Abstracts for Case Studies and Readings
Case studies
1. Dell’s Dilemma in Brazil: Negotiating at the State Level
Dell has recently concluded a site selection process in Brazil to determine where it
will locate its manufacturing plant in that country; it will be its first manufacturing
plant in Latin America. After a lengthy site selection process in the first half of 1998,
involving five states in Brazil—São Paulo, Rio de Janeiro, Paraná, Minas Gerais, and
Rio Grande do Sul—Dell has decided to locate the plant in the state of Rio Grande
do Sul, Brazil. Although a number of factors influence Dell’s decision, one of them
is the generous incentives that Governor Antonio Britto of the relatively centrist
Partido do Movimento Democratico Brasileiro (PMDB) has offered the company.
However, after Dell makes this decision a new governor, Olivio Dutra of the Partido
dos Trabalhadores (PT, or Workers’ Party) is elected in October 1998 and takes
office in January 1999. The PT is a socialist party. Having made an issue of what he
considered to be overly generous incentives offered to transnational corporations
during his campaign, Governor Dutra seems likely to rescind the incentives that the
Britto government had offered.
Given this situation, Keith Maxwell, Dell’s Senior Vice President for Worldwide
Operations, must make a recommendation to Michael Dell. The case presents three
possible options for Dell: (1) leave Brazil entirely; (2) move the plant to another
state within Brazil; (3) try to renegotiate with Governor Dutra.
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2. Kmart De México S.A. De C.V. (Abridged)
El Puerto de Liverpool, S.A. de C.V., one of Mexico’s oldest and largest retail
department store chains, has entered into an agreement with U.S. retail giant Kmart
Corporation to open and operate a series of Super Kmart Centers throughout
Mexico. The new CEO of Kmart de Mexico must create the new Mexican organization. He must consider all elements of the Mexican business environment and assess
how, separately and collectively, these elements will impact the transferability of the
U.S. retail concept. Specifically, he must consider issues of store layout and design,
food, management hiring, training programs, and corporate culture.
3. Unicord PLC: The Bumble Bee Acquisition
This case pertains to a rags-to-riches-to-rags saga of a Thai firm whose acquisition
of an American competitor both enabled it to become a global leader in the tuna fish
processing industry and, shortly thereafter, led to its competitive demise. Although
Unicord’s acquisition was supported by an apparently sound logic, various changes
in its internal, external, and managerial domains proved too much for the firm to
handle. Less than five years after Unicord acquired Bumble Bee, the company filed
for bankruptcy. Dr. Juanjai Ajanant, special advisor to Unicord’s board, is charged
with the daunting task of engineering Unicord’s turnaround. However, to do so, he
must first analyze what had gone so wrong for the firm. The case provides a detailed
history of pre- and post-acquisition events that would assist Dr. Juanjai in his task.
4. Nora-Sakari: A Proposed JV in Malaysia (Revised)
This case presents the perspective of a Malaysian company, Nora Bhd, which was in
the process of trying to establish a telecommunications joint venture with a Finnish
firm, Sakari Oy. Negotiations have broken down between the firms, and students are
asked to try to restructure a win-win deal. The case examines some of the most
common issues involved in partner selection and design in international joint
ventures.
5. Red Star China: Discovering the Essence of Guanxi (A)
Set in September 2002, this case revolves around Howard Zhao, Senior VP (Brokerage)
of Red Star China Shipping Company. Howard’s mandate is to secure future business
with Nanjing ZP Chemical Company (NCC), a Sino-German joint venture. Howard
believes he must first establish guanxi (i.e. a personal connection) with Pan Weidong,
NCC’s Director of Logistics, to compete successfully against SSK Shipping, which
is also striving for NCC’s lucrative business. If Red Star earns NCC’s business, it
will ensure its own future in China. If SSK obtains the business, it will open an office
in Shanghai and probably win over Red Star China’s existing customers. Howard
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therefore needs to build guanxi with someone influential at NCC in order to differentiate Red Star China from SSK. That way, if the two competitors’ price and service
levels are reasonably close to each other, the guanxi will favor Red Star.
Case A describes Howard’s guanxi-building activities and suggests how guanxi
can be used to offset a firm’s strategic weaknesses. Just as the relationship between
Howard and Pan seems secure, Pan is apparently demoted. Howard has to decide
whether to: (1) continue building guanxi with Pan, who appears to have lost his
usefulness for satisfying Howard’s purposes; (2) switch his attention to NCC’s new
Director of Logistics, Hans Hol, who is a German; (3) start all over again by finding
a new person at NCC to build guanxi with. Case B outlines developments that
aggravate Howard’s dilemma. After Howard makes his decision (above), Pan is
re-transferred to NCC, albeit in a different role. Pan is visibly cold to Howard, who
wonders how to repair the breach with Pan. Is such repair necessary to get NCC’s
business? Should Howard make an effort to reintegrate himself with Pan, or should
he work with Hans or someone else at NCC?
6. Hero Honda Motors (India) Ltd.: Is it Honda that Made it a Hero?
The case focuses on a joint venture between Honda Motor Company (HMC) of Japan
and the Hero Group, a conglomerate of Indian companies held by the Munjal family.
Hero is the largest manufacturer of bicycles in the world and at that time had
already dabbled in the motorized two-wheeler market with its mopeds. HMC entered
into a 50/50 alliance with Hero to manufacture motorcycles for the Indian market. It
assumed product design and technology transfer responsibilities, while Hero was in
charge of manufacturing and marketing. The venture performed very well until the
contract renewal period when Hero felt that HMC was slowing down its technology
transfers. The agreement was extended for another ten years after protracted negotiations. Just as the relationship appeared to get better, HMC announced the setting up
of a subsidiary in India to manufacture scooters. It said that the subsidiary would
enter the motorcycle market in 2004. This grew from a split between Honda and its
Indian partner in a venture that was manufacturing scooters. Having exited the
venture, HMC wanted to go it alone. This caused serious concerns for Hero since
HMC’s entry into the motorcycle market would threaten its very survival. The case
closes with a set of issues that face Hero, and sets the stage for exploring alternative
paths that Hero could take in managing its future.
7. Strategic Crossroads at Matáv: Hungary’s Telecommunications
Powerhouse
In September 2004, four months after Hungary joined the European Union, the
strategy group of Matáv—Hungary’s largest communications company—is working
on its mid-term strategic plan. Since being privatized from the state in 1993, the
company has seen several changes in its strategy, structure and culture. Nearly 15
years later, the company is a fully integrated telecommunications company involved
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in a broad range of services including fixed-line telephony, mobile communications,
Internet services, data transmission and outsourcing. The company’s latest acquisition
of a state-run telecommunications company is considered a success, and management believes that international expansion is necessary to realize dynamic growth as
its domestic fixed-line business is declining. In addition, Hungary’s mobile market is
highly competitive and saturated, with 80 percent of the country having a mobile
phone. The management team feels that Matáv is at a crossroads with three main
options: (1) expansion in Hungary; (2) regional expansion; (3) focusing on organic
growth in existing product lines. The team has to consider all of the lines of business
in forming a strategy and whether Matáv’s resources and organization are suitable
for a healthy future.
8. Managing Pibrex Russia (A): New Crisis, Old Grievances
Pibrex is one of the world’s largest developers of petrochemical-based polymers for
the plastics market. The company has purchased a plant in Russia and after three
years of serious operating losses has appointed a new general manager of the plant.
The plant lacks a strong organizational culture; communications within and between
departments are poor; inequity in wages, working conditions, and training exist
but motivation and retention problems are prevalent; Pibrex headquarters is losing
interest in the Russian operation, and two sub-cultures exist within the Pibrex Russia
organization. The general manager must develop an action plan that can turn
operations around with minimal expense to Pibrex.
9. Olly Racela in Bangkok
A recent MBA graduate describes the joys and frustrations of an expatriate life—
both at personal and professional levels—as experienced by a young, single woman.
She has been living in Bangkok for three years and is slowly adjusting to the local
way of life when she receives a job offer that will relocate her back to her home in
Hawaii. Reaching a decision, however, is not easy given career-related uncertainties
in both countries, as well as the array of conflicting emotions that confront her. She
must decide how to sort through these issues. Should she remain in Bangkok or
return home? Her decision is complicated by the fact that she had not entertained
the idea of returning to the United States.
Readings
10. Distance Still Matters: The Hard Reality of Global Expansion
Companies routinely overestimate the attractiveness of foreign markets. Dazzled by
the sheer size of untapped markets, they lose sight of the difficulties of pioneering
new, often very different territories. The problem is rooted in the analytic tools (the
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most prominent being country portfolio analysis, or CPA) that managers use to judge
international investments. By focusing on national wealth, consumer income, and
people’s propensity to consume, CPA emphasizes potential sales, ignoring the costs
and risks of doing business in a new market.
Most of these costs and risks result from the barriers created by distance.
“Distance,” however, does not refer only to geography; its other dimensions can make
foreign markets considerably more or less attractive. The CAGE framework of distance presented here considers four attributes: cultural distance (religious beliefs,
race, social norms, and language that are different for the target country and the
country of the company considering expansion); administrative or political distance
(colony–colonizer links, common currency, and trade arrangements); geographic distance (the physical distance between the two countries, the size of the target country,
access to waterways and the ocean, internal topography, and transportation and
communications infrastructures); and economic distance (disparities in the two
countries’ wealth or consumer income, and variations in the cost and quality of
financial and other resources).
This framework can help to identify the ways in which potential markets may
be distant from existing ones. The article explores how (and by how much) various
types of distance can affect different types of industries, and shows how dramatically
an explicit consideration of distance can change a company’s picture of its strategic
options.
11. Strategy Under Uncertainty
At the heart of the traditional approach to strategy lies the assumption that by applying a set of powerful analytic tools, executives can predict the future of any business
accurately enough to allow them to choose a clear strategic direction. But what
happens when the environment is so uncertain that no amount of analysis will allow
us to predict the future? What makes for a good strategy in highly uncertain business
environments?
The authors, consultants at McKinsey & Company, argue that uncertainty
requires a new way of thinking about strategy. All too often, they say, executives take
a binary view: either they underestimate uncertainty to come up with the forecasts
required by their companies’ planning or capital-budging processes, or they overestimate it, abandon all analysis, and go with their gut instinct.
The authors outline a new approach that begins by making a crucial distinction
among four discrete levels of uncertainty that any company might face. They
then explain how a set of generic strategies—shaping the market, adapting to
it, or reserving the right to play at a later time—can be used in each of the
four levels. And they illustrate how these strategies can be implemented through
a combination of three basic types of actions: big bets, options, and no-regrets
moves.
The framework can help managers determine which analytic tools can inform
decision making under uncertainty—and which cannot. At a broader level, it offers
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executives a discipline for thinking rigorously and systematically about uncertainty
and its implications for strategy.
12. Harnessing the Science of Persuasion
If leadership, at its most basic, consists of getting things done through others, then
persuasion is one of the leader’s essential tools. Many executives have assumed that
this tool is beyond their grasp, available only to the charismatic and the eloquent.
Over the past several decades, though, experimental psychologists have learned
which methods reliably lead people to concede, comply, or change. Their research
shows that persuasion is governed by several principles that can be taught and
applied.
The first principle is that people are more likely to follow someone who is similar
to them than someone who is not. Wise managers, then, enlist peers to help make
their cases. Second, people are more willing to cooperate with those who are not only
like them but who like them, as well. So it’s worth taking the time to uncover real
similarities and offer genuine praise. Third, experiments confirm the intuitive
truth that people tend to treat you the way you treat them. It’s sound policy to do a
favor before seeking one. Fourth, individuals are more likely to keep promises they
make voluntarily and explicitly. The message for managers here is to get commitments in writing. Fifth, studies show that people really do defer to experts. So
before they attempt to exert influence, executives should take pains to establish
their own expertise and not assume that it’s self-evident. Finally, people want more of
a commodity when it’s scarce; it follows, then, that exclusive information is more
persuasive than widely available data.
By mastering these principles—and, the author stresses, using them judiciously
and ethically—executives can learn the elusive art of capturing an audience, swaying
the undecided, and converting the opposition.
13. Achieving Business Success in Confucian Societies: The Importance of
Guanxi (Connections)
The web of interpersonal connections plays a key role in East and Southeast Asia
business dealings. New research shows why and how.
14. The Role of Family Conglomerates in Emerging Markets:
What Western Companies Should Know
Large, diversified, family-owned businesses are dominant players in the economies of
most emerging markets and can be excellent business partners for Western companies. This article highlights the evolutionary patterns of family conglomerates
(FCs) and delineates principal drivers of their growth, expansion, and internationalization. Those aspects of FCs examined in this study include early mover advantages,
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foreign alliances, competitive market positioning, and diversification. Also discussed
are entry-mode considerations for Western companies contemplating doing business
in the fast-growth markets of East Asia, Latin America, and elsewhere.
15. Transferring Management Knowledge to Russia: A Culturally
Based Approach
Russian managers entered the decade of the 1990s ill-prepared to manage their
companies in the country’s chaotic transition to a market economy. This article
draws lessons for transferring Western management knowledge to Russian managers
from programs conducted over a ten-year period by the Rayter Group, a crosscultural training organization. The group’s experience underscores the transitional
nature of business values among Russian managers, including the need to recognize
the barriers and potential opportunities that traditional culture and values can
create, as well as the potential for newly developing ones to support the transfer of
Western knowledge. These two sets of values must be understood and appreciated
by those transferring knowledge through the design and execution of management
education programs, as well as in other situations like joint ventures and parent–
subsidiary operations. The lessons presented in this article are grounded in the context of a culturally based approach to transferring knowledge that includes the
culture, values, attitudes, and behaviors of Russian managers. These factors affect
the capabilities of both transferors and receivers of knowledge to engage in effective
knowledge transfer. The article concludes with recommendations for knowledge
transfer in Russia that may also be useful in other transitional economies.