International Business Lars Skovby Henley

International Business
Lars Skovby
Henley Business School
Student Number: 27021366
Word Count: x.xxx (max 5.900 / min 4.600 words)
(not including appendices and bibliography/reference)
Lars Skovby  IB Assignment  Page 1 of 22

Content
Content 2
1. Executive Summary 3
2. Introduction 4
2.1. Organisation 4
2.2. Challenge 5
2.3. Opportunity 5
3. Analysis and evaluation 7
3.1. Approach 7
3.2. Makro perspective 7
3.3. Cultural, administrative and economical perspective 9
3.4. Firm specific advantages and capabilities 12
3.5. Conclusion 13
4. Integrated summary and solution options 14
4.1. Summery 14
4.2. Solution options 14
5. Recommendations and implications 15
5.1. Headline 15
6. References 16
7. Appendix A 17
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1. Executive Summary
This assignment takes up the issue of current international business problem of AP pension in
terms of entry modes to the foreign markets. The reason behind the selection of this problem is the
thirst for achieving resolution for the acquisition risks prevailing in the threshold of Danish markets.
Along with this, lack of adequate acquisition candidates aggravates the complexities in the
expansion process. Involving EU has been one of an effective steps for aligning the operations
according to the recent marketing trends and the legal requirements. Similarity in the cultural
market, economic growth, level of education and privacy in the pension plans are the aspects
considered for enhancing the critical success factors. Consideration of the collaborative
approaches of the executive management choices is an agent for deciding whether the
assumptions align with the criterions. Sweden is appropriate for AP Pensions in terms of exporting
the pensions. The major drove behind this is the flexible financial regulatory system, strong literacy
rate, innovative technologies, low compliance taxes and measures to reduce the impact of the
environmental pollution. As per the recommendations, strategic partnerships and alliances are
needed for expanding the shareholder base. This is through the means of market research, which
enhances the awareness about the marketing trends plying in the markets of Sweden.
Infrastructural development would be one of the agents, establishing the balance between the
internal and the external environment. Product differentiation strategy would be effective for
diversifying the scope and arena of the business into the threshold of Sweden.
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2. Introduction
#836 / 15% - 750 words
2.1. Organisation
AP Pension ("AP") is a Danish commercial pension company with more than 320.000 customers
and nearly 160 billion DKK in assets under management. AP is one of the oldest pension
companies in Denmark and can celebrate its 100th anniversary in 2019. It is the customers in AP
that, via the fund “Foreningen AP Pension f.m.b.a.”, own the company. AP has about 400
employees on the headquarter in central Copenhagen and on a sales office in Aarhus, Jutland.
AP offers pension savings plans for small and mid-size businesses in Denmark and is the fourth
largest commercial company in Denmark measured by asset under management (AUM). AP's
most significant competitors are PFA Pension, Danica Pension, and Velliv. Today the four largest
companies account for more than 95 pct. combined of the commercial market with more than
1,500 billion DKK in AUM. Further attempts to consolidate the sector amongst the four largest
companies are likely to be rejected by the Danish Competition and Consumer Authority.
In order to run a competitive pension business, it's essential to get the volume to keep
administration and investment costs as low as possible. These two numbers are some of the most
important competition parameters. It has been a strategy for AP for several years to grow the
business organic as well as by acquisitions. In 2012 AP bought a smaller competitor, FPS, and
thereby added 22 billion DKK to AUM as well as 17.000 customers to the client base. In 2017 AP
purchased a small market player, Nykredit Livsforsikring A/S, and added another two billion DKK
billion AUM. Latest, in 2018, AP bought Skandia’s Danish activities, which included 34 billion DKK
in AUM and almost 100.000 customers.
The author of the assignment is the CEO of Skandia Asset Management Fondsmæglerselskab A/S
(SAMF), which is one of the two companies AP has bought from Skandia. SAMF is responsible for
all investment management in Skandia, including both portfolio management and investment
operations. The Author of this assignment has normally no direct involvement with AP’s strategy-
work but has been asked to be involved in analysing the challenge below and presenting the
recommendations to the Executive Management.
2.2. Challenge
The consolidation in the Danish commercial pension market has been ongoing for some years and
has left AP in a challenging situation. There are no obvious acquisition candidates for AP left in
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Denmark as the remaining companies are too small to truly add any value and if AP doesn't
continue the "hunt for growth", they risk of being an acquisition candidate for instance for a foreign
company trying to get into the Danish market.
2.3. Opportunity
AP Pension has just begun updating the company's five-year strategy, and the Executive Board
has asked for an analysis looking at the possibility of continuing the company's growth through
involvement in activities outside Denmark. The internationalisation approach has not been finally
decided and can include both joint ventures or acquisitions of foreign companies and preferable in
markets with interesting growth prospects and in markets, which in their structure, are somewhat
similar to the Danish pension market and the market environment that AP is familiar with.
This assignment will, therefore, be based on assignment option A ("Focus on a current
international business problem or opportunity, conduct the appropriate analysis and develop
scenarios as probable solutions.")
On August 9th, 2019, the Author of this assignment held a meeting with AP's CEO and the VP
responsible for the strategy team in AP. It was discussed how to approach the Executive
Management request. AP's CEO emphasised that the AP wanted to pursue a "small scale entry"
into a foreign market to prevent significant investments before AP can get familiar with the market.
Furthermore, it was mentioned that it might be appropriate for AP to look for new markets within
the EU members as most of the financial regulation is issued at the EU level and AP has
processes in place and the experience to implement this effectively. Potential markets should also
be considered attractive in relation to economic growth, demographic development, and any
regulatory measures that might contribute positively to the private pension savings. Finally, the VP
for strategy argued that the analysis should include one of the AP's "natural markets" (one of the
Nordic countries).
Based on this, the CEO and the VP decided that the analysis should include Sweden and the
Netherlands. The analysis in section 2 will be based on the models and framework listed in table 1
below.
Table 1: Models and frameworks
Model / framework Purpose
PESTEL To analyse any macro-environmental factors that have to be taken into consideration
CAGE To identify Cultural, Administrative, Geographic and Economic differences or
distances between countries that should be address before selecting a new market
Firm specific advantages and
capabilities
To identify and to access the extent to which AP FSA’s (resources and capabilities)
profitably can be leveraged in the targeted foreign market
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VRIO To assess the possibility of gaining competitive advantage in the potential countries
and to assess profit earning potential
3. Analysis and evaluation
2.315 + 648 (tabeller) + KILDER
40% - 2.000 words (max 2.750)
3.1. Approach
The challenging market situation in Denmark has motived AP to expand to markets outside
Denmark so that the company can continue to grow and ensure that the company's customer base
is constantly increasing and thereby ensuring that all customers can get the best and cheapest
possible administration of their pension plans (economies of scale).
AP has historically been good at acquiring other companies in Denmark and integrating them into
the business, but the company has no experience in acquiring foreign companies or entering into
joint ventures or cooperation’s in other countries. Due to the lack of experience, the Executive
Management wants to pursue a cautious approach in the internationalisation process. This
includes that any new foreign markets must be within the EU member countries whereas the legal
framework will be well known and already well-integrated into AP's current business processes.
In addition to finding new business within the EU, it is considered important that new markets are
culturally similar to Denmark and the markets must be attractive in terms of economic growth, the
level of education and the tradition of saving via private pension plans.
The Executive Managements choice of Sweden and The Netherlands as potential markets are
based on the assumption that these countries will meet these most of or all these criteria. Whether
that’s the case will be analysed in the following and the analysis will be based on the models listed
in Table 1.
3.2. Makro perspective
It is essential for success to identify any problems or challenges in a new market so that AP can
decide on a well-informed basis whether the market meets the basic requirements that the
Executive Management has set up. It is necessary to do this analysis on an overall "macro" level,
and for that, a PESTEL model (KILDE) is very suitable. In Table 2 below, Sweden and the
Netherlands are analysed.
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