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It's about international business.. Arcelik is one of MNC that succeed to defeta any competitor in Europe.
Citation preview
Muhammad Setiawan Kusmulyono
A G E N D A
Company Profile
Case Background
Theoretical Concept
Analysis
Case Question
Discussion
Theoretical Concept
Analysis
Q & A Session
T U R K E Y P R O F I L E
www.lexicorient.com
T U R K E Y P R O F I L E
AGRICULTURE
8.9 %
INDUSTRY 30.8 %
SERVICES 59.3 %
G D P 2007
www.indexmundi.com
hazelnut, fig, apricot, cherry, quince and pomegranate
textiles and clothing
tourism and banking
TURKEY’S BEST PERFORMANCE COMPANY
Electronics Arcelik, Vestel (Europe Top 3)
Construction Enka, Tekfen, Ucgen Insaat (Top International Constructor)
Automotive Fiat (Tofas), Renault (Oyak), Hyundai (Ossan) (Top 6 in Europe)
TURKISH NEW LIRA
C A S E B A C K G R O U N D
ADVANCED ECONOMIES
DEVELOPING ECONOMIES
EMERGING MARKETS
Post-industrial countries characterized by high per-capita income, highly competitive industries, and well-developed commercial infrastructure.
US Western Europe Japan Canada Australia New Zealand
Low-income countries that have not yet industrialized. They have low buying power, limited appeal to foreign firms, and limited participation in international business.
Africa
Former developing countries that develop their economies more dynamics. EM is transforming into market-driven by liberalizing trade and investment. More participation in international business and regional economic integration.
Asia and Latin America
International Business; Strategy, Management & New Realities. p. 265
C A S E B A C K G R O U N D
GDP (in billion$)
0
50
100
150
200
250
300
350
400
90 91 92 93 94 95 96 97 98 99 0̂0 0̂1 0̂2 0̂3 0̂4 0̂5 0̂6
Year
GDP (in billion$)
www.imf.org
TURKEY;s
GDP
EMERGING MARKETS
T U R K E Y P R O F I L E
Lift Iron
CLIP 1
C O M P A N Y P R O F I L E
Origins
Establishment
Ownership
Business Line
Product
Market Area
Subsidiaries
KOC Group [Family Business Conglomerate]
Appliance Manufacturer [White Goods Business]
> 100 productsAC, Dishwasher, Washing Machines, Cooking Appliances, and Refrigerator
Brands Beko, Altus, and Arcelik
Turkey, Europe (UK, Italy, Czech, Spain, Germany, Romania, Hungary)
Blomberg, Grundig, Elektra Bregenz, Tirolia, Leisure, Flavel, and Arctic
C O M P A N Y S U B S I D I A R I E S B R A N D S
C O M P A N Y S U B S I D I A R I E S P R O D U C T S
C A S E B A C K G R O U N D
• Turkey is an emerging market• Relatively low saturation level• Purchasing power is low (outside big 4 cities)• 50% are younger population (<25 y.o.)
internally
externally
• Turkey is applying EU membership• Trade barriers declined in 1980-90 (Turkish market was opened for outside competitors)• Archelik’s market share was threatened
Archelik Launched
Aggressive International Expansion
C A S E B A C K G R O U N D
I N D U S T R I A L P R O F I L E
In ADVANCE ECONOMIES, household appliance industry is mature and saturated
In EMERGING MARKETS, household appliance industry is difficult to charge premium prices and increase profit margin
a. Innovation is costly
- Frequent change production methods
- Regular re-training factory workers
b. Low spending power of buyer
I N D U S T R I A L P R O F I L E
B S H
Electrolux
G E
Haier
Merloni
National
Whirlpool
The COMPETITOR:
TODAY, Merger & Acquisition is the strategy to be Worldwide
It caused: only 5 companies control >70% market in Europe (from 400 companies)
ARCELIK: Acquired more than 7 companies in EUROPE
Dishwasher
Refrigerators and Vacuum Cleaners
China (Low Price)
High Technology Involvement
Home Laundry
National
I N D U S T R I A L P R O F I L E
Standardization the material, parts, and components1
Automated manufacturing process 2
Arcelik is categorized as HIGH TECHNICAL COMPLEXITY firms. It is operated in fully automated machine and programmed in advance.Joan Woodward; Organizational Design and Dynamics; p. 241
Build manufacturing plant outside original state3
Arcelik: Build plant in Russia and Western Europe.
Whirlpool: Build plant in China
I N D U S T R I A L P R O F I L E
Home appliances are commodities
Product life-span is 10 – 15 years the lifecycle is slow
Value lower prices create lower profit margin
In advance economies country, market are saturated
Different market, different country, different culture
Sales Distribution of Household Appliances
34%
24%
23%
19%
Asia Pacific
Western Europe
North America
Other
Appliance manufacture & world market share reporter
I N D U S T R I A L P R O F I L E
Different market, different country, different culture
in INDIA: Low Price
in CHINA + LATIN AMERICA: Ample Features but Low Spending Power
in EUROPE: Strict Environmental Rules
Difficult to suit the local market
Difficult to charge average price in every country
“Hard Factors” tooling, factory layout, procurement, and design do not provide long-term competitive edge
I N D U S T R I A L P R O F I L E
I N D U S T R I A L P R O F I L E
Emphasize in Dynamic “S O F T” Factors
Merger and Acquisition
Find Global Opportunities
Comparative Advantage
Benefited from Regional Economic Integration
Erin 1
CLIP 2
A R C E L I K
SUCCESS FACTORS
Produce product in lower-income countries1
Modernize the operations and Double the capacity2
Establish Distribution Centers throughout Europe3
Cooperated with IT Companies to build World IT System4
THREATS
Arcelik’s brands are largely unknown outside Europe1
A R C E L I K’s success factors
Produce product in lower-income countries1
- Manufacturing plant in Turkey and Eastern Europe (Russia)
- Arcelik’s produce appliances less expensively than other
Modernize the operations and Double the capacity2
- Additional investment to build factory in Russia and adapt new production system technology
- Established sales subsidiaries in Czech, Hungary, and Italy
A R C E L I K’s success factors
Establish Distribution Centers throughout Europe3
1.700 unparalleled distribution network (Beko) and 1.700 non-exclusively agents 530 authorized service shops
Cooperated with IT Companies to build World IT System4
CISCO builds Virtual Networked Organization Online
Establish after-sales service network
COMPETITIVE ADVANTAGE
A R C E L I K’s success factors
COMPARATIVE ADVANTAGE
Concept that helps answer the question of all nations can gain and sustain national economic superiority
COMPETITIVE ADVANTAGE
Concept that helps explain how individual firms can gain and sustain distinctive competence vis-à-vis competitors
A R C E L I K
THREATS
Arcelik’s brands are largely unknown outside Europe1
Brand becomes barrier to entry and threats for short-term success
Merger and Acquisition
Global Distribution Network
- Tailor the meet customer needs in respective country
A R C E L I K
To sustain continuous growth
To become a leading global household company
Improve operational efficiency
Increase investment in high-growth markets
Focus in emerging market [Eastern Europe, Asia, and LA]
Lowering operating manufacturing cost
Leveraging low-cost manufacturing platforms and IT
Produce product that appeal to foreign markets
CASE QUESTION
Case Question
Orbital
CLIP 3
CASE QUESTION
Arcelik has been very active in Western Europe,
Do you expect Arcelik’s prospect to be better in EM & DE than Advanced Economies ?1 -
In what ways, are EM and DE attractive to Arcelik?-
How can firm reap benefits from such market in order to maximize performance?-
CASE QUESTION (number 1)
Do you expect Arcelik’s prospect to be better in EM & DE than Advanced Economies ?-
Prospect Arcelik in emerging market and developing market
than advanced market
DIMENSION Advanced Market Emerging Market Developing MarketPopulation (% of the word) 14 62 24
Approximate average per capita income (US dollars; PPP basis)
33.750 13.250 6.450
Trade volume High Low High
Education level High Moderate Low
Trade barriers Minimal Rapidly liberalizing Moderate to high
Industry Highly developed Rapidly improving Poor
Inward FDI High Moderate to high Low
Economic or political system Capitalist Rapidly transitioning to
capitalismAuthoritarian, socialist, or
communist
Country risk Low Variable Moderate to high
CASE QUESTION (number 1)
- In what ways, are EM and DE attractive to Arcelik?
Emerging and developing market are attractive than advance market
• Reason– High population– Fast-growing markets– Urbanization is increasing low-cost labor (ideal bases for
locating manufacture)– Industry rapidly increasing
CASE QUESTION (number 1)
- How can firm reap benefits from such market in order to maximize performance?
Reap benefits from such markets
Advance Market Emerging and Developing Market
Population
• Well educate• Income per capita high
can gain a high profit margin
• Low-labor cost• Income per capita rapidly
increase should be adjusting price and cost little gain profit margin
Industry • Saturated• Open up to be growth as the
way as technology improvement
CASE QUESTION
Arcelik is keen on entering EM and DE,
What type of risk that they challenge in EM?2 -
What management do to identify the most promising market?-
How should firm adapt the product?-
CASE QUESTION (number 2)
- What type of risk that they challenge in EM?
Political Instability• Corruption, Collusion, Nepotism• Week Legal Framework
Week Intellectual Property Protection• No laws enforcement
Bureaucracy, Red Tape, and Lack or Transparency• Burdensome Administrative rules• Excessive requirements for license
Partner Availability and Qualifications• characterized by inadequate legal & political framework
Dominance of Family Conglomerates• Highly diversified• Control the majority of economic activit (half the revenue in korea)• government protection and support• superior market knowledge
Less Reliable (business env.)
CASE QUESTION (number 2)
- What management do to identify the most promising market?
Partnering with Family Conglomerates• Reduce the risk, time, and capital requirement• good relationship with government and other key local player• target market opportunities more rapidly and effective• overcome infrastructure-related hurdles • leverage FC’s resources and local contact
Marketing to Governments in Emerging Market• government buy enormous quantities of product• usually emerging country have economic development plan (need to build or improve national infrastructure)
Skillfully Challenge Emerging Market Competitors
CASE QUESTION (number 2)
-
Per-Capita Income as an Indicator of Market Potential
Middle Class as an Indicator of Market Potential
Use of a Comprehensive Index to measure market potential
GDP are indicator of purchasing power of customer
Size and growth rate of middle class serve a signal of dynamic market economy
-Market Size (all population) -Commercial Infrastructure-Market growth rate (GDP) -Economic Freedom-Market intensity -Market Receptivity-Market consumption capacity -Country Risk
What management do to identify the most promising market?
CASE QUESTION (number 2)
- How should firm adapt the product?
Merge and acquisition with other company in emerging market
Collaboration technology, knowledge (product and market), share distribution channels, etc.
Produce potential product base on customer wants
Purchasing power in emerging market is relative low
CASE QUESTION
Arcelik may be better poised to cater economic development of EM and DE,
In what ways Arcelik skillfully fulfill its CSR ?3 -
Suggest specific approaches of CSR-
CATERING TO ECONOMIC DEVELOPMENT NEEDS OF EMERGING MARKETS AND DEVELOPING
ECONOMIES
• Leading firms display good corporate social responsibility by engaging in
activities that facilitate economic development in emerging market and
developing economies.
• There are 2 (two) trends as form of CSR:
– Fostering Economic Development with Profitable Project
– Microfinance to Facilitate Entrepreneurship
CASE QUESTION (number 3)
- In what ways Arcelik skillfully fulfill its CSR?
FOSTERING ECONOMIC DEVELOPMENT WITH PROFITABLE PROJECTS
• Firms serve low income countries with inexpensive, specifically-designed products and
services and community involvement.
IN OTHER WAYS…
• Firms create jobs and contribute to development.
• Investments generates tax to improve living standard.
• Transferring technology and know how
• Develop community-oriented social programs.
CASE QUESTION (number 3)
- In what ways Arcelik skillfully fulfill its CSR?
Microfinance to Facilitate Entrepreneurship
• Microfinance, emerging of financial institutions that serve emerging market
entrepreneurs with small scale loans.
• By providing small loans, can help pull them out of poverty.
• Various organization now offer other forms of small scale financial services,
including insurance and mortgage lending.
CASE QUESTION (number 3)
- Suggest specific approaches of CSR
ARCELIK’S CORPORATE SOCIAL RESPONSIBILITY IN EMERGING MARKET
FOSTERING ECONOMIC DEVELOPMENT W/ PROFITABLE PROJECTS
• Firm creates product that meet local demand with lower price compared to its quality.
• Firm enter the market and establish manufacturing/assembly plant.
• Firm establish distribution centers throughout country.
• Firm boasts a strong after-sales service network with large number of authorized service
shop.
MICROFINANCE TO FACILITATE ENTREPRENEURSHIP
• Firm offer financial services that provide installment purchase for its customer.
REFERENCES
REFERENCES
Cavusgil, et.al. International Business
Gardner, et.al. Organization Design and Dynamics
www.lexicorient.com
www.imf.org
www.indexmundi.com
www.arcelik.com
www.turkivz.com
closing
Thank you