BUILDING RELATIVE SUPERIORITY Pralabh Verma (pralabhv@gmail.com) 6 th August 2009 [email_address]

AGENDA Strategy and relative competitive advantage Relative superiority as strategy Building relative superiority Case 2 – Apple Vs IBM in computers market Background Case 3 – Supradyn: “Multivitamin to B-complex” Strategy of relative superiority Cases Q&A Case 1 – Battle of Cannae 215 BC [email_address]

WHAT STRATEGY MEANT EARLIER… [A] “ Art of a General” Office of the command of a general leading an army into battle field [email_address]

WHAT STRATEGY MEANS TODAY IN THE BUSINESS WORLD [A] A plan, method, or series of actions for obtaining an objective, goal or result over a period of time! Organization's objectives Objectives of competing companies Strategy Objective usually is attaining higher market share or profitability gain over your competition similar to battle field where objective is to defeat the enemy! [email_address] Market place

STRATEGY DEFINITION [A] The direction and scope of an organization over a long term, which achieves competitive advantage for the organization through its configuration of resources within a changing environment and to fulfill stakeholders expectation ” - Exploring Corporate Strategy, Johnson and Scholes 2002 Organization's objectives Share holder expectation *Time horizon differs from one organization to another 3 years, 5 years to 10 years [email_address] Market Environment Company Competitors Vision /“to be” state of the company TODAY TODAY + n* years Strategy How to reach “to be state” using available resources Competitors

THERE IS ALWAYS COMPETITION, AND RELATIVE SUPERIORITY CAN BE A COMPETITIVE ADVANTAGE [A] Various ways, frameworks and concepts on how to do this, but following elements are always present There is always competition or “source of growth” A winning strategy has to achieve competitive advantage Strategy of building relative superiority addresses these two aspects [email_address] Environment Company Competitors Vision “to be” status Company TODAY TODAY + X years Strategy How to reach “to be state” using available resources Competitors

Various ways, frameworks and concepts on how to do this, but following elements are always present

There is always competition or “source of growth”

A winning strategy has to achieve competitive advantage

Strategy of building relative superiority addresses these two aspects

AGENDA Strategy and relative competitive advantage Relative superiority as strategy Building relative superiority Case 2 – Apple Vs IBM in computers market Background Case 3 – Supradyn: “Multivitamin to B-complex” Strategy of relative superiority Cases Q&A Case 1 – Battle of Cannae 215 BC [email_address]

PROCESS AND DISCIPLE OF BUILDING COMPETITIVE ADVANTAGE THROUGH RELATIVE SUPERIORITY [B] Build relative superiority Operationalise strategy 1 2 3 [email_address] Competitive situation analysis Compare yourself versus competition /source of growth through complete value chain analysis. Analyse each component of the product/service If required revisit/ redefine competition and source of growth. Assess if key success factors have changed over time Perform strength, weakness and opportunities analysis

Compare yourself versus competition /source of growth through complete value chain analysis. Analyse each component of the product/service

If required revisit/ redefine competition and source of growth.

Assess if key success factors have changed over time

Perform strength, weakness and opportunities analysis

PROCESS AND DISCIPLE OF BUILDING COMPETITIVE ADVANTAGE THROUGH RELATIVE SUPERIORITY [C] ILLUSTRATIVE POSITION MAP RELATIVE TO COMPETITION Variable one Variable two Competitive situation analysis Operationalise strategy 1 2 3 [email_address] Identify functional areas for differentiation utilizing strengths areas Identify other areas to achieve relative superiority e.g. resource allocation, distribution, partnerships Assess if this superiority is sustainable, sufficient and synergistic to your capabilities Create a differentiated strategy Build relative superiority

Identify functional areas for differentiation utilizing strengths areas

Identify other areas to achieve relative superiority e.g. resource allocation, distribution, partnerships

Assess if this superiority is sustainable, sufficient and synergistic to your capabilities

Create a differentiated strategy

PROCESS AND DISCIPLE OF BUILDING COMPETITIVE ADVANTAGE THROUGH RELATIVE SUPERIORITY [C] Competitive situation analysis Build relative superiority 1 2 3 [email_address] Assess resource allocation capabilities to achieve this differentiation Ensure resource allocation as per strategy Assess competitive reactions and its implications Redeploy resources if necessary Operationalise strategy

Assess resource allocation capabilities to achieve this differentiation

Ensure resource allocation as per strategy

Assess competitive reactions and its implications

Redeploy resources if necessary

AGENDA Strategy and relative competitive advantage Relative superiority as strategy Building relative superiority Background Case 1 – Battle of Cannae 215 BC Strategy of relative superiority Cases Q&A [email_address]

BATTLE OF CANNAE - 215 BC Carthaginian Army Led by Hannibal Roman Army Led by Terentius Varro Resources: 40,000 heavy infantry, 6,000 light infantry, 8,000 cavalry Resources: 86,400–87,000 men (16 Roman & Allied legions) Casualties: 6,000 Killed, 10,000 wounded Casualties: 70,000 killed, 11,000 Captured Competing Warriors [email_address]

HANNIBAL’S OBJECTIVE WAS TO WIN BY DESTROYING THE ROMAN ARMY He was thousands of miles away from home … in enemy territory… and woefully outnumbered! [email_address]

HIS STRATEGY… IF ABSOLUTE SUPERIORITY CAN NOT BE ACHIEVED … BUILD RELATIVE SUPERIORITY Knowing what Romans do… he divided his army into 3 parts … concentrated his cavalry on left and right flanks… left flank had additional unit… deployed his infantry at center to economize and to fool Romans into a false sense of superiority he put his weak forces in the center [email_address]

ROMANS PLAYED BY THE BOOK AND DID WHAT THEY DO BEST… Central columns roman legions launched a frontal attack while cavalry flanked these legions (1000 on each side) Hannibal’s left flank outnumbered roman right flank… his “weak” center drew legions forward and strong flanks surrounded advancing Romans [email_address]

HIS RELATIVE SUPERIORITY ON FLANKS GAVE HIM TACTICAL ADVANTAGE TO WIN THE BATTLE Hannibal’s cavalry at right flank maneuvered behind Romans to quickly reach the other side Hannibal’s central forces retreated to invert the “V” and trapped Romans Romans were destroyed. For every cartheginian casualty, Romans lost 11! [email_address]

AGENDA Strategy and relative competitive advantage Relative superiority as Strategy Building relative superiority Background Case 2 – Apple Vs IBM in computers market Strategy of relative superiority Cases Q&A [email_address]

COMPUTERS MARKET: RELATIVE SUPERIORITY BUILT BY A NEW ENTRANT… APPLE Vs College drop out, No money, technological know how, marketing muscle, R&D capabilities or manufacturing facility IBM 5100 an established desktop computer designed for professional and scientific problem-solvers , 70% market share of business computers. COMPETITORS STEVE JOBS & STEVE WOZNIAK [email_address]

STEVE JOBS STRATEGY… CREATE A HOME COMPUTER WHICH A DUMMY CAN USE AT HOME Build a personal computer that costs lesser, is easier to use by anyone can be used either at home or at business A COMPUTER FOR DUMMYS [email_address]

Build a personal computer that

costs lesser,

is easier to use by anyone

can be used either at home or at business

HE CONCENTRATED RESOURCES TO MAKE CIRCUIT BOARDS INSTEAD OF TAKING ON THE MIGHT OF IBM Forged a partnership with Steve Wozniak … a former HP design engineer. The plan was simple… make circuit boards to prove themselves and gain mass! Then get backing from bigger players! [email_address]

HE CONTINUED THIS STRATEGY TO GAIN CRITICAL MASS When HP and Atari turned them down, they raised more money to gain mass! They economized resources by selling more and more circuit boards by putting raised money back into circuit boards [email_address] "So we went to Atari and said, 'Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said, 'No.' So then we went to Hewlett-Packard, and they said, 'Hey, we don't need you. You haven't got through college yet.'" - Steve Jobs, cofounder of Apple Computer

MOVED UP THE VALUE CHAIN AND DEVELOPED APPLE II… MADE IT A SUCCESS With limited success of Apple I, thanks to an order of 50 machines at $300 by The Byte Shop , the two Steves moved up the value chain and created Apple II. By the late 1970’s, with Apple II – a machine ready to run out of the box , he again concentrated on gaining mass by selling more computers… [email_address]

WORKED ON GETTING MORE CUSTOMERS WHERE IBM DID NOT FOCUS AND LEFT ITS COMPETITORS BEHIND Placed articles to generate interest and buzz around the product and increased distribution agreements Partnered with Mike Markkula (formerly at Intel) to generate more funding. Apple II sales peaked at $200,000. IBM launched its version of “personal computer” 5150 in 1981. A home PC market was here! [email_address] "Indeed, it would not be an exaggeration to describe the history of the computer industry for the past decade as a massive effort to keep up with Apple.” - Byte, December 1994

AGENDA Strategy and relative competitive advantage Relative superiority as Strategy Building relative superiority Background Case 3 – Supradyn: “Multivitamin to B-complex” Strategy of relative superiority Cases Q&A [email_address]

FINDING RELATIVE SUPERIORITY WHEN YOU ARE “NOT” A LEADER Vs Unit leader in multivitamin market with unit share of 24%. Supradyn out-sold its nearest competitor by 2 units to 1. Reconia, Becadexamine, A to Z etc Multivitamin market – 120 Crs Market Characteristics: Government controlled the pricing Low brand loyalty among customers but high among consumers Promotions targeted towards stocking at various points in channel (below the line) Most players have limited reach and similar to each other To protect bottom line, players investments little in brand building initiatives [email_address] OTHER MULTIVITAMIN Products

Market Characteristics:

Government controlled the pricing

Low brand loyalty among customers but high among consumers

Promotions targeted towards stocking at various points in channel (below the line)

Most players have limited reach and similar to each other

To protect bottom line, players investments little in brand building initiatives

SUPRADYN BRAND TEAM CHALLENGED THE BASIC ASSUMPTION … Are we competing in multivitamin market or larger vitamin supplement market? Which is the largest prescribed and consumed vitamin? It was not Surpadyn! It was BECOSULES! Becosules sells 5 strips for every Supradyn strip sold [email_address]

Are we competing in multivitamin market or larger vitamin supplement market?

Which is the largest prescribed and consumed vitamin?

It was not Surpadyn! It was BECOSULES!

FINDING RELATIVE SUPERIORITY WHEN YOU ARE “NOT” A LEADER Vs Unit leader in multivitamin market became a follower which was out-sold by its competitor in the ratio of 1:5 Reach was not sufficient - ~400 Marketing money was spend on below the line activity A large B – Complex vitamin brand Large reach of ~600 representatives Significant investment in brand recall campaigns (Above the Line) Multivitamin market – 502 Crs [email_address]

BUILDING RELATIVE SUPERIORITY VS BECOSULES Targeting a weakness in the strength of Becosules offensive campaign on “ Supradyn is B-complex + Much More” [email_address]

offensive campaign on

“ Supradyn is B-complex + Much More”

SALES ALMOST DOUBLED IN 3 YEARS AFTER STRATEGIC INFLECTION POINT 14 Cr 26 Cr 14 Cr 2002 2003 2004 13 Cr SUPRADYN RETAIL SALES IN ORG-IMS Strategic Inflection point [email_address] 2008

AGENDA Strategy and relative competitive advantage Relative superiority as Strategy Building relative superiority Case 2 – Apple Vs IBM in computers market Background Case 3 – Supradyn: “Multivitamin to B-complex” Strategy of relative superiority Cases Q&A Case 1 – Battle of Cannae 215 BC [email_address]