The document discusses a joint venture between Singapore Airlines and Tata Sons to establish a new airline in India. Singapore Airlines will own 49% and Tata Sons will own 51% of the new airline. The CEO of Singapore Airlines expresses excitement about partnering with Tata Sons to contribute to the future expansion of India's aviation market. The Chairman of the proposed joint venture airline says that civil aviation in India offers sustainable growth potential.

1. Market Entry
Strategies
Dhruv Sood
dhruvmax@
gmail.com

2. Welcome to the Fresh Stories

3. Welcome to Vistara

4. Singapore Airlines And Tata Sons To Establish New Airline In India
“We have always been a strong believer in the growth potential of India’s aviation sector and are excited about the
opportunity to partner Tata Sons in contributing to the future expansion of the market.”
CEO, Mr Goh Choon Phong
19 September 2013 (Joint Release with Tata Sons) - Singapore Airlines and Tata Sons have signed a
Memorandumof Understanding and applied for Foreign Investment Promotion Board (FIPB) approval to
establish a new airline in India that will help further stimulate demand for air travel.
Subject to FIPB and other regulatory approvals, the airline will be based in New Delhi and will operate under
the full-service model. Tata Sons will own 51% and Singapore Airlines will own 49%.
The initial Board will have three members, two nominated by Tata Sons and one nominated by Singapore
Airlines. The Chairman will be Mr Prasad Menon, nominated by Tata Sons.
“We have always been a strong believer in the growth potential of India’s aviation sector and are excited about
the opportunity to partner Tata Sons in contributing to the future expansion of the market,” said Singapore
Airlines CEO, Mr Goh Choon Phong.
“Tata Sons is one of the most established and respected names in India. With the recent liberalisation, the time
is right to jointly bring consumers a fresh new option for full-service air travel. We are confident the joint
venture airline will help to stimulate market demand and provide economic benefits to India.”
Added the Chairman of the proposed joint venture, Mr Menon: “It is Tata Sons’ evaluation that civil aviation in
India offers sustainable growth potential. We now have the opportunity to launch a world-class full-service
airline in India. We are delighted that we are partnering in this endeavour with the world renowned Singapore
Airlines.”

6. Joint Venture
• Partnership at corporate level
• International JV : Partners are from different
countries.
– TATA SONS – India
– SINGAPORE AIRLINES – Singapore.

7. Environment
Government Policies
• Indian Partner : 51% , Foreign Partner : 49% .
• Entry Norms are restricted in India .
• FIPB Approvals required
Market Potential
• Air Traffic Passengers are growing @12.5%
• Indian consumers have more disposable Income
now
• Good Airport Network developed by the
Government .

8. JVs may be set up with strategic investors
• in the process of entering into a new market
• initially provide the foreign participant local
infrastructure and guidance but with a view to
integrate the operations of the JV into the main
company in the future.
• In this situation, the foreign participant may choose
to acquire the local participant’s interest once the
venture is up and running.
• This can be highly beneficial to both parties as the
foreign party is able to establish itself in the local
market while the local party gets a liquid exit

9. • JV to Provide Products & Services to the
market .
• JV for technical Assistance – Singapore Airlines
, Taj Catering for Food.
• JV to reduce High level of Investment risk :
USD 100 million invested as start up capital.

10. Leveraging Resources
• Access to labor, capital and technological resources to achieve
‘economies of scale.’
• Today, business commitments are far too large to be executed
by a single company.
• Cross-border business projects are all the more demanding
and the best solution is to either outright acquire or share
them by entering into a JV.
• Co-operation is a great way of reducing research and
manufacturing costs while limiting exposure.
Exploiting Capabilities and Expertise
• Parties to a JV may have complementary skills or capabilities .
• parties may have experience in different industries which it is
hoped will produce synergistic benefits. The basic tenet of a
JV is the sharing of capabilities and expertise

11. Sharing Liabilities
• A JV also offers parties an opportunity to jointly manage the risks
associated with new ventures.
• Through a JV they can limit their individual exposure by sharing the
liabilities.
• When the liabilities and risks are shared the pressure on each individual
partner is correspondingly reduced.
Market Access
• JVs are the most efficient mode of gaining better market access.
• Companies utilize JV agreements to expand their business into other
geographies, consumer segments and product markets.
• In the case of a cross-border JV, the involvement of a locally-based party
may be necessary or desirable in countries where it is difficult for a
foreign company to penetrate the market or where the local law limits
the ownership structure by foreigners.
• a regulatory necessity for commencing business and making
investments.

12. Flexible Business Diversification
• JVs offer many flexible business diversification opportunities to the
partners
• A JV may be set up, as a prelude to a full merger or only for part of the
business.
• offers a creative way for companies to enter into non-core businesses
while maintaining an easy exit option.
• Companies can also resort to JVs as a method to gradually separate a
business from the rest of the organization and eventually, sell it off.

13. The other side of a Joint Venture

14. Hero Honda Motors Ltd. (Hero Honda)
This case is about the split between the Hero Group and Honda Motor Company. Hero
Honda Motors Ltd. (Hero Honda), a joint venture between Hero Cycles of India and
Honda of Japan, came into existence in 1984 as a motorcycle and scooter
manufacturer in India. In 2001, Hero Honda became the largest two wheeler
manufacturing company in India with over a million units produced as well as the
'World's number one' company in terms of the unit volume sales for the calendar
year. The technology for manufacturing the bikes was provided by Honda whereas
Hero was strong in its distribution and service network spread across the country
In August 1999, Honda Motor Company announced the setting up of Honda
Motorcycle and Scooter India (HMSI) for making scooters and later motorcycles as
well. After this, the stock of Hero Honda fell by 30%. Subsequently, HMSI started
producing motorcycles, competing directly with Hero Honda. Hero felt that its
ambition to go international was being hampered by the joint venture. Both the
companies decided to end the joint venture and signed their parting agreement on
December 16, 2010. With the split, the erstwhile partners became competitors.
Both the companies have several opportunities ahead of them and are likely to face
challenges to gain and consolidate their position in the Indian two wheeler market.

15. Strategic Alliance

16. Strategic Alliance
• Wide Definition. Alliance may be in areas of
Production , distribution, marketing and R&D
• SA may be due to mergers , Acquisition , JV or
Licensing agreements.
• JV is natural SA where as SA may not be a JV.
• SA doesn’t require a separate legal entity .
• SA is more contractual based agreements –
Entities cooperate with each other to leverage
resources

17. Assignment
• Read about the Jet Etihad Deal and Discuss.
Play Jet Etihad Video

18. DIRECT FOREIGN INVESTMENT

19. Acquisition
• Reasons for Acquisitions
– Product Diversification or enhancement
– Acquisition of Expertise – technology , marketing ,
management

20. Case Study – Tata & JLR 2008
Brownfield Acquisition

22. Jaguar: an overview
• Founded in Blackpool as Swallow Sidecar
company
• 1975 - Nationalized in due to financial difficulties
• 1984 - Floated off as a separate co in the stock
market
• 1990 - Taken over by Ford
Land Rover
• 1948: Land Rover is designed by the Rover Car co
• 1994: Rover Group is taken over by BMW
• 2000: Sold to Ford for $2.75 billion

23. Why was Ford selling?
• The US auto major put the two marquees on the
market in 2007 after posting losses of $12.6billion in
2006 - the heaviest in its 103-year history
• Jaguar was not able to provide any profit for ford
because of the high manufacturing costs provided in
the United Kingdom.
• The strong boy Land Rover's profit, on the other hand,
was driven by the record sale of 2.26 lakh vehicles, an
18% YoY growth in 2007.
• Ford was combining both the brands since the products
and manufacturing of vehicles for Land Rover and
Jaguar was so intertwined.

24. Why Tata wanted to acquire JLR?
• Long term strategic commitment to automotive sector.
• Opportunity to participate in two fast growing auto
segments.
• Increased business diversity across markets and
products.
• Jaguar offered a range of “performance/luxury”
vehicles to broaden the brand portfolio.
• Benefits from component sourcing, design services and
low cost engineering
Finally in 2008 they Paid $2.1 Billion to Ford.

25. For what Tata motors paid
3 modern plants in UK
2 advance design and engineering center
26 national sell companies
Intellectual property: free license to share
technology with Ford
Support from ford motor credit: Ford motor
credit will continue to support the sale of
Jaguar and Land rover for next 12 months

26. Post merger
• Following Cost Rationalisation initiatives were
taken to improve cash flows:
1.Single shifts and down time at all three UK assembly
plants.
2. Supplier payment terms extended from 45 to 60 days
in line with industry standard.
3.Receivables reduced by £133 million from 38 to 27
days.
4. Inventory reduced by £217m between June 2008 and
March 2009 from 70 to 50 days .

27. 5] Labor actions –
- Voluntary retirement to 600 employees.
- Agency staff reduced by 800.
-Offered leaves to 300 workers of Bromwhich and solihull plant.
-Additional 450 job cuts including 300 managers.
6] Agreement with Unions to implement pay freeze and longer working hours
(equivalent to approximately 20% reduction in labor costs.)
7] Engineering and capital spending efficiencies.
8] Fixed marketing and selling costs reduced in line with sales volume.
9] Reduction in all other non-personnel related overhead costs.

28. Tata Motors in Myanmar
GreenField Acquisition
• Tata Motors had signed a turnkey contract with then Myanmar
Automobile & Diesel Industries Limited (MADI), an enterprise under the
Government of Myanmar's Ministry of Industry, for setting up a heavy
truck assembly plant, at Magwe, in central Myanmar, funded by a US$ 20
million Line of Credit from the Government of India. With a highly flexible
chassis & frame assembly line, along with cab manufacturing, paint shop
and trimming set-up, the plant has a capacity of producing 1,000 vehicles
per annum initially and has the flexibility of augmenting up to 5,000 per
year.
• Tata Motors along with its partner Apex Greatest Industrial Co. Ltd. (AGI)
has recently launched its first fully integrated 3-S Commercial Vehicle
Dealership in Yangon, Myanmar. The new dealership serves as a model
dealership for all future setups in Myanmar. The new dealership offers
Sales, Service and Spare Parts facilities for its full range of Commercial
Vehicles.
• Tata Motors along with AGI is working on to expand the network of sales &
after sales service beyond Yangon.

29. Acquisitions Have Color - Green & Brown
• Brownfield investments - a foreign acquisition
– Acquisition is generally viewed as replacement of
domestic ownership. It is perceived as exploitation
& Blow to national pride.
• Greenfield investments - a foreign start-up
– Gov welcome FDI in new project: Green Field as it
generates Jobs , Revenue etc

30. • International Acquisition are depend on Value of currency.
It either reduces or increases the cost of Acquisition
– Eg. Hoechst – Germany it bid for $2.7 Billion for Marion Merrell
Dow Inc. It saved $250 Million as dollar became weaker.
• IA are complex , expensive & Risky.
– Find a suitable company
– Determination of fair price
– Acquisition Debt
– Merging 2 management teams
– Language & Cultural Difference
– Employee Resentment
– Geographical distance

31. Licensing

32. DISNEY CASE STUDY
DISNEY PDF

33. • Licensing is an agreement that permits foreign
company to use Its
– Property – Patent , Trademark and copy rights
– Technical Know how and Skills – Feasibility
studies , manuals , technical advice.
– Licensor allows either manufacturing or sale in
different countries.
Licensing

34. Why License
• Trade barriers
• When capital is scare
• When import restriction discourages direct
entry
• When country is sensitive to foreign
ownership.
• Where transportation cost is very high
compared to product value .

35. Advantages:
• Quick and Easy way to enter the market.
• It can Spread –R&D Costs and Investment cost
• Will receive incremental income with only negligible expense
• Protects company from expiry of the patent or trade mark
cancellation.
• Company can avoid substantial risk and other difficulties with
licensing. Example Disney gets risk free royalties of $500
Million only from Disney Tokyo. Theme park is owned by
Keisei Electric Railway and Mitsui.
– Disney Gets 10% of Gate revenue
– 5% from Sales of food items and merchandise .

36. Disadvantages
• With reduced risk come reduced profits . It may be
the least profitable as entry strategy.
• Nurturing a competitor in Future – Some one who is
gaining technical and product knowledge. Texas
instruments sued many Japanese Manufactures for Memory
Chip
• When Licensee performs poorly ,it can be difficult to
terminate the contact and may be difficult to enter
directly.
• Inconsistent Product Quality can harm product world
wide
• Loss of Prestige related to product when some times
manufactured locally under a license.

37. • Licensing terms should be carefully drafted
– Product & Territorial coverage
– Length of contract
– Quality control
– Grant Back & Cross Licensing
– Royalty Rate & Structure
– Choice of Currency
– Choice of law
– Never Assign a Trade Mark to a licensor.
– Never Over License : Example Pierre Cardin allowed 800
products
– Under license leads profit being lost.

38. • Brand Licensing : Coca Cola has licensed its
brand name to more than 3000 products
which are marketed by 200 licensees in 30
countries .
• Licensing of services.
• Licensing in Drug Industry Manufacturing.

39. Management Contract

41. Reasons for choosing an Accor management contract for your hotel
With more than 2000 directly-managed hotels (including owned, leased and
managed hotels), Accor's experience in this sector is unique.
Operational excellence that will guarantee that you enjoy the highest margins
and earnings.
Innovative and, above all, efficient distribution systems will bring more
customers to your hotel and improve your average room rate, while reducing
your agency commission costs.
Le Club Accorhotels loyalty program, which has over 10 million members, will
attract new customers and encourage existing customers to come back more
often.
A sales force that will let you position yourself in all market segments (leisure and
business), attract all types of customer (individuals and key accounts) and
operate in all high-potential markets specific to your hotel.
Referenced suppliers who will guarantee a level of quality, price and delivery as if
you were an Accor Group subsidiary.
By choosing a management contract with Accor, you are choosing efficiency,
quality and profitability.

42. Management Contract
• Operational control of an enterprise is vested by
contract in a separate enterprise which performs
the necessary managerial functions in return for a
fee.
• Involve not just selling a method of doing things
(as with franchising or licensing) but involve
actually doing them.
• Can involve a wide range of functions,
– technical operation of a production facility,
management of personnel, accounting, marketing
services and training.

43. • MC is used as entry strategy with Minimum
Investment and Minimum Political Risk .
• Management Contracts are common in Hotel
Industry.

44. Manufacturing
• Ford In Russia : Open Ford Case .
• Market Entry Strategy involving all or some
manufacturing in a foreign country
• Helps keep prices down. Save on customs
Duty
• Scale up as markets demand go up

45. • Central Europe became hub for manufacturing
. Eastern Europe had lower wages compared
to Western Europe.
• These countries attracted FDI to create JOBS
• Some Countries gave Tax Holidays Like : Czech
Republic give 10 year Tax Holiday. Taiwan’s
Foxconn Technologies Co. & China Sichuan
Changhong TV manufacturer. They saved 14
Tariff imposed by EU on TV produced in China

46. Manufacturing – Sourcing
• Manufacturing operations in Host Country not
to sell but Purpose of Exporting from Host
Country.
• This can be done with Complete
Manufacturing to Contract manufacturing to
partial manufacturing

47. Backward Vertical Integration Strategy
• Vertical integration describes when a company purchases
or starts a company that it either buys from or sells to and
integrates this new business into its own. Backward vertical
integration can be a part of a company's strategy due to the
competitive benefits it provides.
• A Simple, Hypothetical Example
• an ice cream company that buys a dairy farm. The company
requires milk to make ice cream and either can buy milk
from a dairy farm or other milk supplier or could own the
dairy farm itself. This ensures that it will have a steady
supply of milk at its disposal and that it will pay a
reasonable price. This can protect the ice cream maker in
the event that there are several other buyers vying for the
same milk supply.

48. • Freedom of Intercompany payments
• Dividend Remittances
• Import Duty Concessions
• Tax Holidays
• Guarantees against Expropriation

49. Labor Cost
• Manufactures should pay attention to Absolute
as well as Relative Changes in Labor Costs.
– Should consider factor as low wage
– Should consider factor that wages increase is slow.
– Consider Productivity of Labor Skilled or unskilled.
• But it is only one of the Factors. Need to consider
the Mix and then conclude cost of production.
• Importance of Cheap , unskilled labor in
Attracting Manufacturing Investments have been
Diminishing .

50. Assembly Operations
• Part of Components are Produced in Various Countries
to gain advantage of each country comparative
advantage.
• Capital Intensive parts are produced in Advance
nations . Labor intensive assemblies in less developed.
• Assembly operations allows company products to enter
many markets without being subjected to Tariff and
Quotas. But Countries have there Localization Norms.
Like Italy : 45% product should be Produced Locally to
be termed as “ Made in Italy”.

51. • Screwdriver assembly of imported parts : If
products local content is less than half , then it
is viewed as Imported Product and Subjected
to Tariff and Quota restrictions.

52. Turnkey Operations
• Agreement between Seller to Supply a buyer
with a facility fully equipped and ready to
operate by BUYERS PERSONEL
• A turnkey business is a business that includes
everything you need to immediately start
running the business.
• A product or service which can be
implemented or utilized with no additional
work required by the buyer

53. Indirect Strategies
Case Study: Coffee

54. Exporting
• Comparative Advantage
• Without any marketing or production
organization overseas , exports product from
Home Base.
• Advantage
– Ease of Implementation
– Minimal Risks
– International Marketing efforts are at the lowest.
– Most common approach for small firms.

55. Disadvantage
 If Product is not modified for the market , it can
become a problem.
 If home country currency is strong , export
become a problem. If currencies remain strong for
long period of time can poses problems for
exporting country.
 1970 , Swiss Franc become very strong so couldn’t
export to USA . Swiss companies had to resort to
investing abroad.