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ELKO Group ConventionELKO Group Convention
RigaRiga,, September September 20042004
Agenda
Regional Economic OverviewCEE and EU effectRussian Market
Elko Group Update
Future developments
Regional Economic Overview
European Developing Market Overview
Three groups of countries– New EU Entrants:
Baltics, Poland, Czech, Slovakia, Slovenia, and Hungary
– Prospective EU Entrants: Romania, Bulgaria, and Former Yugoslavia
– EU Neighbours: Russia, Ukraine, and Turkey
The Convergence Play– Political and Economic convergence to EU norms
driven by economic power of one market and political pressure
Convergence – Implications
Faster economic growth than US or Western Europe for 20 years plus– Implies faster market growth for all manufactured goods– Increasing share of European Market
Harmonisation– Common EU law – Similar business rules and partnership
Extending to neighboring countries
– Standardized rules on VAT and Duty– Common Currency and Accounting Principles– Unfortunately, significant cultural and other differences will
remain
CEE vs. EU: GDP Per Capita, 2002The Enduring Wealth GapCEE vs. EU: GDP Per Capita, 2002The Enduring Wealth Gap
CEE vs. EU: GDP Per Capita, 2002The Enduring Wealth Gap
0
5,000
10,000
15,000
20,000
25,000
EU
ES
P
GR
EU
8
BU
CR
O CZ
HU
Es
ton
ia
LT
V
LT
H
PO
RO
RU
SK
SL
O
UK
R
TK
Productivity gap = lower IT spendProductivity gap = lower IT spend
GDP Per Capita at Nominal Rates — 2002GDP Per Capita at Nominal Rates — 2002
Various Estimates — 50 to 80 Years — Based on 3% to 4% Annual GDP Growth
Source: EIU, Eurostat
U.S. $
EU Accession: Understanding the Impact
0
5,000
10,000
15,000
20,000
25,000
30,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Services
Software
Hardware
US$M
CAGR 10.7%
Pre-AccessionIndirect
1998–2000
CAGR 9.9%
Pre-AccessionLow Impact2001–2006
CAGR 9.9–11.4%
Post-AccessionHigh Impact2007–2013
Three Phased Market DevelopmentThree Phased Market DevelopmentIT Spending for the EU 12 Accession StatesIT Spending for the EU 12 Accession States
Source: IDC
CEE vs. EU: GDP Per Capita, 2002The Enduring Wealth Gap
IT Spending Ratios in CEE, 2002
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0 50 100 150 200 250 300 350 400 450 500 550 600 650
Czech Rep.
Slovenia
Greece
Hungary
Romania
EU 15 = 2.8%
Bulgaria
EU Accession 12
CEE is still playing catch-upEU 15 average: $635 per capita/ca. 2.8% of GDP (2002)
Poland Spain
Ukraine
EU 15
Russia
Estonia
Latvia
Lithuania
Turkey
CroatiaSlovakia
Cyprus
Source: IDC
IT/Capita US$
IT$/GDP
EU 12 — IT Market Development
CAGR 2002–2007
IT Consulting
0%
10%
20%
30%
40%
50%
60%
70%
PCs
ServicesOperations
Datacoms
ImplementationVolume
Servers
Software
App. Tools. App. Solutions.
Storage
Overall Regional Market Growth of 10–11% Annually
CAGR 02/07CAGR 02/074.5%4.5%CAGR 02/07CAGR 02/07
6.9%6.9%
CAGR 02/07CAGR 02/0711.8%11.8%
CAGR 02/07CAGR 02/0712.2%12.2%
CAGR 02/07CAGR 02/079.8%9.8%
CAGR 02/07CAGR 02/0711.6%11.6%
$16 Billion Market by 2007
Source: IDC Worldwide Black Book, December 2003
Conclusion
Low IT spending ratios plus high growth = huge potentialLocal expertise will be needed to design and implement a regional strategy.Majority of countries will grow quickly for at least 10 to 15 years in order to reach parity with Western Europe. EU accession will make more funding options available and drive additional investment in IT (direct and indirect impact)
Russian Market: Stabilizing
Political system moving toward democracy
Growth of middle class supporting political and economic reforms
Russian business is increasingly linked to the EU
Russian Market: High Economic Growth
Oil Boom fueling all sectorsEconomic growth spreading throughout country Dormant manufacturing capacity being utilized More predictable regulatory, tax and legal environment More focus on quality and value
High usage of technology to meet international competition
Russian Growth and the PC MarketRussian Growth and the PC Market
6%
30%
64%
Int. Vendors
Large Russianvendors
Others
Total Desktop PCs shipped in 2003: 3.6 Million
Source: IDC
Proximity resellers
Supplier is local
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003
State / Corp.
S. bus.
Home
Russian PC Market by End User, 2003Russian PC Market by End User, 2003
Source: IDC
Russian PC Market: Unsaturated
0
2
4
6
8
10
12
14
1999 2000 2001 2002 2003
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
IB (Millions)
PC Pentration
Source: IDC
Russian IT Market Growth by Product key issue in 2003 has been availability more than marketing investment
PC
Printer
PDP
Server
Total IT
0% 20% 40% 60% 80% 100% 120%
YoY Growth
Source: IDC
0
2
4
6
8
10
12
2003 2007
PC
Total IT
Long term growth for Russian IT market
$bn>70% increase
Source: IDC
ELKO Group Update
Vilnius, LT
Emerald lakes, SL
president Vaira-Vīķe Freiberga, LV
Tatry, SK
Drakula’s castle, RO
Crimea, UA
Andrus Veerpalu, EE Olympics champion
St.Petersburg, RU
Kolsjun island , CR
RIGA, the Headquarters of ELKO Group
ELKO Group countries, overview
countryPopul., mil.
Area sq km Language (Grow to succeed.)
Croatia 4,4 56 542 Da bi uspijeli trebamo neprestano rasti.Estonia 1,4 45 226 Edukalt kasvanud.Latvia 2,4 64 589 Augt, gūstot panākumus.Lithuania 3,6 65 200 Augti, kad pasiektum tikslą.Russia 144,5 17 075 200 Расти преуспевая.Romania 22,3 237 500 Creste spre succes.Slovakia 5,4 48 845 Rast k uspechu.Slovenia 1,9 20 273 Z rastjo do uspeha.Ukraine 48,1 603 700 Зростати у процвітанні.
countries are different:
• size
• language
• culture
• political situation
• mentality
ELKO Group offices have in common:
• ambition to grow and succeed
• be a member of the ELKO Group
Mission Statement
Be the Number One IT supplier in Europe’s Emerging Markets
Through excellent execution and professional services, offer customers and vendors the opportunity to participate in the rapid growth in CIS, Eastern European and the Baltic countries.
Deliver value to customers through excellent service, value to shareholders through superior returns, and value to employees through a stimulating and challenging work environment.
Key Figures ‘00-’04 / SALES REVENUE ($M)
180217
260
360
187
233
0
50
100
150
200
250
300
350
400
450
'00 '01 '02 '03 '04
Sales Revenue ($M) FC ($M)
+20%
+20%
+38%
+18%
Revenue HY 1’03 & HY 1’04
Q1 2003 Q1 2004
Sales $78 million $92 million
+ 18 %
Q2 2003 Q2 2004
Sales $74 million $94,4 million
+ 28 %
Sales Growth by Office HY1’03-HY2’04
21% 15% 12%3%
47% 46%34%
104%
34%21%
0%
20%
40%
60%
80%
100%
120%
Latv
ia
Estonia
Lithu
ania
StPet
ersb
Mos
cow
Ukrain
e
Sloven
ia
Slovak
ia
Roman
ia
Croat
ia
Operational & Strategic Overview
ELKO Group Territory Development
ELKO Group Corporate Strategy
Centralise Strategic management
Integration into local markets
Maintain extensive components based product portfolio
Leverage technology
Recent Developments
Slovakia: – Acquired new company– Upgraded warehouse and office space
Russia:– New logistic centre in Moscow and 11 other regional centers– Increasing sales team by 15 people– Implementing JD Edwards
Ukraine– Opened 5 offices and regional warehouses
Romania– New warehouse and office
Successes of the ELKO TEAM
Some numbers
CPU: 1 Mio.HDD’s: 1,4 Mio.Mainboards: 400kMedia: 20,X Mio.VGA cards:220kStorage devices: 850kDisplays: 220kFloppy Disks: 740kKeyboards: 300kMice: 620k
And much more…
Revenue Development 2003 – 2007 ($M)
233
504
605
726
360
187
0
100
200
300
400
500
600
700
800
2003 2004 2005 2006 2007
FC ( $M ) Sales Rev
The ELKO Team
Powerful selling machine in the NEW middle of EuropeHard working dedicated distribution teamAccess to fast growing marketsOne central contact and control point opens business to 9 countries, 26 offices, 28 warehouses, 120 sales people and 5000 customersStrong financial performance audited by PriceWaterhouseCoopers gives stability and security
thank you!
for more information about ELKO Group please visit our website:
http://www.elkogroup.com/for further questions please contact ELKO Group
marketing department [email protected]