Birla Institute of Technology & Science, Pilani

Work-Integrated Learning Programmes Division

First Semester 2017-2018
Comprehensive Examination (EC-3 Regular)
Course No. : MM ZG611/ POM ZG611/ QM ZG611/ MBA ZG611/ POMSS ZG611
Course Title : STRATEGIC MANAGEMENT AND BUSINESS POLICY
Nature of Exam : Open Book
Weightage : 45% No. of Pages =4
Duration : 3 Hours No. of Questions = 7
Date of Exam : 05/011/2017 (FN)
Note:
1. Please follow all the Instructions to Candidates given on the cover page of the answer book.
2. Assumptions made if any, should be stated clearly at the beginning of your answer.
3. The cases presented in numerous questions are not meant to show any inefficiency of the company. These are
used as illustrations and situation.
Q.1. Read the case-let below and answer the questions given at the end of the case:

‘Toys R Us’ closing?

On Monday, September 18, the toy retailer “Toys R Us” filed for Chapter 11 bankruptcy
protection ahead of the 2017 holiday shopping season- a crucial time of year for any toy seller.
The filing also strikes at the heart of one of the nation's most iconic retailers, a household name
for more than a generation. Toys R Us pioneered big-box toy retailing generations ago, a national
chain that displaced many smaller, neighbourhood toy stores. Toys R Us filing for bankruptcy has
set off a wave of panic in shoppers. Nostalgic customers quickly began freaking out about the
prospect of losing a store that defined their childhood.
Toys R Us has carried a heavy debt load since it became a private company in 2005. Its private
equity investors, KKR, Bain Capital, and Vornado Realty Trust, initially planned to earn back
their investment with a public stock offering, but that plan fell apart three years later when the
Great recession hit. The toy store chain's long-term debt was $5 billion as of April 29, 2017. It
had $701 million in liquidity, which included $400 million in committed lines of credit. Chapter
11 bankruptcy is a way for Toys R Us to restructure and renegotiate its roughly $5 billion in debt.
It may not be a death sentence for stores. For example, retailers such as Eddie Bauer and
Aeropostale have kept stores open despite filing for bankruptcy, though both brands closed
locations following the filing. “Today marks the dawn of a new era at Toys R Us where we
expect that the financial constraints that have held us back will be addressed in a lasting and
effective way,” Dave Brandon, the company's CEO said in a statement.
(a) What might be two crucial external and internal environmental pressure elements (each)
that led Toys R Us to move to this decision? [4]
(b) What type of corporate strategy would you recommend to the case company? Justify your
choice. [3]
Q.2. “As India is moving towards meeting its commitments under the Paris agreement on climate
change, its renewable energy market is likely to witness a strong growth over many years”, says
Moody's Investors Service. According to the rating agency, India's emission reduction
commitments under the Paris agreement will lead to a sharp rise in renewable energy capacity.
India aims to achieve 40 percent of cumulative installed capacity from non-fossil fuel sources by
2030 from the current 30 percent and also plans to grow it's renewable energy capacity to 175
GW by 2022 from the current 57GW. "Such growth will be driven by the public and private
sector. However, the key off-takers for most renewable projects are state-owned distribution
companies.”
After a mature business of optical disk, Moser Baer decided to enter into the solar energy
business. The top management is interested in analysing the competitive intensity of this industry.
Suggest the most appropriate tool for this purpose and highlight your findings of the analysis.
[1 + 4 = 5]

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Q.3. Read the case-let below and answer the questions given at the end of the case:

Proctor & Gamble Restructuring

Three weeks ago A.G Lafley, Chairman and chief executive of Procter & Gamble, was shown ‘a
fascinating new material’. With a group of scientists from P&G alongside him, he was given 30
days to decide whether to take an option on the breakthrough- ‘No, I can’t talk about (it)’- in case
it eventually proved commercially viable. Mr. Lafley recounts: ‘We brainstormed a whole range
of possible applications and said: “OK, we’re going to take a run at this thing.” I just want to get a
look. If we pass, and it becomes big, shame on us.’
A restructuring began by predecessor Durk Jager has, under Mr. Lafley, returned P&G to rude
financial health. Total sales have grown 40% to $57bn since 2000. P&G has doubled its profits
and generated over $30bn in free cash flow, with $11bn of that returned to shareholders. P&G’s
shares have almost doubled. His unassailable command of the company is reflected in his
manner. The youthful-looking 58-year-old rarely pauses for breath as he lays out his vision for
P&G during a 90-minute interview with the Financial Times in New York. In characteristically
straightforward language, he describes the three key strategic choices he has made as ‘Sesame
Street simple.’
The first concerned its core laundry, baby care, feminine-care, and hair-care businesses. He
decided to expand them by incorporating existing technologies into other products. In the past
year, for example, P&G has launched a variation of its Tide laundry detergent incorporating the
odour-eliminating technology used in its Febreze line of sprays.
The second was to expand into beauty and healthcare- one of the most rapidly growing global
businesses. ‘The reasons were really simple,’ says Mr Lafley. ‘Demographics are driving those
industries. Beauty alone is a huge industry-$150bn at least worldwide.’ In a sign of that approach,
P&G last week linked with Dolce & Gabbana to produce luxury fragrances and beauty products
under license for the Italian fashion house.
The third choice was switching from concentrating on the 1bn most affluent consumers in the
world – P&G’s traditional turf-to figuring out how also to serve the remaining 5bn. For the low-
income Chinese consumer, for example, P&G is testing a prototype disposable nappy made
cheaply enough that it can be sold for the price of an egg.
It is not just the numbers that tell the story. P&G has also submitted to radical surgery on its
corporate culture. Mr Lafley goes on: ‘We were terribly internally focused, totally ‘building-
from-within’. And that’s still honestly, an issue. It’s an issue with any organisation: the larger it
is, the worse it is. ‘Units within P&G tended to compete with each other with executives just ‘as
intra-murally competitive as (they were) externally competitive.’
Additionally, P&G’s global operations have been restructured, doing away with ‘fiefdoms’ that
had emerged in Europe and the U.S. ‘In Europe, we were too European, and in U.S. we were too
American. I brought up young leaders who’d spent a lot more time outside their home country,
who had been on the ground in places where we didn’t have leadership and who were, I thought,
more open-minded, more externally focused –more inspirational, frankly, to their peers. Not the
old fuddy-duddy style.’ As a result, the average age of the P&G leadership has fallen since 2000
by between 7-10 years.

(a) How has the chief executive, A.G. Lafley, managed to transform the organizational
culture within P&G? [2]

(b) What structural changes were necessary to achieve this, and why? [2]

(c) How do you evaluate the “Built-from-within” policy of P&G from succession planning
perspective? [2]

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Q.4. Read the case-let below and answer the question given at the end of the case:

Tata’s Governance is still faulty

The ebbing of profits at Tata, India’s largest conglomerate, in recent years has prompted a power
struggle that in turn has exposed the often dysfunctional relationship between several dozen
businesses, holding companies, people and charities that use the Tata name. The struggle is now
over: on February 6th, Cyrus Mistry, Tata’s boss until last October was finally booted out of the
company. Natarajan Chandrasekaran, the boss of one of the group’s key operating firms, Tata
Consultancy Services, takes over as chairman on February 21st.
Executives at the 149-year-old group hope that will close a grim chapter in its history. Mr.
Mistry, whose family owns an 18% stake in Tata Sons, the main holding company, which is
unlisted, reacted badly to being evicted as its chairman last year. The move to oust him was set in
motion by Ratan Tata, the group’s 79-year old patriarch (and Mr. Mistry’s interim successor).
During Mr. Mistry’s reign, Mr. Tata had remained at the helm of the Tata Trusts, charities that
control 66% of Tata Sons.
Before leaving he made all manner of claims of financial and corporate-governance impropriety
at Tata. Regulators are said to be looking into some of them; Tata denies them all. But in the
hundreds of pages of affidavits filed in various tribunals by both sides, a recurring theme
emerges, that the relationships between the Trusts, Tata Sons and Tata companies are governed
primarily by personal relationships and deference to tradition. There is little sense that things are
going to change. The hope seems to be that Mr. Chandrasekaran can grow profits again and put
such problems out of mind.
The main corporate-governance problem is that the interests of minority shareholders, whether
they are invested in Tata Sons or the various operating companies, risk being trampled over if
unaccountable trustees are ruling the roost. But at the level of the businesses, improvised
governance processes also slowed down decision-making to a crawl. Turf battles created
confusion among executives as to who was in charge.

What is a specific issue with corporate governance highlighted in the case-let? How “Agency
theory” and “Stewardship theory” can be useful to understand this issue? [3 + 2 = 5]

Q.5. Read the case-let below and answer the question given at the end of the case:

Pfizer remakes the Company

Pfizer, Inc. was founded in 1849 by Charles Pfizer and Charles Erhart. The company was the
breakthrough leader in the development of the means for producing Penicillin on a large scale. In
fact, most of the Penicillin carried by troops on D-Day in 1994 was made by Pfizer. The company
became a major research lab for the development of the drug. In 1972, Pfizer increased funding of
research and development from 5% of sales (an astounding figure in any industry) to 20% of sales.
The company viewed its mission as discovering and developing innovative pharmaceuticals. By
2011, the company had sales of US$67.4 billion but had also absorbed several very large
acquisitions from 1999-2009, including Wyeth, Warner-Lambert, and Pharmacia. Some
blockbuster drugs had or were coming off patent protection, and new ones were becoming
increasingly difficult to fin. Most of the diseases that still lacked effective treatment, such as
Alzheimer’s, were more complicated.

By 2012, new drug successes were becoming increasingly difficult to find. The company pored
US$2.8 billion into an inhalable insulin (Exubera) and a cholesterol-reducing replacement for
Lipitor (Torcetrapib), but both failed to take hold in the market. History has shown that only 16%
of drugs under development ever get regulatory approval.

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In a bold move, Pfizer’s CEO, Ian Read, decided in 2012 to consolidate around five areas:
cardiovascular diseases, cancer, neuroscience, vaccines, and inflammation/immunology.
Redirecting resources in the company, Pfizer closed the famed Sandwich, England, research
campus (the birthplace of Viagra) laying off more than 2000 employees because its focus was on
areas not included in the new direction of the company. It then divested its animal health and
infant nutrition businesses. It also cut more than 3000 research jobs at its flagship New London,
Connecticut, campus. All of the cuts were being ploughed back into one of the five areas of the
company will focus on in the future.
In 2012, what move did Ian Read take to improve the health of the company? Which type of
corporate strategy was chosen by him? [2 + 2 = 4]

Q.6. Of all the management tools designed to improve corporate performance, the balanced scorecard is
by far the most popular. More than 80 percent of large US companies used it, as do many
government departments. Many Indian companies tested their fate by applying it to improve
performance. As per your understanding, why is it important to understand organization’s
objectives in deciding balanced scorecard measures? Identify few performance measures of four
perspectives of the balanced scorecard for an organization operating in Indian telecom industry.
[2 + 3 = 5]

Q.7. Based on case studies discussed during the course, answer the following questions:

(a) Develop strategy canvas for Patanjali Ayurveda Limited. Describe competitive strategies
adopted by Patanjali. [2 + 3 = 5]

(b) Develop a 5-stage design thinking process for Aravind Eye Care System. [5]

(c) Following Bartlett and Ghosal framework, which type of international strategy would you
recommend to Taco Bell India current managing director Ankush Tuli? Justify the reason.
[3]

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