Strategic Management

 Answer 1

Introduction:
Michael Porter explained generic strategies , which be used to determine the direction of any
organization. He believed that a company can choose its course to sustain the competition.
“The generic strategies are approaches to outperforming competitors in the industry; in some
industries structure will mean that all firms can earn high returns, whereas in others, success
with one of the generic strategies may be necessary to just to obtain acceptable returns in an
absolute sense.” – Michael E Porter, 1980

Concepts and application:

Porter’s Business Strategies
Based on level of business, Michael porter recommended two generic competitive strategies
for outperforming other companies in the competitive space in a particular industry. The
strategies are generic as it can be any firm can take advantage of it and applicable to any
industry, it also does not matter the size of industry. Broadly the two strategies are
categorized as lower cost and differentiation strategies.

Lower Cost Strategy:

When any firm is leveraging a competition using low cost of products and services compared
to its competitors. This kind of strategy allows its competitors to design, produce market and
distribute products more skilfully compared to its competitors. Lower cost strategy can
further be classified into cost leadership or cost focus.
1) Cost Leadership:  When a firm aims to achieve maximum market-share compared to
competitors by making products at a minimal cost , so that it can reach mass of people
in broad market. Cost leadership installs aggressive planning of efficient facilities for
production, control over the overhead costs and other relevant costs. It restraints
marginal customer accounts and efficient reduction of costs in the areas of research
and development, advertising, sales force etc.  Being watchful in cost reduction, a cost
leader is often able to offer products at a lower price compared to its competitors and
still able to gather adequate profit.  This is the core of the strategy as the firm seeks to
win market share by engaging to cost-conscious or price-sensitive customers. E.g.,
Pen-manufacturer

Cost leadership can be achieved by following three ways:

Focus is on lowering unit cost of the product. Hence high volumes are produced through
economies of scale. Companies can take the cost advantages by increasing production, scale
of operation, size and output and thereby cost per unity normally decreases and fixed costs
are segregated across product or service departments.

Reduction of direct and indirect operating costs: For achieving the level of cost leader, the
company should keep minimum direct and indirect cost. This is achieved by offering high
volumes of standardized products, limiting customization and personalization of service, and
offering basic products without room for unnecessary extras that do not add value to the
overall quality of the product.
Control over supply to ensure low costs: company should manage the relationship suppliers
to track and maintain the minimum level of cost. By buying in bulk, giving quantity
discounts helps in reducing supply cost . Separate strategy should be formed with suppliers to
ensure that inventories are kept low.
2) Cost Focus: This is another type of low-cost strategy , where focus is laid on
narrowing market. Ie. A particular segment of market is targeted to market the
product. It could be a particular geographic market or set of customers. Here the
company decides to focus on niche products/services .
Here since the organisations mainly concentrate on internal processes. They usually have
considerable investment capital at their disposal, adequate logistics and low costs when it
comes to materials and labour.
Differentiation Strategies:
As the name suggest, this kind of strategy supports differentiating the product from its
competitors by incorporating special features of the products or services. Example of such
features includes free upgrades for the first year( for digital products) or it may include after
sales services.
Differentiation strategies can be segregated into differentiation and differentiation focus.
1) Differentiation:  This aims at the broader mass market, but unlike cost leadership, in
this strategy firm mainly markets the uniqueness of product and services in its
industry. The firm charges a premium due to the unique features. The cost is passed
onto consumer in the form of premium being charged. In such strategy , the firm
always chases for brand loyalty. Hence when brand loyalty is increased, buyer’s
reactiveness towards prices is reduced. Classic example of such strategy is iPhone
users. They are ready to pay premium prices for the unique features they receive from
the company .
2) Differentiation Focus:  Here the focus normally in on a particular market segment or
a buyer group. While marketing the products and services in the industry, the focus is
given to uniqueness of the product and services. Market is targeted so that profit can
be maximized.

For implementing such a strategy successfully, good research & development along with
innovation is required. The firm should have the ability to deliver high quality products.
Effective marketing is important, so that the market understands the benefits of your unique
product.

It’s very essential to be flexible and to be able to adapt quickly in a changing market, or there
is risk of the competition defeating the uniqueness. Focus of such an organisation is on the
outside world and has a creative approach.

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To choose the right strategy for any organization, it’s important to be aware of the
competencies and strengths of company. SWOT analysis is done for the business.

Conclusion:
As a strategic consultant, I would recommend Philipp Plein to implement hybrid strategy
which would involve differentiation , where the luxury clothing is targeted to higher class of
customer , who is willing to pay the price. Customers , who are Early adopters are not
sensitive to the price, they would like to wear something unique and different, hence they
should be targeted. As Philipp Plein is an international brand entering Indian market for the
first time, it should also it should be a cost leader. It should aim to capture maximum market
share. Being German company, capital to be invested in Indian market would be sufficient.

 Answer 2

Introduction:

In today’s global era, the competition is so fierce in the market that every
organization , be it small start-ups or bigger firms focusses on improving and change the
current dynamics. Organizations leverage different tools for this purpose. One of such
economic tools is ‘ PESTLE analysis’.
A PESTLE analysis is a tool used broadly for fact-finding exercise. It helps an
organization establish the external factors that could support decisions made inside the
organization. It helps organizations to plan better by understanding the impact of these
external factors can have on an organization. Analytical facts support in forming form
strategies to minimize the threats and maximize opportunities for the organization. 

Concepts and application:

Before setting up the campus INSEAD wanted answers for some of the questions such as:
 
o What is the political situation of India and what is its effect on the markets?
o What are the prevalent economic factors in India? 
o How is culture affecting the markets and what are its determinants?
o What are the technological inventions that are trending in India and what are other
future possibilities in this field?
o What are the current legislations that regulate the industry and whether that will be in
line with expectation from France organization working in India?
o What are the environmental concerns for the education industry? 
 

The output of PESTLE analysis is more impactful than just considering the market. It
is a framework represents one of the backbones of strategic management by not only defining
what a company should do but also accounting for an organization’s goals and the strategies
strung to them.
  
  Factors of PESTLE Analysis
  The significance of various factors may differ based on the kind of industry.
  
1. Political factors
 
Factors such as  trade restrictions and reform, tariffs, and political stability, tax policy,
environmental regulations are included during analysis. Analysing these factors help in
understanding the government influence on education industry. E.g., New tax reforms laid by
the government might impact the whole revenue-generating system of a company.
  
2. Economic factors
 
Economic factors such as  economic growth/decline, interest, exchange, inflation and wage
rates, minimum wage, working hours, unemployment (local and national), credit availability,
and cost of living. These factors are catalyst to an economical performance that directly
impacts a company and have echoing long term effect.
 E.g.: elevated inflation rate of any economy would affect the way companies price their
products and services. It can also impact consumer’s purchasing power and bring reform in
demand-supply model.
  
3. Social factors
  Social factors encompass population ,cultural norms and expectations, age
distribution, career attitudes, health consciousness, growth rates and safety. These factors are
crucial for companies to better plan their strategy including marketing analytics. E.g., There
is huge demand for vehicles in Indian market during the last quarter of the year, due to
marriage and the festive season. 
 These factors are particularly important for marketers as they target certain customers. Also,
these factors highlight the need of the local workforce and its enthusiasm to operate under
various circumstances.
 
Ref: https://www.analyticssteps.com/blogs/what-pestle-analysis

 
4. Technological factors
 
Technological factors include the innovations and developments in field of technology.  New
developments like IoT, AI, Machine Learning is influencing technology sector and it
essential for organization to follow the trend to sustain its position in the market. These
factors impact an organization’s operations
Evolution of infrastructure ,rate of technological change and government or institutional
research are also some of the factors included in PESTLE analysis. 

5. Legal factors
 Legal factors include changes to legislation impacting employment, access to materials,
resources ,quotas, imports/exports, and taxation. These may have influence internally as well
as externally. Business environment in the country is impacted by certain laws.
 Organizations retain some of their own set of rules and regulations by which an employee is
expected to abide by. Hence it is essential to take into account analysis of various legal angles
and then forms strategies.
 6. Environmental factors
  The effect of the surrounding environment and the influence of ecological aspects such as
environmental protection laws ,waste disposal laws, energy consumption regulation are
included in analysis. For organizations, Corporate Social Responsibility (CSR) is
compulsory.
  These factors might have more crucial impact on certain industries such as agriculture,
farming, tourism, etc. Global warming and the increased attention to reduced carbon has
compelled organization to switch to sustainable resources. 
  
 For conducting PESTLE analysis following steps should be involved:
 
o First step would be to identify the scope of the analysis. In this case, scope is clearly
given for setting up campus in India. Once the scope is clarified , various current and
future scenarios should be set up. These scenarios should be applicable to the areas of
the business world where INSEAD operates. 
o Forming an eligible team and assign responsibilities accordingly. Diverse team helps
in collecting content-rich data. 
o Identify appropriate sources of information.
o Gather and assemble the information. A suitable template should be created to record
the information. 
o Analysing the collected information is a significant step. 
o Issues should be classified and based on impact; bigger issues should be resolved.
o Identify the business-specific options to address the issues.
o Create a well-informing document for all the stakeholders
o Disseminate and discuss the findings with stakeholders and decision-makers
o Decide on the actions to be taken and trends that need to be monitored on an ongoing
basis
 
Uses of PESTLE Analysis

Ref: https://www.analyticssteps.com/blogs/what-pestle-analysis

 
Conclusion
  PESTLE is simple framework, it would help INSEAD to understand the various
anticipated threats as well helps in spotting an opportunity to capitalize on them. Politically
India is stable and has several economical norms, laws which supports foreign investments in
India. Technologically also we have best workforce and as per the stastical analysis,60% of
our infrastructure is supporting the latest trends which in turn can support the university to
deliver the content using latest technology. India has the most suitable weather conditions
compared to the world. There could be challenge to penetrate the villages of India, however
the positive attitude and ‘Teach India’ project delivers global education, multicultural and
diverse programs. This will be beneficial for INSEAD.
After thorough analysis of business using PESTLE , it would be recommended that
INSEAD should set up the campus in India.

 Answer 3 a
Introduction:
Turning around a struggling business to a thriving one can be a complex process,
involving several steps, methods, and strategies. Sometimes, it may take years to bring a
business back on its normalcy as several factors are involved, including management,
finances, marketing, operations, human resources, and many others

Concepts and application:

Turnaround Strategies are broadly required in following conditions:

 Declining in Market Share
 Falling Gross and Net Margins
 Increasing cost.
 Falling Revenue and /or profits.
 Declining performance measures
 Changing Structure(Industry, competition)
 Falling ROCE (Returning on capital employed)
It is important to the various causes of the failure/decline before turning around the
strategy. Rectification is incomplete without known the reasons of failure. Reasons for the
decline of a business can be broadly classified into two types: i.e., external, and internal
causes.
 Internal Causes
o Defects in Management
o Neglect of Key Tasks
o Failure to change
o Over expansion
o Poor integration
o Lack of resources
  External Causes
o Competitive forces
o Economic Change
o Political Change
o Changes in Demand
o Lifestyle changes
o Changes in Technology
o Consumer Confidence
o New Products

Once the complete analysis on causes/reasons of decline in business in known , focus can be
given to choose the turnaround strategy. Turn around strategies can be classified into
 Operational
The focus is on finding ways to improve the operation of the business and design to
halt the decline.
 Strategic
The focus is on regulating the strategic focus of the business in terms of its
Product/Market profile and halt the decline.
Some of the examples of effective Turnaround recovery strategies are
o Cost reduction strategies
o Asset reduction strategies
o Revenue increasing strategies
o Financial restructuring strategies
o Product/Market redefinition strategies
o Management and cultural change strategies.

 Cost efficiency Strategies:

This is normally implemented first as recovery strategy. They are easy to be
implemented, require less capital and their effects are also immediate. These include
reducing R&D, eliminating pay increases, reducing accounts receivable, stretching
accounts payable, cutting inventory, investment diversification and reducing
marketing activities.
 Asset Retrenchment Strategies:
This helps in company’s ability to generate cash flow.
 Focus on company’s core activities
Under this, companies identify market, customers and products that can potentially
generate high profits.
 Change in Leadership
Companies often replace incumbent CEO which in turn would result in a new senior
management team, which would enable company to focus on new strategies to lead
the turnaround.

Conclusion:
 The turnaround strategies that Ford Motors India can deploy is to increase the sales with
higher profit margin. Analysing the products with less margin and impact on covid situation
on sales will have to be studied . Products with less profit margin or low sales in market will
have to be removed. Company will have to develop new product pricing structure and relook
into the approach for promoting the product to increase the market share. Through the various
promotional campaign, Ford will have to make customers aware about the unique features of
the product and its advantages over competitive products. Ford will have to be very
aggressive in marketing their offers . This would in turn help to win more market share
against the competition.

 Answer 3 b
Introduction:
Joint Venture strategy is pursued to gain the financial benefits with pool of resources.
It helps in maximizing profits with minimal or no new investment. Apart from the legal
proceedings, most important factor in Joint venture is ‘Trust’ . Two different legal entities
from different companies will work together to accomplish shared goals for a lengthy period,
this would need thorough analysis to earn the trust. JV supports in accelerating business
growth , gain more productivity thereby additional profits can be achieved.

Concepts and application:

Companies often get into a joint venture to envisage peculiar assignment. Totally new
project with similar products or services can be considered in a joint venture or entirely new
firm with recognizable business activities can enter a joint venture.
Main advantages of Joint Ventures:
 Shared investment
This helps in reducing financial burden on each company.
 Shared Expenses
This helps in reduction of costs
 Technical expertise and know-how
Each party brings with them specialized expertise and knowledge
 New market penetration
Joint venture supports the companies in widening their product portfolio and market
size and help in obtaining easy access to the marketplace as relevant regulations and
logistics are taken care.
 Intellectual property gains
A large firm with better avenue to financing may contribute their working capital
strength to a joint venture with a firm that has only limited financing capabilities. In
turn the firm with limited financial capability and contribute with the technological
knowledge for the development of products or services.
 Synergy benefits
Financial synergy can lower the cost of capital. Operational synergy can increase
operational efficiency
  Enhanced credibility
Ideally it might take longer period for a young business to build market credibility and
a strong customer base. For such companies, forming a joint venture with a larger,
well-known brand can help them reinforce marketplace visibility and credibility more
swiftly.
 Barriers to competition
Collaboration between two companies helps in avoiding the competition and pricing
pressure and support in penetrating the marketplace.
 Improved economies of scale

Risks of Joint Ventures

Joint ventures can also create challenges:
o Objective of the venture will have to be clearly defined and communicated to
all the stakeholders at the beginning. Having Separate objectives may threaten
the success of the venture.
o Diversed management style and cultural differences between the two firms can
lead to poor integration and cooperation , which could be a threat to success of
the venture.
o There can be an obstacle between the two parties due to disproportionate
levels of competence, investment, or assets brought into the venture by the
different parties. Profit sharing should be clearly discussed and communicated
between the two companies entering the venture.

Conclusion:
It would be appropriate for Ford Motors to pursue the joint venture with Hyundai
Motors. This would help to increase the market share and maximize the profit faster. Range
of profit-making products will considerably expand. Also, Hyundai brings in the innovation
with larger customer base, this will give momentum and focus in growing the market share.
Both the companies together can bring in operational efficiency along with financial
efficiency. With this collaboration, barrier for penetrating the market will be avoided and
pricing pressure will reduce.