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Summary of the course

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Course Progression

ManagingPortfolio

(Multi-BusinessStrategy)

Strategic Management-II Course

ManagingProcess

(ImplementationStrategy)

Success = fn ( Strategy Content & Strategy Execution)

ManagingFormulation-

Implementation Gape.g. internal

structural issues

ManagingFormulation-

Implementation Gape.g. internal

structural issues

Implementation /Process

ExternalFocus:

Product/Factor

Markets

Corporate Strategy

InternalFocus:

Organization

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Review

o Basic Analytic Frameworkso SWOT and PEST

o Porter’s Five Force

o Core Competence

o RBV

o Value Chain Analysis

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Nomenclature

What are the different kinds of strategy?

o Internal Orientation

o Corporate, Business, Functional

(business : how to compete in a given domain)

(corporate : which domains to compete in)

o External Orientation

o Competitive, Co-operative, Co-optive

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Portfolio Analysis : BCG Matrix

Relative Market Share

MarketGrowthRate

High Low

High

Low

•High mkt. growth & share

•Profit potential

•Heavy investment needed tofinance rapid growth

•High mkt. growth, low share• Build into Stars or phase out• Very heavy investmentneeded if to build share

•Low growth, high share• Established, successful• Produce cash

•Low mkt. growth & share• Low profit potential

Hold Build (or harvest or divest)

Hold (or harvest) Hold (or harvest or divest)

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Portfolio Analysis : GE Matrix

Note: Circle - Size of relevant Market; Part of circle- Business's market share

Industry AttractivenessHigh

High

Medium

Medium

Low

Low

Invest/Grow

Selectivity/earnings

Harvest/Divest

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Nucor Steel : Why Nucor did well?

o Market power ?

o Limited market share.

o Firm specific efficiency effects?

o People Plant

o Business Model Narrow set of activities

o it outsources procurement of scrap (to avoid competition amongplant mangers to find the lowest possible scrap price, according toCEO Iverson)

o does little in the way of marketing and research, traditionallyconceived.

o Why Nucor’s apparently superior organizational policies have not beenmore widely imitated?

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Nucor Steel

o Used disruptive technology to unsettle industry norms

o Moved up the value chain

o From low- cost price competitor premium niche large scale

premium

….and Intel learned from them when Cristension visited Intel

Product Market Choice

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Newell’s system of creating value

Time

MarketValueCreated

Low

High

AcquireUnderperforming

Target

One Year Two Years Three Years

Install Systems Upgrade Systems

Install Financial Controls Maintain Controls

Operational Streamlining Continue Streamlining

“New

elliz

atio

n”

Improving Customer Service

Developing Merchandising Programs

Transferring Best Practices

Maintaining Relationship with Customers

Leveraging Corporate ExperienceCo

rpor

ate

Adv

anta

ge

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Newell : Key Points

o Corporate Advantage whole that is more than the sum of itsparts

o An “acid test” for this is whether being part of a larger corporate entityadds value to a firm’s individual businesses, and whether that valuecreation continues over time. Corporate advantage is intimately related tocompetitive advantage.

o Newell has a fortuitous combination of specific and generalresources

o The resources are general enough to be leveraged across a number ofbusinesses but specific enough to play an important role in the competitiveadvantage of each.

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Newell: Key Points

o Effective corporate strategies must be consistent both internallyand externally

o Internally, corporate strategies are systems of interconnected elementsthat continually reinforce each other.

Newell’s strategy started with a clear vision of how the firm would compete. Toimplement that vision, the company built the requisite resources, tailored itsorganization to the strategy, and entered a set of concordant businesses that hadremarkably similar key success factors. As Daniel Ferguson said, “we are in onlyone business.” The products were different, but the logic, and the resourcesthat were critical to competitive advantage in each were the same.

o Externally, the strategy advantageously positioned the firm to takeadvantage of the development of discount retailing. The company wasprescient in identifying the trend, and developing a strategy that was consistentwith those opportunities.

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Newell: Key Points

o Act proactively to upgrade the resource base, and acquire newadvantage in response to a changing environment.

o Newell’s decisions to acquire Calphalon and Rubbermaid are examples of(may be) a company acting proactively to upgrade its resource base, andlayer on new advantages in response to a changing environment. However,neither acquisition is a clear “lay-up”—both are riddled with potentialdrawbacks.

Newell’s struggles in this regard are eye-opening and provide insight intothe difficulties managers face when they seek to improve a company’sresources, or to redefine—however slightly—its corporate advantage.

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HP and Compaq : Does it make sense?

o The merger creates value

o Fiorina argues, that will create value: eliminating the overlapping lines

will create cost savings, and the complementary business lines will create

revenue synergies through cross-selling in the IT-services segment.

What is the Synergy ? How much it is?

VCompaq alone + VSynergies > Vconsideration Paid by HP

Synergy evaluation. But M&A is not all about evaluation

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Acquisition : More than Valuation

o Did Carly Fiorina failed to communicate well to the shareholders

(especially to Hewlett and other ~48% share holders)

o What do you think about the interpersonal relationships : playing and

shaping this corporate game?

o Why ISS Changed? What about Deutsche Bank’s decision?

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HP-Compaq: Points to Ponder

o The final judgment about the HP-Compaq deal hinges on what

“winning” means ?

o Measured financially?

o Strategically?

o Operationally?

o What the benchmark of performance is?

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o How should we measure performance of an alliance such as

this?

o Are financial measures alone appropriate indicators of

success?

o At what cost success was achieved?

o Against what alternatives should we evaluate the alliance?

Xerox- Fuji Xerox: Is the alliance successful?

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Xerox- Fuji Xerox : Lessons

o Alliances are dynamic: they evolve in response to changes in the capabilitiesand needs of the partners and in the external competitive environment. Often,the very logic of collaboration will change, and an alliance can grow to fulfill afunction different its original mission.

o As a result, they need to be managed flexibly, using a wide array oforganizational structures and processes. Even if one aspect of a relationshipremains unchanged (e.g. ownership structure), other aspects (e.g. contractualrelations) may be used to adjust the roles of the partners.

o There is an inherent—and often problematic—tradeoff between allianceautonomy and integration into a firm’s strategy. The optimal balance betweenthe two depends on the role of the alliance in the parents’ strategies and onmarket and technological conditions

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o Ecosystem ?

Competitive Advantage of Nations

Does it improve competitiveness ?

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Porter’s Diamond : Competitive Advantage of Nations

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Big Bazzar: Key Points

o Knowledge of Local consumers

o How to exploit that – in house

o Replicate – when you internationalize

o Familiarity with labour and capital market

o Innovate the best fund design, supply chain.

o Familiarity help in talent, geography selection

o Leverage this to gain a toe-hold in similar markets while

internationalizing

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Big Bazzar: Key Points

o Dealing with institutional voids

o Can you create alternative or go-around it?

o If alternative – at what level ?

o If go-around it – how do you deal when there is

institutional build up?

o Innovations to overcome institutional void. Voids as

business opportunities.

o Use those innovations to internationalize.

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Strategic Review at Egon Zehnder International: Key Learning

o Comparison : Business Model of EZI and competitors : How EZI

managed such robust business model, what did they do internally to

people and processes.

o Effect of disruptive technology : How is the effect going to be?; Is

the tech. stable/how much threat it contain?

o Reaction to change (firm level) : Managing interests and opinions

o Managing strategic myopia (is strategic review the first step?)

o The trade off between old values and urge to change : How to

manage?

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The Transnational Organization: Integrated Network Structure

The Integrated Network

Coordinated Federation

Centralized Hub Decentralized Federation

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Organizational – Structural Characteristics

DecentralizedFederation

CoordinatedFederation

Centralized Hub

Strategic Approach Multinational International Global

Example of HomeCountry

Europe USA Japan

Key StrategicCapability

Decentralized andnationally self-sufficient

Sources of corecompetency centralized,others decentralized

Centralized andglobally scaled

Role of overseasoperation

Sensing and exploitinglocal opportunities

Adapting and leveragingparent -companycompetencies

Implementingparent companystrategies

Development anddiffusion ofknowledge

Knowledge developedand retained withineach unit

Knowledge developed atthe center andtransferred to overseasunits

Knowledgedeveloped andretained at thecenter

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Building the Transnational

o Recognizes structures as a blunt instrument of change

o Simultaneous changes organization's anatomy, Physiology,psychology

Modify individual attitudes/mentalities (Psychology)

Develop new processes/relationships (Physiology)

Confirm with redefined structures/responsibilities (Anatomy)

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Review : Balanced score card

o Performance ? What are the indicators?

o Implications : cost centre vs. profit centre OR activity centers

o Role of middle managers

o How major perspectives might be linked

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The Four Broad Perspectives: Balanced Score Card

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Balanced Score Card : Managing the Four Processes

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Product Development Process : M&M – Creating Scorpio

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Resource Allocation : Different Types of Resources

o Asset :Ownership

o Factor : Ownership &/or Control

o Tradable Factor and Non-tradable factoro Identifiable and monetarily determined by strategic factor market

o Asset Flow :resources that can be obtained and adjusted immediately

o Asset Stock : Cant be adjusted immediately, built up over time overasset flow.

o Contained resources : comprised of identifiable simple network ofresources factors that can be monetarily valued.

o System resource : Complex network of firm’s resources factors

o Network don’t have definite boundary

o Determining monetary value is implausible

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Getting Resources

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Knowledge

Making personal knowledge available to others is the central activity of

knowledge creating company

Knowledge

ExplicitKnowledge

TacitKnowledge

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The Knowledge Creating Company

• Tacit to TacitSocialization

• Tacit to ExplicitArticulation

• Explicit to ExplicitCombination

• Explicit to TacitInternalization

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Review : Jack Welch

o Do you add value at each stage of your leadership?

o A leaders is personal : can you get to the skin/heart of theindividuals?

o Transformation : self as well as organization

o From Strategy, Structure, System TO Purpose, Process, People

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Some key conclusions : Jack WelchElements of a new era of management leadership

A new management philosophy (can you enable a constant renewal – self, org.?)

•Beyond strategy, structure, system to purpose, process, people

A different concept of organization (can you get to the skin of your people?)

•From “organization man” to “individualized corporation”

A changing role for managers (can you lead change and adapt others to it?)

•Beyond allocators, controllers, and implementers to leaders, developers, andentrepreneurs

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Review : Corporate Governance

o Principal -agent problem

o Principal -principal problem

o Corporate Governance : Indian Scenarioo Interlocking directorate

o Why it is important for organizations?

o Why it is important for you?

Corporate Governance Mechanism

Structural element is important OR Human element is important?

Are they complementary ?

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Market?

Entrepreneurs?

Producers?

Fortunefor/at

Bottom ofPyramid

Bottom of the Pyramid

Thank You

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