5-Step Guide to Analyzing a Business Case

How to analyze a business case?
Analysis of a problem case has five elements:
A problem definition
Diagnosis – a summary statement of the important causes
Cause-effect analysis
Concepts and framework – cause-effect analysis relies on causal
framework appropriate to the problem
Actions – problem analysis yields actionable content
1
Regardless of the dimensions of a decision, analysis of a
decision case should focus on:
Decision options – a decision requires concrete options; need to
seek the decision alternatives
Decision criteria – try to avoid too many and too few criteria;
create the best fit between the available relevant evidence and
the criteria
Analysis of options
Recommendation – a specific recommendation sharpens your
focus
Actions – implement the decision as effectively as possible

2
An evaluative case expresses a judgment about the value or
effectiveness of an act or outcome:
Like the decision analysis, an overall evaluation expresses the
best fit between the evidence and criteria
Evaluation includes both positive and negative sides; the
analysis must conclude factors that support the overall
evaluation and those do not
Numbers do not explain what they mean, and they do not make
the decision for you
To be actionable, an evaluation needs a concisely expressed
bottom-line conclusions
3
How to discuss a business case?
The purpose of a case discussion is to construct meanings for a
case based on evidence and to recognize the uncertainties
inherent in all of the meanings
Take responsibility for your own view of a case, develop an
argument for it, be prepared to explain the argument, and listen
to others who disagree with you
Careful preparation (thorough yet flexible) – foundation for

effective class participation
Listening is participation – listen to keep up with the discussion
and find opportunities to contribute
Reflect on what you learn – greater clarity about the issues that
link one case to another and lends coherence to a course
4
How to write a case-based paper?
Writing about a case paper should build on the process of
analyzing a case. There are characteristics that case-based
papers have in common – answer three questions: What? Why?
and How?
What? – Makes a position statement
Why? – Uses evidence (i.e., argument) to persuade the reader
How? – Provides an action plan
How should the recommended decision be implemented?
How can the problem be fixed?
5

Position statement (What?) expresses a conclusion
A sharply focused position statement organizes the entire case
paper
Without one, the paper has no purpose or direction and
complicates the reader’s task as far as the reader is concerned
The most common failing of a case-based paper is that the
writers try to look at a situation from all angles, suggesting
many meanings but committing to none
6
Argument (Why?): Using evidence well is probably the most
crucial skill for a writer of case paper
Evidence can be qualitative, quantitative or both; they can be
used to reinforce each other
Case papers can also use the results or outputs of specialized
methods as evidence to prove conclusions
For example, without financial ratios or tools (e.g., significant
calculations), the writer would have nothing meaningful to say
about liquidity
The argument precedes the action plan because it creates both
the necessity for action and the actionable content

7
Action plan (How?) complements and makes the argument of a
case-based paper actionable by answering the question: How?
How do you solve a problem?
How do you implement a decision?
How do you improve a performance?
The general purpose of action plans is to improve or advance
the situation as it is presented in the paper through a coherent
series of actions
8
An effective action plan has five characteristics:
Sets goals based on the argument
Addresses the actionable content of the argument – every major
actionable issue in the argument should be represented in the
action plan
Consists of specific steps
Has realistic short- and long-term steps
Identifies and responds to the major risk to the plan: Ask the
question: What is the worst thing that could go wrong with the
plan? Then ask: How can the risk be contained or eliminated?

9
What Argument and Action Plans Do
Case situationArgumentAction planProblemProve cause-effect
relationships that account for problemSolve problem: fix
weaknesses and reinforces or increase
strengthsDecisionRecommend best decisionImplement decision:
show the best pathway to achieve desired
outcomeEvaluationProvide detailed evaluation of act,
performance or outcomeImprove performance or outcome;
implement or change decision
10
Conclusion
The lecture presents some fundamental issues regarding case
study and learning in MBA/EMBA education. In particular, I
focus on three key questions which are critically important to
our course objectives:
How to analyze a case?
How to discuss a case?
The lecture also outlines the structure of a case-based paper
appropriate to solve problems, make decisions, and conduct
evaluations
Hopefully, these PPT slides furnish the purpose for your

successfully accomplishing the course specifically by analyzing
business cases and writing a persuasive case-based paper
11
93UPSin India-A Package Deal?-~~-=---'
CASE 26 I UPS m India-A Package Deal? C413
it possible to overcome the numerous challenges that
this highly regulated yet underdeveloped economy
presented?
Which global strategy should they apply? Could they
decentralize decision making and adopt a strategy that
would make it easier to incorporate the diverse local
conditions of India? Which segment would prove to
be most profitable: business-to-business, consumer-
to-consumer, or the emerging business-to-consumer
channel? How quickly would the advent of the new
"credit-card generation" change the scope of a-com-
merce in the country? Once they decided what activities
to pursue, what was the best means of accomplishing
UPS's business objectives? Could they use their current
strongholds to grow organically, or would additional
alliances be a better way to go' Perhaps they should
follow the model of DHL and pursue an acquisition

instead. The dynamic business environment in India
surely needed a dynamic strategy, and it was up to Ms.
Pageto figure out how to proceed from here
Endnotes
1. Mirra, S. (2009), ;<Asurvey of Indian express delivery ser-
vice providers," Indian Institute of Management Calcutta, May.
2. Berg, Eric N. (1985), "United Parcel extends its reach." The
New York Times, June 9.
3. www.ups.com!contenUcorp/aboutihislory/1929.html.
4. Hess, E. D., and R. Kazanjian (2006), The search/or
organic growth. Cambridge, UK: Cambridge University Press.
5. www.ups.comlcontentlcorp/aboutlhislory/1929.html.
6. "Company history; AboULUPS," UPS, com, www.ups.com/
conten tJcorpl abou t/history 11980 .hrml ?WT.s v1=5ubNav,
7. www.pressroom.ups.comlAbout+UPS/Company+History/.
8. www.ups.com/contentJcorp/aboutJhislory/198o.html.
9. "Company history; About UPS," UPS.COlli, www.ups.coml
con ten tJcorp/a bou tJhistory 11990. hrml?WT,svI=SubNav,
10. Ibid.
11. "Teamsters end UPS strike," CNN.co1ll, www.cnn.com/
USI970S/20/ups.update.early/.
12. Leonhardt, D. (1999), "Returns to senders; Snail
mail: It's alive! And it's mutating!" The New York Times,
November 14, www.nytimes.coml19991l1l14/weekinreview/
I'elums-to-senders-snail-mail-it-s-alive-and-it+mutating.
html "refeun ited_parcel_service_inc.
13. Hess, E. D., and R. Kazanjian (2006), "The search for
organic growth."
14. www.ups.com/contenticorp/aboutlhistory/1999.html?WT.
svl=SubNav.
IS. Hess, E. D., and R. Kazanjian (2006), "The search for
organic growth."
16. UPS Media Kit, www.underconsideration.com/speakup_

v'lJups_mcdi a_ki 1.pd f.
17. Hesseldahl, A. (2004), "Toshiba will have UPS fix its
laptops," Forbes.com, www.forbes.com/2004/04127Icx_
ah_0427ups.html.
18. "Company history; About UPS," UPS.com, www.ups.ccm/
contem/corp/ about/history 12002.h trnl?WT.sv I=SubNav.
19. "The UPS store debuts more than 3.000 strong," The
UPSStore.com Pressroom, www.theupsstore.com/about/press-
roomlpagesl0407o3_press_release.aspx.
20. Hess, E. D., and R. Kazanjian (2006), "The search for
organic growth."
21. "United Parcel Service," Wikipedia.org, hnp:11
en.wiki pedi a.orglwikilU ni!ed_Parcel~Service.
22. Hudson, S., "Success with hub and spoke distribution,"
Supply Chain Management, NCSU, htlp:llscm.ncsu.edu/pub-
licllessonslJess031 0 la.hrml.
23. "Pedfix announces domestic express services in China,"
2007 Press Releases, Fedex.com, http://fedex,com/cn_english!
about/pressrel easesl200703 20_507, hrml.
24, "Company history; About UPS." UPS. com. www.ups.coml
conteru/corp/about/history/.
25. UPS CEO Scott Davis in a 2009 CNBC interview, htrp:11
video.msn.coml?mkt=en~tls&brand=money&vid=372a9lb9"
1195-4a Ic-93aa-1 ad61 bd526e4&playlist=videoB y'Iagnag.mo
neY_lop_investing:ns:MSNmoney _Gallery:mk:us:vs: I&from=
MSNmoney_ticker&tab=s216.
26. PM's address to Joint Session of the DIET, Press
Information Bureau (India), December 14,2006, www.pib.nic.
inlrelease/release.asp?relid=233 I8.
27. Balogh. M., (2007). "Significant growth is crucial for
India's economy," January 10, Credit Suisse, hup.r/emageztne.
credit-suisse.comlapp/articlelindex.cfm?fuseacrion=OpenAnicl
e&aoid=20021 o&lang=EN.
28. "India GOP growth rate." Tradingticonomics, July 5,
2010, www.tradingeconomics.com/&onomicslGDP-Growth.

aspx?Symbol=INR.
29. "UPS snapshot for small businesses: Doing business in
India," http://pressroom.ups.com/pressroomlstaticti.leslpdf/
faccshee~sllndia_SnapshotjocSmaILBusinesses.pd.f
30. Williamson, J" "The Rise of The Indian Economy,"
wwwunc.edu. May 11,2006, www.unc.edu/depts/diplornat/
item/2006/0406/will/williamson_india.html,
31. Sharma. A. (2009), "India's Foreign Trade Policy
2009-2014," November 2, The Metropolitan Corporate
Counsel. www.metrocorpcounsel.comlcurrent.
php?artType=view&EntryNo=10306.
32. ENAM Securities Logistics Update, March 2009.
33. "India information,' Embassy of India, www.indianem-
bass y.org/i ndiainfo/indi a_i l.hun.
34. "Deregulation of oil prices-Yet another endeavor."
lndiQlIesl, http://indiquest,wordpress.coml20D9/06130/
deregulation-of-oil-prices-yet~another-endeavor/,
35. "Transport in India," Wikipedia.org, http://en.wikipedia.
org/wiki/Transport.jn.Jndia.
36. "Indian road network," Wikipedia.org, htrp:llen.wikipedia.
orglwikillndian_Road_Network,
II
.-
=-
94 International Business strateg,:y --------------
C414 CASE 26 I UPS in India-A Package Deal?
37. "Rural roads-A lifeline for villages in India," World Bank
Publication, hup:llweb.woridbank,orgIWBSITEJEXTERNAU

COUNTRIESISOUTHASIAEXTIEXTSARREGTOPTRANSP
ORTIO"contentM DK:21755700-pagePK :34004173-piPK :340
03707 -theS itePK :579598 ,OO.htmI.
38. "Kingfisher Red," Wikipedia.org, hup:llen.wikipedia,orgl
wild/Kingfisher_Red.
39. "Research for Aircargo India 2010," www.slauimes.coml
aci2010f.
40. "Indian Railways Infonnalion System," www.indianrail.
gov.in/ablr.hrml.
41. "India: Transport and communications," The EcO/wlIlist,
June 24. 2008, www.eiu.comlindex.
asp?layout=VWPrintVW3&aniclc_id=: 1I I3483696&prinlcr=
printer&rf=O.
42. "Inland waterway transport," United Nations Economic
and Social Commission for Asia and the Pacific,
www.unescap.orgJudw/PublicationsffPTS_pubs/Pub_2307/
pub_2307 _ch II.pdf.
43. Peters, H. J., "India's growing conflict between trade
and transport," Infrastructure and Urban Development
Department, The World Bank, January 1990, www-wds.
worldbank.orgJextemalldefaultlWDSContentServerllW3PI
16120001021241000009265 _3960929 I534371RenderetVPDFI
multi_page.pdf.
44. www.tciLcomlpdfiifrffCILar09J>9_07_09.pdf.
45. HesseldahL A. (2004), "Toshiba will have UPS fix its
laptops."
46. Cygnus Business Consulting and Research Pvr Limited,
Quarterly Performance ArUllysis of Companies tlanuary-
March 2009), Indian Logistics Industry.
47. "Value added lax." Wikipedia.org, hup:llen.wikipedia.org!
wikiNalue_added_tax.
48. WWW.lciI.ComlpdfiifrffCLLar09_09_07_09.pdf.
49. Markoff, J. (2005), "Plan to connect rural India to the
lruemet," The New York Times, June 16, www.nytimes.

cornl2005106/161technoIOgy/l6compute.html.
50. "FirSI of its kind, one-stop retail outlet offers full range
of business services to North India," press release, UPS.com,
www.ups.comlcontentli n/enJabou tlnews/press_ releases/new -
delhi_ups_store.htrnl.
51. peters, H. J., "India's growing conflict between trade and
transport," January 1990.
52. "UPS increases FSL presence in China," POSl
and Parcel, hltp:llpostandparcel.infO/30941/marketsl
ups-increases- fsl-presence-i n-china/.
53. Home page, Alibaba.com, http://news.alibaba.comJspe-
cials/aboutalibabalindex.html.
54. "UPS teams with AIiExpress," AtlanTa Business Chronicle,
May 3, 2010, http://atlanta.bizjournals.comlatlantalsto-
riesl20 I01051031d,i Iy23 .htrnl.
55. "PosLaju and UPS form alliance, The New York Times,
July 5, 2010, http://markets.on.nytimes.comJresearchistOCkS/
news/press_release.asp ?docTag=20 I006031 OOOBIZWIRE_
USPRX_6W5289&feedID"600&presuymbOl"277628.
56. Mitra, S. (2009), "A survey of Indian express delivery ser-
vice providers."
57. "Fast-growing Indian express market set for further con-
solidation," press release, CEP Research, https:llwww.cep-
research.comlexportlsites/defaultlCepresearchlpages/customl
pressfllease_articleslPL 06-09- 21-CEP -Research. pdf.
58. These facts were collected in an author's interview with
logistics industry expert, Supratem Ganguly.
59. Mitra, S. (2009), "A survey of Indian express delivery ser-
vice providers."
60. "India together," www.indiatogether.org/20061augllaw-
poffice.htm .
•

----------------
.......:.-_---------------------------_.....:._-_ ..
INTERNATIONAL ACQUISITION STRATEGY OF FORUM
GROUP 111
International Acquisition Strategy of'Fosun Group
313-135-1
International Acquisition Strategy of
Fosun Group:
Innovation or Pragmatism?
This case was prepared by WU Min and CHEN Chen, students
0/ EM-Lyon, instructed by Prof
Dong Sian, EM-Lyon Business Schoof. If is intended/or class
discussion rather than illustrate
either effective or ineffective in business administration.
Copyright © 2013 by EM-Lyon Business School. No part cf thls
publication may be reproduced,
stored in a retrieval system, or transmitted in anyform or by any
means-electronic, mechanical,
photocopying, recording or otherwise-without the permission of
EM-Lyon Business School.
ethe case for learning DIJlllbul.d by K(h, IlK.nd
USA_w.•~ch.comAllrlghlS .. "NedPrinted in UK.nd USA NorIh
Am.rltaI +1 781 239 S8B4, +1 781 239588S_ I!CthUi~,CO",
1_" oIlh_ worldI +44 (0)1234 75O'J1O]f +4410)1234 7S Ins_

=hOKth.com
..
International Business Strategy112
313-135-1
International Acquisition Strategy of Fosun Group
Introduction
On 13th June 2010. Garden Hotel, Shanghai, under the witness
of dozens ofjoumalists, regrouped the
key figures of Fosun, the biggest Chinese private conglomerate:
Mr GUO Guangcbang, the president-
founder, Mr LIANG Xinjun, the co-Founder, Mr.QIAN
Jianlong, director of au on investments, Mr
CHANG Chuu, VP of Forte (Fosun's filial in real estate). Face
to them were seated the superior
management team of Club Med, the synonym for holiday resorts
for 60 years in the Francophone world.
This team was led by a man in his fifties, with a sharp sight and
a determined face, the President-CEO
of Club Med, Mr Henri Giscard D'Estaing. People can hardly
ignore this rare surnamc, which comes
from his father the ex-President of the Republic of France:
Valery Giscard d'Estaing.
Relaxing smiles took over the solemn ambience in the hall as an
intensive bilateral negotiation had just
finished with a satisfying outcome for both. In the mean while
the news announced in an earlier press
meeting was circulating among the wcll~informed financial

obselVcrs all over the world: Fosun and
Club Med agreed to set up a strategic partnership. Concretely,
Fosun would acquire 7.1 % stake of Club
Med with 20 million euros (220 million RMB), making it the
biggest shareholder of Club Med. Club
Med finally found a pillar for its ambitious expansion plans in
China - FOSUll promised to be a long-
term investor and to help Club Med to rollout its roadmap in
this New World full of opportunities.
This transaction, despite of its moderate amount regarding to
the scale of either Fosun or Club Med, it
marks a mile stone for both companies. On one hand, FOSUll
has been seeking for an entry point for its
internationalization roadmap since quite a long time. The crisis
in 2008-2009 brought down
dramatically the share prices of many old-brand enterprises
around the world and released
opportunities for companies from emerging countries, especially
for those who have as much cash as
desire,like Fosun. On the other hand, as a part of its struggle for
surviving, Club Med has fixed its
strategy "Focus on China" since 2009 and has decided to work
with a strong local partner to implement
this strategy. This decision was largely piloted by Mr Henri
Giscard d'Estaing himself and based on his
cognition from a long political career. Understanding how
important and how precious it is, in China,
the local connections and relationships, be prefers being led by
an experienced sailor which can guide
him to navigate in the deep ocean of Chinese market and to find
big fishes. Moreover, his experience
as CEO of'Evian, filial of Dan one Group, with both success and
failure in the joint venture with a
Chinese company Wahaha, taught him that it is crucial to find
not simply a partner, but the RIGHT one.

Following this successful beginning, FOSUll seems accelerates
its steps in international investment:
investing in Folli Follie, a Greekjewelry and retail group;
creating an investment fund together with
Carlyle; setting up tbe partnership with Prudential, a US
insurance company, etc.
This international marriage so-far-so-good, will it have a happy
ending? Or it will result in bitter pill
for both (not rare in similar cases)? In a wider prospect, will it
be the prelude for tbe epic of'Fosun's
internationalization? Could it become one of'the rare successful
models of overseas acquisition for
Chinese private company? Or it will tum out to be a pure capital
investment, like many others done by
new moneys from emerging economies?
No doubt. that all these questions flashed upon the minds of all
the attendants presented in Garden Hotel
that evening. However, no one was able to give an answer with
certitude by then In the '0110· rtFthi b . . . II wmg pa
a .t us usm~ss case, we invite you to join Fosun's adventure of
intemationalization by acquisition and
WIll share WIth you our personal witness and analysis
2/18
•
GROUP 113________--------------------
====::.::::~~=.:==:.:.:::~==:::::.:::-__'-..uiL ....

313-135-1
lnternntional Acquisition Strategy of Fosun Group
I. Macro economy background: Global crisis bougbt
opportunities to Chinese
investors
To understand the timing that Fcsun chose to launch its
adventure ofintematicnalizaricn, let's review
the global economic environment dominated by the
consequences of'the financial crisis started in 2008.
1. From financial crisis to economic recession
The financial crisis of2008·2009 was detonated by the rupture
of the real estate bubble in the U.S.
High level of default on subprime mortgages led to tremendous
loss on mortgage-backed securities
(MBS). Major global financial institutions and investors, having
heavily invested on MBS were obliged
to report significant write-downs. As a result, transactions
among financial institutions stilled down and
loans 10 key businesses were tightened,
Facing to the crisis, the Central bank of U.S. (FED) provided
rescues to key financial institutions and
launched stimulus programs to encourage lending and restore
confidence. However, the bankrupt of
certain financial institutions, resulted in a total panic of the
financial market. Hence, none of the above
measures could stop the financial crisis from affecting seriously
the real economy. Because of the
accelerating effect, the credit crunch slowed down business
development of many companies facing
difficulties to finance their productive activities. The GOP
growth rates of main economies decreased

significantly while their unemployment rates sharply increased
(c. f. the following graphs). The global
economy has been experiencing the biggest recession cycle after
the Second World War.
15
10..
.s
~
5
~ 0
c,
Q 2006" -5
-10
--Japan
GOPgrowth rate of main economics
--China
2007 2008
--United
K1nsdom
--United
Slates
o ta from H
2006 2007

Data from IMF
2008 2009 2010
Unemployment rate of world main economics
"12 ~- ._---- ~ ..- -+-China
E 10 ..~ ~ ...... Japan"• 8 -~E -'-United>
~ 6 --- ::;: Kingdom• • ~United~ States=> 2 ~Et.roarea
0
Sources ofOate: wwwJMF.com
3/18
..
114 International Business Strategy
313-135-1
lntcmnticnnl Acqursiticn Strategy of Fosun Group
2. The chute in principal stock markets all over the world
Due 10 this global economy volatility. coupled with recent
European debt crisis. the global stock
markets have been unprecedcntedly underperfoOlling, Under
this aunosphere, since the beginning of
the crisis, the stock prices of a majority of companies have
sharply fallen down, including those of
giant multinational corporations. As a result, from
manufacturing to retail, from banking to services,

many intemationnl corporations and brands have been
undervalued and some of them arc even in
difficulties to survive.
Above situation means good opportunities for companies with
available cash to expand via buying
quality assets at low prices. As the lending emerging economy
and stimulated by a tremendous
monetary expansion in 2008-2009, there is no reason for China
to be absent from this grand banquet.
"The situation has been reversed." said Ralph Jaeger, a senior
research consultant for the investment
consultancy firm Cambridge Associates. "Years ago, Chinese
companies were cheaper. Today you
have to go outside China lO find acquisitions at reasonable
price."
As the pressure of the global financial meltdown IntensifIed,
the major European and
US. stock Indexes feu rapidly, moving In lock step.
''''''
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7f08 9108 , 1/08 1/09 3(09
Sourco: 1.UI LLC
Date source: www.zealllc.com
Bloombll'"'ll
Date source: www.bloomberg.com
4/18
GROUP 115
International Acquisition Strategy of Fcsun Group
313-135-1
3. The economic situation in China
In the last two decades, China's economy has emerged as a
major player in the world economy.
China's rapid GDP growth has changed the distribution of
economlc activities across the planet It
surpassed Japan to become the second biggest economy in the
world in 2009, and it seems to be only a
matter of time for it to surpass the United States. China's
exports have lowered down consumer prices
across the globe, and its imports have begun to have a major
impact Oil global commodity prices.
In 2008-2009, the fall of demand from oversea market reduced
China's export and slowed down
China's growth only during a few months at the beginning of the
crisis. Backed by a colossal reserve
of foreign currency (No, I in the world), Chinese government

had the means to quickly enlarge the
country's domestic demand by an unprecedented expansion of
the public dispense (the famous project
of4 trillion RMB). With this method, as a rare exception in the
world, China has been able to maintain
an economic growth outstandingly high despite of tile affects
from the global financial crisis and
sovereign debt crisis in Europe
4. Chinese com pantes accelerate their internationalization by
acquisition
The growth of the country's GOP brings ambitions and
capabilities for Chinese companies to expand
overseas, while investors from other countries, suffering from
huge write-downs during the crisis, were
in general eager for recapitalizations. This contrast provided
Chinese companies a net advantage to
enter in the "auction" of attractive foreign assets as well as a
larger flexibility in the negotiations. lu
this context, Chinese companies, either state-owned or private
ones, have stepped onto the global stage,
with an expanding portfolio of international mergers and
acquisitions. This tendency was shown
statistically by a sharp increase on the outbound foreign direct
investment from China (it posted USD
56.5 billion in 2009, accounting for 5, I% of all over the world,
and the amount in 2010 recorded a
historical high ofUSD 59.3 billion.)
The IT hardware provider Lenovo (acquired the Laptop BU of
IBM in 2004), the metallurgic giant
Chinalco (search for acquiring carbon miner allover the world),
China National Petroleum Corp, and
the Industrial and Commercial Bank of China are just some
examples of tile Chinese companies that

have expanded overseas in recent years. According to a JP
Morgan research report, the transaction
amount with China as the acquirer in the first halfof2010 ranked
second largest in the world, only
behind the US. The milestone transactions in 2010 included
CNOOC's acquisition of Pan American
Energy, Geely's acquisition of Volvo, Shanghai Electrics'
acquisition ofGoss as well as Wenzhou
Chenglong's acquisition of Pierre Cardin. We can see that these
transactions not only involve quality
international assets and well perceived brands, but also the
absolute control of the business
5. The motivations of the Chinese acquirers
We try to summarize in three aspects the principal factors which
could have driven these behaviors:
A. Sufficient capital for overseas investment
The Chinese economic has been growing at an average annual
rate of aim os I 10% since it embraced the
economic reforms in early 80s. The 30 years' prosperity in
continue has accumulated huge capital in
China. As a proof, the total capital raised in China through
Shenzheu, Shanghai and Hong Kong stock
exchanges amounting to USDI30 billion in 2010, exceed that
ofNYSE Euronext (USD 34 billion). In
terms of total capital raised through the capital market in 20 I0,
Chinese companies ranked No.1,
followed by the USA and Japan.
5/18
-------------------------

... _1:-:1.:6::......J~~ln::ternational Business Strategy':.- _
313-135-1
Intcmaucnnl 'Cqllj~lljl)tl Strategy ofFostlll Group
B. Advantageous monetary context
Outside China, RMB was maintaining the trend of appreciation
against major currencies. Due to the
Quantitative Easing policy driven by the Federal Reserve, USD
kept depreciating against RMB, and
commodity prices were likely to go up as long as usa remains
the underlying currency. In the mean
time, the uncertainty of the public finance problems of the
Pl1GS and the European debt crisis
increased the volatility of Euro and would affect its strength
against RMB. And the huge public debt in
Japan would lead to a long-term depreciation of'Yen against
RMB.
Meanwhile, inside China, RMB is under a kind of depreciation.
The real purchasing power of RMB in
the domestic market has been decreasing during the last few
years, as the inflation rate remains high.
The dramatic burst of'housing prices implies further inflations
of the investment products.
The continuous appreciation of RMB coupled with the domestic
inflation provides a further discount of
overseas assets, already undervalued due to the global economic
environment.

C. 1n search 0 f global resources
Since more than a decade, more and more Chinese companies
have begun to look on global markets for
access to resources, customers, intellectual properties and
advanced technologies. However, they have
been also facing a plenty of challenges in terms of culture,
human resource, financial reporting and
legal issues on their attempts for internationalization (not
always successful).
Now, with the change on global trend and favorable internal and
external factors, the Chinese
companies are more likely than ever to put acquisition in the
centre of their internationalization strategy,
as it is the best (or the only) way for them to bypass the above
mentioned challenges.
6. International acquisitions - a real adventure
Despite all above favorable elements, and while specialists
consider that it is a good timing,
international acquisition is still an action ro be carried out with
great caution.
According to statistics compiled by Accenture, from January
2008 to June 2010, Chinese companies
injected over 600 billion RMB (US$90.6 billion) for about 120
overseas mergers and acquisitions, but
not all ofthe deals were successful. Because of cultural
differences and lack of market information
many Chinese companies have suffered important loss in
overseas acquisitions, '
Among all Chinese acquirers, the State-owned enterprises with
sufficient funds seem to be the main

force. Traditionally, these companies prefer ensuring their
control on the acquired company with more
than 50% of stake. However, they are more often example for
failures than for success, sometimes due
to.th.eir background .and va~ious political reasons. As an
example, the Aluminum Corporation of China
L1I11lted(Chalco) failed to mcrease its capital share in Rio
Tinto.
The re~ulation regarding theoantitruS~ is another ~lajor reason
for failure. For example, Shougang
Group s attempt to buy 19.9Vo stake m Mount Gibson Iron Ltd
was rejected because ofth ' ,. e cppostucn
from the Australian government.
Some otl~er M&As are sluggish because it took too longtime to
merge the two companies. For example
effort to integrate the Lenovo Group and (8M arc still underway
even though L k '. enovo too over IBM's
personal computer division in 2005.
ln all, there is still a lot for Chinese companies to learn in
overseas acquisiti d iI Ions an mvesrments.
6/18
INTERNATIONAL ACQUISITION STRATEGY OF fORUM
GROUP
:'--~"""IoC-'"
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II. FOSUN - A typical example of Chinese private company

rising in the past two
decades
I. A brief summery of Fosun's history
The year 1992 witnessed a historic breakthrough in the economy
reform in China since 1978. Being
encouraged by Deng Xiaoping's Shenzhen speech during his
famous tour in the Southern China, a big
quantity ofvelhe", i.e. officers from the Party or the
government, professors from universities and
managers from state-owned companies, decided to quit their
post and to create their own companies.
GUO Guangchang belongs to this group or adveruurers, later
referred as the "92 Fraction".
In 1992, GUO Guangchang, majored in philosophy, gave up his
dream or studymg in the US and
founded Fosun together with three schoolmates, using his
personal saving of 4000$ originally prepared
for his study plan. The name Fosun stands for "Star of Fudan
University", reflecting the entrepreneurial
passion of these four Fudan University graduates.
The majority of the "92-Fraction" started their business relying
on the state-owned enterprises or the
public establishments where they worked. However, Fosun
founders sailed out immediately after their
graduation with their own "treasure" - a better education
background as well as a global vision. Fosun
achieved a rapid development by acutely identifying the
tendency of China's development and
investing in fast-growing domains at different stage (pharmacy,
real estate, mining etc.).
Early 90s, Fosun earned its first pot of gold in pharmaceutics.

In 1994, Fosun launched its real estate
business Forte Land. Soon after, it sailed out also in
pharmaceutical distribution by creating the chain
pharmacy store - Fosun Pharma. Around the year 2000, Fosun
started its adventure as investor by a
serial of strategic investments: Shanghai Friendship Group
(retail) in 2000. Si Yuyuan Group (retail
and commercial real estate) in 2002, Jianlong Group (iron and
steel) in 2002. These successful attempts
encouraged Fosun to accelerate its steps: NISCO (Iron & Steel),
Zhaojin (mining), Tebon Securities
(finance), Yong'an (insurance), Focus (media) .
Nowadays Fosnn has become the largest privately-owned
conglomerate, with approximately 30,000
employees based in all the provinces as well as offices in
Shanghai, Hong Kong and New York
(dedicated for international investment). Within 20 years, they
succeeded in turning from an industry
enterprise to a diversified industry group, then to an
investment-oriented corporation.
Along with the development of Fosun, Guo and his team noticed
the importance of the capital market.
The growing Chinese stock market and the opening of oversea
stock markets to Chinese enterprises
provided precious opportunities of leverage for Fosun's rapid
expansion. Fosun Phanna, the
pharmaceuticals business has been listed on Shanghai Stock
Exchange since 1998. In 2004, Forte Land,
the property business was listed on the Hong Kong Stock
Exchange (HKSE), followed by Fosun
International, the holding company in 2008).
With these successful capital market fundraising, Mr. Guo and
his team have to keep searching for new

growth engines for Fosun, following the unique investment
strategy of Fosun - always focus on
China's growth momentum.
2. Fosun's businesses mainly concentrated in 5 domains:
A. Pharmaceuticals and Healthcare
The pharmaceuticals and healthcare department of Fosun is
involved in .the research, dev~lopm~nt,
manufacture distribution and retail of pharmaceutical products
for medical treatment ofliver; diabetes,
cardiovascular and tuberculosis diseases; and in the provision of
health care services, including supply
chain, retail and other services.
7/18
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... _1.:..;1:.;8:.._~_ln_ternational Business Strateg~y _
313-135-1
lntcrnanonul Acquisition Stralc~y of FOSUll Group
Fosun operates in this sector mainly through its filial Fosun
Pharma, a Shanghai~listed company. ,
focused on modem bio-hcallhcare industry. In addition, Fosun
engages in the development ot China s
premium healthcare service industry by investing in Chindex
International Inc.
B. Real Estate

The company's property segment engages in the development
and sale of urban complex projects,
including hotels, commercial spaces, and apartments, as well as
provides real estate fund management,
property circulation and consultation and sales agency services,
Fosun operates in property domain through its 3 major
subsidiaries: Forte Land, a n~tionwide property
developer listed on the Hong Kong Stock Exchange; Resource
Property, a Shanghai-centered
integrated service provider of property circulation industry; and
Zhenda, a regional Real Estate
developer founded in 1993, focus 011 Shanghai.
C. Industrial
Fosun holds important shares in producers (Nanjing Iron &
Steel and Jianlong Group) of steel plates,
steel bars, wire rods, steel strips, structural section steel,
medium wide hot and cold strips, hot-rolled
coils, bars and wire rods.
D. Natural Resources
Fosun is involved in the mining and are processing of various
resources, including iron are, coking coal
and gold. The Group operates in this sector through its 6
subsidiaries: Hainan Mining, owner of the
largest open-pit iron ore in China; Jin' An Mining; Huaxia
Mining; Shanjiaowulin; Zunyi Shiji
Nonerrous Metal and Zhaojin Mining.
E. Retail, Services and Other Investments
This segment comprises the management of investments

principally in retail and services industries.
The Group operates in the retail business through its principal
associate, Shanghai Yuyuan, a listed
company on the Shanghai Stock Exchange, which operates in
the tourism industry and in the retail
chain of gold and jewellery.
Fosun also o~erates ~ the service indus~ry lh~OUg~lits
participations in Focus Media, the largest
outd.oor ~edla ~dvertls~ment c01~pany 1I1 China; In Club
Med, a renowned world resort operator; in
Felli Fcllie, an international fashion brand; in Yong'An
Insurance, a property and casualty insurance
company.
Being very active in both public and private markets, the Group
applies a golden criterion in its
investing engagements - participating in the activities which
benefit the most from China's growth
momentum.
3. Key management team
The founders and senior management team assure Fcsun's rapid
development Lthei, c.r. CIT general
background below:
Mr. GUO Guangchang, 45 years old, having B.A. in Philosophy
as well as a MBA ofF d U· .
e d f F . I .. u an mverstry
tcun cr 0 osun, IS t ie executive Director and Chairman of the '"
'group smce Its establishment in 1992.
8(18

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GROUP 119
lnremational Acquisition Strategy ofFosun Group
313-135-1
His title includes also, Director of Fosun Pharma, Director of
Nanjing Iron, non-executive Director of
Forte Land and Director of Club Med since March 20 II.
Mr. LIANG Xinjun, 45 years old, co- founder of the group, Vice
Chaim1311, Chief Executive Officer
and Executive Director at Fosun since 2009 after being the Vice
Chairman and the Vice President at
POSUll since its establishment. He serves as a Director at
Yuyuan, a Non-Executive Director at Zhaojin
Mining and an independent Director at Shanghai Oriental Pearl.
Mr. Liang has a bachelor's degree in
genetic engineering in 1991 from Fudan University and a
master's degree in business administration in
2007 from Cheung Kong Graduate School of Business.
Mr. FAN Wei, 43 years old, co-founder of the group, has been
an Executive Director and Co-President
at Fosun since 2010. He has been lite Executive Director and
CEO at Forte since 1998. In 2009 he
resigned from the post of CEO and was appointed as the
Chairman at Forte. Mr. Fan has a bachelor's
degree in genetic engineering from Fudan University.
Mr. WANG Qunbin, 43 years old, co-founder and a Director at

FOSUll Group since its establishment.
He began as a Director and the General Manager of Fosun
Phanna (and its predecessor Shanghai Fosun
Industrial) since its establishment, then the Chairman at Fosun
Pharma since 2007. He also has been a
Non-Executive Director at Sinopharm since 2003. He has been
appointed as the President and
Executive Director at Fosun International since 2009. Before
joining Fosun, he was a lecturer at the
Genetic Research Institute of Fudan Univ. with a bachelor's
degree in genetic engineering from Fudan
Univ. in 1991.
Mr.Q1AN Jiannong, 50 years old, has joined Fosun since 20 I 0
and nominated as GM of To uris III and
Commercial Group. After a brilliant study in the University of
Duisburg of Germany resulted in Master
and Doctor degrees in economy, he gained rich experience in
retails and consumer business. He
worked as the president-CEO ofNepstar Chain Drugstore and
helped the company list in NYSE. He is
the key person who conducted aJl the international investments
of Fosun.
4. The preparation of Fosun for its internationalization
Before launching its global investment, Fosun had already
defined its own roadmap of
internationalization. In an interview, WANG Qunbin disclosed
that, long time ago, the
internationalization had aJready been raised as an option among
the co-founders. But they decide to
focus on domestic market firs! and to accumulate necessary
resources, as their expertise and know-how
were quite local. While waiting for a right moment to take
action for internationalization, they managed

to transform Fosun from an industry company to an investment-
oriented corporation. This effort will be
particularly useful for Fosun's international acquisition later on.
Apparently, in 20 I0, Fosun consider the time is coming: both
external environment and internal
preparations seemed to be mature. They need to just identify
best quality-price assets and catch the
opportunities.
Before the attempts as an investor, Fosun carried out a long
campaign to gain the recognition of its own
company among the international investment society. This
campaign last till Fosun's listing on HKSE
in 2007. During this period, Mr. Guo hired experts to teach him
about the way of thinking and the
business culture in the western world.
At the same time, the founders ofFosun make use of the Chinese
culture as a key to promote the image
of the company on a worldwide stage. In 20 I0, Mr. Guo ~ave a
Kung-Fu perfor:nance in a.silk Tai-Chi
dress during a dinner with Fosun's international contacts III
New York, so as to Illustrate his plan to
introduce Fosun into the world business world "with grace".
"We are doing a Tat-Chi show in New
York, and the next stage will be in Germany ... We want
Chinese culture to go abroad. That's why we
9/1 •
.-17 _
120 International Business Strategy' _

313-135-1
lmcmational Acquisition Strategy of Fosun Group
nsoring an exhibition of Forbidden City's
are opening Tal-Chi training schools overseas and we are spo f
h -fbunders ofFosun.
collections in the Louvre museum" explained Wang Qunbin, one
0 t e co
L11. The tirst step of Fosun's internationalization
I. Club Med -An Old French Coach looking forward to
accelerating ill new world
Club Med is a world-class premium resort operator, with 80
resorts located in famous tourist
destinations and 1.3 million loyal members around the world.
The club was the pioneer of'the all-
inclusive holiday package (stay, B&F, activities, kid take-care
all included), who has introduce~ as .
early as the 50's this creative business model nowadays well-
known to the whole world. Especially, In
the Francophone communities, the mode of Club Med has
marked in the memories several generations
of people and influenced their vision on holidays and resorts.
As a symbol, the word Club Med became
a sort of synonym to family vacations.
The club, founded in 1950 in France by fbrrner Belgian water
polo champion, Gerard Blitz, started its
activity as a non-profit association organizing holiday
excursions with the slogan "bring the happiness
to people". It received all overwhelming welcome from the
European vacationers thanks to its

convenient all-inclusive holiday package and a delightful
ambiance. The association was transformed
to a company in 1956 and was listed in Paris in 1966. With
decades of development, its resorts already
evolved from simple unlit straw huts on a beachfront to upscale
integrated villages with comfortable
rooms, suites and completed facilities. It expanded very quickly
in 1970s and the number of its resorts
achieved once more than 140 in 19805.
In the 1990s, the Club's profit declined as the competitors
around world copied its concepts and
holidaymakers demanded more sophisticated offerings. From
Serge Trigano to Philippe Bourguignon,
the two successive CEOs failed to renin) the situation and Club
Med fell deeply into loss in the
downturn following the September 11,2001 attacks in the USA.
In 2002 a new CEO, Henri Giscard d'Estaing, was appointed.
The new CEO announced the new
strategy -refbcusing on holiday villages for high-end
vacationers. For financial aspect the Club should
shift its.poli.cy from O~ning all its resorts to simply operating
them. Following these decisions, almost
half'ofits Villages, winch were low end and had no possibility
to upgrade, were closed or sold. And the
Club started renting luxury villas and chalets. With this
measure, the resort performance has been in
improvement, which allowed the Club to return 10 profit in
2005.
However, the financial crisis in 2008 interrupted Club Med's
dream of'vren ' "dd I. . . . . alssance ,Sll en y
bringing the Club m big difficulty to find take-over for its
burden assets Id 'II d

. - 0 VI ages non-a apted for
renovanon. As a result, the sale of asset was almost stagnant
while di , , E. " . Ismlssmg uropean staffs cost a
huge amount. The snuauon ISworsened as its traditional markets
(rich f 'I' , W
. . ' lanll les In estern Europe and
III America), deeply touched by the crisis had the tendency to
cut th ' b d flei ,
..' err u get o leisure/holidays By
Apr 20 I0, even with net Improvements on operation performa b
. .
turned to red and share price dropped to 9.0 euros the lowest
.nc~ rCUtlmg COSt,"" annual profit still
2007. ' III 1 S ustory, regarding to 57 euros in
Against this background, Henri Giscard d'Estaing launched "Chi
lila strategy" in 2009 fi 'the development focus of Club Med
will be moved to Chi .pre tgurmg thatmao
This decision was also driven by under the booming to' ket i.
unsm mar et m Chin tl k '
Chinese economy during the past two decades. As early as 2003
Clu alan s to rapid growth of
, b Med already set up its first sales
10/18
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______ INTERNATIONAL ACQUISITION STRATEGY OF
FORUM GROUP 121"'..,-_-----------------

.:=::~:.:.::.:::..:::.::~~==.::::..:..==~_l'--.L6.JL...J
313-135-1
office in Shanghai and started cooperating with Chinese travel
agency 10 bring Chinese clients to its
oversea resorts. In 2009, Chinese in-bound tourism visitors have
achieved 1.9 billion and out-bound
visitors summed up over 40 million. The total tourism revenue
has achieved IOOOmillion RMB. Among
them, 29000 guests chose Club Med as their destination.
The opening in 20 10 ofits first resort in China in the ski town
of Yabuli marked a mile stone for the
"Focus on China" strategy of Club Med. As a result, the number
of its Chinese customers soared 40%
year-on-year that winter.
Encouraged by this success, Club Med sailed out with an
ambitious plan 1.0 open no less than 5 new
resorts in China within 5 years, and to recruit more than 20 000
members by 20 I5, making China its
second biggest market (after France) in the world. To achieve
this objective, Club Med understood that
it is absolutely mandatory to have a strategic partner in China.
As a symbol of its sincerity, Club Med
was willing to open its capital to this new partner so as to
ensure an effective and committed
partnership.
2. The deal
In 2010, Club Med was introduced to FOSWlby Capital A, a
French boutique investing bank. TIle two
companies Fell in love at the first sight and quickly agreed to

set up the strategic partnership. Based 011
an agreement of strategic cooperation, the capital investment
was concluded at a flash speed, after only
2 months' intensive discussion. On June 13th 2010, Fcsun
acquired a 7. 1% stake with 20 million euros
(220M RMB) making it the biggest shareholder of Club Med.
Fosuu promised to be a long-term
strategic investor as a pillar of Club Med's expansion plans and
to help it accelerate the rollout of its
concept in China.
As part of the deal, Fosun pledged not to lift it's stake beyond
10 percent ifit reached that level, at least
during the following 24 months, subject to DOother shareholder
having or wishing to acquire more than
10 percent. FOSUllhas the right to send a board member to Club
Med and a second one if ever its share
amount 9%. In addition, Fosun will have one representative in
both the strategy committee and the
audit committee of Club Med.
For the reason explained in the previous section, the principal
expectation of Club Med on this
marriage is of course a kind of financial partnership with Fosun
or its real-estate filial Forte as, for
example, the village owner in new resort developments. Besides
financial support, Club Med expects
Fosun's local input regarding resort development, human
resources, media and communications. The
global business synergy would be realized in several aspects, as
an example, Club Med could benefit
from Fosun's advantage in its multi-industry investment. We
will see the details of such benefit later in
section 111.3.810.
For Fcsun, it's also a good opportunity to increase its

international exposure and to gain the multi-
cultural experience. In this sense, the deal brought more than
what Fosun expected. FOSW1,being quite
discreet till then, gain a fame and reputation in Europe in a flick
overnight. The president GUO and the
CEO LlANG, were invited for interviews on world top medias
such as Wall Street, Financial times,
TFI, Figaro etc. "Fosun will not only support Club Med's global
strategy of upscale positioning and
sharing China's growth opportunities," deployed GUO
Guangchang in the joint-communique with Club
Med in the press meeting, "but also use this opportunity to
benchmark itself with international brands
and standards in order to improve its ability to consolidate
resources and manage investments."
11/18
~-----------------------
... _':.::2:,:2=- .... 1- International Business Strategy
313-135-1
lntemanonal Acquisition Strlltcp,' of'Fosun Group
3. Synergy
The two companies carried out series ofmeasures to realize an
efficient synergy in order to both
benefit from this strategic partnership.
As a top-level design, a mix-committee regroups key members

to orga~ize regular meetings a,t d~fferent
levels. The high-management-leveJ meeting fixes objectives,
makes guidelines, sets. up the principals
while the executive-level meeting reviews the cooperation
regularly and ensures dally communIcation.
To facilitate the bilateral communication, Fosun recruited a
French-speaking Chinese and Club Med
accelerated its Chinese-speaking stntTrecfuitment.
This attempt is helped by Fosun's continuous effort to improve
the company culture building and
internal communication among its different subsidiaries and
invested partners. Fosun launched a .
campaign named "Fosun _ one family" to unite more than 100
companies with Fosnn investment. WIth
the help of this platform, Fosun invited Club Med to all kinds of
activities. A bilingual magazine,
Fosun Express, is published every month to share latest news
ofFosun with the partners.
We may summarize the essential parts of their cooperation in
following aspects:
A. Resort Development:
As the major part of the strategic partnership with Club Med,
Fosun will help Club Med to achieve it
development goal- identify and develop 5 new resorts in China.
Club Med confirmed its interest in
certain destinations or in certain projects. Since 20 10, Club
Med, as a new comer comparing to
Starwood, Accor, lNG, quickly created its pipeline of new
resort development and planned to deliver
one new resort by year, This success is unimaginable without
Fosun's support: an expertise in real

estate development, a strong financing power as well as a close
connection with the local authorities
and business partners.
In the same time, Fosun is also paying close attention on Club
Med's overseas real estate assets and
managed to get to know potential international partners though
connections of Club Med.
B. Media & PR
As we've mentioned in section 11.1, Fosun holds important
shares in the media industry: own 100% the
publisher of the Chinese edition of Forbes magazine, 40% of
21st Century Media, 17,2% of Focus
Media, th~ last one being the biggest n~w media in China with
coverage of300 million people. With
these media groups as brother companies, Club Med could
easily improve its visibility in China.
Moreover, the deal itself brought many opportunities of
exposure to both companies too. It has been
presented as a.s~ccessful case. in.a 45-minute "International
acquisition" program ofCCTV2 (China
C~ntral Television). Meanwhile It attracts attention from
mainstream oversea Medias such as Financial
TImes, Wall Street, TFI, FIgaro etc. .
C. Sales
Fosun itself has a huge budget every year on conferencing and
employee incentive do i
I
, I' dlinked s.eo co rts partners
supp rers, C rents an In e governmental institutions. Through

these connections CI b M d' '
Id h
e I . . I 1I e 5 resorts
cou t ererore lave opportumues to enter the massive MICE
(Meetings Incentive C f . d
Exhibitions) market in China. ' s, on erencmg an
D. Human Resources
Fosun and Club Mcd share their resources in HR. At basic level
Club Med' ffs i C .
regularly various training programs provided by Fosun But the
'cooper t s.sta Sin hma benefit. a Ion IS much more than that:
12/18
GROUP---+-'-"~ ....123
313-135-1
While Club Med buill-up the staff team for Yabuli, its first
village in China, it chose 40 young talents
among the former volunteers for the Shanghai World Expo (20
I0) already recruited by Fosun; Club
Med',s ,long head-hunting campaign for chiefs of Chinese
cooking in villages was also accomplished by
recrumng from the candidates recommended by Yuyuan (c.f
section 11.2.E), the partnerofFosun
running many Shanghai restaurants.
Fosun staffs dialog weekly, sometimes daily, with their

counterparts at Club Med. "We share with them
our development plans for China. And we ask them for their
point of view and if they know people,
investors or operators who can help us build a resort in that
location" explained Henri Discard
d'Estaing in a press meeting held in New York early 2012.
rv. The Establishment of Fosun's Strategy on international
acquisition
I. Fosum acceleration of internationalization
Encouraged by the successful experience in the strategic
partnership with Club Med, Fosun seemed to
be more and more confident all its strategy and capacity in
international acquisition and expedited the
proceedings:
Also in 20 I0, Fosun teamed up with the Carlyle Group to
launch a 50-50 joint venture fund focused on
high-growth companies with a "business nexus to China."
As a case similar with that of Club Med, Felli Follte, the Greek
jewelry and luxury goods retailer group
also tries to knock at the door of Chinese market. Being well-
known in Europe, Felli Follie is however
a late comer comparing to other luxury brands which has
already expanded their market share in China
since a decade or even longer. Their struggle alone for a piece
of cake in the tremendous market would
definitely be a hard one because of the barrier and the cost to
get into distribution channels. Naturally,
Folli Follie became another target of Fosun. In May 20 I I.
Fosun acquired 9.5% of its stakes with more
than 84 million euros ($120 million).

In September 20 II, Fosun Group got the regulatory approval to
create a joint venture insurer with U.S.
financial service company Prudential Financial Inc. It fanned a
$600 million private equity fund in
January 2012 to invest in Chinese companies listed overseas as
well as foreign firms with operations in
China. The new portfolio, called Pramerica-Fosun China
Opportunity Fund. will put Guo's strategy
into test Mark B. Grier, the vice chairman of Prudential based in
the US said that they chose Fosun as
partner because of the conglomerate's intimate knowledge on
Chinese market and government. He also
pointed out the opportunity for Fosun to make use of its existing
portfolio to support the development
of the new investments. For example, he suggested that one of
Fosun's holdings, Shanghai Forte Land,
a major property developer in China, could benefit from retail
investments.
Fosun becomes a top choice for US private equity flrms looking
for joint ventures in China. "Such
partnerships are considered crucial for foreign players, in part
to navigate the fraud in the marketplace
and the regulatory hurdles", said Shaun Rein, the managing
director of China Market Research Group,
a consultancy firm based in Shanghai.
As a most recent move, Fosun hired the former U.S. Treasury
Secretary John Snow as an advisor for
developing networks in the North America.
2. Elaboration of rrosun's international acquisition strategy by
Fosun's founders
So far, Fosun's roadmap ofinteruationalization is rolled out with
clearer version. In the annual meeting

of Fosun in 20 II Fosun chose "Global resources combining
Chinese market" as its main focus. During
the meeting the four co-founders reviewed the two iutemational
acquisitions (Club Med and Folie
Folie) in tl1; past two years and gave a speech to encourage the
whole enterprise to be ready for further
international investment and internationalization of the group.
13/18
-r _
124
313-135-1
Internauounl vcquisuiou Strategy of Fosun Group
In an interview with Financial Times, GUO outlined the plan for
an extended international acquisition.
which could involve B wide range of brands and businesses that
need Fosun's help to development their
business in China. "Virtually any foreign company in any
industry, listed or unlisted, could be a target,
as long as it fits with Fosun's strategy, 'linking China's growth
momentum and the world's resources
to create a strong combination" he said. "Fosun is not only
interested in luxury fashion brands", he
emphasized. "Chinese consumption is growing fast in
a1lsubdivisions, from high-end to low-end,"
"Low-end food and clothing have big growth potential in China
- KFC is a good example of that," he
analyzed, "We will focus on areas we are already familiar with -
for example, pharmaceuticals, fashion

and tourism." . WANG Qunbin, another co-founder also
emphasized in the same interview "one oflhe
most important criteria for FOSUllto invest overseas is that the
target company should have its future
growth mainly from China."
Fosun CEO and Vice-Chairman Liang Xinjun disclosed in an
interview with Caijing News (One of
biggest financial media in China) thai Warren Buffett is most
likely to be Fosun's model, transitioning
from an industry group to an investment group. "Mr Buffett
focuses on investment skills and I always
keep one of his quotes in my mind," he told the Financial
Times, citing an aphorism by Benjamin
Graham, Mr Buffett's mentor _"In the short term, the stock
market behaves like a voting machine - bUI
in the long tenu, it acts like a weighing machine." "When we're
thinking about investing in a company,
we won't watch its stock's short-term fluctuation. We feel that a
company's long-term value is the
more important factor." For Liang, "long term" means "at least
5 years, 10 years or even 20 years" for
Fosun.
"Fosun has only bought small stakes in foreign firms", also said
Liang Xinjuu. He hoped to overcome
the mistrust in Europe and in North America towards Chinese
investors. The minority stake
investments in Club Med in 2010 and Folli Follie in 2011 are
the good demonstration oftbe strategy.
Fosun's international acquisition hinges on its full-fledged
industrial base, financial and operating
capabilities to support its investments at all stages. Based on its
strong resources and broad expertise in
Chinese market, Fosun helps occidental companies to set up and

develop their businesses in China.
Their investment strategy remains conservative, with a value-
based investment orientation and a focus
on trusted partners. It seeks proactively investment
opportunities arising from the refocusing of China's
economic from export to domestic demand, from China's
progress of urbanization and industrialization,
as well as from the structural changes of the global economy.
Its unique investing model, "combining
China's growth momenmrn with global resources", reinforces its
position as a China expert with global
capacity.
In 20 11, Club Med's global revenue increased by 5.2% with
profitability turn-around and would open
its second resort in China the next year with the help ofFosun.
In2011, Folli Follie increased
significantly the number of its stores in China while its global
revenue and net profit increased by 5.1%
and 4.7% for the first 2 quarters respectively.
A~parentlY, the investment carried out by Fosun has achieved
positive results so far. This positive sign
Will no doubt encourage Fosun to speed lip its further steps of
internationalization under the strate f
international acquisition. gy 0
14/18
.._--------------
GROUP

lntemational Acquisition Strategy of Fosun Group
313-135-1
Annex I: Club Mcd's share holding before Fosun's acquisition
-,.,.- ""NUmIHlr-of .~ /ot'ng "tlllW rfu~Q'.lwh VOlI"Cl dQrrtt
A131Qc:t20oa. , lU310n:lOll8 , ,1,131 cer 2OD9 , .. 1)1 Oc1.
2009
Flplr lnemolioo .... lIC.ine de Oepolo!et
':!,081,140 10.1 2,081,140 ,,. :ta31.nl ". 2,1531,n.l ..•cleo ~uon
_""..roe)...~ $09,517 ... 909,517 ee 1,2lU,111 e.s I.U4,HI ..•
ell!ldll "'tlricole , 115517 .. 1,115,511 "
ToUIl 8()llt'lj olOl1Ktm 4.923078 :15,4 4,923,078 24.7 521'
519 '" 5,211,519 182
NipponUle 169,131 • 7611,731 , .s 760,131 " 169,131
"AIrFnillICeFirotnce 387.1150 , 387,160 '.' $16,21. " 511:1,214
,.GLG ~.rtners LP 2,306,19$ 11.9 2,30£!,796 11.6 ~,"'1S.6DO e
c 2,215,600 "A<_ 1,162,630 • 1.1~,630 s.e
RJdllIije u Finance 1,liS,ne s.e 1,468,456 ,.• 618,221> a a
lltD,228 ,..
KBC 1,230,880 " 1,23O,6l!0 " B""'" as 611e,SlIO ,.•S ..
"....,lJ:Inna kmnd lJ:l 907,252 ... 907.252 '5
Fren.JII ... ~I<Ao~ 2,626.017 135- 2.6&ll,3S6 ,,. .,5991111 18.3
~,658,617 ",
foreign inllltilUMl"" 3,8S6.2113 le,1I 3,9'u,ellfl ". 4961 ~21 '"
9,Il:?O,M1 ,,.n.UUljl'1llC_ lU,a37 ,. 274,631 ... 2$$,394 0.'
25!>,311~ OS
E"lployefl 25,6111 0.' 25,691 0.' 29],)) .. 2&,333 "'
P""car>llolWlr 1.n~.Tt3 e.s 1,164,3>12 " ~~.. eo.952 '"
~,~1l,2~5 15.$
l&1'I1Ol! 19,:H7,9CS "'" 1Q,919.~56 "" 21!11~$l.'llllll "0
21!6M 561 "",I

Source: Fosun's internal report
Annex 2: Fosun's corporate structure
Source: www.Fosun.com
15/18
125
~-----------------------
an
lntcmntional Acquisition Strategv of fosun Group
313-135-1
Annex J: Fosun's shareholding
Fosun
Holdings
79.08%
Companies=====ill
Dimentional Fund
Vanguard
Blackrock
Guoqi Ding
lnvescc
Fldeuram Gestions
Ping Wu

Alliva
John Hancock Invest
Xuelang Oln
Delaware Management
Interfund Advisory
Remaing shares
Other
20,92%
'.iNm,1
0,12%
0.91%
0.26%
0.20%
0.16%
0,13%
0.12%
0.10%
0.08%
0.06%
0,05%
0.05%
18.80%
Yil of Others
Fosun (HK656) is owned as to 79.08% by Fosun International
Holdings with the rest of the share being
held mainly by the public.Tben, Fosun International Holdings is
owned as to 58%, 22%,10% and 10%
by Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei,
respectively
Source: Markctline

16/18
GROUP 127
313-135-1
International Acquisition Strategy of FOSUll Group
Annex 4: Fosun's key flnanclals
profit iEI: Lou
Rmbmn 2009 2010 2011 2012£, 20131
[email protected] 34,S.s6 ..,..... 56,.316 51,'i) S7r:!H
Gro5J prdlt 5,694- 9,357 10,566 10,82' 12,3G9
DPpredatioo 1.94.6: .,8S7 2,149 ',5" 2,914
EBIT 2~467 6.319 7..... 6,J65 7,576
Net interest e:qJ'i'nS(I (1,100) (1,571) (',3<U) (',711) (2,Ml
As.sodate:s a jeE'S 97. 926 I.S71 I,Jl] 1,9+9
POT 8,176 B,6B 0,881 ',J71 6,aJ'3
eeepucnet 3.S'~ Z,~13 911 0 0
T'" (1.'57) (~.~1) (1.0'8) (1.080) (2,167
Mloortty (2,172) (1,910) (1."') (1,543) (1.0.>8
Net pn:Al. (R.pomd) 4,647 ""Z27 l,404 2,348 2,)H
No, pn:Al' (C",") I,"'" 1,604 2."'72. l,3't6 2.,747
EPS ([email protected]~dl 0.'24 0.6s.B 0.530 {U66 0 ....2&
Source: Fosun's annual report (20 11)
17/18

~----------------------
313-135-1
jmcrnatiotml cquisiliotl Strategy of Fosun Group
Annex S: Fosun's major Rcquisition and partners since 2008
FO(1IS' Mti!dill Hold.,g Fason tfltamational BCqUif'e!>
addl1JOnllli .take in Acqui5ition '0
_22,
l~ited (Chine) Focus Medl. fiolding
2011
Fosun Inlemlitlonal to .cquire 95% '5b1b in A""""""
,,, May06,
Fa"l Fole 5.A. (Germany) Foltl Follie
2D11
Shanghai FOfte Larw:l Co.,
Ltd. (Hong KOrlll ~ .. F05un Intemation.1 to acqlJire ShWlgtlai
Forte AcquisiUDn
Jan 20,
sea
Adrrllnl5ln1lilt Regia" of L~' 2011
Ctwul)
PrudentiaJ Insurance Pruden1i.1 Fin.aAtrial receIvH approval

from 0<104,
Cornp~y or A.n'Ienc8 Chine InllU13nl;:e Regulatory
Commission to
partroet$l1lp 78
:W'O
(United SlaWs) form joIInl W1ntulV W1itr Fosun GJ'OlP
Chongqing lar'llilFu sn..ngl'la~ Forte Investment MenaUemenl
ftJ Aug 1S1.
p~rtv ComPllnv Limited MlQtjR tlO,,"ltake in Chon~ LanQFu
Acquisition .. 2010
(China) Pmpert)' Company
Club Meditf!II.. ne. SA snal'toh.lfOSlJnHlahrectmmMv~!i
Acqui!roon
Jun 11,
(Franee-) 1.~% smllieln Club MellitM'anM
:W'0
Anhul Ji"nhuangzhuang
Nanilnll kvn & SIMI .OO.lOnWB'lMilli~ GftMlg U.y1S,
MinIng cc.. Ltd. (China)
)l) acquire 50" stake in Anhui Jinhuangzhuang AcqWlticn 31
2010........
ShltflQl'w Fosun Shangtwli Fosun Pharmaoeubca1 raises $95
OD Private MlIY04,
PhsrmaoelJlicallGroug)

..
ce., lid (China)
mtU;on thrOlJGh pri.., ... pIece~t Placement 2010
ShangtuM CkBngguang Shanghai Forie In~Htment
lMaMgttment to
Invastment Management ~"'10D~ stake in Ctulngguantllrwe-
slmem Aaqutiltian 4B
ApJ14.
Co.. lid, (China) Man~1
2010
ShlMlCllla:l FoM Zhlbao Fort- Investment to aaqulf'a
rerulnll'lJl 25'"
Real Estlile Co., Ud AcqlJisltil:ln
AUQ27.
SllUte in Shanghaj Forie Ztw!J8o RNI E!itfte
,..
2.00
(Chln8)
FOCllS Madia Hakli1g Fosun Intarnstlonalecquires 13.3% stake
in Dea22.
United (Chin.) Focus Media Haldi"G
Acquisition '''' 2008
Source: Marketline
18/18

..--._------------ -
EMERGING MARKET STRATEGY OF TOYOTA
313-294-1
lCMR
las Canter for Management Relearch
WWWicmti!idiO-Orij
ISSCenter for Management Research
Emerging Market Strategy of Toyota
This case was wn"tten by Bamall Chokraborly. under the
direction of Oebapratlm Purkayostha. IBS
Hyderabad. It was compiled from published sources, and is
intended to be used as a basis for
class discussion rather than to illustrate either effective or
ineffective handling of a management
situation.
© 2013, IBSCenter for Management Research
IBSCenter for Management Research llCMRJ
IFHECampus, Donthanapally,
Sankarapally Road, Hyderabad-501 504,
Andhra Pradesh, INDIA.
Ph: +919640901313
E-mail: [email protected]
ecentre

Olmlbuted by Thl ce,l Centre
www.th .... ..:lntrl.o1.il
All rights ,.,llved
NorthAm-riel
t "1781 2395864
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• [email protected]'theclsectn~.OIg
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• Infotllh.clSectnlre.org
~---------------------_.
130 International BUSineSi:s~St~ra~t:eg~y~ ---
313-294-1
ICMR
18$Center rOf Manogement ReleOlch
www Icmllndla Qlg
Emerging Market Strategy of Toyota
In July 2013, Yasumori lhara Ohara), Executive Vice President
of Toyota Motor Corporation was
readying plans to bolster Toyota's position in the emerging
markets by expanding operations into
Cambodia, Myanmar, and Kenya. According to Ihara, who was

in charge of the company's
emerging markets business, "Compared with North America,
Europe, or Japan, where buyers are
mostly replacement buyers, it's mostly first-time buyers in
emerging markets. It's where the future
growth is."]
The Japan-based Toyota was the world's largest automaker with
a presence in more than 170
countries. In March 2011, Toyota announced its 'Global Vision'
in which emerging markets were
given particular importance as part of its strategy. The company
wanted to get 50% of its global
sales from the rapidly growing emerging markets by 2015. The
company considered China,
Southeast Asia, India, and Brazil as its key emerging markets.
In 2012, Toyota's consolidated
vehicle sales was 8.7 million units, out of which 3.7 million
were sold in emerging countries.
But in the second half of 20 13, Toyota was facing intense
competition from its rivals both in the
developed as well as the emerging markets. The company had
invested a huge amount in emerging
markets, but key emerging markets were facing a lot of
volatility and sluggish growth. There were
concerns that these markets were no longer attractive enough. In
addition to getting Toyota's
emerging markets strategy right, Ihara's main responsibility was
(0 reverse the disastrous sales
decline in China, where consumers were boycotting Japanese-
built cars due to diplomatic tensions
over some disputed islands.'
ABOUT TOYOTA
Toyota was founded by Kiichiro Toyoda in ]937. In subsequent

decades the company took the
automobile industry by storm by coming up with its famed
Toyota Production System which
enabled the company to come out with many innovative models
in a cost-efficient way. The
company started its globalization in the 1950s and entered the
US market in 1957. It established its
first overseas production unit in Brazil in 1959. It entered the
European market in 1963. Besides
manufacturing, the company started a global network of design
and R&D facilities covering the
three ~ajo.r car markets of Japan, North America, and Europe.
The company underwent rapid
expansion 111 the 1960s and 1970s and exported fuel-efficient
small cars to many foreign markets.
The Corolla, which went on sale in 1966. became Japan's most
popular family car. By 1974
Corolla had ?ecome the largest selling car in the world, and a
decade later, Toyota ranked second
only to GM 10 the total number of ears produced, By the end of
the 1980s, Toyota began building
new brands and the luxury division, Lexus, was launched.
After some setbacks in the early 1990s, the company began to
grow further bv f ', 'I" . Y locusmg on
1I1ternatlOn~expansion and locahz~tion of production. In 1999,
besides increasing the number of
ma~ufactunng centers and expanding sales networks worldwide,
Toyota focused on localizing
design, deve~opm~nt, and purchasing in every country. Toyota
propagated the Toyota Production
System and Its uruque corporate culture. 'The Toyota Way'
throughout its glob I ' 'units. -, a manuractunng
-.---'----------------

2
EMERGING MARKET STRATEGY OF TOYOTA 11.]
313-294-1
During the 2000s, Toyota registered strong sales in the US and
Japan. In 2001, the company
started two new plants in Europe and in 2002 it established a
plant in Turkey to manufacture
Corolla sedans for export markets. In April 2002, Toyota
announced a new corporate strategy
'20 I0 Global Vision' to achieve a 15% market share of the
global automobile market by early
2010. By rnid~2003, Toyota had a presence in almost all the
major segments of the automobile
market that included small cars, luxury sedans, full-sized
pickup trucks, SUVs, small trucks, and
crossover vehicles. In the first quarter of 2007, Toyota replaced
OM as the world's leading
automaker, breaking the latter's 77-year reign. Based on market
capitalization, Toyota was valued
at almost 12 times OM's value.
On June 23, 2009, when Akio Toyoda (Akio), the grandson of
Toyota's founder, took over as
President of the Japanese automaker, the company was facing
some serious problems. In mid-
2009, the company reported its first losses since 1963 due to the
global financial crisis. Akio
immediately announced some measures to bring the company
back to profits like adopting the
traditional Toyota practice 'genchi genbutsuto' (onsite, hands-on
experience) to solve problems. In

January 2010, Toyota was forced to recall millions of cars after
some problems were found with
the braking, floor mats, and acceleration pedals in its vehicles.
The company even had to stop sales
and production of eight of its most popular models. To address
the issue, in March 2010, Toyota
established a Special Committee for Global Quality to carefully
investigate the cause behind the
problems and re-examine all of Toyota's processes, including
design, production, sales, and
service.
In the fiscal year ended March 31, 2012, Toyota suffered the
double impact of the Oreat East
Japan earthquake and the Thailand floods. These natural
calamities affected its supply chain and
resulted in reduced output. Moreover, a stronger Yen during this
period led to lower revenues and
profits for the company. Toyota's net revenue in the fiscal 2012,
fell by by 2.2% compared to the
previous fiscal. However, in the fiscal 2013, Toyota sold 8,871
thousand vehicles on a
consolidated basis compared to 7,435 thousand vehicles the
previous year (See Exhibit I).
Toyota's net revenues in fiscal 2013, was JP¥22,064.1 billion
and net income attributable to
Toyota was IP¥962.1 billion (See Exhibit II).
Toyota had three business segments - automotive operations,
financial services operations, and
all other operations. Toyota's subsidiary, Daihatsu Motor was
involved in producing and selling
mini-vehicles and compact cars. Another subsidiary of Toyota,
Hino Motors, produced and sold
commercial vehicles such as trucks and buses. Toyota's vehicles
could be classified into two

categories: hybrid vehicles and conventional engine vehicles.
Toyota's product included
subcompact and compact cars, mini-vehicles, mid-size, luxury,
sports, and specialty cars,
recreational and sport-utility vehicles, pickup trucks, minivans,
trucks, and buses. Toyota's
primary market was North America, which accounted for 27.8%
of its total automobile sales; its
domestic market, Japan, accounted for 25.7% followed by Asia
(19%), other markets (18.5%), and
Europe (9%).
THE EMERGING MARKET OPPORTUNlTY
The global automotive market was highly competitive and
competition was likely to intensify
further with continuing globalization. The factors affecting
competition included product quality
and features, safety, reliability, fuel economy, the amount of
time required for innovation and
development, pricing, customer service, and financing terms.
With growing economies and a low vehicle penetration rate,
emerging markets were considered as
the key source of growth for the global automobile industry.
According to the International
Monetary Fund, between 1988 and 2011, while the developed
markets' of global GDP declined
from 61% to 49%' emerging markets' share increased from 21%
to 39%.3 In the early 2000s, the
manufacturing lan'dscape of the global automob.ile industry
started. s?ifting toward the eme~ging
markets (See Exhibit Ill). The reason behind this change was the
nsmg demand from the middle
income group in these countries. The growing middle class
population was expected to fuel

3
.-.z _
..---
313-294-1
consumption and thus demand. According to estimates of
Brooking Institution, while the US and
Europe's share of tile world's middle class would decline from
around S?% in 2013 to 22% by
2030 Asia's share would increase from 30% to 64% during the
same period. Moreover, the low
prod~ction cost in emerging countries also helped the
automob,iJe compa~ies. to shift their
production base to these countries. Asia's share of global
automobile ~roductlOn ,1I1creased f~om
15~20% in 2002 to more than 50% in 2013.4 The top three car
producmg countries were China,
South Korea, and India. According to a study by CSM
Worldwide, during 2008-20 IS, more than
50% of growth in global light vehicle production was expected
to come from China and South
America.' "Rather than setting up duplicate production bases,
OEMs [Original Equipment Makers]
are increasingly seeking to gain efficiencies and scale by
establishing a production base in the
most efficient place where they can minimize cost and
maximize revenue,,,6 said Bill Russo,
Senior Adviser, Booz & Company.

In 2013, Ernst & Young forecast that emerging markets would
drive car export growth in the UK.
According to its report, China would become the UK's leading
trading partner with total
automotive export to China growing by 12% by 2017. Thailand
would also become an important
destination for auto export with total export predicted to more
than double by 2017.
7
In 2012, China overtook the US as the world's biggest car
market with sales of 19.3 million
vehicles compared to 14.5 million in the US. China's dominance
was expected to continue as it
had a low vehicle penetration rate of 85 vehicles per 1000
people while it was 797 vehicles in the
US.S By 2030, China's annual sales were expected to reach 39
million, which would be 28% of
global sales." Apart from China, lndia was expected to become
a key pillar in the global
automotive market. According to an estimate by Booz &
Company, by 2015, Lndiawould become
the fourth largest automotive market by volume. It was also
projected that by 2020, passenger
vehicle sales in India could exceed 6 million units annually."
Other key emerging markets were Russia, Brazil, and the
ASEAN I countries. The BRIe countries
(Brazil, Russia, India and China) were projected to become four
of the six top markets in vehicle
sales by 2030."
Though there was a slowdown of growth in the emerging
markets in 2013, global automakers were
optimistic about the long term growth prospect. While in Brazil,
automobile sales were projected
10decline by 2% in 2013, in India, auto sales were down by 6-

7%. However, it was projected that
in Brazil, sales would grow by 1% in 2014 and in India by 7%?
In China, automobile sales were
projected to grow at a CAGR of around 8.2% during 2013-
2017.13 "Emerging markets are
multiplying. Now you have Indonesia, Burma, Africa. Maybe
one will slow down, [but] the
overall picture of emerging markets justifies every investment
we have done. We have to do
more,"] said Carlos Ghosn, CEO, Renault and Nissan,
TOYOTA'S STRATEGY IN EMERGING MARKETS
Toyota's .presence in the emerging markets dated back to the
1960s when it used to sell vehicles in
market~ ~l~eTaiwan, Brazil, South Africa, Thailand, the
Philippines, Malaysia, Russia, and China.
In the 1I1ltlal.years, .~~yot.a was ':I0stly export.ing vehicles
from Japan to these countries as it only
had pr~duct1on ~acliities Il1 B.razJ1,~outh Afr~c~,~nd
Thailand. During the 19705, Toyota started
producing multipurpose vehicles III the Philippines and
Indonesia as families in these two
countries tended to be large and therefore vehicles that c?uld be
used both for business and family
~ere prere~re?, In 1976, Toyota launched the Tamaraw Il1 the
Philippines followed by the Kijang
In Indonesia Il1 1977. In the 1980s, Toyota started producing
vehicles in Taiwan a d MI'
followed by India in the 19905. By the 2000s, Toyota had
production facilities ~n al~ ~~Sla
emergmg markets (See Exhibit IV). esc
1 ASEAN countries comprised of Indonesia Malays' t1 PhT· S
Myanmar, Cambodia, Laos, and Viemam.' 18, ie I ippmes,
ingapore, Thailand, Brunei,

4
EMERGING MARKET STRATEGY OF TOYOTA
313-294-1
In March 2011, Akio announced the 'Toyota Global Vision'.
Unlike in the past, the vision was
prepared based on deliberations with Toyota's teams from
different regions of the world, and
prepared in English. The slogan of the Global Vision was
"Rewarded with a smile by exceeding
your expectations". The company used a tree metaphor focusing
on the roots, trunk, and fruit to
express how the Global Vision was to be operationalized (See
Exhibit V). A key aspect of the new
strategy was to actively engage in emerging markets with the
goal of shifting the ratio of global
sales in industrialized nations and emerging countries from 6:4
in 20 Ia to 5:5 by 2015.15
Subsequently in March 2013, Akio reorganized Toyota across
four segments and reshuffled the top
management. This enabled a greater focus on emerging markets.
Ihara, a Toyota veteran, who was
brought back from retirement when Akio was appointed the
President in 2009, was made
responsible for the emerging markets business."
!hara (61) had a bachelor's degree in law from Kyoto
University. He had joined Toyota in 1975
and had risen through the ranks. In January 1999, he was
appointed GM of the Engineering

Support Team for Overseas Suppliers (ESTO), Purchasing
Planning Division. In subsequent years,
he held genera] management positions in Toyota's Global
Purchasing Planning Division and
Business Development Division. In June 2004, he was appointed
to the position of managing
officer. In June 2007, he became president of Toyota
Transportation Co., Ltd., and was made an
advisor of Toyota. In June 2009, he was rehired by Toyota as
senior managing director (a title that
was changed to senior managing officer in June 2011). In June
2013, Ihara was made an executive
vice president and a member of the board. 17
EXPANDING PRODUCTION IN EMERGING MARKETS
In an effort to increase its presence in the emerging markets,
Toyota began strengthening its supply
system in the emerging markets and increasing localization.
During the 2000s, the company set up
a local parts distribution network and a supply chain to provide
greater autonomy to affiliates in
the emerging markets.
Toyota's presence in South East Asia dated back to the 1950s.
By 2012, Toyota had 14 production
companies in Thailand, Indonesia, the Philippines, Malaysia,
and other Southeast Asian countries.
Under the Innovative International MUlti-purpose Vehicle
(IMV) project launched in 2004,
Thailand and Indonesia became Toyota's global production
centers. By 2012, Toyota was the
market leader in Thailand, Indonesia, the Philippines, Taiwan,
Brunei, and Vietnam. IS
Over the years, as Thailand became South East Asia's biggest

car market, Toyota also started
expanding its manufacturing capacities in the country. By 2012,
Toyota Motor Thailand (TMT)
had three manufacturing facilities -, the Samrong plant, the Ban
Pho plant, and the Gateway plant
_ with an annual capacity of 230,000 units, 220,000 units, and
220,000 units respectively. To
promote Thailand as the company's regional and global
production hub, TMT announced that it
would invest 12 billion baht (US$386 million) in 2013 on
building a second plant at the Gateway
industrial park to produce environmentally friendly vehicles.
The plant was expected to increase
the company's annual capacity at the industrial park to 300,000
vehicles annually from 220,000.19
ln Thailand, the company intended to increase its production
capacity to 1.2 million units annually
by 2018 by investing a total ofUS$700 million."
Toyota Motor Manufacturing Indonesia (TMMIN) had a
manufacturing plant in Karawang, West
Java, with total capacity of 110,000 units and also had 1VO
plants in Sunter, North Jakarta - one
to build engines and the other for stamping parts. In March
2013, TMMlN opened its second
manufacturing plant in Karawang at an investment of US$340
rruluon." The plant was to be used
to manufacture the Etios Va/co in the initial phase. "With the
commissioning of Indonesia's
second plant in Karawang, production is estimated to reach
180,000 units by the end of this year,
and 250,000 by the end of 20 14,,,22said a principal consultant
at Frost & Sullivan. Indonesia was
5

.-.._----------------------
134
International Business Strateg~y _
313-294-1
increasingly become a leading automotive market in Southeast
Asia with car sales increasing by
25% to 1.2 million units in 2012.23 In 2012, Toyota had a 37%
market share in Indonesia and
with this investment the company aimed to strengthen its
position further. "We also plan to
develop Indonesia as an auto export base. OUf Karawang plants
have become indispensable to the
future growth of global Toyota,,,24 said Takahiro lwese,
Toyota's Senior Managing Officer.
Toyota Kirloskar Motor (TKM), Toyota's subsidiary in India,
had two manufacturing facilities on
the outskirts of Bangalore. In February 2013, Toyota opened a
new plant in India at a cost of
USS100 million. This increased the company's capacity in India
by 50% to 310,000 units." "We
arc in a mode of consolidation (in India). We have a fairly
widespread dealer network and our
capacity right now is climbing to 310,000 vehicles - we are
currently at about 210,000 vehicles.
Our first target is to make sure we produce that kind of volume
by the end of 2014,',26 said the
Deputy Managing Director of TKM. The new plant was to be
used mainly to manufacture the
Etios and tnnova models and a gasoline engine and transmission

plant. In 2013, Toyota had almost
doubled its market share in India to 6% and it aimed to capture
10% of the Indian car market by
2015 mainly by sel1ing the Ettos models." "The local
production of the engine and transmissions
for Etios raises the localization ratio to over 90%,,,28 said
TKM's Vice Chairman.
Toyota do Brasil Ltda. (TDB) had three manufacturing facilities
in Sorocaba, Sao Bernardo, and
lndaiatuba with an annual capacity of 70,000 units yach in the
Sorocaba and Indaiatuba plants."
The Sao Bernardo plant built parts for the Corolla and Hllux
brands. Toyota planned to open its
fourth plant in Brazil by 2015 at an investment of US$SOO
million. The new plant would have an
annual capacity of 200,000 units. 3D
While Toyota had been present in China since the 1970s, it
began facing trouble in the country in
September 2012. There were nationwide protests against
Japanese companies after Japan moved to
purchase a group of disputed islands." Toyota's China sales in
December 2012 dropped 16% to
90,800, bringing annual sales down to 840,500 vehicles, 4.9%
Jess than in 2011.32 Toyota, which
already had three plants in China, decided to postpone
construction of a new plant in Tianjin and
Guangzhou. The two plants were expected to raise Toyota's
production capacity in China by 40%
to 1.3 million units.33
With the expansion of production sites in the emerging markets,
Toyota's production capacity in
these markets increased from 540,000 vehicles in 2000 to 2.38
million vehicles in 2010 and was
expected to reach approximately 3.1 million vehicles in 2013,

the same level of production
capacity as in Japan".
PUSHING SALES IN EMERGING MARKETS
Tlte IMV Project
The [MV Project was intended to create an efficient production
and distribution structure for pick-
~p truc~ and mu~tipurpose vehicles to meet the needs of
consumers globally. Toyota applied the
ge~cJlI genbllf~ll approach. to observe and analyze the needs of
each region and the types of
vehicles us.ed l~ those .regl~ns to. develop and introduce IMVs.
The lMV project included
~nanufact~~In~ diesel engl~es In Thailand, gasoline engines in
Indonesia, and manual transmissions
In the Philippines and India. The JMV project adopted a leaner
development process based on a
comn~on platform, a~d developed five. vehicles: three pickup
trucks, a minivan, and an SUV,
especially developed In 2004 for launch mover 140 countries
(See Exhibit VI).
From mid-2004, Toyota started selling the vehicles developed
LInder the [MY P . t lik h
'/.1 u· . k k i Thai .. rojec ixe t e
r. lUX riga pte -up true in ailand available m standard cab extra
cab and do bl b d I .th / ... I d . " u e ca me e s;
e nnova nuruven tn n onesia, and the Fortuner SUV in Thailand
followed b th Phi I· .
M I
. I di Ar . d S .. y e , rppmes,
a aysra, n ra, gentma, an outh Africa tn 2005 According to Akio
th IMY· ,h . h . , . , c project was' a

new c apter In t e history of Toyota ... and in the history of the
world automobile industry.'?"
6
.._------------------
EMERGING MARKET STRATEGY OFTOYOTA---r- ........_...1
313-294-1
In an effort to localize manufacturing, Toyota adopted the
'Made by Toyota' concept which aimed
at global quality assurance whereby the company undertook to
maintain the same high level of
quality irrespective of where the vehicle was made. Toyota also
started thorough after sales service
programs for IMVs to gain consumer's trust. According to Akio,
uLMV's success indicated that
both customers and the market acknowledged the 'made by
Toyota' concept.':" In 2011, IMV
sales reached 770,000 units and as of March 2012, cumulative
IMV sales volume touched 5
million (See Exhibit VU). By 2012, the IMV series of vehicles
was being manufactured in 12
affiliates in emerging markets, and sold in 170 countries. Asia
contributed 48% of the total [MV
sales, followed by the Middle East, Africa, and Central/South
America (See Exhibit VIII)
Based on the success of the IMV project, Toyota started
launching global JMV models exclusively
designed for emerging markets, such as introducing the Euos,
its first subcompact model, in

December 20 IOta meet local needs in India. The company
applied its expertise from the IMV
project to develop the Elias sedan. The Enos was developed
over a five-year period by a team
predominantly composed of Indian engineers based on opinions
taken from Indian consumers. The
Etios development t.eam collected data from the Indian market
to identify and understand the
features that customers looked for. The Euos was put through
rigorous tests in various road
conditions in India to ensure that the vehicle performed well in
all parts of India. "Toyota has
started to introduce models for emerging markets and that
should be a core part of their mid-term
strategy. The old strategy of taking a hit model from the US or
Japan to emerging markets is
expected to change.?" said Satoru Takada, an analyst at Tokyo-
based TrW Jnc.
Toyota began marketing the Elias as a product tailored to the
needs of emerging markets and
available at an affordable price. In June 2011, TKM also
launched the Etios Liva hatchback
models. By November 20 II, the company had sold over 40,000
units of the Elias sedan and the
Elias Liva. In April 2012, Toyota launched the Etios in South
Africa as well. By May 2012, total
sales of the Elias in India crossed 100,000 units. The car was
modified and introduced in Brazil in
September 2012. In March 2013, Toyota launched the Elias
Volco, a 1.2 litre petrol hatchback in
Indonesia. The Enos Va/co (originally launched as the Etios
Liva in India) was imported to
Indonesia in the form of CKD (Complete Knock-Down) kits and
assembled by Toyota Indonesia.
While in the short term, Toyota planned to sell the Elios Valco

in the local market, it would also
export it to other emerging countries depending on the demand."
Global Supply Base ami Increasing Localization.
Toyota also promoted the process of global izing production and
supply through the IMV project.
The company planned to shift from small scale production at II
companies to large-scale
production at four global supply bases in Thailand, Indonesia,
Argentina, and South Africa.
The IMV project also aimed at 100% local procurement of
vehicle components, rather than
procurement from Japan. The company aimed to develop a
globally optimized procurement
structure for parts. In mid-2004, when Toyota had launched the
[MV series vehicles in Thailand
and Indonesia, 95% of vehicle content was from non-Japanese
sources."
Subcompact and Hybrid Vehicle Strategy
Toyota aimed to focus on developing subcompact vehicles that
would meet the needs of
consumers in emerging markets. The company aimed to launch
eight such models based on the
Enos platform, and expected to achieve sales of more than one
million subcompacts in more than
100 countries and regions in emerging markets like Brazil,
China, India, and Southeast Asia by
2015.40 According to Toyota's Managing Officer Kazuhiro
Kobayashi, "[The cars] will slot
"below the Corolla and will have a size similar to the Etios. The
Etios platform naturally will be
made good use of. ...'.41 The company also announced that it
would manufacture the subcompacts

mainly in Brazil, China, and India with 100% local procurement
of the car components so that they
42could be produced at low cost.
7
~----------------------_.
International Business Strategy136
313-294-1
In September 2012, Toyota announced that it would launch a
turbocharged gasoline-engine car an~
an electric car specifically for emerging markets after 2014.43
The company also announced that It
would introduce 21 new hybrid models by the end of 201544
either by developing new models or
by completely changing its conventional hybrid models so as to
continue to dominate t~e global
hybrid market. Toyota pioneered the green car market when it
started selling its fi~st hyb.nd ~odel,
the Prius also the world's first commercial hybrid car, in 1997.
"It shows Toyota ISstaking Its bets
in the next 5-10 years that hybrids are going to be the key to
market share.?" said Stuart Pearson,
analyst at Morgan Stanley."
Toyota aimed to develop different hybrid models for the
emerging markets as the m~in
components of hybrid vehicles such as the battery, motor, and
control system needed special
technologies to operate and repair, which made the models
expensive. Therefore, Toyota aimed to

launch an eco-friendly vehicle with a turbocharged gasoline
engine in emerging markets. A
turbocharger could add the horsepower needed in a gasoline-
powered car to improve fuel
efficiency. Moreover, turbocharged gasoline engine cars could
be mass-produced easily,
In 2011, Toyota's emerging market sales ratio reached 45% from
35% in 2008 (See Exhibit IX).
"In emerging markets we will serve growth in demand by
fortifying our locally produced core
models, including the Innovative International Multipurpose
Vehicle [IMV] models and newly
developed subcompact models, ..41 said Akio while announcing
Toyota's Global Vision. The
company also aimed to position its high-end Lexus models
extensively in emerging markets.
48
In
2011, Toyota announced that it would officially introduce its
Lexus model in India by 2013
through the fully imported route."
COMPETITION
Though Toyota was still the # 1 automaker in mid-2013, its
position was coming under threat from
a resurgent OM and Ford in the US market. Competition was
catching up in the hybrid car market
too. In its home market, the company was hit hard in late 2012,
after government incentives for
consumers to buy fuel-efficient models expired.so In 2013, the
Yen declined more than 12%
against the dollar. In emerging markets, Toyota had to contend

with intense competition from
other Japanese companies such as Nissan, Honda, and Suzuki,
some of which had managed to
entrench themselves in key emerging markets. Companies such
as GM and Germany-based
Volkwagen were also pushing ahead with their own emerging
strategies. In 2012, Volkswagen
became the most profitable automaker in the world with an
operating income of EIl.S billion
(US$15 billion)." The company had announced plans to invest
€1 O.3billion (US$13.6 billion) to
expand production in China between 2011 and 2015.52 In 2012,
Volkswagen had an 18% market
share in China, 22% in Brazil, 9% in Russia, and below 5% in
India." Though Toyota was the
largest player in Thailand and Indonesia, in China, it had been
pushed to the fifth position behind
GM, Volkswagen, Nissen, and Hyundai."
South-Korea-based Hyundai was the second largest automaker
in India as of 20 12 behind Suzuki
which enjoyed a dominant position. Honda too announced its
aim to get half of its sales from
emerging markets by 2017.5s In an effort to achieve this target,
in August 2013, Honda announced
that It would double its production capacity in Brazil by
opening its second plant in the c try
. h an i f B blllion." ounWit an Investment 0 RL I lilian. Honda
also announced that it would boost productio .
h . . h C' ion tn
at er emerging cou~tfles suc as hina, India, Thailand, Indonesia,
and Mexico. The Franco-
JapaneseRenault-Nlss~n Alliance too invested US$2.5 billion to
boost sales in India. "Japanese

automakers used to enjoy great advantages over Korean U S and
even Ge kers i. ' .., rman carma 'ers In
many markets,' but the rivals h~ve been.cat~hing up quickly and
the gap is at a minimum now. It's
really. not g~mg to be that SImple this tlme,,,51 said Yuuki
Sakurai, president of Ja an-b d
Fukoku Capital Management Inc, P ase
8
..------------------
EMERGING MARKET STRATEGY OF TOYOTA 137
313-294-1
VOLATILITY IN EMERGING MARKETS
In 2008 and 2009, analysts were expecting emerging markets to
become a safe haven for investors,
considering the recession in the US and Europe post the global
financial crisis. But as of 2013,
while developed economies seemed to be strengthening, the
emerging markets had
underperformed in the previous couple of years. Analysts were
also concerned about the
vulnerability of the emerging markets which reacted strongly to
modest changes in the world
economy. In mid-20 13, many emerging markets were struggling
with rapid depreciation of their
currencies. Countries such as Brazil, India, South Africa, and
Indonesia were among the worst
affected." Between May and September of 2013, while the
Indian Rupee fell by 21%, the

Brazilian Real fell by 17%, followed by the Indonesian Rupiah
(J 5%), the Thailand Baht (8%),
and the Russian Ruble (6%). S9 Central banks in key markets
like Brazil and India were working
frantically to prop up their currencies. 60
According to the estimates of the OECD, the US would grow by
1.7% in 2013 followed by Japan
with 1.6%, and the UK with 1.5%. On the other hand, emerging
economies were not growing
according to estimates. Accordinr: to the IMF, the emerging
markets were expected to grow by 5%
in 2013 and about 5.5% in 20146 compared to a growth of 5.3%
in 2012 and 6.2% in 2011.62 "The
bottom line is that advanced economies are growing more and
emerging economics are growing
less,,,63 said Pier Carlo Padoan, Chief Economist at the OECD.
Some experts even went to the
extent of saying that the emerging markets had lost their
attractiveness and would no longer make
up for any weakness in the developed countries. According to
The Economist, "Corporate
strategists who assumed that emerging economies were on a
straight line of ultra-quick growth will
need to revisit their spreadsheets .... ',64
THE ROAD AHEAD
As of mid-2013, Toyota pursued the emerging market strategy
with Asia as its 'second mother
base'. According to Toyota's Global Vision, the company aimed
to implement its TMY Project
strategy in the emerging markets by continuing to fortify its
core models along with new hybrid
models. It would also strengthen its production and supply
bases, and enhance its cost

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