Page 3: Entering continental Europe
Dixons' objective is constant – profitable growth. By acquiring the 'best players' in a range of European locations, the Group gains the ability to increase not only in absolute scale, but also geographical spread.
The businesses acquired in Europe were already either the number one or number two players in their respective countries and their core operations were aligned with those of the Dixons Group. The Group’s recent activities illustrate its systematic approach to achieving profitable growth.
In 1997, Dixons Group plc acquired the retail assets of Harry Moore Ltd, Ireland. This provided retail outlets for audio-visual equipment. They were relaunched as Dixons, to which branches of Currys and PC World have since been added. Growth is being achieved largely by introducing the established UK model. Similarities in retailing practice and sufficient common cultural links make this approach possible.
In December 1999, Dixons Group plc purchased Elkjøp ASA. Elkjøp has 154 stores across the Nordic region selling electrical goods. Elkjøp already had a strong brand identity which will be maintained. It is the market leader in Norway and is the only company with electrical stores in every Nordic country. Store design was quite different to that of the UK with customers entering the store through gates, walking around the store and out through checkouts, rather like a supermarket. Dixons Group was able to build on this and also transfer some of the ideas to other European outlets. The Group is currently considering expanding PC World into the Nordic market.
The company has a record of strong, profitable growth. Its outlets are large superstores and high street stores, under various names offering a wide range of electrical products at competitive prices. Elkjøp operates in a market of 23 million people, with average incomes higher than the UK and with good prospects of continuing economic growth. Clearly, it made no sense for Dixons to set up in competition with an established market leader. The route to growth is through acquiring the successful market leader and developing it.
The Group also recognises the opportunities for further growth in these markets. For example, Ekjøp, which Dixons acquired in Norway with operations in Sweden, Finland, Denmark and Iceland was already expanding further into Finland and Denmark at the time of acquisition.
Early in 2000, the Group purchased Ei System, the leading PC retailer in Spain and Portugal with a strong reputation for quality and value. Spain was attractive to Dixons because the PC market is comparatively underdeveloped (Ei System had only 12 stores) and a relatively relaxed planning regime opens up opportunities for new stores in fast-growing, out-of-town retail parks. The existing stores have development potential and the new series of stores will complement them.
The Group acquired a 15% stake in Kotsovolos, the leading electrical retailer in Greece - Kotsovolos has a 56% stake in Radio Athinae, a retailer of brown and white goods with 15 stores, and an interest in One Way Informatics SA, a retailer of PCs and mobile telephones with concessions in Kotsovolos and Radio Athinae stores.
The purchase exposed Dixons to the particular market characteristics and consumer preferences of the Greek retail industry. In particular Greek stores are highly focused on credit and in the sale of finance to consumers wishing to purchase goods. So established is this phenomenon that many customers pay their monthly instalments in cash via in-store machines, rather like ATMs found outside banks and building societies in the UK.