COUNTRY SPOTLIGHT : SRI LANKA

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1 COUNTRY SPOTLIGHT : SRI LANKA Cultivating Strategic Alliances to Drive Improvements and Enhance Profitability Felix A. Fernando

2 A Continuum of Cooperative Arrangements Mergers and Acquisitions Joint Ownership Joint Venture Formal Cooperative Venture Informal Cooperative Venture Vertical Integration Market Transactions High Interdependence Low Interdependence Source: Lorange and Roos 1991

3 Joint Ventures Legal arrangements where ownership and management of an organization are shared by more than one organization (D. Sparling, R. Cook) Strategic Alliances Flexible cooperative arrangements between organizations, from fluid, short term cooperation to long term, formal agreements (Das & Teng, 1998)

4 A Continuum of Cooperative Arrangements Mergers and Acquisitions Joint Ownership Joint Venture Formal Cooperative Venture Informal Cooperative Venture Vertical Integration Market Transactions High Interdependence Low Interdependence Source: Lorange and Roos 1991

5 Why Strategic Alliance? Strategic Access to new markets Firm core competences Managerial Reduce supply base Stabilise supply/demand Personal loyalty Motives for Alliance Financial Cost savings Reduced prices Leverage capital Technical Access to R&D Access to specialist skills Whipple & Gentry (2000)

6 Strategic Alliances Synergizing Resources, Expertise, and Capabilities Gain competitive advantage through access to your partner s resources Joint marketing & promotion Joint selling or distribution 0% 20% 40% 60% 80% Technology licenses R & D contracts Design collaborations Production arrangements Business expansion abroad Outsourcing Other alliances Involvement of fast-growing companies in different types of strategic alliances On an average, each fast-growing company is engaged in 5 different types of strategic alliances. Source: Trendsetter Barometer, PWC

7 Lessons from Toshiba Strategic Alliances as a Key Element of Strategy Toshiba s approach: To develop strategic alliances with partners for different technologies because a single company cannot dominate any technology or business by itself. Toshiba s Selected Alliances Company GE Apple Computers Microsoft Motorola IBM, Siemens Technology Light bulb filaments Multimedia computer products Hand held computer systems Memory chips Semiconductors

8 Starbucks with Barnes and Nobles bookstores (1993) - provide in-house coffee shops with Pepsico (1996) to bottle, distribute and sell the popular coffee-based drink, Frappacino. with United Airlines alliance - their coffee being offered on flights with the Starbucks logo on the cups with Kraft foods - Starbucks coffee being marketed in grocery stores. an alliance with the NAACP (2006) - to advance the company's and the NAACP's goals of social and economic justice.

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13 Omega Line (Calzedonia Sri Lanka) with Teejay Calzedonia, Italy Euro 2 billion, 42 countries and over 4,200 retail outlets Brands Intimissimi and Tezenis 7 factories in Sri Lanka under Omega Line Group Teejay Omega Line partnership began in 2005

14 Omega Line with Noyon Lanka Started in 2011 Noyon Lanka is the only knitted lace manufacturer in South Asia producing multiple forms of lace Omega Line invested in machinery (w/out equity) Investment recovered thru installments (based on sales) Priority customer, speed, less cost for Omega Line Increase sales and infusion of capital to Noyon

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16 Apparel Industry of Sri lanka 47% of Total Exports 52% of Industrial Exports Employment Direct 300,000 Indirect 600, % of labor force 350 Garment factories 16 Fabric & Textile manufacturing units Highest per Capita of Apparel Exports in Asia SOURCE - EDB

17 The 200 Garment Factory Program (GFP) High unemployment in the south of the country Decentralize the industry away from the Western Province and its capital Colombo Programme launched in 1992 Initiative was personally supported and promoted by the President Garment industry became the country s major manufacturing industry, highest foreign exchange earner, improved social conditions in the rural areas Private companies successfully contributed towards the socio economic development of the country A successful public-private sector co-operation programme

18 MAST Industries, Inc. and Sri Lanka Martin Trust and Dena Trust started MAST in Canton, MA, 1970 One of the world's largest contract manufacturers, importers, and distributors of apparel, including sportswear for brands Once a wholly owned subsidiary of Limited Brands (renamed L Brands) 51% stake in Mast was sold to private equity firm Sycamore Partners in - November 2011 L Brands continues to own Mast's separate sourcing operation for - Victoria's Secret, La Senza, and Bath & Body Works. Mast has manufacturing operations and joint ventures in more than a dozen countries including China, Israel, Mexico, and Sri Lanka.

19 BUILT ON TRUST MARTIN TRUST

20 WHERE ON EARTH IS SRI LANKA?

21 WORLD OF PARTNERSHIPS Ashroff Omar of Brandix (the factory then known as Lux Shirts) JV LM (Lux-Mast) Apparel A stake in Mahesh Amalean s 26-machine Sigma factory Tie-up with Ajith Dias s Jewelknit Group with 3 factories Eden Fashions, Gan Island, Maldives with all 3 above

22 How Sri Lanka benefited Introduced new product lines Influenced in attracting best of the best international partners Strengthened backward linkages by setting up local base for RM Attracted investments in other accessories; thread, elastics, buttons Introduction of advanced technology An environment that is ethical, transparent and geared towards long term sustainability

23 US$ mn Exports % Export Earnings : Textiles & Apparel Year % of Industrial Exports % of Total Exports

24 Export Value in US$ Bn Export Turnover from 2001 to Year

25 BRANDIX now Series of mergers and acquisitions First dyeing plant for Express brand First advanced washing plant for Abercrombie & Fitch Running one of the world s fastest delivery program for Victoria s Secret Over 47,000 employees 42 manufacturing facilities in Sri Lanka, India & Bangladesh US$ 750 mn turnover in Sri Lanka

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27 MAS now Set up JV factories with customers and suppliers Customers transferred the sourcing, product development and design Opened design houses in London, New York and Hong Kong Over 80,000 employees 48 manufacturing facilities in 15 countries US$ 1.6 bn Revenue

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29 17 Strategic Partnerships EME Holdings, S.A de C.V, Mexico Ets Lucien Noyon Et Cie, France Groupo Deal, S.A de C.V, Mexico Hogwarts Ltd, HK Ling Chee Yan, Samuel, HK MAST Industries, Inc, USA New Impact (Pvt) Ltd Singapore NSL Infratech (Pvt) Ltd, India Prym Intimates Group Ltd, HK Regina Pacific Investment Ltd, Mauritius Speedo International Ltd, UK Stretchline (UK) Ltd, UK Tradecard, Inc, USA (Also known as GT Nexus) Triumph International Overseas Ltd, HK Ultimo Brands International Ltd, UK Wind force (Pvt) Ltd, Sri Lanka Brandot International Ltd, USA

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31 Your ability to succeed will be defined by your ability to identify ethical partners, grow with them and provide the conditions that sustain the partnership. Martin Trust

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