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OTIS IN VIETNAM

OTIS IN VIETNAM. Scenario is one depicting problem is a highly regulated environment Administrative regulation and market fragmentation create difficulties Early move needed because of installed base model of business Need to achieve growth target and consider alternatives to achieve this.

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OTIS IN VIETNAM

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  1. OTIS IN VIETNAM • Scenario is one depicting problem is a highly regulated environment • Administrative regulation and market fragmentation create difficulties • Early move needed because of installed base model of business • Need to achieve growth target and consider alternatives to achieve this

  2. ISSUES AND CONSTRAINS • How to expand? • Market is concentrated in a few urban areas • Is current JV arrangement adequate to support growth? • Who to seek as strategic partner? • Is lilama and cec adequate? • Are there alternative or complementary routes to the market? • Need to decide between importing and manufacturing. • Disadvantage in manufacturing is diseconomies of scale • Advantage is lower labour cost that may offset tariff on components and ability to establish wholly owned subsdiaries

  3. STRATEGIC CONCERNS • Ensure compliance with Vietnam’s regulations and government expectations • Protect long-term profit stream • Gain market access to enable more installations

  4. BUSINESS ISSUES • Key consideration is the need build portfolio of 500-600 lifts • This target can make or break otis in vietnam • Tap into potential business from currently installed lifts • What structural configurations can achieve this? • Consider other alliances to support expansion • Learn from approach of some of the Asian firms • The key issue is determining what is the most strategic thing to do • Opportunity to create barriers to entry limited • Trying to lobby and change govt policy can be both risky, time consuming and in a country where corruption is rampant it can be costly • May need to think in terms on networking and collaboration • How to protect profit stream?

  5. POSSIBLE APPROACH • Manufacturing will add little value but offers autonomy • Will enable Otis to protect profit stream by parking service business here • JV with Lilama and CEC needed for legal reasons • Need to find more strategic partners in construction to gain more market access • Among options: • Continue importing CBU? • Develop JV with Asian company that is planning to start manufacturing? • Outsource assembly or sourcing of components from Asian company? • Managing risk requires reducing uncertainty in those areas that can be controlled

  6. BUSINESS APPROACH • Partial manufacturing activity may help strengthen position in negotiatioing royalty issue • Outsourcing reduces capital investment • Depends on govt incentives and tariff regulations • Use structural arrangements to buffer from bribery • Given that profit stream comes from service, separate operational entities • Go for full presence from start with service team targeting currently installed lifts • Good training ground for local recruits • Need to decide on geographical area to concentrate and consolidate • Can help manage cost of dlvrng service • Projection on economic and construction growth would be necessary • Consider even 3 party JV involving another foreign property developer

  7. POSSBILE STRUCTURAL ARRANGEMENT OTIS INDOCHINA OTIS MANUFACTURING AND SERVICES JV/ALLIANCE WITH OTHER CONSTRUCTION FIRMS JV WITH LILAMA JV WITH CEC TO FULFILL LEGAL REQUIREMENT NEED FOR SALES PURPOSES WHOLLY OWNED PERFORM MANUFACUTIRNG AND SERVICE ACTUAL SOURCE OF PROFIT FOR SUPPORTING GROWTH TARGET AND BUFFERING AGAINST BRIBERY

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