Академический Документы
Профессиональный Документы
Культура Документы
Syllabus
SESSION
1
TIME
TOPIC
CONTENTS
21-Sep
5:00-6:20
21-Sep
7:00-8:20
- Class discussion
21-Sep
8:20-10:00
- Class discussion
22-Sep
5:00-5:40
22-Sep
5:40-7:00
Syllabus
SESSION
6
TIME
22-Sep
7:30-8:50
TOPIC
CONTENTS
- Class discussion
- Case -3: Shimla Dairy
22-Sep
8:50-10:00
26-Sep
5:00-5:55
26-Sep
5:55-6:50
- Article on internationalization
- Class discussion
- Case -6: CUMI in China [growth and internationalization strategy]
26-Sep
7:20-8:05
10
11
26-Sep
8:30-10:00
EVALUATION
Assignment (individual or group)
and class participation: 20%
Quiz or minor paper: 30%
Examination: 90 minutes @ 50%
Session 1
SESSION
1
TIME
TOPIC
CONTENTS
21-Sep
5:00-6:20
21-Sep
7:00-8:20
- Class discussion
21-Sep
8:20-10:00
- Class discussion
22-Sep
5:00-5:40
22-Sep
5:40-7:00
SESSION 1
FUTURE
STRATEGY
STRATREGY
FUTURE
STRATEGY
Competitive Strategy
and
Corporate Strategy
Competitive Strategy
COMPETITIVE STRATEGY:
Competitive Strategy
Competitive Strategy
Core business Strategy
Choices made ref the 3 questions [a] Q1: Where
will we compete? [b] How will we compete [ What
will be our Competitive Advantage?] and [c] How
will we create for, communicate with and deliver to
the target group we have chosen
Competitive Strategy
Competitive Strategy as defined above - is a CHOICE made
out of strategic options developed through a Strategic
Analysis of business context along several dimensions,
particularly:
Macro-economic and general environment analysis
Industry and competitive analysis
Resources and capability analysis
Organization and culture analysis
Stakeholder expectation analysis
Each Strategic Option is evaluated along 3 criteria viz. [a]
Suitability, [b] Acceptability and [c] Feasibility
Corporate Strategy
CORPORATE STRATEGY:
Corporate Strategy captures a set of choices that a
corporation makes to create value through configuration and
coordination of its multi-market activities.
Corporate Strategy seeks to achieve synergy among various
businesses in companys portfolio of multi-market operations
from 2 perspectives - external and internal
Thus, Corporate strategy addresses choices about multimarket activities while competitive strategy deals with a set of
choices confined to a single market
Corporate Strategy
Though there are differences between corporate and
competitive strategies, the former can enhance business
units competitive advantage over and above what they could
otherwise achieve. When this happens, business units benefit
from corporate advantage
Two significant choices coming under corporate strategy are:
Corporate Scope that specifies the product-markets the
corporation has chosen to maintain a competitive presence
Corporate Ownership that specifies which part of each
business unit will be owned by the corporation
Corporate Strategy
Two principles can be used to decide the presence and
ownership issues. These are:
Better off Test
Ownership Test
Choice of markets [presence issue]
Does the presence of the corporation in a given market improve the
total competitive advantage of various business units over and above
what they achieve on their own?
A negative answer will suggest exit from the market.
A positive answer will mean a simultaneous presence in multiple
industries will be beneficial
Corporate Strategy
The OWNERSHIP question:
Does ownership of the business unit produce a greater
competitive advantage than an alternative arrangement
would produce?
Ownership means outright control including majority stake in
the business unit
Alternative here means licensing, long term contract, strategic
alliance or joint venture
When both tests are satisfied, we should conclude that a
corporation made an appropriate decision to be present in
another industry and own the unit there
CORPORATE STRATEGY
CORPORATE STRATEGY [essentially can be called PORTFOLIO
STRATEGY ] thus deals with CONTEXT-SPECIFIC strategic
choices ref
Portfolio of distinct businesses [distinct in terms of market mission,
customer segments and competition and capabilities]
Portfolio of geographical markets [more relevant for global cos.]
Role of the corporate office to support value creation at business level
[corporate parenting role]
Resource allocation
Development of enterprise wide capabilities that can be used
by more than ONE Business Unit
Talent scouting and development
Session 2
SESSION
1
TIME
TOPIC
CONTENTS
21-Sep
5:00-6:20
21-Sep
7:00-8:20
- Class discussion
21-Sep
8:20-10:00
- Class discussion
22-Sep
5:00-5:40
22-Sep
5:40-7:00
SESSION 2
Mission
Vision
Goal
Objectives
Policies
Strategy
Control
Rewards
Session 3
SESSION
TIME
TOPIC
CONTENTS
21-Sep
5:00-6:20
21-Sep
7:00-8:20
- Class discussion
21-Sep
8:20-10:00
- Class discussion
22-Sep
5:00-5:40
22-Sep
5:40-7:00
SESSION 3
Strategy Process &
Analysis An overview
Strategic
STRATEGY PROCESS
STRATEGY DEVELOPMENT PROCESS
STRATEGIC ANALYSIS
Political, Regulatory, Economic, Social Technological
[PREST] Analysis
Industry and competitive analysis
Resources and capability analysis
Organization and culture analysis
Stakeholder expectations
DEVELOPMENT OF STRATEGIC OPTIONS, EVALUATION
AND CHOICE
STRATEGY IMPLEMENTATION
Strategic Analysis
[Session 3 ]
INDUSTRY AND
COMPETITIVE ANALYSIS
STRUCTURAL ATTRACTIVENESS OF AN
INDUSTRY
An industry is called structurally
attractive [i.e. High profit potential] if
all or most of the forces are weak
An industry is called structurally
unattractive
[i.e.
Low
profit
potential] of all or most of the forces
are strong
Session 4
SESSION
TIME
TOPIC
CONTENTS
21-Sep
5:00-6:20
21-Sep
7:00-8:20
- Class discussion
21-Sep
8:20-10:00
- Class discussion
22-Sep
5:00-5:40
22-Sep
5:40-7:00
Strategic Analysis
[Continuing from Session 3 & 4]
INDUSTRY AND
COMPETITIVE ANALYSIS
+
Crown Cork Case
STRUCTURAL ATTRACTIVENESS OF AN
INDUSTRY
UNDERSTANDING COMPETITIVE
ADVANTAGE
Concept of Customer Value
Analysis of Competition
Alternative Core Value Propositions
Competitive Threats and Options
Strategic Choices
UNDERSTANDING COMPETITIVE
ADVANTAGE
THREE IMPORTANT AREAS OF UNDERSTANDING:
Concept of customer value
Competitor's capabilities and strategic options
available to them
Firms capabilities to create value in a unique way
that is valuable to customers
CUSTOMER VALUE
VALUE=PERCEIVED BENEFITS IN THE EYES OF
THE CUSTOMERS
CUSTOMER VALUE
VALUE THUS IS:
Perceived
Individualistic
To a great extent subjective
Relative
Dynamic
ANALYSIS OF COMPETITION
Competition in an industry cannot be fully
appreciated by looking at the strategies of
individual players. Actions and relative power
of other 4 forces shape competitive dynamics
and firm level strategic choices
Developments in adjacent industries and
strategic choices made by customers,
suppliers, new entrants and companies
offering substitute products affect the rivalry
and relative power of various competitors
FUTURE
GOALS
CURRENT
STRATEGY
COMPETITORS
RESPONSE
PROFILE
CAPABILITIES
ASSUMPTIONS
COMPETITOR ANALYSIS
CHECK SPECIFICALLY:
COMPETITOR ANALYSIS
DEFENSIVE CAPABILITY OF THE COMPETITOR
Extent of vulnerability to strategic moves / government
policy/ industry events
Which move competitor cannot retaliate
What action will provoke maximum retaliation?
How effective the retaliation going to be given its
strengths
Brand name
Ability to offer industry-first products
Superior infrastructure
Customer loyalty and retention
Entry barriers built by the incumbent such as long term contracts with
suppliers and customers
Access to privileged resources
Ability to reduce prices to stop imitators
Scale economies and economies of scope
Marketing spend
Tacit knowledge of the business
Ability to step up investments thereby making cost of imitation
higher
COMPETITIVE ADVANTAGE
BASES OF COMPETITIVE ADVANTAGE:
Anything , tangible and/or intangible, that helps create
advantages over competition
Lowest price is a competitive advantage when offerings are
perceived as standard
Competitive advantages based on value added offerings lead
to either premium prices or higher market share or both
DIFFERENCES
[DIFFERENTIATION
SUSTAINABLE COMPETITIVE
ADVANTAGES
Required for medium to long term success in the
market place
Competitive advantages result when an organization is
able to deploy its resources [including unique
resources] and competencies [processes to deploy
resources] in a unique way that create value customer
truly wants
Organizational resources and competencies that
create sustainable competitive advantage are:
Valuable to customers
Difficult to imitate
Rare
Structure, systems and processes that facilitate taking numerous
small decisions all aligned and creating customer value
ENSURING SUSTAINABILITY OF
COMPETITIVE ADVANTAGE
Keep investing in and strengthening the
sources of current advantages
Resources
Competencies to deploy resource
Size in the target market
Superior access to resources
Restricting competitors choice
SUSTAINING COMPETITIVE
ADVANTAGE
SUSTAINABLE
COMPETITIVE
ADVANTAGE
Price-based
strategies
Differentiation
based strategies
Lock in
SUSTAINING COMPETITIVE
ADVANTAGE: KEY ACTIONS
PRICE BASED
DIFFERENTIATION
Create difficulties of imitation
Achieve imperfect mobility [of resources/ competencies
should not be available for purchase by competition]
Reinvest margin
SUSTAINING COMPETITIVE
ADVANTAGE: KEY ACTIONS
LOCK IN
REPOSITIONING
Cost leadership
Differentiation
Hybrid
Focus cost or differentiation
COMPETING SUCCESSFULLY
STRATEGIC CHOICES
STRATEGIC CHOICES INVOLVE:
Positioning, based on companys capabilities,
that helps in defending against competitive
forces[ all 5 competitive forces]
Influencing the balance of forces trough
offensive strategic moves thereby improving
companys positioning
Anticipating shift in factors underlying the 5
forces and responding to them ahead of
opponents
STRATEGIC CHOICES
POSITIONING vis--vis current five forces
is the business model of the firm that
and reflects choices regarding:
TARGET CUSTOMERS
TARGET COMPETITION
VALUE PROPOSITION
VALUE DELIVERY MODEL
STRATEGIC CHOICES
Objective of POSITIONING is to either
defend against competitive forces or find
position in the industry where the forces
are weakest.
INFLUENCING goes beyond defending
and is offensive enough to alter the
relative power of 5 forces
STRATEGIC CHOICES
ANTICIPATING takes into account the future
STRATEGIC CHOICES
The key to survival and growth in an industry is to stake
a position that is less vulnerable to attack from head-tohead opponents, whether established or new, and less
vulnerable to erosion from the direction of buyers,
suppliers and substitute goods
Establishing such a position can take many forms viz.:
Building relationship with customers
Product/service differentiation[either substantively
or psychologically]
Integrating forward or backward
Establishing technological leadership and so on
Session 5
SESSION
1
TIME
TOPIC
CONTENTS
21-Sep
5:00-6:20
21-Sep
7:00-8:20
- Class discussion
21-Sep
8:20-10:00
- Class discussion
22-Sep
5:00-5:40
22-Sep
5:40-7:00
Session 5
Strategic Analysis:
Resources and capability
Analysis [including Value
Chain Analysis + Matching
Dell
STRATEGY PROCESS
STRATEGY DEVELOPMENT PROCESS
STRATEGIC ANALYSIS
Political, Regulatory, Economic, Social Technological
[PREST] Analysis
Industry and competitive analysis
Resources and capability analysis
Organization and culture analysis
Stakeholder expectations
DEVELOPMENT OF STRATEGIC OPTIONS, EVALUATION
AND CHOICE
STRATEGY IMPLEMENTATION
Common Organizational
Requirements
Common Organizational
Requirements
Differentiation
Threshold
capabilities
Threshold
resources :
Tangible
Intangible
Strategic
Unique
Capabilities for resources
competitive
Tangible
advantage
Intangible
Competencies
Threshold
competencies
Core
Competencies
DEFINITIONS
Threshold resources minimum required to operate the business
Tangible- plant, labor, finance
Intangible information, reputation and knowledge
Threshold competencies minimum activities and processes required by a
business through which it deploys its resources [tangible+ intangible]
effectively
Unique resources- these are resources that critically underpin competitive
advantage and that others cannot imitate or obtain
Tangible
Intangible
DEFINITIONS
Core competencies these are the activities and processes
through which resources are deployed in such a way as to
achieve competitive advantage in ways that others cannot
imitate or obtain
Strategic capabilities - = Resources ( tangible+ intangible
assets + people )+ Competencies [i.e. processes and activities
that help deploy the resources effectively] of the organization
that collectively create SUSTAINABLE advantage over its
competitors and are appreciated by its customers
Dynamic capabilities- ability of an organization to learn and
adapt to new conditions and sustain the advantage created by
strategic capabilities at a point of time
Product/process
design
Economies of
Scale
experience
Cost
Efficiency
Characteristic
ambiguity
External linkages
Linkage ambiguity
Robustness
of strategic
capability
--------------------------------------------------------------------------------------------Firm infrastructure
--------------------------------------------------------------------------------------------Human Resources Management
---------------------------------------------------------------------------------------------Technology Development
---------------------------------------------------------------------------------------------Procurement
----------------------------------------------------------------------------------------------
PRIMARY ACTIVITIES
Inbound
logistics
operations
Outbound
logistics
Marketing
and sales
services
Margin
Session 6
SESSION
6
TIME
22-Sep
7:30-8:50
TOPIC
CONTENTS
- Class discussion
- Case -3: Shimla Dairy
22-Sep
8:50-10:00
26-Sep
5:00-5:55
26-Sep
5:55-6:50
- Article on internationalization
- Class discussion
- Case -6: CUMI in China [growth and internationalization strategy]
10
11
26-Sep
7:20-8:05
26-Sep
8:30-10:00
Session 6
Strategic options,
Strategy Evaluation and
Choice +
CASE: SHIMLA DAIRY
[GOALS]
PREST
OCA
[O&T]
[S&W]
STRATEGIC
OPTIONS
ICA
RCA
[O&T]
[S&W]
Consolidation
Existing products/services to existing customers
New customers
New products/services
New delivery approaches
New geographies
New industry structure
New competitive arenas including going international [if applicable]
SUITABILITY:
RISKS
Projection of key ratios to assess the underlying risks
under each strategic option being considered [if a ratio will
become adverse over time under an option, there is some
underlying risks which the concerned option has not
considered]
Sensitivity analysis test assumptions, what-if analysis,
stress test
STAKEHOLDER REACTIONS
Regulatory issues
Political issues
Shareholder reactions to issue of new shares [if it
is proposed]
FEASIBILITY
Financial
Resource deployment
Can we compete effectively given the need for Unique
Resources and Core Competence as assumed under the
option being considered and what the firm currently have
Senior managers commitment and support to execute the
option being considered
3.
4.
5.
These principles alone may not make for resilience in a hotter, scarcer, more open world, but they
go a long way. And they point toward one key pathway for managing and even thriving
in a Volatile, Uncertain, Complex and Ambiguous [VUCA] world: RE-IMAGINE & RE-NEW
SESSION 6:
CASE DISCUSSION - 3
SHIMLA DAIRY
Session 7
SESSION
6
TIME
22-Sep
7:30-8:50
TOPIC
CONTENTS
- Class discussion
- Case -3: Shimla Dairy
22-Sep
8:50-10:00
26-Sep
5:00-5:55
26-Sep
5:55-6:50
- Article on internationalization
- Class discussion
- Case -6: CUMI in China [growth and internationalization strategy]
10
11
26-Sep
7:20-8:05
26-Sep
8:30-10:00
SESSION 7
TURNAROUND STRATEGY
+
CASE: FORD
Economic recession
Technological obsolescence
Infra and operating inefficiencies
General decline in competitive advantages
TURNAROUND
A PROPOSED TWO DIMENSIONAL APPROACH
A turnaround strategy can work only if there is still a Viable
Core and the managers think and feel a turnaround is indeed
possible and feasible with a comprehensive turnaround
strategy
When faced with a turnaround situation as defined,
companies can adopt a 2 dimensional approach to turnaround
comprising:
DIMENSION I: TRADITIONAL APPROACH TO TURNAROUND [mostly
reactive in nature, the aim being to stabilize financial performance]
DIMENSION II: PRO-ACTIVE Strategic Transformation [aim being to
redirect the company toward a more promising competitive position]
TURNAROUND
TRADITIONAL APPROACH: DIMENSION I
TRADITIONAL APPROACH TO TURNAROUND comprises 2 basic
approaches:
Revenue increase in current product-market segments
Reducing cost through
Retrenchment
Restructuring and rationalization
TURNAROUND
TRADITIONAL APPROACH: DIMENSION I
Revenue increase in current product-market segments can be
achieved through [continue]:
Refocus/ fine tune organizational activities to the needs of target
segments
Explore cross sell/ up-sell opportunities
Invest funds from reduction in cost in business development activities
TURNAROUND
TRADITIONAL APPROACH: DIMENSION I
Reduce cost through Restructuring and rationalization
Focus on productivity and efficiency improvement
Rationalize product lines
Tighten financial controls
Tighter control on cash expenses
Establish competitive bidding for procurement
Tighter management of debtors and inventory
Portfolio restructuring
Organizational restructuring
Financial restructuring
TURNAROUND
TRADITIONAL APPROACH: DIMENSION I
Some IMPLEMENTATION ISSUES on DIMENSION I [ turnaround through
Retrenchment, Restructuring and rationalization]
When it is comes to turnaround, speed is of the essence
Regaining the control over deteriorating position early is key
Retrenchment, Restructuring and rationalization programs must be
aggressively pursued [with appropriate metrics, targets and
controls]and broadly scoped
Gaining stakeholders support will be key
Prioritization of areas where attention must be given
Management of change will be crucial, since managers and employees
at large must accept the NEW WAY of working post turnaround phase.
It will imply a change in behaviour, a very difficult task for most people
Managers must take full ownership; specific accountability and
rewards/ incentives for TURNAROUND MANAGER
Once the stability is ensured, the next MUST step is transformation
SPEED
OF
CHANGE
MAGNITUDE OF CHANGE
LESS
MORE
FASTER
Strategic
alliance [C]
Conglomerate
acquisition
[A]
Equity Joint
Venture[C]
Horizontal
acquisition[A]
Related
diversificati
on [A]
Vertical
integration
[A]
SLOWER
innovation[C]
TURNAROUND:
SOME TAKEAWAYS
Managers will need robust metrics to assess if a turnaround situation has
really arisen. In general, several years of decline along key metrics vis-avis industry and key competitors will signal the need for turnaround.
In most turnaround cases, simple medication may not work; many a
times, surgery in select part of the business cannot be avoided
Principal objective in any turnaround situation has to be towards
achieving financial stabilization at the earliest through a combination of
retrenchment, restructuring and rationalization
It is complex because it may involve difficult negotiations, legal
complications, emotional turbulence among people and of course
incurring associated restructuring cost.
Such a turnaround strategy [defined as DIMENSION I] may need to be
followed by strategic transformation [defined as DIMENSION II] to
reposition the business, particularly when it is felt the future industry
evolution is going to be vastly different from the past industry dynamics
ADDITIONAL CONCEPTS:
TURNAROUND
Blinded
Inaction
Faulty Actions
Performance
Crisis
Dissolution
Time
Economic downturns
Industry-wide issues
Shifts in consumer
demand
Changes in technology
Government regulations
Changing interest rates
Changes in business
model
INTERNAL CAUSES
Blind pursuit of
growth
Over-extension of
credit
Insufficient capital
Fraud and
dishonesty
Product issues
AT FORD,
TURNAROUND IN JOB 1
FORD: QUESTIONS
What were some of the main problems with Fords previous turnaround
efforts?
What was the state of Fords products [quality, design etc] when Mulally
took over?
In what ways were consumer preferences changing and why was Ford so ill
prepared to meet their changing needs and interest?
What were the internal and external warning sign that indicated Ford was
in trouble?
In what ways was Mulally a surprising choice to be Fords next CEO?
What are advantages/ disadvantages of an OUTSIDER to manage a
turnaround?
Session 8
SESSION
6
TIME
22-Sep
7:30-8:50
TOPIC
CONTENTS
- Class discussion
- Case -3: Shimla Dairy
22-Sep
8:50-10:00
26-Sep
5:00-5:55
26-Sep
5:55-6:50
- Article on internationalization
- Class discussion
- Case -6: CUMI in China [growth and internationalization strategy]
10
11
26-Sep
7:20-8:05
26-Sep
8:30-10:00
Sessions 8
SPECIFIC STRATEGIC CHOICES
Growth Strategy +
CASE: APPLE 2010
KEY OBJECTIVES OF AN
ORGANIZATION
TWIN OBJECTIVES:
INNOVATE AND MANAGE EXISTING BUSINESSES
SIMULTANEOUSLY BUILD NEW BUSINESSES
Horizon 2
Build Emerging business
Horizon 1
Extend and defend core business
RESOLVING TO GROW
Gaining senior team commitment
Raising the bar
Removing organizational barriers
Existing
MARKETS
New
New
PROTECT/BUILD
Consolidation
Market penetration
PRODUCT DEVELOPMENT
With existing capabilities
With new capabilities
Beyond current
expectations
MARKET DEVELOPMENT
New segments
New territories [including
internationalization]
New uses
With new capabilities
Beyond current expectation
DIVERSIFICATION
With existing capabilities
With new capabilities
Beyond current
expectations
1. Existing products/services to
existing customers
Could new approaches to advertising or
promotion persuade customers to increase the
size or frequency of their purchase?
How could one increase customer loyalty and
existing share of each customers purchase?
Could prices be adjusted to boost volume and
revenue?
Could other existing products/services be crosssold
to
current
customers
of
core
products/services?
2. New customers
Could new approaches to advertising and promotion
capture new customers in existing segments?
Are there entirely new customer segments that might
be interested in existing products/services?
How can these products or services be repositioned for
new segments
Are there partnerships or alliances that could be
formed to increase the reach of existing
products/services?
Could one bundle products/services in ways to appeal
to new customers?
3. New products/services
What extensions or modifications to existing
products/services could fill gaps in market coverage?
What customer needs are existing products/services
satisfying, and what is the ideal product or service
for that need?
What fundamentally new products/services could be
developed to cater for emerging or latent demand?
Are there products/product lines that can be
purchased or licensed to complement existing range?
5. New geographies
[including overseas markets]
Are there opportunities to deepen points of
distribution in existing territories?
Are there opportunities to enter underserved
regions within the boundaries of an existing
national business?
Could production cost or quality advantages be
exploited via exports?
Could global coverage drive economies of scale?
In which new markets could the existing business
model be exploited?
CASE 5:
APPLE IN 2010: QUESTIONS
1. What historically have been Apples competitive
advantages?
2. Analyse PC Industry. Are the dynamics favourable or
problematic for Apple?
3. How sustainable is Apples competitive position in PCs?
4. How sustainable is Apples competitive position in MP3
players?
5. How do you assess Apples competitive position in
Smartphones?
6. What are the prospects of iPads?
Session 9
SESSION
6
TIME
22-Sep
7:30-8:50
TOPIC
CONTENTS
- Class discussion
- Case -3: Shimla Dairy
22-Sep
8:50-10:00
26-Sep
5:00-5:55
26-Sep
5:55-6:50
- Article on internationalization
- Class discussion
- Case -6: CUMI in China [growth and internationalization strategy]
10
11
26-Sep
7:20-8:05
26-Sep
8:30-10:00
Session 9
Internationalization
Strategy +
Case discussion: CUMI
CHOOSING CORPORATE
& GLOBAL SCOPE
Difference between Competitive Strategy and Corporate
Strategy:
Competitive strategy usually look at single business unit
looking at specific product [service]- market and examine
whether the business has competitive advantage or
disadvantage
Corporate Strategy captures a set of choices that a
corporation makes to create value through configuration and
coordination of its multi-market activities.
Thus, Corporate strategy addresses choices about multimarket activities while competitive strategy deals with a set of
choices confined to a single market
CHOOSING CORPORATE
& GLOBAL SCOPE
Difference between Corporate Strategy and Competitive
Strategy:
Though there are differences between corporate and
competitive strategies, the former can enhance business
units competitive advantage over and above what they could
otherwise achieve. When this happens, business units benefit
from corporate advantage
Two significant choices coming under corporate strategy are:
Corporate Scope that specifies the product-markets the corporation
has chosen to maintain a competitive presence
Corporate Ownership that specifies which part of each business unit
will be owned by the corporation
CHOOSING CORPORATE
& GLOBAL SCOPE: KEY QUESTIONS
Two principles can be used to decide the presence and
ownership issues. These are:
Better off Test
Ownership Test
Choice of markets [presence issue]
Does the presence of the corporation in a given market improve the
total competitive advantage of various business units over and above
what they achieve on their own?
A negative answer will suggest exit from the market.
A positive answer will mean a simultaneous presence in multiple
industries will be beneficial
CHOOSING CORPORATE
& GLOBAL SCOPE: KEY QUESTIONS
The OWNERSHIP question:
Does ownership of the business unit produce a greater
competitive advantage than an alternative arrangement
would produce?
Ownership means outright control including majority stake in
the business unit
Alternative here means licensing, long term contract, strategic
alliance or joint venture
When both tests are satisfied, we should conclude that a
corporation made an appropriate decision to be present in
another industry and own the unit there
CHOOSING CORPORATE
& GLOBAL SCOPE: KEY QUESTIONS
In international business context, both better-off and ownership test need
to be applied to choose global scope. The relevant questions will be:
Does the presence of the corporation in a given geographic market
improve the total competitive advantage of various business units over
and above what they achieve on their own? [better-off test]
Does ownership of the business unit in a geographic market produce a
greater competitive advantage than an alternative arrangement would
produce? [ownership test ]
When answers to both the above tests are positive, one can conclude that
the corporation can enter another country with direct ownership [i.e.
outright control through branch or wholly-owned subsidiary or at least a
majority stake]
GLOBAL ECONOMY AN
OVERVIEW
Core concepts:
Motivations for expanding globally
Increase size of potential markets of a firms products and
services, thereby achieving economies of scale of various
activities of the firm
[ Boeing, Microsoft etc.]
Reduce R&D and operating cost by locating overseas units in
countries which have cost advantage [such as availability of
cheap raw materials] or availability of low cost but highly
skilled labour
Attain greater purchasing power in relation to inputs by virtue
of access global markets and operating in global scale
Extend life cycle of products [ for example a product which is in maturity
phase in the home country can be launched in a developing or emerging
market to further generate revenue out of that mature product]
Core concepts:
Motivations for expanding globally
Optimize physical location for every activity in a firms value chain [instead
of putting up every activity in the home country]. This is an important
reason why firms go global. Specifically, 3 objectives dominate a firms
thinking process in this regard:
Performance enhancement through taping talented people of other countries
[ location decision based on access to best talent since talented people can
help in enhancing a firms performance. For example, Microsoft established a
corporate research centre in Cambridge, UK. ]
Cost reduction- location decision based on cost consideration [for example,
many Fortune 500 companies have set up their manufacturing plant in China,
Nike sourcing athletic shoes from Asian countries, companies setting up plants
in Mexico for low cost labour and minimize transport cost to USA]
Risk reduction Location decision based on such consideration as
political/economic risks [ that can disrupt global supply chain since many
activities of a firms value chain are spread out in various countries] or
exchange rate fluctuation risks
HIGH
Pressure
to Lower
Cost
Global
Strategy
Transnational
International
Strategy
Multi-Domestic
Strategy
Strategy
LOW
LOW Pressure for local adaptation HIGH
Core concepts:
Definitions of 4 types of strategies used in global business context
INTERNATIONAL STRATEGY:
Diffusion and adaptation of parent companys knowledge and
expertise in foreign markets.
Country managers are allowed to make minor adaptations to product
and ideas coming from the parent company in the home country but
they have very little autonomy compared to country managers of
multi-domestic companies [to be defined].
Examples are Ericsson [small home market], McDonald, Coke, Kellogg
etc., all of whom used products and services that were successful at
home market to develop grow business in international market with
marginal adjustments in design/services.
Core concepts:
Definitions of 4 types of strategies used in global business context
GLOBAL STRATEGY:
Global strategy is most useful when there are strong pressures for
reducing cost and comparatively weak pressures for adaptation to
local market.
A global strategy emphasizes economies of scale through
standardization of products and services and centralization of
operations in a few locations; world-wide standardization can help a
company become industry standard [Intel, Microsoft, Google etc.]
Identifying potential economies of scale becomes an important
consideration. Focus also needs to be there on establishing global
scale and efficient logistics and distribution network.
Competitive strategies are developed centrally and controlled to a
large extent by the Corporate office
Companies in pharmaceutical, semiconductors, jet aircraft etc. follow
global strategies.
Core concepts:
Definitions of 4 types of strategies used in global business context
MULTI-DOMESTIC STRATEGY
A company follows a multi-domestic strategy when its
emphasis is on differentiating its products/services
through adapting the same to individual country context.
Decisions involving multi-domestic strategy tend to be
more decentralized in order to allow country management
to make changes in offerings quickly as and when demand
conditions change.
Country specific culture, language, income level etc.
influence such a strategy significantly and hence strategies
of same MNC across countries can differ
Core concepts:
Definitions of 4 types of strategies used in global business context
TRANSNATIONAL STRATEGY
An MNC following transnational strategies strives to optimize the
trade offs associated with efficiency, local adaptation and learning.
TNCs aim efficiency for global competitiveness, local adaptation for
increased flexibility in the TNC system and cross border learning for
flexibility in international operations.
No single location is important and a TNCs assets and capabilities are
dispersed [for example, for a particular product, several components
can be manufactured at global scale in different countries]
TNCs opt in favour of the most beneficial location for a specific activity. Thus
TNC managers avoid the tendency to either concentrate activities in a central
location [as with a global strategy] or disperse them across many locations to
enhance adaptation [as with a multi-domestic strategy]
In TNCs, every location-specific unit makes unique contribution to make the
world-wide operations highly efficient
ENTRY MODES OF
INTERNATIONAL EXPANSION
High
Extent of
Investment &
Risks
Franchising
Licensing
Low
Exporting
Low
HIGH
Ownership
Advantage
[Why? What is
special?]
Internalization
Advantage
[How to exploit
?]
Locational
Advantage
[Where?]
Local responsiveness
Adaptation: Adjust to
differences
Aggregation
Aggregation: Overcome
differences
Arbitrage
Absolute Economies
Scale Economies
AGGREGATION:
Overcoming to Difference
in CAGE distance
ARBITRAGE: Exploiting
Difference in CAGE distance
REGION
Other country
Groupings
PRODUCT/ BUSINESS
Function
Platform
Competence
Client industry
Key accounts
CULTURAL
Country-of-origin effects
ADMINISTRATIVE
Taxes, regulations,
institutional protection
GEOGRAPHIC
Taking advantage of
distance
ECONOMIC
Differences in prices,
costs, knowledge,
competitive position etc.
Decentralization
Partitioning
Modularization
Partnering
Recombination
Innovation
Transformation
Scope selection
AAA STRATEGIES:
3 FUNDAMENTAL QUESTIONS
How does the MNCs cross-border strategy plan to
make progress on the AAA dimensions
Adaptation
Aggregation
Arbitrage
Which AAA tension the MNC is planning to manage
particularly well
What is going to be its fundamental source of cross
border advantage relative to competition?
A SAMPLE GLOBALIZATION
SCORECARD
Adaptation
Local responsiveness
Rate of development
products
Pricing relative to
Local competition
Mentions in local media
% of locals in top leadership team
Aggregation
Scale Economies
Arbitrage
Absolute Economies
% of back-end activities Off-shored to low cost countries
Legal
Stability of regulations
Mechanisms for expression of discontent
Enforceability of legal contracts
Economic risks
Inflation rate
Current and potential state of the countrys economy
Resource base [natural, human and financial]
Ability to adjust to external shocks [vulnerability in import/export as a % of GDP,
diversification of imports/exports, vulnerability of the economy ref changing prices of
major imports/ exports
CORE CONCEPTE:
MITIGATING SOVEREIGN OR COUNTRY RISKS
GLOBAL MINDSET
In global corporations, interactions and relationships among people who
are culturally different are realities of daily life.
Also a growing reality is the need to form virtual teams for dealing with
projects requiring cross country resources and capabilities. Such virtual
teams comprises diverse members from different countries and cultures.
Members of such virtual teams must be dynamic, flexible and culturally
intelligent in order to deliver speedily tailored products and services
globally.
Since lack of appreciation of how cultural differences can adversely
impact cooperation and collaboration across countries, a key imperative
for managers is to have a global mind-set in order to operate
successfully.
GLOBAL MINDSET
Global mindset is a set of attitudes that help managers cope
constructively with competing priorities [for example global vs. local
priorities] rather than advocating one dimension at the expense of others.
Such a global mindset helps in building an ability to accept and work with
cultural diversity.
LOCAL MINDSET
GLOBAL MINDSET
PERSONAL
CHARACTERISTICS
Functional expertise
Prioritization
Structure
Individual
responsibility
Predictability
Trained against
surprises
Knowledge
Conceptual ability
Flexibility
Sensitivity
Judgment
learning
GLOBAL MANAGERS
Business Manager
Strategist + Architect + Coordinator
Country Manager
Sensor + Builder + Coordinator
Functional Manager
Scanner + Cross-Pollinator + Champion
Corporate Manager
Leader + Talent Scout + Developer
COMPETENCIES OF GLOBAL
MANAGERS
Cross cultural leadership- required for building trust and relationships
Cultural intelligence
It is the ability to interact effectively with people from different
cultural background. Possessing cultural intelligence enables
individuals to recognize cultural differences, adjust to new cultures
and situations, understand local practices and behave
appropriately and effectively
Culturally intelligent persons suspends judgment until information
beyond the other persons ethnicity becomes available
Cultural competence among managers and employees and
openness to different ways of working are paramount to team
effectiveness
Communication and interpersonal skills greater the cultural difference,
more difficulties are expected while communicating
3.
4.
5.
6.
Session 10
SESSION
6
TIME
22-Sep
7:30-8:50
TOPIC
CONTENTS
- Class discussion
- Case -3: Shimla Dairy
22-Sep
8:50-10:00
26-Sep
5:00-5:55
26-Sep
5:55-6:50
- Article on internationalization
- Class discussion
- Case -6: CUMI in China [growth and internationalization strategy]
10
11
26-Sep
7:20-8:05
26-Sep
8:30-10:00
SESSION 10
STRATEGY IMPLEMENTATION:
Select Best practices
Management of 3 key
processes:
Strategy process,
Operations process and
People process
THREE PROCESSES
Strategy
Process
Operations
Process
X
People
Process
X = ROLE OF
THE
BUSINESS
LEADER
STRATEGY IMPLEMENTATION:
Select Best practices
Management of 3 key processes strategy process,
operations process and people process
High quality strategy execution presupposes high
quality operations process [action planning and
control]
Right person for the right job
Robust MIS [based on Balanced Scorecard concept]
and review process
Follow through
Confronting reality
STRATEGY
IMPLEMENTATION[Continued]
Dealing with star performers not performing
up to expectation
Dealing with non-performers
Optimum balancing of 7 key variables strategy, structure, systems, staff, skill, style
and shared values
Strategy execution is the job of the business
leader
STRATEGY
IMPLEMENTATION[Continued]
EXECUTION IS A DISCIPLINE AND MUST BE
LEARNED SPECIALLY:
- Project management planning and review
- Scheduling
- Cost management
- People management
- Time management
- Inter-personal skills
- Negotiation and conflict resolution
- Problem solving skills
- Communication skills
- Relationship management
STRATEGY IMPLEMENTATION :
RESEARCH FINDINGS
WHAT MATTERS MOST IN STRATEGY
EXECUTION] [in decreasing order of
importance]: FOUR BUILDING BLOCKS
Information flow
Clarification of decision rights of
managers
Right motivators
Right structure
ALLENTOWN MATERIALS
CORPORATION [B]
What are the business and organizational challenges
Allentown faced when Rogers took over?
What were the broad design solutions selected by Rogers [
recommendations were made by OE Consultants]? Do you
think these will improve quality of decision making and alter
managerial behaviour?
What were the strengths and weaknesses of the change
efforts made?
Do you think the performance of Allentown will improve in
next few years post implementation of the recommendations
described in the case[ considering the strengths and
weaknesses together]?