BPSM Class Transcript PGDM 2011-13 Section C Transcript by: Sunithi Agarwal (11175) Email: (sunithi.agarwal@gmail.

com) Session 1, Date: 13 June 2012

a. b. c. d. e.

Time: 10:15 AM

1. Why would you want to work with Procter and Gamble (NRG)
Bigger platform for career growth (Bhaskar) Big company and successful brands (Rakhi) Good brand name to associate with (Pranitha) Successful marketing and R&D team (Natansh) Contact and exposure is very good (Himanshu)

NRG: Success of P&G is not because of one important thing. P&G is very serious about R&D. They are wide spread. They go to remote places and take survey. People buy products not only for functionality but also for ad on features. It is successful because of sum total of many functionality such as marketing, R&D and financial prowess. Eg: P&G introduced detergents with good aroma based on customer feedback from Latin American countries (http://www.trefis.com/stock/pg/articles/89967/pg-update-tapping-further-into-latin-americanlaundry-market/2011-12-06) Every organisation is a political institution. Politics is art of gaining and retaining power. And every team in an organisation wants to have an upper hand over the others. They compete with each other. This is business policy and strategy. Goals and aspirations of each unit should coordinate with the overall goal and aspiration of the company will be learnt in this course. Example of Samsung outgrowing Nokia is a very good example. Strategy is the art of choosing the best option out of the given options.

2. How are few people successful?

a. Lucky and hard work(shashank) b. Extensive research (Priyank) c. Learning from Experience and patterns( Harish Shankar) 3. Do plans work in real life?(NRG) The very fact that plan failed is because there was a plan. . In the absence of a plan, you would never know that you have deviated! (NRG)

Subconscious is a very powerful factory. That which comes to conscious level had been churning for long. Narayan Murthy took years of hardwork to become a successful entrepreneur.

4. What is strategy?(NRG)
a. A particular plan to achieve the goal (Gautham) b. Making use of resources to achieve desirable results(Sunithi) c. Action oriented move(Rakhi) i. Strategy should be action oriented. Plan is paper based. Strategy is 90% action and 10% planning just as it 90% perspiration and 10% inspiration. (NRG) d. Planned course of action to win(Natansh) i. Rephrased,Strategy is actually what we do to win(NRG) e. Use of minimum resources to produce maximum results(Somyakanthi) Al-Qaeda means the base. They think that everything wrong that is happening is because of the west. In illustrating the meaning of strategy, example of Operation Geronimo was taken up:

5. Who is Geronimo?(NRG)
a. Tribal leader(Priyank) Geronimo also resisted expansion of United States. US named their operation to get Bin Laden as Geronimo.

6. Why was Pakistan Government kept in darkness regarding the proj Geronimo?(NRG)
a. There was some connection between Pak Govt and terrorists. (Gopal) Strategy is not about being nave. It is about carrying out the operation stealthily. The essence of strategy of the operation Geronimo is weighing the risks and opportunity. Strategy should not be a knee jerk action. It should be deliberate and involve patience. It is just like: Tiger will just jump but leopard jumps only if it knows that it can catch the prey.

7. What is strategy?
a. b. c. d. Have an objective ( JayKrishnan) Game plan to win (Rakhi) Max use of available resources(Harish) Strategy is all about what we do to win.(Jaykumar Zatakia)

Strategy does not mean meeting face to face. It depends on whom we are talking to.

Characteristics of successful strategy: -Goals that are simple, consistent and long term. Dig your well, which is 100 ft deep. If you dig 10 wells which are 10ft deep, it is of no use. (RamKrishna Paramahamsa)

-Profound understanding of competitive environment. Understand that you are a giant in a land of pigmies and a pigmy in land of giants. -Objective appraisal of resources. We must know our limitations and strengths. -Effective implementation. We should not make pious expression of thoughts. There must be implementation in the right direction in order to reach the goal. Madonnas only aim was stardom. Everything she did was oriented towards stardom. The focus took her to where she is. She understood stardom. She managed gatekeepers in media.

8. Who are gatekeepers?

a. Receptionist (Bineet Kumar Jha) NRG: Gate keepers are those who control the access to the decision makers Madonnas resources were: Vocalist, dancer, musician. These talents were very modest. A problem well defined is problem half solved. People who keep on praising you are your enemies. We must know our weaknesses. Always be surrounded by people who are more capable than you are.

9. When you are surrounded by people better than you are, then why must you be recognised?(NRG)
a. Fostering loyalty by honouring commitments. Being ethical is the best strategy. (NRG) Organisation is a system which ensures that resources are used in a correct manner.

10. Why do you think Madonna could sleep for few hours and why is that we need 10 hours of sleep?
a. A person when makes up his mind, can do anything to achieve it(Madhurh) b. Sense of Misson (NRG) Petrol does not take you to a bar or Ashram. We have to decide where we have to go. We dont have to blame the god or anyone else for what we are. (Man is the maker of his destiny)

11. What is the main objective of any organisation?

a. Profit( Students) b. Create a customer, and therefore profit will come as by-product(NRG) c. Business means earning above average returns(NRG).

Transcript by: Sunithi Agarwal (11175) Email: (sunithi.agarwal@gmail.com) Session 3,

Date: 18 June 2012

Time: 8:30 AM

(NRG) Strategy is not something kept in store, we have to keep experimenting to find out what is good. Dell Case study form reading material discussed. 1) What is that impresses you about this company(NRG) a. They dont stock and manufacture to order. (Madhurh) b. Dell was follower to IBM, they have moved leaps and bounds forward compared to what IBM was in spite of IBM having the first mover advantage(Bharadwaj) (NRG)Dell started as street boy and took it up as a challenge c. Michael Dell considered customer centric approach, cost effectiveness and quality(Pranitha) 2) Have they mentioned in the case that Dell is customer oriented (NRG)? a. Page 19 it is mentioned that company wanted to deliver best customer experience(Gopal) b. They used to customize PCs for the customer thats why it is customer oriented(Sandeep) c. Page 44 they have mentioned that for Dell, customer was most important entity for them(Natansh) d. Page 27 , they talk about sales and marketing. Other companies are product oriented whereas Dell wanted to directly talk to customers(DhivyaLakshmi) e. A person who buys his 2nd or 3rd computer, wants to have of a much higher configuration. And hence to cater to those needs it was very important for Dell to provide the facility of customization. (Jacob) f. Dell wasnt brand conscious for the PC segment. (Vinay Kallal) g. Pg 16, there has been mention about the prices(Mayank) h. Pg 17, there has been a comparison made of prices of Dell with that of the competitors(Vinay Bothra) i. Pg 18, Dells product was able to sell their product 40% below that of IBMs(Natansh) Michael Dell started off at the age of 19, and he did not come from any rich family and did not have a great background to start off with. He sold small things/parts and bought a BMW for himself with money earned by him.(NRG) 12. Can you think of one Indian who started off with zero and became big?(NRG) a. Dhirubhai Ambani(Students) i. Dont think that something like Dell was possible only in the US because of the supporting environment and circumstances. It can be possible anywhere in the world. (NRG)Dell was the longest serving CEO of a major computer company 13. How do you say that it was major comp company?(NRG)

a. Market share was 28%(Himanshu) i. If you can be 28% by beating IBM, HP and Gateway, it is something great and well appreciated. (NRG) (NRG): There is no point saying CGPA doesnt matter. A man who talks about Ahimsa but he is a meek person then he has no rights to talk about it. Today the turnover of Dell is $70 Bn. 14. Why was Dell respected as CEO? a. He is a good speaker(Ashwin) b. Pg 21 , there is a citation about how he was asked to speak in front of a huge gathering(Priyank) 15. I contradict the statement that a good speaker will be an efficient CEO (Rakhi) a. I am not saying that he was respected by a lot of people and thats why he was considered efficient. It is just one of the proxies to success.(NRG) Dell was a shy person, not a very good speaker and in spite of that he got many invites for a speech. There are other indicators as well. Assuming Rama Linga Raju wasnt a culprit, Is there any indicator of his success? (NRG) i. 10% share(Ullas) ii. He revolutionised IT industry(Maruthi) iii. Under him, Satyam was 3rd largest IT industry(Gaurav) iv. HE was from farming background but then he went so big(Rakhi) v. The world is never black and White, it is always shades of grey. If someone has got any award you must stand up and take note of it. HE was owner of various awards like peacock award etc.(NRG) 16. During the 1990s (pg 36) a $100 invested in Dell became $28500 giving CAGR of 36%. Exhibit 1 says either in International arena or US, Dell was number 1 right form 2000 itself. They have clearly shown how consistently Dell has risen and won. In 2002 Dell had got market about 28% market share, but around 50% came from other unorganised sector. This is an important part of strategy. Truth is a competitor may not always be a person who is very big. A small sector may take up major shares of the market. Even among coke and pepsi, who is the competitor of these drinks? It is water. Coke will see pepsi as its competitor. 17. How did Dell react to that fact that 50% of market was taken by small players?(NRG) 18. What is a white good?(NRG) a. Electronics(Carl) b. It is unbranded(Deepak) c. Cheaper in price(Priyank) d. No label or brand tag(Vinay Bothra) i. Good books like Economists which is a pocket book are very important. White goods are electronics goods. They dint have any colour initially and hence the consumer durables were considered as white goods(NRG). 19. How did Dell react? a. By Making it available on internet to every person(Manikanta) b. He started making (Pg 33) white box cheaper than competitors (Akheel) i. Was he making it cheaper?(NRG) 1. NO (Students)

PG 32, Dells thinking was that it was cheaper to reach out to many small businsses through the white box dealers that already served them than by using its own sales force.(NRG) 20. When somebody says I have built a brand DELL which is very difficult, what is the danger in giving your computer to local players?(NRG) a. Dell couldnt succeed in China, they were quite successful in unorganised sector but couldnt do much because they were selling off their computers as unbranded.(JISHNU) Brownie points i. SDMIMD does not have any franchise because people think that things which are available easily are not very good. ICFAI material is very good with a great research centre. World is a copy cat. Somebody must experiment. There is nothing new. Everything is already there(NRG) ii. When people bought computers from local players, they found superior quality since it was provided by dell. (Dhivya Lakshmi) iii. They were benefitting financially but the brand value went down. (NRG) 21. How do you account for missing out on chance of printing dell on their products?(NRG) a. There was a danger of eroding brand value (NRG) How do you tackle this?(NRG) b. I wouldn have gone to the white box segment because of fear of losing brand value(Gowtham) c. How do you solve this(NRG) d. By association with the brand, we are trying to rub off part of it. Eg of shaking hand with Abdul Kalam given in class. e. In the year 2002,people were attracted towards unbranded things. Trigger was an apparel brand. And they launched their products in unorganised sector(Binit Kumar Jha) But then gradually they lost out in that field. f. Cannibalisation: Refer http://www.economist.com/node/14248815 22. What was Dells business model?(NRG) a. Business model is something that a company does to generate revenue (Harish) b. Managers conception about the strategy to be followed(Jacob) c. Model which shows how a company earned its revenue(Harsh singh) d. How the company derived revenue and sustains itself(sandeep) e. How company provides value to customers(Carl) f. How the revenues are generated and what the expenses are(NRG)Some business models are complex in the case of IT like Google. Google doesnt charge anything from customer but from advertisements. So thats a business model. The purpose of business is not profit, it is to define the customer. Who is being satisfied? Example of library given wherein the customers can be house wives, children etc.

23. Pg 19 in the handout , defines who is a customer. 24. What is being satisfied(NRG) a. Need for powerful computers(Krishnachandra)

25. How is the customer need satisfied? a. The way in which customers are being satisfied is very important(NRG) b. Delivery to door step(Rajinikar) c. By providing customised service(Sowmya Bora) d. Door to door delivery(Madhurh) e. The distinct way in which the service is being offered is very important(NRG) 26. What is the difference between need and want? a. Need is a luxury and want is a desire(Rakhi) b. Need is state of deprivation. Desire of every marketer is to convert basic need to desire for their own product.(NRG) (NRG)Meaning of strategy is to know who your customers are. Customers are wide spread but then difficulty lies in choosing a particular customer base who you want to satisfy. Depending on the way they define their customers, they develop a business model. 27. In case of dell, article talks about Dell experimenting in different ways. Which among these would you call a successful business model? After all they are experimenting.(Jacob) a. Nothing in this world is written on a stone. We have to experiment and find out the best (NRG) In China he had a kiosk but did not do away with internet selling. 20% of sales in China was by direct selling.

Transcript by: Bharadwaj (11175) Session 4,

What is strategy? NRG*Strategy is a game plan to achieve above average returns. *Game plan- Things you do and dont do to attain the objectives. * Several ways to attain objectives Eg. To travel between Bangalore and Mysore you have several modes of transport but we consider a lot of factors like time, cost etc. in order to arrive at a decision. NRG- What is goal/objective? Manikanta- What we want to do and where we want to be. Mohit- Desired futuristic outcome

Carl- Targets of people Dhivya- Something to achieve your target Harshith- Target to be achieved. NRG- Something that one wants to achieve through his/her efforts. Fructification of whats done or not done, theres nothing called luck. Eg. GE stated goal was to be number one in any market that they operate in. NRG: Reliance Communication wanted to raise capital, What are the means to raise funds? Jindal- FPO The class- IPO NRG- Everything has its pros and cons. Its not easy to raise money. People are not willing to part with their money. People raise money on the basis of Trust and goodwill. NRG- What is the cash reserve with which Infosys operates on? Priyank- Rs.26000 crore NRG- Hes almost right. According to the Hindu (10th June 2012 issue) Infy had 20196 crore in cash reserves. Infy doesnt invest for the heck of it. They invest only when they find an opportunity worth investing. NRG- So what is strategy? Navneet- Game plan to achieve some goal, like expanding the business. NRG- Its an old definition now. Akheel- Choosing the right way of doing things. NRG- Thats it. It is a commitment to certain action, chosen activity that must be compliant of risk management and good governance practices. For instance increased profitability, increased revenue, or decrease costs. It is very easy to increase but usually its the market that determines the price. If the product has any specific attribute eg. Louis Vuitton Profitability is alone not good enough. Cost Selling Price Profit Units sold Amount at the end of day 100 120 20 10 200 100 110 10 100 1000 100 115 15 30 450

Therefore investor looks for profit growth and not just profitability. But its tough to increase both. [Pg 18 Dell Case] Effective vs Efficient- Dell is both effective as well as efficient , and thats the reason it has been so successful (because thats when profit increases). Dell increased its profits from $31 million(1996) to $3825 million(2005). Thats a CAGR of 24.53%. How did Dell achieve this feat? NRG- Profit growth was mainly achieved by *Sell products in emerging markets (Profit growth in emerging markets) Growth happens from own performance and also from competitors. Market share can also be gained by providing value to the customer. In the book Walmart, Made in America it is clearly given that Walmart didnt kill K-Mart, a market is completely democratic and there is equal opportunity for everyone. *Expand overseas (esp China) i.e. look for markets which are still hungry. * Diversify into new types of businesses (Services and Storage devices; other players were not so active in that segment) So what is strategy? Strategy- It is a medium to long term plan to achieve an objective. Strategy has no meaning without reference to an objective. The plan will not only include what needs to be done, but also the financial, production and the HR requirements, and how all of these are gathered and applied. Indian philosophy of thinking is Negotiation We need to know what strategy is. Strategy is not just achieving operational efficiency. Eg. If you are running the best laundry and the others copy it easily, you are not going to make money. (You lack a great strategy) Eg 2. Running a restaurant with the greatest Chef could be an economic disaster but a grubby fast-food chain can make you a millionaire Eg. Mc Donalds. Superior performance alone is not strategy. Therefore strategy (now) is*choosing the right things to do and do it in a better way than your peers. * Being effective is to choose the right thing to do

* Be the business you want to be. NRG- Ok, Then what is corporate strategy? Vijeth- Strategies to reach a goal. NRG- Decide the business you want to be and the business you want to drop. Efficiency is the key. Efficiency is doing the right things in a better way. Read the book Bangalore Tigers, in this book a reference to Infosys and how it made profits is specified. Having chosen the business to be , performing better than the peers in the industry is business strategy. This efficiency can be achieved in varied management functions like *Marketing *HR (Page C-52 2nd paragraph talks about Dells HR efficiency) * Finance NRG- What is the difference between Finance and Accounting? Jindal Mayank- Accounting talks about how much profit you made and Finance talks as to how you go about making so much profits NRG- Counting the beans is accounting and Fetching the beans is Finance * Operations NRG What is efficiency in Operations? Carl- Integrate operations Natansh- Reduce cost Rakhi- Transform input to output at minimum cost NRG- Optimum cost, make the product better, and prevent losses in your operations strategy. Efficiency is not only in Production, it can also deal with cash collection. Strategy is choosing the right thing to do (Pg 48 in textbook) ROIC on select industries How do you compute ROIC? Company Jet Kingfisher Spice Total Net Profit (PBIT in Crore) 1075 (208) 137 1004 Invested Capital 14317 4106 407 18830

(Pg 466 Analysing the case in Strategy management- An integrated approach) (Pg 437, Why ROIC is a good ratio to measure profitability) Shatraj Ka Kiladi Aka Strategy Memo *Take a company of your choice *Brick and Mortar or Click and Mouse *Product or Service (Go through books Art of War and Speed of trust) So at the end of it all, what is strategy? NRG- Strategy is about winning, but win by fair means. (Pg 341, Corporate performance and business Ethics). Weigh risk and opportunities and move with deliberate patience and force. Ultimately strategy is about winning.

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Transcript by: Sunithi Agarwal (11175) Email: (sunithi.agarwal@gmail.com) Session 5, Date: 25 June 2012 Time: 8:30 AM

Module 2 : Competitive analysis and choice of strategies

(NRG):Discussion of quiz paper(Alibaba.com) Suggested answer: Strategy is a long term plan to achieve an objective. Objective in this case is to increase the sales online. Rivals : 360buy.com and tensent holdings. Subsidising rates of products is a tactic which is a short term plan rather than a strategy. This is not sustainable because the company is spending a lot of money from their own pockets. Instead a better strategy would be to improve productivity and improve the SCM as done by Wal-Mart and others.

Discussion of case on Fortis Fortis group of hospitals wanted to take over Parkway Khazana is a government body in Singapore. Khazana increased its offer to S$3.95 compared to Fortis offer of S$3.8 Fortis had paid 3400 crores to buy 25.3% stake. In one year Fortis could made a profit of Rs 400 Crore by selling the stakes. 1) NRG: What does Fortis lose?(NRG) a. Madhurh: Loses market share b. Navneet: Chance to expand c. Vinay: Loses parkway d. Gowtham: Business opportunity e. Jacob: Goodwill NRG: Market runs because of sentiments (fear or dream). Pride is bruised. Fortis has to look for new opportunities and money spent was sunk. Strategy analysis and choice involves making subjective decisions based on objective information. 2) What is subjective?(NRG) a. BJP: Something relevant to the public. b. Jacob: Relative to something else. NRG: Subjective is something very personal. Hubris(Which means pride) hypothesis. Difference of S$0.15 is objective in the Fortis case. But the ultimate thing is that people take subjective decisions. Eg: Someone does not choose Infosys in spite of getting a handsome salary. The decision is very subjective. Decisions are based on economics and behavioural factors. 3) What are behavioural factors?(NRG) a. Mayank: Mindset b. Harish: Previous exp c. Jishnu: Pride d. Vijeth: Emotions e. Carl: Ego f. Rajnikar: Competitors g. Mayank: Cultural environment. NRG: Following are the behavioural factors: Politics: Politics is about acquiring and retaining power. Building Strategies for life is very important. Juggling 3-4(work, life, etc) balls is necessary. Culture: Eg: Among Marwaris , when a child is born everyone give money and once he grows up, the multiplied money can be used to invest in business. This is a subjective factor.

Eg: GE, in order to expand looked at French company which manufactured vacuum tubes called CGR. There is difference in culture between Europe and USA and hence in cases like these, it is very difficult for merging. 4) NRG: What is the culture difference? a. Harish : USA thinks about making money. For them dollar is god. But in Europe they are more bothered about rights of employees. The takeover failed because of cultural mismatch. Ethics: Being ethical is the best way of strategy. Social Responsibility: eg: The case of Andrew Marshall, the ship builder. He was forced to pay bribe. He takes over the company in spite of running in loss. He thought about the people of the town who would lose their job with the shutdown of the factory.

Strategy Formulation and analytical framework

Stage 1: The input stage This involves collecting information. It is a holistic approach. There is a need in us to understand the world around us. This is existential problem. Existential question is who am I? , What am I doing? etc. Various tools used are: CPM: Identify and evaluate the competitors. IFE: Internal factor evaluation: Assessing the strengths and weaknesses. EFE: Assessing the external factor and responsiveness of company to the factors. Factors are the same for all of us but what is important is how we respond. Stage 2: The matching stage: This stage focusses on generating feasible alternatives by aligning key external and internal factors. This is strategic fit between what you have and what the environment wants. Ideas must resonate with the societys needs. Choosing a grand strategy SPACE matrix: Strategic Position Action Evaluation Matrix SWOT Matrix BCG Matrix 5) NRG: When do we use BCG? a. It is used for portfolio management.(NRG) 6) NRG: Why is that we should have Dogs and question marks? a. Himanshu: There is possibility of moving them to stars

b. Ullas: It is product life cycle c. Gourav: There is always opportunity for growth. Gandhiji said that it takes all kind of people to make a society. Internal-External (IE) Matrix Grand Strategy: All inclusive strategy. 7) What is strategic fit? a. Vinay :What we r offering should be need of the society b. Maruthi: Efficient use of resources to the market c. Rakhi: Resonance between the internal resources and external resources Stage 3: Decision stage: Evaluation of relative attractiveness of alternative strategies and help choose the best alternative. Quantitative strategy Planning Matrix is used for decision making. It is used for objective assessment of feasible alternatives. COMPETITIVE Profile Matrix (CPM) Company under study: WalMart, Competitors are Kmart and J C Penny. Referred to page 65 of textbook. Concept of strategic groups. Strategic groups mean that there are groups in the industry whose business models are different. In a particular group, the business models of companies are similar and hence they compete with each other. Strengths and weaknesses should be in relation to company under consideration. You are a giant in the land of pygmies and a dwarf in the land of giants. Refer: Core competence and distinctive competence from book, strategic management by Govinda Bhat and Govinda Sharma. Pg 27 and 28 in the same book, Critical success factors(CSF) or Key success factor(KSF): A competitive factor that either makes or breaks a company. In retail, KSFs are Price competitiveness Market share: This is important because volume plays an important role in retail sector(because of low margin) Quality Customer loyalty: Customer must stay with the company. Vijaya bank gives loyalty points every time customers use ATM.

Assign weights against each of the factors. Calling every factor a critical factor is an error of wisdom. Hence 4-5 must be chosen. Very important ones must be rated nearing 1 and not important ones nearing 0. This must be done honestly.

Session 7, Date: 2 July 2012

Strategic position:
Each company depending on its internal and external environment, it decides to compete on price or differentiation, or wants to grow aggressively etc. Suggested reading: What is strategy by Michael Porter Positioning: The kind of strategy taken Types of strategic positions: 1. Aggressive: When both internal and external environments are positive. One of the most imp internal environments is the mission and vision. One of the most powerful resources a company or person can have is intentions. Example: Tata Steel acquired Corus group of UK with a deal value $1200 Million. Videocon acquired Daewoo electronics for $729 Million in Korea. NRG: Why didnt any other company try to acquire Betapharma? Rakhi: Brand image Aseem: Dr Reddys Labs was financially strong. Vijeth: Resources that Betapharma has are very relevant to Dr Reddys Labs resources. Bharadwaj: Germany is into homeopathy. And hence Dr Reddys Labs might be interested Dr Reddys Labs may not be into homeopathy and hence this might not be the reason

Time: 8:30 AM

1. Competitive: Horizontal integration or joint ventures For horizontal integration , funds(resources) should be available. In this kind of strategy, one tries to be one notch above his competitor. And hence seeking ownership might be very important. Example: Vodafone taking over Essar Hutchinson. Related diversification: Adding new but related products What is the similarity between insurance and banking?

Bank per se has a lot of customer base. And hence attracting this customer base who might also be interested in insurance ( Investment vs pension plan) Unrelated diversification: New but unrelated product 2. Defensive: Retrenchment (reduction of assets), liquidation Suggested reading: In search of excellence. Retrenchment means regrouping through cost and asset reduction to reverse declining sales and profits. Eg: Binny mills selling off a part of its lands in Bangalore. Divestiture: Selling part of the company Case on Eli-Lilly discussed. Eli-Lilly sold off its premier antibiotic brand Distaclor to Pharmalink so that the funds generated can be used for R&D. Pharmalink on the other hand was delighted to get a premium brand with a solid market reputation such as Distaclor. NRG: For every Seller there must be a buyer. And there will be a buyer. Liquidation: Selling off the whole company. Process by which a company is brought to an end and the assets and property of the company redistributed. It is referred to as windingup or dissolution. Example: Liquidation of assets of Golden Forest India Ltd. Fourteen of its prime properties were sold to bidders. 3. Conservative: Staying close to competencies and not risking. NRG: What is Market development Natansh: Introducing present products in a new geographic area Product development Seeking increased sales by improving present product or introducing a new product NRG: what is 3G? Vinay Kalal: Higher speed of internet NRG: Gaming, video chatting etc. Nokia is introducing new handsets to suit 3G services. NRG: What is Convergence? Merging more than one feature in a product

Tool for Choosing the strategy:

SPACE matrix: 4 quadrant framework facilitating choice of an appropriate strategy. Int env Conservative Financial strength Aggresive

Competitive advantage

Industry strength

Defensive

Competitive

Ext Env

Environmental stability Internal Dimension: Financial strength Competitive strength External dimension: Industry strength Environmental stability

Read: Pg 85 of text book (Value creation per unit) Value is the difference between utility created and the cost. Business is all about creating value and then capturing some part of the value. Yagna is sanctified action. This generates value. What are the two major reasons for market competitiveness? Price Differentiation

In a dynamic environment, a late comer is better since he is very aggressive. Example: Intel. IBM cannot compete with Dell because of adaptability and flexibility.

In some industries, profitability is higher. Example : IT industry. Dell believed in profitability and profit growth. When IBM was concentrating on mainframes, Dell concentrated on PCs. How to develop SPACE matrix? 1. Assign a numerical value 2. Financial strength and industry strength a. Ranging from 1 to 6, give 1 to worst and 6 to best to each of the factors 3. Competitive advantage and Environmental stability a. Ranging from -1 to -6, give -6 to the worst and -1 to the best. 4. Compute average. 5. Add the 2 scores on X axis. (net positive or net negative depending on where it is pulling) 6. Add the 2 scores on Y axis 7. Plot the (X,Y) coordinate point 8. Draw a directional vector from the origin of the SPACE matrix through the (X,Y) Coordinate. The vector reveals the strategies recommended for the organisation. Implications of the strategies: When an organisations directional vector is in the aggressive quadrant(Upper right ), an organisation is ain an excellent position to use its internal strengths to Take advantage of external opportunities. Overcome internal weakness. Avoid external threats NRG: To raise the barrier of entry from an organisations perspective, what do we do? Carl : We increase the initial investment. NRG: This in turn also increases the exit barrier The organisation chooses to stay close to its basic competencies and will not take excessive risks. Avoid diversification. Do not try to get into something new and stick to what you are good at. Also avoid backward and forward integration. By investing so much if we think we can leverage then its good to invest. SPACE matrix for Walmart: Financial Strength: ROI is 7.7% compared to industry average of 4% Walmarts net income was $11 billion, up by 10% Revenue increases by 11% Rating 6 5 4

Total FS average: Total score/ Number of factors = 15/3= 5

15

Ratings are based on comparison with competitors in the industry. Industry strength: Deregulation provides geographic and product freedom Asian markets opening up Rising consumerism Total IS average = 18/3 = 6 6 6 6 18

Environmental strength Less developed countries facing high inflation and political instability Too many players Regulation in OTC(Over the counter) drug retailing Total ES average = -6/3 = -2 -2 -2 -2 -6

Directional vector coordinates X Axis = CA rating + IS rating = -2 + 6 = 4 Y axis = FS rating + ES rating = 3 (X,Y) = (4,3)

Aggressive (4,3)

Decision Stage: Intuition and analysis results in various strategic alternatives for a given situation How does one choose an alternative? By determining relative attractiveness of the alternatives QPSM : Quantitative Strategic Planning matrix. Not attractive = 1 Somewhat attractive = 2 Reasonably attractive= 3 Highly attractive= 4 Multiply the scores with the weight and then compare the alternatives.

Session : 9
Date: 12 July 2012 Transcript taken by Sunithi Agarwal
External analysis: Identify strategic opportunities and threats
o o o Industry environment National environment International environment

Time: 2:30 PM

Refer : Business line: Steel industry dip may shut more mill sin dip. Companies like Tata steel have gone a long way identify their reserves. They are critically analysing their resources in order to be sure of not being in danger in the future. o Socio economic or macro environment

Reasons: Line of thinking has changed and availability of more money Macro environment conditions can be rate of unemployment, GDP growth, interest rates etc. Infosys is carrying out Bank of Americas Merill Lynch integration project in America itself because of Troubled Assets Relief Programme requirements. Infosys could have carried out in India itself. But because of socio-economic conditions, they preferred to operate from there.

Internal analysis:
o o Identify organisational strengths and weakness Sources of competitive advantage

NRG: What are the sources of competitive advantage? Priyank : Quality, efficiency Dell succeeded because of its efficiency and Honda is famous for its quality Refer page 91: Building blocks of competitive advantage. Graph on page 93. World is pluralistic and hence comparison is always relative. In the graph discussed in class, proton when compared to others was low on quality but in itself, it is a great car. o Innovation

If you are not spending enough money on R&D, then you might make profits for ten years but then in the long run, competitors will take over Example: Sony Walkman: Owner of the product understood that people enjoy music but they cannot enjoy it on the move. Hence the technology of miniaturization came into being. To be read: Core competence of Innovation by C K Prahlad It is not the capability to do certain things. It is the ability to coordinate. If Intel comes up with a product, it is just not about putting radio on a chip but then it is their ability to do a lot of things together and then come up with their product. NRG: What is knowledge management? Jacob: Collective effort taken up by the organisation in order to make knowledge available till the lowest level NRG: Knowledge happens to be placid knowledge, it is hidden in the people.KM is an attempt to convert placid knowledge to explicit knowledge in order to help the mass and also in effective documentation. But there is issue of ethics here. An elderly person knows about a particular technology. When his knowledge is collected in the form of question and answers, and then documented well, the person become dispensable. o Responsiveness to customers

Mercedes customer care is amazing just like these days pizza deliverys responsiveness is very good.

Based on internal and external analysis, an alternative is chosen. To build a house, you need consultancy NRG: What are the ways you can get consultancy?

Utpal: Go to an architect Bhaskar: Refer consultancy services Priyank: Consult contractor Gowtham: Check designs Harish: Refer Magazines Pranitha: Talk to people who have recently built houses NRG: In-house consultancy division, set-up a subsidiary Tata Electric company did SWOT analysis for themselves. Strengths of TEC: Good team of managers. Weakness: None with consultancy experience Opportunity: In 1962, what happened? Manikanta: Liberalisation Students: China war Akheel: Resurgent India Threat: NRG: what would be the threat? Harish: They were getting into something new and hence the operational efficiency might be low NRG: The major threat was that there could be already existing consultancies. So how did they choose an alternative? TEC chose to set up a subsidiary Tata- Ebasco, the forerunner of present day TCE This ensured that their strength was leveraged and weakness was compensated because there was technical support from Ebasco. Opportunities in resurgent India were exploited and threat was countered because Tata-Ebasco had a sound technical foundation. Therefore once we have strategies in place, we must align a companys resources and capabilities to its environment in order to create and sustain a competitive advantage. Capability is, there might be everything is hand but you wont.

Resources are what are available to us. NRG: What is Strategic fit? Rakhi: Resonance between the external and internal environment. NRG: You must make what the world wants. In occasions of fashion, you must move with the world. But when it comes to values, it is different. Functional level strategy o Marketing, operations, finance, etc Business level strategy o How to compete better than your peers Corporate level strategy o This determines where the company wants to be and where it does not want to be.

NRG: What is the tool that can be used for corporate level strategy? Gowtham: SPACE, BCG Global level strategy

Levels of strategic management: Corporate level: CEO, other senior executives, Board of directors and corporate staff Division A Division B Division C Head office

The three divisions are at business level which includes divisional managers and staff In symphony with what is said at the corporate level, these divisions have their own functional strategies. NRG: Strategy should be done only by top management. Is there any contradiction in statement I made because earlier I said that strategy is everybodys job Jacob: There is contradiction. The level of information passed on to the lower level of employees is less and hence it is important and necessary for strategies to be made at higher level. Nirnay: strategy is about conceptualising the mission and vision. If these are not communicated to all employees then it is not fruitful and hence strategy is everyones job. NRG: Consolidation has to take place in the lower level and execution also begins form them and hence there is no contradiction. This is only upper level contradiction.

It is not necessary that all companies should adopt all levels of strategy.

Implementing the strategy After choosing the strategies, managers must put them into action. Organisation

Refer page 373 Monitoring is trying to find out difference between scheduled and actual metrics Control is actually trying to minimizing he gap between scheduled and actual. NRG: What is Balanced score card? NRG: It is measuring the success of the company in financial terms Refer pg 356 (As Kaplan and Norton..) Refer hand out: pg 124. There are four perspectives for Balanced score card 1) Financial 2) Customer 3) Internal and business perspective 4) Learning and innovation All of these have feedback loop.

Strategic management process is not static. As the system in implemented, the situations can change both internally and externally. Errors of judgement: Something can go wrong if there might not be any internal or external change. Change is the only constant in life! Hence there has to be a feedback loop. This involves changing systems as and when required. Companies do review strategies. ITC exited greeting cards biz. The reason is that the greeting cards category estimated at Rs 300 crores in the year 2000 shrivelled to Rs 100 crores. People preferred ecards or SMS. Refer pg 181 : Strategies in fragmented industry

Session 11 Transcripts taken on 19th July 2012 By Sunithi Agarwal

NRG: What is fragmented industry? Harish: Non-organised industry Dhivya: There is no clear defined market leader When there is no single big player then it gets into price wars. Strategic leadership For any strategy to be successful we need to have strategic leadership. Some of the qualities or characteristics are Vision, Eloquence, Consistency Commitment Being well-informed Willingness to delegate power Astute(shrewd) use of power Emotional intelligence

2:30 PM

Successful leaders have sense of vision in them. Eloquence is the ability to speak. Most of the good strategic leaders are good speakers. Example is Hitler. He was a very powerful speaker. But on the other hand few people are not very good speakers but they are good communicators. NRG: What is Consistency? Gowtham: Improving performance Carl : Being consistent to the vision

Natansh: Not changing the vision Bharadwaj: Ability to remain constant over a period of time Ullas: To deliver without failure.

Consistency in approach means sticking on to your decisions. If the followers have to remain with the leader then they must have a sense of equity. There must be consistency in treatment. NRG: What is Commitment? Vinay Kalal: Do what u say Bharadwaj: Honouring your obligation Priyank: Loyalty towards goal and work If you have promised to do certain things (As a company grow, acquire a certain region), then willing to sacrifice and bring in resources in the right manner to achieve it. Being well-informed: If you want to be successful as the strategic leader then you must be well informed. A strategist must be well informed in spite of not being his/her domain. The reason why Infosys is not performing consistently well, might be that the man behind the company may not be really know the know-how of information technology. Learning curve for strategists must be small and crisp i,e; they must be quick-learners. Willingness to delegate and empower Everyone has a feeling that he is indispensable. Truly, if you ever want to get work done then you must be able to delegate the work NRG: What is delegation? Carl: Distribution of power Jacob: Allocation of task among people

Manu: Giving authority Identifying the right person to do the right job is very important. How much ever you tease a dumb person, he wouldnt be able to sing. Hence delegating the authority with responsibility is important. Once delegated, the person must be trusted. But the amount of supervision required should also be found out. Art of delegation does not mean distributing work to everyone and enjoying yourself. You have to ensure that work is done and should be the man who oversees. NRG : What is woman Empowerment? Rakhi: Giving them some powers. Dhivya: Power and space to act on Priyank: Upliftment of women in the society Nijo: stand on ones own feet Giving education, support and then making sure that they stand on their feet. Its like teach them how to fish rather than giving them the fish. When you are a leader, how do you empower others? Thomas: Teaching them Training is very important Competency mapping is ensuring that skill availability and skill required match. People on bench can actually spend their time learning skills. NRG: What is the resistance in willingness to delegate? Bharadwaj: Ego Rakhi: They might misuse the power. Lack of trust might be one thing but more importantly it is the reason that people get sense of importance by not delegating. Harish: Is decentralisation delegation of empowerment?

NRG: If you have to empower the employees then you have to give them the training and resources. Decentralisation alone might not help. It has to be done along with inflow of resources.

Astute use of power One gets knowledge because of Authoritative reward or Punish

If one is in the position to reward, then others listen to him because there is a quest of reward. Power comes by these 2 sources. Power could be because of constitutional authority or referral power. Referral power comes out of knowledge. The latter is stronger Many people use power in order to get a high. Use power only if you need to. Once a threat is executed, the power is lost. If the threat is there and never executed, then there is no respect for the power. Emotional Intelligence Naba: Ability to deal with situation Krishnachandran: To take the correct decisions. Ability to identify emotions is emotional intelligence. Intelligence is the discriminatory of it. Example: Mysore pak is sweet to the tongue is emotion attached towards the sweet but then the intelligence actually tells a diabetic that he is not supposed to be eating it. The sudden awakening of samurai to his own agitate state illustrates the crucial difference between being caught up in a feeling and becoming aware that you are being swept away by it. Aristotle: To be angry is very easy, but to know how much to be angry, when, with whom, where is not easy. This requires training like vipasana, meditation. Hence you become the

master rather than anger becoming the master. Anger is a very powerful tool. The righteous anger, anger of good people can create wonders. Refer: Emotional intelligence by Daniel Golman Impact of adoption of yoga way of life on the emotional intelligence of managers.

Refer: Pg 67 of hand out Bharadwaj and Ullas Poke about strategic leadership exhibited by the leaders they respect. NRG: Why decisions making is always around a policy or person? Jacob: Difference of opinion Priyank: Dominant person. All of us have the desire to conform. Everybody does so even I do. 90% of the people in this world are actually good. 10% are free riders. The 90% of people should give chance to these 10%. Especially if the person patronizing the proposal is a powerful person, the decisions are made around a person. This costs the company a lot. If two people give the same suggestion, then one of them is redundant. Hence giving ones point of view is very important. Refer: Pg 42 in textbook : Was intelligence on Iraq biased by Groupthink? Process for improving decision making: Devils advocacy

Expert plan

Devil's advocate critizes

Final plan

Devils advocacy is jst to pick the holes so that it improves the plan.

Dialectic Inquiry

Expert plan 1

Expert plan 2

Debate(synthesis)

Final plan

Summary of module: The major components of strategic management process are defining Vision Mission, Carry out SWOT analysis, Choosing the right strategy and Execute. Strategy has bias towards execution. 90% execution and 10% planning Strategy is a never ending process, there is always a feedback loop. Key to success is that the various strategies should act in symphony. Strategic leaders have vision, ability to articulate and lead by example. Group thinking is one of the cognitive biases that limit strategic thinking.