2014
I.
Ülker Gida Sanayi SITUATION ANALYSIS – ANALYSIS – FINAL FINAL PROJECT STRATEGIC MANAGEMENT
Negru Andrei Master in Business Administration and Engineering-YEAR I FILS, UPB, 2014
Corollary
I. Introduction - Company Overview
II. External Environment Analysis
II.A. Macro-environment Analysis – PEST
II.B. Industry Analysis Life Cycle Competition
II.C. Conclusions of External Environment Analysis III. Internal Environment Analysis
III.A. Resources
Labor Financial III.B Capabilities III.C. Conclusions of Internal Environment Analysis
IV. SWOT
V. Factors Evaluation Matrixes
VI. General Conclusions of the Analysis
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I. INTRODUCTION GENERAL PRESENTATION OF THE COMPANY
Ülker is the biggest consumer goods company in Turkey, set up in 1944. The company is owned by the Turkish group Yildiz Holding, which, as of 2007, also included the famous Belgian chocolate manufacturer in its portfolio. Well known for its sweets, an area where the long-term tradition has ensured a solid trust in its high quality products, Ulker Group has boldly extended its portfolio with other categories: dairy products, margarine, coffee, soft drinks, ice cream and many others. In 2003, Ulker Group has set up a joint-venture with the Swiss company Hero, for the food range of products intended for newborns and small children (up to 3 years). Consistent with this trend, in 2005 it has entered into an agreement with Kelloggs, the cereals market world leader, proving once again hat its intention to become an international brand is fully justified. In 2009 , at international level, the company has registered a turnover by USD 10 billion higher1, and had factories in Algeria, Saudi Arabia, Egypt, Iran, Kazakhstan, Romania, Turkey, Ukraine, Uzbekistan. Ülker Biscuits is a consumer-focused company that satisfies its consumers’ needs and expectations at the maximum level, and it has formed a harmonious and lasting relationship with its target group. Surveys conducted in recent years attest to the high levels of loyalty to the Ülker brand. In the “Brands 2008” 2 survey by AC Nielsen, Ülker was ranked first in the biscuit category, and second and third in the categories of “top -of-the-mind” brands and those that consumers feel closest to, respectively.
Mission: Ülker’s vision is to become the most preferred brand by consumers and strengthen its position to be among the top five companies globally in 10 years, particularly in the area of baked goods and products.
1
http://www.ulkerbiskuvi.com.tr/en-US/investor-relations/financial-reports-and-footnotes
2
Ulker Biskuvi Annual Report, 2010
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Strategic Objective Ülker’s management aimed to get a foothold in South-East Europe by internationalizing on the Romanian market. II. SITUATION ANALYSIS II.1. EXTERNAL ENVIRONMENT ANALYSIS a) Macro-Environment Analysis
The further macro-environment analysis will be performed based on the PEST factors. All factors shall be related to the outlined strategy of Ulker, meaning the aim to internationalize the business on the Romanian market. Political Factors Romania was in 2010 a member of the European Union and NATO. The country experienced a deep recession as a result of the 2008 global financial crisis. Modest economic growth has resumed. The government is pursuing significant privatization of major state corporations such as railway freight company CFR Marfa, chemical producer Oltchim, copper mines, and energy companies. Geostrategically positioned on the Black Sea, Romania has extensive natural resources, a productive agriculture sector, and the potential for growth in industry. Romania has struggled to meet EU anti-corruption requirements. A 2012 EU report cited problems with follow-up by administrative and judicial bodies and a pattern of minimum or suspended sentences. Judicial independence was threatened in 2012 by political pressure surrounding the presidential impeachment effort, and courts continue to suffer from corruption, political influence, staffing shortages, and inefficient resources. The processes for business formation and operation have been streamlined. Launching a business takes five procedures and about 8 days. Labor regulations remain rigid, although several amendments to improve the flexibility of the labor code have been made. Government efforts to privatize three heavily subsidized loss-making state-owned enterprises in the rail, mining, and petrochemical sectors are still in progress. EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Romania’s legal and regulatory systems can be difficult for foreign investors to navigate. The evolving financial sector is open to competition, and foreign-owned banks dominate the banking sector. The banking system remains liquid and well capitalized, but significant vulnerabilities remain in light of the ongoing Eurozone turmoil. 4
Economic factors The top individual income and corporate tax rates are 16 % 3. Other taxes include a valueadded tax (VAT) which reached 24 % in July 2010 and an environmental tax. The overall tax burden is equal to 28 percent of GDP. Government spending amounts to 37 percent of GDP. Public debt is equivalent to 37 percent of the domestic economy. The government has been receiving EU and IMF loans to temper the effects of the Eurozone crisis. When the global financial crisis hit in 2008-09, Romania made a quick recovery thanks to prudent macroeconomic management. The crisis prompted long-needed reforms, with support from the international financial institutions, in health, education, the financial sector, public financial management, public administration, social insurance, and social assistance. Some of these reforms address short-term responses to the crisis, while others are anchored in a coherent longer-term strategy. While the implementation of a bold package of macro-stabilization and structural measures supported by a multilateral program with the World Bank, International Monetary Fund (IMF), and the European Commission (EC) - helped lead the country toward growth in 2011, a series of factors has left Romania vulnerable to exogenous shocks and growth was around zero in 2012. Economic activity is expected to pick up only slightly in 2013, with a projected growth rate of 1.2%. Challenges to accelerate growth in the country include uncertainty in the Eurozone and exports markets, political developments in the context of local and parliamentary elections, and absorption of EU funds. In the medium term, the key challenge for Romania is to achieve steady economic growth and improve living standards while meeting fiscal targets, and to continue structural reforms and the modernization of the public administration. Sustainable long-term growth entails that Romania adopt measures that assure compliance with fiscal targets while clearing arrears and improving quality of spending and strengthening tax collections; progress on the structural reform agenda with a focus on energy and transport sectors; and ensure continued financial-sector stability. The National Bank of Romania (NBR) and the government took strong measures to safeguard the stability of financial markets, and banks weathered the stress well. Since the international financial support package, the exchange rate has remained broadly stable.
3
http://www.worldbank.org/en/country/romania/overview
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Socio-Cultural Factors Romania’s poverty rate declined dramatically between 2000 -2008, from 36% in 2000 to 5.7% in 2008. In 2009, poverty declined further to 4.4%, due to increased social protection and insurance spending. However, despite large strides, the poverty rate in Romania is still among the highest in the EU. The most attractive factor for international businesses within Romania is represented by its population, meaning the high skilled labor. Most of the Romanian young-middle aged population would find ease in using foreign languages, especially English. Universities in Romania have had a good reputation and graduates are spread in world’s largest corporations, such as Microsoft or Google. The socio-Cultural factors in Romania do not impose barriers for foreign entrance on the market. On the contrary, renowned services MNCs are drawn by the potential of Romanian workforce and its cultural flexibility. Romania’s richness in language skills represents the country’s significant ethnic diversity. More than 70% of the population speak English while there is a good level of French & German due to cultural and historical reasons. An estimated 12% of the population represents more than 20 ethnic minorities. Romania’s historical ties with countries such as Bulgaria, Italy, Greece, Russia, Turkey, Poland, Hungary, Moldova and Germany. Technological Factors Romania is characterized by outstanding virtual communication capacity. The receptiveness towards internet, cloud computing, IT novelties and programming is higher than in most of world’s countries. Romania is one of the fastest-growing information technology (IT) markets in Central and Eastern Europe. The country has made significant progress in all of the information and communications technology (ICT) subsectors, including basic telephony, mobile telephony, the Internet and IT. The country’s telecoms sector has been deregulated, expanded and modernised over the past 15 years. The IT market is one of the most dynamic sectors of the Romanian economy. Since the year 1994 the IT market has demonstrated growth rates of 40 –60 percent a year 4. The Government has launched a program promoting construction of IT-oriented technology parks – special zones that have an established infrastructure and enjoy a favorable tax and customs regime. Another factor stimulating the IT sector growth in Romania is the presence 4
http://www.romanianstartups.com/about-romania/
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of global technology corporations such as Intel, Motorola, Sun Microsystems, Boeing, Nokia and others, which have intensified their software development activities and opened their R&D centers in Romania. The aforementioned aspects would highly facilitate the development of a multinational’s branch. b) Industry Analysis
Ulker had enjoyed for decades brand loyalty around the world. Their challenge was to get the same effect in South-East Europe, through Romania. During its existence on the market, Yıldız Holding has been having an outstanding way to deal with competition and to expand in the same time. Mostly since 2000 the management signed partnership with important manufacturers from adjacent industries such as candies, tea, ice cream. These partnerships brought a huge added value to the company, by bringing up expertise in producing a wide range of products and well as loyal customers. The availability of substitutes having low prices will limit Ulker’s ability to enter the Romanian market with high prices and has impact upon its cost strategy. Yet, the market is not monopolistic in this field and would welcome foreign products, as proven by the value of food imports (measured at 7,7 % according to the World Bank). Regarding the buying behavior, the economic crisis in 2008 has had a considerable impact on the propensity to consume in Romania. Still, during the following year comeback, equilibrium in consumption was created. Referring to Romania in particular, Dobrogea Grup SA has been the leading company in 2012 and 2013, a result of the strong distribution in the capital but also in other large cities where the main domestic competitors have a more reduced presence. It owes a lot for its position to the brand Eugenia, one of the oldest and most appreciated brands in sandwich biscuits in Romania for decades and for which the rebranding as a quality product at an affordable price represented a significant support for the share gain of the company. In fact, Dobrogea Group is present across the largest categories of biscuits, which has created the premises for leadership. Mondelez Romania will be the main challenger in 2013 due to the success of its premium brands, supported by heavy advertising campaigns. In Romania, Ulker has been enchanting the consumers of all ages for more than 15 years. At the beginning, they were only enjoying imported Ulker products, but as of 2005 they were able to enjoy biscuits or snacks made in Romania. This is mainly due to the fact that, in 2004, Ulker Group has selected Romania in order to expand its production facilities, and has started to build one of the largest and state-of-the-art factories in South Eastern Europe. In February 2006, the Romanian Ulker factory has officially opened its gates, the local company name being S.C. Eurex Alimentare S.A. With
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an area of 20,000 square meters, located on a land of approximately 10 hectares, the Ulker factory is part of an investment project of more than USD 23 million.
The new factory represents a successful mix between Ulker Group’s long-term tradition regarding the manufacture of such products, and the most recent technological discoveries in the industry. Holder of various international quality certifications, some of them unique in Romania, the Ulker factory of Popesti-Leordeni is manufacturing for both the Romanian export and for export to the EU countries and countries located in Asia and Africa (Albania, Bulgaria, Croatia, Germany, Greece, Kosovo, Latvia, Macedonia, Hungary, Saudi Arabia, Lebanon, Senegal). Currently, the Romanian factory manufactures the following brands: Petit Beurre (the only biscuits in Romania using fresh milk as ingredient), Tempo, Biskrem and Clip line of products, including sticks, pretzels and biscuits. In Romania, Ulker has more than 300 permanent employees, out of which more than 220 are directly involved in the manufacturing process. In July 2006 SC Eurex Alimentare SA received the ISO 9001 and IFS certification granted by TUV NORD, thus becoming the sole biscuits manufacturer in Romania that holds such certification. The portfolio expansion is one of our company’s priorities. We intend to quickly develop a products portfolio as wide and competitive possible, adjusted to Romanian consumers’ tastes, and to ensure a constant promotion thereof, Ulker products thus becoming preferred by a larger number of Romanian people.
Competitors Evaluation Matrix
Company/Factors
Critical Success
Weight
Eurex Alimentare SA
Mondelez Romania
(Ulker)
(Kraft Foods)
Rating
Factors
Weighted
Rating
Score
Weighted
Dobrogea Grup SA
Rating
Score
Weighted Score
Product Quality
0.08
4
0.32
4
0.32
3
0.24
Advertising
0.07
3
0.21
4
0.28
2
0.14
Strategic Partnership and Alliances
0.10
5
0.50
5
0.50
1
0.10
8
CSR (Social Responsibility of the Firm)
0.05
3
0.15
3
0.15
1
0.05
Price Competitive
0.09
3
0.27
2
0.18
5
0.45
Market Expansion
0.08
5
0.40
4
0.32
2
0.16
Number of Locations
0.09
4
0.36
5
0.45
1
0.09
Customer Loyalty
0.09
4
0.36
4
0.36
4
0.36
Financial Position
0.08
4
0.32
5
0.20
1
0.08
Public Image
0.07
5
0.35
5
0.35
2
0.14
Distribution Channels Availability
0.06
3
0.18
4
0.24
3
0.18
Expertise
0.10
5
0.50
5
0.50
3
0.30
TOTAL SCORE
3.92
3.85
2.29
The conclusions that can be drawn from the external environment analysis refer to the great potential that Ulker (Yidiz Holding) has in Romania. Ulker can enjoy advantages such as proximity to key areas not covered before, a growing market opened to new, prepared local workforce, and even the beneficial competition- both multinational and local, proving that expansion on Romanian market has potential indeed. The main opportunities offered by this targeted market, as well as the potential threats will be emphasized within the SWOT analysis, further on in this paper.
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II.2. INTERNAL ENVIRONMENT ANALYSIS a) Resources Analysis
Human Resources
Yildiz Holding employs a workforce of 24,400 . According to Ulker’s general manager, the employees are the company’s greatest asset. At the end of 2010 the company employed a workforce had a total of of 1,254. In order for our workers to be the best at their jobs and to prepare them for the future, Ülker Biscuits supports training and development programs focusing on personal and career growth. Ülker Biscuits utilizes a Performance and Career Management System aimed at rewarding employees and determining employee success and potential. Under the Performance and Career Management System, Ülker Biscuits strives to develop the roles and skills of every employee who contributes to the vision of the Company. The vision of Ülker Biscuits Human Resources is to organize and implement the the best human resources for all business fields. The human resources practices of the Company are shaped by the Human Resources Strategy of Yıldız Holding. The mission of the Company’s human resources department is to increase the domestic and international competitiveness of Ülker Biscuits through the efficient management of its human capital while providing motivation and encouraging high quality work, company loyalty and cooperation.
Financial Resources
According to Ulker Annual Report in 2010 , the relevant financial data are:
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In 2009, despite negative macroeconomic conditions and increased costs, Ülker Biscuits reached levels of growth which had worked so hard to achieve. The most difficult period, 2009, the company survived because of their experience, fighting spirit, their innovative approach, focus on productivity and their consumers. In 2010, the Company went through a period of recovery and returned to its pre-crisis form. Compared to 2009 sales figures, 2010 showed an increase.
Fixed Assets and Technology Used
At Ülker Biscuits’ Topkapı factory, with three workshifts were initiated in 2010, an actual capacity utilization ratio of 89% achieved. This translates into the produ ction of 54,697 tons of biscuits and net sales of 54,156 tons of biscuits during the year 2010. At the Topkapı factory, logistical support such as boxing, box handling, packaging, and storage are almost fully automated, and the facility’s technology is ext ensive. In the Topkapı factory there are nine installations and in the Ankara factory there are 19 installations devoted to the manufacture of biscuits, chocolate-covered biscuits and wafers. The Ankara factıory is located in a covered area measuring 80,000 m˛ on a 110,000 m˛ tract, making it the largest biscuit manufacturing and warehousing facility in the Middle East. The factory has been one of the region’s most important economic contributors for more than 39 years. In 2010, three workshifts were adopted which resulted in actual capacity utilization ratio of 68% for the year. In other terms, 72,231 tons of biscuits were manufactured, which resulted in the net sale of 72,305 tons. The production volume of Ülker Biscuits and its subsidiaries over a two-week period would be enough provide a biscuit for every person in the world. Ülker Biscuits has an effective organizational infrastructure. The Company has developed huge production capability and a powerful sales and marketing organization. b) Capabilities Analysis
Ülker Biscuits which has two factories, one in Istanbul/Topkapı and one in Ankara, is the sector leader. Apart from these two main factories, Ülker Biscuits also carries on production operations in the İdeal Gıda/ Gebze and Biskot Gıda/Karamanmanufacturing facilities. Ülker Biscuits’ Istanbul and Ankara factories, which are fitted with the latest technological equipment, manufactured 126,928 tons of biscuits for comsumption market in 2010 5. In the Topkapı factory there are nine installations and in the Ankara factory there are 19 installations devoted to the manufacture of biscuits, chocolate-covered biscuits and wafers. As the leading firm in the sector, Ülker Biscuits’ has the task of fullfilling the expectations of our shareholders and to especially meet the expectations of our customers with the high quality and nutritional integrity of our products. Ethical R&D principles were determined and implemented in 2010 by Ülker Biscuits. In parallel to the R&D staff’s expertise and 5
Ulker Annual Report, 2010 [http://www.ulkerbiskuvi.com.tr/en-US]
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experienced understanding of quality, new productsbare being developed and the concept of innovation was taken to higher levels. Within this scope, R&D projects that are targeted at more efficient capacity utilization are being stressed by initiating the manufacture of new products. The R&D units of our Istanbul and Ankara factories worked on 73 new products in 2010. Of those products, 18 are currently being manufactured and presented for sale in the marketplace. One of the biggest projects brought into being by Ülker Biscuits in 2010 was one based on the “Bolero Gofret”. In addition to this product, in the biscuits, wafer and cracker group, six new products produced by the Ankara factory and 12 new products manufactured by the Istanbul factory were launched in 2010. In Ankara, two product developments and 11 packaging development studies came to fruition, while in Istanbul 41 packaging development studies were completed successfully. Products that were developed in 2010 by the R&D units made up 6.3% of the production tonnage in Ankara and 5% of the production tonnage manufactured in Istanbul. 6 The production volume of Ülker Biscuits and its subsidiaries over a two-week period would be enough provide a biscuit for every person in the world. Ülker Biscuits has an effective organizational infrastructure. The Company has developed huge production capability and a powerful sales and marketing organization. c) Conclusions of Internal Analysis
Ülker is remarkable through its tradition; through the qualitative products it delivers around the world and through its capacity to form strategic alliances. The competitive advantage which raises the company above other firms in the field is the quality of their products, renowned at both national and international level. Testing CA using VRIN Model
VALUABLE
-maintains customer loyalty and perceived customer value -increases product differentiation -supports brand awareness
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RARE
-gained through years of research -based on distinctive raw materials and technology
http://www.ulkerbiskuvi.com.tr/en-US
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COSTLY to IMMITATE
-almost impossible to imitate, as it is linked to the internal know-how
TEMPORARY COMPETITIVE ADVANTAGE
Adding to the feature above the high capacity of Ulker to capture value, it can be concluded that the quality of products represent a Sustained Competitive Advantage. III. SWOT ANALYSIS SWOT Analysis is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment. It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends and also helps in including them in the decision-making process of the organization. Strengths: -
well known brand strong market position upgraded technology innovative promotional methods high production capacity more than 60 years of experience on the market low production costs customer-oriented constant growth stable suppliers affordable prices good quality products financially solid ability of maintaining growth rate and profitability efficient distribution channels socially and environmentally active in reducing greenhouse gas emission; has various ventures concerning education, art, the environment, health, and sport
Weaknesses: -
the need for low cost products. This needs to be balanced against producing good quality
Opportunities: -
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Entrance in Romania may grant entry to a wider market, as Romania is part of the EU cheap labor very attractive for FDI political stability
-
high demand large consumer population, around 22 mil skilled workforce updated legal framework concerning international companies entering the Romanian market
Threats: -
high competition the population has low and medium income, which means low purchasing power currency instability low infrastructure corruption bureaucracy highly affected by the economic crisis in terms of purchasing behavior high logistics costs
After processing the SWOT analysis, the conclusion reached is that Ülker would enter the Romanian market by using the “ Maxi-Maxi” strategy (Maxi-Maxi strategy means using strengths to maximize opportunities). In this way, the company can take advantage of the fact that Romania has a low cost workforce, but also trained. Furthermore, it will focus on producing good quality products at affordable prices. As an internationalization method, the company would adopt the decision of building its own factory on the Romanian territory. As opposed to franchising, building the factory will allow the company to have total control over their operations. Also, Romania is very accessible in terms of legislation, making it very easy to set roots on the country’s territory. IV. Factors Evaluation Matrixes a) External Factors Evaluation Matrix External Factors Evaluation Matrix
Opprotunities Entrance in Romania may grant entry to a wider market, Cheap Labor Attractive environment for FDI Political Stability High Demand Skilled Workforce
Weight
Weighted Score
Rating
0,11 0,08 0,07 0,04 0,07 0,09
4 3 2 1 3 3
0,44 0,24 0,14 0,04 0,21 0,27
0,08 0,06
3 4
0,24 0,24
Updated legal framework-
entering the Romanian market Large Consumer Population 14
Threats High Competition 0,1 4 Medium propensity to consume 0,07 2 Currency-instable 0,02 1 Low infrastructure 0,08 2 Beaurocracy 0,03 1 Corruption 0,02 1 Effects of Economic Crisis upon consumer behaviour 0,04 2 High logistics costs 0,04 3 poor(1), below average(2), above average(3),superior(4) TOTAL WEIGHTED SCORE
1,00
0 0,4 0,14 0,02 0,16 0,03 0,02 0,08 0,12 2,79
Externally, Ulker can benefit from Romania’s openness. Access in Romania will mean more than a large domestic population, but also the potential demand of the surrounding areas. c) Internal Factors Evaluation Matrix Internal Factors Evaluation Matrix
Strenghts Qualitative Products Strong brand (internationally) Strong market position Upgrated technology High production capacity Increased expertise Customer oriented High degree of access on international markets Financial solidity High sustainability Efficient distribution channels Innovative marketing practices
Weight
Weighted Score
Rating
0,12 0,1 0,06 0,1 0,08 0,09 0,04
4 3 4 4 3 4 3
0,48 0,3 0,24 0,4 0,24 0,36 0,12
0,04 0,07 0,08 0,07 0,03
3 3 4 4 3
0,12 0,21 0,32 0,28 0,09
Weaknesses
0
Need to maintain low production costs 0,07 1 0,07 Need to raise brand awareness locally 0,05 2 0,1 major weakness(1),minor weakness(2), minor strenght(3),major strenght(4) TOTAL WEIGHTED SCORE
15
1
3,33
The main conclusion that can be drawn from the above Internal Factors matrix is that Ulker has a strong internal position, due mainly to the quality of their products based on the valuable expertise gained in more than 60 years.
IV. General Conclusions of The Analysis
Ülker not only ranks among Turkey’s most popular brands, the Company also includes other very strong performers in its brand portfolio. Ülker has increased the productivity of its business processes thanks to the effectiveness of the Compan y’s longterm strategies. During the recent years, Ülker further reinforced its robust market position with new capital investments that included new installations in the factories, capacity increases, modifications of production lines, productivity upgrades, improvement of hygienic conditions and warehousing processes. The capital investments undertaken by Ülker aim to further solidify the Company’s dominant market position, increase consumer satisfaction, improve product quality, and to make its cost structure more competitive by increasing efficiency.
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Bibliography
1. Bradford, Robert, “External Environment-What to consider”, Bradford University, 2001
2. Deresky, Helen “International Management: Managing Across Borders and Cultures”, 5th Edition, Pearson Education International, 2006
3. Popa, Ioan; Filip, Radu, “Management International”, Editura Economica, Bucuresti, 2002
4. http://www.worldbank.org/en/country/romania/overview
5. http://www.ulkerbiskuvi.com.tr/en-US/investor-relations/annual-reports
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