Reverse Innovation is the strategy of innovating in emerging (or developing) markets and then distributing/marketing these innovations in developed markets. Many companies are developing products in emerging countries like China and India and then distributing them globally.

Who coined or introduced the ‘reverse innovation’ concept?

Vijay Govindarajan. He is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business and founding director of Tuck’s Center for Global Leadership.

Examples of Reverse Innovation:

Tata Motors – Tata Nano

While companies like Ford set up its global automobile platform in India and catered to the niche premium segments in India, Tata introduced the Tata Nano for the price conscious consumer in India in 2009. Tata plans to launch Tata Nano in Europe and U.S. subsequently.

GE – GE MAC 800

GE’s innovation on the GE MAC 400 to build a portable low-cost ECG machine to cater to the rural population who cannot afford expensive health care was launched as an improved version a year later in 2009, in U.S. as MAC 800.

Procter and Gamble (P&G) – Vicks Honey Cough – Honey-based cold remedy

P&G’s (Vicks Honey Cough) honey-based cold remedy developed in Mexico found success in European and the United States market.

Nestle – Low-cost, low-fat dried noodles

Nestle’s Maggi brand – Low-cost, low-fat dried noodles developed for rural India and Pakistan found a market in Australia and New Zealand as a healthy and budget-friendly alternative.

Xerox – Innovation Managers

Xerox has employed two researchers who will look for inventions and products from Indian start-ups that Xerox can use for North America. The company calls them as ‘innovation managers’

Microsoft – Starter Edition

Microsoft is using its Starter edition’s (targeted at not so technically savvy customers in poor countries and with low-end personal computers) simplified help menu and videos into future U.S. editions of its Windows operating system.

Nokia – New business models

Nokia’s classified ads in Kenya are being tested as new business models. Nokia also incorporated new features in its devices meant for U.S. customers after observing phone sharing in Ghana

Hewlett-Packard (HP) – Research Labs in India

HP intends to use its research lab to adapt Web-interface applications for mobile phones in Asia and Africa to other developed markets.

Godrej – Chotukool Refrigerator

In February 2010, Godrej Group’s appliances division, Godrej & Boyce Manufacturing Co Ltd test-marketed a low-cost (dubbed the world’s lowest-priced model at Rs 3,250) refrigerator targeted mainly at rural areas and poor customers in India. The product runs without a compressor on a battery and cooling chips. The company wants to use a community-led distribution model (as an alternative channel of distribution) to push for product growth.

Tata – Swacch – World’s cheapest water purifier

Swacch means clean in Hindi. Tata launched the water purifier – Tata Swacch targeting the rural market in India with the cheapest water purifier in the market. The product does not require running water, power or boiling and uses paddy husk ash as a filter. It also uses silver nanotechnology. It can give purified water enough to provide a family of five drinking water for a year. The company feels it will open a whole new market.

Pepsico – Kurkure and Aliva

Pepsi is planning to give developed markets (particularly West Asia) a taste of its salted snack Kurkure (and also another snack Aliva). The product enjoys huge success in India and has become a Rs 700 crore brand within a decade of its launch. The success is attributed to product innovation and a good marketing strategy. E.g. Made from corn, rice and gram flour, zero per cent trans fats and no cholesterol, Rs-3 small packs for pushing sales in the lower-tier towns.

Bharat Forge – Maintenance Management Practice

The best practices group at Bharat Forge, a large Indian manufacturer and exporter of automobile components implemented a maintenance management practice it developed in India (developed over 15 to 18 years) in its units it acquired in countries (known for sophisticated engineering) in Germany, Sweden and U.S. The maintenance management process focused on minimizing downtime during machine maintenance and has an advanced information system that predicts problems before they happen. Consequently, Bharat Forge plants globally are very efficient and have an average down time of less than 10 per cent.

KFC – Taco Bell – Yum! Restaurants

KFC test-marketed Krushers, a range of chilled drinks in the cold beverages segment in India and Australia and plans to introduce it to other markets. The launch in India was very successful as ‘Krushers’ accounts for 8 per cent of KFC’s beverage sales in India.

Yum! Restaurant’s Tex-Mex chain Taco Bell has one Indian-designed dessert (tortilla filled with melted dark chocolate) on Taco Bell’s US menus.

Husk Power Systems

In India, Husk Power Systems brings light to rural population (over 50,000) by using locally grown rice husks to produce electricity (a unique and cost-effective biomass gasification technology). The company has also received seed capital from Shell foundation in 2009 to scale up operations.

LG – Low-cost Air Conditioners (AC)

South Korea based LG Electronics (LG) planned to develop low-cost air conditioners targeting the middle and lower-middle classes in India. Their goal was to manufacture air conditioners at the cost of air coolers which were very common.

Renault – Logan

Renault designed a low-cost model of its brand Logan for Eastern European markets. It also sold in the Western European markets later on.

Better Place – Smart Grid of Battery charging/Swap terminals

In Israel, Better Place, a electric vehicle (EV) services provider (creates systems and infrastructure that support the use of electric cars), created an intelligent grid of battery-charging terminals and battery-swap stations. The company is now present in many countries like China, Japan, Australia, the U.S., Canada, France and Denmark.

GE India – Steam Turbines

In 2010, GE’s Indian arm tied up with Triveni Engineering and Industries Ltd to manufacture steam turbines in the 30-100MW range. The company plans to then take advantage of lower input costs incurred in manufacturing and export these products to markets in West Asia, Indonesia, Europe and Latin America.

P&G’s old strategy for innovation was based on the invention model where innovation comes from within the company – ‘invent it ourselves’ model. Earlier, innovation at P&G meant building global research facilities and having the best talent in the world develop unique products or inventions. But with the times and technology changing and P&G growing enormously, the old model was not working. P&G needed a new approach.

New innovation model – Connect and Develop

P&G knew that for every researcher it had, there were many others who existed outside the organization. So, rather than sourcing for innovation from within, P&G wanted to identify potentially good ideas throughout the world and apply its own capabilities to them to develop better and cheaper products, faster. The model was called “Connect and Develop”. The new model allowed P&G to shift its centralized approach to a globally networked internal model.

The term ‘Tick Tock’ has been referred to a music group from Puerto Rico, a novel by Dean Koontz, a fictional character in Marvel Comics Universe and even a dance step, but did you know it is the name of Intel’s go-to-market strategy as well.

The global economic downturn hit the semiconductor industry bad. And for a company like Intel which wants to push the latest technology at a rapid pace, it’s go-to-market strategy is even more critical in a downturn.

A few years ago, Intel was lagging behind competitor Advanced Micro Devices (AMD) on multicore technology. Intel wanted to speed up innovation by lowering product development cycles, flawless product road map execution and meeting yearly targets. The company laid put a new plan. They called the new strategy "tick-tock." The company’s CEO, Paul Otellini backed and also led the new strategy.

‘Tick’ refers to various improvements to Intel’s silicon fabrication process. E.g. doubling of the number of transistors on integrated circuits.
‘Tock’ is a more recently quantified process. E.g. architectural upgrades made to the client and server processors.

McDonald’s

In the UK, McDonald’s strategy is to listen more to local consumers and then act on it. The company strives to do this around the world. Some if its local favorites around the world include the McItaly burger in Italy, Maharaja Mac in India, the McLobster in Canada, the Ebi Filit-O in Japan.

McDonald’s has novelty items on its menu in Japan like the Teriyaki McBurger with Seaweed Shaker fries, Ebi Filet-O, Croquette Burger and Bacon Potato Pie. McDonald’s signed model Yuri Ebihara (known as Ebi-chan in Japan) to market Ebi Filet-O. Ebi means shrimp in Japanese.

Starbucks

Starbucks is trying out locally designed franchises in stores. The stores are non-Starbucks branded in order to recapture the feel of a local coffee shop, which would otherwise be threatened by the existence of Starbucks in its vicinity.

KFC

To increase visits from local residents, KFC has initiated a five-year plan to upgrade its UK restaurants with new contemporary designs. Designs will be based on ‘look and feel’ of the area and in collaboration with local property developers.

KFC has a vegetarian thali (a mixed meal with rice and cooked vegetables) and Chana Snacker (burger with chickpeas) to cater to vegetarians in India.

Tesco

When Tesco expanded globally in countries such as Thailand, Hungary and the Czech Republic it kept it’s usual name and branding. However, when it entered the United States, it named it’s stores "Fresh & Easy Neighborhood Market".

Nokia

Nokia responded to local customer needs with the introduction of dust-resistant keypad, antislip grip and an inbuilt flash light for Indian rural consumers (specifically targeting truck drivers).

Hindustan Lever Limited (HLL)

HLL identified the importance of rural customers and invented the shampoo sachets priced at almost a rupee which were an instant hit.

Ford

In 1904, Ford was one of the first automotive corporations to go International with the opening of Ford Motor Co. of Canada. Even Henry Ford II had opined that in order to further the growth of its worldwide operations, any purchasing activity should be done after considering the selection of sources of supply not only in its own company but also sources located in other countries. When Ford had set up its first plant outside U.S., in Canada, it gained considerably from the geographic and cultural proximity.

Viacom’s MTV localized strategy with localized programming

MTV has catered to local taste in East Asia in South Korea, China, India and Japan. E.g. MTV broadcasts on two channels with Chinese music in China and Hindi pop in India. Using joint ventures with local partners, channels are branded accordingly as MTV India, MTV Korea, MTV China and MTV Japan and use more local employees with use of local language.

Whirlpool Corporation

Whirlpool Example 1: Domestic appliance maker, Whirlpool incorporated specially designed agitators into its washing machines when it sold them in India. This helped Indian women wash saris without the five-foot long sari getting tangled. Whirlpool formed a joined venture with a local partner to produce the redesigned washing machine to suit local taste and culture. Whirlpool also makes its refrigerators in bright colors like red and blue as many Asian consumers placed their refrigerator in living rooms as a sign of status. Whirlpool believes in standardizing worldwide what it can and adapting what it cannot.

Whirlpool Example 2: As part of Whirlpool’s global strategy, the company wanted to develop products based on consumers tastes and needs. Whirlpool had done extensive research and found that European customers wanted a microwave oven that could brown and crisp food. Whirlpool then designed and introduced the VIP Crispwave which could fry crispy bacon and cook a pizza with a crisp crust. The product was successful in Europe and later launched in U.S. as well.

KFC – Yum! Restaurants

Global chain, KFC has introduced ‘Krushers’ in the cold beverages segment in India. The range of flavors of Krushers has been altered to suit the Indian taste buds.

Subway

The Subway chain does not have beef in its stores in India.

Taco Bell

The Taco Bell menu in India has crunchy potato tacos and extra-spicy burritos filled with paneer (cottage cheese). Taco Bell has hired employees who explain what burritos and quesadillas are to customers in India.

Coca Cola

In 1955, a Coca -Cola advertisement or documentary (almost 20 mins long) referred to as the “Pearl of the Orient” shows Coca-Cola’s popularity in Philippines and how Coke has merged itself into the Philippines economy and culture.

Heinz

In 2010, Heinz plans to launch packaged food products in India which will suit the Indian taste. Heinz, which entered India in 1994, plans to Indianise the flavors offering condiments, juices and snacks to the Indian consumers.
]]> http://www.casestudyinc.com/glocalization-examples-think-globally-and-act-locally/feed 0 http://www.casestudyinc.com/what-is-swot-analysis-and-example http://www.casestudyinc.com/what-is-swot-analysis-and-example#comments Wed, 13 Jan 2010 08:23:52 +0000 M J http://www.casestudyinc.com/?p=79 SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis is used for identifying those areas where an organization is strong, where it is weak, the major opportunities the company can explore and the threats. SWOT analysis is a useful tool for assessing the strategic position of a business and its environment. SWOT Analysis helps a company to know where it stands by exploring key issues:

Strengths:

• What do we do well?
• How are we better than our competitors?

Weaknesses:

• What could be done better?
• What is being done badly?

Opportunities:

• What are the opportunities that can be exploited?
• What are the interesting trends?

Threats:

• What obstacles are being faced?
• What is the competition doing?
• Are the specifications for the products or services changing?
• Is changing technology threatening our business?

SWOT Analysis Example

Sample SWOT Analysis for CONMED Corporation: (for illustration purposes only)

Strengths	Global Presence, International Sales approximated 29%, 33%, 35% in 2002, 2003 and 2004 respectively Strong Manufacturing base Clinicians and administrators desiring non-invasive procedures New product introductions Acquisition of key technology like ECOM	Certain products like surgical suction tubing and ECG electrodes are commodity products with little differentiation possible Higher incremental costs in 2005 until manufacturing of the acquired products is integrated	Weaknesses
Opportunities	Scope for new product or technology introductions Current research focus on reflectance technology products which permits non-invasive analysis of blood oxygen levels in clinical situations	Continued cost containment pressures in highly competitive market Change in regulatory environment Patent Litigation risks	Threats

CONMED Corporation (CONMED) (NASDAQ: CNMD) develops and produces medical and surgical procedure instruments.

Dominant in the telecommunications services market, Bharti Enterprises, the telecom giant has unveiled its vision for 2020. Its latest brand identity attempts to reflect its intent to grow its other businesses such as financial services, retail and agri-business.

New Brand Identity and Brand Essence

In early Novemeber (2008), Bharti Enterprises, the Indian business conglomerate with revenues at over Rs. 30,000 crore, unveiled a new brand logo and brand identity. With its new brand identity, Bharti plans to announce its strategic intent to create a conglomerate of the future. The new brand essence – "Big Transformations through Brave Actions" will drive the company’s core values – empowering people, being flexible, making it happen, openness and transparency and creating a positive impact.

Eighty per cent of the group’s current revenues come from Bharti Airtel (a leading mobile operator – India’s leading integrated telecom company with with over 80 million customers and voted as India’s most innovative company by The Wall Street Journal. In October 2008, GSM player Bharti Airtel outperformed all CDMA players (like Reliance Communications, Tata Teleservices, HFCL and Shyam Telecom) put together in terms of mobile revenues, net subscriber addition and revenue share. ). The group now wants to focus on its other retail, agri-business and financial services ventures where it has partnerships with other companies like Wal-Mart, Del Monte and Axa. The group is looking at revenues of $10 billion in around two years with non-telecom business generating at least 50 per cent of the revenues.

New Brand Logo

The group also introduced a new fresh and youthful brand logo which the company believes will depict its multi-dimensional character and its strategy to grow with new avenues.

Bharti’s New Brand Logo and its significance


Bharti’s Old Brand Logo

The Bharti Group

The Bharti Enterprises group includes companies like Bharti Airtel (telecommunications services), Bharti Teletech (telecom & allied products company), Telecom Seychelles (telecom services in Seychelles), Bharti Telesoft (VAS products and services to telecom carriers), Bharti Del Monte India (fresh and processed fruits and vegetables), Bharti Retail (multiple consumer friendly format stores in India), Bharti AXA General Insurance, Bharti AXA Life Insurance, Bharti AXA Investment Managers (asset management company), Bharti Learning Systems (end-to-end learning and development solutions organisation), Jersey Airtel (mobile services in Jersey (Channel Islands)), Guernsey Airtel, Bharti Foundation, Bharti Realty (Real Estate Arm).

With slowdown in developed markets, companies like PepsiCo and Coca-Cola are looking at emerging markets like India and China for growth. PepsiCo is aiming to triple its businesses in India over the next five years (and also setting up a new leadership structure in India). The Coca-Cola Company (Coke), the world’s largest nonalcoholic beverage company, is not one to be left behind. Coke has a new strategy and has renewed its focus on semi-urban and rural markets in India.

Market Focus – Targeting rural India

The soft drink consumption market in India is mainly concentrated in urban cities. Even, market research data suggests that consumers in urban cities spend ten times more than consumers in semi-urban and rural markets. However, Coca-Cola has renewed its focus on the rural market in India and believes there is huge opportunity with vast growth potential in these markets. Coke is targeting small towns (tier II and III towns like Agra, Bilaspur and Lucknow) and rural markets in India.

The ‘parivartan’ program – Training small town retailers

Coke’s new strategy involves training retailers (around 6,000 of them) in a program launched by the Coca-Cola University. [In 2007, the company launched Coca-Cola University — a virtual, global university for all learning and capability-building activities.]

The company calls this the “parivartan” program (meaning “Change” in English). Shop owners (traditional retailers) are given training on displaying and stocking products well. The goal of the innovative training program is to provide traditional Indian retailers with the skills, tools and techniques required to succeed in a constantly changing retail scenario. Presentations (including audio/visual technology) in local Hindi language help small retailers (with stores less than 200 square feet in average size) to better understand the concepts involved. Each retailer also receives a Coca-Cola “Certified Retailer” certificate at the conclusion of the program.

Adapting to local culture and taste

Last year, PepsiCo set up a research facility in India. Last month, Coke too set up an R&D faculty in India to develop beverages that suit local taste and increase focus on localizing its portfolio of beverages. Earlier, Coca-Cola India had been outsourcing all R&D functions from its facility in Shanghai. Some examples of local flavors include Maaza aam panna by Coca-Cola and Pepsi has locally-produced flavors under its Tropicana juice brand (with nimbu pani (lemon water) in the pipeline).

Moving from a price strategy to stepping up distribution

In the past (in 2002-03), Coke had already targeted rural consumers by bringing down the entry price (Rs 5 a bottle) for its product. Now, it has stepped up distribution of its 200-ml (priced at Rs 7 and Rs 8 ) returnable-glass-bottles.

Dell’s Entry in India

Dell International started in India about seven or eight years back by opening a customer contact center at Bangalore in 2001. In 2003, the second contact center was opened at Hyderabad. The company operates its services from four centers based at Bangalore, Hyderabad, Chandigarh and Gurgoan. Dell started in Bangalore providing customer support to English speaking countries and later also began providing technical support, procurement of financial back office and Knowledge process outsourcing. After the U.S., Dell India is the second biggest centre with 13,000 employees. The strategic importance of India to Dell is evident from the fact that India was one among three locations (the other two being US and UK) where Dell’s Latitude E series and Precision notebooks were launched.

Manufacturing – The first Dell ‘Made in India’ desktop

“The Chennai operation reaffirms the strategic importance of India to Dell, providing significant impetus to our growth plans and prospects here, where we are already among the fastest growing computer systems suppliers.“- R Anandan, VP & GM, Dell India

In July 2007, Dell began production at its new manufacturing facility in Chennai (Dell’s third manufacturing location in Asia-Pacific and Japan region and eighth overall). The Sriperumbudur plant (50-acre site with a planned five-year investment of about US$ 30 million) was chosen for manufacturing in September 2006. The planned initial capacity was around 400,000 desktop computers per year. The company has doubled its production capacity since then from 400,000 in 2007 to the 1 million units in June 2008. Infosys, one of Dell’s largest customers in the country, was presented with the first ‘Made in India’ desktop computer system.

Dell’s Market Share in India

“India is the fastest growing market for Dell worldwide and laptops have emerged as the fastest growing form factor.” – Rajiv Ahuja, Director Communications of Dell APACS

“By 2015, the number of PCs in India will grow 10 times and in the last year our personal computer sales in India grew by 99% compared to the previous year” ” – Michael Dell.

“We have gone from zero to 10 per cent share in the government segment and we’re the largest player in the large enterprise space” – Sameer Garde, India General Manager for Dell.

In March 2007, Dell was roughly a half a billion dollar enterprise in India and has expectations to touch revenue of $1 billion within the next year. (Within three years of launching its products in the Indian market, Dell crossed the $1-billion sales mark in India.) In 2008, Dell ranked third in the Indian market with a 7.6 percent market share compared to about 4 percent market share two years ago. In Q2, 2008, Dell had a 16% share in the Notebooks segment and 6% share in Desktops segment as compared to 8% and 4.5% share in Q2, 2007 respectively.

Dell’s new retail strategy and Direct-only model

Dell’s innovative direct- sales model with good sales growth had been successful until the mid-2000s when the company’s profits and share prices began dropping considerably. Dell was selling PCs directly to customers by phone and online. On May 24, 2007, Dell disclosed its plans to sell PCs in the US, Canada, and Puerto Rico through Wal-Mart and Sam’s Club retail stores. This announcement came soon after Michael Dell returned as CEO replacing Rollins.

In India, as part of the retail initiative, Dell tied up with Tata Croma (the Tata-owned electronics retail chain) in July 2008 and with select Staples stores. By the end of 2008, Dell planned to increase its presence to100 Indian cities by increasing its channel partners. In October 2008, Dell announced the opening of the first Dell exclusive stores in India at New Delhi and Coimbatore. Dell also tied up with 600 systems integrators all over the country who could take orders on its behalf.

Dell’s New Marketing Strategy in India

Dell is targeting the small and medium businesses (SMB) in smaller towns in India as its main driver for growth as the company believes this market sector is growing rapidly and is not exposed to global shocks making it a much more stable market. Dell India is focusing on simplification of the business processes (basic areas to improve cost efficiencies) as part of its new rollout plan. It has even tied up with Tally to offer accounting solutions online. For an initial period, customers get a Tally subscription free along with select Dell Vostro systems. Dell has also increased its SMB team to 200 and expanded its presence to about 600 tier-II and tier-III cities. Dell will also introduce a portal titled “Dell 360″ (with discussion forums) where SMBs can educate themselves on benefits of IT to their businesses.

Dell’s New Advertising Campaign for SMBs

First launched in India, Dell’s new advertising campaign is titled – “Take Your Own Path”. The campaign targets Indian SMBs with a new range of laptops.

Testimonial Advertising instead of Transactional

In December 2007, Dell partnered with WPP (after withdrawing its advertising responsibilities from over 800 different agencies worldwide) which launched its own specialist unit Enfatico with Dell as its only customer. Enfatico’s first international campaign for Dell targeted SMBs featured successful Indian faces (like P Rajendran – NIIT’s co-founder and COO, Raman Roy – CEO of Quattro among others with their testimonials) and aimed at establishing an emotional connect with brand Dell.

Related Reading:
Download PDF file on:

• Dell’s Supply Chain Management Strategy

Dell’s new retail business and supply chain approach

Dell is taking steps to turnaround its business and recovering from losses and decline in its profit margins. Dell had first announced cost-cutting measures as early as May last year. In 2007, Dell changed its direct-sales model to offer computers in retail outlets, after losing the title of top PC maker to Hewlett-Packard Co (HP). Dell is now beginning to supply similar products to retailers like Wal-Mart, but as a smaller percentage of its business. Dell is currently the second largest computer retailer in the world behind HP.

Dell’s well-established direct-sales model allowed buyers to custom-build and purchase computers online or by phone. Customers could choose custom PCs (almost 500,000 configuration options or combinations that were assembled) direct from its factory. On the other hand, competitor HP also sold configure-to-order models but also supplied fixed-configuration PCs direct to retail.

Dell’s new retail business is not profitable as of now. So Dell aims to make its retail computer business cost-effective by aligning (reducing) manufacturing costs (cost of goods sold) with its competitors. But this will be challenging since Dell does not have the same volume in retail globally (as competitors), and therefore a smaller fixed base to spread costs. Secondly, Dell’s supply chain had not exactly been designed for mass distribution. HP uses a diversified supply chain unlike Dell’s one supply chain approach. [Download Case Study on Dell's Supply Chain Management Strategy
(pdf file)]

The return of Michael Dell and the Turnaround Plan

Michael Dell, the founder of Dell returned as the CEO in January 2007, and the company has a turnaround plan which it promises will yield $3 billion in annual savings over the next three or four years. Dell’s plans include depending more on resellers and contract manufacturers to cut costs and boost sales of which the consumer personal computer business is expected to contribute more than the current 15 percent of total revenue. (At HP, consumer sales of PCs and printers account for about one-third of revenue. Industry-wide sales of consumer PCs are growing at about twice the rate of PCs for businesses.) Contract manufacturers who manage large volumes of orders for big PC makers like HP will be given more work. But apart from concentrating on designing and manufacturing to cut costs, supply chain and logistics (distributing PCs for retailers) are key focus areas as scale is less of an issue. The cost-cutting exercise would also include restructuring of its logistics network and outsourcing more of its manufacturing operations. Dell also announced its intentions to install a logistics hub in Dubai to cater to the emerging market regions and also into the east African regions. Developed economies like the US (though the biggest) are the slow in growth. Last year, the EMEA region made up less that 25 per cent of its total revenues (70 per cent growth) and is estimated to be $61 billion in 2008.

Dell’s Turnaround Plan:

Cutting costs: Cutting costs is very important because competitors like HP use the money from profitable printers operations and take more market risk with designing innovative products. Moreover the prices of computers keep going down. One can buy a Dell laptop now for less than $500.

Moving away from computers internally and outsourcing more of its manufacturing operations: Dell has manufacturing facilities in Texas, North Carolina, Tennessee, and in Malaysia, Penang, China and Poland. Its manufacturing operation in Austin, Texas will shut down. Also HP, IBM and Sun Microsystems already have long-standing partnerships with outside manufacturing partners. These partners offer customers bundles of computer hardware, software and services. Dell on the other hand is relatively a new player in this field and has traditionally depended on its own businesses to design and make computers.

Moving into indirect sales channels like computer resellers and retailers.

Introducing more products: New product introduction is vital since major PC manufacturers realistically only make money in the first three months (or six in some cases) of a new product.

Analysts predict that it will take Dell one more year for its PCs to be as cost-effective as its competitors and stage a recovery.

“Within our business, we’re being very disciplined in managing costs, generating profitability and cash flow, and investing in ways that separate Dell from others today and when the economy inevitably improves.“
– Founder and Chief Executive, Michael S. Dell.

In February 2009, Dell Computers announced that it would strive to cut an additional $1 billion a year from the company’s costs by 2011. Earlier in 2007, Michael Dell, had returned as CEO and began an aggressive cost-cutting program to turnaround the company. To counter the economic downturn,
Dell’s strategy was to try and keep profits high even if it meant missing out on some sales. The company also wanted to increase its services and software businesses by making
acquisitions. Dell is also looking at reducing the cost of its components. The average cost per computer has fallen by 5% in the past year.

However, Dell is facing the heat as businesses and other customers are sharply cutting spend in technology. Sales in all of its major hardware businesses fell (Dell’s server, software and services businesses declined as well, while storage sales rose). Other leading companies in the PC business like
Hewlett-Packard, reported a drop in PC sales during (19% drop in its fourth quarter revenues of $8.8 billion). Dell reported a 48 percent drop in net income of $351 million from $679 million for the same period last year. Dell’s revenue in the quarter ended Jan. 30, dropped by 16% to $13.4 billion from the $16 billion reported last year. Since 2005, this is Dell’s lowest total and the lowest fourth-quarter profit since 2002.

Related Case Study on Dell:
• Dell’s Supply Chain Management Strategy
• Dell in India – Business and Marketing Strategy

How are foreign retailers like Zara, Hennes and Mauritz (H&M), Mango, Uniqlo, Kira Plastinina and Topshop performing in the U.S.? What are their expansion plans and their entry year in the U.S.? Can they compete with The Gap, the U.S. local retail chain which has more than 3,000 stores and has been a preferred shopping destination for U.S. customers. Some of them have defied global recession and are faring well. Here’s a snapshot:

Keywords: Retailing, Zara, H&M, Hennes and Mauritz, Mango, Uniqlo, Kira Plastinina, Topshop

Related Articles and Case Studies on Retailing (PDF files)
• H&M’s Low-cost, High-fashion Supply Chain
• Hennes & Mauritz, H&M in Japan – Hit or Mistake?
• Wal-Mart’s Supply Chain Management Practices
• Tesco takes on US Wal-Mart
• Of Wal-Mart price cuts, Struggling Retailers and Weak 2008 Retail Sales Forecast
• Wal-Mart’s Marketside or Tesco’s Fresh and Easy stores in US
• Wal-Mart’s Great Value Brand Makeover

Since its formation in 2001, GlaxoSmithKline (GSK), the pharmaceutical giant, for the first time will run from its London headquarters. GSK will continue to operate from its dual headquarters, in London and Philadelphia. GSK’s CEO, Andrew Witty (who joined Glaxo UK in 1985) has decided to remain in London, partly for family reasons. CEO Witty will travel to the U.S. regularly. It is believed that the highly and increasingly regulated U.S. market offers less lucrative returns for large pharmaceutical firms. Big pharma companies are looking to expand in other regions like the Asia-Pacific region. Perhaps, GSK’s move is indicative of this growing belief which is one of UK’s biggest businesses. GSK UK business is worth about £76 billion.

GSK Struggling

Despite annual sales of £20 billion and one of the strongest drug pipelines in the industry, GSK is struggling. Sales of GSK’s second biggest selling product Avandia (diabetes drug) collapsed, after the drug was linked to a significantly increased risk of heart attack last year. GSK is also currently undertaking a £1.5 billion cost-cutting drive. This cost-cutting plan includes cutting workforce by at least 5,000 jobs from 102,000, closing a few sites from its 99 sites and outsourcing drug manufacturing partly.

GlaxoSmithKline GSK, Pharmaceutical Industry

How is HP dealing with a challenging economy?

Leading tech companies (including Intel and Cisco) believe that given the constraints of the economy today and the likely global recession, customer spending on technology will decline rapidly impacting both consumer and corporate purchases. Declining sales figures in October and November (2008) reflected on this fact. Hewlett Packard (HP) on the other hand has delivered a contrastingly optimistic forecast and expects significant growth with respect to the negative outlook for the coming quarter. How is it able to do so? A look at some components of HP’s business strategy:

HP and its Business Strategy

Wide Variety

H.P. offers a wide variety of products to consumer and corporate customers which means that strength in some businesses can offset weakness in others.

Repeat/Recurring Sales and Long-term deals

HP’s stable revenues come from a large amount of recurring sales – about 40 percent (65 percent of its profits) from long-term deals.

Declining sales of major printer and PC products

At HP, printers are often sold at a loss. Fewer printers sold imply higher HP profits. On the other hand, PC losses have a marginal effect on H.P.’s overall profits.

What the CEO and Analysts say?

Mark Hurd, Chairman and CEO of HP remarked that HP’s ability to execute in a challenging marketplace helps it to differentiate against its competitors and therefore it is able to increase its market share and earnings. Other analysts opine that HP is a really well-run company perticularly from a cost perspective.

Cutting costs and layoffs

The company was aggressively cutting costs and even began laying off workers (around twenty-five thousand) before the declining economy had its effect on the tech industry.

HP is optimistic, but will it be able to match its 5 percent (approx.) growth in recent quarters. Given the economic gloom, at least it has done well competitively and probably will emerge from the current economic environment as an even stronger force.

Related Articles

• Hewlett-Packard’s retail channel advantage over Dell
• Is Dell’s Retail Strategy paying off?
• Download PDF file on Dell’s Supply Chain Management Strategy

HP’s retail channel strategy is working

Hewlett-Packard (HP), the world’s largest personal-computer maker (based in the Palo Alto, California), beat Dell in PC sales for the sixth straight quarter and posted a fiscal first-quarter profit (February, 2008). The results which topped analysts’ estimates on orders for PCs, servers and storage show that HP’s retail channel strategy (to rely on a network of retailers) is working. The option to view and touch the machines before buying is helping HP win customers. Furthermore, HP’s PCs and notebooks are sold in about 110,000 stores; 10 times as many stores as Dell. Dell has its PCs selling in more than 10,000 stores. Even in terms of desktop and notebook models offered through retailers, HP offers twice as many as Dell does. Shoppers, therefore have more choice. Last year, Dell discarded its much renowned direct-sales strategy and began forging partnerships with retailers in an attempt to win back shoppers.

Dell’s unique ‘direct build-to-order’ sales model?

Dell had been following its unique ‘direct build-to-order’ sales model for more than 20 years. Dell’s customers could plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dell’s supply chain efficiencies and direct sales gave it a competitive advantage. In 2006 however, Dell faced several problems. Many customers complained about long delays in supplies. Increasing discontent of customers led to a slowdown in sales. Consequently, Dell lost its market leadership to Hewlett-Packard Co. (HP). Dell will have to bear additional costs with its foray into retail distribution thereby minimizing its cost advantage. Besides, profit margins of Dell will drop further since it will have to offer incentives to compete with HP in retail stores. Read full-text of this case study on Dell’s Supply Chain Management Strategy.

Strong order book lifts profit at Hewlett-Packard

HP’s first-quarter net income increased 38 percent to $2.13 billion from $1.55 billion. Chief executive Mark Hurd who succeeded Carly Fiorina in April 2005 has topped his profit forecasts in each quarter since taking over. This only underscores the huge challenge Michael Dell has in turning around Dell.

First-quarter sales increased 13 percent to $28.5 billion. PCs account for about a third of Hewlett-Packard’s sales and it benefited from a decline in the cost of parts for PCs (memory prices fell by almost 45 percent last quarter). Even concerns about reduced U.S. spending were partly offset as Hewlett-Packard gets more than two-thirds of its revenue from fastest-growing economies outside the U.S. Countries like Brazil, Russia, India and China account for approximately 9 percent of the HP’s sales.

Related Stories:
Is Dell’s Retail Strategy paying off?
HP and Green Environment Initiative
Lenovo new European production facility
Dell gets serious about storage services

keywords: Computers, Dell, HP, PC Manufacturing, Retailing

IBM and importance of small and medium businesses

Out of IBM’s total sales, Small and medium business (SMB) revenues account for about 19%. In the fourth quarter 2007, IBM reported that SMB revenues increased by 11% to $5.4 billion. Overall, IBM reported that fourth quarter revenues increased 10% year-over-year to $28.9 billion. Michael Rodin, GM for IBM’s Lotus Notes unit said that, “Small businesses need superior collaboration technology as much as large companies do.”

IBM’s second announced acquisition in 2008

With sales to small businesses becoming increasingly important to IBM, the company announced that it had made its second acquisition of 2008. IBM acquired Toronto-based Net Integration Technologies (NIT). NIT is a developer of an all-in-one business server aimed at small- and mid-sized companies. Financial terms of the deal were not disclosed. IBM expects to close the acquisition in the first quarter of 2008.

Nitix, NIT’s small all-in-one business server, (Linux based system ) is for companies with little or no in-house IT support. It includes Lotus Notes e-mail, file management, directory services, back up and recovery tools, and optional business applications. NIT’s mainly sells to small business environment customers (small- and mid-sized companies) like auto dealerships, law offices, real estate agency branch offices, and others.

IBM recently acquired XIV Ltd., a Tel Aviv-based manufacturer of high-performance digital storage systems earlier this month. Last year, IBM had also acquired Cognos, a Canadian developer of business intelligence software in a $5 billion deal. In 2007, IBM made nine acquisitions.

IBM, Mergers and Acquisitions, small and medium businesses, Net Integration Technologies (NIT)

Larsen and Toubro (L&T), the engineering and construction giant wants to reposition itself and be a more focused value-added engineering company. L&T is a USD 8.5 billion company and has 12 operating companies and three subsidiaries. The company was mainly into engineering, procurement and construction segments. It also has a large exposure to commodity businesses such as cement and ready-mix concrete. In the year 2000, L&T began implementing its business restructuring exercise with its first two five year plans. The restructuring plans had set a target to reach a business volume of Rs 35,000 crore annually which the company achieved and exceeded by 15-20%. As per the restructuring plans, L&T had divested its cement business in favour of the Aditya Birla Group and its ready-mix concrete business in favour of Lafarge SA. The third five-year plan of the company will be executed from 2010 to 2015.

L&T’s operating divisions

• Engineering & Construction Projects (E&C)
• Heavy Engineering (HED)
• Engineering Construction & Contracts (ECC)
• Electrical & Electronics (EBG)
• Machinery & Industrial Products (MIPD)
• Information Technology & Engineering Services

As part of its Business restructuring exercise L&T plans to:

• Revise the status of each of its 12 operating companies, depending on financial performance, size and strength. A threshold value of Rs 5,000 crore has been fixed for identifying size. Only a company having a certain size and strength will be called a “L&T-promoted company”.
• Executive vice presidents running operating companies will be upgraded to senior VPs based on performance.
• A succession plan, with chairman A M Naik retiring in September 2012.

In August 2009, L&T had announced an internal restructuring exercise wherein it planned to form a new entity within the company to cater to the growing opportunities from the railway sector. The new entity was to be formed from L&T’s existing arms which were currently involved in railway work, including the manufacturing, design and marketing arms. The company had also announced plans to enter the general insurance business.

Keywords: L&T, Business Restructuring, engineering and construction

McDonald’s, the fast-food retailing giant has a proven formula for doing well in a recession – courting consumers globally by targeting local tastes with global menus. McDonald’s has expanded its global appeal which has resulted in good results, even though almost every type of industry is seeing widespread sales dips and tougher times.

While still strong in the United States, McDonald’s sales growth has dipped but has been saved by strong international sales. More than half of the McDonald’s total sales have come from abroad since the late ’90s. In 2008, of the total revenues of $23.5 billion, sales abroad accounted for more than 60%. McDonald’s did particularly well in Europe where even the analysts were not expecting good results. McDonald’s has managed to improve its image in France where earlier it was traditionally met with disdain and seen as a symbol of global capitalism. The company also did well in the U.K. which is seen as a tough market with strong competition and the most skeptical customer base. The company’s sales also rose in Asia/Pacific, Middle East and Africa segment.

Download Case Study PDF

Download Management Case Study on McDonald’s – Business Strategy in India
17 pages, PDF file

Keywords: McDonald’s, fast-food retailing, global menus, Innovation, globalization, adapting to local tastes, International expansion strategy

In the emerging markets, Nokia’s business strategy is to:

• Increase mobile usage in rural areas
• Reduce the mobile phone ownership and operating costs
• Bring the benefits of mobile telephony to people in emerging markets
• Bring the power of the Internet to these markets

An end-to-end player with a product for everyone

Nokia caters to the mass-market and also the high-end market and has a product for everyone. The company’s focus would continue to be driving demand and foster brand aspiration.

In November 2008, in India, Nokia introduced handsets (prices ranging from €25 to €90 – Nokia’s lowest cost handset to date at €25) and a range of services (available from first-half of 2009). The services will be expanded to other countries in Asia and Africa later.

Nokia’s Market Positioning: Different price points and value propositions

Nokia’s service offerings

The services being introduced include:

• Nokia Life Tools: Farmers and students can get relevant local information on seeds, crops, markets and weather through SMS. Advantages include information in two languages simultaneously, easy icon-based user interface and availability of critical information without a GPRS connection.
• Mail on Ovi: An email service directly on the mobile phone. No PC required.
• Education Services: Users can opt for an English word a day and learn how it is pronounced and its meaning in their native language.

Finnish cellphone maker, Nokia is planning to close its mobile devices plant in Bochum, Germany by mid-2008, stating that it is not competitive enough. Nokia, the world’s top cellphone maker, may cut up to 2,300 staff. Nokia is moving production to lower-cost regions and to its existing plants, mainly in Romania. Even with additional investment, Nokia’s German plant was proving uncompetitive chiefly because labor costs were almost ten times higher in Germany as compared to Romania. All non-production operations will be closed.

Read case study on Nokia’s Business Strategy in India (pdf file)

In March, last year, Nokia had announced its plan to set up a mobile phone plant in Romania. Nokia had invested 60 million euros ($89 million) in its Romania plant. A majority of Nokia’s cellphone production is in lower-cost countries like Hungary, Bulgaria, Romania, China and India. Nokia also has manufacturing operations in high-cost country Finland. However, the Finnish manufacturing site has been re-focused onto high-end production, and research and development. So it is unlikely to be closed any time soon.

Market changes and cutthroat price competition in the production of mobile devices has led to this move. To the German mobile devices/telecommuniations manufacturing industry, Nokia closing its manufacturing plant is another setback after 3,000 employees lost their jobs at BenQ which declared bankruptcy about a year earlier. By 2010 end, Nokia Siemens Networks is also aiming to cut almost 15 percent of its global workforce. Around 2,290 of these are likely to be in Germany. Nokia also plans to sell its automotive accessory business and is in talks with India’s Sasken Technologies to sell its research and development unit.

Meanwhile, the union [IG Metall and member of the supervisory board of Nokia GmbH (Germany)] are planning action against Nokia. Deputy Economy Minister Hartmut Schauerte said understood the anger of workers at the plant. He further said that, “Germany is globally competitive, Numerous success stories of German export-oriented firms testify to this. Unfortunately, Nokia has evidently not managed to take advantage of this potential despite considerable state support. The German government is in permanent contact with the company and is ready for intensive discussions if the company is prepared to reconsider its decision.” He vowed to stop Nokia getting financial assistance from the European Union to carry out the relocation.

Mobile Devices, Nokia, Motorola, iPhone

Nokia with 40% market share in the fourth quarter of 2007

In what is being regarded as the much-awaited and psychologically important milestone, Nokia (NOK), the Finnish handset maker and global giant, announced that it had achieved a 40% market share in the fourth quarter of 2007. This lead in the global handset business was achieved by Nokia while also becoming more profitable. Nokia increased profit in the fourth quarter of 2007 by 44%, to $2.68 billion, on sales of $23 billion. Increasing sales in emerging markets, coupled with growth in high-end phones were two important factors responsible for the boost in profits. Nokia plans to increase its market share further in 2008.

Read case study on Nokia’s Business Strategy in India (pdf file)

In times of global economic uncertainty…

According to market tracker ABI Research, last year, Mobile phone sales grew 15.8% to 1.15 billion units. But in times of global economic uncertainty, Nokia’s growth is commendable largely aided by the fact that consumers regard phones as necessities and they keep buying new handsets. Nokia has the right products and a distribution strategy to reach the customers. Nokia’s rivals are struggling to match Nokia’s marketing and distribution networks. Nokia can leave its’ competitors further behind by leveraging the increased sales volume, greater economies of scale, and investing more in new product introduction and research and development.

Motorola’s market share dips in the fourth quarter.

Meanwhile, a day earlier, Motorola announced that its profits plunged 84%, to $100 million, as sales declined almost 19%, to $9.6 billion. Motorola’s market share shrank to 12.4%, from 13%, in the fourth quarter. Motorola, the biggest U.S. maker of mobile phones, is also struggling with its inability to deliver phones that can match the popularity of its bestselling Razr. Motorola suffered in places such as Europe and emerging markets with sales of low-end phones and also high-end, multifeature 3G smartphones. However, it did sell more than 8 million Razrs, 3 million Krzrs, and 1.5 million Razr2s. Even established competitors like Samsung Electronics and Sony Ericsson are are yet to match Nokia in emerging markets, where basic phones sell for less than $40. Nokia sold 133.5 million phones in the quarter, more than its three closest rivals combined.

Apple’s iPhone sales are impressive and Nokia is paying attention

Since its launch in March 2007, Nokia has sold more than 5.5 million units of its multimedia handset N95. This is more than the iPhone with sales of about 4 million units. But the iPhone is not available in many parts of world and costs more than an N95. Nokia is aware of iPhone’s popularity and has plans to launch a handset with the same touch-screen technology that made iPhone popular.

Mobile Devices, Nokia, Motorola, iPhone

Nokia is the world’s largest handset manufacturer and the maker of four out of every 10 mobiles sold worldwide. In the past few months (fourth quarter 2008), the mobile phone market slowed dramatically and Nokia’s competitors Motorola and Sony Ericsson announced quarterly losses and even the sales of Apple’s iPhone slowed down. The slowing down could hit other handset manufacturers more severely and force them away from the market. However, this isn’t reason enough for Nokia to cheer as its sales also dipped particularly in large markets like China where sales came down by almost 35% from the last quarter. Some analysts even reported that the company’s operating profit margin on handsets was at its lowest point in 10 years.

Why Nokia’s sales and profits dipped?

• Slowdowns in both developed and developing markets.
• Nokia’s price strategy: Nokia’s refusal to be drawn into a price war in developing countries. Nokia is clearly struggling to maintain its dominance in the face of aggressive price competition from its rivals.
• Cash-strapped consumers: In China, which is regarded as the company’s largest market, consumers are now increasingly being price conscious (due to the faltering economy, slowing exports and slumping real-estate market) and are preferring non-branded inexpensive phones.
• Competition: The total market for high-end devices increased. But, Nokia’s high-end handsets did not do well as compared to Apple’s iPhone and Research In Motion’s BlackBerry.
• Increasing sales of cheap lower-margin devices: In the fourth quarter of 2008, margins dipped because a large proportion of sales was of cheap lower-margin devices.

Can Nokia turnaround? Nokia’s Strength and Opportunities

Analysts feel that Nokia is in the best position to make a turnaround. With a huge market share it can manufacture at a lower cost per unit. It’s wide range of products can give it an edge over any competitor and it has one of the best distribution networks in the world. Nokia can certainly capture back share in the vital high-end devices market with new products such as it’s 5800 Xpress Music (a lower priced iPhone like touchscreen phone) and making more consumer oriented phones.

Oprah Winfrey, the world famous Talk show host and top-earning US celebrity will launch a new television network channel (to debut in 2009 in more than 70 million homes) with Discovery Communications, which owns the Discovery Network and Animal Planet, among others. In a joint statement release, the company said that the new network will be a “natural extension” of her show and that The Oprah Winfrey Network (OWN) will be a multi-platform media venture “designed to entertain, inform and inspire people to live their best lives.”

Oprah said that she had written in her diary that she would set up her own television network one day. Oprah also said that the new network is the evolution of the work she has been doing on television all these years and that it is a natural extension of her show. Oprah Winfrey will have full editorial control over the joint venture and will be responsible for OWN’s programming, branding and creative vision.

In a recent US poll on most admired women, Oprah Winfrey was ranked second to US presidential candidate Hillary Clinton. For five consecutive years, Oprah Winfrey has led the Harris Poll’s favorite television stars list for five consecutive years. However, in a latest poll, Ellen DeGeneres, comedian and daytime TV host replaced Oprah Winfrey as the U.S.’s favorite television personality. Ellen was eighth last year.

Oprah Winfrey, Ellen Degeneres, Discovery Communications, Talk show host, The Oprah Winfrey Network (OWN)

P&G – Being where future customers are

In December 2008, Procter & Gamble Co. (P&G), announced an aggressive expansion plan to build 19 production plants to cater to future consumers in developing countries (where the GDP has grown quickly and which have vast populations). By 2010, P&G wants to reach an additional 1 billion consumers. Presently, it caters to 3.5 billion people out of 6.5 billion globally.

Being cost-effective in hard-to-reach and hard-to-serve environments

P&G already has its presence in around 80 countries where it has 145 facilities. As per the new plan 18 new facilities will be built in developing countries like Malaysia, Romania, India and Pakistan. Competitors Unilever and Colgate-Palmolive already have a presence in emerging markets. Therefore, expansion is one thing, but doing so cost-effectively becomes paramount for P&G. Economic crisis and corruption pose additional pressures.

Exhibit: P&G’s target markets (future consumers) in developing countries

P&G’s strategy to be cost-effective

Extending competitive advantage

• Enter markets with products with less competition
• Establish state-of-the-art facilities (In most cases by providing P&G technology to low-cost machine builders instead of buying a complete production unit)
• Produce more affordable goods for low-income consumers.
• Leave competition far behind

A struggling Starbucks

Starbucks, the leading coffee retailer has been struggling amidst a faltering US economy, its own rapid growth and increased competition from cheaper rivals. In the first three months of 2008 its net income fell to $108.7m (£54.7m) down 28% from the same period of 2007. Its stock price has been falling steadily for the past two years (see exhibit 1). The stock has plunged more than 46% over the past year due to concerns about the weak economy and increased competition.

Exhibit 1: Stock performance graph of Starbucks for past five years (NASDAQ: SBUX)

Slowing down US Expansion plans

In July 2008, it announced closing of 600 of its stores (company-operated) across various locations in the U.S. Earlier, Starbucks had plans to shut only 100 of its stores, while 500 were on its internal watch list. Not great news for a company which revolutionized the coffee industry and transformed an everyday ordinary product into extraordinary business success. The reasons: Starbucks has struggled to maintain its differentiation in the face of growing competition. The company says its research shows it is not losing customers to competitors such as the privately-held Dunkin’ Doughnuts, but that consumers are simply not spending as much in Starbucks stores as they used to. The company had 125 stores when it went public in 1992, now has over 15,000 stores in 44 countries. The stores which are being closed are not profitable and are not expected to be profitable in future.

Starbucks forced to change strategy

Starbucks has always followed a strategy to blanket a region with its new stores. This means that by opening multiple stores in the same street or close by locations, it could reduce the customers’ rush in one store and also increase its revenues through new stores. This helped the company to reduce its distribution costs and the waiting time for customers in its stores, thereby increasing the number of customers. When a new store opens nearby, between 25 to 30% of revenue is cannibalized. Shutting down the stores would help return lost revenues.

Out of the 600 stores being closed, 70% had opened after start of 2006 which implies that Starbucks is closing down 19% of U.S. company-operated stores that opened in the last two years. Around 12,000 of its workforce will be affected by the closings.

Will Starbucks regain its past success?

Starbucks wants to turnaround its business by providing customers with the distinctive ‘Starbucks Experience’ and building on Starbucks legacy of innovation. Howard Schultz returned in early January 2008 as Chairman and Chief Executive and laid out several new “customer-focused” initiatives and a restructuring plan to restore an authentic coffeehouse experience back to its’ stores. Read
management case study (PDF file) on Starbucks’ Turnaround Strategy and restructuring plans. So will Starbucks be able to recreate its magic? Perhaps a recent news item that coffee can do more than just wake one up in the mornings and prevent auto-immune diseases such as lupus and rheumatoid arthritis (perhaps also cure multiple sclerosis) will help bring in more customers to Starbucks.

Starbucks, US Expansion, Coffee Retailing, Howard Schultz

Will a ‘transformational product’ help Starbucks turnaround?

Starbucks will begin selling a new product, called Via. Via is an instant coffee product wherein coffee loving consumers can brew the coffee by emptying the granules into hot water (which will replicate the taste of Starbucks coffee).

Starbucks CEO Howard Schultz had already cited this announcement as a game changer which would deliver innovation, competition, and value in
Starbucks’ turnaround strategy. Starbucks’ top management is confident that Via is a ‘transformational product’ in the $17 billion instant coffee market and the new product had significant potential for Starbucks.

Starbucks’ falling profits and consistent Innovation

In recent years, Starbucks’ profits had started to decline. This was due to over-expansion and ever increasing competition from competitors like McDonald’s and Dunkin Donuts. With consumers spending less Starbucks had to close its stores.

The company’s efforts to attract customers with new products such as breakfast foods, Vivanno smoothies, Pike Place Roast have not taken off in a manner that it had expected. (Also read: Starbucks for a dollar, Storm in a coffee cup?)
This recent attempt with instant coffee may take the same path with soluble coffee being deemed as poor quality. Starbucks however claims that Via tastes just as good as brewed coffee. Analysts feel that the attempt will generate only short term revenues for the company.

The new product will be put to test soon. If it also fails then Schultz will have to rethink re-franchising, or selling existing stores to employees which till now he and other Starbucks management feel will result in brand dilution and losing control over the brand.

Case Studies in Coffee Retailing (PDF files)

• Will restructuring help Starbucks Turnaround?
• Cafe Coffee Day (CCD) – Brand Strategy in India

UPS reported a fourth-quarter (2007) net loss of $2.58 billion, compared with a net profit of $1.13 billion, a year earlier. The quarterly loss was mainly due to a $6.1 billion pension-related charge.

United Parcel Service Inc (UPS), the world’s largest package delivery company has come a long way from being a private messenger and delivery service in 1907 to becoming an integrated supply chain management and logistics solutions provider. It has been so successful in transforming itself from a small regional parcel delivery service into a global company that today (like FedEx), UPS is seen as an indicator of U.S. economic health. The reason of course is that companies and consumers ship more packages in a healthy economy.

A bit of UPS History

In 1907, James E. (“Jim”) Casey (James Casey) felt that there was an increasing need for private messenger and delivery services. Casey started his company in Seattle, Washington and named it ‘American Messenger Company’. In 1913, Casey merged his company with a competitor, Evert McCabe, to form Merchants Parcel Delivery (MPD). In 1919, the name was changed to United Parcel Service when the company made its first expansion beyond Seattle to Oakland, California. ‘United’ implied that operations in various cities were part of the same organization, ‘Parcel’ identified the nature of the business, and ‘Service’ what was offered.

By 1992, UPS was delivering 11.5 million packages and documents a day for more than one million regular customers to more than 200 countries. In 2002, this figure reached more than 13 million packages and documents per business day with delivery volume, 3.4 billion packages and documents.

UPS – Many firsts

In 2007, UPS became the first package carrier to offer its customers a paperless international shipping option as well as a package return capability to 98 countries and territories. But the series of firsts started much before. In 1922, UPS became one of the few companies in the United States to offer common carrier service, a service that many other private carriers, or even the parcel post did not offer. Common carrier service was like retail store delivery service and mainly featured automatic daily pickup calls, acceptance of checks made out to the shipper in payment of C.O.D.s, additional delivery attempts, automatic return of undeliverables, and streamlined documentation with weekly billing. In 1924 UPS introduced the first conveyor belt system for handling packages. In 1995 UPS acquired a company called SonicAir, making UPS the first company to offer same-day, “next flight-out” service and guaranteed 8 a.m. overnight delivery…

Polman wants to increase the speed of decision-making in the sprawling company, which is known for its cautious culture. “Thirty-Day Action Plans” introduced under his reign, for example, are designed to make executives act quickly to fix problems with individual products. – The Wall Street Journal, August 2009.

New Business Strategy at Unilever – drive volume with lower prices and aggressive marketing spending

Unilever’s mission statement reads “add vitality to life”. For now, the Anglo-Dutch consumer goods giant has added vitality to its own operations with “Thirty-Day Action Plans”. These plans introduced by Mr. Paul Polman, the new chief executive of Unilever were intended to make executives take quick action to fix problems with individual products. Paul Polman in fact reversed the strategy of his predecessor.

Polman took over the company in January 2009. He was the first CEO who was not promoted form the internal ranks. He spent most of his career at Procter & Gamble Co. His first job at Unilever was to fire up dwindling sales volumes at Unilever. Earlier last year, Mr. Patrick Cescau, former CEO had increased prices to counter recession. However, this drove sales down as consumers stopped buying Unilever’s products. Polman initiated a different strategy. He wanted to drive volume with lower prices and aggressive marketing spending. In the past few years, Unilever had already cut down on its massive portfolio of brands. The company now wanted to concentrate its efforts at innovation on a smaller number of bigger brands. With the new idea of “30-day plans”, a plan was meant for each product innovation or attempt at troubleshooting. If the plan did not yield results after a month, it was very likely to be discarded.

How does Unilever’s “Thirty-Day Action Plans” work?

In South Africa, Unilever’s laundry detergent sales had dipped. On analysis, company executives found that the product was under threat with competition from a cheap local brand. Unilever executives immediately framed an action plan to counter the threat. The company very quickly introduced a cheaper version of its Surf detergent with fewer features. This plan worked as the brand proved very popular.

Download Case Study PDF

Download Management Case Study on Restructuring at Unilever

Keywords: Unilever, Thirty-Day Action Plans, Paul Polman, Patrick Cescau, Consumer Goods Giant

What is ‘Great Value’ brand?

In 1993, Wal-Mart launched the Great Value store brand. ‘Great Value’ is the largest grocery brand and the biggest brand that Wal-Mart has with thousands of products spanning 100 categories. Wal-Mart has more than 5,250 of its Great Value private-label products.

What did Wal-Mart do to its store brand?

Wal-Mart improved its private label offering – the Great Value line of products. Wal-Mart worked with both the suppliers and its customers for over a year to assess the quality of more than 5,250 of its Great Value private-label products against top national brands.

Features of Wal-Mart’s Brand Makeover:

• Altered the formulas for 750 everyday items, mostly foods. E.g. The kids’ breakfast cereal was made crisper.
• Product Innovation: Introduced new products which were designed using consumer feedback. Wal-Mart trained customers to do comparisons and give feedback on what they were looking for. E.g. New unusual flavors like mocha mud slide and cake batter introduced in the Great Value all-natural ice cream range. 80 new products under the Great Value line, such as thin-crust pizza, fat-free caramel swirl ice cream, and organic cage-free eggs.
• New packaging design to provide a more consistent, consumer-friendly image. E.g. More prominent nutritional information with nearly all labels in both English and Spanish languages.

Why did Wal-Mart overhaul its oldest and biggest store brand?

Private Label Store Brands vs. National Brands

Consumers prefer buying private label store brands instead of national brands in times of economic uncertainty. Why? Simple, because they match the quality of national brands and that too at lower prices. Data tracker Nielsen reported that, in 2008, sales of private-label items increased 10% compared to a 2.6% increase for branded goods. An industry trade group, the Food Marketing Institute found that, in 2008, around 64% of buyers (59% in 2007) said they often or always preferred a store brand as compared to a national one. This is an indication that the initial hesitation shoppers had towards store brand products is disappearing and very quickly.

Advantages of Private-label brands/products

• Typically cost less (5% to 20%) than name-brand products.
• Higher profit margins for retailers owing to lower overhead costs and zero marketing expenses.

How private labels are faring at other retailers?

• Kroger’s private-label collection set a new record when it touched 27% of overall sales in its most recent quarter.
• Safeway’s ‘O Organics’ store brand is very successful. The retailer is now licensing it for use by other retailers.

Keywords: Wal-Mart, groceries, retailing, generic label, private label store brands, brand strategy, national brands

Related Articles and Case Studies on Wal-Mart (PDF files)
• Organization Culture at Wal-Mart
• Wal-Mart’s Supply Chain Management Practices
• Tesco takes on US Wal-Mart
• Wal-Mart in Japan
• Of Wal-Mart price cuts, Struggling Retailers and Weak 2008 Retail Sales Forecast
• Wal-Mart’s Marketside or Tesco’s Fresh and Easy stores in US


Other Articles on Brand Makeover:

• Bharti Gets a Brand Makeover

Adidas plus Reebok is equal to better competition with giant Nike

In 2006, Adidas (the German athletic apparel and the world’s second-biggest sports goods maker after Nike) acquired Reebok in a US$3.1 billion deal. The merger was aimed at helping Adidas increase its share in the U.S. market and better compete with market leader Nike Inc. and fourth ranked Puma AG. At the time experts felt that the merger made sense. But the key challenge was to unite Adidas’s German culture of control, engineering, and production and Reebok’s U.S. marketing- driven culture.

The Reebok acquisition was seen as a key factor in growing the Adidas brand in developing and fashion-oriented markets of Asia like China, Korea, and Malaysia. Moreover, Reebok already had marketing tie-ups in China (with Yao Ming) and Adidas did not have to cover all China segments. Read a blog post Adidas and Reebok Merger Case Study

Download full-text of management case study on adidas and Reebok merger (PDF file)

Adidas – Fourth Quarter 2007 performance

Adidas AG reported its fourth quarter results for 2007 (October-December, 2007). The results were helped by lower purchasing costs resulting from its acquisition of Reebok and improved sales.

Its net income rose to €21 million (US$31.9 million) from €13 million a year earlier. Sales increased to €2.4 billion (US$3.7 billion) compared with nearly €2.3 billion in 2006. In 2007, total yearly earnings were €551 million (US$837.9 million), up 14 percent from €483 million in 2006. Sales for the year rose marginally to €10.3 billion (US$15.6 billion) from €10 billion in 2006.

Adidas vs. Reebok unit performance

The Adidas brand had sales worth €7.1 billion (US$10.8 billion) while Reebok had sales worth €2.3 billion (US$3.5 billion). Last year, in 2006 the Adidas brand had sales worth €6.6 billion to Reebok’s €2.5 billion.

Year-end order backlog represents firm future revenues from contracts signed up to that date. Order backlog is a key indicator of future sales for retailers and Reebok’s lower order backlog remains the key question mark. Order backlog of brand Adidas was excellent up 17 percent which can be partly attributed to the Euro 2008 soccer championship and Beijing Olympics this year. However, Reebok’s order backlog was down 8 percent (down 20 percent in North America). Nike reported worldwide futures orders for athletic footwear and apparel (scheduled for delivery from December 2007 through April 2008) totaling $6.5 billion, 13 percent higher than such orders reported for the same period last year.

Meanwhile, Nike announced (Mar 3, 2008) that it has completed its acquisition of Umbro Plc. Nike’s Umbro takeover is an effort to consolidate its position in the football market where Adidas has performed well. Last year, Nike’s CEO Mark Parker outlined a brave plan to increase the company’s business to $23 billion in revenue by 2011. Will Nike do it or will the Adidas-Reebok merger spoil its plans, still remains to be seen.

Keywords: Adidas, Athletic Apparel and Sporting Goods, Mergers and Acquisitions, Nike, Reebok

Warren Edward Buffett, Chairman and Chief executive of Berkshire Hathaway Inc. and admired by many analysts for his shrewd business acumen is primarily known for his investing success. Over the years, Buffett developed his own tenets of buying a business or stock. Not only his investments, but companies acquired by Berkshire Hathaway also performed consistently over the years. Berkshire owns more than 60 subsidiaries including insurance, clothing, furniture, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as Coca-Cola Co., Anheuser-Busch Cos. and Wells Fargo & Co. Also read Leadership case study on Warren Buffett (10 pages, PDF file).

He is known as the "Oracle of Omaha" and generally considered to be the world’s most successful investor with a net worth around U.S. Dollars 62 Billion. He has figured consistently among the top five in the Forbes magazine’s list of the 400 richest Americans (the elite Forbes 400). Buffett is also known for his philanthropy and in 2006, he announced his plan to give away the bulk of his nearly $49 billion fortune over time.

It may then not come as a surprise, that last year, $650,100 was the price for a lunch with the great leader in an auction on eBay. Buffett has been auctioning off lunches online for six years. He offers only one lunch a year. The auction benefits the Glide Foundation, which provides social services to the poor and homeless in San Francisco. It is anybody’s guess how high the bidding will go this year. Well to end the surprise, in the most expensive charity auction ever held on eBay, a Chinese investment fund manager (Zhao Danyang) won the chance to have lunch with billionaire Warren Buffett by bidding $2.1 million. The most expensive charity item ever sold on eBay earlier was a Harley Davidson motorcycle for $800,100. The motorcycle was autographed by celebrities that TV show host Jay Leno offered in 2005 for tsunami relief.

Warren Buffett, Leadership, Investment Leader, Oracle of Omaha

Daimler 2007 Profit Rises

Mercedes-Benz maker, Daimler AG and the world’s second-largest maker of luxury vehicles reported profits in its fourth-quarter results for 2007. The good results this quarter have come after selling the Chrysler division in the U.S. and cutting jobs at Mercedes-Benz Cars. Without Chrysler, Daimler reported profits of 1.7 billion euros (£1.3 billion) for the fourth quarter and a net profit of 4 billion euros for the year (3.8 billion euros in 2006). Sales rose to 99.4 billion euros ($144.98 billion) from 99.2 billion euros, with 2.1 million automobiles sold globally. In May last year, after a decade of disappointing results, Daimler finally sold Chrysler to private equity firm Cerberus Capital for £3.74 billion.

With the North American car and truck market struggling this year from the impact of falling house prices in the wake of the sub-prime crisis, Daimler is banking on demand from China, India and Russia. Daimler, the Stuttgart-based company expects the North American truck market to recover in the second half of the year.

Daimler Chrysler Merger Failure

In 1926, the merger of two German automobile manufacturers Benz & Co. and Daimler Motor Company formed Stuttgart-based, German company Daimler-Benz. Its Mercedes cars were arguably the best example of German quality and engineering.

In 1998, Daimler-Benz and U.S. based Chrysler Corporation, two leading global car manufacturers, agreed to combine their businesses in what was perceived to be a ‘merger of equals’. Jurgen Schrempp, CEO of Daimler-Benz and Robert Eaton, Chairman and CEO of Chrysler Corporation met to discuss the possible merger.

The merged entity ranked third (after GM and Ford) in the world in terms of revenues, market capitalization and earnings, and fifth (after GM, Ford, Toyota and Volkswagen) in the number of units (passenger-cars and commercial vehicles combined) sold. In 1998, co-chairmen and co-CEOs, Schrempp and Eaton led the merged company to revenues of $155.3 billion and sold 4 million cars and trucks. But in 2000, it suffered third quarter losses of more than half a billion dollars, and projections of even higher losses in the fourth quarter and into 2001. In early 2001, the merged company announced that it would slash 26,000 jobs at its ailing Chrysler division.

Daimler, Chrysler and cultural differences

The Daimler Chrysler merger proved to be a costly mistake for both the companies. Daimler was driven to despair, and to a loss, by its merger with Chrysler. Last year, the merged group reported a loss of 12 million euros.

Analysts felt that though strategically, the merger made good business sense. But contrasting cultures and management styles hindered the realization of the synergies. Daimler-Benz attempted to run Chrysler USA operations in the same way as it would run its German operations. Daimler-Benz was characterized by methodical decision-making. On the other hand, the US based Chrysler encouraged creativity. While Chrysler represented American adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more traditional respect for hierarchy and centralized decision-making.

Related Automotive Updates:
Nissan and Chrysler joint relationship
Toyota overtakes Ford Sales

Automotive, Chrysler, Daimler, Mergers and Acquisitions

Dell’s Turnaround Strategy working…

Ever since founder Michael Dell returned as CEO a year ago, Dell has forayed into retail, made more acquisitions and focussed on cutting costs. IDC reported that Dell is back to double-digit percentage growth in global PC shipments in the fourth quarter. Dell’s worldwide shipments shrank 8.4 percent last year.

Dell leaves behind HP as Largest PC Supplier in the U.S.

One of Dell’s Turnaround move was switching from a direct sales model to selling PCs through retailers like Best Buy and Wal-Mart. Dell’s new retail sales strategy is starting to pay off in the U.S. where Dell sold 15.2 percent more PCs than a year earlier. This figure is more than overall U.S. market growth of 8.8 percent and HP’s 9.8 percent. Dell shipped 5.5 million units in the U.S. Competitor HP’s (Hewlett-Packard)growth slowed. HP shipped 4.5 million units. But still Dell remained in the No. 2 market-share spot globally (Dell shipped 14.6 percent of the global PC market; a total of 11.3 million units). HP kept the No. 1 market share spot with 19 percent. HP remained the world’s largest PC dealer, topping Dell, Acer and Lenovo, according to figures from both firms. Taiwan’s Acer held 9.6 percent of the worldwide PC market and is aggressively expanding. Acer in October 2007, purchased Gateway Inc in the United States after which Acer’s PC shipments increased 60.3 percent. Apple Inc, held 5.7 percent of the U.S. market with its computers sales increasing by 30.9 percent in the fourth quarter. Lenovo made slower growth in the global market and is struggling to retain its core audience of business users.

Acer, Dell, Direct to consumer model, HP, Lenovo, PC Manufacturing

EBay and Ethical sourcing

In September 2008, EBay, the online auction giant, launched an ethically sourced online marketplace for selling products that have a positive impact on people and the planet. The project is a collaboration of eBay and World of Good. It includes a nonprofit development organization along with a corporate arm called World of Good Inc.

Socially responsible shopping – Tailored shopping impact

The online marketplace aims to give socially responsible shoppers a chance to buy great products that also help mankind and the planet. Customers can also customize their shopping impact (regardless of the social causes most important to them) by shopping for items with different attributes spanning 15 categories. Items are broadly classified as People PositiveTM and Eco PositiveTM.

Products for sale – Organic, made from recycled material and animal friendly

Sellers at the website (www.worldofgood.com) are verified by third parties known as trust providers. The goal is to meet a core set of ethical and environmental standards. Items for sale on the site include clothing, jewelry, coffee, tea, pottery, accessories and home decor items. These items are organic (e.g. organic clothing) and made from recycled materials. Beauty products sold on the site are ‘animal-friendly’ and some products are made by artisans from developing countries. Even food items are offered on the site.

Ethical consumer experiences with Unique GoodprintTM labeling system

A labeling system known as GoodprintTM gives each product on the site a unique nutritional label. This helps customers easily identify the positive social and environmental impact on each buy/purchase they make. They can assess if their purchase aids: economic empowerment, helps preservation of animal species, conserves energy, or is made of recycled, organic and/or sustainable materials.

Facilitating ongoing dialogue between buyers and sellers

The marketplace, an online community, not only helps bring together products, people, and organizations all in one place but also facilitates a dialogue (about ethical shopping) between them and Trust Providers via related blogs, articles, and forums.

EBay, founded in 1995, has more than 84 million active users worldwide. The items offered on WorldofGood.com are also made available on eBay.com.

Download related PDF files of management case studies on eBay:

• eBay in Japan
• Meg Whitman and eBay – Leadership Case Study

Margaret Whitman, the chief executive (CEO) of eBay, is planning to retire so as to breathe fresh life into the company and a much needed radical reinvention of eBay. In March, Ms. Whitman, 51, will have served in the position for 10 years.

Whitman, ranks 22nd on Forbes.com’s list of the world’s most powerful women. In October 2002, Fortune Magazine ranked Whitman, as the world’s third most powerful women in business, after Carly Fiorina and Oprah Winfrey. Under her leadership, eBay’s revenues and profits doubled every year.

Whitman, joined eBay as chief executive in 1998. Under her leadership and her strong belief in eBay’s business model and its customers, Revenues increased from $4 million to $1 billion by late 2002. Whitman led eBay towards success even when many dotcoms crashed.

“In the beginning, I was certainly not an entrepreneur who came up with the idea, but I think I was fairly entrepreneurial in trying to figure out how to bring that idea to life and build a backbone for the company that could take it to the next level,” Whitman commenting on her journey from a novice to a leader in the dotcom world.

Margaret C. Whitman was born in August 1956. She was popularly known as Meg Whitman and ‘darling of the Internet’. Whitman, a studious and clever student, and the youngest child of a Wall Street executive grew up in Long Island, New York. She graduated in Economics from Princeton University. She received an MBA from Harvard Business School in 1979. Whitman began her working career at Procter & Gamble from 1979 to 1981 and then worked for companies like Bain & Company and Walt Disney Company. Meg Whitman accepted the 2007 Lifetime Achievement Award for the community of buyers and sellers that make up eBay.

eBay, Leadership and Entrepreneurship, Margaret Whitman

Exxon Mobil and 2007: Record Profits

Oil companies like Chevron and Royal Dutch Shell reported strong profits in 2007. Chevron, the second-largest American oil company, reported profits of $18.7 billion (increase by 9 percent compared to last year). Royal Dutch Shell reported the best figure ever for a British company when its net income rose by 23 percent to $31 billion. Most oil companies, benefited from a near doubling of oil prices. In early January, the cost of crude oil passed the $100-a-barrel mark for the first time and has stayed above $90 for most of the time since then.

Exxon Mobil’s net income increased by 3 percent to $40.6 billion and sales figure was more than $404 billion. The fourth quarter of 2007 was the most profitable quarter ever in its history with net income increasing by 4 percent, to $11.7 billion. Revenue for the fourth quarter increased 30% to $116.6 billion. Exxon Mobil beat its own record for the highest profits ever recorded by any company to become the world’s most profitable publicly traded corporation.

But the main question is, Will Exxon Mobil face controversy again like it did last time in 2005, when it reported highest quarterly profits in the corporate history of the US. Already, the Foundation for Taxpayer and Consumer Rights, has called the profits unjustifiable and at the cost of an economy tipping into recession.

History of Exxon Mobil Corporation

In 1870, John D. Rockefeller (Rockefeller) along with his associates formed Standard Oil. In about 40 years time period, Rockefell went on to become the richest man in the world after he built Standard Oil into one of the largest integrated oil producing, refining, and marketing organizations in the world. However, US politicians and journalists accused Standard Oil of monopolistic practices and stifling competition. In 1911, after a US Supreme Court ruling Standard Oil Trust was dissolved into 34 separate companies.

Two of the thirty four companies formed by the dissolution, Jersey Standard and Socony went on to become Exxon and Mobil respectively.

In 1999, Mobil Corporation became a wholly-owned subsidiary of Exxon Corporation, and Exxon changed its name to Exxon Mobil Corporation.

Fourth Quarter 2005 – Record profits and Controversies

In 2005 (fourth Quarter), Exxon Mobil recorded profits of US$ 10.71 billion. This was the highest ever quarterly profits in the corporate history of the US. However, with rising oil prices there were problems. A few US policy makers and consumer activist groups accused Exxon Mobil of price gouging (pricing above the market when no alternative retailer is available) and corporate greed. In May 2006, the US House of Representatives passed a price gouging bill that would penalize any oil company found guilty of price gouging with penalties of up to US$ 150 million.

Even environmental activist groups were unhappy with the Exxon’s Valdez oil spill and oil drilling in the Arctic National Wildlife Refuge. In March 1989, Exxon Valdez, the oil tanker owned by Exxon, had caused major ecological and financial damage when it spilled 11 million gallons of crude oil in the Alaskan region.

Exxon Mobil maintained that though the rise in prices helped record profits, its ability to complete projects on time as well as keeping its costs in check was also a main contributing factor. The oil industry and American Petroleum Institute (API) too defended Exxon’s record profits. An advertisement in the media by API stated that the profitability of America’s oil and natural gas industry was far less than many other major industries, like banks, pharmaceuticals and real estate on an average in the past five years. And the US$ 10.7 billion fourth quarter profits of Exxon was a reasonable rate of return.

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Business Ethics, Chevron, Exxon Mobil, Oil Companies, Scams and Controversies

Chairman and chief executive of Caterpillar Inc, Jim Owens, expects to see record results again in 2008, in what he thinks will be a challenging year. But he hopes to see the world’s biggest maker of earth-moving equipment have all-time record results again fuelled by growth in markets outside the U.S.

Last quarter Caterpillar’s sales rose more than 10 percent inspite of a difficult domestic market. However, a very strong global footprint ensured record sales and profit for the whole year.

Caterpillar’s Turnaround Story

Until 1982, Caterpillar or ‘CAT’ (as most people refer it to) enjoyed a long-standing record of profitability and market leadership. However, with increased competition it was almost out of business. It then turned around its business from near-bankruptcy to profitability in a space of a few years. Jim Owens (now CEO), who started as a mid level manager at Caterpillar believed that it was a spectacular transformation of a kind of sluggish company into one that actually has entrepreneurial zeal. What made Caterpillar different was how it reshaped its DNA in a way that permanently changed the culture and capabilities of the enterprise. Caterpillar focused on its decision rights, organizational structure, motivating factors and metrics and measures – the four essentials of organizational DNA. CAT delivered 12 straight years of profit after that. It nearly tripled both its top and bottom lines since1993. In 2005, Forbes had listed Caterpillar as the best-managed industrial corporation in America. …

Caterpillar, Corporate Restructuring, Turnaround Strategies

“Jacked Up: The Inside Story of How Jack Welch Talked GE into Becoming the World’s Greatest Company” is a 315-page book written by author Bill Lane. Bill Lane is none other than Jack Welch’s former speechwriter. In his book Bill recounts how John Francis Welch Jr. (Jack Welch) built upon the straight talk culture and insisted on it. He mentions how Welch was sometimes brutally direct and drove out muddy thinking. Perhaps his nickname “Neutron Jack” comes from this passion or like some felt sometimes rude boss.

GE from an old-economy manufacturer into a modern conglomerate

GE’s turnaround from from an old-economy manufacturer (US$13 billion in 1981) into a modern conglomerate (US$480 billion in 2000) is because of this straight talk culture Jack Welch insisted upon. Jack was quick to praise people whose ideas he liked and ready to pounce on those who did not meet his standards. During Welch’s tenure between 1981-2001, GE’s stock price increased 50 times and Jack Welch’s leadership is well illustrated in the fact that GE’s stock has shown little growth after his retirement (Jack Welch retired after spending 41 years with GE in September 06, 2001) and not to forget the 9/11 attacks.

GE Managers – No five-year strategic plans

Under Welch’s leadership, five-year strategic plans were done away with as he believed no one could could plan four or five years into the future. Bill mentions in his book that any such person who planned for four or five years was considered a ‘bullshitter’. Welch wanted GE managers to give simple and clear explanations of the
business challenges they were facing and their plan to overcome them.

Restructuring GE

Jack Welch joined GE in 1960 as a Junior Engineer. Jack Welch quickly rose to become the head of the plastics division in 1968. He became the GE’s youngest CEO in 1981. Jack Welch initiated a restructuring plan in his initial years as the chief executive. This restructuring plan included massive job cuts, positioning the various businesses as number one or number two in the respective segments, and selling off unprofitable ones. The 29 layers of hierarchy were dismantled. GE then transformed into an informal company…

General Electric Co (GE), Leadership and Entrepreneurship

FedEx (NYSE: FDX), is among the 100 “Best Companies to Work For” in the US announced by FORTUNE magazine and the Great Places to Work Institute. FedEx (the largest employer in 2008 list and only shipping company included) now figures in this list in 10 of the past 11 years after being named to the “Best Companies to Work For” Hall of Fame in 2005. FedEx was ranked as 97th overall. FedEx already has a reputation of being one of the most employee-friendly companies in the world.

A History of Employee Commitment at FedEx

The history of FedEx goes back to 1971, when Frederick W. Smith felt the need for an airfreight system which could deliver documents overnight. He decided to setup his own company to effectively serve this need. Smith always believed that since FedEx was essentially a service organization, employees were largely responsible for ensuring success.

FedEx was incorporated as ‘Federal Express Corporation’ in June 1971 at Little Rock, Arkansas, US. Since it began in 1971, its’ management focused on providing a suitable work environment that encouraged employees to come up with innovative solutions. Such was the commitment of the employees to the company that, when FedEx was going through severe financial difficulties during the first couple of years, the employees were prepared to sell their personal belongings. They were also prepared to use their own credit cards to purchase fuel to deliver the packages to the customers. Even when the employees didn’t receive their salary on time, they continued working with FedEx.

Human Resource Management (HRM) Best Practices at the FedEx Corporation

FedEx has developed several innovative human resource programs over the years. These programs have served as a benchmark for many companies.

FedEx’s ‘People-Service-Profit’ (PSP) philosophy

In 1973, Founder and CEO, Smith had developed and implemented FedEx’s ‘People-Service-Profit’ (PSP) philosophy. This philosophy was based on the fact that if FedEx took proper care of its employees, they would provide efficient service to the customers. This in turn would benefit the company by generating more profits.

Survey-Feedback-Action Program or SFA Program at FedEx

The SFA program (a key employee relations and satisfaction program) helped management take decisions regarding romotions. From its inception, the SFA was administered manually, but that changed in 1992 with the introduction of online survey system in the US and other automations. Each April, every employee is asked to participate in the on-line survey. After the results are gathered, managers hold feedback sessions with their employees to discuss the survey findings and identify problems within and outside of their department.

Leadership Evaluation and Awareness Process’ (LEAP)

In 1988, FedEx devised a program known as ‘Leadership Evaluation and Awareness Process’ (LEAP) to encourage non-managerial cadre employees to move to the managerial level within the company.

Employee Communication Program

The employee communication programs implemented by FedEx included the SFA program, Guaranteed Fair Treatment Procedure and Open Door Policy. FedEx also devised a mechanism to address and resolve employee grievances. This was apart from employing a formal communication system to inform employees about the major events taking place in the company.

Job Change Applicant Tracking System (JCATS)

JCATS is an on-line computer job posting system that allows hourly employees to post for any available job.

Recognition and Reward Program

FedEx rewards employees for their work with awards such as the ‘Bravo Zulu’ and the ‘Golden Falcon Award’.

FedEx is an example of an organization that has created an effective HR strategy that supports productivity and profitability.

Read related post on UPS: A bit of UPS history, some UPS and some downs

FedEx, HR Best Practices

For Mattel, 2007 was dubbed “the year of the recall.” ‘How will Mattel fare in the aftermath?’, was a question put forth by many. Analysts were divided over whether the leading toy maker was able to handle the crisis situation effectively.

About Mattel

Mattel Inc (MAT), the world’s largest toy company, with its headquarters in California was founded in 1945. The company designs, manufactures, and markets toys worldwide. Its well known brands include Barbie dolls, Fisher-Price items, American Girl dolls, Hot Wheels, Matchbox, and others.

Product Recall Crisis in Mid 2007

In the middle of year 2007, Mattel had to deal with a product crisis, the worst-ever in its history. Mattel feared that its toys had toxic lead content higher than the permissible level. This could lead to a risk of health hazards for kids. Mattel was heavily criticized for allowing Chinese made toys with unacceptably high levels of lead paint to enter U.S. stores. In August 2007, Mattel recalled about 1.5 million Chinese-made Fisher-Price infant toys. These toys included characters such as Dora the Explorer, Elmo and Big Bird. A second recall followed soon after, when Mattel withdrew approx. 9.3 million Chinese-made toy sets. This time Mattel feared that these toys with small magnets and other parts, could be dangerous if swallowed by kids. This was followed by a third recall of its toys withdrawing more than 800,000 toys across the globe. Mattel even announced that a significant portion of the toys were recalled because of a design flaw and not substandard manufacturing. During this crisis, Mattel’s stock plunged by as much as 25 percent from its year-to-date high.

Mattel Turnaround

Robert A. Eckert, Chairman and CEO of Mattel Inc. had then stated that, Mattel was at the forefront of responsible corporate citizenship and the recent challenges have presented it an opportunity to again be an industry leader. Many analysts would not have been that optimistic. But Mattel, posted a better-than-expected fourth-quarter profit. Mattel was helped by stronger international demand for its Hot Wheels cars and Fisher Price line and by $47.3 million in tax benefits. And of course not to forget the significance of the fourth quarter for toy companies because it includes the holiday shopping season. Research firms like NPD have reported that the toy industry makes nearly half its annual sales during the holiday season. The results included charges and costs of about $42 million stemming from a spate of recalls last year. Worldwide gross sales of Barbie increased by 4 percent, Fisher Price segment by 4 percent and overall Mattel’s girls and boys brands by 9 percent. Mattel’s Wheels business, which includes Hot Wheels and Matchbox cars, increased 15 percent. Net income grew to $328.5 million, from $286.4 million, a year ago.

Mattel, Scams and Controversies, Toy Industry, Turnaround Strategies

RyanAir: The ‘Southwest’ of European Airlines in 2007

Download Case Study on Ryanair in pdf format

The low point…

Ryanair, Europe’s biggest low-cost carrier reported its third quarter results with net profits dropping 27 percent compared to a net profit of 48 million a year earlier. Ryanair cited poor market conditions, fuel costs (oil prices at $90 a barrel) and concerns on recession in the UK and many other European economies for its current performance and not so strong future profit expectations. With average winter fares dropping almost 5 percent its’ underlying net profit in the three months to end December fell to 35 million euros ($52 million). Other factors that contributed included doubling of airport charges combined with reduction of winter capacity at Stansted, significant cost increases at Dublin Airport combined with longer sector lengths and staff costs which increased by 18 pct to 67 mln euros. Ryanair’s net profit figure excludes a one-off gain of 12.1 million euros ($17.99 million) arising from the disposal of 5 Boeing 737-800 aircraft.

A year earlier and a different story…Ryanair, hedged fuel and had a performance to envy

The high point

Last year, in February 2007, British Airways (BA) had announced that its third-quarter earnings had plummeted 14%. BA attributed its poor performance to fuel charges, fog-related delays and the cost of heightened security requirements at London’s Heathrow Airport. Ryanair on the other hand reported enviable results. Its third-quarter earnings had increased by 30% to 47.7 million euros ($61.8 million), while sales rose 33% to 492.8 million euros ($638.4 million). While fuel costs had so dragged on the earnings of BA, Ryanair had a string of advance supply contracts that had adeptly locked in prices.

History of Ryanair

Ryanair which was set up in 1985 is one of the oldest and most successful low-cost airlines of Europe. In fact Ryanair was one of the first independent airlines in Ireland. In 2001, many compared Ryanair and drew similarities with Wal-Mart and Southwest Airlines. Ryanair transformed the Irish air services market where other airlines like Avair failed to compete with the more powerful national carrier Aer Lingus.

Airline Industry, European markets, Low-cost airlines, Ryanair

Starbucks (SBUX) is famous for its frappuccinos and mochas and has always concentrated on premium coffee, typically costing more than £2 a cup. But now Starbucks Corp is testing $1 coffee and free refills. Starbucks says that this test is not indicative of any new business strategy. Well, new strategy or not it surely makes business sense. Over the past year, Starbucks’ shares have lost about half their value. Analysts feel that this is due to over-expansion, increasing competition from fast-food rivals, and concerns about lower U.S. consumer spending. There is stiff competition from fast-food rivals such as McDonald’s Corp and Dunkin’ Donuts, a unit of Dunkin’ Brands Inc.. Both offer specialty coffees and regular coffee prices at both start in the low $1 range.

Download full-text of Case Study:
Will restructuring help Starbucks Turnaround?

Earlier this year, Starbucks had announced management restructuring. Howard Schultz, was brought back back into the CEO position. Howard Schultz is once again looking after day-to-day operations of the business. His return follows after the sudden departure of chief executive Jim Donald. Scultz has immediately felt the need to fix important things, particularly in the US like over enthusiastic expansion, large queues in stores and bureaucracy. Starbucks started 2,571 new stores globally last year, taking its total to 15,011. According to Starbucks’ estimates there was scope for 20,000 more stores in the US and a further 20,000 internationally. Schultz is expected to scale back such ambitious expansion strategy and concentrate on reviving the popular brand after transactions in its 10,600 US stores slowed down. Schultz commented in an interview to the Fortune magazine, “Yes, we became less passionate about customer relationships and the coffee experience. We spent time on efficiency rather than experience. We never wanted to be transaction driven.“

Starbucks: A contrast in 2003

When Fortune came out with its annual list of ‘Fortune 500 companies’ in March 2003, Starbucks featured in the list. For Howard Schultz, Chairman of Starbucks Corp (Starbucks) and Seattle based entrepreneur it was like a dream coming true. Afterall, Starbucks announced a 31% increase in its net earnings and a 23% increase in sales for the first quarter of 2003. This inspite of many retail majors reporting losses and applying for bankruptcy. The US economy was reeling under recession. For Starbucks it only showed that a quality product speaks for itself. Also the fact that Starbucks spent less than 1% of its sales on advertising and marketing was indicative of its popularity. Many analysts felt that the success of Starbucks was primarily due to its profitable domestic operations. They felt that Starbucks’ international operations were not as well planned as its US operations.

Starbucks History

In 1971, Jerry Baldwin, Zev Siegl and Gordon Bowker had launched a coffee bean retailing store named Starbucks to sell specialty whole-bean coffee in Seattle. The three partners, took the name “Starbucks” from mate Starbuck in the novel Moby Dick. In ten years, by 1981, Starbucks had five stores and a small roasting facility in Seattle. In 1982, Schultz joined Starbucks as marketing manager. In 2001, Interbrand (a brand management consultancy) had named Starbucks as one of the 75 global brands of the 21st century. In 2002, Starbucks had 5689 outlets in 28 countries. By early 2006, Starbucks had more 11,000 stores around the world. Starbucks had turned coffee from a commodity into an experience to savour.

Keywords: Coffee Retailing, Retailing, Starbucks, Howard Schultz

Starbucks, the leading retailer, roaster and brand of specialty coffee in the world, has been struggling amidst a faltering economy, its own rapid growth (international expansion and growing presence in 43 countries) and increased competition from cheaper rivals. Starbucks wants to turnaround its business by providing customers with the distinctive Starbucks Experience and building on Starbucks legacy of innovation.

The return of Schultz and the Starbucks success story

Howard Schultz returned in early January as Chairman and Chief Executive. Schultz had served as chief executive officer from 1987 to 2000, a period where Starbucks enjoyed exceptional U.S. and international growth. Schultz is acknowledged as the architect of Starbucks brand image and a coffee visionary . In 1982, he joined Starbucks Coffee Company as director of operations and marketing. At that time Starbucks had only four stores. In August 1987, Schultz purchased Starbucks Coffee Company. In 1992, under his leadership, Starbucks was the first specialty coffee company to become a public company. The growth of Starbucks has been amazing: from 17 stores in 1987, to more than 15,000 worldwide today.

The Restructuring Moves

Ever since his return, Schultz outlined a series of initiatives to help transform Starbucks. These initiatives were largely governed by the principle – ‘getting back to the essence of what drove Starbucks past success’.

Soon after Schultz returned as CEO, quite a few top management jobs were shuffled and some new posts were created like the chief creative officer to lead efforts to improve the experience customers have in the stores. For the first time, Starbucks unveiled plans to start offering limited free wireless Internet service. The partnership with T-Mobile – which only offered a paid subscription service – ended with switching over to AT&T Inc.

Commenting on the recent reorganization efforts Schultz said, “We realize that we are operating in an intensely challenging environment, one in which our customers and (employees) have extremely high expectations of Starbucks. And we have to step up to the challenge of being strategic as well as nimble as our business evolves. Unfortunately, we have not been organized in a manner that allowed us to have a laser focus on the customer.” He added that the company will be reorganized from two to four U.S. field divisions, in an effort to “enable the company to align our leaders closer to our customers and partners.” The East and West divisions will be replaced with four new ones: Western/Pacific, Northwest/Mountain, Southeast/Plains and Northeast/Atlantic.

No warm breakfast sandwiches and job cuts

In January 2008, Starbucks announced that it will stop selling warm breakfast sandwiches. The reason: the egg, cheese, bacon and ham competed with the coffee aroma in stores. Perhaps to re-ignite the emotional attachment with customers and restoring the connections customers have with Starbucks® coffee, brand, people and stores. A three-hour training session for all employees on making espresso was also scheduled.

In 2008, Starbucks will open hundreds fewer U.S. stores than initially planned and will close about 100 poorly performing domestic stores. It will ramp up its expansion overseas to increase the profitability of Starbucks outside the U.S, even redeploying a portion of the capital originally earmarked for U.S. store growth to the international business.

Also, in February 2008, Schultz announced 600 job cuts (about one-third who worked at the company’s Seattle headquarters in the US) in an e-mail to Starbucks’ more than 170,000 employees, calling it a difficult decision aimed at sharpening the company’s focus on customers. Some analysts felt the move was to remove bureaucracy and lower costs.

More restructuring changes will be announced at the company’s annual meeting on March 19.

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Starbucks for a dollar, Storm in a coffee cup?

Keywords: Brand Strategy and Management, Coffee Retailing, Corporate Restructuring, Starbucks, Turnaround Strategies

Wal-Mart Stores Inc (WMT) announced a price cut on thousands of items including groceries, popular electronics and other items. Price cuts range from 10 percent to 30 percent. Though Wal-Mart announces such price cuts during the holiday shopping season, this promotional move (just before the Super Bowl football championship game) is aimed at winning sales from limited budget shoppers ahead of the Super Bowl. Besides, forecast for retail sales in the US for 2008 is believed to grow slowly, the slowest in six years. Retail analysts opine that holiday sales rose by no more than 4 percent, one of the slowest rate increases since 2002. The National Retail Federation (NRF) in its 2008 economic forecast, predicted that retail industry sales (which exclude automobiles, gas stations, and restaurants) will increase 3.5 percent from last year. According to the NRF report, the slow pace in sales growth will continue before picking up in the second half of the year.

Retailers must turn to promotions to lure cash strapped shoppers into their stores, and at the same time try to keep inventory lean at the start of the season. There is a lot of pressure to give more discounts to clear unsold merchandise which hurts profit margins.

Others like Best Buy Co Inc and Circuit City Stores Inc are charging no interest on their websites on electronic items (like no interest for three years on all Samsung flat panel TVs $999 and up) ahead of the Super Bowl weekend.

Weak holiday sales

But, are such promotions working. One would certainly think so, specially after Wal-Mart’s December sales at U.S. same-store rose 2.4 percent, beating Wall Street’s forecast for a 2.1 percent gain. However, consumers are reluctant to spend. If one looks at Wal-Mart’s sales, necessary products drove sales. Shoppers spent mostly on cheap grocery and pharmacy items. Most U.S. retailers reported disappointing holiday sales in December. No. 1 wholesale club Costco Wholesale Corp. was another rare bright spot, benefiting from budget-conscious consumers seeking bargain electronics and buying bulk-food items.

Lackluster traffic levels in the weeks leading up to Christmas drove increased promotional activity. Many analysts feel that the reasons for shopper’s spending less and being more budget conscious are:

• Concerns for higher gasoline prices or higher energy costs
• Higher food costs
• Slow Job Growth
• Declines in the credit and housing markets.

Year 2008 is definitely going to be a struggle for most retailers, even for the well-established and the best-known brands.

Related Stories: Wal-Mart’s Marketside stores (smaller Neighborhood Markets) will compete with competitor and British retailer Tesco. Read: Wal-Mart’s Marketside or Tesco’s Fresh and Easy stores in US

Retailing, Wal-mart

Whirlpool’s fourth-quarter results 2007

Whirlpool, the appliance maker announced its fourth-quarter results. Its net income rose 72% to $187 million up from $109 million, a year earlier. Revenue increased 7.5% to $5.33 billion from $4.95 billion. Gross profit margin rose to 15.7% from 14%.

Chairman and Chief Executive Jeff M. Fettig of Whirlpool Corporation said, “We delivered record financial results in the face of both the most challenging U.S. industry demand environment in more than two decades and unprecedented global material price inflation.”

Whirlpool benefits from strong International sales and its 2006 Maytag Acquisition

Whirlpool benefited from its Maytag acquisition, an improved product mix, and robust international sales. Whirlpool’s had bought Maytag for $1.68 billion in order to gain market share and ward off competition from Asian manufacturers like Samsung Electronics and LG Electronics. When Whirlpool acquired Maytag in March 2006, Maytag was struggling with high fixed costs and nothing to show as investments in product innovation. In 2005, even retailer Best Buy had stopped selling Maytag appliances. But it was a turnaround this quarter, as Maytag gained market share after it received a boost when retailer Best Buy began selling Maytag appliances again last year. On the other hand, sales dropped in 2007 from 14% last year to 12% with its biggest retail customer, Sears Holdings Corp. (Also see: Restructuring at Sears, Can the retailer turnaround its business) Whirlpool makes some appliances that are sold under Sears’ proprietary Kenmore label.

Whirlpool’s North American earnings rose 41% to $175 million (benefiting from cost-cutting as part of the 2006 acquisition of Maytag and sales of higher-margin products), European earnings rose 22% (benefiting from higher sales on favorable currency exchanges) and Latin American 73% (benefiting from volume, pricing and an asset sale gain). North America sales dropped less than 1% compared to the 6% drop industry-wide. Other American manufacturing companies which benefited from strong International sales include Caterpillar (Also See: From a sluggish Caterpillar to an alert CAT) and Honeywell International, benefiting from strong international results. IBM also reported strong International figures.

Expensive name-brand home products are having a tough time with rising product prices and the home credit crisis risk affecting the market badly. Then there are other macroeconomic challenges like increasing raw material costs, unprecedented global material price inflation and expected lower product demand in U.S. and Europe. Companies need to adjust their cost structure to the lower expected industry demand levels.

Last month, Whirlpool had announced that it would get rid of two of its North American factories to face the challenges better and counter the economic downturn. Whirlpool is planning to offset increasing material and oil-related costs through cost-based pricing adjustments and productivity improvements.

Whirlpool expects 2008 appliance industry shipments for Latin America to increase 5% to 8%, Europe to be same as in 2007, U.S. to decrease 3% to 5% and Asia up by 5% to 10%.

Whirlpool is in a better position to counter any economic downturn than many as a major portion of its business is not new home-oriented, but essentially a replacement business. Moreover, many of the products it makes are not considered optional items anymore like the vacuum cleaners, dishwashers and refrigerators are necessities to any home. And if an old washing machine breaks down, then it can supply customers a new washing machine, which in many cases might be a better bargain for customers than high repair costs.

History of Whirlpool

In 1911, Whirlpool was a small firm manufacturing wringer washers. It was founded by three brothers – Frederick, Louis and Emory Upton in Michigan, USA. In 1916, Upton entered into a business partnership with Sears, Roebuck and Co. Sears marketed the washers manufactured by Upton under the brand name ‘Allen’. By early 2000, Whirlpool became one of the most well-established brands and leading manufacturer and marketer of home appliances. Whirlpool manufactured refrigerators, microwave ovens, washers, dryers and air conditioners. It then marketed its products under the names Kenmore, KitchenAid, Roper, Inglis and Speed Queen, in addition to the brand name ‘Whirlpool’. Whirlpool’s other brands included Amana and Jenn-Air.

Appliance Makers, Maytag, Mergers and Acquisitions, Whirlpool

Wal-Mart Stores Inc (WMT), the world’s largest retailer, will open small-format grocery stores named ‘Marketside’. These stores to be set up in Arizona will be roughly 20,000 square feet in size to begin with. This in comparison to Neighborhood Markets, Wal-Mart’s existing stores which are almost double in size. Neighborhood markets sell fresh produce and other groceries and are much smaller than a Wal-Mart Supercenter.

Wal-Mart’s Marketside stores (smaller Neighborhood Markets) will compete with competitor and British retailer Tesco. Tesco recently entered in the U.S. retail market setting up ‘Fresh & Easy’ markets. Some of the Marketside stores Wal-Mart plans to open are quite close to where Tesco is planning its grocery stores.

Wal-Mart’s ‘Marketside’ logo

Wal-Mart entered the grocery market in 1988. Since then Wal-Mart has grown into being the single largest grocer in the U.S. and has a market share of around 20 per cent. Wal-Mart’s new Marketside stores are the first new store banner to be used by Wal-Mart in the US in two decades.

Wal-Mart has unveiled its logo for Marketside, its new store format to take on UK’s Tesco’s new small-format Fresh & Easy discount grocery stores. Wal-Mart though says that the stores represent just another variation on its existing neighborhood market format.

Reports suggest that Wal-Mart’s Marketside logo includes lower-case green lettering, next to a stacked pile of pile of fresh food items – a fancy tomato, egg and grape.

Related Reading:

• Tesco in US Retail Market
• Tesco takes on US Wal-Mart [Download pdf file]

Retailing, Tesco, Wal-mart. Marketside logo

McDonald’s began operations in India in 1996. The fast-food chain started making profits after it broke even in 2008. Reports suggest that McDonald’s two subsidiaries in India, Connought Plaza Restaurants based in New Delhi and Hard Castle Restaurants in based in Mumbai posted accumulated losses of Rs 189.19 crore and Rs 119 crore in fiscal 2008. A total of Rs 211.41 crore of accumulated losses for fiscal 2008 for the company. India and China continue to be high-growth markets for McDonald’s. The top management felt that McDonald’s had achieved tremendous brand success in India and there was nothing extraordinary about accumulating losses and that McDonald’s India was not a unique case as the company was making losses similarly in many other markets.

Download management case study (PDF file) on McDonald’s Business Strategy in India

What McDonald’s is doing to increase the footfalls and increase the store utilisation?

McDonald’s menu is recognized world over for its affordability. A McDonald’s store gets an average of 3,000 walk-ins every day in each of its 165 restaurants in India. Typically, a customer visits a McDonald’s store twice. The key is to make that customer visit the McDonald’s store a third time so that the existing store space and rent can be leveraged further. Earlier attempts by McDonald’s to do so included adding breakfast to its menu, longer hours of service, setting up of kiosks etc. Eventhough breakfast was on its menu globally, it was on launched on a trial basis in India.

However, McDonald’s had a ‘snack joint’ tag in India. To overcome this McDonald’s added a lunch and dinner menu.

McDonald’s Pricing Strategy in India

In September 2009, McDonald’s announced reduction in prices by almost 25% for its lunch and dinner menus. Prices for its extra-value meals like McVeggie and McChicken were reduced to Rs. 85 and 95 respectively from Rs. 110 and 120 respectively. Typically a meal consists of burger, French fries and soft drinks. This strategy was surprising as it came at a time when food prices were increasing by the day. Cutting prices in such times did not make sense. But the management in India was convinced that tweaking the prices of it combo meal offering would help customers prefer McDonald’s as a lunch and dining destination as well.

“If I get on a plane next week and it goes down, there will be somebody in this seat the next morning,” – A.G. Lafley, P&G’s CEO as quoted in Fortune magazine.

Lafley took over Procter & Gamble (P&G) as CEO in 2000 and since then has been very successful in increasing sales by 110% and tripling profits. Does he have a succession plan? If he does he has not disclosed it yet and is certainly not overly concerned judging by his above statement. What is the reason? Does P&G have a strong leadership development program

P&G’s Leadership Program and Proctoids

P&G’s leadership program is called “Build From Within”. The program helps track the performance of each manager in a very detailed manner. The program ensures a manager is ready for the next level. According to CEO Lafley, “Each of the top 50 jobs already has three replacement candidates lined up.” Lafley himself oversees the development of the top 150 employees.

At P&G, a business school graduate is recruited at an entry level position. This position offers him/her a major window of opportunity for becoming what’s known in the company as a Proctoid (less than 5% of hires come from the outside at a later stage). Proctoids discuss their business goals, their ideal next job, and what they’ve done to train others during monthly and annual talent review sessions. The recruits select a career track depending on his/her goals and P&G’s needs. They are then trained to work in different countries and businesses. This helps build deep bench strength. So when a position is open, P&G has a pool of employees who are ready to move in to the new position in a particular country or region. According to Lafley, “We can fill a spot in an hour, that’s the beauty of the system.“

Training and Internal Reputation

P&G has a training center near to the CEO Lafley’s office where all executives teach and hold weeklong “colleges” for employees entering new levels. An executive’s willingness to train others ultimately determines who advances. Moheet Nagrath, head of human resources at P&G believes, “If your direct reports aren’t ready, neither are you. A manager who isn’t good at developing others doesn’t attract the best talent [to be on his team]. Internal reputation is crucial.”

Advantages and Success Factors for the program

• Loyalty
• P&G rarely hires from outside, promoting talent from the inside
• At P&G, less than 5% of hires come from the outside at a later stage
• P&G maintains a comprehensive database of its 138,000 employees. An employees’ performance (stars) are tracked carefully through monthly and annual talent reviews.

Disadvantages

• Promoting from within can build well oiled teams that act quickly but at the same time builds an insular culture where most people think in similar ways. This can hinder innovation.

Related Case Study:
Download Business Strategy Case Study on Restructuring at Unilever – Path to Growth Strategy (PDF)

McDonald’s in India

McDonald’s was launched in 1996 in India and has established itself as the family’s favorite quick-service restaurant. According to estimates, McDonald’s stores have an average of 2,750 walk-ins in each of the 155 stores. India counts itself amongst the top 10 per cent of the busiest markets for McDonald’s anywhere in the world. In India, McDonald’s had decided not to launch its beef-based core product – the hamburger – so that it didn’t hurt religious sentiments of the Hindus.

The Strategy – Building awareness among citizens

The strategy is simple. Delhi has approximately 40 lakh electors between the age group of 18-29. McDonald’s is popular among the younsters and catchy slogans and messages will encourage them. McDonald’s India wants to support the task of building awareness amongst citizens and remind them of exercising their right to vote.

Related Reading:
Download management case study (PDF file) on McDonald’s Business Strategy in India

• A $1.1 billion savings plan in its electronics division
• Cutting 16,000 jobs
• Pulling out of businesses and limiting investment for savings of almost 100 billion a year

Analysts believe the company needs more and bigger restructuring measures to improve its slowing sales and inventory pile-ups. Another challenge Sony has been facing are cultural clashes between its Japanese, US, and European operations. Restructuring moves would imply changing many of its long-established business practices (the Japanese business culture which is so deeply connected to its social culture). The restructuring plans include shutting down of some of its major divisions in its Japanese domestic operations. How Sony would go about facing these challenges and are more restructuring moves imminent amidst the financial crisis and lower consumer demand? Sony’s first non-Japanese CEO, Sir Howard Stringer sure has his task cut out.

In October 2008, Nokia, the world’s largest mobile phone maker launched a brand new campaign with the tagline ‘It’s not just a phone, it’s who we are’.

Nokia selected Priyanka Chopra, former Miss World and current Bollywood actor, as the Brand Ambassador. The company believes the young actor’s brand association will create a deeper connection with its young and style-savvy consumers and the new ad capmpaign featuring her will represent style, modernity and individuality. The TV campaign would be integrated with other consumer touch points like print, outdoor, radio, online and digital media.

Nokia’s other brand ambassadors include Bollywood’s leading actor – Shahrukh Khan. The company has already planned to bundle exclusive content featuring the actor for handsets sold in India. His movie ‘Om Shanti Om’ movie was recently bundled in Nokia N96.

New Indian factory

In October 2008, Nokia Siemens Networks, the second-largest network gear provider in India after Ericsson, announced that over three years it will invest $70 million in a new Indian factory in Chennai (south of India). The unit will make and distribute mobile communication equipment. Nokia Siemens already has a manufacturing facility in Kolkata in eastern India, where it makes fixed network equipment.

Also, in October 2008, Nokia’s handset manufacturing unit in Tamil Nadu (with over 8,000 workers) reached production volume of 200 million handsets within just three years of starting operations. Around 50 per cent of the production is sold domestically and the rest is exported. Nokia has two manufacturing units in China.

Nokia has a 62.5% market share in India while Samsung, the second major player with Aamir Khan (lead Bollywood actor) as the brand ambassador, has a 8% share.

Download PDF file on Nokia’s Business Strategy in India
Article on Nokia’s Strategy in the Emerging Markets

Michael Dell’s return and turnaround plans were paying off as the world’s No. 2 personal computer maker, posted higher-than-expected quarterly profit aided by strong demand from consumers and foreign markets and cost cuts. Last year, Dell had lost its spot as top PC maker to Hewlett-Packard (HP) and was struggling to regain momentum. In January 2007, Michael Dell had returned to the chief executive post. In May 2008, Michael Dell selected Brian T. Gladden (working with General Electric, GE), to take over as chief financial officer (CFO) at the troubled PC maker. Dell aims to shave $3 billion of its operational costs. Dell also announced plans to cut 8,900 jobs to reduce costs, but Asia would see more job growth as it formed a large part of it’s supply chain. Meanwhile, Dell’s supply chain ranked third in the fifth-annual “Supply Chain Top 25″ list released by AMR Research in May 2008 behind Apple and Nokia. Dell’s supply chain was acknowledged for its outstanding inventory turns and high marks from peers.

Dell’s strong International Growth

Dell believes that in around five years time its sales outside the U.S. could account for two-thirds of total revenues. Its sales in international regions topped U.S. revenues as corporate customers in the United States were uncertain about buying given the current and future economic outlook. Brazil, Russia, India and China (BRIC) led the way with 73 percent shipment growth in the quarter ended May 2008. Americas revenue rose 1 percent in the quarter.

Related Reading
Download Pdf file of management case study on Dell’s Supply Chain Management Practices

However, Home Depot is not the only one scaling back expansion plans or shutting down stores. Other major retail chains like Starbucks, Foot Locker, Pacific Sunwear, Charming Shoppes, J. C. Penney, Kohl’s, Wal-Mart and Ann Taylor have announced plans to slow their expansion or delay store openings. Trade group, The International Council of Shopping Centers, predicts 5,770 store closings in 2008 – an increase of 25 percent from last year.

This has prompted analysts to comment that these retails chains made overly ambitious expansion plans when consumer spending was unusually robust and that America is over-stored.

Retail Chain – Number of stores for close/delay
Ann Taylor – 117
Charming Shoppes – 150 stores
Foot Locker – 140 stores
J. C. Penney will open 36 stores instead of 50 planned
Kohl’s will open 75 instead of 100 planned in 2008
Starbucks – 100
Wilsons – 158
Zales – 100

On March 19, 2008, Sony Ericsson warned of a sharp decline in profit expectations. The No.4 player in the cell phone industry cut its current-quarter profit forecast ($276 million) to less than half the year-ago level ($571 million). Reasons given were a slowdown in consumer spending on its mid-priced and high-end phones. The growth in the mobile phone industry is expected to be at 15% in 2008, about half when compared to a high of 31% in 2004. Sony Ericsson expects to ship about 22 million phones in the first quarter. It shipped 30 million units in the fourth quarter and 21.8 million in the first quarter of 2007.

Sony Ericsson’s announcement was expected when Texas Instruments cited fewer mobile phone chip orders for its lower guidance. Its key customer Nokia possibly has a inventory pileup. Sony Ericsson also said that certain component shortages for popular midprice phones had also contributed to modest unit-sales growth in the first quarter.

A low profit expectation is common in the first quarter – the slowest time of year for phone sales after the Christmas shopping season. However, the concern is the magnitude of Sony Ericsson’s shortfall. The same can be expected from Nokia and Motorola might even lose its third place position as a mobile phone maker.

The Sony Ericsson joint venture

In 2001, Sony Ericsson was formed as a joint venture between Telefonaktiebolaget LM Ericsson of Sweden, and Sony Corporation of Japan. Both partners had 50% ownership in the company.

Ericsson was established in 1876 and was a major player in the telecommunications equipment and related services to mobile and fixed network operators worldwide with presence in 140 countries. Sony on the other hand was established by Masaru Ibuka and Akio Morita in 1946 in Japan. At the time Sony was the world’s second largest consumer electronics company and famous for its innovative products like the Walkman, Playstation, and Aibo, the robot dog.

In the last quarter of 2000 and the first quarter of 2001, Ericsson made a loss of US$ 1 billion and US$ 558 million respectively. Shareholders of Ericsson wanted a sell-off. Sony was also making losses in its mobile phone business. Ericsson’s board decided to form a joint venture with Sony instead of exiting the business. In 2001, this decision was rated as the fifth best management decision by Sunday Business.

Walkman phones are no longer popular?

In February 2005, at the 3GSM World Congress in France, Sony Ericsson had announced its mobile music strategy. It looked to integrate of high quality digital music players into stylish mobile phones under Sony’s world famous Walkman brand. The strategy was to target a specific product portfolio and not look at providing various types of mobile phones across various price points.

In the third quarter of 2005, the Walkman phones were launched. The impact was visible in the subsequent quarter itself in terms of increased volumes, sales, and net income for the company. Similar to its success with its camera phones in 2004, Sony Ericsson reported a 36.4 per cent increase over its third quarter figures and 47.1 per cent higher than the figures for the same period in 2004. It even revived Sony’s Walkman music player which had lost market share drastically after the launch of iPod by Apple in 2001.

However, mobile phone users are known to be quite finicky and generally choose the most popular or the next cool mobile phone in the market. Earlier, users replaced handsets every three years, but with the economy slowing down this is no longer the trend. And with the popularity of Apple’s iPhone growing, Sony Ericsson may have reached the end of its good run with the popular Walkman phones. The general higher price of its phones than its rivals’ devices does not help either.

Quote
Be Number 1 or Number 2. “When you’re number four or five in a market, when number one sneezes, you get pneumonia. When you’re number one, you control your destiny.“ – Jack Welch

Unquote
“Sony Ericsson will continue to try to reduce its dependence for growth on the European high-end sector and develop its presence in new markets. This strategy will continue, and our objective remains to become a top-three player globally by 2011″ – Sony Ericsson President Dick Komiyama

Related Reading:
Case Study on Nokia in India [Pdf file]
Nokia and its growth strategy in China
Nokia increases market share, Motorola Struggles
Nokia to exit expensive Germany, move production to low cost countries

Dimon was born in New York to second-generation Greek immigrants. He has a degree in biology and economics from Tufts, and a MBA from Harvard. At Harvard he met Sandy Weill. Both went on to create the banking major Citigroup and emerged as a powerful force on Wall Street. In 1998, both separated after having worked together for 16 years. Rumor mills suggested that Dimon was fired by Weill for not promoting his daughter in the company.

After leaving Citigroup, Dimon became the chief executive of Bank One. In 2001, Dimon played a key role in the turnaround of Bank One. In January 2004, he negotiated the acquisition of Bank One by JP Morgan Chase & Company. After the merger, Dimon was appointed President and Chief Operating Officer of JP Morgan Chase. The merger was the third largest acquisition (at the time) in the US history at US$ 58 billion.

Dimon, since then has been aggressively involved with JPMorgan and aims to turn it into the biggest and best banking group in the US. So far, he has been successful in his endeavor and is emerging as one of the most successful navigators of the credit crunch. Over the last few years, he has focused strongly on cutting costs, improving technology and integrating JPMorgan’s disparate operations. But he also has been resolute about preparing the company for an economic downturn. While other investment banks are struggling, Dimon managed several accomplishments one after the other. He co-chaired the summit of world and business leaders in Davos, Switzerland. He even persuaded former Prime Minister Tony Blair to sign on as an adviser and ambassador for JPMorgan. And in what is being regarded as his biggest coup, he has plans to prop up Bear Stearns to avoid a full-blown banking crisis. This draws similar reference to John Pierpoint Morgan (JPMorgan’s founder). JP Morgan financed the US government and other large corporations during the Great Depression and the two world wars. In 1907 during the panic, his organization and personal funding for rescuing of the banking system was representative of the end of a long recession.

Similarly Dimon has played a key role in JPMorgan and the Federal Reserve guaranteeing the huge trading obligations of the troubled firm Bear Stearns. JPMorgan agreed to pay only about $270 million in stock for Bear’s big losses on investments linked to mortgages. Dimon negotiated the deal with Bear and government officials, sleeping only for a few hours over the weekend. Though Dimon had his doubts about the deal and has not been an aggressive acquirer since his joining the company, the quick decision making to buy Bear is outstanding.

Related Reading:

Backsourcing at JPMorgan

Tesco Group is UK’s biggest retailer and operates more than 2,500 stores in the UK and 12 other countries in Europe and Asia. For years, Tesco had plans to enter the U.S. retail market. It was believed that Tesco even looked into possibly acquiring key parts of the Albertson’s grocery chain. But finally, Tesco announced that it would enter the US by 2007 and that its new stores would be based on its “Tesco Express” convenience store model. Tesco operates four different retail formats – Tesco Express, Tesco Metro, Tesco Supercenters and Tesco Extra. Tesco Express is a smaller store format of up to 3,000 sq. feet.

At the time many analysts predicted that the coming of Tesco – even though a new player was a quite accomplished retail entity – had the ability to impact the U.S. market over the long term. To the conventional supermarket channel and even Wal-Mart, Kroger, and Safeway it could only be viewed as a negative. For the traditional supermarket chains who were already struggling to compete with Wal-Mart and the growing popularity of organic food stores like Whole Foods (and other premium food chains), the competition was only going to get worse.

Taking on Wal-Mart

Tesco was serious about expanding into the U.S. as indicated by its initial plans to spend $400 million a year to build its U.S. stores. This investment could pay for 100 to 150 stores. It aims to build 1,000 stores in the US eventually. Tesco chose to enter U.S. through the West Coast first because that region of the country is not yet dominated by Wal-Mart. Like Wal-Mart, Tesco is nonunionised. Wal-Mart is planning to test similarly sized new grocery stores under the “Marketside” banner in the Phoenix area later this year.

Success of Tesco’s launch in the US?

There was growing speculation that the initial performance of Tesco’s new Fresh & Easy discount grocery stores concept was not up to the mark and that internal sales targets were not being met. Some reports in the US suggested that the small neighbourhood groceries, similar in concept to an Aldi hard-discount store, have been failing to attract customers at the rate needed. (The hard discount store, pioneered by Aldi, is a small outlet with only 700 to 1,000 lines of stock compared with 100,000 in a big Wal-Mart. The shelves are mostly filled with own-brand goods.)

Even competitors like Stater Brothers, a supermarket chain in south California (and where the first 20 Tesco stores opened) felt almost no impact from Tesco. The Fresh & Easy concept was being questioned. Fresh & Easy had claimed to be up to 25 per cent cheaper than its main supermarket competition and had expectations of average sales to reach $200,000 per store per week.

Will Tesco succeed in the U.S?

A spokesman from Tesco however maintained that its failure claims were “a bit ridiculous, given that we only opened four months ago”. Tesco is continuing to push ahead with its ambitious US store plans, with another 150 stores expected to open over the coming year in its initial markets. The group has committed £1.25bn ($2.48bn) over five years to its US expansion plans. It is signing leases on additional store sites in northern California, where it is also planning to open a second large distribution centre outside Stockton.

In the past, retailers from the UK like Marks & Spencer, Next, Dixons, and Sainsbury’s have all tried to expand in the US and failed. Tesco has already made the first change to its executive management team at Fresh & Easy. Jeff Adams is heading back to US. He was the chief executive of Tesco’s Lotus business in Thailand. He will be second-in-command to Tim Mason, Fresh & Easy’s chief executive. Meanwhile, Tesco has other things to worry about in its home UK market after it was accused of setting up an elaborate offshore tax avoidance scheme.

Related Reading

Tesco takes on US Wal-Mart [Pdf File]
Wal-Mart’s supply chain management practices [Pdf file]
Wal-Mart’s Marketside or Tesco’s Fresh and Easy stores in US
Corporate Social Responsibility at Tesco [Pdf file]
Of Wal-Mart price cuts, Struggling Retailers and Weak 2008 Retail Sales Forecast

Adidas and Reebok – Two mega brands, with great strengths

In August 2005, German adidas-Salomon AG announced plans to acquire Reebok at an estimated value of € 3.1 billion ($3.78 billion). At the time, Adidas had a market capitalization of about $8.4 billion, and reported net income of $423 million a year earlier on sales of $8.1 billion. Reebok reported net income of $209 million on sales of about $4 billion. While analysts opined that the merger made sense, the purpose of the merger was very clear. Both companies competed for No. 2 and No. 3 positions following Nike (NKE).

Competition with Nike and Puma

Nike was the leader in U.S. and had made giant strides in Europe even surpassing Adidas in the soccer shoe segment for the first time. According to 2004 figures by the Sporting Goods Manufacturers Association International, Nike had about 36%, Adidas 8.9% and Reebok 12.2% market share in the athletic-footwear market in the U.S. Adidas was the No. 2 sporting goods manufacturer globally, but it struggled in the U.S. – the world’s biggest athletic-shoe market with half the $33 billion spent globally each year on athletic shoes. Adidas was perceived to have good quality products that offered comfort whereas Reebok was seen as a stylish or hip brand. Nike had both and was a favorite brand because of its fashion status, colors, and combinations. Adidas focused on sport and Reebok on lifestyle. Clearly the chances of competing against Nike were far better together than separately. Besides Adidas was facing stiff competition from Puma, the No. 4 sporting-goods brand. Puma had then recently disclosed expansion plans through acquisitions and entry into new sportswear categories. For a successful merger, the challenge was to integrate Adidas’s German culture of control, engineering, and production and Reebok’s U.S. marketing- driven culture.

The ADDYY and RBK Merger – Impossible is Nothing

On January 31, 2006, adidas closed its acquisition of Reebok International Ltd. The combination provided the new adidas Group with a footprint of around €9.5 billion ($11.8 billion) in the global athletic footwear, apparel and hardware markets.

Adidas-Salomon AG Chairman and CEO Herbert Hainer said, “We are delighted with the closing of the Reebok transaction, which marks a new chapter in the history of our Group. By combining two of the most respected and well-known brands in the worldwide sporting goods industry, the new Group will benefit from a more competitive worldwide platform, well-defined and complementary brand identities, a wider range of products, and a stronger presence across teams, athletes, events and leagues.”

Hainer also said, “The brands will be kept separate because each brand has a lot of value and it would be stupid to bring them together. The companies would continue selling products under respective brand names and labels.”

Related Reading on Adidas Reebok merger case study: Is the Adidas Reebok merger working?

Download PDF file (25 pages) – Management Case Study on adidas and Reebok Merger

In 2005, Sears Holdings was formed with the merger of Kmart and Sears. When the merger took place, a centralized managed structure was essential to control costs and focus on integrating the two companies. But recent profit declines and its struggle to win customers from its competitors have prompted retailer Sears Holdings Corp (Sears) to go for a new decentralized structure in order to turn around its business. Sears had earlier announced lower quarter profit expectations compared to last year. Even its holiday sales and sales of home goods such as appliances and tools slowed with the crumbling U.S. housing market and competition. A new structure was necessary for a turnaround.

The new structure – Five business units

The new structure separates its business units into:

• Operating businesses – current product lines like appliances, apparel and electronics
• Support – marketing, store operations and customer strategy
• Brands
• Online and
• Real estate

The real estate and onine units will focus on increasing the “sales productivity” of real and virtual holdings. Each business unit will have a leader and an advisory group including senior Sears Holdings executives who will oversee performance. With these five business units, Sears (controlled by hedge fund manager Edward Lampert) can simplify the way they are managed, besides giving each unit greater power to focus on consumers and operating more efficiently.

In 1994, China had 1.5 million subscribers across the country. Also in 1994, China transitioned from an analogue network towards a digital Global System for Mobile communications (GSM, originally Group Special Mobile) system. In 1998, Motorola, Nokia and Ericsson had 83% market share. Also in this year, Kejian introduced its (first local mobile brand) GSM mobile phone.

Keywords: Nokia in China, Domestic and foreign cell phone players in China, Nokia entry strategy in China, Chinese mobile phone market

Download Case Study: Nokia’s Business Strategy in India

Case Contents

1. Introduction – Tesco in US Retail Market
2. Tesco – Company Background and Timeline
3. TESCO at a Glance
4. Localization Strategy – Tesco in South Korea
5. Tesco’s Business Strategy in the US – Healthy food, No waiting
6. Store Formats
7. Financial Highlights
8. Related Reading

Download Case Study (in PDF format)

Case Abstracts

UK’s largest retailer Tesco and one of the top supermarket operators in the world plans to open a thousand-strong chain of discount stores in the US. Tesco plans to invest more than $250m (£120m) [$2.5 billion over the next five years] in its US business launch. This expansion plan and strategy places it directly against competitor retail giant Wal-Mart. Many UK retailers have found it difficult to survive or compete in the US retail market. The US retail market is most competitive in the world, a fact well-known to British retailers Sainsbury’s and Marks & Spencer which failed to attract US customers.

Tesco’s Business Strategy in the US – Healthy food, No waiting

Fresh & Easy stores

Tesco started operations in the US by opening 15 of its Fresh & Easy stores in Las Vegas, Los Angeles, San Diego and Phoenix. By 2009, Tesco plans to open 200 more outlets to expand the retail network. Tesco’s basic US stores will be similar to European discounters Aldi and Lidl though Tesco stores will be 75% smaller than most American supermarkets. Fresh & Easy stores about 10,000 square feet are one-third the size of a typical supermarket, but four times that of a convenience store. Tesco is adopting a hard-discount model in the US. Tesco’s convenience stores modeled on the Tesco Express blueprint target US grocers such as 7-Eleven and locally-run stores.

This case study covers the following issues:
1. Assess Tesco’s globalization strategies
2. Examine and analyze the entry and expansion strategies of Tesco in US
3. Study how Tesco localized its retail practices in US
4. Understand Tesco’s efforts to integrate its global best practices with local strategies in US

Case Study Keywords:
Tesco, Samsung, Globalization Strategy, Localization Strategy, International Business, International Expansion and Entry Strategies, Retail Store Formats, supermarkets

In early 2007, Daimler sold 80 percent of Chrysler to private equity firm Cerberus Capital Management LLC for $7.4 billion. This strategic move ended a nine-year merger. Daimler can now concentrate on its luxury Mercedes brand and its truck business.

Daimler Chrysler Merger – Marriage made in heaven?

In 1998, Daimler and Chyrsler merged to form the Daimler-Benz and Chrysler Corp. in a $36 billion deal. At that time, then-CEO Juergen Schrempp described the merger as a marriage made in heaven. Since then, up-and-down earnings and repeated cost-cutting soured many investors on the effort to create a global auto giant.

The failure of the merger between two leading competitors in the global computer industry, Hewlett-Packard Company (HP) and Compaq Computer Corporation (Compaq) failed as the synergies identified prior to the merger did not materialize.

HP bought Compaq for US$ 24 billion in stock. This was the largest ever deal in the history of the computer industry. The deal meant combined operations in more than 160 countries and more than 145,000 employees. HP-Compaq would offer the most complete set of products and services in the computer industry.
The motivation behind a HP-Compaq merger (whether it made economic sense) and the problems encountered in merging operations is an interesting discussion as the stock prices of both HP and Compaq fell within two days of the merger announcement. An estimated 13 billion dollars was lost (in terms of market capitalization) in this time frame.

Shares fell further as industry analysts failed to understand the benefits HP would derive by acquiring Compaq. HP was a market leader in the high margin printer’s business and Compaq, a low-margin personal computer (PC) manufacturer. Moreover, established players like direct marketer, Dell and leading IT service consulting company like IBM would give fierce competition even if economies of scale were to be achieved.

With the stock price of HP’s shares stabilising at a level much below than before the merger and the PC & other hardware businesses not making much profits, the merger was ruled a failure. Industry experts felt that HP’s printer business should be spun off into a separate entity.
Merger Challenges:

Product line integration: This requires discontinuing some products (some loss in revenue) thereby rationalizing the product line.

Reorganization: In the computer industry this has always been a failure.

Cultural change challenges: HP’s culture is largely based on engineering and compromise, while Compaq had a hard-charging sales culture.

Some Facts:
HP was founded by Stanford engineers Bill Hewlett and David Packard

HP was started in California in 1938 as an electronic instruments company.

According to 2003 figures, HP revenues from imaging and printing systems accounted for 31% which was more than seventy percent of total operating profits.

Keywords: Post merger integration, merger and cultural challenges, HP, Compaq, Carly Fiorna, computer industry, printers, merger & consolidation, merger and acquisitions, change management

The problem faced by Time Warner after its merger with AOL is an issue which merits discussion. The AOL-Time Warner merger in 2001 resulted in the largest media company in the world. AOL joined hands with Time Warner (TW) to create synergy between its online businesses and Warner’s media business.

Two significant factors affected the post merger company. One, the dot com bust meant adverse effect on AOL’s advertising revenues. And two, dial-up subscribers decreased thereby affecting revenues and overall profitability of AOL. Richard Parsons, the CEO and Chairman of Time Warner and Joe Miller, the CEO of AOL took steps to turnaround AOL. A key element of their turnaround strategy was to offer free content on its portal. This strategy benefited AOL in attracting more online users and advertising revenues.

When AOL began operations it soon became the leading company for-pay online subscriber service, bringing easy-to-use Internet service to more than 30 million users. AOL was mainly based on around its dial up business. With customers shifting to broadband, AOL was losing subscribers rapidly. In 2004, AOL had 20 million subscribers. The dial-up segment though profitable, was declining in revenues having lost 2.6 million subscribers in a period of one year. The share price of AOL Time Warner fell by 60% after the merger. The merger was heavily criticized from all quarters.

Growth in advertising business came with AOL establishing itself as a support service rather than an internet access provider. Seeing AOL’s success Google entered into a global advertising partnership with the AOL. Google acquired a 5% equity stake in AOL for US$ 1 billion.

To be continued…

The focus of this case study is the hurdles faced by retailing giant Wal-Mart in the Japanese market. In the early 90′s, Wal-Mart’s decision to globalize is a major focus area.

Issues covered in the case study include: Download Case Study (in PDF format)

• Wal-Mart’s entry strategy in Japan
• WalMart’s best practices in retailing like Every Day Low Prices (EDLP) and Rollback to the Japanese market through its joint venture with Seiyu.
• Wal-Mart’s problems faced in Japan because of the differences between the operational and cultural environment in its home market and the Japanese market.
• Walmarts future prospects and business strategies in Japanese Market.

Other management issues covered include:

• The Japanese retailing industry: It’s nature and structure and its market size, market scope, and market characteristics.
• How to frame an entry strategy for a global and culturally diverse market.

Business Case study terms:

Wal-Mart Stores Inc., Green Field Operations, Costco Wholesale, Metro, Tesco, Japanese Retail Industry, Ito Yokado , Large Store Law, Every Day Low Prices, Carrefour, Daeiei, America Online Inc., Sam’s Clubs

Related Case Study Reading:

1. Can Wal-Mart Woo Japan?, Business Week Online
2. Japan Isn’t Buying The Wal-Mart Idea, Business Week Online
3. How Wal-Mart Is Reshaping Packaging?
4. A New Era in Japan’s Retailing Market
5. Tesco Enters The Japanese Market
6. Japanese Retail Market Overview
7. Japan Market Research
8. Japan Retail Sector Overview: companies Walmart

Will Wal-Mart be able to sustain its supply chain advantage : Download Case Study on Wal-Mart’s Supply Chain Practices in PDF format.

A Plain English handbook by the US Securities and Exchange Commission in the late 90’s to help companies draft clear SEC disclosure documents emphasize the need for writing clear informative text. As Warren Buffett mentions in the preface, it is quite difficult to understand what the companies are actually saying.

Writing clear, informative text is vital for a case study. Those who master the technique can boost their case studies value with readers. Clear writing is becoming more and more important.
Readers of a case study will have very different backgrounds and knowledge levels. Some students may be from finance backgrounds who understand balance sheets. A majority will not.

Case studies should be written in a manner that students and educators can assess their level. There needs to be sufficient introductory level subject matter for those with relatively less financial or business knowledge, and more advanced information for those who do. It’s easy to do that on the web with hyperlinks but difficult to do in a hard copy case study.

Case Study – A student’s perspective

With management and business case studies, Yamini, a MBA student with Maharishi Institute of Management Education likes to see a summary at the beginning. She opines that having key facts up front will be very useful.

Case study writers who use acronyms and do not define them develop an incomplete case study. It is absolutely wrong to assume that a case study reader knows what acronyms mean. Most readers are particularly interested in hard facts. Most students read the case study from the back. As Ishleen says, “I am not interested in the fancy stuff in a business or management case study.”

Good-quality writing does get case studies credit. One case study writer with a business management education provider says, “We get feedback from the students and case study corporate trainers. These people are the actual users of the case studies so they know if they have understood the case study or case studies correctly, but we sometimes have to modify the case studies for the students or corporate trainers. The language in our case studies tends to be straight to the point and simple. We try not to make it too formal and complicated with management or business jargon. In cases where we write about management subjects like business ethics and corporate governance, the text in the case study needs to be more formal. It depends on which management or business area we write.”

The skill lies in not just writing correctly, but in being able to interpret and explain potentially complex business situations in clear-cut ways.

In 2003, an Apple reseller, Tom Santos, filed a lawsuit against Apple Computers Inc. . The court case alleged Apple of showing undue preference to its own Apple retail and online stores. The lawsuit claimed that Apple Computers was neglecting Apple reseller stores while shipping new goods. Many believed the suit was a result of Apple’s deteriorating relationship with some of its dealers

Apple was also accused for adopting unethical business practices. The legal battle criticized Apple’s intention to divert sales to its own stores. Dealers claimed that Apple used discriminatory pricing to undercut dealers, selling products below cost in order to get customers away from independent stores. Many other resellers joined the legal proceedings. Till June 2005, the plaintiffs awaited the allotting of a trial date at the Superior Court of the county of Santa Clara, California. Over the years Apple has succeeded not because of its first-to-market strategy but because it has been able to reach customers with clever products, clever marketing, and smart distribution. Apple though claims that its intent with its retail stores program is to make the market bigger, rather limit its existing channel.

Case Study Keywords:

Apple Computers Inc, Apple, Macintosh (Mac), handling channel conflicts, Apple iPod, Steve Jobs, Steve Wozniak, Reseller, Online Store, Retail Store, Class Action Lawsuit , Hybrid channel system, channel functions, channel integration, channel leader, channel members, channel strategies, dealers, channel partners, Apple resellers association

Management Issues:
Channel Conflict and resolution
Channel Strategies and Management
Reseller Management Issues
Channel Conflict vs. Channel Cooperation
Developing flexible and hybrid distribution strategies to minimize channel conflict

About Apple Computers Inc. (Nasdaq listing: AAPL)

Apple Computer, Inc. is a Silicon Valley company based in California. Apple’s main business is computer technologies. Apple is known for its pioneering, efficiently designed hardware like the iPod and iMac. Apple’s innovations in the software segment like the iTunes part of iLife suite and Mac OS X, its operating system are noteworthy.

Apple Computers Facts and Figures:

Apple Computers was founded on April 1, 1976
Apple was founded by Steve Paul Jobs (Jobs) and Steve Wozniak (Wozniak)
Apple was founded in Jobs’ garage.
Apple opened its first retail store in May 2001
Apple’s first store was opened in a suburb of Washington D.C.
Apple helped begin the personal computer revolution in the 1970s

Related Reading:
Resellers, Consumers File Suit Against Apple
http://www.thechannelinsider.com/article2/0,1895,1768399,00.asp

Microsoft’s Channel Focus Appeals to ISVs
http://www.thechannelinsider.com/article2/0,1895,1833854,00.asp

Channel Conflict and Coordination in the eCommerce Age
http://omis.scu.edu/pdf/POMS-channels-2003-0402.pdf

Best Practices for Channel Management
http://newsroom.cisco.com/dlls/tln/newsletter/2002/september/part1.html

Supply chains have improved drastically in the past ten to fifteen years. The revolution can be attributed to companies’ shift in focus to efficiency. This applies both to the supply and manufacturing operations. GlaxoSmithKline is an example in case. Its efforts in improving production processes and packaging and enhanced supply to meet demand better are proof enough. This article highlights some of the challenges GlaxoSmithKline faced and how it overcame them.

GlaxoSmithKline – The Company

GlaxoSmithKline (GSK) is the world’s second largest pharmaceutical, biologicals and healthcare company (as per 2004 figures). Its sales touched GBP 20 billion yielding a profit of GBP 6 billion approximately. It employs around 100,000 people worldwide, with over 40,000 in the sales and marketing teams. Primarily headquartered in London, with dual US headquarters in Philadelphia and Research Triangle Park. GSK’s prime activities include creation, discovery, development, manufacture, and marketing pharmaceutical and consumer health-related products the world over.

GSK operates largely in two segments, Pharmaceuticals and Consumer Healthcare. GSK has more than 36,000 SKU’s manufactured across over 80 manufacturing plants worldwide. GSK has a market share of seven percent in the pharmaceutical business.

Year Merger/Acquisition New Company Name
1989
Beecham merged with SmithKline Beckman SmithKline Beecham
1995
Glaxo acquires Burroughs Wellcome & Co. Glaxo Wellcome
2000
Glaxo Wellcome merged with SmithKline Beecham GlaxoSmithKline
2001 GlaxoSmithKline acquires consumer health care company Block Drug Co. GlaxoSmithKline
Exhibit 1: Merger and Acquisition activity at GSK

The Challenges

Post merger Integration Issues
With the spate of mergers and acquisitions, GSK faces three major integration challenges:

* Integrating the separate identities
* Integrating different strategies and
* Integrating the packaging and manufacturing operations of Glaxo, Burroughs Wellcome, Beecham, SmithKline Beckman and Block Drug Co.

Complex product portfolio
Market dynamics and short life expectancy of patients have tilted the demand in favour of specialised drugs. GSK, like its competitors has to combat the need for specialised drugs continuously and reaping quick rewards. Such market forces alongside a changing industry make creative marketing and innovative products crucial.

Multi faceted US Markets
The US market mainly comprises of chain pharmacy stores, more traditional mom and pop stores and high-end deliveries. Such diverse markets have diverse needs. Catering to different customers brings forth the challenge of managing small volumes of niche packages.

Regulatory and operational challenges
Frequent merger and acquisition activity implies complicated paper work (re-registration and labelling) compliance with regulatory frameworks of different countries. With over 250 legal entities across the world, printing and other associated challenges emerge with different names that have to appear on different products distributed in different countries. The complexity increased manifold with the mergers owing to labelling changes. Moreover, different markets have different schedules on when GSK must incorporate the labelling changes.

Different departments could always make different packaging design changes. Communicating packaging specifications, graphics and artwork changes across the entire pharmaceutical organization was challenging if not an insurmountable task.

Outsourcing/supplier challenges
One of GSK’s products, Aquafresh Floss‘N’Cap (AFNC) is symbolic of the typical outsourcing challenges. AFNC has a flip top containing dental floss and toothpaste in the tube. AFNC had three custom designed sub assemblies outsourced to three different suppliers. The suppliers worked in sequence on the custom designed cap. Once the package reaches GSK, only filling of the tube with toothpaste remained. Coordinating with these three cross Atlantic suppliers, especially outside GSK’s manufacturing facilities was a challenging task.

Finding alternate/multiple suppliers
GSK had a bad experience early on with supply disruptions from a single source supplier. Almost a decade ago, one of its sole resin supplier’s plants exploded. It had no alternate suppliers and consequently had to lose market share not to mention customer goodwill, as customers have to do without critical drugs or life saving devices. GSK wanted to eliminate such situations. The challenge was not only to find alternate suppliers but ones who complied with the FDA regulations and supplied in time.

On the major machinery and equipment side, GSK’s goals were different though. It wanted to limit the number of machinery suppliers to better familiarise with the manufacturer’s equipment and establish partnerships with machine suppliers who offered total packages when compared to independent system integrators.

Operational/production challenges
The foremost challenge in production operations was synchronising with different manufacturing locations and multiple suppliers. With different packaging and assembly lines, implementing automation and advanced technology or process improvement programmes was a huge challenge. Other considerations were quick machine setup, minimum production stoppages, better equipment availability and flexibility besides handling innumerable design changes.

Technological Challenges
Technologies, for example RFID in anti-counterfeiting are largely untested or simply not the best. GSK has RFID supply chain projects planned but faces a tough test with respect to being the first mover in investing huge sums into the technology or adopt a wait and watch policy. GSK may lose out in both cases owing to failure of the relatively new technology or lose out to competitors who can gain significantly by adopting the technology faster

* Originally published by me in TMM

Glaxo Smithkline (GSK) spends about GBP 800 million to develop a drug. Its efforts and money will go waste unless its customers get the product in time without any defects and have no difficulty in handling the package. In other words, every facet of GSK’s supply chain should be up to the mark. This article (Glaxo Smithkline Supply Chain Challenges –Part I) highlighted some of the supply chain challenges GSK faces. Part II of this article (Glaxo Smithkline Supply Chain Challenges –Part II)illustrates GSK’s response to those supply chain challenges.

John Francis Welch Jr. better known as Jack Welch needs no introduction as a successful entrepreneur and leader. Jack Welch took a company and transformed it into a world-class performer and the most admired one too. Jack Welch was the the CEO from 1981 to September 2001 of General Electric Corporation (GE) . When Jack Welch handed over control of GE, GE was operating in over 100 countries with about 340,000 employees and $130 billion in annual revenues.

GE entered into diversified businesses ranging from aircraft engines to medical diagnostics, from lighting to appliances, from nuclear power to broadcasting (GE owns NBC) and from plastics to financial services. Most of these businesses were added to GE through almost 1000 odd acquisitions made when Jack Welch was its CEO.

More on Jack Welch’s Principles follows….

Anti-Bureaucracy

“If you’re not No. 1 or 2 in your field, get out.” This statement by Jack Welch sums up his business philosophy. Jack made GE follow this principle by operating it like a small business in spite of its size. …to be continued.

What is a case study?

The foremost challenge for IT management teams as they develop and manage a global organization via merger and consolidation is to make certain the production teams of the merged entities keep up their present business at standard service levels.

Typically, when mergers occur the operations/production teams find it difficult to match customer defined service level agreements all through standard business conditions. The disruptions related to merger and consolidation actions imply that IT managers will find they are now faced with managing issues such as degrading productivity arising out of organizational differences, employee fears, differing cultures, time zones and challenging timelines for combining the merged entities into a single global operations entity.

It is critical for IT managers to guarantee they maintain focus on their customers’ needs, while establishing good relationships/partnerships with the freshly merged operations’ entities. Success comes from the top management and other management teams striving right away to reach out to employees of the combined merged organization to correspond to them their value to the team and the overall single global entity.

Employees within the combined IT organizations must recognize their value and role in building the new IT organization. Knowledge of how the employees will add value to the final organization will supply the buy-in they need to focus on matching their customers’ expectations, while aiding a better IT organization utilizing the best practices from the two merged IT companies.

A Human Capital Index study was conducted twice (1999 and 2001) by Watson Wyatt, a global human-capital consulting firm to understand the correlation between how organisations manage their human capital and its effect on their financial performance. The Human Capital Index study included analysing HR practices and financial performance of 750 companies across Canada, Europe and US. The Human Capital Index research was done twice to correlate the results.

Human Capital Index research involved evaluating HR practices and financial performance of 750 companies across Canada, Europe and US.

Key findings of the study:

$ Three times higher share holder returns for organisations with superior HR practices
$ Good HR practices result in positive financial performance to a much great extent as compared to what good financial performance do to effective HR practices
$ Certain traditional HR practices like 360-degree appraisal or developmental training if not conducted well can harmfully change an organisation’s financial performance

HR practices that in fact steer financial performance based on data from 51 companies surveyed included:

Total 43 HR practices were mostly divided into 6 general groups

Five groups of HR practices in which a significant improvement can lead to as much as 47% increase in market value. The sixth group that can reduce stakeholder value.

The Human Capital Index study clearly showed that better HR practices are no more a sanitation factor. HR practices are vital factors that decide an organisation’s performance.

Additional Reading:

1. “Human Capital Index: Human Capital As a lead Indicator of Shareholder Value”, Watson Wyatt Publication.
2. “The Hidden Human resources: Shareholder Value”, by Pfau B., Kay I., Optimize Magazine June 2002.
3. “How HR Drives Profits”, by Caudron S., Workforce Magazine.

Oprah Winfrey’s skills as an entrepreneur are noteworthy. Oprah Winfrey is the Chairman of the Harpo group of companies. Oprah is a top television talk show host. How Oprah became one of the richest women and a successful entrpreneur in the world along with leadership qualities. Oprah’s Harpo group entrered into various businesses and Oprah’s role in each of them was excellent. Oprah’s philanthropic ventures are varied and liked by many.

Facts about Oprah Winfrey
Oprah’s original name was Orpah Gail Winfrey.
Orpah Gail Winfrey is named after the Moabite woman in the Book of Ruth in the Bible
She became Oprah after Orpah was misspelt in her school records.
Oprah parents: Vernon Winfrey and Vernita Lee
Oprah was born on January 29, 1954.
Oprah was born in Kosciusko (Mississippi, US)
Oprah is ranked as the most powerful celebrity by Forbes magazine
Oprah is the ninth most powerful woman in the world.
Oprah Winfrey is believed to be worth over $1.3 billion.
Talk Show queen, Oprah Winfreys Web site is Oprah.com
Oprah publishes the O magazine

Oprah’s public speaking and leadership skills were evident in Oprah right from her early days. Oprah recited sermons from the Bible at her local church when she was less than four years old.

In 2002 Oprah formed a partnership with South Africa’s Ministry of Education to build the “Oprah Winfrey Leadership Academy for Girls”

Oprah’s Angel Network donated $1 million to help tsunami efforts. The Angel Network’s funds are pooled for emergency relief, such as that required by tsunami. Oprah also likes to use these funds to enhance other countries by focusing efforts on education, women and children.

Also read leadership case study on Warren Buffet

1. Begin with Lean Sigma: Begin with Lean Sigma if company requires quick implementation because most successful companies grow out of Six Sigma or Lean in parallel.
2. Begin small: The best way to exhibit the value of implementing Six Sigma formally is to begin with a few small projects and uphold their success.
3. Using Six Sigma consultants to implement Six Sigma or provide Six Sigma training depends on the costs and how well the consultants understand the company before trying to implement Six Sigma.
4. DMAIC (Design, Measure, Analyze, Improve, Control) must be used to give Six Sigma projects the go ahead and prompt early enthusiasm and success.
5. Design for Six Sigma (DFSS) and Define Measure Analyze Design Verify (DMADV) must be used when a total revamp or restructuring is required for a failed or nonexistent process. DFSS and DMADV are best for future state designs without considering what is happening today.

Outsourcing supply chain functions can enhance:

• Cost reduction (10-20%)
• Efficiency
• Customer satisfaction
• Revenues and
• Competitiveness.

One manufacturer was able to reduce its inventories by USD 1 billion, cut down on inventory holding costs by USD 124 million and reduce delivery times to dealers by 26%.

Major areas where supply chain costs need to be reduced are:

• Order management costs: By combining order management and parcel traceable programs
• Material purchasing costs: Reverse Auctions
• Inventory holding costs: Less than 10 percent of total supply chain costs
• Overall supply chain costs including Supply chain planning costs, and supply chain IT savings

Poka Yoke is Japanese methodology for “mistake proofing” to avoid non-conformities from entering into processes. It allows defect detection and elimination at the source. It can also be used as a continuous improvement tool.

In short, Poka Yoke is a methodology that ensures that Quality Management Systems (QMS) perform efficiently.

Poka Yoke – History

Mr Shigeo Shingo devised the concept of Poka Yoke in the 1980s. He was one of the pioneers in the development of the Toyota production system. This apart, he also initiated developments in many Japanese organisations.

Leadership is defined as the abilities and the activities of the leaders in the company to inspire a culture of Business Excellence in achieving the objectives of the company.

Some leadership best practices in leadership that are clearly visible:

• Rewarding performers not only on their financial results, but various other factors. To assess performance, many companies used the Balanced ScoreCard method, developed by Kaplan and Norton
• Top management meet often to discuss methods to improve their business performance
• Meetings and surveys are conducted at regular intervals to include employees in decision-making for company strategy and policies
• Understanding that recognition by peers is an important motivation, the best leaders showed recognition to their performing employees through different methods, such as commendation letters, putting their names on the company’s intranet newsletters, commending in the presence of people respected by the performers and giving small gifts. Formal procedures were also in place in some companies for such assessment and rewarding of performance
• Putting in place a system that allows employees to work on improvement besides providing them the needed resources. In addition facilitators who work with the employees on personal improvement programmes were engaged
• Involvement of top management in setting up Customer Relationship management as well as Supplier Relationship Managements through initiatives such as interactive meetings, two-way visits between the company and the suppliers and customers. The Efficient Consumer Response (ECR) approach was introduced by top-notch companies to build a closer relationship throughout the entire supply chain.

Slow and steady no longer wins the race. Globalization teaches Lenovo to embrace risk and leave a lumbering legacy behind.To go global Lenovo, the leading PC manufacturer in china took various steps like:

Lenovo – globalization plans

• Lenovo is sponsoring the 2008 Olympic Games
• Lenovo acquired IBM’s PC unit
• Lenovo changed its corporate name from Legend to Lenovo

Keywords

Lenovo Legend Group Globalization Plans Global Branding Brand Consolidation Business Diversification IBM’s PC Unit Acquisition Globalization Challenges Cultural Clashes

Lenovo Facts

Lenovo founded in 1984
Lenovo was originally called Legend Beijing
Lenovo was by Chuanzhi along with ten colleagues at the Computer Technology Institute of the Chinese Academy of Sciences (CAS)

Lenovo controls 25 % of the Asian computer market, largely due to its ability to sell computers cheaply and China’s high tariffs on imports. Lenovo paid 1.25 billion United States dollars to IBM, of which $650M were paid in cash and $600M were in Lenovo stock.

Lenovo manufacturing
Lenovo has manufactured 4.5 million PCs including laptops and desktops

Lenovo Diversification
Lenovo has also diversified into other business areas including handheld devices and IT.

Lenovo Revenues
51.5% – corporate segment
33.5% – consumer segment
8.8% – handheld devices
3.8% – contract manufacturing and
2.4% – IT services

• e-business strategy of General Motors (GM) the world’s largest automobile manufacturer.
• GM’s need to adopt e-business in its manufacturing supply chain operations.
• Supply chain and demand chain
• Dis-advantages of GM’s e-business strategy.

GM facts
GM brands include
Buick, Cadillac, Chevrolet, Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saturn, Saab, and Vauxhall.

General Motors GM was founded in 1908 as a holding company for Buick.

GM and e-Business Inititatives in Supply Chain

e-Business Initiative
General Motors Acceptance Corp. (GMAC) BuyPower
Retail.com/ Auto Centric
Onstar
The GM Owner Centre
DealerWorld
GMAC SmartAuction
Covisint
GM SupplyPower
Shared “Virtual Factory” Tools
Joint Product Design

E-business particularly facilitated supplier and customer collaborations into early design programmes and product conceptualisation stages. Business process reengineering led to increased process efficiency. Advantages were self-evident. GM trimmed down new vehicle launch time to mere 18 months, a significant reduction from three years earlier. With revenues touching almost USD 600 million per year, GM invested to revamp existing infrastructure. For example, LAN bandwidth was increased by 10 times, old legacy systems gave way to modern standardised systems.

Student-Written, Instructor-Facilitated (SWIF) case study writing is a powerful tool for helping both students and instructors redefine their roles. The guide is divided into two sections. The first section provides background information on the case-study-writing process and answers the most commonly asked questions about case study writing. The second section provides a guide to data resources and some tools for evaluating the case study. New library technologies and computerized databases offer an extraordinarily rich array of information resources. In fact, the resources are so rich and growing so rapidly that it is impossible to summarize them in a document of this size, so this second section is meant to be only a starting point. The guidelines provided and the resources identified will help the new case study writer prepare a clear, concise, and illustrative case study.

What is a Case Study ?

The following books/resources will be helpful:

Guide to case analysis, McGraw-Hill

Preparing an effective case analysis / South-Western College

Case studies / University of St Thomas, St Paul, Minnesota.

Analysing a strategy case study

Notwithstanding its technical excellence, Xerox PARC failed to take competitive advantage with its innovations. PARC innovated on a number of products which transformed the computer industry like the PC prototype, LAN, GUI interface, mouse, page description languages, laser printers, etc. There was much commercial potential in most of its innovations. Reasons attributed for failure to capitalize on its innovations were the relaxed and flexible culture that prevailed at its Palo Alto Research Centre. Though flexibility is good, it made its employees to practice ventures of their interest with no alarm for commercial importance. Another reason attributed was the distance between PARC and its corporate headquarters. This remoteness cut it off from the competition of the corporate world. Another theory of thought was that there was a basic disparity between the goals and functioning methods of PARC researchers and the employees at the corporate/ management office.

By the beginning of the 21st century, PARC was spun-off as an autonomous subsidiary of Xerox. Xerox had also set up some subsidiaries to help commercialize the inventions that came out of PARC.

Point to note: Paradoxical structure and culture elements involved are essential to manage innovation profitably. Every organization needs to promote original thinking to foster innovative ideas and products, coupled with ensuring control to commercialize the ideas and products effectively.

In a case study method or a real life business situation, there exist many strategic alternatives. But selecting a particular strategy which satisfies both corporate and stakeholder objectives is a crucial part of any strategic process. This usually involves a tradeoff in the ultimate corporate goals to be achieved. This is usually a very complicated task. Even Swaps is a logical and an easy technique for making relevant trade-offs that help a manager in making a decision to consider the importance of one goal relative to another keeping in mind future scenarios. By indicating the absolute changes in the corporate goals, the real value of the strategic alternatives can be easily ascertained.

Strengths ‘S’
Strengths are those rudiments of the company that are useful and secure. For e.g. Company service that is well acknowledged by the customer

Weaknesses ‘W’
Weaknesses are those rudiments of the organisation that are unstable and insecure. For e.g. Outdated technology or apparatus.

Opportunities ‘O’
Opportunities represent areas where applying fresh proposals or schemes can prove favorable. For e.g. Establishing a brand

Threats ‘T’
Threats can prove dangerous to a company. For e.g. : New laws.

•Identify companies and industry sectors which are of concern?
•How has the company performed in the last few years/ historically? Good, very good, bad, very bad or ugly.
•How has the company progressed over a span of time? Which successful or failed strategies has it adopted/followed?
•What are your primary assumptions of the critical issues and alternatives facing the company? Company information in tables, related readings and annexures help here.

Environment Analysis
What external environment factors help the company succeed or fail? How can this macro environment modify so as to provide opportunities or give rise to threats?

Competitive Environment
What is the nature/number of competitors (direct or indirect)? How do they react to the companies strategies related to marketing, product, service etc.

Internal Analysis
Which Strategic Resources help provide competitive advantages?

First point to note. Identify a relevant issue to write on. Having a lot of issues in one case study-hmmmmm not a good idea. Here you need to display your ability, firstly, to have a good understanding of the business subject (strategy, ethics, finance, governance, HRM, Marketing, innovation …) you have chosen. Identify a company which is relevant to this subject. News items, business magazines, management articles are a good source to start of with an idea. After you have identified an issue to write a case study on, start analysing. Here company information is crucial to analyse the strengths, weaknesses, opportunities and threats, yeah yeah you guessed it right, DO a SWOT Analysis.

Identify the key players (could be the marketing manager, product manager or the CEO)central to the theme that you are building the case upon. More to follow

Case studies are usually considered as problems to which a unique, correct solution is possible. However, this is not the case as a decision maker can choose between several options, conventional or unconventional backed by a logical argument.

Management Case Studies can present an extensive, detailed analysis of a single project in the context of its business environment.

The case method of imparting management education has been used for several years now in business schools to teach various management subjects. Use of case studies holds great potential as a pedagogical technique for teaching management science, particularly to budding managers, because it illustrates various approaches and values. It hones students’ skills in team based learning, presenting, and analytical thinking, and since many of the best cases are based on latest and often debatable management problems that management students encounter in the news (such as Unethical Practices being followed by a particular company), the use of cases in the classroom makes business management study relevant.