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    Case Study: Water- the oil of the 21stcentury

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    tarek_admin
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    Case Study: Water- the oil of the 21stcentury

    Post  tarek_admin on Sun Mar 25, 2012 9:15 pm

    Water- the oil of the 21stcentury

    Multinational enterprises (MNE): A Multinational enterprises (MNE) is a company that is headquartered in one country but has operations in one or more countries. Sometimes it is difficult to know if a firm is an MNE because multinationals often downplay the fact that they are foreign-held. For example, Water- the oil of the 21stcentury is US.
    Now we will discuss about Water- the oil of the 21stcentury.


    1. Why did Thames Water become Multinational enterprises (MNE)? Why did Vivendi buy Seagram?

    Ans:

    Thames Water becomes Multinational enterprises (MNE):

    Thames Water plc is the largest British company. In October 2000, Thames Water was acquired by the Giant German utility, RWE, for $ 14million.The Thames Water senior management team has been left in place to pursue international operations and the Thames Water brand name has been retained by RWE.
    As the activities of the core water utility division of Thames Water are still subject to regulation, the company made a earlier strategic decision to focus its growth on the no regulated water service business, and on international expansion. It now has major projects in china, Australia, turkey, Indonesia, Malaysia, the Philippines and Thailand.

    Vivendi buy Seagram:

    Vivendi moved in 2000 to become a global media, communications, and entertainment MNE by its purchase of Seagram. In contrast, the CEO of Suez, Gerard Mestrallet, failed in venture with Eon of Germany, and Air liquid. Vivendi-Universal was formed with the merger of Vivendi, Canal, and Canadian company Seagram. After the merger Seagram sold its spirits and wine business and Vivendi divested itself from AOL.


    2. In general, why do the three major European water companies engaged in foreign direct investment to expand their operations to North America and other parts of the world?

    Ans:

    The three major European water companies engaged in foreign direct investment to expand their operations:
    Vivendi water, Ondeo and Thames water are all aggressively pursuing contracts in Eastern Europe, Asia and Latin America. These companies, all from the EU, are faced with structured domestic markets under strict government regulations and are thus increasingly relying on foreign markets to maintain profits.
    Emerging and developing markets provide water MNEs with opportunities to develop water infrastructure in untapped markets. In 2000 an estimated 1 billion people in the world’s less developed economies lacked access to clean drinking water and 3 billion needed improved accesses to sewage facilities. Expanding operations to developing nations has not always come without bumps.
    In 1999, Thames water the then Suez Lyonnais des Eaux had to renegotiate their contract for the Jakarta water supply after the Indonesia president was removed office. They did better than Vivendi environment, which lost its contract for the water supply in tucman city, a northern Argentinean city, at about the time.
    Because of such political risk, as well as the major capital costs involved, it is common in large projects for a consortium of water companies to be formed.
    For a Buenos Aires projects, Vivendi has partnered with Agbar, its main rival Suez Lyonnais, Anglican water, Banco de Galicia and other firms.





    3. What is the strategic management philosophy of Water MNEs? Does it vary from the French to the British?

    Ans:

    The strategic management philosophy of Water MNEs:

    Multinational enterprises are different from companies that confine their activities to the domestic market in that MNEs make decisions based on what is based for overall company, even if this means transferring jobs to other countries and cutting back the local workforce. MNEs also hire large numbers of workers in overseas countries.
    The Water market is dominated by companies that have the ability to provide infrastructure to treat and distribute water at reasonable prices. Over the years, governments scrambling to find funds to provide water to an ever increasing population have handed over the management of water provision to private hands.

    It varies from the French to the British:

    In an Australian project in Adelaide, Thames Water supplied the technical expertise in collaboration with a French partner. The French did the political lobbying, and their skill in this was reflected by winning the contract shortly after the French government conducted a series of nuclear tests in the pacific which were strongly opposed by the Australian and New Zealand governments.
    The political image of Thames Water in Asia was not affected by this association and the British company tends to have “neutral” political risk exposure.
    In 1999 Thames Water started moving into the huge US water market. It acquired a New Jersey water utility.
    Thames Water under CEO, Bill Alexander; has developed a portfolio of international operations which build on its core skill, and are closely integrated with its basic British utility business.


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