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1st Edition, Issue-1 Tiny Homes to Set the Trend in Urban Living

Tiny Homes to Set the Trend in Urban Living

Case Study

This case was written by Krupa Kalsy and reviewed by Rajan Shah, Amity Research Centers
Headquarter, Bangalore. It is intended to be used as the basis for class discussion rather than
to illustrate either effective or ineffective handling of a management situation. The case was
compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in
any form or medium whatsoever without the permission of the copyright owner.

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Author: Krupa Kalsy

Tiny Homes to Set the Trend in Urban Living

Abstract: By 2050, 2.5 billion more people would live in urban areas triggering less dwelling
space, high cost of living and lesser recourses. One of the fallouts of the scenario was
expensive real estate. In many places in and around the US, real estate was getting so
expensive that families began to look for alternative living space. While some basked in the
glory of luxurious living, a few traded in their traditional lifestyle for simpler and affordable
option, along with smaller ecological blueprint. The tiny house movement started from a need
to ‘simplify life’ and to become more environment friendly. But then, downsizing was not so
easy for people used to living in big houses. People needed to be in material diet to downsize
as tiny houses were typically 400 sq. ft. or less. The silver lining, although, was that such
houses significantly limited a household’s use of natural resources. The small surface area, less
space to heat and cool, fewer lights, and fewer appliances were all aspects of the tiny home
that contributed to the lessened footprint and cost. The lower economic burden was also an
incentive for people to switch over to the tiny house movement, an important link to actualise
the potential for urban sustainability. Another key area of sustainability in tiny homes was
efficient waste management practice. Despite the numerous incentives of simpler living in
smaller spaces, it remained to be seen whether the trend would continue to thrive in other
parts of the world? More importantly, whether the world was mentally prepared for this
paradigm shift?

Case Study

“A tiny house is any house in which all the space is being used well... People are really into the
idea of what they really need to be happy and comfortable and surviving, and a small house
really encapsulates that. Extra stuff and extra square footage dilutes a sense of vitality.”1

– Jay Shafer2

One of the ironies of the modern Western societies was ‘the larger the house, the more
status in the society’. Since centuries, people used to define their status by owning bigger
buildings and places.3 The trend of buying big and expensive homes year after year was seen
mostly in Western countries. In the US, since 1970, the size of an average house had increased
by almost 50% despite the fact that the family size had decreased notably.4

1 Johnson Cat, “Inside the rise of the tiny house movement”, https://www.resilience.org/stories/2014-01-
09/inside-the-rise-of-the-tiny-house-movement/, January 9th 2014
2 He is a Professor at University of Iowa and an active member of Tiny House Movement.
3 Vyas Devashree, "Tiny Homes and What They Represent in A World Gripped by Superficiality and Luxury”,
http://volzero.com/tiny-homes-and-what-they-represent-in-a-world-gripped-by-superficiality-and-luxury/,
August 9th 2017
4 Stearns Randy W., “Tiny Houses With Big Ambitions”, http://time.com/130959/tiny-houses-with-big-
ambitions/, May 29th 2014
“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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But post-recession, triggered by the global financial crisis 2008, many lost their homes, jobs
and retirement funds, due to which, the mind-set of people began to change.5,6 The trend of
living in smaller and sustainable houses, between 80 and 1000 sq. ft., began to gain
momentum.7 There were two main factors associated to choose tiny space - first was an
attempt to live a cheaper (mortgage and debt free) and sustainable life and second, in many
places around the US, real estate was so expensive that families began to look for alternative
living options like vans, mobile trailer-houses and boats.8 In short, tiny houses were being built
to gain financial freedom and make ecological footprint.9 But living in a tiny house was not
easy. While the minimalist lifestyle had benefits, it also had challenges: zoning laws (make tiny
living illegal in some zones), stressful to adjust in smaller space, lesser storage space, no
privacy, unhooking and re-routing water, sewage and electric cables every time the destination
changed, plumbing issues, stow movable items whenever on the move and so on. It was a
huge step especially for people used to live in big and elaborate houses.10 However, despite
the challenges, many still preferred living in tiny houses. Was the trend of ‘tiny living’ here to
stay? Was the world prepared for the paradigm shift in living spaces?

Tiny Homes: A Background Note

For humans, the idea of dwelling in small spaces had evolved over centuries and decades, right
from living in rock-hewn enclaves, mud settlements to the modern day housing.11 Going back
in time to around 3500 BCE12, people of Banpo, belonging to the Chinese civilisation, were
living in circular wood and mud structure covering the area of only 40 square meter (Sq. m).
Around same time in the ancient civilisation, people of Catal Hüyük13 in Turkey, began to live in
30 Sq. m rectangular flat-roofed houses.14

But along the way, humans broke the ‘organic coherence’ and ‘mutated with inorganic
settlements’, which were radically distorted over the centuries. The human settlement made a
paradigm shift during the industrial revolution in the late 18th century which fostered
urbanised socio-economic structure and growth pattern of the world.15 The trend of bigger and
lavish houses, especially in the urban societies of Western and developed countries like
America, became evident. By 1970, ‘the average size of a house swelled by 50%, despite the
decrease in the average size of an American family’.16 On an average, people spent half of their
revenue to buy a ‘typical-sized’ house, which meant 15 years of hard work to pay for it. Around

5 Blake Whitford, “The History of the Tiny House Movement”, https://cozeliving.com/tiny-house-movement/
6 “Living in a Box: How the Concept of Tiny Houses Has Changed Over the Years”,
https://www.arch2o.com/living-in-a-box-tiny-houses/
7 “Tiny Houses With Big Ambitions”, op.cit.
8 Hoffower Hillary, “California real estate is so expensive that families, retirees, and even tech workers are living
in cars and vans”, https://www.businessinsider.in/California-real-estate-is-so-expensive-that-families-retirees-
and-even-tech-workers-are-living-in-cars-and-vans/articleshow/65492304.cms, August 21st 2018
9 Larino Jennifer, “Americans are warming up to tiny homes: report”,
https://www.nola.com/business/2018/11/americans-are-warming-up-to-tiny-homes-report.html, November 5th
2018
10 Hoffower Hillary, “Here's what living in a tiny house is really like, according to people who traded their homes
for minimalism”, https://www.businessinsider.in/heres-what-living-in-a-tiny-house-is-really-like-according-to-
people-who-traded-their-homes-for-minimalism/articleshow/65822633.cms, September 15th 2018
11 “Living in a Box: How the Concept of Tiny Houses Has Changed Over the Years”, op.cit.
12 BCE is the era before Current Era (CE).
13 Çatalhöyük, a large Neolithic and Chalcolithic proto-city community based in Southern Anatolia, existed from
around 7500 BC to 5700 BC and thrived in 7000 BC.
14 “Living in a Box: How the Concept of Tiny Houses Has Changed Over the Years”, op.cit.
15 ibid.
16 “Tiny Houses With Big Ambitions”, op.cit.

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76% of people living in the US were living from one paycheck to another, signifying ‘little to no
emergency savings’.17 According to the United States Census Bureau18, “The average square
footage of a home had eclipsed 2,150 square feet for the first time since home sizes were
tracked in 1973.”19

Buying an ‘average sized house’ meant a lifetime of mounted expenses. The total true price of
purchasing a house, which was around `0.29 million including the ‘interest, taxes, insurance,
repairs and maintenance’, mounted up to ‘more than a million dollars in 30 years’ lifespan.20
(Exhibit I).

Exhibit I
Total Cost of Living in ‘Average-sized House’

Source: “What Is The Tiny House Movement?”,
https://thetinylife.com/what-is-the-tiny-house-movement/

Henry David Thoreau, one of the most influential writers, became famous for living in a small
‘150-square-foot’ cabin located by the Walden Pond in Concord, Massachusetts. Decades later,
many states followed suit. In his famous book titled, ‘On Walden Pond’, he quoted, “A man is
rich in proportion to the number of things which he can afford to let alone.” But it was an
American architect, Sarah Susanka (Susanka) through her book ‘The Not So Big House: A
Blueprint for the Way We Live’ published in 1998, brought tiny homes into the mainstream
society. Susanka became an influential voice in teaching people about ‘better spaces over
bigger spaces’ and using various ‘architectural principles to make smaller spaces feel bigger’.
According to observers, she was able to influence tiny home architects of the future.21

In 2000, Jay Shafer (Shafer), a Professor at University of Iowa, a public research university,
became part of the ‘Tiny House Movement’. His ‘96-square-foot’ tiny house became ‘front-
page attraction’ in The Des Moines Register, daily morning newspaper of Des Moines, Iowa. On
this, Shafer explained, “Aside from not needing anything more than this, I really like the idea of
putting what I do have into quality over quantity. Living small is really a luxury, in the sense

17 “What Is The Tiny House Movement?”, https://thetinylife.com/what-is-the-tiny-house-movement/
18 The United States Census Bureau, a major agency of the US Federal Statistical System, is responsible to
construct information on the people and economy of America
19 “The History of the Tiny House Movement”, op.cit.
20 “What Is The Tiny House Movement?", op.cit.
21 “The History of the Tiny House Movement”, op.cit.

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that I have a lot of time now that I didn’t have before. I can focus now on the other things I
want to do in my life, rather than just paying the mortgage and taking care of the house.”22

Meanwhile, the movement began to gain serious momentum. Randy Stearns (Stearns), Senior
Editor at Group SJR, a New York-based marketing consultancy said, “As with most things, a
countertrend, focused on homes that are smaller and simpler than the norm, emerged in
recent decades... The concept describes efforts by architects, activists and frugal home owners
to craft beautiful, highly functional houses of 1,000 square feet or less (some as small as 80
square feet). It’s both a practical response to soaring housing costs and shrinking incomes, and
an idealistic expression of good design and sensible resource use.”

Interestingly, natural disasters like ‘Hurricane Katrina’ in 2005 and the economic crisis and its
subsequent adverse impacts in 2008 shook the entire US, and compelled citizens to think
about the pressing housing crises. People started viewing homeownership differently.23 This
economic situation presented a sobering reality check, and more and more people desired for
an alternative modes of living. For the struggling economy, tiny homes became a more
attractive option. Blake Whitford (Whitford), an author with ‘Coze Living’, a leading source of
tiny homes information said, “The costs were low, the life was simple and the environmental
footprint was minuscule compared to the average size home of more than 2,500 square feet.”

Post 2009, television and internet began to play a big role in popularising tiny house concept.
During such period, ‘books were being written, blogs were launching and associations were
forming’. More interestingly, ‘Tiny House Nation’ and ‘Tiny House Hunters’, two popular shows
focusing on the tiny houses were launched. On such development, Whitford opined, “Viewers
from across the country were able to listen to the reasons why people were leaving their
homes or apartments for tiny houses. And, in seeing the development of a tiny home from a
dream into a reality, the TV shows helped to legitimize the movement on a national scale.
Perhaps the most fascinating aspect of the movement is that it’s moved beyond solutions for
individuals; cities are now considering tiny homes as a way to curb their housing crises.”

Over time, the movement went through various transformations and gradually built into a
complete cultural phenomenon. According to www.spurfreedom.org (Tiny House Friendly
Community), “The tiny house movement is one example of reducing costs and gaining freedom
to operate according to your own plan, unfettered by onerous and unnecessary costs. We
propose that tiny houses in small towns yield even more freedom and offer a unique
opportunity to regain a sense of community and self-sufficiency.”24

Tiny Homes – A Sustainable Initiative for the Long Run?

In 2018, a report published by the United Nations Department of Economic and Social Affairs25
stated that nearly 67% of the world population would live in urban areas by 2050 compared to
55% in 2018. In terms of figures, over 2.5 billion more people would be living in metropolitan
areas by 2050. The report further suggested that between 2018 and 2050, countries like India,
China and Nigeria would experience 35% surge in the urban population. The report forecasted
that, “India will have an additional 416 million people in urban areas. China will have 255

22 “The History of the Tiny House Movement”, op.cit.
23 “Tiny Houses With Big Ambitions”, op.cit.
24 “The History of the Tiny House Movement”, op.cit.
25 UN DESA, a part of the United Nations Secretariat, was responsible for working to help countries around the
globe meet their economic, social and environmental goals.

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million and Nigeria will have 189 million. Currently, North America is the most urbanized
region, with 82 percent of its population living in urban areas in 2018. It is followed by Latin
America and the Caribbean (81 percent), Europe (74 percent) and Oceania (68 percent).
Although Asia and Africa are expected to become highly urbanized over the next three
decades, they currently have many people residing in rural areas.”26

With urbanisation, megacities27 too were mushrooming. By mid-2018, there were around 33
megacities across the world. Tokyo remained at the top with population of 37 million people.
By 2030, the numbers of megacities were expected to increase to 43. The report further
revealed, “As the world continues to urbanize, sustainable development depends increasingly
on the successful management of urban growth, especially in low-income and lower-middle-
income countries where the pace of urbanization is projected to be the fastest. Many countries
will face challenges in meeting the needs of their growing urban populations, including for
housing, transportation, energy systems and other infrastructure, as well as for employment
and basic services such as education and health care.”28

In such scenario, to meet the growing demand of accommodation, many cities began looking
for alternate solutions. Like in Boston city, where urban population was likely to grow 0.7
million people by 2030, as well as Florida’s Miami-Dade County, people started looking for
possibilities of tiny houses as alternatives solutions due to the lack of space and future needs.
On such approach, Miami-Dade County commissioners opined, “Micro houses would
encourage the efficient use of land by accommodating greater population density in a smaller
area.”29

Small and Sustainable Lifestyle

So what was it like living in a tiny house? Tiny house, on a technical specification was a
compact lightweight structure, promoted an affordable lifestyle providing only the essential
and intelligently modular spaces for comfortable living. These houses provided ‘freedom of
mobility’, which was not possible in conventional houses, and therefore produced ‘own energy
and waste management system’, hence living off the grid.30 One anonymous tiny house owner
testified, “In my own journey, I started out in an apartment that cost me $1000 per month
once you added in utilities, insurance, etc. Once I moved into my tiny house, my bills virtually
disappeared, it now costs me $15 (yes you read that right, fifteen dollars!) per month. The cost
of building my own tiny house was recouped in under 2 years’ time, allowing me to bank a lot
of savings.”

While an average American house was built in 2,600 sq. ft., a tiny house took roughly between
100 and 400 sq. ft. to construct, based on ‘usage, context and individuality’.31 The tiny house
trend became a social movement. Market analysts, too, voiced their support and mentioned,
“The tiny life provides huge financial advantages and the ability to live a lifestyle filled with
adventure. We work hard to afford bigger houses than we need. We continue to work, so we

26 Lardieri Alexa, “Report: Two-Thirds of World’s Population Will Live in Cities by 2050,”
https://www.usnews.com/news/world/articles/2018-05-17/report-two-thirds-of-worlds-population-will-live-in-
cities-by-2050, May 17th 2018
27 Technically defined as the city with a population of more than 10 million people.
28“Report: Two-Thirds of World’s Population Will Live in Cities by 2050,” op.cit.
29 “The History of the Tiny House Movement”, op.cit.
30 “Living in a Box: How the Concept of Tiny Houses Has Changed Over the Years”, op.cit.
31 “What Is The Tiny House Movement?”, op.cit.

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can fill our houses with more stuff…items we may not need but buy anyway. Many Americans
are overwhelmed by their packed schedules and obligations. They’re tired of running in the rat
race. While small homes aren’t for everyone, tiny house costs are much lower than a full-size
building.”32

The tiny house was constructed either on land or on wheel (independent structures like trailers
that were parked on land). (Annexure I). Tiny houses on wheels were built on mobile trailer
frames. Such houses gave freedom to move anywhere in the country. The mechanism required
to construct a tiny house involved basics recreational vehicle plumbing and electrical systems
along with composting toilets (while on the move), solar-powered power systems as well as
propane hook-ups. On this, Shafer said, “Someone could easily get by on about $70 a year for
propane, which would both heat the house via an elegant little marine heater, and power its
stove.” Shafer had installed ‘a gray water system that cycles all his waste water into the nearby
garden’. At the same time, since his house has access to services, he's plugged into his local
grid. Yet power consumption in a Tiny House matched its name.33

Tiny houses not only downsized and simplified living, they created ‘an affordable second home
and innovative ways to live outside the mainstream’.34 Irrespective of their shapes and sizes, all
the tiny houses showcased same philosophy – ‘living simple, smaller and efficiently’. At the
same time, identifying the financial benefits, analysts mentioned that, “68% of tiny home
owners have no mortgage (compared to 29.3% of all U.S. homeowners). It’s no surprise then,
that more tiny home owners (78%) own their own home—plus, 55% of tiny home owners have
more savings than the average American. 32% of tiny home owners have more than $10,000
tucked away for retirement.”

Apart from convenience, mobility and low investment, tiny home was easier to maintain,
tailor-made and it also promoted streamlined and sustainable living by using lesser area,
consumption, energy expenditure and taxes. There were being termed as viable both
economically and ecologically.35,36 According to Stearns, “Cheaper to build and maintain, built
mostly of ecologically friendly materials, requiring no building permits and taking up far less
real estate than traditional houses, the appeal of living small is obvious to many people. Some
imagine entire villages built of tiny homes as solutions to homelessness.”37

Looking at the aesthetics and utilisation of space, architects and designers were finding
creative ways to make the small spaces work well. “You can buy a tiny house already made and
ready to go. You simply have to have land to put it on. You can pick from some basic floor
plans and change a few details as desired then the builders can create your own personal tiny
home. We’ve even see (Sic. seen) people build tiny houses from old school buses, campers,
and more. Choose a stationary house, or one on wheels, so you can take home with you
everywhere you go,” lauded analysts.38

Tiny living was also credited for bringing people closer into a community. According to Alexis
Stephens and Christian Parsons, ‘filmmakers, DIY tiny house dwellers and community

32 "What Is The Tiny House Movement?", op.cit.
33 Terdiman Daniel, “Building a green empire, one Tiny House at a time", https://www.cnet.com/news/building-
a-green-empire-one-tiny-house-at-a-time/, November 10th 2010
34 “Tiny Houses With Big Ambitions”, op.cit.
35 “What Is The Tiny House Movement?", op.cit.
36 “Tiny Homes and What They Represent in A World Gripped by Superficiality and Luxury”, op.cit.
37 “Tiny Houses With Big Ambitions”, op.cit.
38 “BEST TINY HOUSES”, https://www.besttinyhouses.com/

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educators’, “Living tiny encourages greater connection to your surroundings, your neighbours,
and the great outdoors. This leads to what we like to call ‘everyday adventure’, where you find
yourself interacting with more people; something that is easily avoided in larger, fenced-in
American homes. And whatever your tiny home might lack, like a washer and dryer, you can
find in your neighbourhood or in a communal facility.”39

With the sense of community also came the sense of understanding and sustainable living.40
Every time an average house was built, it created huge impacts on the environment as well as
economy. Comparatively, the overall energy consumption of a tiny house was significantly less,
leading to lesser ‘carbon waste and ecological impact’.41 Kate Holmes, advocator of Tiny House
Movement, said, “The movement to reduce environmental impact kicked off right during the
start of the tiny house movement. People were looking for a different solution to reducing
their carbon footprint. Tiny houses were not only small in scale but small in overall impact.
This is because they used less electricity and natural resources. The hope was that with smaller
houses, there would be less negative consequences for the state of the environment.”42

The small surface area, less space to heat and cool, fewer lights, and fewer appliances were
the unique aspects of the tiny home that contributed to the lessened footprint and cost.
Another interesting feature was waste management system. People living in tiny houses were
more cognisant about consuming resources and wastage. According to an anonymous tiny
house owner, “They (tiny houses) can be defined not merely in terms of movable structures,
but rather as a way of intelligently inhabiting a specific environment at a specific time and
place in a way that better reacts to increasingly frequent social shifts.”43

Boiling down to the reality, living in a tiny house had few qualms. One of the most common
challenges was less storage space as tiny house has no space for regular sizes refrigerators,
instead people had to use dorm fridge. Similarly, there was no room for an entertainment
space. Talking about the sacrifices of a tiny house living brought, Shafer said, “I was living in
the back of my truck for a while and living in an Airstream Trailer for a while. In those cases,
initially, I’d gotten down to just a bed and some storage and that’s really all I needed to
survive. I missed having a laptop... And I also missed having a sink in the back of the truck.”44

Another challenge was zoning laws and utility bills. Mike Arman, a retired Florida-based
Mortgage Broker and Real Estate Agent, said, “Building permit and zoning regulations may
prohibit homes of certain sizes or on wheels. Your utility installation fees will be exactly the
same as for a larger house, so will your cable and internet fees. About the only thing that will
be cheaper is your power bill... Your property taxes may be slightly less as well.” Kim Skobba,
an Assistant Professor at University of Georgia who taught course on tiny home construction,
opined, “That means tiny homes may work best either as permanent structure in RV

39 Stephens Alexis and Parsons Christian, "Small Mercies: How Tiny Homes Are Creating Strong Communities in
the US", http://www.rocagallery.com/tiny-homes-us, September 17th 2018
40 “Holmes Kate, “Tiny House Movement: How, Who & When It Started (decades ago!)”,
https://www.godownsize.com/tiny-house-movement/, March 7th 2019
41 “Living in a Box: How the Concept of Tiny Houses Has Changed Over the Years”, op.cit.
42 “Tiny House Movement: How, Who & When It Started (decades ago!)”, op.cit.
43 “Living in a Box: How the Concept of Tiny Houses Has Changed Over the Years”, op.cit.
44 “Tumbleweed Homes: Jay Shafer Interviewed”, https://www.networx.com/article/tumbleweed-homes,
December 26th 2018

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(recreational vehicle) resorts (and parks) or as accessory buildings to larger homesteads, where
owners of tiny houses may lease from landowners.”45

Further, there were legalities of living in tiny homes such as ‘building codes’ and ‘zoning’.
While building codes were easy to manage, the biggest challenge was zoning as it prohibited
certain structures from being occupied. On this, Shafer pointed out, “While you can put a
house on wheels in order to get around minimum size standards, you can’t live on your
wheels, in a trailer, just anywhere.”

While many states had strict norms, there were other states that welcomed the downsized
living. Shafer said, “Most of the building officials themselves. Regardless of the rules they have
to enforce, are really in favor of all this stuff because they can see the merit in it and they’re
eager to find loopholes with the people. For instance, I wasn’t allowed to live in my trailer in a
residential area in Iowa City, but I could camp out in my own yard, and so I did, for five years.
They were fine with that. They were trying to help me find a way around those antiquated laws
too.”46

The Road Ahead

Despite the minor hiccups, tiny houses were more than just being a ‘lifestyle choice’. Talking
about how the tiny house market was shaping up, Mike Schmidt, Business Development
Director for Tiny Home Industry Association47 said, “This is the perfect time for the industry,
since two demographic waves are crashing: Baby boomers want to downsize and retire, and
millennials want homes and flexible living without debt.”48

With the rising demand for urban real estate, many architects and designers were cashing in by
providing innovative solution, smart storage solutions, modular living and specially designed
tiny homes to fill the gap across the world.49 “Rail-thin lots that might have been left
undeveloped get outfitted with tiny homes. Empty buildings are transformed into living spaces
through adaptive reuse. Prefabricated units such as shipping containers become pint-size
dwellings,” said Hannah Martin, an author on Architectural Digest, an American monthly
magazine.50 (Annexure II).

And with inventions like 3D Robotic Printing technology and advanced materials which were
capable of building quick and custom house structures in 2,000 sq. ft. area with less waste and
at lower cost, the future of tiny house looked potential.51 Was this trend here to stay?

45 Kulp Kayleigh, “Tiny houses grow in popularity, yet drawbacks abound”,
https://www.cnbc.com/2017/02/02/tiny-houses-grow-in-popularity-yet-drawbacks-abound.html, February 2nd
2017
46 “Inside the rise of the tiny house movement”, op.cit.
47 It is a group aimed at creating sustainable and adaptable codes to organise tiny home communities, build up
sustainable building regulations and to support municipalities on zoning and policies for tiny homes.
48 Sisson Patrick, "Tiny houses: Big future, or big hype?", https://www.curbed.com/2017/7/18/15986818/tiny-
house-zoning-adu-affordable-housing, July 18th 2017
49 Tchong Michael, ‘Small Homes: Future Of Real Estate”, https://ubercool.com/small-homes/, April 4th 2018
50 Martin Hannah, "9 Tiny Houses Marie Kondo Would Approve of,"
https://www.architecturaldigest.com/gallery/tiny-houses-marie-kondo, February 10th 2017
51 "The future of human shelter has arrived", https://www.iconbuild.com/

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Annexure I
Types of Tiny Houses

XS House, on wheels, is
one of the most petite
designs built in just 65
sq. ft..

A 140-square-foot tiny
house on land
surrounded by massive
garden space

Sources: 1. Tafline Laylin, "The World’s Smallest House Will be Auctioned on eBay to Benefit the
Toledo Art Museum, https://inhabitat.com/the-worlds-smallest-house-will-be-auctioned-on-ebay-to-

benefit-the-toledo-museum/
2. Tiny, https://www.pallspera.com/news/tiny/

Annexure II
Tiny House Architectural Designs from Around the World

This 15-foot-wide contemporary townhouse in Landskrona,
Sweden, is a stark white contrast to the two older buildings
that flank it.

The 11-foot-wide-by-22-foot-long Minim House in Washington,
D.C., designed by Foundry Architects, is like a slightly roomier
trailer, and includes a solar energy system and a rainwater
harvesting mechanism.

The white metal façade of the three-story White Hut and Tilia
Japonica house, created by Takahashi Maki architects in Saitama,
Japan, boasts two long windows that run from the first floor to
the third.

Situated on a tight urban plot about the size of a parking space,
this Fujiwara-Muro house, also in Kobe, uses skylights and large
windows to bring light deep into the home.

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This small house in Kobe, Japan, designed by Fujiwara-Muro
Architects has an odd, angular configuration that allows each
room to get natural light, despite its long, narrow footprint that
measures 13 by 50 feet.

The Slim House in London by Alma-nac Collaborative
Architecture—a renovation of a 19th-century residence that was
built in an alley—is just 7.5 feet wide. Behind its traditional
façade featuring a red door and windows, the home has a sloping
slate-clad roof dotted with strategically placed skylights.

In Bordeaux, France, Fabre/deMarien Architects transformed a
dilapidated 18th-century garage in a cobblestone alley into a
441-square-foot home, replacing a run-down garage door with a
sliding pine façade.

The Billboard House perches atop a two-story building in the
Mexico City’s Polanco neighborhood. While the project—
conceived by architect Julio Gomez Trevilla—was commissioned
by an advertising agency, it acts as a prototype for how the
densely-populated city might approach an impending housing
shortage.

Anonymous Architects erected the 15-foot-wide, two-
bedroom Eel’s Nest—named for the Japanese term for very
narrow lots—in Echo Park neighborhood, Los Angeles, where
new buildings join older bungalows on the hilly streets. The
narrow home actually replaces a skinnier structure dating
from 1927.

Source: Compiled by the Author from - Hannah Martin, "9 Tiny Houses Marie Kondo Would Approve
of," https://www.architecturaldigest.com/gallery/tiny-houses-marie-kondo, February 10th 2017

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Troubles Brewing at Huawei
Can the Tech Giant Survive?

Case Study

This case was written by Meenu Bhatnagar and reviewed by Dr. A. Saravanan Naidu, Amity
Research Centers Headquarter, Bangalore. It is intended to be used as the basis for class discussion
rather than to illustrate either effective or ineffective handling of a management situation. The case
was compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any
form or medium whatsoever without the permission of the copyright owner.

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Author: Meenu Bhatnagar

Troubles Brewing at Huawei: Can the Tech Giant Survive?

Abstract: Ren Zhengfei (Zhengfei) established Huawei Technologies (Huawei) in 1987. From a
humble beginning it grew astronomically to become a global tech giant. However, as Zhengfei had
served in China’s People’s Liberation Army, it raised doubts over Huawei’s relationship with Chinese
State Security Services. Huawei’s products currently had a presence in more than 170 countries
serving about a third of the global population. The company had come under severe political
pressure from the U.S. which considered Chinese companies as security risks and had also influenced
countries like New Zealand, Australia and Japan to ban its products and services. Huawei’s Chief
Financial Officer, Meng Wanzhou’s arrest in December 2018 by Canadian authorities was at the
behest of the U.S. The company was perceived to be a national security threat to the U.S. On the
other hand, Huawei was focusing on developing 5G networks by 2020, and as part of that strategy
moved away from being only a component manufacturer to self branded smartphone manufacturer.
Moreover, Huawei’s growth was not dependent on western countries and their political stand, as it
had an immense domestic market within China besides concentrating on emerging markets namely,
Middle East, Asia, Africa and South America. Would Huawei achieve its ambition of becoming a
global tech leader amidst the changing global business alignment?

Case Study

“We shall drink to our heart’s content to celebrate our success (ren sheng de yi xu jin huan), but if we
should fail let’s fight to our utmost until we all die (ju gong jin cui, si er hou yi).”1

- Ren Zhengfei, Founder President, Huawei Technologies

Established in 1987 by Ren Zhengfei (Zhengfei), Huawei started from phone and cable network
businesses with a staff of three people to become third biggest global manufacturer of
telecommunication equipments with 180,000 employees in three decades. It also built expertise as a
prominent global mobile phone manufacturer. The company provided telecommunication
equipments, developed networks and mobile operations while it invested heavily in R&D to
continuously pursue innovative products and services. It had competed successfully with global
brands namely Samsung and Apple, besides the rising Chinese brand Xiaomi. The company was keen
on cloud services and artificial intelligence while showing growth despite the ongoing aspersions
centred on security concerns. The trade treaty between the U.S. and China had come under
considerable stress due to security apprehensions. Huawei’s core problems originated from its
mysterious corporate culture which confused global security experts about its intentions. On the
other hand, experts claimed that the U.S. was suppressing Huawei’s business prospects as it was a
formidable business competitor. The company was fast progressing in the development of 5G
technology and the U.S. and it allies wanted to keep Huawei out of their 5G mobiles networks.

1 Cremer De David and Tao Tian, “Huawei’s Culture Is the Key to Its Success”, https://hbr.org/2015/06/huaweis-culture-
is-the-key-to-its-success, June 11th 2015
“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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Moreover, Zhengfei had been in the process of grooming Meng Wanzhou (his eldest daughter) as
future CEO. She had grown through the ranks and sat on the board as Chief Financial Officer.
Unfortunately, her fortunes were in the dark following her arrest in Vancouver, Canada on
December 1st 2018. Moreover, the U.S. was looking for her extradition on the scam (fraud) charges
for violation of ‘U.S. sanctions against Iran’. At the same time, Zhengfei’s military background
provoked suspicions about Huawei’s involvement with China’s state security services ‘to spy on
customers’. Would the US’ efforts in gathering other countries to ban the company, adversely affect
Huawei’s global expansion plans and survival in the tech sector?

Huawei: The Rise and Fall

Huawei Technologies Co., Ltd (Huawei) was a traditional ‘rags-to-riches’ tale. It was established in
1987 by Ren Zhengfei (Zhengfei), who came from rural area having served for about two decades
with the People’s Liberation Army in the military technology department. He began with a staff of
three and $5,000 and the company grew to be a multibillion-dollar giant. Despite tremendous
growth, Huawei remained Chinese company inclusive of ‘boot camps’ and ‘fully Chinese Board of
Directors’.2

Huawei’s Growth

Huawei began as China’s rural sales agent representing Hong Kong-based phone and cable network
businesses. During 1996 to 1998, with rising urban population, Huawei spread its operations in the
metropolitan areas of China. It had become ‘the third-biggest global manufacturer of routers,
switches and other telecommunications equipment by market share’ behind Alcatel-Lucent and
Cisco, while joining the predominantly-aggressive ‘smartphone race’. According to market observers,
“Huawei has seemingly come out of nowhere to become one of the world’s most dominant
technology brands. Primarily a business-to-business company (B2B), its biggest gains have been
outside of the public eye.” Key clientele were ‘telephone and internet operators’ using Huawei’s
capability in offering services to customers in their individual names rather than in Huawei’s name.
Moreover, the company was not popular globally because of its Chinese origins. The growth of
Huawei was possible only because one-fifth of the global population was within its own borders. The
company’s main business was divided into three groups namely, Carrier Network Business Group,
the Enterprise Business Group, and Consumer Business Group. 3 (Exhibit I).

In 2005, the revenue earned from markets abroad surpassed that from the Chinese market. Besides,
in 2012, Huawei outdid Ericsson (world leader in telecommunications and networks) in ‘sales
revenue and net profit’ which continued till the 2014 financial year wherein Huawei achieved ‘all-
time high sales revenue of $46.5 billion and net profits of $4.49 billion (both in U.S. dollars)’
(Annexure I). Further, Huawei stressed on ‘the power of thinking’ as a part of its philosophy which
was the most valuable thing. Attempts were made to ascertain that intellectual exchange occurred
routinely wherein ideas were exchanged between employees, senior executives as well as Zhengfei.
Significantly, it was establishment and demonstration of the international quality of what was a
‘once-Chinese company’. Moreover, feedback was welcomed throughout the company for
developing ideas which would finally become a fuel to the company’s future vision.4

2 Fifield Anna, “‘Bloodthirsty’ like a wolf: Inside the military-style discipline at China’s tech titan Huawei”,
https://www.washingtonpost.com/world/asia_pacific/bloodthirsty-like-a-wolf-inside-the-military-style-discipline-at-
chinas-tech-titan-huawei/2018/12/12/76055116-fd85-11e8-a17e-162b712e8fc2_story.html?utm_term=.c23ef11ad964,
December 13th 2018
3 “Huawei – Transforming A Chinese Technology Business To A Global Brand”,
https://martinroll.com/resources/articles/strategy/huawei-transforming-chinese-technology-business-global-brand/,
February 2018
4 “Huawei’s Culture Is the Key to Its Success”, op.cit.

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Exhibit I
Huawei’s Business Groups

# Business Group Particulars

Provided wireless networks, fixed networks, global services, carrier software,

core networks and network energy solutions set out by nearly all major

1 Carrier Network communications carriers globally. From 2005 to 2012, the compound annual
growth rate of Huawei’s managed services division exceeded 70% annually

turning Huawei into fastest-growing managed services provider across the

world.

A perfect complement - once information was sent and received through

2 The Enterprise ‘pipes’, these data were analysed, translated, stored and saved, by Huawei’s
data center and storage products.

Leading the company’s push into the personal handset and smartphone

3 Consumer segments, Huawei called it ‘pipe strategy’, focusing on Information storage &
Business processing, Information transportation & distribution and Information

presentation & creation.

Source: Compiled by the Author from – “Huawei – Transforming A Chinese Technology Business To A Global
Brand”, https://martinroll.com/resources/articles/strategy/huawei-transforming-chinese-technology-
business-global-brand/, February 2018

As one of the most popular tech firms to surface from the Chinese market to compete globally,
Huawei was comfortably positioned as a global leader providing telecommunication equipment
while developing networks for prominent mobile operators. Besides, it was ahead in number of
patents filed and the only Chinese company entering into the Fortune 500 list. Meanwhile, its R&D
investment went beyond 15% of total revenue in 2015, outshining stalwarts like Apple, Oracle and
Facebook. In brief, Huawei was a global tech leader with huge capital and ready infrastructure for
innovation. Still, the company had to make tremendous efforts to appear as a true innovator on the
lines of global brands namely Apple.5

Huawei attained 46th position in 2016, as the most innovative company worldwide by Boston
Consulting Group. Subsequently, two years continuously in 2015 and 2016 - it won global Patent
Cooperation Treaty patent applications. In a multitude of 180,000 employees, the company
comprised about 80,000 R&D employees (45% of its workforce) spread across Sweden, Germany,
UK, the U.S., Finland, Ireland, Italy, Belgium, Russia, India as well as China. The company valued the
strength of brands as it drove innovation visible in global processes. Moreover, the company
believed that with dedicated resources, it could maintain a focused rationale of improving life
through communication. With a winning move into the smartphone business, the company followed
a philosophy of ‘positioning its products as technologically-advanced problem-solvers’. The objective
was to connect largest telecommunication providers ‘with its future platform of manufacturing and
selling the most advanced phones’.

In April 2017, the company pronounced it’s preparation of crafting a separate cloud business unit by
investing $1 billion towards its expansion. Eric Xu, Rotating CEO, Huawei, said “Brand has been
pushing its new public cloud platform both independently and by partnering with operators in some
countries, such as Deutsche Telekom in Germany. Huawei’s personal handset business has steadily
built expertise from a low-cost component and assembly provider to the top global mobile phone
makers. Although it received no branding benefits, by 2008, it was ranked No.3 in the global mobile
equipment market. It has now successfully shed its role as an original design manufacturer (ODM)
and begun to manufacture and brand its smart devices.”6

5 Kozhakhmetova Dana, “Can Huawei become an innovator?”, https://chinafocus.ucsd.edu/2017/04/06/can-huawei-
learn-to-innovate/, April 6th 2017
6 “Huawei – Transforming A Chinese Technology Business To A Global Brand”, op.cit.

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International Data Corporation7 (IDC) in its data given to The Verge8 highlighted, “China’s Huawei
enjoying a meteoric rise since the start of 2017. Yes, the same Huawei that the US government
advises its citizens to avoid.” Further it added, “In the first quarter of 2017, Huawei shipped 3.6
million phones in Europe and had a respectable 11.4 percent share of the market. That number has
been on a steady upward climb and is now nearly double, sitting at 6.7 million for the second
quarter of 2018.” The company’s growth alongwith occasional Apple’s releases had managed to give
it a remarkable 24.8% market share in Europe, growing more than Apple’s. Significantly in a bid to
move west, Huawei had initiated its flagship P20 Pro in Paris alongwith Xiaomi with several devices
in Madrid and Oppo selecting the Louvre for its Find X launch. These changes were indicative that
European phone markets would appear like a mix of the US and Chinese. The markets were shared
by the traditional giants like Apple and Samsung alongwith fast rising Chinese alternatives namely
Huawei and Xiaomi.9

Huawei, the face of China's vibrant tech sector had grown astoundingly - from a small manufacturer
of telephone exchange switches to a global leader of tech industry. Though known for its several
mobile phone handsets, Huawei had interests in cloud services to artificial intelligence. In spite of
rising debate about security concerns, the company was continuously and steadily moving on
towards global growth. The growth happened due to the conditions of China moving on the path of
becoming the world's second largest economy which gave the company a platform to develop its
base market and a launch pad for global expansion. Consumers were aware of Huawei moving to a
market for consumer electronics namely smartphones. In the beginning of 2018, the company
outdid Apple in the quantity of handsets it shipped globally. Though shipments did not necessarily
mean phones reaching consumers, yet production and distribution definitely echoed rise in Huawei's
popularity both for low priced Honor brand as well as premium models.10 (Exhibit II A & B).

Exhibit II A
Huawei’s Quick Growth in a Decade

Source: Hooker Lucy and Palumbo Daniele, “Huawei: The rapid growth of a Chinese champion in five
charts”, https://www.bbc.com/news/business-46480208, December 7th 2018

7 It is a provider of market intelligence, advisory services, and events for the information technology,
telecommunications, and consumer technology markets.
8 It is an American technology news and media network operated by Vox Media.
9 Savov Vlad, “Despite being shunned in America, Huawei is flourishing in Europe”,
https://www.theverge.com/2018/8/22/17768966/huawei-xiaomi-idc-smartphone-market-europe-statistics, August
22nd 2018
10 Hooker Lucy and Palumbo Daniele, “Huawei: The rapid growth of a Chinese champion in five charts”,
https://www.bbc.com/news/business-46480208, December 7th 2018

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Exhibit II B
Huawei Rise in Sales across Continents

Source: Hooker Lucy and Palumbo Daniele, “Huawei: The rapid growth of a Chinese champion in five
charts”, https://www.bbc.com/news/business-46480208, December 7th 2018

The brand Huawei for many meant a brand related to most modern, premium technological
products. Having come a long way since the time of its inception in 1987 and within a short span of
three decades, Huawei had grown to be a global giant competing with competitors like Samsung and
Apple.11 According to IDC, “Huawei is a Chinese tech company based in Shenzhen that sells
smartphones and telecommunications equipment around the world. Earlier this year, it became the
world's second-largest smartphone maker, behind Samsung.”12 (Exhibit III).

Exhibit III
Status of Smartphone Sales of Huawei

Source: Horowitz Julia, “What is Huawei, and why the arrest of its CFO matters”,
https://edition.cnn.com/2018/12/06/tech/what-is-huawei/index.html, December 9th 2018

As of 2018, Huawei’s products and solutions were spread across more than 170 countries thereby
catering to over one third of the global population.13 Huawei as the second-largest smartphone

11 “Huawei – Transforming A Chinese Technology Business To A Global Brand”, op.cit.
12 Horowitz Julia, “What is Huawei, and why the arrest of its CFO matters”,
https://edition.cnn.com/2018/12/06/tech/what-is-huawei/index.html, December 9th 2018
13 “Huawei – Transforming A Chinese Technology Business To A Global Brand”, op.cit.

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maker globally, declared sale of a record-breaking 200 million units in 2018, regardless of mounting
attacks from the U.S. and its allies as well as generally declining smartphone market. As per the
market experts, earlier the company sold 153 million units in 2017, compared to 3 million units in
2010, which symbolised 30% growth and a 66-fold increase. According to IDC, “Huawei is also
gaining rapidly in market share. Earlier this year, it edged out Apple in smartphone sales and had
14.6% of the global smartphone market in the third quarter, second only to Samsung’s 20.3%.”14

Causes for Decline of Huawei

Despite lack of political sympathy in certain parts of the world, particularly in the U.S. towards
Huawei, sales of smartphones continued to grow. Though consumers did purchase Huawei phones,
it could not be comprehensively marketed due to paucity of support. The company’s telecoms
network equipment – a major part of Huawei’s business, suffered the most with Washington's
hostility. With a warning of security risks, the U.S. wanted other governments also to follow suit by
banning the company to which Japan, New Zealand and Australia agreed.15

To top it all, the arrest of Meng Wanzhou (Meng), Chief Financial Officer, Huawei, on December 1st
2018, by the Canadian authorities had shaken the business world with the risk upsetting the shaky
trade treaty between the U.S. and China. According to Canadian prosecutors, “Meng Wanzhou...was
detained in Vancouver...at the request of US authorities...accused by the United States of helping
Huawei cover up violations of sanctions on Iran.” US lawmakers were critical of Huawei as a national
security threat to the U.S. While, the Global Times - a Chinese tabloid stated, “The United States is
just trying to stifle Huawei because it's a business competitor.” Scott Kennedy, Expert, Chinese
Economy, Center for Strategic International Studies, Washington observed, “This case is like a sharp
tug on a loose thread that could be part of an unraveling of the relationship...Both sides need to
proceed with abundant caution and a clear sense of their long term interests.” As a top player in
Chinese tech sector, Huawei was playing a significant role in the nation’s aspiration to be a global
tech superpower. It had been moving fast towards development of 5G technologies which was core
to China's preparations in dominating super-fast wireless networks. Security issues raised had
already created problems in United Kingdom, while New Zealand and Australia had already banned
Huawei equipment in their 5G mobile networks.16 The U.S. officials had warned allies about the
possibilities of the Chinese state utilising Huawei for cyber espionage. Huawei had brushed the
apprehensions aside, although Meng’s arrest and possible extradition to the U.S. had increased the
tensions. Stephane Richard, CEO, Orange stated, “We don't foresee calling on Huawei for 5G...We
are working with our traditional partners - they are Ericsson and Nokia.”17

Meng’s arrest was an extension of the ambidextrous deadlock between the U.S. and China, which
included differences over trade, intellectual property and naval lanes and much more. However,
Huawei denied having any connection to the Chinese government or military, but the critics stayed
sceptical. A suspicion had been created regarding risks to the American national security.
Consequently, major Huawei equipment sales in the United States had been blocked. President
Donald Trump’s (Trump) administration had decided to give priority to American technology. Experts
opined, “All of that, to a degree, is Huawei’s own fault. The problem starts with its mysterious
corporate culture, which has left policy makers and security experts hazy about its background and

14 Hao Karen, “Huawei is the world’s fastest-growing smartphone seller despite increasing global scrutiny”,
https://www.technologyreview.com/the-download/612681/huawei-is-the-worlds-fastest-growing-smartphone-seller-
despite-increasing-global/, December 26th 2018
15 “Huawei: The rapid growth of a Chinese champion in five charts”, op.cit.
16 “What is Huawei, and why the arrest of its CFO matters”, op.cit.
17 “Huawei facing fresh set of problems in France and Germany”,
https://telecom.economictimes.indiatimes.com/news/huawei-facing-fresh-set-of-problems-in-france-and-
germany/67094312, December 14th 2018

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intentions.”18 They further added, “The U.S. government will continue putting pressure on the
company over what the intelligence community views as intractable supply-chain issues.”19

Elliott Zaagman, Writer, Corporate Trainer and Executive Coach stated, “China’s biggest telecom
company can attribute much of its success — and most of its setbacks — to how stubbornly
‘Chinese’ it remains, even in the face of rising demands for it to conform to Western standards... It
was notorious even before the detention of its CFO, Mèng Wǎnzhōu.” He further added, “This is
about the way in which the People’s Republic of China, its companies and its people, engage with
the rest of the world. It is about culture and identity, the norms of doing business, and the way in
which concepts of trust and success are defined.”20

Can Huawei Re-script its Success Saga?

According to market analysts, there had been no change in the prevalent corporate culture of
Huawei since 1990s wherein, ‘a military style and wolf culture of survival of the fittest’ flourished.
The old tenets of corporate culture were crucial for surviving not only in the Chinese domestic
market, but also for competing with global players while embarking on a demanding passage to
winning in foreign markets. Severe competition in the ICT sector demanded a company to be at the
forefront of innovation. Huawei was persistently modifying its operations and profusely investing in
R&D for forecasting new market trends and offering powerful solutions to the customers.
Somewhere, it missed out on talent management a key asset for any company. The company had
been giving financial incentives for staff motivation and while recruiting highly skilled talents, the
values were more in sync with earlier generations than millennials.21

According to McKinsey & Company22, “China’s urban population will hit the one billion mark by 2030
and have 221 cities with over one million inhabitants by 2025 compared to 35 in Europe. Vast cities
require complex communication networks and Huawei has continued to grow at an astounding rate
by expanding on and servicing this need. The movement up the value chain from component
manufacturer to self-branded smartphone maker is a major part of Huawei’s current and future
growth strategy.” In 2017, Huawei Group commanded 10% of the total global market share. The
company’s vision was to ‘enrich life through communication’. According to experts, “By 2020,
interactions between people, things and the environment are expected to result in over 50 billion
connection requirements from GPS, compasses, cameras and microphones, not just
communications. To deal with these digital floods, Huawei is committed to provide broader,
smarter, and more energy-efficient pipes.”23

Meanwhile, reconsidering its vendor plans over ensuing debate on the security of Chinese network
gear in Germany and other markets where it operated, Deutsche Telekom24 stated that it “takes the
global discussion about the security of network equipment from Chinese vendors very seriously.”
Further on pursuing a multi-vendor strategy, it said, “Nevertheless we are reassessing our
procurement strategy.” However, other German telecoms players stated, “They are continuing talks

18 Schuman Michael, “The Fate of Huawei Foreshadows the Fate of China”,
https://www.theatlantic.com/international/archive/2018/12/huawei-problems-china-challenges/578413/, December
18th 2018
19 Fazzini Kate, “For Huawei, another week of bad headlines means the company is facing trouble on a global scale”,
https://www.cnbc.com/2019/01/11/huawei-is-facing-trouble-on-a-global-scale.html, January 15th 2019
20 Zaagman Elliott, “Huawei’s Problem Of Being Too ‘Chinese’”, https://supchina.com/2019/01/24/huaweis-problem-of-
being-too-chinese/, January 24th 2019
21 “Can Huawei become an innovator?”, op.cit.
22 It is a global management consulting firm.
23 “Huawei – Transforming A Chinese Technology Business To A Global Brand”, op.cit.
24 It is Europe's largest telecoms company.

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with Chinese vendors as they draw up proposals to take part in Germany's auction of 5G licences in
early 2019.” While Analysts opined, “German telecoms operators depend heavily on Huawei,
meaning it will be hard to rip out and replace its existing gear or to cope without the Chinese
company, the world's top network supplier, in building their 5G networks.” On the other hand, Hans
Schotten, Professor and Head of the Institute of Wireless Communication, Technical University,
Kaiserslautern, opined, “If the Chinese companies are excluded, this would reduce the number of
vendors - and that could drive costs higher. For that reason, many vendors would be reluctant to do
without Huawei.”25

The changeover from a non-descript ODM to a noticeable manufacturer of brands had been a tough
drive for the company. It needed committed leadership team to exploit the global prospects. The
company’s R&D teams had been diligently working for development of 5G networks for many years
to launch commercial 5G networks by 2020. Ken Hu, Rotating CEO, Huawei proposed, “5G will be up
to 100 times faster than 4G.” Experts claimed that “Although a chain of command that promotes
uniformity and control quality is vital for branding, it can be detrimental to innovation. Making more
decentralised decisions is important, and Huawei has begun delegating decision-making authority to
customer-facing roles and field offices, encouraging idea flow.” Most risky yet most prospective of
brilliant leadership strategy was Huawei’s rotating CEO system wherein a few executives of a group
took turns to fulfil CEO duties. To a certain degree, Huawei followed Apple in building awareness
through flashy events while considerably investing in lobbying and public relations. Meanwhile, the
marketing strategy was focused on positioning of smartphones as superior products. Its brand
visibility improved with the fall of Sony, Blackberry and HTC brands, thereby giving it new
opportunities in the sphere of consumer retail. Apart from China and the U.S., its brand reach for
smartphones created prospective and profitable opportunities in Indonesia, Taiwan, India as well as
several African countries. These newly realised opportunities enabled Huawei’s position as an entry-
level challenger in many markets and allowed it to design and execute a global marketing strategy.
Constant and large outlay in advertising and communications had been core of Huawei’s brand
strategy alongwith the likes of Apple and Samsung.26

The fate of Huawei mattered for China and the world at large. Major goal for the company was
transforming China into a technology powerhouse and rise above and then challenge, the U.S.
Huawei – most prominent of China’s global enterprises was a core component of that pursuit.
Moreover, it had to shield itself against crimes for which there was no proof. In 2017, it had
generated almost $93 billion in revenues by doing business successfully across an extensive range of
countries.

The rising unease about Huawei led to escalating wariness of China. Foreign governments were in
China’s path as both the U.S. and the European Union initiated new policies for cautiously examining
foreign investments so as to restrict ‘high-tech know-how out of Chinese hands’. Malaysia had
stopped the progress of high-profile infrastructure projects supported by China. William Reinsch,
Senior Adviser, International business, Center for Strategic and International Studies, Washington,
D.C. stated, “Most of it is a China problem, and it’s gotten worse... If Huawei was an Indian company,
I think that the attitude toward it would be very different.” Huawei’s difficulties in the U.S. and in
other places were an indication for China’s top leadership to walk an extra mile ‘to ease fears about
its ascent and ambitions’. It was a deadlock which required to be opened.27 Huawei’s growth was not
solely dependent on the political attitudes of the western countries as it was focusing on R&D to
gain a competitive edge. According to Stephane Teral, Industry Analyst, IHS Markit,28 “Prospects may

25 “Huawei facing fresh set of problems in France and Germany”, opp.cit.
26 “Huawei – Transforming A Chinese Technology Business To A Global Brand”, op.cit.
27 “The Fate of Huawei Foreshadows the Fate of China”, op.cit.
28 It is a London-based global information provider.

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not be as bright for Huawei now as they used to be, given the political squeeze from the West. But,
the firm went through the financial crisis unfazed thanks to a powerful domestic market in
China...The same could happen again if it loses more contracts in the West... Huawei went through
this unfazed with no problems, because they were able to diversify at a time when China was just
taking off, including telecoms restructuring, that really helped Huawei.”29

Difficulties faced by Huawei

Huawei's had earned its position amongst the global leaders. Subsequently, to retain its position, it
was essential for the company to gain knowledge about innovating and adapting in sync with
western contenders. One of the major obstacles in disrupting the company’s growth was its
corporate culture. The company had been unable to regulate its corporate culture with the changing
nature of its workforce. However, dissimilar employees would make it difficult for Huawei to bring
together all ‘to share common values and principles’. Besides, traditionally Chinese culture was
intricately embedded in the company thereby making change even more difficult. To deviate from its
basic principles would mean shedding its identity which was unlikely for the company, yet the
minimum it could do was to take responsibility to build a healthy work atmosphere wherein
employees would not be stifled by aggressive competition. Another issue was Huawei's internal
structure for leadership succession which lacked clarity as to whether the next leader would emerge
from rotating CEOs or from a family member. A strong leader was essential for the company as
having been dominated by Zhengfei’s strong personality the succession issue would definitely be a
determining factor in Huawei’s future.30

Huawei was divided into three main business segments - carrier, corporate and consumer. While the
carrier (cellular network, base station etc) was growing but was restricted due to the bans and
sanctions from 5 eyes countries31. Although having given up the U.S. market, Huawei might be driven
out of west Europe too. Though significant, yet this would not break the company as its success
mainly rested on moving into other emerging markets namely Middle East, Asia, Africa and South
America, which proffered good profits nearly at par with western countries. Huawei had a strong
hold on 5G tech patents which enabled them ‘to collect licensing fees without actually selling
products’. Similarly, corporate market was in a comparable situation. The strong hold in China’s
domestic market potential helped its expansion into emerging markets. Though small in comparison
to other two segments it had the potential to witness growth with 5G networks emerging globally
alongwith new products and applications. Besides, consumers (Smartphone and other electronics)
were the main growth pillar of the company and had a lot of potential.32

Despite having achieved remarkable accomplishments, Huawei faced exceptional business
challenges. As a part of digital and technology sector wherein very fast changes took place daily, it
was essential for the company to position innovation as a priority.33 (Annexure II). Huawei was a
knowledge-intensive company and with its 180,000 employees from 165 different nationalities and
over 40,000 non-Chinese employees with strong educational backgrounds posed a big challenge in
utilising the creativity of all and simultaneously pooling together for creating value.34 Besides, due to
business prospects with the U.S. going dim, Huawei’s approach was changing. Moreover, the Federal

29 “Huawei: The rapid growth of a Chinese champion in five charts”, op.cit.
30 “Can Huawei become an innovator”, op.cit.
31 An intelligence alliance comprising Australia, Canada, New Zealand, the United Kingdom and the United States and
were bound by the multilateral UKUSA Agreement, a treaty for joint cooperation in signals intelligence.
32 Tian Li-Geng, “Is China’s Huawei in trouble?”, https://www.quora.com/Is-Chinas-Huawei-in-trouble, December 13th 2018
33 “Huawei – Transforming A Chinese Technology Business To A Global Brand”, op.cit.
34 Robinson Dan, “The growth of Huawei: How Chinese brand became world’s second largest smartphone
manufacturer”, https://www.compelo.com/growth-of-huawei-how-chinese-brand-became-2nd-largest-smartphone-
maker/, November 26th 2018

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Communications Commission was planning to come with a new rule which would be to ‘block
federally subsidised telecommunications carriers from using suppliers deemed to pose a risk to
American national security’. Alongwith major tech companies (American or Chinese), Huawei found
itself caught in efforts by the U.S. administration to stop China’s high-tech ambitions.35

Huawei’s work culture was criticised in today’s modern age businesses, yet some considered such
culture as the company’s means to success. Criticism of Huawei culture meant disapproving China
and what had formed a part of their identity. As Huawei had been under scanner, the challenges it
was facing were similar to those facing China, its culture, and its system. Lack of clarity at Huawei
also had its repercussions which corroded trust within and outside the company particularly
amongst employees who were not Chinese. This factor played major role in company’s fight back in
managing their public image overseas. Non-Chinese people hired for more junior-level executive
positions usually did not contribute in company decision-making. According to Experts, “Some of the
strongest problems I can see (are) the lack of transparency, the chaotic management and
exploitation culture. Only the Chinese colleagues enjoy the trust of the upper management and are
given opportunities. The rest are not seen as part of the company.” Besides, the common concerns
raised included ‘issues of diversity, cultural sensitivity, ethics and discrimination’ especially in
developed markets.36

Moreover the biggest risk for Huawei was in its leadership succession. Despite a good plan in place,
Meng’s arrest threw a spanner. Meng was indisputably the heir to the throne but in case of her
detention in Canada and pending extradition to the U.S., one might not see her take the position at
Huawei, and in the meanwhile if her father (who was 74 years old) passes away, it would result in a total
confusion. In Huawei’s exceptional shareholding structure, the founder and CEO held a mere 1.01% of
the company, while the rest remained with the union of employees wherein senior management team
controlled and had veto power over any decisions. It would have gone to Meng, but in the absence of a
collectively agreed upon replacement of Meng, there was a possibility of in-fighting or breaking of the
company. In favour of Huawei was it being run with a rotating Chairman scheme, so changes in top
leadership was not new for them. Yet, a balanced power at the board was good to avoid internal power
fighting and also a lot depended on her father living beyond her absence.37

Trump’s first ‘National Security Strategy’ released in December 2017 highlighted, “For decades, U.S.
policy was rooted in the belief that support for China’s rise and for its integration into the post-war
international order would liberalize China. Contrary to our hopes, China expanded its power at the
expense of the sovereignty of others.” It further added, “We will work with our partners to contest
China’s unfair trade and economic practices and restrict its acquisition of sensitive technologies.”
Moreover the U.S. administration believed “Huawei is the tip of the spear.” While the U.S. officials
were of the view that, “A malevolent state with control over an adversary’s 5G network could wreak
mass industrial sabotage and social collapse.” According to Robert Spalding, Retired Air Force
Brigadier General, “This will be the first major deployment of internet technology which creates
more risk than benefit if not properly controlled.” While, an American official stated, “In other
foreign capitals, U.S. officials are playing hardball over Huawei, warning allies that the U.S. will re-
evaluate what intelligence it shares with them if they don’t end cooperation with the company.” The
U.S. being aware of Huawei’s market advantages was trying to build alternatives to provide foreign
companies with an option. The objective was to checkmate and blunt Huawei’s growth.

35 Zhong Raymond and Mozur Paul, “Huawei, Failing to Crack U.S. Market, Signals a Change in Tactics”,
https://www.nytimes.com/2018/04/17/technology/china-huawei-washington.html, April 17th 2018
36 “Huawei’s Problem Of Being Too ‘Chinese’”, op.cit.
37 “Is China’s Huawei in trouble?”, op.cit.

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Australia, New Zealand and Japan accepted to the U.S. requests to bar Huawei’s 5G equipment and
allies were also falling in line. In Britain, BT Group Plc also had been removing Huawei equipment
from its main structure after acquiring mobile carrier EE Ltd., in 2016, which was using Huawei gear
all through its systems. It was also getting rid of Huawei products from the emergency-response
network which it was building in Britain. On the other hand, Germany was contemplating about
limiting Huawei’s role in its future telecom infrastructure, as well as Czech officials had articulated
unease over China preparing an economically damaging revenge against them when Czech
authorities issued warnings about Huawei’s risk to national security. According to Australian
Strategic Policy Institute report, “Every night for five years, equipment installed in the Chinese-built
headquarters of the African Union in Addis Ababa, Ethiopia, transmitted data from midnight to 2
a.m. back to servers... Subsequently, microphones hidden in desks and walls were stripped from the
$200 million building, which was financed by China, and Huawei’s servers were replaced.”38

Huawei’s growth path from a little known to popular brand had been undeniably remarkable and
exceptional. The period covering 2012 to 2016 witnessed Huawei doubling its annual sales revenue to
$75 billion wherein more than half came from outside China. Significant factors contributing in a
company’s growth comprised its engaging corporate branding and marketing campaigns, unwavering
commitment to R&D investment and spending alongwith efficient pricing strategy aiming at the right
consumer sector for excelling on the world platform. However, Huawei had a comparatively weak
presence in the South Asian, Indian, and North American markets restricting its potential to become a
world leader. To fulfil its aspiration of becoming a world leader in the global information and
communications technology sector it needed ‘bold, daring and different decisions’.39

According to Zak Doffman, Founder & CEO at Digital Barriers,40 the future of the company was bleak
on account of the ongoing deadlock with the U.S. He opined that “Huawei’s future will be defined by
the geopolitics between the U.S. and China in what will become a global tug-of-war between the
commercial appeal of state-subsidized Chinese technology and U.S. political and economic influence.
If there is no lessening of tensions, Huawei will not survive in its current form. It will not continue to
control approaching 30% of the global market for its networking equipment, and it will not control
the next-gen networking backbone underpinning the scaling of IoT that we are about to see.”41

On the other hand, Guo Ping (Ping), Huawei’s rotating Chairman had affirmed that the company
would bounce back and become the world leader. “If we can develop the simplest possible network
architecture, make our transaction models as simple as possible, ensure the highest level of cyber
security and privacy protection, produce the best products and provide the best services, no market
can keep us away… We must not be discouraged by malicious incidents or temporary setbacks, and
must remain determined to achieve global leadership. Setbacks will only make us more courageous,
and incredibly unfair treatment will drive us to become the world's number one,” claimed Ping.42

38 Waldman Peter, et al., “Another Reason U.S. Fears Huawei: Its Gear Works and It's Cheap”,
https://www.bloomberg.com/news/articles/2019-01-24/huawei-stokes-u-s-fear-with-low-cost-networking-gear-that-
works, January 24th 2019
39 “Huawei – Transforming A Chinese Technology Business To A Global Brand”, op.cit.
40 A provider of AI and IoT surveillance technologies to defence, security and law enforcement agencies worldwide.
41 Doffman Zak, “U.S., U.K. And E.U. Look Set To Deal Death Blows To Huawei's 5G Ambitions”,
https://www.forbes.com/sites/zakdoffman/2019/02/03/2018-was-a-disaster-for-huawei-but-heres-why-2019-will-be-
much-worse/#544cc4d64714, February 3rd 2019
42 Tan Aaron, “Huawei aims to be more resilient in 2019 amid challenges”,
https://www.computerweekly.com/news/252455121/Huawei-aims-to-be-more-resilient-in-2019-amid-challenges,
January 2nd 2019

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Annexure I
Foundation of Huawei’s Value Driven Culture

S. No. Values Particulars

Strong leaders provided a sense of purpose to their

people and Zhengfei was no exception who’s first and

1 Customer-First foremost concern was the customer. The company
Attitude distinguished itself from the competition as in the early
years of Huawei everyone in the company had to turn

their eyes to the customers and their backs to the

bosses.

Huawei emphasised that the only way to obtain

opportunities was through hard work. Knowing that a

dedicated and committed work force made companies

2 Employee more competitive was not a too difficult concept to
Dedication understand. The employee shareholding system was
referred to within Huawei as the ‘silver handcuff’.

Zhengfei emphasised on avoiding an IPO and carved

current employee-ownership structure to enable the

company maintain a strong collective fighting spirit.

The employee-ownership arrangement not only helped

Huawei attract and retain dedicated employees but also

3 Long-Term Thinking allowed the company to plan for the long term. Zhengfei

too credited it with allowing them to stay close to their

goals and long-term vision.

Zhengfei was known for avoiding quick decisions and

taking time to reflect, the company too reflected these

traits. Further, tying to their ownership structure - the

4 Gradual Decision- decision-making power was under company control – no
Making outside investor would gain relative control over
Huawei. There system of rotating CEOs enabled a

gradual, more democratic decision-making process

thereby helping Zhengfei make a gradual decision about

his ultimate successor.

Source: Compiled by the Author from – Cremer David De and Tao Tian, “Huawei’s Culture Is the Key to Its
Success”, https://hbr.org/2015/06/huaweis-culture-is-the-key-to-its-success, June 11th 2015

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Annexure II

Challenges for Huawei in Building a Better World

S.# Dispute Particulars

History had proven that monopoly control was temporal.

Structural realities in most industries had and would continue

1 Continuing the to change and the major fault of successful companies was

pace of Innovation complacency. Huawei’s forward push with R&D was

continuous. However, it needed to continually seek and satisfy

future consumer needs rather than only their current ones.

Most difficult challenge - Huawei’s global strategy in the U.S. A

smear campaign by the U.S. government and intelligence

officials recommendations for American firms not to do

business with Huawei due to potential Chinese state influence

and security concerns. The B2B challenges were partly why the

Smartphone were central to Huawei’s growth in America.

2 Brand Image in the Huawei could not let go of U.S completely or admit defeat as it

United States comprised nearly 20% of global telecom spending. It curtailed

its need for dominance in the U.S. market while accepting its

growth as a Smartphone brand. If Huawei played this out well

then it could find space alongwith other Asia technology brands

in the United States namely Samsung, Lenovo and LG. However,

to move ahead, it was essential for Huawei to volunteer more

financial and corporate information for transparency.

A major part of Huawei’s rise from regional player to global

leader was its astute strategy of brand partnerships throughout

its development. To continue to add to the expertise, Huawei

3 Mergers and was likely to face a challenge of staying away from those
Acquisitions mergers or acquisitions which would influence cost efficiency
and economies of scale. Moreover, only those mergers and

acquisitions for brand-building would work which really added

to company’s competitive advantage and not just their bottom-

line.

Asian companies to stand up to Western players required – a

strong commitment to branding by their boardrooms and

senior management. For success it was essential for Huawei to

rotate more marketing-oriented personnel into CEO roles

rather than the traditional experts in finance and operations.

Further, they needed more managers with a global vision,

4 Brand Oriented regardless of nationality or background. Conscious efforts by
global leadership the company ensured inducting more international and diverse

experience in its managerial ranks and across Board level

alongwith multiple senior and mid-management roles. Further,

it had to be followed and implemented comprehensively so

that diverse, global thinking and experience pervaded deeply

into the organisation’s fabric for Huawei’s success in foreign

markets.

Source: Compiled by the Author from – “Huawei – Transforming A Chinese Technology Business To A Global
Brand”, https://martinroll.com/resources/articles/strategy/huawei-transforming-chinese-technology-

business-global-brand/, February 2018

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Japan’s Tourism Boom
A Blessing Amidst Challenges

Case Study

This case was written by Shilpa Bhadrapur and reviewed by Rajan Shah, Amity Research
Centers Headquarter, Bangalore. It is intended to be used as the basis for class discussion
rather than to illustrate either effective or ineffective handling of a management situation. The
case was compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in
any form or medium whatsoever without the permission of the copyright owner.

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1st Edition, Issue-1 Japan’s Tourism Boom: A Blessing Amidst Challenges

Author: Shilpa Bhadrapur

Japan’s Tourism Boom: A Blessing Amidst Challenges

Abstract: In 2018, Japan was chosen as the ‘Destination of the Year’ by America’s most notable
magazine ‘Travel + Leisure’. The island nation was witnessing a historic tourism boom. In 2018,
the number of international visitors’ arrival to Japan had reached a record high of 30 million.
Further a significant surge in tourist arrivals was expected in 2019, as the country was gearing
to host major international sports events like Rugby World Cup (2019) and Tokyo Olympics
(2020). However, it was difficult to ignore the fact that tourism boom in Japan was a double-
edged sword. There were several major barriers in the form of capacity constraints,
major cultural crises, visitor-portfolio imbalance that needed to be addressed. Amid the major
challenges, the Government of Japan was aspiring to increase the number of tourists to 40
million by 2020. Could Japan reach its ambitious target and become a tourism-oriented nation
by 2020?

Case Study

“Undoubtedly the increase in tourists has had an influence on the daily lives of the citizens of
Kyoto.” 1

– Shuhei Akahoshi, Managing Director, Department of Conventions and Tourism, Japan

In 2018, the international tourist arrivals had reached 1.4 billion. According to United Nations
World Tourism Organisation’s (UNWTO) report, “UNWTO estimates that worldwide
international tourist arrivals (overnight visitors) increased 6 percent to 1.4 billion in 2018,
clearly above the 3.7 percent growth registered in the global economy.” Experts at UNWTO
had further stated, “Yet stronger economic growth, more affordable air travel, technological
changes, new business models and greater visa facilitation around the world have accelerated
growth in recent years.” According to Zurab Pololikashvili, Secretary-General, UNWTO, “The
growth of tourism in recent years confirms that the sector is today one of the most powerful
drivers of economic growth and development.”2

Among various countries, Japan’s tourism industry was witnessing a huge influx of inbound
tourists. From mere 3.2 million tourists in 1990 to 6.7 million tourists by 2005 and further 30
million tourists by 2018, Japan had become a top tourist destination in the world. The

1 Ryall Julian, “‘Pollution by tourism’: How Japan fell out of love with visitors from China and beyond”,
https://www.scmp.com/week-asia/society/article/2110388/pollution-tourism-how-japan-fell-out-love-visitors-
china-and, September 9th 2017
2 Talavera Catherine, “International tourist arrivals hit 1.4 billion in 2018”,
https://www.philstar.com/lifestyle/travel-and-tourism/2019/01/25/1887814/international-tourist-arrivals-hit-
14-billion-2018, January 25th 2019
“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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1st Edition, Issue-1 Japan’s Tourism Boom: A Blessing Amidst Challenges

Japanese tourism industry was expected to further witness a huge surge by 2019 due to Rugby
World Cup (2019) and Tokyo Olympics (2020).3

However there was a downside of this booming industry expressed as 'kankō kōgai’ or ‘tourism
pollution’, a term coined by the Japanese media. The Government of Japan (GoJ) took various
policy initiatives to boost the tourist flow in the country such ‘Visit Japan Campaign’ and ‘Enjoy
My Japan’ to ‘change the image of Japan as a travel destination,’ and let the tourists see Japan
as an ‘affordable, value-added and comfortable’ international tourist destination. But,
according to industry analysts, GoJ failed to estimate the actual number of visitors’ arrival.
Many tourist destinations in Japan were not capable of accommodating such sudden surge in
the numbers of visitors.4 Amidst various challenges and protest from the native people, would
Japan be able to succeed in meeting its next target of attracting 40 million tourists by 2020?

Tourism in Japan – A Sneak Peek

Tourism in Japan had grown steadily from 1995 to 2012 with the annual number of tourists
growing from 3.3 million to 8.4 million, registering an annual growth rate of 6%.5 According to
United Nations World Tourism Organisation (UNWTO), in 1995 Japan was the 34th ‘most visited
nation in the world’ after Ukraine, Belgium and Bulgaria. In the next few decades, Japan’s
tourism numbers grew exponentially. In 1998, 4.1 million tourists visited Japan, boosting its
position in the list of the ‘most visited destination in the world’ to 33. Further in 2005, around
6.7 million tourists visited Japan again boosting its position to 32 in terms of ‘most visited
destination in the world’. By 2010, the country moved to 31st position with the tourist inflow
reaching 8.6 million.

However, the country experienced a speed breaker after it faced the ‘Fukushima nuclear
disaster’ in March 2011. With such development, in 2012, the tourists’ inflow dropped to just
8.4 million. However, from the year 2013 onwards, the tourism industry in Japan saw a
spectacular growth. Annual number of tourists visiting Japan rose to more than 20 million,
making it ‘the fastest growing travel destination in the world’. According to UNWTO, since
2010, the tourist arrivals had seen an exponential growth of 334% with the number of tourists
visiting the country reaching a significant figure of 28.7 million in 2017. With such massive
inflow of tourists, Japan had swiftly moved to 12th position in the list of the ‘most visited nation
in the world’.6 According to observers, the surge in tourism industry was a result of relaxed visa
rules mainly for tourists from China. At the same time, the fall in the value of Japanese yen
since 2011 had further boosted Japan’s tourism industry making it affordable to middle class
tourists.7 (Exhibit I & Annexure I).

3 Dickinson Greg, “Japanese attractions ban foreigners in overtourism backlash”, https://www.msn.com/en-
ph/travel/news/japanese-attractions-ban-foreigners-in-overtourism-backlash/ar-BBUvBcV?li=BBr91nr, July 3rd
2019
4 Brasor Philip, “Japan is struggling to deal with the foreign tourism boom”,
https://www.japantimes.co.jp/news/2018/05/05/national/media-national/japan-struggling-deal-foreign-
tourism-boom/#.XLhLuzAzbIU, May 5th 2018
5 Kopf Dan, “The rise in tourists visiting Japan is statistically off the charts”, https://qz.com/1283090/going-to-
japan-youre-not-alone-tourism-is-booming-at-unprecedented-levels/, May 22nd 2018
6 Smith Oliver, “How the world's fastest growing travel destination is becoming the next overtourism
battleground”, https://www.telegraph.co.uk/travel/destinations/asia/japan/articles/japan-fastest-growing-
travel-destination/, May 29th 2018
7 “The rise in tourists visiting Japan is statistically off the charts”, op.cit.

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Exhibit I
Rise of Tourism in Japan

Source: Smith Oliver, “How the world's fastest growing travel destination is becoming the next overtourism
battleground”, https://www.telegraph.co.uk/travel/destinations/asia/japan/articles/japan-fastest-
growing-travel-destination/, May 29th 2018

In 2018, the two most notable travel and tourism magazines of America had recognised Japan

as the best holiday destination. The magazine ‘Travel + Leisure’ had named Japan as the

‘Destination of the Year’ for 2018 and Condé Nast Traveler had voted ‘Tokyo and Kyoto as the

two big cities in the world’. According to Naohito Ise, Executive Director, Japan National
Tourism Organisation (JNTO)8, New York, “American tourism to Japan is expected to continue

to rise in 2019 as the country builds up to host major international sporting events, with a host

of prestigious American media including Japan in their much-valued annual lists of the most
recommended places to visit in the coming year.”9 (Exhibit II).

Exhibit II

Major Industries Benefitting From Tourism Boom in Japan

Major industries in Japan benefitted immensely from the tourism boom. The

main beneficiaries were retailers in the country as most tourists indulged in shopping

Retail during their visit to Japan. As of 2017, tourist spending in the country had reached $41.7

Industry billion after 17.8% more tourists had visited Japan compared to 2016. Retail companies

like Shiseido (cosmetics maker) and Don Quijote Holdings (discount retailer) had posted

huge gains fueled by tourists spending.

The booming tourism had pushed up demand for hotel accommodation in Japan. The

traditional path that most visitors took (Golden Route of Tokyo, Osaka and Kyoto) had

Hotel Industry witnessed hotel occupancy rate as high as 80%. The huge demand had pushed GoJ to
support the construction of hotels by private companies. Some prominent companies in

the hotel sector in Japan investing in new projects were Nomura Real Estate

Development, Marriott, Mitsui Fodosan and Hyatt to name a few.

Japan was set to host Olympics in 2020 which required the development of the

necessary infrastructure. As of December 2017, the budget for Olympics was as high as

$12.7 billion, two times the estimated budget figures set in 2013. According to Masa

Infrastructure Takaya, Spokesman for the Tokyo Organising Committee of the Olympic and Paralympic
Games, “Tokyo will be upgrading existing sites and building new sites for the games that

can be used after the event to help control costs”. Infrastructure companies like Mitsui

Fudosan and Mitsubishi Estate that had won the bid for development of the athlete’s

village had benefited immensely from these developments.

Source: Tan Huileng, “Japan welcomed 20% more tourists in 2017 — and the number is growing”,

https://www.cnbc.com/2018/03/23/japan-welcomed-20-percent-more-tourists-in-2017--and-the-number-
is-growing.html, March 23rd 2018

8 A dedicated organisation which promotes tourism in Japan both inbound and outbound.
9 “2018 Tourism To Japan Breaks All-Time Record”, https://www.prnewswire.com/news-releases/2018-tourism-
to-japan-breaks-all-time-record-300779696.html, January 16th 2019

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As per the statistics provided by the Japan Tourism Agency10 (JTA), in 2018, the nation
witnessed a record high of 30 million tourists. The surge in tourism was despite the
occurrences of several natural disasters in the country in a form of torrential rain and
earthquakes. By 2020, Japan was targeting to attract 40 million tourists in lieu of the ‘Olympic’
and ‘Paralympic Games’ scheduled to be hosted in Tokyo in 2020. To reach its goal, the
Government of Japan (GoJ) had relaxed visa rules, promoted budget airlines and encouraged
the setting up of ‘private lodging services’ to cope with the huge accommodation demand for
hotel rooms. The GoJ was also working towards accessibility of multilingual information at
train stations and airports during the times of natural calamities to help tourists.11

According to industry watchers, in 2008, the GoJ had set an ambitious target for the domestic
tourism industry to reach a mark of 20 million tourists by the year 2020. However, the target
was reached within five years before the scheduled time. This had coaxed the GoJ to further
set new goals and double its target to 40 million tourists by 2020. It aimed to attract more and
more tourists from non-Asian countries.12

Such ambitious goal was set in 2015 after JNTO had registered a huge number of 19.73 million
tourists in 2015, an increase of 47.3% compared to 2014. A meeting was set to discuss the new
goal of special panel members in the presence of Shinzō Abe (Abe), Prime Minister of Japan.
The GoJ was also aiming to register ¥8 trillion of spending by overseas tourists in 2020
compared to ¥3.48 trillion spending registered in 2015. After the 2020 Olympics, the GoJ was
further aiming to target 60 million tourist arrivals each year by 2030 with a yearly spending of
¥15 trillion. “Tourism is an important pillar of our country’s growth strategy, and a trump card
for regional revitalization. It is also an engine to boost growth to achieve the ¥600 trillion GDP
goal,” stated Abe. He further added, “To establish a tourism-based country, I’m determined to
take any political measures in advance to be fully prepared.”13

GoJ’s Initiatives to Boost Tourism Industry

In 2003, JNTO had initiated the ‘Visit Japan Campaign’ with the intention to ‘change the image
of Japan as a travel destination,’ and let the tourists see Japan as an ‘affordable, value-added
and comfortable’ international tourist destination. As an international marketing initiative, the
campaign set to boost inbound tourists flow. In due course, under the several broad spectrums
of initiatives, the new digital marketing and public relations initiatives were also undertaken. In
2018, the country came out with ‘Enjoy My Japan’, a global campaign which was aimed to
attract tourists from Australia, Europe and America.14 According to Mamoru Kobori (Kobori),
Executive Vice President, JNTO, “We wanted to let people know more about different aspects
of Japan as a travel destination, Many people who have a ‘one-sided’ image of Japan only

10 An organization set up on October 1st 2008 as an agency of the Ministry of Land, Infrastructure, Transport and
Tourism in the country.
11 “Japan marks new record as foreign visitors top 30 million in 2018”,
https://www.japantimes.co.jp/news/2018/12/18/national/japan-marks-new-record-foreign-visitors-top-30-
million-2018/#.XKxBqFUzbIU, December 18th 2018
12 Tan Huileng, “Japan welcomed 20% more tourists in 2017 — and the number is growing”,
https://www.cnbc.com/2018/03/23/japan-welcomed-20-percent-more-tourists-in-2017--and-the-number-is-
growing.html, March 23rd 2018
13 Murai Shusuke, “Japan doubles overseas tourist target for 2020”,
https://www.japantimes.co.jp/news/2016/03/30/national/japan-doubles-overseas-tourist-target-
2020/#.XKxncFUzbIU, March 30th 2016
14 Weissmann Emma, “How Japan's Tourism Industry Is Changing”, https://www.travelagewest.com/Travel/Asia-
Pacific/How-Japan-s-Tourism-Industry-Is-Changing, October 25th 2018

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know about our metropolitan areas. They may not realize Japan can offer attractions related to
nature…we have 34 government-registered national parks”15

Along with such initiatives, Japan was slated to host several international events in the coming
years which included the G20 Global Summit in Osaka (2019), Rugby World Cup (2019), the
Olympics in Tokyo (2020) and Kansai World Masters Games (2021) to name a few. According to
Kay Allen, Senior Marketing Specialist, JNTO, Los Angeles, “It’s really been in the last 10 years
that Japan has put a big focus on promoting tourism, Local sellers have started to recognize
how much tourism can do for the economy. So now, there’s been a lot more emphasis on
tourism promotion, which is why you see destination management companies sprouting up
everywhere — from every region, every prefecture and every city.”16

Meanwhile, the GoJ’s new tourism strategy also involved the enactment of ‘Private Lodging
Business Act’ in June 2018. It aimed to improve the private accommodation facilities known as
‘minpaku’ through services like Airbnb across the country. Rural areas in Japan were reckoned
to have shortage of accommodation and the new regulation was aimed to solve the issue and
provide travellers a safe private house rebuilt to host visitors. The new norms had ensured that
the private lodging owners follow the local regulations. In this regard, Jun Takashina, Vice
Commissioner, JTA, explained, “[Private lodging] can cause problems, so that’s why we
introduced a new system with better structure to control it.”17

To increase the accommodation facilities at hotels, Japanese authorities had collaborated with
private sector players in areas where there was shortage of hotels. Some of the examples were
‘New Hilton’ properties in Hiroshima and Nagasaki located close to convention facilities and
‘Ritz Carlton’ at ‘UNESCO World Heritage’ site in Nikko, a small city in the mountains, North of
Tokyo. Apart from them, there were a number of private and luxury chains planning to start
operation in the country. According to Kobori, “In the next couple of years, we’ll have two or
three dozen new hotel properties in the luxury category opening, not only in Tokyo but in
other local areas.” Analysts felt the development of these new projects would help in creating
demand in lesser known areas of the country. Another initiative taken by the GoJ was to
encourage and support local and regional tourism boards to collaborate and work together.
Earlier regional activities for marketing and tourism were handled separately by each region
but that had changed after the formation Destination Marketing Organisation (DMO) by JTA in
2015. They worked together to form common tourism strategies, by 2018, JTA had registered
‘86 DMO’ and ‘122 candidate DMO’ in Japan. However, authorities at JNTO had asserted the
importance of each region to collaborate, innovate and develop strategies to suit the
requirement of their individual areas. In this regard Kobori opined, “We have to invest. It may
take some time for each local community to get ready to adapt to this new age of digital
marketing, but many people are already aware of the need to change.”18

However, according to analysts at McKinsey, Japan had to remove several significant barriers
to become a tourism-oriented country by 2020. One of the challenges faced by the tourism
industry in Japan was the ‘visitor-portfolio imbalance’. There were several factors responsible
for causing the imbalance, like lack of suitable infrastructure, lack of awareness of Japan’s
tourist attractions, misconception among tourists that Japan was a very expensive destination
and lack of online tourism portals. According to Rob Stein (Stein), Senior Travel Advisor, The

15 “How Japan Is Transforming Its Visitor Economy for the Next Wave of Tourism”, https://skift.com/2019/01/23/how-
japan-is-transforming-its-visitor-economy-for-the-next-wave-of-tourism/, January 23rd 2019
16 “How Japan's Tourism Industry Is Changing”, op.cit.
17 “How Japan Is Transforming Its Visitor Economy for the Next Wave of Tourism”, op.cit.
18 ibid.

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Stein Collective by Ovation Vacations, “While Westerners are fascinated by both the traditional
and contemporary cultural elements of Japan, the majority are intimidated by the prospect of
actually visiting.” Referring to some of their well-travelled clients, Stein further stated, “The
general misconception is that Japan is a closed off homogeneous society and thus
unwelcoming towards foreign visitors.” Suggesting that the culture of Japan was very formal
leading to cultural barriers, He further added, “Japan can better promote its tourism by
adopting a more casual and modern approach. Formality is inherent in Japanese business
practices, but perhaps a little moderation could go a long way.”19

Booming Tourism –The Japan’s Dilemma

A growing tourism industry was considered as a boon for any country’s economy. However,
analysts had pointed out that the excessive growth of tourism had led to overcrowding in
major cities and tourist locations around the world. For instance, the popular tourist locations
like Madrid, Mallorca, Amsterdam, Venice, Barcelona and Dubrovnik had made headlines due
to issues caused by over tourism. Similarly, Japan was also facing several issues as the
tourism industry in the country was skyrocketing at a rapid pace. ‘The Japan Times’ in May
2018 had used the term 'kankō kōgai’ or 'tourism pollution’ to describe the situation faced by
the country. Cities like Kyoto were struggling with over tourism leaving residents miserable due
to crowded public transport and restaurants. Many residents had claimed that the city’s
‘miyabi’, ‘a refined atmosphere unique to Kyoto’ was ruined.20 Shuhei Akahoshi (Akahoshi),
Managing Director, Department of Conventions and Tourism, Japan had agreed that, “It has,
for example, caused our buses, trains and roads to become more crowded, causing adverse
effects for commuters. The increase of illegal guest houses has brought up concerns from our
residents about the potential threat to their safety and peace of mind. And cultural differences
concerning things like smoking and garbage have caused various problems.”21

As a key measure to tackle issues of ‘tourism pollution’, Japan’s tourism agency was asking the
tourists to venture off the ‘Golden Route’ that linked ‘Tokyo with Osaka and Kyoto’ and
explore rural areas across Japan. Despite several businesses benefitting from the surge of
visitors, local crowd was not very pleased with the influx of tourists in their towns.
Tourists were mostly unaware of local customs leading to tussle with the locals. (Exhibit III).

Exhibit III
Caution Signs for Tourists in Kyoto

Source: McCurry Justin, “Tourism pollution': Japanese crackdown costs Airbnb $10m”,
https://www.theguardian.com/world/2018/jun/15/tourism-pollution-backlash-japan-crackdown-costs-

airbnb-10m-kyoto, June 15th 2018

19 Powell Laura, “Japan Is Upping Its Tourism Game Before the 2020 Olympics”,
https://skift.com/2018/02/20/japan-is-upping-its-tourism-game-before-the-2020-olympics/, February 20th 2018
20 “How the world's fastest growing travel destination is becoming the next overtourism battleground”, op.cit.
21 “Pollution by tourism’: How Japan fell out of love with visitors from China and beyond”, op.cit.

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Some of the prominent tourist locations in Japan were prohibiting large groups of foreign tourists
from visiting their site. These restrictions were adopted across tourist areas in Japan after
authorities at Nazoin Temple, a Buddhist temple in Sasaguri, Fukuoka Prefecture, Japan had
banned foreigners from entering the site in May 2016. In order to protect the holy place and area
around the 41-metre-long ‘sleeping Buddha’ statue, signpost in 12 languages were installed
stating that ‘non-Japanese group of visitors’ were prohibited from entering the premises.

However, in spite of such ban, international tourists in the country had increased by 42% and
according to JTB Tourism Research & Consulting Co. (JTB)22, foreign tourists in Japan had

reached to 30 million in 2018. Further by 2020, the number of visitors in Japan was expected

to reach 40 million. The ban was a result of untoward incidents caused by tourists like

splashing in sacred waterfalls and playing loud music. Similar instances in other tourist

locations like Kyoto and the Kumamoto Prefecture (the central part of Japan’s southwestern
Kyushu island) had also resulted in banning of overseas visitors.23

At the same time, bad behavior from tourists had also forced an “izakaya” (pub) in Kyoto that
served traditional dishes and drinks to ban foreign tourists. Even the Yatsushirogu shrine had
temporarily stopped accepting group of passengers from cruise ships due to overcrowding in
2017. According to analysts at JTB, visitors from China and Korea made up 50% of tourists in
Japan and the number of visitors from China had increased significantly in 2018. People from
China and Korea also followed Buddhism and the ban denied them the right to worship.
According to reports from Japanese newspaper, ‘The Asahi Shimbun’, Japan’s Ministry of
Justice considered nationality discrimination as violation of UN resolutions under the treaty
‘International Convention on the Elimination of All Forms of Racial Discrimination (ICERD)’
created in 1965. Japan accepted such treaty in 1995. However, Takao Ikado, Associate
Professor of Tourism Management, Takasaki City University of Economics, felt that, “The
central and local governments should make active efforts to make people abroad understand
the rules that should be abided by in Japan, such as keeping silent in certain occasions and
paying attention to cleanness.”24 (Exhibit IV).

Exhibit IV

Japan’s Growing Tourism Industry - Three Major Challenges

Lack of Non- Japan’s portfolio of visitor’s showcased significant imbalance, it had majorly relied on
Asian Visitors Asian tourists. In 2015, non-Asian tourists accounted for only 16% of international
visitors. Japan was struggling to attract tourists from Western countries.

Majority tourists only visited Tokyo, Osaka, and Kyoto. These destinations account for

Skewed Regional 48% of foreign tourist stays in Japan. These major cities received close to 60% of
Distribution overall inbound-tourism expenditures. Despite they contributed only 28% in Japan’s
overall GDP. There was a huge potential if tourists were diversified to Japan’s other

cities.

Major cities in Japan were facing shortage of accommodation. It was estimated that

Capacity the three major cities Kyoto, Osaka, and Tokyo would face an accommodation

Constraints shortage of 50% in 2020. Overcapacity in airports (30%) was also expected in Narita

and Haneda airports in Tokyo.

Source: Andonian André and et al., “Can inbound tourism fuel Japan’s economic growth?”,

https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/can-inbound-tourism-

fuel-japans-economic-growth, October 2016

22 JTB was a Japanese tourism statistics organisation.
23 McMullan Carrie, “Japan Shuns Tourism in Popular Locations Despite Increase of International Visitors”,
http://campus.ie/lifestyle/travel/japan-shuns-tourism-in-popular-locations-despite-increase-of-international-
visitors/, March 17th 2019
24 “Japan Shuns Tourism in Popular Locations Despite Increase of International Visitors”, op.cit.

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Meanwhile, to ease the shortage of accommodation, Japan’s new home-sharing law was
enacted in June 2018. It was meant to bring order in the unregulated home-sharing industry of
Japan before the commencement of major events like Rugby World Cup and the Tokyo
Olympics in 2020. However, the new law had made it difficult for companies like Airbnb and
other investors in the home-sharing business to carry out operations due to its stringent
norms. The new law had put a limit of 180 days on home-sharing per year which made its
difficult for home owners to make any profit.25

There were a number of initiatives undertaken by Kyoto’s Tourism Bureau to tackle these
issues and reduce cross-cultural challenges. In collaboration with the TripAdvisor website (an
American travel and restaurant website company), the Kyoto’s Tourism Bureau had designed a
leaflet of etiquette’s consisting of as various "a ki ma hen" ("don'ts") for visitors. The city
authorities had also introduced various policies known as, ‘Three kinds of dispersion’ as
solutions to tackle the situation of over tourism. The first was changing the time of events,
early morning or evening events were encouraged to reduce peak time crowd. Second, the
organisers were encouraged to hold events away from busiest areas of the city. And lastly, the
initiatives were taken to encourage tourists to visit the city during off season months during
January, May and June to reduce peak season crowd.

Apart from these, there were efforts in the form of ‘Ryokan guide’ that explained the appropriate
behaviours expected from the international tourists. For instance, taking shoes off at entrance
and avoid using soap in bath. Training was also provided to city guides in English and Chinese
languages with plans to conduct training in several new foreign languages. According to
Akahoshi, “For a long time, Kyoto has experienced various issues as our tourists have increased,
our goal is harmonious coexistence and mutual benefit between our citizens and our guests, and
we address the various problems that arise through innovation. For us in Kyoto, we do not think
of things in terms of confrontation or conflict, but instead we believe in achieving harmony
through careful work. We have pride as an international tourist destination and that further
drives our determination to be flexible and solve the issues as they come up.”26

Another hurdle was the supply of accommodation in Japan which was tight. As per the records
of JTA, during July-September 2017, 75% of foreign tourists were staying at hotels and 18%
were staying at traditional ‘Japanese-style inn’ and 12% were staying in private
accommodations known as ‘minpaku’. On an average, the occupancy rate at hotels and
corporate hotels was 80% and nearly fully occupied in Tokyo and other bigger towns like
Osaka, Fukuoka and Nagoya. With the increase in tourists flow, there was a huge pressure for
supply of accommodation which was a difficult task in hand for the Japanese authorities.
Meanwhile the rate of occupancy in traditional ‘Japanese-style inn’ was comparatively low (50-
60%) as they mostly failed to meet the requirements of tourists in terms of locational-
advantage and convenience point of view. Analysts felt that the initiatives to improve these
kinds of accommodations would help solve the problems emanating from shortage of tourist
accommodation.27

25 Fujita Junko, “In Japan, new rules may leave home-sharing industry out in the cold”,
https://www.reuters.com/article/us-japan-airbnb/in-japan-new-rules-may-leave-home-sharing-industry-out-in-
the-cold-
idUSKBN1HU06C?utm_campaign=trueAnthem:+Trending+Content&utm_content=5add86cd04d30172dc547128&
utm_medium=trueAnthem&utm_source=twitter, April 23rd 2018
26 “Pollution by tourism’: How Japan fell out of love with visitors from China and beyond”, op.cit.
27 “Increasing inbound tourism”, https://www.japantimes.co.jp/opinion/2018/01/16/editorials/increasing-
inbound-tourism/#.XKxBsFUzbI, January 16th 2018

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Meanwhile, in 2019, the GoJ had started collecting ¥1,000 ($9) departure tax from every
tourist leaving Japan. This fund was an initiative taken to further promote tourism for Tokyo
Olympics 2020 and Paralympics and after the event as well. According to government policy,
tax income was planned to be used for mainly three purposes, ‘providing smoother travel
services, facilitating access to information on the country's tourist attractions, and improving
visitor satisfaction levels by promoting tourism resources in regional areas such as unique local
culture and natural features’.

The GoJ had estimated to generate ¥50 billion by the end of 2019 from the departure tax
income. The funds were planned to be utilised for installing facial recognition gates at air and
sea ports and ensuring availability of multiple languages at cultural sites. According to analysts
at JTA, inbound tourists in Japan had crossed the 30 million mark for the first time in 2018.
However, most of the visitors came from Hong Kong, South Korea, Taiwan and China.
(Annexure II). The GoJ planned to use the departure tax income to attract more tourists from
the European countries. However, several citizens were skeptical of the
new tax law's benefits for themselves. According to a citizen of Japan, Takuma Asai, “(The new
tax) is unavoidable, but I hope the revenue will be used to benefit Japanese citizens and
foreign travellers in visible ways”. However, expressing his concern, an anonymous tour
attendant in Osaka stated “Holidaymakers always go for cheaper packages, so even if it's only
1,000 yen, the rise in (tour) prices will be a huge burden for us”. In this regard, Hideaki Tanaka,
Finance Professor, Meiji University's Graduate School of Governance Studies asserted that, “It
will be necessary to check that the funds are not being used on less productive measures, but
in ways that taxpayers find convincing”.28

Amid the major challenges, the GoJ was still aspiring to increase the number of inbound
tourists in the country to 40 million by 2020. The tourism boom in Japan was a double-edged
sword for many citizens living near tourist spots. According to Peter MacIntosh, a Japanese
tourist guide for small group, “Japan’s rise as a bucket-list destination is a mixed blessing.When
there were very few tourists, people complained, and now that there are lots of them, they’re
not ready for it. If it’s like this now, what do you think it’s going to be like closer to the
Olympics?”29

28 “Japan begins departure tax to fund inbound tourism promotion”,
https://english.kyodonews.net/news/2019/01/db1e575b82b3-japan-begins-departure-tax-to-fund-inbound-
tourism-promotion.html, January 7th 2019
29 McCurry Justin, “Tourism pollution': Japanese crackdown costs Airbnb $10m”,
https://www.theguardian.com/world/2018/jun/15/tourism-pollution-backlash-japan-crackdown-costs-airbnb-
10m-kyoto, June 15th 2018

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Annexure I
Japan - Top Travel Destination in the World

Source: Sugiura Eri, “Japan gets more than it bargained for with tourist boom”,
https://asia.nikkei.com/Spotlight/Cover-Story/Japan-gets-more-than-it-bargained-for-with-tourist-

boom,
April 17th 2019

Annexure II
International Tourist Arrivals in Japan

Source: Kopf Dan, “The rise in tourists visiting Japan is statistically off the charts”,
https://qz.com/1283090/going-to-japan-youre-not-alone-tourism-is-booming-at-unprecedented-

levels/, May 22nd 2018

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1st Edition, Issue-1 Advanced Analytics: Scripting Business beyond the Hype

Advanced Analytics
Scripting Business beyond the Hype

Case Study

This case was written by Dr. Garima Ratna and reviewed by Dr. A. Saravanan Naidu, Amity
Research Centers Headquarter, Bangalore. It is intended to be used as the basis for class
discussion rather than to illustrate either effective or ineffective handling of a management
situation. The case was compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any
form or medium whatsoever without the permission of the copyright owner.

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1st Edition, Issue-1 Advanced Analytics: Scripting Business beyond the Hype

Author: Dr. Garima Ratna

Advanced Analytics: Scripting Business beyond the Hype

Abstract: Advanced Analytics (AA) had come to minimise the risk element in the business
decision making process and to mitigate the insecurities related to predictions. In a complex
business world laden with overwhelming investments and risks running high, AA along with
Predictive Analytics promised to ease multiple pain points. AA helped the businesses to get
insights into customer behaviour, demand forecasting, process optimisation and many other
crucial functions of the business. In short, AA seemed to have created a hype which was
applauded by businesses of all diversity. However, amidst these applauding voices there were
analytical minds who questioned the strategic business value of the technology. These sceptics
called for objective assessment of the utility of AA in addressing efficiencies, process
improvement and marketing and sales related business decisions. Was it time to look beyond
the hype surrounding AA and make a detailed assessment of the ROI in embracing the
technology?

Case Study

“The hype around data and analytics has reached a fever pitch. From baseball to biomedical
advances, the media highlights one money-making or money-saving corporate experience with
analytics after another. Stories abound about data scientists applying their wizard like talents to
find untapped markets, make millions, or save lives. Pundits have been talking up the promise of
data in grand terms for several years now: Data has been described as the new oil, the new soil,
the next big thing, and the force behind a new management revolution.”1

– Data & Analytics Report by MIT Sloan Management Review2

Data and Advanced Analytics (AA) had enchanted analysts and impacted industries to an
enormous extent. The technology was portrayed as the magic wand which would ease
many of the organisations’ pain points. Consequently, much of the investments were pumped
into incorporating AA into day to day as well as long term decision making. AA which included
Predictive Analytics (PA) minimised the risks involved in business decision making. Besides,
crafting a well thought after AA strategy helped businesses reduce costs and enhance
operational efficiencies. However, as time progressed it emerged that either business were not
able to extract definite value from investing in AA or it was ill prepared and ill skilled to extract
anything substantial from it. Several reasons were cited for the gap between investments and

1 Ransbotham Sam, et al., “Beyond the Hype: The Hard Work Behind Analytics Success”,
https://sloanreview.mit.edu/projects/the-hard-work-behind-data-analytics-strategy/, March 8th 2016
2 The report was authored by Sam Ransbotham, Associate Professor in the Information Systems Department at the
Carroll School of Management at Boston College, as well as guest editor for MIT Sloan Management Review’s Data
& Analytics Big Idea initiative; David Kiron, Executive Editor of MIT Sloan Management Review; and Pamela Kirk
Prentice, Chief Research Officer at SAS Institute Inc.

“© 2019, Amity Research Centers HQ, Bangalore. All rights reserved.”

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1st Edition, Issue-1 Advanced Analytics: Scripting Business beyond the Hype

ROI. Amidst the innumerable challenges that blocked implementation of AA and extraction of
value subsequently, analysts argued whether AA ushered in hope for businesses or it was merely
a hype created without much thought attached to it. This entailed having an objective
assessment of the business value offered by AA and what steps needed to be taken to get
maximum leverage from the technology. Most importantly, what should be the AA strategy of
the organisation?

Advanced Analytics: A Conceptual Overview

Human intelligence constituted of several faculties which included ‘learning, reasoning, problem
solving, perception and the ability to understand language’. All of these entailed usage of
analytical skills. Artificial Intelligence (AI), too, used these skills. As the levels and types of
analytics progressed from the most simple to the most sophisticated; AI augmentation
increased. Descriptive and Diagnostic Analytics were taken care of by Data mining and Business
Intelligence. Predictive Analytics (PA) was important component of AA.3 (Exhibit I).

Exhibit I
AI Augmentation Progression in Sync with Levels and Types of Analytics

Source: “Let’s talk about Advanced Analytics: A brief look at Artificial Intelligence”,
https://becominghuman.ai/lets-talk-about-advanced-analytics-a-brief-look-at-artificial-intelligence-

bf1c7a7d3f96, December 26th 2017

AA was defined by Gartner4 thus, “Advanced Analytics is the autonomous or semi-autonomous
examination of data or content using sophisticated techniques and tools, typically beyond those
of traditional business intelligence (BI), to discover deeper insights, make predictions, or
generate recommendations. Advanced analytic techniques include those such as data/text
mining, machine learning, pattern matching, forecasting, visualization, semantic analysis,
sentiment analysis, network and cluster analysis, multivariate statistics, graph analysis,
simulation, complex event processing, neural networks.”5 Overall, the Analytics spectrum was
composed of two major sections: BI and AA with many subsections in each category (Exhibit II).
BI and AA were different in their sophistication level and usage.6 (Annexure I).

3 “Let’s talk about Advanced Analytics: A brief look at Artificial Intelligence”, https://becominghuman.ai/lets-talk-
about-advanced-analytics-a-brief-look-at-artificial-intelligence-bf1c7a7d3f96, December 26th 2017
4 Gartner is the world’s leading research and advisory company based in Stamford, Connecticut, United States.
5 “IT Glossary – Advanced Analytics”, https://www.gartner.com/it-glossary/advanced-analytics/, 2019
6 “Introduction to Advanced Analytics”, https://rapidminer.com/resource/introduction-advanced-analytics/, 2019

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Exhibit II
Analytics Spectrum

Source: “Introduction to Advanced Analytics”,
https://rapidminer.com/resource/introduction-advanced-analytics/, 2019

PA, a sub division of AA, was used in the identification of future events and in the calculation of
their respective probability values. Together, AA and PA could be applied to a diverse set of use
cases including customer value and success forecasts, price, sales and demand forecasts,
prediction of machine failures, social media monitoring and assessment and predictive policing,
etc.7 Machine Learning (ML), too, was important component of AA. ML was a discipline that built
complex models and algorithms which facilitated prediction.8 According to tech experts, while
AA could be utilised in a number of statistical tasks (Exhibit IIIA), ML had multiple applications
across industries (Exhibit IIIB).9, 10 PA, too, could be utilised in minimising system inefficiencies,
optimisation of marketing campaigns, fraud detection in financial transactions and in doing
credit risk analysis.11

Exhibit IIIA
Usage of Advanced Analytics in Statistics

Source: Compiled by the Author from – “Advanced and Predictive Analytics: An Introduction”,
https://bi-survey.com/predictive-analytics

7 “Advanced and Predictive Analytics: An Introduction”, https://bi-survey.com/predictive-analytics
8 “Let’s talk about Advanced Analytics: A brief look at Artificial Intelligence”, op.cit.
9 “Advanced and Predictive Analytics: An Introduction”, op.cit.
10 “Let’s talk about Advanced Analytics: A brief look at Artificial Intelligence”, op.cit.
11 Farooq Mohammad, “Applications of Predictive Analytics in various industries”, https://bigdata-
madesimple.com/applications-of-predictive-analytics-in-various-industries-2/, October 31st 2016

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1st Edition, Issue-1 Advanced Analytics: Scripting Business beyond the Hype

Exhibit IIIB
Machine Learning Applications across Industries

Source: “Let’s talk about Advanced Analytics: A brief look at Artificial Intelligence”,
https://becominghuman.ai/lets-talk-about-advanced-analytics-a-brief-look-at-artificial-intelligence-

bf1c7a7d3f96, December 26th 2017

AA had multiple applications in Internet of Things (IoT) too. Tech experts pointed out that from
the point of data generation to the point of its consumption, AA could be utilised at various
steps including ‘analytics location, rule based deviation detection, anomaly detection, change
point detection, predictive system behavior and edge analytics’.12 Tech experts from Accenture13
further listed down the applications of AA in banks (early warnings, trade surveillance),
government agencies (audit operations efficiency, revenue fraud prediction, spend optimizer),
telecommunications companies (predictive fraud detection) and manufacturers (warranty
analytics).14 However, while on one hand analysts listed the multiple applications of AA in
businesses, on the other they doubted the exact strategic business value offered by it.

Can Advanced Analytics Turn Data into Business Value?

Analysts opined that businesses of the day were complex systems and were laden with different
cognitive biases. AA could lead to eliminating biases and increasing objectivity in business
decisions. Dr. Andrew Peterson (Dr. Peterson), Principal Data Scientist Soltius15, explained the
utility of AA in business scenarios by stating, “A principal way that advanced analytics can reduce
complexity to an understandable level is by identifying which variables among many, possibly
many hundreds, are the key drivers of a particular business process, function, or metric.” Dr.
Peterson explained further, “To be clear about the full business value of advanced analytics, we
need to see it as a collective whole that not only helps empower organisations to achieve
specific business objectives such as retaining customers and improving operational efficiency,
but also as a powerful means for maximising objectivity in mission-critical business decisions.”16

12 Prabu D K, “Advanced analytics applications in IoT”, https://developer.ibm.com/code/2017/11/17/advanced-
analytics-applications-iot/, January 5th 2018
13 It is a global management consulting and professional services firm that provides strategy, consulting, digital,
technology and operations services based in Dublin, Ireland.
14 Gutierrez Daniel, “Accenture Launches 7 New Advanced Analytics Applications”,
https://insidebigdata.com/2016/06/16/accenture-launches-7-new-advanced-analytics-applications/, June 16th 2016
15 The company is New Zealand’s most trusted SAP provider.
16 Dr. Peterson Andrew, “The Business Value of Advanced Analytics”,
http://cdn2.hubspot.net/hubfs/1836464/soltius_PDF/soltius_white_paper_-
_business_analytics_value_singles_final.pdf

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Anita Gibbings (Gibbings), a Senior Director of Product Marketing for Analytics at SAP17, attached
a definite business value to data analytics. She offered ample examples to corroborate the
power of analytics to transform business process improvement, predictive power and self-
service time savings. While giving example of a hospital, she stated, “The team looked at data on
the total cost of processes and found that by standardizing procedures, they could not only
improve patient outcomes but deliver service at 60% cost savings. But the power of analytics is
in bringing data from disparate locations to show the whole picture in order to compare and
contrast and look for outliers. In this case, the hospital team created a win-win, improving
patient outcomes, standardizing best practices, and reducing costs.” Quoting the experience of
a transportation company, Gibbings revealed, “Using the Internet of Things (IoT), they identified
the variables that lead to accidents – for example, excessive speed, operators not taking breaks,
and other variables – and created alerts so when certain parameters were broken, they could
intervene in real time to prevent the accident. The results? Accidents were reduced by 30%,
saving the company $2.4 million per year. And as often happens when one area of business is
improved, additional benefits also result: In this case, the company saved an additional $1.9
million annually due to reduced employee turnover as drivers felt more connected to the
company and tenures increased.” Gibbings explained further, “A true data-driven culture
enables all decision-makers to quickly and easily gain insights for themselves. When creating a
report takes only an hour (or less), your analytics investment can really start to deliver results.
One customer reported saving 28,800 hours (the equivalent of about 14 full-time employees)
through data analytics, which enabled them to reallocate these employees to deliver more
business value.”18

Analysts opined that the business value of data analytics depended upon series of fundamentals
termed as the ‘Insights Value Chain’ (IVC) of an organisation. IVC comprised of various technical
capabilities and the firmly entrenched business processes within the organisation. It was
observed that the IVC driven use cases reverted business value either by supporting growth (top
line) or by reducing costs (bottom line).19 (Annexure IIA & IIB). A White Paper titled – ‘Data In,
Value Out’ published by Intel20 in 2017 showcased the company’s initiatives and takeaways from
applying AA into its business processes. AA saved the tech company a whopping and valuable
$100 million in unit testing. The company improved manufacturing quality as well. AA helped
Intel connect sales and marketing data in addition to connecting all business processes. This
helped the company roll out a new customer centric experience which generated an
encouraging over $500 million in revenues. In addition, ML shortened the time to market Intel’s
products and also helped increase product quality. Incorporating PA in the company’s business
processes delivered an impressive $656 million worth of business value to the organisation from
2012 to 2017. There was more. ML based market intelligence across the company’s 50,000
accounts led to doubling of sales lead, tripling of click-through rate for email newsletters and
completion rate of training programs.21 In the finance domain, analytics was applied to
strengthen the companies’ capabilities to meet financial reporting requirements, especially

17 SAP SE is a German-based European multinational software corporation that makes enterprise software to manage
business operations and customer relations. SAP is headquartered in Walldorf, Baden-Württemberg, Germany.
18 Gibbings Anita, “Data Analytics: An Investment In Business Value”, https://www.digitalistmag.com/future-of-
work/2017/01/04/data-analytics-investment-in-business-value-04812487, January 4th 2017
19 Hürtgen Holger and Mohr Niko, “Achieving business impact with data”, https://www.mckinsey.com/business-
functions/mckinsey-analytics/our-insights/achieving-business-impact-with-data, April 2018
20 Intel Corporation is an American multinational corporation and technology company headquartered in Santa
Clara, California, in the Silicon Valley.
21 “Data In, Value Out”, https://www.intel.com/content/www/us/en/analytics/business-value-through-advanced-
analytics-whitepaper.html, 2017

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valuation processes, procedures, and analyses.22 A report by Forbes Technology Council23
revealed that a robust 86% of PA users acknowledged tangible gains to their bottom line.24

While conceding that there was concrete and measurable business value in AA, analysts were
doubtful whether senior executives knew how to extract that value. Many a times, analysts
rued, businesses were into AA and ML just for the sake of it. These businesses had never
assessed the exact business value it could deliver/or not deliver.25 Hemanth Kumar, a tech
professional working in Acuvate’s26 Analytics & Database services, observed in this regard,
“There are only a few organizations who have unlocked the value of this data. The rest are still
unsure on how to unlock the value and become analytical competitors in their industry.”27
Forbes Insights28 conducted a survey of 200 Indian companies in August and September 2016
where the respondents were C-level executives and came up with interesting findings regarding
business value from AA.29 (Annexure IIIA & IIIB).

Analysts suggested that a systematic, realistic and focussed approach was required to drive
maximum value from AA. A group of McKinsey analysts suggested two courses of action. Firstly,
the senior executives should assess how AA disrupted the existing business models and allocate
some time to focus on the long term impact. Also, lessons needed to be learnt from industries
already deep into AA. An assessment needed to be done of the type of customer demands
would be fulfilled with the new business models. Secondly, McKinsey analysts suggested to
capitalise on new opportunities, begin with data and its worth, target industries/sectors who
would potentially need data and then reassess the business model. As stated by McKinsey
analysts, “A simple way to get started is to conduct a market scan of the data and analytics
players, as well as a competitor scan to understand what others may be doing. Identify where
and how to play within this ecosystem. Analytics create value when big data and advanced
algorithms are applied to business problems to yield a solution that is measurably better than
before. By identifying, sizing, prioritizing, and phasing all applicable use cases, businesses can
create an analytics strategy that generates value.” Analysts from McKinsey laid down a set of
recommendations to extract maximum value of AA.30 (Annexure IV).

Dr. Fern Halper (Dr. Halper), Vice President and Senior Director of TDWI Research for Advanced
Analytics31, quoted a report on AA published by TDWI, wherein the AA related challenges faced
by organisations were listed. The top three challenges that emerged were ‘lack of skilled
personnel, lack of understanding of technology, and insufficient budget and/or a lack of
executive support’. Halper pointed out that organisations were taking cues from best use cases

22 Forsythe Greg, “Harness the power – How advanced analytics in valuation is driving value”,
https://www2.deloitte.com/us/en/pages/advisory/articles/fair-value-measurement-risk-analytics.html
23 Forbes Technology Council is a community for senior technology executives such as CIOs and CTOs.
24 Kumar Hemanth, “Advanced Analytics: 4 Simple Steps for Enterprise Adoption”,
https://acuvate.com/blog/advanced-analytics-4-simple-steps-enterprise-adoption/, January 18th 2018
25 Chin Kee Jit, et al., “Advanced analytics: Nine insights from the C-suite”, https://www.mckinsey.com/business-
functions/mckinsey-analytics/our-insights/advanced-analytics-nine-insights-from-the-c-suite, July 2017
26 Acuvate Software is a Microsoft Gold certified partner providing Intelligent Chatbots for enterprise, Intranet,
Content and Collaboration Applications, Power BI, etc.
27 “Advanced Analytics: 4 Simple Steps for Enterprise Adoption”, op.cit.
28 Forbes Insights is the strategic research and thought leadership practice of Forbes Media, publisher of Forbes
Magazine and Forbes.com.
29 Bhattacharya Gautam, “High Stakes, High Rewards Indian Enterprises Outperform Global Peers”,
https://www.ey.com/Publication/vwLUAssets/ey-fi-data-analytics-india/$File/ey-fi-data-analytics-india.pdf, 2017
30 “Advanced analytics: Nine insights from the C-suite”, op.cit.
31 TDWI (Transforming Data With Intelligence) is the premier resource for business intelligence and data
warehousing education and research.

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1st Edition, Issue-1 Advanced Analytics: Scripting Business beyond the Hype

to derive value from AA.32 A Whitepaper titled ‘Three Steps to Building a Long-Term Big Data
Analytics Strategy’ published by BMC33 advocated Analytics maturity to derive optimum
benefits from AA. As stated in the Whitepaper, attaining Analytics maturity was a long drawn
journey not an overnight phenomenon. The journey included three crucial phases: ‘Critical shifts
in mindset, skills, and processes, as well as adoption of new technologies’, ‘New definitions of
success based on a deeper understanding of IT’s role in the business’ and ‘Learning and
embracing established best practices from data science, such as figuring out which questions to
ask to obtain the right information’.34

Other analysts’ recommendations included creating an analytics Centre of Excellence, setting
objectives and recognizing potential use cases, rolling out a pilot project, driving user adoption
with Chatbots35, getting organised, stepping up the capabilities, failing early, scaling up36,
creating a cross-functional analytics team that composed of technology, business, operations,
legal and HR executives, evaluating the factors that drove the business concerned and
identifying pain points where the application of AA would improve business outcomes
considerably, assessing the prevailing analytics expertise of the existing personnel, etc.37

Authors of the Data & Analytics Report at the MIT Sloan Management Review made a pertinent
point when they stated, “Despite the hype, the reality is that many companies still struggle to
figure out how to use analytics to take advantage of their data. The experience of managers
grappling, sometimes unsuccessfully, with ever-increasing amounts of data and sophisticated
analytics is often more the rule than the exception. In many respects, the hype surrounding the
promise of analytics glosses over the hard work necessary to fulfill that promise. It is hard work
to understand what data a company has, to monitor the many processes necessary to make
data sufficient (accurate, timely, complete, accessible, reliable, consistent, relevant, and
detailed), and to improve managers’ ability to use data. This unsexy side of analytics is where
companies need to excel in order to maximize the value of their analytics initiatives, but it is also
where many such efforts stall.”38 Bob Messier (Messier), SAS39 Vice President, Global Technology
& Industry Practices, put forth his perspective pretty emphatically when he stated, “We’re in the
midst of an analytics platform movement. It presents different and new challenges for the
people in IT to support this movement. But this movement will bring forth an analytics economy.
Not only is it coming at us, but it’s coming at us at a velocity we never imagined.” While lauding
AA, Messier played a cautionary note too, “Dip your toe into the water and take a crack at it.
There’s no doubt that it’s all achievable. But don’t get caught up in all of the hype. Do your
business assessment first before you go off and buy a technology. Figure out what problem you
want to solve.”40 Was Messier right?

32 Halper Fern, “Overcoming Challenges in Advanced Analytics”, https://tdwi.org/Articles/2015/02/17/Overcoming-
Challenges-in-Advanced-Analytics.aspx?Page=1, February 17th 2015
33 BMC Software, Inc. is an American technology company. BMC produces software and services that assist
businesses in moving to digital operations.
34 “Three Steps to Building a Long-Term Big Data Analytics Strategy”, https://vyomlabs.com/wp-
content/uploads/2017/06/it-operations-management-Whitepaper.pdf, June 2017
35 “Advanced Analytics: 4 Simple Steps for Enterprise Adoption”, op.cit.
36 Glatz Philipp and Burke Jamie, “Advanced Analytics: A Blueprint for Enterprise Adoption”, https://www.isg-
one.com/articles/advanced-analytics-a-blueprint-for-enterprise-adoption, 2019
37 “4 Challenges With Leveraging Analytics -- And How To Overcome Them”,
https://www.forbes.com/sites/insights-cisco/2018/08/15/4-challenges-with-leveraging-analytics-and-how-to-
overcome-them/#7f8f0fea2469, August 15th 2018
38 “Beyond the Hype: The Hard Work Behind Analytics Success”, op.cit.
39 SAS is the leader in analytics. The company helps the organization with making better business decisions with the
help of innovative analytics, BI and data management software and services.
40 “Industry experts reveal power and vision of advanced analytics”, https://www.cio.com.au/brand-
post/content/643438/industry-experts-reveal-power-and-vision-of-advanced-analytics/, July 10th 2018

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Annexure I
Advanced Analytcis: Applications

Source: “Introduction to Advanced Analytics”, https://rapidminer.com/resource/introduction-
advanced-analytics/, 2019

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1st Edition, Issue-1 Advanced Analytics: Scripting Business beyond the Hype

Annexure IIA
Leveraging Data throughout Insights Value Chain

Source: Hürtgen Holger and Mohr Niko, “Achieving business impact with data”,
https://www.mckinsey.com/business-functions/mckinsey-analytics/our-insights/achieving-business-

impact-with-data, April 2018

Annexure IIB
Insight driven use cases showcasing benefits of AA

Source: Hürtgen Holger and Mohr Niko, “Achieving business impact with data”,
https://www.mckinsey.com/business-functions/mckinsey-analytics/our-insights/achieving-business-

impact-with-data, April 2018

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1st Edition, Issue-1 Advanced Analytics: Scripting Business beyond the Hype

Annexure IIIA
Business Value from Advanced Analytics: India Experiences

Source: Bhattacharya Gautam, “High Stakes, High Rewards Indian Enterprises Outperform Global
Peers”, https://www.ey.com/Publication/vwLUAssets/ey-fi-data-analytics-india/$File/ey-fi-data-

analytics-india.pdf, 2017

Annexure IIIB
Challenges in Extracting Business Value from Advanced Analytics: India Experiences

Source: Bhattacharya Gautam, “High Stakes, High Rewards Indian Enterprises Outperform Global
Peers”, https://www.ey.com/Publication/vwLUAssets/ey-fi-data-analytics-india/$File/ey-fi-data-

analytics-india.pdf, 2017

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1st Edition, Issue-1 Advanced Analytics: Scripting Business beyond the Hype

Annexure IV

Extracting Business Value from AA: Analysts Recommendation based on insights from C-Suite

Scenario Recommendations

Surprisingly few  Initiate a dialogue with executive team to identify potential

companies know where sources/functions of value

and how Analytics can  Decide the order of priority, considering economic impact,

create value. fit with the business, feasibility, and speed

Data science is the easy  Connect data strategy with analytics strategy

part. Getting the right  Keep specific use cases in mind and understand how data

data, and getting the are acquired (commercially or open sources)

data ready for analyses,  Segregate what data business owns as it would then be an

is much more difficult asset

 Incorporate good data and metadata practices and build

automatic data-reconciliation processes that constantly

verify that new data meet quality standards

 Interconnect different data sets

Data ownership and  Implement effective data governance, specifying who is

access needs to be accountable for data definition, creation, verification,

democratized curation and validation—the business, IT, or the analytics

centre

 Adopt the dual principles of business ownership and broad

access

 Create data discovery platforms, such as web-based self-

serve portals that allow frontline staff to easily extract data

 Host data-discovery sessions to build data literacy

Embedding analytics is  The design of analytics solutions has to be user led,

as much about change participatory and democratic from the very beginning

management as it is  Employ a ‘translator’ who not only understands the data

about data science science but also how it can be applied to the business

 The cycle should be- the business identifies the

opportunity, the data scientists develop the algorithm, the

user-experience designers shape the user interface, the

software developers run production, the process engineers

reengineer work flows, and the change agents do the

implementation

 Develop a playbook for each use case, making sure critical

adoption elements such as training and communication are

not ignored

Learn to love metrics,  Prepare a dashboard that incorporates all performance

and measure, measure, indicators of interest and features automated data feeds,

measure so that you are aware of what is going on

 With automation and digitization, it is possible to see

changes in real time, rather than waiting for the end of the

month, quarter, or year

There is no universal  Senior executives should assess where the decision-making

way to organize an power rests in their organization—in the center or in the

analytics operating business units—and then design an analytics organization

model model that leverages the strengths of existing structures

 Among the questions to ponder are: How fast can decisions

be made? Is there sufficient business input into analytics

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solutions? Am I capturing the expected value from these

solutions?

The talent challenge is  Identify high performers with a quantitative background,

not only to find data such as statisticians and econometricians, then design a

scientists but also to capability-building program to extend their analytics skills

groom ‘translators’  Make use of adult-learning principles when designing these

programs, combining methods like on-the-job training, in-

person learning, and online refresher courses

 Award formal certifications to those who successfully

complete these courses as this would provide recognition

and creates a common language and set of standards

The fastest way to a big  Cultivate a ‘data culture’

idea is to cultivate a  Provide the right tools, technology, and computer power

data driven, needed to discover new features, run correlations, and

test-and-learn culture perform analyses

 This is all part of building a culture in which data, not

guesses, are brought to bear on problems, and where

people are comfortable with constant change

Source: Compiled by the Author from – Chin Kee Jit, et al., “Advanced analytics: Nine insights from the

C-suite”, https://www.mckinsey.com/business-functions/mckinsey-analytics/our-insights/advanced-

analytics-nine-insights-from-the-c-suite, July 2017

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1st Edition, Issue-1 Voice Search – The New Driver of Retail Landscape?

Voice Search
The New Driver of Retail Landscape?

Case Study

This case was written by Amrita Sahay and reviewed by K. Bhagyalakshmi, Amity Research
Centers Headquarter, Bangalore. It is intended to be used as the basis for class discussion rather
than to illustrate either effective or ineffective handling of a management situation. The case
was compiled from published sources.
© 2019, Amity Research Centers Headquarter, Bangalore.
Website: www.amity.edu/casestudies/
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any
form or medium whatsoever without the permission of the copyright owner.

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