Kesko's year 2007

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40 Kesko's year 2007 Strategic emphases BUSINESS Kesko is a Finnish retail specialist which provides products and services valued by consumers in the Nordic and Baltic countries, Russia, and Belarus in close cooperation with retailer entrepreneurs and other partners. Kesko manages retail store chains, develops store concepts and business models, data management and logistics services. Kesko’s operations include food, building and home improvement, car, department store, home and speciality goods, agricultural and machinery trade. healthy, focused growth Increasing shareholder value by improving profit Kesko’s strategic objective is to strengthen shareholder value by focusing on increasing business divisions’ sales and market shares and improving profitability. The proportion of international business will be increased. The target return on invested capital is 16%, while the target return on equity is 14%. The key issue in increasing the shareholder value is achieving customer satisfaction exceeding that of competitors. Main divisions are expanding to high-growth markets In Kesko’s strategy, the emphasis in investment and internationalisation is above all on the food, and building and home improvement trade. Growth is achieved with considerable store site investments and business acquisitions supporting the growth strategy. Outside Finland, growth is sought particularly from the high-growth Russian and Baltic markets. Kesko’s strategic emphases healthy, focused growth ● We increase the shareholder value by improving profit ● We expand our main divisions to the high-growth markets ● We increase our market share particularly in the domestic food trade ● We expand our store network strongly in the food and building and home improvement trade Sales and services for consumer- customers ● Our customer satisfaction exceeds that of competitors ● Retailers’ local knowledge is our competitive asset ● We leverage customer information efficiently ● We develop electronic commerce and services The spearhead in Kesko’s growth and internationalisation process has been the building and home improvement trade, which is being expanded in accordance with the strategy by opening new store sites in Russia, the Nordic countries and the Baltic states. In addition to store site investments, business has also been grown through acquisitions. The Russian market in particular offers significant growth potential in the building and home improvement trade. In addition to St. Petersburg and Moscow, Rautakesko’s objective is to open new stores in other large Russian cities, too. Support for Rautakesko’s growth is provided by investments in the joint enterprise resource planning system and centrally directed logistics network and by leveraging economies of scale in sourcing and purchasing. Kesko Food’s objective is to expand business to Russia, and the Baltic market is also being investigated. Expansion to the Baltic countries in the sports trade is also being studied. Kesko will also strengthen its position in the Baltic machinery and furniture trade. Responsible and cost-efficient business models ● Our operating practices are responsible ● We combine retailer entrepreneurship and chain operations efficiently ● We leverage our economies of scale to the benefit of customers ● We guide business with efficient data management ● We have the best practices and competence in the trading sector
Year 2007 Divisions The Group Financial statements Further information 41 Increasing market share particularly in domestic food trade Besides Kesko’s international growth, a key strategic objective is growing the market share in Finland on a long-term basis, particularly in the food trade. Large store site investments and improvement in customer satisfaction will contribute to this growth in market share. K-food stores aim to offer their customers the best food ideas and solutions at low prices. This is achieved with customer-driven, high-quality and diversified selections, individual service and competitive pricing. Sales and services to consumer-customers Customer satisfaction exceeding that of competitors Kesko’s strategic growth area is sales to consumer-customers. The target is customer satisfaction that exceeds that of competitors and sales growth. Success in the consumer-customer trade requires clear customer and brand promises and delivering these promises on every visit to the store. Customer promises are delivered with high-quality and competitively priced products, a comprehensive store network and good service. Kesko has dozens of successful product and chain brands. Extensive brand strategy work has been started to strengthen the position of these brands. A steering group, comprising Kesko people and outside memebers, has been established to steer this work. Creation of customer-driven selections and targeted marketing are supported by the K-Plussa customer loyalty system, whose reward and debit card features underwent a major reform in 2007. The objective of the K-Plussa system is to offer considerable product and service benefits to customers, encouraging them to centralise their purchases in the K-Group. Customer-driven business models The business models applied in Kesko’s sales to consumer-customers are retailing through retailer entrepreneurs and own retailing. Kesko is also engaged in B-to-B sales. 1) Retailer entrepreneurs’ retailing The principal business model in the Finnish market is the chain business model, in which independent K-retailers run retail stores in the chains managed by Kesko. In Finland, for example, all food and building and home improvement stores in the K-Group are run by retailer entrepreneurs. With its chain operations, Kesko provides a first-class setting for its retailer entrepreneurs to serve their customers as well as possible. The K-retailer entrepreneur is responsible for his or her store’s customer satisfaction, personnel and profitability of business. Good service, competence and knowledge of local circumstances provide a competitive edge. At the end of 2007, Kesko had 1,285 K-retailer entrepreneurs as partners and, in addition, about 250 other retailer partners in the Asko, Sotka, Tähti Optikko, Byggmakker and Senukai chains. Kesko’s sales to retailer partners accounted for 43% of Kesko’s net sales in 2007. 2) Kesko’s own retailing Kesko acts as a retailer in business operations where the competitive advantage is based on the centrally directed chain concept. Kesko’s own retail stores in Finland include the Anttila and Kodin Ykkönen department stores. In addition, Kesko is also responsible for retailing home and speciality goods in the K-citymarket chain. Kesko’s own retailing is the principal model used in expanding business operations outside Finland, where rapid growth and efficient risk management play key roles, particularly in the Baltic and Russian markets. In 2007 Kesko’s own retailing accounted for 31% of net sales. 3) B-to-B sales Kesko is engaged in B-to-B sales particularly in those business operations that support consumer-customer sales. Typical business customers include building companies, VV- Auto dealers, agricultural entrepreneurs, the manufacturing industry, institutional kitchens and the public sector. In 2007 Kesko’s B-to-B sales accounted for 26% of net sales. Development of electronic commerce and services Electronic commerce is rapidly gaining ground in consumer-customer sales. Kesko’s strategic objective is to grow business and improve customer satisfaction through e-commerce and services. In order to achieve this objective, a project covering online customer communications has been started. Kesko holds a strong position in online busi-
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Page 71 and 72: Year 2007 Pekka Lahti b. 1955, M.Sc
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Design and layout: Incognito Photos
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Kesko's year 2007

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