TESCO Fresh and Easy- Starting to become just that

After years of lackluster experiences, shoppers in the Southwest Valley may have a new reason to shop at their local TESCO Fresh & Easy (F & E).  F & E is getting an overdue makeover as it looks to expand its US presence and hit the 300-store mark (the break even point for their US venture) by Spring 2013.

Tesco, the UK’s largest retailer and the 3^rd largest retailer in the world, penetrated foreign markets over the years with relative ease. However, its US subsidiary, F & E, which opened in 2007, fell flat-mainly due to a series of miscalculations of its strategy and fit. Tesco, with the majority of its profits being derived from the U.K., misjudged the level of ease at which their stores would translate into U.S. markets. For a six-month period ending in 2010 the company reported trading losses of $151m and they temporarily closed several stores due to market conditions.¹ . Six years after its initial entry into the market, it is now clawing itself back up the retailing ladder and has plans to reach 300 stores, placed in more economical locations, by the spring of 2013².  In the Southeast valley that means re-designed store interiors, giving locals what they want with a new shopping experience. F & E will drop their “sterile” image by adding more color, redesigning checkouts and interior décor. More information will be provided in the store of fresh and quick meal ideas, bridging the currently unserved market between supermarkets and convenience stores. The addition of more stores also means that the capacity of F&E’s distribution centers will be better used.

Failure to Launch

The retailer has always benefitted from best-in-class store operations, centralized logistical platforms, and has been a leader in consumer insights that localize assortments.  The company has utilized these strengths well in the emerging world with the strategy of “speed to scale” in which the goal is to achieve the number one or two positions in the market within five years of entry.  This has worked well in countries such as Thailand and Slovakia. Leveraging their knowledge of centralized logistics their goal has been to fill the gap between convenience store and super market with stores that are supplied from centralized warehouses.

However, the U.S. has proved more challenging

Tesco’s F & E was originally presented as a “top up” or “fill in” retailer that could satisfy consumer demand for trips where fresh foods like vegetables, fruit, and dairy items were needed during the week, but did not require a full shopping experience.  This concept did not prove formidable for Tesco as they found it hard to connect with US shoppers to form any level of loyalty.

TESCO made a series of blunders in its initial strategy due mainly to lack of knowledge of its U.S. customer base. Although TESCO attempted market research when entering the U.S. by sending 50 of its British executives to live and ‘learn’ California, it failed to grasp the cultural nuances of American stores  perhaps due in part to employing an all expat team. The motivation behind this was in part was to successfully transfer Tesco’s culture to the states;  however, it failed to recognize the difference in taste of their new marketplace. For example, American shoppers found the interior décor- stark concrete flooring, which potentially wasn’t important to British customers, off-putting and unwelcoming.

The lack of local knowledge was made further evident by:

• Store Size and Appeal: F & E stores are 75% smaller than typical American supermarkets  and do not offer bulk shopping like their core competition of big box stores.  Furthermore, they were visually unappealing with cement floors and lack of welcoming aesthetics.(BBC article)
• Lack of “car culture” knowledge: Americans buy a week’s worth of groceries and load up their trunks—unlike the daily runs to the supermarket that F & E seeks to attract.
• Location! Location! Location: In California, store location has been hampered by the fact that Tesco stores were placed on the inbound side of the road—the side those suburbanites heading into the city for the work day drive on—rather than on the outbound side—where suburbanites would be more likely to pull over and buy a quick dinner on their way home. Also, the freshly prepared meals that F & E boasts may have worked if stores were located downtown—where there is more foot traffic.
• Foreign market entry strategy- When TESCO entered the U.S. it did not form a joint venture like it had in other countries; something that would have given it a leg up in understanding the US market. They also did not incorporate their loyalty cards the way they had done in the U.K. and abroad.

Perhaps Tesco was hoping to stave off competitors from the onset, but the reality is that while Tesco has been trying to right its blunders—closing several stores and delaying store openings—competitors, like Wal-Mart, were busy incorporating the good things the UK retailer brought from over the pond into their strategy.

Present Strategy

After its initial gaffe and multiple years of huge financial losses, Tesco executives were not ready to give up as the US was too attractive of a market to do so. They altered their strategy starting with the appointment of a new CEO – Tim Mason. They halted new store openings and began listening to US consumers. In January 2010, Tesco announced that it would be closing 12 stores due to poor performance.  Tesco had gained key insights into what kind of store F & E was to become. They increased the number of items on shelves without increase the their footprint by adding height to the rows, they painted store walls and added new décor, and begun catering to an American clientele—through weekly specials, big colorful signs, and other marketing techniques geared at Americans. The new and improved F & E along with the company’s promise to breakeven in the next year are converting Tesco’s spot in the US market from being designated as a black hole – a highly desirable market where the company consistently dumps resources but can’t seem to find success.

Local operations

Tesco had tried to centralize its US operations, building a distribution center in Riverside County. However, the location and number of their stores was insufficient to leverage the savings. The closing of stores and reopening in new locations allowed F & E to fully realize the centralization savings. The theme of centralization extends all the way to management with Tim Mason, the British expat CEO of F & E, now taking on the roles of Tesco’s deputy CEO and chief marketing officer⁴. Such appointment of a successful subsidiary market executive to advise the global operation further portrays to movement of the US market from being a black hole to being more of a strategic leader. Mason appears to be looking to correct Tesco’s initial lack of localization by doing a lot of listening. Shoppers who visit the F & E website, can access a link to contact the CEO directly.

““In order for the Tesco Board to better reflect the global nature of our business, provide more focus on key areas of performance and deliver on our immediate objectives, we made additional changes in March 2011. Tim Mason has become Deputy CE O and Chief Marketing Officer in addition to his role as President and CEO Fresh & Easy.” – David Reid, Chairman of Tesco

Another thing that has helped propel F & E back into the spotlight is their focus on Green technology and organic food. Its diesel trucks run on hybrid technology. (www.freshandeasy.com)The stores use energy-saving LED lights, and refrigerator doors designed to conserve energy. The Riverside distribution center is powered, in part, by solar panels. Following recent headlines over the beef safety, a March 24^th, website press release states,

“At Fresh & Easy, we have never, would never, and will never use “pink slime” in our ground beef. We believe in fresh quality products you can trust, which is also why we never use high-fructose corn syrup, added trans fats, artificial colors or flavors in any Fresh & Easy brand products. Not because we took a poll or reacted to a headline, but because we’re feeding your families and our families with that we put on our shelves.”

A Fresh & Easy Future?

In order for Tesco’s future in the U.S. to be both fresh and easy, Tesco will need to stay the course of leveraging its existing strengths and understanding its clientele better.  In the past they had heavily underestimated the importance of their modification of their emerging market strategy into that of the U.S. They need to continue to focus on their niche, high quality and low cost products available in the customer’s neighborhood. The need to be aware of their clientele and if, for example, US consumers don’t like the off-putting approach of sealing ‘fresh’ produce in plastic like Tesco is known for, then they should reassess their presentation.

Initially, Tesco’s high hopes for the US F & E fell lower than expected: the year-on-year losses are continually in the decline⁵. Their US customers did not understand the value they could get at F & E, both in terms of the organic, custom-designed meals and in terms of the bang for your buck. However, F & E customers are more recently giving better feedback about both the products, and services offered. Moreover, manufacturing productivity has increased, as have year-on-year like-for-like sales.

Although F & E still is not expecting positive profit in 2012, this year will see the opening of 50 new stores and the company may even break even for the first time thanks to costs savings created in two recent acquisitions and its continued revenue growth.⁴ What does this mean for the UK based giant and its competitors? Only time can tell, but it is safe to say that F & E is not packing up and going home but looking to make a fresh start in the U.S., whether easy or not.

References

1. Tesco to close 12 Fresh & Easy Stores,  http://supermarketnews.com/retail_financial/tesco_close_1005/?cid=upd 13 Fresh & Easy Stores to Close
2. Fresh & Easy to close six stores in Las Vegas, http://www.lvrj.com/business/fresh—easy-to-close-six-stores-in-las-vegas-104732049.html
3. Fresh & Easy Exec: Tesco fills gap in U.S. Market, http://www.progressivegrocer.com/print/topstory/fresh-easy-exec-tesco-concept-fills-gap-in-u-s-market/26447/
4. Tesco Annual Report and Financial Statements 2011, http://ar2011.tescoplc.com/pdfs/tesco_annual_report_2011.pdf
5. Kantar Retail, Tesco Global Session Key Regional Growth Review. September 2011.

Thoroughly satisfied with her recent assignment as a global manager for development and “subsea”, Martha Salia gladly took part in a recent career video that aired. She has a technology degree from Colorado School of Mines, after graduation she went to work for Halliburton in her home country Venezuela. Martha is an excellent example of the type of motivated employee that Halliburton attracts. She says she is excited to work with a diverse group of people from all over the world at Halliburton and she enjoys her technical challenges at Halliburton and working with a global team. Martha’s generation has witnessed a combination of economic and political events that have prompted significant rise in oil prices and the way firms manage oil extraction and distribution.(Halliburton Career Story)

Strategic issue:
Halliburton, one of the world’s largest providers of products and services to the energy industry, operates in an incredibly competitive industry, subject to shifting relationships with governments and regulators as well as with national oil companies, rapidly changing technologies, unpredictable price changes, and dynamic market demands. As global oil reserve locations, extractions, and other complexities intensify, Halliburton must collaborate effectively to leverage and develop its core competencies, distributing risk across multiple contractors. It intends to address present and future challenges and opportunities by employing four key strategic imperatives:

1) Leading in Unconventional Plays

2) Making Deepwater Advancements

3) Maximizing the Mature Field Performance

4) Building Relationships, Delivering Results

(Halliburton Annual Report 2011)

Halliburton took initial steps to become a global company in 1920s and with tremendous growth in the industry after the turn of the century and center of gravity shifting eastward, Halliburton recognized that strategically managing coordinated global operations could become a competitive advantage organizationally and relocated the CEO office and several executive functions from Houston, TX, USA to Dubai, UAE. Because operational concentration within the Middle East emerged as a significant component of Halliburton’s business, executive presence throughout the region allowed for limited risk of declining sensitivity to local issues and disjointed strategic deployment of resources. Maintaining a continued large presence in Texas allowed Halliburton to remain sensitive to the western world’s market and consumer demand. This organizational structure strategically addressed closer management of subsidiary offices throughout the world from a sort of dual headquarter model.

Halliburton’s response to rapidly changing technologies
With competitors like Transocean and Schlumberger closing the gap swiftly, there is enormous pressure for Halliburton to rapidly improve its drilling technology, the productivity level of workers with efficient use of control mechanisms, and knowledge in its long list of more than 140 subsidiaries.

Halliburton’s website is loaded with information touting their latest technological advancements. Setting a cooperative and inclusive direction to, followed by cautious and responsible implementation of subsidiary differentiation, and playing an adaptive referee role with each category of subsidiaries to take advantage of diverse customer, regulatory and competitive stimuli, Halliburton has shown it can lead to an exploitable electric entrepreneurial climate inside national subsidiaries.

The latest HYDRO-GUARD System employed by HAL Mboundi field in the Republic of Congo helped the operator reduce drilling time and mud costs.
Baker Hughes deployed an automated directional drilling assembly on a well in Canada. The rise of horizontal drilling in North American onshore drilling has prompted more operators to consider using rotary steerable despite their higher unit cost. In response, HAL has used Optimized Steering Solutions for Maximum Reservoir Exposure in South East Asia. (Hsieh) Another example of a technological advantage is the 325 Filter Cake Breaker systems from HAL, used in oil fields of Kazakhstan lead to increased performance and production rate. HAL also engineered Baroid fluid systems to help Saudi’s Aramco.

To manage the extremely competitive nature of industry, Halliburton deep-water completion division forged a productive collaboration effort with a competitor, BP Exploration, which was a major victory with a record-breaking well production and an economic value of $33 million (Halliburton Case Studies). The financial success of this venture served to strengthen both Halliburton and BP’s competitive position within the industry and proved mutual beneficial to both competitors.

Halliburton’s response unpredictable price changes:
The North American (which represents HAL’s 50% revenue base) market has expanded to two chief commodities, oil and natural gas, for the first time in well over a decade. Historically oil has been the primary driver, however during the last few cycles natural gas is the primary sole driver of activity. It is important to note that oil and gas have fundamentally different drivers. Because of the low correlation between the two commodities, HAL’s customers have developed balanced portfolios that allow them to shift activity as needed.

HAL’s customers have broad access to the capital markets with record low interest rates. In the previous cycle, constrained capital halted investment and this in turn caused the abrupt reduction in activity levels, causing wide swings in product prices.

Through an active customer acquisition strategy, Halliburton’s customer mix weighs heavily towards larger customers who have more stable activity levels and are not as vulnerable to short-term fluctuations in commodity prices. HAL expects this strategy will help temper any impact of a potential slowdown to our business.

The contract structures in North America look more and more like those of the international markets. In the past, the majority of North American contracts were pricing agreements without volume commitments. The nature of the business has changed to the point where equipment and services agreements blend with long-term utilization contracts. As a result, the majority of the existing frac crews have contracts with clauses that govern minimum volume or efficiency commitments through the duration, and virtually all of the new fleets have similar contracts. HAL is currently engaged in discussions with some customers about a new type of contract that gives them more flexibility but assures us of a contracted volume of work and efficiency level.

Finally, there is still a significant shortage of capacity for equipment in the market today due to the continued increase in rigs that, weighting the demand distribution towards the service-intensive, oil-directed activity. Because HAL builds its own equipment, it is less susceptible to regional declines in activity due to these shortages. (Lesar)

Halliburton’s response to dynamic market demands:
Halliburton has been building Supplier Competencies for Globalization. The supplier diversity focus has been trying to create mutually beneficial business relationships that deliver value to the company and its customers. Supplier diversity is a proactive business process, which seeks to diversify HAL’s supplier base, expand business opportunities, and develop a supply chain that reflects the diversity of the communities and countries where they work. To support and encourage the development of diverse suppliers who have global capabilities or the potential to be a global provider, the company introduced the BEST program in late 2006. BEST—Business Education and Supplier Transformation—is a program intended to foster closer relationships with diverse suppliers that will play a key role in Halliburton’s future. (Len Cooper, VP)

In order to better cater to the rising demand and market growth potential, in September 2010, Halliburton acquired Boots & Coots, Inc., creating the industry’s premier intervention services and pressure-control service line. Boots & Coots was the premier pressure-control management company in the industry, largely focusing its efforts on emerging Middle Eastern markets. The merger combined Halliburton’s coiled tubing and hydraulic work-over operations with Boots & Coots’ well intervention services, providing operators with a more comprehensive production services portfolio.(Halliburton 2010 Press Release)

In response to structural reforms in Schlumberger and Baker Huges, Halliburton announced the acquisition of Multichem group in October of 2011. Halliburton benefitted from the company’s product portfolio that includes biocides, viscosity reducers, and wetting agents. Halliburton, as part of its integrated services offering, plugged a vital gap in its offering with the Multi-Chem acquisition. Multi-Chem is the fourth largest production chemicals company with around 750 customers and provides customized solutions for oilfield products, gas well treatments and pipelines. (Forbes)

How does HAL manage the National Oil Companies
As Halliburton continues to pursue growth and increasing market share as it expands globally, it must adapt to new business environments and develop key relationships that it was not have otherwise have done had it maintained a home market focused strategy.

As an illustration of application of this strategy, Halliburton intends to “to maintain leadership in unconventional plays” with its recent collaboration with Malaysian company Petronas. HAL wants to expand into the Asia Pacific market and providing the same quality level of service they already provide in North America” (Halliburton February 2012 Press Release). Following GE’s example in Bangalore, India HAL foresaw an opportunity to improve Petronas’ internal capabilities by setting up a Shale Technical Centre of Excellence in Kuala Lumpur, Malaysia. Halliburton employed this same strategy in Brazil with the establishment of another technology center in Rio de Janeiro with the Universidad Federal do Rio de Janeiro. This center exists to enable Halliburton to break into the Brazilian oil market and develop future relationships with Brazilian semi-national oil company Petrobras, among others, and thus ensure long and lasting collaboration relationships with these countries and their associated oil industries. (Halliburton August 2011 Press Release)

This strategy is overall, a win-win for Halliburton and the national oil companies it both hopes to collaborate with and to whom they would like to provide business services. Michael Porter would most certainly support this type of strategy fitting as it fits with the idea of engaging in strategic corporate social responsibility by assisting in the maturation of these markets and the economic well-being the communities in which these centers reside. This approach also enables these communities to develop related and supporting industries, which will establish long-term relationships with these governments, companies, and people, and enable Halliburton to pursue long-term global growth.

Conclusion
Based on the information above, it is clear that Halliburton is in a maturing stage of global growth. They are actively pursuing a diverse portfolio of capabilities across the lifecycle of an oil field, from location and exploration to capabilities that will maximize mature field performance. Additionally, they are addressing the strong current and future market pressures and dynamism with application of this capability portfolio as well as expanding into untraditional relationships with foreign governments as well as their respective national oil companies or in country partners of opportunity. By establishing Centers of Excellence and Technology Centers, Halliburton intends to shape these relationships for future talent pools but also bolster these foreign relationships with the win-win strategy of improving the related and supporting industries of these nations and thus improving their standard of living as well. While Halliburton has had a few high profile missteps in its expansion strategy, they are quickly adapting and improving to overcome them and improve their brand image.

Martha Salia can be confident that she will continue to have tremendous opportunities with Halliburton as the firm continues pursue a cohesive and results driven strategy to address the strategic issues they face. Moreover, given the results of their 2011 year, they seem to be on the right path for longevity and competitiveness in the high stakes, dynamic market of petroleum products and services.

Contributors: Brian Dwyer, Brian Gatti, Karthik N. Govinahalli, John Nuclo, and David Prestin

Bibliography
Forbes. Multi-Chem Acquisition Helps Halliburton Stock Hit $60. 13 September 2011. 15 April 2012 .
Halliburton 2010 Press Release. 15 April 2012 .
Halliburton Annual Report 2011. 2011. 15 April 2012 .
Halliburton August 2011 Press Release. 15 April 2012 .
Halliburton Career Story. Martha’s Career Story. 15 April 2012 .
Halliburton Case Studies. Production Enhancement. 15 April 2012 .
Halliburton February 2012 Press Release. 15 April 2012 .
Hsieh, Linda. Rotary steerables: Cost, reliability still key; higher dogleg capability, downhole motor integration also on asking list. 23 March 2010. 15 April 2012 .
Len Cooper, VP. “Supplying Halliburton.” Profiles in Diversity Journal (2007): 23-33.
Lesar, David J. Halliburton’s CEO Discusses Q3 2011 Results – Earnings Call Transcript Kelly Youngblood. 17 October 2012.

The luxury goods market in China is a must-enter space for global companies in this industry. Research indicates that multinational corporations (MNCs) need to assess their current strategies and take advantage of challenging, yet rewarding opportunities in emerging markets¹.  By 2015, China will represent 20% ($27B) of the market in luxury goods, and MNCs like Marc Jacobs cannot afford to hesitate in penetrating this emerging market².  The Chinese view these high-end products as “trophies of success” and are worn as such³.  Labels and visible brand symbols are critically important for show in public, but rarely of value in the home. While this new market opportunity presents promising avenues, the Chinese market is known for its battles with infringement through counterfeiting, parallel importing, or unauthorized selling of goods.  Companies like Marc Jacobs are forced to address this issue head on and seek ways within their global strategy to develop solutions.

Counterfeiting, parallel importing, or unauthorized selling of goods comprise a multi-pronged problem in China. As an example, a factory can produce more units than it reports and then sell them on the black or “grey” market. A material supplier can produce a larger volume than reported and sell to unauthorized manufacturers. Those manufacturers then produce goods out of the same materials and can sell them for very high prices; this happens frequently with Louis Vuitton, since the company uses a standard material quality across many of its products. Additionally, a supplier can sell proprietary information on the market; this is prominent among athletic footwear companies where a vendor will produce a tool for a factory, then leak the tools to competitive brands. Manufacturers can produce copied items with slight tweaks, such as using “Goach” on the logo instead of “Coach” – almost unnoticeable by the consumer. Manufacturers can produce copied items knowing that it is impossible for brands to trademark every style and every detail. As trade marking is restrictive and costly, a brand will often times only protect a few key shapes per year. Finally, parallel importers can buy goods in the US, most often in states where there is no sales tax (such as Oregon), then ship overseas and markup the price. As consumers internationally are used to paying a markup to the US, it is easy to turn a profit on these goods. In markets such as Japan, the markup to the US is often times 30-35%.

The more popular a brand becomes, the more abundant fakes and parallel importers become. Some countries’ governments will help crack down and some will not. In China, Taobao.com sells more counterfeits and parallel imports than any other website. The government is aware of the site yet does nothing to shut it down. Because these goods are sold online, tax revenue is generated which benefits the country. While China claims it wants to cut down on piracy, the effort is minimal.

Marc Jacobs and other global brands realize the need to develop a defensive strategy to combat these unauthorized mechanisms of product theft.  Unfortunately, it is difficult, timely, and costly for brands to go after violators. If they can identify the source – perhaps a specific factory – it can be fairly straightforward; otherwise, it is next to impossible to stop all counterfeiting. Services such as Mark Monitor do exist, which for a fee will patrol the internet to identify places their brand’s products or brand name are sold – authorized and unauthorized – and can help shut violators down.  Again, this is costly, as it is a manual process.  Some brands have taken steps to provide a “certificate of authentication”, which is a more cost effective method of detecting whether a customer who bought a fake is trying to return that item to the authentic store or have it repaired. It is also supposed to encourage customers to only buy the “real deal”.

Research on global strategy published by the Harvard Business Review discussed that MNCs with similar strategic goals can benefit from partnering in order to mutually gain in the market⁴.  Along these lines, several companies are banding together to fight against counterfeiting in China.  Luxury brands, such as LVMH and Estee Lauder, are collaborating with each other to develop best practices for measuring and implementing IP enforcement in China as well as other Asian countries. These practices include designing and managing IP investigation budgets, which are put toward filing complaints within the 76 different patent courts in China.

Though many of the brands collaborating on IP issues are competitors at the business level, they share common IP enforcement objectives; i.e., “the partners’ strategic goals converge while their competitive goals diverge”⁴. Luxury brands have found it financially and operationally beneficial to team up to combat counterfeiters. LVMH and Apple teamed up and shared enforcement costs once it was discovered that counterfeit iPhone and iPad covers with LV logos were being produced – mutually gaining from their partnership.

Is this strategy of competitive collaboration one that is valid long-term, or will it lead to too much information sharing that will weaken the strength of certain luxury brands in China? Hamel et al stress the importance of “building a solid defense” when engaging in competitive collaboration: “Companies must carefully select what skills and technologies they pass to their partners.  They must develop safeguards against unintended, informal transfers of information.”⁴ Vaid, an IP enforcement director at LVMH, stated that “working together is always a challenge but it is also an opportunity. Until a certain point in time, the payoffs for all the cooperating brands are similar, but after a certain point the payoffs change.”⁵

While partnering with others in the industry can increase economies of scale and strengthen a company’s “defense”, MNCs must also consider investing in new technologies and/or products in order to ward off the competition – and in this case, counterfeiters. To remain one step ahead of competitors and “copycat” manufacturers, brands like Marc Jacobs are constantly reinventing themselves through new product categories, materials, and general aesthetics. Unfortunately, it does seem like these counterfeit agents are keeping the pace as well. Perhaps continued collaboration with rivals will help combat these threats from counterfeiters, but it seems that MNCs may need to start looking for new and creative ways to protect their brands.

The Chinese government is beginning to respond to consumer and business demands to rid the market of fakes.  In 2010, it started a crackdown on intellectual property rights, which has realized some success.  For example, in the same year, the government seized more than 2,000 fake Columbia™ Sportswear products with a street value of over $2.7M USD⁶.  This is nowhere near enough – some estimates suggest counterfeits make up 20% of consumer luxury goods purchased in China – but it is a step in the right direction.

Counterfeiting remains a real problem in China, but signs point to Chinese consumers rejecting fake luxury goods in favor of the “real thing”.  Why the sudden shift?  Because increasingly more Chinese consumers can afford luxury products; thus, more consumers are willing to fork over full retail price for a product they can still find reliably on the street.  As the Wall Street Journal reported on 14 Feb 2012:

“A survey conducted last year by China Market Research found that 95% of women aged 28 to 35 would be embarrassed to carry counterfeit handbags.”⁶

Because of this shift in demand, multinational retailers are beginning to invest in the interior and secondary cities in the Chinese market.  So far, Marc Jacobs has only chosen to locate its brands in top tier cities; however, as parent Louis Vuitton (LVMH) and competitors like Valentino, Gucci and Ferragamo have planned to enter into secondary cities, it would seem natural for Marc Jacobs to follow suit.  Western firms, for now at least, are benefitting from a reputation and brand perception of quality products.  As local product quality improves, brands will see more challengers in domestic competitors.

The Chinese are very proud of their long history and culture and want to see this incorporated into luxury brands. Potential “emerging giants”, such as menswear maker China Garments Co. and the revamped 114 year-old cosmetic company Shanghai VIVE, are working hard to make a name for themselves in China’s luxury industry. Some European luxury brands are also moving towards a more localized approach to appeal to the growing high-end consumer market in China. “Shang Xia, which is owned by Hermes International SCA, aims to appeal to customers domestically and abroad and promote Chinese heritage, handicraft and philosophy,” Chief Executive Officer Jiang Qiong said in an interview⁷.

As it takes several years to develop a brand, an emerging China-made luxury fashion giant is still several years away. But Chinese competitors have made inroads in white goods, electronics, and food processing – competing effectively against global players like Nestle, Procter & Gamble, and Unilever for market share. If a Chinese luxury brand does take off, this could be a positive step toward offsetting the counterfeit industry as the Chinese will want to protect a homegrown champion.

Leaders within the luxury goods industry face a serious challenge with counterfeiting in the increasingly important Chinese market.  Engaging in competitive collaboration has allowed companies such as LVMC to strengthen their defense and develop cost-effective methods for battling IP violators.  These MNCs are also benefiting from the fact that Chinese consumers have begun to reject fake luxury goods and instead willingly invest in the “real deal”.  Despite recent successes with competitive collaboration, companies like Marc Jacobs and Louis Vuitton should be cautious of opening up their doors too far to rivals in the effort to combat counterfeiters.  Furthermore, companies should be prepared to face “emerging giants” in China who are well-positioned to develop luxury goods that appeal not only to locals but also to consumers abroad.  It is clear that leaders in the luxury goods market cannot afford to ignore the ever-expanding Chinese market; the question is, are their strategies strong enough to face these challenges head-on and compete against the “emerging giants”?

Authors: David Curtis, Merissa Gordon, Kori Joneson, Emily Mahoney, Rob Thompson

References

¹ Khanna, Tarun and Palepu, Krishna. “Emerging Giants: Building World-Class Companies in Developing Countries.” Harvard Business Review. Oct 2006.

² Atsmon et al. “Tapping China’s luxury-goods market.” McKinsey Quarterly. Apr 2011. Web. 13 Apr 2012.

³ “The mystery of the Chinese consumer.” The Economist. 7 Jul 2011. Web. 4 Apr 2012.

⁴ Hamel et al.  “Collaborate with your Competitors – and Win.” Harvard Business Review. Jan-Feb 1989.

⁵ “How brand owners run Asian criminal procedures”. Managing Intellectual Property (Nov 2011): n/a.

⁶ Burkitt, Laurie. “Retailers Rush in as Chinese Lose their Taste for Fakes.” Wall Street Journal: B.1. ABI/INFORM Global. Feb 14 2012. Web. 4 Apr. 2012.

⁷ Bloomberg News. “China luxury pits L’Oreal against Chiang Kai-Shek Kin: Retail”. Bloomberg BusinessWeek. 27 Feb 2012. Web. 4 Apr 2012.

This trimester the Thunderbird Management Consulting Association will be building ties with the Institute of Management Consultants (IMC).  IMC USA provides the only certification for individual management consultants in the US that conforms to the international standards of the International Council of Management Consulting Institutes (ICMCI). ICMCI sets global standards of technical competence and professional conduct for consultants in more than 40 nations.  IMC also provides, through national conferences, online resources, chapter events, and its diverse and experienced membership a full range of professional development opportunities.

IMC hosts a monthly breakfast and this trimester the TMCA will be allocating funding for students to attend those breakfast meetings.  The first IMC breakfast will take place on Friday, February 10^th from 7:15 am – 10 am.  The keynote speaker for the event is Vickie Sullivan, a market strategy consultant whose market intelligence updates have been distributed throughout the US and 17 other countries.  She specializes in branding for high fee markets and her work has earned her an appointment on the Women’s Leadership Board for the Harvard Kennedy School of Government.  Scheduled dates for the next three IMC breakfasts are:

Friday, February 10th  (7:15 am – 10:00 am)

Friday, March 9th  (7:15 am – 10:00 am)

Friday, April 13th (7:15 am – 10:00 am)

IMC breakfasts take place at the University Club in Phoenix and TMCA will arrange a carpool for members interested in attending.  The University Club address is:

The University Club
39 E. Monte Vista Road
Phoenix,Arizona 85004

- Benny Axt

Dear TMCA Members,

Welcome back to our returning students and congratulations on joining Thunderbird to our new students!  The Thunderbird Management Consulting Association leadership team is excited to bring you a trimester of fun and professional development.

Community

TMCA will continue on its efforts from last trimester to build a sense of Community among its members.  We are going to provide opportunities to get to know one another, get to know our faculty advisors, and learn about the Consulting field.  We hope that you join us in strengthening TMCA within the Thunderbird Community.

Professional Development & Networking

We are planning to increase our outreach to the Industry and provide opportunities for networking and professional development to our members. TMCA will be establishing connections with the Institute of Management Consultants (IMC) and provide opportunities to our members to attend IMC sponsored events. Please read the article on IMC in this newsletter.

TMCA 1^st Meeting – Tuesday February 7^th (1PM – 2.30PM – Snell 21)

We would like to invite you to attend the 1^st meeting of TMCA on Tuesday Feb 7^th where we would be introducing the leadership team, discuss the events lined up for this trimester and also answer questions and meet new members. Here is a list of the events planned for this trimester.

• TMCA 1^st Meeting – Feb 7^th
• Consulting Functional Day – Feb 24^th
• Lunch & Learn with Prof. Finney – Date TBD
• Presentation Workshop with Prof. Baer – Date TBD
• Clash of the Consultants (Case Competition) – March 2^nd
• IMC Events – Monthly Breakfast / Main spring event – Please look out for the dates
• 1^st Tuesday with Phoenix Alumni – Date TBD

As always, we are here for questions, comments, or suggestions.  Feel free to reach out any time and let’s make it a great trimester!

Best regards,
Anuj Mathur

TMCA President

Karan: How is working for a boutique consulting firm different from working for larger consulting firms?

Bryan: My expectations from choosing to work with a boutique firm was primarily based on exposure and greater decision making in the firm strategy. In addition to this, I wanted to manage client relationships end-to-end where I was responsible for client delivery as well has developing relationships between my firm and the client. Today I am working on three projects with a major multinational technology client and am also leading the market expansion strategy for the firm. In this way, the exposure I am getting working with the firm as well as large clients is helping me achieve these goals and objectives.

Karan: What are the pros and cons of working for a boutique consulting firm?

Bryan: A key pro in working with a boutique firm is that you get to see the value you are creating within the firm and with its clients almost instantaneously. Also, the influence you have in decision making and firm strategy goes a long way and you are also given the opportunity to lead initiatives that interest you. On the flip side, a con for working with a boutique firm is the type of people that can survive in a boutique world. Unlike larger firms where people with different working styles can thrive, a boutique firm requires individuals who are able to manage multiple responsibilities of equal priority without diminishing the entrepreneurial nature of the person. In this way, you tend to work with very highly-charged and motivated individuals and thus begin seeing common patterns in work cultures without any major diversity.

Karan: What skills/personality would fit in well with a boutique consulting company?

Bryan: As mentioned in my previous response, individuals who are willing to take on multiple responsibilities and manage client relationships at the same time would thrive in a boutique world. It is not for the faint-hearted and considering the large sphere of influence you would have, your decisions would make or break your career. A good foresight, ability to multi-task, manage client relationships, deliver value, ability to grasp patterns etc. are all skills that are required as a basic necessity for anyone wanting to working in a boutique firm.

Karan: Because many boutique consulting firms are not well known, what advice do you have for students looking to find boutique consulting jobs?

Bryan: Network. It is important to remember that although many boutique firms exist out there, only a chosen few of them are actually creating ripples in the industry. One way I was looking to identify value-adding boutique firms which had a strong future strategy was by simply speaking with professionals in large companies that employed their services. That way I was able to see how the firm was adding value and also take a call if I would fit in that culture – and this method proved to be very useful to me since I am not seeing that same pattern of delivering value through my work with the firm. Do not go by jobs on job portals because firms get hundreds of thousands of applications every day. Network with individuals in the firm who can refer you.

Karan: How can students leverage their Thunderbird experience to help them prepare for a career in boutique consulting?

Bryan: Take classes in Thunderbird that tell a story of where you are going with your career. Do not take classes just because they are easy or don’t have exams but ensure that at the end of the day, when you look at your resume and call yourself a major in a subject, you have the classes on your transcripts to prove that. I have been asked for my transcripts with multiple firms I interviewed with and got offers from, large and boutique, and I have always had to explain why I took the classes I took. Make sure your story makes aligned sense on your resume and on your transcripts.

Karan: Looking back on your Thunderbird experience, are there things you wish you had done differently? For example: courses you wish you had taken, clubs you wished you had joined

Bryan: For one, I wish I could have attended more networking events and joined professional associations during my MBA. Even though I started networking in the first trimester of Thunderbird, I always feel that it is never too early to start networking. I am still networking even though I am working as a Senior Consultant with Loft9 Consulting primarily because the industry is always changing. The function is always changing and if you don’t network or stop networking once you have a job, it will be too late to catch up.

————————————————————————————————————————————————————

Karan Singh is a second-year MBA student, focusing on Global Marketing and set to graduate in April 2012. He has been associated with TMCA for the past one year and heads the Communication Chair.

Dear TMCA Membership,

The time has come to say good-bye.  As we finish up our finals and either graduate or go home for winter break, I just wanted to let you know how appreciative I am of your support and involvement over the last trimester.  We had a very successful Consulting TREK, a great Lunch-and-Learn, a fabulous Presentation Workshop, and a killer Clash of the Consultants.  As a leadership team we are proud of the contribution you have made to the success of the Association.  We are who we are because of you!  So thank you!

I am very excited about the new Leadership team and I know that they are going to increase the value to the student body over the next year.   I had the privilege of hearing some of their ideas and they are both exciting and progressive!  I hope that you are just as involved and engaged next trimester!

I wish you all a restful winter break and to all of you who are graduating, Congratulations!  I’m proud to have called you a peer and a friend.  Good luck with the rest of finals!

Kind regards,

Michelle Toto

Anuj Mathur, CPA

TMCA President Spring 2012

Global experience in the “Financial Services” industry has been the hallmark of Anuj’s career. As a qualified Chartered Accountant from India and a CPA, he has a deep understanding of corporate finance, controllership and internal audit functions. Having worked for 10 years at GE Capital, Anuj had the opportunity of designing and executing financial process transformation across major corporations.

Anuj has expertise in finance, strategy, audit and performance improvements through six sigma / lean transformation. Recently he concluded a successful internship at the Corporate Audit group of Pfizer Inc. An active participant in extra-curricular activities on campus he is presently the Vice President of the Management Consulting Association and has previously served as the President of the Finance Association, In spring 2011 he led a team of T-Bird’s who won 2^nd prize at a M&A Case Competition organized by ACG.

Anuj has held leadership positions and his most recent role was of “Assistant Vice President (Strategic Projects)” at Genpact Inc.

Karan Passey

TMCA Vice President, Spring 2012

Karan is a first year Traditional MBA candidate at Thunderbird School of Global Management. An international student from India, Karan has 5 years of experience in a variety of functions and industries.

Karan graduated summa cum laude from Fairleigh Dickinson University with a BS in Business Management. Upon graduation, he worked with a leading medical software company in Boston as an end-user trainer and implementation specialist. When he returned to India, Karan spent two and a half years with KPMG’s governance, risk and compliance advisory practice in Mumbai, India. Karan is a passionate scuba diver and took on the role of COO at a scuba diving company focusing on organizational culture change and restructuring of business processes prior to attending Thunderbird.

At Thunderbird, Karan is focusing on Management Consulting. He is actively involved on campus and apart from the Thunderbird Management Consulting Association; he is a Campus Ambassador, part of the Thunderbird Cricket Team, and a number of regional Cultural Clubs.

Allison Martyn

TMCA CMC Liaison, Spring 2012

Upon graduating from the University of Scranton with a Bachelor of Arts in International Language Business-French, Allison spent a year teaching English in a suburban high school in northeast France.  After completion of this contract she took a position in the Innovation Department of a property and casualty insurance company.  In this role she managed the corporate innovation program and the implementation of corporate-wide collaboration software.  Allison is a first-year, traditional MBA student pursuing a career in change management and human capital consulting with an emphasis on cross cultural communication.  In her spare time she enjoys travel, music, baking and trying extreme sports like canyon jumping.

Jing Ma, Joy

TMCA Treasury & Consulting Projects Chair

Spring 2012

Jing Ma (Joy) holds a bachelor degree in Finance and Accounting. She will graduate from Thunderbird with a Master of Science in Global Management in December of 2012.

She is a down-to-earth individual who believes and exercises the motto that the only way to success is work hard. Her educational training, extracurricular activities and professional involvement equipped her with strong communication, analytical and problem solving skills.  She intends to leverage her skills, knowledge base and a global mindset to pursue her career interest in the field of financial services. She always wants to challenge herself to think differently and go beyond the expectation.

Darshan Shah, MS Candidate

TMCA Marketing Chair, Spring 2012

Darshan Shah holds a Bachelors Degree in Information Technology Engineering from Mumbai University, India. He is a very focused and optimistic individual with strong quantitative skills. Prior to joining Thunderbird in Fall 2011, Darshan worked with a retail firm in Mumbai and was responsible for inventory management and overall business development of the company.

Darshan is extremely ambitious and futuristic. He was a part of the winning team for ‘Clash of Consultants’ event organized by TMCA in Fall 2011. As a second trimester student at Thunderbird, Darshan represents the Thunderbird Cricket Team and constantly seeks to develop his Global Mindset through his involvements at campus.

Set to graduate in December 2012, he is currently seeking an internship in the Supply Chain Industry and aspires to leverage this opportunity to gain relevant and transferable skills.

By Onyeka Azike, Communication Shawdow Chair – TMCA

OPEN UP. This was the crux of the presentation skills workshop delivered by Prof. Baer. The session kicked off with Prof. Baer laying out the agenda for the session as well as anecdotes highlighting the importance of good presentation skills. If you lack the ability to clearly and effectively communicate your ideas, people will underestimate your business ability. Although it is ok to be nervous – because it shows that you are taking the presentation seriously – you must OPEN UP: Organized, Passionate, Engaging, Natural, Understand and Practice.

Prof. Baer recommended that you identify three critical points, state them at the beginning of the presentation, expand on them and then end the presentation by reminding the audience of those three points. This results in an organized and structured presentation that is easy for the audience to follow. Prof. Baer also mentioned several times in the session the importance of having an executive summary. CEOs do not want to wait until the end of your presentation to find out what you need from them. Tell them upfront. Delivering your presentation with passion, using assertive words, is an essential part of an effective presentation.

Avoid umms and like other…err…ummm…like other “verbal graffiti”. Speak clearly and pause deliberately for emphasis. Visual aids should be simple and easy to read. Additionally, your audience is likely to enjoy your presentation more if you engage them by asking question, for example. Let your delivery be natural and conversational. Gestures can be used to highlight important points, for example, extending your hands from low to high to show increase in revenue.

Before the presentation, make sure you completely understand the audience, product, company etc. It is important to understand who is in your audience, why they are there and what they want to hear from you. Lastly, practice, practice and then practice some more, if possible in the venue of the presentation to get acclimated to the environment. Pay particular attention to your body language and ensure that it conveys confidence. Standing tall with your hands at your side is the best posture; not slouching or with your hands in your pocket, or folded at your back or in front. Prof. Baer’s workshop ended with three volunteers from the audience each giving a short presentation and receiving constructive feedback from Prof. Baer and other students.