August 2011

Aug 16, 2011

gap-china476A corporate strategy article by Thunderbird students Emma Brown, Caroline Caverly, Julie Goodman, Kelly Post and Angela Wong

Last year, when an apparel giant opened four stores in China and failed to gain a significant portion of the retail sales, multinational retail stores took note. The Gap, an apparel line successful in more than 3,000 locations worldwide, had everything going for them. So, what went wrong?

The Gap’s biggest mistake was the cookie cutter approach it took to establishing its presence in the world’s largest youth market. The Gap sought to target the increasing middle-income consumers in the rapidly growing Chinese market, but failed to capture the attention of their most important customers, the Chinese youth.

In China, the Gap is perceived as middle class apparel selling for a luxury price.  Status and luxury are important goals for China’s consumers, especially for the youth. However, a premium price for a middle class product is a cost youths are not willing to bear.  Moreover, The Gap chose to open stand-alone stores rather than locating in mall areas, forcing customers to go out of their way to make a special trip just to visit the store. The majority of Chinese consumers purchase apparel at a mall because they can use it as a single destination for shopping, eating, and entertainment. The Gap failed to realize that China’s middle class youth consumer is very different from an American consumer.

Aug 11, 2011

COMACA corporate strategy article by Thunderbird students Brett Davis, Don Dennis, Tras Obsuwan, Kyungwhan Park and Ryan Wegner

How comfortable would you feel if you boarded an aircraft that was entirely developed, manufactured, and assembled in China by a wholly-owned Chinese company?  That reality may occur in the near future. With global industry revenue projected to increase to $4 trillion by 2029[i], of which approximately 12% [ii] is expected to occur in the Chinese market, new competitors are quickly strengthening their positions in the historically duopolistic airline industry. Amongst these players is Commercial Aircraft Corporation of China (COMAC), a Chinese state-owned aircraft manufacturing company, which is focused on fiercely competing with industry leaders Boeing and Airbus. COMAC’s aspirations are to obtain market share and at the behest of the Chinese government reduce the country’s reliance on foreign airline manufacturers.

Aug 08, 2011

ebay in ChinaA corporate strategy article by Thunderbird students Bo Lin, Jason Martin, Chiemi Perry, Jian Tong and Wei Wang

There are many characters to distinguish great companies with others, such as innovation ideas, stunning development speed and outstanding leadership.  However, not all great companies could rebound after their failure in some specific areas.  As we all know, the case of Starbucks in Australia and Wal-Mart in Korea, both reveal the insurmountable local market differences and accordingly systematic slow responses could lead many business legends to be negative examples.  To compare and research how to practice in this situation, we pick up the case from eBay and discuss how the strategy adjustments could help eBay come from behind to win.

eBay has a vision “to be the world’s personal trading community.”[i] Nevertheless, it struggled with early strategic moves in Asia, Japan and China in particular, and needed to reconsider its global strategy.  In general, eBay sought global growth through acquisition and joint venture as way to gain quick access to markets and establish a leadership position.  Since 1998 eBay has made 37 significant acquisitions globally, 25 of which amounted to $10.1 billion[ii]&[iii].  In Asia, three acquisitions of leading online marketplaces in South Korea, China, and India totaled $1.5 billion.  eBay sites also exists in other Asian countries such as Taiwan and Thailand.  Approximately 54% of eBay’s 2010 net revenue comes from international locations[iv], but revenues derived from Asian markets appear to be still much smaller.

Aug 07, 2011

ebay in ChinaA corporate strategy article by Thunderbird students Joel Baughman, Srinivas Chundi, Mikhail Kholyavko, Chintan Patel and Chris Vadner

There are striking similarities between the colonial powers of past and contemporary beer conglomerates. For years, there has been an uneasy quiet in the world beer markets as brewers have carved out territories and regions for themselves, often finding themselves in close proximity with competitors. Until now, they have appeared reluctant to disturb the status quo and encroach on competitors’ turf in pursuit of increased market share. Nevertheless, consolidation has accelerated in recent years, leading to high industry concentration. The growth in demand for beer in emerging markets, coupled with saturation and stagnation in developed markets, promises to unsettle this uneasy calm and force brewers to rethink their strategy. As these large conglomerates come under increasing pressure from restless investors looking for revenue and profit growth, any gentleman’s agreement that might exist is less likely to be honored in the future. Major players are poised to engage in full-blown competitive conflict in order to conquer new markets.

Aug 07, 2011

by R. Dharni, A. Ibanez, T. Phan, J. Mendenhall, and P. Zamorano

Grupo Televisa SAB’s recent acquisition of a 50% stake in near-bankrupt Mexican wireless company Iusacell has been touted by company management as core in its strategy to become an “integrated media-telecom Company.”  While the deal has been widely panneddue to the high, $1.6 billion valuation for a company in an industry most analysts see as having few synergies with any of the company’s existing businesses, the bigger risk may lie in how the deal impacts Televisa’s successful foray into global markets.

As the dominant entertainment media company in Mexico, commanding 70% of the television broadcasting market1, Televisa has progressively built a robust global footprint through content licensing agreements, minority ownership stakes in foreign media entities, and content creation and distribution partnerships.  The company has parlayed this global strategy into a market capitalization of over $11 billion2 where it stands alone as the world’s largest Spanish-speaking media company. However, if recent statements in the press are any indication, it appears Televisa does not see its domestic and global success in media as the right trajectory for the company’s future.  Instead, the company is betting heavily on its telecom strategy to drive future growth.