PGP 2021-22 Smii Sgunta Set1

Why have SM – II?
Srinivas Gunta
Faculty Member
Strategic Management
It depends….
….on the context!
© Srinivas Gunta PGP 2021-22 Strategic Management II

SM – I
• Tried understanding the nature of the beast

• Do BHAGs matter?
• PEST control?
• Porter’s five forces
• Resource-based view
• Value Chain
• Generic Strategies
• Competitive dynamics
Competitive Strategy
• Tried understanding the nature of the beast

• Do BHAGs matter?
• PEST control?
• Porter’s five forces
• Resource-based view
• Value Chain
• Generic Strategies
• Competitive dynamics
Value Chain
© Srinivas Gunta PGP 2021-22 Strategic Management II Source: Dinesh Pratap Singh, Wikimedia Commons
Generic Strategies
• Cost Leadership
• Differentiation
• Focus Cost Leadership
• Focus Differentiation
• Stuck-in-the-middle

Stuck-in-the-middle
Focus Stuck-in-the-middle Generic
ROE
Market Share

Yet…
• Titan & Sonata

• Tanishq & GoldPlus
• How do you manage two diverse logics?

…diverse logics get managed increasingly!
• Does it make sense

to have same
components?

Strategy Diamond
Arenas
Economic
Staging Vehicles
Logic
Differentiators
• Strategy Diamond – Is it about initial (founding) strategy? Or is it

about how to change a strategy?

The Strategy – Structure Paradox
• Heard of Chandler?
• To implement a strategy, you need a structure
– Structure follows Strategy (P. 57)
• What would happen when you need to
change strategy?
– Strategy follows Structure
• Why? What does that imply?

Strategy Diamond – Old Wine, New Bottle?
Porter’s
Arenas
5 forces?
Porter’s
Economic Firm
Staging
Intended? generic
Logic scope
Vehicles
strategies
modified?
?
Differentiators
USP in
Mktg.?

How do strategies get made?
• Would Titan have set out to start Sonata?

– Emergent strategy
• Would Wal-Mart have started out with all these?
– Investments in IT
– “No questions asked” return policy
– 60% full occupancy on back-hauls of trucks
– Not more than 20% from one vendor
• How do you implement?
– The devil lies in details!

Fit drives competitive advantage
• “Fit locks out imitators by creating a chain that is as strong as

its strongest link.”
• Investments in IT
• “No questions asked” return policy
• Middle-of-nowhere  Rentals? Pay?
• 60% full occupancy on back-hauls of trucks
• Not more than 20% from one vendor
• “Competitive advantage grows out of the entire system of
activities.”

Fit drives competitive advantage
• Not more than 20% from one vendor

• Why?

Bargaining Power of
Suppliers
Threat of New
Existing Competition Threat of Substitutes
Entrants
Bargaining Power of
Buyers

Molasses,
Grains
? 60% market-share ?
Recession-proof
industry?

Yet, the liquor business is the least of…
• …worries for Mr. Vijay Mallya despite huge debts in

USL to the tune of ₹4,200 crore
• USL ~ ₹12,500 crore big
• All of Mallya’s businesses ~ ₹25,000 crore
– Kingfisher airlines have a debt of ₹7,000 crore
• Obviously, managing a group of businesses is tougher
than managing a single business
– “Moving from Competitive Strategy to Corporate Strategy
is the equivalent of passing through the Bermuda triangle.”
(Porter, 1987 HBR)

Corporate Strategy
Srinivas Gunta
Faculty Member
Concepts of Corporate Strategy
• Portfolio management
• Restructuring
• Transferring skills
• Sharing activities
(Porter, 1987 HBR)

Ansoff matrix

Nucor at a Crossroads
Srinivas Gunta
Faculty Member
Discussion questions
1. How consistent have been Nucor's product-market

choices over the years? Lately?
2. Should Nucor enter the flat sheet segment? Is the
thin-slab casting by SMS the way to go?
3. In what ways does Nucor's corporate strategy aid
and abet its competitive strategy? Or does it?

Nucor: 1972 to 1986
• Steel capacity grew at a CAGR of 16.97%

• Steel production grew at CAGR of 18.25%
• Net profits grew at CAGR of 16.55%
• Sales grew at CAGR of 15.81%

Nucor: 1972 to 1981
• Steel capacity grew at a CAGR of 23.86%


Nucor: 1982 to 1986
• Steel capacity grew at a CAGR of 0%

• Average capacity utilization:
– 72-86: 72.74%
– 72-81: 73.58%
© Srinivas Gunta
– 82-86: 71.05% PGP 2021-22 Strategic Management II
Ansoff matrix

But then debt is increasing…
De bt at Nucor
90000
80000
70000
60000
50000
'000 $
40000
30000
20000
10000
0
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
Year

…folks, so is equity!
Equity & Debt at Nucor
450000
400000
350000
300000
250000
'000 $
200000
150000
100000
50000
0
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
Year

…and at a much higher rate!
Nucor: Debt to Equity Ratio
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
Year

Nucor: Good at only two things
• Building plants fast

• Running plants efficiently
• Is this by default or by design?
– Marketing
– Scrap
– What is incentivised?

Nucor: How impactful can the decision be?
• What happened next?

– How does it matter?
• Is it a bet-the-company decision?
• Would you call this decision “strategic”?
– A taxonomy of decisions

How to tell which decisions are strategic
Significant
Strategic Neo-Strategic
CHANGES IN FIRM SCOPE
Insignificant Tactical Operational
Framework by R. Shivakumar, CMR 2014 Significant Insignificant
CHANGES IN FIRM COMMITMENT

The Marvel Way: Restoring a Blue Ocean
Srinivas Gunta
Faculty Member
Strategy Canvas
• How would it look like for Marvel till 1960?

• How would it look like for Marvel in 1961-65?
• Trouble in Paradise?
– 1968: Sold to Cadence
– 1986: Sold to New World Entertainment
– 1988: Perelman, the corporate raider enters
– 1998: Perlmutter era starts
• How would it look like for Marvel post-1998?
– Is it the same throughout? Or are there distinctive
phases?
Refining the Strategy
• Marvel in 1998-2004
– Licensing characters as collateral
• Marvel in 2004-09
– Becoming an actual studio
• Marvel post 2009
– Why get acquired by Disney?
– Relations with other studios?
• The Wagon wheel
– What are the spokes?
The Marvel Way: Restoring a Blue Ocean
• In analyzing a Blue Ocean, we need to ask:

What did the company..
– …eliminate?
– …reduce?
– …raise?
– …create?

Newell Company: Corporate Strategy
Srinivas Gunta
Faculty Member
1. What has been Newell's competitive strategy?

Corporate strategy?
2. What exactly are Newell's skills that have enabled
it to diversify through acquisitions? and continue to
be successful?
3. What do you make of the Calphalon acquisition?
the Rubbermaid acquisition?

Excellent growth at Newell
• 1992-97 CAGR
– Net Sales: 14.28%
– Total Assets: 16.60%
– Net Income: 10.07%

Would you like to work for Newell?
• What do you think of Dan Ferguson?

– And what do you think of Bob Katz, his professor
at Stanford?
• What do you think of the business?

– Making high-volume/low-cost product
– Relating and selling to a large retail institution
– Low-tech, non-seasonal, non-cyclical, non-
fashionable products
What are Newell’s Skills?
• LBO?
• Manufacturer?
– Fixed costs vs. Variable costs
• Merchandiser?
– Differentiation at various price points
• Marketer?
– For?
Newellization
• Is Newell really a diversification story?

– Growth by diversification?
– Growth by acquisition?
– Growth by diversification through acquisition?
• 30 major businesses in 20 years
• How do you control?

– Outcome
– Behavioral
– What happens in S/w services industry?

Pop Quiz
1. Is the nature of resources at Newell general or

specialized? Justify.
2. Is the scope of businesses at Newell narrow or
wide? Justify.
3. What exactly is meant by “Newellization”?

Are Newell’s Strategies Well Aligned?
• Nature of resources
– General <-> Specialized
• Scope of businesses
– Wide <-> Narrow
• Coordination mechanisms
– Transferring <-> Sharing
• Control systems
– Financial <-> Operating
• Corporate Office Size
– Small <-> Large: 375 people at HQ; $ 3 Bn. Revenue; 20 divisions

Multiple businesses: Multiple paths

Newell’s Diversification Strategy
• Calphalon acquisition?
– 1994 to 1997: De-growth in net income: CAGR of
–17.4%
• Rubbermaid acquisition?
– 1994 to 1997: De-growth in net income: CAGR of
–11.4%?

What do you think of Wm. E. Wright co.?
• Home sewing products firm divested as the

business dwindled out of mass retail channels
• What about Calphalon?
• What about Rubbermaid?

What do you make of the $10 bn. mark?
• PIMS study!

Xerox and Fuji Xerox
Srinivas Gunta
Faculty Member
1. Why was Fuji Xerox incubated? How has the

relationship between Xerox and Fuji Xerox changed
over the years?
2. What would you recommend that the Codestiny
taskforce do?
3. Should Fuji Xerox be considered as an alliance in
the spirit and the meaning of the term? More
fundamentally, can alliances and acquisitions be
viewed as different ways of reaching similar goals?
How should they move in future?
• What do you think of the codestiny task force?

• What do you make of the relationship options in
marketing?
research?
development and manufacturing?

Pop Quiz
1. Kobayashi believes that goals of Xerox & Fuji Xerox

can be described as “mostly compatible and partly
conflicting.” Do you agree? Justify. (8 marks)
2. Which option in Exhibit 11 under Research options
should Codestiny task force recommend? Justify. (8
marks)
3. In Exhibit 11, under Marketing options, what

depicts the relation followed in 1970’s? Why? (4
marks)

Xerox: The early years
• Xerox: 914 and operating model

– Machine rental scheme
– Phenomenal growth: Fastest in US to $1bn. sales
• Forms Rank Xerox

– Rationale for JV?
– Advantage for Xerox?
– What happened in 1964 in terms of marketing
rights?
Fuji Xerox: The early years
• Fuji Photo Film the only non-electronics suitor

– Why did Rank enter into an agreement with Fuji?
– Why did Rank insist on a JV?
• What role did Fuji Photo Film play?
– FX’s subcontractor. Primarily manufacturer. Why?
– 1971: FX combines Mfg. & Mktg. under one roof
– What made FPF become passive?
– What happened to Rank Xerox equity structure in
1969?
Xerox and Fuji Xerox
• Successful alliance?
• Reasons for alliance?
– Changes in the reasons?
• Who is controlling whom?
• Is Fuji Xerox better off alone?

Managing Ambiguity in Strategic Alliances
Exploratory vs.
Exploitative
Cognitive or
Behavioral
reframing
Excerpted from Rajesh Kumar, CMR,

© Srinivas Gunta PGP 2021-22 Strategic Management II 2014
Thank You!!

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Why have SM – II?

….on the context!

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Tried understanding the nature of the beast

• Tried understanding the nature of the beast

© Srinivas Gunta PGP 2021-22 Strategic Management II

Focus Stuck-in-the-middle Generic

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Titan & Sonata

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Does it make sense

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Strategy Diamond – Is it about initial (founding) strategy? Or is it

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Would Titan have set out to start Sonata?

© Srinivas Gunta PGP 2021-22 Strategic Management II

• “Fit locks out imitators by creating a chain that is as strong as

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Not more than 20% from one vendor

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

• …worries for Mr. Vijay Mallya despite huge debts in

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

1. How consistent have been Nucor's product-market

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Steel capacity grew at a CAGR of 16.97%

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Steel capacity grew at a CAGR of 23.86%

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Steel capacity grew at a CAGR of 0%

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

• Building plants fast

© Srinivas Gunta PGP 2021-22 Strategic Management II

• What happened next?

© Srinivas Gunta PGP 2021-22 Strategic Management II

CHANGES IN FIRM SCOPE

Insignificant Tactical Operational

Framework by R. Shivakumar, CMR 2014 Significant Insignificant

CHANGES IN FIRM COMMITMENT

© Srinivas Gunta PGP 2021-22 Strategic Management II

• How would it look like for Marvel till 1960?

• In analyzing a Blue Ocean, we need to ask:

© Srinivas Gunta PGP 2021-22 Strategic Management II

1. What has been Newell's competitive strategy?

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

• What do you think of Dan Ferguson?

• What do you think of the business?

• Is Newell really a diversification story?

• How do you control?

© Srinivas Gunta PGP 2021-22 Strategic Management II

1. Is the nature of resources at Newell general or

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II

© Srinivas Gunta PGP 2021-22 Strategic Management II