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COURSE : CASE 1 Total Marks : 80 (20 Marks)

Kodak started selling photographic equipment on Japan 1889 and by the 1930s it had a dominant position in the Japanese market. But after World War II, U.S occupation forces persuaded most U.S companies including Kodak to leave Japan to give the war torn local industry a chance to recover. Kodak was effectively priced out of the market by tariff barriers; over the next 35 years Fuji gained 70% share of the market while Kodak saw its share slip to miserable 5%. During this period Kodak limited much of its activities in Japan. This situation persisted until early 1980s when Fuji launched an aggressive export drive, attacking Kodak in the north American and European markets. Deciding that a good offence is the best defense, in 1984 and the next six year, Kodak outspent Fuji in Japan by a ratio of more than 3 to 1. It erected mammoth $ 1 million near signs as land marks in many of the Japan’s big cities and also sponsored Sumo wrestling, Judo, and tennis tournaments and even the Japanese team at the 1988 Seoul Olympics. Thus Kodak has put Fuji on defensive, forcing it to divert resources from overseas to defend itself at home. By 1990’s, some of Fuji’s best executives had been pulled back to Tokyo. All this success, however , was apparently not enough for Kodak. In may 1995, Kodak filed a petition with the US trade office, that accured the Japanese government and Fuji of “Unfair trading practices”. According to the petition, the Japanese government helped to create a ‘ profile sanctuary’ for Fuji in Japan by systematically denying Kodak access to Japanese distribution channels for consumer film and paper. Kodak claims Fuji has effectively shut Kodak products out of four distributors that have a 70% share of the photo distribution market. Fuji has an equity position in two of the distributors, gives large year –end relates and cash payments to all four distributors as a reward for their loyalty to Fuji, and owns stakes in the banks that finance them. Kodak also claims that Fuji uses similar tactics to control 430 wholesale photo furnishing labs in Japan to which it is the exclusive supplier. Moreover Kodak’s petition claims that the Japanese government has actively encourages these practices. But Fuji a similar counter arguments relating to Kodak in U.S. and states bluntly that Kodak’s charges are a clear case of the pot calling the kettle back. (a) What was the critical catalyst that led Kodak to start taking the Japanese market seriously? (b) From the evidence given in the case do you think Kodak’s charges of unfair trading practices against Fuji are valid? Support your answer.

In these technologies. Our product division executives have worldwide profit responsibility. Since the min-1980s. (b) Cost differentials in research salaries between developing and industrialised countries. Company B : “ We are multinational firm. Israel. video CDs. For instance. Multi National company and Trans Multi National Company ? CASE . however. Consequently. and multimedia and microchip software. even those in key portions? Questions : 1 Which company is truly Multinational ? Why? 2 List three differences between Company . We distribute our products in about 100 countries. and in a few cases. because it generates more revenue than foreign market. Also. The rewards are for global performance. manufacturing. assigning particular affiliates the responsibility for developing. The executive from Company B goes on to explain. they have also started locating strategic R & D centres in some developing countries. derivative models and circuit blocks for new TV chases. and car stereos. it has one unit in Indonesia focusing on the design of audio products. if not the policy. It has three units in Singapore conducting R & D on core components such as optical data shortage devices. It has one unit in Republic of Korea focusing on the design of compact discs. Africa etc.3 Strategic R & D by TNCs in Developing Countries (20 Marks) TNCs have had long units in developing host countries for adapting products and processes to the local conditions. and new materials. It has one in Taiwan designing and developing video tape-recorders. It is also possible to separate R & D in core activities from that in non-core activities. “ of course the most of the key ports in our subsidiaries are held by home country nationals. We look at all new investment projects both domestic and overseas using exactly the same criteria”. Sony Corporation of Japan has around nine R & D units in Asian developing countries. in each division”. and marketing particular products worldwide. The execution from company A continues. minidisk players. discman and hi-fi receiver designs. and duplicators. It has three units in Malaysia working on video design. it is the practice. As our organisational chart shows. the united states is just one region on a par with Europe. the location of R & D can be geographically de-linked more easily from the location of manufacturing. but strategy is to focus on domestic. radio cassettes. tape recorders. The main incentives for this are : (a) access to highly qualified scientists as shortages of research personnel emerge in certain fields in industrialised countries. Malaysia or Brazil serve TNCs as good locations for strategic R & D.CASE 2 (20 Marks) Two Senior executives of world’s largest firms with extensive holdings outside the home country speak. They have been promoted from domestic ports and tend to view foreign consumers needs as really basically the same as ours. and (c) rationalisation of operations. . to products for local markets. The senior executives incharge of this divisions have little overseas experience. Latin America. “the worldwide Product division concept is rather difficult to implement. radio cassettes. Whenever replacements for these men are sought. integrated chip design for audio products and CD-ROM drives. biotechnology. Singapore. countries like India. Th new trends are more visible in industries dealing with new technologies. to look next to you at the lead office and pick some one (usually a home country national) you know and trust”. for developing generic technologies and products for regional or global markets. Most of the senior executives simply do not understand what happens overseas and really do not trust foreign executives. Finally. such as microelectronics. product division executives tend to focus on domestic market. We manufacture in over 17 countries and do research and development in three countries. Company A : “We are a multinational firm.

furnishes you the following data relating to the year 2000. CASE -4 VK Ltd a multi-product Company. Daimler Benz has established such a unit in Bangalore. Current work includes interface design of avionics landing systems and smart GPS sensors for use by the group’s business worldwide.000 (20 Marks) Assuming that there is no change in prices and variable costs and that the fixed expenses are incurred equally in the two half years periods calculate for the year 2000. Fixed Expenses 3. For instance. 1. 43.000 Second Half of the year Rs. India. The Profit Volume ration 2. in collaboration with the Indian Institute of Science to work on projects related to its vehicles and avionics business. Questions: (a) Explain why MNCs have located R & D centres in developing countries? (b) Mention the areas where R & D activities can easily be decentralised. Percentage of margin of safety. 45. First Half of the year Sales Rs. 5 marks each .000 Total Cost Rs. Break-Even Sales 4. Source: World Investment Report 1999.Such units often work in collaboration with science and technology institutes in the host country. 40. 50.000 Rs.

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