Strategies in Corporate Finance

MINISTRY OF EDUCATION AND SCIENCE OF THE RUSSIAN FEDERATION
PLEKHANOV RUSSIAN UNIVERSITY OF ECONOMICS INTERNATIONAL BUSINESS SCHOOL
STRATEGIES IN CORPORATE FINANCE CASE STUDIES
Moscow 2011
EDITOR: ROBIN JOYCE COMPILED BY: PAUL STREKHA
Copyright Notice The copyright of the material contained in this publication belongs to Plekhanov University, Moscow, Russia and material may be used free of charge for any noncommercial purpose, if attributed to Plekhanov University. Where sources have been noted in the text, the copyright of those parts of the text belong to those sources.
Introduction. Anastasiya Volokhova Kapuchinoff

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CONTENTS
INTRODUCTION .............................................................................................................4 SECTION 1. SMALL AND MEDIUM ENTREPRISES ...............................................7
Anastasiya Volokhova Kapuchinoff ....................................................... 7 Alexander Sarukhanyan Investment Fund ............................................ 23 Pavel Tolpeev IKEA ............................................................................. 38 Vladimir Serousov Gourmet Food Store............................................... 60
SECTION 2. NATIONAL ENTERPRISES ..................................................................79
Margarita Balasanyan Sberbank............................................................ 79 Ekaterina Cuellar Colinversiones S.A. E.P.S ........................................ 91 Victoria Karelova ABS Bank .............................................................. 108 Dauren Toktamysov Plan of development for Sugar Company ......... 127
SECTION 3. INTERNATIONAL GROUP ................................................................144
Darima Dordzhieva CE Bank .............................................................. 144 Denis Gaitanov Girsberger GmbH ...................................................... 156 Ekaterina Gonastareva Onegin Luxury Store ..................................... 172 Elena Plakhova Shtokman Development AG ..................................... 191 Ekaterina Vashurina, Irina Koroleva Starbucks .................................. 206
SECTION 4. GLOBAL PLAYER................................................................................232
Maria Kinarova British American Tobacco ........................................ 232 Ekaterina Gurieva General Electric..................................................... 252 Ali Israilov IBM .................................................................................. 273 Sofia Petrova Apple Inc ...................................................................... 292 Pavel Strekha Canon ........................................................................... 312 Rano Usmanova Nestle ....................................................................... 329
ABOUT THE AUTHORS .............................................................................................349 ABOUT IBS PLEKHANOV .........................................................................................360
Introduction.Anastasiya Volokhova CONTENTSKapuchinoff

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INTRODUCTION
Introduction from Dean of IBS-Plekhanov Dear Colleague, Thank you for choosing to read Strategies in Corporate Finance Case Studies. I recommend this publication for the variety of case studies covering a wide range of businesses in Russia, Europe, Asia, North and South America. We have presented them in four parts: 1. 2. 3. 4. I Small, medium enterprise National enterprise International group Global player we are presenting such a wide range of
NADEZHDA.VASILIYEVNA PONOMAREVA, DEAN OF IBS-PLEKHANOV
am pleased that
businessesindicating that strategic planning is relevant to all sizes of business, not just to the major players. Each paper is approximately 15 pages in length and considers planning with a five-year horizon. The selection comprises start-ups, young businesses, mature groups and there is even a bank which is a composite picture of existing Russian banks. Many of the corporations will be known to you, whilst others will be new.The primary use of this material is to provide bases for discussion of corporate planning. Some provide proposed radical routes forward, one providing three alternatives, whilst others suggest that more of the same excellent management of the corporation will suffice. There is plenty of scope for your alternative proposals.The styles and approaches vary substantially, which also yields teaching points. Some made extensive use of published sources, whilst others developed most of the paper themselves. We asked our students to maximize analysis while
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Introduction. Anastasiya Volokhova Kapuchinoff INTRODUCTION

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES minimizing financial data, so that they would stretch themselves in considering the strategic issues and opportunities. These papers were written by our first intake of students to our Master of Economics in English course, three months after starting the course. They wrote them in English, despite English being their second or third language. Students have to pass Cambridge University Business examinations as part of this course. We have limited editing to the minimum. Biographies appear at the end of the publication, as does information about the International Business School. I hope that you will find them interesting and of value to your students.Your comments will be very welcome.
Sincerely, Nadezhda Vasilievna Ponomareva Dean, IBS-Plekhanov
Introduction.AnastasiyaINTRODUCTION Volokhova Kapuchinoff

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Introduction from Course Supervisor Dear Colleague, These papers were written by students as their examination for their course on Strategies in Corporate Finance. The task was to write a strategy for the organization in which they work, worked, or would like to work. The strategy is a view over the next 5 years and
LILIYA SERGEEVNA BABYNINA, COURSE SUPERVISOR
what improvements you would recommend. The structure should reflect:
the economic environment as it will relate to your business (or one in which you would like to work) over the next 5 years impact of competition strategy of your business and how it will be supported financially.
Sincerely, Liliya Sergeevna Babynina
Introduction. Anastasiya Volokhova Kapuchinoff INTRODUCTION

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SECTION 1. SMALL AND MEDIUM ENTREPRISES

ANASTASIYA VOLOKHOVA KAPUCHINOFF
Introduction Caf Kapuchinoff is a 90 seat fine-dining caf located on the south of Moscow on the near way the to
Kolomenskaya
metro
station
Kolomenskoye Park . It is focused on European menu with a touch of Italian influence. The menu of the caf is not greatly diversified. There are some kinds of pasta, salads, appetizers, main dishes and desserts. Speaking about beverages, there is quite a wide range of different sorts of coffee and tea and also some alcohol cocktails.
ANASTASIYA VOLOKHOVA
The caf has many brand-loyal customers, due to the fact, that it is the only place with good interior and homelike atmosphere located near the Kolomenskoe metro station and some neighboring stations. Moreover, due to the fact that it is located on the way to the Kolomenskoe Park Parkthat is one of the best parks in Moscow, there are a lot of people visiting this caf on their way to and from the park. The caf is open 7 days a week. The working hours are from 10 am till 12 pm. The park is closed at 11 pm. So visitors can have some drinks and meals after a long walk in the park. Actually the caf closesat about 1 am, due to the fact, that many customers do not want to leave the homelike atmosphere, even after the closing time. It is a warm and friendly place with excellent food. A place where you always know you will get the best of everything:comfortable furnishings and decor Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES with soothing warm tones. It is the perfect place to stop in for a bite to eat, for a drink or for a small business meeting. It also has some special tables for children and atthe weekend there some professionally-trained people who are happy to entertain children during the time their parents are having a meal. Prices in the caf are a bit higher in a comparison with other cafes in the area, but the level of service and quality of food is also a lot higher.It is the strategy of Kapuchinoff to give a perception of higher value than its competitors, through its food, service and entertainment. The cafe is fine dining in a cozy atmosphere:warm colors, fresh flowers, soft music, candles and amazing artwork from some of the areas most notable new artists. This contributes to a sense of community and gives new artists a chance to show their work for a diverse clientele. There are also some special additions to the menu depending on the season. For example: a lot of iced drinks and ice-cream in summer and different times of special hot drinks in winter. During the busy summer months, you can also sit outside on the patio and you will be offered a special summer menu, featuring lighter fare, exotic drinks, as well as non-alcoholic offerings. The patio and garden setting will be a fun and casual atmosphere for the summer crowd. The service is relaxed, very friendly and correct. The staff is perfectly trained, motivated, encouragedand very friendly. Moreover the caf has a special offer to the visitors, who want to take coffee to go. It offers a 30% discount on all sorts of coffee to go. It is an interesting fact that, in the guest book, many clients noticed that there is no bakery products offered and it will be great to take some bakery products to go with coffee, to make a walk in the park more pleasant. The best way to catch the interest of a regular, loyal customer and visitors is to offer a broad variety of
Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES bakery. To do this, it is most logical to bake buns and rolls in its own bake house to make it fresh and delicious all the time. Mission Caf Kapuchinoff is now mostly focused on regular clients and those who aregoing to sit in the caf, having a meal. Now it aims to focus on visitors who aregoing to take some food and beverages to go. In other words: to extend the target audience. It is sensitive to the often over-looked population of allergy sufferers and caters to their needs for healthy, delicious baked goods. It seeks a fair and responsible profit, enough to keep the company financially healthy for the long term and to fairly compensate owners for their money and risk. Company Summary The company has existed6 years and it did not have any problems with indebtedness. In order to start up the business 6 years ago,aloan of 7 000 000 rub for two years was taken fromSberbank. Thus, the company has good credit history. The rest was provided from their own capital. After the first 4 years of operation, a decision to expand the business was made. The company rented larger premises in the neighborhood, thus the caf became two times bigger. The kitchen was expanded twice two. Another loan of 2 000 000 rub was taken from the Sberbank for one year. The managerial team is ready to expand and is open to the developments. Company Ownership Caf Kapuchinoff is managed by two partners. These partners represent sales and management and finance and administration areas, respectively. The partners provide funding from their own savings, which cover start-up expenses of the bakery and provide a financial cushion for the first months of operation. A one year loan from Sberbank will cover the rest of the required financing. Financial position
Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The turnover of the company in the year 2010 was 32 468 000 rub that is 19% higher comparedto the year of 2009. Nowadays, the company has strong market position and has no debts. The net profit in the year 2010 was 7 244 000 rub. The capacity of premises the company is renting now is enough to build a bakery inside it. Start up of the bakery For the equipment for the bakery, repair, provision and other spending 1 600 000 rub is needed as the initial investment. 1 000 000 rub will be provided through the own funds, another 600 000 rub will be taken as a loan fromSberbank with a12% interest rate annually for the next 2 years. That means that 644 000 rub are to be payed to Sberbank in 2 years. These costs include: Equipment Repair Bakery ingredients Advertising brochures Insurance Qualified personnel Bakery accessories, i.e. paper bags, cartons, etc. The company plans to continue building a strong market position in the area, due to the partners' industry experience and mild competitive climate in the area. Once the bakery becomes established and the cash flow is steady, 2 persons will be hired: one professional baker and anassistant baker. Products of bakery The Bakery will provide not only normal donuts, breads, muffins, cakes and pastries, but also non-gluten baked goods and pastries to diet-conscious and wheatallergic consumers.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Example of goods: -Spelt breads, muffins and pastries -Spelt flour is the most common wheat-alternative flour as it has the same characteristics as wheat which provides similar taste, consistency and behaviors creating goods that are just as good as any wheat baked good. -Donuts with the wide range of tastes -Yeast-free breads Many people have an allergy to yeast, or have been warned by their doctors not to eat it. We provide a line of yeast-free breads. Market Analysis Summary Kapuchinoff focuses on the middle- and upper-income markets. These market segments consume the majority of products it offers. Market Segmentation What is very important in the present day world, is that our target market includes people who are health conscious and/or have common food allergies. This is a niche market since most bakeries do not cater to these needs, with the exception of high-fiber diets. So thanks to this, the new segment of customers is to be attracted. This market Segment includes The Allergy Group and The Diet Group. The Allergy Group According to Health Magazine, one out of five people suffer from a common food allergy, however many bakeries do not cater to their needs. The Diet Group Many people, especially young people are sick of traditional diets. The bakery will have special kinds of muffins with low fat. That should be pretty popular among students and people who are interested in diets and their health.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Moreover, for health reasons, many people are warned off certain foods by their doctors because of high cholesterol and blood pressure. Currently the main killer in the Russia is heart disease, according the Russian Heart Association. Many Russians aged 50+ are going on special diets to prevent heart disease. Target Market Segment Strategy The dominant target market is a regular stream of local residents. Personal and expedient customer service, at a competitive price, is key to maintaining the local market share of this target market. Tourists Tourist traffic comprises approximately 15% of the revenues due to the fact, that Kolomenskoe Park is pretty popular among them. Due to the fact, that most tourists are from Europe where some food and beverages to go are very popular, it is expected that the number of tourists consuming bakery to go will be increased to 25%. The revenue will increase by 10% correspondingly. The high visibility and competitive products and service are critical to capture this segment of the market. A special banner will be made as a part of marketing strategy to attract new customers and tourists especially. Some special banners will be made in English for tourists. The menu in English already exists. Service Business Analysis The retail coffee and bakery industry in the Russia has recently experienced rapid growth. The cool marine climate in Moscow stimulates consumption of hot beverages throughout the year. Coffee drinkers in the Northwest are finicky about the quality of beverages offered at the numerous coffee bars across the region and, what is very important, more and more people prefer to drink coffee with some bakery. It is very urgent nowadays, as many people quit smoking and now they substitute bakery to cigarettes. Despite low competition in the immediate area, Kapuchinoff will position itself not only as a place where customers can enjoy a
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES cup of delicious coffee with a fresh pastry in a relaxing environment. But it is also a place where you can take some bakery to go to the park, or even buy some delicious bakery to take home. Competition Competition in the local area is somewhat sparse and does not provide nearly the level of product quality and customer service that
doesKapuchinoff. Local customers are looking for a high-quality product in a relaxing atmosphere. They desire a unique, classy experience. Leading competitors purchase and roast high quality, whole-bean coffees and, along with Italian-style espresso beverages, cold-blended beverages, a variety of pastries and confections, coffee-related accessories and equipment, and a line of premium teas. Theysell these items primarily through company-operated retail stores. In addition to sales through company-operated retail stores, leading competitors sell coffee and tea products through other channels of distribution (specialty operations). Larger chains vary their product mix depending upon the size of each store and its location. Larger stores carry a broad selection of whole-bean coffees in various sizes and types of packaging, as well as an assortment of coffee- and espresso-making equipment and accessories such as coffee grinders, coffee makers, espresso machines, coffee filters, storage containers, travel tumblers and mugs. Smaller stores and kiosks typically sell a full line of coffee beverages, a more limited selection of whole-bean coffees, and a few accessories such as travel tumblers and logo mugs. During fiscal year 2010, industry retail sales mix by product type was approximately 73% beverages, 14% food items, eight percent whole-bean coffees, and five percent coffee-making equipment and accessories. Technologically- savvy competitors make fresh coffee and coffee-related products conveniently available via mail order and online. Additionally, mail-order

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES catalogs offering coffees, certain food items, and select coffee-making equipment and accessories, have been made available by a few larger competitors. Websites offering online stores that allow customers to browse for and purchase coffee, gifts, and other items via the Internet have become more commonplace as well. But in the area near Kolomenskaya metro station no comparablecompetitors are located. There is a Sushi restaurant Chast Shushi in the area that is located in anoffice building and cannot be considered to be a real competitor due to absolutely different specialization. There is also a Georgian restaurant with a rather specific atmosphere. This place is oriented only tolocal customers, that is the Caucasian community. Also, the prices there are 2 times higher than in Kapuchinoff as it is a restaurant. In other words, it is not the direct competitor. Another caf is located right near Kapuchinoff and can be considered to be a competitor. But the quality of food there is rather low and the decoration is not of such a high level. Prices are low too, as the target audience is people with low income, that is not our target. So this place cannot be considered to be a real competitor. Strategy and Implementation Summary The strategy focuses on serving a niche of the bakery market with quality goods. Kapuchinoff is determined to become a part of the community - an establishment that becomes as much of the community as a church or local grocery store. To achieve these goals, the following will be provided: Friendly, neighborhood-feel atmosphere, as it is now Quality baked goods for everyone to enjoy at a fair price Special diet menus in relation to the advice of local healthcare providers
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The main emphasis of the strategy is not cost minimization. It is expansion and getting a new target audience due to this expansion. Firstly, the new target of people interested in their health and people seeking interesting food for diets. Secondly, focusing on tourists. Later, getting and serving new customers, living in remote districts through delivery service. Finally, increasing turnover through the bigger range of products to be offered in the future. It should be mentioned that the economical situation in the country is very hospitable and favorable for the business expansion, as the time of crisis is already in the past and now the economy is recovering. The situation with unemployment is improving and people have a possibility to spend a part of their income on their entertainment instead of saving money in the fear of future possible problems. Marketing strategy First three years: First of all, as it was mentioned, some special banners in English will be placed in order to attract tourists. There will be also advertising blotters that will be given to people near the metro station Kolomenskaya and also in Kolomenskoye Park. A special discount of 10% will be given to pensioners and students. There will be also some discounts that a person can get while buying bakery for asum bigger than 1000 rub. Moreover, special discount cards for existing customers will be provided. Firstly a person will get a 5% discount. To get this card, they would have to fill the form with some personal information. There will be an accumulative system, meaning that the more a person spends in the caf, the sooner he/she will get bigger discount. In three years time, after the loan to Sberbank is repaid, the break-even point will be about to be achieved and the profit from operation of the Caf itself and the

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES bakery achieved, it is planned to put an advertisement to the website Vkontakte that is considered to be the most popular one in Russia nowadays. It should be taken into consideration that the advertisement there is very expensive, but it is still worth it. That advertisement will emphasize not only the high quality food, bakery and beverages the caf offers, but also describe the advantages of walks in Kolomenskaya Park. It will be donedue to the fact, that competition in Moscow is very severe. The main advantage Kapuchinoff has is that there are no real competitors in the area. But if Moscow itself is considered,the situation is absolutely different. So if some customers will be attracted to walk in the park, that is really beautiful and great they will surely enjoy the walk greatly. Then they will surely visit caf Kapuchinoff, thanks to which they visited the park. Simultaneously with placing an advertisement in Vkontakte, some emails with special offers will be sent to existing customers. The main aim of these offers will be to attract as many new customers as possible. For example: Bring 5 friends with you and get two free slices of apple cake! Year four and year five: In three years time, after the loan to Sberbank is repaid, the break-even point will be about to be achieved, the profit from operation of the Caf itself and the bakery will be achieved and an advertisement to the website Vkontakte will be in place, the delivery service is to be provided. It is expected, that many brand-loyal customers will appear in three years time. Many of them may possibly live quite far away from the Kolomenskaya metro station. Thus, to buy some bakery or other products that Kapuchinoff offers they would have to visit caf itself, which is very problematic. The solution of this problem will be delivery service. The delivery itself will be free of charge, but the minimum sum of the order will be set. This sum is planned to be 1000 rub. Moreover, each client will get a
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES special muffin for free, with the taste he/she will choose. This small present will help to get more brand-loyal customers. Speaking about costs, two cars will be bought to deliver food in the neighborhood. These will be Russian cars called Zhiguli, costing 120 000 rub each. Four persons for delivery service will be hired with a salary of about 25 000 each. They will have flexible working hours, but not less than 30 hours a week. Thus, the delivery service will cost the company 340 000 rub. It should be mentioned that 240 000 rub can be considered to be an initial investment, as cars are the fixed assets of the company and the depreciation period is rather long, about 7 years. 100 000 the salary to hired workers- is a fixed cost that will be to be paid every month. 340 000 rub is not a big amount of money. So the delivery service can be started even after the bakery will be opened. The thing is that delivery service is to be introduced only after a large-scale advertising campaign. Emails to existing customers and the advertisement in Vkontakte will bring the company many new clients, as Vkontakte is the mostly visited website in Russia nowadays and internet itself is the most popular nonverbal way of communication. Only if this investment is successfulwill additional profit be made. It should be mentioned that the scenario of further development is positive. There is no guarantee that advertising campaign will bring expected results, thus this scenario is to be implemented only if no great changes in the country, economy, industry and consumer preferences occur. Sales Forecast The sales forecast assumes the following changes: Bread sales in the summer months will be slightly higher, since more people will be going to have walks in Kolomenskoye Park.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Bread and pastry sales will be higher in November and December because of the food-oriented holidays. Coffee sales will be higher in winter months and, for summer months, sales of sodas and iced beverages will increase, as willthe bakery with fruits and icecream. Sales Strategy The strategy focuses on building a customer base by providing good customer experience. With the addition of the coffee bar and lunch menu in early spring, it is expected to have customers who make the bakery their one-stop destination for breakfast or lunch. In the summer, the outdoor patio will be opened, more and more customers will make the bakery a destination for their lunches more often, since the atmosphere will be so pleasing. It is planned to work closely with local doctors and elder peoples care homes to bring in customers with health problems. Competitive Edge The competitive edge is the quality of goods. Only organic flours of the highest quality that create incredible non-gluten goods, that cannotbe matched practically anywhere else in the city, are used. The other bakeries in the city focus on wheat goods and sometimes, as an afterthought, use alternative flours. Financial Plan Important Assumptions In the fiscal year the turnover was about 90 000 rub monthly. The smallest revenuerunning the business was in November due to the weather conditions. The turnover was just 35 000 rub. The most profitable month was May, when the turnover was 125 000 rub and the revenue from the bakery will be about 38 000 a month.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES In the first three years, the annual turnover of the bakery will be about the same with the tendency to grow. It will be approximately: The first year: 422 000 rub Second year: 464 000 rub Third year: 498 000 rub Fourth year (after the advertising campaign): 584 000 rub This sum is expected taking into consideration, that one month will be needed for the bakery start-up. Pessimistic view In the first few months, sales will be rather small. In the next months, they will increase, but still slightly. The turnover will be: The first year: 242 000 rub. Second year: 286 000 rub. Third year: 284 000 rub Fourth year (after the planned advertising campaign): 378 000 rub Fifth year: 422 000 rub Optimistic view: In the first few months, sales will be great, as all brand loyal customer will appreciate the novelty. Moreover,existing customers will get notification to their emails. In the subsequent periods the turnover will be increased greatly. The turnover will be: The first year: 432 000 rub. Second year: 512 000 rub. Third year: 620 000 rub It should be mentioned that it is still very possible that the optimistic scenario is the one that will be closest to reality. But there is still the risk

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES whetherthe level of profit that can be achievedin the case of normal process of business development. Break-even Analysis The Break-Even Analysis includes running costs of production. These are fairly low since all of our goods are manufactured at a low cost to us. The costs are about 11% of the price. Here are the items included in the average percent variable cost: Manufacturing ingredients, i.e. flour, sugar, yeast and butter. Payroll Utilities Advertising The Break-Even Analysis: Gross Profit 1 year 2nd year 3rd year 4th year Total:
st
Costs(rub) 46 420 51 040 53 680 73 240 215 380
Turnover (rub) 422 000 464 000 488 000 684 000 1 958 000
GrossProfit (rub) 375 580 412 960 434 320 619 760 1 842 620
The initial investment is 1 600 000 rub. Taking into account the table above, it can be concluded that the break-even point is achieved in the third quarter of the fourth year. After that moment the bakery will have revenue of about 55 000 thousands monthly. Pessimistic view: Break-even point will be achieved only in the beginning of the 6th year. That is not acceptable as this business strategy covers the period of 5 years. Moreover 5 years is too long a period of time for such investment to be worth making, as some other options of business development can be found.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Optimistic view: Break-even point will be achieved only in the very beginning of the 4th year. This scenario is mostly desirable, but the possibility of it to become real is rather small, unfortunately. Conclusion The impactof the world financial crisis can be truly considered to be extremely hard for the companies operating in all industries all over the world. In the year 2010, the economy of Russia began to recover and this recovery gives an opportunity for business development and expansion. Caf Kapuchinoff has beenoperating in the market for 6 years and has a strong market position. Due to its fortunate location, it has real chances to get the new target audience and thus increase profit. In the menu of the caf, a client can find some kinds of pasta, salads, appetizers, main dishes and desserts, also many beverages, but unfortunately no bakery products. The best solution to this omission is to build its own bakery. The initial investment is 1 600 000 rub, but due to the fact that part of the money is financed through the loan, an additional 44 000 rub of interest are to be paid during two years period. The expected pay-back period is 3 years and 9 months. There are still some risks connected with such kind of expansion. The pay-back period can be up to 6 years in the pessimistic view. But still the increase in the turnover will be up to 800 000 rub a year after the pay-back period, that is additional 260 000 rub of net profit. So the risk is worth taking. Considering the target audience, firstly there are people interested in their health and figure, as there will be special bakery of low fat. Also pensioners and students, as there will be special discounts for them. In addition there are a lot of tourists who are interested in visiting historical Kolomenskoe Park and who are in the habit of buying some coffee and bakery to go.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES In three years time, after the loan to Sberbank is repaid, and the break-even point isabout to be achieved, it is planned to put an advertisement to the website Vkontakte that is considered to be the most popular one in Russia nowadays. After that moment the new stream of clients is expected. Moreover,existing clients will get special offers to their emails of taking more friends with them to get some special discounts. Simultaneously with this marketing campaign, the delivery service will be started to make it possible for clients living quite far away from Kolomenskoe to order their favorite food from their favorite place. It should be mentioned, that the atmosphere in the Caf is really very homelike and kind of magical. Many clients wrote about that in the guest book. This fact reassures and lifts hopes and spirits.
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ALEXANDER SARUKHANYAN INVESTMENT FUND

Introduction In this work I want to describe the functioning of myown investment fund. The activities of this fund will be considered in the long term: a term of5 years. This paper will set out the structureand forms of organization and management of the fund, considered strategies and methods of portfolio management. Description of the investment fund and its activities First of all, I want to give the wording to what
ALEXANDER SARUKHANYAN
we intend to do in the future - the creation and development of a investment fund. An investment fund is the mechanism by which individuals providemoney, or assets, to professional managers to manage. Aggregating the fundsof thousands of investors and then managing the combinationas a single portfolio, in which each investor has a share, proportional to his investments. This gives the following advantages: small, private investors have neither the time nor the knowledge of procedures for the selection of shares and the stock market, but they want to have the same benefits of investing in stocks and bonds, and large professional investors. portfolio management recognized the fact that diversification reduces risk, but small investors cannot achieve this in a cost-effective way because of the high costs of operations with small numbers of shares.
Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES managing a large number of small investments as one big portfolio can achieve economies of scale of operations, from which the investor can benefit in the form of lower management fee. As investment funds in virtually all countries are subject to legislation and regulation aimed at protecting the interests of small investors, investors can be largely confident that the fund will properly manage their assets and protect them. The main financial instrumentsthat exist in the securities market, are stocks, bonds, futures, stocks, bonds.Much more attention should be given by using these instruments. Competent management is needed to properly analyze the state of the market. To do this, it requiresthefollowing: Financial analysis. There are two main reasons to explain the usefulness of financial analysis. The first is the need to define some characteristics of the securities. The second - in an effort to identify to the investor a mispriced paper. According to modern portfolio theory, a financial analyst seeks to estimate the potential exposure securitiesas well as possible risks detailed in this paper because these numerical data are needed to determine the risk of the portfolio (measured by standard deviation). The analyst may try to estimate the rate of dividend yield of securities in the following year to determine the feasibility of theirinclusion in the portfolio, for which the rate of dividend yield is an important characteristic. Careful analysis of such issues as the company's dividend policy and the likely influx of investors in the future, can provide better forecasts than the simple extrapolation of last year's rate of dividend yield. In many cases, you need to know about the sources of risk and profitability of a security. If, for example, the portfolio is formed for athe clientengaged in the oil business, then the investor may want to minimize the risk of changes in portfolio returns due to changes in oil prices. The fact is that if oil prices fall, the
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Section 1. Small and Medium Entreprises. Alexander Sarukhanyan Investment Fund

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES portfoliois likely to fall as are theearnings of the investor from the oil business. If the portfolio is affected by fluctuations in oil prices (that is, if it includes a significant portion of oil stocks), then its market value drops, further weakening the financial position of the investor. To detect falsely- priced securities, there are commonly used methods of fundamental analysis. In essence, these processes involve a search and discovery of those situations where a financial analyst estimates of future earnings and dividends of the company: 1. substantially different from conventional wisdom; 2. convince the analyst that they are more accurate than conventional estimates; 3. havenot yet been reflected in the market rate of securities firms. In fundamental analysis, there are two different approaches to the identification of incorrectly priced securities. The first approach attempts to define the appropriate internal, or true, value of the securities. After that, the intrinsic value is compared with the current market rate of securities. If the market rate is much higher than the intrinsic value, then we say that the paper is overrated. If the market rate is substantially less than the intrinsic value, then we say that the paper is underestimated. To successfully manage the investment fund, we must meet the following conditions: Identification of incorrect priced securities Income above the average. Application of financial analysis and analysis of market efficiency. The necessary qualifications of staff. Correct evaluation of investment schemes. Reduction of incorrect risk assessment.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Avoiding underestimation of transaction costs. Eliminate incorrect estimates of the dividends. Eliminate incorrect fit. Comparison with efficient systems. Application of technical analysis. Strategies for the moving average and the line break market. Analysis of the lower limit. Charts. Moving averages. Indicators of relative strength. The opposite view. Use of fundamental analysis. Prediction from the top - down and bottom-up. Probabilistic forecasting. Econometric models. Analysis of financial statements. It is best to analyze the performance of funds over a period of 36 months. This will help to understand how effective is the basisfor a longer period. Assume that already as a competent novice investor, we have developed an investment strategy, with a risk you are willing to bear. The question arises: how to independently assess the effectiveness of various investment funds? This will help the performance of the fund. Profitability. Earnings in the past. Yield shows what income the securityhas providedover a certain period in the past. Yield is calculated as the increase in share value as a percentage of its value at the beginning of the period (eg over three years). For the evaluation of funds, it is best to take long periods of measurement of the fund: 3 years and above. This shows how the fund managers have performed overa longer time and it is hoped that they will continue to run a well- managed fund. Section 1. Small and Medium Entreprises. Alexander Sarukhanyan Investment Fund
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Volatility. Risk In the bowels of the internet I came across the following sentence by an unknown author, "If you do not pay attention to the risk, itwill pay attention to you." A volatility index allows you to pay attention to risk and rate it. Volatility is measured by the movement of asset prices, or more simply, the scale fluctuations in the price of securities. It shows how much risk thereis in investing in the asset and determines what type of securityitis (conservative, moderate, aggressive). The value of volatility after the crisis of 2008 for various types of instruments can be roughly defined as follows: Conservative - 10% Moderate - 15-20% Aggressive 20 or above A more widely-used measure of volatility is the standard deviation. Standard deviationsare expressed as a percentage, as well as absolute profitability. It is calculated based on the profitability of the fund over a given period. The standard deviation allows us to estimate the boundaries of profitability, which can show the funds potential. How can weuse rates of return and standard deviation? With these figures, we can calculate the lower and upper limits of the possible annual yield. The lower boundary of return = average yield for a certain period - (standard deviation over the same period * 2). The upper limit of yield = mean yield (over a certain period) + (the standard deviation for the same period * 2). Lower boundary with a minus sign - means a loss that we could incur, upper limit - this is our best possible income from the fund. We can analyze the volatility of the fund, using the chart of a fund for some period of time. In the Russian practice for the analysis of the funds are most commonly used factors:

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Beta Alpha Sharp Beta coefficient. Risk and market The Beta coefficient shows how much the fund's performance depends on the movements of the market (the standard, to compare with the performanceof the fund). It is important that it is the correct comparison of the fund with the correctindex. Since equity funds should be compared with an index of stocks, bond funds - with an index of bonds, and mixed can often be compared with the composite index (includes part of the index stocks and some bonds). The Russian stock market the benchmark for stock funds is the index of the MICEX and RTS, for bond funds - RUX-Cbonds, for mixed funds - a composite index 50:50. What is the beta coefficient of performance? Beta = 1 means that the fund followed the ups and downs of the market precisely, in a 1:1 ratio. This is especially important when choosing an index fund. Beta <1, eg 0.3 means that any market movement reflected in the yield of the fund only in part, in our example - 30% (in the direction of the market). Beta> 1 means that the value of a share fell more than the market or index during the fall, but the growth was stronger than the market or index during its growth. Typically, the fund's risk is below market risk (beta <1), because reduction ofinvestment risks isone of the main goals of this kind of investment. For example: beta> 1 can mean, for example, that in the mixed fund there are more shares than the average for similar funds - it was more risk thanthe market for this segment, although smaller than the market risk in a segment of the shares. For standard-risk segment, we should usesuch an index which closely correlates precisely with mixed funds.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Beta <0 indicates that the fund market was moving in the opposite direction. For example, when beta = -0.2, and fall (rise) of the market by 5%, the fund was up (down) by 1% (5 * (-20%)). Coefficient Alpha. The art of management. Coefficient alpha is closely related to the beta coefficient. If the Beta of the market assesses the impact on the profitability of the fund, the Alpha shows how much of this profitability has been created not by the growth of the market. A positive value of coefficient alpha fund means that its average yield is superior to the return on the benchmark portfolio. Conclusion - management was effective. Negative value, on the contrary, shows that the average portfolio yield was lower than the yield of the reference portfolio, and management wasineffective. For example, if Beta = 1 ("head to head" withan index fund), the Alpha is equal to 0.4 means that the fund beat the index by 0,4%. With the Beta 0.5 Alpha 0.4 says that the fund rate of return was equal to half the yield of the index plus 0.4%. Sharpe ratio. Yield / Risk The Sharpe ratio records the of return and risk for the selected fund. In fact, the value of the Sharpe ratio reflects how effectively management is managing the fund. The higher the score, the better the fund is managed in terms of combinations of risk and return. The lower the ratio, the lower the return on investment justifies the risk.Anegative value of the Sharpe ratio indicates that investment in risk free instruments (a U.S. government bond) would bring more revenue than investment in the Fund. In Russia, the risk-free instruments areconsidered short term deposit given to the Savings Bank (Sberbank). To date, government securities are not riskless. In practice, you can use the Sharpe ratio.For example, consider two funds. (A and B) The fund A Sharpe ratio - 0.4234. Fund B - 0.4124. . This means that

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES the fund and the investor for the assumed additional risk can get a bigger return from A than fromfund B. Hence, from the standpoint of the investor fund A is moreinteresting than Fund B. Thus, the analysis of the above parameters allows us to answer the following questions: What was the fund's performance in the past? What are the risks you assume by investing in this fund? How does the fund behave in relation to the market - faster than it in growth or slower than the market when it is falling? Did it Show a better yield on the fund compared with the market index? Whether investing in the fund more profitable than investing in a riskfree instrument, such as government bonds or deposit in a safe bank?
Types of investment strategies. Choice of Investment Strategy Depending on investment objectives, the type of control, the nature of the economic situation and many other factors can identify a large number of diverse strategies. Strategy is an efficient owner. The main income is derived from the economic activity of enterprises. There is also a speculative strategy of merger or acquisition. The main goalof this strategy is to acquire a controlling stake for access to scarce types of products (services), financial resources, or to obtain a profitable disposal of real estate and other economic and legalrights. Portfolio investment strategy selection is largely determined by the type of management. There are usually 2 types of control: passive and active. Passive management is characteristic of the conservative and moderatelyaggressive investors. The main targets ofpassive management are the protection of investments against inflation and a guaranteed income with minimal risk and low
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES management costs. This type of management involves creating well-diversified portfolio of securities, for which we can accurately calculate the profitability, risk and liquidity. Active management involves careful monitoring of the market, rapid acquisition of financial instruments that meet the investment objectives, as well as rapid changes in the structure of the portfolio. The main feature of the active type of control is to try to beat the market and investors should earn a yield that exceeds the average. Examples of portfolio strategies. The most common strategy for passive management when investing in corporate shares is the strategy of "buy-and-hold." It should be borne in mind that the effectiveness of this strategy depends largely on the level of undervaluation of shares and the selected time period. It is obvious that in the bear market phase, almost any other strategy would be benefit in comparison with the strategy of "buy-and-hold." The highest security and profitability by using the strategy "buyand-hold" is achieved in long-term investment. Another kind of strategy for passive management strategy favors the index fund. It is based on the fact that the portfolio should reflect the motion of a selected stock market index, which characterizes the state of the securities market (or its most important segments). Types of securities and their percentage are selectedin the same manner as when calculating the index. The main objective of the investor is duplicatingthemarket structure in its portfolio,with a periodic adjustment aftersix months or a year. Management reviews the deviations of the portfolio structure withthe index structure. When using this strategy, real income, usually provided at the timing of investments is not generated in less than one year. The main income is generated by the growth of the market value of the most undervalued stocks.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Auction strategies used in the acquisition of shares at the time of a privatization process.A variety of these strategies are determined by the auctions. This is considered to be aparticularly successful strategy when used in the earliest stages of privatization. Aproper selection of securities purchased at auctions stocks can provide returns of hundreds or thousands of percent per annum. The final auction price, in most cases is significantly lower than the market price. Thus, the main advantage of this strategy is that one can buy shares fairly cheaply of a littleknown companies that are not yet in demand in the market. Risks specific to this strategy arethat, as a result of excessive demand for more "juicy" bits of government property, auction prices may be too high. Another danger is that an investor will not be able to buy shares due to high market demand, and will have invested their funds for six to eight weeks for no return. Expectations of investors associated with an increase in market value in the struggle for control over the enterprise, cannot be justified if one of the participants in the auction will buy a controlling stake. Finally, there is always a possibility that, for whatever reasons, timing of auctions will be delayed indefinitely or their results will be declared invalid. Arbitrage strategies actively were used at the initial stage of privatization (sale vouchers in the 1990s in Russia), and also today. It is the use of the fact that the same asset can have different prices in two different, including geographically distant, markets. Strategy vacuum cleaner is a strategy used by the largest investment companies, which enable (mostly foreign) investors to bulk buying of shares. Optimization strategy is based on building economic and mathematical models of the portfolio. Ranking strategy is that the formation and updating of the portfolio securities is based on the result of the construction of the rating table. The strategy
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES of "flexible response" is whenthe professional party to give market signals, demonstrating the interest of large foreign, or domestic, investors in the shares of an issuer.Investors use their financialcapabilities in order to beat the competition and then advance to massive buying of small investors. The strategy of "market timing" suggests that investors are trying to make their own forecast of the market and use it for a profit Depending on the timing of the return of invested capital, portfolio managers can provide a strategy of short, medium and long-term investments, as well as combinations thereof. For the domestic market for corporate stocks as short-term investments,the generally-accepted period is of several hours up to 3-6 months. Medium-term investment suggests the possibility of return on investment in 6-12 months, and long-term - one year or more. Short-term investment strategy can be described as a strategy for catching short-term fluctuations. " It comes from the fact that stock prices are subject to frequent fluctuations, which are not always adequate to effect real change in the affairs of public companies. Consequently, in the market there are always securities for which are quoted toohigh or too low prices. Some stock market participants are trying to take advantage of such shortlived situations and to "fix" short-term profits. A variation of this strategy is the strategy of "scalping," which is most often used in stock trading. Portfolio Management can be based on a short-term strategy based on the use of even small fluctuations, so that profit maximization is possible at very high speeds. Accordingly, in selecting securities, the portfolio manager should be aware that significant volumes of transactions should not have a significant impact on the change in their quotations. The main dangers of this strategy are associated with risk of default transactions, errors in predicting the movement of the securitys priceas well as the impossibility of a quick withdrawal of funds tied up by a

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES particularly large gamble. The risk of using a strategy based on short-term fluctuations, particularly is high when a sale of securities made without cover (short sale selling shares that are not owned by the portfolio manager). How to start. So, we are readyto start investment activities. For starters, we need to determine what organizational form is our business. Assume that the form of our organization is either a private investment fund, or a hedge fund. It will be created by investing money of a certain number of individuals. In this case, the amount of share capital must comply with the statutory authorized capital for such institutions. After resolving all legal issues, we should elect the leader. It may be the person, whoinvested thelargest sum, ie having a large share of the total, orhas the best professional experience. Next, elect the board of directors, ie, participants of the enterprise, with ownershipof a certain minimum amount of total investment in the fund. Now, we decide the strategy, which will be followed by the fund. Activities of a Fund in the short term. Short-term strategy - from one hour to one day. This is a potentially highly profitable strategy for experienced traders. It is used by professional players who are already well aware of the market. The positive point here is that in using this strategy to work, you are not putting yourself at risk of unexpected communication and changes in prices at a time when you were not in the market. Positions are closed at the end of each day. Negative aspects - high indirect costs (commissions, spreads, communication services, etc.), greater risk of adverse short-term fluctuations in price; requires constant concentration, and control over the entire working day.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Very short-range strategy - the most attractive for beginners and rapidly leads them to a total collapse. Tempted by short-term fluctuations of a few points, the trader begins to "catch points". Sometimes if successfully managed, he earns 20-40 points. In this period should be considered such an activity fund, as trade in the market FOREX. The main instruments for very short-range activities will be scalping and shorting. Activities of a Fund in the long run. It can be considered a long-term, for the period of 2 years or more, value for money. The investments can be as securities (stocks, bonds, forwards and futures) and investment in major projects (such as construction, real estate, or the development of high-tech products). Given the latest trend in the market, the fund mightinvest in gold. Gold prices (the market quotations of gold) area very important economic indicator. The price of gold has long been the benchmark for funds. The price of gold continues to maintain the status indicator of inflation and risk appetite. Quotes of gold may be useful for investors to make decisions about buying gold assets. Operational quotes of gold will also be useful in trading on the Forex market. History Centerbuys gold from any broker, and provides access to trading in gold. In addition, gold prices are published on the website of the Central Bank (Bank of Russia). On the commodity exchanges, futures are traded for gold. Often, the futures price of gold is gold price today in a general sense. Quotes of gold may reflect both the beginning of growth and decline in world stock markets. Often, the dynamics of the gold price is negatively correlated with the stock markets. Given that the price of gold has grownrapidly in the last 5 years, we can, with some confidence, predict its future growth and, therefore, may invest in gold. Naturally, only for the long term.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Ditto for the securities (mostly related to the stock), as mentioned above can be applied to the strategy "buy-and-hold." In the long run, it should have a positive result. If you judge them by common attributes, such as capital investment, the degree of acceptable risk, and some others, it is proposed to allocate five possible strategies for long-term investment: 1) development of an aggressive (active) growth; 2) moderate growth; 3) improvement at the same level of growth; 4) deterrence of recession and the development of new products;
A"safe" long-term strategy can be considered an investmentin the economy as a whole. The mechanism is as follows: we create a portfolio of stocks of large companies according to percentage of their weighted presence in the market. The idea is that this strategy is not aimed at maximizing profits and minimizing risks and losses in the event of adverse market conditions. For example, if the economy grows as a whole, but some of the companies in which we invested, fall, it would havevirtually no impact on our profitability. Exiting the game. Whatever our ideal-designed plans, estimates, strategies - there is always the risk of "losing." This may include, for example, -liquidation of the Fund. Upon liquidation of the fund we must repay the fund liabilities to investors in relation to the size of their investments. The same applies to dividends. Conclusion. Analyzing the above, we can conclude that the investment fund - a high-risk venture, requires good management, complex calculations and intelligent market analysis. For its successful functioning, it is necessary to consider all possible
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES factors to consider all scenarios, not excluding the most disadvantaged. The main disadvantage of the investment fund may include: High risks (including risks of loss) High dependence of the fund on the economic situation in the market But the risks can be justified if the fund receives income from its activities. Often, with proper management, investment fund can achievea large enough profit that can multiply the share capital of the fund, which will contribute to more investment, and hence greater profits in the future. Success can never be assured when acquiring an asset, as there are many risks involved such as the unpredictability of the future market, opinion and outlooks. Given that property is only one of the opportunities for investment on the market and that different investments appeal to different investors, the comparison of asset with asset is essential, but the comparison of that asset against other forms of investment is also just as important.

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PAVEL TOLPEEV IKEA

Introduction. The goal of this work is to analyze the performance of IKEA group, find the reasons of success and develop a strategy for further growth. To achieve thesegoals lots of data was processed, and result is below. This work consist of 4 main parts, they are: Part 1 explanations of IKEA success, Part 2Structure, group facts and performance in Fiscal Year 2010, Part 3 Five forces model, PEST-G analysis, SWOT analysis, Part 4 New strategy and conclusion. Part 1 about IKEA success is given in order to understand what is attractive in IKEA for customers, what arethe strong points, that should not be loosened, but strengthened. Part 2 shows Group structure to provide understanding of group cash flows and find how management is realized. Group facts and performance subparts show the entire company performance in numbers. Part 3 Different comprehensive analysis that help to develop a strategy, find threats, opportunities and find new development directions. Part 4 is a summation of entire work, suggestion of new strategy and conclusion. Overview. IKEA is the worlds largest international home products retailer, which was established in 1943 by Ingvar Kamprad in Sweden, who is of great influence today. Most of its stores can be found in Europe, the United States, Canada, Asia and Australia, so it is a globally-acknowledged home furnishings retail chain.
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Section 1. Small and Medium Entreprises. Pavel Tolpeev IKEA

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES IKEA is only responsible for the design and development of the products, the manufacture issubcontracted. The company is well-known for its strong cult brand which is based on IKEAs fundamental values of offering affordable, but still contemporary-designed, products for everyone. Besides this, the company is also committed to environmental protection; therefore it created the so-called IKEA GreenTech in 2008 to commercialize green technologies for sale in the stores in the next few years. Although IKEA dominates the market of home furnishing, mainly because of the fact that it was the first inexpensive Scandinavian-designed furniture seller, it has to face more competition than ever. The main competitors are Pier 1 Imports and Target in the U.S. and Kmart which has been collaborating with Martha Stewart on its own furniture line. In addition to this, an IKEA-like chain called Fly become very popular in France, while in Japan Nitori Co. has a lock on low-cost furniture. All of these competitors try to cut costs and employ well-know designers who offer the customers something new and beautiful, but also affordable. Reasons of success IKEA became successful with a relatively standardized product and product line, the Scandinavian style furniture, in a business with strong cultural influence. Ingvar Kamprad, the founder of IKEA, realized the demand forminimalist traditional Scandinavian design furniture at anaffordable price. Customers would like to have contemporary design in their home, but they could not afford it. After then came Kamprad and sold IKEA products all over the world, and IKEA became the worlds largest home furnishings retailer chain. The main success factor of IKEA is its low prices, wide variety and listening to customers. Design The products are contemporary, well-designed, simple, self-assemble, practical, environmentally-friendly, and last but not least, affordable. These are the
Section 1. Small and Medium Entreprises.Pavel Tolpeev IKEA

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES main characteristics of IKEAs products which first come into customers mind. IKEA sells a wide range of products from kitchen accessories to garden tools, everything you need to create a nice home. Young couples filled with energy and joy of life try to furnish their first common home with new, up-to-date, stylish furniture, but usually they cannot afford expensive pieces. That is when IKEA comes and helps their dreams come true. Of course, not only young married couples are in the target group, rather all of the young people of all ages belong there. Quality is also very important for the company and the customers, as well; therefore they use good and cheap materials, like fir and plastic. They also pay attention to make transportation easier by offering their products in flat-packaging. On the other hand, IKEA does not forget about those who need delivery services, so it cooperates with car rental companies to offer vans and small trucks at reasonable rates. At home, everyone can assemble their own furniture with only the use of an Allen wrench, however, sometimes it is still not an easy task, but IKEA tries to help with detailed descriptions. Price An important factor in connection with products is price. IKEA takes every opportunity to cut the prices. They cooperate with manufacturers who can produce their products on low price, but keep them qualitative. Their network of 1,300 suppliers in 53 countries showsthat they have regard for finding the right manufacturer for the right product. Therefore, they choose companies near raw materials and with advanced technology. In addition to this, designers have to consult with the manufacturers before creating something new to find the most efficient way of production at low costs, but of course preserving simple, IKEAstyle, moreover they can only use inexpensive technology for new products. The companys pricing strategy is mostly based on rivals, which is expressed by a manager of IKEA who said that after taking the prices of the competition, they slash them in half creating competitive advantage in pricing. The simple nature of
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Swedish design itself is also a cost-cutting factor. The products are standardized which means that mass production and economies of scale influences the price, as well. Besides these, IKEA employs only local people and often students, because they provide cheaper labor which is good for the company and advantageous for the country, too. Almost in every country the simple, contemporary design comparing with low prices made IKEA successful, except for in Japan where customers wanted materials of high quality and not low price. However, nowadays IKEA is getting stronger in Japan without making serious changes in its functioning, and it is still among the best in home furnishing concerning operating margins. Standardization The stores have the same appearancein every country, blue-and yellowpainted, huge and flat. It consists of 3 or 4 parts: the showroom, the warehousestyle selling part, a restaurant and a babysitting place (crche). Every part has its own advantage. In the showroom you can have new ideas of how to furnish your home, and maybe you will fall in love with things you never thought you might need, that place is also a good promotion part. They guide you through every showroom, and if you follow the arrows, you will not miss anything. After that, you go to the warehouse where wide aisles are constructed to let you inspect the products without holding up traffic. After all, if you are tired and hungry, you can have lunch or just grab a hot dog, or drink a coffee, at the restaurant. If you have a baby and do not want to drag along with you all day, you can live the junior with a qualified babysitter. IKEA has 159 or nowadays more outlets in 30 countries. It has three regions: Europe, North America and Asia-Pacific. The stores are outside the city limits of major metropolitan areas, and they are easily accessible. The delivery is mainly the customers job, but delivery companies are cooperating with IKEA, and offer their services if needed, thus there are no, or cheap, delivery costs.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Promotion IKEA uses a great number of promotion tools. It has commercials on TV, radio and on the internet, as well, so it uses ATL marketing tools. These ads are often about sales and low price. The well-known IKEA catalogue is another part of the promotion. It offers solutions, inspiration and low-priced products in which the prices are valid for a 12 month period. This catalogue also shows how the IKEA product range helps to create a better everyday life for everyone. Although the IKEA catalogue is extensive, it shows just a part of the range that the IKEA stores offer, and the price of each product. It also contains details on how to get to the nearest IKEA store and its opening hours. IKEA usually tries to entice the customers with seasonal sales and by buy 2 get 3 etc. actions, which are often successful. The website is very customer friendly, easy to use, where the customers can find information about new actions, prices and the actual catalogue, as well. It also offers an additional service where the customers have the possibility to compile their dream furniture. Market environment. IKEA gained high market share in all over the world, but in some countries it had to deal with new challenges. For instance, in North America IKEA was not successful first. The standardized products and simplicity did not satisfy the customers needs. They needed to listen to customers in details and made some adaptations. IKEA has redesigned about a fifth of its product range in that area, because Americans needed more colorful and happy products, and they had a need for bigger glasses, as well. IKEA listened carefully and the mission began to move in a more advantageous way. But we should mention that this adaptation has not meant the destroying of its original formula; however, they had to change not just the product but also the way of selling. Mainly, because Americans hate standing in lines:that is why store layouts have been changed to accommodate new
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES cash registers. It can be argued that minor adaptations do not amount to a defeat of their original approach. The main target customers of IKEA can be described on the whole as the young people of all ages which covers a great layer of the society who have roughly similar features and lifestyles all over the world. They are always mentioned like this, inasmuch as the most conspicuous attribute of them is not their ages, but their youthful taste referring to modernity. They are breaking with the traditional way of home furnishing, and looking for a more streamlined and contemporary design which in a lot cases are not affordable for everyday people. Therefore, IKEA made it possible for those people who are keen on value and quality to have an access to trendy design for less money. Nevertheless we know that quality usually means more costs, hence IKEAs prices do not include delivery (however it offers this service on payment) and assembling in order to be able to maintain the low prices. In turn, the customers are willing to contribute to the process; moreover they enjoy this do-it-yourself work. In addition to this, the easily variable units of the furniture give them also the freedom to use their imagination and be creative. Because of these facts, they are usually called as prosumers, who are not just customers, but also producers. In the aspect of use, they favor simplicity and practical solutions, which are important features of this Scandinavian style represented by IKEA, as well. And if it all would not be enough, IKEA was able to provide a new, unique dimension of shopping by offering additional facilities in the stores, such as IKEA restaurant, babysitting areas and so on. These customers expect more from shopping than just a transaction, they need a kind of entertainment and the feeling of belonging, as well, so that is why IKEA is more than a furniture retailer. However, there are also a few regional differences that IKEA should take into consideration for being able to satisfy the claims of the customers. As long as it remains adaptable to the local markets, it can still preserve the IKEA concept worldwide.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES This raises the question of whetherIKEA is capable to succeed everywhere it cares to establish itself? Almostevery home furnishings retailer istrying to sell their designed products at low prices to remain competitive.Nonetheless, the concept of IKEA still hasa power of distinction in the market. It was laid down by Ingvar Kamprad who established the company with the purpose of providing better life for everyone. Henceforth, it determined the strategy of the company which put an emphasis on making practical and contemporary design affordable, besides keeping the costs at a low level. Furthermore, the name of IKEA has been interwoven with a kind of lifestyle and experience of shopping which is almost impossible to imitate for the competitors. IKEA was successful in creating an emotional attachment in the people to the company, by which it became a global cult brand, and appeared as more than a furniture merchant. The environmentally sensitive nature of the company also contributes to enhance this feeling towards IKEA even more, which not only aiming at protecting the planet, but also economizing money through flat-packaging, and by recycling used materials into ready-to-use furniture. Nevertheless, the regional differences mean a kind of difficulty in the preservation of IKEAs position, because people of different cultures perceive good value and low prices in differentways, however, the company should insure the same kind of quality and perception of brand in every countries. Consequently, IKEA has to make slight modifications at local markets in order to gain success globally, whilst it should keep the core founding values alive without departing considerably from the original IKEA concept. If IKEA can still cope with these challenges, it will succeed in preserving its dominant role in home furnishing. Conclusion to the reasons of success In conclusion, the key factor of IKEAs global success can be found mainly in its approach towards the customers, because according to the company everyone should have the same possibilities to furnish their dream homes as they want. By
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES the obsession of cost-cutting and its dedication to home, IKEA was able to make an access for the people to live a better life at lower prices, and make them feel like they belong to a family. If IKEA can retain these competitive advantages globally, and preserves its capability to adapt to the regional markets besides keeping its original values, as well, it will subsist for a long period on the market of home furnishing.
Structure The groups of companies that form IKEA are all controlled by INGKA Holding B.V., a Dutch corporation, which in turn is controlled by a tax-exempt, not-for-profit Dutch foundation. The intellectual property of IKEA is controlled by a series of obscure corporations that can be traced to the Netherlands Antilles and to the Interogo Foundation in Liechtenstein. INGKA Holding B.V. owns the industrial group Swedwood, which sources the manufacturing of IKEA furniture, the sales companies that run IKEA stores, as well as purchasing and supply functions, and IKEA of Sweden, which is responsible for the design and development of products in the IKEA range. INGKA Holding B.V. is wholly owned by Stichting INGKA Foundation, which is a non-profit foundation registered in Leiden, Netherlands. The logistics center Europe is located in Dortmund, Germany and Asian Logistic center is located in Singapore.
Inter IKEA Systems B.V. in Delft, also in the Netherlands, owns the IKEA concept and trademark, and there is a franchising agreement with every IKEA store in the world. The IKEA Group is the biggest franchisee of Inter IKEA Systems B.V. Inter IKEA Systems B.V. is not owned by INGKA Holding B.V., but by Inter IKEA Holding S.A. registered in Luxembourg, which in turn is controlled by the

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Interogo Foundation in Liechtenstein. Ingvar Kamprad has confirmed that this foundation is controlled by him and his family. The company which was originated in Smland, Sweden, distributes its products through its retail outlets. As of October 2010, the chain has 313 stores in 38 countries, most of them in Europe, North America, Asia and Australia. The IKEA Group itself owns 276 stores in 25 countries and the other 37 stores are owned and run by franchisees outside the IKEA Group in 16 countries/territories. 2006 saw the opening of 16 new stores. A total of at least 15 openings or relocations are planned for 2010. On February 17, 2011, IKEA announced it is plans for a wind farm in Dalarna County, Sweden, furthering the furniture giant's goal of running on 100 percent renewable energy. Consolidated income statement Sept1-Aug31
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Consolidated balance sheet Assets: August 31
Consolidated balance sheet Equity and liabilities

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Sales and profit trends: This bar diagram shows the sales of IKEA for a decade from 2000 to 2010.
The IKEA group figures are based on the IKEA fiscal year. Sales for the IKEA Group for the financial year 2010 were up by 7.7% to a total of 23.1 billion Euros. Gross margin improved to 46.1% from 44.6% in FY09. Turnover for IKEA Food was 1.1 billion EURO.
Group Facts THE IKEA GROUP The IKEA Group had operations in 41 countries 29 Trading Service Offices in 25 countries and 27 Distribution Centers and 11 Customer Distribution Centers in 16 countries. INDUSTRIAL GROUPS Swedwood, an industrial supplier within the IKEA Group, had 15,500 coworkers and 41 production units in 9 countries. Swedspan, an industrial supplier within the IKEA Group, had 500 co-workers and 5 production units in 5 countries. SUPPLIERS IN FY10 IKEA had 1,074 suppliers in 55 countries. PRODUCTS IN THE RANGE The IKEA range consisted of approximately 9,500 products.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES IKEA GROUP STORE VISITORS IN FY10 Last year 626 million customers visited an IKEA store, gaining inspiration from their displays which show IKEA products in actual room settings. An idea which has increased the sales by a manifold, instead of advertising their goods individually IKEA introduced a new way of displaying or advertising their products VISITS TO IKEA WEBSITES IN FY10 IKEA websites had 712 million visits. PRINTED CATALOGUES, LANGUAGES & EDITIONS The IKEA catalogue was printed in more than 197 million copies in 29 languages and 61 editions. CO-WORKERS PER FUNCTION Purchasing, distribution, wholesale, range & other: 14,500 Retail: 96,500 Swedwood: 15,500 Swedspan: 500 CO-WORKERS PER REGION Asia & Australia: 8,000 North America: 15,500 Europe: 103,500 Sales: The pie diagram given above shows the volume of sales
individually in different continents. It is quite evident from the diagram that the sales are pretty high in Europe as most of its business is concentrated in this area. We can even see that 15% of its total sales are from USA wherein IKEA

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES has started its business in the year 2010 and within a year its sales in USA indicate the efficiency of its marketing policies and strategies. Top five sales countries: 1. Germany 15%, 2. USA 10%, 3. France 9%, 4. UK 7% 5. Sweden 6%. Purchases by region: IKEA has 29 trading service offices in 25 countries. This allows them to be close to their suppliers - about 1,074 in 55 countries - so as to monitor production, test new ideas, negotiate prices and check quality while keeping an eye on social and working conditions. The pie diagram given above shows the purchases that have been made for the year 2010. Top five purchasing countries: 1. China 21%, 2. Poland 17%, 3. Italy 8%, 4. Sweden 6% 5. Germany 6%. Distribution and transportation: IKEA has its presence in 16 countries with 11 distribution centers and 27 customer distribution centers. Using flat packs, transporting goods where possible by rail and sea, and utilizing fuel-saving techniques makes them cost-effective and environmentally friendly. This is where it gains extra points over its competitors.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Flat pack technique which was introduced by IKEA brought a lot of changes in furniture transportation, making it easier and comfortable to the customer as well as the manufacturer. This is the technique that enabledIKEA to spread its roots in different countries. Five forces model This model is helpful in assessing the level or intensity of competition in specific areas. We are using this model in order to assess the following: Threat of new entrants: In this section, well see how easy or difficult it is for the competitors of IKEA to compete. Weak barriers of entry, though IKEA has a strong brand image. Distribution channels are not that easy to access, as IKEA has a variety of distributors for different materials. Economies of scale IKEA purchases raw materials on a bulk scale at cheaper rates, so low cost of production. Therefore, there is hardly any threat of new entrants. Power of suppliers: As there are a number of suppliers in the market like DFS, John Lewis, Argos and other small furniture suppliers; customers have got a wide range of options so, IKEA has a possible threat in this field. Power of buyers: This field shows the buying and bargaining power of consumers and it shows the options available to them. The position of buyers is strong as there are a number of suppliers available. They have a number of cheaper alternatives. As the stores of IKEA are outside the towns, they opt for something which is within the reach.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Threat of substitutes: Most of the furniture cannot be easily substituted, as the products offered by IKEA are unique in design, style, comfort, price and quality. As most of their designs are patented it is difficult for other manufacturers to copy it. As IKEA puts in constant innovation into their products it is difficult for any other competitor to offer anything better than theirs. They produce goods on a bulk basis so the cost offered to customer is within the reach of everyone. Rivalry among competitors: Rivalry among competitors is strong as there are bigger players in the market like Argos, John Lewis, etc and the range of goods, price and quality that they offer is quite similar. PEST-G Analysis Before making a strategic planning for marketing, every strategic planner has to make a PEST-G analysis in order to make a long lasting successful strategy. Political Factors: As per GATT treaty, general trading between continents might be difficult. EEA formation would help to boost the business within the European Union, but not with UK. So keeping this in mind, the strategies have to be flexible. As IKEA trades in different countries, the political scene is different everywhere, so it cannot be a one-size-fits-all strategy. The countries in which they have their presence are mostly developed, so they need to have a clear picture about the transportation and shipping taxation between the countries.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Economical Factors: Due to rises in inflation, interest rates would increase. As IKEA plans to open more stores, their borrowing rate might increase. They need to open stores in areas where the percentage of unemployment is more and hourly pay rate is less, or else they would end up paying more wages. They have their presence in different countries so they need to import and export goods very often, so the exchange rate might also vary. Socio-Cultural Factors: In USA, Christianity is the dominant religion so goods preferred by Americans might vary when compared to the goods liked by Chinese. In Europe, there are many single parents whereas in Europe or Asia the situation is different so the choice of furniture or household items would differ. In Japan, the older people outnumber the youth, so the furniture should be of their choice. Technological Factors: The recently introduced EDI, or electronic data transfer, has made the communication between departments much easier and simpler. The new way of introducing goods online by arranging them in a welldesigned room-like environment has increased the volume of sales, as this creates a sense of need in the minds of a customer. Geophysical Factors: In the recent years, it has become important for every company to decrease their carbon foot print. IKEA has recently taken a step further by joining hands with WWF in preserving forests and addressing climate change. It is even working hand in hand with WHO in order provide quality food and health alongside good education.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES It is protecting and maintaining 18,500 hectares of forest land in Malaysia. SWOT Analysis: SWOT analysis helps to identify the key internal and external factors that are important to achieving the objective. These come from within the company's unique value chain. SWOT analysis groups key pieces of information into two main categories: Internal factors The strengths and weaknesses internal to the organization. External factors The opportunities and threats presented by the external environment to the organization. Strengths: IKEAs motto is low cost and high quality, and this reputation has made it the market leader. The differentiation strategy that it applies is very unique, wherein rich or poor can buythe same product within their budget (value added). It is up to the customer to choose how he wants his product to look like (customized fitting options). At IKEA nothing goes waste, as their innovation team is constantly working to turn the leftovers into something useful. Presentation of their furniture in room-like settings makes it easier for customer to choose what they need without any hassle. Their flat pack way of manufacturing their goods makes it easier to transport them. They have their stores in almost all 30 countries. Every country has its own unique tastes and culture, IKEA has adopted itself in each and every country so as to fit into.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES They are not just a furniture shop they offer different facilities like coffee, restaurant, play area for children and transportation in order to make their customers shopping experience hassle free, enjoyable and memorable. They have plans in the near future to open road-side stores wherein they plan to sell plants, gardening materials, candles, etc so as to reach more people. They are working hand-in-hand with lot many environmental organizations, which shows their determination to bring about an environmental change, this is an added advantage that it has over its competitors. Strong internationally-known brand built upon a unique mission: to offer a wide range of home furnishing items of good design and function at prices so low that the majority of people can afford to buy them Unique business model with no direct competition the self-service and cash-and-carry concepts, the catalogs, the use of explanatory tickets (distinctive core competency) Big parking space consistent with the new shopping habits rather than a downtown location Price structure offering value for both innovative, contemporary and functional products; facilitated by anti-waste culture and organization-wide obsession with cost control (core competency) Central control of product range, design, pricing and unique facility layout globally; the standardized IKEA concept Established culture, unique management philosophy, comparatively flat organization: bypassing formal structures; there is no security behind status, which prompts management to perform; easy to expand and grow Creativity is fostered by trial-and-error culture Strong long-term relationships with suppliers

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Unique facilities that ensure maximum consumer exposure to product line and also offer a family experience rather than just shopping
Weaknesses: Homogeneous senior management group efficient but not consistent with the different cultures worldwide Hard to maintain product standards with such a global reach; insufficient room for creativity on the individual store level Overreliance on one target market segment of young low- and middle-income families, which is shrinking Undeveloped E-commerce, goes away from their unique business model Privately-owned, hence capital is restricted Overreliance on the European market Most of its stores are situated on outskirts which make it difficult for new customers to know about it. It operates in a highly competitive environment with competitors like Argos, MFI, John Lewis, etc wherein it needs to constantly adopt and change but it just sticks to its only furniture stance, unlike others, which makes it a bit difficult for IKEA. The goods that it offers are mostly available in all other stores as well, at times at cheaper price. It is known as the cheap producer but it cannot stand up to its name in Asian countries like China. It does not offer after sales and services, except for warranties. Opportunities: Opening of new high street stores (unlike being on the outskirts) wherein, they get to introduce themselves to new customers.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES There are opportunities for them to merge with oriental businesses to open up more stores in the EAST. Forming alliances with existing retailers in the home market would make it easier for them to reach broader customer base. Absorbing new technologies would make its work more optimized giving it more time to concentrate on customers issues. Threats: As it is a western company, they need to put in a lot of effort to understand eastern culture and tradition and to innovate new furniture to suit the oriental mind set. So there are chances of it being targeted by eastern retailers for going wrong, or making a mistake anywhere. As it operates in different countries, wherein political scenario is subject to constant change. So IKEA needs to make changes to its approach in order to please people in power. IKEA puts in a lot of effort and money in innovation so its cost of manufacturing ishigh compared to high street stores which easily copy their goods and offer them at a lower price. Strategy: IKEAs market position is strong enough. The percentage of customer base that it has and its global presence makes it the only provider of low cost and high quality household furniture. The economies of scale that it has achieved are possible only through careful planning and implementation of successful long term strategies. The flat pack, cost, quality, transportation, assembling of furniture as per individuals budget and taste made it the leader and that is what differentiates it from its competitors.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Achieve overall low-cost leadership in the industry The emphasis on efficiency at all levels within the organisation is the central idea to a cost leadership strategy .Costs need to be monitored at all levels to ensure that they gain benefit from economies of scale. A low-cost leadership strategy will only work if the products produced are cheaper compared to its competitors. Concentrate on products that are differentiated. A differentiation strategy requires the organisation to offer something which is unique and valued by the customers.The value added by differentiation results in the ability to charge a higher price. This is to cope with added costs of differentiation, leading to higher profit margins. The risk involved with this strategy is that the consumers may perceive the product as a value added product. Focus on serving a few market segments in cost or differentiation The focus strategy is a combination of the strategies. It focuses on cost leadership and product differentiation in a market segment, or a niche. IKEA follows a combination strategy which is a combination of both the aforesaid strategies that is where it differs from its competitors. At IKEA, the customer is given the utmost priority, it is the customer who has to make a choice of raw materials as per their budget and, based on that, the product is made. This is how it meets low-cost leadership and product differentiation as well. Conclusion: After having a thorough look at IKEAs development throughout the decade it is evident that it emerged as a global winner. In order to be successful in the future, it has to adopt new innovative ideas and technology to overcome the competition and produce low cost and high quality goods. Emergence of Ilva, a Danish furniture manufacturer, on the centre stage in Europe is a threat that IKEA has to face in the future. So it needs to retain its loyal customers at all terms and also make sure that it increases its customer base. Section 1. Small and Medium Entreprises. Pavel Tolpeev IKEA
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES As it plans to open up new high street stores there is a possibility that it might reach a wider customer taste. This way it can know and understand the tastes of more people and strategies new plans to meet the standards. Introduction of new goods under its roof will make it a whole package of home designing goods provider. The way it projects itself by paying attention to the issues of environment is what makes it a winner. This, if taken further, would make IKEA an environmentfriendly organization, giving it an edge over its competitors. Due to increases in global warming and issues of environment like deforestation, extinction of species, etc. the concern of people towards these has increased, and if a company gives priority to these issues then there is more possibility for it to make a greater impact on customers morals and people in general to bring about a change.
References: 1. 2. 3. 4. 5. WWW.IKEA.COM (Internet) Home page http://www.scribd.com/doc/6153182/ikeamarketing http://dspace.hh.se/dspace/bitstream/2082/1211/1/Dissertation.pdf http://www.ikea.com/hu/hu/ http://hbr.harvardbusiness.org/2006/12/strategies-to-fight-low-costrivals/ar/1

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VLADIMIR SEROUSOV GOURMET FOOD STORE

Introduction The aim of this report is to present the short business strategy of the company OOO XXX for future period from 2011 2016. The company XXX is a part of the ZZZ Group. XXX has been providing customers with the finest quality fresh and frozen food products. The XXX primarily deals with wholesalers in the public area and in low volume deals directly with retail companies. The company plans to increase the production turnover, minimize costs and develop the operation activity of
VLADIMIR SEROUSOV
the company using different ways. The main aim is to increase the sales directly to the public in Rostov region, and to try to sign new contracts with other wholesalers in other regions. In an expanded market, the company will bring its commitment of quality, freshness and reasonable prices to the public. By purchasing in large quantities, company XXX is able to pass the savings on to its clients. Currently, company XXX supplies over 12 grocery shops, 5 giant wholesales and several restaurants. That is a 25% increase, because of new contracts with 12 grocery shops, over last 3 months. Despite increase in 25% of sales, company XXX is planning to expand its operation by opening new gourmet food store. Holding company ZZZs funding and internally-generated cash flow will financemost of the expansion plan. Executive Summary A new grocery shop will be under the name of one of the brands of XXX company. All products of company XXX will be distributed in this shop. The shop
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Section 1. Small and Medium Entreprises. Vladimir Serousov Gourmet Food Store
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES is a new business located in center of Rostov-on-Don, on the first floor of a building, where an area of 670 sq meters belongsto the holding company ZZZ. The store is an upscale international grocery and delicatessen with a distinct menu that includes authentic, hard-to-find ingredients from around the country and the world. The facility will include a sixteen-person capacity eating area,
deli/kitchen with counter and check out area, grocery area, and a small rest coffee bar. The mission of shop of company XXX is to provide Rostovs residents and visitors with a combination of quality, authentic, hard-to-find, grocery items and prepared foods, with good service and a pleasant atmosphere with the warm feel of an Old-World outdoor market. Our store motto is, "eat and enjoy." The deli will serve sandwiches, salads, and picnic lunches, hot and cold dishes that will be produced by company XXX. Gift items will complement the international theme of the store and include a limited selection of kitchen wares, cookbooks, picnic items, and original hand-sewn items. Gift baskets and all other products will also be available in the store and over the internet, but products of company XXX will be sold only under special conditions. All the recipes used in the deli will highlight the grocery items sold in the market. The gourmet and specialty foods market is booming across the country. Consumers are looking for quality food coupled with a quality shopping experience. Many large cities have entire sections dedicated to ethnic foods and culture. New populations are starved for the fine ingredients they were able to purchase in big cities and are looking for a rural solution to this problem. Rostov's residents and many visitors have expressed the desire for a local gourmet food store. By making alliances with local farmers and restaurants as well as
Section 1. Small and Medium Entreprises.Vladimir Serousov Gourmet Food Store

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES international distributors, Shop of company XXX will give customers a combination of "shopping local" and wide gourmet selection previously unavailable in this highly-visited rural area. For residents, Shop XXX offers a more convenient and appealing option than ordering online or lugging fancy groceries back from infrequent trips to the nearest cities (several hours away), especially in winter. Shop XXXs projects net profits will be increasing over the first three years and helpingto increase the sales of company XXX. The increasing profitability is partly based on expectations that wide seasonal differences in sales levels in the first year will moderate as we strengthen our local clientele base. These forecasts are based on the recent performance of similar cross-market upscale stores in Rostov-on-Don, and general trends in the gourmet food stores industry.
Mission The mission of Shop XXX is to provide Rostovs residents and visitors with an upscale grocery store, products of company XXX, and delicatessen specializing in a combination of quality, authentic, hard-to-find, grocery items from around the
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES world. Goals and Objectives Shop XXX has the following goals and objectives: Obtain necessary funding ($24,000 personal internal investments and $100,000 investments from the holding company ZZZ). Create a service-based company that exceeds customers' expectations, and increases the number of repeat clients serviced by at least 20% per year, through superior performance and word-of-mouth referrals. Become
an
established
community
destination
with
customer satisfaction rate of 90% by the end of the first year. Achieve cash flow self-sufficiency by the end of the first year. Sales of $461,900 in the first year, with sales increasing to $484,735 in the second year and $508,000 in the third year. Provide an income for the founders by the end of the second year with income growth possibilities. Repay debt tothe holding companyby the end of the 4th year. Provide new customers with new and have already existed goods of company XXX, and increase the demand of goods.
Keys to Success The keys to success for shop XXX include: Reputation: Every customer visiting our store will want to return and will Section 1. Small and Medium Entreprises.Vladimir Serousov Gourmet Food Store
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES recommend shop XXX to their friends and family. Word of mouth marketing will be a powerful ally for this business. Superior Customer Service: Knowledgeable, friendly service will be of the utmost importance. Location: an easily accessible location for customer convenience, including walk-by and drive-by traffic. (future - provide comfortable parking). Product/Environment: Offer a variety of high quality foods with domestic and international themes, sold at a fair price in a clean, authentic, comfortable environment. Serious draft of goods, and new foreign goods, with is rarein the Russian market. New interest of consumers. Special line of fresh, goods of company XXX, under new brand, sold only in this shop XXX. Convenience: Customers of the shop XXX will know that they can buywhat they need at our market for a fair price. This will reduce their need to travel for desired items or order them online. Marketing plan: Unique service in shop business, special free seminars of master chef 1 time a month, professional degustation of goods. Shop XXX will have its own discount system. Weekend free tea for waiting people in coffee bar.
Company Summary Start-up Summary Start-up costs and initial financing are shown in the following table. The company XXX (founder of the shop) will get an internal holding loan in the amount of $100,000 to supplement company XXX investment in covering costs. The estimated start-up costs may be lower than projected here if the company XXX is able to purchase used equipment and do the renovation workinternally. Company XXX plans a three month start-up period. Expenses are broken
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES down as follows: Insurance - $300/month Rent (Car, sales floor space) - $2,500/month (tax minimization) Initial Loan Repayment - $1,000/month (tax minimization) Utilities - $1,000/month Salaries: 2 managers - $2,000/month each
Long-term Assets: 2 Refrigeration Units 3 Display Cabinets 4 Kitchen Equipment 5 Illuminating equipment of front elevation
Short-term Assets: - Tables and Chairs

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Start-up Requirements Start-up Expenses Legal Books/Accounting Marketing/Website Licenses/Permits Delivery/Transportation Insurance Rent Loan Payment Utilities Deposits Expensed Equipment Building Renovations Salaries Payroll Taxes Other Total Start-up Expenses Start-up Assets Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets Non-cash Assets from Start-up Cash Requirements from Start-up $63,300 $60,700 $124,000
$500 $600 $5,000 $1,000 $1,500 $900 $7,500 $3,000 $3,000 $500 $5,000 $20,000 $12,000 $1,800 $1,000 $63,300
$15,700 $20,000 $5,000 $20,000 $60,700 $124,000
$45,000 $15,700
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Additional Cash Raised Cash Balance on Starting Date Total Assets $0 $15,700 $60,700
Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital Planned Investment Andy and Cathy Rosie and Kenny Other Additional Investment Requirement Total Planned Investment Loss at Start-up (Start-up Expenses) Total Capital
$0 $100,000 $0 $0 $100,000
$12,000 $12,000 $0 $0 $24,000 ($63,300) ($39,300)
Total Capital and Liabilities Total Funding Company Ownership
$60,700 $124,000
Shop XXX is a Limited Liability Company owned and operated by the Company XXX. The name of the shop XXX will be patented under the name of one of the brands of company XXX. At the same time company XXX is owned by international offshore holding. Shop XXX will have more advantages and will be operated by its own special financial system because of the existence of offshore

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES company. Products and Services Shop XXX offers the following products and services: Groceries Shop XXX will offer high-quality groceries from Italy, the Mediterranean, Mexico, Asia, Europe (especially Germany and Austria), Australia, and the United States. Groceries will include items that represent the best-known and desired foods from these areas. Items will include, but will not be limited to: sauces, oils, spices, spreads, peppers, cheese, meats, pasta, rice, canned goods, drinks, chocolates, and hard-to-find desserts and candies. A selection of fresh meals (made by company XXX) will be available for home cooking (just warm it), and will include homemade Kazak food, French and Italian cuisine with more than 25 numbers of dishes. Company XXX will provide their own frozen food and fresh meat and chicken. Gifts Gift items will complement the Russian and international theme of the store and include a limited selection of kitchen wares, cookbooks, handmade sweets made by company XXX, alcohol drinks, special selections of tea coffee and other goods from the store. Gift baskets will also be available in the store and over the internet. Professional employees will package gift baskets and the supply of gifts baskets will be increased before holidays. Delicatessen Shop XXX will offer unique cuisine with an international flair. The deli will offer a limited menu for breakfast, lunch, and dinner. The rotating menu will feature sandwiches, soups, salads, drinks, and desserts. All menu items will be prepared fresh each morning and displayed for easy pick-up. Company XXX will offer business (picnic) lunches and frozen meals as well as cheese, meats, and
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Russian ethnic deli dishes by weight. The breakfast menu will include items such as quiche, scones, and biscotti, and the lunch/dinner menu will consist of sandwiches, salads, homemade breads, frozen meals, and daily specials. In Shop XXX, there will be served high quality coffee, tea, juice, and soda from around the world throughout the day. Business (picnic) lunches will be made available to visitors, specially packed to be carried into the numerous national parks and outdoor venues surrounding Rostov. All business lunches could be delivered directly to the offices. Competitive Comparison Rostov-on-Don is not a typical rural community, in that it has more than 37 different nationalities and everyday new visitors arrive from Caucasus Mountains. Rostov-on-Don is the city and the administrative center of Rostov region and the Southern Federal District of Russia, the informal name is Gates of Caucasus, located on the Don River, just 46 km from the Sea of Azov. The population of Rostov-on-Don is 1,068,267. The competition facing Shop XXX includes all the grocery stores,and mega markets, coffee shops, and some of the eating establishments in Rostov-onDon. There are 12 chain grocery stores including mega markets in Rostov-on-Don. Assorted, Empire products,Magnet,Crossroads,Pyaterochka,Apex, Solar Circle, Village, Auchan, Okay, Metro Cash & Carry, Carousel, all shops carry many healthy food choices and some ethnic choices, but do not have an expanded ethnic food selection. The Village Market carries health food but does not have an expanded ethnic food selection either. The main competitor is (shop) Tixiy Don, but it is old fashioned and quality of the service and goods reduces everyday. Overthree years this shopdid not make any innovations and hardly changed the variety of goods from the opening. Most of the goods, which are

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES supplied in this shop, are domestic production. The mix of gourmet products and high-quality services, combined with pleasant atmosphere, will help company compete with the existing small businesses. As for the larger grocery store chains, company XXX will compete by providing a more intimate and educational shopping experience with quality products they do not carry.
Market Analysis Summary Main target markets are: People who live and work in Rostov-on-Don, who are looking for quality ingredients needed to prepare their favorite international cuisine. Surrounding businesses looking for a tasty meal for their customers and staff. Families looking for quality, affordable, home cooked meals to take home and prepare for their families with ease. People looking for a comfortable environment in which to enjoy a cup of coffee, read a book, or just shop. People looking for high quality, unique gifts and kitchen supplies. Each market segment consists of people who either live, work, or vacation in the Rostov-on-Don. Each market will be seeking an establishment that will meet their desire for authentic, healthy food, quality service, and a pleasant atmosphere. Market Segmentation The total potential market in units is shown in the following table. There areapproximately 1175 businesses in Rostov-on-Don that could potentially be our customers. The company used 20% as a starting point with 5% growth per year.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES There are 1, 048, 124 residents in Rostov-on-Don, according to the 2002 census, with 2% projected growth over the next 6 years. Residents of Rostov-onDon are the main customers. From 1999-2003, an average of 32,578 people visited the city annually. Projected growth was not included, because it used as an average number, and it is believed that the number of visitswill remain similar over the next five years. Market Analysis Year 1 Potential Customers Local Businesses Residents Visitors Total Growt h 10% 35 39 199794 3000 191531 43 211781 3000 191645 47 224487 3000 191759 52 237956 3000 191874 Year 2 Year 3 Year 4 Year 5 CAGR 10.40 % 4.7% 0.00% 0.03%
6% 188485 0% 3000 0.06% 191520
Target Market Segment Strategy The last ten years have seen an increase in Moscow explorations of foreign and gourmet foods. Whether this can be attributed to celebrity chefs, arrivalsfrom foreign countries, new health diets, or the increasing accessibility of once-obscure ingredients, it seems that gourmet and adventurous palates are here to stay. In Moscow this trend has been developing over5 years, and now it is starting to reach other regions. In Rostov-on-Don, residents often use travel to larger cities as occasions to stock up on luxury and gourmet items not available locally. However, they prefer to shop locally whenever possible, and would welcome a store that offers this combination. Rostov is growing city, allowing for increased business opportunities without diminishing the provincial-town feel. Natural attractions of the shop are in no danger of becoming dated or otherwise less accessible, and so company expects

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES continued market growth for the foreseeable future. Ambitious marketing programs towards different target market segments will utilize different publications and media, but all will emphasize our good value, high quality, unique and varied selections, and great service. Market Needs Rostov-on-Don and Rostov region are in need of a quality international market that sells items that are currently only available in Moscow, over the internet, or even abroad. Many residents tell stories of traveling to large cities with empty luggage so that they can fill their suitcase with speciality food they cannot find in Rostov-on-Don. The residents of Rostov-on-Don are dedicated to protecting its "provincialtown" feel and make a point to shop locally whenever possible. The residents of Rostov-on-Don and its surrounding communities would be thrilled to be able to shop for the food they want at home. Closest cities to Rostov-on-Don are rural and industrial small cities like Shachty, Tagonrog, Bataisk, Novocherkask. Rostov-on-Don is the capital of Rostov region and center of south. People from close by cities arrive inRostov like to go to the place where they could relax and find something new. Local and visiting customers desire high quality, healthy food that will appeal to their aesthetics. In addition, they desire a pleasant shopping and dining experience that allows them to learn about and purchase the grocery items they want in a comfortable, friendly, hassle-free environment. Customers will also enjoy the delicious home cooked take-home meals available to them when they do not have time to prepare quality meals at home. Strategy and Implementation Summary Strategy of the company XXX will exploit our advantages over the competition (location, convenience, and high quality) with carefully-tracked milestones for growth.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Marketing Initial marketing efforts for opening will be geared towards generating name recognition and making a clear distinction between XXX and other local competitors. This brand name has been seen by customers in the food market and proved itself as a good quality brand. Follow-up marketing programs will encourage repeat visits and assist customers in the understanding, appreciation, and preparation of our products. Sales and Pricing Company XXX will gear prices towards its competitors in the nearest cities and online, with a small "convenience" increase for offering them locally. This will offset its distribution costs. Local discounts, daily specials, and new products will satisfy customers they are getting a good value, while keeping them intrigued. Emphasis on consistently good service, from special orders to recipe help, will make new customers repeat customers. Competitive Edge Location is critical to success. The shopwill located on Main Street, or just off Main Street, so shop XXX can take advantage of walk-by and drive-by traffic. The shop also needs adequate parking to make shopping at store convenient for drivers. Convenience. Rostov-on-Don residents and visitors are willing to pay a little bit more for good food and the convenience of being able to get what they want without having to travel out of town, or order over the internet. Customers will purchase its food because it is authentic and delicious. High quality. Focusing on high quality international food will draw customers from the competition, as well as create a local market that has not existed before in Rostov-on-Don. If the prices are reasonable and the food is

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES good, shop will have growth through repeat business. Marketing Strategy Marketing strategy consists of promotional actions including advertisements in local newspapers, the yellow pages, and at local businesses, postcards & flyers sent through the mail, and promotional coffee mugs given to local customers that can be filled and refilled at a discount. Company XXX also plans on supporting the community radio station in exchange for mentioning shop XXX as an underwriter; giving free product samples to our customers; and offering cooking classes and recipes that introduce customers to our products. The first step is to have aconference with numerous numbers of journalists and use tree big billboards at the beginning and at end of main street and at the entrance of the city. Sales Strategy Shop XXXs most important sales strategy is developing an environment towhich customers will return time-after-time because our market provides knowledgeable, friendly staff, quality products, and a comfortable atmosphere that fills their needs. When customers visit store XXX, they will know they are entering a clean facility with the best service in the industry. Pricing strategy will focus on providing high quality, hard-to-find international products and services at a fair price. Because the closest competition is far away, company XXX will be able to charge a little more for some products, but must be careful not to price items too high (or customers will continue to stock up on specialty foods when they visit large cities or will buy over the internet). Company XXX will make use of local discounts, daily specials, and new products to keep customers interested and to help them feel they are getting a good value. Shop XXX intends to listen to its customers and collect their feedback through surveys and friendly conversation, in order to determine areas where we
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES can expand and/or improve. Company XXX wants Shop XXX to become a staple in the local community, as well as a "must stop shop" to vacationers visiting Rostov-on-Don. Sales Forecast The following assumptions, table and chart illustrate conservative sales forecast. Assumptions: The average item sold in the market will cost $4.50 $20.00/average sale x 40 people/day x # of days in January, February, November, and December (slow season). $30.00/average sale x 75 people/day x # of days in each month from MarchOctober (busy season).

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Web Plan Summary Shop XXXs website is intended to be an enjoyable virtual shopping experience for its customers. The website will be simple, elegant, and well designed. It is important that website is kept current and provides a format in which customers can easily preview gift baskets and other groceries. Website Marketing Strategy Shop XXXs website will grow in popularity as shop XXX will inform its customers about it. Company XXX will let customers know about its gift basket service and online shopping options whenever it seems appropriate. Web address will be displayed in the store and printed on promotional materials, including advertisements, bags, and mugs. Development Requirements A company will be hired to design initial web site and will require access to the template so that our staff can make additions or changes to it at will. Management Summary Shop XXX is a small shop business. Two of the managers from the Company XXX will be the managers for the store and will work at the same time
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES in the shop and in company XXX.They will get extra salary, until it is determined to hire additional staff. The other two managers will maintain outside jobs, help out when needed in the store, and do the administrative tasks. Manager: Deli Manager Manages deli Works with Merchandise Manager Hires staff Order deli items Manager (from the company XXX): Merchandise Manager Makes merchandise decisions Works with Deli Manager Orders Merchandise Runsmarketing/promotions Manager: Bookkeeper/Administrator Keeps books Pays taxes Computes and distributespayroll Helps with store operations when necessary Manager (from the company XXX) Web Master/Support Manages website Helps with store operations when necessary Personnel Plan The personnel plan is illustrated in the table below:
Personnel Plan Managers (2) Clerks (1-2) Year 1 $48,000 $25,600 Year 2 $48,000 $25,600 Year 3 $52,000 $25,600

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Accounting/Books (1) Cooks/Kitchen (1) Other Total People Total Payroll Exit Strategy The owner of Shop XXX will exit this endeavor after they have created a flourishing business that could be sold for a substantial profit and/or as a franchise that could serve to different communities across the country. If the first shop XXXis successful, company XXX to open the same shops in other cities of Russia. It means that supply and demand of products XXX will be increased. In the future, Company XXX has big opportunities not only in the production of goods but to create a new chain of shops. In the event the proposed plan is not successful the company XXX will implement necessary measures to exit the business endeavor with minimal damage to holding company ZZZ and themselves. All equipment and merchandise will be sold to cover any outstanding debts. Any remaining debt will be paid by the owners in the form of monthly payments until all debts are paid in full. The success of the business will be monitored monthly in the first year and quarterly in subsequent years. The owner is aware that it usually takes new businesses three years to start turning a profit and that the business could operate at a loss during that time. The owner will keep this in mind when evaluating the state of the business, and make adjustments when possible to keep the business running with a positive cash flow. Acceptable loss has been determined; if the business exceeds this amount and is unable to compensate company XXX, and owner will begin the process of closing the business and paying back debt. $2,400 $10,240 $0 4 $86,240 $5,000 $10,240 $0 6 $88,840 $5,000 $10,240 $0 6 $92,840
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SECTION 2. NATIONAL ENTERPRISES

MARGARITA BALASANYAN SBERBANK
Introduction Sberbank today is the largest credit institution in Russia and CIS, accounting for 27% of the aggregate Russian banking assets and 26% of banking capital. According to The Banker magazine, as of 1 July 2010, Sberbank was ranked 43th in the world in terms of Tier 1 capital 1. Established in 1841, Sberbank has grown into a universal commercial bank with diversified
businesses. Sberbank is the biggest taker of deposits in the country and the key lender to the national economy. As of 1 June 2010, Sberbank accounted for
MARGARITA BALASANYAN
48% of retail deposits, 33% of consumer loans and 30% of corporate loans in Russia. Sberbank has the largest countrywide branch network with 18 regional head offices and more than 19,100 retail outlets with about 245,600 employees. Elsewhere, Sberbank operates subsidiary banks in Kazakhstan and Ukraine (and is contemplating operations in Belarus) and targets 5% share of these markets. Under the new strategy, the Bank plans to build a foothold in China & India and generate about 5% of net income outside Russia by 2014. As of 16 April 2010, CBR (Bank of Russia Central Bank) owned 60.3% of Sberbanks ordinary shares and 57.6% of its total share capital, being
http://www.sbrf.ru/- the official web-site of Sberbank
Section 2. National enterprises.Margarita Balasanyan Sberbank

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Sberbanks controlling shareholder. The remaining shares are held by more than 263,000 institutional and private investors. Non-resident ownership of about 32% suggests Sberbanks shares are a compelling investment. Sberbanks solid business reputation is confirmed by its international ratings: BBB long term issuer default rating from Fitch Ratings and a long-term foreign currency deposit rating of Baa1 from Moodys Investors Service. The Bank has the highest national scale rating of AAA.ru. That is why it is very important for this bank to pay particularattention tostrategy planning, on setting right goals, on the valuation of advantages and disadvantages, and on the making objective decisions. Banking sector in Russia till 2015 For creation a corporate plan for this bank, first of all we have to consider the banking sector in Russian, its real situation now and some forecasts over the next several years. There are a lot of views on this issue.We have to consider the basic points. Different views on this issue On the official web-site of Central Bank of the Russian Federation is mentioned that at the next stage (2009-2015), the Russian Government and Bank of Russia will attach priority to effectively positioning the Russian banking sector ininternational financial markets.1 On the web-site www.euroruss-business.com there is a report about Finance Minister Kudrins opinion on this issue. The report includes that Kudrin said in November 2009 that he was prepared to introduce a bill in twelve months obliging banks to raise their minimal capital to 1 billion rubles within five years. The minister said the ministry would come up with the proposal to raise bank capital requirements only after the world financial sector was stabilized.
http://www.cbr.ru/eng/today/history/central_bank.asp
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Section 2. National enterprises. Margarita Balasanyan Sberbank

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Under current law, the minimum capital requirement for Russian banks is 90 million rubles ($3 million) from 2010, rising to 180 million rubles ($6 million) from 2012. Russia, which receives a large part of its revenue from oil exports, was hit hard by the global financial crisis, prompting the government to take urgent measures to save the banking sector from collapse, extending direct and subordinated loans to major banks, most of them held in private hands. Central Bank First Deputy Chairman Alexei Ulyukayev said in March that while a second wave of economic crisis was unlikely in Russia, the country was braced for a long period of recovery after the global financial meltdown. 1 There is forecast of banking sector development in Russia till 2015,which has been worked out by expert RA together with Russia association of banks. The report about it includes following The project has been initiated by the community of bankers and experts, striving to use their potential for the benefit of the country. Our goal is to present the document for discussion to the Parliament, the RF Central Bank, the RF Government and the Public Chamber, said Anatoly Aksakov, president of the regional banks' Association, member of the National banking council, deputy of the State Duma. The paradox of the current situation is that pretty often market laws, concepts and strategies are prepared by the state officials without discussing it with the market participants". The current strategy of the banking sector development was prepared in2008. Its tasks have beenpartly implemented:credit of the real sector and consumers showed increased volumes. But, according to common opinion of economists, the banking sector in Russia is still undercapitalized and not sufficiently competitive. New more ambitious and brave tasks demand new
http://euroruss-business.com/en/newss/dayli-news/russia-s-bank-capital-requirements-could-be-raisedfrom-2015-kudrin.html - MOSCOW, November 25 (RIA Novosti)

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES approaches and ideas, aimed at surpassing inertia of development and achieving a new ascending trajectory. According to Pavel Samiev, Expert RA director of department of financial institutions' ratings, the strategy should consider the issue of comprehensive modernization of the Russian financial market in different areas. It would be wrong for banks to distinguish between markets of capitals, securities and insurance. All sectors of the domestic financial market are to be developed in a comprehensive and parallel way. The main tasks for the new stage of the banking sector development should be as follows: Steady growth of the Russian financial market and its dramatic and speedy development; Determination of "points of growth", related to involvement of material assets into financial turnover in order to multiply capacities of the national financial system; Development of a mechanism for the state support and encouragement of the banking and financial sector; Development of regulatory base and institutional environment; Increased access to banking services; Increased financial literacy of the population. Association Russia and Expert RA invite heads of banks and specialists, managers of insurance companies, pension funds and professional participants of the stock market, and other financial institutions, representatives of the state agencies, experts and analysts to participate in preparation of the large-scale document, meant to play an important role in the development of the Russian financial system. 1
http://www.raexpert.org/releases/2008/Feb15/
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Strategy of banking sector development for RF till 2015 The Ministry of Finance of Russia has published the project of Strategy of banking sector development of the Russian Federation for the period till 2015.A result offull implementationwould bethat the bank system in all basic aspects should correspond to international standards. The aspects such as the activity organization, quality of banking management, thecondition of the competitive environment, accounting and the reporting, discipline in the market, and bank supervision. Tothe government of the Russian Federation and Bank of Russia the document puts four primary goals on change of model of banking sector development. The ministry and a regulator are charged with solvingthe whole complex range of tasks. Firstofall, creationoftheconditionsprovidingdevelopmentofcompetitioninallsegmentsoffinanci almarket, includingthroughdevelopmentofalready-availableformsofanon-
bankfinancialintermediation. Secondly, creation of the infrastructure meeting modern requirements, including, within the limits of work of the government and the Central Bank of the Russian Federation, creation of the International financial center in Moscow. Thisis to be made on the basis of use of the advanced banking technologies, development of system of bureau of credit stories, system of registration of pledges, a payment and settlement infrastructure, institute of the central counterpart and other infrastructural conditions and institutes. Thirdly, the Ministry of Finance suggests implementing measures on improvement of quality of corporate management and risk management of the credit organizations. Fourthly, the department considers it necessary to improve bank regulation and bank supervision, first of all by development in them of a substantial move to full compliance with international standards.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES "Tasks on transition to intensive model of development of bank sector will demand essential change of conditions of its functioning, and transition can lead to change of its structure, - says the document. - a main objective of development of the Russian bank sector on medium-term prospect is an essential increase of level and quality of the banking services given to the organizations and the population, increasing the provision of its system stability". Sberbank today Today Sberbank is an absolute leader in the Russian banking sector. Sberbankis several times larger than its immediate competitors measured by its marketposition, assets, capital, financial results and scale of infrastructure. Thescale and stability of the Bank are particularly visible during periods ofinstability in financial markets. The competitive advantages and weakness for today The success of Sberbank in recent years has been driven by four majorcompetitive advantages 1: An extensive customer base in all customer segments (corporate and retail, large and small customers) across all regions; Scale and scope, in terms of financial indicators (available amounts and duration, access to funds, international ratings, investment capacity), as well as the scope and quality of the Banks actual infrastructure (including a unique retail and corporate distribution network). Brand and reputation, largely based on the solid trust earned among
http://www.sbrf.ru/- the official web-site of Sberbank
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES customers of all groups. Employees and a proven track record. Numerous and experienced staff in all regions, substantial managerial expertise within one of the largest companies of the world; systems and processes capable of generally handling tasks unique in scope and complexity. For all that, there are some serious drawbacks in the way the Bankoperates today. Overcoming these will be critical to realizing Sberbanksdevelopment potential: Inefficient utilization of Sberbanks two foremost competitive advantages: its distribution network and customer base. This is caused by insufficient customer relationship management and immature sales and service systems and skills.Ittranslates in a low rate of cross selling, low profitability in product sales and low customer reach. Another factor is poor service quality in terms of decision-making time, process and procedure complexity, communication and bank-to-client interaction levels, as well as general convenience and functionality of the branches. In the customers opinion, the Bank is behind its main competitors in terms of service level. Extremely low productivity. In this regard, the Bank is seriously lagging behind not only the banks in mature markets (some with an established presence in Russia) but emerging market banks as well. The main reasons lie in unwieldy and overcomplicated business processes, poor specialisation and division of labour; lack of unified business processes across the Bank, making it impossible to capitalise on economies of scale and implement modern information technologies. There is a low level of automation and too much manual labour. Operations andsupport functions are decentralised. As a result, many bank systems

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES andprocesses are poorly scalable and growing business volumes do not leadto efficiency growth. Insufficiently effective and costly risk management systems Corporate culture weaknesses, primarily meaning excessive
bureaucracy,
insufficient responsibility for end results and the quality of customerservice, a weak drive and aspiration for improvement and development.
Sberbanks position in Russian market and position of its competitors. Russian banking sector assets of RUB 30,607 bn were divided among 979 banks. The concentration of assets in the top 10 banks is high (62.3%), meanwhile there is a very long tail of smaller banks. The biggest bank is Sberbank (27%), the second one is VTB (12,4%) and the third is Gazprombank (6,5%). In retail deposits it has 48,1% of the market, in retail lending 32,6%, in corporate accounts 17,5%, in corporate lending 29,8%. 1 There were some facts showing its position in market; Sberbank is the largest bank in Russia and CIS in terms of assets; Sberbank is the largest and oldest player in the Russian banking sector with 169years of history; Sberbanks banking network consists of 18 Regional Head Offices, which have about 19,000 branches and 22,907 ATMs; Coverage across all regions of Russia. Spanning 9 time zones; Nationwide brand recognition; 300 million individual accounts in a 142 million population country; Sberbanks public & private ownership exemplifies a proper balance between sustainability and profitability
http://www.sbrf.ru/common/_en/img/uploaded/ir/docs/Presentation_for_Investors_2010_09en.pdf
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES To show more clearly a position of the Sberbank in the market in comparison with other banks, I have made a schedule: Name of the bank Sberbank VTB Gazprombank Russian Agricultural Bank 1,632 898 620 Bank of Moscow 519
Corporate (rub bn)
lending 4,011
Retail lending (rub 1,216 bn) 1-day overdue 6,8 corporate loan (%in corporate loan book) 1-day overdue 3,6 corporate loan (%in retail loan book) Corporate accounts 1,616 (rub bn) Retail deposits (rub 4,144 bn) International 2,4 borrowings (% in total liabilities and equity) Strategy planning
366 7,1
86 2,9
75 4,9
71 1,7
4,6
5,3
1,4
15,1
1,101 1,271 534 253
237 -
209 175
12,4
6,3
39,2
21,4
On the official web-site of Sberbank there is a strategy planning, where they mention: Given Sberbanks current competitive market position and potential for development combined with the structurally attractive features of the Russian banking sector, make possible a growth dynamic far above the market if Sberbank chooses a modernization scenario. Specifically, there are great opportunities for building up competitive strengths both in the retail and corporate sector through greater depth of customer relationships and enhanced customer reach. Sberbank Section 2. National enterprises.Margarita Balasanyan Sberbank
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES also has great opportunities for raising efficiency and building up competitive advantages through economies of scale. This would help the Bank to build a longterm competitive position in the domestic market and to start transforming from a large domestic financial institution into a leading bank internationally. In their strategy plan they mention that: The key elements of the Strategy include: Development of a client-oriented model to service individual and corporate clients of the Bank. Technological upgrade of the Bank and processes industrialization. Radical increase of the Banks operational efficiency, based on up-to-date technologies, management and overall optimization through bank-wide
implementation of Sberbank Production System/BPS based on Lean/Toyota Production System. Development of international operations, primarily in the CIS countries. Sberbanks goals and aspirations by the year 2014
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The implementation of the Development Strategy shall result in consolidation of Sberbanks competitive positions in all market segments, improving its performance indicators and reinforcing its position of a leading financial institution in the Central and Eastern Europe and one of the top banks of the world1 Conclusion Summing up all this work, I can say, that I partly agree with strategy of Sberbank, but of course I need more experience for further analytical work. That is why I try to analyze and give comments ontheir planning in the role of customer, and partly in the role of investor. On my opinion, I can give following recommendations: Retail banking they should increase the quality of service. Still, in a lot of offices,personnel are so unskilled,that is why usually there are queues and in consequence of that there are a lot of nervous and unhappy customers; Also, I can recommend paying more attention to international markets, but not Europe and other developed countries, because in comparison with the service of the banks there, Sberbank has a lot of operations to improve (I will recommend Ukraine, Kazakhstan or may be Armenia, Azerbaijan). I also can recommend Sberbank to make modernizations, to invest a great sum of money on this, because as we can see in my first part of work, banking sector would be developed, and Ministry of Finance of Russia with Strategy of banking sector development till 2015 would try to realize that the bank system on all basic aspects should correspond to international standards. It means that Sberbank as the biggest bank in Russia has to correspond to international standards as well. We can see that Sberbank has a lot of operationstoimproving before meeting the standards.
http://www.sbrf.ru/en/about/strategy/

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES If the bank undertakesthese recommendations, the quality will increase, so will increase the number of customers So, from there we can cover our expenses.
References 1. http://www.sbrf.ru/- the official web-site of Sberbank 2. http://www.cbr.ru/eng/today/history/central_bank.asp 3. http://euroruss-business.com/en/newss/dayli-news/russia-s-bankcapital-requirements-could-be-raised-from-2015-kudrin.html MOSCOW, November 25 (RIA Novosti) 4. http://www.raexpert.org/releases/2008/Feb15/ -
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EKATERINA CUELLARCOLINVERSIONES S.A. E.P.S

Introduction First of all, I want to start by specifying the company in which I want to work in the future. This company is located in Bogota, Colombia. It may sound strange, but actually, I have lived almost my whole life in Bogota and I plan to do it in the future as well. The company is called Colinversiones S.A. E.P.S.
Historical Review The Colombian company of Coltabaco SA started its tobacco business of SA EKATERINA CUELLAR
manufacturing
and
marketing of cigarettes in 1919 and years later began to develop parallel activities tending to participate in the
capital market and establishment of other companies. In this way, the company had developed two activities simultaneously: industrial and investing, until October 2001. In the extraordinary shareholders assembly on June 2001, by unanimity of this body was taken, the decision of splitting the company by order to give origin to
separating the industrial and investment activities, in
the Colombian Company of Investments SA on October 8, 2001. In this way, Coltabaco transfer 70% of its capital to the new company: Colinversiones. When the capital of Coltabaco was divided, each one of the shareholders (6.589) of this companyreceived, in proportion of one to one, shares of the Colinversiones company, so that those who were shareholders of Coltabaco
continued being shareholders of Colinversiones in equal proportion and number.
Section 2. National enterprises.Ekaterina CuellarColinversiones S.A. E.P.S

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The managing of the relationships with shareholders and the services of the Presidency, for both companies, was in charge of Coltabaco until 2005, when the control of the company was soldto the tobacco company Philip Morris. Between 2005 and 2006,there was a Colinversiones capitalization through the issuance of shares worth
$300,000 million (subscribed: above 99%). Additionally, the company exchanged shares of Conavi for shares of Suramericana (South American Investment). The company also bought 9,7% of the Colombian Stock Exchange and expanded its participation in the hotel sector with the acquisition of the Pereira Hotel. 2007 was a period of great significance for Colinversiones. With the purpose of having a complete transformation, the company established a new strategy. This strategy was the result of different studies and works made with national consultants and foreign investment bankers in order to
identify the sector that would become the new focus of investment. Finally, the company decided to focus on the generation of energy. In order to pursuethe strategy, the company, on 3 December 2007, acquired one of the energy-generating plants (Termoflores S.A E.S.P) located in the city of Barranquilla. Then in 2008, a year of significant progress, the company continued with the development of the strategy and acquired two power plants and an electricity generation project. On December 2009, Colinversiones, through its subsidiary Colener S.A.S., acquired 47,3% of the Pacific Power Company S.A. (EPSA), through a takeover bid. EPSA is the fifth largest electricity generating plant of the country. At the end of 2009, Colinversiones became a Public Service Company (in spanish Empresa de Servicios Publicos, E.S.P). Colinversiones ranks fourth in the electricity generating market of the country. Currently, the company has two thermal power plants (Termoflores and Merilectrica), a micro-hydro plant (Riopiedras), and a hydraulic project under
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Section 2. National enterprises. Ekaterina CuellarColinversiones S.A. E.P.S

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES construction (Hidromontanitas), which has involved a USD 55 million investment. Additionally, another project will expand the capacity of the Termoflores plant (Flores IV), in which the company is investing USD 188 million. Also, the company owns 50,01% of EPSA, one of the main energy generating companies of the southwest of the country. Future Projects The company continues making progress in strengthening its strategic focus, energy, by advancing significantly in the expansion of the energy-generating capacity projects and by working in the consolidation of negotiations related with the energy sector. For this, currently the company is working in the construction of oneplant - Flores IV -expected to operate at the beginning of 2011, and anotherplant Hidromontanitas -whose commissioning is scheduled for
the second half of 2011. These two projects are expected to increase the capacity of the company by 31%. In the annual report published by the company at the end of 2009, only the two projects mentioned above are part of the future projects. There are no projects related with the hotel sector or with the identification of a new focus of investment. Corporate Structure
From the annual report of Colinversiones S.A E.S.P 2009

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The corporate structure of the company is divided by three bodies. The first one: Plantas, refers to the energy-generating plants that the company owns: Merilectrica, Riopiedras and Hidromontanitas. The second body refers to a firm own by the company that also can be classified as an energy-generating plant: Termoflores. Finally, the subsidiary of the company through which the company acquired part of EPSA as mentioned above. Business Structure The next chart shows the business structure of the company. Basically, the company has two main businesses: energy and investments. The energy sector hasbeen described in the chart above. The investments of the company can be divided in four sections. Colinversiones S.A E.P.S owns 2,19% of Suramericana (South American Investment); two companies related with hotels: 95,41% of Hotel Pereira and 88,82% of Promotora de Hoteles Medellin S.A; two firms related with industrial security: Arseg and Pass; and finally, other investments like real estate.
From the annual report of Colinversiones S.A E.S.P 2009
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Proposals Colinversiones S.A E.P.S at the end of 2009 had 87% of their assets invested on the energy sector. According to the annual report, which the company published on 2008 for their shareholders, the efforts would be directed to achieve a strategic transformation. The company disclosedits intention of focusing on the energy sector and transforming the earlier strategy of being a holding company with a diversified portfolio. Because of this, the company has invested simultaneously in the energy sector, which has been funded by disinvestment operations and the pursuit of additional funding.
The pie chart above shows us the progress of the company achieving its proposed transformation. The orange portion of the graph represents the assets invested in the energy sector, there have been growing significantly. While on 2007 they represent almost 1% of the assets, on 2009 they represent almost 87% of total assets. The future strategy of the company, as the directors have announced, is to continue with the current strategy, which means that the company is interested in expanding the capacity of their energy-generating plants through the expansion

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES projects in execution. The funds necessary to complete these projects come from disinvestment operations and borrowing. According to the consolidated financial statements, the capital of the company increased from 2008 to 2009 by 22,99%. The net profit per share also increased; however, it is not possible to establish a specific growth rate because there is no enough information available. In a country like Colombia a diversified portfolio is always a good option. Therefore, despite the fact that the company has been presenting good financial results, it is not possible to grow without limits if there are no more projects at the date despite the ones already mention. There are different possibilities that the company may take into account in order to sustain the rhythm of growth. I want to propose three different strategies that may have a good result for the company in the future. Acquisitions The first strategy that I want to propose for the company for the next five years is not to different to the one implemented already. The company can continue expanding its capacity in order to supply the energy demanded by different consumers. The capacity can be expanded not only by finishing the projects of Flores IV and Hidromontanitas, but also by increasing its participation in EPSA. The complete acquisition of EPSA in the next five years is not a reality, due to financial and legal limitations; however, Colinversiones S.A E.S.P can increase its participation in EPSA finance by disinvestment operations. The company can sell part of its participation in the finance and insurance sector in order to have at least 52% of EPSA with the aim of having more control over the decisions of this company. Increasingthe participation in EPSA can only be done in almost one to two years because of the expenses the company is having right now by investing in currentsprojects. Two of the energy-generating plants of
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Colinversiones S.A E.S.P can expand their capacity and that it will be necessary in three to four years. Therefore, the company will need new funds to invest in this expansion. Due to the good results the company has been presenting sincealmost its creation, the investment banks are willing to finance new projects, if the company needs it. According to the estimations of 2009, the demand for energy in the country will increase significantly due to weather conditions forecasted for the next years. Additionally, required exports to Ecuador and Venezuela would increase also. Then, if the demand for energy is expected to increase in the following years, the company can be sure about selling its production and of the growing demand not only by local consumers, but also external ones. The last acquisition of Colinversiones S.A E.S.P, EPSA, since its inception, through a privatization process that is a model for
the country, brings benefits to the region like no other company in Colombia. It also delivers profits not only for its strategic partners, but also for others
collaborators partners and natural and legal persons. Investment over its 15 year history has helped improve it as the the infrastructure and energy largest coverage of the for
the Valley, positioning
department electrified of
country, besides offering an excellent the region.
service and generate jobs and wealth
According to the article of Goedhart, Koller, and Wessels (2010) there is no magic formula to make acquisitions successful. However, the authors affirm that their experience suggest that in the most successful deals, well-articulated value creation ideas going on had take place. Additionally, they mention the strategic rationale for an acquisition that creates value typically conforms to at least one of the following five archetypes: improving the performance of the target company, removing excess capacity from an industry, creating market access for products,

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES acquiring skills or technologies more quickly or at lower cost than they could be built in-house, and picking winners early and helping them develop their businesses. Although, Colinversiones S.A E.S.P cannot acquire completely EPSA in the following five years because of the required amount of investment, not capable to be achieved by the company in the next years, owning more than 51% of EPSA and increase the influence on that company, will bring successful results. Colinversiones S.A E.S.P can add value to EPSA according to the archetypes mentioned above. The performance of EPSA can be improved. This fact is not subjective; it was already affirmed by the directors of EPSA at a meeting had with the directors of Colinversiones when they presented mutually results of 2009. The directors of EPSA commented that the management and production process of Colinversiones were admirable since 2007 on the energy sector, and that if Colinversiones would manage EPSA, probably the results of the lattercompany would be better. The acquisition will stimulate a decrease on the marginal costs of EPSA. The management of Colinversiones has been successful at the moment and it has been recognized because of the reduction of costs. Some analysts have affirmed that is one of the reasons of the good results presented by the company on the last years. Colinversiones will be interested on the good performance of EPSA and will apply toit strategies already known by the directors in order to increase the utility generated by EPSA. Colinversiones and EPSA do not lead the energy market of the country as other companies do. There are bigger companies in charge of generatingmost of the energy consumed by the population. However, the rhythms of grow of both companies have been well recognized, and the competitors are afraid if a merger occurs. Nonetheless, analysts suggested for both companies not to merge, but
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES instead, create mutual added value. EPSA is a company with a larger experience; although, investors think that Colinversiones in a few years will present better results than EPSA.That is why I suggest an acquisition or, in other words, an increase in the ownershipof EPSA by Colinversiones. As a result of the acquisition by Colinversiones S.A E.S.P
of 47, 32% of EPSA on 2009, on 2010 due to unexpected weather conditions not only in the country but in the world in general, operating revenues of Colinversiones decreased by 65%. However, net income or profit was boosted by the dividends generated by EPSA and the increase on the generation of energy of the Termoflores energy-generating plant. In 2011 and the beginning of 2012 Colinversiones cannot increase its participation of EPSA due mainly to financial limitations. The company at the moment is interested in finishing the projects in progress in order to operate more effectively in the market and recover its investmentin the medium term. At the beginning of 2012, Colinversiones can start analyze the possibility of increasing its participation in EPSA. If Colinversiones S.A E.S.P decides to apply this strategy it will be necessary to make an official public announcement informing the rest of the shareholders about its intentions. Probably the shareholders will agreed with the proposal because, in genera,l the population recognizes the faster growth rate of the company. EPSA at the moment has five ongoing expansion projects that will
increase its own capacity by about 26%, which is planned to be developed over the next five years. Therefore, the management of Colinversiones S.A E.S.P will have to be involved on these projects over the comingyears. Increasingthe participation in EPSA obviously cannot be the unique strategy recommended to Colinversiones to be appliedover the next five years. It will be

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES necessary to search for new opportunities in the market in order to become year by year closer to leading the energy sector of the country. The competence is high; there are two other companies in the energy market that cover over 50% and it is difficult to compete with them separately. Increase Investments in the Hotel Sector In the portfolio owned by Colinversiones S.A. E.S.P since 2001, the year of its creation, there were always investments on the hotel sector. In 2009 the company owned 95,41% of Hotel Pereira and 88,82% of Promotora de Hoteles Medellin S.A.In total the company on 2009 was the principal owner of three hotels in Colombia. In 2010, there were neither acquisitionsnor disinvestments of the company in the hotel sector. Although, a month ago the company expressedits intention of selling part of its participation in this sector, the proposals received have not been accepted. The first strategy I proposed for the company mainly focuses on the energy sector leaving other sectors behind. However, according to my point of view it is important and profitable to maintain a diversified portfolio. Then, I think the company may sell part of the hotels it owns; however, it should keep and conserve the majority of the participations. Tourism in Colombia will grow steadily over the next decade, and in a few years this tropical country, travelers which from has allthe natural around the charm and a world, will
host of possibilities for
begin to rebound as one of the main destinations in Latin America. Americans are returning and in the first quarter of this year represented around 22% of the visitors. The effort that has been made to change Colombia's image abroad has begun to pay off. The hotel industry is characterized by its constant evolution and because in it there is room for improvisation. The smallest detail can mean the loss
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES of customers who will gladly be taken health up and by the competition. Thus, others, the prepared.
infrastructure, location, services,
safety, among meet
are concepts to consider in developing new
proposals to
demand of increasingly demanding customers and competition better
The importance attached to leisure and business tourism in the country has led to the incursion of new foreign players to the hotel sector in
Colombia and has identified measures to modernize the existing ones in many aspects, affirmed Carlos Montes, journalist of one of the main news papers of the country. The fact that there are foreign players interested in entering in the hotel market of Colombia can be seen as a good signal of good growthopportunities in this sector. As mentioned above, the number of travelers that will visit Colombia in the next years is expected to increase. Therefore, selling completely the hotels own by Colinversiones S.A E.S.P for me is not a good option in this moment. The investment in the hotel sector should be the same for the five next years. Owning three recognized hotels of the country provides the company with a diversified portfolio that has been recognized over recent years. According to the annual report presented to the shareholders on 2009 by Colinversiones S.A E.S.P, the renovations of the main buildings were concluded at the end of the year. Additionally, the directors affirmed that the renovations are on par with the best in the industry and the three hotels provide an
excellent platform for competitiveness. Unfortunately, there is no information available about the net profit generated by each one of the hotels over the last years. Only the shareholders and agents involved with the company have access to this information. However, information about the assets, liabilities and capital of both subordinated companies is available, but minimal changes are observed, so conclusions cannot be draw up.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Numerical information cannot be shown in order to estimate if it will be profitable or not to maintain investments on the hotel sector; however, the expectations of the country related with the hotel sector are very optimistic. If the company conserves for the next five years the hotels it owns it is possible to increase the profits due to an expected increase in the demand for this service. The consolidatedfinancial statements showed the profitability of the hotels in the last few years, so it is not strange to think about a possible increase in profits derived from the hotel sector if one, the demand possibly will increase, and two, the hotels are supplying currently the services the consumers are demanding. The strategy I proposed of not selling a significant participation of subordinated companies involved on the hotel sector obviously cannot be the main and unique strategy of the company for the next five years; although, I want to highlight the preference of the local companies of having a diversified portfolio in order to avoid high levels of risk. Colinversiones S.A E.S.P has been recognized as one of the most successful companies of the country since 2002, the portfolio it owns has also been recognized as a riskless one, so, I am afraid that if the company decided to invest all its assets on the energy sector the levels of risk will increase. Therefore, why not conserve the investments on the hotel sector with the aim of maintain low levels of risk, while the companies increase profits. Identify a New Sector that Will Become the New Focus of Investment The third strategy I want to propose for the company is completely different from the two previous ones. According to the historical review of the company, in 2007 local consultants and foreign investment bankers identified what would become the focus of investment of the company. This is how the company started to invest on the energy sector since 2007 with successful results to the date. Although, the company has considered that a significant focus only on the energy sector leaving other types of investments behind, it is also possible to start
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES considering the possibility of identify a new focus of investment in three years from now. According to local analysts, the mining sector, of the country, presentsfastergrowth rates. During the last years, the mining sector has become one of the most dynamic in the Colombian economy, evidenced by the behavior that has its gross domestic product - GDP, which on 2005 registered a growth of 4,28%, as a result of the global market trends, because of an increase in the demand
for such commodities. It is estimated that Mining Colombia GDP ranks fifth in Latin America. Revenues for the country from exports related with the mining sector amounted almost 4.302 million dollars, growing
by 29.6%, representing 20.30% of total exports in 2005. Additionally, in the last years foreign investment flows mainly focused on mining not only on foreign markets, but also in Latin America, and Colombia has not been the exception. Foreign investment flows were on 2003 about US$627 million, on 2004 US$ 1.246 million and on 2005 US$ 2.165 million, which means an average growth of 86.17%. According to the Minister of Mining and Energy,this year the country will be producing 82 million tons of coal and will export 90 percent. An increased demand and reserves for almost one hundred years, suggest further mining development in the next years. Moreover, the Minister considers that in mining the country has a significant potential and still has considerable natural resources to offer the world. Colombia is sitting on reserves of coal," said the head of the portfolio of Mines in a forum on the mining and energy sector. "Having half of thermal coal reserves in Latin America makes us a true power mining," he said. He argues that even Brazil, which covers a substantial portion of the Americas, has less carbon

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES than Colombia, with 7.062 million tons of measured coal reserves and 17.000 million potential coal reserves. Currently investorsin the sector include such companies
asDrummond (USA), BHP Billiton (Australia,UK), Anglo American Coal (UK),Gl encore (Switzerland), Xstrata (Switzerland), Cemex(Mexico), among others. Companies like AngloGold Ashanti, one of the largest producers of gold with an investment budget of US$ 8 million, also develop mining exploration works as
Greystar Resources, with an investment budget close to US$ 14 million. Theexpectations ofinvestment very favorable, given the large mining country and its diverse presence of coal, precious nickel, emeralds, addition to other iron, copper geological in the sector are potential available formation with in the the
environments of
metals (gold, silver and and salt, among
platinum), ferroones, in stone, zinc,
the most recognized as ornamental
products such
clay, phosphate rock, metal concentrates of manganese, among others, represent economic interests. which
copper, are
molybdenum,
although
less visible explored,
There are potential opportunities in the mining sector. The Colombian government is working together with companies interested in this sector with the aim of develop it in the following years. Colinveriones S.A E.S.P has been working really close with the government over the last years due to the fact that it is a public service company. The energy and mining sector have been always considered as part of another more general sector: that is why there is a ministry focus concretely on both sectors. Therefore, Colinveriones S.A E.S.P has knowledge about the working process of the mining sector.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES What I want to suggest is the possibility of considering another sector on which to focus future investments. Instead of focusing only on the energy sector, the company can finish the projects currently in progress and then try to enter in the mining sector. Obviously this strategy will be completely different to the one being implemented by the company at the moment and the one proposed in the first part; however, it is a good option to consider another potential sector. The results of this decision can be the same or even better than the ones basedon the energy sector. The company at the moment has not discussed future projects different from the ones already in execution. The press communicator announced at the end of 2009 that the company was studying new opportunities of the market and that in the second half of 2010 they would disclose the new strategies they would follow. However, at this moment the company has not said anything new about its medium term goals that differ from the ones announced on 2009 (related with extending the capacity of its energy-generating plants). The fact that the company has not disclosed new projects may suggest,that the directors are not interested in extending the capacity of their energy-generating plants in the following years. Therefore, finding a new sector in which to direct their investments will be attractive. Colinversiones S.A E.S.P already has an influence on the energy sector.Investingin the mining sector will add power to the company, without mentioning the benefits of diversified the portfolio it owns. Although, there are risks linked with the mining sector,the company does not haveto focus only on this. The performance of the sector wouldsatisfythe expectations of the directors. If there are foreign investors willing to invest in this sector it is because they have already the security of having recovered their investments and receive an additional benefit.

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During the coming years, the company cannot direct its investments to the mining sector until it recovers part of the investment it directed to the projects in execution at the moment. Almost ten months ago, the company sold part of its participation inColombiana Kimberly Colpapel, South
American Investment Group and Colombias Stock Exchange. The income received from these operations was directed to the projects Flores IV and Hidromontanitas, and the company announced the credit granted by Bancolombia Bank to finish the projects mention above. Thismeans that the company at the moment is not capable of invest on the mining sector. However, the results of the third quarter of 2010 showed a net profit of almost USD$ 11,8m and according to the results forecasted for 2011 the profit will not be less than the previous year. At the end of 2011 and the beginning of 2012, when the company will be able to evaluate the results of its latestinvestments, it will be possible to analyze more details on the possibility of invest in the mining sector. Obviously the company cannot leave behind the energy sector and the rest of the subsidiarycompanies. The company may consider the possibility of orientate its investments to the production of natural gas on 2012 and 2013. During the last years, natural gas has seen higher growth worldwide. In 2005, it was the third most important source of energy, with about a quarter of the energy consumed in the world. Between 2000 and 2005, the consumption of natural gas grew at an
average annual rate of 2.8%, exceeding the average annual growth rate of the last ten years. In Colombia the natural gas service is provided to about three million, seven hundred thousand users and it is believed that
this figure will continue to rise. In addition, three thousand miles of pipelines were build and twenty six gas distribution companies were formed in the
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES last two decades, which confirms once again the rise not only in the number of users but in the figures related to consumption and therefore demand.
References 1. Botero L. (2008) Turismo / Colombia en la Buena Hora (Tourism / Colombia in the Good Time) Find 10-Jan-2011 on: http://blog.guiasenior.com/archives/2008/06/turismo-colombia-en-labuena-hora.html 2. Colinversiones Homepage. Find 9-Jan-2011 on: http://www.colinversiones.net/ 3. Colinversiones Annual and Quarterly Informs. Find 9-Jan-2011 on: http://www.colinversiones.net/downloads.php?id_menu=4&id_menud erecho=6&id_submenu=0&id_texto=0 4. Daz M. (2010) El turismo de Colombia est en alza (Colombia's tourism is booming). Find 10-Jan-2011 on: http://www.infosurhoy.com/cocoon/saii/xhtml/es/features/saii/features /economy/2010/02/09/feature-03 5. EPSA Homepage. Find 9-Jan-2011 on: http://www.epsa.com.co/ 6. Goedhart M; Koller T. & Wessels D. (2010) Five Types of Successful Acquisitions. At: https://www.mckinseyquarterly.com/Corporate_Finance/M_A/The_fi ve_types_of_successful_acquisitions_2635 7. Ministry of Mines and Energy (2005). Resolution No.181783 30 december of 2005 8. Ministry of Mines and Energy (2005). Resolution No.180507 30 april of 2009 9. Proexport (2009) Evolucin Turismo 2002-2008 (Tourism Trends 2002-2008). Find 10-Jan-2011 on: http://www.proexport.com.co/vbecontent/library/documents/DocNew sNo10136DocumentNo8302.pdf 10.UPME (2001) Plan Nacional de Desarrollo Minero 2002-2006. (National Mining Development Plan) 11.UPME (2006) Plan Nacional de Desarrollo Minero 2007-2010. Gestin publica para propiciar la actividad minera.(National Mining Development Plan. Public management to promote mining) 12. UPME (2006) Colombia Pas Minero. Plan Nacional para el Desarrollo Minero. Visin al ao 2019. (Colombia Mining Country. National Mining Development Plan. Vision for 2019)

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VICTORIA KARELOVA ABS BANK

Introduction
The aim of this coursework is produce longterm strategies for the organization that can be implemented in the course of 5 years (2010-2015). I have chosen a
commercial bank a type of financial intermediary that provides checking accounts, savings accounts, and money market accounts and that accepts time deposits. 1 Commercial banking is also known as business banking. Banks are mainly concerned with making and receiving payments as well as supplying short-term loans to
VICTORIA KARELOVA
individuals. They accept deposits and channel those deposits into lending activities, either directly or through capital markets. A bank connects customers with capital deficits to customers with capital surpluses. 2 The strategic plan presupposes an important change in the strategic direction of the organization with strong importance on the aspects of leadership, process, and learning-and-growth perspectives as key prerequisites to deliver the financial objectives of revenue growth, cost reduction and sustainable profitability. Attention has been taken to design business strategies that will be synchronized with the structure, the mission and vision of the bank. When developing the strategy plan, the future forecasts of the macroeconomic situation, banking sector and global trends are taken into consideration. The plan, in essence, is not only a theoretical essay but also a proactive working document of the virtual bank. In
Sullivan, A., Sheffrin S. (2003). Economics: k. Upper Saddle River, New Jersey: Pearson Prentice Hall. http://en.wikipedia.org/wiki/Bank
pp. 511.
2
108
Section 2. National enterprises. Victoria Karelova ABS Bank

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES further description of the banks development strategy, the name ABS Bank will be given to the organization. Materials of periodicals, notes from lectures, books in the field of corporate finance and economy, government organization/consulting company reports, internet searches, and foreign and Russian sources are used in this work. Overview ABS Bank profile ABS Bank is a Russian bank, has retail and corporate businesses. It offers the full range of retail banking services, all-inclusive support to its corporate customers and is currently one of the largest credit banking institutions. The Bank has a regional network: present in 250 out of 1099 cities throughout the country 1; located in different Russian regions while providing services to customers using its 11 000 retail offices spread all over the country, and 7 regional headoffices. The organization is a member of Visa International and MasterCard International payment systems. ABS Bank shares have not been publicly traded on the Russian stock exchanges MICEX 2or RTS 3. Macroeconomic situation in Russia The Ministry of Economic Development of the Russian Federation forecast report (Table1) shows that the Gross Domestic Product (GDP) growth rate will increase to 4.5% (index -104,5) in 2013. Economic dynamics and an increase throughout the forecast period will be determined by the domestic demand. In real terms, in 2010 it will increase by 6.8% (index 106,8) and in 2012-2013 increase
http://www.gks.ru/dbscripts/cbsd/dbinet.cgi?pl=2407002 Moscow Interbank Currency Exchange - one of the largest universal stock exchanges in the Russian Federation and East Europe. There are approximately 239 Russian companies listed. http://www.micex.com/ 3 The Russian Trading Systemhttp://www.rts.ru/en/
2
Section 2. National enterprises.Victoria Karelova ABS Bank

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES 5,2-5,8% (indexes 105,2-105,8) per year. In general, industrial production growth over the four-year period is estimated at 121.9% compared to 2009. Main changes are expected in industries that suffered in the 2009 crisis e.g. mechanical engineering, construction, and general manufacturing. Industrial production will recover faster than investment. In 2011 it is expected that industrial production will overtake levels seen in 2008 (pre-crisis) and even higher industrial production numbers for 2013.
Table 1. Key indicators of Russian economy development up to 2013* Forecast (compare preceding year) Unit 201 dimensio Indicators name ns 2008 2009 2010 2011 2 104, 103, GDP Growth, % % 105,2 92,1 0 104,2 9 106, 105, Domestic demand % 109,1 85,9 8 106,2 2 Industrial production 107, 103, index % 100,6 90,7 6 103,9 8 102, 103, Investments % 109,9 83,8 5 110,0 5 105, 105, Retail % 113,5 95,1 2 105,0 6 Profit 792 from all activities bln. rub. 3984 5270 6660 7100 6
on
2013
growth in 2013 compare with 2009,%
104,5 117,6 105,8 126,2 104,9 121,9 107,4 125,3 106,0 123,6 9115 173,0
* Indicator's value are extracted from the forecast of socio-economic development of the Russian Federation in 2011 and the planned period 2012 and 2013 by Ministry of Economic Development of Russian Federation (www.economy.gov.ru)
The Russian economic situation shows stable growth in the planned periods. This fact will have a positive influence on the financial system in the Russian Federation. In accordance with the increasing profits from all activities (173,0 %) the situation with "bad loans" (loans where repayments are not being made as originally agreed between the borrower and the lender, and which may never be
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES repaid 1) should stabilize. In both short-term and long-term prospects, the Russian economy will develop under the innovative socially-focused scenario according to Russian policy makers. Generally, the perspective sectors for investment will be retail, and sectors of investment demand like high-technology, medium hightechnology sectors and construction. Russian banking sector The Russian financial market will continue to be one of the most rapidlygrowing and attractive world markets considering different development scenarios and the instability in global finance. According to Sberbanks analytical data center 2, the Russian market will be characterized by: a) Growth and considerable size. Depending on the scenario the average annual growth of the sector till 2014 is forecast to be between 18 and 24%. Banking assets will reach from 70 to 80% of Gross Domestic Product by 2014, which evidences a potential for further growth and is lower when comparing to similar countries. As a result, in terms of net revenue 3 by 2014 the Russian market is expected to be approximately as large as the Indian market, several times greater than some of the other large fast growing markets e.g. Turkey, and will reach about one third of the Chinese market. b) Good operating profitability. Russia, according to the ROE 4 / cost of capital 5 ratio is comparable with the most attractive developed markets and exceeds practically all of the large fast-emerging markets. It is expected that despite a certain margin contraction across the main product lines, the Russian
Longman Business English Dictionary http://www.sbrf.ru/moscow/ru/analytics/cmei/ 3 The amount of money available after subtracting from gross revenues such costs and expenses 4 Return on Equity - ratio serves as the basis for investors' assessment of the business 5 Cost of capitalis the return required to satisfy the provider of a particular type of capital to be used in the business.
2

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES banking sector will still continue to be attractive in this regard till 2014 and beyond. c) A tendency towards consolidation of the banking sector. Today the banking sector is characterized by a low concentration of assets: the five biggest banks account for about 40% of overall assets. This is far less than in countries with a more developed financial sector. A large number of medium and small players in total control 30 to 40 % of the market for some of the banking products. Inevitable consolidation will open up opportunities for the larger market players, and increase competition, both of which will benefit the sector. The economic crisis is likely to accelerate the pace and scale of consolidation. Mr Mikhail Sukhov, a member of the board of the Central Bank of Russia pointed out In 2011 M&As will continue at the same pace, and by the scale and the portion of assets involved the scope of M&A transactions could be even wider". Since early 2010, 18 Russian banks have already merged with 12 banks, with this process exceeding 6% of the banking assets.1 He also specified that the only difficulty on the road of consolidation is the legal provision that prohibits joint stock companies from takingover limited liability companies. But this prohibition does not prevent takeover opportunities. It just results in a potential delay of three to four months. The trends and their determining factors detailed above, imply that the Russian financial market will remain attractive not only till 2015, but also in the subsequent 5 to 10 year period. They will contribute greatly to ABS bank's significant potential for development domestically. A lot of Russian debt is shortterm and foreignheld. Current falling Russian interest rates at 8.25% will go someway to ease the Russian corporate debt weight as mentioned in DT Global's consulting report 2. Many issuers see an opportunity to strengthen their balance sheets by taking on more equity and reducing their debt.
1 2
http://www.banki.ru/news/engnews/?id=2385672 http://www.dt-globalbusinessconsulting.com/DT_Russia_Paper_April_2010.pdf
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Also the liquidity is improving in the banking sector, but credit activities remained very weak during 2010 and net credit to the private sector increased slightly in April-August 20101. But most of this increase is due to new credits to enterprises, while net credits to households remained limited. With real policy rates now in negative territory, the observed marginal recovery in credits suggests supply constraints in the banking sector. Banks have been keeping wide spreads between the refinancing rates and effective lending rates. This suggests that most banks still perceive credit risks of potential borrowers as very high, especially households. Given the slow economic recovery and low profitability, prevailing interest rates on new loans for firms and households remain high and effective rates for consumer loans may vary from 18 to 40 percent 2. The recovery in credits depends, among others, on the strengthening of bank balance sheets and increases in borrower profitability. It is worth pointing out that competition has risen in Russia during the crisis and will remain strong in the coming years. This is a global trend. Western companies are competing more aggressively against western counterparts as everyone looks for new niches. Newcomers from Western Europe, often smaller players, are looking around in the CEE and CIS markets for new opportunities. The strategy globally and in Russia will be twofold: premiumpriced products where western companies are in their comfort zone, but then developing more affordable products for the rising middle class and the lowerlower middle class. These factors are involved in developing the strategies for ABS Bank.
1 2
World Bank Growth with moderation and uncertainty Russian Economic Report 23 November, 2010 Ibid

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES ABS Bank Mission, Vision and strategies Vision By 2015, the bank will engage in lending activities and become one of the biggest takers of deposits. It will be selling and offering affordable products to retail customers. It expects to increase the number of retail offices up to 12 500 in 300 cities. The target indicators for 2015 are listed in appendix A. Mission To grow existing business, whilst building the platform to be the preferred financial solutions provider and leading bank in the Russian Federation, satisfying the expectations of customers and shareholders, providing a full range of cost efficient and high quality services through the optimization of information technology and efficient branch network. Goals ABS bank will make its position stronger in the Russian banking sector and perform, financially and operationally, as a top Russian financial institution by implementing its development strategy. The Bank sets goals in three major points: 1. Increase of profit more than three times and decrease of operating costs / net operating income ratio by five percentage points by 2015: this will help to reach at least 20% ROE (Appendix A). 2. Strengthen competitive positions in the key banking sectors (retail and corporate loans and deposits). 3. Acquire the best customer service skills in Russia; become the leader in service quality; refresh risk management systems, develop and implement quality management systems that comply with international standards; An IT platform which is capable of copingwith the requirements and scale of the business; professional and motivated staff and customer loyalty.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Reaching the above goals will translate into higher market capitalisation and further progress on the way to be the leading financial institutions of the Russian Federation. SWOT Analysis SWOT review of the ABS bank will help to identify possible strategies. Strengths & Weaknesses are internal to the business and Opportunities & Threats are external. Internal Strengths - Vast customer base in all customer segments (corporate and retail, large and small customers) across all regions; - Scale and scope, in terms of financial indicators (available amounts and duration, access to funds, international ratings, investment capacity), as well as the scope and quality of the Banks actual infrastructure (including retail and corporate distribution network). - Brand and reputation, largely based on the solid trust earned among customers of all groups. - Numerous and experienced staff in all regions Weaknesses - Inefficient utilization of distribution network and customer base. - Poor service quality in terms of decision-making time, process and procedure complexity, communication and bank-to-client interaction levels, as well as general convenience and functionality of the branches. - Extremely low productivity. - Not-effective and costly risk management systems. - Corporate culture weaknesses External Opportunities - Building up competitive strength both in retail and corporate sector - Raise efficiency and strengthening competitive advantages through economies of scale - Improve the quality of customer service and products range, - Make a solid base for sustainable development and avoid major risks - Build a long-term competitive position in the domestic market and transform to leading Russian bank - List shares on a public exchange
Threats The macroeconomic situationcompetition in the Russian financial sector. - A long-term downward trend in product margins on the Russian market, stemming from a systemic shortage of funding in the banking sector and competitive dynamics in some of the banking product segments (major corporate lending, car loans). - The risk of cost/income ratio decline,

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The below points are designed to resolve shortcomings identified in the above table. The solutions will be to: Build on the business's key strengths using retail and corporate development approach Resolve its internal weaknesses through operations improvement approach Fully exploit ABS Bank external opportunities by means of : IPO and/or M&A approach Avoid major external threats by applying risk management strategy. Above mentioned approaches for the ABS Bank are described in the development direction chapter. Development directions In order to increase profit and develop further retail and corporate segment it is necessary to follow the organizations growth strategy, customer attraction strategy and examine quality improvement service methods. Thus it is required to decrease the influence of the weakness factors presented in SWOT analysis, which prevent bank expansion. The mechanisms presented in the operations improvement strategy allow reaching set targets. In the same way, for leveling the risks of the ABS bank current activity, it is essential to advance risk management. Organizations growth strategy. This strategy has two possible variants: organic growth and growth through Mergers or Acquisitions. Organic growth represents the true growth for the core of the company. It is a good indicator of how well management has used its internal resources to expand profits. Organic growth also identifies whether managers have used their skills to improve the business.1 Organic growth in a large number of cases has the advantages of leaning against a team of managers developed
http://www.investopedia.com/terms/o/organicgrowth.asp
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES experience recognized by shareholders, and on the knowledge of the market and style of business dealing. Nevertheless, the possibilities for organic growth have limits. For example, the new markets can appear inaccessible because of technological imperfections, impossible exit methods for the international market, uncertainty of a trade mark, a lack of understanding of the new markets. Besides, internal resources can appear insufficiently quickly to react to new possibilities or problems. Therefore, maybe the wise decision would be to merge or absorb, in order to acquire the necessary knowledge, technology and market share. At the expense of acquisition, it is possible to gain fast access to new markets, and to expand a range of production goods and given services, enabling the company to reach the size when the economy of scale becomes essential to business. An acquisition is when you buy another business and end up controlling it. A merger is when you integrate your business with another and share control of the combined businesses with the other owner(s). There are many good reasons for growing your business through an acquisition or merger. 1 These include the following: Obtain qualified skillful staff, with knowledge of the industry or sector, acquireother business intelligence. For instance, a business with good management and process systems will be useful to a buyer who wants to improve their own. The chosen business will have systems that complement your own and that will help to run a larger business. Accessing funds or valuable assets for new development. For example, better production or distribution facilities are often less expensive to buy than to build. It is wise to look for target businesses that are only marginally profitable and
http://www.businesslink.gov.uk/bdotg/action/layer?lang=en&r.i=1074409301&r.l1=1073861225&r.l2=10 74407571&r.l3=1074407579&r.s=m&r.t=RESOURCES&topicId=1074407579

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES have large unused capacity and which can be bought at a small premium to net asset value1. It can be less expensive to buy an existing business than expanding internally if the business is underperforming. For example, if there is struggle with regional or national growth. Buildinga wider customer base and increase the market share. The targeted business could have distribution channels and systems which may be used for own offers. Diversification of the products, services and long-term prospects of the business. A target business may be able to offer products or services which you can sell through your own distribution channels. Reducing the costs and overheads through shared marketing budgets, increased purchasing power and lower costs. Reducing competition. Buying up new intellectual property, products or services may be cheaper than developing them. On the other hand, an acquisition could become expensive if there is a battle of bidding where other parties are equally determined to buy the business. If you cannot agree on terms who will run the business or how long the owner will remain. Disadvantages of M&A are listed below: diseconomies of scale if business becomes too large, which leads to higher unit costs; clashes of culture between different types of businesses can occur, reducing the effectiveness of the integration; may need to make some workers redundant, especially at management levels this may have an effect on motivation; may be a conflict of objectives
The value of each share. The total value of a company's assets less the total value of its liabilities is its net asset value (NAV). For valuation purposes it is common to divide net assets by the number of shares in issue to give the net assets per share
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES between different businesses, meaning decisions are more difficult to make and causing disruption in the running of the business; antitrust implications. Considering advantages and disadvantages of both described variants ABS Bank plan will be: Organic growth with possible mergers with stock-brokers or insurance companies for cross-selling purposes and retail offices expansion by 2015. In order to facilitate such growth, capital shall need to be raised. There are currently several solutions available to ABS Bank, several of which rely on the capital markets. Solutions presented are as follows: a) IPO or Initial Public Offerings (IPOs) when a company (called the issuer) issues common stock or shares to the public for the first time. b) Debt issuance when company raises funds by borrowing money from bondholders. The company borrowing the money (issuing the debt) agrees to pay the lender (the bondholder) a set interest rate over an agreed period. This payment, which is usually made quarterly or monthly, is often called the coupon. At the end of the period, the borrower pays back the lender in full. The main drawback is the larger financial leverage than when going public. IPO disappeared off the screen in 2009 as they did globally, but they are coming back, as mentioned in GT-global consulting report.1 According to the same source, Russian companies are turning towards IPO in order to: 1) Reduce debt; 2) Finance growth; 3) Add to their reputation (less so than in past); 4) List their assets in order to get an objective assessment of what they are worth: a benchmark with reality.
http://www.dt-globalbusinessconsulting.com/DT_Russia_Paper_April_2010.pdf

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Therefore, the plan for 2011-2013 year will be to prepare for the IPO and to list the stock on the MICEX and RTS in 2015. Customer attraction strategy This strategy is based on using the current advantages of the bank, such as a well-known brand and a large retail network. Implementation of the strategy will allow ABS bank to reach its following objectives: - Ability toobtain the servicesof bankclientsin differentregions of the RussianFederation. - Simplificationof procedures for obtainingcredit - Reduced time for decision making - Improved customer service and customer satisfaction - Distribution channels development (percentage of transactions handled by remote channels) The strategy can be realized by using below methods: Having a service quality monitoring system based on feedback from customers, sales, service performance results and IT data to motivate and incentives respective staff categories. Development of the measures aimed at strengthening the bank's competitive advantage by improving the policy of granting loans to individuals. This market segment has not currently regained pre-crisis levels and loan growth is a priority for the bank Building systematic sales skills within all of the Banks service channels and building industrial skills to manage customer relationships and increasing crosssales as part of a targeted campaign. ABS Bank plans to implement this on a stage by stage basis. Eventually, the Bank will be in a position to provide each customer with a personalised offer in a targeted and integrated manner through a variety of channels, and to administer thousands of marketing campaigns for customer microsegments.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Introducing products for specific customer groups and special offers for young customers; a broader range of services from all main ABS Banks branches; a special service format for pensioners. Development of pricing policies for corporate clients, taking into account the special credit conditions for promising sectors of the economy. This policy will allow the bank to focus on developing industrial enterprises, which will provide greater revenues for scale projects for which credit is made. Operations improvement strategy Strategy based on leveling the main weaknesses of the bank, implementation of a Quality Management System, and streamline its IT infrastructure and systems. As identified in SWOT analysis, the drawbacks below: - Poor service quality in terms of decision-making time, process and procedure complexity, communication and bank-to-client interaction levels, as well as general convenience and functionality of the branches. Bank is behind its main competitors in terms of service level. - Extremely low productivity. In this regard, the Bank is seriously lagging behind not only the banks in mature markets (some with an established presence in Russia) but emerging market banks as well. The main reasons lie in unwieldy and overcomplicated business processes, poor specialisation and division of labour; a lack of unified business processes across the Bank, making it impossible to capitalise on economies of scale and implement modern information technologies. There is a low level of automation and too much bureaucracy. Operations and support functions are decentralised. As a result, many bank systems and processes are poorly scalable and expanding business volumes are hampering efficiency. - Corporate culture weaknesses, primarily meaning excessive bureaucracy, insufficient responsibility for end results and the quality of customer service. Therefore this strategy implementation will allow: - cost reduction due unify of business processes and organization structure;

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES - revenue growth due increasing customer satisfaction - quality growth; - process automation; - unified business processes; - optimal organization structure; Implementation of Quality Management System (QMS) will enable the ABS Bank to achieve the goals and objectives and strategy. It provides consistency and satisfaction in terms of methods, materials, equipment, etc, and interacts with all activities of the organization, beginning with the identification of customer requirements and ending with their satisfaction, at every transaction interface1. A good QMS will set direction and meet customers expectations, improve process control, reduce wastage, lower costs, increase market share, facilitate training, involve staff, raise morale. A fully documented QMS will ensure that two important requirements are met. The first is customers requirements - condence in the ability of the organisation to deliver the desired product and service consistently meeting their needs and expectations. And the second is the organisations requirements both internally and externally, and at an optimum cost with efcient use of the available resources materials, human, technology and information. These requirements can only be truly met if objective evidence is provided, in the form of information and data, to support the system activities, from the ultimate supplier to the ultimate customer. The changes in the Banks IT environment will need to support its ambitious business objectives and its organisational strategy. This will require new up-to-date mechanisms and a totally different level of management information. The IT capability will need to become a source of competitive advantage for the Bank.
1http://www.businessballs.com/dtiresources/quality_management_systems_QMS.pdf
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The Bank is aiming to gradually unify its software and data storage systems and to create a single information space that meets all reliability, availability and other operating requirements. The solution will be to follow a centralised approach wherever possible. To improve the efficiency of capital expenses and change over to uniform IT standards ABS Bank would need to consolidate existing, regionally distributed data centers into two data centers: main and standby by 2014. ABS Bank human resource policy is guided by the philosophy of skill development as the major instrument for enhancing productivity. It has set its objective to improve the Banks productivity and efficiency through proper development and effective utilization of human resource. It is also oriented towards downsizing/rightsizing of the average number of assistant level staff and narrowing in offices (levels of jobs) down the existing non-proportional gap between the officer level and assistant level staff in the long run. Implement the right man at the right job, by placing them in the appropriate jobs. However, recruiting and retaining quality manpower, upholding the morale of the staff, devising an appropriate succession plan, and maximizing staff productivity still remains a challenge. The goal is to develop and manage human resource for attaining the objectives of the Bank through possible activities listed in (appendix B). By 2015 the ABS Bank plans to take the average headcount down to 90,000 (as stated in Headcount section - Appendix A) which implies an annual reduction by approx 3-5% while the volume of operations should grow annually. Risk management strategy It is impossible to attain commercial objectives without an overall upgrade of the risk management system of the Bank. The most significant changes will be seen in retail and corporate credit risk management, as well as interest rate, liquidity, operational and market risk.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Risk management will be improved to make credit products more attractive for all customer categories, through simpler procedures, shorter time for decision making, enhanced predictability, reduced requirements for collateral and other security (primarily, in retail business), finer differentiation of rates and terms depending on the customer risk level (primarily, in corporate business). The key objective in risk management is to set the stage for a more aggressive commercial policy based on improved transparency of decision making in the credit risk sector, a higher role and broader powers of its risk management department which ABS Bank will regard as a partner and constructive counterweight to the business units. To prevent internal and external fraud and corruption in extending / receiving loans, ABS Bank will introduce changes to the credit risk processes in 2010 (Appendix C). Conclusion The strategies of ABS Bank are aimed at developing its potential and building on the unique opportunities provided by the Russian market. Its year by year implementation offers a prospect to create a great company that will be stronger in 5 years, which both its employees and the entire country can be proud of. Active usage and development of the basic competitive advantages of the bank, leveling major factors, which have had a negative impact on its current activity, and measures which are directed on the business diversification for the purpose of increasing its competitive advantages, have all been proposed in the strategic program of ABS Bank development. Consequently, given actions will allow the Bank to take the next step on its way of transformation into one of the leading banks of the Russian Federation, and to introduce innovative financial products, expanding its retail network, raising client satisfaction levels, improving cost management efficiency, and to increase the financial stability of the bank and shareholders prosperity.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES References 1. Brealey R., Meyers S. Principles of Corporate Finance, Seventh Edition McGrawHill, 2003 2. Sullivan, A., Sheffrin S. Economics. Principles in Acton, Pearson Prentice Hall, 2003. 3. Sherman, E. Financial and Accounting for non financial managers, AMA American Management association, 2000. 4. http://www.stplan.ru/ 5. http://www.planware.org/gstrategies.htm 6. http://www.planware.org/strategicplan.htm# 7. Sberbank of the Russian Federation http://www.sbrf.ru 8. Russia Federation Federal Statistics Service http://www.gks.ru/ 9. http://www.micex.com/ 10.http://www.rts.ru/en/ 11.http://www.rbc.ru/ 12.http://www.banki.ru/news/engnews/?id=2385672 13.http://cebviews.com/ 14.World Bank Growth with moderation and uncertainty Russian Economic Report 23 November, 2010 http://www.worldbank.org/russia 15.http://www.investopedia.com/ 16.http://www.businesslink.gov.uk/ Business advice for business 17.http://www.mckinseyquarterly.com/newsletters/topten/2010_Q4.htm 18.Have you tested your strategy lately? Article by Chris Bradley, Martin Hirt, and Sven Smit, January 2011) http://www.mckinseyquarterly.com/Have_you_tested_your_strategy_l ately_2711 19.Department of Trade and Industry report http://www.businessballs.com/dtiresources/quality_management_syst ems_QMS.pdf 20.The Russian Business Outlook 2010-14 report by Dr. Daniel Thorniley President, DTGlobal Business Consulting, April 2010. 21.http://www.dtglobalbusinessconsulting.com/DT_Russia_Paper_April_2010.pdf 22.The Moscow Times Newspaper Article by Maxim Rakhita: Leverage Buyouts as Driver of the Russian M&A Market. dated 20 April 2010. 23.The forecast of socio-economic development of the Russian Federation in 2011 and the planned period 2012 and 2013 by Ministry of Economic Development of Russian Federation dated 23 September 2010.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES http://www.economy.gov.ru/minec/activity/sections/macro/prognoz/d oc20100923_07
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DAUREN TOKTAMYSOV PLAN OF DEVELOPMENT FOR SUGAR COMPANY

Introduction of the company One Russian company (a key player among trading companies of oil products in Russia) decided to diversify its activity and established sugar department. Sugar was chosen due to clear price structure and increasing interest to food markets. There are five stages of development Trading operation with white sugar Importing raw sugar, refining it in sugar plants and selling it Investing in sugar beet production, refining it in sugar plants and selling it Purchasing a sugar plant Creating an agricultural holding company. This work provides ideas and descriptions of how to build this business from zero. Profile of the Russian sugar industry According to the ICAR, the capacity of the Russian sugar
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industry in 2010 will be about$ 5.2 billion (wholesale prices from the warehouse of the plant), including imported whitesugar $ 0.3 billion
Section 2. National enterprises.Dauren Toktamysov Plan of development for Sugar Company

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In 1999-2010 with the protection from imports rapidly growing, production of beet sugar is primarily due to productivity growth, as well as increasing the acreage of sugar beets. Exports of white sugar from Russia is carried out, mainly in the form of tolling raw sugar more often in the Krasnodar Territory in the CIS countries,
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Section 2. National enterprises. Dauren Toktamysov Plan of development for Sugar Company
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Mongolia and Afghanistan, and before 1998 its volume was small. In 1999, in the year of peak delivery of raw sugar to Russia, against the background of extremely low world, and especially the Russian, prices was afavorable situation for the supply of sugar in the countries of Central Asia and Transcaucasia. In November 2006, after a 6-year break, sugar exports again increased significantly, in 2007, itpassed for 300 thousand tons. After a pause, in October 2007 - November 2008, exports of sugar tolling is growing again. Unique competitive advantages of Russian sugar refineries, especially in the Southern Federal District, in the macroregion CIS (the cost of logistics, energy and other resources) that form the potential tolling of exports more than 0.5 million tons per year. To unlock this potential requires state support, primarily from the Customs and Russian Railways, as well as raw storage capacity expansion in the Black Sea ports and factories. Thenumber of sugar factories in Russia in 1991 was96. Of them,still workingin 2009 were77, including two plants processing only raw sugar. The 75 beet sugar factories and 48 factories have capacity for more than 30 000 tons of sugar, including 16 which have developed capacity for more than 60 000 tons of sugar. For comparison - in Ukraine in 2009, there were only 56 sugar plants of the 192 ratings in 1991. The number of operating sugar plants in 2009
Actual production capacity of existing plants only processingsugar beet in 2007 amounted to 257 thousand tons per day (4.5% in 2006). Russian can handle up to 32 million tons of sugar beet and produce up to 4,1 million tons of beet sugar. In Russia, existing power plants can process up to 8.8 million tons of raw

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES sugar. The Russian sugar industry can meet the demand for sugar for all CIS countries combined.
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In September 2007, Russia resolved a problem with Guatemalan raw sugar, but until February2010, Russian companies have not taken advantage of diversification of sources of raw sugar. The main features of the market Production and consumption of sugar is seasonal. Beet sugar is
mainly produced in September-November; raw sugar - in March and July. The peak of consumption usually occurs in July.

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The customs regime of sugar production in Russia The industry has a fairly complex system of applied with the use regulation of imports. In
the 2001-03 system
of licensing, quotas,
seasonal and regular duties on raw and white sugar.
Since 2004, the government has introduced "flexible" import duty on raw sugar (the higher the exchange price, the lower the fee and vice versa), and
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES prohibitive import duties on white sugar at a rate of $ 340 a ton (except CIS countries with a regime of free trade in sugar). Following various changes (sometimes annually) in May 2009, the government increased the lower level of duty on raw sugar from $ 140 to $ 165. Since January 2010, the sugar industry has failed to adjust the scale of flexible fees for the first time since 2003 and is already in the Customs Union of Belarus, Kazakhstan and Russia. The range of inversely-related duties and world sugar prices is shifted from 4.5 - 9.0 12 - 18 c / af. At prices lower than 18 c / af (as is likely in the summer of 2010) import duty increases. As a compromise, there is a proposal for a mechanism for consumers' raw sugar to be taxed less from May to July. In respect of Belarusian sugar: -.- From April 2007, there operates a self-restraint quota in the supply of sugar to Russia of 180 thousand tons in 2007, 100 thousand tons in 2008 and 150 thousand tons per year from 2009 The situation with the "sleeping giant" - Ukraine is temporarily closed. In accordance with the CIS inter-state agreements, only from January 2013 shall beet sugar originating in Ukraine not be subject to import duties. In summary, the fluctuating import duties are another factor that must be taken into account by sugar importers.
Detailed History and prospects of state regulation of sugar imports in Russia. Key market participants Recognized industry leaders are companies Prodimeks, Rusagro, Dominant, Razguliay, Sucden, Cargill, and Maine and controlling of at least 70% of the market for the past few years.

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Wholesale prices for sugar in Russia are highly volatile, which is traditional for commodity markets in the world.
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Trading operation with white sugar The idea is to buy a large amount of sugar, deliver it to final consumer and sell it in small amounts. This simple approach can work anytime, but in bear and bull markets it is useful to have different strategies. Procedure Signing a contract with supplier Organizing sugar storages in different regions Transporting white sugar to customers Selling white sugar The cash cycle is 1 month. Finance is available for this business. The leverage (borrowings) can be up to 50% offull amount.The break-even volume is 1 000 tonnes per month or 30 mln rubles per month. Strategy for the bear market trend The idea is to keep stocks at low level and fix price with supplier later or at the same time as with customer. Strategy for the bull market trend The idea is to have high level of stocks, buy sugar in advance and sell it later.
.Dauren Toktamysov Plan of development for Sugar Company

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Arbitrage Arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When prices fluctuate we can have arbitrage profit due to different prices in regions. Importing raw sugar, refining it in sugar plants and selling it Procedure Signing a contract with supplier and fixing the price on basis of CIF port in Russia Customs and payment of duties Transporting raw sugar to sugar plants Refining raw sugar Transporting white sugar to customers Selling white sugar The cash cycle is 5 months. It is possible to finance this business with debt. The leverage can be up to 70% offull amount. The break-even volume is 3 000 ton per operation or 90 mln rubles per operation. It is also possible to use currency SWAP in order to minimize currency risks. Currency SWAP A currency swap is a foreign-exchange agreement between two parties to exchange amounts of currency(namely the principal and/or interest payments) of a loan in one currency for the equivalent net present value in another currency. Currency swaps are over-the-counter derivatives, and are closely related to interest rate swaps. However, unlike interest rate swaps, currency swaps can involve the exchange of the principal.
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. Dauren Toktamysov Plan of development for Sugar Company

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES There are three different ways in which currency swaps can exchange loans: The most simple currency swap structure is to exchange the principal only with the counterparty, at a rate agreed now, at some specified point in the future. Such an agreement performs a function equivalent to a forward contract or futures. The cost of finding a counterparty (either directly or through an intermediary), and drawing up an agreement with them, makes swaps more expensive than alternative derivatives (and thus rarely used) as a method to fix shorter term forward exchange rates. However for the longer term future, commonly up to 10 years, where spreads are wider for alternative derivatives, principal-only currency swaps are often used as a cost-effective way to fix forward rates. This type of currency swap is also known as an FX-swap. Another currency swap structure is to combine the exchange of loan principal, as above, with an interest rate swap. In such a swap, interest cash flows are not netted before they are paid to the counterparty (as they would be in a vanilla interest rate swap) because they are denominated in different currencies. As each party effectively borrows on the other's behalf, this type of swap is also known as a back-to-back loan. Last, but certainly not least important, is to swap only interest payment cash flows on loans of the same size and term. Again, as this is a currency swap, the exchanged cash flows are in different denominations and so are not netted. An example of such a swap is the exchange of fixed-rate US Dollar interest payments for floating-rate interest payments in Euro. This type of swap is also known as a cross-currency interest rate swap, or cross-currency swap.Currency swaps have two main uses: To secure cheaper debt (by borrowing at the best available rate regardless of currency and then swapping for debt in desired currency using a back-to-backloan). To hedge against (reduce exposure to) exchange rate fluctuations.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Hedging an agricultural commodity price As it was mention before, sugar prices are highly volatile. In order to minimize risks,it is useful to use hedging mechanisms to reduce risks. A typical hedger might be a commercial trader or farmer. The market values of sugar and other agricultural products fluctuate constantly as supply and demand for them varies, with occasional large moves in either direction. Based on current prices and forecast levels at harvest time, we might decide that buying sugar is a good idea, but the forecast prices are only that forecasts. Once we bought sugar or started to plant, we are committed to it for an entire period of time. If the actual price of sugar rises greatly between planting and harvest, we stand to make a lot of unexpected money, but if the actual price drops by harvest time, we could be ruined. If a trader or farmer sells a number of sugar futures contracts equivalent to his capacity to sell or crop size at planting time, he effectively locks in the price of sugar at that time: the contract is an agreement to deliver a certain number of tons of sugar to a specified place on a certain date in the future for a certain fixed price. The trader or farmer has hedged his exposure to sugar prices; he no longer cares whether the current price rises or falls, because he is guaranteed a price by the contract. He no longer needs to worry about being ruined by a low sugar price at harvest time, but he also gives up the chance at making extra money from a high sugar price at harvest times. We can use futures and options for this type of hedging. Futures and options A futures contract is a standardized contract between two parties to buy or sell a specified asset (eg.sugar, oranges, oil, gold) of standardized quantity and quality at a specified future date at a price agreed today. The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks, bonds, rights or warrants. They are still securities, however, though they are a type
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES of derivative contract. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price is determined by the instantaneous equilibrium between the forces of supply and demand among competing buy and sell orders on the exchange at the time of the purchase or sale of the contract. An option is a derivative financial instrument that establishes a contract between two parties concerning the buying or selling of an asset at a reference price during a specified time frame. During this time frame, the buyer of the option gains the right, but not the obligation, to engage in some specific transaction on the asset, while the seller incurs the obligation to fulfill the transaction if so requested by the buyer. The price of an option derives from the value of an underlying asset (commonly a stock, a bond, a currency or a futures contract) plus a premium based on the time remaining until the expiration of the option. Other types of options exist, and options can in principle be created for any type of valuable asset. An option which conveys the right to buy something is called a call; an option which conveys the right to sell is called a put. The price specified at which the underlying may be traded is called the strike price or exercise price. The process of activating an option and thereby trading the underlying at the agreedupon price is referred to as exercising it. Most options have an expiration date. If the option is not exercised by the expiration date, it becomes void and worthless. In return for granting the option, called writing the option, the originator of the option collects a payment, the premium, from the buyer. The writer of an option must make good on delivering (or receiving) the underlying asset or its cash equivalent, if the option is exercised.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Investing in sugar beet production, refining it in sugar plants and selling it Procedure Signing a contract with farmer about financing and fixing percentage of future harvest Signing a contract with sugar plant and fixing the formula of white sugar from sugar beet Refining sugar beet Transporting white sugar to customers Selling white sugar The cash cycle is 8-10 months. It is possible to finance this business. The leverage can be up to 50% of thefull amount. The break-even volume is 1 000 ton per operation or 30 mln rubles per operation. It is also possible to hedge those operations the same way as hedging raw sugar. Purchasing a sugar plant Procedure: Research to find suitable sugar plants (possible factors for taking into account: location, refining raw sugar per day, refining sugar beet per day, condition of a plant, distance from railways and main roads, etc.) Due diligence Signing a loan agreement with bank Signing a purchase contract with seller of plant Making sure that a plant has enough resourses to refine Developing a sugar beet zone around a plant Further development using mergers and acquisitions deals.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The cash cycle is 10 months for operating activity and 7 years for capital expenditures. It is possible to finance this business. The leverage can be up to 70% of thefull amount of capital expenditures and up to 80% of theoperating activity. Mergers and Acquisitions The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. An acquisition is the purchase of one company by another company. Consolidation is when two companies combine together to form a new company altogether. An acquisition may be private or public, depending on whether the acquiree or merging company is or isnot listed in public markets. An acquisition may be friendly or hostile. Whether a purchase is perceived as a friendly or hostile depends on how it is communicated to and received by the target company's board of directors, employees and shareholders. It is quite normal for M&A deal communications to take place in a so called 'confidentiality bubble' whereby information flows are restricted due to confidentiality agreements (Harwood, 2005). In the case of a friendly transaction, the companies cooperate in negotiations; in the case of a hostile deal, the takeover target is unwilling to be bought, or the target's board has no prior knowledge of the offer. Hostile acquisitions can, and often do, turn friendly at the end, as the acquiror secures the endorsement of the transaction from the board of the acquiree company. This usually requires an improvement in the terms of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover. Another type of acquisition is reverse

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES merger, a deal that enables a private company to becomepublicly listed in a short time period. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly listed shell company, usually one with no business and limited assets. Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. The acquisition process is very complex, with many dimensions influencing its outcome. Creating an agricultural holding company Procedure: Buying land plots around a plant Hiring agronomists Starting to produce crop, including sugar beet Building beet and grain storages Looking for possible acquisition and merges. The cash cycle is 10 months for operating activity and 7 years for capital expenditures. It is possible to finance this business. The leverage can be up to 50% of thefull amount of capital expenditures and up to 80% ofoperating activity. Conclusion Food commodities are very attractive place for investment. Our planet faces a constantly increasing population and demand for products, including sugar, constantly rises. In this work the plan of development for Sugar Company is presented. This plan includes 5 stages: Trading operation with white sugar Importing raw sugar, refining it in sugar plants and selling it Investing in sugar beet production, refining it in sugar plants and selling it Purchasing a sugar plant Creating an agricultural holding company.
142 . Dauren Toktamysov Plan of development for Sugar Company
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES This plan includes such financial instruments as Hedging Financial leverage Arbitrage Currency SWAPs Mergers and acquisitions The company can follow the plan in order to have differentiated strategy for development. It means that the company will have maximum capitalization, be attractive for potential investors and have full cycle production process. Entering into very competitive market What factors could lead to success in a very competitive market? First of all, management team should have clear understanding of the market, market trends, and have business connection. Secondly, it is essential to use seasonal fluctuations, in other words, buy more products in low price in time of harvest in autumnand sell it in spring and summer at high price. Thirdly, a full cycle process is more profitable, therefore initial strategy should be buying product from farmers in large volume and selling to direct customers in small quantities. References http://en.wikipedia.org/wiki/Main_Page https://www.theice.com/homepage.jhtml http://www.ikar.ru/ http://www.isco-i.ru/ http://sugarinfo.ru/nuke/index.php http://www.sugartech.com/ http://sugarinds.blogspot.com/ http://www.sugaronline.com/ http://www.bartens.com/

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SECTION 3. INTERNATIONAL GROUP

DARIMA DORDZHIEVA CE BANK
Russian banking sector overview
Generally the Russian banking servicesmarket is marked by the characteristics that are described below. Outlook for the development of the Russian economy in next 5 years is quite positive. The Ministry of Finance of Russian Federation estimates that the RussianGDP will have the following dynamics during next several years:3,4% GDP growth in 2011;4,2% GDP growth in 2012. It is expected that Russia will also experience steady per capita income growth in the nextyears. The major objectives of DARIMA DORDZHIEVA the Russian monetary policy for a three-yearperiod will be:to minimize a negative impact of the world financial crisis on the Russian economy;to reduce theinflation rate to 5-7% in 2012. These decisive steps will have a positive effect on the development of the Russian bankingsector. Still, there will be certain examples of economic instability in Russia due to anumber of factors (an actual occurrence of deferred corporate defaults, a significant rate ofunemployment, a relatively high volume of problem loans, etc.). The next characteristic is a significant growth potential of the Russian economy. The banking system is the coreof the Russian financial system. The Russian banking system accumulates a major part ofassets held by the Russian
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES financial community. The total assets of the Russian bankingindustry constitute about 70 % of the Russian GDP. The third characteristic is a high concentration level of the Russian banking services market. The five top banks possessnearly 48% of the total assets of the Russian banking system, an increase of 5,6% for the lasttwo years. During the next five years the concentration level will increase due to overalleconomic instability, bankruptcy of medium-sized and small Russian banks and numerousM&A transactions in the Russian banking services industry. Furthermore, the Central Bank ofRussia has a plan to reduce the number of credit institutions doing business in Russia. Furthermore, regional banking services markets are marked by an intensifiedcompetition due tofurther expansion of foreign banks and Russian government-managed and private bankinginstitutions. Banking institutions enhance quality of service and introduce new bankingproducts and services. The alternative investment instruments will become more attractive among the falling rates onbank deposits in a medium-range perspective. Investments in securities and real estate willseriously compete with bank deposits. Since the above-mentioned trends seem to have a long-term nature, the Russian banking marketwill remain attractive in a long-range perspective. At the same time, a more intensecompetition is expected from alternative credit institutions and investment instruments. Company background Credit Europe Bank Ltd. (former Finansbank Russia Ltd.) was established in the Russian Federation as a closed joint stock company and was granted its general banking license in 1997. The principal activities of the Bank are deposit taking and customer accounts maintenance, lending and issuing guarantees, cash and settlement operations and operations with securities and foreign exchange. The activities of the Bank are regulated by the Central Bank of the Russian Federation
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES (the CBR). The Bank has 106 locations (including 73 branches, 15 in-store branches, 4 regional sales offices and 14 representative offices) (2008 112 locations (including 85 branches, 19 in-store branches, 5 regional sales offices and 3 representative offices)), from which it conducts business throughout the Russian Federation. The average number of persons employed by the Bank was 2,869 (2008 4,359). Credit Europe Bank (Russia) is included into top-50 of the biggest Russian banks in terms of assets size and in top-25 for the volume of issued loans (as of January, 2010). The Banks ultimate parent company is FIBA Holding A.S., a Turkish joint stock company, which is ultimately controlled by a single individual, Mr. Husnu Ozyegin. The Bank has three segments, as described below, which are the Groups strategic business units. The strategic business units offer different products and services, and are separated because they require different technology and marketing strategies. The following summary describes the operations in each of the segments: Commercial banking includes corporate and SME banking operations which include deposit taking and commercial lending, settlements and cash operations. Commercial banking services also include trade finance. Retail banking includes retail banking operations which include deposit taking and commercial lending, settlements and cash operations. Treasury (investment banking and financial markets) includes corporate finance, operations in foreign exchange, debt and equity capital markets, brokerage, securities trading. Strategy Macroeconomic situation caused by the global economic and financial crisis, increases therisks associated with overcoming unfavorable trends in the domestic
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES economy. The poor financial condition of enterprises and actual occurrence of deferred corporate defaults will increase bad debts on business and consumer loans. In this connection, it is critical to improve some functional areas, such as risk management, borrower selection techniques and debt collection procedures. There exists intensified competition for personal deposits from other banking institutions.The banks also struggle for attraction of first-class borrowers to safeguard their loan transactions.To win new clients, Bank should expand the size and scope of their banking business through: - a further expansion of their customer base; - an active acquisition of banks which have a well-diversified branch network. It is of great importance to increase a technological and innovative potential of the Bank in order: - to enhance an overall quality of banking products and services; - to meet every financial want and need of customers in the best possible way. Although big banks possess a number of competitive advantages as they have relatively cheap resources and can use so-called economies of scale, competition among them is very high. In thissituation, Bank must seek: - to launch unique banking products and services; - to develop its non-price competitive advantages; - to improve its product pricing policy; On the other hand, Bank can improve management process in order to optimize expenses and to ensure a reasonable application of resources from an economic point of view. Bank can strengthen its position and efficiently struggle with various challenges set by the market by means of:

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES - developing new technological solutions; - launching unique products; - upgrading service level; - enhancing management system. All these developments will enable Bank: - to achieve a greater mobility; - to be more flexible in adjusting to the wants and needs of customers; - to reinforce its leadership in the marketplace; Strategic management system Bank needs to enhance strategic management system in order to increase the efficiency of overall management process. The efficient strategic management system will help the Bank reach its strategic development targets and ensure a systematic approach to the development of its business and organizational processes based on the following parameters: -business environmental conditions; -market requirements; -a business potential of the Bank; -a level of acceptable risks. The process of strategic management of the Bank will be coordinated by thenewly-created Board of the Bank. The process of implementation of the
strategic developmentprogram and realization of major development aims by business area and development stage will be regularly monitored. The responsibilities for the implementation of strategic development program will be distributed amongst different structural units of the Bank, based on their business profile. The strategic development program of the Bank will be realized through efficient usage andcoordination of various management practices (a financial
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES planning system, a staff motivationsystem, a project priority system, a regional development system, etc.). Risk management system The development of an organizational and informational-methodological system for implementation of risk reduction and neutralization procedures will enable the Bank to achieve its strategic goals and to improve its corporate culture in the area of risk management.Credit risk management system will be updated and enhanced in many respects. A uniformmethodological base will be created to link credit risk management tasks with financial management tasks and business development tasks. The credit risk management process willbe improved within a general framework of the Banks business development strategy. The Bank will enhance our credit risk management system in the following way: - to improve a procedure of assigning internal credit ratings to borrowers by branch andbusiness segments; - to optimize lending process by creating new credit scoring software products and creditscore products for small business (microcredits); - to improve the existing system of resolving problem loans based on economic efficiency andexperience in dealing with problem loan situations; - to improve a day-to-day credit risk management by optimizing some specific businessprocesses technically known as a primary underwriting, loan extension and loan monitoring;to create a specialized debt collection service; - to improve risk minimization system by optimizing credit limits by each lending segmentand other key parameters. The development of an automated credit risk management system is an important integral part ofstrategic risk management program. It will enable the Bank:

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES - to ensure an efficient day-to-day monitoring of credit risks through a standardized analysisof borrowers by market segment, capacity and collateral; - to increase the efficiency of lending process by optimizing workout costs when dealing with problem loans; - to develop stress testing techniques in order to optimize the Banks lending process. Expansion through M&A and Regional development The Bank already has tangible presence in many big cities and regions. However, those branches are not developed enough. They provide few services to customers, usually only one strategic business unit (segment). So, the Bank should widen its range of services for regional sales (beforehand, analysis should be made whether any particular business unit would bring gain for the Bank). In existing offices the absence of ATMs and cashiers is also a vital problem. Within the next 2 years all branches should be equipped either with ATMs or Cashiers. Besides, the Bank can focus and ensure its strong presence: 1) in already presented cities: 1 office for 50 thousand inhabitants. 2) in the cities with the population exceeding 500 thousand inhabitants and with high level of socio-economic development: - capital of republic, oblast or region: 1 office for 50 thousand inhabitants - Othercitieswith highlevels ofindustrialandsocio-economic development 1officefor100 thousandinhabitants. The priority in opening new branches is given to the cities where bank has already anchor clients (e.g. clients with head office in Moscow and branches in regions) and or in a case of investment projects which are financed by the Bank in that particular region. The aim of opening our own branches is to attract more clients. The setup and opening of a branch should be realized by certain common standards. IT strategy
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The main aim of the IT strategy is to provide complete information when it is necessary in order to support current or new business processes and operations, to maintain existing and new competitive advantages of the bank, to be in compliance with global banking automation standards, providing high reliability and security of business. As an example, the Bank can start an initiative to replace individual software solutions by a new core banking system based on SAP for Banking solutions. The SAP implementation will be able to underpin the banks strategy to push for a high degree of industrialization and standardization of processes. The bank can also achieve greater flexibility in its IT infrastructure, building on standardized, modular SAP software functions within a service-oriented architecture (SOA). Using SAP software, Bank will aim to boost efficiency and profitability as well as to accelerate time to market in rolling out new products and services to even better serve the banks clients. This new core banking system could comprise of partner data, payments, account management and savings applications. The SAP for Banking solution portfolio provides banking-specific (transactional banking, CRM, finance and risk management) and banking-relevant (human resources management, procurement) services and solutions created on a single SOA-enabled business process platform with integrated business insight. Solutions are delivered in areas such as Analytical Banking (Integrated Finance & Risk, Compliance), Transactional Banking for retail and wholesale banks (Loans, Deposits, Payments, Collaterals, Leasing, and Covered Bonds), Business Support (Procurement, Human Capital Management), Customer Relationship Management and Business Intelligence. SAP for Banking provides an integrated set of tools and automated processes to manage every aspect of the front- and back-office banking environment from high-volume transactional banking processes and customer Section 3. International Group.Darima Dordzhieva CE Bank
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES relationship management to financial accounting, cost controlling and profitability and risk analysis. SAP for Banking helps companies expertly manage transactions and relationships across the entire enterprise to quickly identify and exploit market opportunities and easily tailor new products to the specific needs of individual customers. Outsourcing Business Process Outsourcinginvolves the transmission to a third party ofindividualbusinessprocessesthat are notcoretothe company. Amongst them are human resource management,accounting,marketing, advertisingand logistics. BPO is an extremely dynamic developing process with the greatest growth in finance and accounting. Study of six hundred firms in 1997 by the American Management Association showed that every fifth of the surveyed companies outsources at least part of the financial and accounting operations, and the rest four-fifths of firms - some administrative functions.
In our case, the Bank can partly outsource HR management. Although it has its own well-organized department, for a future rapid growth the Bank needs more resource powers to employ new staff. As a financial institution, the Bank can deal with the financial and accounting operations itself. As we plan to start implementing SAP Banking, it would be useful to outsource IT services. There is a range of companies on the Russian market that specialize on this kind of software. Marketing The Bank needs to create an efficient marketing system in order to strengthen its existing competitive advantages and to create new competitive advantages. We want to address a widespectrum of marketing matters. In particular, we will take steps: - to develop market positioning strategy;
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES - to undertakemarketing studies in order to become aware of consumer preferences; - to fix a price policy and a product policy of Bank. The implementation of the Banks marketing strategy will be coordinated by the MarketingCommittee. The main duties of the Committee in question will include: - an introduction of a strategic marketing function and an operational marketing function atall organizational levels of the Bank; - an implementation of a client-centric approach at all organizational levels of the Bank. The foundations of marketing system will include: - a uniform methodology for creation of new products/services; - a marketing expertise of the existing and new products/services; - a comprehensive analysis of the competitive environment; - an introduction of uniform specifications of quality for various customer segments. Product lines will be based on the following criteria: - product profitability; - product sophistication (e.g. the use of modern banking technologies such as remote bankingtechnologies and Internet banking technologies); - demand availability for a particular banking product from key customer groups. We will workhard both to develop unique service packages for each customer segment and to launchcross-selling technologies. We want to speed up the introduction of new banking productsfor our customers. The Bank will launch a customer satisfaction system. Additionally: - to launch a special client loyalty program in order to build up long-term relationship with customers;

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES - to improve direct sale, advertising, marketing and PR functions in order to ensure efficientadvancement of products and services in the marketplace.
Staff The Bank will continue to build up its relationships with staff members based on trust and mutualrespect. To attain strategic goals, it is needed: - to motivate all staff members to actively participate in the implementation of the Banksdevelopment strategy; - to motivate all staff members to enhance their educational background and professionalproficiency for the new tasks required; - to improve the overall staff management system. The professional development of staff members is effected in line with the staff managementstrategy employed by the Bank. The integral components of the strategy in question include: - a skills enhancement and corporate training system; - a career progression system; - a human resources management system. The Bank can implement a new salary system providing new principles for establishing the salary of the employee and the calculation of the bonus fund: - to motivate all staff members to become part of the Banks overall team; - to assess performance of each individual staff member and to properly reward each staffmember based on his/her contribution to the growth of our Bank. Introduction of a grade system and the establishment of salaries, taking into account the value ofeach position for the Bank and the required qualification level will ensure alignment of employees'salaries to the functional. The application of a bonus system based on key performance indicators (KPI) and management by objectives will enable the Bank:
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES - to increase overall labor productivity of each individual member of staff and each structuralunit of the Bank; - to establish a direct correspondence between the amount of a bonus remuneration andperformance of each staff member. The introduction of a staff motivation system will allow to identify the expertise, skills andpersonal talents of each staff member and to unite the synergies of individual members of staffwithin a framework of the Banks strategic development program. Conclusion In an environment characterized by an intense competition and increasing market uncertaintythe Bank needs to adapt its business strategy to the changing market conditions in a swift andefficient way. The Banks strategic development program can be realized through: - an introduction of a client-centric business model; - a development of new technologies; - expansion.
References 1. 2. 3. 4. http://www.crediteurope.ru/ru/bank/ http://www.sap.com/industries/banking/index.epx http://www.minfin.ru/ru/ http://www.pwc.com/en_GX/gx/operations-consultingservices/pdf/outsourcingcomesofage.pdf

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DENIS GAITANOV GIRSBERGER GMBH

Introduction Financial planning is a crucial aspect of any for-profit organization wherever it operates or willing to start operating. In line with marketing or new product launch for instance, financial strategy plays a big role in future company development. Poor management of which can lead a company to bankruptcy, while well managed, it can give some key competitive advantages in market place and increase profits.
DENIS GAITANOV
The importance of financial planning is a relatively young concept; the necessity in financial planning has been realized for the past 15 years by the majority of companies managers and directors; however the introduction of shortterm financial plans does not lead to desired goals. Despite the efforts while making plans on financial cash flows and budgets, it is still a problem to solve the maximization of companys value. For this particular paper, a company Girsberger GmbH was chosen. Girsberger GmbH is well known in Europe office furniture manufacturer and seller (for full company description see Chapter 2). One of the reasons for such company choice and industry choice was that I (the author) enjoyed a placement in this particular company during my university education. Therefore, while developing a financial plan, I am able in fact to invent something that can be actually implemented in real business environment, due to the fact that I am familiar with company organizational structure, internal business processes and have some knowledge about company present situation and history.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The aim of this work is to make an approximately five year financial plan and describe in details its key aspects. The subject of the work is the international company Girsberger GmbH.
Company profile Girsberger GmbH is a company with long history and strong values, createdabout 120 years ago. Originally from Switzerland, Girsberger GmbH operates now almost all over the Europe and supplies its production to other continents. The core products of the company are chairs. However nowadays, due to business diversification, it has 2 distinct product portfolios. One is office seating, which ismainly produced in German branch. The second one is the socalled Home Collection, which includes various design solutions and furniture for households. And of course it has a great number of chairs for home usage. Home Collection is produced mainly in the Swiss branch. After being on the market for 120 years, nowadays Girsberger GmbH has about 400 employees worldwide and a turnover of 100 million euro in year 2008, which makes it one of biggest employers in Endingen, Germany. Having production sites in such countries as Germany, Switzerland, Turkey and USA, Girsberger produces very high quality products which are able to compete with much bigger international competitors. Girsbergers creative and technical mastery goes hand in hand with the latest production methods. We work with creativity, passion, and diligence from the original design to the development of high-quality materials, to installation. Our careful attention to minute detail and an overarching quest for the highest quality delivers an uncommon excellence. Take a close look. 1
http://www.girsberger.com/en/company/
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES This says better than everything, that company dedication to, first of all, quality, design and innovative technology, is what makes it strong competitor, and allows competing on international basis. Girsberger GmbH nowadays has branches and showrooms in such countries as: Switzerland, Germany, Austria, France, Spain, Holland, Great Britain, Turkey and USA. Five year financial planning main points. The current situation of Girsberger GmbH is that it is very well known and highly respected for its quality and service office furniture manufacturer. It supplies its products all over the European Union and some selected countries all over the world. It has a well managed manufacturing process with excellent, proven by time, quality control and service. I believe that its expansion into Russian market can be very successful in a long-term perspective. Russian office furniture market is very big, with high potential, however, has its peculiarities, which are not present in other European countries. Another argument for this is that the price of an office chair in Russia is about 150 us dollars, and office chairs and furniture of higher price levelsare presented very poorly. As the result market segment for highly-priced office furniture suffers a lack of healthy competition. Besides, while expanding to Russian market, manufacturing expansion also would be very beneficial in this case. If we compare salaries in Germany and Russian Federation, it is clearly seen that in Russia workers get much less. For instance, the average salary in year 2010 was around 20 000 rubbles 1. That is approximately 500 euro. Where in Germany average salary varies form 2 000 to 3 000 euro (for instance, a sales person gets around 2 700 euro per month 2).
1 2
http://ssp.karelia.ru/content/srednyaya-zarabotnaya-plata-po-rossii http://www.jobs.westeastcafe.eu/average-monthly-net-salary-Germany.html
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The difference is noticeable. It is generally known that German quality is higher than quality of Russian goods, however well introduced quality control would allow to manufacture goods of the same quality, but with much lower manufacturing costs (mainly due to the wage difference). Why expand into the Russian market? First of all it is important to know that the Furniture market in Russian Federation, as well as the notion Office itself, is relatively young. As the result almost all of the Russian manufacturers of office furniture are relatively young companies, especially if compared to their German, Italian or other European competitors. The beginning of this market segment could be dated the beginning of 90s. That is the point in time when manufacturers from such countries as Germany, Italy, Scandinavian countries etc entered the market and trends shifted from gray and brown office colors to more modern and up-to-date. It is important to say that before the beginning of 90sall office furniture was of a brown color and did not have any outstanding features. Nowadays, of course, the situation is completely different from what it was and the office spaces are furnished pretty much like European for instance, due to the fact that all the technology and trends came from there. This report is aimed to explain the currents situation of the market and give an idea what happened and what most likely will occur in office furniture segment. Plus, it gives information about biggest Russian market players and some foreign manufacturers, mostly from Germany.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Market analysis As already mentioned before, Russian office furniture market is young and the major players have been in the market for about 15-20 years. The visible tendencies in the office furniture have appeared only recently and experts do say that they copy the western market, from which technology and design came. The Russian manufacturers occupy the lower segment of the market. They produce cheap furniture, which is not good in a long-term perspective, because it often breaks and needs to be replaced. Despite the fact that their quality is getting better, they are still not able to compete with foreign manufacturers in the business and executive sectors, which have more experience there. It is believed that the office furniture market in Russia has different segments.However there is no common classification accepted:different experts suggest different ones. Some think that the market is divided in 3 basic parts: economy, business and first class. Speaking about furniture for employees, here the price goes up to 300$, the second costs not more than 700$ and the third one 700$ or higher. Another suggests that the market is divided into operational furniture 1 300-700 EUR, which is commonly aimed for the regular employees and manufactured by Russian companies. Secondly it is operational furniture for higher ranked employees 700-2000 EUR, usually supplied by Italy. And finally, elite furniture (2000 6000 EUR) supplied by USA, Italy, England and Germany. The Russian office furniture market can be divided in three major segments, according to pricing. The first and the biggest one is so called cheap furniture. It accounts about 75% of the whole market share, and filled primarily by Russian, Turkish and Polish manufacturers. The second is the medium segment. It is filled mostlyby Russian and European manufacturers and accounts from 10 to 15% of the market. According to
Operational furniture office furniture for ordinary employees
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES experts, the number of companies operating in this segment is small and is about 20. The main suppliers for this segment are from Russia, Italy, Germany and Scandinavian countries. Finally, the third segment consists of company who offer only expensive office space solutions. It is relatively very small and accounts not more than 10 companies and is especially concentrated in Moscow and St. Petersburg. Market in numbers The Russian furniture market is believed to be one of the most non transparent markets in the economy. Approximately 5 years ago, there was absolutely no exact information about the market, no research nor statistical data.Even these days, there are some gray areas experts cannot agree on. The share of office furniture in the furniture market is about 20%. The volume of the office furniture market in 2006 was about 1 1.1 bln $. However not all experts agree on that and claim that already in year 2004 it was about 1 bln $, and therefore in 2006 it was about 1.2 1.3 bln $. Some even say that in 2006 this number was around 1.5 bln $ comprising 25% of the total furniture market. The fact that the numbers are inexact and there are a lot of opinions is due to non transparency of the market. In 2005 office furniture market grew for about 13%, In the following graph the growth between years 2003 and 2007 can be seen: Graph 1:

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES According to the assessment of Express-review the growth of office furniture production in Russia has a tendency to decrease. For instance in 2004 the production increased almost by 24% in actual prices, by the end of the 2007 the increase was only 16%. Graph 2: depicts the growth of Russian overall furniture market between 2001 and 2007
A steady growth of Russian furniture market can be clearly observed on this graph. Graph 3: depicts the % of office furniture market in the overall Russian furniture market
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Almost all domestic office furniture does not leave the country, only 3-4% goes for export; however this number has a tendency for a relatively slow growth. On the other side, it has to be mentioned that the import share of office furniture has been decreasing recently. Fromabout 60%, it has decreased and by the end of 2009 totalled just40%. The major segment in office furniture market is so called operational furniture, which is used by ordinary employees; by the end of 2007 its share compiled 32%. An interesting fact is observed, that operative furniture is being forced out by furniture for executives and senior managers, which market share by the end of 2009 has already totalled in 28%. The biggest consumers of office furniture in Russia are private companies and government organizations. Target market Speaking about the target market, the big centralization of office furniture exists:half of the whole office furniture consumed in country is sold in Central Federal District, where around 42% is consumed by Moscow. It is explained by the simple fact that Moscow is the capital, one of the biggest cities in Russia and its financial capital, which means huge concentration of domestic and foreign offices and headquarters of various companies and financial institutions. Of course it makes it a perfect entry point into Russian market with further possibilities of expansion. The cities following Moscow in this aspect are St. Petersburg and other which have 1 mln or more inhabitants.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Graph 4: depicts the share of different Federal regions in consumption of office furniture
Competition There is no clear opinion whetherit is more beneficial to sell your goods through authorized dealers or directly. There area number of firms with successful b2b approach, however the biggest manufacturers prefer to invest and develop their own network. The development of selling networks and building offices, both in Moscow and regions, requires huge investments, which is why a lot of manufacturers, especially the smaller ones, prefer direct sales. The Russian office furniture market could be divided into 2 parts, one is Moscow and Moscow region and the second is the rest of the country. Where both parts account for approximately 50% of the whole office furniture market. The Moscow market is dominated by the big players, where other regions of Russian federation are usually dominated by the local manufacturers. There a number of main players, however I would like to mention some of them: 1) Felix Let us start with probably the biggest player in this market Felix ().
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Felix was founded in 1991; it specializes not only in office furniture, but home and hotel furnishing. It is the biggest manufacturer and supplier of office furniture and has the biggest selling network in Russia and in CIS 1 around 65 selling offices in all over the Russia. According to researches it has around 50% of Moscow market. 2) Unitex Company Unitex () has a market share of 12%. Unitex has been on the Russian market for more than 17 years, producing all kind of furniture for offices and selling not only their own production but also reselling goods of foreign colleagues. For the moment, Unitex owns11 sales offices, however it also has a huge number of authorized resellers. 3) KRAFT Another big player on the Russian furniture market, worth mentioning, is KRAFT. Having its own production plant, it is also a reseller of products of companies from Italy, Germany and Spain. It also should be said that KRAFT is an authorized representative of Knig + Neurath, and it has the only 1 showroom of K+N, situated in Moscow. Together with K+N, Kraft offers also complex office solutions. Strategic advantages and disadvantages The main points that prove Russian market as very perspective for expansion are: 1) It is very young. The market is full of domestic competitors, however they are maximum 15 to 20 years old, and therefore they lack experience and technology, which its western competitors do possess. Girsberger GmbH, with its more than 100 years history, obviously has competitive advantage over domestic
CIS - the Commonwealth of Independent States

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES competition in experience, manufacturing technology, quality control and other important aspects related to office furniture industry. 2) The sector of elite office furniture is poorly presented in target market, and competition is presented only by few players, the majority of which are not domestic manufacturers. Therefore, unlike in highly competitive European Union, this segment of Russian market offers relatively easy entrance and lack of competition. 3) Russian federation is the biggest country in the world, but Moscow itself accounts for almost half the consumption of office furniture of the whole country. Such consumption centralization makes logistics easier and it is easier for the company to focus on particular city rather than on the whole country. 4) Big market potential. Office furniture market is constantly growing, the number of offices, particularly in Moscow, continues to grow and is expected to grow in the foreseeable future. With all these great advantages, some specific disadvantages come along: High risks. Investing in Russia is still associated with risk. While the political situation is stable, there are still a lot of issues concerned with opening a new business and running a business. Utility costs are high. To start a new business or a subsidiary may cost a lot of money, and one of the aspects that is not presented in Europe are so called extra expenses. Registration and preparing all the necessary documents sometimes can take too long. Penetration strategy, 1-3 years This expansion strategy is planned for the first three years of five year corporate strategy I. Coming to Russian market for the first time, even with a great business plan, is always a risk. Therefore my suggestion is to use a joint venture.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES A joint venture should be created with a domestic manufacturer who specializes in low or medium quality office furniture, which is not a direct competitor. By doing so, the company minimizes risks, and has such advantages as: 1) Access to new market and distribution networks. It has a ready full access to new market and to distribution network. This cuts a lot of costs, such as logistics and research and development. 2) Increased capacity. Possibly Girsberger can use its Russian partners capacity. This aspect is more a long-term advantage. Since the quality of goods is expected to be different from that of the Russian partner, new equipment is expected to be installed. 3) Sharing of risks and costs with a partner. Generally, according to joint venture agreements, partners share all risks and losses. As the result, in case of failure, it minimizes losses at least by half, which is very beneficial for foreign investor when investing in country with a relatively risky business environment. 4) Access to greater resources, including specialized staff, technology and finance. Faster and greater access to resources, especially human resources. This aspect deals cultural differences. For example, language can be a great obstacle when a foreign company comes to new market (for instance, the Russian language is difficult). Domestic partners help to deal with such obstacles as language, the Russian business environment, bureaucracy, organizational issues etc. 5) Low costs. Investors, in case of joint venture, invest much less than if they went alone to a new market. This is due to low costs in developing network, sales system, advertising etc II. Secondly, after finding the appropriate partner, it is necessary to open a showroom. Preferably in Moscow city, to not only use partners network but also start its own marketing campaign. Plus, it can start participating in various Russian fairs and exhibitions.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES 3-5 year strategy. In case of successful fulfillment of first free year penetration strategy, a second phase of the plan is advised. The main idea of second part of the plan is to start building its own manufacturing plant. As already mentioned above, if the first part of the plan succeeds, Girsberger will have experience in Russian market and resources for expansion. Building a plant in central part of Russian federation cuts logistics costs for delivering to Russia and allows for delivering goods in surrounding countries, such as Ukraine, Belorussia, Latvia, Finland, Kazakhstan etc. The second factor favouring manufacturing in Russia is wages. Average wages in Russia are much lower than in Germany or any other country where Girsberger operates. Graph 5: depicts the difference in wages between German and Russian workers Comparison of average wages (euros)
1 2
Germany
Russia
It has to be mentioned that while domestic workers are hired for manufacturing, several German experts are needed for quality control inspection. This way manufacturing costs can be decreased significantly and quality maintained at high level.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Location of the plant is determined by the major target region. Since the target Russian region is the city of Moscow, the plant is supposed to be built somewhere in the Moscow region or in a region that is close to Moscow. Finance wise, unfortunately there is no exact numbers on how much would it cost to built up a plant. Its price depends on many factors such Location. The closer to Moscow city, the higher the price is. Plant power. This is one of the most important aspects in price, because utilities are very expensive not only to use but also to buildup the infrastructure for them. Based on average figures, building a plant near Moscow can cost about 90 mln dollars. Since it is a big sum of money, I advise to use gearing. That is to finance part of the construction by taking bank loan. The amount of loan is recommended to be about 40%-50% of the whole sum. This will allow using tax shield, therefore lowering tax base of the company. Payback of the projects second part is expected to be around 10 years after finishing construction. To sum up construction of plant gives: 1) Low logistic costs 2) Possibility for new markets access 3) Lower manufacturing costs
Last, but not the least, is the exchange rate of Euro to Rouble. If we look at historic exchange rates, the Rouble has been constantly weakening against Euro, which is obviously beneficial for a German investor.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Graph 6: depicts historic exchange rates euro to rubble for the last 6
months. Conclusion Girsberger GmbH is a German company with an excellent history, experience and reputation. It has very good position in Europe. It is time for further expansion. The Russian office furniture market is a very good choice for that. The first part of plan consists of creating joint venture with domestic partner and winning market share in the first three years. After successful completion of first part, the second part suggests starting building its own manufacturing plant in Moscow region. There are a number of reasons for going to Russia: 1) Young, inexperienced market. Western companies with long histories have advantage over domestic producers, who are not older than 20 years. 2) Poor competition in elite office furniture segment, presented by few companies. Take the lead and gain bigger market share before its western competitors arrive. 3) Big market potential and high centralization of consumption. Therefore, no high logistic costs. 4) Low manufacturing wages, compared to European. This corporate plan describes strategy, which in the long-term perspective (more than 5 year period) would allow expanding further in Russia or going to surrounding countries markets.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES I believe this paper gives a clear view on how the company should develop in the following five years and enter a risky, but potentially highly- profitable, market. References 1. 2. 3. 4. 5. www.girsberger.com www.gks.ru www.jobs.westeastcafe.eu www.ssp.karelia.ru www.yandex.ru

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EKATERINA GONASTAREVA ONEGIN LUXURY STORE
Company Description The Kido Company was established in Moscow 1995 by Natalia Ciplenko, and in this company there are investors which only take part in investing money rather than having management roles. Other investors participate in managing the company, in order to take the main decision over the menu. This company is mainly a restaurant which sells the good and products goods all over Saint-Petersburg. EKATERINA GONASTAREVA After fifteen years of constant growth and commercial success, the goals and overall strategy of the company was totally revised at the 12th shareholders meeting. The major decision, adopted on the 12th meeting, is to explore totally a new market - in July 2011 we are planning to open Onegin Luxury Store, which we expect will possess the biggest market share among the up-market product stores. Thanks to our past, now we have firm trade contacts with many product suppliers. Accordingly, O.L.S. will always have an advantage in terms of supplying products, products prices and guarantee of high quality. Also, the management of the company consists only of professionals in each field. Please see more details in chapter Organization.
Strategic Focus and Plan Mission/Vision The mission of Onegin Luxury Store is to provide prospective and current Saint-Petersburg consumers with an upscale variety store, gift shop, and
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES delicatessen specializing in a combination of quality, authentic, hard-to-find grocery items from around the world.
Goals Create a company that exceeds customers' expectations, and increases the number of repeat clients serviced by at least 20% per year, through superior performance and promotion/word-of-mouth referrals. Achieve substantial brand image and high level of brand loyalty for Onegin Luxury Store because these factors constitute the key to success for any upmarket sector consumer oriented companies Become an established community destination with a customer satisfaction rate of 90% by the end of the first year. Achieve cash flow self-sufficiency by the end of the first year. Sales of $461,900 in the first year, with sales increasing to $484,735 in the second year and $508,000in the third year. Provide an income for the founders by the end of the second year, with income growth possibilities.
Core Competency and Sustainable Competitive Advantage Reputation: Every customer visiting our store will want to return and will recommend us to their friends and family. Word of mouth marketing will be a powerful ally for our business. Superior Customer Service: Knowledgeable, friendly service will be of the utmost importance. Location: Provide an easily accessible location for customer convenience, including walk-by and drive-by traffic. Product/Environment: Offer a variety of high quality foods with domestic
Section 3. International Group.Ekaterina Gonastareva Onegin Luxury Store

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES and international themes, sold at a fair price in a clean, authentic, comfortable environment. Convenience: Our customers will know that they can get what they need at our market for a fair price. This will reduce their need to travel to get desired items or order them online. Situational Analysis This situation analysis starts with a snapshot of current environment in which Onegin Luxury Store will have to perform. After this overview, the more detailed analyses are provided: industry analysis, competitors analysis, company and consumers analysis. Internal Factors Management Strength Weakness Experienced managers team Costs on re-orienting and redue to 10-year past work arranging goals, because of background transforming the company into consumer-oriented one Unique high-quality service Upmarket orientation involves relatively high importance (therefore costs) on achieving consumer loyalty and brand awareness
Offerings
Finance
Stable and high growth of Long pay-back period (3 years) revenues on condition of achieving consumer awareness Distribution through stable and Limited number of markets due growing market of Moscow to target customers concentrated in major cities (Moscow, SaintPetersburg)
Marketing
Manufacturing Vast number of stable timeproved relations with suppliers due to companys retailing background
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Personnel High qualified personnel Extra costs trained on special two-week training courses provided by Fortnum&Mason specialists External Factors on personnel
Opportunities Threats Consumer/Social Upscale market; growing Premium price narrows because overall growth of down the market size households with slightly larger incomes Competitive No substantial market-leading Two major competitors competitors;High costs prevent having their loyal new rivals from entering the customers (Globus market Gourmet Super Siva) Technological Technological breakthroughs allow to increase quality of service facilities automatic parking devices, comfortableto-use food carts, etc. Economic Constant growth of the market Unstable Russian because of an overall tendency economy risk of of incomes growth in Russia economic crisis Regulatory Possible problems with corrupt state organizations Amongst the internal factors, the most favourable are: -experienced management team which have worked in the Kido for fifteen years, knowing all the peculiarities of business in Russia; -vast number of firm trade relations with national and (mostly) foreign food suppliers it allows to use old time-proved contacts in order to organize stable and quality goods supply for Onegin Luxury Store Externally, favourable factors (opportunities) for Onegin Luxury Store are growth of peoples incomes (particularly, the increase of households with an income of more than 2000$ per one family member) and the unsatisfied market

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES outlet of premium-class variety stores. Amongst the unfavourable factors are: (external) Instability of Russian economy (For example, any substantial economic crisis involves the sharp reduction of our customers) Costs on achieving consumer awareness, brand loyalty Industry Analysis Recently the new trend appeared in Russian market the segment of premiumclass variety stores and gourmet boutiques. The main reasons for this tendency are: Overall trend of growing incomes of customers and the increase of number of households with higher incomes (more than $3000 per one family member) Increase of the level of consumers culture more and more customers are willing to pay more for higher-quality service Popularization of healthy lifestyle in Russian society a growing amount of health-aware people Generally, the niche of premium-class variety stores in Russia (Particularly, Saint-Petersburg) could be characterized as few. The industry is at the developing stage, showing neither market-leaders nor unique industry standards each significant competitor introduces its own standards, none of them has achieved substantial level of consumer awareness and brand-loyalty.
Competitor Analysis History of upmarket variety stores in Russia: The first upmarket store appeared in Russia is Kalinka Stokmann as a Soviet-Finnish project in 1989 at Moscow State General Store (, ). Until the year 1997, it was the only major store of premium-class. In 1997, Kalinka Stokmann scaled down its orientation to the quality, but not upmarket
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES and today it cannot be a direct rival to Onegin Luxury Store. After the end of the year 1997, the market of premium-class stores in Russia started to develop the major competitive companies opened from 1997 to 2005 (Azbuka Vkusa, Sedmoy Continent Five Stars, Globus Gourmet and others)
Classification and the most competitive firms at the market Currently at Moscow market operate a number of upmarket food stores that could be classified as: Gourmet Boutiques (Hediard, Fauchon, Globus Gourmet) Premium-class variety stores (Azbuka Vkusa, Kalinka Stokmann, Sed'moy Kontinent 5 Stars) Trials of Strength (Perekrestok at Rublevo-Uspenskoe Highway, Ramstor at Novinsky boulevard) Others (Alye Parusa store, etc.)
Gourmet Boutiques and Premium-class variety stores.
The real rivalry menaces for Onegin Luxury Store are gourmet boutiques and premium-class variety stores. The main differences of gourmet boutiques and premium-class variety stores are: The assortment of a gourmet boutique is smaller than of a premium-class store, although the ratio of luxury and exclusive products of a gourmet boutique is relatively higherSelling space of a premium-class store could be up to twice larger than of a gourmet-boutique Average bill sum of a gourmet boutique could be up to three times larger than of a premium-class variety store

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES 300-500 units 650 2 m ; 350m2 $70 (Estimated)
Assortment of goods Selling Space
Gourmet Boutique Premium-class Variety Store 30-100 units 200-500 units 70-200 m2 300-900m2
Average sum that $100 $30-50 customer pays per one visit (average bill sum) Representatives Globus Gourmet*, Azbuka Vkusa, Fauchon, Hediard Kalinka Stokmann, Sedmoy Kontinent Five Stars *sometimes is classified as premium-class variety store Amongst the above mentioned firms the most competitive are Globus Gourmet and Azbuka Vkusa both having a market-share of 20% approximately.
The inability of Trials of Strength and other premium-like stores to be substantial rivals to Onegin Luxury Store Trials of Strength are the attempt of current variety store chains to enter a higher-income market, building their stores For the upmarket stores one crucial criterion of success is the precise positioning in the market. It is very important for such enterprises to have a brand, uniquely understandable by consumers; such companies must have a face, i.e. brand personality. That is why such stores as Alye Parusa, Ostrov, Yozhik Store (
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES ), Perekrestok at Rublevo-Uspenskoe Highway could not be a real rivalry menace for Luxury Store they do not have a unique and precise marketing strategy, some of them having different formats within one chain of stores. Thus, such stores and chains do not expose a substantial market-share.
Company analysis core customers. The best architectures will be engaged in setting up the main building. Finally, the high society will provide the public with beneficial positioning of O.L.S. (special promotion activities will be used for it) and simultaneously high society will be our core customers. That is why we can predict very fast growth of brand image and revenues, what in our opinion plays an essential role in achieving the lead positions. Consumer Analysis Our product is specific and intended for a very narrow category of people in Saint-Petersburg. So when we generated an idea of the store we had in our mind a person like this: a very successful man in his 30-55 years or his wife, who lives somewhere in prestigious districts of Saint-Petersburg (PrimorskoeHighway or in the center of Saint-Petersburg), who has about two-three expensive cars, private driver, and big country house. Additionally, this man or woman follows all fashion trends, takes care of their health, and does not want to be an ordinary consumer like in Ashan supermarket. This person often takes part in the meetings of high society, may be famous and wants to receive the best quality ever. On the other hand,this can be a not very public person, who does not want to be discussed; we like to call these people snobs. Unfortunately, there is no unique psychological portrait can be here. But our potential customers inevitably have

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES minimum one common thing substantially high level of income (more than $2000 per one family member). Market-product Focus In this chapter marketing and product objectives, which were set for Onegin for the 5 year period, will be described. Additionally, here we would like to introduce target markets for our boutique, points of difference of our products and service and positioning of Onegin . Market-product objectives. The marketing objective is the total and the most efficient using of the potential of brand and simultaneously setting up the basis for getting the maximum possible profit. The following above points will provide you with the information about main objectives, divided into 4 directions: The existing markets. The growth of market will be guaranteed by enlarging the amount of potential customers as a result of the high rate of economic growth of Russian Federation as a whole. It means that more people will have the level of income not less than 2.000$, which potentially makes them our future customers. Also, the volume of product sold is expected to increase due to success of promotional activities, which will be very specific and focussed and which will serve to attract the high-income customers. It is necessary to mention that not many new customers will appear (it can be harmful for the brand), but our future loyal customers will buy more products predominantly in Onegin. Because of points mentioned before, our boutique will have an opportunity to become a nonformal monopolist in the sphere of up-market product boutiques. This will lead to the long-term profitability and building a strong brand. The new markets After five years of existing Onegin boutique in SaintPetersburg, Primorskoe, we are planning to run a new store in Moscow, Barvikha. We find this city very prospective, because it is said to be a cultural capital of
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Russia, so according to this and to marketing research we expect to meet many people fond of best quality products and highest level of service, who are ready to pay much in order to purchase the best. New products. Taking into consideration our past links with many suppliers of food products and very high rates of technology growth, we expect to enlarge our product line with more and more modern products. It means that the quality of our goods will be at the highest level, which makes it possible to establish rather high but reasonable prices for them. Actions of introducing the new products will help with two things: increasing the volume of sales and attracting attention to our store with further strengthening the brand. Overcome rivals. It is very important objective because the market of gastronome boutiques in Moscow nowadays does not have the head, like for example the IBM has in the computer market in USA. So that is why it is very important to make consumers buy only in our store. The promotional activities are to help it. If Onegin will become fashionable, so the success and the high volume of sales is guaranteed.
Target markets. The primary market for Onegin Luxury Store are households with substantially high level of income (more than $2000 per one family member) living mostly in prestigious districts of Moscow. Points of difference. Onegin Luxury Store will introduce to its potential customers the following features, which they could hardly find in any other stores: Product features:

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES 60% of the highest quality product will be imported from Holland, France, England and many others European countries, which are known for their sophisticated tastes in food. These goods will be like wine, cigars, milk, drinks, ingredients for food, candies The necessity of introducing the imported goods appeared after several marketing research exercises, which stated that many Russian people do not like the quality of domestic products. Additionally, our company has many connections with exclusive suppliers from all over the world, which helps to reduce cost and always provide our store with products on time. 20% of products will be made by our head-cooks from Switzerland, Italy, Japan and Russia. These goods are Italian pizza, rolls, traditional Russian food and many other exclusive dishes. 20% of goods will be from domestic producers. It will be the goods for everyday use like fruits, vegetables, some other dishes
Origin of goods in Onegin Luxury Store
Service features The car of every our client will be washed, parked and guarded carefully by our staff. The most important feature is buying goods for the client. For example our customer will sit in Onegin caf, enjoying the time with friends, while our staff will do his shopping for him. The only thing the buyer will have to do is to provide the stuff with the list of necessary goods. Every customer, who has our special card will be able to buy everything on credit. The terms of paying are 1 week. Every customer will have an opportunity to test no more than one sample
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES of product for free, excluding the unique and very expensive ones. Every customer will obtain the quantity discount, depending on amount of goods he/she purchases. Every customer will have an opportunity to ask for extra security or consulting service. Every customer will have a right for free delivery service (limit is 30 km from RAR ()). Many other features like taxi, phone, wireless connection in caf etc. It is guaranteed that no one our customer will waste his time in a queue. If any problems with the quality of the product appear, we guarantee to compensate it with similar product or pay money back. Positioning Every client in our shop will be obligated to open a card on his name (for family or relatives) with initial installment of 100.000 rubles. It is done to restrict the amount of people for positioning the brand as an up-market one. The advertisements could be only seen in very reputable and fashionable magazines like Esquire, GQ and etc. The mass media will be actively used in positioning Onegin as an exclusive, very expensive boutique: not for everybody. Marketing Program The four marketing mix elements of the Onegin Luxury Store are detailed below. Product Strategy. (food, drinks, alcohol, etc.) Products sold by our company are only upmarket products of high quality brought from abroad, especially rare products.
Product quality

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Special brand control. Providing 100% guarantee for all products sold in our shop. Any product can be returned within 2 days providing it has our signature on a package or consumer has the check. When it is our fault, the consumer gets a substitution and a small gift from us (any product at the price not more than 300 hundred rubles). Food can be bought already cooked (in the restaurant).
Special packaging The sign of our shop on each package will inform people that it was bought in our shop. Free, specially-designed bags will also come with our brand icon. (Variety of colors, especially bright, sizes, and shape of bags, material paper) Onegin Luxury Store offers the following products and services: Groceries We will offer high quality groceries from Italy, France, Holland, the Mediterranean, Asia, Europe, Australia, and the United States. Groceries will include items that represent the best-known and desired foods from these areas. Items will include, but will not be limited to: sauces, oils, spices, spreads, peppers, cheese, meats, pasta, rice, canned goods, drinks, chocolates, and hard-to-find desserts and candies. A selection of frozen meals (made in the store) will be available for home cooking, and will include items such as homemade Italian meatballs & sausage, pizza, and "holiday" tamales. Souvenirs Souvenirs will complement the import orientation of the store and include a limited selection of kitchen wares, cookbooks, picnic items, and original sewn items and jewelry. Gift baskets will also be available in the store and over the internet.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Delicatessen Another important feature of Onegin Luxury Store is the availability of 5* restaurant, where any customer can relax and have a dinner. Onegin Luxury Store restaurant will offer unique cuisine with an international flair. The deli will offer a limited menu for breakfast, lunch, and dinner. The rotating menu will feature sandwiches, soups, salads, drinks, and desserts. All menu items will be prepared fresh each morning and displayed for easy pick-up. We will offer picnic lunches and frozen meals as well as cheese, meats, and ethnic deli salads by the pound. The breakfast menu will include items such as quiche, scones, and biscotti, and the lunch/dinner menu will consist of sandwiches, salads, homemade breads, frozen meals, and daily specials. We will serve high quality coffee, tea, juice, and soda from around the world throughout the day. Picnic lunches will be made available to visitors, specially packed to be carried into the numerous national parks and outdoor venues surrounding areas around the stores. A special feature of our store will be booking goods for our customers. Customer can book any product sold in our store and all the work of gathering goods will be done by our employees. Product types available The starting menu will include items such as: Quiche - Made with fresh ingredients and cheese featured in the market Fresh Bread - Crusty Italian, wheat, and pumpernickel Scones/Muffins/Biscotti - International recipes Coffee, Tea, and Juice - From around the world

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Roast Beef - With sharp provolone cheese, red onion, lettuce, & tomato on dark rye bread Corned Beef/Pastrami - With Wisconsin swiss cheese, red onion, shredded red cabbage and Russian dressing on rye bread Turkey - With sharp Wisconsin cheddar cheese, lettuce & tomato on French bread Smoked Turkey - With Havarti cheese, avocado, sprouts, cucumber, lettuce & tomato on multi grain bread The Boonero - Daily Special The Day After Thanksgiving - Turkey, herb stuffing, lettuce & cranberries on a potato bread roll The O'Connor - Turkey, Genoa salami, bacon, sharp Wisconsin cheddar cheese, lettuce & tomato on Italian bread The BLT - Bacon, sharp provolone cheese, lettuce & tomato on Italian bread Veggie Deluxe - Avocado, cucumber, sprouts, lettuce, tomato, red onion & sharp Wisconsin cheddar cheese served on multi grain bread Italian Veggie Deluxe - Marinated Italian vegetables, artichoke hearts, olives, red onion, & fresh mozzarella cheese on Italian bread Tomato with Fresh Mozzarella & Basil - On focaccia bread Bruschetta - Topped with ripe tomatoes, fresh basil, olives, & grated Italian cheese) Fresh Gazpacho - Ripe tomatoes, sweet white onions, jicama, cilantro, fresh jalapenos, and lime juice chopped and mixed for a truly refreshing taste. Eggplant Chickpea Pesto - A delicious combination of baba ganoush and hummus served with pita wedges Seven Layer Bean Dip - Refried black beans, tomatoes, corn, onion, mixed fresh, cilantro, and authentic mexican cheese. Served with sour cream, your
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES choice of hot sauce, and corn chips for dipping Organic Soups - Made fresh Chili - Homemade using only the best ingredients Chips - A wide variety of speciality flavors Giardiniera is always available as a side dish to add a little spice to your sandwich. Salads: Caesar Salad - Homemade dressing with bacon, croutons, and imported parmesan cheese. Greek Salad - Light airy and zesty Rotelo pasta tossed with tomatoes, spinach, cucumbers, red onion, feta cheese, and Greek olives. Italian Salad - Ripe tomatoes, cucumbers, fresh basil, and balsamic vinegar mixed to perfection. Tomato, Basil, & Fresh Mozzarella Salad - Tossed in a light olive oil and balsamic vinegar dressing. Fresh Herb Salad - Spring greens mixed with dill, cilantro, basil and Italian parsley for a delightfully fresh taste. Pasta Salad of the Day - Always fresh and tasty.
Drinks/Ice: Juice - High quality flavors from around the world Soft Drinks - All natural Coffee - International & organic choices Tea - High quality flavors from around the world Frozen Dinners: Onegin Luxury Store will carry a variety of hard-to-find frozen food items. Many of our frozen meals will be prepared at Onegin Luxury Store and

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES follow recipes that highlight items we sell in the grocery and deli. Onegin Luxury Pizza (Brand unique) Meatballs & Sausage with Marinara Sauce Stuffed Shells Manicotti Baked Ziti Chicken Parmesan Italian Beef Holiday Tamales Ready to Bake Bagles Ice Cream/Deserts Price strategy General pricing policy We provide consumers with high quality upmarket goods, so prices are at premium-high level. We propose the best products only of well known brands. Every kopek spent in our shop would be paid for quality and variety of goods this is our policy. Price of our products is much higher (by about 2 times for everyday products(such as bread) and by 3 or more times on exotic products) than average prices in the market as rely on loyalty of customers and their snob appeal. Price approach. Selecting an approximate price level, the Prestige pricing approach will be used. It involves setting a high price so that status-conscious consumers will be attracted to the products and buy it. Promotion Strategy First attempts
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES For the opening of the market there will be made a great party. Only guests with flyers will be allowed. Flyers will be sent to representatives of the elite, especially politics and celebrities. To attract them special gifts and unique performance will be held.
Other advertising campaigns: -ads through TV(Ort channel, NTV, Russia, fashion TV) -sponsorship of fashion shows -permission of celebrities to advertise our shop -giant bill-boards on places of interest(center of Moscow, Rublevo-Uspenskoe Highway) -ads in magazines (Vogue, GQ, Esquire, Mens Health, Playboy) -by means of air-balloons. A huge image of our company and slogan will be on the balloon. The balloon will travel especially above center of Saint-Petersburg and regions around market.
Place(distribution) strategy. suppliers According to our previous specification in supplying goods to markets, such as ours, we will be suppliers for ourselves. This will allow us to save a lot of money.The saved money will be put into development of shop.
The stores would be opened in Saint-Petersburg: Onegin Luxury Store Primorskoe Place: Saint-Petersburg Oblast; Sales Area (Shopping Space + Restaurant Area): 650m2

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Onegin Luxury Store Nevskyi (will opened after one year on condition of the success of the plan) Place: Saint-Petersburg, Nevskyi Prospekt; Sales Area (Shopping Space + Restaurant Area): 350m2
Financial projections Here are the financial projections for Onegin Luxury Store as follows: One Sales Unit: we assume one visit of a customer to the shop will generate as estimated average bill of $70 (1900 rur) The estimated pay-back period of Onegin Luxury Store is 3 years. The complex analysis shows that achieving a break-even number of customers per day (Sales) will be achieved in the second year of operation (2012). Substantial sales will be achieved at the end of 2013 we will enjoy approximately 40 customers a day at one store enabling us to gain substantial profit (estimated 9,74 mln rur) Organization Structure Four chief executive officers report to the president. The next level consists of full-time employees; fourthly, comes the level of personnel who have passed the special 3-weeks training course. It is necessary to state that that top marketing manager (James Brown, Jr.) was headhunted from Procte&Gamble Europe, and the finance and audit director from Sberbank RF . As Onegin Luxury Store is subsidiary of BKS, some management positions would be switched from the core company (BKS) to the subsidiary (Onegin Luxury Store).
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ELENA PLAKHOVA SHTOKMAN DEVELOPMENT AG

Introduction This paper is devoted to the corporate strategy of Shtokman Development AG which is an international company involved in gas, gas
condensate and liquid natural gas production, created in order to develop the Shtokman gas field. The first part of the paper illustrates the company profile and the details of the project the company will be implementing, business
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environment in which it operates and the main
competitors the company has to face. Further in the paper, the SWOT analysis for the company is being conducted where the main strengths and weaknesses of Shtokman Development AG are being highlighted, as well as the potential opportunities and factors that threaten the financial stability of the company. Moreover, the main opportunities and strategies for the following years are being analyzed and atthe end of the paper the corresponding conclusions about the appropriate corporate strategy for the subsequent years are being made. Company profile Shtokman Development AG is a joint venture by three major world companies: OAO Gazprom (Russia), Total S.A. (France), and Statoil ASA (Norway). The company was founded to implement the First Phase of the Shtokman gas condensate field located in the Russian sector of the Barents Sea. The shares in the Company are currently held by the following shareholders:
Section 3. International Group.Elena Plakhova Shtokman Development AG

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OAO Gazprom which holds 51% of the share capital of the Company; Total Shtokman B.V. which holds 25% of the share capital of the Company; Statoil Holding Netherlands B.V. which holds 24% of the share capital of the Company. Gazprom is one of the worlds largest energy companies. Its major business lines are geological exploration, production, transportation, storage, processing and marketing of hydrocarbons as well as generation and marketing of heat and electric power. Gazproms share in the global and Russian gas production is nearly 20% and nearly 85%, respectively. It exports gas to 32 countries within and beyond the FSU, and continues reinforcing its positions on conventional international markets. Gazprom Neft Shelf (a 100 % subsidiary of Gazprom) holds a license to explore and produce gas and condensate in the Shtokman Field and is a sole customer for the design and construction of the field infrastructure, including a production complex, a pipeline network and a Liquid Natural Gas plant. The second shareholder is the French company Total. Its activities in more than 130 countries cover the entire operation cycle from production to sales of refined products to end users. Total is also involved in the transportation and storage of natural gas, as well as in electricity generation at combined-cycle gas Section 3. International Group. Elena Plakhova Shtokman Development AG
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES fired power plants and use of renewable energy sources. Total is active in the marketing and sales of natural gas, electricity, liquid natural gas and coal. As already mentioned above, the third shareholder of Shtokman Development AG is Statoil ASA. The company is the leading operator on the Norwegian continental shelf (NCS) and has operations in 40 countries. After 30 years of developing and producing oil and gas on the NCS, Statoil holds competence and experience especially applicable for deep waters in harsh conditions like the Arctic. Shtokman Development AG was founded on February 21, 2008 for the design, financing, construction, and operation of Phase 1 facilities for the Shtokman gas condensate field that involves offshore installations, pipeline to shore and the onshore processing plants both for liquid natural gas (LNG) and piped gas. The company will own the Phase 1 infrastructure for 25 years after the field is commissioned. Gas produced under the project will be marketed by OAO Gazprom. The company is headquartered in Zug, Switzerland, but also has offices opened in Paris, Moscow, Murmansk, and the village of Teriberka in Murmansk Oblast. As the Shtokman project operating company, Shtokman Development AG will bear all the financial and engineering risks associated with the natural gas recovery and LNG production. Business environment and competition In order to identify the environment in which the company operates it is important to describe the whole project in more detail. The Shtokman field was identified in 1981 based on offshore geophysical surveys performed by Sevmorneftegeofizika specialists on board the research vessel Professor Shtokman, which gave its name to the field. Geological study of the field was launched at that time too. In 1985, the structure was mature enough for evaluation

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES through drilling. In 1988 the first exploration well was drilled with design depth 4500 meters. That drilling was completed in July 27, 1988 at 3153 meters. Well testing resulted in the discovery of two formations of free gas and gas condensate, and the State reserves balance as of 01.01.1989 was added by more than 2.4 trillion cubic meters of free gas of industrial grades. It is located in the central part of the shelf zone in the Russian sector of the Barents Sea. Currently the project development program encompasses the entire cycle of field development, from research to processing and transportation, and consists of three phases. The First Phase of field development will provide an annual production of 23.7 billion cu.m. of natural gas per year.
Known reserves of natural gas in the SGCF are today among the largest in the world. The geological reserves of the field are 3.9 trillion cubic meters of gas and around 56 million tonnes of gas condensate. The detailed characteristics of the field are of significant importance because they determine the future development strategy of the company. Basic field characteristics are the following: Field discovered in 1988
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Located 550 km from shore Initial geological reserves estimated at 3.9 trillion cu.m. of gas and 56 million tonnes of gas condensate Sea depth is 340 m Wave height is up to 27 m Annual temperature range from 50C to +33C Presence of icebergs weighing up to 4 million tones 1 Since its incorporation in February 2008, Shtokman Development AG has completed a broad scope of preparatory works for Phase 1 development of the Shtokman gas and condensate field. An integrated base project has been developed for the entire value chain from drilling through the transfer to the license holder of the final product (pipeline gas, LNG and condensate) ready for delivery to the target markets. Currently the detailed engineering surveys and studies are complete, design engineering documentation is being developed according to both international and Russian standards. The project can be divided into two zones offshore and onshore. The basic offshore facilities will include: Subsea production system System of flowlines and flexible risers to feed the gas condensate wellstream to the production vessel Self-propelled floating production unit (FPU) that can be rapidly uncoupled and moved out of the path of icebergs Trunk pipeline for LNG production at the onshore facilities and pipeline gas deliveries The basic onshore facilities will include the following:
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Product intake facilities Treatment plant for export pipeline gas Liquid natural gas plant with capacity of 7.5 million tonnes per year Liquid natural gas storage tanks Marine terminal for condensate and liquid natural gas export Power station, housing village, support vessels and tugs, heliport, etc. It has been officially confirmed that the project is technically feasible and provides a high reliability and operational readiness. The target sales markets for Shtokman Development AG are Europe for natural gas and North America for liquid natural gas. The project is unique and is the first of its type in Russia. However, in order to identify the main competitors it is necessary to observe the sales markets of Shtokman Development AG and to point out other companies that supply natural or liquid natural gas to the same target areas. One of the major competitors for Shtokman Development AG is Norway that has several leading companies operating in the same sector, but which have competitive advantages, such as the valuable experience of working on shelf and creation of unique platforms on shelf, application of high technologies and the existence of infrastructure that can be rapidly developed while in Russia the infrastructure near Murmansk is not developed enough not to be of great concern for the company. Furthermore, Norway is increasing its supplies of natural gas to Europe and currently its market share is almost 20%. Norway is the second largest gas supplier to Europe after Russia. Also according to several market analysts, in the long term Norway may become the leading supplier of natural gas, while Russia is also willing to maintain and even to increase its market share.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The other market challenge that Shtokman Development AG has to face is the current decrease of natural gas prices. The quick drop in international prices ofnatural gas has become a serious challenge for both Norway and Russia. Gazprom has lost a serious part of its share in the European gas market to alternative suppliers. According to a survey from the Rossiiskaya Gazeta, the company in 2009 sold less gas to all of its client countries with the exception of Poland and the UK. Furthermore, pressure is now increasing on export monopolist Gazprom to change delivery agreements. The Russian gas is more expensive than competing gas from Norway. According to Rossiiskaya Gazeta, Gazprom fully understands the graveness of the situation and is intensively looking for alternative and mutually favorable alternatives. In addition, Gazprom is stepping up its focus on alternative markets. The countries in Southeast Asia are increasingly seen as potential buyers of the Russian gas and the companys Eastern Programme outlines major deliveries to China. The lower prices and the rapid shifts in the gas market might also influence both Norways and Russias plans for new field development. As Shtokman Developments major shareholder is Gazprom, it falls under the category of projects with uncertain future. As already stated above, the project has unprecedented technological challenges and includes huge investments. With the current uncertainties in the gas market, the project could face new postponements. The Final Investment Decision for the Startup Facilities and the First Phase of the Development will be made in March 2011. In accordance with Gazproms gas balance, the first pipeline gas will be delivered in 2016. Meanwhile, the first liquid natural gas is expected to be launched in 2017.

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SWOT analysis 1. Opportunities New era in the Geographical Competitiveness development of position the Arctic shelf Conflict of Implementation Financial risks from interests is of innovative consortium are lower possible technologies Organizational Creation of a International structure new LT experience lobbying is resource base possible Experience in gas sector Shareholders possess new technologies Existing sales markets Diversification of export products and routs for exporting products Strengths The main strengths of the Shtokman Development AG arise from the fact that the company is a consortium of three leading energy companies Gazprom, Statoil and Total. As a result, the company has a strong financial basis and a big field for further investments. Moreover, the shareholders of the company have their own developments and technologies that can be further implemented in Shtokman Development Company. Total, Gazprom and Statoil have huge international experience in operating in oil and gas sector which will be essential for the implementation of this project. They also have their reliable sales market, suppliers New projects Strengths Weaknesses Threats The project is unique Costs high are too
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New risks may arise Environmentally sensitive ecosystem
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5. 6. 7.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES and clients which arealso important. Furthermore, the Company diversifies its routes for exporting hydrocarbon products to global markets and diversifies the products themselves as it will export not only natural gas, but liquid natural gas as well. Weaknesses The Shtokman production field is located in the central part of the shelf zone in the Russian sector of the Barents Sea where the climate is rather severe and the annual temperature ranges from 50 C to +33 C, the wave height in the production area is up to 27 m and the sea depth is 320-340 meters. All these factors result in higher costs of construction. Moreover, the weaknesses of Shtokman Development AG result from the adverse sides of a consortium. These are the possibilities of conflicts of interests due to the different cultures and different traditional ways of business organization. This is why it is possible that shareholders will be lobbying their organizational structures in the company and also they may be lobbying their own people on major positions in the company. Opportunities The project is strategically important as it may open the new era in industrial development of the Arctic shelf. Also, the company may be further implementing new technologies such as the creation of a production platform based on a floating production unit (FPU) type vessel. This type of vessel can be rapidly uncoupled and moved in the event of impending collision with an iceberg, can maneuver in ice, and can halt production, move out of the path of the oncoming ice, then return, hook up again, and continue production. It will be the first time that this technology has ever been used in Russia. The operational effectiveness of the company will result in the creation of a new long-term resource base. Moreover, in the future the company may perform other similar projects as it possesses the

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES know-how technologies, the established team and the experience required for extraction and production of natural and liquid natural gas. Threats As it has already been mentioned before, Shtokman field is one of the largest natural gas fields in the world. Located on the shelf of the Barents Sea almost 600 kilometers from land at a depth of 340 meters, it is unique in terms of scale and complexity of development. No project of this level has ever been undertaken in Russia before. Being a big opportunity, it is also a major threat for the company. As the project is unique, there are practically no benchmarks and too many innovations to be implemented. As the unknown and not-a-typical project is being implemented, many unpredictable dangerous factors and risks may occur that may be hard to deal with. For example, the construction of a production platform based on a floating production unit (FPU) type vessel may appear to be far more complicated that it seemed to. Consequently, the costs of the project may increase beyond the predicted level. This is what has actually happened. Currently new investments are required to meet the quality standards of the production field and to undertakefurther research. This is why in March 2011, the Board of Directors will make the final investment decision about the future of Shtokman Development AG. Finally, as for any company operating in oil and gas sector, there are many environmental issues that are to be managed which leads to further costs. However, due to the scale and complexity of the Shtokman project, the company has made enhanced commitments to conserve the environment and minimize any potential negative impact on the vulnerable and unique ecosystem of the Barents Sea and its coastal lands. Two assessments of the impact by the company's operations were conducted during 2007-2010: An environmental impact assessment (OVOS) according to Russian standards
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES An environmental, social, and health impact assessment (ESHIA) according to international standards. The company regularly holds public hearings and consultations with regional environmental and public organizations. The meetings are attended by major stakeholders of the project, including environmental organizations in Murmansk Oblast and members of the indigenous minorities of the North. Moreover, on September 24, Shtokman Development AG and the World Wildlife Fund (WWF) signed an agreement of intent that provides for bilateral consultations, working meetings, and exchange of information on the implementation of environmental protection measures and projects. According to Igor Chesten, Director of WWF-Russia, it was the first time that this sort of agreement had ever been signed in Russia at such an early stage of project implementation. Further development opportunities Shtokman Development AG has many opportunities for future effective operation. The project is also significant for the whole country. It will set up a benchmark for future Arctic shelf development. Shtokman will contribute to longterm energy security on the local, European and international markets supplying sizable portion of gas to meet growing demand for energy. In times of market competition, it is really important. Diversification of the export products and export routes to the global market will make supplies more flexible and reliable. The gas produced under the Shtokman project has been identified as the resource base for Nord Stream pipeline deliveries to Western Europe and the production of Russian LNG that will subsequently be sold on international markets. Moreover, the Arctic region may contain over a quarter of still undiscovered world hydrocarbons reserves. Shtokman project starts the age of industrial Arctic exploration.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES With the geological reserves estimated at 3.9 trillion cubic meters of gas and around 56 million tones of gas condensate Shtokman gas and condensate field is inside top-10 gas fields worldwide. It equals to 1.3 years worlds gas consumption today and will ensure long-term gas supplies to the targeted markets. Additionally, it will bridge up knowledge and expertise transfer in offshore development to the Russian industry and will maintain their production capacity during the worldwide economic recession. Shtokman Development AGs other objective should be to extend the role of Russian companies in the project and to give invaluable experience of the offshore development through the consortiums with leading foreign oil and gas companies. Participation of Russian companies in the First Phase should become the launching pad for their participation in subsequent phases. Russian involvement in the Shtokman project means involvement of Russian R&D institutes, industrial enterprises and contactors, use of Russian materials, equipment and spare parts, utilizations of Russian human resources. It also means that goods and services are manufactured on the territory of the Russian Federation. In accordance with Partnership Agreement of Shtokman Development AG, shareholders during contractor selection preference shall be given to Russian companies, provided they demonstrate a competitiveness, sufficient experience of performing similar works, financial stability and competitive prices, quality and schedule for the required works satisfying overall requirements of Shtokman Development AG and the project in general. Moreover, for efficient development of the mineral resources of the Russian continental shelf it is reasonable to rely on international experience as well as the leading Russian technologies and know-how. As it has already been stated before, in the core of the project lies international partnership between the largest Russian
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES gas concern JSC Gazprom and two world leaders in the oil and gas industry Total and Statoil. So it can be concluded that the key strategic factors that lead to success of the company are the following: International cooperation, Experience and Innovations. Involving the Russian companies into the project as subcontractors will enablelearning and obtaining of experience of international cooperation and best oil and gas business practices. They willreceive unique expertise and master advanced methods. Moreover, international cooperation will create conditions for the development of new skills, transfer and implementation of modern technologies and know-how, it will increase competitiveness of Russian enterprises for participation in international tenders and work on the international arena. It should be noted that with the development of the Arctic oil and gas continental shelf of the Barents Sea the economy of the North-Western region of Russia will be boosted, and these are specifically the Murmansk and Arkhangelsk regions in the first instance. This will affect the adjoining sectors of economy, allow the use of local human resources, local supply chain and transport infrastructure. The Shtokman project will give opportunities for revival and development of local enterprises and whole industries and create conditions for transfer of cutting edge technologies to Russia. Taking into account all the above-mentioned peculiarities of Shtokman project, the strategy of the company for the subsequent years should cover the following aspects: More specialists should be hired in the opened branches in Moscow, Murmansk and Teriberka in Murmansk region.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Long-term cooperation with the Russian industry should be built and developed for the further phases of the project. The core elements should be the use of expertise, scientific achievements and overall potential of the Russian Federation in the oil and gas industry, the development of local companies of the North-Western region of Russia, creation of incentives for international cooperation, creation of preconditions for transfer of technologies and know-how, in particular in the area of subsea technologies for continental shelf projects and the LNG technology. In order to attract Russian companies as services suppliers, Shtokman Development AG should conducts various information events and initiatives. These are to be held within large oil and gas assemblies and fora, industrial exhibitions and also events hosted by oil and gas supplier associations. Whenever necessary, Shtokman Development AG should attract external consultants. This is due to the fact that the schedule for current tasks is rather tight and most of the emerging issues require specialized experience in the particular narrow area. As it has turned out that for the project implementation the company needs more investment, the financial plan for the future years should be adopted and approved. The financial plan should contain several scenarios of the project development that take into account all the possible risks and losses resulting from these risks. Conclusion To conclude, Shtokman Development AG is a company that implements a project of strategic importance. The corporate strategy of the company should involve international cooperation, experience, innovations and a thoroughly-
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES planned scenario analysis of the companys financial plan for the subsequent years that should be based on the amount of investments that will be distributed within the project. That is of particular importance because currently the company experiences some financial difficulties and requires additional investments from its shareholders. Moreover, Shtokman Development AG should assist and support the development of international cooperation within the project framework and the establishment of joint ventures and consortiums between Russian and international companies. The success of the company in the future will determine the development and exploration of the whole Arctic shelf that will bring benefitsnot only to its shareholders, but also to the whole Russian Federation. References 1. Shtokman Project Presentation 1st June 2010 World Trade Center 2. Organizational regulations of Shtokman Development AG 3. Shtokman review 4. www.shtokman.ru 5. www.gazprom.com 6. www.energybulletin.net 7. www.bbc.co.uk 8. www.barentsobserver.com 9. www.worldenergy.org 10.www.total.com 11.www.statoil.com

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EKATERINA VASHURINA, IRINA KOROLEVA STARBUCKS

Starbucks is the premier roaster and retailer of specialty coffee in the world. Starbucks Corporation was formed in 1985 and its common stock trades on the NASDAQ Global Select Market (NASDAQ) under the symbol SBUX. Starbucks (together with its
subsidiaries, Starbucks or the Company) purchases and roasts high-quality whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of complementary food items, a selection of premium teas, EKATERINA VASHURINA and beverage-related accessories and equipment, primarily through Companyoperated retail stores. Starbucks also sells coffee and tea products and licenses its trademark through other channels such as licensed retail stores and, through certain of its licensees and equity investees, Starbucks produces and sells a variety of ready-to-drink beverages. All channels outside the Company-operated retail stores are collectively known as specialty operations. Starbucks has three reportable operating
segments, and each segment provided the indicated percentage of total net revenues for fiscal year ended September 27, 2009 (fiscal 2009): United States (US) (73%), International (19%) and Global Consumer Products Group (CPG) (8%). In the fourth fiscal quarter of 2009, the Company changed the composition of its reportable segments. The US
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foodservice business, which was previously reported
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES in the US segment, is now reported in the CPG segment, as a result of internal management realignments within the US and CPG businesses. Segment information for all prior periods presented has been revised to reflect this change. The US and International segments both include Company-operated retail stores and certain components of specialty operations. Specialty operations within the US include licensed retail stores and other initiatives related to the Companys core business. International specialty operations primarily consist of retail store licensing operations in nearly 40 countries and foodservice accounts in Canada and the United Kingdom (UK). The International segments largest markets, based on number of Company-operated and licensed retail stores, are Canada, Japan and the UK. The CPG segment includes packaged coffee and tea, and other branded products sold worldwide through channels such as grocery stores, warehouse clubs and convenience stores, and US foodservice accounts. CPG operates a significant portion of its business through licensing arrangements and joint ventures with large consumer products business partners. This operating model leverages the business partners existing infrastructures and as a result, the CPG segment reflects relatively lower revenues, a modest cost structure, and a resulting higher operating margin, compared to the Companys other two reporting segments, which consist primarily of retail stores. Fiscal 2009 was a challenging year for Starbucks. The Company was confronted with extraordinary economic and operating challenges in addition to facing an increasingly competitive landscape. Although the global economy has shown some signs of improvement recently, management recognizes the difficult economic situation that many consumers are still facing and does not expect that to significantly change over the course of fiscal 2010. This challenging economic environment has strained consumer discretionary spending in the US and internationally, which in turn has impacted Company revenues, comparable store
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES sales, operating income and operating margins. Starbucks responded to this difficult environment with a more disciplined focus on operations and the introduction of initiatives to permanently improve the Companys cost structure. The result is an underlying business model that is less reliant on high revenue growth to drive profitability, and that still preserves the fundamental strengths and values of the Starbucks brand. The primary initiatives in this strategy include rationalizing the global Company- operated store portfolio, right-sizing the nonretail support organization, and reducing the Companys cost structure, while renewing the focus on service excellence in the stores and delivering relevant innovation. The following graph depicts the Companys total return to shareholders from October 3, 2004 through September 27, 2009, relative to the performance of the Standard & Poors 500 Index, the NASDAQ Composite Index, and the Standard & Poors 500 Consumer Discretionary Sector, a peer group that includes Starbucks. All indices shown in the graph have been reset to a base of 100 as of October 3, 2004, and assume an investment of $100 on that date and the reinvestment of dividends paid since that date. Starbucks has never paid a dividend on its common stock. The stock price performance shown in the graph is not necessarily indicative of future price performance.
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Financial Highlights Consolidated operating income was $562 million for fiscal 2009 compared to $504 million in fiscal 2008, and operating margin improved to 5.7% compared to 4.9% in fiscal 2008. Cost reduction initiatives and related operational efficiency efforts contributed significantly to the margin improvement, offset in part by higher restructuring charges incurred in fiscal 2009 compared to fiscal 2008 as Starbucks continued its work to rationalize its global store portfolio and support organization.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES EPS for fiscal 2009 was $0.52, compared to EPS of $0.43 reportedin fiscal 2008.Restructuring chargesimpacted EPS by approximately $0.28 per share in fiscal 2009 and restructuring and other transformation costs impacted EPS by approximately $0.28 in fiscal 2008. Cash flow from operations was $1.4 billion in fiscal 2009 compared to $1.3 billion in fiscal 2008, while capital expenditures declined to $446 million in fiscal 2009 from $985 million in fiscal 2008. Available operating cash flow during fiscal 2009 was primarily used to reduce short-term borrowings to a zero balance in fiscal 2009, down from $713 million at the beginning of the fiscal year. The Company realized approximately $580 million in reductions to its cost structure in fiscal 2009, with the initiatives focused on store closures, headcount reductions, in-store efficiencies and supply chain improvements.
Company-operated retail revenues decreased from fiscal 2008, primarily attributable to a 6% decline in comparable store sales, comprised of a 4% decline Section 3. International Group. Ekaterina Vashurina, Irina Koroleva Starbucks
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES in transactions and a 2% decline in the average value per transaction. Foreign currency translation also contributed to the decline with the effects of a stronger US dollar relative to the British pound and Canadian dollar. The weakness in consolidated comparable-store sales was driven by the US segment, with a comparable-store sales decline of 6% for the year. The International segment experienced a 2% decline in comparable-store sales. The Company derived 16% of total net revenues from channels outside the Company-operated retail stores, collectively known as specialty operations. The decrease in Foodservice and other revenue was primarily due to the softness in the hospitality industry. Cost of sales including occupancy costs decreased as a percentage of revenues primarily due to the implementation of in-store operational efficiencies designed to reduce product waste, and due to lower dairy costs in the US, partially offset by higher coffee costs. Store operating expenses as a percentage of Company-operated retail revenues decreased primarily due to reduced headcount and spending in the regional support organization as a result of Starbucks restructuring efforts, and the effect of initiatives to improve store labor efficiencies. Restructuring charges include lease exit and related costs associated with the actions to rationalize the Companys global store portfolio and reduce the global cost structure. Operating margin expansion was primarily due to the improved labor efficiency and reduced product waste in Company-operated stores, partially offset by increased restructuring charges. Starbucks actions to rationalize its global store portfolio have included the planned closure of nearly 1,000 Company-operated stores globally. At the end of fiscal 2009, nearly all of the approximately 800 US Company- operated stores, 61 stores in Australia and 41 Company-operated stores in other International markets

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES had been closed. The remaining International store closures are expected to be completed by the end of fiscal 2010. Initiatives targeting reductions in the Companys cost structure in fiscal 2009 proceeded as planned, with full-year costs of $580 million removed from the Companys cost structure. These targeted cost reductions and associated operational efficiency efforts, along with a more profitable Company-operated store base, have moved Starbucks toward a more sustainable business model, while preserving the fundamental strengths and values of the brand. The operational efficiency efforts are primarily focused on store level execution and include improved staffing models and better management of waste in coffee, dairy and food. Starbucks actions to improve the customer experience have resulted in a more focused effort toward in-store offerings, and simplifying the demands on store partners (employees), while concurrently raising already-high standards for beverage and food offerings, customer service and the overall in-store experience. The effects of these efforts have already been seen in the Companys improved customer satisfaction scores. Starbucks has a renewed focus on relevant product innovation and the disciplined expansion and leveraging of its existing products and sales channels. For example, Starbucks VIATM Ready Brew coffee was launched in fiscal2009 and is designed to capture a significant share of both the $21 billion global instant coffee category and the single-serve market. The Company intends to drive sales within the retail store base and CPG channels, both in the US and internationally. The Company continues to maintain a solid financial foundation, with no short term debt outstanding at the end of fiscal 2009 and with cash and liquid investments totaling more than $650 million. This solid financial position and continued strong cash flow generation have provided Starbucks with the financial
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES flexibility to implement its restructuring efforts as well as make ongoing investments in its core business. The Companys retail goal is to become the leading retailer and brand of coffee in each of its target markets by selling the finest quality coffee and related products, and by providing each customer a unique Starbucks Experience. The Starbucks Experience is built upon superior customer service as well as clean and well-maintained Company-operated retail stores that reflect the personalities of the communities in which they operate, thereby building a high degree of customer loyalty. Starbucks disciplined strategy for expanding its global retail business is to increase its market share by selectively opening additional stores in existing markets, opening stores in new markets, and increasing sales in existing stores, to support its long term strategic objectives. Store growth in specific existing markets will vary due to many factors, including the maturity of the market. Starbucks financial condition and results of operations are sensitive to, and may be adversely affected by, a number of factors, many of which are largely outside the Companys control. The Companys operating results have been in the past and will continue to be subject to a number of factors, many of which are largely outside the Companys control. Any one or more of the factors set forth below could adversely impact Starbucks business, financial condition and/or results of operations: lower customer traffic or average value per transaction, which negatively impacts comparable store sales,net revenues, operating income, operating margins and earnings per share, due to: the impact of initiatives by competitors and increased competition generally;

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES customers trading down to lower priced products within Starbucks, and/or shifting to competitors with lower priced products; lack of customer acceptance of new products or price increases necessary to cover costs of new products and/or higher input costs; unfavorable general economic conditions in the markets in which Starbucks operates that adversely affect consumer spending; declines in general consumer demand for specialty coffee products; or adverse impacts resulting from negative publicity regarding the Companys business practices or the health effects of consuming its products; cost increases that are either wholly or partially beyond the Companys control, such as: commodity costs for commodities that can only be partially hedged, such as fluid milk, and to a lesserextent, high quality arabica coffee (See also the discussion under Product Supply in Item 1); labor costs such as increased health care costs, general market wage levels and workers compensation insurance costs; litigation against Starbucks, particularly class action litigation; construction costs associated with new store openings; or information technology costs and other logistical resources necessary to maintain and support the global growth of the Companys business; delays in store openings for reasons beyond the Companys control, or a lack of desirable real estate locations available for lease at reasonable rates, either of which could keep the Company from meeting annual store opening targets and, in turn, negatively impact net revenues, operating income and earnings per share; any material interruption in the Companys supply chain beyond its control, such as material interruption of roasted coffee supply due to the casualty loss of any of the Companys roasting plants or the failures of third-party suppliers, or interruptions in service by common carriers that ship goods within the
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Companys distribution channels, or trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions; and the impact on Starbucks business of factors such as labor discord, war, terrorism (including incidents targeting Starbucks), political instability in certain markets and natural disasters. The Company may not be successful in implementing important strategic initiatives, which may have a material adverse impact on its business and financial results. There is no assurance that the Company will be able to implement important strategic initiatives in accordance with its expectations, which may result in a material adverse impact on the Companys business and financial results. These strategic initiatives are designed to drive long-term shareholder value and improve Starbucks results of operations, and include: ongoing initiatives to improve the current state of the business by refocusing on the customer experience in the stores, new products and store design elements, and new training and tools for the Companys store partners to help them give customers a superior experience; balancing disciplined global store growth while meeting target store-level unit economics in a given market; executing a multi-channel advertising and marketing campaign to effectively communicate the Companys message directly to Starbucks consumers and partners; and focusing on relevant innovation and profitable growth platforms, such as the recent introduction of Starbucks soluble coffee, VIA. Economic conditions in the US and certain International markets could adversely affect the Companys business and financial results.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES As a retailer that is dependent upon consumer discretionary spending, the Companys results of operations are sensitive to changes in macro-economic conditions. Starbucks customers may have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies, reduced access to credit and falling home prices. Any resulting decreases in customer traffic or average value per transaction will negatively impact the Companys financial performance as reduced revenues result in sales de-leveraging which creates downward pressure on margins. There is also a risk that if negative economic conditions persist for a long period of time, consumers may make long-lasting changes to their discretionary purchasing behavior, including less frequent discretionary purchases on a more permanent basis. Failure to meet market expectations for Starbucks financial performance will likely adversely affect the market price and volatility of Starbucks stock. The Companys failure to meet market expectations going forward, particularly with respect to operating margins, earnings per share, comparable store sales, and net revenues, will likely result in a decline and/or increased volatility in the market price of Starbucks stock. Starbucks is highly dependent on the financial performance of its US operating segment. The Companys financial performance is highly dependent on its US operating segment, which comprised approximately three-quarters of consolidated total net revenues in fiscal 2009. The Company continued to experience negative traffic in its US stores in fiscal 2009, which adversely affected the operating results of the US segment and the Company as a whole. Although the US segments operating results improved in fiscal 2009 compared to fiscal 2008 due to the Companys restructuring efforts, if improvements in its financial performance do
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES not continue, the Companys business and financial results will continue to be adversely affected. Starbucks is increasingly dependent on the success of its International operating segment in order to achieve its growth targets. The Companys future growth increasingly depends on the growth and sustained profitability of its International operating segment. Some or all of the Companys International market business units (MBUs), which Starbucks generally defines by the countries or regions in which they operate, may not be successful in their operations or in achieving expected growth, which ultimately requires achieving consistent, stable net revenues and earnings. The performance of the International operating segment may be adversely affected by economic downturns in one or more of the Companys large MBUs. Additionally, some factors that will be critical to the success of International MBUs are different than those affecting the Companys US stores and licensees. Tastes naturally vary by region, and consumers in new international markets into which Starbucks and its licensees expand may not embrace Starbucks products to the same extent as consumers in the Companys existing markets. Occupancy costs and store operating expenses are also sometimes higher internationally than in the US due to higher rents for prime store locations or costs of compliance with country-specific regulatory requirements. Because many of the Companys International operations are in an early phase of development, operating expenses as a percentage of related revenues are often higher compared to US operations. The Companys International operations are also subject to additional inherent risks of conducting business abroad, such as: foreign currency exchange rate fluctuations; changes or uncertainties in economic, legal, regulatory, social and political conditions in the Companys markets;

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES interpretation and application of laws and regulations; restrictive actions of foreign or US governmental authorities affecting trade and foreign investment, including protective measures such as export and customs duties and tariffs and restrictions on the level of foreign ownership; import or other business licensing requirements; the enforceability of intellectual property and contract rights; limitations on the repatriation of funds and foreign currency exchange restrictions; in developing economies, the growth rate in the portion of the population achieving targeted levels of disposable income may not be as fast as the Company forecasts; difficulty in staffing, developing and managing foreign operations, including ensuring the consistency of product quality and service, due to distance, language and cultural differences; and local laws that make it more expensive and complex to negotiate with, retain or terminate employees. Moreover, many of the foregoing risks are particularly acute in developing countries, which are important to the Companys long-term growth prospects. Starbucks International operating segment is highly dependent on the financial performance of its Canada, Japan and UK market. Starbucks Canada, Japan and UK markets account for a significant portion of the net revenues and profit contribution of the Companys International operating segment. Any significant decline in the financial performance of one of these key markets may have a material adverse impact on the results of operations of the entire International operating segment, if not partially or fully offset by positive financial performance from the other two major markets. Starbucks faces intense competition in the specialty coffee market, which could lead to reduced profitability.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES A description of the general competitive conditions in which Starbucks operates appears under Competition in Item 1. In the US, the continued focus by one or more large competitors in the quick-service restaurant sector on selling high-quality specialty coffee beverages at a low cost has attracted Starbucks customers and could, if the numbers become large enough, adversely affect the Companys sales and results of operations. Similarly, continued competition from well-established competitors in international markets could hinder growth and adversely affect the Companys sales and results of operations in those markets. The Company faces increased competition from larger well-known competitors which have greater resources. Increasing competition from the US packaged coffee and tea and ready-to-drink coffee beverage markets could adversely affect the profitability of the CPG segment and the Companys results of operations. Given its premium brand, Starbucks may be impacted more severely than its competitors by customers trading down to lower-priced coffee beverages and related products. A regional or global health pandemic could severely affect Starbucks business. A health pandemic is a disease outbreak that spreads rapidly and widely by infection and affects many individuals in an area or population at the same time. If a regional or global health pandemic were to occur, depending upon its duration and severity, the Companys business could be severely affected. Starbucks has positioned itself as a third place between home and work where people can gather together for human connection. Customers might avoid public gathering places in the event of a health pandemic, and local, regional or national governments might limit or ban public gatherings to halt or delay the spread of disease. A regional or global health pandemic might also adversely impact the Companys business by disrupting or delaying production and delivery of materials and products in its supply chain and by causing staffing shortages in its stores. The impact of a health

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES pandemic on Starbucks might be disproportionately greater than on other companies that depend less on the gathering of people together for the sale, use or license of their products and services. The Companys success depends substantially on the value of the Starbucks brand. Starbucks believes it has built an excellent reputation globally for the quality of its products, for delivery of a consistently positive consumer experience and for its corporate social responsibility programs. The Starbucks brand has been highly rated in several global brand value studies. To be successful in the future, particularly outside of US, where the Starbucks brand is less well-known, management believes it must preserve, grow and leverage the value of the Starbucks brand across its sales channels. Brand value is based in part on consumer perceptions as to a variety of subjective qualities. Even isolated business incidents that erode consumer trust, particularly if the incidents receive considerable publicity or result in litigation, can significantly reduce brand value. Consumer demand for the Companys products and its brand equity could diminish significantly if Starbucks fails to preserve the quality of its products, is perceived to act in an unethical or socially irresponsible manner or fails to deliver a consistently positive consumer experience in each of its markets. The Companys business depends in large part on the success of its business partners and suppliers, and the Companys brand and reputation may be harmed by actions taken by third parties that are outside of the Companys control. The Companys business strategy, including its plans for new stores, foodservice, branded products and other initiatives, relies significantly on a variety of licensee and partnership relationships, particularly in its International markets. Licensees are often authorized to use the Starbucks logo and provide Starbucksbranded beverages, food and other products directly to customers. The Company
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES provides training and support to, and monitors the operations of, these business partners, but the product quality and service they deliver to Starbucks customers may be diminished by any number of factors beyond the Companys control, including financial pressures. Management believes customers expect the same quality of products and service from the Companys licensees as they do from Starbucks and the Company strives to ensure customers have the same experience whether they visit a Company- operated or licensed store. Any shortcoming of a Starbucks business partner, particularly an issue affecting the quality of the service experience or the safety of beverages or food, may be attributed by customers to Starbucks, thus damaging the Companys reputation and brand value and potentially affecting the results of operations. The Companys products and in particular, its coffee and tea products, are sourced from a wide variety of domestic and international vendors. The Company relies on international vendors to provide high quality product that comply with applicable laws. The Companys ability to find qualified vendors who meet our standards and supply products in a timely and efficient manner is a significant challenge, especially with respect to goods sourced from outside the US. These issues could negatively impact the Companys business and profitability. The loss of key personnel or difficulties recruiting and retaining qualified personnel could jeopardize the Companys ability to meet its financial targets. The Companys success depends substantially on the contributions and abilities of key executives and other employees, and on its ability to recruit and retain high quality employees to work in and manage Starbucks stores. Starbucks must continue to recruit, retain and motivate management and other employees sufficient to maintain its current business and support its projected growth. A loss of key employees or a significant shortage of high quality store employees could jeopardize the Companys ability to meet its financial targets.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Effectively managing the Companys growth is challenging. Effectively managing growth can be challenging, particularly as Starbucks expands into new markets internationally, where it must balance the need for flexibility and a degree of autonomy for local management against the need for consistency with the Companys goals, philosophy and standards. Growth can make it increasingly difficult to ensure a consistent supply of high quality raw materials, to locate and hire sufficient numbers of key employees to meet the Companys financial targets, to maintain an effective system of internal controls for a globally dispersed enterprise and to train employees worldwide to deliver a consistently high quality product and customer experience. Adverse public or medical opinions about the health effects of consuming the Companys products, as well as reports of incidents involving food-borne illnesses or food tampering, whether or not accurate, could harm its business. Some Starbucks products contain caffeine, dairy products, sugar and other active compounds, the health effects of which are the subject of increasing public scrutiny, including the suggestion that excessive consumption of caffeine, dairy products, sugar and other active compounds can lead to a variety of adverse health effects. There has also been greater public awareness that sedentary lifestyles, combined with excessive consumption of high-calorie foods, have led to a rapidly rising rate of obesity. Particularly in the US, there is increasing consumer awareness of health risks, including obesity, due in part to increasing publicity and attention from health organizations, as well as increased consumer litigation based on alleged adverse health impacts of consumption of various food products. While Starbucks has a variety of healthier choice beverage and food items, including items that are low in caffeine and calories, an unfavorable report on the health effects of caffeine or other compounds present in the Companys products, or negative publicity or litigation arising from other health risks such as obesity,
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES could significantly reduce the demand for the Companys beverages and food products. Similarly, instances or reports, whether true or not, of unclean water supply, food-borne illnesses and food tampering have in the past severely injured the reputations of companies in the food processing, grocery and quick- service restaurant sectors and could in the future affect the Company as well. Any report linking Starbucks to the use of unclean water, food-borne illnesses or food tampering could damage its brand value, immediately and severely hurt sales of its beverages and food products, and possibly lead to product liability claims. Clean water is critical to the preparation of specialty coffee beverages. The Companys ability to ensure a clean water supply to its stores is limited, particularly in some International locations. If customers become ill from food-borne illnesses, the Company could also be forced to temporarily close some stores. In addition, instances of food-borne illnesses or food tampering, even those occurring solely at the restaurants or stores of competitors, could, by resulting in negative publicity about the foodservice industry, adversely affect Starbucks sales on a regional or global basis. A decrease in customer traffic as a result of these health concerns or negative publicity, or as a result of a temporary closure of any of the Companys stores, could materially harm the Companys business and results of operations. Deterioration in operating performance could lead to increased leverage, which may harm the Companys financial condition and results of operations. Any reduction in cash flow relative to the level of the Companys financial obligations would result in an increase in leverage. Any increase in leverage could lead to deterioration in Starbucks credit ratings, which could limit the availability of additional financing and increase its cost of obtaining financing. In addition, an increase in leverage could raise the likelihood of a financial covenant breach which

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES in turn could limit the Companys access to existing funding under its credit facility. The Companys ability to satisfy its operating lease obligations and make payments of principal and interest on its indebtedness depends on its future performance. Should the Company experience deterioration in operating performance, it will have less cash flow available to meet these obligations. In addition, if such deterioration were to lead to the closure of underperforming stores, the Company would need to fund the costs of terminating store leases. If Starbucks is unable to generate sufficient cash flow from operations in the future to satisfy these financial obligations, it may be required to, among other things: seek additional financing in the debt or equity markets; refinance or restructure all or a portion of its indebtedness; sell selected assets; or reduce or delay planned capital or operating expenditures. Such measures might not be sufficient to enable Starbucks to satisfy its financial obligations. In addition, any such financing, refinancing or sale of assets might not be available on economically favorable terms. Starbucks relies heavily on information technology in its operations, and any material failure, inadequacy, interruption or security failure of that technology could harm the Companys ability to effectively operate its business. Starbucks relies heavily on information technology systems across its operations, including for management of its supply chain, point-of-sale processing in its stores, and various other processes and transactions. The Companys ability to effectively manage its business and coordinate the production, distribution and sale of its products depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, or a breach in security of these systems could cause delays in product sales and reduced efficiency of the
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Companys operations, and significant capital investments could be required to remediate the problem. Failure of the Company to comply with applicable laws and regulations could harm its business and financial results. Starbucks policies and procedures are designed to comply with all applicable laws and regulations, including those imposed by the SEC, NASDAQ, and foreign countries, as well as applicable labor laws. Additional legal and regulatory requirements, together with the fact that foreign laws occasionally conflict with domestic laws, increase the complexity of the regulatory environment in which the Company operates and the related cost of compliance. Failure to comply with the various laws and regulations may result in damage to Starbucks reputation, civil and criminal liability, fines and penalties, increased cost of regulatory compliance and restatements of the Companys financial statements. For fiscal 2010, the Company expects revenues to grow in the low-to-mid single digits compared to fiscal 2009, driven by modestly positive comparable store sales, a 53rd fiscal week, and approximately 100 planned net new stores in the US and approximately 200 net new stores in International markets. Both the US and International net new additions are expected to be primarily licensed stores. Given these revenue expectations, combined with the Companys reduced cost structure, in-store operating efficiencies, and lower restructuring charges, Starbucks currently expects significant improvement in its consolidated operating margin in fiscal 2010. Operating cash flow for fiscal 2010 is currently expected to reach approximately $1.4 billion and capital expenditures are expected to range from $500 million to $550 million. Starbucks has three reportable operating segments: US, International and CPG. The US and International segments both include Company-operated retail

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES stores and licensed retail stores. Licensed stores frequently have a higher operating margin than Company-operated stores. Under the licensed model, Starbucks receives a reduced share of the total store revenues, but this is more than offset by the reduction in its share of costs as these are primarily borne by the licensee. The International segment has a higher relative share of licensed stores versus Company-operated compared to the US segment; however, the US segment has been operating significantly longer than the International segment and has developed deeper awareness of, and attachment to, the Starbucks brand and stores among its customer base. As a result, the more mature US segment has significantly more stores, and higher total revenues than the International segment. Average sales per store are also higher in the US due to various factors including length of time in market and local income levels. Further, certain market costs, particularly occupancy costs, are lower in the US segment compared to the average for the International segment, which comprises a more diverse group of operations. As a result of the relative strength of the brand in the US segment, the number of stores, the higher unit volumes, and the lower market costs, the US segment, despite its higher relative percentage of Company-operated stores, has a higher operating margin, excluding restructuring costs, than the less-developed International segment. The Companys International store base continues to expand and Starbucks has been focusing on achieving sustainable growth from established international markets while at the same time investing in emerging markets, such as China, Brazil and Russia. The Companys newer international markets require a more extensive support organization, relative to the current levels of revenue and operating income. The CPG segment includes packaged coffee and tea, and other branded products operations worldwide, and the US foodservice business. For the packaged
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES coffee and tea and branded products, Starbucks operates primarily through licensing arrangements and joint ventures with large consumer products business partners, most significantly with Kraft for distribution of packaged coffees and teas, and The North American Coffee Partnership with the Pepsi-Cola Company for manufacturing and distribution of ready-to-drink beverages. This operating model allows the CPG segment to leverage the business partners existing infrastructures and to extend the Starbucks brand in an efficient way. Most of the customer revenues from the packaged coffee and ready-to-drink products are recognized as revenues by the licensed or joint venture business partner, not by the CPG segment. Royalties and payments from our licensing agreements are recorded under licensing revenue, and the proportionate share of the results of the Companys joint ventures are included, on a net basis, in Income from equity investees on the consolidated statements of earnings. The US foodservice business sells coffee and other related products to institutional foodservice companies with the majority of its sales through national broadline distribution networks. The CPG segment reflects relatively lower revenues, a modest cost structure, and a resulting higher operating margin, compared to the Companys other two reporting segments, which consist primarily of retail stores. Expenses pertaining to corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment are not included in the reported financial results of the operating segments. These unallocated corporate expenses include certain general and administrative expenses, related depreciation and amortization expenses, corporate restructuring charges and amounts included in Net interest income and other and Interest expense on the consolidated statements of earnings.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Starbucks (SBUX.O) is planning aggressive growth again in Japan after having shored up its profit margins and is eyeing a partner to enter the Indian market, the head of the world's largest coffee retailer said. The launch will coincide with a new focus on growth in Japan, where decisions over the past few years to slow the pace of store expansion, review its cost structure and raise prices have firmed up profit margins following a slide into the red in 2003. Japan's instant coffee market was worth about $2.3 billion in 2009, roughly the same size as the fresh coffee market, according to Euromonitor. By comparison, the U.S. instant market came to about $640 million, against $7.6 billion for fresh coffee. Nestle is by far the biggest player in Japan with nearly two-thirds of the market through the Nescafe and Excella brands. Another one-fourth is covered by AGF, a joint venture between Kraft and Japanese food firm Ajinomoto (2802.T). Starbucks will sell a box of three Via sticks for 300 yen, or 100 yen per cup. A box of twelve sticks will sell for 1,000 yen. It comes in two flavors -- Colombia and Italian roast. That will make it considerably more expensive than rival offerings on shelves in Japan, where a Nescafe box of 15 sticks of ready-mix for cafe au lait sells for just under 300 yen. Starbucks Coffee Company announced two important milestones as part of its long-term commitment to environmental stewardship. The company has entered into the construction phase of the U.S. Green Building Councils (USGBC) LEED Volume Certification pilot program, which will enable the company to reduce the environmental impact of its stores on a global scale with significant cost and time efficiencies; and Starbucks has also begun implementing its LED lighting conversion program, the result of an alliance with GE Consumer & Industrial to
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES develop a solution that will help reduce energy consumption as well as utility and maintenance costs at Starbucks stores around the world. The USGBC is working with Starbucks and other Volume Certification pilot contributors to develop resources that will help integrate the adoption of LEED into the standard design, construction, and operations practices of participating organizations. Over the next six months, Starbucks will build or renovate a minimum of 10 pilot stores in six different bioregions around the world. Once the pilot stores environmental strategies are audited and approved, they can be replicated elsewhere. This capability will allow Starbucks to reach its goal of achieving LEED certification for all new company-owned stores worldwide beginning in late 2010. In fiscal 2009, we unveiled a bold and innovative store design approach, with new concepts in Seattle, Paris and Londonall enthusiastically received. All newly constructed company-operated stores worldwide will be LEED-certified beginning this calendar year, moving us closer to our goal of significantly reducing our environmental footprint. This initiative, coupled with locally relevant store designs and renovations, is helping us form deep and long-lasting connections with customers in their own neighborhoods. With our progress over the past two years, we are now in a position to take advantage of the global opportunity for Starbucks. Improvements in the U.S. business will allow us to pursue disciplined new store growth internationally. While Starbucks now operates in more than 50 countries (we added Portugal, Bulgaria and Poland in fiscal 2009), we are still in the early stages of international growth. We expect future growth for Starbucks to come from deeper expansion in markets where we already have a strong presence, such as the UK, Canada and Japan. Our progress in China continues, and we believe it will one day be the largest market for Starbucks outside the U.S.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES As part of our international strategy, we will also seize opportunities to move beyond our retail stores. Extending our profitable global consumer products group allows us to reach more customers in more places, and we plan to grow this business at an accelerated pace around the world. We see significant runway for CPG to grow, and we will be poised to capture that opportunity with an evolution of our distribution structure and with an increasing variety of offerings in the grocery channel. Our future lies in our ability to innovate, to be forward-thinking and nimble. In fiscal 2009, we wrote a new playbook for just that with the launch of Starbucks VIATM Ready Brew. We have been extremely excited to see our customers in North America embrace this 100 percent natural roasted soluble coffee that maintains the high standards of quality and taste of freshly brewed Starbucks coffee. This is a substantial new global growth platform within our core business, representing the first significant innovation in more than 50 years in the $21 billion global instant coffee category. Starbucks VIATM also gives customers an easy and affordable single-serve option at home and on-the-go. We look forward to extending the product internationallyboth in our stores and in grocery channelsin fiscal 2010. Another growth vehicle will be Seattles Best Coffee. Our research tells us we can aggressively position SBC with new customers, and we plan to create compelling franchising and distribution opportunities in 2010. We have ambitious goals for the brand and look forward to making some big moves in the coming months. The Companys objective is to maintain Starbucks standing as one of the most recognized and respected brands in the world. To achieve this goal, the Company plans to continue disciplined global expansion of its retail and licensed store base, to introduce relevant new products in all its channels, and to selectively
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES develop new channels of distribution. The Companys Global Responsibility strategy and commitments related to coffee and the communities it does business in, as well as its focus on being an employer of choice, are also key complements to its business strategies. References 1. http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhome 2. http://beginnersinvest.about.com/cs/newinvestors/a/021103a.htm 3. http://www.investment2011.com/index.php/tag/starbucks/ 4. http://www.evancarmichael.com/Other/612/Starbucks-Strategy.html 5. http://www.gaebler.com/Howard-Schultz-and-Starbucks.htm

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SECTION 4. GLOBAL PLAYER

MARIA KINAROVA BRITISH AMERICAN TOBACCO
Introduction This research has been conducted with an aim to develop a business plan for British
American Tobacco Company. The work contains the descriptive view of tobacco industry in general and a five year forecast of the economic environment changes in the market where the company operates. The business plan contains SWOT analyses
identifying the main opportunities and difficulties that British American Tobacco may experience within a 5 year period and projections of companys
MARIA KINAROVA
results. One of the chapters in this work is devoted to recommendations and proposals of business ideas which can help the company to overcome negative business changes in the industry and to develop a strong strategic plan of further business development. Today, British American Tobacco represents the worlds second largest tobacco group by global market share, with its brands sold in more than 180 markets. Possessing more than 250 brands in its portfolio, due to statistics, BAT makes the cigarette chosen by one in eight of the worlds one billion adult smokers. For more than 100 years the company has been developing its global presence across the world. Founded in 1902, by 1912 it had become one of the worlds top dozen companies by market capitalization. Currently, 50 cigarette
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES factories in 41 countries are run by BAT and more than 60 000 people are employed by it worldwide. BAT's global cigarette brands include Dunhill, Kent, Lucky Strike, and Pall Mall -- just four in a portfolio of about 300. 1 Brief overview and projections of BATs financial situation British American Tobacco is currently valued at $80 billion USD. In 2009, it generated 2.9 billion ($4.8 billion USD) in profits after taxes. The company reported 907 billion sticks in cigarette volume sold worldwide, down by 1% from 2008. According to tobacco market analysts at Euromonitor International, BAT held a 12.7% retail volume market share in cigarettes worldwide in 2009 and a 20.7% volume share of the global market (excluding China). 2 In 2009, BATs best performing region was the Africa and Middle East region. BAT reported 724 million ($1.17 billion USD) in operational profits, a 41% increase from 2008. Cigarette volume in the region increased by 11% to 127 billion sticks in 2009.3 Given the Groups history of growth in profit from operations, its high and stable cash conversion rate from profit into cash, the access to the 1.75 billion, revolving credit facility which is used only as a back stop and the spread of banks providing the facilities, BAT represents a company with a stable access to the debt capital markets. This, together with the maturity profile of debt, spread over a long period with only limited redemptions scheduled for 2010, provides confidence that the Group has sufficient working capital for the foreseeable future. After reviewing the Groups results in the previous periods it can be concluded that the company has adequate resources to continue stable operating during the next 5 years. As at 31
1
http://www.bat.com/ Euromonitor International. British American Tobacco in Tobacco. Euromonitor International; 2010 July 2010. 3 British American Tobacco. British American Tobacco Annual Report 2009. 2009.
2
Section 4. Global player.Maria Kinarova British American Tobacco

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES December 2009, the ratings from Moodys and S&P were Baa1/BBB+ with a stable outlook (end 2008: Baa1/BBB+). The strength of the ratings has underpinned the debt issuance during 2008 and 2009 and, despite the impact of fluctuations in financial markets, BAT can be confident of its ability to access the debt capital markets.1
Vision and Mission Vision: To become a leader on the global tobacco market in order to create value for shareholders and to satisfy clients needs in the best way. Mission: To develop sustainable and responsible business across the globe and to become a market winning organization, satisfying customers needs and providing them with innovative products of best quality.
Tobacco industry: General Overview The tobacco industry is one of the most profitable industries in the world. The global cigarette business alone is valued at $559.9 billion USD.The tobacco industry generally refers to the companies involved in the manufacture of cigarettes, cigars, snuff, chewing and pipe tobacco. The international tobacco market is dominated by five major transnational tobacco companies (TTC): China National Tobacco Company (CNTC), Philip Morris International (PMI), British American Tobacco (BAT), Japan Tobacco International (JTI) and Imperial Tobacco, all of which focus on selling their lethal products in markets around the world. In most, countries these companies either have long established dominance, or have purchased the major domestic producer or producers, often a former state
1
British American Tobacco. British American Tobacco Annual Report 2009. 2009.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES monopoly. The United States has one other substantial independent firm, Lorillard. India has its own major player, ITC Limited. There are a small number of surviving state monopolies, and some small independent firms. The biggest market is China where some 350 million smokers consume around 2,200 billion cigarettes a year, or some 41 per cent of the global total. Though, the industry in China is state-owned. Outside of China, the four largest stock market listed international tobacco companies compete and account for around 46 per cent of the global market. Due to BAT, the estimates of market shares for 2009 were: Phillip Morris International- 16%; British American Tobacco 13%; Japan Tobacco 11%; Imperial Tobacco 6%1 Tobacco industry in Russia Russia is the worlds third largest tobacco market by volume. Russias tobacco market is unique in that all four of the major transnational tobacco companies (TTCs) operate in the country, with all of the big manufacturers investing in facilities, brands, marketing and distribution. Since 2001, local ownership market shares have decreased dramatically from 42% of the market in 2001 to 7% in 2009. Also, more than in other tobacco markets, there is huge diversity in cigarette brands across the country. This is due in part to the presence of and competition between the TTCs and also due to the complicated distribution, retailing and marketing of tobacco products in Russia.
2
Retail volume sales have
http://www.britishamericantobacco.com/ Euromonitor International [database on the Internet]. Cigarettes: Russia. Euromonitor International. c 2010 [cited 2010 June 2].
2

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES increased by over 30% (31.6%) in the last ten years from 290 billion sticks in 1999 to 382 billion sticks in 2009.1 Tobacco industry: Current situation and future forecasts In general, 2009 was a difficult time for all fast moving consumer goods. Economic instability in the world influenced a reduction of tobacco consumption and a preference change to cheaper cigarettes. Total market volume declined by around 2 per cent in BATs key markets, with consumer down-trading moving some of this volume into illicit trade. The illicit trade in tobacco goods smuggled or tax-evaded by any other means is, in effect, one of BATs major global competitors, representing up to 12 per cent of world consumption. That is a black market estimated at up to 660 billion cigarettes a year, making governments around the world lose up to 30 billion a year in avoided tobacco taxes. 2 Judging by the scale of black market development, the illicit trade will continue to be a strong drain on the industry during the following 5 years, attracting customers by cheaper prices and stealing returns from the tobacco companies. Still, the government is expected to concentrate forces on struggling against the menace of smoking and reducing the black market power. Economic impact Today most commentators are forecasting improving economic conditions, though it will definitely take time for economies to strengthen. The unemployment rate is still rather high, especially in the developed countries that negatively influence the consumption power, as a result, some level of adverse consumer response in these markets should be expected during the next five years 3. Therefore, a lot of clients may continue to prefer lower-class cigarettes at lower
Euromonitor International [database on the Internet]. Cigarettes: Russia. Euromonitor International. c 2010 [cited 2010 June 2]. 2 http://www.britishamericantobacco.com/ 3 http://www.imf.org/external/pubs/ft/survey/so/2010/NEW090210A.htm 236

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES prices. On the other hand, some developing markets have been less affected by the global recession and are likely to see a measure of economic recovery which is a favorable condition for British American Tobacco, as nearly two-thirds of BAT revenue comes from developing markets, giving it an advantage in comparison to the competitors. This aspect will be more precisely studied in the following chapter. Due to forecasts, in some of those developing countries that has been less effected by financial crisis and where the living standards are improving yearly the consumer preferences may move to more expensive tobacco brands. BATs recent acquisitions of tobacco companies Bentoel in Indonesia and Scandinavian Tobacco in Denmark are expected to strengthen BATs access to the emerging Indonesian and Eastern European markets even more and provide a platform for future growth. The 2008 Tekel acquisition in Turkey increased BATs market share fivefold to 34%. Despite the overall downturn of tobacco market during the crisis, due to BATs large investments in marketing programs and innovations, the overall volume share in key markets was virtually unchanged during the time of financial instability and will have a positive influence on operating activities during the following 5 years as well. Governmental regulations Analyzing the tobacco market, governmental regulations should be especially highlighted among the negative environmental changes. Regulation of the industry continues to increase, including official governmental programs, graphic health warnings on packs with description of the diseases provoked by smoking, tougher restrictions on smoking in public places, ban on tobacco advertising and some bans on shops displaying tobacco products at the point of sale.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES John Dalli, member of European Commission, announced his main tasks for future and said that, in his view, ideal would be turning European Union to a nonsmoking zone, which certainly seems to be impossible but represents a signal of further smoking restrictions and toughening of anti-smoking regulations.
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In
Russia a new anti-smoking policy for 2010-2015 was adopted by the government which includes increase of excise duties up to 30- 40 % for cigarettes with filters and up to 70 % for cigarettes without filters2, leading them to the average European price level. Besides it, the new policy is also aimed to stimulate increase of taxes on the tobacco producers level on all tobacco products and to establish a ban on any kind of tax-free or duty-free tobacco sales. 3The Ukraine government who already increased the excise duties in 2009 is also discussing the further possible growth of taxes in the following years. 4The current situation in Germany, with its budget deficit, stimulates the discussions in the Ministry of Finance concerning the necessity to increase taxes on tobacco products in order to improve the economic situation, on the one hand and, on the other hand, to continue struggling against smoking. According to plans of federal government, due to tax raise in 2011 the budget will rise by 200 mln EUR and in 2014 it may increase by 800 mln EUR. Therefore, due to some projections, the prices on tobacco in Germany may increase by 40%. 5 Sharply rising taxes in markets where tobacco prices are already rather high today prove the fact that consumers will continue to switch to cheaper brands or contraband, therefore this trend is likely to remain during the coming years.
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http://www.pravo.ru/interpravo/news/view/39853/ http://infox.ru/business/consumer/2009/12/14/nik.phtml 3 http://base.consultant.ru/cons/cgi/online.cgi?req=doc;base=LAW;n=105331

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Demographic situation Generally speaking, the below-mentioned trends indicate that individual smokers will consume fewer cigarettes each and smaller percentages of populations will smoke due to price increases and various anti-smoking policies. However, due to demographic statistics the number of adults in the world over the age of 20 is forecast to grow by around 11 per cent over the next ten years. As a result, it can be concluded that global annual sales will be broadly unchanged in a decades time. In general, world consumption forecasts also suggest that the world market is likely to remain fairly stable during the coming 10 years. In fact, taking into account industry and economic projections described below and stability in financial results shown by BAT last year and in the previous periods, it can be said that no negative changes will take place during the coming 5 years in the companys business.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES SWOT Analysis

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Strength Firm Presence in Emerging Markets Strong and well diversified brand portfolio Marketing and innovations Sustainability Opportunities
Weaknesses Foreign exchange rate exposure Controversy of tobacco business Resource allocation Marketing for low class cigarettes Threats Illicit trade Excise and tax Foreign exchange rate exposures Managements of cost base Wrongly valued acquisition opportunities
Increase of share market New mergers and acquisitions Products and services expansion Leadership in innovations
Strength Firm Presence in Emerging Markets Nicandro Durante, BATs Chief Operating Officer, recently highlighted BATs strength against its competitors in emerging markets. He described BAT as having the best exposure to developing markets of all publicly-traded transnational tobacco companies (TTC) which gives the company an advantage because emerging markets are likely to be more resilient than developed markets. In fact, BAT appears to be better positioned to profit from emerging markets than, for example, a global market leader and at the same time the main competitor Philipp Morris International (PMI). In 2009, 77% of the BATs total volume and 60% of its total profits were attributed to gains in developing markets compared to
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES 68% and 48% of PMIs total volume and profits accordingly. 1 Key developing markets targeted by BAT include such countries as Egypt, Russia, and Eastern Europe.2 In Latin America, BAT currently dominates the market and has held approximately 55% of the cigarette market since 2003. Important markets in the region include Brazil (86% market share), Chile (98%),Venezuela (90%), Peru (76%) and Costa Rica (66%). BAT has dominated the African cigarette market since the early 20th century. Over 90% of cigarette sales in Ghana, Malawi, Nigeria, Sierra Leone, Zambia, Kenya, Mauritius, South Africa, Uganda and Zimbabwe are attributable to BAT. The strong positions in the developing markets open doors for further expansion during the following year and show prospects of increased profit.
BATs exposure to developing markets
Source: Nicandro Durante, BATs Chief Operating Officer 3 Strong and well diversified brand portfolio
http://www.bat.com/group/sites/uk__3mnfen.nsf/vwPagesWebLive/DO7VNH87/$F ILE/medMD7VWMDP.pdf?openelement. 2 Euromonitor International. British American Tobacco in Tobacco. Euromonitor International; 2010 July 2010. 3 http://www.bat.com/group/sites/uk__3mnfen.nsf/vwPagesWebLive/DO7VNH87/$F ILE/medMD7VWMDP.pdf?openelement.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Another important point that British American Tobacco possesses is a strong brand portfolio with a balance of products across price segments and geographies that has allowed the company to deliver a consistent growth year on year, whatever the trading conditions and consumer preferences were. With its strong brand portfolio and an overall brand mix that is balanced between various cigarette classes - premium, mid-price and low-price- at the same time combined with its wide geographic spread, BAT continues to be very well placed to build strong consumer loyalty and deliver sustainable growth. Marketing and innovations in GDBs (Global Drive Brands): Through the years BAT has invested in various marketing programs and development of innovations. That was one of the key factors helping the company to keep overall volume share in the markets virtually unchanged during the financial crisis proving that investments were made in right directions and the programs work effectively. During the crisis BATs Global Drive Brands
Dunhill, Kent, Lucky Strike and Pall Mall grew by 4 per cent in volume and gained a big market share. 1 What is also important, BAT has developed strong relations with its retail partners and created joint marketing programs with them, resulting in acknowledgement of BAT as a partner of choice. This stimulates deeper integration with the retailers and improvement of business process. Therefore, BATs well developed marketing and innovativeness represent another strength which will help the company during the next 5 years. Sustainability In 2009, BAT, for the eighth year running, appeared to be the only tobacco company included in the Dow Jones Sustainability World Index. This index tracks the economic, environmental and social performance of leading companies based on how well they integrate sustainability into their businesses. This factor seems to
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES be especially important nowadays because consumers pay more and more attention to corporate responsibility and sustainability of companies and give preferences to the leaders. This helps BAT to create a successful brand image of a responsible company and in fact attract more clients by it. Weaknesses Foreign exchange rate exposure The fact that BAT represents a great multinational company, operating in most of world markets is certainly related to success and large profit margins. On the other hand, it also has a negative side related to exposure to foreign exchange rates fluctuations. Operating in more than 180 markets and having factories in 41 countries means that BAT has a lot of receipts and payments in currencies other than sterling- the reporting currency of the company. This all represents the possibility of cash flow losses and increase in costs connected to sudden exchange rate movements. Controversy of tobacco business In fact, business which BAT involved in is rather controversial and sensitive due to the proven fact that smoking damages health and even kills. Therefore, tobacco producers are always carrying double risk of getting involved into various law suits and judicial settlements. These issues are strongly connected to companys brand name which can be easily damaged. Especially nowadays, at the time of world struggling against smoking the industry where BAT operates cannot be called stable and peoples attitude to is oftennot positive. This weakness is strongly related to possible financial losses. Any sign of corporate irresponsibility, any kind of unfavorable outcome, or settlement of pending or future litigation can cause a both a brand damage and material impact on consolidated results of operations, cash flows and financial position.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Resource allocation and business integration Due to the fact that BAT is a multinational company operating in more than 180 world markets, it becomes difficult for the company to take advantage of its scale. In fact, it can be concluded that BAT lacks global integration and standardization of its business processes which increases overall cost level and adversely influence efficiency of performing. At the same time BATs resource allocation is also imperfect, and that is also recognized by the company itself, meaning that BAT does not decrease the production costs and ineffectively serves the markets. Marketing for low class cigarettes As it has been mentioned before in the industry forecast, in the developing countries, less affected by crisis, the preference choice may change to more premium brands, what cannot be said about the developed countries. BATs marketing is focused mainly on Global Drive Brands Dunhill, Kent, Lucky Strike and Pall Mall which represent premium and middle class segment. Still, BATs low-class segment stays in shadow and marketing for Alliance, Viceroy and remains underdeveloped. Therefore, customers switching from Pall Mall to cheaper cigarettes do not choose, for example Alliance or , but go to competitors. This influences a customer loyalty loss and decrease in sales. At the same time, Philipp Morris and JTI increased their investments in low-class cigarettes marketing and were rather successful in promoting Bond Street, LD and Peter I during the crisis.
1
Opportunities Increase of share market During the recession BAT continued to invest in marketing programs especially in the segment of premium cigarettes. As a result, the overall volume share in key markets remained stable despite overall economic instability and
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Global Drive Brands (GDBs) have grown by a combined 4 per cent in volume, gaining a market share, helped by continued organic volume growth. Due to success of premium brands and in case of more intensive investments in low class cigarettes and development of a good marketing campaign for them as well, BAT has all chances to increase the market share during 2011-2016. Besides, BAT chose a right innovation-driven strategy which can also help the company to conquer the market. New mergers and acquisitions Historically, BAT has been greatly involved in mergers and acquisitions, most of which appeared to be rather successful and contributed to BATs global development and achievement of the leading positions. For example, for 2009, revenue growth was enhanced by the full year benefits of the acquisitions of the cigarette and snuffbusinesses of Skandinavisk Tobakskompagni (ST) and the purchase of the cigarette assets of Tekel, the Turkish state tobacco company that also gave the company a stronger position in the cigarette market and opened doors for kretek segment. 1 Therefore, continuous growth strategy through M&A represents future opportunity for BAT.
Products and services expansion BAT has proved to be rather creative and innovative in their product strategies. It has gained the customers loyalty by the constant review of the clients needs and preferences. At the time of sudden preference changes, such as moves to cheaper cigarettes in the developed countries and a possible switch to higher quality cigarettes in the developing regions should stimulate BAT to think about expansion of the product lines and range of services in accordance with the customers needs.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Leadership in innovations Through itshistory, BAT proved to be an innovative company with large investments in research and development which amounted to 112 mln in 2009. Its large Group R&D Centre is based in the UK, and has laboratories in Southampton and Cambridge. BAT seeks to develop innovative technologies and new products to reduce the harm caused by tobacco use. The company invests heavily in scientific research and is committed to engaging with the external scientific community. Its approach to tobacco harm reduction is to pursue the research, development and test-marketing of innovative tobacco products, including smokeless, that will be acceptable to consumers and be recognized by the scientific and public health communities and regulators as posing reduced risks to health. 1 Taking into account the strong innovative base which has been developed through years, BAT has a good opportunity to win the leadership in innovations in case it continues its large investments in R&D. Threats Illicit trade A sudden and disproportionate excise increase combined with ineffective governmental regulations -lack of law enforcement and weak border controls may cause a strengthening of illicit trade in the future. Customers will turn to widely available low-priced forgery goods. If this happens, it may cause an erosion of brand equity; it may also be followed by an insufficiency of investment in trade marketing and distribution and, as a result, lower sales volumes and reduced profits.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Excise and tax As it has been forecast before, there is a high probability of toughening of smoking regulations. Governments in many countries are going to raise excise and taxes on tobacco products within context of national health policies and as a means of revenueraising. This may cause rejection of the Groups legal tax-paid products by clients for cheaper goods from illicit sources. As a result, it will have an impact on sales volume and alteration of sales mix. Foreign exchange rate exposures BATs cash flows and earning are exposed to foreign exchange rate fluctuation and its movements against sterling-the Groups reporting currency. The company has a lot of receipts and payments in non-domestic currencies due to multinational business which increases exposure to currency changes. Therefore, it may cause volatility in reported results and cost of operation with a negative impact on average financial performance. Management of cost base High inflation of key production commodities (leaf, wood, pulp, energy), wage inflation, insufficiency of resources stimulated by the difficult
macroeconomic conditions may cause increase in product costs, salary costs with a negative impact on cash flow. 1 These macroeconomic changes may lead to inability to manage cost savings meaning lower profits and reduced funds for investment in long-term growth. All these may also stimulate reduction of shareholders confidence. Wrongly-valued acquisition opportunities BAT has always been interested and highly involved in mergers and acquisitions which has become a part of companys history. Though most of the
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES recent acquisitions were considered successful, there always exists a risk of lack of market intelligence, overvaluation of the assets or understatement of the liabilities. These risks mean a loss of great opportunity, loss of volume, market share and profit and, of course, damage to corporate reputation. Business proposals Better business integration and resource allocation. Due to the fact that BAT is a multinational company operating in more than 180 world markets, much attention should be paid to business integration into one global enterprise that will allow the company to take better advantage of its scale. Greater integration across the whole supply chain will help to reduce costs, increase speed to market and improve effectiveness and efficiency of work. Standardization of business processes and simplification of the portfolio should be further developed as a cost reducing mechanism making integration easier to implement and develop. Smarter resource allocation can be vitally important for BAT as well, especially at the time of overall economic recession which decrease the sales and increase of tobacco restriction through taxes and extra duties which influence the cost rises. Starting from year 2000, the Group has reduced the number of cigarette factories from 83 to 50 as the first step of resource reallocation. Factories in Latvia, and Italy were replaced by acquired plants in Indonesia and Turkey with lower costs of production and more convenient geographical position. Vranje factory in Serbia was rationalized and currently the consultation process is commenced for downsizing the factory in Pagewood, Australia. This strategy should come to the first line, it should be further developed and implemented during 2011-2016, aiming to relocate the production to the less costly regions where new factories will be able to serve larger number of markets.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Mergers and Acquisitions In order to fulfill the vision and to achieve leadership of the global tobacco industry, BAT can increase the volume and value share of the market by means of mergers and acquisitions. Acquisitions have always played a large part in companys growth strategy. For example, Tekel and Skandinavisk
Tobakskompagni (ST), both acquired in mid-2008, are being successfully integrated into the Group, contributing to overall growth in volumes. During 2009 BAT acquired Bentoel in Indonesia, giving the company a stronger position in the fourth largest cigarette market in the world and enabling it to enter the distinctive kretek segment. Considering acquisitions, BAT can be recommended to keep this possibility in mind and to conduct the necessary research and analyses, but in a long run perspective. In the view of the following 5 years, the company should, first of all, fully integrate the already acquired plants and companies in order to take a better advantage of the increase in volume and total share. While analyzing, future acquirers should first of all work out a specific, well-articulated value creation ideas. Due to McKinsey advice, the strategic rationale for an acquisition that creates value typically conforms to at least one of the following five archetypes: improving the performance of the target company, removing excess capacity from an industry, creating market access for products, acquiring skills or technologies more quickly or at lower cost than they could be built in-house, and picking winners early and helping them develop their businesses. 1 Promotion of low class cigarettes As it has been mentioned before in the chapter describing the strength of British American Tobacco, the company has made large contributions in marketing campaigns and innovation development for its key success brands- Dunhill, Kent,
http://www.mckinseyquarterly.com/Corporate_Finance/M_A/The_five_types_of_s uccessful_acquisitions_2635
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Lucky Strike and Pall Mall. Therefore, these premium class cigarettes have gained popularity and won a market share. The same cannot be said about the low class brands which lack a good promotion program. Taking the example of competitors performance during the recession, JTI operated successfully due to a wise promotion of cheaper cigarettes to which customers switched during crisis- for example, LD and Peter I , due to Forbes magazine, joint the rating of 50 leading brands judging by sales turnover on Russian market. Philip Morris also successfully promoted its Bond Street high sales of which compensated the decrease of Marlboro and Parliament purchases.1 BATs low price products like Alliance, Viceroy and are not highly in demand by consumers. The fact that they do not represent BATs Global Drive Brands, mistakably, results in underpaid attention and insufficient contribution to their promotion. Therefore, a lot of BATs customers forced by economic
conditions to change their preference to cheaper cigarettes, do not simply consume Alliance instead of Pall Mall or Kent but switch to competitors products. 2 Therefore, in order to maintain the customer base and sales volume and develop the clients loyalty, in the following 5 years BAT is recommended to increase its contributions in marketing programs for low class cigarettes which will continue to be in demand especially in developed countries. This campaign may be easily financed through internal sources: in 2009 the company generated profit of $4.8 billion USD and due to economic and market projections, BAT will not experience large negative changes in sales and profit in the following 5 years.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES References http://www.bat.com/ http://www.batrussia.ru/ British American Tobacco Annual Report and Accounts 2009 Euromonitor International. British American Tobacco in Tobacco. Euromonitor International; 2010 July 2010. 5. British American Tobacco. British American Tobacco Annual Report 2009. 2009. 6. Euromonitor International [database on the Internet]. Cigarettes: Russia. Euromonitor International. c 2010 [cited 2010 June 2]. 7. http://www.pravo.ru/interpravo/news/view/39853/ 8. http://infox.ru/business/consumer/2009/12/14/nik.phtml 9. http://base.consultant.ru/cons/cgi/online.cgi?req=doc;base=LAW;n=105331 10. http://www.imf.org/external/pubs/ft/survey/so/2010/NEW090210A.htm 11. http://www.rosbalt.ru/2010/06/24/748070.html 12. 1http://www.euromag.ru/germany/4561.html 13. http://www.rbcdaily.ru/2010/02/26/market/461050 14. http://www.mckinseyquarterly.com/Corporate_Finance/M_A/The_five_type s_of_successful_acquisitions_2635
1. 2. 3. 4.

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EKATERINA GURIEVA GENERAL ELECTRIC

Introduction Strategy formulation is vital to the well-being of a company or organization. Corporate strategy is supposed to be the means by which an organization achieves and sustains success. In this work, the strategy of General Electric is considered for the next 5 years. The goal of this work is to consider the economic environment in which General Electric operates
EKATERINA GURIEVA
nowadays, to determine its position in this economic environment, to create the strategy of the company over the next 5 years and to understand how this strategy will be supported financially. The paper is structured as follows. The first section deals with the short overview of the General Electric company, the main accent of this part is made on the current situation of the company. The second section is devoted to the economic environment in which General Electric operates today.The main tendencies of economic development are outlined for today and for the next 5 years. The third part of this work provides the strategy of GE for the next 5 years. This part is based on the personal opinion of the author and the opinions of professionals. Afterwards, the results of the work are combined in the conclusions and recommendations are made. The company General Electric has been chosen for analysis as the author of this work is currently an employee of General Electric and has personal interest in this company. The methodological basis of this work is conduction of desk research and personal ideas. The desk research included the analysis of the ideas of domestic
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Section 4. Global player. Ekaterina Gurieva General Electric

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES and foreign experts, the personal ideas are based on the personal experience of the author of working at GE. General Electric today The General Electric Company, or GE, is an
Americanmultinationalconglomerate corporation incorporated in the State of New York. The Company operates through five segments: Energy Infrastructure, Technology Infrastructure, NBC Universal (NBCU), Capital Finance and Consumer & Industrial. Through these businesses, GE participates in a wide variety of markets including the generation, transmission and distribution of electricity (e.g. nuclear, gas and solar), lighting, industrial automation, medical imaging equipment, motors, railway locomotives, aircraftjet engines, and aviation services. GE is also one of the US's pre-eminent financial services providers. GE Capital, comprising commercial finance, commercial aircraft leasing, real estate, and energy financial services, is its largest segment. GE Capital is the largest revenue driver, including GE Commercial Finance, GE Money, and GE Consumer Finance. GE's diversification provides the company with a degree of protection against poor performance in any business segment. Additionally, GE's size enables it to buy and sell companies at opportune times, taking advantage of favorable market conditions. GE traces its beginnings to Thomas A. Edison, who established Edison Electric Light Company in 1878. In 1892, a merger of Edison General Electric Company and Thomson-Houston Electric Company created General Electric Company. GE is the only company listed in the Dow Jones Industrial Index today that was also included in the original index in 1896 1. Jeffrey Immelt is the current chairman of the board and chief executive officer of GE. He was selected by GE's Board of Directors in 2000 to replace John
1
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Section 4. Global player.Ekaterina Gurieva General Electric

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Francis Welch Jr. (Jack Welch) following his retirement. His tenure as the Chairman and CEO started at a time of crisis he took over the role on September 7, 2001 four days before the terrorist attacks on the United States, which killed two employees and cost GE's insurance business $600 million as well as having a direct effect on the company's Aircraft Engines sector. Over the last years, GE has received several awards honoring them for their accomplishments, values and reputation: - in 2010, GE ranked 1 in healthcare and 19 overall on Fast Company's list of the world's top 50 most innovative companies. - in 2010, GE was named in Ethisphere's list of the world's most ethical companies. - in 2010, GE was named in Business Week's list of the world's 25 most inventive companies. - in 2010, GE ranked among Fortune magazine's listing of the Most Admired Companies in the World for its 5th consecutive year 1. - recognized as a "sustainability leader" by Dow Jones, GE is included in the 2009 North American and World indexes of the Dow Jones Sustainability Index (DJSI) for the sixth consecutive year. - in 2009, Fortune ranked GE among its list of the world's top companies for leaders. Nowadays GE has the fourth most recognized brand in the world, worth almost $48 billion. In 2010, Forbes ranked GE as the world's second largest company (after JP Morgan Chase), based on a formula that compared the total sales, profits, assets, and market value of several multinational companies. GE operates in more than 100 countries and employs about 300,000 people worldwide.
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Economic environment Looking at the current business environment, we can suppose that the world is not going to become stable and predictable in the nearfuture. Thus, successful business players need to have a corporate culture and strategic process that is flexible and can adapt quickly. The following tendencies can be observed in the next 1-5 years: - An increasingly interdependent global economy wracked by excess manufacturing capacity and the resulting price pressure. This is why unemployment remains stubborn and margin growth is tough to achieve. GE should invest in innovation and build new revenue streams from their current capabilities. - A new economic order of global competitiveness and growth. Competition from places like China and India has evolved beyond low-cost manufacturing labour to include highly-competitive engineering graduates who earn less than production workers in the developed world. GE should think globally, but understand local consequences. Only competitive companies can serve investors, employees and stakeholders during this dramatic phase of globalization. - A move to consolidate distribution channels, which creates value for consumers but makes it difficult for manufacturers to maintain margins. GE should have strong direct sales forces, low costs and value propositions that tie their own profitability to their customers. - An opportunity to build growth platforms based on unstoppable demographics. GE should sustain long-term growth by betting on highgrowth markets to which they can bring unique technical and management capabilities.

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES - A more volatile and uncertain world. The underlying insecurity created 2008 financial crisis will not end soon. GE should keep the confidence of customers, investors and employees by maintaining financial and cultural strength. - Decoupling of economies showing that economic engines of growth are emerging around the world. China and resource-rich countries have remained strong through the 2008 financial crisis. Additionally, many countries (outside of China and India) have the ability to drive growth over the next 5 to 10 years. GE should use the opportunities offered by emerging countries. - Moving to the era of activist government. The intersection between government and big business is very strong nowadays. Companies are going to be good at understanding regulations and the subsequent government impact. - Strong competition. GE competes against a number of other companies, but most of them are more specialized, focusing in one industry. GE's operations, on the other hand, are spread across many different industries, limiting its exposure to competition from any one company. Of GE' competitors, Siemens AG (SI) is the most significant. Siemens operates in a number of different industries, many of which it shares with GE. In fact, NBC Universal is the only of GE's six divisions that Siemens does not directly compete with. Despite GE's size advantage, however, Siemens is still a very large company in its own right, and it is the only company that effectively competes against GE in nearly all of its main industries 1.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Figure 1. GE vs Siemens 2009 GE vs. Siemens income data GE Siemens Revenue (mm) Net Income (mm) Profit Margin 7.29% 3.66% 5 Yr. Net Revenue Avg. income per Profit per employee Margin employee 11.17% 3.92% $522,610 $244,662 $38,113 $8,958
$156,783 $11,025 76,651 2,292
Industry 1.34% 4.22% average Apart from Siemens, GE competitors are also Philips, Honeywell, United Technology Corporation, 3 M Company (Tier 1 GE competitors) and Bank of America, JPMorgan Chase, News Corporation, Viacom, The Walt Disney Company (Tier 2 GE competitors). Anyway, GE has very strong position in the industry, but it should always keep close eyes at its main competitors. In this environment, GE can outperform by executing its strategic imperatives: sustain strong business model; strengthen portfolio; drive growth initiatives. The economic environment and the responses of GE to it can presented in the form of the table:

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Figure 2.GE in economic environment Macro themes Multi-speed world Government intersection Customer productivity More volatility Reputation counts Reset (2008-2009) - protect GE Capital - preserve cash - competitive organization Renewal (2010) - simplify portfolio - accumulate cash - invest in growth
Growth (2011+) - strong capital franchise - industrial innovation - financial flexibility GE well positioned for current environment
GE strategy over the next 5 years The main strategy that has been implemented in GE for the last 6 years and that in my opinion should be preserved for the future development is the strategy of growth. Keep your company safe but keep building the future these are the words of the CEO of GE Jeffrey Immelt which show the top priorities of GE growth strategy. Of course, as the business environment is constantly changing and cannot be predicted, the growth strategy should constantly be adjusted to the changing environment, but that does not mean putting growth on the back burner. The GE growth strategy has proved to work and to be effective. For instance, after 9/11, when commercial aviation was a disaster, GE plowed ahead. Already a force in jet engines and aircraft leasing, GE continued to invest in new products and customer relationships. The result: its market share grew.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The key growth drivers for GE in the next 5 years can be determined as follows: 1) Lead in technology seeking competitive cost advantage in everything, launch great new products 2) Grow services that achieve customer productivity 3) Build leadership in the key emerging markets 4) Expand the core of the company through infrastructure adjacencies 5) Run a very good and disciplined and valuable specialty finance business 6) Solve problems for customers & society 7) Develop leaders Leadership in technology and innovation Technology and innovation are at the heart of GEs initiatives. Technical leadership produces high-margin products, wins competitive battles and creates new markets. GE has about 2,000 researchers in its Global Research Centers linked to market and customer needs and in constant dialogue with GE businesses. The main long-term 5-years goal in this area is to implement the reverse innovation model in all businesses of GE. This approach is the opposite of the glocalization (global/local) approach that GE has employed for decades. With glocalization, GE developed products in the USA and then distributed them worldwide, with some adaptations to local conditions. Glocalization has been powerful strategy, because when GE globalized in the last 30 years, they took their products mostly into Europe and Japan. Glocalization model worked because customer base in Europe and Japan is similar to USA. That is why the product from the USA could be taken and adapted to Europe and Japan. What happened in last 5 years, in countries like China and India emerging middle class appeared, which is fundamentally different as a customer base compared to the USA. For example, per capita income in India is 200$ while it is 50000$ in the USA. That is why it became not possible to pick and adapt business model from the USA to

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES China and India. Glocalization has been very successful strategy for GE because largely because of glocalization, GEs revenues outside the United States soared from $4.8 billion, or 19% of total revenues, in 1980, to $97 billion, or more than half of the total, in 2009. But if reverse innovation model could be implemented in heavily populated places like China and India, the growth would be 2-3 times more. Of course, it is impossible to replace glocalization model with reverse innovation model totally for the next 5 years. The two models need not just coexist, but cooperate. The glocalization can be adapted for rich customers and in rich regions of poor countries whereas reverse innovation should be implemented in poor countries and in poor regions. In 4 years, the implementation of the reverse innovation model should be in process. On the first stage the local production should be implemented in emerging markets (China, India, Russia). Once products have proven themselves in emerging markets, they must be taken global, which may involve pioneering radically new applications, establishing lower price points, and even using the innovations to cannibalize higher-margin products in rich countries. Reverse innovation is not a quick process and it requires thorough preparation. It also brings big cultural changes which should be put as the central part of the strategy. In 3 years, Indians, Chinese should be also present in the top management of the company which will help to make cultural integration. Reverse innovation is only possible when almost all the people and resources dedicated to reverse innovation efforts are based and managed in the local market. The strategic goal of GE in area of innovations in 3 years is also to develop these local growth teams, whose work will be based on 3 principles: local resources (product development, marketing, distribution, selling etc); connection to global technology (GE Worldclass global technology center in the US); experimental approach (uncertain outcome), resolving unknowns.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The short-term 1-2years goal of GE is to increase innovation investment, adding $1 billion in 2011. Innovation investment is planned to be doubled in 2011 in comparison to previous years. Figure 3. R&D investment ($ billion)
5 4,5 4 3,5 3 2,5 2 1,5 1 0,5 0 History 2010 2011
The main strategic goals for 2011 and 2012 are also to gain profitable share through execution, innovation & more NPI; execute difficult technologies better than competition; lower costs and higher margin. The main accent of innovation is planned to be made in Aviation, Energy and Healthcare businesses. In the Energy business a tremendous diversity of technology, a team of 15,000 engineers, lots of patents and a big spend means that GE will expect $3 billion to $4 billion in orders over two years. In next 2 years new large-frame gas turbines, more distributed energy, more service products will be launched. In Aviation, there will be launches in the GEnx engine, the LEAP-X, which will go into the narrowbody, new avionics products. In Healthcare, new segments with extremity MRs and portable ultrasound products, new products in digital pathology, a growing lineup of Brivo low-cost products for emerging markets are planned. At the same time, the local production should start being implemented in all GE businesses in emerging markets. Growing services that increase customer productivity Technical leadership has created a massive installed base of more than 100,000 long-lived GE jet engines, power turbines, locomotives and medical Section 4. Global player.Ekaterina Gurieva General Electric
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES devices for which GE can provide high-margin services for decades. In 2010, GE services revenues grew to $34 billion, up 29%.
But services only work if they make the customers more profitable. In the energy market, GE has built an asset optimization business to improve customers energy efficiency, uptime and environmental performance. In Healthcare, more than 8,000 of GE installed products have broadband connections. This technology is used to upgrade and repair the products remotely and proactively, creating more uptime and revenue for the customers. The main long-term 4-5-years goal of GE in the area of services is to double the revenue from it, improve the quality of provided services, expand margins through improved analytics & diagnostics. The great potential can be seen in growing software and solutions. The revenues from it are estimated to increase to $4 billion in 2015 from $0,4 billion in 2010. GE is the major software player today, 14th largest by revenue. Its 1-3years goals are to invest in technology and analytics (HCIT, Qualibria, Smart Grid, Movement planner are of great potential). The predictive analysis being now up to 25% is planned to be increased to more than 90%; the analysis cycle should be decreased from 3 months to 2 weeks; the number of online users is planned to be increased dramatically from hundreds to millions which will lead to substantial revenue growth. Building leadership in key emerging markets GE makes more than half of its revenues outside of the USA. Five or 10 years ago, the incredible demise of the ASEAN region was predicted, as a giant China and India basically stepped on the region and made it essentially irrelevant vis-a-vis development. Through investment in the emerging markets, GE has gained almost $5 billion for the last 5 years ($ 30 billion up to2010). But GE will not stop despite the success it hasachieved; it will continue its investment in emerging markets.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES The long-term 4-5-years goal is to build leadership in emerging markets. These markets include not only China and India, but also such resources-rich countries as Russia, Australia, Latin America, Africa, Canada. The 5-years goal is to increase the revenue from resources-rich countries by 10% (to $ 20 billion) and to increase the revenue from emerging markets (China, India, ASEAN by 10% (to $ 30 billion). The way to do it is to use company-country approach which includes building key customer capabilities, establishing regional partnerships, increasing M&A activity, investing in local products, leading market innovation, investing in manufacturing and service. At the same time many other countries (outside of China and India) have the ability to growth over the next 5 years. For example, the projects in Malaysia and Vietnam have done well, the projects in Indonesia seem to be perspective in the long-run 4-5-years perspective. The short-term (1-3-years) strategic goals of GE are connected with China and India markets. Economies in emerging markets are doing very well now and developed countries are slowly improving. Chinas economy is estimated to grow 9 percent and Indias 6.4 percent in 2011. That compares with growth of 1.7 percent in Japan, 1.5 percent in the U.S. and 0.3 percent in the euro region. Thus, GE plan is to double revenue from India to $6 billion in the next three to four years. GE expects to expand its business in India mainly in energy, transportation and aviation which will create new jobs. Concerning China, GE expects sales in China to double in the next four to five years. GE views China not only as a market, but also as a center of excellence in technology and manufacturing that can benefit all of its products around the world. Jeffrey Immelt signed an agreement with the Chinese government to spend up to $50 million in China over the next five years developing more environmentally friendly technologies. GE, which has nearly 13,000 employees in China will expand cooperation in the development of

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES advanced experimental technologies for sustainable economic growth with the Chinese Cabinets National Development. GE will also provide management and leadership training for up to 2,500 Chinese managers and government officials over the next five years. The main accent in China is made on the coal gasification and other energy-related fields, water-filtration technology, solar, wind and other renewable power sources; winning in Healthcare through accelerating localization; gaining market share in the Aviation as it considered to be the China future market and biggest aviation market in the world; making partnerships with state-owned enterprises in rail industry, transmission and distribution 1. In Russia, GE has some good opportunities. Russia is going to reframe and reinvest in itselectricity grid. It is the least efficient electricity grid in the world. Here GE sees opportunities. Australia is a boomtown for GE now in terms of all the oil, gas and energy. Brazil is extremely exciting country with good future long-term perspectives, but in the next 5 years it is not considered as the core market for GE. Expanding the core of the company The overall long-term 4-5-year strategy of GE is to focus on its healthcare, engine, energy, and other core manufacturing businesses instead of its service-oriented businesses like GE Capital and NBC Universal. This strategy originates from the times of the 2008 Financial Crisis, which has had a sizable effect on GE, since the company generated half of its profits from GE Capital Services (GECS), the company's financing arm. GE Capital originally worked with the GE units that make consumer products such as refrigerators and dishwashers. Eventually, it gained enough scale and expertise to offer finance services for GE's more sophisticated industrial
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES products, including power plants and jet engines. Now financial services account for 46 percent of GE's revenue. As the company suffered a lot from Financial Crisis, the following goal is to be achieved in the next 5 years: the company must rely more on making physical products and less on financial engineering. Technology-based manufacturing of all sorts has to be a central part of reinvigorating the economy as in the long-run it has higher profit margins and returns on capital than the financial sector. In the short-run (1-3 years) more than 4000 jobs will be created in manufacturing, production and research in GE. The payroll should be increased, the 2-year goal is to increase the payroll for employees of manufacturing sector twice to 450 by 2012. Still, the profits from GE Capital are planned to increase in the short-run. But before that, it still has many hurdles to clear next year, including resolving GE Capital's exposure to bad commercial real estate loans. The lending arm has a large portfolio of bad loans in commercial real estate, including office buildings that need to be cleared. One more step of GE in concentrating more on its core activities and diminishing the role of other activities is the NBC deal. On December 4, 2009, General Electric agreed to give Comcast majority ownership in NBC Universal, the oldest television network in the US. In the deal, Comcast merged its cable networks and some of its web assets with NBC into a joint venture, paying GE $16.5 billion for a 51% stake in NBC Universal. GE CEO Jeffrey Immelt said the deal generated about $8 billion in cash to his company at closing. With the sale of NBC, GE gained not only an immediate healthy boost in cash of $8-$9 billion but also continued in its strategy of focusing on its core industrial businesses. The strategy of GE in the next 5 years also includes mergers and acquisitions activity, but the main goal is to make the company less dependent on them. $ 6 billion are planned to be spent on M&A activity in 2011, and the main accent should be made on the prosperous companies. When they become worse in their segment and stop bringing competitive advantage to GE, the company should

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES finish collaboration with them. According to the preliminary estimations, over the next 5 years GE plans to spend about $ 30 billion on acquisitions. Looking at the core businesses of GE, following conclusion can be made for next 5 years: the transportation and healthcare sectors would see good growth, and energy and aviation would see flattish growth. Energy sector is planned to experience growth till 2015. The following tendencies are expected: - oil: a good new product pipeline, new gas turbines and distributed energy, strong M&A pipeline in the energy business - wind and thermal energy: down in 2011, pricing is planned to be tougher next year - offshore wind: it is very likely that GE will havea 25 percent market share by 2015. Twenty-five percent market share will give about $3 billion in revenue - solar: five percent share in this business is $2 billion or $3 billion by 2015. GE plans to give its solar business a charge in two years with the introduction of panels with the same solar cell material used by industry cost leader First Solar. In 2011, the energy giant expects to produce solar panels made with cadmium telluride, a thin-film solar cell material, said Michael Idelchik, vice president of advanced technologies at GE Global Research Healthcare sector is also planned to experience recovery in next 5 years because of the following tendencies: - there is more certainty in the market, the growth markets are fantastic - GE is counting on European markets - strong positioning in adjacencies such as molecular diagnostics and imaging, CT dose reduction, healthcare IT Aviation sector is also planned to go positive till 2012 as it is a really good market with lots of new airframes and new planes being discussed.
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Transportation sector will also experience recovery till 2015 due to following reasons: - a big snap-back year in 2011 with an improved North American market - heavying up R&D and transportation between now and 2010 In Appliances sector big investments in lighting are planned to be done. The development and success of this sector depend to high extent on the home market. If it gets better, the appliance market will also get better1. Solve problems for customers and society In September 2003, Jeff Immelt challenged the business leaders at GE to come up with "Imagination Breakthroughs," innovative new projects that would serve as the centerpiece of GE's organic growth initiative. These changes are being driven through the business units, focusing on GE Transportation as it launches a series of groundbreaking, green products--from the Evolution Locomotive to the Hybrid Locomotive. The growth process transforms the culture within GE Transportation, leading to a redefinition of the marketing role, the implementation of a "growth leader" profile and new decision-making processes to encourage innovation and risk. Finally, growth presents a critical decision point, as Transportation executives must decide whether or not to support the high-risk Hybrid Locomotive project. The 2 main GE strategic imagination projects are ecomagination and healthymagination. GE's Ecomagination is currently invested in emerging clean tech industries, such as wind turbines and efficient engines for airplanes and locomotives. In the next few years, the company plans to invest particularly in the development of low-carbon products. $10 billion does seem like a lot, although in 2009, the company sold more than $18 billion worth of its Ecomagination
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES products, a revenue that it expects to double by 2015.
GE is hoping to make production of those products greener, as well: it has already cut greenhouse gas emissions by 22% since 2004, and reduced water use by 30% since 2006. The company is aiming at to halve its energy use and reduce greenhouse gases by another 25% by 2015. GEs Healthymagination is a business strategy that will offer dramatic new investments toward achieving sustainable health, while helping GE grow. It is all part of GEs dedication to solving the world's biggest problems. By 2015, the goal of GE is to: - significantly reduce the cost of precedures and processes where possible with GE technology and services
- increase people's access to services, technologies and health education, touching at least 100 million lives in a new way every year
- greatly improve quality of care for patients by partnering with physicians and other stakeholders to focus on innovation that simplify and refine healthcare procedures and accelerate standards of care To reach these goals, the short-term goals are refocusing of efforts, from research to product development, services, consumer capabilities, and partnerships and use of all tools, technology, and expertise, from GE Healthcare to GE Capital, NBC Universal, GE Water, GE Global Research, and the GE Foundation. 80 new products are planned to be introduced in the frame of healthymagination program till 2012. One more strategic initiative of GE till 2015 is the purchase of 25000 electrocars, 12000 of them are planned to be purchased from Chevrolet Volt of General Motors. In the next 3 years, GE could spend in this segment around $ 500 million. The short-term goal of GE is to buy 12000 Chevrolet Volt in 2011 and later the cars of other producers will be bought. Developing leaders
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES According to the words of Jeffrey Immelt, We have always believed that building strong leaders is a strategic imperative. When times are easy, leadership can be taken for granted. When the world is turbulent, you appreciate great people. 1 These words determine the GE strategy in this area for the coming 5 years. People have always been the greatest GE asset. People desiring to make world better with new ideas and technologies are admired and welcomed by GE. Worldwide, about $ 1 billion is invested every year on training and education programs. Education is pervasive at all levels of organization over the course of 15 years, GEs 191 most-senior executives spent at least 12 months in training and professional development. Different programs for leaders development exist such as Entry-Level Leadership Program, Experienced Leadership Program. The Crotonville Leadership Development Center created by J.Welch attracts the worlds brightest and most influential minds, serves as a powerful organizational force and commissions each of the employees with an important reminder: to never stop learning. Thus, the strategy of GE concerning people in the next 5 years remains: to never stop learning and to develop leaders who will successfully lead the company to success. The financial goal for 5-years perspective is to increase annual investment in people to $ 1,5 billion. Asian, European, Abu Dhabi, African Learning Centers are planned to be developed whereas the Learning Center in Russia, China, India are to be opened. The short-term goals are winning again the rewards Best company for leaders and Best rotational leadership programs; development of GEs rich system of human resource policies and practices. The financial sources to finance the strategic goals of GE that have been described above are earnings from investment in emerging markets (increasing
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES sales in China, India); earnings from keeping GE Capital at 30-40% of total operating earnings of the company; earnings from divestment of NBC ($ 8 billion); earnings from concentrating on core activities; earnings from infrastructure acquisitions (Dresser, Clarient, Wellstream). The tendencies in the operating earnings for 2011 can be summarized in the form of the table: Figure 4. 2011 operating framework Operating earnings Industrial GE Capital Flat/Corporate ++ Total operating earnings $ 14-15B CFOA Total revenues $ 1213B 0-5% + continued working capital improvements - lower progress payments + industrial; acquisitions NBCU equity inv-t in Corporate Strong business segment profit growth, partially offset by NBCU dilution Conclusions This work has proved that strategy is essential for any business as it outlines the main directions of its future development. The main aim of this paper was to create the 5-year strategy for the company based on its position in the industry and on the main tendencies in ++ NBCU dilution (-); less restructuring (+), pension (flat) 2010 Flat ++ 2011 + ++ Drivers + healthcare, Transportation, M&A services wind, higher R&D expend. + higher margins, lower losses, real estate firming
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES economic environment. The work has been done for the company General Electric. The first chapter provided a short overview of the company, the second chapter was devoted to the description of current economic environment and its perspectives over the next 5 years. In the third chapter the 5-year strategy was presented for GE. In the example of General Electric, we could see that strategy creation is not an easy and quick process which requires time, a lot of preliminary work, good knowledge of industry the company is operating in, the companys position in this industry, the company strengths and weaknesses, the companys main goals and values. The core idea which lies behind GE strategy can be expressed in the words of the CEO of the company Jeffrey Immelt: When youre GE, you dont have to do it in a day. You can do it in a decade and still have a lot of customers that want to buy your stuff. Right? And so, we do that. 1 References 1. Arnott, Sarah (March 26, 2010). "GE to build 99m UK wind turbine plant" 2. Fairly, Peter. The Greening of GEIEEE Spectrum, July 2005 3. Goldman, Davis; Pepitone, Julianne (December 3, 2009). "GE, Comcast announce joint NBC deal" 4. Murphy, Dennis. GE completes Enron Wind acquisition; Launches GE Wind EnergyDesert Sky Wind Farm, 10 May 2002 5. VentureBeat, Camille Ricketts. "GE Pumps 10B More Into Green Technology R&D." June 24, 2010 6. http://www.ge.com 7. http://www.smartplanet.com 8. http://www.ft.com 9. http://www.reuters.com 10.http://www.ge.com 11.http://www.forbes.com 12.http://www.newstimes.com 13.http://www.wikipedia.com
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES 14.http://www.ssrn.com 15.GE Annual Report 2009 16.GE Fact Sheet
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ALI ISRAILOV IBM

Corporate Culture and Identity A number of dominant organizations have failed in their respective industries due to many reasons such as lack of productivity, poor strategic planning, missed market opportunities, unsuitable acquisitions, obsolete product portfolios,
underfunded research and development, etc. But rarely is a companys failure attributed to its failed culture and just as rarely is a successful companys culture credited for its achievements (Want, 2007, pg.6).
ALI ISRAILOV
Corporate culture contributes directly to a companys ability or inability to effectively manage radically changing business conditions and is the only reliable resource to deal with a dynamically changing business environment (Want, 2007, pgs.3-4). Want (2007) also mentions that when companies are not able to change their cultures, they cannot expect to be successful in responding to radically changing business conditions in the marketplace. They will fail. Training Top 100 magazine ranks companies that support corporate values and enhance the work environment of employees. IBM had been ranked no. 1 in reviews of 500 submissions (ManageSmarter, 2004), but principles can quickly become empty slogans. like muscles that turn soft and weak if theyre not exercised regularly (Rodgers et al., 1986). Therefore, it is necessary to continue investigating if the values and principles that are so highly regarded by outside observers are still effectively achieved in the workplace with the student section of the workforce. Internships, Work placements and Temporary Work Section 4. Global player.Ali Israilov IBM
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES There has been rapid emphasis put on internships in recent times among students and employers alike with regards to its popularity and perceived importance (Oldman and Hamadeh, 2003). Increasingly, organizations are turning to their own internships to find permanent employees with employment directors frequently describing their programs as cost effective bull pens or probationary periods because such programs are low risk means to assess the merits of a potential employee (Oldman and Hamadeh, 2003). The same can be said of the interns because they also use the experience to decide on the suitability of the company, job role and/or industry they will eventually work in. In this regard, IBM is no different than any other company hoping to find appropriate future employees. The twelve month IBM Industrial Trainee (IT) scheme is the largest student hire scheme with an estimated community of 500 hires per annum. The long-term aim is to provide future graduates with interesting roles to keep IBM at the forefront of their minds. The work-placement scheme within IBM hires students for various fields within technical and business areas, including marketing, sales, IT, consulting and HR, to finance, research and development, as well as manufacturing and supply chain logistics (ibm.com, Industrial Trainees, 2009). Forming an important link between learning and earning, work-placements allow students to develop key competencies (refer to Appendix [C.1] IBM Key Competencies), implement their own ideas and identify and/or confirm career aspirations. The most useful element is the insight it provides into the workplace culture, and the opportunities it offers in terms of discovering how well individuals are able to integrate into different environments. Subsequently, IBM consistently ranks in the Top 10 among students for the following: BusinessWeek: Ranked 4th Best Place to Launch a Career. (US)
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES BusinessWeek: Ranked 9th Best Internship Program. (US) Universum: Ranked 4th Best Engineer Program. (India) (ibm.com, Industrial Trainees, 2009) Figure 1 IBM Corporate Structure MARKET CHANNELS DIRECT Face-to-Face Teleweb ibm.com
BUSINESS UNITS IBM Global Financing Integrated Operations Software Group Sales & Distribution Systems & Technology Group Global Business Services IBM Research Global Technology Services
SECTORS Communication Distribution Financial Services Industrial
GEO'S
Americas
Asia Pacific
Public
INDIRECT Business Partners Alliances
Northeast IOT
Small & Medium Businesses
Southwest IOT
COMMUNICATIONS, LEGAL, IT, HUMAN RESOURCES, FINANCE MARKETING, STRATEGY, SALES OPERATIONS Source: Internal IBM Diagram, Induction Booklet IBMs History IBM (International Business Machines Corporation) also known as Big Blue is an IT company providing software, hardware and consulting services in over 170 countries and one of the few IT companies that has a history dating back
Section 4. Global player.Ali Israilov IBM

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES to the 19th century (Euromonitor International, Software & Services Industry Profile World, 2008). The company officially adopted its current name IBM in 1924 due to the growth and extension of activities making the old name of the company too limited (formerly known as the Computer Tabulating-Recording Company, ibm.com, IBM History 1920s). It was initially thought in the computer industry in the 1960s that selling software would not be a profitable trade - it was either provided free of charge by the computer manufacturers or written specifically for each computer installation. There were a number of entrepreneurs who thought otherwise and several years later the concept of charging for software products was given legitimacy by IBMs unbundling in June 1969 (Johnson, 1998). Grad (2002) reaffirms this by stating that many people believe that one pivotal event in the growth of the business software products market was IBM's decision, in 1969, to price its software and services separately from its hardware. The companies founded by these software pioneers grew to become enterprises worth hundreds of millions of dollars and were the prototypes for the thousands of software companies that came after them (Johnson, 1998). Demise and Recovery The early 1990s were turbulent times for the company with many observers commenting that it was a dinosaur, a wreck and an implosion (Mills, 1996). The recovery of the organisation, however, was predicted by other commentators so long as the excessive bureaucracy and costs were eliminated. The appointment of Lou Gerstner as CEO in 1993-2002 achieved this and growth had returned to all the segments of the organisation. The underlying cause of the decline was the failure to strategically plan with regards to its technological expansions, customer commitments and influx of employees with poor job security. Through rigorous management restructuring, the company was able to commit to its promises both to customers and employees (Mills, 1996).
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES As a result of the reformation period that transpired during the early 1990s, the IBM brand today is ranked 2nd in the world in terms of its brand value (Interbrand.com, Best Global Brands 2008) with Coca Cola positioned at the top of the table and Microsoft in 3rd (Best Global Brands 2008). The subsequent rise of the brand has led to an extensive product portfolio that provides a generous range of products & services for all aspects of business needs from software applications dealing with communication and collaboration capabilities to business consulting services (IBM Company Segments & Capabilities). Financial Analysis The majority of the market share is not attributed to any one company as even top performing corporations such as IBM and Microsoft control only 5.3% and 3.3% respectively, while 88.80% is controlled by others (Global Software & Services Industry, Market Share, 2008). IBM generates revenues through five business divisions: GTS Global Technology Services (36.9%), STG Systems and Technology Group (21.8%), Software (20.4%), GBS Global Business Services (18.4%) and Global Financing (2.5%). IBM recorded revenues of $98,786 million during the fiscal year ended December 2007, an increase of 8.1% over 2006. The growth in 2007 revenues was due to strong performance from GTS, GBS, and software business driven by key middleware products. Strategic acquisitions and continued growth in emerging markets Brazil, Russia, India and China, also contributed to the increased revenues. Operating profit was $14,474 million during fiscal year 2007, an increase of 12.8% over 2006 with net profit at $10,418 million in fiscal year 2007, an increase of 9.8% over 2006 (Butler Group, IBM Company Profile, 2008) Corporate Values The basic beliefs of Tom Watson, IBMs founder, guided the company through nearly a century of change providing guideposts for multiple

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES reinventions that turned a small company into one of the pillars of global commerce. He implemented a series of effective business tactics through a focus on customer service and instilling company pride and loyalty in every worker. Based on the two cultures that are inherently present within organisations, IBM would be the best example of the more liberal company whereby ideas come ultimately from individuals...people are responsible, motivated and capable of governing themselves (Handy, 1993, pg. 182). By 2003, IBMers came together by tens of thousands in a worldwide, 72hour on-line discussion on what, at its core, IBM propagates. Thousands of
comments posted by IBMers over the course of the so called ValueJams were analysed and distilled into three values: Dedication to every clients success. Innovation that matters for our company and for the world. Trust and personal responsibility in all relationships. The values of IBMers shape what choices they make on behalf of the company. Having a shared set of values helps to make decisions and, in the process, makes the company unique in terms of uplifting its employees and providing value to its clients and other stakeholders. In summary, the IT industry is an extremely dynamic and evolving sector in which IBM had held some dominance until its slow decline within the late 1980s and early 1990s. Its subsequent revival through Lou Gerstner has now made it the 2nd most valued brand in the world with highly regarded values towards its clients, innovative practices and trust. Diversification (New Products/New Market) Diversification is aggressive growth strategy. The major reason for this issue is because on the one hand products are not tested in the certain markets, on the other hand there are no solid guarantees that markets themselves are profitable. However IBMs success and reputation derives from the consistent innovative
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES ideas which differentiate them from their competitors in the market. In order to expand itself, IBM offering wide range of brand products to its customers. IBM is considered as the international company, as the result new potential markets are various markets all over the world. Set as the medium-sized business at first, the company has diversified and establishes its offices in the countries like: France, Germany, Hungary, Indonesia Italy and Jordan. The Russian Federation, after its independence in 1991, has been characterized as potentially new market with variety of opportunities. Today IBM has expanded and set up several offices insuch financially-beneficial cities as Moscow, Petersburg, Tomsk, etc.. One of the most innovate ideas (besides selling electronic products) was supporting local middle and small sized businesses, by providing a full package of software as well as hardware products. Market Development (Existing Products/New Market) IBMs major and effective strategic approach which has been successfully performed over decades is discovering new markets and supplying them with the existing products. Firstly, IBMs strategy involves exporting products. This has the undisputed advantage of identifying the abilities of the product. If the market has sufficient sales rates, then it is considered as the potential for the investment. Secondly, after establishing itself in the market, IBMs tactics involves searching for the most attractive demand on behalf of electronic shops, computer clubs, offices, etc. This is all known as discovering major distribution channels and benefiting to the maximum from it. IBM is one of the most professional groups which can easily adjust itself to all rules and regulations of the market. The company has been very successful by expanding itself all over the world. The company uses most convenient styles of cooperating by using local language where necessary. This tactics breaks language barriers and helps to work in the mutually-beneficial exchange process between local customers and IBM. (IBMs

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES outlets, warehouses and even web-sites are constructed for the convenience of the local consumers). For such countries as Mexico and Spain, all information is provided in Spanish. Malaysia, Kuwait, Ireland,Hong Kong aretransactedin English. Poland and Japan are negotiated in Polish and Japanese respectively. Product Development (New Products/Existing Market) The general and well-established strategy successfully obtained by IBM;innovation of ideas and transforming those ideas into products and services then furnishing those goods into the market. Thisis what the company is famous for. Rather than discovering new potential markets and spending time and money over sophisticated research, the company regularly uses New Products/Existing Market strategy. This motivates IBM for more ideas, to set and reach objectives. Operating in the same market encourages for new ideas, and determination of objectives. IBM does possess those ideas and offers a wide range of variety of products and services on the regular basis. IBM Security Services IBM Security Services has the absolute and undisputed leading position in the market. IBM Security Services possess knowledge, experience, skills, professionalism, capabilities, and highly efficient working personnel to furnish customer with the best security ever. IBM constructseffective security bases to
decrease costs, develop services, and manage risk in the non-stop moving business environment, searching for the best track of cost-positive change and by strengthening and bringing security on the higher level: Searching and identifying the most dangerous threats Decreasing the costs for brand new security versions
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Searching and solving the threats of continuous situations with nonobservance Decreasing the costs of the effective and efficient control IBMs professional services: Integrated communications services Connect technology (including computers, laptops, desktops, etc) into one worlds networking system IT strategy and design opportunity Develops manufacturing of IT to implement integration between IT strategy and business major objectives Business sustainable services Sustain web operations safely, immoderately defines major threats and uses the most efficient ways to protect them
IBM & ADM (Advanced customer management) IBMs ADM offers efficient distributional channels directed towards split customer groups through well-established furnishing channels. Increasing revenue is the major objective for any business to expand. By the help of IBMs ACM solution, the company researches and discovers customers UVP (unique value proposition), most profitable customer groups and the collaboration and integration strategy applied towards those groups. Those services derive from the long-term work experience and represent the strategy that is IBM has built during decades: Profit growth plan Customer entrapping plan Customer brainstorming strategy Market brainstorming strategy Efficient sales rate Identification of new sales objectives Section 4. Global player.Ali Israilov IBM
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Development and improvement of sales quality
Searching for the right personnel Likethe most ambitious and successful companies, the IBM always looking for young enthusiastic, perspective, responsible team-working apprentices who under IBMs control and training, would grow into professionals in different areas. This is part of so-called long-term plan. This is the strategic approach which was set up and improved on the regular basis from the moment company started its journey in the world of business. The service is distinguished from others by its specific way of choosing right person as well as settling him on the right place. The approach consists of list of services which were verified and justified as the beneficial ones: Organizational and Structural Approach Professional training analyses Leadership identification and evaluation Personnel development Exclusive employees training Self control, self confidence, team-working analyses IBMs corporate strategies IBMs corporate strategies searching and discovering most essential business strategies.. Those strategies consist of apply to front office services as: Selling Order entry Customer service Purchasing
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Production Control IT Payroll HR And back office services: Manufacturing Warehousing Distribution Transportation processes The profitable strategies derive from appropriate strategic processes. IBM improves itself by using those approaches in order to generate higher revenue and receive more profit: Major process identification Quality/efficiency/effectiveness Process Verification/justification Process Determination Process Evaluation Process By using the strategic process approaches the company progressed considerably in different operational, technological, distributional manufacturing processes. Those processes also include: Qualitative and quantitative manufacturing Plant and factory establishment :

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES Warehouse constructions and spaciousness Technological development and usage IBMs products and services IBMs products and service strategy offering technologically advanced, qualitative, well-designed, highly productive, useful and price-beneficial products and services. Promoting and representing those products to the public in general is an important strategy in which the company directs high financial investments in order to receive recognition. The IBM is aware that with less contribution towards the development of products and services, there is always the chance customer loss in the market due to high competitions. IBM effectively controls this situation by using and implementing its own policy:
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES.
Product innovation Product construction Product portfolio planning Service portfolio planning Product / service revenue expansion New product/service development IBMs Expansion and development plan IBMs Expansion and Development plan- the brainstormed plan for the efficient profit plan policy that provides most appropriate ways to expand the business, increase the total revenue and establish its brand recognition in the market. When IBMs Expansion and Development plan is fully set, the
companystarts implementing it by using its professional service tools such as: Aims, Objectives, Policy, Evaluation Competition strategy Strategy support Implementation management acknowledgment Competitive strategic approach ( SWAT, PESTLE) Demand and supply research Developing mergers and acquisition planning

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IBMs moral ethics IBMs moral ethics establishing list of rules and regulations which will go alone together with beliefs, values, traditions, and customs to inspire the team, strengthen the relationship in the organization, to set such environment in which every member will work in the mutually beneficial exchange process within IBM. IBMs moral ethics systems integrate each person in one team to collaborate evaluate and develop one common opinion which will be adoptedinto decision making process. As the leader in technological goods and services around the world, IBM has set effective time management to identify and implement major aspects of ethical behavior: Equal treatment policy
Traditional, Cultural, Religion acknowledgement Responsibility, Understanding Policy Personnels values believes IBM SWOT Analyses
Strength IBM is one of the most recognized organizations in the world. Over decades it has established itself in all major countries. The company demonstrates outstanding performance in the market, leaving all competitors behind. IBM has invested enormous amount of finance, assets and time which in the result turned into incredible revenues.
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The company has the ability to continuously observe the market and identify what new products do customers need. IBM consists of one of the most professional, skilful, loyal determined personnel. The company concentrates not only on the revenue rates but also the efficiency and effectivenessof the product Customer satisfaction and delight is the priority for IBM Wide range of products and services Innovation in the technological production Ethics values and customers are highly considered Advertising strategies, professional level of promotion Free access to information through books, journal, internet
Weaknesses: The company has various factories, manufactoring centres andoffices all over the world. This might negatively affect in the way that there is a chance for the lack of control over the different branches. IBMs products can be the victim of the so-alled black market. (Same products with the same label are supplied in the market, but with poor quality). Generally technological competition is growing over the worlds biggest markets, as the result lack of innovations might have negative effect on the sales revenue. Opportunities: The technological business is rapidly growing. This gives extremely incredible opportunities to develop and expand

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Threats: The expansion of the technological market may drive IBM tohigher investments which might result in losses The dramatic change in the development of the technology itself may be difficult to control and follow up Possibility of new markets with wide range technological goods and services PESTEL Analysis Political factors: IBM is operating all over the world. Every country has its own taxation rates, higher in Western Europe and lower in Eastern, whereas in some Asian countries taxation is considered extremely low. Nowadays, the company tries to apply to those countries with lower taxation systems. This will give the company freedom to concentrate on the right price and equally compete with major outlets. Socio-cultural factors: The Internet is one of the most common tools nowadays, neutral towards age, gender, race, status, authority or social position. For such companies like IBM, the proportion of internet expansion will only lead to increase in total revenue sales. Technological factors: A recent survey identified that there over 7 million Internet hosts in2010, with over900 Internet Service Providers in 2005. This market has all necessary tools for continuous rapid expansion. Environmentalfactor: IBM is the leader for innovative products designed and has developed special technological systems for NASA specifically made to observe the planet and its environmental changes. This support toward astronaut development dramatically increases popularity and recognition of the public.
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Legal: IBM is mainly concerned with environmental conditions and the usage of materials (chemicals) in producing hardware and most efficient approaches to avoid those pollutions. Conclusion Taking all facts, figures, processes and strategies into consideration, it is clear, that IBM is the absolute leader in the technological production all over the globe. The company has various branches in most significant markets. The company with the incredible determination possesses all major tools to succeed in the market: professional personal, customer recognition, well established brand, continuous innovations in technology, appropriate prices. Furthermore, the company uses different strategies to enter and control the market from the moment it starts operating in it. IBM has outstanding investment policy, that always turns into the dramatically high revenues. The IBM as the company is considered itself as the part of political, social, economical, technological processes. IBM is the company that was builtfrom loyal, determined, responsible and highly-professional personnel. The company has free access to informational resources that saves time of the customer. The variety of products and services is the major part of IBMs strategy. Discounts, special deliveries, qualitative technological products of all kind are available to a customer on the regular basis. Taking this knowledge into final conclusion, it is clear that for next 5 years IBM will not just survive in the worlds market, but will strengthen its leadership position, brand recognition, loyalty and expand to ahigher level.
References
1. Aaltio-Marjosola, I. and Mills, A. J. 2002. Gender, Identity and the Culture of Organizations. Routledge 2. Albert, S. and Whetten, D. 1985. Organizational Identity in J. M. T. Balmer and S. A. Greyser Editions, Revealing the Corporation: Perspectives on Identity,

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STRATEGIES IN CORPORATE FINANCE CASE STUDIES. Image, Reputation, Corporate Branding and Corporate-level Marketing. 1st Edition. London: Routledge, 77 105. Anthony, P. 1994. Managing Culture. Open University Press. Bjerke, B. 1999. Business Leadership and Culture: National Management Styles in the Global Economy. Edward Elgar Balmer, J. M. T. And Greyser, S. A. 2003. Managing the Multiple Identities of the Corporation in J. M. T. Balmer and S. A. Greyser Editions, Revealing the Corporation: Perspectives on Identity, Image, Reputation, Corporate Branding and Corporate-level Marketing. 1st Edition. London: Routledge, 15 29. Carroll, P. 1994. Big Blues: The Unmaking of IBM. London: Orion Books Creswell, J. W. 2003. Research Design: Qualitative, Quantitative, and Mixed Method Approaches. 2nd Edition. SAGE
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8. Daft, R.L. 1986. Organization Theory and Design. New York: West Publishing 9. Dornbusch, S. M. and Scott, W. R. 1975. Evaluation and Exercise of Control Applied to Diverse Organizations. San Francisco: Jossey-Bass Inc 10. Fairholm, G. W. 1994. Leadership and the Culture of Trust. Greenwood Publishing Group 11. Fitz-Enz, Jac. 2005. The 8 Practices of Exceptional Companies: How Great Organizations Make the Most of Their Human Assets. AMACOM Div American Mgmt Assn 12. Foddy, W. 1994. Constructing Questions for Interviews and Questionnaires: Theory and Practice in Social Research. Cambridge University Press 13. Frederick, W. C. 1995. Values, Nature, and Culture in the American Corporation. Oxford University Press US 14. Frost, P.J. et al. 1991. Reframing Organizational Culture. Thousand Oaks, CA: Sage. 15. Gibbs, J. P. 1981. Norms, Deviance, and Social Control: Conceptual Matters. New York: Elsevier 16. Green, M. E. 1997. Internship Success: Real-world, Step-by-step Advice on Getting the Most Out of Internships. McGraw-Hill Professional 17. Handy, C. 1993. Understanding Organizations. 4th Edition. London: Penguin Group. 18. Huczynski, A. and Buchanan, D. 2001. Organizational Behaviour An Introductory Text. 4th Edition. Harlow: Prentice Hall 19. Kanter, R. M. 1983. The Change Masters: Corporate Entrepreneurs at Work. London: George Allen & Unwin 20. Kotter, J. and Heskett, J. 1992. Corporate Culture and Performance. New York: Macmillan Inc. 21. Martin, J. 1992. Cultures in Organizations: Three Perspectives. New York: Oxford 22. University Press 23. Melewar, T. C. 2008. Facets of Corporate Identity, Communication and Reputation. New York: Routledge 24. Moingeon, B. 2002. Corporate and Organizational Identities: Integrating Strategy, Marketing, Communication and Organizational Perspectives. Routledge
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STRATEGIES IN CORPORATE FINANCE CASE STUDIES. 25. Oldman, M. and Hamadeh, S. 2003. The Best 109 Internships. 9th Edition. The Princeton Review 26. Oden, H. W. 1997. Managing Corporate Culture, Innovation, and Intrapreneurship. Quorum Books 27. Olins, W. 1978. The Corporate Personality: An Inquiry into the Nature of Corporate Identity. London: Thames and Hudson 28. Parker, M. 2000. Organizational Culture and Identity: Unity and Division at Work. SAGE 29. Rogers, B., Shook, R. and Peters, T. 1986. The IBM Way: Insights into the Worlds Most Successful Marketing Organization. New York: Harper & Row Publishers 30. Sathe, V. 1985. Culture and Related Corporate Realities. Homewood, IL: Irwin. 31. Saunders, M, Lewis, P and Thornhill, A. 2006. Research Methods for Business Students. London: Pitman Publishing. 32. Schein, E. H. 2004. Organisational Culture and Leadership. 3rd Edition. New York: John Wiley and Sons 33.Scherer, F. M. 1980. Industrial Market Structure and Economic Performance. Boston: Houghton-Mifflin Company

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SOFIA PETROVA APPLE INC

Introduction The purpose of this report is to review a corporate strategy of Apple, Inc, at the present time and during the following five years. The review takes into consideration the economic environment of the IT industry as a whole at present and in the future, including recent and upcoming trends analysis; Apple's competitors position and
influence on the company and on the IT; and recommendations on Apple's strategy and sources of financing during approximately the next 5 years. Apple Inc. is an American multinational corporation that designs and manufactures consumer electronics, computer software, and commercial servers. The company's best-known hardware products include Macintosh computers, the iPod, the iPhone and the iPad. Apple software includes the Mac OS X operating system; the iTunes media browser; the iLife suite of multimedia and creativity software; the iWork suite of productivity software; Aperture, a professional photography package; Final Cut Studio, a suite of professional audio and filmindustry software products; and Logic Studio, a suite of audio tools. As of January 2010, the company operates 284 retail stores in ten countries, and an online store where hardware and software products are sold. Established in Cupertino, California on April 1, 1976 and incorporated January 3, 1977, the company was called Apple Computer, Inc. for its first 30 years, but dropped the word "Computer" on January 9, 2007 to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. As of September 25, 2010, Apple had 46,600 full time employees and 2,800 temporary full time employees worldwide
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and had worldwide annual sales of $65.23 billion. For reasons as various as its philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand, particularly in the United States. Fortune magazine named Apple the most admired company in the United States in 2008 and in the world in 2009. 1 In order to fulfill the report task, such sources of information as the company's annual report, official website, other internet sources, as well as the internet press releases of online magazines have been used. Information from the above-mentioned sources have been carefully analyzed, processed and presented here. Also, an overview of IT industry was made to make it possible to analyse and predict the current and future strategies of Apple, Inc. IT-industry overview Information technology, and the hardware and software associated with the IT industry, are an integral part of nearly every major global industry. The information technology (IT) industry has become one of the most robust industries in the world. IT, more than any other industry or economic facet, has an increased productivity, particularly in the developed world, and therefore is a key driver of global economic growth. Economies of scale and insatiable demand from both consumers and enterprises characterize this rapidly growing sector. Information technology is a huge industry not only in itself, but also as the source of dramatic changes in different business practices in other sectors. The term IT covers a variety of related disciplines and areas, from semiconductor design and production (also covered in the profile of the electronics sector), through hardware manufacture (mainframes, servers, PCs, and mobile devices), to software, data storage, backup and retrieval, networking, and, of course, the
1http://en.wikipedia.org/wiki/Apple_Inc - "Apple, Inc.". Wikipedia, the free encyclopedia
Section 4. Global player.Sofia Petrova Apple Inc

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internet. 1 Unlike other common industries, the IT industry is knowledge-based. Moreover, the IT industry helps many other sectors in the growth process of the economy including the services and manufacturing sectors. The top five global companies providing IT services and solutions are International Business Machines Corp., HP Enterprise Business, Fujitsu Ltd., Rdz Sweden and Hewlett-Packard International, according to Hoovers. According to the Economist Intelligence Unit (EIU), relatively few countries possess all the factors necessary to support a thriving information technology (IT) sector, but the United States, Japan, South Korea and the United Kingdom provide the strongest environments for IT competitiveness. 2 Each of the major sub-areas in IT can be divided into its component parts, in turn. Somewhat off the main track of IT at present, but still very interesting and related to both increases in processor power, and to work in simulation and artificial intelligence, is the field of robotics. The impact of crisis All these trends have enabled the IT industry to continue to generate a strong demand among businesses and individuals for the next generation of servers, PCs, and laptops. However, in the period of crises, companies of all sizes generally postpone upgrading their IT, or implementing major IT projects that are not already in hand. Such a global downturn of the industry had quite a big impact on revenues of many companies in the sector worldwide. According to Gartner, the world's leading information technology research and advisory company, worldwide server shipments and revenues saw double-digit
1 http://www.qfinance.com/sector-profiles/information-technology"Information Technology Industry". QFinance, the ultimate finanal resourse 2 http://itvoir.com/portal/boxx/knowledgebase.asp?iid=274&cat=3- "World's IT industry competitive index : US, Japan, South Korea, UK and Australia top the charts.". Itvoir.com
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declines in the fourth quarter of 2008 1. Compared with the same quarter in 2007, shipment numbers declined by 11.7% while revenue dropped by 15.1%. Gartner said that the fall in shipments and revenue was reported across all regions apart from Japan, which managed a 4.7% revenue increase. Europe, the Middle East, and Africa (EMEA) suffered the worst decline, with revenues falling by 20.6%. Even the emerging regions of Latin America and Asia-Pacific suffered, with declines of 12.5% and 14.8%, respectively. North America server revenue declined by 14.6%. 2 The scale of the IT server sector as an industry can be seen from the fact that IBM, the market leader, ended 2008 with revenues of US$4 billion from server shipments, with almost exactly one- third of the global market. However, IBM saw revenues decline by 17.4% as a result of the downturn. Hewlett-Packard was next, with revenues of just under US$4 billion and with a 30% market share. 3 Thus, the figures in server shipments for 2008 represent the situation of the IT market in the period of crises quite clearly. When the crises came to the end, the situation on the IT market became better. According to analyst firm Forrester Research, the U.S. IT market was projected to grow by 8.1 percent in 2010. Forrester projected that total spending on U.S. information and communications technology would reach $758 billion in 2010. 4 Recent and future trends of IT The recession has changed IT priorities. Software-as-a-service and other cloud options, for example, are suddenly more alluring. The downturn has made many companies focus more strongly on how they use their assets, how they make
http://www.gartner.com/it/page.jsp?id=905914- "Gartner Says Worldwide Server Shipments and Revenue Experience Double-Digit Declines in Fourth Quarter of 2008". Gertner Newsroom 2 Ibid. 3 Ibid. 4 http://www.ehow.com/facts_7390697_information-technology-industry-analysis.html"Information Technology Industry Analysis". EHow
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investments, and whether or not it makes sense to put a lot of capital into their own IT and their own data centers. As for the IT companies, their resourses still remain tight, and sometimes make it rather difficult to keep up with and execute all the changes in their core infrastructure. Still, compared to 2008, the economy is recovering from the crisis and the access to capital funds has become a little easier. In 2010, it became clear to anyone following the industry that applications of Apple and Android are changing the way people use the Internet and the way businesses structure profit and marketing models. New gadgets and services - such as iPad, micro-blogging and Twitter-clone sites in China - continue to change people's lives. New technologies, including cloud computing and Internet of Things, have developed rapidly thanks to government support. For the first time, a China-developed super computer ranks No. 1 in the world in terms of calculation ability. As for 2011, many research firms, e.g. McKinsey, predict cloud computing to be a critical driving force in the industry. The others include mobility, analytics, IT democratisation, IT abstraction and convergence. 1 The research firm IDC predicts the technologies will merge into a new mainstream platform for IT industry and those industries will serve. According to IDC, the platform transition will be stimulated by another solid year upturn in IT spending. The research firm expects that next year, the global IT spending to U.S. $ 1600 billion, an increase of 5.7 percent compared to 2010. 2 In 2011 the cost of public IT cloud services will grow to more than five times the rate of the IT industry, an increase of 30 percent from 2010. Transfer app-able, non-PC mobile devices is expected to more than PCs during the next 18 months. IDC predicts that about 25 billion mobile users apps will be downloaded
http://www.netqin.com/en/security/newsinfo_3628_3.html- "APAC IT market predictions for 2011". NetQin, technology pioneer 2 http://indianews99.com/news/business-news/idc-predicts-new-mainstream-platform-for-it-industry-in2011/- "IDC predicts new mainstream platform for IT industry in 2011". India News
1
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in 2011 and says over time, it is still new software ecosystems fundamentally restructure channels for digital content and services to consumers. 1 Taking into consideration all the above mentioned information, it can be concluded that further development of the IT sector as a whole, and of all the firms operating in this sector, will mostly depend on such trends as mobility, compactness and intelligence of all the devices and services, andof course cloud computing and nanotechnology. Thus, the strategy of Apple, Inc. and its financial position will depend on its ability to keep up (or even implement) all those trends, and to compete successfully with other companies in IT segment. Apple, Inc. overview This chapter contains an overview of Apple, Inc, and includes information on its current financial position, performance and competition. All this information must be included and analysed in order to get a full image of the company's position and to be able to draw some conclusions and proposals concerning its future strategies and perspectives. In order to get a full image of Apple, Inc. at the moment, including its financial position, its annual report should be used. This report is called "Form 10K" and can be downloaded from the official website of the company. It represents such data as the companysbasic information, business description, risk analysing, competitors analysing, etc. The data is valid for the fiscal year ended September 25, 2010. Apple Inc. and its wholly-owned subsidiaries designs, manufactures and markets a range of personal computers, mobile communication and media devices, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The company's products and services include Macintosh ("Mac") computers, iPhone, iPad, iPod, Apple TV, Xserve, a portfolio of consumer and professional
1
Ibid.

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software applications, the Mac OS X and iOS operating systems, third-party digital content and applications through the iTunes Store, and a variety of accessory, service and support offerings. Apple, Inc. sells its products worldwide through its retail stores, online stores, and direct sales force and third-party cellular network carriers, wholesalers, retailers, and value-added resellers. In addition, the company sells a variety of third-party Mac, iPhone, iPad and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals, through its online and retail stores. The company sells to consumer, small and mid-sized business ("SMB"), education, enterprise, government and creative markets.1 Apple is committed to bringing the best user experience to its customers through its innovative hardware, software, peripherals, services, and Internet offerings. Its business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design. Apple believes that continual investment in research and development is critical to the development and enhancement of innovative products and technologies. 2 Financial position The financial position of Apple is quite strong, and has been for a long time. Even in the period the crisis, the company managed to finish 2008 with a revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share. And this is more than it was in the same quarter of 2007, when Apple's revenue was $6.22 billion and net quarterly profit of $904 million, or $1.01 per diluted share, as the company's annual reports state. 3
1 2
https://www.apple.com/investor/- Apple's "Form 10-K" Ibid.

http://www.apple.com/pr/library/2008/10/21results.html
- "Apple Reports Fourth Quarter Results 2008", Apple.com
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As for 2010, on October 18 Apple announced that the company revenue was a record and reached $20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted share. These results compare to revenue of $12.21 billion and net quarterly profit of $2.53 billion, or $2.77 per diluted share, in the year-ago quarter (2009). Gross margin was 36.9 percent compared to 41.8 percent in the year-ago quarter. International sales accounted for 57 percent of the quarter's revenue. Apple sold 3.89 million Macs during the quarter, a 27 percent unit increase over the same quarter a year-ago, as well as 14.1 million iPhones in the quarter (91 percent unit growth over the year-ago quarter). Sales of iPad are also rocketing. The Company sold 4.19 million iPads during the quarter (taking into consideration the fact that the gadget was introduced this year). As for ipod, its sales deceased a bit, and were 9.05 million iPods during the last quarter of 2010, representing an 11 percent unit decline from the year-ago quarter. Peter Oppenheimer, Apple's CFO is quite pleased with such results, and states that the company has generated almost $5.7 billion in cash flow from operations during the quarter. He expects to achieve a revenue of about $23 billion in the first fiscal quarter of 2011.1 2.3. Performance and Competition Apple is confronted by aggressive competition in all areas of its business. The markets for its products and services are characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of personal computers, mobile communication and media devices, and other digital electronic devices. The financial position of Apple thus can be rather affected by the behavior of its competitors, such as price cuts, lowered product margins, etc. The principal competitive factors include price, product features, relative price/ performance, product quality and reliability, design innovation, availability of software and peripherals, marketing and distribution
http://www.apple.com/pr/library/2010/10/18results.html
- "Apple Reports Fourth Quarter Results 2010", Apple.com

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capability, service and support, and corporate reputation, as it is stated in the annual report of Apple, Inc. 1 Due to the wide range of products and services that Apple supplies, its competitors differ from segment to segment. From the point of view of the author of this report, the most important competitors of Apple at the moment are:
In the computer segment,
both hardware and software, it is surely Microsoft, Inc.
with its PCs and Windows. Microsoft has been an Apple competitor from the very moment of these companies foundation, and remains a keyone today. -In the software segment only, it is mostly Microsoft (Windows) and, recently, Google (with its new Chrome OS and Android)
In the hardware segment only,
these are many other producers of laptops, tablets,
etc, such as HP, Toshiba, Acer, Asus and others. -In the segment of mobile phones, these are such brands as Nokia, LG, Samsung, Phillips, Motorola and many other firms. -In the segment of services, such companies as Amazon have appeared to be rather dangerous competitors. -Finally, numerous producers of mp3 players (such as iRiver or Explay) should not be forgotten either. Some of these examples will be considered in detail below. Apple has launched three major new product lines since 2001: the iPod (October, 2001); the iPhone (July, 2007); and the iPad (April, 2010). The company's stock has increased by 3,000 percent since the launch of iPod, 125 percent since the launch of iPhone, and 20 percent since the launch of iPad. 2 This is illustrated in appendixes. (see App.1)
https://www.apple.com/investor/- Apple's "Form 10-K" http://www.investmentmoats.com/stock-market-commentary/business/apples-a-case-studyof-great-segmentation-strategy/- "Apple's a case study of great segmentation strategy". Investment Moats Stock Market Investing
1 2
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Despite the 2009 recession, Apple made significant alterations to its products and also the company decided to change its strategy in 2010 to compete with Google, Microsoft and other companies. According to the data from the research companies, in the first half of 2010, Apple sold 17 million mobile handsets compared with 400 million handsets sold by Nokia, Samsung and LG. Yet it pulled in 39% of the industry's profit during that period, more than the 32% earned by the world's three largest handset makers combined. 1 This situation indicates rather clearly that although the company does not have the biggest market share compared to other companies, its influence on the whole industry is rather strong (see Graph 1 and Graph 2).
Graph 1. Share of industry profits Jan. to June Graph 2. Mobile handsets sold Jan. to June 2010. 2010. Source: Canaccord Genuity and IDC Source: Canaccord Genuity and IDC
All the above mentioned companies outsold Apple in raw units in a ration of 23.5 to 1, but combined they are garnering only 82 percent of Apple's profit level. A marvelous, successful result of a true market-leader.
This can be explained byApple's ability to monetize its
innovative products through selling high-margin consumer products that drive strong earnings results and growth trends for Apple shareholders.
The situation in thePC market is even better.
Apple's share of the U.S. personal
computer market grew more than 13% to reach a modern day high of 10.4% for the third quarter of 2010, leaving it just 17,000 units of becoming the nation's third largest PC vendor.2
http://tech.fortune.cnn.com/2010/09/21/pie-chart-apples-outrageous-share-of-the-mobileindustrys-profits/- "Apple's outrageous share of the mobile industry's profits". CNN news 2 http://www.appleinsider.com/print/10/10/13/apples_share_of_u_s_pc_market_cracks_the_10_barrier.htm l- "Apple's share of U.S. PC market cracks the 10% barrier". Apple Insider

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According to statistics released by market research firm Gartner, Apple has sold 1,831,664 Macs in the United States alone for the three-month period ending September. That is up sharply from the 1,611,000 units the company shipped domestically during the same period last year, which netted it a 9.3% share of the market (see the graph below).
Company HP Dell Acer Apple Toshiba Others Total 3Q10 Shipments 4,459,473 4,188,688 1,848,511 1,831,664 1,629,100 3,650,807 17,608,242 3Q10 Market Share (%) 25.3 23.8 10.5 10.4 9.3 20.7 100.0 3Q09 Shipments 3Q09 Market Share (%) 4,372,231 4,447,478 2,338,816 1,611,000 1,427,000 3,036,573 17,233,099 25.4 25.8 13.6 9.3 8.3 17.6 100.0 Growth (%) 2.0 -5.8 -21.0 13.7 14.2 20.2 2.2
Graph 3. Preliminary U.S. PC Vendor Unit Shipment Estimates for 3Q10 (Thousands of Units) . Source: Gartner
Overall, Apple ranked fourth on the firm's list of top U.S. PC vendors, falling just 17,000 units shy of Acer, which saw shipments decline 21 percent to 1,848,511 units. Apple's iPad sales are not factored into Gartner's totals (and if they were, the situation would be completely different). However, it is interesting to notice that a rival of Gartner - a market research company called IDC - stated that Apple ranked number 3 with its Mac sales:
Company HP Dell Apple Acer Group Toshiba Others Total 3Q10 Shipments 4,591 4,352 1,999 1,949 1,592 4,387 3Q10 Market Share (%) 24.3% 23.1% 10.6% 10.3% 8.4% 23.3% 3009 Shipments 3Q09 Market Share (%) 4,469 4,578 1,611 1,946 1,426 4,151 18,181 24.6% 25.2% 8.9% 10.7% 7.8% 22.8% 100.0 /o Growth (%) 2.7% -4.9% 24.1% 0.1% 11.6% 5.7% 3.8 /o
Graph 4. Preliminary U.S. PC Vendor Unit Shipment Estimates for 3Q10 (Thousands of Units) . Source: IDC
IDC notices that the influence of Apple on the PC market continues to grow.
As for the global market, the first 6 companies were HP, Acer, Dell, Lenovo, Asus and Toshiba , according to Gartner. This can be explained by a comparatively higher price of Macs outside the US markets, which makes Apple computers not so popular among users with middle-to- low income customers, especially in Asia.
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However, it is also interesting to mention that Apple owned a 90% market share for premium PC priced 1000$ and more in the US, as of 1 February 2010, according to NPD. This means that 9 out of 10 dollars spent on a computer of a premium kind was spent on a Mac.1 As for iPad, this device bit all the records ever since its launch. According to a report by Morgan Stanley analyst Katy Huberty, the iPad is on track to become the world's most popular mobile device, within just 3 months of its launch. Morgan Stanley projects sales of 16 million units in the first year alone. With over 3.3 million iPads sold in less than 3 months, that is an argument hard to refute.2 According the report by YuDu Media, in the latest quarter (April to June), the iPad generated $2.17 billion in revenues, representing almost 14% of Apple's total income for the period. For the first time ever, just after the iPad launched in April, netbook sales growth declined with figures dropping by 13% (compared to a 25% growth the previous month).3 Another analytical company - Strategy Analytics - states in its report that iPad provided 95% of the world's tablets market sales. "The tablet has started", as they say, and other tablets based on Android, Windows, MeeGo ! webOS will try to securea bigger market share soon. 4 To sum up, Apple has rather strong competition in all segments of its production. Although the company does not take the first places in quantity measures, it still manages to have quite a big influence on the whole market, and surely has the most loyal consumers in its segment, who tend to stick to Apple products from the moment they try it. In order to stay successful in the future,
1
http://www.betanews.com/joewilcox/article/Nine-out-of-10-premiumpriced-PCs-sold-
at-US-retail-is-a-Mac/ 1265047893 - "Nine out of 10 premium-priced PCs sold at US retail is a Mac". Betanews http://www.slideshare.net/yudu/the-apple-ipad-trends-and-statistics- "The Apple iPad trends and statistics", YuDu Media report 3 Ibid. 4 http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5863- "Global Tablet Vendor Market Share: Q3 2010". Strategy Analytics
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Apple should pay attention both to its current competitors and to new potential ones, as well as develop its unique corporate strategy further. The strategy itself, together with its future perspectives and some investment ideas, will be considered in detail in the next chapter. Corporate strategy and recommendations This chapter contains an overview of the current Apple strategy and recommendations on its further development in the next five years, together with some investment ideas. Strategy From the point of view of the author of this report, the best advice for Apple to stay successful and increase its market share, concerning its strategy, is the following: go on with the current strategy, as it is. The Apple company is a true phenomena from strategic point of view. And the cornerstone of this strategy is innovation and quality. Apple has the most loyal consumers ever. When people sleep outside of stores just to be one of the first to buy an iPhone, their fanatical brand loyalty becomes obvious. This brand success is not a result of dumb luck; it is a part of a well-thought-out plan to deliver strong products and to create a socalled "Apple culture". The things to create such a culture can be all combined into a short list:
A Store Just for Apple:
A problem which made it difficult for Apple to set its
very different products apart from the rest of the computing crowd has historically troubled Apple. A solution to this was the creation of its own store. By creating a store strictly devoted to Apple products, the company has not only eliminated this problem but has made an excellent customer-loyalty move. Apple stores are a friendly place where customers are encouraged to play with and explore the technology that the company offers, as well as hang out with each other. By creating this space, Apple encourages current and new customers to get excited about what it has to offer.
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In the next five years, it is for sure that the company will not give up its personal stores, and this tendency will still exist. Which will, in turn, keep this "Apple culture" alive, and Apple products - always unique and "different". Just like in one of the company's well-known commercials - "be different". Should Apple ever try to make its products like all other products in a computer store it will lose its image, and its customers. Complete Solutions: Apple's products complementeach other. For the average user, most Mac programs are produced by Apple. A user of iPod can download all the music via iTunes. A user of iPhone can download software via AppStore. A user of iPad gets the Times subscription together with the gadget. Apple has control over the entire user process, from hardware to software, strengthens customer loyalty. As for the nearest future, this tendency will remain, and even develop. As cloud computing becomes more and more popular, Apple should pay special attention to its cloud-like services, and keep an eye on its rivals in this segment. Software is just asimportant as hardware for Apple. Varied Products: Many consumers may not be ready to buy an Apple computer, but they're willing to purchase gadgets like the iPod or iPhone. By selling products with lower entry costs, it creates an opportunity for new users to be introduced to Apple. If these users enjoy their gadgets, they are more likely to consider buying an Apple computer in the future. In the future, Apple will continue to introduce more and more gadgets and fill as many markets segments as possible. The same was with introduction of its iPod nano, which became quite a popular device among all the other mp3-players. Apple should continue creating products for all needs of consumers. So that in five years, a consumer can watch TV, listen to music, use its laptop or PC, phone, read and so on using gadgets of the same producer, which are perfectly fit to interface with each other and work as a single network. Actually, all the above- mentioned

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can already be done, but the company has a lot of space to increase quality and other small details in this chain. Education Sales: By selling its products to schools and universities, Apple turns classrooms into showrooms and attracts its new potential customers from school-desk. If students go through school using Apple products, they are very likely to use them at home. By creating this early exposure, Apple captures customers before they even know that they are customers. In the next five years, the company should increase its share in education segment. Perhaps the next step would be an office-segment penetration, where Windows is leading at the moment. Though, it is rather unlikely to see such a shift in the following five years. Consistency: All of Apple's products have the same basic architecture. Because of this consistency, customers who already own Apple products have a good idea of what they will be getting before they make a purchase. They know that it will be easy to adapt to new hardware, and this makes them more open to making a repeat purchase. The same tendency will continue to exist in the future, obviously. Attractiveness: This point concerns marketing and package design. From packaging to user interface, Apple makes its products accessible and attractive. Bright colors, a smiling icon and slick- looking hardware remind customers every time they use Apple products that what Apple offers is appealing. Actually, marketing has always been one of the main driving forces for Apple. And the company will continue to make the same with no doubt in the future, in order to support its unique image.
Competition In the following years Apple should pay special attention to its competitors. Apart from already existing competition in face of Microsoft or HP, there is still
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another threat for Apple, which is not so obvious now, but may become such in the nearest future, as technology will continue to change. This competition is coming from Amazon, Google, Real Networks, and to some degree, Sony, because of their strong investment in content. Also, according to the current tendencies of the IT market, services will be developing even more than tangible products market. Apple's successful position results not only from its operating system, applications environment, and user interface, but also from Apple's direct role in providing content for the user: music, movies, and applications for mobile devices, such as iTunes or AppStore, as it has already been mentioned before. Google is a big Apple's competitor, too. Its Chrome browser is actually a Web-based OS which can work with cloud-based assets in a single-user environment. And of course, Android, Google's OS and apps for smartphones, is quickly evolving into a product that could challenge the iPhone. If the content players are smart, they will find ways to make sure their content goes into the Google ecosystem as well as into Apple's. This makes Google an adversary that Apple has to watch very closely in the following five years. As it can be seen, the question of competition will be one of the most important in the next five years for Apple. In order to remain as successful and stable as it is now, Apple should continue investing into its Research & Development, and continue trying to set new tendencies on the market, rather than following them. Financing Of course, the question of finance is one of the most important for companies. It is quite a well-known fact that technology and companies are a major source of innovation now, and it is easier for them to attract more capital compared to other kinds of companies. As we know, capital structure of any capital is a ration of its debt to equity. Thus, logically, there are two main ways to raise finance for a company - either by

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increasing its debt (such as taking a loan or credit, or issuing bonds) or by increasing its equity (by means of issuing shares, mostly). Apple, Inc. uses both of these sources in its activity at the moment. If we look at the consolidated balance sheet of the company as of September 25, 2010, we can see that the company has $27,392 mln of liabilities, and $47,791 mln of shareholders equity (see App. 2). It has always been such a tendency that Apple's leverage has been quite low, which makes the company more stable and more attractive for investors. A big part of all Apple's activities and business is financed by its revenues. The revenues of the company consist mostly of net sales, which come from the sale of hardware, software, digital content and applications, peripherals, and service and support contracts. As the services market will continue developing in the future, Apple will also have to increase the share of services sales. At the moment the sales of its software and services generate about 4% of its total sales. Also, Apple's liquidity is quite high. The company has $41,678 mln of current assets compared to $20,722 mln of current liabilities. The company can raise its funds by means of its cash and cash equivalents, which include money market funds, US Treasury securities, certificates of deposit, commercial papers and corporate securities, as well as municipal securities. Speaking about the next 4-5 years, it is quite likely that Apple will continue maintaining a similar strategy for being financed, for its capital structure control and being liquid. The main source of capital will still be shareholders equity, just as now. The company can continue issuing new shares and attract investors' capital for the following next years. Its shares have been rising steadily during the last several years, and Apple remains to be an admirable target for potential shareholders, which its revenues continuing to grow and set new records. Thus, in opinion of the author, there will not be serious problems concerning financing the company in the next years.
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Conclusion This paper covered the performance of Apple, Inc. concerning its general performance overview, its position in the market, its role among competitors and the overall influence of IT industry on the company. The conclusion from this report is that Apple, Inc. is on the right track now, having a stable and growing market positions in different segments of IT-market, and making rocketing profits in the period of crisis. IT organizations today can no longer rely on the marketing strategies of the past years for growth and survival. Remarkable changes in the global environment such as technological innovation, rapid diffusion of products and social responsibility are affecting the nature of threats and opportunities, as well as the competitive advantage in international markets. Also, Apple is a good example of being a model for other IT-companies in the sphere of innovation. There is more pressure than ever on IT companies nowadays in terms of appropriate marketing strategies for global expansion. Advertising, sales management, product development, pricing and distribution play an ever more important role for staying in the market now. To succeed, IT companies must continually evolve, develop, adapt and respond to the changing realities of the global marketplace. Corporate strategy plays a leading role in this question, and Apple has managed to make its strategy unique and almost perfect. Not only does Apple follow all the trends of the modern IT-market, such as cloud computing and so on, but also sets new trends itself, making other competitors follow, as it already happened with iPad. Looking at the company's business, the prognosis is great: Macs are selling incredibly well even during period of recession in economy, the iPad continues to inspire the competition, and the iPhone will continue to rake in profits. If Apple, Inc. will stick to its main principal of "quality and image over quantity" in the future - no doubt, that it will

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remain a desirable target for investors not only in the next five years, but much longer.
References 1. apples_share_of_u_s_pc_market_cracks_the_10_barrier.html - "Apple's share of U.S. PC market cracks the 10% barrier". Apple Insider 2. http://en.wikipedia.org/wiki/Apple_Inc - "Apple, Inc.". Wikipedia, the free encyclopedia 3. http://indianews99.com/news/business-news/idc-predicts-new-mainstreamplatform-for-it- industry-in-2011/ - "IDC predicts new mainstream platform for IT industry in 2011". India News 4. http://itvoir.com/portal/boxx/knowledgebase.asp?iid=274&cat=3 "World's IT industry competitive index : US, Japan, South Korea, UK and Australia top the charts.". Itvoir.com 5. http://tech.fortune.cnn.com/2010/09/21/pie-chart-apples-outrageous-shareof-the-mobileindustrys-profits/ - "Apple's outrageous share of the mobile industry's profits". CNN news 6. http://www.apple.com/pr/library/2008/10/21results.html - "Apple Reports Fourth Quarter Results 2008", Apple.com 7. http://www.apple.com/pr/library/2010/10/18results.html - "Apple Reports Fourth Quarter Results 2010", Apple.com 8. http://www.appleinsider.com/print/10/10/13/ 9. http://www.betanews.com/joewilcox/article/Nine-out-of-10-premiumpricedPCs-sold-at-US- retail-is-a-Mac/1265047893 - "Nine out of 10 premiumpriced PCs sold at US retail is a Mac". Betanews 10.http://www.ehow.com/facts_7390697_information-technology-industryanalysis.html - "Information Technology Industry Analysis". EHow 11.http://www.gartner.com/it/page.jsp?id=905914 "Gartner Says Worldwide Server Shipments and Revenue Experience Double-Digit Declines in Fourth Quarter of 2008". Gertner Newsroom 12.http://www.hoovers.com/industry/information-technology-services/11191.html - "Information Technology Services". Hoovers 13.http://www.insidecrm.com/features/strategies-apple-loyal-customers/ - "11 Effective Strategies Apple Uses to Create Loyal Customers". Inside CRM 14.http://www.investmentmoats.com/stock-marketcommentary/business/apples-a-case-study-of- great-segmentation-strategy/ "Apple's a case study of great segmentation strategy". Investment 15.http://www.netqin.com/en/security/newsinfo_3628_3.html - "APAC IT market predictions for 2011". NetQin, technology pioneer
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16.http://www.qfinance.com/sector-profiles/information-technology "Information Technology Industry". QFinance, the ultimate financial resourse 17.http://www.slideshare.net/yudu/the-apple-ipad-trends-and-statistics - "The Apple iPad trends and statistics", YuDu Media report 18. http://www.strategyanalytics.com/default.aspx?mod=reportabstractvie wer&a0=5863 - "Global Tablet Vendor Market Share: Q3 2010". Strategy Analytics

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PAVEL STREKHA CANON

Introduction Strategic planning is generally the cornerstone of every common-interest community.Without strategic planning, the community will never know where it is going muchless know if it ever arrivedthere. An important concept of strategic planning is an understanding that in order for the community to flourish, everyone needs to work to ensure the communitys goals are met. Strategic planning is utterly important nowadays since it enables one to stimulate thinking to make better use of the companys resources, assign responsibility and
PAVEL STREKHA
schedule work, coordinate and unify efforts, facilitate control and evaluation of the associations activities (accountability), creates awareness of obstacles to overcome, identify opportunities, avoid the trap of linear thinking and facilitate progressive advancement of the companys goals1.All these factors render the skills of strategic thinking essential for everyone who has a will to succeed in modern fierce competitive environment. This paper serves the purpose of development of such skills through elaboration of approximate goals of company development for a 3-5 year horizon and a plan for achievement of those goals, in other words, through creation of a strategy. In this report, Canon Inc. was taken as a sample for analysis and strategy creation since it presents to be a large scale corporation with rather large number of factors influencing its performance, but at the same time possessing a large number
Roadmap to the Future, The Importance of Long-Range Planning by Bernard Steiner,A Common Ground, January/February 1986.
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Section 4. Global player. Pavel Strekha Canon

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of opportunities to withstand such pressure, this way, combining into a challenging, interesting and useful work in a sense of strategy elaboration. The structure of the paper includes three chapters providing overviews of internal and external environment and elaborating provisions for creation of a strategy in chapter 1-3 respectively. The first chapter covers company profile and philosophy as well as financial highlights, the second market analysis and outlook for 2011, the third chapter finally sets strategic goals and directions. The paper is summarized with a conclusion and list of used sources. Overview of internal environment Company Profile Canon develops, manufactures and markets a growing lineup of copying machines, printers, cameras, optical and other products that meet a diverse range of customer needs. The Canon brand is well recognized and trusted throughout the world by the individuals, families, offices and industries that use Canon products. In 1996, Canon launched its Excellent Global Corporation Plan with the aim of becoming a corporation worthy of admiration and respects the world over. To this end, the Company is promoting cross-media imagingwherein a high level of collaboration is realized among input and output devicesand the solutions businessthrough which it not only develops and markets hardware and software but also proposes ways for users to optimize convenience1. The companys operating activities are distributed among the three Business units (BU), such as Office, Consumer and Industry and Others. Each BU operates within a specific array of products, so as to provide decent focus of company resources and differentiation. This is in detail described by table 1.
http://www.canon.com/aboutus/
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Table 1. Main Activities of Canon Group

Office Business Unit Office Network Digital Multifunction Devices (MFDs), Color Network Digital MFDs, Personal-use Network Digital MFDs, Office Copying Machines, Full-color Copying Machines, Personal-use Copying Machines, Laser Printers, Large Format Inkjet Printers Digital SLR Cameras, Compact Digital Cameras, Interchangeable Lenses, Digital Video Cameras, Inkjet Multifunction Printers, Single Function Inkjet Printers, Image Scanners, Broadcast-use Television Lenses Semiconductor Production Equipment, Mirror Projection Mask Aligners for LCD Panels, Medical Image Recording Equipment, Magnetic Heads, Micromotors Computers, Handy Terminals, Document Scanners, Calculators
Consumer Business Unit
Industry and Others Business Unit
Corporate Philosophy The corporate philosophy of Canon is kyosei 1. A concise de nition of this word would be Living and working together for the common good, but Canons denition is broader: All people, regardless of race, religion or culture, harmoniously living and working together into the future. Unfortunately, the presence of imbalances in the world in such areas as trade, income levels and the environment hinders the achievement of kyosei.Addressing these imbalances is an ongoing mission, and Canon is doing its part by actively pursuing kyosei. True global companies must foster good relations, not only with their customers and the communities in which they operate, but also with nations and the environment. Theymust also bear the responsibility for the impact of their activities on society. For this reason, Canons goal is to contribute to global prosperity and peoples well-being, which will lead to continuing growth and bringthe world closer to achieving kyosei2.
1 2
http://www.canon.com/about/philosophy/index.html http://ascendcsr.com/kyosei.aspx
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Financial Highlights During the year 2010, cash flows from operating activities totaled 744.4billion (U.S.$9,190 million), an increase of 133.2 billion (U.S.$1,644 million) from the previous year, mainly due to the significant increase of profit. Although investments, such as for the acquisition of shares of Oce N.V., increased substantially, purchases of fixed assets decreased, which led to a year-on-year decrease in cash flows from investing activities of 28.1 billion (U.S.$347 million) to 342.1 billion (U.S.$4,223 million). Accordingly, free cash flows totaled 402.3 billion (U.S.$4,967 million), an increase of 161.3 billion (U.S.$1,991 million) from the corresponding previous year (see table 2). Table 2. Consolidated results of Canon Inc. and forecast 1
Year ended Year ended Change Year ended December 31, December (%) December 31, 2010 31, 2009 2010 3,706,901 3,209,201 + 15.5 $ 45,764,210 387,552 217,055 + 78.6 4,784,593 392,863 219,355 + 79.1 4,850,160 Year ending Change December 31, (%) 2011 (forecast) 4,100,000 + 10.6 470,000 + 21.3 470,000 + 19.6
Net sales Operating profit Income before income taxes Net income attributable to Canon Inc.
246,603
131,647
+ 8.3 $ 3,044,481
310,000
+ 25.7
Cash flows from financing activities recorded an outlay of 279.9billion (U.S.$3,456 million), mainly arising from the dividend payout of 136.1billion (U.S.$1,680 million) and repurchases of treasury stock. Consequently, cash and cash equivalents increased by 45.5 billion (U.S.$562 million) to 840.6 billion (U.S.$10,378 million) from the end of the previous year despite foreign currency translation adjustments stemming from the strong yen.
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Non-consolidated net sales totaled 2,317.0 billion (U.S.$28,605 million), a year-on-year increase of 14.4%, ordinary profit increased by 92.6% to 274.7 billion (U.S.$3,391 million), and net income increased by 88.8% to 152.5 billion (U.S.$1,883 million). The broader overview is provided by table 3. Table 3. Non-consolidated results of Canon Inc 1.
Year ended Year ended Change Year ended December 31, December 31, (%) December 31, 2010 2009 2010 2,317,043 2,025,546 + 14.4 $ 28,605,47 240,365 274,742 152,498 97,777 142,684 80,778 + 145.8 2,967,469 + 92.6 3,391,877 + 88.8 $ 1,882,691
Net sales Operating profit Ordinary profit Net income Net income per share: - Basic - Diluted Dividend per share
123.50 123.49 120.00
65.44 65.43 110.00
+ 88.7 + 88.7 + 9.1
1.52 1.52 1.48
Analysis of External Environment Market Analysis Looking at the global economy in 2010, economic conditions continued to improve broadly throughout the world, led by the economic growth of such emerging markets as China and India. In the United States, despite the unemployment rate remaining at a relatively high level and other concerns, economic conditions continued to recover gradually thanks in part to economic measures by the government. As for Europe, in spite of lingering financial and employment concerns along with the emergence of financial crises in some countries, the region overall managed to realize a recovery. China, which quickly recovered its growth pace through major economic stimulus measures, and the rest of Asia, along with other emerging nations, continued to achieve economic expansion. Also,in Japan, although signs began to appear indicating a turnaround,
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the recovery came to a standstill at the end of 2010 due to prolonged deflation and other factors. As for the markets in which Canon operates amid these conditions, within the office equipment market, demand for network digital multifunction devices (MFDs) recovered, mainly for color models, while laser printers also realized a steady rebound compared with the previous year. As for the consumer products market, demand for digital single-lens reflex (SLR) cameras maintained healthy growth across global markets. As for compact digital cameras, although sales were sluggish in developed countries, demand in emerging markets grew favorably resulting in a slight increase overall. With regard to inkjet printers, demand continued on a track to recovery. In the industry and others market, demand for semiconductor lithography equipment and liquid crystal display (LCD) lithography equipment grew steadily, owing to improved investment by semiconductor device and LCD panel manufacturers. Sales by geographic areas are depicted by the following exhibit (Exhibit 1)
Exhibit 1. Sales by geographic areas
Looking at Canon's performance by business sector, within the Office Business Unit, sales volume of both color and monochrome network digital MFDs

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increased, boosted by the recovery in demand for office equipment along with the introduction of new imageRUNNER ADVANCE-series products (see Exhibit 2). Exhibit 2. Sales by Business Unit 1
Laser printers, which suffered sluggish sales in the previous year, recorded a substantial increase in sales volume. Consequently, despite the effects of the strong appreciation of the yen, the sales for the segment totaled 1,987.3 billion (U.S.$24,534 million), growing 20.8% year on year. Operating profit increased by 27.9% to 293.3 billion (U.S.$3,621 million) for the year, mainly as a result of expanded sales and the rise in the gross profit ratio. Within the Consumer Business Unit, sales volumes increased significantly for such digital SLR cameras as EOS Digital Rebel T1i (EOS 500D) and the new EOS Digital Rebel T2i (EOS 550D) the competitively priced models, along with the EOS 5D Mark II, EOS 7D and the new EOS 60D advanced-amateur models.
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As for compact digital cameras, the Company launched five new ELPH (IXUS)series models and seven new PowerShot-series models, boosting sales volumes particularly in emerging markets (see Exhibit 3). Exhibit 3. Camera Sector Profitability 1
With respect to inkjet printers, sales volume increased from the year-ago level, fueled by healthy sales growth, particularly in Asia. As a result, despite the strong yen, sales for the segment rose 6.9% year on year to 1,391.3 billion (U.S.$17,177 million), while operating profit increased by 29.7% to 238.1 billion (U.S.$2,939 million) , largely reflecting increased sales and gross profit ratio. In the Industry and Others Business Unit, in addition to an appreciable increase in sales volume of LCD lithography equipment and a rebound in sales volume of semiconductor lithography, semiconductor-related independent business sales by Group subsidiaries also grew, resulting in an increase in sales for the segment of 20.9% to 433.0 billion (U.S.$5,345 million) for the year. The operating loss
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totaled 9.8 billion (U.S.$121 million) for the year, despite a turnaround of 66.1 billion (U.S.$816 million), made possible through increased sales and an improved gross profit ratio. Outlook for 2011 As for the outlook in 2011, emerging nations such as China and India are expected to maintain healthy expansion. Developed countries, by comparison, while expected to be headed toward modest recovery, will face uncertainty regarding future prospects due to such factors as employment problems in the United States, financial concerns in European countries, and continued domestic (Japanese) deflation. In the businesses in which Canon is involved, within the office equipment market, demand for such products as network digital MFDs and laser printers is projected to achieve solid growth amid increasingly intense competition. With respect to the consumer products market, demand for digital SLR cameras, compact digital cameras and inkjet printers is expected to expand, although competition is also expected to become more severe. In the industry and others market, while demand for semiconductor and LCD lithography equipment will likely increase steadily, uncertainty remains regarding the future. With regard to currency exchange rates for the next year, on which Canon's performance outlook is based, despite the uncertainty over such factors as future interest rate policies for major countries and the speed and degree realized by the economic recovery, Canon anticipates exchange rates for the period of 85 to the U.S. dollar and 110 to the euro, representing appreciations of approximately 2 against the U.S. dollar, and approximately 5 against the euro compared with the previous year (see table 4). Table 4. 2011 Projections Average Exchange Rate Yen-1USD
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FY11 85.00 yen
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Yen-1EURO 110.00 yen 114.97 yen Impact of Exchange Rate Movement (FY11 impact given a one yen change) Net sales Operating profit USD 19.4 billion yen 10.1 billion yen EURO 10.4 billion yen 5.8 billion yen Upon taking into consideration these foreign exchange rate assumptions and current economic forecasts, Canon projects full-year consolidated net sales in 2011 of 4,100.0 billion (U.S.$50,617 million), a year-on-year increase of 10.6%; operating profit of 470.0 billion (U.S.$5,802 million), a year-on-year increase of 21.3%; income before income taxes of 470.0 billion (U.S.$5,802 million), a yearon-year increase of 19.6%; and net income attributable to Canon Inc. of 310.0 billion (U.S.$3,827 million), a year-on-year increase of 25.7% (see table 5). Table 5. Impact of the exchange rate change projected for 2011 (bln. yen) FY 2010 Actual Foreign exchange impact [net sales, cost of sales, expenses] Sales volume impact Office Consumer Industry and Others Total Others Total Change FY 2011 Projection Sales 3,706.9 -102.5 Op. Profit 387.6 -52.9
+281.5 +265.5 +48.6 +595.6 -100.0 +393.1 4,100.0
+263.8 -128.5 +82.4 470.0
Change in Exchange Rate1 USD: 87.40 to 85.00 yen; 1 EURO: 114.97 to 110.00 yen
Strategic Provisions of Development of Canon Inc. on 3-5 year Horizon Strategic Goals Under the corporate philosophy of kyosei living and working together for the common good Canon's basic strategic targets should be oriented towards contributing to the prosperity and well-being of the world while endeavoring to

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become a truly excellent global corporation targeting continued growth and development. In 2009, however, due to the global recession triggered by the collapse of Lehman Brothers, the company was forced to temporarily shift strategic direction from expansion to establishing a "muscular" business constitution and enhancing corporate strength to agilely respond to changes in the business environment. After working to further expense reductions, capital-investment efficiencies and the establishment of advanced supply-chain management enabling inventory reduction, in 2010, Canon realized a quick recovery in performance, employing a new growth strategy, capitalizing on the turnaround to post results that outpaced the speed of the economic recovery. Stemming from the market analysis it becomes apparent that the global economy's engine of growth has largely shifted from developed countries to emerging countries, which is expected to lead to volatility in the business environment. Canon should take advantage of these dramatic changes and tackle the challenge of achieving sound growth through timely transformations tailored to the changes of the times. Thus, taking the current circumstances concerning the internal and external environments into account the Company should be, in particular, focusing on the following four important goals.
1) 2) 3) 4)
Establishing a world-leading global optimized production system Comprehensively reinforcing global sales capabilities Building the foundations of an environmentally advanced corporation Imparting a corporate culture, and cultivating human resources
befitting a truly excellent global company Directions for Achieving The Strategic Goals The path for achievement of the above-mentioned strategic goals is generally required to take into account the business challenges represented by the
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development trends of the markets Canon is operating in so as to be coherent and efficient. It may be stated that the situation with the global economy, despite the risk of a slowdown due to the ongoing credit crisis and high unemployment, is expected to continue towards gradual recovery. In Europe, while concerns remain regarding an economic slump due to financial instability, the economy is likely to make steady progress towards recovery. In Asia, the overall trend toward economic recovery is expected to continue, fueled by such factors as continued strong economic expansion in such countries as China and India. The pattern of emerging markets, such as China and India, leading the global economy is likely to become increasingly prominent over the near future. As for Japan, while the economy will likely continue to realize a gradual economic rebound against the backdrop of a global economic recovery, it is also expected that the current trend of economic deflation continues for the time being due to weak domestic consumption. Taking the above-mentioned trends into account and having set a task of achieving the above-mentioned goals, the company should aim at transforming into a different company in terms of scale and business operations, further strengthening imaging-related businesses and working to expand business domains by cultivating such areas as medical and industrial equipment into new business pillars. At the same time, as a manufacturer, Canon should make efforts to significantly transform itself in keeping with the changing times through the reinforcement of such basic functions as research and development, production, and sales and marketing. Specifically, it should strive to change to a situation where products developed in each region are sold globally, accelerating transition to a three regional headquarters management system, which includes R&D centers

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in Japan, the U.S. and Europe soliciting the world's great minds and innovative power. Targeting this kind of change and transformation, the company should also make active use of M&As. For this, it is suggested to set up a special organization in charge of further promoting M&As. Additionally, the company should pursue thorough cost reductions to further lower the cost of sales ratio. In this regard, it is sensible to accelerate activities to establish an optimized global production system, enhancing roadmap of reform for the ideal production system from a comprehensive viewpoint taking into account such aspects as logistics, procurement, labor and country risks. In addition to accelerating new product development through computer simulation and thorough cost reductions, Canon should also promote the further automation of production and the in-house production of manufacturing equipment. Establishing a highly efficient and advanced manufacturing business model, promoting "man-machine cells" will also allow further productivity improvements. Next, the company should work to reinforce its global sales capabilities. In order to further improve the performance in Asia, where an increasing proportion of group sales each year is generated, in addition to further strengthening the sales organization in China, Canon should also further our reach into the markets of Southeast Asia and India At the same time, the company should work to solidify its foundation as a leading environmental company that aims for both growth and environmental conservation, by further raising the environmental performance of its products and reducing the impact of all corporate activities on the environment. Furthermore, with the understanding that product quality represents the lifeblood of a manufacturer, the company should also make further efforts towards the commitment to "quality first".
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In order to realize further advancements for the Canon Group and for it to become a truly excellent global corporation that continues to thrive and prosper, it should strive to foster global human resources that can exercise their abilities around the world. Strategy Summary In order to summarize the strategy, it is sensible to link the goals set for the given horizon with the directions for their achievement stemming from the analysis of internal and external environment. This way, it is possible to construct a mind map of an array of measures clustered by the goals these measures are pursuing. Exhibit 4 illustrates the idea. By achieving the abovementioned goals, the company may reach the level of net sales of more than 5 trillion, an operating profit ratio of more than 20%, a net income ratio of more than 10%, and a shareholders' equity ratio of more than 75% by 2015 judging by the current performance. Exhibit 4. Strategic mind map

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Conclusion Analyzing the external environment of the company it can be concluded that the company overcame global economic crisis and is now heading toward recovery. Canon related markets remained strong and the exchange rate environment became more challenging. This way, the company managed to increase volumes and expanded market share, through lineup enhancement and expanded sales and absorbed yen's appreciation to post 15.5% net sales growth, 1.8-times increase in operating profit and 1.9-times increase in net income, realizing cost savings through improved productivity. Taking in account the situation with internal and external environments of the company a set of goals and measures for their achievement was formed, representing a corporate 5-year strategy: Establishing a world-leading global optimized production system; o Three regional headquarters management system (Japan, U.S., Europe); o Expand business pillars; o Strengthening imaging-related businesses; Comprehensively reinforcing global sales capabilities; o Make active use of M&As; o Cost reductions to further lower the cost of sales ratio; o Promote the further automation of production and the in-house production of manufacturing equipment; o Reach into the markets of Southeast Asia and India; Building the foundations of an environmentally advanced corporation; o Raise the environmental performance of its products; o Reducing the impact of all corporate activities on the environment;
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o Make further efforts towards the commitment to "quality first"; Imparting a corporate culture, and cultivating human resourcesbefitting a truly excellent global company; o Foster global human resources that can exercise their abilities around the world. In particular, implementation of such strategy comprises advancement and strengthening of the global Three Regional Headquarters management system; developing unique technologies and products in Japan, the U.S. and Europe, and build a structure for mutual importing and exporting (also acting as a natural hedge against foreign exchange risk); strengthen core proprietary technologies and acquire "unique technologies" in areas such as biotech and medical that Canon currently does not have through M&A. As for the geographic regions, in Japan, the company should continue to build a structure that allows us to make high-added value, superior quality products through advances in production technologies. In the U.S., where competent technicians from around the world gather, Canon should have research facilities that exceed those in Japan. In Europe, leverage Oce's high-speed printer product development capabilities and expand sales globally. Globally, the company should optimize regional production through further advancement of production technologies. After implementing the above-mentioned measures, the company has a potential to become the leader in development, manufacturing and marketing a growing lineup of copying machines, printers, cameras, optical and other products References 1. Bernard Steiner Roadmap to the Future, The Importance of Long-Range Planning. A Common Ground, January/February 1986 453 p. 2. Brealey Richard A, Myers Stewart C, Franklin Allen. Principles of Corporate Finance, McGraw Hill 2008 1077p. 3. http://economictrends.blogspot.com/ Section 4. Global player.Pavel Strekha Canon
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4. 5. 6. 7. 8.
http://www.canon.com http://www.doingbusiness.org/ http://www.rbc.com/economics/market/index.html http://www.statistics.gov.uk/statbase/product.asp?vlnk=308 Ross Stephen A., Westerfield Randolph W., Jaffe Jeffrey Corporate Finance
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RANO USMANOVA NESTLE

Introduction Nestl is the world's leading Nutrition, Health and Wellness company. Itsmission of "Good Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. The Company was founded in 1866 by Henri Nestl in Vevey, Switzerland, where the companys headquarters are still located today. Itemploys around 280 000 people and hasfactories or operations in almost
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every country in the world. Nestl sales for 2009 were CHF 108 bn. The key factor which drove the early history of the enterprise that would become the Nestl Company was Henri Nestl's search for a healthy, economical alternative to breastfeeding for mothers who could not feed their infants at the breast. In the mid-1860s Nestl, a trained pharmacist, began experimenting with various combinations of cow's milk, wheat flour and sugar in an attempt to develop an alternative source of infant nutrition for mothers who were unable to breast feed. His ultimate goal was to help combat the problem of infant mortality due to malnutrition. He called the new product Farine Lactee Henri Nestl. Nestl's first customer was a premature infant who could tolerate neither his mother's milk nor any of the conventional substitutes, and had been given up for lost by local physicians. People quickly recognized the value of the new product, after Nestl's new formula saved the child's life and within a few years, Farine Lactee Nestl was being marketed in much of Europe. Section 4. Global player.Rano Usmanova Nestle
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Henri Nestl also showed early understanding of the power of branding. He had adopted his own coat of arms as a trademark; in his German dialect, Nestl means 'little nest'. Meanwhile, the Anglo-Swiss Condensed Milk Company, founded in 1866 by Americans Charles and George Page, broadened its product line in the mid1870s to include cheese and infant formulas. The Nestl Company, which had been purchased from Henri Nestl by Jules Monnerat in 1874, responded by launching a condensed milk product of its own. The two companies remained fierce competitors until their merger in 1905. Some other important firsts occurred during those years. In 1875 Vevey resident Daniel Peter figured out how to combine milk and cocoa powder to create milk chocolate. Peter, a friend and neighbor of Henri Nestl, started a company that quickly became the world's leading maker of chocolate and later merged with Nestl. In 1882 Swiss miller Julius Maggi created a food product utilizing legumes that was quick to prepare and easy to digest. His instant pea and bean soups helped launch Maggi & Company. By the turn of the century, his company was producing not only powdered soups, but also bouillon cubes, and sauces and flavorings. The year 2003 started well with the acquisition of Mvenpick Ice Cream, enhancing Nestl's position as one of the world market leaders in the super premium category. In 2006, Jenny Craig and Uncle Toby's were added to the Nestl portfolio and 2007 saw Novartis Medical Nutrition, Gerber and Henniez join the Company. Nestl entered into a strategic alliance with the Belgian chocolatier Pierre Marcolini at the end of that year. In 2008, Nestl began a process of selling Alcon by divesting 24.8% to Novartis.
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In 2009, Nestl opened the Chocolate Centre of Excellence in Broc, Switzerland, with Pierre Marcolini one of the master chocolatiers. Nestl describes itself as a food, nutrition, health, and wellness company. Recently they created Nestl Nutrition, a global business organization designed to strengthen the focus on their core nutrition business. They believe strengthening their leadership in this market is the key element of their corporate strategy. This market is characterized as one in which the consumers primary motivation for a purchase is the claims made by the product based on nutritional content. In order to reinforce their competitive advantage in this area, Nestl created Nestl Nutrition as an autonomous global business unit within the organization, and charged it with the operational and profit and loss responsibility for the business of Infant Nutrition, HealthCare Nutrition, and Performance Nutrition. This unit aims to deliver superior business performance by offering consumers trusted, science based nutrition products and services. The Corporate Wellness Unit was designed to integrate nutritional valueadded in their food and beverage businesses. This unit will drive the nutrition, health and wellness organization across all their food and beverage businesses. It encompasses a major communication effort, both internally and externally, and strives to closely align Nestls scientific and R&D expertise with consumer benefits. This unit is responsible for coordinating horizontal, cross-business projects that address current customer concerns as well as anticipating future consumer trends. Nestle: Corporate strategy At the beginning of this century, Nestl made the strategic decision to transform itself from a successful, technology-driven food and beverages company into an R&D- and marketing-driven Nutrition, Health and Wellness Group.
Section 4. Global player.Rano Usmanova Nestle

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Turning this strategic vision into reality requires a re-orientation of Nestls R&D efforts towards life science and an open collaboration environment that constantly delivers bigger, bolder and better innovations. Although they have more than 4500 people in Nestl Food and Beverages R&D, they cannot achieve their ambitions simply by working internally. They increasingly operate in an Open Innovation mode to enhance their own internal R&D capability by tapping into external resources. To do this, they have built up a network of some 300 external research institutions, allowing them to work regularly with scientists and technologists in universities, research establishments and private industry all over the world. These partnerships are mutually beneficial. They benefit from identifying new opportunities and integrating them into their business. Their partners benefit from access to our specialist knowledge and our tradition of best-in-class technology. Open Innovation also opens the door to greater innovation cooperation between companies affiliated with Nestl. Joint research by Nestl and LOreal is leading to totally innovative Nutrition, Health and Wellness products in the form of beauty nutritional supplements. Theyexpect similar breakthroughs from collaboration with Galderma, one of the worlds leaders in dermatology. R&Ds role is one of creating bridges not only outside the Company but also across the Company. That way they are building a wide base from which to drive their Nutrition, Health and Wellness transformation and further business growth. Open Innovation to the outside is the way forward. But Nestls success is and always will be decided inside the Company. They continue to listen to their consumers and anticipate their future needs. They are proactive and aim for fewer and bigger breakthrough innovations. For their Nutrition, Health and Wellness products, this means establishing innovative pipelines beyond the next five years. Today, they already think more like a life science company, with different projects
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in different phases at any given time some in development or conceptualization, some in clinical or consumer trials, and others in their launch phase. For Nestl to achieve all of this, R&D takes on even more importance. It forms the scientific base and creates the proprietary technology platforms in order to be leader in Nutrition, Health and Wellness. Research & Development at Nestl R&D is one of Nestls strengths. It always has been. They constantly leverage their scale to new and more challenging heights. Innovation is the first pillar of their corporate strategy with Nutrition, Health and Wellness a core value. Being faster and closer to the consumer through R&D considerably strengthens Nestls leadership in Nutrition, Health and Wellness, where the body of world knowledge grows continuously. Insights like subtle biochemical makers, make the science of nutrition the prime mover in health maintenance and disease prevention. More and more consumers, in developed and developing countries alike, want to benefit from products and personal solutions through foods and beverages that contribute to their health and wellness. To intensify their excellence in the consumer-food relationship, R&D works more and more in an open innovation mode. They actively involve scientific and technical expertise from many external sources. Nestl R&Ds role includes the knowledge management needed in the multidisciplinary sciences and technologies that form the basis of innovation in Food, Nutrition, Health and Wellness. Their innovating the future leadership strategy is based on: Continuous improvement in consumer insights and their translation to innovative products built on superior science and technology; Harnessing the vast expertise in their unmatchable research and development network; Working closely with leading universities and outside partners on cuttingedge science and technology;

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Recruitment of open-minded and passionate innovators who can bridge science, technology and business needs; Bigger pioneering innovations that hit the innovation sweet-spot where best-in-class science and technology combine to deliver precisely targeted Nutrition, Health and Wellness benefits that lead to significant business success. For Nestl safety and quality are non-negotiable. R&D plays a key role in ensuring the best in products and processes. The further Nestl moves along the road towards the Nutrition, Health and Wellness Company, the more this role becomes important. Nestls unique Food and Beverages Research & Development structure Nestls vision for the future is to occupy centre stage as the Worlds Food, Nutrition, Health and Wellness Company through Good Food, Good Life. Nestl products embody clear and relevant consumer benefits. Nestl R&D generates the innovative science and technology needed to build nutritional and health benefits into products offering Nestls legendary sensory excellence. It thus plays a key strategic role in realizing the Nestl vision, helping to assure the Groups sustained growth. Nestl acts on the principle of think global act local. R&D is structured accordingly. Global product and process development is vertically integrated into all Nestl core businesses and pushed out locally to the markets through some 500 factories in 100 countries worldwide. Throughout Nestl, 265 000 people make a valuable contribution by their links across all sectors. At the local level, Nestl interacts daily with over one billion consumers. The R&D structure offers the flexibility to use this huge source of local ideas, bring them back and develop them for global implementation. This adds the power of broad-based consumer insight to the power of innovation. Together, these
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global and local approaches give them the capacity for rapid response in an everfaster changing global socio-economic environment. For strategic alignment, R&D interfaces with the Strategic Business Units (SBUs). The SBUs all coordinate strategies within the individual Nestl business categories. This includes investment, competitive analysis, key performance indicators, quality & strategic brand standards and portfolio management. Powerful Research & Development: Nestls strong commitment The Nestl long tradition of technological excellence is now combined with superiority in Nutrition, Health and Wellness. The Group is becoming ever more R&D intensive. In 2006, Nestl has invested CHF 1.73 billion in R&D and over CHF 1.5 billion in Venture Capital. This increase in investment is reinforcing Nestl R&Ds world-class reputation in science and technology: They are accelerating Nestls transformation to Nutrition, Health and Wellness with the enhanced controls and product tests this implies; They are intensifying science-driven Food and Nutrition R&D, which brings added value to Nestl by expanding their knowledge base; They are building Nestls food and beverages systems, by combining product technology and dispensing machine technology, e.g. the single portion beverages, Nespresso and Nescaf Dolce Gusto. Nestl attracts the best scientists and engineers from top-level universities who want to work and partner with us: Three Nestl University Chairs in Nutrition are now active. Two chairs are at the EPFL (EcolePolytechnique Fdrale de Lausanne),Switzerland, for research on the linkbetween nutrition and the brain,including the development of cognitivefunction in childhood and Alzheimers

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Disease. One chair is at the University of Mexico City, Mexico, for research on Nutrigenomics, to investigate how individual genes may influence individual nutritional needs; Annual Nestl International Nutrition Symposia These are organized in the Nestl Research Center. Nobel Prize winners and other leading experts in nutrition and health worldwide debate issues of human health and physiology, and publish their conclusions in the scientific press. These discussions open new directions in Nestl research on Nutrition, Health and Wellness; The Nestl Nutrition Council (NNC) First created in 1978, the NNC consists of external and independent advisors on human nutrition. It provides a vital input for Nestl in nutrition and food safety policies, general nutrition guidance and scouting for future innovations. Nestl makes targeted acquisitions of nutrition-based businesses that bring new skills and know-how enhancing the Nestl R&D knowledge-base: Jenny Craig in the US for personalized weight management solutions; Uncle Tobys in Australia for adult nutrition snacks. These continuously improve Nestl R&D structure and capabilities to ensure efficiency in innovation. Research & Development and the Keys to the Future The higher Nestl aims, the more science and technology they need, and the more precise they have to be in their manufacturing processes. They must ensure the highest levels of product consistency, quality and safety. This means the R&D role goes far beyond its traditional task of innovation and assumes a much greater scope in technology transfer. They must provide the necessary knowledge at all levels from the management to the process-line. R&D must place ever greater emphasis on Good Manufacturing Practice procedures in safety, quality and hygiene. Providing Nutrition, Health and
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Wellness, means consistently meeting tighter tolerances and more stringent regulations. This moves the goalposts in food manufacturing ever closer to the approach of a life science company. Within this framework, Nestl R&D has three important tasks: Quality by design Building all aspects of quality into new products and processes right from the start of any project. Including everything from the raw materials through to the packaging and the quality of the product at the time of consumption. It means putting in all process controls in the factory to ensure that strict tolerances are met to deliver high quality products. Nestl R&D develops many new analytical methods needed to fill the evergrowing demand for product testing from international and national safety authorities. Some of these relate directly to Nutrition, Health and Wellness claims for Nestl products that offer the competitive edge. Others are non-competitive and touch the whole food industry. In such cases, Nestl works with food trade organizations and government laboratories to find solutions. Many methods developed by Nestl R&D become international standards; Product and Process Mastership knowing everything down to the last detail about Nestl products and processes R&D provides continuous training internally and out in the factories on the technical and analytical procedures associated with every product. To ensure high performing Nestl factories, R&D expert teams have provided best practices and helped in their implementation. Everybody in the supply chain is responsible for guaranteeing Nestl quality scientists, technologists, engineers, supervisors and line operators; Source of scientific and operational human resources The further Nestl moves to Nutrition, Health and Wellness, the more people with a scientific background are needed throughout the Group.

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Over the past decade, more and more people from R&D have added business skills to their scientific and technological background and continued their careers in the Nestl businesses, markets and factories. This combination of skills, added to their knowledge of Nestl, cements R&D Business interactions, bringing dynamism and efficiency into the innovation process. The goal is to aggregate all Nestls skills and expertise in the drive towards an ever-more personalized nutrition:an approach that further strengthens the Groups relationship with eachindividual consumer. International Strategy Nestl is a global organization. Knowing this, it is not surprising that international strategy is at the heart of their competitive focus. Nestls competitive strategies are associated mainly with foreign direct investment in dairy and other food businesses. Nestl aims to balance sales between low-risk-but-low-growth countries of the developed world and high-risk-and-potentially-high-growth markets of Africa and Latin America. Nestl recognizes the profitability possibilities in these high-risk countries, but pledges not to take unnecessary risks for the sake of growth. This process of hedging keeps growth steady and shareholders happy. When operating in a developed market, Nestl strives to grow and gain economies of scale through foreign direct investment in big companies. Recently, Nestl licensed the LC1 brand to Mller (a large German dairy producer) in Germany and Austria. In the developing markets, Nestl grows by manipulating ingredients or processing technology for local conditions, and employ the appropriate brand. For example, in many European countries most chilled dairy products contain sometimes two to three times the fat content of American Nestl products and are released under the Sveltesse brand name.
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Another strategy that has been successful for Nestl involves striking strategic partnerships with other large companies. In the early 1990s, Nestl entered into an alliance with Coca Cola in ready-to-drink teas and coffees in order to benefit from Coca Colas worldwide bottling system and expertise in prepared beverages. European and American food markets are seen by Nestl to be flat and fiercely competitive. Therefore, Nestl is setting its sights on new markets and new business for growth. In Asia, Nestls strategy has been to acquire local companies in order to form a group of autonomous regional managers who know more about the culture of the local markets than Americans or Europeans. Nestls strong cash flow and comfortable debt-equity ratio leave it with ample muscle for takeovers. Recently, Nestl acquired Indofood, Indonesias largest noodle producer. Their focus will be primarily on expanding sales in the Indonesian market, and in time will look to export Indonesian food products to other countries. Nestl has employed a wide-area strategy for Asia that involves producing different products in each country to supply the region with a given product from one country. For example, Nestl produces soy milk in Indonesia, coffee creamers in Thailand, soybean flour in Singapore, candy in Malaysia, and cereal in the Philippines, all for regional distribution. It is vital to any firm that its marketing objectives are compatible with the overall corporate objectives. In selecting corporate objectives and strategy, a firm might wish to refer to the Boston Matrix, Ansoff's Matrix or use a simple SWOT analysis to establish where the company is and in which direction it wishes to head. For example, a company planning to consolidate its position within a national market might set very different objectives for the marketing of its products to a company wishing to expand into international markets. This in turn would affect the marketing tactics each company might employ.

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Confusion can often arise when attempting to reconcile marketing and corporate objectives. It could be argued that the success of any firm depends on its ability to satisfy a consumer need at a profit. This is- the essence of marketing - so it could also be said that marketing and corporate objectives are the same thing. However, this would imply that marketing is more important than the other functional areas, when clearly they are all inter-dependent. Ultimately, any corporate strategy must both reflect and dictate to each of the different functional areas of the firm. Nevertheless, the information provided by the marketing department will be central to any corporate strategy formulation. This will include sales and market share, analysis of the competition, sales and profit forecasts for the future and analysis of changing consumer attitudes. Nestl's corporate objective is to be the world's largest and best branded food manufacturer, whilst ensuring that the Nestl name is synonymous with products of the highest quality. In recent years, the company has pursued a policy of expansion and diversification through acquisition and divestment to achieve a more balanced structure to the business. Global brand names can achieve substantial production and purchasing economies of scale and, as world travel increases, so does the importance of instantly recognizable products. With a product portfolio which includes eight of the thirty top selling confectionery brands, such as Quality Street, Aero, Smarties, Polo and Rowntree's Fruit Pastilles, Milky Bar and After Eight, it is extremely important that the marketing objectives for each product line are fully compatible with the overall objectives of the company as a whole. Like any group of individuals, each product has its own character, strengths and weaknesses and consequently, the marketing objectives of each product need to be specifically tailored. Nestl 's Growth Strategy and Business Development 1.) Does it make sense for Nestl to focus its growth on emerging markets?
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As it can be derived from the text, Nestl generates operates worldwide with a focus on European markets, which make up 70 percent of its sales. These markets are in the mature state of life cycle of that industry and additionally demographic changes such as the stagnation of population growth rates make it very hard companies like Nestl to generate higher profits through higher sales. As a matter of fact the western economies are actually facing a downturn in output and growth, thus influencing the consumption patterns of customers, especially in the retail business. Consumer are becoming more price aware and tend to spend less while demanding at the same time for customization, product differentiation and specialization. Another trend is the shift away from branded food and beverages towards cheap non-branded foods and beverages. Nevertheless, the introduction of non-brand own labeled products such as Food Lion offers only makes sense in a large scale in order to achieve economies of scale. As a result of increasing nonbrand cheap products offered by rivals, Nestl find itself in an even more embattled market and needs to develop a new strategy either away from branding or towards a higher degree of international market penetration. Since Nestl stands for high quality and has distinctive competencies in producing higher quality food, it would not make sense to change the strategic group, because it would most likely becomestuck in the middle. The right strategy is to expand into new markets such as Asia, Eastern Europe and South America. Logically, in these markets the consumer behavior, macroeconomic environment and cultural habits are different in contrast to western economies. Most of these markets are in a growth cycle and this clearly generates an opportunity because they are emerging markets and untouched. China, for instance,had 700 million people in2010 who have nearly the same income levels as Spain. While income levels in these emerging markets will increase, people will gain a higher purchasing power with unsatisfied demands. Serving thesedemands is the right opportunity for Nestl to penetrate new markets, build up market share while at the same time using its profits to

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defend its old markets in the western economies through low prices. Concluding, I am strongly convinced that expanding into new markets is necessary for Nestl if it wants to stay a global player in the 21st century. 2.) What is the companys strategy with regard to business development in emerging markets? Does it make sense? Nestl follows the first mover advantage strategy which means that the company enters in an early stage the emerging markets, in order to establish a network there before competitors, such as Unilever, do so. The first step they make is to establish a substantial position by selling basic products such as infant formula and condensed milk to the customer, with the goal to build up commending positions in each niche. In order to save the costly process of establishing a brand name, Nestl simply purchases local brand names which the consumer is accustomed to. This helps the company to overcome cultural barriers and customer resentments to foreign brands. After these niches of basic food supply are filled,Nestl moves on into the more upscale segments such as chocolate, soft drinks and the like. Their strategy is to establish a basis and then expand into more niches as demand rises. Connected to the rising demand is the rising income level as the population can afford to spend more money on food products. Nestl provides about 8500 brand names, but only 750 of them are registered in more than one country and only 80 are registered in more than ten countries. This is due to the fact that Nestls strategy is based on a broad range of local brand names which are not entitled as Nestl. The company uses that approach in order to the convenient fact that the consumer is easier to reached because he is accustomed to this brand name and they think they know what they are buying. Consequently, marketing is easier and less costly because a reputation, a distribution channel and customer loyalty already exists for that product with that brand name. As a result Nestle can focus its distinctive competencies on product improvement and technological aspects such as process innovation.
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Concluding, the key to their success is customization rather than exaggerated globalization. This strategy makes sense as the business success of the company proofs. An example is Nestls success in the Chinese milk powder market. There was hardly any infrastructure, nor transportations systems in 1987 when the company entered the market. Nevertheless, Nestl increased the output of powdered milk from 300 tons in 1990 to 10,000 tons in 1994. This refers to an increase in output of 790% per year. These figures show the success of their strategy, as well as their flexibility, the steady learning processes and the monitoring of the environment. In combination all these factors make up a successful and sense full strategy. 3.) From an organizational perspective, what is required for this strategy to work effectively? As a matter of fact a good strategy is not the only necessary prerequisite for operating successfully in foreign markets. In markets of transitory nations, or even less developed nations, there could be a risk in terms of political instability harming the political economy such as the security of property
rights.Macroeconomic and cultural uncertainties are as well an issue. To a certain extent environmental changes occur with the notion of endangering the basic strategy. In order to avoid these influences and to counter react on these, a company needs the ability of gaining a steady learning process which needs ultimately to be implemented with a cross-functional attitude among all functional levels. Flexibility is another distinctive competency a company must be able to achieve to react as quickly as possible to changing environments. As a consequence, the company must implement mechanisms allowing it to respond to changes in local demand, cultural barriers and political fluctuation. Ethnocentric behavior must be avoided in any circumstances in order to approach the market in the appropriated way. A company must also learn to consider decisions under the

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long-run perspective, because markets can be conquered within in short period, but the successful implementation of a strategy needs more time than that. Entering a new market requires some serious calculations. The company must estimate the perspectives it has in that new market with regards to threats and opportunities formulating the profile of that country. Basedon this profile, the company is able to figure out the strategical approach. One important part of the strategy must be the cultural awareness, which means a company should employ locals in order to lower cultural barriers and resentments established by the foreigner. Hence, this results in a better insight and handling of local demand conditions and knowledge about the customer. In order to guarantee flexibility, the functional level units must have their own responsibility and must have freedom in decision making, which allows a quick response towards market fluctuations. To relate these statements to this case,Nestls business process in Nigeria gives a good example. An entirely new marketing approach, distribution channel and network had to be set up due to changing demands, lacking infrastructure and a lack of security. Nestl managed these threats successfully by understanding the culture and the being aware of the lack of essentials. 4.) How would you describe Nestls strategic posture at the corporate level? The ability to react and act on environmental changes is a crucial part of Nestls strategy. Consequently, all subsidiaries have their freedom in decision making regarding strategy issues. This allows them act independently from headquarters. Hence, it responds quicker to the local environment, conditions and demands with the result of a more efficient approach to local distribution, employees, advertising, products and marketing. To support this approach Nestls established its expatriate army which is a group of about 700 managers who have a lot of experience in undertakingmanagement activities in foreign countries. These managers are highly educated and trained in order to enable them a
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worldwide field of operations. Employee training is not the only distinctive competency Nestl was able to establish. As mentioned earlier, Nestl has a sophisticated R&D department. A steady stream of new inventions and product improvements allows Nestl to keep up its competitive edge. Supporting this globally aware approach the company is organized into seven worldwide strategic business units which are called SBUs. These units formulate the high level strategic decisions on a worldwide basis, while each of these SBUs focuses on a specific segment: chocolate, infant food, cereals, coffee etc.Engaging in the overall strategy development, such as acquisition and market entry strategy, these SBUs form an important part of the companys decision making and operating process. Acquisition contributes about 2/3 to Nestls growth rate, hence this emphasizes the importance of this functional part of the company.
Additionally,Nestl established a structure of regional organization which divides the world into 5 major geographical zones: North America, South America, Asia, Europe and Asia. These organizations are assisting the SBUs and have the responsibility for developing strategies within their region. 5.) Does this overall strategic posture make sense given the markets and countries that Nestle participates in? Why? This overall strategic posture makes sense which is proved by Nestls successful worldwide expansion, the steady growth rate and the continuously generated profits. Nestls approach of expanding into emerging markets clearly is highly functional throughout the organizational structure (support of R&D, SBU, regional zones) and the corporate level strategy. One of the main reasons for this successful expanding into new markets is due to flexible responds to environmental changes and the ability to obtaining a steady learning process. These two factors make up a large contribution to Nestls operating performance, which is as well manifested in the credo of having customization rather than

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globalization. Through this attitude the company was able to create a functional and operational synergy among the corporate level strategy, the organizational structure and the general strategy set up. Despite of recessional tendencies and high market fluctuations in the western economies, Nestl was able to grow continuously into new market segment through skilful market penetration. Clearly, this extraordinary performance was only enabled through its strategy of avoiding an ethnocentric approach, building up customer ties through local employees and managing the distribution channel by an entirely unique approach. The company will continue to generate profits and increase market share when it keeps up its strategy, but has to be aware that macroeconomic, social or cultural aspects have to be taken into account while pursuing the strategy. Especially in the new emerging markets this strategy awareness makes a lot of sense, because western economies are pretty much standardized in regards to cultural or social economic aspects while Asian or South American markets are characterized by different means. Nestl was already able to emerge into markets such as Africa and the Middle East where long lasting formal and informal trade barriers were established by local government. Lesser-developed countries tend to raise trade barriers justifying it with the infant industry protection argument. Nevertheless, food is needed all over the world and with the product range and the distinctive competencies the company possesses a decent platform is given to keep up that strategy. Finally, the approach makes sense from that point of view, that these transitory and less developed economies have a high growth potential over the next two decades. China, Southeast Asia, South America and Mexico will be the future markets on this planet with a growing population and growing income level. If Nestl would not take the opportunity of moving into these markets with these incredible potentials, the company will lose its competitive edge and will lose its position as a global player. Hence, I strongly recommend it to pursue this.
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Conclusion Working for the consumer of today and for the world of tomorrow Key success factors for today and the future are to keep the consumer firmly at the centre of Nestls innovations and strengthening the partnership with firms businesses and markets. In this partnership, the Strategic Business Units and Nestl businesses are the strategic drivers, R&D supported by the Application Groups are the providers and innovators, and the markets and factories are the implementers. Consumers want health and wellness from their foods. They want fun, freshness and flavor. But they also want a feeling of wellbeing. In providing this, Nestl R&D must know as much aboutconsumers as about food. How do different nutrients and food components interact within the body to exercise their beneficial effects? Can we enhance these effects? And how much does individuality affect interactions? At a societal level it also means a better understanding of broader human needs. For example, how can nutrition delivered by excellence in foods and beverages limit the upward spiral of health costs by enhancing health and wellbeing. R&D must look to the future. Company need clear roadmaps and strong pipelines for today and tomorrow. But to really stay on top, Nestl has to think beyond a time horizon of two to five years, and look ten to fifteen years ahead. How will new sciences like nutrigenomics influence society and our individual life? What opportunities will the new sciences give Nestl? Will they open the way to personalized nutrition? Nestl need to be involved early, act at the right momentand steer the course successfully. A final word for the force that drives Nestl their consumers. They always put the consumer at the centre. They define consumer needs and transform these

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into products that deliver appropriate consumer benefits. The guarantee from Nestl R&D is reproducible high quality products every day, everywhere at the right cost. These are firms R&D messages for today and the future.
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ABOUT THE AUTHORS

ANASTASIYA VOLOKHOVA Born: Moscow, Russia Education: Plekhanov Academy of Economics (bachelor degree) University of Northern Iowa - fall semester 2008 Plekhanov Academy of Economics (master degree)2010- 2012 Occupation: ZAO "Triton Import" -Financial Manager : 2010 - till now (February 2011)
ALEXANDER SARUKHANYAN Born: Tashkent, Uzbekistan Education: Plekhanov Russian University of Economics Bachelor Degree inE economics. Speciality: finance & credit. Occupation: Forward Ltd. - Analyst
About the authorsA .Rano Usmanova Nestle BOUT THE AUTHORS

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PAVEL TOLPEEV Born: Moscow, Russia Education: Plekhanov Russian University of Economics, Faculty: International Business school. Speciality: finance & credit. Haagse Hogeschool HHS '09(Netherlands) Faculty: Academie voor European Studies & Communication Management Plekhanov Academy of Economics (master degree)2010- 1012
VLADIMIR SEROUSOV Born: Rostov, Russia Education: Plekhanov Russian University of Economics, International Business School faculty - Bachelor degree, specialization Economics
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About the authors . Rano ABOUT THE Usmanova AUTHORS Nestle

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MARGARITA BALASANYAN Born: Erevan,Armenia Education: Plekhanov Russian University of Economics, - Bachelor degree in Economics, specialization Finance Plekhanov Russian University of Economics, International Business School faculty, Master Degree Occupation: Deloitte Touche Tohmatsu Limited Auditor.
EKATERINA CUELLAR Born: Pavlodar, Kazakhstan Education: Economics Degree - Los Andes University - Bogota, Colombia Occupation: Academic Assistant (Aug 2009 Dec 2009) - Los Andes University Bogota, Colombia Board Member (Feb 2009 Jun 2009) Cavar Transportes SA Bogota, Colombia
About the authors.Rano Nestle ABOUTUsmanova THE AUTHORS

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VICTORIA KARELOVA
Born: Moscow
Education: University of Huddersfield West Yorkshire,England BA (Hons) International Hotel & Catering Mangement College of Tourism & Hotel Management - Nicosia,Cyprus IATA/UFTA Advanced Diploma (International Travel Consultant) Higher Diploma in Travel & Tourism Administration Calderdale College, Halifax, England Occupation: Team Assistant - The Royal Bank of Scotland, Moscow DAUREN TOKTAMYSOV Born: Moscow Education: Moscow State University Mechanics and Engineering Plekhanov Russian University of Economics, International Business School faculty, Master Degree Occupation: TCubed and Partners Executive Director
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About the authors . Rano Usmanova Nestle ABOUT THE AUTHORS

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DARIMA DORDZHIEVA Born: Elista, Russia Education Plekhanov Russian University of Economics, International Business School faculty - Honored Bachelor degree, specialization Economics Plekhanov Russian University of Economics, International Business School faculty, Master Degree Occupation: Deloitte&Touche (Audit department)
DENIS GAITANOV Born: Fryazino, Moscow Region, Russia Education: Plekhanov Russian University of Economics, International Business School faculty - Bachelor degree, specialization Economics Hanse University of Applied Science - Bachelor degree, specialization Plekhanov Russian University of Economics, International Business School faculty, Master Degree
About the authors .BOUT RanoTHE Usmanova A AUTHORS Nestle

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EKATERINA GONASTAREVA Born: Saint-Petersburg , Russia Education: Plekhanov Russian University of Economics, International Business School faculty - Bachelor degree, specialization Economics
ALENA PLAKHOVA Born: Moscow Education: Plekhanov Russian University of Economics, International Business School faculty - Honored Bachelor degree, specialization Economics Economic University of Vienna (WU Wien), International Finance Certificate Plekhanov Russian University of Economics, International Business School faculty, Master Degree Occupation: JSC Audit Consulting Group Business Systems Development, Moscow, expert
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EKATERINA VASHURINA Born: Moscow, Russia Education: Moscow State University, RussiaBachelor Degree inForeign Languages Kaplan International Colleges. London MA corporate finance , Plekhanov University, Moscow, Russia Master Degree in Corporate Finance , Plekhanov University, Moscow, Russia
IRINA KOROLEVA Born: Podolsk, Russia Education: Plekhanov Russian University of Economics Bachelor degree, specialization Economics Master Degree in Corporate Finance , Plekhanov University, Moscow, Russia
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MARIA KINAROVA Born: Moscow, Russia Education: Plekhanov Russian University of Economics, International Business School faculty - Honored Bachelor degree, specialization Economics Hogeschool Utrecht, Netherlands Bachelor degree in International Business Management Plekhanov Russian University of Economics, International Business School faculty, Master Degree Occupation: Clifford Chance CIS Limited Moscow, Russia - Working capital assistant
EKATERINA GURIEVA Born: Tambov, Russia Education: Plekhanov Russian University of Economics, International Business School faculty - Honored Bachelor degree, specialization Economics Fachhochschule WrzburgSchweinfurt, Wrzburg, Germany Bachelor Degree in Business Administration Plekhanov Russian University of Economics, International Business School faculty, Master Degree
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ALI ISRAILOV Born: Taraz, Kazakhstan Education: Regent College, Cambridge, EnglandBusiness and Management School Pre-bachelor Degree Brunel University, West London, England Business and Management School Honored Bachelor Degree Plekhanov Russian University of Economics, International Business School faculty, Master Degree
SOFIA PETROVA Born: Schelkovo, Moscow Region, Russia Education: Plekhanov Russian University of Economics, International Business School faculty - Honored Bachelor degree, specialization Economics Fachhochschule WrzburgSchweinfurt, Wrzburg, Germany Bachelor Degree in Business Administration Plekhanov Russian University of Economics, International Business School faculty, Master Degree
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PAVEL STREKHA Born: Kursk, Russia Education: Plekhanov Russian University of Economics, International Business School faculty - Honored Bachelor degree, specialization Economics Hogeschool van Arnhem en Nijmegen, Netherlands Bachelor degree in International Business Management Plekhanov Russian University of Economics, International Business School faculty, Master Degree Occupation: LLC Technologies of Strategic Management, Moscow Analyst
Rano Usmanova Born: Almaty , Kazakhstan Education: Plekhanov Russian University of Economics, Bachelor degree, specialization Finance Plekhanov Russian University of Economics, International Business School faculty, Master Degree
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DMITRIY EPIFANOV Tutor of English Language Deputy Dean of IBS-Plekhanov
ROBIN JOYCE Lecturer - Strategies in Corporate Finance Professor of the Chair of International Banking and Finance, Finance University under the Government of the Russian Federation Honorary Professor of the Siberian Academy of Finance and Banking
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ABOUT IBS PLEKHANOV

International Business School (IBS-Plekhanov) is: State Diploma of the Russian Plekhanov Academy of Economics plus International certificate or Diploma of one of the foreign schoolspartners within Double Degree program and online second Bachelor Degree from an American Ellis College of New York Institute of Technology (NYIT) About fifty partner schools in Europe and North America (see the Partners section) Fully compatible study programs of the Academy and partner schools (see the Programs section) All disciplines are taught in English Students study two more languages choosing from German, French, Spanish, Dutch, Swedish, and Italian One semester studies abroad with one of the foreign schools-partners (see the Partners section) One semester placement with an international company in Russia or abroad The following programmes of higher professional education with a further award of a degree are realized at IBS-Plekhanov: Bachelor in "Economics" and "Management"; Master in "Economics" (specialization "International Corporate Finance") Master of business administration in "Finance" and "Strategic Management" (in Russian)
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About IBS Plekhanov . Rano Usmanova Nestle ABOUT IBS PLEKHANOV

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Within the frameworks of the bachelor programme of higher professional education, which has the International Accreditation by the European Council for Business Education (ECBE), students are trained for two specializations: Marketing Finance and credit
Employment Advantages Combination of traditional fundamental Russian and applied West European education Fluent knowledge of three languages Computer literacy Work experience with an international company Skills in spheres of 1. 2. 3. 4. Professional communication Presentations Business correspondence Recruitment interviews
In 2008, 2009, and 2010 International Business School (IBS-Plekhanov) took the has been awarded with 3 Palms considering its International influence
Copyright Notice The copyright of the material contained in this publication belongs to Plekhanov University, Moscow, Russia and material may be used free of charge for any noncommercial purpose, if attributed to Plekhanov University. Where sources have been noted in the text, the copyright of those parts of the text belong to those sources.
About IBS Plekhanov Rano Usmanova Nestle A.BOUT IBS PLEKHANOV

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MINISTRY OF EDUCATION AND SCIENCE OF THE RUSSIAN FEDERATION

PLEKHANOV RUSSIAN UNIVERSITY OF ECONOMICS INTERNATIONAL BUSINESS SCHOOL

STRATEGIES IN CORPORATE FINANCE CASE STUDIES

STRATEGIES IN CORPORATE FINANCE CASE STUDIES

EDITOR: ROBIN JOYCE COMPILED BY: PAUL STREKHA

Introduction. Anastasiya Volokhova Kapuchinoff

STRATEGIES IN CORPORATE FINANCE CASE STUDIES

Introduction.Anastasiya Volokhova CONTENTSKapuchinoff

STRATEGIES IN CORPORATE FINANCE CASE STUDIES

Introduction. Anastasiya Volokhova Kapuchinoff INTRODUCTION

Sincerely, Nadezhda Vasilievna Ponomareva Dean, IBS-Plekhanov

Introduction.AnastasiyaINTRODUCTION Volokhova Kapuchinoff

what improvements you would recommend. The structure should reflect:

Sincerely, Liliya Sergeevna Babynina

Introduction. Anastasiya Volokhova Kapuchinoff INTRODUCTION

STRATEGIES IN CORPORATE FINANCE CASE STUDIES

SECTION 1. SMALL AND MEDIUM ENTREPRISES

Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff

Costs(rub) 46 420 51 040 53 680 73 240 215 380

Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises.Anastasiya Volokhova Kapuchinoff

Section 1. Small and Medium Entreprises. Anastasiya Volokhova Kapuchinoff

STRATEGIES IN CORPORATE FINANCE CASE STUDIES

ALEXANDER SARUKHANYAN INVESTMENT FUND

Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises. Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises. Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises. Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises. Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises. Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises. Alexander Sarukhanyan Investment Fund

Section 1. Small and Medium Entreprises.Alexander Sarukhanyan Investment Fund

STRATEGIES IN CORPORATE FINANCE CASE STUDIES

PAVEL TOLPEEV IKEA

Section 1. Small and Medium Entreprises. Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises.Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises. Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises.Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises. Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises.Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises. Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises.Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises. Pavel Tolpeev IKEA

Consolidated balance sheet Equity and liabilities

Section 1. Small and Medium Entreprises.Pavel Tolpeev IKEA

Section 1. Small and Medium Entreprises. Pavel Tolpeev IKEA