Strategy

STRATEGY

Action plan or decisions & actions which managers take /do to reach their goals.

(The Goals having emanated in relation to competitive environment in which the manager, business or corporate is situated.)

(Q: Is it contradictory to what is learnt in economics ---- that “value based strategy is the best”?)

(Q: Even if no competition in a particular cigarette (filter) segment exists, why ITC company formulates strategies?)

The strategy concept

BRANCHING OFF FROM ECONOMIC THOUGHTS. COMPETITIVE EDGE/ADVANTAGE.1.INDIVIDUAL STRATEGIES.2.BUSINESS STRATEGIES.3.FIRM/CORPORATE STRATEGIES.4.NATIONAL STRATEGIES. FUNCTIONAL STRATEGIES. (HR, PRODUCTION,

MARKETING, FINANCE etc.)Vs GENERAL MANAGEMENT STRATEGIES. LONG TERM ---- STRATEGIES; SHORT TERM ---- TACTICS.

But currently the distinction is slowly dimming.Q: Japan follows best of the value based strategy as enunciated in

economic theories. But then why are they facing economic woes? Global Strategies --- are they different in practice?

PERSONAL/INDIVIDUAL STRATEGIES! (TACTICS)

FROM Indian Classics:1. Friendly Approach. (SAMA)2. Magnanimous Approach. (DHANA)3. Divide & Rule. (Manipulative) (BEDA)4. Aggressive Attack. (DANDA)MODERN ANALYSIS:1. Manipulative / Tricky Strategies.2. Emotional Strategies.(Q: Name the corporate advertisements, which adopt these

styles of strategies!)

Manipulative / Tricky Strategies.

1. Setting One Against the Other.2. Join & Spoil.3. Just Join or Collaborate.4. Isolate. Alienate!5. Divide & Rule.6. Withdraw & Pounce (Big Cat)7. Direct Attack. (Q: As a kid how often you have used these? Q: Name the companies corresponding to these!)

EMOTION BASED INDIVIDUAL STRATEGIES.

1. Angering.2. Sympathizing. 3. Being Concerned.4. Mild Fun/mock.5. Rebuking.6. Expressing fear (mild, mid level & serious)7. Being Exclaimed!8. Being very affectionate & friendly.9. Deliberate ignoring.10. Infusing worries.11. Praising.12. Boosting up.13. Provoking.14. Insulting.15. Embarrassing.(Q: How often house wives and girl friends use some of them? No stereotyping please!Name corporate Examples!)

Corporate and business-level strategy.

DISCUSS THE FOLLOWING:1. The whole corporate might be matured; but would like to launch one

more product --- would the corporate strategy be applicable then?2. One of the products or service is at the fag end of its life cycle. The

company might be at the brand equity stage --- would the strategy of the corporate and of the business be same?

(Exercise: RELATE BUSINESS STRATEGY TO PRODUCT LIFE CYCLE RELATED ACTIVITIES and draw up action plans.)

(Q: Vision & Mission Statements ---- Are they related to strategic management?)

VISION & MISSIONVISION, INTENT, DESIRED STATE & OVERALL PURPOSE.

VISION IS DIRECTION BASED & MISSION IS ACCOMPLISHMENT OREINTED.

Vision is said to be inspirational reverberation of desires, values & possibilities:

Organization wants,-- needs,-- it ought to, --it might do, it should do---- & it can!

Vision is embedded with mission; mission leads to vision and vision leads to formulation of objectives.

Value is culture based!Goals are tangible statements of accomplishments in the

corporate journey of long duration.(Q: What do you name ----”the converting of potential into

feasibility?”)

Strategic & Planning Focus.

“AS PER CLASSICAL MANAGEMENT STRATEGY IS A PRODUCT OF RATIONAL PLANNING PROCESS”1. Strategy emerges from within an organization in the absence of formal plans as managers need to

respond to unpredicted to contingencies!2. Though strategy could be evolved by conscious planning, many often they are ill-equipped to

confront hard realities, which need on-spot & tailor made instantaneous strategic action plans!3. Planning focus believes in conceiving all contingent situations and providing for them in

managerial situations as an on going process!4. Planners, when distinct from day today management, draw up plans which lack contingent action

plans for day-to-day unforeseen occurrences--- making it theoretical rather than implement worthy! 5. FITTING strategy & STRETCHING strategy!6. Strategic INTENT is stretching strategy!7. Poor strategies could result on account of individual cognitive or perceptional biases and or group

pressures that influence the decision making, despite the formulation of perfect planning for strategic actions!

8. DEVIL’S ADVOCACY (total criticism) & DALECTIC (antithesis & synthesis) ENQUIRY!(Q: What will you do when a riding a bicycle in a busy road and if you are intruded by a running

crosser?)

Corporate Strategy & Business Strategy.

Corporate as a whole might have several businesses. (NILGIRIS has bakery, dairy products and retailing)

Each Business may have its own strategic formulation. (Dairy has to compete with local Govt. sponsored coop dairies, bakery with the local brands as well as the international brands & retailing with several retailers!)

(For Example in Mahabharata, each day’s fight had different war formations though the war was the same.)

(Q: In the previous transparency if there were to be speeding truck coming from behind will the decision change?)

Q: Could there be a single corporate strategy instead of multiple strategies?

NATURAL & DEVELOPED STRATEGIES.

Survival. Payback. Brand Equity. Market Dominance. Maturation.Developed Strategies:1. Consolidating.2. Growing. (vertical & horizontal) 3. Capturing.4. Conglomeration.5. Divesting.(Q: Is there correlation between what is stated in the first set to MASLOW’S

model?)

Environment Focus

External (Macro) Environments & respective Focus:

1. Economic climate.

2. Technology --- state of the art!!

3. Demographic influences.

4. Social affiliations and values!

5. Political Scene.

6. Legal Framework.

Internal Environment Focus

Internal (Micro) Environments & respective Focus:1. Morale.2. Corporate culture, values and beliefs.3. Core competence.4. Capabilities.5. Grapevines.6. Formal & Informal groups.7. Knowledge Level and Potential. 8. STRATEGIC GROUP (can it be formed for the whole corporate? ---

Is it embedded in each section?) (Q: As a manager where could you adopt fitting and where could you

adopt stretching --- strategies? --- discuss regarding Indian & foreign situation!)

Role of the General Management in the Strategy Process

Providing Organizational Focus Resources Re-allocation. Re-working Factor compensations. Organizational Redesign. Functional Strategic Formulations.Q: When Questioned as to “what was the

Organizational Design?” what did Mr. MULGOANKAR (erstwhile TELCO)

chairman reply?

ORGANIZATIONAL COMPONENT based TOOLS.

Functional & SECTORAL decentralizations. Empowerments & Flatter Organizations. Highly Structured setups & Information Linkages. Span of Control & Controlling. Directional Levers & Sanctions. Coordination. Synergy.

(Q: If earthquake engineering requires flexible joints; what is the analogy in Organizational Management Strategy to face contingencies & crisis?)

ORGANIZATIONAL LEVELS.

1. Policy Level.

2. Strategy Level.

3. Functional Level (Middle Level)

4. Operational Level. (Executive Level)

5. Supportive Level.

(Q: Should all the levels be present in all the Organizations? What levels are present in TATA group? What are present in United Breweries?)

BROAD STRUCTURES.

1. Bureaucratic. (Highly Structured - Formal)

2. Project Type. (Functional – Partly structured)

3. Matrix Type. (Highly empowered)

4. Loosely Bound Type. (Power not properly defined)

5. Hybrid. (Situational)

(Q: For Banking, For Army & For FMCG what types are preferred?) AMUL?

ORGANIZATIONAL ANALYSIS.

Structural Stability. Destabilizing Forces. Decentralization & Stability. Is there a critical size? Are flatter organizations a choice or necessity? Are structured organizations a choice or necessity? What are the binding forces? How to strategically focus there? Is it focused on the critical issue?(Q: How many organizations plan for the structure--- how often

structures are formed after people are hired?Is it analogous to tune to lyrics and lyrics to tune?)

STRATEGIC ORGANIZATIONAL LEADERSHIP.

Supportive. Autocratic. Participative. Empowering. Laissez Affaire.(Q: Is Organizational Leadership is individual

dependent? What about environment? Are you dependent follower-ship styles? Name the examples!)

(Q: How Crisis, Goaded, Situational & Natural Leaders formulate their strategies?)

Managerial Styles and Strategic Implications.

1. Bureaucratic.

2. Autocratic.

3. Delegating.

4. Democratic.

5. Administering.

Depending on the top Management Strategic Implications vary!

(Q: “How?”---- is the question?)

IMPLICATIONS!

TAKEN FROM TEXTS ---- COMPARE WITH PRACTICE! In the case of Bureaucratic Manager the strategic set up is

yet another unit reporting! In the case of Autocratic Manager the strategy could come

up well if the manager himself /herself is a good strategist! Otherwise it is luck of the organization.

In the case of Delegating Manager it depends on the Strategic Unit of the Organization.

In the case of Administering Manager Strategic Unit a department, which advises!

(Q: Discuss these apparently casual /general statements for their validities/veracities!)

INFORMATION & STRATEGIC MANAGEMENT.

1. Can Information be of strategic use?2. If so, what type of strategies could be worked?

(Contracting Quotes!)3. When is strategy mostly built around

information? (Competing Varieties!)(Q: When strategic management is so reliant on

information, why the classical books – even the modern strategic management books discuss scarcely on it?)

How Organizations Formulate Strategy? MODELS - 1

THREAT OF SUBSTITUTES

COMPETITIONAMONG EXISTING

FIRMS

BARGAINING POWER OF SUPPLIERSBARGAINING POWER

OF BUYERS

RISK OF POTENTIALNEW COMERS

DOES THIS NOT OMIT AN IMPORTANT THING? ----

How Organizations Formulate Strategy? MODELS - 2

ECONOMIES OF SCALE

GLOBAL COMPETITION

INNOVATIONSCOMPARATIVE ADVANTAGES

BARRIERS

DOES THIS NOT OMIT AN IMPORTANT THING? ---- LOYALTY!

Formulation of Strategies In Particular Situations.

Process by which strategy is formulated:Internal Analysis of 1. Resources,2. Capabilities,3. Competencies,4. ABSOLUTE COST ADVANTAGE5. Competitive Advantage.(Q: What is organizational inertia --- Is it relevant

to strategic formulation?) (Motor spares)

QUALITY STRATEGY.

QUALITY IS PERCEPTIONAL BUT COULD BE STATED AT TIMES!

1. What is TQM?2. What is six sigma?3. What is ISO? --- Does ISO mean best quality?GLOBAL STANDARDS & INDIAN PROBLEMS

IN QUALITY MANAGEMENT(Q: By culture is India ill-equipped to match

international quality?)

DEVELOPMENT OF QUALITY STRATEGY.

Breakdown Maintenance. Periodic Maintenance. Preventive Maintenance. Zero Breakdown Maintenance. Continuous Maintenance. Total Maintenance. ( & Self Maintenance.)

(Q: Can you draw strategically the IR parallel?)

Developing Strategic Intent and Corporate Advantage

ULTIMATELY ALL STRATEGIC INTENTS RESULT IN:1. Lower Unit costs, 2. Higher Consumer Utilities (& responsiveness)3. Higher Unit prices,4. Service or Product efficiency,5. Quality perceptions, 6. Innovation.{6 to 1 & 1 to 6 is a continuous cycle known as VALUE CHAIN in

STRATEGY.}(Q: Name some of the products that are currently undergoing this

value chain rapidly? Could there be a strategic objective similar to cash cycle?)

BETTER UNIT PRICES

SERVICE/PRODUCT EFFICIENCY

QUALITY PERCEPTIONS

INNOVATION

LOWER UNIT COSTS

INCREASED UTILITIES & RESPONSIVENESS

STRATEGIC VALUE CHAIN

Criticalities of An Organization & Corporate Advantage

EVERY FIRM OR ORGANIZATION HAS A critical issue or function or resource input. Criticality of a issue or input or function is judged by its relational sensitivity to net advantage of the organization. If mere 5% change in labor results in 40% change in value then it is critical. Similarly if mere 10% change in Technology results in 60% in value then it could be very critical too!

Now focusing on critical issues Strategic Advantages could be got!

(Exercise: Name companies or products where small alterations affect the value chain heavily. ---- i.e. identify critical factors!)

CRITICAL EVALUATION OF STRATEGIES.

Issues that are evaluated are:1. Competitiveness.2. Controllability.3. Compatibility.4. Feasibility.5. Impact.6. Risk.(Q: For Converting potential feasibility are these

factors adequate?)

STRATEGIC OPTION

Contribution to CONTROLLLABILITY?1. Key players2. Impact3. Results4. Sensibility Analysis

How much is the COMPATIBILITY?1. Motivation2. Values3. Skills

Appraisal of RISK?1. Threats2. Opportunities3. NegativeConsequences

How Excessive is the COMPETITIVNESS?1. Customer Support2. Supplier Support3. Distinctiveness.

How desirable is the IMPACT?1. Gains2. Contributions3. Benefits

Level of FEASIBILITY?1. Resources2. Constraints3. Inertia

Formal Strategy analysis &Strategy formulation.

PERSPECTIVES:1. CUSTOMER.2. BUSINESS.3. INNOVATION & LEARNING.4. FINANCIAL IMPLICATIONS.5. CORE COMPETENCE.6. CLARITY REGARDING CONSOLIDATION OR

GROWTH.7. A CLEAR DIRECTION REGARDING

COLLABORATIVE ACTIONS.8. BENCH MARKING THE COMPETIVIE EFFORTS.9. INSTALLING STRATEGIC CONTROL SYSTEMS

--- DISCUSS!

OSCILLATING STRATEGIES

Innovation Vs consumer response. Dialogue based monologue. Developing Relationship Vs Bombarding with information. Unique variety Vs Extra Value Niche to Mass & VICE VERSA Prospecting Vs Identifying. General Vs Special Status. Branded Status Vs General Status. Mass to Class & VICE VERSA

VOLUME & VARIETY RELATED STRATEGIES!!

IF UNIT COST COULD BE BROUGHT DOWN BY INCREASED VOULME OF PRODUCTION THERE IS POSSIBILITY OF

ECONOMIES OF SCALE:MES: Minimum efficient scale.By introducing more varieties however, this balance is shifted back again to

smaller production outfit.Therefore a tradeoff graph could be drawn to have the ideal balance

between the two!(Q: Varieties within an organization ----is it more competent than a

substitute?(Q: What if substitute could be produced instead of varieties?)

STRATEGIC FORMULATION.

STEPS: Comprehensive focus on Internal & External

Environment. Drawing Up of Objectives. Open Minded Approach by applying scientific

norms of evaluation rather than emotional judgment.

Drawing Up Scope by the Following Analysis.

ANALYTIC FRAMEWORK & STRATEGIC FORMULATION. 1

STEPS: DEMAND ANALYSIS:1. Structure.2. Regulations.3. Technology.4. External Pressures/ compulsions.5. Perceptions. (Q: By this analysis can you FULLY ensure that

the potential could be converted into a feasibility?)

ANALYTIC FRAMEWORK & STRATEGIC FORMULATION. 2

SUPPLY:1. Finance.2. Competition.3. Cost.4. Deployment of Resources.5. Product Life Cycle.6. Management Skills & Expertise.7. Existing Structure & System.8. Values, Culture & Leadership of the Organization.(Q: Can You now draw the road map to scale the feasibility

cliff?)

Strategic IMPLEMENTATION.

ANALYSIS IMPLEMENTATION RESULTS

Strategic Plan Measures of individual & Organization performance

Visible Marks of change!

Qualitative & Quantitative

Measuring Progress

Current Plans

Strategic Choice

Strategic Direction

Future Plans

Monitoring for The Strict Tolerances

These Have Implications For

COULD THERE BE MODELS?

1. Instead of every time drawing up plans and trying to work out implementation schemes can we have standardized models for formulation, evaluation and implementation?

2. If not for all the organizations could it there be for one organization?

3. Could it be there for one business at least?4. If endowed with highest capabilities --- is it a

boon or bane? (Icarus Paradox --- Bhasmasura Paradox!)

FUNCTIONAL STRATEGIES & CUTTING EDGES.

IF CUSTOMIZATION IS THE ULTIMATE AIM OF VALUE CHAIN ---

HOW DO YOU EXPLAIN INDIAN CHANGE SCENARIO WHICH WAS

EARLIER EPICENTER OF CUSTOMIZATION GIVING IN FOR

MASS PRODUCTS OR READYMADES? IS IT RETROGRADE INFLUENCE OF GLOBALIZATION?

STRATEGIC CONTROL SYSTEMS

BALANCE SCORECARD APPROACH:1. State Mission & Goals.2. Develop Strategy & Corresponding Structure.3. Create Control Systems that measure: Efficiency,

Quality, Innovation & Responsiveness to Consumers

4. Relate them to Financial Performance.HAVE A FEEDBACK LOOP!(1 to 2 to 3 to 4 to 1)

DESIGNING CONTROL SYSTEM.

1. ESTABLISH TARGETS & MEASURABLE STANDARDS

2. PUT IN PLACE THE MEASURING & MONITORING SYSTEMS

3.COMPARE THE ACTUAL WITH TARGETED PERFORMANCE

4.EVALUATE RESULTS & TAKE CORRECTIVE ACTIONS

IMPORTANT This has to be done at each level of Organization & Installed Properly!

The Changing Strategic Context

Technology Economy Markets Politics Law Environment SocietyTEMPLES ---- In changing Strategic Management these figure

out as the lead indicators!(Q: for alcohol business how these issues changing -----

discuss?)

Culture and Power in Strategy.

POWER:1. Personality. (Charismatic)2. Positional (delegated)3. Professional. (Knowledge)4. Financial (Promoter’s, Lender’s, Supplier’s, Buyer’s)5. Labor (Union!)All these powers play role in strategy making.(Q: What are the implications – give Industrial examples?)(BIG QUESTION? What are the general cultural influences across the

globe & the Indian subcontinent and narrate the strategic behaviors?)

Competitive Strategies & Non-Competitive Strategies.

Competitive strategies are:1. Quality.2. Quantity.3. Technology.4. Substitute.5. Variety.Value based as above and non-value based like defensive &

offensive, attritional, divisive etc. Q: Could there be non-competitive strategies? When BIRLAS build temples what strategy is it?

MANAGING CHANGES THROUGH STRATEGIES.

Strategies for change (Corporate Change – Usually studied as Diversification Strategies!)

Strategies for Business Change (BPR,TQM, 6 Sigma etc.)

Leadership requirements for strategic change Implementation of strategic changes (Q: What are the different types of

DIVERSIFICATION strategies adopted by companies in the recent past?)

CORPORATE DIVERSIFICATION STRATEGIES.

1. Re-positioning2. Restructuring.3. Mergers & Acquisitions (Take over!)4. DIVESTITUDES:5. Spin-Offs.6. Split Offs/ Split ups.7. Carve Outs.(It is difficult to get pure examples for each, as in

practice hybrid strategies are followed)

Re-positioning

1.Why Private companies reposition as Public Ltd. companies?

2. Why Budget hotels reposition as Star hotels?

3. Why cooperative banks go for scheduling--- is it re-positioning?

4. Why airlines reposition as international carriers instead of domestic carriers?

Restructuring.

1. Could it be organizational design restructuring?

2. Could it be functional re-structuring?3. Could it be sectoral re-structuring?4. Could it be power restructuring?5. Could it be product, service, process,

systems, technology, HR (downsizing), layout, output restructuring?

Mergers & Acquisitions (Take over!)

TAKING OVER CONTROLLING INTEREST: By agreed/friendly take over. By Hostile methods. By merging. By purchase of assets. By purchase of shares.(Do you know that Karnataka Bank Ltd. Has taken over

three banks more than three decades ago? ---- Namely Bank of Karnataka, CHITRADURGA Bank, & SRINGERI SHARADA Bank Ltd.)

IT COULD BE VERTICAL OR HORIZONTAL

When BIRLA cements took over L & T cements, it was -------- ?

When a paper board manufacturing buys a pulp producing company & another card board manufacturing firm it is --------?

(What are forward & backward mergers/ integration?)

CONGLOMERATIONS.

When companies are bought and or taken over, which have no relation to the current businesses, the diversifications strategy results in the formation of CONGLOMERATIONS.

In India ITC is a classic example.

(Q: Can you name a current example?)

SPIN OFFS.

1. Can be associated with controlled subsidiaries.2. Subsidiary company shares are distributed to parent organization’s

share holders, implying formation of another company.3. No cash/money passes from the hands of the shareholders.4. The subsidiary company’s shares are not re-valued.5. The whole transaction is treated as stock dividend & a tax free

exchange.

(Example: SHRIRAM finance companies) (Ex: On Mobile spun off from INFOSYS and later got Rs128 CRORES from Goldman Sachs, Deutch Bank etc)

Another variation in spin offs is formation of a joint venture company with another public company and such a company buys parts of the shares of parent company.

SPLIT OFFS.

Subsidiary Company’s shares are issued to a group of share holders and are relinquished/ asked to relinquish the parent company’s shares. In fact a covenant is drawn up as a condition precedent for releasing the parent company’s shares for acquiring the subsidiary company’s shares.

SPLIT UPS & EQUITY CARVE OUTS

SPLIT UPS: In the case of 100% subsidiary company the shareholders decide in united fashion to split up and form another company.

EQUITY CARVE OUTS: Subsidiary company shares are partly issued to public without the parent company losing the governing control of the subsidiary.

FINANCIAL CONSIDERATIONS FOR DIVERSIFICATION!

1. Analysis of the target.2. Valuation of the target.3. Target Pricing/ costing.4. Basis of Exchange or basis of setting up.5. Merger accounting or issue of new equity.FROM WHERE THE RESOURCES?1.Reversal of acquisitions wrongly undertaken (jettisoning)2.Correcting the previous decisions.3.Increasing the value of company by selling of performing assets.4.Raising temporary liquidity to pay off debts.5.Disposal of assets which cannot be improved.6.Financing through leveraged buyout.

Collaboration for Implementing Strategic Change.

InternalExternalProfessionalInternational

(Q: How need based analysis limits the strategic collaborative choices --- with international examples?)

STRATEGIES FOR OVERSEAS PROJECTS.

1. Inimitability as Competitive Advantage.2. Core Competence which is not easily replicable.3. International Flexibility (in Market, Production, Distribution

etc.)4. Pay Back.5. Low rate or nil rate of obsolescence.6. International Comparative Advantage.IF THESE ISSUES ARE QUITE OUTSTANDING THEN

THE PROJECT WOULD BE STRATEGIC SUCCESS! (Of course, all the issues as relevant to normal project appraisal need be fulfilled.)

(Q: Why software is a success in India?)

STRATEGY FOR INDIAN MNCREDDY’S STRATEGY

*REDDY’S LABORATORIES ACQUIRED BETAPHARM OF GERMANY @Rs.2250/=CRORE, WHICH IS A GENERIC DRUG MANUFACTURTER HAVING 3.5% MARKET SHARE IN GERMANY.

RANBAXY BUYS A ROMANIAN DRUG COMPANY FOR Rs1445/-CRORE TERAPIA WHICH MANUFACTURES 157 DRUGS & HAS 2 PRODUCTION UNITS.

(PS: RANBAXY failed in its attempt to capture BETAPHARM)Q: Draw lessons for Indian corporate to become an MNC?

Leadership Requirements for Strategic Change.

1. Vision2. Eloquence.3. Consistency.4. Commitment.5. Well informed and or open minded.6. Desire to delegate.7. Naturally Empowering attitude or ability to develop followers into leaders.8. Political astuteness.9. Aware of environmental or quick perception for sensing up environmental

changes and impacts.10. Agility or ever preparedness.(Q: Are visionaries and good planners good strategists?) --- Compare with Dr.

Prahalad’s statement!

Joint Ventures

It may result in Fluidizing frozen assets.Stakeholders are kept committed.Risk reduces the risk of a buyer.There is transparency for both the parties.Continued managerial & technical

collaboration.

(Oil exploration company & Oil well land owner)

Alliances.

If you cannot compete and win over, cooperate to death. Strategic alliances go on WIN-WIN principle.Key elements:Time, Clear Statement of Alliance actions & Exit methodology.(Q: Bring out the various considerations in deciding strategic alliances

with examples!){Q: You are bidding for an international project of very value. You are

likely to get it. But you are worried that like Bangkok 7 KM highway got nationalized (and Japan lost in the bargain) your project may also be nationalized. How do you strategically avert this contingency?}

Case Study Approach – JV s

In 1989 PHILIPS entered into Joint Venture with the incoming partner WHIRL POOL for a diversification effort wherein PHILIPS received a substantial higher price than it would have otherwise got through a direct sale by going in for consumer appliances. WHIRL POOL established a strong presence in Europe due to this Strategic Alliance. (Sharing P 47% WP 53%). This JV was terminated in good sense in 1991.

CORNING – JV case.

In 1985 CORNING went for a JV with CIBA GEIGY for getting rid of peripheral business (without destroying the business value) for medical diagnostic equipments and in the process CIBA GEIGY entered the US market as a Major Player. It was 50-50 deal and got terminated for good in 1989.

HONEYWELL –BULL-NEC JV

Honeywell promoted JV with BULL & NEC for the business of mainframe computers in 1987 (terminated for good in 1991), in which BULL established a substantial presence outside FRANCE and NEC developed channel for marketing its own computers in US. HONEYWELL jettisoned its mainframe computer business and diversified (got focused) into its electronic control business) (Sharing HW: B: N: 42.5: 42.5: 5.5)

DRESSER JV with KOMATSU

DRESSER a US company promoted a JV with KOMATSU (50% each from 1988 -1994) for the business of CONSTRUCTION EQUIPMENT.

In the process DRESSER jettisoned its non-core competency area of Business i.e. Construction Equipment Business to KOMATSU which strengthened its presence in US.

IBM JV with SEIMENS!

IBM promoted JV with SEIMENS for marketing, distribution & servicing of electronic PBX system (From1989 to’92 for 50% each partnership!)

SEIMENS could strengthen its US presence in telecommunications market and IBM exited form price competitive supplementary business so as to concentrate on its core competency Area of computers.

HINDUSTAN LEVER Ltd STRATEGY.

Over a period of time Hindustan Lever Ltd. has taken over KISSAN FOOD Products, TOMCO, ICE CREAM Business of Cadbury & JAGJIT Industries and also industries of KWALITY group.

Their Strategy:1. Structured Process of Take over.2. Business Cell In Unilever collects full data of the target industry/group.3. There are about 12 companies under scan at a time.4. Once a a target company is identified, a compact team goes on action.

(TEAM: Chief executive officer, A Finance Professional, A Legal Counsel, A Specialist In Business Area of the targeted company)

5. Top confidentiality is maintained by booking hotel rooms under disguised names, no conversations are held in cars and or telephonically--- lastly secretaries and PA are kept off.

6. In the negotiation team at least one member is expected to know one of the members of the selling company team.

Continued----

HINDUSTAN LEVER Ltd STRATEGY continued---

7. HLL is very sensitive about public opinion. (But still TOMCO issue became messy!)8. The overall goal is taking the whole lot of Promoters, Employees, Bankers, Suppliers &

Customers etc. of the target company.9. Perception audit of the employees is conducted beforehand. (In TOMCO case it helped in

identifying 16 people who needed to be tuned in for the takeover.)10. HLL keeps informed of the developments after settlement through circulars, faxes and

short bulletin.AFTER ACQUISITION:1. A five member team for integration is formed.2. Fear Apprehension is removed from target the target co. employees.3. Redeployment plan is worked out and put in place.4. Cultural Integration is induced & permeated. (TOMCO losses were brought down to 90 LAKHS (in Dec. 1994) from 13.5crores (1992-93)

Receivables were also brought down from whooping 40crores to just 9crores during the said period. PS: Currently TOMCO sales personnel are doing better jobs than HLL boys!)

LESSONS OF THE CASE:

1. MANAGE THE PRE-PHASE WELL:Utmost Secrecy, Evaluating the Strengths of oneself, Identifying where value addition is by economies of

scale and core competencies & TECHNOLOGY SKILL USAGE & Advantage.2. SCREENING & EVALUATING TARGETS:Calculating/identifying knock out point, Taking bankers into confidence, Prioritizing particulars, Looking

at the companies & options.3. HANDLING THE SELECTED TARGET:Finding methods of recouping the transfer premium, Working out real synergy patterns, working out

enduring restructuring plan, & financial engineering.4. PUTTING THROUGH THE NEGOTIATION:Deciding the optimum price & sticking to it, Understanding the incentives in the target’s camp,

Formulating a negotiation strategy, diligence review of the seller.5. POST M & A:Fast Moves, Complete Integration.

(PS: Valuation of TOMCO 40% for earning potential, 40% Average market value of share and 20% for book value of assets.)

Q: What is the CCI guidelines for valuation?

HOLCIM’S CEMENT STRATEGY.

Shortly after acquiring shares in India major in cements, ACC, last year Swiss Major HOLCIM this year acquired 14.8% of GUJARATH AMBUJA (promoter’s) shares with a price of Rs.90/= (very high) plus a non-compete fee of Rs.15/= per share. -------News!

(Q: Can you draw the scientific implications of strategy?)

Corporate Strategies in Emerging Global Markets

International openings offer higher earning and other avenues for corporate. Value creation chain can get benefit from international comparative advantages

in economies. International Volumes bring down prices and provides scope for R & D. Transfer of skills is a strategic plan which is best facilitated by globalization. Customization lessons are best learnt in global markets. Exporting, Licensing, Franchising, Joint Venture & Wholly owned subsidiary

are classical FIVE strategies --- BPO is the NEWER version of global strategies.

Strategic Alliances are between competitors. Both leverage on the differences. They give away a lot to ward off competing each other --- but get very little in return!

(Q: If Globalization strategies are such a boon why India was resisting it for decades?)

SUB-CONTRACTING GOES BY THE NAME STRATEGIC --- “BPO” NAME!

Between Industrial Concerns Existing in Different Countries.

Between Subsidies of Multinational Corporations Located in the same country.

Between subsidies of a multinational situated in different countries.

Between multinationals situated in different countries.( Of Course, Domestically Ancillary Industries and contractors

role are well known.)(Discuss the role of developed technology in the BPO zoom) (Q: Can subcontracting lead to Joint Ventures?)

FORMS OF BPO

License. Franchise.1. Performance Contract. (L & T Projects)2. License Contract. (Drug Productions)3. Turnkey Contract. (Installation of imported machineries)4. Specific performance BPO. (Medical Transcription) 5. Buy Back BPO. (Oleoresins)6. Contract Farming. (Coca, Straw berries, Orchids)7. Technology Transfer (CECRI, CLRI – in India, Germany)(Q: Bring out the advantages & disadvantages!)

Learning From Others

Alliances Give Technical Exposure. Alliances Give Ready Made Experience. Starting from Advantageous heights. The Organizational set up and the associated

burden are done away with.(JAPAN is the best example for learning from others

and improving better than the original-) (Q: In India which areas are best examples of learners from others’ experiences?)

Appreciating and Leveraging Differences.

General Insurance (Since 1972) & Life Insurance (since more than fifty years) were the monopolies. If insurance sector was opened up for foreign participants, how did they appreciate and leverage the differences in the Indian Market?

Discuss & Formulate the chapter contents!

Creativity and Innovation

Is there innovation when you decide between yes or no? Is there innovation when you either attack or defend? A weekly wanted to have perpetual suggestion for buying magazine

--- what was the sentence coined by them? Is there innovation when you either fight or flight?1. Creativity should lead to development of substitutes instead of

varieties!2. Creativity should result in culmination of specific knowledge not

easily replicable!3. Creativity results in mature SSI too --- example Germany!4. Value additions are possible only with creativity and innovation ----- (Q: In first transparency a question arose as to the validity of

economics thoughts on strategy --- now after a full circle we are back to square number ! --- Is it so?)

STANDARD STRATEGIC FORMULATION & ANALYSIS.

A. BUSINESS RISK DRIVERS:A.1 Industry Characteristics: (A.1.1) Demand Factors (A.1.2) State Of

Competition.(A.1.3) Environmental Issues (A.1.4) Bargaining

Position of Suppliers.A.2. Market PositionA.3. Operational EfficiencyA.4. New ProjectsA.5. Quality of Management.

EVALUATION PROCESS continued…

B. FINANCIAL RISK DRIVERS:B.1. Funding Policy:(B.1.1) Future Requirements (B.1.2.) Leveraging Level.(B.1.3) Retaining Share Control (B.1.4.) Targets Return to Share

holders (B.1.5) Interest Rates (B.1.6) External Exposure ($, Euro) (B.1.7) AL Match

B.2. Financial Flexibility:(B.2.1) Past Financial Performance (B.2.2) Accounting Quality

(B.2.3) Indicators of Financial Performance Like (i) Profitability, (ii) Gearing & Leveraging, (iii) Coverage Ratios, DSCR, (OPBDIT/Interest), (iv) Net Cash Accruals as a percentage of total debt.

(B.2.4) Liquidity Position (B.2.5) Adequacy of Future Cash Flows

A.2. OPERATIONAL EFFICIENCY.

A.2.1. Location of Production Facilities.

A.2.2. Access to RM.

A.2.3. Scale of Operations.

A.2.4. Quality of Technology.

A.2.5. Level of Integration.

A.2.6. Experience in the line.

A.2.7. Ability to Effectively Use the resources input.

A.1.1. DEMAND FACTORS

A.1.1.1. Drivers & Potential.A.1.1.2. Nature of Product.A.1.1.3. Nature of Demand – Cyclical

Perennial.A.1.1.4. Bargaining Position of the

Customers

A.1.2. STATE OF THE COMPETITION

A.1.2.1. Existing and Expected Potential

A.1.2.2. Intensity of Competition

A.1.2 3. Entry Barriers for New Entrants

A.1.2.4. Exit Barriers.

A.1.3. ENVIRONMENTAL ISSUES

A.1.3.1. Environmental Factors that affect

A.1.3.2. Extent of Government Regulation.

A.1.3.3. Future Directions of Government Policies.

A.1.3.4. Contribution to Green Belt. (CARBON CREDIT)

(Q: How this odd piece of format finds relevance as a Cross relational knowledge tool in Management?)

STRATEGIC ORGANIZATION MANAGEMENT

Organizational capacity. Authorizing environment. Goals and missions.

ATTACKING KEY RESULT AREAS.

(Q: Is it as fundamental as the cardinal Objectives ---- or more superficial?)