Syllabus

Past Year Question Paper Analysis

As we analyze the paper, we see that there are two case questions (1 & 3)
that require the student to read the case and analyze it carefully, and then
link it with their existing knowledge.
There are two questions (2 & 5) which don’t require much knowledge and
are straight out of the textbook.
There is one question (4) which can be attempted by those with the
slightest knowledge of the matter, and is open to attempt in different
manners.
Keeping in sight the type of question paper, our focus in these notes would
be to cover the subject matter to a concise extent, and also induce some
cases as necessary, from exam point of view.
 Unit 1
Nature & Importance of Business Policy & Strategy
Business Policy:
 Business policies are the guidelines developed by an organization to govern its
actions. It highlights the rules, values and beliefs of the organization.
 It can define the scope decisions can be taken by the subordinates in an
organization thus permitting the lower level management to deal with the
problems without consulting top level management for every decision
(operational decision making).
 Policies are designed taking opinion of a number of people in an organization,
and are made from past experiences.
Features of Business Policy
 1. Specific: There shouldn’t be any uncertainty, else implementation becomes
difficult.
2. Clear: It should be devoid of any jargons, and should be unambiguous to avoid
misunderstanding.
3. Uniform: Uniform enough so it can be followed by subordinates at all levels
4. Appropriate: In-line with the present organizational goal
5. Simple: Simple & easy to understand
6. Comprehensive: Wider scope, both in terms of time horizon and current
magnitude
7. Flexible: Flexible in its application, and void of rigidity, so that minor
deviations from the routine decisions can be tackled
8. Stable: Not be constantly changing. Shouldn’t induce indecision in those who
take guidance from policy
Business Strategy
 It is a game plan, chosen to achieve the organizational objectives, gain
customer trust, attain competitive advantage and acquire a market position.
 It is a combination of well-designed corporate moves which lead the
organization towards its desired position and help in competing with rivals
 It is made to achieve the basic objectives of the company taking advantage of
opportunities, full resource utilization, coping with threats, and handling
events/problems.
Features
 It should be formulated from top level management; however sub-strategies
can be made by middle level management.
 It should have a long-range perspective
 It should be dynamic in nature
 The main purpose should be to overcome uncertain situations
 It should facilitate best possible use of scarce resources.

Difference between Strategy & Policy

Strategy
Best plan opted from a number of plans
to achieve org. goals
Plan of action
Dynamic in nature
Framed by top management, sub-
strategies are formulated at middle level
Deal with external environment
Policy
Common rules and regulations forming
the base of day to day decisions
Principle of action
Uniform in nature (relaxations can be
made)
Made by top management
Deal with internal environment
Strategic Management Process
It is an ongoing process comprising of 5 steps that defines the way an organization can
make strategies to achieve its goals. Using this, a company can implement a selected
few strategies, decide its stakeholders, draw an implementation plan, and keep on
appraising the progress of the implementation.
1. Goal Setting: The vision and goals (short term and long term) of the
organization are clearly stated. Then the process to achieve the objective is
identified, along with the staff capable to work on the process. (This can be
done by Environmental Scanning i.e. Opportunities and Threats identification)
2. Analysis: Data relevant to achieve the goal is gathered, potential internal and
external factors that can affect this achievement are gathered, and SWOT
analysis is performed.
3. Strategy Formulation: The plan to acquire the required resources is designed,
issues facing the business are prioritized and finally the strategy is formulated
on a corporate, business and functional level.
4. Implementation: Employees are clearly made aware of their responsibilities,
organization structure is setup, resources are distributed, decision making
process’s framework is set in place.
5. Strategy Evaluation: Strategies that are implemented are evaluated regularly to
check whether they are producing the desired results. In case of deviations, the
corrective action is taken.

Importance of Strategic Management Process

It enables the organization to plan a proper strategy to deal with its competitors, and
equips it to deal with various internal and external factors. The process can vary in
terms of the size, focus and core competency of a company. The process must ensure
relevant and timely information of changing environment and company’s performance
else it holds no use.
Limitations: It is rare that the company will follow this process from first till the last
step. Producing a quality strategic plan requires time during which many external and
internal conditions may change, rendering the plan useless.
It might be possible that implementing the strategic plan does not result in
achievement of the goals, thus the alteration of the same must be done, which makes
the whole process more complex.

Various Approaches towards Implementation of Strategy

1. Commander Approach: CEO concentrates on formulating the best strategy and
then passes it on to the executives who implement it in a top-to-bottom
approach.
2. Organizational Change Approach: Executives implement the strategy by
reorganizing the organization’s structure along with some HR (incentive)
mechanisms.
 3. Collaborative Approach: The CEO follows a participatory style in getting the
support of his or her senior managers in formulating the strategy, so they will
implement it as their own.
4. Cultural Approach: The people at the lower rungs are involved in both strategy
formulation and implementation through development of an organization wide-
culture.
5. Crescive Approach: It involves growing strategies from within the firm, where
the CEO guides his or her employees to bring up sound strategies. Strategy
planning and implementation occur simultaneously and there may not be any
long-term planning process.
Level Based Strategic Management Decisions
In an organization, the strategies are chosen at 3 different levels:
Corporate Level Strategy
Occupies the highest level of strategic decision making, and covers actions dealing
with the objective of the firm, acquisition and allocation of resources, and
coordination of strategies of various SBUs. Top management makes such decisions,
and the nature of such decisions tends to be more value oriented, conceptual and less
concrete than business or functional level decisions.
Business Level Strategy
Applicable in those organization which have different businesses, and each business is
treated as a strategic business unit (SBU). Fundamental concept in SBU is to identify
the independent product/market segments served by an organization.
E.g. Reliance Industries Limited operates in textiles, yarns, various petrochemical
products. For each product group, the nature of market differs, therefore different
strategies for each SBU is required, to make best use of its resources given the
environment it faces.
E.g. Bullet sells its Royal Enfield in UK & India, and focus on different market
segments by selling at different prices as a part of different strategies.
Functional Level Strategy
Deals with a single functional operation (say Marketing) and the activities involved in
it. Decisions are tactical (short-term) are guided and constrained by overall strategic
considerations. The plans are restricted to specific functions, allocation of resources
and coordination amongst different operations within that function, and optimal
contribution towards achieving SBU level objectives.
Note: Functional level strategy can be divided into operation level strategy say
Marketing can be divided into Promotion, Pricing etc.

Vision & Mission Statements

Vision Statement
A vision statement is a company’s roadmap, indicating what the organization wants to
become by setting a defined direction for company’s growth. It helps the organization
to differentiate from its competitors. In short, the Vision is what the company wants to
be in the future.
Examples:
 Amazon: To be Earth’s most customer-centric company where customers can
find and discover anything, they might want to buy online
 LinkedIn: To create economic opportunity for every member of the global
workforce
 Kingfisher: The Kingfisher Airlines family will consistently deliver a safe,
value based and enjoyable travel experience to all our guests
Mission Statement
Any institution mobilizes a body of people to achieve a specific set of goals. When
formulated precisely into words, these goals become a mission statement. It answered
the questions as to why an organization exists, its overall goal, goal of operations, its
core competence etc. In short, the Mission comprises of the principles that motivate
and guide an organization’s actions.
Basic Structure: Who the organization is, what it does, for Whom it does these things
and How the What is accomplished.
Examples:
 Amazon: We strive to offer our customer the lowest possible prices, the best
available selection and the utmost convenience
 LinkedIn: To connect the world’s professionals to make them more productive
and successful
Mission Statement Vision Statement
How you will get where you want to be Where you want to be
Defines the purpose and primary objective Communicates the macro-purpose
related to your customer needs and team and value of your business
values
Lists broad goals for which organization is Lists where you see yourself some
formed years from now
Talks about the present leading to its future Talks about your future

More Examples of Vision:

 Microsoft (founding time): A computer on every desk and in every home.
 Budweiser – To be the best beer company in a better world
 Nike – To bring inspiration and innovation to every athlete in the world
Need for a mission and vision statement
 Cultivates organization culture
E.g. Tim Cook shares with new employees a statement that goes “Apple has always been
different. A different kid of company with a different view of the world. It’s a special
place where we have the opportunity to create the best products on earth – products
that change lives and help shape the future. It’s a privilege we hold dear.”
 Attracts & motivates your staff
E.g. Sony’s vision statement in the 50s – “Becoming the company that most changes the
worldwide image of Japanese products as being of poor quality.”
 It will keep you going when times get tough, becoming the subconscious
motivation for continuing efforts towards the organization.
E.g. Red Cross (Mission): Prevent and alleviate human suffering in the face of
emergencies by mobilizing the power of volunteers and generosity of donors.
 It decreases the dependency of the business on a few individuals (say top level
management) as every person in the organization feels connected to its goals,
thereby encouraging ownership.
Why Companies use Mission & Vision Statement?
1. Internally
 Guide management’s thinking on strategic issues
 Help define performance standards
 Inspire employees to work more productively by providing focus and common
goals
 Guide employee decision making
 Establish framework for ethical behavior

2. Externally
 Create closer linkages and better communication with customers, suppliers, and
partners
 Serve as a public relation tool

Criteria for evaluating a mission statement

The following criteria can help in evaluating the effectiveness of a mission statement.
1. Should be understandable to all the personnel of the organization
2. Should be brief enough for most people to keep in mind
3. Should clearly specify what the business is all about
 What needs it is fulfilling
 Who it is catering to?
 How it is doing the same
4. Should have a primary focus on one strategic goal
5. Should reflect the distinctive competence (USP)
6. Should be broad enough to permit flexibility in implementation but not so
broad to permit defocus
7. Should serve as a template by which leaders can make decisions
8. Should be reflective of the values, beliefs and philosophy of the organization
9. Should reflect attainable goals
10. Should be worded to serve as an energy source for the organization
Formulating a Mission Statement (Drucker)
1. Establish a mission writing group, that can identify the reason behind
company’s existence (CEO, Chairman, Writer, Functional heads)
2. Adopt a criterion for an effective mission statement, and gather ideas for the
first drafts. (Brainstorming, one word that must be in statement, Finishing the
sentence “The mission should be…”) Then discuss the ideas that must/must not
be in the statement
3. Develop one or more draft statements
4. Judge initial drafts against the criteria
5. Develop a second draft (if first one fails) and gain feedback from outside the
group.
6. Summarize feedback and re-evaluate the second draft (if fails again, move to
step 3)
7. Present the proposed mission statement for board approval
Drucker’s Performance Areas
Drucker believed that the survival of the company was at risk when managers
emphasized only the profit objective, because this can encourage them to make money
today with little regard for how profit will be made tomorrow. 8 key areas in which
management objectives should be set are:
 Market standing: Where company would like to be in relation to competitors
 Innovation – Commitment to the development of new methods of operation
 Productivity – Target levels of production
 Physical and Financial Resources – Acquisition, use and maintenance of capital
and monetary resources
 Profitability – Specify the profit company would like to generate
 Managers Performance and Development – Setting rates of manager’s
productivity as well as desirable attitudes
 Workers Performance and Attitude – Setting rates of workers productivity as
well as desirable attitudes
 Public Responsibility – Responsibility to the customer and society and extent
to which it intends to live up to those responsibilities
Bennis’s Core Problem
Bennis’s states four failures of leaders, the first one being Lack of Vision, which is
relevant here as is discussed as below.
In dark times of a company, a vision is important. Without a clear personal and
organizational vision, we grab what we can to serve our immediate needs. Lack of
vision leaves us incapable to navigate the complexities of the world. Vision is the
product of reflection. It requires that we slow down and look at what matters the most,
and what’s worth doing, that must be accomplished beyond our reactive impulses.
Similarly, in an organization, without a vision there is no way to determine whether
we are being driven by our values and principles over personal gain. Leaders that fail
to harness this insight, or learning from the past, and foresight the application of these
lessons to the future. Leaders can miss the opportunity to examine the impact of their
choices in advance of making them.
As per another information source, Bennis states that “integration, distribution of
power, collaboration, adaptation and revitalization are the major human problems of
the next 25 years. How organizations cope with and manage these tasks will
undoubtedly determine the viability and growth of the enterprise”. These core
problems can be kept in consideration while formulating a mission statement.
 Integration
 Social influence
 Collaboration
 Adaptation
 Identity
 Revitalization
Create a Mission Statement for a consulting firm: Key words in the statement shall be:
 Clients
 Innovative, Lon lasting solutions
 Company’s employees
 Leaders in industry
 Decision making, Change
Our mission is to help our clients make distinctive, lasting and substantial
improvements in their performance and to build a great firm that attracts, develops,
excites and retains exceptional people

Unit 2
Environmental Analysis & Diagnosis
Analysis of Company’s external environment
Whether a firm has high external focus or high internal focus, their products compete
in the market for buyer’s attention and appreciation. A company thereby needs to
analyze and diagnose its environment, to keep up with its dynamicity, and sustain its
business. With this premise, we can define certain dimensions of an external business
environment:
1. Market is free-for-all, giving opportunities to firms to try out, survive and
grow. The firms thereby have a tendency of developing specialized divisions
within its boundary, corresponding to the divisions that exist in the external
 environment. (Finance division interacts with financial institutions, production
deals with suppliers, end customers etc.)
2. Firms can consider their market globally, spreading across countries, cultures
for both sourcing inputs, and selling the outputs. On the contrary, companies
can also operate in limited geographical spread or niches. The global-national-
local criteria serves as another dimension of external environment (EE)
3. Macro-environment is the interplay of PESTEL forces where as the
microenvironment is the industry level environment, both bearing different
implications on the firm’s strategy.
4. Dynamicity of EE can happen due to technology, legalities, nature etc. The
environment is turbulent, hence the strategy process must be focus on
anticipating the unanticipated opportunities and problems in the external
environment.
5. Fifth dimension of EE includes the industries and sectors meeting the various
needs of the society. Each industry may be catering to the specific needs of the
market segment, with products having certain core features. The boundary of
an industry (say customer segment, or position in the value chain) may change
when firms expand. Trade associations of industries are cooperative
arrangements that can influence the environmental factors to industries’
advantage.
Impact of EE on Business
Anything and everything outside the boundary of a firm is EE. As a firm is embedded
in an environment from where it draws inputs and to which it ejects outputs, EE
impacts the firm in multiple ways. For instance:
 Change in government policy say GST can initially impact the bottom line of
the heavily taxed industries (Kite & Gold)
 Research claiming Lead in Maggi which is harmful to public health, can crash
down the business overnight
Firms that collect strategic intelligence constantly from the EE can make internal
adjustments quickly in order to synergize its internal environment, and change its
strategy.
A focal firm, that sells a product in the market has interaction with A, B, C, D in terms
of collaboration, competition or cooperation. The firm also has interaction with
suppliers who provide inputs. The input market is affected by PESTELD factors (D-
Demographic) that would directly or indirectly affect the focal firm. The outputs of
the firm go to market directly or indirectly through the other firms as well, who are
also affected by the PESTELD factors. Therefore, a firm’s strategy should consider
this multi-faceted interaction system, so that it is in-line with all the external forces
and influences.
Remote Environment
It consists of a set of forces that originate beyond a firm’s operating situation.
Analysis of remote environment is done by PESTELD analysis.
PESTELD Framework: Divide the external environmental into the following
parameters: Political, Economic, Social, Technological, Environmental, Legal,
Demographic (Macroenvironment)
Specific Environment
Refers to the forces and institutions outside the organization with which it interfaces
during the course of conducting its business. They are directly relevant to the
achievement of the organization goals, because they have a very direct and immediate
impact on the decisions and actions of the managers. Analysis of specific environment
is done Porter’s 5 Force Model.
Porter’s 5 Force Model
It is a model that analyzes five competitive forces that shape every industry, and helps
determine an industry’s weaknesses and strengths. Porter’s model can be applied to
any segment of the economy to search for profitability and attractiveness, and thus
determine the appropriate corporate strategy.
There are 5 undeniable forces that shape every market and industry in the world:
 1. Competition in the industry: Refers to the number of competitors, and their
ability to compete. Larger the number of competitors, offering similar products,
lesser is the power of the company. Suppliers/Buyers can seek a competitor if
they offer a better deal or lower prices. Conversely, when competition is low,
the company (say C) has grater power to charge higher prices, and achieve
higher sales & profits.
Intense competition is characterized by:
 Many competitors
 High exit barriers
 Equal size competitors
 Lack of product differentiation
 Low customer loyalty

2. Potential of new entrants: C’s power is affected by new entrants in the market.
The less time and money it cost for a new entrant to enter the market and become a
competitor, lesser would be the power of C (making industry less attractive). If there
are strong barriers to entry, say expensive patents, heavy infrastructural/technological
investment, then C has more power to charge higher prices, and can negotiate at better
terms.
Easy entry is characterized by:
 Low amount of capital to enter market
 No patents, trademarks with existing firms
 No government regulation
 Low customer switching costs (firm can easily switch to other industry)

3. Power of Suppliers: The more the number of suppliers, and less unique is the
input they are offering, greater would be the power of C (as it can easily switch its
supplier). Conversely, if the number of suppliers is low, and inputs they are offering is
unique, this would lead to higher switching costs, and less power of C.
Higher power of suppliers is characterized when:
 Few suppliers, many buyers
 Suppliers threaten to forward integrate
 Suppliers hold scarce resources
 Raw materials are not easily substitutable

4. Power of Buyers: Small and more powerful customer base means they can
negotiate for lower prices and better deals. Large number of fragmented customers
can be charged higher prices to increase profitability. Power of buyers is high when:
 Buyers purchase large quantities
 Few buyers
 Buyers threaten to backward integrate
 Large number of substitutes
 Price sensitivity of buyers
 5. Threat of Substitutes: Substitute pose as a threat for C. If there are a smaller
number of close substitutes, then C can increase prices. When substitutes products are
available, C’s power over its pricing is reduced, ad customers can easily switch to an
alternative. Threat of substitutes is highest when (refer to same points as high
competition in industry i.e. 1 point)
st

Internal Analysis
Internal analysis highlights an organization’s strengths and weaknesses in the areas of
their competencies, resource and competitive advantage. An organization can have a
clear idea of where they are excelling, where they are average, and where they are
underperforming. Thereby, a firm can exploit its strengths and opportunities, while
eliminate any threats and weaknesses, by the means of an appropriate strategy.
Internal analysis can be done by the following tools:
1. SWOT Analysis: Analyze the Strengths and Weaknesses that are intrinsic to an
organization, and the Opportunities and Threats that are extrinsic to it.
2. McKinsey 7S Framework: Used to assess the organization’s current state, the
proposed state and the gaps that lie between them. The 7 internal aspects that
must be studied are: Strategy, Structure, Systems, Share Values, Skills, Style,
Staff.
NOTE: In SWOT & PESTEL, we haven’t ventured in much detail, primarily because
they are simple concepts. It is better to read their cases, to gain better applicability of
the models.
Competitive Advantage
The conditions that allow a company to produce a product of equal value at a lower
price or in a more desirable manner. Competitive Advantage (CA) allow the company
to generate more sales or earn higher margins compared to its rivals. CA can be
attributed to a variety of factors, including cost structure, branding, quality of product
offerings, distribution network, intellectual property, customer service and so on.
The more sustainable a CA is, the more difficult it is for competitors to neutralize it.
The two main types of CA are:
i.Comparative Advantage: A firm’s ability to produce a good or service more
efficiently than its competitors, which leads to greater profit margins, creates a
Comparative Advantage. (Economies of Scale, efficient internal systems, geographic
locations are a few reasons) A comparative advantage does not imply a better product
or service, it only shows the firm can offer a product at a lower price. (Chinese firm
can manufacture at lower labor costs, than one in US)
Ex. Amazon has built and sustained its comparative advantage by having a level of scale
and efficiency that is difficult for retail competitors to replicate, allowing it to rise
primarily through price competition.
 ii. Differential Advantage (DA): DA is when a firm’s product differs from its
competitors and is seen as superior. (Advanced technology, Patents, Superior
personnel, Strong brand identity) drive DA. These factors support wide
margins and large market shares.
Ex. Apple is famous for creating innovative products, and supporting their market
leadership with savvy marketing campaigns to build an elite brand. Major drug
companies can also market branded drugs at high prices, because they are protected
by patents.
Core Competence
Core competencies are a firm’s collective knowledge about how to coordinate diverse
production skills and technologies. CK Prahalad and Gary Hamel propose three tests
to identify core competencies:
1. Provide potential access to a wide variety of markets
2. Make a significant contribution to the perceived customer benefited of the end
product
3. Difficult for competitors to imitate
A core competency is about harmonizing streams of technology, the organization of
work, and the delivery of value. It takes considerable time to develop a core
competency, as reaching a stable equilibrium state of a configuration of technological
streams and work processes is time consuming. Once developed, they enable a
company to produce core products and one core product may lead to production of
many end products for the company.
Ex. Honda has developed core competence to produce effective engines, and this
leads to a core product i.e. engine. This gives many end products such as bikes, cars,
boat engines etc. (Firm should take diversification decision not by seeing
attractiveness of market but from core competencies of the firm). Certain
characteristics of a competency such as complexity, tacitness and interconnectedness
are the reasons for causal ambiguity of a competency and its performance outcomes.
Causal Ambiguity – The inability to fully specify the factors about why a given action
results in a given outcome is causal ambiguity. All competing firms must have an
imperfect understanding of the link between the resources controlled by a firm and a
firm’s core competency in order for causal ambiguity to be a sustainable competitive
advantage.
Michael E. Porter’s Value Chain Analysis
Value Chain analysis is a process of dividing various activities of the business in
primary and support activities and analyzing them to determine their contribution in
terms of the value creation to the final product.
(Value Chain represents the internal activities that a firm engages in when
transforming inputs into outputs)
Primary Activities: The goal of these activities is to create value that exceeds the cost
of that activity, therefore generating a higher profit.
 1. Inbound Logistics: Includes a range of activities like receiving, storing,
distribution etc. which makes the goods and services available for operational
processes.
2. Operations: Activity of transforming input raw material to the final product
ready for sale. E.g. Machining, assembling, packaging.
3. Outbound Logistics: Activities that help in collecting, storing and delivering
the final product to the customer is outbound logistics.
4. Marketing & Sales: Activities like advertising, promotion, sales, marketing
research, public relations etc. performed to make the customer aware of the
product and create a demand for it.
5. Service: Service provided to the customer so as to improve or maintain the
value of the product. (financing, after-sales service etc.)
Support Activities: Activities that support the primary activities as stated above, thus
playing a role in each activity.
1. Procurement: Supplying all the necessary inputs to perform primary activities
like material, machinery etc.
2. Technology Development: This requires heavy investment, and can take years
of R&D, however its benefits can be enjoyed for several years.
3. Human Resource Management: Managing human resource, as required in all
the primary activities.
4. Infrastructure: Management system which provides its services to the entire
organization, by the means of planning, finance, information management,
quality control, legal, government affairs.
Advantages of Value Chain Analysis: Flexible tool, can be used to compare business
models, helps in understanding organizational issues
Disadvantages of Value Chain Analysis: Oriented towards manufacturing business,
requires expertise, Business Information systems may not be heavily developed
How to Use Value Chain Analysis
1. Identify sub activities for each primary activity. There are three different types
of sub activities:
 Direct Activities: Create value by themselves. E.g. For a book publisher
marketing activity, direct activities include advertising, selling online etc.
 Indirect Activities: Allow direct activities to run smoothly. E.g. For a book
publisher, these would include keeping customer record, managing sales force
etc.
 Quality Assurance: Activities that ensure that direct and indirect activities meet
necessary standard. E.g. Proofreading books, editing advertisements etc.
2. Identify sub activities for each support activity: Similar to step 1
3. Identify Links: Find connections between all the activities that you’ve
identified. These links are key in increasing a competitive advantage from the value
chain framework. E.g. Links may exist between Sales Force (HR) and Sale volumes
(Marketing)
4. Look for opportunities to increase value: Review each sub activity and links
that you’ve identified, and think how you can change or enhance it to maximize the
value you offer to customers. (customers of support activities can be internal as well
as external)
Examples of Key Value Chain Elements
1. Food & Beverage (Starbucks):
 Selecting and sourcing high-quality coffee bean
 Developing loyalty though excellent customer service
 Aggressively marketing their brand

2. Delivery Service (FedEx)

 Emphasizes and invests in employee development through excellent human
resource initiatives and infrastructural developments

3. Retail (Walmart)
 Regularly evaluates suppliers and integrating in-store and online shopping
experiences
 Driven by their commitment to help people save money

Brief Value Chain Analysis of McDonald’s

Primary Activities:
1. Inbound Logistics: Pre-defined suppliers, Backward integration, Fresh & Local
ingredients, Coca-Cola
2. Operations: Changed design of restaurant kitchen, new speedy kitchen has
higher efficiency. Distribution network of McDonald’s is efficient in terms of
delivery and warehousing needs of every outlet.
3. Marketing & Sales: Happy Meal, Sharing Packs, Billboards & Neon Signs
4. Services: Free Wi-Fi, Play Parties, McDelivery
Support Activities:
1. Infrastructure: Modern & Sophisticated infrastructure with drive-in facility at
majority places, Eco-friendly workplaces, Advanced IT
2. Human Resources: Fairly secure employment, offers work for those
marginalized in labor market
3. Technology Development: Modernized restaurants, E-Portals, Five-year IT
support deal with Fujitsu
4. Procurement – E-Procurement system, which is very efficient and is its
backbone towards successful supply chain management.
 Unit 3
Formulation of Competitive Strategies
Michael E. Porter’s Generic Competitive Strategy
Two primary determinants of a firm’s profitability are the attractiveness of the
industry it operates in, and the position it holds within that industry. Even though an
industry may have below average profitability, yet a firm that is optimally positioned
can generate superior returns. Porter argues that firm’s strength ultimately falls into
one of the two headings: cost advantage & differentiation. By applying these strengths
in either a broad or narrow scope, three strategies result, known as the generic
strategies (which are not firm or industry dependent).

Cost Leadership Strategy: It calls for being the low-cost producer in an industry for
a given level of quality. The firm sells its products either at an average industry price
to earn an abnormal profit, or sells it below the industry average price to gain a higher
market share. In the event of a price war, the firm can maintain some profitability,
while the competition suffers losses. A firm succeeding in cost leadership have
following internal strengths:
 Access to the capital required to make significant investment in production
assets
  Skill in designing products for efficient manufacturing
 High level of expertise in manufacturing engineering
 Efficient distribution channels
This strategy bears a risk, that if the technology improves, the competitor may
leapfrog the production, thus eliminating any advantage that existed.
Differentiation Strategy: Involves developing products that offer unique attributes
that are valued by customers and that customers perceive to be better or different from
competitor products. The value added due to uniqueness of product may allow the
firm to charge a premium price for it. The firm can then hope that the higher price can
cover the extra costs incurred in offering the unique product. (In situation where
suppliers increase price, the firm can increase the costs to it customers who cannot
find substitute products easily)
Firms with differentiation strategy have following internal strengths:
 Access to leading scientific research
 Highly skilled and creative product development team
 Strong sales team with ability of communicating the perceived strength of the
product
 Corporate reputation for quality and innovation
This strategy bears the risk of change in customer taste, imitation by competitors etc.
Focus Strategy: This strategy focuses on creating a narrow segment, and within that
segment attempts to achieve cost advantage or differentiation. The logic is that the
needs of the group can be better serviced by focusing entirely on it. A firm using focus
strategy enjoys a high degree of customer loyalty, which discourages other firms from
competing directly.
The firms having narrow market focus, have lower volumes, and therefore less
bargaining power with their suppliers. However, the ones pursuing a differentiation
focused strategy may be bale to pass higher costs to customer due to lack of
substitutes.
Firms that succeed in a focus strategy are able to tailor a broad range of product
development strengths to a relatively narrow market segment that they know very
well.
Some risks include imitation, and changes in target segments. Further, a broad market
cost leader can also adapt its product to the targets segment (of the narrow cost focus
business) to compete directly.
Note: These generic strategies are not necessarily compatible with one another. If a
firm attempts to achieve an advantage on all fronts, it may achieve no advantage at all.
Therefore, Porter argues, that to be successful over the long-run, a firm must select
only one of these three generic strategies, otherwise the firm will be stuck in the
middle and will achieve no competitive advantage. (Alternatively, a firm can succeed
at multiple strategies by creating separate business units for each of them, having
different polices and different cultures.)
Also Note: There exists a viewpoint which says that a single strategy is not always
best, because within the same product, customers often seek multi-dimensional
satisfaction such as quality, price, style etc.
Implementing Competitive Strategy
Offensive & Defensive Moves
Defensive Strategies: Set of strategies used to make possible attacks unattractive or
discourage competitors. The motives are primarily to protect market share, position or
profitability, while maintaining leadership in market and retaining the customer
loyalty and faith in the brand. These strategies involve less risk, and ensure that the
share of the market is retained. By emphasizing the benefits of the brand, one can
devalue the competitor and secure a niche for your product.
Types
1. Position Defense: Involves trying to hold the current position in market, and
continue investing in the current market and building brand name and customer
loyalty. (Johnson & Johnson cut the price of its product Tylenol when a cheap
alternative Datril was launched by Bristol-Myers.)
2. Mobile Defense: Makes constant changes in business and keeps innovating, by
introducing new products, entering new markets or making changes in existing
products. Includes market broadening and market diversification strategies.
(ITC ltd. has expanded into several segments, following a heavy diversification
strategy)
3. Flanking Defense: Market leader attempts to identify and strengthen its own
weak points, commonly geographic areas or market segments before a smaller
rival can mount an attack against it (Johnson & Johnson example also fits here)
4. Counter-Offensive Defense: When a market leader is attacked by another
company, it retaliates by attacking main territories of the competitor. (Launch
of Lexus by Toyota to challenge Mercedes strong hold in India)
5. Contraction Defense: A market leader gives up a segment which is not so
profitable to concentrate on other segments. This happens when there is
extreme competition or when there is not enough expertise in the leader to
handle the situation. (TATA motors gave up passenger vehicle market to focus
on commercial vehicle market)
Offensive Strategies: Involves improving own position by taking away the market
share of the competitor. It can include direct ad indirect attacks on competition, or
moving into new market segment. The primary objective is to destabilize the current
market leader and acquire a greater market share. The company can benefit from the
first mover advantage, exploit the untouched/neglected market segments.
Its types are stated as below:
1. Frontal Attack: Attacking a competitor head-on, with similar products, price,
quality, promotion etc. This is highly risky unless the attacker bears a clear-cut
competitive advantage. It focuses on competitor’s strength rather than his
weakness. (Pepsi introduced Diet Pepsi when Coke introduced Diet Coke)
 2. Flank Attack: Attacking the competitor at the weak point or blind spot. This is
less risky compared to a frontal attack. Here company follows the path of least
resistance where the competitor is incapable of defending itself. (Canon took
over Xerox’s copier market by focusing on small size coper market that
couldn’t afford Xerox’s large copiers)
3. Encirclement Attack: Combination of Frontal & Flank attack. Here attacker
must have superior resources, and must surround the competitor with various
brands, which results in the defender’s attention getting spread across various
products. (Honda Super Cub costed 75% less than Harley Davidson bikes, and
casual bikers with little interest in large or powerful bikes purchased them)
4. Bypass Attack: Involves overtaking the competitors by introducing new
technology and innovating its product. (Leap Frog Strategy) (iPod attacking the
Sony Walkman)
5. Guerilla Attack: Making small changes, which repeatedly put your brand in the
forefront, and slowly makes it a huge name in the market. Intention here is to
destabilize, harass or demoralize the competitor. (Hello Happiness phone booth
installed by Coca Cola that accepts bottle caps and gives goodies) (Israel wins
war, Palestine wins hearts)
Formulating Corporate Strategies
Strategies that are used to make decisions regarding the allocation of resources or
pursue an operational strategy are often categorized as stability strategies, expansion
(growth strategies), retrenchment strategy or combination strategy.
Stability Strategies
The strategy seeks to maintain operations, market size and position. This strategy is
characteristic of the small risk averse firm or firms that operate in a very uncertain
market that is comfortable with its current position. It can be further broken down
into:
 No Change Strategies: Firm makes no considerable changes to its objectives or
operations. The firm examines the internal and external factors affecting the
firm in its current environment and makes a conscious decision to maintain its
current strategic objective. This is observed commonly in low competitive
environments, with no major market shifting occurrences. (Firms operating in
niche markets choose a cost/differentiation strategy until internal/external
factors necessitate a change)
 Profit Strategies: Endorses any action necessary to maintain or improve
profitability. This may include cutting costs, raising prices, increasing sales etc.
It is used by firms that are profitable but face temporary pressures that threaten
their profitability (say recession, inflation, competition). If pressures become
long term, then the profit strategy risks harming the firm by reducing
competitiveness. (Strategy does not involve the investment of new resources)
 Caution Strategies: It requires a firm to wait and continue to assess the market
before employing any particular strategy. This is a temporary strategy
employed for a limited time while deciding on the formal strategy to pursue
further. It avoids making any significant investment, and discontinues any
 strategy pursued till now, until the firm has full understanding of market, and
the effects of former strategies. (common in manufacturing companies
evaluating the launch of new products)
Growth Strategy
Strategy adopted with an aim to achieve faster growth, achieve higher profits, grow a
brand, occupy a larger market share and so on. It can be classified into:
1. Concentrated Growth: Focusing resource allocation and operational
efficiency on selected business units. Concentration may include:
 Penetrating existing market with an existing value proposition
 Developing new market by attracting new customers to an existing value
proposition
 Developing a new value proposition to introduce in the existing market
This allows the firm to focus on areas where it already has a level of competency.
However, strategy is analogous to putting too many eggs in one basket, i.e. changes in
market may cause the strategy to become unsuccessful.
2. Expansion through Diversification: Involves diversifying the value offering of
the company by either of the two ways listed below:
 Concentric Diversification – entails developing a new value proposition related
to the existing value proposition
 Conglomerate Diversification – entails entering into new markets (with
existing value proposition or combining with another industry competitor)
This strategy reduces specific industry risks, such as an economic downturn. The profits
of one value offering might offset the losses arising due to another.
Examples: Virgin Media moved from music to travel and mobile phones, Walt Disney
moved from producing animated movies to theme parks and vacation properties,
Canon diversified from a camera-making company, into producing whole new range
of office equipment
3. Expansion through Integration: Involves the consolidation of operation
units anywhere along the value chain to create greater efficiency and
produce economies of scale. There are two types:
 Vertical Integration: Forward integration involves consolidating closer to the
point at which value is delivered to the consumer. Backward integration is
consolidating closer to the genesis of the value chain (say point of
manufacturing)
 Horizontal Integration involves consolidating operations ate the same point in
the value chain. The consolidation may be between business units or by
acquiring/merging with competitors.

4. Expansion through Co-operation: Involves working closely with a

competitor (while potentially still competing against them in the market).
Working with a competitor provides both companies an advantage.
Working together can generate operational efficiency, or expand the market
potential for either of them. It can take place in the following forms:
 a. Mergers & Acquisitions: Described in depth at the end of this Unit 3.
b. Strategic Alliance: A formal arrangement between two companies that share
resources to undertake a specific, mutually beneficial project with certain objectives.
It is less involved and less permanent than a joint venture. Each company maintains its
autonomy. Partners may provide resources such as products, distribution channels,
technology, IPR etc. (Helps develop more effective process, expand into new market,
gain advantage over competitor)
Ex. An oil and natural gas company from strategic alliance with a research laboratory to
develop a more commercially viable recover process.

c. Joint Ventures: Joint venture is an entity created when two or more firms pool
a portion of their resources to create a separate jointly owned organization. The
two parent companies do not cease to exist. Each of the participants is
responsible for profits, losses and costs associated with the project. JV can take
on any legal structure, say corporations, partnerships, LLP companies. (New
technological knowledge, greater flexibility, shared risks are advantages)
Ex. Sony-Ericsson was a joint venture between Sony (mobile phone manufacturer)
and Swedish Company Ericsson which is a manufacturing company. Also, tata motors
have formed a 51:49 JV in bus body building with Marco polo of Brazil

d. Licensing: The essence here is the owner retaining ownership of its IP

(intellectual property) while granting others the right to use it. Some licensing
can look a lot like Franchising.
Ex. In 1850, the inventor of sewing machine, Isaac Singer, sold licenses to entrepreneurs to
sell his machines, in different parts of USA. He also offered training in use of
machines. The IP licensed was a patent, brand name and know how. Strictly this was
licensing. A clearer case is a car wash process being licensed and sold to other
business in return for royalties. Similarly, Microsoft Office is also a software license,
where you do not own anything more than the right to use it, with the license being
subject to strict terms and conditions.

e. Franchising: It is a way to scale a business once it is successful and proven. It

involves finding franchisees with the skills necessary to operate the same
business at their level. Under a franchise, the franchisor retains control of the
brand and licenses, and provides training, know how, marketing along with
other resources and skills to the to other party. Franchisee puts up the initial
capital for the business, helps promote the brand and pays a license fees which
enables it to use the successful business model and brand and earn profits.
Note: Licensing intellectual property such as confidential information, trademarks, logos,
designs, copyright materials etc. is at the heart of a franchise contract.
Example: Best known example is McDonald’s; whose franchise agreement contains
strict quality control provisions.
 5. Product Development Strategy: Based on developing new products, or
modifying existing products so they appear new, and offering the same in current or
new markets. This strategy is applicable when there is little to no opportunity for new
growth in company’s current market. The company can create an updated product for
current product in current market, enhance an existing product for a new market, or
simply move away from the product altogether, and cease growth.

6. International Expansion: Involves creating new market for a value offering by

looking outside the immediate nation. This option is preferable when there is little
room for expansion in the domestic markets. Internationalization can be carried out
through the following strategic approaches:
7. International Strategy: Focus in offering a value proposition in a foreign
country without modification or differentiation (KFC in initial days)
8. Multi-Domestic Approach: Involves modifying or differentiating a
product to make attractive or suitable to the foreign markets (McDonalds)
9. Global Strategy: Focuses on delivering the standardized value
proposition in countries where there is a low-cost structure for delivery.
(Cost of starting a business is highest in Venezuela, while India ranks first
globally in terms of lowest living costs, while Egypt ranks second globally
in terms of providing a low-cost environment for entrepreneurs)
10. Transnational Strategy: Employs both global and multi-domestic
strategy by modifying the product in foreign markets where there is a low-
cost structure that results in profits from delivering the value proposition.
Renewal/Retrenchment Strategies
Strategies that seek to restructure, sell or divest a business unit. The purpose is to
reduce costs, streamline operations, or stabilize cash flows. Three primary types of
retrenchment strategy are:
1. Turnaround Strategy: Retreating from the decision wrongly made earlier, and
transforming from a loss making to a profit-making company. It calls for
realigning operations to be more cost efficient or profitable. It often comes in
response to an ineffective strategy causing harm to the company.
Ex. In 2006, Dell announced the cost-cutting measures, and to do so it started selling its
products directly, and suffered huge losses. Int 2007, Dell withdrew its direct selling
strategy, and started selling its computers through the retail outlets, and today it is the
third larger computer retailer in the world.

2. Divestment – It means reducing operations or completely divesting a business

unit. The unit might be losing money, or may not be in line with company’s core
operational objectives. Drivers of this strategy are negative cash flows, sustained
losses, better alternative use of resources, rising casts, limited market share etc.
(Divestment comes after a turnaround strategy has proved ineffective)
 3. Liquidation – Similar to divestment, however it focuses on selling specific
assets or shutting down business units. Unlike divestment, which seeks to streamline
operations and focus resources, liquidation simply sees a business unit as a failure.
(extensive loss, obsolete assets/technology, ineffective process cause liquidation)
Combination Strategy
Employing any simultaneous combination of other strategies, either by adopting
different strategy in individual unit, or multiple strategies (at same time) in single unit.
(Most popular in large, complex organizations)

Strategic Fundamentals of Mergers & Acquisitions

Merger: It is a deal uniting two existing companies into one new company with a new
name. Mergers and acquisitions are commonly done to expand a company’s product
range, enter new segments or gain market share. All this is done to please
shareholders and create value for the company. There are several reasons why
companies merge, along with several types of mergers as stated below:
1. Conglomerate: nothing in common for united companies
(Walt Disney Company & American Broadcasting Company (ABC) merged, leading to
expanded distribution of Disney media)
2. Horizontal: both companies are in same industry, the deal is a part of
consolidation
(Brook Bond Lipton India ltd. is a merged company. Exxon Mobil is a merger of the first and
second largest energy corporations.) (to obtain economies of scale, and increase
market share)
3. Vertical: two companies that make parts for a finished good combine
(E-Bay (online auction & shopping) acquired PayPal (online payments))
4. Market extension: companies sell same products but in completely different
markets
(Dell (Casual Gamers) acquired Alienware (Hardcore gamers), led to sunk costs for Dell, as
some range of its laptops competed with Alienware)
5. Product extension: merge together the products that go well together
(Disney had a copyright over cartoon characters, and together with Pixar, they produced
animated films)

Acquisitions
It is a corporate action, where company buys most if not all of the target firm’s
ownership stakes to assume its control. It is done as a part of company’s growth
strategy, when it is more beneficial to take over an existing firm’s operation rather
than expand on its own.
Friendly Acquisition: It occurs when the target firm expresses its agreement to be
acquired. They often work towards a mutual benefit for both the acquiring and target
firms, and companies develop strategies to ensure that acquiring firm purchases
appropriate assets, including the review of financial statements and other valuations.
Once both parties agree to the terms, the purchase moves forward.
E.g. Johnson & Johnson undertook a friendly acquisition of a Dutch vaccine maker
Crucell, Facebook acquiring WhatsApp
Hostile Acquisition: There isn’t an agreement from the target firm, and acquiring firm
must actively purchase large stakes of the target, to have a majority stake. The
acquiring company can produce a tender offer designed to encourage current
shareholders to sell their holdings in exchange for an above market value price.
E.g. L&T bought a 20.4% stake in leading services firm Mindtree.
Defending against a Hostile Acquisition
Poison pill – A form of defense tactic utilized by a target company to prevent hostile
takeover, where the target corporation makes its stock less attractive to the acquirer,
by making its’s stock more expensive. (e.g. allowing the existing shareholders to buy
more stocks at a discount, this increases the number of shares acquirer will have to
buy)
1. Golden Parachute – Substantial benefits given to top executives if the company
is taken over by another firm and the executives are terminated as a result of
the takeover. It is an anti-takeover measure, taken by a firm to discourage an
unwanted takeover.
2. Pac-Man Defense – Target firm tries to acquire the company that has made the
hostile takeover attempt, with its efforts made at reversing the whole game, and
using its war chest (reserves for unexpected opportunity) to buy the majority
stake of the acquirer firm.
Benefits of Mergers & Acquisitions
1. Economies of Scale – Combined firm can become more cost-efficient and
profitable
2. Greater pricing power from reduced competition and higher market share
3. Combining different functional strength say marketing and production
processes
4. Firm with excess cash, can fund a firm with high return projects yet lack of
funds
5. Debt capacity can increase, as the new firm’s cash flows can become more
stable and predictable
6. Tax benefits earned by a profitable firm that acquires a money losing firm,
using the net operating losses of the latter
7. Diversification of the products, services and long-term prospects of the
business

Examples of Mergers & Acquisitions:

4. Merger of Vodafone & Idea
5. Merger of Dena Bank, Vijaya Bank & Bank of Baroda
6. Myntra acquiring Jabong, Flipkart acquiring Myntra, Walmart acquiring
Flipkart
7. Microsoft acquiring Nokia (bought – $7.6 bn, sold - $350 million)
8. Jacque Nasser the CEO of Ford acquired Lincoln, Volvo, Mercury, Aston
Martin, Jaguar & Land Rover.

Unit 4
Strategic Framework
Strategic Analysis & Choice
Strategy analysis and choice focuses of generating and evaluating alternative
strategies, as well as selecting strategies to pursue. Here we seek to determine the
alternative course of action that could best enable the firm to achieve its mission and
objectives.
 Firm’s present strategies, mission and vision along with external-internal audit
information provides a basis for generating alternative strategies
 Alternative strategies hereby derived (from above information) are consistent
with past strategies that have worked well.
 Strategic analysis discusses analytical technique at two stages i.e. corporate
level (BCG matrix, GE matrix, Hofer’s matrix, DPM) and business level
strategies (SWOT, Experience Curve, Grand Strategy Selection matrix)
The judgmental factors constitute the other aspect on the basis of which strategic
choice is made.
Strategic Analysis at Corporate Level treats a corporate body constituting a portfolio
of business in a corporate vase. It is relevant to a multi-business corporation. For
single business entities, business level strategic analysis is sufficient.
Strategic Gap Analyses
It is an evaluation of the difference between the desired and actual outcome, and what
must be done to minimize this gap. It attempts to determine what a company should
do differently to achieve a particular goal by looking at the time frame, management,
budget and other factors to determine where the shortcomings lie. After this analysis,
the company should develop an implementation plan to eliminate the gaps.
1. Identifying the gap between the application of resources and the best
possible result from that application of resources.
2. Strategic gap = What the company must do – What the company is doing
3. This procedure stems from a variety of performance assessments, most
notably benchmarking, where if the general performance of an industry is
known then it becomes possible to use that as a benchmark to determine
whether a company’s performance is acceptable or not.
4. With such comparative data along with a strategy for improvement in mind,
the company can allocate resources such as time, money and people to seek
out a specific outcome.
Ex. If a small restaurant wants to become a tourist destination, then a gap analysis
would look at the changes required by the restaurant to meet its goals (say relocation,
altering many, more staff) The analysis would then determine how these changes
would take place, and help the business to strategize to meet its future objectives.
Portfolio Analyses
BCG Matrix
BCG Growth Share Matrix is a portfolio planning model developed by Boston
Consulting Group. It is based on the observation that a company’s business units can
be classified into four categories based on combinations of market growth and market
share relative to the largest competitor. Market growth serves as a proxy for industry
attractiveness, and relative market share serves as a proxy for competitive advantage.
The matrix thus maps the position of a business unity, within these two important
determinants of profitability.

The framework assumes that an increase in the relative market share will result in an
increase in the generation of cash, which often is true because of the experience curve
(described later). Second assumption is that a growing market requires investment in
assets to increase capacity, thus increasing the consumption of cash.
This means the position of business on growth share matrix provides an indication of
its cash generation and its cash consumption.
The four categories that a business unit can be put in (as per the matrix) are:
 1. Dogs – Low maker share, Low growth rate. Neither generate nor consume
large amounts of cash. Serve as cash traps because of the money tied up in
business with little potential. Divestment must be done.
2. Question Marks – Grow rapidly, consumer large amount of cash. Low market
share, thus do not generate much cash. Large net cash consumption. Has the
potential to gain market share and become a star, and eventually a cash cow. If
it does not become a market leader, then after years of cash consumption it will
degrade to a dog, when market growth declines.
3. Stars – Generate and consume large amount of cash, both balancing each other
out. If star can maintain its large market share, then it will become a cash cow,
as market growth rate declines. (Portfolio of a well-diversified company should
have stars that will become the next cash cows, and ensure future cash
generation.)
4. Cash Cows – Generate more cash than they consume. Profits should be
extracted, while investing as little cash as possible. They can provide the cash
required by question marks. Their value can be determined with reasonable
accuracy, by calculating the present value of its cash stream using discounted
cash flow analysis.
Limitations:
1. Market growth rate is only one factor in industry attractiveness, and relative
market share only one factor in competitive advantage. (Other factors may also
determine these factors)
2. Each business unit may not be independent of other (which matrix assumes),
for instance a dog unit may help other units gain a competitive advantage.
3. Definition o the market is relative, and can thus produce skewed results.

GE Matrix
The GE Matrix was developed by Mckinsey & Company consultancy group in the
1970s. The nine cell grid measures business unit strength as against industry
attractiveness. Whereas BCG is limited to products, business units in this matrix can
be products, whole product lines, a service or even a brand.
Industry Attractiveness can be measured by:
 Market size
 Market growth
 PESTEL Factors: Political, Economic, Social, Technological, Environmental,
Legal
 Porter’s 5 Forces: Competitive Rivalry, Buyer Power, Supplier Power, Threat
of new entrants, Threat of substitution
Business Unit Strength can be measured by:
 Market Share
 Growth in market share
 Brand equity
 Profit margins compared to competition
 Distribution channel’s strength
Application:
1. Choose the factors you will use as determining factors (both attractiveness and
strength)
2. Give each factor a weight number based on its magnitude (make the total
weight of all factors add up to 1 or 10)
3. Rate each business unit against each factor on a scale of 1 to 5.
4. Calculate the weighted average rating for each business unit.
E.g. For measuring Industry attractiveness of a unit say A, you select market size and
market growth, and a lot a weight of 5 & 5 respectively to each. You give A a rating
of 4 & 5 on the metrics. Then the Industry attractiveness of A is = (4*4 + 5*5)/ (5+5)
= 2.3
Based on above measurements you can plot your business units on the GE matrix, in
the following criteria:
1. Grow/Invest: Unit has high market share and promises high returns, should be
invested in.
2. Hold/Selectivity: Unit is ambiguous, should be invested only if there is money
left over after investing in profitable units
3. Harvest/Divest: Poor performing units in an unattractive industry end up in this
section of the grid. They should be invested in only if they can make more
money than is put into them, otherwise they should be liquidated.
GE matrix allows for more complexity, and helps in analyzing business units against
multiple factors rather than the 2-dimensional approach of the BCG. This can be used
for building your strategy and for allocating resources and expanding products.

Product Market Evolution Matrix/Hofer Matrix

Hofer Matrix is one of the tools used to assess the competitive position of the
company as determined by its internal and external factors.
Matrix is created on the basis of two criteria, the maturity of the sector (divided into 5
phases) and the competitive position of the companies in the sector. Circles are
created, which represent different sector in the company, and the size of the circle is
proportional to the size of the sector.
In the matrix, we can characterize the groups of products as:
 Products A – Dilemmas, that have chance of success with appropriate
marketing strategies and financial aid
 Products B – Winners, require appropriate marketing strategies and financial
aid, if company has limited resources for marketing, then managers must make
a choice between products A & B.
 Products C – Potential losers, weak position with sector in growth phase –
managers should make additional analysis, to rule out the possibility of going
through the shock phase
 Products D – despite current difficulties, they can become the market leaders or
profitable producers
 Products E & F are profitable, so it is possible to introduce other similar
products in the phase of shock and generate considerable profits
 Products G & H are the losers, and are in the exit phase of the market, before
full withdrawal, managers should use strategies for “gathering the harvest”
Experience Curve
The experience curve concept was devised by the Boston Consulting Group. From
BCG’s research into a major manufacturer of semiconductors, they found out that the
unit cost of manufacturing fell by about 25% for each doubling of the volume that it
produced. BCG concluded that the more experience a firm has in producing a
particular product, lower are its costs. The logic that operates here is:
 As business grows, they gain experience
 The experience may provide an advantage over the competition
 The experience effect of lower unit costs is likely to be particularly strong for
large, successful businesses (market leaders)
If the experience curve concept is valid, then it has some significant implications for
growth strategy:
 Business with the most experience should have a significant cost advantage
 Business with the highest market share is likely to have the most/best
experience
Therefore:
 Experience is a key barrier to entry (as lower experience results in high costs)
 Firms should try to maximize the market share
 External growth (e.g. takeovers) might be the best way to do this if a business
can acquire firms with strong experience
Criticism:
 Market leaders often become complacent, perhaps because of their experience
 Experience may cause resistance to change and innovation
 EC curve concept is a relatively old theory that is less relevant in a competitive
environment that changes so rapidly

Product Life Cycle Portfolio Matrix

Matrix designed specifically to deal with criticism that the BCG matrix ignores the
products that are new, and that it overlooks markets with a negative growth rate.

Warhorses: When a market begins to exhibit negative growth rate, cash cows become
warhorses. These products still have high market share, and hence can be substantial
cash generators. This might require reduced marketing expenditure, or it may take the
form of selective withdrawal from market segments.
Dodos: These are the products that have low share of declining markets with little
opportunity for growth. The apt strategy is to remove them from the portfolio, but if
competitors have already removed themselves from the market, it may still be
marginally profitable to remain. (Timing is crucial)
Infants: These are pioneering products that possess a high degree of risk. They do not
immediately earn profits and consumer substantial cash resources. The length of
innovation can vary from short time (consumer goods) to an extended period for a
product that is innovative enough to require a shift in buying habits.

Note: Rest classes (old BCG) remains same, Problem Children is synonymous with
Question Marks.
Directional Policy Matrix (DPM)
It is a tool that can help decide which market segment a business wishes to pursue. By
DPM you can understand what you should invest in and the direction your
organization should take. DPM measures the attractiveness of a segment and the
capability of the organization to support that segment.
Attractiveness of Market Segment (includes the following variables (can be more))
 Size of the segment (number of customers)
 Growth rate of the segment
 Profit margins of the segment to the sales
 Ongoing purchasing power of the segment
 Attainable market share given promotional budget
 Required market share to break even
Capability of the Organization: Evaluation of the capability of the organization to
meet the needs of the segments should include (but not be limited to) the below
variables:
 Competitive capability of organization against the marketing mix
 Access to distribution channels
 Capital and human resource investment required to serve the segment
 Brand association of the organization in the eyes of the segment
 Current market share/likely future market share
Scoring the DPM: To score DPM the goal of yours stagey must be known, which can
be higher profit, higher market share or increased valuation of the organization
1. Weight the relative importance of each factor of attractiveness and capability in
terms of its contribution to the goal of the marketing strategy out of 1
2. Allocate the respective weight out of a total score of 48 points to each factor (if
weight for a factor was 0.2 then points for that factor is 0.2*48 = 10)
3. Score each segment relative to other segments. (For attractiveness factor: size
of segment, score the largest segment 10 and smallest segment 1)
4. Plot the resulting score in excel, and create a bubble chart graph where size of
the bubble represents the size of the segment.
Tactics for each sector are described as:
1. Leader – Focus your resources on the segments in this sector
2. Growth Leader – Grow by focusing just enough resources here
3. Cash Generator – Milk segments in this sector for expansion elsewhere
4. Phased withdrawal – Move cash to segments with greater potential
5. Custodial – Do not commit any more resources to segments in this sector
6. Try harder – Determine if there are ways you can build your capability for
segments in this sector for low levels of cash
7. Double or quit – Invest in your capability or get out of segments in this sector
8. Divest – Liquidate or move assets used is segments in this sector as fast as you
can
Grand Strategy Selection Matrix
Grand Strategy Matrix is a popular strategy tool, in which there are 4 quadrants based
on two important dimensions i.e. Market Growth & Competitive Positions.
QUADRANT I: Strong competitive position and rapid market growth
Strategies: Market Development, Market Penetration, Product Development,
Backward Integration, Forward Integration, Horizontal Integration, Concentric
Diversification
Ex. Gatorade (PepsiCo)
QUADRANT II: Weak competitive position and rapid market growth
Strategies: Market Development, Market Penetration, Product Development,
Horizontal Integration, Liquidation, Divestiture
Ex. AMP Energy Drink (PepsiCo)
QUADRANT III: Weak competitive position and slow market growth
Strategies: Horizontal Diversification, Concentric Diversification, Conglomerate
Diversification, Retrenchment, Liquidation
Ex. Fritos (PepsiCo)
QUADRANT IV: Strong competitive position and slow market growth
Strategies: Horizontal Diversification, Concentric Diversification, Conglomerate
Diversification, Joint Ventures
Ex. Lay’s (PepsiCo)
Behavioral Considerations affecting choice of strategy
Describes the subjective factors that can influence what strategy is chosen by a
manager. The factors are described as below:
1. Role of current strategy:
 What is the amount of time and resources invested in previous strategy?
 How close are the new strategies to the old ones?
 How successful were the previous strategies?

2. Degree of firm’s external dependence

 How powerful are firm’s owners, customers, competitors, unions and its
government?
 How flexible is the firm with its environment?

3. Attitudes toward risk

 Industry volatility and industry evolution affect managerial attitudes
 Risk oriented managers prefer offensive, opportunistic strategies
 Risk averse managers prefer defensive, conservative strategies

4. Managerial priorities
 Agency theory suggests managers frequently place their own interest above
those of their shareholders
 Thereby depending upon the managers, and the strategy maybe implemented
that protects their interest prior to that of shareholders
 Strict supervision on the managers can ensure that the strategy is in-line with
overall company’s objectives

5. Internal political considerations

 Majority of company’s power rests in the hands of CEO, Directors, key units
and key departments
 Power can affect corporate decisions over analytical considerations
 The rational behind strategic decisions and the process of arriving at such
decisions can be politically influenced

6. Competitive reaction
 Probable impact of competitor response must be considered during the strategy
designing process
 Competitor response can alter the success potential of a strategy

Culture & Strategic Leadership

Strategic Leadership
While operational leadership focuses on organizing resourced to get the job done,
Strategic Leadership is concerned with the strategic aspects in an enterprise such as
problems, issues, trends or events that threaten the very existence and survival of the
firm or its growth. The CEO or other org. leaders address the external strategic issues
by focusing on the big picture and being future oriented. This is done by:
1. Continuous environmental scanning
2. Business model reinventing
3. Organizational redesign
4. Invest more in R&D
5. Alliance building or acquisitions
6. Competitive business intelligence
A strategy defines what a firm will be, thus strategic leaders have the role of shaping
the firm, outwitting competition. A strategic leader takes decision in such fashion that
every decision bring the organization one step closer to its vision.
Competencies of a Strategic Leader
1. Resoluteness & perseverance
2. Fearlessness in taking risks
3. High aspiration to build a world of their liking
4. Looking beyond immediate environment (far-sighted)
5. Insightful about a situation
6. Ability to inspire & energize others
7. Confidence about themselves and what they do
Structure & Strategy
“We shape our buildings; Thereafter they shape us.” …Winston Churchill

“Structure follows strategy.” This means that all aspects of an organization’s structure
from the divisions to the designations should be made keeping in mind the strategic
intent. Strategy decides the markets in which a company will compete, targeting a
customer segment and also asserts the competency in which the company seeks to
differentiate itself. Thereby a need to restructure is triggered by strategic shift driven
by new technologies or market changes.
In essence, the way you organize your company to pursue the strategic objective is an
important part of organizational design.
Design elements such as hiring and HR development, communication and decision-
making systems, reward, recognition and renewal systems all must be aligned around
the chosen structure.
Ex. General Motors progress in the mid-20 century was due to its famous divisions of
th

Chevrolet, Pontiac, Oldsmobile Buick, Cadillac listed in order of pricing segment,

were line up with the market segments, so each division could seek to please a
particular target segment.
Criteria for an effective structure:
 Aligns the organization to follow strategic direction
 Clearly defines roles & responsibilities, decision making and accountability
 Pulls together people who need to work most closely with each other
 Allows unrestricted information flow
 Creates manageable spans of control
Structures can be functional (HR, Finance Marketing), Product Line centric (Soap,
Shampoos), Customer Segment oriented (Housewives, Kids), Organized as Matrix
(e.g. Customer segment groups cross by functional depts.)
Implementing Strategy
Strategy implementation is a lively process by which firms move forward in its
mission towards the vision, thereby solving problems (en route) and identifying future
opportunities that are evolving. An action plan is a tool to communicate the strategy to
all those who have to participate in its implementation. Planning systems convert a
strategy into a doable format by providing information on most of the following items:
1. When to do an activity (Date)
2. Where to do an activity (Place)
3. For whom the activity or action is targeted (Customer/Client)
4. What is the activity or action or decision (customer needs, products or
services)?
5. Why the activity is to be performed (objective or mission)
6. By whom the different activities are to be done (person responsible)
7. How the activities are done (methods)
8. What will be the cost for each activity and the people involved (budget/HR)?
9. What are the results expected (output)?
Levels of Strategy Implementation
 Level 1: Major strategic direction of the firm, crafted in Vision, Mission and
Strategic objectives
 Level 2: Major activities for the next five years
 Level 3: Main activities in each year within the five-year term
 Level 4: Activities for each month within the year
 Level 5: Detailed work of each week within a month
Operationalizing Strategy
Having a great strategy on paper is not enough. This intention needs to be translated
into decisions and actions. Strategy execution occurs through the flowing major
components which are essential steps of operationalizing the strategy:
1. Creating a portfolio of programs or change programs aligned to the strategy
2. Formulating a budget by attracting, allocating and managing all the required
resources
3. Re-designing organizational structures, management systems and process to
achieve the strategic objectives
4. Aligning all the resources towards the goals through strategic leadership
 5. Creating review systems such as balance scorecard, performance metrics and
audits
6. Developing a culture of superior performance, innovation, result orientation
and stakeholder engagement
Note: Functional & Business Level strategies already discussed in Unit 1
Strategic Culture
Coherence among culture and strategy makes culture an accelerator of strategic
change. The way people think, feel and behave in a company is its culture. The formal
and informal elements of the existing culture are to be identified during strategic
analysis and then the execution strategy should be drawn up for working with and
within the culture. Efforts should be made to reach people at an emotional level
(invoking altruism, pride and positivity about work) and tap rational self-interest
(position, money, and external recognition to those who embrace change). Efforts can
also be made to make changes in certain elements of the culture if needed and to
execute the strategy with less resistance and sustainability.
Relationship between strategy and culture
 Strategy drives focus and direction, while culture is the emotional habitat in
which a company’s strategy lives or dies
 Strategy is a headline on company’s story-culture needs a clearly understood
common language to tell the story that includes mission, vision, values.
 Strategy lays down the rules for playing the game, culture fuels the spirit for
how the game will be played
When culture meets strategy, execution is scalable, repeatable and sustainable.
Balanced Score Card
Balanced scorecard is a performance metric used in strategic management to identify
and improve various internal functions of a business and their resulting outcomes.
Data collection is crucial to produce quantitative results, as the information gathered is
interpreted by managers and executives to make better decisions for the organization.
The idea here is to reinforce positive behavior and attain goals and objectives that
result from the 4 primary functions of a business. The company can use the card to
implement strategy mapping to see where value is added within an organization and
develop strategic initiatives and strategic objectives. The 4 Legs of Balanced
Scorecard are:
1. Learning & Growth: Analyzed via investigation of training and knowledge
resources. Reveals how well information is captured, and utilized to convert
into a competitive advantage over the industry.
2. Business Processes: Evaluated by investigating how well products are
manufactured. Operations are analyzed to track any gaps, delays, bottlenecks,
wastage etc.
3. Customer Perspectives – Collected to gauge customer satisfaction with quality,
price etc. via customer feedback.
 4. Financial Data – Sales, incomes, costs are used to understand financial
performance. These metrics may include ratios, budget variances, income
targets etc.
These 4 legs encompass the vision and strategy of an organization and require active
management to analyses the data collected.
Introduction to Strategic Control & Evaluation
Strategic Evaluation and control are the process of determining the effectiveness of a
given strategy in achieving the organizational objectives and taking corrective actions
whenever required.
Strategic Control
Control can be exercised through formulation of contingency strategies and a crisis
management team. Types of control are:
i.Operational Control: It is aimed at allocation and use of organizational resources
through evaluation of performance of organizational units, divisions, SBU’s to assess
their contribution in achieving the organizational objectives.
ii.Strategic Control – It takes into account the changing assumptions that determine a
strategy, continually evaluate the strategy as it is being implemented and take the
necessary steps to adjust the strategy to new requirements. Types of strategic control
are:
 Premise Control: It defines the key assumptions (behind a strategy) and keeps
track of any change in them to assess its overall impact, by testing whether they
hold true or not. (Generally handled by the corporate planning staff)
 Implementation Control: Evaluating plans, programs and projects to see if they
guide the organization towards its goals. Involves strategic rethinking.
 Strategic Surveillance: Aims at generalized control. Designed to monitor a
broad range of events inside and outside the organization that can threaten the
course of the firm. Knowledge management systems help capture the info for
the same.
 Special Alert Control: Rapid response or immediate reassessment of strategy
due to any sudden or unexpected events. Exercised via contingency strategy
and crisis management team.
Strategic Evaluation Process
1. Setting standards of performance: Firm must identify the areas of operational
efficiency in terms of people, process and productivity. Standards must then be
set for key management task, which have special requirements. Performance
criteria can be qualitative or quantitative, set keeping in mind past
achievements, industry average or competitor’s performance.
2. Measurement of performance: Measuring the performance via an accounting,
reporting and communication system. Key areas here are the difficulty in
measurement, timing of measurement (critical checkpoints), and timing of
measurement (task schedule).
3. Analyzing Variances:
  When actual performance (AP) = budgeted performance (BP), the tolerance
limits must be set
 When AP>BP, validity of standards must be rechecked
 When AP<BP, areas where performance is low must be corrected
4. Taking corrective actions:
 Undertaking in-depth analysis of the factors responsible for poor performance
 Lowering/Elevation of performance standards
 Reformulating strategies, fresh start to the strategic management process
Strategic Evaluation & Control is important, because it serves as an input for a new
strategic planning if old one fails. It serves the need for feedback, appraisal and
reward. Helps testing the validity of the strategy from time to time. The congruence
between the set strategy and decisions can be evaluated using this technique.
Strategic Surveillance
Small businesses use strategic surveillance to observe events inside and outside the
business that is likely to affect its strategy. The goal here is to keep ahead of
competitors in a changing business climate.
This can be done by:
1. Reviewing Outside Literature: It can range from reading newspapers, to
corporate magazines, business weekly’s or research articles, that offer insight
into emerging business trends, and outdated trends.
2. Environmental Factors: Watching environmental factors is essential. For
instance, in US the mad cow epidemic urged the fast food industry to shift its
market from beef towards chicken and vegetarian alternatives, which avoided
revenue losses.
3. Trade Conferences – Attending conferences in line with your business, that
introduce new products and discuss futuristic ideas. These can help to view the
competition amidst test the new ideas or products.
4. Social Networking websites – To observe how clients and competitors will
react to a company changing their strategy. Online comments can serve as a
review mechanism for business to evaluate their strategy.
For Example: Strategic surveillance plays a crucial role in fashion industry, where
they can use various social media networks to determine the popularity of various
products, and brands. Since trends shift at a fast pace in this sector, surveillance
becomes all the more important to gauge in the customer sentiment (how much they
are willing to spend, what discounts they expect and so on.)
 TM SIR CASE EXAMPLES
Due to time constraint, these case examples could not be aligned with the syllabus
content. These can read, interpreted and inferred in an open manner, and can be used
at the student’s individual mental capacity and discretion.
1. Strategy Intro
 #US Commercial Printing Industry (worth $5 Billion): Major players (Donelly,
Quebecor, World Color Press, Big Flower Press) serving all types of customer,
with same array of technologies. Profit margins lost.
 Strategy rests on unique activities – #Southwest Airlines, Company caters to
midsize cities and secondary airports in large cities, frequent departures, low
prices, business travelers, families and students – both price and convenience
sensitive
 #Ikea – Targets young furniture buyers wanting style and low cost

2. Source of Strategic Position

 Variety Based – #Jiffy Lube International – automotive lubricants but no other
service provided on car, customers buy only oil from JLI, repairing takes place
at other places
 #Vanguard Group (Mutual Funds) – Company’s investment approach
sacrifices extraordinary performance in one year for good relative performance
every year
 Need Based – #Bessemer Trust Company targets families with minimum $5
million investable assets, #Citibank – Targets families with minimum $250,000
assets, and want convenient access to loans
 Access based positioning – #Carmike Cinemas, serve cities with population
less than 2,00,000
 Strategic position is not sustainable unless there are tradeoff with other
positions, #Neutrogena – sacrificed soap like features to adopt medicinal
positioning, #Honda traded off cheaper product position for quality

3. Set C: Random
 #Honda – set up distribution in college stationary shops
 #1957 – Aircrafts take over waterways
 #Cruise ships – Hindenburg, Zeppelin, Blimp
 #Concord 2003 crash led to its death
2001- 9/11
2004 – oil prices
 #Frank whittle – British engineer who invented jet engine
 Boeing 707 – Worlds first transatlantic passenger plane
 Anwar Sadak – Yom Kippur War 1973
4. Corporate Imperialism: MNC operate with the assumption that big emerging
markets are new markets for their old product, but don’t look at the same markets
(China, India, Indonesia, Brazil) as sources of technical and managerial talent for their
global operations
 Indians on average tried 6.3 brands of the same product in a year,
compared to 2 of US
 Failed example of MNCs that tried to bring existing product without
calculating new market dynamics – Ford, Revlon

5.

 Too much segmentation (Kellogg’s) and over generalization can be a

problem (Coke)
 SKU – Stock Keeping Unit
 Video killed the radio star (Buggles)– Lament for the golden age of
radio, first video song that played on MTV, says music video robbed us
of something as it gave us dazzling visuals to goggle at, i.e. the freedom
to flex our imaginations and simple listen (Radio Gaga by Queen bears a
similar sentiment)
 Strategy is for long term, not short term. When company don’t make
technical jumps, they get stuck in business cycles. E.g. Weston TV
(poor perceived growth prospects), Sony to some extent.
 Wine is perceived as occasional drink, hence different view from coke,
thus coke won’t survive in wine industry
 Napa Valley – famous for Agri products, wine tasting
 Honda – competency is engine, hence it ventured into different products
 Toyota – production system efficiency (TPS – Just in Time)
 Motorola – Six Sigma
 Chrysler – Pickup tricks & mini vans outsourced engines to Mitsubishi
 Cummins – generators
 NUMMI – New United Motor Manufacturing Industry (shutdown in
1970s due to union troubles)
 Japan sets up industries of Japan because of fluctuation of Yen

6.

 Rivalry in pharma – patent, product differentiation (Schering Plough

company)
 Rivalry in Steel – excess capacity, product homogeneity, slow growth
(US Steel)
 Products vary across industries due to nature of product (10-20%
depends on industry, 30-45% internal industry effects)
7. Competitive Advantage
 Japanese manufacturers – reduced defect rate
  Dell – build to order PC’s
 Accenture – R&D, training
 Southwest airlines – fuel efficiencies, secondary airport routes
 Cirque Du Soleil – Circus + Theatre
 Ford – competency – pickup trucks
 Toyota doesn’t sell similar products in all geographic
 Europe – small electric vehicle market rising
 1970s TV technology took a toll because it took a peak and no
advancement was expected by GE & Zenith
 Samsung sucks at designing
 Maersk – World’s largest shipping company
 Daewoo, Hyundai, Samsung- ship making leaders
 Soyuz Rocket – NASA’s biggest mistake
 Raytheon – invented space shuttle
 Beriev – aircrafts designed to work in and on water (competency in
product that nobody else)
 Raytheon – died out, defense contractor and industrial corporation
 Lockhead Martin – aircraft manufacturer that ventured into commercial
sphere and lost (Last Soviet Union head caused death of Raytheon)
(rebound with Osama bin laden)
 BMW – used to manufacture aircraft engines
 Zyklon B – pesticide used in gas chambers
 Ekranoplan – aircraft designed by Soviet Union for a specific purpose
and specific region
 Auro – died out, made bombers for British air force, after war
transitioned to short route carriers across Europe & UK
 Tesla – Gigafactory – Australia
 Competitive Advantage of Nations:
 Middle East – Land, access to market, oil, zero taxation
 America – huge market
 Silicon Valley – hub for entrepreneur
 New York, London – hub for financial services
 Seattle – Apple/Microsoft Hub
 Australia – minerals, coal
 China had huge demand for Australian steel, slowdown affected Australian
markets making them shift to India
 Australia – cattle lots
 Spratley Islands – First shot of WW3 being fired, South China
 Ruhr Valley – Germany’s industrial hub, destroyed during WW 2
 Ingolstadt – Audi Manufacturing
 Chennai – Pimpri Chinchwad, Gurgaon – Manesar belt (Major car
manufacturing hotspots)
 Bombay’s growing part of real estate – BKC (Bandra Kurla Complex)
 Gary Indiana – Rust Belt (North eastern US, manufacturing, hub of US till
1960s)
  Competitive Advantage of US in WW1 & 2 – distance from everyone else,
couldn’t have the manufacturing area bombed
 China needs raw material; hence it is building roads in another country, China
has lots of cash
 Japan’s competitive advantage – labor
 Tel Aviv Israel) – becoming capital for IT
 Israel becoming world leader in agriculture
 Italy – Fashion, Food, Tourism
 US Agri State – California (Farms work on illegal immigrants)

8. Sustainability
 Lloyd’s of London – 1700s – Marine Insurance
 Mitsubishi – diversified in different industries, hence difficult to die
 Wernher Von Braun – responsible for putting man on moon, director of
NASA during Apollo
 First satellite in space was Russian because they stole Werneher’s work
– Sputnik
 UH-1 Iroquis – type of helicopter, very versatile
 Bletchley Park – think tan for codebreaking
 Swiss Watch Industry – moved from volume to value manufacturing
 Voortrekkers – German & Dutch immigrants who colonized South
Africa
 IDF – Israel Defense Forces – invested huge efforts in battlefield
activities
 Jack Welch – 1980 to 2000 – CEO of GE
 Pizzara (Spanish who conquered South America) & Cortez (Central
America Conquered)
 AK-47 – reliable
 IED – Improvised Explosive Devices
 TU-95: Large, four engine turbo-powered strategic bomber and missile
platform, first flight 12 November 1952, born from Soviet Union’s
desire to develop its own strategic bomber force to match that of US in
WW II, one of the fastest existing propeller planes, 500 miles/hr.,
dropped the largest every nuclear weapon, detonated over Severny
Islands in 1961
 B52 – American long-range subsonic jets powered strategic bomber,
since 1950s, Capable of carrying 32000 kg of weapons, with combat
range of more than 88000 miles, without aerial refueling
 Isambard Kingdom Brunel – English mechanical and civil engineer,
built dockyards, Great western railway, series of steamships, numerous
bridges and tunnels, designed 3 ships that revolutionized naval
engineering, prominent figure in industrial revolution, revolutionized
public transport and modern engineering
 Saint Nazaire – One of the most damaged town in France during WW-2,
was subject to a British raid in 1942, as a submarine base for Germans
 and was heavily bombed until 1945, it was one of the last territories in
Europe to be liberated from the Germans

9.

 Patanjali Medium cost, medium profit

 AC/DC War – Edison (DC) v/s Westing House (AC)
 CVP – Customer Value Proposition (Apple – social prestige, trade off)
 General Dynamics – World’s largest submarine builders, IT systems,
Making defense electronics
 Business Model is a value proposition for customers
 ICICI Lombard – online insurance
 Netflix own content
 Southwest airlines (frequency, punctuality)
 Dell (made to order, customized – flexibility, can change premium, no
inventory)
 Indigo (low cost, on time)
 GE today is known for financial services & jet engine, after consumer
electronics was dying
 Harmon Cardon – car stereo diversification from standalone music system
 General Dynamics – aircraft business shrinking, defense electronics, IT,
submarine
 Apple exited desktop market because of competition from IBM
 Microsoft focused a lot on cloud computing, gave away software for free 5
years ago, no unified customer platform, depends on device like android
 Companies facing problem because of efficient competitions (Compaq vs Dell,
Yahoo vs Google, Walkman vs iPod)
 World’s largest company by Revenue – Walmart (Hub & Spoke Model – to
delivery products in the most cost-effective and timely means possible)
 Problem with Google & FB – Privacy, Intellectual Property

10.

 Twitter CEO refused to meet government

 Blackberry long ago refused to setup service in India, govt. shut its service,
Blackberry eventually did setup in India
 World Rally Championship: Audi 4-wheel drive, car gamechanger
 Toyota getting no benefit in F1, no tangible return
 India’s F1 track – no money generation useless
 Schelby – car tuner – customize and upgrade vehicles

11. Environmental Analysis

  In tea gardens, quality differs in both hill sides, because of environmental
factors that need to be incorporated. E.g. Tata Tetley on one side, Harrison Tea
on other – very expensive, not sold in Indian retain market
 GI – Geographical Indicators serve as a patent for an area to produce a
particular thing (others can produce but won’t get recognition) E.g. Sulla
valley, France – Sparkling Wine. Assam, Darjeeling – Tea
 To be called champagne, it must be grown in the champagne region of France
 Bath fittings/Household Fittings – Germany (Kohler)
 Tea, Basmati Rice – India
 Twinning’s Tea have an edge over Tata, because of translating environmental
advantage
 Patanjali took over Dabur/Himalaya because of business model (Make in India)
 Flybmi – UK low cost carrier collapsed because of Brexit
 Rediff, India Times online shopping were defeated by Flipkart because of
easier return policy (tweaked business model slightly due to better customer
interface), but Amazon came with more cash and reaped benefits of flipkart’s
initial efforts

12. Porter’s 5 Force

 Steel Industry – low threat of new entrants due to high capital, e.g. Posco –
South Korean steel manufacturer – largest is Arcelor Mittal SA
 Bargaining power of suppliers – USP of Bluedart (Logistics) (Network,
Reliability), USP of Indian Postal Service (Network)
 Bargaining power of Buyers – Qatar, Etihad, Emirates have bargaining power
as customers over Boeing & Airbus since they are still purchasing their
aircrafts
 Industry Rivalry – Giga Factory (Tesla) (building large factory to accelerate the
world’s transition to sustainable energy through increasingly affordable electric
vehicles, and ramp up production to 500,000 cars per year)
 Chernobyl Area – Disaster Tourism, Solar Panels, Sanctuary for European
birds
 America China trade war affected beer industry, due to cans becoming costly

13. PESTEL
 Political Influence: Beef ban, Muslim traders troubled/Angola – large oil
production
 NBCC may take up stranded projects of Jaypee, Amrapali (UP- Mayawati,
Akhilesh)
 Semi-Dictatorship (Asian Tigers) – Taiwan, South Korea, Hong Kong,
Singapore
 Cuba – dominance in medical standards, lowest infant mortality rate across the
world
 Japanese Mafia – Yakuza
 Samsung controversy – Samsung shifted its production to Vietnam, because
they offered incentives
  Blood Diamond- whole separate case involving DeBeers corporation
 Sunderland-Nissan, Swindon – Honda, Derby – Toyota (production places)


Note: I understand it can be complex to sort out the examples relevant from exam
point of view, but that’s how things are. You would have to research a bit deeper, to
find out their backstory and relevance to the theoretical subject matter, in case you
have not attended classes.
14. SWOT
 Bluedart
S: Large network, established partnerships
W: Low customer penetration, low advertisements
O: expansion through tie-ups with e-commerce sites
T: Amazon flipkart, delivery system

 Boeing 737 Max 8

S: Established manufacturer, fuel efficiency
W: negative publicity, no betterment even after October crash

15. International Expansion

 Amazon Kindly shrinked the book market
 Goodyear- American, Micheline – France who wanted to invade US market
(largest car market), Michelin’s global presence helped it enter US & overtake
goodyear
 Walmart – Flipkart – hit competitor where it hurt most (Amazon)
 MAD – Mutually Assured Destruction: Doctrine of military strategy in which a
full-scale use of nuclear weapons by two or more opposing sides would cause
complete annihilation of both attacker and defender
 First thing strategy does is resource allocation – how much I have, how much I
can allocate
 China – World’s leading power for solar panel
 India – largest solar energy producer, but plants imported from China
 Power generation company abroad – Suzlon
 California, Washington import electricity for Vancouver, British Colombia,
Canada
 Cosmetics boomed in India, after Aishwarya Rai, Sushmita Sen, crowned in
pageants
 Coffee – Keorg
 O-General – manufactured to work in middle east, and so will work in India
 Maruti collaborating with Toyota for production of its car due to less plant
capacity
 International Expansion:
TYPE RISK REWARD
SALES AGENT LOWEST LOWEST
 LICENSING
FRANCHISING
JOINT VENTURE
OWN OPERATION HIGHEST HIGHEST

Sales Agents – manufacture only exists in market, no real penetration. E.g. imported
products that are not customized (Amway, Avon, Tupperware)

Licensing – Described earlier, FIAT’s biggest problem in India – Premier Padmini (Bombay
Taxi)
 BNSF – World’s largest private railway operator (North American)

16.

 Zain – African telecom acquired by Airtel

 Airport sold near Madrid sold for 10000 euros
 CVP – Customer Value Proposition (Business statement that described why a
customer should buy a product or use a service)
 Vertu – Fancy Armed Forces Mobile company that invited customer to parties
 Maybach – most expensive Mercedes
 Parle G – cost optimization such that Parle G, has always kept its price to Rs. 2
for 8 biscuits, but no advertising, bulk purchasing, reduced biscuit size and
design on biscuit
 Tupolev TU -144 (Russian) competed with Concorde (French) and crashed at
the 1973 Paris Air Show
 Treebo/Oyo hotels
 Uber/Ola differentiation (aggregator model)
 Korean airlines – peanuts served to Presidents daughter – who sued them – but
in turn landed in Jail (same thing happened again with her sister)
 Coca Cola –contaminated water table of Kerala

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