Homework answers / question archive / In December 2009, Volkswagen AG (VW) of Germany purchased a 19

In December 2009, Volkswagen AG (VW) of Germany purchased a 19

Business

Share With

---

In December 2009, Volkswagen AG (VW) of Germany purchased a 19.9% stake in the Japanese manufacturer Suzuki Motor Corporation (Suzuki). They both agreed to share their technologies and distribution network with each other.

 

While VW agreed to provide its hybrid and electric technologies along with access to global markets to Suzuki, Suzuki agreed to provide VW with access to its small-displacement motors and Indian presence. However, both the auto manufacturers failed to reach an agreement on any of their proposed goals.  Suzuki served notice of breach of contract to VW in October 2011 stating that VW had not given it access to the hybrid technology which it had promised. Similarly, VW accused Suzuki of violating the agreement by procuring diesel engines from Fiat. Further fuelled by the cultural differences and failed joint business proposals, the partners, on November 18, 2011, terminated the framework agreement and Suzuki demanded that VW return its 19.9% shareholding in the company. VW's refusal to do so led to Suzuki filing for international arbitration. This case is meant for MBA students as a part of the International Management/ Strategic Management course.

Issues:

» Understand the various issues and challenges in strategic alliances.

» Understand the various challenges and issues in trans-border/transcontinental alliances.

» Understand the global consolidation trends in the global automotive industry and the rationale for the alliance between Volkswagen and Suzuki.

» Examine the partnership and understand the reasons for the breakup, and discuss ways in which the situation could have been salvaged.

» Discuss the challenges that lie ahead for the companies and possible remedial actions.

2..Q)The case focuses on UK-based retailer Tesco's strategies in the Turkish market. It discusses Tesco's international ventures and elaborates on some of the strategies that it followed in the non-UK markets. Tesco entered Turkey in 2003 by acquiring the Kipa Kitle Pazarlama Ticaret ve Gida Sanayi AS (Kipa) chain of supermarkets and operated under the name Tesco Kipa.

 

It started operating hypermarkets and then introduced other format stores in the country. It opened Tesco Express stores which were smaller than hypermarkets, and sold a wide range of food products. 

To cater to the needs of shoppers who preferred to shop at open air shops and small mom-and-pop stores called bakkals, Tesco Kipa opened smaller stores called supermarkets. It also operated through Kipa Extra stores, which were larger than hypermarkets. Tesco Kipa initially operated in the Izmir region and later expanded to other regions. It localized its operations by offering products preferred by the local people.

 

In spite of its best efforts, Tesco did not manage to become one of the leading players in the market and its market share was at just 1% as of 2011. With Tesco closing its stores in Japan due to poor performance, analysts opined that it might also exit Turkey soon. However, Tesco continued to expand in the country and acquired Ardas Supermarket chain in November 2011. It remained to be seen if Tesco would be able to succeed in the market or would make an exit.

Issues:

» Evaluate Tesco's globalization strategies..

» Study and analyze the entry and expansion strategies of Tesco in Turkey.

» Examine how Tesco localized its retail practices in Turkey.

» Examine the challenges faced by Tesco in Turkey.

» Understand the entry and expansion strategies of a retailer.

Q.3).This case discusses the success of Alibaba.com Corporation (Alibaba) in China under the leadership of Jack Ma (Ma), its founder. It talks about the transformation of Alibaba into one of the most successful e-commerce companies in China and also analyzes its business portfolio. The case explains in detail the rationale behind Ma starting an e-commerce website and his efforts to bring about the growth of the company. Alibaba had emerged as the largest e-commerce company in China. The company tailored its strategies to meet the needs of the customers and made a mark because of its understanding of the Chinese language and culture. However, some experts also raised doubts over the sustainability of Alibaba's business model.

 

In 2011, the company was also making efforts to increase its dominance in the Chinese web search market. In August 2011, it acquired Sogou.com, search engine of Chinese online portal Sohu.com, and in October 2011, it launched an online shopping site eTao to combat with Baidu. In December 2011, Alibaba announced that it was testing a social-networking product. This was part of its efforts to expand outside its e-commerce platforms to seek different streams of revenue, according to industry observers. The company was also planning to acquire Yahoo! China's stake of 40 percent in Alibaba. Experts felt that all these initiatives would help Alibaba gain a stronger foothold in China since Internet penetration and e-commerce were rapidly growing in China.

Issues:

» Understand the issues and challenges faced by a Chinese e-commerce company in growing its business.

» Study Alibaba's business model and see whether it is sustainable.

» Study how Alibaba achieved a balance in catering to global customers while customizing its practices to suit the needs of its Chinese consumers.

» Understand how e-commerce companies operate in emerging markets.

» Examine the challenges faced by Alibaba in expanding its business globally.

Q.4).The case discusses the entry and the subsequent exit of the US-based electronics retailer Best Buy in China. Best Buy entered China by opening a procurement office in 2003. After studying the market for quite some time, it decided to acquire Jinangsu Five Star Appliance Co, (Five Star), the fourth largest electronics retailer in the country, in order to have a wide presence in the market. In China, Best Buy followed the dual brand strategy that it followed in the Canadian market. As per this strategy, the company operated Five Star as a separate brand, different from the Best Buy stores, the first of which was opened in 2006 in Shanghai. In China, electronic retail stores usually consisted of vendor representatives who promoted their own products.

Customers could bargain and get the product at a lower price. This led to a highly chaotic environment in the stores. Best Buy refrained from using this model and positioned itself differently from the local vendors. It did away with the vendor representatives and had its own salespeople manning the stores. The salespeople in the Best Buy stores did not interfere with the customers and provided assistance only when asked for. In the Chinese stores, the products were displayed in glass cases. Best Buy, in contrast, displayed products in such a way as to enable the customers to touch and feel the product. Though Best Buy's first store was highly successful and went on to become one of the top 10 Best Buy stores in the world, it could not sustain the momentum. It could not open stores as rapidly as it had planned to and the opening of the second store was delayed. Also, though customers appreciated the modern shopping experience at Best Buy they still preferred to shop at local stores as they offered lower prices. Though Best Buy opened nine stores by 2010, the local competitors ended up opening hundreds of stores. Due to high competition and the high costs of operations, Best Buy decided to exit the market in February 2011. The case discusses in detail Best Buy's pre-entry strategies, its entry into the market, the strategies it adopted in the Chinese market, and its subsequent decision to exit the market, while examining the strategies adopted by the competitors in the market.

Issues:

» Understand the nature of problems faced by retailers like Best Buy in emerging markets like China.

» Study and analyze Best Buy's pre-entry and entry strategies.

» Examine the reasons that prompted Best Buy to exit the market.

» Analyze the retail industry in China.

Q.5).This case study discusses Research In Motion's (RIM, maker of BlackBerry smartphone) dilemma of striking a balance between its business interests and the security concerns of governments across the world. In 2010, the UAE government imposed a ban on the BlackBerry and created a furor in countries like India, Saudi Arabia, Indonesia, etc., as well. The governments of these countries considered the phone a national security threat due to the strong encryption built into the design of its system that blocked security agencies from tracking communications carried over these devices. This encryption system was developed by RIM to guarantee customers' privacy - a major unique selling proposition (USP)

for the company. The case study enables a discussion on the remedial measures available for RIM to answer such security concerns without compromising on privacy.

Issues:

» To understand the various issues and challenges facing a company in international markets.

» To understand the controversy regarding BlackBerry usage and also to debate why this controversy is more prominent in Asia and the Middle East.

» To analyze the remedial measures available to RIM in addressing the national security concerns and its business interests effectively

» To understand the strategic lessons from Blackberry episode for MNCs in general and for technology and telecom companies in particular

Q6).This case is about US-based diversified conglomerate General Electric Company (GE) and its environmental initiative Ecomagination that was launched in mid-2005. Through this initiative, the company invested liberally in renewable energy and cleaner technologies.

 

It also promoted energy-efficient Ecomagination products through its marketing campaigns. Besides, the company set targets for reducing its greenhouse gas emissions and for increasing the energy efficiency of its operations. Industry observers noted that the strategy had been successful for GE as it was able to make good money.GE, which had set a target of investing US$ 5 billion in Ecomagination research and development (R&D) by 2010, surpassed the goal on June 24, 2009, one year ahead of schedule. The company was also on its way to achieving the US$20 billion mark in revenues as it had already generated US$18 billion in revenues from Ecomagination products in 2009.

 

Some analysts lauded GE's Ecomagination strategy saying that the company was addressing global issues such as climate change, greenhouse gas emissions, and energy conservation, while at the same time making money. However, its critics felt that Ecomagination was a business savvy move to resurrect GE's image as an environmentally friendly company. They felt that the initiative was over-hyped and that GE was pursing profits in the name of clean technologies. Some even called it greenwashing. However, GE continued its commitment to Ecomagination and expected Ecomagination revenue to grow at twice the rate of total company revenue by 2015. This would give Ecomagination an even larger share of total company sales.

Issues:

» Understand how GE employed CSR as a strategy with its Ecomagination initiative.

» Understand the importance of sustainability (especially environmental sustainability), and the role that renewable energy and clean technologies could play in this regard.

» Understand the role leading players such as GE can play in addressing global issues such as climate change, greenhouse gas emissions, and energy conservation and also benefit in the process.

» Analyze the Ecomagination strategy of GE

» Understand the reasons for the criticism faced by GE for its Ecomagination initiative and discuss and debate whether this was an attempt by the company to indulge in greenwashing

Q.7).

This case study is about India's largest real estate company DLF Limited's (DLF) struggle in the stressed market conditions due to the global financial crises which started in the year 2007. The company which created India's biggest IPO in history, raising more than US$ 2 billion, was counting on the continued growth of realty sector in the country. However, the depressed economic situation coupled with credit crunch led to a significant decline in the demand and property prices. While the company had ambitions plans to launch several properties ranging from Special Economic Zones (SEZs), large townships, hotels, and convocation centers, the market conditions took its toll on the business. These factors disturbed the cash flow cycle of DLF, making it difficult for it to repay its debt on time. The debt to equity ratio of the company increased to all time of high of 0.7 in June, 2010, with inadequate debt paying capacity.

In light of these factors, DLF had to exit from many of its projects either before, or even in middle of starting the operations. The company devised several strategies overcome the prevailing situation. By the mid-2010, DLF had a much leaner business structure, but it still facing various challenges in bringing its business back into shape.

Issues:

» Understand the real estate sector in India and issues and challenges faced by the market leader in this sector.

» Understand the impact of global financial crises on business dynamics.

» To analyze how macro and micro economic factors influences the success of an organization.

» Determine the internal competencies of business though SWOT analysis.

» Examine the role of external factors influencing business thorough PESTEL analysis.

» Appreciate the importance of healthy cash flow cycle for a business. » Determine the best product mix, thorough analysis of demand, revenue streams, and profitability from different verticals of business.

» Understand the criticality of decision making process in business, especially during stressed market conditions.

» Scrutinize the impact of increasing debts on planning, execution, and evaluation of business strategy.

» Understand the importance of tailoring business tactics and strategy to fit specific industry and company situations.

» Appreciate the role of corporate restructuring and turnaround strategies.