Group 1@Raleigh: Zara, success or failure?

Zara is a Spanish clothing retail group. It is hold by Inditex SA and is one of the most profitable company of this group. The headquarters of Zara are based in La Coruña, Spain, where the first store were opened in 1975. Since this date, they have been expanded operations into 45 countries with more than 2000 stores located in more than 400 cities in Europe, Americas, Asia and Africa.

The business model of Zara can be divided in 3 basics components: concept, capabilities, and value drivers. The main strategy of Zara is to maintain design, production, and distribution processes. It allows the company to respond quickly to customers’ demands.

Indeed, Zara is making its high-fashion clothes in Spain and in nearby Portugal and Morocco. This is obviously more expensive than if it was done cost in China, but a short, flexible supply chain allows the firm to respond quickly to changes in customer taste. Also they sell the vast majority of its outfits at full price rather than at a discount. Its decision to stay close to home has become its main source of competitive advantage.

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This firm is an exemple of a firm illustrating the paradoxical effect of new technologies on offshoring. Indeed, Zara was a pioneers of the use of new technologies in the textile sector. It allows Zara to have a rotation of its stock much more rapidly; and this stock is renewed every two weeks. This strategy allows Zara to play with the customer: they will have to buy clothes immediately otherwise they might not find it again.

Globally the offshoring strategy of Zara is quite limited, but this limitation is the strategy itself. There is no need for companies to go full offshoring, they have to manage their ressources with their political strategies and find an equilibrium between these two, as Zara did.

Nevertheless, the success story of Zara offshoring strategy has to be questioned. Indeed, the spanish firm has faced some huge scandals: one of the biggest is the “labor slave” in Brazil. In 30 of its factories in Brazil, Zara has been found to exploit its workers. The investigation TV show “A Liga” has highlighted Bolivian laborers working in inhuman conditions. The security requirements were not met at all (for instance, an extinguisher was found outdated, and potentially not operational at all). They only earned $569 per month, for long workings days of 12 hours.

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Zara opted for an ostrich-like approach, and declared they were not aware of these problems. They argue the factories’ behavior was totally in contradiction to the Inditex criteria. Saying themselves not responsible, they asked publicly the factories to conform to the rules. Finally, they informed that they were going to set up an auditing department to be sure it won’t happen again in the future.


Offshoring Information Technology: Sourcing and Outsourcing to a Global workforce, By Erran Carmel, Paul Tjia

Baldor Success Story Group 7 Paris

Baldor electric company


Baldor is an electric company founded in 1920 by Edwin Ballman and Emil Doerr. The name of this company is a mix of their 2 names. The plan to be the best marketers, designers and manufacturers of industrial electric motors, drives and mechanical power transmission products. Today they are implemented in more than 70 countries with about 50 warehouses America. Baldor supplies to over 9,500 customers and is headquartered in the city of Fort Smith, Arkansas.

How to produce more efficiently?

The CEO of Baldor wanted to be more efficient than Americans and have less costs than Mexicans. But it wasn’t really realistic, that’s why they planned to go offshore in Quebec. The problem is that most of the employees was afraid of losing their job.
In 2008 when Baldor bought Maska, Pierre Boutin, the CEO of Baldor failed at recovering the production of the Mexican’s warehouses. Unfortunately there was an important economic crisis and Baldor was acquired by a Swiss company in 2010, specialized in handwork.
Offshoring in Québec have been a complete success because they had a manual manufacturing process while Baldor were robotic.

EISA Effect on motor sales

Intensification of the production:

Pierre Boutin also worked in collaboration with ABB personnel to convince Investissement Québec (IQ) to help the company. IQ agreed to subsidize 10% of the investments planned to $ 6 million to upgrade the plant equipment and increase its production capacity.
In 2011 Sainte Claire’s factory (Québec) was able to demonstrate that it would have enough production capacity and could produce at lower costs.

The transfer of the Mexicans’ production increased the turnover by 15% and created 12 job. They had the idea of creating a suggestion box which was a complete success because on 163 suggestions, more than a hundred have been applied.
When Sainte Claire arrived in the group Baldor the company was ranked 13th out of 26, 3 years later, in 2012, the company reached the first place.

Group 14@Paris: Camaïeu-Failure offshoring in Bangladesh




Camaïeu SA is one of France’s largest chains of women’s ready-to-wear stores. The company founded in 1984 by Jean-Pierre Torck and Jean Duforest, focused on the segment of 20-40 years old women with a mid-range positioning.

Camaïeu operates a global distribution network of 1,060 stores (including 626 stores in France) located in 18 countries as of 2013.

In 2000, Camaïeu has accelerated its international network expansion. It is established in large and medium size cities. It has made important investments in Eastern Europe and the Middle East. In 10 years, Camaïeu has managed to develop its presence in 17 countries: France, Italy, Spain, Poland, Czech Republic, Slovakia, Belgium, Luxembourg, Hungary, Romania, Russia, Saudi Arabia, Bahrain, UAE, Kuwait, Qatar and Morocco.


With over 6,000 employees, of which 4,000 in France, Camaïeu opens more than 100 stores per year. A new Camaïeu store opens somewhere in the world every 3 days. Today the company sells more than 70 million items annually to nearly 37 million customers and had a turnover about 810 million euros as of 2010.

As the company focuses on the lower mid-range women’s clothing market, it has to outsource its production to low-wage countries such as China, Turkey, and the Middle East, in order to position itself as a low-cost alternative in the market.

Failure in Bangladesh

Even if offshoring was, at first, seen as an advantage for Camaïeu, this all changed after an accident occurred in Bangladesh: the Rana Plaza’s fell-down in April 2013. In fact, a whole building where laborers were working for the textile industry collapsed. More than 1100 people died in that accident. Among the ruins, some Camaïeu label were found, which contradicted Camaïeu’s declaration that it was not producing clothes in that factory. Thierry Jaugeas, Camaïeu’s managing director assured that they order some goods to that factory in May 2012, one year before the drama, and affirmed that it was the only time they worked with that factory. So, how come some labels could be found one year after their last purchase?

After doing an internal inquiry, it seems that a Camaïeu’s supplier off-shored its activity in Bangladesh, without informing Camaïeu. Therefore, Camaïeu has decided to indemnify the victims. After this scandal, it has been decided that Camaïeu will keep working with this supplier, but that there will be more control to check if the terms and conditions of the contract with its supplier are respected.

How did they manage to overcome this ordeal and what is the current situation

After the scandal that occurred in Bangladesh, a lot of things where said in the media, but things haven’t really improved yet.

Camaieu, with other French brands such as Auchan, Carrefour, Casino, Benetton, Mango, Walmart or Leclerc, in association with national and international unions and under the auspices of the International Labour Organisation (OIT) were supposed to sign a security agreement in textile factories.

That security agreement required factory inspections and a total transparency on their results. This would have been a huge victory for human rights and working conditions in Bangladesh, if it had been signed.

In France, a bill about a “Vigilance Duty” for French multinationals has been submitted on human rights, but it has not been adopted yet.

Auchan and Carrefour wanted first to reject their responsibilities, because they “were not aware of the lack of security in the building” but under the pressure of French ONG (Peuple Solidaire, Collectif Ethique), they have signed the security agreement. Other companies didn’t.

Currently, those two brands brag about the fact that they did sign the agreement contrary to other brands, even if they didn’t participate to the compensation of victims. 200 corpses have still not been recovered, and that is a good reason for them not to compensate the families’ victims. The total of indemnities they could face is around 54 million €, which is nothing compared to their 2.5 billion € turnover (Auchan and Carrefour).

Camaïeu, other brands involved in the scandal, and some ONG helped by giving money to the victims. That is still not enough.

A lot of demonstrations from textile workers have occurred all around Bangladesh, and the government has taken action.

The minimum wage for textile workers has been raised from 28$ to 50$ (36€) per month, which is still way below the vital wage of 260€ per month.

For the moment, a lot of promises have been made. Hopefully things will change radically for those developing countries with cheap labor force.







SEB group – Group10@Sophia

SEB group is a global leading company of small domestic appliance. The company name means Société d’Emboutissage de Bourgogne (SEB). It sells 6 products every second around the world and has launched famous innovative products which are now considerate as “must-have” in the domestic appliance domain.

The history of the company started 150 years earlier thanks to Antoine Lescure who initiated everything in 1857 in Selongey (next to Dijon in France). Eventhough Antoine Lescure started from scratch, the company is now leader on its market and has a turnover of about 4.6 billion euros in 2013 which means an increase of 2.5% in comparison to the previous year. (figures from BFMbusiness, Jones Newswires). The company has about 25 000 employees in 49 different countries. This is definitely a global company.

SEB group is composed of several subsidiaries that contribute to reach such a dynamic growth. Among them there are : Rowenta, Krups, Moulinex, Tefal, All-Clad, Calor or Supor in China.

The production is realized in 29 plants located all around the world: 12 in Europe (10 in France), 1 in the US, 3 in Brazil, 3 in Colombia, 5 in China, 1 in Vietnam, 1 in Russia and 1 in India. SEB has managed to keep its industrial sites in France thanks to the delocalization of its cheap domestic appliance products and a very intensive Research and Development strategy[1]Therefore 40% of the products are still “made in France” and the company belongs to the few that have never left the country. Products with an important added value are still manufactured in France even if the company owns manufacturing plants in countries such as China since the takeover of Supor in 2011.

As we said before, due to the competitiveness, SEB Group decided to implement an industrial reorganization plan. The world leader of the small electrical household appliances succeeded in maintaining a part of his production in France by focusing on the R&D, but they decided to offshore the low price segment. Concerning the products on which the brand has a leader position, they decided to keep some of the production in Europe, and the rest outside EU. For the latter, they conserve intern the R&D part (products and process). Finally, they decide to outsource the product that has become standard[2].

From an economic point of view, this strategy paid off. The group succeed to gain international recognition becoming a market leader in different area.

In the US, All-Clad and Mirro WearEver acquisitions, respectively in 2004 and 2006, led to reach complementary segments of market, offering culinary items from entry level model to the top of the range and to become North-American leader in this market. Acquisitions in Brazil and Italia in 2005, Colombia, Vietnam and India in 2001 and Egypt and Canada in 2013, allow the group to strengthen his worldwide influence. Moreover, the acquisition process of Supor (2007-2011), n°1 of culinary items and n°3 of small domestic appliances, allows him to seize the opportunity of important Chinese market potential.

The Group succeeds in combining growth and competitiveness by promoting innovation and flexibility, proposing a diversify offer and respecting a rigorous cost management. His differentiation and upgrade have permitted to improve his benefit margin and to re-invest in R&D, initiating a virtuous circle[3]. Emerging markets are still in an equipment phase (fast urbanization and middle class development), so the globalization is a constant opportunity as well as a competition-increasing factor. This is why the group understood the importance to constantly adapt its strategy and to bet on an innovative and diversify strategy ; diversified by its localization and by his offer.

If we consider the environmental issues, globalization lead to increased ecologic impact of transports, linked to manufacturing and commercialization. The group has strengthen his eco-logistics approach in 2008 in reducing his CO2 emission. Despite that, he registered an increase in its emissions of 16,7% from 2012 to 2013 (resulting from a methodological calculation evolution among the group). Its emissions rose by 253K tons of C02 today.

To improve his ecological impact, Seb orientates his action following 3 levers : Improvement of the rate of completion of the units of transport (lorries or maritime containers); development of alternate ways of road-transportation (waterway, rail) and the intensification of the requirements towards the carriers[4].

Last but not least, the social impact mitigates positive repercussions of globalization on the group. The outsourcing leaded to close factories in France (in Vosges, Jura and Sarthe) and to suppress 900 jobs in 2005 for example. In 2012, Seb group took a census of 6,000 French employees versus 25,000 in the world. Eventhough Seb proposes other solutions (geographical resettlement etc.) to people losing their job, the qualification level of jobs created through globalization is not the same as the jobs destroyed. And some people could assimilate this strategy to social dumping[5].



[1] i.e. Corinne Scemama, L’Express, “Pourquoi Seb garde la frite”, article published on 11.01.2012





Group 36@Sophia – The Rise of Rocket Internet

Rocket Internet is a German VC firm and startup incubators founded in 2007 by the 3 Samwer brothers.

The company’s business model is to quickly build copies of successful E-commerce platforms in markets and countries where competition is not very strong in the targeted sector. The firm controlled by its founders is known for its aggressive approach in building these new companies, often referred to as “blitzkrieg”. It prides itself for the speed of execution and ability to hire exceptional talents.

Rocket Internet operates in more than 50 countries and has more than 75 ventures in their portfolio such as the e-commerce retail companies Zalando in Germany, in India, in Russia, ZALORA in South East Asia, The Iconic and Zanui in Australia, the global food delivery platform Foodpanda/Hellofood, etc.
In France, they are for example known for creating CityDeal, which is a clone of american Groupon. They implement new firms all around the world except in USA and China.


“My advantage is never that I’m the first” the elder brother states “My advantage is that we just build faster and better in more instances than anyone else.” As well as copying others’ models, the Samwers have made significant investments in originals, including Facebook, LinkedIn and Zynga.

“We looked at trends in the US, the Asian market and in the offline industry, and thought about how we could bring them online, because this is what we have some relevant experience at doing. That was the original idea for Rocket: bringing together people who will then allow us to be faster than competitors whenever we have an idea, because we can start right away.”

The overall performance has been extraordinary. The company has so far launched around 30 startups, only five of which have failed.



Marc, the youngest of Samwer brothers likes to compare Rocket Internet to some kind of McKinsey on steroïds… The company recrutes their « entrepreneurs » from high level international consulting firms or corporate banking. The entire organization is maximum efficiency oriented. Because each and every new project is planned to be sold at the highest price possible.

Created 15 years ago, this war machine rarely misses its goals and continues its spectacular development. This has been so successful that its founders are now going for an IPO : they want to raise from 800M$ to 1.5B$ for 15% of their company.

So why have they been so successful ?

Because their business model is not just about cloning websites which are successful in the US, make them grow fast and manage them on the long term; but above all selling them for a high price only a few years (or months) later…

And it works, as shown by the long list of success stories : in 1999 they sold their online auctions website Alando to Ebay for 53M$, 5 years later they got 270M$ with the sell of Jamba (mobile rings platform) to Versisign. In 2008, they sold BigPoint (online social games) for 110M$ and in 2010 it was Groupon’s turn to buy its own French copy : CityDeal…


Group3@Lille : Tax offshoring – How companies maximize their profits

The Finance ministers of the top 20 world industrialized countries, joined by member-States of the OECD, gathered on September 21th in Cairns, Australia, to claim their willingness to fight against tax evasion. Tax evasion consists in transferring money gained in certain places to another places which proceed less restrictive tax rate levels. Today the OECD counts between 30 and 40 tax havens around the world, hosting offshore financial accounts – both from individuals and companies.

In 2009, Saint-Gobain didn’t pay any tax on profits, and it’s unfortunately not the only firm in this case. Indeed in France, between 60 and 80 billion euros are estimated being hidden by big companies from national tax authorities. One can also observes that the top 50 European companies own on average 117 offshore societies in the so-called tax havens. This is legitimately considered as a huge loss of income for national governments as they are desperately looking for money to figure out their economic issues (reducing deficits, ensuring quality of public services, undertaking employment politics, etc…)

The giants of the Internet industry – Google, Facebook, Amazon,… – are especially taking advantage of the loopholes in the French law to pay minimum taxes on their profits. The chart below is a typical example of a complex mechanism frequently used by these firms in order to pay as less taxes as possible.


Many industrialized countries feel unarmed facing this situation. As it is a globalized issue, countries have to cooperate to tackle it. Let’s take an example of a French consumer who decides to buy a book on website. The consumer won’t pay the product to Amazon France, a subsidiary on which the French State could take off corporate taxes as the company is making profits in France. In fact money received from French sales goes directly to another subsidiary (in Ireland for instance) which allows Amazon not to pay high rate on its revenues. Indeed France has one of the most tax pressure systems in Europe with a maximum corporate tax rate about 36% whereas it’s around 12.5% only in Ireland.


These tax offshoring strategies are well-known from governments and international institutions for years, but it seems these authorities do not use the right tools and/or lack of political courage to overcome this challenge. It therefore worths to see if the States will adhere to the recommendations of the OECD by acting with real measures.

If you want to learn more about tax evasion, we strongly recommend you this documentary (in French):

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Other sources :

Group 5 @ Raleigh : Pernod Ricard Internalization Success

Success of the internationalization of Pernod Ricard in Japan (1991-2014)


A world co-leader in the field of wine&spirits, Pernod-Ricard operates autonomously in Japan since more than 20 years. The company is succeeding in this country where people tend to drink less but better. Its strategy is to establish a brand port-folio linked to the market tendencies and consumption habits. In order to do this, Pernod-Ricard Japan rely on 3 main points deeply well-established in the group culture :

  • Decentralization of decision
  • Creation of value through innovation
  • Team spirit.

The Business Model is based on their ability to take decisions and act locally to increase their responsiveness in the market. P-R’s particularity lies on giving to its subsidiary the entire responsibility for Profit&Loss while they get support from the brand owners who are in charge of the production and the global strategy of the brands. It enables the teams to ensure consistency between global brand’s strategies and their local application. The strategy of Pernod Ricard Japan has been to focus on product value in terms of marketing placement based on reputation and image of the product. This strategy has been implemented thanks to a huge and continuous investment in innovation, to response to a decrease in consumption volume of spirits. On one hand, Pernod Ricard has decided to launch product related to different age criterion and on the other hand, products related to different type of consumers. For instance, Café de Paris, a product with different flavors and that can be customized, has been launched for entertainment purpose and got a huge success.


An other example to quote is the “premiumization” of a product, as Pernod Ricard did with the Chivas 18 years Gold Signature in order to reach the upper class and their need for quality.


Moreover, the group has succeeded in mixing the brand image with Japanese food culture. They had called for a famous Japanese chief to innovate a wine that can be in accordance with Japanese food tastes. Pernod Ricard has succeeded in creating a strong link with the country and not only insert the brand in the spirits market. This advantage enabled the group to be able to deeply understand how a Japanese consumer reacts to a product or to a trend. It is the reason why Pernod Ricard’s implementation has been an upward trend and embodies one of internalization success example.

Sara Faraj / Clément Cheiroux / Louis-Maxence Harb / Robin Sbai / Simon Coin / Hadrien Breux

Group 14 – CFM Sophia – Lego success story

The Lego Group is a Danish company producing toys based on elementary bricks to assemble. In 2014, Lego became the first toy manufacturer in the world after having been 2nd in 2013 and 4th in 2011.

It hasn’t always been like this. In 2004, it was even very close to bankruptcy after a too ambitious diversification strategy. In 1983, the company had diversified into theme parks, merchandise, and products a bit distant of the main entertainment produced by the construction and creative play.

Therefore, massive losses and decline in sales were recorded at the end of 2004, which led to the arrival of a new CEO, Jorgen Vig Knudstorp, former manager of Lego’s internal strategic planning unit. At this point, his role was to innovate the Lego business model in four key dimensions:

–          Reduction of the product offer (number of inputs used for Lego products)

–          Restructuring of the supply chain by substantial outsourcing and offshoring

–          Opening up to customers by creating user communities

–          Engaging in joint new product development efforts with major customers like Wal Mart and Toys’r’Us

As a result, Lego has known a double-figure growth in almost all the markets until 2013.

Last year, the company invested DKr2.6 billion ($478m) in production facilities and added more than 1,300 full-time workers, a 13% increase. It is expanding two existing factories – in Kladno in the Czech Republic and Monterrey in Mexico – and building two new ones – in Nyiregyhaza in Hungary and, most important of all, in Jiaxing in China.

Its management is being globalized too, with regional offices being opened in Singapore and Shanghai (as well as in London). The aim is twofold: to replicate in the rapidly growing east Lego’s success in the west; and to transform a local company that happened to go global into a global company that happens to have its head office in Billund (Denmark).

The company is now at an inflection point, building its organizational capacity and embracing globalization, to help it find new sources of growth.*

AMAIS PARIS GROUP 3_ Offshoring of the Boeing 787 is alleged to be absurd

It has been noticed many problems about the Boeing 787, such as brake problems, fuel leaks, windshield cracks, especially the battery fire in 2013, and an emergency landing in Japan which. All these mechanic failures have been the origin of almost 50 aircrafts of 787 being prohibited from flying. Regulators denying flight for aircraft of the same model is unusual, this is the first time since 1979. The boeing engineers  claimed the energy efficiency as a key factors; however, using the innovative lithium batteries lead to an easy overheat and causing  fire  and after burning, it will produce oxygen ,and it is difficult to extinguish.

Actually, Boeing 787 program has been higher than the budget of billions dollars, Delivery schedule has been delayed by at least seven times. The first aircraft delivery was delayed for more than three years. In fact, they have sold 848 aircraft, but the company only delivered 6%. While these issues seem very serious, but they are only the symptoms of a deeper disease, the diseases over the past few decades have tortured American economy. Offshoring is not something easy, it involves a number of critical issues which are likely to affect the survival of the company, the industry and the entire economy.

This picture shows us how complex is it supply chain


Then the biggest problem of Boeing is not only the off shoring of production process but a large number of engineering designs. Off shoring companies work in several levels, but they should be designed to consistency, so that  components can  coincide with each other, but Boeing’s parts components cannot be assembled together. Many companies tend to be designed here, and be produced in other place. Eventually, as Pisano and Shih mentioned, weakness innovative, increasing the risk.

Offshoring  can reduce the cost if the offshoring decisions are reasonable, but it may be risky and cost more.  As Gary P. Pisano and Willy C. Shih said: “Offshoring has been destroying the various industries of United States, stifle innovation and undermine America’s long-term competitiveness.” Manufacturing recession in particular region will have a ripple effect.