Strategy Management 2

ISA

Name: Khitab
Roll No: 1714
 Q1: select an industry of your choice. Identify Porter’s five force of competition in that industry.
Perform a competitor analysis from the point of view of the market leader in that industry.
Identify the possible strategic groups in that industry and judge the implications of such groups
on the strategies of the market leader.

The Ecommerce industry

The Ecommerce industry has flourished at an impressive rate during the last few years. The
reasons include growing economic activity around the world and the growth of technology.

Bargaining power of suppliers

In the Ecommerce industry, the bargaining power of the suppliers is generally low to moderate.
The reason is that the rules are set by the brand and the suppliers have to follow the code of
conduct set by them. Most of the ecommerce brands are highly cautious regarding their
supplier relationships and set a code of conduct related to quality, labor and wages as well as
sustainability.
How Amazon.com can tackle bargaining power of the suppliers

 By building efficient supply chain with multiple suppliers.

 By experimenting with product designs using different materials so that if the prices go up of
one raw material then company can shift to another.

Bargaining power of the buyers

The bargaining power of the buyers is moderately high in the ecommerce industry. It is because
several small and big brands ha e cropped up and there is hardly any switching cost for the
customers. Today’s customer is well informed and has every piece of information available at a
single click.
How Amazon.com, Inc. can tackle the Bargaining Power of Buyers

 By building a large base of customers. This will be helpful in two ways. It will reduce the
bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its
sales and production process.
 By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if Amazon.com, Inc. keep on coming up with new products then it can
limit the bargaining power of buyers.
 New products will also reduce the defection of existing customers of Amazon.com, Inc. to its
competitors.
 Threat of substitute products

There two main threats in terms of substitutes for the Ecommerce brands. The first are the
competing e-retail businesses and the second are the physical retailers. Brands try to earn a
competitive advantage through low prices, better quality of products or through a better
overall customer experience.

How Amazon.com can tackle the Threat of substitute

 By being service oriented rather than just product oriented.

 By understanding the core need of the customer rather than what the customer is buying.
 By increasing the switching cost for the customers.

Threat of new entrants

The threat of new entrants is low to moderate in the ecommerce industry. This is because there
is a need for large investment in technology, human resources and marketing. The barriers to
entry are moderately high. One can enter with enough capita.

How Amazon.com can tackle the Threat of New Entrants

 By innovating new products and services. New products not only brings new customers to the
fold but also give old customer a reason to buy Amazon.com, products.
 By building economies of scale so that it can lower the fixed cost per unit.
 Building capacities and spending money on research and development.

Rivalry in the industry

The level of rivalry in the industry is high because of the large number of players. The number
of local and global brands in the ecommerce market has grown and this has also led to higher
competition.
How Amazon.com, Inc. can tackle Intense Rivalry among the Existing Competitors

 By building a sustainable differentiation

 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather than just competing for small
market.
 Q2: A large business group wishes to identify strategies for the various business in its portfolio.
How can it go about doing this? Describe the GE nine cell matrix technique used for analysis
corporate portfolio?

There are several important components of corporate strategy that leaders of organizations
focus on. The main tasks of corporate strategy are:

1. Allocation of resources
2. Organizational design
3. Portfolio management
4. Strategic tradeoffs

Allocation of Resources
The allocation of resources at a firm focuses mostly on two resources: people and capital. In an
effort to maximize the value of the entire firm, leaders must determine how to allocate these
resources to the various businesses or business units to make the whole greater than the sum
of the parts.

Key factors related to the allocation of resources are:

 People
o Identifying core competencies and ensuring they are well distributed across the firm
o Moving leaders to the places they are needed most and add the most value (changes over time,
based on priorities)
o Ensuring an appropriate supply of talent is available to all businesses
 Capital
o Allocating capital across businesses so it earns the highest risk-adjusted return
o Analyzing external opportunities (mergers and acquisitions) and allocating capital between
internal (projects) and external opportunities

Organizational Design
Organizational design involves ensuring the firm has the necessary corporate structure and
related systems in place to create the maximum amount of value.

Key factors related to organizational design are:

 Head office (centralized vs decentralized)

o Determining how much autonomy to give business units
o Deciding whether decisions are made top-down or bottom-up
o Influence on the strategy of business units
 Portfolio Management
Portfolio management looks at the way business units complement each other, their
correlations, and decides

Corporate Strategy related to portfolio management includes:

 Deciding what business to be in or to be out of

 Determining the extent of vertical integration the firm should have
 Managing risk through diversification and reducing the correlation of results across businesses
 Creating strategic options by seeding new opportunities that could be heavily invested in if
appropriate
 Monitoring the competitive landscape and ensuring the portfolio is well balanced relative to
trends in the market

Strategic Tradeoffs
One of the most challenging aspects of corporate strategy is balancing the tradeoffs between
risk and return across the firm. It’s important to have a holistic view of all the businesses
combined and ensure that the desired levels of risk management and return generation are
being pursued.

As an example of a business portfolio, consider Hilton Hotels. The Hilton Hotels group is made
up of many SBUs including Hilton Double Tree, Hilton, Conrad Hotels, and Waldorf Astoria
Hotels.

Some businesses can be very complex, even having over one hundred SBUs. In addition, no
business has an infinite amount of resources to invest. The GE McKinsey Matrix allows a
business to analyze their portfolio of SBUs to determine:

 Which SBUs should receive more or less investment

 What new products or SBUs are needed in the business portfolio

 Which products or SBUs should be divested

Q3: Discuss Michael Porter’s approach to defining generic competitive strategies?

Michael Porter classifies competitive strategies as cost leadership, differentiation, or market

segmentation

1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources
of cost advantage are varied and depend on the structure of the industry. They may include the
pursuit of economies of scale, proprietary technology, preferential access to raw materials and
other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm
can achieve and sustain overall cost leadership, then it will be an above average performer in its
industry, provided it can command prices at or near the industry average.

2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that
are widely valued by buyers. It selects one or more attributes that many buyers in an industry
perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its
uniqueness with a premium price.

3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.

Q4: Select a company which is a market leader in a competitive industry in India. Identify
the sources of competitive advantage of your chosen company.

The company which I am going to investigate is Walmart. Walmart is leading the retail
market now. Its competitive advantage are;
Pricing strategy
This is the key strength of the brand upon which its entire business model rests. It has not just
helped it build a great brand image that is popular for its low costs model but also a large
customer base.

Customer service
Walmart has not built a vast empire without being obsessed for customers’ convenience. Apart
from lower prices, it is also known for its focus on customer experience. You do not just get
good quality products at low prices but in fact shopping at Walmart is also a distinct experience
in itself.
 Large scale operations and bargaining power
Large scale operations give rise to some great strengths and therefore prove to be a source of
competitive advantage. The first great benefit that arises from large scale operations is
economies of scale. It allows Walmart to buy in bulk and sell at lower prices.

Financial strength
Financial clout of a brand also becomes an important source of competitive advantage allowing
it to spend more on new products, R&D as well as allowing more leg space in terms of
marketing and advertising.

International expansion
International presence and expansion of the brand is also a great strength in itself. While most
of its revenue is generated from US, it has still expanded significantly over years. Today, it is
operational in 28 countries through its 59 banners.

Q5: Identify the features of business strategies that would be appropriate under the following
industry condition (a) embryonic (b) growth (c) maturity (d) decline?

Marketing strategies used in introduction stages include:

 rapid skimming - launching the product at a high price and high promotional level
 slow skimming - launching the product at a high price and low promotional level
 rapid penetration - launching the product at a low price with significant promotion
 slow penetration - launching the product at a low price and minimal promotion

Product growth strategies

Marketing strategies used in the growth stage mainly aim to increase profits. Some of the
common strategies to try are:
 improving product quality
 adding new product features or support services to grow your market share
 enter new markets segments
 keep pricing as high as is reasonable to keep demand and profits high
 increase distribution channels to cope with growing demand
 shifting marketing messages from product awareness to product preference
 skimming product prices if your profits are too low
 Product maturity strategies
Marketing strategies used in the growth stage mainly aim to increase profits. Some of the
common strategies to try are:
 market modification - this includes entering new market segments, redefining target markets,
winning over competitor’s customers, converting non-users
 product modification - for example, adjusting or improving your product’s features, quality,
pricing and differentiating it from other products in the marking

Product decline strategies

During the end stages of your product, you will see declining sales and profits. This can be
caused by changes in consumer preferences, technological advances and alternatives on the
market.
 reduce your promotional expenditure on the products
 reduce the number of distribution outlets that sell them
 implement price cuts to get the customers to buy the product
 fin another use for the product
 maintain the product and wait for competitors to withdraw from the market first
 harvest the product or service before discontinuing it

Another option is for your business to discontinue the product from your offering. You may
choose to:

 sell the brand to another business

 significantly reduce the price to get rid of all the inventory

Reference
https://www.yourarticlelibrary.com/marketing/marketing-strategies-stages-of-product-life-
cycle/48630
https://notesmatic.com/2018/03/11711/
https://en.wikipedia.org/wiki/Porter%27s_generic_strategies
https://online.visual-paradigm.com/knowledge/strategic-analysis/ge-mckinsey-matrix-for-
portfolio-analysis/