Business Strategy

Assignment

On

Grand Strategy
 STABILITY STRATEGY

1. Concentration:

A firm following this strategy focuses its resources on a single product, in a single
market, using one tested technology to ensure profitable growth. Companies adopt this
strategy as it is less risky and does not demand scarce additional resources.

Example 1: FedEx
Fredrick Smith, an entrepreneur identified the opportunity and established Federal
Express (FedEx) in 1973. Smith operated flights exclusively for cargo and offered home
delivery and pick-up services. The business model was a big hit and there was no
looking back for the company. Looking at the success of FedEx many other companies
imitated the model. Thus FedEx concentrated on the Courier industry in order to gain the
competitive advantage over other players in the market.
FedEx differentiates itself from other player based on its delivery process.

Example 2: Swarovoski Crystals

It provides crystal products to the higher end only.

Example 3: Rolls Royce

Rolls Royce follows the strategy of focusing on the single market. It manufactures
only luxurious car and caters to higher income class.

2. Market Development:

This process involves marketing existing products with little modification, to customers
in relates market areas. The organization employs different channels of distribution,
changes the content of advertising or the medium of promotion.

Example 1: HLL’s E-tailing Venture

Sangam Direct is a Hindustan Lever Limited initiative in Mumbai to provide
home delivery of various FMCG, food and grocery products to the customers directly.
The company boasts of a product range of 3500 products including those of its
competitors and unbranded products. The customer can order through phone – 55550000
or through email – sangamdirect.hll@unilever.com and the order are delivered in 24
hours. For availing free home delivery the minimum order size must be worth Rs 400 else
the customer has to pay Rs 20 as delivery charges.

Example 2: NIIT
NIIT, India’s leading information technology training institute is a good example
of a company followed the market development strategy. It started its operation in 1982
 when computer education was accessible only to engineers and other science graduates.
During 1982-1992, it focused on building awareness about computer careers. NIIT had
to change the mindset of the people to make them consider computers as a career option.
In 1992, it introduced the “Bhavishya Jyoti Scholarship” for students who secured high
marks in the entrance test for its course. NIIT also entered into alliances with foreign
universities, these enabled students to get admission into foreign universities fir degree
courses at the end of a minimum 2 years of any NIIT course after 12 years of schooling.

Example 3: Allen Solly brand to Women’s wear.

Allen Solly is a brand of Madura, a leading Indian apparel company. Madura
employed the Indian Market Research Bureau (IMRB) to conduct a market study on
clothing requirements of working women. The study revealed that while Indian women
loved ethnic clothes, they ware not comfortable to work in. The study indicated a
growing need for Western wear. The study also revealed that the western wear available
in the market was unsuitable for Indian women. This information motivated Madura to
extend its Allen Solly brand to women’s wear.

3. Product Development:

This process involves the modification of existing products or the creation of new items
in a related category. These products are marketed to current customers through
established channels.

Example 1: Nokia launches Nseries N80

Nokia’s latest addition to its Nseries family, the Nokia N80, weighing only 134
grams, Nokia N80 is the first quad band handset designed to work both on 3G and four
GSM bands. The convenient, in-built intuitive browsing and fast internet access makes it
possible to send and receive e-mails at WLAN speeds.
The Nokia N80 demonstrates the cutting-edge technological leadership of the
Nseries and offers an unparalleled experience to consumers. This compact, internet-
optimized and feature-rich device has raised the bar for mobile devices. Comprising the
functionality of a highly advanced converged mobile device, the Nokia N80 empowers
people to pursue professional goals and personal passions with equal fervor.

Example 2: Indica by TELCO

Development of Indica by TELCO is a good example of successful product
development. TELCO had emerged as a leading name in commercial vehicles, passenger
vehicles, constructions equipment, metal cutting and grinding machines, industrial
shutters, high quality steel, alloy castings and other related products. TELCO sought of
transform itself from truck manufacturer to an automobile integrator so in early 1990s,
TELCO’s chairman planned to develop a small car i.e. Indica.

Example 3: New Coke

In April 1985, Coca-Cola, the largest aerated beverage manufacturer in the world
launched a sweeter version of soft drink named “New Coke”. Coca-Cola’s decision to
 change Coke’s formulation was one of the most significant developments in the soft
drink industry during that time. The taste of New Coke was similar to that of Pepsi. The
main idea of launching New Coke was to substitute Pepsi.

GROWTH STRATEGY

1. Innovation:

Innovation involves the use of a new idea or method. A firm which brings out an
innovative product usually enjoys the ‘first mover’ advantage.
 Example 1: Process Innovation – Dell’s Direct Model
The direct model was strong differentiator for the company as its reduced
unnecessary distribution overheads that logged other PC major.
The direct model was based on direct selling, with no retail channel or reseller.
The telephone operator used to take the order from the customer and his requirements for
the system; sometimes he even helped the customer select a system that would meet his
requirement. Then the order was passed on to the manufacturing people. When the
system was assembled, the PC was delivered to the customer.
This enables the people at DELL to benefit from real-time input from customers
regarding products and services.

Example 2: Product Innovation – Gillette

In recent years, Gillette introduces more than 20 products annually. The
differentiated products include Sensor Excel and Mach 3. Product Innovation has
become an integral part of Gillette’s strategy. Gillette excelled in creativity and tried to
commercialize new product designs. It also tried to market the new products as fast as
possible to get the product design. As a result, 40% of the Gillette’s revenue comes from
products introduced in the past five years.

Example 3: Strategy Innovation – Wipro

At Wipro, innovation is used to provide added value to customers. Wipro has an
innovation team and employees who work on development of innovative projects are
rewarded. Projects are executed in three areas: Home networking, collaboration, and
knowledge management. The goal is to shape ideas into products that are viable and
marketable. Currently, Wipro has over 200 people working on innovative projects

2. Horizontal Integration:

If a firm grows through acquiring one or more similar business which is operating at the
same stage of production-marketing chain, then the firm is said to be following a strategy
of horizontal integration. With these acquisitions, the firm gets access to new markets
and eliminates competitors

Example 1: Global Green Company (GGC) acquired InterGarden Group

Thapar Group’s GGC acquired Belgium based InterGarden Group for € 50
million. The acquisition will give GGC a strong foothold in key European Market.
GGC supplies gherkins, jalapenos and other preserved foods to retail and other
food service to customer in more than 23 countries and about 30 cities in India.
Intergarden has processing factories in Belgium, Hungary, Turkey and India. The
company produces pickled products such as gherkins, silverskin, cherries, red peppers,
etc.
With this acquisition GGC has extended global footprints, giving themselves
better access to customer.
 Example 2: GAP Inc.
The GAP Inc. retail clothing corporation is a good example of a business that
practices horizontal integration. GAP Inc. controls three distinct companies, Banana
Republic, Old Navy, and the GAP brand itself. Each company has stores that market
clothes tailored to appeal the needs of a different group. Banana Republic sells more
expensive clothes with a more "upscale" image, the GAP sells "moderately" priced
clothes that appeal to middle-aged men and women, and Old Navy sells "inexpensive"
clothes geared towards children and teenagers. By using these three different companies,
GAP Inc. has been very successful at controlling a large segment of the retail clothing
industry.

Example 3: Bank of Madura – ICICI Bank

The acquisition of the Bank of Madura (BOM) by ICICI bank is an example of
the horizontal integration. With this acquisition ICICI bank has become one of the largest
private sector banks in India and has consolidated its presence in South India.

3. Vertical Integrations:

This type of integration involves the acquisition of suppliers of inputs or the buyers of the
output.

Example 1: Apollo Health Street (AHS) Pvt. Ltd. Acquires Armanti Financial
Services (AFS)
AHS, the healthcare services company of Apollo group has acquired US based
company AFS, working in hospital billing and receivables management areas.
The acquisition would promise outstanding growth and redefine the market space.
Post acquisition the company expected to achieve $45 million in 12 months and $100
million in next 18 months

Example 2: Chirag Din

Chirag Din is one of the leading brands of the country. It has its own
manufacturing unit and it sells the apparels through its own outlet.

Example 3: Disney
Disney owns companies mainly in the exhibition sector with TV channels such as
Disney Channel and ABC. It is a media institution owns companies in only one sector of
the industry (production, distribution or exhibition).

4. Diversification:

Diversification is the process of entering into different industries either to exploit

untapped potential or to minimize the risk of changing business trends.
 Example 1: Britannia Industries Limited (BIL)
As part of its strategy to reduce its dependence on biscuits, BIL sought to
diversify its product portfolio. BIL saw an opportunity in the dairy segment as it had
only one large player, Amul. In 1997, BIL entered the dairy segment with cheese and
milk powder or dairy whiteners. By 2000, BIL captured about 35% of market share of
cheese market and 20% in the dairy whitener segment. It launched butter in 1998, tetra
packs in 1998 and ghee in 2000. The company relaunched its entire dairy business in late
April 2000 by bringing it under the ‘Milkman’ name.

Example 2: Piramal Enterprises

As a part of its strategy, Piramal Enterprises sought to diversify its product
portfolio. Piramal Enterprises saw an opportunity in retail sector as it was largely driven
by un-organized market. In September 1999, Piramal Enterprises launched India’s first
shopping mall ‘Crossroads’ in Mumbai. Apart from this they also launched in-house
retail store Pyramid and Truemart.

Example 3: ITC
ITC has diversified into a completely unrelated industry such as food, apparels.

RETRENCHMENT

1. Turnaround:

A turnaround occurs when “a firm preserves through an existence – threatening

performance decline; and the threat with a combination of strategies, systems, skills and
capabilities; and achieves sustainable performance recovery. The obverse of
performance recovery is failure and eventual death.”

Example 1: Turning Around IBM

IBM’s decline started in the late 1980s. During the period 1986-1992, IBM’s
overall market share in the IT industry in US fell by 37%, while its global market share
fell by 30%. In 1993, it reported a record net loss of $8.1 billion.
 IBM’s decline can be attributed more to R-extinction that to K-extinction factors.
The company had 24 product units functioning independently, even though they were a
part of IBM
Louis Gerstner took over as the CEO of the company from John Akers and turned
the company around. He brought about a radical change in the work culture of IBM. In
1993, he reduced the workforce by 35000 and under took cost cutting initiatives. He also
reversed the decision of Akers to split IBM into 11 entities. IBM also shifted from
product-centric to customer-centric in order to provide complete solution to its client.
In 1994, Gerstner made effort to improve reporting procedures across different
units of the firm. He started focusing on specific problems related to individual units.
The outcome of Gerstner efforts were seen after eight years in 2001. In that year,
the company reported a net income of $7.7 billion. During the period 1993-2001, the
share price of IBM shot up by nearly 800%.

Example 2: Turning Around Chrysler

Chrysler Corporation’s decline started in the early 1970s. The decline can be
attributed to both internal and external factors. The top management lacked an
understanding of the strategic direction of the company and the dynamics of the industry
in which the firm was operating.
Iacocca joined the company in 1978; it was only 1983 that Chrysler announced
that it would repay the entire $1.5 billion government backed loan by the end of year
1983. Thus there was a gap of about 5 years between the time Iacocca joined the
company and the official announcement of the repayment of the loan amount.
Over a period of 3 years, Iacocca fires 33 of 35 vice presidents and in 1979-80
fired 15500 workers, saving $500 million in annual cost. Iacocca visited every single
plant, conducted sessions with plant supervisors and spoke directly to workers;