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Case Analysis

STRATEGIC

Strategy Formulation at Coolex


What should our business-mix be? Can we achieve our goals faster by

focusing on one or two businesses? Are these the right questions? Where do we want to be 3 years from now? How do we bridge the gap between our resources and our goals? Who are our competitors today? What is the competitive framework in which we operate? What are the strategies being adopted by our competitors? The answers form the basis of strategyformulation

Marketing

HR

Finance
Functional Heads

Operations

Once a year , week long meet

Boring & Mundane Activity

Tradition Approach : Industry/ Competitor Focused


Static picture of the competition Underplays the role of innovation Exaggerates the role of the environment Does not account for the varying resource- and competence-levels across

companies Strategy Formulation : Mundane Activity Old Perspective : Reactive, follow the competitor Move New Perspective : Base strategy on your core competencies instead of the environment and the industry

New Approach : Focus on Core Competency


Look within your Organisation Find your core strengths, and understand how you can leverage them to gain a

competitive edge, You may not be able to emulate your competitors simply because you do not have the expertise to do whatever they are doing Do what you do well; the rest will just fall into place

Shifting the Focus of Strategy Analysis: From the External to the Internal Environment

THE FIRM Goals and Values Resources and Capabilities Structure and Systems

THE INDUSTRY ENVIRONMENT

STRATEGY
Competitors Customers Suppliers

Rationale for the Resource& Capability-based Approach to Strategy


When the external environment is subject to rapid change, internal resources and capabilities offer a more secure basis for strategy than market focus Resources and capabilities are the primary sources of profitability

The Links between Resources, Capabilities and Competitive Advantage

COMPETITIVE ADVANTAGE

STRATEGY

INDUSTRY KEY SUCCESS FACTORS

ORGANIZATIONAL CAPABILITIES

RESOURCES
TANGIBLE Financial Physical INTANGIBLE Technology Reputation Culture HUMAN Skills/know-how Capacity for communication & collaboration Motivation

In traditional approach companies tend to adopt similar strategy While core competency based approach implements a strategy that exploit a firms unique strength

Has it got a grip on its core competencies at all?

Difficult to Emulate UNIQUE Internally Sustainable

Core Competency

There are two marketdriven tests to identify a core competence, and Jagmohan has ignored both: Should provide potential access to a wide variety of markets Should make significant contribution to the perceived benefits delivered by the product to the customer

perception of its core strengths is not accurate

Finance Structure

Marketing

Project Managemen t Skills

Finance, for instance, is not really its strength. The company could increase its revenues by offering a more flexible credit-schedule to its customers. Its modular payment-schedule, while increasing the efficiency of its working capital utilisation, could well turn away potential customers, who wish to pay for a project only after it has been completed-or even 30 days later--and not in stages Most of the strengths listed by the senior management team are not core

Logistics Relationsh ip Manageme nt

Human Resource

competencies; they are merely positive attributes. Only those that result
in adding value from the customer's perspective, not the company's are core competencies. Understanding them should be the basis of strategy-development at Coolex

Traditional Approach
ORGANIZATIO N STRUCTURE

INDUSTRY STRUCTURE

STRATEGIC POSITION

BCG Growth Share Matrix

TOOLS

Michael Porters Five Forces

Game Theory

Resource Based Approach


Select Strategy

STRATEGY

COMPETITIVE ADVANTAGE

Appraise competitive advantage Identify the firms capabilities Identify and classify firms resources

Identify Resource Gaps

CAPABILITIES

RESOURCES

Roadmap
LONG TERM STRATEGY FOR SUSTAINABLE COMPETITIVE ADVANTAGE

STEP 1. Identify the firms resources and capabilities. STEP 2. Explore the linkages between resources and capabilities. STEP 3. Appraise the firm resources and capabilities in terms of (i) strategic importance (ii) relative strength
1 Relative Strength 10

Superfluous Strengths C1 R4 C6

Key Strengths C3 R3 R1 C2 C5 C2 R2 C4

POTENTIAL FOR SUSTAINABLE COMPETITIVE ADVANTAGE

Zone of Irrelevance 1

Key Weaknesses 10

Strategic Importance

Roadmap
LONG TERM STRATEGY FOR SUSTAINABLE COMPETITIVE ADVANTAGE

STEP 4. Develop strategy implications: (a) In relation to strengths How can these be exploited more effective and fully. (b) In relation to weakness _ Identify opportunities to outsource or acquire resources and capabilities to remove weakness.
SHORT TERM STRATEGY

Identify Current Problem faced, In this case customer expectation gap


EVALUATION STRATEGY

Develop Strategy to Solve Problem, In this case better synergy between R&D and Marketing unit required

Develop Actionable Plan with varying cycle for evaluation of Implementation for long term and Short term Strategy

STRATEGY FORMULATION
Superfluous Strengths Logistic support for trading Distribution & Marketing for other companies products. Key Strengths Low cost working capital Project Management Relationship Management Organizational structure Talent Puller PROBABLE SOURCES OF COMPETITIVE ADVANTAGE

Strategic Importance

10

IDENTIFYING SUSTAINABILITY OF COMPETITIVE ADVANTAGE

Durability

Transferability

Replicability

STRATEGY FORMULATION
Key Strength Low cost Capital Sustainable Advantage or not ? Replicable by Central-AC Manufacturer. Derived from superior engineering , procurement and routine Big Players can build up big networks Decision making can be imitated by having flat organization, Talent can get transferred.

Project Management Skills

Relationship Management

Organizational Structure Attract Best Talent.

STRATEGY FORMULATION
SUPERFLOUS STRENGTH Logistic support for trading Distribution & Marketing for other companies products. OTHER KEY STRENGTHS Low cost working capital, Attracting Talent, Relationship Management No increase in Investment and possible Disinvestment.

How can they be exploited more and fully ? Can any other organization do it better (Outsource) ?

CORE COMPETENCE Project Management Skill

Prioritized, Increase the gap through routine and innovation.