09-075
August 25, 2009
What’s Driving Porsche?
Rebecca Henderson, Cate Reavis
There are some customers who love the idea that an engineer working on their project in the
afternoon was the same guy working on a 911 motor in the morning.
—Managing Director, Porsche Engineering Group 1
We were working with Volkswagen on the next generation of the Cayenne (which shared its structure
with the VW Touareg and Audi Q7) and I wanted a clear connection to safeguard Porsche’s interests.
We could not do this alone.
—Porsche CEO Wendelin Wiedeking, on decision to acquire VW 2
In early March 2008, Porsche’s supervisory board, which included the chairman of the Volkswagen
Group, Ferdinand Piëch, agreed to raise its holding in Volkswagen from 31% to 50% giving it a
majority stake.
Porsche’s takeover of VW was seen by many as a wise move for the small, independent car company
that, unlike rival brands Jaquar, Ferrari, Lamborghini, and Lotus, had managed to avoid being
gobbled up by the auto industry’s behomoths the likes of General Motors, Chrylser and Ford. There
was, however, a key strategic question about Porsche’s acquisition of VW that was not receiving a lot
of press: Would the long-term stability of Porsche’s engineering and design prowess be at risk by
bringing VW “in-house”?
1
Scott Miller, “Road More Traveled,” The Wall Street Journal, August 21, 2002.
2
Ray Hutton, “Porsche Set to Take the Wheel at VW,” The Sunday Times, October 14, 2007.
This case was prepared from published sources by Cate Reavis under the supervision of Professor Rebecca M. Henderson.
Professor Henderson is the Eastman Kodak Leaders for Manufacturing Professor of Management. This case is based on
research conducted by Julien Heider, Jody Muehlegger and Konrad Haunit (MIT Sloan MBAs, Class of 2008).
Copyright © 2009, Rebecca M. Henderson. This work is licensed under the Creative Commons Attribution-Noncommercial-No
Derivative Works 3.0 Unported License. To view a copy of this license visit http://creativecommons.org/licenses/by-nc-nd/3.0/
or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
Engineering and design were considered the hallmarks of Porsche’s competitive advantage, and rather
than keeping its R&D under tight wraps, Porsche shared its R&D team of 2,300 engineers with
outside companies, and had built a lucrative engineering services business based on this model.
Through its 100% wholly-owned customer engineering development company, the Porche
Engineering Group (PEG), Porsche made its wide-ranging expertise in the development and
production of vehicles available to clients from a variety of industries. PEG was considered Porsche’s
“secret weapon, enabling it to employ more engineers than if it worked alone, giving it an edge in
product development.” 3 Porsche’s small size and market niche made it easier for other auto
manufacturers to trust that Porsche would not use the technology knowledge attained through its
engineering services division to compete head-to-head.
Bringing the R&D functions of the two firms too close together could potentially weaken Porsche
engineers’ sense of belonging and demotivate them. While Porsche was a company that thrived on
healthy profit margins, VW’s business model was all about volume. Furthermore, if Porsche
engineering was too closely associated with the entire VW portfolio, the company could lose its
ability to sell external engineering to other OEMs concerned that Porsche would be sharing strategies
and innovations with VW. The question facing Porsche’s senior leadership was how to ensure that the
integration of VW did not negatively effect Porsche’s outside engineering business.
Porsche
Porsche was founded in 1931 by Ferdinand Porsche, along with his son and son-in-law, Anton Piëch,
father of VW Chairman Ferdinand Piëch. Known in its early days as the Porsche Engineering Office,
Porsche did not start off as an automaker, but rather a firm that sold design and engineering services
to other carmakers. In 1934, Adolf Hitler commissioned Porsche to make a “people’s car” or
“volkswagen.” The forerunner to the VW Beetle, the VW Type 60 hit the roads in the mid-1930s, and
in 1938 the first plant dedicated to the manufacturing of the VW was opened. It wasn’t until 1948,
three years after the end of World War II, that Porsche produced its first branded sports car. Within
two years, the Porsche 356 series rolled off the production lines. 4
By 2007, Porsche was the world’s most profitable automaker on a per unit basis, 5 a feat that was
especially impressive considering it produced just over 100,000 automobiles annually. The
company’s recorded average revenue per car of €62,568 ($91,974) dwarfed that of Mercedes’s
€40,445 ($59,454), BMW’s €34,766 ($51,106) and was nearly 2.5 times Audi’s €27,500 ($40,425). 6
In an industry where scale was usually considered a prerequisite for reducing production costs, the
company’s operating margins of nearly 20%, double those of Toyota, 7 made Porsche an exception to
the rule. In 2007, Porsche’s income topped $9.4 billion on revenue of $10 billion. (See Exhibit 1 for
3
Bret Orekson, “Engineering Is Porsche’s Secret Weapon,” Automotive News, January 15, 2001.
4
Adler, Dennis, Porsche: The Road from Zuffenhausen, 2003, p. 76.
5
Jeremy Cato, “Porsche Revs Up for Explosive Growth,” The Globe and Mail, February 22, 2007.
6
€1 = US$1.47 (December 31, 2007)
7
Gail Edmondson, “Pedal to the Metal,” BusinessWeek, September 3, 2007.
AUGUST 25, 2009
2
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
select financials of Porsche and the top automakers.) Ironically, over 60% of Porsche’s pre-tax
earnings came from trading derivatives. All of the options trading Porsche was involved in pertained
to its stake in VW. Porsche used the options to hedge against the likelihood that VW’s shares would
rise after its interest was made public. 8
Porsche was renowned for the quality of its products. For three consecutive years (2006-2008),
Porsche was the top ranking brand in J.D. Power and Associates “Initial Quality Study” (IQS). The
study ranked brands by the fewest problems per 100 vehicles. Porsche spent about 12% of revenue on
R&D compared to an industry average of 4% to 6%. (See Figure 1.) Approximately 19% of Porsche
employees worked in its R&D facility compared to 6.6% at Volkswagen.
R&D Expenditure as % of Revenue for Select Auto Makers (2007)
300,000
14
250,000
12
8
150,000
6
100,000
%
10
200,000
Revenue
% on R&D
4
Porsche
Fiat Group
Automobiles
Nissan
Honda
0
Ford
(automotive)
0
VW
2
GM
(automotive)
50,000
Toyota
US$ Millions
Figure 1
Source: Annual Reports.
Turnaround
Porsche hit a speed bump in the early 1990s when production processes described as “fat and
wasteful” 9 and a weak U.S. economy sent orders plummeting. Between 1986 and 1993 Porsche’s
sales had fallen from more than 50,000 units to 14,000 units. 10 The company was teetering on the
verge of bankruptcy, and there were whispers about a possible takeover.
8
Richard Milne, “Share Options Put Porsche on a Faster Path to Profit,” Financial Times, November 12, 2007.
9
Tom Mudd, “Back in High Gear,” Industry Week, February 21, 2000.
10
Ibid.
AUGUST 25, 2009
3
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
Newly named Porsche CEO Wendelin Wiedeking orchestrated a turnaround focused on building new
core competencies in lean manufacturing and synchronized engineering. In the past, Porsche’s
celebration of craftwork encouraged individuals to work on their own processes rather than
collaborating with the entire production line. But this soon became a significant handicap for the
company. Engineers were tempted to ignore the need for cross-department cooperation on Porsche’s
own car designs while making handsome profits for Porsche on outside sales of engineering
services. 11 As one industry observer put it, “Porsche didn’t have a full-fledged, adult-rated
simultaneous engineering process in place. It was still struggling to completely shed the rigid,
sequential system upon which it had relied for decades.” 12 Wiedeking introduced lean manufacturing
and the team concepts and processes followed by industry giants Toyota, Nissan and BMW.
Part of the turnaround included the decision to extend Porsche’s product line beyond the sports car
niche it had dominated for many decades. As Wiedeking explained, “Our strategy is to go beyond the
one-dimensional product range we have had so far.” 13 As Figure 2 shows, Porsche’s production and
sales doubled in just six years as did its revenue through organic growth.
Figure 2
Porsche Sales, Production and Revenue Results (1999-2008)
8,000.0
120,000
7,000.0
100,000
Units
80,000
5,000.0
4,000.0
60,000
3,000.0
Eur million
6,000.0
Production
Sales
Revenue
40,000
2,000.0
20,000
1,000.0
2008
2007
2006
2005
2004
2003
2002
2001
2000
0.0
1999
0
Source: Porsche Annual Report.
In 2003 Porsche introduced the Cayenne, an SUV which was entering into a crowded field of
competitors inhabited by Acura, Audi, BMW, Mercedes, Land Rover, Volkswagen, Volvo, Lexus,
and Infiniti. The year the Cayenne was introduced, Porsche’s vehicle production shot up from 50,000
11
Womack, James and Daniel Jones, Lean Thinking: Banish Waste and Create Wealth in your Corporation, 1996, p. 192.
12
Christopher Jensen and Don Sherman, “The Porsche Process,” Automotive Industries, November 1, 1997.
13
Brandon Mitchener, “Rebounding Porsche Seeks to Shift More Output Abroad,” The Wall Street Journal Europe, December 6, 1995.
AUGUST 25, 2009
4
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
to 75,000 units a year. 14 The Cayenne, produced in collaboration with VW at VW’s factory in
Slovakia and which shared the same frame and doors as VW’s Touareg, was derided by many as a
“corruption of the brand.” 15 In fact the day after Porsche unveiled the first Cayenne prototype, the
company’s share price fell more than 4%. 16 Porsche CEO Wiedeking was aware of the risk the
company was taking in being so closely associated with a mass production carmaker that produced a
cheaper SUV. 17 It was a risk he believed would pay off down the road.
Porsche’s first foray outside of its sports car market was not an immediate hit. The early version of
the Cayenne was plagued with quality problems earning it the least reliable rating from Consumer
Reports magazine. In its efforts to correct problems with the Cayenne, the company went through a
cultural alignment of sorts. As one industry observer noted, “Sports car engineers didn’t quite
understand the demands of the many female buyers who ended up making the Cayenne their daily
runabout.” 18 One of those demands was having the capability to unlock the Cayenne from a much
further distance. Porsche key fobs were originally designed to unlock sports cars at a very close
distance. Porsche went to work to fix this defect and other more serious problems, and by 2006 the
Cayenne occupied the No. 1 spot in the IQS which measured buyer satisfaction in the first 90 days of
ownership. 19
In 2005, Porsche announced that it would be making another move outside its sports car niche. In
partnership with VW, Porsche would produce a luxury sedan called the Panamera (named after a
Mexican long-distance car race 20 ) which would compete against models produced by Mercedes,
Aston Martin, and Audi. The Panamera was being built in a low-cost part of East Germany and was
scheduled to launch in 2010. 21
Despite the significant changes to the company’s product line, Porsche’s outside engineering
business, PEG, remained focused on selling services based on Porsche’s strength in engineering.
Outside Engineering at Porsche
Providing outside engineering services for carmakers had always been an important part of Porsche’s
business model. While clients owned the research that Porsche conducted on their behalf, Porsche
reserved the right to use the research if the client chose not to, with the understanding that it would
14
Bret Okeson, “Engineering is Porsche’s Secret Weapon,” Automotive News, January 15, 2001.
15
Jeremy Cato, “Porsche Revs Up for Explosive Growth,” The Globe and Mail, February 22, 2007.
16
Scott Miller, “Road More Traveled,” The Wall Street Journal, August 21, 2002.
17
Jeffrey Fear and Carin-Isabel Knoop, “Dr. INg. H.c. F. Porsche AG (A): True to Brand?” HBS Case No. 9-706-018, Harvard Business School Publishing,
2006.
18
Jeremy Cato, “Porsche Revs Up for Explosive Growth,” The Globe and Mail, February 22, 2007.
19
Ibid.
20
Stephen Power, “The Family Porsche,” The Wall Street Journal, July 28, 2005.
21
Jeremy Cato, “Porsche Revs Up for Explosive Growth,” The Globe and Mail, February 22, 2007.
AUGUST 25, 2009
5
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
not be sold to anyone else. Porsche could test or develop ideas that the company would not have been
able to fund on its own. 22
For several decades VW had been Porsche’s main client. In 1949, Porsche and VW signed an
agreement under which Porsche was forbidden to design a car for any other company with an engine
between 1.0 and 1.3 liters through 1974. 23 The formality of this agreement, however, was in dispute
with others characterizing the contract as a “loose agreement” between Ferdinand Porsche and VW’s
chairman in which about 40% of Porsche’s development capacity belonged to VW over a certain
number of years. 24
By the 1980s Porsche was working with a variety of carmakers as well as motorcycle producer
Harley Davidson. In 1991, the company founded Porsche Engineering Services Inc. based outside of
Detroit, Michigan to serve the growing engineering demands of the North American market. As a
wholly-owned subsidiary of Porsche AG, PES was able to work with a wide array of carmakers. As
the CEO of PES explained, “We’re not a competitor to automakers, due to the limited number of
vehicles we produce. But we try to convince them that two OEMs working together, rather than one
OEM and supporters, makes a difference. We understand the fundamentals of automaking.” 25
In 2001, PES became the North American arm of the Porsche Engineering Group. With 400
employees, PEG was based out of Porsche’s R&D center in Weissach, a town of 7,000, 23 kilometers
from Porsche’s sales, marketing and production activities. PEG engineers had direct access to
Porsche’s entire engineering team of 2,300 which was also based at Weissach. To reassure clients that
their projects would remain confidential, Porsche required all visitors to sign a confidentiality
agreement, making them liable if any secrets learned at the Weissach complex were revealed. 26 In
addition, the company not only kept the names of its clients confidential, but it also disguised the
vehicles tested on its private racing track.
PEG worked with virtually every auto maker in the world, with the exception of those that produced
luxury sports cars, and was also involved in projects involving elevators, forklifts, earthmovers, and
artificial knees. 27 While revenues of PEG were not disclosed in Porsche’s annual report, one source
indicated it accounted for 3% of turnover. 28
Of significant help to PEG engineers was a pool of nearly 600 graduate student interns who worked
alongside Porsche’s staff engineers. A budget of $30 million was allocated to finance paid internships
for the students as well as university or institute-based research studies conducted exclusively for
22
Jeff Daniels, Porsche: The Engineering Story, (Somerset, UK: Haynes, 2007), p. 129-131.
23
Randy Leffingwell, Porsche 911: Perfection by Design,” (Osceola, WI: Motorbooks, 2007), p. 68.
24
Ibid.
25
Gary Kobe and Lindsay Brooke, “How’s Outside Engineering,” Automotive Industries, September 1, 1994.
26
Bret Okeson, “Engineering Is Porsche’s Secret Weapon,” Automotive News, January 15, 2001.
27
Ibid.
28
Scott Miller, “Road More Traveled,” The Wall Street Journal, August 21, 2002.
AUGUST 25, 2009
6
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
Porsche. Porsche offered its top interns (typically about 10%) full time jobs, and those students who
did not get a job offer became part of an alumni network that would be called on to provide advice on
research and technology. A student intern cost 15% of what a full-time employee would cost. 29
Competitors and Market
The outsourcing of engineering services for carmakers was a growing industry. Some of the big
players for the automotive industry included Italy’s Stola and U.K.-based Hawtal Whiting and the
two U.S. automotive engineering companies MSX International Inc. and Modern Engineering Inc.,
each of which posted revenues between $100 and $500 million. Lotus Engineering was the only
carmaker with whom Porsche competed for outsourced engineering business.
These firms had seen their share of hard times. In the economic downturns of the early 1990s and
2000s, a lot of outsourced activities were brought in-house again. But by the mid-2000s, many of
these firms had their sights set on the U.S. auto industry where demand for outsourced engineering
was growing in spades due to production challenges and increased market segmentation. Between
1995 and 2005, the number of new car models produced by U.S. automakers grew 50% while the
annual sales per model dropped from 100,000 to 75,000 units. 30 As a CEO of a U.S.-based outside
engineering firm opined: “Outside engineering is a permanent change in the way business is done.
There’s no manufacturing business that needs to be vertically integrated anymore. It just costs too
much.” 31 The CEO of PES echoed this sentiment in 2005: “We’re following our customers’ changes.
The (automakers) have so many niche vehicles, it really compounds their resources. The downsizing
and reduction of engineering means there are gaps in some engineering programs. There are
opportunities for companies like us to provide that support.” 32 As one industry observer noted,
globalization was forcing many automakers to make the difficult decision of “entrust[ing] core
engineering services, and even the complete end-to-end design and development of a vehicle, to firms
with the experience, expertise and sheer innovative talent to help create better products, faster and at
lower cost. 33
Despite the up-tick in demand in the U.S. market, PEG sold PES to automotive supplier Magna
International in 2006 for an undisclosed sum. In commenting on the transaction, a Porsche executive
simply stated, “In the future, we will center all development activities for external customers in our
development centre in Weissach for efficiency reasons.” 34
29
Sigvald Harryson and Peter Lorange, “Bringing the College Inside,” Harvard Business Review, December 2005.
30
Terry Kosdrosky, “Switching Gears Pays Off,” Crain’s Detroit Business, October 10, 2005.
31
Stuart F. Brown, “New Products From Rented Brains,” Fortune, September 4, 2000.
32
Terry Kosdrosky, “Switching Gears Pays Off,” Crain’s Detroit Business, October 10, 2005.
33
Warren Harris, “Engineering Services Outsourcing,” PR Newswire, January 13, 2009.
34
“Magna Buys Porsche’s North American Engineering Services Unit,” Austria Today, August 10, 2006.
AUGUST 25, 2009
7
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
VW Takeover
Porsche made its first move towards VW in 2005 when it acquired a 20% stake igniting a rumor that
its eventual takeover of VW was not an “if” but a “when.” After all, it was no secret that VW was an
important partner and supplier to Porsche. In March 2007, Porsche upped its stake to 31% by paying
€5 billion ($6.6 billion), 35 an investment that was worth €16-17 billion ($23.4 billion) 36 by October
of that same year. 37
On the surface, it appeared as if Porsche and Volkswagen had little, if anything, in common. With
12,000 employees, Porsche was a small independent player in the auto industry focused on the
performance sports car market. It typically sold about 100,000 cars a year at prices that ranged from
$50,000 to more than $150,000. Historically, it had had few if any direct competitors. Other high-end
sports car manufacturers like Ferrari, Maserati and Lamborghini never had the production numbers to
threaten Porsche’s sales. Companies like Mercedes Benz, BMW and Audi each produced more than
10 times the number Porsche did but for a wide range of vehicles outside the sports car market.
The Volkswagen Group sold more than 6 million cars a year. With 2007 revenue topping $160 billion
(Figure 3) and 340,000 employees, it was the world’s fourth largest carmaker (based on units sold)
with a portfolio of eight brands that included Audi, Bentley, Lamborghini, and truck manufacturer
Scania, with prices ranging from $18,000 to $250,000. It wasn’t until the late 1990s that VW began
moving up-market purchasing Rolls-Royce, and Italian sports carmakers Lamborghini and Bugatti all
in one year. 38
Figure 3
Revenue and Net Income for Select Automakers, 2007 (US$ millions)
300,000
US$ Millions
250,000
200,000
150,000
100,000
50,000
0
-50,000
Revenue
Net Income
Toyota
GM
(automotive)
VW
Ford
(automotive)
Honda
Nissan
Fiat Group
Automobiles
Porsche
262,394
180,000
160,285
154,400
121,200
108,242
39,433
10,060
17,146
-39
6,030
-5
6,060
4,823
1,181
9,400
Source: Annual Reports.
35
€1 = US$1.32 (March 1, 2007)
36
€1 = US$1.42 (October 1, 2007)
37
Ray Hutton, “Porsche Set to Take the Wheel at VW,” The Sunday Times, October 14, 2007.
38
Jon Ashworth, “Porsche’s New Empire,” The Business, March 31, 2007.
AUGUST 25, 2009
8
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
Despite their differences, VW and Porsche’s histories were intimately intertwined. It was Ferdinand
Porsche’s engineering company that, in the 1930s, designed the first Volkswagen which later became
known as the VW Beetle. A few years later, the first Porsche debuted with some of the same
components used on the VW Beetle. More recently, Porsche and VW had built cars that shared
platforms and components. In addition to sharing research and development, the two companies’
leadership shared familial bonds. Legendary German-Austrian engineer Ferdinand Karl Piëch, the
grandson of Ferdinand Porsche, was the chairman of Volkswagen’s supervisory board and the
Porsche and Piëch families together owned 50% of Porsche’s shares and 100% of its voting stock. 39
Their alliance based on old family relationships allowed both companies to develop technology
jointly without concern for confidentiality.
The ability to scale and create synergies across a number of areas were two driving forces that led
Porsche to secure its partnership with VW. As Wiedeking explained, electronics was one area of
particular interest: “Electronics account for 30% to 35% of our development costs. Spreading this
investment over 2 million cars instead of Porsche’s 100,000 will make a big difference and the
components will be cheaper.” 40 Furthermore, the capital intensity of R&D and required fixed assets
in new technologies would be increasing, making it increasingly difficult for a premium-only OEM to
survive unless operating in the context of a larger OEM. Forming closer ties with VW would also
enable Porsche to benefit from VW’s more fuel efficient technologies at a time when new emissions
regulations would come into effect.
On a more macro level, by acquiring VW, Porsche was helping protect itself from the ups and downs
of the auto sector. As one industry observer wrote, “A huge mainstream global car company like VW
was in a better position to weather any marketplace vagaries than a luxury brand like Porsche.” 41
While Porsche looked at the VW takeover as a way to leverage synergies, Porsche and VW would
exist as two separate companies that would sit under a new holding company called Porsche SE. (See
Exhibit 2.)
A Repeat of Daimler-Chrysler?
While many in the industry believed that Porsche’s acquisition of VW was a wise move, others
expressed concern that VW would prove to be a distraction for Porsche, particularly at time when the
company was about to enter another new car market with its luxury sedan the Panamera. As one
industry observer wrote, “As we’ve seen at Daimler-Chrysler, when cultural issues are in play, the
products can suffer and when the products suffer, so does everything else at a car company.” 42
39
Michael Connolly, “Porsche Tightens Grip on VW,” The Wall Street Journal, November 15, 2006.
40
Ray Hutton, “Porsche Set to Take the Wheel at VW,” The Sunday Times, October 14, 2007.
41
Jeremy Cato, “Porsche Revs Up for Explosive Growth,” The Globe and Mail, February 22, 2007.
42
Mark Landler, “Porsche and VW: One Happy Family?” The New York Times, December 23, 2007.
AUGUST 25, 2009
9
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
However, Wiedeking was adamant that the Porsche brand and culture would remain well protected:
“Believe me, if you mix the Porsche guys with the Audi guys and VW guys you will have trouble.
Each is proud to belong to his own company. My Porsche people are very proud of what they have
achieved. They don’t want to build a bastard in the future. They want to build a Porsche.” 43
But whether keeping Porsche and VW as separate operations under a Porsche holding company
would adequately protect the engineering and design talents that Porsche was known for was not
certain. And whether the carmakers that PEG had provided services to in the past would rethink their
relationship with Porsche now that it would be producing a number of competing car models was also
not certain. What was certain was that Porsche was no longer a small, nimble, carmaker focused
solely on the luxury sports car market. With VW now under its wing, Porsche would soon be
everywhere.
43
Ray Hutton, “Porsche Set to Take the Wheel at VW,” The Sunday Times, October 14, 2007.
AUGUST 25, 2009
10
WHAT’S DRIVING PORSCHE?
Rebecca Henderson and Cate Reavis
Exhibit 1
Selected Financials for Carmakers, 2007 (revenue and net income in US$ millions)
Toyota
Revenue
Net Income
% on R&D
unit sales
#
employees
262,394
17,146
3.6
8,900,000
GM
(automotive)
180,000
-39
4.5
9,286,000
299,394
266,000
VW
160,285
6,030
4.2
6,191,618
Ford
(automotive)
154,400
-5
4.9
6,553,000
329,305
246,000
Honda
Nissan
121,200
6,060
4.9
3,652,000
108,242
4,823
4.8
3,700,000
Fiat Group
Automobiles
39,433
1,181
2.8
2,233,800
179,000
180,535
50,542
Porsche
10,060
9,400
11.8
98,652
12,202
Source: Annual Reports.
Exhibit 2
Porsche SE
Porsche SE
Porsche AG
(100%)
Porsche
Consulting
(100%)
Porsche
Engineering
(100%)
Volkswagen
Porsche
Design
(65%)
VW (100%)
Skoda
(100%)
Bentley
(100%)
Audi
(99.14%)
Seat (100%)
Lamborghini
(100%)
Source: Porsche Annual Report.
AUGUST 25, 2009
11
09-095
September 15, 2009
Digital Divide Data
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
As Digital Divide Data (DDD) entered its ninth year of operations, its leadership had ample reason to
be pleased with the company’s progress. Since its inception in 2001 as a small IT outsourcing company with a dozen employees in Cambodia, DDD had grown into an internationally recognized,
nonprofit social enterprise. A 2008 recipient of the prestigious Skoll award for social entrepreneurship, DDD and its staff of 500 served clients in the United States and Western Europe from two
offices in Cambodia and one in Laos. Its annual operating revenues hovered around US$2 million,
and it had trained and provided scholarships to over 1,300 disadvantaged youth.
DDD’s social mission was to help economically disadvantaged young adults, some of whom were
physically disabled. DDD trained and employed young Cambodians and Laotians in IT outsourcing,
with the goal that they would graduate from DDD and continue to earn competitive wages for
themselves and their families. DDD recruited recent high school graduates whose prospects for jobs
and post-secondary education were limited, due to lack of resources or disability. The company
provided its recruits with computer training as well as English classes required for DDD’s work—
data entry and digitization—and gave scholarships to all recruits to study for a business- or
technology-related degree at a local university. After three to four years working at DDD, the
operator (as an entry-level employee was known) would then complete his or her university degree
and graduate from DDD. Graduates either were promoted within DDD, or left to join other
organizations that valued their professional experience and technical skills.
Satisfied with the apparent success of the company’s business model and operations, DDD’s U.S.based leadership wondered how it could rapidly scale up DDD’s social impact globally. DDD relied
on a small U.S.-based management team, supplemented by expatriate volunteers and short-term
assignees on the ground in Cambodia and Laos. Growing the number of paid U.S. staff to manage
This case was prepared by Anju Mathew, Grete Rød, Jaime Villalobos, and David Yates (MIT Sloan School of Management,
MBA Class of 2009) under the supervision of lecturer M. Jonathan Lehrich.
Copyright © 2009, Massachusetts Institute of Technology. This work is licensed under the Creative Commons AttributionNoncommercial-No Derivative Works 3.0 Unported License. To view a copy of this license visit
http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San
Francisco, California, 94105, USA.
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
expansion plans was not very feasible given financial constraints. DDD was therefore eager to design
an expansion strategy that could provide the same level of employment opportunities and social
programs, but would require less infrastructure, resources, and financing than was typically necessary
when starting new sites from scratch. But whichever growth strategy they selected—whether it be
organic growth, partnerships, joint ventures, or social franchising—DDD’s leadership team knew that
more was at stake than mere global scale. The right strategy would determine the future: break even,
break down, or break through.
DDD History and Background
Canadian-born Jeremy Hockenstein, DDD’s CEO and a co-founder, had visited Cambodia in
November 2000 on vacation from his job as a McKinsey consultant in the United States. He was
struck by the level of poverty in the country, and the lack of opportunities for young people to build
careers and provide for their families, even though Cambodians seemed to value education and sought
ways to empower themselves. Hockenstein concluded that Western demand for IT outsourcing
services could be satisfied by Cambodian workers, given the right resources and training.
Upon his return to the United States, Hockenstein, a graduate of the MIT Sloan School of
Management, looked for advice and, ideally, participation from his network of friends and colleagues.
On a return trip to Cambodia in February 2001, he and four others visited Phnom Penh and
investigated sustainable ways of providing employment and education to the disadvantaged youth in
Cambodia’s capital. They decided to create an IT outsourcing business that would provide data entry
and digitization services. This would result in young people trained in technology and English, and
the prospect of future gainful employment based on their DDD work experience. In mid-2001,
DDD’s first office opened in Phnom Penh with 20 operators and a contract: to digitize the back
catalogue of Harvard University’s Harvard Crimson undergraduate newspaper.
During the first few years, DDD’s revenue came from a number of U.S. contracts for data entry and
digitization that were sourced by the company’s U.S. management team. There was little
specialization and standardization of workflows and processes between projects. Employees worked
either a morning or afternoon shift, so that they could spend the other part of the day attending their
university classes.
Towards the end of 2003, DDD decided to open two new offices outside of Phnom Penh in order to
reach disadvantaged youth who were unable to move to the capital city to further their education. The
first was in Battambang, Cambodia’s second largest city of nearly one million people, located roughly
180 miles northwest of Phnom Penh. The Battambang office was opened by two Cambodian
managers from Phnom Penh who had started with DDD as operators. They successfully implemented
DDD’s training and employment practices and recruited the first group of trainee operators. Later that
year DDD also opened an office in Vientiane, Laos. Creating these new sites allowed DDD to
differentiate each office’s services, as well as to seek local work to bolster the offices’ revenue.
September 15, 2009
2
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
At the start of 2009, DDD was breaking even on its operating expenses. It had secured several large
multi-year contracts from U.S. and European clients, such as Reader’s Digest and Content Conversion Specialists, and had entered the domestic market with a contract to provide services to Mobitel,
the national cellular telephone provider of Cambodia. (See Exhibit 1.) Yet as the number of clients
grew, so did the number of employees. To maintain its swelling social programs, training, and
operator scholarships, as well as its fundraising and expansion planning, DDD continued to rely on
donations and sponsorships.
Not only did DDD depend on a dedicated U.S.-based sales staff to develop Western business
contracts, but the company also relied on expatriate project management expertise. Initiatives were
underway to standardize project management and operations processes among the three sites. In
addition, steps were being taken to ensure that the training curriculum was standardized yet specific
to the services each office provided.
In 2008 DDD began a partnership with the Centre for Information Systems Training (CIST) in
Phnom Penh. CIST, a French NGO, provided two-year IT training scholarships to disadvantaged
Cambodian youth, and helped them find jobs in the local IT market after graduation. CIST agreed to
select and train cohorts of DDD operators for three to six months, with the cost shared between the
two organizations. In early 2009 the first group of 50 CIST-trained DDD recruits was preparing for
full-time employment with DDD. Plans were in place to continue and expand the partnership to train
more incoming operators.
Cambodia and Laos Operations
Two of DDD’s three offices were in the Kingdom of Cambodia. Located in Southeast Asia,
Cambodia shared borders with Thailand, Laos and Vietnam. With a population of 15 million, of
which 80% lived rural areas, Cambodia was one of the poorest countries in the region. GDP per
capita in 2007 was US$1,600 (PPP); over one-third of Cambodians lived on less than $.50 a day. 1
Cambodia’s poverty had been at crisis or near-crisis levels since the days of Pol Pot’s Khmer Rouge
regime (1975-1979). An extremist political group, the Khmer Rouge’s goal was to create an agrarian
society and extinguish the educated classes. Under Pol Pot’s four year reign, Cambodians endured
harsh living conditions, torture, political persecution and genocide. It was estimated that two million
Cambodians, approximately 20% of the total population, particularly the well-educated, were killed.
By the late 2000s, three decades after an entire generation was lost in the genocide and a mere decade
since a 1997 coup brought an end to years of civil war and foreign occupation, Cambodia,
particularly Phnom Penh, appeared to be embracing the future. Japanese- and Korean-made cars
darted around the capital, new hotels and houses were being built, and Internet cafés were filled with
1
Geoffrey Cain, “Cambodia: Cambodia’s New Intellectuals,” Far Eastern Economic Review, November 7, 2008.
September 15, 2009
3
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
eager youth using mobile phones to participate in the country’s growing fascination with blogging. 2
Prior to the global economic crisis of 2008, the Cambodian economy had been growing at doubledigit rates, boosted by booming industrial and services sectors that reduced the country’s historic
reliance on the agricultural sector; the garment industry alone accounted for 80% of export earnings
and employed 3 million people. 3 Between 2004 and 2006, foreign direct investment skyrocketed from
$340 million to $2.6 billion. 4
Despite its progress, the country still had a long way to go before a thriving business sector was up
and running. The country ranked 136 out of 178 countries on the United Nation’s Human
Development Index, well behind Malaysia, Thailand and Vietnam. (Exhibit 2 provides select human
development indices for Cambodia and neighboring countries.) Even though it had a fairly high
literacy rate of 76%, Cambodia suffered from a high drop-out rate between primary and secondary
schools with only 24% enrolled in high school (Exhibit 3). In its “Ease of Doing Business” survey, 5
the World Bank ranked Cambodia 145 out of 183 nations, whereas Thailand was ranked 12, Malaysia
23, and Laos 167. Contributing to the Cambodia’s poor performance on the “Ease of Doing Business”
survey was its shortage of experienced managers. Cambodia’s recent economic growth had
exacerbated the scarcity, as new businesses continuously entered the country. 6 The existing managerial rank therefore commanded a premium price in the marketplace, especially in Phnom Penh.
For DDD the situation posed a number of human resource management challenges. The company’s
limited financial resources made it hard to compete for and attract local management talent. DDD
often found that it had to rely on the appeal of the company’s social mission to recruit trained professionals. The company also faced difficulties retaining internally-trained managers and high-performing operators. Cambodia’s IT sector was growing rapidly, and the experienced people could go
elsewhere and earn a higher salary than what DDD could offer. As it grew, therefore, DDD faced a
human resources challenge in both Cambodia and Laos: skilled managers were hard to find, and
expensive because they were in such demand. To fit well with DDD, an individual moreover needed
to not only meet the role’s technical requirements, but also be passionate about DDD’s social mission.
DDD’s Battambang office faced additional challenges. Battambang was signficantly less developed
than Phnom Penh. The majority of roads were unpaved and only a handful had street names. Outside
of the rainy season, the road from Battambang to Phnom Penh took anywhere from three to five
hours; during the rainy season the only accessible bridges were often wiped out. Moreover
Battambang’s electricity supply was unreliable, broadband connections were limited and very
2
Geoffrey Cain, “Cambodia: Cambodia’s New Intellectuals,” Far Eastern Economic Review, November 7, 2008.
3
Andrew Ross, “Cambodia Slowly Rising Again from Khmer Rouge Killing Fields,” The San Francisco Chronicle, December 9, 2007.
4
Erika Kinetz, “Private Equity Digs for Treasure in Cambodia,” The New York Times, May 31, 2008.
5
Rankings based on the following criteria: starting a business, dealing with construction permits, employing workers, registering property, getting credit,
protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business.
6
Economic Intelligence Unit, “Country Profile: Cambodia” (2008).
September 15, 2009
4
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
expensive, and T1 connections, where available, cost several thousand U.S. dollars per month. As a
result, DDD could not assign certain types of profitable work to Battambang as it could not ensure
that Battambang would be able to successfully send the finished product electronically to the client on
time. The DDD Battambang office also reported very limited private-sector support—no local firms
provided computer equipment or even basic office supplies such as desks, chairs, or printer paper.
The poor infrastructure made it difficult for DDD to transfer skills from the Phnom Penh office, as its
managerial staff were reluctant to relocate to Battambang. Meanwhile, most of northern Cambodia’s
educated workforce tended to move to Phnom Penh rather than stay in the regions, so recruiting
talented operators and managers locally was a constant challenge. The Battambang office had had to
implement proficiency and intelligence testing to ensure that the quality of the recruits was up to
standard. On the other hand, once the Battambang employees were recruited, DDD had no trouble
with retention, since it was one of the only IT service operators in the region.
Both the Battambang and Phnom Penh offices struggled with the realities of the Cambodian
educational system. DDD’s leaders had found that because Cambodian education tended to be lecture-based, rarely interactive, and under-resourced, it was not uncommon for students to take several
semesters of computer classes without ever seeing or touching an actual computer. Furthermore, the
quality of education varied. Generally speaking, the quality of the education system in the northern
areas of Cambodia, including Battambang, was not as good as in Phnom Penh. Recruiting outstanding
high school graduates, therefore, had been more challenging for DDD’s Battambang office.
In Laos DDD had faced similar problems and more, particularly when seeking local clients and local
employees. Laos was significantly less developed than Cambodia; there was not much local demand
for DDD’s services. Instead DDD used its NGO network and related private companies to capture
sales. Moreover, Laotian businesses were only convinced that DDD could deliver on its promises
after DDD had demonstrated that its European and other Western contracts were successful.
Operational Challenges
On the business side, DDD had to compete with other much larger IT providers, including Aptara,
SPI Technolgies and Apex Data Services, to win international contracts. (See Exhibit 4 for competitor profiles.) Due to its small size, partnerships were very important to DDD. When it lacked
capacity, DDD outsourced to a number of smaller IT outsourcing firms. DDD leveraged these
partnerships to learn about new digitization processes that it could build on to win future work.
Although DDD’s social component gave it an edge when the bidding for jobs was close, its grassroots
origins made its operations complicated to scale. DDD’s three offices lacked a standardized system
for project management, and the operational processes were not documented. This made it difficult to
establish best practices across the organization, which in turn might be reducing its potential
September 15, 2009
5
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
profitability. In mid-2008, the company began to address these issues, mainly by recruiting Western
expatriate volunteers to work with the current management.
Recruitment and Training
Training new recruits was a critical component of DDD’s model. The company trained new staff for
about six months before they started as operators on client projects. In order to help as many people
as possible and maximize the company’s social impact, an operator could only stay with DDD for
four years before he or she graduated. Fewer than 10% of employees then continued with DDD in
management roles; the rest moved on to other local firms, usually into higher-paying positions.
Through DDD’s internally developed training curriculum, recruits learned basic skills such as typing
and how to operate a computer, as well as business-specific skills such as business etiquette,
teamwork, and email writing. In addition, trainees received one hour of English instruction every day.
In the last part of the training program, trainees were expected to learn the basic tools and software
that they would use in the course of their work. This portion of the curriculum, therefore, was
customized to reflect each site’s product and service offerings. The curriculum was mostly in Khmer,
the Cambodian language, and had not been translated into English.
Because the recruitment and training practices in Phnom Penh differed from those of Battambang and
Laos, DDD had very little documentation or company-wide guidelines on recruitment. For example,
in Phnom Penh the recruitment and training was outsourced to CIST, but in Battambang it was done
in-house.
Capacity and Contract Allocation
One of the most pressing challenges and considerations for future growth pertained to how work was
allocated among DDD’s three offices. The three offices were largely specialized. The Laos office
primarily performed xml tagging services, Battambang academic data entry and survey work, and
Phnom Penh digitization of print publications. Although DDD had signed up some local clients, such
as Mobitel, all three offices still relied on international contracts generated by the U.S.-based sales
team for the vast majority of their revenue.
DDD’s executive team was also concerned about capacity imbalances among the three offices. For
example, the Battambang office had too little workflow to continuously occupy all operators, yet the
Phnom Penh office had too much, and was constrained by the lack of personnel and physical space.
Retraining the operators and project managers in Battambang to take on some of the work from the
Phnom Penh office was not considered a viable option as it would require considerable financial and
human resources.
September 15, 2009
6
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
DDD’s Goals for Growth
In 2008 DDD’s board of directors set two parallel goals: grow its existing operations to 1500 people,
while exploring ways for the company to expand globally. The board believed that DDD had
overcome its main operational challenges and had a proven business model that could be deployed
internationally. While the main objective was to help more people in farther reaches of the world,
expansion would also add capacity and enable DDD to take on larger contracts in the publishing
market. The company’s founders emphasized that while they remained committed to further growth
in Cambodia, both the country and the company had come far since DDD started training its first
operators in 2001. The time had come to take DDD’s mission, business model and ability to make a
social impact to another level, and possibly another continent.
While DDD’s senior management and board of directors were fully committed to the expansion
strategy, they weren’t sure which path to pursue or how best to proceed. In the past DDD’s expansion
efforts had been challenged by local particularities such as labor shortages, lack of basic business
infrastructure, and variation in labor pool skill-sets. DDD’s management was therefore eager to make
sure future expansion took place in locations that had been thoroughly vetted and were well
understood by the expansion team. Senior management had already conducted exploratory talks with
potential partners in India, China and Vietnam, but they didn’t know whether partnership was the best
approach to expansion. Moreover, no matter where or how DDD expanded, one thing was clear:
expansion meant that more people would be needed to support a larger organization. Management
was keen to keep control over the size of its U.S. staff in order to minimize costs, potentially further
straining local resources.
Growth Options
Nonetheless, a cohesive strategy would help DDD transform itself into a premier mission-oriented
global IT services enterprise. In addition, developing a single coherent global strategy and business
model was critical for securing fundraising and donor support. Through conversations with senior
management, partners, and donors, DDD’s board of directors had identified four potential strategies
for expansion: organic growth, partnership with a local entrepreneur with an existing business, social
franchising, and partnership with an international NGO or outsourcing firm.
Organic Growth
A greenfield growth model would deviate little from DDD’s previous strategy of expansion into
Northern Cambodia and Laos. Such a strategy could be initiated immediately, as DDD would not
have to go through the process of vetting and negotiating with potential partners. DDD would also be
in complete control of the strategy and management of a new DDD office.
Yet DDD’s leaders recognized that organic growth would put a severe strain on the company’s
managerial resources. DDD would have to evaluate and enter a new market where they had limited
knowledge of or experience with the local culture, government, business practices, and infrastructure
September 15, 2009
7
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
limitations. Without a local partner, DDD would have to lay out significant capital up front in order to
develop sites and establish a local management team. It also wouldn’t be easy to attract local revenue
sources, a crucial factor in making new offices less dependent on DDD’s U.S.-based fundraising and
sales teams.
Partnership or Joint Venture with a Local Entrepreneur
DDD was therefore considering partnering with a local entrepreneur, whether already in the IT
outsourcing business or not. Although selecting the right partner and negotiating the terms of an
agreement was likely to be time-consuming, a partnership would give DDD access to a committed
local partner with detailed knowledge of the local labor pool, legal requirements, and business
practices. Selecting a local partner would also facilitate rapid expansion, since such a partner might
already have a business, a labor force, and the required physical facilities. In India, for example, DDD
already had a longstanding partnership with an Indian entrepreneur to whom DDD subcontracted
work when it was at full capacity. This Indian entrepreneur also provided business and operational
mentorship to DDD because he felt strongly about the company’s social mission.
On the other hand it wasn’t clear exactly what value proposition DD would be offering to a local
entrepreneur who already had a business in IT outsourcing. The local partner would have to adhere to
DDD’s model of recruiting, training, and graduating disadvantaged youth, and would have to commit
resources to social programs such as healthcare and continued education. DDD might also have
difficulty finding a partner whose business fit within either the scope of DDD’s current product
offerings or the spectrum of services offered to clients in the industries targeted by DDD.
Alternatively, the partnership model might require DDD’s sales team to pursue contracts and develop
competence and contacts in a whole new area of product offerings. Regardless of the structure
specifics, in a partnership model DDD would have to develop processes for incentivizing the partner
to follow DDD’s standards for recruitment, social programs, and most importantly quality control.
Ensuring compliance and resolving potential conflicts could be a problem in emerging economies
with weak legal systems.
Social Franchising
DDD’s board was intrigued by the concept of social franchising. Social franchising was a somewhat
undefined, yet fashionable, buzzword that had the potential to excite donors and help raise the capital
required to fund a global expansion. Social franchising required the development of a “business in a
box” concept: a standardized set of manuals and procedures for recruitment, training, project
management, and daily operations. DDD would help franchisees establish their business and also
provide ongoing support.
The franchisee selection process would take time, but contract negotiations and legal arrangements
would, in theory, be streamlined as franchisees would sign on to a standardized DDD “franchise
package.” Capital, from both DDD and the franchisee entrepreneur, would also be required to launch
a franchise unit. DDD’s management felt it was imperative that franchisees be incentivized to develop
September 15, 2009
8
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
local revenue sources, rather than rely on DDD’s U.S.-based sales and fundraising teams. In an ideal
franchise agreement, capital would be repatriated to DDD over time through revenue sharing.
Although a franchise model would require significant upfront work in order to document best
practices and prepare a “business in a box” package, the standardized nature of the franchise model
meant that given sufficient start-up capital, DDD could achieve global scale relatively quickly. On the
downside, there were concerns about how the potential franchisees would be selected and how DDD
would manage competition among the different franchises given the global nature of digitization
services. In a traditional franchise model, revenues were locally sourced and franchisees were given
territorial rights that precluded other units from seeking revenue in a particular geographic area. In
DDD’s case, a contract sourced in the United States could theoretically be assigned to any capable
DDD site around the globe. Determining where work would be allocated could prove challenging in
the more loosely controlled structure of a franchise network.
Partnership with an International Organization
Meanwhile DDD’s senior management had been approached by a large international nonprofit
interested in bringing DDD’s model to the countries in which it worked, through a partnership with
DDD. In order to potentially benefit from DDD’s IT outsourcing expertise and brand, the NGO
would provide the capital and human resources required for a fast-paced expansion. Since the partner
had the capacity to provide the new DDD/partner office with a revenue source, this model of
expansion could be pursued without putting significant additional pressure on DDD’s sales
organization, though the precise division of sales was unclear.
DDD’s board was also considering a different approach: finding a large international IT outsourcing
firm interested in establishing a “social enterprise” subsidiary. Since such a partner would already
know the business, DDD could potentially tie more seamlessly into its operations and sales force, not
to mention learn best practices from a global IT outsourcing giant. On the other hand, such a
partnership might also threaten one of the selling points that appealed to U.S.-based corporate clients,
namely DDD’s identity as an independent social enterprise that provided high impact in the countries
where it operated.
Next Steps
DDD’s leadership team was now at a critical juncture in the company’s life cycle. Its mission of
providing sustainable sources of employment and education to disadvantaged youth was already
validated by nine years of successful operations. Looking towards the future, the decision to expand
was motivated by DDD leadership’s desire to lift more people out of poverty and to empower
disadvantaged youth through market-driven, world-class IT services.
Selecting the right business model for expansion was the first step towards the development and
implementation of an expansion strategy. The risks of failure, however, were considerable. If DDD
September 15, 2009
9
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
opened new sites without the necessary infrastructure in place to support the expansion, then the
company’s product quality and carefully built brand name, among donors and clients, might suffer
irreparable damage. Although it was not clear which growth strategy the company would choose,
DDD’s leadership team knew that potential donors would only support a strategy that was compelling
and achievable. At stake was the future of the company and all who benefited from DDD.
Study Questions
1. What has made DDD successful so far?
2. What are its constraints?
3. Which strategy or strategies should DDD pursue?
September 15, 2009
10
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
Exhibit 1
Sample Clients of Digital Divide Data
Bookshare.org
Brown University
Harvard Business School
Ingenta, a division of Publishing Technology
InStedd
Jewish Telegraphic Agency
Kaplan Test Prep
King's College London
Mobitel
New York Daily News
The Reader's Digest Association
Tufts University Perseus Project
UNICEF
University of Arizona
URC (University Research Co., LLC)
World Vision
Yale University
Source: Digital Divide Data.
Exhibit 2
Human Development Indices for Cambodia and Select Countries
Malaysia
Thailand
Vietnam
Indonesia
India
Laos
Cambodia
Myanmar
East Timor
HDI
Rank
GDP
US$ billions
GDP Per Capita
(ppp US$)
Population
(millions), 2005
Population Urban
(% of total)
63
81
114
109
132
133
136
135
158
130.3
176.6
52.6
287.2
805.7
2.9
6.2
NA
0.3
12,536
7,613
2,363
3,455
2,489
1,980
1,619
881
668
25.7
63.0
85.0
226.1
1,134.4
5.7
14.0
48.0
1.1
67.3
32.3
26.4
48.1
28.7
20.6
19.7
30.6
26.5
Source: United National Human Development Indices (http://hdr.undp.org/en/statistics/).
September 15, 2009
11
DIGITAL DIVIDE DATA
Anju Mathew, Grete Rød, Jaime Villalobos, David Yates
Exhibit 3
Education and Internet Statistics for Cambodia and Select Countries
Adult
Literacy Rate
(15+, %)
92
94
90
91
65
73
76
90
50
Malaysia
Thailand
Vietnam
Indonesia
India
Laos
Cambodia
Myanmar
East Timor
Combined Primary,
Secondary,
Tertiary Enrolment
Rate (%)
72
78
62
68
61
60
59
56
63
Secondary
Enrolment
Rate (%)
76
64
69
58
NA
38
24
37
NA
Internet
Subscribers*
(per 100
people)
19.33
NA
6.09
1.39
1.09
0.09
0.12
0.01
0.98
Internet Users
(per 100 people)
62.6
18.0
23.9
13.2
7.0
2.1
.51
.09
.16
* pertains to the number of dial-up, leased line and fixed broadband Internet subscribers.
Source: International Telecommunication Union (http://www.itu.int/ITU-D/icteye/).
Exhibit 4
International IT Outsourcing Services Providers
Company
Description
Aptara, Inc
•
Founded in 1988.
•
Headquartered in Virginia. Formerly known as TechBooks.
•
Offices: U.S., U.K., Australia and India.
•
Production facilities: New Delhi and Pune, India.
•
3700 employees (2008).
•
Services: Content capture, digitization and distribution.
•
Clients: financial institutions, government, agencies, universities and libraries.
SPI Technologies
Apex Data Services
•
Founded in 1980.
•
Revenues of approximately $44m in 2007.
•
Headquartered in the Philippines.
•
An operating subsidiary of ePDLT, a large Philippines-based communications company.
•
Headquartered in Virginia.
•
3,200 employees (2008).
•
Production facilities: India.
•
Services: document management and conversion, imaging, indexing, original content creation,
professional editorial services, copy-editing, cross-referencing, and semantic-tagging.
•
Clients: construction and engineering, finance, healthcare, legal, publishing, universities, and
libraries.
Sources: Company websites.
September 15, 2009
12
Using APA style, prepare a 500-word synthesis paper following these recommendations:
1. Select a focal point based on the two case studies we have read this semester (Case
Study #1 and 2)
2. Build your argument based on these two sources, integrating their material with your
commentary
3. Avoid plagiarism by properly paraphrasing, using direct quotations, and using in-text
citations
4. Include the major components of an academic paper, including an introduction (with a
thesis statement), a body (with topic sentence), and a conclusion. Paragraphs should be
coherent and demonstrate unity.
5. Edit, drawing from feedback from previous assignments and strategies discussed in
class. Keep up the outstanding efforts!
Synthesis Assignment
In one to two pages, select one focal point (or main idea) from Case Study #1 and Case Study #2 from
this quarter and build your discussion based on the material from these sources. (Remember to use
paraphrasing and direct quotes).
Paragraph #1 – Introduction:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
___________________________________________________________________
Paragraph #2 & #3 – Discussion from cases:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Conclusion:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Purchase answer to see full
attachment