SM PDF

Date Event Remark
1910--1926 Works from a leased office in Kolkatta Inception

24th August 1926 Purchase a office in Kolkatta Establish in India
1925 Packaging and Printing Backward Integration
1969 A.N.Hakasr ITC's first Indian chairman feels the need to diversify out of tobacco as it is a non-priority sector. FOCUS/ INTENTION
1973 Sea food export.. Prawn and Fish but soon got out FAILED Diversification
1975 ITC-Welcomgroup Hotel Chola, Chennai Diversification - Hospitality Sector
1979 Paperboards business by promoting ITC Bhadrachalam Paperboards Limited. Development of Backward Areas
1985 Nepal Subsidary.. Surya Tobacco Co. First step outside India
1990 Setsup Agri Business Division for export of agri-commodities Focus on agri business
1990 Acquired Tribeni Tissues Limited, Specialty paper manufacturing company & supplier of tissue paper for cigarettes Inorganic Growth
2000 Choupal initiative with soya farmers in Madhya Pradesh. New areas
2000 Lifestyle Retailing - Wills Sport range of international quality Premium Offering
2000 Information Technology arm spun off as an independent unit New areas
2001 Kitchens of India Agri/ Premium
2002 Safety matches brands like iKno,Mangaldeep and Aim. Agri / General
2002 Entered the confectionery and staples segments with Mint-O, Candyman confectionery and Aashirvaad atta (wheat flour).
2002 Wills Classic formal wear launched Garments/ Fashion
2002 Premium range of notebooks under brand Paperkraft launced Paper / Fashion
2002 John Players Clothing range Garment/ Fashion
2003 Classmate range of notebooks launched Paper / General
2003 Wills Clublife evening wear launched Garment/ Fashion
2003 Mangaldeep Agarbattis (incense sticks) Agri
2003 Sunfeast Confectionary Agri
2004 Acquired the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), Coimbatore Inorganic Growth
2004 Nepal unit diversified into manufacturing and exports of garments. Garment/ Fashion
2005 Personal care products 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel' and 'Superia' brands Personal care/ Fashion
2006 Lead name Wills Lifestyle India Fashion Week Fashion
2007 Bingo! Chips Launched Agri / Premium- General
2010 Sunfeast Yippee! Instant noodles market Agri / Premium- General
2010 Introduces handrolled cigar, Armenteros, in the Indian market. Agri / Premium
2010 Colour Crew was launched as a new brand of art stationery. Paper / Fashion
2013 Engage - 'couple deodorants' Personal care/ Fashion
Date Event Remark

August' 24 1910 Imperial Tobacco Company of India Limited. Incorporated
1970 India Tobacco Company Limited Name change
1974 I.T.C. Limited Name change
September'18th 2001 ITC Ltd (Full stops removed) Name change
Session 01
- Ground Rules
- SM-I recap
- Hambrick and Fredrickson (2005)
Sasanka Sekhar Chanda

2019
Strategic Management - II
2
Ground Rules
• Students are expected to come prepared to the class
▫ Studying in groups is encouraged
• Per my understanding the PGP Office will not
entertain any representation for excusing misses in
biometric attendance recording
▫ Therefore I am unable to help with attendance
▫ In the event of a missed biometric recording, a
student needs to inform the Academic Associate, only
on the same day, at the start or end of class.
Session 01
- SM-I recap
- Hambrick and Fredrickson (2005)

2019
4
Re-cap SM-I: Business Strategy

• Started with core values and core purpose
• Learned to analyze the environment
▫ Look into the future, set goals as a function of core values
and purpose, walk back to present to determine the strategy
to attain those goals, given what a firm has & what it can do
• Moved on to Competitive strategy
▫ Analytic recourses to obtain an edge over rivals
 From the perspective of analysis of Five forces & value
chain
 Either be the Cost Leader, or obtain premium by
differentiation
 From the perspective of ownership of unique, valuable,
rare, inimitable, non-substitutable (VRIN) resources
5
Some questions arise after SM-I

• If every company acted as per 5 forces and
value chain analyses, profitability should be
same across firms?
▫ Only stupid firms make less profits, and they die
• If everyone went after VRIN resources, their
prices would be bid up, nullifying advantage
of possession?
▫ Management would concern bribing officials to corner
VRIN resources at below market prices (Coal-block
allocation scam, 2G-spectrum scam …)
6
Conceptual basis of Porter

7
Functions of the Corporate Office

BOARD OF GOVERNORS
HEADQUARTERS
Functional Heads: FINANCE AND ACCOUNTS , IT, HR, OPERATIONS , R&D
Division Heads: SBU Leaders, COUNTRY Heads
Horizontal functions: Legal, Public Relations, Corporate Social Responsibility
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2
Strategic Business Unit (SBU) Functions

Analyze Product Market conditions, Respond to competitor moves and
technology changes by management of product life cycle, seek to deliver
higher value
Corporate Functions
Strategic Decision Making, Strategy Formulation, Strategy Implementation,
Diversification, Mergers and Acquisitions, Strategic Alliances, Internationalization,
Corporate Venturing, Knowledge Management , Organizational Structure
Control Function (TMT & Board of Directors) Leadership, Corporate Governance
8
Hambrick DC, Fredrickson JW (2005)
Are you sure you have a strategy?
Academy of Management Executive, 15(4): 48-59

9
Clarifying Elements of Business Strategy:

ARENA
• What business are we in? (Drucker p. 53)
▫ Product category, Market segment, Geographic
areas, core technologies, value creation segments
[Design, Mfg, service , distribution]
 E.g. Women’s high end fashion accessories;
countries with per-capita GDP > $5000; Inexpensive
contemporary furniture for young, white collar
(IKEA); Leading-edge Braking systems for high-end
passenger automobiles and off road vehicles (Brake
Products I)
• How does this help? Pros, Cons?
10
Clarifying Elements of Business

Strategy: VEHICLES
• The means for attaining presence in a particular
product category, market segment, geographic
area or value creation stage
▫ Internal development; Joint venture; Licensing of
Franchising, Acquisitions (p. 54)
 E.g. Organic expansion with wholly owned stores
(IKEA) Internal development of new, leading edge
technology + Strategic alliances with suspension-
component manufacturers + Joint ventures with
brake companies in Asia (BPI)
• How does this help? Pros, Cons?
11
Clarifying Elements of Business Strategy:

DIFFERENTIATORS
• Concerns what will make customers buy the
products/services of the firm (p. 55)
▫ Image, customization, price, styling, product
reliability (p. 54)
 E.g., there is no better value- quality for the price
than a Honda (car); Lowest possible fares and on-
time reliability (Southwest Airlines); Instant
fulfilment + reliable quality + low price + shopping
experience (IKEA); ABS & Electronic traction
control technology + system integrations capability
(BPI)
• What are pros and cons to making
differentiators explicit?
12

Strategy: STAGING
• Concerns speed or sequence of moves (p. 55)
▫ No universally superior sequence (p. 55). Judgment
required as to what sequence is more useful, given a
firm’s resources and environmental constraints.
 E.g.: Regional Insurance Co. expanded in its neighboring
regions first, acquiring resources to enable larger
advertising expense on branding, paving the way for
more acquisitions at lower premium; International
expansion by region + expansion from one store in a
country(IKEA); Asian JVs and alliances with suspension-
component companies, followed by aggressive design and
marketing of system-integration offering (BPI)
• Should a firm broaden its suite of offering before
going international, or do the reverse? Pros, Cons?
13

Strategy: ECONOMIC LOGIC
• Logic as to how profits will be generated, by
returns above a firm’s cost of capital (p. 56)
▫ Premium prices by offering customers a difficult-to-
match product (that they are willing to shell-out money for),
 e.g. NYT digital charges readers a fee for reading news
articles on their website (others Huffington Post, Rediff,
ToI do not).
▫ Lowest costs through scale/ scope advantages e.g. Walmart
▫ All the good stuff regarding Focus, CL and Diff (Porter)
• Don’t all differentiated products eventually become
commodities (e.g. cellphone features)?
1
Session 02
Ghemawat P, Stander HJ (1992)
Nucor at crossroads HBS 9-793-039
case
2019
Strategic Decision:
Choice of New Technology
2
Steel Industry in the USA: 1986

• Production 70 million tons. Consumption 90m. Imports 21m.
Exports 1m
• Types of Producers
▫ Integrated Steel Plants, Minimills, Specialty steel
• Production mix in US (p. 15 Ex 2)
▫ Flat sheets 52% (36 million tons)
▫ Non-flat 48% (33 million tons)
• Consumers: Automotive, Construction, Appliances &
Equipment [A, C and A&E], some via service centers and
distributors (downstream processing)
▫ 75% of flat-rolled sheets consumed by A, C and A&E
• Quality parameters (p. 2)
▫ Internal: metallurgical structure & strength
▫ Surface quality – important in Automobiles and Appliance
castings
▫ Dependable delivery
3
INTEGRATED STEEL PLANTS
• 107 Million tons installed capacity

• Minimum economic plant size 3 million ton +
• Capital cost $1000+ per ton of installed capacity
▫ Life span of 25-30 years
• Use iron ore as input:
▫ Sell to higher end consumers- Automotive and
Appliances
• US Steel, Bethlehem, LTV major players
▫ 59% of ISP capacity;
▫ 49% of flat rolling capacity
4
Minimills
• Key Players: Nucor, North Star, Florida Steel &

NSW
• Use Scrap as input (contains impurities)
• Capital cost $100+ / ton of installed capacity
▫ Lifespan of 10 years
▫ Minimum efficient scale: few hundred thousand tons
▫ Require cheap electricity
• Sell low end structural products
▫ Like beams, flanges to construction industry
• Absent from flat-rolled products
▫ Impurities in scrap cause blowouts if cast thinly
5
Nucor
• Competence & Strength

▫ In quickly commissioning plant (~18 months)
 New plants achieve 25% ROA within 5 years from
start
▫ In improving manufacturing processes
▫ Lower wage bill from fixed + bonus pay plan
▫ Captive consumer – Vulcraft
• Upcoming expense at CSP,(Compact Strip
Production) decision time
▫ $175 million on a JV with Yamato Kogoyo (YK) to
produce wide flange beams (p. 11)
6
Commercials in the CSP decision
• ISP-CSP-MM (integrated steel plant, compact strip

production, mini mill)
▫ capital cost per ton installed capacity $1000 / $ 300-400 / $ 100
▫ Minimum efficient scale: Million/800+/ 100s tons
▫ Plant life 25-30 yr / 10-12 yr / 10 yr
• The tab:
▫ Just CSP 280+30+30 = 340 (p. 13)
▫ CSP +YK-Japan 100+250+60 = 410, till 1989. (p.
14)
▫ Only YK => 175 (p. 11)
▫ Nucor Reserves 185. (all $ million)
7
Technology uncertainty in CSP(2”)

adoption
• Alternative technology may forge ahead
▫ Hazelett caster may succeed in producing 1”
 At present, Conveyor belts etc. wear out (moving
parts)
▫ Mannesman-Demag also trying to produce 1”
• Whether pilot results will continue to hold in
manufacturing
▫ Breakouts of one out of every ten casts- encouraging
▫ Pilot ran for 7 min and produced 12 tons- can it
sustain?
 Longer run is required to get slabs 100+ feet long.
8
Why consider CSP at all?
• Main benefit of CSP over minimill

▫ CSP produces of thinner slab (2”) [MM’s => thicker]
 will require less reheating for further processing (cost
saving)
 will make it easier to get closer to flats, where the money
is
• Main benefit of CSP over ISP
▫ Thinner slab with scrap as input (in place of Iron Ore)
 Iron Ore processing much more complicated than
CSP/MM
▫ Relatively thin (2”) slab is produced with much lower
capital investment and much lower commitment
horizon
9
Strategic considerations in going with

CSP
RAW MATERIAL
SCRAP Iron Ore (DRI)
Low End Feasible, with Overkill to use purer iron
SMS’s CSP (I) for low-end (II)
MARKET
SEGMENT High End Optimistic, due to Opportunity, when going
(Auto + presence of with SMS’s CSP
Appliances) impurities (III) technology (IV)
If Scrap is used as raw material, 2” flats being thinner than

current produce there will be some cost benefits (I). But the
produce may not satisfy the quality requirements of the high end
customers (III).
In IV, Nucor will be able to produce 2” flats with quality of ISPs
but with investment (and lock in period) lower than ISPs.
10
Class question
How would one classify the following decisions

in terms of ∆(scope) & ∆(commitment):
- Going ahead or dropping the agreement with
YK-Japan
- Going ahead or stopping with the CSP
initiative?
11
Framework for class question

∆(Commitment) ∆(Scope)
If Nucor keeps the
YK agreement
If Nucor backs out of
the YK agreement
∆(Commitment) ∆(Scope)
If Nucor decides not
to go ahead with
the CSP-SMS now
If Nucor goes ahead
with the CSP – SMS
now
12
Decision Alternatives
Yes, go with YK-Japan No, drop YK-Japan
Yes- Go with (I) (II)
SMS-CSP
No, just (III) (IV)
don’t go with
CSP now
YK effort:
CSP effort:
YK and CSP together:
Saying “No” to YK:
Session 02
Shivakumar R (2014)
How to tell which decisions are strategic
California Management Review, 56(3): 78-97
reading
2019
Strategic Decision Making

2

BOARD OF GOVERNORS
HEADQUARTERS
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

higher value
Corporate Functions
Corporate Venturing, Knowledge Management, Organizational Structure
3
Decision Dimensions: Commitment and Scope
• The degree of commitment is measured by the

extent to which a decision is reversible (p. 79).
▫ Example: Intel building a next-generation chip factory.
Costs ~$3 billion, takes 2 years to build
• The term “scope of a firm” refers to the firm’s choice
of products, services, activities and markets (p. 86)
▫ Example of Significant change in firm scope (p. 80)
 Apple entering the smart phone market
▫ Example of insignificant change in firm scope (p. 80)
 Implementing an ERP system replacing legacy sys
4
If there is large change in both …
• The strategic decision involving significant

change in both commitment and firm scope
▫ Involves problems that are hard to comprehend
▫ Is often without precedent
▫ Having few obviously wrong or right answers
▫ Potentially carry grave consequences for the firm
if done wrong
5
Classifying Decisions
Significant change in Insignificant Change in
Commitment Commitment
Significant STRATEGIC Neo-Strategic (Shivakumar)
change in Scope (I) Not Strategic (previously)
(II)
Insignificant Tactical (Shivakumar) OPERATIONAL (also not
change in Scope Strategic (Ghemawat etc.) strategic)
(III) (IV)
Traditionally all decisions involving significant change in commitment by

firm (commitment signifying irreversibility) were considered strategic,
regardless of whether firm scope was altered or not. In p. 83, Shivakumar
himself says that “strategic decisions commit firms to some paths and make
it difficult to pursue others”
Shivakumar proposes a label “Tactical” in quadrant III and a label “Neo-

Strategic” in quadrant II
1
Session 03
Kim & Mauborgne (2016)

The Marvel Way: Restoring a Blue Ocean
case
2019
Exploring Options: Blue Ocean Strategy

2
Marvel – early days

• Started 1939 Martin Goodman, comic books
▫ 40s Captain America only original character. Rest
knock-offs from DC comics (mimicking Superman, Batman, Wonder Woman)
▫ 1954 slump: comics are bad Homosexuality, teen pregnancy
▫ DC Comics purchases Marvel’s distribution arm
 Restricting sales of me-too, knock-off Marvel comics
• Onwards 1961 (Marvel under Stan Lee in ‘61-’65)
▫ New demographic- college students targeted with
original content and a new way of writing The Marvel method.
 Fantastic Four, Incredible Hulk, Thor, Ant-Man,
Spiderman. Bundled into The Avengers
 Also, X-men, The Human Torch, Dr. Strange, Loki
3
Trouble starts from late ‘60s
• 1968: Goodman sold Marvel to Cadence Industries

• New owners poor managers. Lead cartoonist quit for DC
• 1986: Marvel sold to New World Entertainment
• 1988: Perelman the corporate raider bought Marvel
4
Till bankruptcy under Perelman (1996)

▫ Comic book prices were raised repeatedly
▫ Marvel introduced many versions of the same comic
book, each with a different cover, in order to fuel
speculative purchases by collectors
▫ 12 distributors reduced to one
 Hero World acquired for $7m, 1994
 # of comic book stores fell from 9000+ to 4000+
▫ More companies purchased to artificially boost share
prices (showing higher revenue)
 Fleer ($286m, 1992), Skybox ($150m, 1995) both in sports
card Panini (Stickers, $158m, 1995), 46% of Toy Biz
▫ 1996: 375 + 115 employees laid off.
 Marvel filed for Bankruptcy in December
5
Post Bankruptcy 1998

• 1998: Perlmutter era starts
▫ Toy Biz used $250 million in high-yield junk bonds,
renamed Co. to Marvel Enterprises high interest debt $30m/yr
• 5 businesses
▫ Comic books: Revenue + IP + Goodwill + brand
▫ Trading cards: not profitable Fleer + Skybox sold for $26m in 1999
▫ Toys: low margin but profitable Marvel exited toy prodcn in ‘99
 Successful movies increased toy sales
▫ Licensing of characters (movie studios, toy biz)
▫ Marvel Studios: Not a movie production set up
 Rather, used for licensing Marvel characters to Hollywood
6
Early movie deals provided capital

• Spiderman
▫ Movie rights purchased by Sony for $10m + 5%
first dollar royalties.
▫ Spiderman, Spiderman 2, Spiderman 3 grossed
$2.5b, marvel got upwards of $62m
• Twentieth Century Fox
▫ Movie rights to X-men, Fantastic Four, etc.
▫ Movies grossed 2.5b. Marvel got $26m for X-men
• Universal: rights to make Hulk movies
7
2004 onward: create a real movie studio
• David Maisel earlier worked for talent firms Endeavor and Creative Artists Agency
▫ Comic book fan, suggested that Marvel make movies
▫ Create one large Universe of Marvel characters
▫ Use Marvel characters as collateral for financing
 Eventually $525m in low interest debt
• 2006 Maisel – chairman of Marvel Studios
▫ Iron Man in May 2008, $585m w/w revenue
8
Cost consciousness @ Marvel Studios

• Location: Above a car dealership
▫ No empty soundstages, no unused backlots
• Office Furniture: Threadbare; no unused space
• No free coffee/ Lunch. Thin rank of mid-management
• No spending on glamor
▫ Lesser known actors, directors, screen-writers
 Signed to obligation for appearing in 6-9 films
▫ Edited films to reduce expense on shots
9
Value in marvel-made movies

• Rich narrative and story-telling, leveraging decades of
intricate comic book storylines
▫ X-men are mutants with special abilities but are also
alienated
▫ The Hulk character has a tendency to ‘blow up’
▫ Spiderman has power. Struggles to get date
▫ Iron man has life-threatening heart condition, and a
drinking problem
• High quality drama that contains super heroes
▫ Layering: building success of new characters on success of
preceding characters
▫ Creative committee to ensure integrity of characters and
story lines: Marvel execs (not 3rd party) bring comic books to
life. Storyline independent of any single actor or director
• Nerd culture began to eclipse pop culture
10
The Wagon Wheel @ Marvel

• Hub: Characters, Brands (IP)
• Rim: Synergy across the spokes
• Spokes: Media forms, consumer product categories
▫ Only two spokes at start: Comic Book, Toys
▫ Subsequently:
 Motion pictures
 Licensing
 Video games
 Television
 Amusement parks
11
At present …
• Dec 2009: Disney acquired Marvel for $4.2b
▫ Maisel (chairman), Cuneo (CEO) out. Perlmutter stays
• Marvel and Time Warner key players in fantasy films
• Marvel’s primary competitor is bad comic book movies
▫ Too many of them sour audiences to the genre
▫ Marvel made 91 movies, from 1999-2015
 41 based on Marvel characters($21.7b), 16 DC ($5b)
• Aggressive expansion into television sector 2010
• Fiege (studio head) dissolved the Creative Committee
▫ Got Captain America: Civil War reassigned to Disney studio
• Marvel moved to Disney’s lot –better offices etc.
12
Class Questions
• Draw the Strategy Canvas for Marvel:
▫ Before 1961 and afterwards, i.e., in 1961-65
▫ before the Bankruptcy (1996) and afterwards (till 2015)
• What factors of competition did Marvel eliminate,
reduce, raise and create post-1996
• In the post-2015 scenario
▫ (a) How do Marvel and Time Warner look like, on the
strategy canvas?
▫ (b) what can Marvel do to find another blue ocean?
Draw the corresponding curve in the strategy canvas.
THE STRATEGY CANVAS
AS-IS Hollywood Studios Marvel Studios

Session 03
Kim,W.C.,& Mauborgne,R. (2002)

Charting your company’s future
Harvard Business Review. (June) 77-83
reading
2019
Exploring Options: Blue Ocean

2

BOARD OF GOVERNORS
HEADQUARTERS
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

higher value
Corporate Functions
3
Strategy Canvas
Is a visual representation
of levels of investment in
competitive factors by
players in an industry
• Factors for competition
in a given industry are
listed on the horizontal
axis
• Vertical axis indicates the
degree to which
competitors invest in a
given factor
Source: blueoceanstrategy.com
4
Purpose of the Strategy Canvas

▫ Shows the strategic profile of an industry
 Depicts the factors that affect competition among
industry players
▫ Shows the strategic profile of current and
potential competitors
 Identifies what factors they invest in, strategically
▫ Shows the focal company’s strategic profile or
value curve (focal company => a company being studied)
 Shows how it invests in factors of competition
 Suggesting how it may invest in future
5
Terminology in the strategy canvas
• Focus
▫ The factors emphasized by a focal company
featured in the strategy canvas, as given by higher
level of investment in them, relative to investment
in other factors, and relative to investment by
competing firms
6
Terminology- Continued
• Divergence of a focal Innovator firm
▫ Lower investment in certain factors emphasized
by competitors (or even elimination) reduce / eliminate
▫ Higher investment in certain other factors that are
underemphasized by competitors Raise
▫ Creation of new factors missing in the investment
profiles of competitors create
• Compelling tag line
▫ Advertises the focal company’s offering clearly and
truthfully accord coherence
7
Steps to construct Blue Ocean strategy

• Draw the strategy canvas to understand as-is
• Learn from the field watch consumers in action & the ecosystem
▫ why non-customers do not subscribe to the focal
company’s products / services what are the advantages
of providing more of a particular factor, or bundles of
factors
▫ Assess factors to eliminate, change (reduce / increase),
and create that is within the capacity of the focal company to carry out
• Draw the to-be strategy canvas & articulate a
compelling tag-line
8
Summary
• Blue Ocean strategy calls on companies to create
uncontested new market space, making the
competition irrelevant.
▫ Deliver higher value to buyer, keeping costs low
 Some costs are reduced, others eliminated, by
lowering investment in corresponding factors
 Higher investment in existing factors or investment
in new factors deliver high value to consumer
▫ Create and capture new demand
▫ Attract non-customers
9
Class questions
• Which of the following does / does not suggest a
Blue Ocean Strategy? Why?
▫ Haier developed a small washing machine that
washes only one garment at a time. It was popular
with white collar working professionals
▫ Tata Motors developed the low-cost Nano car
targeting middleclass people wishing to upgrade
from a two-wheeler
Red Oceans represent all industries in existence
today.
They have defined rules, competitors, and market

boundaries.
Key words might include competition, price wars,

market share, commoditization, benchmarking,
strategic positioning, value add.
Blue Oceans represent all industries
NOT
in existence today.
This is undefined market space, otherwise known as

OPPORTUNITY.
Key words might be value innovation, focus, differentiation,

creation of demand, new marketplace
Origin of Red and Blue Oceans
The business environment in which most business strategy and

management has been based on is changing, evolving or
disappearing.
Some of this change is due to technology. Other reasons might be

culture, globalization, speed of new information, or the role of
demographics in the workplace.
Most blue oceans are created from red ocean companies expanding
industry boundaries.
Value innovation is the “new” strategic logic behind Blue
Ocean Strategy.
Instead of focussing on beating the competition, you focus on

making it irrelevant by creating a leap in value for buyers
and creating uncontested market space.
Value innovation only occurs when organizations have
aligned innovation with utility, price and costs.
The market must be ready to accept the product, meaning

that timing is key.
The focus is on both differentiation and low cost to provide

value to both customers and the organization.
The Four Actions Framework
The Strategy Canvas
• Captures the current state of play in the market by detailing

the factors players compete on in product, service and
delivery
• Each factor is plotted on the canvas, with a high score
reflecting the level of investment a specific company
makes in that factor (for example a high score on price in the
wine industry means that the price per bottle is high)
3 Characteristics of a Good Strategy
• It is focused; it is not diffused across all potential aspects of

the market
• The shape of the value curve diverges from any potential

competitors
• It has a compelling tagline

THE STRATEGY CANVAS: Marvel’s foray into
movie making
AS-IS Hollywood Studios Marvel Studios

Acknowledgments
• Prof. Koushik Dutta and Prof. Swapnil Garg provided valuable inputs
Session 04
Montgomery C (2005)
Newell Company HBS 9-799-139
CASE

2019
Diversification
2
Case facts: Newell Company

• 1902: Ed Newell buys assets of a bankrupt
manufacturer of brass curtain (drapery) rods
▫ 1917 sells to small h/w stores, industrial builders
& specialty retailers, - Woolworths
• 1965 Dan Ferguson becomes CEO of $10m co.
▫ Drapery h/w sold to motels, dept stores, Europe
• 1966 acquisition of a small window shade mfgrr
• 1967 Dan Ferguson wrote down the strategy
▫ Sell H/w & Do-it-yourself products to volume
merchandizers
3
Case facts, contd. …

• 1969 acquires Mirra-Cote bath hardware
▫ Opened up a relationship with Zayre discnt rtlrs
• 1972 Newell goes public
▫ Access capital markets to fund acquisitions
• Newell acquired 30+ businesses in next 20 yrs
• Originally used one sales force to sell all stuff
▫ Later, reorganized into divisions, each with own sales
staff. More local promos & retailer tie-in Less national advertisng (p.9)
• Newell sought managers who would be motivated by
success and a lucrative bonus system
▫ Product focus and Profit orientation stressed (p. 8)
 Employees, suppliers, customers are lower priority
4
More case facts

• 1997: revenue of $3.2 bn,
▫ 40% from top 10 customers
▫ Sold mainly to mass merchandizers like Walmart,
Staples, Home Depot
 Walmart accounted for 15% of sales
• Products (Housewares industry p. 9)
▫ Drapery h/w, blinds, shades, torches, paint brush,
home & office storage (shelves), writing instruments,
cookware, specialty glass, office products, picture
frames. “Good, better, best” kinds of brands
• CEO John McDonough. Below him co. Prez T. Ferguson
• Some iffy philosophy from senior management: if each piece is done
right, the whole will look after itself (p. 8).
5
STRATEGY
• Newell acquired companies that manufactured low-
tech, non-seasonal, non-cyclical, non-fashionable
products (Product Strategy)
 “Fundamental Similarity” (p. 2) “volume, staple line” (p. 7)
• Newell sold to volume merchandizers (Market /
Distribution Strategy)
▫ Became a supplier to (US world’s) largest retailers
• Acquisition Strategy: Newellization (Growth Strategy)
• Take over a company making < 10% operating margins.
• Centralize functions, cut redundancies, make operating
margin > 15%
• Keep central control for Administrative, Legal and Treasury
6
Newellization of operations of an acquired co.
• Took place in 6- 18 months timeframe

• President and controller assigned (by transfer from
other divisions of Newell)
• 3 systems were introduced
▫ Integrated financial system
▫ Sales order processing system
▫ Flexible manufacturing system
• Administration, accounting, customer-related
financial aspects were centralized in HQ IT sys
▫ Legal and Tax issues, employee benefits, credit and
collection, EDI, financial control systems
7
Newellization Example
• Anchor Hocking acquisition
• Dismiss sr. managers of acquired company (lower expenses)
• Newell’s sr. managers take part of their jobs. IT does the rest
• Also, sr. managers of the acquired company work according to
old way of functioning, that Newell wishes to discontinue
• Eliminate some product lines (product strategy mismatch)
• reduce employee headcount
• close some factories
• Close company-owned retail stores (market strategy mismatch)
• Anchor Hocking reduced order fill time 18=>7 days)
Being “renowned for squeezing costs out of acquired companies” (p. 12) used to be
the template of successful US firms growing inorganically. Does it work any
more? Why?
8
Newell value propositions: 1997

• Newell sells mainly to volume merchandizers
• Only products that are low tech, non-seasonal, non-
cyclical, non-fashion
▫ that can be manufactured by flexible manufacturing
system.
• By having manufacturing operations are integrated with
proprietary sales order processing system
▫ Newell had invested heavily in computer and
communications hardware. Top 20 customers placed 90%
of their orders through EDI (Newell charged higher prices)
• Newell’s customers share nightly Point-of-Sales data
▫ Helps plan manufacturing and shipping schedules to
minimize inventory
9
Why Newell consolidation succeeded?

• Big retailers would be very reluctant to share their
sales information (PoS data). They will do so only
with suppliers they consider as absolutely needing it
in order to reduce inventory in the supply chain.
▫ The suppliers’ interest being tied with theirs will
ensure that the data is not misused (viz., given to
competitors). Newell products get shelf-space only in the
premises of the mass merchandizers, N. does not have own outlets!
However, Newell did not serve any one retailer exclusively (p. 7).
• As a bigger player N. can invest in costly EDI
• This is why the consolidation of multiple small
players, attempted by Newell, was successful
10
Underlying Newell’s success

• MUTUAL HOSTAGE situation, under high stakes
▫ Merchandizer takes a risk by sharing PoS data for VMI
▫ N. (supplier) takes a risk by not selling from own outlets
▫ Both benefit by reduction of inventory in the supply chain
• Strategy is about creating a weakness on own part, in
order to become eligible for certain roles one will not get
otherwise. PoS data is precious, has high competitive value
• The weakness should not be debilitating- as evidenced by
N.’s refusal to supply exclusively to one merchandizer.
• The new role obtained (supplying lots of products with
low overall inventory) may need costly investment (EDI)
• N. got industry support towards acquisition efforts
▫ Cost of EDI requires high revenue base
▫ Merchandizers happy to deal with one entity instead of
many
11
Pre-’90s vs. ‘90s & later

• Pre-1990’s
▫ Newell purchased Wm. E. Wright company a
manufacturer of ribbons & home sewing products
▫ Sold it off in 1989, though it was a profitable biz.
 Because the business dwindled out of mass retail
channels and moved to small independent retailers
• In the ‘90s
▫ Internationalization was necessary
▫ Newell purchased Cornings’ housewares biz in
Europe, the middle-east and Africa
▫ By 1997 non-US sales ~ 17% of Newell’s revenue
12
Internationalization
• Newell followed its mass merchandizer
customers to overseas markets (as supplier)
▫ Walmart acquired 95 stores in Germany
• Newell’s 1998 acquisitions:
▫ Rotring a German mfgrr of writing instruments
▫ Panex a cookware mfgrr in Brazil
▫ 2 European mfgrrs of window treatments-
Gardinia & Swish
13
“acquiring critical mass”- late ‘90s

• By acquiring critical mass, Newell means that
▫ It has offering at low and medium price point
 Distributed through mass merchandizers
▫ It has offering at higher end of price point
 That are often distributed through specialty
departmental stores
▫ Overall divisional margins are higher than 15%
• Picture Frame example:
▫ Acquired Intercraft and Decorel, large US mfgrrs
▫ 1996 acquired Burnes, a leading mfgrr of high-end
branded pic frames sold thru spclty deptl stores
14
Newell’s new strategy, post 1997

• “Course Correction” – McDonough the CEO
• Seek to Buy or develop stronger brands
▫ Since power of Newell’s customers have gone up
▫ Since Newell CEO aspired to make Newell cross
$10 billion in market capitalization
 Higher PE multipliers at $10b+ => higher bonus
• Led to purchase of Calphalon and Rubbermaid
15
Calphalon
• Privately held manufacturer of anodized aluminum
cookware, placed at the top of the market ($250-
500), and sold through specialty stores. $102
million sales in 1997.
• High selling, general and administrative expenses
(25%)
▫ To build emotional connection with customer
▫ From store within a store format, with Chef
endorsements, cooking classes, book signings
▫ 250 selling specialists managing events, conducting in-
store cooking demos, training stores ppl to sell Calph.
• Competition from (HK origin) Meyer, that sells in
specialty as well as mass merchandizing stores
16
Meyer-competitor to Calphalon
• Apparently had lower cost manufacturing in HK
• Apparently benefitted from lower tax in HK
• Apparently was cross-subsidizing the high end
business (by accepting lower margin) by means
of money made in selling to mass-merchandizers
• Meyer offered poorer service levels, since they
shipped from Asia
17
At acquisition time …
• Calphalon imitated Meyer, as seen from its plan to
sell “Kitchen Essentials …” through Target, with
products manufactured in Indonesia
• Newell planned to retain the Target program
• But, it would not go with any more mass
merchandizers
• Newell expected to obtain Calphalon’s expertise
with “pull strategies” and building strong
connections with the end-consumer
• Newell would also emphasize focus on Calphalon’s
profitability
18
How can Newell benefit?

• Calphalon’s advantages
▫ Presence at high end
▫ Selling in a way that suits the high end
▫ Having technology to make high end product
▫ Having demonstrated that remote, low-cost
manufacturing was possible
• Question is, what use does Newell have of above
advantages
▫ How, if at all, can Newell reduce expenses, when
those originate from the special way high-end stuff
needs to be sold?
19
Rubbermaid
• Manufacturer of plastic product for retail markets
• Was known for product innovation
▫ 100+ products were introduced in a year
• In trouble because
▫ Major retailers resisted passing on increase in resin prices
in 1995
▫ Competitors were more efficient
▫ Rubbermaid customers desired higher service
• Newell expected to be successful in applying its
established process of acquiring, streamlining and
managing smaller companies to Rubbermaid.
• R.’s brands to enhance N.’s global growth opportunities
20
Class Questions
1. Are there any differences between the manufacturing
processes of Newell’s usual acquisitions and Rubbermaid’
manufacturing processes? How does it matter (with respect to
integration with Newel)?
2. Are there any differences between the way Newel’s usual

products accesses customers and Calphalon’s manner of
access? How does it matter (with respect to integration with
Newel)?
3. With respect to the dimensions of Newellization:

*3A What should be done differently to absorb Rubbermaid?
*3B What all should be different to absorb Calphalon?
21
Newellization to Calphalon & Rubbermaid

Newellization Calphalon Rubbermaid
Fire sr.
Managers
Put uniform IT
systems
Flexible
manufacturing
Serve only
volume
merchandizers
Competition
Supplier
Customer
Session 04
Collis DJ, Montgomery CA (1998)

Creating Corporate Advantage
Harvard Business Review, 76(3): 70-83
Reading

2019
Modifying Firm Scope:

Diversification
2

BOARD OF GOVERNORS
HEADQUARTERS
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

higher value
Corporate Functions
3
Type of resources necessary in the corporate office is a

function of the business processes in a company
• If there is significant resource sharing,

coordination needs are higher, leading to larger
corporate staff
▫ Performance management needs to be based on
inputs or behavioral (not financial targets),
particularly so in a changing environment
• Else, coordination needs are lower, leading to
lean corporate staff
▫ Performance may be managed based on outputs,
for instance fulfillment of financial targets,
particularly if environment does not change much
over time.
4
Large numbers of corporate staff

• If there is lot of activity sharing across businesses
(product lines), more staff will be required to
perform coordination roles
▫ A company engages in making big bets with basic
research. Will not get immediate payback
▫ Operating control is suitable. Input (behaviors) that
managers and employees put in used for measuring
performance
 Example: Sharp has ~1500 staff in the corporate office.
Basic Research in optoelectronics is used in quite a few
product lines. Long term employment motivates
employees. Promotions are based on teamwork and
communication.
5
Low number of corporate staff

• If businesses are largely independent, corporate
office can be lean
▫ There is hardly any sharing of resources. Each
business has its own R&D, sales force etc.
▫ A company will likely be in businesses not
requiring making large bets in basic research
 Business scenario will change only incrementally
 Therefore businesses can be managed/ monitored
based on financial targets.
 Example: Tyco is in mature, stable, low-tech
businesses (wide scope). It has ~50 people in the
corporate office. There is no cap on bonuses.
Divisional presidents function like entrepreneurs
6
NEWELL: The in-between case

• Newell has ~375 people in the corporate office
▫ A large proportion of them are involved in data
management- the only activity shared across biz.
 Facilitates efficient logistics, billing and collections
• Newell serves discount retailing
▫ By efficient, high volume manufacturing
▫ It avoids hi-tech or seasonal/fashion stuff
▫ Newell tracks 30 operating variables
• Newell frequently transfers staff
▫ Particularly so after an acquisition, to put in Newell’s
systems. Similar scope of businesses helps
7
Mistakes by Saatchi and Saatchi

• Rose in ‘70s & ‘80s, in creative advertising
• Global client base most valuable resource
• World number 1 in advertising 1986
• S&S did not outline the boundary of its domain
▫ Acquired a consulting firm, bid for a commercial bank
▫ No formally encouraged cross-selling across biz.s
• Mortal blow came from implementing wrong kind of
control system
▫ Advertising Co. should start with expected client
revenues
▫ Instead, S&S went for expanding headcount (in
consulting, revenue is proportional to headcount)
8
Food for thought

• IIM Indore
▫ Faculty shared across many programs- PGP, EPGP,
PGP-Mum, FPM, FPM-Industry, IPM etc.
▫ Very lean corporate office (Director Sir + 3 Deans +
PAs)
 Is this the right structure?
Session 05
McQuade,K. & Gomes-Casseres,B. (1991)
Xerox & Fuji Xerox

HBS 9-391-156
case

2019
Modifying Firm Scope: Strategic Alliance

2
XEROX corporation
• Haloid corporation used xerographic technology
▫ 914 copier in 1959
 First automatic plain paper copier (PPC)
▫ 1961 name change to xerox corporation
 Would give machines only in rental schemes
▫ 1956: RX born as a 50/50 JV with Rank Org. UK
 XC would get 66% of profits of RX
 Originally RX was to operate in all except US & CAN
 1964: XC bought back rights to market in western
hemisphere
PLAYERS:
XC: xerox corp. (USA); RX: Rank Xerox (UK),
FX: Fuji Xerox ; FPF: Fuji Photo Film (Japan)
3
Fuji Xerox (FX)- early days

• 1962
▫ FX contracted with RX to carry out manufacture
 Exclusive right over xerographic patents in Japan. FX
pays RX 5% revenues as royalty
 RX gets 50% of profits from FX
 FX sub-contracted manufacturing to FPF
▫ FX gets exclusive rights to sell machines in Indonesia,
Japan, South Korea, the Philippines, Taiwan,
Thailand, IndoChina (probably Laos, Vietnam, Cambodia)
▫ XC would have no direct relationship with FX
• By 1965
▫ 90% of the parts for 914 machines sold in Japan came
from local suppliers in Japan. Rental system only
4
1960s …
• 1967
▫ FX sales surpassed RX’s French & German
subsidiaries
▫ Faster version of 914, & a smaller desktop model
▫ The 2400 @ 40 cpm was introduced
 High vol ~ > 90 cpm; Low vol ~ < 25 cpm
▫ FX dominated high vol, Ricoh the mid segment
• 1969
▫ RX became a XC subsidiary by transfer of 1% shares
▫ XC started dealing directly with FX (RX management out)
• 1971
▫ FPF out. FX takes full manufacturing responsibility
5
FX product
• 1970
▫ Shono demonstrated 4 experimental copiers to Rank
Xerox London. Slower, but lighter, and cost 50% less
• 1973: FX2200 world’s smallest copier
• 1978: RX purchased 25,000 FX2202 from FX
• By 1979 FX3500 broke Japanese record for number
of copiers sold in a year
▫ FX’s “declaration of independence”
 Tony K refused to stop the product as XC wished.
▫ XC imported FX2202, FX2300, Fx2350 in 1979
Comparatively for XC, 1970s was a lost decade.

6
Market / competition
• 1970: Cannon’s own “new process” copier
• 1970: IBM introduced Copier I. v. II in 1972
• 1972: Canon introduced liquid toner in JAP mkt
• By 1975: 20 PPC mfgrrs worldwide (11 in JAP)
▫ Ricoh-Savin brought liquid toner copier in US
• 1975: Eastman Kodak – Ektaprint 100 high qlty
• 1976 Ricoh/Savin top seller in US mkt (p. 9)
• 1977 (JAP): Ricoh (34%), FX (25%), Canon (15%)
• 1983-88: $2bn of Fin service co. profits kept XC going
7
XC, after lost decade

• 22 sept 1982: 1075 announced by XC in NY
▫ 14 models ‘82-’86. Six still sold in 1990. mid-vol
 XC gained back market share, morale by 10-series
▫ FX designed & produced lower end models
 1020, 1035, 1055 (latter from FX 3500)
 Sourced basic research on new tech from XC (p. 14),
as well as software capabilities (p. 15)
▫ 94% of RX and XC low-end copiers were FX
designs, by 1987
 Even @ 1989 mid & high-vol machines of Rx, XC did
not have any designed by FX
8
Co-destiny III taskforce charter

• 1990s: Cannon rising, with laser printers (HP-USA)
• FX wishes to expand Asia market.
▫ Important segments held by RX (AUS, NZ, SIN,
MY, CHN, HK)
▫ RX emphasized high margin hi-end products
▫ FX at lower end, emphasizing market share
• Low end laser printer biz USA- who gets?
▫ Slim margins. FX mark up cost. XC seek margin
 Cannon advances all the while
9
WHO DOES WHAT IN 1990s?

XC FX RX
Mkt Low-Vol copiers in AUS, SIN, NZ
Mkt High-Vol copiers in AUS, SIN etc

Mkt High-Vol copiers in US, CAN, EU
Mkt low end laser printer in US/CAN

Mkt hi-end laser printer in US/CAN
Basic research for copiers
Basic research for laser printer
MFG Process design for copiers
MFG Process design for laser printers

10
Questions
1. Rank Xerox emphasized high profit margins and sales
of high-end machines, whereas Fuji Xerox put greater
emphasis on the market share and low end products.
This arrangement gave rise to certain problems for
Xerox Group, in serving South Pacific markets. Discuss
these problems.
2. Originally, Xerox did not allow outright sale of copier
machines; rather they required that rental contracts be
entered into, with customers. Discuss, with
justification, the pros and cons of this arrangement.
3. Tony Kobayashi of Fuji Xerox was instructed by Xerox
Corporation to stop work on the FX3500 project. Tony
refused.
▫ Evaluate the decision from the perspective of (a) Fuji Xerox
and (b) Xerox Corporation.
Session 05
Kumar R (2014)
Managing Ambiguity in Strategic Alliances
reading

2019

Managing Strategic Alliances
2

BOARD OF GOVERNORS
HEADQUARTERS
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

higher value
Corporate Functions
3
Managing alliance ambiguity

• Alliance formation phase
▫ Partner ambiguity
• Interactional ambiguity
▫ Operational phase
• Evaluative ambiguity
▫ Outcome phase
AMBIGUITY: Options may be known, probability of materialization

of outcome is not known, and cannot be known. Interpretation of
varied cues is resorted to, in order to draw tentative inferences
4
Partner ambiguity: complementarity,

compatibility, commitment
• Early negotiations identify value creation

potential: shared vision (strategic consensus)
▫ Mixed motive nature of alliances: appropriate
sufficient value, & not let out too much of own stuff
 Developing a relationship is necessary. Fairness &
mutual respect considerations.
5
Strategic consensus
• Shared vision w.r.t.
▫ Ends for the alliance
▫ Means to accomplish above ends
• Differing perspectives, control requirements
• Techniques
▫ Task partitioning: collaborate early on low-conflict
issues. Focus on common-ground / win-win (p. 90)
▫ Boundary spanners (bi-cultural)
▫ Use of external (3rd party) protocols/ structures
▫ Top management push (to go beyond technicalities)
6
Interactional Ambiguity
• Team that runs the day-to-day work different from
the team that negotiated the alliance
• IA arises when unfavorable process discrepancies
show up. Usually sign of lack of (working) consensus
▫ Effective coordination, communication & bonding
• Antidote
▫ Detect discrepancies early, before they become big
problems: alertness, proactivity, communication
▫ Forestall damaging effect of display of negative
emotion by being respectful to the other, obligating the
other to reciprocate
7
Invoke routines, powered by interpersonal

relations, towards better coordination
Low environmental High

change environmental
change
Low level of internal Coordination Routines Sensing Routines
contingency/ churn
High level of internal Coordination Routines Sensing Routines
contingency/ churn in Learning Routines Transformation
alliance routines
Coordination Routines: Allying firms coordinate their actions

Learning routines: Allying firms transfer knowledge back and forth
Sensing routines: monitor environmental changes; interpret them.
Transformation routines: Allying firms restructure their pattern of
interaction
8
Evaluative ambiguity
• Outcome discrepancy
▫ temporary or deeper problem
• Reframing: A shift in meaning even as concrete
facts stay the same
▫ Cognitive: Relation quality between the firms, tacit
and explicit learning, progress towards LT strategic
objectives, base for new cooperative agreements
▫ Behavioral: change governance / resource allocation
patterns
 Alliance champions may help: lack positional authority.
Much depends on their vision, commitment & energy
 Carl Ghosn in Renault-Nissan.
9
Question
• Consider two scenarios.
▫ In scenario 1, you have to do a group project for a
course in PGP1 with group members assigned by the
PGP Office.
▫ In scenario 2, you do a group project for a course in
PGP1 with group members chosen by you (i.e. not assigned
by PGP Office, but subject to the usual market-mechanism of worker bees
being in demand as project partners).
• In both cases, you have to submit a written report.
• In selecting the project topic, working on the project
and developing the final report what would be
different in above two scenarios, with respect to
Partner, Interactional and Evaluative ambiguity?
Session 05
Christensen & Rising (2009)
Anadarko’s acquisition(s)
HBS 9-610-020
case

2019
Modifying Firm Scope: Acquisition

2

BOARD OF GOVERNORS
HEADQUARTERS
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

higher value
Corporate Functions
3
Main points to understand

• Oil and Gas Terminology
▫ Upstream, Midstream, Downstream
• The 3 companies: Anadarko, Western Gas (WG),
Kerr-McGee (K-M)
▫ Managers involved from each company
▫ Assets of each Co. (relevant to the acquisition logic)
• The logic behind the Acquisition Activity
▫ General logic, Logic specific to WG & K-M
• Post-Acquisition
4
OIL and GAS Terminology: Upstream
• The upstream industry finds and produces

crude oil and natural gas (also called E & P)
▫ The upstream sector includes searching for
potential underground or underwater crude oil
and natural gas fields, drilling exploratory wells,
and subsequently drilling and operating the wells
that recover and bring the crude oil or raw natural
gas to the surface. [E&P => Exploration & Production]
The boundaries between Upstream, Midstream and Downstream in the Oil and
Gas industry are not sharply defined. Descriptions given are approximate.
Source: The Internet
5
OIL and GAS Terminology: Midstream

• Midstream refers to the transportation of
crude (or refined) petroleum products, usually via
pipeline, oil tanker, barge, truck or rail.
• The final destination is refineries which will then
commence the downstream process.
▫ The midstream operations are often taken to
include some elements of the upstream (e.g.
transportation of crude) and downstream (e.g.
transportation of refined products) sectors.
▫ (alternately) Midstream activities include the
processing, storing and transporting of oil, natural
gas and natural gas liquids.
6
OIL and GAS Terminology: Downstream

• The downstream sector is the refining of
petroleum crude oil and the processing and
purifying of raw natural gas, as well as the
marketing and distribution of products derived
from crude oil (e.g. diesel, gasoline, kerosene,
aviation fuel) and natural gas, right up to the
retail level.
Roughly:
Upstream is the exploration and production (E&P),
Midstream is the shipping and pipelines, and
Downstream is the refining of the crude oil into value-added products for
commercial sale
7
Anadarko: Key Managers

• Bob Allison pre-2003 CEO believed in organic growth
▫ Merged with Union pacific: 2X reserves, 3X cash flows. No layoffs.
• James (Jim) Hackett, President and CEO, 2003-
 Earlier Seagull Energy Corporation, then Ocean
Energy (which had an JV with K-M in 2001-06) then
Devon. $3.5 billion worth of divestiture in 2004-05 (in Anadarko)
• Al Walker CFO 2005- (deal guy)
▫ Earlier UBS Investment bank upstream practice, banking
positions in Prudential Financial (Capital)
▫ In 1994 Was on Board of Global National Resources (GNR)
▫ Seagull acquired GNR. Walker moved to Seagull board.
▫ Walker appointed Hackett as Seagull CEO in 1998.
▫ Seagull merged with Ocean. Walker in Ocean board till 2000
8
Other Anadarko managers

• John Gordon: lead director in Anadarko
• Chris Doyle: manager reserves and planning
• Al Richey: ex- treasurer, then vice president
corporate development
• Katie Jackson: Walker reportee from UBS
• Bob Gwin: VP finance & Treasurer: ex-Prudential
▫ Invested in WG debt on behalf of Prudential, along with Al Walker
• Bob Daniels: Senior VP, world-wide exploration
• Bobby Reeves: General Counsel & CAO (ex-Ocean)
• Bruce Busmire and Mario Coll – leaders, (ex-Ocean)
9
Western Gas: Key Managers

• Peter Dea: CEO
▫ Was leading Barrett resources in 2001 when Shell
attempted a hostile takeover
▫ Was approached by Jim Hackett and Al Walker of
Anadarko regarding acquiring WG
• Bill Krysiak : CFO
▫ Was colleague of Al Walker (of Anadarko) in
Prudential
• Jim Sentry: Chairman
• Dave Keanini: VP Engineering
10
Kerr-McGee: Key Managers

• Luke Corbett: CEO
• Chuck Meloy: VP Exploration and Production
▫ Expertise in developing offshore properties
▫ His group’s combined expertise created and
executed the processes which enabled the infra
and the technology – valuable in the deal
• Frank Patterson: VP exploration
• Other leaders: Don Vardeman, Darrell Hollek
▫ Known to Jim Hackett (Anadarko- CEO)
11
Acquisition (and divestiture) logic: general

• What do we do with what we have and what do we do
with what we do not have (p. 1): Make a ‘New Company’
• To be ‘acceptable’ to the average investor, a company
needs ‘steadier’ / ‘new’ growth comparable to S&P 500
(manufacturing and service-oriented Co.s)
▫ Divest maturing assets to remodel growth (p. 6)
• Purchasing a company is (sometimes) cheaper than
asset purchase due to undervaluation (p. 5, p. 6)
▫ Willingness and ability of the target organization to be
acquired is necessary (p. 7)
• Deal-making skills & exploitation of (low debt) B/Sheet
• Divestitures retire debt, buy-backs bolster the B/S
12
Acquisition logic specific to W-G

• WG’s forte: compressors and pipeline installations
▫ Premiere mid-stream expertise (Engineering skill)
• Western’s Gas factory in the Rockies complemented
Anadarko’s assets in the Rockies
• Anadarko was failing to find LNG to feed its re-
gasification facility in Nova Scotia. Use WG.
• Anadarko had a water pipeline that would help
dispose off wastewater and exploit Western’s Powder
River holdings (p. 8)
• Combined midstream infra allow MLP (free up
capital, by selling assets but keeping control)
▫ Stable & predictable earnings & returns from midstream
13
Acquisition logic specific to K-M

• Anadarko wished to have more than 1 offshore
platform (p. 5). K-M had 504 deepwater blocks
• K-M was undervalued, post the Tronox spin-off
▫ Smaller K-M had low internal growth potential (p. 8)
• Kerr-McGee’s onshore production and reserve
machine in the Rockies would give Anadarko a more
predictable base and balance (risks of) deepwater
exploration (Walker p. 9)
• K-M’s ability to standardize the design and
construction of platforms cost effectively, particularly
the SPAR (deepwater) platform architecture (p. 10)
▫ From discovery to development and production
14
Post Acquisition
• K-M cost $16.4 + $ 1.6 = $18 billion (+40%)
• WG cost $4.7 + 0.6 = $5.3 billion (+ 50%)
• No stock evaluation, bidding war, shareholder vote
• The $24 billion cash loan needs interest payment
upwards of $3.5 million per day
• Quick divestitures are needed (~ $15 billion) and
equity issue (~ $5 billion)
• Aggressive hedging (whatever it is) is called for
• After all this, Co. returns to same size as before
15
Questions
1. Why do companies acquire other companies?
2. What are the pros and cons of using only cash
for acquisitions? Why not use share swaps?
3. Can you suggest why the W-G and K-M
acquisitions had to be all-cash deals?
4. On one hand, we have comments (e.g. Dea)
that Anadarko displayed high integrity in the
deals. On the other hand we see that WG were
kept in the dark regarding the K-M acquisition
and vice-versa. How do we reconcile these?
Session 07
Divestitures

2019
2
Divestment == mirror of acquisition?

• Not always
• In principle when one party is acquiring a
business the counterparty is divesting the same
business (except when a whole company is
acquired). Likewise, a divestment implies a sale
of a business unit to another party in all cases
except the one where there a unit is spun-off as
an independent business.
• Acquisitions that are hostile takeovers cannot be
termed divestment (since target is unwilling)
3
Key Reasons for divestment

• [A]: A divestment is done to raise cash to fund other
/new businesses, lower debt burden, pay dividend etc.
e.g. Anadarko, post acquisition of K-M & WG
▫ Motivating Reason: Obtaining funding for pressing needs
• [B]: A divestment is made to leave a commoditizing
business or a business that has naturally become
incompatible with other businesses of the divesting
company. e.g. IBM's sale of H/W biz to Lenovo
▫ Motivating Reason: Preserving profit margins
• [C]: Entrepreneur divests upon being forced to drop
out of the race. e.g. sale of Thums Up to Coca Cola
▫ Motivating reason: Coercive competitive pressure
4
Reasons for divestment, contd...

• [D]: The divesting company is responding to a big
monetary offer for a part of the business. e.g. The
Weather Company divesting all but its TV channels to IBM in
order to pay off the private equity investors
▫ Motivating reason: Investors cashing out, given that the
unit (being divested) is more valuable to the buyer
• [E]: An Investment Bank tempts investors or company
managers with prospects for making quick money, by
divesting a unit. [MR: Arbitrage / short-termism]
• [F]: Pressure from regulatory quarters to separate out
businesses. e.g. AT&T Bell labs breaking up into Baby Bells
▫ Motivating Reason: Address of legally mandated
incompatibilities
5
Important reasons for acquiring a business
• Pick up a business on sale because it is available

cheap (say, owing to emergency selling or
undervaluation of shares) AND is either matching
with buyer Co.'s strategy, or is intended for future
sale (Mirror mechanism of divestment reason A or B)
• Pay way above market price to acquire a business
(a company or part of a company) since the underlying
capability is much more valuable to the buyer
(Mirror mechanism of divestment reason D)
6
Key reasons for acquiring, contd.…

• Strategic Reason: Survival / Increasing Market Power
▫ Buy off a competitor to reduce competition,
restricting and possibly killing the competitor's
brand eventually. {Mirror mechanism of C}.
▫ Become bigger through acquisitions in order to (a)
avoid takeover, (b) gain market power, etc.
▫ Blocking out another competitor from acquiring the
target and getting stronger
▫ Having a moonshot plan to transition to a new and
different business by learning from the target biz.
7
Do all divestment candidates originate

in failed acquisitions?
• NO, not all.
• If a company fails to benefit by acquiring a target, it may
shut down the business of the acquired Co. altogether,
instead of divesting
• Divestitures are not failed acquisitions if:
▫ The parent is spinning off a business to make it independent
▫ The parent is divesting to raise cash
▫ The parent divests a commoditizing biz, to protect margins
▫ The divestment is forced due to anti-trust action
▫ The divestment is forced due to competitive coercion. ETC.
8
From 2nd reading: 2 kinds of spin-offs

Corrective Proactive
Make up for previous mistakes Restructure asset portfolio
Reduce over-diversification Design efficient governance
Refocus or realign strategy with the core Improve performance
Respond to industry competition Generate new cash flows
Resolve org anomalies Reduce levels of debt or tax
Eliminate negative synergies Secure better contracts with
regulators
Stimulate entrepreneurship
and innovation
Divestiture may be used to change a company’s capital structure and

redistribute equity and debt.
9
READING
Mankins, Harding, Weddigen (2008 - HBR)

How the Best Divest
10
Divesting a business with change of

ownership
• Broadly, following kinds of considerations apply,
regarding the business unit being divested
I. Not much is left of the business unit. Aged
plants / machinery, common skills.
II. The unit has valuable possessions like patents
(e.g. IBM exiting laptop business), landing slots in key
airports (airline biz), but the parent no longer
requires those
III. The unit is viable and can grow with investment,
but the parent does not wish to invest further.
• The article ‘how the best divest’ addresses III.
11
Prescription for good divesting

• A Co. should have a dedicated team handling
identification of businesses to sell
▫ The team regularly scans for divestment candidates
▫ Keeps data on every transaction completed /
contemplated in the market, & database of buyers
▫ Moves in with a de-integration plan and exit story
moment they deem a biz as “non-core” AND more
valuable elsewhere
 Unwillingness of the management to support a business
with further investment is an indicator
 Or, the unit does not appear capable of meeting growth
targets (e.g. Textron requires $1b+ sales, 15% YoY incr. in value)
12
Tasks involved in a divestment

• Separating accounting systems.
• Disentangling asset-ownership. Marking unit’s assets.
• Deployment of specialized HR expertise
▫ Completion bonus, retention & severance package
• Frame SLAs (Service level agreements) between Co. & div. unit
• Take steps to boost performance of the unit
▫ Reworking long term agreements with suppliers
▫ Reducing clutter in offerings
▫ List actions to improve unit, & timelines thereof
• Pay Mode: Cash/Stock/ reverse Morris trust, taxes
▫ Determining the split of div. benefits with buyer
▫ Pairing with other activity, e.g. acquisition, pay debt, buy
back shares etc.
13
“Human narrative”
• Motivate and inspire the people in the business
(being divested) to keep it humming along until
the deal closes (and beyond: afterthought).
• Creative approach to compensation policies
▫ Completion bonus, retention and severance pkg
▫ Parent will not hire people of unit being divested
• Anything missing?
14
READING
Moschieri & Mair (2011 – HBR)

Successful Divestitures need proper cultivation
15
Spin-offs == Divestiture in this article

• Divestment: Sell of parts of a company – physical
assets as well as entire business unit
• Divestiture: the parent creates a new company
▫ Redesigning, splitting, transferring or exiting
businesses altogether, to cease new mkt opportunity.
• 13% of new business formations in Europe result
from divestitures (spin-offs) [~2011 study]
16
The divested unit

• A parent can use spin-offs to develop new
technologies or operate in new knowledge
environments
▫ Alternately, divestiture may be used to change a
company’s capital structure and redistribute equity
and debt.
• Divested units have greater flexibility, possibilities
to negotiate a more favorable set of contracts with
regulators and fewer corporate taxes.
▫ Shorter distance between policy and implementation
▫ Reduced size and complexity of org. structure
▫ Easier delegation, action and consensus between
managers and owners
17
Implementation
• Continuous in-house due diligence
▫ Strategic fit and medium & long term value creation
• Establish new legal entity
▫ Specify who owns whom, who earns what
▫ Bonus and incentive schemes
• Divestiture task force shapes strategic directions
▫ Willingness of in-house personnel to go to divested
unit (and that of ext ppl to join) positive signs
• Design multi-faceted parent-child relationship
Session 08
Khanna,T., Palepu,K.G. & Bullock,R. (2008)

House of Tata:Acquiring a global footprint
HBS 9-708-446
case
2019
Corporate strategy:
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Case facts: House of Tata

• Founded in 1868 as a trading firm, by JN Tata
• Into textiles in 1874
• Luxury hotel 1903
• Private Steel company 1907 (set up London office)
• Airline 1932
• 1945: Office in the USA
• Software 1968
• Tata Sons a promoter company served as the group’s
holding company
▫ 66% owned by 2 charitable trusts
 Also funded education, medicine, arts, scientific research
4
Case facts continued

• 13 companies in 1938
• 300 companies in 1991
▫ Some operating companies were divested when Ratan
Tata took over
▫ Costs and employee ranks were cut in 1990s (p. 2)
▫ Group companies required to pay for using the Tata
brand
• 96 companies in 2007 (m-cap $59.5 billion)
▫ Share of Tata Sons in any group company was raised
to 26% to prevent unwanted takeover
 It is likely that the proceeds from divesting 200+ companies
was used to raise shareholding in the retained companies
5
Business history, relevant to Tata group
• 1991 deregulation
▫ Indian laws (at that time) required foreign firms
to partner with local firms
 Tata group Cos partnered with AT & T, Mercedes-Benz
(this was present in the ‘60s, for trucks, and did not
continue into the 1970s), IBM, Cummins, Honeywell etc.
• Late ‘90s ASEAN financial crisis
▫ Tatas realized that they cannot rely solely on
Indian market
• Globalization, challenges from worldwide Cos. other
factors for going international
6
Raising capital/ making foreign

investments became easier
• Foreign exchange capital controls relaxed over time
▫ 2000 FERA replaced by FEMA
▫ 2004: Indian Co.s could invest 100% of their net worth
overseas. 2007: raised to 400%
▫ 2005: Indian co.s allowed to borrow from domestic
banks for foreign operations
▫ 2007: Standard & Poor’s raised India’s sovereign
debt rating to investment grade
 Meaning, if the India government guaranteed the loan taken by
a private Indian Company, investors would freely put their
money in such private Indian Companies. Helped Corus deal?
7
Tata’s global footprint

• TCS: IT services to N. America & Europe
• Titan: originally failed in EU, success in Middle East
• Indian Hotels: mixed bag, US, UK
• Tata Tea
▫ Became global Co. by buying Tetley Tea, UK
▫ Good Earth (US), Jemca (Czech), 8-o-clock coffee (US)
▫ Acquired 30% in EBI, had to sell to Coca-Cola (May 2007)
• Tata Steel
▫ Acquired NatSteel (SIN), Millenium (THAI)
▫ 2007 Feb: $12.1 bn acquisition of UK-based Corus
 Consolidation in Steel industry the main driver. Savings amounted
to just $450 million in first three years of joint operation.
8
Tata Motors
• Tata Motors $7.2 bn revenue in 2006-07
▫ $105 m loss in 2000-01; focused on South Africa,
middle east and Korea markets thereafter
 2004 acquisition of Daewoo commercial vehicle Co.
▫ 2003-05 car project Indica-MGRover UK failed
▫ 2005: 21% stake in a Spanish bus maker
▫ 2006: JV with Thonburi Auto Assy Pl for pickup truck
• In India: Leader in commercial truck
▫ Sturdy vehicles withstood poor road conditions
▫ 2005: Ace , a small inexpensive truck introduced
▫ Small car Nano (~$2500) for end 2008 launch
9
Tata Motors, w.r.t. JLR (UK) from Ford

• Ford had acquired Jaguar, a British luxury and sports car in
1989. vehicle price $35k to 93K (2006)
• Land Rover was acquired in 2000. ($42-93K) (2006)
▫ Rugged vehicle with strong off-road capabilities
• PE firm excesses: close pension schemes, make people
redundant, strip assets
• J & LR bring in new technology, global brands and advanced-
market distribution channels
▫ Acqs to cost between $ 1 and $2 billion
• TM raised $450m in 2007 through FCCARS
▫ For other commitments
▫ High Debt/Equity ratio already, vis-à-vis free cash flow
10
Analysis Framework 1
Expansion Opportunities
Attractive Not-attractive
Financial High
Risk of Low
leveraged
transactions
What are some attractive opportunities in front of the Tata Group,

where the financial risk of leveraged transactions are low?
What are some opportunities that are not attractive and yet come
with high financial risk of leveraged transactions, that Tata Group
should avoid?
11
Domestic Opportunities
Attractive Not-attractive
International Attractive
opportunities Not-attractive
Of the set of opportunities in front of the Tata Group, can you

identify the ones that are attractive both from the perspective of
domestic as well as international markets?
Identify some international opportunities that are attractive , but

may have negative impact on domestic operations or on pursuit of
domestic opportunities.
Identify attractive domestic opportunities that may otherwise stymie

pursuit of some international opportunities
12
Realizing synergies of acquisition

Important Less Important
Maintaining Important
the character Less
of acquired Important
companies
Under what circumstances it is essential to maintain the character

of acquired companies? If such is done, what may be impact on existing businesses?
Alternately, what kind of synergies are realizable if an acquired company is

quickly acculturated to the Tata Group ways?
13
ADDITIONAL MATERIAL:
Khanna,T., & Palepu,K.G. (2006)
Emerging Giants: Building world-

class companies in developing countries

14
Key message (as of 2006)
• Even though liberalization, globalization was expected to

wipe out local firms and hand over markets in
developing countries to MNCs
▫ Some emerging market firms are doing well, and even
expanding internationally
 S.A.C.I. Fallabella, Chile
 Lenovo group & Huwei Technology, China
 Dr. Reddy’s Labs, Infosys, India
 Cemex, Mexico
 Jolibee Foods, the Philippines etc
15
MNCs vs. Incumbents in Developing

country markets
• Why MNCs (apparently) do not do well
▫ MNCs unwilling to customize products to local
needs, since volumes are low
▫ MNCs are dependent on research by
professional firms in developed markets. Such
are non-existent in developing markets. So,
MNCs are unable to frame appropriate
strategies
▫ MNCs’ lack familiarity with resource markets
16
MNCs vs. Incumbents in Developing

country markets contd. …
• What incumbents in developing markets do well,
compared to MNCs
▫ Local firms are able to engage people-intensive
intermediaries, and use their inputs well, being
familiar with the local culture
 MNCs lack tools to interpret data of variable quality
▫ Local governments protect some institutions, for
example, media, banking and financial services
 Hence, local firms are not subject to the same
surveillance and pressures from analysts as the MNCs
17
More recent research regarding advantages

enjoyed by emerging market firms
▫ In countries like India, Chile, etc. conglomerates

of diverse businesses thrive under a single
business group ownership. Given large
proportions of family shareholding it is not
possible for the financial markets to pressurize
these companies into taking ‘global standard’/
short-term actions
 The groups have functioning capital markets within their
boundaries. So, they do not have to accept the same level
of restrictive covenants as a firm that has to approach the
capital market
▫ The key is forcing dilution of family shareholding,
else MNCs cannot “win”
18
Smoothening the path of MNCs in India

• 2010: A rule was made (MSP) that any listed company
in India must issue a certain percentage (~ 25%) to the
‘public’ – chiefly foreign institutional investors
▫ Oversight by FIIs shall apparently help improve corporate
governance & ‘help’ minority shareholders
• Efforts are on to make it more difficult to obtain loans
from banks (publicity to industrialists’ NPAs)
• Uday Kotak, founder of Kotak Mahindra Bank
▫ Is required to dilute his shareholding to < 30% by law
▫ In an interview he appeared to suggest that this rule
demotivating to founders
Session 08
Barlett CA, Ghoshal S. (1999)

Developing coordination and control: The
organizational challenge
Transnational Management Text, Cases and Readings in Cross-
Border Management. 2nd edition
reading
2019
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Key message
• Earlier attempts toward managing worldwide (multi-
country) firms looked towards structure as solution
▫ European firms organized as decentralized federation and
followed multinational strategy
▫ US origin firms organized as coordinated federation and
followed international strategy
▫ Japan origin firms organized as centralized hub, following
global strategy
• Organizing as Transnational firm is more suited to
modern times, in order to balance local responsiveness
with global standardization
▫ In order to make the change, first the opinions and values
of the senior leaders need to be influenced.
▫ Next the systems and processes get updated
▫ Finally the new structure is made official
4
Dimensions of structure
• Function
▫ E.g. sales, HR, manufacturing, IT, logistics
• Product / Product line
▫ E.g. PL1, … PL3 (CPU, motherboard, memory- Intel)
• Geography
▫ E.g. Asia-Pacific, South Asia, Europe and Middle East
• Competency
▫ E.g. Basic Research, Applied Research, Logistics, Public
relations, Customer relations, Worldwide purchasing
• In consulting world some more
▫ Industry vertical (Oil and Gas, Power plants, FMCG, BFSI)
▫ Application horizontal- Oracle, SAP, JDE
▫ Developers, Quality Analysts, Release Management, System
administrators
5
Additional complications from

separation by distance, time, culture,
language
Several matrix configurations are possible, However,

no man and no woman can serve more than one master
at a time. A matrix configuration is unlikely to be
successful.
6
Administrative Heritage
• A company’s history and its embedded
management culture influences its organization
and willingness to change
• Is influenced by the path through which the
company developed- organizational history
• Advantage: is really an underlying source of a
company’s key competencies
• Can be liability, being a source of inertia
7
Decentralized federation
• Emerged in the 1920s and 30s (European origin firms)
▫ Virtually independent country units. HQ manages finances.
“distributed assets and delegated responsibilities”
• Rising tariffs (imposed by governments of countries
importing from European countries) required setting up
production facilities abroad
▫ Change in regulation frequently has a major directing role
to business strategy
• Local responsiveness high. HQ control low.
• Culture emphasizes personal relationships
▫ Not formal structures
• Firm-level learning from experience is low
8
Coordinated Federation
• Emerged in the ‘40s-’50s (US origin firms)
• HQ imposes new technologies and management
practices on to the subsidiaries
• Subsidiaries may carry out a limited extent of
adaptation to existing products, to suit local needs
• Subsidiaries must look to HQ to get new products
▫ New ideas and developments must originate in the
parent
• Higher bandwidth required in HQ for coordination
and control (compared to EU model)
9
Centralized Hub
• Originated in the ‘60s and ‘70s (Japanese origin firms)

▫ As an outcome of declining trade barriers
• Very little capability in overseas unit
• Production at high scale at home (Japan)
▫ Tight central control on product development
• Interpersonal harmony valued high
▫ Cultural norms emphasize group behavior
▫ Less occurrence of layoffs at the drop of a hat
▫ More rotation of staff across functions (than US model)
10
3 needs of modern companies

Efficiency, Responsiveness, Learning
• To be efficient, one has to learn how to be so
▫ And respond to feedback suggesting progress or lack of
it
• In order to be responsive one needs to
▫ Scan and search for cues to respond to
▫ Develop ability to identify more salient cues (L)
▫ Have ability to fashion fruitful response to cues (L)
 Do all of above efficiently
• Learning needs a purpose asking why am I learning
this now
▫ Learning to do existing and known things better
▫ Learning about new things worth doing
▫ Learning to do new things
11
TRANSNATIONAL FIRM
• Units are interdependent
▫ Each is given an exclusive function to serve
 Global sales of a set of products
 R& D for a set of products
 A subsidiary unit hosting all resources w.r.t. a particular
expertise
▫ Avoiding duplication of effort is a goal
• Example
▫ Manufacturing : A country is the international
production hub for a product
▫ R&D lab: CoE w.r.t. particular competency
▫ Marketing subsidiary: Worldwide marketing of certain
products
12
TRANSNATIONAL FIRM contd. …

• Enthusiasm of country units high
▫ Every unit ‘owns’ something
• Coordination is more complex
• Management needs to be more alert
▫ Such that a single country unit does not hold the whole
company to ransom
• Article says
▫ more central control is necessary for research,
manufacturing
▫ Less central control is necessary for sales, service
• Alternately, manufacturing and service are low
variety, low uncertainty functions.
Session 09
Nanda, A. & Morrell,K. (2004)

Strategic review at Egon Zehnder International (A)
HBS 9-040-71
case
2019
Strategy Review: Antecedents

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Case Facts
• 1964: EZI founded by Mr. Egon

▫ As an executive search firm. Exec search was alien
to European businesses
 Independent Exec search firm was necessary to
avoid consultancies like Mckinsey run into a conflict
of interest: recommending management changes on
one hand and selling CVs to fill those positions on
the other
▫ Mr. Al. of Mckinsey (Zurich) an early backer
• Early years of EZI ‘64-’78
▫ Mostly organic growth. No debt. Cash from
operations to fund new offices
4
Case facts continued

• 1978
▫ Mr. Egon sold off his shares to the EZI partners
 Retained veto on major strategic changes
 EZI a corporation. Equal equity to each Partner
▫ Dan Meiland hired
• 1980 Egon tells Meiland he will be the next CEO
• Late ‘80s – EZI entered US market
• 1989: EZI acquires Canadian firm J. Robert Swindler Inc
• 1992: Meiland CEO, Egon Chairman
• 1996: Meiland Chairman
• 1998: 233 out of 390 consultants hired into EZI, had not quit
• 1998: Acquired a firm in India to commence India operations
• 1999: 122 partners, 200 consultants, 240 researchers (young
univ graduates), 39 countries
▫ 39 office managers reported directly to the CEO
• 2000: 300 management consultants, 58 offices
5
Late 90’s: changing environment
• Growth of Internet. Websites like Monster.com

• EZI’s competitors aggressive in Europe
• 1999: Heidrick & Struggles and Korn Ferry IPO
• Zehnder announced: To retire in June 2000
• April 2000: proposal for strategic review @ EZI
▫ Was a change in business model overdue?
6
EZI: 7 values 1964-78 (?) 3 core pillars as of 1999
• Value 01: Rank order- Clients, Firm, Employees

• Value 02: Fixed fee, not % of salary of hire
• Value 03: One firm, one profit center
• 04: Ethic: Managers placed off limits as long as they
stayed in the organizations placed; clients off limits
for 3 years after search completion
• 05: Partner owned firm. No outsiders, even in Board
• 06: effort intensive recruitment 25-40 interviews
(??) before one is hired. Mckinsey alum preferred
• 07: No up-or-out (as in Mckinsey)
7
3 core pillars - 1999

• Client first
▫ Flat fee, agreed upon upfront. Going over-budget tolerated
 other search firms: 33% of salary of hire
• Reputation for quality
▫ 2 consultant team works on a search
▫ Avoid the unethical, immoral, illegal
 Clients off limits for 3 yrs after search completion
 Placed personnel not contacted if staying on in firm placed
• Unique Partnership spirit
▫ Single profit center. Interdependence. 39 office managers
report to the CEO (1999). Inter-office collaboration in
sharing lists of prospects.
▫ Partner compensation: Profit $100. Reinvest $20. $48
divided equally among partners. Rest divided per seniority
8
Consultants (non-partners)
• When CEO, Zehnder interviewed everyone due to join
the firm
• 25-40 interviews (??). 10% candidates made it
▫ 2 interviewers disliking => enough to stop progress
▫ All MBA/ Phd. Many from Mckinsey (50/270 in 1999)
▫ Warm, honest, sincere, team player
• Each candidate performed 12 searches per year
▫ Operating in pair to forestall hoarding of information
 To prevent becoming “individual practitioners” (p. 6)
• Seniority principle (in profit sharing) did not apply
• Annual bonus delinked from billings
▫ “how well he/she supported colleagues”
▫ Publications that brought fame to EZI
9
Everything seems to be hunky

dory in ezi (A) as in 2000.
What precisely then needs to be

brought under strategic review?
Session 09
Burgelman,R.A., & Grove,A.S. (1996)

Strategic Dissonance
California Management Review 38(2): 8-28
reading
2019
Strategic Dissonance
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The “new” five vectors

4
Terminology: Basis of competitive

advantage in the industry
• Is determined by industry factors (external to the firm)
▫ Bargaining power of customers
▫ Bargaining power of suppliers
▫ Nature of rivalry among incumbents
▫ Threat of new entrants
▫ Threat of substitution
▫ Presence or absence of complements (This one was
missed out by Porter. Porter continues to say he did not miss anything).
• Technological changes, legislation or
government regulation can affect each of
above, and their relative importance
5
Terminology: Distinctive competence

• Internal to firm (RBV)
• Competencies that made it possible to develop a
competitive advantage and to survive
▫ Hold over valuable, rare, inimitable, non-
substitutable resources
▫ Unique configurations of resources and processes
 That are difficult to fashion, in other firms
 Different entrepreneurs imagine different futures.
They take steps to be successful in the future
imagined. Build up resource and process bundles.
6
Terminology: Internal selection environment

• Role of the internal selection environment is to
regulate the allocation of the company’s scarce
resources
▫ Cash, competencies & capabilities, senior management
attention
• A company’s internal selection environment may be
more important for its survival than strategy
• A company can survive if its internal selection
environment selects actions that are consistent with
competitive reality, even while becoming decoupled
from the official (stated ) strategy
▫ Maximize margin per wafer start helped direct
resources away from DRAM to microprocessors (Intel)
7
Strategic Dissonance, Origin
Basis of competitive
advantage in the industry
Unchanged from Changed since
previous strategic previous strategic
review review
Distinctive Unchanged No Dissonance Manifestation
competence since last review ???
of the firm
Got modified Manifestation High
since last review ??? Dissonance
8
Strategic Dissonance, Outcomes

Source of Strategic Action
Strategic
dissonance↓
Actions aligned with official Actions out of alignment
corporate strategy with corporate strategy
From change More intense Experimentation /

in basis of experimentation / search to identify new
competitive search to do better with basis for competing
advantage current competency
From change Attempts to legitimize Search for novel
in distinctive use of new skill application for newly
competence developed skill
9
Strategic Recognition
• One type involves top management’s ability to
recognize the strategic importance of actions by
mid-level managers who try to tie a new business
initiative to the corporate strategy
▫ Leading to legitimacy for the new business
• A second type involves top management’s ability to
recognize the strategic importance of actions of mid-
level managers that diminish the legitimacy of an
existing business
▫ Leading to decoupling from the corporate strategy
• Non-punishment to failures in either is a must
10
How?
• Debating tough issues even when biz is good
▫ Giving due regard to emotional attachment to the
prior / incumbent
▫ Constructive Confrontation
▫ Disagree and Commit
▫ May involve rediscovering the Co.s identity
▫ Shift from Strategic Intent to action may be
accompanied by some members leaving ship
11
Questions
• What is a strategic inflection point?
▫ How can a company identify whether a inflection
point is happening?
• What are the determinants of a company’s
internal selection environment?
▫ How may the internal selection environment of a
company undergo a change?
Session 10
Strategy Reformulation
case: EZI (B)

2019
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Strategic Decision Making, Strategy Formulation, Guiding Strategy Implementation,
Corporate Venturing, Knowledge Management
3
Nanda, A. & Morrell,K (2004)
Strategic review at Egon Zehnder

International (B)
HBS 9-040-72
4
Objectives of the Strategic Review

• Complacency may set in, if a company is doing well;
therefore a strategic review can:
▫ Find whether EZI was doing the right things
▫ Find what, if any, needs to change
▫ Provide a forum to employees of lower tenure* to ask
questions, seek answers (*”smart young people” who are
MBAs and Phds with over 3-5 years prior work exp)
▫ Review the “equal partnership”
 ‘Be a therapeutic process’ : may mean get feedback from the
company that the equal partnership thing is good, working,
functional, useful etc.
• 2 outside consultants were roped in
▫ So that work of the SR team is credible
5
The Survey
• April 2000: SR proposal accepted by EC
▫ To present findings in June 2001 meeting of Partners
in Brussels
• July 2000: a survey administered to all
“consultants” (p. 2 consultants == partners ??)
▫ Text says Exhibit 1 was survey sent to partners. Text in
Exhibit 1 says it was sent to consultants
▫ What areas the firm is strong? What areas the firm is
weak / not aligned to stated strategy (if there is any)
▫ What opportunities and threats are there?
▫ What should and should not change
6
Survey findings: on Changes needed

▫ If more support and systems are provided,
productivity can be increased
 Give us snazzier gadgets ?
▫ Knowledge management: learnings in client projects
resides in heads, don’t get codified for access by others
 Who has the time to write down stuff for use by others?
 The “practice group” folks don’t face clients. Let them
figure out how to earn their keep
▫ Employee retention actions desired
 Please loosen purse strings?
 Performance management: more pay/bonus welcome?
▫ Improve cross-border execution
 More foreign trips, please?
7
Survey findings: What should be retained?
• Firm Culture / values

▫ No office closures. Less of top down direction
• Quality of consultants
▫ We are good! Please keep us this way.
• One firm structure
▫ Not having separate profit centers is good, avoids
a lot of bickering otherwise, to determine shares
• Consulting approach to search
▫ Fixed fee, less headache to make revenue
▫ ???
8
Cluster of issues identified from survey

• Capital Structure: Keep as present, IPO, other?
▫ Funding for growing in the US market from ??
• People: Formalize performance appraisals, viz., by
looking at actual revenue brought in?
▫ Provide training to develop people?
• Internet: stick to high-touch or provide some
mechanization, as in Internet-based search?
▫ Maintain lists – prospects & clients. Do some rule-
based matching. Less of “touch”
• Billing method to remain same?
• Get into New biz – outsourcing, outplacement?
• More investment in tech infrastructure?
9
Below excerpts suggest Apprehension … about what?

• P.1 we should have courage to look at … issues
• P.1 Meiland was … nervous as to where this process might go.
He felt this was disconcerting and unsettling …
• P.1 we needed the buy in of everyone …
• P.2 we wanted the partners to feel that they could shape the
firm they owned
• P3. some of the senior partners worried that everything was
being called into play … broached topics that had traditionally
been off-limits for the firm
• P3. Meiland: This process might be … potentially very
dangerous for the firm
• P3. what if team presentations … demoralized the partnership
and belittled the uniqueness of the firm?
• P. 3 … assuage the concerns of the senior partners that the
process might unleash uncontrollable forces for change
• P. 4 open the Kimono
10
Moot
• The open forum in Brussels (Partner-only meet)
might produce a groundswell of opinion on issues
that the leadership of the firm felt were not up for
debate.
▫ Compensation structure: sacred tenet
▫ Non-closure of underperforming offices too
• A conservative vs. progressive fight might fragment
the firm
• Meiland email (May 2001) softens the blow:
▫ Meet is just a recommitment to objective to being a
leading firm & developing a shared understanding of
issues needing redress/ address.
11
SR actions identified
• Even though US offices were underperforming
▫ High investments would be made, viz., by adding 100
consultants, since US is a big market
▫ Acquisition would be costly. Growth by hiring preferred.
 Slow process, does not need full monetary commitment,
upfront, etc.
• Appraisal mechanism for Partners!
▫ Measure rigorously: Contribution Performance and
Development Review (CPDR)
• Promotion to principal (pre-partner) and election to
partner mechanisms revised – CPDR for both
• Matrix: Industry practice group && client service
• Some KM investment (web tool), but no move to codify
everything
• Internet to only complement EZI processes
Session 10
Post review implementation
case: EZI (C)

2019
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Strategic Decision Making, Strategy Formulation, Guiding Strategy Implementation,
Corporate Venturing, Knowledge Management
3
Nanda, A. & Morrell, K. (2004)
Strategic review at Egon Zehnder

International (C)
HBS 9-040-73
4
What did EZI do differently after SR?

• More strategic in making investments
▫ No tearing hurry to make investments, so that IPO
(and loss of control) is avoided
▫ Growing organically => growing gradually, no big
investment commitment, reversible
• Cultural change
▫ Partners discussed
 growth rates : gives sense of where firm is headed
 Financials: help compare costs and services delivered,
at least within EZI offices
 retention rates: could be a measure of employee
satisfaction – whether jobs are mundane or interesting,
whether training is provided in a timely fashion, whether
new knowledge is created / used
5
CPDR comes to use in Economic

downturn of 2001 - 03
• Post June 2001
▫ The Internet went bust: i.e. the e-business craze
vanished
▫ War for talent died: e-businesses were absorbing
lot of talented sr. managers. No longer required
• Jan-Feb 2002: cost reduction focus
▫ EZI laid off 30/330 consultants, 3 partners,
reversed 3 partners to pre-partner grade
 CPDR the “robust” performance measuring tool
came handy, in identifying people to let go
▫ Sub-lease extra office space
6
CPDR origin metrics

• Metrics for performance
▫ Ratio of partners to consultants
▫ Utilization rates
▫ Number of assignments per consultant
▫ Billings / expenses per consultant
• EZI learnt to “shrink” effectively
• Eventually the appraisal process became too
analytical
▫ Consultants were being rigorously measured in
manner similar to other firms, but not paid as
much
▫ Trust and collaboration among partners hit
7
Other “revolutionary” changes

• EZI made US operations a separate profit center
• EZI margins down to 20% from 40% till recovery of
exec search market in 2003
• US offices allowed to undertake referral search work
from non-US offices, at fees negotiated by the latter
▫ So, some ‘reconciliation’ who gets how much would,
eventually be necessary (recall law firm example in A)
• Apparently US consultants are not paid enough
▫ They get lured away by competitors
 Spirit of partnership, the great EZI culture etc. not
enough to keep them in
8
So, what came off the SR

• Partners had questioned EZI’s position based on
non-action on expansion of Internet and slowness
(in expanding) in view of expanded exec search at e-
business boom time
• The SR helped EZI Leadership understand that
▫ It is better off sticking to its high-touch model (i.e. it
ought not be in lower-touch e-business)
▫ It is better off not surrendering control by IPO, i.e.
better off growing slower
▫ It needs to understand performance appraisal better,
in order to get closer to a pay-for-performance model
• The last one gave handsome rewards in
smoothening the path of austerity measures
9
In general what can we take away from EZI

• Most superficially: do nothing (or go slow) can be an
useful strategy, when other industry players display
herd behavior towards unrealistic growth
• A strategic review may be useful when the baton is
passed over from an older generation of leadership
• SR brings out aspirations and frustrations of
organizational members
• Products of SR are dual use: can loosen core
rigidities, good or bad
▫ Partners not appraised or let go => appraisal and
possible retrenchment
▫ Separate profit center accounting for US operations, a
precursor to differential pay, but higher layoff risk
Session 11
Bower JL & Gilbert CG (2007)

How Managers’ Everyday Decisions Create or Destroy
Your Company’s Strategy Harvard Business Review, 85(2): 72-79
reading 01
2019
Strategy Execution
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3
Study Facts
• Example 1
▫ Managers in a subsidiary had raised a series of low value
work orders to build a factory. When a costly chimney was
necessary, corporate got to know. Managers did not wish to
wait for the corporate approval processes. The chimney was
approved. The move was successful
• Example 2
▫ Lou Hughes of Opel, a GM subsidiary, worked with a East
German Factory Union and German Chancellor Kohl, to
force GM’s hand in opening a plant in East Germany.
Normally, opening a new plant is a GM Board decision. Lou
would have had to get it past GM Europe, before GM USA
4
Study Facts contd. …

• Example 3
▫ Toyota brought out a low cost car Echo
 Its sales people did not show interest in selling it,
steering customers to other, higher margin models
instead
• Example 4
▫ Intel management decided to go out of memory
business and firmly into microprocessor biz
 Intel middle management had already made the
transition, viz., by allocating more facility space to
microprocessor production
5
The contention of authors

• Senior executives, divisional managers, operating
managers all play a role in deciding which
opportunities a company will pursue and which it
will pass by
▫ Process by which resources get allocated inform on
step by step crafting, at many levels of the company
6
The reasons for strategy being decentralized
• Knowledge is dispersed
▫ Expertise resides scattered in many parts of the
company
• Power is dispersed
▫ De facto and de jure power
• Roles determine perspectives
▫ People in different roles consider a different set of
facts. This leads to alternate perspectives. May
lead to different action to respond to same stimuli
7
Decision making processes

• Processes span multiple levels. Activities proceed on
parallel, independent tracks
▫ Notion of top down strategic process depends upon
central control of all steps in the process.
 This level of control almost never exists in a large org (p. 4)
▫ Operating managers are in a position to sharpen or
dampen activity on the top-down strategy
▫ Commitments are made, then revised, as new realities
emerge
 Hughes’s example—taking part in the factory vote, engaging
with Chancellor Kohl for subsidies—the publicity part of all this
8
Who all can capture decision-making processes?

• General Managers
▫ Run the fundamental processes
▫ Translate corporate objectives into actionable items
▫ Filter proposals going up for review
• Operating Managers
▫ -ve example: Toyota Echo; +ve example allocation of
wafer processing capacity to microprocessor at Intel
• Best Customers
▫ Print ad customers stymied newspaper outlets foray
into online ads
• Capital Markets
▫ Dip in stock price? Cut R&D, short term performance will
improve
9
What tasks are left for TMT?
• The track record of the manager making a proposal

is crucial in informing about success potential.
▫ Sr. management’s judgment not so much on the
numbers as on the proposal champion’s credentials
• Focus needs to be on the question Should a
(proposed) business idea be supported?
▫ With what intensity
• Listen to debates by putting knowledge power and
position power in the same room
• Reach down to operational managers directly
(micro-manage) occasionally, rather than going
through hierarchy
10
TMT tasks contd. …

• Referee in case of conflicting divisional views
▫ TMT steps in to frame questions that reflect the
corporate perspective
 Influence discourse to a direction “What is best for
the company”
 I.e. look beyond the proposals of the divisional managers to
just grow their individual businesses.
• Create a new context that allows circumventing the
regular resource allocation process
▫ Separate organizational unit , possibly in a new location
▫ Milestone type measurements instead of annual budgets
▫ Short reporting lines to the top
Session 11
Sull, D., Homkes, R., & Sull, C. (2015)

Why strategy execution unravels -- and What to do about it
Harvard Business Review (Spotlight, March, 2015)
reading 02
2019
Strategy process
Issues in Strategy implementation
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Strategy Execution
• For the companies surveyed, Strategy Execution
is the #1 challenge, ahead of
▫ Innovation
▫ Geopolitical instability
▫ Top-line growth
• 2/3rd to 3/4th of large firms struggle to implement
strategy
4
Problems underlying strategy execution:

Problem 1 of 5
• Focusing just on cascading objectives down the

hierarchy does not work
▫ Apparently, colleagues of other functions and units
are to blame
▫ They don’t keep commitments; Engage in
dysfunctions etc.
• Antidote, as from the article: Insufficient support
from other units can be overcome by
▫ More teeth given to horizontal performance
management (whatever that means)
5
My understanding: how problem #1 originates, &

suggestion as to how to deal with the problem
• When an entity (say a company) pursues multiple goals, there is
invariably some negative correlation among them
▫ ROI, ROCE, ROA, Market Share, Sales, top line, bottom line cannot
all be headed in the positive direction all the time!
• Organizations partly solve this problem by giving different goals
to different departments as well as by emphasizing different
goals at different times [spatial & temporal separation of objectives]
▫ Standard operating procedures streamline behavior
▫ Each department myopically pursues its goal
• At the time of strategy implementation
▫ Emphasis on regular (day-to-day) goals must be subdued
 larger variances must be allowed
 Incentives / punishment must be attenuated.
▫ Prioritizing a strategy implementation task above a regular goal-
filling task must be credibly encouraged* by the top management
*See other reading: ‘How managers everyday decisions …’’ article
6
Problems underlying strategy execution: Problem 2 of 5
• Detailed road maps (plans & budgeting) specify

▫ Who should do what, by when, with what resources
▫ Executives view deviations as lack of discipline
 Tools like balanced scorecard, management by objectives etc.,
force alignment down the throats of middle managers.
• Apparently, companies react too slowly to adapt to changing
circumstances
▫ Even though 50% of the middle managers surveyed believe they
could secure significant resources that fall outside their strategic
objectives
• The Antidote, as from the article
▫ Allotment of funds, people and managerial decision is not a one
time affair
▫ Managers must screen opportunities against company strategy*
▫ Fluid reallocation of funds required to rescue resources trapped
in unproductive uses
 Kill unsuccessful initiatives quickly enough
 Find out how quick is quick enough by … ???
*Recall the Strategic dissonance article

7

• In uncertain environments, top management planners
are quite likely to be out-of-synch with ground realities
▫ Demanding alignment to plans made ahead in time, is undesirable
▫ Learning by doing is desirable over fixating on plans made with
limited knowledge
 Mistakes will be made along the way, when learning.
 Such mistakes must not be punished, or there will be no takers for
the risk of discovery by learning
• Schon and Argyris (1976) proposed a reasonable approach—double
loop learning
▫ Managers not only track whether strategy is being executed as per
plan, but also check whether the assumptions at the time of making
strategy continue to be valid*, or course corrections are necessary.
*Will be revisited in a later session, in the Organizational DNA article

8
• Relentlessly communicating the strategy is key to

success
▫ Yet, only 55% of managers can name 1+ objectives
 Objectives are poorly understood
 Objectives appear unconnected to each other
 Execs dilute core message with peripheral considerations
▫ Baffling listeners about what matters most
 Objectives appear disconnected from overall strategy
 Top executives change their messages frequently
▫ Key leaders don’t understand the communication well
• I could not find any Antidote mentioned in the article
9

• Different constituencies require different
communication packages
▫ In developed economies, the Wall Street analysts constitute
a vocal set of listeners (and critics) of listed companies
 These listeners prefer to hear only such information as will
help investors (temporary shareholders) make a quick buck.
 They purposefully subdue communication on other topics?
▫ Communications to Wall Street tells little to an employee of
a firm as to what to do in his/her individual capacity
 In fact, it may communicate emphasis on doing short term
actions, that hurt the company & employees
• CK Prahalad observed that
▫ A theme such as “Beat Caterpillar” by Komatsu was quite
effective in organizing employee action around specifics
10
• Companies do a good job of recognizing and rewarding

performance, yet struggle in strategy execution
▫ 2/3rd of managers cite past performance as important
contributor to promotion decisions
 Private praise, public acknowledgement, access to advanced
training etc. non-financial rewards too.
 Throwing out “non-performers” also done
▫ Many managers avoid experimentation, because they fear
consequences of failure. Sure-fire cost reduction preferred over risky growth.
Managers make light commitments, ones they can easily meet
 Discussion on difficult issues are suppressed, considered taboo etc.
• Antidote, as from the article
▫ Reward other things- agility, teamwork, ambition
 As measured by … ? How is fairness maintained? Article is silent!
▫ Consider track record of collaboration, ability to adapt to
changing circumstances
▫ Award stretch goals to managers
11
My understanding: how problem #4 originates
• The root of the problem—as the authors rightly point out—is

emphasis on individual accomplishment at the expense of
teamwork
▫ This is typical in Anglo-Saxon thinking
• A parcel of work can be broken up into an arbitrary number of
parts, and given to different individuals to perform
▫ However, effectiveness of the whole is not equal to the sum of the
parts {how about PGP group assignment submissions ?}
▫ But, there is hardly any role charted with responsibility for
coherence of the whole, and with authority to instruct others to
change their actions to develop that coherence
 An architect, rather than a manager
 However, actual doers of pieces of work know more about its
strengths and weaknesses, than any 3rd party (architect or manager)
▫ Figuring out how individuals get motivated to give attention to
details in their work as well as dependent details in other person’s
work is an ongoing subject* of management & organization research
*Will be revisited in the Knowledge Creating Company article

12

• Heroic CEO drives execution. But:
▫ Frequent and direct intervention from on high encourages middle
managers to escalate conflicts rather than resolve them.
 Initiative, decision-making skills, and ownership of results by Mid-
managers reduces
 They lose the ability to work things out with colleagues, over time.
 However, sometimes time spent in synching with colleagues may cut
into opportunity window too
• CEO may be incapable of taking calls that require technical and
domain expertise
• CEO may not have time to go through all possibilities
• Antidote, as from the article
▫ Execution needs to be driven from the middle by distributed leaders,
guided by the top* (whatever “guidance” is supposed to mean)
▫ All focus on what is best for the company (not own agendas) how is
this different from maximizing shareholder wealth (that is to be done
anyway)
 What will make anyone do that, all the time?
*Is visited in the ‘How managers everyday decisions …’’ article
13
Class question
• In a very large proportion of PGP Group
assignments, the submission is simply a
collection independent work output of
students*, frequently lacking coherence.
▫ What can be done to improve execution excellence
on PGP group assignments?
*Notable exception being the cases where just one student worked on
the entire assignment.
1
Session 12
Bartlett,C.A. (2006)
Mckinsey & Company: Managing knowledge and learning
HBS 9-396-357
case
2019
Knowledge management
2
Top leaders of Mckinsey (reconstructed)
• 1926-37: Founder James (Mac) Mckinsey

• 1937-50 Marvin Bower de facto leader
• 1950-67: Bower is formally “managing partner”
• 1967-76: Three unnamed individuals
• 1976-1988: Ron Daniel – Managing Director
• 1988-1994: Fred Gluck (MD)
• 1994 => : Rajat Gupta “successor”
▫ Case (2006) is 1995-1996 setting
3
Early days of Mc. 1926-67

• 1937 memo- Marvin Bower
▫ Focus on issues of importance to top-level
management
 Adhering to highest standards of integrity, professional
ethics and technical excellence at least the clients must believe so
 Attract young men of outstanding qualifications
 Continually raising Mc’s stature and influence
 Focus on serving clients superbly well afterthought?
• 1945 New Engagement Guide
 Billing rates- Revenue
 Right of first refusal to marquee projects- Prestige or
experience
▫ ONE FIRM policy
 Profits to be shared from a firm pool, not an office pool
4
Practice (expertise) Development

• 1970s downturn
▫ slowing divisionalization in EU, oil-shock
▫ Too many Partners, too little client-work
 Let us develop our technical and professional skills
 “T”-shaped consultants: broad generalist + in-depth in either
industry (oil, textiles, auto) OR function (HR, Sales, IS)
 Associates (worker Bees): Mgmt ratio reduced from 7:1 to
5 or 6 : 1
• The idea was that Mc. Consultants learnt so many
things when working with clients
▫ But there was no organized effort to capture the
knowledge in repositories (for potential future use by
other consultants in other projects)
5
Organization around: 1983

• 1983: Exhibit 3
▫ Centers of competence [Function / horizontal]
 Systems, technology, sourcing, strategic
management, manufacturing, marketing, microeco,
change management, corporate fin, corp leadership
▫ Clientele sector
 Automotive, Banking, Chemicals, Communication &
Information, Consumer products, Electronics,
Energy, Health Care, Industrial Goods, Insurance,
Steel
6
Organization 1991
• 1991: Exhibit 4
▫ Clientele Industry sector
 FI (Banking, Insurance, Health Insurance)
 Consumer (Retailing, Media, Pharma)
 Energy (Petroleum, Natural Gas, Electrical utility etc.)
 Basic Materials, Transportation, Aero, el & telecom
▫ Functional capability group
 Corp gov & Leadership
 Organization
 IT
 Marketing
 Strategy
 Operations Effectiveness
7
So, what was ailing Mc?

• Decade of doubt (1971 – pre Daniel)
▫ Preoccupation with geographical expansion and new
practice possibilities caused Mc to neglect the
development of technical and professional skills (p. 2)
• 1976 competition from BCG (Mc. under Daniel)
▫ BCG used tools: experience curve, growth share matrix
etc. made inroads into strategy consulting market
 Mc knowledge widely diffused, minimally codified
▫ BCG consultants conc. around Boston. Fly in and out
to client locations. Mc many offices, relationship
building with local biz. emphasized
8
Mc ailments, contd. …
• 1982 (under Gluck)
▫ Knowledge development a peripheral activity
▫ 15 centers of competence (virtual)
 Did not have a natural, stable client base
▫ Internal status hierarchy, based largely on the size
and importance of one’s client base
▫ Deep seated suspicion of anything that suggested
packaging of ideas or creating proprietary concept
▫ Peters and Waterman book came out
 Quite a few of the excellent companies bit the dust
shortly thereafter
9
Actions to tackle ailments (Gluck)

• Develop career path for deep functional specialists
• FPIS: Firm practice information system
▫ Computerized record of client engagements
• PDNet Practice development network
▫ Repository of knowledge documents
• Knowledge Resource Directory (KRD)
▫ Yellow pages- who worked on what with which client
(and might help on a new assgmt)
• “I” shaped consultant (carry spclzd knowledge, no
client work, client development orientation p. 6)
▫ Difficult to have them billable, all the time
10
Into the 1990s (still under Gluck)

• Practice Development ==
▫ Creation of experts and generation of documents in
order to build Mc’s reputation (p. 6)
 But that knowledge was not getting ‘between the ears of
the consultants’ for solving client issues(p. 6)
• 72 islands of activities (fiefdoms – p. 6) to shrink
▫ Sectors, Centers, Working Groups, Spcl projects
• Client Service Team concept mooted: 200 CST 1993
▫ Single partner no longer ‘owns’ a client.
▫ To focus on client’s long term needs. To work with the
client over a longer term. i.e. to prospect for
opportunities for further billable work
11
1994 enter new MD

• Legacy
▫ Clientele Industry Sector, Functional capability Group,
PDNet, FPIS
• Added Practice Olympics (15% consultants took
part)
• Multi-year special initiatives for study of
▫ Shape and function of the corp of future
▫ Creating and managing growth (of client firms)
▫ How Mc. may capture globalization opps
• Considered giving up 5-10% billable hrs for above
12
Latest ailments of Mc (mid-90s)

• Growth stretching fabric of Mc
▫ Creating niche for every 1 (partners) difficult
▫ CSTs the way- one partner not to ‘own’ one client
• Not enough opportunity and excitement for ppl
▫ i.e. not many new Partner roles in horizon
▫ Existing partners therefore should mentor young
associates (who see less prospect of being elevated)
• Technopoly: Email etc. driving out F2F commcn
• Too many compartments- no sense of ‘village’
• Acting on basis of Pddocs getting reified
▫ Threatens to replace original thinking
Session 12 1
Nonaka,I. (2007)
The Knowledge-Creating Company
Harvard Business Review. 85 (7/8): 162-171
reading
2019
Knowledge management
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Knowledge creating company

• Co.’s business is continuous innovation
▫ Consistently create new knowledge
▫ Disseminate widely throughout the org
▫ Embody in new tech and products
• Formal & systematic knowledge can be codified
▫ Data, codified procedures, universal principles
▫ Value realized through increased eff, lower cost
• Not easily codified knowledge (Tacit knowledge)
▫ Slogans: Theory of Automobile evolution (Honda),
beer can (personal copier), optoelectronics (Sharp)
 Taps tacit & often highly subjective insights
4
Tacit knowledge
• Highly personal
▫ Hard to formalize & communicate to others
 Hard-to-pin-down skills in “know-how”
▫ Deeply rooted in action
• Has cognitive dimensions
▫ Mental models, beliefs, ingrained perspectives
 Hard to articulate
• May be transferred by apprenticeship
▫ Thru’ observation, imitation & practice
• Example: increasing the pace in Amazon w/h
▫ Humans discover heuristics. Those put in machines,
subsequently
5
Requirements to developing and using

Tacit knowledge
• Tapping and using tacit knowledge requires
▫ Personal commitment
 That arises from an employee’s sense of identity with the
enterprise and its mission
▫ Managers being comfortable with images & symbols
• Is Not the sole responsibility of R&D department
 Is a way of behaving, a way of being ready to recreate the
company. Every one is an entrepreneur, a knowledge
worker
• Requires fresh approach to
▫ Think about managerial Roles & Resp, org design &
biz practices (different from the Anglo-Saxon way)
6
Expressing the inexpressible

• Tap the store of figurative language and symbolism
▫ That managers can draw from to articulate their intuitions
and insights (evocative, poetic language)
• Use metaphor: a distinctive method of perception
▫ Something is understood intuitively through the use of
imagination and symbols without analysis for genrlzn
▫ May involve linking two distant ideas in one phrase &
multiple meanings (Man max, m/c min – Honda City)
• Thereafter use an analogy to clarify what similarities
and differences are pertinent
▫ Cannon example: Making the photosensitive copier drum,
source of maintenance problems, disposable, like a beer can
• Develop a model
▫ Quality standards at Osaka International Hotel, for bread,
used to develop standards for a bread-making machine
▫ Image of sphere => tall boy design for Honda city
7
Managerial Practices for K-creation

• Limited number of non-specific a-priori instructions
(non-specific may appear as vague)
▫ Two as in the Honda example- H-City design –
something very different but not very costly.
▫ If too clear it becomes an order. Does not nurture
creativity. Thinking and actions become frozen along
fixed lines.
 Equivocal vision gives workgroups the freedom and autonomy
to set their own goals
 Top management is more an obstacle-clearer
 Pooling info and examining stuff from various angles
“Man-max, m/c min”
Reasoning of Detroit that sacrificed comfort for appearance was overturned.
Short & tall car provided max space to passenger while taking up lesser road space
(and costing less)
8
Managerial practices contd. …

• Redundancy (Waste, in eyes of Western mgmt)
▫ Conscious overlapping of company information,
business activities and managerial responsibilities
 Overlap in perspectives helps in developing
understanding
▫ Two teams chartered to do the same project in
different ways
 Appreciation of variance (in how) helps develop
insight
9

• Job rotation
▫ 3 jobs in 10 years
▫ R&D folks ‘retiring’ & joining marketing
• Equal access to Co. information
▫ Unequal access hinders search for alternate
interpretations of company knowledge
10

• Dynamic interaction across 3 roles
▫ FLE: experience realities, signals from marketplace
▫ K-mgrs=> orient this chaos to purposeful knowledge
creation: re-examine stuff taken for granted: what is
▫ TMT=> create symbols, metaphors that orient the
knowledge creating efforts: what ought to be
 Also take call on which efforts to support
 When approving a project, instead of only looking at
efficiency, ROI etc. other stuff is looked at-
 embody co.’s vision? (Mazda- rotary engine sports car)
 Expression of top mgmt’s aspirations and strategic goals?
 Potential for augmenting the org’s knowledge network
Session 13
Khanna,T., Lal,R., & Manocaran,M. (2005)

Mahindra and Mahindra: creating Scorpio
HBS 9-705-478
case

2019
Corporate Venturing
2
Auto Industry
• Worldwide
▫ GM, Ford, Daimlyer Christler (US)
▫ Volkswagen, Peugot, Fiat (EU)
▫ Toyota, Nissan, Honda (JP)
• India (2003)
▫ A 2.3-3.5l Maruti 800, Maruti Omni
▫ B 3.5-4.5l Indica, Santro, Fiat Palio, Zen
▫ C 4.5-9l Accent, Honda City, Icon, Indigo, Esteem
▫ D 9-15l Octavia, Accord, Sonata, Corolla
▫ E > 15l Mercedes Benz, BMW
3
Scorpio Design
• Pre-1995: Peugot tech collab: diesel eng & trnsmssn
• 109 BHP engine: AVL Austria (powertrain)
▫ Petrol Euro III, Diesel Euro II emission std
• Air conditioning (temp drop required over time)
▫ Behr group, Germany (heating, aircon for cars)
• Suspension System: Samlip Ind co ltd (Korea)
• Headlamps: Lumax (with Korean co.)
• Interiors incl Seating: Lear Corporation
• Body Shop: Wooshin Systems Co. Ltd (Korea)
• Engineering Development (p. 10) IDAM team
▫ 120 ppl 5yrs @$10k/yr .75/200 prototypes
 97-98% of robustness reached at 1/3rd of MNC cost
4
Market research leading to Scorpio

• M&M spent 6 months holding product clinics
with owners of vehicles from similar segments
▫ Qualitative research in trend-setting areas
▫ Options from automotive experts
• Findings
▫ Reducing noise/vibration was important
▫ Car associated with (self) image (of owner)
▫ Environmental regulations less stringent in India
▫ After 2000s ppl were willing 2 take loans 2 buy car
▫ Road networks expanded. Excise cut 32=>25%
5
Brand Identity prism – Scorpio

• Persona: Powerful, in control, sophisticated
• Culture: Living life at own terms
• Self-image: A cut above. Only the best will do
• User image: Successful, new economy
businessman, self-made, evolved taste
• Relationship (with product): Extnsn of lifestyle
• Physique: Styling, International looks, power,
car-like comfort
6
What M&M did different

• UV: mostly diesel (2/3 of petrol cost), guzzlers
• 120 member IDAM team in same location
• All major systems were designed & engineered
by suppliers; incl. validation, testing, mtl selctn
• Small volumes => consolidate biz from othr prd
• Timing good: global suppliers had lean biz
• Scorpio from mahindra positioned as a car+
• Urban dealers had separate outlets for Bl & Scor
▫ Where shared, color scheme & décor was different
7
International footprint M&M
• 1983: top selling tractor brand in India

• 1994: Mahindra USA. Foreign tractor sales 20%
• 2004: 181/1600 veh sold overseas were Scorpio
• 100 vehicles sold to SL, Nepal, Bangladesh govt
• MOU with Iran state-owned Co.
• Kuwait – 40 vehicles
• Uruguay: Bolero launched as Mah. Cimarron
• Europe: Scorpio was launched as Mah. Goa
• A tie-up with Peugot for selling modif in Italy
• 2004 July: South Africa. Target 4000 veh.
• 2003: Each M&M Co. must get 20% rev abroad 3yr
8
Questions
• Considering the Scorpio project as NewCo and the
M&M company parent as OldCo, Justify with
reasons
▫ What all did NewCo borrow from OldCo?
▫ What all did NewCo forget?
• Compared to Scorpio- M&M, NYT-Digital with NYT

parents seems to have had a much rougher ride.
Why?
▫ Is it just that Indians are better in doing new ventures,
compared to Americans, or can we find more nuanced
reasons?
Session 13
Govindarajan,V. & Trimble,C. (2005)

Organizational DNA for strategic innovation.
reading

2019
Corporate Venturing
& organizational culture
2

BOARD OF GOVERNORS
HEADQUARTERS
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

higher value
Corporate Functions
3
Strategic Innovation in org DNA

• Strategic Experiment +
• Structure +
• Staff +
• System +
• Culture
4
Strategic Experiments
• Require departure from a corporation’s proven
business definition
• Leverage some existing assets
• Target emerging and poorly defined industries
• Require some new knowledge
• Potential customers are often mere possibilities
• Value propositions are often just guesses
• F/b to experimentation is delayed & ambiguous
5
Corporate Venture
• CoreCo: parent
• NewCo: new venture
• Distinct subunits within a corporation
• Must have their own general manager, both
reporting to an Executive sponsor (CEO/Staff)
• NewCo is distinct from CoreCo, but not isolated
• Carefully chosen links, say between the R&D of
NewCo and CoreCo and between marketing (fig 2)
▫ Brands, skill sets, customer relationships, mfg capacity
6
Diff: CoreCo - NewCo

• Understands existing customers vs. must be
attentive to emerging customers
• Focused on efficiency vs. emphasis on learning
• NewCo might cannibalize CoreCo Revenues
▫ NewCo might end up with different customer set
• Promotion criteria, planning, budgeting, reward
systems need to be different
• NewCo may require new competencies that are
not present in CoreCo
7
6 forgetting recommendations to NewCo

• Hire outsiders in NewCo, more so in mgmt level
▫ To foster redefinition of customers, value propositions
and work processes. Acquire new competence
• NewCo should not report to a CoreCo manager
▫ Else NewCo will go underfunded (ADI/ MEMS)
• Roles, responsibilities different in NewCo
▫ From software world in NYTD vs publcn in NYT
▫ Avoid replicating HR, IT, purchasing functions
• Performance measures must match biz model
▫ Not by annual planning cycle or CoreCo biz cycle
• Rigor and speed in testing assumptions important
▫ Short term incentives to be avoided
• Unique culture needed (universals like teamwrk ok)
8
Borrowing
• Borrowing Physical Assets (ADI-MEMS gross margin)
▫ CoreCo’s income statement needs to be properly
compensated through fair transfer pricing
 ES to mediate conflicts over resource priorities (p 63)
 Make arrangement such that CoreCo receives more
money if NewCo succeeds (p. 69), for proc. o/p used
• Expertise: requires interpersonal interaction
• Process coordination (NYTD print vs online ad sales)
• Joint process development (NYTD: classifieds ad pkging)
• ES oversight necessary
▫ CoreCo may resist changing its procs for NewCo
▫ Manage frustration of CoreCo managers making less.
Hold separate business reviews for CoreCo & NewCo
Session 14
Wozny,M., & Bartlett,C.A. (2004)

GE's Two decade transformation:
Jack Welch's leadership HBS 9-399-150
case

2019
Leadership
2
GE Timeline
• Bellwether of American management practices
• 1930s highly centralized tightly controlled corp
• 1950s resp delegated to 100s of deptl mgrs
• 1960s profitless growth. Strong stgic planng sys
• 1973-(Jones) 10 groups, 43 div, 190 depts: 43sbu
• 1977 depts scrapped. Sectors
• 1980s (Welch)
▫ Eliminated 59k salaried and 64k hourly positions
▫ Divestitures led to separation of another 123k empl
 200 biz sold, $11b freed up. 370 acqs, $21b
▫ Total empl count 404k (1980) =>292k (1989)
3
Concepts from Welch ‘81-’01

• Be #1 or #2, else be prepared to be shut, sold etc.
• Work out sessions (Eliminate bureaucratic work)
▫ Employees bring forth proposals, boss needs to
approve or disapprove 80%
• Best Practices
▫ How other companies in the industry do it. Helped
focus on how things got done (behavior vs. o/p)
• Learning from other verticals (Boundaryless)
▫ Try out successful practices of one in another
 Productivity from lighting, quick response asset
management from Appliances, global A/c mgmt plastics
• Destroy your business .com
▫ Planning, in order to be successful in Internet era
4
Key Events in Welch Era

• Early eighties
▫ Shirtsleeves session with 14 business heads
▫ 12/14 of those heads roll
▫ Strategic planning division shut down
▫ All biz heads report directly to Welch (delayering)
▫ Divestiture of non-#1/#2 biz. Acqsn of other biz
• Mid-eighties to early nineties
▫ Managers not delivering but high on ‘GE values’
allowed to say. Deliverers low on ‘GE values’ let go
• Early to mid nineties
▫ ‘Non-performers’ let go; adhering to values no
longer helpful. New ideas in demand. A players
5
Experiment; Act; Find dysfunction; Act again;
• Pre-Welch GE was Planning heavy

▫ Mgmt layers needed to aggregate information
• Welch shut planning. Managed bizs by #1-2 target
• Divestitures, forced departures impacted morale
▫ Adherers to ‘GE Values’ protected, as a concession
• Company became frozen as threat-rigidity response
▫ Work-out sessions to drive change from below
▫ Outside benchmarking by best practices
▫ Adoption of practices from one GE vertical to other
• 6-sigma was next. Plan is back. (closing out dcade)
• Performance focus makes re-entry: only A players
▫ Redefine psy contract as “getting to work in great GE”
• With dyb.com Planning makes a re-entry
6
Welch Techniques
• Pace: An orgnzn ought to stretch itself, ought to
reach, to the point where it almost comes unglued
▫ Delink from past knowledge. Dreams to set goals
• Going Global From just USA
▫ Need to have a solid base at home (M&M ?)
▫ 1987 #1 or #2 bar raised to worldwide (from US)
• Adding services biz (lower capex, higher varbl)
• Buying Cos on downturn EU, SE Asia, S Am
• Succession plans- draw attention to time
• Putting contrasts in one slogan “Integrated
diversity” “Boundaryless” “Dwb” (recall Nonaka)
• Distributed processing: globalizing intellect
Session 14
Montgomery,C.A. (2008)
Putting leadership back in Strategy
reading

2019
Leadership
2

BOARD OF GOVERNORS
HEADQUARTERS
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

higher value
Corporate Functions
3
What is the problem being addressed?

• Strategy has been narrowed to a competitive game
plan, divorcing it from a firm’s larger sense of purpose
• Formal planning efforts, e.g. through BCG growth
share matrix, Mc 7S framework etc. have narrowed
down strategy to mere economic analysis on problems
of strategy and competition
▫ Thereby, strategy has lost breadth and stature
▫ Has been reduced to ‘getting the idea right at the
outset’,
 assuming a degree of hyper-rationality and predictive
accuracy that firms/managers don’t have
 Resulting in production of trivial artifacts
4
What is meant by strategy having had a narrow,

analytic focus?
• Strategy is not merely about the position a firm is
placed, w.r.t. the external environment
▫ The notion that there is a brilliantly conceived
strategy, a Holy Grail, defendable over time, is
dangerous
 The notion that all thinking is done at the beginning and
the job of the strategist is to get the analysis right is
deeply flawed
• The world, both inside and outside the firm, changes
not only in big, discontinuous leaps, but in frequent
smaller ones as well
▫ As irreversible changes accumulate, the ‘right thing to
do’ changes from what it was at stgy formulation time
5
Why is a narrow analytic focus wrong?

• Holding too strongly to one competitive advantage
or one purpose may result in the firm’s being
controlled by a perception of value long after the
value has diminished in significance
• Specifying complete strategies, with all particulars is
not possible
▫ Just as all contracts are essentially incomplete
▫ Only the shallow know themselves- Oscar Wilde
• Ability of to make judgment about a host of issues
facing leadership cannot be resolved through
analysis alone. Creativity and insight are key
▫ Repeated judging is necessary to figure what
irreversible commitment to make next
6
What is the right way of doing strategy?
• Strategy decides what a firm will be

▫ Recall from the B.O.S. reading that the job of
managers is not to valiantly fight off issues from env
▫ Rather, a firm must create value
 This requires bringing in something new to the world
 Requires proactive shaping the environment (or
demand) in order to highlight the usefulness of the new
 We learnt from the knowledge creating firm article, that
something meaningfully “new” is rarely the product of
repeated application of codified knowledge
• A firm must have an appreciation regarding how it will
capitalize on the learning that accumulates on the way
7
So, how will leaders fix the problem?

• Play unique role in formulating & implementing stgy
• Live with the stgy over time, guide course correction
• Identify what is truly distinct to the firm and why it
matters
▫ Ask, what would be lost to the world, i.e. to whom
would it matter, if the firm disappeared? Which
customers miss the firm the most, why? How long is it
before another firm fills the void?
• Purpose should be at the heart of strategy
▫ Ex: Pixar, films for x-y-z, but not mature audience
8
Leadership: right brain activity also needed
• Negative events can be great teachers

▫ RyanAir; M&M being snubbed by Ford for car
• Purpose of a firm may change: IBM, Apple ex.
▫ Constant, difficult renewal of base business
requires creativity, that, in turn, requires tapping
into tacit knowledge, not mere analysis of past
 Irreversible commitments by the focal firm and
other players in the ecology keep changing the
relevant reality
• A leader needs to create and recreate reasons for
a company’s continued existence
Session 15
Hasson,R. (2007)
Why didn’t we know?
case

2019
Corporate Governance
2
GALVATRENS who is where

Arch C. Dan R.
others Sheila C.
Lead director Corporate Governance
Audit Committee
Chip B.
CEO & Chairman
ombudsman Harry M. Terry S Dale W Sydney B

COO VP Sales VP HR GC
Mike F Greg W Ethics

DSM DSM Officer
DSM: Divisional Sales Manager

The dotted line box is Galvatrens’ Board
3
Case Facts
• Mike F. DSM Sales, learnt about a peer’s (Greg W)
illegal Channel Stuffing plan
• Reported the misdemeanor to Harry M the COO
• Harry the busy COO, passed the matter on to Terry
S, boss of both Greg and Mike
• Terry S scolded Greg W in secret & allowed him to
resign (instead of disciplinary proc + dismissal)
• Meanwhile Mike F’s performance dropped due to
custody battle in a recent divorce
▫ Terry S. asked Mike F. to take a demotion and move to
a different location. Mike F. unable to move, due to
joint custody of children. Mike F. terminated. Mike F.
filed a case alleging wrongful (retaliatory) termination
4
Who is to blame?
• Dale W the HR guy, old hand
▫ He delayed the plan to get ombudsman
• Harry M. COO
▫ Should have stopped to pause why Mike F. did not
report the matter to his boss Terry. Should have
alerted the board/ CEO / Ethics Officer
• Syd B. General Counsel (only 1 not required to follow ethics?)
▫ Citing denial of Mike’s claims when the co. also
investigates and negotiates as ‘standard’ procedure
 Even as the channel-stuffing event was known to be true
• Chip B. CEO: Both Harry & Syd are his hires
• Anyone else? Or anybody above for any other
reason?
• How should Galvatrens strengthen its system for
uncovering misconduct? What wd be board fns?
Session 15
Sonnenfield,J.A. (2002)
What makes great boards great?
reading

2019
Corporate Governance
2

BOARD OF GOVERNORS
HEADQUARTERS
SBU2 SBU3B
SBU1 SBU1A
SBU3
COUNTRY 1 COUNTRY 2

higher value
Corporate Functions
3
Position of the Author

• Studies have suggested a variety of factors are
responsible for dysfunctional BoDs
▫ Meeting attendance, finance/accounts skills, Age,
presence of past CEO, low proportion of outside
directors, board size, presence / absence of
compensation and audit committees
• Author finds that most of those factors are seen
in well-acclaimed BoDs as well as BoDs of
companies having failed Corp. Gov. records
• Hence new thinking is required to improve BoD
4
The prescription
• BoDs need to cultivate dissent, and not suppress
dissent as disloyalty. Pressure to conform must go
• BoD members should not politic, for example by
bypassing the CEO to obtain information from Co.
• CEO should be forthcoming with timely information
• Political allies in BoD should be split up during site
visits, external meetings, research projects
• BoD’s nominating or governance committee should
make BoD members write self-evaluation, as well as
write evaluation of peer directors
• This will satisfy shareholder activists, accountants,
lawyers, and analysts who study Corp. Gov.

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Date Event Remark

1910--1926 Works from a leased office in Kolkatta Inception

Date Event Remark

Sasanka Sekhar Chanda

Sasanka Sekhar Chanda

Re-cap SM-I: Business Strategy

Some questions arise after SM-I

Conceptual basis of Porter

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Strategic Business Unit (SBU) Functions

Hambrick DC, Fredrickson JW (2005)

Are you sure you have a strategy?

Academy of Management Executive, 15(4): 48-59

Clarifying Elements of Business Strategy:

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Clarifying Elements of Business Strategy:

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Clarifying Elements of Business

Steel Industry in the USA: 1986

INTEGRATED STEEL PLANTS

• 107 Million tons installed capacity

• Key Players: Nucor, North Star, Florida Steel &

• Competence & Strength

Commercials in the CSP decision

• ISP-CSP-MM (integrated steel plant, compact strip

Technology uncertainty in CSP(2”)

Why consider CSP at all?

• Main benefit of CSP over minimill

Strategic considerations in going with

If Scrap is used as raw material, 2” flats being thinner than

How would one classify the following decisions

Framework for class question

Strategic Decision Making

Functions of the Corporate Office

Strategic Business Unit (SBU) Functions

Decision Dimensions: Commitment and Scope

• The degree of commitment is measured by the

If there is large change in both …

• The strategic decision involving significant

Traditionally all decisions involving significant change in commitment by

Shivakumar proposes a label “Tactical” in quadrant III and a label “Neo-

Kim & Mauborgne (2016)

Exploring Options: Blue Ocean Strategy

Marvel – early days

Trouble starts from late ‘60s

• 1968: Goodman sold Marvel to Cadence Industries

Till bankruptcy under Perelman (1996)

Post Bankruptcy 1998

Early movie deals provided capital

2004 onward: create a real movie studio

Cost consciousness @ Marvel Studios

Value in marvel-made movies

The Wagon Wheel @ Marvel

AS-IS Hollywood Studios Marvel Studios

Kim,W.C.,& Mauborgne,R. (2002)

Exploring Options: Blue Ocean

Functions of the Corporate Office

Strategic Business Unit (SBU) Functions

Purpose of the Strategy Canvas

Terminology in the strategy canvas

Steps to construct Blue Ocean strategy

They have defined rules, competitors, and market