ALLIANCE UNIVERSITY

EPGDM Program
Term III
Feb. to May 2020

Business Strategy
Module 1
Prof.Dr.Krishna Kumar V Rao
 What is so special about these companies?
List No.1

CISCO IBM DELL

Google Microsoft Apple
Walmart Toyota Coca-Cola
Reliance Dabur ITC
TCS Cipla OTIS
Asian Paints Shalimar Paints EID Parry
 What is so special about these companies
List No.2
 Eastman Kodak Nortel Networks
 Agfa Photo Co. Polaroid
 Compaq Blackberry
 Hindustan Motors HMT
 Blockbuster Nokia
 Air India Pan Am
 Toys R Us Motorola
 Yahoo Lehman Brothers
 Enron Arthur anderson
 Success and Failure of organisation

 In Retail Industry: Wal-Mart consistently outperforms,

whereas Kmart(a rival company & once upon a time No.1)
faced bankruptcy in the difficult years of 90’s – still far behind
WM
 Success and Failure of organisation

 In Computer Industry:
 Apple and Digital Equipment Corp(DEC), which were
regarded as most successful, faced difficult time in 90s
whereas Compaq and Dell flourished. DEC does not even
exist now. Later Compaq was bought over by HP. Apple is on
Top once again.
 Success and Failure of organisation

 In Semiconductor Industry: Intel consistently outperforms its

closest rival AMD
 Success and Failure of organisation

 Google : Most successful On-line search and Advertising Co :

over 80% market share; Rapidly increasing its product
portfolio & its reach
 Yahoo, now, a distant second
 Microsoft, a giant, but struggling to get a foot hold , in search
engine with ‘Bing’
Top Companies by Revenue & Profit
 Good to Great

 Greatness is not a function of circumstances

 Greatness, it turns out, is largely a matter of conscious choice
and discipline,” says James C Collins in his best-selling
management book Good to Great: Why Some Companies
Make the Leap…and Others Don’t
 Businesses do fail!

 Businesses often fail. In fact, 86 percent of companies

that were on the Fortune 500 in 1955 no longer exist.
 More importantly, the pace of failure is accelerating.
 A study conducted by Olin Business School at
Washington University in St. Louis projected that 40
percent of the current Fortune 500 companies will face
extinction in 10 to 15 years
 A study also indicates that while general longevity of
good companies was about 50+ years in the early
1900s, now it is hardly 20+
 Competitive Landscape

Strategic maneuvering
among global and
innovative companies

Globalisation
of economy

Rapid
technological
change
 21st Century Competitive Landscape
Globalisation

 The Global Economy

 Goods, services, people, skills and ideas

move freely across geographic borders

 Emerging major competitive forces: China, India, Brazil, South

Africa, Russia
 Globalization increased economic interdependence among countries a

 Recent Trends:

 BREXIT: What impact it may have On EU, On Briton and On

other Countries
 Increasing tendency for inward looking- protectionism- by

developed countries – the ‘new ‘Trump’ing in USA

 Competitive Landscape: Hyper-competition

Hyper competition Hyper competition

is the condition of rapidly escalating
competition based on the following factors:

• Price-Quality positioning
• Competition to create new know-how and establish first-mover
advantage
• Competition to protect or invade established product or geographic
markets
• Assumptions of market stability replaced with notion of Instability
and change
 Present Century Competitive Landscape

 Technology and Technology Changes

 Perpetual innovation: describes how new information-
intensive technologies are replacing older forms
 Speed to market may be primary competitive advantage

 Disruptive technologies
 Technologies that

 Destroy value of existing technology

 Create new markets for products and services

 The first major discontinuity in the history of
global business environment

 Industrial Revolution.
 Mass Production

 Complicated Processes

 Complex Organisation Structures

 Evolving of an emerging paradigm – Survival of the fittest

 The second major discontinuity in the history of
global economic environment

 World War II.

 Global market place.

 Affluence of the new customer.

 Homogeneous to heterogeneous products.

 Changes in the technology fore-front

 From uniform performance, performance across firms became

differentiated. The question of outperforming the benchmark
became the new buzzword.
 The third major discontinuity in the history of
global business environment

 Analog to Digital
 Miniaturisation
 Seamless integration of technologies, domains and
products/services
 Global & Regional Trade Pacts
 Almost free movement of factors of production across the globe
 May be the 4th - emerging major discontinuity -
in the history of global business environment

 Artificial Intelligence
 Virtual Reality
 IOT
 Mobile Inter-connectivity – seamless inter-operability among
multiple gadgets – at home as well as outside in the ‘space’ –
Data is the game changer
 And may be “outer space” as well
 What subjects you had learnt so far -
in Trimesters I & II ?

 Can we try and re-collect (y)our key learning

 Briefly describe each of them – their significance
 (so that we may all have a common understanding of the various
concepts, before we move forward)
 Management

 What is it?
 Management

 Deploying Resources Optimally to

 Achieve the Desired Results

 Thru the Process of

 Planning, Organising, Directing, Controlling
 Business Questions

 We need to discuss and understand the following key

questions and key words:
 What drives business performance (the value creation)?
 How firms can continue to perform well over long time
having better advantages relative to competitors, even while
some others firms may fail?
 Addressing the Business Questions

 How do we address the Business Questions and try to resolve the

situation effectively?
 By understanding
 some core concepts
 basic principles & theories
 some techniques, tools, models and their applications over the next
16 & odd hours
 discuss quite a few business cases, Indian and foreign to illustrate
critical points
 Planning as of now

 Generally what kind of or what type of planning is done in

most of your companies you had worked for?
 Planning in the “old ways”

 Budget ‘top down’ – no questions asked

 Only two budget parameters – revenue, expenses
 The only planning we needed to do was “to do better
than last year”
 Planning was ‘bottom up’ - compilation of plans within
set budget
 No one knew what the other Dept./Section would plan!
 Problems right from the beginning of
planning process

 Split Objectives: Sales? Share Price? Image? – Which one(s)?

 Each business unit of a Corporate operating as Independent
entities, with its own priorities
 Accounts Dept.” controlling schedule
 Always “short of money”!
 Lack of appropriate Market research – Lack of correct
understanding of the market and the customer/consumer
 Sales & Marketing always running over-budget in costs! – at
least, that is what Other Depts. & Accounts would say
 Problems from the beginning

 Never learns from past mistakes, usually starting in under-

budgeting (e.g. staff and equipments)
 Under-estimating or ignoring competitors or sometimes
“playing second fiddle”
 Over-estimating Revenue or over-confidence that the numbers
will somehow come in
 The Challenge before us (our organisations)

 How to cater to scale across borders – Global dimension

while still need to be differentiating products and services
to suit the customers’ value proposition
—all of these, without letting the complexity getting in the way
of speed and agility.
 Eastman Kodak
Case Study Discussion
 Once a leader in Photography
 Most preferred Company for investors to buy shares
and accumulate
 What happened? Why they lost the ‘plot’? And
eventually failed and now trying to start from scratch.
 What Strategy is about?

 What resources (skills, assets, finance, relationships, technical

competence, facilities) are required in order to be able to
compete? (resources)?
 What external, environmental factors affect the businesses'
ability to compete? (environment)?
 What are the values and expectations of those who have power
in and around the business? (stakeholders)
 Strategy?

 Is a combination of competitive moves and business

approaches. It is necessary to stand up in the face of
aggressive competition

 Is required to achieve superior performance & organisation’s

goals
 Strategy?

 Is mainly Proactive

 Is the art and science of Formulating, Implementing, and

Evaluating Cross-Functional Decisions that enable an
organisation to achieve its objectives in competitive
environments.
 What is Strategy?

 "Strategy is the direction and scope of an organisation over the

long-term:
 which achieves advantage for the organisation through its
configuration of resources within a challenging environment,
 to meet the needs of markets and to fulfill stakeholder
expectations".
 - Johnson and Scholes
 Concept of Strategy-Where it came from

 Until the 1940s, strategy was seen as primarily a matter for the
military - devising offensive and counter-offensive moves for
the purpose of defeating an enemy

 The word strategy derives from the Greek for general

ship, stratego, - “General’s art” and entered the English
vocabulary in 1688 as strategie.
 Concept of Strategy-Where it came from

 In the 1980s business strategists realized that there was a

vast knowledge base stretching back thousands of years that
they had barely examined
 They turned to military strategy for guidance.
 Like Offensive marketing warfare strategies, Defensive
marketing warfare strategies, Flanking marketing warfare
strategies, Guerrilla marketing warfare strategies
 The marketing warfare literature also examined leadership and
motivation, intelligence gathering, types of marketing
weapons, logistics and communications
 STRATEGY – Then & Now!

 In the ancient days battles were won not by virtue of size,

efficiency, adaptive ability; but by virtue of their
strategies.
 Even in today’s markets, battles fought on the market front
are won by companies by virtue of their strategies, most of
which we have learnt by studying and analysing the battles
fought in earlier days.
 Strategic Management Now

 Primary aim in business is ‘to gain competitive advantage’

 In business the focus is ‘competition’ & ‘competitors’ whereas
in military it is ’conflict’ & enemy
 STRATEGY

 Strategy is all about making trade-offs between what

to do and more importantly what not to do
consciously choosing to differentiate
 It reflects a congruence between external
opportunities and internal capabilities.
 What would happen if we don’t have a
‘suitable’ & ‘sound’ strategy

 Without a proper strategy, clearly spelt out -

 the time and resources are easily wasted on piecemeal,
disparate activities;
 mid-level managers will anyway fill the void with their own,
often parochial, interpretations of what the business (or their
own function) should be doing;
 and the result will be a potpourri of disjointed feeble
initiatives.
 leading to disaster for the company in the days to come
 Strategy Framework

 A business must have a strategy framework providing answers

to five elements
 arenas: where will we be active?
 vehicles: how will we get there?
 differentiators: how will we win in the marketplace?
 staging: what will be our speed and sequence of moves?
 economic logic: what would be our desired return on
investment & how will we obtain this ?
 Stages of Strategic Management Process

 Strategy Formulation
 Strategy Implementation
 Strategy Evaluation
 Strategy Formulation Issues

 Strategy Formulation almost irrevocably commits and

organisation to specific products/services, markets, resources,
technologies over a long period of time
 Chosen strategies aim at creating long term competitive
advantage for the organisation
 For good or bad, they have major multi-functional
consequences and enduring effects on the organisation
 Strategy Implementation:
The Action stage of Strategic Management

 The success or failure of the outcome of a meticulously

formulated strategy depends on the effectiveness of the
implementation
 Dependent upon the ability of the management to get the best
out of each Division/Dept
 Competencies in Achievement Orientation, Inter-personal
skills, Leadership Skills, Goal Orientation, Sensing the
environment, Adaptiveness to change, Communication skills
are critical to be present throughout the organisation
 Strategy Evaluation

 Carefully crafted and efficiently implemented strategies : Are

they working well ? Are we on course?
 Where are we in relation to the stated objectives
 The external environment is constantly changing impacting
the organisation’s on-going activities
 Today’s success no guarantee for success tomorrow
 Top Line - Bottom Line

 What are these ‘lines’?

 What we mean by these?
 (new) Triple Bottom Line

The triple bottom line involves, taking care of:

1.the management of (the traditional) profit/loss;

2.the management of the company’s social responsibility; and

3.the management of its environmental responsibility.

 Gains from Strategic Management Process

 Strategic Management Process drives the organisation to be

more pro-active than reactive in shaping its future
 It helps organisation to initiate and influence- to exert control
not only over its own destiny but even the environment itself
 Empowerment throughout the organisation resulting in
engaged, motivated and involved managers and employees
 Helps reduce the financial and non-financial risks associated
with businesses
 Organisations using Strategic Management Process are found
to be more successful and profitable than most others
 Gains from Strategic Management Process

 Let us clear some of the misconceptions

 A strategy need not be static: Strategy doesn’t require a
business to become rigid
 It can evolve and be adjusted on an ongoing basis.
 The appropriate lifespans of business strategies depends on the
type of business, the industry characteristics, evolving
technologies, changing customer preferences may be 3 – 5 – 7
years
 Gains from Strategic Management Process

 A survey of nearly 50 corporations in a variety of countries

and industries found the three most highly rated benefits of
strategic management to be:
■ A clearer sense of strategic vision for the firm.
■ A sharper focus on what is strategically important.
■ An improved understanding of a rapidly changing environment
 MICROSOFT

 Pre-1994: Fluid, Freewheeling, Entrepreneurial, Innovative

 1994-Bill Gates & Steve Balmer invites Bob Herbold (from
P&G) to join as COO
 Lack of operative efficiency and cohesion
 3 Year Plan initiated
 Strategic Planning Process- Formal, Decentralised & Flexible
 The Rest is History
 IBM

The 90’s:
 The focus was process centered

 Resulted in what Michael Giersch, VP Strategy called “a near

death experience” .
 With plummeting revenues and profits, a reorganisation

brought Lou Gerstner as President & CEO in 1996

 His background: Highly successful stints at Amex, Nabisco

 He started a radical revamping the company's existing

planning and execution practices and policies

 IBM

 Today, strategic planning at IBM looks quite different than it

did in the late 1990s

 A continuous strategic planning process involves ongoing
review of major issues and executive decision making on a
twice-monthly basis.

 "Deep dive" research initiatives enable the firm to fully

explore a new challenge or opportunity, develop a strategy,
and allocate resources within 30-90 days.
 IBM

With economic (and political) upheaval, technical innovation,

and competitive initiatives happening rather more frequently
than annual strategic reviews,
IBM's continuous strategy evolution enables the firm to act and
react more quickly than most to critical market challenges and
opportunities

 Couple of years back they adopted 3 Key Value Factors

 dedication to every client’s success
 innovation that matters—for our company and for the world
 trust and personal responsibility in all relationships

 IBM continues its leadership among tech companies

 Notable Quotes

 If we know where we are and something about how we got

there, we might see where we are trending-and if the outcomes
which lie naturally in our course are unacceptable, to make
timely change- Abraham Lincoln
 Notable Quotes

 Without a strategy, an organisation is like a ship without a

rudder, going round in circles…no place to go – Joel Ross &
Michael Kami
 Notable Quotes

 Strategic management is not a box of tricks or a bundle of

techniques. It is analytical thinking and commitment of
resources to action - Peter Drucker