International Business

Indian Institute of Management Kozhikode

Sections E, F 2013
Instructor: Deepak Dhayanithy
Office: #13, Faculty block III, Extn: 433, Mob: 9495055400
Welcome back!
Skills <> perspective
Not mutually exclusive
Awareness of the shifts in the business world
Integrate
Important
Class rep for IB
Skills <> perspective
Not mutually exclusive
Awareness of the shifts in the business world
Integrate
Important
Class rep for IB
Course Features
Lecture + Case presentations and discussions (from CEMEX, market
power onward)
Teams of 5
1 presentation (15), 1 discussant (10)
Presentation and discussant groups to share their ppt on the day previous to the
class with the instructor, before 23:59:59
Group project term paper teams to choose topics in one of the following
areas (6 X 2)
Institutional voids, International growth through adjacencies, International lobbying,
international ethics, dynamic arbitrage, globalization and its discontents
Term papers should be original, analytical pieces comprising of a succinct statement of the
problem/ issue, review of the pertinent literature (trade, research, news, data as required),
analysis, and recommendations. The main audience for the paper is top management and
policy makers. Executive summary of 300 words, total not more than 2000 words + exh.
Significant effort should go into choosing the topic, earlier the start the better
A separate statement of equal contribution and original work (plagiarism free) needs to
be submitted at each stage of the process, which are (1) Proposal, (2) Work-in-progress
review, and (3) Final paper submission
Due Dates
Proposal 7
th
July 23:59:59
Work-in-progress review 28
th
July 23:59:59
Final submission 18
th
Aug 23:59:59
Papers of quality to draw interest from the press/ conferences/ journals will be A+
Lecture + Case presentations and discussions (from CEMEX, market
power onward)
Teams of 5
1 presentation (15), 1 discussant (10)
Presentation and discussant groups to share their ppt on the day previous to the
class with the instructor, before 23:59:59
Group project term paper teams to choose topics in one of the following
areas (6 X 2)
Institutional voids, International growth through adjacencies, International lobbying,
international ethics, dynamic arbitrage, globalization and its discontents
Term papers should be original, analytical pieces comprising of a succinct statement of the
problem/ issue, review of the pertinent literature (trade, research, news, data as required),
analysis, and recommendations. The main audience for the paper is top management and
policy makers. Executive summary of 300 words, total not more than 2000 words + exh.
Significant effort should go into choosing the topic, earlier the start the better
A separate statement of equal contribution and original work (plagiarism free) needs to
be submitted at each stage of the process, which are (1) Proposal, (2) Work-in-progress
review, and (3) Final paper submission
Due Dates
Proposal 7
th
July 23:59:59
Work-in-progress review 28
th
July 23:59:59
Final submission 18
th
Aug 23:59:59
Papers of quality to draw interest from the press/ conferences/ journals will be A+
Globalization is the interplay of two
forces
Homogeneous civilization
Standard products and services
Barriers to entry & exit should be minimum
World is heterogeneous
Non-standard products and services
Interaction between cultures, products and
different systems (legal, political economic
etc)
1he ulsLlncLlve ConLenL of
lnLernaLlonal SLraLegy
Similarities of IB, IS and CS
CA in the home market
Extend through multi-market activity
Tests relevant for corporate strategy are applicable
Better off test
Demand-side scope
Horizontal multinational
Supply-side scope
Vertical multinational
Ownership test
Market failure
Rule of law, mutual trust, appropriation risk
Limitations to contracting
Information sharing and value transfer
CA in the home market
Extend through multi-market activity
Tests relevant for corporate strategy are applicable
Better off test
Demand-side scope
Horizontal multinational
Supply-side scope
Vertical multinational
Ownership test
Market failure
Rule of law, mutual trust, appropriation risk
Limitations to contracting
Information sharing and value transfer
Then, what is different?
The crossing of national boundaries gives rise to new
strategic tradeoffs and choices
Heterogeneity
Static arbitrage opportunities
IF windows of Citi, HSBC in the Middle-east, Malaysia, Indonesia
What product to sell?
Scale and Complexity of Global operations
Scope for global efficiency
Japanese motorbike manufacturers
Where to compete?
Unpredictability of Economic conditions
Innovation and dynamic arbitrage mindset
WHO vaccine program, GE Labs, Altisource migrating outsourcing
destinations
Where to locate activities?
The crossing of national boundaries gives rise to new
strategic tradeoffs and choices
Heterogeneity
Static arbitrage opportunities
IF windows of Citi, HSBC in the Middle-east, Malaysia, Indonesia
What product to sell?
Scale and Complexity of Global operations
Scope for global efficiency
Japanese motorbike manufacturers
Where to compete?
Unpredictability of Economic conditions
Innovation and dynamic arbitrage mindset
WHO vaccine program, GE Labs, Altisource migrating outsourcing
destinations
Where to locate activities?
Some questions
How flat is the world?
Are societies similar or very different?
Depends on affluence level?
Is information flow streamlined given technological
advances?
Depends on education levels, absorptive capacities
Are consumers more savvy uniformly?
Depends on historical influences
Eg: 401K versus salary deductions with equal contribution
from the employer
Increasingly uniformly conscious of say, carbon
footprint
Depends on position in the Maslows hierarchy?
How flat is the world?
Are societies similar or very different?
Depends on affluence level?
Is information flow streamlined given technological
advances?
Depends on education levels, absorptive capacities
Are consumers more savvy uniformly?
Depends on historical influences
Eg: 401K versus salary deductions with equal contribution
from the employer
Increasingly uniformly conscious of say, carbon
footprint
Depends on position in the Maslows hierarchy?
How IB adds to SM
Factor Competitive
Advantage
Strategic Decision Example
Heterogeneity Static arbitrage
(convergence,
communication
costs)
What product to
sell? (global or
multi-domestic)
Ice-cream flavors
(Hagen Daz),
servicing Hispanics
Scale & complexity Global efficiency Where to compete? Star TV, Zara Scale & complexity Global efficiency Where to compete? Star TV, Zara
Volatility Innovation and
dynamic arbitrage
Where to locate
activities?
WHO vaccine
management
Example: Online poker industry
Connects players from across the world
24 X 7 casino operations
# hands per hour is a key metric
Crosses multiple jurisdictional boundaries
Businesses like PS, Bally, etc.
Fair dealing, Fischer Knuts shuffle
Domiciled in Isle of Man, Gibraltar, etc.
Multiple online payment gateways
Cards (FIs), Online wallets [Difference?]
Impacted by Port Act [?]
Interacts with real casino ops
High-end development, audit, creativity, branding meets
customer support, payout processing, etc.
Of course, multi-$B [Jhunjhunwala Delta Corp.]
Connects players from across the world
24 X 7 casino operations
# hands per hour is a key metric
Crosses multiple jurisdictional boundaries
Businesses like PS, Bally, etc.
Fair dealing, Fischer Knuts shuffle
Domiciled in Isle of Man, Gibraltar, etc.
Multiple online payment gateways
Cards (FIs), Online wallets [Difference?]
Impacted by Port Act [?]
Interacts with real casino ops
High-end development, audit, creativity, branding meets
customer support, payout processing, etc.
Of course, multi-$B [Jhunjhunwala Delta Corp.]
IB course structure
1rade
Lheorles Lo
CompeLlLlve
AdvanLage of
naLlons
CloballzaLlon
- romlses
and
Challenges
ulfferences - lul,
CrganlzaLlon,
CompeLlLlon, Alllances,
Leadershlp,
lnS1l1u1lCnAL vCluS,
Au!ACLnClLS,
LC88?lnC, L1PlCS,
8L?Cnu 1PL ll8M
1rade
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AdvanLage of
naLlons
IB course structure cases
ACLLC
PLAL1P
S18LL1, 1C?S
CLMLx, 88LP, n?SL-
nASuAC and ulAL8
WA8S, LLl LlL?
8An8Ax?, vCLvC and
nCklA uLnMA8k, n8A,
LL8 and PAlL8, CLAM,
uCW, CA, ln1L AluS
vACClnL
CLMS
First gear
The globalization of healthcare
MRI scan, Dr. Sanjay Saini, 2002
Medical tourism
A $2.3B industry by 2012
Apollo group, Mr. Reddy
US educated Hyderabad HQ chain
Not all business driven
Insurance regulations
MRI radiologist certification
Some businesses have more constraints on
globalization than others
The globalization of healthcare
MRI scan, Dr. Sanjay Saini, 2002
Medical tourism
A $2.3B industry by 2012
Apollo group, Mr. Reddy
US educated Hyderabad HQ chain
Not all business driven
Insurance regulations
MRI radiologist certification
Some businesses have more constraints on
globalization than others
Second gear
Trade theories, stakeholders
Mercantilism, absolute and comparative
advantage, H-O [comparative advantage driven by
factor endowments], Leontief paradox, product
lifecycle views
Competitive advantage of Nations
Factor conditions, demand conditions, supporting
industries, competitive rivalry
Trade theories, stakeholders
Mercantilism, absolute and comparative
advantage, H-O [comparative advantage driven by
factor endowments], Leontief paradox, product
lifecycle views
Competitive advantage of Nations
Factor conditions, demand conditions, supporting
industries, competitive rivalry
Third gear
International strategy <> cost leadership/ product
differentiation
How do we organize to execute international strategy
Understanding multi-market competition
Alliances
Leadership
Institutional voids (IV)
Adjacencies
Lobbying, ethics, beyond the firm
Term paper topic is situated largely in this set of third
gear topics understanding built on the first two
International strategy <> cost leadership/ product
differentiation
How do we organize to execute international strategy
Understanding multi-market competition
Alliances
Leadership
Institutional voids (IV)
Adjacencies
Lobbying, ethics, beyond the firm
Term paper topic is situated largely in this set of third
gear topics understanding built on the first two
What is globalization?
The globalization of markets
Demographics
Globalization of production
Technology
Emergence of global institutions
Globalization discontents Joseph Stieglitz
Stakeholders who dont necessarily win
Managing in this environment
Opportunities real or simply correspond to
poorer standards?
The globalization of markets
Demographics
Globalization of production
Technology
Emergence of global institutions
Globalization discontents Joseph Stieglitz
Stakeholders who dont necessarily win
Managing in this environment
Opportunities real or simply correspond to
poorer standards?
Average Tariff Rates on Manufactured
Products
1913 1950 1990 2002
France 21 % 18 % 5.9 % 4.0 %
Germany 20 % 26 % 5.9 % 4.0 %
Italy 18 % 25 % 5.9 % 4.0 % Italy 18 % 25 % 5.9 % 4.0 %
Japan 30 % -- 5.3 % 3.8 %
Holland 5 % 1 % 5.9 % 4.0 %
Sweden 20 % 9 % 4.4 % 4.0 %
Great Britain -- % 5.9 % 4.0 %
United States 44 % 14 % 4.8 % 4.0 %
Multi-polar
Country Share of
World
Output 1963
Share of
World
Output 2004
Share of
World
Exports 2004
United States 40.3% 20.9% 10.4%
Germany 9.7% 4.3% 9.5%
France 6.3% 3.1% 4.8% France 6.3% 3.1% 4.8%
Italy 3.4% 2.9% 3.8%
United
Kingdom
6.5% 3.1% 4.7%
Canada 3.0% 3.5% 3.4%
Japan 5.5% 6.9% 5.7%
China NA 13.2% 5.9%
Figure 1.2: Growth of World Trade, Production
and FDI, 1992-2004
0
100
200
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800
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n
d
e
x

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=
1
0
0
World Trade World Production FDI Outflows
CrowLh 1rends
Figure 1.2: Growth of World Trade, Production
and FDI, 1992-2004
0
100
200
300
400
500
600
700
800
1
9
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World Trade World Production FDI Outflows
Lowerlng 1rade 8arrlers
Figure 1.1: V olume of World Trade and World
P roduction, 1950-2004
100
600
1100
1600
2100
2600
3100
1
9
5
0
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Tot al M erc handi s e E x port s W orl d P roduc t i on
Figure 1.1: V olume of World Trade and World
P roduction, 1950-2004
100
600
1100
1600
2100
2600
3100
1
9
5
0
1
9
5
4
1
9
5
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1
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2
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e
x

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=
1
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0
Tot al M erc handi s e E x port s W orl d P roduc t i on
The Globalization Debate
Pro Factors
Lower prices for goods and
services
Economic growth stimulation
Increase in consumer income
Creates jobs
Countries specialize in
production of goods and
services that are produced
most efficiently
Con Factors
Destroys manufacturing jobs
in wealthy, advanced
countries
Wage rates of unskilled
workers in advanced countries
declines
Companies move to countries
with fewer labor and
environment regulations
Loss of sovereignty
Pro Factors
Lower prices for goods and
services
Economic growth stimulation
Increase in consumer income
Creates jobs
Countries specialize in
production of goods and
services that are produced
most efficiently
Con Factors
Destroys manufacturing jobs
in wealthy, advanced
countries
Wage rates of unskilled
workers in advanced countries
declines
Companies move to countries
with fewer labor and
environment regulations
Loss of sovereignty
Changing Nature of
Multinationals
Non-U.S. Multinationals
In the 1960s global business
activity was dominated by large
U.S. multinational corporations
In 1973 48.5% of multinationals
were U.S. firms
In 2002 28% of largest
multinationals were U.S. firms
Globalization of the world
economy has resulted in a
relative decline in the dominance
of U.S. firms in the global
marketplace
Rise of Mini-Multinationals
Growth of medium-size and
small multinationals has become
a trend in international business
Consider Lubricating Systems
Inc. which employs 25 people
and generates sales of $6.5
million, of which $2 million are
from global sales (Misys, Ocwen
growth)
International business is
conducted not just by large firms
but also by medium-size and
small enterprises
Non-U.S. Multinationals
In the 1960s global business
activity was dominated by large
U.S. multinational corporations
In 1973 48.5% of multinationals
were U.S. firms
In 2002 28% of largest
multinationals were U.S. firms
Globalization of the world
economy has resulted in a
relative decline in the dominance
of U.S. firms in the global
marketplace
Rise of Mini-Multinationals
Growth of medium-size and
small multinationals has become
a trend in international business
Consider Lubricating Systems
Inc. which employs 25 people
and generates sales of $6.5
million, of which $2 million are
from global sales (Misys, Ocwen
growth)
International business is
conducted not just by large firms
but also by medium-size and
small enterprises
World Trade Organization
The successor of the General Agreement on Tariffs and
Trade (GATT)
Primarily responsible for:
Policing the world trading system
Promoting the lowering of barriers to trade
As of May 2005 there were 148 member nations that
collectively accounted for 97% of world trade
The successor of the General Agreement on Tariffs and
Trade (GATT)
Primarily responsible for:
Policing the world trading system
Promoting the lowering of barriers to trade
As of May 2005 there were 148 member nations that
collectively accounted for 97% of world trade
Borders exist in multiple dimensions
Political
Economic
Society
Technology
Ecological
Legal
Political
Economic
Society
Technology
Ecological
Legal
Political
Least understood, attention paid to in b-school
Why?
What can a business manager do? What should she
learn?
Importance of being aware of the political pulse
For eg: Economic crisis (2007,2008), modifications, sub-
prime tranche prices
Glasnost, Perestroika, Tiananmen Square (89), Aung
Sang Suu Kyi (89)
Negotiating with the Chinese on floating the Rb
Whose economic policy should a business support?
Least understood, attention paid to in b-school
Why?
What can a business manager do? What should she
learn?
Importance of being aware of the political pulse
For eg: Economic crisis (2007,2008), modifications, sub-
prime tranche prices
Glasnost, Perestroika, Tiananmen Square (89), Aung
Sang Suu Kyi (89)
Negotiating with the Chinese on floating the Rb
Whose economic policy should a business support?
Economic
Development of Trade theory from 179x
Mercantilism, Absolute advantage, comparative advantage,
factor endowment, product cycle views, national competitive
advantage
Producers and consumers of both countries benefit from trade
Duties and quotas diminish this benefit
Regional trade blocs (NAFTA, ASEAN), anti-dumping
Win-win versus a stakeholder view
Crashing solar cell prices (Chinese manufacturers)
Crashing computing prices (the Rs.40,000 to Rs.50,000 laptop)
Basic concepts (Jun) some important geographies (Jul)
key themes (Aug)
Development of Trade theory from 179x
Mercantilism, Absolute advantage, comparative advantage,
factor endowment, product cycle views, national competitive
advantage
Producers and consumers of both countries benefit from trade
Duties and quotas diminish this benefit
Regional trade blocs (NAFTA, ASEAN), anti-dumping
Win-win versus a stakeholder view
Crashing solar cell prices (Chinese manufacturers)
Crashing computing prices (the Rs.40,000 to Rs.50,000 laptop)
Basic concepts (Jun) some important geographies (Jul)
key themes (Aug)
Society
Social and Cultural studies considered pass?
Eleanor Nostrom (Gbhs)
Mainly the marketers lens in b-school?
Perhaps the promised, border-less world is closest to
reality on this dimension (why?)
Often quoted: McD, KF, Subway, Toys
What about T20, Buddh, SDM?
More internationalized value chain?
Wants to be a Millionaire? KBC, Neengallum Vaellalam..
What similarities and differences do these shows have?
Do we need to learn these dynamics?
Social and Cultural studies considered pass?
Eleanor Nostrom (Gbhs)
Mainly the marketers lens in b-school?
Perhaps the promised, border-less world is closest to
reality on this dimension (why?)
Often quoted: McD, KF, Subway, Toys
What about T20, Buddh, SDM?
More internationalized value chain?
Wants to be a Millionaire? KBC, Neengallum Vaellalam..
What similarities and differences do these shows have?
Do we need to learn these dynamics?
Technology
Homogenization driver or beneficiary?
Medical imaging, targeted therapy, stem cell
research [the debate]
Mass Transit [Dubai, New Delhi]
Solar Energy
IDL and the Stanford University initiative
Vibram Fivefingers
Mountaineering, vulcanization, tier-1 supplier, to
branded shoes
Homogenization driver or beneficiary?
Medical imaging, targeted therapy, stem cell
research [the debate]
Mass Transit [Dubai, New Delhi]
Solar Energy
IDL and the Stanford University initiative
Vibram Fivefingers
Mountaineering, vulcanization, tier-1 supplier, to
branded shoes
Ecological
Fad? Obvious? Necessity?
Environment friendly, sustainable, renewables, carbon
footprint, carbon credits
Various agreements and protocols (Kyoto, Doha)
Concerns are shared but who will pay?
Total Environment and Windmills of the Gods
Solar lights, vehicles, power grids (?)
Devils advocate view
Willingness and ability to pay
Who benefits and who incurs (or is exposed to) the costs
Fad? Obvious? Necessity?
Environment friendly, sustainable, renewables, carbon
footprint, carbon credits
Various agreements and protocols (Kyoto, Doha)
Concerns are shared but who will pay?
Total Environment and Windmills of the Gods
Solar lights, vehicles, power grids (?)
Devils advocate view
Willingness and ability to pay
Who benefits and who incurs (or is exposed to) the costs
Legal
Buyers beware versus sellers beware
Pokers legal status across the world (rake)
US v Isle of Man v Gibraltar v Scandinavia v Australia v Taiwan v
Vietnam v Brazil v India
New technology raises new legislative challenges
Fetus testing, internet, etc. Does difficult to regulate mean a business is
illegal?
Islamic Finance, interest (riba), Islamic banking windows, Sharia
boards
Capital is scarce, essential to create wealth, hence earns interest
Entrepreneurship is vital, capital without entrepreneurship doesnt
necessarily create wealth, riba not desirable
Speculation ban puts a lid on smart risk taking OR limits growth OR
protects the consumer?
Buyers beware versus sellers beware
Pokers legal status across the world (rake)
US v Isle of Man v Gibraltar v Scandinavia v Australia v Taiwan v
Vietnam v Brazil v India
New technology raises new legislative challenges
Fetus testing, internet, etc. Does difficult to regulate mean a business is
illegal?
Islamic Finance, interest (riba), Islamic banking windows, Sharia
boards
Capital is scarce, essential to create wealth, hence earns interest
Entrepreneurship is vital, capital without entrepreneurship doesnt
necessarily create wealth, riba not desirable
Speculation ban puts a lid on smart risk taking OR limits growth OR
protects the consumer?
Similarities of IB, IS and CS
CA in the home market
Extend through multi-market activity
Tests relevant for corporate strategy are applicable
Better off test
Demand-side scope
Horizontal multinational
Supply-side scope
Vertical multinational
Ownership test
Market failure
Rule of law, mutual trust, appropriation risk
Limitations to contracting
Information sharing and value transfer
CA in the home market
Extend through multi-market activity
Tests relevant for corporate strategy are applicable
Better off test
Demand-side scope
Horizontal multinational
Supply-side scope
Vertical multinational
Ownership test
Market failure
Rule of law, mutual trust, appropriation risk
Limitations to contracting
Information sharing and value transfer
Then, what is different?
The crossing of national boundaries gives rise to new
strategic tradeoffs and choices
Heterogeneity
Static arbitrage opportunities
IF windows of Citi, HSBC in the Middle-east, Malaysia, Indonesia
What product to sell?
Scale and Complexity of Global operations
Scope for global efficiency
Japanese motorbike manufacturers
Where to compete?
Unpredictability of Economic conditions
Innovation and dynamic arbitrage mindset
WHO vaccine program, GE Labs, Altisource migrating outsourcing
destinations
Where to locate activities?
The crossing of national boundaries gives rise to new
strategic tradeoffs and choices
Heterogeneity
Static arbitrage opportunities
IF windows of Citi, HSBC in the Middle-east, Malaysia, Indonesia
What product to sell?
Scale and Complexity of Global operations
Scope for global efficiency
Japanese motorbike manufacturers
Where to compete?
Unpredictability of Economic conditions
Innovation and dynamic arbitrage mindset
WHO vaccine program, GE Labs, Altisource migrating outsourcing
destinations
Where to locate activities?
How IB adds to SM
Factor Competitive
Advantage
Strategic Decision Example
Heterogeneity Static arbitrage
(convergence,
communication
costs)
What product to
sell? (global or
multi-domestic)
Ice-cream flavors
(Hagen Daz),
servicing Hispanics
Scale & complexity Global efficiency Where to compete? Star TV, Zara Scale & complexity Global efficiency Where to compete? Star TV, Zara
Volatility Innovation and
dynamic arbitrage
Where to locate
activities?
WHO vaccine
management
Apollo Health Street
What are the opportunities and threats facing
AHS?
Options to build scale in the short term?
Options to create value in the longer term?
Recommend a way forward for AHS
What are the opportunities and threats facing
AHS?
Options to build scale in the short term?
Options to create value in the longer term?
Recommend a way forward for AHS
1rade Lheorles Lo CompeLlLlve
AdvanLage of naLlons
1rade
MercanLlllsm (uavld Pume, 1732)
AbsoluLe advanLage (Adam SmlLh, 1776)
ComparaLlve advanLage (8lcardo, 1817)
lree Lrade
lacLor endowmenL (Peckscher 1919 - Clln 1933)
roducL llfe cycle
new 1rade 1heory (hlgh flxed cosLs)
1rade Lo lul, aggregaLe welfare Lo compeLlLlveness
1heory of naLlonal CompeLlLlve AdvanLage (orLer, 198x)
1rade
MercanLlllsm (uavld Pume, 1732)
AbsoluLe advanLage (Adam SmlLh, 1776)
ComparaLlve advanLage (8lcardo, 1817)
lree Lrade
lacLor endowmenL (Peckscher 1919 - Clln 1933)
roducL llfe cycle
new 1rade 1heory (hlgh flxed cosLs)
1rade Lo lul, aggregaLe welfare Lo compeLlLlveness
1heory of naLlonal CompeLlLlve AdvanLage (orLer, 198x)
r|ce
If the autarky equ|||br|um pr|ce |s the same for
both countr|es, no trade w||| occur even when
trade |s a||owed. In th|s case, trade changes
noth|ng.
Lurope Iapan Wor|d + = uant|ty
hLLp://myweb.llu.edu/~uroy/eco41
r|ce
1he h|gh-pr|ce country |n autarky, Lurope,
becomes the |mport|ng country under trade.
r|ces fa||. roduct|on fa||s.
1he |ow-pr|ce country |n autarky, Iapan,
becomes the export|ng country under trade.
r|ces r|se. roduct|on r|ses.
Lurope Iapan Wor|d + = uant|ty
hLLp://myweb.llu.edu/~uroy/eco41
Iapan: 1he Lxport|ng Country
r|ce
of Stee|
uomesLlc
supply
rlce
afLer
Lrade
World
prlce
0
uant|ty
of Stee|
prlce
uomesLlc
demand LxporLs
rlce
before
Lrade
uomesLlc
quanLlLy
demanded
uomesLlc
quanLlLy
supplled
hLLp://myweb.llu.edu/~uroy/eco41
Iapan: 1he Lxport|ng Country
u
8
A
r|ce
of Stee|
uomesLlc
supply rlce
afLer
Lrade
World
prlce
LxporLs
u
C
8
0 uant|ty
of Stee|
prlce
rlce
before
Lrade
uomesLlc
demand
hLLp://myweb.llu.edu/~uroy/eco41
1he Wlnners And Losers lrom 1rade:
LxporLlng CounLry
uomesLlc producers of Lhe exporLed good are
beLLer off, and
uomesLlc consumers of Lhe exporLed good are
worse off.
1rade ralses Lhe economlc well-belng of Lhe
naLlon as a whole. 1haL ls, Lhe galn Lo
producers exceeds Lhe loss Lo consumers.
uomesLlc producers of Lhe exporLed good are
beLLer off, and
uomesLlc consumers of Lhe exporLed good are
worse off.
1rade ralses Lhe economlc well-belng of Lhe
naLlon as a whole. 1haL ls, Lhe galn Lo
producers exceeds Lhe loss Lo consumers.
hLLp://myweb.llu.edu/~uroy/eco41
Lurope: 1he Import|ng Country
r|ce
of Stee|
uomesLlc
supply
rlce
before
0 uant|ty
rlce
afLer
Lrade
World
prlce
of Stee|
uomesLlc
demand
lmporLs
uomesLlc
quanLlLy
supplled
uomesLlc
quanLlLy
demanded
before
Lrade
hLLp://myweb.llu.edu/~uroy/eco41
Lurope: 1he Import|ng Country
A
r|ce
of Stee|
uomesLlc
supply
C
8
u
A
0
uant|ty
of Stee|
uomesLlc
demand
rlce
afLer Lrade
World
prlce
lmporLs
rlce
before Lrade
hLLp://myweb.llu.edu/~uroy/eco41
1he Wlnners And Losers lrom 1rade:
lmporLlng CounLry
uomesLlc producers of Lhe lmporLed good are
worse off, and
uomesLlc consumers of Lhe lmporLed good are
beLLer off.
1rade ralses Lhe economlc well-belng of Lhe
naLlon as a whole because Lhe galns of
consumers exceed Lhe losses of producers.
uomesLlc producers of Lhe lmporLed good are
worse off, and
uomesLlc consumers of Lhe lmporLed good are
beLLer off.
1rade ralses Lhe economlc well-belng of Lhe
naLlon as a whole because Lhe galns of
consumers exceed Lhe losses of producers.
hLLp://myweb.llu.edu/~uroy/eco41
8uslness concerns are sllghLly dlfferenL
1rade
MercanLlllsm (uavld Pume, 1732)
AbsoluLe advanLage (Adam SmlLh, 1776)
ComparaLlve advanLage (8lcardo, 1817)
lree Lrade
lacLor endowmenL (Peckscher 1919 - Clln 1933)
roducL llfe cycle
new 1rade 1heory (hlgh flxed cosLs)
1rade Lo lul, aggregaLe welfare Lo compeLlLlveness
1heory of naLlonal CompeLlLlve AdvanLage (orLer, 198x)
1rade
MercanLlllsm (uavld Pume, 1732)
AbsoluLe advanLage (Adam SmlLh, 1776)
ComparaLlve advanLage (8lcardo, 1817)
lree Lrade
lacLor endowmenL (Peckscher 1919 - Clln 1933)
roducL llfe cycle
new 1rade 1heory (hlgh flxed cosLs)
1rade Lo lul, aggregaLe welfare Lo compeLlLlveness
1heory of naLlonal CompeLlLlve AdvanLage (orLer, 198x)
roducL llfe cycle
1heory of naLlonal
CompeLlLlve AdvanLage
1he Lheory aLLempLs Lo analyze Lhe reasons for a
naLlon's success ln a parLlcular lndusLry
orLer sLudled 100 lndusLrles ln 10 naLlons
Postulated determinants of competitive
advantage of a nation were based on four
major attributes
Factor endowments
Demand conditions
Related and supporting industries
Firm strategy, structure and rivalry
1he Lheory aLLempLs Lo analyze Lhe reasons for a
naLlon's success ln a parLlcular lndusLry
orLer sLudled 100 lndusLrles ln 10 naLlons
Postulated determinants of competitive
advantage of a nation were based on four
major attributes
Factor endowments
Demand conditions
Related and supporting industries
Firm strategy, structure and rivalry
orLer's ulamond
Success occurs where Lhese aLLrlbuLes exlsL
More/greaLer Lhe aLLrlbuLe, Lhe hlgher chance of
success
1he dlamond ls muLually relnforclng
Success occurs where Lhese aLLrlbuLes exlsL
More/greaLer Lhe aLLrlbuLe, Lhe hlgher chance of
success
1he dlamond ls muLually relnforclng
orLer's ulamond
lacLor LndowmenLs
Iactor endowments: A naLlon's poslLlon ln facLors of
producLlon such as skllled labor or lnfrasLrucLure
necessary Lo compeLe ln a glven lndusLry
Basic factor endowments
Natural resources
Climate
Geographic location
Demographics
Advanced factor endowments
CommunlcaLlons
Skllled labor
8esearch
1echnology
LducaLlon
Iactor endowments: A naLlon's poslLlon ln facLors of
producLlon such as skllled labor or lnfrasLrucLure
necessary Lo compeLe ln a glven lndusLry
Basic factor endowments
Natural resources
Climate
Geographic location
Demographics
Advanced factor endowments
CommunlcaLlons
Skllled labor
8esearch
1echnology
LducaLlon
uemand CondlLlons
uemand:
creates capabilities
creates sophisticated and demanding
consumers
uemand lmpacLs quallLy and lnnovaLlon
1he 8eal Madrld falLhful expecL Lhe besL ln Lhe world Lo
play week ln week ouL aL Lhe SanLlago 8ernabeu"
uemand:
creates capabilities
creates sophisticated and demanding
consumers
uemand lmpacLs quallLy and lnnovaLlon
1he 8eal Madrld falLhful expecL Lhe besL ln Lhe world Lo
play week ln week ouL aL Lhe SanLlago 8ernabeu"
8elaLed and SupporLlng lndusLrles
CreaLes clusLers of supporLlng lndusLrles LhaL are
lnLernaLlonally compeLlLlve
Slllcon valley
humble buL equally valld examples
AuLomoblle anclllarles ln a around une, Chennal
CreaLes clusLers of supporLlng lndusLrles LhaL are
lnLernaLlonally compeLlLlve
Slllcon valley
humble buL equally valld examples
AuLomoblle anclllarles ln a around une, Chennal
llrm SLraLegy, SLrucLure
and 8lvalry
Long Lerm corporaLe vlslon ls a deLermlnanL of
success
ManagemenL 'ldeology' and sLrucLure of Lhe flrm can
elLher help or hurL you
resence of domesLlc rlvalry lmproves a company's
compeLlLlveness
Long Lerm corporaLe vlslon ls a deLermlnanL of
success
ManagemenL 'ldeology' and sLrucLure of Lhe flrm can
elLher help or hurL you
resence of domesLlc rlvalry lmproves a company's
compeLlLlveness
International Business session 2,
06/13/13
International Business session 2,
06/13/13
Indian Institute of Management
Kozhikode
Sections E, F 2013
Session 2: outline
Recall similarities of IB and CS, recall
differences
Heterogeneity (product), scale (market) and
complexity (location)
Today
Discuss AHS case
Market disruptions, institutions, long-term growth
Trade theories to product lifecycle view, CAN
Stakeholders
PESTEL boundaries
Toys R Us Japan
Recall similarities of IB and CS, recall
differences
Heterogeneity (product), scale (market) and
complexity (location)
Today
Discuss AHS case
Market disruptions, institutions, long-term growth
Trade theories to product lifecycle view, CAN
Stakeholders
PESTEL boundaries
Toys R Us Japan
What is globalization?
The globalization of markets
Demographics
Globalization of production
Technology
Emergence of global institutions, standards
Globalization discontents
Stakeholders who dont necessarily win
Managing in this environment
Mobility
Ambidexterity
Culturally attuned
The globalization of markets
Demographics
Globalization of production
Technology
Emergence of global institutions, standards
Globalization discontents
Stakeholders who dont necessarily win
Managing in this environment
Mobility
Ambidexterity
Culturally attuned
AHS service suite
Healthcare providers
Full revenue outsourcing, cash collections process
streamlining, 3
rd
party solutions, denial management (sic),
private pay solutions, patient access partnership, EMS
billing, transaction services
Physicians
Full business office, patient access and accounting,
physician consulting (enrollment of patients)
Healthcare payers
Provider data management, claims admin (>2mill a month),
eligibility and plan maintenance, call centers, mail rooms
IT support
Development and maintenance, QA
Healthcare providers
Full revenue outsourcing, cash collections process
streamlining, 3
rd
party solutions, denial management (sic),
private pay solutions, patient access partnership, EMS
billing, transaction services
Physicians
Full business office, patient access and accounting,
physician consulting (enrollment of patients)
Healthcare payers
Provider data management, claims admin (>2mill a month),
eligibility and plan maintenance, call centers, mail rooms
IT support
Development and maintenance, QA
Apollo Health Street
What are the opportunities and threats facing
AHS?
Options to build scale in the short term?
Options to create value in the longer term?
Recommend a way forward for AHS
What are the opportunities and threats facing
AHS?
Options to build scale in the short term?
Options to create value in the longer term?
Recommend a way forward for AHS
1. Opportunities
Opportunities Threats
PPACA forced cost examination BPO!
Seamless interfacing between patients,
payers, healthcare providers new
solution development opportunity
Changing market & needs scope for
partnerships with healthcare BPO, IT and
ITeS companies
Changing market & needs scope for
partnerships with healthcare BPO, IT and
ITeS companies
Universal Standards and Codes
development ICD 10 geographical
expansion
1. Opportunities and Threats
Opportunities Threats
PPACA forced cost examination BPO! Services based in the US will face falling
demand
Seamless interfacing between patients,
payers, healthcare providers new
solution development opportunity
Great technology solutions could make the
BPO layer itself redundant
Seamless interfacing between patients,
payers, healthcare providers new
solution development opportunity
Changing market & needs scope for
partnerships with healthcare BPO, IT and
ITeS companies
Near-shoring may be preferred , Large US
players may set up captives in India
Universal Standards and Codes
development ICD 10 geographical
expansion
With the flux, competition arrives from
various industries IT, ITeS, BPO,
chances of getting blindsided are real
Global healthcare service providers have
much larger budgets for R&D
Cost escalations in India
What are AHS strengths?
Domain experience and process expertise?
Domain knowledge?
Particularly when the landscape is shifting
courtesy PPACA, ICD development
Cost leadership?
Technology solutions and expertise?
Industry relationships and consulting
expertise?
Domain experience and process expertise?
Domain knowledge?
Particularly when the landscape is shifting
courtesy PPACA, ICD development
Cost leadership?
Technology solutions and expertise?
Industry relationships and consulting
expertise?
Some numbersexhibit 2 (?)
(INR mill unless mentioned otherwise) 2010 2009 2008
Income 20,587 16,350 12,416
Revenue growth rate 26% 32%
Opex 10,726 8,728 6,530
Employee costs 3,308 2,594 1,944
Total expenses 17,861 14,333 10,709
# employees 21,080 19,088 15,927
Revenue (INR mill) per employee 0.98 0.86 0.78 Revenue (INR mill) per employee 0.98 0.86 0.78
Operating margin (?) 92% 87% 90%
Net margin (?) 15% 14% 16%
Employee costs/ Opex 31% 30% 30%
Avg Employee CTC (INR) 156,926 135,897 122,057
Avg Employee CTC increases by: 15% 11%
2. Options for short-term scale
building
New markets X New products/ services
What is this called?
Customer loyalty?
Or stickiness? Why?
US market
350 healthcare payers
$500B market
Annual IT spending of $13B (AHS wants to be $1B)
3.4B claims > 1.1B payments
Language a big plus (vis--vis India BPO) as compared to Europe
Organic versus Inorganic
Need to scale up customer lists, order books
3 routes to short-term scaling up
Value addition
Go IT-centric rather than services-centric (unless services are high-end)
Embed employees in important client organization to build differentiation
Reverse off-shoring, acquire US based service companies
New markets X New products/ services
What is this called?
Customer loyalty?
Or stickiness? Why?
US market
350 healthcare payers
$500B market
Annual IT spending of $13B (AHS wants to be $1B)
3.4B claims > 1.1B payments
Language a big plus (vis--vis India BPO) as compared to Europe
Organic versus Inorganic
Need to scale up customer lists, order books
3 routes to short-term scaling up
Value addition
Go IT-centric rather than services-centric (unless services are high-end)
Embed employees in important client organization to build differentiation
Reverse off-shoring, acquire US based service companies
3. Long-term value addition
AHS, like many other firms, start with the disruption of
labor arbitrage
But is that a one-and-done?
In other words, it is a static arbitrage opportunity defined once
and early one only?
Is right-location of all activities the answer?
Contrast with Financial services industry trends
Recall customer satisfaction surveys, their importance in the
context of PPACA
Where should the various activities be placed
Is it possible to look beyond the large hospitals?
What should AHS alignment with drug companies and
diagnostics firms/ technologies?
Is seamless information sharing, especially in health,
utopia?
AHS, like many other firms, start with the disruption of
labor arbitrage
But is that a one-and-done?
In other words, it is a static arbitrage opportunity defined once
and early one only?
Is right-location of all activities the answer?
Contrast with Financial services industry trends
Recall customer satisfaction surveys, their importance in the
context of PPACA
Where should the various activities be placed
Is it possible to look beyond the large hospitals?
What should AHS alignment with drug companies and
diagnostics firms/ technologies?
Is seamless information sharing, especially in health,
utopia?
4. Going forward
AHS needs to track the institutional climate
Legislative and regulatory change
Japan, Canada, Germany <> deeper ties in the US
market
Long term is a series of short-terms
Can AHS provide a compelling alternative to
captives?
Why would healthcare players want to set up captives?
Why do financial services & retail firms set up
captives?
AHS needs to track the institutional climate
Legislative and regulatory change
Japan, Canada, Germany <> deeper ties in the US
market
Long term is a series of short-terms
Can AHS provide a compelling alternative to
captives?
Why would healthcare players want to set up captives?
Why do financial services & retail firms set up
captives?
Trade theories to Competitive
Advantage of Nations
Increase welfare by increasing consumption,
production
Specialization helps
Trade to FDI, aggregate welfare to
competitiveness
Theory of National Competitive Advantage
(Porter, 198x)
Increase welfare by increasing consumption,
production
Specialization helps
Trade to FDI, aggregate welfare to
competitiveness
Theory of National Competitive Advantage
(Porter, 198x)
Trade theories to Competitive
Advantage of Nations
MercanLlllsm, Pume, 1732
AbsoluLe Adv, SmlLh, 1776
ComparaLlve Adv, 8lcardo, 1817
lrench 8evoluLlon, 1789 - 1799
uS v. 1he AmlsLad, 1841
lacLor endowmenL, Peckscher, 1919
lacLor endowmenL, Clln, 1933
roducL llfe cycle, vernon, 196x
aradox, LeonLlef, 1953
new 1rade Theory, eos, 197x
naLlonal CompeLlLlve Adv, orLer, 1990
lndlan lndependence 1947
uS v. 1he AmlsLad, 1841
Trade theories to Competitive
Advantage of Nations
Increase welfare by increasing consumption,
production
Specialization
Even in a simple purely economic framework,
trade affects stakeholders (in the immediate term)
differently!
Trade to FDI, aggregate welfare to
competitiveness
Theory of National Competitive Advantage (Porter,
1990)
Increase welfare by increasing consumption,
production
Specialization
Even in a simple purely economic framework,
trade affects stakeholders (in the immediate term)
differently!
Trade to FDI, aggregate welfare to
competitiveness
Theory of National Competitive Advantage (Porter,
1990)
r|ce
If the autarky equ|||br|um pr|ce |s the same for
both countr|es, no trade w||| occur even when
trade |s a||owed. In th|s case, trade changes
noth|ng.
Lurope Iapan Wor|d + = uant|ty
hLLp://myweb.llu.edu/~uroy/eco41
r|ce
1he h|gh-pr|ce country |n autarky, Lurope,
becomes the |mport|ng country under trade.
r|ces fa||. roduct|on fa||s.
1he |ow-pr|ce country in autarky, Iapan,
becomes the export|ng country under trade.
r|ces r|se. roduct|on r|ses.
Lurope Iapan Wor|d + = uant|ty
hLLp://myweb.llu.edu/~uroy/eco41
Iapan: 1he Lxport|ng Country
r|ce
of Stee|
uomesLlc
supply
rlce
afLer
Lrade
World
prlce
0
uant|ty
of Stee|
prlce
uomesLlc
demand LxporLs
rlce
before
Lrade
uomesLlc
quanLlLy
demanded
uomesLlc
quanLlLy
supplled
hLLp://myweb.llu.edu/~uroy/eco41
Iapan: 1he Lxport|ng Country
u
8
A
r|ce
of Stee|
uomesLlc
supply rlce
afLer
Lrade
World
prlce
LxporLs
u
C
8
0 uant|ty
of Stee|
prlce
rlce
before
Lrade
uomesLlc
demand
hLLp://myweb.llu.edu/~uroy/eco41
The Winners And Losers From Trade:
Exporting Country
Domestic producers of the exported good are
better off, and
Domestic consumers of the exported good are
worse off.
Trade raises the economic well-being of the
nation as a whole. That is, the gain to producers
exceeds the loss to consumers.
Domestic producers of the exported good are
better off, and
Domestic consumers of the exported good are
worse off.
Trade raises the economic well-being of the
nation as a whole. That is, the gain to producers
exceeds the loss to consumers.
hLLp://myweb.llu.edu/~uroy/eco41
Lurope: 1he Import|ng Country
r|ce
of Stee|
uomesLlc
supply
rlce
before
0 uant|ty
rlce
afLer
Lrade
World
prlce
of Stee|
uomesLlc
demand
lmporLs
uomesLlc
quanLlLy
supplled
uomesLlc
quanLlLy
demanded
before
Lrade
hLLp://myweb.llu.edu/~uroy/eco41
Lurope: 1he Import|ng Country
A
r|ce
of Stee|
uomesLlc
supply
C
8
u
A
0
uant|ty
of Stee|
uomesLlc
demand
rlce
afLer Lrade
World
prlce
lmporLs
rlce
before Lrade
hLLp://myweb.llu.edu/~uroy/eco41
The Winners And Losers From Trade:
Importing Country
Domestic producers of the imported good are
worse off, and
Domestic consumers of the imported good are
better off.
Trade raises the economic well-being of the
nation as a whole because the gains of
consumers exceed the losses of producers.
Domestic producers of the imported good are
worse off, and
Domestic consumers of the imported good are
better off.
Trade raises the economic well-being of the
nation as a whole because the gains of
consumers exceed the losses of producers.
hLLp://myweb.llu.edu/~uroy/eco41
Matters become more involved when
PESTEL dimensions & boundaries are acknowledged
Family structure in India today may be going through what
happened in Japan in the 60s and 70s
Religion
Economic incentives and threats are tempered by
politics, culture?
To a similar extent across the world?
Economic incentives tempered by ecological concerns?
Global institutions emerge
Inter and intra-institutional political economy
Business needs to track the shifts, and perhaps even
influence them
PESTEL dimensions & boundaries are acknowledged
Family structure in India today may be going through what
happened in Japan in the 60s and 70s
Religion
Economic incentives and threats are tempered by
politics, culture?
To a similar extent across the world?
Economic incentives tempered by ecological concerns?
Global institutions emerge
Inter and intra-institutional political economy
Business needs to track the shifts, and perhaps even
influence them
hLLp://myweb.llu.edu/~uroy/eco41
roducL llfe cycle
1heory of naLlonal
CompeLlLlve AdvanLage
1he Lheory aLLempLs Lo analyze Lhe reasons for a
naLlon's success ln a parLlcular lndusLry
orLer sLudled 100 lndusLrles ln 10 naLlons
Postulated determinants of competitive
advantage of a nation were based on four
major attributes
Factor endowments
Demand conditions
Related and supporting industries
Firm strategy, structure and rivalry
1he Lheory aLLempLs Lo analyze Lhe reasons for a
naLlon's success ln a parLlcular lndusLry
orLer sLudled 100 lndusLrles ln 10 naLlons
Postulated determinants of competitive
advantage of a nation were based on four
major attributes
Factor endowments
Demand conditions
Related and supporting industries
Firm strategy, structure and rivalry
orLer's ulamond
Success occurs where Lhese aLLrlbuLes exlsL
More/greaLer Lhe aLLrlbuLe, Lhe hlgher chance of
success
1he dlamond ls muLually relnforclng
Success occurs where Lhese aLLrlbuLes exlsL
More/greaLer Lhe aLLrlbuLe, Lhe hlgher chance of
success
1he dlamond ls muLually relnforclng
orLer's ulamond
lacLor LndowmenLs
Iactor endowments: A naLlon's poslLlon ln facLors of
producLlon such as skllled labor or lnfrasLrucLure
necessary Lo compeLe ln a glven lndusLry
Basic factor endowments
Natural resources
Climate
Geographic location
Demographics
Advanced factor endowments
CommunlcaLlons
Skllled labor
8esearch
1echnology
LducaLlon
Iactor endowments: A naLlon's poslLlon ln facLors of
producLlon such as skllled labor or lnfrasLrucLure
necessary Lo compeLe ln a glven lndusLry
Basic factor endowments
Natural resources
Climate
Geographic location
Demographics
Advanced factor endowments
CommunlcaLlons
Skllled labor
8esearch
1echnology
LducaLlon
uemand CondlLlons
uemand:
creates capabilities
creates sophisticated and demanding
consumers
uemand lmpacLs quallLy and lnnovaLlon
1he 8eal Madrld falLhful expecL Lhe besL ln Lhe world Lo
play week ln week ouL aL Lhe SanLlago 8ernabeu"
uemand:
creates capabilities
creates sophisticated and demanding
consumers
uemand lmpacLs quallLy and lnnovaLlon
1he 8eal Madrld falLhful expecL Lhe besL ln Lhe world Lo
play week ln week ouL aL Lhe SanLlago 8ernabeu"
8elaLed and SupporLlng lndusLrles
CreaLes clusLers of supporLlng lndusLrles LhaL are
lnLernaLlonally compeLlLlve
Slllcon valley
humble buL equally valld examples
AuLomoblle anclllarles ln a around une, Chennal
CreaLes clusLers of supporLlng lndusLrles LhaL are
lnLernaLlonally compeLlLlve
Slllcon valley
humble buL equally valld examples
AuLomoblle anclllarles ln a around une, Chennal
llrm SLraLegy, SLrucLure
and 8lvalry
Long Lerm corporaLe vlslon ls a deLermlnanL of
success
ManagemenL 'ldeology' and sLrucLure of Lhe flrm can
elLher help or hurL you
resence of domesLlc rlvalry lmproves a company's
compeLlLlveness
Long Lerm corporaLe vlslon ls a deLermlnanL of
success
ManagemenL 'ldeology' and sLrucLure of Lhe flrm can
elLher help or hurL you
resence of domesLlc rlvalry lmproves a company's
compeLlLlveness
Toys R Us Japan
Session 3, International Business,
sections E and F
Setting
1991
TRS a category killer
$7.9B Japanese market a natural destination
the black ship of Kawasaki
Mathew C. Perrys warships, 1854
Japanese multi-layer distribution versus large store format
What is the central TRS concept
Self-service
Supermarket-style format
Low price, wide selection
Identical outlets across the TRS chain
Warehouse size stores, 15,000 SKUs
20% of US market, $5.5B sales
Since 84 stores in Canada, Europe, Hong Kong, Singapore
Resistance and ire from all destinations, fears often founded!
TRS persists with their playbook
1991
TRS a category killer
$7.9B Japanese market a natural destination
the black ship of Kawasaki
Mathew C. Perrys warships, 1854
Japanese multi-layer distribution versus large store format
What is the central TRS concept
Self-service
Supermarket-style format
Low price, wide selection
Identical outlets across the TRS chain
Warehouse size stores, 15,000 SKUs
20% of US market, $5.5B sales
Since 84 stores in Canada, Europe, Hong Kong, Singapore
Resistance and ire from all destinations, fears often founded!
TRS persists with their playbook
Japanese toy market
Encouraging signs
$7.1B market for toys
Like rest of retail, expanding fast
Smaller families, demographic trends, lots of toys!
Difficulties
Idiosyncratic networks that structure and dominate
Cramped, tiny stores, family run mom and pop
Loyalty chain
Retailer > wholesaler > distributors > manufacturers
Tightly knit, retail price maintenance, relationships
Inefficient system or safety net?
Folks accustomed to high service levels
But system bolstered by several laws
Restriction on spread of large retail establishments
7-11 type retailers making some headway
But lots still to be done
Encouraging signs
$7.1B market for toys
Like rest of retail, expanding fast
Smaller families, demographic trends, lots of toys!
Difficulties
Idiosyncratic networks that structure and dominate
Cramped, tiny stores, family run mom and pop
Loyalty chain
Retailer > wholesaler > distributors > manufacturers
Tightly knit, retail price maintenance, relationships
Inefficient system or safety net?
Folks accustomed to high service levels
But system bolstered by several laws
Restriction on spread of large retail establishments
7-11 type retailers making some headway
But lots still to be done
Opening up
2 moves to open Japans retail industry
MITI (Ministry of International Trade and Industry) Memorandum
Amendment to Large Scale Retail Store Law
High level discussions between US and Japanese negotiators
Structural Impediments Initiative
TRS plan
Ally with Den Fujita
McDonalds in Japan fame
TRS subsidiary subject to heavy fire
TRS position in 1991
Local toy sellers have mobilized stiff opposition
Leading manufacturers refuse to sell to TRS
Land prices at a all-time high
Economy in a state of full employment
TRS plans already stalling!!
How can TRS change the rules of the game?
2 moves to open Japans retail industry
MITI (Ministry of International Trade and Industry) Memorandum
Amendment to Large Scale Retail Store Law
High level discussions between US and Japanese negotiators
Structural Impediments Initiative
TRS plan
Ally with Den Fujita
McDonalds in Japan fame
TRS subsidiary subject to heavy fire
TRS position in 1991
Local toy sellers have mobilized stiff opposition
Leading manufacturers refuse to sell to TRS
Land prices at a all-time high
Economy in a state of full employment
TRS plans already stalling!!
How can TRS change the rules of the game?
Discussion Questions
1. Is Japan a good market for Toys R Us?
2. Is Toys R Us good for Japan?
3. Has Toys R Us chosen the best entry
strategy for Japan? Has it chosen the right
partner?
1. Is Japan a good market for Toys R Us?
2. Is Toys R Us good for Japan?
3. Has Toys R Us chosen the best entry
strategy for Japan? Has it chosen the right
partner?
Toys are culturep11.
Toys R Us assumption
What about Sapphire, Blore
Are toys culturally and historically determined
Binaca boxes as cars
Toy cars to toy earth moving and heavy construction
equipment (JCBs)
Chennapatna toys versus say, Transformer, Batman
What about Barbie?
Should there be some uniformity in the toys kids play
with beyond a certain level of economic development
in a country, then certainly Toys R Us should work
well in Japan
Toys R Us assumption
What about Sapphire, Blore
Are toys culturally and historically determined
Binaca boxes as cars
Toy cars to toy earth moving and heavy construction
equipment (JCBs)
Chennapatna toys versus say, Transformer, Batman
What about Barbie?
Should there be some uniformity in the toys kids play
with beyond a certain level of economic development
in a country, then certainly Toys R Us should work
well in Japan
Typical Toys R Us indeed many
other similar chains today store
Look, signage, color, lighting
Layout, merchandise
Customer service
Who shops in the large toy stores? What do
they buy?
When are the stores visited?
Time spent in the store
Look, signage, color, lighting
Layout, merchandise
Customer service
Who shops in the large toy stores? What do
they buy?
When are the stores visited?
Time spent in the store
Where and why wouldnt this format
work (remember: late 80s)?
Reasons lie with the consumer? Or the children?
Toys R Us store size (p. 2)
54,000 sq. ft. = 5,400 sq. m. (70m X 80m!!)
Commercial and regulatory resistance
Price of land (exhibit 6)
Large stores need regulatory clearance
A politically charged process
Retailing system where distributor maintains price for the manufacturer, who
in turn offers generous and flexible credit and payment terms
Tightly knit hierarchy of long standing relationships
Price maintenance evidence (exhibit 11)
1970 (1.5 million stores with 3.35 employees) 1990 (1.6 million stores with
4.36 employees)
Typical Japanese toy store (p. 4)
3,200 sq. ft. = 320 sq. m. (16m X 20m)
Reasons lie with the consumer? Or the children?
Toys R Us store size (p. 2)
54,000 sq. ft. = 5,400 sq. m. (70m X 80m!!)
Commercial and regulatory resistance
Price of land (exhibit 6)
Large stores need regulatory clearance
A politically charged process
Retailing system where distributor maintains price for the manufacturer, who
in turn offers generous and flexible credit and payment terms
Tightly knit hierarchy of long standing relationships
Price maintenance evidence (exhibit 11)
1970 (1.5 million stores with 3.35 employees) 1990 (1.6 million stores with
4.36 employees)
Typical Japanese toy store (p. 4)
3,200 sq. ft. = 320 sq. m. (16m X 20m)
Discussion Questions
1. Is Japan a good market for Toys R Us?
2. Is Toys R Us good for Japan?
3. Has Toys R Us chosen the best entry strategy
for Japan? Has it chosen the right partner?
4. Given the structure of retailing in Japan, are the
benefits of market entry worth the costs?
5. How do you get around these costs of entry?
6. Do you want to get the government involved?
1. Is Japan a good market for Toys R Us?
2. Is Toys R Us good for Japan?
3. Has Toys R Us chosen the best entry strategy
for Japan? Has it chosen the right partner?
4. Given the structure of retailing in Japan, are the
benefits of market entry worth the costs?
5. How do you get around these costs of entry?
6. Do you want to get the government involved?
Benefits of market entry
$7.9B annual sales market
Going by Canada toy sales and store count, Japan can easily have 200
stores huge opportunity (exhibits 4 and 5)!
Exhibit 1 shows TRS is financially sound
Low debt and 1992 retained earnings of $1.8B
Can Toys enter Japan
Without cooperating at some level with the existing industry structure
For example, price maintenance
Without its traditional large store, variety and discount retailing format
Does Toys undermine its competitive edge if it compromises on its
retailing format in Japan?
Is there any other way to enter Japan say, exert political pressure?
Is this a market Toys should try and blast apart, or modify itself to fit in?
$7.9B annual sales market
Going by Canada toy sales and store count, Japan can easily have 200
stores huge opportunity (exhibits 4 and 5)!
Exhibit 1 shows TRS is financially sound
Low debt and 1992 retained earnings of $1.8B
Can Toys enter Japan
Without cooperating at some level with the existing industry structure
For example, price maintenance
Without its traditional large store, variety and discount retailing format
Does Toys undermine its competitive edge if it compromises on its
retailing format in Japan?
Is there any other way to enter Japan say, exert political pressure?
Is this a market Toys should try and blast apart, or modify itself to fit in?
What happened?
Ive always maintained that kids are the same all over the world. And every time we put down roots
in a new country, they prove me right Charles Lazarus
Dec 20, 1991 Ami Toys R Us supermarket
Prices!
Barbie dolls - $19.52
$14.99 in US, $26.50 in Japanese department store
1/3
rd
of the toys were imports
1991, Nintendo finally agreed to sell direct to Toys
Toys accounted for 30% of Nintendos global sales
Toys established own distribution center in Kawasaki
Direct working relationship with 50 Japanese manufacturers
Still, Tomy, Takara and Bandai keep Toys out
Escalating costs including labor costs Japanese unused to self serve
Sales of higher margin imports were lower than expected
By 1992 6 stores in Japan, $96M sales, 20 30% above expectations, 10x sales of existing two
national chains!
By 1993, 16 superstores with average annual sales $15 to $20 M (4% of the market)
Japanese retailers feel the brunt down 10 to 45% in sales. Scrambling
In 1994, toy retailers adopting the manufacturers suggested price down to 29% from 70%
Attributed to Toys superstore launches
Sea change in the industry structure
By Jan 1995, 24 stores launched
Folks love discounts the issue was not culture, people did have enough choice (paradox?) earlier!
Ive always maintained that kids are the same all over the world. And every time we put down roots
in a new country, they prove me right Charles Lazarus
Dec 20, 1991 Ami Toys R Us supermarket
Prices!
Barbie dolls - $19.52
$14.99 in US, $26.50 in Japanese department store
1/3
rd
of the toys were imports
1991, Nintendo finally agreed to sell direct to Toys
Toys accounted for 30% of Nintendos global sales
Toys established own distribution center in Kawasaki
Direct working relationship with 50 Japanese manufacturers
Still, Tomy, Takara and Bandai keep Toys out
Escalating costs including labor costs Japanese unused to self serve
Sales of higher margin imports were lower than expected
By 1992 6 stores in Japan, $96M sales, 20 30% above expectations, 10x sales of existing two
national chains!
By 1993, 16 superstores with average annual sales $15 to $20 M (4% of the market)
Japanese retailers feel the brunt down 10 to 45% in sales. Scrambling
In 1994, toy retailers adopting the manufacturers suggested price down to 29% from 70%
Attributed to Toys superstore launches
Sea change in the industry structure
By Jan 1995, 24 stores launched
Folks love discounts the issue was not culture, people did have enough choice (paradox?) earlier!
Internationalization of Asian
Paints
Internationalization of Asian
Paints
Session 3, International Business,
sections E and F
First Indian multinational
Asian Oil & Paint Company
Champaklal Choksey, Chimanlal Choksi, Suryakant Dani and
Arvind Vakil 1942
Gattu, designed by RK Laxman 1952
1968 India market leader
Hailed as the first Indian multinational
Markets product through branches, subsidiaries and JVs in
Fiji (1977), Tonga (1982), Nepal (1983), Vanuatu (1993),
Australia (1995), Oman (1999)
South Pacific, Africa and Middle East
Starts buying Berger units from 1994
International Business Division established in 1999
Asian Oil & Paint Company
Champaklal Choksey, Chimanlal Choksi, Suryakant Dani and
Arvind Vakil 1942
Gattu, designed by RK Laxman 1952
1968 India market leader
Hailed as the first Indian multinational
Markets product through branches, subsidiaries and JVs in
Fiji (1977), Tonga (1982), Nepal (1983), Vanuatu (1993),
Australia (1995), Oman (1999)
South Pacific, Africa and Middle East
Starts buying Berger units from 1994
International Business Division established in 1999
Early growth
Paint segments
Decorative
Enamel, wall finishes, exteriors and wood finishes
Industrial coatings
Automotive coatings, powder coatings and CRP coatings
AP had very little IPR
Constrained by the above and its size, exports were small compared to
other industry players
Capacity to enter new markets limited to developing countries why?
Overseas acquisitions
Delmege Forsyth (Sri Lanka) 1999, Pacific Paints (Australia) 2000, Egypt,
Singapore
Buying Berger gave it the Berger footprint in 33 countries in the world
International Business Division profitable in 2004
In 2012, 4,640 employees in 17 countries
Sales $1.44B, profits $173M, 26% growth, amongst top 10 in decorative
paints segment
Paint segments
Decorative
Enamel, wall finishes, exteriors and wood finishes
Industrial coatings
Automotive coatings, powder coatings and CRP coatings
AP had very little IPR
Constrained by the above and its size, exports were small compared to
other industry players
Capacity to enter new markets limited to developing countries why?
Overseas acquisitions
Delmege Forsyth (Sri Lanka) 1999, Pacific Paints (Australia) 2000, Egypt,
Singapore
Buying Berger gave it the Berger footprint in 33 countries in the world
International Business Division profitable in 2004
In 2012, 4,640 employees in 17 countries
Sales $1.44B, profits $173M, 26% growth, amongst top 10 in decorative
paints segment
Some key differences in political
economy and culture
Some key differences in political
economy and culture
Session 3, International Business,
sections E and F
Diversity discussion points
Ethnocentricity, Omphalos syndrome
Recall Barry Schwartz
PESTEL
Invisible hand and Command economies
Mixed economies
Product safety and liability
Property rights
Intellectual property protection
Legal systems efficiency
Why the Delaware Corp?
Geography, education and economic development
Democracy, terrorism, nature of economic transformation
Why Orascom (Djezzy) had the leave Algeria?
Sunset of Boutefikas career
2008 Orascom Construction Industries sells Algerian cement biz to LaFarge
Sawiris v. Boutefika?
How does Bono build DATA?
Ethnocentricity, Omphalos syndrome
Recall Barry Schwartz
PESTEL
Invisible hand and Command economies
Mixed economies
Product safety and liability
Property rights
Intellectual property protection
Legal systems efficiency
Why the Delaware Corp?
Geography, education and economic development
Democracy, terrorism, nature of economic transformation
Why Orascom (Djezzy) had the leave Algeria?
Sunset of Boutefikas career
2008 Orascom Construction Industries sells Algerian cement biz to LaFarge
Sawiris v. Boutefika?
How does Bono build DATA?
Diversity discussion points contd.
Differences in economic development
GDP/ GNP per capita view
Purchasing Power Parity adjusted
Human Development Index
Amartya Sen
Development should be assessed less by material output (why would Barry Schwartz agree
here?) such as GNI per capita and more by the capabilities and opportunities that people enjoy
Recall Nilakottai, Maheshwari (?), how to become a nurse?
Life expectancy at birth
Educational attainment
PPP income adequacy in meeting the basic needs
One live ongoing debate
Trash
The linkage between political economy and Economic progress
classic democracy, IP and property rights spur innovation
But clearly, alternatives do well just as much as the classic route sputters
China, smaller states like UAE, Singapore, Denmark
But what about large countries, say with no significant factor
endowments?
Differences in economic development
GDP/ GNP per capita view
Purchasing Power Parity adjusted
Human Development Index
Amartya Sen
Development should be assessed less by material output (why would Barry Schwartz agree
here?) such as GNI per capita and more by the capabilities and opportunities that people enjoy
Recall Nilakottai, Maheshwari (?), how to become a nurse?
Life expectancy at birth
Educational attainment
PPP income adequacy in meeting the basic needs
One live ongoing debate
Trash
The linkage between political economy and Economic progress
classic democracy, IP and property rights spur innovation
But clearly, alternatives do well just as much as the classic route sputters
China, smaller states like UAE, Singapore, Denmark
But what about large countries, say with no significant factor
endowments?
Some key differences in culture
Session 3, International Business,
sections E and F
The determinants of Culture
Social structure
Individual and the group
Stratification
Mobility
Religion
Hindu rate of growth
Protestant work ethic
Recall the miniaturists in My Name is Red
Hofstedes power distance, individual v. collective, uncertainty
avoidance, gender DWITHAM
Political philosophy
Economic philosophy
Education
Language
Social structure
Individual and the group
Stratification
Mobility
Religion
Hindu rate of growth
Protestant work ethic
Recall the miniaturists in My Name is Red
Hofstedes power distance, individual v. collective, uncertainty
avoidance, gender DWITHAM
Political philosophy
Economic philosophy
Education
Language
Revisit the logic of IB
Scale (where to compete?), Heterogeneity (what
product to offer?), Complexity (where to locate
activities?)
Price arbitrage
Cross border value chains
Aggregation through expansion of production
Adaptation of products and services
Assimilation of norms, beliefs, values and
attitudes
Market State interactions
Scale (where to compete?), Heterogeneity (what
product to offer?), Complexity (where to locate
activities?)
Price arbitrage
Cross border value chains
Aggregation through expansion of production
Adaptation of products and services
Assimilation of norms, beliefs, values and
attitudes
Market State interactions
Next class National Competitive
Advantage and GEMS case
Will email the discussion questions to the
class (or CoCo?)
Please discuss any doubts about the
presentation (both presenting and discussant
groups) with the instructor
Please remember that this is not only about
groups members working together, but also
presenting and discussant groups sync
Will email the discussion questions to the
class (or CoCo?)
Please discuss any doubts about the
presentation (both presenting and discussant
groups) with the instructor
Please remember that this is not only about
groups members working together, but also
presenting and discussant groups sync
IB session 4 sections E, F
GEMS, Managing Differences
IB session 4 sections E, F
GEMS, Managing Differences
Indian Institute of Management
Kozhikode
Where would I recruit first?
Discussion questions
GE Medical Systems(21st June)
1. What is the economic logic of GPC? How does
the logic work for GEMS?
2. What are the pros and cons of the Chinese
management team's request to change GPC?
Does slashing prices in China make sense?
3. Should GEMS pursue genomics and healthcare
IT related opportunities instead of China
opportunities?
GE Medical Systems(21st June)
1. What is the economic logic of GPC? How does
the logic work for GEMS?
2. What are the pros and cons of the Chinese
management team's request to change GPC?
Does slashing prices in China make sense?
3. Should GEMS pursue genomics and healthcare
IT related opportunities instead of China
opportunities?
1. GPC
Cross-border splitting of value chain activities
R & D, manufacturing, marketing, sales, after-sales
support
Rationale
Economies of scale (high fixed costs), technical talent,
tariff jumping, local citizen
Why the local focus? (adaptation)
Variation in products demanded
Per capita income and demographics
Insurance markets
Cross-border splitting of value chain activities
R & D, manufacturing, marketing, sales, after-sales
support
Rationale
Economies of scale (high fixed costs), technical talent,
tariff jumping, local citizen
Why the local focus? (adaptation)
Variation in products demanded
Per capita income and demographics
Insurance markets
2. In China for China
How much should volume increase to forgo Mexico ops for
China market?
China opportunity
$1 per capita in 1.3B people incremental medical devices
expenditure > 10% better margins > $10M incremental cash
Giving up on GPC
85% of $2B in high-cost countries
$1.7B cost opportunity is staggering
20% on materials (80%), 50% on labor (20%) > 10.4% of the
26% saving to be realized > value of savings foregone = $30M
per year (6 CoEs)
Market grows by x% it may be worthwhile to go in China
for China
How much should volume increase to forgo Mexico ops for
China market?
China opportunity
$1 per capita in 1.3B people incremental medical devices
expenditure > 10% better margins > $10M incremental cash
Giving up on GPC
85% of $2B in high-cost countries
$1.7B cost opportunity is staggering
20% on materials (80%), 50% on labor (20%) > 10.4% of the
26% saving to be realized > value of savings foregone = $30M
per year (6 CoEs)
Market grows by x% it may be worthwhile to go in China
for China
3. Technology + Biology, Bytes,
Broadband
Early stage identification
Personalized intervention
Collaboration
Electronic Medical Records efficiency
Clinical support systems
Amersham
Protein agents
Contrast agents
Sensitivity <> Specificity gains
Long-term view enforcement
Early stage identification
Personalized intervention
Collaboration
Electronic Medical Records efficiency
Clinical support systems
Amersham
Protein agents
Contrast agents
Sensitivity <> Specificity gains
Long-term view enforcement
GE Healthcare > GEMS + Amersham?
Optimistic
GE growth, technology platform for Amersham
Life sciences skills acquisition for GE biz
GE global reach
Synergy
Pessimistic
Too disruptive
Too many moving parts to justify the premium
Good for Hogan [behag etc.], for GE?
Optimistic
GE growth, technology platform for Amersham
Life sciences skills acquisition for GE biz
GE global reach
Synergy
Pessimistic
Too disruptive
Too many moving parts to justify the premium
Good for Hogan [behag etc.], for GE?
How different are GE & Amersham?
R & D
Product development
Regulations
Operations
Marketing
HR
R & D
Product development
Regulations
Operations
Marketing
HR
GEMS global corporation eg: Signa
IRR ~ -50% at origin, -12% in 2.5 years, 25%
in 6 years
15% margin on product, 23% on service
3:2 ratio of initial sales to service
Device lifespan about 7 years
How does being a global corporation help
Inputs side seek cheap location to make (Immelt)
Output side recoup investments worldwide
Market-maker for used side 10 to 30%
IRR ~ -50% at origin, -12% in 2.5 years, 25%
in 6 years
15% margin on product, 23% on service
3:2 ratio of initial sales to service
Device lifespan about 7 years
How does being a global corporation help
Inputs side seek cheap location to make (Immelt)
Output side recoup investments worldwide
Market-maker for used side 10 to 30%
Synergies
GE Healthcare equipment + Amersham contrast
agents deliver better Sensitivity, Specificity
Better off?
Why not just contract it out?
Joint ownership?
Back to roots, Schenectady house of magic, BNW
Ensure no trampling?
CMO
Bill Castell as Vice Chairman before Hogan
Cross appointments
HQ movement
GE Healthcare equipment + Amersham contrast
agents deliver better Sensitivity, Specificity
Better off?
Why not just contract it out?
Joint ownership?
Back to roots, Schenectady house of magic, BNW
Ensure no trampling?
CMO
Bill Castell as Vice Chairman before Hogan
Cross appointments
HQ movement
Two key individuals
Castell
Hogan
Castell
Hogan
Why GE?
Investor can diversity the portfolio?
An entrepreneur?
Imagination at Work
Investor can diversity the portfolio?
An entrepreneur?
Imagination at Work
Managing Differences Ghemawat
Adaptation
Aggregation
Arbitrage
Should/ Can a company win on all dimensions
Median <> 90%
Adaptation + Arbitrage
CTS
Aggregation + Arbitrage
TCS
AAA?
Adaptation
Aggregation
Arbitrage
Should/ Can a company win on all dimensions
Median <> 90%
Adaptation + Arbitrage
CTS
Aggregation + Arbitrage
TCS
AAA?
IB session 6 sections E, F
B R L Hardy, HQ Subsidiary
relationship; competition and strategy
IB session 6 sections E, F
B R L Hardy, HQ Subsidiary
relationship; competition and strategy
Indian Institute of Management
Kozhikode
Role of National subsidiaries
Competence
of Local
organization
Contributor Strategic Leader
Strategic importance of local market
Competence
of Local
organization
Implementer Black hole
Bartlett and Ghoshal
Twin dimensions
Strategic importance of local market, L/ H
Competence of local organization, L/ H
Roles of national subsidiaries
Implementer LL
Contributor LH
Strategic leader HH
Black hole HL
Corporate management challenge
Setting the course
Building differentiation
Directing the process
Not unidirectional!
Decisions over multiple planning horizons
Twin dimensions
Strategic importance of local market, L/ H
Competence of local organization, L/ H
Roles of national subsidiaries
Implementer LL
Contributor LH
Strategic leader HH
Black hole HL
Corporate management challenge
Setting the course
Building differentiation
Directing the process
Not unidirectional!
Decisions over multiple planning horizons
Good people move to important
markets
Competence
of Local
organization
Contributor Strategic Leader
Strategic importance of local market
Competence
of Local
organization
Implementer Black hole
Markets importance get defined by
quality of the people
Competence
of Local
organization
Contributor Strategic Leader
Strategic importance of local market
Competence
of Local
organization
Implementer Black hole
Discussion questions
BRL Hardy (9
th
July)
1. Discuss BRLHs post merger success
Value chain, organizational logic
2. Discuss the nature, pros and cons of HQ
subsidiary tension
3. Should Millar agree to Carsons Distinto launch
decision
BRL Hardy (9
th
July)
1. Discuss BRLHs post merger success
Value chain, organizational logic
2. Discuss the nature, pros and cons of HQ
subsidiary tension
3. Should Millar agree to Carsons Distinto launch
decision
1. BRL Hardys post-merger success
Cross border coordination benefits
Multi-country sourcing
Currency risk
Scale to support brand marketing
Scope to build supplier power vis--vis retail
Consumer demand shift to grape varietals
Industry shift
Fragmented export
Local responsiveness
Global integration
Cross border coordination benefits
Multi-country sourcing
Currency risk
Scale to support brand marketing
Scope to build supplier power vis--vis retail
Consumer demand shift to grape varietals
Industry shift
Fragmented export
Local responsiveness
Global integration
1. BRL Hardys post-merger
success2
1. Strategic potential
BRLs extensive fruit sources
Hardys marketing strength
2. How to deliver on the potential though?
BRL gaining operational control
Willingness to delegate to the frontline managers
bottom up
Many small bets versus a few big ones
Phil Jackson
X old Hardy traditions
1. Strategic potential
BRLs extensive fruit sources
Hardys marketing strength
2. How to deliver on the potential though?
BRL gaining operational control
Willingness to delegate to the frontline managers
bottom up
Many small bets versus a few big ones
Phil Jackson
X old Hardy traditions
1. BRL Hardys post-merger success
contd.
Earning ones stripes
Carson growth to lead Europe strategic initiatives
3. Export based to truly international
Response to broadening customer base
Consolidation of retail channels
Scale economies
Building a global brand
Simplify a complex decision to new wine buyers
Deal with concentrated retail channels
Unconstrained by regulation faced in France, Italy eg.
Scale economies captured
Earning ones stripes
Carson growth to lead Europe strategic initiatives
3. Export based to truly international
Response to broadening customer base
Consolidation of retail channels
Scale economies
Building a global brand
Simplify a complex decision to new wine buyers
Deal with concentrated retail channels
Unconstrained by regulation faced in France, Italy eg.
Scale economies captured
2. HQ Subsidiary tension
Strain between
UK country > Europe Head (Christopher Carson)
Corporate marketing manager (Stephen Davies)
HQ as brand owner pricing, labeling, branding
Overseas as implementer sales, distribution, promo
Strain between
UK country > Europe Head (Christopher Carson)
Corporate marketing manager (Stephen Davies)
HQ as brand owner pricing, labeling, branding
Overseas as implementer sales, distribution, promo
2. HQ Subsidiary tension contd.
Significant differences in UK, Aus markets
Market structure (% branded very different)
Consumer development
Competition
Distribution channels (supermarkets v wine stores)
Davies doesnt understand UK market,
Carson doesnt understand the larger
organizational context global wine company
Significant differences in UK, Aus markets
Market structure (% branded very different)
Consumer development
Competition
Distribution channels (supermarkets v wine stores)
Davies doesnt understand UK market,
Carson doesnt understand the larger
organizational context global wine company
2. HQ Subsidiary tension what
should Millar do?
Intervene?
On which differences between Carson and
Davies?
Should he look at removing one of them?
Intervene?
On which differences between Carson and
Davies?
Should he look at removing one of them?
3. Distinto launch?
Strategic logic
Organizational logic
Risk exposure
What are the tradeoffs here?
Is this an independent decision on Millars
hands?
Strategic logic
Organizational logic
Risk exposure
What are the tradeoffs here?
Is this an independent decision on Millars
hands?
Summary
Managing IB
Global scale
Local responsiveness
Organizational capability
The making of strategyemergent
Managing IB
Global scale
Local responsiveness
Organizational capability
The making of strategyemergent
Summary
Go
STRATEGIC LOGIC
Reduce sourcing risk
Reduce currency risk
Reduce demand fashion risk
Leverage global marketing expertise
STRATEGIC FIT PERSPECTIVE
No Go
STRATEGIC LOGIC
Mopocho problems model viable?
Financial problems GBP100K
launch, GBP400K inventory
OPERATIONAL PERFORMANCE
PERSPECTIVE
Go
STRATEGIC LOGIC
Reduce sourcing risk
Reduce currency risk
Reduce demand fashion risk
Leverage global marketing expertise
STRATEGIC FIT PERSPECTIVE
No Go
STRATEGIC LOGIC
Mopocho problems model viable?
Financial problems GBP100K
launch, GBP400K inventory
OPERATIONAL PERFORMANCE
PERSPECTIVE
ORGANIZATIONAL LOGIC
UK teams belief, commitment
European performance exceptional
Carsons expertise in Italian wine
Lessons learned from Mopocho
ORGANIZATIONAL DEVELOPMENT
PERSPECTIVE
Against earn your stripes philosophy
Stretch management too thin
MANAGEMENT DISCIPLINE
PRIORITY
Summary
Managing IB
Global scale
Local responsiveness
Organizational capability
The making of strategyemergent
Managing IB
Global scale
Local responsiveness
Organizational capability
The making of strategyemergent
Competition and strategy
Walmart v Carrefour [TESCO, Ahold]
20% v >50% from international sales
First foray
JV with Cifera in Mexico
Issues for Walmart
Looking out started only in 1990
Infrastructure, systems, politics all quite different
Prices in Mexico +20% from US
Merchandise on offer not relevant
Match to local environment by mid 1990s
By 2004, with Cifera acquisition, $11B sales in Mexico
> 1500 stores outside US
Benefits
Global buying power [recall Nintendo in TRS case]
Flow of ideas [discuss Walmart consultant]
Walmart v Carrefour [TESCO, Ahold]
20% v >50% from international sales
First foray
JV with Cifera in Mexico
Issues for Walmart
Looking out started only in 1990
Infrastructure, systems, politics all quite different
Prices in Mexico +20% from US
Merchandise on offer not relevant
Match to local environment by mid 1990s
By 2004, with Cifera acquisition, $11B sales in Mexico
> 1500 stores outside US
Benefits
Global buying power [recall Nintendo in TRS case]
Flow of ideas [discuss Walmart consultant]
Enterprise value view
Profitability
Reduce costs
Add value, raise
prices
Enterprise
valuation
Add value, raise
prices
Profit growth
More in existing
markets
New markets
Value creation
V > P > C
Rel [V P] ~ market share
Rel [P C] ~ profitability
Rel [V C] ~ value created
Globalization Transnational
V > P > C
Rel [V P] ~ market share
Rel [P C] ~ profitability
Rel [V C] ~ value created
Low Cost (C)
Increased
value/
differentiation
X 4S
X Marriott
Feature sensitivity
of customers/
idiosyncrasies
(pressures for local
responsiveness)
Price sensitivity
of customers
(pressures for
cost reduction)
International
Multidomestic/
Localization
IB session 7 sections E, F
Competition NYSE v Nasdaq; Diaper
Wars
IB session 7 sections E, F
Competition NYSE v Nasdaq; Diaper
Wars
Indian Institute of Management
Kozhikode
Discussion questions
NYSE Nasdaq (11
th
July)
a) Are the efforts taken to create a global bourse
justified? How or how not?
b) What are the coordination problems across
various markets in the world?
c) Which of the routes taken, NYSE or NASDAQ's,
is more likely to succeed? Why?
d) Update of what has happened in NYSE,
NASDAQ's plans till date
NYSE Nasdaq (11
th
July)
a) Are the efforts taken to create a global bourse
justified? How or how not?
b) What are the coordination problems across
various markets in the world?
c) Which of the routes taken, NYSE or NASDAQ's,
is more likely to succeed? Why?
d) Update of what has happened in NYSE,
NASDAQ's plans till date
Discussion questions
Diaper War (11
th
July)
a) Did Artzt's appointment as CEO in 1989 signal a
shift of focus away from the US market? Discuss
b) Did P&G need to strengthen its access to better,
environmentally friendly technologies in its
diapers?
c) What should Kimberly Clark do in response to
the new CEO appointed at P&G?
d) What is the current status of the Diaper War? Has
the industry structure changed? If so, how?
Diaper War (11
th
July)
a) Did Artzt's appointment as CEO in 1989 signal a
shift of focus away from the US market? Discuss
b) Did P&G need to strengthen its access to better,
environmentally friendly technologies in its
diapers?
c) What should Kimberly Clark do in response to
the new CEO appointed at P&G?
d) What is the current status of the Diaper War? Has
the industry structure changed? If so, how?
Diaper War
KC Strategic Options
Do nothing
Accelerate gender specific diaper launch
Expand overseas
Incontinence products
JV with Japanese player to bring tech to US
5 forces
1985
1989
KC Strategic Options
Do nothing
Accelerate gender specific diaper launch
Expand overseas
Incontinence products
JV with Japanese player to bring tech to US
5 forces
1985
1989
IB session 7 sections E, F
Competition NYSE v Nasdaq; Diaper
Wars
IB session 7 sections E, F
Competition NYSE v Nasdaq; Diaper
Wars
Indian Institute of Management
Kozhikode
Course Features
Lecture + Case presentations and discussions (from CEMEX, market
power onward)
Teams of 5
1 presentation (15), 1 discussant (10)
Presentation and discussant groups to share their ppt on the day previous to the
class with the instructor, before 23:59:59
Group project term paper teams to choose topics in one of the following
areas (6 X 2)
Institutional voids, International growth through adjacencies, International lobbying,
international ethics, dynamic arbitrage, globalization and its discontents
Term papers should be original, analytical pieces comprising of a succinct statement of the
problem/ issue, review of the pertinent literature (trade, research, news, data as required),
analysis, and recommendations. The main audience for the paper is top management and
policy makers. Executive summary of 300 words, total not more than 2000 words + exh.
Significant effort should go into choosing the topic, earlier the start the better
A separate statement of equal contribution and original work (plagiarism free) needs to
be submitted at each stage of the process, which are (1) Proposal, (2) Work-in-progress
review, and (3) Final paper submission
Due Dates
Proposal 7
th
July 23:59:59
Work-in-progress review 28
th
July 23:59:59
Final submission 18
th
Aug 23:59:59
Papers of quality to draw interest from the press/ conferences/ journals will be A+
Lecture + Case presentations and discussions (from CEMEX, market
power onward)
Teams of 5
1 presentation (15), 1 discussant (10)
Presentation and discussant groups to share their ppt on the day previous to the
class with the instructor, before 23:59:59
Group project term paper teams to choose topics in one of the following
areas (6 X 2)
Institutional voids, International growth through adjacencies, International lobbying,
international ethics, dynamic arbitrage, globalization and its discontents
Term papers should be original, analytical pieces comprising of a succinct statement of the
problem/ issue, review of the pertinent literature (trade, research, news, data as required),
analysis, and recommendations. The main audience for the paper is top management and
policy makers. Executive summary of 300 words, total not more than 2000 words + exh.
Significant effort should go into choosing the topic, earlier the start the better
A separate statement of equal contribution and original work (plagiarism free) needs to
be submitted at each stage of the process, which are (1) Proposal, (2) Work-in-progress
review, and (3) Final paper submission
Due Dates
Proposal 7
th
July 23:59:59
Work-in-progress review 28
th
July 23:59:59
Final submission 18
th
Aug 23:59:59
Papers of quality to draw interest from the press/ conferences/ journals will be A+
Discussion questions
NYSE Nasdaq (11
th
July)
a) Are the efforts taken to create a global bourse
justified? How or how not?
b) What are the coordination problems across
various markets in the world?
c) Which of the routes taken, NYSE or NASDAQ's,
is more likely to succeed? Why?
d) Update of what has happened in NYSE,
NASDAQ's plans till date
NYSE Nasdaq (11
th
July)
a) Are the efforts taken to create a global bourse
justified? How or how not?
b) What are the coordination problems across
various markets in the world?
c) Which of the routes taken, NYSE or NASDAQ's,
is more likely to succeed? Why?
d) Update of what has happened in NYSE,
NASDAQ's plans till date
Discussion questions
Diaper War (11
th
July)
a) Did Artzt's appointment as CEO in 1989 signal a
shift of focus away from the US market? Discuss
b) Did P&G need to strengthen its access to better,
environmentally friendly technologies in its
diapers?
c) What should Kimberly Clark do in response to
the new CEO appointed at P&G?
d) What is the current status of the Diaper War? Has
the industry structure changed? If so, how?
Diaper War (11
th
July)
a) Did Artzt's appointment as CEO in 1989 signal a
shift of focus away from the US market? Discuss
b) Did P&G need to strengthen its access to better,
environmentally friendly technologies in its
diapers?
c) What should Kimberly Clark do in response to
the new CEO appointed at P&G?
d) What is the current status of the Diaper War? Has
the industry structure changed? If so, how?
Diaper War
KC Strategic Options
Do nothing
Accelerate gender specific diaper launch
Expand overseas
Incontinence products
JV with Japanese player to bring tech to US
5 forces
1985
1989
KC Strategic Options
Do nothing
Accelerate gender specific diaper launch
Expand overseas
Incontinence products
JV with Japanese player to bring tech to US
5 forces
1985
1989