Question
Paper instructions
1)there are 4 cases in total. Each case has 2 essay questions by the end of each case to answer. Each question has the same point value.
2)Each answer should be no longer than one single-spaced page.
Solution
International Business Cases
- 15-3. Companies within the Oneworld, Star, and Sky Team alliances have also engaged in major mergers and acquisitions (M&A): American and US Air (Oneworld), Delta and Northwest (Sky Team), and Continental and United (Star). What are the advantages and disadvantages of M&A versus non-equity alliances in this industry?
Mergers and acquisitions (M&A) means combining two already existing companies to gain a greater market share or to reduce production costs, thus increasing efficiency. Non-equity alliances, on the other hand, refers to an coalition between two or more companies that share their unique resources and abilities in a contractual relationship (Nolan et al. 130). Airlines ally themselves with other carriers from different countries to enjoy the benefits of the mergers and alliances. Various companies, such as Oneworld, Star and Sky Team, have formed mergers and alliances to benefit their business operations.
Airlines in M&A can avoid government regulations. For instance, the AA cannot fly between Brazil and South Africa as there are national landing rights restrictions. Therefore, the airline has to align with another carrier to realize benefits in various operations undertaken in the industry. As a result, companies in M&A are able to make cost savings by sharing the high maintenance and reservation systems costs with other airlines. Combined airlines with an agreed code sharing assist the passengers to be at ease when deciding on the routings and connections between terminals. Indeed, the alliances maximize their competitive advantages. For instance, the airlines in the Oneworld alliance advertise their affiliation by painting the name Oneworld alongside their logo (Nolan, et al. 130). In addition, airlines practicing M&A are easier to finance and also acquire new technological developments.
On the other hand, M&A could result to daunting problems. Some government regulations can be strict on the ownership requirements in a merger, which could make the process expensive. Legal expenses involved are also high when forming mergers, such as when establishing the carrier routes and agreement with other flyer points. Furthermore, there are intangible costs such as land or intellectual properties, hence increasing acquisition take over costs. The process gets more complicated when there is a devaluation of equity in the case of M&A. Ultimately, deciding whether to continue with a merger primarily depends on the companies’ gains from the process.
Non-equity alliances are beneficial for airlines since they facilitate activities that can only be accomplished through collaborative efforts. The representatives from the aligned airlines can jointly promote and sell flight spaces, manage the capacity of the carriers, and schedule connecting flights. The alliances strengthen collaborations, which assist in cost-cutting as most activities are a combined effort. For example, airlines could combine passenger lounges in airports to reduce costs. Similalry, non-equity airline alliances share the risks when making expansion investments and also complement each other advantages. Just like in M&A, non-equity alliances have disadvantages, especially due to government regulations, instability when flight schedules are altered, and complexity in management. Therefore, alliances are a basis for sharing various components of the airline business.
- 15-4. Some airlines, such as Southwest, have survived as niche players without extensive international connections. Can they continue this strategy?
The Southwest airlines has survived niche players, despite lacking international connections. However, this strategy cannot continue due to the industry’s regulatory costs and competitive factors, which necessitate an airline to be part of an international alliance for continuity. Alliances like the Oneworld assist the airlines to reduce the operating costs, such as in security measures and oil prices. In addition, being part of an international alliance gives airlines access to an expanded market. A member airline can schedule connecting flights, sell and promote sitting space on flights operated by each other, lower the prices, and divide the revenues. The airlines in an alliance are also able to schedule shorter journeys and have destinations with checked luggage. The passengers often prefer booking with the airlines offering lower prices and with routes that make the journey shorter. Therefore, the Southwest airlines should change the operational strategy and join any of the available airlines, especially ones that will increase its market share and improve traffic to its flights. Notably, being part of international connections would help the airline to have competitive advantages and work with others to cut costs, while satisfying the passenger’s needs.
- 16-3.Would you prefer to work in a decentralized or centralized company? What outlooks and competencies would make you a high-performing executive in your preferred choice?
Centralized organizations involve a structure of decision-making hierarchy. The top managers and executives handle the organization processes, while the employee lower levels have limited impact in the decision making and operational processes. On the other hand, decentralized organizations have fewer boundaries and are characterized by a delegation of decision making power and flexible processes (Zabojnik 10). The management is entrusted with the operational processes, where their judgment is trusted and allowed to influence various aspect of a company. Given the bureaucracy and inefficiencies in centralized organizations, I would prefer to work in a decentralized company where the power is much spread out, thus making adaptability easier.
Teamwork and collaboration are essential if I am to be a high performing executive in a decentralized company. Groupwork contributes to innovation as employees are given the chance to share ideas; hence, decentralisation creates an inclination open-mindedness and motivation. Such an orientation would enable an executive to maintain a successful MNE and at the same time attract a talented pool of people in the human resource. An apt knowledge of the market and high qualifications, from diverse collaborative efforts within and among departments, would also contribute to high performance. Notably, business intelligence from multiple sources assists an executive in addressing the consumer’s needs and deliverind high-quality solutions.
A successful executive in a decentralized company should possess good decision-making skills. Involving the managers and employees in the process helps in increasing competitiveness and innovativeness, while running the company units. The success is facilitated by creating strategic communication channels. The channels in a decentralized company encourages sharing of ideas that seamlessly translates to achieving local effectiveness and global efficiency. As a result, an executive can withstand the pressure to integrate operations due to the changing competitor moves, technological and market trends. Ultimately, as the leader, I can leverage the core competencies, location of the company units, and the scale effects, such that any major product releases or processes gets implemented in all operational units.
- 16-4.Explain how Johnson & Johnson makes its structure, systems, and culture work in synchronicity.
Johnson & Johnson (J&J) pharmaceutical anchors its superior operations on its decentralized structure, sophisticated coordination, and control systems. This creates synchronicity that boosts performance. Notably, J&J’s business units operate as independent structures; this means that every segment has the autonomy to operate with its employees and leaders to address local conditions. The innovation is given as the core business operation strategy in all its worldwide centers, leading to technological and operational developments. The J&J headquarters also tightened their coordination and control systems, hence freeing the operating units to focus on the daily performance, which sets a contest between the local economies and global integration.
J&J decentralized systems offer fast responses to local needs. The worldwide innovation relies on the established effective communication channels. Therefore, while using the company’s systems, the unit managers get a precise understanding of the market trends and needs. However, J&J’s decentralized system could influence inconsistent market development. The system may intensify the pressure in company units worldwide, thus slowing the global diffusion of J&J products and processes.
J&J’s organizational culture and Credo also play a major role in the success of the business. The culture of individual inclusivity has contributed to innovations and product breakthroughs. Specifically, J&J’s code of ethics offers priority setting during its operations, which sets the company apart as responsibility to the customers come first. For instance, the doctors, nurses, mothers, and fathers who use the J&J products and services are always the company’s priority. The corporation’s employees and the communities where the J&J operates follow closely as the shareholders come last after the suppliers and distributors. Indeed, the organization believe sstakeholders have to be treated fairly for them to get reasonable returns.
- 17-4. How much do you think Danone’s decision to set up a social business was motivated by wanting to be socially responsible versus believing the move would help its performance? Does the answer to this make any difference?
Danone’s choice to set up the social business joint venture has several arguments that support the decision as being influenced by a sense of social responsibility. France’s food company, Groupe Danone, had a global market share for its products. However, the company formed a joint venture to invest in a country with impoverished citizens. The argument makes logical sense since the company’s global presence could have generated a greater return if it invested in other high-income regions.
Despite Danone’s JV obligation to generate profits, the company’s corporate mission was, “to bring health through food to as many people as possible.” The mission statement proved the company was more inclined towards being socially responsible. Grameen Bank founder, Mohammed Yunus, contends that people may desire more than economic gains for themselves, resulting in their being philanthropic. The executive compares this with Danone’s decision to have a joint venture that could not yield them dividends or capital gains. The Danone JV created a social business that assists some of the most needy citizens by offering nutritious and affordable foods. Bangladesh BoP citizens are characterized by a high rate of illiteracy, dilapidated infrastructure, incidences of infectious diseases, and unemployment. Despite the unfavorable conditions, the Danone joint venture was formed.
The creation of Danone JV consequently helped the organization’s performance. The worldwide positive publicity achieved from the formation of the business acted as a potential catalyst for Danone’s development. Besides, as the BoP consumers improved economically, they would have more to spend. It’s also logical to argue that they will naturally prefer Danone products due to their earlier experience. Frank Riboud argues that combating poverty is in the interest of the business, and even goes further to encourage venturing not only on the peak of the pyramid, but also at its bottom (BoP). In conclusion, the true motivations of Danone’s joint venture with GB bank was essential when making ethical analysis and considerations. However, for the impoverished citizens who benefit from the venture, the company’s actions matter more than its intentions.
- 17-8. Initially, Grameen Danone Foods JV was expected to make a profit by 2012. Although no official numbers are published, it seems that they had not reached that point by 2016. Should Danone continue to invest in this JV? If so, what can be done to improve the financial outlook of the JV going forward?
Danone should continue investing in the joint venture, despite failing to make the targeted profits by 2012. Investing in the Grameen Danone joint venture is strategic for the company since it had no prior operations in Bangladesh. In addition, most of its products were aimed at high-end consumers; hence, the joint venture increased the product’s demand in the wealthier regions. Danone also found a chance to learn about the consumers in the BoP and operation models in these regions.
Pricing and brand loyalty are crucial items for consideration in order to improve the financial outlook of the Grameen Danone JV. In the BoP countries, sales would increase when there is a presence of low and stable prices. The venture should also ensure that the products sold are of high quality and nutritious, where they are compatible with the impoverished citizens’ accustomed habits. Consequently, due to a high rate of illiteracy, the joint venture should embark on educating the citizen on the benefits of its products.
The joint venture publicity plays a major role. Just as Danone used the French footballer Zinedine Zidane to gather worldwide publicity during the plant’s opening event, the joint venture should work on promotion to expand the market share. Additionally, the branding should be a priority even in BoP countries. Notably, the product appearance should also reflect the locals to help them identify with the varied items and brand. Grameen joint venture should also invest in the distribution of the product to improve the financial outlook. In Bangladesh, door to door women distributors could be stigmatized due to their culture. Therefore, the JV should work on sensitizing the importance of women empowerment just like with the Grameen women bank loans. The distributors should also be taught on how to ration their stocks to avoid perishability as very few individuals own refrigerators in a BoP country.
- 18-3. What manufacturing strategy should Nokero pursue? Should it continue to supply all of its light bulb orders from a single factory location in China?
Nokero’s increasing solar light bulb sales necessitate regional manufacturing and distribution strategies. The growth of the sales globally may require the company to undertake a larger part in the production process in order to address the shipping and supply requirements. Specifically, the firm should also expand its supply chain capabilities. in addition to the major China supplier, it would be wise to add a second or third supplier to enable the company to fill both the large and concentrated orders from governments and organizations worldwide. Nokero should also pursue other markets by taking advantage of the media publicity. Notably, maximizing the website’s light bulb sales can help the company to meet small and sample orders from consumers in North America and abroad. Therefore, the firm has the potential for growth by increasing production.
Other manufacturing strategies that concentrate on the supply chain are important. Specifically, the development of distributorship and dealer agreements in several countries is necessary since such parties order large quantities of the products. Consequently, Nokero’s factory in China fills these orders and sends them to the fulfillment partner. As a result, the corporation’s partnerships with the government and organizations to support various collaborative social and environmental sustainability programs is a significant manufacturing strategy. Katsaros, the founder of Nokero, insists on reaching as many people as possible. Therefore, company is obligated to support disaster and relief projects as well as poverty eradication. Nokero could also pursue the formation of an intermediary who would solve the last mile issue, as a manufacturing strategy. The intermediary would assist in introducing the solar bulbs in the remote locations, where guidance and sales cannot be done through a website or a manual. The intermediary should be a local person who can communicate and offer a demonstration of the products.
- 18-4. In terms of distribution networks, should Nokero maintain fulfillment warehouses in Africa, Asia, and Latin America? How should Nokero address the last mile issue of accessing people in the most remote locations?
Nokero should maintain the order fulfillment warehouses beside the main one in Shenzhen, China. Having a fulfillment warehouse in continents like Africa and Latin America would enable the company’s products to have a global impact by reaching far off countries. Establishing the warehouses in different continents increases efficiency as the delivery time is reduced substantially, thus creating an efficient supply network. However, Nokero needs to address and resolve the problem of updated international pricing on shipping charges.
Nokero identified the importance of educating the consumers on the product attributes and usage as a solution to the last mile issue. The concern refers to the potential customers who live in remote locations, where the company cannot easily access. Nokero is considering partnering with companies that have mastered how to penetrate these locations and those that have connections with customers. As a result, Nokero partnered with Proctor and Gamble distributors who have a strong reach and connections with consumers in Kenya’s remote locations. Moreover, the company employed local employees to assist in the distribution of products and as ambassadors for educating the customers regarding the light bulb products.
Works Cited
Nolan, James, et al. “International Mergers and Acquisitions in the Airline Industry.” Advances in Airline Economics, 2014, pp. 127-150.
Zabojnik, Jan. “Centralized and Decentralized Decision-Making in Organizations.” SSRN Electronic Journal, 2000.
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