ISBInsight | Research Magazine | Indian School of Business (ISB)

ISBInsight is the Flagship Research Periodical of the Indian School of Business

  • Home
  • Magazine
    • Current Issue
    • Archives
  • Topics
    • Entrepreneurship
    • Finance
    • Innovation
    • Public Policy
    • Strategy
    • Family Business
    • Business Analytics
    • Infrastructure
    • Philanthropy
    • IT Services
    • Technology
    • Personnel Management
    • Governance
    • Operations
    • Human Capital
    • Media
    • Leadership Management
    • Leadership
    • Manufacturing
    • Health Care
  • Management Briefs
    • Latest Issue
    • Previous Issues
  • About Us
    • About Us
    • Editorial Team
    • Contact Us
No Result
View All Result
  • Home
  • Magazine
    • Current Issue
    • Archives
  • Topics
    • Entrepreneurship
    • Finance
    • Innovation
    • Public Policy
    • Strategy
    • Family Business
    • Business Analytics
    • Infrastructure
    • Philanthropy
    • IT Services
    • Technology
    • Personnel Management
    • Governance
    • Operations
    • Human Capital
    • Media
    • Leadership Management
    • Leadership
    • Manufacturing
    • Health Care
  • Management Briefs
    • Latest Issue
    • Previous Issues
  • About Us
    • About Us
    • Editorial Team
    • Contact Us
No Result
View All Result
No Result
View All Result

Moser Baer and OM and T Choosing a Strategic Partnership Mode

Past Issues Technology Media Oct-Dec 2015 Features
Published on   Dec-02-2015

Kannan Srikanth , Sonia Mehrotra , Priyank Arora , Geetika Shah
2019/02/15
in Past Issues, Technology, Media, Oct-Dec 2015, Features
Share on FacebookShare on Twitter

In the case study, “Moser Baer and OM&T: Choosing a Strategic Partnership Mode,” set in the optical storage media industry in 2006, the authors highlight the uncertain dynamics within a high-growth, technology intensive industry. The case allows students to put themselves in the shoes of Deepak Puri, the Founder of Moser Baer, and the management team, as they choose between organic vs inorganic growth options. Students get an opportunity to evaluate the costs and benefits of different modes of inorganic growth in order to identify the best option for strategic partnership in a given context.

In December 2006, the management of Moser Baer India Limited (MBIL), was considering pursuing a strategic partnership with Optical Media and Technology (OM&T). They also had to decide on the form this strategic partnership should take – a technology licensing agreement, a strategic alliance by taking a minority equity stake in the company or a complete acquisition of the company.

MBIL was India’s largest and the world’s third largest optical storage media manufacturer with a presence in over 82 countries, serviced through marketing offi ces in India, the United States and Europe. In 2006, MBIL had also entered the Photovoltaic (PV), cells industry and aimed to succeed in this new business by leveraging its core process strength in “coating thin films on substrates.” OM&T was based in the high technology cluster in Eindhoven, the Netherlands, and was known as a technology leader in the industry for its prototyping, standardisation and pilot production of advanced optical disc formats such as Digital Versatile/Video Disc (DVD), and Blue Laser Discs (Blu-ray discs).

Evolution of Optical Discs

In the early 1970s, engineers at Philips Research Laboratories began using video laser disc technology to experiment with audio-only optical discs. In 197980, Sony collaborated with Philips and produced a new digital audio disc or Compact Disc (CD), for the fi rst time. By the early 1990s, a user-recordable CD for data storage, the CD-R, was introduced which became the standard for exchanging and archiving computer data and music.

A second-generation optical disc format – the Digital Video/Versatile Disc (DVD), was subsequently launched in Japan (1996), the United States (1997) and Europe (1998). The DVD, with its higher storage capacity, rapidly replaced the videocassette recorder for playback of standard defi nition video. The third-generation optical discs that followed were the Blu-ray discs and the HD-DVDs. The development of High Defi nition/Density (HD), technology created the need for a storage format with greater capacity. However, for the third-generation optical discs, no single standard format had been established. Two camps had formed in the industry – Bluray and HD-DVD. The HD-DVD camp, led by Toshiba, had exclusive support from companies such as Intel, Microsoft, Sanyo, NEC, Kenwood and Memory Tech Corporation. Heading the Blu-ray camp was Sony, which was supported by Apple, Dell, Hitachi, Mitsubishi, Philips, Sharp, Pioneer and Thomson. The movie studios were also divided in their backing of the different formats. Fox, Disney, Lions Gate, MGM and Sony had aligned with Blu-ray, whereas Universal Studios had signed on with HD-DVD. Paramount and Warner Bros supported both the formats. Talks between the two camps continued into 2005, at which point it became apparent that marketplace dynamics would determine the winning format.

The case study allows readers to put themselves in the shoes of MBIL and get an opportunity to evaluate the costs and benefi ts of different models of inorganic growth and best options for strategic partnerships.
OM&T was based in the high technology cluster in Eindhoven, the Netherlands, and was known as a technology leader in the industry for its prototyping, standardisation and pilot production of advanced optical disc formats such as Digital Versatile/Video Disc (DVD), and Blue Laser Discs (Blu-ray discs).

While both formats were similar in offering much larger data storage capacity and clearer picture, they were technically incompatible. Manufacturing of Blu-ray discs required either new or modified production lines. Also, Bluray discs were costlier than HD-DVDs. However, at comparable volumes, Bluray disc production costs were within 10 percent of DVD production.

Optical Storage Media Industry

The optical storage media industry was made up of two types of players: manufacturers of optical storage media (such as MBIL, TDK Corporation, etc.) and companies that purchased and marketed these products (such as Universal Studios). Optical discs were more or less commodity products, similar to electronic components such as memory chips. The industry was marked by rapid technological advances, with new format products coming to market every five years.

Original Equipment Manufacturers (OEMs), of optical discs such as MBIL focused on low ost manufacturing and lacked the technological capabilities to develop new formats. Yet, given the high clock-speed of the industry, the success of an optical media manufacturing firm was highly dependent on its flexibility to adapt to the new technology format and quickly ramp up manufacturing volumes.

MBIL – Growth and Diversifi cation

MBIL was founded in 1983 as a time recorder unit by Deepak Puri and had soon entered the data storage industry in 1985 with the production of 5.25 inch fl oppy diskettes. By 1987, it had begun manufacturing 3.5 inch micro fl oppy diskettes (MFDs). In 1999, MBIL entered the optical media storage market and established a 150 million unit capacity plant to manufacture CD-Rs and CD-RWs. By 2006, the company had three state-of-the-art completely integrated manufacturing facilities.

The third-generation optical discs that followed were the Blu-ray discs and the HD-DVDs. The development of high defi nition/density (HD) technology created the need for a storage format with greater capacity. However, for the third-generation optical discs, no single standard format had been established. Two camps had formed in the industry – Blu-ray and HD-DVD.

In addition, MBIL had started volume shipments of third-generation high-density formats such as HDDVDR and ventured into the production of Blu-ray discs with its patented technology. The company had signifi cantly consolidated its position in the global optical media storage markets and had emerged as among the three largest producers across both DVD and CD formats. The Indian market was among the fastest growing markets worldwide for all formats of optical media discs, and Moser Baer had captured over 50 percent share of this market.

Recognising that cost competitiveness and flexibility in switching to new formats were key to survival in the optical storage media manufacturing industry, MBIL had invested significantly in process R&D to enhance its capabilities on these fronts.

Also, due to the cyclical nature of the optical media manufacturing business and the uncertainty associated with third-generation optical media, MBIL had explored diversification opportunities. In 2006, MBIL ventured into the manufacture of Photovoltaic (PV), cells. This business was identifi ed as technology driven, therefore, the company anticipated a successful entry based on its core strengths. In addition, in December 2006, MBIL also entered the entertainment space, specifically the home video market, with the launch of Moser Baer Entertainment Ltd.

Decision Time at MBIL

MBIL was a competent OEM of optical discs with a focus on low-cost manufacturing. The executives at MBIL were aware that optical discs were primarily commodity products. The external market dynamics and emergence of a range of hardware drives supporting HD content made it obvious that it was just a matter of time before the next generation optical storage media would be in the markets. MBIL, to gain first mover advantage and consolidate its market share, had to take steps to upgrade its technological and manufacturing capabilities.

A strategic partnership with OM&T would provide MBIL with HTL recording technology capabilities for Blu-ray disc production. However, the compatibility of MBIL’s existing production lines with the requirements of the new technology for Blu-ray discs was a challenge. In addition, OM&T’s expertise was what MBIL could leverage for its new PV cell business . Also, OM&T’s technical knowledge pool, in terms of experienced scientists and engineers, could further help MBIL strengthen its position as a technology company.

On refl ection, it was a big investment for MBIL. Deepak Puri and his team had to decide – and decide quickly – the options, apart from doing nothing, were a technology licensing arrangement with OM&T, an alliance with MBIL (taking perhaps a minority equity stake in OM&T) or an outright acquisition of OM&T.

ABOUT THE RESEARCH

Moser Baer and OM&T: Choosing a Strategic Partnership Mode by Kannan Srikanth, Sonia Mehrotra, Geetika Shah, and Priyank Arora is an ISB case published and distributed as part of ISB’s case collection in the Harvard Business Publishing catalogue. The case was the winner of the “Bringing Technology to Market” category award at the European Foundation for Management Development (EFMD) Case Writing Competition 2014, in Brussels, Belgium.

About Authors


Notice: Trying to get property 'ID' of non-object in /var/www/html/wp-content/plugins/easy-author-image/easy-author-image.php on line 209

Kannan Srikanth


Notice: Trying to get property 'user_description' of non-object in /var/www/html/wp-content/plugins/custom-shortcodes-dri/custom-shortcodes-dri.php on line 131
Kannan Srikanth is Associate Professor of Strategic Management at the Lee Kong Chian School of Business, Singapore Management University.


Notice: Trying to get property 'ID' of non-object in /var/www/html/wp-content/plugins/easy-author-image/easy-author-image.php on line 209

Sonia Mehrotra


Notice: Trying to get property 'user_description' of non-object in /var/www/html/wp-content/plugins/custom-shortcodes-dri/custom-shortcodes-dri.php on line 131
Professor, Centre of Excellence for Case Development at Welingkar Institute of Management Development and Research, Bangalore


Notice: Trying to get property 'ID' of non-object in /var/www/html/wp-content/plugins/easy-author-image/easy-author-image.php on line 209

Priyank Arora


Notice: Trying to get property 'user_description' of non-object in /var/www/html/wp-content/plugins/custom-shortcodes-dri/custom-shortcodes-dri.php on line 131
Priyank Arora is a Doctoral Candidate in the Operations Management area at the Scheller College of Business,Georgia Institute of Technology


Notice: Trying to get property 'ID' of non-object in /var/www/html/wp-content/plugins/easy-author-image/easy-author-image.php on line 209

Geetika Shah


Notice: Trying to get property 'user_description' of non-object in /var/www/html/wp-content/plugins/custom-shortcodes-dri/custom-shortcodes-dri.php on line 131
Geetika Shah is Associate Director - Content Development and Training at the Centre for Learning and Management Practice (CLMP) at ISB

Related Posts

Latest Highlights in Corporate Finance Research

Latest Highlights in Corporate Finance Research

Are Strong Intellectual Property Rights the Future of Innovation in India?

Are Strong Intellectual Property Rights the Future of Innovation in India?

A Short Guide to Smart Cities in India

A Short Guide to Smart Cities in India

Access, Empowerment and Cancer Care

Access, Empowerment and Cancer Care

2018-11-30

We’re on Mobile! Download our app now

Get it on Google Play Get it on App Store

Subscribe for latest insights

ISBInsight content is free to read. To receive Management Briefs in your inbox, and other special content for subscribers, please sign up.

  • About Us
  • Contact
  • Sitemap

About ISBInsight

ISBInsight is the flagship research periodical of the Indian School of Business (ISB).

It features research-driven insight and evidence-informed opinion for practitioners, with a focus on Indian and emerging markets.

ISSN: 2582-1180 (Online)
Publisher:
Indian School of Business
Gachibowli, Hyderabad
Telangana - 500 111

© 2018 – Indian School of Business (ISB).

Privacy PolicyTerms of use

No Result
View All Result
  • Magazine
    • Current Issue
    • Archives
  • Topics
    • Innovation
    • Public Policy
    • Strategy
    • Finance
    • Entrepreneurship
    • Family Business
    • Infrastructure
    • IT Services
    • Philanthropy
    • Technology
    • Sales and Marketing
    • Personal Effectiveness
    • Governance
    • Operations
    • Human capital
    • Media
    • Leadership
    • Leadership and personal effectiveness
    • Manufacturing
    • Healthcare
  • Management Briefs
    • Latest Issue
    • Previous Issues
  • About Us
    • About Us
    • Editorial Team
    • Contact Us

© 2018 - ISBInsight - Flagship Research Periodical of the Indian School of Business (ISB).

wpDiscuz