Michael Faye gets a new assignment

Submitted By:
Group No: 3 Sec: B

Group Members:
2012066: Ankit Jhunjhunwala 2012071: Anshul Chaudhary 2012077: Ashish Dhar 2012083: Avisha Shukla 2012090: Anubha Bhatnagar 2012097: Chakradhar Shah 2012108: Dhilon Priyadarshi Dash

Submitted To:
Dr. Saleena Khan

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Group-3, Sec-B

Introduction
Michael Faye is an experienced and a relegate executive. He is currently the President of Salvatec, a leading multinational in medical solutions. Faye has to learn and meet his objectives of expanding his companys market in China. He knows that China is the future and is one of the fastest growing and emerging markets. Fayes challenge is to learn about the Chinese market from different sources and then plan and workout whether he would follow the path of others or discover the market his own way. All this is to be done, and that too fast.

Case Objectives:

Characterizing Fayes idea-hunting style. Establishing Salvatec in the Chinese market and to gain an edge over the competitors. Determining the most effective learning source for Michael Faye. Identifying overlooked areas and accelerating the learning process.

CASE ANALYSIS:
Problem background Salvatec has been dormant in the Chinese market for 12 years and is striving to capture a significant market share in the country. The company is unfamiliar with the prevailing market conditions in China. Chinese market is complex due to the existence of various market segments. There is a lack of penetration in the local market framework.

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Solutions:
1) Strengthening the R&D Existing model of R&D in Salvetec is not sufficient as it is mostly based in US. The company has to develop local R&D in order to bring innovative products suiting local market needs. Also it is important to keep pace with developing trends of local market.

Pros:
1. Local R&D may result in significantly reducing costs of products. Thus low cost will further help in capturing large market of low income group. 2. Innovation will lead to introduction of new product catering to the wider market needs. 3. It will lead to reduction in price, which may help in penetrating the rural market

Cons:
1. Locally setting up a R&D base would require considerable investments. 2. Higher R&D spending will not guarantee any innovation or creativity of new product.

2) Making strategic alliances: Forming alliance with the partner firms will help Salvetec achieve the objectives of penetrating the Chinese market and making advances in the areas of technology, product, personnel, distribution, research etc.

Pros:
1. Better supply chain management. 2. Salvatec can take advantage of the credibility of the local firm (strategic partners). 3. Expansion of Product line and reduction in production and distribution cost.

Cons:
1. Difference in culture and attitudes- forming alliances with international companies will result in differences in language, egos, manners, attitudes and approaches. 2. Operational and performance risk- operational issues may arise when there is a delay in goods production or in their delivery. This affects the other partner. Performance risk may occur due to conditions like introduction of new government policies or the changing market conditions.

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3) Acquiring Manufacturers: As Salvetec aims to considerably increase its stake in Chinese market and that too without any prior manufacturing base there, it would not be economically viable to import the products and capturing the market. Initially to start its manufacturing operations, one way could be to acquire local manufacturers.

Pros:
1. It would be an efficient way for a new entrant as local manufacturers would be having prior knowledge about the functioning of local economy and supply chain. 2. Cheap labor and procurement of raw materials at low cost as compared to production in United States.

Cons:
1. Different manufacturing units may not adhere to same quality, which may damage the companys reputation. 2. Manufacturers interest may not align with Salvetecs objective.

4) Acquiring regional distributors. As the products which Salvatec intends to sell in China has to compete with local manufactures, it needs a proper and extensive distribution channel to establish its product in the market. For this the company needs to acquire regional distributors who have prior knowledge of extensive and complex network of local market.

Pros:
1. Consumer preferences and choices will be communicated to Salvetec through regional distributors. 2. Acquiring regional distributors will result in widespread market reach.

Cons:
1. Conflict of interest amongst the distributors. 2. Trivial issues might pose a threat to relationship between Salvetec and the distributors.

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The Best Solution:

The group consensus is that strengthening the local R&D would help Salvatec to catch up with the growing and the highly competitive market of China. It will make it competent enough to innovate its own products and thus help it get an edge over its competitors by catering to the needs of the larger public. Moreover, entering into alliances with the local manufacturers and distributors would aid Salvatec in reducing its price due to cost cutting which in turn will help them to penetrate all segments of the market. It will also help in overcoming the cultural differences and hence building long lasting business relationships.

Relation with the theoretical concepts:

Experiential learning model: This model given by Lewin describes learning as a process having a concrete experience, making observations and reflections on that experience, thus forming abstract concepts and generalizations based on those reflections, and testing those ideas in a new situation, which leads to another concrete experience.

The OADI mental model: It represents a persons view of the world including implicit and explicit understandings. The model provides the context in which to view and interpret new materials and it determines how stored information is relevant to a given situation.

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CASE CONCLUSION 1. Michael Fayes idea hunting style can be characterized as an accelerated learning process in which he gathers ideas and information by observing the environment, gathering perspectives and identifying opportunities thereby. 2. He is very proactive in making Salvatecs presence prominent in the Chinese markets .Within a few days he has travelled throughout the country and has been successful in establishing alliances with manufacturers, competitors and investment bankers and has also gained an insight into the Chinese market by meeting figureheads of various segments and taking in account different perspectives. 3. He has made fresh attempts for acquiring local manufacturers to expand the product line. He has also formed strategic alliances with local market leaders for R&D and distribution, which will also ensure the issue of protection of IP rights. By joining hands with local manufacturers and distributors maximum market penetration in all existing segments can be achieved. 4. He has not taken into consideration Governments role in safeguarding the interests of state owned firms. He hasnt made efforts to strengthen the brands image among the consumers. He has not taken into consideration the degradation of quality that might occur by manufacturing through local firms.

Managerial Learnings:
1. Expanding in an unexplored and a fast emerging market. 2. The importance of forming strategic alliances which would ultimately lead to the overall success of the organization. 3. Targeting and catering to the larger sector especially the rural market. 4. The amalgamation of cultures, opinions and ideas of the partner organizations which are working towards the realization of common goals and objectives.

References:
Wikipedia: Chinese Pharmaceutical market. Reading material (based on topics of Organizational and individual learning) provided by Dr. Saleena Khan.

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