Case Study 1: Seven Star Beverage Limited.

Questions on the case

1. Was the diversification adopted by SSBL concentric or conglomerate? Explain the
meaning of Concentric and Conglomerate and then substantiate your answer.

1) Answer:
The diversification is the methodology in making new products by completing the need of
their existing company & it opens the opportunity to tap the new market opportunities. In
general, the diversification classifications are concentric and conglomerate to its original
business. 
As per the FSSAI’s food categorization, it’s a conglomerate diversification. As the soft drink
and wine an alcoholic drink can’t share market or technology related or the combinations of
both diversifications. The raw materials and the processed raw material required to
manufacture these two drinks are completely different, even the exchange of technology,
skills set and resources between both the drinks are different.

So The diversification adopted by SSBL is conglomerate because they acquired the Himachal
wine company and three other smaller wine companies and the product portfolio is similar to
its existing product produced within the similar. 
In the case of SSBL the company has the knowledge about the market as well as the product
in which the company is expanding which in turn can be of great help to the company for
running the new business success fully. In the case of conglomerate diversification company
has very little knowledge about the market as well as product in which company is
expanding 

Concentric diversification refers to that diversification in which the company goes into a new
business which is closely related to the current business or in simple words company
develops products or services which are closely related with current core products or services
of the company whereas conglomerate diversification refers to that diversification  in which
company goes into new business which is completely unrelated to current business of the
company or in simple words company develops products or services which have no relation
with current core products or services of the company.
In case of concentric diversification the degree of diversification is less because company has
diversified into the same product line or business and any problem in that product or business
will lead to fall in the sales of both business whereas in case of conglomerate diversification
due to company diversifying into other products or business the degree of diversification is
high because if one product or business is sluggish than losses from it can be compensated by
other business.

Knowledge & Risk Factor 

In the case of concentric diversification company has knowledge about the market as well as
the product in which the company is expanding which in turn can be of great help to the
company for running the new business successfully but when it comes to conglomerate
diversification company has very little knowledge about the market as well as product in
which company is expanding resulting in company facing many difficulties at the start of the
business.
In case of concentric diversification since company has diversified into same product line or
business the risk of company failing is less due to company being aware of the market as well
experience of the company in same product line whereas in case of conglomerate
diversification since company has diversified into different product line as well as different
business the risk of company failing is high in this type of diversification.

2. How would you explain the strategy of ABC WL and why they did better, while
HSBL couldn’t do it?

2) Answer:
From my point of view ABC know the strength of the company before taking over the
business and they formulated a strategy. A company will first assess its current situation by
performing an internal and external study. The purpose of this is to help identify the
organization’s strengths and weaknesses, as well as opportunities and threats. This strategy
will guide the decision making process from resourcing to delivery of the product to its end
customer by making different departments works together to achieve the organization’s goal. 
Would like to highlight the couple of Strategic approach, 

Market understanding & knowledge:   The development of specialised industrial clusters

improves the organisational performance of regional industry and creates a geographical hub
for product. When ABC decided to buy out the SSBL they have clearly identified and
understand that there is a huge available market for wine and expansion is possible with the
changing lifestyle habits, increasing income, international brands entering Indian market, and
the existing distribution channels.  After understood the market potentiality they have crafted
their strategy from acquiring raw material to distribution. Because wine marketers must
understand consumer wants and needs. 

Contract Farming Implementation:  Contract farming model was great success for farmers
as typical contract is for 5 years. In order to grow their business ABC WL required consistent
quantity of grapes from their owned and contract vineyards. As a growth strategy ABC WL
felt the need of increase its manpower which triggers the idea of contract farming. They also
started providing credit to their farmers and selection of varietals, it helped the farmers
knowledge and confidence.  In addition, cultivation of wine grapes is a proven way for
creating jobs in the rural sector which ensures the constant annual income for the contract
farmers.

Bulk Production helped the Economics of scale: Economies of scale refer to the lowering
of per unit costs as a firm grows bigger, here scale refers to the decrease in production or
service cost from large scale operation during the mass production. This could help ABC WL
being competitive even when there’s are foreign player. The strategy over here is ABC WL
can purchase bulk number of raw materials in cheaper price for say bulk purchase of wine
grape from the farmers with whom they have their contract farming business. This will helps
them in making quality wine in a cheaper production cost & increases the output. This
reduction in production cost can be passed as a discount to their vendors or consumers that
can helps ABC WL consumers and vendors to stay with their brand for longer run. 
Marketing and outreach strategies:  We can’t think of wine marketing without tourism as
these two goes together. ABC WL’s well-planned strategies for promoting the brand would
be through tourism. Some of the time-tested ideas of outreach partnership with gram
panchayats and other local authorities and cultural programmes helped them to create more
awareness in the state & national level. 

Ambience and free tasting packages: ABC WL has their outlets where any customer can sit
and have wine tasting in-front of grape farm. By doing this their brands gets advertised
quickly & through word-of-mouth publicity. The studies also shows that consumer prefers to
taste the product before purchase and they offered free samples by setting up a small wine
outlets in urban market. 

3. Do you agree with Mr. Harish’s view? Whether your answer is YES or No, give
appropriate justification in about 6 to 8 sentences.

3) Answer :
I agree with Mr. Harish view, 
 Because the company started targeting all the major states is the 1 strategic approach
st

and already, they had the 1 mover advantage in the category with the brand. The
st

biggest advantage of having the wine production in Hyderabad, Nashik & Himachal
Pradesh as these regions can be penetrated by having the good supply chain. Slowly
they started penetrating in the North & South market and this gives them the multi
state penetration and strategic partnership with the local vendors to increase the sale.
 Since SSBL have created the brand awareness and now it’s time to establish the brand
as a popular brand and no 1 wine brand in the country. To achieve that awareness,
they started creating different campaign and that leads to a Wine festival.  Through a
add campaign its very easy to understand the consumer and push the product through
distributors. 
 They have started competing with the international brands.
 The overall wine category sales are growing and after seeing the growth in Indian
market many international players started selling wines in Indian market.
 The business has an opportunity to expand since the wine production does not have
limitations.
 Company has a solid understanding of the Indian wine market because of its series of
products and distribution platforms.
 Company has the opportunity of diversifying marketing beyond its current scope of
operations because of its wide supply chain channel. Specifically the company has the
potential of penetrating the foreign market segment such as China, Singapore and
even Korea.
 The business has an opportunity to expand since the wine production does not have
limitations. The business also has the opportunity of developing more products and
services for its global market and the Indian market since the demand for wine in
India is higher than the annual quantity supplied by all the wine production
companies.
  Packaging & colour combination played a very important role and that lead to a very
innovative pricing strategy for the size of the bottels. Company started selling small
180 ml to 750 ml depending upon the need of the trade and consumer. 

4. In the light of opportunities and threats of and its strengths and weaknesses, what
strategy should SSBL have followed to improve its performance and strengthen its
competitive position. Explain with justification-based SWOT analysis. 

4) Answer:

Strength: 

 Stable management team and the company has the solid understanding of the
Indian wine market because of its series of acquiring various small wine
manufacturing companies. 
 The company has a strong presence in the wine production industry due to its wide
network of distribution channel.
 The company has different wine product and because of wide portfolio they started
catering to all segments and from the beginning volume went to 4 lakh cases per
month. 
 The company has a strong financial base which gives it a competitive advantage
ahead of its competitors. 
 The location advantage has improved the competitive positioning such as lower
cost, enhanced accessibility of the product. 
 Contract farming helped them to produce wine at a competitive price. 

Weakness:
 Competition turned to make better strategy along with the course of action to
achieve the desired result.  
 Competition started spending more on the promotional activities. 
 Failed to capitalise the 1 mover advantage in the wine category. 
st

 They could have tied up with international brands to capitalize the market and that
could have given them the edge over competition.  
 Failed to use the R&D facility set up by SSBL, also the didn’t invest on the
innovative product to capture the entire market. 
 Overall management and team failed to capitalize on opportunities offered by the
government. 
 Poor Inventory may shaken up the company’s efficiency as wine grape is seasonal
and keeping the right amount of inventory inline with the production planned is
crucial
 Unable to understand the customer needs and expectation can lead to poor
decision making which perhaps weakens the potential improvement in product &
services
Opportunities:

 The business has an opportunity to expand since the wine production does not
have limitations.
 The business also has the opportunity of developing more products and services
for its global market and the Indian market since the demand for wine in India is
higher than the annual quantity supplied by all the wine production companies.
 Good consumer base in India as there’s an increase in the middle income group’s
income
 Changes in the customer’s needs, taste & preference can act as opportunity for
SSBL
 Usage of new technology to assist the product or services and delivery process can
be exploited
 Increase the distributor in the region where there’s no direct sales possibility
through strategic partnership

Threats:

 Threats are external forces that represent risk to a business and its ability to
operate. 
Since the business is a threat to its competitors, company might retaliate by
providing the wine consuming market with similar wines at a lower price. This will
hurt the revenue of the company since it relies heavily on the revenues from the
local market. 
 Besides conglomerate diversification can be a threat to the company. 
 Changed preferences for its wines is likely to affect the element of loyalty of the
customer. 
 The increasing number of local and International competitors effects the
organisations’ ability to thrive & sustain.
 The changing regulatory frameworks and the policies poses more threats on the
legal & compliances perspective. 

What SSBL should’ve done better?

For any business sustainability over a longer period is far more important than overnight
growth or success for any company. To have a sustainable model, investing on assists is as
important as investing on its own people and far more important on the people who are
prospect consumers.
Investments for growth can be extremely tricky when it comes to reaching out to the right
consumer or target audience via promotional campaigns and branding activities. A step
before this should have been setting up distribution network reaching out to not only the
extravaganza store but to the retail outlets as well. Primary investments should definitely be
on the fundamental pillars of the company- farmers and their employees.
Nonetheless the next step should be new brand acquisitions and extensive investments on
promotions for the same.
 Case Study 2:  Auto Smart Private Ltd.

1) Answer

European Union is an economic zone larger than that of the USA and Japan combined with
500 million customers and it generates a GDP of about 16.2 trillion EURO according to the
International Monetary Fund. This makes it the largest economy in the world.

The decisions for Auto smart private Ltd., to enter international market is correct and
it’s because of  - 
 Europe is one of the world’s largest automotive markets, With the increasing free
trading agreements and thin barrier to international trade and investment has opened
the gate for many auto parts manufacturing companies to think of making their foot
print. Expanding Auto smart private Ltd, business globally allows the firms to
increase their profit margin and rate of growth in a much higher way, which is not
available for the company in the domestic market.
 Also the company was looking for expansion and it possible Through Diverfication - 
Diversification is a strategy to enter into a new market, involving substantially
different skills, technology and knowledge. It shows the strength and the capability
for the organisation, also its a company policy to achieve growth. 
 Auto Smart is successful in domestic market and build the credibility in last 12 years, 
Entering European market means Accessibility & Growth.  The EU’s 28 member
states include some of the world’s wealthiest countries and altogether is a huge
market in which to sell your goods and services. It also gives you access to a huge
source of suppliers. European Union is an economic zone larger than that of the USA
and Japan combined with 500 million customers and it generates a GDP of about 16.2
trillion EURO (nominal) according to the International Monetary Fund.
 Profit Potential can anticipate greater profits due to greater revenues and lower
operating cost. The company can manufacture in domestic market and export to the
European market. 
 Taking the business globally can bring the access to large pool of local talent. Local
talent can also bring the new technology and faster adaptation to the European
market. 
 By serving the UK & Europe market which increases the productivity and ensures a
higher return on the capital invested. As Auto smart enters into global market its
bargaining power with their supplier increases which again aid in increase the
profitability.
2) Answer

For Auto Smart it’s the combination of skills, knowledge, processes, and assets that
distinguishes a company from its competitors and allows it to deliver a unique value
proposition. That’s why the company is growing at 20% year on year. 
Mr Siddharth has rich experience of working abroad and he is dynamic and ready to take risk.
He always emphasizes on maintaining high quality standards.  
When Mr. Siddharth entered in the business the company didn’t make much profit and later
on they signed a agreement with Maruti Udyog because with rich experience he want to
establish that the products Auto Smart is selling are unique and of higher quality than those
found anywhere else and it gives the company a steady growth along with edge over their
rivals. 

For Auto Smart there are 3 core distinctive competencies are 

 A clear Vision
 Passionate Employees
 Open mind with new ideas and risk taking abilities. 

For Auto Smart the core competence is the unique and specialized skill set that allows it to
produce automobile parts. This skill set makes the company’s products and services stand out
from the competition. For Mr. Siddharth & Team the Core competencies helped them to
established in the automobile manufacturing industry, acting as the foundation for other
international market. For Auto smart the core competency is essential to compete in the
marketplace, its distinctive competence will ultimately make it successful for the
management in the industry. 
3) ANSWER -  

Mr. Siddharth has the mission and vision for his company. He is a true leader and risk taker
who believes in leading his team at all times. For Siddharth business level strategy is an
integrated and coordinated set of commitments & actions, for Auto Smart to gain a
competitive advantage with the products line up in specific market. Business level strategy
always determines who they will serve, what product or services will meet the needs of their
targeted customers and how they will keep customers satisfied. He was maintaining high
quality standard for his automobile parts.

After the success of Indian market Mr. Siddharth should adopt the corporate level strategy for
high growth market. Current business level strategy is to focus on creating value offering that
is appealing to consumer while also being good quality / cost effective. 
Corporate-level strategies will allow Auto Smart to select the right pricing option that will
allow them to maximize on profits. In general, corporate-level strategy deals with the
organization as a whole. It examines what the business does and makes command decisions,
including whether the business should diversify into different areas, leave product lines
behind or develop specific partnerships with other companies. Auto Smart core competencies
will play in the decision to diversity into a new business markets. 
Core competencies are the collective learning in organizations, and involve how to coordinate
diverse production skills and integrate multiple streams of technologies. It plays an important
role in the organization because it gives the organization more opportunity to work with other
of different skills and background. When the firm incorporate core competencies it give them
ability to become more creative and more competitive.
4) ANSWER - 
 a. Continue to manufacture products in Indian factories and export them to
various countries. 

             PROS:
 For Auto Smart its an advantage  to produce at India and exporting the goods to
various countries because the shrinking industrial workforce it pushing the labour-
intensive work out of Europe. This can continue for at least the next decade, and India
is emerging as one of the alternatives for labour intensive-sectors. 
 Some of the leading reasons for Auto Smart is that the ability to manufacture at scale
& adequate liquidity. Both the factors leads to greater efficiencies and cost reduction
to manufacture and export to other countries. It increases overall profitability because
the manufacturing cost is low. 
             CONS:
 But in  the long term for Auto Smart with excess capacity may export effectively as
long as the excess exists. In fact the average cost of production per unit usually falls
as it uses more of it capacity, By selling abroad because of spreading fixed cost over
more sales units. But this decrease continues only as long as there is unused capacity.
Later on when demand pushed having a manufactured unit in UK &Europe helps in
realizing the economics of scale in global sales. Since European market is very fast in
adapting to newer auto technologies it wise to having a manufactured location and as
per demand, so that the scalability can be increased. 

b. Initiate own new manufacturing activities in one or two locations in Eastern and
Western Europe

PROS - 
 As per the current scalability it’s better to own new manufacturing activities in one or
two locations in Eastern & Western Europe. It helps to reach untapped markets and It
increases the brand recognition significantly throughout the world. The brand
awareness is important for any companies that want to continue expanding. 
 Also the Auto parts suppliers also need to collaborate with vehicle manufacturers to
design best in class components and accessories at scale with competitive pricing.
Having a manufacturing unit will help to understand the Automobile manufacturers in
a better way because of local support and understanding with the key players.
 AUTO Smart can significantly save on the costs of transportation across European
region and Shorter time of shipping the products from factories  means not only lower
costs, but also more flexibility.

             CONS - 
 Differences in cultural norms may be difficult to plan and language barriers may
complicate effective communication.
 Without hiring a third party or making a trip to the facilities, there’s no way to keep
an eye on how the facilities are run or to witness the production of your product.
 When products intended for domestic sale are manufactured overseas, shipping costs
rapidly mount to transport them to market.
  Though experienced overseas manufacturers are expert in helping their domestic
customer mitigate these costs, customs are an important part of the equation in
choosing whether to have a product manufactured at home or overseas.
 Without the stringent protections of intellectual property laws, it’s more likely that the
USP of the company or idea might be stolen.

c. Takeover some existing medium size manufacturers of the products in Northern

India, to expand manufacturing as the Indian market also has been promising
for good growth.  

Opening production plant in foreign countries:

Initiating manufacturing facility in a foreign country needs careful considerations as it bring

the certain amount of risk. Business can consider expanding their operation or to reduce the
cost can consider this option.

Advantages: 

 It helps business organization to bridge the service gap exist. Due to the increased
customer preferences creates a gap in what the company is offering & what the
customer is expecting. Acquisition helps in closing these gaps
 It reduces the entry barriers to market and provides the gateway to enter into a new
market or product which will improves company’s reputation and offers enhanced
client base
 By acquisition the business will  gain new competencies and resources which will
offer more benefits such as growth& profit and good financial benefits
 It helps in gaining new ideas and more perspective and usually allowing the team to
brainstorm & come out with the solutions in a new perspective 

Disadvantage: 
 Replica of roles, business function and duties
 Sometimes instead of complementing there is a possibility of conflicting due to
different cultures
 Higher possibility of mismatched business goals or objective though it can happen
only after the acquisition, and this can be well avoided if there’s a proper
investigation before take overs
 For expanded production supplier’s production capacity may be not sufficient which
puts the suppliers on pressure which may create the delay in delivery and /or creates
quality issues
Conclusion: 
From my point of view opening a one or two manufacturing unit in European market will
have a competitive edge over the competition. When you and your manufacturer speak the
same language, you’re less likely to experience challenging, and potentially costly,
communication breakdowns.

Opening a manufacturing unit at Europe can set AutoSmart company positively apart and the
made in Europe stamp can be a valuable marketing tool. Because of Europe public tends to
perceive European made products as being a better quality than products manufactured in
India.

By opening a manufacturing unit chance of AutoSmart can experience a quicker turnaround

time. AutoSmart can save hefty transport costs and customs charges.
While European manufacturers often accept only a few payment methods by opening a
manufacturing unit company can avail flexible financing terms.