MGN600

Corporate Strategy
&
Decision Simulation

RAJESH VERMA

1
“Victorious warriors win first and then go to war, while
defeated warriors go to war first and then seek to win”
The ‘Chamba’ Gold Mine
The Chamba Gold Mine
• You have taken a three-month option on a possible
The Chamba Gold Mine gold mine in Chamba (HP). During your trek and
exploration, you have remained relatively healthy
except for an injured left hand which sometimes
can suddenly become quite weak. With two weeks
to go before your option expires, you have finally
discovered gold in what appears to be good
quantity. You have exactly two weeks to get to the
claims office. If you arrive late and attempt to
secure the property with the owners knowing you
have visited it, they will probably hold an auction, at
which you, given your limited resources, could
easily be outbid.

• The weather is only moderately favorable; a

mountain storm may be brewing. You will know
within 48 hours if the storm is coming and will know
whether the mountain is passable (if the storm
comes) about one day later.
The Chamba Gold Mine

The Chamba Gold Mine

Here is your alternative one:

1. Wait three or four weeks until

the weather warms up and
enjoy a safe trip home. Take it
easy
The Chamba Gold Mine

Here is your alternative two:

2. Go over the mountains.

This is dangerous. It is
sometimes impossible. It is
quick, however (usually 7 to
10 days), if you can make it
without harm. If you
encounter storms or are
injured before you reach the
top, you will probably have to
turn back. In either case,
you may perish, because the
longest part of the journey is
on the way over the top.
The Chamba Gold Mine

Here is your alternative 3:

3. Go through the valley passes. This is less dangerous and is usually

passable. However, it is slow and tiring. Most people can usually
complete this journey in two to three weeks.
The Chamba Gold Mine

Here is your alternative 4:

4. Wait two to four days, take #2
if the weather permits; if not
take #3. (There is no
advantage to waiting if you
prefer #3 anyway, and waiting
to take #1).
The Chamba Gold Mine

Gold Mine
(You have 14 days)
Option Min Max Possible Personal
Time Time Gain Risk

#1
(wait 3-4 weeks)

#2
(over top)

#3
(valley)

#4
(wait 3 days)
The Chamba Gold Mine

Gold Mine
(You have 14 days)
Option Min Max Possible Personal
Time Time Gain Risk

#1 No $$$ None
(wait 3-4 weeks)

#2
(over top)

#3
(valley)

#4
(wait 3 days)
The Chamba Gold Mine

Gold Mine
(You have 14 days)
Option Min Max Possible Personal
Time Time Gain Risk

#1 No $$$ None
(wait 3-4 weeks)

#2 7 days 10 days For sure $ Life

(over top) $$s

#3
(valley)

#4
(wait 3 days)
The Chamba Gold Mine

Gold Mine
(You have 14 days)
Option Min Time Max Time Possible Personal
Gain Risk

#1 No $$$ None
(wait 3-4 weeks)

#2 7 days 10 days For sure $$ Life

(over top) $s

#3 14 days 21 days Maybe $$$s None

(valley)
Win if no
#4 10-13 days to 14-21 days $$$, if top storm
(wait 3 days) top to valley Lose, if Lose if
storm storm
Conceptual Overview

The Environment -
GOAL
“Threats & Opportunities”

Management’s values &

STRATEGY
attitude toward risk

Capabilities -
“Strengths & Weaknesses”
14
Strategic Management Process

Environmental Strategy
? ?
Scanning Formulation
Copyright © 2001 Houghton Mifflin Company. All rights reserved.

1-16
The Chamba Gold Mine

Part II
• Assume you chose the valley pass (#3). Five days later you are
halfway there. But, you may have pushed too hard as you sprained
your ankle. Fortunately, you run into Ravi, and old friend on a trapping
expedition. Ravi could get you to the claims office and offers to take
you. If you were healthy, you could get there easily in 7 days, but you
cannot make it alone without a few days rest, and even then it could
take 10 days or more, depending on how your ankle holds up.
Traveling together, you might make it in 10 to 14 days. If you tell Ravi
about the gold and make a deal, Ravi alone could get there in 8 to 10
days.
• Your are not sure whether Ravi can exercise the option and file the
claim correctly, because Ravi is not bright, tends to drink in excess,
and is not the single-minded hustler that you are. Ravi is a simple,
decent person who likes trapping but would, you suspect, both need
and desire financial independence. You think you could trust Ravi if
you offer to split 50-50, because Ravi would need your expertise to
capitalize on the discovery.
• What is your decision? Go it alone____ Go with Ravi____ Send
Ravi____
Conceptual overview

The Environment - GOAL

“Threats & Opportunities”
Implementation Levers:

Management’s values &
STRATEGY
attitude toward risk
Organization structure
Systems and processes
People and rewards
Strategic Leadership:

Lever and resource

allocation decisions
Develop support among
stakeholders
Organization’s resources
and capabilities -
“Strengths & Weaknesses”

Performance
19
20
Strategic Management Process

Environmental Strategy Strategy Evaluation &

Scanning Formulation Implementation Control
Copyright © 2001 Houghton Mifflin Company. All rights reserved.

1-22
Strategy Formulation & Implementation

Implementation Levers:
Organization structure
Systems and processes
People and rewards
Realized &
Intended
Emergent
STRATEGY Strategic Leadership:
STRATEGY
Lever and resource
allocation decisions
Develop support among
stakeholders
1-24
Example

Intel, the world’s largest manufacturer of microprocessors (MPs),

Intel originated as a memory company, in the business of DRAMs –Dynamic

Random Access Memory- and EPROMS-Erasable Programmable Read only
Memory.

So how did the core business of Intel get transformed from DRAMs to MPs in
1980s, and how did this happen, despite top management clinging to the
view that DRAMs were the core strategic business of Intel?

Andy Grove’s famous move to bet Intel’s future on microprocessors was, in

fact, an emergent rather than a planned strategy. In his memoir, he recounts
that his decision was largely based on changes in production already made
by line managers.

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UNPLANNED ACTIONS CAN DRIVE STRATEGY

Intel’s original focus

(1970s & 1980s)

By 1984, 95%
Design and
of Intel revenue
manufacture of Focus on micro-
came from the
Dynamic, Random- processor
microprocessor
Access Memory Chips segment
segment
(DRAM)

Unplanned
experimental
venture to
make
microprocesso
rs for Busicom,
a Japanese
calculator
maker
26
TIFFANY & Co.

Would is surprise you if the

next time you opened up a
blue box rather than
diamonds you saw
stationary? Yes, it’s true.

Tiffany’s started out as a

stationer before making the
transition into luxury jewelry.

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AVON

This international beauty company comes

from significantly different beginnings. David
McConnell, the creator of Avon, was originally
a door-to-door used book salesman.

McConnell gifted samples of perfume to

ladies so they would readily open the door for
him.

As it turns out the market was more

interested in beauty than knowledge.

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.

1-29
VEDANTA ALUMINUM LTD (VAL)

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VAL STORY

 Lanjigarh, Odisha, India.

 London-based billionaire Anil Agarwal’s Vedanta.
 Based out of London, has revenues in excess of $14 billion with operations in Namibia, Zambia,
Ireland, Liberia, South Africa and Australia, apart from India.
 Agarwal spotted an opportunity in mining bauxite in Niyamgiri and refining it in the vicinity, a move
that was expected to result in one of the most economical operations in the global aluminium
industry.
 Odisha is known to have substantial deposits of bauxite — an estimated 2,000 million tonnes as
against the country's total deposit of 3,000 million
 In 2004, Vedanta entered into a MoU with the Odisha government for bauxite supplies; according to
the agreement, roughly half the assured offtake of the total 150 million tonnes was to come from
Niyamgiri. Two years later, a 1 million tonne per annum (tpa) alumina refinery plant went on stream
in Lanjigarh, roughly 15 km from the Niyamgiri Hills. Cost: Rs 5,000 crore. Another Rs 35,000 crore
was invested in a 0.5 million tpa aluminum smelter and a 1,215 MW captive power plant at
Jharsuguda in Orissa. Add to this an investment of nearly Rs 10,000 crore in a 2,400 MW
independent power plant that group company Sterlite Energy has put up, which has linkages with the
aluminum project.


Resulting into a total Investment of Rs. 50000 Crore
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BATTLE GROUND

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WHY PROBLEM…..

 NIYAM RAJA-Entire mountain range is sacred. Tribe

Kondhs are ready to die for the mountain (Dongrias who
are the mountain tribe and their cousins, the Kutias who
live on the plains)

 leaders of the movement are Lado Sikaka, a mountain

tribal, and Kumti Majhi who is from the plains.

 The Supreme Court has said that if the bauxite mining

project "...in any way affects their religious rights, especially
their right to worship their deity, known as Niyam Raja, in
the hill top of the Niyamgiri range of hills, that right has to
be preserved and protected.”

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http://www.survivalinternational.org/films/mine
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PROBLEM…..

 The short point: Vedanta has spent roughly Rs 50,000 crore on putting up
the infrastructure to make aluminum without getting access to the raw
material needed.
 Vedanta decided to move with speed and aggression and built its
infrastructure even before it had got the clearances required to mine
Niyamgiri.


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RESPONSE-Viewpoints

 VAL managing director SK Roongta — in light of the decision taken by the

palli sabhas — on the chances of the company getting access to bauxite in
Odisha, he said that Vedanta was "hopeful" that the government would
provide access to the mineral.

 "The investment in the plant was rightly made on the basis of assured
supply of bauxite in the form of an MoU with the Odisha government and
through an agreement with OMC.“

 Basant Poddar, vice-president of the Federation of Indian Mineral Industries,

"They [Vedanta] took it for granted that they would get the bauxite, given the
size of their investment," Poddar feels Vedanta may have been betrayed by
the system since the state had assured them of giving access to the mine.
"But since the clearance wasn't in hand yet, they should have waited,"

 Malay Mukherjee, former chief operating officer at a Lakshmi Mittal

company, points out such episodes make it even more difficult for India Inc
to get land for mining. "Getting land for mining has become difficult
because of a lack of credibility around the corporate sector on proper
rehabilitation.
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VAL’s Alternatives

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AVOID ISSUES

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THANK YOU

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