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Tying it up
Seeing the ElephantDataClear
Key points of the case:-
Software is a global business, what you dont
learn early about cross border management will
come back to haunt you later. ClearCloud is a complex product, it needs
service infrastructure, manuals translated into
local languages.
Id stay focused on US as long as possible..
The Salmon was visible under the
surface.were the conditions here
different?
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Tying it up
Seeing the ElephantDataClear
Interpretation:-
Its imperative that DataClear goes global
However at this juncture It lacks the resources and
capabilities to go global But that doesnt mean that it sits with hands folded!
A lot of background work is required before the first
overseas office is opened. The value chain needs to be
well defined with each activity The US market is still unexplored
The opportunity to expand and go global is visible, yet
the company lacks the ability to seize the moment
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Tying it up
Seeing the ElephantDataClear
Objective- Build capabilities of cross border management
ScopeDefine what ClearCloud offers to clients
Advantage- To cross the $ 100 million mark in next
years and provide maximum return to the investing
partners
UVPTo offer what VisiDat doesnt
Value ChainTo tie up all back office work and service
Trade-offDefine what DataClear will never do FitSynchronize and minimize the thru-put time of
activities
ConsistencyNever react to a competitors offerings
(Intel)
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Tying it up
Seeing the ElephantEuro Disney
Key Points of the Case:-
Respecting and utilizing French culture in its themes
Euro Disney was expected to generate 28000 jobs and
boost real estate industry
The site was being set up in one of the richest
agricultural land in France
Disneys strict appearance code and enforcement of
American WAY of doing things In first six months only 29% of the visitors were French
Major payment disputes arose with subcontractors
The next Government in 1996 didnt agree or support the
terms and conditions agreed upon by its predecessor
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Tying it up
Seeing the ElephantEuro Disney
Interpretation:- Disneys strict appearance code and American Way of
doing things was in direct contradiction of the agreementto respect French Culture
The appearance code while conforming to certain basicaspects of cleanliness and uniformity had to take intoaccount French sensitivities, this was not helping theemployment issue
For the first time Disney was operating in a multi lingual
and multi cultural setup, where there were less admirersof the American WAY.
The Arrogance of being a Big MNC didnt go down wellwith French Public, Contractors, visitors to the park,
employees and the powers that be
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Tying it up
Seeing the ElephantEuro Disney
Objective To help the host country tide over employmentand other economic issues
Scope- To promote family entertainment, while beingsensitive to European culture
Advantage Become the largest and the most popularentertainment park in entire Europe over a period of 10 years
UVPAmerican icons in an European guise!
Value Chain Float tenders in all European languages andnegotiate well with contractors
Trade-offpromote and impose the American Way
FitRelook all the activities of the park in European context
Continuity Evolve as a multicultural and multilingualentertainment destination
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Tying it up
Seeing the ElephantKonka
Key Points of the Case:- By 1999 Konka was the Largest CTV maker in China
By end of 1999, Konka diversified into Mobile handsets
Konka started as a subcontract manufacturer, later on with
a series of acquisitions it became a large player in thedomestic market with Govt. support
The Chinese CTV industry was marked by excess capacityand price wars
Konka expanded overseas in the low end of the CTVmarket in Australia and US. In India its initial foraysfailed due to wrong tie ups and later on due to stiffdomestic competition
Technology was not easy to acquire and not capital
intensive, therefore was a commodity
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Tying it up
Seeing the ElephantKonka
Interpretation of the Case:-
The deciding factor here was INDUSTRY DYNAMICS
The industry dynamics in two of the biggest emerging
markets were sameovercapacity, strong competitors
and price wars
The domestic growth was attained with Govt. support
and Konka lacked the cross border talent and asset
management skills, essential to become a global giant.
Its branding in overseas markets was a major issue
To its credit, Konka attempted to narrow the technology
gap with HDTV
The initial headways were left to be consolidated
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Tying it upSeeing the ElephantKonka
Objective- to capture the low end of the Asian markets, esp.in India
Scope- Low priced, easily serviceable, yet smart looking TVsets for the lower segment of the population
Advantageto become the largest CTV maker by volume in
all major emerging Asian Markets and later on in all BRICmarkets
UVPLow price, high quality, pride of ownership
Value chain- Build a sourcing network from China toMalaysia
Trade-offDont compete with the likes of Sony
Fitminimize the cost and time of activities
ContinuityGradually evolve as a leading Televisioncompany over a period of 20 years.
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The 3 Cs of making the Elephant Walk
COMMITMENT
CO-
EVOLUTION
COST
INNOVATION
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The 3 Cs of making the Elephant Walk
Strategic CommitmentHyundai in India
Strategic Co-EvolutionPanasonic in China
Strategic Cost InnovationHonda in Vietnam
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The Core of the Diamond
Till mid 2000s, the business model of leading MNCs
involved sourcing from low cost hubs and selling it at 10-20 times the total cost in developed markets. The huge
margins covered all overheads, yet provided a decent
ROCE.
The financial meltdown of 2008-9 and the subsequent
Euro Zone crisis changed all that. The developed markets
now have an ageing population, slow growth rates, double
digit unemployment and high levels of debt.
As a result, MNCs have now turned their attention to
EMERGING markets of BRIC nations and SA.
Whereas the products they have sold so far and their high
margin business models are unsuitable for emerging
markets
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The Core of the Diamond
To add to their woes, they will now have to contend withemerging market giants, like Hyundai, Samsung, Huawei,Haier, Tata Motors, M&M and so on. These emergingmarket giants know their home base better than the MNCsfrom Japan, Germany or USA.
Competing on emerging markets require a complete
rethink of the existing business model of the MNCs andthey will have to be ready for with a business model todrill into the core of the diamond.
income range % population % Consumption
Upper class > $ 60k 2 17
Middle class 14k-59k 37 55
Lower class 14k< 61 28
(Source- Mckinsey Qtly, July 2010.)
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The Core of the Diamond
The consumption distribution has transitioned from apyramid into a diamond shaped structure over last 10years
Which suggests that the potential of emerging markets likeIndia and China, may now reside at the core of thediamond. For India this translates to a population of 40
crores approx and growing. Majority of the European, American and Japanese MNCs
didnt have a business model and a product range to sell tothis core of the diamond, where purchasing power andtastes and preferences vary widely, from region to region
This calls for a mass customized business level strategy,atomization of the value chain and standardization ofglobal product platforms, which paradoxically will bringdown the cost of customization.
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Drilling into the Diamond-Strategic
Commitment- Hyundai in India
Market Shares of Leading Auto Companies in India as of
2013 in passenger cars (source:- www.autobei.com)
MSIL39% (1051046)
Hyundai14% (383611)
Tata -12% (314464)
M&M -11.5% (310707)
Toyota6% (165504)
GM -3.3% (88150)
Ford 2.9% (77,225) Honda -2.75% (73,483)
VW2.4% (65,465)
Renault1.9% (52463)
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Drilling into the Diamond-Strategic
Commitment- Hyundai in India
Model Wise top 10, March 2013 (source teambhp)
Alto27356
Dzire -20078
Swift19654
Wagon-R-14681
Bolero -11675
I 10 -8686
Eon -8604
Innova8422 I 20 -6988
Duster -6313
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Drilling into the Diamond-Strategic
Commitment- Hyundai in India
WHAT DID HYUNDAI DODIFFERENTLY?
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Drilling into the Diamond-Strategic
Commitment- Hyundai in India
Unlike the big six who were testing the waters in 1996
with stripped down models, Hyundai pursued anaggressive FDI strategy and set up shop in India.
It focused on the upwardly mobile Indian middle classconsumer (the then purchaser of Zen model of Maruti), forwhom buying a car was NOT A LET-DOWN on
international terms
It hired top notch Bollywood stars
It marketed models with contemporary designs andtechnology at prices closely matching the market leader.
It showed high levels of commitment towards the Indianconsumer and the Indian market with a large factory (¬ looked down on him as a poor man who cant afford acar) and invested heavily in after sales with more than 300outlets within 2 years.
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Drilling into the Diamond-Strategic Co-
Evolution, Panasonic in China
The tension between local adaptation and global
integration is a perennial one. This tension is more amplified for MNCs entering
emerging markets, with vast regional and cultural
differences
The usual strategy is a trade-off, adapting a greater degreeof localization (McDonalds in India) or a greater degree of
globalization (Wal-Mart in China)
However with a high degree of coordination between the
country office and global office, a deeper localization canresult in a greater degree of knowledge assimilation in
corporate headquarters, which in turn can spark off
another round of localization this concept is known as
STRATEGIC CO-EVOLUTION
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Drilling into the Diamond-Strategic Co-
Evolution, Panasonic in China Panasonic came to China in 1987 with a CRT unit for
televisions Panasonic during this time was organized along the lines
of SBUs. Each major product category had its own SBUhead. There were 40 SBUs then.
Between 2000 and 2006, under the then CEO Kunio
Nakamura, Panasonic reorganized itself into 14 businessdomain units. This companies broadly included similarproducts and the reorganization eliminated efforts inR&D, Marketing and service dept costs
In 2003, Panasonic created a separate company called Panasonic Corporation of China.
Back home, the Home appliance BDU had its HQ inKusatsu, Japan and had a Japan lifestyle research center,which provided inputs on consumer preferences to productdevelopment
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Drilling into the Diamond-Strategic Co-
Evolution, Panasonic in China
Overseas however Panasonic didnt have any such
research centers and its products outside Japan werelargely models modified for foreign markets, but
developed at home (a mistake the big six auto firms made
in India)
Panasonic around 2000 was losing market share to localcompetition and the company realized that without a
deeper understanding about the local consumer, their
competitiveness in Chinese markets will not last long
Addressing this concern, Panasonic opened a China lifestyle research center in 2005.
The center started creating an extensive local lifestyle
database
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Drilling into the Diamond-Strategic Co-
Evolution, Panasonic in China
The database build up a rich data bank on regional
differences. Such as use of short grain rice in northernChina, medium grain rice in central China and long grain
rice in southern China (similar to use of short grain rice in
Southern India and long grain rice in Northern India and
semi boiled rice in eastern India). The mission of CLRC goes beyond building a database of
local tastes and preferences. A staff member at CLRC is
usually assigned a product, say Washing Machine.
The staff member at CLRC collects data on washingmachine habits and usage across the country.
He then interacts with the BDU engineer in-charge of
product development of washing machines at Kusatsu
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Drilling into the Diamond-Strategic Co-
Evolution, Panasonic in China
One of key findings of CLRC was that 90% of the
housewives washed under garments with hand, althoughthey had washing machines.
In-depth interviews with housewives revealed that they
fear about bacterial infection of under garments, when
washed in washing machine with normal garmentsexposed to dust and infections from streets.
Accordingly it was communicated to Kusatsu about
incorporating bacteria sterilization function in the product-
Panasonic didnt have this technology at its disposal then. The BDU in Kusatsu came out with a washing machine
with sterilization function after an year, and made it a
standard feature in all washing machines (Globalization),
which resulted in a 15% market share, up from 3%.
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Drilling into the Diamond-Strategic Co-
Evolution, Panasonic in China
Once Panasonic had the technology enabler (Sterilization),
it allowed the CLRC to probe further into local adaptation(yet deeper localization)
Panasonic then opened a European Lifestyle Research
Center in 2009, a similar center was opened in 2010 in
India. The company is further exploring the co-evolution
dynamics with its Marugoto (Wall to Wall) philosophy.
A wall to wall approach, entails making all electronic and
electrical appliances used at homes world wide, whichcalls for a high degree of localization combined with
global technology platforms.
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Drilling into the Diamond-Strategic Cost
InnovationHonda in Vietnam
The Japanese companies are used to selling high quality
products at a premium price in West, yet they offer morefeatures at a comparable price than their western
counterparts (made possible by lean manufacturing). This
has been the USP of Japanese auto and home appliance
companies for very long now. Honda in Vietnam had a 35% market share in bikes in
1996. By 2001 it dipped to 10%, in face of competition
from low cost Chinese bikes.
Honda sold its flagship model CUB in emergingmarkets like Cambodia, Vietnam, Burma and Thailand for
$ 1500. The Chinese bikes were selling for $ 500 to $ 700
and the overall bike market had expanded by 300% to 2
million units in five years, due to advent of Chinese bikes.
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Drilling into the Diamond-Strategic Cost
InnovationHonda in Vietnam But Hondas sales stagnated at 10% and was decreasing
day by day. Through this Honda learned that there is ahuge market at sub $ 750 price range and it doesnt have a
model to adress this segment (A predicament face by top 6
auto firms in India in 1996, and they are still addressing
that!).
Research revealed that the Vietnamese cities are very
crowded and they rarely drive at speeds exceeding 80
kms/hr. Therefore the need of the hour is a fuel efficient,
low cost bike with minimum features, that will transport
the person from point A to B (Something Hero Honda didin India in 1985). The Vietnamese are looking at
transporters, not life style products.
Accordingly a new bike called WAVE was introduced in
2002 with a price tag of $ 800.
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Drilling into the Diamond-Strategic Cost
InnovationHonda in Vietnam Key Lessons
Jugaad or Frugal Innovation
A deeper insight into evolving customer preferences
Willing to work with diversity
Providing a greater degree of autonomy to the local unit,
strategy should not be formed in New York, Tokyo orMunich
Building up a cross country network of parts and
component suppliers, as Honda did with its CUB and
WAVE models and with CITY in India. This allowedHonda to access the ASEAN market, as well as the Indian
market.
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Making the Elephant Walk
CommitmentUnderstand your host better
Co-Evolution adapt to local tastes betterbuild newerglobal technology and management practices probe
deeper into the continuously evolving and expanding
milieu of cultures.
Frugal Innovation Develop newer products, with worldclass quality at affordable prices.
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Making the Elephant Walk: Key Strategic
Points to consider Fluid and evolving segments, not well defined
A mix of lifestyle and need driven segments
Scope exists for creation of new product categories
A need for sturdy, maintenance free and functional
products
A still price sensitive and emerging middle class Highly fragmented and poorly connected distribution
channels
Problem of scaling up quickly
Multiple price points and multiple customizations
Danger of overestimation of the market (a billion middle
class)
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