Professional Documents
Culture Documents
Business Strategy I & Ii Made Easy Full Course
Business Strategy I & Ii Made Easy Full Course
Business Strategy I & Ii Made Easy Full Course
2
STRATEGY - DEFINITION
Strategy is all about making trade-offs between what to
do and more importantly what not to do; consciously
choosing to differentiate. It reflects a congruence between
external opportunities and internal capabilities. Types of
strategies -
– Corporate Strategies – It is all about making choices
across various businesses and allocating resources
among them.
– Business Strategies – It is all about developing and
leveraging competitive advantage.
– Functional Strategies – It is all about doing things
differently, rather than doing different things.
3
STRATEGIC MANAGEMENT -
DEFINITION
Economic
al
Fit Strategic Fit
Technological
Management
Finance
Productio
Fit
Strategic
Political
HR
PoliticalIntent
Strategic
Fit
Political
Marketin
n
g
Fit Manageme Fit
nt
Social & 5
Cultural
STRATEGY - ORIGIN
9
EVOLUTION OF STRATEGIC
MANAGEMENT
10
ENVIRONMENTAL CHANGE
Prior to
3 1990 1950
onwards
Phase III: Range of Scenarios Phase II: Discrete Scenarios
1 2
1A
1
3 1B
2A
2 2B 1950 to
1970 to 1970
11
1990
STRATEGIC MANAGEMENT -
IMPORTANCE
Performance Decomposition
13
STRATEGIC MANAGEMENT – MYTHS
14
ENVIRONMENTAL DEMANDS
To be continuously alert.
To assimilate change faster.
To be future oriented.
To tap markets across boundaries.
To be insulated against environmental threats.
To leverage size, scale and scope.
To generate large resource pool.
To gain expertise in technologies.
To develop core–competencies.
15
APPROACHES TO STRATEGY
16
APPROACHES TO STRATEGY
18
APPROACHES TO STRATEGY
19
STRATEGIC MANAGEMENT -
PROCESS
Strategic Intent
Strategic Planning
– Environmental Scanning
Strategic Gap
– Internal Appraisal of the Firm
Strategy Formulation
– Corporate Strategy
– Business Strategy Strategic Choices
– Functional Strategy
Strategy Implementation
Strategy Performance
Strategy Evaluation & Control 20
TOP MANAGEMENT PERSPECTIVE
21
STRATEGIC INTENT
22
STRATEGIC INTENT - HIERARCHY
Visio
Integrativ n Single
e Mission
Dominant
Objective
Do
s
m
g ic
in
Goal Man
an
Specifi
Lo
s y
t
c
Plans
23
DOMINANT LOGIC
24
HOW DOES DOMINANT LOGIC
EVOLVE?
(Schemas)
(What worked
(Paradigms)
before?)
(Heuristic Principles)
26
VISION
27
VISION - CHARACTERISTICS
31
GOALS & OBJECTIVES
33
STRATEGIC DRIFT
Environmental Change
Radical Change
Strategic Change
Degree of change
Incremental Change
Stage of Atrophy
Time 35
ORGANIZATIONAL POLITICS
36
LOGICAL INCREMENTALISM
37
IMPLEMENTING INCREMENTALISM
39
MANAGING UNCERTAINTY
Scenario
Planning Learning
Static
Forecasting Decentralisation
Simple Complex 41
INTENDED & REALISED STRATEGIES
43
FORMAL PLANNING Vs STRATEGIC
PLANNING
Political Environment
– Government Stability
– Government Attitude
– Economic Model
– Central – State Co-alignment
– Subsidies & Protection
– Licensing & Quotas
46
EXTERNAL ENVIRONMENT
Economic Environment
– GDP, Fiscal deficit
– Savings & Investment
– Inflation & Interest Rates
– Monsoon & Food stock reserves
– Economic Cycles
– Capital Market
– Forex Reserves
– Currency Stability
– Infra-Structural Investments
47
EXTERNAL ENVIRONMENT
Environmental - Technological
– Manufacturing Processes
– Flexible Production Systems
– Obsolescence Rate
– Patent Laws
– Research & Development
– Backward Integration
– Carbon Credits
– Green Supply Chain Management
– Enterprise Resource Planning (ERP)
49
EXTERNAL ENVIRONMENT
International Environment
– Emerging Markets
– Forex Markets
– War & Terrorism
– FII & FDI Inflows
– Mergers & Acquisition
– Financial Crises – Sub Prime
Legal Environment
– Corruption – Transparency International – 89th
– Transparency – RTI Act, 2005
– Speedy Trials & Pending Cases
50
ECONOMIC LIBERALISATION
Hyper Competition
– MNC’s - Globalization
– Cheap Imports
– Access to technology
Buyers exacting demands
– Shortage to surplus – Price competition
– Life-style changes
– Stress on quality, Consumerism
Challenges on the technology front
– Competencies become technology based
– Investment in R&D become inescapable 54
DISCONTINUITY
Bargainin
Bargainin Competition gBargainin
power
g power from Existing ofg power
of Players of
Suppliers
Suppliers Customer
s
Threat of Substitutes
56
PORTERS FIVE FORCES ANALYSIS
57
PORTERS FIVE FORCES ANALYSIS
59
PORTERS FIVE FORCES ANALYSIS
60
FIRM ENVIRONMENT
Competencies
– Imitability – Uniqueness
– Substitutability – Difficult to Emulate
– Sustainability – Duration
– Leverage – Scope
Performance
– Accounting, Market, Risk, Growth
– Strategic
62
VULNERABILITY ANALYSIS - SWOT
65
SOURCES OF OPPORTUNITIES
71
STRATEGIC ADVANTAGE PROFILE
(SAP)
Marketing
– High market standing and steady market share.
– Continuous product innovation.
– Strong market penetration.
– Market Research – early trend recognition.
– Advertising effectiveness.
– Cost leadership.
Finance
– Low cost of capital.
– Dynamism in tax planning.
– Innovative financial instruments.
73
COMPOSITION OF SAP
Human Resources
– Low attrition rate.
– Ability to attract talent.
Research & Development
– Large no. of patents.
– Huge spending in R&D.
– Velocity of R&D multiplier.
Production
– Flexible manufacturing systems.
– Outsourcing and controlling SCM.
74
KEY SUCCESS FACTORS (KSF)
Production / Volume 77
EL - TRADITIONAL VIEW
2
Efficiency = Lower Costs
1 3
Experience = Efficiency Lower Costs = Higher Sales
3
Experience = Inertia Limited Growth = Diversification
1
5
IDENTIFYING ALTERNATIVE
STRATEGIES
80
CORPORATE STRATEGY
Corporate
Strategy
Intensificatio Diversification
n
Vertical Horizontal 82
STABILITY
Market Market
Penetration Development
(+) (++)
Product Diversificatio
Development n (+++)
(++)
involved.
MARKET PENETRATION
86
PRODUCT DEVELOPMENT
87
DIVERSIFICATION
88
HOW DIVERSIFICATION REDUCES
RISK?
Consider a hypothetical planet, in which a given year is
either under hot or cold wave, either of which is equally
likely to prevail. Let us assume that there are two
businesses constituting the entire market – coffee and
ice-cream. If the hot wave dominates the planet, the ice-
cream business would register a return of 30%, while the
coffee business would register a return of 10%. If on the
other hand, cold wave dominates the planet, ice-cream
business would register a return of 10%, while the coffee
business would register a return of 30%. What would be
your diversification strategy?
89
SOLUTION
90
WHAT GUIDES DIVERSIFICATION
SUCCESS?
The newly formed business should be consistent with
the dominant logic of the group. Businesses which are
not consistent are said to be opportunistic. Conclusion:
Higher the strategic fit; better the performance.
The countermanding logic –
– Appropriate and timely response.
– Better strategic and operational control.
– Unlearning and learning of new skill sets.
– Resource commitment from top management.
– Development of capabilities & competencies.
– Override the industry context.
91
HORIZONTAL DIVERSIFICATION
It takes place when a company enlarges its scope
of operations by getting into businesses which
provides a feeder services to its existing businesses
(Eg. Reliance). On the other way existing business
may recreate new businesses, which are distinct,
but strategically related (Eg. Bajaj – scooters to
motorcycles).
– It results in increasing market power.
– Distinctive capabilities extended to other areas.
– Resources can be shared for mutual benefit.
– Reduces economic risk, because of differences in
business cycles.
92
HORIZONTAL DIVERSIFICATION -
RELIANCE
Reliance Capital
Reliance Power
93
VERTICAL DIVERSIFICATION
94
VERTICAL DIVERSIFICATION -
RELIANCE
Oil & Gas exploration
Naptha-cracking
Acetic Acid
Paraxylene (PX)
(PTA) (MEG)
Purified tetra-pthalic Mono-ethylene glycol
acid
Polyester Filament Polyester Staple Fibre
Yarn (PFY) (PSF)
Textiles 95
QUASI & TAPERED INTEGRATION
96
A CASE OF TAPERED INTEGRATION
Zero Ownership
Component Component
s s
Components
Full Ownership
Partial
Ordinary
Ownershi
p
Transmission
102
STRATEGY CHOICE
103
WHAT IS A BUSINESS GROUP?
Parent Company
Firm 1 Firm 5
Firm 3
105
BCG GROWTH MODEL
High Low
?
Industry Growth
High
107
BUSINESS ANALYSIS – TATA GROUP
Distinctive Capabilities
Strong Medium Weak
High
109
ARTHUR’ D. LITTLE
Inception Growth Maturity Decline
Competitive Position
Strong Improve
Tenable Niche
Market Generate
Strong Growth
Leadership Cash
Try Phased
Custodial
Average Harder Withdrawal
Double
Phased
Or Expand Divest
Withdrawal
Weak Quit
111
STRATEGIC CHOICE – SUBJECTIVE
FACTORS
Commitment to past strategies - Inertia.
Attitude towards risk.
– Risk averse managers.
– Risk prone managers.
Degree of external dependence.
Internal political considerations.
Timing – Pressures, Frame, Horizon.
Corporate culture.
Competitive reactions.
Organisation structure.
112
STRATEGIC CHOICE – MACRO TIMING
Recession
(Divestmen
Prosperity t)
(Diversificatio
n)
Depressio
n
Recovery
(Stability)
(Intensification
)
113
STRATEGIC CHOICE – MICRO TIMING
Re-
Engineering
Maturity -
Growth (%)
Diversification
Decline - Divestment
Growth -
Expansion
Inception -
Stability
Duration (Yrs) 114
COMPETITIVE STRATEGY
115
GENERIC STRATEGIES
116
GENERIC STRATEGY - TYPES
117
GENERIC STRATEGY - TYPES
119
PORTERS MODEL OF COMPETITIVE
ADVANTAGE
Competitive Advantage
Cost Leadership Product Differentiation
Competitive Scope
Broad
Differentiation
Cost Focus
Focus
(Hyundai)
(Mercedes)
120
EMERGING INDUSTRY
Emerging Industry – An industry characterised by
radical environmental changes, changing customer
needs, technological innovations, ending in a
different cost economics. Eg. Digital photography
and printing. Reasons for emerging –
– High level of technological uncertainty.
– High initial costs, followed by steep cost
reduction.
– First-time buyers. Eg. i-Phones.
– Excessive turbulence in the environment.
– Unknown customer and market profile.
– Low penetration levels.
121
GENERIC STRATEGY
Rapid industry changes - strategic uncertainty.
(Eg. Pricing in the telecom industry).
Shaping industry structure.
Be a market leader, not market follower.
Strictly differentiation, not standardisation.
Flexible supplier and distribution channels.
Shifting mobility barriers.
122
FRAGMENTED INDUSTRY
123
GENERIC STRATEGY
124
MATURE INDUSTRY
125
GENERIC STRATEGY
126
DECLINING STRATEGY
128
COMPETITIVE ADVANTAGE
129
COMPETITIVE ADVANTAGE
130
HOW TO DEVELOP COMPETITIVE
ADVANTAGE?
Building competitive advantage is the task of
the top management – Identify KSF’s.
Internal appraisal and competition analysis
helps identify competitive advantage.
Benchmarking – Internal, Functional,
Competitive, Generic.
Value chain will be great of use in identifying
and building competitive advantage.
Building competitive advantage is a conscious
long term process.
131
UNDERSTANDING VALUE CHAIN
A value chain segregates a firm into
strategically relevant activities to understand its
cost behaviour.
Competitive advantage arises by performing
these activities efficiently and differently.
The sustainability of the value chain depends on
the degree of fit between the activities.
Value chain significantly influences the
competitive scope. How it can be leveraged?
– Segment Scope
– Industry Scope
– Vertical Scope
– Geographical Scope 132
VALUE-CHAIN ANALYSIS
Infrastructure
Ad
Support
va
n
Technology Development
ta
ge
Procurement
e
Out Logistics
Service
Operations
iv
In Logistics
Primary
tit
pe
m
Co
133
STRATEGIC FIT – THE PORTER WAY
134
CORE COMPETENCE
137
BIASED AND UNBIASED GAME
Use Radio +2 +7
Use Newspaper +6 -4
Use Radio +3 +5
Use Newspaper +1 -2
139
Firm X’s Pay-Off Matrix
BLUE OCEAN STRATEGY
140
TWO WORLDS - MARKETSPACE
141
WHAT IS RED OCEAN?
142
WHAT IS BLUE OCEAN?
143
RED OCEAN Vs BLUE OCEAN
Make the value cost tradeoff Break the value cost tradeoff
144
RECONSTRUCT MARKET BOUNDARIES
Structures
Industry Within
Beyond
Competitiveness Short - Medium
Long
Buyer Group Serving
Redefining
Issues
Scope Forecast
Dream
146
BLUE OCEAN STRATEGY
147
THE CORE PRINCIPLES
Reconstruct market
boundaries
… overcome beliefs.
Reach beyond
existing demand COST
VALUE
Get the strategic
sequence right
… value (innovation) first. 148
VALUE INNOVATION – GREENER
PASTURES
Reduce
Which factors
to be reduced
below the industry
standard
Eliminate Create
A new
Which of the industry
factors that the industry
value Which factors should be
created that the
takes for granted curve industry has not
should be eliminated offered
Raise
Which of the factors
should be raised above
the industry’s standard 149
REACH BEYOND EXISTING DEMAND
150
RISK IN BLUE OCEAN
Adoption Cost
What are the adoption hurdles in
actualizing your business idea? Can you attain your cost
Are you addressing them up target to profit at your
front? strategic price? 152
STRATEGY
IMPLEMENTATION
153
STRATEGY IMPLEMENTATION
It relates to transforming strategy formulations into
practices. Performance realisation of a strategy
depends on the effort behind it to move it forward.
Successful implementation depends on the
appropriateness of the strategy. It requires –
– Strategy activation.
– Full commitment of the top management.
– Optimum resource allocation; including its
stretching and leveraging.
– Proactive leadership and motivating employees.
– Compatible organisation structure.
– Strategic evaluation and control.
154
STRATEGY IMPLEMENTATION -
ROUTES
Strategic Alliance
Joint Venture
158
MERGERS & ACQUISITION
159
TAKE OVERS
It refers to the acquisition of significant
management control by buying out a majority stake
in the equity of the company (Eg. TISCO Vs Corus).
– A company seeking to acquire control has to
inform SEBI and make a public offer of not less
than 20% of the balance equity (Also Refer Slide: 231).
– Hostile takeover.
– Instant access to capacities and markets.
– Integration of organisation cultures becomes a
difficult exercise.
– Geographical spread.
– Consolidation in a fragmented industry.
160
RESOURCE ALLOCATION
Resources include physical resources (Eg. land, labour,
machines), intangible resources (Eg. brands, patents), and
distinctive capabilities and competencies. The various
methods of resource allocation includes –
– Historical Budget – The budgets framed by SBU heads
for a particular business keeping in mind past trends.
– Zero Based Budget – In this case the budget of a SBU
has to worked out from the scratch.
– Performance Budget – Here the act of allocation is a
function of the performance of the SBU.
161
STRATEGY & STRUCTURE
An appropriate organisation structure is essential to implement strategies and
achieve stated goals. It refers to the ways authority and responsibility is allocated
to individuals and groups. The following considerations are to be kept in mind –
– Size – An organisation grows steeper its size increases.
– Complexity – An organisation grows flatter as its business process complexity
increases.
– People – An organisation grows flatter as people become more matured.
– Technology – An organisation grows flatter as it becomes more technology
inducive.
162
TYPES OF STRUCTURES
164
THE STRATEGIC FIT – 7S
Shared Values – It represents the dominant logic of
the top management.
Strategy – A trade-off aimed at gaining competitive
advantage.
Structure – An organisation chart that represents how
tasks are divided and integrated.
Style – The way in which the top management
influences the functioning of an organisation.
Systems – It represents the flow of activities.
Staff – The basic values and beliefs of employees.
Skills – An organisations capabilities and
competencies.
165
MC KINSEY 7-S FRAMEWORK: TOM
PETERS
Strategy
Structure Systems
Shared Values
Skills Style
168
FINANCE STRATEGIES
Procurement of Funds – It ensures adequate and
regular supply of capital at a competitive cost of
capital. (Eg. The Tatas enjoy one of the lowest
cost of debt by virtue of the immense trust their
name generates). It involves fixed as well as
working capital through a mix of debt and equity.
Utilisation of Funds – It involves applying various
discounting criteria to appraise, rank and select
projects in order of their merit. It also includes
decisions like make, buy or lease. (Eg. When
Reliance selects a project, they saturate it with
resources as much it can absorb. For them time
lost is more important than costs).
169
HR STRATEGIES
Recruitment – It is a process of creating an
challenging environment to link the best people
with the jobs to be filled (Eg. Infosys).
Selection – It is the process of picking the right
people to fill up jobs in an organisation.
Sometimes it is also a process of elimination. (Eg.
Aptitude & Psychometric Tests).
Placement – The broad objective is to put the
right person in the right job. For mid-level
placements experiences relating to previous
organisation cultures is an important criteria. (Eg.
Learning & unlearning of skills).
170
STRATEGIC CHANGE
Post 1990
173
STRATEGY CONTROL
It is concerned with trafficking a strategy as it is being
implemented detecting changes in the external and
internal environment and taking corrective action
wherever necessary. (Eg. Reliance Infocomm’s pricing
strategy). It attempts to answer questions such as –
– Are the organisations capabilities still holding good?
– Is the strategic intent appropriate to the changing
context?
– Has the company acquired any new competency?
– Has the company been able to overcome the
environmental threats.
– Are competitive advantages becoming competitive
disadvantages?
174
IMPLEMENTING STRATEGY CONTROL
175
MANAGEMENT TOOLS
IN STRATEGY
176
WHY MANAGEMENT TOOLS?
178
SOME BEST PRACTICES
179
WHAT TO BENCHMARK?
180
HOW TO BENCHMARK? APPROACHES
Phase 1: Planning
– What to benchmark?
– Whom to benchmark?
– Identify key performance indicators.
– Data source.
Phase 2: Analysis
– Assessment of performance gaps.
– Predict future performance levels.
Phase 3: Integration
– Communicate findings and gain acceptance.
– Establish functional goals and implementation plans.
181
HOW TO BENCHMARK?
Phase 4: Action
– Implement and monitor progress.
– Measure results against stakeholder wants
and needs.
– Recalibrate benchmarks.
182
WHOM TO BENCHMARK?
183
BENCHMARKING - ADVANTAGES
184
BENCHMARKING - LIMITATIONS
185
RE-ENGINEERING
186
REENGINEERING – KEY TENETS
Micro Vs Macro
Focus
Business Processes Vs Organisational Processes
Innovative Vs Traditional
Performance
Customer centric Vs Organisational centric
187
REENGINEERING - LEVELS
188
REVERSE ENGINEERING
190
WHAT IS QUALITY?
195
BARRIERS TO STRATEGY EXECUTION
196
BSC - CONCEPTUALISATION
198
CUSTOMER PERSPECTIVE
GOALS MEASURES
GOALS MEASURES
GOALS MEASURES
GOALS MEASURES
3 4
Align the organisation Make strategy
to the strategy everyone’s job
203
BSC - ADVANTAGES
204
EFFICIENCY Vs EFFECTIVENESS
Ineffective Effective
Inefficient
Goes out of
Business Survives
quickly
Efficient
Dies
Thrives
Slowly
205
CORPORATE
RESTRUCTURING
206
RESTRUCTURING
207
RESTRUCTURING – BASIC TENETS
208
RESTRUCTURING – BASIC TENETS
210
HIVE OFF
213
BUSINESS RESTRUCTURING – THE
TATAS
Divestments Diversifications
Lakme – Rs. 256 cr Tata Motors – Rs. 1700 cr
ACC – Rs. 950 cr Trent – Rs. 120 cr
Merind - Rs. 42 cr Tata AIG – Rs. 250 cr
Tata Timken – Rs 120 cr Tata Telecom – Rs. 1170 cr
Voltas - Rs. 230 cr Tata Tetley – Rs. 1890 cr
Goodlass Nerolac – Rs. 99 cr Tata Power – Rs. 1860 cr
CMC – Rs. 150 cr
VSNL – Rs. 1439 cr
214
RESTRUCTURING OUTCOMES
Short - Term Long - Term
Alternatives
Reduced labour Loss of
Organisational costs human capital
Emphasis on Higher
strategic control performance
Financial
High debt Higher
costs risk
215
NUMERATOR & DENOMINATOR
MANAGEMENT
Most of the companies in the developing
economies are operating in saturated markets.
In order to put back the company on the right
track they are resorting to –
– Denominator – It assumes that turnover
cannot be increased hence go in for
downsizing, downscoping or asset sell off.
– Numerator – It assumes that turnover is not a
barrier; focuses on reengineering, reverse
engineering and restructuring.
While DM yields results instantaneously; NM is
an effective option in the long run.
(Prahalad & Hamel, 1994)
216
RESTRUCTURING & FIRM VALUE
217
TURNAROUND
MANAGEMENT
218
WHY TURN AROUND MANAGEMENT?
220
ACTION PLANS – SHORT TERM
Success
Equilibrium Line
Failure
Nadir
Indeterminate
Time
222
223
INITIATION (STAGE 2)
Asset Restructuring
Business Restructuring
224
TRANSITION (STAGE 3)
227
COOPERATIVE STRATEGIES
229
LICENSING
230
CONSORTIA
231
STRATEGIC ALLIANCE
It is an short term understanding between two or
more firms in a similar business to share
knowledge and skills in a particular domain or
function for mutual benefit (Eg. Tata Motors –
Daimler Benz, Reliance – Du Pont).
Generic motives involved are –
– Enable learning organisation.
– Design next generation products.
– Effective R&D management.
– Move up on the experience curve.
– Enhance credibility.
– Preempt competition.
232
STRATEGIC ALLIANCE - TYPES
Collusion – Tacit top management understanding to
neutralise price wars (Eg. Coke – Pepsi).
Complementary Equals – Two firms mutually
promoting each others complimentary products (Eg.
Whirlpool – Tide).
Bootstrap – An alliance between a weak and a strong
company with an intention to acquire it.
Alliances of the Weak – An alliance is entered into to
preempt competition (Eg. Airbus – Boeing).
Backward – An alliance (quasi or tapered) with a
supplier of critical components seeking commitment
(Eg. Maruti).
233
JOINT VENTURE
234
JOINT VENTURE - GENERIC MOTIVES
235
RISKS INVOLVED
237
MERGERS
&
ACQUISITION
238
MERGERS & ACQUISITION
240
SEBI TAKEOVER CODE, 2002
241
TYPES OF MERGERS
242
MERGERS & ACQUISITION - MOTIVES
244
PLC & MERGER TYPE
245
INTERNATIONAL M&A - FRAMEWORK
247
M&A - VALUATION
248
VALUING OPERATIONAL SYNERGY
249
VALUING FINANCIAL SYNERGY
250
VALUING FINANCIAL SYNERGY
252
LEVERAGE BUYOUT (LBO)
254
RATIONALE FOR HIGH LEVERAGE
257
EFFECT OF TAKE-OVER
ANNOUNCEMENT
The shareholders of target firms are the clear
winners.
– Takeover announcements reported 30% excess
returns.
– Merger announcements reported 20% excess
returns.
Excess returns also vary across time periods.
During bearish periods excess returns were 19%;
and 35% during bullish periods.
However, takeover failures have only initial
negative effects on stock prices. Most target firms
are taken over within (60-90) days.
258
EFFECT OF TAKE-OVER
ANNOUNCEMENT
The effect of take-over announcement on
bidder firm stock prices are not clear cut.
– Most studies reported insignificant excess
returns around take-over offers or merger
announcements.
– However, in the event of take-over or
merger failures reflected negative returns to
the extent of 5% on bidder firm stock prices.
260
DEFENSIVE STRATEGIES
261
COMPETING FOR
THE
FUTURE
262
GETTING OFF THE TREADMILL
264
THE PRESENT OF COMPETITION
266
ABOUT THE DREAM
268
ABOUT THE EMPOWERMENT
269
THE FUTURE OF STRATEGY
Unlearning
Curve
Learning
Curve
t1 t2 t3 t4 t5
274
Time
CORE COMPETENCE
Core Group
Core
Businesses
Core
Products
Core
Competencies
277
RESOURCE LEVERAGE
280
COMPLEMENTING RESOURCES
281
CONSERVING RESOURCES
284
EMERGING MARKETS
285
DIVERSITY - PERFORMANCE (I)
Strategic Fit
Risk diversification,
conglomerate power
289
INTERNATIONAL BUSINESS
ENVIRONMENT
Cultural Adaptability – It reflects the adaptive ability to a
changing environment - culture, way of life, attitude, code
of conduct, dress sense, customs, time value, flexibility (Eg.
high cultural adaptability in developed markets and vice
versa for emerging markets).
Country Risk – It reflects the political and economic risk (Eg.
political stability, credit rating, currency, FOREX reserves,
inflation, interest rates, terrorism (9/11), corruption,
judiciary) of doing business in a particular country (Eg. low
country risk in developed markets and vice versa for
emerging markets).
290
INTERNATIONAL BUSINESS
ENVIRONMENT
Time Sensitiveness – Developed country managers
regard time as precious, however, in most emerging
markets meetings are delayed and lasts unusually
long. Other factors – local celebrations, time-zones.
Language Barriers – Developed country managers
expect foreign partners to communicate in their
languages; in most emerging markets use of an
interpreter may be a standard protocol.
Ethnocentrism – Developed country managers tend to
regard their own culture as superior; and vice-versa.
High levels of ethnocentrism usually has a negative
effect on business.
291
GATT
294
FII Vs FDI INVESTMENT
Classical economists believed that foreign investment
(in any form) is basically a zero sum game (i.e. the
gain of one country is loss of another). Neo classical
economists believe that foreign investment may in
fact be a win-win game.
– FDI (transfer of tangible resources) is slow but
steady for the purpose of economic growth. It is
long term with high levels of commitment.
– FII (transfer of tangible resources) is fast but may
have strong repercussions (i.e. hot money). It is
short-medium term with comparatively low levels
of commitment.
295
INTERNATION MARKETING
298
INTERNATIONAL OPERATIONS