Christian Nehammer January 13th 10C Mr.

Ponish Business Growth and Expansion potential Pam Pam is an Italian hypermarket based in Milano, Italy. Their focus is to provide fresh Italian products at an affordable price. Pam does not produce any products therefor their business model is focused on retail. Pam only operates in Italy where it has 42 hypermarkets, most of them based in big cities such as Milano, Roma, Torino, Genova and Bologna. As stated before Pam has a reputation to guarantee fresh Italian products at an affordable price, this is their market focus. The Evaluation is if the expansion of pam into Germany would benefit the company. Pam is not a manufacturing company but an Italian retail chain. The input is products bought from manufactures, mainly from Italy. Pam does not produce any products that are sold at their hypermarket; they rely solely on other manufacturing companies. Retail market can be dived into grocery and nongrocery retailing. Examples of grocery retailing are Mom and pop stores, supermarkets and hypermarket. The difference is determined by size and ownership. Examples of non-grocery retailings is clothes and sport stores etc. Pam is a grocery retailer focusing on fresh Italian products, which are mostly fresh fish, meat, fruits, vegetables and baked goods. This is Pams point of difference, which is where the company tries to excel to have an advantage over its competitors and to create a competitive advantage. Pam is clearly focusing on food that has super and hypermarkets. A retail market can range from many different products; pam specializes on a food retail market unlike companies like footlocker, which focus on apparel and footwear retail. The retail of fresh food is a competitive market because the shelf life of fresh products is limited compared to that of none food retail markets. This creates pressure and complexity in the supply-chain. When a product has a short shelf life for example milk, fish etc Inventory management becomes very important and is the key to for managing the input process. To create an economy of scale Pam has created a central warehouse from where the stores are able to order products directly several times a day. For a retailer such as Pam avoiding to have own production and using products by various companies helps to make the supply chain more manageable. For Pam factors of production or value added activities is clearly generated by efficiency in purchasing, warehousing, transportation and displaying the product in a way which allows Pam to sell the product at a higher price then what it was purchased for. Pros If pam were to expand its business into Germany, it would benefit from a whole new consumer group. Italy has 60 million inhabitants Germany has 80 the potential consumer group would more then double. With these new consumers

would have the opportunity to significantly increase their revenue. The following benefits would be Italy is known for its high quality fresh food. In Germany Italian food has a high perception. Pam could use its Italian heritage to gain a quality advantage over existing retailers. This could result in generating significantly more sales and revenue than what pam has today. With the increased volume the bargaining power or the economy of scale would be increased. This means that Pam would have stronger negotiation power to buy the products at lower prices then, which they do today. This will not only benefit product purchase for the expansion country but also for the Italian stores. Using existing management and administration infrastructure Pam will be able to achieve economy of scale and lower the per store administration costs. Cons With any expansion into new regions/countries/markets several cons need to be considered before the expansion of a company. For Pam I believe the following risks need to be evaluated: Lack of local knowledge Expanding to a new country is important to understand the local market, habits and culture. The consumers in Germany appreciate Consumer habit: Consumers in new countries can have different habits than the ones of your home market. Pam should study the wall-mart example "If you want to be successful in a foreign market, you have to know what your customers want. That's the most important lesson," Wild said, who is from England "It does not good to force a business model onto another country's market just because it works well somewhere else." This states that if entering a market without general knowledge and a well trained staff a successful business is hard to achieve. Not understanding the completive landscape: It is vey important for a company to understand that the landscape of a food market can differentiate from north to south. In Italy the mentality is focused on quality of their food. While an Italian family would pay a lot for food it would cut down on apartment bills and car prices. Although in the north the consumer is focused on saving money on food and therefor spending the saved money on other luxuries, such as cars. Capital intensive (cost of expansion) The cost of expansion of Pam is a huge factor to take into consideration. For these expansion costs to me reached Pam has to be equipped with excess money, which because of Italys economic status is not the case. Timing: Italy is undergoing a rough economic crisis which affects Pam in a negative way. The consumers have less money to spend therefor Pams profit decreases to that of previous years. Timing is very a important factor to take in consideration before expanding a company. It is very

important for Pam to defend their market in Italy before attacking the foreign market of Germany. In conclusion, Pam would not benefit from expansion because of the current economic status in Italy. For Pam to be able to attack outer markets they have to have enough profit being gained at home, although because of the economic situation this is not the case. Pam although could consider expanding in countries which obtain similar food market concepts such as Spain or France. Pam remains the leader in fresh food at an affordable price in Italy although and expansion in too Germany would not be optimal for the company as stated before because of Italys drastic economic status. Works cited: 1. Interview with Thomas Ingelfinger Managing Director Beiersdorf Southern Europe 2. Interview with Maurizio Pettorino Indesit Company Managing Director 3. "World's Biggest Retailer Wal-Mart Closes Up Shop in Germany." TOP STORIES. N.p., n.d. Web. 13 Jan. 2013. Bibliography: 1. "World's Biggest Retailer Wal-Mart Closes Up Shop in Germany." TOP STORIES. N.p., n.d. Web. 13 Jan. 2013. 2. "Economies of Scale, Economies of Scope." Ribbonfarm RSS. N.p., n.d. Web. 13 Jan. 2013. 3. "Home." Pam Home. N.p., n.d. Web. 13 Jan. 2013. 4. "Addio, Silvio." The Economist. The Economist Newspaper, 12 Nov. 2011. Web. 13 Jan. 2013 5. http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Be rlin_Germany_7-31-2012.pdf (pdf document)