OCR A2 Economics Unit F585 June 2013 | AQA A2 BUSS4 | AQA AS Applied BS03 | IB B&M Royal Danish Bearings | OCR AS Business F292 | OCR A2 Business F297 | OCR AS Applied F242 | OCR A2 Applied F247
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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!
The business currently has around 350,000 employees and in 2011 reported revenues of $220 billion and economists estimate that Samsung's revenues account for about 20% of the value of South Korea's economy! Whilst there are plenty of highly diversified businesses out there in the global economy (conglomerate multinationals). I'm struggling to think of one of such scale and diversity. Tata Group, for example, doesn't come close despite its extensive takeover activities in recent years.
But might Samsung be too diversified? Does this reduce the risk of innovation in the business?
This short video from CNN highlights some of the Samsung businesses that are not so well known to us: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...»
A great example to use here which combines takeovers/mergers and also Ansoff’s Matrix. Starbucks has used a recent takeover as the platform for the launch of a new store concept which it hopes will generate sales and profit growth outside of the core coffee market.read more...»
A significant example here of strategic choice when it comes to evaluating the options for growth. Starbucks has opted to enter into a strategic alliance with Tata Group as it attempts to establish a position in the Indian market.read more...»
For any colleagues and students researching the Tata Group takeover of Jaguar Land Rover in 2008 - this is a must-watch video interview. In fact, it has broader relevance to anyone wanting a concrete example of how to respect the culture of a takeover target as part of a long-term plan to increase shareholder value.read more...»
A business studies lesson gem from an unusual source here - the politics team at the BBC! Germans use the word “mittelstand” for the millions of middle-sized companies that form the backbone of their booming economy, and some in Britain reckon the model could teach UK industries a few lessons…read more...»
The importance of understanding and adapting to the business culture in international markets is illustrated well in this new short video from the Telegraph. Some great insights packed into this short piece, including issues that you might find surprising!
You might reasonably believe that a legal squabble about screening Sky football matches in the pub had little to do with Business Studies. But in fact the recent ruling sheds a clear light on the single most important feature of the European Union to UK businesses.read more...»
Operating a business in a developing economy is cheap, right? That’s why the BRIC economies have a comparative advantage, right? Wrong! At least, not in Brazil. The FT report the high costs of setting up in such a booming economy, highlighted by the fact that it is cheaper now to get your shoes shined by a Brazilian in New York than by a Brazilian in São Paulo. So businesses wanting to expand to Brazil and get the benefits of its high growth rate need to be aware of the low margins they will make, at least at first.read more...»
The Tata takeover of Jaguar Land Rover (“JLR”) in 2008 is one of our five “must research” deals for the AQA BUSS4 research theme in 2012. And this recent article provides students with some compelling evidence about how successful the takeover has been for Tata, the private Indian conglomerate that is now the UK’s largest manufacturer. The Telegraph reports that JLR made record pre-tax profits of £559m in the final three months of 2011 as demand for its premium cars soared in Asia. This follows on from JLR’s record profits of £1.1bn in 2010.read more...»