Visioning Opportunities & Growth Strategies

Visioning: Opportunities
And Growth Strategies
Dr. Sharad Sarin
1
VISION
• Vision without action is merely a dream.
• Action without vision just passes the
time.
• But vision with action can change the
world.
- Joel Arthur Barker

2
VISION: A vividly descriptive image
of what a company wants to
be or wants to be known
for.
MISSION: A statement of intent of
what a company wants to
create, and through which
lines of business.
PURPOSE: An articulation of the
functions that a company
intends to fulfill through its
businesses.
3
BUILDING YOUR COMPANY’S VISION [1996]
-Collins, Porras
VISION
Core Ideology Envisioned Future

[You do not create core ideology, you [10-30 years – BHAG Big Hairy
Audacious Goal; vivid description]
discover core ideology]
*O rganization
reason for being
Core Values Core Purpose [should last at
least 100 years]
•These require no external justification. They have
intrinsic value and importance to those inside the * Its like a
organisation [what we stand for] guiding star on
the horizon –
• Walt Disney: Imagination and wholesomeness; P & G; forever pursued
product excellence – only a few values can be truly core; but never
values must withstand the lost of time. reached. 4
TYPES OF VISION
• Target Vision - $125 bn – Coby 2000 – Wal-Mart
• Common Enemy Vision [David vs Goliath] – knock off RJR as Number One
tobacco company in the world – Philip Morris [1950s]; crush Adidas – Nike
[1960s]
• Role Model Vision – become the Harvard of the West – Stanford University
[1940s]
• Internal Transformation – become Number One or Number Two in every

market we serve and revolutionize this company to have the strengths of a
big company, combined with the leanness and agility of a small company
[GE, 1980s]
5
SONNY IN THE 1950S – CORE IDEOLOGY
• Core Value
- Elevation of the Japanese culture and national status.
- Being a pioneer – not following others, doing the impossible.
- Encouraging Individual ability and creativity.
• Purpose: To experience the sheer joy of innovation and the application of

technology for the benefit and pleasure of the general public.
• Envisioned Future: BHAG – Big, Hairy, Audacious Goals. Become the

company most known for changing the worldwide poor quality image of
Japanese products.
• Vivid Description: We will create products that become pervasive around the
world. We will be the first Japanese to go into the US markets and distribute
directly.
6
CORE VALUES
• Merck
- Corporate social responsibility
- Unequivocal excellence in all aspects of the company
- Science – based innovation
- Honesty and integrity
- Profit but profit from work that benefits humanity
• Philip Morris
- The right to freedom of choice
- Winning – beating others in a good fight
- Encouraging individual initiative
- Opportunity based on merit – no one is entitled to anything
- Hard work and continuous self improvement
7
CORE PURPOSE
• 3M: to solve unsolved problems innovatively
• Cargill: To improve the standard of living around the word.
• Hewlett-Packard: To make technical contributions for the advancement
and welfare of humanity
• Mary Kay Cosmetics: To give unlimited opportunity to women
• McKinsey & Co: o help leading corporations and government to be more
successful
• Merck:To preserve and improve human life
• Nike: To experience the emotion of competition, winning and crushing
competitors
• Sony: To experience the joy of advancing and applying technology for
the benefit of the public
• Wal-Mart: To give ordinary folk the chance to buy the same thing as
rich people
8
BILL GATES VISION
“A computer on every desk and in every
home, all running on Microsoft
Software”
9
CORPORATE PURPOSE
Our purpose is to meet everyday
needs of people, everywhere.
PRINCIPLE
Deep roots in local culture and markets,
truly multi-local, multinational.
-HLL
10
TATA STEEL - 1990
Mission of the Company

Consistent with the vision and values of the founder, Mr. Jamsetji Tata, Tata
Steel strives to strengthen India’s industrial base through the effective
utilization of men and materials. The means envisaged to achieve this are high
technology and productivity, consistent with modern management practices.
Tata Steel recognizes that while honesty and integrity are the essential
ingredients of a strong and stable enterprise, profitability provides the main
spark for economic activity.
Overall, the company seeks to scale the heights of excellence in all that it does
in an atmosphere free from fear, and thereby reaffirms its faith in democratic
values.
11
Business Purpose of the Company
To be a profitable producer of quality steel, other value-added engineering and
construction materials and a supplier of related technology.
Strategic Business Challenges

The business challenges facing the company in the next decade are:
- Creating a climate for the full realization of individual potential
- Quality improvement
- Modernization
- Improving customer service
- Good industrial relations
- Proper projection of a company’s image
- Diversification
- Maintaining and improving existing self-sufficiency in selective areas
- Coping with competition
- Environmental management
12
TATA STEEL
“To strengthen India’s industrial base
through the effective utilization of men
and material. The means envisaged to
achieve this are high technology and
productivity, consistent with modern
management practices…”
13
VISION STATEMENT
“We shall offer world class products and
services, by anticipating and exceeding
the expectations of all our customers.”
14
TATA STEEL - VISION
• Tata Steel enters the new millenium with the confidence of a learning, knowledge-based, and a
happy organization.
• We will establish ourselves as the supplier of choice by delighting our customers with our
services and our products.
• In the coming decade, we will become the most cost nation.
• Where Tata Steel ventures---others follow.
THRUST AREAS: 1999-2000
CUSTOMER COST CHANGE

March 1999
15
STRATEGIC PLAN: SARIN’S FRAMEWORK
• THE SITUATIONAL ANALYSIS
* The History and Lessons
- Corporate Ethos
- Corporate past performance
- Strategic wonders and blunders
- Important milestones and turning points
* Swpot or tows
- Corporate audit
- Corporate capabilities
- Corporate weaknesses
- Core competencies
* Environment Scanning for the ‘future’
- Opportunities and threats
- Trend analysis
16
• REVIEW AND FORMULATION OF MISSION STATEMENT
- What business are we in and in what do we want to be?
(Definition of business]
- Corporate character and values
- Dreams and vision
- Core competencies
• FORMULATION OF CORPORATE OBJECTIVES

- Quantitative objectives [3-5 years] * Achieving side
- Qualitative objectives-----------Becoming side
• STRATEGICES
- Overall corporate related
- Functional strategies: operations, R&D, marketing, HR and
HRD, materials
17
• LINKING/LINKAGES
- Linking ‘capital’ and other expenditure plans with
‘Financial’ plans and performance
• REVIEW MECHANISM
- Measurement on key result areas
- Process of review
18
BROAD-NARROW BUSINESS DEFINITION
BROAD DEFINITION NARROW DEFINATION
Beverages Soft drinks
Footwear Athletic footwear

Furniture Wrought iron lawn furniture
Global mail delivery Overnight package delivery

Travel and tourism Ship cruises in the Caribbean
19
DEFINING BUSINESS CUSTOMER FUNCTION (NEEDS)
CUSTOMER GROUPS (SEGMENTS)
ALT. TECHNOLOGIES 20
BUSINESS DEFINITION END USES
CHEWING
CIGAR
BIDI
CIGARETTES
END
USERS
M F ADULTS CON END

TECHNOLOGY
SEMI AUTOMATIC
FILTER
21
NON FILTER
ALTERNATIVE GROWTH STRATEGIES
22
DIMENSIONS OF THE STRATEGIC DECISIONS
• Strategic issues require top management decisions.

• Strategic issues involve the allocation of large
amounts of company resources.
• Strategic issues are likely to have significant impact
on long – term prosperity of the firm.
• Strategic issues are future oriented.
• Strategic issues multi-business consequences.
• Strategic issues necessitates consideration of factors
in the firm’s external environment.
23
CONSISTENT AMONGST THE
GROWTH COMPANIES
• They believe in and act on the idea that there is

no such thing as mature business.
• Their growth is profitable sustainable and
capital efficient.
• They grow because growth is in corporate
mindset, created by the company’s Leaders.
• The mindset of growth starts at the top, but it
must reach all the way to bottom.
24
1. There’s no such thing as a mature business. Get the
ideas about mature businesses out of your mind forever.
Any company of any size in any industry-no matter how
“mature” the industry-can grow, once its leaders learn
how to look beyond their traditional definitions of
industry and markets.
2. Not all growth is good. Growth at all costs, or growth
for its own sake, can be a recipe for disaster. Good
growth is sustainable, profitable, and capital efficient;
don’t confuse it with feverish spurts of volume that
ravage earnings or steal from the future.
3. Growth is a mentality created by a company’s
leadership. It starts with the spark of a new point of
view, and it catches fire when everyone buys into what
the leaders are teaching and coaching.
25
4. Balanced growth is the key to prosperity in the
twenty-first century. Sustainable growth-growth for
the long haul-requires meticulous attention to the basics:
cost structure, quality, product development cycle time,
productivity, asset utilization, investment of capital,
supply chain innovation, customer service satisfaction,
and all the other components of operational excellence.
Never-ending focus on these generates the resources for
growth.
5. Growing is less risky than not growing. You’ll hear
people say that growth is about taking risks, but they’re
wrong. Personal risks, yes; it takes courage to stand up
for new ideas. But a sustainable growth strategy, based
on tightly defined customer needs, is far less risky than
rearranging the furniture while a competitor grows a
your expense.
26
EVERY BUSINESS IS A GROWTH BUSINESS
Charan & Tichy
Four simple rules that are framework for any growth plan or
strategy.
1. Look at your business from the outside in.

2. Enlarge the pond you fish in – look beyond your
industry’s boundaries and existing markets to the
customer’s total needs.
3. Find market segments that are growing – or create
them.
4. Build core competencies to capitalize on your new
opportunities.
27
1. The Inside-Out View
Your company/your customer/the final users e.g.
IBM – mainframe industry.
2. The Outside-In View
The final users/your customers/your companies.
New competitors
28
COKE
1980: Reberto – Goizuetta
• Average per capita daily consumption of fluids by the
world population of 4.4 billion – answer 64 ounces.
• Daily per capita consumption of Coca Cola – less
than 2 ounces.
• Large fish constrained in small pond, but a small fish
in a huge pond.
• Market share of the stomach – [water is the enemy]
• Ford’s water – vehicle life time – Ford’s share only
15% margins are typically less than 4%.
29
D C
New
NEEDS
Existing
A $20 billion B
$10
billion
Existing CUSTOMERS New

FIGURE 4.3 IN 1994, GE POWER SYSTEMS HAD HALF OF THE APPROXIMATELY
$20 BILLION WORLD MARKET FOR LARGE POWER GENERATION EQUIPMENT
– BUT THE MARKET WASN’T GROWING. (CIRCLES ARE NOT NECESSARILY TO
30
SCALE.)
D C
New
$5-10 billion
NEEDS
A
Existing
$20 billion B
Existing New
CUSTOMERS
FIGURE 4.4 THE ACQUISITION OF ITALY’S NUOVO PIGNONE BROADENED
POWER SYSTEMS’ POND TO $25-$30 BILLION, INCLUDING $4 BILLION OF
COMPLEMENTARY BUSINESS IN NEW MARKETS. 31
C
D
New
NEEDS $18 billion $5-10 billion
A
Existing
$20 billion B
Existing New
CUSTOMERS
FIGURE 4.5 MOVING INTO SUPPLYING SERVICES AS WELL AS EQUIPMENT TO
ITS UTILITY CUSTOMERS OPENED UP ANOTHER $18 BILLION IN POTENTIAL
BUSINESS, ENLARGING POWER SYSTEM’S POND TO AS MUCH AS $48 BILLION.
32
New
NEEDS
$700 BILLON
A
Existing
Existing New
CUSTOMERS
FIGURE 4.7 GE POWER SYSTEMS’ 1998 POND IS THE ENTIRE GLOBAL
POWER INDUSTRY – AND AT $700 BILLION, IT’S ALMOST 37 TIMES AS
BIG AS THE MARKET IT DEFINED AS SERVED THREE YEARS PREVIOUSLY.
33
THE CRUCIAL POINTS
[Focusing, Energizing and Strengthening]
• There is no such thing as mature business

• Not all growth is good.
• Growth is a mentality created by company
leadership.
• Balanced growth is the key to prosperity in the
twenty first century.
• Growing is less risky than not growing.
34
NEW BUSINESS DEFINITIONS
1. Well-head to consumer a $700 billion market – GE

Power
2. “From well head to wall socket”- Reliance
3. Computer technology to-day is about where
electricity was in 1990 – roughly halfway to its peak.
4. The combination of PC, packaged consumer
software, the internet, de-regulation and
globalization is creating mother of all discontinuities.
35
THE LEADERSHIP ENGINE
Noel Tichy
“Winning companies win because they have good leaders who mature the
development of other leaders at all levels of the organisation”. Good
leader possesses a teachable point of view which includes:
• Ideas – based on clear knowledge of what it takes to win in the market
place and how the organisation should operate.
• Value that support the business ideas and that everyone in the
organisation understand and lives up to.
• Emotional energy that drives the leaders themselves and is actively
communicated to create positive emotional energy in others.
• Edge – the leaders’ ability to face reality and to champion tough decision
about products, investments and people.
36
EMOTIONAL EQUITY
• Just as bad management destroys

shareholders equity, recurrent
downsizing ravages emotional equity.
• Emotional equity, the terms that sums up
the alignment of employees with their
company and its goals – a psychic energy,
the trust, the willingness to follow leaders
eagerly and give 110 % to their effort.
37
THE ‘VALUE’ EQUATION: ROLE AND
RESPONSIBILITIES OF THREE KEY FUNCTIONS
NOPAT NOPAT SALES

IC =SALES * IC
Revenue Cost Tax Sales

*
Ton Ton IC
Ton
Marketing operation A/c or Finance

NOTE:
1. NOPAT – Net Operating profit after tax
2. IC – Invested capital
38
THE UNIVERSAL BUSINESS RULE
R = M* V
Return = Margin * Velocity
where R is ROI, M is profit margin,
V is velocity
R = M *V
Income Sales
R = ---------- * ------------
Sales Assets
Source: Charan & Tichy

39
THE UNIVERSAL BUSINESS RULE
M [MARGIN] V [VELOCITY]
• Annual productivity • Faster inventory turnover

improvement.
• Faster time to market. • Lower capital investment
per dollar of sales.
• New product and services. • Reduced working capital.
• Creative segmentation and • Additional sales from the

re-segmentation of markets. same assets, via products of
higher value.
40
NINE AVENUES of Growth:
1. Natural Growth, where your market

is expanding.
2. Gaining market share through low
cost high productivity growth, rapid
cycle times, high assets turnover.
3. Proprietary or patented technology.
41
NINE AVENUES of Growth (Cont..) :
4. Highly developed DISTRIBUTION

CHANNELS that you have built over
time.
5. Opening new markets for existing

products,through globalization etc.
42
NINE AVENUES of Growth(Cont…):
6. Gaining power in the market place via

acquisitions, alliances vertical integration
etc.
7. Expanding your “pond”.
• Identifying the RELATED MARKETS
8. Re-segmenting your markets.
9. Moving into adjacent segments.
43
THE DYNAMICS OF SATISFACTORY
UNDERPERFORMANCE
Successful Competitiveness, Managers begin

Business growth and to believe they
strategy profits are the best
Builds layers of
staff to cope
with growth
Gradual decline into Initiative and External

satisfactory under arrogance and
performance and then innovation
to crisis stifled internal focus
of control
44
THE SWEET AND SOUR CYCLE
Radical Performance
Improvement
Improving Resource Creating and Exploiting

Productivity [SOUR] New Opportunities
[SWEET]
Portfolio choice [eliminating Growth opportunities [new
low-return activities] products and markets;
Improving labor productivity expanding share]
[revenues and profits per
Building competencies [new
employee)
capabilities & resources]
Improving operating efficiency
Organizational capabilities
[speed, reducing waste]
[revitalizing organization &
Improving capital productivity people]
[ROCE] 45
YOUR COMPANY’S PERFORMANCE
YEAR ANNUAL ROCE

GROWTH
1998
1999
2000
2001
2002
46
PERFORMANCE [1994 – 97] OF COMPANIES
PARTICIPATING IN THE SENIOR MANAGEMENT
PROGRAMME IN INDIA
25
20
15
10
5
0
-5%
-5% 0 5% 10% 15% 20% 30% 35%
47
Ghoshal
GOOD TO GREAT
1. LEVEL 5 LEADERSHIP Paradoxical blend of personal humility and
professional will.
2. FIRST WHO THEN WHAT First the right people on the bus, the
wrong people off the bus and the right people on the right seats and
then they figured out where to drive it. Not vision & strategy first but
later. People are not your most important assets. The right people.
3. Confront the brutal facts [yet never lose faith].
4. The Hedgehog concept [simplicity within three circles].
5. The culture of discipline.
6. Technology accelerators.
7. The flywheel and the doom loop. Good is the enemy of great is not
just a business problem. It is a human problem. The best students
are those who never quite believe their professors: one out not to
reject the date because one does not like what the date implies.
48
GOOD TO GREAT
8. LEVEL 5 EXECUTIVE Builds enduring greatness through a
paradoxical blend of personal humility and professional will.
LEVEL 4 EFFECTIVE LEADER Catalyzes commitment to
and vigours pursuit of a clear and compelling vision,
stimulating higher performance standards.
LEVEL 3 COMPETENT MANAGER Organizes people and
resources toward the effective and efficient pursuit of
predetermined objectives.
LEVEL 2 CONTRIBUTING TEAM MEMBER Contributes
individual capabilities to the achievement of group objectives
and works effectively with others in a group setting.
LEVEL 1 HIGHLY CAPABLE INDIVIDUAL Makes
productive contribution through talent, knowledge, skills and
good work habits.
49
THE GOOD TO GREAT MATRIX OF
CREATIVE DISPLINE
HIGH
HIERACHICAL GREAT ORGANIZATION
ORGANIZATION
BUREAUCRATIC START-UP
ORGANIZATION ORGANIZATION
LOW
LOW HIGH
50
HEDGEHOG CONCEPT
WHAT YOU ARE
DEEPLY
PASSIONATE
ABOUT?
WHAT YOU WHAT DRIVES

CAN BE THE YOUR
BEST IN THE ECONOMIC
WORLD AT? ENGINE?
51
LEARNING FROM GOOD TO GREAT
by Jim Collins
1. Larger – than life, celebrity leaders who ride in from the outside
are negatively correlated with taking a company from good to
great. Ten of eleven good-to-great CEOs came from inside the
company, whereas the comparison companies tried outside
CEOs six times more often.
2. We found no systematic pattern linking specific forms of
executive compensation to the process of going from good to
great. The idea that the structure of executive compensation is
a key driver in corporate performance is simply not supported
by the data.
3. Strategy per se did not separate the good-to-great companies
from the comparison companies. Both sets of companies had
well-defined strategies and there is no evidence that the good-to-
great companies spent more time on long –range strategic
planning than the comparison companies.
52
TED LEVITT
There is no such thing as a growth industry. There are

only companies organized and operated to create and
capitalize on growth opportunities.
– LARRY BOSSIDY – CEO – ALLIED SIGNAL

“Complexity is not the sign of an intellectual gift,
making things simple is---”
53
YOUR COMPANY’S PERFORMANCE
25%
20%
15%
10%
5%
0%
-5%
-5% 0% 5% 10% 15% 20% 25%
Return on Capital employed
54
IF CAGR IS
Growth 10% 15% 25%

Rate
Year 0 100 100 100
Year 1 110 115 125
Year 2 121 132 156
Year 3 131 152 195
Year 4 146 174 244
Year 5 161 200 305
55
STRATEGIC PLAN: SARIN’S
• FRAMEWORK
THE SITUATIONAL ANALYSIS
* The History and Lessons
- Corporate Ethos
- Corporate past performance
- Strategic wonders and blunders
- Important milestones and turning points
* Swpot or tows
- Corporate audit
- Corporate capabilities
- Corporate weaknesses
- Core competencies
* Environment Scanning for the ‘future’
- Opportunities and threats
- Trend analysis
56
• REVIEW AND FORMULATION OF MISSION STATEMENT
- What business are we in and in what do we want to be?
(Definition of business]
- Corporate character and values
- Dreams and vision
- Core competencies
• FORMULATION OF CORPORATE OBJECTIVES

- Quantitative objectives [3-5 years] * Achieving side
- Qualitative objectives-----------Becoming side
• STRATEGICES
- Overall corporate related
- Functional strategies: operations, R&D, marketing, HR and
HRD, materials
57
• LINKING/LINKAGES
- Linking ‘capital’ and other expenditure plans with
‘Financial’ plans and performance
• REVIEW MECHANISM
- Measurement on key result areas
- Process of review
58
VISIONING WORKSHOP
OUR ASPIRATION
WHAT IS
OUR
GOING ON
AROUND GAP ACTION
US
OUR CURRENT REALITY
59
L & T [WHY ITS AN OUTSTANDING ORGANIZATION]-
60 YEAR OLD ORGANIZATION IN INDIA
[What the Directors shared]
• The vision of founding Fathers.
• Pride in National building - Engineers to the nation. Now
building the globe.
• Promise to customer must be delivered - irrespective of
profits or losses.
• Good corporate governance is good business.
• Integrity and honesty – Never indulge in bribes and short
cuts. Always law abiding.
• Only merit counts.
• Hire people with high capabilities and enable them to excel.
• Encourage experimentation: Do not reprimand for
mistakes.
60
L & T [WHY ITS AN OUTSTANDING ORGANIZATION]-
60 YEAR OLD ORGANIZATION IN INDIA
[What the Directors shared]
• Empowerment and delegation from day 1.
• No one is boss – you can approach any body without fear or
reprimand.
• It’s a transparent organization which tolerates dissent.
• Loyalty – all the current Executive Directors have put in 30
to 40 years of service – each one has a different background
and not related to any promoter or shareholder.
• When Holck Larsen died he had just 3000 shares!!
• By 2005, L & T had 65 Business across 12 verticals. It had a
turn over of Rs.14,000 crore]
61
INFOSYS
GROWTH
BIG LEAP
RUN UP
FOOT HOLD
1981 1992 1999

62
INFOSYS
CORE VALUES
• HONESTY
• COURTESY
• TRANSPARENCY
• FAIRNESS TO ALL STAKEHOLDERS
[THERE IS NOTHING UNIQUELY INDIAN
OR MIDDLE CLASS ABOUT THESE
VALUES]
63
N. R. Narayana Murthy
[Lesson from Infosys]
1. Strategizing Success
2. Organizing Human Resource
3. Looking within
4. Fostering Innovation
5. Focusing on Stakeholders
6. Cultivating a workforce
7-9. Upholding Investors’ interest
10. Respecting the Law
11. Creating Goodwill
12. Adhering to values
13. Going Global
14. Excelling & Improving
64
ARUN SHOURIE
ON DHIRU BHAI
1. SCALE
2. FOCUS
3. EXECUTION
4. FINANCIAL PRODUCTS
5. SHARE HOLDERS INTEREST
6. GROWTH IS LIFE
65
Mr. Mukesh Ambani – on Jam Nagar: Refinery Project
1. Dhiru Bhai’s dream:

India should be next to none in the world.
2. Dhiru Bhai’s two principles:
- Are we able to earn more from one rupee of investment
as compared to others in the field.
- Can we execute a business plan in lesser time than any
one else in the world.
3. 1995 – Petro Chemical Business Rs. 9000 Crore to
Rs.20,000 Crore by 2000
- But in Refinery, turn over achieved was Rs.40,000 Crore
by 2000.
Combination of Refinery, Petrochemical and Power could
fetch superior rate of returns.
4. World’s largest greenfield refinery complex
- 4500 Engineers
- 80,000 Workers 66
DHIRUBHAISM
1. Roll up your sleeves and help.

2. Be a safety net for your team.
3. Be a silent benefactor.
4. Dream big but dream with your eyes open.
5. The arm-around-the-shoulder leader.
6. The Dhirubhai theory: Supply creates demand.
7. Money is not a product by itself.
67
8. Leave the professional alone.
9. Change your orbit, constantly.
10. Optimism, the core of Dhirubhaism.
11. You can find a friend in every human being.
12. Think big
13. Hold on to your dreams…
14. Bet on your people.
15. Be positive
68
WHAT REALLY WORKS:THE HBS STUDY
THE FOUR MUSTS

1. STRATEGY
2. EXECUTION
3. STRUCTURE
4. CULTURE
SECONDARY [ANY TWO]

• TALENT
• LEADERSHIP
• INNOVATION
• MERGERS AND PARTNERSHIP
69
VISION
• Vision without action is merely a dream.
• Action without vision just passes the
time.
• But vision with action can change the
world.
- Joel Arthur Barker

70
SO HOW TO ENSURE THE RIGHT SEED
• Dream : – J.N. Tata, J. R. D. Tata, G. D. Birla,

Holck Larsen, Narayan Murthy, Dhiru Bhai Ambani
• Focus : - Do what fires your passion
• Cause: for society, for nation
• Right Product Mix & Technology
• Avoid traps of short term temptations
• Talent management which inspires and retain people
• Culture: Merit, transparency, empowerment, dissent
• Values:
71
TWO FINAL MESSAGES:
• The softest pillow is a clear conscience and a

good nights sleep is worth more than a billion
dollars” – A Quote from Mr. Narayana Murthy
• Karta Tha To Kyon Kiya
• Ab Kyon Kari Pachtay
• Boya Ped Babool Ka
• Aam Kahan Te Paye
Sant Kabeer
72
KEY FACTORS OF SUSTAINABILITY
1. Adapting to Environment.
2. Decentralization – Empowerment of People.
3. Becoming Part of Society.
4. Financial Prudence.
Mr. B. Muthuraman,
Managing Director
Tata Steel
73
THE GUIDING PRINCIPLES OF J.R.D. TATA
Nothing worthwhile is ever achieved without deep thought and hard work.
One must think for oneself and never accept at their face value slogans and
catch phrases to which, unfortunately, our people are too easily susceptible;
One must forever strive for excellence, or even perfection, in any tasks
however small, and never be satisfied with the second best;
No success or achievement in material terms is worthwhile unless it serves
the needs or interests of the country and its people and is achieved by fair
and honest means;
Good human relations not only bring great personal rewards but are
essential to the success of any enterprise.
TATA STEEL
74
• SUCCESSFUL LEADER CAN
NEVER BE DEFEATED BY
PROBLEMS.
• CREATE PROBLEM FOR

PROBLEMS
75
FROM THOUGHT TO ACTION
• A great leader not only formulates the perfect strategy but also knows
how to make it work…read more.
Key Learning:
• Most of the time leaders conceive good strategies but fail to
successfully execute them which is why actual results fall short of
expectations.
• Displaying commitment and keeping a strong focus on the strategy is

essential for the leader.
• Proper communication, effective implementation and harnessing

cooperation of the workforce is necessary for effective execution of a
strategy.
76
ANSOFFS – GROWTH VECTOR
NEW
B C
PRODUCT
A D
EXISTING
EXISTING NEW
MARKETS
77
THE OUTSIDE-IN STRATEGIC TOOL
NEW
D C
NEEDS
A B
EXISTING
EXISTING NEW
CUSTOMERS
78
PERFORMANCE [1994-97] OF COMPANIES PARTICIPATING
IN THE SENIOR MANAGEMENT PROGRAMME IN INDIA
25
20
15
Average
Annual 10
Growth
5
-5%
-5% 0 5% 10% 15% 20% 30% 35%
Return on Capital employed [ROCE]
79
VISIONS
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
STUDYING COMPETITION:
SOME VIEW POINTS
1. The Ability to Formulate Right Questions.

2. Suggestions of Prof. Nelson.
3. The Hierarchy of Needs and Levels of Competition.
4. The Principles of Marketing Warfare.
5. The Total Product Concept.
6. The Suggestions of Kenichi Ohmae
114
STUDYING COMPETITION:
SOME VIEW POINTS
A set of questions:
In the competitive strategic analysis of product markets four important
questions are frequently posed:
1. Are there certain unique force that drive competition in a product-market?
2. How is competition defined and how are relevant competitors identified in a
product-market?
3. Do competitors in a product-market adopt specific competitive strategies?
4. How can the activities performed by a firm and its competitors in the design,
production, marketing, distributors and support of its product be used to
establish a competitive advantage in the market place.
115
PROF. JIM NELSON’S FOUR
MODELS ON COMPETITION
• Economic Models of Competition
• Biological Model of competition
• Global Competition Model
• Social – Psychological Competition
Model
116
THE ECONOMIC MODELS:
THE MARKET STRUCTURE
Perfect Monopolistic Oligopoly Monopoly

Competition Competition
• No. of
Manufacturers Many Many Few One
• Product
Differential None Yes Yes Unknown
• Entry or Exit Open Open Restricted Blocked
117
THE MARKETING VIEW POINT: LEVELS OF
COMPETITION
• Desire Competitors
• Generic Competitors
• Product Form Competitors
• Brand Competitors
118
THE MARKETING VIEW OF COMPETITION
What desire do I What do I want Which type of Which south
want to satisfy to eat] restaurant I Indian
[Break Monotony] want to visit restaurant I
want to visit
• Sports • Home Food • South Indian • Lodhi Hotel

• Video Film • Restaurant • Mughlai • Andhra
Pradesh
• Eat Out • Fast Food • Chinese
Bhawan
• Indian Coffee
House
Desire Generic Product Form
Competitors Competitors Brand
Competitors
Competitors
COMPETITION HIERARCHY
LEVEL 1 - Desire Competitors LEVEL 3 - Product Form Competitors
LEVEL 2 - Generic Competitors LEVEL 4 - Brand Competitors
119
SOURCES OF COMPETITION: MARKETING VIEW POINT
CUSTOMER NEED: LIQUID FOR THE BODY
Existing : Thirst
Latent : Liquid to reduce weight
Incipient : Liquid to prevent aging
INDUSTRY COMPETITION
Existing Industries : Hard Liquor; Beer; Soft Drink; Milk; Coffee; Tea
Water
New Industry : Mineral Water
PRODUCT-LINE COMPETITION
Me-Too Product : Regular Cola; Diet Cola, Lemonade
Improved Product : Caffeine Free Cola
Break Through Product: Diet and Caffeine free Cola providing full Nutrition
ORGANIZATIONAL COMPETITION
Type of Firms:
Existing: Coca Cola, Pepsi
New Entrants : General Foods, Nestle
Scope of Business: Regional, National
Product/Market: Single/Multi Product
120
COMPETITION HIERARCHY
LEVEL AIR CONDITIONING
1. Desire Comfort
2. Generic • Air-conditioning
• Ventilation
• Air cooling
3. Form • Packaged Unit
• Central Plant
• Fans
• Desert Cooling
4. Brand VOLTAS, BS, Utility etc.
121
PRINCIPLES OF DEFENSE
MARKETING WARE
• Only the market leader should consider
playing defense.
• The best defense strategy is the courage

to attack yourself.
• Strong competitive moves should always

be blocked.
122
PRINCIPLES OF OFFENSIVE
MARKETING WARFARE
• The main consideration is the strength of
the leader’s position.
• Find a weakness in the leader’s strength

and attack at that point.
• Launch the attack on as narrow a front

as possible.
123
PRINCIPLES OF FLANKING
MARKETING WARFARE
• A good flanking move must be made into
an uncontested area.
• Tactical surprise ought to be an

important element of the plan.
• The pursuit is as critical as the attack

itself.
124
PRINCIPLES OF GUERRILLA
MARKETING WARFARE
• Find a segment of the market small
enough to defend.
• No matter how successful you become,

never act like the leader.
• Be prepared to bug-out at a moment’s

notice.
125
THE FLANKING ALTERNATIVES
• Flanking with low price.
• Flanking with high price.
• Flanking with small size.
• Flanking with large size.
• Flanking with distribution.
• Flanking with product form.
• Flanking with fewer calories.
126
GUERRILLAS
• Geographic guerrillas
• Demographic guerrillas
• Industrial guerrillas
• High – end guerrillas
• Product guerrillas
127
DEFENSE STRATEGIES
[4] Flank Positioning Defense
[1]
Position [6] Strategic
Defense Withdrawal
[3] Pre-emptive
Defense
Defender
[5] Counter-defense
Attacker
[2] Mobile Defense
128
ATTACK STRATEGIES
[4] By Pass [5]

Guerrilla
[2] Flanking Attack
Attacker
Frontal
Defender
Attack
[3] Encirclement 129

THE SUGGESTIONS OF PROF. LEVITT
• Marketing concept embodies, “the view

that an industry is a customer satisfying
process, not a goods – producing
process…
An industry begins with the customer
and his needs, not with a patent, a raw
material, or a selling skill.
THEODORE LEVITT
130
DIFFERENTIATION OF ANYTHING:
THE TOTAL PRODUCT CONCEPT: LEVITT
Augmented
Product
Expected Generic
Product Product
Potential
Product
131
THE TOTAL PRODUCT CONCEPT
Expected
Potential
Augmented
Generic
A B
132
Expected Augmented
Product Product
Potential Generic
Product Product
A 133
B
STEEL:THE TOTAL PRODUCT CONCEPT
GENERIC EXPECTED AUGMENTED POTENTIAL
PRODUCT PRODUCT PRODUCT PRODUCT
• Right metallurgy • Trouble free • Ability to • Honest
• Right dimensions performance supply the organization
• Right surface • Adherence to desired • Helpful outlook
committed metallurgy •
finish Integrated steel
• Desired range delivery schedule • Ability to plant; can help
• Fair prices supply the during
• Competitive desired physical emergency
terms of dimensions, • Financial
besides the
payments strength to over
standards
• Efficient physical ride short term
• Ability to problems at
transportation
supply superior customers’ end
surface finish
134
• Efficient and helpful • Stockyard • R&D
stockyard operations operations in facilities to
• Test certificates along main develop better
with the supplies consumption and superior
• Prompt action on: centres and door products
delivery • High
• Refunds
• Matching capability
• Complaints delivery profile of the
• Information • Change in personnel
• Correct and timely production
invoices and other schedules in
documents shorter times
• Regular contact with [flexibility] and
the customers responsiveness
135
• Accessibility to the • Technical
top advice to the
• Good behaviour of customers
the executives
136
THE TOTAL PRODUCT CONCEPT:
PRODUCT – HWX VACUUM CIRCUIT BREAKER
GENERIC EXPECTED PRODUCT AUGMENTATION POTENTIAL PRODUCT
•Horizontal Isolation •Cable glands Adjustable •Internal Arc toss •Application Engaged for
•Horizontal Draw-out •Transportation w/o •Raychem Sleeving Customer
•Up to 40KA, 2500A-11kv Transshipment •IP-55 •24 hour Customer
•Powder Coating •Unloading & insp. at arrival •Packing (Carton with Helpline
(site) wrapping) •Govt. Clearance &
•Safety Interlocks
•Commissioning Support Approval
•Sheet Thickness •Erection Supervision
•Minimal Spares •R & D for Improvement
•Complete Documentation •AMC
•Extended Guarantee •Intelligent Breakers (self
•Type of Mechanism SPX •Numerical Relays,
diagnostics)
or SPMX •Approval of Design with Communicable Type
Purchaser Consultant •Training for Staff •Compatibility to DCS
•Faster Delivery (within 4 •Vacuum failure indication
•Dedicated Service
weeks) Centre with Spares •Retrofitting/Refurbishme
•Technical Advice Support nt/upgradation
•Market Price (630A) •In house manufacturing •FIT IT, Charge it, forget
•Customer visits to Factory of Key Components viz it.
•Qualified Technical Sales VI
Person •Customer Involvement
•Slow Closing in Quality forum
137
PRODUCT – HWX VACUUM CIRCUIT BREAKER
GENERIC EXPECTED PRODUCT AUGMENTATION POTENTIAL

PRODUCT
Approval of Design Training for Staff •Vacuum failure
with Purchaser •Dedicated Service indication
Consultant Centre with Spares •Retrofitting/Refurbis
•Faster Delivery (within Support hment/upgradation
4 weeks) •In house •FIT IT, Charge it,
•Technical Advice manufacturing of forget it.
•Market Price (630A) Key Components viz
•Customer visits to VI
Factory •Customer
•Qualified Technical Involvement in
Quality forum
Sales Person
•Slow Closing
138
KENICHI OHMAE’S SUGGESTIONS
139
KEY FACTORS OF SUCCESS
Key Factor or Function Specimen Industries
To 4 Profits To gain Share
• Raw Material Sourcing. • Uranium • Petroleum
• Production Facilities • Ship Building • Ship Building
[Ecco. Of Scale] • Steel • Steel
• Design • Air Craft • Air Craft
• Production Technology • Soda • HiFx
• Application Engineering • Semi conductor • Semi conductors
• Sales Force • Dept. Stores • Components
• Distribution Network • Mini Computer • LSI
• Servicing • ECR • Micro Processor
• Beer • Automobile
• Elevators • Films
• Home appliances
• Taxies
140
PRODUCT-CHANGE OPTIONS AFTER
COMPETITIVE TEAR-DOWN
No Excuse Closer examination
• Value-engineer We • Reconsider price or
• Switch to competitor’s are more promotion
parts expensive • Value engineer
For each
We are inferior corresponding We are better
component
Cover it up
• Upgrade We are Leave it alone
• No change cheaper
141
FOUR BASIC STRATEGIES
BUSINESS/PRODUCT OFFEREC
KFS Aggressive initiatives
Intensify functional Ask “why-whys”

differentiation
Relative superiority Strategic degrees of freedom
Exploit competitor’s weakness Maximize user benefit

142
DEGREES OF STRATEGIC FREEDOM FOR IMPROVING
QUALITY OF FINISHED PHOTOGRAPHS
FILM
Skill of camera 7 1
user
6 2
Optical System [Lens, etc.
Laboratory
Mechanical
3 System and
5 4
accessories
Printing & Light
Paper Source 143
THREE SELECTED DEGREES OF
STRATEGIC FREEDOM
MECHANICAL SYSTEM AND
ACCESSORIES
Benefits to
• Shutter consumers
• Flash [Quality of
Photo, Prices,
• Size etc.]
• Weight
FILM
OPTICAL SYSTEM • Speed
• Aberration Speed
• Color Tone
• Weight
• Number of exposure
• Focal length
• Resolving power
144
Creative Insight is the ability to
combine, synthesize, or reshuffle
previously unrelated phenomena in
such a way that you get mote out of
the emergent whole than you have
put in.
Ohmae
145
THE STRATEGIC THREE C’S
Target Segments Multiple Market

CUSTOMERS Segments
Value Value
CORPORATION COST COMPETITION
Product/Service
Differentiation
146
TOTAL
MARKET
Product/Model not offered
A
B Customers not covered
C Customers competed for and lost
D Customers competed for and won
E Customers not competed for
USEFUL DEFINITIONS • Cream Skimming

• Share of Market = D + E Factor = Winning Ratio
• Winning Ratio = D/C + D Share of Market
• Market coverage = C + D + E = D • 1
C+D D+E
147
IMPACT OF STRUCTURAL CHANGES ON A TRUCK
MAKER’S TOTAL MARKET
1965
100%
Co. share of Company’s Total

Share 37%
segments 40
1%
36%
0 90 100
Fleet Owners Individual
Owners
1985
100%
Company
share of Co’s Total Share
segments
30 ----------- 15%
9% ----------------------
-
Fleet 148
6% Individual
owners 0 30
100
MIKE PORTER’S SUGGESTIONS
149
STUDYING COMPETITION: SUGGESTIONS OF
MIKE PORTER
• Competitive strategy aims to establish a profitable and
sustainable position against the forces that determine
industry competition.
• Two central questions underlie the choice of competitive
strategy.
1. Attractiveness of the industry for long term
profitability and the factors that determine it.
2. The determinants of relative competitive position
within an industry.
• Both industry attractiveness and competitive position can
be shaped by a firm. Competitive strategy then, not only
responds to the environment but also attempts to shape
the environment in its favour.
Porter
150
PROFITABILITY OF 14 U.S. INDUSTRIES (1986)
3.5 Mechanic Tools Drug

Market to book ratio
Electronic
3.0 Advertising
2.5 Paper & Paper bd Food processing
2.0
Metal Mining
1.5 Int. Auto
Petro Int. Steel
1.0 Shoes
0.5 Oilfield Services
-4 -2 0 2 4 6 8 10
Forecast of ROCE less cost of Equity
Market to book ratio
B
E A
J F
K C
G D
N L M H I
O
Forecast of ROCE less cost of Equity
PROFITABILITY OF PAPER & FOREST PRODUCTS COMPANIES151

• Competitive advantage grows fundamentally out of
“value” a firm is able to create for its buyers that
exceeds the firm’s cost of creating it. Value is what
buyers are willing to pay, and superior value stems
from offering lower prices than competitors for
equivalent benefits or provides unique benefits that
more than offset a higher price. There are two types of
competitive advantage: Cost leadership or
differentiation.
152
P O R T E R’ S M O D E L
POTENTIAL ENTRANTS
•Economy of Scale
•Absolute Cost advantage
•Brand Identity
•Switching Cost
•Government Policies
Threat of New Entrants

SUPPLIERS THE INDUSTRY: DEGREE BUYERS
•Supplier’s concentration OF RIVALRY
•Buyers
•No. of competitors Concentration
•No. of buyers
•Industry growth •No. of suppliers
•Switching costs
•Asset Intensity •Switching costs
•Substitute R.M.
•Product differentiation •Threat of B.I.
•Threat of F.I.
•Exit Barriers
Threat from substitutes

Bargaining SUBSTITUTES Bargaining
power of •Price performance trend power of
suppliers •Product Identity customers
•Functional similarity
153
BARGAINING POWER OF SUPPLIERS
• Almost 25% of CTV components are imported. Each

manufacturer imports individually – hence prices are high.
• The major imports are :picture tube deflection components,
electronic PCBs. AI capacitor sets – make up 15% of cost of CTV.
Import duty presently 80% (previously 90%) subassembly parts/
plastics – import duty 110% (previously 150%).
• Indian components are 80% costlier than foreign counterparts.
• Gap between demand & production of components has grown
from Rs.4,300 million (85-86) to Rs.10,800 million (89 – 90). The
gap as = 35% of demand.
• CTV – picture tubes – demand for color picture tubes will keep
ahead of indigenous supply till mid-nineties. Presently only 4
manufacturers in India.
154
• Protection given to CTV picture tube manufacturer. Import duty on CTT
– 80%. Import duty on raw materials for CTT – 40%. Differential gives
them strangle hold as they can dictate prices.
Trends:
• Manufacturers are integrating backwards. This eliminates dependence on
imports and at the same time non dependence on third parties assures
them of the quality of the components.
• Diversification by existing players. Players finding the heat in the industry

too much are moving towards manufacturing components for the industry.
• New glass shell unit being set up as Joint venture between GNFC &
Videocon. Bring export content down further to 15%.
NOTE: B & W picture tubes allowed on OGL, hence stable price of

local picture tubes maintained.
155
POTENTIAL ENTRANTS:
 200 competitors shakedown is expected, Japan style.

 Spurious manufacturers for B & W, not possible for CTV.
 Licensing is a problem.
 Capital intensive.
 Low product differentiation, advertising expenses very high especially
if brand salient has to be established.
 Low profit margins as buyers are price sensitive.
 Dealer margins extremely high.
 No learning curve benefits.
 Can diversify into other consumer durables.
 Low economies of scale as companies are essentially assembling units.
156
SUBSTITUTES
 No direct substitutes.
 However, price sensitivity exists – other consumer durables like
audio systems, refrigerators, scooters etc. are considered more
essential when the prices of TV’s go up.
 Rapid emergence of Cable TV and s Star TV likely to give impetus
to TV sales over other consumer durables.
 RIVALRY WITHIN INDUSTRY
 Growing emphasis on semi rural and rural areas – portable B &
Ws popular.
 Lower income groups especially in rural areas offers greater
future scope.
 Price wars – pricing important.
 Low profit margins – fallen from 7.5% to 5%.
 High dealer margins
 Industry growth is slowing down.
157
 Dealers pass on some of the incentives to consumer. Eg. –
Videocon has a price tag of 17,200/- but sells for 16,000/-
 1987 – BPL, Onida, Videocon – 24% of the market.
 1992 – BPL, Onida, Videocon – 70% of the market.
158
THREE GENERIC STRATEGIES
1 2
BROAD TARGET
COMPETITIVE SCOPE
COST DIFFERENTIATION
LEADERSHIP
3A 3B
NARROW TARGET
COST FOCUS DIFFERENTIATION

FOCUS
LOWER COST DIFFERENTIATION
COMPETITIVE ADVANTAGE
159
COMPETITION & GLOBALISATION
COST LEADERSHIP DIFFERENTIATION
BROAD TARGET
COMPETITIVE SCOPE
• BAJAJ AUTO • ASIAN PAINTS

• TELCO • BLOW PLAST
• HLL
COST FOCUS DIFFERENTIATION

NARROW TARGET
FOCUS
• NIRMA
• T - SERIES • TITAN
LOWER COST DIFFERENTIATION
COMPETITIVE ADVANTAGE
160
GENERIC STRATEGIES
MARKETS
• BLOW PLAST -D BAGGAGE
• BAJAJ AUTO - CL SCOOTERS
• HLL -D SOAPS
• TELCO - CL COMM. VEHICLES
• TITAN -D WATCHES
• NIRMA - CF DETERGENTS
• ASIAN PAINTS -D WALL FINISHES
• T-SERIES - CF AUDIO CASSETTES
• TANISHQ - DF JEWELLERY WATCHES
• MICROLAND - DF NET WORKING
• PCL - CF PCs
• BABOOL - CF TOOTHPASTES
• VIDEOCON - CL CON. DURABLES
161
BLOW PLAST DIFFERENTIATION
BAJAJ AUTO COST LEADERSHIP
HLL DIFFERENTIATION
TELCO COST LEADERSHIP
TITAN DIFERENTIATION
NIRMA COST FOCUS
ASIAN PAINTS DIFERENTIATION
T-SERIES COST FOCUS
162
GENERIC STRATEGIES FOLLOWED BY COMPANIES
COMPANY GENERIC STRATEGY
BLOW PLAST DIFFERENTIATION
Odyssey, Elanza – Premium, Aristocrat & VIP – Middle/Upper Middle,
Alfa – Economy Model
BAJAJ AUTO COST LEADERSHIP
Economy Models
HLL DIFFERENTIATION
Surf Ultra, Lux International – Premium, Lux, Surf – Middle Income
Group, Lifebouy, wheel – Economy
TELCO COST LEADERSHIP
HCVs, MCVs, LCVs – Low cost
TITAN DIFERENTIATION
Aqura – Low priced, Classic – Medium priced, Insignia – Rs.5000,
Tonishque - Premium
NIRMA COST FOCUS
Nirma washing power Lower income group
Nirma detergent cake
ASIAN PAINTS DIFERENTIATION
Tractor Distempor – Value for money
T-SERIES COST FOCUS

Cassettes, CDs, TVs, VCRs, Detergents Lower segment 163
WHAT MAKES AN INDUSTRY FRAGMENTED
• Low overall entry barriers.

• Absence of economies of scale or experience curve.
• High transportation costs.
• High inventory costs or erratic sales fluctuation
• No advantages of size in dealing with buyers or suppliers.
• Dis-economics of scale in some important aspect.
• Diverse market needs.
• High product differentiation, particularly, if based on image.
• Exit barriers
• Newness
• Local regulation
• Government regulation
164
OVERCOMING FRAGMENTATION
1. Common approaches to consolidation

 Create economies of scale or experience curve.
 Standardize diverse markets needs.
 Neutralize or split off aspects most responsible for
fragmentation.
 Make acquisitions for a critical mass.
 Recognize industry trends early.
2. Industries that are “stuck”

 Existing firms lack resources or skills.
 Existing firms are myopic or complacent.
 Lack of attention by outside firms.
165
3. Coping with fragmentation
 Tightly managed decentralization.
 ‘Formula’ facilities.
 Increased value added.
 Specialization by product type or product segment.
 Specialization by type of order.
 A focused geographical area.
 Bare bones/no frills.
 Backward integration.
4. Potential Strategic Traps
 Seeking dominance.
 Lack of strategic discipline.
 Over centralization.
 Assumptions that competitors have the same over head and
objectives.
 Over reactions to new projects.
166
STEPS FOR FORMULATING COMPETITIVE
STRATEGY IN FRAGMENTED INDUSTRY
STEP 1 : What is the structure of the industry and the

positions of competitors.
STEP 2 : Why is the industry fragmented.
STEP 3 : Can fragmentation be overcome? How?
STEP 4 : Is over coming fragmentation profitable? Where

should the firm be positioned to do so?
STEP 5 : If fragmentation is inevitable, what is the best
alternative for coping with it?
167
THE GENERIC VALUE CHAIN
SUPPORT ACTIVITIES
FIRM INFRASTRUCTURE
MA
HUMAN RESOURCE MANAGEMENT
RG
TECHNOLOGICAL DEVELOPMENT
IN
PROCUREMENT
MA
INBOUND OPERATIONS OUTBOUT MARKETING SERVICE
R
LOGISTICS LOGISTICS & SALES
GIN
PRIMARY ACTIVITIES
168
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
MA
RGI
TECHNOLOGY DEVELOPMENT
N
PROCUREMENT
INBOUND OPERATIONS OUTBOUND
MKTG. & SERVICE
LOGISTICS LOGISTICS SALES
MA
RGIN
MARKETING ADVERTISING SALES SALES FORCE TECH. PROMOTION
MANAGEMENT FORCE OPERATION LIT.
ADM.
SUB DIVIDING A GENERIC VALUE CHAIN

169
VALUE CHAIN FOR A COPIER MANUFACTURER
FIRM INFRASTRUCTURE
•Recruiting Recruiting
HRM
•Training
MA
Design of Auto, •Comp. Design InformationSyste •M.R. Service Manual
System •M/c Design m •Sales & Procedures
RGI
TECH.
•Energy Development Aids
DEV.
N
Transporta- tion •Materials •Computer •Media agency •Spare parts
PRO- service service
•Parts •Service supplies •Travel &
CURE- •Supplies •Transportn. Subsistence
MENT •Energy Service
•Inbound Mat. •Comp. Fab. •Order proce- •Advtg. •Service Reps

Hand. •Assly Ssing •Promotion •Spare parts
•Inbound •Fine tuning & •Shipping •Sales force •Systems
Inspection testing
•Parts picking &
MA
•Maint.
Dly •Facilities
R
•Opn
G IN
INBOUND OPERN. OUTBOUND MKTG. & SERVICE
LOGISTICS LOGISTICS SALES 170
REPRESENTATIVE SOURCES OF DIFFERENTIATION IN THE VALUE CHAIN
•Top management support in selling * Facilities that enhance the firm’s image Superior
management information system
HRM FI
•Superior training •Stable workforce •Sales incentives to Extensive training

of per. policies retail best s.m. of service tech.
MA
RG
Superior mat. •Unique product •Unique value •App. Engg. Supp. Advanced service
IN S
handling and features scheduling •Superior media techniques
T.D.
sorting •Rapid model •Software research

introduction •Special purpose
vehicles and
containers
Most reliable •Highest quality •Best located ware Most-desirable High quality
transportation forcomponents houses media placements replacement parts
Pro
inbound.
•Handling of •Tight conformance •Rapid & timely •High advantage •Rapid installation
inputs that to specify delivery level & quality •High service
MA
minimizes •Attractive product •Accurate & •High sales force quality
R
damages or appearance responsive orders coverage & quality •Extensive buyer
G
degradation
I NS
•Low defect rates processing •Most extensive training
•Timeliness of •Handling that credit to channel &
supply to the mfg. minimizes damages buyers
process
171
IL O OL M&S S
FIRM BUYER
SUPPLIER VALUE CHANNEL VALUE
VALUE CHAIN VALUE CHAIN
CHAIN CHAIN
SINGLE INDUSTRY FIRM
BUSINESS UNIT
VALUE CHAIN
BUSINESS UNIT
VALUE CHAIN
SUPPLIER CHANNEL BUYER
VALUE VALUE VALUE
CHAIN CHAIN CHAIN
BUSINESS UNIT
VALUE CHAIN
THE VALUE SYSTEM
DIVERSIFIED FIRM 172

ORGANISATIONAL STRUCTURE AND THE VALUE CHAIN
INFRA
STRUCTURE
MAR
HRM
GIN
T&D
PROCUREMENT
M AR
IN G
INBOUND OPERATIONS OUTBOUND MKTG & SERVICE
SALES
LOGISTICS LOGISTICS
Administration Production R&D PROCUREMENT Marketing
173
A C T I V I T Y T Y P E S
• Direct: Activities directly involved in creating value

to the buyer such as assembly, part machining etc.
• Indirect: Activities that make it possible to perform

direct activities.
• Quality
Assurance: Activities that ensure quality of other
monitoring, inspection, testing, receiving.
174
A S S E T S
FI 16%
HRM (1%)
TD(2%)
P (1%)
8%
6% 15%
38%
2% 5%
IL 8% O(46%) OL(20 %)
M&S(1%) S(2%)
PURCHASED OPERATING COSTS/INPUTS
LIQUID ASSETS 175

Visionaries are concentrated:
Electronics - Japan
Chemicals - Germany
Pharmaceuticals - Germany, Switzerland
Computers - America
• Innovation grows out of pressure and challenges. It also comes

from finding the right challenges to meet. The main role of the
firm’s leader is to create the environment that meets these
conditions.
176
Firm Strategy
Chance Structure and
Rivalry Firm
Factor Demand
Conditions Conditions
Related and
Supporting Govet.
Industries
177
THE COMPETITIVE ADVANTAGE OF NATIONS
* High Intensity domestic competition breeds international success.
Chance
Firm Strategy
Structure and
Rivalry Firm
Factor Demand
Conditions Conditions
Related and
Supporting Govet.
Industries 178
THE NEW RULES FOR INNOVATION
• Sell to the most sophisticated and demanding buyers and channels.
• Seek out the buyers with the most difficult needs.
• Establish norms of exceeding the toughest regulatory hurdles or product
standards.
• Source from the most advanced and international home based suppliers.
• Treat employees as permanent.
• Establish outstanding competitors as motivators.
179
CONCEPT OF CORPORATE STRATEGY
PORTER
FOUR CONCEPTS OF CORPORATE STRATEGY
1. Portfolio Management
2. Re Structuring
3. Transferring Skills
4. Sharing Activities
While the concepts are not always mutually exclusive, each rests
on a different mechanism by which the corporate creates share
holder value.
180
POSSIBILITIES FOR THE COMPETITIVE
ADVANTAGE
1. Raise some questions reflective of the competition,
competitiveness and the competitive en----------------- relevant to
the product of your interest.
2. If given a choice, what would be your strategic intent for your

division product line?
3. With the help of Porter’s framework identify the ‘entry’ and

exit barriers. Also identify the implications with respect to ‘
suppliers’, ‘ customers’ and the ‘threats’ from the substitute
with the help of this analysis, what could be some of the focus
areas/thrust areas to gain and maintain competitive advantage.
4. Can you suggest some ‘flanking’, moves for your product.
181
INTENSITY OF RIVALRY WITHIN INDUSTRY
Identify the developments in the next 5 to 7 years that may

increase or decrease the intensity of the competition for the given
product market. Also assess the impact of these developments on
the profitability.
Factors/Dev. Impact on Profitability

Very high Very high
(+ve) (-ve)
1
2
3
4
Conclusions
182
C K PRAHALAD & HAMMEL’S
SUGGESTIONS
1. Strategic Intent
2. Strategy as Stretch
3. Core competencies
183
STRATEGIC INTENT
• In 1970, few Japanese Companies possessed the
resource base, manufacturing volume or
technical prowess of U.S. and European
industry leaders.
• KOMATSU was less than 35% as large as
Caterpillar [in terms of sales], was scarcely
represented outside Japan and relied on just
one product line – small bulldozers. – for most
of its revenue.
184
• ‘Honda’ was smaller than American Motors and had
not yet begun to export cars to the U.S.
• Canon’s first halting steps in the reprographics
business looked pitifully small compared with the $4
business [$4000 million U.s. Dollars] Xerox.
• By 1985 KOMATSU was a $2.8 billion company with a
product base encompassing earth moving equipment
industrial robots and semi conductors.
• By 1985 ‘Honda’ manufactured as many cars world
wide as Chrysler.
• By 1985, CANON had matched Xerox’s global unit
market share.
185
• Strategic Intent Captures the Essence of
winning. The Apollo programme – landing a
man on the moon first – ahead of the soviets.
• Strategic Intent is stable over time.
• Strategic Intent sets a target that deserves
personal efforts and commitment.
186
STRATEGIC INTENT
YEAR INDIA JAPAN STEEL
1 1947 2MN 0.6MN
2 1972 20 MN [PLANNED]
3 1975 6MN 100 MN

4 2000 30 MN
[ESTIMATED]
Note: Late Kumarmanglam’s [Minister for Steel] had, in
his perspective plans envisaged a production of 20 Mn
tonnes of Steel.
187
STRATEGY AS A STETCH
• It is not cash that fuels the journey to the

future, but the emotional and intellectual
energy of every employee.
• Starting resource positions are a very poor

predictor of future industry leadership.
Prahalad & Hammel
188
STRATEGY AS STRETCH
It is not cash that fuels the journey to the future, but the emotional and
intellectual energy of every employee. Does this premise seem a bi far
fetched? Well, think about this. Imagine you were a investor who, a
decade or two ago, was asked to choose between the following pairs of firms
as long term investment opportunities:
Volkswagen versus Honda
Upjchn versus Glaxo
CBS versus CNN
Xerox versus Canon
RCA versus Sony
Westinghouse versus Hitacid
Pan Am versus British Airways
IBM versus Compaq
Firestone versus Bridgestone
Sears versus Wal-Mart
189
STRATEGY AS STRETCH AND LEVERAGE
• Toyota developed a new luxury car for a fraction of the resources required by
Detroit.
• IBM challenged Xerox in the copier business and failed; while Canon, a
company only 40% the size of Xerox in the mid-1970s, eventually, displaced
Xerox as the world’s most prolific copier manufacturer.
• There are two basic approached to garnering greater resource productivity:

- Downsizing, cutting investment [lean and mean] – demoralizing.
- Leveraging - energizing
190
The Arenas of Resource Leverage

• By concentrating them more effectively on key strategic goals.
• By accumulating them more efficiently.
• By complementing one kind of resource with another to create higher
order value.
• By conserving resources wherever possible.
• By recovering them from the market place in the shortest possible time.
Concentrating Resources: Convergence and Focus
Convergence
• Have we created a chasm between resources and aspirations that will
compel creative resource leverage?
191
Focus
• Have we clearly identified the next competitive advantage that we must build?
• Is top management’s attention focused firmly on the task, until it is
accomplished?
Accumulating Resources: Extracting and Borrowing

• Extraction: Are we willing to apply lessons learned on the front line, even
when they conflict with long-held orthodoxies?
• Have we found a way to tap the best ideas of every employee?
• Borrowing: Are we willing to learn from outsiders as well as from insiders?
• Have we established borrowing processes and learning goals for employees
working within alliances and joint ventures?
192
Complementing Resources: Blending and Balancing
• Blending: Have we created a class of technology generalistics who

can multiply our resources?
• Have we created an environment in which employees explore new
skill combinations?
• Balancing: Have we pursued high standards across the board so
that our ability to exploit excellence in one area is never imperiled
by mediocrity in another?
• Can we correct our imbalances? To be balanced, a company, like
a stool, must have at least three legs:
– A strong product development capability.
– The capacity to produce its products or deliver its services at world
class levels of cost and quality.
– Sufficiently widespread distribution, marketing, and service
infrastructure.
193
Conserving Resources: Recycling, Co-opting and Shielding
• Recycling: Do we view core competencies as corporate resources
rather than the property of individual business?
• Have we created lateral communication to ensure that ideas are
not trapped?
Co-option
• Have we identified the industry players who are dependent on us
for some critical skill or for their very livelihood?
• Do we understand how to enroll others in the pursuit of our goals?
194
Shielding
• Do we understand competitors’ blind spots and orthodoxies?
• Can we attack without risking retaliation?
• Do we know how to explore markets through low cost low risk incursions?
Recovering Resources: Expediting Success
Recovery
• Have we shortened product development, order processing, and product
launch times?
• Have we built global brands and distribution positions that allow us to
preempt slower rivals
195
STRATEGY AS A STETCH
• It is not cash that fuels the journey to the

future, but the emotional and intellectual
energy of every employee.
• Starting resource positions are a very poor

predictor of future industry leadership.
Prahalad & Hammel
196
STRATEGY AS STRETCH
It is not cash that fuels the journey to the future, but the emotional and
intellectual energy of every employee. Does this premise seem a bi far
fetched? Well, think about this. Imagine you were a investor who, a
decade or two ago, was asked to choose between the following pairs of firms
as long term investment opportunities:
Volkswagen versus Honda
Upjchn versus Glaxo
CBS versus CNN
Xerox versus Canon
RCA versus Sony
Westinghouse versus Hitacid
Pan Am versus British Airways
IBM versus Compaq
Firestone versus Bridgestone
Sears versus Wal-Mart
197
THE CORE COMPETENCE OF THE CORPORATION
[Prahalad and Hammel]
• The critical task for management is to create an

organization capable of infusing products with irresistible
functionality or better yet, creating products that
customers need but have not even imagined.
• 1970s: NEC articulated a strategic intent to exploit the
convergence of computing and communications [C & G]
• Semi conductors – core products.
• Strategic architecture – build core competencies in
communications, computing and components.
• By 1988: NEC has emerged as a world leader in semi
conductors and as a first tyre player in telecom products
and computers.
198
CORE COMPETENCIES
• In the long run, competitiveness derives from an ability
to build, at lower cost and more speedily than
competitors, the core competencies, that spawn
unanticipated products.
• Core competencies are collective learning in the
organization, especially how to coordinate diverse
production skills and integrate multiple streams of
technologies.
• Honda: engine and power train, car, motorcycle, law-
mower, generator bus.
• The strategic architecture is a broad map of the
requirements, potential technologies and core
competencies.
199
200
• Between 1980-1988, Canon grew by 264% and Honda
by 200%.
• Canon has given us: personal copiers.
• Honda: Four-wheel off – road buggies.
• Sony: 8mm Camcorders.
• Yamaha: digital Piano.
• Komatsu: Underwater remote controlled bulldozer.
• Casio: Small screen colour LCD, television.
• Core competencies are collective learning in the
organization, especially how to coordinate diverse
production skills and integrate multiple streams of
technology.
201
CORE COMPETENCIES
• Competencies are invisible assets. They represent accumulated

knowledge and skills in an organization. A competency is based
on creative harmonization of several constituent skills and
technologies.
• Core competencies represent a bundle of skills that are not widely

available in an industry. It is not easily copied and is capable of
being applied across several existing and new business and
provide clear benefits to customers.
202
203
CORE COMPETENCIES AT CANON
Products Precision Fine Micro
Mechanics Optics Electronics
Basic Camera  
Compact Fashion  
Camera
EOSauto Focus   
Camera
Video Still Camera   
Laser Beam Printer   
Colour Video Printer  
Bubble Jet Printer  
204
Basic Fax  
Laser Fax  
Calculator  
Plain Paper Copier   
Battery PPC   
Colour Copier   
Laser Copier   
Colour Laser Copier   
205

NAVI   
Still Video System   
Laser Imager   
Cell Analyzer   
Mask Aligner  
Stepper Aligner  
Excimer Laser   
Aligner
206
GROWING COMPETENCIES
[C K Prahalad]
Premises
• Indian companies must compete effectively with transnationals, both within and
outside. For this, they need to gain competitive parity.
• Core competencies concept is not about managing denominators, but numerator
– growth.
• It is not reducing assets and head count. It is about leveraging the limited
resources – by stretching the imagination and aspirations of the organization.
Idea
• For organizations to be creative, their aspirations must lie outside the available
resources. This misfit, by design is critical for generating energy and innovation
within companies.
• Assets [large factories] infrastructure [distribution systems], privileged access
to resources [low energy cost source] and protected markets [government
sanctioned monopolies] are not core competencies.
Suggestion
• If the goal is to build world class MNCs, there is no choice but to focus on
competencies.
• Focus on traditional business and build world class capabilities.
• Core competencies provide a competitive advantage.
207
CORE COMPETENCIES
• Apple: User friendliness that sustains.
• WalMart: Logistics systems and relationship with suppliers.
• Hew-Packard Integration of ‘computing’ and ‘communication.’
• Cargil: Risk management; low cost processing; global logistic
management.
• Reliance: Skills in project management; large scale financing.
• 3M: 60,000 products [post-it slips, shingles, sticky tape, road
signs, magnetic tapes, abrasive and health applications] – all are
around three competencies: substrates; adhesives; coatings.
• Core competencies is not a sell-off and becomes a single business
company; but a clear way to avoid the conglomerate style of
business.
• Model of resource leveraging.
208
CORE COMPETENCIES: THERMAX
[ Mr RD Aga]
Core competencies involve:
• The know-how and know-why.
• A ear finely tuned to the nuance of the market.
• A cross fertilization of technologies.
• Institutionalizing the technology.
• Predicting future trends in the technology and in new products and
bringing them into being.
Core competencies: Thermax

• Fabrication and welding of pressure vessels.
• Thermo dynamics.
• Combustion.
• Heat transfer
• Separation
• Polymerization
209
Core Competencies Areas
• Fabrication • Energy Conservation
• Welding Pressure • Pollution Control
Vessels Equipment and
• Thermo Dynamics Systems
• Combustion • Specialty Chemicals
• Heat Transfer
• Separation
• Polymerization
210
CORE COMPETENCIES: THERMAX
Core Competencies Old Product
Fabrication, Pressure Small packaged

Vessels, Welding, Boilers
Combustion, Heat
Transfer
•New products in energy conservation.

•Utilization of exhaust gas from Hurbine
and Diesel gensets.
•Waste heat from kilns, sulphuric acid
plants
211
Core Competencies Old Product
• Separation • Water Treatment

• Polymerization
• Fireside chemicals.
• All purpose compounds that conditions
industrial water.
• Range of Ion Exchange resins for purifying
glycol, de-ash and catalyze selected
petrochemicals.
• Biocides
• Anti-corrosive agents
212
Core Competencies Old Product [Air Pollution]
•Fabrication •Dust Collectors

•Separation
New Products
•Electrostatic Separators
•Multi Cyclones
•High Energy Venturi Scrubbers
•Fume Extraction Systems
•Gas Conditioning Towers
213
CK PRAHALAD ON CORE COMPETENCIES
[1998]
• Core competence is nothing more than re-usability of accumulated
intellectual capital.
• Core competence does not, as an idea, stand by itself. It is vested in
the whole idea of how to leverage complex organizations.
• Core competence does not restrict diversification.
• The first principle of the core competence argument is not to
narrow the company to one business. It is to understand the
common set of skills that pervade multiple businesses. 3M, with its
6000 line items, is a very core competence-driven company. Cargil,
with its 41 distinct business – everything from commodities trading
to financial services – is also a core competence – driven
corporation.
214
• There is also a view often expressed in India that
Indian companies don’t have to worry about core
competence. On the contrary, to leverage limited
resources, a corporation must be much more focused in
exploiting its accumulated skills base. I would say the
concept is more relevant to resource –starved Indian
corporations.
• The third argument is that core competence is very
difficult to find and define. That is correct. That is
precisely the reason it is useful. I expect managers to
be creative in understanding what the underlying skill
structures are.
215
CORE COMPETENCY TREES: SOME
EXAMPLES
216
Product Types [e.g.] Owens Corniwn
Product type
Chopped strand mat - Composites
Chopped stands [e.g.]
Roving
-Cratec Consultancy
Continuous fil mat
-Cratec plus Grass mat thermo plastic
Chopped strands [GMT]
-Offline Project 2 [License &
Phenolic ABS fiber glass
Vinylester PC Project 1 License & Fibre
Polyester PBT glass & value added Prod.
PP Silentex muffler filling
Nylon
Thermo Set Group Thermo Plastic Group systems [license & eqpmt
& fibreglass
Reinforcements Composites system solutions
Systems approach and

Knowledge of Applications knowledge of
Technology & Innovation
composites and development customer’s “fitness for
to be the lowest cost
manufacturer composites mfg. use” requirements
217
processes
CORE COMPETENCY
ITG – AGRO -TECH
EP 1 EP 2 EP 3 EP 4
Oil Seed Cake Branded Ed

Ed Loose Oil Oil Sundrop Brand X
Extracts
Crystal
CP 2
CP 1
Edible Oil/Oil Basic Foods
Extracts
Distn Inventory Mgt

Trading Brand Building
& Logistics
C1 C2 C3
C4 218
MANUFACTURE RETAIL TELECOM
Maintenance Re-Engg.
Services Services
Software Engg Relationship Opt Execution Conversion of

Methodology Mktg & Mgmt of Offshore N-IT to IT &
Model Retention of
CC 1 CC 2 Talent
CC 3
CC 4
Domain Domain
Knowledge Marketing
Total Solutions
Provider 219
CAVINKARE LIMITED
CORE COMPETENCIES
V R DR DS
1 Low cost sourcing    
2 Trade support    
3 Knowledge of consumer    
V = VALUABLE
R = RARE
DR = DIFFICULT TO REPLICATE
DS = DIFFICULT TO SUBSTITUTE
FLEXIBILITY : NO INVESTMENT IN P & M  EASE OF
EXIT/ENTRY
220
KODAK
CNF PAPER
COLOR NEGATIVE
CRF INKS
B&W +VE
B&W CAMERA
DISPLAY X-RAY
MOTION PICTURE SOFTWARE
MOTION PICTURE
X-RAY PRINTERS
B&W
GRAPHICS
INKS
ARIAL
FILM PAPER CHEMICAL DIGITAL MEDIA CORE

PRODUCT
FILM COATING COLOR PHOTO

MANAGEMENT CORE
TECH/SERVICE CONVERSION COMP
CC 1 CC 2 CC 3
OPTICS ELECTIVE CC
NEEDED
221
Time-based product
Surface GATI
House
Air Total Logistics [GLS] -hold
CTL C&F Industrial
Time –bound Total Logistics Packing &

express cargo Solution Forwarding
Knowledge of
Skills of handling IT Hub & spoke Knowledge of
Cargo
small & high Gatiship operational packing &
movement
value cargo method forwarding
through
surface air
Knowledge of Export/Import
Warehouseing Documentation
222
Crisplan Financials
Career education MRP
Corporate training Systems Engg EIS
Appln. Div
Automated learning centres Advisory consultation
Client/
NIS Service
SI Services Client/Service
IOL
TECH
Support TQM CBT
Services
Training Consulting S/w Solutions
& Products
Methodologies
Instructional Design Knowledge of
for applying &
IT
diffusing CC2
knowledge CC3
CC1
Knowledge of
Systems & CC5 Networking &
Processes CC4 communication
223
NEED TO DEVELOP:INNOVATION
POWERED BY INTELLECT, DRIVEN BY VALUES
NTL PORTNT BELL

ATLANTIC DELL JP REETAK
ASC AEON 11CP
JC PERNY
EXCEL
OSDC RE ENG MAINT. DEV INTERNET CONSULTANCY AREA/

SERVICES
LEARNABILITY OF STANDARDS ORGANIZATION PROJECT

MANPOWER METHODOLOGIES WIDE MGMT
KNOWLEDGE SKILLS
224
COMPETENCIES
Physical
Highend Customized Application Software Test
Infrastructure skilled
Latend development Re---
Structure manpower
Platform infrastructure Softw
Infinity Allied development
are
Deve.
Core Product INFRASTRUCTURE FOR

IT INDUSTRY
INFRA STRUCTURE INSTITUTIONAL
The Trend in as Changing The trend in To run an IT

delivery [product[ customer expectation company
IT as IT [technical] IT as Business
Marketing IT and
•Software deve Opportunity globally •The Indian
•Hardware Mfg •The global end user •international 225
THE CORE COMPETENCE
ITC - ITD & ILTD
CIGARETTES PIPE TOBACCO DOMESTIC EXPORT
CIGARETTES LEAF TOBACCO

E.P.
C.P.
QUALITY
TOBACCO
TOBACCO FARMER’S CONFIDENCE UNDERSTANDING

KNOWLEDGE IN THE COMPANY CUSTOMER NEEDS
226
CC # 1 CC # 2 CC # 3
ITD & ILTD
Constituents of cc # 1
• Brand Management
• Blending
• Distribution
• Marketing ability
Pepsi foods: cc
Marketing of Impulse Driven Products
227
THE CORE COMPETENCES
ITC P AGRI BUSINESS
• Commodities
E
N • Hybrid Oil Seeds • Branded ref Oils • Hi Protein Meals
D • Margarine • Animal feeds
• Canola
U
S •Other Hybrids • Specialty Oils • Protein
E • Blended Oils • Isolates
C
P • Proprietary Hybrids • Oils • De-oiled cakes
S
• Germ Plasm bank • Relationship • Creation & • Distribution and
C and Breeding sustenance of logistics
with the
C skills farmers brands
S
Future CCs Product Design
• R&D
• Trading skills Value Addition
228
MOTOROLA NEEDS TO BUILD UP
COMPETENCIES AS :
• DIGITAL COMPRESSION
• FLAT SCREEN DISPLAYS
• BATTERY TECHNOLOGY
229
IDENTIFYING CORE COMPETENCIES
• Core competence provides potential access to a
wide variety of markets.
• Core competence should make a significant

contribution to the perceived customer benefit
of the end products.
• Core competency should be difficult for

competitors to imitate.
230
PRECISION FINE MICRO
MECHANICS OPTICS ELECTRONICS
Basic camera
Compact fashion camera
Electronic camera
EOS auto focus camera
Video still camera
Laser beam printer
Color video printer
Bubble jet printer
Basic fax
Laser fax
Calculator
Plain paper copier
Battery PPC
231
PRECISION FINE MICRO
MECHANICS OPTICS ELECTRONICS
Color copier
Laser copier
Color laser copier
NAVI
Still video system
Laser imager
Cell analyzer
Mask aligners
Stepper aligners
Excimer laser aligners
Every Canon product is the result of at least one core competency
232
SALES TASKS MARKETING TASK
[These essentially takes care of the present [These are needed to ensure future
need I.e. AOP] prosperity I.e. LRP]
Selling Task Current Marketing Task Future
1. Customer contact 1. Brand Management
2. Pre-tendering & selling activity 2. Promotion and communication
3. Relationship Management 3. Sales support
4. Selling 4. Market Analysis
5. Negotiation 5. Competition Analysis
6. Offer follow up 6. Technology up gradation
7. Channel Management 7. New Product
8. Order Management 8. Training and Development
9. Sales Management 9. CRM
10. After sales service & support 10. Interfacing cross functional teams
11. Complaint handling and 11. Customer feedback & insight
management 12. New opportunities
12. Solution selling 13. Market intelligence strategic
13. Market Intelligence Operational
14. CRM
233
EXERCISE
• Identify the technological trends/developments
that seemed to have converged over the last few
years to provide newer product opportunities.
• Identify major competencies of your company’s

business. Project newer opportunities.
234
WHAT DOES IT TAKE TO GET TO THE
FUTURE FIRST?
[HAMMEL AND PRAHALAD]
• An understanding of how competition for the future is different.
• A process for finding and gaining insights into tomorrow’s
opportunities.
• An ability to energize the company from top to bottom for what
may be a long and arduous journey toward the future.
• The capacity to outrun competitors and get to the future first,
without taking undue risks.
• Strategy is the quest to over come resource constraints through a
creating and unending pursuit for better resource leverage.
235
COMPETING FOR THE FUTURE
• Unlearn
• Foresight
• Strategic Architecture
• Stretch Goals
• Resource Leverage
• Competing to shape the Structure
• Core Competence
• Coalitions
• Global Preemption
236
Restructuring the Re-engineering Re-inventing
Portfolio and Process and Industries and
Downsizing the Continuous Regenerating
Head Count Improvement Strategies
Better Different
Smaller
237
FIGURE 5-2 WHY DO GREAT COMPANIES FAIL?
Unparalleled Accumulation of Optimized Success

track record of abundant business confirms
success resources system strategy
No gap between A view the

expectations Deeply Momentum
resources etched is mistaken
and will win out
performance recipes for leadership
Contentment Resources Vulnerability Failure to

with current substitute to new “reinvent”
performance for creativity rules leadership
Inability to escape Inability to Invent

the past ! the future !
238
PRAHALAD SPEAK
239
CK PRAHALAD ON MBA EDUCATION [1998]
In a good MBA programme, the effort is to teach four basic skills:
• First, is the basic analytical skill set, whether it is in finance, marketing
research or IT, so that each student gets a minimum analytic component
and a body of knowledge that shapes the way one thinks about complex
business problems.
• Second, is an ability for young men and women to understand teamwork
and leadership. Part of this training is experiential. That is why the
University of Michigan system spends a lot of time helping people
understand how to work in teams, how to work cross-culturally, and how
to become inter-personally competent.
• Third, management education is a very value-loaded education. We strive
to get students to think explicitly about values inherent in the analytical
tools that we use.
• Fourth, we want to provide an ability, a perspective and a problem –solving
orientation. We build a ‘can-do’ orientation in our students.
240
Experiential knowledge, problem-solving orientation, and a
certain innate desire to lead – that is what a good MBA education
is about. When an individual possesses natural capabilities this
training serves to enhance those capabilities.
Personally, I am not overly committed to case studies alone. Case

studies allow students to see a wide variety of industries and
situations, and builds their confidence, so that, when they are
presented with a new situations, they have a pattern which they
can understand and reason by analogy. It is a lot like being a
chess master; the better players have a lot more patterns in their
heads. That is what we are trying to do – to help create more
patterns that students can relate to.
241
PRAHALAD’S PRESCRIPTION FOR THE
INDIAN CEOs
MANAGING DISCONTINUITY
• Financial success may co-exist with strategic vulnerability. One can
fall off the cliff, while being immensely profitable. The challenge
is to motivate people for a change even when profitability gives the
management a feeling of being in control.
• Acquire new skills. How to make top management learn new ways
of managing their own organizations. Questioning the implicit
recipes, one has grown up with –on how to run a business,
received wisdom is vital.
• Don’t create clones. Ancestor worship should stop. Discontinuity

demands different skills and not more people who look like us.
242
PRAHALADSPEAK
• Core Competencies: A company’s bundle of skills and technologies
representing the sum of learning across individual skill-sets and individual
organizational units.
• Competitive Innovation: Taking competitive risks within manageable limits,
achieved by building layers of advantage and changing the terms of
engagement in a battle.
• Expeditionary Marketing: Lifting the number of hits: by increasing the
number of market opportunities, niches, and product permutations.
• Managerial Frames: Binding frames of reference that managers acquire
invisibly from business school, peers the business press, and their own
experiences.
• Strategic Architecture: A high level blue print for building new
competencies, migrating from existing competencies, and reconfiguring the
interface with customers.
• Strategic Intent: Envisioning a desired leadership position, which must be
out of proportion with existing resources and capabilities.
• White Spaces: Potential competitive territory that lies concealed between
existing business units.
243
The Duty List
Indian managers will be required to have analytical orientation along with
a commitment to introspection and self development, and enforce learning
through uncomfortable situations. A manager’s tasks will include:
• Exploiting opportunities that are increasingly becoming global.
• Customizing at low cost.
• Learning to manage and work in highly volatile environments, political and
otherwise, and to scale down or scale up operations, according to need.
• Learning to become part of the global, intellectual chain.
• Being less dependent on governments, the role of which is increasingly
being challenged in every sphere.
• Realizing that a job is no longer an entitlement or a right.
• Being able to convert data into knowledge.
• Looking at strategy as resource mobilization and resource leverage.
• Developing capacity for knowledge in action.
• Developing education, particularly management education, for a
framework for sustaining change.
244
COMPETING FOR THE FUTURE
FOCUS
• Focus your energy on a few essential things such as quality,

product development capability, management development and
global expansion. Diversify. But creating skills is important.
• Concept of focus is a lot more complex than being in a few

businesses. 3M is very focused with 60,000 products as Cargil
whose products range from seeds to mini steel mills.
• Focus is not limiting the number of business, but creating multiple

business which are built on and exploit core competencies.
245
CORE SKILLS, DIFFERENT BUSINESSES
• Core competencies is often misunderstood as a perspective that

restricts the number of businesses a company can have.
• Core competence perspective is about creating new businesses and

enlarging the scope of the corporate portfolio, while underlining
the necessity of developing and exploiting core skills in all the
areas.
• For developing countries, with limited resources, a portfolio of

unrelated businesses does not provide an opportunity for resource
leverage.
246
THE INDIAN MANAGER
At Home in the World
In terms of raw intelligence, Indian managers compare very well

with their global counterparts. But this is not enough. Knowledge
of how the world has to be acquired, not through assumptions but
by traveling, living, working, selling and competing abroad. They
need to understand global customers, the basis for competition,
and the cultural ethos of the countries in which they operate.
Most European and Japanese companies send a lot of their fast-

track managers abroad. So by the time they come to the senior
management level, they have not only raw intelligence but also
considerable knowledge of how the world works, and here they
score.
247
THE PEOPLE FACTOR
• The most important challenge is to attract, retain and motivate talent.
• Compensation may not be the key determinant in retention.
• Challenge is to create an organization where everybody feels

responsible for creating new mindsets, the right incentives and for a
where young people can be heard.
• Management has to become egalitarian and not elitist. Listening to

people at lower levels – who are closest to technology and customers –
is a must.
• Management must learn to differentiate between HR as a function and

HR as a responsibility.
248
THE RULE OF THREE
Sheth and Sisodia
• Markets evolve in a highly predictable fashion, governed by The Rule
of Three.
• Two kinds of competitors:
- Volume driven players
- Margin driven players
• Volume driven players: Full line generalists.
• Margin driven players: Product specialists or market specialists.
• Contrary to the traditional eco theory, evolved markets tend to be
simultaneously ‘oligopolistic’ or ‘monopolistic’.
• The Rule of Three applies [and renews itself] at every stage of a
market’s geographic evolution – from local to regional; regional to
national; and national to global.
• To be viable as volume-driven players, companies must have a critical
mass market share of at least 10%.
249
• At market shares of less than 5%, financial performance turns out
to be inversely correlated with market share: the smaller the
market share, the higher the cash flow. These smaller margin
driven players – whose numbers vary considerably from industry
to industry – are known as specialists.
• The strategies for volume and margin driven players are different.
• The Rule of Three dictates that there is only room for three major
players that tend to be full line generalists along with several [in
some markets, even numerous] product or market specialists.
• Together, the three inner circle competitors control, in varying
proportion, between 70% to 90% of the market.
250
MARKET SHARE
1%
Product/Market
40%
Specialist
Financial Performance
Margin Driven
Full Line
Generalists
[Cash Flow]
5% Volume
10% Driven
The Ditch
251
LOW
Declining Market [Manual Mature Markets [Packaged
G Typewriters] Goods]
R
O
W
T
H Start-up Market [Biogenetics Growth Market [PCs]
HIGH
LOW EFFICIENCY HIGH

• Two driving forces sustain markets: efficiency and growth. Growth comes
primarily from customer demand, while efficiency is a function of operations. In
a cyclical pursuit of these objectives, markets get organized and reorganized over
time.
• The starting point for a new market is always a new technology. Almost all new
entrants are product specialists.
• Young markets tend to have few technical standards, low barriers to entry and
exit; and decidedly, local geographic focus. 252
The Drivers of Market Evaluation:
The Drivers for Efficiency:
• Creation of standards
• Shared infrastructure
• Government intervention
• Consolidation
253
The Common Factors in Market Evolution:
• Contrary to popular belief, shakeouts often take place during market
expansion [PC industry in the US].
• Extent of market share [of three full line generalists] concentration
depends on the extent to which fixed costs dominate the cost structure.
• If the top player commands 70% or more of the market, there is often no
room for even a second full line generalist. [when IBM dominated
mainframe, all other had to become niche players to survive.]
• When the market leader has a share substantially in excess of 50%, there
is often no room for a third full line generalist.
• If the market leader enjoys considerably less than 40%, there may be
[temporarily] room for a fourth generalist.
• A market share of 10% appears to be minimal level for a generalist to
survive. Below this, it may not be viable.
254
• In a market suffering through a downturn in growth, the fight for
market share between No. 1 and No. 2 often sends the No. 3 into the
ditch [RC Cola, Lockheed, McDonald, Douglas].
• In the long run, a new No. 3 full line player always emerges,
especially if the market becomes globalized. [Cadbury-Schweppes,
Dr Pepper and 7-Up have combined to become a viable No. 3 player,
with approximately 17% market share in the global market.]
The Rule of Three and Industry Shakeout

The three factors/forces can cause – once secure full line players- to
lose their viability. These may shift the balance of power to a different
set of competitors.
• Substitute technology.
• Regulatory change.
• Market shifts.
255
The Rule of Three and Geographic Market Scope
• When the scope of markets expands – whether from
local to regional; regional to national; or national to
global – The Rule of Three prevails and industry
restructuring becomes inevitable. Many regionally
dominant companies find themselves trailing badly
once the market globalizes.
• To survive as a global full line generalist, a company
has to be strong in at least two of three legs of the
‘triad’: US, West Europe and Japan.
• You do not have to be one of the volume players to do
well. Honda, for example, seems to be heading towards
becoming a high-end product specialist.
256
Strategies for Number One Companies:
• Adopt a ‘fast follower’ posture for innovation.
• Utilize single or dual brand positioning.
• Use multiple distribution channels.
• Emphasize low costs as well as product differentiation.
• Emphasize volume over margin.
• Grow the market.
257
STRATEGIES FOR NUMBER TWO
COMPANIES
Overtake – come from Clone the leader [e.g.,
Growing behind [e.g., Compaq vs Intel, Chrysler]
IMB PCs]
Market Rivalry – jostling for Co-exist – segment the

leadership [e.g., Coke vs market [e.g., PC market]
Pepsi]
Mature
Non-Dominant Dominant
RELATIOVE POSITION OF NUMBER ONE COMPANIES
Strategies for Number Three Companies:
• Innovation and differentiation
• Vertical partnership
• Horizontal partnership and mergers.
258
Strategies for Specialist Companies:
Maintain uniqueness
• Micro segmentation
• Shun fixed costs
Making the Turn
40%
5%
10%
The Ditch
259
Characteristic Generalists Specialists
• Source of advertising • Size X Speed • Selectivity X Service
• Cost structure • Hi fixed cost • Hi variable cost
• Scope of offerings • Full line products • Limited line of
• Positioning and • One-stop shop products
branding positioning with single • Target market
• Distribution channels brand [Corp] identity positioning, multiple
• Organization and • Multiple channels brand identity
operations • Integrated organization • Focused channels
shared operations multi-business
organization dedicated
• Networks and alliances
operations
• Vertical integration
260
When the Rule of Three Does Not apply:
•Regulation.
•Exclusive rights.
•Major barriers to trade and foreign ownership of assets.
•Markets with a high degree of vertical integration.
•Markets with combined ownership and management.
Why Three: The Rule is based on some fundamental truths about
consumer psychology, compt, dynamics and balance of power.
•It is based on empirical observations. [The theory applies to
markets rather than industries – aviation industry vs commercial
aviation.]
•To create a balance or equilibrium, three entities are needed.
•The Rule of Three is strongly linked with the theory of consumer
of ‘evoked sets’ – the short list of purchase options considered by a
consumer.
261
RULE OF THREE [SOME EXAMPLES]
IND COS MKT SHARE G/S
1. FHP GE 70% G
CG 15% G
OTHERS 15%
2. ALUMINIUM HINDALCO 32% G
NALCO 28% G
BALCO 11% G
MALCO 4% G
INDAL 5% G
OTHERS 20%
3. PROCESSORS INTEL 80% G

AMD 15% G
CYRIX 5% G
262
4. PC’S COMPAQ 20% G

DELL 12% G
HP 10% G
IBM 8% G
GATEWAY 6% G
APPLE 8% S
5. SHAMPOOS HLL 60% G

CKL 15% G
P&G 5% G
OTHERS 20%
263
6. FAIRNESS CREAM HLL 78% G

CKL 14% G
OTHERS 8% G
7. CARS MARUTI 50% G
DAEWOO 8% G
FORD 4% G
HYUNDAI 9% G
TATA 8% G
OTHERS 21% S
264
COMPETITIVE SCENARIO
INDUSTRY MAJOR LEADER FOLLOWERS
PLAYERS [MKT SHARE] [MKT SHARE]
MOTOR CYCLE 6 HERO HONDA 1. BAJAJ AUTO

2. TVS SUZUKI
SCOOTERS 4 BAJAJ AUTO 1. MAH.

SCOOTERS
2. LML
LCV 6 TELCO [47.2%] 1. BAJAJ
TEMPO
[30.9%]
2. SWARAJ
MAJDA
[8.7%
265

STEEL 10 MAIN SAIL [54%] 1. TISCO [11%]

PRODUCERS 2. VIZAG [6%]
20 SECONDARY
PRODUCERS
SPONGE IRON 15 ESSAR GUJRAT 1. NIPPON

[CAPACITY 1.7 DENRO
MTPA] 2. [BIHAR
SPONGE [0.15
MTPA]
266
TVS 4 BPL [26.6% Onida [17.7%]
V Con [16.7%]
CARS 4 Maruti [72% 1. HM [14%]
[PASSENGER] 2. PAL [12%]
WATCH 7 HMT [42%] 1. TITAN [28%]
2. TIMEX [87%]
TEXTILE 17 GRACIM [87.5%]
MANMADE
[VSF]
PAINTS 5 ASIAN PAINTS 1. Goodlas Nesolac
[SALES – [Rs.205.8]Cr
RS.487.91 Cr] 2. Berger[Rs
114.95]Cd
267
Refrigerators 5 Godrej [43%] 1. Kelvinator
[29%]
2. Voltas [11%]
3. V’Con [11%]
268

Visioning Opportunities &amp; Growth Strategies

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Visioning Opportunities &amp; Growth Strategies

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Visioning: Opportunities

And Growth Strategies

Dr. Sharad Sarin

- Joel Arthur Barker

Core Ideology Envisioned Future

• Internal Transformation – become Number One or Number Two in every

• Purpose: To experience the sheer joy of innovation and the application of

• Envisioned Future: BHAG – Big, Hairy, Audacious Goals. Become the

Mission of the Company

Strategic Business Challenges

• In the coming decade, we will become the most cost nation.

• Where Tata Steel ventures---others follow.

THRUST AREAS: 1999-2000

CUSTOMER COST CHANGE

• FORMULATION OF CORPORATE OBJECTIVES

Beverages Soft drinks

Footwear Athletic footwear

Global mail delivery Overnight package delivery

CUSTOMER GROUPS (SEGMENTS)

M F ADULTS CON END

• Strategic issues require top management decisions.

• They believe in and act on the idea that there is

1. Look at your business from the outside in.

2. The Outside-In View

The final users/your customers/your companies.

Existing CUSTOMERS New

• There is no such thing as mature business

1. Well-head to consumer a $700 billion market – GE

• Just as bad management destroys

NOPAT NOPAT SALES

Revenue Cost Tax Sales

Marketing operation A/c or Finance

Source: Charan & Tichy

• Annual productivity • Faster inventory turnover

• Creative segmentation and • Additional sales from the

1. Natural Growth, where your market

4. Highly developed DISTRIBUTION

5. Opening new markets for existing

6. Gaining power in the market place via

8. Re-segmenting your markets.

9. Moving into adjacent segments.

Successful Competitiveness, Managers begin

Gradual decline into Initiative and External

Improving Resource Creating and Exploiting

YEAR ANNUAL ROCE

WHAT YOU WHAT DRIVES

There is no such thing as a growth industry. There are

– LARRY BOSSIDY – CEO – ALLIED SIGNAL

Growth 10% 15% 25%

• FORMULATION OF CORPORATE OBJECTIVES

OUR CURRENT REALITY

1981 1992 1999

1. Dhiru Bhai’s dream:

1. Roll up your sleeves and help.

THE FOUR MUSTS

SECONDARY [ANY TWO]

- Joel Arthur Barker

• Dream : – J.N. Tata, J. R. D. Tata, G. D. Birla,

• The softest pillow is a clear conscience and a

2. Decentralization – Empowerment of People.

3. Becoming Part of Society.

• CREATE PROBLEM FOR

• Displaying commitment and keeping a strong focus on the strategy is

Visioning Opportunities & Growth Strategies

Visioning Opportunities & Growth Strategies