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International Business Cases

• 15-3. Companies within the Oneworld, Star, and Sky Team alliances have also engaged in major mergers and acquisitions (M&A): American and US Air (Oneworld), Delta and Northwest (Sky Team), and Continental and United (Star). What are the advantages and disadvantages of M&A versus non-equity alliances in this industry?

Mergers and acquisitions (M&A) means combining two already existing companies to gain a greater market share or to reduce production costs thus increasing efficiency. Non-equity alliances, on the other hand, refers to an alliance between two or more companies that share their unique resources and abilities in a contractual relationship (Nolan, et al. 130). Airlines ally themselves with other carriers from different countries to enjoy the benefits of the mergers and alliances. Such are companies in team alliances like Oneworld, Star and Sky Team.

Airlines in M&A can avoid government regulations. For instance, the AA cannot fly between Brazil and South Africa as there are national landing rights restrictions. Therefore, the airline would need to align with another carrier. Companies in M&A are also able to make cost savings through the sharing of the high maintenance and reservation systems costs with other airlines. Thirdly, combined airlines with an agreed code sharing assist the passengers to be at ease when deciding on the routings and connections between terminals. Fourthly, the alliances maximize their competitive advantages. For the airlines in the Oneworld alliance, for instance, advertise their affiliation by painting the name Oneworld alongside their logo (Nolan, et al. 130). Besides, airlines practicing M&A are easier to finance and also acquire new technological developments.

Consequently, M&A could result to daunting problems. Some government regulations can be strict on the ownership requirements in a merger. This could make the process expensive. Legal expenses involved are also high when forming mergers. For example, when establishing the carrier routes and agreement with other flyer points. Thirdly, there are intangible costs such as land or intellectual properties. Acquisition take over costs could also be very expensive. Finally, there could be a devaluation of equity in the case of M&A.

Non-equity alliances are also advantageous. The representatives from the aligned airlines can jointly promote and sell flight spaces, manage the capacity of the carriers, and schedule connecting flights. The alliances also help in cutting the cost by strengthening the collaborations. An example could be with the combining of passenger lounges in airports to reduce costs. Also, non-equity airline alliances share the risks when making expansion investments and also complement each other advantages.

Just like in M&A, non-equity alliances have disadvantages. Government regulations cannot be avoided. Secondly, airlines in these alliances could suffer instability from the altering of the flight schedules. Also, non-equity alliances experience complexity in management.

• 15-4. Some airlines, such as Southwest, have survived as niche players without extensive international connections. Can they continue this strategy?

For some airlines like Southwest, despite surviving as niche players, they must join an extensive international connection. The industry’s regulatory costs and competitive factors necessitate an airline to be part of an international alliance to survive. Alliances like the Oneworld assist the airlines to reduce the operating costs like the security measures agreed and the oil prices.

Another advantage of being part of an international alliance is access to an expanded market. A member airline can schedule connecting flights, sell and promote sitting space on flights operated by each other, lower the prices and divide the revenues. Also, the airlines in an alliance not only charge better prices in flights and airline connections but are also able to schedule shorter journeys and have destinations with checked luggage. The passengers often prefer booking with the airlines offering lower prices and with routes that make the journey shorter. The Southwest airlines should, therefore, change the operational strategy. Being part of international connections would help the airline to have competitive advantages and work with others to cut costs while satisfying the passenger's needs.

• 16-3.Would you prefer to work in a decentralized or centralized company? What outlooks and competencies would make you a high-performing executive in your preferred choice?

Centralized organizations involve a structure of decision-making hierarchy. The top managers and executives handle the organization processes while the employee lower in the command chain have limited impact in the decision making and operational processes. Decentralized organizations, on the other hand, have fewer boundaries and are characterized by a delegation of decision making power and flexible processes (Zabojnik 10). The management is entrusted with the operational processes as they see it fit. Given the bureaucracy and in-efficiencies in centralized organizations, I would prefer to work in a decentralized company where the power is much spread out and adaptability is easier.

To be a high performing executive in a decentralized company, I must emulate teamwork and collaboration. Teamwork contributes to innovation as employees are given the chance to share ideas. Decentalisation creates an inclination for entrepreneurship and motivation. Such an orientation would enable an executive to maintain a successful MNE and at the same time attract talented and motivated people. An apt knowledge of the market and high qualifications would also contribute to high performance. Market knowledge assists an executive in addressing the consumer’s needs and deliver high-quality solutions.

To be a successful executive in a decentralized company, one must possess good decision-making skills. Involving the managers and employees in the decision making helps in being more competitive and innovative while running the company units. A high performing executive should also be masterful in building communication. The communication channels in a decentralized company encourages the sharing of ideas that seamlessly translates to achieving local effectiveness and global efficiency. Finally, a performing executive should be able to withstand the pressure to integrate operations due to the changing competitor moves, technological and market trends. One should leverage the core competencies, location of the company units and the scale effects so that any major product releases or processes gets implemented in all operational units.

• 16-4.Explain how Johnson & Johnson makes its structure, systems, and culture work in synchronicity.

Johnson & Johnson pharmaceutical anchors its superior operations on its decentralized structure, sophisticated coordination, and control systems. This creates synchronicity that boosts performance. For her structure, J&J’s business units operate independently. This means that every segment has the independence to operate with its local employees and leaders to address local conditions. The innovation is given a key chance in all its worldwide centers. Technological and operational developments are thus achieved. The J&J headquarters also tightened their coordination and control systems freeing the operating units to focus on the daily performance which sets a contest between the local economies and global integration.

J&J decentralized systems offer fast responses to local needs. Worldwide innovation is also possible because of the effective communication channels. Also, by using the company’s systems, the unit managers get a precise understanding of the market trends and needs. However, the J&J decentralized system could influence inconsistent market development. The system could intensify the pressure in company units worldwide. Using the system also slows the global diffusion of J&J products and processes.

J&J’s organizational culture and Credo also play a major role in the success of the business. The culture of individual inclusivity has contributed to innovations and product breakthroughs. J&J code of ethics that offers priority setting during its operations sets the company apart. The J&J’s responsibility to the customers come first. The doctors, nurses, mothers, and fathers who use the J&J products and services always come first. The company’s employees and the communities where the J&J operates comes second. The shareholders come last after the suppliers and distributors because they believe stakeholders have to be treated fairly for them to get reasonable returns.

• 17-4. How much do you think Danone’s decision to set up a social business was motivated by wanting to be socially responsible versus believing the move would help its performance? Does the answer to this make any difference?

Danone’s decision to set up the social business joint venture has several arguments that support the decision as being influenced by a sense of social responsibility. France’s food company, Groupe Danone had a global market share for its products. However, the company formed a joint venture to invest in a country with impoverished citizens. It would be logical to argue that due to the company’s global nature, it could have invested in other regions that could have generated a greater return on the outcome.

Despite the Danone’s JV obligation to generate profits, the company’s corporate mission was, “to bring health through food to as many people as possible.” The mission statement proved the company was more inclined towards being socially responsible. Grameen Bank founder Mohammed Yunus contends that people may desire more than economic gains for themselves and thus result in being philanthropic. He compares this with the Danone’s decision to have a joint venture that could not yield them dividends or capital gains. The Danone JV created a social business that assists some of the most needy citizens by offering nutritious and affordable foods. Bangladesh BoP citizens are characterized by a high rate of illiteracy, dilapidated infrastructure, incidences of infectious diseases and unemployment. Despite this, the Danone joint venture was formed.

The creation of the Danone JV consequently helped Danone’s performance. The worldwide positive publicity achieved from the formation of the social business acted as a potential catalyst for Danone’s development. Besides, as the BoP consumers improved economically, they will have more to spend. It’s also logical to argue that they will naturally prefer Danone products because of the earlier experience. Frank Riboud argues that combating poverty is in the good interest of the business. He goes further to encourage trying business not only on the peak of the pyramid but also at the bottom of the pyramid (BoP).

In conclusion, the true motivations of Danone’s joint venture with GB bank are essential when making ethical analysis and considerations. However, for the impoverished citizens who benefit from the venture, the company’s actions matter more than its intentions.

• 17-8. Initially, Grameen Danone Foods JV was expected to make a profit by 2012. Although no official numbers are published, it seems that they had not reached that point by 2016. Should Danone continue to invest in this JV? If so, what can be done to improve the financial outlook of the JV going forward?

Danone should continue investing in the joint venture despite failing to make the targeted profits by 2012. Danone should continue investing in the Grameen Danone joint venture because it had no prior operations in Bangladesh. Also, most of its products were aimed at high-end consumers. The joint venture enabled the product’s demand in the wealthier regions to rise. Danone also found a chance to learn about the consumers in the BoP and the way of operating in these regions.

To improve the financial outlook of the Grameen Danone JV, pricing and brand loyalty must be considered. In the BoP countries, sales would increase when there is a presence of low and stable prices. The venture should also ensure that the products sold are of high quality and nutritious. The quality should also be compatible with the impoverished citizens’ accustomed habits. Consequently, due to a high rate of illiteracy, the joint venture should embark on educating the citizen on the benefits of the products.

The joint venture publicity plays a major role. Just as Danone used the French footballer Zinedine Zidane to gather worldwide publicity during the plant’s opening event, the joint venture should work on promotion to expand the market share. Besides, the joint venture should also work on branding. The product appearance must be made in a manner in which the locals will identify themselves with the product and brand.

Grameen joint venture should also invest in the distribution of the product to improve the financial outlook. In Bangladesh, door to door women distributors could be stigmatized due to their culture. The JV should thus work on sensitizing the importance of women empowerment just like with the Grameen women bank loans. The distributors should also be taught on how to ration their stocks to avoid spoilage as very few individuals own refrigerators in a BoP country.

• 18-3. What manufacturing strategy should Nokero pursue? Should it continue to supply all of its light bulb orders from a single factory location in China?

Nokero’s increasing solar light bulb sales necessitate it to have regional manufacturing and distribution strategies. The growth of the sales globally may require the company to undertake in a larger part in the production process to be able to address the shipping and supply requirements. The company should also expand the supply chain capabilities. Apart from the major China supplier, bringing on board a second or third supplier will enable the company to fill both the large and concentrated orders from governments and organizations globally.

Nokero should pursue the increased sales from the media publicity. By maximizing the website’s light bulb sales, the company can meet the small and sample orders from consumers in North America and abroad. The company, therefore, can grow and increase production.

Another manufacturing strategy is the development of distributorship and dealer agreements in several countries. Distributors and associations order large quantities of the light bulbs. Nokero’s factory in China thus fills these orders and sends them to the fulfillment partner. Consequently, Nokero’s partnerships with the government and organizations to support various collaborative social and environmental sustainability programs forms the manufacturing strategy. Katsaros, the founder of Nokero insists on reaching as many people as possible. The company is therefore obligated to support disaster and relief projects as well as poverty eradication.

A manufacturing strategy Nokero could also pursue is the formation of an intermediary who would solve the issue of the last mile. The intermediary would assist in introducing the solar bulbs in the remote locations where guidance and sales cannot be done through a website or offering a manual. The intermediary should be a local person who could communicate and offer a demonstration of the products.

• 18-4. In terms of distribution networks, should Nokero maintain fulfillment warehouses in Africa, Asia, and Latin America? How should Nokero address the last mile issue of accessing people in the most remote locations?

Nokero should maintain the order fulfillment warehouses beside the main in Shenzhen China. Having a fulfillment warehouse in continents like Africa and Latin America would enable the company’s products to have a global impact by reaching far and wide countries. Establishing the warehouses in different continents increases efficiency. The delivery time is reduced substantially thus creating an efficient supply network. However, Nokero needs to address and resolve the problem of updated international pricing on shipping charges.

Concerning the last mile issue, Nokero identified the importance of educating the consumers on the product attributes and usage. The last mile issue refers to the potential customers who live in remote locations that could be hard for the company to access. Nokero is considering partnering with companies that have mastered how to penetrate these locations and have connections with the customers. To this effect, Nokero partnered with Proctor and Gamble distributors who have a strong reach and connections with consumers in Kenya’s remote locations. Moreover, the company employed local employees to assist in the distribution of products and as ambassadors for educating the customers of the light bulb products.

Works Cited

Nolan, James, et al. "International Mergers and Acquisitions in the Airline Industry." Advances in Airline Economics, 2014, pp. 127-150.

Zabojnik, Jan. "Centralized and Decentralized Decision-Making in Organizations." SSRN Electronic Journal, 2000.

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