90994009 Mb0052 Solved Assignment Fall 2011

7/31/2019 90994009 Mb0052 Solved Assignment Fall 2011

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MasterofBusinessAdministration-MBASemester4MB0052StrategicManagementandBusinessPolicy-4CreditsAssignmentSet-1(60Marks)Note:Eachquestioncarries10Marks.Answerallthequestions.

Q.1WhatsimilaritiesanddifferencesdoyoufindinBCGbusinessportfoliomatrix,AnsoffgrowthmatrixandGEgrowthpyramid.(10marks)Ans.TheBCGmatrixisaportfoliomanagementtoolusedinproductlifecycle.BCGmatrixisoftenusedtohighlighttheproductswhichgetmorefundingandattentionwithinthecompany.Duringaproductslifecycle,itiscategorisedintooneoffourtypesforthepurposeoffundingdecisions.Figure3.5belowdepictstheBCGmatrix.

Figure3.5BCGGrowthShareMatrixQuestionMarks(highgrowth,lowmarketshare)arenewproductswithpotentialsuccess,buttheyneedalotofcashfordevelopment.Ifsuchaproductgainsenoughmarketsharestobecomeamarketleader,whichiscategorisedunderStars,theorganisationtakesmoneyfrommorematureproductsandspendsitonQuestionMarks.Stars(highgrowth,highmarketshare)areproductsatthepeakoftheirproductlifecycleandtheyareinagrowingmarket.Whentheirmarketrategrows,theybecomeCashCows.


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CashCows(lowgrowth,highmarketshare)aretypicallyproductsthatbringinfarmoremoneythanisneededtomaintaintheirmarketshare.Inthisdecliningstageoftheirlifecycle,theseproductsaremilkedforcashthatcanbeinvestedinnewQuestionMarks.Dogs(lowgrowth,lowmarketshare)areproductsthathavelowmarketshareanddonothavethepotentialtobringinmuchcash.AccordingtoBCGmatrix,Dogshavetobesoldofforbemanagedcarefullyforthesmallamountofcashtheyguarantee.Thekeytosuccessisassumedtobethemarketshare.Firmswiththehighestmarketsharetendtohaveacostleadershippositionbasedoneconomiesofscaleamongotherthings.Ifacompanyisabletoapplytheexperiencecurvetoitsadvantage,itshouldabletoproduceandsellnewproductsatlowprice,enoughtogarnerearlymarketshareleadership.LimitationsofBCGmatrix:TheuseofhighsandlowstoformfourcategoriesistoosimpleThecorrelationbetweenmarketshareandprofitabilityisquestionable.Lowsharebusinesscanalsobeprofitable.Productlinesorbusinessareconsideredonlyinrelationtoonecompetitor:themarketleader.Smallcompetitorswithfastgrowingsharesareignored.GrowthrateistheonlyaspectofindustryattractivenessMarketshareistheonlyaspectofoverallcompetitiveposition3.4.2IgorAnsoffgrowthmatrixTheAnsoffGrowthmatrixisatoolthathelpsorganisationstodecideabouttheirproductandmarketgrowthstrategy.Growthmatrixsuggeststhatanorganisationsattemptstogrowdependonwhetheritmarketsneworexistingproductsinneworexistingmarkets.Ansoffsmatrixsuggestsstrategicchoicestoachievetheobjectives.Figure3.6depictsAnsoffgrowthmatrix.


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Figure3.6AnsoffGrowthMatrixMarketpenetrationMarketpenetrationisastrategywherethebusinessfocusesonsellingexistingproductsintoexistingmarkets.Thisincreasestherevenueoftheorganisation.MarketdevelopmentMarketdevelopmentisagrowthstrategywherethebusinessseekstosellitsexistingproductsintonewmarkets.Thismeansthattheproductisthesame,butitismarketedtoanewaudience.ProductdevelopmentProductdevelopmentisagrowthstrategywhereabusinessaimstointroducenewproductsintoexistingmarkets.Thisstrategymayneedthedevelopmentofnewcompetenciesandrequiresthebusinesstoreviseproductstoappealtoexistingmarkets.DiversificationDiversificationisthegrowthstrategywhereabusinessmarketsnewproductsinnewmarkets.Thisisanintrinsicallyriskierstrategybecausethebusinessismovingintomarketsinwhichithaslittleornoexperience.Forabusinesstoadoptadiversificationstrategy,itshouldhaveaclearideaaboutwhatitexpectstogainfromthestrategyandanhonestassessmentoftherisks.3.4.3McKinsey/GEgrowthpyramidTheMcKinsey/GEmatrixisatoolthatperformsabusinessportfolioanalysisontheStrategicBusinessunitsinanorganisation.ItismoresophisticatedthanBCGmatrixinthefollowingthreeaspects:


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Industry(market)attractivenessIndustryattractivenessreplacesmarketgrowth.Itincludesmarketgrowth,industryprofitability,sizeandpricingpractices,amongotherpossibleopportunitiesandthreats.CompetitivestrengthCompetitivestrengthreplacesmarketshare.Itincludesmarketshareaswellastechnologicalpositions,profitability,size,amongotherpossiblestrengthsandweaknesses.McKinsey/GEgrowthpyramidmatrixworkswith3*3gridswhileBCGmatrixis2*2matrixes.Externalfactorsthatdeterminemarketattractivenessarethefollowing:MarketsizeMarketgrowthMarketprofitabilityPricingtrendsCompetitivetensity/rivalryOverallriskofreturnsintheindustryOpportunitytodifferentiateproductsandservicesSegmentationDistributionstructure(e.g.,retail,direct,wholesale)Internalfactorsthataffectcompetitivestrengtharethefollowing:StrengthofassetsandcompetenciesRelativebrandstrengthMarketshareustomerloyaltyRelativecostposition(coststructurecomparedtocompetitors)DistributionstrengthRecordoftechnologicalorotherinnovation


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Accesstofinancialandotherinvestmentresources

Figure3.7McKinsey/GEGrowthPyramid


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Q.2Discusstheinvestmentstrategiesapplicableforbusinessesandmethodstorectifyfaultyinvestmentstrategies.(10marks)Ans.Aninvestmentstrategyisakeycomponentofeveryconceivablebusinesstype,and

it scriticaltoensuringthesuccessofthebusiness.Entirecollegeprogramshavebeendesignedspecificallytoteachbusinessinvestmentstrategies,butafewkeytipscanhelplaygroundworkforeffectiveinvesting.

UseIncometoEliminateDebto

Whilethepay-downofoutstandingdebtmaynotseemlikebusinessinvestmentonthesurface,debteliminationcanequatetoafinancialreturnthatoutpaceseventhebestinvestments.Ifabusinesshasoutstandingdebtfinancedatagiveninterestrate,payingoffthatdebtguaranteesaninstantreturnofthatpercentage.Becausebusinessdebtoftenreachesintodoubledigitinterestrates,payingoffthisdebtcanprovideaninstant,guaranteedreturnthatissignificantlyhigherthanusualreturnsonotherinvestments.

ReinvestFundstoNurturetheBusinesso

Perhapsoneofthemostcommonwaysbusinessesinvesttheirfundsinvolvespurchasingadditionalequipment,remodelingcustomer-facingenvironmentsoropeninga

dditionallocations.Byreinvestingprofitsbackintothebusinessforexpansionorimprovement,thebusinessstandstogainadditionalprofitsasaresultoftheexpansion.Asanaddedbonus,aguaranteedreturnontheinvestmentwillcomeintheformoftaxnotassessedonthereinvestedfunds.

InvestinOtherBusinesseso

Somebusinessesfindsuccessininvestingtheirprofitsinothernoncompetingbusinesses.Theseinvestmentsmaybemadeastraditionalcashinvestments,asloansorbypurchasingsecuritiesissuedtobusinessstart-ups.Investinginotherbusinessescanbeanespeciallywisemoveforcompaniesinshakyindustries,asspreadinginvestmentsintoothertypesofoperationscanhelpdiversifyabusines

s sholdingsandreducetheriskofacompletebusinessloss.

OrUseofincometoeliminatedebtReinvestmentoffundstonurturethebusinessInvestmentinotherbusinesses


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Investmentisdefinedasthecommitmentofmoneyorcapital(e.g.purchasingassets,keepingfundsinabankaccountetc)togeneratefuturereturns.Aproperunderstandingoftheinvestmentstrategiesandathoroughanalysisoftheoptionshelpsaninvestortocreateaportfoliothatmaximisesreturnsandminimisesexposuretorisks.Followingarethewaystoinvestsuccessfully:LeaveamarginofsafetyAlwaysleaveamarginofsafetyinyourinvestmentstoprotectyourportfolio.Thefollowingarethetwowaystoincorporatetheaboveprincipleinyourinvestmentselectionprocess.BeconservativeinyourvaluationassumptionsOnlybuyassetsdealingatsubstantialdiscountstoyourconservativeestimate.InvestinbusinesswhichyouunderstandInvestinabusinessinwhichyouhaveathoroughunderstandingofthecustomers,products/servicesetc.MakeassumptionsMakeassumptionsaboutyourfutureperformancebyrecognisingyourownlimitations.Neverpurchasethestockuntilyouunderstandtheindustrialeconomyandabletoforecastthefutureofthecompanywithcertainty.MeasureyoursuccessEvaluateyourperformancebytheunderlyingmeasuresinbusiness.HaveacleardispositiontowardspriceThemoreyoupayforanassetinrelationtoitsearnings,thelesserisyourreturnvalue.Sohaveaclearoutlooktowardstheprice.AllocatecapitalbyopportunitycostAllocateinvestments/assetstothechoicewhichhasbeenoptedasthebestamongseveralmutuallyexclusivechoices.

InternalmethodstorectifyfaultyinvestmentstrategiesInthissectionwewillexplainthemethodstorectifyfaultyinvestmentstrategies.Someofthemethodsareasfollows:InternaltransformationCorporaterestructuringandreorganisationFinancialrestructuringDivestmentstrategy


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ExpansionstrategyDiversificationstrategyVerticalandhorizontalintegrationstrategyBuildingcorecompetenciesandcriticalsuccessfactorsFrequentassessmentreportassistsindetectingtheproblemsassociatedwithfaultyinvestmentstrategiesinanorganisation.InternaltransformationInternaltransformationtakesplaceinanorganisationtosustainconstantgrowth,survivalandmaintainprofitability.Itincludescorporaterestructuring,downsizingofemployeesetc.Thefollowingarethereasonsforinternaltransformationofacompany:PressureonownertodecreasecostsOverstaffingLargeandcomplicatedcompanystructureLowflexibilityofstaffFinancialinstabilityThemainobjectiveofacompanywhichadoptsinternaltransformationistoincreaseefficiencybyreachingthestandardsintheglobalmarket.Thisisachievedbyholdinghighqualitylevelofproductivity.Theessentialcomponentsofasuccessfulbusinesstransformationareasfollows:AchievementAnewlevelofsustainablyhighperformanceemergesExtraordinaryandunexpectedresultsappearthroughoutImprovedsynergyCollaborationnaturallyoccursacrossalllevelsCreativityandinnovationflourishesAliveness


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Employeesflourishastheyopenlyexpresstheirpassion,commitmentandcreativitytowardswork.GrowthanddevelopmentoccursbothpersonallyandprofessionallySharedfutureTheentireorganisationunitestoaccomplishthefutureandliveconsistentlywithcorevaluesWewillnowdiscussthetwointernaltransformationprocessesinthefollowingsection.Corporaterestructuringandre-organisationLayoffsandemployeetermination


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Q.3.a.Distinguishpolicy,procedureandprogrammeswithexamples.(5marks)b.Giveashortnoteonsynergy.(5marks)

Differencesbetweenpolicy,procedure,processandprogrammesIntheprevioustopicwediscussedthedefinitionandmeaningofpolicy,procedure,processandprogrammes.Nowwewillanalyzehoweachconceptisdifferentfromtheother.1.Policyisgeneralinnatureandidentifiesthecompanyrules.2.Policyexplainsthereasonforexistenceofanorganisation.3.Policyshowshowrulesareenforcedanddescribesitsconsequences.4.Itdefinesanoutcomeoragoal.5.Theyaredescribedbyusingsimplesentences.6.Policiesareguidelinesformanagerialactions.7.Itisaplannedwaytohandlecertainissuesintheorganization.8.ItisframedbythetoplevelProcedureidentifiesthespecificactionsandexplainswhenanactionneedstobetaken.Itdescribesemergencyprocedureswhichincludewarningsandcautions.Itissystematicwayofhandlingroutineactions.Proceduredefinesthemeanstoachievethegoals.Proceduresarewritteninanoutlineformat.Itisgenerallydetailedandrigid.Itisapartoftacticaltools.Processisasetofactivitiesconductedbypeopletoachieveorganizationalgoals.Processdefinesthemethodinwhichtheworkisdone.Itisalongtermrulethatdrivesanorganization.Programmeisaconcreteschemeofactivitiesdesignedtoaccomplishaspecificobjective.Itprovidesstepbystepapproachtotheactivitiestakentoachievethegoals.Programminghelpsindevelopinganeconomicalwayofdoingthingsinasystematicmanner.


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management.9.Policiesareapartofthestrategiesoftheorganization.

Ans.b.Synergyistheenergyorforcecreatedbytheworkingtogetherofvariouspartsorprocesses.Synergyinbusinessisthebenefitderivedfromcombiningtwoormoreelements(orbusinesses)sothattheperformanceofthecombinationishigherthanthatofthesumoftheindividualelements(orbusinesses).Organizationsstrivetoachievepositivesynergyorstrategicfitbycombiningmultipleproducts,businesslines,ormarkets.Onewaytoachievepositivesynergyisbyacquiringrelatedproducts,sothatsalesrepresentativescansellnumerousproductsduringonesalescall.Ratherthanhavingtworepresentativesmaketwosalescallstoapotentialcustomer,onesalesrepresentativecanofferthebroadermixofproducts.Mergersandacquisitionsarecorporate-levelstrategiesdesignedtoachievepositivesynergy.The2004acquisitionofAT&TWirelessbyCingularwasanefforttocreatecustomerbenefitsandgrowthprospectsthatneithercompanycouldhaveachievedonitsownofferingbettercoverage,improvedqualityandreliability,andawidearrayofinnovativeservicesforconsumers.Negativesynergyisalsopossibleatthecorporatelevel.Downsizingandthedivestitureofbusinessesisinparttheresultofnegativesynergy.Forinstance,Kimberly-ClarkCorporationsetouttosharpenitsemphasisonconsumerandhealthcareproductsbydivestingitstinyinterestsinbusinesspaperandpulpproduction.Accordingtothecompany,theremovalofthepulpmillwillenhanceoperationalflexibilityandeliminatedistractiononperipheryunits,thusallowingthecorporationtoconcentrateonasingle,corebusinessactivity.Theintendedresultofmanybusinessdecisionsispositivesynergy.Managersexpectthatcombiningem

ployeesintoteamsorbroadeningthefirm sproductormarketmixwillresultinahigherlevelofperformance.However,themerecombinationofpeopleorbusinesselementsdoesnotnecessarilyleadtobetteroutcomes,andtheresultinglackofharmonyorcoordinationcanleadtonegativesynergy.


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Q.4.SelectanyestablishedIndiancompanyandanalysethedifferenttypesofstrategiestakenupbythecompanyoverthelastfewyears.(10marks)

Cadburyplc,formerlyknownasCadbury-Schweppesplc,beforeitdemergedfromitsAmericasBeveragesmanufacturingbusinessin2008(Peston,2008),istheworldsleadingconfectionerymanufactureranddistributor.Cadburyplcoperatesinover60countries,workswithover35,000directandindirectsuppliersandemploysaround50,000people(CadburyIndiaLtd.,2008).Cadburystressestheimportancethatitplacesonquality.Apartfromitsmissionstatement,italsoreferencestheslogan,Cadburymeansqualityasanintegralpartofitsbusinesssactivities(Superbrands,2008).Lastly,CadburyalsoaimstoputACadburyineverypocket(KarvyResearch,n.d.)bytargetingcurrentconsumersandencouragingthemtomakeimpulsepurchasesandbymaintainingasuperiormarketingmix(KarvyResearch,n.d.).CadburyIndiaLtd,astheIndiansubsidiaryofthisconfectionerygiant,alsoutilizesthesamemissionandvisionstatementsofitsparentfirmwhenoperatingintheIndianmarket,albeitwithdifferentbusinessstrategiesandapproaches.SinceCadburysactivitiesvaryfromcountrytocountry,thisreportwillsimplyexaminetheactivitiesofCadburyIndiaLtdintheIndianmarket,oneofthefastestgrowingconfectioneriesmarketsintheworld(FinancialExpress,2008).ProductsofferedbyCadburyIndiaLtd.Cadburyplcmanufacturesandsellsthreedifferentkindsofconfectionery:chocolate,candyandchewinggum(CadburyIndiaLtd.,2008),butintheIndianmarket,itsproductlineissplitupintothechocolateconfectionery,milkfooddrinks,candyandgumscategories(CadburyIndiaLtd.,2008).Thisreportwillexaminetwodifferentproductsofferedtothe

IndianmarketbyCadburyIndia:CadburyDairyMilk(chocolatecategory)andCadburyBournvita(milkdrinkscategory).(a)CadburyDairyMilk(i)PricingCadburyIndiaenjoyscontrolling70%oftheconfectionerymarketinIndia,ofwhich30%isdirectlyduetothesuccessofitsDairyMilkproduct,whichaveragessalesofaround1millionbarsperday(CadburyDairyMilk,2008;MarketingCommunications,2008).CadburyDairyMilkbarsareCadburyIndiascashcowinthecountrys4000


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tonne,Rs.6.50billion(around1.6billionCAD)chocolatemarket(Gupta,2003),assuch,hasbeendesignateditsflagshipbrand(CadburyIndiaLtd.,2008;Chatterjee,2000).PartofCadburyDairyMilkssuccessliesinitssharedhistorywithIndiasidentity(itwasfirstsoldin1948,oneyearafterthecountrywasmadeindependentfromtheBritishEmpire)(CadburyDairyMilk,2008)butalsointhefactthatitispricedrelativelycheaply(Chatterjee,2006)andisrelativelyaffordablebytheIndianmasses.EvenitssmallestDairyMilkbar,the13gramversion,ispricedatRs.5(about0.13CAD),affordablebymanymiddle-classIndiansasanoccasionaltreat,butnotaffordableforthosewhobuyfromtheless-then-3-rupee(Rs.3)segmentofthemarket(Chatterjee,2006).Itshistoryofoperatinginthecountryanditsaveragelevelpricingofchocolatebars,hasmadetheCadburydairyMilkbarsynonymouswithhighquality,affordablepuremilkchocolateformanyIndiancustomers(CadburyDairyMilk,2008).(ii)Consumersegmentsservedandadvertising/promotionalstrategiesusedCadburyIndiaLtdcontinuouslymarketsDairyMilkasarelativelyinexpensivetreat,towardsmarketsegmentsdividedbyage,income,technologicalknowledgeandhealthconsciousness.Inthe1990s,thecompanystatedpromotingthechocolateforthekidineveryone,inanattempttoappealtoadultsaswellaschildren(CadburyDairyMilk,2008).Inordertoappealtopotentiallower-incomecustomersinthevillagesofIndia,furthermarketingintheformoftheRealtasteoflifecampaign(CadburyDairyMilk,2008)attemptedtoabsorbthesecustomersintoitsmarketshare.ByusingopinionleadersfromBollywoodandusingextensiveadvertisinginnewspapers,television,magazinesandmassivebillboardsacrossthecountry,Cadburymanagedtocapturetheattentionofthenationandcementitsmarketsharesuperiorityin

India(CadburyDairyMilk,2008;MarketingCommunications,2008).Nowadays,CadburysistryingtotapintothepotentialmarketofyoungergenerationInternetusersbyofferingcontestsandhostingcompetitionsonline,themostnotablebeingitsPappuPassHoGaya(PappuPassed!)jointventureoperationwithRelianceIndiaMobile,abranchofIndiaslargestnetworkserviceprovider,whichallowedstudentsacrossthecountrytochecktheirexaminationgradesonlineandcelebratewithCadburysDairyMilkiftheydidwell(CadburyDairyMilk,2008).Furthermore,CadburyIndiacontinuouslydevelopsnewversionsofitsDairyMilkbrandinordertokeepitsadultandchildrenconsumerssatisfiedandinterested.VariationsincludetheFruit&NutandCrackle&RoastAlmondvariations(CadburyDairyMilk,2008)whicharemeantforsnacking,aswellastheCadburyDairyMilkDesserts,tocatertotheurgeforsomethingsweetaftermeals(CadburyDairyMilk,2008)TheCadburyBournvilleDarkChocolatebar,similartotheDairyMilkbar,targe

tsthehealthconsciousmarketsegmentofthechocolatemarket,whowishtoenjoythetasteofdarkchocolatebutalsoitshealthbenefits(FinancialExpress,2008).Lastly,CadburyDairy


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MilkWowie,withDisneycharactersembossedoneachchocolatesquare(CadburyDairyMilk,2008)clearlytargetsthechildsegmentofitsmarket.Cadburysmarketsegmentationisquiteeffectivebecauseitallowsthemtotargetallthreemajormarketsegments:children,adultsandtechnologically-savvyconsumers,butitdoesnotservethosesegmentsofthemarketthathavebeendividedbyincomelevels.AlthoughDairyMilkisaffordabletotheupperandmiddle-incomeconsumerswhoviewitasamidpriceditem(Kochhar,2007),lowerincomeconsumerswhobuyfromtheless-than-3rupeerangeofchocolatecannotaffordtobuyCadburyDairyMilkregularly.CadburywillneedtoaddresstheneedsofthismarketsegmentinordertoboostitssalesofDairyMilk.IndianconsumersseemtobesatisfiedwithCadburyDairyMilkasitsmarketingpromotesitasanoccasionalindulgence,despitepopularopinionthatitisarelativelyexpensiveluxuryproduct(CadburyIndiaLtd.AnalystsMeet,1999).ThisrestrainedmarketinghasallowedthechocolatetoslowlybecomeameasureofqualityformanyIndians,asCadburyDairyMilkistheirGoldStandardforchocolate,wherethepuretasteofCadburyDairyMilkdefinesthechocolatetastefortheIndianconsumer(CadburyIndiaLtd.,2008).Infact,CadburyDairyMilkwasvotedoneoftheIndiasmosttrustedbrandsinapollconductedin2005(CadburyDairyMilk,2008).(iii)ProductPositioningCadburyIndiaLtdsmainsourcesofcompetitioncomefromAmul,IndiasowndairycompanyandNestleIndia,NestlessubsidiaryinIndia.AsseeninAppendixB,CadburyIndiacontrolsaround70%(CadburyIndiaLtd.,2008)ofthechocolatemarket,whereasAmulcontrolsaround2%(Dobhal,n.d.)andNestleIndiaaround27%(Nestletoexpand,2008).Asmentionedearlier,CadburysmainstrengthcomesfromitabilitytomarketDairyMilkproductsthroughalteringthethemeandfunctionality

oftheproductasthetimedemands(CadburyIndiaLtdAnalystsMeet,1999).Althoughthishasallowedittocontrolmoreofthemarketthanitsclosestcompetitors,thereasonsforitssuccessmayalsolieinthefactthatmanyIndiansstillviewitschocolatesasluxuryproducts(CadburyIndiaLtdAnalystsMeet,1999)andnotashouseholdgoods.ThiscontradictsCadburysassertionthatitsleadershipismaintainedbyasuperiormarketingmix(KarvyResearch,n.d.).CadburyIndiamayhavemisinterpretedthepopularityofDairyMilkasasignthattheIndianpublichasaccepteditasahouseholdproduct.Infact,theboomingeconomyandtheincreasingaffluenceoftheburgeoningmiddleclass(Basu,2004)haspromotedtheuseofstatussymbols,wheretheregularconsumptionofso-calledluxurychocolatessuchasCadburyDairyMilkisviewedasfashionable(Kochhar,2007).DespiteAmulslongerhistoryinIndia,itschocolatesareviewedasbeinglocalandnotluxurious,justifyingalowerpricetag(Chansarkaretal.,2006).Cadbur

yIndiamustmaintainitscurrentmarketingstrategybutslowlystarttopromoteDairyMilkasahouseholdgoodsothatconsumersspendtheirrisingdisposableincomesonitandboostitssales(Rai,2006).


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AmulsoriginsasacommunitywelfareprograminGujarat,oneofIndiasmostindustrializedstates,tobecominganationalenterprise(Amul,2008)spannedthedecadesduringwhichnewly-independentIndiaforgeditsidentity,thusbecominganintegralpartofIndiasidentityandgivingitsmarketingstrategyanewsourceofauthority.Cadburysimplycannotmatchthiskindofnationalendorsement,sobyatleastpromotingthefactthatithasbeenoperatinginIndiaforalmostaslongasAmul,itcantrytobeIndiantoo.This,incombinationwiththelongestrunningadvertisingcampaignthatAmulisfamousforgivesitabrandawarenessboost.Moreover,Amulsreputationforcredibility,safetyandconsumersatisfactionwasonlyreinforcedwhenCadburyIndiasChinese-madeproductswerefoundtobecontaminatedwithwormsandmelamine(SinnandKarimi,2008).TheGoldStandard(CadburyDairyMilk,2008)wasnolongergold,norwasitastandardanymore,aspeoplesconfidenceinitssafetywasshattered.Inordertopositionitsproductsassafeandaffordabletreatsonceagain,CadburyIndiashouldmakeattemptstobeevenmoresensitivetoconsumerdemands.Customersatisfactionmustbegiventheutmostimportance,evenifthecompanyhastorunatalossforafewmonths,asthiswilleventuallyallowittonegatesomeoftheextensivedamagethatthisnegativepublicityhastothefirmsreputation.Thenewextra-layerpackagingofchocolatethatisnowbeingusedinthemanufactureofDairyMilkisagoodfirststeptotakeinreclaimingsomeofthepublicstrust(Vivek,2004).Lastly,AmulsinnovativeideaswillbethebaneofCadbury.Theirreleaseofdiabeticfriendlychocolateandchocolatescateringtodifferentethnicflavours(JanveandDogra,2007)aswellaschocolatesforfestiveseasonsallowthemtorapidlyswayconsumersovertotheirproducts.Thisaccountsfortheirsoaringannualmarke

tgrowthratesof18%annually(IndianExpress,1999).IncomparisontoNestleIndiahowever,CadburyIndiaslongertrackhistorygivesitacompetitiveedge.CadburyhasmoreofabrandrecognitionpowerthanNestlehas,anditusesthisextensivelytopromoteCadburyDairyMilkalloverthecountry.NestlestillhastobreakintotheIndianmarket;onewaytodothiswouldbetofollowAmulsleadanddevelopandmarketproductsthatmeetspecificethnicneeds,suchaschocolatesforDiwaliandRakshabandan(twodifferentIndianfestivals)(Kochhar,2007),conceptsthatCadburyIndiahasyettoexplore.CadburyIndiamustcounterthisthreatthatNestleandAmulpose,namely,theproductionofchocolatesspecificallyforthefestiveseasonsofIndia.Bydoingso,CadburywillbeabletopositionitschocolatesaschocolatespecificallydesignedforIndia,endearingittotheconsumersandboostingitssales.(a)CadburyBournvita(i)Pricing


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CadburyBournvitawasfirstsoldontheIndianmarketsin1948,soonafterCadburyIndiaLtd(thenknownasCadbury-Fry)wasincorporated(CadburyBournvita,2008).AsaresultofbeingoneofthefirstproductsofferedontheIndianmarketbyCadbury,combinedwithsuccessfulmarketingstrategiesandpromotionaloffers,CadburyBournvitaenjoysa17%marketshareofthemalt-basedfooddrinkmarket(CadburyBournvita,2008).Indiaaloneaccountsfor22%oftheworldsmalt-foodmilkdrinkretailsales(BeverageDaily,2004),butunlikeCadburyDairyMilk,CadburyBournvitadoesnotcontrolalargeshareofIndiasmalt-basedfooddrinksmarket.Bournvitaislargelysoldin500grambottlesforaroundRs.95(2.35CAD)apiecedespiteothersizesbeingavailable,andisperceivedtobequiteexpensive(Hawa,2002).However,duetoitslonghistorywithIndia,andthefactthatitisusedastaplesourceofnourishmentbyIndianmothersfortheirchildren,Bournvitasstillremainspopular(Hawa,2002).(ii)Consumersegmentsservedandadvertising/promotionalstrategiesusedCadburymarketsitsBournvitaproductindiversemarketsegments.Bournvitahasbeenmarketedmainlytowardschildren,butalsofindsfollowersamongstelderlypeople,pregnantwomenandathletes(Hawa,2002;CadburyBournvita,2008).Continuousbrandre-invention,arichbrandheritageandcompleteoverhaulsinpackaging,productdesign,promotionanddistributionhaveallowedCadburyBournvitatomaintainits17%marketshareovertheyearsinIndias220,000tonnemalt-foodmarket(CadburyBournvita,2008;BeverageDaily,2004).Overtheyears,CadburyhasmarketedBournvitainordertoappealtothechangeinperceptionsandtastesofitsconsumers.ItfocusedontheGoodUpbringing,GoodnessthatgrowswithyoucampaigntopromoteBournvitaasanessentialhealthdrinkforchildren(CadburyBournvita,2008).Thiscampaignwas

conductedmainlyontheradio,theprimarymediumofcommunicationformanyIndiansatthetime(Ranjan,2007).ThiscampaignwasfollowedbythemassivelysuccessfulBroughtupright,Bournvitabrighttelevision,newspaperandmagazinecampaign(CadburyBournvita,2008)toreachouttomorechildrenandpromotethelinkbetweenintelligenceandBournvita,aconceptthatappealedtomanychildren.Inordertocementtheirconsumerbaseandensurebrandloyalty,inthe1990s,Bournvitachallengedthepublicbypromisingcompletephysicalandmentaldevelopmentforitsconsumers(CadburyBournvita,2008),wherethesubsequenttelevisionmarketingcampaignsecuredCadburyBournvitasplaceintheIndianmarket.ThemostrecentmarketingcampaignundertakenbyCadburyBournvitaistheonespeciallydesignedtoharnessconsumersuncertaintyaboutthechallengesofthenewmillennium.TheRealAchieverswhohavegrownuponBournvitacampaignfocusedonpreparingconsumerswiththehealth,vitalityandnutritionnecessaryforfacingthe

challengesofthenewmillennium(CadburyBournvita,2008)andallowedCadburyBournvitatokeeppacewiththeevolvingmindsetsofthenewageconsumers(CadburyBournvita,2008).Thismarketingcampaignwasbroadcastontelevisionandpublishedinnewspapersinanefforttorecruitcontestants(Kapoor,2007).


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ThereleaseofnewversionsoftheoriginalBournvitasuchasBournvita5-Star,combiningtheflavouroftheoriginalchocolateBournvitawiththeflavorofCadbury5Star(CadburyBournvita,2008),oneofitscaramelchocolateshelpsmaintainconsumerinterest.Thenewproductisbeingaimedatthesegmentofchildrenwhowantnutritionbutalsotaste(CadburyBournvita,2008).ByalsosponsoringtheIndianOlympicteamtotheMoscowOlympicsof1980(CadburyBournvita,2008),CadburyBournvitahasmanagedtoappealtoanathleticmarketsegmentaswell.Recently,bysupportingsportscompetitionsandsponsoringathletesacrossthecountry,CadburyBournvitahasmanagedtopromoteitselfasasportsdrinkforathletes(Kapoor,2007).Furthermore,oneofthemostfamousIndianexamplesofCadburyBournvitasingeniousmarketingisitssponsorshipoftheBournvitaQuizContest.TheBournvitaQuizContestisthelongestrunningquizshowinIndia,havingfirstbeenairedin1972.TheContestspans7countries,hasinvolvedmorethan4000schoolsandmorethan1millionstudents,makingitoneofthemostpopularhighschoolcontests(CadburyBournvita,2008),aswellasoneofCadburysmostsuccessfulmarketingventurestilldate.However,despiteCadburyBournvitashistoryofservingconsumersintheIndianmarket,andamidstallegationsofdecliningqualityandtasteoftheBournvitabrand(Hawa,2002),manycustomersstillfeelthatBournvitadoesnothavetheappealthatotherbrands,suchasHorlicksdo(refertoAppendixC)andthusthemarketisslowlyswitichingovertowhitemalt-basedfooddrinkssuchasHorlicks(KarvyResearch,n.d.;CadburyIndiaLtdAnalystsMeet,1999).(iii)ProductPositioningThemalt-basedfooddrinksmarketinIndiaisdividedintobrowndrinksandwhitedrinkscategories(CadburyIndiaLtdAnalystsMeet,1999;KarvyResearch,n.d.),withwhitedrinksbeing

popularinthesouthernandeasternpartsofthecountry,andthebrowndrinksbeingpopularinthenorthernandwesternpartsofthecountry(KarvyResearch,n.d.).CadburyBournvitasmajorsourceofcompetitioncomesfromGlaxoSmithKlinesHorlicksandHeinzFoodsComplan.AsseeninAppendixC,Horlicksisthemarketleaderwitha44%marketshare(Chatterjee,2006),followedbyCadburyBournvitawithits17%marketshare(Chatterjee,2006)andthenComplanwithits13%marketshare(Samajdar,2006).Asmentionedearlier,themalt-drinksmarketissplitupintothewhiteandbrowndrinkscategories.ThewhitedrinkscategoryismainlyledbyHorlickswhereasthebrowndrinkscategoryisledbyBournvita(KarvyResearch,n.d.).Lately,moreconsumershavestartedswitchingovertoconsumingwhitedrinksthanbrowndrinks,therebygivingHorlicksalargermarketsharethanBournvita(KarvyResearch,n.d.).


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WhencompetingwithHorlicks,CadburyBournvitascurrentmarketingstrategyissimplynotenough.GiventhanHorlickshasbeenoperatingintheIndianmarketforlongerthanCadbury(Horlicks,2008),thislargermarketsharemaybeexplainedbymoreconsumerfamiliaritywithHorlicksthanwithBournvita,however,Horlicksextensivemarketingcampaignsmayalsohaveplayedapart.HorlickshasalwaysmarketeditselfasaGreatFamilyNourisherwithproductssuchasMothersHorlicksdesignedfordifferentmembersofthefamily(Horlicks,2008),whichmakesitmoreappealingtoawidersectionofthemarket,withproductsdesignedfordifferentmembersofthefamily,suchasMothersHorlicks(Horlicks,2008),thanBournvitasmainlychild-orientedapproach.Thus,evenelderlyandconvalescentconsumerscanconsumetheproductwithoutfeelingconsciousofconsumingachild-onlyproduct.EventheBournvitaQuizContest,effectivelyBournvitaslongestrunningmarketingcampaign,mainlyattractsmorechildconsumerstoitsproduct(Radakrishnan,2002),andthuscannotcompetewithHorlickswiderappeal.Thus,thesolutionliesinCadburyIndiamarketingBournvitaasanadultdrinkaswell.OnlythenwillitbeabletocompeteeffectivelywithHorlicks.Meanwhile,Complansmarketshareof13%(Samajdar,2006),islessthanBournvitas.Althoughbothproductsaretargetedatchildren,Complanhasmarketeditselfasaperfectnutritionalsupplement(Complan,n.d.)ratherthanasahealthydrinkforchildren,whichisBournvitasapproach.Sincethewordsnutritionalsupplementconnoteaneedforextranourishment,thismaypossiblyworkagainstComplanasmanyfamiliesmayfeelthattheirchildreceivesenoughnourishmentanddoesnotrequiremore.AlthoughCadburyBournvitacurrentlyhasalargermarketshareofthetwo,itmustcontinuetomarketitselfasachild-friendlydrink,andnotasanutritionalsupplemen

t,inordertomaintainitssuperiority.DeliveringCadburyproductstocustomersIndias300billionUSDretailmarketisgrowingatarateof30%perannum(Rai,2006).Inacountrywherehalfabillionpeopleareundertheageof25,disposableincomesareontheriseandtheeconomyisgrowingatarateof8%annually(Rai,2006),sellingtreatssuchasCadburyDairyMilkbarsandCadburyBournvitapowderwillgeneratemassivereturns.However,inordertobeabletoselltheseproductstocustomers,properdistributionchannelsmustbeidentified.TheIndianretailsectoriscomposedof97%family-run,streetcornerstores(Rai,2006)andtheremaining3%consistingofmallsandshoppingcomplexes.Therefore,CadburyIndiaLtd.producesitsproductsinfactoriesspreadgeographicallyacrossIndia,butalsosellsitsproductsthroughachainofover300,000retailersspreadacrossIndia(CadburyIndiaLtdAnalystsMeet,1999).Theeffortsoftheseretailersareaugmentedbythesupportof1900distributorlocationsand27de

pots(CadburyIndiaLtdAnalystsMeet,1999).Furthermore,ofatotalof3600locationsthatsellCadburyproducts,almost3100locationsaredirectlysuppliedbyCadburyIndiaLtddistributorsatleastthriceamonth(CadburyIndiaLtdAnalystsMeet,1999).


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ThesedistributionnetworksgiveCadburyIndiaitscompetitiveedgeinIndiasmassiveconsumermarket.SWOTAnalysisofCadburyIndiaLtd.CadburyIndiaLtdsobjectiveofputtingaCadburyineverypocket(KarvyResearch,n.d.)canonlybedoneifthecompanymarketsitsCadburyDairyMilkasahouseholdgoodanditsBournvitaasafamily-friendlydrink.Untilthen,itsCadburyDairyMilksuccesswillonlybeshort-terminnatureandBournvitawillnotbeabletoreversethetrendtowardstheconsumptionofwhitemalteddrinks(CadburyIndiaLtdAnalystsMeet,1999)andcompetewithHorlicks.AsseeninAppendixD,ifCadburyDairyMilkcanbemarketedextensivelyenoughtobreaktheluxuryperceptionthatconsumershaveofitcurrently(CadburyIndiaLtdAnalystsMeet,1999),itcanbenefitfrominelasticdemandasahouseholdproduct,thusgeneratingaconstantstreamofrevenueandcementingtheDairyMilkbrandasacashcowproduct.Thisobjectivecanbeaccomplishedbysimplybuildingonthegoodreputationandtrustthatithasearned,andbylisteningtotheneedsofitsconsumers.BournvitameanwhileneedstobeextensivelymarketedinordertoreducethedamagingeffectthatHorlicksfamily-friendlymarketingmixishavingonitsmarketshare.Furthermore,thekeythreatthatcanaffectCadburyIndiaLtdssuccessinIndiaisAmulsinnovativemarketingstrategy.Asaresultofitswittymarketingstrategies,lengthoftimeservingIndiaanditsabilitytodevelopandmarketproductsspecificallytailoredforIndianconsumers,Amulsyearlygrowthrateof18%mayslowlystarttoeatawayatCadburyssuccess(IndianExpress,1999).ConclusionCadburyIndiaLtdspositioninIndiaisrelativelystrong.Inordertomaintainitsleadinsuchalargemarket,itmustlearntoaddressthespecificneedsofitsconsumersandcontinuetomaintaintheirgoodwill,whilealsoanalyzingitscompetitorsmark

etingstrategies.Bydoingso,itwillbeabletoisolatethebenefitsanddrawbacksofitscompetitorsmarketingmixandusethosetoitsownadvantage.Cadburymustalsoappreciatetheadvantagesofapositivereputationandalwaysstressconsumersatisfaction.OnekeyaspectofthisliesinmaintainingthesafetyofitsproductssothatthenameofCadburyisalwayssynonymouswithhighqualitysafeproducts.Repeatsoftherecentmelamineandwormsissuescannotbeallowedtohappenasonceconsumerconfidenceinitsbrandnameisshattered,CadburyIndiasbrandrecognitionaspectwillimmediatelyworkagainstitbyhighlightingthelinkbetweenitsnameandcontaminatedfoodproducts.Thiswillcripplesalesandreversethefruitsof70yearsofhardworkinthecountry,leavingthepathopenformoreefficientlocalcompanieslikeAmultolearnfromCadburyIndiasmistakesandtakeoveritsmarketshare.

FutureStrategyInthebrandedimpulsemarket,theshareofchocolatein6.6%andCadburys


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shareintheimpulsesegmentis4.8%factorlikechangingattitude,higherdisposableincome,alargeyouthpopulation,andlowpenetrationofchocolate(22%ofurbanpopulation)pointtowardsabigopportunityofincreasingtheshareofchocolateinthebrandedimpulseamongthecostlyalternativeinthebrandedimpulsemarket.Itappearsthatcompanyislikelytoplaythevaluegametoexpandthemarketencouragedbytherecentsuccessofitslowpricedvalueformanypacks.Variousmeasuresareundertakeninallareasofoperationtocreatevalueforthefuture.Newchannelofmarketingsuchasgiftingandchildconnectivityandlowendvalueformoneyproductforexpandingtheconsumerbasehavebeenidentified.IntermsofmanufacturingmanagementfocusisonoptimizingmanufacturingefficienciesandcreatingaworldclassmanufacturinglocationforCDMandclairs.ThecompanyistodaythesecondbestmanufacturinglocationofCadburysSchweppesintheworld.Efficientsourcingofkeyrawmateriali.e.cocathroughforwardpurchaseofimports,higherlocalconsumptionbyenteringlongtermcontractwithfarmerandundertakingeffortsinexpandinglocalcocaareadevelopment.Theinitiativesinthetermsofdevelopmentalongtermdomesticcocaasourcingbasewouldfieldmaximumgainswhencommoditypricesstartmovingup.UseofittoimprovelogisticanddistributioncompetitivenessUtilizingmassmediatocreateandmaintainbrands.Expandtheconsumerbase.Thecompanyhasadded8millionnewconsumerinthecurrentyearandhowhasconsumerbaseof60millionalthoughthegrowthinabsolutenumbersislowerthantargeted,thecompanyhasbeenabletoincreasethewidthofitsconsumerbasethroughlaunchoflowpricedproducts.Improvingdistributionqualitybyaddressingissuesofproductstabilitybyinstallationofvisicoolersatseveraloutlets.Thiswouldbereallyeffective

inmaintainingconsumptioninsummer,whensalesusuallydipduetothefactthattheheateffectsproductqualityandtherebyconsumption.Theabovearesomestepsbeingtakeninternallytoimprovefutureoperationandprofitability.Atthesametimethemanagementisalsoawareofexternalchangestakingplaceinthecompetitiveenvironmentandistakingstepstoremaincompetitiveinthefutureenvironmentoffreeimports,lowerbarriertotradeandtheadventofallglobalplayersintothecountry.Themanagementisnotundulyconcernedaboutthehugedelugeofimportedchocolatebrandsinthemarketplace.Itisoftheviewthatsizeofthisimportedpremiummarketissmalltothreatenitsownvolumesorsalesinfact,thecompanylooksatthetreeimportantasanopportunity,whereitcouldoptimallyusetheglobalCadburySchweppesportfolio.Thecompanywouldbeabletonotonlyprovidegreatervariety,butitwouldalsobemorecosteffectivetotestmarketnewproductaswellasimprovespeedofresponsetochange

inconsumerpreferencethroughimports.Theonlyconcernsthatthecompanyhasinthisregardisthecurrenthighlevelofduties,whichlimittheopportunitytolaunchvalueformoneyproducts.


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Q.5Whydoyouthinkitisnecessaryfororganisationstohavevisionandmissionstatementsandalsocorecompetencies?Supportyouranswerwithrelevantexamples.(10marks)

Ans.VisionandMissionstatementsAwell-articulatedstrategicintentguidesthedevelopmentofgoalsandhelpsininspiringtheemployeestoachievetargets.Italsofacilitatesinutilisingtheintenttoallocateresourcesandinencouragingteamparticipation.Itcomprisesofthevisionandmissionstatements.VisionstatementAvisionstatementdefinesthepurposeandprinciplesofanorganisationintermsofthevaluesoftheorganisation.Itisaconciseandmotivatingstatementthatguidestheemployeestoselecttheprocedurestoattainthegoals.Visionstatementistheframeworkofstrategicplanning.Avisionstatementdescribesthefutureambitionofanorganisation.Avisionistheabilitytoviewwhattheorganisationwantstobeinfuture.Itispreparedfortheorganisationanditsemployees.Itshouldbeimplantedintheorganisationbeingcollectivelysharedbyeveryoneintheorganisation.Itconveysaneffectivebusinessplan.Itintegratesanunderstandingaboutthenatureandaspirationsoftheorganisationanddevelopsthisconceptiontoleadtheorganisationtowardsabetterobjective.Itmustsynchronisewiththeorganisationsprinciples.Theambitionshouldberationalandachievable.Example-Wal-Martsvisionistobecomeworldwideleaderinretailing.

VisionstatementofL&TL&Temployeesshallbeinnovativeandtheempoweredteamwillconstantlycreatevaluesandattainglobalbenchmarks.L&Tshallpromotea

cultureoftrustandcontinuouslearning.Itshallmeettheexpectationsofemployees,stakeholdersandsociety.


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(i)CadburysVisionStatementOurobjectiveistodeliversuperiorshareholderreturnsbyrealizingourvisiontothebetheworldsbiggestandbestconfectionerycompany.Wearecurrentlythebiggest,andwehaveanenduringcommitmenttobecometheundisputedbest.Attheheartofourplanisourperformancescorecard,deliveredthroughourpriorities,sustainabilitycommitmentsandcultureCadburyplanstodeliversuperiorshareholderreturns(Cadburyplc,2008)bymeasuringitsfinancialprogressintheareasofgrowth,efficiency,capabilitiesandsustainabilityfrom2008to2011(Cadburyplc,2008).

MissionstatementAmissionstatementistheextensivedefinitionofthemissionofanorganisation.Itisaconcisedescriptionoftheexistenceandfundamentalpurposeofanorganisation.Itdescribesthepresentpotentialsandactivitiesoftheorganisation.Itconveysthepurposeoftheorganisationtoitsemployeesandthepublic.Itisvitalforthedevelopmentandgrowthoftheorganisation.Missionstatementistheresponsibilitybywhichanorganisationaimstoserveitsstakeholders.Itgivesaframeworkontheoperationsoftheorganisationwithinwhichthestrategiesaredevised.Itdescribesthepresentcapabilities,thestakeholdersandthereasonforexistenceofanorganisation.Thestatementdistinguishesanorganisationfromitsothercompetitorsbyexplainingitsscopeofactivities,technologies,itsproductsandservicesusedtoachievethegoalsandobjectives.Itshouldbepracticalandachievable.Itshouldbeclearandprecisesothattheactionscanbetakenbasedonit.Itshouldbeuniqueanddifferenttoleaveanimpactoneveryone.Itshouldbecrediblesothatthestakeholdersacceptit.Example-Wal-Martsmissionistoprovideordinarycustomersthec

hancetobuythesamethingasrichpeople.MissionstatementofIBMAtIBM,westrivetobetheforerunnerininventing,developingandmanufacturingmostadvancedinformationtechnologies,includingcomputersystems,software,storagesystemsandmicroelectronics.


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Thedistinctionbetweenmissionstatementandvisionstatementisthatthemissionstatementfocusesonthepresentpositionoftheorganisationandthevisionstatementfocusesonthefutureoftheorganisation.(ii)CadburysMissionStatementCadburysmissionstatementoutlinesitsoverallbusinessobjectiveanditscommitmenttoitscustomers.OurcorepurposeWorkingtogethertocreatebrandspeoplelovecapturesthespiritofwhatwearetryingtoachieveasabusiness.Wecollaborateandworkasteamstoconvertproductsintobrands.Corecompetenciesarethoseskillsthatarecriticalforabusinesstoachievecompetitiveadvantage.Theseskillsenableabusinesstodeliveressentialcustomerbenefitliketheselectionofaproductorservicebyacustomer.Corecompetencyisthekeystrengthofbusinessbecauseitcomprisestheessentialskills.Thesearethecentralareasofexpertiseofthecompanywheremaximumvalueisaddedtoitsservicesorproducts.ExampleInfosyshasacorecompetencyininformationtechnology.Itisauniqueskillortechnologythatestablishesadistinctcustomervalue.Astheorganisationprogressesandadaptstothenewenvironment,thecorecompetenciesalsoadjusttothechange.Theyarenotrigidbutflexibletoadvancingtime.Theorganisationmakesthemaximumutilisationofthecompetenciesandcorrelatesthemtonewopportunitiesinthemarket.Resourcesandcapabilitiesarethebuildingblocksonwhichanorganisationbuildsandexecutesavalue-addedstrategy.Thestrategyisdevisedinamannerthatanorganisationcanreceivereasonableprofitandattainstrategiccompetitiveness.CoreCompetenciesarenotfixed.Theychangeinresponsetothetransformationintheenvironmentofthecompany.Theyareadaptableandadvanceovertime.Asanorganisationprogressesandadaptstonewcircumstances,thecorecompetenciesalsoadapttothetransfo

rmation.


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Q.6.WhatisSBU?Explainitsfeatures,functionsandroles.MentionsomeofthesuccessfulSBUofMNCs.(10marks)Incompelete

Ans.StrategicBusinessUnitorSBUisunderstoodasabusinessunitwithintheoverallcorporateidentitywhichisdistinguishablefromotherbusinessbecauseitservesadefinedexternalmarketwheremanagementcanconductstrategicplanninginrelationtoproductsandmarkets.Theuniquesmallbusinessunitbenefitsthatafirmaggressivelypromotesinaconsistentmanner.Whencompaniesbecomereallylarge,theyarebestthoughtofasbeingcomposedofanumberofbusinesses(orSBUs).StrategicBusinessUnit(SBU)isnecessarywhencorporationstartstoprovidedifferentproductsandhence,needtofollowdifferentstrategies.SBUsarealsoknownasstrategycenters,IndependentBusinessUnitorevenStrategicPlanningCenters.StrategicBusinessUnit(SBUs)isnecessarywhencorporationstartstoprovidedifferentproductsandhence,needtofollowdifferentstrategies.Toeaseitsoperation,corporatesetdifferentgroupsofproduct/productlineregardingthestrategytofollow(intermsofcompetition,prices,substitutability,style/quality,andimpactofproductwithdrawal).ThesestrategicgroupsarecalledStrategicBusinessUnits(SBUs).EachBusinessUnitmustmeetthefollowingcriteria:1.Haveauniquebusinessmission,independentfromotherSBUs.2.Haveclearlydefinablesetofcompetitors.3.IsabletocarryoutintegrativeplanningrelativelyindependentlyofotherSBUs.ShouldhaveaManagerauthorizedandresponsibleforitsoperation.


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