Strategic Management

MST – Oct 2020

Part A:
1. (a) “Corporate Social Responsibility as a business imperative must not be
accepted
grudgingly or half-heartedly. Instead, it must be practiced with full vigor
and straight from the heart passion and this certainly helps the
companies in the long run” – Critically analyze the statement with Indian
examples.

 India is the first nation in the world to make corporate social

responsibility (CSR) mandatory, following an amendment to the
Companies Act, 2013 in April 2014. This is a welcome step in the
direction of urging companies to take on the role of a corporate citizen
and promote responsible business conduct while ensuring
accountability, not only financial or material but accountability as a part
of the society, as a crucial part in the endeavor of nation building.

Yet, it is desirable to not have the companies do this under any legal
pretext. Rather, if they engage in CSR of their accord, it sweetens the
relationship between the consumer and the company adding a tinge of
humane and empathetic understanding to a relationship that is mostly
commercial or materialistic.

Case in point is the TATA group. Now, how many of us can remember
the last time we saw an advertisement about TATA? Their ads ARE out
there. Yet, they are so subtle and so unobtrusive that in comparison to
the sleek, hip new companies like Swiggy, Zomato etc., their presence
seems very inconspicuous.
Having asserted and affirmed all this, a majority of the Indians look at
the TATAs with admiration, trust and a desire for affiliation with the
group and its brand. Why?
Be it the Tata Sports Complex at IIT, Kharagpur, the colonies at
Jamshedpur or the numerous research institutes and educational trusts
run by TATA, their contribution and involvement in improving the life of
the common Indian cannot be argued against. They administer self-help
groups by way of which, they have touched the lives of so many. From
women empowerment to poverty alleviation to sustainable income
generation plans, TATA, perhaps has a finger in as many pies in the field
of CSR as there may be fingers on a hand. The cancer treatment
provided by their TATA Memorial Center Hospital, Mumbai to an ever
growing bunch of citizens at low cost has provided relief to so many. As
if this was not enough, they also subsidize travel as well as stay for those
who cannot afford it.

There are not too many companies which devote a separate division
(Tata Sustainability) to focus on their CSR outreach. Whether it be
supporting small businesses or providing scholarships and endowments
to those who wish to pursue education but do not have the means to;
TATA has touched lives in the most tangible and at times, intangible
ways.

This is not to say that TATA is the only one with the do-gooder spirit. We
have other contenders like ITC, who with their e-choupal initiative have
made substantial efforts to assimilate the rural economy into the
national mainstream. Under this program, a processing center is based
in the village where farmers can come to sell their produce which is
processed and checked for quality before being absorbed by ITC to be
sold at its numerous outlets, packaged and shipped using ITC’s vast
distribution network. It also provides regular agricultural updates to the
farmers by way of technology and gives crucial information related to
new organic farming methods as well as weather predictions.

Procter & Gamble India Limited

P&G (Procter and Gamble) initiated a social development and education
program in India called "Shiksha" which aims at advancing the education
among children in rustic areas at affordable expenses. P&G started
contributing a fixed sum from the sale of its items to the children
education finance for country areas. Till date, it has spent more than Rs.
 24 Crores on the Shiksha program; the sum is increasing every year to
benefit the poor children and promote school education among them.

2. Write notes on any - Corporate governance

Corporate governance is the relationship among the board of directors,

top management, and shareholders – determining the direction and
performance of the corporation.

It is the system or procedures that dictate how a directorial board

should manage and oversee the functioning and operations of the
company. It includes various principles such as accountability, security,
and transparency.

There are a number of stakeholders that the board of directors must

think about and it is this challenge to balance the interests of
shareholders, suppliers, promoters, government and the society at large,
that comes under the purview of corporate governance.

It consists of veritably every sphere of management as it provides the

framework following which the objectives of the company can be
achieved. It is responsible for planning, internal synergy, performance
enhancement as well as disclosures.
The most important function perhaps that needs to be carried out is
overseeing the running of company affairs in accordance with the best
interests of the shareholders while functioning within the boundaries
and with respect to the laws of the society that the corporate entity
exists in.

3. Case Study:

a. Can Marley Simpson reengineer its mobikes to appeal to a larger

market while retaining the brands’ image?
 Marley can reengineer its bikes to provide latest features. It already has
the brand image of producing powerful, gas guzzling war machines that
own the roads.
 What it needs now, is a touch of finesse. It can definitely use technology
to provide new features, safety and increase the reliability and durability
of the bike.

While technology is an issue, as mentioned in the case, it can be

assimilated by outsourcing it to 3rd parties and having them work on the
technical details while Marley’s own product and development teams
work on new designs to introduce segments ranging from cruisers bikes,
adventure tourers, café racers to the most exciting sports bikes.

Yes, Marley can continue to sell the same old powerful machines but
with the added touch of new designs and technology, it can target those
among the affluent who want to race or cruise or go on off-road trails or
complete long rides without breakdowns in addition to the old and
faithful brand loyalist who just want a monster machine that owns the
roads.

b. What should Marley, Simpson do to clarify its strategic direction for

the mid and long-term?

 The company needs to market its incremental products well which

would stabilize it in the short term. At the same time, Marley also needs
to be futuristic. The best brands are those which are eager to push the
boundaries. The brands that innovate and survive do not wait for
competitors to challenge their products. Rather, they challenge and
improve their own offerings through continuous innovation.

And innovation cannot be short sighted. For the long term, the company
needs to work on new product development and modern designs that
are ready to be introduced once the present offerings have run their
course.

It is due to the short term goal oriented working right now that each
new bike has only incremental new features. If the same process is
carried out with the view point of introducing a radically new bike 5
years or 10 years down the line, these incremental changes can be
 bunched up to unveil a new product which can take the markets by
storm.

c. “Catering to the lower-end commuter would amount to diluting the

Marques associations and brand image”. Why and why not?

 A large part of the rationale behind why customers would wish to

purchase a Marley is aspiration and ambition. Having one means you
have truly arrived and accomplished a fair bit. It gives acknowledgement
to the individual as well as reassurance about his own financial growth
and reach.

If Marley starts catering to mass markets at the lower end, it would

mean that any Tom, Dick or Harry can now reach this pedestal and it
would no longer be a testimony of the fulfilment of ambition.

Right now, the focus is on making powerful bikes which as a given, are
not fuel efficient. Catering to the lower-end commuter would mean
redesigning the engines to be small, silent and fuel efficient. This does
not resonate with the core values of freedom, living by one’s own rules
etc. It would clash with the brand identity making it seem domesticated
and mild instead of wild and free.

d. “Once Marley has decided to go the niche way, the company must
work hard to own that area and expand the appeal of its bikes”. Do you
agree? Why and why not?

 Yes. This seems the likely way to grow. As it is, high end motorcycle
might have low sales volume. Yet in this segment, the profit margins are
high on each individual sale. This can help the manufacturer survive for
the short term. New products that it comes out with should provide
distinction to the buyer along with a unique way of transportation. It
should have all the values that the brand is associated with and try and
revitalize those values for the new generation of customers.
 It can be done by way of organizing expeditions of riders to far off areas,
bike cruises to hilly areas and brand sponsored biking rallies to foreign
countries. If the idea is to cater to the affluent and rich, the marketing
should also be large scale and should aim to provide new experiences
and introduce the brand and its soul to the consumer by giving them a
taste of it.

Marley can also expand to high margin foreign markets while using its in-
country distributor’s networks to cut costs, provide better sales
experience to the customer and increase net revenue inflows.

Many premium bike brands are also launching apparel to go with their
motorcycles. These are premium riding gears and bike-wear that does
not sell cheap and demands a premium as it promises rider safety.
Marley can also expand in this segment and this would also help to
create a brand culture where customers not only buy the motorcycle but
also branded gear in order to complete their look as a serious rider
backed by the credibility of the brand in the riding space.

Part B:

1. What is meant by Functional Strategy? Explain in detail the various types

of Functional strategies used by firms with suitable examples of each.
Functional strategy - An approach taken by a functional area to achieve
corporate and business unit objectives and strategies by way of
maximizing resource productivity. It is a short-term game plan for a key
functional area within a company’.
It is concerned with developing and nurturing a distinctive competence
to provide a company or business unit with a competitive advantage.
- Marketing Strategy:
o Marketing strategy deals with pricing, selling, and
distributing a product.
o Consumer product giants such as P&G, Colgate, Palmolive,
and Unilever are experts at using advertising and promotion
to implement a market saturation/penetration strategy to
gain the dominant market share in a product category.
- Financial Strategy:
o Relates to the sourcing, usage and management of funds.
o According to Apple’s Chief Financial Officer, Peter
Oppenheimer, “Our preference is to maintain a strong
balance sheet in order to preserve our flexibility.”
- R&D Strategy:
o R&D strategy deals with product and process innovation
and improvement. It also deals with the appropriate mix of
different types of R&D (basic, product, or process) and with
the question of how new technology should be accessed—
through internal development, external acquisition, or
strategic alliances
o Chrysler Corporation’s skilful use of parts suppliers to
design everything from car seats to drive shafts has enabled
it to spend consistently less money than its competitors to
develop new car models
- Operations Strategy:
o The total pattern of decisions which shape the long term
capabilities of any type of operations.
o In the case of Dell Computer, customers use the Internet to
design their own computers.
o Baldor Electric Company, the largest maker of industrial
electric
motors in the United States, built a new factory by using the
new technology to eliminate
undesirable jobs with high employee turnover
- Purchasing Strategy:
o Purchasing strategy deals with obtaining the raw materials,
parts, and supplies needed to perform the operations
function.
 - Logistics Strategy:
o Logistics strategy deals with the flow of products into and
out of the manufacturing process
o HP contracted with Roadway Logistics to manage its
inbound raw materials warehousing in Vancouver, Canada
- HRM Strategy:
o Human resource management (HRM) strategy assists in
implementing the specific function of human resource
management to any organization.
o One Indian company, HCL Technologies, publishes the
appraisal ratings for the top 20 managers on the company’s
intranet for all to see
- IT Strategy:
o Corporations are increasingly using information technology
strategy to provide business units with competitive
advantage. When FedEx first provided its customers with
PowerShip computer software to store addresses, print
shipping labels, and track package location, its sales jumped
significantly.

3. What are Directional Strategies? Explain its different types and

relevance.

Directional strategy is the game plan a company decides on and

implements to achieve growth in the business, augment profits, and
realize goals. Any organization can create its own directional strategy to
focus on the specific of each SBU (separate business unit). For example,
certain companies may find that a directional portfolio strategy works
best, while other businesses may choose to follow a parenting
directional strategy.

There are 3 kinds of directional strategies:

o Growth strategies: Expanding the company activities.
 Concentration (vertical growth, horizontal growth)
  Concentration of resources on those product lines
which already have proven potential makes sense as
a strategy for growth.
 Vertical growth can be achieved by taking over a
function previously provided by a supplier or by a
distributor. The company, in effect, grows by making
its own supplies and/or by distributing its own
products.
 A firm can achieve horizontal growth by expanding
its operations into other geographic locations and/or
by increasing the range of products and services
offered to current markets.
 Diversification (Concentric, Conglomerate)
 Concentric: A type of diversification in which a
company acquires or develops new products or
services (closely related to its core business or
technology) to enter one or more new markets.
 When management realizes that the current industry
is unattractive and that the firm lacks outstanding
abilities or skills that it could easily transfer to related
products or services in other industries, the most
likely strategy is conglomerate diversification—
diversifying into an industry unrelated to its current
one
 Growth leads to high sales and increases revenue that
creates slack in the organization. This can be used to
easily resolve conflicts and alleviate issues between
departments and divisions. Everyone likes money and
it can be a great motivator to get people to work for
the benefit of the organization.
 Growth means better promotions, more hiring etc. A
growing firm is always on the move and so employees
can get to experience a dynamic career and be
rewarded with value adding opportunities.
o Stability strategies: Make no change to the company’s currents
activities.
  Pause/proceed – taking a timeout or rest before continuing
onwards towards growth. A very deliberate attempt to
make only incremental improvements until a particular
environmental situation changes
 No change strategy – Do nothing new. Continue current
policies and processes for some time.
 Profit strategy - The profit strategy is useful only to help a
company get through a temporary difficulty. It may also be
a way to boost the value of a company in preparation for
going public via an initial public offering (IPO).
o Retrenchment strategies: Reduce the company level of activities.
 Turnaround strategy – Improve operational efficiency -
most appropriate when a corporation’s problems are
pervasive but not yet critical.
 Captive company - involves giving up independence in
exchange for security.
 Divestment - If the corporation has multiple business lines
and it chooses to sell off a division with low growth
potential, this is called divestment
 Liquidation – Termination of the firm.

2. Explain the meaning and reasons for Strategic Alliances. Also explain in
detail the 4 different types of Strategic Alliances along with examples.

- A strategic alliance is a long-term cooperative arrangement

between two or more independent firms or business units that
engage in business activities for mutual economic gain.
- Each of the top 500 global business firms now averages 60 major
alliances.
- A study by Cooper & Lybrand found that firms involved in strategic
alliances had 11%
higher revenue and 20% higher growth rate than did companies
not involved in alliances.
Reasons:
- To obtain new capabilities.
 - To obtain access to specific markets
- To reduce financial risk
- To reduce political risk

1. Mutual Service Consortia. A mutual service consortium is a partnership

of similar companies in similar industries that pool their resources to
gain a benefit that is too expensive to develop alone, such as access to
advanced technology. For example, IBM established a research alliance
with Sony Electronics and Toshiba to build its next generation of
computer chips. The result was the “cell” chip, a microprocessor running
at 256 gigaflops—around ten times the performance of the fastest chips
currently used in desktop computers. Referred to as a “supercomputer
on a chip,” cell chips were to be used by Sony in its PlayStation 3, by
Toshiba in its high-definition televisions, and by IBM in its super
computers.
2. Joint Venture. A joint venture is a “cooperative business activity, formed
by two or more separate organizations for strategic purposes, that
creates an independent business entity and allocates ownership,
operational responsibilities, and financial risks and rewards to each
member, while preserving their separate identity/autonomy.”
3. For example, Proctor & Gamble formed a joint venture with Clorox to
produce food-storage wraps. P&G brought its cling-film technology and
20 full-time employees to the venture, while Clorox contributed its bags,
containers, and wraps business.
4. Licensing Arrangements. A licensing arrangement is an agreement in
which the licensing firm grants rights to another firm in another country
or market to produce and/or sell a product. The licensee pays
compensation to the licensing firm in return for technical expertise.
Licensing is an especially useful strategy if the trademark or brand name
is well known but the MNC does not have sufficient funds to finance its
entering the country directly. For example, Yum! Brands successfully
used franchising and licensing to establish its KFC, Pizza Hut, Taco
Bell, Long John Silvers, and A&W restaurants throughout the world
5. Value-Chain Partnerships. A value-chain partnership is a strong and close
alliance in which one company or unit forms a long-term arrangement
with a key supplier or distributor for mutual advantage. For example,
P&G, the maker of Folgers and Millstone coffee, worked with coffee
appliance makers Mr. Coffee, Krups, and Hamilton Beach to use
technology licensed from Black & Decker to market a pressurized, single-
serve coffee-making system called Home Cafe.