Understanding Industrial organisation through News articles

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  • 1. ! ! [Type! ! text]! ! Industrial!Organization! In d i v i d u a l!A s s i g n m e n t ! .! ! Name: Akta Gupta GDGWI ID: 100100 Course: BBA Business Studies Module: Industrial Organization Module Code: ECON331 Module Leader: Mr. Prawesh Singh Semester: V Cohort: 2010-2013 ! !
  • 2. Industrial!Organization! GDGWI!100100! ! 2! Table!of!Contents! ! Japan's Softbank snaps up Sprint in $20 billion deal -Article ...........................................................................................................................3 -Introduction ..................................................................................................................6 -Analysis ........................................................................................................................8 Starbucks opens spectacular flagship store in Mumbai, honouring the dynamic culture of India -Article .........................................................................................................................10 -Introduction ................................................................................................................12 -Analysis ......................................................................................................................14 Huawei to invest $150 million in Bangalore R&D centre -Article .........................................................................................................................16 -Introduction ................................................................................................................17 -Analysis ......................................................................................................................19 Bibliography ...............................................................................................................20 Appendix -Big Risk, Big Reward: Felix Baumgartner and Red Bull Deserve All The Marketing ......................................................................................................................................24 -Red Bull's space jump stunt with Felix Baumgartner 'worth £100m' in ad spend .....26 -Cisco to buy cloud-networking start-up Meraki for $1.2 bn ......................................27 -OPEC lowers medium-term demand forecast over eurozone ....................................28 -Starbucks effect? CCD, Barista souping up ...............................................................29 -Tata Starbucks readies for India entry by end of October..........................................30 -Taro bites Sun Pharma’s higher buy-out offer ...........................................................31 -Competition panel unsure on airline cartel.................................................................32 -Judge to hear Samsung phones ban case on Dec 6.....................................................33 -Samsung has lost a court case, not the Asian Market.................................................34 ! !
  • 3. Industrial!Organization! GDGWI!100100! 3! ! Japan's Softbank snaps up Sprint in $20 billion deal By Mari Saito and Tim Kelly and Nicola Leske Mon Oct 15, 2012 7:58pm EDT (Reuters) - Japanese mobile operator Softbank Corp said it will buy about 70 percent of Sprint Nextel Corp for $20.1 billion, giving Softbank the American toehold it has long desired and Sprint the capital to expand its network and potentially buy peers. The deal for the third-largest U.S. wireless carrier represents the most a Japanese firm has spent on an overseas acquisition. Announced by Softbank's billionaire founder and chief Masayoshi Son and Sprint Chief Executive Dan Hesse at a packed news conference in Tokyo on Monday, the transaction gives Softbank entry into a U.S. market that is still growing, while Japan's market is stagnating. Part of the deal involves a direct infusion of billions of dollars into Sprint, giving it the firepower to buy peers and build out its 4G network to compete in a market dominated by AT&T Inc and Verizon Wireless. Shares in one of those potential targets, Clearwire Corp, surged 12 percent to $2.60 in afternoon trading. Sprint owns 48 percent of Clearwire, and while Softbank said no action was required, most analysts and investors see a Sprint-Clearwire tie-up as an inevitable consequence of the Softbank deal. One way or another, analysts have long said the U.S. telecommunications industry needed to consolidate, but few looked to Japan as a catalyst. Some investors and rating agencies worried that Softbank is biting off more than it can chew. But the 55-year-old Son, a rare risk-taker in Japan's often cautious business circles, is betting U.S. growth can offer relief from cut-throat competition in Japan's saturated mobile market. Combined, Softbank and Sprint will have 96 million users. "It could be safe if you do nothing, and our challenge in the U.S. is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built," Son told the news conference. "But not taking this challenge will be a bigger risk." FIREPOWER The financing is highly complex, involving at least three steps with two entities as well as a debt conversion. Softbank's newly created U.S. subsidiary New Sprint will buy $3.1 billion in old Sprint convertible bonds to start. After shareholders and regulators approve the proposed deal, Softbank will then buy $4.9 billion in New Sprint shares. The two together represent the $8 billion infusion directly into Sprint. On top of that, 55 percent of existing Sprint shares would be exchanged for $7.30 per share in cash, representing a further $12.1 billion. A source close to the matter, who declined to be named publicly, said shareholders would actually be offered a choice
  • 4. Industrial!Organization! GDGWI!100100! 4! ! between taking the cash or shares in the new company - though there will be caps in place so Softbank would not pay out more cash or give up more stock than planned. The transactions are to be completed by mid-2013, at which point New Sprint will be a publicly traded company and the old Sprint will survive as its subsidiary. A second person familiar with the negotiations told Reuters that one reason for the deal's complex structure, and for the use of the convertible debt, was the desire to infuse some capital into Sprint in short order without having to wait for regulatory approvals for the full investment. Sprint fell 1.3 percent to $5.65 in afternoon trading after surging last week on the first reports of a pending deal. The offer, while a substantial premium, is still less than some observers had hoped. A fund manager at T. Rowe Price, a top-15 Sprint shareholder, told Reuters last week he thought Sprint would be worth $10 a share in 18 months. Hesse, who will stay on as Sprint CEO, said the Softbank investment would give Sprint opportunities it hadn't had since he joined the firm in late-2007, and enable the U.S. firm to play a bigger role in future market consolidation. "This is pro-competitive and pro-consumer in the U.S. because it creates a stronger No. 3 ... it competes with the duopoly of AT&T and Verizon," he said. Hesse, one of the few corporate CEOs in America to star in his own company's commercials, also acknowledged the financial challenges Sprint has faced -- which the new capital could fix quickly. "Sprint has been engaged in turnaround since 2008. We have been at a disadvantage due to our debt," he said on an investor call Monday morning. But it was not all serious, as the American took some time for a bit of levity with his Asian counterparts. At the press conference, Hesse noted it was the first time he had seen his long-time acquaintance Son with a tie on. Later in the day, Hesse sent a note to Sprint staff, listing the positives of the deal, while directors held calls with their various units to talk about what Sprint could do faster or better - like its network build-out - with the extra capital. SOFTBANK WEAKENS Softbank shares tumbled more than 8 percent on Monday before closing down 5.3 percent to their lowest finish in five months. The stock has lost more than one-fifth of its value - or $8.7 billion - since news first surfaced late last week about its interest in Sprint. On Monday, credit rating agency Moody's said it was reviewing Softbank's ratings for a possible downgrade, but some analysts said Son's gamble might pay off in the end. "It's the same (market) reaction as when Softbank said it was going to buy Vodafone a few years ago. Everyone came out and said it was far too expensive," Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities, said ahead of the announcement.
  • 5. Industrial!Organization! GDGWI!100100! 5! ! Softbank bought Vodafone's Japan unit for $15.5 billion in 2006. "Son made a company worth 3 trillion yen, and now it will be worth 6 trillion yen. That's quite impressive, and I think investors will realize he's making the right decision down the road," said Nakanishi. Four banks - Mizuho Financial Group Inc, Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial GroupM and Deutsche Bank - have approved loans totaling 1.65 trillion yen ($21.1 billion) to Softbank, three sources with direct knowledge of the matter told Reuters. Standard & Poor's has warned the deal "may undermine Softbank's financial risk profile" and pressure its free operating cash flow for the next few years. Reflecting the concerns, Softbank's 5-year credit default swap spreads - the cost of protecting its debt against default - widened to 267/327 basis points from around 160 basis points before the deal, and yields on its yen bonds have risen sharply. NO CLEARWIRE OBLIGATION Sprint is going through a $7 billion upgrade of one of its networks, while closing its Nextel iDen network, which makes Softbank's capital especially useful. But the Clearwire question looms large as well. Macquarie analyst Kevin Smithen, in a note to clients, described Softbank as the "white knight" that could give Clearwire management and investors a successful exit, though he also warned the company may drive a hard bargain in negotiations. According to the second source, one thing Softbank's Son liked about Sprint was the benefit of the affiliation with Clearwire, without the need for full ownership. An alliance with Sprint could also give Softbank leverage when dealing with Apple Inc, helping bolster its domestic position against KDDI Corp, which also offers the iPhone in Japan, and market leader NTT Docomo, which has yet to offer the Apple smartphone. The Sprint deal takes outbound deals by Japanese firms to a record $75 billion this year, according to Thomson Reuters data, underscoring a strong appetite for overseas assets seemingly unaffected by signs of slowing global growth. This is not the first Japanese foray into telecoms overseas. NTT Docomo racked up big losses after a string of failed investments in names like AT&T Wireless and Taiwan mobile operator KG Telecom in the late 1990s and early 2000s. Raine Group LLC, a boutique merchant bank focused on the technology, media and telecoms sector, and Mizuho Securities were lead financial advisers to Softbank. Deutsche Bank also acted as an adviser to the firm.
  • 6. Industrial!Organization! GDGWI!100100! 6! ! Introduction Softbank Telecom Corporation (formerly known as Japan Telecom Company Limited) is a telecommunications and Internet service provider company based in Japan founded in 1981. It provides telecommunication services to individual consumers and businesses at large. Some of the fields in which Softbank serves are broadband, e-commerce, fixed-line, financing, marketing, etc. It has been working aggressively over the years in terms of growth and pricing strategies and is the third largest mobile service provider in Japan. Also, it was the official IPhone services provider to the consumers in Japan until IPhone 4S was launched. The company is known to own stake in about 960 mobile Internet companies over the world, most of which is in Asia. Sprint Corporation was found in 1937 whose merger with Nextel Communications resulted in the formation of Sprint Nextel Corporation in 2005. It is the third largest service provider in US. Sprint Nextel serves a wide range of wireline and wireless communications services in United States, the U.S Virgin Islands and Puerto Rico. Some of the brands offered by Sprint Nextel are Boost Mobile, payLo, Assurance Wireless and Virgin Mobile. In the second quarter of 2012, it was known to have a customer base of 56 million people and is rated the No.1 by the American Customer Satisfaction Index among all the national carriers for the last four years. But, in the second quarter it lost $1.37 billion and is expecting to make further losses in the coming quarters. Sprint Nextel also has a huge financial debt, which is forecasted to mature in the coming months. Due to the financial distress in which Sprint Nextel finds itself, it is seen to merge with Softbank Telecom Corporation for $20.1 billion. A merger is a state where two firms come together to form a single entity and the shareholders of the companies are allowed to keep interest in the new company. According to the Minority Business Development Agency, the few benefits a company could attain from a merger is getting access to financial support for building assets; building on economies of scale and improved efficiency; attaining skills, knowledge and industry intelligence that the company may not have otherwise or find it difficult to develop; if a company is underperforming, a merger with a growing or a stable company could support it and prevent permanent decline; increasing the customer base and increased market share; adding more products to the portfolio; reducing costs through added expertise; accelerated growth and ability to fight competition. Though merger can be seen as an advantage to the company, there could be certain disadvantages attached with this action. There are possibilities of inefficiency being developed due to different working cultures and styles, it could result in a monopoly which would though strengthen the firm but weaken the market as it is known that a monopolistic firm may provide low quality products as there is reduced competition. It may result in employees being laid off, as duplication of activities would not be required resulting in jobs being lost and the bargaining power of the company will increase resulting in loss to suppliers. According to the merger deal, Softbank will own 70% stake in Sprint Nextel for $20.1 billion where it will buy $3.1 billion worth convertible bonds from Sprint and $4.9 billion worth shares in New Sprint which would be the Softbank and Sprint subsidiary in the US resulting in a total of $8 billion invested directly in Sprint. Another $12.1 billion worth shares will be bought from existing shareholders for $7.30 per share that
  • 7. Industrial!Organization! GDGWI!100100! 7! ! accounts for 55% of the existing shares of Sprint. The shareholders would be given an option of selling the shares in exchange for cash or for shares in the new company that is New Sprint. As per the news released, this investment would help Sprint Nextel build a 4G network so that it can compete with the market leaders that are AT&T and Verizon wireless. Due to this merger, Softbank finds itself in having a stake in Clearwire Corporation that is a wireless provider in the US, Spain and Belgium where Sprint owns 48%. Due to market speculations of the deal, the share prices of the companies were seen to fluctuate. The share value of Clearwire Corporation’s rose by 12% to $2.60 the afternoon the information of the merger was declared while the share value of Sprint fell by 1.3% to $5.65. As the news of Softbank’s interest in Sprint surfaced, Softbank lost $8.7 billion in the stock market and its share price reach the lowest in the last 5 months. This is because investors feel that Softbank’s decision is not appropriate as Sprint is under financial debt and has a declining market value. But analysts claim that this speculation will fail in the upcoming days as Softbank has proved investors wrong in 2006 when they felt that Softbank has bought the Japan unit of Vodafone for an overpriced deal but was seen to be a success and paid well to rise the value of Softbank from ¥3 trillion in 2006 to ¥6 trillion in 2012. The past successes and growth of Softbank may help it gain customer confidence and bring back investors. Through this merger, the firms wish to change their position of being the 3rd largest in the respective realm to the third largest wireless firm in the world. This deal will put Softbank ahead of its competitor KDDI in Japan and also give the challenge to grow in the culturally different environment.
  • 8. Industrial!Organization! GDGWI!100100! 8! ! Analysis To analyze this merger, we aim to find the reason why Softbank decided to merge with Sprint, which was a declining firm and not any other US firm which could have provided similar benefits to Softbank. Firstly, it would be cheaper for Softbank to merge with a declining firm than a growing firm such as AT&T and Verizon. Secondly, Softbank and Sprint has many similarities as they both are Smartphone and tablet service providers and thus can develop synergies. They also offer similar products that are devices like HTC, Samsung, LG, RIM and Kyocera along with Apple products. Thirdly, Sprint is the largest shareholder company for Clearwire that has a sizeable market in the US. Having a 70% stake in Sprint gives access to Clearwire which is working on the next generation network operating TD LTE technology, which is similar to the network plan’s of Softbank for the future. Fourthly, Other companies are allowed to resell their access to Sprint’s network by Sprint through an arrangement called mobile virtual network operator. Sprint is the market leader in this segment and could provide an opportunity to Softbank to grow its brands and Lastly, Softbank’s rival firm NTT Docomo is seen to have close connections with AT&T due to their previous merger and working styles, this connection could help New Sprint (merger subsidiary of Sprint and Softbank) compete in the US market against AT&T, thus fighting NTT Docomo. This deal is important for Sprint Nextel as well, as it will provide it with the funds to overcome its financial debt and also help it grow by building its 4G networks where it needs $7 billion and the capital from Softbank will support this upgrade. Sprint is behind AT&T and Verizon in the 4G LTE deployments and workings with Softbank will open doors for it to work against them and make improvements in the network offered. Working with Softbank will give Sprint access to Japanese style of working which is known for quality and may open doors in the future if it wishes to invest in Japan. This deal makes Sprint a strong player in the US and it can push the competition against AT&T and Verizon further through its aggressive strategy and new capital. This merger will help revive Sprint Nextel’s balance sheet and provide it with capital to overcome the financial debt it may drown in, while giving access to the Japanese firm to the growing U.S telecom industry as the Japanese market seems to mature. The basic motive of this horizontal merger is to develop synergy between the two firms, reviving Sprint Nextel and building a network for Softbank in the US. When we seek the reaction of the Sprint competitor AT&T and Verizon to this merger, we can say that they are not very pleased with the plan of Sprint merging and growing in terms of size and capital, as it would become highly competitive. Also, after the merger, Sprint will have the funds to offer unlimited data plans for smartphones to its customers that AT&T and Verizon have stopped to offer to its new customers. Also, this negative response to this merger is because in 2011, Sprint Nextel voiced out their concern against the merger of AT&T and T-mobile suggesting that it would result in a extreme duopolistic market in the telecommunication industry as they would be left with just Verizon which is the market leader, AT&T and the crucially small Sprint Nextel which resulted in the elimination of the deal. Due to this action, AT&T is sharing a similar sentiment for the merger of Softbank with Sprint Nextel, as this merger would make Sprint almost at the same position at which AT&T
  • 9. Industrial!Organization! GDGWI!100100! 9! ! is. The Vice-President of AT&T expressed this discomfort over the merger by staying that this merger would give a foreign company power in the national wireless service spectrum thus reduce the control the local companies have over the industry. This, though true to is a strategic statement used by AT&T to influence the authority to eliminate the merger proposal. A result of this merger is that Sprint and Softbank combined can compete more efficiently against the US telecom giants AT&T and Verizon as the combined revenue of Sprint and Softbank is about $32 Billion in the first half of the year which is almost equal to that of AT&T and close to Verizon’s $37 billion. This merger also helped both the firms have a larger number of subscribers. Sprint and Softbank, together have 96 million customers that are close to AT&T’s 105 million and Verizon’s 111 million. But this deal may results in problems from Sprint as on today (before the New Sprit is set up) as customers and employees may be uncertain of the result of the merger. This uncertainty could result in the top employees of Sprint leaving the job, as they may be worried of their roles and position in the new firm. These complexities could harm the business today even before the merger is complete. As the customers may be unsure of the New Sprint and the services they may receive from them, there is a possibility of them changing their service provider that would affect the revenue of the company, thus affecting the operations of the company. Thus the company needs to persuade the employees and the customers by raising employee morale and motivating key employees to stay until the merger is complete. It can also be seen that the benefits that a Sprint and Softbank would enjoy by this merger as similar to the theoretical benefits of a merger stated by the Minority Business Development Agency. Thus we can say that this merger is following industry norms and if approved may enjoy these benefits
  • 10. Industrial!Organization! GDGWI!100100! 10! ! Starbucks opens spectacular flagship store in Mumbai, honouring the dynamic culture of India October 19, 2012 Mumbai: Tata Starbucks, the 50:50 joint ventures between Starbucks Coffee Company and Tata Global Beverages, today opened its doors to the first Starbucks store in India. This flagship store is located at the historic Elphinstone Building at Horniman Circle, Mumbai and marks the beginning of the iconic brand’s India journey. In addition to the flagship store, Tata Starbucks will launch two more stores next week at Oberoi Mall and the Taj Mahal Palace annexe in Mumbai. “We are proud to enter the Indian market with Tata Global Beverages, a global company that shares many of the same values that Starbucks was founded on more than 40 years ago,” said Howard Schultz, chairman, president and CEO, Starbucks Coffee Company. “Our first flagship store in Mumbai is an amazing celebration of great coffee, rich Indian heritage and community. Together, the two companies are bringing an unparalleled experience to Indian customers. We are investing for the long-term and see great potential for accelerated growth in India.” “This is a historic moment for Tata Global Beverages and Starbucks,” said RK Krishna Kumar, vice chairman, Tata Global Beverages. “Both companies have a history of delivering product innovation and the highest quality experience to customers around the globe. We are delighted to come together today and transform the coffee experience for consumers across India, while providing a community gathering place to connect with family and friends.” In addition to the exceptional third place experience Starbucks is known for globally, the two companies are proud to offer Indian Espresso Roast, sourced locally through the coffee sourcing and roasting agreement with Tata Coffee. The Indian Espresso Roast will be a hallmark feature of all Starbucks stores in the market and highlights the quality espresso available in India. As part of the agreement, Starbucks and Tata Coffee will work towards developing and improving the profile of Indian-grown arabica coffees around the world by elevating the stature of Indian coffee, as well as improving the quality of coffee through sustainable practices and advanced agronomy solutions. Commenting on the first Tata Starbucks store, Avani Saglani Davda, CEO, Tata Starbucks, stated, “We are honoured to open our doors to customers today and look forward to sharing our passion for high-quality, locally sourced and roasted espresso, as well as the uplifting moments of connection Starbucks baristas are known for around the globe. Tata Starbucks is committed to investing in the communities where it does business and creating a great work environment for its people.” The unique flagship store is owned and operated by the joint venture and branded as Starbucks Coffee - A Tata Alliance. Strategically located, the store is designed to reflect Starbucks coffee heritage and embrace the local culture, with artifacts, Indian teakwood furniture, floor design and interiors created by local craftsmen and artists. The extensive product portfolio includes Starbucks signature espresso-based
  • 11. Industrial!Organization! GDGWI!100100! 11! ! beverages, as well as Starbucks VIA Ready Brew and Starbucks Reserves. The store will also offer Tata Tazo and Himalayan mineral water, and its broad food offering boasts a wide selection of 42 items, which includes western favourites as well as locally relevant flavours reflected in items such as the elaichi mawa croissant, murg tikka panini, tandoori paneer roll and the signature Star Club. Deepening its commitment to community, Tata Starbucks will work to improve the lives of coffee growing communities in the state of Karnataka. The joint venture, through an initial financial commitment, will work to support Swastha, a school for children with special needs (in partnership with the Coorg Foundation). Additionally, Tata Starbucks will work on initiatives that include the promotion of responsible agronomy practices and training of local farmers, technicians and agronomists to improve their coffee-growing and milling skills. Along with exploring social projects that could positively impact the communities in the coffee growing regions where Tata Global Beverages is active, the joint venture is committed to supporting the local community near the store. Towards this, Tata Starbucks is proud to be developing a cultural hub at Horniman Circle where local artists can come together. The first step in the development of this cultural centre was the community service project to clean up the area and prepare it for future development, which took place with Starbucks partners earlier this month. Tata Global Beverages and Starbucks Coffee Company announced the strategic joint venture – Tata Starbucks, to open as Starbucks stores in India in January 2012.
  • 12. Industrial!Organization! GDGWI!100100! 12! ! Introduction According to Desai, N (2011), a joint venture (JV) is an arrangement between two or more parties to set up another business where they co-operate to achieve a monetary objective or run the business. Starbucks Coffee Company and the Tata Coffee did a similar act with a 50:50 joint venture and open Tata Starbucks in 2012. Starbucks Corporation is a coffeehouse originating in the United States. Jerry Baldwin, Zev Siegel and Gordon Bowker in Seattle, Washington first set up Starbucks in 1971 that sold specialty coffee equipment and premium coffee beans. In 1981, Howard Schultz who was then a sales representative at Hammerplast was attracted by Starbucks operations and joined it as the head of marketing. On his visit to Milan, he developed a fascination for the coffee culture that was built there. Convinced that his idea to copy the same culture would be a success, he left Starbucks, as he did not receive a positive response from the founders of Starbucks to rebuild the Italian coffee culture at Starbucks. He opened a coffee house named Giornale which was a success and later bought Starbucks in 1987 for $3.7 million. He renamed his coffee house as Starbucks and continued to build on the “third place” experience for the customers. It opened 125 stores by 1992. In 1992, the company went public and by 1997 it grew tenfold. From the beginning, Starbucks has been committed to sourcing and roasting Arabica coffee of the highest quality in the world. Starbucks today has about 7500 stores, which are self-operated and 5500 licensed stores in about 39 countries. “Tata Coffee Limited” is a subsidiary of the Tata Global beverages and is owned by the Tata Group and has an annual turnover of about US$1.4 billion. Tata Coffee Limited is the largest coffee plantation company in the world. It caters to all fields in the coffee making business such as growing, curing of the coffee and tea to be manufactured, selling and marketing. It also has its own estates where it grows coffee and exports green coffee, manufacturers, sells and exports instant coffee under its own brand name in India. In terms of exporting, it is the second largest in India for instant coffee and has the largest coffee plantation in Asia. The production is about 10000MT of Arabica and Robusta coffee grown in about 19 estates of South India and has a capacity of 6000MT for making instant coffee with two facilities. The places where it exports are Europe, North America, Middle East and Asia. In terms of certification, it is triple certified which are Rainforest Alliance, Utz and SA8000, which reinforces their commitment towards the environment and people. Starbucks struck a deal with Tata Coffee in late 2011, for sourcing green coffee beans from their Coorg facility and is exploring opening coffee shops in India with a Joint venture with Tata Coffee. The first Tata Starbucks started by the end of October 2012 at the Horniman Circle, Mumbai and had planned to open two more outlets at the Oberoi Mall and the Taj Mahal Palace, Mumbai, which did materialize. Starbucks in the aim to build the “third place” experience between home and work in India with Tata coffee offering locally sourced Indian Espresso Roast. The stores which are strategically located are said to reflect the coffee culture at Starbucks and welcomes the Indian culture with Indian artifacts, furniture made form Indian teakwood, the interiors and designing along with the flooring done by local craftsman and artists. Tata Starbucks to cater to the taste buds of the Indian Consumer have
  • 13. Industrial!Organization! GDGWI!100100! 13! ! offered a combination western favorites on the menu along with the local Indian tastes in the list of its 42 selections like murg tikka Panini, elaichi mawa croissant, tandoori paneer roll, etc. The stores will also serve Tata products like the Himalayan mineral water and Tata Tazo. In order to serve the community, which Starbucks and Tata are known for, they would work together to elevating the profile of the Indian Arabica coffee all over the world that would. They would work together for the Karnataka state coffee growing community and improve their lives. They would also work together and cater to children with special needs under the NGO Swastha in the Coorg Foundation. Along with this, they would work towards improving farming practices and training and education farmers about new technology so that they can improve their milling skills and the coffee grown. These actions will add to the brand value of this joint venture that may provide benefits in the coming future. According to Terjesen, S, some of the benefits a company is expected to attain from a joint venture is access to new resources, distribution channels, staff, finance, capacity, technology, and intellectual properties.
  • 14. Industrial!Organization! GDGWI!100100! 14! ! Analysis Starbucks, which has a global footprint, had strong reasons to eye the Indian consumer market and adding profits to their balance sheet. The entry of Starbucks to India may seem highly profitable to them as India has a huge consumer market. After Starbucks recent success in China, entering India is highly logical and maybe fruitful in the long run. Along with the increasing consumer market to which Starbucks wishes to cater for its benefit, another reason why Starbucks wishes to enter India is because according to a survey conducted by ENAM Securities, the average spending of an Indian consumer from his final consumption expenditure on eating out is 51%. Due to this, India saw many foreign companies entering it, like Lavazza entered India by acquiring Barista and Gloria Jeans which is an Australian brand has also opened a number of cafes. Starbucks, if did not take an action may loose out the coffeedrinking consumers to the competitors. Also, according to the Time Magazine Story, the Indian Coffee drinking market is growing at a rate of 23-14% annually, which could be highly beneficial for the beverage companies. Starbucks choose to form a joint venture with the Tata group since the Tata group is known to have considerable experience in the field of retailing as it has successful retail chains like Westside, Landmark, Titan and Croma. This experience adds as a benefit to Starbucks as Tata would have studied the Indian retail market well during its course of existence. Also, Starbucks had a sourcing agreement with Tata for a year now, and their relations were quiet comfortable, which becomes a reason for the joint venture. Also as Howard Schultz (President and CEO of Starbucks) stated, “Tata Global Beverages, a global company that shares many of the same values that Starbucks was founded on”, which suggests that they have similar work cultures and ethics that makes management easy. According to the 50:50 joint venture between Starbucks and Tata Coffee, Starbucks will be setting cafes and stores in the Tata Group’s properties such as retail outlets, hotels and malls apart from sourcing and roasting coffee beans from Tata’s Kodagu Coffee facility and work towards improving the coffee culture in India. This availability of property for setting up the café will result in cost reduction as real estate as the most expensive parts for a retail business. Another advantage of Starbucks joining Tata Group is that it will now be working with Tajsats as well, which is an in-flight catering business. These benefits result is adding distribution channels, finance and exploring of new territories like catering for Starbucks, which would improve its market value. Through this, Tata Global beverages that was in the business of production and sale of beverages, is now moving into retail of coffee, thus exploring new areas by adding innovation. This move of forming a joint venture resulted in a more than 10% hike in the stock value of Tata Global Beverages the day after the news of its JV with Starbucks was released. Through this we can say that this joint venture is giving immediate returns to Tata Global beverages and its stakeholders that may result boosting investor confidence towards the Tata Starbucks venture. This joint venture will help Tata Coffee grow on a faster scale, as Tata coffee will be sold in Tata Starbucks as well as Starbucks branches overseas. According to a statement passed by Howard Schultz, Starbucks plans to stay in India for a long term, and this alliance of Tata Coffee with Starbucks could help it in getting access to various modes of selling
  • 15. Industrial!Organization! GDGWI!100100! 15! ! coffee overseas. Also, after this deal, Tata Coffee will be Asia’s biggest publicly traded coffee grower, which gives it strong market dominance globally. Thus it can be seen that both the companies have an advantage by sharing synergies with each other and growing together. But, in this entry of Starbucks in India, it has to face tough competition from its competitors, Café Coffee Day (CCD) that is the market leader, Barista, Costa Coffee, etc. It is an evident scenario that customers will tend to move towards Starbucks as it is an international brand and customers would wish to try it. This could create troubles for the local players as the youth to whom these companies generally target would wish to try something new which may result in them moving to Starbucks to experience the “third place”. To avoid loosing customers to their new competitor, the local companies would have to change their functioning in certain ways, maybe by introducing new items on the menu, changing the look of the cafes, revamping the experience the customers received from them, etc. to fight this new competition, Barista has already played its cards and has introduced new items on the menu and changing interiors of the café. They have also indulged in a new brand ambassador since the October 2012. CCD is seen to follow suite in the coming days as it is working on changing the new and marketing the company on a larger scale. It is known that Starbucks caters to the premium market segment of coffee drinkers, and its competitor, CCD belongs to the affordable segment. CCD in the revamped menu is offering premium delites as well to the customer to cater to different segments. Also, they are working on increasing their market presence by increasing the number of stores to 2000 by 2014. Though it seems evident to the market analysts that this reaction is due to the entry of Starbucks, they companies claim it to be an expansion strategy and not act due to Starbucks arrival. But Starbucks may also be adversely affected by the industry presence and love for CCD in India where customers have built tastes for products and may wish to continue to work towards brand loyalty. Also, the growth strategies of CCD and Barista may hinder Starbucks growth as these two market dominators can be seen in almost all parts of India which has the presence of a coffee culture and this may become a problem for Starbucks. Starbucks may have to indulge in marketing to show its market presence and gain the coffee retail market in India. Thus it can be seen that Starbucks is affecting the local competitors due to whom they are indulging in growth strategies. Also, Starbucks and Tata Coffee are seen to benefit form this joint venture and their benefits and theoretically similar. Through this we can claim that this joint venture is meeting industry models.
  • 16. Industrial!Organization! GDGWI!100100! 16! ! Huawei to invest $150 million in Bangalore R&D centre VENKATESH GANESH BANGALORE, AUG. 30: Chinese telecom equipment maker Huawei will invest $150 million in its research and development (R&D) centre coming up in Bangalore. The centre, being built over one million sq feet can seat about 4,000 people, according to the company whose revenues were at $32 billion in 2011. Huawei officials did not give out specific hiring plans, but said that they would pick up telecom engineers and networking specialists whenever there was a need. The development centre will cater to Huawei’s enterprise, telecom operators and cellphone business segments. Scott Sykes, Vice-President, Corporate Media Affairs, Huawei Technologies, told Business Line: “We see demand coming from 4G rollout in India, and the centre will work on our NextGen smartphone handsets.” Last year, Huawei started making smartphones and, according to company officials, has sold 60 million smartphones till date. The India centre will work on technologies that can increase battery life in smartphones. This is because the battery life of most handsets in the market last not more than a day. “We already have smartphones that come with two days of battery life and are looking to further reduce the form factor in a smartphone and provide better quality battery life and run on the latest networks.” At the Mobile World Congress in Barcelona earlier this year, Huawei launched its slimmest smartphone at 6.68mm weighing about 110 gm.
  • 17. Industrial!Organization! GDGWI!100100! 17! ! Introduction According to the Statement of Financial Accounting Standards No. 2, (1974), Research can be defined as the critical investigation or planned search which aims at discovering new knowledge with an aim that the discovered knowledge can be put to use for developing new products, services, processes, techniques or bringing about a substantial change in the existing process or products. It defines development as the productive use of this research to design a new product or make an improvement in the existing product which maybe for sale or self-use. This development would include activities like designing a conceptual framework, designing and testing product alternatives, prototype construction and functioning of pilot plants. These would not include activities such as making minor alternations in the product or making slight changes in the manufacturing process or production lines. Though these may bring about significant improvements, these do not include market research or testing due to which they cannot be claimed to be developments. Investing in research and development (R&D) is a highly complex and risky procedure that incurs high costs and do not guarantee any returns. Most of the R&D projects tend to fail, as they do not provide the expected financial return. But the projects that are successful tend to pay off for the costs incurred in the R&D of the projects, which were not a success or could not be materialized. Investing in R&D could give long term benefits to the companies as the companies generally tend to patents their R&D which helps them in gaining a competitive advantage, increase customer base and compete efficiently in the market. To take advantage of the above benefits a company could gain due to investing in R&D, Huawei, which is a Chinese telecom equipment maker, invested $150 million at its upcoming Bangalore centre. Huawei was founded in 1987 by Ren Zhengfei, which initially focused towards operating as a sales representative for a Hong Kong company. After Huawei gained enough experience, knowledge and resources on the private branch exchange business from the business partner, in 1992 it moved towards the mainstream telecommunication market and launched C&C08 digital switch. The company has grown over the years and has received international contracts that have been profitable. It was also included in the Global Fortune 500’s 2010 list when it made an annuals sale of US$21.8 billion and a profit of US$2.67 billion. On the research and development front, the company has spent over CNY100 billion on R&D over the last decade and has about 62000 employees, which is more than 44% of the employees working with Hauwei. It has 23 research centers in Germany, Sweden, the UK, Italy, India, Russia and France. Also, the company has continuously been working to have a competitive edge over its competitors as it was seen to file for 57572 patent licenses till 2011 of which it was awarded 23522 patents licenses where 90% are invention patents. It set up its R&D plant in Bangalore in 1999 and is now launching another R&D centre in Bangalore by investing $150 million. As per the news released by The Hindu, the centre will be built upon 1 million sq.ft and would have seating for 4000 people. Though hiring plans have not been declared but the company aims at mainly hiring telecom engineers and specialists in networking. Huawei introduced smartphones in 2011 and has sold 60 million smart phones. This branch will cater to working towards increasing the battery life of
  • 18. Industrial!Organization! GDGWI!100100! 18! ! smartphones for Hauwei as most of the smartphones in the market do not last for more than a day. Huawei already deals with smartphones that comes with two days of battery life but wishes to improve the quality of the battery life so that it can run on the latest networks. Also, Huawei sees a rise in the demand for smartphones in India after the 4G will be rolled out, due to which they wish to work towards the next generation of smartphones that provide long battery lives.
  • 19. Industrial!Organization! GDGWI!100100! 19! ! Analysis India has been a bullish market for most investors over the years and considering that the global recession did not make a drastic impact on the India, it becomes a land for huge investments due to which international firms have been eyeing India for growth. Also, according to the Zinnov Management Consulting, in 2008, the R&D cost in India has reduced by 6% and is expected to further fall by 10-12%. This fall in cost would interest investors who would desire to build on the R&D at lower costs. The basic aim of any company behind investing in R&D is to generate future returns along with being able to capture the latest technology to compete in the market. This investment of Huawei in India to set up an R&D center is because it claims that India has “great technical talent” and would help it grow globally. Through this R&D centre, they wish to develop designs and technologies that would provide long battery life along with being able to have multiple functions. It is a common scenario of cell phones running out of battery due to excessive use to internet on the cell phones, Huawei at this R&D centre wishes to develop technology which would help combat this situation and customers could enjoy a longer battery life even with operating 4G on their smartphones. In future, if Huawei is able to develop the desired technology, it could patent it that would be a competitive advantage to the company against its competitors Cisco and ZTE. India would be interested in Huawei setting up its R&D plant as it would help generate employment and over the years this centre is wished to improve the quality of smartphones circulated around India. The Indian employees working at Huawei would also be benefited as Huawei is neither a public nor a private company but is owned by the employees. It works on the bases of Employee Shareholding scheme and thus with the growth of the company, the employees would also grow. The Indian economy would benefit from the foreign investment as it would support infrastructure and the R&D would make India more competitive in terms of technology, globally. It can also be seen that building this R&D centre by Huawei in Bangalore can be a reaction to Cisco’s growth in R&D who set up a similar R&D centre of 1 million Sq.ft in 2007 in Bangalore. Huawei is trying to compete with Cisco on the same platform of indulging in R&D and hiring the best talent available in the market. Also, it was seen that Cisco stated that its R&D centre would have the potential to provide revenue worth $1 billion by 2012. Huawei, being a staunch competitor may wish to add similar returns to their balance sheet and thus would have initiated this investment hoping for growth.
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  • 24. Industrial!Organization! GDGWI!100100! 24! ! Appendix Big Risk, Big Reward: Felix Baumgartner and Red Bull Deserve All The Marketing 10/14/2012 Dan Bigman, Forbes Staff Ask an ad guy: In this cynical, media-soaked age it’s tough to get anyone’s attention anymore. What it takes to really break through: authenticity. Brands telling their own stories, friends recommending what to buy, and on and on. That’s what’s hot. (That, and Google ads). Blame it on the media business, blame it on three generations reared on blanketed advertising, but that’s what’s left, increasingly. We’ve so supersaturated the world with messaging–from blinking banner ads to cookie cutter car spots (wet roads, anyone?) to covering every surface of at least New York City with someone trying to sell us something–that almost nothing sticks anymore. You’ve got to be totally clueless to see why people are turned off by all this. In the apex of the age of consumerism, we’re just drowning in pitches to buy. Then comes today, with Red Bull. Yeah, as one friend just said to me, “I thought it was just some stunt,” — and it was. But what a stunt. Jumping from a balloon in nearspace to fall more than 23 miles while breaking the sound barrier, risking his life, setting records, Heroic Stuff! The Right Stuff! And all brought to you by Red Bull. In this new age of attempted authenticity (just act natural! CEOs Tweeting! People Like my new product!) they just absolutely killed it by being absolutely, totally, truly, over-the-top authentic. They backed a guy in an insanely risky, old-school kind of venture that was elegantly simple in its principles (go higher than anyone else, jump, live) yet so hair-raisingly sophisticated in its execution (pressure suit, capsule, hours of countdown, etc.) that it grabbed the world’s attention and kept a good part of it on pins and needles for a week, and talking about their brand. Why’d we watch, why’d we care? ‘Cause it was, in the words of Van Morrisson circa 1971, really, really, really, real (Lord have mercy). You can’t tell immediately how many views this live stream of the jump on their site pulled in, but over on the YouTube live stream, at the peak of coverage, there were 8 million concurrent viewers from around the world watching. The walkup videos in the months ahead of today pulled in more than 5 million views, and got shared, of course, like crazy. Red Bull hasn’t said what all this cost, and it couldn’t have been cheap, but it certainly would be in line with a couple minute spots on the Super Bowl. Sponsoring someone to jump from a record height certainly won’t work for other brands. Every month I get a “Red Bull Bulletin” magazine in my inbox at work, chronicling its cadre of extreme sports athletes (is athletes really the right word here?), and I put their full marketing muscle behind everything from base jumping to constructing massive half-pipes in the middle of nowhere for Shawn White to train on (though he moved to another sponsor in 2011.) They’ve spent years and many millions establishing this kind of stunt as core to their
  • 25. Industrial!Organization! GDGWI!100100! 25! ! brand DNA, so it didn’t surprise anyone when they took up Baumgartner’s cause. Nor did they seem late to the party or like anyone was selling out. Because they weren’t. Red Bull sponsors as much of this stuff as National Geographic. The result is a home run. My guess is that for every buck they spent on this thing, they garnered what, $20 in media? $50? More? They’ve lit up Twitter and Google News today and they’ll likely end up on the front page of every major newspaper on earth tomorrow. As they say, you can’t buy that kind of press, no matter how many emails you send to us. Will the stunt sell more Red Bull? Yeah, I bet it will. And it’ll keep people talking for a long time to come. Perhaps the biggest danger here? That another, more mainstream brand will try to copycat it. A warning to everyone in Midtown Manhattan tomorrow who kicks off the Monday brainstorming session with discussion of how they can horn in on Red Bull’s success: These people are professionals. Do not try this at home.
  • 26. Industrial!Organization! GDGWI!100100! 26! ! Red Bull's space jump stunt with Felix Baumgartner 'worth £100m' in ad spend By Emma Rowley, and Rebecca Clancy 5:36PM BST 15 Oct 2012 The energy drink company's risk-taking marketing is paying off as industry insiders suggest its space jump could be worth £100m to the brand. As Felix Baumgartner dropped through the sound barrier on Sunday, his 24-mile freefall from the edge of space did not just signal world records breaking. For relieved Red Bull executives, his safe landing represented tens of millions of pounds of media coverage. One advertising executive guessed the exposure could be worth £10m in the UK and as much as £100m worldwide. To put that in context, a 30second ad slot during the US Super Bowl, the most prime time you can get, costs £2.2m. The jump marked Red Bull’s most ambitious attempt yet to harness its caffeinated soft drink to the qualities of speed and adventure, following on from events ranging from a motorcyclist jumping on to the Arc de Triomphe to planes racing a slalom course metres above the Thames. “I’m completely in awe of Red Bull as a brand,” said marketing guru Mark Borkowski. “Very few brands would have the appetite to do something so risky.” It must help that rather than being answerable to shareholders, Red Bull is privately owned and led by “maverick” Dietrich Mateschitz, the Austrian toothpaste marketer who adapted Asia’s tonic drinks to Western taste. In a soft drinks market dominated by Coca-Cola and Pepsi, he has pioneered “experiential” marketing, where companies use events to define their brand and build loyalty.
  • 27. Industrial!Organization! GDGWI!100100! 27! ! Cisco to buy cloud-networking start-up Meraki for $1.2 bn Reuters Nov 19, 2012, 07.42AM IST Networking equipment company Cisco Systems Inc said it will buy privately held cloud networking company Meraki for $1.2 billion in cash as part of its cloud and networking strategy. Cisco said the acquisition of Meraki, which was founded in 2006 by members of MIT's Laboratory for Computer Science, is expected to close in the second quarter of Cisco's 2013 fiscal year and is subject to regulatory approval. Cisco's second quarter runs until the end of January. Meraki - funded by Sequoia Capital and Google Inc - offers Wi-Fi technology, switching, security and mobile device management from the cloud with a focus on mid-sized businesses. "This is a very logical move for Cisco," said ZK research analyst Zeus Kerravala. He said the deal will allow Cisco to offer alternative solutions to traditional Wi-Fi deployment models like smaller competitors, such as Aruba Networks and Ruckus Wireless , which debuted on Friday. "Cisco didn't really have anything to counter that before," Kerravala noted. Meraki's Chief Executive Sanjit Biswas said in a letter to employees posted on the company website that Cisco had approached the company several weeks ago. The company's founders had at first rejected the offer in favor of continuing Meraki's strategy aimed at an initial public listing. "After several weeks of consideration, we decided late last week that joining Cisco was the right path for Meraki," Biswas said. He also said that Meraki had achieved a $100 million bookings run rate, grown to 330 employees and had a positive cash flow.
  • 28. Industrial!Organization! GDGWI!100100! 28! ! OPEC lowers medium-term demand forecast over eurozone AFP Nov 8, 2012, 09.04PM IST VIENNA: Oil cartel OPEC lowered on Thursday its medium-term forecast for global oil demand, citing "growing concern" about economic growth especially in the eurozone. By 2016, demand was expected to reach 91.8 million barrels per day (mbpd), the Organisation of Petroleum Exporting Countries said in its annual World Oil Outlook report. Last year, it had forecast average daily demand at 92.9 million barrels within four years. OPEC said that in its last two reports it had taken a "more positive view on how quickly a recovery would occur, leading to upward revisions in medium-term oil demand prospects," based on "the extraordinary monetary and fiscal stimulus that were put in place." It said: "This year, however, there is growing concern about immediate prospects for economic growth, particularly in the eurozone." Risks from the region "have heightened as a result of expanding public deficits, weakening economic growth, deleveraging in the banking system, as well as policy indecisiveness," OPEC secretary-general Abdullah El-Badri added in a foreword. While the US seemed to be faring better, slow growth in developed countries was threatening to spill over into developing countries, he warned. OPEC also lowered its long-term oil demand forecast Thursday, seeing it average 107.3 mbpd by 2035, 2.4 mbpd lower than the 109.7 mbpd it had forecast last year. The cartel blamed this on technological developments that would impact especially the transportation sector, as well as on higher oil prices. Nevertheless, the forecasts in OPEC's latest report still see a hike in demand over the next two decades, with most of the growth -- in both the medium- and long-term -due to occur in Asia. This year, demand is expected at 88.81 mbpd, followed by 89.60 mbpd in 2013.
  • 29. Industrial!Organization! GDGWI!100100! 29! ! Starbucks effect? CCD, Barista souping up Nov 16, 2012| By Nupur Anand, DNA It’s difficult for rival coffee retailers not to be worried about the extremely long queues outside Starbucks. They graciously say the market’s big enough for one more chain. But behind the stoicism lies hectic marketing activities. Industry sources said all cafe chains are cranking out plans to revamp menu and offer better experience to consumers. To wit, Barista has introduced new items on the menu, changed the store interiors, and roped in a new brand ambassador in the last one month. The chain has also tied up with publishing house Penguin for book launches. Cafe Coffee Day (CCD), the market leader in India, is also believed to be going through a similar exercise. Sources said it will soon have a new menu and is stepping up advertising and marketing campaign. CCD, which is positioned in the affordable segment, is now also changing interiors in an attempt to cater to the premium segment, which is where Starbucks is positioned. The Bangalore-based chain also plans to add 592 stores and hit the 2,000 mark by the end of 2014. Another person in the know said similar activities are ongoing at Aussie chain Gloria Jeans, too. All of them, to top it, are betting big on brand merchandising – a strength that only Starbucks can boast of in the coffee market in India right now. Barista and CCD officials refused to call it the Starbucks effect and preferred to say they are in any case in expansion mode. Harminder Sahni of Wazir Advisors, a hospitality consultancy, said all cafe chains are now beginning to focus on brand building. “With something like Starbucks here — which has a magnetic brand pull —others can’t afford to sit idle. Earlier, the focus was only on expansion and more store openings. Now they are changing the focus on brand building activities in order to compete. And the marketing activities are on back of that,” he adds. Analysts believe the long queues at Starbucks are, well, too long to be sustainable. “That’s what rivals are banking on,” said Saloni Nangia of Technopak Advisors. “Once the euphoria and curiosity ebbs, Starbucks would want to be in a position to cater to a larger customer base,” she said. Technopak estimates the cafe market in India at $230 million and expects it to maintain an annual growth rate of 13-14% for the next five years. India, however, remains a pre-dominantly tea-drinking market. Not surprisingly, experts suggest the coffee chains would soon be slugging out for a larger share of that brew. This at a time when even Starbucks has acquired Teavana, and is changing its positioning from being a coffee chain primarily.
  • 30. Industrial!Organization! GDGWI!100100! 30! ! Tata Starbucks readies for India entry by end of October Namrata Singh, TNN Sep 28, 2012, 10.48AM IST MUMBAI: Tata Starbucks, the 50:50 joint venture between Starbucks Coffee Company and Tata Global Beverages has confirmed that the first store in India will open in the Horniman Circle area of Mumbai by the end of October 2012. The store will also be the first Starbucks location to feature espresso sourced and roasted locally from India through the coffee sourcing and roasting agreement with Tata Coffee. "We are delighted to be able to announce our progress toward opening our first store in India and to introduce locally sourced espresso," said John Culver, president, Starbucks China and Asia Pacific, in a statement. Tata Global Beverages is a company known for bringing memorable tea consumption moments to consumers in India, stated Harish Bhat, CEO, Tata Global Beverages. The joint venture is in line with Tata Global Beverages' strategy of growing through strategic alliances in addition to organic growth. "We are excited about the opportunity to innovate in the retail space and bring new beverage moments to more consumers,'' he added. Tata Starbucks will own and operate Starbucks cafes in India. Tata Starbucks also announced the appointment of Avani Saglani Davda as CEO. Avani, who has worked for the Tata companies for more than ten years, joined the Tata Group as a TAS (Tata Administrative Service) probationer in 2002. Most recently, she worked in the vice chairman's office for Tata Global Beverages, where she was responsible for driving and facilitating key strategies and initiatives for the company as well as marketing and business development assignments.
  • 31. Industrial!Organization! GDGWI!100100! 31! ! Taro bites Sun Pharma’s higher buy-out offer NEW DELHI, August 13, 2012 On completion of merger, Taro will become a privately held company, wholly-owned by affiliates of Sun Pharma The board of Israel-based Taro Pharmaceutical has agreed to sell the remaining stake of the company to Sun Pharmaceutical and its affiliates for an enhanced price of $39.50 a share. “The merger agreement was approved by Taro’s board of directors based upon the recommendations and approvals of the Special Committee of Taro’s Board of Directors and the Audit Committee of Taro’s Board of Directors,” Sun Pharmaceutical Industries said in a statement. The merger agreement provides that all shareholders of Taro other than Sun Pharma and its affiliates will receive a cash payment of $39.50 a share upon the closure of the merger deal, it added. The raised buy-out offer by Sun Pharma is over 61 per cent from its earlier offer of $24.50 a share. On completion of the merger, Taro would become a privately held company, whollyowned by affiliates of Sun Pharma and its shares would not be traded on the New York Stock Exchange, Sun Pharma said. Last month, Taro’s board had rejected the Sun Pharma’s October 18, 2011, offer to purchase all the outstanding shares of the Israeli firm that would have entailed an outgo of $367.5 million (over Rs.1,810 crore). This was after the special committee of Taro’s board said the offer price was inadequate. Sun Pharma had acquired a controlling stake in Taro in September, 2010. The closing of the merger is subject to certain terms and conditions customary for transactions of this type, including the affirmative vote at the shareholder meeting to be convened to approve the merger, the company said. Shares of Sun Pharmaceutical Industries were trading at Rs.682.05 on the BSE.
  • 32. Industrial!Organization! GDGWI!100100! 32! ! Competition panel unsure on airline cartel Mumbai, September 20, 2012 The Competition Commission on Thursday said it could take a relook at the issue of cartelisation in the airline industry in terms of hike in airfares but maintained that ticket prices generally moved up due to a mismatch between supply and demand. “The Commission looked at the airfares some time ago, but we found that the fares had moved up and down more because of the market play dynamics and not because of anti-competitive practices, that they had formed a cartel,” its chairman Ashok Chawla said on the sidelines of an event organised by industry lobby FICCI here. “So, if the need arises, the Commission will look into the issue again.” Maintaining that the aviation sector was going through a “bit of turmoil”, he said there was a volatility in demand and supply, mainly on account of two large airlines reducing capacity for certain reasons. He was apparently indicating at cash-strapped Kingfisher and Air India which have reduced capacity for financial problems as well as strikes. “So when the number of players in a sector goes down, there is always volatility in demand and supply. And that seems to be the main thing happening in the aviation sector,” Chawla. He also pointed out that the fares move up and down, mainly during the festive seasons or when there was more demand. “That need not be a competition issue. In fact, it may reflect more robust competition,” the Competition Commission chief said.
  • 33. Industrial!Organization! GDGWI!100100! 33! ! Judge to hear Samsung phones ban case on Dec 6 SAN FRANCISCO, AUG 30 The judge in the landmark Apple-Samsung case set a December 6 hearing on punitive damages to the US firm for patent infringement and on whether to ban eight Samsung phones in the US market. Judge Lucy Koh said in an order yesterday she would bypass proceedings on preliminary injunction and go directly to Apple’s request for a permanent ban on sales of certain phones by the South Korean electronics giant. The December 6 hearing will also include debate on whether to triple the jury award of over $1 billion. Because the jury last week found that Samsung “willfully” infringed on Apple patents for its iconic iPhone, the judge may triple the award as a punitive measure. Apple has asked the court to ban some of the newer 4G phones from Samsung’s Galaxy line as well as the Droid Charge sold through Verizon. The case does not include Samsung’s newest Galaxy S III, which was released subsequent to the suit but which is facing separate litigation. Apple asked the US District Court in San Jose, California to ban the Galaxy S 4G, Galaxy S2 AT&T model, Galaxy S2 Skyrocket, Galaxy S2 T—Mobile model, Galaxy S2 Epic 4G, Galaxy S Showcase, Droid Charge and Galaxy Prevail. Samsung meanwhile asked the court to dissolve an injunction on its Galaxy Tab 10.1, after the jury found it did not infringe on Apple’s design patent for the iPad tablet. Koh said she would probably hear arguments on that motion on September 20. She said in yesterday’s order that she would ask the parties for briefs on a permanent injunction sought by Apple, bypassing the temporary injunction in the interest of “judicial economy.” Samsung has pledged to fight the proposed ban.
  • 34. Industrial!Organization! GDGWI!100100! 34! ! Samsung has lost a court case, not the Asian market N Madhavan , Hindustan Times September 02, 2012 Economics is a funny thing in which sometimes, losers can be winners in another sense. That is the feeling I got last week after Apple won an intellectual property case in the US against Samsung involving a series of patents. The award of $1 billion in damages to Apple will only make ateeny addition to the iPad and iPhone maker’s huge cash chest, but it clearly established the company founded by the late Steve Jobs as the King of Cool in the gadget market. However, in market economics, two other things also matter. One is the return one gets on investments made, and the other the market share. The basic market wisdom is that there is always room for two in the same product category. Going by that logic, it seems Samsung stays in the reckoning for at least the No. 2 slot in high-end smartphones in the foreseeable future. Respected technology site Arstechnica citing IDC and NPC data, said last month that in the April-June quarter, Samsung held a 30% share worldwide, while Apple held 17%. But in the US, Apple led with 31% while Samsung held 24%. Google’s Android mobile platform is what enabled Samsung to win the global market at low costs, unlike Apple, which has invested huge amounts in developing and nurturing its own iOS platform. Samsung has been in the dock for mimicking Apple in its design features like the curved rectangle interface and the “pinch” zoom on the touchscreen. But beyond cool factors like these, smartphones are about various utilities and applications (apps) My argument is that Apple will remain the premium product, but the second premium slot (even if it loses some money and market share now) is something Samsung has gained at much lower costs by riding piggyback on Android. Meanwhile, Samsung is also keeping its options open. It quietly launched its own Windows-based smartphone last week, ahead of a September 5 unveiling of the next big Windows gizmo from the Nokia-Microsoft partnership. Cash-rich Google has initiated quiet talks to settle some patent disputes with Apple on the Android platform. If Google picks up the tab for some of the potential disputes (Apple has sued Samsung again in a fresh dispute), it could contain Samsung’s damages. Sure, the Korean company has lost some of its premium sheen in the court dispute, but there is plenty of room left in value-for-money markets in Asia, which as a whole is much bigger than the US. India alone has 900 million mobile connections Just as Microsoft’s IBM-PC compatible and Windows desktops stole the thunder from Apple outside the US, other brands including HTC, Samsung and Nokia do stand a chance in taking on Asia. For this, they must realise a basic lesson: you cannot be charging a fat premium for copycat features. If they drop the prices a little while innovating a little more, Samsung, HTC and Nokia can have a great time in Asia.