Kodak started selling photographic equipment on Japan 1889 and by 1930s it had the dominant position in the Japanese market. But after World War II, U.S occupation forces persuaded most U.S companies including Kodak to leave Japan to give war torn local industry a chance to recover. Kodak was efficiently priced out of the market by tariff barriers; over next 35 years Fuji gained 70% share of market where as Kodak saw its share slip to miserable 5%. During this period Kodak limited much of its activities in Japan.
This situation persisted till early 1980s when Fuji launched an aggressive export drive, attacking Kodak in the north American and European markets. Deciding that a good offence is the best defense, in 1984 and the next six year, Kodak outspent Fuji in Japan by the ratio of more than 3 to 1. It erected mammoth $ 1 million near signs as land marks in many of the Japan’s big cities and also sponsored Sumo wrestling, Judo, and tennis tournaments and even Japanese team at the 1988 Seoul Olympics. Therefore Kodak has put Fuji on defensive, forcing it to divert resources from overseas to defend itself at home. By 1990’s, some of Fuji’s best executives had been pulled back to Tokyo.
All this success, though, was apparently not sufficient for Kodak. In may 1995, Kodak filed a petition with the US trade office, which accured the Japanese government and Fuji of “Unfair trading practices”. According to the petition, Japanese government helped to create a ‘ profile sanctuary’ for Fuji in Japan by systematically denying Kodak access to Japanese distribution channels for consumer film and paper. Kodak claims Fuji has efficiently shut Kodak products out of four distributors which have a 70% share of the photo distribution market. Fuji has the equity position in two of the distributors, gives large year –end relates and cash payments to all four distributors as the reward for their loyalty to Fuji, and owns stakes in the banks that finance them. Kodak also claims that Fuji uses same tactics to control 430 wholesale photo furnishing labs in Japan to which it is the exclusive supplier. Furthermore Kodak’s petition claims that Japanese government has actively encourages these practices.
But Fuji a similar counter arguments relating to Kodak in U.S. and states bluntly that Kodak’s charges are clear case of the pot calling the kettle back.
(a) What was critical catalyst which led Kodak to start taking the Japanese market seriously?
(b) From the evidence provided in the case do you think Kodak’s charges of unfair trading practices against Fuji are valid? Support the answer.
Two senior executives of world’s largest firms with extensive holdings outside home country speak.
Company A : “We are a multinational firm. We distribute our products in about 100 countries. We manufacture in over 17 countries and perform research and development in three countries. We look at all latest investment projects both domestic and overseas using exactly similar criteria”.
Execution from company A continues, “of course the most of the key ports in our subsidiaries are held by home country nationals. Whenever replacements for these men are sought, it is the practice, if not the policy, to look next to you at the lead office and pick someone (usually a home country national) you know and trust”.
Company B : “ We are multinational firm. Our product division executives have worldwide profit responsibility. As our organisational chart shows, united states is just one region on a par with Europe, Latin America, Africa etc, in each division”.
Executive from Company B goes on to describe, “The worldwide Product division concept is rather difficult to execute. Senior executives’ in charge of this division have little overseas experience. They have been promoted from domestic ports and tend to view foreign consumers requirements as really basically similar as ours. Also, product division executives tend to focus on domestic market, as it generates more revenue than foreign market. Rewards are for global performance, but strategy is to focus on domestic. Most of the senior executives simply do not understand what happens overseas and really do not trust foreign executives, even those in key portions?
(a) Which company is truly Multinational ? Why?
(b) Describe three differences between Company , Multi National company and Trans Multi National Company ?
CASE - 3
Strategic R & D by TNCs in Developing Countries
TNCs have had long units in developing host countries for adapting products and processes to local conditions, and in a some cases, to products for local markets. Since the min-1980s, though, they have also began locating strategic R & D centres in few developing countries, for developing generic technologies and products for regional or global markets. The major incentives for this are : (a) access to highly qualified scientists as shortages of research personnel emerge in some fields in industrialised countries, (b) Cost differentials in research salaries between developing and industrialised countries, and (c) rationalisation of operations, assigning particular affiliates the responsibility for developing, manufacturing, and marketing particular products worldwide. The latest trends are more visible in industries dealing with latest technologies, like microelectronics, biotechnology, and new materials. In these technologies, location of R & D can be geographically de-linked more easily from location of manufacturing. It is also possible to separate R & D in core activities from that in non-core activities. Consequently, countries like India, Israel, Singapore, Malaysia or Brazil serve TNCs as good locations for strategic R & D.
For ex, Sony Corporation of Japan has around nine R & D units in Asian developing countries. It has three units in Singapore conducting R & D on core components like optical data shortage devices, integrated chip design for audio products and CD-ROM drives, and multimedia and microchip software. It has three units in Malaysia working on video design, derivative models and circuit blocks for new TV chases, radio cassettes, discman and hi-fi receiver designs. It has one unit in Republic of Korea focusing on the design of compact discs, radio cassettes, tape recorders, and car stereos. It has one in Taiwan designing and developing video tape-recorders, minidisk players, video CDs, and duplicators. At last, it has one unit in Indonesia focusing on the design of audio products.
Such units often work in collaboration with science and technology institutes in the host country. For ex, Daimler Benz has established such a unit in Bangalore, India, in collaboration with Indian Institute of Science to work on projects related to its vehicles and avionics business. Present work includes interface design of avionics landing systems and smart GPS sensors for use by the group’s business worldwide.
Source: World Investment Report 1999.
(a) Describe why MNCs have located R & D centres in developing countries?
(b) Mention areas where R & D activities could easily be decentralised.
VK Ltd a multi-product Company, furnishes you the following data relating to the year 2000.
First Half of the year Second Half of the year
Sales Rs. 45,000 Rs. 50,000
Total Cost Rs. 40,000 Rs. 43,000
Suppose that there is no change in prices and variable costs and that fixed expenses are incurred equally in two half years periods compute for the year 2000.
(a) The Profit Volume ration
(b) Fixed Expenses
(c) Break-Even Sales
(d) Percentage of margin of safety.