IMT - 56: STRATEGIC MANAGEMENT

PART - A

Q1. 'What do you mean by strategy? What are the strengths and weaknesses of formal strategic planning?

Q2. Do you view Vision and Mission as distinct guidelines for strategic planning? If so, discuss the subtle differences with examples.

Q3. Under what environmental conditions are price wars most likely to occur in an industry? What are the implications of price wars for a company? How should a company try to deal with the threat of price war?

Q4. Discuss the five basic competitive forces on which the state of competition in an industry depends.

Q5. Distinguish between

a. merger, acquisition and takeover

b. strategy, goals and targets

PART - B

1. Why is it difficult for a company in one strategic group to change to a different strategic group?

2. When is a company likely to choose related diversification and unrelated diversification? Discuss with

suitable examples.

3. An analysis of each significant existing and potential competitor can be used as an important input to

forecast future industry conditions. Discuss.

4. Discuss the four basic strategic approaches for competing in declining market.

5. a. Explain how Value Chain Analysis helps in identifying a company's strength & weakness

b. Under what conditions is market penetration the main strategy of a firm?

PART - C

Q1. a. What is the meaning of a stakeholder in an organisation?

b. Explain how is it possible to reconcile the diverse and conflicting interests of various stakeholders in an organisation though having shared and empowering vision and mission statement?

Q2. What are the problems constraining emerging industry development?

Q3. What kind of companies stand to gain the most from entering into strategic alliances with potential competitors? Why?

Q4. a. What is the relationship between organisational structure, control and culture?

b. What kind of structure, control and culture would you find in a chain store?

Q5. Explain the strategic alternatives in Global industries.

CASE STUDY-1

Educomp Solutions Limited

"By all conventional yardsticks of corporate evaluation - return on equity, return on capital employed, and cash flow - ESL's numbers are excellent. The company's business model is unique and unprecedented. It lacks peers for comparison purposes."

- Prashanth Nayak, Manager, IL&FS Invest Mart, August 2008.

On September 29, 2008, India based Educomp Solutions Limited (Educomp) was listed in Forbes '200 Best under a Billion' for Asia-Pacific region. For this list, Forbes selected those companies which had pre-tax profits of at least 5% in that year and five years returns on capital of at least 5%. These companies were then judged on sustained gains in sales, return on equity, and earnings. Analysts said that with sales of US$ 71 million for the fiscal year 2007-08, Educomp had been selected because of its promising growth potential and its unique business model.

Founded in 1994 Educomp operated in the education sector by providing Information Technology (IT) enabled solutions to the students, parents and schools. Educomp served the K-12 segment of academia both in India and other countries like the US, Singapore, China and Sri Lanka. The company also operated schools through its subsidiaries and joint ventures with other institutions. Educomp offered products that helped teachers and parents to make the process of educating children more effective. Besides the K-12 segment, Educomp also expanded into developing educational products that were employment oriented like courses in business management, marketing, accounting, insurance and interior design.

Educomp categorized its offerings into business- to- business (B2B) and retail & consulting. Its B2B division comprised SmartClass, ICT and Professional Development products. Educomp's retail & consulting division included of Mathguru, ETEN, Millennium Schools, TMS, Vidya Prabhat schools, learninghour.com, learnhub, RTW and EuroKids. Educomp's B2B division contributed 91.7% and retail & consulting division contributed 8.3% to the company's sales of Rs. 5011.7 million for FY 2008-09.

SmartClass was a digital initiative aimed at private schools. It was an instructor led content system. SmartClass helped teachers in private schools in using digital resources such as graphics, 3D images and video clips in addition to the traditional chalk and board method for teaching.

Educomp had products like CD-ROMs and platforms like websites and schools that catered to the retail segments. The company's RTW and EuroKids catered to the preschool segment of education. Educomp followed the franchising route to expand these pre-schools. RTW was the first structured and process driven IP in early child education in India.

Educomp recognized the scope and opportunity for providing IT-enabled learning solutions in Indian schools in the mid-1990s. As usage of computers in schools during early 1990s was at a nascent stage, Educomp started its operations by setting up computer labs at schools.

Educomp entered into contracts with its customers binding them for certain period of time. Such a contract based business provided visibility to Educomp's revenues, and reliable estimates of cash flows, analysts felt, would enable Educomp to plan its capital outlays more effectively.

As of June 2009, Educomp provided services to 23,000 schools and 12 million learners and educators across the world. It was the leading K-12 online education company in India. Educomp expanded through both organic and inorganic routes. It acquired equity stakes in various companies in the education sector in several countries as a part of its global expansion strategy. It collaborated with several renowned institutes like Indian Institute of Technology (IIT) to develop content relevant for the target segment of the company.

Educomp planned to serve 15 million learners by 2010 and aimed to be in the top five K-12 education companies worldwide by 2012. Its tie up with Raffles Education Corporation to provide K-12 solutions in China would help it in working towards this goal as China was one of the world's largest K-12 education markets.

"Our children are not equipped with the right kind of skill-sets which would make them employable candidates in the future. Therefore, we need to make sure that all children are made part of this digitally aware generation and have the same levels of exposure to IT."

- Soumya Kanti, President, ICT Division, Educomp, May 2009.

Questions:

1. Discuss how a strong product and first mover advantage could help a startup become a market leader in context of Educomp.

2. Analyze growth strategies of Educomp.

3. Examine the challenges Educomp faces in the near future.

CASE STUDY-2

Maruti Suzuki India Limited

The Government of India had entrusted the company a responsibility of building low cost, fuel efficient cars for the people of India as also building firm foundation for the modernization and growth of Indian automobile industry. Thanks to the support of our stakeholders, we have successfully led the automobile revolution in India. We are positioning India as the global small car manufacturing hub, in line with the government's vision."

- Shinzo Nakanishi, Managing Director and CEO, Maruti Suzuki India Limited, in December 2008.

It was in the 1970s that the Indian government decided to develop an affordable small car or a 'people's car' in India. Its target customers would be the burgeoning middle class. Maruti Limited was set up in 1971. However, in 1978, the company was liquidated. In the early 1980s, the small car project was brought back to life by the government. The government entered into a joint venture agreement with Suzuki. The joint venture company, Maruti Udyog Limited was incorporated in 1981, to take over the assets of Maruti Limited.

Founded in 1981, Maruti was India's leading car manufacturer. Since the late 1980s, the company had been the market leader in the passenger car industry in India. However, the liberalization of the Indian economy in 1991 changed the dynamics of the Indian passenger car industry.

From the mid 1990s, foreign automobile companies started entering the Indian passenger car market. Maruti started losing market share as competitors began taking over their space with the launch of models that proved very popular with Indian buyers. Between the financial years 1997-98 and 1999-2000, Maruti's market share declined from 83.1 percent to 60.8 percent.

To counter the competition, Maruti started a major restructuring exercise. The company focused on improving its operational efficiency by upgrading manufacturing using new manufacturing techniques, increasing capacity, using information technology (IT) in manufacturing, focus on new product launches at regular intervals and venturing into other related businesses like car finance, insurance and buying and selling used Maruti cars. Maruti's restructuring exercise paid off as the company was able to hold its market leadership position with a 55 percent market share in 2008-09. The new products launched by the company were well accepted by the market. However, there was no room for complacency and so the company formulated a careful plan for its future direction. The company decided that it would upgrade all its products with its new KB series engine.

The Indian automobile industry was regulated by the government till 1990. Indian consumers had little choice as there were only a few players in the industry including Maruti, Hindustan Motors, and Premier Automobiles. In 1991, several sectors of the Indian economy including the automobile industry were delicensed with the announcement of the 'New Industrial Policy'. Over the years, the norms of foreign investment in the automobile industry and import of technology were also eased.

In an effort to counter competition from local and foreign players, Maruti started restructuring its operations. The continuous decline in market share and sales forced the company to rethink its strategy and formulate a new competitive strategy. Maruti upgraded its manufacturing facilities to meet the foreign challenge with its claims of high-end technology. It broadened its product portfolio and expanded its sales and service network to reach all over India.

Within a year of its launch of its Challenge 50 plan, Maruti's restructuring efforts started reflecting in its financial performance. In the financial year 2003-04, Maruti reported a 25.2 percent increase in net sales to Rs 90.81 billion as compared to Rs 72.53 billion in the preceding fiscal year. The net profit of the company for 2003-04 also increased from Rs 1.46 billion in fiscal 2002-03 to Rs 5.42 billion in fiscal 2003-04. The company was able to increase its net profit riding on the high sales growth of Alto, which increased by over 130 per cent in fiscal 2003-04 as compared to fiscal 2002-03.

Maruti announced plans to invest Rs 18 billion in the fiscal 2009-10 on launching new models and upgrading plants. In July 2009, the company launched a new version of Grand Vitara. Maruti would also launch a Multiutility vehicle (MUV) in October 2009. The MUV would be built on the Maruti Versa platform.

"The car market is growing increasingly competitive. This is not surprising as global manufacturers are bound to come where they see a growing market. Maruti has a strategy for the future."

- RC Bhargava, Chairman, Maruti Suzuki India Limited, in August 2008

Questions:

1. Examine the growth strategies of Maruti over the decades.

2. Evaluate the competitive strategies of Maruti to retain its market share in the recent years.

3. Examine the future plans of Maruti to improve its competitive position.