Competitive Strategy in a Digital Age

Course Notes for PGDM – Set 1

by
Prof CB Mohan
 Competitive Strategy in a Digital Age
Session Schedule
Table 3. Session Wise Details
Session No-1
Session Title Macro Environment and Industry dynamics
Reading Material Chapter 1 – Introduction to Strategy, Chapter 2 – Macro Environmental Analysis and Chapter 3 – Industry and Sector Analysis - Exploring Strategy by Johnson and Scholes
- The Five Competitive Forces that Shape Strategy, M E Porter, R0801E-PDF-ENG
Additional Reading
- https://hbr.org/video/3590615226001/the-explainer-porters-five-forces
Case Title Case 1: HBR Case Study - Mahindra Electric Mobility Limited: The Electric Vehicles Dilemma - Product #: W18697-PDF-ENG
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-2
Session Title Leadership and Strategy, Global Market Environment
- HBR Article – What VUCA Really Means for You by Nate Bennett & G James Lemoine
Reading Material - HBR Article – 4 Ways to Improve Your Strategic Thinking Skills by Nina Bowman

Additional Reading Sun Tzu’s Art of War

Case Title Case 2: JCB Construction Equipment: Made in India for the World by Anupama Prashar
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-3
Session Title Culture and Strategy, Global Leadership
Reading Material Chapter 5 and Chapter 6 - The International Manager by Frank Garten
-https://hbr.org/video/5476393165001/how-cultures-across-the-world-approach-leadership by Erin Meyer
Additional Reading - Differences and the CAGE Framework by Pankaj Ghemawat

Case Title
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-4
Session Title Internal Assessment, Resources and Capabilities
Chapter 4 - Resources and Capabilities - Exploring Strategy by Johnson and Scholes
Reading Material
Chapter 4 – Internal Assessment – Strategic Management by Fred Davis
Additional Reading Case 3: London Business School Case Study - The Rise and Fall of Nokia by Lisa Duke and Julian Birkinshaw
Case Title Case 4: HBR Case Study - The Rise and Fall of Nokia by Juan Alcacer and Tarun Khanna
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
 Competitive Strategy in a Digital Age
Session Schedule
Table 3. Session Wise Details
Session No-5
Session Title Stakeholders and Governance
Reading Material Chapter 5 - Stakeholders and Governance - Exploring Strategy by Johnson and Scholes
- Case 5: Nissan Motors: Corporate Governance Failure by Nisha Kohli and Ajai Gaur
Additional Reading
- Watch Web Series - Dirty Money – The Volkswagen emission scandal
Case Title Case 6: ICICI Bank: Restoring Faith in Corporate Governance by Arpita Agnihotri and Saurabh Bhattacharya
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-6
Session Title The Strategic Choice – Corporate Level Strategy – Integration and Diversification
Reading Material Chapter 8 – Corporate Strategy- Exploring Strategy by Johnson and Scholes
Additional Reading
Case Title Case 7: Honda (A), Tatum Christiansen and Richard T Pascale, HBR, 9-384-049, March 2011
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-7
Session Title Inorganic growth – Mergers and Acquisitions
Reading Material Chapter 3, M E Porter Competitive Advantage
Additional Reading
Case Title Case 8: Toyota Tsusho Corporation Acquiring the French CFAO to Penetrate African Markets
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-8
Session Title Business Level Strategies – Generic Strategies
Reading Material Chapter 7 – Business Level Strategy- Exploring Strategy by Johnson and Scholes
Additional Reading
Case Title Case 9: AirAsia: Flying Low Cost with High Hopes by Stephen Ko and Claudia H. L. Woo; Product #: HKU833-PDF-ENG
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-9
Session Title International Market Entry Strategies
Reading Material Chapter 8 – International Strategy- Exploring Strategy by Johnson and Scholes
Additional Reading
Case Title Case 10: Cycles Devinci Develop an Asia-Pacific Internationalization Strategy
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
 Competitive Strategy in a Digital Age
Session Schedule
Table 3. Session Wise Details
Session No-10
Session Title Strategy Development
Reading Material Chapter 13 - Strategy Development Process - Exploring Strategy by Johnson and Scholes
- Managing Yourself: Zoom In, Zoom Out by Rosabeth Moss Kanter
Additional Reading - Business Model Canvas Digital Transformation Visual by Benjamin Mueller
- Case 11: The National Hockey League (NHL) by Eric Brunelle, Francois Normandin, Jeremie Scraire-Laframboise
Case Title Case 12: Sense Time Group Limited: Business Model and Expansion by Howard Pong Yuen Lam, Hugh Thomas, Keith Chi-ho Wong
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-11
Session Title Implementing Strategies; Organization Structure and Strategy
Chapter 7 – Implementing Strategies – Strategic Management by Fred David
Reading Material
Chapter 14 – Organizing and Strategy - Exploring Strategy by Johnson and Scholes
- How to Move from Strategy to Execution by Tomas Chamorro-Premuzic and Darko Lovric
Additional Reading - Mckinsey’s 7S Framework (refer - https://whatfix.com/blog/mckinsey-7s-model/)
- Case 13: Howard Schultz; Building Starbucks Community, Bill George, Andrew McLean, HBR, 9-406-127, April 2007
Case Title Case 14: NTCC Case Study - Chinese Telecommunications Giant Huawei - Strategies to Success
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-12
Session Title Strategy and Innovation
Reading Material Chapter 10 – Entrepreneurship and Innovation - Exploring Strategy by Johnson and Scholes
Additional Reading The Overlooked Key to a Successful Scale-Up Innovation and Leadership Magazine Article Jeffrey Rayport, Davide Sola, Martin Kupp
Case Title Case 15: HealthCo by Jim Ellis and Imogen Mansfield (Health care and treatment, Start-ups, Entrepreneurship)
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
Session No-13
Session Title Strategic Tools and Concepts
Reading Material Chapter 6 – Get the Strategic Sequence Right and Chapter 8 – Build Execution into Strategy - Blue Ocean Strategy by W Chan Kim and Renee Mauborgne – HBS Press
- https://hbr.org/video/6089366740001/the-explainer-blue-ocean-strategy
Additional Reading
Case 16: Zerodha: Sustaining a Leadership Position in India by Vipul Kumar Singh and Sandeep Puri
Case Title Case 17: How to Implement Blue Ocean Strategy by W. Chan Kim, Renee Mauborgne, Katrina Ling (Product #: BOS014-PDF-ENG)
Pedagogy Lecture/ Discussion/ Group Presentation/ Case Study and Analysis
 Competitive Strategy in a Digital Age
Participant Guidelines

 Presentation Guidelines
 Be ready with your presentation (ppt) including your line of argument.
 This should be sent to the Junior Faculty a day in advance.
 Any group will be called to present. Even if you have already presented, you may be called again
 Entire class needs to be prepared for each of the case studies
 Concepts of strategy would be focal point of the presentations and discussions.
 Strictly time the group’s presentations to 7-10 minutes (4-5 slides, maximum)
 Give a very brief overview of the case facts, Dwell down into analysis, concepts and takeaways
 Please load all your presentation files into the system ahead of the commencement of the class
 Remember – The presenter is more important than the presentation

 Participation Guidelines
 Class participation grades will be based on your contribution with respect to the case discussions
 Class Participation grades will be based on the quality of your presentation and participation
 Please use same seating (as groups) throughout the term, with name boards clearly exhibited
 Competitive Strategy in a Digital Age

Macro Environment and Industry dynamics

 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

 Introduction to Strategic Management

 Definitions of Strategic Management
 Strategic Management – History and Origin
 Strategy Pyramid
 Vision and Mission
 Three Levels of Strategy
 Operational and Strategic Management
 Strategic Management Process
 Strategic Positioning
 Strategic Thinking
 The Environment
 PESTEL Framework
 Porter’s Five Forces
 VUCA
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Strategy Definitions

 Strategy
 Strategy comes from Greek word “Strategos” which means a plan to compete with enemy (in army).
 Strategy means that a plan of action designed to achieve a long-term overall goals.
 We can say that it a game plan of any organization to gain competitive advantage on a long-term basis

 Strategic Management
 Is the set of decisions and actions resulting in the formulation and implementation of plans designed to
achieve a company’s objectives – Pearce and Robinson
 Is the process of managing the pursuit of organizational goals while managing the relationship of the
organization to its environment - James M. Higgins
 Strategic management includes understanding the strategic position of an organization, making strategic
choices for the future and turning strategy into action – Johnson and Scholes
 Strategic management is a process of formulating, implementing and evaluating cross-functional
decisions that enable an organization to achieve its objective – Fred R David
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

 Strategy - History and Origin

 Greek word – Strategos or Strategia
 Its origins can be traced back to Sun Tzu’s The Art of War from 500 BC
 According to James’ 1810 Military Dictionary
 It differs from tactics, which are immediate measures in face of an enemy.
 Strategy concerns something “done out of sight of an enemy.”

 Strategic Planning and Strategic Management in Business

 Igor Ansoff – Pioneer of Strategic Management
 Started by James Mckinsy - basic financial planning and budgeting
 Long Term Planning initially was five-year financial planning or budgeting
 Peter Drucker – Introduced Concept of Strategic Planning
 George Steiner brought the focus on to long term corporate planning. .
 GE introduced the concept of Strategic Business Units (SBUs).
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Dimensions of Strategic Management

Require Top Management Decision

Requires Large amount of Firm's

Resources

Affects Firms Long Term Prosperity

Future Oriented

Have multi-functional multi

business consequences

Firm’s External Environment

 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics
The Strategy Pyramid

Mission Purpose of existence

Aspire Vision Where are we going

Values What do we stand for

Objectives
Achieve What do we need to achieve

Strategies How do we get to get there

Action Plans
Who does what and by when
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics
Three Levels of Strategy

Corporate
Corporate level

Business level
Business 1 Business 2 Business 3

Functional level Sales and

HR R&D
Marketing
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Operational and Strategic Management

Description Strategic Operation

Focus Mostly External Mostly Internal
Time horizon Long Term, Future Oriented Short Term, Day to Day
Change Transformational Incremental
Resources High Deployment Low Deployment
Level Top and Senior Management Junior Management
Growth and profitability High Impact Low Impact
Process type Complex and more Conceptual Simple, Procedural
Organization Engagement Multi-functional Specific Area
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Operational and Strategic Management

What type of decisions are these - operational or strategic ?

 Nokia earlier decided not to use Android but continue with Sembian OS
 Company decides to outsource payroll
 A company decides to invest in office equipment
 Commercial vehicle manufacturer enters passenger car market
 Company saves substantially with its continuous improvement projects
 CEO rewards Quality Circles for their exemplary performance
 HR Head advises CEO on the need to acquire skills in a specific technology
 HR Head and Finance Head decide to outsources payroll
 Marketing Head decides to enter new geography
 Auto supplier decides to localize certain components based on recent government policy
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Strategic Management Process

Strategic Strategy Strategy Strategy

Intent Formulation Implementation Evaluation

Do

Plan PDCA Check

Act
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Strategic Positioning

 What is Strategic positioning

 It is is concerned with the way in which a business as a whole distinguishes itself in a valuable way from
its competitors and delivers value to specific customer segments (Wickham, 2001: 230)
 It is is concerned with the impact on strategy of the external environment, internal resources and
competences, and the expectations and influence of stakeholders. Together, a consideration of the
environment, strategic capability, the expectations and the purposes within the cultural and political
framework of the organization provides a basis for understanding the strategic position of an organization
(Johnson and Scholes, 2005)

 Steps in Strategic Positioning

 Analyze macro-environment of organizations in terms of PESTEL factors.
 Identify key drivers in this macro-environment and use these key drivers to construct alternative
scenarios with regard to environmental change.
 Use five forces analysis in order to define the attractiveness of industries and sectors for investment and
to identify their potential for change
 Identify strategic groups, market segments, and critical success factors, and use them in order to recognize
strategic gaps and opportunities in the market
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics
Four ways to improve your strategic thinking skills

Know: Observe and seek trends Speak: Sound strategic

 Ask strategic questions  Consider opposing ideas
 Solid understanding of the current problem
 Prioritize and sequence thoughts
 Explore and synthesize the data trends
 Question your assumptions
 Share your findings across the network
 Engage in higher level of conversation
Think: Ask the tough question • Act: Embrace conflict
 Consider Big Picture • Formal training
 Explore different possibilities
• Urgent – Important matrix
 Consider Diverse Perspectives
 Possible Potential outcomes

HBR Case Article – 4 ways to improve your strategic thinking skills by Nina Bowman
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

The Environment

Customer

Supplier
Employee

Company

Society Competitor

Government
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Layers of Business Environment

Company

Competitors

Industry or
Sector

Environment
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

PESTEL Factors

Economic

Legal Political
International
Business

Environ Technological
mental
Social
(Cultural)
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

P E S T E L
• Government • Economic • Culture • Level of • Environmental • Consumer
Policy Growth • Population Innovation Policies Protection Laws
• Political Stability • Exchange Rates Growth Rate • Technology • Weather • Antitrust Laws
• Corruption • Interest Rate • Age Distribution Incentives • Climate • Copyright and
• Foreign Trade • Inflation Rate • Career Attitude • Automation • Climate Change Patent Laws
Policy • Disposable • Safety Emphasis • R&D Activity • Pressure from • Discrimination
• Tax Policy Income • Health • Technology NGOs Laws
• Labour Law • Unemployment Consciousness Awareness • Health and
• Trade Rate • Lifestyle • Infrastructure Safety Laws
Restrictions Attitude
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Porter’s Five Forces Model

Barriers
to Entry

Bargaining Industry Bargaining

Power of Competitors/ Power of
Suppliers Rivalry Buyers

Threat of
Substitutes
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics
Porter’s Five Forces Model
Barriers to Entry
- Economies of Scale
- Product Differentiation
- Capital Requirements - Customer Switching Costs
- Access to Distribution Channels
- Government Policy

Bargaining Power of Suppliers Bargaining Power of Buyers

Competitive Rivalry
- Suppliers’ products have few substitutes - Buyer has alternative suppliers
- Intensity of Rivalry - Supplier is a subcontractor of buyer
- Supplier product is an important input to buyer
- Key Capabilities of - Buyer has design ownership
- Suppliers’ products are differentiated Competitor
- Suppliers’ products have high switching costs - Buyer can easily switch suppliers

Threat of Substitutes
- Products with similar function limit the prices firms can charge
- Price - value equation of substitute products
- Disruptive innovation
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

VUCA

Increasing rate of
Volatility change

Less clarity Uncertainty

about the future

Multiple
Complexity decision factors

There may be no
“right” answer Ambiguity

VUCA – An acronym originated by a US Army Military

College to indicate new challenges faced by leaders
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Volatile Uncertain

 The situation is understandable but not  Understanding of Impact exists

predictable  Information is not readily available
 Nature, Speed, Volume and Magnitude of  Lack of Ability to Predict
the change are great

 Counter Volatility With Vision  Meet Uncertainty With Understanding

Complex Ambiguous

 many different, interconnected factors  Lack of clarity or awareness about

come into play situations
 potential to cause chaos and confusion

 React to Complexity With Clarity  Fight Ambiguity With Agility

 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics

Mahindra Electric Mobility Limited: The Electric Vehicles Dilemma

 Electric Vehicles in India

 Indian government wants to shift 30 per cent of the country’s transport fleet to electric by 2030
 The spike in oil prices following the United States’ move to impose sanctions on Iran in May 2018 had given a new momentum
to India’s ambitious EV program
 National Electric Mobility Mission Plan initiated a scheme called Faster Adoption and Manufacturing of Hybrid and Electric
Vehicles (FAME)
 Indian and Global Auto Firm are finding Various fiscal (tax holidays) and non-fiscal lucrative
 Mahindra Electric Mobility Limited (MEM) was the pioneer of EV technology in India

 MEM Vision
 There was a perfect fit between MEM’s vision and the Indian government’s EV initiative
 MEM - part of the Mahindra Group conglomerate; Automobiles, IT, Financial Services and Hospitality
 Mahindra’s EV initiative began in 2010, when it acquired majority stake in Reva Electric Car Company
 Mahindra had planned to cumulatively invest 35–40 billion in MEM’s EV business
 In 2018, MEM joined hands with LG Chem Limited to develop lithium-ion batteries for its EVs
 MEM plans to drive and lead the EV market in India; also to act as a supplier of components
 It was expected that by 2030, as many as 40 per cent of new PVs to be sold in the local market would be EVs.
 Nearly 70 per cent of the cost of an EV was contributed by the battery
 Competitive Strategy in a Digital Age
Macro Environment and Industry dynamics
Mahindra Electric Mobility Limited: The Electric Vehicles Dilemma

 EV Opportunities in India
 EESL had floated a tender for 10,000 basic electric sedans in August 2017; Tata Motors had cornered 60% of the tender
 In May 2018 the government proposed setting up EV charging stations every 3 km
 Competitors in The Indian Electric Vehicles Market – Tata Motors, Maruti Suzuki, Hyundai Motors and BYD Auto
 India was known as a small-car market; however, the country was witnessing an SUV rush
 By showing a preference for SUVs, Indian consumers were behaving like their counterparts elsewhere in the world
 The thrust of SUVs had led companies to provide hybrid-engine option

 Concerns
 Despite the government’s heavy push, experts felt that electric road transportation was yet to become viable in India due to
inadequate infrastructure (especially charging stations)
 There was concern as to how to electrify small cars and make them affordable
 Ecosystem to manufacture the battery-management systems, power electronics and lithium-ion batteries required for EVs
was not yet available in India
 It was believed that in the future, India would have to depend on China for battery imports
 For a power-deficit nation like India, there would be challenges in ensuring adequate supplies needed to run EV

 Way Forward
 In its endeavour to shift 30 per cent of the country’s transport fleet to electric by 2030, the Indian government had initiated
plans to provide many incentives to public and private enterprises as well as Indian consumers.
 There was still a lack of clarity regarding the various macro- and microenvironmental factors that had to be addressed to
make the EV dream a reality in India.
Competitive Strategy in a Digital Age

Global Market Environment

Leadership and Strategy
 Competitive Strategy in a Digital Age
Global Market Environment

 Global Market Environment

 Globalization
 Need for Globalization
 Global GDP
 Ansoff’s Growth Matrix
 International Trade
 Barriers to Trade
 Tariff and Non-tariff barriers
 Rostow’s Model of Economic Development
 International Bodies – WB, IMF and WTO
 Currency Factors in International Business
 Porter’s Diamond
 Leadership and Strategy
 Leadership Definitions
 Leadership Theories and Styles
 Sun Tzu’s Art of War
 Competitive Strategy in a Digital Age
Global Market Environment

 Globalization
 World is a Global village and interdependence between countries manifolds
 Leads to free movement of goods, capital, services, people, technology and information

 International Business
 Marketing of Goods and Services across national frontiers
 International Business - Plan, Price, Promote and direct the flow of a company’s goods and services to
consumers or users in more than one nation for a profit
 Seeking its profit impartially around the world, on a planned and systematic basis

 Need for International Business – Why go international ?

 Growth, Profit Motive, Spin-Off Benefits
 Competition, Domestic Market Constraint, Monopoly Power
 Government Policies, Strategic Vision

 Proactive Stimuli - Profit advantage, Unique products, Technological advantages, Exclusive information,
Economies of scale (or scope), Market size

 Reactive Stimuli - Competitive pressures, Overproduction, Stable or declining domestic sales, Excess capacity,
Saturated domestic markets, Proximity to customers and ports
 Competitive Strategy in a Digital Age
Global Market Environment

US$ 100 Trillion

Global GDP 2022

https://www.visualcapitalist.com/100-trillion-global-economy/
 Competitive Strategy in a Digital Age
Global Market Environment
Ansoff Growth Matrix

 Market Development  Diversification

 Domestic Market  Concentric or Conglomerate
 International Market  High Capex
Markets

 Emerging Market
New

 Market Penetration  Product Development

 Cost Leadership  Economies of Scope
 Economies of Scale  Variants of existing product
Existing
Markets

 Red Ocean  Horizontal Integration

 Vertical Integration

Existing Products New Products

 Competitive Strategy in a Digital Age
Global Market Environment

Driving and Restraining Forces

 Driving Forces
 Liberalization, MNCs
 Technology, Internet and Communication revolution
 Cost reduction pressures, Competition
 Growth, Rising aspirations

 Restraining Forces
 Government policy and control
 Social and Political Opposition
 Management Myopia
 Organizational Culture
 Competitive Strategy in a Digital Age
Global Market Environment

 International Trade

 Balance of trade is the difference in the value between how much a country imports and how
much it exports.
 When a country exports more than it imports, it has a trade surplus
 When a country imports more than it exports, it has a trade deficit
 A country can have an unfavorable balance of trade with one country and a favorable
balance with another.

 Global competition often leads to trade disputes between countries. At the heart of most
trade disputes is whether there should be limits on trade
 Protectionism is the practice of putting limits on foreign trade to protect businesses at home

 Benefits of Free Trade

 No limit on trade, Open Market
 Creates new job opportunities
 Customers get Choice
 Global competition brings more Efficiency
 Promotes cultural cooperation
 Improves standard of living
 Competitive Strategy in a Digital Age
Global Market Environment

 Barriers to Trade

 Why are trade barriers imposed?

 Protect domestic industries from foreign goods.
 Promote new industries and R&D activities
 Maintain favorable balance of payment, by restricting import
 Conserve foreign exchange reserves of the country by restricting imports
 Protect national economy from dumping by other countries
 Mobilize additional revenue by imposing heavy duties on imports.
 Counteract trade barriers imposed by other countries.
 Encourage domestic production in the domestic market

 Type of barriers
 Tariff Barriers
 Levy collected on goods when they enter a domestic tariff area (DTA) through customs.
 Tariff refers to the duties imposed on internationally traded commodities
 Non-tariff Barriers
 Do not affect the price of imported goods but only the quantity (supply) of imports
 Competitive Strategy in a Digital Age
Global Market Environment

Tariff and Non-Tariff Barriers

 Who Collects Tariffs

 In simplest terms, a tariff is a tax
 It adds to the cost borne by consumers of imported goods
 Tariffs are paid to the customs authority of the country imposing the tariff
 In 2018, USA introduced billions of dollars in new tariffs on Chinese imports

 Common Types of Tariffs

 Ad valorem (according to value) tariffs
 Countervailing
 Anti dumping
 Specific tariffs

 Non-Tariff Barriers
 Licenses
 Import quotas
 Voluntary restraints
 Local content requirements
 Embargoes or Sanctions
 Competitive Strategy in a Digital Age
Global Market Environment

Rostow’s Stages of Economic Development

Mass
Consumption
Drive to
Maturity
Take-Off

Preconditions
for take-off
Traditional
Society

Investment in Exploitation of
Commercial Development of
Limited Manufacturing comparative
exploitation of Manufacturing
Technology exceeds 10 percent advantage in
agriculture Sector
of national income international trade

37
 Competitive Strategy in a Digital Age
Global Market Environment
International Bodies - IMF and World Bank

Basis For
IMF (International Monetary Fund) World Bank
Comparison
Purpose Maintain global monetary system Finance and advice the developing nations and make
them economically developed

Focus on Economic Stability Economic Growth

Size 2300 staff members 7000 staff members
Organizational It is a single organization with four It has two major institutions, namely International
Structure credit lines. Bank for Reconstruction and Development (IBRD)
and the International Development Association (IDA).

Membership 188 countries IBRD - 188 countries

IDA - 172 countries
Operations Provides assistance Facilitates lending
Objective To deal with all the issues related to the To lessen poverty and promote the long term
financial sector and macroeconomics. development of the economy.
 Competitive Strategy in a Digital Age
Global Market Environment

 World Trade Organization (WTO)

 Basic Functions
 Organization for trade opening
 Forum for governments to negotiate trade agreements
 Place for governments to settle trade disputes
 Place where member governments try to sort out the trade problems, they face with each other
 Earlier negotiations under the General Agreement on Tariffs and Trade (GATT)
 Host to new negotiations, under the ‘Doha Development Agenda’ launched in 2001

 WTO Objectives
 Facilitate Trade negotiations
 Implement and Monitor agreements (entered into during negotiations)
 Settle Disputes
 Build Trade Capacity
 Outreach

 Trade Alliances and Regional Cooperation

 To reduce limits on trade more countries are forming trade alliances with each other
 In a trade alliance, several countries merge their economies into one huge market
 Some of the major trade alliances in the world today – NAFTA, EU and ASEAN
 Competitive Strategy in a Digital Age
Global Market Environment
Currency Factors – in International Business

 What is PPP (Purchasing Power Parity)?

 A macroeconomic analysis metric to compare economic productivity and standards of living between countries
 An economic theory that compares different countries' currencies through a "basket of goods" approach
 Two currencies are said to at par when a basket of goods is priced the same in both countries, taking into
account, the exchange rates.
 Allows economists to compare economic productivity and standards of living between countries

 How is PPP calculated?

 Suppose by using INR 75, we can purchase one kilogram of orange, then the purchasing power of Indian
Rupees can be expressed as INR 75 = 1 kg orange
 Similarly for purchasing one kg orange, we have to pay one US dollar, then the purchasing power of dollar can
be expressed as 1 USD = 1 kg orange
 Now it is possible to state the exchange rates in terms of the value of orange – INR 75 = 1kg orange = 1 USD
 This expression is based on the parity of purchasing power of the two currencies
 Competitive Strategy in a Digital Age
Global Market Environment
Strategies to counter foreign exchange fluctuation

 Ways to manage exchange rate fluctuation

 Establish an agreement – lay out the terms of exchange rate fluctuation in the agreement with customer or
supplier
 Set a base line rate – Set upper and lower limit within which exchange rate can fluctuate. When exchange rate
goes beyond this limit, adjust prices accordingly
 Understand exposure of Customer or Supplier – Ensure that this is taken care in the agreement
 Time for new supplier – Review the need
 Pass on impact of exchange rate to client

 Other methods to manage exchange rate fluctuation

 Currency Forwards – used to hedge currency risk for a longer period up to one year
 Currency Futures – Forward contract for a fixed date
 Hedged Assets – Invest in hedged assets such as Exchange Traded Funds (ETFs)
 Selling and Purchasing in the same currency
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 Competitive Strategy in a Digital Age
Global Market Environment

Strategies to counter foreign exchange fluctuation

 When Domestic Currency is Weak

 Sell the price advantage
 Exploit opportunities to export.
 Expand product line and add more costly features
 Minimize expenditure in host country
 Shift activities (sourcing, manufacturing, packaging) to home country
 Speed repatriation of foreign income

 When Domestic Currency is Strong

 Do value selling; highlight product differentiators
 Look at cost reduction opportunities in local operations in home country
 Shift sourcing and manufacturing to low-cost countries
 Keep foreign exchange income in host country
 Buy local services in host country and pay in local currency
42
 Competitive Strategy in a Digital Age
Global Market Environment
Porter’s Diamond

Firm Strategy,
Structure
and Rivalry

Factor Demand
Conditions Conditions

Related and
Support
Industries

https://www.youtube.com/watch?v=t9SrWRUov0Q
 Competitive Strategy in a Digital Age
Global Market Environment
Porter’s Diamond – The competitive advantage of nations

 Why certain industries within a particular nation are competitive internationally, whereas others are not
 Company’s ability to compete in the international arena is based mainly on an interrelated set of location advantages that
certain industries in different nations posses
 Factor (Input) Conditions are the factors of production
 Includes things like skilled labor, education, capital, climate, and infrastructure
 Demand Condition is a country with sophisticated homebuyers
 Buyers have awareness and demand for advanced, quality, and innovative products
 This create international competitiveness
 Related and Supporting Industries
 These are the inputs for a country, which drives its success
 Example - raw material from fabric suppliers in Italy helps to drive the success of the Milan fashion industry
 Firm Strategy and Rivalry - competition in the home market
 Drives innovation and quality
 Competition and rivalry keeps companies on their toes
 They try to out-compete each other by continually developing more innovative and quality products
 Government Policies influencing the above four factors
 Chance Events (outside control of firm) – Inventions, Shifting competitive advantage
 Competitive Strategy in a Digital Age
Global Market Environment
JCB Construction Equipment: Made in India For The World

 India is a very strong part of our business that is involved in designing, making products for India, and is also an important
manufacturing hub for exports - –Lord Bamford, JCB Group Chairman

 Construction Business in India

 India had always been a strategic market despite the strenuous conditions it exhibited
 Arriving in India in 1979 with a first-mover advantage, JCB expanded its manufacturing capacity in 2007
 Infrastructure expansion had been a key enabler of India’s economic growth
 Higher infrastructure spending by the government
 100 per cent foreign direct investment (FDI) in construction development projects through the automatic mode of FDI
 Rising public–private partnerships in infrastructure projects (45% of planned through private funding)
 A surge in mining activities (coal production increased at a compound annual growth rate of 4.9%)
 The government of India’s ambitious programs, such as Make in India and Smart Cities

 JCB: Company Overview

 Founded in 1945 by Joseph Cyril Bamford, JCB. company had a presence in four continents around the world
 Company produced more than 300 types of machines in the construction, agriculture, and manufacturing sectors
 JCB formed a wholly owned subsidiary in 1979 with the first manufacturing facility in Ballabgarh, near New Delhi
 JCB invested about $300 million in India, establishing five world-class manufacturing facilities
 JCB products were not only sold domestically but were also exported to more than 60 countries
 Known globally for its excellent customer support, JCB had developed a comprehensive dealership network to reach out to its
customers throughout the country
 JCB India gained nationwide recognition for its best practices in the fields of engineering, design, innovation and exports
 Competitive Strategy in a Digital Age
Global Market Environment
JCB Construction Equipment: Made in India For The World

 Competitors
 BEML – Komatsu, Caterpillar, L&T – Poclain and Tata Hitachi
 The manufacturing of earth-moving equipment accounted for the largest segment of the CE industry in the country, with an
estimated 56% of the industry’s total revenue in 2014
 Infrastructure expansion had been a key enabler of India’s economic growth
 JCB: Localization Drive
 India’s CE customer segments were comprised primarily of government civic bodies, followed by institutional buyers,
contractors, and plant hirers
 Products manufactured in India were world class in terms of technological innovation, safety, comfort, and productivity
 JCB backhoe loader was the most popular choice among Indian customers
 Its versatility made it suitable for a variety of construction applications such as excavation, digging, and levelling

 Customer Support
 Customer Interface – Understanding requirements of various segments and providing solutions
 Product Support and Supply Chain – Prompt Service and Parts support
 Technology and Innovation - advanced monitoring system, JCB Livelink, allowed the machine owners to remotely monitor
their machines in real time

 Future Ahead
 JCB had become synonymous with CE in India.
 Economic downturn and reduction in infrastructure spend affected not just JCB but the entire CE business in India
 JCB is confident of coming out this successfully
 Competitive Strategy in a Digital Age
Leadership and Strategy

 Leadership Definition

 Leadership is the capacity to translate vision into reality.” - - Warren G. Bennis

 The final test of a leader is that he leaves behind in others the conviction and will to carry on.“ - Walter
Lippman

 "The function of leadership is to produce more leaders, not more followers."

- Ralph Nadar

 Leadership is a combination of strategy and character. If you must be without one, be without the
strategy."- Gen. H. Norman Schwarzkopf

 Leadership is an influence process that enable managers to get their people to do willingly what must be
done, do well what ought to be done.” - Cribbin, J.J. ‘Leadership: strategies for organizational effectiveness’
New York: AMACOM (1981)
 Competitive Strategy in a Digital Age
Leadership and Strategy

Leadership Theories

Trait Theory
Great Man Theory

Behavioral Theory
Leaders are made not born

Contingency Theory
War time vs Peace time

Situational Theory
Leaders should adapt
 Competitive Strategy in a Digital Age
Leadership and Strategy

Leadership Styles

Authoritarian
The Participative
Perfect
Leader

Delegative
 Competitive Strategy in a Digital Age
Leadership and Strategy
Sun Tzu’s Art of War
Strategy without tactic is slowest route to victory
 Philosophy - winning without conflict. Tactics without strategy are noise before defeat

 Its philosophy has several aspects:

 Understanding strategic positions,
 Collecting competitive information & recognizing opportunities,
 Automatically selecting moves that minimize losses and avoid dangerous
situations
 Instantly recognizing the specifics of situations and the responses they require
 Getting the most out of each move and securing advantages

 Five points for victory – for a Leader

 Knows when to fight and when not to fight will win (Timing)
 He who understands how to handle both superior and inferior forces will win
(Forces at play)
 He whose ranks are united in purpose will win (common goal)
 He who is well prepared and lies in wait for an enemy who is not well prepared
will win (Strategic Positioning, Patience)
 He whose generals are able and not interfered with by the sovereign will win
(Freedom to Senior Leadership)
Competitive Strategy in a Digital Age

Culture and Strategy

Cross-Cultural Leadership
 Competitive Strategy in a Digital Age
Culture and Strategy

 Culture
 Cultural Universals
 Verbal and Non-verbal Communication
 High-context and Low-context Cultures
 Hofstede’s Cultural Dimensions
 Power Distance Index; Individualism vs Collectivism
 Uncertainly Avoidance Index; Pragmatic vs Traditional
 Indulgence vs Restraint; Masculinity vs Feminity
 Cross-cultural Leadership
 Cross-Cultural Communication
 Cross-cultural Team Leadership
 HBR Article on Cross-cultural Leadership
 Competitive Strategy in a Digital Age
Culture and Strategy

PESTEL Factors

Economic

Legal Political
International
Business

Environ Technological
mental
Social
(Cultural)
 Competitive Strategy in a Digital Age
Culture and Strategy

Cultural Universals

It is central to
what you see
Passed Learnt Way of
through through life of
generations doctrines people
How you make sense
of what you see

How you express

yourself
 Competitive Strategy in a Digital Age
Culture and Strategy

Cultural Universals

 What we “see” with our eyes

 Food, Dances, Music, Arts, Greeting Rituals

 Deep below the "water line"

 Core values.
 What is good, right, desirable, and acceptable
 What is bad, wrong, undesirable, and unacceptable

 Self Reference Criterion

 Defined as an unconscious reference to one's own
cultural values, experiences and knowledge as a basis
for decisions.
 That is to say that one's own culture or company knows
the best how to do things
 Competitive Strategy in a Digital Age
Culture and Strategy

Verbal and Non-verbal Communication

 Non-Verbal
Communication
 Gestures
 Verbal
Communication  Postures
 Words  Facial
Expressions
 Voice
 Eye Contact
 Vocal
Characteristics
 Personal
Appearance
 Touch
 Competitive Strategy in a Digital Age
Culture and Strategy

High and Low Context Cultures

High Context
Culture : Cultures
that rely heavily on
non-verbal and
subtle situational
cues in
communication.

Low Context
Culture : Cultures
that rely heavily on
words to convey
meaning in
communication.
Cross cultural video
 Competitive Strategy in a Digital Age
Culture and Strategy

Hofstede’s Cultural Dimensions

 Culture as “the collective programming of the mind

distinguishing the members of one group or category of
people from others”.

 The six dimensions of national culture are based on

extensive research done by Professor Geert Hofstede, Gert
Jan Hofstede, Michael Minkov and their research teams.

 Power Distance Index

 Individualism Vs. Collectivism
 Masculinity Vs. Femininity
 Uncertainty Avoidance Index
 Long Term Orientation Vs. Short Term Normative
Orientation
 Indulgence Vs. Restraint
 Competitive Strategy in a Digital Age
Culture and Strategy
Hofstede’s Cultural Dimensions – In Summary

Low Cultural Dimension High

Egalitarian (Democratic) Power Distance Strong Hierarchy (Autocratic)

Collectivistic (More We) Collectivism vs Individualism Individualistic (More I)

Comfortable with Uncertainty Uncertainty Avoidance Uncomfortable with Uncertainty

Traditional (Normative) Short-term vs Long-term Pragmatic

Stricter Social Norms Restraint vs Indulgence More gratification

More Caring (Nurturing) Femininity vs Masculinity Assertive

 Competitive Strategy in a Digital Age
Culture and Strategy

Hofstede’s Cultural Dimensions

 Power Distance Index

 This dimension expresses the degree to which the less powerful members
of a society accept and expect that power is distributed unequally.
 The fundamental issue here is how a society handles inequalities among
people
 In societies with high Power Distance accept a hierarchical order in which
everybody has a place and which needs no further justification
 In societies with low Power Distance, people strive to equalize the
distribution of power and demand justification for inequalities of power

 Individualism Vs. Collectivism (I vs We)

 Individualism, can be defined as a preference for a loosely-knit social
framework in which individuals are expected to take care of only
themselves and their immediate families.
 Its opposite, collectivism, represents a preference for a tightly-knit
framework in society in which individuals can expect their relatives or
members of a particular in-group to look after them in exchange for
unquestioning loyalty.
 Competitive Strategy in a Digital Age
Culture and Strategy

Hofstede’s Cultural Dimensions

 Uncertainty Avoidance Index

 Not Same As Risk Avoidance
 The Uncertainty Avoidance dimension expresses the degree to which the members of
a society feel uncomfortable with uncertainty and ambiguity
 Countries exhibiting Strong UAI maintain rigid codes of belief and behaviour and
are intolerant of unorthodox behaviour and ideas
 Weak UAI societies maintain a more relaxed attitude in which practice counts more
than principles.

 Pragmatic vs Traditional Approach

 Long Term Orientation (Pragmatic Approach)
 Take a more pragmatic approach
 Encourage thrift and efforts in modern education as a way to prepare for the
future
 Short Term Orientation (Normative or Traditional Approach)
 Prefer to maintain time-honoured traditions and norms
 While viewing societal change with suspicion.
 Competitive Strategy in a Digital Age
Culture and Strategy
Hofstede’s Cultural Dimensions

 Indulgence Vs. Restraint

 Indulgence stands for a society that allows relatively free gratification of
basic and natural human drives related to enjoying life and having fun.
 Restraint stands for a society that suppresses gratification of needs and
regulates it by means of strict social norms.

 Masculinity Vs. Femininity

 Not Same As Male and Female
 The Masculinity side of this dimension represents a preference in society for
achievement, heroism, assertiveness and material rewards for success.
 In Masculine cultures, difference between gender roles are more rigid.
 Its opposite, Femininity, stands for a preference for cooperation, modesty,
caring for the weak and quality of life.
 In Feminine cultures, difference between gender roles are less rigid.
 Competitive Strategy in a Digital Age
Culture and Strategy

Cross Cultural Communication

Do’s Don’ts

 Avoid Assumptions, jokes which are  Using the same approach world-wide.
misunderstood  Considering traditional knowledge and
 Use symbols, diagrams and pictures. practices as ‘backward’.

 Avoid using slang and idioms  Letting cultural differences become a source
of conflict that hinder the process or work.
 Investigate their culture's perception
 Fail to ignore culturally-dependent enabling
 Take cultural and local differences into
and counteracting forces.
account.
 Fail to take language barriers into
 Say what you do and do what you say
account.
 Competitive Strategy in a Digital Age
Culture and Strategy

Cross Cultural Communication

 Barriers to Cultural Communication

 Ethnocentrism – Inability to accept another culture's world view; "my way is the best.“
 Discrimination – Differential treatment of an individual due to minority status; actual and
perceived; e.g., "we just aren't equipped to serve people like that.“
 Stereotyping – Generalizing about a person while ignoring presence of individual difference;
e.g., "she's like that because she's Asian – all Asians are nonverbal.“
 Cultural Blindness – Differences are ignored and one proceeds as though differences did not
exist; e.g., "there's no need to worry about a person's culture
 Cultural Imposition – Belief that everyone should conform to the majority; e.g., "we know
what's best for you, if you don't like it you can go elsewhere.“
 Tone Difference – Formal tone change becomes embarrassing and off-putting in some cultures
Competitive Strategy in a Digital Age
Culture and Strategy

Source – HBR Article by Erin Meyer

Competitive Strategy in a Digital Age
Culture and Strategy

Source - https://praxie.com/cage-distance-framework-model-online-tools-templates/
 Competitive Strategy in a Digital Age
Culture and Strategy
The CAGE Framework at the Country Level

Cultural Distance Administrative Distance Geographic Distance Economic Distance

• Different languages • Lack of colonial ties • Physical distance • Rich/poor
Country pairs • Different ethnicities; lack • Lack of shared regional • Lack of land border differences
(bilateral) of connective ethnic or trading bloc • Differences in time zones • Other differences
social networks • Lack of common currency • Differences in climates / in cost or quality of
• Different religions • Political hostility disease environments natural resources,
• Lack of trust financial resources,
• Different values, norms, and human resources,
dispositions
infrastructure, and
information or
knowledge

• Insularity • Landlockedness • Economic size

Countries • Nonmarket/closed • Lack of internal • Low per capita
(unilateral) • Traditionalism economy (home bias vs. navigability income
foreign bias) • Geographic size
• Lack of membership in • Geographic
international remoteness
organizations • Weak transportation or
• Weak institutions, communication links
corruption

Differences and the CAGE Distance Framework by Pankaj Ghemawat

 Competitive Strategy in a Digital Age
Culture and Strategy
The CAGE Framework at the Industry Level

Cultural Administrative Geographic Economic

Distance Distance Distance Distance
Cultural differences matter the Government involvement is high in Geography plays a more important Economic differences make the
most when: industries that are: role when: biggest impact when:
• Products have high linguistic • Producers of staple goods • Products have a low value-to- • Nature of demand varies with
content (TV programs) (electricity) weight or bulk ratio (cement) income (cars)
• Products matter to cultural or • Producers of other “entitlements” • Products are fragile or • Economics of standardization
national identity (foods) (drugs) perishable (glass, fruit) or scale are limited (cement)
• Product features vary in • Large employers (farming) • Local supervision and • Labor and other factor cost
terms of size (cars) or • Large suppliers to government operational requirements are differences are salient
standards (electrical (mass transportation) high (services) (garments)
equipment) • National champions (aerospace) • Distribution or business
• Products carry country- • Vital to national security systems are different
specific quality associations (telecommunications) (insurance)
(wines) • Exploiters of natural resources (oil, • Companies need to be
mining) responsive and agile (home
• Subject to high sunk costs appliances)
(infrastructure)

Differences and the CAGE Distance Framework by Pankaj Ghemawat

Competitive Strategy in a Digital Age
Culture and Strategy
 Competitive Strategy in a Digital Age
Culture and Strategy

International Product Strategies – Standardization vs Adaptation

Straight Product Product

Extension Adaptation Innovation

The firm adopts the The company caters The firm designs a
same policy used in to the needs and wants product from scratch
its home market. of its foreign customers. for foreign customers.

 Extension – offering product virtually unchanged in markets outside of home country

 Adaptation – changing elements of design, function, and packaging according to needs of
different country markets
 Creation – developing new products for the world market
 Competitive Strategy in a Digital Age
Culture and Strategy

International Product Strategies – Standardization vs Adaptation

Need for
High Adaptation
Degree of Cultural
Grounding

Low
Industrial/ Technology Intensive Consumer

Nature of Product
 Competitive Strategy in a Digital Age
Cross-cultural Leadership

Cross Cultural Communication

 Culture
 Is a group which shapes a person’s values and identity
 Cultural identities can stem from the following differences : race, gender, class, religion, country of
origin and geographic region

 Communication
 Two-way process of reaching mutual understanding
 Participants exchange (encode-decode) not only information, news, ideas and feelings but also create
and share meaning

 Cross-Culture
 The interaction of people from different backgrounds in the business world.
 Cross culture is a vital issue in international business
 Success of international trade depends upon the smooth interaction of employees from different
cultures and regions

 Cross-Cultural Communication
 Involves understanding culture difference and overcoming language problems
 Communicating across cultures improves harmony and creates a positive work environment
 Competitive Strategy in a Digital Age
Cross-cultural Leadership

Cross Cultural Team Leadership

 Effective Cross-Cultural Communication and Leadership

 Cultural literacy is one of the most important skills to build effective relationships with
diverse employees, collaborative alliances with suppliers and strong connections with customers.

 Strategies for Effective Cross-Cultural Leadership

 Determines how people communicate
 Be aware of your own culture, beliefs, values and behavior.
 Show curiosity toward other cultures and expand your knowledge when interacting with local
people by listening and observing.
 Show respect for other cultures and customs by adopting appropriate behavior and
language (verbal and non-verbal)
 Do not over-react when you feel uncomfortable; ask questions for clarification
 Be Patient, Genuine, Open and Inclusive
 Help other managers and employees by communicating clearly on roles, responsibilities,
expected initiatives and behaviors.
 Learn how to give feedback in a culturally sensitive way
 Leverage cultural differences for mutual gain
 Competitive Strategy in a Digital Age
Cross-cultural Leadership

Cross Cultural Team Leadership – Decision are usually non-programmed

Non-Programmed

Types of Decisions Unique/ Novel &

Unusual Non-Recurring
Ready made solutions are
not available
Programmed

Mostly of
Non- High Importance
programmed

Programmed Non-Programmed

Non-programmed Decision
 Competitive Strategy in a Digital Age
Cross-cultural Leadership
How Cultures Across the World Approach Leadership

 Video – HBR Culture,

 https://hbr.org/video/5476393165001/how-cultures-across-the-world-approach-leadership
 Being the Boss in Brussles, Boston and Beijing

 Culture and Global Leaders

 Two Dimensions
 Deference to Authority
 Decision Making

 Research by Erin Meyer of Insead

 Some cultures are Egalitarian and some are oriented to Hierarchy
 Americans look up to their boss for immediate decisions
 Germans – look for consensus; once decision is made, they are committed to it
 Four Basic Leadership Styles emerge
 Consensual and Egalitarian – boss is a facilitator
 Consensual and Hierarchical – decisions are made by groups rather than boss
 Top down and Hierarchical – boss is the clear decision maker
 Top down and Egalitarian – individuals are free to express option but decision of boss is final
 It is important to understand where you are and where your global partner is
Competitive Strategy in a Digital Age

Resources and Capabilities

Internal Assessment
 Competitive Strategy in a Digital Age
Resources and Capabilities

 Resource and Capabilities

 Definitions
 Threshold vs Distinctive Resources and Capabilities
 Intellectual Capital
 Value Chain Network
 Industrial Organization vs Resource Based View
 VRIN Framework
 Cross-cultural Team Leadership

 Internal Assessment
 Basic Functions of Management
 Management Audit
 Strategic – Stretch, Leverage and Fit
 SWOT Analysis and TOWS Matrix
 Competitive Strategy in a Digital Age
Resources and Capabilities

 Resources are the assets that organisations have or can call upon
 Capabilities are the ways assets are used or deployed

Resources: Assets what we have Resource Capabilities: what we do well

(usually nouns) Type (usually verbs)

Machines, buildings, raw materials, patents, Physical Ways of achieving utilisation of plant, efficiency,
databases, computer systems productivity, flexibility

Balance sheet, cash flow, suppliers of funds Financial Ability to raise funds and manage cash flows,
debtors, Creditors

Managers, employees, partners, suppliers, Human How people gain and use experience, skills,
customers knowledge, build relationships, motivate others
and innovate

Intellectual Property (Patents, Design, Intellectual How people create cutting edge technology
Brand), Intellectual Capital
 Competitive Strategy in a Digital Age
Resources and Capabilities

Threshold vs Distinctive resources and capabilities

 Threshold Resources and Capabilities

 Base requirements to compete in a given market
 Achieve parity with competition
 Without these, the organisation cannot survive
 Important but does not create competitive advantage

 Distinctive resources and Capabilities

 Base requirements to compete in a given market
 required to achieve competitive advantage
 distinctiveness or uniqueness that are of value to customers
 Competitors find difficult to imitate
 Bundle of such distinctive competencies can become core of any business and how they differentiate
themselves from competition; this can then be called as core competency of an organization
 Competitive Strategy in a Digital Age
Resources and Capabilities

Threshold vs Distinctive resources and capabilities

Tangible resources - physical assets - Strategic capability refers to the resources

plant, labor and finance and competences of an organization needed
Intangible resources - non-physical assets for it to survive and prosper
- information, reputation and knowledge.

Resources Capabilities
Physical Resources Financial Resources

Threshold Threshold Threshold

Capability Resources Capabilities
Resources (Tangible or
Intangible)

Capability for Unique

Human Resources Intellectual Capital Competitive Resources Distinctive
Advantage (Tangible or Capabilities
Intangible)
 Competitive Strategy in a Digital Age
Resources and Capabilities

Understanding Intellectual Capital

 Intellectual Property (IP)

 Intellectual property (IP) allows people to own their creativity and innovation in the same way that
they can own physical property.
 The owner of IP can control and be rewarded for its use, and this often encourages further innovation
and creativity which can have wider benefits
 The four main types of IP are – Patents, Trademarks, Product Design and Copyright

 Intellectual Asset (IA)

 Intellectual assets extend beyond intellectual property rights (such as patents, trademarks, copyright
and design rights) which provide legal protection to include know-how, processes and trade secrets - all
of which may be developed during a research project

 Intellectual Capital (IC)

 Intellectual material - knowledge, information, intellectual property and experience - that can be put to
use to create wealth – Thomas Stewart
 It is knowledge with potential value – Ideas in People, Processes
 No legal ownership yet
 Competitive Strategy in a Digital Age
Resources and Capabilities
The Components of Intellectual Capital – A Spectrum of Knowledge Assets

When legally protected these are Intellectual Property

When codified these are Intellectual Assets

Trade
Copyrights Secrets Knowledge
Trademarks Know-How
Providing
Information Confidential Value
Publishing Customer
Databases Information
Rights Capital
Patents Human
Industrial Technology Capital
Brand logos Unpatented
Design Research
designs Structural Culture
Software
Platforms Capital

Most Least

Tangible

Source: PricewaterhouseCoopers
 Competitive Strategy in a Digital Age
Resources and Capabilities
Value Chain/ Value Network
 Competitive Strategy in a Digital Age
Resources and Capabilities
Value Chain/ Value Network
 Competitive Strategy in a Digital Age
Resources and Capabilities
Experience Curve

 Competences in activities develop

over time based on experience,
resulting in cost efficiencies
 Growth may not be optional
 Unit costs should decline year
on year
 To achieve competitive
advantage
 First mover advantage is
important
 Competitive Strategy in a Digital Age
Resources and Capabilities
Industrial Organization Model versus Resource Based View

 Industrial Organization Model

 Take care of External Environment before you make your strategy
 stake out a position that is less vulnerable relative to the five forces within an industry

 Resource Based View (RBV)

 Strategy determined by resources
 Firm's sustained competitive advantage is based on its valuable, rare, inimitable, and non-substitutable
resources
 Resources and Capabilities should be basis for strategic decisions (not external environmental conditions)
 Competitive advantage is gained through acquisition and value of organizational resources
 Organizations can identify, locate and acquire key valuable resources
 Resources are not highly mobile across organizations and once acquired are retained
 Valuable Resources are costly to Imitate and are Non-substitutable

 Jay Barney - The resource-based view (RBV) argues that firms possess resources, a subset of which enable them to achieve competitive advantage, and a
subset of those that lead to superior long-term performance. Resources that are valuable and rare can lead to the creation of competitive advantage. That
advantage can be sustained over longer time periods to the extent that the firm is able to protect against resource imitation, transfer, or substitution. In general,
empirical studies using the theory have strongly supported the resource-based view
 Competitive Strategy in a Digital Age
Resources and Capabilities

VRIN Framework

Value

Non-
Capability Inimitable
Substitutable

Rarity
 Competitive Strategy in a Digital Age
Internal Assessment
Basic Functions of Management
Planning  Managerial activities related to Preparing for Future Strategy
 Forecasting, establishing objectives, devising strategies, developing policies Formulation
and procedures
Organizing  Managerial activities that result in a structure of task and authority Strategy
relationships Implementation
 Organizational design, job specialization, job descriptions, job specifications,
span of control, unity of command, coordination, job design, and job analysis
Motivating  Efforts directed toward shaping human behaviour Strategy
 Leadership, communication, behaviour modification of work groups, delegation Implementation
of authority, job enrichment, job satisfaction, needs fulfilment, organizational
change, employee morale, and managerial morale
Staffing  Personnel or human resource management. Strategy
 Salary administration, employee benefits Implementation
 Interviewing, Hiring, Training, Management Development, Career
development
 Employee safety, Union Relations, Discipline Policies, Grievance Handling,
Affirmative action, Equal employment opportunity and Public relations
Controlling  Ensuring that actual results are consistent with planned results Strategy
 Quality control, financial control, sales control, inventory control, expense Evaluation
control, analysis of variances, rewards, and sanctions.
 Competitive Strategy in a Digital Age
Internal Assessment
Management Audit

 What is Management Audit

 Is a Process with strategic intent
 Has the ability to provide impetus for positive change.

 Objectives of Management Audit

 Assessment of compliance to policy and law and results of enforcement
 Internal management control system to assure quality of performance and delivery
 Effectiveness of organization and management reform process
 Development of competency of human resource system
 Improving investment decision system
 Assessing market effectiveness of performance and delivery
 Identification of risks and search for mitigating measures

 Basic Features of Management Audit

 Guided by strategic planning
 Systematic, scientific and independent examination of management decisions and actions
 Assessment of efficiency and effectiveness in conformity with performance standards
 Examination of non-financial data
 Challenges underlying rules, procedures and methods with focus on competitive efficiency and results
 Competitive Strategy in a Digital Age
Internal Assessment
Management Audit

Audit Intention
(Why of audit)

Audit
evidence/facts
(what is) Audit
findings/judgments
/ reforms
(Outputs/impacts)
Audit capacity
(How should be)

Audit
criteria/norms
(what should
be)
 Competitive Strategy in a Digital Age
Internal Assessment
Management Audit

Compliance
to policy
Evidence- and law Strategic
based orientation

Focus on Key Principles of Performance

critical risk Management Audit
areas improvement

Assurance to
Professional standards and
Enhanced
capacity with accountability
continuation and
ethical and moral
innovative/research
values
-based reforms
 3
Competitive Strategy in a Digital Age
Internal Assessment
Strategic – Stretch, Leverage and Fit

 Strategic Fit is the degree to which an organization is matching its resources and competences with the needs of
the external environment.
 Identify opportunities in the environment – Tailor strategy to capitalize on these
 Strategic intent (or vision) of the organization may not be limited to the extent of the external environment
or the available opportunities
 A small organization shall always remain small if it only tries to match its resources to the available
external environment.

 Strategic Stretch is the process of innovation and development involved in finding new opportunities and
creating a competitive advantage from an organization’s resources and competencies.
 Stretch is a misfit between resources and aspirations
 The difference between the strategic intent and the available resources is called Stretch
 The key to strategic stretch is leveraging resources

 Leverage refers to concentrating, accumulating, complementing, conserving, and recovering resources in such a
manner that meagre resource base is stretched to meet the aspirations that an organization dares to have
 Both financial and non-financial leverage
 Conserve, Concentrate and Accumulate resources
 Complementing one resource with another
 Recover the value from the marketplace in the shortest possible time
 Competitive Strategy in a Digital Age
Internal Assessment
SWOT Analysis

 What is SWOT Analysis

 Technique is credited to Albert Humphrey who led a research project at Stanford University
 Tool used to understand Strengths, Weaknesses, Opportunities, & Threats involved in a project /
business
 Used as a framework for organizing and using data and information gained from situation analysis of
internal and external environment
 Technique that enables a group or individual to move from everyday problems and traditional strategies to a
fresh prospective

 Benefits of SWOT Analysis

 To help decision makers share and compare ideas
 To bring a clearer common purpose and understanding of factors for success
 To organize the important factors linked to success and failure in the business world
 To help complex ideas to be presented in a simple and systematic manner

 Who needs SWOT Analysis

 Corporate - New business launches, Profit targets not met and Diminishing market share
 Business - Customer Service Issues, New Team Leader and Target not met
 Employee - Issues with work output, New targets set and Performance improvement
 Competitive Strategy in a Digital Age
Internal Assessment
SWOT Analysis

Strength Weakness
• Things your company does well • Things your company lacks
• Qualities that separate you from • Things your competitors do Internal
your competitors better than you
• Internal resources such as • Resource limitations
skilled, knowledgeable staff • Unclear unique selling
• Tangible assets such as IP, Brand proposition
Image

Opportunity Threat
• Underserved markets for • Emerging competitors
specific products • Changing regulatory
• Few competitors in your area environment
• Emerging needs; Economic • Negative press/media coverage External
Boom • Changing customer attitudes
• Press/media coverage of your toward your company
company
 Competitive Strategy in a Digital Age
Internal Assessment
SWOT Analysis

• Brand Image • Financial issues

• Financial resources • Outdated technology
• Strong Management • Unhappy Employees
• Channel • High cost
• Employees

Strength Weakness

Opportunity Threat

• Growing market • Foreign Competition

• Economic Boom • Downturn
• Deregulation • End of product
lifecycle
 Competitive Strategy in a Digital Age 3

Internal Assessment
TOWS Matrix

TOWS Analysis Strengths Weaknesses

Name of Business

Opportunities SO Strategies WO Strategies

Threats ST Strategies WT Strategies

 Competitive Strategy in a Digital Age 3

Internal Assessment
TOWS Matrix - Nokia
 Competitive Strategy in a Digital Age
Resources and Capabilities

The Rise and Fall of Nokia

2002
1998 Mobile Phone with
World Leader in 3g Technology
1987
Mobile Phones
GSM Mobile

2005
2001 Billionth Phone
1992 First Phone with
First Digital Video Camera.
GSM Phone
 Competitive Strategy in a Digital Age
Resources and Capabilities

The Rise and Fall of Nokia

 Product Innovation – Nokia did not catch up

 Touch Screen Issues
 User experience with latest software
 Outdated Symbian OS – when compared to Android or iPhone
 Less stylish – especially low priced products
 Low end – Domination by Chinese manufacturers
 High end – Nokia too slow to react to market needs
 Nokia went to Microsoft who had no presence in OS for Mobile phones
 Nokia with Lumia found itself to be alone - They thought Microsoft Software and Nokia Hardware
would be a winning combination

 Android and Apple developed strong Ecosystem

 Shift of market from hardware to software
 Android developed an Ecosystem with almost all mobile manufacturers
 Mobile App Developer and Handset Manufacturer were strongly wedded to Android or Apple
 Hardware, Software, Search, Social Application, Location Services, Advertising – All this part of OPEN
Ecosystem of Android
 Apple had a CLOSED ecosystem strategy – they connected MacBook, iPad, iPhone – to their iOS
 All App developers preferred to develop new Apps only on Android or Apple platform
 Competitive Strategy in a Digital Age
Resources and Capabilities

The Rise and Fall of Nokia

 Nokia’s Product and Business Strategy did not pay off

 Nokia believed that their brand equity would hold them in good stead – Competitive advantage has
limited life
 Nokia did not want to go with Google Android – Did not want to be part of the crowd
 They wanted to develop a blue ocean strategy but there was no ecosystem
 Nokia went to Microsoft who had no presence in OS for Mobile phones
 Their strategy - Microsoft Software and Nokia Hardware would be a winning combination – did not work
 Nokia with Lumia found itself to be alone
 They were late entrants in the smart phone market but were slow

 Organizational Changes
 Olli Pekka Kallasvuo was replaced by Stephen Elop
 Elop saw Nokia's business
 As an oil rig that was on fire
 Which was forcing workers to jump into the North Sea
 Clinging to a "burning platform" only meant certain death
 Nokia saw huge attrition which they never had in history
 Market value nosedived from $ 50 Bn to $ 6 Bn
 Nokia did transform – but their strategy did not prove to be right
Failures are steppingstones for success
Too much success maybe steppingstone for failures