Get Summer 2014 Right First Time with tutor2u Exam Coaching & Revision Workshops
“students never really cognitively understand something until they can create a personal metaphor or model”
To help students understand how a business can overcome the many barriers to success in China, we used the metaphor of trying to gain the affections of a beautiful, foreign (but very high-maintenance) woman… called China! The analogy worked surprisingly well and we compiled the pros and cons on the attached PowerPoint.
To summarise, everybody loves China because…
- She’s beautiful
- She’s popular
- She’s rich (14% of global GDP in 2010)
- She has over 1 billion “things” to offer you
However, the problems are that…
- She’s very picky and discerning (48% of foreign businesses have failed within 2 years - WeberShandwick)
- She likes designer goods (“will purchase 20% of world’s luxury goods by 2015” - McKinsey)
- You don’t speak her language or know what she wants
- There are a lot of locals who do (35% of businesses feel comp from local is the 2nd biggest threat - The Economist )
- Her parents are strict and probably won’t like you (Hostile government - 32% see the Chinese government as the 3rd biggest threat)
- Her parents seem to prefer the locals (Protectionist approach – local businesses nurtured with fiscal and financial help)
So what do you do to succeed? The answer seems simple; learn why so many have failed, make sure you’re better than the rest, learn the language, culture and habits, give her what she wants and keep the parents happy!
This then led to application to businesses such as JLR, LinkedIn, KFC and Starbucks and what they did to build strong long-term relationships with the beautiful China.
This article about Mothercare asks whether it can be reborn, following a series of errors and decisions which have gone wrong. So it makes a very good case study from which students can identify decisions which were made, and turned out to be mistakes, and also actions which were not taken, and probably should have been. Their sales have been falling for years, they have restructured and reduced staffing, they issued a profits warning in January which led to £112mn being knocked off their share value, and now their Chief Executive has resigned - and yet they have a well-respected brand and the nature of their market means that their products are in constant demand.read more...»
My students were particularly interested in Facebook’s acquisition of WhatsApp for the ridiculously high $19billion. We used the previous blog, then delved deeper and found a few great related articles; one explaining why it was a good price ($42 dollars for each of the 450m customers) but bad strategy and the other predicting that WhatsApp will not help them succeed in China. To summarise the two:
- WhatsApp is pro-privacy and data-free
- WhatsApp CEO Jan Kuom is sticking to his “ad-ban”
- WeChat – China’s domestic messenger service already has 300m customers and better functionality
- WeChat helps China’s economy and is subject to Chinese law (meaning “they” can keep tabs on the content).
- Chinese government banned Facebook, linked them with an act of terrorism and state media claimed that “80 percent of China’s net users felt Facebook should be punished”
- The government don’t want Facebook siphoning money and talent away from China’s domestic social media industry, most notably Weibo (China’s Twitter), whose profits have just jumped from $2.4m to $44.5m!
Segueing seamlessly to a social networking firm that seems to have secured a way into China; LinkedIn is trialing it’s Chinese language site via joint ventures with Sequoia China, China Broadband Capital and the aforementioned Weibo and WeChat!
Chief Executive Jeff Weiner said the deal has raised “difficult questions” for him, and has been forced to make various concessions in order to adhere to the Chinese Government’s censorship requirements, but believes that “LinkedIn's absence in China would deny Chinese professionals a means to connect with others on our global platform,"
Overall, these combined articles give students relevant ammunition for each of the research “bullets” as it covers success, failure, methods of operation and ethical implications of entering the Chinese market.
It would appear that social network firms need to network with Chinese social network firms if they want to become social network firms that operate in China. Simple really.
After Facebook’s acquisition of WhatsApp, I thought this made an interesting exam question. I've compiled a PowerPoint (Facebook_Whats_app.ppt) with graphs and hyper-links and asked students to research the facts behind the purchase. The main reasons seem to be:
- WhatsApp exponential growth was becoming a threat
- Facebook’s “determination to be the 'next' Facebook”!
- WhatsApp's comparative success in Europe
- Messaging companies becoming the social networks of choice for the young
- Google tried and failed
Whilst Facebook's share price fell and then recovered after the purchase, analyst Ian Maude stated "expensively buying every competitor does not feel like a long term strategy". Are Facebook, like Apple, losing their competitive edge?
Hope it helps.
We have blogged about Huawei several times recently. Huawei is a terrific, though controversial example, of a fast-growing Chinese business with global ambitions which poses an increasing competitive threat to established multinationals.
For example, in this blog entry we reported on how Huawei is investing heavily in innovation and new product development: 62,000 of its 140,000 staff work in research and development, and it has 23 R&D centres around the world.
Two recent news articles highlight how this investment in R&D is starting to bear fruit, even if (in the case of 5G the returns are still a few years away)
There has been much media attention recently about the roll-out of 4G mobile networks (thing Kevin Bacon strolling through the streets extolling the virtues of EE). However, Huawei already has its eyes on the next (5G) generation of mobile networks which offer the prospect of data speeds up to 1,000 times faster than the current performance. That's some prize for the successful developers and Huawei is investing over $600m into the research necessary.
5G mobile networks might be 5-6 years away, but a more short-term opportunity looks like the impending competitive battle for wearable technology. The Wall Street Journal reported yesterday on plans by Huawei to take on Samsung and (potentially) Apple by launching a smartwatch at an upcoming technology convention in Barcelona. Another example of Huawei's ambition to compete on the global stage, particularly in consumer electronics.
Whilst quoting Sun Tzu’s The Art of War is normally reserved for market traders and Gordon-Gekko-types, I’ve used the attached PowerPoint (Sun_Tzu_The_Art_of_Business.ppt) as a nice introduction to Strategic Planning (and, quite appropriately, expansion into China) with A2 students, and Business Planning with AS (a little tweaking may have to take place for the different year groups).
I’ve picked out a few choice quotes from the 2500 year old text and asked students to write down the business implications (or advice it gives) to businesses. Finally, students need to plot all of the factors a manager/general must take into account to ensure a strategy of success.
It can take as little or as long as required, but is an interesting way of getting students to understand that strategic planning is the key to success in war, competition, business and life.
Hope it helps.
It has arrived there somewhat later than its major competitors. However, McDonald's has finally open its first outlet in Vietnam. It is a significant moment for an icon of globalisation, not the least given the historical connection between the USA and Vietnam.read more...»
Sony’s embattled CEO Kazou Hirai and his Board have been reviewing their product portfolio in recent months and the result is a strategic choice to remove two “dogs”.read more...»
This article in Forbes is a useful example of a multinational that has decided that China is no longer an attractive business opportunity.read more...»
OUP is one of the country's major academic book publishers, and naturally enough it has commissioned and published new studies on the outbreak of the First World War. A new book 'Saving the City', by Richard Roberts, covers the financial crisis which broke out in Britain, after the assassination of Archduke Franz Ferdinand in 1914.read more...»
Google’s $3.2 billion purchase of Nest and current shopping spree into all things futuristic has made for an excellent BUSS4 case study. Attached is a 10 slide PowerPoint (Google_mergers_and_acquisitions.pptx) with videos, articles, hyper links and questions that can either be used as a homework task to start students on the road of research, a lesson in which students work independently and focus on the sections they find most interesting, or a catalyst for discussion about the similarities of Google, 1984 and Brave New World.
Whilst it focuses on acquisitions, by the end of the lesson all students were able to analyse Google in relation to the following BUSS4 topics:
- Mission statements, corporate aims and strategy
- Government intervention (or Google’s intervention with the government)
- Managing change
Most amusing is the Daily Mash's vision of a world run by Google... as if we have a choice!
The announcement of Google's takeover of smart home-appliance maker Nest for $3.2bn is potentially hugely significant for Google.read more...»
The challenges for businesses outside China gaining a profitable share of fast-growing markets in China have been illustrated by two recent announcements by leading multinational cosmetics firms - L'Oreal and Revlon.read more...»
In this six minute interview with The Economist, our good friend Tim Richards, CEO of Vue Cinemas, discusses the strategies the company has adopted as VUE has completed its massive investment in digital projection.read more...»
Retailing is a dynamic market, and firms which have been slow to adapt to changing technologies, falling real incomes, and different patterns of consumer behaviour have been losers rather than winners.read more...»
These two pieces of video evidence on South Korean multinational giant Samsung are pure business studies gold - particularly for students preparing their evidence for AQA BUSS4.
Samsung is a highly diversified multinational that is the most significant firm in the South Korean economy. It has achieved a strong record of improved profitability, quarter after quarter, as demand for its product portfolio has grown, particularly mobile devices. However, in January 2014 it announced that it expected to suffer a fall in profits, It expects to make an operating profit of 8.3 trillion won ($7.8bn; £4.8bn) for the last quarter of 2013, down 18% from the previous three months.read more...»
There’s just been a terrific book review in The Economist picking up on a great topic: corporate culture. The term is on everybody’s lips at the moment, helped by the current Leonardo DiCaprio movie ‘Wolves of Wall Street’, which is said to present a damning picture of the behaviour of some US banks.read more...»
You read the books; you watched the movies; you've visited the theme park. Next up - the Harry Potter Musical?read more...»
Wal-Mart - the world's biggest retailer - has struggled to establish itself in China. However, the world's second-largest economy must still remain an attractive and strategically important opportunity for Wal-Mart, particularly given its need to find better growth and returns to offset maturing performance in the US.
This FT article (and accompanying video below) describes how Wal-Mart is is refocusing its growth strategy in China by using its Sam's Club chain to target affluent Chinese consumers in the main Tier 1 and Tier 2 cities.read more...»
A terrific example here of how a return to core, basic retailing skills has enabled fashion retailer Bonmarche to turn around its performance and future.read more...»
It has been along time coming (a six year negotiation), but Apple has finally signed the deal that enables it to connect to hundreds of millions of increasingly affluent consumers in China.
Apple has agreed a deal with China Mobile - the world's biggest network of mobile phone users - to sell iPhones to the network. China Mobile, which has about 760 million customers, will begin registering orders for iPhone from December 25 2013 in a deal that is likely to add many billions of dollars of annual revenues for Apple.read more...»
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...»
Tucked away in a dark corner of the #buss3 syllabus is a topic entitled ‘Competitive Organisational Structures’. It is my experience that there is a temptation for students to be fooled into thinking that this is simply a re-hash of the content they considered during #buss2. For most it probably is, but for those wishing to buy a ticket to ‘Success Ville’ and ride the A-train all the way to June 2014 the topic is, in fact, completely different.read more...»
Last week The Queen and the Duke of Edinburgh visited One Angel Square in Manchester to open the world's "greenest" office, the new £100 m 14-storey headquarters of The Co-Operative Group. Yet within 72 hours, celebrations turned to dismay when The Mail on Sunday printed a story linking The Reverend Paul Flowers, a former Co-Op Bank Chairman with illicit drug use.read more...»
This revision presentation highlights the key opportunities and threats faced by firms outside China looking to do business in and with China. It also provides examples of businesses that have succeeded in China and those that have struggled!
A fully editable and printable version of this presentation is included in our AQA BUSS4 2014 Toolkit on China which is being published on 8 November 2013.read more...»
This revision presentation provides an overview of the key considerations and options facing businesses outside China looking to enter the Chinese market.
A fully editable and printable version of this presentation is included in our AQA BUSS4 2014 Toolkit on China which is being published on 8 November 2013.read more...»
A superb short video here from the business team at Reuters which highlights a strategic challenge facing camera manufacturers in Japan.
Top-end cameras for professional use are almost all Japanese - Japan made 81% of all digital cameras in 2012.
However, the emergence of high quality photography features on smartphones has slowed down demand for mid-range digital cameras.
Camera makers are moving away from compact digital cameras and moving towards the high-end market segments where sales might be lower but profit margins are higher.read more...»
Ansoff's Matrixis a key part of most business studies courses and on the face of it is an easy model for students to understand.
The model was created by Igor Ansoff and was first published in 'Strategies for diversification' in 1957.
The basic premise of the matrix is that there are 4 different strategies that a business can adopt with each one carrying a different degree of risk. At first glance this is simple to apply. For example, a business launching new products into new markets is a high risk strategy because it consists of both product and market development and the business may be operating outside of its comfort zone.
Where Ansoff can become tricky is correctly classifying which strategy the firm is adopting.read more...»
Entrepreneurship, finance, research, corporate culture, marketing, product development, changing management structures are all part of the ingredients in this BBC entrepreneurship feature about the development of Charlie Bingham's Foods.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...»
A fascinating and useful profile here from The Economist of Zhang Ruimin, the Chinese entrepreneur who has guided Haier through a successful strategy of international expansion.
Ruimin challenged the preconception that Chinese manufactured goods could be produced very cheaply but to a poor quality. His relentless focus on higher production quality has enabled Haier to become the world's largest producer of "white goods" such as washing machines, fridges and freezers.read more...»
Innovation turns business markets upside down, it alters the price and use of resources, it creates and destroys revenue flows and profitability as well as the way we work.
Peter Day a former BBC presenter considers a significant changes in a BBC Radio 4 series this weekend. Consider how the internet, search engines and 3D printing or additive manufacturing might alter market production processes, job opportunities marketing and economies.
There is much to discover and discuss in his superb introductory article linked above. The broadcasts are linked here.
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...»
It looks to me like the last throw of the dice. A final attempt to cut costs, stem rising losses and rationlise a business so that a buyer can be found - even in its current distressed state. But will the announcement of 4,500 job losses be enough to save Blackberry?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...»
In early 2013 the BBC asked global brand research company Millward Brown to identify the 20 most powerful foreign brands in China: the ones that have gone in and succeeded where many others have failed.
When the results came back one noticeable feature was that one company - Procter and Gamble ("P&G") - had three of the top 5 brands!
Of course you might expect P&G to be successful in China. After all, P&G is the world's largest maker of household and personal-care products. At the start of this decade P&G had set itself an ambitious corporate objective. It aimed to add 1 billion customers by 2015 (a 25% increase) and P&G were clear that emerging markets would be crucial in achieving that goal. Of all the emerging markets, P&G is strongest in China, which by 2012 had become its second-biggest national market with around 6% of the firm's worldwide sales.
So how has P&G managed to achieve such a strong position in China? Why had P&G succeeded when so many other Western brands had struggled to establish a leading position there?
To understand the achievement, you need to go right back to when foreign firms were first allowed to enter China. Here are some key features of the P&G approach to building its business in China.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...»
A useful article here in BusinessWeek for business teachers and students - particularly those interested in the sports wear market. The article analyses recent comments by the CEO of Under Arnour, a fast-growing and increasingly global sports wear brand.
Under Armour is a great example of a business that has been able to sustain high levels of revenue growth using an organic growth strategy. But can it sustain this growth?read more...»
As the new term welcome and induction activities draw to an end this week, our focus turns to 'chalk and talk'. I've just completed my first topic of teaching A2 (on the AQA spec) and the mix of research and discussion led to a group creation of the first essay for Upper Sixth.read more...»
It's all over for Nokia CEO Stephen Elop and his 32,000 employees in the core of Nokia - their mobile phones (handset) business. After several years of struggling to turn the business around in the face of intensive competition from Apple, Samsung, Google, Huawei and others, Elop has decided the best option is to sell the business to Microsoft.read more...»
This looks like a must-watch and must-record series from Robert Peston. Robert's new three-part series takes us behind the scenes of some of Britain's most successful retailers and also explores their history, heritage and organisational culture. Robert Peston Goes Shopping is on at 9 p.m. on Monday nights starting 2 September. Fantasticread 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...»
For years, BSKYB has dominated the market for subscription-based television using the rights to broadcast high-profile sports to attract and retain household subscribers. However, the markets for consumer media consumption are converging and this has led to the emergence of a new, powerful competitor for BSkyB - BT Sports.read more...»
An excellent case study here in how to grow a business through expansion into faster-growing international markets.read more...»
Harriet Green's strategy for Thomas Cook looks like it might become a classic case study in how to achieve a successful turnaround for a business with a strong brand and customer base but a weak balance sheet (gearing too high).
Before Green could get the balance sheet right through a refinancing, she had to get the business right first. She needed to change the organisational structure and improve profitability and medium-term cash flow through a strategy of retrenchment. This has been a painful process but it made it much easier when Thomas Cook approached the stock market to raise new share capital (equity) and reduce the amount of debt.
This short interview with Harriet Green is packed full with great A2 business studies materials as she explains the basics of her turnaround strategy.read more...»