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A fascinating survey has been released by the UK's Manufacturing Advisory Service ("MAS"). It reports that a growing number of manufacturing SMEs are bringing production back to the UK from overseas. This is a process called "onshoring" which, of course, is the reverse process to "offshoring".read more...»
A terrific six minute video here which highlights and then explains five key challenges for a business outside China wanting to do business in China. Well worth a watch. An underlying theme across the challenges is how businesses outside China can reduce or manage the risks involved in entering Chinese markets. China poses quite distinct risks, particularly around the lack of information, the different culture of doing business, the role of government and the importance of local relationships.read more...»
With the high-profile visits of George Osborne and Boris Johnson to China this week, there is a glut of resources available on the BBC website which could be very valuable to BUSS4 research.
Here are links to just a selection:read more...»
Students looking at international expansion strategies of multinationals will soon come across the term "glocalisation". It sounds similar to the idea of diversification and both are concerned with choices that businesses make about which products and services are offered and into which markets. Such choices are often analysed using the Ansoff Matrix. But is glocalisation the same as diversification? Or is it really a kind of market development?read more...»
During our CPD briefing days on China we've often mentioned the rapid growth of the Chinese middle class and the resulting impact on demand for consumer goods. China now accounts for 20% of global demand for luxury goods and this is illustrated in the following short video from the excellent FT team based in Hong Kong.read more...»
A strong sign here of the increasing competitive strength of businesses based in China that wish to expand into other markets around the world. US-based venture capitalist KKR has invested around $550m for a 10% stake in Qingdao Haier, China's largest refrigerator and washing machine maker.
We have mentioned Haier before on the Business Blog as a good example of an emerging markets multinational corporation (EMMC) and Haier is also recommended as a case study for students researching China & Emerging Markets for AQA BUSS4.read more...»
More than half of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the U.S. from China or are actively considering it, according to a new survey by The Boston Consulting Group.
The share of executives who are planning to "onshore" or “reshore” or are considering it rose to 54 percent, compared with 37 percent of executives who responded to a similar BCG survey in February 2012.read more...»
Here's Lei Jun (on the left). Notice something familiar about him? The blue jeans; dark top and introducing a shiny new smartphone to present to the world's media. Uncanny.
Lei Jun is the founder and CEo of a firm called Xiaomi which the Chinese media have nicknamed the “Apple of the East."
Lei Jun himself is also increasingly being called the "Steve Jobs of China" - and not just for his dress sense and presentational style!read more...»
How on earth is Starbucks making a success of its push into China? China is a tea-drinking nation. In fact, China has the world's oldest and largest tea-drinking culture. Chinese people hate coffee – they say it tastes so bitter it is like tasting medicine.
But, look at the evidence. Starbucks has been in China for 13 years, with an initial presence in the major tier 1 cities Beijing, Shanghai and Guangzhou. Starbucks expects China to become its second-largest market by 2014 aiming to have 1,500 outlets throughout China by 2015. The number of staff employed by Starbucks in China is forecast to rise from 12,000 to 30,000.
According to the latest Euromonitor report, Starbucks has a 60 per cent share of China's emerging coffee house market, well above its closest competitor.
That sounds like a success story. So how has it done it?read more...»
Just why have so many Western retail giants struggled to succeed in China? If global retailers like Walmart, Tesco, Carrefour and Best Buy have struggled, what hope is there for the rest?read more...»
Say the word e-commerce in the US, UK and many other developed economies and one word usually comes to mind – Amazon. The Seattle-based multinational claims to be the world's largest online retailer. It has highly diversified operations that have taken the business well beyond the original proposition - selling books online. CEO and Founder Jeff Bezos launched Amazon.com in 1995 and over the next two decades Amazon has expanded its retail websites to dominate the market in Canada, the UK, France, Germany and elsewhere.
However, in China, say e-commerce and a different "A" word is on everyone's lips. Alibaba is a private Chinese company that is now the largest business-to-business and consumer-to-consumer company in the world. Amazon might dominate global business-to-consumer online retailing. But, in China, Amazon has a very small market share and it is Alibaba that dominates.
In fact, Alibaba can legitimately claim to be the world’s leading e-commerce business. Reports suggest that Alibaba handled total sales of $170 billion in 2012 – which is more than the transaction value handled by Amazon ($96bn) and eBay ($75bn) combined!
After more than eight years of effort, Amazon has less than 1 per cent of China’s $196bn e-commerce market. Alibaba is estimated to have a market share of nearer 75 per cent.
To put this into perspective, China’s e-commerce market is already the largest in the world and by 2020 is forecast to be bigger than the existing markets in the USA, UK, Japan, Germany and France combined. So Alibaba’s market share of over 70% makes it a very big player indeed.read more...»
Businesses from outside China trying to sell in China face a critical question as they try to enter China. How far should they go to adapt or redesign (“localise”) their products and services to meet the needs and wants of customers in China? Should they adapt existing products just enough to appeal to consumers in China? Or should they look to start again – rethinking the product or service from the ground up – in order to established a position in the market and then gain market share?
Yum! Brands is a multinational that operates or licenses Kentucky Fried Chicken ("KFC"), Pizza Hut, Taco Bell and other small restaurant brands worldwide. Yum! is the world's largest fast food restaurant company in terms of outlets with more than 39,000 restaurants around the world in over 125 countries and global sales of over $12bn.
For the last decade, Yum! Brands has relied upon international expansion as the main driver of revenue and profit growth. China in particular has proved to be a significant source of growth. For example, KFC has opened an average of one new outlet per day in China and has an objective of reaching 15,000 outlets.
KFC has achieved this high rate of growth by adopting the concept of localisation. It has largely ignored the traditional model of KFC outlets in the US and other developed economies - that of a franchise operation with a limited menu, low prices and an emphasis on customers taking-out their food and drink to consume. Instead, the KFC model in China was redesigned to meet local needs.read more...»
The risks for businesses from outside of China from operating in China have been well-illustrated by the problems now faced by pharmaceutical giant GlaxoSmithKline plc ("GSK”).
GSK is facing claims that it made corrupt payments of around £323m to Chinese doctors in order to win market share. GSK is cooperating with the Chinese government in an investigation which might result in a substantial fine or other punishments for the company.read more...»
The risks of doing business in China have been highlighted again with news that a division of Danone, the French multinational with global brands operating in bottled water and dairy products, has been accused of bribery.
The Chinese authorities have instigated a number of investigations into bribery recently. The accusation for Danone to handle is that its baby milk brand Dumex paid large bribes to doctors and nurses in Tianjin to incentivise them to feed newborns Dunex brand infant formula.read more...»
If they want to grow, multinationals based in developed economies have to make emerging markets their number 1 strategic priority.
That's the view of the CEO of Tupperware - Rick Goings.
"Customers that want growth simply must be where the growth is" said Rick Goings in his contribution to a major survey about multinational strategy in emerging markets.read more...»
CK Prahalad once wrote of the "fortune at the bottom of the pyramid" - reflecting the commercial opportunities for businesses that can successfully connect and bring products to markets inhabited by low income consumers whose living standards are on the rise. China's fast-growing economy provides an enormous opportunity, but how can companies win sales in the Chinese interior, hundreds of miles away from the coastal centres of commerce?
As wealth and consumerism reach China's most remote cities, foreign brands are venturing far from Shanghai and Beijing hoping to win over millions of new consumers. The FT's Patti Waldmeir visits two lower tier cities in central China and looks at how Adidas is expanding in the far outposts of the Middle Kingdom.read more...»
An excellent case study here in how to grow a business through expansion into faster-growing international markets.read more...»
Students looking for a great example of how a UK business can transform its fortunes by focusing on the opportunities in emerging markets need look no further than JCB.read more...»
It is now six years since the global financial crisis triggered a prolonged downturn in economic activity. The UK economy, like other developed economies, has struggled to escape from a period of stagnant economic growth.
However, despite the weak economy, many UK firms have succeeded in significantly growing their revenues and profits.
Here are three examples of such businesses. Their strategies for success are different – but there are also some similarities.
Can you compare and contrast these three – and also identify some other businesses that have enjoyed similar success despite the tough economic environment?
You might also consider:
- What factors have driven revenue growth at each of the three
- Has their growth strategy been based on organic or external
- To what extent has their growth been driven by international
- Do you think their recent success can be sustained?
- What factors might that continued success depend on?
Let's face it. Nearly all of us associate Ikea with flatpack, affordable furniture. The Ikea brand has become a global success and, as we reported on the business blog recently, the Ikea format is well-positioned to achieve further success in key emerging markets.
However, Ikea's business portfolio is not just about furniture retailing.
In March 2013, Ikea announced that it is to partner with Marriott International to open a chain of three-star hotels. The chosen brand name for this joint venture between Marriott and Ikea is Moxy Hotels.read more...»
A superb article here from Reuters which examines the challenges facing Ikea as it accelerates its expansion into key emerging markets, notably China and India.
On the one hand, Ikea aims to exploit its global brand by applying the core retailing concept (epitomized by the store racetrack layout, flatpack goods etc) and core values that have enabled to it to become the world's largest furniture retailer.
However, Ikea also needs to be sensitive to the specific customer needs and wants in each national market if it is to meet customer expectations and compete effectively.read more...»
A simply stunning video here from the FT which is perfect for students wishing to gather some evidence on industries, firms and brands that have thrived despite the prolonged economic downturn in developed economies.read more...»
A great video to share here with your students and pose the question - can a fast food chain based on healthy eating succeed?
Students at tutor2u's EntrepreneurLIVE 2012 events met Vincent McKevitt, the entrepreneur behind Tossed, a healthy-eating fast food chain based in London.
It looks like Vincent might soon be facing some competition from an ambitious Canadian startup Freshii which is also testing the idea that fast food can be healthy by building a chain of healthy fast-food restaurants in the U.S. and around the world.
Can the concept work? Why not? But what will it take to encourage more of us to switch from the instant satisfaction of a burger or fried chicken.
And can businesses like Freshii and Tossed compete with established multinational fast food giants like McDonalds and Subway who may simply alter their product offering if significant numbers of customers decide to start looking for a healthy-eating alternative?read more...»
"We have no idea where these products will go" says one of the production line workers at a factory in China operated by Zhejiang Hongyu Medical Commodity Co. Ltd
Thousands of miles away, the final destination for those products are the shelves of retailers in developed economies, particularly the discount and/or single-price retailers who have enjoyed such rapid growth in recent years.
In this fascinating article, Tom Phillips reports for the Telegraph from Yiwu - a landlocked trade hub in China's eastern Zhejiang province - which conducts over £5bn of trade exporting low-cost consumer products around the globe. The article is a real eye-opener.read more...»
Perhaps we’re all guilty of picking up on ideas or stories that support a particular view that you feel is right. Ever since I began reading about doubts over the benefits of outsourcing and offshoring I’ve seen more stories on the same theme. There was Bob, who had outsourced his own IT job to China. Then came a special report in The Economist that asked some searching and detailed questions too (you can read more here).
And now the definitive proof - the "Nation's Noodle" is coming home. Golden Wonder's pot noodles are currently made in China and shipped 10,000 miles to the UK, but the 191-year-old British company that makes the product has cancelled its Chinese contracts in favour of making its own noodles in Leeds.read more...»
The value of the pound - or the exchange rate - is back in the news. It looks as though enough international investors have sold £££s that its value has fallen quite sharply. Here are some reminders of what this means, and some helpful reading links.read more...»
We probably now Samsung best for its smartphones, tablets and televisions. However, Samsung's business activities and operations are spread much wider than just those two important markets.
The electronics giant also makes military hardware, apartments, ships and operates a Korean amusement park! Imagine how complicated it would be if you were asked to compose a Boston Matrix for Samsung's entire product or business unit portfolio!read more...»
The central thrust of their argument is that the advantages of offshoring work (outsourcing overseas) are falling, fast. The logic of returning work to the developed economies looks fairly convincing.read more...»
A directive from The US Federal Aviation Administration has stopped flights of the Boeing 787 Dreamliner, until the plane maker has satisfied the regulator that it has resolved problems with the aircraft’s battery systems. Boeing’s shares had dropped by 2% $72.80 (£45.50) after the announcement. The share price of GS Yuasa the Japanese battery maker had fallen 11% since 7 January when an electrical fire broke out on a JAL 787 at Logan International Airport in Boston.
Tesco's decision to review the future of its US grocery supermarket chain Fresh and Easy will provide us all with some fantastic teaching material to use when looking at some core topics such as international expansion, product/market strategy (Ansoff), retrenchment and other elements of corporate strategy. Tesco have invested up to $1.6bn over five years in trying to establish the Fresh and Easy format in the US, facing fierce competition. The result? Heavy losses and no sign of achieving the break-even point, even after five years.read more...»
I’ve taken a lot of interest in Tesco’s overseas strategy, which took them to the United States in 2007 with their Fresh and Easy store chain. The set-up was bold; adding lots of capacity but high fixed costs, meaning the enterprise has consistently struggled to break even. Now Tesco have just confirmed that they are launching a strategic review that may lead to the sale or closure of its US operations. Dramatic news. What’s behind it?read more...»
Why and how should UK firms expand into international markets? Exporting provides a significant opportunity for UK firms to reduce dependency on demand from domestic markets. But exporting isn't straightforward and it carries risks if not implemented properly.
This short video features a UK business that has embraced the export opportunity. Selling overseas has made British skincare firm Eve Taylor stronger - their MD explains how.
Admittedly it's a bit of an advert for Barclays Bank (who made the video) but there are still some really useful insights for students.read more...»
As the October 10th deadline approaches, the board of BAE face significant difficulties to
complete the proposed merger with EADS.
Rather than merge with a rival, car firms may form alliances in the development of new products.
The BAE EADS merger proposal ought to help pupils attempt develop analytical skills using PESTLE, SWOT or stakeholder models. Can you use these management tools to develop your analysis and evaluation and go beyond application and understanding?
This concise case study looks at the growth strategy currently being pursued by one of Europe's largest brewers, Heineken International. It deals with many strategic issues relevant to the A2 syllabus and can be a useful case study or discussion topic.
From Father to Son. Long-term, generational succession is seen as key to the stability and success of businesses in Japan. This fascinating video from the BBC explains how the use of adoption has enabled Japanese businesses to maintain the process of succession.
A whole industry has evolved providing potential adoptees to businesses who are looking for suitable candidates to take on the family business ownership.read more...»
British Aerospace (BAE Systems) and EADS announced that they are discussing a merger.
A classic example of niche segmentation here, combining the design of a product for customers who will be prepared to pay a premium price for meeting their special needs and wants…read more...»
Yet more evidence of success at Jaguar Land Rover (“JLR”) which has reported very strong sales growth for the last quarter, driven by rapid expansion in emerging markets - particularly China.
The introduction of new models, together with full-stocking of cars in showrooms seems to have helped JLR outperform its competitors. JLR’s factories in the UK are running at high capacity utilisation and longer shifts are being introduced.
This BBC video looks at how JLR is achieving its sales growth and questions whether the growth is sustainable.
A useful piece here in Forbes India Magazine about the impending launch of Starbucks in India. Looks like the first Starbucks outlets will open in Autumn 2012, a little behind schedule - but a significant event nonetheless.
We reported earlier on Starbucks’ chosen method of market entry in India - a joint venture with Tata Beverages.
In January 2012, Starbucks announced its objective to open 50 outlets in India by the end of 2012, through a 50-50 joint venture with Tata Global Beverages. The two partners will initially invest a total of $80million to establish the business.
The Forbes article emphasises the role of choosing the right locations for the first stores. Mumbai looks like the first choice and it sounds like prominent positions in mainly business districts are being sought, as well as in well-established shopping malls, alongside other well-known brands such as Hermes, Calvin Klein and Zara.
The Greek economy contracted 6.5% in the first quarter of 2012. Carrefour, the massive french supermarket which is the world’s second largest retailer, has been operating in Greece in a joint venture with local partner Marinopoulos since 1999 and had 41 hypermarkets, 287 supermarkets and 479 convenience stores in Greece and Cyprus. They made 2.2 billion euros of sales there last year, but are thought to have made a loss of 440 million euros on that revenue.
A fall in sales of a further 16% in the first quarter of this year has now convinced Georges Plassat (a new CEO who took up his post last month) that it is worth taking a loss of 220 million euros to get rid of the business by selling it to the Joint Venture partner for just one euro, and the stock market clearly agrees with him as shares in Carrefour rose by 2.8% in Paris. Here is an example of a new CEO quickly making a decision to mark a change in strategy. Reuters quotes an un-named analyst who implies that the company needs to focus on its core business: “Greece was a market which had been dragging on them. They have their hands full with other projects. It’s better for them to concentrate on saving their French operations.”
M&S took a similar decision last month when they took a 44.9 million pound write-off on their Greek business. French bank Credit Agricole is transferring assets to France from its Greek subsidiary Emporiki bank. Given the deep uncertainty about what will happen to the Greek economy, a business strategy of retrenchment is looking like one which may gain momentum amongst overseas investors.
Our BUSS4 blog has a series of streamed revision presentations which students may find helpful in supporting their studies ahead of the exam. They are listed below:read more...»
The textbooks often find it hard to come up with a topical example of contingency planning which has widespread application - but I suspect that the possible break-up of the Euro zone is a good one. In fact I think this has to be the best example of a possible future event which is of such significance that almost every sizeable business needs to consider contingency planning.
With that in mind, this pdf document from accountants Deloitte provides some useful evidence of how contingency planning works. Its a detailed document and certainly not worth printing or reading in full. I have jotted down some examples from the document further below to illustrate the role that contingency planning plays for this potentially significant risk.
The key for students is to use examples like this to help develop the depth of their analysis. By using the Euro crisis, they are also able to demonstrate the use of relevant, independent research in their answers.
Let’s take a look…read more...»
I was reading today that BMW i8 engines are to be built in Birmingham. Why would the German-based car maker want to produce engines in the UK? What’s brought them here?
I often find this is a great induction session for students who are new to Business Studies, or those progressing from AS to A2 and are looking to apply their knowledge and understanding.read more...»
In the 1980s and 1990s, Ford embarked on a series of takeovers Jaguar, Volvo, Land Rover, all of which were sold off to meet the firm’s liabilities. It also had built up a substantial stake in the Japanese Mazda company, holding almost 1/3 of the share capital, making a successful bid by rival multinational car makers less likely.
Today’s business news included an announcement that Mazda was forming an alliance with Alfa Romeo develop a new two-seater rear-wheel-drive sports car.read more...»
For the BUSS4 exam this June, it is useful to understand why a merger may fail to work and a retrospective look at BMW’s acquisition of Rover back in 1994 provides a good illustration of several possible pitfalls.read more...»
The pound buys more euros now than since November 2008, according to a news clip on the BBC. Any Business Studies question with an international dimension gives you scope to talk about exchange rates. This might be a story for you to refresh in your revision, so that you can make a brief reference to it when you are looking to add application, analysis or evaluation to your marks.read more...»
The topic of emerging markets is hugely important for BUSS4 students. The economic growth and large populations of the ‘BRIC’ nations (amongst others) has meant many businesses, including some of the tutor2u twelve: have been targeting these countries as part of their strategies for growth. Examples include Starbucks who plan to have 1,500 coffee shops in China by 2015, and Apple as their Shanghai store sells more iPhones per square foot than any other Apple store in the world.read more...»
Those of you who are looking at business production, or operations management, (especially in A2 courses) will certainly want to read this week’s Economist either in the library, or by getting their own copy from the newsstand.
They are predicting a new industrial revolution, with a potentially enormous impact on all industries.
BUSS4 students can accumulate some useful evidence about changes in business strategy by examining the reasons for Tesco’s fall in UK profits, and their strategy to reverse the trend. There is an opportunity to do some ‘compare and contrast’ with the strategies of other businesses which are struggling to turnaround disappointing business results such as Nokia and others that have such as BA and Starbucks.read more...»
A fascinating and detailed look here at working conditions at Apple’s main supplier in China. This 15 minute video raises a lot of issues which students can develop; particularly useful for any discussion around CSR, but also excellent for operations and HRM. In the video, ABC News Nightline goes behind the scenes of the FoxConn factory - the operation which makes iPads and iPhones.read more...»
Students familiar with the concept of delayering will know that the benefits of successfully reducing the number of layers in the management hierarchy are not just limited to lower costs. Of course, there can be significant cost savings from delayering, particularly if the roles concerned are highly-paid. However, the strategic rationale for delayering is also usually linked with the need to improve the effectiveness of decision-making and making the business more responsive to customer needs.
There is a great example of delayering which was in the news yesterday (19 April 2012) concerning a decision by insurance firm Aviva to remove an entire layer from their organisational structure.read more...»
I like this short article from Channel 4 News which examines how Nokia’s competitive position has been severely weakened by the success of firms like Apple and Nokia.read more...»
This revision presentation provides an overview of the topic of emerging markets. It highlights some examples of how businesses have pursued a growth strategy in emerging markets and also how developed economies have seen investment coming in the opposite direction. A brief overview of the methods and benefits/drawbacks of international expansion is also provided.read more...»
A great article here for students researching the competitive environment in the consumer electronics industry. Students should certainly be familiar with the strategies of Apple, Samsung, Nokia, Sony and others. But have they heard of Huawei? It looks like they might soon, if Huawei is successful in its objective of grabbing a significant share of the smartphone and tablet markets.read more...»
Buried in this article about generating investment in Manchester are some gems of examples of why government might encourage foreign takeovers of British business. The article starts with an unlikely visit by Jim O’Neill of Goldman Sachs to the Manchester City stadium.
Famous for coining the term BRICS to describe the major emerging economies, O’Neill is equally famous as the leader of the Red Knights, who failed in their bid to buy Manchester United from the Glazer family in 2010 - the Glazer’s are accused by United supporters of failing to put enough cash into the club since they took it over. Sheikh Mansour, of Abu Dhabi, has poured money into Manchester City since he bought it in 2008 and there are ambitious plans to regenerate the whole area around the stadium.read more...»
It’s been a diffcult time in China for global retail giant Walmart recently, However, as the BBC’s Sharanjit Leyl reports in this short video, Walmart hopes to capitalise on the growing number of Chinese who do their shopping online, as the ‘bricks and mortar’ competition between foreign supermarket operators in Chinese cities becomes more intense.read more...»