Cultivating Strategic Alliances to Drive Improvements

and Enhance Profitability

Felix A. Fernando

COUNTRY SPOTLIGHT : SRI LANKA

Mergers and Acquisitions

Joint Ownership

Joint Venture

Formal Cooperative

Venture

Informal Cooperative

Venture

Vertical Integration

Market Transactions

High Interdependence

Low Interdependence

Source: Lorange and Roos 1991

A Continuum of Cooperative

Arrangements

• Legal arrangements where ownership and management of an organization are shared by more than one organization (D. Sparling, R. Cook)

Joint Ventures

Strategic Alliances

• Flexible cooperative arrangements between organizations, from fluid, short term cooperation to long term, formal agreements (Das & Teng, 1998)

Mergers and Acquisitions

Joint Ownership

Joint Venture

Formal Cooperative

Venture

Informal Cooperative

Venture

Vertical Integration

Market Transactions

High Interdependence

Low Interdependence

Source: Lorange and Roos 1991

A Continuum of Cooperative

Arrangements

Why Strategic Alliance?

Motives for

Alliance

Strategic Access to new markets

Firm core competences

Managerial Reduce supply base

Stabilise supply/demand Personal loyalty

Financial Cost savings

Reduced prices Leverage capital

Technical Access to R&D

Access to specialist skills

Whipple & Gentry (2000)

Strategic Alliances Synergizing Resources, Expertise, and Capabilities

Gain competitive advantage through access to your partner’s resources

Joint marketing & promotion

0% 20% 40% 60% 80%

Joint selling or distribution

Technology licenses

R & D contracts

Design collaborations

Production arrangements

Business expansion abroad

Outsourcing

Other alliances

Involvement of fast-growing companies in different types of

strategic alliances

On an average, each fast-growing company is

engaged in 5 different types of strategic

alliances.

Source: Trendsetter Barometer, PWC

Lessons from Toshiba Strategic Alliances as a Key Element of Strategy

Toshiba’s approach: To develop strategic alliances with partners for different technologies because a single company cannot dominate any technology or business by itself.

Company Technology

GE Light bulb filaments

Apple Computers Multimedia computer products

Microsoft Hand held computer systems

Motorola Memory chips

IBM, Siemens Semiconductors

Toshiba’s Selected Alliances

• with Barnes and Nobles bookstores (1993) - provide in-house coffee shops

• with Pepsico (1996) to bottle, distribute and sell the popular coffee-based drink, Frappacino.

• with United Airlines alliance - their coffee being offered on flights with the Starbucks logo on the cups

• with Kraft foods - Starbucks coffee being marketed in grocery stores.

• an alliance with the NAACP (2006) - to advance the company's and the NAACP's goals of social and economic justice.

Starbucks

• Calzedonia, Italy – Euro 2 billion, 42 countries and over 4,200 retail outlets

• Brands – Intimissimi and Tezenis

• 7 factories in Sri Lanka under Omega Line Group

• Teejay – Omega Line partnership began in 2005

Omega Line (Calzedonia Sri Lanka) with

Teejay

• Started in 2011

• Noyon Lanka is the only knitted lace manufacturer in South Asia producing multiple forms of lace

• Omega Line invested in machinery (w/out equity) • Investment recovered thru installments (based on sales)

• Priority customer, speed, less cost for Omega Line

• Increase sales and infusion of capital to Noyon

Omega Line with Noyon Lanka

• 47% of Total Exports • 52% of Industrial Exports

• 350 Garment factories • 16 Fabric & Textile manufacturing units • Highest per Capita of Apparel Exports in Asia

Direct 300,000 Indirect 600,000 11.5% of labor force

Apparel Industry of Sri lanka

Employment

SOURCE - EDB

The 200 Garment Factory Program (GFP)

• High unemployment in the south of the country

• Decentralize the industry away from the Western Province and its capital Colombo

• Programme launched in 1992

• Initiative was personally supported and promoted by the President

• Garment industry became the country’s major manufacturing industry, highest foreign exchange earner, improved social conditions in the rural areas

• Private companies successfully contributed towards the socio economic development of the country

• A successful public-private sector co-operation programme

MAST Industries, Inc. and Sri Lanka

• Martin Trust and Dena Trust started MAST in Canton, MA, 1970 • One of the world's largest contract manufacturers, importers, and distributors of

apparel, including sportswear for brands • Once a wholly owned subsidiary of Limited Brands (renamed L Brands) • 51% stake in Mast was sold to private equity firm Sycamore Partners in -

November 2011 • L Brands continues to own Mast's separate sourcing operation for - Victoria's

Secret, La Senza, and Bath & Body Works. • Mast has manufacturing operations and joint ventures in more than a dozen

countries including China, Israel, Mexico, and Sri Lanka.

BUILT ON TRUST – MARTIN TRUST

WHERE ON EARTH IS SRI LANKA?

Ashroff Omar of Brandix (the factory then known as Lux Shirts)

50-50 JV LM (Lux-Mast) Apparel

A stake in Mahesh Amalean’s 26-machine Sigma factory

Tie-up with Ajith Dias’s Jewelknit Group with 3 factories

Eden Fashions, Gan Island, Maldives with all 3 above

WORLD OF PARTNERSHIPS

How Sri Lanka benefited

Introduced new product lines Influenced in attracting best of the best international partners Strengthened backward linkages by setting up local base for RM Attracted investments in other accessories; thread, elastics,

buttons Introduction of advanced technology An environment that is ethical, transparent and geared towards

long term sustainability

0

500

1000

1500

2000

2500

3000

3500

1973 1977 1981 1985 1989 1993 1997 2001 US$

mn

Export Earnings : Textiles & Apparel

0

10

20

30

40

50

60

70

80

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

Exp

ort

s %

Year

% of Industrial Exports % of Total Exports

0

1

2

3

4

5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Exp

ort

Val

ue

in U

S$ B

n

Year

Export Turnover from 2001 to

2016

BRANDIX now Series of mergers and acquisitions

First dyeing plant for Express brand

First advanced washing plant for Abercrombie & Fitch

Running one of the world’s fastest delivery program for Victoria’s Secret

Over 47,000 employees

42 manufacturing facilities in Sri Lanka, India & Bangladesh

US$ 750 mn turnover in Sri Lanka

MAS now

Set up JV factories with customers and suppliers

Customers transferred the sourcing, product development and design

Opened design houses in London, New York and Hong Kong

Over 80,000 employees

48 manufacturing facilities in 15 countries

US$ 1.6 bn Revenue

17 Strategic Partnerships

• EME Holdings, S.A de C.V, Mexico

• Ets Lucien Noyon Et Cie, France

• Groupo Deal, S.A de C.V, Mexico

• Hogwarts Ltd, HK

• Ling Chee Yan, Samuel, HK

• MAST Industries, Inc, USA

• New Impact (Pvt) Ltd Singapore

• NSL Infratech (Pvt) Ltd, India

• Prym Intimates Group Ltd, HK

• Regina Pacific Investment Ltd, Mauritius

• Speedo International Ltd, UK

• Stretchline (UK) Ltd, UK

• Tradecard, Inc, USA (Also known as GT

Nexus)

• Triumph International Overseas Ltd, HK

• Ultimo Brands International Ltd, UK

• Wind force (Pvt) Ltd, Sri Lanka

• Brandot International Ltd, USA

Your ability to succeed will be defined by your ability to identify ethical partners, grow with them and provide the conditions that sustain the partnership.

Martin Trust