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
THANK YOU !!
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