TU Berlin Internationalization Handout 120112 · PDF fileSafety technology is required in pl...

BARTECBARTEC

INTERNATIONALIZATION OF A HIDDEN CHAMPION

Reflections on the BARTEC Case

Dr. Ralf KösterCEO BARTEC GroupJanuary 16th 2012, TU Berlin

Agenda

I I t d i th BARTEC G

From Hidden Champion to Global MasterFrom Hidden Champion to Global Master

I. Introducing the BARTEC Group

II. Reasons for Internationalizing Why?g

III. Organizing for Internationalization

y

What?

IV. Managing Internationalization How?

V. Conclusion

2January 16th 2012, TU Berlin

BARTEC at a Glance

BARTEC –Worldwide leading in Safety Technology for hazardous areasEmployees………………... 1.500

Sales (Business Year 2010/11) …… 237,7 Mio. EUR


BARTEC´s Mission Statement

BARTEC is the leading, global provider of high-quality, industrialsafety technology for use in explosive hazardous areas and related areas

regulated through directives, standards and certification procedures.


BARTEC´s Core Competencies & Unique Position

Concentration on Ex-Market:High levels of applied technical knowledge/experience

Global competencies in norms/international certification proceduresNo comparable product portfolio (worldwide coverage) among competitors

SystemsComponents/Products Engineered Solutions

... SystemsComponents/Products Engineered Solutions

Pioneer: From component manufacturer to provider of complete systems and engineered solutions in close cooperation with customers & certifying bodies.


BARTEC´s End Markets

Equipment manufacturing (OEM) Chemical industryOil & Gas

Safety technology is required in plants where flammable substances in the form of oil, gas or dust may create explosive atmospheres:

Equipment manufacturing (OEM) Chemical industryOil & Gas

OEM/Gas pump Pharmaceutical industryOil & Gas/Refineries

(as % of sales)

Mining Aviation Power plants/renewable energy

OEM/Petro logisticOil & Gas/Off shore


Customer Groups

Within our markets, we have strong and stable relationships with a well diversified and prestigious customer base.

End Users (Plant Operators)( p )

Engineering ProcurementEngineering, Procurement,Construction Companies

Original Equipment Manufacturers(Machines, Systems, Instruments)


BARTEC Safety Technology

BARTEC operates four highly synergistic business units, leveraging the core competencies and sharing common technologies.

Control & Connection Equipment Measurement Systems

Analyzer and Measurement Systems

Electric HeatingTechnology MiningExplosion

Protection

Automation Technology

Measurement Systems

Automation Technology

Process Analyzers

Communication & Security Systems

Share ofS l


Sales:(BY 2010/11)

Integrated Solutions for Oil and Gas Industries (Example)

BARTEC supplies essential safety technology solutions for the complete oil value chain!

Oilvalue

RefineriesDrilling / Off-shore Tank farm Logistic / fuel station

value chain

Control stations Analyzers,control stations

Heating technology,mobile computers

Visualisation, measurement technology

BARTECkey

productsproducts


Integrated Solutions for Natural Gas Industry (Example)

BARTEC supplies essential safety technology solutions for natural gas distribution chain!

Exploration / liquefaction Transportation / storage / gasification Distribution / gas fuel station

C t l t ti i ti & h ti t h l A l & t tControl stations, communication & heating technology Analyzers & measurement systems


BARTEC´s Innovation Capability

Proven German EngineeringProven German Engineering

Prix „Les Léonards“ 2005Regula Award 2006expo petrotrans

Innovation Award 2008

AUTOMATION AWARD 2007(SPS/IPC/DRIVES)

Sensor Innovation Award 2006

TOP 10 AUTOMATION AWARD 2011(SPS/IPC/DRIVES)

(SPS/IPC/DRIVES)

R&D Operations100 BARTECians working in Research & Development, approx.210 patents & 10 registered designs in hand; 6 in progressAwarded TOP100 Innovator of German medium sized companies


BARTEC´s Innovation Capability (Examples)

Ex mobile phonePEGASUS

Ex mobile computerMC

BUS SystemANTARES plus

Quad Band GSM module

Online Tracking System

Co-operation with Motorola (worldwide exclusivity for all products)

Innovative automation technology for hazardous areas

Man down function (motion sensor)

High battery capacity

Barcode-scanning & RFID

User friendly touch screen

Strong power supply

PROFINET, MODBUS TCP and Ethernet IP protocolsg y p y

ATEX, IECEx, UL certificates

y

Real-time-data exchangethrough WLAN

p

User-friendly system configuration


Launch: Q3 2010 Launch: Q4 2010 Launch: Q3 2011

BARTEC´s Locations

Ten production sites (incl. the headquarter in Bad Mergentheim) design and manufacture components, systems and solutions for safety technology:

Menden (GER)Reinbek (GER) Nottingham (UK)

Gotteszell (GER)Bad Mergentheim (GER)

Shanghai (CHN)


Zagorje (SVN) Sainte-Croix (SUI)Saudasjoen (NO)Shanxi (CHN)

International Sales Organization

BARTEC´s strong global sales network with 28 own sales units and more than 50 representatives guarantees an outstanding dynamic growth:

BARTEC Subsidiaries(>95% of sales)Representatives


ep ese tat es

International Sales Organization

The international, market-driven technologygroup with more than 250 highly experienced sales engineers

Germany Austria

Switzerland

WesternEurope& Africa

ScandinaviaEastern

Europe & Russia/CIS

Asia Pacific China Middle East & India

North & South America

S1 S2 S3 S4 S5 S6 S7 S8

8 Regional Manager System (VP’s sales), responsibility per region/per country>> More than 95% of BARTEC Sales are generated through our own Sales Subsidiaries<<


New Markets: New Regions & New Customers

Strong commitments to New Markets complement our Innovation Strategy and our Buy & Build Strategy.gy y gy

New Markets

New Customers & New & Emerging MarketsApplications

New & Emerging MarketsBrazilTurkeyTurkeyIndiaMiddle EastMiddle EastChina


…

New Markets: New Customers & Applications

BARTEC is ready to serve tomorrow‘s markets!

Bio-Fuels Hydrogen Technology

Coal-to-Liquid Solar Energyq gySelected Future

Customers & A li ti

Gas-to-LiquidDeep Sea Explorations

Applications

Green Chemistry Arctic Sea Applications


Applications

New Customers & Applications: Biofuels (Example)


Biofuels have up to 90% Greenhouse savings over Fossil FuelsSecond Generation Biofuels are produced from non food feedstocks


Second Generation Biofuels are produced from non-food feedstocks

New Customers & Applications: Biofuels (Example)


Major Players are boosting their biofuel production:

Example: Kerosene Mix


BARTEC – The Hidden Champion


Hidden Champions

Hermann Simon’s researchHidden Champions are companies largely unknown from theHidden Champions are companies largely unknown from the public, but being world market leaders in their business segmentFirst publication on Hidden Champions in 1996First publication on Hidden Champions in 1996Current bestseller: “Hidden champions of the 21st century –success strategies of unknown world market leaders“

Criteria for a Hidden ChampionNo 1 2 or 3 on the world market or no 1 on its continentNo. 1, 2 or 3 on the world market or no. 1 on its continentRevenue < $4 billion (<EUR 3 billion)Low level of public awareness


(Simon 2009)

BARTEC – The Hidden Champion

BARTEC is the European leader for„BARTEC is the European leader for explosion protection equipment. BARTEC has more than quintupled its revenues since 1995. Ten yearsits revenues since 1995. Ten years ago, BARTEC had 450 employees; today this figure exceeds 1,300…“


(Simon 2009)

Strengths of a Hidden Champions

External chances

Close market focus

Internal competencies

ClearStrong

leadershipGl b lGl b l Clear

com-petitionadvan-tages

The core

Ambitious targets

Global Global orientation orientation

Selected and motivated

employees

Customer proximity


(Simon 2009)

Agenda


From Hidden Champion to Global Master




y

What?


V. Conclusion


Why Internationalization?

Here are some common slogans!Attention! Choice, not destiny!

„We have to internationalize or die“ „Expand or expire“

Attention! Choice, not destiny! Survival is more than expansion;

many counter-examples…

Att ti ! I t ti li ti b t li „Our strategy is to internationalize“

Bi i b tt “

Attention! Internationalization can be a means to realize a strategy, but it can hardly be an objective itself (unless you

need an excuse for a costly investment)…

Attention! Benefits of scale will not turn up automatically! Growth is not a driver „Bigger is better“

„It‘s now or never“

p yas such, but the result of doing something right.

Attention! Urgency may mobilize attention, but it also distracts from the „real“ questions: Is this the right time? Am I in the right position?

C I I i li i ?„It s now or never

„Few interesting targets left“

Can I manage Internationalization?

Attention! Don‘t do a dumb deal! Acquisitions should not be determined by the number of targets left, but by business logic.

„Eat or be eaten“ Attention! „Eating“ should not depend on a perceived threat, but on business logic (such as the goal to defend your

position) Also think of alternatives (alliances etc)!


(Verdin & Van Heck 2001)position). Also, think of alternatives (alliances etc)!


„Our competitors are already doing it“Be aware! Your competitor might have a company specific

internationalization driver! Think focus, not fashion!

„Foreign competitors entering home market“Fix the problems in your own back yard first! „Eye

for an eye“ is seldom a good strategy.

Ask more questions! Make sure it‘s not an excuse for not „Home market saturated/too small“

W j t f ll i li t “

Ask more questions! Make sure it s not an excuse for not becoming more competitive or innovative at home!

Don‘t follow your clients blindly! Understand their reasoning and find „We are just following clients“

„Be where the market is“

Don t follow your clients blindly! Understand their reasoning and find out what is in it for you!

Planting your company‘s flag in all geographies is nice. But does it add value for you? What does it bring extra? Presence is no guarantee for success.„Be where the market is

„Depending on home market alone is too risky“

g g

Hedging risks requires more than just geographic diversification. Attention! As research shows, internationalization may even increase your risk profile!


(Verdin & Van Heck 2001)


But:

Despite some truth in the slogans‘ reasoning, NEVER internationalize on the basis of a generalizing motto!g g

As Internationalization is not an end in itself, look at the ,real issues and challenges!

Understand Internationalization as a possible instrument to implement your

’company’s goals!(Verdin & Van Heck 2001)



The Case (societal/environmental goal):

BARTEC protects people and the BARTEC protects people and the environment through the safety of environment through the safety of components, systems and plants.components, systems and plants.p , y pp , y p

For us, Internationalization is an essential instrument to achieve this goal Protecting people and thethis goal. Protecting people and theenvironment is a worldwide task!



The Case (economic/business goal):

BARTEC creates value for its stakeholders.BARTEC creates value for its stakeholders.

In times of high competition and keeping in mind the fact that CAPVIS, a private equity fund,

8 % f BARTEC hiowns 85% of BARTEC, this means continuous improvement of

RevenueEBITDA yieldCash yield Now FutureCash yield

For us, Internationalization is an instrument to reach these l !

Now Future


goals!


The Case Summary: Internationalization is an instrument to implement the firm’s strategy, not an end in itself!

Market Strategy

Growing Markets

Acquisition StrategyProduct Strategy

R&D PipelineChinaMiddle EastIndiaCIS-States

Sales Structures

international Buy & BuildStrategyDe-Invest Strategy

R&D PipelineProduct launchesLocal-ContentBusiness Unit Electric HeatingBusiness Segment BCSS (VODEC)Sales Structures

WholesaleKey-Account-Management

(VODEC)Business Segment CCE (Ex)

BARTEC G th St t


Growth Strategy


The Case: Assessing the cost aspect of product relocation

Cost Advantages of Product Relocation:Cost Advantages of Product Relocation:

Lower production costs (mostly due to lower wages)L l C t t (P d t) P ibilit

COst Advantages

globali ation

Local Content (Product): Possibility to enter “new” markets at the lower range of product pricingBetter margins due to higher volume

globalization limits Local Content (Sourcing)

…

Limits / Risks:

Lower productivityInefficient material quotaqQuality problemsLonger delivery timesDanger of “Copy Cats”


Increasing Complexity (e.g. logistics)…


The Case: Assessment of relocation advantages & risks

BARTECBARTEC Relocation ConceptMaximizing Advantages Minimizing Risks

Criteria CriteriaTarget Prod ct

Low marginHi h ( i )

o

Criteria

Market Analysis

s

Criteria

Example: Limit Switch

Target Product

High (price) competitionLabor intensiveLittle automationP

ortfo

li Total market volumeExpected market growth M

arke

ts

High standardizationHigh volumeDocumentation od

uct P Current BARTEC

salesCompetitorsBARTEC lo

bal M

Example: China

Target Market

availableEasy, stable processesLocal markets

Pro Strengths

BARTEC weaknessesChance / Potential

G

p


available for BARTEC


The Case: Defining Regions (Market Analysis)

E

… in these Regions! … in these Regions! Chi Middl E t I di CIS R iChi Middl E t I di CIS R i

Mitt 2008

Ex China, Middle East, India, CIS, RussiaChina, Middle East, India, CIS, Russia

Ex

Mitte 2008

Anfang 2009Anfang 2010

Ex

Economic recovery? Economic recovery? Yes! But…Yes! But…


(ZVEI, DB Research)


The Case: Relocation Concept Target Product

Identified target products & targets markets must fit to each other!

Example: Limit Switch

You can lever your internationalization success by respecting the fact that local

t t h t di i !content has two dimensions!

Local Products AND Local SourcingLocal Products AND Local SourcingTarget Market gg

Example: as a supplier also produces in China Direct delivery to

Example: China

g

produces in China. Direct delivery to BARTEC China (instead via Germany) cuts costs by 20% (customs & logistics savings) Immediate Effect!


savings). Immediate Effect!


The Case: Defining Markets (Example: India)

Market Volume (2009): xxx Mio EURMarket Volume (2009): xxx Mio. EURMarkt Growth: xxx%

xxx

Start up since 2009

xxxk €


Sales2005/06

Sales2006/07

Sales2007/08

Start-up2008/09

Sales2009/10

Goal 2012/13


Goal Resulting from Market Analysis: M ki BARTEC I di E i i it f th h l ( ll B i U it )

The Case: Defining Markets (Example: India)

Making BARTEC India an Engineering site for the whole group (all Business Units)and extending the local Sales Network.

Team with high expertise Team with high expertise Team with high expertise Team with high expertise and project management and project management knowknow--howhow

Create complete packages Create complete packages and solutions within projectsand solutions within projects

Sales Unit / Office

Ser ice

Technical Support for the Technical Support for the BARTEC Group: Engineering, BARTEC Group: Engineering, Documentation, Drawings etc.Documentation, Drawings etc.

Service

Sales Unit/Branch (new/plan)

Sales Partner (new/plan)



The Case Summary: As new markets evolve and regions of economic growth shift, internationalization for BARTEC is an instrument to implement its growth strategy.

China Middle East India Russia/CISChina Middle East India Russia/CISNew BranchesLocal Production

Extendes Sales Network

New Branches

Portfolio adaptionNew Branches

BARTEC RUSNew Sales

Structure


… New Branches…

… Structure…

Strength in Emerging Markets

Asia / India /

Asia / Pacific India /

Middle East

Eastern Europe

Americas

Asia / Pacific

India / Middle East

WesternAmericas

Western Europe

Europe Western Europe

Eastern Europe

Pastxxx Mio. EUR

Presentxxx Mio. EUR

Germany / Austria /

S it l dGermany / Austria /

BARTEC´s business is increasingly driven by sales outside Western Europe

Switzerland Austria / Switzerland

BARTEC s business is increasingly driven by sales outside Western Europe, mainly in Asia (incl. China, India) and Eastern Europe (incl. Russia).Including indirect exports, >60% of all BARTEC products go into operation in emerging markets/regions.


g g g


The Case: Deepwater Horizon Accident (Gulf of Mexico)

Impact on BARTEC´s business:

Sh t t (2010) b l t tShort-term (2010) - absolute stop:for new projectsthe construction of offshore platformsthe demand for equipment

Mid and long-term consequences:more safety regulation deriving from the accidentmore redundancy of equipment more frequent servicing andq gmore replacement of equipment

H f t t ti l f f t t h l !


Huge future potential for safety technology !


The Case: VODEC Acquisition (Buy & Build Example)


Strengthening BARTEC’s position in international up-stream sectors


The Case Summary: Economic growth does not take place homogenously across the world. It differs by regions (e.g. growth in China, Middle East India Russia/CIS) and it is impacted by (regional) exogenousMiddle East, India, Russia/CIS) and it is impacted by (regional) exogenous shocks, e.g. Deepwater Horizon Accident.

Region 1For companies that want continuous

growth, internationalization is an instrument to buffer regional growth cycles and shocks.

Region 2


„Shock“


Punch line:

Internationalization is a fact of life, but it is not unconditionalis not unconditional.

Focus on how internationalization really adds value to yYOUR company!

What does Internationali ation mean for YOU and YOURWhat does Internationalization mean for YOU and YOURcompany? What is YOUR conclusion?

Identify the specific benefits you are trying to achieve!



Agenda






y

What?


V. Conclusion


Organizing for Internationalization

What is the most appropriate organizational set-up so that the potential benefits of internationalization are turned p

into reality?




Should your firm be organized according to Should your firm be organized according to geographic region product line or function?geographic region product line or function?geographic region, product line, or function?geographic region, product line, or function?

The organizational structure should relate to theThe organizational structure should relate to the benefit you are currently seeking in your international strategy (cost, network, learning)!

Like “Internationalization”, “Organizational design” is an instrument to achieve higher level

lgoals.

> Structure follows Strategy <> Structure follows Strategy <gygyProductionR&D


(Chandler 1984; Verdin & Van Heck 2001)


The Case: Implementing a new organizational structure (2009)BARTEC Group

G l T t d k t bl Change is the only constant in

CEO

Goal: Transparent and marketable organizational structure, which is suitable

for integrating acquisitions.

Change is the only constant in organization. Be ready to re-

organize yourself!

CMO COOCFO

Finance and Controlling / IT Corporate Functions

Business Units ProductionSales & Marketing

Sales Regions Explosion Protection China, Slovenia

… … …

Focus:Orientation towards applications &

Focus:Adapt to specific requirements of local

Focus:Global production (Feeder) according to


solutions; synergies; cost benefits.clients; “produce global, sell local” relative advantages; cost benefits.


The Case: A strong local orientation despite global activities

BARTECSales Organisation

(Regional Responsibility, Country, Region)(Regional Responsibility, Country, Region)

Germany, Austria,

Switzerland

Western Europe and

AfricaScandinavia

Eastern Europe &

Africa

Asia-Pacific, Australie and New Zealand

China India & Middle East

North and South America

S1 S2 S3 S4 S5 S6 S7 S8

Key Account Management (see KAM-Concept)

C C


CRM Communication Tool, Project Data Base, Documentation, …


How should you enter a foreign market? How should you enter a foreign market? What is your vehicle?What is your vehicle?

Entry ModesExportWhat is your vehicle?What is your vehicle?

Different entry modes offer different potential

ExportLicensing/Franchising

Different entry modes offer different potential with regard to the different types of benefit. ENSURE A FIT!

Foreign direct investmentCross border

Modes are not strategies. They‘re instrumentsthrough which strategies are realized!

Cross-border M&AJoint Venture

As benefits may shift over time,

> ADJUST your entry mode! <> ADJUST your entry mode! <




The Case: Smartly using underestimated entry modes

Choosing an appropriate legal/organizational entry mode is useless if you have no “real” market access.

> Access to the relevant people is important! <> Access to the relevant people is important! <

For example, the Ghorfa Arab-German p ,Chamber of Commerce and Industry e.V.is THE door opener to the Middle East.

Dr. Ralf Köster, Member of the Board of Directors (Ghorfa)



Punch line:

The pros and cons of the different target markets, entry modes, and organizational charts should be considered in terms of the specific benefits that you are after in your particular situation!

Don’t forget the informal entry modes!



Agenda






y

What?


V. Conclusion


Managing Internationalization

Internal barriers related to People (examples):If we follow your

The others won‘t accept it.

yproposal, it will be your responsibility!It is obvious that the person

with this great idea is not a practitioner!

We don‘t have the staff.

We don‘t have the necessary knowledge &

f iliti

It will be too difficult!

It cannot be sold.

We will make a fool of ourselves.It is against my

experiences.

facilities.

I don‘t understand why we are the ones to take on

international experiments.

p

We are too busy! We have

tried it before

In principle you are right, but…Let us form a

iLet us sleep in

i !

tried it before.



g ,committee.on it!


Overcoming the barriers (examples):

Top commitment If you want to motivate the people who implement inter-nationalization in the field, top management must stand up!

Shared rationale Allow people to see and agree on the benefits of internationalization. This requires leadership!

Involvement Make people feel that the strategy-making process is open, consistent, fair, sensitive to obstacles, and allows for their

International

input.

There are few substitutes for life experience! Go forMindset

There are few substitutes for life experience! Go for international training, management exchange, rotation program, etc.




Overcoming the barriers: The Case

BARTEC Leadership Training

Leadership Training for BARTEC managers, because securing the benefits inherent in internationalization & diversity require both management and leadershipmanagement and leadership.

Identification and active communication of the “Winners”BARTEC Competitive Environment

Identification and active communication of the Winners , “Loosers”, and the “Rising Star” of the year. For successful drivers of internationalization, this is an intrinsic reward. For opponents, hi i (fi d l ) i 1stthis is a (first and only) warning. 1




BARTEC Communication

Communication is a corporate function that reports directly to the CEO. The company’s magazine EXakt regularly picks up the topic of internationalization.

BARTEC mindsetSetting up of “Mind Change”, a BARTECprogram to integrate all individual actors i t ld id BARTEC f ilinto a worldwide BARTEC family.

BARTEC Job RotationJob Rotation for employees: Learning from the different environments and building up informal communication channels.




BARTEC MeetingsAnnual management/sales meetings: Allowing face-to-face communication between all BARTEC subsidiaries and

ti l


promoting common goals.

Agenda






y

What?


V. Conclusion


Conclusion

Unfortunately, there is no blueprint for successful internationalization.

In answering the question “Why?”, managers must focus on the benefits THEY want to achieve for THEIR organizations.

Finding answers to the questions “What?” and “How?” ill th h l t h th i t t lwill then help managers to choose the appropriate tools

for levering the potential benefits of internationalization.


BARTEC. International. Innovative. Powerful.

Thank you very much for your attention!


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