P&G's Connect and Develop Strategy for Innovation

Reinventing P&G's innovation business model

P&G's old strategy for innovation was based on the invention model where innovation comes from within the company - 'invent it ourselves' model. Earlier, innovation at P&G meant building global research facilities and having the best talent in the world develop unique products or inventions. But with the times and technology changing and P&G growing enormously, the old model was not working. P&G needed a new approach.

New innovation model - Connect and Develop

P&G knew that for every researcher it had, there were many others who existed outside the organization. So, rather than sourcing for innovation from within, P&G wanted to identify potentially good ideas throughout the world and apply its own capabilities to them to develop better and cheaper products, faster. The model was called "Connect and Develop". The new model allowed P&G to shift its centralized approach to a globally networked internal model.

Nokia's three-way strategy to capture the mobile music segment

• Launching devices with advanced multimedia capabilities and that stimulate consumers’ imagination.
• Using the Internet, adding value to devices with innovative services like the Music Store and Comes with Music. These services offer the best possible mobile music experience to the customer.
• Providing the customer with the best updated/dynamic local content with suitable partnerships.

McDonald's Pricing Strategy in India

McDonald's in India

McDonald’s began operations in India in 1996. The fast-food chain started making profits after it broke even in 2008. Reports suggest that McDonald's two subsidiaries in India, Connought Plaza Restaurants based in New Delhi and Hard Castle Restaurants in based in Mumbai posted accumulated losses of Rs 189.19 crore and Rs 119 crore in fiscal 2008. A total of Rs 211.41 crore of accumulated losses for fiscal 2008 for the company. India and China continue to be high-growth markets for McDonald's. The top management felt that McDonald's had achieved tremendous brand success in India and there was nothing extraordinary about accumulating losses and that McDonald's India was not a unique case as the company was making losses similarly in many other markets.

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What McDonald's is doing to increase the footfalls and increase the store utilisation?

McDonald's menu is recognized world over for its affordability. A McDonald's store gets an average of 3,000 walk-ins every day in each of its 165 restaurants in India. Typically, a customer visits a McDonald's store twice. The key is to make that customer visit the McDonald's store a third time so that the existing store space and rent can be leveraged further. Earlier attempts by McDonald's to do so included adding breakfast to its menu, longer hours of service, setting up of kiosks etc. Eventhough breakfast was on its menu globally, it was on launched on a trial basis in India.

However, McDonald's had a 'snack joint' tag in India. To overcome this McDonald's added a lunch and dinner menu.

McDonald's Pricing Strategy in India

In September 2009, McDonald's announced reduction in prices by almost 25% for its lunch and dinner menus. Prices for its extra-value meals like McVeggie and McChicken were reduced to Rs. 85 and 95 respectively from Rs. 110 and 120 respectively. Typically a meal consists of burger, French fries and soft drinks. This strategy was surprising as it came at a time when food prices were increasing by the day. Cutting prices in such times did not make sense. But the management in India was convinced that tweaking the prices of it combo meal offering would help customers prefer McDonald's as a lunch and dining destination as well.

P&G’s Leadership Case Study – ‘Build From Within’

Succession Planning at P&G

"If I get on a plane next week and it goes down, there will be somebody in this seat the next morning,” - A.G. Lafley, P&G’s CEO as quoted in Fortune magazine.

Lafley took over Procter & Gamble (P&G) as CEO in 2000 and since then has been very successful in increasing sales by 110% and tripling profits. Does he have a succession plan? If he does he has not disclosed it yet and is certainly not overly concerned judging by his above statement. What is the reason? Does P&G have a strong leadership development program

P&G’s Leadership Program and Proctoids

P&G’s leadership program is called “Build From Within”. The program helps track the performance of each manager in a very detailed manner. The program ensures a manager is ready for the next level. According to CEO Lafley, “Each of the top 50 jobs already has three replacement candidates lined up.” Lafley himself oversees the development of the top 150 employees.

At P&G, a business school graduate is recruited at an entry level position. This position offers him/her a major window of opportunity for becoming what's known in the company as a Proctoid (less than 5% of hires come from the outside at a later stage). Proctoids discuss their business goals, their ideal next job, and what they've done to train others during monthly and annual talent review sessions. The recruits select a career track depending on his/her goals and P&G's needs. They are then trained to work in different countries and businesses. This helps build deep bench strength. So when a position is open, P&G has a pool of employees who are ready to move in to the new position in a particular country or region. According to Lafley, "We can fill a spot in an hour, that's the beauty of the system."

Training and Internal Reputation

P&G has a training center near to the CEO Lafley’s office where all executives teach and hold weeklong "colleges" for employees entering new levels. An executive’s willingness to train others ultimately determines who advances. Moheet Nagrath, head of human resources at P&G believes, “If your direct reports aren't ready, neither are you. A manager who isn't good at developing others doesn't attract the best talent [to be on his team]. Internal reputation is crucial.”

Advantages and Success Factors for the program

• Loyalty
• P&G rarely hires from outside, promoting talent from the inside
• At P&G, less than 5% of hires come from the outside at a later stage
• P&G maintains a comprehensive database of its 138,000 employees. An employees’ performance (stars) are tracked carefully through monthly and annual talent reviews.

Disadvantages

• Promoting from within can build well oiled teams that act quickly but at the same time builds an insular culture where most people think in similar ways. This can hinder innovation.

Related Case Study:
Download Business Strategy Case Study on Restructuring at Unilever - Path to Growth Strategy (PDF)

Corporate Social Responsibility (CSR) and McDonald's

The chief electoral office of Delhi, India decided to launch a series of advertisements in April 2009 at McDonald's retail outlets to encourage young voters for the Lok Sabha elections - the largest ever democratic process in the world. McDonald's which has around 155 restaurants in India (including 35 in Delhi) is keen on the idea and considers it as its social responsibility to make people aware and encourage to participate the democratic process.

McDonald's in India

McDonald's was launched in 1996 in India and has established itself as the family's favorite quick-service restaurant. According to estimates, McDonald's stores have an average of 2,750 walk-ins in each of the 155 stores. India counts itself amongst the top 10 per cent of the busiest markets for McDonald’s anywhere in the world. In India, McDonald's had decided not to launch its beef-based core product - the hamburger - so that it didn't hurt religious sentiments of the Hindus.

The Strategy - Building awareness among citizens

The strategy is simple. Delhi has approximately 40 lakh electors between the age group of 18-29. McDonald's is popular among the younsters and catchy slogans and messages will encourage them. McDonald's India wants to support the task of building awareness amongst citizens and remind them of exercising their right to vote.

Related Reading:
Download management case study (PDF file) on McDonald's Business Strategy in India

Restructuring challenges at electronics giant Sony

In December 2008, Japan's Sony Corp. - the world’s second-largest consumer electronics maker - announced a few restructuring measures primarily aimed at changes in management and manufacturing. These include:

• A $1.1 billion savings plan in its electronics division
• Cutting 16,000 jobs
• Pulling out of businesses and limiting investment for savings of almost 100 billion a year

Analysts believe the company needs more and bigger restructuring measures to improve its slowing sales and inventory pile-ups. Another challenge Sony has been facing are cultural clashes between its Japanese, US, and European operations. Restructuring moves would imply changing many of its long-established business practices (the Japanese business culture which is so deeply connected to its social culture). The restructuring plans include shutting down of some of its major divisions in its Japanese domestic operations. How Sony would go about facing these challenges and are more restructuring moves imminent amidst the financial crisis and lower consumer demand? Sony's first non-Japanese CEO, Sir Howard Stringer sure has his task cut out.

Nokia's new Brand campaign and Manufacturing in India

Nokia in India - New Brand campaign

In October 2008, Nokia, the world's largest mobile phone maker launched a brand new campaign with the tagline 'It's not just a phone, it's who we are'.

Nokia selected Priyanka Chopra, former Miss World and current Bollywood actor, as the Brand Ambassador. The company believes the young actor's brand association will create a deeper connection with its young and style-savvy consumers and the new ad capmpaign featuring her will represent style, modernity and individuality. The TV campaign would be integrated with other consumer touch points like print, outdoor, radio, online and digital media.

Nokia's other brand ambassadors include Bollywood's leading actor - Shahrukh Khan. The company has already planned to bundle exclusive content featuring the actor for handsets sold in India. His movie 'Om Shanti Om' movie was recently bundled in Nokia N96.

New Indian factory

In October 2008, Nokia Siemens Networks, the second-largest network gear provider in India after Ericsson, announced that over three years it will invest $70 million in a new Indian factory in Chennai (south of India). The unit will make and distribute mobile communication equipment. Nokia Siemens already has a manufacturing facility in Kolkata in eastern India, where it makes fixed network equipment.

Also, in October 2008, Nokia’s handset manufacturing unit in Tamil Nadu (with over 8,000 workers) reached production volume of 200 million handsets within just three years of starting operations. Around 50 per cent of the production is sold domestically and the rest is exported. Nokia has two manufacturing units in China.

Nokia has a 62.5% market share in India while Samsung, the second major player with Aamir Khan (lead Bollywood actor) as the brand ambassador, has a 8% share.

Download PDF file on Nokia's Business Strategy in India
Article on Nokia's Strategy in the Emerging Markets

Michael Dell's Turnaround plan working

Dell posts higher-than-expected quarterly profit

Michael Dell's return and turnaround plans were paying off as the world's No. 2 personal computer maker, posted higher-than-expected quarterly profit aided by strong demand from consumers and foreign markets and cost cuts. Last year, Dell had lost its spot as top PC maker to Hewlett-Packard (HP) and was struggling to regain momentum. In January 2007, Michael Dell had returned to the chief executive post. In May 2008, Michael Dell selected Brian T. Gladden (working with General Electric, GE), to take over as chief financial officer (CFO) at the troubled PC maker. Dell aims to shave $3 billion of its operational costs. Dell also announced plans to cut 8,900 jobs to reduce costs, but Asia would see more job growth as it formed a large part of it's supply chain. Meanwhile, Dell's supply chain ranked third in the fifth-annual "Supply Chain Top 25" list released by AMR Research in May 2008 behind Apple and Nokia. Dell's supply chain was acknowledged for its outstanding inventory turns and high marks from peers.

Dell's strong International Growth

Dell believes that in around five years time its sales outside the U.S. could account for two-thirds of total revenues. Its sales in international regions topped U.S. revenues as corporate customers in the United States were uncertain about buying given the current and future economic outlook. Brazil, Russia, India and China (BRIC) led the way with 73 percent shipment growth in the quarter ended May 2008. Americas revenue rose 1 percent in the quarter.

Related Reading
Download Pdf file of management case study on Dell's Supply Chain Management Practices

Home Depot and other retail chains slow down expansion plans

Home Depot, the largest home improvement chain in the United States has shelved plans to open 50 new stores as it battles hard with the housing slowdown and economic downturn. (The chain will still open the 55 stores it planned for 2008. But it will not build 50 stores it has had in the works for up to 10 years) For the first time in its 30 year history, Home Depot will open new stores at the slowest rate as it permanently scales back plans for expansion after 2008. Additionally, 15 poorly performing locations will also be closed.

However, Home Depot is not the only one scaling back expansion plans or shutting down stores. Other major retail chains like Starbucks, Foot Locker, Pacific Sunwear, Charming Shoppes, J. C. Penney, Kohl’s, Wal-Mart and Ann Taylor have announced plans to slow their expansion or delay store openings. Trade group, The International Council of Shopping Centers, predicts 5,770 store closings in 2008 - an increase of 25 percent from last year.

This has prompted analysts to comment that these retails chains made overly ambitious expansion plans when consumer spending was unusually robust and that America is over-stored.

Retail Chain - Number of stores for close/delay
Ann Taylor - 117
Charming Shoppes - 150 stores
Foot Locker - 140 stores
J. C. Penney will open 36 stores instead of 50 planned
Kohl's will open 75 instead of 100 planned in 2008
Starbucks - 100
Wilsons - 158
Zales - 100

Sony Ericsson Mobile Music Strategy not working

Sony Ericsson and low profit expectations in 2008

On March 19, 2008, Sony Ericsson warned of a sharp decline in profit expectations. The No.4 player in the cell phone industry cut its current-quarter profit forecast ($276 million) to less than half the year-ago level ($571 million). Reasons given were a slowdown in consumer spending on its mid-priced and high-end phones. The growth in the mobile phone industry is expected to be at 15% in 2008, about half when compared to a high of 31% in 2004. Sony Ericsson expects to ship about 22 million phones in the first quarter. It shipped 30 million units in the fourth quarter and 21.8 million in the first quarter of 2007.

Sony Ericsson's announcement was expected when Texas Instruments cited fewer mobile phone chip orders for its lower guidance. Its key customer Nokia possibly has a inventory pileup. Sony Ericsson also said that certain component shortages for popular midprice phones had also contributed to modest unit-sales growth in the first quarter.

A low profit expectation is common in the first quarter - the slowest time of year for phone sales after the Christmas shopping season. However, the concern is the magnitude of Sony Ericsson's shortfall. The same can be expected from Nokia and Motorola might even lose its third place position as a mobile phone maker.

The Sony Ericsson joint venture

In 2001, Sony Ericsson was formed as a joint venture between Telefonaktiebolaget LM Ericsson of Sweden, and Sony Corporation of Japan. Both partners had 50% ownership in the company.

Ericsson was established in 1876 and was a major player in the telecommunications equipment and related services to mobile and fixed network operators worldwide with presence in 140 countries. Sony on the other hand was established by Masaru Ibuka and Akio Morita in 1946 in Japan. At the time Sony was the world's second largest consumer electronics company and famous for its innovative products like the Walkman, Playstation, and Aibo, the robot dog.

In the last quarter of 2000 and the first quarter of 2001, Ericsson made a loss of US$ 1 billion and US$ 558 million respectively. Shareholders of Ericsson wanted a sell-off. Sony was also making losses in its mobile phone business. Ericsson's board decided to form a joint venture with Sony instead of exiting the business. In 2001, this decision was rated as the fifth best management decision by Sunday Business.

Walkman phones are no longer popular?

In February 2005, at the 3GSM World Congress in France, Sony Ericsson had announced its mobile music strategy. It looked to integrate of high quality digital music players into stylish mobile phones under Sony's world famous Walkman brand. The strategy was to target a specific product portfolio and not look at providing various types of mobile phones across various price points.

In the third quarter of 2005, the Walkman phones were launched. The impact was visible in the subsequent quarter itself in terms of increased volumes, sales, and net income for the company. Similar to its success with its camera phones in 2004, Sony Ericsson reported a 36.4 per cent increase over its third quarter figures and 47.1 per cent higher than the figures for the same period in 2004. It even revived Sony's Walkman music player which had lost market share drastically after the launch of iPod by Apple in 2001.

However, mobile phone users are known to be quite finicky and generally choose the most popular or the next cool mobile phone in the market. Earlier, users replaced handsets every three years, but with the economy slowing down this is no longer the trend. And with the popularity of Apple's iPhone growing, Sony Ericsson may have reached the end of its good run with the popular Walkman phones. The general higher price of its phones than its rivals' devices does not help either.

Quote
Be Number 1 or Number 2. “When you’re number four or five in a market, when number one sneezes, you get pneumonia. When you’re number one, you control your destiny.“ - Jack Welch

Unquote
"Sony Ericsson will continue to try to reduce its dependence for growth on the European high-end sector and develop its presence in new markets. This strategy will continue, and our objective remains to become a top-three player globally by 2011" - Sony Ericsson President Dick Komiyama

Related Reading:
Case Study on Nokia in India [Pdf file]
Nokia and its growth strategy in China
Nokia increases market share, Motorola Struggles
Nokia to exit expensive Germany, move production to low cost countries

Jamie Dimon - The man behind JPMorgan's Turnaround

Jamie Dimon (Dimon), president of JPMorgan is referred to as one of the best numbers men around, a Wall Street legend or the right-hand man to Sandy Weill - the titan of banking behind Citigroup. He is also known as an aggressive banker, savage cost-cutter, direct boss who eschews excessive wealth ($44.4 million or £22.2 million annual salary) and invests heavily in philanthropy. In 2007, he was ranked 15 on the 25 most powerful people in business by Fortune.

Dimon was born in New York to second-generation Greek immigrants. He has a degree in biology and economics from Tufts, and a MBA from Harvard. At Harvard he met Sandy Weill. Both went on to create the banking major Citigroup and emerged as a powerful force on Wall Street. In 1998, both separated after having worked together for 16 years. Rumor mills suggested that Dimon was fired by Weill for not promoting his daughter in the company.

After leaving Citigroup, Dimon became the chief executive of Bank One. In 2001, Dimon played a key role in the turnaround of Bank One. In January 2004, he negotiated the acquisition of Bank One by JP Morgan Chase & Company. After the merger, Dimon was appointed President and Chief Operating Officer of JP Morgan Chase. The merger was the third largest acquisition (at the time) in the US history at US$ 58 billion.

Dimon, since then has been aggressively involved with JPMorgan and aims to turn it into the biggest and best banking group in the US. So far, he has been successful in his endeavor and is emerging as one of the most successful navigators of the credit crunch. Over the last few years, he has focused strongly on cutting costs, improving technology and integrating JPMorgan’s disparate operations. But he also has been resolute about preparing the company for an economic downturn. While other investment banks are struggling, Dimon managed several accomplishments one after the other. He co-chaired the summit of world and business leaders in Davos, Switzerland. He even persuaded former Prime Minister Tony Blair to sign on as an adviser and ambassador for JPMorgan. And in what is being regarded as his biggest coup, he has plans to prop up Bear Stearns to avoid a full-blown banking crisis. This draws similar reference to John Pierpoint Morgan (JPMorgan’s founder). JP Morgan financed the US government and other large corporations during the Great Depression and the two world wars. In 1907 during the panic, his organization and personal funding for rescuing of the banking system was representative of the end of a long recession.

Similarly Dimon has played a key role in JPMorgan and the Federal Reserve guaranteeing the huge trading obligations of the troubled firm Bear Stearns. JPMorgan agreed to pay only about $270 million in stock for Bear’s big losses on investments linked to mortgages. Dimon negotiated the deal with Bear and government officials, sleeping only for a few hours over the weekend. Though Dimon had his doubts about the deal and has not been an aggressive acquirer since his joining the company, the quick decision making to buy Bear is outstanding.

Related Reading:

Backsourcing at JPMorgan

Will Tesco succeed in the U.S?

The British are coming

Tesco Group is UK’s biggest retailer and operates more than 2,500 stores in the UK and 12 other countries in Europe and Asia. For years, Tesco had plans to enter the U.S. retail market. It was believed that Tesco even looked into possibly acquiring key parts of the Albertson's grocery chain. But finally, Tesco announced that it would enter the US by 2007 and that its new stores would be based on its "Tesco Express" convenience store model. Tesco operates four different retail formats – Tesco Express, Tesco Metro, Tesco Supercenters and Tesco Extra. Tesco Express is a smaller store format of up to 3,000 sq. feet.

At the time many analysts predicted that the coming of Tesco - even though a new player was a quite accomplished retail entity - had the ability to impact the U.S. market over the long term. To the conventional supermarket channel and even Wal-Mart, Kroger, and Safeway it could only be viewed as a negative. For the traditional supermarket chains who were already struggling to compete with Wal-Mart and the growing popularity of organic food stores like Whole Foods (and other premium food chains), the competition was only going to get worse.

Taking on Wal-Mart

Tesco was serious about expanding into the U.S. as indicated by its initial plans to spend $400 million a year to build its U.S. stores. This investment could pay for 100 to 150 stores. It aims to build 1,000 stores in the US eventually. Tesco chose to enter U.S. through the West Coast first because that region of the country is not yet dominated by Wal-Mart. Like Wal-Mart, Tesco is nonunionised. Wal-Mart is planning to test similarly sized new grocery stores under the "Marketside" banner in the Phoenix area later this year.

Success of Tesco's launch in the US?

There was growing speculation that the initial performance of Tesco’s new Fresh & Easy discount grocery stores concept was not up to the mark and that internal sales targets were not being met. Some reports in the US suggested that the small neighbourhood groceries, similar in concept to an Aldi hard-discount store, have been failing to attract customers at the rate needed. (The hard discount store, pioneered by Aldi, is a small outlet with only 700 to 1,000 lines of stock compared with 100,000 in a big Wal-Mart. The shelves are mostly filled with own-brand goods.)

Even competitors like Stater Brothers, a supermarket chain in south California (and where the first 20 Tesco stores opened) felt almost no impact from Tesco. The Fresh & Easy concept was being questioned. Fresh & Easy had claimed to be up to 25 per cent cheaper than its main supermarket competition and had expectations of average sales to reach $200,000 per store per week.

Will Tesco succeed in the U.S?

A spokesman from Tesco however maintained that its failure claims were “a bit ridiculous, given that we only opened four months ago”. Tesco is continuing to push ahead with its ambitious US store plans, with another 150 stores expected to open over the coming year in its initial markets. The group has committed £1.25bn ($2.48bn) over five years to its US expansion plans. It is signing leases on additional store sites in northern California, where it is also planning to open a second large distribution centre outside Stockton.

In the past, retailers from the UK like Marks & Spencer, Next, Dixons, and Sainsbury’s have all tried to expand in the US and failed. Tesco has already made the first change to its executive management team at Fresh & Easy. Jeff Adams is heading back to US. He was the chief executive of Tesco’s Lotus business in Thailand. He will be second-in-command to Tim Mason, Fresh & Easy’s chief executive. Meanwhile, Tesco has other things to worry about in its home UK market after it was accused of setting up an elaborate offshore tax avoidance scheme.

Related Reading

Tesco takes on US Wal-Mart [Pdf File]
Wal-Mart's supply chain management practices [Pdf file]
Wal-Mart's Marketside or Tesco's Fresh and Easy stores in US
Corporate Social Responsibility at Tesco [Pdf file]
Of Wal-Mart price cuts, Struggling Retailers and Weak 2008 Retail Sales Forecast

Adidas Reebok Merger Case Study

The sporting goods industry has seen many mergers and acquisitions (M&A) driven by rising competition and industrial growth. In 1997, Adidas acquired the Salomon Group for $1.4 billion. In 2003, Nike acquired Converse for $305 million and in 2004 Reebok acquired The Hockey Company for $330 million.

Adidas and Reebok - Two mega brands, with great strengths

In August 2005, German adidas-Salomon AG announced plans to acquire Reebok at an estimated value of € 3.1 billion ($3.78 billion). At the time, Adidas had a market capitalization of about $8.4 billion, and reported net income of $423 million a year earlier on sales of $8.1 billion. Reebok reported net income of $209 million on sales of about $4 billion. While analysts opined that the merger made sense, the purpose of the merger was very clear. Both companies competed for No. 2 and No. 3 positions following Nike (NKE).

Competition with Nike and Puma

Nike was the leader in U.S. and had made giant strides in Europe even surpassing Adidas in the soccer shoe segment for the first time. According to 2004 figures by the Sporting Goods Manufacturers Association International, Nike had about 36%, Adidas 8.9% and Reebok 12.2% market share in the athletic-footwear market in the U.S. Adidas was the No. 2 sporting goods manufacturer globally, but it struggled in the U.S. – the world’s biggest athletic-shoe market with half the $33 billion spent globally each year on athletic shoes. Adidas was perceived to have good quality products that offered comfort whereas Reebok was seen as a stylish or hip brand. Nike had both and was a favorite brand because of its fashion status, colors, and combinations. Adidas focused on sport and Reebok on lifestyle. Clearly the chances of competing against Nike were far better together than separately. Besides Adidas was facing stiff competition from Puma, the No. 4 sporting-goods brand. Puma had then recently disclosed expansion plans through acquisitions and entry into new sportswear categories. For a successful merger, the challenge was to integrate Adidas's German culture of control, engineering, and production and Reebok's U.S. marketing- driven culture.

The ADDYY and RBK Merger – Impossible is Nothing

On January 31, 2006, adidas closed its acquisition of Reebok International Ltd. The combination provided the new adidas Group with a footprint of around €9.5 billion ($11.8 billion) in the global athletic footwear, apparel and hardware markets.

Adidas-Salomon AG Chairman and CEO Herbert Hainer said, "We are delighted with the closing of the Reebok transaction, which marks a new chapter in the history of our Group. By combining two of the most respected and well-known brands in the worldwide sporting goods industry, the new Group will benefit from a more competitive worldwide platform, well-defined and complementary brand identities, a wider range of products, and a stronger presence across teams, athletes, events and leagues.”

Hainer also said, "The brands will be kept separate because each brand has a lot of value and it would be stupid to bring them together. The companies would continue selling products under respective brand names and labels."

Related Reading on Adidas Reebok merger case study: Is the Adidas Reebok merger working?

Download PDF file (25 pages) - Management Case Study on adidas and Reebok Merger

Restructuring at Sears - Can the Retailer Turnaround its business?

Sears - Moving from centralized to decentralized management structure

In 2005, Sears Holdings was formed with the merger of Kmart and Sears. When the merger took place, a centralized managed structure was essential to control costs and focus on integrating the two companies. But recent profit declines and its struggle to win customers from its competitors have prompted retailer Sears Holdings Corp (Sears) to go for a new decentralized structure in order to turn around its business. Sears had earlier announced lower quarter profit expectations compared to last year. Even its holiday sales and sales of home goods such as appliances and tools slowed with the crumbling U.S. housing market and competition. A new structure was necessary for a turnaround.

The new structure - Five business units

The new structure separates its business units into:

• Operating businesses - current product lines like appliances, apparel and electronics
• Support - marketing, store operations and customer strategy
• Brands
• Online and
• Real estate

The real estate and onine units will focus on increasing the "sales productivity" of real and virtual holdings. Each business unit will have a leader and an advisory group including senior Sears Holdings executives who will oversee performance. With these five business units, Sears (controlled by hedge fund manager Edward Lampert) can simplify the way they are managed, besides giving each unit greater power to focus on consumers and operating more efficiently.

Nokia and its Growth Strategy in China

The Chinese mobile devices market has grown tremendously since the 90s. Nokia has been trying to establish a strong presence in the Chinese market since mid 80s. Nokia has made significant investments in research and manufacturing facilities. In the Chinese market, Nokia faces stiff competition from global players like Motorola, Samsung and also from domestic players like TCL and Ningbo Bird. The domestic local players have increased their market share to almost 50% (in 2003).

In 1994, China had 1.5 million subscribers across the country. Also in 1994, China transitioned from an analogue network towards a digital Global System for Mobile communications (GSM, originally Group Special Mobile) system. In 1998, Motorola, Nokia and Ericsson had 83% market share. Also in this year, Kejian introduced its (first local mobile brand) GSM mobile phone.

Keywords: Nokia in China, Domestic and foreign cell phone players in China, Nokia entry strategy in China, Chinese mobile phone market

Download Case Study: Nokia's Business Strategy in India

Tesco takes on US Wal-Mart

Case Contents

1. Introduction - Tesco in US Retail Market
2. Tesco - Company Background and Timeline
3. TESCO at a Glance
4. Localization Strategy - Tesco in South Korea
5. Tesco's Business Strategy in the US - Healthy food, No waiting
6. Store Formats
7. Financial Highlights
8. Related Reading

Download Case Study (in PDF format)

Case Abstracts

UK's largest retailer Tesco and one of the top supermarket operators in the world plans to open a thousand-strong chain of discount stores in the US. Tesco plans to invest more than $250m (£120m) [$2.5 billion over the next five years] in its US business launch. This expansion plan and strategy places it directly against competitor retail giant Wal-Mart. Many UK retailers have found it difficult to survive or compete in the US retail market. The US retail market is most competitive in the world, a fact well-known to British retailers Sainsbury's and Marks & Spencer which failed to attract US customers.

Tesco's Business Strategy in the US - Healthy food, No waiting

Fresh & Easy stores

Tesco started operations in the US by opening 15 of its Fresh & Easy stores in Las Vegas, Los Angeles, San Diego and Phoenix. By 2009, Tesco plans to open 200 more outlets to expand the retail network. Tesco’s basic US stores will be similar to European discounters Aldi and Lidl though Tesco stores will be 75% smaller than most American supermarkets. Fresh & Easy stores about 10,000 square feet are one-third the size of a typical supermarket, but four times that of a convenience store. Tesco is adopting a hard-discount model in the US. Tesco's convenience stores modeled on the Tesco Express blueprint target US grocers such as 7-Eleven and locally-run stores.

This case study covers the following issues:
1. Assess Tesco's globalization strategies
2. Examine and analyze the entry and expansion strategies of Tesco in US
3. Study how Tesco localized its retail practices in US
4. Understand Tesco's efforts to integrate its global best practices with local strategies in US

Case Study Keywords:
Tesco, Samsung, Globalization Strategy, Localization Strategy, International Business, International Expansion and Entry Strategies, Retail Store Formats, supermarkets

Daimler Chrysler Merger and De-merger

Daimler Chrysler De-merger

In early 2007, Daimler sold 80 percent of Chrysler to private equity firm Cerberus Capital Management LLC for $7.4 billion. This strategic move ended a nine-year merger. Daimler can now concentrate on its luxury Mercedes brand and its truck business.

Daimler Chrysler Merger - Marriage made in heaven?

In 1998, Daimler and Chyrsler merged to form the Daimler-Benz and Chrysler Corp. in a $36 billion deal. At that time, then-CEO Juergen Schrempp described the merger as a marriage made in heaven. Since then, up-and-down earnings and repeated cost-cutting soured many investors on the effort to create a global auto giant.

HP and Compaq Merger

The failure of the merger between two leading competitors in the global computer industry, Hewlett-Packard Company (HP) and Compaq Computer Corporation (Compaq) failed as the synergies identified prior to the merger did not materialize.

HP bought Compaq for US$ 24 billion in stock. This was the largest ever deal in the history of the computer industry. The deal meant combined operations in more than 160 countries and more than 145,000 employees. HP-Compaq would offer the most complete set of products and services in the computer industry.
The motivation behind a HP-Compaq merger (whether it made economic sense) and the problems encountered in merging operations is an interesting discussion as the stock prices of both HP and Compaq fell within two days of the merger announcement. An estimated 13 billion dollars was lost (in terms of market capitalization) in this time frame.

Shares fell further as industry analysts failed to understand the benefits HP would derive by acquiring Compaq. HP was a market leader in the high margin printer’s business and Compaq, a low-margin personal computer (PC) manufacturer. Moreover, established players like direct marketer, Dell and leading IT service consulting company like IBM would give fierce competition even if economies of scale were to be achieved.

With the stock price of HP’s shares stabilising at a level much below than before the merger and the PC & other hardware businesses not making much profits, the merger was ruled a failure. Industry experts felt that HP’s printer business should be spun off into a separate entity.
Merger Challenges:

Product line integration: This requires discontinuing some products (some loss in revenue) thereby rationalizing the product line.

Reorganization: In the computer industry this has always been a failure.

Cultural change challenges: HP’s culture is largely based on engineering and compromise, while Compaq had a hard-charging sales culture.

Some Facts:
HP was founded by Stanford engineers Bill Hewlett and David Packard

HP was started in California in 1938 as an electronic instruments company.

According to 2003 figures, HP revenues from imaging and printing systems accounted for 31% which was more than seventy percent of total operating profits.

Keywords: Post merger integration, merger and cultural challenges, HP, Compaq, Carly Fiorna, computer industry, printers, merger & consolidation, merger and acquisitions, change management

AOL-Time Warner Turnaround Strategy

The problem faced by Time Warner after its merger with AOL is an issue which merits discussion. The AOL-Time Warner merger in 2001 resulted in the largest media company in the world. AOL joined hands with Time Warner (TW) to create synergy between its online businesses and Warner's media business.

Two significant factors affected the post merger company. One, the dot com bust meant adverse effect on AOL’s advertising revenues. And two, dial-up subscribers decreased thereby affecting revenues and overall profitability of AOL. Richard Parsons, the CEO and Chairman of Time Warner and Joe Miller, the CEO of AOL took steps to turnaround AOL. A key element of their turnaround strategy was to offer free content on its portal. This strategy benefited AOL in attracting more online users and advertising revenues.

When AOL began operations it soon became the leading company for-pay online subscriber service, bringing easy-to-use Internet service to more than 30 million users. AOL was mainly based on around its dial up business. With customers shifting to broadband, AOL was losing subscribers rapidly. In 2004, AOL had 20 million subscribers. The dial-up segment though profitable, was declining in revenues having lost 2.6 million subscribers in a period of one year. The share price of AOL Time Warner fell by 60% after the merger. The merger was heavily criticized from all quarters.

Growth in advertising business came with AOL establishing itself as a support service rather than an internet access provider. Seeing AOL’s success Google entered into a global advertising partnership with the AOL. Google acquired a 5% equity stake in AOL for US$ 1 billion.

To be continued...

Wal-Mart in Japan Case Study

Wal-Mart in Japan

The focus of this case study is the hurdles faced by retailing giant Wal-Mart in the Japanese market. In the early 90's, Wal-Mart's decision to globalize is a major focus area.

Issues covered in the case study include: Download Case Study (in PDF format)

• Wal-Mart's entry strategy in Japan
  
• WalMart's best practices in retailing like Every Day Low Prices (EDLP) and Rollback to the Japanese market through its joint venture with Seiyu.
  
• Wal-Mart's problems faced in Japan because of the differences between the operational and cultural environment in its home market and the Japanese market.
  
• Walmarts future prospects and business strategies in Japanese Market.
  

Other management issues covered include:

• The Japanese retailing industry: It's nature and structure and its market size, market scope, and market characteristics.
• How to frame an entry strategy for a global and culturally diverse market.

Business Case study terms:

Wal-Mart Stores Inc., Green Field Operations, Costco Wholesale, Metro, Tesco, Japanese Retail Industry, Ito Yokado , Large Store Law, Every Day Low Prices, Carrefour, Daeiei, America Online Inc., Sam's Clubs

Related Case Study Reading:

1. Can Wal-Mart Woo Japan?, Business Week Online
2. Japan Isn't Buying The Wal-Mart Idea, Business Week Online
3. How Wal-Mart Is Reshaping Packaging?
4. A New Era in Japan's Retailing Market
5. Tesco Enters The Japanese Market
6. Japanese Retail Market Overview
7. Japan Market Research
8. Japan Retail Sector Overview: companies Walmart

Will Wal-Mart be able to sustain its supply chain advantage : Download Case Study on Wal-Mart's Supply Chain Practices in PDF format.