Strategic Management

1. You are the CEO of an Automotive firm in India. Recently you have expressed interest to
change your Traditional Inventory System to a Just-in Time Inventory System. Conduct a
detailed Force Field Analysis by identifying atleast 3 Driving forces & 3 Restraining forces each
& suggest atleast 3 ways of reducing the restraining forces.
Ans:
Introduction:
According to the Force Field Analysis model of Kurt Lewin, effective change happens by
unfreezing the existing state of affairs or the current situation, moving to a changed or a desired
situation and then refreezing for making the change relatively permanent. During the stage of
Unfreezing, the driving forces should be made stronger to motivate a change in the behaviour or
ways of working, while the restraining forces should be made weaker or removed. The driving
forces from the external environment could be Globalization, Technological Development and IT
revolution, changes in the workforce, etc. Apart from this, the driving forces may originate
within the organization through the efforts of the corporate leaders.
Concepts and Application:
Force field analysis to change from traditional to just in time inventory system:
One effective approach to overcoming resistance and implementing change is called Force-field
analysis. Force-field analysis grew from the work of Kurt Lewin, who proposed that change was
a result of the competition between driving and restraining forces. Driving forces can be thought
of as problems or opportunities that provide motivation for change within the organisation. Re-
straining forces are the various barriers to change, such as a Lack of resources, resistance from
middle managers, or inadequate employee skills. When a change is introduced, managers should
analyze both the forces that drive change (problems and opportunities) and the forces that resist
it (barriers to change). By selectively removing forces that restrain change, the driving forces
will be strong enough to enable implementation, as illustrated by the move from A to B in below
figure. As barriers are reduced or removed, behavior will shift to incorporate the desired
changes.
Just-in-time (JIT) inventory control system schedule materials to arrive at a company just as they
are needed on the production line. In an Ohio manufacturing company, management’s analysis
showed that the driving forces (opportunities) associated with the implementation of JIT were (1)
the large cost savings from reduced inventories, (2) labor/ personnel savings from needing fewer
workers to handle inventor and (3) a quicker, more competitive market response for the
company. Restraining forces (barriers) that managers discovered were (1) a freight system that
was too slow to deliver inventory on time. (2) a facility layout that emphasized inventory
maintenance over new deliveries, (3) worker skills that were inappropriate for handling rapid
inventory deployment, and (4) union resistance to loss of jobs. The driving forces were not
sufficient to overcome the restraining forces.

To shift the behavior to JIT, managers attacked the barriers. An analysis of the freight system
showed that delivery by truck provided the flexibility and quickness needed to schedule
inventory arrival at a specific time each day. The problem with facility layout was met by adding
four new loading docks. Inappropriate worker skills were improved with a training program to
instruct workers in JIT methods and in assembling products with uninspected parts. Union
resistance was overcome by agreeing to reassign workers no longer needed for maintaining
inventory to jobs in another plant. With the restraining forces reduced, the driving forces were
sufficient to allow the JIT system to be implemented.
Ways of reducing the restraining forces:
The approach to implementing change is to use specific to overcome resistance and more
smoothly put change in to action. The following five tactics, given below have proven
successful.
Top Management Support
The visible support of top management also helps overcome resistance to change. Top
management support system symbolizes to all employees that the change is important for the
organization. Top management support is especially important when a change involves multiple
departments or when resources are being reallocated among departments. Fred Smith, the
founder of FedEx, got personally involved in communicating about the addition of ground
shipping services. By giving talks on the corporate television network, going on road trips, and
communicating via e-mail and newsletters, smith signaled that the change was important to the
company's future success. Without top management support, changes can get bogged down in
squabbling among departments. Moreover, when change agents fail to enlist the support of top
executives, these leaders can inadvertently undercut the change project by issuing contradictory
orders.
Participation
Participation involves users and potential resisters in designing the change. This approach is time
consuming, but it pays off because users understand and become committed to the change.
Participation also helps managers determine potential problems and understand the differences in
perceptions of change among employees. When General Motors tried to implement a new
management appraisal system for supervisors in its Adrian, Michigan, plant, it met with
immediate resistance. Rebuffed by the lack of cooperation, top managers proceeded more
slowly, involving supervisors in the design of the new appraisal system. Through participation in
system design, managers understood what the new approach was all about and dropped their
resistance to it.
Negotiation
Negotiation is a more formal means of achieving cooperation. Negotiation uses formal
bargaining to win acceptance and approval of a desired change. For example, if the marketing
department fears losing power if a new management structure is implemented, top managers may
work with marketing to reach a resolution. Companies that have strong unions frequently must
formally negotiate change with the unions. The change may become part of the union contract,
reflecting the agreement of both parties.
Conclusion:
The restraining forces or the resistance from the employees can be controlled by way of effective
communication and involvement of the employees in the process, training initiatives for
strengthening the new set of knowledge and skills, implementation of stress management
techniques to help employees in coping with the stressors, negotiation for ensuring compliance
and the last method is implementation of coercive measures if all the other measures fail and the
need for change is urgent in nature.
2. During the year 1999, Vodafone, a UK based telecom company decided to acquire
Mannesmann, a German cellphone company. Identify the nature of acquisition in this case.
Which one of the following types of acquisition would you categorise this to be the most
appropriate?

 Hostile Takeover
 Friendly Takeover
 Merger OR
 Demerger

Describe in detail the process undertaken of your chosen option. If you were the CEO of the
Vodafone, would you undertake this above mentioned step?
Ans:
Introduction:
On 13 November 1999, the UK-based Vodafone AirTouch, the world's largest mobile phone
group, announced a takeover bid for the German telecommunications and engineering group
Mannesmann AG, on the basis of an exchange of shares between the two corporations. The
Mannesmann executive board, however, immediately rejected the acquisition proposal, calling it
an "inferior offer" which is "extremely unattractive for Mannesmann shareholders". According to
Mannesmann management, a merger with Vodafone is not strategically reasonable since both
companies have very different structures and economic growth prospects. While Vodafone
concentrates its business mainly on mobile phones, Mannesmann is much more diversified, with
four main business divisions operating in engineering, automotive, telecommunications and
tubes.
Concepts:
In November 1999, Vodafone, a UK based telecom company acquired Mannesmann, a German
cellphone company through hostile takeover bid.
A hostile takeover is the acquisition of one company (called the target company) by another
(called the acquirer) that is accomplished by going directly to the company's shareholders or
fighting to replace management to get the acquisition approved. A hostile takeover can be
accomplished through either a tender offer or a proxy fight. The key characteristic of a hostile
takeover is that the target company's management does not want the deal to go through.
Hostile Takeover Process
There are three common methods:
Hostile Bid - Company A wants to achieve a hostile takeover of Company B. Company A goes
directly to the shareholders of Company B with an offer to buy their stock at a premium price -
substantially above the current market price. This is known as making a tender offer, and if
successful, Company A takes majority ownership of Company B, even if the board of Company
A objects.
Open Market - Company A buys a majority of the available shares in Company B on the open
market, thus taking control of Company B. This may not always be possible as the majority of
shares may be in the hands of private investors and not in holdings of financial institutions,
available for purchase.
Proxy Fight - Shareholders in a company have a right to vote on things, like replacing
management or selling the company. They can either vote on their own behalf or assign their
voting rights to someone else through a form called the proxy. A proxy fight is when an
acquiring company convinces shareholders of a target company to assign them their voting rights
through the proxy. The acquiring company then uses the proxy votes to boot out the management
who opposed the takeover, taking control.
Application:
If I were the CEO of the Vodafone, I would like to go with Friendly Takeover.
Friendly Takeover is a situation in which a target company's management and board of directors
agree to a merger or acquisition by another company. In a friendly takeover, a public offer of
stock or cash is made by the acquiring firm, and the board of the target firm will publicly
approve the buyout terms, which may yet be subject to shareholder or regulatory approval. This
stands in contrast to a hostile takeover, where the company being acquired does not approve of
the buyout and fights against the acquisition.
In most cases, if the board approves a buyout offer from an acquiring firm, the shareholders will
vote to pass it as well. The key determinant in whether the buyout will occur is the price per
share being offered. The acquiring company will offer a premium to the current market price, but
the size of this premium (given the company's growth prospects) will determine the overall
support for the buyout within the target company.
In a friendly takeover, the target company often has a lot to benefit from the takeover. The
biggest determinant behind a friendly takeover is often the price per share being offered to the
target company. The price is often better than the current market price of the company’s shares.
In some instances, the target company might receive other benefits such as further investment or
a better opportunity to expand the company to new markets.
It is important to understand that a friendly takeover doesn’t necessarily mean the deal will go
through. Even if the board and management approve the buyout term, all deals will be subject to
regulatory approval. Each nation’s regulatory board may reject the deal, even if neither company
is against it. For example, the country’s regulatory board might deem the deal to lead into a
monopoly position. The merger or acquisition might also require shareholder approval. In rare
instances, company’s shareholders might reject the board’s recommendation to sell.
We should give the below benefits to the employees and management of Mannesmann:
 A merger of Mannesmann and Vodafone AirTouch would not mean any additional job
losses;
 The rights of the employees, trade unions and works councillors would be fully
recognised. Mannesmann AG would continue to have a "co-determined" supervisory
board with employee representatives;
 Employment perspectives in telecommunications would be improved in favour of the
Düsseldorf region;
 The traditional industry divisions of Mannesmann would become a separate stock
company under the current management, as had already been decided by the
Mannesmann executive and supervisory board; and
 The fixed-line division of Mannesmann telecommunications would become an
independent company within the new Mannesmann-Vodafone corporation.
Conclusion:
In conclusion, Vodafone is a classic mobile phone company because of its unique history,
aggressive acquisitions, and worldwide growth. Right from its inception, the company has been
the first-mover in many markets. Vodafone's future expansion and global strategy has been
affected by dot-cum bubble continues to accumulate a strong share in the wireless industry. In
the Coming years, Vodafone will continue to play a major role in the wireless industry along
with other players.
3. You have been appointed as a Consultant to a Malaysian automotive company wanting to
enter India.
a. Conduct a PEST analysis for India as a market.
Ans:
Introduction:
PEST Analysis is a measurement tool which is used to assess markets for a particular product or
a business at a given time frame. PEST stands for Political, Economic, Social, and Technological
factors. Once these factors are analysed organisations can take better business decisions.
Concepts and Application:
PEST analysis for India as a market:
1. Political Factors
Being one of the largest democracies in the world, India runs on a federal form of government.
The political environment is greatly influenced by factors such as government’s policies,
politician’s interests, and the ideologies of several political parties. As a result, the business
environment in India is affected by multivariate political factors. The taxation system is well-
developed and several taxes, such as income tax, services tax and sales tax are imposed by the
Union Government.
2. Economic Factors
The economy of India has been significantly stable, since the introduction of the industrial
reform policies in 1991. As per the policy, reductions in industrial licensing, liberalization of
foreign capital, formation of FIBP and so on, has resulted in a constant improvement of India’s
economic environment.
3. Social Factors
The social factors refer to any changes in trends which would impact a business environment.
For instance, the rise in India’s ageing population is resulting in a considerable rise in pension
costs and increase in the employment of older workers. India has a population of more than 1.2
billion people with about 70% between the ages of 15 and 65. Therefore, there are structures
with percentages according to age. These structures contain varying flexibility, in education,
work attitudes, income distribution, and so on.
4. Technological Factors
Technology significantly influences product development and also introduces fresh cost-cutting
processes. India is served with both 3G and 4G technology which has facilitated several of their
technological projects. Furthermore, the country also possesses one of the strongest IT sectors in
the world, promoting constant IT development, software upgrades and other technological
advancements. Recently, India has also attempted to launch their satellites into space.
5. Legal & Environmental Factors
In the recent past, a number of legal changes have been implemented in India, such as recycling,
minimum wage increase and disability discrimination, which has directly affected businesses
there. However, when it comes to environment, the quality of air in India has been adversely
affected by industrialization and urbanization, also resulting in health problems. As a result, there
have been establishments of environmental pressure groups, noise controls, and regulations on
waste control and disposal.
Conclusion:
The Indian government’s efforts are directed towards the establishment of a free, fair, transparent
and fully informed market with help of the Futures market, so that futures prices are truly
determined by the forces of demand and supply. In the long term, the continuing rapid growth of
economy in India creates a huge potential for futures market. The entry of the foreign investment
firms will help the development of the market as the trading will be very active when there are a
large number of participants.
b. Based on the PEST analysis conducted, would you recommend a positive entry or suggest a no
entry into the Indian market. State your response with atleast 4 reasons.
Ans:
Introduction:
Foreign portfolio investors (FPIs) worldwide believe that India is an attractive investment
destination among emerging markets with a favourable trade and settlement cycle, moderate tax
rates and adequate investment limits. India is growing at a rapid pace. World is growing at 3.2%
when India is at 6-7%. So we see lot of interest among foreign investors investing in India.
Concepts and Application:
I would like to recommend a positive entry into the Indian market, based on the above PEST
analysis.
The reasons to Invest in India:
1. Socio economic structure
India has a large sized middle class, which is further expanding substantially, offering a big fat
market for foreign products and services. In fact, if India continues its recent growth trend,
average household incomes will triple over the next two decades and it will become the world's
fifth largest consumer economy by the year 2025, according to a McKinsey report in 2010. The
consistent economic growth in India has been an important factor that has contributed towards
the decline in poverty.
2. The infrastructure
Road - India's total road network spans 3.34 million KM which is second largest in the world.
This road network consists of 65,589 KM of highways.
Rail - Indian rail route is 63,028 KM long which is largest in Asia and second largest in the
world under one management. Indian Railways have 222,147 freight wagons for use in
movement of freight to any corner of the country.
Ports - There are 13 major ports and 187 minor/intermediate ports along the coast line of the
country. Total capacity of Indian ports in the year 2010-11 was 616.73 million tons. Ports handle
over 90% of India's international trade.
Airports - India has a total of 125 Airports, which include 11 International Airports.
SEZs - With a view to attract larger foreign investments in India, the Special Economic Zones
(SEZs) Policy was announced in April 2000 by Indian Government. There are 133 special
economic zones operating presently all over India.
3. Locational advantage
Located in south Asia, India has its border countries as China, Bhutan and Nepal on north-west
side, Myanmar and Bangladesh on East side and Afghanistan & Pakistan on its North-West side.
The great Himalaya Mountains divide India from rest of Asia in its North side. Some of the
emerging and established markets such as Middle-East and South East countries are also closely
located.
Naturally connected via the sea route from the other three sides, India is surrounded by Bay of
Bengal, Arabian Sea and Indian Ocean which facilitates most its overseas trade in all directions.
4. Population and work force
One out of every six people in the world is an Indian. India's biggest asset is huge size of its
young and working population class. The proportion of population in the working age-group 15-
59 years is expected to rise from 57.7 percent in 2001 to 64.3 percent in 2026. This is going to
positively impact India's growth in the coming years.