Strategic Management

-
The Competitive Edge
Prof. R.Srinivasan
Dept of Management Studies
Indian Institute of Science
Bangalore
Topics Sessions*
1.Introduction to Strategic Management
Concept of Corporate Strategy
Strategic Management Process
The 7-S Framework
Corporate Policy and Planning in India

1-5


2.Board of Directors-Role and Functions
Top Management-Role and skills
Board Functioning-Indian Context

6-8

3.Environment Scanning
Industry Analysis
Synthesis of External Factors
External factors Analysis Summary (EFAS)
Internal Scanning
Value Chain Analysis
Synthesis of Internal Factors
External factors Analysis Summary (IFAS)
Case Study 1



9-14




15
CONTINUED…
4.Strategy Formulation
Strategic factors Analysis Summary (SFAS)
Business Strategy
Corporate Strategy
Functional Strategy
Strategic Choice
Case Study 2



16-19


20
5.Strategy Implementation
Organization Structure
Corporate Culture
Diversification
Mergers and Acquisition
Case Study 3



16-19


24
6.Evaluation and Control
Strategic Information Systems
25-26
CONTINUED…
7.Other Strategic Issues
Small and Medium Enterprises
Non-Profit Organizations

27-28
* Each session is approximately for 1.5 hours
Books and References
•  R.Srinivasan, Strategic Management -The Indian Context,
4
th
Edition, Prentice Hall of India, 2012

•  R.Srinivasan, Case Studies in Marketing – The Indian
Context,5
th
Edition, Prentice Hall of India, 2012
STRATEGIC MANAGEMENT


LONG RANGE PLG / STRATEGIC PLANNING: MGT PROCESSES IN ORGNS THRO WHICH THE FUTURE
IMPACT OF CHANGE IS DETD AND CURRENT DECISIONS TO
REACH A DESIGNED FUTURE ARE MADE

: INCLUDE ENTIRE PROCESS OF MAJ OUTSIDE INTEREST GRPS
AND THEIR STAKES; EXPECTATIONS OF DOMINANT INSIDE
STOCK HOLDERS INFN - PAST, PRESENT & PROJD PERF;
EVALN OF CO. STRENGTHS & WEAKNESSES; FORMLN OF
ORGNL PURPOSE, MISSION, OBJS, POLICIES AND
STRATEGIES

STRATEGY: LONG - TERM DECISIONS - INCLUDES OBJS, GOALS &
COURSES OF ACTION
Ex: (ANSOFF: CORP. STRATEGY…., 65)
OBJS: ROI: THRESHOLD 10%, GOALS 15%
SALES
GROWTH : THRESHOLD 5%, GOALS 10%
RATE

STRATEGY: PROD-MKT: BASIC CHEMICALS &
SCOPE PHARMACEUTICALS
COURSES
OF GROWTH : PROD DEVPT & CONCENTRIC DIVSFN
ACTION VECTOR

COMPETITIVE: PATENT PROTECTN, SUPERIOR
ADVANTAGE RES COMPETENCE

SYNERGY : USE OF FIRMS RES CAPABILITIES
& PRODN TECHNOLOGY

PURPOSE & MISSION: USED INTERCHANGEABLY
Mission statement
! A strategically revealing mission
statement incorporates three elements
! What customer need is being satisfied
! Who is being satisfied
! How value is created and delivered to
customers satisfying their needs
Mission statement to strategic
vision
! Questions that must be answered
! What changes are occurring in markets and what are the
implicati ons for the direction we need to move
! What new or different customer needs should we move
sati sfy
! What new or different buyer segments should we
concentrate on
! What new geographic or product markets should we be
pursuing
! What should the company’s business makeup look like in
five years
! What kind of company should we be trying to become

GOALS: LEGITIMISE ORGN; IDENTIFY INTER ORGNL RELNSHIPS;
HAVE PR VALUE;IMAGE BLDG WITH SUPPLIERS, CUST, PUBLIC POLICY
MAKERS AND THE GOVT; COORDN OF MULTIPLICITY
OF TASKS, MANAGING OF CONFLICTS; STDS OF PERF;
MOTIVATORS

GOALS: OFFICIAL (DESCRIBED IN MOA, CHARTER, ANN. REPORT)
OPERATIVE - WHAT ORGN IS REALLY ATTEMPTING TO DO CAN BE
INFERRED FROM ORGNL POLICIES; HELP FOCUS ATTN,
REDUCE UNCERTAINTY, CHOOSE ORGNL DESIGN ALTVES
OPERATIONAL - USED BY SUP. PERSONNEL OR MGRS TO INFLUENCE
THE BEHVR OF SUBORDINATES AND MEASURE THEIR
PERFORMANCE
OFFICIAL - ABSTRACT, IDEALISTIC; OPERATIVE -
ACTUAL GOALS BUT NOT ARTICULATED;
OPERATIONAL - DETAILED, MEASURABLE

POLICIES: GUIDE TO ACTION

MAJ POLICY
(LINE OF BUS)
(CODE OF ETHICS)
SECY POLICIES
(GEOGR. AREA, MAJ
COST, PROD)
FNL POLICIES
(MKTG,PRODN,RES,FIN,..)
PROCEDURES & STD OPTG
PLANS (CUST ORDERS,
SERVICING,….)
RULES (DELAY OF PAYMENT
OF CHEQUES, SECURITY,….)

PYRAMID OF BUSINESS POLICIES (FROM STEINER, TOP MGT PLG, P.268)
STRATEGIES: GROWTH STRATEGIES

I. HOLD RELATIVE POSN IN HIGH GROWTH PROD/MKT AREA
II. MKT SHARE IN HIGH GROWTH MKT
III. MKT SHARE IN MATURE MKTS
IV. HOLD STRONG RELATIVE POSITION IN MATURE MKT, USE
EXCESS CASH FLOW, FUNDS,… TO EFFECT PENTN WITH
EXISTING PRODUCT LINE - MULTI NATL MKT
V. AS IN (IV) -WRT NEW PROD/MKTS DOMESTICALLY
VI. HOLD STRONG RELATIVE POSN IN DIVERSIFIED PROD. LINE
DOMESTICALLY, AND USE EXCESS CASH FLOW, FUNDS
CAPABILITY AND OTHER RESOURCES TO DIVERSIFY MKTS

DEPENDANCY REDN STRATEGIES

I. MAINTAINING ALTERNATIVES
II. BLDG POSITIVE IMAGE
III. DIRECT CONFRONTATION
IV. CONTRACTING - TO REDUCE UNCERTAINTIES
V. CO-OPTATION - TO INVOLVE REPS OF OTHER ORGNS INTO POLICY-
MAKING POSITIONS TO ACHIEVE CERTAINTY OF FUTURE
VI. COALITIONS - TO ACHIEVE COMMON GOALS LIKE OPPOSING A
COMMON ENEMY

VERTL. INTEGN. STRATEGIES - BACKWARD; FORWARD RISK: LOSS OF FLEXIBILITY

GENERIC: I. OVERALL COST LEADERSHIP
II. DIFFERENTIATION
III. FOCUS

MERGERS AND JOINT VENTURES

TURNAROUND STRATEGIES - ENTREPRENEURIAL AND EFFICIENCY

BUS. UNIT STRATEGY AND CORP. STRATEGY

Tests of a winning strategy
!Goodness of fit test
!Match to industry and
competitive condition,
opportunities and threat
!Tailored to company’s
strengths and weakness,
competencies, and
capabilities
!Competitive advantage test
!Leads to sustainable
competitive advantage
!Performance test
!Boosts profitability and
competitive strength and
long term position
STRATEGIC - INTERFACE BETWEEN OPEN & EXTL. ENVNT -
MGT. DECISIONS OPERATING ALLOCATION OF TOT. RES- INFREQUENT.
- RES. CONVN
ADMNVE - FACILITATIVE



ORGNS SUCCESS OR FAILURE IN THE LONG-RUN DEPENDS UPON STRATEGIC
DECISION MAKING i.e. UPON DOING THE RIGHT THINGS THAN UPON DOING THINGS RIGHT

Table 1.1: Comparison Of Operating and Strategic Decisions
How
What
STRATEGIC DECISIONS
Clear Unclear
O
P
E
R
A
T
I
N
G
D
E
C
I
S
I
O
N
S
E
f
f
e
c
t
i
v
e
I
n
e
f
f
e
c
t
i
v
e

I
Clear strategy and effective
operations have contributed
to success in the past and will
contribute to success in the
future.
II
Unclear strategy but effective
operations have contributed
to success in the past but
success in the future is
doubtful.
III
Clear strategy but ineffective
operations have sometimes
worked in the past in the
short-run, but increasing
competition makes success
doubtful in the future.
IV
Unclear strategy and
ineffective operations have
meant failure in the past and
will be so in the future.
Source: Tragoe B. and J Zimmerman ,1980, Top Management Strategy, John Martin:
London, pp.20
Important Definitions
Strategic Management Process
The full set of commitments, decisions,
and actions required for a firm to achieve
strategic competitiveness and earn
above-average returns

Strategic Competitiveness
Achieved when a firm successfully formulates
and implements a value-creating strategy
Occurs when a firm develops a strategy that
competitors are not simultaneously
implementing
Provides benefits which current and potential
competitors are unable to duplicate
Above-Average Returns
Important Definitions
Risk
An investor’s uncertainty about the
economic gains or losses that will result
from a particular investment
Returns that are equal to those an investor
expects to earn from other investments with
a similar amount of risk
Average Returns
Strategic Flexibility
A set of capabilities used to respond to
various demands and opportunities
existing in a dynamic and uncertain
competitive environment
It involves coping with uncertainty and the
accompanying risks
1
DETERMINATION OF
MISSION OR
PURPOSE
3
ORGANISATIONAL
ANALYSIS
(STRENGTHS &
WEAKNESSES)
2
ENVIRONMENTAL
ASSESSMENT
(THREATS &
OPPORTUNITIES)
REDETERMINE AS
NEEDED
REDEFINE & REVISE
AS NEEDED
4
SPECIFICATION OF
OBJECTIVES
REFORMULATE AS
NEEDED
5
FORMULATION OF STRATEGY OR
STRATEGIC PLAN (TO ACHIEVE OBJECTIVES
AND GOALS)
REWORK AS
NEEDED
6
IMPLEMENTATION OR EXECUTION OF
STRATEGIC PLAN
RECYCLE TO PHASES
1,4,5 & 6 AS
NEEDED
7
MONITORING, REVIEWING &
EVALUATION
FIG.2
Strategic Management – Decision Making Process



INTERNAL

Structure

Culture

Resources

(Strengths &
Weaknesses)



Environmental
Analysis
EXTERNAL

Social
Environment
Task
Environment

(Opportunities &
Threats)

Strategy Formulation
Implementation of
Strategy
Evaluation
& Control
Mission
Objectives
Strategies
Policies
Programs
Budgets
Procedures
Performance
Feedback & Control
Strategic Management Process
LEARNING ORGANISATION –
FOUR MAIN ACTIVITIES

• Solving Problems Systematically

• Experimenting with New Approaches

• Learning from their own past experiences and past history
as well as from the experiences of others

• Transferring knowledge quickly and efficiently
throughout the Organisation
Mintzbergs Modes of Strategic Decision Making

* Entrepreneurial Mode: by one powerful individual. Focus is on
Opportunities ; problems are secondary; guided by founders
own vision of direction; exemplified by large, bold decisions.
Ex. AOL (founder STEVE CASE) (though clear growth strategy
is an advantage of the entrepreneurial mode, tendency to mkt
products before being able to support them is certainly
a disadvantage)
* Adaptive Mode: Muddling through; characterised by reactive
solutions to existing problems - Much bargaining goes on
concerning priorities of objectives - Strategy is fragmented and
is developed to move the company forward incrementally.
Ex. Typical of our Universities, Edn System, Govt agencies
(Encyclopedia Britannica Inc. has moved away from this approach to
Telvn Advtg & Internet mktg from 1996 after acquisition by the dual
career couples)




* Planning Mode: Systematic gathering of appropriate information
for situation analysis, generation of feasible alternative strategies
and rational selection of the most appropriate strategy - includes
proactive search for new opportunities and relative solutions of
existing problems.
Ex. J.C. Penny Co. - after careful study of shopping trends in
1980s moved out of hardware, appliances, automotive items &
electronics to apparel and home furnishings . Lower personal
incomes in 1990s led J.C. Penny to emphasise private brands;
could offer high quality of goods at lower prices in dept stores.
* Logical Incrementalization- syntheses of planning, adaptive and to a
lesser extent entrepreneurial mode of decision making. – Organisation
learns through an interactive process of probing into the future,
experimenting and learning from a series of incremental commitments
rather than through global formulations of total strategies. Useful
when the environment is changing rapidly and it is important to build
consensus and develop needed resources before committing the
organisation to a specific strategy.
CORP. PLAN- CHANGES IN THE OVERALL SHAPE OF AN ORGN - TAKES YRS TO
FRUCTIFY i.e. LONG-RANGE

HOWEVER CORP. PLAN & LRP DO NOT MEAN THE SAME.
LRP ASSUMES CURRENT ENVNT TO REMAIN INFUTURE AS WELL - BUILT
FROM LOWER LEVELS IN ORGN. STRATEGY MAKING STARTS AT THE TOP
MGT

- DENOTES PLG. FOR FUTURE OF THE ORGN AS A WHOLE; CONSIDERS
ALL ASPECTS OF ORGN ACTIVITIES

- INTEGRATES STRATEGIC PLG WITH SHORT RANGE OPNL PLANS


CORP PLG & SYSTEMS APPROACH - COMPUTER MODELS CAN BE USED AS AN ADJUNCT OF
SYSTEMS APPROACH; USEFUL FOR LARGE ENTERPRISES
FOR FINL EVALN - HOWEVER, SH. NOT CREATE MGRL PBLMS;
DATA HAS TO BE REGULARLY UPDATED

BENEFITS OF C.P. - ANTICIPATE TECHGL. CHANGES & ACHIEVE STRATEGIC OBJS & GOALS
RATIONAL RES. ALLOCATION
IMPROVED COORDINATION
EMPHASIS ON MANPOWER DEVPT
NEW PROD. DEVPT & LONG TERM NVESTMENTS
NEW SENSE OF DIRECTION

STUDIES IN US - 38 TO 40% IN SALES

64% IN EPS

56% IN SHARE PRICES WITH C.P.
Figure 3.1A Conceptual Model of Corporate Planning
INFORMATION
FLOWS
DECISION &
EVALUATION RULES
THE
PLAN
TO
PLAN
EVALUATIONS OF
Environment:
Opportunities
Threats
Company:
Strengths
Weakness
THE DATA BASE
Past Performance
Current situation
Forecasts
EXPECTATIONS OF MAJOR
INSIDE INTERESTS
Top Managers
Other Managers
Workers/Staff
EXPECTATIONS OF MAJOR
OUTSIDE INTERESTS
Society
Community (local)
Stockholders
Customers
Suppliers
Creditors
MASTER
STRATEGIES
Mission
Purposes
Objectives
Policies
PROGRAM
STRATEGIES
MEDIUM-RANGE
PROGRAMMING
& PROGRAMS
SHORT-
RANGE
PLANNING &
PLANS
IMPLEMEN-
TATION OF
PLANS
REVIEW &
EVALUA-
TION OF
PLANS
TECHNICAL
PLANNING
STRATEGIC PLANNING
Source: 1. George A. Steiner, et. Al:, Management Policy and Strategy: Text, Readings and Cases, p.18
2. John D.C. Roach and Michael G. Allen, Strengthening the Strategic Planning Process in The Strategic Management Handbook, Kenneth J. Albert (ed.), pp.7-10


ORGNL CHANGE - COMPLEX RELATIONSHIP BETWEEN STRATEGY, STRUCTURE,
SYSTEMS, STYLE, SKILL, STAFF AND SUPER ORDINATE GOALS
- SHOWN BY McKINSEY 7S FRAMEWORK IN FIG. 3





STRUCTURE
SYSTEMS
STYLE
STAFF
SKILLS
STRATEGY
SUPER
ORDINATE
GOALS
FIG. 3
SUPER ORDINATE GOALS: SET OF VALUES AND ASPIRATIONS THAT GOES BEYOND THE
THE CONVENTIONAL FORMAL STATEMENT OF CORP. OBJECTIVES;
ARE FUNDAMENTAL IDEAS AROUND WHICH A BUSINESS IS
BUILT - ITS MAIN VALUES
E.g.: IBM's MKTG: CUSTOMER SERVICE
GE's: PROGRESS IS OUR MOST IMPORTANT MOTTO
HEWLETT - PACKARD: INNOVATIVE PEOPLE AT ALL
LEVELS IN ORGN
ASCI: WE TRAIN OUR MANAGERS
MAY NOT MEAN MUCH TO OUTSIDERS BUT HAVE TREMENDOUS
SIGNIFICANCE FOR THOSE INSIDE

STRUCTURE: PRESCRIBES FORMAL RELNSHIPS AMONG VARIOUS POSITIONS
AND ACTIVITIES

- REDUCES EXTERNAL UNCERTAINTY THRO FORECASTING,
RES & PLG IN THE ORGN
- REDUCES INTL UNCERTAINTY ARISING OUT OF VARIABLE,
UNPREDICTABLE, RANDOM HUM. BEHAVR WITHIN THE ORGN.
THRO CONTROL MECHANISM
- UNDERTAKES WIDE VARIETY OF ACTIVITIES THRO DEVICES
SUCH AS DEPARTMENTALISATION, SPECLN, DIVN. OF LABR,
AND DELEGATION OF AUTHORITY
- ENABLES COORDN OF ORGNS ACTIVITIES & TO HAVE FOCUS


ACCING TO McKINSEY (7S FRAMEWORK) - RELNSHIP BETWEEN STRATEGY AND
STRUCTURE RARELY PROVIDES UNIQUE STRUCTURAL SOLNS - EXECUTION PROBLEMS
SYSTEMS- RULES, REGLNS AND PROCEDURES - FORMAL & INFORMAL THAT
COMPLEMENT THE ORGN STRUCTURE (INFRASTRUCTURE)

STYLE- LEVER TO BRING ABOUT ORGNL CHANGE - PATTERN OF ACTION
TAKEN BY TOP MGT TEAM OVER A PERIOD OF TIME

STAFFING- SELECTION, PLACEMENT, TRG & DEVPT OF APPROPRIATELY
QUALIFIED EMPLOYEES
EG: HIND. LEVER

SKILLS- ONE OF THE MOST CRUCIAL ATTRIBUTES OR CAPABILITIES OF AN
ORGN - DISTINCTIVE COMPETENCE
EG: HIND. LEVER - MKTG SKILLS
TELCO - ENGG. SKILLS


7-S FRAMEWORK- THE REAL TASK OF IMPLEMENTING STRATEGY IS ONE OF BRINGING
ALL 7-Ss INTO HARMONY - HELPS BY PROVIDING A CHECKLIST FOR
JUDGING WHETHER ORGN IS RIPE FOR IMPLEMENTING STRATEGY -
POWERFUL EXPOSITORY TOOL
Global Issues for the 21
st
Century
* Nations are forming Trading Associations - makes trading within
regions easy but between regions difficult Ex. EU, NAFTA,
Mercosur (Argentina, Brazil, Paraguay, Uruguay), ASEAN. Firms
have to decide if they will do better as a regional or a global
competitor.
* World: 3 dominant trading blocks : Europe, Asia, Americas - firms
will need to have meaningful manufacturing and trading activities
in every trading block.
* Globalisaton: Creates opportunities but also threats to Cos. not able
to adapt quickly
* More people at all levels in an organisation are involved in
Strategic Decision making - greater need for more access to info,
but greater difficulty in dealing with it
* Increasing pressure on organisations for quick response to
changing conditions may make it difficult to engage in planning
mode; even with its faults, may have to go in for entrepreneurial
mode.
BOD - Oversees the running of the enterprise by C.E.
DIRECTORS - Individually have no power; collective body of directors has superior total
power over C.E.

BODs - Make calls on shareholders in respect of money unpaid on their shares
(powers-Sec.292) - Issue debentures
- Borrow money otherwise than Thro debentures
- Invest funds of the Co.
- To make loans

BODs - Expected to meet once in a quarter;
(Quorum 1/3 of total strength or 2 directors whichever is higher)

BODs - Marginally derived expectations
- To remain effective on technology
- Market growth
- Divestment and diversification on sound lines
- Long-term productivity & quality not sacrificed for short-term profitability
- Judicious earnings retention policy
- Sound human values and exalted corporate culture
Strategic Management - Role of BODs
- To initiate and determine
- To evaluate and influence
- To Monitor

BODs - 2 or 3 in small private companies to 20 in large public companies
- Structure : Ratio of WTDs to TDs is high in multinational companies like
Hindusthan Lever, ITC, IEL
: When PTDs Proportion of WTDs to TDs; in case of L&T & TISCO ratio is 1:1
: One MD, few WTDs, besides PTDs – MD managed company
: WTDs & PTDs have complementary roles to play

- Two tier BDs (Policy BD and Executive BD) – not favoured by Sachar Committee (1978)

- Japanese Cos: Most directors are whole time employees

- Part-time outside Chairman Plus WT MD; whole time-inside Chairman, plus whole
time inside MD; WT inside C-cum-MD

Remuneration: <=5% of net profits if onlyh on WTD
10% ofnet profits for all (more than 1)
Top Management - CEO (Responsible to BOD for overall management of organisation)

CEO - Strategist, organisation builder & leader – Flag Flying & Transmitting to and
receives signals from external environment

Top Management - Providing direction
Setting vision
Setting standards

Behavioural Roles - Interpersonal : Figurehead (for ceremonial duties)
Leader (to provide direction)
Liaison agent (for outside contracts)

- Informational : Monitor (of information)
Disseminator (within the organisation)
Spokesman (to external organisation)

- Decisional : Entrepreneur
Disturbance handler
Resource allocator
Negotiator
Planning for succession encouraging creative thinking

Skills required - Dynamism
Decisiveness
Humane approach
Conscientiousness
Ability to understand workers needs
Appealing personality
Objectivity
Communication ability
Corporate Values- Reflect values of managers, especially at the top

Strategic management styles






Degree of involvement by BODs

Degree of
involvement
by top
management
High Entrepreneurship
management
Partnership
management
Low Chaos management Stipendiary
management
Low High
Enhancing BODs effectiveness:
- Corporate shareholding should be dispersed
- Part-time non-exec. Chairman should not be ornamental
- Role of Director should be internalised – different from heading profit centre
- BODs should be for two days
- Outside director fees should be not less than Rs.2500-
- No. of directorships by a person should be not too many
- should refrain from actual operations and policy implementation

Beers 5 step system model for organisations viability

System 1 : Various operational units or division of firm
System 2 : Various common service departments to co-ordinate and create orderliness in operational units
functioning – accounting, purchase, …
System 3 : Various specialist directors for synergy of operational units – marketing, production, finance,
cutting across operational divisions (inside & now of firms operations)
System 4 : Outside & then for the firm – corporate, planning, R&D, management development
(development directorate)
System 5 : Monitor integrate System 3 and System 4
FOUR RESPONSIBILITIES OF BUSINESS

! Economic - Must do
! Legal - Have to do
! Ethical - Should do
! Discretionary - Might do
Social Responsibility – includes Ethical & Discretionary

Ethical Responsibility:
! Utility: does it optimise the satisfaction of the stake holders? (Should behave in such a
a way that it produces the greatest benefit to the society and least harm the lowest cost)
! Rights: does it respect the rights of the individuals involved?
! Justice: is it consistent with the cannons of justice (decision makers should be
equitable, fair and impartial in the distribution of costs and benefits to individuals and
society
Social Audit
IPCL – Dec 1987
Focus Groups for Social Audit
(Weightage of 25 for each group)
(weightage measured in percentage)
Employees
Customers
Government
Society
Employees – factors and sub factors
Satisfact
ion, 50
Hygiene,
50
Hygiene
Satisfaction
0
10
20
30
40
50
60
Hygiene Satisfaction
Salary and
other benefits
organisational
policies
working
conditions
growth
job satisfaction
employee-
employer
relationship
Customers
Service
Attributes, 20
Promotion, 20
Product
Development, 30
Product
attributes, 30
Product
Development
Product attributes
Service Attributes
Promotion
Government
Tax Payments
and Dividends,
30
Other
conditions to
economy, 50
Adherence to
rules and
regulation, 20
Tax Payments
and Dividends
Adherence to
rules and
regulation
Other conditions
to economy
Society
Rural
development, 20
Charities and relief
measures, 20
Community
welfare, 20
1st Qtr, 40
1st Qtr
Community
welfare
Rural
development
Charities and
relief measures
Overall Corporate responsibility of IPCL
Group Weight Score Product
Employees .25 5.1 1.275
Customers .25 5.8 1.45
Govt .25 7.0 1.750
Society .25 6.6 1.650
1.00 6.125
ETHICS AND CORPORATE
GOVERNANCE
•  Business Ethics is primarily concerned with the
Relationship of Business Goals and Techniques to
specifically Human ends. It studies the impact of
Acts {Decisions} on the good of the Individual,
the Business Community and Society as a whole.

•  Corporate Governance relates to the set of
Incentives, Safeguards and Dispute Resolution
process that is used to control and coordinate the
actions of the agents on behalf of Shareholders by
Board of Directors
Reports on Corporate Governance
•  Cadbury Committee Report
•  CII Committee Report
•  Kumara Mangalam Birla Report
•  Narayana Murthy Committee Report
Cadbury Committee Report
•  The Committee was set up in 1991 by the
Financial Reporting Council of London Stock
Exchange.
•  It was set up to address the Financial Aspects of
Corporate Performance
Some of the Major Recommendations are:
"  A single Person should not be vested with the decision
making power i.e., the roles of Chairman and Chief
Executive should be separated clearly.
"  A majority of Directors should be independent Non-
Executive directors, they should act independently and
should not have any Financial Interests in the company.
CII Committee Report
The Confederation of Indian Industry (CII) drafted some
codes of Corporate Governance in 1996.
Growing International Competition, Growth in the Economy
as well as Scams and Frauds brought forth the Importance
Of Corporate Governance and the CII Report.
Some of the Major Recommendations are:
"  Listed Companies with a turnover of at least 100 Crores and a
paid up capital of at least Rs 20 Crores must appoint Audit
Committees of the board within 2 years.
"  Non-Executive Directors should actively participate in Board
Affairs and they should be adequately compensated through
Commissions and Stock options
"  No person should hold Directorships in more than 10 Companies

Kumara Mangalam Birla Report

The Committee on Corporate Governance was set up in 1999,
by the Securities and Exchange Board of India (SEBI).
It was set up to address the Safeguards which are to be
instituted within the Company to deal with Insider
Information and Insider Trading.
Some of the Major Recommendations are:
"  The Board should have an optimum combination of Executive and
Non-Executive Directors and at least 50% should be Non-
Executive Directors.
"  Board should set up a Remuneration Committee to determine the
Remuneration Packages for the Executives.
"  Management should assist the Board in its decision-making
process in respect of Companys Strategy, Policy, Code of
Conduct and Performance Targets.


Narayana Murthy Committee Report
SEBI instituted a Committee under Mr. Narayana Murthy
which submitted its final report in the year 2003.
It was established to raise the Ethical Standards for Good
Corporate Governance.
Some of the Major Recommendations are:
"  Board Members should be informed about Risk Assessment and
Minimization Procedures.
"  All Audit Committee should be Financially Literate and at least
one Member should have Accounting or related Financial
Management Expertise.
"  Mere Explanation as to why a Company has followed a different
Accounting Standards from the Prescribed standards will not be
sufficient.


Global Issues for the 21
st
Century

As firms become increasingly global

• BoDs may need to become more international
• BoDs may have to consider the interests of all key stake holders and not just
who own stock while taking strategic decisions
• Ability to articulate a strategic vision and motivate people to achieve it may
become the most important characteristics required of a CEO
Environmental analysis Environmental Threat: Challenge by unfavorable
trend
Environmental opportunity Attractive arena for Companys action where it would
enjoy a competitive advantage
Environment: Taxonomy - Mega environment
- Micro environment
- Relevant environment

Mega environment: Technological advances
- Transportation Capability
- Mastery over energy
- Ability to extend and control life and serviceability
- Ability to alter characteristic of materials
- Extension of Mans sensory capabilities
- Growing mechanisation of physical activities
- Growing mechanisation of intellectual processes
Mega Environment
Relevant Environment
Micro Environment
Internal Environment
Exhibit 6.1: A Taxonomy of the Firms Environment
Exhibit 6.2: Constituents of the Mega Environment
Exhibit 6.3: Constituents of the Micro Environment
Regulatory
The Mega
Environment
Political Economic Technological Social
Suppliers Marketing Intermediaries Market Types Market Demand Competition
Financial Institutions Regulatory
Provisions
Industrial
Relations Climate
Availability of
Skilled Manpower
THE MICRO ENVIRONMENT
Some Important Variable in Societal Environment
Economic Technological Political-Legal Socio-Cultural
GDP Trends Total Government spending
for R&D
Antitrust regulations Lifestyle Change
Interest rates Total Industry spending for
R&D
Environmental
protection laws
Career Expectations
Money Supply Focus of technological
efforts
Tax laws Consumer activism
Inflation rates Patent protection Special incentives Rate of family
formation
Unemployment levels New Products Foreign Trade
Regulations
Growth rate of
population
Wage/price controls New developments in
technology transfer from lab
to marketplace
Attitude towards
foreign companies
Age distribution of
population
Devaluation/
Revaluation
Productivity improvements-
automation
Laws on hiring and
promotion
Regional shifts in
population
Energy availability
and cost
Stability of
Government
Live expectancies
Disposable and
discretionary income
Birth rates
Fundamental nature of
competition is changing
Competitive Landscape
Hypercompetitive
environments
Dynamics of strategic
maneuvering among
global and innovative
combatants!
Price-quality
positioning, new know-
how, first mover!
Protect or invade
established product or
geographic markets!
Fundamental nature of
competition is changing
Hypercompetitive
environments
Competitive Landscape
Emergence of
global economy
Goods, services, people,
skills, and ideas move
freely across geographic
borders.!
Spread of economic
innovations around the
world.!
Political and cultural
adjustments are
required.!
Fundamental nature of
competition is changing
Hypercompetitive
environments
Competitive Landscape
Emergence of
global economy
Rapid technological
change
Increasing rate of
technological change and
diffusion!
The information age!
Increasing knowledge
intensity!
Indias Technology Missions Providing Drinking Water
Promoting Literacy
Stepping up Child Immunisation
Hiking up Production of Oil Seeds
Linking Remote Areas (Rural) with Countrys Telecommunication N/W
Industry Response Entrepreneurial
- Future Form of Product Group
- Future Processing Technology
- Future Form of Raw Materials
- Technological Developments in Related Areas
- Technological Development Stages – Invention, Innovation & Diffusion
Assessing Impact of Opportunities
Threat Matrix
High 1
Major Threat
2
Moderate
Low 3
Moderate
4
Minor
High Low
Probability of Occurrences

Opportunity Matrix
High Very Attractive Moderately Attractive
Low Moderately Attractive Least Attractive
High Low
S
e
r
i
o
u
s
n
e
s
s

A
t
t
r
a
c
t
i
v
e
n
e
s
s

External Factor Analysis Summary (EFAS): Maytag as Example












Notes:
1.  List opportunities and threats (5-10 each) in column 1
2.  Weight each factor from 1.0 (most important) to 0.0 (not important) in column 2 based on that factors probable
impact on the companys strategic position. The total weights must sum to 1.00
3.  Rate each factor from 5 (outstanding) to 1 (poor) in column 3 based on the companys response to that factor.
4.  Multiply each factors weight times its rating to obtain each factors weighted score in Column 4.
5.  Use Column 5 (comments) for rationale used for each factor.
6.  Add the weighted scores to obtain the total weighted score for the company in Column 4. this tell how well the
company is responding to the strategic factors in its external environment.
Source: T.L. Wheelen and J.D. Hunger, External Strategic Factors Analysis Summary (EFAS), Copyright © 1991 by
Wheelen and Hunger Associates.


External Factors

Weigh
t

Rating

Weighted
Scorer

Comments

1

2

3

4


Opportunities









• Economic Integration of European Community

0.20

4

0.80

Acquisition of Hoover

• Demographics favor quality appliances

0.10

5

0.50

Maytag quality

• Economic development of Asia

0.05

1

0.05

Low Maytag presence

• Opening of Eastern Europe

0.10

2

0.10

Will take time

• Trend to Super Stores

0.10

2

0.20

Maytag weak in this channel

Threats









• Increasing government regulations

0.10

4

0.40

Well positioned

• Strong US competition

0.10

4

0.40

Well positioned

• Whirlpool and Electrolux strong globally

0.15

3

0.45

Hoover weak globally

• New product advances

0.05

1

0.05

Questionable

• Japanese appliance companies

0.10

2

0.20

Only Asian presence in
Australia

Total Score

1.00



3.15



Global Issues for the 21
st
Century
! Increasing environmental uncertainty: environmental scanning
will become important. To remain competitive companies will
have to develop better methods of gathering, evaluating and
disseminating intelligence to those who need it.
! To manage strategically, organisations have to become more
attuned to the many stakeholders who are affected by the
companys actions. Shareholders will form only one part of the
equation
! Distinction between developed and developing nations will begin
to fade as the developing nations take on a greater proportion of
the world trade.
! As more industries become hyper competitive, strategy will
become increasingly short term in orientation, thus creating a
paradox. Can Strategic Management exist with only a short time
horizon?
Internal Corporate Analysis (Organisational Audit)
Corporate Strength Competitive & other distinct competencies in market place
Corporate Weakness Constraints or obstacles which check movement in desired
direction and may also inhibit organisation in gaining a
distinctive competitive advantage
Criteria for Determination
Historic Past performance – Sales, Prof after Tax, Cap.
Utilization, … Before coming to conclusions should check
replicability of PAST in future
Normative Judgement (What ought to be on level of
performance (Expert opinion)
Competitive parity Firm must at min. meet the actions of competitors – should
Identify dimensions of uniqueness
Critical factor for success KFS; EG: TV Manufacturer: advertising is a
must – cant afford- may be considered as a weakness

One criterion seldom sufficient to evaluate a firm
Measurement: Attribute Measures
Effectiveness Measures
Efficiency Measures
Impact Matrix
Trends
Probability of
Occurrences
Impact on Strategies
S1 S2 S3 S4
T1

T2

T3

T4

Impact Scale +2 +1 0 -1 -2
Extremely
Favorable
Moderately
favorable
No impact Moderately
unfavorable
Extremely
unfavorable
Competitive Analysis
Need to study competition
- What is driving competition in specific industry?
- What actions competitors are likely to take in the wake of increased competition?
Types of Industry Structures
Factor Perf. Competition Monopolistic Competition Oligopoly Monopoly
No. of Factors Many Many Few One
Prod Diffn No Yes Yes Unknown
Entry or Exit Open Open Restricted Blocked
Competitor Analysis - Current Strategy
- Current Performance
- S&W
- Actions (Expected) in the near Future
Routes to Competitive Advantage
- Intensify function diffn. (key factors of success)
- Exploit competitors weakness (relative superiority)
- Ask Why\Whys (aggressive initiatives)
- Maximize user benefit (strategic degree of freedom)
Three Generic Strategies (Accelerating to Porter)
Strategic Advantage
Industry Wide

Strategic Target

Particular Segment Only
Uniqueness Perceived Low cost Position
by Customer

Competition Marketing warfare viewpoint
- Defensive warfare for Market leaders
- Offensive warfare for No. 2s-attack Leaders weak point
- Flanking warfare for firms with limited resources eg., Promise
- Guerilla warfare for smaller Companies eg., Deccan Herald
Focus
Differentiation
Overall cost Leadership
Firm Infrastructure
(general management, accounting, finance, planning)

Human Resource Management
(recruitment, training, development)

Technology Development
(R&D, process & product development)

Procurement
(purchasing of raw materials, machines, supplies)

Inbound
Logistics
(raw
materials)
Operations
(machining,
assembly,
testing)
Out bound
Logistics
(distribution)
Marketing
& Sales
(advertisement,
promo)
Services
(Installation,
repair)
Primary Activities
Support
Activities
FIRMS VALUE CHAIN
Profit
Margin
Source:Michael E Porter: Competitive Advantage: Creating and Sustaining Superior Performance, Freeman Press, 1985, p. 37
Risks of Cost Leadership

Risks of Differentiation

Risks of Focus

Cost Leadership is not sustained:

• Competitors imitate
• Technology changes
• Other bases for the cost leadership
erode

Differentiation is not sustained:

• Competitors imitate
• Bases for differentiation become less
important to buyers

The focus strategy is imitated:
The largest segment becomes
structurally unattractive:

• Structure erodes
• Demand disappears

Proximity in differentiation is lost

Cost proximity is lost

Broadly targeted competitors
overwhelm the segment:

• The segments differences from other
segments narrow
• The advantages of a broad line increase

Cost focusers achieve even lower cost in
segments

Differentiation focusers achieve even
greater differentiation in segments

New focusers sub-segment the industry

Source: Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, p.21.

The Eight Dimensions of Quality
1

Performance

Primary operating characteristics, such as a washing machines cleaning ability

2

Features

Bells and whistles, like cruise control in a car, that supplement the basic functions

3

Reliability

Probability that the product will continue functioning without any significant
maintenance

4

Conformance

Degree to which a product meets standards. When a customer buys a product out of the
warehouse, it will perform identically to that viewed on the showroom floor

5

Durability

Number of years of service a consumer can expect from a product before it significantly
deteriorates. Differs from reliability in that a product can be durable, but still need a lot
of maintenance

6

Serviceability

Products ease of repair

7

Aesthetics

How a product looks, feels, sounds, tastes, or smells

8

Perceived Quality

Products overall reputation. Especially important if there are no objective, easily used
measures of quality


Source: D.A. Garvin, Managing Quality: The Strategic and Competitive Edge, New York: Free Press, 1988.


Risks of Generic Competitive Strategies
Source: D.A.
Garvin,
Managing
Quality: The
Strategic and
Competitive
Edge, Free
Press, New
York, 1988.
Key Factors for Success
A key Success Factor is a competitive skill or asset that is particularly relevant to the
industry. To PLAY IN THE GAME a competitor will usually need to have some minimum
level of skill or asset with respect to each of the industrys Key Success Factors. If a firm has
strategic weakness in a Key Success Factor and it is not neutralized by a well conceived
strategy, the firms ability to compete will be weak. Conversely sustainable competitive
advantages usually will be based on Key Success Factors. In general the successful firm will
have strengths in the Key Success Areas and unsuccessful competitor will lack one or more
of them
Key Success Factors To Increase Profits To Gain Market Share
Raw-Material Procurement Gold-mining, Wine-making Sugar-industry, Petroleum
industry
Raw-material Processing Steel & Paper Industry Steel & Paper Industry
Production Fabrication Integrated Circuits, Tire Industry Integrated Circuits, Tire Industry
Assembly Apparel Industry, Instrumentation Instrumentation
Design Heavy Engineering Industry Heavy Engineering Industry
Distribution Bottled water, Metal cans Home Appliances, Cement
Industry
Marketing Branded Cosmetics, Liquor Branded Cosmetics, Liquor
Service Automobiles Hotel Industry
Alternative Formats for Analysis Check Lists (Ref: X8)
Conceptual Approach – By Bates & Eldredge
- Management, Operations & Finance
Strengths & Weakness profile
Dimension. Basis of Comparison Ranking Existing S or W
Management
Financial
Operations

7S
Grid Approach (by Ansoff):
F/W
Ref: x9
FNS
Dimension Marketing Finance Human Resource Production
1.  Strategy
2.  Structure
3.  Systems
4.  Shared
Values
5.  Skills
6.  Style
7.  Staff
Corp Audit 1) Ask questions – within & outside
2) Observation
3) Examine Records
Match S&W for competitive advantage; concept of synergy could be helpful
Exhibit 7.3: Porters Model of Industry Competition
Potential Entrants (2)
• Economies of Scale
• Absolute Cost Advantage
• Brand Identity
• Access to Distribution
• Switching Costs
• Government Policy
Buyers (5)
• Buyer Concentration
• Number of Suppliers
• Switching Costs
• Substitute Products
• Threat of Backward
Integration
The Industry Competitors (1)
Degree of Rivalry
• Number of Competitors
• Industry Growth
• Asset Intensity
• Product Differentiation
• Exit Barrier
Suppliers (4)
• Supplier Concentration
• Number of Buyers
• Switching Costs
• Substitute Raw Materials
• Threat of Forward
Integration
Substitutes (3)
• Functional Similarity
• Price/Performance Trend
• Product Identity
Source: The Free Press, A Division of Macmillan, Inc. from Competitive Strategy by Michael E. Porter, p.4
Threat of Substitute Products or Services
Bargaining
Power of
Customers
Bargaining
Power of
Suppliers
Threat of New Entrants
Exhibit 7.4: Areas of Strength and Weakness
Functions Facilities &
Equipment
Personnel Skills Organisational
Capabilities
Management
Capabilities
1. General
Management
2. Finance
3. R&D
4. Operations
5. Marketing
(examples)
• Warehousing
• Retail Outlets
• Sales Offices
• Training Facilities
for Sales Staff
• Door to Door
Selling
• Retail Selling
• Advertising
• After Sales Service
• Direct Sales
• After Sales
• Service Network
• Customer Loyalty
• Industrial Marketing
• Household Marketing
• Large Customer Base

ORGANISATIONAL ANALYSIS - VRIO FRAMEWORK

1. Value: Does It provide Competitive Advantage?

2. Rarity: Do other competitors possess it?

3. Imitability: Is it costly for others to imitate?

4. Organisation: Is the firm organised to exploit the resource?



Using resources to gain Competitive Advantage

Identify and classify the firms resources in terms of
strengths and weaknesses

Combine the firms strengths to specific capabilities: Corporate
capabilities (often called core competencies) should move to
distinctive competencies

Profit potential & capabilities : for sustainable Competitive
Advantage

Select the best Strategy.

Identify resource gaps and invest in upgrading weaknesses
Determining The Sustainability of an Advantage

Durability: Rate at which a firms resources and capabilities
become obsolete

Imitability: Rate at which a firms resources and capabilities
can be duplicated by others. A core competency can be imitated
to the extent it is transparent, transferable & replicable.

* Transparency - Speed with which other firms can understand the
relationship of resources and capabilities
supporting a successful firms strategy
e.g.. Gillette, Sensor, Mach 3.
* Transferability - ability of competitor to gather resources
and capabilities to support a competitive
challenge
* Replicability - ability of a competitor to use duplicated resources
and capabilities to imitate the firms success

Internal Factor Analysis Summary
Internal Strategic Factors Weight Rating Weighted
Score
Comments
Strengths
S1 Quality Maytag Culture
S2 Experienced top Management
S3 Vertical Integration
S4 Employee relations
S5 Hoovers International Orientation

0.15
0.05
0.10
0.05
0.15

5
4
4
3
3

0.75
0.20
0.40
0.15
0.45

Quality key to success
Know appliances
Dedicated Factories
Good but deteriorating
Hoovers name in cleaners
Weaknesses
W1 Process-oriented R&D
W2 Distribution Channels
W3 Financial Position
W4 Global position
W5 Manufacturing facilities

0.05
0.05
0.15
0.20
0.05

2
2
2
2
4

0.10
0.10
0.30
0.40
0.20

Slow on new products
Superstores replacing small dealers
High debt load
Hover weak outside UK & Australia
Investing now
Total 1.00 3.05
Global Issues for the 21 Century

*As more & more Cos become hyper-competitive, it will become
harder to maintain competitive advantage, unless a Co. has a
distinctive competency which is not only hard to imitate but
also durable. Durability has however little value during technical
discontinuity.

* Subcontracting by firms to reduce costs and become globally
competitive

* Primary activities to increase in importance in hyper-competitive
global industries.

* Autonomous work-teams may lead to greater efficiency and
reduction in supervision. Work-teams should have better training
to handle conflict management.
Strategic Factor Analysis Summary (SFAS) Matrix
1 2 3 4 Duration 5 6




Key Strategic Factors
(Select the most important opportunities/threats from
EFAS,
Table 3.4 and the most important strengths and
weakness from IFAS,
Table 4.2)









Weight









Rating








Weighted
Score






S
h
o r
t
In
t
e
r
m
e
d
I
a
t
e







L o
n
g









Comments
S1 Quality Maytag culture (S)
S3 Hoovers international orientation (S)
W3 Financial Position (W)
W4 Global Positioning (W)
O1 Economic integration of
European Community (O)
O2 Demographics favor quality (O)
O5 Trend to super stores (O+T)
T3 Whirlpool and Electrolux (T)
T5 Japanese appliance companies (T)
0.10
0.10
0.10
0.15

0.10
0.10
0.10
0.15
0.10
5
3
2
2

4
5
2
3
2
0.50
0.30
0.20
0.30

0.40
0.50
0.20
0.45
0.20







X
X

X
X



X
X



X
X



X
Quality key to success
Name recognition
High debt
Only in NA, UK, and Australia

Acquisition of Hoover
Maytag quality
Weak in this channel
Dominate industry
Asian presence
Total Score 1.00 3.05
Notes:
1.  List each of your key strategic features developed in your IFAS and EFAS tables in Column 1
2.  Weight each factor from 1.0 (most important) to 0.0 (not important) in column 2 based on that factors probable impact on the companys
strategic position. The total weights must sum to 1.00
3.  Rate each factor from 5 (outstanding) to 1 (poor) in column 3 based on the companys response to that factor.
4.  Multiply each factors weight times its rating to obtain each factors weighted score in Column 4.
5.  For duration of Column 5, check appropriate column (short term –less than 1 year; intermediate – 1-3 years; long term-over3 years).
6.  Use Column 6 (comments) for rationale used for each factor.
Source: T.L. Wheelen and J.D. Hunger, External Strategic Factors Analysis Summary (EFAS), Copyright © 1991 by Wheelen and Hunger Associates.
Prof R Srinivasan, IISc 1
Introduction to
Case Analysis
Prof R Srinivasan, IISc 2
Case Analysis
!  Performance of an organization over a period of
time.
!  Information on organizations history and operations
environment.
!  Contains data related to functional areas like
Marketi ng, Fi nance, Operati on and Human
Resources.
!  Presents to students a realistic situation by which
they are exposed to decision making practices
Prof R Srinivasan, IISc 3
Objectives of the Case Method
!  To acquire skills to apply theoretical
knowledge to practice.
!  To get into the habit of diagnosing the
probl em, anal ysi s and eval uat i on of
alternatives and formulation of an action plan.
!  To learn to independently find the answers to
practical problems
!  To gai n exposur e t o a var i et y of
organizational and managerial situations.
Prof R Srinivasan, IISc 4
Benefits of the case method
!  Clear thinking in complex situations
!  Devising consistent, rational and creative
action plans
!  Application of quantitative knowledge
!  Recognizing the value of information
!  Group communication
!  Better written communication
!  Applying personal values to the decision
making process
Prof R Srinivasan, IISc 5
Developing a case study
Should have the following aspects
!  Origin/History and growth of company over time
!  Organizational analysis
!  Nature of external environment
!  Strength Weakness Opportunities Threats (SWOT)
Analysis
!  Present corporate strategy
!  Present business strategy
!  Organizational structure and control systems
!  Recommendations
Prof R Srinivasan, IISc 6
Key Financial Ratios
Profitability ratios
1.  Gross profit margin
2.  Operating profit margin
3.  Net profit margin
4.  Return on total assets
5.  Return on stock
holders equity
6.  Return on common
equity
7.  Earnings per share
Leverage Ratios
1.  Debts to assets
2.  Debt to equity
3.  Long-term debt to
equity ratio
4.  Times interest earned
5.  Fixed charge coverage
Prof R Srinivasan, IISc 7
Key Financial Ratios (contd)
Activity Ratios
1.  Inventory turnover
2.  Fixed assets turnover
3.  Total assets turnover
4.  Accounts receivable
turnover
5.  Average collection period
Liquidity ratios
1.  Current ratio
2.  Quick ratio
3.  Inventory to net working
capital
Other Ratios
1.  Dividend yield on common
stock
2.  Price earnings ratio
3.  Dividend payout ratio
4.  Cash flow per share
!"#$"%&'()*$+$&%,%+"))
!"#$%&'()*+%,-./#*#%0$12-/3/45$#%6575'$)8%09(3*%:3/;"3%%
!"#
$%&%'()*#+,%)-#
./*0-(#123*0#
8rlef Þroñle
•  SLarLed ln 1981 by n. 8. narayana MurLhy and
slx englneers ln Þune, lndla, wlLh an lnlual
caplLal of uS$ 230
•  1oday, a global leader wlLh revenues of over
uS$ 3 bllllon
•  ueñnes, deslgns and dellvers Lechnology-
enabled buslness soluuons
•  A global consulung and l1 servlces company,
lnfosys was llsLed on nASuAC ln 1999
ConLd..
•  lnfosys' servlce oñerlngs
–  8uslness and Lechnology consulung
–  Appllcauon servlces
–  SysLems lnLegrauon
–  ÞroducL englneerlng
–  CusLom soûware developmenL
–  MalnLenance, re-englneerlng, lndependenL Lesung
and valldauon servlces
–  l1 lnfrasLrucLure servlces
–  8uslness process ouLsourclng
N/%#1'46,",#89)*9%C"#
Þhase l: Cemng a looLhold
Worklng wlLh shackles:
•  Command and conLrol economy
•  lmporL resLrlcuons
•  Þunluve Laxes
•  under-developed caplLal
markeLs
•  lorelgn exchange conLrols
•  CaplLal shorLage for
lnfrasLrucLure lnvesLmenLs
•  Þoor Lelecom lnfrasLrucLure

!"#$"%&'%-)./01"%/2)
)
• )3+-'"%)40(5-)
• )6%7)8$#&%)(5-"0,%#-)
• )9+/'#%(")-$8%-)
)
Þhase ll: 1he 8un up
Llberallzauon of Lhe economy:
•  Abollshlng of llcenses
•  8auonallzauon of Laxes
•  LxporL lncenuves
•  8auonallzauon of Larlñs
•  Abollshlng of wealLh Lax on
producuve asseLs
•  lorelgn exchange reforms
•  lree prlclng of lssues and
enLry of llls
•  Lmployee sLock opuon plans

!"#$"%&'%-)./01"%/2)
)
•  Clobal benchmarklng
•  Clobal dellvery model
- uo work where lL makes economlc
- sense and reduce Lhe LoLal cosL of
ownershlp
- use Lwo worklng shlûs ln Lhe same
calendar day Lo reduce ume Lo markeL
-  8amp up resources ln muluple
conunenLs
•  Lmployee reLenuon
•  lnvesLmenL ln sales and markeung
•  8ecomlng a company of cholce for
lnvesLors, cusLomers and employees
)
Þhase lll: 1he 8lg Leap
CurrenL envlronmenL:
•  MarkeL Lrends
–  Cloballzauon, deregulauon & consolldauon are changlng buslness fundamenLally
–  llnanclal markeLs have been Lransformed
–  lncreaslng compeuuon from low cosL economles
•  1echnology Lrends
–  Plgh speed AuSL and opucal ñbre are provldlng hlgher bandwldLh
–  Wlreless access and new Lechnologles WAÞ and 8lueLooLh are becomlng popular
–  Web appllances are expecLed Lo prollferaLe and non-ÞC devlces wlll ouLnumber
connecLed ÞCs ln Lhe fuLure
•  CuLsourclng ls lncreaslng because of:
–  1lme-Lo-markeL conslderauons
–  lnLernal resource shorLage
–  CosL conLrol
–  ComplexlLy of l1
–  lmproved vendor capablllues
–  locus on core-compeLency
narayana MurLhy and lnfosys
•  uurlng 1998-99, narayana MurLhy planed Lo posluon
lnfosys as a Lrue global company.
•  narayana MurLhys global sLraLegy comprlsed of 3
feaLures.
–  Clobal uellvery Model: Þroduclng where lL ls mosL cosL
eñecuve Lo produce, selllng where lL ls mosL proñLable Lo
sell.
–  Movlng up Lhe value chaln: Cemng lnvolved ln a soûware
developmenL pro[ecL aL Lhe earllesL sLage of lLs llfe cycle.
–  ÞSÞu Model: ÞredlcLablllLy of revenue, SusLalnablllLy of
Lhe predlcuon, ÞroñLablllLy of revenues and ue-rlsklng



Source: lCM8 case collecuon, lClAl cenLre of 8esearch
Z-'*'G-*0,#
###
###
###
###
###
N/A),(*"#KK#@*)G/#KM:K# :<#
1'46,",#&-,PdP&-,#5%%),#
Infosys TCS Wipro
Detailed Risk management Reporting YES NO NO
Corporate Governance Report YES YES YES
Detailed Subsidiary information YES NO NO
Value Reporting YES NO NO
Intangible Asset Scoresheet YES NO NO
Human resource Valuation YES NO NO
EVA information YES NO NO
Brand Valuation YES NO NO
aAQ*'#?%,6A)G%#e*0A*F6'#
•  1'46,",#A,%,#9/%#]%&#`#8G/E*)9^#Q6(%0#96#&*0A%#-9,#/AQ*'#)%,6A)G%,>#
•  S*0GA0*9%#5e#64#9/%#4A9A)%#%*)'-'C,#64#9/%#%QH06"%%,>#
•  .%%H,#9/%#%QH06"%%,#Q6F&*9%(>#
#
!)*'(#e*0A*F6'#
•  @%9/6(606C"#46)#&*0A-'C#9/%#3)*'(#-,#*,#46006E,>#
–  $%9%)Q-'%#9/%#3)*'(#H)679,#3"#%0-Q-'*F'C#9/%#'6'#3)*'(#H)679,>#
–  ?%,9*9%#/-,96)-G*0#H)679,#*9#H)%,%'9#(*"#&*0A%,>#
–  5)6&-(%#46)#)%QA'%)*F6'#64#G*H-9*0#96#3%#A,%(#46)#HA)H6,%#69/%)#9/*'#
H)6Q6F6'#64#3)*'(>#
–  +(cA,9#46)#9*B%,>#
–  $%9%)Q-'%#3)*'(#,9)%'C9/#6)#3)*'(#%*)'-'C,#QA0FH0%>#
#
N/A),(*"#KK#@*)G/#KM:K# Kf#
_e+#
•  _e+#-,#9/%#,A)H0A,#C%'%)*9%(#*V%)#Q%%F'C#*'#
%2A-9*30%#G/*)C%#96E*)(,#H)6&-(%),#64#G*H-9*0>#
•  X-&%,#*#(-)%G9#)%4%)%'G%#96#-'&%,96),#46)#%BG%,,#
)%9A)',#9/%"#G*'#%BH%G9>#
•  S*'#3%#A,%(#96#G*0GA0*9%#9/%#%'9%)H)-,%#&*0A%#966>#
X063*0#$%0-&%)"#@6(%0#
X063*0#$%0-&%)"#@6(%0#
• ##5)6c%G9,#*)%#(-&-(%(#-'96#########
####G6QH6'%'9,#
• ##_B%GA9%(#-'(%H%'(%'90"###
####*'(#G6'GA))%'90"#
• ##5*)90"#*9#9/%#G0-%'9#,-9%#*'(##
###9/%#)%,9#*9#9/%#########################
###(%&%06HQ%'9#G%'9%),#
• ##S6QH6'%'9,#*)%#9/%'###
###-'9%C)*9%(#-'96#/-C/#2A*0-9"####
###)63A,9#,60AF6'#
• ##!"#A,-'C#X$@D#1'46,",###
###(%0-&%)%(#9/%#/-C/%,9####
###H)6G%,,#*'(#2A*0-9"####
###,9*'(*)(,D#E/-0%#0%&%)*C-'C####
###(-U%)%'G%,#-'#G6,9D#2A*0-9"###
###*'(#,\-00#,%9,#64#Q*'H6E%)###
###-'#(-U%)%'9#C063*0#06G*F6',>#
lnfosys: Wln ln Lhe ßaL world
•  1he world ls gemng ßauened by forces of globallzauon,
changlng demographlcs, ublqulLy of Lechnology and
regulaLory compllance.
•  lnfosys has Laken Clobal uellvery Model Lo Lhe nexL level
wlLh Modular Clobal Sourclng.
•  *0/58$#):80;$8)!05#('+&)2)lL ls a seL of declslon
frameworks and plannlng acuvlues deslgned Lo help you
make sound sLraLeglc sourclng declslons and achleve hlgh
reLurns on your l1 and buslness process lnvesLmenLs.
•  lnfosys have a worldwlde presence Lo ensure LhaL Lhe rlghL
skllls are avallable ln Lhe rlghL locauons aL Lhe rlghL cosL.
Source: lnfosys whlLe paper 1hlnk llaL
*0/58$#):80;$8)!05#('+&
1radluonally companles focused on
opumlzlng Lhelr sourclng beneñLs around
cosL savlng and emclencles
MCS lnvolves deconsLrucung buslness processes,
supporung appllcauons and lnfrasLrucLure, and
Lhe execuuon llfe-cycle phases lnLo modules.
l1 and buslness process poruollo of an enLerprlse
can be sllced along a Lhree dlmenslonal grld
1'46,",#3%0-%&%,#9/*9#46A)#4A'(*Q%'9*0#,/-V#-'#6H%)*F6'*0#
H)-6)-F%,#E-00#3%#)%2A-)%(#96#G6QH%9%#-'#g*9#E6)0(#
86A)G%W#1'46,",#E/-9%#H*H%)#N/-'\#Z0*9#
8%)&-G%,#6U%)%(#3"#1'46,",#
•  S6',A0F'C#
•  +HH0-G*F6'#(%&%06HQ%'9#
•  _P3A,-'%,,#H)*GFG%,#
•  bU,/6)%#Q*-'9%'*'G%#
•  S6QQA'-G*F6'#,60AF6'#
•  ?%P%'C-'%%)-'C#
•  _'9%)H)-,%#,60AF6',#
•  8",9%Q#-'9%C)*F6'#
•  5)6(AG9#%'C-'%%)-'C#
•  _'9%)H)-,%#3*'\-'C#
,60AF6',#
•  _'C-'%%)-'C#,%)&-G%,#
•  S6)H6)*9%#H%)46)Q*'G%#
Q*'*C%Q%'9#
•  _'9%)H)-,%#2A*0-9"#,%)&-G%,#
•  1'4)*,9)AG9A)%#,%)&-G%,#
•  5*G\*C%(#*HH0-G*F6'#
,%)&-G%,#
#
1'(A,9)-%,#S*9%)%(#3"#1'46,",#
•  +%)6,H*G%#`#$%4%'G%#
•  +A96Q6F&%##
•  !*'\-'C#*'(#S*H-9*0#
@*)\%9,##
•  S6QQA'-G*F6'#8%)&-G%,##
•  S6',AQ%)#5*G\*C%(#
X66(,##
•  $-,G)%9%#@*'A4*G9A)-'C##
•  _'%)C"##
•  a%*09/G*)%##
•  a-C/#N%G/'606C"##
• ####a6,H-9*0-9"#`#]%-,A)%##
• ####1',A)*'G%#
• ####]-4%#8G-%'G%,#
• ####@%(-*#`#_'9%)9*-'Q%'9#
• ####?%,6A)G%,#
• ####?%9*-0#
• ####N)*',H6)9*F6'#8%)&-G%,#
• ####IF0-9"##
#
@*c6)#G0-%'9,#
•  [*&%G6Q#
•  =6)9/#89*)#
•  =-,,*'#=6)9/#+Q%)-G*#
•  kA)-G/#!*'\-'C#
•  N)-AQH/#X)6AH#
•  =6)(,9)6Q#
•  ?%%36\#
•  +6'#
•  e-,*#
• ##!%00#S*'*(*#
• ##!)-F,/#N%0%G6Q#
• ##e%)-^6'#
#
Predictability Sustainability
Profitability De-risking
Maintenance
Higher value services
Increase revenue productivity
Offshore model - Global Delivery
Upsell to existing customers
Iterative Model of Development
Translating clients to partners
Offshore Software
Development Centers
Quality
People
Transparency
Exposure limits for client concentration
Exposure limit for dotcom businesses
Exposure limit for opportunity
businesses (like Y2K)
Geographical diversification
Long-term relationship
Growth
5(#
585$#@6(%0#
ÞSÞu Model (ConL..)
•  ÞredlcLablllLy:
–  Pas had long-Lerm relauonshlps wlLh lLs key cllenLs
–  Pelped ln a beuer undersLandlng of Lhe fuLure Lrends ln
Lhe global Lechnology markeLplace.
–  lnfosys' repeaL buslness levels (aL 93°+ levels) are among
Lhe hlghesL ln Lhe lndusLry.

•  SusLalnablllLy:
–  Company over Lhe years Lransformed a large number of lLs
cusLomers lnLo parLners, wlLh whom Lhe company has
bulld on lnnovauve processes and Lechnologles.
–  1hls has provlded Lhe much-requlred susLalnablllLy Lo Lhe
company's growLh.
ÞSÞu Model (ConL..)
•  ÞroñLablllLy:
–  lnfosys has been gradually movlng up Lhe value chaln.
–  8lslng conLrlbuuon of hlgh-value servlces.
–  8educe cycle ume
•  ue-rlsklng:
–  Cradually shlûlng lLs revenues from Lhe uS reglon Lo
oLher large markeLs llke Lhe Lu and Asla Þaclñc
–  Also reduced lLs exposure from a few cllenLs and now
has one of Lhe largesL cllenL bases ln Lhe lndusLry.

lssue 1: CommenL on Lhe approprlaLeness of Lhe models used by
lnfosys for markeL dellvery. Are Lhey llkely Lo be valld ln Lhe nexL
ñve years?
Anu
lssue 2: WhaL shlû ln Lechnologlcal buslness should lnfosys be
looklng aL? WhaL changes ln sLraLegy would you advocaLe?


<=  >0#10#$"%)8%?%8)-"#$"%&'%-2)>0#%)!"#$"%&'%-2))
:80;$8)@%8'?%#A)*0/%8)- Þroduclng where lL ls mosL cosL
eñecuve Lo produce & selllng where lL ls mosL proñLable
Lo sell.
*0?'+&)51)"B%)C$85%)>B$'+)- Cemng lnvolved ln a
soûware developmenL pro[ecL aL Lhe earllesL sLage of lLs
llfe cycle.
D!D@)*0/%8)- ºÞredlcLablllLy of 8evenues, SusLalnablllLy
of 8evenues, ÞroñLablllLy, ue-rlsklng" for rlsk
managemenL.
lssue 1 & 2 (ConL..)
.(E0+-)F$G%+2))
1.  1o malnLaln low-cosL advanLage Lhey have opened omces
ln Czech 8epubllc, Maurluus, Þoland, Þhlllpplnes, 1halland
and Mexlco.
2.  lnvesLed ln developlng Lralnlng cenLers
3.  lmproved quallLy capablllues - CMM level 3l company.
4.  lnfosys ConsulLancy esLabllshed Lo provlde hlgh end
servlces ln value chaln.
3.  Pas hedged currency for more predlcLablllLy of revenues
(rlsk managemenL).

!"#$%&%'(%')*+',-.(-/-*'("'<=94"-51%49/>'2?%"-)%"1@(59$%/-3*%
'2/#$%1/7A"-5$#%5-%35-$%>5'2%#'9"'$451%4/"3#B%''
lssue 1 & 2 (ConL..)
2. :HIHJ9>)!FJ.FH:9H!2))
–  Low cosL Clobal dellvery 24/7 Model.
–  Llule dlñerenuauon ln low-end servlces of value
chaln, hlgh dlñerenuauon ln hlgh end servlces of
value chaln llke soûware producLs and package
soluuons.
–  locus on quallLy, cusLomer relauonshlp
managemenL, umely-dellvery.
1,,A%#:#`#K#lS6'9>>m#
O>#:J.I@)!FJ.FH:9H!2))
.+-0KL-)*$"#'M2)
))
#
lssue 1 & 2 (ConL..)
•  MA8kL1 ÞLnL18A1lCn S18A1LC?:
>5##%+")*$#G%"-2 uSA and Lurope
>5##%+")D#0/5("-2 AuM, 8ÞC, kÞC, consulLancy
servlces (ln 8lSl, manufacLurlng and reLall) and
soûware producLs (ñnanclal producLs).
J%(0,,%+/$E0+2)As mosL large cllenLs ln uS
and Lurope are cumng cosLs, lnfosys needs Lo be
more aggresslve on cosL and quallLy fronL.
J%-58")04)-"#$"%&A2)unllkely Lo yleld good resulLs
lssue 1 & 2 (ConL..)
•  MA8kL1 uLvLLCÞMLn1 S18A1LC?:
I%7)*$#G%"2)lndla, Mlddle-easL and AusLralla
>5##%+")D#0/5("2)AuM, 8ÞC, kÞC, consulLancy
servlces (ln 8lSl, manufacLurlng and reLall) and
soûware producLs (ñnanclal producLs).
J%(0,,%+/$E0+2)Slnce Lhese are fasL
developlng l1 markeL, lnfosys needs a paradlgm
shlû ln focus from uS and Lu markeLs Lo Lhese
markeLs.
J%-58")04)-"#$"%&A2)Llkely Lo yleld good resulL.
lssue 1 & 2 (ConL..)
•  Þ8CuuC1 uLvLLCÞMLn1 S18A1LC?:
>5##%+")*$#G%"2)uSA and Lurope
I%7)D#0/5("2)ConsulLancy and package
lmplemenLauon servlces ln relauvely growlng secLors
esp. healLhcare, llfe sclences and avlauon secLor, and
kÞC servlces.
J%(0,,%+/$E0+2 ConcenLraLe on bulldlng experuse
ln Lhese domalns by sLraLeglc acqulsluons.
J%-58")04)!"#$"%&A2)Llkely Lo have good resulL. (beuer
Lhe company acqulred, Lhe beuer Lhe resulL).
lssue 1 & 2 (ConL..)
•  ulvL8SlllCA1lCn:
I%7)*$#G%"2)lndla, Mlddle-easL and AusLralla
I%7)1#0/5("2)ConsulLancy and package
lmplemenLauon servlces ln relauvely growlng
secLors esp. healLhcare, llfe sclences and avlauon
secLor, and kÞC servlces.
J%(0,,%+/$E0+2 Changlng 8rand lmage from
low value servlce provlder Lo hlgh value servlce
provlder.
J%-58")04)!"#$"%&A2)ulmculL Lo achleve overnlghL
(posslble ln long Lerm)
lssue 1 & 2 (ConL..)
4. 3FNHJ)!FJ.FH:9H!2))

>3I>HIFJ.F93I2 90° of lnfosys revenues from Amerlcan and
Luropean nauons.
CHJF9>.O)9IFH:J.F93I2)lnfosys made a bld Lo acqulre a Luropean
ma[or - Axon consulLancy Lo lmprove lLs buslness ln Luropean
markeLs, buL ñnally called oñ Lhe deal due Lo hlgh valuauon.
CLherwlse, lnfosys has always belleved ln organlc growLh.
9II3C.F93I2)1he Soûware Lnglneerlng and 1echnology Labs
(SL1Labs) aL lnfosys ls Lhe cenLer for applled Lechnology research ln
soûware englneerlng and enLerprlse Lechnology. SL1Labs
conducLed 24 lnnovauon Workshops wlLh cusLomers from Lhe uS
and AusLralla, Lo ldenufy research collaborauon posslblllues.
lnfosys promoLes a favorable work envlronmenL LhaL encourages
lnnovauon and merlLocracy.
!FJ.FH:P)!Q>>H!!6QO)3J)I3FRSS)#
86A)G%W#1'46,",#360(#C063*0#*Q3-F6',D#3"#?+aI]#8+Sa1N+=+=$D#!A,-'%,,##N6(*"#Z%3#
KMM;#
lssue 3: 1he ma[or revenues of lnfosys come from Lhe uSA. 1he
slowdown of Lhe Amerlcan economy has led Lo Lhe presslng of
panlc buuons. WhaL markeung sLraLegles would you prescrlbe
for Lhe lnfosys Lo come ouL unscaLhed?

9I63!P!)T>:)*.FJ9U)#
volume vS Margln
•  1he company's buslness chleßy
comprlses of shorL Lerm
conLracLs LhaL are smaller ln
volume, buL wlLh hlgher
marglns.
•  lndusLry waLchers say Lhe
company wlll have Lo revamp lLs
buslness model ln order Lo scale
up Lo Lhe blg leagues.
•  1hey can do so by shlûlng Lhelr
focus Lo long-Lerm annulLy
conLracLs whlch are hlgh volume
buL wlLh lower marglns, ln
addluon Lo bemng on blg
acqulsluons Lo grow.
llg. ln bn $, l8M and PÞ numbers are
only for Lhelr servlces buslness
lssue 4: Should lnfosys go ln for branded producLs? lf yes, whaL
are Lhe sLeps LhaL you would suggesL?

ÞroducL kluy should be enhanced (Cnly producL: llnacle)
lnorganlc growLh Lhrough Mergers & Acqulsluons should
be consldered
SecLors wlLh hlgh growLh (1elecommunlcauon, lnsurance,
eLc.) should be Lapped lmmedlaLely
lor soûware producL developmenL, lnfosys should
employ a process LhaL ls based on Lhe besL pracuces of
Aglle MeLhodology and CMM Level 3 quallLy
lor mechanlcal producLs, Lean MeLhodology based
soluuons ln knowledge-based englneerlng should be
developed Lo shorLen ume Lo markeL
lssue 3: Should lnfosys alm for dlsuncuve compeLence? lf yes,
whaL sLeps would you suggesL Lo achleve Lhls goal?

•  lnfosys operaLes ln a hlghly compeuuve and rapldly changlng
markeL and compeLes wlLh a number of Consulung, l1 ouLsourclng
and 8ÞC ñrms aL home Lurf and globally.
•  ln near fuLure, compeuuon ls expecLed Lo grow from ñrms
esLabllshlng and bulldlng Lhelr oñshore presence and ñrms ln
counLrles wlLh lower personnel cosL Lhan lndla.
•  Powever, prlce alone cannoL consuLuLe a susLalnable compeuuve
advanLage.
•  Þrlnclple facLors where lnfosys can have a compeuuve advanLage
are as follows:-
–  Lñecuvely lnLegraLe onslLe and oñshore execuuon capablllues.
–  lncrease scale and breadLh of servlce oñerlngs Lo provlde one-sLop
soluuon.
–  Þrovlde lndusLry experuse Lo cllenLs buslness soluuons.
–  AuracL and reLaln hlgh quallLy Lechnology professlonals.
–  MalnLaln ñnanclal sLrengLh Lo make sLraLeglc lnvesLmenLs ln human
resources and physlcal lnfrasLrucLure Lhrough buslness cycles.
?6*(#*/%*(#
•  lor lnfosys Lo emerge as a global leader ln Lhe ñeld of
l1, lL has Lo shake oñ Lhe Lag of belng a suppller of low
cosL l1 servlces/8ÞC/soûware developmenL, all of
whlch are commodluzed buslnesses, a sLereoLype
whlch ls assoclaLed wlLh Lhe lndlan l1 lndusLry ln
general.
•  Whlle low margln servlces conLrlbuLe Lo bulk up Lhe
bouom-llne, allowlng lL Lo achleve global economles of
scale, Lhe hlgh margln producLs add Lo lLs Lop llne, Lhls
ls useful ln wardlng oñ Lhe rlsks of compeuuon,
cycllclLy or proñL eroslon ln any parucular segmenL.
Business Strategy
• A company can make use of its business strategy to improve the
competitive position of its business units and products/services
within the specific market segment or industry

• The generic strategies suggested by Porter i.e., cost leadership,
differentiation and focus, could help the company in drawing up
the business strategy

• Whereas the corporate strategy asks what industry/industries,
should the company be in, the business strategy asks how the
company should compete or co-operate in each industry
Cost Dynamics
Cost Levels in India:
Textiles For comparable pre-tax RET. On invest, a typical Indian Plant with
cap of 6,000 tons/yr polyester production has 84% higher selling price
than a typical polyester plant with 30,000 tons/yr cap in USA. Even with
same cap, India: 24% higher selling prices
Similar trends are obtained in tyre and tube, Al, Steel
Causes Excise, Customs, Sales Tax Levies, Etc, Uneco, Production levels,
Obsolete technology, high B/E points, excess dependence on
import of semi=finished goods
High costs narrowed Dom. Cons. Markets & competition in International markets
Larger size plants not only save on initial invest. Cost but also on operational costs (cost v/s size
of production)
Cost v/s Market Sellers Market
Products Price = Intl. Cost + desired profit margin
Buyers market
Profit Margin = Permissible price – intl. Cost
OR
Tolerable Cost = Permissible price – acceptable profit
Experience Curve:
Unit Manufacturing Cost When Production Quantity
When Production Quantity of time of Dir. Lab components for each item
80% Experience Curve

Accumulated Production Cost/Unit (RS)
2 100
4 (100*0.80) = 80
8 (80*0.80) = 64
16(64*0.80) = 51

Plot give 80% Exp. Curve – Hyperbola
Causes: Improved Lab. Productivity
Incre4ased specialisation
Innovation in production methods
Value engineering & fine tuning
Line balancing
Rationalisation of methods & systems

Exp. Curves - Simple approximations of extremely complex real-time relationships;
extreme care is to be exercised to get rreliable results – distinguish time
from exp; unit exp; consider influence of time
Sensitivity Analysis: Can be w.r.t., FC, VC, and/or price
decrease in FC results in decrease in B-E-P. Profitability
at a particular volume of production improves with lower FC

in VC has marked effect on B-E-P & eats up profits
in VC improves profitability

in permissible price, B-E-P and vice-versa. At a particular
volume of production profitability improves. Price-most
sensitive instrument followed by VC & FC

Non-Linear B/E Analysis When prices may be consciously reduced to gain additional
sales vol. & market share or in response to computers action

Assumptions FC Fixed for all production volumes
(often unrealistic) VC do not fall with increasing level of production
TC && TR vary in linear relationship with output
Maximise profit BEF int. & tax is the desirable BUS. objective
Experience curve relationship - Good framework for marginal considerations for
predicting industrial scenario w.r.t., future costs,
profit margins and corresponding cash flows for
own & competitors opns
- Has done very well in segments such as PC mkt;
implications – a few large plants with standardised
productions would be able to supply global market
marketing efforts SH. Be fully coordinated with
manufacturing plans; lowering prices SH. Not be
inferior quality; more applicable when dem is elastic

- Limitations: detn. of cost; data reg. competitors;
a late market entrants has to operate at lower initial
prices to survive

B/E Analysis
TC = FC + VC * Q (VC-Unit Var. Cost-R/M, electricity, fuel, packing etc)
TR = P * Q
At B/E point TR = TC
p * QB = FC + VC * QB QB = FC/(P-VC)
[P – VC = Unit Contribution]
Doom Loops
! Self reinforcing processes.
! Drive an organization into cyclical situations from
which an organization finds it difficult to extract itself.
! To avoid getting into a doom loop, it is required to
constantly upgrade the products, services and
efficiency of distribution channels.
! To get out of a doom loop – refocus on the small
business units and a change has to be brought about in
the firms culture.
Doom loop - Example
Competitors innovate
& develop better Pdt.
at lower cost.
Competitor matches
price & yet is profitable.
Firm cuts price to hold
onto the market share.
Firm has inadequate
margins to reinvest.
Employees become
demoralized.
Competitor gains mkt.
Share at firms expense.
Quality of Pdt. &
services becomes poor.
Corporate Strategy

The important issues involved in Corporate Strategy are:
!  The companys orientation towards growth, stability or
retrenchment. This is referred to as directional strategy.
!  The markets in which the company competes through its
products or business units. This is referred to as Portfolio strategy.
! Activity co-ordination and transfer of resources for achieving
capabilities among product lines and business units. This is referred
to As parenting strategy.
Relative Cost advantage & Competitive Strategy

Examples Modi Tyres - Initially entered largest product
segment i.e., truck with latest
technology & lower prices (good
value for money). Subsequently
matched market leaders price
and displaced him by capturing
higher market share

Hero Cycles - Dropped irrelevant product
attributes; subcontracted
production of parts

Portfolio Analysis and Display Matrices
Portfolio Analysis - Corp. investments in different products or industries (SBUs)
Balancing - w.r.t. net cash flow
Stake of development
Risk
Display Matrices:
BCG Matrix
McKinsey Matrix
Strategic Planning Institutes Matrix (Profit impact of Market Strategy – PIMs)
Arthur D.Little Cos Matrix
Hofers Product/Market evaluations Matrix
The Boston Consulting Groups
Growth-Share Matrix
22%
20%
18%
14%
12%
10%
8%
6%
4%
2%
0
10x 4x 2x 1.5x 1x 0.5x 0.4x 0.3x 0.2x 0.1x
5
6
4
1
2
3
7
8
Relative Market Share
M
a
r
k
e
t

G
r
o
w
t
h

R
a
t
e

Source: B. Heldey, Strategy and the Business Portfolio, Long Range Planning, February 1977, p.12
Reprinted with permission from Long Range Planning, © 1977, Pergamon Press Ltd.
Stars
Question Marks
Cash Cow Dogs
SBU Objectives:
Build (For Question Marks)
Hold (for strong Cash Cows)
Harvest (for weak Cash Cows; can also be used
with Question Marks and Dogs)
Divest (for Question Marks and Dogs which are
a drag on company profits)
Strategic Planning
Planning: Viable fit between
organizations objectives and its
changing market opportunities
Key: investment portfolio, future
profit potential, strategy
BCG Matrix (New)
! 2*2 Matrix
!  Size of competitive advantage Vs. No. of approaches to
competitive advantage.
Fragmented
Stalemate
Specialization
Volume
No. of
approaches
to achieve
comp. Adv.
Size of the comp. Adv.
Many
Few
BCG Matrix (Contd.)
Fragmented Specialization
Volume Stalemate
! Small and Regionalized.
! Profitability not related to size.
! Advantage gained by focus.
! No premium on growth.
! Ex. Specialty restaurants or
designer labels.
! Focused segments.
! Steep learning curves.
! Ex. Cray research in field of
Super computers.
! Where it is difficult to gain
advantage.
! CA often is the sheer sustaining
power.
! Ex. Kellogg's in India.
! Where there are economies of scale
and IRS operates.
! Constrained by market
segmentation and differentiation.
! Ex. The car industry.
GE Matrix
High
Protect Position
• Invest to grow at maximum
digestible rate
• Concentrate effort on
maintaining strength
Invest to build
• Challenge for leadership
• Build selectively on strengths
• Reinforce vulnerable areas
Build selectively
• Specialize around limited
strengths
• Seek ways to overcome
weaknesses
• Withdraw if indications of
sustainable growth are
lacking
Medium
Build Selectively
• Invest heavily in most attractive
segments
• Build up ability to counter
competition
• Emphasize profitability by
raising productivity
Selectivity/ manage for
earnings
• Protect existing program
• Concentrate investments in
segments where profitability is
good And risk is relatively low
Limited expansion or
harvest
• Look for ways to expand
without high risk;
otherwise, minimize
investment and rationalize
operations
Low
Protect and refocus
• Manage for current earnings
• Concentrate on attractive
segments
• Defend strengths
Manage for earnings
• Protect position in most
profitable segments
• Upgrade product line
• Minimize investment
Divest
• Sell at time that will
maximize cash value
• Cut fixed costs and avoid
investment meanwhile
Strong Medium Weak
(b) Strategies
BUSINESS STRENGTH
M
A
R
K
E
T

A
T
T
R
A
C
T
I
V
E
N
E
S
S

Table 2-2
Factors underlying market attractiveness and competitive position in GE Multifactor
Portfolio Model: Hydraulic Pumps Market
Weight Rating (1-5) Value
Market Attractiveness Overall market size
Annual market growth rate
Historical profit margin
Competitive intensity
Technological requirements
Inflationary vulnerability
Energy requirements
Environmental impact
Social/political/legal

0.20
0.20
0.15
0.15
0.15
0.05
0.05
0.05
Must be acceptable
1.00
4.00
5.00
4.00
2.00
4.00
3.00
2.00
3.00
0.80
1.00
0.60
0.30
0.60
0.15
0.10
0.15
.
3.70
Competitive Position Market share
Share growth
Product quality
Brand reputation
Distribution network
Promotional effectiveness
Productive effectiveness
Productive efficiency
Unit costs
Material supplies
R&D performance
Managerial personnel

0.10
0.15
0.10
0.10
0.05
0.05
0.05
0.05
0.15
0.05
0.10
0.05
1.00
4.00
2.00
4.00
5.00
4.00
3.00
3.00
2.00
3.00
5.00
3.00
4.00
0.40
0.30
0.40
0.50
0.20
0.15
0.15
0.10
0.45
0.25
0.30
0.20
3.40
Source: La Rue T. Hormer, Strategic Management, Englewood Cliffs, N.J.: Prentice Hall, 1982, p.310
McKinsey Matrix
Used for GE: Factors determining industry (Market) attractiveness
Weightage (typical)
1.  Size of the market 10% SBUs rated on a scale of 1-10
2.  Growth rate (sales) 15%
3.  Nature of Competition 15%
4.  Technology Requirements 10%
5.  Entry conditions & Social factors 10%
6.  Profitability 40%
100%
Factors Determining Competitive Position
Weightage Rating (1-10) Score
1.  Market Share 20% 7 1.4
2.  Growth rate 10% 7 0.7
3.  Location & Distribution 10% 5 0.5
4.  Mgt. Skills 15% 6 0.9
5.  Work force harmony 20% 7 1.4
6.  Technical excellence 20% 8 1.6
7.  Company image 5% 8 0.4
100% 6.9

Shall Matrix : Similar to GE approach – identifies different strategies for each grid sector

PIMS Model: Profit impact of market strategy (PIMS) started at GE – used later by strategic
planning institute – develops industry CH/C, bus avg. profitability using cross-
sectional regrn. Of more than 2000 industries
Shells Directional Policy Matrix
SECTORAL
PROSPECTS



Attractive Leader Try Harder Double or quit
Average
Leader
Growth
Custodial
Phased
withdrawal
Unattractive Cash
Generation
Phased
Withdrawal
Disinvest
Strong Average Weak
UNITS COMPETITIVE POSITION
Strategy Business
Prospects
Competitive
Capability
Recommended Strategy
1. Leader High Strong High priority with all necessary resources to hold high market position
2. Try Harder High Medium Allocate more resources to move to leader position
3. Double or
Quit
High Weak Pick products likely to be future high flyers for doubling and abandon
others
4. Growth Average Avg. strong May have some strong competition with no one company as leader.
Allocate enough resources to grow with market
5. Custodial Average Average May have many competitors, so maximise cash generation with
minimal new resources
6. Phase
withdrawal
Low Average Slowly withdraw to recover most of investment
7. Cash
generation
Low Strong Spend little cash for further expansion, and use this as a cash source for
faster growing businesses
8. Disinvest Low Weak Assets should be liquidated as soon as possible and invested elsewhere.
Heartland
Edge of
Heartland
Ballast
Value trap
Alien
Territory
High
High Low
Low
Fit between Parenting Opportunities and
Parenting characteristics
M
i
s
f
i
t

b
e
t
w
e
e
n

C
r
i
t
i
c
a
l

S
u
c
c
e
s
s

F
a
c
t
o
r
s

a
n
d

P
a
r
e
n
t
i
n
g

c
h
a
r
a
c
t
e
r
i
s
t
i
c
s

Arthur DLittle Companys Matrix
•  The Matrix considers the different stages of
the PLC with the business strength.
•  The businesses are classified according to
business strength as weak, tenable,
favorable, strong or dominant.
•  The Horizontal axis has the four stages of
the PLC: Embryonic, Growth, Mature and
Decline.
B
U
S
I
N
E
S
S

S
T
R
E
N
G
T
H

Dominant


Strong


Favorable


Tenable


Weak












Unacceptable



Build


Hold

Harvest
•  The Strategy recommended in the growth and embryonic
stage is to build the business except when the business
strength is weak.

•  For Businesses in the mature stage, with dominant to
favorable business strength, hold strategy is recommended.

•  For Businesses with strong and dominant position in the
declining stage, harvest strategy is recommended.

•  For Businesses which are weak and in the mature/decline
stage, the return-on-investment is unacceptable.
Hofers Product/Market Evolution
Matrix
•  It is a 3x5 matrix, where businesses are
plotted in terms of the product/market
evolution and competitive position.
•  The circles show the relative size of the
industry, and the shaded portion depicts the
market share.

According to the matrix,
•  Businesses in the Development or the Growth stage have
the Potential to become Stars.
!  If the market share is large, additional resources must be invested, to
develop competitive position.
!  If the market share is low, a strategy to improve should be developed.
•  Businesses in Shake out/Maturity stages can be Cash
Cows. These may require some Investments.
•  Businesses in the Decline stage with a low Market share
are in the category of Dogs and should be considered for
Divestment or Liquidation.


Intenational Portfolio Analysis
•  Portfolio analysis can be applied to international markets
to help in the international strategic planning.
•  The matrix makes use of countrys attractiveness, which
comprises market size, market growth rate, extent and type
of government regulation, economic and political factors.
•  It also makes use of the products competitive strength,
which consists of Market share, product fit, contribution
margin and market support.
Depending on how the product fits in the matrix, funding or
harvesting can be decided upon.


INVEST/GROW



HARVEST/DIVEST
COMBINE/LICENSE

DOMINANT/DIVEST
JOINT VENTURE

SELECTIVE
STRATEGIES
C
O
U
N
T
R
Y

A
T
T
R
A
C
T
I
V
E
N
E
S
S

L
O
W

HIGH MEDIUM
LOW
H
I
G
H
M
E
D
I
U
M
Functional Strategy
The approach followed by a functional area to
achieve the objectives set by the corporate
and business strategy by maximizing
resource productivity is called
FUNCTIONAL STRATEGY.
•  It is concerned with the nurturing and
development of distinctive competitiveness.
•  Orientation of Functional Strategy is
dictated by the Parents strategy.
Utility of Display Matrices:
Correlate industry growth or profitability with market share
either as direct single variable or as an index based on multiple
variables

Facilitate graphic display of diversity of orgn; help raise critical
questions; not provide precise answer; not applicable where mkt.
share is not critical or capital cannot be easily withdrawn; if value
added is low or cost can be decreased without experience, rapid
technology transfer, seasonal/cyclic business, patent restrictions.
Low economies of scale complicate their outcome
Indian Situation:
- Industrial development much behind Japan or USA
- Huge dom. Potl. Mkt still untapped
- Managers will & systematic approach with top management
support can help make use of these matrices for developing
competitive strength and corp. growth
A distinctive Competency must meet the following
three tests:
1.  Customer Value
2.  Competitor Unique
3.  Extendability
For a Functional Strategy to be successful, it should
be built on a distinctive competency within a
Functional Area, else should consider
outsourcing.
Outsourcing
•  Outsourcing refers to purchasing a product
or service which the company was
previously producing.
•  The key to Outsourcing lies in the
purchasing from outside only those
activities that are not key to companys
distinctive competencies.
Marketing Strategy
•  Marketing strategy deals with the pricing,
selling and distribution of a product.
•  Using this strategy, a business unit can
improve its market share for current
products through market saturation and
penetration, or develop new products for
existing markets.
Financial Strategy
•  Financial strategy examines the financial
implications at corporate and business levels to
identify the best financial course of action.
•  This can provide competitive advantage through
lower cost of funds and flexibility to raise capital.
This strategy normally helps in maximizing the
financial value.
R&D Strategy
•  The R&D strategy determines the R&D mix that a
company has to follow.
•  It determines the mix of basic research, product
development and process R&D.
•  This strategy also influences the decisions in the
areas of development of new technologies,
acquisition of technology from external sources,
strategic alliances, product/process innovation and
improvement.
Operations Strategy
•  Operations strategy answers vital questions
of manufacturing, concerning where to
produce, vertical integration, deployment of
resources, relationship with suppliers,
technology to be used and levels of quality
to be acheieved.
Purchasing Strategy
•  Decisions regarding raw materials, parts and suppliers for
the manufacturing function are influenced by the
purchasing strategy.
•  The company has the options of single, multiple or parallel
sourcing.
Single sourcing- It helps in reduction of both cost and time
and in controlling quality.
Parallel sourcing- It provides two suppliers for two different
parts, with each of them backing up the others parts.
Multiple Sourcing-It has an advantage in that it forces
suppliers to compete, leading to reduction in costs and
improvement in quality for the company.
Logistics Strategy
•  Logistics strategy deals with the flow of the
product into and out of the manufacturing
function.
•  This requires synergies across business
units and expertise in transportation modes.
Two Important decisions on logistics strategy
!  Centralization
! Outsourcing
Human Resource Management
Strategy
•  This strategy deals with the recruitment of
skilled employees and their training to
participate in self managed work teams.
Information Systems Strategy
•  Information systems make use of
information technology to provide
companies with competitive advantage

Strategic Choice and Development
of Policies
•  .Strategic choice represents the evaluation
of alternative strategies and selection of the
best alternative.
Assignment 4
•  What are the different types of Environments that
a firm faces? For a Firm you are acquainted with,
chart the relevant Environment.
•  According to Porters Model, what determines the
Competition Intensity in an Industry? With respect
to a Firm that you know, identify the key Strategic
factors in its External Environment.
•  For the above Firm, develop the Industry Matrix
and an EFAS.
•  For the same Firm, compare and contrast different
scenarios by using Trend Extrapolation.
Assignment 5
•  What are the criteria used to determine the Corporate
Strengths and Weaknesses? Use these criteria for a
company you are familiar with to identify its Strengths and
Weaknesses. Suggest Corrective Actions.
•  How can Value Chain Analysis be used to Identify
Corporate Strengths and Weaknesses?
•  How can a Company make use of its Structure and Culture
in Internal Corporate Analysis?
•  What is VRIO Framework? How can this be used for
gaining Sustainable Competitive Advantage?
•  List the Strategic Marketing, Financial, R&D, Operational
and HRM issues for a Company you are familiar with.
•  How has Information Systems affected Strategic Decision-
making? What are the issues that have surfaced in the light
of rapid changes in Information Technology.
Assignment 6
•  What is a Propitious niche? Which Industry forces can
make it to disappear?
•  When the Industry becomes Hypercompetitive, is it
possible to have a sustainable Competitive Advantage?
Give reasons.
•  Strategic Alliances are temporary. Do you Agree? Justify.
•  What is Doom Loop? Why do Industries find it difficult to
get out of it?
•  Discuss how Corporate Parenting is different from
Portfolio Analysis. In what aspects are they similar? How
could this be useful in Global Marketing?
•  When should a company Outsource a Function or
Activity?
•  How does Policy relate to Strategy? Explain
Strategy Implementation

Strategy implementation refers to the sum total of
the activities and choices required for execution of a
strategic plan. The implementation process has to
answer these questions:
• Who will carry out the strategic plan?
• What should be done to align the companys
operations in the new direction?
• When and how everyone concerned, should
respond?
Function Stage I Stage II Stage III
1. Sizing up: Major
problems
Survival and growth
dealing with short-term
operating problems
Growth, rationalization, and
expansi on of resources,
provi di ng f or adequat e
a t t e n t i o n t o p r o d u c t
problems
Trusteeship in management and investment
and control of large, increasing and diversified
resources. Also, important to diagonise and
take action on problems at division level
2. Objectives Personal and subjective P r o f i t s a n d me e t i n g
functionally oriented budgets
and performance targets
ROI, profits EPS
3. Strategy Implicit and personal;
exploration of immediate
opportunities seen by
owner-manager
Functionally oriented moves
to one product scope;
exploitation of one basic
product or service field
Growt h and product di versi f i cat i on;
exploitation of general business opportunities
4. Organisation:
Major characteristic
of structure
One unit, one-man
show
One uni t f unc t i onal l y
specialized group
Multiunit general staff office and decentralised
operating divisions
5. (a) Measurement
and control
Pe r s o n a l c r i t e r i a ,
relationships with owner,
operat i ng ef f i ci ency
ability to solve operating
problems
Functional and internal
cri t eri a s uch as s al es ,
performance compared to
budget, size of empire, status
i n g r o u p , p e r s o n a l
relationships, etc
More interpersonal application of comparisons
such as profits, ROI, P/E ratio, sales, market
share, productivity, product leadership,
personal development, employee attitudes,
public responsibility
6. Reward
punishment system
I nf ormal , pers onal ,
s ubj ect i ve; us ed t o
maintain control and
divide small pool of
resources to provide
personal incentives for
performers
More structured; usually
based to a greater extent on
agreed policies as opposed to
pe r s o na l o pi ni o n a nd
relationships
Allotment by due process of a wide variety of
different rewards and punishments on a formal
and systematic basis. Companywide policies
usually apply to many different classes of
managers and workers with few major
exceptions for individual cases
Factors Differentiating Stage I, II and III Companies
Source: O.H. Thain, Stages of Corporate Development, Business Quarterly, p.37, Winter 1969.
Board of Directors
Chairman &
Managing Directors
R & D Corporate Staff
Operating
Companies
(India)
Operating
Companies (SAARC
Countries)
Operating
Companies
(Africa)
Operating
Companies
(Europe)
Product
Group
A
Product
Group
B
Product
Group
C
Product
Group
D
Product
Group
E
Geographical Area Structure of an MNC
Classification
According to Risk : Low
Moderate
High

Courses of Action : Niche
Vertical Integration – Backward and Forward
Horizontal expansion
Diversification
According to desired rate of growth: Alternatives are
- Internal Expansion. (adding more capacity)
- Internal Stability (by augmenting resources
- Internal retrenchment or turnaround (eg: Hind.
Photo-Films)
- External Retrenchment or Divestiture (ITDC- decided
to close Hotel Akbar some years ago)
- External expansion through mergers
- Combination of the above strategies
Selection of Strategy : Based on growth objects, resources, S&W, government
policy & best method to close the gap between projected
performance and desired performance; PL-C of
product/SBU could also be helpful; marginal factors
(attitudes towards risk) also influence selection.
Top Management
Manufacturing Marketing Finance Human Resource
Manufacturing
Unit
Marketing
Unit
Finance
Unit
Human Resource
Unit
Manufacturing
Unit
Marketing
Unit
Finance
Unit
Human Resource
Unit
Manager:
Project A
Manager:
Project B
(a) Matrix Structure

Packers

Suppliers Designers
Manufacturers Distributors
Corporate
Headquarters
(Broker)
Promotion/
Advertising
Agencies
(b) Network Structure
Matrix and Network Structure
Diversification Related: Eg. JK- from textiles to synthetic fibres unrelated
Related: Constrained or Controlled
Linked - Closely related to main product line
- Weak link as well as to teach other
- Bus reln. Eg: Nirlon – from nylon filament yarn for
Eg: India to nylon tyre cord for industrial
Shaving products. applications to conveyor belts, V-belts,….
all based on industrial grade nylon yarn
(Blades to toiletries and writing products)

Qns. Co. SH. Ask:

• Do the common skills & Res. Really exist?
• Will the economies/benefits resulting from sharing of skills and res. be substantial?
• Will the related diversification improve overall results?
• Will the related diversification lead to any difficulties or problems and does the Co. have cap. To
overcome these?
Unrelated diversification By setting up new projects, Through mergers, take overs
off-running business. Eg: Hyderabad Allwun: Bus body
Building to refrigerators to deep freezeders, water coolers, Acs,
Watches,….
Planned diversification
Options to Management - Status Quo
- Sail with the wind
- Go on moving in the direction
- Move in new direction in a planned manner

Diversification in an ongoing process
- Define your bus
- SWOT analysis
- GAP Analysis
- Competition & Risk analysis

Corporate diversification in India – Now actively pursued due to
- Liberalisation
- Indian Entrepreneur willing to think big and
grow big
- higher risk bearing attitude by financial
institutions
- Middle class confidence in equity market
- shrinking demand for Indian consumables
abroad; so joint ventures in India; NRI
scheme for technology & finance flow
- Massive market expansion (largely middle
class domestic market
Integration Horizontal – Owning (or controlling) a number of similar but
separate activities in the same industry of business
Vertical – Backward – Diversifying into R/M & other supplies for
the companys products – may enable a co. to improve the
quality of final product Eg: Vimal

Forward – Div ersification further down the line to final
consumer – direct control on distribution and logistic
channel Eg: Nirlon
Diversification & Synergy
Production Synergy: Co. mfg coolers, refrigerator,s ACs, getting into room
heaters, ovens
Marketing Synergy: Cricket balls & bats; tennis balls and rackets
Financial Synergy: Fan manufacturers offering discount in winter
Organisation Synergy: Manufacturing organisation starting consulting services

Diversification V/s Expansion: Before diversifying company can & SH. Consider
expansion in existing product line
Mergers and Acquisitions:
Merger - Takes place when two or more Cos roughly of equal size
or strength formally submerge their corporate identities into
a single one in a friendly atmosphere; a holding Co. may be
formed and its shares are exchanged for shares held by the
share-holders of the merging Cos

Acquisition – When a Co. offers cash or securities in exchange for the
or take over the majority shares of another co. – happens when merger
is not agreed upon – when the battle is severe, tgt price
may be 100% above market price

Merger - Improving Economies of scale, gaining managerial expertise,
motivations market supremacy, acquiring a new product or brand name,
diversifying the portfolio, reducing risk and borrowing costs
taxation or investment incentives
Screening Process:
- Identify industries – Medium scale investment/large scale investment
- Select sectors: based on data w.r.t., sales T/O, ROI, market shares,
competition, asset turn over, etc
- Choose Cos – by sales turnover & asset level- determines acqn. Cost
- Cost of acquisition & returns: Compare candidates
- Ranking: Concept of Fit
- Identifying good ones: High market share
Growing market
Good management system
Diversified portfolio
ROI above bench mark level
Assembling suitability of a proposal
- Funds availability
- Likely positive synergies
- Negative synergies & Weaknesses
- Is timing appropriate
- Is required management style available
Valuation for mergers and acquisitions:

Market price per share
P/E Ratio:--------------------------------------------
Net earnings after tax per share
- P/E Ratio & EPS (Market price of Share / P/E ratio) SH. Be compared with
balance sheet & P&L A/C
Acquirer should
- Divest loss making opns
- Use ratio analysis (to compare with ind. Avg)
- current ratio (reduce C.L.)
Stocks
- Stock Level = * 12 months
(reduced stock level) Cost of Goods sold

Debtors
- Avg. Age of debtors (in days) =------------ * 365
(Reduce ave age of Debtors) Sales
- Revise B/S & P&L A/c
- Incorporate growth & expectation rates
age of assets
- Calculate replacement value of assets = 1 - -----------------
Tot. Eco. Life
of asset
Managing after merger:
Indian scene - NRI status is helping in mergers (to get out of FERA)
- Likely to become more dominant in future
* current cost of
asset
Evaluation and Control Process can be viewed as a
five-step model:

• To determine what to measure – this means that the
processes and results must be capable of being measured in an
objective and consistent manner.
• To establish performance standards = these specify the
measures & acceptable results i.e., provide a tolerance range.
• Actual performance measurement
• Comparison of actual with standard
• Taking corrective action – this becomes necessary when the
actual results are outside tolerance range. Before acting, the
manager has to ensure whether the deviation is due to chance
fluctuation and whether the process is correct and
appropriate.
Problems in Measurement of Performance
Short–term orientation (high ROI in short-term)
• Goal displacement – refers to the confusion of means with end. It occurs
when activities intended to help managers achieve corporate objectives
become ends in themselves or are adapted to meet ends other than those
for which they are intended.

Goal displacement can be of two types – Behaviour Substitution and
Sub-optimisation.
Behaviour Substitution: refers to a phenomenon where activities that do
not lead to goal accomplishment are substituted for activities that do
lead to goal accomplishment. In other words, the wrong activities and
people who focused on these activities are being rewarded.

Sub-optimisation: is a situation where optimisation occurs for a unit or a
functional area to the detriment of an organisation as a whole.
Strategy Audit
The idea of strategy audit is to develop benchmarks. This
process involves the following steps:
• Identification of area or process to be examined – usually an
activity which can give competitive advantage to a business unit.
• Determination of measures of performance of the area or
process.
• Competitors against whom the company has to benchmark –
these have to be generally the best among the industry.
• Difference in performance measurement of the company and
the best in class.
• To develop tactical program for bridging performance gap.
• Implementation of programs and comparing the results of new
measures with those of best-in-class.
The following guidelines can be made use of for proper
control of strategic planning implementation exercise:
• Focus should be on critical success factors i.e., 20% that
determine 80% of the results.
• Control should be directed towards monitoring
meaningful activities and results and should be timely.
Controls can be both long term and short term.
• Controls should help in pinpointing exceptions.

There should be emphasis on rewards on meeting or
exceeding standards of performance.
AsslgnmenL 7
•  Pow would a company achleve synergy among
dlñerenL funcuons and buslness unlLs?
•  ls re-englneerlng anoLher fad or does lL oñer
someLhlng of lasung value?
•  Can corporaLe culLure be changed? lf yes, how?
•  ls downslzlng a good opuon for lndlan ñrms?
ulscuss Lhe pros and cons.
!""#$%&'%()E)
•  !")1)"(71('$#2)&1%1$'7@)0'6'/,3)1)7'1/#":2)&,0'/)
9,7)'61/.1:,%)1%0)2,%(7,/)#%)(5')=%0#1%)2,%('F(D)
•  G#6') ",&') 'F1&3/'") ,9) B%1%2#1/) 2,%(7,/"D) G#6') 1)
/#"() ,9) H'4) B%1%2#1/) 71:,"@) ,%') '125) 97,&) (5')
$7,.3) ,9) 37,B(1;#/#(4@) /#I.#0#(4@) /'6'71$') 1%0)
12:6#(4)71:,"D)
•  J,7) 1%) ,7$1%#A1:,%) (51() '&351"#A'") 27'1:6#(4@)
5,-) "5,./0) (5') 61/.1:,%") 1%0) 2,%(7,/) 'F'72#"'")
;')(1#/,7'0<)=")27'1:6#(4)1%0)2,%(7,/)2,&31:;/'<)
IT and Strategy
•  Traditional and Alternative views of IT vary in four
dimensions –
!  Nature
!  Evaluation
!  Use
!  Returns.
•  There is a growing feeling in organizations, as per the
alternative view, that the returns on IT investments, may
not, at the expected levels, be making the investment
decisions look suboptimal. This is due to the fact that IT is
viewed as providing strategic inputs.
IT Strategy Components
Sound strategic plans contain at least six
components or elements, they include
! Application system components
! Application development components
! Infrastructure component
! Maintenance component
! Operations component
! Security component
Viewing IT as Strategy
•  Investments should be made in those IT
based applications and services that are
likely to yield the best returns.
•  Information systems for competitive
advantage are those that reflect the
fundamental objectives of the firm and that
may have a significant impact on its
success.
Influence of IT on pricing strategies
•  Increased availability of information – Increased
information gathering, handling, and analysis capabilities
enhance price customization, bundling and unbundling,
revenue management and automated pricing strategies
•  Enhanced reach – Enhanced reach catalyses various
pricing strategies, in particular the internet provides
companies, access to an extended universe of customers,
more demand and new markets
•  Expanding interactivity - IT may increase efficiency
through electronic transactions and online customer
interactions, which can affect pricing by creating
exchanges, such as maintenance, repairs and operations
hubs, through which buyers and sellers group together.
Emphasis on Strategy for IT
•  Organizations with more experience in
automation, realize that IT can not only
improve the efficiency and effectiveness,
but also play a decisive role in the
companies success thus acquiring a strategic
quality.
Strategic Contributions of IT
Nolan Growth Curve and the Growth of Management
Looking ahead
•  The nature of the linkage between IT
investment and corporate strategy needs to
be put on firmer grounds
•  The nature of IT in organizations is
undergoing continuous change. There is
need to quantify the benefits arising out of
the shift towards IT in organizations.
!"#$%&'()%"*
•  knowledge ls a sLraLeglc asseL.*
•  Crganlzauons mlss ouL on buslness opporLunlues by falllng Lo
explolL Lhe knowledge base.*
*- Survey (kÞMC 2003)
+#'&,*%-*."%/01&21*34"42151"#*
lrom an organlzauonal lnluauve perspecuve, kM ls usually embodled
ln Lhe form of buslness sysLems LhaL are drlven by number of
Lechnologles such as
•  Convergence of kM and 8uslness lnLelllgence
•  kM enabllng Lechnologles are a vlLal parL for Lhe lmplemenLauon
and/ or adopuon of cusLomer relauonshlp managemenL[C8M}
•  lnLellecLual caplLal managemenL[lCM}, communlues of lnLeresL or
8esL Þracuce managemenL[8ÞM}
*
+%51*%-*#61*.3*4()78)19*4$1:*
LsLabllshlng and malnLalnlng onllne relauonshlps beLween
organlzauons and Lhelr suppllers, dealers/vendors.




!"#$%&'$( )%*+&'$( ,"+-( .$%/0"(12+-+1*"-%3&13(
kM ls Lhe collecuon of
processes LhaL govern Lhe
creauon, dlssemlnauon
and uullzauon of
knowledge
newman.8 1992 1urns lnformauon lnLo a
resource by exerclslng
selecuvlLy, lmposlng order
and addlng sLrucLure ln
order Lo lncrease lLs value.
kM ls managlng Lhe
organlzauon's knowledge
Lhrough Lhe process of
creaung, sLrucLurlng,
dlssemlnauon and
applylng lL Lo enhance
organlzauonal
performance
CLeary
u.L
1998 ulssemlnaLes and applles
knowledge Lo enhance
organlzauonal
performance.
kM allows buslness
process auLomauon and
enhances communlcauon
and collaborauon
beLween lnLernal and
exLernal consuLuenLs
Suguraman.v 2000 Allows buslness process
auLomauon, enhances
communlcauon beLween
lnLernal and exLernal
parLners.
urlvlng and lmpedlng forces of kM
•  CusLomer orlenLed 1rends
–  lasLer servlce, for Lhe cusLomer ,ume ls money
–  Self-servlce, empowered cusLomers
•  L-servlce 1rends
–  lnLegraLed sales and servlce, cusLomlzauon and lnLegrauon
–  lncreased process vlslblllLy
•  Crganlzauonal Lrends
–  CuLsourclng managemenL, ßauerlng Lhe organlzauon
–  ConLracL manufacLurlng, become broad lnLenslve
•  Lmployee mega Lrends
–  Plrlng Lhe besL and Lhe brlghLesL workers
–  keeplng LalenLed employees .
•  LnLerprlse Lechnology Lrends
–  lnLegraLed enLerprlse appllcauons, connecL Lhe corporauon
–  Mulu-channel lnLegrauon, look aL Lhe blg plcLure.
•  Ceneral Lechnology Lrends
–  Wlreless web appllcauons, moblle commerce
–  Pand-held compuung and lnformauon appllances.
1hese forces drlve Lhe need for companles Lo lnLegraLe
kM sysLems lnLo Lhelr commerce processes ln order Lo
-  lmprove back emclency
-  provlde greaLer cusLomer lnumacy
-  become more ßexlble Lo adapL Lo markeL changes
-  enhance knowledge based declslon maklng.
SLraLegles for knowledge
ManagemenL
Successful knowledge managemenL lmplemenLauon resLs
on Lhree essenual sLraLegles
Lñecuve chlef knowledge omcers(CkCs)LargeL key acLors
ln Lhe organlzauon and allgn Lhe conLrlbuuons of
varlous lnLernal parLners Lo supporL knowledge
managemenL.
Lñecuve CkCs bulld on exlsung lnluauves and acuvely
fosLer knowledge neLworks LhaL generaLe a
momenLum of Lhelr own.
Lñecuve CkCs communlcaLe a purposeful message Lo
Lhelr ñrms, Lhereby supporung Lhe Lransformauon lnLo
a knowledge-cenLrlc organlzauon.
1argeung key acLors
Managers should conslder Lhe ñrm as a markeL
of knowledge. 1ransacuons ln Lhls knowledge
markeL are drlven by 3 maln acLors:
- knowledge buyers
- knowledge sellers
- knowledge brokers
CkCs see Lhemselves ln Lhe role of a knowledge
broker and Lhey esLabllsh connecuon beLween
buyers and sellers ln order Lo opumlze Lhe
ñrms knowledge asseLs.

!"#$%&'()*+(",-%.)%*/%$,"&0*
•  +(",-%.)%*1",#*'(*2(*"&)2('324"(*52(*6%*
5"782&%.*$"*2*9""$62--*)27%:*
•  +(",-%.)%*,"&0%&#*5"(#$2($-;*82##*6'$#*2(.*
8'%5%#*"9*&%-%<2($*0(",-%.)%*$"*%25=*"$=%&*
2(.*%()2)%*'(*.;(27'5*0(",-%.)%*(%$,"&0#*
'(*"&.%&*$"*8&%<2'-*'(*2*5"78%44<%*
%(<'&"(7%($:*
*
uellverlng Þurposeful Message
•  Llke every change managemenL lnluauve, kM
requlres lnLenslve communlcauon.
•  CkCs musL dellver a compelllng message ln order
Lo galn supporL from key organlzauonal acLors
and Lo bulld eñecuve knowledge neLworks.
•  MosL of Lhe CkCs menuon lnLernal markeung as
Lhelr maln ob[ecuve.
LñorLs range from publlcauon of ßyers and
lnformauon bookleLs, lnformauon meeungs and
lnLroducLory workshops Lo full-ßedged kM road
shows.
!"#$%&'()*+,$-&'.,/0,$'1,'"2,
+3&1456,1"7"#&+-"'6,
,
,
!"#$%&'($$ )*+,+-./,012-1$$ )*+,+-./,012-1$
knowledge sLrucLure
dlmenslons and ßows
kM-relaLed sLamng, Lralnlng
and reward sysLems
lragmenLed kMS knowledge vlewed as an
ob[ecL, predomlnanLly slmple,
expllclL and lndependenL
knowledge
no deslgned kM-relaLed
posluons ,mlddle managers
and pro[ecL managers lnluaLe
adhoc, lnformal kM acuvlues.
ConLenL-based kMS knowledge vlewed as an
ob[ecL, boLh slmple and
complex knowledge
predomlnanLly expllclL and
lndependenL knowledge
ueslgnaLed slngle k-relaLed
posluons, mlddle managers
and pro[ecL managers engage
ln bulldlng up formal sysLems
for managlng knowledge
conLenL
Þrocess-based kMS knowledge vlewed as a
process, predomlnanLly
complex and expllclL
knowledge, boLh lndependenL
and sysLemlc
kM-relaLed unlLs aL PCs and
subsldlarles, Lop managemenL
lnvolved ln deslgnlng formal
sysLems Lo Lransfer knowledge
beLween knowledge sources
CapablllLy-based kMS SysLemauc eñorLs Lo creaLe
share and uullze new
knowledge
Speclñed and elaboraLed
Lralnlng ln kM
!"#$%&'()%"*
•  +,-.* ,-* /* .01* -#$/#02,(* ,--'03* 4'-,"0--* ,-* /5%'#* $,-.6* /"&*
#70*/&/206*#70*5,220$*#70*$,-.6*#70*2$0/#0$*#70*$08/$&6*
,-*-)99*8,&091*509,0:0&3*
•  ;,#7%'#*$,-.*#70$0*(/"*50*"%*$08/$&3*<70$0*=/1*8099*50*
/*"%$=/9*&,-#$,5')%"*%>*$,-.*/"&*$0#'$"-*?0$>%$=/"(03*
•  <70* #$00* %>* =%&0$"* $,-.* =/"/20=0"#* 7/-* ,#-* $%%#-* ,"* /*
"'=50$*%>*'"$09/#0&*&,-(,?9,"0-3*@,9,#/$1*$,-.*/"/91-,-*90&*
#%*#70*0:%9')%"*%>*%?0$/)%"-*$0-0/$(73*
8lsk - A SLraLeglc lssue
•  Cûen Lhe managemenL focuses on Lhe negauve
consequences raLher Lhan on such quesuons as,
–  Pow does rlsk añecL caplLal allocauon?
–  WhaL rlsk-based lnformauon do we need?
–  Pow do we creaLe a rlsk culLure?
–  Pow do we ensure LhaL our rlsk proñle ls commensuraLe
wlLh reLurns and shareholder rlsk appeuLes?
•  A varleLy of Lools have evolved Lo supporL companles
ln managlng dlscreLe Lypes of rlsk.

ueñnluon - SLraLeglc 8lsk
•  8lsk managemenL ls a sLraLeglc buslness process.
•  1he managemenL needs Lo assess wheLher Lhe
companys buslness acuvlues are conslsLenL wlLh lLs
sLaLed sLraLeglc ob[ecuves, and how rlsk managemenL ls
llnked Lo lnvesLmenL and growLh declslons.
•  8lsk can be besL undersLood ln Lerms of lLs Lwo maln
elemenLs: SLake and uncerLalnLy.
ueñnluon - SLraLeglc 8lsk ConLd..






•  1he hlgher Lhe sLakes, Lhe greaLer Lhe poLenual galns or
losses.
•  uncerLalnLy, ln Lurn, varles by ume and slLuauon.
!"#$%&'(')*+*(,%"#%'%-,.',*)"/%
01#"(*##%2.3/*##%
!"#$%&'(%)*%&+'(,*-%./01%0(*%.0/1%20%
'(02+*/%
!"#$"%&'()*'+,)-$.$&%/%.")
•  01$#,%)$.2)3$#/$)455#6$(7)
–  87%)$55#6$(7)9'11)7%15)"65)/$.$&%/%.")5#6"%(")"7%)
(6/5$.:)$&$'.+")($"$+"#657'()16++%+)$.2)+;556#")
+;5%#'6#)#'+,)#%";#.+)5%#<6#/$.(%)$.2)+7$#%7612%#)
=$1;%)&#69"7>)
SLraLeglc 8lsk Communlcauon
•  Þubllc relauons and rlsk communlcauon researchers and
campalgn sLraLeglsLs oûen forgeL LhaL Lhelr work can and
do - posluvely or negauvely - añecL people's healLh,
safeLy and envlronmenL.
•  lormauve research prl or Lo devel opl ng and
lmplemenung a rlsk communlcauon campalgn ls
essenual.
!""#$%&'()*+,'
•  -)*.*'$/'+'%**,'0"'+1)$*2*'+',*3$1+0*'4+3+%1*'+5"%&'0)*'
.$/#'1"556%$1+7"%'*8".0/'+%,'0*1)%$1+3'$%9".5+7"%'
+2+$3+4$3$0:;'
•  ('1"5<.*)*%/$2*'6%,*./0+%,$%&'"9'/0.+0*&$1'.$/#'$/'
.*=6$.*,;'(%'$%0*&.+0*,'.$/#'5+%+&*5*%0'5*0)","3"&:'
56/0'4*'6/*,'9".'$,*%79:$%&'+%,'*2+36+7%&'.$/#;'
•  >*2*3"<5*%0'"9'/0.+0*&$1'.$/#'5+%+&*5*%0'5",*3/'1+%'
5+?$5$@*'/)+.*)"3,*.'2+36*;'
Technology Management

! Tech. Management – Due to market changes.
! Tech. Management – Crucial for Corporate success.
! Cos. should think of methodologies to generate max. return
on R&D investment.
! Innovative approaches from personnel thus becomes
essential.
! This calls for taking risks on the part of Management.
! Top Mgmt. - To stress upon new product development,
having customer needs and wants in mind.
Environmental Scanning
! Scanning internal and external environments.
! Marketing intelligence system – Help in building
a Technology Road Map.
! Indian firms in the ongoing process of
globalization – should learn to listen not only to
their current customers, but also look at new
customers.
! Firms to always escape from technological
discontinuity.

AsslgnmenL 9
•  1ake a company of your cholce and develop a road map
for lLs 8&u plannlng.
•  ls 8&u [usL a game of chance or can sLraLegy make a
dlñerence?
•  Lxplaln Lhe Lerms:
–  neLworklng ln 8&u
–  1echSLraLegy ln 8&u
•  lor an lnLernauonal markeung ñrm, Lo whaL exLenL
would you advocaLe Lhe use of lnformauon Lechnology
and sLraLegy?

!""#$%&'%()KL)
•  M/E)-%/E8'6$')&,%,$'&'%()./%(4#N3('")#%)/4$,%#",H/%)
8',4%#%$@)
•  M/E) -%/E8 '6$') &,%,$'&'%() "(4,('$1) ,?'.(")
/4$,%#",H/%,8)0'42/4&,%.'@)
•  O,%) 1/3) (4',() -%/E8'6$') &,%,$'&'%() ,") #%2/4&,H/%)
"1"('&@)
•  ;#".3"") (5') "('0") /2) O8,4-') ,%6) P,4&,) ,004/,.5) 2/4)
"(4,('$#.)4#"-)&,%,$'&'%(<)
Balanced Score Card.
!  Strategy Evaluation - 4 Parameters:
a)  The Financial perspective.
b)  The Customer perspective.
c)  The Internal business perspective.
d)  Learning and Growth.
!  Managing the Strategy – 4 processes:
a)  Translating the Vision.
b)  Communicating and Linking.
c)  Business Planning.
d)  Feedback and Learning.
Balanced Score Card (Contd.)
!  BS as a tool:
Using BS companies-
a)  Clarify and update Strategy.
b)  Communicate throughout the company.
c)  Align unit and individual goals throughout the
company.
d)  Identify and align Strategic initiatives.
e)  Conduct periodic performance reviews.
BCG Matrix (New)
!  2*2 Matrix
!  Size of competitive advantage Vs. No. of approaches to
competitive advantage.
Fragmented
Stalemate
Specialization
Volume
No. of
approaches
to achieve
comp. Adv.
Size of the comp. Adv.
Many
Few
BCG Matrix (Contd.)
Fragmented Specialization
Volume
Stalemate
! Small and Regionalized.
! Profitability not related to size.
! Advantage gained by focus.
! No premium on growth.
! Ex. Specialty restaurants or
designer labels.

! Focused segments.
! Steep learning curves.
! Ex. Cray research in field of
Super computers.
! Where it is difficult to gain
advantage.
! CA often is the sheer sustaining
power.
! Ex. Kellogg's in India.
! Where there are economies of scale
and IRS operates.
! Constrained by market
segmentation and differentiation.
! Ex. The car industry.
Competitive Advantage of Nations.
!  Porter – Differences - 4 Decisive elements:
a)  Availability of strengths in certain narrow, technical fields.
b)  High demand in the home country.
c)  Related and supporting industries in the home country.
d)  Strong domestic rivals, Local rivalry.
Porter also refers to this as the NATIONAL DIAMOND.
Competitive Adv. Of Nations (Contd.)
! Generalizations for Strategic management:
a) Devaluation is bad for competitiveness.
b) Relaxing antitrust is bad.
c) Relaxing product safety and environmental regulation is bad.
d) Deregulation is good.
e) Promoting inter-firm cooperation is bad.
f) Orderly marketing agreements are bad.
g) Increasing defence contracts are bad.

Competitive Convergence.
! Firms compete on the basis of similar strategies as in Strategic
groups.
! Cannot be the basis for sustained Competitive advantage.
! Firms to compete for unique positioning – different Strategies
(Competitive divergence).
! Also loosely related to Prahlads concept of Dominant
Managerial Logic.
Grand Strategy Matrix
(Dimensions: Competitive position and Market growth).
Rapid Mkt. growth
Slow Mkt. growth
Weak Comp. Posn. Strong Comp. Posn.
Q3
Q1 Q2
Q4
Mkt Development, Mkt Penetration,
Fwd Integration, Bwd
Integration,Horizontal Integration,
Divestiture, Liquidation.
Mkt Development, Mkt Penetration,
Pdt. Development, Horizontal
Integration, Divestiture, Liquidation.
Retrenchment, Concentric
Diversification, Horizontal
Diversification, Conglomerate
Diversification, Divestiture,
Liquidation.
Concentric Diversification,
Horizontal Diversification,
Conglomerate Diversification,
Divestiture, Joint Ventures.
Doom Loops.

! Self reinforcing processes.
! Drive an organization into cyclical situations from which an
organization finds it difficult to extract itself.
! To avoid getting into a doom loop, it is required to constantly
upgrade the products, services and efficiency of distribution
channels.
! To get out of a doom loop – refocus on the small business units
and a change has to be brought about in the firms culture.
Doom loop - Example
Competitors innovate
& develop better Pdt.
at lower cost.
Competitor matches
price & yet is
profitable.
Firm cuts price to hold
onto the market share.
Firm has inadequate
margins to reinvest.
Employees become
demoralized.
Competitor gains mkt.
Share at firms
expense.
Quality of Pdt. &
services becomes poor.
J Curve, Floating
! First noticed by Jack Welch.
! Future predictions – Things would get worse before it got better.
! Welch – J curve would shift to right as time came closer.
! Myopic pessimism becomes clear here.
J Curve, Floating.
Time
Performance
Cobweb Theorem.
Convergence
Divergence
! Equilibrium need not necessarily be
established in an iterative process.
! Originally conceived to explain why
inflation may arise through a mismatch
of expectations.
! Has widespread applicability in
pricing strategies.
! Diagrams – Denoting demand supply
imbalances, one process guarantees
converging, the other, diverging [dis]
equilibrium.
End Game Strategies.
Enhance the productivity of declining businesses till they
collapse absolutely.
The decline phase, according to Harrigan and Porter becomes
volatile because –
! Uncertain demands due to changing technology,
preferences, rising uncertainty.
! Exit barriers.
! Strategic considerations.
! Management resistance.
! Asset Disposition.

End Game Strategies.(Contd.)
Harrigan and Porters four strategic options -
Has competitive strengths
for remaining demand
pockets.
Lacks competitive strengths
for remaining demand
pockets.
Leadership
Or
Niche
Harvest
Or
Divest
Harvest
Or
Niche
Divest
Quickly.

Fav. Industry
structure for decline.
Unfav. Industry
structure for decline.
4 Strategies: Leadership, Niche, Harvesting, Divest.
Economic Value Added (EVA).
! EVA = The after tax cash flow generated by a business - cost of
capital it has deployed to generate that cash flow.
! Can be employed to evaluate the performance of a company.
! Important role is Strategy formulation.
! EVA – 4Ms in Implementation:
• Measurement
• Management system
• Motivation
• Mindset

National Diamond.
!  Porters way of looking at a nations competitive advantage.
!  National Diamond – why? Because its valuable, adds value.
!  Four parts :
a)  Factor conditions (Land, Labor, Capital, Entrepreneurship).
b)  Demand conditions.
c)  Role of Supporting Industries.
d)  Firms Structure Rivalry and Strategy.
Space Matrix.
!  Strategic Position and ACtion Evaluation Matrix.
!  For determining an organizations overall strategic
performance.
!  4 Quadrant framework –
a)  Aggressive.
b)  Conservative.
c)  Defensive.
d)  Competitive.
IS
FS
CA
ES
Aggressive
Defensive
Competitive
Conservative
Space Matrix(contd.)
2 internal dimensions –
! Financial Strengths (FS) – Cash flows, liquidity, ROI, ease of
exit from market etc.
! Competitive Advantage(CA) – Mkt. Share, Product life cycle,
customer loyalty etc.
2 External dimensions –
! Environmental Stability(ES) – Technological changes, Rate
of inflation, Demand variability etc.
! Industry Strength – Growth potential, Profit potential,
Technological know-how etc.
Strategic Control Grid.
!  To measure the power that a firm is able to establish in its
working environment.
!  Mapping of this control grid w.r.t competitors can give the
strategist useful ideas of the appropriateness of the strategy.
!  5 elements to the manifestation of this power –
a)  Position.
b)  Profits.
c)  Process.
d)  Product.
e)  Perception.


Web Structure.
!  Definition: A set of companies that use a common
architecture to deliver independent elements of overall
value propositions that grows stronger as more companies
join.
!  2 conditions:
!  A common platform, either technology or geography etc.
!  Increasing returns to scale.
!  3 types of webs (Hagel):
a)  Market web : Shopping Malls.
b)  Consumer web : Readers digest.
c)  Technology web : Tech. Platforms – windows etc.
X Efficiency.
! The measure of a firms management in minimizing the cost
of producing a given output or maximizing the output given a
set of inputs.
! Supposed to capture the discrepancy between the efficient
behavior of firms as implied by economic theory and their
observed behavior in practice.
! Libenstein introduced this theory of inefficiency generated
due to lack of competition.
A Theoretical Model for Corporate Philanthropy
(Note: Numbers denote factor rankings)
Parameters of NPO Choice

• Responsiveness
• Credibility
• Capability
• Confidence
• Communication
• Channel
• Tangibility
• Top Management
Organisational

1.  Image
2.  Disposition
5. Resource – in – kind
7.  Resource Monetary
8.  Top Management
9.  Self - interest
CP

Policy
and
Programs

Agency

3.  Awareness
10. Confidence
11. Strategy

External

4. External
6. Social
Comparison


NPO

Non Profit Organizations

Important factors for an NPO choice in the Indian
context are –

Responsiveness Channel
Credibility Tangibility
Capability Top management
Confidence Communication

Small and Medium Enterprise (SME)

• Small and Medium Enterprise (SME) employs less
than two hundred People with an annual turnover of
Rs.5 crores.
SMEs in India have to develop entrepreneurial
characteristics in order to survive in the changing
market scenario. Four important characteristics which
are key to the success of the firm are:
• Ability to identify potential opportunities better.
• A sense of urgency making them action oriented.
• Knowledge of key to success in the industry.
• Supplementing through outside help skills, knowledge
and ability
Guidelines
• Focus on industries facing sustained technological or regulatory changes, especially those which
witnessed exits by established competition
• Seek industries whose smaller firms have relatively weak competitive position
• Seek industries that are in early, high-growth stage of evaluation
• Seek industries in which it is possible to create high barriers for subsequent entry
• Seek industries with heterogeneous products that are relatively unimportant to the customers overall
success
• Seek to differentiate your products from those of your competitors in ways that are meaningful to
your customers
• Focus differentiation efforts on product quality, marketing approaches and customer service – and
charge enough to cover the costs of doing so
• Seek to dominate the market segments you compete in. if necessary, segment the market differently, or
change the nature and focus of your differentiation efforts to increase the domination of the segments
you serve.
• Stress innovation, especially new product innovation, that is built on existing organisational
capabilities
• Seek natural, organic growth through flexibility and opportunism that builds on existing
organisational strengths.
Some guidelines for new venture success
Source: C.W. Hofer, and W.R. Sandberg, Improving New Venture performance: Some guidelines for
new venture success, American Journal of Small Business, pp.17, 19, Summer 1987.

Master your semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master your semester with Scribd & The New York Times

Cancel anytime.