Business Strategy Assignment on Grand Strategy

STABILITY STRATEGY
Concentration:
A firm following this strategy focuses its resources on a single product, in a single market, using one
tested technology to ensure profitable growth. Companies adopt this strategy as it is less risky and does
not demand scarce additional resources.
Example 1: FedEx
Fredrick Smith, an entrepreneur identified the opportunity and established Federal Express (FedEx) in
1973. Smith operated flights exclusively for cargo and offered home delivery and pick-up services. The
business model was a big hit and there was no looking back for the company. Looking at the success of
FedEx many other companies imitated the model. Thus FedEx concentrated on the Courier industry in
order to gain the competitive advantage over other players in the market.
FedEx differentiates itself from other player based on its delivery process.
Example 2: Swarovoski Crystals
It provides crystal products to the higher end only.
Example 3: Rolls Royce
Rolls Royce follows the strategy of focusing on the single market. It manufactures only luxurious car and
caters to higher income class.
Market Development:
This process involves marketing existing products with little modification, to customers in relates market
areas. The organization employs different channels of distribution, changes the content of advertising
or the medium of promotion.
Example 1: HLL’s E-tailing Venture
Sangam Direct is a Hindustan Lever Limited initiative in Mumbai to provide home delivery of various
FMCG, food and grocery products to the customers directly. The company boasts of a product range of
3500 products including those of its competitors and unbranded products. The customer can order
through phone – 55550000 or through email – sangamdirect.hll@unilever.com and the order are
delivered in 24 hours. For availing free home delivery the minimum order size must be worth Rs 400
else the customer has to pay Rs 20 as delivery charges.
Example 2: NIIT
NIIT, India’s leading information technology training institute is a good example of a company followed
the market development strategy. It started its operation in 1982 when computer education was
accessible only to engineers and other science graduates. During 1982-1992, it focused on building
awareness about computer careers. NIIT had to change the mindset of the people to make them
consider computers as a career option. In 1992, it introduced the “Bhavishya Jyoti Scholarship” for
students who secured high marks in the entrance test for its course. NIIT also entered into alliances
with foreign universities, these enabled students to get admission into foreign universities fir degree
courses at the end of a minimum 2 years of any NIIT course after 12 years of schooling.
Example 3: Allen Solly brand to Women’s wear.
Allen Solly is a brand of Madura, a leading Indian apparel company. Madura employed the Indian
Market Research Bureau (IMRB) to conduct a market study on clothing requirements of working
women. The study revealed that while Indian women loved ethnic clothes, they ware not comfortable
to work in. The study indicated a growing need for Western wear. The study also revealed that the
western wear available in the market was unsuitable for Indian women. This information motivated
Madura to extend its Allen Solly brand to women’s wear.
Product Development:
This process involves the modification of existing products or the creation of new items in a related
category. These products are marketed to current customers through established channels.
Example 1: Nokia launches Nseries N80
Nokia’s latest addition to its Nseries family, the Nokia N80, weighing only 134 grams, Nokia N80 is the
first quad band handset designed to work both on 3G and four GSM bands. The convenient, in-built
intuitive browsing and fast internet access makes it possible to send and receive e-mails at WLAN
speeds.
The Nokia N80 demonstrates the cutting-edge technological leadership of the Nseries and offers an
unparalleled experience to consumers. This compact, internet-optimized and feature-rich device has
raised the bar for mobile devices. Comprising the functionality of a highly advanced converged mobile
device, the Nokia N80 empowers people to pursue professional goals and personal passions with equal
fervor.
Example 2: Indica by TELCO
Development of Indica by TELCO is a good example of successful product development. TELCO had
emerged as a leading name in commercial vehicles, passenger vehicles, constructions equipment, metal
cutting and grinding machines, industrial shutters, high quality steel, alloy castings and other related
products. TELCO sought of transform itself from truck manufacturer to an automobile integrator so in
early 1990s, TELCO’s chairman planned to develop a small car i.e. Indica.
Example 3: New Coke
In April 1985, Coca-Cola, the largest aerated beverage manufacturer in the world launched a sweeter
version of soft drink named “New Coke”. Coca-Cola’s decision to change Coke’s formulation was one
of the most significant developments in the soft drink industry during that time. The taste of New Coke
was similar to that of Pepsi. The main idea of launching New Coke was to substitute Pepsi.
GROWTH STRATEGY
Innovation:
Innovation involves the use of a new idea or method. A firm which brings out an innovative product
usually enjoys the ‘first mover’ advantage.
Example 1: Process Innovation – Dell’s Direct Model
The direct model was strong differentiator for the company as its reduced unnecessary distribution
overheads that logged other PC major.
The direct model was based on direct selling, with no retail channel or reseller. The telephone operator
used to take the order from the customer and his requirements for the system; sometimes he even
helped the customer select a system that would meet his requirement. Then the order was passed on
to the manufacturing people. When the system was assembled, the PC was delivered to the customer.
This enables the people at DELL to benefit from real-time input from customers regarding products and
services.
Example 2: Product Innovation – Gillette
In recent years, Gillette introduces more than 20 products annually. The differentiated products include
Sensor Excel and Mach 3. Product Innovation has become an integral part of Gillette’s strategy. Gillette
excelled in creativity and tried to commercialize new product designs. It also tried to market the new
products as fast as possible to get the product design. As a result, 40% of the Gillette’s revenue comes
from products introduced in the past five years.
Example 3: Strategy Innovation – Wipro
At Wipro, innovation is used to provide added value to customers. Wipro has an innovation team and
employees who work on development of innovative projects are rewarded. Projects are executed in
three areas: Home networking, collaboration, and knowledge management. The goal is to shape ideas
into products that are viable and marketable. Currently, Wipro has over 200 people working on
innovative projects
Horizontal Integration:
If a firm grows through acquiring one or more similar business which is operating at the same stage of
production-marketing chain, then the firm is said to be following a strategy of horizontal integration.
With these acquisitions, the firm gets access to new markets and eliminates competitors
Example 1: Global Green Company (GGC) acquired InterGarden Group
Thapar Group’s GGC acquired Belgium based InterGarden Group for € 50 million. The acquisition will
give GGC a strong foothold in key European Market.
GGC supplies gherkins, jalapenos and other preserved foods to retail and other food service to customer
in more than 23 countries and about 30 cities in India.
Intergarden has processing factories in Belgium, Hungary, Turkey and India. The company produces
pickled products such as gherkins, silverskin, cherries, red peppers, etc.
With this acquisition GGC has extended global footprints, giving themselves better access to customer.
Example 2: GAP Inc.
The GAP Inc. retail clothing corporation is a good example of a business that practices horizontal
integration. GAP Inc. controls three distinct companies, Banana Republic, Old Navy, and the GAP brand
itself. Each company has stores that market clothes tailored to appeal the needs of a different group.
Banana Republic sells more expensive clothes with a more "upscale" image, the GAP sells "moderately"
priced clothes that appeal to middle-aged men and women, and Old Navy sells "inexpensive" clothes
geared towards children and teenagers. By using these three different companies, GAP Inc. has been
very successful at controlling a large segment of the retail clothing industry.
Example 3: Bank of Madura – ICICI Bank
The acquisition of the Bank of Madura (BOM) by ICICI bank is an example of the horizontal integration.
With this acquisition ICICI bank has become one of the largest private sector banks in India and has
consolidated its presence in South India.
Vertical Integrations:
This type of integration involves the acquisition of suppliers of inputs or the buyers of the output.
Example 1: Apollo Health Street (AHS) Pvt. Ltd. Acquires Armanti Financial Services (AFS)
AHS, the healthcare services company of Apollo group has acquired US based company AFS, working in
hospital billing and receivables management areas.
The acquisition would promise outstanding growth and redefine the market space. Post acquisition the
company expected to achieve $45 million in 12 months and $100 million in next 18 months
Example 2: Chirag Din
Chirag Din is one of the leading brands of the country. It has its own manufacturing unit and it sells the
apparels through its own outlet.
Example 3: Disney
Disney owns companies mainly in the exhibition sector with TV channels such as Disney Channel and
ABC. It is a media institution owns companies in only one sector of the industry (production, distribution
or exhibition).
Diversification:
Diversification is the process of entering into different industries either to exploit untapped potential or
to minimize the risk of changing business trends.
Example 1: Britannia Industries Limited (BIL)
As part of its strategy to reduce its dependence on biscuits, BIL sought to diversify its product portfolio.
BIL saw an opportunity in the dairy segment as it had only one large player, Amul. In 1997, BIL entered
the dairy segment with cheese and milk powder or dairy whiteners. By 2000, BIL captured about 35% of
market share of cheese market and 20% in the dairy whitener segment. It launched butter in 1998,
tetra packs in 1998 and ghee in 2000. The company relaunched its entire dairy business in late April
2000 by bringing it under the ‘Milkman’ name.
Example 2: Piramal Enterprises
As a part of its strategy, Piramal Enterprises sought to diversify its product portfolio. Piramal Enterprises
saw an opportunity in retail sector as it was largely driven by un-organized market. In September 1999,
Piramal Enterprises launched India’s first shopping mall ‘Crossroads’ in Mumbai. Apart from this they
also launched in-house retail store Pyramid and Truemart.
Example 3: ITC
ITC has diversified into a completely unrelated industry such as food, apparels.
RETRENCHMENT
Turnaround:
A turnaround occurs when “a firm preserves through an existence – threatening performance decline;
and the threat with a combination of strategies, systems, skills and capabilities; and achieves
sustainable performance recovery. The obverse of performance recovery is failure and eventual death.”
Example 1: Turning Around IBM
IBM’s decline started in the late 1980s. During the period 1986-1992, IBM’s overall market share in the
IT industry in US fell by 37%, while its global market share fell by 30%. In 1993, it reported a record net
loss of $8.1 billion.
IBM’s decline can be attributed more to R-extinction that to K-extinction factors. The company had 24
product units functioning independently, even though they were a part of IBM
Louis Gerstner took over as the CEO of the company from John Akers and turned the company around.
He brought about a radical change in the work culture of IBM. In 1993, he reduced the workforce by
35000 and under took cost cutting initiatives. He also reversed the decision of Akers to split IBM into 11
entities. IBM also shifted from product-centric to customer-centric in order to provide complete
solution to its client.
In 1994, Gerstner made effort to improve reporting procedures across different units of the firm. He
started focusing on specific problems related to individual units.
The outcome of Gerstner efforts were seen after eight years in 2001. In that year, the company
reported a net income of $7.7 billion. During the period 1993-2001, the share price of IBM shot up by
nearly 800%.
Example 2: Turning Around Chrysler
Chrysler Corporation’s decline started in the early 1970s. The decline can be attributed to both internal
and external factors. The top management lacked an understanding of the strategic direction of the
company and the dynamics of the industry in which the firm was operating.
Iacocca joined the company in 1978; it was only 1983 that Chrysler announced that it would repay the
entire $1.5 billion government backed loan by the end of year 1983. Thus there was a gap of about 5
years between the time Iacocca joined the company and the official announcement of the repayment of
the loan amount.
Over a period of 3 years, Iacocca fires 33 of 35 vice presidents and in 1979-80 fired 15500 workers,
saving $500 million in annual cost. Iacocca visited every single plant, conducted sessions with plant
supervisors and spoke directly to workers…