Individual Assignment -- Corporate Evolution and Strategic Management(401) MBA (Part-Time) 3rd Year Faculty of Management Studies

Case - Competitive Strategy and Planning for Coolex Industries Case Analysis using the Positioning School of Strategic Management

Submitted to: Prof. Swapan Dasgupta

Submitted by: Ritesh Goel (N 57)

Date: July 27, 2011

The COOLEX case describes the process followed for developing a strategy and the planning problem being encountered by the company. The management is not clear on the kind of approach they should have for developing the long term strategy. And thats why the CEO Jagmohan raises the debate with his friend Prof. Mahapatra. The case indirectly mentions the need to change the strategy formulation process at COOLEX. Currently the company is following traditional approach which maps more to the Planning School of strategic management. However, it appears that Prof. Mahapatra indirectly advises Mr. Jagmohan to go back to his team and rethink the strategic plan that they have. Right now, they are more or less reacting to the external environment and current state of the industry. Prof. Mahapatra clearly states that I hope you realize that the only reasons this approach worked over the years are your historical advantage, and familiarity with a regulated environment. And both are under threat now. Thus, we would take a look at the Positioning School of thought for the solution to Mr. Jagmohans problems. Premise of the Positioning School of Strategic Management Following are some basic concepts of the positioning school. We will try to answer the questions keeping these in mind, while trying to suggest a possible strategy for Coolex. Strategies are generic, specifically common, identifiable positions in the market place. The marketplace is economic and competitive. The strategy formation process is therefore one of selection of these generic positions based on analytical calculation. Analysts play a major role in this process, feeding the results of their calculations to managers who officially control the choices. Strategies thus come out from this process full blown and are then articulated and implemented; in effect, market structure drives deliberate positional strategies that drive organizational structure.

Here are the questions raised as part of the case 1. How should COOLEX evolve its strategy? Should it continue with the conventional approach, with its focus on the external environment, in the face of potential competition? The core business of COOLEX is to offer solutions in the air-conditioning space. It primarily wants to address the needs of customers--with products, systems, and services. The company operates mainly in the systems segment, where its skills in Engineering, Procurement, and Construction serve it well. However COOLEX has set itself a goal of attaining a turnover of Rs 1,200 Cr. by 2002. This target translates into a 15% growth over the next 4 years. The true reasons behind such a growth rate would come from customer-needs, competition, technology, and the ability of COOLEX to acquire, or develop the resources required to achieve the goal.

However the case suggests that the present strategy being employed by COOLEX has only led them on a path of declining market share. The last 14 years have seen them being reduced from a 55%market share to the present state of 40%, in the central air conditioning market. As Prof. Mahapatra asks What are the long term goals and vision for COOLEX? Are they really aligning with the internal as well as external environment of the company? As of now, COOLEX relies on a static picture of the competition, underplays the role of innovation, exaggerates the role of the environment, and does not account for the varying resource- and competence-levels across companies. Thats the primary reason a competitor like Airtemp has been able to carve out a market share of 15% within the last 4 years. 2. Is it feasible to link strategy-planning at COOLEX to its core competencies? Or is the competencies-based approach to strategy-development old wine in a new bottle? The strategy development process at COOLEX needs to incorporate both environmental changes and its strengths and weaknesses. Besides, the process should look beyond addressing a 3-year goal. From the market segmentation point of view, Jagmohan accepts that 70% of their current business is coming from the central air conditioning business. However, the comment from Gopal Menon is that the market for Unitary Systems is set to grow at 30% per annum. And that market is being lead by Airtemp. This clearly indicates that COOLEX is at a possible disadvantage in one of the fastest growing segments. It could easily take COOLEX much longer to even acquire the skills needed to realize their goals of maintain a leadership position. It should outline the direction and frame a broad road-map to prepare the organization for a longer timegoal. There are many ways by which COOLEX can achieve its turnover target even while staying within the confines of its vision statement: it can choose to focus on a specific product segment: central air-conditioning, unitary air-conditioners, or ducting systems. Or, it could decide to look at a particular customer segment: industrial or domestic customers. Or, it could adopt a mix-andmatch approach, choosing to cater to the needs of customers in profitable segments in both markets. The final choice would depend on the answers to some of these questions:

Do we have, or can we acquire, the resources (financial, technological, and knowledge) in time to reach the goal we have set? What are the risks associated with each alternative? What are the financial implications of each alternative? What does the choice of a particular strategy mean for the company post-2002? Once the company has chosen a market segment to achieve its target for the year 2002, it would simultaneously need to adapt to the changing market dynamics. Whether it be the demands of the ever changing consumer or the technology changes being brought about in the industry. 3. Has COOLEX got a grip on its core competencies at all? No. From the discussion that Mr. Jagmohan has with his executive staff, it appears that there is a strong disconnect between the various department heads as well as the business heads. Each of them seems to suggest that the function of the department or the business is their primary core competency, which is essentially a fragmented view. If COOLEX were to follow the Positioning School of strategic management, they would need to sit down and agree on a smaller set of core competencies. Also, things like a strong financial management as suggested by Mr. Vaidya should not be considered as core competencies. For a company like COOLEX, core competencies

should be more inclined towards its technical capabilities as well as its understanding of the way market is going to shape in the next 5 years or so. 4. Is there an alternative to the traditional approach to strategy-formulation? COOLEX needs to articulate medium- and long-term goals in addition to its 3-year goal. It needs to build these goals around not just turnover, but also other financial measures, which will enable it to address concerns about the long term sustainability as well as profitability of the business. Next, the company's market analysis should address all segments of the air-conditioning business--irrespective of its presence in them. After all, COOLEX cannot decide whether or not it should operate in a segment without having studied it first. As already identified, COOLEX has a severe lacking in the Unitary Air Conditioning space which sells a capacity of less than 3 tons. Finally, COOLEX would do well to study its competitors and anticipate their moves. This would imply taking a look at what makes COOLEX succeed in the 5. Are the managers of COOLEX asking the right questions? What should the roadmap for Jagmohan and his team be? COOLEX's planning process should detail a 3-year business plan that lists all the activities that need to be set in motion to achieve immediate targets; at another, it should be capable of evolving a strategy for a longer period. Only this mixed approach will help Coolex decide on the skills and resources it needs to acquire in the short and the long terms. In the process, Jagmohan will be able to ensure success for his company.