1. 1 NUFARM in France Best in France Case Study December 2004 By: Ms. A. Jaros, Mr. S. Montigny, Mr. J. Khwaja and Mr. M. Watanabe

2. 2 Executive Overview What's your business Company clients Why did you go to France Do company values fit the French culture? CHEMICAL PRODUCTS B2B, DISTRIBUTORS BIGEST EU MARKET SIZE NO

3. 3 Nufarm Company (1) What's its business Nufarm Limited is an Australian-based company, headquartered in Melbourne, with core capabilities in chemical synthesis, sales and marketing Through a global network of manufacturing and formulation facilities, the company operates in two key areas of business activity: –crop protection –industrial, fine and performance chemicals Nufarm employs more than 2,000 people at its various locations in Australia, New Zealand, Asia, Africa, Europe and North America

4. 4 Nufarm Company (2) When did it come to France The French subsidiary is based in Gennevilliers in France and began operating in 1928 (Former CFPI) It was taken over by Nufarm in 1996 Initially it was treated as an investment holding and afterwards fully integrated in the group The company develops, manufactures and markets a wide range of chemical products used in agriculture and a range of industrial applications

5. 5 Company products Crop ProtectionIndustrial Chemicals Herbicides (main business) Fongicides (low margin product) CORE BUSINESSNON-CORE BUSINESS Product expansion Disinvestments

6. 6 Company's clients Products manufactured and supplied by the company are used to help farmers protect crops from damage caused by weeds, insects and disease, as well as in a variety of other industries such as manufacturing, pharmaceuticals and consumer products Customer segments –B2B (Bayer, BASF…) –End-users (distributors) Customers expectations –Reliable results from quality products with top technical support and flexible supply –Regulatory support as the products are used in the agriculture sector, which is regulatory driven

7. 7 Why it went to international After 1994 Nufarm has started an international growth mainly through acquisitions In the last 10 years it tripled its sales Today 59% of total sales comes from foreign subsidiaries

8. 8 Why it went to Europe Today the European subsidiaries generate 21% of total sales France UK Germany Austria Netherlands Spain Portugal Ireland

9. 9 Why it went to France (1) 1.Participation in the market 2. Business strategy

10. 10 Why it went to France (2) 1. Participation in the market MARKET CONDITIONS 1.France has the largest total agriculture and forest area of the EU member states 2.It boasts a very large and fertile land area of 55 million hectares (56% of it is agricultural) 3.Over half of the agricultural lands is used for arable production (cereals, maize, protein crops, sunflower, soybean, oilseed rape, sugar beet, potatoes) Crop protection need

11. 11 Why it went to France (3) 1. Participation in the market MARKET SIZE The total French agrochemical market is twice the size of any other European agrochemical market

12. 12 Why it went to France (4) 1. Participation in the market PRODUCT TYPES

13. 13 Why it went to France (5) 2. Business strategy & competition Horizontal acquisitions are typical for the whole agrochemical industry The leading agrochemical companies are buying out mainly family businesses in order to: –Extend the production lines –Increase the registered/ licensed product portfolio –Increase market shares in the local markets (organic growth too timely and costly) –Integrate the acquired business into the group and generate core business related synergies Main competitors: Bayer, BASF, Dupont, Sumitomo Chemical, DOW Chemicals, Rhodia

14. 14 Company values Headquarter AustraliaEuropean subsidiaries Australian managers are mainly action oriented The structure and processes are adjusted afterwards (secondary element) European managers set up the processes first Their actions follow worked out and generally agreed business structures Gap Gap difficult to close as the differences are mentality based and none approach is superior

15. 15 Company values Headquarter Australia French subsidiary DECISION MAKING PROCESS “Oral”“Written” BUSINESS ORIENTATION CustomerProduction

16. 16 Constraints in France What are the principle constraints the company foresaw before going to France? –The Australians expected that the main constraint associated with expanding their activities will be the trade unions but, as in Australia there are no unions, they underestimated their impact on the integration of the French business –In fact, as labor laws in Europe are complex & the French unions are very strong, this slowed down the integration and almost freezed the necessary reorganization

17. 17 Adaptation to France 1.Recruitment/Selection –The recruitment of the majority of the local employees stays on the local level as the operational business is quite independent from the Headquarters –The Headquarters is involved in appointing key management positions in order to assure the cultural “fit” –In the past there were problems with setting up efficient reporting lines between the subsidiaries and headquarters top management –Additional communication difficulty arose from the time zones differences between the two continents

18. 18 Adaptation to France 2.Compensation –As there are big differences in the compensation schemes between the countries, the compensation rules stays in the local responsibility 3.Management Development –In the first integration stage there were no Management Development and Succession plan in place –In the meantime there was created one position in the HQ to cover the topic from the global perspective

19. 19 Adaptation to France 4.Workforce Planning –Workforce planning is included in the local budgeting phase and then agreed yearly at HQ level 5.Performance Appraisal –Performance appraisal differs between the French subsidiary and the Australian HQ as it is directly linked to the management mentality –HQ: yearly formal review for each employee –France: employee’s review process exists but doesn’t reflect the performance rewards as the trade unions are involved and insist on equal rewards for all employees based on external indicators such as consumer price index

20. 20 Adaptation to France 6.Motivation –Main motivation tools in the group: Increasing responsibility Financial incentives –Because of the reasons described in pn. 5 (trade unions influence) it is difficult to implement group standards like: Short term incentives for operational successes Medium term incentives for the yearly achievements Long term incentives (based on the option-like tools) –Additional difficulty in motivating and rewarding the French employees lies in the divesting process as the group wants to concentrate on the core business.

21. 21 Adaptation to France 7.Job Design, Job Assignment –Adjustments at group level not possible as the job assignments and their treatment is mentality driven –HQ: Job specification is kept at minimum level and its scope is flexible as the management culture is action and results driven –France: Written Job specifications play crucial role as they define & structure responsibilities but often do not enable the communication flow between departments

22. 22 Adaptation to France 8.Communication Policies –At the beginning the HQ didn’t introduce global communication policies in its subsidiaries in order to prevent interferences into local operations –In the meantime there is a need to standardize the majority of the policies in order to minimize the operational risks –Recently a global revision unit for all foreign subsidiaries was created

23. 23 Adaptation to France 9.Use of Expatriates –In the initial phase 4 Australian Expatriates were present –Their goal was to understand the local culture, set up new strategies and put in place new local management –As of 2005 there will be only one Expatriate in France and the management structure will improve the communication INITIALY NOW Australian AmericanFrench Australian

24. 24 Adaptation to France 10.Training –Wide range of trainings for the new SAP system –Trainings in other specific areas not developed at a satisfactory level –Training in the HQ for two French employees in the area of marketing and operations

25. 25 Key Constraint Costs What are the key costs of operating in France that are more or less than operating in other locations? –Due to complex HR activities the French HR department is relatively bigger and more costly than in other locations: France: 6 employees for 400 FTEs Australia: 4 employees for 600 FTEs UK: 25% of the French size Other locations: mainly consolidated with Finance functions

26. 26 Essential Advice 1.Before going to France –Understand the labor laws and the rule of the trade unions especially when you increase your presence in France though acquisitions 2.Adaptation while in France –Understand the French way of doing business and take into account slower adaptation mode 3.Future investments –The market is nowadays in decline (products removed from the registration, price decreases, competition from non-European countries eg. Africa, China, India)

27. 27 We Thank Manager 1: –Chris Fazekas –General Manager Technical Sales –Chris.Fazekas@fr.nufarm.com –Tel. 0033/140-85-50-52 5492 Manager 2: –Antoine Meyer –General Manager Specialty Products (Executive) –Antoine.Meyer@fr.nufarm.com –Tel.01 40 85 50 50 Manager 3: –Henri Dorfsman –Senior Financial Analyst –Henri-Charles.Dorfsman@fr.nufarm.com –Tel. 0033/6-65-00-63-43

28. 28 Our Team HEC MBA 2006: Agnieszka.Jaros@mailhec.net Sebastien.Montigny@mailhec.net Javed.Khwaja@mailhec.net Munetaka.Watanabe@mailhec.net