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1) What is strategy? Explain some of the major reasons for lack of strategic management in some companies?

Ans: Meaning of strategy: The word strategy comes from Greek strategies, which refers to a military general and combines stratus (the army) and ago (to lead). The concept and practice of strategy and planning started in the military, and, over time, it entered business and management. The key or common objective of both business strategy and military strategy is the same, i.e., to secure competitive advantage over the rivals or opponents. Evolving Definitions of Strategy Seven definitions of strategy are given below which have evolved over a period of more than 30 years (196296). During this evolutionary process, different authors have focused on different aspects of the definition of strategy. Let us see these definitions. Chandler (1962): The determination of the basic long-term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals.
Source: A Chandler, Strategy and Structure: Chapter in the History of the American Enterprise (MIT Press, 1962).

Lack of Strategic Management in Some Companies


Some companies do not undertake strategic planning and management. Some other companies do strategic planning, but receive no support from managers and employees. In some other cases, managers and employees do not get enough support from the top management. A number of such and other reasons explain why certain companies do not take to strategic planning and management. David (2003) has mentioned various reasons for poor or no strategic planning and management by companies. These are discussed below: 1. Poor reward structure: When an organization achieves success, it often fails to reward its managers or planners. But when failure occurs, the company may punish the managers concerned. In such a situation, it is better for individual managers to do nothing than to risk trying to achieve something, fail and be punished. 2. Content with success: If an organization is generally successful, the top management or individual managers may feel that there is no need to plan and strategize because everything is fine. However, they forget that success today does not guarantee success tomorrow. 3. Overconfidence: As managers gain experience, they may rely less on formalized planning and more on individual initiative and decisions. But, this is not appropriate. Overconfidence or overestimating experience leads to complacency and ultimately can bring downfall. Forethought and planning are the right virtues and are signs of professionalism. 4. Fire-fighting: An organization may be so deeply engrossed in crisis management and fire fighting that it may not have time to plan and strategize. This happens with many companies and is a clear sign of nonprofessionalization. 5. Waste of time: Some organizations view planning as a waste of time because no tangible marketable products are produced through planning. But they forget that time spent on planning is an investment, and there would be returns, both tangible and intangible, in due course. 6. Too expensive: Some organizations are culturally opposed to spending resources on matters like planning which do not produce instant or immediate results. They feel that spending on planning is a wasteful expenditure. 7. Previous bad experience: Managers may have had previous bad experience with planning, that is, cases in which plans have been cumbersome, impractical or inflexible. There could be experience of failures also. They would like to avoid recurrence of this. 8. Honest difference of opinion: Some managers may sincerely think that a plan is not correct. They may see the situation from a different viewpoint, or, they may have aspirations for themselves or the organization, which are different from those envisaged in the plan. Different people in different jobs in the same organization may have different perceptions of the same situation, and this may lead to difference of opinions among them and eventually to lack of planning due to lack of consensus.

9. Self-interest: When management has achieved status, privilege or selfesteem through effectively using an old system, it often sees a new plan or a new system as unnecessary or a threat. 10. Fear of the unknown: Managers may not be sure of their abilities to learn new skills or take on new roles or adapt to new system. This is basically inertia against change or fear for change. 11. Fear of failure: Whenever something new or different is attempted, there is a chance of success, but, there is also some risk of failure. Many companies and managers may like to avoid strategic planning and management for fear of failure. 12. Suspicion: Employees may not trust management, or, the management may not have enough confidence in the managers. This gives rise to mutual suspicion.

2. Explain the following: (a) Core competence (b) Value chain analysis Ans: (a) Core competence Core Competence Core competence of a company is one of its special or unique internal competence. Core competence is not just a single strength or skill or capability of a company; it is interwoven resources, technology and skill or synergy culminating into a special or core competence. Core competence gives a company a clear competitive advantage over its competitors. Sony has a core competence in miniaturization; Xeroxs core competence is in photocopying; Canons core competence lies in optics, imaging and laser control; Hondas core competence is in engines (for cars and motorcycles); 3Ms core competence is in sticky tape technology; JVCs in video tape technology; ITCs in tobacco and cigarettes and Godrejs in locks and storewels. Hamel and Prahalad, two of the greatest exponents of core competence, argue in The Core Competence of the Corporation (HBR, 1990) that the central building block of the corporate strategy is core competence. Hamel and Prahalad defined core competence as the combination of individual technologies and production skills that underlie a companys product lines. According to them, Sonys core competence in manufacturing allows the company to make everything from the Sony walkman to video cameras to notebook computer. Canons core competence in optics, imaging and microprocessor controls have enabled it to enter markets as seemingly diverse as copiers, laser printers, cameras and image scanners. To achieve core competence, a particular competence level of a company should satisfy three criteria: (a) It should relate to an activity or process that inherently underlies the value in the product or service as perceived by the customer. This is important because managers often take an internal view of value and either miss or deliberately overlook the customer perspective. (b) It should lead to a level of performance in a product or process which is significantly better than those of competitors. Benchmarking is a good way and is generally recommended for undertaking performance standard and also for differentiating between good and bad performance. (c) It should be robust, i.e., difficult for competitors to imitate. In a fast changing world, many advantages gained in different ways (like a superior product feature, a new marketing campaign or an innovative price policy/strategy) are not robust and are likely to be short lived. Core competence is not about such incremental changes or improvements, but, about the whole process through which continuous change and improvement take place which lead to or sustain clearly differentiated advantage. Distinctive Competence Core competence may not be enough, because it focuses predominantly on the product or process and technology, or, as Hamel and Prahalad put it; The combination of individual technologies and production skills. There are two problems with this. Strategic Competence Strategic competence coexists with, or supports, core competence and distinctive competence. Strategic competence is the competence level required to formulate, implement and produce results with a particular strategy, for example, to outwit competitors.

(b) Value Chain Analysis Various competences and resources of an organization can be integrated into a chain of activities which an organization performs to meet customer demand. Since each of these activities is expected to create value when it is performed, the chain can appropriately be called a value chain. Michael Porter (1985) introduced the concept of value chain analysis. Now, it has become common for professional companies to do this analysis. Value chain analysis helps in understanding how value is created in organizations through various activities. These activities can be divided into two broad categories: primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service or customer value. Support activities, as the name indicates, support the primary activities, or, more, correctly, help to improve the effectiveness or efficiency of primary activities.

Primary activities can be divided into five major areas: inbound logistics, operations, outbound logistics, marketing and sales and service. Inbound logistics: These are activities concerned with receiving, storing and distributing raw materials and inputs to the production or service division. Inbound logistics also include materials handling, stock control, transportation of inputs, etc. Operations: These are activities involved in transforming various inputs into final product or service. Operations also include machinery, packaging, assembly, testing, etc. Outbound logistics: These include collecting, storing and distributing or delivering final products to customers. For tangible products (industrial or Consumer goods), this would include warehousing, materials handling, transportation, etc. In the case of service, these may be more concerned with arrangements for bringing customers close to the service location. (e.g., sports events, entertainment events, etc.). Marketing and sales: These comprise activities such as advertising, sales promotion, selling, sales force management, pricing, channel selection, channel management, etc. Marketing and sales provide the most important link between the company and the customer. Service: These include activities which maintain or enhance value of a product or service such as installation, repair, training, supply of spares and prompt after-sales service, etc. Support activities can be divided into four categories: procurement, technology development, human resource management and organizational infrastructure. Procurement: This relates to the processes for acquiring or purchasing various resource inputs like raw materials, intermediate inputs, equipment, machinery, etc. Procurement primarily supports inbound logistics and operations. Technology development: Technology is involved in all value creations. Key technologies are concerned directly with the product, (e.g., R&D, product design, quality control, etc.,) or with processes, (e.g.,process development). Technology development is fundamental to the innovative capacity of an organization. Technology mainly supports operations. Human resource management: This provides support to all primary activities in the value chain. More specifically, HRM is concerned with recruiting, managing, training and developing people within the organization. Infrastructure: This is the organizational system including finance, MIS, general management, strategic planning, etc. Infrastructure also comprises organizational structures, values and culture. Infrastructure, directly or indirectly, supports all primary activities.

3. Describe in brief the following environmental factors which a business strategist considers:(a) Political factors (b) Technology Ans: (a) Political factors: Political Factors Political factors or political conditions can have significant impact on industry, business and the corporates. Political stability improves business environment and encourages economic and business activities. Political instability produces the opposite effects. Political factors do not refer to only national political conditions or relations, but also to international relations. Improved political relations between the US and China in the mid-70s resulted in trade agreement between the two countries. The trade agreement provided opportunities to US electronics manufacturers to commence operations in China. There are many instances where deteriorating political relations between countries (India and Pakistan), have affected business conditions. Rubock (1971) has developed an analytical framework for identifying and assessing political risks which may affect business conditions. Sources of political risks can be many. Major risk factors identified by Rubock are: electoral majority of the party in power; internal dissensions within the ruling party; strengths of the parliamentary opposition parties; conflicting political ideologies; insurgencies in border areas, international power alignments and alliances, etc. Given below are two contrasting Indian examples of the impact of political environment on business. The progressive political philosophy of Chandrababu Naidu during his tenure as the chief minister of Andhra Pradesh led to the creation of Cyberabad. IT companies have found Hyderabad, nicknamed by the media as Cyberabad, to be the most hospitable location for development of IT, mostly because of highly supportive political climate. Chandrababu had taken keen personal interest in IT; and, had encouraged and ensured use of IT in governance by simplifying rules and procedures, offering concessions and building good supportive infrastructure. The Ayodhya-Babri Masjid episode became a political issue and provoked violence in different parts of the country, and caused serious law and order problems during December,1992 and January 1993. Apart from the apprehensions of political instability, the events disrupted transport, slowed down industrial production and growth of exports, and, also reduced government revenue. (b) Technology as an environmental factor: Technology, as an environmental factor, influences strategic planning and management in a number of ways. Technological changes lead to the shortening of product life cycles and create new sets of consumer expectations. Electronic products are a good example. This sector is experiencing the most rapid changes today. One can clearly see the technological revolution in the colour TV market. Sometimes, advance signals on technological developments are available through research and development and industry/trade journals and magazines. Companies in the pharmaceutical industry, for example, are continuously aware of developments in new formulations and drugs in the world through medical journals and periodicals. Developments in information technology are greatly affecting the competitive position of companies. In a different way, technological developments affect a companys raw material, packaging, operations, products and services. For example, developments in the plastics and packaging industry have brought in new packaging in the form of tetrapacks, pet bottles, cellophane, etc. This has made the packing more attractive, carrying of the product more convenient and has definitely reduced the cost of packaging and the product. Similarly, containerized movement of cargo, deep freezers and trawlers have influenced the operations of the companies. Technological development also provides an opportunity to companies to develop new products. On the other hand, companies which ignore these developments face a crisis and eventually may even face extinction. The Indian automobile industry gives a good illustration. With the introduction of Maruti 800 which caught the imagination of consumers, Hindustan Motors (Ambassador) and Premier Automobiles (Padmini) had to improve their vehicle performances in terms of fuel efficiency, driving

comfort, aesthetic appeal, etc. But what they did was to bring in peripheral changes only and those were not enough. The result: Padmini is extinct today with Ambassador following suit (some extension of life has been given to Ambassador by the government and the public sector). 4. Write a brief note on Turnaround strategy. Ans: Turnaround Strategy Corporate turnaround may be defined as organizational recovery from business decline or crisis. Business decline for a company means continuous fall in turnover or revenue, eroding profit, or accrual or accumulation of losses. So, business or organizational decline, like business performance, is understood in relative terms, that is, compared with the past. But, some strategy analysts describe business decline in terms of current comparisons also; for example, relative to industry rates or averages or even relative to economic growth of the country. Corporate crisis means deepening or perpetuation of a decline. Turnaround strategies are usually required for crisis situations. If organizational decline is not continuous or severe, corporate restructuring can provide the solutions. That is why turnaround strategy may be said to be an extension of restructuring strategy. When restructuring is very comprehensive and leads to corporate recovery, it almost becomes a turnaround strategy as mentioned above in the case of Voltas. Corporate or business decline manifests itself in many forms or symptoms, including profitability. These symptoms are actually different performance criteria of companies. Major symptoms or criteria or situations which signal towards the need for a turnaround strategy are: Steadily declining market share; Continuous negative cash flow; Negative profit or accumulating losses; Accumulation of debt; Falling share price in a steady market; Mismanagement and low morale. With some or all these symptoms becoming clearly visible (these symptoms are generally interrelated) for a company, a turnaround or recovery becomes highly imperative. But, the situation should be carefully reviewed to assess the extent of recovery possible before undertaking any such programmes. Given a strategy, in some situations, recovery may be more or less successful than in others. Slatter (1984) contends that there are four recovery situations in terms of feasibility or success. These situations are: (a) Realistically non-recoverable situation; (b) Temporary recovery situation; (c) Sustained survival situation ; (d) Sustained recovery situation. Realistically non-recoverable situation is one in which chances of survival are very little, because the company is not competitive, the potential for improvement is low, clear cost disadvantage exists and demand for the companys product is in decline stage. In such a situation, divestment or liquidation may be a better option. Temporary recovery situation exists when there can be initial successful recovery, but, sustained turnaround is not possible. This can happen because repositioning of the product is possible. Some cost reduction programmes may be successful, and revenue generation is also possible at least for some time.

Sustained survival situation means that recovery is possible but potential for future growth does not exist. This may happen primarily because the industry is in a declining phase (say, black and white TV, audio cassettes, VCR). A company in such an industry or situation can either go for divestment or turnaround if it foresees or can create a niche in the industry and if the growth prospects can be created. Sustained recovery situation is one in which successful turnaround is possible for sustained growth. In such cases, business decline might have been caused by internal organizational factors or external or environmental conditions which the company is able to deal with effectively. Inherently, the company is strong in terms of competence.9 Surgical Turnaround and Non-surgical Turnaround Generally, there are two methods of corporate turnaround: surgical and nonsurgical. The surgical method, more commonly practiced in the West, involves sweeping changes like firing of staff, managers, wholesale reshuffling of portfolios, closing down operations, etc. Some call it bloodbath or bloodshed. Non-surgical turnaround adopts the opposite approach, that is, peaceful meansrevamping or recovery through meetings, discussions, persuasions, consensus, etc. The operations in surgical turnaround are like this: the first step is to replace the chief executive of the ailing company by a new iron chief. The new chief promptly gets into action; he asserts his authority. He issues pre-emptory orders, centralizes functions and spears some convenient scapegoats. Then he goes about firing employees en masse and auctioning/selling whole plants and divisions until the fat is satisfactorily cut to the bone. The bloodbath over, the product mix is revamped, obsolete machinery is replaced, marketing is strengthened, controls are toughened, accountability for performance is focussed and so on. How bloody this sort of turnaround can be may be seen from the examples of companies like the US video games manufacturer Atari, which, among other actions, cut its labour force by two-thirds to 3500 to turn itself around. At British Leyland, 84,000 employees (40 per cent) were axed to complete the surgery. At GE, 1,00, 000 of a workforce of 4,00, 000 lost their jobs; at Imperial Chemical Industries (ICI), the labour force was reduced from 90,000 to 59, 000; half the staff at Chrysler Corporation disappeared; at British Steel, half the companys production capacity and 80 per cent of workforce were gone. Turnaround management of the humane type may involve negotiated and humane layoffs and divestiture, but, not a bloodbath. This type of turnaround also is generally brought about by the new helmsman. But, he spends a great deal of time in trying to understand organizational problems and deliberating on them. He takes all the stakeholders including unions into confidence; forms groups within the organization to brainstorm together on what needs to be done to get over the crisis; tries to create a new work culture; and, generally infuses a strong sense of participation among the employees and many critical decisions become participative decisions. There are many examples of successful turnarounds of the humane type including Enfield, Volkswagen, Lucas, Air India, SPIC, BHEL and SAIL. We give here the example of SAIL, the Indian public sector steel giant. Its losses were about `100 crore during 198283 and `200 crore in 198384. A price rise during 198485 saw SAIL break even in that year. But, rapid increases in coal prices and freight rates threatened a loss in 198586. The steel ministry and SAIL management then called for another price hike. Krishnamurthy entered the scene as Chairman, SAIL in mid-1985. He promptly lobbied against price increase on the ground that efficiency had to be improved. Indian steel was already the costliest in the world and any further increase in steel price would have ruinous effects on the economy, contended Krishnamurthy. He spent several months talking to small groups of executives, officials, staff and workers in SAIL. He estimates that he talked to over 25,000 employees to identify operating problems, got perception of

how the company was doing and what employees thought should be done to improve performance and turn around the company. The turnaround strategy finally emerged from discussions at all levels. 5. Define the term strategic alliance. What are its characteristics and objectives? Ans:

Strategic Alliance
Strategic alliance may be defined as cooperation between two or more organizations with a common objective, shared control and contributions (in terms of resources, skills and capabilities) by the partners for mutual benefit. This definition can be expanded and made more comprehensive in terms of essential features or characteristics of strategic alliance. A typical strategic alliance exhibits five essential features or characteristics: (a) Two or more organizations join together to pursue a defined objective or goal during a specified period, but, remain organizationally independent entities; (b) The organizations pool their resources and investments and also share risks for their mutual (and not individual) interest/benefit; (c) The alliance partners contribute, on a continuing basis, in one or more strategic areas like technology, process, product, design, etc; (d) The relationship among the partners is reciprocal with partners sharing specific individual strengths or capabilities to render power to the alliance; (e) The partners jointly exercise control over the performance or progress of the arrangement with regard to the defined goal or objective and share the benefits or results collectively.

Objectives and Forms of Strategic Alliance The basic objective behind all strategic alliances is to secure competitive or strategic advantage in the market. All strategic alliances have long-term objective or purpose. Many companies realize that they do not possess adequate resourcesfinancial and managerialto pursue an innovation, develop a new product or technology. They look towards other organizations to supplement or augment their resources or capabilities for the fulfilment of their objective. It can also be a functional area where they have very little expertise. Different authors have analysed the objectives or purposes or reasons for strategic alliance. Six objectives or purposes are more commonly observed:
(a) Development of a new product: In the pharmaceutical industry, new product development takes place on a continuous basis, and, in this, many strategic alliances are formed between pharmaceutical companies and research laboratories and institutions for R&D. We have already given the example of Boeing and their Japanese partners. (b) Development of a new technology: Development of technology is a longterm process, and, also, many times, involves considerable cost. Collaboration leverages the resources and technical expertise of two or more companies. (c) Reducing manufacturing cost: Co-production, common in the pharmaceutical industry, is a good form of strategic alliance to reduce manufacturing cost through economies of scale. (d) Entering new markets: This is often the objective in international business. Many foreign companies enter into strategic alliances with some local companies (host country) to enter into and establish themselves in that country. Piggybacking is a common form of strategic alliance. Some of the Japanese electronic manufacturing companies like Matsushita

Electricals, during their initial years, had entered into strategic alliances with some US electrical or electronic manufacturers for entering into the US market. (e) Marketing and Sales: This is common in both national and international business. Many manufacturers in India have marketing and sales arrangements with companies like MMTC and Tata Exports for both domestic and international marketing. (f) Distribution: In pharmaceutical and other industries where distribution represents high fixed cost, potential competitors swap their products for distribution in the respective markets where they have well-established distribution systems. Many such alliances exist between the US and Japanese pharmaceutical companies. Strategic alliances are non-equity based, i.e., none of the parties invest any equity capital in such alliances. But, funding is involved and funding can be by one of the parties or all of them. The nature of funding depends on the type of strategic alliance, i.e., whether new product development, technology development or transfer, marketing or sales, etc., and also the parties involved. For example, if research laboratories or institutions are involved, most of the funding is done by the corporate concerned. As mentioned above, many areas of businessfrom R&D to distribution provide scope for strategic alliance. In the semi-conductor industry, many companies in the US and Japan feel short-handed in their R&D, and they swap licences. In a multiple alliance, which includes both technology and operations, Samsung Electronics and IBM Korea have entered into an agreement to swap patents for design and manufacture of semiconductors. IBM and Apple Computer, have formed an alliance for development of hardware and software technology for a new generation of desktop computers. Ranbaxy has formed a strategicalliance with Eli Lilly of the US to fulfil its mission of becoming a research-based international pharmaceutical company. In the telecommunication sector, a number of strategic alliances have been formed between Indian and foreign companies: Crompton Greaves and Millicom; Usha Martin and Telekom Malaysia; SPIC group and Telstra, etc. A good example of synergistic benefits from a strategic alliance is that of Taj hotels and British Airways; both create mutual advantages through complementarity of hotel and airline services. In the field of agricultural development, Hindustan Unilever and ICICI have entered into a partnership project for contract farming of wheat and rice in MP and Haryana.

6. Write short notes on the following: a) Competitive advantage b) Porters Competitive threat model

Ans: a) Competitive advantage: Competitive Advantage Analysis Competitive advantage, also called strategic advantage, is essentially a position of superiority of an organization in relation to its competitors. A more formal definition of competitive advantage is:
Competitive advantage exists when there is a match between the distinctive competences of a firm and the factors critical for success within its industry that permits the firms to outperform competitors.

The definition shows that superiority of a company over its competitors exists because the company has developed some unique competencecore competence or distinctive competencewhich matches the environmental factors or success factors in the industry in a better way than the capabilities of competitors. South (1981) has given a definition of competitive advantage which also gives a good perspective:
The process of strategic management is coming to be defined, in fact, as the management of competitive advantage, that is, a process of identifying, developing and taking advantage of enclaves in which a tangible and preservable business advantage can be achieved.

Developing Competitive Advantage Competitive advantage can be secured through two primary routes: product manufacturing and marketing route. The product manufacturing route reflects core competences, special capabilities, superior product design, etc. The marketing route reflects marketing mix application, positioning, offering a bundle of benefits or value to the customer, etc. The product-making route and the marketing route are obviously not exclusive to each other; they are, in fact, complementary to or supporting or reinforcing each other

Fig: Competitive Advantage: Product and Marketing A corporate strategy can consist of various individual strategies like product strategy, pricing strategy, promotion strategy, distribution strategy, competition strategy, etc. Many forms of competition exist. But these strategies or the way a company competes is not the only key to, or the complete course for success. There are at least three other strategic factors which are essential for creation of a competitive advantage which can be sustained over time. These three factors are: how to compete (basics), i.e., business assets and skills, where to compete, i.e., productmarket selection, and whom to compete against, i.e., competitor position

b) Ans:

Porters Competitive Threat Model


A vital task of a strategist is to anticipate and/or recognize the nature of competition and potential threat from competitors and to develop appropriate response strategies. The most difficult task in this is to properly assess the magnitude of existing competition and correctly foresee the threat from new and emerging competitors. Porter (1980) in his pioneering work on competitive strategy had identified five major types of competitive threats Which are valid even today. These are:

Fig: Porters Five Forces Model

1. Industry (existing) competitors 2. Threat of substitutes 3. Bargaining power of buyers 4. Bargaining power of suppliers 5. Threat of new entrants Industry competitors: Various degrees or intensities of competitive rivalry exist in the market for a product. This is the battle for market share and is the most immediate concern of a company, particularly if it is a market leader or challenger. Ongoing battles between Coca-Cola and Pepsi, Surf and Ariel, Colgate and Pepsodent are good examples. Competitive intensity or rivalry depends, to a large extent, on the stage of the product life cycle. Competition is practically non-existent at the introduction stage, then starts growing steadily and becomes significant till the product enters the decline stage. Threat of substitutes: Substitute products reduce demand for a particular product or a category of products because some customers switch over to the alternatives. Substitution depends on whether an alternative product offers higher perceived value to the customers. Substitution may take three different forms: product-for-product substitution, substitution of need and generic substitution, Product-for-product substitution or substitution for the same use are same; for example, e-mail substituting for postal service or mobile phones substituting for landlines. Substitution of need means that a new product or service makes an existing product or service redundant. For example, IT has provided e-Commerce

as a tool which has generally made secretarial services or printing redundant to a large extent. Generic substitution takes place when different products or services compete for a share in the same family income or household income: for example, air conditioner manufacturers competing with colour televisions or music systems or home theatres for snatching a share in fixed household income. Bargaining power of buyers: Buyers are generally in a better bargaining position. But, they can become stronger bargainers or create competition among suppliers under certain specific conditions. Some of these conditions are: i. the buyer purchases a very significant proportion of total output of the supplier can happen typically in industrial products; ii. the industry consists of a large number of small operators so that buyers can easily create competition among them; iii. cost of switching a supplier is low, i.e., substitutes are available or there is no product differentiation, or, for industrial or service products, there is no long-term contract; iv. backward integration into suppliers producta truck or car manufacturer beginning to make components or accessories like Tata Motors or an air conditioner manufacturer also making compressors like Carrier Aircon or a colour TV manufacturer also making picture tubes like Sony. Bargaining power of suppliers: Suppliers, or sellers, generally in a weak bargaining position, can be strong bargainers under certain conditions. Such market conditions are : i. no close substitutes available for the product offered by the supplier ; ii. the product(s) sold by the supplier(s) is an important or critical input in the buyers product; for example, ICs and chips in electronic products which can be bought only from few or selected suppliers; iii. high switching cost of changing a suppliermay be because the supplier manufactures a special product or the product is clearly differentiated; iv. forward integration into buyers product; for example, a carbon black producer entering into tyre manufacturing and competing with tyre manufacturers or TVS (earlier Lucas-TVS), traditionally a component or accessories maker, enters into production of motor cycles (TVS-Suzuki). Threat of new entrants: Many times, new entrants pose a major threat to the existing market players. Examples of entry of Toyota and Honda in the US car market (and also in the global market), Maruti Suzukis entry into the Indian car market, Vimal fabrics in the Indian textile market and Titan in the Indian watch market are well known. In fact, most of the established products and brands in consumer and industrial markets today were new entrants at some point of time. Forecasting the emergence of new entrants is very important for existing competitors and it is also one of the most difficult jobs. But, companies which fail to foresee the new entrants or ignore them may even face disastrous results. We have the examples of Padmini (earlier Fiat) cars, HMT watches, Weston TV, etc.