Strategic Management
Growth and Corporate Strategies (Session XI)
Dr. Saurav Snehvrat
Course: STMBJ22-3

Introduction
❑ Concepts + Case Based Approach.
❑ Course Outline
❑ Cases – assigned to groups.
❑ Plagiarism related rules.
❑ Will require knowledge of various functional areas and competitive
strategy.
❑ Consulting Cases.
❑ Proposed Evaluation (individual and team based):
Quiz 9%
Case Analysis /
In Class Assignments 11%
Mini Project- Consulting Case 8%
Class Participation (details) 2%
Total 30%

Cases
Nbr Case Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 Group 7 Group 8 Group 9 Group 10
1
The De Beers Group: Exploring the
Diamond Reselling Opportunity Y Y Y Y Y
2 $19B 4 txt app WhatsApp...omg! Y Y Y Y Y
3
Fnac-Darty Merger: From Bidding Wars
to Entity Integration Y Y Y Y Y
4
McDonald’s in India: Not a Happy
Meal Y Y Y Y Y

Consulting Cases
Session Case
4 Sula Vineyards
5 Saregama
6 boAt
7 PayTM
Not more than 3 groups per case.
FCFS basis.
8 marks
2 marks for Class Participation

Market vs Industry
Market
Markets defined by demand conditions and based on an organization’s
customers and potential customers.
Industry
Industry is defined by supply conditions and based on production technology.

Basic forces in strategy
Sunk Costs
Economies of Scale
Economies of Scope
Economies of Learning
Transaction Costs
Agency Problems
Industry Life Cycle

Sunk Costs/Anchoring
Basic Forces In Strategy

Sunk Costs/Anchoring
Your firm has built a new plant for manufacturing transmission wires in India
which cost INR 50 Crores
(Recoverable Amount INR 10 Crore).
During the same time, a completely new material is discovered by your R&D
department that is stronger and cheaper than the wire your firm will produce.
Basic Forces In Strategy

Basic Forces In Strategy
Sunk Costs/Anchoring
Traditional Wire Business:
Net Income after 5 years: INR 100 Cr
New Material Business:
Net Income after 5 years: INR 200 Cr
What to do?
2018 2019 2020 2021 2022 2023 2024
2018 2019 2020 2021 2022 2023 2024

Basic forces in strategy
Economies of Scale:
Average Cost of producing a product or service decreases as output
increases (up to-a-limit).

Basic forces in strategy
Economies of Scale:
Reasons:
• Spreading of product specific Fixed Costs
• Lower cost of inventories as a percentage of sales
• Specialization will only be attractive if there is enough demand
• The Cube-Square Rule
Both Economies of Scale and Economies of Scope
• Combined Purchasing
• Combined Advertising
• Combined R&D

Basic forces in strategy
Economies of Scope:
Total Cost of producing two or more products/services together are lower
than the sum of the costs of producing each separately.
C(Y1, Y2) < C(Y1, 0) + C(0, Y2)
Total Revenue of selling two or more products/services together are higher
than the sum of the revenues of selling each separately (cross-selling).
R(Y1, Y2) > R(Y1, 0) + R(0, Y2)

Basic forces in strategy
Economies of Learning:
Average Cost of producing a product or service decreases with time spent on
producing it.

Basic forces in strategy
Experience Curves: