(Pages : 4)

7278-C Of-[I S MBA_December2014

THIRD SEMESTER M.B.A,
DEGRE-IJEXAMINATiON,
2014
C 01 : STRATEGIC MANAGEMENT

Maximum : E0 Marks
Section A
1. AnsweranylOout of 12 strb-q.trestions
gtvenbelou €achquestion
carries1 malk.
(a) 0efineStrateBic
Management,
{bJ Differentiate
betweena fragmente
y11,, aconsoridated
i'ltt! E"y,'.o",n"",o,3,lxti'otfland industry.
)ll
ru/ rxptarn "r"
theVRtOframework.
(el Whatisa 'earning
organization?
(t) Wiat is meantby ,Boardof Dire(tors.
(9, WhatisCaptive continuum,?
Company Stratesv?
{n, what doVouunderstand by co Jiiont
{U wnat iscompetitive intelljgence?
orTorecasrins?
ili i;f"l'l'*"?:i:[Ichnique
(l) WhatdoyoumeanTurnaround
Strategy?

(10x1=lOmarks)
i
Section B
answerany 4out of S qlestions given
below. Eachquestioncafri€s
S mark.
2. fxpjajnthe benetitsofStrategic
Management.
; ;l1i'&'Ji.3i,illi stratesc process
Mana6ement
iil"lll?ilhe inanindustrv?
s Listoutrhesteps
invoi;; ;i;il;;:1',e^f,of-:-companv Explain
witherampre.
indusrry
inrndia ton*ud
cons""i",,-l i",no."i"ilrj,XrY"lrl"matrix anhdustry
Marixforany
.
H"*ot'siness
" XlU"t:Jffi,nV;l;"c"!";X;*v'r'z fi,ms
m"ke'use
oritwhire
deci.rins
thek

(4x5=2omarks)
sectiouc
Answeranyl out of 2 questionsgiven
below.Thequestioncar.ieslO mark.
7. ExplainMichaelpo.te/sFiveForces
M(
otyour inrnj; ;;;-;H'd;:i"",j;i:jll I,,T:;ljffi:;;'J"T:smode,
choice toany
industry

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 7218-C 01-III S MBA-December ito14

8. Whatdo you understand by Directional

Strategies?
Whichdirectionalstrategiesareoften usedby
companiesto withstandcompetitivepressures?
what arbthe controversiesin directionalstratepies?
. Explain
withsu;table examples.

G x 10 = 10 marks)
Section D (Computsory)
L Readthe casestudvBivenbelowandanswerthe questionsgivenat the end.
(10 mark6)
DAII(ININDIASTURNAROUNDsTRATEGY

A dustyrrindihg
road,off the Delhi-Jaipur
highway,leadsto the sprawling
40-acre
campus
of Japanese
air conditioner
(Ac)makerDaikin'sIndiafactoryin Neemrana. Thetown is knownmorefor its six
centuries
oldfort-palace,
a weekend getawayfor Delhites.

ForDaikin,Neemrana hasits o\rn importance.

lt is ctoseto its component makersin the
Rajasthan
stateIndustriar
Deveropment andrnvestmentco.poration industdar
{Rflco) bert.
Ar50,Derhi,
oneofDaikin's
keymarkets,isjust120kmaway.

TheNeemrana prantmakes1,oooAcseverydayfor residential,

commercial andindustriar
In manywavs,the hustteandbustreat the,unitsignars use.
Daikintgrowingfootprintin India.In 2009/10,
Daikinsofd34,000ACsin India,andrankedseventh anont altACmak;rs.By ZOL2/13. thistigurehad
growna spedacular twelvetimesin volumeto about4oo,0oo. Aboutg5 percentof its salesare
resldential
ACs.

ul:: 'ncreased.
irsrevenues nanifotd_ fromRs.44Ocrore in 2OO9/10
to Rs.1,80ocrore
,-
rr -^. -,?1'U,1.,h..
zulzl'. rrrsnowrnesecond-rargest Ac makea in rndiaaftervortasin termsof revenire,
according
to
Registrar of companres dataavairabrewiththe company. In 2013/14, the firm hopesto crocksares
Rs.2,200crore. of
TheACindustry is estimatedto posta turnoveiof Rs.l6,Sooarore nextyear,according
to
industry growingat 10percent
estimates, annua lly.

Themanwho spearheaded Daikin,sspectacular

turnaroundis ManagingDircctorKanwal
Jeet
Jawa.Hehasspentthreedecades in theACbusiness, andhasbeenwiththe;m;any s,nceApril,2010.
"Wehavea productrangeno onecanmatch- from0.75tonneto 2.700tonnechilters,,,
hesays.But
buildinta diverseproductportfoliois onlypartlyresponsible
for Daikin,s
success.
Thecompany has
deviseda five-pointstrategywhichrevoives not only aroundproducts,but alsopeople,service,
systems,andthebrand.

Thebranditselfhasundergone a metamorphosis. In 2OOO,whenDaikinsetup |t5operaflons

India,it wasa premiumAc maker.rtsproductpriceswerebeyond in
the reachofthe c;mmonman.Jawa
rearized thishadto change if Daikinhadto geta siSniflcantshareofthemarket.Butit wasa Ionghaur.rn
2004Daikinboughtolt sharesof the Siddharth Shriram Group,whichownsthe Ushabrand,to make
yn:]ty-owned iubsidiary. In manywaysthiswasthetufningpointandDaikinbegan to
:T..,llil
rocusmore on -"
"ll, rtsIndianoperations. "lt tookthema lot of timeto understandIndia,,,
saysJawa.Daikin,
then,importedresidential ACsfrom.,apan andTaiwan. However, cosflyimportsdid not allowthemto
scaleupandbecome a massmarketplayer.
 3 7218-C 01-III S MRA-December 2014
ln 2009,at Daikin'sheadquarters in Osaka, put togethera lsGpagevision
ihe seniorleadership
docufient,Fusion2075,for the companyin India.A new coreteam of 15, includingJawa,was put in
placefor its Indianoperations.ThesameyearDaikindid a surveyon brandperception- 56 out of 100
peoplehad not heardabout the company.lt startednew campaigns to boostbrandvlsibility.Butthe
new tean went for the kill, when it slashedthe productpricesby 40 percentin 2009a.ndlauncheda
seriesof productsin the pricerangeof Rs.24,000,Thestrategyworkedand in 2010/11Daikindoubledits
revenueto R5.850 crore,

The phenomenonwas new in the consumerdurablesspaceeventhough it had beenseenin

othersectors.Forinstance,foreignshoebrands,includingAdidas,Reebol!and Nike,hadenteredIndia
at prlceshigherthan domesticcompetition. Theyeventuallyrolledout productsat lowerpricepointsto
boostsalet thoughstill at a relativepremiumto localbrandssuchas Actionand Tuffs."Daikinhasgot
the lndianethosto AC makingcofiect,"saysHarishBijoorof HarishBioor Consults, a consulting
firm
specializing
in brandand business strategy."ln India,the valueformoneyconnolationisvery huge,and
the opportunityis in the middlelevelmarket."

Jawaalso realizedthat Daikinhad to be presentin manymore towns and cities.ln 2010,he

calleda dealers'meet at the ITChotelin Agra.About350dealerswere invitedandglventhe optionto
'We
80 to tier-lland tier{ll citiesby addingan additionaldealership, were at that time sellingto only
the superrich,whlchis a niche,"saysJawa. Withina yea/stime the dealernetworkdoubled.At the end
of the lasttscal, Daikinhad 1,800dealers.lt expandedfrom four regionalofficesin the metrosto 11
officesaroundthe country,andit alsoopenedup godownsand5malleroffices.

"We were an enBineering companyand now becomlnga marketingcompany,but we had to

DNAintact,"saysJawa.Daikinthenunveileda product- R32refrigerant- in 2012,
keepthe engineefing
whichallowedDaikinto usea smallcompressor, coil,andothercomponents, reducingthe sizeofthe AC
by 30 percentand offer it at only a 15 percentpremium over what its SouthKoreanrivalsLGand
Samsung did.

Meanwhile,the consumerdurablesindustrywasmovingtowardsstar rating,the standards set

by the Bureauof EnergyEfficiency. The morethe numberof stars{the maximumbeingfive},the lesser
electricitywill be consumed.Daikinthen developedan energy-efficient productwhichcouldsensethe
occupancy ofthe room,and retulatecoolingandtonnageofoutput accordingly. lt wasinitiallylaunched
as a lightcommercial product,but it is now findinga placeIn largeapartmentsand villas.With.lesser
-
competitionin this space MitsubishiandToshibaare its onlycompetitors-Daikinhasa fair chanceto
be a leader.In China,Daikinhasalreadycornered45 percentofthe liShtcommercial produdACmarket.
In India,it claimsto havealreadygot halfofthe ma.ketandaimingat 57 percent
by 2015.

The turnaround in Daikin'sfo.tunes in India is in large measurean outcome of higher

Till abouttwo yearsbacl! Daikinwasonlymakingcommercial
localization, ACsand chillersin India,and
was importing allits residential
unitsfrom Taiwan
andJapan.ButJawa thatto bringdownprice,
realized
it wasimportanttorelyon localcomponent manufacturers.

Turn over
 4 72la-C 01-III S MBA-Deeember 2014
lawa had alsolearntfrom experience. ln 2010,a hugeconsignment of residentialACsgot stuck
in customsand neededto be deliveredurgentlyto its dealers.Daikinwasin expansioimode,andJawa
could not afford to 'ose time. The moment the consignment was cleared,tawa Eot it airliftedand
transportedto variouslocationsin the country,spendinga bigamounton transportation. Theonlyway
he €ouldavoidsucha situationin the future was by makingthe ACsin India.He startedprocuring
components locally,andIlnallyby 2012Daikinstoppedall importsandstartedmanufactudng residential
ACsat the Neemranaplant.Exceptthe compressor andthe contrcller,everythingelsein DaikinACsa.e
madein India.This,Jawasays,alsohashelpedin reducingcost by around45 percent.

Daikinis now setto expandoperations.lt hasalreadyinvestedRs.743crorein Neemranaplant.

Theplantcan manufactureup to five lakhACseveryyear,but the currentcapacitywill be fully utilized
by the end of this fiscal.lawa has alreadyanticipateddemand.upply. He has got Rs.300crore
fromthe parentto doublethe planfscapacity
sanctioned to a millionunits.
The companyhas also opened100 exclusiveDaikinstores,and there are a few more in the
pipeline.Thecompanyhasdemarcated fiveacresof landin the plantfacilityfor a trainingcentreon soft
skillsandsales.Forexample,it is mandatoryto pickup customer-carc callswithin li seconds. .,Wehave
our own bible,"saysJawa.Daikinemployees callit the BlueBook,andtheyabideby it.

The0aikinmanagement abouttrackinggroMh. Everyquarter,Jawasays,

in Japanis obsessive
there is a review done by the Japaneseparent.Everymonth there is a review by the lndian
managementrand zonalofflcesdotheirweeklyreview,

EventhoughDaikin'sgroMh is praisedby someanalysts, otherslook at it with skepticism.,,This

categoryis fast movingtowardscommoditization," saysArund Singhal,Chairmanof the consultancy
firm Technopak Advisors."How much ofthat growthissustainable
is not known.,,This is largelvbecause
the AC industrypbr se can go throughlittle innovation,sayexperts,lt ls also easyto reptjcateany
innovatlon, whichleaveslittle room for differentiation.
Forexample,energy-efficient InvertersACsare
in the portfolioofeverycompanynow.

Thereare other challen8esbefore Daikin.The Koreanconsllmerelectronicsmajors,LG and

Samsung, havea largerdistributionnetworkandcanreachout to manymore peoplqespeciallyin rural
India.OtherJapanese makert suchas Panasonic,havealsoslashedpricesof productswhichmighthit
Daikin,Also,the three competitorsmentionedabovehavea wider rangeof productswhichcan give
themanedgeoverDaikin, saysSinthal.

Jawalsunruffled. HehasonlyonethinSonhismind- meeting thegoalsoutlinedIn Fusion

2015.
Theoriginalplan,according to Fusion2015,wasto become the No,1ACmakerin India,in termsof
revenue,by2015.gutthe DaikinIndiachiefhasa slightly differentplan.Hewantsto do it a yearbefore
thetarget."Giventhecurrentrunrate,we willbetherebefore2015,"saysJawawitha smile.Andgiv€n
histrackrecord,
it isdifflcultnotto takehimseriously.

QuestionS:
(a) ldentifythe movesinitiatedbyDaiklnIndia.
strategic
(b) Doyor.rbelieveKanwal Jeetlawa'splansto achieve 2015goalsa yearin advance
Fusion may
happen?lf yes,why?lf no,why?
(c) what couldbethe challeneesMr. Jawamightfaceto sustalnthe groMh of Daikinlndiabeyond
2015? (5+3+2=10marks)