YARA cases .pdf

Case in: EXC 3602 International marketing(Process evaluation: 80% part of EXC 3602) Posted date: 17.02.2015, kl 00:00 Due date: three days before the case presentation, at noon. Total number of pages: 47 pages Case 1: Aurora Light facing their first export venture side 2 Case 2: Yara International side 11 Case 3: Ronstan sailing around the world side 19 Case 4: Orkel – what now? side 30 __________________________________________________________________________ Groups of 5 students solve a case. Cooperation between several groups to prepare presentations is considered cheating or attempt at cheating, and is subject to the cheating regulations in the exam rules. A copy of the presentation must be delivered on e-mail to the grader before the case seminars, and changing the content after delivery is not permitted. When the case seminars approach, you will find instructions on It’s Learning concerning the e-mail addresses to which you must send your presentation. The file-name of the presentations must be of the following format: GroupnumberXXCasenumberY.ppt (A file name may for example look like this: 13Case2.ppt – which means that the file contains group number 13’s presentation of Case 2). Note that we prefer file formats of the ppt-form, just in case some of the graders do not have newer versions of power point. The front page of the presentation must contain the following: Case in: ……………………………………. (course code and name) Case: ……………………………………….(number and name of case) For: ………………………………………. (group number and name of students) Submitted: ………………………………… (date) Case 1: Aurora Light facing their first export venture by Prof. Carl Arthur Solberg, BI Norwegian Business School. © Carl Arthur Solberg Although the background of the story is real, facts have been changed, in order to disguise the real company. Any resemblance in any company with the persons mentioned in the case is coincidental. "This is a real mess!" Mrs. Sunhill had problems of hiding her temper when she confronted her marketing manager Mr. Mark Salsbury with a letter received the same morning from their Italian agent, Mr. Antonio di Napoli. Mr. di Napoli had in fact informed Aurora Light AS that he ended the contract they had entered into a year or so earlier, and he asked for 600.000 Euro in indemnities. And, if this was not enough: Their representative in Newcastle, GB-Lite, had insisted on more changes to be made on the products, in order to satisfy the requirements of the British market. According to Mr. Counting, Aurora Light's financial officer, additional adaptation costs would increase the end price to an unbearable level, making redundant all the efforts put into the British market. They were lucky to have a good grasp of the Norwegian market, to at least sustain the costs incurred during the introduction to the new markets. In fact, they were holding a good 25-30% of the home market, with sales approaching 140 million NOK last year. They felt well entrenched in the market place with good relations to the distribution channels and a technological advance to the competitors. Although the profitability was not up in the sky, the return on sales showed a sturdy 2-6% per year over the last couple of years, and annual net profits were in the three to six million NOK range. Besides the Norwegian archrival, LightTech, these latter consisted of companies mainly from Sweden and Germany. Typical for this industry, has over the years been the dominance of the national companies in each market, Norwegian companies dominating the Norwegian market, Swedish companies in Sweden and so on and so forth. The major reasons for this industry structure were the local design and technical standards, and the multitude of different contractors and distribution channels in the national markets. 2 However, the industry was gradually being consolidated, lead by the proactive strategies of the French Schneider Group. Schneider had in fact initiated an “acquisition campaign” in Europe and controlled their Norwegian competitor as well as this latter’s partner in Finland. They were also dominant in France and Germany and other countries on the continent. So far their Norwegian competitor had kept their independence and there were few signs of “one European design” of the products. Rather on the contrary: electrical fixtures still had conspicuous features of being local products. The background for the export adventure was to anticipate what had to come: the emerging industry concentration in Europe, and the ensuing inroad of new competitors into the Norwegian market. So, they started to investigate different avenues for exporting. After some discussions with people in related businesses and Innovation Norway – the Norwegian Trade and Industry Promotion Agency, and some research on statistics and magazine articles, they decided to approach the following countries in the EU: Great Britain, Denmark, Italy, France and Germany. France and Germany were rapidly excluded given the prominent presence of the mother company of their Norwegian competitor. The markets in Great Britain and Italy were deemed to be the most interesting ones and Mr. Salsbury was assigned the task to identify possible candidates for representation in these two markets. After some investigation - partly through small advertisements in trade magazines, and partly with the assistance of the local representatives of Innovation Norway - they ended up with a long list of candidates in each country, most of which seemed quite serious and capable. They were of the most diverse types of companies, anything from the "one man show"-company to large, established import firms. Mrs. Sunhill expressed some doubt as to what kind of company they ideally should tie up with. On the one hand, a large and well introduced importing company with an established network of wholesalers and customers would facilitate the task. One major disadvantage with this kind of solution was of course that such a company could be too big for Aurora Light, and Aurora Light would only be a small and insignificant supplier to the larger company. On the other hand, "the eager beaver" solution had its clear advantages in the amount of attention the agent could bring to Aurora Light’s products. After endless discussions on the pros and cons of each alternative, Mrs. Sunhill decided to try both. 3 The British market In the UK they started discussions and negotiations with a company well entrenched in the business, GB-Lite. This company had been importing electrical fixtures and equipment ever since the early sixties, and - out of their base in Newcastle, they had developed a large network of retailers especially in the North East region of England. This company was chosen among all the other for two reasons: 1) the Managing director, Mr. Jones, seemed to go easily along with both Mrs. Sunhill and Mr. Salsbury; 2) GB-Lite had shown a spectacular ability to yield good financial results. With a yearly sales of 34 million GBP and a sales staff of between 18-20 people, they were regarded as a solid potential partner. The contract negotiations, however, were a new and unexpected experience for both Mrs. Sunhill and Mr. Salsbury. In the introductory phases of their negotiations, they had met with Mr. Jones alone, who gave a refreshing impression of a professional manager, quite unlike the stereotype picture one typically has of established British companies. When they met to negotiate the details of the agency contract, Mr. Jones was joined in by three other men: Mr. P. Halloway, Mr. Jones' partner in GB-Lite, Mr. A.G. Ressing their sales manager, and finally Sir John Lawson, their lawyer. The four were all equipped with a 10 page sample, standard contract which they would like to use as a starting point in their further discussions with Aurora Light. Sir John politely presented the details of its content to the two representatives of Aurora Light. Mrs. Sunhill was quite astounded. This was very different from the relaxed meetings they had previously held with Mr. Jones. During these meetings they had discussed things like commission and sales volume and had reached a general agreement on these issues. Our friends from Aurora Light thought that the contract negotiations were a mere formalization of this discussion. Instead, they were met with a long range of requirements:  Develop an English version of their product catalogue, manuals and service instructions.  Transfer for one week in Newcastle a product engineer in order to train the sales and service people involved in the project.  Send GB-Lite within three weeks a complete set of demo-models. 4 our friends in Aurora Light started to fulfill their commitments.  Changes in prices and terms of payment should be submitted for approval in Aurora Light before being granted.  Authorize GB-Lite to grant price discounts. Salsbury accepted it because they were quite confident that they would be able to -putting some extra effort to the job . Sunhill did not find any clause in the suggested contract that really committed GB-Lite in any significant way. Salsbury had a hard time introducing terms like:  Minimum sales the first year of £ 100 000. Mr. and she and Mr. on their side were quite stubborn on this clause if they were to soften their stance on the issues put forward by Aurora Light.000 if any of Aurora Lights commitments were breached. Back home again. And the British. the development manager of Aurora Light.  Contribute at least 90 000 GBP to the introductory advertising campaign. Mrs.  Maximum delivery time to be one month. This was a bitter pill to swallow.comply with the clauses. accept returns and extend credits of more than 4 months when deemed necessary. Counting achieved after lots of persuasion an extension of the credit line with the local bank. These "concessions" from the GB-Lite team. Take the responsibility of spare parts and the most popular models in a warehouse facility in the outskirts of Newcastle. and further pay 25% of any advertising programs in the future. Prodding. to comply with GB-Lite's requirement on advertising expenditures. to be increased to £ 1 000 000 after two more years. was sent over to train the sales and service people. Mr. and submitted a request 5 . At the end of this "exercise" more than NOK 1 300 000 was spent on the British market introduction. but Mrs. the Newcastle branch. GBP 90 000 was transferred to GB-Lite's account in Barclay's Bank. arrangements were made to rent storage space and transfer spare parts and demo models. did not go without the inclusion of a major clause stating that GB-Lite is entitled to a compensation of £ 80. Sunhill and Mr. And finally. They had the brochures and manuals translated.  A guarantee of not extending credits or pursuing sales to customers who have exhibited a notoriously bad credit record. they could start "breathing normally" and wait for orders to come. Salsbury was confident they had come across the right man for the job. their newly won friend expressed great interest in being assigned the agency for all of Aurora Light's products in Italy. to Innovation Norway. Salsbury was sitting on the phone the next couple of days checking Mr. Counting to have his references checked before any contract was to be signed. The Italian experience The Italian experience was quite different. Salsbury received a telephone call from a certain Mr. He had in fact accepted the idea of Mr. not even within the business community. He also doublechecked through Innovation Norway’s Milan branch. Norway was such a different country and he and his wife were in for a new kind of "experience". Besides. they agreed to the main points in a contract to be signed when di Napoli passed by on his way back to Italy after his holidays in Norway. Next Tuesday. He had in fact worked in the electro fixtures industry for several decades and knew the members of the dealer network better than his own cousins! After a visit in the factory. He referred to the ads about representation and would like to "poke his nose" in any time during the next two days to discuss the prospects for a deal. After one month of hard work.for support on part of the money (translation. and that was not commonplace in Italy. Sunhill and Mr. Mr. calling from the Oslo Airport. di Napoli. Antonio di Napoli happened to be a charming and also knowledgeable man who could refer to a long list of references of sales assignments in Italy. advertising budget. Counting was somewhat more doubtful: what about all the others on the list? "We haven't even bothered to look at the list!" he exclaimed. Mr. All references recommended Mr. He had just landed and was together with his wife for two weeks of summer holiday. a week or so later. he spoke very good English. and a review of the products. Salsbury who both felt convinced that he was the man. But he was overrun by Mrs. training program). Gardermoen. di Napoli's reputation. they signed a contract with the following terms:  di Napoli would get the exclusive rights to represent Aurora Light's products in Italy. At the end of a couple of hours discussion. 6 . Mr. di Napoli without any reservation and Mr. Jones returned with inquiries concerning "minor product alterations". "Our dealers find it difficult to achieve preference for your products as they now stand and at the price that you quote. Prodding were reluctant to do anything more for their British representative at this moment: "Who do they think they are?" exclaimed Mr. di Napoli did not place any importance on advertising. "What matters". and nobody will get to use them.2 million the year after and finally reaching and 2. Business as usual? After half a year. he said. 7 . he was granted a commission of 10% of the total sales. After some two or three weeks' time. increasing to 1. Mr." He finally suggested some changes in the design of the products. approaching Christmas.. Salsbury was not in doubt: "We have to go along with these requirements. "We have put almost one and a half million NOK into the venture. and received some noticeable interest from one dealer. but both Mr. Mr. etc. as he put it. "is a good network and personal selling. Mr. Jones was what one could term a qualified acceptance. between 12 and 15%. However. di Napoli even agreed to come by himself to Norway for an introduction into the technical parts of the product offering. they had to grant substantial price discounts. the two parties were committed to develop a good spirit of cooperation. He committed himself to sell for at least 500 000 Euro the next year. No mention was made to advertising expenditures.  Finally. the status of Aurora Light's export efforts was as follows: In the UK trial orders started to come in already two weeks after the first "introductory month" (when all the preparatory work had been done). disbursing all the travel expenses out of his own pocket. otherwise we will not get the products through the dealers in the first place." This made sense. In fact. The reaction from Mr. GB-Lite had in fact presented the products on a local trade fair outside Newcastle. Counting. Mr. etc. Counting and Mr. and now they ask for discounts!" After one hour of discussion they settled for a compromise: GB-Lite was allowed to grant 5-7% discount to particularly interesting customers. Mr.  Furthermore. Then the rest comes by itself”.5 million after four years of operation. Jones reported that in order to push the sales. Mr. Mr. Mark". and that Aurora Light had to be patient if 8 . -0In Italy. In Italy we don't meet any of these objections to what we can offer: both the price and the product are being accepted as they stand. Prodding was out of his mind. and Antonio has succeeded in getting our product introduced in at least 20 dealers' network. "I really wonder what kind of customers our friend. about Stella Lucia.' I think that we should start looking for a new candidate for our sales in the UK. There was an endless stream of orders. I'm fed up with these petty quarrels around details. Sunhill stated at one moment. the financial officer countered. and during their internal discussion of the issue. Salsbury said. Counting entered into her office and presented the last quarter's book report. "That's all fine.I think it is time to review our credit policies toward Italy". Antonio. "Antonio reassured me about the solidity of his customer base. Mr. he expressed a great deal of annoyance with the whole venture: "We have now ended up in endless discussions with our British representatives on just about every tiny issue of our marketing program. and they have not achieved a single major sale.and we have granted liberal credit terms. "but I think that when twelve out of our fourteen invoices have not been paid in time . he grunted. and based on the references we have received. Salsbury conceded that something had to be done and agreed to write an e-mail airing Aurora Light's concern over late payments. But only a week later. things at first seemed to develop much more brightly. Mr. An inquiry from Mr. I find it hard to doubt what he is saying". had filed in for bankruptcy. Aurora Light was very happy and executed the orders as they came in. which don't lead us to anything but higher costs". their biggest account so far in Italy. In his report the trade officer added though that this is not unusual in Italy. first small trial orders. "I can't understand this". Mrs. "We certainly have found a good niche in Italy". one month . Only ten percent of all the invoices due from Italy had been honored! "I don't like this". has led us into". but later on they amounted to much more than the amount of sales agreed upon in the contract. Counting to Innovation Norway's local representative in Milan revealed that a good deal of di Napoli's customers did not exhibit the world's best track record concerning timely payment. The situation did not get less sour when they two days later received a note from Banco di Milano.     Best regards.11. we have tried for one year to enter two export markets. until we get to know them better.it Late payment Hello Antonio.    Antonio di Napoli  This was not nice music in anybody's ear.2014. She introduced the issues as follows: "Gentlemen. with so far . we would suggest that the following practices should be introduced:  1.no Late payment Mark  Reference is made to your mail some 20 minutes ago. and Mrs.  Here the snow has started to fall and hopefully this year we’ll have  a white Christmas.  We would also like to mention that we have experienced that some of your customers are not very  prompt in paying their dues.    I will therefore by December 1 of this year.  I hope everything is well in Italy.000 Euro in indemnities. However. Off course we are newcomers. Salsbury still tried to be polite and friendly when writing the mail: From: msal@Aurora Light.    I trust you understand this and look forward to hearing from you in the near future. and can inform you that I don't see how I can  work under the conditions stated in the mail. and would like to ask you to  do anything in your power to retrieve what is possible to get out of whatever is left of their assets.    Until this day we have liberally paid the commission to you and we certainly intend to do so also in  the future.it Time: 06.    Mark   The response was not very pleasant: From: Anapoli@lucia.  2. end our relationship and will require that you pay a fee of  600. and the established slow payers should also be  confronted with this new policy. All new customers should pay by Letter of Credit. at 1433 To: Re: Anapoli@lucia. Mr.2014. but your suggestions on commission payment and L/C suggest to me that we will have  problems in getting along in doing business in the future. and as you certainly understand.no Time: 06. Sunhill concluded her intermezzo with Mark Salsbury by calling the management team for a meeting to discuss the situation. but what we now are into exceeds any 9 .  I write to you about the bankruptcy of Stella Lucia. I thought that I had to do with professional business  people. we are suffering from this. at 1456 To: Re: msal@Aurora Light. We will not transfer any commission on sales made until we receive payment from our customers.they wanted to retrieve their outstanding balance with their Italian customers.11.I dear say very meager results. 10 . This should be done. I think time has come to look at our strategic position and reassess the whole investment. before we discuss how to proceed with Antonio and our British "friends" in the short term. I'm afraid to tell you that our business in Norway has been suffering from this. The efforts we have put into this misadventure. runs up to a balance of at least one and a half million NOK in the UK and outstanding debts of at least two and a half millions in Italy. plus of course the indemnity hanging over us from Antonio. I open the floor for comments”. We have paid too much attention to our situation in our new markets and opportunities in Norway have been left behind.expectation of bad luck. If this was not enough. I think. but that he would have a hard time convincing some of his colleagues back in Norway of the necessity to shift to another operation mode in this 11 . certain facts have been changed in order to conceal critical information. Sitting back in the business lounge at the Baranquilla International Airport. Oslo. Mexico. please visit their home page www. Vice president Downstream. He could still hear the resounding mantra given by Mr. This was his third trip to Latin America over the last four months since he took over the job as SVP Downstream and he realised that they now had come to a crossroads on their market presence in Colombia. It had been a demanding week for Mr. Hogna slowly developed a sense of antipathy for the guy they all worshipped only a couple of years back.yara. The story was however quite different in Colombia. For background information about Yara. recollecting the discussions over dinner the night before. Guatemala and also Ecuador were an easy ride compared to Colombia. Gonzales: “You are the producers – we are the marketers”. Although the case describes a real life situation. This does not however essentially alter the issues raised in the case.very loyal and devoted distributor since the last 23 years was utterly opposed to any of the solutions suggested by Yara to the dilemma that they were confronted with. Ernesto Cortissoz. Senior Vice President Downstream at Yara International ASA. and the visit there was more of a courtesy kind. Carl Arthur Solberg. Oslo in cooperation with Mr. BI Norwegian School of Management. their local and most would say . Egil Hogna.Case 2: Yara International by Prof. at Yara International. There they had already established a local presence through their own sales office.com NB! It is not permitted to contact the company or its employees when solving this case. He was so frustratingly stubborn and single minded “You are the producers – we are the marketers” – and Mr. He had been travelling across Latin America visiting four countries in six days and was now heading back home to the Oslo headquarters of the world’s largest fertilizer company. Egil Hogna. Senõr Cesare Gonzales. he realised that he was about to change his mind about their presence in Colombia. © Note: this case has been developed for class discussion in international marketing and management courses. “we risk a 10% loss of our NPK output and that represents a turnover of some USD 80 million. and in the long run we could jeopardise the viability of the plant itself. “You know Egil” the local plant manager. had insisted before he left. It will take a nerve to challenge Mr Gonzales bearing this in mind.. 12 . even though Norsk Hydro was the name of the company before 2004. His dealer network of some 80 dealers was well located in central agricultural regions of the country and represented the “upper crust” of the industry. For instance in Latin America sales in 2009 fell one third from the year before – a combined effect of lower prices and lower volumes.”.he hoped . Only China and Scandinavia were larger markets for the Porsgrunn plant. Mr. were Mr. A lot was at stake. He knew that at the Monday meeting next week he needed to persuade a lot of people who were staunch supporters of Mr.important market. Colombia had over the last two decades evolved into one of the most important markets for NPK fertiliser from their Porsgrunn plant in Norway. Mr.imminent break out. For the sake of simplicity we will in the following use Yara as the name of the company throughout the rest of the narrative. Gonzales and of the idea of continuing with him as their sole distributor in Colombia. One of the key differences between the two lies basically in 1 Yara International AS was spun off from Norsk Hydro in 2004. Actually. Hogna was quite adamant that something had to be changed.. Yara downstream activities were particularly hard hit by the crisis. their product was in many ways different from those of their main competitors at the time as they were producing compounds – as opposed the more generally used blends. Gonzales had through his firm Ferticol SA developed Yara to be one of the major players in the Colombian market achieving a market share of some 35-40%. as to make matters worse. Gonzales had been the key architect behind the success.. He was particularly impressed by the reported crop yields provided by the Yara NPK prills. Gonzales expressed interest in a presentation held by a Yara (then Norsk Hydro1) agrochemical engineer. that the 2008-2009 financial crisis had made a big bite into both sales and profits. Their first contact originated back in 1986 at a trade fair in Madrid. And he was of course right in that the profitability of the plant hinges on its utilisation rate and. but he was still worried about the consequences and he was unsure of how to tackle the marketing task in the wake of an indispensable and . In fact. We’re gonna have a hard time to find other markets to offset such a loss. taking about 10% of its total production of some 2 million tons of NPK and Mr. Mr. It was not easy. Ola Earthgood. Only a few years earlier they were reluctantly accepting things as they were. was at first not happy with this. Gonzales had managed to get a good grasp of the market. Gonzales and key personnel at Yara. Thorleif Enger expressed concerns about the Colombian venture not yielding better results even after fifteen years of operation: “Yes . Certainly.we do have a comfortable market position in Colombia. Hence the yield was superior with the Yara product and a lower dosage could be used than with that of the competitors. where he de facto was their sole distributor in Colombia. but the upside was a loyal distributor and also a more rational logistics solution (larger and fewer shipments). true. top management of Yara was already back in 1998-99 starting to ask questions about the Return On Capital Employed levels of the Colombian venture. If there was a problem in the delivery Yara would instantly give him accurate information. Mr. This experience would be a perfect background for him to represent Yara in his country. the then controller at the Porsgrunn plant. at first only on an individual purchase contract basis. reaching almost 40% market share. Peggy Credilane. If truth be told. And as the present CEO. but things have not really moved the last couple of years and our volumes and returns are not showing any sign of improvement”. thereby securing essential scale economies and its competitiveness. Phosphorus (P) and Potassium (K) – were all present in each prill with equal parts in the whole batch. Mr. Gonzales was able to communicate the higher product quality to the market and therefore rapidly gained the commitment of the best dealers in Colombia. some key people at headquarters in Oslo started to ask “impertinent” questions about the potential for improved returns. True. and if Yara needed to push product. but it evolved with time into a close distributorship relation. Jørgen Ole Haslestad.the fact that in the Yara product the three main nutrients of the fertiliser – Nitrogen (N). First the then President Mr. Mr. was professing: 13 . Gonzales had indeed experienced the variance of fertiliser yields from his time in the horticultural industry in Colombia. the Colombian market constituted a significant addition to the capacity utilisation of the Porsgrunn plant. Gonzales would have available warehouse space as long as the credit terms were generous enough. whereas most of the competitors supplied a blend where the components randomly were present with varying degree of concentration. the profitability of the Colombian operations was not among the best in the Yara system – rather it was ranking as a “middle of the ground” performer in their portfolio. Their relationship was built on trust gained through a professional handling of business matters and an evolving friendship between Mr. Nevertheless. if he expressed the need for extended credit terms it was granted – at times it could go well beyond the “normal” 90 days. A year later they were in business. Ms. Yara was delivering good products at a slightly higher price than the general market price level for blends. but Mr. However. the expat head of the Bogotá office. buying and taking title to the product rather than – as in the agency contract – acting on behalf of the principal. In fact Kemira Growhow as they now where labelled. This was not well viewed by Mr. In fact with no distributorship contract until that date. whatever the cause of the contract cessation by Yara. So on 100 USD in the market the dealers would typically only have a margin of some 15%. reported back to headquarters that some of Ferticol’s local dealers expressed concern about being financially squeezed and that some of them had been forced into bankruptcy by Mr. and that came at much lower volumes and only after 6-7 years of operation. So for severance payment accruing to the agent. so as to assure Mr. They settled for a severance payment of 1 million USD in case of termination. A year later – in late 2002 . Gonzales saw this as a clear advantage in that he secured his position in a potential termination conflict. Yara eventually formalised the relationships with Ferticol SA. since he de facto was their distributor. Concurrently with the decision to set up a liaison office. since agent he was not. But it raised some eyebrows at headquarters when they learnt that the credit line offered by Mr. Gonzales as he persistently was telling his mantra (“You are the producer – I am the marketer”). this was indeed a point of uncertainty.“We need to get closer to the customer in order to understand what is happening in the market and how the customers think”. but also on price. he believed that he still was to be regarded an agent by Colombian Code of Commerce. Mr. receiving a commission or a fee. one from headquarters in Oslo and one local were hired to both overlook the market operations and to spot new market opportunities in Colombia and beyond. This was possibly not a big surprise as the whole world was in financial disarray in the wake of the bursting of the dot. Gonzales was only 30 days.com bubble that year. Two people. To that effect they established in 2001 a liaison office in Bogotá in order to get a better grasp of the market. Mr. as the uncertainty concerning the future was increasingly worrying Yara management. had sales offices both in Colombia and Ecuador. and they reported much higher returns than Yara in this latter’s relationship with Ferticol. At the same time they also formalised the “producer-marketer” role distribution. Gonzales of his position in the value chain. This was only partly true. Ole Clerck. whereas Ferticol was often given more than 180 by Yara! It was only after they bought Kemira OY’s fertiliser business in 2007 that their suspicion was given real substance . Gonzales. leaving 55% to Yara. however he acquiesced and acknowledged that as long as he was in command of the operative marketing and sales programme he was not to be challenged by headquarters. and Ferticol reaping the bulk of the margin of some 30%. It appeared that Ferticol not only squeezed the dealers on credit terms. This equation was quite different in the Kemira 14 . Gonzales at his residence outside Baranquilla.case: roughly 20% at the dealer level.... That was indeed true: Mr..not given any decision making role in the firm.”. when you are centrally placed in the industry network. Jørgen Ole Haslestad suggested a solution to the dilemma: a joint venture initially to be owned 49% by Yara and 51% by Ferticol. He has used our logo for what it is worth: Yara and the Viking ship are basically seen as a household. Hogna asked how this could be: “I mean. They also offered an unbalanced distribution of the dividend from the JV the four first years: Ferticol 65%/Yara 35%. but with Yara to take a majority ownership after four years. not that I make any allusion to any wrongdoing. in early 2009 Mr. at these occasions he also got the opportunity to experience Mr.. There was no doubt where his loyalties were. but they were only regarded as apprentices and were – despite their age: 42 and 39 years . his producer-marketer mantra was constantly repeated and he was uninterested in whatever change was suggested in the operating conditions of their relationship. Clerck during his last visit to Colombia. how can Cesare sit back with those profit margins at the expense of his dealers. offering other products than just ours. local brand. Hogna recalled the occasional receptions and cocktail parties held by Mr. And remember”. Mr. And indeed. whereas most of the competition is operating with much lower margins?” Mr. Gonzales – now 76 years old – was the big boss. but of course. Eventually. so many of their dealers have developed a certain dependence on Ferticol. Also – and let’s not forget that – Cesare has grown into an important figure locally in Baranquilla. But to no avail: Mr. he added. These were useful inputs in his formation of the total picture of the marketing situation. Discussing the matter with Mr. Clerck offered the following explanation: “You know Egil. And in support of this Ferticol has over the years invested in a very competent sales force. Gonzales’ devotion to Yara: in the middle of the pear shaped swimming pool a mosaic blue and white Yara Viking ship gleamed from the bottom. This proposal was advanced after several attempts had been made to more closely monitor Ferticol’s marketing activities. where he had the chance to meet local figureheads and also some local horticultural leaders. “Ferticol also has a wide product range. after years of hesitation and internal deliberations.. you find most of the time ways to improve your situation. Cesare has been very successful in building an image of being the industry leader in Colombia. Two of his sons were involved in the discussions. with great product knowledge and with frequent and close relations with their dealer network. 20% at the local sales office level and 60% at producer level. 15 . Ferticol. As far as I am concerned we have two major alternatives: 1) stay with our present distributor. Hogna still a bit jet lagged felt well prepared for the discussion. we will most likely change the name of our subsidiary to Yara Colombia Ltda. Monday morning. I hope that you have had time to consider the facts of the situation in Colombia. that network is much weaker compared to our existing distribution. Remember that Mr. 09:00 o’clock meeting with top management of his department. and his sons seem to be more willing to discuss viable solutions with us than the ‘old man’. but also it mostly consists of second tier dealers compared to Ferticol’s structure. but on the other hand losing ten percent of our total volume is much more serious. and that our margins could be better in that market. Earthgood. and Chief Legal Officer Mr. independently and side by side.Back in Norway. And we don’t know how competent they are. Elfrida Rodrigues. Gonzales is now soon 80. In this latter case. and we need to make sure that all the aspects of the situation are properly evaluated before we decide what to do. as the sentiment there is to rationalise rather than setting up double sets of sales units abroad. Not only is it much smaller with their 35 dealers. This third solution will however meet resistance in the board of directors. Present: the regional sales manager Latin America. Mr. Mr. but we don’t really know how long time it will take before they will be able to take the helm. If we continue with Ferticol. It is not a straight forward decision to take. Hogna opened the meeting with a warm “Good morning everyone. Mr. Ms. we need to try and persuade them to take a more customer friendly stance toward their dealers. thereby riding on our market experience acquired through their network and their operations in the market. Even though we may take advantage of the Kemira Growhow dealer network. We may of course also set up a totally new Yara sales office and let the Kemira brand sail on its own – each brand then will operate with their own distribution network and their own marketing strategy. both concerning credits and price – and I think that with some patience and some pressure from our side we may in the longer term succeed in that endeavour. We all know that these lately have been under financial pressure.” Ola Earthgood was the staunchest advocate of the status quo in the group and he reminded his colleagues of the vulnerability of the Porsgrunn plant should the volumes drop. I agree that his pricing policies are dubious. Trygve Faksvaag. “but rumours have it that the Russians are actively searching for new outlets in South 16 . or 2) move all our importing activities to the Kemira Growhow sales office. “He has been serving us pretty well after all.” Elfrida Rodrigues filled in: “and not only that”. she said. . Mr. Now that we plan to set up our own sales unit – the quality seems to be more than good enough. even for him . “One problem that we are sure to encounter is the fact that we are culturally extremely far from Colombia. but the mechanisms that follow in the wake of hierarchical rules and social network ties.. Cesare’s tough policy towards many of the dealers has given him a reputation in the market that probably will help us retain a large part of them. And furthermore.. we will still struggle with the problem of understanding and interpreting the information – that he might give us! It took us a long time to understand the way in which Cesare was operating – I say no more”! 17 .second only to Yara in terms of compound NPK output. He will have a hard time biting his own words”. I think we will be able to increase our market share in the course of a couple of years”. Rodrigues countered. It was generally known that they were about to review their own presence in Colombia. and if we cease our relationship with Senõr Gonzales I am convinced that the two will be in business in the course of less than one week”! The Russian fertiliser company. and if I am not mistaken. but then again. as they up till this date only had occasional deliveries through direct sales to some of the larger dealers around Bogotá based on the dealers’ attempt to pressure Ferticol on price. was one of Yara’s main competitors in world markets. Of course daily etiquette is relatively easy to learn – even though there are lots of pitfalls even here. our brand name is well known in the market. “This may be true. and had gone to length to communicate this viewpoint to his dealers.. but they were indeed a serious player in the market. And these things are extremely important in B2B relations. not as good as Yara’s. are something far less permeable. Mr. Their product quality was. As a matter of fact Cesare had always been dismissing Acron as low quality supplier. Egil. And – given a properly conducted marketing campaign. Acron . since I am half Spanish.. however.America. And I can say this. As far as I am concerned this will prevent us from an easy ride into the market. Hogna thought by himself “Well – so much for Cesare’s loyalty. but we don’t really know” Ms. speak the language and feel that there are many things going on there that I cannot fathom! Using a local figure to head the subsidiary is of course a way around. a great deal of these guys would rather welcome us as their main supplier instead of Ferticol.. Hogna said: “I agree that we are vulnerable since we do not have the direct link to the dealers or to the end users. But that is one of the main problems that we want to address: customer contact. should we call it irregular business practices. together with Elfrida and Trygve. I don’t think that we are any worse than the Finns” he said. he warned against a problem that was so far not given so much attention. Faksvaag had been listening to the discussion. ehem. and outline the consequences of the two alternatives.. he said. Mr.This was not the first time Mr. Mr. That has however not prevented the Kemira people to successfully penetrate the market. To what Mr.” The meeting was drawing towards the end and Mr. We need to look more seriously into that. I don’t say that this should preclude any switch to fully owned operations..” 18 . we all know that”. I will now. Hogna concluded: “Well – we all know that we have different views on the situation. but possibly still similar enough to potentially confuse some of our end users when they see the two products together. “Yes Ola. and many of the arguments were known to him. where we discuss these matters more in detail. set up a PM to top management. Granted it has a somewhat different shape than our logo. And we have heard rumours of . However.. in a situation where we were already the market leaders and had captured the best dealers. “but I have heard rumours of Mr. particularly with a view to the local marketing effort. Hogna heard the cultural argument. Earthgood retorted “Success is relative : the Kemira Growhow brand sells possibly a fifth of our volume”. which I am sure that will have an effect on their agribusiness exports and thus boost the fertiliser market”. Gonzales registering a trade mark that is profiling a Viking ship. “We don’t know for sure”. since Colombia just recently has entered into a new deal with the EU. and consider what possible legal actions to take. Thank you for your contributions. Hogna resignedly replied. but it might affect the way in which we’ll approach our marketing in the wake of a break-up. “but Kemira entered the market only ten years ago. I think that precisely this year is a good time to do the switch. And to be true. and of course he was aware of the problems: “It is certainly true that we are way away from Colombia – also in cultural terms. and their top guy in Colombia was a Finnish expat. Ronstan is the leading manufacturer in Australia and second or third internationally. well equipped canteen with an outside eating area.75 million (AUD). Arambewela. International sales in 1987/88 were $2. 27m in 2001. In 2012. the new facility has a large. winning a number of government sponsored export awards in recognition of its achievements. NB! It is not permitted to contact the company or its employees when solving this case. last update February 2015. Welch.A. Welch and Runar Framnes for use at BI Norwegian Business School.Case 3: Ronstan sailing around the world By A. In 2010. office and managerial employees. Ronstan had about 175 employees in total. Ronstan is currently a private company. predominantly in the infrastructure and building sector). Its overall sales increased to about 15m in 1994. including the Managing Director). staff are not permitted to eat at their desks (a rule that applied to everyone.. Ronstan International is an Australian company specialising in the production of high quality fittings for yachts. Turnover of staff is very low. and Lewmar in the U. For its type of marine hardware. Ronstan was the 2009 winner of the inaugural Australian marine industry export award.about 70% being foreign sales. Murray .K. It has been a successful exporter from Australia over many years. Forty eight of the current staff have been with the company for 25 years or longer. and the management team is stable – its turnover “is zero”. with the bulk of 19 . which represented 30% of the company's total sales. This encourages intermingling of factory. An indication of the company’s ethos is the listing of all employees by name in its official history published in 2003. To build a cohesive workforce. and architectural products (various stainless steel applications such as structural and aesthetic cables and rods. and +35m in 2011 . each producing a similar range of marine hardware. Ronstan moved from its original site into a specially built factory and office facility in the Melbourne suburb of Braeside. with about 10% of the global market after Harken in the U. team atmosphere is strong. Ronstan has a strong identification with Australian participation in international yachting contests such as the America's Cup and the Olympics. (© 2011) Revised twice by Lawrence S.S. a New Zealand producer of marine hardware 1990 Fortuna goes into receivership. during 2012-2014 the strengthening of the USD made the AUD fall approx. and then Managing Director. Ronstan mainly sells into the marine products after-market (about 80%). the company has since experienced a decline in total sales of about 20 per cent. a New Zealand conglomerate. The Board of Directors of the company is composed of 4 people: a non-executive Chair. The current managing director. is a part of the shareholding group and has been heavily involved in the development of Ronstan’s international operations: earlier as export manager and later as general manager of Ronstan (US). 10% held by company executives 1995 Ronstan acquired by UK company. About 20% of total marine product sales are represented by the OEM market. Ronstan’s main Australian competitor and merges it with Ronstan 1985 Fortuna. Alistair Murray. however. 25% and restored a large part of Ronstan’s currency competitiveness. attributed to the global financial crisis and the strengthening of the Australian dollar. modest profits had been achieved as a result of significant cost cutting 20 . Table 1: Ownership changes Year Event 1977 Ronstan acquired by Australian Reinforced Concrete 1980 ARC acquired by Humes Industries 1981 Humes Industries acquires Fico Marine. 14 of whom work for Ronstan 2007 Ronstan owned by a private syndicate of 18 people. 2012 The syndicate now comprises 15 people. although Ronstan is trading profitably 1991 Syndicate of investors buys Ronstan. the managing director and two other Ronstan executives (see organizational chart). In the three years up to 2011. Fortuna had also acquired RC Marine. acquires Ronstan from Humes Industries. the majority of whom had participated in the 1999 buy-out. Had the company been relying only on boat builders. From late 2008 to 2011 the Australian dollar rose by about 60%.equity held by its managers (see Table 1 for the changes in the company’s ownership over the years). Chemring 1999 Management buyout (buyback!) of Ronstan: ownership in the hands of 16 people. The increased competitiveness and the high Australian dollar made Ronstan’s home market attractive to their major competitor – Harken – which was prepared to offer their products at prices 20 to 25% lower than Ronstan. the downturn in the marine industry would have had serious consequences: in 2009 sales of boats were down about 50%. with Alistair Murray still as the Managing Director While there were steady increases in profit in the 10 years to 2007. A. arose through an order from an American of Australian origin who was in contact with the Canadian distributor. The opportunity to establish a distributorship in the U.S. The decision to leave the boat-building field and concentrate entirely on the manufacture of fittings was taken in 1961. a retail showroom. but sufficient capital for tooling and machines to make marine hardware on a production basis could be raised in conjunction with the sale of the Marine Centre. The lack of key 21 . The domestic phase origin and growth The company was started as a backyard boat building project in 1953 by two partners. Also the market was highly seasonal which resulted in the need to retrench staff in winter. The company realised that further expansion would be greatly limited if it were to rely solely on the Australian market. Exports are generally priced in Australian dollars. the domestic market was Ronstan’s primary concern.including a reduction in staff numbers (25 employees). Over a period of time the exports to these two markets grew on an ad hoc basis. was established. In 1960. Though responsive to exporting. but since 2012 the tide has turned and sales picking up. This ability to mass produce fittings gave Ronstan a significant advantage over the competition and in particular its major Australian competitor Fico. The trial consignment proved successful and the Canadian became the first overseas distributor for Ronstan. Production was mainly wooden hulled yachts but some stainless steel yacht fittings were also manufactured to satisfy their own requirements and also the growing requirements of local yachtsmen. The capital required was not forthcoming due to the government's credit squeeze at the time. the Ronstan Marine Centre. The off shore phase getting their feet wet Up to this time Ronstan had given no particular consideration to the possibility of export but in 1965 an order was received from Canada from a Canadian airline pilot who had become familiar with the products on visits to Australia and who saw a potential for them in the Canadian market. RON Allatt and STAN Lenepveu in the Melbourne bayside suburb of Sandringham. To remain as boat builders the company needed to convert from wood to fibreglass construction due to the rise in popularity of this material. a procedure which the company disliked. the company had neither control over the internal working of the agency nor service to the trade. Consequently. without warning. "It is difficult to recover or remedy the situation as you do not actually know the people who have been buying your product from the distributor". Ronstan was quite happy with the progress made there. setting up a subsidiary in 1978 with warehouse facilities and a comprehensive inventory. Eventually. At this stage Ronstan was faced with the decision of whether to find an alternative distributor or to set up a company owned and staffed operation. and therefore lacked the ability to deal with problems that arose. However the Australian government's support for exports with export promotion grants and market advisory services for which Ronstan qualified as a new exporter resulted in a change of thinking. Fico was taken over and merged into Ronstan.personnel with relevant international marketing experience at this time made it reluctant to commit to servicing distant markets of which it had little knowledge. The American market for marine hardware of the type made by Ronstan was substantial (annual retail sales exceeding U. hiring staff and developing a total service and promotion programme. As the distributor was independent. it was decided to incorporate Ronstan in the U. The American experience From the time of establishing the distributor in the U. but in 1977. sales suddenly dropped by 50% following strengthening of the Australian dollar. service and delivery were required to maintain sales. The success of more committed export efforts led. in 1970. These sales representatives operated in a different manner from their counterparts in Australia. no formal plans were made to increase penetration of these markets or to attempt to enter other export markets.S.. having relied entirely on the distributor to market the products there. A further influential factor in setting Ronstan's course was the success of the exporting activities of Fico. High standards of product. market and the success of the company's products up to this time. Sales grew steadily.S. As Ronstan's marketing manager at the time said.S. Further. in 1966. its main Australian competitor. not 22 .A. to its first export award. $60 million) and competition was intense.A. In view of the potential of the U. it had no real knowledge of the distribution system in America. price. Distributors required a stock turn rate of 4 to 5 times annually otherwise they dropped the product. The appointment of American sales staff who had a deep knowledge of the nature and subtleties of the market was effective in increasing sales. mainly on the west coast.S. The French manufacturers held 95% of the market.A. taking stands at major international boat shows in Europe such as Hamburg. It was found that the more time that could be spent with them in imparting product knowledge the harder they would sell for the company. increasing from $1. As a result. Developing other markets Following its early success in the Canadian and American markets Ronstan began to investigate the possibilities of other overseas markets. which represented 25% of total sales worldwide. penetration of which has been difficult for Ronstan. A somewhat extreme example has been the French market.91 million in 1984/85. This policy produced such successful results that in 1980 a second warehouse facility was opened in California. London and Genoa as well as exhibiting at the major American boat shows in Chicago. This lack of local competition enabled Ronstan to achieve a 50% share of the Swiss market whereas in other countries. Subsequent exhibitions were used to support Ronstan's international marketing effort. until the fall in the Australian dollar between June 1984 and June 1985 caused distribution costs in Australian dollar terms to escalate sharply. where there are local manufacturers. Indifferent performance from earlier distributors resulted in a less than 1% market share in the late 1980s.being actual employees of the company but representing several companies and selling on a commission basis. As a result. which gave the company a presence on the west coast as well as the east coast. the two warehouses were sold to the former manager of Ronstan USA and the American operation reverted to a distributor basis. Ronstan's parent at the time felt that the higher distribution costs were unwarranted and was uncomfortable about involvement in offshore investments. the first warehouse having been established at Clearwater in Florida. Sales in the U. These manufacturers on the other hand made no international sales. a market where there was no local manufacture of similar products. In 1970 Ronstan appointed its first European distributor in Switzerland. To try and rectify this situation Ronstan exhibited at the Paris International Boat Show in 1987 for the first time. market penetration has been significantly lower.S. which 23 .53 million in 1982/83 to $1. Miami and Long Beach in California. continued to grow at a satisfactory rate. on the principle of one distributor per country. The initial purpose of these exhibitions was to attract interested parties who would be suitable for appointment as distributors in the various countries. and buying something for less is better than making something for more. experienced copying and price pressure from low cost countries. then we’re going to be beaten by the competition that does”. As well. like most other companies coming from a high cost country. France. but after difficulties for about 2 years. key markets are the UK. While early penetration of the Japanese market resulted in steadily increasing sales of marine hardware. While the US has been the main market for Ronstan over many years. Denmark. Ronstan has. Asia in general has not proven to be a rewarding arena for Ronstan’s marketing efforts on the marine side. Italy and the Netherlands. We’re a marketer and ideas and solutions provider. The greater potential is definitely in the architectural business”. New Zealand has been maintained as an important market for Ronstan products. In Europe. One of the interested locals was chosen as a distributor for Ronstan. Ronstan’s MD commented in an interview in 2011: “We have less and less of a commitment to being a manufacturer. 24 . The managing director commented that “for a given amount of effort there has not been the same return in Asia. We are not committed to making things so if I could source anything that we could make for better quality and a lower price.we are going to be looking harder. challenging ourselves more because if we don’t. this has stalled in recent times. so that now Europe is roughly equivalent to the US. And with a high dollar – Australian dollar – we are going to be upgrading our sourcing activities . The marketing effort in Asia recently has been focused on architectural products. making their management rethink future position and strategy. then we would do it.resulted in interest being shown by four or five different companies. By 2010 France had become one of the more important markets in Europe. the position has been changing in recent times. Germany. a new distributor was tried and sales began to ‘take off’. it has until recently achieved particular success exporting to China a range of sophisticated components used in the manufacture of kite boards for sale in world markets. I don’t want to commit to making something inefficiently. The chimpanzee enclosure is pretty much designed by Ronstan – the mesh and cables and all sorts of things – so that’s a landmark project for us”. making a significant commitment to R&D. utilising its expertise in stainless steel technology (eg cables). for kite surfing) to manufacturers in China – they are the main manufacturers globally of kiteboards. In early 2005 Ronstan began supplying pulley and block systems for kiteboards (e. Ronstan has always had a strong emphasis on quality and been heavily involved in product development. The association with yacht racing has helped to enhance the company’s image as a producer of high performance equipment. volumes decreased. continuous innovation. The MD has commented that “product development. The business is still going.g. Ronstan diversified its product range into the architectural/industrial area. 25 .Products The marine products market in which Ronstan operates is highly responsive to product performance (racing and safety). and in over 60 cable-stayed suspension bridges worldwide since 1976. The systems allow greater control and safety of kite boards. This was so successful that Ronstan became the largest supplier globally of such kiteboard systems in 2007. on American jets during the Gulf War. has been a cornerstone for us”. The new product was not only an improvement on the previous range but its revolutionary design allowed significant cost reductions that resulted in a 25% reduction in the equivalent retail price. The latest example is the Taronga Zoo in Sydney. taking the blocks out of some of the kite boards so there is less need for the Ronstan parts. The R&D expenditure on this range was about AUD $3 million. due to the manufacturer’s changes: they simplified the boards. Ronstan has sought to be at the leading edge of technology. and its products are sold at premium prices. particularly in large wind ranges. but not at the same volume. The Ronstan trademark has been registered in all markets. Three new patents have been applied for in relation to the new Orbit™ block series. By 2011. In the 1990s. A major recent development has been the patented Orbit™ range of ultra-light weight but high performance blocks which won an Australian design award in May 2007. Its products have been used in a wide range of applications. The MD explains that the architectural business is about selling solutions: “We now design projects from the ground up. such as building sites at Sydney’s Darling Harbour. the importing business is worth about 2530% (up from 15% in 2001). The 2001 acquisition. product and market areas. Australian and New Zealand distributors”. However. lifejackets from New Zealand. “We have the people to provide solutions domestically and are developing the same capabilities in the U. and to a lesser extent in the UK and Australia. Success is a long way off elsewhere – we are only just getting started now. developing a portfolio of products for which it acted as distributor. They’re the only two markets where we’re up and running. The main market is the domestic market. During the 1990s Ronstan expanded into importing activities. Frederiksen Boat Fittings. making up for what we are losing on the marine side so it’s been a good diversification for us”. It complemented Ronstan’s product range and lifted its overall global profile in the field of marine hardware. Foreign Acquisitions and Subsidiaries In a change of strategy. for example. but related. It was considered that Puma was not adequately developing its sailing product range.The architectural products side of the business has been very successful in Australia: “If an architect thinks stainless steel cabling. In 2008. . is a manufacturer of high quality hardware for large racing sailboats with a worldwide reputation for making the world’s best big blocks . Ronstan entered into an arrangement to sell a range of Puma sailing clothing. now. We are now their American. According the MD. given its high profile and reputation within the global market. which is the best yachting rope in the world. Overall. Ronstan undertook acquisitions in 2001 and 2010 as way of expanding into new. It is going well this year. it was decided to switch to Ronstan from the 26 . and increasingly so in other countries. there was considerable discussion within the management group about whether to retain the Frederiksen brand.”.S. Apart from these imports. we have only had that for a few years as a distributor and they are so pleased with the job we did that they have given it to us in America as well. it is Ronstan. or supporting Ronstan’s sales effort. On taking over Frederiksen. After an initial promising start in the US. a very small proportion of components (about 2%) is produced for Ronstan in China. and rope from Austria: “FSE Robline line from Austria. We are the main player. Ronstan decided to drop this arrangement. in 2011 this line of the business made up about 25% of total sales. Both were located in Denmark. outset. As well as its subsidiaries in Denmark. 2 brand of yacht fittings. subsidiary (Ronstan International) handles Ronstan’s business in the U. West Marine takes stock from the US subsidiary as well as direct exports from Australia. from 1992-1996.” The current managing director of Ronstan spent four years in the US..K. Ronstan is its No. Bainbridge International. As to why the company set up its own subsidiary in 1992. It is a very good marriage. The current MD of Ronstan Denmark is now in charge of both operations. but the Andersen brand will be retained. it continues to manufacture its specialised product range. Ronstan operates through subsidiaries in the U. setting up the subsidiary and re-launching its marketing efforts. the company will be renamed as Ronstan. The number two brand in deck hardware is probably us and we didn’t make winches and the number three brand for winches in the world is Andersen but they don’t have deck hardware”. Again. That is what it really came down to . Ronstan acquired Frederik Andersens Maskinfabrikk. From 1985 to 1992. He is a Danish national and a shareholder. The U. Ronstan set up a sales office and warehouse in the UK. Its largest customer is West Marine. and were joined by two of the staff from the original UK distributor. Ronstan was represented in the US by an independent distributor. In October of 2010.S. Since that time there has been 27 . Two of the Danish staff were moved into this operation. Now trading as Ronstan Denmark. In 2002. “We’re going to shut down Ronstan [the former Fredriksen] and move it into Andersen because Andersen’s big enough to absorb both”. “many years ago we thought of making their winches under licence. its largest foreign market. As the MD explained. Palby Marine. The original Danish distributor.. We incorporated and ended up buying his [the independent distributor’s] business out and taking on his employees.S.S. with about 300 stores. the largest retailer of marine products in the US and Canada. Another advantage is both Danish acquisitions were located in the same town. and the U. the managing director explained: “Sales had started to slide and we were not doing [as] well…It was the realisation that nobody is as dedicated as yourself. We decided to commit ourselves to the US market and the big commitment was putting me [Ronstan’s export manager at the time] there. remains as distributor to the after-market. .bringing them over here [Australia].I mean to stay with them...substantial growth in US sales. He added: “It is the relationships with the customers. They want to be dealing with us. it’s all part of the package”. seeing what our competitors are doing. it is the market intelligence. The US national in charge of the US subsidiary is one of the 15 shareholders that own Ronstan. The upper management group in Ronstan is heavily involved in foreign sales visits to distributors. He stressed the importance of personal relationships. We have some who have been with us for more than 35 years. as well as parts of Asia and the Pacific islands. with the Australian base. looking at the trends. He has delegated a lot.S. “There is a core of 6 of us that travel a lot. And we have a lot of success with them…We have spent a fortune over the years [with them]. [Although] if we had lousy products. Argentina and the U. We have had a program for years of bringing distributors over here at our expense. They are our friends. Canada. Distribution A critical part of the export success of Ronstan has been its distribution network. even though there are no formal agreements with them – only ‘handshake agreements’: “It is amazing the relationship with our agents.. South Africa. and another 14 that swing in and out of it. It currently has around 40 distributors. but is still an important face for the company and for many of the key relationships. our distributors would lose interest. our allies. Chile. Part of the family…If we come out with a new product we have people around the world who can hardly wait to get their hands on it. Talk about long standing. Twenty of the distributors have been with Ronstan for more than 20 years. The MD refers to the distributors as a major strength. It is estimated that Ronstan products are sold into about 50 countries. It is not just showing your face. they provide relatively widespread coverage of the global market for yacht fittings.” To some 28 . We have a fantastic relationship with our distributors. attendance at trade shows.” The managing director has been spending about 3 months himself ‘on the road’ but indicates he would like to reduce that commitment. and building and maintaining relationships with customers. Overall. “It is a hard life”. rather than just dealing with them at the purchasing level. mainly in Europe (including Russia). meeting the owners of the businesses. Without doubt our biggest strength is our distribution. our partners. they have tended to be less inclined to push the architectural side of the business. the international travel and visits by other members of the management team are seen to be part of building a broader set of strong personal relationships – “building up their profile”. outline your recommendations for future international expansion of Ronstan’s marine division. Howe would you formulate the company’s strategic problem? What solution would you use? Would you change the current distribution strategy? Acting as a management consultant. One of the problems in developing the non-marine side of the business is the existing distributors of Ronstan’s marine products. Your task: Your task in this case is to analyze and discuss the company’s approach to distribution. and requires new types of expertise. which of course requires the opening up of a new customer base. Figure 1: Organizational chart 29 . While enthusiastic.extent. even dedicated to marine products. with all its activities. milk wagons and – in 1966 – a trailer for farm tractors.Case 4: Orkel – what now? by Runar Framnes and Jon Bingen Sande. BI Norwegian Business School. known for its high quality. Over time. students should assume that all information provided in the case document is correct.no) is one of the many small and medium-sized export firms in Norway. 30 . He started by purchasing a welder to make toys. such as tricycles and chair sledges.orkel. It is based. Company history Orkel (see www. Orkel started it’s first export venture in Sweden in the early 1980s. Orkel was established 1949 by Johan Gjønnes. Orkel became a brandname in the market for agricultural equipment. at Fannrem in Orkdal community. More employees were hired and they built a nationwide distribution network. The firm became involved with agriculture through the production of bicycle trailers. The same year they started building their factory at Fannrem. selling feeding cars (Norwegian: fôrutlegger). NB! It is not permitted to contact the company or its employees when solving this case. However. Note that some of the information in this case has not been confirmed by the company (especially concerning internal organization and the details of the agreement between CNH and Orkel). even if they have or find contradicting information elsewhere. for neighbors and friends. The round balers are primarily developed for Norwegian conditions. Trailers.. The new line of mowers and rakes will be produced by a Slovenian producer. mowers. Their goal is to become Norways leading specialist on roughage (Norwegian: grovfôr). but marketed under the Orkel brand through Orkel Direkte. 31 . including weighing systems and the use of broad plastic films to make more compact and watertight bales. Products and production Their current product portfolio includes:  Round balers  Compactors  Trailers for tractors  Motor snowplows  Mowers  AgriNIR forage analyzer (forage= plant material eaten by grazing livestock)  Rakes (for merging and distributing hay) Orkel is a market leader with several of their products in Norway. Instead the round balers are produced by the company CNH. Orkel emphasizes high feed quality. Over the years. Orkel does not anymore produce the round balers at Fannrem.In 1986 they built their first Orkel round baler. They have a particularly strong position with their trailers for tractors. and are used to create round bales of grass. and in 1991 they got their first Japanese customers. snowplows. efficient harvesting and reliability as the core attributes of their round balers.e. Orkel export their balers and compactors to approximately 40 countries around the world. SIP. The round hay bales opened the world for the company. and marketed under the Orkel brand. To realize position as Norways leading specialist on roughage they will in 2015 offer a full line of grass-related products including mowers and rakes in addition to the round balers. AgriNIR and rakes are mostly marketed in Norway and not abroad. farmers) in improving profitability. Orkel has implemented a number of innovations in their round balers. while involved in product devlopement. These attributes help their customers (i. As noted below. dinamicagenerale. but they soon discovered that it could be used to compress a number of other materials as well. A chief difference between the round balers and the compactors is that the compactors handles shorter materials and are not exclusively used for grass. which reduces transportation and storage costs. crude protein. instead of waiting one or two weeks for laboratory results. (http://www. For students not acquainted with round baling and compactors.wikipedia. Farmers will be able to take tests and get results immediately. but it can help farmers save significant costs by analyzing fodder.youtube. by not only supplying machines. Such analyses help the farmer understand the quality of the inputs.youtube.p. The AgriNIR further underlines how Orkel concentrates on helping customers to improve their bottom line. and to determine how he or she should combine different types of inputs in the livestock’s fodder to optimize production. MC1000 and MC850. in particular. The tests assesses fodder quality on several important parameters. Orkel believes that the AgriNIR forage analyzer and their 30 years of experience in round bale production and development puts them in a strong position in Norway as a specialist on roughage.com/agrinir_analyzer). Thereby it is also possible to prove fodder quality.The mechanical products are now complemented by the AgriNIR forage analyzer. we recommend the following Wikipedia article as a brief introduction: http://en. The compactors are therefore currently used for more than 25 32 .com/user2078576. The compactors are used to compress and create bales of a variety of bulk materials. The following video with the MP2000 Compactor is particularly informative: https://vimeo. the compactors: MP2000. The AgriNIR is an expensive suitcase (it costs NOK 200 000).com/watch?v=bgRSZFje68k. wholecrop (Norwegian: helsæd or helgrøde). which means that bales can be stored outdoors.org/wiki/Baler.com/user/orkel100/feed and https://vimeo. but also knowledge and solutions more broadly. The major export product are the round balers and. which is a portable system for analyzing fresh grass.com/66367228. and fiber. The plastic film covering the bales prevents moisture from penetrating into and out of the bales. Orkel’s youtube and vimeo channels are also illustrative: https://www. including dry matter. The MP2000 Compactor was originally developed for compressing maize. starch. and total mixed ration (Norwegian: fullfôr) developed by the Italian company Dinimica Generale S. This video provides statements from customers in the UK using the MP2000 Compactor: https://www. silage (Norwegain: silofôr). The compactors reduce the volume of the bulk materials by 60-70%. p.A. uk/).no/assets/Produktinformasjon/Compactors/brochure-MP2000-industrienglish. 80% of their round balers and compactors are exported.different types of bulk materials. Example of bulk materials compacted by the Orkel compactors include:  Waste materials: domestic waste. peat. logistics.no/products/compactors-en-GB/compactors/ for a more detailed description of the compactors. About 50% of the operating income in 2013 were from exports.no/assets/Produktinformasjon/Compactors/brochure-MP2000agriculture-english. companies that have invested in the MP2000 Compactor baler have seen costs plummeting by 40%.  Industrial bulk materials: sugar pulp. and auto fluff. and cotton. and the following brochures for information about the MP2000 Compactor: http://www. and manure. K S Baling Ltd (http://www. recycling.orkel. recent EU policies aim to minimize the depositing of waste in land fillings. Orkel is currently the world’s only producer of mobile compactors that can be used to compress waste.co.  Agricultural bulk materials: grasses. and use of waste. Orkel has experienced increased demand for their products in recent years.orkel. grape mark. Markets and demand Although many of Orkel’s products are sold in Norway. forage maize. compost. 33 . See http://www. industrial waste. According to the UK distributor. Waste materials such as paper. in particular the compactors. forage mixes.pdf and http://www. As a consequence of these policies Orkel was a few years ago contacted by customers in Germany to help create solutions for efficient storage.pdf. plastics and textiles can be used as fuel. but such use typically requires storage and transportation of waste. paper/plastic.ksbaling. For example.orkel. crimped grain. Orkel’s is represented in about 40 countries on 5 continents. increase energy recovery. reuse and prevent waste the creation of waste in the first stage. Orkel experiences high demand also in more traditional agricultural markets. (EMEI) in China to deliver 84 baling machines (Orkel MP2000 Compactor Balor and GP1260 HiT round baler). SDG wanted Orkel to deliver more than 84 machines. Orkel AS and Orkel Compaction AS. 5) Orkel Development AS. Orkel Compaction AS had operating income of about 50 million NOK. 34 .. in December 2012 Orkel received a 100 million NOK order from Advanced Machinery Equipments Inc. in particular the MP2000 Compactor. In Appendix 1 we therefore include the accounting data for only Orkel Holding AS. For example. The high demand also gives Orkel challenges. 4) Orkel Direkte AS. and six wholly-owned subsidiaries: 1) Orkel AS. Organization The Orkel system consists of the mother company. 3) Gjønnes Eiendom AS. Orkel will deliver the 84 machine over a two-three year period. EMEI will in turn deliver the machines to Shanghai Dairy Group (SDG). 2) Orkel Compaction AS. but CEO Jarl Gjønnes had to ask for a smaller contract because of capacity constraints. which in turn helps SDG in maintaining a high milk production throughout the year. a state-owned cattle feeding company in China with more than 30 000 milk cows. Orkel Holding AS. Orkel AS and Orkel Compaction AS are the two main income generating subsidiaries. Orkel Compaction AS concentrates on production and distribution of compactors. Jarl Gjønnes is the CEO of Orkel Holding AS as well as all the subsidiaries. The principal advantage for them of using Orkels products is that it maintains fodder quality.e. and 6) Orkel EU Ltd. In fact. a sizeable portion of the company’s revenues. SDG will use the compactors to compress and package maize (i. which is controlled by various members of the Gjønnes family. corn) that will be used as fodder. In 2013 the company (Orkel Holding AS) had and operating income of 200 million NOK. no). combine harvesters. they are currently represented in about 40 countries. However. With this agreement. Strategic partnership with CNH In 2012 Orkel entered a long-term partnership agreement with CNH Global NV (www.A. (FI.no/kontakt/ for a full overview of employees in the sales. It produces and distributes New Holland and Case IH tractors.orkel. the company has spread their activities to many countries. she is trained as an agronomer from NMBU. and Orkel became CNH’s “preferred engineering partner for the development of high performance/heavy duty new generation of fixed chamber round baler products”.MI). As noted above. and tools. In the past. Gjønnes has worked in Orkel since he graduated as a civil engineer within machine technology and product development in 1978. Orkel’s web-pages list 26 agents and distributors around the world. Orkel’s export efforts have been characterized by little planning.no/contact/sale-office-factory/ for a full overview of the export marketing and sales organization). through more than 11 000 dealers in more than 170 countries. Her specialty is roughage quality. and had annual sales of 17 billion Euro in 2011.com).felleskjopet. CNH is a majority owned subsidiary of Fiat Industrial S. giving her a strong understanding of customer requirements within the agricultural sectors around the world. See http://www. Borchsenius was hired in 2014 with a background in agriculture. Orkel would still sell and market round balers and compactors for their own 35 .p.Export marketing is primarily handled by CEO Jarl Gjønnes and marketing manager Ragnhild Borchsenius (see also: http://www. CNH acquired Orkel’s technology in the area of fixed chamber round baler products. and has for 21 years been working as an advicer in Norsk Landbruksrådgivning (Norwegian Agricultural Extension Service) in SørTrøndelag. and word of mouth. Orkel sells most of their products through Orkel Direkte. They have a long-term agreement with Felleskjøpet concerning trailers for tractors (www. In Norway. marketing. and service.cnhindustrial. In addition they provide after-sales service through 15 service points around the country. the world’ second larges producer of agricultural and construction equipment (see Appendix 2 for the press release). Hence.orkel. the use of the occasional reference. In contrast to the many engineers in the company. also on behalf of CNH. 36 . One of the most exiting projects concerns the use of MP2000 Compactor to package wholecrop (Norwegain: helsæd or helgrøde). peas. However. and they will in addition produce round balers and equipment for round balers for CNH for a certain period. Part of the background for this agreement was that Orkel understood that it would become increasingly more difficult as a small producer to survive the competition with the large fullline producers like CNH and John Deere. Being able to offer high-quality round balers is also important if Orkel is to achieve a position in the Norwegian market as the leading roughage specialist. When Orkel entered the agreement CNH Orkel had about 40 employees involved in production of balers (and 70 in total). and Orkel is clearly still marketing its own round balers. blades and the grains. barley. Fannrem is Orkel’s only manufacturing facility. which states that “Orkel’s round balers are no longer produced at Fannrem” and that “round balers are now produced on conveyer belts together with red Case IH balers and yellow New Holland balers”. Wholecrop means that grain (Norwegian: korn) or legumes (Norwegian: belgvekster) are harvested when they have reached the stage of development when they are cheesy and ripe. Future development Although Orkel continues to produce round balers. including the MP2000 Compactor. The partnership with CNH thereby frees up time and resources in Orkel. including the straw. or beans. they had already hired three engineers and were planning to hire two to three more. The reasons for using wholecrop as fodder is that it combines fiber-rich roughage. the agreement with CNH means that Orkel in the near future will cease to produce round balers. they had to hire more personnel. with easily dissolvable starch from the grains. “We needed a big brother to continue developing ourselves and stay competitive” Jarl Gjønnes said to the magazine Norsk Landbruk last fall. In other words. both within production and in product development. The main difference between wholecrop and grass is that wholecrop contains starch. so that they can concentrate on the compactors. instead you will see the cheesy white meat inside the grain. They will continue to deliver rolls and shafts to CNH as well as some specialty equipment that is not standard on the balers from Case IH and New Holland. if you squeeze a grain between your fingers. Instead CNH now produces round balers for Orkel1. you will not squeeze out any juice. At the time of entering the agreement with CNH. for example from wheat. and easily 1 This is how we interpret a recent article in Norsk Landbruk by Jøsang. Wholecrop consists of the entire plant.distribution. using both information provided in this case description as well as information available from other sources. to define the company’s 2 The case author Runar Framnes is Chairman of the Board of Directors in MRBB. During a meeting in the fall 2013 with representatives from Møre og Romsdal Biobrensel AS (MRBB)2 the Orkel CEO Jarl Gjønnes was challenged to think in new directions concerning use of the products and a possible partnership abroad. it should be mentioned that Orkel has secured the rights to distribute the AgriNIR forage analyzer in all the Nordic countries. there is little research in Norway on the effects of using wholecrop or on how to package and store the wholecrop.dissolvable proteins from the silage (Norwegian: surfôr or silo/silofôr). and sugar cane. The benefit of using round bales is that they are more compact so that the fodder becomes less exposed to air. they might find customers among entrepreneurs who want to add an additional service for their customers. In addition.and forest plantation waste (South Africa and Mozambique). which in turn should improve fodder quality and efficiency. Orkel’s compressing and packaging technology could give significant logistical cost reductions related to storing and transporting raw materials to the pellets factories. Such projects could significantly increase sales of Orkel’s machines. 37 . Your task Your task in this case is to analyze Orkel’s situation. and they believe it is possible to apply for and win funding from public Norwegian and Norwegian initiated international programs that will help projects succeed that use and develop Orkel’s technology further. Another possibility may be within the bioenergy sector. Norfund. As a start. The meeting was primarily concerned with cooperation within the agricultural market. they will market the AgriNIR to consulting companies like Tine and Norsk Landbruksrådgivning (Norwegian Agricultural Extension Service) and groups of farms operating together. However. MRBB has good contacts in Norad. In 2014 Orkel conducted experiments together with Tine and Norsk Landbruksrådgivning where the goal was to find out if using a compactor could further improve fodder quality (compared with traditional means of treating wholecrop). rice straw and cotton plants (Egypt). Finally. where MRBB together with Swedish and British partners consider bioenergy projects based on pellets produced from straw from food grains (Polen). and the Ministry of Foreign Affairs. A few issues are likely to be of interest when formulating the company’s strategic problem definition and when developing the proposed solution for the company: In what markets and segments should Orkel operate? How should they balance domestic and export marketing? How should they be represented in those markets? Should Orkel get involved with more partners? What products should they concentrate on in their domestic and export markets. http://faostat3. However.fao. information about the production and trade of a wide variety of agricultural products and machinery. and we leave it up to you to judge what sources may be useful and relevant. for example. and to suggest how Orkel should further develop and grow its international presence. In this case. Note. they would not be satisfied with stagnation. Other sources also exist. that the main point of your task is not to gather information. Therefore. the main point is to get training in using theory to formulate and solve practical business problems.strategic problem definition. Therefore. It is also a good advice to consider sources that tell you something about buyer behavior within different markets and segments. If you lack important information to make decisions. you have to make (realistic) assumptions. information gathering from external sources will be more important than in the other cases. you should try to obtain more information about Orkel’s international market environment.org/home/E (statistics from the United Nations Food and Agriculture Organization) is likely a useful resource. we encourage you not to spend time searching for more information about Orkel than you find in this document and in web-pages linked to in this document. however. Instead. 38 . Although Orkel has developed favorably in recent years. and how should they develop those products further? How should they communicate with their customers? How should they price their products? Practical information Note that it is difficult to find more information about the internal resources and capabilities of Orkel than already presented in this text. just like in the real world. There you will find. you have to strike a balance between searching for additional information and analyzing the information that you already have. Instead they hope to continue to increase revenues and profits both from domestic and export sales. URL: http://www. 2014. Espen. “Orkel skal produsere CNH presser”. 2014.no/norsk-landbruk/orkel-skal-produsere-cnh-presser/ Jøsang. “Orkel lanserer komplett graslinje”. Norsk Landbruk. 2012.no/nyhet/pakker-helgrode-%E2%80%A8i-rundballer/ Jøsang. 2012. Dag Idar.no/profilen/jordnaer-innovator/ Suljyåsen. Norsk Landbruk. URL: http://www. 2014. Norsk Landbruk.no/nyhet/orkel-lanserer-komplett-graslinje/ 39 . March 9. “Jordnær innovatør”. URL: http://www. August 22. Dag Idar.norsklandbruk. Berge. “Pakker i helgrønne rundballer”.norsklandbruk. URL: http://www. 2014. September 10. Helene Cecilie. 2014. Norsk Landbruk. 2014.norsklandbruk. September 11.norsklandbruk.References Below follows references to some of the articles we used when writing this case. 2010 31.01.12.12. All data (except number of employees) are reported in 1000 NOK.2009 31.2008 01.01.2013 31.2013 140 941 157 320 123 793 147 919 157 167 200 054 128 527 149 060 122 490 144 126 146 940 173 123 Operating profit/loss 12 414 8 259 1 304 3 793 10 228 26 931 Total financial income Total financial expenses Total/net financial items 1 748 2 145 1 606 1 245 1 496 3 163 5 991 3 533 4 823 4 144 3 900 4 614 -4 243 -1 388 -3 217 -2 899 -2 404 -1 451 Ordinary result before taxes 8 171 6 872 -1 913 894 7 824 25 481 Tax on ordinary result 1 443 1 736 -1 075 57 1 721 6 277 Ordinary result 6 728 5 135 -838 837 6 103 19 203 NET RESULT/PROFIT FOR THE YEAR 6 642 5 135 -838 837 6 103 19 203 Total transfers and allovations 6 728 5 135 -838 837 6 103 19 203 40 . We first report the accounting data for Orkel Holding AS. Students who want a Norwegian-language version of the accounts may log in there (through the BI library) and download the Norwegian version.12.2011 01.2012 01.12.12. then the data for two of the subsidiaries Orkel AS and Orkel Compaction AS (data for other subsidiaries are not included).01.01.2011 31.2009 01.Appendix 1: Accounting data All accounting data have been downloaded from Proff-forvalt. All subsidiaries are owned 100% by Orkel Holding AS.12.01.01.2010 01.2008 31.2012 31. Orkel Holding AS: Results: 2008 Start date End date Total operating income Total operating expenses 2009 2010 2011 2012 2013 01. 61 372 27 137 3 351 58 526 38 769 2 279 69 438 32 124 426 54 283 36 919 3 447 63 027 23 727 1 185 56 684 20 186 7 243 Total current assets 91 860 99 574 101 988 94 649 87 940 84 113 115 020 119 942 124 997 118 054 106 515 104 224 Total equity deposits Total retained earnings Minority after accrued equity 667 11 475 21 101 16 896 0 101 16 058 0 100 16 896 100 22 999 100 42 237 Total equity 12 163 16 996 16 159 16 996 23 099 42 337 Total provisions for liabilities and charges Total long-term liabilities 4 408 31 648 5 167 29 262 1 834 25 281 1 500 29 367 2 903 28 407 6 606 30 610 Total short-term liabilities 71 209 73 683 83 557 71 692 55 010 31 276 Total liabilities 102 857 102 946 108 838 101 058 83 416 61 886 TOTAL LIABILITIES AND EQUITY 115 020 119 942 124 997 118 054 106 515 104 224 2008 70 2009 70 2010 70 2011 70 2012 70 2013 90 TOTAL ASSETS Other information: Employees 41 .Balance: 2008 2009 2010 2011 2012 2013 Total inventories fixed assets Total fixed assets Total financial fixed assets 3 141 20 019 0 1 922 18 445 1 5 526 17 482 1 6 416 16 983 6 0 18 570 6 0 20 046 65 Total fixed assets 23 159 20 368 23 009 23 404 18 576 20 111 Total inventories Total receivable Bank deposits. cash etc. 12.01.2012 01.12.12.2009 01.01.12.12.2013 128 518 136 959 115 832 128 888 138 724 167 899 119 000 132 355 118 419 128 181 132 245 150 376 Operating profit/loss 9 518 4 604 -2 587 707 6 479 17 524 Total financial income Other interest expenses from group companies Total financial expenses Total/net financial items 2 087 1 436 1 601 987 1 165 1 481 0 23 5 48 148 61 4 587 2 413 2 445 2 473 2 330 3 070 -2 500 -977 -844 -1 486 -1 165 -1 588 Ordinary result before taxes 7 018 3 627 -3 431 -779 5 315 15 935 Tax on ordinary result 848 1 015 -1 513 -263 1 205 3 982 Ordinary result 6 171 2 612 -1 918 -517 4 110 11 953 NET RESULT/PROFIT FOR THE YEAR 6 171 2 612 -1 918 -517 4 110 11 953 600 0 540 -936 -576 -720 450 5 571 2 072 -982 59 4 830 11 503 6 171 2 612 -1 918 -517 4 110 11 953 Allocation dividends Group contributions Allocation other equity/covering of previous uncovered loss Total transfers and allovations 42 .2009 31.01.2012 31.2011 01.2008 01.01.2011 31.Orkel AS: Results: 2008 Start date End date Total operating income Total operating expenses 2009 2010 2011 2012 2013 01.2013 31.2008 31.12.01.2010 31.01.2010 01. cash etc. 45 327 27 607 293 46 199 30 683 577 56 652 26 081 274 45 071 30 941 793 48 953 22 188 1 006 31 871 17 506 6 011 Total current assets 73 227 77 459 83 007 76 805 72 147 55 389 TOTAL ASSETS 86 564 89 110 97 284 83 544 73 346 60 525 Total equity deposits Total retained earnings 500 15 872 500 17 944 500 16 962 500 17 021 500 21 851 500 33 354 Total equity 16 372 18 444 17 462 17 521 22 351 33 854 Total provisions for liabilities and charges Other long-term liabilities Total long-term liabilities 2 804 13 179 15 983 3 685 11 527 15 212 577 9 905 10 482 351 8 882 9 233 1 858 7 464 9 322 5 712 7 430 13 142 Total short-term liabilities 54 208 55 455 69 340 56 790 41 674 13 528 Total liabilities 70 191 70 666 79 822 66 022 50 995 26 670 TOTAL LIABILITIES AND EQUITY 86 564 89 110 97 284 83 544 73 346 60 525 2008 2009 2010 2011 2012 2013 68 69 67 64 77 87 Other information: Employees 43 .Balance: 2008 2009 2010 2011 2012 2013 Total inventories fixed assets Total fixed assets Total financial fixed assets 0 1 754 11 582 0 1 390 10 261 4 348 1 073 8 855 5 982 694 63 0 1 198 1 0 1 772 3 365 Total fixed assets 13 336 11 651 14 277 6 739 1 199 5 136 Total inventories Total receivable Bank deposits. 01.2013 Total operating income Total operating expenses 22 719 25 515 20 524 32 048 33 727 51 224 19 472 22 223 16 822 29 462 30 431 42 105 Operating profit/loss 3 246 3 292 3 702 2 586 3 296 9 118 Total financial income Other interest expenses from group companies Total financial expenses Total/net financial items 1 445 758 18 272 507 1 912 78 35 22 5 29 18 712 554 1 848 748 1 035 714 733 204 -1 830 -476 -528 1 198 Ordinary result before taxes 3 979 3 496 1 872 2 110 2 768 10 317 Tax on ordinary result 1 115 983 521 591 645 2 890 Ordinary result 2 865 2 513 1 351 1 519 2 123 7 427 NET RESULT/PROFIT FOR THE YEAR 2 865 2 513 1 351 1 519 2 123 7 427 1 230 1 800 1 296 1 318 1 152 1 512 1 634 713 55 201 971 5 915 2 865 2 513 1 351 1 519 2 123 7 427 Allocation dividends Group contributions Transfers from share premium reserve Shareholder contribution Bonus issues Allocation other equity/covering of previous uncovered loss Total transfers and allovations 44 .12.Orkel Compaction AS Results: 2008 Start date End date 2009 2010 2011 2012 2013 01.01.01.2008 01.2011 01.12.2008 31.12.01.2010 31.12.2011 31.2013 31.2009 31.01.2010 01.12.2012 31.2009 01.01.12.2012 01. cash etc.Balance: 2008 2009 2010 2011 2012 2013 Total inventories fixed assets Total fixed assets Total financial fixed assets Other fixed assets 2 666 48 0 1 922 30 0 1 256 95 3 468 52 18 11 22 7 650 15 0 7 361 Total fixed assets 2 714 1 952 1 353 538 7 683 7 376 Total inventories Total receivable Bank deposits. Total current assets 16 044 9 747 3 036 28 827 12 224 8 946 1 599 22 769 12 203 14 310 126 26 639 8 988 10 687 2 627 22 301 13 858 5 449 154 19 461 24 607 7 838 1 182 33 626 TOTAL ASSETS 31 541 24 722 27 992 22 839 27 144 41 003 9 716 3 144 9 716 3 857 9 716 3 911 9 716 4 113 9 716 5 084 9 716 11 034 12 860 13 573 13 627 13 828 14 800 20 750 21 16 0 0 0 0 Total long-term liabilities 1 281 16 0 0 0 0 Total short-term liabilities 17 401 11 133 14 364 9 010 12 344 20 253 Total liabilities 18 681 11 149 14 364 9 010 12 344 20 253 TOTAL LIABILITIES AND EQUITY 31 541 24 722 27 992 22 839 27 144 41 003 2008 2009 2010 2011 2012 2013 4 4 4 4 4 4 Total equity deposits Total retained earnings Total equity Total provisions for liabilities and charges Other information: Employees 45 . compactors and tractor trailers.(March 8. New Holland Agriculture and Case IH brands through their respective dealer networks. CNH will acquire intellectual property rights and tooling for Orkel’s fixed chamber round balers (FCRB) and Orkel will become CNH’s preferred engineering partner for the development of high performance/heavy duty new generation of FCRBs.300 dealers in approximately 170 countries. is a majority-owned subsidiary of Fiat Industrial S. "Our partnership with Orkel .p. Owner and President of Orkel. This alliance brings together CNH’s expertise in tractors. whose stock is listed on the New York Stock Exchange (NYSE:CNH). combines. Supported by approximately 11.a key player in the heavy duty fixed chamber round baler and compactor sector . CNH’s partnership with Orkel will involve several key collaboration areas to further reinforce CNH’s leadership in the agricultural business.” said Richard Tobin. a global leader in the agricultural and construction equipment businesses.. CNH brings together the knowledge and heritage of its Case and New Holland brand families with the strength and resources of its worldwide commercial. "We are very excited about the prospect of leveraging our market position for the benefit of our customers in Europe and becoming CNH’s engineering partner in the premium baler segment.MI).Appendix 2: Press release concerning partnership with CNH Thu Mar 08 08:30 EDT 2012 CNH Announces Strategic Partnership with Orkel AS For more information contact: CNH Corporate Communications +1 (630) 887-3823 LUGANO. President and CEO of CNH.V. More information about CNH and its Case and New Holland products can be found online at www.is a sign of CNH’s intention to strengthen its presence in the Hay & Forage business. Orkel-CNH products will be sold under the Orkel. Switzerland -.A. industrial. This agreement brings CNH’s product offering in line with market trends and requirements to better meet the evolving needs of our global customers." said Jarl Gjonnes.com. ### About CNH CNH Global N. 46 . CNH Global N. the Norwegian market leader in high performance fixed chamber round balers. is a world leader in the agricultural and construction equipment businesses. (FI. forage harvesters and other agricultural equipment of all classes and power ranges with Orkel’s leading technology in high performance fixed chamber round baler products. product support and finance organizations.cnh. 2011) -. sprayers.CNH.V. today announced a long term strategic partnership with Orkel AS. is one of the largest manufacturers of farm machinery in Norway. due to its long and lasting service for the Norwegian farmer. The company has been leading in the development of new products enabling its customers to meet the challenges of the future. Orkel AS products have earned a reputation of being top quality. Over the years. and being well-fitted for the rough Scandinavian demanding conditions. mid Norway. based in Fannrem. Round chamber balers. Orkel AS has a unique position on the domestic market. More information: http://orkel. compactors. tractor trailers and snow blowers are the main products.no/home/ 47 .About Orkel Orkel AS.