Assignment Report

On

By

Prayas Nanda

200409120012

SUB -: Business Policy & Strategy (CUTM 1222)

Guided By

Prof. Dr. Susanta Kumar Mishra

 INTERNATIONAL ENTRY

Exporting is the marketing and direct sale of domestically produced goods in another
country. Exporting is a traditional and well-established method of reaching foreign markets.
Since it does not require that the goods be produced in the target country, no investment in
foreign production facilities is required. Most of the costs associated with exporting take the
form of marketing expenses.

While relatively low risk, exporting entails substantial costs and limited control.
Exporters typically have little control over the marketing and distribution of their products,
face high transportation charges and possible tariffs, and must pay distributors for a variety of
services. What is more, exporting does not give a company first-hand experience in staking out
a competitive position abroad, and it makes it difficult to customize products and services to
local tastes and preferences.

Exporting is a typically the easiest way to enter an international market, and therefore
most firms begin their international expansion using this model of entry. Exporting is the sale
of products and services in foreign countries that are sourced from the home country. The
advantage of this mode of entry is that firms avoid the expense of establishing operations in
the new country. Firms must, however, have a way to distribute and market their products in
the new country, which they typically do through contractual agreements with a local company
or distributor. When exporting, the firm must give thought to labelling, packaging, and pricing
the offering appropriately for the market. In terms of marketing and promotion, the firm will
need to let potential buyers know of its offerings, be it through advertising, trade shows, or a
local sales force.

Among the disadvantages of exporting are the costs of transporting goods to the
country, which can be high and can have a negative impact on the environment. In addition,
some countries impose tariffs on incoming goods, which will impact the firm’s profits. In
addition, firms that market and distribute products through a contractual agreement have less
control over those operations and, naturally, must pay their distribution partner a fee for those
services.

Firms export mostly to countries that are close to their facilities because of the lower
transportation costs and the often greater similarity between geographic neighbours. For
example, Mexico accounts for 40 percent of the goods exported from Texas.5 The Internet has
also made exporting easier. Even small firms can access critical information about foreign
markets, examine a target market, research the competition, and create lists of potential
customers. Even applying for export and import licenses is becoming easier as more
governments use the Internet to facilitate these processes.

Because the cost of exporting is lower than that of the other entry modes, entrepreneurs
and small businesses are most likely to use exporting as a way to get their products into markets
around the globe. Even with exporting, firms still face the challenges of currency exchange
rates. While larger firms have specialists that manage the exchange rates, small businesses
rarely have this expertise. One factor that has helped reduce the number of currencies that firms
must deal with was the formation of the European Union (EU) and the move to a single
currency, the euro, for the first time. As of 2011, seventeen of the twenty-seven EU members
use the euro, giving businesses access to 331 million people with that single currency.

A company that wants to get into an international market quickly while taking only
limited financial and legal risks might consider licensing agreements with foreign companies.
An international licensing agreement allows a foreign company (the licensee) to sell the
products of a producer (the licensor) or to use its intellectual property (such as patents,
trademarks, copyrights) in exchange for royalty fees. Here’s how it works: You own a company
in the United States that sells coffee-flavoured popcorn. You’re sure that your product would
be a big hit in Japan, but you don’t have the resources to set up a factory or sales office in that
country. You can’t make the popcorn here and ship it to Japan because it would get stale. So
you enter into a licensing agreement with a Japanese company that allows your license to
manufacture coffee-flavoured popcorn using your special process and to sell it in Japan under
your brand name. In exchange, the Japanese licensee would pay you a royalty fee.

Licensing essentially permits a company in the target country to use the property of the
licensor. Such property is usually intangible, such as trademarks, patents, and production
techniques. The licensee pays a fee in exchange for the rights to use the intangible property and
possibly for technical assistance as well.

Because little investment on the part of the licensor is required, licensing has the
potential to provide a very large return on investment. However, because the licensee produces
and markets the product, potential returns from manufacturing and marketing activities may be
lost. Thus, licensing reduces cost and involves limited risk. However, it does not mitigate the
substantial disadvantages associated with operating from a distance. As a rule, licensing
strategies inhibit control and produce only moderate returns.

Another popular way to expand overseas is to sell franchises. Under an international

franchise agreement, a company (the franchiser) grants a foreign company (the franchisee) the
right to use its brand name and to sell its products or services. The franchisee is responsible for
all operations but agrees to operate according to a business model established by the franchiser.
In turn, the franchiser usually provides advertising, training, and new-product assistance.
Franchising is a natural form of global expansion for companies that operate domestically
according to a franchise model, including restaurant chains, such as McDonald’s and Kentucky
Fried Chicken, and hotel chains, such as Holiday Inn and Best Western.

An alliance can serve a number of purposes:

 Enhancing marketing efforts

 Building sales and market share
 Improving products
 Reducing production and distribution costs
 Sharing technology

Alliances range in scope from informal cooperative agreements to joint ventures—

alliances in which the partners fund a separate entity (perhaps a partnership or a corporation)
to manage their joint operation. Magazine publisher Hearst, for example, has joint ventures
with companies in several countries. So, young women in Israel can read Cosmo Israel in
Hebrew, and Russian women can pick up a Russian-language version of Cosmo that meets
their needs. The U.S. edition serves as a starting point to which nationally appropriate material
is added in each different nation. This approach allows Hearst to sell the magazine in more than
fifty countries.

Strategic alliances are also advantageous for small entrepreneurial firms that may be
too small to make the needed investments to enter the new market themselves. In addition,
some countries require foreign-owned companies to partner with a local firm if they want to
enter the market. For example, in Saudi Arabia, non-Saudi companies looking to do business
in the country are required by law to have a Saudi partner. This requirement is common in
many Middle Eastern countries. Even without this type of regulation, a local partner often helps
foreign firms bridge the differences that otherwise make doing business locally impossible.
Walmart, for example, failed several times over nearly a decade to effectively grow its business
in Mexico, until it found a strong domestic partner with similar business values. The
disadvantages of partnering, on the other hand, are lack of direct control and the possibility that
the partner’s goals differ from the firm’s goals. David Ricks, who has written a book on
blunders in international business, describes the case of a US company eager to enter the Indian
market: “It quickly negotiated terms and completed arrangements with its local partners.
Certain required documents, however, such as the industrial license, foreign collaboration
agreements, capital issues permit, import licenses for machinery and equipment, etc., were
slow in being issued. Trying to expedite governmental approval of these items, the US firm
agreed to accept a lower royalty fee than originally stipulated. Despite all of this extra effort,
the project was not greatly expedited, and the lower royalty fee reduced the firm’s profit by
approximately half a million dollars over the life of the agreement.” Failing to consider the
values or reliability of a potential partner can be costly, if not disastrous.

To avoid these missteps, Cisco created one globally integrated team to oversee its
alliances in emerging markets. Having a dedicated team allows Cisco to invest in training the
managers how to manage the complex relationships involved in alliances. The team follows a
consistent model, using and sharing best practices for the benefit of all its alliances.

INTERNATIONAL ENTRY OPTIONS

1. EXPORTING :

Goods and services produced in one country but supplied to buyers in another are
known as exports. International trade is made up of exports and imports. Exporting forms an
integral part of international trade. Exports help countries expand their market globally. This
way, customers also have access to products from around the world. Some countries can grow
globally faster than other countries. The ease of exporting and expanding into other areas of
the world depends on various factors, such as the political and economic conditions of the
nation. We will take a closer look at this concept in the following sections.

Direct exporting is a type of exporting where the company directly sells products to
overseas customers. All the deals are done directly between the companies without any
intermediaries. This way, the companies have more control over the processes. Direct exporting
also increases profits as the intermediary is eliminated, reducing costs. Direct exporting also
creates a stronger bond between the supplier and the buyer, and maintaining business
relationships is crucial for business success. Despite the advantages mentioned above, direct
exporting also demands more resources from the exporting company. This exporting type
requires more personnel, resources, and time than it would if the export process were to happen
through an intermediary.

Indirect exporting is a type of exporting practiced by companies that sell products to

other countries with the help of an intermediary. The company has various intermediaries, such
as foreign agents, export merchants, expert management companies, etc. Here, businesses have
lesser control over the processes.

The intermediaries are present in the country producing the product. They are
responsible for sending the products to the customer's country and finishing all the paperwork,
transport, and marketing. The first intermediary may sell directly to the customer or the
customer's intermediary. Indirect exporting is less expensive than direct exporting. It is easier
to cancel indirect exports than direct exports. The main disadvantage of indirect exporting is
the transfer of power to the intermediaries. As a result, companies may lose the opportunity to
build longterm relationships and offer after-sales services to customers.

Exporting's most significant advantage is the opportunity to grow in new markets and
gain customers worldwide. Without exporting, companies may be limited to one market,
reducing their growth potential. Selling in different markets can help companies grow their
brand reputation and increase revenues. The initial costs to set up an exporting system can be
very high. This is because exporting requires extensive market research, recruitment of
personnel, training, finding a distribution partner, more promotions, and so on.

2. LICENSING :

Licensing gives a licensee certain rights or resources to manufacture and/or market a

certain product in a host country. Licensing is a business arrangement in which one company
gives another company permission to manufacture its product for a specified payment.
Licensing is defined as the granting of permission by the licenser to the licensee to use
intellectual property rights, such as trademarks, patents, brand names, or technology, under
defined conditions. The possibility of licensing makes for a flatter world, because it creates a
legal vehicle for taking a product or service delivered in one country and providing a nearly
identical version of that product or service in another country. Under a licensing agreement,
the multinational firm grants rights on its intangible property to a foreign company for a
specified period of time. The licenser is normally paid a royalty on each unit produced and
sold. Although the multinational firm usually has no ownership interests, it often provides
ongoing support and advice. Most companies consider this market-entry option of licensing to
be a low-risk option because there’s typically no up-front investment.

For a multinational firm, the advantage of licensing is that the company’s products will
be manufactured and made available for sale in the foreign country (or countries) where the
product or service is licensed. The multinational firm doesn’t have to expend its own resources
to manufacture, market, or distribute the goods. This low cost, of course, is coupled with lower
potential returns, because the revenues are shared between the parties.

Licensing generally involves allowing another company to use patents, trademarks,

copyrights, designs, and other intellectual in exchange for a percentage of revenue or a fee. It’s
a fast way to generate income and grow a business, as there is no manufacturing or sales
involved. Instead, licensing usually means taking advantage of an existing company’s pipeline
and infrastructure in exchange for a small percentage of revenue.

An international licensing agreement allows foreign firms, either exclusively or

nonexclusively, to manufacture a proprietor’s product for a fixed term in a specific market. To
summarize, in this foreign market entry mode, a licensor in the home country makes limited
rights or resources available to the licensee in the host country. The rights or resources may
include patents, trademarks, managerial skills, technology, and others that can make it possible
for the licensee to manufacture and sell in the host country a similar product to the one the
licensor has already been producing and selling in the home country without requiring the
licensor to open a new operation overseas. The licensor’s earnings usually take the form of
one-time payments, technical fees, and royalty payments, usually calculated as a percentage of
sales.

3. FRANCHISING :

Franchising is a form of marketing and distribution in which the owner of a business

system (the franchisor) grants to an individual or group of individuals (the franchisee) the right
to run a business selling a product or providing a service using the franchisor's business system.
Franchisees are also given permission to use the franchisor's branding, trademarks, and
identifying marks under specified guidelines. It is important for anyone deciding to start a
business by becoming a franchisee to remember that in franchising the franchisee is bound to
a partnership agreement with the franchisor for a defined period of time (some exceptions do
exist). Franchising as we know it today is widely believed to have originated with Isaac Singer
in the 1850s. After Singer invented his sewing machine he encountered two main problems
when introducing it to the marketplace. The first was that customers needed to be taught how
to use the new invention before they would buy it. The second was that Singer did not have
enough capital to manufacture his machine in large numbers. In response, Singer, along with
business partners, came up with the idea of selling the rights to sell the sewing machines as
well as train those who bought one to local business people across the country (and eventually
internationally).

Once he employed this system, Singer’s enterprise expanded rapidly. The royalties
earned from the license rights helped offset manufacturing costs and, because each franchise
was self-financed, Singer Manufacturing Company was able to tap into the entrepreneurial
attributes and local market knowledge of the franchisees to help Singer become more
successful than he could have by himself. The tipping point for franchising came in the 1950s.
In 1954, Ray Kroc, a successful business man from Illinois, saw the potential in franchising a
successful southern California hamburger stand owned by a couple of brothers. This restaurant
chain, McDonald’s, is perhaps the most well-known example of franchising in the world. Kroc
has drawn comparisons to auto maker Henry Ford for bringing an assembly line-like concept
to the fast food industry through his belief that customers of McDonald’s should have an idea
of what to expect wherever in the world they may be. When asked, the majority of people when
asked for a commonly known franchise would name a fast food franchise most often. However,
franchising is extremely diverse. Name a product or service from ATMs to yogurt and there’s
likely a franchise industry for it. While franchising is a staple of the American business
landscape, the merits of franchising have not been ignored abroad. It is steadily increasing its
footprint in numerous other countries. This is especially true in emerging markets such as
China, India, Russia, Brazil and the Middle East among others.

Elements of the franchise model has also been woven into the fabric several other
industries. For example, Coca-Cola was able to expand throughout the United States by shifting
the burden of manufacturing, storing and distributing its product to local business people who
acquired bottling rights. Car manufacturers who had been spending enormous amounts of
capital tooling their assembly lines found they could develop retail distribution networks using
capital provided by independent dealers. Oil companies such as Standard Oil and Texaco also
started granting franchises to convenience stores and repair mechanics across the U.S. to
efficiently expand their reach.

There are three main types of franchises.

 Most franchises fall under the business format type where the franchisor licenses a
business format, operating system, and trademark rights to its franchisees.
 The second type of franchise is product distribution, which is more of a supplier-dealer
setup. The franchisor grants the franchisee permission to sell or distribute a product
using their logo, trademarks and trade name, but typically does not provide an operating
system to run the business with.
 The third is manufacturing, where the franchisor permits the franchisee to manufacture
their products (e.g. clothing) and sell them under its trademarks.

When the purchase of a franchise is made, the franchisee is required to comply with
strict guidelines and rules regarding the operation of the business. These guidelines are in place
to maintain brand consistency. In addition, fees are collected regularly for as long as the
franchisee owns the franchise. In exchange for these payments, the franchisee will receive
continued support such as marketing assistance and ongoing training opportunities.

Despite its strong association with fast food, franchising is not confined to a narrow
range of business segments. Name an industry from drug testing to dog walking, and there’s
likely a franchise in it. Not only is it used in many different industries and sectors, but elements
of franchising are becoming a feature in many areas of business. For example, car
manufacturers who had been spending enormous amounts of money building up centralized
assembly lines found they could more efficiently build and sell their cars by developing
networks for manufacturing and retail distribution in different areas using capital provided by
independent dealers.

4. JOINT VENTURE :

Joint Venture is a business preparation in which more than two organizations or parties
share the ownership, expense, return of investments, profit, governance, etc. To gain a positive
synergy from their competitors, various organizations expand either by infusing more capital
or by the medium of Joint Ventures with organizations. Joint Ventures can be with a company
of same industry or can be of some other industry, but with a combination of both, they will
generate a competitive advantage over other players in the market.

In short, when two or more organizations join hands together for creating synergy and
gain a mutual competitive advantage, the new entity is called a Joint Venture. It can be a private
company, public company or even a foreign company. In India, many companies underwent
joint venture with various foreign companies, which were either technologically more
advanced or geographically more scattered. The major joint ventures in India were done in
sectors like Insurance, Banking, Commercial Transport vehicle, etc.

A joint venture can be very flexible which can be in context to the requirements of the
organization. The agreement between the companies should have detailed terms and conditions
with respect to the activities that will be carried by them. This aids in clarification and don’t
allow any ambiguity between the stakeholders. The agreement also helps to designate the actual
scope of work which either of parties has to conduct. Two organizations of different countries
can also undergo a Joint Venture to conduct a business. In this case, the directives issued by
the respective governments have to be followed before entering into any kind of Joint Venture.
These norms help the governments to keep a check on the activities of the organizations and
ensure a legal activity is conducted by the organizations in Joint Venture.

5. ACQUISITION :

A business acquisition occurs when one company (the acquirer) buys most or all shares
in another company (the target) to assume control of its assets and operations. Acquisitions are
often amicable, meaning both companies are on-board with and negotiate the terms of the
transaction. However, the word “acquisition” is sometimes used interchangeably with
“takeover,” which can be hostile. In other words, one company might wrest control of — or
acquire — another company by buying a majority stake against the wishes of the target
company’s board of directors or management. Acquisitions are often coordinated by
investment bankers or lawyers. Large companies, including private equity firms, often have
internal teams that manage the process.

Pros-:
  They can increase market share. Acquisitions are often one of the quickest ways to enter
a new market. Say you’re a grocery company with stores on the East Coast and want to
expand to West Coast metros. You could consider acquiring a grocery chain that has
stores in your desired locations. Alternately, you could offer a new product to juice
sales by acquiring a company that already manufactures that product.
 They can lower costs. Acquisitions help companies reach economies of scale — cost
reductions that occur when production increases. While complex, you can effectively
think of this economics concept as the business equivalent of buying in bulk.
 They reduce or eliminate competition. If our fictional streaming network, for instance,
were to buy another streaming network, they would acquire (and, by extension, no
longer have to compete for) its customers.

Cons-:

 They take time. While potentially a way to accelerate growth, acquisitions are still
complex legal arrangements, subject to internal and external negotiations,
investigations, audits, and reviews. They can take months or, even, a few years to
complete.
 They cost money. The acquirer has to pay for the target company in cash, stock, and/or
borrowed funds (known as a leveraged buyout). There are also legal fees and tax
implications associated with each deal. (Get familiar with the legal side of M&A with
the Latham & Watkins Mergers and Acquisitions Virtual Experience Program.)
 They can be mispriced. While M&A professionals rely on a variety of business
valuation methods, it still can be tricky to pinpoint how much exactly a company is
worth. Valuations, after all, are subject to market and economic conditions outside a
business’ control. Given that inherent volatility, there’s generally at least some risk
associated with each transaction.
6. GREEN FIELD DEVELOPMENT :

According to the Bureau of Economic Analysis (BEA), a greenfield investment is a

project “where foreign investors establish a new business or expand an existing business on
U.S. soil.” (or where a U.S. investor establishes a new business on foreign soil). A greenfield
investment is a form of market entry commonly used when a company wants to achieve the
highest degree of control over its foreign activities. It can be compared to other foreign direct
investments such as the purchase of foreign securities or the acquisition of a majority stake in
a foreign company in which the parent company exercises little to no control over daily
business operations. Apart from potential tax breaks or subsidies in establishing a greenfield
investment, the overarching goal of such an investment is to achieve a high level of control
over business operations and to avoid intermediary costs.

Advantages of a Greenfield Investment

There are numerous advantages to a greenfield investment, including the following:

 High level of control over business operations

 High level of quality control over the manufacturing and sale of products and/or
services
 High control over brand image and staffing
 Economies of scale and economies of scope can be achieved in terms of marketing,
research and development, and production
 Bypassing trade restrictions
 Creating jobs for the economy where the greenfield investment is taking place

Disadvantages of a Greenfield Investment

There are, of course, potential disadvantages as well, such as the following:

 An extremely high-risk investment – a greenfield investment is the riskiest form of

foreign direct investment
 Potentially high market entry cost (barriers to entry)
 Government regulations that may hamper foreign direct investments
 High fixed costs involved in establishing a greenfield location
7. PRODUCTION SHARING :

Production Sharing Contract (PSC) is a term used in the Hydrocarbon industry and
refers to an agreement between Contractor and Government whereby Contractor bears all
exploration risks, production and development costs in return for its stipulated share of (profit
from) production resulting from this effort. The costs incurred by the contractor are recoverable
in case of commercial discovery. Thus, PSC is a fiscal regime existing in the exploration and
production of hydrocarbons. Production Sharing Contracts became widely adopted as part of
the New Exploration and Licensing Policy (NELP) launched by the Government in 1997 for
enhanced exploration of oil and gas resources in the country.

The Production Sharing Contracts (PSCs) under NELP are based on the principle of
“profit sharing”. When a contractor discovers oil or gas, he is expected to share with the
Government the profit from his venture, as per the percentage given in his bid. Until a profit
is made, no share is given to Government, other than royalties and cesses. Thus, in production
sharing contract (PSC), Government's take depends on biddable share of profit petroleum/ gas
after allowing for cost recovery. In other words, PSC allows the contractor to recover his cost,
before giving Government its share in the contractor's revenues, in case there is commercial
discovery leading to production (Not all drilling leads to discovery of oil/gas). Thus, a certain
proportion of the balance revenues of the contractor are shared with the Government. The PSC
regime has been changed with a revenue sharing contract model in 2016 through a Cabinet
decision of the Government dated 10.03.2016. However, the new regime is applicable only for
future contracts that would be awarded by the Government.

8. TURN KEY-OPERATION :

According to the Oxford Dictionary, the adjective ‘turnkey’ refers to something that is
‘complete and ready to use right away.’ The notion of a turnkey project stays the same when
applied to project development. A turnkey project is one that is conceived, constructed, and
equipped with all necessary facilities under the terms of a contract by a corporation. When it is
ready to start doing business, it is sold to a buyer. Obviously, the firm in charge of constructing
a turnkey project does so for the agreed-upon price. The company’s turnkey project work
includes design, manufacturing, installation, aftermarket support, and technical service.

Features of a turnkey project

Rather than doing everything themselves, a firm in need of a manufacturing or services

facility employs a third-party operator to design and develop it. Everything from production to
support sustainable operations is the responsibility of the third-party contractor.

Instances of turnkey projects

Turnkey projects account for the bulk of government-funded large-scale infrastructure

projects. For example, the forthcoming Jewar Airport project is a turnkey project. Zurich
Airport International, a Swiss firm, is working on it. The airport will be given over to the local
government to operate after it has been completely constructed. A turnkey property is a
completely equipped flat or apartment which you may buy and rent right away on the property
market.

The advantages of turnkey projects

Such initiatives, sometimes known as turn-key, benefit both the company that creates
them and the player who finally takes ownership of them. The following are some of the
significant advantages of turnkey projects:

 Cost-cutting: A corporation engages companies who are prepared to do projects for a

set price.
 Companies save time and money since they don’t have to invest time and money
creating a facility. Instead, they can focus on growing their own enterprises.
 Free of legal and technical obstacles: Because someone is devoting time and energy to
building the facility, the main operator is free of all types of legal and technical
challenges, which are an inevitable part of project development, especially in a nation
like India.
 Expert expertise and technological know-how are available: A textile firm may not be
an expert in the construction and operation of a textile production facility. As a result,
turnkey projects allow them to recruit professionals in the relevant industry.
9. BOT- CONCEPT :

A build-operate-transfer (BOT) contract is a model used to finance large projects,

typically infrastructure projects developed through public-private partnerships. The BOT
scheme refers to the initial concession by a public entity such as a local government to a private
firm to both build and operate the project in question. After a set time frame, typically two or
three decades, control of the project is returned to the public entity.

 A build-operate-transfer (BOT) contract is a model used to finance large projects,

typically infrastructure projects developed through public-private partnerships.
 BOT projects are normally large-scale, greenfield infrastructure projects that would
otherwise be financed, built, and operated solely by the government.
  Under a build-operate-transfer (BOT) contract, an entity—usually a government—
grants a concession to a private company to finance, build, and operate a project for a
period of 20 to 30 years, hoping to earn a profit.
 After that period, the project is returned to the public entity that originally granted the
concession.
 Under a build-operate-transfer (BOT) contract, an entity—usually a government—
grants a concession to a private company to finance, build, and operate a project. The
company operates the project for a period of time (typically 20 or 30 years) with the
goal of recouping its investment, then transfers control of the project back to the public
entity.
 BOT projects are normally large-scale, greenfield infrastructure projects that would
otherwise be financed, built, and operated solely by the government. Examples include
a highway in Pakistan, a wastewater treatment facility in China, and a power plant in
the Philippines.
 In general, BOT contractors are special-purpose companies formed specifically for a
given project. During the project period—when the contractor is operating the project
it has built—revenues usually come from a single source, an offtake purchaser with a
binding agreement. This may be a government or state-owned enterprise.

A BOT can be broken down into three distinct phases:

 Build: A private company agrees to build a public infrastructure project for the
government.
 Operate: It then proceeds to operate and manage the facility for an agreed-upon period,
during which it should recoup its outlay and start making money.
 Transfer: After the concessionary period, the company transfers ownership back to the
public entity.
10. MANAGEMENT CONTRACT :

Management contracts are legal agreements that enable one company to have control
of another business's operations. Business owners often sign these written agreements directly
with the management company. This typically gives the management company operational
control for an established period of time, usually for two to five years. Most management
contracts are task-specific and focused on the work itself, not established outcomes.
Advantages of Management Contracts

 Using a contract management company can give business owners more time to focus
on growing the business instead of daily operational tasks.
 Contract management companies can complete a wide range of tasks, including hiring,
firing, and recruiting.
 A contract management company can help business owners manage more than one
business.
 An outside manager often has expertise in working with many different companies.
 Unlike employees who quit and go on to other ventures, the operations the management
contract firm offers will be consistent, regardless of the tenure of one specific person.
 Management contracts typically have a high degree of accuracy and efficiency.

Disadvantages of Management Contracts

 Unlike when you hire an employee into your company, using a management company
means that you will have to give up some privacy by letting another company know
about your company's internal operations.
 The management company will be exposed financially, which can make your company
more vulnerable to exposure and fraud.
 You may end up with a conflict with a contract management company that is
unexpected.
 Using a contract management company can change financial forecasts and outcomes.
 If the management contract is industry-specific, the management company may also
manage the operations of your competitors.

Management Contracts writing

 The management contract details just how much control the management company is to
have over the company.
 Include how much the management company is to be paid and how often.
 Detail job expectations so both parties know what is expected and how performance
will be evaluated.

 Determine how long the management contract is to be in place.

  Most management contracts last for one year, with options for renegotiation and
extension.
 Clearly identify what happens if either party is in breach of contract.
 This includes how to suspend the contractor if fines are to be paid to the business owner.
 Some companies choose to start a relationship with a management contract as a trial period.
The specifics and scope of the work should be included.
 All members need to sign the document and get their own copy.
 Presentation Report
On

By

Prayas Nanda

200409120012
SUB -: Business Policy & Strategy (CUTM 1222)
Guided By

Prof. Dr. Susanta Kumar Mishra

 COMPANY PROFILE

 Trade name - Tesla

 Founded by - Martin Eberhard and Marc Tarpenning.
 Formerly - Tesla Motors, Inc. (July 2003 – February 2017)
 Type - Public
 Industry - Automotive
 Founded - July 1, 2003; 19 years ago in San Carlos, California, United States
 Headquarters 13101 Tesla Road, Austin, Texas, U.S.
 Number of locations - 655 retail stores/galleries and service centers (2021)
 Area served - North America, Europe, Oceania, East Asia, Middle East, Southeast Asia
 Key people - Robyn Denholm (chair), Elon Musk (CEO)
 Products - Model 3, Model S, Model X, Model Y
 Production output - 1,369,611 vehicles (2022)
 Services – Service, charging, insurance, software upgrades, connectivity
 Revenue - US$53.8 billion (2021)
 Owner - Elon Musk (13.4%)
 Number of employees - 110,000(April 2022)
 Subsidiaries - Tesla Energy, Tesla Grohmann, Automation
VISION & MISSION
 Tesla’s vision is to “create the most compelling car company of the 21st century by
driving the world’s transition to electric vehicles.”
 Its mission is “to accelerate the advent of sustainable transport by bringing compelling
mass-market electric cars to market as soon as possible.”
VISION & MISSION
 Tesla’s primary goal is to increase the availability of electric vehicles.
 Its objective is to design, manufacture and market socially responsible luxurious
electric powered vehicles. Integrate technological innovation as well as luxurious
features into their products.
 COMPETITORS

Tesla competitors include BMW Group, Audi, General Motors, Lexus and Ford Motor
Company. Tesla ranks 1st in Pricing Score on Comparably vs its competitors.

PORTERS 5 FORCES

RIVALRY AMONG COMPETITORS

Attractiveness Remarks

Low High

1 2 3 4 5

No.of     The number of competitors of Tesla are few, but the brands in
Competitors luxury segment are high

Industry      Automotive Market consisted of 85.32 million units in 2020,

Growth and is expected to reach 122.83 million units by 2030.

Fixed Cost     Tesla’s expenses, standing at 77% of Revenue in 2016 and
rising to 83% of Revenues in 2019

Differentiation      The company produces Electric Vehicles which are different

from its usual competitors and few companies have produced
luxurious electric vehicles to compete with tesla but still tesla
is no. 1

Switching Costs      Switching cost is low in tesla.

THREAT OF NEW ENTRANTS

Attractiveness Remarks

Low High

1 2 3 4 5

Economies of Scale  High economies of scale are another weak force.

Economies of scale are a positive force for established
market players; however, it does not favor new entrants.

Product  Tesla uses broad differentiation to compete in its

Differentiation industry. The strategy entails developing unique car
models that differentiate Tesla from other automakers.

Brand Identity  Brand development is expensive as it needs highly

innovative and very advanced technology. The high cost
is a weak force to discourage new companies.

Access to Channels  Tesla uses direct sales, unlike other automakers who sell
of Distribution through franchised dealerships. And it doesn't depend on
one supplier, so it is a moderate force.

Capital  The capital requirements are high, therefore, making it

Requirement difficult for new entrants to set up businesses as high
expenditure need to be incurred.

Access to  Tesla uses various technologies in its cars. Autopilot

Technology technology is major.

Access to Raw  Access of raw material are moderate.

Material
Government  The government has introduced schemes to strengthen
Protection and give a much-desired boost to the Electric Auto
Mobile Sector. But they are mainly focussing on low cost
EVs.

THREAT OF SUBSTITUTE PRODUCTS

Attractiveness Remarks

Low High

1 2 3 4 5

Availability of Close  Tesla has a moderate and limited number of

Substitutes substitute options in the market.

Profitability of the Producer  The very few substitutes that are available are
of Substitute Products also produced by low profit earning industries.

BARGAINING POWER OF BUYERS

Attractiveness Remarks

Low High

1 2 3 4 5

No.of Buyers  Tesla's 2022 full year deliveries were around 1.31 million
vehicles, a 40% increase over the previous year, and
cumulative sales totaled 3 million cars as of August 2022.

Availability of  There are not many suppliers of electric cars in the market
Substitutes
 Buyer's Threat for  Backward Integration is a weak force in Tesla
Backward
Integration

Industry's Threat of  It is a Moderate Force

Forward
Integration

BARGAINING POWER OF SUPPLIERS

Attractiveness Remarks

Low High

1 2 3 4 5

No.of Suppliers  Tesla procures from multiple suppliers, so

eventually, it is not dependent on one supplier. So, it
is a moderate force.

Availability of  There are not many suppliers of electric cars in the

Substitutes market

Suppliers Threat of  Forward integration is a moderate force.

Forward Integration

Industry's Threat of 
Backward Integration

CONCLUSION

The future is bright for Tesla Motors as it continues to impact on the automobile
industry. However, the company needs to have a meticulous technology development strategy
to maintain its position as well as compete with rivals that appear more and more on the market
today.
 Presentation Report
On

By

Prayas Nanda

200409120012

SUB -: Business Policy & Strategy (CUTM 1222)

Guided By

Prof. Dr. Susanta Kumar Mishra

 ABOUT THE COMPANY

 Company - Tesla Inc.

 CEO - Elon Musk
 Founded - 2003
 Location - Palo Alto, California, United States
 Annual Revenue - US $81.462B(2022)

SWOT ANALYSIS

STRENGTHS -:

Energy Efficiency - Tesla is a leading pioneer when it comes to electric vehicles due to its
prominent use of renewable energy sources like solar power.

Partnership - Tesla is collaborating with big giants like Southeast APDA, Yes Energy etc.
These collaborations help is expanding Tesla’s renewable energy efforts and in the global
market.

Highly innovative - Tesla’s design is top class. And they put a lot of thought during
engineering and designing of their electric vehicle to give extreme comfort to their consumers.

Sturdy Brand Image - The market trusts and expects the company to develop clean energy
and profitable products. It has gained immense fame.

WEAKNESSES -:

Limited Presence - On the one hand, Tesla is working on establishing themselves in a

hypercompetitive automobile market and on the other they are trying to expand globally.

Premium Product Range - Tesla is an established premium clean energy brand. One of the
setbacks they can face is in terms of affordability and a consumer’s trust when it comes to
electric vehicles.

Succession Strategy - Elon Musk has become the brand face od Tesla and it is accepted as an
one-man-show. Although Elon Musk himself has a lot on his plate.
OPPORTUNITY -:

Autonomous Driving Technology - Tesla’s autopilot technology has gained it fame for its
safety and convenience. Making it trustworthy by consumers and the share market. Tesla’s
work in autopilot is constantly evolving.

Environment-friendly cars - As consumers are becoming more environmentally conscious,

the need for more electric vehicles is growing along with the need to minimise fuel-driven cars.

Battery Production Technology - Tesla is planning on manufacturing its battery cell in-house.
This can be a game-changer as it will help the company lower its production cost. And will
also create many jobs, in turn, helping the economy.

THREATS -:

Increased Competition - Heavy research is being done for automobiles powered by renewable
energy and many big companies like BMW and Volkswagen are becoming Tesla’s
competitors.

New technologies - There are innovative ways of energy being used in vehicles. Competitive
pressure can lead to high operational costs and decreased profit margins.

Long Term Sustainability - It is essential to maintain long term sustainability for a clean
energy automobile company. This is a potential threat due to Tesla’s unstable manufacturing
conditions and limited EV support infrastructure in North America and several parts of Asia.