Articles and Case Studies on Strategy


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Articles and Case Studies on Strategy

  1. 1. Project REPORT ARTICLES AND Case Studies On STRATEGY Submitted by: Prashant Jain Roll No. 251 Section K 1
  2. 2. Acknowledgement I have made a lot of efforts in this project. However, it would not have been possible without the support and help of many individuals. I would like to extend my sincere thanks to all of them. I am highly indebted to my Business, Entrepreneurship and Management teacher, Mr. Amit Sachdeva, Associate Professor, SRCC, for his guidance and constant supervision as well as for providing necessary information regarding the project and also for his support in completing the project inspite of being busy with his duties. It was an honor to receive advice from him. He is a person with vast knowledge and experience. I would like to express my gratitude towards my parents for their kind co-operation and encouragement which help me in completion of this project. My thanks and appreciations also go to my friends who helped me in developing the project and people who have willingly helped me out with their abilities. Student’s Signature (with date) Certificate This is to certify that Prashant Jain, a B.Com (Hons.), first year student of SRCC, University of Delhi has done a project work on the topic ‘Articles and Case Studies on Strategy’ under my guidance and supervision. He has successfully completed the project report and has made his submissions on time. Teacher’s Signature (with date) 2
  3. 3. Contents S.No. Title Pg. No. 1. About the Project 4 2. What is Strategy? 5 3. Articles and Case Studies 6-15 I. Picking The Right Transition Strategy (Michael D. Watkins) 6 II. The Five Competitive Forces That Shape Strategy (Michael E. Porter) 7 III. Reinventing Your Business Model (Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann) 8 IV. How Strategy Shapes Structure (W. Chan Kim and Renée Mauborgne) 9 V. Transforming Strategy One Customer at a Time (Richard J. Harrington and Anthony K. Tjan) 10 VI. Choosing Strategies for Change (John P. Kotter and Leonard A. Schlesinger) 11 VII. Is Your Growth Strategy Flying Blind? (Mehrdad Baghai, Sven Smit, and Patrick Viguerie) 12 VIII. Value–for-Money Strategies for Recessionary Times (Peter J. Williamson and Ming Zeng) IX. Strategy as a Wicked Problem (John C. Camillus) 13 X. 4. Strategies for Learning from Failure (Amy C. Edmondson) References 14 15 16 3
  4. 4. 1. about the Project A. Title of the project Articles and Case Studies on Strategy B. Aim To find examples of the ideas conveyed through these articles using case studies. C. Scope of the Project 1. The articles are related to strategy only. 2. The articles’ first publishing date ranges from 2008 to 2013. 3. The articles cover different aspects of strategic management. 4. The case studies are confined to Indian geographical territory. D. Research Methodology 1. Thorough reading of articles. 2. Going through as many case studies as possible. 3. Comparison of the findings derived from the study of both of the above points. 4. Result obtained from such comparison was used to explain one case study under each article. E. Limitation of the Project The project discusses success stories and instances of failure only and not necessarily the current status of the respective organization or industry. 4
  5. 5. 2. What is Strategy? When we (commerce students) hear the word ‘strategy’, at least 8 out of 10 times we think that the person is talking about a business strategy. Strategy is not limited to the corporate world. In reality, the concept of strategy has been borrowed from the military and adapted for use in business. Strategy is a term that comes from the Greek word ‘strategia’, meaning "generalship." Back in earlier times, strategy was a common feature of every battle. We have had brilliant strategists in past, such as Sun Tzu, the Chinese military general. His strategies were compiled in a text popularly known as ‘The Art of War’, which is one of the most influential works in the field of strategy even now. The text is composed of 13 chapters, each related to one aspect of war. Let’s take another example. How can we forget Lord Krishna’s role in Mahabharata? This may sound lame because Lord Krishna didn’t raise any weapon against the Kauravas. But he was able to convince Duryodhana to take charge of the Narayani sena. Moreover, it is worth mentioning the fact that he was the one who convinced Arjun to fight against the Kauravas who had caused tremendous harm to his and his brothers’ pride. Other strategists include Chanakya who authored the ‘Arthashastra’. Besides, every scholar/researcher has his/her own definition. According to Michael Porter, strategy means deliberately choosing a different set of activities to deliver a unique mix of value. Besides, he has written two very famous articles which are a part of Harvard Business Review’s 10 must reads on strategy. On October 1st 2013, another article authored by him was published. Its title was “The Strategy That Will Fix Health Care”. It is worth mentioning the fact that entrepreneurs define strategy in their own way. Rajiv Bajaj, Managing Director, Bajaj feels that “It is more about what you choose not to do rather than what you choose to do”. The ones interested in playing computer games know the fact that there is a plethora of games based on strategy such as the Age of Empires collection. The term ‘strategy’ is of vital importance in almost all the spheres such as politics, sports etc. It is a concept which plays a crucial role in differentiating between success and failure. Thus, we can say that strategy has a much wider scope than what comes to our minds. 5
  6. 6. 3. Articles and Case Studies I. Picking the Right Transition Strategy Michael D. Watkins Executive Summary [1] Leaders in transition reflexively rely on the skills and strategies that worked for them in the past. That’s a mistake, says Watkins, whose research shows that executives moving into new roles must gain a deep understanding of the situation at hand and adapt to it. To help them accurately assess their organizations and tailor their strategies and styles accordingly, he developed the STARS framework. “STARS” is an acronym for the five common situations leaders move into: start-up, turnaround, accelerated growth, realignment, and sustaining success. Thus, the model outlines the challenges of launching a venture or project; saving a business or initiative that’s in serious trouble; dealing with rapid expansion; reenergizing a once-leading company that’s now facing problems; and following in the footsteps of a highly regarded leader with a strong legacy of success. Executives can accelerate their immersion in new roles by following certain fundamental principles: Organize to learn about the business, establish A-item priorities, define strategic intent, quickly build the leadership team, secure early wins, and create supportive alliances across the company. But the way those principles should be applied depends very much on the business situation, which the STARS framework can help leaders analyze. Turnarounds and realignments present especially distinct leadership challenges that call for particular transition strategies. Regardless of the business situation, leaders must figure out which things need to happen—perhaps a jump in market share or an expansion into different markets—for their business to achieve its goals. And they must determine which leadership style best fits the new culture they’re joining. Armed with such clarity, executives can design effective plans to manage their organizations and themselves. Case Study: Avani Bio Energy Pvt. Ltd. [2] Kumaon region of Uttarakhand is full of pine forests. On one hand, pine needles which litter the forest floor during dry summer months form a carpet on the soil causing the rainwater to run down the slopes before it percolates into the soil. On the other hand, the highly inflammable pine needles cause forest fires which deprive all other species except pine from regenerating. After many years of exploring and researching, an organization named Avani Bio Energy Pvt. Ltd. figured out a way to use pine needles to generate electricity through a process known as gasification. Through this process, Avani Bio Energy converts hazardous pine needles into clean and affordable energy. Energy access in the Himalayan region is a crucial issue right now. Acumen Fund, a venture capital fund managed by Acumen Fund Advisory Services India Pvt Ltd, had invested Rs 1.3 crore in Avani Bio Energy Pvt Ltd. Avani Bio Energy will be able to create 20 operational plants within five years, providing electricity for more than 58,000 people and enabling hundreds of households to move from kerosene to pine charcoal. The removal of surplus pine needles will also reduce forest fires in an area populated by 7,500 farming families. Pine needle gasification was able to generate rural employment while protecting the forests from fires. The conversion of pine needles into fuel gases or electricity immediately gives it an economic value, thus a motivation for the people to collect these from forest floor. As a consequence, the forests have minimum risk of fires, protecting the precious biodiversity, thus affecting the fragile mountain ecosystem positively. This conversion of pine needles into usable fuel also saved the forest from fuelwood pressure. 6
  7. 7. II. The Five Competitive Forces That Shape Strategy Michael E. Porter Executive Summary [3] In 1979, a young associate professor at Harvard Business School published his first article for HBR, “How Competitive Forces Shape Strategy.” In the years that followed, Michael Porter’s explication of the five forces that determine the long-run profitability of any industry has shaped a generation of academic research and business practice. In this article, Porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, which includes substantial new sections showing how to put the five forces analysis into practice. The five forces govern the profit structure of an industry by determining how the economic value it creates is apportioned. That value may be drained away through the rivalry among existing competitors, of course, but it can also be bargained away through the power of suppliers or the power of customers or be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. In exploring the implications of the five forces framework, Porter explains why a fast-growing industry is not always a profitable one, how eliminating today’s competitors through mergers and acquisitions can reduce an industry’s profit potential, how government policies play a role by changing the relative strength of the forces, and how to use the forces to understand complements. He then shows how a company can influence the key forces in its industry to create a more favorable structure for itself or to expand the pie altogether. The five forces reveal why industry profitability is what it is. Only by understanding them, can a company incorporate industry conditions into strategy. Case Study: FMCG Industry (India) Analysis • • • • • [4] Rivalry among Competing Brands – In the FMCG Industry, rivalry among competitors is fierce. There are scarce customers because the industry is highly saturated and the competitors try to snatch their share of market. Market Players use all sorts of tactics and activities from intensive advertisement campaigns to promotional stuff and price wars etc. Hence, the intensity of rivalry is very high. Potential Entry of New Competitors – FMCG Industry doesn’t have any measures which can control the entry of new firms. The resistance is very low and the structure of the industry is so complex that new firms can easily enter and also offer tough competition due to cost effectiveness. Hence, potential entry of new firms is highly viable. Potential Development of Substitute Products – There are complex and never ending consumer needs and no firm can satisfy all sorts of needs alone. There are plenty of substitute goods available in the market that can be re-placed if consumers are not satisfied with one. The wide range of choices and needs give a sufficient room for new product development that can replace existing goods. This leads to higher consumer’s expectation. Bargaining Power of Suppliers – The bargaining power of supplies of raw materials and intermediate goods is not very high. There are ample number of substitute suppliers available and the raw materials are also readily available and most of the raw materials are homogeneous. There is no monopoly situation from the supplier side because the suppliers are also competing among themselves. Bargaining Power of Consumers – Bargaining power of consumers is also very high. This is because in FMCG industry the switching costs are very low and there is no threat of buying one product over other. Customers are never reluctant to buy or try new things off the shelf. 7
  8. 8. III. Reinventing Your Business Model Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann Executive Summary [5] Why is it so difficult for established companies to pull off the new growth that business model innovation can bring? Here’s why: They don’t understand their current business model well enough to know if it would suit a new opportunity or hinder it, and they don’t know how to build a new model when they need it. Drawing on their vast knowledge of disruptive innovation and experience in helping established companies capture game-changing opportunities, consultant Johnson, Harvard Business School professor Christensen, and SAP co-CEO Kagermann set out the tools that executives need to do both. Successful companies already operate according to a business model that can be broken down into four elements: a customer value proposition that fulfills an important job for the customer in a better way than competitors’ offerings do; a profit formula that lays out how the company makes money delivering the value proposition; and the key resources and key processes needed to deliver that proposition. Game-changing opportunities deliver radically new customer value propositions: They fulfill a job to be done in a dramatically better way (as P&G did with its Swiffer mops), solve a problem that’s never been solved before (as Apple did with its iPod and iTunes electronic entertainment delivery system), or serve an entirely unaddressed customer base (as Tata Motors is doing with its Nano—the $2,500 car aimed at Indian families who use scooters to get around). Capitalizing on such opportunities doesn’t always require a new business model: P&G, for instance, didn’t need a new one to leverage its product innovation strengths to develop the Swiffer. A new model is often needed, however, to leverage a new technology (as in Apple’s case); is generally required when the opportunity addresses an entirely new group of customers (as with the Nano); and is surely in order when an established company needs to fend off a successful disruptor (as the Nano’s competitors may now need to do). Case Study: Tata Nano [6] 1. Creating a Customer Value Proposition: Imagine on a rainy day you see scooters bearing whole families – both parents and several children. You may think that’s the way it is developing countries. When Ratan Tata looked at this scene, he saw a critical job to be done, providing a safer alternative for families. Offering an affordable, safer, all-weather alternative for scooter families was a powerful proposition, one with the potential to reach tens of millions of people. 2. Designing a Profit Formula: Ratan Tata knew the only way to get families off their scooters and into cars would be to break the wealth barrier by drastically decreasing the price of the car. Tata envisioned a price point of Rs 1 lakh, less than half the price of the cheapest car available. This, of course, required a significant drop in gross margins and a radical reduction in many elements of the cost structure. He knew that his target base of consumers was potentially huge and he could still make money if he could increase sales volume drastically. 3. Identifying Key Resources and Processes: To fulfill the above mentioned points, Tata Motors had to reconceive how a car is designed, manufactured, and disturbed. Tata built a small team of fairly young engineers who would not, like the company’s more – experienced designers, be influenced and constrained in their thinking by the automaker’s existing profit formulas. This team minimized the number of parts in the vehicle, resulting in significant cost saving. Tata also reconceived it’s supplier strategy, choosing to outsource a remarkable 85% of the Nano’s components and use nearly 60% fewer vendors than normal to reduce transaction costs and achieve better economies of scale. 8
  9. 9. IV. How Strategy Shapes Structure W. Chan Kim and Renée Mauborgne Executive Summary [7] When executives develop corporate strategy, they nearly always begin by analyzing the industry or environmental conditions in which they operate and the strengths and weaknesses of the players they are up against. They then set out to carve a distinctive strategic position from which they can outperform their rivals by building a competitive advantage. The underlying logic here is that a company’s strategic options are bounded by the environment. In this structuralist approach, structure shapes strategy. But as Kim and Mauborgne, the authors of Blue Ocean Strategy, point out, history reveals plenty of situations in which firms’ strategies shaped structure—from Ford’s Model T to Nintendo’s Wii. For the past 15 years, the authors have been developing this Reconstructionist approach into the blue ocean strategy, which reflects the fact that a company’s performance is not necessarily determined by an industry’s competitive environment. In this article, they explain the key differences between the two approaches, identify the circumstances under which each one is appropriate, and discuss cases of blue ocean strategies. The authors conclude by observing that most large and diversified businesses operating in multiple industries will need to learn to apply both approaches, depending on the strategic needs of their various units. Case Study: IPL (Indian Premier League) [8] The IPL cricket tournament has been interesting for a couple of reasons: One, it showed how innovation in services can be appealing to consumers; two, it showed how competition and globalisation can bring improvements. By re-packaging the sedate game of cricket to something with non-stop action, and by reducing the time investment that spectators need to put in for the event, the IPL administrators have modernised it. It has also converted attending the 20-20 game into a family event like going to the movies, whether you watch at home or in the stadium. This, for instance, has increased the appeal to women, for the three hours required is something a busy housewife can afford to spare, as compared to having to spend all day watching the game. Besides, fast-moving games have instinctive appeal, which is why soccer finds such a ready audience everywhere. It was able to: 1. Eliminate the patience of watching an 8 hour long ODI or a five day long test match. 2. Reduce the spectator time (competes with football match or a movie) and also the uncertainty of results as in case of a test match or an ODI. 3. Raise the pace of the game and introduce a pool of young talent. 4. Create a new industry. Thus, IPL was able to change the face of cricket in India. No surprise that such an astronomical sum of money is a historic debut for any Indian game and splendidly makes IPL stand as a true $2 billion IPO in marketing sense. This is an extra-ordinary example of blue ocean strategy in Indian context. 9
  10. 10. V. Transforming Strategy One Customer at a Time Richard J. Harrington and Anthony K. Tjan Executive Summary [9] A decade ago, the Thomson Corporation, like most B2B companies, had a much better understanding of the people who purchased its newspapers, journals, and textbooks for their organizations than of the people who actually used them in their daily jobs. Facing an internet shakeup of its market, Thomson realized it needed to bridge that critical knowledge gap. The company began systematically scrutinizing its end users— in much the same way that Procter & Gamble tackles consumer research—as part of a new front-end customer strategy that would become the cornerstone of the firm’s transformation. In this article, Harrington, Thomson’s CEO, and Tjan, a consultant who advised him, describe how the company adopted a user-centric mind-set—initially in the Thomson Financial division and then throughout the organization. First came a redefinition of the division’s market, which was mapped not by type of purchaser but by eight end-user segments. That gave Thomson a clear view of the division’s real, addressable market and of corresponding opportunities. After conducting surveys and “day in the life” observations of users, Thomson charted their entire work flow, beginning with what they were doing three minutes before and after using a product, and saw where the organization could add value. Then, through cluster and conjoint analysis, the company determined how pain points and product preferences varied among the users. With that information, Thomson was able to identify three clusters of customers in one segment and develop three categories of offerings. Since beginning to implement this approach, Thomson has changed radically. Its revenue now comes mostly from digital, not print, products, and it generates twice the operating profit and four times the free cash flow it did 10 years ago. In a market that changes by the day, Thomson’s revenue is unusually predictable and profitable. Case Study: Hindustan Unilever Ltd. “Project Shakti” [10] By the late 1990’s, though the company had a vast reach and was the market leader, it was looking for the next big opportunity. The aim was to get to really small villages not reached by their distribution network. 70% of India’s population lives in rural areas. While the business rationale was clear, setting up a distribution channel to reach remote parts of India was less straightforward. Hence, HUL came up with an interesting solution: build a distribution system through a network of women micro-entrepreneurs to get the product directly to consumers. The solution also aimed to assist rural entrepreneurs to start businesses and improve living conditions in their regions. The business objective was to extend their direct reach into untapped markets and to build brands through local influencers. The social objective was to provide sustainable livelihood opportunities for underprivileged rural women. How was HUL able to successfully transform its distribution strategy? 1. Discovery of untapped potential – Even though HUL enjoyed a greater penetration in the rural market as compared to Nirma and ITC, its direct reach was restricted to 16 percent. 2. Understanding the objectives of target customers – The main issue in rural areas was income generation. The social side of Project Shakti was that it was aimed to create income-generating capabilities for underprivileged rural women. 3. Providing solutions that consumers value most - HUL offered a wide range of products to the SHGs, which were relevant to rural customers. HUL invested significantly in resources who work with the women on the field and provide them with on-the-job training and support. HUL provided the necessary training to these groups on the basics of enterprise management. For the SHG women, this translated into a much-needed, sustainable income contributing towards better living and prosperity. Women from SHGs became direct-to-home distributors in rural markets. 10
  11. 11. VI. Choosing Strategies for Change John P. Kotter and Leonard A. Schlesinger Executive Summary [11] The rapid rate of change in the world of management continues to escalate. New government regulations, new products, growth, increased competition, technological developments, and an evolving workforce compel organizations to undertake at least moderate change on a regular basis. Yet few major changes are greeted with open arms by employers and employees; they often result in protracted transitions, deadened morale, emotional upheaval, and the costly dedication of managerial time. Kotter and Schlesinger help calm the chaos by identifying four basic reasons why people resist change and offering various methods for overcoming resistance. Managers, the authors say, should recognize the most common reasons for resistance: a desire not to lose something of value, a misunderstanding of the change and its complications, a belief that the change does not make sense for the organization, and a low tolerance for change in general. Once they have diagnosed which form of resistance they are facing, managers can choose from an array of techniques for overcoming it: education and communication, participation and involvement, facilitation and support, negotiation and agreement, manipulation and co-optation, and both explicit and implicit coercion. According to the authors, successful organizational change efforts are characterized by the skillful application of a number of these approaches, with a sensitivity to their strengths and limitations and a realistic appraisal of the situation at hand. In addition, the authors found that successful strategic choices for change are both internally consistent and fit at least some key situational variables. Case Study: ICICI on change management [12] In May 1996, K.V. Kamath replaced Narayan Vaghul, CEO of ICICI. Kamath identified the main problem as the company's ignorance regarding the fine distinction of lending practices in newly opened sectors like infrastructure. Kamath introduced massive changes in the organizational structure and the emphasis of the organization changed - from a development bank mode to that of a market-driven financial conglomerate. Kamath decided to create new divisions to tap new markets and to introduce flexibility in the organization to increase its ability to respond to market changes. Necessitated because of the organization's new-found aim of becoming a financial powerhouse, the largescale changes caused enormous tension within the organization. The systems within the company soon were in a state of stress. Employees were finding the changes unacceptable as learning new skills and adapting to the process orientation was proving difficult. The changes also brought in a lot of confusion among the employees, with media reports frequently carrying quotes from disgruntled ICICI employees. ICICI conducted an employee behavioral pattern study to assess the various fears and apprehensions that employees typically went through during a merger. Based on their findings, ICICI established systems to deal with employee resistance. These include: 1. Employee communication 5. Performance management 2. Cultural integration 6. Training 3. Organization structuring 7. Employee relations 4. Recruitment & Compensation By 2000, ICICI emerged as the second largest financial institution in India with assets worth Rs 582 billion. 11
  12. 12. VII. Is Your Growth Strategy Flying Blind? Mehrdad Baghai, Sven Smit, and Patrick Viguerie Executive Summary [13] Despite an abundance of raw data, few organizations have figured out how to parse and analyze all that information to reveal the best opportunities for growth. Even fewer have attempted to structure and manage themselves to match the texture of the markets in which they play. But a fine-grained understanding of company performance and markets is critical, especially during an economic downturn, which calls for a nuanced approach to cutting costs and making long-term investments. Baghai, Smit, and Viguerie urge firms to target narrower market slices and to measure sources of growth— market momentum, mergers and acquisitions, and market share gains—in a more detailed way. When they reviewed growth patterns of global firms from 1999 to 2006, they found that companies can get a much more accurate picture of growth prospects by digging deeply into micromarkets (typically ranging from $50 million to $200 million in value) than by looking at the division-level performance numbers commonly used for measuring, organizing, and managing. The authors examine several companies—including Amazon and Ping An — that have benefitted from greater granularity. For instance, one large European manufacturer of personal-care products went beyond an aggregated view of performance and discovered that some of its higher-growth segments were lurking in the unit with the lowest overall growth rate. Another company, an integrated telecommunications service provider, retooled its marketing mix—making fewer roughly calculated media trade-offs (television versus direct mail versus radio) and instead selecting the right media within narrowly defined regions for specific lines of business. As a result, it boosted sales between 10% and 15% in several regions and increased average lifetime customer value by 15%. Case Study: Renault Duster in India [14] When Renault first entered India through a Joint Venture with Mahindra and Mahindra, it had placed on its maiden product offering – Logan in 2007. But the high price and its dated looks failed to please the Indian customers. The failure was of such a large scale, that it lead to the termination of the joint venture in 2010. Ironically, the Logan’s failure laid the foundation for the success of Renault Duster. After its break – up, Renault chose to go alone. Renault desperately needed an opportunity to be successful in India. It identified a gap in the SUV segment. There were SUVs costing Rs. 20 lakh and above manufactured by global players and those priced between Rs. 6 lakh to 10 lakh produced by Indian companies. The company launched the Duster priced between Rs. 8 lakh to 12 lakh in July 2012. The Duster took the Indian market by storm. It fuelled the segment of compact SUVs and grabbed a 23 percent market share within a year. The Duster was so successful that Renault had to triple production within months of its launch from 7 per hour to 20 per hour. The Duster today accounts for 86 percent of Renault India’s production, 81 percent of its sales and 100 percent of its exports. Renault Duster is successful because of the following three reasons: 1. It was able to identify a gap in the SUV segment. 2. The break – up eventually allowed Renault to focus on Duster and hence, it was able to invest resources in the areas which would yield higher profits and jettison low growth areas. 3. Renault was able to restructure its operations in India, which allowed them to almost triple their production. 12
  13. 13. VIII. Value-for-Money Strategies for Recessionary Times Peter J. Williamson and Ming Zeng Executive Summary [15] In tough economic times, some companies have outmaneuvered rivals to become market leaders through value-for-money strategies. That is, they have enabled recession-hit consumers to economize (do less and spend less), become more efficient (do the same for less), or become more effective (do more but spend no more). To implement such a strategy, argue this British professor and Chinese academic, companies must go beyond refining cost-cutting capabilities to develop expertise in cost innovation. That may not be good news for many U.S., European, and Japanese corporations, because multinationals from emerging markets, which have long experience with value-conscious customers, have already built cost-innovation capabilities that are unlocking mass markets in both developing—and developed—countries. Some, like battery maker BYD, have learned to sell high-tech products profitably at mass-market prices through a combination of lower labor costs and manufacturing innovations. Others, like drinks purveyor United Spirits, have dominated industries by blanketing sizable niches in their home markets with a full range of products or customized options. And still others, like appliance manufacturer Haier, have used lowprice offerings to turn small, unguarded niches into mass markets in developed countries. In response, the authors argue, Western companies should turn to developing countries for vital lessons in lowering the cost of building brands and developing and manufacturing products. They should enter into alliances with emerging giants to gain cost-innovation capabilities. And they should use their superior financial strength to beat emerging giants at their own game of growing mass markets in developing countries. Multinationals that fail to learn from emerging rivals are unlikely to weather the recession well—or stay competitive for very long. Case Study: Reva Electric [16] REVA first launched its first electric car in 2001 i.e. during the time of recession of early 2000s. The cars produced by REVA Electric Car Company (RECC) competed with Chevrolet Volt, the electric gasoline ethanol hybrid. REVA electric cars were much cheaper than Chevrolet Volt. As the recession intensified, sales of REVA car increased (specially in European countries). REVA, now Mahindra REVA, tries to offer a lot of varieties in the same product line. This forces the customers to purchase from them. Their strategy is basically to occupy a space in retail showrooms and shelving off the rivals. It is a niche today, but Chetan Maini, the founder of RECC feels that the potential is very large. Their target is the second car in a household. Last year, 40% or 4,00,000 cars of total number of cars sold in India were to serve the second car purpose for households. With the second car, the consumer does not need to ride 500 km a day taking huge luggage. The second car is fundamentally to serve daily routine things covering short distances of around 40-50 km per day. About 95% of the consumers drive less than 40 km per day. For this purpose, the consumer will consider cars that are easy to drive, easy to park, automatic and economical. For this kind of usage, Reva will save around Rs 4,000-Rs 5,000 a month, which would work out to around Rs 2 lakh over a period of five years plus no maintenance charges. 13
  14. 14. IX. Strategy as a Wicked Problem John C. Camillus Executive Summary [17] In today’s complex world, companies often find themselves facing confounding strategy problems. These issues are not just tough or persistent; they’re “wicked”—a label used by urban planners for problems that cannot be definitively resolved. Poverty and terrorism are classic examples. A wicked problem has innumerable causes, morphs constantly, and has no correct answer. It can be tamed, however, with the right approach. In this article, Camillus, a professor at the Katz Graduate School of Business, explains how executives can tell if they’re dealing with a wicked strategy problem. In a 15-year study involving 22 companies, he identified five key criteria. If a problem involves many stakeholders with conflicting priorities; if its roots are tangled; if it changes with every attempt to address it; if you’ve never faced it before; and if there’s no way to evaluate whether a remedy will work, chances are good that it’s wicked. According to the author, the need for faster growth is, in all likelihood, a wicked issue for Wal-Mart. Traditional linear processes—identifying the issue, gathering data, studying all the options, choosing one strategy—don’t work with wicked problems. They instead demand social processes that constantly engage stakeholders, explore related issues, reevaluate the problem’s definition, and reconsider the assumptions of stakeholders. A strong corporate identity is essential: It serves as a rudder that helps the enterprise navigate a sea of choices. Because it’s impossible to tell which options are appropriate, executives should stop analyzing them and start experimenting with actions. Eventually they will make progress by muddling through. Envisioning possible futures and identifying moves that will realize the one the company hopes for will uncover promising remedies. That’s how PPG Industries, a 100-year-old manufacturer, has successfully coped with its wicked strategy issues. Case Study: Walmart in India [18] As Walmart grew, so did the number of stakeholders. They all have their own interests. Not all stakeholders share Walmart’s goals which leads to problems in growth. In India, most of the cities have very high real estate prices, the only place where Walmart can set up such large scale formats is in the outskirts of the city. But a very small percent of Indians own car, thereby reducing down a huge percent of buyers who would like to flock to this huge discount retail shops. The most critical reasons for Indians to buy from a specific "kirana" store is the personal touch. The owner of the Kirana store generally knows every customer and has a personal touch with the customer. At the same time the owner of the kirana store goes a step ahead to please the customer. Though Walmart has its own way of customer service, it cannot beat the personal touch of the Indian marwaris who sell at the local "kirana stores". The whole idea behind Walmart business model is to buy the goods which one may require over a period of month and buy it in wholesale, without needing to go to kirana stores. But Indians mostly avoid eating anything which is stale for more than 2 days. And also are the one who are not comfortable with eating from canned food. Also, the low price image of Walmart hurts because it makes it difficult to make up – scale products. Until 2011, Walmart couldn’t operate in India directly because of the fact that foreign retail chain stores were not allowed in India. As Walmart is known for its low price image, it is difficult for them to raise prices as competitors will come into play. Walmart faces problems to whom solutions are hard to provide. Thus, Walmart has a hard time on capitalizing on growth opportunities in India. 14
  15. 15. X. Strategies for Learning from Failure Amy C. Edmondson Executive Summary [19] Many executives believe that all failure is bad (although it usually provides lessons) and that learning from it is pretty straightforward. The author, a professor at Harvard Business School, thinks both beliefs are misguided. In organizational life, she says, some failures are inevitable and some are even good. And successful learning from failure is not simple: It requires context-specific strategies. But first leaders must understand how the blame game gets in the way and work to create an organizational culture in which employees feel safe admitting or reporting on failure. Failures fall into three categories: preventable ones in predictable operations, which usually involve deviations from spec; unavoidable ones in complex systems, which may arise from unique combinations of needs, people, and problems; and intelligent ones at the frontier, where “good” failures occur quickly and on a small scale, providing the most valuable information. Strong leadership can build a learning culture—one in which failures large and small are consistently reported and deeply analyzed, and opportunities to experiment are proactively sought. Executives commonly and understandably worry that taking a sympathetic stance toward failure will create an “anything goes” work environment. They should instead recognize that failure is inevitable in today’s complex work organizations. Case Study: Tata Group – “The Best Failed Idea” [20] Don’t you think that these four words our a bit strange to your ears? I mean how can the words ‘Best’ and ‘Failed’ be related to an idea simultaneously. That’s what sets aside Ratan Tata from rest of the entrepreneurs. In 2011, Ratan Tata started an annual contest in Tata Group that will reward the best failed idea in the company. His aim was to foster frugal innovation in the company and this contest was a step towards that. It is also aimed at communicating the need to learn from failure. Even if the Nano proved disappointing, frugal innovation looks promising overall. Tata Motors has made small trucks that are replacing threewheelers. TCS has co-produced a cheap water filter, the Swach, using ingredients such as rice husks. By recognising failure and even rewarding it, the Ex - Chairman was keen to show that failures are likely in the pursuit of innovation. According to him, failure is a gold mine! The idea was to keep the company from avoiding risks, with a prize meant to communicate how important trying and failing can be. He has managed to leave an innovative spark that can ride out most failures and help keep the company relevant on the global stage. 15
  16. 16. 4. References 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Business Today – October 27, 2013 15. 16. 17. 18. 19. 20. 16