financial models allowing cities to invest in innovation; Growth of population; The fastest-growing of smart industries - smart transportation; Well defined role of smart cities in Europe; Growth of Smart city technology market; Low power of suppliers; Low threat of substitutes; Several rich and economically independent municipalities in Lithuania; Few cities are Energy Cities members; Kaunas project for modernization of city street lighting; Palanga project for installation of sustainable lighting plants in the beach; Many Lithuanian cities are in need for street lighting modernization; Lithuanian Rails and Fegda collaboration in Vilnius Public Logistic Centre Intermodal Terminal project; Consultant for Lithuanian market; Agent â&#x20AC;&#x201C; marketing consultant for Lithuania; Collaboration with Italian-Lithuanian Chamber of Commerce.
UMPI SWOT Analysis
Negative stereotypes about Italians; Bureaucracy; Low level of people speaking English, especially when older that 30; Low level of young people speaking Russian; Lithuanians are individualistic; Lithuanians are not for taking risks; The electricity transmission and allocation are monopolized activities; Street lighting maintenance companies are owned by municipalities; Two competitors with seat in Lithuania: local company IRTC and global corporate Schneider Electric; No vision of the city; Difficult to find funding beyond the piloting stage; Several huge players in the global market; High threat of potential entry; High bargaining power of buyers.
It could be concluded that UMPI has high potential because of his core values of research and product development, but has weak overall foreign marketing strategy. Despite some threats very common to global market, Lithuania is encouraging with many opportunities for energy efficiency providing companies. The European directives and Lithuanian national initiatives, strategies and projects are fostering the growth of smart energy use in national and business sectors. The constant growth of Lithuanian GDP and EU funds provide financial resources for fostering of sustainable innovation. And the demand for smart innovations increasing life quality of population and interaction between cities and their citizens provides UMPI with high opportunities of finding many customers waiting for companies proposing intelligent and customized solutions. - 37 -
ENTERING INITIATIVES
Entry Mode Analysis After analysis of UMPI’s internal environment, the industry and Lithuanian market, it is relevant to analyse what entry mode is UMPI using and what are the criteria for the choice. According to Root (1994) there are three rules for choosing entry mode: naïve, pragmatic and strategy rules. UMPI uses the naïve rule, because it implements the same entry mode for all foreign markets. Root warns that “this rule ignores the heterogeneity of the individual foreign markets”. Hollensen (2011) reveals that there are three types of entry modes: export modes, intermediate modes and hierarchical modes. Currently UMPI is active in 20 markets, including Spain, Switzerland, Austria, France, Czech Republic, Slovakia, UK, Greece, Brazil, Saudi Arabia and Emirates, etc. using export modes. According to Hollensen, when using export entry modes a firm manufactures its products in the domestic market or a third country and then transfers either directly or indirectly to the host market. Although author marks three major types of the modes of exporting, such as indirect, direct and cooperative export marketing groups, he reveals that “export channels may take many different forms”. Hollensen warns that in establishing export channels a firm has to decide which functions will be the responsibility of external agents and which will be handled by the firm itself. UMPI collaborates with agents and distributors located in the foreign market it is entering. It usually makes agreements where the distributor takes care of marketing and transportation. UMPI sets the price and collaborates with their agents and distributors for finding customers. Agents and distributors contact and meet potential customers and when it is needed for back up of UMPI and / or when the deal has to be concluded the area manager and technical commerce managers are coming to the meeting too. The price setting depends on UMPI, and the agents and distributors get agreed commissions upon the sales made. Thus it could be assumed that UMPI uses direct export channels. According to Hollensen, companies using direct export usually handle the documentation, pricing policies and have direct contact with the first intermediaries in foreign markets. But UMPI is not taking care of physical delivery and is not selling the products to agents and distributors, when these activities are described by the author as common to direct exporters.
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In order to develop initiatives that would give consequence for setting the objectives and preparing the entry strategies it would be appropriate to implement the TOWS framework. TOWS help to identify strategic initiatives answering following questions: • • • •
Strengths and Opportunities (SO) – How can UMPI use its strengths to take advantage of the opportunities in the market and industry? Strengths and Threats (ST) – How can UMPI take advantage of its strengths to avoid real and potential threats in the market and industry? Weaknesses and Opportunities (WO) – How can UMPI use the opportunities in the market and industry in order to overcome its internal weaknesses? Weaknesses and Threats (WT) – How can UMPI minimize its weaknesses and avoid threats in the market and industry?
The table below provides UMPI potential initiatives for entering Lithuanian market. SO Demand for energy efficiency in Lithuanian market -> Minos System saving costs for energy and maintenance; Growing need for interaction between the city and its citizens -> Minos System additional values; Trend of sustainability -> UMPI - sustainable company (White Papers, awards, certificate); Lithuanian long term orientation culture -> high quality of the products, warranty up till 10 years, post sales services; Lithuanian priority of quality of life -> Minos System and integrated additional options create smart city; Lithuania in need for city lighting modernization -> next to LED’s and renewable energy using lighting plants it is important energy control -> Minos System; Global growth of smart transportation need -> Minos System integrated additional options; High level internet connection -> UMPI applications for smart city services. ST Lithuanians are not for taking risks -> UMPI quality assurance by certificates; The electricity transmission and allocation are monopolized activities, street lighting maintenance companies are owned by municipalities -> UMPI is good at establishing partnerships; UMPI has know-how about smart cities -> cities do not have vision.
UMPI TOWS Analysis
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WO UMPI without experience in Lithuania -> competitors without experience in Lithuania or in the industry; Low establishment in the marketing activities in foreign market -> build marketing strategies and implement promotional activities in Lithuania; Not sustainable marketing and sales advantages > make marketing and sales activities in Lithuania rare and difficult to imitate; Sales managers are not speaking Lithuanian -> hire a Lithuanian sales agent; Naïve choice of entry mode -> implement strategies to measure the right solution for Lithuanian market.
WT UMPI with middle cultural, geographic and high psychic distance -> some local competitors with low distances; UMPI low establishment in the marketing activities in foreign market -> municipalities not obliged and not motivated to save energy; increased interest in Lithuanian market by UMPI competitors; UMPI is an Italian company -> negative Lithuanian stereotypes about Italians; Sales managers are not speaking Lithuanian -> bureaucracy.
After the TOWS analysis it is relevant to identify initiatives that would give the greatest benefit, and that would best achieve the mission and vision of UMPI. UMPI could promote Minos System as saving energy and maintenance costs, contributing to sustainable and intelligent lifestyle of the cities, as well increase its brand possibilities to enter the market using secondary associations of smart cities, advertising Minos System integrated solutions. It should hire Lithuanian sales agent to fight the threats of cultural barriers and to have a profound and up-to-date understanding about Lithuanian market. As well UMPI should be aware about the need of substantial level of marketing activities in order to enter the market as quick as possible, and being between the first to establish itself in Lithuanian market and thus have more possibilities to increase its market share compare to the current and potential competitors. Since the municipalities are not obliged to increase energy efficiency, it should be build a strategy to educate the customers and to motivate them by personal approach, since Lithuanians usually are individualistic people, thinking about themselves and their closest environment. Additionally, the marketing strategy has to consider the potential negative impact to UMPIâ&#x20AC;&#x2122;s reputation created by stereotypes about Italians.
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ENTERING STRATEGIES
Marketing Objectives UMPI cannot do all the possible activities at once which means that it is needed to select specific initiatives and convert them into relevant objectives and strategies. In order to design a marketing strategy leading to sales, right marketing objectives have to be set. The SMART model, proposed by Paul J. Meyer, is an appropriate method to define specific, measurable, achievable, relevant and timeable objectives. The table below shows the steps UMPI has to take for developing the main marketing objective.
SMART Model Specific
Explanation (Doran 1981) Specific goals tell a team exactly what is expected, why is it important, whoâ&#x20AC;&#x2122;s involved, where is it going to happen and which attributes are important.
UMPI Goal Enter Lithuanian market selling Minos System to national institutions and companies
Measurable
Measurable goals help a team stay on track, reach its target dates, and experience the exhilaration of achievement that spurs it on to continued effort required to reach the ultimate goal.
Turnover of 200 000 Euros
Achievable
Achievable goals develop the attitudes, abilities, skills, and financial capacity to reach them.
Relevant
Relevant goals (when met) drive the team, department, and organization forward. A goal that supports or is in alignment with other goals would be considered a relevant goal. Timeable goals help a team focus their efforts on completion of the goal on or before the due date.
In order to achieve the goal a Lithuania based sales representative / agent has to be hired and supported by area manager and technicians with their know-how, as well the financial investment has to be made for promotional activities. UMPI has a goal of expansion of its market coverage, thus entrance in Lithuania would be relevant when considering next steps of going in to other Baltic states, Russia and Nordic countries. 1 year from 3rd of June, 2013
Timeable
Main UMPI Marketing Objective in Lithuania
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Based on the SMART model it could be concluded that the main marketing objective of the first year is to enter Lithuanian market promoting and selling Minos System to national institutions and companies. The goal is to increase the brand and product knowledge and to agree for one or two projects that would at least cover the expenses, thus around 200 000 Euros.
Entry Mode Strategies Before deciding the entry mode strategy for Lithuanian market, it should be distinguished in which internationalization situation would currently be UMPI entering this market. It will be analysed the four cases of internationalization of a firm provided by Hollensen (2011) visualized in the appendix 7. Lithuanian market has a low level of internationalization, and UMPI could be considering as having low level of internalization, thus it would be in the early starter situation. As described by Hollensen, the early starter gradually and slowly enters the market using “an agent, leading to a sales subsidiary and then a manufacturing subsidiary”. This process he describes as creating “the basis for stronger commitments”. After the analysis of UMPI entry modes and the potential entry situation in Lithuania market, it is relevant to consider potential entry mode partners. Hollensen warns that the selection of a suitable intermediary can be a problematic process, thus he suggests asking potential customers to suggest a suitable agent, obtain recommendations from institutions such as trade associations, chambers of commerce and government trade departments, use commercial agencies, poach a competitor’s agent or advertise in suitable trade papers. According to the author, for selection of a particular intermediary the exporter needs to examine each candidate firm’s knowledge of the product and local markets, experience and expertise, required margins, credit ratings, customer care facilities and ability to promote the exporter’s products in an effective and attractive manner. As Hollensen recommends, chambers of commerce can suggest the potential agents, but as well they can play a stronger role in going into the foreign market. Usually the chambers of commerce are offering possibilities for benchmark of potential customers, organizing meetings between the supplier and buyers, contribute to promotional activities. Italian-Lithuanian Chamber of Commerce could propose UMPI opportunities to build brand knowledge and brand visibility through such channels as direct marketing and online marketing reaching Lithuanian business and especially government segment. As well UMPI would have the - 42 -
opportunity to borrow solid and reliable image of the chamber which could be an important factor fighting with the threat of stereotypes of “not reliable Italians”. In order to find the right way to enter the market it should be examined options of entry mode strategy. According to Hollensen (2011), foreign market based representative would be more customer committed than the domestic based sales representatives. The author warns that if the product that the company is producing is technical and complex the travelling salesperson is not an efficient entry method and a permanent foreign base is needed. Since UMPI is producing technical and complex products it should choose a foreign based sales representative option, thus UMPI could use direct export mode and hire the professional as a sales agent or use hierarchical mode and hire her as resident sales representative. Considering two the options, if to hire an external agent or internal, UMPI should take desired mode characteristic into account. Hollensen marks three characteristics: risk-averse, control and flexibility. The author reveals that direct exporting entails low levels of financial and management resource commitment, but he warns that “modes of entry that entail minimal levels of resource commitment and hence minimal risks are unlikely to foster the development of international operations and may result in significant loss of opportunity”. According to him, modes of entry with minimal resource commitment provide little or no control over the conditions under which the product or service is marketed abroad, when owned subsidiaries provide the most control, but also require a substantial commitment of resources. Hollensen marks that the hierarchical modes are typically the most costly and most difficult to change in the short run, and intermediate modes limit the firm’s ability to adapt or change strategy when market conditions are changing rapidly. A table with advantages and disadvantages of the modes is presented in the appendix 8. Although the hierarchical mode requires more financial and managerial resources invested, it is as well bringing to more sales per year as it is visible in the image in the appendix 9. Concluding it could be assumed that considering the UMPI’s financial resources the company could invest in long-term entry strategy in Lithuanian market. Thus it could hire the professional as internal representative in Lithuanian market with intention to develop its position to open in Lithuania regional headquarters for entry into the neighbour countries, such as other Baltic States, Nordic countries and Russia and with perspective of possible growth of the representative to the position of coordinator of the regional headquarters. In this way, UMPI would motivate the representative to perform on high level and concentrate just on UMPI without taking responsibilities for representation of other companies and as well would save costs, because Lithuania is advantageous for foreign investment, which could be particularly important for UMPI since it is headquartered in high-tax country.
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Marketing Mix After the analysis of UMPI internal capacities and Lithuanian market factors that the company would be influenced by, as well after setting the objectives and deciding the entry mode, the marketing strategies can be set. According to Hollensen (2011), marketing mix is “the heart of the marketing plan”. For analysing UMPI’s marketing mix it is chosen 4P’s - the product, place, price and promotion - since additional three P’s proposed by Booms and Bitner’s (1981) participants, physical evidence and process – are possible to incorporate inside of the original 4P’s. The table below illustrates UMPI marketing mix for the first year in Lithuania.
Marketing Mix
Activities for the 1st Year in Lithuania
Product
UMPI representative for Lithuanian market would be the direct transmitter of the company’s values, thus the product perception made by customers depends from the impression the representative of UMPI gives. After the first approach, the area manager and presales technical assistance would be involved in order to explain the technological, commercial and legal conditions of the deal. In case the customers can not be reached directly by the agent, the intermediaries, such as Italian-Lithuanian Chamber of Commerce etc. are involved. The main product is Minos System with its integrated options. The quality is assured by provision of UNI EN ISO 9001 Quality Management System certification, White Papers, awards, warranty of up to 10 years, training of local technicians, aftersales services.
Price
Price policy equal in all the markets
Place
Approach the customers in their offices or rent a meeting room in the short distance from the customer in representational area, invite potential customer to visit UMPI in Italy in the headquarters of UMPI Elettronica and UMPI R&D that are located next to the Adriatic sea, as well invite to the representative in Rome. First of all UMPI should become a member of Italian-Lithuanian Chamber of Commerce in order to gain visibility and credibility. Then the potential customers and partners should be contacted first by phone asking for permission to send the e-mail, and then if the customer is interested, send the e-mail and call again in few days asking for a meeting, always mentioning that UMPI is a member of ILCC, thus it is a reliable company, recommended by Italian-Lithuanian high level institution.
Promotion
As well UMPI should translate UMPI’s internet site and presentational material into Lithuanian language, be active in LinkedIN groups of Smart Cities, implement occasional publicities on media relevant to the target group, - 44 -
such as “Savivaldybiu naujienos” (Municipalities’ News), “Valstybe” (The State), “Verslo zinios” (Business News), “Delfi” etc, promote UMPI in the Association of Lithuanian Municipalities, meetings organized by institutions fostering Lithuanian business and trade, as well events connected with sustainability, technologies, innovation etc. Additionally, if UMPI partner Strabag will win the tender for modernizing the streets’ lighting of Vilnius, UMPI could agree with “Mados infekcija” (Fashion Infection) – international fashion show in Lithuanian capital, to organize a pilot project (“Smart Fashion Capital”) in the end of March 2014, connecting Vilnius with Milan not just through fashion but as well through smart technologies. UMPI in spring of 2013 Milan Fashion Show presented its pilot project in the main fashion area in Milan. There is already a link in fashion industry between Italy and Lithuania – one of the major countries wherefrom are hired female models for Italian fashion houses is Lithuania. Thus UMPI could partner Strabag, Lithuanian higher education institutions educating designers and engineers, as well national institutions and businesses, ItalianLithuanian Chamber of Commerce, Italian Consulates and Embassy, international fashion houses etc, in order to give to Vilnius a more international context, foster partnership idea, connect deeper Italy and Lithuania, fashion and innovation, as well raise knowledge about Smart Cities and build awareness about UMPI and Strabag. UMPI could use LinkedIN and Facebook creating groups and pages, as well bloggers for promoting the projects to a wide international audience. The project could be a promotional tool for other markets, implementing the idea each year in a different smart fashion capital. UMPI Marketing Mix for the first year in Lithuania
Concluding it should be marked that the marketing mix should be regarded as UMPI potential strategies according to which the plan for implementation and the budget should be set.
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SUB CONCLUSION – STRATEGIES
After the proposition of UMPI objectives, entry mode and marketing strategies, it could be concluded that the main marketing objective of UMPI’s in Lithuania could be considered the entry into the market promoting and selling Minos System to national institutions and companies with intention of coverage of the expenses without necessity of receiving profits within the first year. In order to meet the objectives entry mode and marketing strategies were set. UMPI should hire foreign based internal sales representative for Lithuanian market with perspective for farther moves in Lithuanian and neighbour countries’ market. Later on, the company could open regional headquarters in Lithuania in order to enter into other Baltic, Nordic countries and Russia. The sales representative would be supported by the company’s area manager and technical commerce office. She should collaborate with Italian-Lithuanian Chamber of Commerce (ILCC) and other institutions, companies and individual intermediaries when needed. It should be kept the same price policy as in other markets, and the main concentration should be made on sales and promotion of Minos System with integrated attributes. The customers should be assured by provision of UNI EN ISO 9001 Quality Management System certification, White Papers, awards, warranty of up to 10 years, training of local technicians and aftersales services. The customers should be approached in their offices or in rented meeting rooms in the short distance from them in representational areas, as well they could be invited to visit UMPI in Italy in the headquarters of UMPI Elettronica and UMPI R&D that are located next to the Adriatic sea, as well in to the representative offices in Rome. In order to gain credibility and fight the threat of negative stereotypes about Italians, UMPI should become ILCC member. As well UMPI’s internet site and presentational material should be translated into Lithuanian language. Additionally, the representative of UMPI should be active in relevant social and professional networks and media, events and meetings.
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MAIN CONCLUSION
In the first part of the report the analysis of UMPI’s internal and external factors relevant for answering if Lithuania is attractive for expansion of the brand was made. After the conclusion that the European directives and Lithuanian national strategies and the constant growth of Lithuanian GDP and EU funds are providing demand and financial resources for sustainable innovation, it could be assumed that there is a favourable market for smart cities’ lighting control industry. UMPI has high potential to enter Lithuanian market because of his core values of research and product development, but its overall marketing strategy for foreign markets should be reconsidered. In order to answer which strategies should be used by UMPI for entering Lithuanian market the objective was set. The main marketing objective is to enter into the market promoting and selling Minos System to national institutions and companies with intention of coverage of the expenses without necessity of receiving profits within the first year. In order to meet the objectives entry mode and marketing strategies were set. UMPI should hire foreign based internal sales representative who would be supported by the company’s area manager and technical commerce office. In order to gain credibility and fight the threat of negative stereotypes about Italians, UMPI should become Italian-Lithuanian Chamber of Commerce member. As well UMPI’s internet site and presentational material should be translated into Lithuanian language. Additionally, the representative of UMPI should be active in relevant social and professional networks and media, events and meetings. Concluding it should be marked that the report should serve the company as a tool according to which the plan for implementation and the budget should be set.
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REFLECTIONS
After the report is written I should reflect on it through the prism of my 2 years at TEKO, because it is my final work at this educational institution, and evaluate it upon the criteria of the knowledge I acquired. I assume that there is always potential to write better, and I hope to develop myself to a valuable marketing specialist. But regarding at the report as to the final product of AP Degree studies, I believe it is a strong work. If I could proceed with the report I would put more power in acquiring primary data about the potential customers, as well would scan deeper and broader the competitors and would regard also the potential competitors that are not yet in the market. Additionally I would probably develop the problem formulation and would propose the strategiesâ&#x20AC;&#x2122; implementation plan. Regarding the process, I should say that the beginning was difficult until I visited the company. After the visit, presentations and talking to the employees I got a deeper understanding and a higher degree on interest in the industry. As well after receiving a highly professional consultancy from my tutor J. Pettersson who provided me with a detailed and precise approach to the report content, I had a clear idea how to proceed with my report. From the 3rd of June I will start to scout Lithuanian market for UMPI, and I am very enthusiastic from the analysis made. I assume that the beginning can be hard, especially finding the right connections for reaching the potential customers and key decision makers. Until the exam I hope to have some deeper knowledge about the market and be able to present some new findings. Especially, I would like to deepen the customer knowledge, thus I could be able to correct and develop the objectives and strategies I suggested in the report.
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Porter, M. E. (1998). Competitive Strategy: Techniques for Analysing Industries and Competitors. 2nd Edition. The Free Press. Peng, M. W. (2009). Global Strategy. 1st Edition. Cengage Learning. Robbins, S. P. and Judge, T. A. (2012). Organizational Behavior. 15th Edition. Prentice Hall.
Articles Barney, J.B. (1991). “Firm Resources and Sustained Competitive Advantage”. Journal of Management, v. 1, no. 19, pp. 99-120. Borker, D. R. (2012). “Accounting, Culture and Emerging Economies: IFRS in Central and Eastern Europe”. International Business & Economics Research Journal, v. 11, no. 9, pp. 1003-1018. Johanson, J. and Vahlne, J.E. (1977). The Internationalization Process of the Firm – a Model of Knowledge Development and Increasing Foreign Market Commitments. Journal of International Business Studies, v. 1, no. 8, pp. 23-32. Gray, S. J. (1988). Towards a Theory of Cultural Influence on the Development of Accounting Systems Internationally. Abacus, v. 1, no. 24, pp. 9-12. Prahalad, C.K. and Hamel, G. (1990). “The Core Competence of the Corporation”. Harvard Business Review, v. 68, no. 3, pp. 79–91. Doran, G. T. (1981). “There's a S.M.A.R.T. way to write management's goals and objectives”. Management Review, v. 70, no. 11, pp. 35–36.
Web Sources Energy Sector, 2012, Energy Efficiency Directive, European Commission. Available from: <http://ec.europa.eu/energy/efficiency/eed/eed_en.htm> [25 October 2012]. Lithuania Is Not Using Possibilities to Increase Energy Consumption Efficiency, 2011. Available from: <http://www.vkontrole.lt/pranesimas_spaudai.aspx?id=16682>. [2 August 2011]. Vilnius Is Going to Renovate its Streets’ Lighting Net, 2012. Available from: <http://www.vilnius.lt/index.php?1512345629 >. [15 June 2012].
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Efficiency â&#x20AC;&#x201C; 6 Milliard Value Ambition, 2013. Available from: <http://vz.lt/article/2013/2/17/efektyvumas-6-milijardu-vertes-ambicija>. [17 February 2013]. CEEP Signs Vilnius Memorandum on Strengthening of Energy Independence, 2013. Available from: <http://www.lithuaniatribune.com/37043/ceep-signs-vilnius-memorandum-onstrengthening-of-energy-independence-201337043/>. [11 May 2013]. The Long LSDPâ&#x20AC;&#x2122;s Election Program, 2012. Available from: <http://www.lsdp.lt/lt/straipsniai/273lsdp-ilgoji-rinkimu-programa.html>. [25 August 2012]. The Government Proposes More Effective Public Procurement Law, 2013. Available from: <http://www.lsdp.lt/lt/naujienos/3928-vyriausybe-siulo-efektyvesne-viesuju-pirkimutvarka.html>. [30 April 2013]. Constitution of Lithuanian Republic, 1992. Available from: <http://www3.lrs.lt/home/Konstitucija/Konstitucija.htm>. [25 October 1992]. Sodonis, 2013, Different Life Quality in Municipalities. Available from: <http://www.silokarcema.lt/index?article=18058/17630/31256>. [15 February 2013]. Swedbank: Global Economic Environment Is More Stable, Lithuanian Growth Will Remain Rapid, 2013. Available from: < http://www.swedbank.lt/lt/articles/view/1734>. [16 January 2013]. Swedbank Economic Outlook 2013, Overview of Lithuanian Economy, Swedbank. Available from: <http://www.swedbank.lt >. [10 April 2013]. Lithuanian Economy Development and Perspectives, 2013. Available from: <http://www.lb.lt/makroekonomines_prognozes>. [10 April 2013]. Indexmundi, n.d., GDP per Capita. Available from: <http://www.indexmundi.com/g/g.aspx?c=lh&v=67>. [29 May 2013]. Altman, 2013, Introducing the Baseline Profitability Index. Available from: <http://www.foreignpolicy.com/articles/2013/05/06/investing_overseas_baseline_profitability _index>. [6 May 2013]. Population by Educational Attainment and Languages Proficiency, 2013. Available from: <http://osp.stat.gov.lt/pranesimai-spaudai?articleId=292298>. [29 March 2013]. The 2nd Audit Department, 2011, State Audit Report: Electricity Energetic Sector Reorganization, Lithuanian Republic State Control. Available from: <http://www.vkontrole.lt>. [7 November 2011].
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SGA, 2009, History. Available from: <http://www.sga.lt/index.php/lt/istorija>. [30 July 2009]. Commission Approved Minimal Requirements for Electricity Energy Transmission Servicesâ&#x20AC;&#x2122; Reliability, n.d. Available from: <http://www.regula.lt/lt/naujienos/index.php?full=yes&id=5807>. [29 May 2013]. Net Index, 2013. Available from: http://www.netindex.com/quality/2,77/Lithuania/. [28 May 2013]. Lithuanian Information Society Development Committee, 2013, Mobile Internet is Used by Quarter of Population, Ministry of Transport and Communications (ISDC). Available from: <http://www.ivpk.lt/news/1835/61/Mobiliuoju-internetu-naudojasi-ketvirtadalis-Lietuvosgyventoju>. [16 January 2013]. Lithuanian Information Society Development Committee, 2013, 75% of Lithuanian Population Is Using Computers and 73% - Internet, Ministry of Transport and Communications (ISDC). Available from: <http://www.ivpk.lt/news/1861/61/75-proc-Lietuvos-gyventoju-naudojasikompiuteriais-ir-73-proc---internetu>. [29 April 2013]. Ikamas, 2013, What Is Concealed When Publishing Mobile Connection Maps. Available from: <http://mokslas.delfi.lt/archive/kas-nutylima-skelbiant-mobiliojo-rysiozemelapius.d?id=61292283>. [2 May 2013]. Navigant Consulting, 2013, Executive Summary: Smart Cities. Available from: <http://www.navigantresearch.com>. [1Q 2013]. McKinsey and Co, 2012, Lighting the Way: Perspectives on the Global Lighting Market. Available from: <http://www.2012.smartlighting.org/pdf/MCKINSEY_LIGHTING_THE_WAY_AHEAD.pdf>. [29 May 2013]. National Statistic Department of Lithuania, 2013, Municipalitiesâ&#x20AC;&#x2122; Budget Revenues. Available from: <http://db1.stat.gov.lt/statbank/SelectVarVal/Define.asp?Maintable=M2040204&PLanguage=0 >. [29 May 2013]. Biggest Armies of Top Officers in the Poorest Municipalities, 2013. Available from: <http://www.veidas.lt/skurdziausiose-savivaldybese-gausiausia-aukstosios-valdininkijos-armija >. [21 January 2013]. GDP by Districts in 2011, 2012. Available from: <http://www.spekuliantai.lt/straipsniai/apzvalgos/kitos/straipsnis/22602/bendrasis-vidausproduktas-pagal-apskritis-2011-m >. [21 November 2012].
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After Modernization of Lighting Control Points Yearly Savings Will Be More than 1 Million Litas, 2013. Available from: < http://www.alfa.lt/straipsnis/15074404/>. [9 January 2013]. Kaunas City Municipality, n.d. Available from: <http://www.krea.lt>. [29 May 2013]. It Is Wished to Illuminate Palanga’s Beaches with Hybrid Lighting Plants, 2013. Available from: <http://www.alfa.lt/straipsnis/15133262/Palangos.papludimius.norima.apsviesti.hibridiniais.zib intais=2013-04-24_10-46/> . [24 April 2013]. Lithuanian Energy, n.d., Information about the Company. Available from: <http://www.le.lt/lt/investuotojams/informacija-apie-bendrove/>. [29 May 2013]. LESTO, n.d., About the Company. Available from: < http://www.lesto.lt >. [29 May 2013]. Siauliai Streets’ Lighting, 2009, About the Company. Available from: <http://www.sga.lt>. [31 July 2009]. Lithuanian Rails, 2012, About Company. Available from: <http://litrail.lt>. [16 March 2012]. Design of Rails, n.d. About the Company. Available from: <http://www.gelpro.lt/apieimone.html>. [29 May 2013]. Freight Transportation Management, 2013, Kaunas Public Logistic Centre Intermodal Terminal Preparation Works Are Starting. Available from: <http://www.litrail.lt/wps/portal/!ut/p/c1/04_SB8K8xLLM9MSSzPy8xBz9CP0os3h3C2N_VzcPIw MDH3NHAyNTU69gPyd_Q->. [23 May 2013]. Fegda, n.d., About Us. Available from: <http://www.fegda.lt/lt/apie_mus/>. [29 May 2013]. IRTC, n.d., About Us. Available from: <http://www.irtc.lt/apie-mus/>. [29 May 2013]. Schneider Electric, n.d., About Us. Available from: <http://www.schneiderelectric.lt/sites/lithuania/lt/products-services/products-services.page>. [29 May 2013]. UMPI, n.d. About Us. Available from: < http://www.umpi.it>. [29 May 2013].
Internal UMPI Documents UMPI, (2013), Operative Organization Chart. UMPI, (2010, 2011), UMPI Elettronica Balance Sheets.
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APPENDICES
Appendix 1 UMPI Mission (Bruni 2012): • • •
“Provide intelligent systems for the remote management of external lighting, both public and private, with the aim of energy saving, respect of the environment, safety and lighting quality, cost optimization. Provide Building Automation integrated systems for building safety, control and energy saving. Support and assist our customers and partners with our experience and know how in developing technological solutions of public utility.”
UMPI’s main product Minos System (Bruni 2012): • • • • •
“The most advanced system for the remote management of public lighting. The solution which allows to optimize the costs of one of the most important item of the public administration balance sheet. It diagnoses and controls the single lighting point allowing the remote management. Remote control on all components of each lighting point both on existing and new installations. Transform the lamppost and the lighting network in a smart infrastructure able to integrate and control further services for the public utility and safety.”
Minos System is a powerline technology enhancing the lighting plants and “providing an added value” by transforming them into “low cost urban communication network” providing these services: • • •
Public utility services (lighting signposts, dynamic road signs, remote reading of meters); Environmental services (analysis of noise pollution, PM10, weather); Security services (video surveillance, health emergency, security emergency).
The system allows energy savings up to 45% and maintenance savings up to 40%. As well UMPI offers complementation of basic options of Minos System with other options that provide: detailed and timely analysis of territory’s meteorological and hydrogeological conditions, - 54 -
advertising, electric vehicle charging, pollution monitoring, traffic flow and parking, smart traffic light and emergency call management.
UMPI Brand Structure (UMPI n.d.): • • • •
UMPI Elettronica - specialized in realizing projects and providing smart solutions, based on the Powerline digital transmission, for the remote management/control both of public lighting installations and private/public buildings. UMPI R&D – focused on innovation, research, development of new solutions in order to anticipate the market needs. Adria Energy – provides ESCO “White Certificates”: instruments that guarantee that a certain amount of Energy Saving has been achieved. Biometrika - Specialised in security system based on finger print recognition: logical and physical access control.
UMPI Organization Chart
Organization Chart of UMPI Group (UMPI 2013).
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Appendix 2
Support Activities
Primary Activities
Firm Infrastructure Strategic planning; Management; Accounting. Human Resource Management Recruiting; Training Technology Development Research and development; Technical consultancy. Procurement Purchasing of raw materials, machines.
UMPIâ&#x20AC;&#x2122;s Value Chain using Michael Porterâ&#x20AC;&#x2122;s Value Chain Framework
Appendix 3
The VRIO Framework (Barney 2006).
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M A R G I N E
Appendix 4
GDP Growth in 2012 (International Monetary Fund, Goldman Sachs Global ECS Research 2013).
Appendix 5
Lithuanian GDP per capita growth in 2007-2011 (Indexmundi n.d.).
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Appendix 6
Electricity Quality in Europe and Lithuania (Commission Approved n.d)
Appendix 7
Four Cases of Internalization of a Firm (Hollensen 2012)
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Appendix 8
Advantages and Disadvantages of Direct Exporting Mode and Hierarchical Entry Modes (Hollensen 2012)
Appendix 9
Break-Even Shifting from Agent to Sales Subsidiary (Hollensen 2012)
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