Case Studies

1. Tata Motors Acquisition of JLR

India- based Tata Motors Ltd. successfully acquired two British automotive brands - Jaguar and Land
Rover (JLR), in June
2008 from Ford Motors for $ 2. 3B. As part of the deal, Tata Motors gained
1009% stake in companies,
3 UK plants, 2 advanced design and engineering centres, 26 national sales
companies, IP rights, $1.1B in capital allowances for taxes, and $600M in pension contributions. In
deal, Tata Motors raised $3B through bridge loans through a number of banks,
orderto facilitate the
including JP Morgan, Citigroup and State Bank of India. Although analysts were sceptical about the deal
mainly due to the economic slowdown in the major selling markets, Europe and North America, Tata
Motors had
accumnulated immense cash reserves (D/E ratio of 0. 56) to raise the required funds without
producer worldwide
endangering its own finances. Ford Motor Company is the third largest automobile
Tata Motors.
and ten times the size of
parts, virtual
The company is known for low-priced automobile with standard interchangeable
manufacturing, safety focused and low fuel consumption. It acquired JLR into its new group PAG,
Volvo and Lincoln. In September 2006, Allan
which comprised of other brands including Aston Martin,restructuring exercise called "Way Forward" in
Mulally cleared the sale of brands within PAG as part of
fact that Ford had not accomplished its
order to become more competitive. The decision highlighted the
brands.
goal of penetrating into luxury acquisition of Jaguar and Land Rover. How does the
Assess the pros and cons of Tata Motors'
pursued in terms of growth? Tata Motors
acquisition compare to other options the company could have synergies and M&A knowledge, but also
past
main interest for the acquisition was not only to leverageautomotive
importantly, establish a global presence within the sector and remove its dependency
more from other foreign brands. The shareholders
on the Indian market, which was facing greater competition
perspective as they felt it was over-priced and not confident that Tata's balance sheet could
had a different automotive market would eventually recover, and
handle this new debt. However, considering that the
for the two brands, it can be believed that Tata
that it paid Ford slightly more than half of what it paid
Motors made a wise acquisition.

Sveral pros can be identified:

dependence on the Indian market, which contributed to 90% of Tata's revenue.
2Reduce its
commitment to the global automotive sector.
Adaitionally, it indicated its long-term strategic
C.2 || International Business

b. Establish aglobal footprint, and enter the high-end premier market segment. JLR would
the current brand portfolio. broaden
c. Improved business diversification for JLR products across newer markets (SE Asia), and
its traditionally dependency on US and European markets. removing
d. Thetwo advanced design technology centres provide accessto advanced technology and
growth of Tata Motors SUV market segment in India. facilitate
e. The synergistic presence of Corus Steel, which would provide a supplier cost
competitiveadvantage.
Corus Steel is the main supplier of high-grade steel to the automobile industry.
a

Several cons can be identified:

a. Increase in debt ratio from 1X to 2. 5X, especially given that it had immense capital expenditure de
to the launch of Nano.
b. Downturn in the economy and higher gas prices resulted in a 5% decrease in worldwide automotia
market, and in particular, SUV and luxury brands were the hardest hit.
c. Loan payment of $3 Bfor the acquisition, and subsequent rollover of this loan. An additional Joss
of $510 Mof JLR during the lst ten months of the acquisition.
d. Strong presence of competitors like Mercedes, BMW, Lexus and Infinity, all of who have an
established presence within this market space.
Will Tata Motors be able to achieve its desired results for purchasing Jaguar and Land Rover? This
acquisition highlights the underlying need for Tata Group's global growth. What steps could it take to
add value to the acquisition? On acquiring JLR, Ratan Tata, Chairman, Tata Group, said, "We are very
pleased at the prospect of Jaguar and Land Rover being asignificant part of our automotive busines. We
have enormous respect for the two brands and will endeavour to preserve and build on their heritage
and competitiveness, keeping their identities intact. We aim to support their growth, while holding true
to our principles of allowing management and employees to bring their experience to bear on growth of
the business."
Making JLR design and technology centres as Tatas global design HQ; using existing JLR istribution
channels to foster promoting of existing brands into the global market space; Leveraging JLRs brand
image to gage acceptance of Tata as a global brand; Reduce risk profile with diversification and entry
into different markets; Reduce production costs of JLR, by introducing/utilizing Indian facilities for
production; calls for assessing the merits of the approach Tata Motors planned to take with acquisition.
What challenges might it have to overcome? Presence of well-established competitors, who haye
already capacitized this market with their global brands; JLR'S receding sales and brand image, and
volatility for new automotive entry products; Economic downturn, resulting in decreased sales for the
identified market segment; Ability of successful introduction into other SE Asia markets. Considerinig
the SWOT analysis, Tata motors approach to pre- and post-acquisition is sound.
Having already established aglobal presence with other products (Tetley and Corus) and sucestu
integration with the holding company, it is now only an exercise of realizing the threats and caetu
defininga scope and plan to mitigate. Given that the threats are more to do with the automotive industry
Tata
rather than core competencies, one can foresee a successful integration of the JLR brand with
Motors, albeit a longer road than first anticipated.
 Cae Study C3

Concusion Rovers in the UK. Additionally.

of Euro 27M to build small Range stylish,
Land Rover has recciveda grant offer
(mid-size XE, revised Range Rovers and XJ Saloon), which are reign,
Rhasintroduced new models
US. Although, these models were first conceived during Ford's
and being heavilymarketed in the gathered much anticipation.
has
the media blitz by Tata Motors "Made in ndia" tag on its freshly designed JLR models to
Secondly, Tata Motors plans to puta take place at the company's Pimpri facility and to berolled rising
he assembled inIndia. The assembly is toshowrooms in India, which are targeted to attract theHaving
JLR has 3 market.
out by July 2011.Additionally, iscreating a glorious vision for the global automotive
affluent classin India. Ratan Tata cheapest and luxury brand categories, indicates that Tata
accomplished a brand and presence in both the become an indomitable force to reckon with.
spectrum and has now
Motors hasconsidered the whole

2. Nestle vs Unilever

Unilewer
Neste
and 1930.
Unilever are multinational companies that were established in 1866
Nestle corporation and these two companies has been seen over the years with their
of
The longevity and continued success
expanding customer base on a global scale. a
rebranding, improvement and advertisement of their products have made them
Continued Indiscriminate investment including their
almost every country in the world.
household name in including Russia has been instrumental to their
operation in both socialist and communist countries
about 283,000 individuals whilst Unilever has
expanding networks across the globe. Nestle has staff of company that specializes in foods and nutrition
163,000 employees as of 2010. Nestle corporation is a industry by producing a cornucopia of
products. The company has diversified in the food processing ice cream, confectionery,
products. Their products include baby food, bottled water, dairy products,
breakfast cereals, coffee and pet foods.
cosmetic products
Nestle is however a 26.4 %stakeholder in the world largest producer of beauty and
Cereals with General
known as LOreal. Nestle is involved in joint ventures with other companies in
and finally
Mills, beverages with Coca-Cola, dairy products with Fonterra dermatology with Galderma
Laboratories with L'Oreal. It is therefore indirectly involved in the production of non-food products.
(Nestle, 2010). On the converse, Unilever is a more diversified corporation that has an array of consumer
CA| ternational Busines

products The company produces more than food products and beverages hence itsinclude
cleaning agents, as well as products for personal care purposes. These products productnails incude
polish,
shampoos, deodorants, petroleum jelly (Vaseline), edible oils and fats, soaps, tea, skin and hait
products and other cosmetics. Unileveris directly involved inthe production of both food and
products from the raw materials as with some products, and through all the stages of the non-food
production
line (Unilever, 2010), Unilever Corporation is amultinational company that boasts of factories as wel
laboratories on all the continents apart from Antarctica.
The company posted a net income of '3,659 million and an operating income of 15,020 million in
the year 2009(Unileven, 2009), On the other hand, the Nestle Corporation(Swiss
drawsFrancs)
its customer
aand
base fto
86 countries. The company registered a net income of CHF 10.43 billion an
income of 15.70 billion in 2009 (Nestle, 2009). operating
Both Unilever and Nestle use the strategy of buying already established and household b brands.
They
then expand these brand and market them more aggressively. This can be exemplified by the ice-crea
market share that the two compete for at aglobal scale. Unilever bought both Ben 8& Jerry's and Brever
Ice Cream to extend its tentacles. Nestle responded by buying both Movenpick and Haagen-Das
Dreyer's. In the end, these brands made the two companies the largest ice-cream sellers in the world with
Unilever boasting of 16% a close second to Nestle which has 17.5 9% of the global market share. Thev
therefore have alot of semblances in the marketing strategy. They employ avoid introducing atotally new
product under a different company's name.
In lieu of that, the two companies introduced these products/ flavours through the established
companies which the populace is familiar with. These are the companies they have bought (Carer
Journal,2007). Both companies are aware of the global rise of economies and increased awareness of
healthy food consumption. It is in this light that the two companies have shifted their axis of their
paradigms into a marketing strategy that targets this growing class of people in North America and
Western Europe. They have therefore given precedence to products with low fat and calorie levels to
entice this market. This is how these two companies compete as they roll out nouveau product with
descriptions fitting what the health conscious and fairly opulent consumer wants (Benady, 2005).
A
financial projection of the purchasing power in Asia predicts atwo-fold increase in the purchasing
power of the opulent populace in five years' time. The two companies have a lot of prospects in Asia
especially in the ice cream business. The only impediment they are faced with is that the market
penetration is at minimal in these countries where owning adomestic freezer is aluxury. The marketing
strategy they employ in the case of ice cream sale is employing street vendors who would dispense the
ice cream in serving that donot require refrigeration due to their small sizes. The market aggressivenes
of both Unilever and Nestle is almost uniform given the current trends in ice cream sales in the Asian
countries (Career Journal, 2007).
However, Nestle has demonstrated slightly more aggressiveness and innovative characteristics when
it comes to venturing into the Asian market than Unilever. Nestle does this by holistically bestowing
certain responsibilities to its subsidiaries. This facilitates the seamless blending of its products in such a
market by being in tandem with the taste profile in that foreign market. The company has business units
numbering to several and are charged with the responsibility of laying out global marketing strategies
as well as research and development, systems control and production expertise. This perspective s
instrumental in fashioninga regional strategy that automaticaly avails abusiness strategy that will serve
the local market.
 | |C.5
CaseStudy

The business aspect is therefore intricately interwoven with the marketing facet ofthe corporation
(Ihetimes 100, 2010). As mentioned above, the two companies have unequivocallyprodigious budgets
which are generously allotted for marketing that has a synergistic effect with their well ramified and
extensive marketing networks. These factors are instrumental to the acquisitions that theyare planning
make in Asia which is the next new hot spot for imperative to note that
the market penetration strategy of both Unilever and marketing their products.
Nestle begins It is
with acquisition oflocal companies
focus of
in their target region. In this case, nutritional products/foods that have medical benefits are the
the two companies.

3. Four Seasons Hotel - PESTLE Case Study

the company
Acompany's strategy can be identified by figuring out what business? approachesand actions
understanding a
undertakes. Thompson et al. outline the key elements to look for in the process of organization's
the
company's strategy. Four Seasons diferentiation based focused strategy is evident fromso as to outao e
strategic actions. Sharp'sdecision to build on high-end luxurv and modern amenitiesagainst threats as well as
old grand hotels is an example of efforts to pursue new opportunities or defend
actions to outcome rivals, which revised basis for differentiation.
exceptional service levels, Four
by focusing on medium-sized hotels of exceptional quality with providing superior
Seasons defines the business scale and diferentiates itself from competitors throughdocumenting rivals.
advantage thus
quality and service, This is one of the moves to build a competitive
changing external circumstances, which supports
Ihe actonto go public to raise funds is a response to
the business growth and paves the way for Four Seasons to be the market leader.
Seasons extends into the fields of luxury
In order to serve diverse needs of the customers, Four
diversify, it enables Four Seasons to serve a market
resorts and residential properties, With such action to
niche.
acquisition of Regent,
An example of actions to merge or acquire rival companies is the ownership Seasons improves
and a strategic alliance is formed via selling stake to Prince Allowed. By doing so, Four
management services
its competitive position as the market leader. The shift of focus from ownership to and its responses to
reflects Four Seasons' efforts to ruse new opportunities or defend against threats
shift. The
changing external conditions. The business model of Four Seasons is defined by this strategic
regional management structure, the finalization process ofbudget plan, the human resource management,
Seasons. By
and the recruitment policy are examples of how functional activities are managed In Four
optimizing functional castles, it enables improved quality and customer service provided.
Four Seasons' actions to alter geographic coverage lie in its international expansion program, which
enables business growth by reaching new markets and new customers. The distinctiveness of properties
that reflects the local culture is another example of actions to diversify, which leads to differentiation. The
actions to strengthen resources and capabilities that support quality and customer service improvement
include the training and development programs and the new initiatives to offer added convenience to
guests. By linking the actions with the strategy, it can be summarized that a company's strategic actions are
driven by the strategy it employs. Therefore, the strategy that the company employs must be responsive
to the external environment.
The external environment outside Four Seasons affects its strategy in many aspects.
C.6 || International Business

. Political: The events such as the Iraq war, the September 11h attack and
terrorism
hotel industry significantly, which lead to decreased profitability. As aresponse to the impact the
Four Seasons dedicates to international expansion. Through wider geographic presence, it
Four Seasons to make more profits in the areas that are less impacted thus enhancing
resistaalnces,lows
the overal
profitability. Amidst these challenges, Four Seasons manages to maintain its position as the
leader, which owes to its globalization strategy. market
" Economic: As one of the largest factors that shape the strategy of Four Seasons, the
recession pulls down the luxury hotels' business and poses crisis for Four Seasons. It is no economic
profitable to build and own hotels. As a result, Four Seasons shifts its focus from
hotel management services so that the financial risk is mainly borne by the hotel
hotel ownershilonger
p to
management operations, Four Seasons is able to make the best use of its expertise
owners. Through
and
exceptional quality and service to the customers, thus gaining a competitive advantage overprovide
rivale
Social: The trend of increasing international travel both in business and leisure markets Crahos
more opportunities for the hotel industry. In order to better serve the travel needs of its
existingits
customers and attract new international travellers, Four Seasons looks forward to expand
geographic coverage by adding five to seven hotels per year to key destinations, thus
capitalising
on the emerging opportunities. In response to the changing lifestyle of the global travellers who
want personalized service, Four Seasons constantly innovates new ways to make business travel
more efficient and leisure travel more enjoyable. By doing so, the differentiation strategy throneh
superior customer service is enhanced.
Technical: In support of the rapid development of information technology, Four Seasons enhances
its management services via operating a central reservations system, commending information
technology systems and developing certain database applications. It enables Four Seasons to be
more profitable through optimized management services.
Legal: The nature of the leasehold agreement with three properties makes it difficult to sell the
ownership and shift to management services, which results in adding losses to Four Seasons
accounting. It reinforces Four Seasons' decision to concentrate on management operations. In
order to reduce the impact of these properties, Four Seasons continues to seek ways to improve the
operating profitability.
"Environmental: To follow the major trend of beingenvironmental-friendly, Four Seasons initiates
recycling programs for glass, paper and other biodegradable garbage, in support ofits uncompresed
customer service. Such approaches help Four Seasons maintain its leadership position in luxury
hotels.
Acomprehensive evaluation of a compapy's resources and capabilities reveals the strengths and
weaknesses in the present strategy so that adjustments and improvements can be made. Four
Seasons' strategy facilitates the decision making on its internal activities in diferent ways.
" Four Seasons focuses on the market niche of luxury hotels. In order to better serve the diverse needs
of the focused customers, Four Seasons extends into the fields of resorts and residential properties
so that the customers who use the hotels can enjoy the same quality in resorts and residence clubs.
Byretaining the customer base and competing in different segments, Four Seasons is able to maintain
its position as market leader. One of the strengths of Four Seasons is the attractive locations of its
 Case Study || C.7
properties. With business and
leisure, travellers as the target customers, Four Seasons locates its
tools centrally in the commercial and financial districts ofthe world's leading cities, while
and residential properties in world-class leisure resorts
destinations. It allows Four Seasons to attract
more potential CustomeTs With its location advantage that are unmnatched by rivals,
competitive advantage. thus gaining a
One major distinctive competency of Four Seasons is the exceptional customer service,
which is
delivered by its valuable human assets. The human resource management at Four Seasons makes
sure that its employees treat the guests as they would wish to be treated. With high staff morale and
high employee satisfaction, Four Seasons' customers can expect the best possible customer service.
Through the training and development programs, Four Seasons equips its employees with advanced
skills and expertise. As a result, the employees are able to deliver services above desired standards
while carrying out innovative solutions to solve customers' concerns. With these highly trained and
professional staffs, Four Seasons stresses ways to differentiate itself from rivals through superior
customer service.
.The expertise in hotel management is another competitive capability of Four Seasons. In order to
make the best use of its expertise, Four Seasons concentrates on hotel management operations.
To improve the operating profitability, Four Seasons engages in every aspect of the hotel operations
on behalf of the owners, even before the hotel is built. Four Seasons stays committed to serving
the niche and seeks ways to meet the diverse needs of the customers thus drawing business from
companies that employ a focus strategy. The diferentiation strategy is fulfilled through unmatchable
customer service.
In order to improve the customer service continuously and attend to every need of guests, Four
Seasons keeps initiating new approaches to offer more convenience to customers, and incorporates
innovative features to enhance customer satisfaction. In addition to retaining its existing customer
base, Four Seasons also makes attempts to acquire new international customers, by means of
extending its reach into new countries and continents. To strengthen its resources and competencies,
Four Seasons shifts its focus from hotel ownership to management operations, while increasing its
overallprofitability.
. In response to the changing external environment, Four Seasons makes adjustments to its strategy.
By optimizing its resources, capabilities and value chain activities, Four Seasons aligns its internal
environment with the strategy. Hence a sustainable competitive advantage is obtained over rivals,
which ensures Four Seasons to be the successful market leader.

4. Lego Group vs. Flextronics. Yay or Nay?

By Marcus Moller Larsen, Torben Pedersen, DmitrijSlepniov
LEGO Group originally had a very complex supply chain from 2004 to 2009. In those years, the
LEGO group learned the importance of how toefficiently manage the global supply chain. For LEGO
Group to grow, CEO Knudstorp decided that LEGO Group will implement "Shared Visio" based on
nree core principles which were creating and refocusing value for customers, sales channels as well as
increasing operational excellence.
C.8 |) nternational Business

In the past, Lego's distribution method was lenient towards both large and small retailers whi
caused inefhiciencies in the supply chain. Therefore, Lego decided to implement policies in place and
retocus their attention on larger retailers that were gaining more market power. Ihis resulted in decreased
cost of distribution, more reliable demand data, and reduced complexity of the supply chain.
One of Legos main goals was to achieve alighter production portfolio, therefore, looking for external
partners to carry out the bulk production of Legos. Lego had two manufacturing factories, and thre
distribution centres based in different countries. During the time, Lego's mantra was to aggressivel
outsource to low-cost countries. So, they started outsourcing in Eastern Europe- Czech Republic and
Hungary. and Mexico for the US market and started scaling down productions in Denmark and Switzerland
(high-cost production countries). To produce an annual 24 million bricks, they also outsourced to ofher
partners, the main one was Flextronics, that was in charge of high production of the DUPLO and System
lines of Lego. Lego thought it was a "brilliant idea" to outsource to Flextronics because the price of
production was set for a long period of time that eliminated the risk of production price fluctugioms
as wellas Flextronics was capable to produce in high volumes and showed credibility and experience
in standardizing and documenting work routines. The three reasons stated above convinced Lego that
its partner, Flextronics would succeed in the job and ultimately reduce the complexity of Legos supply
chain itselfbecause Flextronics took on the bulk production. To Lego, this meant that they have achieved
their goal of alighter production portfolio when the bulk production was passed to Flextronics.
However, the relationship between Flextronics and Lego only lasted for 3 years from 2006 to 2009.
Lego realized that as it attempts to simplify the supply chain process through outsourcing, it only became
cdearer that global manufacturing and external partners only add to the complexity of Legos supply chain.
Another challenge for Lego was that they needed flexible and market-responsive business solutions as
Lego's demand fluctuated a lot and was unpredictable at times.
Flextronics took on the partnership with Lego because it was largely motivated by the knowledge
about plastics that is associated with producing Lego parts. This helped increase its core competencies
and encouraged growth for part of its electronics manufacturing activities. But because of Flextronics'
stable and predictable operations, it proved to itself that it was not a compatible partner for Lego and its
unpredictable demand.
The fallout of Lego and Flextronics was also largely due to the pace of global operations that
both companies initiated. Lego's production facilities in Denmark and Switzerland were relocated to
Flextronics plan in Nyiregyhaza and Sarvar in Hungary. The Enield plant in the US was also relocated
to Flextronics' Juarez plant in Mexico. This also happened to the Kladno facility in the Czech
Republic.
The transition pace was so fast that Legos in-house production capacity dropped rom 90-95% to about
209% which proved that it went from most of the in-house production to be highly dependent on external
partners. This fast transition suggested that both Flextronics and Lego did not analyse the compatibility
of their company's partnership in the long term and were only thinking about the short-term attempt of
cutting cost and reducing complexity.
This experience had provided Lego with an immense amount of knowledge about its own
processes and structures. Lego realized that they were weak in documenting its own communications,
company's
processes, and tasks in production because there were so many people who were heavily experienced -
thev already knew what to do and therefore neglected documentation of tasks in production. The second
learning was about Lego realizing its own strength in its sales and operations planning process (S&OP).
 Case Study || C.9

TheS&OPteam was implemented in 2005 to monitor and coordinate different production facilities'
roles,capacities,andresponsibilities to the supply chain. The S&OP team thrived when placed in Enfield,
the US through Kanban. Lego also realized that for a company of its standing, standardization was a
criticaltoolfor a high degree of accuracy. This led Lego to categorize standardizing in 3stages: upper
level(mindset, attitude, way of thinking), mid-level (planning process, follow-up process), and lower
(hardware, machines, lines, and layout of productions). This also helped Lego establish its priorities
level the consequences of its actions in the long term.
andthink about
Case Discussion Questions:
did Lego outsource to Flextronics?
1. Why were the key ovposing factors that tore Lego/Flextronics relationship?
2. What Lego fromthis experience?
3. What were key learnings for

Rise of India's Drug Industry

5 The stories international trade in recent years has been the strong growth of India's
in
the great success
Oneof
industry. The country used to be known for producing cheap knockoffs of patented drugs
pharmaceuticall
Westernand Japanese pharmaceutical companies. This made the industry something of an
discoveredby they made copies of patented products, and therefore violated intellectual
international pariah. Because allowedl to sell these products in developed markets. With no
,Indian companies were not
propertyrights,their intellectual property would be protected, foreign drug companies refused to invest
assurancethat their Indian counterparts, further limiting the business opportunities of
with, or buy from
partner
in, companies. In developed markets such as the United States,the best that Indian companies could
Indian pharmaceuticals (generic pharmaceuticals are products whose patents
was to sell|low-cost generic
do
haveexpired).
signed an agreement with the World Trade Organization that brought the
In2005, however, India Indian companies stopped
into compliance with W'TO rules on intellectual property rights.
country products. Secure in knowledge that their patents would be respected, foreign
producing counterfeit
to do business with their Indian counterparts. For India, the result has been
dramatic
companies started
sector.
growth in its pharmaceutical
than twoand a half times the figure
The sector generated sales of close to $30 billion in 2012, more
of 205. Driving this growth have been surging exports, which grew at 15 percent per annum between
around $1 billion. By 2012, the
206 and 2012, In 2000, pharmaceutical exports from India amounted topartner-ships between Western
ipure was around $14 billion! Much of this growth has been the result of
und Indian firms. Western companies have been increasingly outsourcing manufacturing and packaging
Rico,
activities to India while scaling back some of these activities at home and in places such as Puerto
hich historically has been a major manufacturing hub for firms serving the U.S. market.
Indias advantages in manufacturing and packaging include relatively low wage rates, an educated
workforce, and the widespread use of English as a business language. Western companies have continued
1 bperform high value-added R&D, marketing, and sales activities, and these remain located in their
ome markets.
C.10 | International Business

During India's years as an international pariah in the drug business, its nascent domestic industry
set the foundations for today's growth. Local start-ups invested in the facilities required to discover
and produce pharmaceuticals, creating a market for pharmaceutical scientists and workers in India.
In turn, this drove the expansion of pharmaceutical programs in the countrys universities, thereby
increasing the supply of talent. Moreover, the industry's experience in the generic drug business during
the 1990s and early 2000s has given it expertise in dealing with regulatory agencies in the United States
and European Union. After 2005, this know-how made Indian companies more attractive as partners for
Western enterprises. Combined with low labour costs, all these factors came together to make India an
increasingly attractive location for the manufacturing of pharmaceuticals.
The U.S. Federal Drug Administration (FDA) responded to the shift of manufacturing to India by
opening two offices there to oversee manufacturing compliance and make sure safety was consistent
with FDA-mandated standards. Today, the FDA has issued approvals to produce pharmaceuticals for
sale in the United States to some 900plants in India, giving Indian companies alegitimacy that potential
rivals in places such as China lack. For Western enterprises, the obvious attraction of outsourcing
drug manufacturing to India is that it lowers their costs, enabling them to protect their earnings in
an increasingly difficult domestic environment where government health care regulation and increased
competition have put presure on the pricing of many pharmaceuticals. Arguably, this also benefits
consumers in the United States because lower pharmaceutical prices mean lower insurance costs,
smaller copays, and ultimately lower out-of-pocket expenses than if those pharmaceuticals were still
manufactured domestically. Offset against this economic benefit, of course, must be the cost of jobs lost
in U.S. pharmaceutical manufacturing. Indicative of this trend, total manufacturing employment in this
sector fell by 5 percent between 2008 and 2010.

Case Discussion Questions

1. How might (a) U.S. pharmaceutical companies and (b) U.S. consumers benefit from the rise of the
Indian pharmaceutical industry?
2. Who might have lost out as a result of the recent rise of the Indian pharmaceutical industry?
3. Do the benefits from trade with the Indian pharmaceutical sector outweigh the losses?
4. What international trade theory (or theories) best explain the rise of Indiaasa major exporter of
pharmaceuticals?

6. Just Eat's Sucess Story

Scaling your business from your local market abroad provides a wealth of opportunities. Perhaps most
notably is the new market entry advantage. Just because your organisation is operating well in its local
market doesn't mean there isn't a new opportunity out there that will prove even more successful.
Just Eat is one of the most globally recognised takeaway services, with it successfully operating in
the UK, Canada, Australia, France, Italy, China, and Spain, to name a few. What many aren't aware of is
that Just Eat's home country is in fact Denmark. One of the key reasons this is little-known is because the
company didn't truly take off as a service until it relocated to the UK in 2006.
 Case Study || C.11
that? This case study
explores Just Eat's global
So, why is it
andhow effective business planning turned them into a global expansion
householdstrategy,
name. why it was successful,

NewMarket Opportunity
One offthe most notable areasthat Just Eat succeeded in during its international expansion was defining
servingthe market most relevant to them.
and Whilst Denmark was providing the company opportunity, Just Eat noted the demand of the UK
takeaway market. They were bought out by Bo Bendtsen in 2005, who decided to launch the Just Eat
Headquartersin London.
context to just how much the UK market could offer, over 50% of Europe's food delivery
To provide Britain.
industryis basedin
ing and expanding to serve a well-suited market proved a smart move for the takeaway
As of 2017, over 70% of the company's revenue
came from the UK alone, despite being located
business.
in overa
dozen countries worldwide by this time.
Whilst international expansion is a step-by-step process, with success comes the opportunity to
business.
further expand your
rtiv what Just Eat did, with the Netherlands and Ireland being the next locations for
expansionin 2007 and 2008 respectively. By this point, the company was growing rapidly, as well as
multi-million-pound investments with the view of buying out competitors further afield.
acquiring
Within the next 10 years, the company had either expanded to or bought out their market
and the UK. At the time of writing this article, they are operating in
competitionin Australia, Canada,
anacityacross 23 different countries. Just Eat is also a partner to other existing businesses in Brazil
expansion method.
andColumbia, proving a versatile approach to their international
Branding is something that can easily be lost in the wider picture when expanding yourwhat business
-labally Whilst your business will already have a brand identity, it's important to consider mav
etentially work even better in other markets. Just Eat has done a greatjob at not only changing branding,
various markets. For examnle
messaging, and logos to keep up with the times, but also tailoring it to their
chose to maintain the
when acquiring existing takeaway competitors in Australia and Canada, toJusttheEattrademark Yust Eat logo
alreadv familiar names of the companies and simply rebranded the logos the Dishes.
style. This means that in Australia Just Eat is known as Menu log and in Canada, Skip
Maintaining the corporate identities of companies that the new markets are already familiar with gave
Iust Eat a valuable head-start when relocating to new countries. In terms of international sponsorship,
this is yet another area in which Just Eat has succeeded. Previously shirt sponsors of English football
club Derby and Belgian side Oud-Hever lee Leuven, the company ensured that their brand identity
was visible to their target market across various countries. In a similar sponsorship deal, Just Eat also
sponsored the 14th and 15th series of the UK X-Factor.

1. Foreign Retailers in India

For years now, there has been intense debate in India about the wisdom of relaxing the country's
restrictions on foreign direct investment into its retail sector. The Indian retailing sector is highly
C.12 || International Business

fragmented and dominated by small enterprises. Estimates suggest that barely 6percent off
S500 billion in retail sales take place in organized retail establishments. The rest takes place inIndia's almost
shops, most of which are unincorporated businesses run by individuals or householde In small
organized retail establishments account for more than 20 percent of sales in China, 36 percent ofi contsalerasst,
Brazil, and 85 percent of all retail sales in the United States. In total, retail establishments in India in
Some 34 million people, accounting for more than 7 percent of the workforce.
Advocates of opening up retailing in India to large foreign enterprises such as
employ
Ikea, and Tesco, make a number of arguments. They believe that foreign retailers can be a
Walmart, Carrefour,
for improving the efficiency of India's distribution systems. Companies like Walmart and
positive
force
experts in supply chain management. Applied to India, such know-how could take significant Costs are Tesco
of the economy. Logistics costs are around 14 percent of GDP in India, much higher than the 8 out
the United States. While this is partly due to a poor road system, it is also the case that most percentin
is done by smalltrucking enterprises,,often withasingle truck, that have few economies of scale or distribution
Large foreign retailers tend to establish their own trucking operations and can reap significantscope.
gains
from tight control of their distribution system.
Foreign retailers will also probably make major investments in distribution infrastructure such
cold storage facilities and warehouses. Currently, there is a chronic lack oficold storage facilities in India.
Estimates suggest that about 25 to 30 percent of all fruits and vegetables spoil before they reach tha
market due to inadequate cold storage. Similarly, there is a lack of warehousing capacity. Alot of wheat
for example, is simply stored under tarpaulins, where it is at risk of rotting. Such problems raise foode
costs to consumners and impose significant losses on farmers.
Farmers have emerged as significant advocates of reform. This is not surprising because they stand
to beneft from working with foreign retailers. Similarly, reform-minded politicians argue that foreign
retailers will help to keep food processing in check, which benefits all. Ranged against them is apowerful
coalition of small shop owners and left-wing politicians, who argue that the entry oflarge, well-capitalized
foreign retailers willresult in the significant job losses and force many smallretailers out of businesses.
In 1997, it looked as if the reformers had the upper hand when they succeeded in changing the
rules to allow foreign enterprises to participate in wholesale trading. Taking advantage of this reform,
in 2009 Walmart started to open up wholesale stores in India under the name Best Price. The stores are
operated by ajoint venture with Bharti, an Indian conglomerate. These stores are only allowed to sellto
other businesses, such as hotels, restaurants, and small retailers. By 2012, the venture had 20 stores in
India. Customers of these stores note that unlike many local competitors, they always have products in
stock, and they are not constantly changing their prices. Farmers, too, like the joint venture because it has
worked closely with farmers to secure consistent supplies and has made investments in warehouses and
cold storage. The joint venture also pays farmers better prices--something it can afford to do because far
less produce goes to waste in its system.
For its part, in 2011the Indian government indicated that it would soon introduce legislation to
allow foreign enterprises like Walmart entry into the retail sector. On the basis of this promise, Walmart
and Bhartiwere planning to expand downstream from wholesale into retailestablishments, but their
plans were put on hold in late 2011 when the Indian government announced that the legislation had
been shelved for the time being. Apparently, opposition to such reform had reached such showed
apitch that
tha
implementing it was not worth the political risk. Opponents argued that global experience
 Case Study || C.13

to job losses, although they cited no data to support this claim. Whether India will further
FDIleads
regulationslimitinginward FDI into retail remains to be seen.
relax
Case DiscuSsion Questions
that the Indian retail sector is so fragmented?
Why do youthink retail establishments? Who are the
2. What are
the potential benefits to India of entry by foreign
potentiallosershere?
sector?
standsto lose as a result of foreign entry into the India retail
3. Who India has been so difficult?
you think reform of FDI regulations in
4. Why do
Vodafone's International Expansion
8 headquartered in Newbury, Berkshire, England, is the world's second
British company
Vodafone, a communications operator, with networks in 64 countries in five continents, serving 458
mobile
largest customers. Its annual revenues in 2015 were UKE 42.2 billion and its EBIDTA £ 11.9 billion. (1
million of Vodafone's revenues come from voice communications. But
data
¬ 1.40). About 90%
£= $ 1.51 ordevices gaining momentum. More than 20 million of its customers were already using 4G
s is
Over mobile
2015.Industry forecasts predict a total l of 7 billion mobile phone subscribers by 2016, with 2
servicesin
smartphones The company's business is organized in four major product units:
billion using Services, Europe: 41% of the company's service revenues in 2015. This segmnent is
Consumer networks.
sensitive to availability of 4G for
Communications: 20% of revenues. It aims at satisfying increasing customer demand
TInifed
4G, Wi-Fi, cable, and fibre.
bundling multiple technologies: 3G,Markets: 23% of revenues. Mobile banking and data are core
Consumer Services, Emerging
" doubling annually since 2011.
activities of this business unit, with sales
potential, as ubiquitous round-the-clock
Enterprise Services: 27% of revenues. High growth
standard enterprise practice
customer and employee relations are becoming a

Requlatory and Technology Chalenges and Opportunities

Electronics, a manufacturer of military communications
Vodafone began its activities in 1982 as Racal a
1985, at a time when telecommunications was
equipment, and entered the Civil cellular sector in began in mid-1980s, first in
highly regulated industry in most of the world. Deregulation in Europe
followed in the 1990s by the introduction
Britain and later in Continental Europe. This development was
System for Mobiles (GSM), which is now used in
of apan-European technological standard, the Global roaming. Vodafone was one of the very
219 countries on harmonized frequencies that enable seamless
the new technology.
first telecommunications services providers to convert its network to

Threat of Foreign Competitors

Ihe advent of GSM and the abolition of state monopolies in EU mobile telephony stimulated speculative
nvestors to get into the industry. By 1998 there were on an average three mobile operators per country.
 C.14 || International Business

The more ambitious ones, from France and Germany, quickly saw opportunities for expansion in the
Continent and Britain. Vodafone came under attack,through alliances built by competitors
exploit the UK market. towanting
International Expansion
In adefensive reaction, Vodafone's management began contemplating overseas expansion. Itconsidered
thatmovesconfronting its major Continental competitors head-on was risky. Its first internationalization
were towards former British colonies and protectorates, such as Gulf States and Malta, where
cultural differences were low. The business potential of these markets was, however, limited. In abold
move, the companydecided to sail across the Atlantic, where cellular telephony was still fragmented with
scores of small operators jockeying for limited geographical territories. The British company was in Iune
1999 successful in acquiring 4s% stake in AirTouch Cellular, a Californian corporation using AMPS
technology standard. It was a year later renamed to Verizon Wireless.
Confident after this strategic move, Vodafone made an offer to buy controlling interest in Germany's
second largest mobile operator, Mannesmann, which was already in partnership negotiations with two
heavyweights of the industry, Hong Kong's Hutchinson Whampoa and France's Vivendi. But quickly
Mannesmann's CEOand Board replied they were not interested to sell. Vodafone swiftly made a hostile
take-over bid directly to the German company's shareholders. In spite of resistance from the. German
government and general public, Vodafone in February 2000 succeeded to strike a friendly merger, paving
$180.95 billion for the control of 50.59% of the new company. This transaction, the largest cross-border
shares in lieu of
merger ever, did not involve any cash: Mannesmann's shareholders received Vodafone
payment.
This company's global expansion followed rapidly, and the stock-swap payment method has been
enshrined in Vodafone's financial strategy. Its strategic goal has also remained steady: to invest in the
number two operator in the target country. Vodafone's network is today composed of 24 wholly-or
majority-owned subsidiaries and 40 associated, partnership and joint venture operations. Customer
billing is done in local currencies. Through interconnection agreements, Vodafone also offers its users
roaming to practically any country on the globe. Its submarine cable infrastructure reaches 100 countries.
Vodafone is a truly multicultural organization. It employs 101,443 persons from two-dozen different
nationalities. Its CEO is an Italian, while his predecessor was Indian. Women occupy 24% of senior
management positions.
The Emerging Markets have taken prominence in the company's internationalization strategy, with
emphasis on Asia andSub- Saharan Africa. Vodafone is organized in two geographical divisions: Europe
and AMAP (Africa, Middle East, Asia-Paciic), which contribute at 66% and 32% respectively to total
revenues. Vodafone failed to enter the Chinese market with an acquisition, but it broke through in India,
where today it serves 142 million customers.

Expansion Hurdles and the Future

Vodafone's internationalization has not always been smooth. Technology incompatibility with national
standards in Japan and America, shareholders' appetite for dividends, and cross-cultural issues in
 Case Study | C.15

management to divest from its ventures in Japan, France, and USA, thus,
mnarkets have forced the
certain companys market value. has now become a target of take-over bids by China Mobile,
It
educing the mobileoperator, and AT&T ofDallas, Texas. In Europe, where mobile telephony revenues
worldslargest 2009 and 2015, industry consolidation is in the air, with Orange, Telefonica,
fallen 119% between Altice, and corporate raiders looking for acquisitions.
haveta Whampoa, Liberty, new-entrant
become
Hatchinson benefit.from this race, or its victim.
Vodafone may
Case Discussed Questions
nature the
oft
f international business environments Vodafone faces? What types of risk
the
1. Whatis firm face?
doesthe
Vodafonebeenefited from expanding abroad? What types of advantages
overseas
has the company
can help Vodafone
has What advantages acquired
2. How from its international expansion?
obtained in Europe?
maintainitsleadership
underlying rationale for Vodafone's expansion strategy to invest in the number two
What is the target country,instead oftfthe incumbent number one?
operatoroofa through the acquisition of 45% of AirTouchs
expand first towards the U.S., between North America and Europe, making
did Vodafone compatibility
4. Why althoughthere was no technologythe UK and U.S.
share, between networks impossible? What competences
and other synergies this venture?
roaming have thattit could use in
company Mannesmann by Vodafone
did the
German government and public resist the acquisition of
didthe with the lack of success of the company to acquire alocal
5. Why 1999? Are there any similarities
in late or a stake in China
Mobile in recent years?
operator, Merge" Wall Street Journal, June 1, 2015, retrieved
Chinese
Shayndi Raice "European Telecom Companies Race to Mobile Economy 2015,
Bender and Saga (Mumbai, Schroff, 2008): GSM Association, The
Sources: Ruth wjs.com; J. Couvas, Vodafone: An Englislh Vodafone AirTouch's Bid for Mannesmann (Boston, HBSP, 2003): Gautam
Kedia,
from htp://wwwhttp://www gsmaintelligence.com; S. Set Takeover at $180.95 Billion After Long Struggle, Wall Street Journal, February 4,
retrieved from Mannesmann 2000, retrieved from http:llwww.
Raghavan,"Vodafone, The bid that couldn't fail', Euromoney, March
Naikand Anita http://www.wsj.com; Markus Walker, mark; ITU News, September 2015, retrieved fromn htp://www.itu.int; Vodafone
2000, retrieved from subscriptions near the 7-billion
euromoney.com;"Mobile http://www.vodafone.com.
2015, retrieved from
Group Plc Annual Report
Companies
9. The Rise of Native Worldwide service founded in 2010 for use withsmartphones. Instagram's
photo-sharing although it has only a few dozen
Instagram is an online international markets quickly. Today,
drateoy was to enter many worldwide as its customers
omnlovees. Instagram boasts millions of consumers and businesses users
largest social networks on the Internet. Only about 12 percent of those from
constituting one of the InstaMeets allow users
America; the rest are scattered around the world. Virtual
live in North
Peoplewant to share photos to depict their life
Mumbai to Munich to take photos and share them. easy-to-use editing tools, allows anyone to create and
experiences. Instagram's social feed, paired with coincides with a global shift to a more visual
share their distinctive pictures. Its advanced technology
style of communication.
medium-sized enterprises (SMEs) active in
Instagram is one of a growing number of small and country and often account
international business. SMEs make up the majority of all firms in a typical
C.16 || International Business

for more than 50 percent of national economic activity. In contrast to large multinational
(MNEs) that historically have dominated cross-border business, most SMEs have far
and human resources. International business was often beyond their reach. Globalization fewerentfeinrpanciriseasl
technological advances have now made venturing abroad much less expensive. This hasand recent
commercial environment in which many more Small firms can participate in international a created
Born global firms target a dozen or more countries within the first few years of launching the
agility and flexibility help them serve both foreign and domestic customers better. firm. Their busines .
Born globals internationalize early for various reasons, some specializing in aproduct
which demand is universal. Geo Search (www.geosearch.co.jp) is a Japanese company that develonfor category
high-technology equipment to help engineers survey ground surfaces for cavities and build safe
airports, and underground utility lines. The firm developed aland-mine detector to find buried
and discovered aready market in countries such as Afghanistan, Cambodia, and Libya. bombs
Smaller companies such as Instagram and Geo Search demonstrate that any firm of:
any size and
resource base can participate actively in cross-border trade and investment. More companies undertal.
international business today than ever before.

Case Discussion Questions

1. What are the main characteristics of born global firms?
2. What drivers and causes of globalization have allowed born global firms such Instagram 1n
internationalíze at or near their founding?
3. What advantages do you think a young company can gain by entering international markets soon
after its founding?
Sources: S. Tamer Cavusgil and Gary Knight, "The Born-Global Firm: An Entrepreneurial and Capabilities Perspective on Early and
Rapid Internationalization" Journal of International Business Studies, 46, No. 1 (2015). pp, 3-16; Jessi Hempel, "Instagram is Ready to
Take Its Shot" Fortune, July 21, 2014, pp. 72-78; Lauren Johnson, "Instagram Will Hit 100 Million U.S. Users by 2018" Adweek, March.
2015, p. 1;Dackwan Kim,Choton Basu, GM Naidu, and Erin Cavusgil, "The Innovativeness of Born-Globals and Customer Orientation:
learning from Indian Bo-Globals, Journal of Business Research 4, No. 8(201), pp. 879-886; G. Knight and S. Tamer Cavusgil, "Innovation.
Organízational Capabilities, and the Born-Global Firm" Journal of International Business Studies 35, No. 2 (2004), pp. 124-141l: Ingrid
Lunden, Instagram Is the Fastest-Growing Social Site Globally. Tech Crunch, January 21, 2014; retrieved 3/15/15 from htp://techcrunch.
com/2014/01/21/instagram-isthefastestgrowingsocia-sitegloballymobiledevices-ruleoverpcstorsocial-access; B. Oviatt and P. McDougal.,
"Toward a Theory of International New Ventures" Journal of International Business Studies 25, No. 1(1994). pp. 45-64.

10. Hollywood Movies - Aportrayal of International Culture

The most commercially successful filmmaker of all time. Steven Spielberg, is synonymous with U.S.
cinema. He has directed and produced international blockbusters such as Jurassic Park, Transformers,
and the Indiana Jones movies. But his movies have been criticized because of the values represented in
his films, which are often viewed as part of the larger trend of the Americanization of global values and
beliefs.
Jurassic Park ignited a storm of protest. Film critics and cultural ministries around the globe found
it to be a brainless film, lacking plot and succeeding wholly through special effects and big-budget bells
and whistles. French officials labelled the film a threat to their national identity.
 Case Study || C.17

Hollywood movies-for example, Hotel Rwanda and Blood Diamnond- consistently portray Africa as
scenicallybeautiful but terrible in every other way. Other ilms, for example, Independence Day, depict
land of backward villagers and
tribal warriors. The popular movie Lost in Translation came
a
Africa as
under fire for portraying
Japanese people as robotic characters
as comic
who mix up their Ls and Rs. The image-
relief. Inascene in which Bill Murrays
were disappointed by their depiction
conscious Japanese shower in afive-star hotel, he has to bend and contort to get his head under the
a
character is taking scene, in, which Murray is shown towering at least a foot above an elevator full of
showerhead. AnothermockS the smaller physique of the Japanese. The film was seen to reinforce negative
businessmen,
local Japanese.
stereotypesabout the internationally; after aerospace,
American studios produce 80 percent of the films viewed European film industry is now
Today,
the United States' largest net export. In contrast, the
Ur of the U.S.
Hollywoodis often
one-ninth the size it was in 1945,
and today, foreign films hold less than 1 percent contributed
books, music, and TV,
about
copyright- based industries, which also include software, sector. Although the United States
market. The economy in the 2000s than any single manufacturing worldwide.
moreto the U.S. output remains in high demand
imports few foreign films,Hollywood's

Stereotypes and Religious Values widely accused of presenting biased accounts of

origin, Hollywood war films are
IÜnder attack since their Samurai and the Kill Bill movies, Westerners are better at martial arts than
hictory,According to The Last offended by Brokeback Mountain, which portrayed a
Asians are. Nations with deep religious values were dominance of world
relationship between two cowboys in the United States. Crucial to U.S.
homosexual
acceptance of the cultural associations inherent in Hollywood films, an obstacle
cinema is widespread Hollywood directorsare wellestablished in the
international
competitors must overcome. U.S. stars and
power.
movie scene, with worldwide drawing

Movies and Comparative Advantage

According to the theory of comparative advantage, countries should specialize in producing what they
do best and import the rest. Economists argue this theory applies tofilms as much as to any industry.
mistaken to view
As a former Canadian prime minister remarked, "Movies are culture incarnate. It is
culture as a commodity... Cultural industries, aside from their economic impact, create products that
are fundamental to the survival of Canada as a society* Thus, some countries attempt to block imports
of movies from the United States in an effort to protect their own film industries.

ACultural Dilemma
Despite plenty of arguments on both sides of this ongoing debate, many big-budget Hollywood movies
these days are in fact multinational creations. The James Bond thriller Quantum of Solace, with its
German-Swiss director and stars hailing from Britain, Ukraine, and France, was filmed in Britain,
Panama, Chile, Italy, and Austria. RussellCrowe, Charlize Theron, Penelope Cruz, Nicole Kidman, and
Daniel Craig are just a few of the many global stars not from the United States. Two of the seven major
him companies collectively known as Hollywood aren't even U.S. firms. Hollywood is not as American
as it once
was.
C.18 || lnternational Business

As the lines connecting Hollywood with the United States are increasingly blurred, protectionists
should not abandon their quest to save the intellectual and artistic quality of films. In an interview wit
the New York Times, French director Eric Rohmer stated that his countrymen should fight back wa
high-quality movies, not protection, "I am a commercial film maker. I am for free competition and
not supported by the state."

Case Discussion Questions

1. Most aspects of foreign culture, such as language, religion, gender roles, and
strategies, are hard for the casual observer to understand. In what ways do Hollywood movia problem-solving
affect national culture outside the United States? What aspects of U.S. Culture do Hollywood 6lms
promote around the world? Can you observe any positive effects of Holywood movies on worla
cultures?
2. Culture plays akey role in business. In what ways have movies infiuenced managerial tasks, company
activities, and other ways of doing business around the world? Can watching foreign films be an
effective way of learning how to do business abroad? Justify your answer.
3. Hollywood movies are very popular abroad, but foreign films are not viewed much in the United
States. What factors deter- mine the high demand for Hollywood films? Why are they so popular
in Europe, Japan, Latin America, and elsewhere? Why are foreign films demanded so little in the
United States? What can foreign filmmakers do to increase demand for their movies in the United
States?
Sources: Hillary Busis, "Blame Canada: The 5 Greatest Pop Culture Insults to Americas Hat," Entertainment Weekly. January 18. 20s
retrieved from http://www.ew.com/article/2012/10/12/canada-jokes; Hyun-key Kim Hogarth, The Korean Wave: An Asian Reaction to
Western-Dominated Globalization" Perspectives on Global Development e Technology 12, No. 1/2 (2013), pp. 135-151; K. Lee, The Litl:
State Department: Hollywood and the MPAAs Influence." Northwestern Journal of International Law &Business 28, No. 2(2008), pp. 371.
383; "Moreover: Culture Wars" Economist, September 12, 1998. pp. 97-10; K. Day, "Totaly Lostin Translation" The Guardian, January
24. 2004; A. Marvasti and E. Canterbery, "Cultural and Other Barriers to Motion Picture Trade, Economic inquiry, Januarv 2005. n
39-55. This case was written by Sonia Prusaitis, under the supervision of Dr. Gary Knight.

11. Huawei's FDl and Collaborative Ventures in Africa

Africa is the world's second most populous continent, with a population just over one billion. Africa is
troubled by poor economicconditions. Most people in sub-Saharan Africa live on less than two dollars
per day. Recently, Africa has begun to grow economically in part due to increased investment from
abroad.
China is investing billions of dollars in Africa. The investments are targeting extractive industries,
such as petroleum and mining, as well as higher-value industries, such as textiles and telecommunications.
African demand for mobile communications is growing rapidly, In Ghana, Kenya, and South Afica, for
example, about 85 percent of citizens own acell phone, compared to 90 percent in the United States.
Huawei Technologies is Chinas largest telecommunications equipment manufacturer, with anual
revenues of $32 billion. The firm generates about 70 percent of its sales outside of China. It is a key
player in African development. Huawei (pronounced who-ah-way) employs more than 140,000 peopl.
including 7,000 in Africa. Huaweiestablished a presence in Africa in the 1990s. It has developed cel
 Case Study || C.19

the past decade, Huawei has invested more than $1.5

throughout the continent. Inabout
networks for 12 percent of Huawei's annual revenue.
phone
Africa. The region now accounts
billion in in Africa to establish
direct investment (FDI) and collaborative ventures
foreign Despite
Huawei leveraged regional headquarters, six training centres, and 20 representative; offices.
facilities, tour The firm lever ages economies
twoR&D Huawei's operations there have proven very profitable.
variouschallenges, labour, and numerous other advantages to other keep costs low. Efficient operations allow
inexpensive Ericsson, Nokia, and competitors. The ability of Chinese
scale, lower than
of cell phones primary reason China's companies are outpacing firms
Huaweito priceits profitably iin poor countries is a
firms to
operate North America in expanding their presence in Atrica.
Japan, and | andIseveral large-scale projects connecting
fromEurope, Huawei developed a government data centremore than $100 million to develop telecom
In Uganda, Ghana, Huawei invested
central network. In joint venture with ZTE Corporation to expand mobile
network
agencies to aNorthern Africa, Huawei entered a In Algeria, Hçawei establisheda mobile
800,000 phone lines.
facilities. n
nine cities andl build In 2015, io Huawei:i and Global Marine Systems formed
ZTE.
networksin network completed by Africa.
complementa cell telecommunications infrastructurein contribute
to ventureto develop telecommunications infrastructure, Huawei's investments
ajoint Africans, many of whom live
addition to developing The expansion of cell networks allows Connecting to the Internet
In economic development. important contacts.
directlyto find jobs and interact with Win investments benefit not only Africans, but also
in isolated
areas, to
commercial growth, China's Africa the roads, railways, telephony, energy systems,
from
further enhances firms. These companies benefit develop.
Europeanand
US.
Chinese firms have helped to expands, Chinese firms will
infrastructure that African middle class
and other China rise and the financing and providing needed
manufacturing costs in playing a key role by
As
much more in Africa. China is streamlining regulations and creating business-
are
likelyinvest
expertise. Various African countries tor more FDI.
development attractiveness
increasing their
friendly environments,
Case Discussed Questions
telephones?
characteristics of Africaas a market for mobile
1. What are the main investment bring to Africa?
does foreign
2. What benefits invested in Atrica.
ways Huawei has 12; Africa Research
Bulletin.
3. Describe the various Africa, "China: Future Partnership," January 2012, p. Together," April 23, 2011, pp. 73
Southern Pull
Sources: Africa Monitor: pl9850C-1985 1C; Economis, "Trying tocom; Andrea Marshall, "China's Mighty
"Telecommunications: Africa," January l6, 2013, pp.
Sheet," December 10, 2011,
www.huowel.
75: Huawei Technologies Company, Africa Fact
Portal, February 21, 2011, www.elearning africo.com; Olusegun Ogundeji,
Telecom Footprint in Africa," eLearning Africa News www.poworld.com; Pew Research
Coble infrastructure in Africo,' PCWorld, March 19, 2015, China's
"Huawei leads New Efforts to Develop
lifeline,' April 15, 2015, www.pewglobal.org: Hejuan Zhao and Zhang Yuzhe,
Cenier, Cell Phones in Africo: Communication February 22, 2012, english.caixin.com.
Telecoms and Wireless Drums for Africa," Caixin Online,