Sub : International Business

CASE 1:Nokia- Ahead of OthersFinland may be a small country with a population of over 500 lakh spread on an areaof nearly 340,000 sqkm, giving a density of 17 people per sqkm. But the country hasseveral firsts to its credit, but two are highly conspicuous. First, probably Helsinki(capital of Finland) is the only city in the world where public roads, are moppeddaily. Another first is the fact that Finland is the home for world’s largest MNC –Nokia.Figures are staggering. Nokia has sales in over 130 countries, manufactures at 16facilities in 10 countries, and conduct R&D in 11 nations. The company has over51,000 employees and as an annual sales turnover of more than $33 billion.Nokia made its India debut in 1195, and in 14 years, has chipped away a formidable62.5% market share, with revenues exceeding Rs. 25,000 crore. It is undoubtedly thelargest MNC in India, with a consumer base of 200 million, a sixth of the country’spopulation. Nokia has manufacturing facility at Sriperumbudur, off Chennai. With72% of female workforce and average age of the 210 acre factory sitting at 23 years,the plant is unique in many ways. With over $285 million in FDI, the plant exports toover 50 countries and produces 100 million phones per year. Besides, it is proving tobe a harbinger of innovation.Nokia was founded by Fredrik Idestam, a Finnish engineer. Its early success isconsistent with the theory of comparative advantage. Idestam’s young company setup a shop on the bank Nokia River in Finland (hence the company’s name) tomanufacture pulp and paper with the local forests as raw material. Nokia flourishedin anonymity for nearly 100 years, focusing almost exclusively on its domesticmarket.During the 1960s Nokia’s management decided to expand regionally. In 1967, withthe government’s encouragement, the company took over two state-owned firms-Finish Rubber Works and Finnish Cable works. A real breakthrough came in 1981,when the government sold Nokia, 51 percent of the state-owned Finish

Telecommunications Company.Because Nokia was already developing competencies in digital technologies, it soonseized the opportunity and pushed aggressively into a variety oftelecommunications businesses.Nokia’s reputation has been built on cellular phone style and technology. Its brandpersonality reflects the human-technology link, embracing individuality, quality andfreedom.Nokia has three business verticals: Networks, Mobile Phones and CommunicationProducts. Networks deals with data, video and voice network solutions. Mobilephones (flagship of Nokia with a market share of nearly 30% worldwide) include awide variety of products. Communication products include multimedia terminals fordigital TV and interactive services via satellite, cable and terrestrial networks.Certain factors have worked well for Nokia. Many parts of the Finnish landscape areheavily forested and vast regions of the country are, sparsely populated. Creating,maintaining and updating land-based wired communication networks can be slowand expensive, making wireless digital systems advantageous. Thus, geographicconditions of Finland favoured Nokia.Finland has encouraged competition in the telecom sector early 20th century. In1930s, there were more than 850 private telephone companies. As on today, thecountry has just 90 of them. The country’s decision to team up with Norway,Denmark and Sweden to form the Nordic Mobile Telephone Group helped increating a vast market. This has enabled Nokia gain a competitive edge.As stated earlier, sale of Finnish Telecommunications Company to Nokia gave thelatter a real break through. It is not that Nokia is depending on external factors for itssuccess. The company is moving aggressively to expand its technologies, turningthem into innovative products, and scaling up the innovations globally. Nokia’s keyadvantage is an unconventional process of prospecting for knowledge fromeverywhere in its operating environment and its R&D activities spread over 11nations are a great enabler.The company’s informal style of management, its emphasis on building a strongcorporate culture and its focus on handsets (unlike its competitors who havediversified) will enable Nokia to march ahead with confidence.Not that everything is easy going for Nokia, there are problems, but the MNC hasresilience to get over them. Building production facilities and communications

infrastructure requires a great deal of money. How the company is going formobilize the financial resource is a cause for concern. There are powerfulcompetitors – LG, Samsung, Philips, Motorola, Siemens and Sagem waiting to take onNokia. Finally, Nokia has no doubt achieved success. But how far it will sustain it is tobe keenly watched.Questions:1. To what extent do you credit the success of Nokia to external factors?2. The success of Nokia is mainly in mobile phones. Why not the company didachieve success in other verticals?3. What proactive strategies do you suggest for Nokia to stay ahead of others in thedays to come?Case 2:AOL and Time Warner Team–UPDifficult as this may be to comprehend today, America Online (AOL) started out in1985 as simply one of many service firms providing customers with a way to connectto the Internet. Remarkable only fifteen years later AOL entered the new millenniumas the world’s leading online service firm, with more than 20 million payingsubscribers and ad phenomenal growth in revenue. By merging with the world’sleading media company, Time Warner, AOL has transformed itself into an Internetcolossus. With combined revenues of $36 billion, the new firm, AOL Time Warner, isbeing touted as “the world’s first media and Communications Company of theInternet age”.The union of AOL and Time Warner illustrates how partnerships and mergersbetween firms can benefit Internet-related businesses. Partnerships and mergerscan be quicker and less expensive ways for firms to grow. By merging with TimeWarner, AOL has enhanced its delivery of Internet content, since it can now offer itscustomers some of Time Warner’s rich variety of entertaining and informativeproducts, such as CNN online news services and journals. By the same token, TimeWarner has found a partner that can deliver its internationally appealing content to alarge existing audience – the audience that AOL has built up through earliermergers and acquisitions, as well as through the introduction of its internallydeveloped products and services. For instance, in 1998 AOL acquired ICQ fromIsrael-based Mirabiiis, the world’s largest communications community, comprisingmore than 50 million registered users. ICQ’s free access service allows users tolocate and chat with individuals and groups online regardless of which Internet

service provider they use. More than two-thirds of ICQ registrants live outside theUnited States, and so AOLs acquisition of ICQ has helped the company open thedoor to the customers worldwide. Given that people living in North America are stillthe dominant users o the Internet, the strategic merger continues to make sense inthe race to enlist customers globally and build brand recognition on the Internet.According to AOL’s research, 70 percent of all online consumers regularly oroccasionally receive their news through the Internet. The synergy of the fit betweenAOL and Time Warner (www.aoltimewarner.com) thus becomes even more obvious.With the merger, both parties have made considerable progress in their efforts togrow their e-business. AOL’s exclusive access to Timer Warner content, which mayattract new customers, gives the company a major competitive advantage over otherInternet service providers that lack access to this content. The merger may alsoincrease the number of consumers of Time Warner’s magazines (Business 2.0,inStyle, Time, Sports Illustrated, People, Teen People, Entertainment Weekly) andother products, including music (Atlantic Records, Rhino Records, Warner BrothersRecords), cable television (WB, TNT, Cartoon Network, Turner Classic Movies, CNN,HBO), films (Warner Brothers, New Line Cinema), and the accompanying websites.Furthermore, the variety of communication products AOL Time Warner offers – suchas telephone service through cable, e-commerce products, and cross-promotion ofvariety of consumer products-will generate many more new opportunities forgrowth.Questions:1. What lessons can other businesses learn from the success of e-business in AOLTime Warner?2. Do you think that AOL Time Warner achieved the present progress only throughe-business? Could not the same success have been achieved through brick-andmortarmodel?Case 3:PeruPeru is located on the west coast of South America. It is the third largest nation of the

continent (after Brazil and Argentina), and covers almost 500,000 square miles(about 14 per cent of the size of the Unites States). The land has enormous contrasts,with a desert (drier than the Sahara), the towering snow-capped Andes Mountains,sparkling grass-covered plateaus, and thick rain forests. Peru has approximately 27million people, of which about 20 per cent live in Lima, the capital. More Indians(one half of the population) live in Peru than in any other country in the westernhemisphere. The ancestors of Peru’s Indians were the famous Incas, who built agreat empire. The rest of the population is mixed and a small percentage is white.The economy depends heavily on agriculture, fishing, mining, and services. GDP isapproximately $115 billion and per capital income in recent years has been around$4,300. In recent years the economy has gained some relative strength andmultinationals are now beginning to consider investing in the country.One of these potential investors is large New York based bank that is considering a$25 million loan to the owner of a Peruvian fishing fleet. The owner wants torefurbish the fleet and add one more ship.During the 1970s, the Peruvian government nationalized a number of industries andfactories and began running them for the profit of the state. In most cases, thesestate-run ventures became disasters. In the late 1970s, the fishing fleet owner wasgiven back his ships and allowed to operate his business as before. Since then, hehas managed to remain profitable, but the biggest problem is that his ships aregetting old and he needs an influx of capital to make repairs and add newtechnology. As he explained it to the New York banker. “Fishing is no longer just anart. There is a great deal of technology involved. And to keep costs low and becompetitive on the world market, you have to have the latest equipment for bothlocating as well as catching and then loading and unloading the fish.”Having reviewed the fleet owner’s operation, the large multinational bank believesthat the loan is justified. The financial institution is concerned, however, that thePeruvian government might step in during the next couple of years and again takeover the business. If this were to happen, it might take an additional decade for theloan to be repaid. If the government were to allow the fleet owner to operate thefleet the way he has over the last decade, the loan could be repaid within sevenyears.

Right now, the bank is deciding on the specific terms of the agreement. Once thesehave been worked out, either a loan officer will fly down to Lima and close the dealor the owner will be asked to come to New York for the signing. Whicheverapproach is used, the bank realized that final adjustment sin the agreement will haveto be made on the spot. Therefore, if the bank sends a representative to Lima, theindividual will have to have the authority to commit the bank to specific terms. Thesefinal matters should be worked out within the next ten days.Questions:1. What are some current issues facing Peru? What is the climate for doingbusiness in Peru today?2. What type of political risks does this fishing company need to evaluate? Identifyand describe them.3. What types of integrative and protective and defensive techniques can the bankuse?4. Would the bank be better off negotiating the loan in New York or Lima? Why?Case 4:Seventh HeavenIf there is one thing William H Pickney, Managing Director and CEO, Amway Indiamastered during his seven year stay in India, it’s the art of breaking the coconut inone go. He has had enough practice at eh opening of every new branch office, andduring the annual Diwali puja in office, which is an Indian tradition followedreligiously at Amway.From wearing a kurta pyjama to eating local food, Pickney has taken to India andthings Indian. Even his office has shades of Indian influence, including a bronzeGanesh statue. “My wife and I had always talked about an adventure, and to us, Indiawas the ultimate adventure,” says Pickney.The Pickney affair with India started in late 1997, when Amway sent them for atypical look-see, to decide whether they could contemplate living here for sometwo-odd years. They spent a week in Delhi just getting a feel for living in the capitalcity.“Before I came here, I had heard a lot of stories, and none of them were good.” Whatdidn’t help matters was the number of vaccinations he has to take before coming toIndia; “I had never had as many shots in my life before,” says the only expat on the

rolls of the Rs. 600-crore Indian operations of Amway.Cleanliness and health were two issues the Pickneys were concerned about. But, totheir immense relief, it turned out to be far better. “We have not taken any malariapills in the last five years.”People were the first thing Pickney notice on his arrival in India. “In Sydney, youdon’t find people on the roads just outside the city. Here, they are everywhere.”What’s impressed him dedication and commitment, which he says is ‘the best andthe highest in the world.’Professionally, the HR aspect of working in India has been most interesting, ‘alearning curve’ for him. “Coming out of the West, one was used to giving the directfeedback. But if India, you criticism has to be applied very carefully.”Another interesting observation he made was regarding performance appraisal.“People here equate hard work with high performance. Just because you spent asmany hours, it does not make you a high achiever.”Pickney himself works almost every Saturday, if he is in town, and dislikes takingwork home to his lovely house in the plush Sainik Farms locality in the outskirts ofDelhi. While both husband and wife tend to stay in more, dining out with friends isone of the few entertainment options available in India. He has got more Indianfriends than expacts, mostly people he met through business, like Kanwar Bhutani ofTupperware.Both, however, try to find time to play golf at the ITC Golf Course in Gurgaon. It’s agame Mrs. Pickney took up in India, since she found free time on her hands for hefirst time in her life. A certified chartered accountant, Mrs. Pickney used to run herown business in Australia. Some of that itme has been used to learn to cook typicalIndian fare, butter chicken, aloo palak, rogan josh and dal makhani.It’s no wonder then that half their meals are Indian. They’ve adjusted to the spicefactor in Indian food. What was hot when they first came is nothing compared to hottoday. “When we travel abroad, we really miss the spice.”After all this time in India, they still find it striking that irrespective of which part ofthe country they are in, ‘there’s a positive spirit about people of India.’ “People havehope, optimism, and are generally happy.” The respect Indians have for their

culture and beliefs is another factor that the Pickneys appreciate.“Family ties are much stronger here, as is respect for elders and their wisdom. Forinstance, girls in our office who talk and dress in a Western way, have no problemsaccepting arranged marriages,” says Pickney, whose daughter is getting married inAustralia in November this year. Papa Pickney is planning to throw an Indianreception after the Australian wedding, including traditional attire for the bride andthe groom.“Yet another occasion to break a coconut, Mr. Pickney?” we wonder.Questions:1. How could William H. Pickney acculturate himself in India?2. What lessons can Pickney convey to similar other expatriates?Case 5:An Unexpected Currency for UkraineIn the early 1990s, the Soviet Union split into separate countries. Consequently, theRussian Ruble was no longer the monetary unit for the newly independent nations.Ukraine was one of these nations. To prevent a financial crisis, until a new currencywas issued, the Ukrainian government issued coupons for use in buying thecountry’s limited supplies of food and other products.These coupons were not originally intended to be the new Ukrainian currency.However, as Ukraine’s economy developed, these coupons became widelyaccepted as money. At first, Ukrainians were using both the coupons and the RussianRuble. As the new monetary system replaced the old one, Rubles became lessacceptable for making purchases. The acceptance of the ration coupons made themthe unofficial currency of Ukraine.Today Ukraine’s currency is the Hryvnia. In recent years, in an effort to expand thecountry’s economic development, the World Bank has provided Ukraine withseveral major loans. Two of these were designed to improve agriculturalproductivity and to expand food product exports. Ukraine’s rich soil is well suited togrowing grains, sugar beets, vegetables and other farm products.Questions:1. What problems can occur in an economy that does not have enough money incirculation?2. What made the ration coupons valuable in the Ukrainian economy?3. What made the Russian Ruble less acceptable among Ukrainians?----The End----