Entering the Swedish market: The Karstadt GmbH case

by

Sebastian Meyer

Semester 2, 2003/2004

Table of Contents

1. Introduction 1

1.1. Information about the Company 1
1.2. Scenario and Product/Services 1

2. PEST Analysis 2

2.1. Political factors 2
2.2. Economic factors 2
2.3. Sociocultural factors 3
2.4. Technological factors 3

3. Risk Assessment 3

4. Market Entry Plan 5

4.1. Market Entry Strategy 5
4.2. Corporate and strategic marketing objectives 5
4.3. Market to be entered 6
4.4. Market Entry Alternatives 6

5. Operational Plan 6

5.1. Detailed Target Market Analysis 6

5.1.1. Demography 6
5.1.2. Geography 7
5.1.3. Psychography 7

5.2. Market Positioning Statement 7

5.2.1. Product 7
5.2.2. Price 7
5.2.3. Place 8
5.2.4. Promotion 8

6. Management Implications 8

6.1. People 8
6.2. Profits 8
6.3. Physical Evidence 9

7. Monitoring, Controls, Budget 9

7.1. Measurements 9
7.2. Control Systems 9
7.3. Budget 9

Bibliography 10

1. Introduction

As one of Europe’s oldest and largest over-the-counter retailers Karstadt GmbH, subsidiary of Karstadt Quelle AG (Figure 1), operates exclusively in Germany. The present assignment puts forward the proposal that Karstadt GmbH should attempt to penetrate the Swedish market. Furthermore, a PEST analysis and a risk assessment as well as a market entry plan and a final conclusion will form different parts of this work.

1.1. Information about the Company

The KarstadtQuelle AG (Plc.) is Europe’s largest department store and mail order group. In 2003 the firm’s revenue was € 15.3 billion and the earnings before tax and amortisation of goodwill were € 225 million. 100,956 employees were employed by KarstadtQuelle at the end of 2003 (www.karstadtquelle.de). Karstadt GmbH (Ltd.) as a subsidiary of KarstadtQuelle consists of 212 department stores and 305 speciality stores which accounted for 45.7 % or € 6.972 billion sales in 2003. In addition, the well-known ‘KaDeWe’ (abbreviation for ‘Department Store of the West’) which is situated in Berlin and with 60,000 square metres of sales space the largest department store in Europe also belongs to Karstadt (www.karstadtquelle.de).

1.2. Scenario and Product/Services

Due to the problematic economic situation in Germany with decreasing consumption in retail trade KarstadtQuelle decides to enter new markets within Europe by moving to Sweden. The products/services provided by Karstadt will be restricted to the implementation of department stores in excellent city centre locations at the beginning of the process.

2. PEST Analysis

At the beginning of our process it is useful to examine a PEST analysis which consists of Political, Economic, Sociocultural and Technological factors (Douglas 1995 p. 11). With the assistance of this analysis the environment of Sweden will be evaluated.

2.1. Political factors

Sweden is a constitutional monarchy ruled by the governmental parliament. Moreover, Sweden can be seen as a very peaceful country without participating in a war since 1814. In 1995 Sweden joined the European Union and has been a member of the United Nations since 1946. The current and dominant political force is the Social Democratic Party led by the Prime Minister Göran Persson (www.sverigedirekt.se). Therefore we can say that Sweden is a very safe country with excellent international relations.

2.2. Economic factors

Due to Sweden’s neutrality the living standard of its population can be described as enviable. Sweden has a skilled labour force and outstanding internal and external communications. The purchasing power parity of the gross domestic product (GDP) was $ 230.7 billion in 2002 with a real growth rate of 1.9%. This signifies a per capita GDP of $ 26,000 in the same year. In 2002 Sweden’s inflation rate amounted to 2.2% and the unemployment rate to 4% (www.cia.gov). Sweden’s current interest rate is with 2.5% half a percentage point above the benchmark rate of the European Central Bank (www.sweden.se). The debt of Sweden is now at 50% of GDP whereas in 1998 it was about 75% of GDP (www.sweden.gov.se). Main competitors in the Swedish department store market would be Nordiska Kompaniet and Ahlens (en.wikipedia.org). Recapitulating we can say that the Swedish economy is constantly improving.

2.3. Sociocultural factors

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