5. Bharti Airtel case
• Strategy indicates what the firm will do as well as what
the firm will not do.
• BTVL/ Bharti Airtel focuses single business :
telecommunications, mobile telephony segment, GSM
technology, reinforcing presence in basic, broadband,
internet service and international telecom business.
• Continuous innovation to stay ahead in competition
• Not to diversify in any other unrelated business
• Idea cellular solely in GSM mobile business
• BSNL also has its presence in all areas of telecom,
but its dependence on basic services continues to be
very high.
1–5
14. Air Deccan: unable to Reach the cruising Height
• Air Deccan’s share of 16 % at the time of liquidation
did not go to Kingfisher, but it went to Spicejet and
Indigo.
• Kingfisher get only 8 percent from Deccan while
Spicejet increased from 9.2 percent to 13.3 percent
between 2007-08 to 2009-10.
• Indigo increased from 8.8 to 16.4 per cent over the
same time.
• The low cost airlines continued their no frills, low cost
model, with punctual and reliable services that
attracted a substantial clientele. The concept was not
flawed but the strategy to put that in place that went
wrong, both for Air Deccan and Kingfisher.
1–14
21. 1–21
Technology and Technological Changes
• Rate of change of technology and speed at which new
technologies become available
It took the telephone 57 years to reach 25% in 2007 and 68 % in 2010
Mobile phones 15 years reached to 65%
Tv 10 years to reach 25 %and in 2009 60%
Internet penetration had reached 8 % and expected to reach 25 % by
2015
• Perpetual innovation—how rapidly and consistently new,
information-intensive technologies replace older ones
Patents are effective way of protecting proprietary technology in a small
number of industries like pharmaceuticals.
Electronics industry do not go for patents to keep competitors away
from access to the technological knowledge included in the patent
application.
22. Technology and Technological Changes
• The development of disruptive technologies that destroy
the value of existing technology and create new markets
iPods, wifi and the browser
• The Information Age
The ability to effectively and efficiently access and use information has
become an important source of competitive advantage
Technology includes personal computers, cellular phones, artificial
intelligence, virtual reality, massive databases and multiple social
networking sites are a few examples of how information is used
differently as a result of technological developments.
Internet creating hypercompetition
ITCs access to the internet on smaller devices such as cell phones is
having an ever growing impact on competition in a number of
Industries. 1–22
24. 1–24
I/O Model of Above-Average Returns
• The industry in which a firm competes has a stronger
influence on the firm’s performance than do the choices
managers make inside their organizations
Industry properties include
economies of scale
barriers to market entry
diversification
product differentiation
degree of concentration of firms in the industry
• External environment is the dominant factor in influencing
the strategy formulation
25. 1–25
Four Assumptions of the I/O Model
External environment imposes pressures and constraints
that determine strategies leading to above-average returns
1
2
Most firms competing in an industry control similar
strategically relevant resources and pursue similar
strategies
Resources used to implement strategies are highly mobile
across firms
3
4
Organizational decision makers are assumed to be rational
and committed to acting in the firm’s best interests (profit-
maximizing)
27. 1–27
The I/O Model of
Above-Average Returns
Adapted from Figure 1.2
The External
Environment
1. Study the external environment,
especially the industry
environment
• The general environment
• The industry environment
• The competitor environment
28. 1–28
An Attractive
Industry
2. Locate an attractive industry
with a high potential for above-
average returns
• An industry whose
structural characteristics
suggest above-average
returns
The External
Environment
The I/O Model of
Above-Average Returns
Adapted from Figure 1.2
34. 1–34
Resource-Based Model of Above-Average Returns
• Each organization is a collection of unique resources
and capabilities that provides the basis for its
strategy and that is the primary source of its returns
• Capabilities evolve and must be managed
dynamically
• Differences in firms’ performances are due primarily
to their unique resources and capabilities rather than
structural characteristics of the industry
• Firms acquire different resources and develop unique
capabilities
36. 1–36
Resources and Capabilities
• Resources
Inputs into a firm’s
production process
Capital equipment
Skills of individual
employees
Patents
Finances
Talented
managers
• Capabilities
Capacity of a set of
resources to perform
in an integrative
manner
A capability should
not be
So simple that it is
highly imitable
So complex that it
defies internal
steering and
control
37. Key Criteria of Resources and Capabilities
Valuable
Resources and capabilities are valuable when they allow a firm to
take advantage of opportunities or neutralize threats in external
environment
Rare
Resources and capabilities are rare when possessed by few, if
any, current and potential competitors
Costly to Imitate
Resources and capabilities are costly to imitate when other firms
either cannot obtain them or are at a cost disadvantage in
obtaining them
Non-substitutable
Resources and capabilities are non-substitutable when they have
no structural equivalents
38. Core Competencies
• Core Competencies are resources and
capabilities that serves as a source of
competitive advantage for a firm over its rivals
• When the four key criteria of resources and
capabilities are met, they become core
competencies
• Core competencies serve as a source of
competitive advantage
• Managerial competencies are especially
important
39. How Resources and Capabilities Provide
Competitive Advantage
The firm is organized appropriately to obtain
the full benefits of the resources in order to
realize a competitive advantage
Valuable Allow the firm to exploit opportunities or
neutralize threats in its external environment
Rare Possessed by few, if any, current and
potential competitors
Costly to imitate When other firms cannot obtain them or
must obtain them at a much higher cost
Nonsubstitutable
41. The Resource-Based Model of
Above-Average Returns
Adapted from Figure 1.3
Resources
1. Identify the firm’s resources.
Study its strengths and
weaknesses compared with
those of competitors
• Inputs into a firm’s
production process
44. The Resource-Based Model of
Above-Average Returns
Adapted from Figure 1.3
An Attractive
Industry
4. Locate an attractive
industry.
• An industry with
opportunities that can
be exploited by the
firm’s resources and
capabilities
Competitive
Advantage
Capability
Resources
45. The Resource-Based Model of
Above-Average Returns
Adapted from Figure 1.3
Strategy
formulation and
Implementation
5. Select a strategy that best
allow the firm to utilize its
resources and capabilities
relative to opportunities in
the external environment.
• Strategic actions taken to
earn above-averagae
returns
An Attractive
Industry
Competitive
Advantage
Capability
Resources
48. Strategic Vision and Mission
• Formed in light of the information and insights gained from
studying a firm’s internal and external environment.
• Vision is a picture of what the firm wants to be and in broad
terms what it wants to ultimately achieve.
• Mission specifies the business in which the firm intends to
compete and the customers it intends to serve.
• Vision and mission provide direction to the firm and signal
important descriptive information to shareholders.
49. Stakeholders
• Individuals and groups who can affect, and are
affected by, the strategic outcomes achieved
and who have enforceable claims on a firm’s
performance
• Claims are enforced by the stakeholder’s ability
to withhold essential participation
52. Product Market Stakeholders
• Customers
Demand reliable products at low prices
• Suppliers
Seek loyal customers willing to pay highest
sustainable prices for goods and services
• Host communities
Want companies willing to be long-term employers
and providers of tax revenues while minimizing
demands on public support services
• Union officials
Want secure jobs and desirable working conditions
56. 1–56
Strategic Leaders
• Strategic leaders are people located in different
parts of the firm using the strategic management
process to help the firm reach its vision and
mission.
• It is important for all strategic leaders and
especially the CEO and other members of the top
management team to work hard, conduct through
analyses of situations facing the firm, be brutally
and consistently honest, and ask the right
questions of the right people at the right time.
• People responsible for the design and execution of
strategic management processes
57. Strategic Leaders
• Decisions they make include
How resources will be developed or acquired
At what price resources will be obtained
How resources will be used
• It predict the potential outcomes of their strategic
decisions. To do this, they must first calculate profit
pools in their industry that are linked that are linked to
value chain activities. Predicting the potential
outcomes of their strategic decisions reduces the
likelihood of the firm formulating and implementing
ineffective strategies.
58. Four steps to identify profit pools
1. Define the pool’s boundaries
2. Estimate the pool’s overall size
3. Estimate the size of the value-chain activity in the pool
4. Reconcile the calculations