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A
GLOBAL / COUNTRY STUDY AND REPORT
ON
“Japan”
Submitted to
Gujarat Technological University
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ASMINISTRATION
Faculty Guide
Mr. V S Gupta, Assistant Professor
Mr. S V Rana, Assistant Professor
Mr. R M Mahida, Assistant Professor
Submitted By: Batch: 2011-13
MBA SEMESTER III/IV
---------------------------------------------------------------------------------------- The Mandvi Education Society Institute of Business Management &
Computer Studies, Mandvi
MBA Programme Affiliated to Gujarat Technological University, Ahmedabad
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Preface
We undertake writing this report of the specialization report because we all are of the few
students who are presently undertaking education in the field of management for master of
business administration which covers total business activities.
As a student of management, we must be encouraged by the growth and rapid development
taken place in the global market. In India, management is growing body. Keeping in mind the
ever development field of management and great demand for marketing in our country, the
university has arranged specialized programs in many field of management. Thus, this is our
moral and obligatory duty to take this part of our studies with great enthusiasm and
seriousness and give it a due importance.
The report gives information about various aspects of Japan country; the report contains
political, economic and technological environment of Japan based company.
I hope this report will help both the evaluator as well as reader.
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Acknowledgement
We have taken efforts in this project. However, it would not have been possible without the
kind support and help of many individuals and organizations. I would like to extend our
sincere thanks to all of them.
We are highly indebted to Gujarat Technological University for their guidance and constant
supervision as well as for providing necessary information regarding the project & also for
their support in completing the project.
We would like to express our gratitude towards my parents & member of The Mandvi
Education Society governed MBA Programme for their kind co-operation and encouragement
which help us in completion of this project.
We would like to express our special gratitude and thanks to industry persons for giving us
such attention and time.
Our thanks and appreciations also go to our colleague in developing the project and people
who have willingly helped us out with their abilities.
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―ECONOMICS PERSPECTIVE OF JAPAN‖ includes the study of the economic indicators
of Japan such as
1. Industrial policy
2. Fiscal policy
3. Gross domestic product
4. Foreign exchange rate &
5. Balance of payment
As Japan is the world‘s second largest economy after the USA, accounting for nearly one
fifth of world GDP and more than two thirds of East Asian GDP. Its individual regions alone
constitute major Asian markets in their own right. Increasingly the Japanese economy is
feeling the impact of international forces. Japanese companies are the fastest growing group
among the world‘s 100 most internationalised companies (ranked by foreign assets),
increasing from 11 in 1990 to 19 in 1994 (United Nations 1996a). Furthermore, the Ministry
of International Trade and Industry (MITI) expects Japan‘s overseas manufacturing
production to soon exceed the value of its exports. Japanese foreign direct investment (FDI)
totalled US$240 billion between 1988 and June 1996. It has focused on developing offshore
markets and maintaining markets at home for products that can be manufactured more
competitively abroad.
Ministry of International Trade and Industry (MITI) has been instrumental for the economic
growth and has encouraged dynamic manufacturing network. MITI has orchestrated strong
telling for ―businesses what to do‖. The Japanese economy has achieved high
industrialization and maturity, due to the role of MITI which has also diversified into
environment like energy saving, safety standards, trade negotiation, intellectual property
rights, regional cooperation and so forth. The overall influence of MITI on Japanese
industries declined due to large private firms to become competitive in nature and to be
globalized. In 2001, the government reorganized MITI into the Ministry of Economy, Trade
and Industry (METI).
NEDO is Japan‘s largest core organization to promote national level R&D projects that
individual private enterprises can not undertake by themselves (due to high risk and
requirement of integration of diverse technologies). It utilizes its extensive network to
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support cooperation between industry, universities and public research organizations along
with the application of public funding in the areas of electronics and information technology,
machinery systems technology, aircraft and space technology, nanotechnology and materials
technology, Biotechnology and medical technology, chemical substance management
technology, fuel cell and hydrogen technology, and energy and environment technology.
Japan's industrial networks operate efficiently in gathering world-wide economic and
political intelligence. Findings are often publicly available, but the potential value of such
resources remains largely unrecognised in the West Due to the persistent trade surpluses, the
Japanese central government is formulating policies more favourable to foreign investment.
Japan's fundamental infrastructure is solid and well-developed overall, but many major cities
face considerable exposure to a potential for disaster via earthquake and associated fires.
Thus there are numerous challenges ahead. But two major characteristics of the Japanese
people are pragmatism and perseverance - and these will no doubt assist greatly in the future
weathering of shock and change.The Japanese economy struggled with the aftermath of the
burst ‗bubble‘. Excessive investment, excessive employment, and mounting and excessive
lending and over-burrowing that had piled up during the bubble development period had
resulted in excess capacity and mounting non performance loans. The necessary stock
adjustment of this ‗excess‘, however has been delayed in consideration of job security , this
delay in adjustment resulted in long lasting stagnation, persistent deflation , and financial
crises , in spite of massive expansion of government expenditures and the money supply .
This , in turn created a public domestic debt overhang. In order for the Japanese economy to
get of this trap, a comprehensive strategy and bold structural reforms are indispensable.
There are about five hub organization with specifically designs and capabilities to carry out
METI‘s various industrial policy functions, namely New Energy and Industrial Technology
Development Organization (NEDO) Advanced Science and Technology (AIST),
manufacturing Science and Technology Center (MSTC), Small & Medium Enterprises and
Regional Innovation, (SMRJ) and Singapore Bioimaging Consortium (SBIC), these are the
main functioning and sound foundation for new alliance among government , industry and
academia in promoting Japan‘s overall industrial technology R&D and commercialization
activities.
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Following the Meiji restoration, Japanese trade with the rest of the world increased
dramatically. From a base of essentially nil at the time of Admiral Perry's first visit in 1853,
exports rose to approximately 15% of GDP shortly after the turn of the century and to over
20% of GDP by the 1920s.1 For most of the nineteenth century, however, Japan was not on
the gold standard. From 1867 to 1878, the Japanese monetary system was effectively a
system of fiat currency and floating exchange rates. From 1878 until 1897, when Japan did
finally adopt gold, Japan both de jure and de facto was on a silver standard. The result was a
continuation of floating rates relative to the gold standard world.
WITH their overnight-lending rates at zero for most of the past decade, the Japanese public
long ago stopped caring about interest rates. Instead the yen is their focus. Shoppers may
revel in its current strength against the dollar but in the news media, the financial markets and
corporate Japan; it is a relentless source of woe. Carlos Ghosn, the boss of Nissan and
Renault, publicly lambasts it as a ―1,000-pound gorilla‖ that hurts his ability to sell Japanese
cars abroad. Its strength is increasingly becoming a political issue, too. Both the Bank of
Japan (BoJ) and the finance ministry have taken steps recently that analysts believe are
surreptitiously aimed at the currency markets. On April 27th the BoJ increased the size of its
asset-purchase programme by ¥5 trillion ($62 billion), and extended the maturity limit of
government bonds it would buy from two to three years. That enhanced easing measures
introduced in February which sharply weakened the yen.
This flexibility in exchange rates enabled Japan to avoid the deflation that prevailed in
Britain, America, and other countries on gold during these years. Over the subperiod 1874 to
1887 Japanese wholesale prices showed virtually no net change, earlier inflation being offset
by later deflation. Over the later sub period 1888 to 1896, they actually rose by 35%. In the
United States, wholesale prices declined by slightly over 40% between 1874 and 1887 and by
another 21% between 1888 and 1896. In Britain, the deflation followed a largely similar
pattern, cumulative declines in wholesale prices of 41% and 11% in the two subperiods,
respectively.
With World War II came the disruption of international transactions, breaks in the official
yen exchange-rate data and substantial increases in price levels around the world. In Japan,
the inflation was severe. Between 1940 and 1949 Japanese wholesale prices increased by a
multiple of 127, or at a continuously compounded average annual rate of increase of 53.8%.
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Relative to American and British wholesale prices, this translated into (continuously
compounded) cumulative increases in excess of 400%. In 1948, when official data for yen
exchange rates become available, its value relative to the dollar had fallen from the 4.35 yen
per dollar rate in place in 1940 to 160 yen per dollar. By 1950, in the face of continued strong
inflation, it reached 361 yen per dollar, roughly the rate maintained for the remainder of the
Bretton Woods era. Then in 1971, in the face of monetary excesses in the United States, the
reserve-currency country, the Bretton Woods system broke down and the current float began.
The Gross Domestic Product (GDP) in Japan contracted 0.90 percent in the third quarter of
2012 over the previous quarter. GDP Growth Rate in Japan is reported by the The Cabinet
Office. Historically, from 1980 until 2012, Japan GDP Growth Rate averaged 0.5 Percent
reaching an all time high of 3.2 Percent in June of 1990 and a record low of -3.9 Percent in
March of 2009. Japan's industrialized, free market economy is the second-largest in the
world. Its economy is highly efficient and competitive in areas linked to international trade,
but productivity is far lower in protected areas such as agriculture, distribution, and services.
Japan's reservoir of industrial leadership and technicians, well-educated and industrious work
force, high savings and investment rates, and intensive promotion of industrial development
and foreign trade produced a mature industrial economy. Japan has few natural resources, and
trade helps it earn the foreign exchange needed to purchase raw materials for its economy.
Balance of payments accounts, Japan has traditionally run a deficit in services. Trade in
services includes transportation (freight and passenger fares), insurance, travel
expenditures, royalties, licensing fees, and income from investments. The deficit in services
rose steadily from US$99 million in 1960, to nearly US$1.8 billion in 1970 and to more than
US$11.3 billion in 1980 which can be attributed to rising royalty and licensing payments for
Japan's acquisition of technology from other industrial countries and to rising deficits in the
trade-related services of transportation and insurance. The transportation deficit rose after the
1960s, as rapidly climbing labor costs made Japanese-flag vessels less competitive, leading to
greater use of foreign-flag carriers (including many flag of convenience vessels actually
owned by Japanese interests).
The idea that MITI‘s industrial policy was a cause of Japan‘s growth does not bear close
scrutiny. Any industrial policy that promotes one industry is necessarily a policy against other
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industries. For industrial planning to succeed, it must identify, better than markets do, which
industries should be favored. In a FREE MARKET, competitive bidding dictates how capital and
labor are allocated, and PROFITS and losses reveal what adjustments should be made.
Information about which industries should exist is revealed only through the market‘s process
. Industrial policy rigs the market to enlarge some industries at the expense of others, thus
undermining the process that generates the relevant information. Industrial policy faces the
same knowledge problem as socialist planning: neither central planners nor anyone else can
know the optimal industrial structure before the market produces it. Attempts at industrial
planning are likely to hinder development by promoting incorrect industries. MITI was no
exception.
Economic Indicators In Japan
1. Gross domestic product (purchasing power parity):
Gross domestic product refers that all the goods and services produced within a country. A
GDP at purchasing power of parity of the nations is all sum totals of goods and services
produced in the country valued at pricing prevailing in the United States.
Gross domestic product (purchasing power parity) - (Billion $):
Year 199
9
200
0
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
Amoun
t
295
0
315
0
355
0
358
2
374
5
402
5
421
8
427
2
432
9
414
9
431
0
449
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2. Inflation rate:
Inflation rate refers the percentage changes in consumer prices compared with the previous
year's consumer prices. The historical data is as follows.
Inflation rate (%)
Year 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Rate -0.8 -0.7 -0.9 -0.3 -0.1 -0.3 0.3 0.1 1.4 -1.4 -0.7 -0.3
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3. Exports:
Exporting refers to the sale of goods of services produced by a company based in one country
to customers that reside in a different country.
Exports (Billion $)
Year 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Amount 413 450 383.8 383.5 447.1 538.8 550.5 590.3 746.5 545.3 765.2 788
*figures are calculated on exchange rate bases.
4. Imports:
It refers the purchase of goods or services by a company based in one country from sellers
that reside in another.
Imports (Billion $)
Year 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
amount 306 355 292.1 292.1 346.6 401.8 451.1 524.1 708.3 501.6 636.8 808.4
5. Unemployment rate:
It refers the percentage of the labor forces that are without job.
Unemployment rate (%)
Year 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Rate 4.7 4.7 5.4 5.3 4.7 4.4 4.1 3.8 4 5.1 5.1 4.6
6. Industrial production growth rate (%)
It includes manufacturing, mining, and construction activities.
Year 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Rate -0.1 5.3 -1.4 3.3 6.6 1.5 3.3 1.3 -2 -17 15.5 -3.5
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7. Reserves of foreign exchange and gold (US$)
Reserve of foreign exchange and gold shows the dollar value for the stock of all financial
assets that are available to the central monetary authority for use in meeting a country's
balance of payments needs as of the end-date of the period specified.
It is not includes only foreign currency and gold, but also a country's holdings of Special
Drawing Rights in the International Monetary Fund, and its reserve position in the Fund.
Year 2003 2005 2006 2007
Amount
($) 664,600,000,000 835,500,000,000 864,700,000,000 954,100,000,000
Year 2008 2009 2010 2011
Amount
($) 1,011,000,000,000 1,024,000,000,000 1,096,000,000,000 1,259,000,000,000
8. Manpower available for military service
year 2000 2001 2002 2003 2004 2005 2008 2010
Numb
ers
30,259,25
0
29,926,6
10 29,644,500
29,392,5
60
29,179,10
0
27,003,11
0
27,819,8
00
27,301,4
40
This entry shows the number of males and females falling in the military for the country.
9. Military expenditures - percent of GDP
It shows the total spending on defense programs for the most recent year available as a
percent of gross domestic product (GDP).
Year 1998 2001 2002 2003 2004 2005 2006
Rate (%) 0.9 1 1 1 1 1 0.8
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Japanese legend maintains that Japan was founded in 600 BC by the Emperor Jimmu, a direct
descendant of the sun goddess and ancestor of the present ruling imperial family. In the
earliest eras of historic Japan there existed a hereditary corporation of raconteurs (Katari-be)
who, from generation to generation, performed the function of reciting the exploits of the
sovereigns and the deeds of heroes.
The "Meiji restoration" of 1868 initiated many reforms. The feudal system was abolished,
and numerous Western institutions were adopted, including a Western legal and educational
system and constitutional government along parliamentary lines. In 1898, the last of the
"unequal treaties" with Western powers was removed, signalling Japan's new status among
the nations of the world. In a few decades, by creating modern social, educational, economic,
military, and industrial systems, the Emperor Meiji's "controlled revolution" had transformed
a feudal and isolated state into a world power.
Two diplomatic issues dominated Japanese foreign policy during the Meiji period. Revising
the unequal treaties, namely regaining tariff autonomy and abolishing extraterritoriality, had
dominated Japanese relations with the West since the late 1850s, and settling the status of
Korea stood at the centre of Japanese military strategy. The two were interrelated, and their
resolution during the final two decades of the Meiji period would contribute to the ambiguity
of Japan‘s position in the world in the twentieth century.
Unlike the American political system and the British political system which essentially have
existed in their current form for centuries, the present Japanese political system is a much
more recent construct dating from Japan's defeat in the Second World War and its subsequent
occupation by the United States. The post-war constitution of 1947 is an anti-militarist
document which includes the renunciation of the right to wage war and prohibits the
maintenance of armed forces although later a limited self-defence force was permitted.
The constitution was drawn up under the Allied occupation. It is a rigid document and, since
its adoption, no major amendment has been made to it.
Unquestionably Japan is a democratic country, but it is a very different kind of democracy to
that prevailing in most of Europe in countries like France and Germany The single most
important reason for this is the dominant position of one party – the Liberal Democratic Party
– which held power almost unbroken for more than 50 years.
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Japan today is a very complex and well developed country with many large international
business located within Japan and around the world. The Japanese government is also quite
interesting in that it is more habitable with the British system than that of the United States. It
consists mainly of ―The Diet as the Legislative Branch of Government, The Cabinet and the
Executive Branch of the Government, and The Supreme Court‖ (Governmental Structure of
Japan).
Firstly, the Diet is a ―name used to refer to the national parliament of Japan, as a translation
of the Japanese name Kokkai‖ (National Diet – Japan‘s Government). As stated in Japan‘s
Constitution, ―Japan manifested a system of representative democracy in which the Diet is
the lithe highest organ of state power, and this came into effect in 1947‖ (Government
Structure of Japan). The National Diet is made up of two houses, the House of
Representatives, and the House of Councillors. The House of Representatives is composed of
480 members, and their term of office lasts 4 years, but can be terminated before the full term
is up. The House of Councillors consists of 242 members, and their term in office lasts 6
years (Fundamental Structure of the Government of Japan). Both of these houses have equal
power with the very rare exception in some cases in which the decision of the House of
Representatives overrules that of the House of Councillors.
Secondly, there is The Cabinet and The Executive Branch of the Government which
executive power is granted to, and consists of the Prime Minister and no more than 17
Ministers of State, who are collectively responsible to the Diet (Fundamental Structure of the
Government of Japan). The Prime Minister of Japan is selected by the Emperor, who is said
to be ―the symbol of the state and of the unity of the people, the current Emperor is Akihito‖
(The Emperor of Japan). The Prime Minister is the one who appoints the Ministers of State
and may dismiss them as he chooses. The Prime Minister reports to the Diet on things such as
general national affairs and foreign relations (Fundamental Structure of the Government of
Japan).
The third branch of Japan‘s Governmental structure is the Supreme Court. ―The whole
judicial power is vested in the Supreme Court, and in such inferior courts as High Courts,
District Courts, Family Courts and Summary Courts‖ Fundamental Structure of the
Government of Japan).
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―The Japanese political system has three major types of elections that are similar to the
United States and other governments. General elections to the House of Representatives held
every four years, elections to the House of Councilors held every three years to choose one-
half of its members, and local elections held every four years for offices in prefectures, cities,
and villages. The minimum voting age for persons of both sexes is twenty years; voters must
satisfy a three-month residency requirement before being allowed to cast a ballot. For those
seeking office, there are two sets of age requirements: twenty-five years of age for admission
to the House of Representatives and most local offices, and thirty years of age for admission
to the House of Councillors and the prefectural governorship.‖
World Wars I and II skyrocketed Japan‘s economy. It became the world‘s second largest after
the Second World War, making it one of the world‘s most powerful countries. The next
notable phase of Japanese politics was in 1955, when the conservative Liberal Democratic
Party (LDP) was established and became the largest political party. The history of the
Japanese political and trade systems have been diverse and ever changing entities. The future
is sure to bring about an evolved state of government for the people in the land of the rising
sun.
Today Japan has a Parliamentary Government consisting of three separate branches: The
executive branch, legislative branch, and the judicial branch. Japan‘s legislature is also
known as the National Diet of Japan. They direct the emperor to appoint and remove chiefs
of the executive and judicial branches. (ms.cc, 2007) It is said to be the most potent of the
three branches consisting of two houses: the House of Representatives and the House of
Councillors. (ms.cc, 2007) The legislative branch has the ability to pass bills into laws. The
House of Representatives first passes the bills into laws which are later reviewed by the
House of Councillors.
After World War II the Japanese government became active participant in industrial policy
making. There have been three main elements that have been involved in the industrial
policies in Japan. The first is that the manufacturing sector became more competitive.
Secondly, the industry was restructured in a way which resources were shifted to specific
industries so that more value was inputted in their processes. ―The third element was
aggressive domestic and international business strategies,‖ When the policies were enforced
initially, there was credible testimony that it was successful in the business sectors.
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In Japanese political system they are more emphasis to believe in equanimity and Socio-
political movements which claimed to represent the interests of disadvantaged groups in
Japanese society, including women, minorities and industrial workers.
The Japanese social system revolves around the concepts of Ie and Uchi. In the city of Tokyo,
class is divided by the sections of Shitamachi and Yamanote. Although the first two are
spatial terms and describe whether one is in a corporate or informal setting, and the latter two
are districts that house blue and white-collar workers, they are all weaved together to create a
culture that Dorinne Kondo comes to appreciate in Crafting Selves.
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The mission of the Center of the History of Japanese Industrial Technology is to put the
history of technology to work in the service of the future. After world war II, Japan
entered an era of unprecedeted economic growth. This growth did not spring out of
nothing; it was built on a solid foundation of industrial technology erected during hte
Meiji era (1868-1912).
The networked bank has three components. The first component includes the access channels
that link tje consumer to the bank—ATMs, telephones, PCs, and bank tellers. Control over
these channels rests in the hands of consumers and of third-party providers, such as on-line
services. The second component is the ―customer information and relationship management
system,‖ the bank‘s data base tracking customer activities to glean information about
customer preferences.
Nathan Resenberg examines the relationship between uncertainty, technological change,
and economic growth. Rosenberg‘s approach to the topic is, he admins, anecdotal; but he
discusses many of the most important innovations of this century, demonstrating the
influence of uncertainty for technologies that have had tremendous economic impact.
Not exist at the time invention A is introduced. Take, for example, the use of lasers in
communications. Only upon the development of fibber optics, and upon understanding
how laser light could be transmitted through fibber optic cable, did lasers become a
viable communications medium. When the success of the innovation depends upon a
system of complementary innovatins, as may be the case with computer technology, the
length of the genstation period from inception to a full menu of uses may be decades.
J. Bradford De long’s paper attempts to explain wwo striking observations about the
cross-country distributions of living standards and growth. The first is that the cross-
country disparity of per capita real incomes has increased markedly over the past two
centuries. The second is that the growth rates of real income in individual countries seem
to be converging to the pace that is consistent with their rates of investemnt and
population growth (as documented in the work of Ball, Manis, and Romer 1988).
Technological progress in developing countries between the 1990s and 2000s has been
very strong. It has outpaced progress in developed countries by more than 100 percent in
some cases. But the technology gap between rich and poor countries is still very wide.
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Rich and poor countries while the level of technology used in all countries has increased
rapidly, it has done so quicker in developing countries and quickest in low-income
countries. (Of course, the initial level of technology in lower-income countries was much
lower to begin with.)
Alan Greenspan‘s address focuses on human reactions to the structural changes caused
by modern computer and telecommunications technologies. Pointing to the paradoxical
pervasiveness of insecurity and malaise in a period of extended economic growth,
restrained inflation, and a comparatively low layoff rate, he examines the origins of this
anxiety and suggests ways of alleviating it. He sees modern societies as having evolved
from a time when the creation of economic value depended on physical brawn and
physical product to the present when ideas are the critical input
Since 1982, household ownership of consumer durables has grown at an annual average
rate of 3.3 percent a year, a slightly faster rate than in the 1960s and 1970s. Moreover,
according to data provided by Stephanie Shipp and her colleagues at the Bureau of
Labour Statistics, while ownership of consumer durables clearly rises with income, the
distribution of ownership rates across income groups for cars and many appliances
actually became more equal between 1980 and 1994.
These expenditures. First, where government is the primary purchaser of public goods,
like national defence or space exploration, the government clearly bears primary
responsibility for promoting related technological change. In addition, much federal
R&D is directed towards basic research because market failures or spill over could cause
private sector investment to fall short of socially optimal levles.
Trends in Japanese Technological Industries:
SURFING IN THE RAIN
WORLD’S SMALLEST HUMANOID ROBOT
THE MIND-READING ROBOT
HELP FOR THE HEART
SUPER-POWERED CABLE
THE RUNNING ROBOT
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Michel Porter‘s Five Force Analysis
1. Bargaining Power of Suppliers
The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods
or services.
Supplier bargaining power is likely to be high when:
The market is dominated by a few large suppliers rather than a fragmented source of
supply,
There are no substitutes for the particular input,
The suppliers customers are fragmented, so their bargaining power is low,
The switching costs from one supplier to another are high,
There is the possibility of the supplier integrating forwards in order to obtain higher
prices and margins. This threat is especially high when
The buying industry has a higher profitability than the supplying industry,
Forward integration provides economies of scale for the supplier,
The buying industry has low barriers to entry.
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In such situations, the buying industry often faces a high pressure on margins from their
suppliers. The relationship to powerful suppliers can potentially reduce strategic options for
the organization.
2.Bargaining Power of Customers
Similarly, the bargaining power of customers determines how much customers can impose
pressure on margins and volumes.
Customers bargaining power is likely to be high when
They buy large volumes, there is a concentration of buyers,
The supplying industry comprises a large number of small operators
The supplying industry operates with high fixed costs,
The product is undifferentiated and can be replaces by substitutes,
Switching to an alternative product is relatively simple and is not related to
high costs,
Customers have low margins and are price-sensitive,
Customers could produce the product themselves,
The product is not of strategical importance for the customer,
The customer knows about the production costs of the product
There is the possibility for the customer integrating backwards.
3.Threat of New Entrants
The competition in an industry will be the higher, the easier it is for other companies to
enter this industry. In such a situation, new entrants could change major determinants of
the market environment (e.g. market shares, prices, customer loyalty) at any time. There is
always a latent pressure for reaction and adjustment for existing players in this industry.
The threat of new entries will depend on the extent to which there are barriers to entry.
These are typically
Economies of scale (minimum size requirements for profitable operations),
High initial investments and fixed costs,
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Cost advantages of existing players due to experience curve effects of
operation with fully depreciated assets,
Brand loyalty of customers
Protected intellectual property like patents, licenses etc,
Scarcity of important resources, e.g. qualified expert staff
Access to raw materials is controlled by existing players,
Distribution channels are controlled by existing players,
Existing players have close customer relations, e.g. from long-term service
contracts,
High switching costs for customers
Legislation and government action
4. Threat of Substitutes
A threat from substitutes exists if there are alternative products with lower prices of better
performance parameters for the same purpose. They could potentially attract a significant
proportion of market volume and hence reduce the potential sales volume for existing
players. This category also relates to complementary products.
Similarly to the threat of new entrants, the treat of substitutes is determined by factors like
Brand loyalty of customers,]
Close customer relationships,
Switching costs for customers,
The relative price for performance of substitutes,
Current trends.
5 Competitive Rivalry between Existing Players
This force describes the intensity of competition between existing players (companies) in
an industry. High competitive pressure results in pressure on prices, margins, and hence,
on profitability for every single company in the industry.
Competition between existing players is likely to be high when
There are many players of about the same size,
Players have similar strategies
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There is not much differentiation between players and their products,
hence, there is much price competition
Low market growth rates (growth of a particular company is possible only
at the expense of a competitor),
Barriers for exit are high (e.g. expensive and highly specialized equipment).
BARGANING POWER OF BUYERS IN TELECOMMUNICATION INDUSTRY
COMPARISON BETWEEN JAPAN AND INDIA:
JAPAN
Rank within the world in network size is third once u. s...
Country had 122.44 million cellular phone subscribers (out of a complete population
of 128 million).
Mobile phones penetration is at approx seventy fifth.
Japanese main players in the communication market:
The cell phone market is dominated by breaking down the quantity to individual‘s carrier, in
keeping with (TCA) telecommunication carrier associates the main players are:
NTT DoCoMo (54.6% of the market),
KDDI (28.9%)
Softbank (16.5%).
Softbank Mobile gained 239,000 new subscribers on a web basis in August,
transportation the whole to twenty six.62 million.
NTT Docomo came in second with 182,100 subscribers gained (total: fifty eight.79
million).
E-mobile gained seventy five,000 new customers (total: three.42 million).
KDDI -au attracted seventy three,000 subscribers (total: thirty three.53 million).
27
Willcom gained fifty five,100 subscribers (total: four.1 million).
All major Japanese client physics firms like Matushita , NEC , Mitsubhishi ,Sony, and Fujitsu
turn out cellular handsets . The leading international telephone manufactures, Ericsson,
Nokia, and Motorola have conjointly recently entered the japanese telephone market, this
shows the mixing of market to win the property
HIGH EXIT BARRIER:
About 97%of Japan‘s 130million subscribers use 3G services. Even conjointly Japan has
become the fourth country within the world to deploy future evolution(LTE) technology in
2010 with DoCoMo‘s competitors to launch in 2013.
E –mobile operator American state noninheritable by Softbank .
And over over one hundred million net users have embraced I phones, good phones, and
tablets.
New operator UQ Communications, during which KDDI is that the largest investor,
continuing its WiMAX rollout and had over four million subscribers going into 2013;
COMPETITORS ANALYSIS
Source: NTT DoCoMo
28
Internet, broadband, IP telephony and telecoms statistics for Japan – 2010 - 2013
Sector 2010 2011 2012 2013 (e)
Internet users (million) 94 95 96 97
Internet penetration rate 74% 74% 76% 77%
Broadband subscribers 34 37 39 42
Mobile internet users 95 101 105 108
Fixed-line subscribers 43 39 35 33
Mobile phones 112 120 129 135
(Source: BuddeComm based on various sources)
TCA –Telecommunication Carrier Association
The Telecommunications Carriers Association (TCA) of Japan has free a group of statistics
on Japan‘s mobile market nowadays, showing that the country had 122.44 million cellular
phone subscribers last month (out of a complete population of 128 million). in keeping with
the organization, Japan‘s carriers additional 569,200 new customers between July and
August.
Breaking down the quantity to individual carriers, the TCA aforementioned that:
Softbank Mobile gained 239,000 new subscribers on a web basis in August,
transportation the whole to twenty six.62 million
NTT Docomo came in second with 182,100 subscribers gained (total: fifty eight.79
million)
Emobile gained seventy five,000 new customers (total: three.42 million)
KDDI au attracted seventy three,000 subscribers (total: thirty three.53 million)
Willcom gained fifty five,100 subscribers (total: four.1 million)
29
Sailing the Blue Ocean
The DoCoMo case deals with a firms quest to ace the extremely competitive market
with the assistance of the market pioneers.
As a technology and telecommunication based mostly trade in an exceedingly
extremely evolved and mature sell was inevitable to explore new white areas.
DoCoMo set to enter the info service supplier house and was sure-fire in grabbing the
hand movers advantage and also the market share.
This was attainable with its in depth understanding of the market and novelty of their
proposition.
i-mode ?
Service across a wireless network that allows hand-held devices (such as cell phones)
to access the web.
Mobile net service offered by NTT DoCoMo Introduced in Gregorian calendar month
1999.
Extraordinarily common in Japan and increasing into Europe as of March thirty first,
2002, there ar around thirty two,150,000 subscribers (in Japan) fast Note: fancied by
Mari Matsunaga.
What am i able to do With i-mode?
Web-browsing
Email (the ―killer app‖)
Chat, Games eating house Guide, phonephone Directory… News updates, sports
news, stock quotes… ▫ information Content cash Transfer, Balance Check, price
tag Reservation… ▫ data Content
Access to data ▫ group action Content
30
INDIA
Rank within the in network size is seventh.
.SUBSCRIBERS
India contains a total of 960.9 Million telecommunication subscribers consists of nine29.37
mobile subscribers & thirty one.53 wire-line subscribers.
The Indian telecommunication density currently stands at seventy nine.28%.
MAJOR PLAYERS OF INDIAN TELECOMMUNICATION TRADE
Telecom firms in Republic of India
Market leader – Airtel
Market contender – reliance , Vodafone, bsnl
Market follower – Tata , Idea
UNDIFFERENTIATED PRODUCT
The product in telecommunication market ar comparatively uniform, product, service
and technology innovations ar simply traced by the competitors.
Price sensitivity of patrons: uniform providing makes buyers value sensitive. Price
Sensitivity of the patrons induces a continuing threat of price battle within the trade.
Hence, this issue is negative for the trade.
BUYER CONCENTRATION (posing a threat):
31
Undifferentiated offerings makes patrons value sensitive, value sensitivity induces
patrons.
Most of patrons ar focused in urban India; teledensity in populated area is 119%
wherever as in geographical region the teledensity is fifty three. thus geographical
region is unattractive for the trade.
BARGAINING POWER OF patrons (HIGH)
Buyer power is one among forces that influence the appropriation of the worth created by
associate trade. the foremost vital determinants of emptor power ar the scale and also the
concentration of consumers. different factors ar the extent to that the patrons ar advised and
also the concentration or differentiation of the competitors. Kippenberger (1998) expressed
that it\'s usually helpful to differentiate potential emptor power from the buyer\'s disposition
or incentive to use that power, disposition that derives principally from the ―risk of failure‖
related to a product\'s use.
his force is comparatively high wherever there a number of, giant players within the
market, because it is that the case with retailers a grocery stores;
Present wherever there\'s an oversized variety of uniform, little suppliers, like little
farming businesses supply giant grocery companies;
In the context of Indian telecommunication trade we are able to say that the subsequent points
influence the customer power:
Lack of differentiation among the service supplier
Cut throat competition
Customer is value sensitive
Low change prices
Number movability to possess negative impact
Strategy of try the talks Power of client
Keeping the worth in keeping with market level.
32
Providing the best quality of service.
Providing best client service.
Providing price additional services at competitive value.
Providing up to this point technology.
Providing wide selection of product and services
SUGGESTIONS
Keep the worth lowest in market.
Actively participate in analysis and development activities to supply new technology.
Try to keep up the distinctiveness of product as long as attainable.
Try to be market leader in product and repair vary offerings.
Try to eliminate the intermediaries concerned in providing merchandise and services
to scale back the price
Source:http://www.businessteacher.org.uk/free-finance-essays/indian-telecom-
sector.php#ixzz2QLQ
BARGAINING POWER OF SUPPLIERS IN INDIA
Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier
power typically focuses first on the relative size and concentration of suppliers relative to
industry participants and second on the degree of differentiation in the inputs supplied. The
ability to charge customers different prices in line with differences in the value created for
each of those buyers usually indicates that the market is characterized by high supplier power
and at the same time by low buyer power.
(i) Limited number of suppliers: The industry basically has limited number of suppliers.
BSNL is one of the major supplier in Indian Telecom Sector, it provides link to all other
service providers.
33
(ii) Shared tower infrastructure: Technology has helped them to share the tower
infrastructure. This basically helps them to reduce the initial investment a lot.
(iii) Limited skilled Managers: Limited pool of skilled managers and engineers especially
those well versed in the latest.
(iv) Medium Switching Cost: Medium cost of switching since changing their hardware would
lead to additional cost in modifying the architecture.
(v) Overall influence on the industry - medium.
SUPPLIERS POWER ANALYSIS
Mobile tower companies in india:-
1. Telecos owned tower companies
2. Independently telecom tower companies(IITC)
SIM manufacturers:-
List of mobile operators and their tower services.
Less Bargaining power because of more number of suppliers.
34
Little or no forward integration.
Operator Power Services
Bharti BIL/TIL
Reliance RITL
Vodafone ITL
BSNL MTNL, BSNL and Others
Idea ITL
TATA Viom
• Sim card for the mobile operators are mostly produced in india and some are
imported.
• The mobile operators are doesn‘t always procure the sim card from a single suppliers
to avoid any delays.
• The bargaining power of suppliers is less.
• There is little or no threat of forward integration.
Mobile phone handsets:-
• Two types of mobile phones are generally used (GSM & CDMA).
• The leading CDMA phone manufactureres are Samaung, Blackberry, ZTE, Motorola,
Spice, etc.
• The bargaining power of suppliers is less.
35
• There is little or no threat of forward integration.
Top 4 leading mobile phone manufacturer in india are:
Company Share
Nokia 39%
Samsung 17.2%
Micromax 6.9%
Blackberry 5.9%
BARGAINING POWER OF SUPPLIERS IN JAPAN
Specialist technology suppliers
Although liberalising regulatory regimes provided a necessary condition for rapid and
successful entry by the original new entrants they were not sufficient. Equally important
were low technological barriers to entry into the telecoms services markets created by the
existence of specialist telecoms equipment suppliers. These specialist technology suppliers
provided the 'black-boxed' technologies that the Original New Entrants needed to contract
and run their own networks.
From the point of view of the specialist technology suppliers, liberalisation created new
markets for their accumulating knowledge and competencies. An important example is Nortel
that seized the new opportunities presented by liberalisation with both hands. Nortel was
originally established in 1895 as the subsidiary of Bell Canada. From 1906 to 1962 AT&T‘s
equipment subsidiary, Western Electric, held a minority stake in Nortel, a stake that was
gradually sold to Bell Canada. In 1971 Bell Canada, that bought most of its equipment from
Nortel, established a joint R&D subsidiary with Nortel called BNR. However, in order to
grow, Nortel from the late 1970s made strenuous efforts to enter export markets. In these
36
attempts the company was considerably aided by its pioneering success in developing one of
the first small digital central office switches, the DMS 10. Beating AT&T into this segment
of the switching market Nortel was able to gain a foothold in the US, its first major
breakthrough outside Canada.
In MCI, the main long-distance competitor to AT&T, Nortel found an important ally. As a
competitor to AT&T, MCI, like many of its original new entrant counterparts in other parts of
the world, did not want to depend on the same specialist equipment suppliers that supplied
the incumbent. This provided Nortel with the opening it was seeking. Furthermore, able to
rely on Nortel and other specialist technology suppliers for the technology and equipment it
needed, MCI also decided that it did not need to replicate similar R&D capabilities that
AT&T had in its Bell Laboratories. With further stages of liberalisation in the US and Europe
Nortel quickly became the main technology supplier to the 'new new entrants' as will be
shown below.
Threat of New Entrance
This is one area which has seen a dramatic change just over the last three years. When I along
with a couple of my classmates worked on the same topic in 2008 - we termed the Threat of
Entry to be low. At that time there were only these huge companies Nokia, Samsung,
Motorola, Sony Ericsson, RIM (Blackberry) and Apple. Then there were huge capital
requirements, economies of scale advantages in production, distribution and after sale
service, brand and technical knowhow to integrate several hardware and software bits which
prohibited several players from entering the market.
The reduction of entry barriers is evident in the Global handset market share. From the
Strategy Analytics data on the Market shares one can see that the share of other handset
vendors after the top 8 globally has raised from 16.3% in 2009 to 22.7% in 2010. The share
of other handset vendors is highest in APAC (Asia-Pacific) at 31.2% in 2009 and grown to
36.5% in 2010. Latin America, Africa and Middle East regions also have more than 20%
other vendor shares in 2010 whereas North America, Europe have less than 10%. One of the
possible reasons is the relative weight of distribution channels in these markets
37
Cases from India (Micromax & Karbonn):
Micromax, which has started its mobile operations in 2008 is close to the second largest
handset vendor in India Samsung. Started around the same time Karbonn sold an average
60o,000 phones a month in 2010. The figures are not very far compared to the market leader
Nokia's approximate 4 million phone a month. From the Draft Red Herring Prospectus of
Micromax [3] - one can see that while the comany's revenues grew from 375 Crore Rupees
(83 mil US$) to 1662 crore Rupees(369 mil US$) an astounding 345% growth the net profits
are at around 12% of revenues for 2010. The company depends for every thing including the
hardware, software and service on third party vendors.
Threat of entry
• Capital Requirements
– The cost of active equipment is estimated to be 40 percent of the telecom
operator's total capex, while the balance is accounted for by passive
infrastructure.
– Bharti has invested close to Rs. 230 billion to create the cellular infrastructure
with 45,000 towers across the country. Typically, a ground based tower costs
Rs. 25-30 lakh. A roof-based tower can be built for Rs.13-14 lakh.
– Cost of maintaining one tower (active + passive) is estimated at Rs. 60,000-
65,000 per month.
– If tower is rented then monthly rent of Rs. 40,000-45,000 for active network.
– The monthly outflow of a TSP would be close to Rs. 80,000-85,000 per tower
per month.
– However, the recent announcement made by BSNL about leasing its towers
will help both the older and newer players to penetrate into new markets.
– This factor makes the telecom industry moderately attractive for the new
players and investors
38
• Declining ARPU
– The market is maturing and new classes of consumers are mostly rural and
their ARPU is well below $5 (probably $3-3.5). So, managing bottom-lines at
such low levels of revenue per user will prove to be a challenge for new
entrant
– Access To Optical Fibre Network
– The largest optical fibre has been built by the incumbent operator BSNL who
is also the long distance operator.
– The private sector players such as Bharti and Reliance have also constructed
optical fibre cable network connecting mainly cities and towns but their
presence is very limited in the rural areas and difficult terrains.
– It is fairly difficult and cost- ineffective for new entrants to lay down optical
fibre connecting remote places as well.
• Retaliation By Established Players
– Also known as Incumbent Wrath signifies the leverage the players in the
market commands. The incumbents grow because of an established network
presence, a brand that consumers are aware of and sheer economies of scale.
– Mobile termination charge which one operator pays to the other when the
customer of the former uses the roaming charges of the latter. This is 30 paise
a minute charge as of today. This is charged to the consumer as the cost of
roaming. With an all India footprint (or 80% coverage), the incumbents
effectively do not have to pay termination charges.
– The incumbents have either been pocketing the termination charges or passing
them to consumers ―no roaming charge‖ kind of schemes. This factor makes
the industry unattractive for the new entrants and investors.
– The existing Telecom players might begin to bundle broadband, voice,
wireless, video and other emerging technologies together, as well as a variety
39
of value added content, in an effort to remain competitive, offer seamless
services and attract more customers, at a cheaper price (incumbent wrath)
• Government And Legal Barriers
– Private operators will have to enter into an arrangement with fixed-service
providers within a circle for traffic between long-distance and short-distance
charging centres.
– Seven years time frame set for rollout of network, spread over four phases.
Any shortfall in network coverage would result in encashment and forfeiture
of bank guarantee of that phase.
– Private operators to pay one-time entry fee of Rs.25 million plus a Financial
Bank Guarantee (FBG) of Rs.200 million. The revenue sharing agreement
would be to the extent of 6%.
– Private operators allowed to set up landing facilities that access submarine
cables and use excess bandwidth available.
– No industrial license required for setting up manufacturing units for telecom
equipment.
– 100% Foreign Direct Investment (FDI) is allowed through automatic route for
manufacturing of telecom equipments.
– Moderate threat entry based on Government Policies.
THREAT OF SUBSTITUTES IN TELECOMMUNICATION INDUSTRY
Substitute Technologies in Japan for Telecommunication
Japan‘s telecom sector is experiencing a period of great activity and fast change. This is also
true for the development of different techniques that are suitable to meet the needs and
demands that correspond to the development of the industry. There is a common opinion
among our respondents that the development of the industry will be very rapid in the coming
years and especially between 2010 and 2012. The fast development in the industry implies
40
that techniques and products have a short life cycle. In the next section we will describe the
trend for a couple of identified substitute technologies for ISDN.
ISDN is growing very quickly in Japan but there are other techniques that compete in the
arena of future transfer methods. We are focusing on techniques that can be used as a way of
connecting to Internet, thus transferring data. Below we have identified a couple of the main
substituting technologies to ISDN in Japan and these are DSL, cable, satellite and mobile
systems. These technologies have reached different stages of development and we will
describe their current state in Japan today. We will also discuss which actors that specialise in
the various techniques.
Digital Subscriber Line (DSL)
DSL comprises two various techniques, ADSL and SDSL, which can send high-speed data
through existing copper lines. ADSL lets users download quickly, but uploading is slower.
This makes it good for surfing on the Internet, video/audio and downloading from corporate
LANs (Local Area Networks). SDSL offers the same high speed whether uploading or
downloading, making it suitable for applications such as video conferences.
SDSL is usually marketed to businesses while ADSL is usually marketed to consumers a it
offers high-speed data transfer at a fairly low price. This makes ADSL a direct substitute to
ISDN.162 A problem so far with DSL is that the life span for the signal is not very long. DSL
includes no services (which is one of the main advantages of ISDN); it is only a ―highway‖
for transferring information.
NTT dominates the access network also for DSL. Since only a few companies gain access to
NTT‘s copper network, NTT is the main driving actor for this technique. NTT‘s priorities lie
in the FTTH project and their ISDN services, although they are at present studying the DSL
technique.
The fact that NTT does not prioritise DSL means that this technique is not very recognised in
Japan today.
41
Cable
At present the cable TV market is undergoing a rapid change. High-speed Internet access
through cable TV networks is increasingly being used as a substitute for Internet via
telephone lines. The Japanese authorities support an opening up of the market and foreign
actors see this as n opportunity.
Examples are AT&T and British Telecom that are making buy-ups in the domestic cable TV
companies. They offer competitive alternatives to NTT‘s ISDN and other services. The
combination of foreign actors having the capital and knowledge, and the Japanese cable TV
companies having the networks, is a major driving force in this field.
Satellite
According to MPT‘s White Paper 1999, providing Internet connections via satellites enables
wireless transmission of a large amount of data. Satellitebased Internet can transmit several
hundred kbps to several Mbps of data.
Currently, only a few operators offer Internet services using satellites in Japan and their
services are mainly limited to corporate users. However, with the increased efficiency in
satellite transponder usage, there have been moves to start up services targeting individuals.
Actors supplying Internet via satellite today are Japan Satellite Systems Inc. (JSAT), Space
Communications Corp. (SCC) These companies offer domestic satellite communications
services via their own satellites.
Mobile Systems
Mobile phones are gaining ground in Japan. It is estimated that in between five to ten years
around two thirds of the Japanese population will have mobile phones, i.e. 80 million
subscribers.165 The speed will depend on the competition, which has increased since the
deregulation started in the beginning of the 1990s. Even today there exist mobile services that
allow 64kbps data transmission.
The third generation mobile systems will be introduced on the Japanese market in 2010. It
takes around ten years to develop a new standard, and the fourth generation mobile systems
42
will come into use in 2008-2012. This standard will enable even higher speed of information
transfer and make it possible to see moving pictures on cellular phones.
Analysis of ISDN vs. Substitute Technologies
To summarise we can say that there are several substituting techniques to ISDN in Japan, but
ISDN is by far the most developed and prioritised technique today. The greatest threat can be
seen as coming from wireless solutions, since they are in line with the Japanese lifestyle, the
high and continues penetration of mobiles, as well as coming transfer capacities over mobile
telephones.
The future of ISDN will also depend on how much the Internet usage will increase, since
high frequency use makes for example cables cheaper. Another important factor is how the
telecom industry will develop, and what type of actors that will grow large.
The reason why this is important is because new actors compete most efficiently by investing
in competing techniques to ISDN, due to NTT‘s monopolistic position in this field today.
NTT‘s future actions will have a direct influence on the ISDN development, as it is the
dominant actor within this market. The price setting that NTT will pursue, will have a large
influence on the demand for ISDN services and thereby in turn the size and growth of the
ISDN market.
Analysis of the Industry Logic
The parts described above are logically tied together and structured after the industry analysis
model in Chapter 2. We think that the information provided in this chapter creates the
necessary base for understanding the industry. If a company has knowledge of the various
factors described and analysed in this chapter, they have enough information to be able to
navigate on the Japanese ISDN market.
The telecom sector in Japan has traditionally been very regulated, but is today opening up
which means that new conditions for competition in the industry emerge. This fact together
with Japan‘s leading role in electronics clearly illustrate that the market for ISDN products in
Japan is very competitive. At the same time, it is very important to be aware of the fact that
43
NTT still exercises a huge influence on the industry. This chapter has clearly stated that there
are a market and a demand for ISDN services and ISDN products in Japan
However, in a longer perspective the ISDN technique will probably have been replaced by
other technologies with a higher capacity of transferring information. A foreign company that
wants to establish a presence in this industry has to be well prepared and have an
establishment strategy for how to penetrate the market. This will be discussed in the next
chapter from the perspective of our case company
THREAT OF SUBSTITUTES IN TELECOMMUNICATION INDUSTRY
(1) Buyer Propensity To Substitute
(2) Relative Prices
(3) Performance of Substitute
Threat of Substitutes
(1) Buyer Propensity to Substitute
internet Subscriber base increasing in India by 18.06% , compared to 10.60% for
GSM/CDMA services.
Representations from the industry and from within the DoT to Open Up Net
telephony.
If allowed, this will open up India‘s domestic voice market to all operators which
have an unified access services license such as Reliance infotel and Aircel to offer
voice services along with data to its consumers.
Dot also contemplating allowing operators without a unified access license which
includes broadband and internet companies such as Google and Skype to offer
telephony services for international calling and PC-to-PC domestic calls.
(2) Relative Prices
Internet Telephony eating into the revenue of GSM/CDMA telephony.
44
Flat/fixed rate revenues from internet services –cannibalization of revenues from
GSM/CDMA services.
(3) Performance of Substitute
Voice quality is an issue with internet telephony
Internet voice services also currently limited due to regulatory road blocks.
RIVALRY AMONG EXISTING COMPETITORS IN TELECOMMUNICATION
INDUSTRY
COMPARISON BETWEEN JAPAN AND INDIA:
JAPAN
Rank in the world in network size is 3rd
after United States.
Country had 122.44 million cell phone subscribers (out of a total population of 128 million).
Mobile phones penetration is at approx 75%.
Japanese main players in the communication market:
The cellular phone market is dominated by breaking down the number to individual‘s carrier,
according to (TCA) telecommunication carrier associates the major players are:
NTT DoCoMo (54.6% of the market),
KDDI (28.9%)
Softbank (16.5%).
Softbank Mobile gained 239,000 new subscribers on a net basis in August, bringing
the total to 26.62 million.
NTT Docomo came in second with 182,100 subscribers gained (total: 58.79 million).
E-mobile gained 75,000 new customers (total: 3.42 million).
KDDI -au attracted 73,000 subscribers (total: 33.53 million).
Willcom gained 55,100 subscribers (total: 4.1 million).
45
All major Japanese consumer electronics companies such as Matushita , NEC , Mitsubhishi
,Sony, and Fujitsu produce cellular handsets . The leading global handset manufactures,
Ericsson, Nokia, and Motorola have also recently entered the Japanese handset market, this
shows the integration of market to win the sustainability
HIGH EXIT BARRIER:
About 97%of Japan‘s 130million subscribers use 3G services. Even also Japan has
become the fourth country in the world to deploy long term evolution(LTE)
technology in 2010 with DoCoMo‘s competitors to launch in 2013.
E –mobile operator ia acquired by Softbank .
And over more than 100 million internet users have embraced Iphones , smart phones,
and tablets .
New operator UQ Communications, in which KDDI is the largest shareholder,
continued its WiMAX rollout and had over 4 million subscribers going into 2013;
COMPETITORS ANALYSIS
Source: NTT DoCoMo
46
Internet, broadband, IP telephony and telecoms statistics for Japan – 2010 - 2013
Sector 2010 2011 2012 2013 (e)
Internet users (million) 94 95 96 97
Internet penetration rate 74% 74% 76% 77%
Broadband subscribers 34 37 39 42
Mobile internet users 95 101 105 108
Fixed-line subscribers 43 39 35 33
Mobile phones 112 120 129 135
(Source: BuddeComm based on various sources)
INDIA
RANK:
Rank in the in network size is 7th.
SUBSCRIBERS
India has a total of 960.9 Million telecom subscribers consists of 929.37 mobile subscribers
& 31.53 wire-line subscribers.
The Indian tele density now stands at 79.28%.
MAJOR PLAYERS OF INDIAN TELECOMMUNICATION INDUSTRY.
47
THE DEGREE OF RIVALRY IS HIGH:
Market leader – Airtel
Market challenger – reliance , Vodafone, bsnl
Market follower – Tata , Idea
HIGH EXIT BARRIER
The long legacy of statutory public monopoly in telecommunications which has
afforded the incumbent.
The incumbent operators BSNL/MTNL enjoys a dominant position in wireline
segment of telecom market with a market share of nearly 88%.
BSNL enjoys the dominant position in the market not only with respect to the number
of kilometres cable laid but also its reach to various blocks, headquarters and villages.
High Exit Barriers: Telecom industry is a capital intensive industry with high sunk
and Fixed cost due to specialized equipment, spectrum cost, etc. This raised the
exit barrier for an existing player to a very high level. As a result, in order to sustain
in the market the
players compete and fight up to the bleeding point. This makes industry unattractive
for the potential entrants.
UNDIFFERENTIATED PRODUCT
The product in telecom market are relatively undifferentiated, product, service and
technology innovations are easily copied by the competitors.
Price sensitivity of buyers: Undifferentiated offering makes buyers price sensitive.
Price
Sensitivity of the buyers induces a constant threat of price war in the industry. Hence,
this
Factor is negative for the industry.
48
BUYER CONCENTRATION (posing a threat):
Undifferentiated offerings makes buyers price sensitive, price sensitivity induces
buyers.
Most of buyers are concentrated in urban India; teledensity in urban area is 119%
where as in rural area the teledensity is 53%. Therefore rural area is unattractive for
the industry.
Importance of telecommunication in Japan
The market for telecom in Japan experienced a dip at the rate of 1% in the year 2010
and accounted for over $175 billion in overall revenues. In coming five years ahead,
the Japanese telecommunication services market is anticipated to have a value of
nearly $195 billion. Japan accounts for 46% of the Asia-Pacific telecommunication
services market value and fixed line is the largest segment of the telecommunication
services market in Japan. Japan probably has the world's most advanced cellular
networks and a very advanced acceptance by consumers and industrial customers of
wireless services.
NTT Corporation, KDDI Corporation and Softbank Corporation are the biggest
players in the industry. The growing popularity of smart phones was largely
stimulated by manufacturers adding functions previously only found in feature
phones, such as one-seg digital TV, mobile wallet technology and infrared
communication capabilities. In the third quarter of 2011, one out of every two smart
phones was equipped with these functions, with several overseas brands including
them exclusively for Japanese consumer‘s needs. Additionally, demand increased as
new smart phones introduced in 2011 packed more powerful CPUs than their
predecessors to deliver improved user experience.
Naturally, telecom companies are moving quickly to deploy 4G networks and devices.
In addition, carriers who want to position themselves for continued leadership will
maintain their focus on enhancing customer service and resolving connectivity issues,
which may yield a measurable increase in consumer loyalty. In addition, telecom
companies in Japan may want to consider options for expanding embedded mobile
capabilities, which can add significant value to just about any product out there.
49
In this industry scenario, Taiyou Research analyzes the Japanese telecom sector in its
research report Telecom Industry in Japan. The report covers the following.
• An analysis of the global telecom industry through an industry definition, industry
statistics, industry value & volume analysis, industry segmentation, and a look at the
competition in the global telecom industry.
• An in-depth analysis of the major global telecom players such as AT&T Inc,
Deutsche Telekom, and others. Each player is analyzed through a company overview,
analysis of their businesses, a financial analysis and a SWOT analysis.
• Moving on to the analysis of the Telecom Industry in Japan, we analyze the industry
starting with an overview of the business conditions in Japan and the Asia Pacific
region for the telecom sector. We include an ARPU analysis of the Japanese telecom
sector, along with an overview of the mobile services sector in Japan, fixed line
telecom sector in Japan and an overview of internet services in Japan.
• An analysis of the mobile telecom sector in Japan is carried out through the analysis
of industry statistics, the growth in the market, ARPU analysis of this sector, the
expansion and development of the mobile network in the country, the development of
3G & 4G services in the country, the growing role of mobile content and VAS
facilities in the market, and the statistics of the major players in the mobile services
sector in Japan. An outlook for the sector is also included.
• We then perform a SWOT analysis on the mobile services sector in Japan.
• Fixed line telecom market in Japan is analyzed through industry statistics, subscriber
data, and an analysis of the major players and their market statistics.
• A SWOT analysis of the wire line telecom sector in Japan is included.
• An analysis of the broadband market in Japan looks at industry statistics, industry
50
growth and development trends, the potential of 4G services, and the introduction of
higher level bandwidth in the country.
• Regulatory framework governing the telecom sector in Japan is analyzed.
• Major industry vendors and players such as NTT Corporation, NTT DOCOMO etc.,
are analyzed through a company overview, analysis of their mobile services, analysis
of their network, company strategy, company financials, a SWOT analysis, amongst
others.
Taiyou Research's analysis of the Telecom Industry in Japan is a comprehensive
statistical and analytical study of this highly competitive industry.
Japan‘s telecommunications industry size is on the order of US$ 200 billion for the
operators alone, and annually about US$ 20 billion are invested in networks. Japan‘s
has one of the world‘s most advanced cellular networks. With Soft Bank‘s planned
acquisition of SPRINT-Nextel, Soft Bank has attracted global attention, and Soft
Bank‘s charismatic founder and leader, Masayoshi Son has declared that ―as a man,
he of course wants to be Number One‖ expressing his hope to grow Soft Bank into the
global telecommunications leader. This report gives a thorough overview of Japan‘s
telecommunications markets, with a wealth of statistical and financial data in
visualized graphical form with analysis and trends.
―The entrance of Japanese service providers and handset manufacturers in global
wireless telecommunications markets is causing widespread speculation about how
the market will change in the future.‖
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52
Brief History
During the recovery years after World War II, the pharmaceutical industry operated within a
fairly stable situation. Achieving dangerous mass in R&D to struggle for patent safety
resulted in a difficult barrier to enter the industry. Success was far in excess of other
industries and opposition was mild.
Technological success, in the growth and advertising of new products, characterised the
industry during the 1960s, while the 1970s were marked by the beginning of legislation that
fuelled the growth of generics and increased era to market.
In view of the fact that the mid-1980s the situation has changed and could be viewed as being
far from stable. Slowly but gradually, the capability to create superior returns began to be
worn as reflected by:
• The coming out of biotechnology firms and the likely change of the drug innovation
process;
• The larger power of buyers (as the cost of healthcare exceeds the capability to pay
for it);
• Greater confidence on runaway success drugs as the main source of income.
These factors recommended participants‘ moving back opportunity of future effectiveness as
well as mirroring changes in the balance of rivalry and the procedure of value construction,
including:
• Expenses on R&D have matured while the number of new products getting the
market has fallen. In 1981, universal R&D spending was around $5.4 billion while it is likely
to go above $50 billion in the year 2000. On the other hand, 51 new chemical entities (NCE)
were introduced in 1980 but only 32 in 1999, 24 in 2001 and 17 in 2002.
• Effortless medicine targets, such as simple infections, have been addressed. New
investigate leading to treatment for previously natural diseases or a important advance over
existing treatments is both costly and risky. Temporarily, regulators, payers and prescribers
are demanding much larger data packages, offering increased confirmation of usefulness,
safety and value for currency.
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• Threats to the possibility of official document safety. This threat emerged from
various corners: on the one hand, manufacturers of generics effectively entered the market
before patents had expired (and official battles during the courts proved unsuccessful to
protect uniqueness rights). On the other hand, social considerations were also infringing on
pharmaceuticals. Most particularly the effective movement to supply HIV/AIDS drugs free or
at reduced prices raised issues as to which drug or which nation would be next.
Hence, at the launch of the new Millennium, the main concerns for industry participants
evolved around global pricing disparities destabilising the key US market, threats to patents
from the ramifications of the AIDS crisis, future patent expiries on runaway achievement
drugs and shares being perceived as ―old economy stocks‖.
Pharmaceutical industry overview
Major players of the world pharmaceutical industry
The pharmaceutical industry is characterized by a far above the ground level of attention with
fifteen international companies dominating the industry. Table 1.1 contains information
regarding these major pharmaceutical companies that are sorted in the organize of their 2004
revenues from the sales of pharmaceutical products. Records provided in this table contain
sales of all subsidiaries and joined companies that are consolidated in yearly reports of the
consequent companies. In order to smooth the progress of a comparison of different
companies revenues of all of them are shown in US dollars; economic data of the companies
with control center outside of the U.S. was transformed to US dollars by means of average
2004 rates provided in Table 1.1.
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Table 1.1.Major pharmaceutical companies.
Company HQ
location
Revenue of
pharmaceutical
segment, mln USD
Total sales,
mln USD
Share of
pharmaceutical
segment, %
Pfizer NY, U.S. 46,133 52,516 87.85%
GlaxoSmithKline UK 31,434 37,324 84.22%
Johnson & Johnson NJ, U.S. 22,190 47,348 46.87%
Merck NJ, U.S. 21,494 22,939 93.70%
AstraZeneca UK 21,426 21,426 100.00%
Novartis Switzerland 18,497 28,247 65.48%
Sanofi-Aventis France 17,861 18,711 95.46%
Roche Switzerland 17,460 25,168 69.37%
Bristol-Myers Squibb NY, U.S. 15,482 19,380 79.89%
Wyeth NJ, U.S. 13,964 17,358 80.45%
Abbott IL, U.S. 13,600 19,680 69.11%
Eli Lilly IN, U.S. 13,059 13,858 94.23%
Takeda Japan 8,648 10,046 86.09%
Schering-Plough NJ, U.S. 6,417 8,272 77.57%
Bayer Germany 5,458 37,013 14.75%
Source: 2012 Annual Reports of the companies
Drugs and pharmaceutical industry plays a very important role in the trade and industry
growth of a country. It is one of the largest and most advanced sectors in the world, acting as
a source for various drugs, medicine and their intermediates as well as other pharmaceutical
formulations. It offers innumerable business opportunities for the investors/ corporate the
55
world over, being the strong knowledge-driven industry. The survival of well-defined and
strong pharmaceutical industry is vital for promoting and sustaining research and
developmental (R&D) efforts and initiatives in an economy as well as making available the
quality medicines to all at reasonably priced prices.
The Indian drugs and pharmaceutical industry has shown great advancement in terms of
developing infrastructure & also technology creation as well as product usage over the years.
On the global platform, India holds fourth position in terms of volume and thirteenth
position in terms of value of production in pharmaceuticals. The industry has been producing
higher volume of drugs belonging to all major healing groups requiring complicated
manufacturing processes as well as a wide range of pharmacy machinery and equipments. It
has also developed excellent 'good manufacturing practices' (GMP) compliant facilities for
the production of different dosage forms. The Indian pharmaceutical industry has become
self-reliant in several areas and has developed sounder and scientifically advanced R&D
segment.
The industry shows quite a lot of opportunities for investments and trade due to the following
advantageous features:-
Independence exhibited by the production of 70% of mass drugs and almost the entire
requirement of formulations within the country.
Low cost of manufacturing of worth mass drugs and formulations.
Low Research & Development costs.
Strong methodical, inventive and technical manpower
Exceptional and world-class national laboratories specialising in method development
and progress of cost effective technologies
Increasing balance of trade in pharmacy sector
Efficient and cost effective source for procuring generic drugs, especially the drugs
going off patent in the next few years
Excellent centre for clinical trials in view of the diversity in population
Fast growing biotech industry which has great potential in the international market
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Apart from its strengths in manufacturing and exporting allopathic medicines, the systems of
medicines like Ayurveda, Unani, Siddha, Yoga, Naturopathy and Homeopathy are also
prevalent in the country.
Driven by all such factors, India has been recognized as one of the leading global players in
pharmaceuticals. The annual turnover of the industry is estimated to be about US $ 17 billion
(over Rs.68, 000 crores) during 2012-13. Indian exports are destined to more than 200
countries around the globe including highly regulated markets of US, Europe, Japan and
Australia. The value of exports of drugs and pharmaceuticals has increased to Rs. 24,942
crores in 2009-10 from around Rs. 22,216 crores in 2008-09.
While, the imports of medicinal and pharmaceutical products have been around Rs.5867.3
crores in the year 2011-12, It is estimated that the industry has the potential to achieve over
Rs. 125,000 crores in formulations and bulk drug production by the end of year 2013.
Moreover, increasing number of Indian pharmaceutical companies have been getting
international regulatory approvals for their plants from agencies like USFDA (USA), MHRA
(UK), TGA (Australia), MCC (South Africa), Health Canada, etc.
India has the largest number of USFDA approved plants for generic manufacture. Leading
Indian companies are now seeking more Abbreviated New Drug Approvals (ANDAs) in
USA in specialized segments like anti infective, cardiovascular and central nervous system
groups.
Top 10 Pharmaceutical Companies in India
In the list of top pharmaceutical companies in India it is not the Indian companies but also the
MNCs that are becoming the part of the race. Indian pharmaceutical market in 2012 was
$7,743m and if compared to year 2011, it was 4% more than that. It is expected that Indian
pharmaceutical market will grow more than the global pharmaceutical market and will
become $15,490 million in 2014.
Today Indian pharmaceutical industry is the second most fastest growing industry displaying
the revenue of Rs 25,196.48 crore and growth of 27.32 percent. Top pharmaceutical
companies in India are also acquiring the small companies worldwide to further expand the
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market. Pharmaceutical drugs injections, tablets, capsules, syrups are the products of
pharmacy companies in India along with many more.
Looking back into history reveals that it was in 1930 when the first pharmaceutical company
in India came into existence in Kolkata. It is called the "Bengal Chemicals and
Pharmaceutical Works". This Indian company is still there and today it is the part of five drug
manufacturing companies that are owned by the government. Till the period of 60 years the
pharmaceutical industry in India was overshadowed by the foreign drug manufacturing
companies. With this the Indian market was more open to Indian pharmaceutical companies
than the MNCs.
At present there is a cut throat competition among top pharmaceutical companies in India
with the local as well as MNCs. But there are certain issues that are concerning the growth of
pharmacy companies in India. These are:
Mandatory licensing and failure of new patent system.
Regular power cuts and inadequate infrastructure.
Restricted funding.
Authoritarian barrier that lead to the delays in the launch of new drug or pharmacy
product.
Too many small as well as big pharmaceutical companies and excessive competition.
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Source: http://business.mapsofindia.com/pharmaceutical/
59
Company Name Last Price Change % Change Net Sales
(Rs. cr)
Cipla 409.80 0.15 0.04 6,977.50
DrReddys Labs 2,002.40 12.35 0.62 6,686.30
Ranbaxy Labs 458.20 -0.45 -0.10 6,303.54
Lupin 685.00 0.30 0.04 5,364.37
Aurobindo Pharm 187.35 -2.85 -1.50 4,284.63
Sun Pharma 948.00 -7.85 -0.82 4,015.56
Cadila Health 772.00 -2.00 -0.26 3,152.20
Jubilant Life 169.05 -0.65 -0.38 2,641.07
Wockhardt 1,890.00 31.75 1.71 2,560.16
Ipca Labs 521.90 5.95 1.15 2,352.59
Torrent Pharma 684.00 0.25 0.04 2,079.90
Divis Labs 1,085.55 23.55 2.22 1,844.82
Orchid Chemical 65.60 0.55 0.85 1,736.33
Surya Pharma 1.37 0.03 2.24 1,622.95
Glenmark 475.00 5.55 1.18 1,619.98
Ind-Swift 8.00 0.04 0.50 1,590.47
Sanofi India 2,524.35 11.90 0.47 1,573.04
Biocon 284.10 5.60 2.01 1,555.30
Alembic Pharma 112.60 1.40 1.26 1,370.20
Ind-Swift Labs 44.45 0.80 1.83 1,318.18
Nectar Life 14.15 0.05 0.35 1,313.11
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Piramal Enter 564.00 -1.05 -0.19 1,152.71
Pfizer 1,033.00 17.05 1.68 1,093.42
Elder Pharma 380.00 1.90 0.50 984.69
Parabolic Drugs 7.00 0.15 2.19 924.34
Novartis India 587.75 6.65 1.14 843.61
Unichem Labs 171.90 0.00 0.00 803.19
Sharon Bio Medi 345.50 0.75 0.22 785.06
Shasun Pharma 73.70 0.35 0.48 735.91
Twilight Litaka 5.35 -0.12 -2.19 730.19
Claris Life 180.20 1.55 0.87 718.01
Panacea Biotec 122.50 2.65 2.21 700.58
FDC 89.80 -0.10 -0.11 699.24
Hikal 395.70 -10.15 -2.50 694.24
Merck 621.00 -5.85 -0.93 687.28
Aarti Drugs 172.00 4.90 2.93 665.36
JB Chemicals 79.50 1.10 1.40 642.41
Ajanta Pharma 769.00 39.75 5.45 604.27
Wyeth 814.00 0.35 0.04 588.67
Indoco Remedies 63.50 0.35 0.55 564.31
Granules India 141.80 19.60 16.04 563.07
AstraZeneca 687.00 8.80 1.30 530.89
Fresenius Kabi 126.75 -0.90 -0.71 524.32
Aanjaneya Life 84.25 4.00 4.98 479.96
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Dishman Pharma 68.00 -0.10 -0.15 463.40
Neuland Lab 114.45 1.25 1.10 448.23
Arvind Remedies 35.00 0.05 0.14 436.63
Natco Pharma 447.50 2.90 0.65 432.00
Venus Remedies 249.15 5.55 2.28 405.19
Vivimed Labs 286.00 -2.40 -0.83 382.90
TTK Healthcare 486.80 3.65 0.76 353.74
Wanbury 21.50 -0.45 -2.05 344.55
Sequent Scienti 150.00 -0.05 -0.03 332.43
Torrent Cables 77.00 0.30 0.39 319.82
Morepen Lab 2.86 0.06 2.14 269.50
Anus Labs 0.38 0.00 0.00 268.04
Albert David 95.05 -1.95 -2.01 258.81
Anuh Pharma 116.00 -2.25 -1.90 226.09
Parenteral Drug 97.25 -3.70 -3.67 222.56
Smruthi Organic 100.00 0.85 0.86 206.14
Suven Life Scie 25.90 0.15 0.58 204.21
Kopran 14.50 0.25 1.75 198.91
RPG Life 69.00 8.65 14.33 192.82
Jagson Pharma 10.00 -0.13 -1.28 176.51
Lincoln Pharma 26.35 -0.85 -3.13 174.16
Marksans Pharma 3.90 0.06 1.56 154.59
Elder Healthcar 62.00 -10.00 -13.89 152.85
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Ankur Drugs 8.04 0.14 1.77 151.49
Lyka Labs 9.05 -0.09 -0.98 139.81
Bal Pharma 17.50 1.00 6.06 139.69
Themis Medicare 74.65 -1.30 -1.71 138.02
Aarey Drugs 12.65 0.00 0.00 130.48
Bafna Pharma 38.35 1.35 3.65 120.98
Syncom Formula 71.10 0.80 1.14 118.45
Alembic 18.10 0.25 1.40 116.87
Amrutanjan Heal 130.00 -0.70 -0.54 115.21
Astec Life 18.05 0.05 0.28 110.84
Caplin Point La 70.15 1.45 2.11 107.62
Kilitch Drugs 22.05 -0.50 -2.22 106.86
Syncom Health 9.85 0.09 0.92 85.84
Pharmaceutical Industry in Japan
Japanese pharmaceutical market supposed to be the second largest individual market in the
world. With sales of $60 billion it constitutes approximately 11% of the world market.
The total production amount of final pharmaceutical products in Japan in 2010 was 6.6201
trillion yen; the import amount from abroad was 1.8594 trillion yen; and thus, the total sales
amount was 8.4795 trillion yen. In contrast, the total domestic shipping amount was 8.1800
trillion yen and the total export amount to foreign countries was 162.6 billion yen.
The Japanese market remains the second largest household pharmaceutical market in the
world, with total sales of prescription drugs of $47.5 billion in 2010, only slightly less the
total sales in the five foremost EU countries. Suitable with this status the R&D spends of the
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Japanese pharmaceutical industry is greater than that of any European country accounting for
15.4% of global R&D spending. This market thus provides a major source of revenue for the
pharmaceutical industry that continues to be dominated by domestic pharmaceutical
companies. However, the recent problems of the Japanese economy and a failure to penetrate
Western markets have led to a relative decline in the global status of Japanese pharmaceutical
companies with only Takeda now ranking in the world's top 20 pharmaceutical companies.
Despite such problems the Japanese pharmaceutical industry continues to be a major source
of innovation and the leading Japanese companies dominate their domestic market. In
consequence these companies have significant R&D pipelines. Most lack significant market
capabilities in the USA or Europe and are reliant on co marketing or licensing deals to reap
the full commercial benefits from their R&D investment.
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65
PORTER’S FIVE FORCES.
In this part Porter's model will be applied to the pharmaceutical industry. This will be the
institution of the study of the pharmaceutical industry. However, Porter‘s model has not
included the role of technology, nor the role of the management in an industry. Consequently
these two subjects will be dealt with after Porter‘s Five Forces.
THE THREAT OF NEW ENTRANTS
The pharmaceutical industry is a very much attractive industry for likely newcomers. As an
signal of the effectiveness of the industry, twelve US based companies are featured among
the top fifty Fortune 500 companies in arrival on sales (Forbes Magazine). Still, in any
ranking of industries by profitability, in terms of return on investment (or equity) or profit
margin on sales, the pharmaceutical industry comes out at, or very close to the top.
There are large facts for the survival of barriers to way into the pharmaceutical industry. Four
possible barriers to entry can be recognized in the pharmaceutical industry: patents, Research
and Development investments, marketing investments and company reputation. Patents are a
main difficulty for free entry into the market. Drugs are costly to build up but once imaginary
are inexpensive to copy. Without official barriers such as patents, competitors can easily copy
drugs, powerful down prices and eliminating the go back on R&D investments that created
the unique modernization. However, while patents are a critical incentive for companies to
connect in long and costly research, they can also create artificial separation between drugs
which are ‗me-too‘. The opinion for and against patents have raged long and hard and go on
to do so. It is usually decided that patents are a requirement in making the market both
product and price-competitive. Abolishing them would almost certainly mean less
modernization and, in the long term, less competition. The contrasting view is that some
action could be taken to decrease the extent of patent protection in order to reduce prices. The
key problem for civilization as a whole, however, is whether lower prices now are valuable if
they mean fewer drugs in the future.
The second barrier to new entry is the very high cost of engaging in pharmaceutical Research
and Development. The standard charge of R&D to a top 10 medicine company in 1993 was
15.9% of sales, reaching 23,8% for Roche in 1994. The largest nominal financier in 1995 was
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Glaxo-Wellcome, with $1833.4.1 million (pro forma figures, Scrip magazine, Jan 1996, pag
35). Potential new entrants, it is argued, are discouraged from toward the inside the
pharmaceutical market because of the vast assets outlays required in setting up research
services that would agree to them to compete with open companies, as well as the time it
takes to construct up the R&D staff and expertise. The very long lead era of the Latest
Product Development procedure (on average 12 years) and the low achievement charge of
R&D in the pharmaceutical industry (it is probable that only one out of every 10.000
compounds synthesized will develop into a profitable product), involve that companies have
to spend very closely now, in classify to get a return in ten to fifteen years‘ time. New
(biotech and genome) technologies are generally developed in little research firms, possibly
resulting from commercializing primary research. These small firms are liable to become
(partially) owned by great multinationals, as rapidly as their importance is known (JWB).
The high rate of advertising new drugs, in particular, the condition of a huge, internationally
distributed and very much qualified sales force who can encourage the products openly to the
prescriber, is an extra effective barrier disappointing new firms from entering the industry as
can be seen in table .
The fourth barrier to entry, basic to the pharmaceutical industry, is the integrity of a drug
company in the professional health market. Since there is always some risk involved in the
prescription and use of drugs, the name of the producer and inventor of the drug is a main
risk-reducing implement for the prescriber. Of course, a character takes point in time to
construct and this time requirement acts as an main prevention for possible newcomers to the
pharmaceutical industry.
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Industry
Percentage
Ethical pharmaceuticals, surgical
supplies and equipment
Durable goods
Proprietary drugs and toiletries
Major household items
Food
16.9
9.0
7.9
4.4
3.5
While large barriers exist, the relation extra R.O.I. of the pharmaceutical industry is in the
procedure of attracting a few new players to the game. Numerous non-pharmaceutical
companies have invested in or bought drug companies. The majority notable, possibly, the
inroad taken into the OTC market by Fast Moving customer Goods huge Proctor & risk by
selling Morton Norwich and Richardson Vicks. If P&G, and companies alike, e.g. Nestlé and
Unilever, would move into the market for prescription drugs (probably through acquisition),
the fight for market share will develop into even more dynamic. Being the advertising
specialists they are, they will strength the presented leaders in the industry to move
mechanism and become even more forceful in their advertising move toward. Additionally,
as a effect of a more confused market, and more cost aware consumers, effectiveness will
suffer, creation the pharmaceutical industry a less comfortable one for the less efficient and
less effective conventional medicine companies.
Rivalry among Competitors for Pharmaceutical industry in India
Pharmaceutical manufacturing is one of the most competitive industries in the country with
as many as 10,000 different players fighting for the same pie. The rivalry in the industry can
be gauge from the fact that the top player in the country has only 6% market share, and the
top five players mutually have about 18% market share.
Therefore, the concentration ratio for this industry is extremely low. High growth scenario
make it attractive for new players to enter in the industry.
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Another chief factor that adds to the industry rivalry is the fact that the entry barriers to
pharmaceutical industry are very low. The fixed cost requirement is low but the require for
working capital is high.
The fixed asset turnover, which is one of the gauge of fixed cost requirements, tell us that in
greater companies this ratio is in the range of 3.5 to 4 times. For smaller companies, it would
be even higher.
Many slighter players that are focused on a particular region have a better suspend of the
distribution channel, making it easier to succeed, albeit in a limited way.
An imperative fact is that pharmaceutical is a stable market and its growth rate generally
tracks the economic growth of the country with some multiple. nonetheless volume growth
has been consistent over a period of time, value growth has not followed in tandem.
The product differentiation is one key factor, which gives competitive gain to the firms in any
industry. Conversely, in pharmaceutical industry product differentiation is not possible from
the time when India has followed process patents till date, with laws favouring imitators.
Accordingly, product differentiation is not the driver, cost competitiveness is. However,
company and Glaxo have created big brands in over the years, which act as product
differentiation tools. This will increase over the long term, as product patents come into play
from 2005.
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Conclusion
We predict increasing competition in the industry but the form of competition will be
different. It will be between large players (with economies of scale) and it may be possible
that a little kind of oligopoly or cartels come into play.
This is due to the fact that the industry will move towards consolidation. The larger players in
the industry will stay alive with their proprietary products and strong franchisee.
In the Indian perspective, companies like Cipla, Ranbaxy and Glaxo are likely to be key
players. Still if, consolidation inside the current big names is not ruled out. Smaller fringe
players, who have no differentiating strengths, are likely to either be acquired or finish
existing.
Rivalry among Competitors for Pharmaceutical industry in Japan
Japanes Drugs Company should be able to compete in the global market in the same way as
American firms do: they have a large domestic market where drug prices are high. American
firms used the financial resources they gained at home to expand multination ally, and thus in
turn generated funds for reinvestment in R&D.
Government controlled pricing in Japan, in contrast to the free market forces of the US, had
the opposite effect. It removed the incentive for firms to take creative risks, and thus
undermined their scope to take chances with multinational expansion.
Mature, consolidating, extremely competitive industry (many large pharmaceutical
acquisitions closed in 2007 including AstraZeneca‘s $15.6Bn purchase of
Medlmmune Inc. and Schering-Plough‘s $15Bn acquisition of Organ on Biosciences).
well-built credit profiles: companies operate off of high margins (high 70%), healthy
balance sheets, and good liquidity
Industry profit from strong demand from consumers.
Weak, small companies typically go out of business (bankruptcy) if they have no
potential ―blockbuster‖ in future pipeline. Others that have some important research
or valuable assets will be bought by big and strong pharmaceutical companies.
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Top Competitors
BioCryst Pharmaceuticals, Inc.
Novartis AG
Astellas Pharma Inc.
Shire Plc
Celgene Corporation
Mochida Pharmaceutical Co., Ltd.
Takeda Pharmaceutical Company Limited
Gedeon Richter Plc.
Ono Pharmaceutical Co., Ltd.
Japan Tobacco Inc.
GENTIUM S.p.A.
Chugai Pharmaceutical Co. Ltd
Daiichi Sankyo, Inc.
Santen Pharmaceutical Co., Ltd.
Sunesis Pharmaceuticals, Inc.
• Intensity of rivalry was restricted by government pressure on Production levels and
capacity.
• Drugs: entry endorsement (1956–1972). Though virtually all the applications were
ultimately approved, this Policy hindered competition. A minimum scale was set for the
approval, but many plants didn‘t achieve economies of Scale.
• Chemical fertilizers: price control (1946–1989) and supply Control (1946–1989).Delayed
the petrochemical sector‘s shift to chemicals.
• Chemist—approval of capacity expansion, promotion of joint investment (1956–1987).
• Promotion of mergers, joint production and sales.
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Threat of substitute products.
First we understand, the existence of products outside of the realm of the common product
boundaries increases the propensity of customers to switch to alternatives. For example, tap
water might be considered a substitute for Coke, whereas Pepsi is a competitor's similar
product. Increased marketing for drinking tap water might "shrink the pie" for both Coke and
Pepsi, whereas increased Pepsi advertising would likely "grow the pie" (increase
consumption of all soft drinks), albeit while giving Pepsi a larger slice at Coke's expense.
Pharmaceutical companies in Japan have build a low-cost production
system by exploiting such advantages as the lowest electricity prices in Japan, the region's
sufficient water resources, and the local concentration of ancillary firms that allows
production to be integrated. Thanks to strong-minded efforts to develop their own products
using existing technologies, a range of medical products such as tablets, capsules, adhesive
patches and ointments are associated with high-quality production technology and quality
control systems. Recently, changes in the home Pharmaceutical industry's operating
environment, including revisions to the Pharmaceutical Affairs Act in April 2005 (which
made full outsourcing of Pharmaceutical manufacturing possible), and government efforts to
decrease medical costs (by increasing generic drug usage to 30 percent of total volume by
2012 [23 percent in 2010]), have spurred Pharmaceutical companies to enhance their
competitiveness by aggressively investing in additional capacity and research and
development. As a outcome, Pharmaceutical production in the Japan has grown substantially
at a far faster pace than the national average since 2005. The Japan recorded production
expansion of 61.1% between 2005 and 2010, against the national growth rate of just 6.1
percent, and growth continues at a high level.
Today's business environment is tremendously competitive and in economics parlance where
perfect competition exists, the profits of the firms operating in that industry will become nil.
nevertheless, this is not possible because, firstly no company is a price taker (i.e. no company
will operate where profits are zero).
Secondly, they struggle to create a competitive advantage to thrive in the competitive
scenario. It is only because of the threats of substitute product.
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Example of Threat of substitute product is Takeda Pharmaceutical Company Limited
who is the best in healthcare product here company having shortcoming of threat of
susitute product that Astellas Pharma co. producing SURIZINE capsules which are
used for manifold disease so it is major substitute for Takeda.
Buyer propensity to substitute
Relative price performance of substitute
Buyer switching costs
Perceived level of product differentiation
Number of substitute products available in the market
Ease of substitution. Information-based products are more prone to substitution, as
online product can easily replace material product.
Substandard product
Quality depreciation
Bargaining power of suppliers
The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw
materials, components, labor, and services (such as expertise) to the firm can be a source of
power over the firm, when there are few substitutes. Suppliers may refuse to work with the
firm, or, e.g., charge excessively high prices for unique resources.
The Pharmaceutical industry is composed of companies that research, develop, produce,
market, and sell chemical or biological substances for medical or veterinary use; these
products include: prescription, generic, and over-the-counter drugs; vitamins and nutritional
supplements; diagnostic substances. The companies also develop and manufacture drug
delivery systems. So that wise in japan, bargaining power of supplier play prominent role.
The pharma industry depends upon several organic chemicals.
The chemical industry is again very competitive and fragmented.
The chemicals used in the pharma industry are largely a commodity.
The suppliers have very low bargaining power and the companies in the pharma
industry can switch from their suppliers without incurring a very high cost.
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However, what can happen is that the supplier can go for forward integration to
become a pharma company. Companies like Orchid Chemicals and Sashun Chemicals
were basically chemical companies, who turned themselves into pharmaceutical
companies.
Supplier switching costs relative to firm switching costs
Degree of differentiation of inputs
Impact of inputs on cost or differentiation
Presence of substitute inputs
Strength of distribution channel
Supplier concentration to firm concentration ratio.
Employee solidarity (e.g. labor unions)
Supplier competition - ability to forward vertically integrate and cut out the buyer.
74
75
Indian Automobile industry
The Indian auto industry ended the year 2011-12 on a positive note. The total production data
for the period shows production growth of 13.83% over the same period last year. In March
2012 as compared to March 2011, production grew at a single digit rate of 6.83%. In 2011-
12, the industry produced 20,366,432 vehicles of which share of two wheelers, passenger
vehicles, three wheelers and commercial vehicles were 76%, 15%, 4% and 4% respectively.
The growth rate for overall domestic sales for 2011-12 was 12.24 percent amounting to
17,376,624 vehicles. Passenger Cars grew by 2.19%, Utility Vehicles grew by 16.47% and
Vans by 10.01% during this period. For the first time in history car sales crossed two million
in a financial year. If we compare sales figures of March 2012 to March 2011, the growth for
two wheelers was 8.27%
Growth rate of automobile industry in India in percentage
Particulars Growth in %
Passenger Vehicles 14.18
Commercial Vehicles 25.15
Three Wheelers 34.41
Two Wheeler 27.13
In March 2012 compared to March 2011, overall automobile exports registered a growth of
17.81%.
76
Size of the Industry 2.6 Million Units
Geographical distribution Jamshedpur, Pune, Lucknow, Gurgoan, Delhi, Mumbai,
Bangalore, etc
Output per annum Rs 2,000 crore per annum
Percentage in world market 6-8%
Market Capitalization 5% of the share
Segment wise market share in % in India
Particular Market share (%)
Passenger vehicles 15.86
Commercial vehicles 4.32
Three vehicles 3.58
Two vehicles 76.23
77
Porter's five forces model on Automobile Industry in India
1. Barriers to Entry –
It's true that the average person can't come along and start manufacturing
automobiles. The emergence of foreign competitors with the capital, required
technologies and management skills began to undermine the market share of many
automobile companies. Globalization the tendency of world investment and
businesses to move from national and domestic markets to a worldwide environment
is a huge factor affecting the auto market. More than ever, itis becoming easier for
foreign automakers to enter the Domestic market .Automobiles depend heavily on
consumer trends and tastes. While car companies do sell a large proportion of vehicles
to businesses and car rental companies (fleet sales), consumer sales is the largest
source of revenue. For this reason, taking consumer and business confidence into
account should be a higher priority than considering the regular factors like earnings
growth and debt load.
2. Threat of Substitutes –
Rather than looking at the threat of someone buying a different car, there is also need
to also look at the likelihood of people taking the bus, train or airplane to their
destination. The higher the cost of operating a vehicle, the more likely people will
seek alternative transportation options. The price of gasoline has a large effect on
consumers' decisions to buy vehicles. Trucks and sport utility vehicles have higher
profit margins, but they also guzzle gas compared to smaller sedans and light trucks.
When determining the availability of substitutes you should also consider time,
money, personal preference and convenience in the auto travel industry. Then decide
if one car maker poses a big threat as a substitute.
3. Competitive Rivalry –
Highly competitive industries generally earn low returns because the cost of
competition is high. The auto industry is considered to be an oligopoly (A market
condition in which sellers is so few that the actions of any one of them will materially
affect price) which helps to minimize the effects of price-based competition. The
automakers understand that price-based competition does not necessarily lead to
78
increases in the size of the marketplace, historically they have tried to avoid price-
based competition, but more recently the competition has intensified - rebates,
preferred financing and long-term warranties have helped to lure in customers, but
they also put pressure on the profit margins for vehicle sales. Every year, car
companies update their cars. This is a part of normal operations, but there can be a
problem when a company decides to significantly change the design of a car. These
changes can cause massive delays and glitches, which result in increased costs and
slower revenue growth. While a new design may pay off significantly in the long run,
it's always a risky proposition.
4. Bargaining Power of Suppliers –
The automobile supply business is quite fragmented (there are many firms). Many
suppliers rely on one or two automakers to buy a majority of their products. If an
automaker decided to switch suppliers, it could be devastating to the previous
supplier's business. As a result, suppliers are extremely susceptible to the demands
and requirements of the automobile manufacturer and hold very little power. For parts
suppliers, the life span of an automobile is very important. The longer a car stays
operational, the greater the need for replacement parts. On the other hand, new parts
are lasting longer, which is great for consumers, but is not such good news for parts
makers. When, for example, most car makers moved from using rolled steel to
stainless steel, the change extended the life of parts by several years.
5. Bargaining Power of Buyers –
The bargaining power of automakers is unchallenged. Consumers may become
dissatisfied with many of the products being offered by certain automakers and began
looking for alternatives, namely foreign cars. On the other hand, while consumers are
very price sensitive, they don't have much buying power as they never purchase huge
volumes of cars.
79
Attractiveness of the Automobile Industry for Investment purpose
Economic reforms and deregulation have transformed that scene. India has already become
one of the fastest growing automobile markets in the world. The Indian automobile industry
is going through a technological change where each firm is engaged in changing its processes
and technologies to maintain the competitive advantage and provide customers with the
optimized products and services. Starting from the two wheelers, trucks, and tractors to the
multi utility vehicles, commercial vehicles and the luxury vehicles, the Indian automobile
industry has achieved splendid achievement in the recent years.
Automobile industry has a strong multiplier effect and is capable of being the driver of
economic growth. A sound transportation system plays an essential role in the country's rapid
economic and industrial development. The well-developed Indian automotive industry
skilfully fulfils this catalytic role by producing a wide variety of vehicles: passenger cars,
light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters,
motorcycles, mopeds, three wheelers, tractors etc.
The automotive sector is one of the core industries of the Indian economy, whose prospect is
reflective of the economic resilience of the country. Continuous economic liberalization over
the years by the government of India has resulted in making India as one of the prime
business destination for many global automotive players. The automotive sector in India is
growing at around 18 per cent per annum.
The Indian automotive industry started its new journey from 1991 with relicensing of the
sector and subsequent opening up for 100 per cent FDI through automatic route. The
automobile sector has been contributing its share to the shining economic performance of
India in the recent years. With the Indian middle class earning higher per capita income, more
people are ready to own private vehicles including cars and two-wheelers
Side by side with fresh vehicle sales growth, the automotive components sector has witnessed
big growth. The domestic auto components consumption has crossed rupees 9000 crore and
an export of one half size of this figure.
80
India is on the peak of the Foreign Direct Investment wave. FDI flows into India trebled from
$19 billion in 2008-97 and $25 billion in 2011-12. By AT Kearney's FDI Confidence Index
2006, India is the second most attractive FDI destination after China, pushing the US to the
third position. It is commonly believed that soon India will catch up with China.
India is up-and-coming a significant manufacturer, especially of electrical and electronic
equipment, automobiles and auto-parts. The country is expected to witness over Rs 30,000
crore of investment by 2010.
Maruti Udyog has set up the second car plant with a manufacturing capacity of 2.5 lakh units
per annum for an investment of Rs 6,500 crore (Rs 3,200 crore for diesel engines and Rs
2,718 crore for the car plant itself). Hyundai and Tata Motors have announced plans for
investing a similar amount over the next 3 years. Hyundai will bring in more than Rs 3,800
crore to India, Tata Motors will be investing Rs 2,000 crore in its small car project.
Commercial vehicle segment, Ashok Leyland and Tata Motors have each announced well
over Rs 1,000 crore of investment. Mahindra & Mahindra's joint venture with International
Trucks is expected to see an infusion of at least Rs 500 crore. Hero Honda is about to
establish its fourth manufacturing plant. Bajaj Auto and TVS Motors are moving to the
excise-free zones of Himachal Pradesh and Uttaranchal for putting up new capacity.
India provides trained manpower at competitive costs making India a favoured global
manufacturing hub. The attractiveness of the Indian markets on one hand and the stagnation
of the auto sector in markets such as Europe, US and Japan on the other have resulted in
shifting of new capacities and flow of capital to the Indian automobile industry.
Global auto majors such as Japanese auto majors Suzuki, Honda and Korean car giant
Hyundai are increasingly banking on their Indian operations to add weight to their businesses,
even as numbers stay uncertain in developed markets due to economic recession and
slowdown.
81
JAPANESE AUTOMOBILE INDUSTRY
Eight major Japanese automakers produced about 7.98 million units domestically in 2011,
down 13.4 percent from the previous year, due to damage caused by the Great East Japan
Earthquake. This was the lowest figure since the so-called Lehman shock pushed 2009
production down to about 7.74 million vehicles.
Toyota produced about 40 percent of its vehicles domestically, the highest among Japan's
three largest carmakers--Toyota, Nissan Motor Co. and Honda Motor Co. As a result,
Toyota's production was hit hardest by the March 11 disaster.
Japanese carmakers have been suffering globally even though they have until recently
enjoyed high market shares around the world. According to FOURIN, Inc., a global
automotive market research and publishing company, the share of Japanese cars in the global
market plunged from 32.2 percent in 2008 to 28.6 percent in 2010.
An average new Toyota has about 24,000 inputs and outputs and as many as 70 computer
chips processing information and sending it to other chips to operate engine control units that
are very complex. An average new automobile is about 60 percent electronic.
Among the devices in new Toyota is an event data recorder—the automotive equivalent of an
airplane‘s black box—that record things like speed and engine RPMs and is used to deploy
airbags and record information of what happens five second before a crash and two seconds
after it.
82
Japanese Automobile Industry and Japan
An estimated 850,000 people are employed by the vehicle manufacturing sector, with
includes motorcycles makers and parts suppliers. If you add related materials sectors, such as
steel makers and vehicle service and repair services, the figure reaches 2 million. If other
vehicle-related jobs such as service station attendants and car rental workers are added the
figures climbs to 5 million, roughly 8 percent of Japan‘s work force.
According to the japans trade organization in 2012 Japans total domestic auto related output
of worth $500 billion‖ which amounted to more than 20% of Japan total annual
manufacturing output. On top of that auto related business provides one out of every ten jobs
in Japan. A major part of Japan work force is dependent on the automobile industry. Japan
maintained the long term relationship with buyer is very important and it‘s easy to maintain
the long term relationships with buyer.
More than 50 percent of the vehicles made in Japan are exported. Exports of vehicles and
vehicle parts reached about $180 billion in 2007, accounting for roughly 20 percent of Japan
exports. Among Japanese exports in 2011, transportation equipment including automobile-
related products accounted for the highest portion of about 23 percent.
Domestic sales of vehicles have been on the decline for some time in Japan. At its peak in
1990, the Japanese automobile industry produced 13.48 million vehicles, of which more than
5 million were exported and 7.78 were sold domestically. By 2001, the domestic sales had
shrunk 24 percent to 5.91 million vehicles.
Japan has 11 companies that produce motor vehicles, including eight that make cars or mini
cars and three that make only trucks. An additional 9,000 companies supply parts and do
subcontract work. The automobile industry accounts for around 10 percent of Japan's
industrial output and employs 3 percent of the workforce.
The top five automobile companies in Japan are Toyota, Honda, Nissan, Mitsubishi and
Mazda. The other companies that make motor vehicles are Subaru, Suzuki, Daihatsu, which
make cars, and Isuzu, Hino, Fuso, which make trucks. These companies fight for a piece of
market that is 30 percent the size of the United States. Foreign companies claim only 4.6
percent share of the car market in Japan.
83
Industry Overview:-
The evolution of the automotive industry has been influenced by various innovations in fuels,
vehicle components, societal infrastructure, and manufacturing practices, as well as changes
in markets, suppliers and business structures. Some historians cite examples as early as the
year 1600 of sail-mounted carriages as the first vehicles to be propelled by something other
than animals or humans.
The engine was developed as a result of discovering new energy carrying mediums,
such as steam in the 1700s, and new fuels, such as gas and gasoline in the 1800s.
During the 1890s and early 1900s, developments of other technologies, such as
the steering wheel and floor mounted accelerator.
During the 1910s, the development of technologies and societal infrastructure
continued in addition to new manufacturing practices and business strategies.
In the 1920s, the development of infrastructure, adoption of new manufacturing
practices, and the merging of companies continued for example Benz and
Daimler, Chrysler and Dodge, Ford and Lincoln.
In the 1930s, several new vehicle brands were developed for example Ford
Mercury, Lincoln Continental, Volkswagen and trends in vehicle consumer
preferences were established that differentiated the American and European
market.
In the 1940s, during World War II (WWII), automotive factories were used to
make military vehicles and weapons, thus halting civilian vehicle production.
In the 1950s and 1960s, more technological innovations, such as fibreglass
bodies and higher compression ratio fuels, allowed vehicle developers to
appease the growing consumer interest for vehicle comfort, look, and feel.
The 1970s were marked by stricter environmental regulations and the oil
embargo of the early 70s, which led to the development of low emission vehicle
technologies, such as catalytic converters, and a 55 -mph nationwide speed limit
in the U.S. Foreign cars like the Japanese Honda Civic started appearing in the
U.S. market.
In the 1980s, the U.S. automotive industry began losing market share to the
higher quality, affordable, and fuel efficient cars from Japanese automakers. In
84
response to this market share loss, U.S. automakers began focusing on
improving quality by adopting different Japanese manufacturing management
philosophies, such as JIT.
In the 1990s with the construction of overseas facilities and mergers between
multinational automakers. This global expansion gave automakers a greater
capacity to infiltrate new markets quickly and at lower costs.
Porter’s Five Forces Analysis
Degree of Rivalry:-
The automotive industry in the U.S. is no longer the playground of the Big 3
(GM, Ford, and Daimler Chrysler); global companies compete in the U.S.
market, while U.S. companies have globalized themselves.
In the 1980s, the Japanese car makers Honda and Toyota entered a fairly
disciplined U.S. market and have been very focused in growing their shares of
the market.
The great diversity of rivals in terms of cultures and associated philosophies has
intensified rivalry in the industry.
Market growth is slow in the established markets of the U.S. and Western
Europe, and companies must fight fiercely to eke out gains or prevent losses in
market share.
The degree of rivalry in the automotive industry is further heightened by high
fixed costs associated with manufacturing cars and trucks and the low switching
costs for consumers when buying different makes and models.
Threat of Substitutes:-
Numerous other forms of transportation are available, but none offer the utility,
convenience, independence, and value afforded by automobiles.
The switching costs associated with using a different mode of transportation,
such as train, may be high in terms of personal time (i.e., independence),
85
convenience, and utility (luggage capacity), but not necessarily monetarily
(round trip train fare on MARTA would most likely be less expensive than the
cost of fuel consumed on a similar round trip, daily parking, car insurance, and
maintenance).
In these areas, the substitutes available (walking, mass transit, bicycles, etc.)
can be less costly than automobiles and thus alternative modes of
transportation are often preferred.
The American dream of ―a car [or two] in every garage‖ is not what the rest
of the world currently wants or needs.
Barriers to Entry:-
The barriers to enter the automotive industry are substantial. For a new
company, the start-up capital required to establish manufacturing capacity to
achieve minimum efficient scale is prohibitive.
The barriers to new companies are substantial, established companies are
entering new markets through strategic partnerships or through buying out or
merging with other companies.
In fact, the barriers to entry for new (or different) markets may be quite low; in the
1980s, U.S. companies practically invited Japanese makers into the U.S. by failing
to offer quality vehicles in the lower price markets.
In the newer, undeveloped markets of Asia, Africa, and South America, the barriers to
entry similarly exist.
Such an operation, if successful, would surely be snatched up by one of the global
giants and incorporated into its fold.
Bargaining power of Buyer and Supplier:-
There are specific characteristics that make members of the automotive industry
powerful buyer-:
(1) There is not a grand proliferation of companies manufacturing automotives, and the
four largest automotive companies in the U.S. have roughly 90% of the value of shipments
and value added in the U.S.
86
(2) Automotive parts (e.g., oil filters, mufflers, belts, etc.) are standardized commodities
and these parts are only used on automobiles.
(3)Backward integration can and does occur, as seen in summer 2005 when Ford
purchased struggling parts maker Visteon.
Consumers wield the greatest power in this relationship due to the fairly standardized
nature of the automotive commodity (a vehicle) and the low switching costs associated
with selecting from among competing brands.
DaimlerChrysler
DaimlerChrysler (DCX) was formed in 1998 in a merger of two of the automotive
industry‘s oldest and most prestigious manufacturers: Daimler-Benz AG and the
Chrysler Corporation. This so-called ―merger of equals‖ was the culmination of a long
complicated family history that in some sense follows the history of the automobile
itself. Because of this prestigious history, DaimlerChrysler enjoys a strong reputation
on both sides of the Atlantic.
Today, DaimlerChrysler employs a total of 384,723 people in 17 countries. Their
products are sold in over 200 countries. DaimlerChrysler is the fourth largest vehicle
producer in the world in terms of units sold behind GM, Ford, and Toyota.
Ford
Ford Motor Company (F) was founded in 1903 by automotive and industrial pioneer
Henry Ford in Dearborn, Michigan. Being first to implement a moving assembly line
for automotive manufacturing, Ford was able to more efficiently mass produce their
products than their competitors. In 1908 the Model T was introduced and went on to
sell over 15 million vehicles, firmly establishing Ford as the major player in the early
automotive industry with 50% market share by the 1920s. The company went public
in 1956 and since then has grown to be a significant presence in the global
automotive market.
87
The Ford Motor Company product portfolio includes cars, trucks, and SUVs from the
following brands: Ford, Lincoln, Mercury, Mazda, Aston-Martin, Jaguar, Volvo, and
Land Rover. In addition to its core automotive business, Ford has a finance division, a
parts and service division, and they also currently own Hertz Corporation, the largest
car rental business in the world. Relative to other massive automotive manufacturers
in 2003, Ford was number two domestically and globally (behind GM), in terms of
number of vehicles sold.
General Motors:-
After its organization in 1908, General Motors (GM) proceeded to acquire seven
companies by the end of 1909. Today, the company‘s brand names include many of
the beginning acquisitions including Buick, Cadillac, Chevrolet, GMC, Oldsmobile,
and Pontiac, as well as newer acquisitions and creations including Holden, Hummer,
Opel, Saab, Saturn, and Vauxhall. GM is the largest automobile manufacturer in the
world, selling nearly nine million cars in 2004, which equated to a 14.5% global
market share.
As of the end of 2004, GM reduced its projected earnings for 2005 by over 50% from
previous projections, which reflects its low expectations for the company in the near
future. Investors have also lost faith in the future of GM; the current stock price is
selling at a fraction of the book value. GM‘s debt has been steadily downgraded and
stood at BBB- as of the end of 2004 according to Standard & Poor‘s ratings.
GM‘s main problem is their failure to remain cost-competitive in the global market.
GM is focusing on increasing market share in growing countries such as India and
China.
Honda:-
Honda Motor Co. (HMC) was established by Soichiro Honda in 1946. It originally
began producing motorcycles in the mid 20th
century and began manufacturing
88
automobiles (the Honda Civic) in 1972. After the original Civics‘ inception, Honda
produced many variants of this highly successful vehicle, such as the four-door sedan,
wagons, hatchback, coupe, and more recently the hybrid. Honda currently has two
automotive brands (Honda and Acura) and it produces over 20 other vehicle models,
such as the Accord, Element, Insight, Odyssey Minivan, Pilot SUV, and Ridgeline
Truck, in addition to producing motorcycles and power products.
Since Honda began producing automobiles it has been a leader in producing fuel
efficient and low emissions vehicles. In 1977 and 1983, Civic models ranked first in
U.S. fuel-economy tests. Honda has also introduced hybrid vehicles such as the
Insight, Civic, and Accord, in 1999, 2002, and 2004, respectively, with the 2006
Insight being the most fuel efficient car of 2006.
Currently, Honda ranks sixth in sales within the automotive industry. They have
overseas plants in over 12 countries including the U.K., Italy, Brazil, Taiwan,
Indonesia, Malaysia, Thailand, Nigeria, U.S., and Canada.
Hyundai:-
Hyundai Motor Co. (HMC) was established in Korea in 1967. The company‘s first
model (Cortina) was released, in cooperation with Ford Motor Company, in 1968. In
1998, Hyundai acquired a 51% stake in Kia, but has since reduced its share to 37%.
In 2004, Hyundai was South Korea‘s largest car maker and the world‘s seventh
largest car maker selling 2.3 million units. Hyundai currently offers about a dozen
cars and minivans, as well as trucks, buses, and other commercial vehicles. Some
popular entries in their product line-up include the Accent, Sonata, Tucson, Elantra,
Santa Fe, and Tiburon, which all earned the title ―Best Bet‖ in Jack Gillis‘ The Car
Book 2005.
89
Maruti Udyog:-
A license and Joint Venture agreement was signed between the government of India
and Suzuki Motor Company (SMC) in Oct. 1982 to launch Maruti Udyog Limited
(MUL). Today, MUL offers 11 models, including the Maruti 800, Omni, premium
small car Zen, international brands Alto and WagonR, off-roader Gypsy, mid size
Esteem, luxury car Baleno, MPV, Versa, Swift, and Luxury SUV the Grand Vitara
XL7.
MUL‘s dominant position in the Indian car market and its ability to satisfy its
customers has made it the success it is today. MUL has been the leader in the Indian
car market for two decades. Today, MUL holds about 50% of the total Indian market.
For a record sixth year in a row, MUL was ranked highest in customer satisfaction,
according to the J.D. Power Asia Pacific 2005 India Customer Satisfaction Index
Study. In 2004, Business World ranked MUL among the country‘s five most
respected companies and the country‘s most respected automobile company.
90
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Asia:Comparison of Production, Trade and Market Structure in Selected Countries",
located on: http://www.unescap.org/tid/artnet/pub/wp3707.pdf
1 fragment found in a text with the title: "Industry Trends Report Spring 2008", located on: https://www.mitchell.com/mcms/content/pub/Newsletters/ITR_vol-8-no-2_spring-2008-2011.pdf
1 fragment found in a text with the title: "Customer Loyalty and Employee Enthusiasm: An
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Complexity Edited by", located on: http://cevdetkizil.brinkster.net/cevdetchess/tr/admin/editor/sayfalar/handgm.pdf
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1 fragment found in a text with the title: "The Role of the Property Tax in Financing Rural
Local Governments in Developing Countries", located on: http://www.rotman.utoronto.ca/iib/ITP0608.pdf
1 fragment found in a text with the title: "Hyundai Motor Company", located on: http://en.wikipedia.org/wiki/Hyundai_Motor_Company
1 fragment found in a text with the title: "Hyundai Sonata", located on: http://en.wikipedia.org/wiki/Hyundai_Sonata
1 fragment found in a text with the title: "The work of WHO in the South-East Asia Region:
1 July 1976 - 30 June 1977", located on: http://repository.searo.who.int/bitstream/123456789/5297/53/rdr77_Administration.pdf
http://repository.searo.who.int/bitstream/123456789/5297/43/rdr77_Complete.Pdf
1 fragment found in a text with the title: "An assessment of carbon sources for the
production of synthetic fuels from nuclear hydrogen", located on: http://dspace.mit.edu/bitstream/handle/1721.1/41598/213817648.pdf?sequence=1
1 fragment found in a text with the title: "Intellectual property rights in the software sector:
issues on patents and free/libre open source software", located on: http://amsdottorato.cib.unibo.it/501/1/TesiFrancescoRentocchini.pdf
96
1 fragment found in a text with the title: "Towards an Empirical Model of WWW Site
Response Times", located on: ftp://ftp.cs.umass.edu/pub/techrept/techreport/1996/UM-CS-1996-019.ps
1 fragment found in a text with the title: "Passenger vehicles in the United States", located
on: http://en.wikipedia.org/wiki/Passenger_vehicles_in_the_United_States
1 fragment found in a text with the title: "European Social Models and Growth: Where are
the Eastern European countries heading?", located on: http://ies.fsv.cuni.cz/default/file/download/id/7200
1 fragment found in a text with the title: "Knowledge economy, innovation and growth in
Europe", located on: http://pdc.ceu.hu/archive/00003656/01/Knowledge_Economy_Innovation_and_Growth_in_Europe.pdf
1 fragment found in a text with the title: "Terrorism in India", located on: http://en.wikipedia.org/wiki/Terrorism_in_India
97
Pharmaceutical Industry:
Report D i g i t a l s i g n e d
Title: Untitled
Processing date: Mon, 10.6.2013 9:27:37 CEST
A total of 172 fragments were analysed. As a result 24 fragments (14.0%) were found in
other documents. In the document preview below the fragments are marked light blue and
clickable.
Cross reference documents
Following list of found documents is grouped by document titles and ordered by found
fragements. With a mouseclick on "x fragments" the relevant fragments in the document are
colored blue and the window scrolls to the first location. Click on "x fragments" again resets
the special marks.
7 fragments were found in a text with the title: "Porter five forces analysis", located on: http://en.wikipedia.org/wiki/Porter_five_forces_analysis
3 fragments were found in a text with the title: "Rayleigh Distribution Definition", located
on: http://www.kellogg.northwestern.edu/faculty/sstern/htm/NEWresearchpage/Publications/Cockburn Henderson
Stern SMJ.pdf
http://planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_pharma.doc
2 fragments were found in a text with the title: "Report of the Working Group", located on: http://planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_pharma.pdf
2 fragments were found in a text with the title: "Manufacturing in Japan", located on: http://en.wikipedia.org/wiki/Manufacturing_in_Japan
2 fragments were found in a text with the title: "A Critical review of SME
internationalization : through two Swedish/Chinese SMEs", located on: http://hig.diva-portal.org/smash/get/diva2:227383/FULLTEXT01
1 fragment found in a text with the title: "HEALTHCARE PORTALS- CUSTOMER
CENTRICITY IN THE PHARMACEUTICAL INDUSTRY", located on: http://is2.lse.ac.uk/asp/aspecis/20010093.pdf
1 fragment found in a text with the title: "Analyzing the Distributions of the Stochastic Firm
Growth Approach", located on: http://www3.druid.dk/wp/20030012.pdf
98
1 fragment found in a text with the title: "Japan and Taiwan in the wake of bio-
globalization : drugs, race and standards", located on: http://dspace.mit.edu/bitstream/handle/1721.1/39195/67767409.pdf?sequence=1
1 fragment found in a text with the title: "Strengthening the Export Competitiveness of firms
in the Indian Pharmaceutical Industry", located on: http://www.eSocialSciences.com/data/articles/Document12142006180.7148554.pdf
1 fragment found in a text with the title: "The placebo effect: international patent law and
the protection of traditional plant medicine", located on: https://papyrus.bib.umontreal.ca/jspui/bitstream/1866/2772/1/12028920.PDF
1 fragment found in a text with the title: "Strategic implementation analysis on biological
pharmaceuticals and market access in Western Canada", located on: http://ir.lib.sfu.ca/bitstream/1892/8994/1/b38612021.pdf
1 fragment found in a text with the title: ""Regulating Healthcare Technologies and
Medical Supplies: A Comparative Overview"", located on: http://aei.pitt.edu/6897/01/altenstetter_christa.pdf
1 fragment found in a text with the title: "Eleventh Five Year Plan (2007–2012) Volume
III Agriculture, Rural Development, Industry,Services, and Physical Infrastructure",
located on: http://www.eSocialSciences.com/data/articles/Document11882008110.2548944.pdf
1 fragment found in a text with the title: "Strategy & structure of the pharmaceutical
industry", located on: http://129.3.20.41/eps/io/papers/0211/0211018.pdf
1 fragment found in a text with the title: "Economy Survey 2005-06, Chapter 7", located on: http://www.eSocialSciences.com/data/articles/Document1272200612.741641E-02.pdf
1 fragment found in a text with the title: "View Point-Antimicrobial price variation:
Conundrum of medical profession!", located on: http://www.bioline.org.br/pdf?jp07023
1 fragment found in a text with the title: "Overseas Acquisition versus Greenfield Foreign
Investment: Which Internationalization Strategy is better for Indian Pharmaceutical
Enterprises?", located on: http://mpra.ub.uni-muenchen.de/12339/1/wp0607.pdf
1 fragment found in a text with the title: "Information management using Web 2.0
technology", located on: http://dspace.mit.edu/bitstream/handle/1721.1/50100/462153001.pdf?sequence=1
1 fragment found in a text with the title: "Analyzing the distributions of the stochastic firm
growth approach", located on: http://webdoc.sub.gwdg.de/ebook/serien/lm/DRUIDwp/03-12.pdf
99
1 fragment found in a text with the title: "Drug development for neglected diseases: a
deficient market and a public-health policy failure.", located on: http://fieldresearch.msf.org/msf/bitstream/10144/28441/1/Access Trouiller 2002.pdf
1 fragment found in a text with the title: "Clinical trials in Ontario", located on: https://ospace.scholarsportal.info/bitstream/1873/1141/1/268176.pdf
1 fragment found in a text with the title: "Drug Regulation in the Philippines", located on: http://www.eSocialSciences.com/data/articles/Document11662009160.1892511.pdf
1 fragment found in a text with the title: "IMPLEMENTING R&D POLICIES: AN
ANALYSIS OF SPAIN’S PHARMACEUTICAL RESEARCH PROGRAM", located on: http://docubib.uc3m.es/WORKINGPAPERS/WE/we035923.pdf
1 fragment found in a text with the title: "Evaluation of the Pharmaceutical Industry
Investment Program", located on: http://129.3.20.41/eps/mic/papers/0305/0305001.pdf
1 fragment found in a text with the title: "Life sciences in Ontario Rx for growth.", located
on: https://ospace.scholarsportal.info/bitstream/1873/9234/1/275206.pdf
1 fragment found in a text with the title: "Governing Biodiversity. The Realisation of Access
and Benefit Sharing under the Convention on Biological Diversity", located on: http://rudar.ruc.dk/bitstream/1800/1148/1/Busch_Kern Governing Biodiversity.pdf
1 fragment found in a text with the title: "Untangling the Origins of Competitive
Advantage", located on: http://dspace.mit.edu/bitstream/handle/1721.1/3822/IB_Untangling.pdf?sequence=2
1 fragment found in a text with the title: "Implementing R and D policies: an analysis of
Spain's pharmaceutical research program", located on: http://e-archivo.uc3m.es/bitstream/10016/313/1/we035923.pdf
1 fragment found in a text with the title: "Japanese government policy to innovative R&D in
pharmaceutical industry", located on: http://dspace.mit.edu/bitstream/handle/1721.1/35990/31762002.pdf?sequence=1
1 fragment found in a text with the title: "The biological etiology of mental health disorders
[electronic resource] : social influences and change potential of practitioners' beliefs /",
located on: http://www.marshall.edu/etd/doctors/midkiff-donna-2006-phd.pdf
1 fragment found in a text with the title: "Development of a measurement for technology
learning process (TLP)", located on: http://doras.dcu.ie/529/1/dabnoon_mohammed_2008.pdf
1 fragment found in a text with the title: "Untangling the origins of competitive advantage",
located on: http://dspace.mit.edu/bitstream/handle/1721.1/49334/untanglingorigin00cock.pdf?sequence=1
100
Telecommunication Industry Report:
Report D i g i t a l s i g n e d
Title: Untitled
Processing date: Mon, 10.6.2013 10:36:04 CEST
A total of 266 fragments were analysed. As a result 78 fragments (29.3%) were found in
other documents. In the document preview below the fragments are marked light blue and
clickable.
Cross reference documents
Following list of found documents is grouped by document titles and ordered by found
fragements. With a mouseclick on "x fragments" the relevant fragments in the document are
colored blue and the window scrolls to the first location. Click on "x fragments" again resets
the special marks.
55 fragments were found in a text with the title: "Entering the telecom industry in Japan",
located on: http://gupea.ub.gu.se/bitstream/2077/2400/1/Emilson_1999_25.pdf
6 fragments were found in a text with the title: "THE LIMITS OF THE NATIONAL
INNOVATION SYSTEMS MODEL:", located on: http://ecommons.library.cornell.edu/bitstream/1813/5190/1/dissertation_tansel_erbil_last_2.pdf
4 fragments were found in a text with the title: "Rayleigh Distribution Definition", located
on: http://iopp.fileburst.com/old/old_01_110.pdf
http://darkwing.uoregon.edu/~moursund/Books/AIBook/AI.doc
http://www.tcs.com/SiteCollectionDocuments/White Papers/TCS_FS_algorithmictrading.pdf
http://www.basisboekmvo.nl/images/mvo-scriptie/10 Rooda.pdf
4 fragments were found in a text with the title: "JÚRI: /40thesis.pdf", located on: http://in3.dem.ist.utl.pt/master/thesis/03files/40thesis.pdf
1 fragment found in a text with the title: "The rise of private higher education in Poland:
policies, markets and strategies", located on: http://doc.utwente.nl/57443/1/thesis_Duczmal.pdf
1 fragment found in a text with the title: "Institutional dimensions of poverty reduction",
located on: http://www-
wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1990/05/01/000009265_3960929215615/Rendered/P
DF/multi0page.pdf
101
1 fragment found in a text with the title: "Customer Loyalty and Employee Enthusiasm: An
eclectic paradigm for strategic sales improvement at MB Silicon Systems", located on: http://etdindividuals.dlib.vt.edu:9090/341/1/Customer_Loyalty_and_Employee_Enthusiasm.pdf
1 fragment found in a text with the title: "INTERNATIONAL ATOMIC ENERGY
AGENCY NUCLEAR ENERGY AGENCY ORGANISATION FOR ECONOMIC CO-
OPERATION AND DEVELOPMENT ORGANISATION FOR ECONOMIC CO-
OPERATION AND DEVELOPMENT", located on: http://www.nea.fr/rwm/reports/2002/nea3682-yucca.pdf
1 fragment found in a text with the title: "Tech Culture --- A Real World Practice of
Effectuation Theories", located on: http://etd.lsu.edu/docs/available/etd-05042006-160735/unrestricted/Cheng_thesis.pdf
1 fragment found in a text with the title: "Is QinetiQ market oriented?", located on: http://ssudl.solent.ac.uk/18/1/MBA_2004Bisseker.pdf
1 fragment found in a text with the title: "The Relationship between Vegetable Growers and
the Supermarkets : a Study of South Eastern Scotland in Comparison to the Situation in
Skåne, Sweden", located on: http://ex-epsilon.slu.se:8080/archive/00000647/01/SV_Annie_Drottberger.pdf
1 fragment found in a text with the title: "Storage and capacity rights markets in the natural
gas industry", located on: http://dspace.mit.edu/bitstream/handle/1721.1/45093/99007.pdf?sequence=1
1 fragment found in a text with the title: "Entering the Chinese wastewater reuse market in
the construction industry: Strategic analysis for CWRTC", located on: http://ir.lib.sfu.ca/retrieve/4040/etd1888.pdf
1 fragment found in a text with the title: "Oral pulsatile delivery systems", located on: http://www.touchbriefings.com/pdf/2287/LindeGas_tech_HIRES.pdf
http://www.touchbriefings.com/pdf/2287/akerlindh.pdf
1 fragment found in a text with the title: "Strategy to maximize maintenance operation",
located on: http://ir.lib.sfu.ca/retrieve/4021/etd1854.pdf
1 fragment found in a text with the title: "Marketing environment and marketing
communication analysis for supermarket O", located on: https://publications.theseus.fi/bitstream/handle/10024/28035/Ding_Xi.pdf?sequence=1
1 fragment found in a text with the title: "Characterization and limits of a cold atom Sagnac
interferometer", located on: http://hal.archives-ouvertes.fr/docs/00/43/27/09/PDF/gyro14.pdf
1 fragment found in a text with the title: "Substitution-permutation network cryptosystems
using key-dependent s-boxes", located on: http://www.collectionscanada.ca/obj/s4/f2/dsk2/ftp04/mq22329.pdf
102
1 fragment found in a text with the title: "How do foreign auto suppliers need to compete
differently in China market?", located on: http://dspace.mit.edu/bitstream/handle/1721.1/34626/71359708.pdf?sequence=1
1 fragment found in a text with the title: "Strategic analysis of a commercial product
business unit", located on: http://ir.lib.sfu.ca/bitstream/1892/8926/1/b37259908.pdf
1 fragment found in a text with the title: "High-resolution scanning thermal probe with
servocontrolled interface circuit for microcalorimetry and other applications", located on: http://deepblue.lib.umich.edu/bitstream/2027.42/69814/2/RSINAK-75-5-1222-1.pdf
1 fragment found in a text with the title: "Virtual Institutions.", located on: http://utsescholarship.lib.uts.edu.au/iresearch/scholarly-
works/bitstream/handle/2100/536/02whole.pdf?sequence=2
1 fragment found in a text with the title: "VERTICAL AND HORIZONTAL
COORDINATION IN THE AGRO-BIOTECHNOLOGY INDUSTRY: EVIDENCE AND
IMPLICATIONS", located on: http://ageconsearch.umn.edu/bitstream/15537/1/29010129.pdf
1 fragment found in a text with the title: "The interplay of sector regulators and competition
authorities in regulating competition in telecomunications : the south African case",
located on: http://uir.unisa.ac.za/xmlui/bitstream/handle/10500/3576/dissertation_khosa_a.pdf?sequence=1
1 fragment found in a text with the title: "Entry strategies of foreign companies in Indian
telecomunications market", located on: http://doc.rero.ch/lm.php?url=1000,40,2,20061012130929-US/BenjaminLeviKJ.pdf
1 fragment found in a text with the title: "The work of WHO in the South-East Asia Region:
1 July 1984 - 30 June 1985", located on: http://repository.searo.who.int/bitstream/123456789/5305/36/rdr85_Complete.Pdf
http://repository.searo.who.int/bitstream/123456789/5305/34/rdr85_DTRT.pdf
1 fragment found in a text with the title: "Application of intellectual capital in management
accounting and finance", located on: http://eprints.utm.my/3782/1/NORHAMIMAHMASTOR71974.pdf