09-02-2023

Strategic Intent

• Strategic intent drives all but

• a.) Articulation of vision and mission
• b.) Competitive innovation
• c.) Long term goals
Strategic Management-I • d.) Generic strategies

IIM Lucknow

Strategic Intent Strategic Intent

• Which are the four approaches of competitive innovation?
• Building layers of competitive advantage
• Searching for loose bricks
• Changing the terms of engagement
• Competing through collaboration
• Strategic intent is one of the essential elements of the strategic management process
• It describes what a firm strives to become in future
• Provides guidance about what core to preserve and what future to stimulate progress
toward
• Concerned with the ends and purposes of the enterprise and combines a vision of the
future with the intent to work towards it
• Strategic intent drives – vision, mission, goals
 How it works:
 provides a sense of higher purpose
 has to be acceptable to the various stakeholders.
 only exists when all employees and levels of a firm are committed to the pursuit of a specific,
significant performance criterion.
 should stretch the enterprise beyond its present aspirations and practices.

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The content of strategy
I. Vision – What we want to be?
• Our aspirations for future/desired end state
II. Mission – What we are/Why we exist?
• Describes the organization in terms of the:
• Stakeholders
• Business scope – customers, products, technologies
• Skills it intends to develop to fulfill its vision
III Core Values – What we value?/Our boundaries
IV Goals and Objectives – Our intermediate milestones
• Results to be achieved within a specific time period
V. Strategies
These together define the nature of the business and provide a framework for analysis,
choice, implementation and evaluation process
Mission Statements
Mission statements identify what an organization is in
business to accomplish, e.g., make high quality tires, health
care products, food products, software, and for whom
(stakeholders).
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VISION
Vision statements describe what the organization is trying to become, the future
state of the organization.
Visions often include how the organization will behave, what it will focus on
or value, in order to realize the vision.
“BE THE GLOBAL LEADER IN CONVENIENT FOODS AND BEVERAGES BY
WINNING WITH PURPOSE”
Some Mission Statements
“CREATE MORE SMILES WITH EVERY SIP AND EVERY BITE”
FOR OUR CONSUMERS: By creating joyful moments through our delicious
and nourishing products and unique brand experiences.
FOR OUR CUSTOMERS: By being the best possible partner, driving game-
changing innovation, and delivering a level of growth unmatched in our OUR MISSION IS TO
industry. DELIVER HIGH QUALITY,
FOR OUR ASSOCIATES AND OUR COMMUNITIES: By creating meaningful AFFORDABLE HEALTHCARE
opportunities to work, gain new skills and build successful careers, and a SERVICES TO THE BROADER
diverse and inclusive workplace. POPULATION IN INDIA.
FOR OUR PLANET: By conserving nature’s precious resources and
fostering a more sustainable planet for our children and grandchildren.
FOR OUR SHAREHOLDERS: By delivering sustainable top-tier TSR and
embracing best-in-class corporate governance.
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Core Values
Template for a mission statement

• We exist to (primary purpose, need served or problem solved):

• _________________________ Our core values are represented by the
• For (primary clients or customers): acronym "iCare", which
encompasses innovation and
• _________________________ efficiency, Compassionate
care, Accountability, Respect for all,
• In order to (core services offered):
and Excellence as a culture. At the same
• _________________________ time, we seek to generate a strong financial
• So that (long-term outcomes determining success): performance and deliver long-term value to
our shareholders through the execution of
• _________________________ our business strategy.
- Integrity and Ethical Behaviour
- Performance driven work culture
- Value Creation through Innovation &
Differentiation
- Quality through Compliance & Best
Practices
- Collaboration, Team Work & Mutual
Respect

Objectives Examples of objectives

• More specific aims resulting from the vision and environmental
scanning
• Mainly used as yardsticks for decisions on firm’s product –market
posture
• Spell-out how much of what kind of Performance by when
• Example: Corporate objectives
• To Achieve 100 Percent Total Customer Satisfaction... Everyday …In Every
Restaurant…For Every Customer - Mcdonald’s
• To increase annual sales from institutional customers from $1 billion
to $1.5 billion in 2 years.
• To enter a new market every 18 to 24 months.
• To have 30% of sales each year come from products not in the
company’s product line five years earlier.
• To be the lowest cost, highest quality producer in the household
products industry.
• To achieve a 15% average annual growth in sales, profit, and earnings
per share

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 09-02-2023

Industry Analysis: Indian Airline Industry

• Air Traffic:
• In January 2021, the domestic air traffic was at 77.34 lakh but in November 2021, it increased to 105.16 lakh
as per the data available with DGCA. And there is potential for growth (around 6.9% annual growth) for airline
carriers in the country, considering the low penetration in India.
• According to various reports, the aviation penetration in India is among the lowest in the world. For instance,
the total fleet size in India is 716 as of December 2020, while the fleet size of American Airlines alone is 994,

Strategic Analysis: External Analysis

United Airlines is 950, and in the fleet size of Chinese Airlines: China Southern Airlines is 636, Air China is 448
and China Eastern Airlines is 574. This gives the airline operators the space to expand their business.
• High operating costs:
• Around 75-80% of the total cost is fixed
• Fuel expenses: around 35% of the total cost (ATF in India is higher than the international benchmark)
• Rentals of flight equipment: around 15% of the total cost
• Flight equipment maintenance and overhaul: around 10% of the total cost
• General and admin expenses around 8%
• Airport landing and navigation charges at Indian airports were 50% higher than international benchmarks

• Competition
• Market share (2021): Indigo – 55%; SpiceJet – 13%; Air India – 9%; Go Air – 7.5%; Air Asia – 6.5%; Others – 9%
(include Vistara ~ 6.3%; Trujet ~ 0.5%; Star Air ~ 0.2%; Alliance air ~ 1.3% )
• Most of the players are Low Cost Carriers
• Load Factors (2019-20): Indigo – 85.1, SpiceJet- 90, Go Air – 83.1, Vistara – 77.9, Air Asia – 83

Industry Analysis: Indian Airline Industry (Contd.)

• Government regulations
• 49% FDI in Scheduled Air Transport Services/Domestic Passenger airlines through automatic route (greater than 49 %
allowed through government route)
• 100% FDI by NRIs

Examine the attractiveness of the Indian

• 100% FDI in greenfield and brownfield airport projects
• No Greenfield airport will normally be allowed within an aerial distance of 150 kilometers of an existing airport.
Where it is allowed as a second airport in the same city or close vicinity, the parameters for distribution of traffic
between the two airports will be clearly spelt out
• An airline providing scheduled services on domestic sectors in India is required to comply with Route Dispersal
Airline Industry
Guidelines as formulated by the Government in March 1994. These guidelines provide for the following categories of
routes
• Category-I: Twelve city pairs: Mumbai-Bangalore, Mumbai-Kolkata, Mumbai-Delhi, Mumbai-Hyderabad, Mumbai-Chennai, Mumbai-
Thiruvananthapuram, Kolkata-Delhi, Kolkata -Bangalore, Kolkata-Chennai, Delhi-Bangalore, Delhi-Hyderabad, Delhi-Chennai.
• Category-II: Routes connecting the North East, Jammu & Kashmir, Andaman & Nicobar Islands, and Lakshadweep with cities in Category I and
Category III routes
• Category-IIA: City pairs within the North East, Jammu & Kashmir, Andaman & Nicobar Islands, and Lakshadweep
• Any city pair that does not fall in Categories I, II and IIA
• According to the Route Dispersal Guidelines, scheduled domestic airlines must deploy their capacity as follows: ·
• On Category II routes, 10% of the capacity on Category I units.
• On Category IIA routes, 10% of the capacity on Category II routes (which is aggregated for meeting the requirement of Category II)
• On Category III routes, 50% of the capacity on Category I route

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Porter’s Five Forces Analysis RIVALRY

Factors Data/Remarks Low/ Rivalry Industry
Moderate/ Attractiveness
High
Rating: 1 --- 5 Rating: 1---5

Number of competitors

Industry Growth

Fixed Cost

Product Differentiation

Switching Costs

Excess Capacity
Perishability
High exit barriers (asset specialization,
cost of exit, gov. restrictions)
Average Attractiveness

Porter, 1979

THREAT OF NEW ENTRANTS SUPPLIERS’ BARGANING POWER

Factors Data/Remarks Low/ Threat of Entry Industry Factors Data/Remarks Low/ Suppliers’ Industry
Moderate/ Rating: 1 ---- 5 Attractiveness Moderate/ Bargaining Attractiveness
High Rating: 1----5 High
Rating: 1 --- 5 Rating: 1---5 Rating: 1 --- 5 Rating: 1---5

Economies of scale
Suppliers’ concentration
Demand side benefits of scale
Industry switching costs
Capital requirements
Product differentiation
Product differentiation
Substitutes for supplies
Brand differentiation
Threat of forward integration
Access to distribution channels
Access to raw materials Dependence on industry

Switching costs Average Attractiveness

Restrictive government policies

Average Attractiveness

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BUYERS’ BARGANING POWER THREAT OF SUBSTITUTES

Factors Data/Remarks Low/ Buyers’ Industry Factors Data/Remarks Low/ Threat of Industry
Moderate/ Bargaining Attractiveness Moderate/ Substitutes Attractiveness
High High
Rating: 1 --- 5 Rating: 1---5 Rating: 1 --- 5 Rating: 1---5

Availability of close substitutes

Customer Concentration Switching costs

Customer switching costs Substitute’s price-value ratio

Product differentiation Innovation in the substitute’s industry

Brand differentiation Average Attractiveness

Threat of backward integration

Customers price sensitivity

a. concentration of purchases
b. customers’ financials
c. Impact on product quality
Average Attractiveness

Forces Average Weights Net Score

Sixth Force: Complementors
Attractiveness

Rivalry • Product or services that are compatible with the focal firm’s own
Threat of new entrants product or service
Suppliers’ Bargaining Power
• Complementary goods offer more value to the consumer together
Buyers’ Bargaining Power than apart
Threat of substitutes • Operating system and anti-virus
OVERALL ATTRACTIVENESS
• Car and insurance
• When complementors are important and their number is increasing
demand and profits in the industry are boosted

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Q1: Examine the attractiveness (profitability potential) of the PC industry

Case discussion: Apple Inc. in 2020

Industry Value Chain and Profit Pool

Profit Pools
• Total profits earned in an industry at all points along the industry’s value chain
• Pattern of profit concentration is different from the pattern of revenue concentration
PC Industry Profit Pools
Q2: Examine the attractiveness of the smartphone industry

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Industry Lifecycle
How Typical is the Life Cycle Pattern?

• Technology-intensive industries (e.g. pharmaceuticals,

semiconductors, computers) may retain features of emerging
industries.
• Some other industries (especially those providing basic necessities,
e.g. food processing, construction, apparel) may reach maturity, but
not decline.
• Industries may experience life cycle regeneration.

Sales Sales Color

B&W Portable

HDTV
?

1900 50 90 07 1930 50 70 90 07
MOTORCYCLES TV’s

• Life cycle model can help us to anticipate industry evolution—but

dangerous to assume any common, pre-determined pattern of
industry development

Competitor Analysis Strategic Groups

• A cluster of firms in an industry with similar competitive approaches
• Strategic Groups and market positions
• Competitor Array • Firms in same strategic group have two or more competitive
• Competitors’ Value Curve characteristics in common
• Competitor Profiling • Sell in same price/quality range
• Emphasize same distribution channels
• Use same product attributes to appeal to similar types of buyers
• Use identical technological approaches
• Offer buyers similar services
• Cover same geographic areas

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Strategic Groups Strategic Group Mapping

• Strategic Group Analysis is useful to:
• Identify firms with similar strategic/competitive characteristics
• Therefore identify the most direct competitors
• Identify mobility barriers
• Identify strategic opportunities
• Strategic threats and problems
• STEP 1: Identify competitive characteristics that differentiate firms in
an industry from one another
• Price/Quality range, geographic coverage, use of distribution channels,
integration, product-line breath, degree of service offered
• STEP 2: Plot firms on a two-variable map using pairs of these
differentiating characteristics
• STEP 3: Assign firms that fall in about the same strategy space to
same strategic group
• STEP 4: Draw circles around each group, making circles proportional
to size of group’s respective share of total industry sales

Strategic Groups in Retail US Auto Industry

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Strategic Groups in the Pharmaceutical Industry Strategic Groups in the Pharmaceutical Industry

Interpreting Maps
• Competitive pressures have similar impact on members of a strategic
group
Identify strategic groups in Indian Domestic
• Profit potential of different strategic groups varies Airline Industry
• The closer that strategic groups are on the map, the stronger that
competitive rivalry among the members of these groups tends to be

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Creating a Competitor Array Competitor Array

 Determine who your key competitors are

 Determine who your customers are and what benefits they expect

 Determine what the critical success factors (CSFs) are in your industry

 Rank the critical success factors by giving each one a weighting

 Rate each competitor on each of the critical success factors

Source: Beat the Competition: How to Use Competitive Intelligence to Develop Winning
Business Strategies", Ian Gordon, Basil Blackwell Publishers, Oxford, UK, 1989.

CSFs for Pharma Industry (Example) Competitors’ Value Curve

 R&D Effectiveness
 New products in pipeline
 Time to market
 Quality and standard conformance
 Extensive sales and distribution channel
 Brand reputation

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Competitor Profiling
Create detailed profiles on each of your major competitors. These profiles give an in-depth Competitor Profiling
description of the competitor's background, finances, products, markets, facilities, personnel, and
strategies. This involves:
• Marketing
• Background
• location of offices, plants, and online presences • segments served, market shares, customer base, growth rate, and customer
• history - key personalities, dates, events, and trends loyalty
• ownership, corporate governance, and organizational structure
• promotional mix, promotional budgets, advertising themes, ad agency used,
• Financials sales force success rate, online promotional strategy
• P-E ratios, dividend policy, and profitability
• Various financial ratios, liquidity, and cash flow • distribution channels used (direct & indirect), exclusivity agreements,
• Profit growth profile; method of growth (organic or acquisitive) alliances, and geographical coverage
• Products • pricing, discounts,and allowances
• products offered, depth and breadth of product line, and product portfolio balance
• new products developed, new product success rate, and R&D strengths
• brands, strength of brand portfolio, brand loyalty and brand awareness
• patents and licenses
• quality control conformance
• reverse engineering

Competitive Dynamics
Competitor Profiling
First Movers and Followers
• Facilities • First movers who succeeded
• plant capacity, capacity utilization rate, age of plant, plant efficiency, capital • Xerox in photocopiers
investment • General Electric in light bulbs
• location, shipping logistics, and product mix by plant • Coca Cola in soft drinks
• Personnel
• First movers who failed
• number of employees, key employees, and skill sets
• strength of management, and management style • Sony in VCR
• compensation, benefits, and employee morale & retention rates • Chux in disposable diapers
• Osborne in portable PCs
• Corporate and marketing strategies
• objectives, mission statement, growth plans, acquisitions, and divestitures
• marketing strategies

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First Movers Advantages
• Preempting the scarce resources
• Setting industry standards and gaining economies of scale
• The ability to register patents and trademarks
• Building firm’s image and reputation
• Loyalty of first time buyers
• Able to create customer switching costs
Setting Industry Standards
• Windows operating system – supported by network externalities
• Sony's Betamax video standard was introduced in 1975, followed a
year later by JVC's VHS. For around a decade the two standards
battled for dominance, with VHS eventually emerging as the winner
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Preempting scarce resources
• Input factors
• Skilled human capital, natural resources
• Locations
• prime retail locations – convenience stores, petrol pumps
• Marketing and distribution channels
• retail shelf space, exclusive arrangement with stockists
• Preemption of market positions
• small markets with room for a limited number of players
• Preemption of consumers’ perceptual space
• Xerox, Coca-Cola
• Preemptive capacity investments
First Movers Disadvantages
• Pioneer invests in both R&D and market education, but it is risky –
deal with technological or market uncertainty
• Do not have the benefit of learning from the mistakes of others
• Rapid technological change allows followers to leapfrog pioneers –
stuck with old technology
• Skills and know-how of pioneers could be easily imitated by late
movers
• Sometimes costs of pioneering are sizable but the loyalty of first time
buyers is weak
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Resource Based View

 Resources
 Tangible
Internal Analysis  Intangible

Tangible Resources Intangible Resources

• Physical resources
•
•
A manufacturing firm’s plant and equipment
A telecom company’s network of towers, cables and satellites
• Human resources
• Employee knowledge and expertise, managerial skills
• A natural resource company’s land/offshore exploration leases
• State-of-the-art R&D facilities of a pharmaceutical company • Cumulative experience
• A multi-national company’s accumulated experience of dealing with various national governments
• Organizational resources
• Reporting structure • Innovation resources
• Control and coordination systems, incentive systems • Creative thinking/ideas
• Scientific and technical talent
• Technological resources • Culture of innovation
• Stock of technology, patents
• Technological artifacts such as design, trade secrets, copyrights
• Reputational resources
• A well known or trusted brand name
• Financial resources • A firm’s good reputation with various stakeholders
• Cash reserves
• A high level of community support
• Borrowing capacity
• Account receivables

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Capabilities
Capabilities
 Ability to deploy resources to achieve the desired results
Functional areas Capabilities Example
 Skills the firm needs to exploit full potential of its resources
Distribution Effective use of logistics and distribution Wal-Mart, ITC
techniques
Administration Management of a multi-business, multi- Unilever, ABB, GE
national organization
Manufacturing Miniaturizing of components and products Sony
Production of technologically sophisticated Honda
automobile engines
Marketing Effective promotion of brand name products Gillette, P&G, Coke
R&D Speed of new product development Microsoft
Reverse engineering of production process Dr. Reddy’s

VRIO Framework Isolating Mechanisms

 Isolating mechanisms – means through which firms limit
 Valuable: Helps a firm increase revenue or lower costs or lower risk imitation/substitution
 Physical uniqueness
 Rare: Are not possessed by many others Characteristics difficult to replicate – great location for a retailer, mineral spring for a water
bottler; patents
 Imperfectly imitable/substitutable: Hard to replicate/substitute
 Organized to exploit the VRI resources: organizational structure, control and  Path dependency
information systems, incentives, and culture appropriate to leverage the VRI Circumstances and prior choices that lead to development of the capability
resources  e.g. ISB’s choice to become a research-focused institute. It might be difficult to imitate the whole
set of choices made so far including Founding team’s vision, commitment, and other organizational
policies

 Causal ambiguity
Eg.3M’s innovation capabilities – Is it because of culture, hiring, luck, capital budgeting,
organization structure

 Scale deterrence
 Preemptive capacity building that deters competitors

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Company Classroom Activity

Resources/Cap V R I O Use the VRIO framework to assess which resources and capabilities
abilities
provide Apple Sustainable Competitive Advantage (if Any)?

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