ENTRY AND EXIT BARRIER

1. Entry barrier
 It becomes difficult for the organization to entre from that particular market
 What makes it diff for the org to enter the market?
i. Patented Technology
 If it is a patented technology then it will be difficult for the organization to enter the
market
 If it is a normal or general technology then it will be easier for the organization to enter
the market

i. Distribution channel
 If restricted distribution channel then difficult for the organization to enter the market
 If excess of distribution channel then easier for the organization to enter the market

ii. Switching cost

 If high switching cost then difficult for the organization to enter the market
 If low switching cost then it is an opportunity for the players to enter the market

iii. Breakeven point

 If the breakeven point is achieved quickly then is an opportunity for the players to enter
the market
 If longer time to achieve breakeven point then new player must think twice before
entering the market

1. Exit barrier
i. Specialized asset
 Wherever there are specialized asset those organization posses then it acts as deterrence
to exit the market
 This is because less number of people is willing to buy the business
 Also, such specialized assets require specialized people and high cost for maintenance
 In case of non specialized machine then it be easier to sell

iv. Interrelated business

 Example = RIL manufactures yarn, cloth, etc – each business is interdependent on each
other
 So negative effect on one will have the effect on all other
 So whenever the business is interrelated, the exit barrier will be high
 In case of independent business it becomes easier for the org to exit the market

GENERIC STRATEGIES
 Given by Michael porter
 Parameters – basis of describing the generic strategy
i. Strategic advantage
 Advantage that the organization will have will either be of manufacturing the product at
lower cost; or
 The product will be unique among the competitors
v. Strategic targets
 Whether the target market segment of the organization is entire the industry or market; or
 A particular segment of society/market

i. Overall cost leadership strategy

 Aim of the organization is achieving cost leadership
 Product is aimed to the entire market [market is heterogeneous – divided on the basis of
income, behavior, age group – so the product caters to all those segments in the market]
 Thus, organization will be in a position to manufacture the product at the lowest cost
compared to the competitor
 Example – AMUL butter achieved low cost leadership – because the product is meant for
everybody so far the market is concerned

vi. Differentiation strategy

 Unlike the overall cost leadership strategy, the differentiation strategy focuses on class
leadership
 It is going to cater to the entire market and even then there is some sought of uniqueness
perceived by the customers
 In differentiation strategy, the organization is aimed at uniqueness in the market

vii. Focus strategy

 Two types
a. Focused overall cost leadership strategy
 Focus of the organization is on low cost
 Organization caters to the particular segment of the market
 But the organization has achieved low cost position

b. Focused differentiation strategy

 It is for a particular segment of the market
 Some sort of uniqueness is perceived by the customers

MARKETING WARFARE STRATEGIES

 Given by Al Ries and Jack Trout
 They say that marketing strategy doesn’t necessarily need to cater to the customers but it
is also about how the organization out fight its competitors
 According to them marketing is like war where competitor is the enemy and customer is
the battle ground that is to be won

 Four types strategies – called as principles of warfare

These are competition related strategies
They are to understood in a typical market structure consisting of market leader, 2 or 3
challenger, followers and nichers

i. Principle of defensive warfare

 When we are talking from the perspective of Principle of defensive warfare it is generally
adopted by the market leader in order to defend its market share and customer base

viii. Principle of offensive warfare

 Generally followed by the market challengers
 The purpose is to increase their market share

ix. Principle of flanking warfare

 Generally followed by market followers [i.e. the favorable firms]
 The purpose is profitable survival of the organization
 x. Principle of guerrilla warfare
 Generally adopted by market follower like tenable and weak firms
 The purpose is survival

PRINCIPLE OF DEFENSIVE WARFARE

 Three sub-principles
i. Only the market leader should consider adopting the defensive strategy
 This is because they already have a very high market share
 There are very low probability of gains extra market

xi. The best defensive strategy is the encouragement to attack one’s own self
 One should try to eliminate or remove those products which will make the leaders
position vulnerable

xii. Strong competitive moves should always be blocked

 Example – Ariel was the first company to come out with green granules in the detergent
powder
 Earlier the detergent market consisted of undifferentiated products
 But Ariel became the first to differentiate its product by adding green granules
 Thus customers identified the Ariel products easily and were able to differentiate the
products
 Looking at Ariel – Surf came out with blue granules in the detergent
 Ariel was market challenger to surf
 Surf identified the strategy and decided to block the strategy
 Thus they came out with blue granules - so a strong competitive move was blocked by
surf

PRINCIPLE OF OFFENSIVE WARFARE

 Three sub-principles
i. The main consideration is the strength of the leader and not your own
strength and weakness
 We should always try to look at the strength of the leader and then we should try and
launch an attack on the strength of the leader
 The organization must be well aware of the strength of the competitor and how they as an
organization can minimize the strength in the market by formulating a strategy to counter
the strength
 Example – Mother’s recipe conducted an analysis of the strength of Nilons pickle
 Strengths – ingredients, taste, long lasting and variety of pickle
 Then mother recipe used its on strength to come out with the product that Nilons was
already manufacturing and pacify their strengths

xiii. Find a weakness in the leader’s strength and attack at that point
 Example – Lakme – they had different colors of nail paints – but price was high – not
within the reach of lower middle class of the society including students or office goers
 Then Elle18 came out with nail paint with the price of only 18
 The weakness was the price - so Elle 18 came out with the nail paint of lower price and
increased their market price

xiv. Launch the attack on as narrow a front as possible

 Example – Loreal – manufactured hair color – they provided different variants
 Godrej was the challengers
 Godrej was earlier a leader in manufacturing hair dye [only black color]
 Then Loreal came out with hair color [different to hair dye]
 Godrej identified it the problem but did not want to move to hair color segment
 So they restricted themselves to the same business – but coming out with different
variants in the hair dye industry – thus launching an attack on as narrow a front as
possible

PRINCIPLE OF FLANKING WARFARE

 Most innovative form of coming out in the market
 Here, generally the organization tries to do something different to create a separate image
of its product in the market
 Organization tries to create distinctive position in the market
 Three sub-principles

i. A good flanking move must be made in an uncontested area

 xv. Tactical surprise should be an important element of the plan

xvi. Pursuit is just as critical as the attack itself

 Example - Earlier the Indian market had only white calcium toothpaste
 Promise toothpaste came out with a white tooth paste only but with clove oil [something
distinctive] and claimed that it would help cure toothache
 They created a distinctive identity with clove oil in white toothpaste
 They essentially moved into an uncontested area – clove oil in toothpaste
 Tactical surprise also an important element – coming out with clove oil – surprise to
competitors and customers alike because earlier the industry catered only the plain white
calcium toothpaste

 Along with surprise the organization also had to pursue

 Pursuit is critical as attack itself i.e. more and more acceptance in the market
 More and more progress so that product is accepted in the market

 Example - Revive color fix

 Trying to make washing of colored and white cloths in the machine easier as they could
be washed together
 The product was a liquid - couple drops to be put in washing machine and you can wash
colored and white cloths without color bleeding
 But they did not pursue the product long in the market. So this product is no longer seen
in the shelves.

PRINCIPLE OF GUERILLA WARFARE

 Three sub-principles
i. Find the market segment small enough to defend

xvii. No matter how successful you become never act like a leader

xviii. Be prepared to bug out at a moment’s notice

 Followed by tenable and non viable firms in the market

 They need to localize themselves
 Small areas where they will operate
 Because it is not economical for them to expand their market share
 Even if they are getting success in that market they should not act like a leader because
slow and steady wins the race
 The organization must climb the ladder- become weak to tenable and then favorable and
then they can use their resources full-fledged
 Need to make their base in market segment stronger and then keep growing stronger
 The organization must be prepared to bug out at a moment’s notice
 Since the organization have very little market share, they should not unnecessarily incur
expenditure and should be ready to bug out the market if it goes against you
STRATEGIC GROUPS
 It is a group of organization that uses similar resources to pursue similar strategies on the
same set of customers
 Example- Dove and Lifebuoy - They don’t constitute a strategic group
 Example- Pears and Lux – organization in the same strategic group

 Why does the organization need to indentify the strategic groups?

 There will be n number of competitors and brands in the market
 But not all players will be the competitor
 So the organization needs to identify its competitor
 That’s the reason why the organization identify the strategic group
 Organization is not concerned about other competitor because they do not pose direct
threat

 How to identify?
i. Customers
 Organization identifies the competitor or strategic group on the basis of target market
segment
 These organizations caters to similar needs of the customer

xix. Resources
 The organizations use similar type of resources meaning similar raw material, man power
or financial resources
 Example - Dove and Lifebuoy – different resources – different target market segment –
different promotional strategies

xx. Similar strategies

 The organization in the strategic group will use similar strategies
 Example - Dove – how to look beautiful and how to have soft skin – but Lifebuoy – germ
protection

 We take strategic group on the basis of products

 Bisleri and AquaFina – same product – mineral water
 Himalaya will not come in the strategic group of Bisleri or AquaFina because they
provide normal bottled water at Rs. 20 bit Himalaya provide with more minerals and is
also expensive i.e. Rs. 60
 The above example tells that organization will be classified on the same basis of similar
products – but about variants?
 Flavored water and Water with extra minerals – variants of mineral water – will they
come under same staretgic group?
 Here strategic group depends on the market and resources used by organizations
 Example - Flavored mineral water – acceptance not that much in India – so the
organizations do not provide similar resources or targets similar markets – thus not
strategic groups
 But if flavored water was accepted then would fall under category of mineral water and
same strategic because it would be a variant of the mineral water – and organization
would contribute similar resources to the variant

STRATEGIC TYPES
 Given by Raymond E. Miles and Charles C. Snow

i. Organization having defender approach

 In this case organization is manufacturing limited products or are into single product line
 The organization does not want to diversify and stay in limited products
 Aim – enhance efficiency wrt to limited product lines only
 Organization wants to enhance efficiency to protect and defend its position in the market
or else any player will come and challenge
 Thus organization does not want to move into new area and remain and defend in that
initial area
 Organization will leave no stone unturned to defend its area
 Since the organization operates limited products or single line of product, the
organization will go for Centralized control model
 Since the organization operates single line of business they require narrow environmental
analysis

xxi. Organization having Prospectors approach

 Organization tries to take innovative approach and explore new area
 Organization likes to move towards concentric diversification and conglomerate
diversification
 Aim - Constantly looking for new opportunities in the market and go for product
innovation
 Since the organization has lot many products, TLM will not got for intensive planning but
broad planning
 They will go for decentralization – separate product division or SBU’s – and give
managers the power to take decision and formulate their own objectives and strategies
 When the organization operates with lot many products then they tend to cater different
customers, different distribution channel and different technology
 Thus the environmental analysis will be highly comprehensive

xxii. Analyzers approach

 Hybrid of defenders and prospectus
 This means that there can be different types of market situation for different products
 The market situation might be stable for one product but volatile for another product
 Then organization will take up analyzers approach
 In stable market condition – organization focus more on efficiency
- This is because more or less things under control – so organization must come out
with products with lower price to fight out competitors and attain competitive edge
- If low price then organization can reduce price and increase sale volume turnover
- Or sell the product at same price as that of competitor – earn more profit – utilize it
for R&D or promotion or etc – whatever suitable

 In volatile market condition

- Either the competitors are entering into the market or competitors are coming out with
better quality of products or the needs of the customers are changing [looking for
better opportunities in the market]
- Here focus of the organization will shift to innovation – come out with products to get
competitive edge over competitors

xxiii. Reactors approach

 Laid back approach of the organization
 They are only going to react when forced to do so by the changes in the environment
 They will react when changes are a threat
 When opportunity – they are not bothered to react

HYPER COMPETITION
 The term was coined by Richard B. Aveni

 Definition – hyper competition can be defined as a scenario or process wherein the

frequency, boldness and aggressiveness of the dynamic movement by the players
accelerate to create a condition of constant disequilibrium and change. The market
stability is threatened by short product life-cycles, short product design cycles, new
technologies, frequent entry by unexpected outsiders, repositioning by incumbents and
tactical redefinition of market boundaries as diverse industries merge. In other words, the
environment escalates towards higher and higher levels of uncertainty, dynamism,
heterogeneity and hostility of the players.

 Hyper competition – intensive and excessive competition

 Short product life cycles – organization launches one product and then another product
will come in the market that will render the earlier one useless
 This is because organization are coming out better quality product or better version or
better features – continuous level of improvement - that is why product life cycle is
getting shorter
 So if better product – then people wants to shift to them
 Specialty goods – people want to buy the better products
 Example – pager and phones
 Organization tries to identify substitute product and try to extend product life cycle – by
identifying the features or version and try coming out with better products
 Example – Cadbury or Pepsi or Maggie
 Organization came out with same product but removing the defects and providing better
features

 Short product design cycle – organization tries to come up with modification and up-
gradation in the product
 Organization has the technology available with it – but they will slowly and steadily come
out with their innovation
 Example – Apple’s Iphone – they have the technology – but not releasing at one go –
coming out with innovative products at their own pace
 Because – the organization will not want to render their earlier product useless – so they
slowly come out with innovative products

 Heterogeneity of players – different organization coming into the particular market –

apart from branded products there are other organization
 Organization which are into the sale of same product – they might have experience in
other industries [multiple product line – diversification] – the organization might have
used their experience [and goodwill or brand name] in other market to diversify in to our
market

 New players entering the market

 Or existing players - diversifying

 Repositioning – huge opportunity to grow in the market - then firm who are not doing
well - they will also entre the market and put new resources – rebrand – earn profit

 Tactical redefinition of market boundary

 Diverse industries – coming together – when there are organization operating in two
different industries and they come together then it will result in hyper competition
 Example - Car manufacturer and financial intermediaries
 They come together – easier for the customer to purchase – because finance and the
product are available easily
 Mergers – conglomerate or concentric mergers – synergy of the org result in HC

 The product is introduced in the market – the moment the product enter the growth stage
or early maturity stage – the organization will try to increase the product life cycle – how
– by introducing new feature – then organization again enters the early maturity stage of
product – new variant – or new version
 Growth – exploitation
 Maturity stage – organization come out with something new called the counter attack
stage
 When the company comes out with new product – then called counter attack stage
 New tech – related to production process or plant and machinery – organization might be
in a position come out with new variants or features or better quality products or reduce
the cost of manufacturing – then organization will have competitive advantage – and
hence competition intensives

Environmental factors affecting 5 Stars

Identify the nature of product, target market segment and the competitors
Discuss the micro and macro environmental factors
Plot the issue priority matrix

INTERNAL (ENVIRONMENTAL) APPRAISAL

 Definition
 Internal appraisal is a process by which the executives analyze the firms material,
financial, ideational and other resources to determine where the firm has significant
strengths so that it can exploit the opportunities and meet the threats of the environment.

DIMENSIONS OF THE INTERNAL ENVIRONMENT

1. The organizational resources
 The organizational resources [like human resources and other physical resources] are
treated as inputs to produce outputs
 The success of the organization depends upon its resources
 When we talk about resources the factors that must be kept in mind are cost and
availability of resources
 Low cost and high availability – favorable
 High cost and scarce availability - unfavorable

2. Organizational behavior
 In the internal environment the quality of leadership [autocratic, participative, etc] plays
an important role
 The quality of work will also play an important role as it reflects the relation the
subordinate has with its superior, the conflict between the subordinates or superior and
 subordinate, and the technological availability – all of this will affect the work
environment
 The organizational politics, the individual personality, etc will have an influence over the
organizational behavior

3. Synergistic effect
 Synergistic effect is reflected when the combined effect of certain parts is greater than
sum of their individual effects
 It means that when people pool in their work or work together, it will a have a greater
result when compared to people completing their work and putting it together at the end

4. Distinctive competence
 When a specific ability is possessed by a particular organization exclusively or in
relatively large measures then it is called as distinctive competence
 Example – LG came out with golden eye technology for the television – distinctive
technology possessed exclusively by LG – this resulted in huge sale volume turnover
 Example – LG came out with bio-refreshable technology [vegetables] for refrigerators –
this feature keeps the vegetable fresh for a longer period of time [up till a week] -
distinctive technology possessed exclusively by LG – this gave LG competitive
advantage over the competitors

 Distinctive competence here is referred to features of the product

 If the competitors are in a position to copy the product feature then it is strength and if not
then it is distinctive competence
 Difference between distinctive competence and strength
 Distinctive competence cannot be copied easily but the strengths can be copied easily
 Also, the distinctive competence can be for a long period of time but the strength is for a
short term

 First the organization has to identify the needs of the customers – them on the basis of the
ideational and other resources the organizations comes out with distinctive competence –
this distinctive competence - possessed exclusively by the organization will give it
competitive advantage – result in huge sale volume turnover – and increase the profits
which can again be invested in R&D and come out with distinctive competence
5. Organizational Capability Profile [OCP]
 It is an inherent capacity or potential of an organization to use its strengths and overcome
its weaknesses in order to exploit the opportunities and face the threats in the external
environment

DIFFERENT MODES OF IDENTIFYING THE STRENGTHS AND WEAKNESS

1. Asking question – conduct survey – through questionnaire [structured or unstructured] –
or interviewing – the respondents [people inside the organization – employees & people
outside the organization – intermediaries and customers]
6. Observation – observing the people – hyper city example – impulsive product placed
near the counter – ice cream is placed near the counter because if placed near the gate
then they melt by the time customer reaches the counter
7. Past performance – past records of the organization – identifying the performance in
different intervals of time and different performance areas – identifying the problems
encountered in the past

TOOLS THAT CAN BE USED TO IDENTIFY THE STRENGTHS AND WEAKNESS

1. SWOT analysis
2. SAP [Strategic Advantage Profile]
3. IFAS [Internal strategic Factors Analysis Summary]

SWOT ANALYSIS
 S – Strength, W – Weakness [external environment], O – Opportunity, T – Threat
[internal environment]
 This distinction is done to clearly demarcate the factors that will be taken up during the
analysis
 The manager must not confuse these aspects and must not misplace the factors

1. Definition
 Strength is an inherent capacity which an organization can use to gain strategic advantage
over its competitor
 Example – R&D – strong and innovative department then organization can come out with
products or features that will give them a strategic advantage
 Weakness is an inherent limitation or constraint which creates a strategic disadvantage
 Example – overdependence of the organization on a single product line – can be risk
[weakness] if those products are not doing well – result – lack of funds to engage in R&D
and come out with innovative products

 Opportunity is an attractive arena in the external environment for the company’s action in
which a particular company will enjoy a strategic advantage
 Example – growing demand for product – it will be an opportunity – why – because there
is scope to sell more products due to expanding target market segment

 Threat is a challenge posed by an unfavorable trend or development in the external

environment that would need to the erosion of the company position in the absence of a
purposeful action
 Example – emergence of competitors – Alfred Gross’s external environment analysis

8. How to identify strength

 To identify the strength the organization must look at the advantage that they will derive
from the internal environmental factor
 Organization takes opinion of the experts or the employees and managers to find out the
factor that adds to their advantages

9. How to identify weakness

 To identify the weakness organization must look at the disadvantage that they face from
the internal environmental factor
 Organization takes opinion of the experts or the employees and managers to find out the
place where they faltered

10. How to identify opportunities

 They can be lifestyle changes, change in social pattern, and change in governmental
policy

11. How to identify threats

 They can be obstacles that the organization will face in terms of change – like the change
in method of production of competitor

12. SWOT Analysis Matrix

ii. Aggressive growth oriented strategy

 The organization has lot of opportunities and lot of resources to encash those
opportunities
 Here, both internal and external environment are favorable
 The organization can be classified as market leaders, challengers, favorable firms
 This can be used when the market is growing and there are lot many opportunities

xxiv. Diversification strategy

 Organization has lot many internal strengths but major external environment threats
 Here the organization will not be able to capitalize on the market or grow as much as they
anticipated because there are severe threats despite the strengths
 Thus the organization uses its strengths and enters a new market by diversifying into a
new product line

 But if the organization does not want to diversify and has deep financial pockets [which is
a strengths] – then the organization will go for stability strategy
 The organization will select stability strategy for the simple reason that – if the
organization cannot increase market share but defend the existing the market share

xxv. Defensive strategy

 The organization fasces major threats – and has critical weaknesses
 So the organization comes under the category of weak and tenable firms
 Here the organization maintains a status quo position – stability strategy
 Or the org goes for retrenchment strategy by losing on some market or contracting some
product line
 The major aim of the organization is defend its position in the market

xxvi. Turnaround strategy

 The organization has lot many opportunities – but critical weaknesses
 But the organization would not want to leave the lucrative market
 So the organization will try and exploit the opportunity
 Thus under this strategy, organization will look back and identify its weaknesses and try
to minimize the impact of those weaknesses
 The org tries to convert the weakness into strengths
 Once the organization has worked upon its weakness - then it will have strengths
 Then it will be placed in the cell with numerous strengths and numerous opportunities –
then pursue aggressive growth oriented strategy

13. How to conduct SWOT analysis

 List down all the strengths, weakness, opportunities and threats
 Then rate them on the scale of 1 to 10
 Then take the aggregate and so you will know where the organization stands

SAP [STRATEGIC ADVANTAGE PROFILE]

 On same lines of ETOP analysis – qualitative way of assessing the environment
 Only difference is that ETOP analysis was based on external analysis and SAP is based
on internal analysis
 In SAP ever organization department will prepare its own SAP
 It is limited to particular department and not the entire organization

2. Four columns
 First column is Strategic advantage factors
 Second column is Strong [+]
 Third column is Neutral [0]
 Fourth column is Weak [-]

14. Example – HR department

First columns - Strategic advantage factors –
Personnel capabilities [factors]
- Quality of workers [sub-factors]
- Training and development
 - Incentives
- Loyalty
- Motivation
- Low level of absenteeism

Financial capability [factors]

- Excess of finances [sub-factors]
- Relationship with financial institution
- Shareholders confidence
- Credit worthiness

Marketing capability [factors]

- Wide variety of products [sub-factors]
- Better quality of products
- Wide customer base
- Low price of the product as compared to the competitors

Operations capability
- Reliable sources of supply
- Favorable plant location
- Good inventory control system
- High level capacity utilizations

General management capability

- Risk taking capability
- Entrepreneurial capability
- Rapport of the management with the government

 Then you will tick on the Second, Third or Fourth column based on the impact on the
organization
 However, SAP does not identify the reasons for the impact of the factors on the
organization
 It will provide a subjective analysis of the factors at the end

IFAS [INTERNAL STRATEGIC FACTORS ANALYSIS SUMMARY]

 5 columns - Internal factors, Weight, Rating, Weighted score & Comments

 Weightage – strength and weakness

 Scale – how well the org can handle strengths and weaknesses