About GSK

Established in the year 1924 in India GlaxoSmithKline Pharmaceuticals Ltd. (GSK Rx India) is one of the oldest pharmaceuticals company and employs over 4000 people. Globally, we are a 27.4 billion, leading, research-based healthcare and pharmaceutical company. In India, we are one of the market leaders with a turnover of Rs. 2275 crore and a share of 3.9%*. At GSK, our mission is to improve the quality of life by enabling people to do more, feel better and live longer. This mission drives us to make a real difference to the lives of millions of people with our commitment to effective healthcare solutions. The GSK India product portfolio includes prescription medicines and vaccines. Our prescription medicines range across therapeutic areas such as anti-infectives, dermatology, gynaecology, diabetes, oncology, cardiovascular disease and respiratory diseases. The company is the market leader in most of the therapeutic categories in which it operates. GSK also offers a range of vaccines, for the prevention of hepatitis A, hepatitis B, invasive disease caused by H, influenzae, chickenpox, diphtheria, pertussis, tetanus, rotavirus, cervical cancer, streptococcus pneumonia and others. With opportunities in India opening up, GSK India is aligning itself with the parent company in areas such as clinical trials, clinical data management, global pack management, sourcing raw material and support for business processes including analytics. GSK's best-in-class field force, backed by a nation-wide network of stockists, ensures that the Company's products are readily available across the nation. GSK has two manufacturing units in India, located at Nashik and Thane as well as a clinical development centre in Bangalore. The state of art plant at Nashik makes formulations. Being a leader brings responsibility towards the communities in which we operate. At GSK, we have a Corporate Social Responsibility program that works towards fulfilling basic healthcare, education and other developmental needs of the underserved population. With this dedication and commitment, we believe that the world will be better, healthier and happier. GSK is committed to developing new and effective healthcare solutions. The values on which the group was founded have always inspired growth and will continue to do so in times to come.
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THURSDAY, 20 DECEMBER 2012

Sony buys out Ericsson in mobile joint venture

Japanese electronics giant buys total control of mobile phone business after a 10 year tie-up with Ericsson Sony is to spend 920 million to acquire Ericsson's half of the Sony-Ericsson mobile handset joint venture. Sony's chief executive and chairman, Howard Stringer, said that Sony's "four screen strategy" is now in place with this deal. "We can more rapidly and more widely offer consumers smartphones, laptops, tablets and televisions that seamlessly connect with one another and open up new worlds of online entertainment," Stringer said. In a statement, Sony said that the deal "provides Sony with a broad IP cross-licensing agreement and ownership of five essential patent families," and that Sony-Ericsson phones would be "integrated into Sonys broad platform of network-connected consumer electronics products". Ericsson CEO Hans Vestbeg, meanwhile, said that the company would now "focus on enabling connectivity for all devices, using our R&D and industry leading patent

portfolio to realize a truly connected world." The purchase is seen as a Sony bid to catch up with Apple and Samsung in the mobile phone space. Although Sony-Ericsson's Experia brand has started to catch up with Apple, Samsung and HTC recently, the company was left behind when touchscreen phones originally took off. The deal will complete in January 2012.
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Amul case study

Here is an interesting case study on the dairy giant AMUL : Every day Amul collects 447,000 litres of milk from 2.12 million farmers (many illiterate), converts the milk into branded, packaged products, and delivers goods worth Rs 6 crore (Rs 60 million) to over 500,000 retail outlets across the country. Its supply chain is easily one of the most complicated in the world. How do managers at Amul prevent the milk from souring? Walk in to any Amul or Gujarat Cooperative Milk Marketing Federation (GCMMF) office, and you may or may not see a photograph of Mahatma Gandhi, but you will certainly see one particular photograph. It shows a long line of Gujarati women waiting patiently for a union truck to come and collect the milk they have brought in shining brass matkas. The picture is always prominently displayed. The message is clear: never forget your primary customer. If you don't, success is certain. The proof? A unique, Rs 2,200 crore (Rs 22 billion) enterprise. Organization structure It all started in December 1946 with a group of farmers keen to free themselves from intermediaries, gain access to markets and thereby ensure maximum returns for their efforts. Based in the village of Anand, the Kaira District Milk Cooperative Union (better known as Amul) expanded exponentially. It joined hands with other milk cooperatives, and the Gujarat network now covers 2.12 million farmers, 10,411 village level milk collection centers and fourteen district level plants (unions) under the overall supervision of GCMMF. There are similar federations in other states. Right from the beginning, there was recognition that this initiative would directly benefit and transform small farmers and contribute to the development of society. Markets, then and even today are primitive and poor in infrastructure. Amul and GCMMF acknowledged that development and growth could not be left to market forces and that proactive intervention was required. Two key requirements were identified. The first, that sustained growth for the long term would depend on matching supply

and demand. It would need heavy investment in the simultaneous development of suppliers and consumers. Second, that effective management of the network and commercial viability would require professional managers and technocrats. To implement their vision while retaining their focus on farmers, a hierarchical network of cooperatives was developed, which today forms the robust supply chain behind GCMMF's endeavors. The vast and complex supply chain stretches from small suppliers to large fragmented markets. Management of this network is made more complex by the fact that GCMMF is directly responsible only for a small part of the chain, with a number of third party players (distributors, retailers and logistics support providers) playing large roles. Managing this supply chain efficiently is critical as GCMMF's competitive position is driven by low consumer prices supported by a low cost system. Developing demand At the time Amul was formed, consumers had limited purchasing power, and modest consumption levels of milk and other dairy products. Thus Amul adopted a low-cost price strategy to make its products affordable and attractive to consumers by guaranteeing them value for money. Introducing higher value products Beginning with liquid milk, GCMMF enhanced the product mix through the progressive addition of higher value products while maintaining the desired growth in existing products. Despite competition in the high value dairy product segments from firms such as Hindustan Lever, Nestle and Britannia, GCMMF ensures that the product mix and the sequence in which Amul introduces its products is consistent with the core philosophy of providing milk at a basic, affordable price. The distribution network Amul products are available in over 500,000 retail outlets across India through its network of over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of the entire range of products. GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. This practice is consistent with GCMMF's philosophy of maintaining cash transactions throughout the supply chain and it also minimizes dumping. Wholesale dealers carry inventory that is just adequate to take care of the transit time from the branch warehouse to their premises. This just-in-time inventory strategy improves dealers' return on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated vehicle operations. Umbrella brand The network follows an umbrella branding strategy. Amul is the common brand for

most product categories produced by various unions: liquid milk, milk powders, butter, ghee, cheese, cocoa products, sweets, ice-cream and condensed milk. Amul's sub-brands include variants such as Amulspray, Amulspree, Amulya and Nutramul. The edible oil products are grouped around Dhara and Lokdhara, mineral water is sold under the Jal Dhara brand while fruit drinks bear the Safal name. By insisting on an umbrella brand, GCMMF not only skillfully avoided inter-union conflicts but also created an opportunity for the union members to cooperate in developing products. Managing the supply chain Even though the cooperative was formed to bring together farmers, it was recognized that professional managers and technocrats would be required to manage the network effectively and make it commercially viable. Coordination Given the large number of organizations and entities in the supply chain and decentralized responsibility for various activities, effective coordination is critical for efficiency and cost control. GCMMF and the unions play a major role in this process and jointly achieve the desired degree of control. Buy-in from the unions is assured as the plans are approved by GCMMF's board. The board is drawn from the heads of all the unions, and the boards of the unions comprise of farmers elected through village societies, thereby creating a situation of interlocking control. The federation handles the distribution of end products and coordination with retailers and the dealers. The unions coordinate the supply side activities. These include monitoring milk collection contractors, the supply of animal feed and other supplies, provision of veterinary services, and educational activities. Managing third party service providers From the beginning, it was recognized that the unions' core activity lay in milk processing and the production of dairy products. Accordingly, marketing efforts (including brand development) were assumed by GCMMF. All other activities were entrusted to third parties. These include logistics of milk collection, distribution of dairy products, sale of products through dealers and retail stores, provision of animal feed, and veterinary services. It is worth noting that a number of these third parties are not in the organized sector, and many are not professionally managed with little regard for quality and service. This is a particularly critical issue in the logistics and transport of a perishable commodity where there are already weaknesses in the basic infrastructure. Establishing best practices A key source of competitive advantage has been the enterprise's ability to continuously implement best practices across all elements of the network: the federation, the unions, the village societies and the distribution channel.

In developing these practices, the federation and the unions have adapted successful models from around the world. It could be the implementation of small group activities or quality circles at the federation. Or a TQM program at the unions. Or housekeeping and good accounting practices at the village society level. More important, the network has been able to regularly roll out improvement programs across to a large number of members and the implementation rate is consistently high. For example, every Friday, without fail, between 10.00 a.m. and 11.00 a.m., all employees of GCMMF meet at the closest office, be it a department or a branch or a depot to discuss their various quality concerns. Each meeting has its pre-set format in terms of Purpose, Agenda and Limit (PAL) with a process check at the end to record how the meeting was conducted. Similar processes are in place at the village societies, the unions and even at the wholesaler and C&F agent levels as well. Examples of benefits from recent initiatives include reduction in transportation time from the depots to the wholesale dealers, improvement in ROI of wholesale dealers, implementation of Zero Stock Out through improved availability of products at depots and also the implementation of Just-in-Time in finance to reduce the float. Kaizens at the unions have helped improve the quality of milk in terms of acidity and sour milk. (Undertaken by multi-disciplined teams, Kaizens are highly focussed projects, reliant on a structured approach based on data gathering and analysis.) For example, Sabar Union's records show a reduction from 2.0% to 0.5% in the amount of sour milk/curd received at the union. The most impressive aspect of this large-scale roll out is that improvement processes are turning the village societies into individual improvement centers. Technology and e-initiatives GCMMF's technology strategy is characterized by four distinct components: new products, process technology, and complementary assets to enhance milk production and e-commerce. Few dairies of the world have the wide variety of products produced by the GCMMF network. Village societies are encouraged through subsidies to install chilling units. Automation in processing and packaging areas is common, as is HACCP certification. Amul actively pursues developments in embryo transfer and cattle breeding in order to improve cattle quality and increases in milk yields. GCMMF was one of the first FMCG (fast-moving consumer goods) firms in India to employ Internet technologies to implement B2C commerce. Today customers can order a variety of products through the Internet and be assured of timely delivery with cash payment upon receipt. Another e-initiative underway is to provide farmers access to information relating to

markets, technology and best practices in the dairy industry through net enabled kiosks in the villages. GCMMF has also implemented a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk collection as well as the marketing process. Farmers now have better access to information on the output as well as support services while providing a better planning tool to marketing personnel. Posted by hari at 11:15 PM
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Nestea, Coca-Cola Company Striking the goliath of iced tea with an innovative, strategic punch
THE CHALLENGE Isn't Iced tea Just Tea Gone cold with Lots of Sugar? Non-alcoholic Ready To Drink Category: Trend Consumption Jan 07 to June 08 What do you do when 90% of Australian households refuse to try your category? This was the challenge facing Nestea, the distant second in the Ready To Drink (RTD) Tea category. The market leader at 70% of share, Lipton, had spent seven years and in excess of $35 million advertising its brand to Australians and inspite of it all, Iced Tea only accounted for 2% of all drinks sold in 2007. Lipton Spend Source: Lipton Trade Presenter 2008. The barrier to consumption was the perceived taste, the belief that Iced Tea is essentially hot tea gone cold. Nestea had to change the rules of the game. We anchored the brand in a powerful insight that energized Nestea's brand, differentiating it from Lipton and repositioned Iced Tea in the minds of both Australian consumers and at critical retail/trade levels. ICED Tea RTD Category Pre-Campaign Market Share BUSINESS OBJECTIVES 1. Grow Nestea's share of the category across all major channels. Fosdstores from 4.5% to 7.5% Convenience and petrol retailers from 16.7% to 25% 2. Exceed category growth throughout the period, from 18.7% to 40%. 3. Increase distribution and ranging from a total market average of by repositioning Nestea and the Iced Tea category in the minds of the trade. THE SOLUTION Our Opportunity In 2007, current Tea drinkers were responsible for much of the growth in the Iced Tea category. People were slowly beginning

to consider the category and as such, consumption of Iced Tea in the home rose from 10.4%-11.5% at year end 2007. The bigger prize that Nestea decided to pursue was the remaining 90% of Australian households that had never tried Nestea Iced Tea before. Driving trial became Nestea's strategic imperative. By 2007, Lipton had become the category gorilla, a dominant force that ironically helped create the communications problem in the first place by leveraging the brand's equity and heritage in the hot tea, specialty category. Building their message platform around the tagline Tea can do that, a benefits driven (eg: anti-oxidants) approach to Tea made sense for Lipton, but it also presented Nestea with a golden opportunity to make an impact and steal share in the Iced Tea category. The arrival into the market of the iconic British tea brand Tetley only compounded the taste barrier issue as they too leveraged their hot tea equity with a platform; Tea on Ice, brought to you by Tetley. At 18.7% of the category, Nestea was suffering from competitors with significantly bigger media budgets who were essentially confusing Australians by leading with Tea cues and/or coming from a hot tea background. Nestea had enough of bigger brands polluting the Iced Tea category with confusing hot tea gone cold orientated messaging and believed there was a greater opportunity to break through the category. We had to roll up our sleeves and get to work. From Yuck to Yum in 30 Seconds Nestea's challenge was to bring Iced Tea to the mainstream and we knew that a younger audience of 1829 year old Australians would be open to trying something new as a change from their usual carbonated soft drinks of choice. We found that at this life stage people are more open minded. They're on a journey of discovery, generally willing to embrace the latest and greatest especially if their peers had done so. We had to appeal to this mindset by encouraging them to have the confidence to give Iced Tea a go and make up their own minds. So what was the key barrier that our communications needed to overcome?
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Wal-Mart Struggles in Japan

Abstract: The case focuses on how retailing giant Wal-Mart struggled in the Japanese market. It elaborates on the reasons for Wal-Mart's decision to go global in the early 1990s. The case discusses in detail Wal-Mart's entry strategy and describes its efforts to bring in its best practices in retailing like Every Day Low Prices (EDLP) and Rollback to the Japanese market through its joint venture with Seiyu. The case details the problems that Wal-Mart faced in Japan because of the differences

between the operational and cultural environment in its home market and the Japanese market. It finally ends with a discussion on the company's future prospects in Japan. Issues: Nature and structure of the Japanese retailing industry including its size, scope, spread, and unique characteristics Entry strategy for an overseas market Impact of competition, culture, and unique environmental factors on the performance of a firm in the international market Influence of regulation on the success of a company in such markets "It will be a long-term story to see if Wal-Mart can take advantage of the merits of the Japanese market." 1 -Yasuyuki Sasaki, Retail Analyst, Credit Suisse First Boston in 2002. "Japan is a challenging market, but it is also a very significant growth opportunity." 2 - Greg Penner, Chief Financial Officer, Wal-Mart Japan in 2004. "For Wal-Mart, success in Japan is important, since a solid foothold in the world's No. 2 retail market could someday be a key to future growth." 3 -Business Week Magazine in 2005. Introduction Wal-Mart Stores Inc. (Wal-Mart) entered Japan in March 2002, through an alliance with Seiyu Limited (Seiyu), Japan's fifth largest retailer in 2002. There were mixed reactions from analysts. Some cited macro-economic factors like the low rate of growth4 and an aging population that made Japan's retail market less than attractive. However, others felt that despite these factors, Japan's $451 billion retail industry was sufficiently large to justify WalMart's interest. As soon as it entered Japan, Wal-Mart brought in its best practices in retailing like Every Day Low Prices5 (EDLP) and Rollback,6 for which the firm was renowned. It also attempted to introduce substantial changes to the management of Seiyu stores by revamping its store layouts, and implementing Retail Link,7 its widely appreciated supply chain management software. Despite these efforts, Seiyu registered consecutive losses in 2003 and 2004. Some experts commented that Wal-Mart's retailing model was not suitable for Japan. They pointed out that Japanese consumers preferred conveniently located stores within the city and were not visibly price-conscious. They added that foreign retailers had trouble with procurements due to the multi layered network of suppliers and retailers in the Japanese retail sector. Experts began to compare Wal-Mart's experiences in Japan with its experiences in other countries such as Mexico and Germany. While Wal-Mart had a shaky start in Mexico, it later emerged as a market leader in the country. In Germany, however, it could not overcome initial setbacks and was still struggling. Experts wondered whether the Japanese venture would replicate the Mexican success story or the German misadventure. In August 2005, Wal-Mart announced that it was contemplating launching stores with its own brand name in Japan. This seemed like a bold move by Wal-Mart, especially since another big foreign retailer - Carrefour8 - had exited the Japanese market just a few months earlier in March of the same year, after struggling to establish itself for six years. Despite its troubles with Seiyu, Wal-Mart also made a bid to acquire Japan's fourth largest retailer Daeiei in 2004, when it was being restructured through a bailout. However, Wal-Mart's bid for Daeiei was rejected in September 2005, dealing a big blow to its expansion plans in Japan. Had the bid been successful, Wal-Mart could have emerged as the second largest retailer in Japan after Ito Yokado.

Background Note In 1962, Sam Walton (Walton) and his brother James Lawrence "Bud" Walton opened the first Wal-Mart store in Rogers (Arkansas), USA. In the first year of its operations, the store registered sales of over $1 million. Initially, the Waltons concentrated on opening stores in small towns and introduced innovative concepts such as self-service. By 1967, Wal-Mart had 24 stores with sales of $12.6 million. Encouraged by the early success of Wal-Mart, Walton expanded Wal-Mart's operations to Oklahoma and Missouri in 1968. In the following year, Wal-Mart was incorporated as a company under the name Wal-Mart Stores Inc. In 1970, Wal-Mart established its first distribution center in Bentonville, Arkansas. The same year, it was also traded for the first time as a public limited company in over the counter9 stock trading. In 1972, WalMart was listed on the New York Stock Exchange. Wal-Mart continued to grow in the 1970s, benefiting from its highly automated distribution system, which reduced shipping costs and time, and its computerized inventory system, which speeded up the checkout and reordering of stocks. By 1975, there were 125 Wal-Mart stores in operation with sales of $340.3 million and 7,500 employees. The famous 'Wal-Mart Cheer' was introduced by Walton in the same year to foster cooperation and team spirit among employees (Refer Exhibit II for the Wal-Mart Cheer). In 1978, Wal-Mart purchased the Hutcheson Shoe Company, and later set up pharmacy, auto service center, and jewelry divisions. By 1980, Wal-Mart had 276 stores with annual sales of $1.4 billion and by 1984 the number of stores increased to 640 with annual sales of $4.5 billion and profits of over $200 million. In the 1980s, strong customer demand in small towns led to the rapid growth of Wal-Mart. Wal-Mart succeeded in smaller towns because it offered low prices and catered to the specific needs of small towns. It offered the kinds of products that were most in demand by customers and fixed the store's business hours according to its customers' convenience. This made Wal-Mart more popular than the local stores which offered limited selection and had high mark-ups... Wal-Mart's International Operations In early 1990s, Wal-Mart announced that it would go global. It wanted to look for international markets for the following reasons: Wal-Mart was facing stiff competition from K-mart and Target , which had adopted aggressive expansion strategies and had started eating into Wal-Mart's market share. Although Wal-Mart had the scope to expand in the US, it was becoming difficult for the company to sustain its double digit growth rate. Wal-Mart was suffering from soft sales and rising inventories, especially in respect of its Sam's Club divisions. Wal-Mart also realized that the US population represented only 4% of the world's population and confining itself to the US market would mean missing the opportunity to tap potentially vast markets elsewhere. In the early 1990s, globalization and liberalization opened up new markets and created opportunities for discount stores such as Wal-Mart across the world. During the first five years of its globalization initiative (1991-1995), Wal-Mart concentrated on Mexico, Canada, Argentina and Brazil, which were close to its home market. It started with Canada and Mexico due to the similarities in people's habits, culture and the business environments in these countries and also because the North American Free

Trade Agreement (NAFTA) made it easier for US companies to enter these markets. Wal-Mart's decision to enter Argentina and Brazil was based on the high growth rates of the Latin American markets... Wal-Mart's Entry Into Japan In the 1990s, real estate prices in Japan declined, prompting many foreign retailers to enter the country. Wal-Mart started exploring the Japanese market in 1997. Other major foreign retailers Costco and Carrefour entered the Japanese market in 1998 and 1999 respectively (Refer Table V for foreign retailers in Japan). Costco and Carrefour entered Japan without a local partner and faced difficulties from the very beginning. This convinced Wal-Mart that it should partner with a Japanese company so as to enable it to understand the peculiarities of the Japanese market... The Wal-Mart-Seiyu Partnership Wal-Mart and Seiyu identified IT and distribution as the key areas for reforming the retail business of Seiyu. During 2002-03, Wal-Mart also conducted extensive focus group researches and studied retailers in Japan so that it could apply this insight to the management of Seiyu's stores. Seiyu launched a five-year plan in December 2002, called as the "New Seiyu"program. Through this Seiyu wanted to implement the best practices offered by the Wal-Mart model. In line with the above program, in August 2003, Seiyu began the roll out of Wal-Mart's store information system called as "Smart System". The Impact Of The Partnership Seiyu's performance improved marginally with a reduction in losses from $754 million in 2002 to $67 million in 2003. By the first quarter of 2004, Seiyu announced that it had cut down 3.6% of costs compared with the same period the previous year. It had laid off 25% of its full time employees though voluntary retirement schemes. The company announced that it expected to make profits of $4.6 million with sales of $10.2 billion for 2004. The company's share prices on the Tokyo stock exchange also showed an improvement as compared to the year 2003... The Future As of 2005, Seiyu said that it did not hope to make any profits till 2006. The opening of the next Super Center would also be taken up only after 2006. The company had realized that it was not able to cut costs enough to allow it to offer really heavy discounts necessary to make customers shop regularly at its stores. In Japan, as compared to the US market, Wal-Mart was still to achieve big efficiencies by leveraging Retail Link and increasing its purchasing. As Marra remarked, "In the U.S., Wal-Mart's information technology and huge buying power allows the company to undercut rivals by some 15% across the board...
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The Story of the Cellular Phone Brand Orange

By the end of 2000, the sun seemed to be setting on the Hutchison empire in India, or at least on its Orange1 brand. Hong Kong-based cellphone operator Hutchison Max Telecom,2 which owned the popular Orange brand in Mumbai (India) might soon have to give it up in favor of the city's second operator, BPL-France Telecom.

France Telecom, which acquired worldwide rights for the Orange brand in May 2000 from Vodafone3, was planning to enforce its ownership of the brand in India in a bid to cash in on the popularity of the brand.4 France Telecom was keen on using the brand via its joint venture with BPL5 in Mumbai. Said a France Telecom official, "We are likely to retain the brand for this part of the world. A final decision is likely to be taken early next year". Analysts felt that the Orange takeover could come as a severe blow to Hutchison in Mumbai, as the company could lose its leading position in this market. Hutchison would have to re-invest huge amounts in building up a new brand and giving it the same level of credibility that Orange enjoyed. Analysts also felt that Hutchison, which had controlling stakes in cellular operators in other circles like Delhi, Calcutta and Gujarat, would have to develop a new brand for these circles.6 The company might be hit particularly hard in Delhi, the second largest cellular market in the country. The Hutchison Group had initially planned to launch the Orange brand in Delhi, in May 2000, through its 49 per cent holding in Sterling Cellular. This was later delayed to October 2000. It became clear that the Orange launch in Delhi had run into rough weather. Sudarshan Banerjee, CEO, Sterling Cellular, agreed that there was a delay in the Orange launch in the Capital, but attributed it to an expansion in its network. He Said, "We might launch Orange some time next year in Delhi." The Orange brand was also to be launched in Kolkata, where The Hutchison Group held 49 per cent in Usha Martin. But France Telecom, the foreign equity partner of Hutchison's Mumbai rival, BPL, seemed to be raising objections over the use of the Orange brand name outside the Mumbai circle. Sandip Das (Das), Chief Operating Officer (COO), Orange, claiming he was ignorant about France Telecom opposing the launch of the brand in other cities. He commented, "It was upto the equity partners in the New Delhi and Calcutta ventures to decide on whether to launch Orange or not." The Making of an Empire Hutchison had a presence in the cellular market in India since 1995. In December 1999, Hutchison picked up a 49% stake in Delhi-based cellular service provider Sterling Cellular. Since then, another 2% seemed to have been acquired by a Hutchison associate company.7 The rest was held by the Essar group, which owned almost the entire stake in Aircell Digilink, the cellular license holder for Haryana, Rajasthan and Eastern UP. In 1999, when the Essar group approached financial services company GE Capital Services for a loan of Rs 650, crore to pump into its cellular operations, it could manage to get the money only after the loan was guaranteed by its partner, Hutchison. Analysts felt that Essar had already agreed to take the backseat in the venture. In early 2000, when Business World contacted Asim Ghosh (Ghosh), Managing Director and CEO, Hutchison Max Telecom (India), he refused to comment on whether the Ruias would let Hutchison be the dominant partner in the cellphone services relationship. But an Essar official commented, "Under the arrangement, Essar will not pull out of the telecom ventures for now, but Hutchison will call the shots. Essar will end up playing only a passive role in the arrangement." Essar officials held that the company had entered into a tacit agreement with Hutchison that Essar would exit from the telecom business in favor of the multinational when these telecom companies would go for an initial public offer (IPO) in the not-too-distant future. Hutchison would first acquire half of Essar's stake in these companies and then Essar would go to the primary market with an 'offer for sale' to offload the rest of its stake to the general public. That would leave Hutchison as the majority owner of the cellular telephone companies. However, foreign companies weren't allowed to hold more than 49% stake in Indian telecom outfits and Hutchison already owned 49% of Sterling. Under such circumstances, Hutchison would not be in a position to acquire more shares

and majority control. But, Hutchison had circumvented the 49% limits way back in 1998 itself. While picking up Max India's 41% stake in Hutchison Max Telecom (Max retained 10%), Kotak Mahindra Capital Company and Hutchison Whampoa's 100% subsidiary CGP India floated a new company, Telecom Investments India where Kotak owned 51% and CGP 49%. Telecom Investments then took over Max's 41% stake. A similar deal could perhaps be struck with Essar. Again, analysts felt that with the government in the process of reviewing the 49% limits set on foreign ownership in telecom, Hutchison might not have to resort to such complicated ways of upping its stake in Essar's telecom ventures. It seemed that the rationale behind Hutchison building up such a huge customer base was to help it get seamless connectivity across states and bring down prices, something that operators in individual circles would not be able to do. The fear among Indian operators was that they could end up as marginal players. Bharti Telecom and BPL were already planning to put forth a united front against Hutchison. However, Hutchison was also cash rich. In November 1999, it sold its 44.8% stake in Orange to Mannesmann. When Vodafone acquired Mannesmann, Hutchison got 5% of Vodafone's share capital. In March 2000, the company sold 1.5% of these shares for $4.7 billion (Rs 20,445 crore). It was part of this money that Hutchison was using to fund its expansion in India. All the other Indian telecom service providers, put together, did not have that kind of ready cash. Mobile Mania By the end of 2000, mergers, acquisitions and alliances had become the order of the day in the cellular phone market. Commented Atul Chopra, Managing Director, New Delhi based investment bank, Asia Pacific Capital, who was involved in some of the telecom deals, "You can either acquire or get acquired. There is no third option." In March 2000, Business World wrote, "Once the dust settles down in less than 18 months, the number of players in the business will come down from 22 to five or six". The probable long-term players could be Bharti Enterprises, BPL, Hutchison Whampoa, Reliance and the Tata-Birla-AT&T combine. MTNL could also be a significant player with its launch of mobile services under the brand name Dolphin in Delhi and Mumbai. Analysts felt that with 1.58 million subscribers (as compared to 26 million fixed lines), and less than 0.4% of the world's 400 million mobile users, there should not be a scramble for the market. "The entire mobile business in India has been notionally valued by investment bankers at $ 4.5 billion (INR 22,500 crore) which is nowhere near the valuation of say, the country's software business. So why this madness?" asked one. Mobile operators hoped that India would follow the rest of the world in opting for more cellular phones. The consistently falling call rates and a number of new services that mobile operators were offering was expected to drive the boom in the market. The impact of some of these developments was already being felt. The mobile market was expected to grow at a phenomenal 66% in 2000 and add one million new subscribers to touch 2.7 million subscribers by April 2001. In 2000, the mobile market was worth Rs. 2000 crore in terms of revenue and was expected to cross Rs. 5,000 crore by 2002. The mobile market was also expected to become huge in the near future and waiting to carve out their share of this pie would be a handful of players. Once the foreign companies were allowed to hold 100% stakes in Indian mobile firms, foreign majors with deep pockets would expand the market much faster. The major players in the cellular phone market, other than Hutchison Max Telecom,

were Bharti Telecom, Essar Teleholdings, BPL Mobile/BPL Cellular, RPG Cellular/Cellcom, Spice Cell/Spice Communications, Fascel/Celforce and Birla Tata AT&T. TABLE I MAJOR PLAYERS IN THE CELLULAR MARKET Companies Stakeholders % Bharti Cellular Bharti Televentures Bharti Telecom 56 44 Bharti Mobile Bharti Televentures Telia 74 26 Sterling Cellular (Essar Cellphone) Essar Hutchison Max 51 49 BPL Mobile France Telecom BPL Cellular Holdings 26 74 BPL Cellular BPL Cellular Holdings AT&T 51 49 RPG Cellular RPG Group Vodafone CellNet Others 68 20 11 1 RPG Cellcom RPG Group Vodafone 51 49 Spice Cell Modicorp Distacom AIG 45 43 12 Fascel Hinduja Group Kotak Mahindra Ltd. Hutchison Max 40 11 49 Birla AT&T Aditya Birla Group AT&T 51 49 Tata Cellular Tata Group Bell Canada International AIG 64 27.4 8.6 Welcome Orange In early 2000, a bright orange bloom over cities like Mumbai, Delhi and Kolkata was giving sleepless nights to Sunil Mittal (Mittal)8 and Rajeev Chandrashekhar

(Chandrasekhar)9. In February 2000, Hutchison Max Telecom introduced Orange in India. The brand "Max Touch"10 was replaced by Orange. This was for the first time that a globally recognised cellular service brand was available in India. Said Ghosh, "What that means to our subscribers is that they will now benefit from the technology advantages that Orange has. Orange is refreshing, honest, straightforward, innovative and friendly. In continuum, we will incorporate these brand values in our services at an accelerated pace". The change in the brand logo and culture was reinforced with a fresh round of campaigns. The mass media plan included print, outdoor and cable television. The brand was positioned as one which was not for the elite or techno-savvy geeks alone but for down-to-earth, 'real' world people who wanted to be spoken to honestly and directly. Commented Ghosh, "Orange had inspired Max Touch ever since the inception of Max Touch. Orange is the logical extension and replacement of the brand Max Touch which had always imbibed Orange values." The earlier uniform of a formal black trouser-suit with a scarf was replaced with an orange shirt and black skirt with the supervisors having the option of wearing a black jacket with an orange handkerchief. The men wore a white shirt, black trousers and an orange printed tie. Officials of Hutchison Max Telecom felt that France Telecom's purchase of Orange would not have any immediate impact on the Orange brand in India. Hutchison Max Telecom had already acquired the rights to use the Orange brand in India and so the question of 'cracks in Orange' did not arise. Again, under the National Telecom Policy, BPL would not be able to utilize the Orange brand name in Mumbai.11 Analysts felt that there would not be any major conflict of interest in use of the Orange brand in Mumbai. Said one, "I don't think that BPL or France Telecom would be interested in getting into that issue at this stage. May be never. Unlike some other telecom companies in India, BPL wanted to promote its own brand and not of a foreign partner. Suddenly, I don't see any reason for them to change that stand now." Analysts also felt that the primary focus of France Telecom, through Orange would be to consolidate operations in Europe. Commented one, "What they (France Telecom) decide to do with their non-European properties or businesses is not clear as yet. France Telecom has been lying low in India and Hutchison, on the other hand, has been expanding its operations with a great deal of interest. Hutchison might, at a later stage, plan to sell off its Asian properties to a separately spun-off and publicly-traded "New Orange" if they fetch the company as much as it has in Europe--around $ 7,000 per subscriber against around $ 2,500 per subscriber Hutchison itself has spent on expansion." Orange is Squeezed In May 2000, when France Telecom acquired Orange, two top officials from Orange met senior Hutchison India officials in Israel at a convention. They made an offer to pick up a significant stake in Hutchison's India operations, which was by then planning to launch the Orange brand in New Delhi after having made a big splash in the lucrative Mumbai circle. The offer was made a second time shortly thereafter, but Hutchison India officials turned it down, saying that they were in no mood to sell, and that they would eventually effect a merger of all the circles by taking their Indian partners along. After the offer was turned down, a team of Orange officials visited India and said that the Orange brand licensing agreements needed to be reworked and a higher royalty would now have to be paid by Hutchison for use of the Orange brand. Hutchison officials seemed to have rejected a higher royalty payout. They said they enjoyed the rights for Mumbai and also had the option to launch the Orange brand in some "other properties"

in India. It was pointed out that the only way out could be to go in for arbitration. However, nothing has moved on this front so far. In late 2000, in a significant departure from their earlier stand, Hutchison officials hinted that Orange was not a brand they would die for. They also hinted that Orange might not be the brand they would eventually go ahead with. Analysts also felt that it might not make sense to push a brand to which they could not claim all-India rights. In late 2000, in response to The Economic Times' query on whether Orange representatives had negotiated a stake buy-out with Hutchison, a Hutchison spokesperson said, "There has been a great deal of speculation about Orange and Hutchison, since Hutchison sold its stake in Orange to Mannesmann over a year ago. There has also been speculation and rumours at Orange branded businesses. Yes, there have been representatives from Orange in India. We have nothing further to add at this time." In early 2001, there was speculation that Hutchison might withdraw Orange from all parts of India, including Mumbai, replacing it with a new global brand by the end of 2001. There was also speculation that BPL might use Orange in Mumbai. However, BPL decided not to use the Orange brand in Mumbai, even after the current user Hutchison choice to give it up. Said Chandrashekhar, "BPL is a very strong brand there (Mumbai) and there is no question of our replacing it with any another brand. Our philosophy is clear: we do nothing, which doesn't enhance value for us." Analysts also felt that BPL was a fairly strong brand and replacing it in Mumbai or anywhere else in India, with any other brand would make little sense for the company. "I don't think BPL should be very keen on Orange. When its own brand is so reputable, why should it pay royalty to use the brand? For the rest of India also, BPL may not like to spend a lot on promoting the new brand," said a Mumbai based analyst. But Not Hutchison Hutchison's honeymoon with the Orange brand in India could soon be over but it would still remain a dominant player in the cellular phone market. In December 2000, the company announced that it was planning to consolidate its cellular telephone assets in India and list them within a year or eighteen months. In early 2001, oblivious of the threat looming large over its Orange brand, Hutchison was gearing up for a new competitor, MTNL in the aggressive Mumbai market. Said Das, "The company plans to launch a slew of marketing initiatives to promote the Orange brand in the near future." To support the print campaign, the company planned to launch an ad campaign and ground promotions. Mr. Das said, "Competition may come and go. We are not worried about new rivals. We will be exploring new marketing options this year like any other year." In Feb 2001, Orange announced significant cuts in their tariffs. As per their new standard tariff plan, the outgoing and incoming calls would cost Rs. 2.80 and Rs. 1.60 respectively, as against Rs. 4 earlier. For Hutchison, the road ahead was tough and future uncertain. Cut-throat competition, its squabbles with France Telecom over royalty payments and other issues had begun to squeeze out Orange's vigor. The million-dollar question was, whether Orange would survive and bounce back.
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Private Label Marches

Retailers are marching towards branding their products through the name of private labels and the original brand makers are finding it difficult to occupy the shelf space and soon will find it difficult to occupy the mindspace of the customer. That is the power of the private labels to influence the minds of the customer. As the retailers use the private label concept they could also with stand the core inflation against the period by using supply chain magic. The concept of logistics helps the retailers to shave the cost by 3 percentage minimum for each product.Thomas Varghese, CEO of Adhitya Birla Retail says the private labels strategy of More has undergone a revamp in terms of number SKUs. More, says Varghese, had 360 SKUs in 13 brands. Now it has reduced to 280 SKUs across brands which he likes to call as "power brands".
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Sachin gets a Big Bonanza

It must be the greatest start Sachin Tendulkar ever had: earning Rs 1.5 crore a day! In the first 27 days of 2011, the Little Master has won Rs 40 crore and two villas in new endorsement deals. If only he could match the strike rate on the pitch during this World Cup! Indian cricket's little big man has signed deals with Pune-based real estate company Amit Enterprises for Rs 9 crore and apparel maker S Kumars Nationwide (SKNL) for Rs 12-13 crore, within days of Coca-Cola announcing a Rs 20-crore, three-year contract with the top batsman. Tendulkar's deal with the Rs 250-crore developer includes two villas, priced at Rs 2.5 crore each, in Amit Enterprises' upscale housing project. "We have taken Sachin as our brand ambassador because we are not known outside Pune, and his association with us should help when we start projects in Mumbai and Nashik," Amit Enterprises chairman and managing director Kishor Pate (Wani) said. The company plans to enter Bangalore, Hyderabad and Chennai, he added. SKNL , which already has high-velocity brand ambassadors such as Shah Rukh Khan for Belmonte and Amitabh Bachchan for luxury suitings brand Reid and Taylor, believes Tendulkar can help its economy brand, World Player, break into the value segment for men and become a pan-Indian brand. "The timing of the World Cup is purely coincidental to the endorsement," SKNL's apparel and retail director Ashesh Amin said. Tendulkar's association with the brand will extend to incorporating his personal tastes with respect to colours as well as the look & feel of the brand. "Tendulkar is a go-getter. His dedication and attitude fits into World Player's brand values," Amin said. Last week, Coca Cola signed Tendulkar as its 'happiness ambassador', laying the pitch for a Tendulkar-M S Dhoni face-off in the cola battlefield this season. "Sachin Tendulkar will play his part in the company's various strategic communication initiatives including its corporate, CSR and brand campaigns," Coca-Cola said in a statement. PepsiCo has already released a high-visibility campaign featuring the Indian cricket captain Dhoni. Sachin had endorsed PepsiCo for close to a decade before being dropped

two years ago as they felt he did not fit their 'youngistaan' campaign theme. Tendulkar endorses 17 brands, including Adidas , luxury Swiss watch maker Audemars Piguet, Canon, ITC, Aviva Life Insurance , RBS and appliances major Toshiba. He charges about $1 million per year per deal. His endorsements are managed by sports management firm World Sport Group . Other cricketers like Gautam Gambhir and Virat Kohli are also learnt to be on a signing spree, and are on the verge of signing two-three deals each. Details of the same were not available.
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Kmart: Fall of a Retailing Giant

ABSTRACT: The case details the journey of US-based retailing company Kmart from being an integral, successful part of the country's corporate history to bankruptcy in 2002. The company's origins and its evolution into a retailing giant over the decades have been traced. The reasons for its poor performance vis--vis rivals Wal-Mart and Target have also been explored. The case takes a look at the restructuring moves taken during CEO Conaway's tenure and examines the reasons for the failure of the same. The case also takes a look at Kmart's reorganization plans and its efforts to emerge from bankruptcy during 2002-03. Finally, the case discusses Kmart's future prospects in light of its changed strategic game plan and the various problems that still persist. ISSUES: Understand the major causes that contributed to the failure and bankruptcy of Kmart Appreciate how remote and operating environments impact a company's performance over a period of time if they are not factored into the strategic framework Understand how competition, operational efficiencies and positioning strategies can significantly alter market shares, leadership position and financial success "Think of Kmart as a sick uncle. He has been coughing and wheezing for years. Now he has to have major surgery. We hope he survives the knife. But he will never be what he once was." - Tom Walsh, Free Press Columnist, January 2002. "We will emerge as a vital enterprise, focusing on providing value to our customers and our stakeholders." - Julian Day, Kmart CEO, in April 2003. KMART GOES BUST In January 2002, leading US-based retailer Kmart filed for bankruptcy protection under Chapter 111 after it was unable to meet its payment obligations to suppliers due to severe financial problems. The company's (the second-largest discount retailer and the third-largest general merchandise retailer in the US) losses amounted to $ 2.45 billion in 2001 (Refer Exhibit I for key financials). Since Kmart was the largest retailer in US history to declare bankruptcy (2114 stores at the time of the declaration), the announcement came as a major shock to industry observers, customers and employees alike. In March 2002, Kmart decided to close 284 stores throughout the US and lay off 9% of its employees (22,000) as part of its

reorganization plan. The then Chairman, Chuck Conaway (Conaway) said, "The decision to close these under-performing stores, which do not meet our financial requirements, is an integral part of the company's reorganization effort." In that year, closures were carried out in 44 US states and Puerto Rico. Over the next one year, the total number of stores closed went up from 284 to 600, while the total number of employees laid off increased from 22,000 to 67,000. Many senior executives were also laid off - reportedly, around 25%-35% of senior level positions were eliminated. Thousands of vendors dependent on Kmart for selling their merchandise were affected badly. Kmart's share prices reflected the company's uncertain future: while the stock traded at $ 13 in August 2001, it had reached an abysmal low of 11 cents in February 2003 - a loss of $ 6.7 billion in market capitalization in less than two years. In December 2002, the stock was even delisted from the New York Stock Exchange (Refer Exhibit II for Kmart's stock chart). The downfall of the once mighty company soon came to be seen as the result of problems on a number of fronts: strategic, operational, marketing, human resources and business ethics. BACKGROUND NOTE Kmart's story dates back to 1899, when Sebastian S. Kresge (Sebastian) set up the S.S. Kresge Company (Kresge) in Detroit, US. The company established a network of retail stores that sold everything for 5 and 10 cents. The low pricing strategy worked well, and by 1912 the company expanded to 85 stores, worth $ 10 million. In 1918, Kresge was listed on the New York Stock Exchange. During the First World War and the Great Economic Depression, the company's low prices model kept it running. By the mid-1920s, Sebastian opened the forerunner of today's discount stores in the form of stores that sold items for $ 1 or less. In 1929, the company's Canadian subsidiary, S.S. Kresge Company, Ltd. was founded. By the end of the year, it ran 19 stores in Canada. In 1937, Kresge opened a store in the first suburban shopping center in the US, the Country Club Plaza in Kansas City, Missouri. As more companies entered the retailing arena and competition intensified, Kresge launched a newspaper advertising program that became highly popular and successful. The campaign was extended to radio in due course of time. Over the next few decades, the company established many retail outlets across the country and became a name worth reckoning with in the US retailing industry. In 1959, Harry B. Cunningham (Cunningham), a seasoned retailing expert, became the President of Kresge. Cunningham decided to launch a discount department store to help the company's stores stand apart from the rest of the players. Thus, the first Kmart store was opened in Garden City, Michigan, in 1962. In that same year, 17 more Kmart stores were opened. These stores contributed a major chunk of the company's sales of $ 483 million for that year. In 1966, Kmart recorded $ 1 billion in revenues for the first time through its 915 stores, of which 162 were Kmart stores. In 1968, Kmart (Australia) Ltd. was set up in association with G. J. Coles & Coy Ltd. of Australia, with Kresge holding 51% of the venture's equity... KMART UNDER CONAWAY In May 2000, Conaway replaced Floyd as the CEO of Kmart - and things were never the same again. In addition to Wal-Mart, the company was struggling hard to compete with another discount retailer Target. Competition from these two companies led to a fall in Kmart's market share (Refer Table I) and financial performance (for 2000, Kmart posted a loss of $ 244 million). Kmart had become infamous for not keeping its stores clean and for not stocking enough goods. Customers had to wait in long queues for shopping at its stores. Even Martha complained of distribution problems and the difficulty customers had locating her products. For such customers, she said, "If you are frustrated, keep looking." Conaway identified the following as Kmart's major problems: poor inventory management (resulting in empty store shelves); lack of customer focus; and a poor, undifferentiated marketing strategy...

TOWARDS BANKRUPTCY Under the above circumstances, Conaway's and Schwartz's (who joined in September 2002) 'obsession' to beat Wal-Mart and Target was untimely. Conaway and Schwartz wanted to leave no stone unturned in their quest to beat the competition. In 2001, while Kmart posted a loss of $ 1.3 billion on sales of $ 36 billion, Wal-Mart posted a profit of $ 6.7 billion on sales of $ 217 billion (Refer Exhibit III for a brief note on the industry environment for these companies). In fiscal 2001-02, Kmart reduced its prices significantly, hoping to beat Wal-Mart and Target. Under this initiative, named the BlueLight Always campaign, the company planned to sell over 50,000 items at everyday low prices. Reportedly, the directors of the company including Adamson expressed their displeasure with regard to the BlueLight Always program. In fact, Adamson recommended a trial-run of the program. However, Conaway went ahead with a full-fledged implementation of the program... THE REORGANIZATION INITIATIVES After almost a year of arranging funds, streamlining operations, organizing store closures and laying off employees, Kmart filed its plan of reorganization with the bankruptcy court in January 2003. As per the plan, ESL Investments (ESL) and Third Avenue Value Fund were to be the two main investors. ESL converted claims worth $ 2 billion into stock and put up $ 109 million in cash for running the business. These two were to invest around $ 140 million in exchange for shares in the reorganized Kmart (with a combined stake of 54%). And subject to certain conditions, ESL was to provide additional $ 60 million of convertible unsecured note financing. ESL also agreed to use the cash received by it (as a holder of Kmart's bank debt of approximately $ 152 million) to purchase more equity. Other holders of Kmart's debt were to be given 40 cents for each dollar of debt held... REORGANIZATION ROADBLOCKS In February 2003, Kmart reported a $ 54 million net loss on revenues of $ 2.7 billion. In the same month, the bankruptcy court approved Kmart's plan of reorganization with minor modifications. The confirmation hearing for the plan was scheduled to be finished on April 14 and 15, 2003. The company revealed that as per preliminary projections, it foresaw earnings before interest, taxes, depreciation and amortization of $ 51 million for the three months ending March 26, 2003. From the beginning of 2003, sales were $ 4.06 billion, a little higher than the $ 4.01 billion mentioned in the plan submitted to the court. The first obstacle to the reorganization came in the form of a dispute with a company called Capital Factors (CF). Kmart owed $ 20 million to CF, a company which bought Kmart's accounts receivables at a discount and assumed the risk of collecting the money. CF had appealed against a court decision (in 2002) which approved Kmart's plans to make payments to critical vendors... LIFE GOES ON - KMART'S FUTURE PLANS Liquidation sales had begun at 317 Kmart stores across the US in January 2003. Heavy discounts were offered and sales off take was quite impressive. To lure back customers to the stores that continued to remain in business, Kmart launched the 'Savings Are Here To Stay' promotion in February 2003. The campaign included in-store events, lucky draws and money saving offers in the form of coupon books (worth over $ 150 in savings on major brands and exclusive Kmart merchandise)... Posted by Pramit Saran at 08:10 No comments: Email ThisBlogThis!Share to TwitterShare to Facebook Labels: Case study

Red Bull's Innovative Marketing: Transforming a Humdrum Product into a Happening Brand
ABSTRACT: The Red Bull energy drink was launched in Austria in 1987, by Dietrich Mateschitz. He claimed to have experienced the invigorating properties of a popular Thai energy drink, Krating Daeng, on a trip to Thailand. Realizing that a similar product could have good potential in Western markets, Mateschitz obtained the license to manufacture a carbonated version of Krating Daeng from its Thai owners. Obtaining permission to sell Red Bull in Europe was not easy, as it contained several ingredients whose effects on the human body were untested. However, permissions were eventually obtained, and Red Bull became exceptionally successful in all the markets in which it was launched. It was generally acknowledged that Red Bull's success was the product of the company's innovative marketing efforts. This case study discusses the marketing strategy adopted by Red Bull GmbH, including the company's effective employment of buzz marketing in new markets, and its sponsorship of sporting activities, especially extreme alternative sports, to enhance its image. The case also talks about Red Bull's target markets, and its pricing and differentiation strategies. It includes a section on the various controversies surrounding Red Bull, and the effects of these on its brand image. The competitive situation in the energy drinks market and Red Bull's position vis--vis competitors, is also discussed. The case concludes with a commentary on Red Bull's attempts at brand extension, and the company's future prospects in the light of its excessive dependence on a single product. ISSUES: To understand how savvy marketing can transform an ordinary product into a powerful brand. To study the use of buzz marketing in establishing a product in new markets. To appreciate the importance of identifying suitable target markets, and designing marketing activities to reach them effectively. To examine the role of sports sponsorships in establishing brand image. To study the effect of controversies on brands and how, in certain circumstances, controversies can actually help in the growth of a brand. To analyze the potential effects of a large number of competitors on a powerful brand and the sources of differentiation in a crowded market. To understand the importance of brand extension and the pitfalls of being associated with a single product. RED BULL ACQUIRES SECOND F1 TEAM In September 2005, Red Bull GmbH, the manufacturer of the Red Bull energy drink, acquired Minardi, an Italy-based Formula One (F1) team for an undisclosed amount. Dietrich Mateschitz (Mateschitz), the founder and managing partner of the company said that the Minardi team would continue under the existing management till the end of 2005, after which it would be renamed for the 2006 racing season. Red Bull GmbH already owned another F1 team, Red Bull Racing, at the time it acquired Minardi. Red Bull Racing had participated in F1 as Jaguar Racing, until Mateschitz bought it from its previous owner, the Ford Motor Company (Ford) in November 2004. After the acquisition of Minardi, Mateschitz announced that Red Bull Racing would be the company's main team, and the newly acquired Minardi (renamed Scuderia Toro Rosso (STR) for the 2006 racing season) would serve as the 'rookie team' in 2006. Red Bull GmbH intended to use the team to train young drivers sponsored by

the company. Red Bull, widely acknowledged as the creator of the 'energy drink' category, maintained a close association with sports from the time it was launched in 1987. Red Bull GmbH was known for its sponsorship of extreme, alternative sports like white water kayaking, hand gliding, wind surfing and snowboarding -sports that involved elements of adventure and risk. Red Bull's association with F1 Racing, one of the world's most glamorous and expensive sports, also helped enhance its image as a trendy drink. Analysts said that the company's sponsorship of extreme sports that required stamina and energy was also just right for the image of the beverage. For a product that did not have any extraordinary qualities, and was made of ingredients whose effects had often been called into question, Red Bull had a huge market presence. The company was reported to hold almost 70 percent of the worldwide market for energy drinks in 2005. Analysts attributed the beverage's success to the unconventional marketing strategy adopted by the company to promote it in new markets. BACKGROUND Dietrich Mateschitz was born in 1944 in Austria, to parents who were primary school teachers. After graduating with a marketing degree from the University of Commerce in Vienna, he took up marketing jobs at Unilever and Jacobs Coffee, before becoming the international director for marketing at Blendax, a German company that dealt in FMCG products like toothpaste, skin creams and shampoos, in 1979. Mateschitz's job involved a lot of travel around the world, and during one of his trips to Thailand, he discovered an 'energy drink' called Krating Daeng, which was very popular among blue collar workers in the country. When he sampled it, Mateschitz reportedly discovered that the drink was good at combating jetlag. The idea for marketing an energy drink in Western markets came when he realized that energy drinks had a huge market in Asia and that there was no such product available in Europe. These events were major attractions and were considered crucial for the business of fashion. Fashion weeks served as a platform for the entire fashion industry to display the upcoming seasons' collections to trade buyers (retailers, buying houses, wholesalers, etc.), the media, and individual customers. The central idea behind a fashion week was to showcase representative samples to the trade - quite unlike individual 'couture' fashion shows which tended to be more social/theatrical in nature. The 'allbusiness' nature of fashion weeks makes them popular among buyers who attend them to preview, plan, and order their lines for the next season. Mateschitz approached Chaleo Yoovidhya (Yoovidhya), the owner of TC Pharmaceuticals, which made Krating Daeng, with a proposal to market the beverage in Europe. Yoovidhya agreed to give Mateschitz the foreign licensing rights to the drink in return for a partnership in the venture. In 1984, Mateschitz resigned from his job to pursue his new business. Mateschitz and Yoovidhya each invested $500,000 to become equal partners, with a 49 percent stake each, in the new company. The remaining two percent was held in trust for Yoovidhya's son. The founders agreed that Mateschitz would run the company, while the Thais remained sleeping partners... ELEMENTS OF RED BULL'S MARKETING STRATEGY Red Bull was generally acknowledged by marketing experts to be a good example of an ordinary product of uncertain worth that was transformed into a powerful brand through innovative marketing. The emphasis Red Bull placed on marketing was evident from the fact that the company spent around 30 percent of its annual turnover on marketing - much higher than most other beverage manufacturers who spent approximately 10 percent. Red Bull was positioned as an energy drink that 'invigorated mind and body' and 'improved endurance levels'. The company's slogan 'Red Bull gives you wiiings' reinforced this positioning. The beverage was targeted at people who sought increased endurance, speed, concentration and alertness (Refer Table I for the 'benefits' of Red Bull as claimed by the company)... CONTROVERSIES Red Bull had been a controversial product right from the start. When Mateschitz first planned to launch the beverage in Europe, he had to wait for three years to get approval in Austria, his home country.

After that, it took another five years before it could be sold internationally, and Hungary became Red Bull's first foreign market in 1992. Red Bull's launches in new markets were almost always preceded by controversy, usually centering on the nature of the ingredients in the drink. While exotic ingredients were acceptable in many Asian markets where food regulations were not stringent, in Europe, the beverage faced difficulties in getting approval from the authorities. As of 2006, Red Bull was banned in France and Denmark. In Norway, it was classified as a medicine that could only be sold in pharmacies. The most controversial ingredient in Red Bull was taurine. Taurine, an acidic chemical substance, was an untested food product in many western countries and was thought by some to be harmful. The controversies were further fuelled by rumors that taurine was actually derived from the bile of bulls... THREATS TO CONTINUED SUCCESS Red Bull was a market leader in its category in the early 2000s, garnering strong sales in its various markets around the world. Nevertheless, analysts were skeptical about the company's continued survival and growth as there were several factors threatening the brand's long term prospects. Red Bull's success had spawned a spate of imitators, all wanting to cash in on the booming energy drinks market. Some of the knock-offs even had names that evoked the Red Bull brand -Red Tiger and American Bull being notable examples. The US itself saw the launch of brands like Red Devil, NRG, Eclipse, Blue Ox, Niagara, Dynamite, Red Rooster, Energy Rush, SoBe Adrenaline Rush, Mad Croc, Hansen's Functional, and Jones Whoop Azz, among others, in the energy drinks market during the early 2000s. Not to be left behind, certain American celebrities like rap stars Cornell Iral Hayes, Jr. (known as Nelly) and Jonathan Smith (known as Lil Jon) also came out with their own brands. Nelly launched an energy drink called Pimp Juice, while Lil Jon launched the Crunk brand.Overall, it was estimated that as of 2005, there were 125 players in the energy drinks market in the US. Major beverage companies like Coke, Pepsi and beer major Anheuser-Busch had also come out with new energy drinks. Coke and Pepsi launched KMX and AMP respectively, while Anheuser-Busch launched 180, in the early 2000s. Analysts said that competition from big companies might affect Red Bull, as these companies, with their greater spending power, had the potential to give the brand a run for its money. "Strategically, Red Bull could be vulnerable to such giants as Coca-Cola and Pepsi, which can't sit back and simply do nothing," said John Hudson, coordinator of the graduate business school at the University of Palermo. "They could wind up competing in the same segment. It would be hard to fight that battle."Pr