ARTICLES AND CASE STUDIES

ONSTRATEGY

INDEX1. About the Project

2. What is Strategy?

3. Articles and Case Studies on:

I. Picking The Right Transition Strategy

II. The Five Competitive Forces That Shape Strategy

III. Reinventing Your Business Model

IV. How Strategy Shapes Structure

V. Transforming Strategy One Customer at a Time

VI. Choosing Strategies for Change

VII. Is Your Growth Strategy Flying Blind?

VIII. Value-for-Money Strategies for Recessionary Times

IX. Strategy as a Wicked Problem

X. Strategies for Learning from Failure

ABOUT THE PROJECTA. Aim

To find examples of the ideas conveyed through these articles using case studies.

B. Scope of the Project

1. The articles are related to strategy only.

2. The articles’ first publishing date ranges from 2008 to 2013.

3. The articles cover different aspects of strategic management.

4. The case studies are confined to Indian geographical territory.

C. Research Methodology

1. Thorough reading of articles.

2. Going through as many case studies as possible.

3. Comparison of the findings derived from the study of both of the above points.

4. Result obtained from such comparison was used to explain one case study under each article.

D. Limitation of the Project

The project discusses success stories and instances of failure only and not necessarily the current status of the respective organization or industry.

WHAT IS STRATEGY?

The concept of strategy has been borrowed from the military and adapted for use in business.

Derived from the Greek Word ‘strategia’, which means ‘generalship’.

Had brilliant strategists right from the past Sun Tzu, author of ‘The Art of War’

Lord Krishna in Mahabharata

Chanakya, author of ‘Arthashastra’

Birbal, one of the nine advisors of Akbar

Every scholar or researcher has his own definition for strategy

Besides, entrepreneurs define strategy in their own way (eg. Rajiv Bajaj - It is more about what you choose not to do rather than what you choose to do)

It is of vital importance in almost all spheres such as politics, sports etc.

Many computer games are also based on strategy!

ARTICLES AND CASE STUDIES

PICKING THE RIGHT TRANSITION STRATEGY (Michael D. Watkins)

Start – up: Assembling the capabilities to get a new initiative off the ground

Turnaround: Saving a business or initiative widely acknowledged to be in serious trouble

Accelerated Growth: Managing a rapidly expanding business

Realignment: Reenergizing a previously successful organization that now faces problems

Sustaining Success: Ensuring that the success of an organization lasts longer

CASE STUDY: AVANI BIO ENERGY PVT. LTD. Start – up: The company initiated its operations in 1997. It focused on

capacity building of rural communities, enabling them to make sustainable and capable contributions to society.

Turnaround: Forest fires were common in the Kumaon district. The area has pine chir trees in abundance which are a cause of such fires. This organization has developed a way to make productive use of these pine needles. The suggested method ensured:

Electricity generation

By product of this process is charcoal, which is cheaper than kerosene oil and can be used for cooking purposes

Reduced emissions of carbon dioxide

Employment (for the purpose of collecting pine needles)

Reduced forest fires

Percolation of rain water, thus avoiding soil erosion

A more fertile land for growing crops

CONTINUED Accelerated Growth: The suggested model was a great success and

attracted a lot of investors.

Realignment: Acumen Fund invested Rs. 1.3 crore in Avani Bio Energy Pvt. Ltd. It will be able to create 20 operational plants within 5 years, providing electricity to more than 58000 people and enabling hundreds of households to substitute kerosene oil by charcoal. The removal of surplus pine needles will also reduce forest fires in an area populated by 7,500 farming families.

Sustaining Success: The company will undertake the setting up of more such power plants, generating profits, which in turn will be shared by the producers and pine-needle collectors, sustaining the institution.

THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY(Michael E. Porter)

Rivalry among Existing

Competitors

Threat of a New Entrant

Bargaining Power of

Customers

Threat of Substitutes

Bargaining Power of Suppliers

FMCG INDUSTRY (INDIA)SUPPLIER POWER1. Supplier concentration2. Switching costs of firms in the industry3. Presence of substitute inputs

THREAT OF SUBSTITUTES1. Switching costs2. Buyer inclination to substitutes.3. Price-performance trade-off of substitutes.

DEGREE OF RIVALRY1. Exit barriers2. Industry concentration3. Fixed costs/Value added4. Industry growth5. Product differences6. Switching costs7. Diversity of rivals

BUYER POWER1. Bargaining Leverage2. Buyer volume3. Buyer information4. Price sensitivity5. Product differentiation6. Buyer concentration7. Substitutes available

BARRIERS TO ENTRY1. Absolute cost advantages2. Access to inputs3. Economies of scale4. Capital requirements5. Switching costs6. Access to distribution7. Expected retaliation

High

Low

REINVENTING YOUR BUSINESS MODEL(Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann)

A new business model involves four dimensions:

1. Customer Value Proposition: Helping the customer to get an important job done.

2. Profit formula: All these factors decide the profitability of the model:

I. Revenue Model

II. Cost Structure

III. Margin Model (Revenue - Cost)

IV. Resource Velocity (speed of inventory turnover, fixed assets and other assets turnover)

3. Key Resources: Assets required to deliver Customer Value Proposition to the targeted customer.

4. Key Processes: The processes (training, manufacturing, service) required to leverage the above resources.

CASE STUDY: TATA NANO – THE ONE LAKH CAR

1. Creating Customer Value Proposition: Offering an affordable, safer, all-weather alternative for scooter families was a powerful proposition, one with the potential to reach tens of millions of people.

2. Designing a Profit Formula:

I. A significant drop in gross margins

II. Radical reduction in many elements of the cost structure

III. Target base of customers was huge and hence Ratan Tata new that he could still earn a huge sum.

3. Identifying Key Resources and Processes:

I. Reconceive how a car is designed, manufactured, and disturbed.

II. Built a small team of fairly young engineers

III. Minimized the number of parts in the vehicle

IV. Outsource a remarkable 85% of the Nano’s components

V. 60% fewer vendors than normal to reduce transaction costs

HOW STRATEGY SHAPES STRUCTURE(W. Chan Kim and Renée Mauborgne)

Executives develop strategy by

Analyzing industry or environment

Doing SWOT analysis of the competitors to outperform them

This implies that STRUCTURE SHAPES STRATEGY

This article talks about the reconstructionist approach which focuses on blue ocean strategy

Blue Ocean Strategy is a concept wherein a company’s performance is not necessarily determined by the competitive environment.

Such approach is favourable when conditions are unattractive, company lacks resources and the person has an innovative and risk taking mindset.

THE THREE STRATEGY

PROPOSITIONS

• Value Proposition

• Profit Proposition

• People Proposition

CASE STUDY: IPL

Value Proposition: Modernization of cricket in India

I. Eliminate the patience of watching an 8 hour long ODI or a five day long test match.

II. Reduce the spectator time (competes with football match or a movie) and also the uncertainty of results as in case of a test match or an ODI.

III. The greatest players representing the same team.

IV. Raise the pace of the game and introduce a pool of young talent.

V. Offering entertainment through cheerleaders.

Profit Proposition:

I. The tickets are sold at a high price.

II. People turnout in large numbers.

People Proposition:

I. Offering young players with an opportunity to showcase their talent.

II. Actors use IPL as a stage to increase their fan following.

III. The auction procedure of recruiting players allows cricketers to earn a huge sum.

TRANSFORMING STRATEGY ONE CUSTOMER AT A TIME(Richard J. Harrington and Anthony K. Tjan)

What steps does a transformation include?

1. Map Out Your Real Market: This includes defining a target customer and understand the company’s own areas of strengths, hence, discovering the untapped potential

2. Understand the Customers’ Objectives and Work Flow: This point focuses on exploring the needs of the targeted customers. It also talks about understanding the activities undertaken by them in their daily routine.

3. Develop Products That Provide What Users Value Most: After following the above steps, the company can add desired features to products or offer desired services.

CASE STUDY: HUL “PROJECT SHAKTI”

Discovery of untapped potential – Even though HUL enjoyed a greater penetration in the rural market as compared to Nirma and ITC, its direct reach was restricted to 16 percent.

Understanding the objectives of target customers: The main issue in rural areas was income generation. The social side of Project Shakti was that it was aimed to create income-generating capabilities for underprivileged rural women.

Providing solutions that consumers value most:

I. Offered a wide range of products to the Self Help Groups, which were relevant to rural customers.

II. HUL invested significantly in resources who work with the women on the field and provide them with on-the-job training and support.

III. Training to these groups on the basics of enterprise management.

IV. For women, this translated into a much-needed, sustainable income contributing towards better living and prosperity.

V. Women from SHGs became direct-to-home distributors in rural markets.

CHOOSING STRATEGIES FOR CHANGE(John P. Kotter and Leonard A. Schlesinger)

Top Officials introduce change for organization’s benefit or in response to the dynamic business environment.

Human beings have a tendency to resist change.

This article focuses on two very important points:

1. Diagnosing Resistance

I. Low tolerance for change

II. Misunderstanding and lack of trust

III. Frustration

2. Dealing with Resistance

I. Education and Communication

II. Participation and Involvement

III. Negotiation and Agreement

CASE STUDY: ICICI ON CHANGE MANAGEMENT

In May 1996, K.V. Kamath replaced Narayan Vaghul as CEO of ICICI.

He identified a major problem in the company’s lending practices.

He introduced massive changes in the organizational structure and the emphasis of the organization changed.

He decided to create new divisions to tap new markets and to introduce flexibility to enable the company to respond to market changes.

Changes caused enormous tension within the organization and were unacceptable as learning new skills and adapting to the process orientation was proving difficult.

CONTINUED

ICICI conducted an employee behavioral pattern study to assess the various fears and apprehensions.

Development of new systems to deal with resistance. Some of these are:

1. Employee communication

2. Recruitment & Compensation

3. Training

4. Employee relations

By 2000, ICICI emerged as the second largest financial institution in India with assets worth Rs 582 billion.

IS YOUR GROWTH STRATEGY FLYING BLIND?(Mehrdad Baghai, Sven Smit, and Patrick Viguerie) 

A successful growth strategy focuses on the following three:

Identify micro-segments of customers, geographic regions, and products with the strongest market momentum.

Invest resources (R&D, advertising, and so on) in those areas, and jettison low-growth areas.

Restructure your organization to focus on the expanded number of priorities.

CASE STUDY: RENAULT DUSTER IN INDIA

Renault entered in India through a Joint Venture with Mahindra & Mahindra.

Maiden product offering – Logan. It unsuccessful because of dated looks and high pricing

Renault chose to go alone and here starts the success story:

1. Identified a gap in the SUV segment: There were SUVs costing Rs. 20 lakh and above manufactured by global players and those priced between Rs. 6 lakh to 10 lakh produced by Indian companies. The company launched the Duster priced between Rs. 8 lakh to 12 lakh in July 2012. It fuelled the segment of compact SUVs and grabbed a 23 percent market share within a year.

2. Restructuring: The Duster was so successful that Renault had to triple production within months of its launch from 7 per hour to 20 per hour. The Duster today accounts for 86 percent of Renault India’s production, 81 percent of its sales and 100 percent of its exports.

VALUE-FOR-MONEY STRATEGIES FOR RECESSIONARY TIMES(Peter J. Williamson and Ming Zeng) 

Three dimensions of cost innovation:

1. Selling high tech products at mass market prices: Smart companies in emerging markets have invested in research to sell products for less than the prevailing market price.

2. Offering choice and customization to value customers: Developing countries have learnt to gain economies of scale because of low human resource costs.

3. Turning premium niches into mass markets: It basically means that companies previously satisfying the specific market needs should look to satisfy the needs of the mass market.

CASE STUDY: REVA ELECTRIC CAR

1. Selling High Tech Products at Mass Market Prices: REVA electric car was sold at a cheaper price than Chevrolet Volt because of which it is available in several European countries.

2. Offering Choice and Customization to Value Customers: Mahindra and Mahindra, the parent company looks to offer several varieties in the same product line. (eg., REVA, REVAi, REVA L-ion, REVA NXR etc.)

3. Turning Premium Niches into Mass Markets: REVA is a niche today, but the potential is very large. The target is the second car in a household. About 95% of the consumers drive less than 40km per day. For this purpose, REVA is just the perfect alternative as it is economical because of lesser fuel and maintenance costs.

STRATEGY AS A WICKED PROBLEM(John C. Camillus)

According to the author, strategy issues are wicked as no traditional processes can resolve them. Such problems are faced due to constant changes in environment.

Challenges or Problems are Difficult to Solve when:

1. The problem involves many stakeholders with different values and priorities.

2. The issue’s roots are complex and tangled.

3. The problem is difficult to understand and changes with every attempt to address it.

CASE STUDY: WALMART IN INDIA1. The problem involves many stakeholders with different values and

priorities: As Walmart expands, so does this problem. Not all stakeholders share Walmart’s goals and have individual interests.

2. The issue’s roots are complex and tangled:

I. Intense Competition from other retail outlets

II. People’s opposition to opening of stores in urban areas

III. Low price image hurts its ability to sell upscale products

3. The problem is difficult to come to grips with and changes with every attempt to address it:

I. Raising prices reduces its ability to fend off rivals

II. Until 2011, foreign retail stores were not allowed. Removing such restriction meant competition from the retailers to whom it supplies.

STRATEGIES FOR LEARNING FROM FAILURE(Amy C. Edmondson)

The author believes that some failures are inevitable and some are even good in the sense that you learn from them.

This article focuses on the need to have a strong leader, the one who can build a learning culture and opportunities for experimentation are also provided.

The author also feels that executives should realize the fact that failure in today’s complex business environment is inevitable and should look to develop a culture in order to learn from them.

CASE STUDY: TATA GROUP “THE BEST FAILED IDEA”

1. In 2011, Ratan Tata started an annual contest in Tata Group that will reward the best failed idea in the company. Its aim was to:

Foster frugal innovation

Communicate the need to learn from failure.

2. The ex–chairman was keen to show that failures are likely in the pursuit of innovation. According to him, FAILURE IS A GOLD MINE!

3. The prize was meant to communicate how important trying and failing can be.

4. He managed to leave an innovative spark in the company before he left, in order to keep the company relevant on the global stage.

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