In November 2019, almost a year after it went public, Tencent Music Entertainment Group ("TME") announced its third quarter financial results. Market investors had had high expectations for TME since it was the strategic music arm spun out by Tencent Holdings Limited ("Tencent"), one of the world's most valuable technology, gaming and social media companies. When TME made its debut on the New York Stock Exchange in late 2018, many individual investors were mystified by its "music-centric social entertainment" business model. Was it just the Chinese version of Spotify, which operated the world's most popular music app? Or was it a truly different business model which might generate more lucrative and diversified business revenue than its international counterparts? Some market analysts and investors also wondered if TME presented a more attractive investment opportunity than similar music streaming platforms in the world, including the global leader Spotify. As the global and domestic market became more competitive, how could TME sustain its competitive advantage by leveraging its synergies with Tencent's dominant position in social networking? Would TME's atypical music and social entertainment business model be easily replicated by its industry rivals or adopted beyond the music industry? What role would music streaming platforms play in driving the growth of the music industry and how would it affect the ecosystem of the global entertainment industry?
On the morning of 21 November 2018, Diet Prada, an Instagram account that uncovered the dark secrets and stories about the fashion industry, posted alleged text messages between Dolce & Gabbana S.R.L. (D&G)'s cofounder Stefano Gabbana and fashion writer Michaela Phuong. In the exchange, Stefano complained about the removal of D&G's videos (#DGLovesChina and #DGTheGreatShow) from Chinese social media Weibo amid an onslaught of criticisms. Stefano's alleged anti-China comments on Instagram, coupled with the D&G videos that were perceived as racist and offensive, prompted a slew of outraged responses not only from the Chinese consumers but also from its own brand ambassadors and celebrity partners in China. Many immediately severed ties with the brand. Following this intense backlash from celebrities and consumers, a number of retailers took swift action to sever connections with D&G and removed its products. Bowing to the public backlash from the controversial videos and the Instagram post, the founders of D&G made a personal apology through a video address. This case is a continuation of D&G's marketing missteps in China (A).
In November 2018, Dolce & Gabbana S.R.L. (D&G) faced a serious brand crisis following the release of three short videos on Instagram, Facebook, and Twitter as well as Sina Weibo in China to promote its first-ever fashion show in mainland China. The brand crisis was further exacerbated by derogatory comments alleged to have been made by the cofounder, Stefano Gabbana, on Instagram. The failure of D&G to take swift action to quell the controversy triggered by the videos had resulted in cancellation of the Shanghai catwalk event and a public relations disaster. This case summarises the reputational damage caused by the crisis and initial marketing efforts made by D&G to rebuild its image in China from the end of 2018 up to May 2019. It is the third case of a three-part case series and should be used in conjunction with Case A (D&G's Marketing Missteps in China (A): How to Balance Fashion Brand Strategy and Cultural Sensitivity?) and Case B (D&G's marketing missteps in china (B)-The Deepening crisis).
On 18 November 2018, Dolce & Gabbana S.R.L. (D&G) released three short videos on Instagram, Facebook, and Twitter as well as Sina Weibo in China to promote its first-ever fashion show in mainland China. The campaign was specifically designed to drum up excitement about an important catwalk event to be held at the Expo Center of Shanghai on 21 November 2018. However, the videos did not create the intended positive effect. In fact, the incongruous or extreme presentations in the videos jeopardized the entire promotion campaign. From the Chinese audience's perspective, the D&G videos were not entertaining but inappropriate, offensive, and racist. The result enraged the Chinese audience and fueled a heated online debate. Within 24 hours, under public pressure, D&G was forced to remove the videos from its Weibo promotion channel. While many Chinese media users were demanding a formal apology from D&G for the videos, the company allowed the debate to simmer and boil for the next few days. This case is the first case of a three-part case series. It can be used on a stand-alone basis or in combination with Case B (D&G's Marketing Missteps in China (B): The Deepening Crisis) and Case C (D&G's Marketing Missteps in China (C): The Epilogue).
This case describes a hypothetical situation faced by a fictitious international conglomerate, ICL, that intends to enter the retail grocery market in Hong Kong. The conglomerate's interest in the Hong Kong supermarket industry was initially kindled by the plan of Hutchison Whampoa, Ltd. (HWL) to sell its leading supermarket chain PARKnSHOP in August 2013. However, in October 2013, HWL reversed course and decided not to sell PARKnSHOP, saying that the sale would not deliver maximum value to its shareholders. Before embarking into new territory, ICL wanted an in-depth understanding of the Hong Kong grocery market environment, competitors, and potential barriers to entry. The conglomerate was aware that the new Competition Law, which was expected to take effect in 2015, might have profound implications on the grocery market landscape in Hong Kong.
In June 1997, Thailand's currency became the object of intense speculation as the country's balance of payments was in tatters. Amidst the government's efforts to turn things around, finance minister Dr Amnuay Viravan resigned over policy disagreements and the Thai stock market plunged as investors feared a currency devaluation. As Amnuay's successor, Thanong, tried to pick up the pieces, he uncovered an awful secret: Thailand's central bank had virtually no liquid foreign exchange reserves left to defend its exchange rate. What action should he take? And, more importantly, what action could he take?
Since late 2003, Merrill Lynch & Co., Inc ("Merrill Lynch") had become the world's largest underwriter of collateralized debt obligations ("CDOs"). The assets of CDOs comprised some of the riskiest tranches of mortgage-backed securities mostly tied to subprime mortgages. With the collapse of the subprime mortgage market and declining liquidity in the summer of 2007, Merrill Lynch was caught with a substantial number of CDOs that had diminished sharply in value. Disillusioned with chief executive Stanley O'Neal's leadership, the management of Merrill Lynch called for a series of meetings to assess the firm's exposure to subprime-backed CDOs and redefine its risk-management strategy. To the management, an embarrassing write-down seemed inevitable for the third quarter of 2007, but how much of such assets should be written down and how quickly? What would be the implications for the firm in making such an announcement?
This case explores events surrounding the development of the Sydney Cross City Tunnel, an innovative infrastructure project developed by the New South Wales government in Australia in conjunction with Cheung Kong Infrastructure, Cheung Kong's Hong Kong infrastructure investment arm. The tunnel opened for traffic in 2005. This case analyzes three matters: the political and institutional background that led to the decision to develop the Cross City Tunnel; the general economic assumptions upon which the venture had been based; and the build-operate-transfer project finance arrangements put into place to develop and finance the tunnel venture. The case explains the project finance arrangements surrounding a typical road transport infrastructure which seems to have failed, and raises questions about estimates of demand for the tunnel and traffic management arrangements surrounding access to the tunnel.
Founded in 1881, Seiko gained prominence for introducing the world's first quartz watch in 1969 and is often associated with the "quartz revolution" of the 1970s that threatened to destroy the Swiss watchmaking industry. Competition from inexpensive Chinese watch producers, a resurgent Swiss watch industry, domestic rivals, and a profusion of new fashion brands have led the company to reconsider its sales-oriented strategy of offering numerous products at various price points. Having become nearly obsolete in the face of quartz technology, the mechanical watch business was thriving once more, as a number of predominantly Swiss firms attracted luxury watch buyers. Since the 1960s, Seiko has produced luxury and complex mechanical watches for the domestic market under the brands "Grand Seiko" and "Credor." In 2003, Shinji Hattori, a great grandson of Seiko's founder became Seiko Watch Company's president and CEO and felt that Seiko should raise its perceived image outside Japan. In management's view, Seiko could claim distinction as the only "mechatronic manufacturer" in the world--a vertically integrated watchmaker that excelled in both mechanical watchmaking and micro-electronics. The launch of an innovative new watch movement--the Spring Drive--presented an opportunity for Seiko to make a timely foray into high-price segments in the international watch market. Examines the legacy of Seiko's watch business and provides a basic overview of the world watch industry. Considers the manner in which watches have evolved as a product category, and how a company like Seiko has attempted to reconcile its competitive advantage with its brand positioning in a highly crowded market.
Deals with the operational phase of a privately operated urban infrastructure project, Hong Kong's Western Harbour Crossing, a toll road tunnel from West Kowloon to Sai Ying Pun on Hong Kong Island, developed as part of the prestigious Airport Core Program supporting the new Hong Kong Airport development in the early- to mid-1990s. The tunnel opened for business in 1997 and has underperformed financially since then. Explores the hypothetical purchase of the tunnel as an infrastructure portfolio asset by a prominent bank acting for a private equity group. The bank is also interested in providing long-term debt financing on a non-recourse/limited recourse basis to the potential purchasers. Revisits the economics of the project, valuation of the tunnel as a going venture, and financing of the purchase, and discusses the merits of investing in it as a portfolio decision. Considers two corporate/project finance activities. First, as a fundamental capital budgeting function, considers valuation of the Western Harbour Crossing as a going concern relative to its historical cost ("book value") in order to highlight the problems associated with sunk costs and irreversibility in underperforming real fixed assets structured as project-financed ventures. Secondly, outlines the potential purchaser's financing decision and the approach that banks take in syndicating very large financial commitments to very risky projects.
In the spring of 2005, Dell, Inc., the world's largest personal computer maker, announced a new goal: to reach $80 billion in annual sales by 2009. The goal was fairly ambitious for Dell, which at the time had revenues of about $49 billion. In the second quarter of 2005, Dell significantly missed revenue expectations and lowered its outlook. Dell shares were down by about 28% from the end of 2004 to late December 2005, whereas those of its major competitor, Hewlett-Packard Co., had soared more than 36%. Given the dip in revenues, investors began to question whether Dell was still the high-flying growth company it once was. Could Dell get its revenue growth back on track to realize its bullish vision? Could the company capture the opportunities available outside the United States, where its presence was younger and its share smaller? As Dell expanded into new product markets, could it replicate past success with the direct model and find new drivers for growth?
In late 2004, Macau, a gaming and tourism Mecca in Asia, caught the attention of investors and casino operators around the world. From a wider perspective, the city's new casinos and resort projects are expected to have a significant spillover effect on the entire economy and society. Presents insights into the history and development of this rapidly emerging gaming market and analyzes the economic opportunities arising from such development. Drawing on the experience of Las Vegas, examines how Macau could create a new concept of gaming packaged in destination entertainment and what changes are expected in its gaming industry as well as its economic and real estate development.
Team and Concepts Ltd. (TnC), an IT company founded by David Lee and his partners in 2003, was not a typical small business. Its owners were innovative, business-savvy entrepreneurs with audacious goals who worked daily to grow the business and transform it into a successful company. Such a transformation required comprehensive changes in many aspects of the business. Facilitating this transition required enhanced managerial, financial, marketing, and R&D capacities. In 2004, the company was facing the challenge of working with new investors and partners who would likely set conditions for the business and require it to adopt new behaviors and a new management structure. TnC was also exploring the trade-offs between acquiring outside funds and retaining control to make wise decisions about its future strategy.
Set in 2003, this case presents the relative merits and demerits of direct and indirect methods of international property investment from the perspective of an Australian property company, LandLease (Asia) Property Ltd. (LL). It wished to gain exposure to the Hong Kong property sector and had the option of investing directly by acquiring real property assets or indirectly by acquiring interests in investment vehicles whose underlying investment performance was linked to the property sectors. LL was particularly interested in creating an investment portfolio and listing it as a REIT in Hong Kong. Compares and contrasts the most common forms and strategies of real estate investment. The relative attractiveness of direct and indirect international property investments will depend on the requirements, objectives, and financial strength of the investors. Despite differences in the underlying asset base and quality, direct and indirect investments are not mutually exclusive.
Provides real estate market data for the analysis of an office lease or buy decision. Demonstrates what is known as the "leasing puzzle"--the answer simply being that the two forms of financing are not cost equivalent in the presence of capital market imperfections, despite both being credit forms. Explores asset-specificity arguments to support the view that generally, a firm should not own an office unless it is dictated by its core business. Presents two opposing anecdotes to illustrate why trading companies should not take the opportunity to capitalize on a buoyant real estate market. The argument is that shareholders do not need trading companies to invest in properties for them, because they can do this through their own investment portfolio activities. Also explores issues such as shareholder rights and accounting and tax implications. Analysis provides ample materials for debate.
Hongkong Land Holdings Ltd. (HKL), the property arm of the Jardine Matheson Group, is a leading property investment, management, and development company with a major portfolio in Hong Kong and other property and infrastructure interests in Asia. In early 2000, HKL was faced with significant changes in its business environment in the Central District in Hong Kong, where it was the leading landlord of Grade A retail and office real estate. It had commissioned a report from consultants to inform the company on developments in the Grade A retail and office markets and the influence it might have on the company's operations. One of the major issues was how to reposition the company's aging properties to achieve optimal returns in a competitive market.
For centuries, Jingdezhen, the "Porcelain Metropolis" of China, produced and exported the finest porcelain treasures in the world. By the late 20th century, however, the city was in danger of losing its past glory. Although its factories still churned out more than a million pieces of porcelain a day, it was facing more competitors at home and abroad than at any time in its history. The declining quality of porcelain made in this highly respected city disappointed a number of porcelain experts and collectors. Jiangdong Crystal-color Art and Crafts Co. Ltd. (JCAC) was one of the few ceramic makers that had differentiated itself from its rivals. The company manufactured top-of-the-line luxury products and limited its distribution to the government and high-end retailers. Although JCAC was enjoying its success, a number of small and medium-size porcelain manufacturers in Jingdezhen were still struggling to make a profit. With new competitors looming on the horizon, some ceramic firms were reviewing their marketing plans with an eye toward finding a market niche. JCAC, at the same time, was aiming to develop a global brand and to revive the image of Jingdezhen ceramics. This case illustrates the problems of adopting an undifferentiated strategy in a competitive market. It explores how to identify market niches in a traditional industry and examines strategies for building a global brand.
In mid-1993, Hutchison Whampoa Ltd. (HWL), a respected company based in Hong Kong, was planning to demolish the Hilton Hotel to make way for a highly lucrative office building. The Hilton Hotel was one of the territory's oldest and best-known landmarks. It was wholly owned by HWL. To proceed with the redevelopment plan, HWL proposed to compensate the Hilton Group for an early termination of its 50-year management contract. The cost for compensation was estimated to be around U.S. $125 million. Before approaching the Hilton Group for the buy-out, the chief development executive of HWL hoped to convince himself and the directors that the deal was necessary and that the redevelopment plan would be beneficial to both the group and its shareholders. This case explains the background to the Grade A office rental market in Hong Kong and provides statistics to illustrate the major trends in the market and causal factors over 20 years.
Jack Perkowski established Asian Strategic Investment Corp. (ASIMCO) in February 1994. ASIMCO became one of the largest components organizations serving the Chinese motor vehicle industry. This case shows the process of human capital development at ASIMCO. Describes ASIMCO's management restructuring efforts, its management development strategy, and its system of fast-tracking leaders through the leadership development program. Instead of transplanting Western management models into China, ASIMCO strongly believed in creating a centralized, top-down management model that could be adapted to China's unique environment.