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MM 5011 Knowledge Management and Innovation

Group Assignment

Pakistan: A Story of Technology, Entrepreneurs and Global Networks

Lessons Learned

Entrepreneurs and Global Networks Lessons Learned Syndicate 2 X.46 (Great Leaders Syndicate) 29111311

Syndicate 2 X.46 (Great Leaders Syndicate)

29111311

Haidir Afesina

29111328

Hendra Winata

29111329

Mita Listyatri

29111338

Andek Prabowo

29111344

Aprian Eka Rahadi

29111384

Chairunnisa Mirhelina N

29111387

Franciscus Xaverius Kresna P

29111393

Agung Indri Pramantyo

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT

INSTITUT TEKNOLOGI BANDUNG

2012

Company Overview

ePlanet Ventures, a technology fund based in Silicon Valley founded by Asad Jamal. Asad is a Pakistani with Bachelor`s degree from the London School of Economics who spent most of his life overseas. He successfully developed business in the advertising, media, communications and wireless, computing software, consumer internet, and other market spaces. As a venture capitalist he always look for new horizons.

Objective

To be one of the first venture capital entrants enter Pakistan with its largely untapped market (the growth of middle class).

Problem

Doubt that Pakistan condition with its mere 60 years old will be sustainable for investor despite of their growing middle class.

Lesson Learned

Fact#1 Leadership President Musharaf`s policies appeared to invigorate Pakistan`s economy and stimulate entrepreneurship within the country regardless of uncertain political future. Lesson Learned

Country`s leader vision as dealmaker has to put as a consideration before entering the market

Leadership is a vision to build hope, trust and optimism through opportunities for the future (Kouzes and Posner,

2002).

Other Country Experience Taken from Dubai: A Star in The East by Balakrishnan (2008), it was His Highness Sheikh Mohammed Bin

Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai who has transformed Dubai into the number one investor destination in its region. Through his visionary leadership made the policy easier and be trusted for investors to invest in infrastructure and tourism .

Fact#2 GDP Pakistan, the 6 th most populated country in the world with GDP growth around 7% per year since 2002, had large market, cost-base and talent, and family connections dominance. Lesson Learned

Higher GDP means higher buying power

High-populated country is an emerging market (Kertajaya, 2002)

Other Country Experience Taken from Markplus Conference 2011, since 2010, Indonesia has becoming the most attractive destination for foreign investor because of its high rate consumption and huge resources. It can be seen from GDP annual increment stability followed by the increasing of FDI in end of 2011 (foreign direct investment) i.e. 11.5% (www.bkpm.co.id). Thus Fontera plans to invest in new Indonesian plant, Honam P builds cement factory for 45 trillion and China with South Korea to invest in straight bridge.

Fact#3 Regulation According to the World Bank’s “Doing business 2008” report, the country ranked highest in South Asia in categories such as “Starting a Business” and “Protecting Investors” because of its recent policy trends of liberalization and deregulation (Private Equity and Venture Capital Funds). Lesson Learned

Good law enforcement attracts investor

To attract FDI, a country needs resources, law enforcement and infrastructure (Salvatore, 2004). Other Country Experience Taken from Hermawan on Marketing by Kertajaya (2002), after its revolution, in 1970 China allowed investor especially multinational company to start their business by ensuring their safety and promising country politics and economy sustainability. Thus made China number one for FDI recipients in the world. A company such as

SK-II built and developed its factory in China.

Fact#4 Culture The culture was still one of family-owned businesses with limited professional management that made trusted management was hard to come by in Pakistan as the concept of equity and options were new in Pakistan. Lesson Learned

New concept needs research, patient and collaborate with local business people

To introduce new product and concept to the market, the need of local knowledge and influence are needed to gain people acceptance (Drummond, Ensor and Ashford, 2008). Other Country Experience Taken from Hermawan on Marketing by Kertajaya (2002), Wal-Mart failed its concept in Indonesia in 1998 as hypermarket that offered value of low price with product varieties. They failed to understand the local behavior,

impatient and reluctant to adapt with the business system. Thus Carrefour that came after Wal-Mart was gain successful time with their understanding of Indonesian system.

Fact#5 Labor Pakistan’s talent pool was generally 30-40% cheaper than India and China despite of expensive price of real estate, unreliable supply of electricity, water and other utilities. Lesson Learned

Cheap labor is huge resources

To attract FDI, a country needs resources, law enforcement and infrastructure (Salvatore, 2004). Other Country Experience Taken from Chindia by Engardio (2007), many high-tech and manufacturing multinational companies chose to build their factory because of the availability of labor. People are low skill so that they need a job despite of getting low payment. Thus company will save lots of cost. In return, the investment drives China growth.

Fact#6 Costumer Relationship Besides emerging of middle class in Pakistan, Ayuz ul Haque, Managing Director of ePlanet Ventures said “what we look for in a company in a country like Pakistan is whether the business can survive and sustain itself in the local market”. Lesson Learned

Local middle class consumption

The middle class at any country is at the forefront of consumption and leads important business trends (Drummond, Ensor and Ashford, 2008). Other Country Experience Taken from Markplus Conference 2011, many high tech foreign companies invest and launch their products in Indonesia because of its middle class high consumption. Steven Koeberle from World Bank said that 7 million people a year is the expanding rate of emerging middle class. Therefore Honda put Indonesia as their first priority for their product and their innovation project in Indonesia based on people preferences e.g. Scoopy.

Fact#7 Knowledge Resources “Friends”, a sitcom created by Align technologies, was a training tool for employees with Master`s degrees and who were fluent in English. Lesson Learned

Knowledge resources

Investment in virtual learning software is one of the effective ways to develop knowledge management in the company regardless of the cost (Collison and Parcel, 2011). Other Company Experience Based on Fezi experiences at Hilton Bandung, there was hotel software called “Hilton University”. The program has various subjects from leadership, business and language. It created for different levels. The software is

installed on every computer in cafeteria. The language program has become the most famous program for employees as it accessible at home. It helps the employees to practice both of writing and speaking.

Fact#8 Promotion For access to markets, YouTube and Scrybe as promotion channel. Lesson Learned

Internet media as effective promotion tool

Both of above the line and below the line communication are being used to either build brand awareness or drive sales (Gauri and Cateora, 2006). Other Company Experience Taken from YouTube and Video Marketing by Jarboe (2009), Tom Dickson, Blendtec founder, throws such items as marbles, running shoes, glow sticks, golf balls and iPhones into his company’s blenders and flips the on switch. People love these crazy videos so much that Blendtec’s YouTube channel has more than 200,000 subscribers. It resulted to the increasing of blentec`s blender products.

Fact#9 Human Capital In technology space alone, Pakistan universities were producing upwards of 20,000 English-speaking Convent schools instilled neutral English accents, enabling better communication with their Western counterparts. Lesson Learned

Human resources development

In business world, the readiness of human capital starts with good communication (Mullins, 2007). Other Company Experience Based on Fezi experiences at Hotel Mulia, the company provided English teachers for employees. The courses are selected specializing in Hotel industries. For managerial level, the company collaborated with The British Institute to create modules that focus on business skills such as negotiation, contract and presentation.

Fact#10 Organization OPEN (Organization for Pakistani Entrepreneurs) collaborate with MIT Entrepreneurship Center held the workshops, seminars and business competition in order to educate Pakistani-based entrepreneurs. Lesson Learned

Activities to encourage entrepreneurship along with its development

The collaboration of industries and academic institutions help to generate and stimulate new start up business along with to facilitate networking and opportunities to potential investor (Bessant and Tidd, 2011). Other Company Experience Taken from Innovation and Entrepreneurship by Bessant and Tidd (2011), MIT and Standford University had collaboration to build the academic entrepreneurship. They shared research result along with program development. They become a bridge to both of entrepreneur and investor.

Analysis

Assad as many other venture capitalists are keen to provide funding for a venture with a proven track record and strong business plan. Bessant and Tidd (2011) argued that they are typically often requiring some equity or management involvement in return. Therefore some of them are prepared to go public to fund further growth.

Bessant and Tidd (2011) stated that studies consistently find that the age of company, educational level of founders, number of founders and starting capital all have a positive effect on venture success. Therefore the

Authors analyze that the opportunity for ePlanet to expand their business and invest in Pakistan is huge. There are some considerations that ,the case given such as;

1. The emerging middle class in Pakistan is potentially profitable. Competition: Middle class is attractive to both existing and new players, the competition will be fierce, and therefore ePlanet need to define their direct competitor and differentiate their offering Customer : Middle class segment are too big as a target segments, ePlanet need to define a more specific segment and adapt their offering

2. Find a business model suited to the them for Pakistan (best fit in) Production and operation: improve capabilities in servicing middle class Marketing and sales: optimizing offline channels and online channels Post sales operation: build long-term relationship to increase buying power and build loyalty

3. Financial resources Venture assets and access to funding e.g. IPO

4. Management Recruit people with industry related market or sector experience. Size of the founding team has important role to bring diverse expertise to the ventures and help for better decision-making.

Recommendation

Corporate Entrepreneurship

For most companies include ePlanet Ventures that its market already established, a change is costly. This condition make ePlanet limit its innovation to incremental one. To avoid this condition, ePlanet shall:

a. Developing internal knowledge Create external network in Pakistan, such as make ventures, alliance or partnership with existing local company and supplier that will related to ePlanet Ventures business portfolio

b. Have the appropriate resources, which covered:

i. Decision Making; Because Pakistan still lack of top management skills, Asad Jamal shoul hire foreigner in the beginning of his start up business in Pakistan.

ii. Empowered Teams; Employees who work in the company shall empowered and encouraged to improve their knowledge and skills to both of technical and management skills, especially for local employees. It is very important to the growth of Pakistani skills for the future in order to support its sustainability in human capital aspect of local people. Besides, it will also help the government to produce domestic professional labor.

iii. Skills and capabilities;

In the beginning of business in Pakistan, Asad Jamal shall divide the employee in 2 groups.

First, professional management worker who come from foreigner and local people. Second,

technical expertise from local people. While running the business, local people in management

side is ready to become professional, thus they ready to replace the foreigner accordingly.

iv. Risk Tolerance;

Any business always followed by risk. Although many uncertainty from politics, organization,

culture, and human capital in Pakistan, there are some facts that GDP, GNI growth, number of

human capital in IT, number of company in IT would minimize the uncertainty level. Thus Asad

Jamal shall open the new venture in Pakistan.

c. Asad Jamal must understand and analyze his existing strong capability and strategic assets to

make new venture in Pakistan: the one that related to Pakistan condition and also to help improving the

Pakistan condition.

Then Asad Jamal should analyze of the new business in Pakistan through Corporate Venturing that is

one of the Corporate Enterpreneurship types. Corporate Venturing models are:

a. Internal corporate venturing

b. Cooperative corporate venturing

c. External corporate venturing

Table of comparison Operating System model Vs New venture entities

of comparison Operating System model Vs New venture entities From the table above, it is clearly

From the table above, it is clearly said that Venturing Company as the best choice in terms of faster

transformation and flexible environment in order to create or develop new innovation.

The success history came from South Korea-based conglomerate Samsung. It transformed from an

"infotainment" company to a "lifecare" one based on green technology and healthcare. They decided to make

the tranformation as they believe that "lifecare" one based on green technology and healthcare has emerging

market. However, this transformation is big strategic shift and arrived too late to dominate the business portfolio.

Samsung Venture Investment

Corporation which bring many investors from different business units in the group, such as Samsung

Fortunately, there is a way called Corporate Venturing. Samsung created

Electronics.

References

Books:

Balakrishnan, Melodena Stephens (2008) Dubai: A Star in The East, A case study in strategic destination branding", Journal of Place Management and Development, Vol. 1 Iss: 1, pp.62 - 91

Bessant, John and Tidd Joe (2011) Innovation and Entrepreneurship (2 nd Ed), Chichester: John Wiley & Sons

Collisson, Chris and Parcell, Geoff (2001) Learning to Fly: Practical Lessons from One of The World`s Leading Knowledge Company, Chichester: Capstone

Engardio, Pete (2007) Chindia: How China and India Revolutionizing Global Business, McGraw Hill

Drummond, Graeme, Ensor, John and Ashford, Ruth (2008) Strategic Marketing (3 rd Ed), Oxford: Butterworth- Heinemann

Ghauri, P and Cateora, P (2006) International Marketing, New York: McGraw-Hill Education

Jarboe, Greg (2009) YouTube and Video Marketing, Sybex

Kertajaya, Hermawan (2002) Hermawan on Marketing, Jakarta: PT. Gramedia Pustaka Utama

Kouzes, James M and Posner, Barry Z (2002) The Leadership Challenge (3 rd Ed), San Francisco: Josey Bass

Mullins, Laurie J (2007) Management and Organizational Behavior (8 th Ed), Harlow: FT Prentice Hall

Markplus Conference 2011, December 5 th , 2011 Ritz Carlton Jakarta

Pierantozzi (2007), Corporate Venturing

Salvatore, Dominic (2004) Managerial Economics in Global Economy (5 th Ed), Thomson Southwestern

Internet:

http://blogs.hbr.org/cs/2011/10/corporate_venturing_rhymes_wit.html (Last accessed 22 Nov. 12 at 1pm) http://tuta.aalto.fi/fi/tutkimus/strateginen_johtaminen/julkaisut/tyopaperit/backholm_wp_1999_1.pdf (Last accessed 22 Nov. 12 at 1pm)