This is a terrific article from BusinessWeek on the growth strategy of Xiaomi, a Chinese business that is fast-becoming one of the countries best-known global brands.
Lots in the article (and the related video which I have added further below) for business students to note - I have jotted down some of the things I spotted below.
We've written before about Xiaomi and it is certainly an important business to watch - take a look at the other business blog articles on Xiaomi.read more...»
My students and I invariably use Tesco as our shining example of failure in China (and failure after the departure of a long-term leader, and failure due to over-diversification, and failure due to neglect of their core market, and failure due to complacency over smaller competitors). However, Tesco today finalised the deal with China Resource Enterprise which gives them 20% of the largest food retailer in China. This BBC article could be used as a nice evaluation point to show that in the long term, Tesco could still be winners in China.
Tesco have kept a healthy foothold in the world’s largest food market, and due to China’s efforts to rebalance the economy towards consumption, the market is due to grow by 50% over the next three years.
More interestingly, Tesco appear to have learnt from their error and won’t try to “go it alone” in India. They have announced a joint venture with JLR’s parent company Tata Group to initially open 12 stores. From what we know of Tata (and the Indian market’s rapid growth forecast), it seems possible that Tesco may still recover from their recent slump.
If students are looking for a research example of a business that is truly built around a deliberate attempt to create and nurture a strong organisational culture, they need look no further than online shoe retailer Zappos.
Tony Hsieh - the founder of Zappos (bought by Amazon in 2009) wanted to build a business based around a simple idea. That it - if you get the organisational culture right - then everything else that you need to be successful will fall into place.
Is he right?read more...»
2 perfectly contrasting and counter-intuitive articles that show how “the markets” can favour retrenchment over growth.
Barclays announced it was slashing 19,000 jobs and reducing the size of its Investment bank. The immediate result? Share price surged 8%.
Carphone Warehouse announce a £3.8bn merger with Dixons that will “create a seamless experience” for their customers. The result? Dixons share price closed 10% down and Carphone Warehouse’s dropped by 8%.
By comparing and contrasting the 2 strategies (and the reasons for the resultant change in share price) students can show good analysis of the benefits of retrenchment.
Anthony Jenkins, in an interview in the Sunday Times, said it best by echoing/paraphrasing/plagiarising Howard Schultz after he closed almost 1000 Starbucks stores in the US - “Growth is not a strategy, it’s the by-product of good strategy”.
I hope the revision is going well!
In true tutor2u style, here we have an adapted resource that asks students to decide whether the annual sales ($bn, 2013) of one major global brand is 'higher' or 'lower' than another. The original resource was an economics activity comparing the GDP growth of different countries (available from this link).
This resource has been compiled by Paul Hoang, using data from Fortunes Top 100 companies. It is an interactive Powerpoint game that asks students to string together as long a sequence of correct answers as possible (the highest possible score is 36). The screen shows one business and its annual sales revenue for last year and then shows the name of a second business. The student has to say whether they think the annual sales revenue of the second company is higher or lower then that of the first business. Answer correctly they are offered another business to compare. Answer incorrectly, the student is 'out' and someone else can be invited to play.
This is a fun, interactive resource that gives students an insight into the relative sales figures of some of the world's major companies.
Click this link to download the resource.
The strategy of retrenchment is covered in this revision quiz
To update your knowledge and understanding of retrenchment, have a look through this revision presentation
Test your knowledge and understanding of Porter's Five Forces model with this ten-question revision quiz:
You can update your studies of this important model by looking through these support resources:
Here are 15 multiple-choice questions that test your knowledge and understanding of the key strategy models used in A2 business
Virgin Galactic is Richard Branson's dream to provide suborbital space flights to space tourists by 2015, and it provides a wealth of Business Studies concepts for AS and A2.
Firstly, the premium price of £150,000 to £250,000 (the cost of decent Rolls Royce to you or me) means it has a very specific target market; over 700 space tourists have signed up, with one third from America (the other two thirds come from over 50 different countries), most are millionaire men in their 50s and are definitely not risk-averse. Akin to Branson, many stated the moon landing of 1969 as the reason for their purchase.
In her quest for a new USP, Lady Gaga will be swapping her meat suit for a space one and be first earthling to sing live from space, ensuring that she maintains her outlandish, cutting edge image.
JLR & Virgin
These 2 iconic British brands are expanding the empire, and for BUSS4 students, the long-term partnership between JLR and Virgin, with their “shared vision of pioneering spirit, technological innovation and sense of adventure”, provides information for almost every section of the specification.
The CNBC article focuses on the technological innovations in JLRs new concept SUV.
In this short video, Richard Branson discusses his dream and vision, how JLR will aid Virgin in creating a completely new market and, to show that it’s not all about profit and pride, he hopes it will inspire future generations to pursue careers in engineering and science.
Abu Dhabi and beyond
Finally, Abu Dhabi state-controlled investment fund paid $280 million for a 32% stake in the business, in return for "regional rights to launch Virgin Galactic tourism and scientific research space flights from the United Arab Emirates capital". It sees this as an Investment opportunity to progress from an international tourism hub, to an inter-galactic one, with this article suggesting Virgin space hotels in galaxies far far away!
Boston Consulting Group have produced a fascinating new report which investigates the competitiveness of the world's top 25 goods exporting nations. Their press release highlights significant changes in the world order over the last decade. The newly-minted BCG Global Manufacturing Cost-Competitiveness Index incorporates four factors: energy costs, productivity, wages and exchange rates. That analysis shows that Mexico now has lower manufacturing costs than China, while Brazil is now one of the highest-cost countries, and the UK is the cheapest location in western Europe.
Hostile government, the threat of a financial meltdown, slowing growth, higher wages and an ageing population. Is China still the best option for foreign investment?
Compare this to India's younger, cheaper workforce, more welcoming government and forecasted largest middle-class population by 2030.
To allow students to analyse and evaluate the benefits and drawbacks of investment in China , I've attached a research task based on India that gives key economic and demographic information, and looks at the "Indian strategies" for the following Tutor2u BUSS4 Top Ten businesses: JLR, Starbucks, KFC, Apple, Samsung and Ikea.
Good luck with the revision this term!
An item on the BBC website looks like a good source of revision about entrepreneurs and what drives them, and how they respond to failure. Eight high profile entrepreneurs, including Richard Branson, Richard Reed, Liz Earle and angel investor Dale Murray, talk about their biggest failures, and what they have learned from those - so offer plenty of opportunities for the vital Application which students can add to their exam answers. This could be useful for students sitting all four of the BUSS papers, as the examples cover a wide range of business topics, from dealing with suppliers to the risks of entering new markets, and from aspects of leadership to the best way of exiting a business.
The written article uses extracts from an edition of 'On the Money' which was broadcast on Radio 5 on Sunday - and available to listen to on i-player until Sunday 27th April.
No doubt like many of you, the bulk of this week (and last) has been spent attempting to get on top of my workload and capitalise upon the opportunity the Easter break has presented. Having said that, work and revision for the June papers is only optimised when effectively combined with an appropriate amount of rest and relaxation. For me that has mainly consisted of over-dosing on the hit TV series Breaking Bad.read more...»
Following on from Jim's blog updating us on Starbucks strategy, here is another great 4 minute CNN video interview with Howard Schultz in which he talks about his app that allows customers to order on-line. The factors leading to this are the rise in internet shopping and subsequent reduction in footfall in shopping centres, but will online-ordering reduce the impact of this? Schultz talks about the need for all retail businesses to completely transform the way they do business, and as always, Starbucks seem to be ahead of the curve.
He explains the benefit of technology and data to help him better meet the needs of the customers (and ultimately shareholders), but is adamant that robots will never serve the coffee as this will detract from the customer experience instead of enhance it.
Another gem of a video that covers strategic planning, innovation, technology and customer service.
Starbucks - always one of the best BUSS4 research examples - continues to be a source of inspiration for business teachers and students. I picked up on this excellent Q&A interview between CEO Howard Schultz and Bloomberg Businessweek which is packed with useful research insights.read more...»
Two very interesting stories regarding Google’s intentions of world domination (in a nice way) via innovation, product and market development.
Firstly, in an effort to “de-dorkify” the Google-Glass and appeal to a wider audience, Google have struck a deal with Luxottica (the makers of Ray-Bans and Oakley sunglasses) to design the wearable device. The deal looks promising and Luxottica’s share price increased 4% after the deal. At the same time, Google founder Sergey Brin has been denigrating mobile phones saying that they are socially isolating, with “people walking around hunched up, looking down, rubbing a featureless piece of glass”. This is a great example of how Google are trying to push what they hope is their next rising star by challenging accepted norms about how we currently interact.
Secondly, to “connect the two-thirds of the world's population which does not have affordable net connections”, Google has launched Project Loons, which consists of floating balloons laden with 3G equipment into the skies over lesser developed countries. The driving force behind this is of course altruistic, with an ancillary benefit being that billions more people will use Google services. Moved by this act of philanthropy, Facebook intend to do the same, but using solar-powered drones instead!
Perfect stimulus for discussions for Ansoff’s Matrix, Boston Matrix, Innovation, Competition, Overcoming barriers, CSR and Strategic planning.
A combination of excellent news articles from last week have helped my students and I to fully understand the size and scope of Alibaba. Former teacher (and self-confessed technophobe) Jack Ma’s online company has experienced exponential growth and led to fear and envy from some of China’s (and the world’s) biggest companies. However, in his modesty he has described himself as “a blind man riding on a blind tiger”, giving him instant legend-status in our eyes!
The attached presentation has videos, hyperlinks and infographics that allow students to focus on the various elements that have led to Alibaba’s potential $150bn valuation. Each slide focuses on a different section from the BUSS4 specification thus giving information on leadership, strategy, competition, diversification and the economic (electronic) environment.
Hope it helps.
I talk way too much in lessons, I can’t help it. So, to reduce my word emissions, my students and I collated a handful of concise quotes from artist, sportsman, writers, leaders and businessmen on the topics below. Some are great, many are cheesy, but they make for a good display and help students find links between business studies, entrepreneurship and the other subjects they are studying.
How can it be that the announcement from Morrisons today that they have made a £176m pre-tax loss for the year to February 2, has caused Tesco's share value to fall to its lowest level in almost a decade?
There are a couple of articles here which give students a good opportunity to analyse the internal and external influences which are forcing Morrisons to change their strategy, and the effect of that change on their competitors. As this article in the Daily Telegraph explains, the problem for Tesco, and for Sainsbury as well, is in the change of strategy that Chief Executive Dalton Philips announced in order to try to turn this around. Morrisons intend to cut their costs aggressively, by £1bn, and to use those savings to cut their prices.read more...»
“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...»