By Group 8 Apar Bansal D011 Shivani Bhatia D014 Jitendra Jidewar D030 Ankur Khosla D033 Arpit Mahendru D035 Rahul Panigrahi D045 Chhavi Saluja D048 Gaurav Singh D058

TABLE OF CONTENTS1. Introduction2. Directions of Strategy Development 3. Tows Matrix 4. Methods of strategy development 5. Strategic Alliances 6. Tesco Case

Whats my motive?Environment Based Fitting new strategies to a changing business environment

Capability BasedExpectations Based

Stretching and exploiting resources and competences of an organization Meeting expectations created by the cultural and political context

Strategy DevelopmentExisting Products New

Existing

Protect/Build

Product DevelopmentAnsoffs Matrix

Markets

New

Market Development

Diversification

Roseville Enterprises Workshop for the blind funded by the Leeds city council, UK 80% work came from the council for renewing windows and

doors. The contract was to expire in 2008 To ensure employability of the staff the range of activities were broadened: Computer refurbishing center Pine furniture Laundry hire and cleaning services

Alternative of encouraging some workers to enter the

mainstream(commercial window fabricators) also considered

Protect and buildCONSOLIDATION: Organizations protect and strengthening current markets with

current products May require reshaping by downsizing or withdrawal from some activities:

Reasons for downsizing Changing value of a companys assets: astute acquisition and

disposal of these products is important Competitive Disadvantage

Competitive Disadvantage for Kodak

In 1889, Kodak moved into Japan, operating through a Japanese

distribution system. This initial entry developed substantial business and was fairly successful, until foreign firms ran into trouble around the end of the Second World War. In order to protect the domestic firms of Japan, their government implemented restrictions on the entry of foreign firms by limiting direct investments and imposing tariffs and quotas on imports. Moreover, in 1960 the Japanese government specifically told Kodak that they would have operate through a single importer, which forced Kodak to stop supplying wholesalers directly. Lagged behind Fujifilm till the 90s in which it sought aid from WTOSource: The Kodak-Fujifilm Trade Dispute, Graduate school of business, Stanford University

Reasons for downsizing Changing value of a companys assets: astute acquisition

and disposal of these products is important Competitive Disadvantage Prioritization

Prioritization at SonyRestructuring efforts at SONY: Headcount reduction programs Initiatives to advance rationalization of manufacturing operations Shifting and aggregating manufacturing to low-cost areas, and utilizing the services of third-party original equipment and design manufacturers. Sony also ceased production at two overseas manufacturing sites, including Sony Dax Technology Center in France, which manufactures tape and other recording media, and terminated LCD rear-projection television operations Total restructuring charges of 37,421 million yen, 45,635 million yen and 61,913 million yen in 2007,08 and 09Source: Wikinvest, Sony Financial Reports

Consolidation for higher market shareIncreased spending in R&DAbility to invest in improved service quality Ability to incur higher marketing expenses

The Google Advantage Spending close to $1.3 billion in R&D in the 1st fiscal

quarter in 2012 Boosted development of web based products, operating system, desktop products, hardware and services Increase of 62% market spend in 2012 Google goggles, Google cars, Google Me!, Super broadband

Market Penetration

Impact of Growth Rate Corus An Example Corus formed through merger of companies British Steel and

Koninklijke Hoogovens in 1999 Global provider of aluminum and steel solutions Corus Colors is an international business with strip products division manufacturing pre-finished steel CES , a key market including hospitals and fodd processing industry Introduction of brand Assure which provided laminate having anti-bacterial additive Adoption of premium pricing policy by differentiating into a niche market

Impact of Resource Issues Amazon- An Example Launched in 1995 as an online retail bookstore by Jeff Bezos

Became Webs largest and best online book store in less than a

year State of the art recommendation centre and online promotion Profits started to come only in 2002 Currently holds 75% of the market share in online e-book market

Complacency of market leader Smart phones- An Example Blackberries were the early smart

phones that dominated the market Viewed as technologically superior Launch of Iphone in 2007 by Apple eroded their market share Apple grew from a niche market to a larger demography Launch of Android OS completely changed the game

Product Development Delivering modified or new products to existing markets Can be achieved in 2 ways

Using Existing Capabilities

Developing New Capabilities

Changing with the needs of Customers

eg. Diet Sodas with increasing health issues with sugar

When Product life cycles are short Apple comes out with new product every year

Exploiting findings in market analysis Cheap and powerful data mining tools

Product Development Delivering modified or new products to existing markets Can be achieved in 2 ways

Using Existing Capabilities

Developing New Capabilities

Response to Change of Emphasis Customer experienced at knowing value for money Apple changing the way consumers used touch screen phones no stylus

Critical Success Factors (CSF) Focus on delivering new CSFs Old CSFs becoming Must Be attributes of a Product Touch Screen phones without stylus are standard now

Dilemmas of Product Development Expensive , Risky and Potentially Unprofitable High R&D spendings High market share companies may benefit Weak market share companies cant afford such investment What if no new products are developed ? Might not be accepted in market Degradation of performance in market Target for acquizitions Eg: Motorola

Lacked innovation over last few years Lost market share Acquired by Google for $12 bn

Market Development Existing products are offered in new markets When ? no further opportunities in current market Considerations : Exploiting other market segments

Existence of similar CSFs

New Uses of current products Eg. Camera Phones Increasing Geographical Spread Expanding nationally and internationally

Difficulties Credibility Expectations

Diversification Diversification is defined as a strategy that takes an

organization away from both its current markets and products.

Proctor & Gamble Virgin

Haircare Pantene, Head & Shoulders, Laundry Daz, Ariel, Fairy, Bounce Beauty Oil of Olay, Max Factor Virgin Travel (& Virgin Holidays), Mobile phones Virgin Retail (Music & Entertainment) Virgin Investments, Virgin Communications

Walt Disney

Theme Parks, vacation properties Movie Production, Videos Toys, TV Broadcasting

Introduction-TOWS matrix TOWS analysis is basically putting SWOT analysis into

action. A complementary way of generating options from knowledge of the organization position. TOWS Analysis is an effective way of combining A) Internal strengths with external opportunities and threats, and B) Internal weaknesses with external opportunities and threats to develop a strategy. Difference between TOWS and SWOT is that TOWS emphasizes the external environment whilst SWOT emphasizes the internal environment

TOWS MatrixInternal Strengths(S) 1. 2. 3. External Opportunities (O) 1. 2. 3. Internal Weaknesses (W) 1. 2. 3. W-O

S-O

"Maxi-Maxi"Strategy Strategies that use strengths to maximize opportunities. S-T

"Mini-Maxi StrategyStrategies that minimize weaknesses by taking advantage of opportunities.

External Threats (T) 1. 2. 3.

W-T

"Maxi-Mini"Strategy Strategies that use strengths to minimize threats.

"Mini-Mini StrategyStrategies that minimize weaknesses and avoid threats.

TOWS Matrix for VWInternal Strengths: 1. Strong R & D and Engineering 2. Strong Sales and Service Network 3. Efficient Production/Automation Capabilities External Opportunities: 1. Growing Affluent Market DemandsMore Luxurious Cars 2. Attractive Offers to Build an Assembly Plant in U.S. Internal Weaknesses: 1. Heavy Reliance on One Product 2. Rising Costs in Germany 3. No Experience With U.S. Labor Unions

S-O1. Develop & Produce Multiproduct Line with Many Options, in Different Prices (Dasher, Scirocco, Rabbit, Audi Line) (O1S1S2) Build Assembly Plant Using R & D, Engineering, and Production /Automation Experience (O2S1S3) 1.

W-ODevelop Compatible Models for Different Price Levels (Ranging from Rabbit to Audi Line) (O1W1) To Cope with Rising Costs in Germany, Build Plant in U.S., Hiring U.S. Managers with Experience in Dealing with U.S. Labor Unions (O2W2W3)

2.

2.

External Threats: 1. Exchange Rate: Devaluation of Dollar 2. Competition from Japanese and US automakers 3. Fuel Shortage and Price

S-T1. Reduce Effect of Exchange Rate by Building a Plant in the U.S. (T1T2S1S3) Meet Competition with Advanced Design Technology - e.g. Rabbit (T2T3S1S2) Improve Fuel Consumption Through Fuel Injection and Develop Fuel EfficientDiesel Engines (T3S1) 1.

W-TReduce Threat of Competition by Developing Flexible Product Line (T2W1)

2.

3.

Options not exercised by VW 1. Withdraw From U.S. Market 2. Engage in Joint Operation

Methods of Strategy DevelopmentInternal Development Mergers and Acquisitions Alliances

Internal /Organic DevelopmentInternal Development is where strategies are developed by building on and developing an organizations own

capabilities

Why Organic Growth?Products that are Highly Technical in DesignDevelopment of New Markets by direct involvement Lower Spread of Cost over time

No choice about how new Ventures are developed

Finding Suitable target can be formidable

Pillars of Organic Development

Revenue

Headcount

PR

Quality

AT Kearney The Inside Story on Organic Growth Supreme Innovations, Major

Investments not necessary American Express, 3M enhance customer value, recapture lost customers Cisco, Centrica dynamic product portfolio management T-Mobile- value-based and bundled pricing

Capture Shortterm growth opportunities

Eliminate barriers to growth Sales and marketing excellence

Mergers And AcquisitionsAcquisition is where strategies are developed by taking over the ownership of another organization Merger is a combination of two or more distinct

entities into one

Segment Wise Breakup of M & A Deals(2010-2011)

MOTIVES FOR MERGERS AND ACQUISITIONsSpeed with which it allows the company to enter into new product or market areas Eg: Airtel Acquisition of Zain Africa Competitive Situation Deregulation

Cost Efficiency

Exploitation of organization's core competencies Eg: Duracell

Why Mergers & Acquistion Fail Bank of America acquistion of Merrill Lynch:

Dozens of senior Merrill bankers, like George H.Young III, have left since the merger to join competitors like Lazard Ltd. because they didn't want to give up the fast pace of Wall Street, where money is king, to work in a commercial banking culture with Southern characteristics. Coca-Cola's recent bid to take control of

Unalike Company Culture Lost Time Never Found Again Merge Unequals, Not Equals

Chinese Company Huiyuan Juice, which in turn pave way for PepsiCos Topicana to gain the

market share in chinese market Source: http://www.forbes.com/2009/06/16/mergers-acquisitions-advice-leadership-ceonetwork-recession.html

Successful Mergers & Acquisitions:Daichii Sankyo control over Ranbaxy in 2008 The deal valued at $4.6 billion created combined

company worth about $30 billion Cost competitiveness by optimizing usage of R&D and

Major supplier of low-priced generics in Japan

manufacturing facilities of both companies, especially inIndia Alliance with the goal to be a Global Pharma Innovator

Complementary Business Combination

and providing the opportunity to complement strongpresence in innovation with a new, strong presence in the fast growing business of non-proprietary pharmaceuticals

Global Reach

General Electric -Europe Small where we should be big Acquisition of Amersham for 5.7 bn euros GE had half the market share in Europe

Aggressive growth in Europe

than it did in USA Acquisition of Finlands Instrumentarium,

a medical instruments business William Castell to be appointed the CEO An annual increase by $25 bn to match the

Market Enlargement and Regulatory Convergence

annual sales of USA

Ambitious Senior Management

Strategic Alliances Two or more organizations share resources and activities to

pursue a strategy Alliances vary in complexity from simple two-partner

alliances co-producing a product to multiple partners providing complex products and solutions

Two-partner alliance co-producing a product

Variation between alliances

Multiple partners providing complex products/solutions

Motives for Alliances

Motives for Alliances The need for critical mass: can be achieved by forming

partnerships with either competitors or providers of complimentary products Co-specialization: Allowing each partner to concentrate on activities that best match their capabilities Learning from partners: developing competencies that may be more widely exploited elsewhere

UK anti-drug strategy In mid 2000s Britain was facing Drug misuse problem Government wanted to protect the communities from drug-

related antisocial problems Youth education on drug misuse was needed Treatment for people with drug abuse had a growing importance

UK anti-drug strategy Different agencies were involved in different activities

Collaborative alliances were setup among the different

agencies to tackle the problem At the central government level a cabinet sub-committee was established At local levels too Drug Action Teams were established These teams had people from all agencies working together to tackle the problem This is one example of a strategic alliance formation to achieve a common objective

Types of AllianceFORM OF RELATIONSHIP

Loose (Market) Contractual INFLUENCING FACTORS Networks Opportunistic AlliancesFast change Managed separately by each partner Draws on parents assets

Licensing Franchising Subcontracting

Ownership Consortia Joint Ventures

The Market Speed of Market ChangeSlow change

Resources Asset Management Partners Assets Risk of losing assets to partner

Managed together Dedicated assets for alliance

High Risk

Low Risk

Expectations Spreading Financial Risk Political Climate

Maintains Risk Unfavorable Climate

Dilutes Risk Favorable Climate

Types of AllianceJoint Venture Networks Opportunistic Alliance Franchising Subcontracting Co-production

TATA Motors & FIAT

Oneworld; DLNARenault Nissan Alliance Coca-Cola and McDonalds Giving contracts to I.T. companies Dell Computers

Factors influencing types of Alliance

Problems faced by TESCO in 1992 TESCO MARKET CONDITIONS IN 1992 Tesco faced following difficult market conditions in 1992 Low population growth Low food price inflation Well developed and relatively saturated supermarket market in the UK Three strong competitors (Sainsbury, Asda& Safeway) Number two market position (16.7%) behind Sainsbury (19.0%) The arrival of two new store formats: warehouse clubs (Costco) and limited assortment stores (Aldi, Lidl, Netto)

TESCO sales growth Tesco turned on a dramatic growth at a compound rate of

12.9% per year for the past fourteen years, adding 24.5 billion in sales over the period 1991-2004

TESCO strategy diagrams Bringing prices down model

TESCO strategy diagrams Steering wheel

model

Growth strategy overview

TESCO private labels examples

TESCO private labels examples

TESCO private labels examples

Four store formats of TESCO

TESCO EXTRA The 70,000+ sqftTesco Extra hypermarket format makes a

strong one-stop-shop offer

TESCO METRO

TESCO EXPRESS

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