strategic management13

7/27/2019 Strategic Management13

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Strategic ManagementModule 1 (A)How do we define Strategic Management?

According to Peter Drucker

Strategic Management is not a box of tricks or a bundle of techniques . It

is analytical thinking and commitment of resources to action

How do we define Strategic Management?

According to Lawrence R Jaunch and William F Glueck

Strategic Management is a stream of decisions and actions which leads

to the development of an effective strategy of strategies to help achieve

corporate objectives . The strategic management process is the way in

which strategists determine objectives and make strategic decisions

According Thompson and Strickland

The tasks of crafting , implementing and executing company strategies

are the heart and soul of managing a business enterprise

As per Ireland , Hoskisson , Hitt

A strategy is an integrated and coordinated set of commitments and

actions designed to exploit core competencies and gain a competitive

advantage .

A firm has a competitive advantage when it implements a strategy

competitors are unable to duplicate or find too costly to try to imitate .

According Thompson and Strickland

In crafting a strategy , management is saying , in effect , Among all thepaths and actions we could have chosen , we have decided to move in this

direction , focus on these markets and customer needs , compete in this

fashion , allocate our resources and energies in these ways . And rely on

these particular approaches to doing business .

How Stakeholders relationship could be source of competitive

advantage ?

Stakeholders are the individuals and groups who can affect the vision and

mission of the firm are affected by the strategic outcomes achieved , andhave enforceable claims on a firms performance . Claims on a firms

performance are enforced through the a stakeholders ability to withhold

participation essential to the organisations survival , competitiveness , and

profitability .

Classification of Stakeholders


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A : Capital Market Stakeholders

1.Shareholders

2. Debenture holders

3 . FIs , Banks , MFs , FIIs, PEs , VCs Etc.

B. Product Market Stakeholders

1.Primary customers

2. Suppliers

3. Host communities

4.Unions

C . Organisational Stakeholders

1.Employees

2. Managers

3. Non- ManagersStrategic Leaders

Strategic leaders are people located in different parts of the firm using the

strategic management process to help the firm using the strategic

management process to help the firm reach its vision and mission .

Their location in organisational structure is not that important .

Organisational Culture

Refers to the complex set of ideologies , symbols , and core values that

are shared through out the firm and that influences how the firm conductsbusiness . It is social energy that drivesor fails to drivethe organisation

. For example , highly successful Southwest Airlines is known for having

a unique and valuable culture . Its culture encourages employees to work

hard and have fun too . The firm also pays importance by its commitment to

provide POS ( Positively Outrageous Service )

Average returns

Above average returns are returns in excess of what an investor expects to

earn from other investments with a similar amounts of risk .

Risk is an investors uncertainty about the economic gain or losses that

will result from a particular investment .

Average returns are returns equal to those an investor expects to earn

from other investments with similar amount of risk .

The I / O Model of Above Average Returns


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Industrial Organisation ( I/O ) model of above average returns explains

the external environments dominant influence on a firms strategic actions

.

The model specifies that the industry in which a company chooses to

compete has stronger influence on performance than do the choices

managers make inside their organisations .

The performance is believed to be determined by primarily by a range of

industry properties :a) economies of scale , b) barriers to market entry ,

diversification , and the degree of concentration of firms in the industry .

Assumptions of I / O Model

1. External environment is assumed to impose pressures and constraints

that determine the strategies that result in above- average returns .

2.Most firms competing within an industry or within a segment ofindustry are assumed to control similar strategically relevant resources and

to pursue similar strategies in light of those resources .

3.Resources used to implement strategies are assumed to be highly mobile

across firms , so any resource differences that might develop between

firms will be short lived .

4.Organisational decision makers are assumed to be rational and

committed to acting in the firms best interests

The I/ O Model of Above Average ReturnsResource Based Model of Above Average Returns

As per this model , differences in firms performances across time are due

primarily to their unique resources and capabilities rather than to the

industrys structural characteristics .

Resources are inputs into a firms production process , such as capital

equipment , the skills of individual employees , patents , finances , and

talented managers . Put under 3 categories viz., physical , human and

organisational capital .

Resource Based Model of Above Average Returns

A capability is the capacity for a set of resources to perform a task or an

activity in an integrative manner .

Core competencies are resources and capabilities that serve as source of

competitive advantage for a firm over its rivals .


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When resources are valuable , scarce , costly to imitate , and non

substitutable , they have potential to constitute competitive advantage .

Strategic Vision

Strategic Vision so as to provide long term direction , delineate what kind

of enterprise the company is trying to become and infuse the organisation

with a sense of purposeful action.

Instances of Strategic VisionMicrosoft Corporation

In the past A computer on every desk and in every home using great

software as an empowering tool .

In 1999 , in the light of latest technology , it changed to

Empower people through great software anytime , any place and on any

device

Instances of Strategic VisionMicrosoft Corporation Bill Gates

We see a world where people can use any computing device to dowhatever they want to do anytime , anywhere . The PC will continue to

have a central role -- but it will be joined by an incredibly rich variety of

digital devices accessing the poweer of the Internet

Instances of Strategic VisionINTEL

Our vision : Getting to a billion connected computers worldwide ,

millions of servers, and millions of dollars of ecommerce . Intels core

mission is being the building-block supplier to the Internet company and

spurring efforts to make the Internet more useful . Being conncted is nowthe centre of peoples computing experience . We are helping to expand the

capabilities of the PC platform and internt .

Instances of Strategic VisionOTIS ELEVATOR

Our mission is to provide any customer a means of moving people and

things up , down , and sideways over short distances with higher reliability

than any other enterprise in the world

Instances of Strategic Vision

AMERICAN RED CROSS

The mission of the American Red Cross is to improve the quality of

human life , to enhance self-reliance and concern for othrs , and to help

people avoid , prepare for and cope with emergencies

AVIS RENT-A-CAR


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Our business is renting cars . Our mission is total customer satisfaction

Mission Statement

A mission specifies the business or businesses in which the firm intends to

compete and the customers it intends to serve.

Mission statement tends to deal with companys present business scope

who we are and what we do where as Strategic Vision portrays a

companys future business scope.

Examples of Mission Statements

Mc Donalds

Be the best employer for our people in each community around the world

and deliver operational excellence to our customers in each of our

restaurants.

LNPGE Plastics CompanyOur mission is to be recognized by our customers as the leader in

applications engineering. We always focus on the activities customers

desire: we are highly motivated and strive to advance our technical

knowledge in the areas of material, part design and fabrication technology.

Business Model

According Thompson and Strickland , a business model deals with the

revenue-cost-profit economics of its strategy - the actual and projected

revenue streams generated by the companys product offerings andcompetitive approaches , the associated cost structure and profit margins

and the resulting earnings stream and return on investment.

Strategy vs Business Model

According Thompson and Strickland , strategy relates to a companys

competitive initiatives and business approaches ( irrespective of the

financial and competitive initiatives and business approaches while the

term business deals with whether revenues and costs flowing from the

strategy demonstrate business viability .

Strategy vs Business Model

According Thompson and Strickland, Companies that have been in

business for a while and are making acceptable profits have a proven

business model - there is a clear evidence of that their strategy is capable of

profitability and that they have viable enterprise .


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Striking Business Models

Microsoft [[Linux

Highly secretive code

In house R &D

Highly paid Employees with SOPS

Highly Priced Software

Open code

Open R &D

External Experts

Free software

Striking Business Models

HLL

Nirma

Super QualityHighly focussed R &D

Superior Technology

Targeting high income groups

Compatible Quality

Indigenous R &D

Manual Process

Targeting low income groups

The Environment AnalysisModule 1 BExternal Environment Analysis

Components :

Scanning : Identifying early signals of environmental changes and trends .

Monitoring : Detecting meaning through ongoing observations of

environmental changes and trends .

Forecasting : Developing projections of anticipated outcomes based on

monitored changes ,and trends .

Assessing : Determining the timing and importance of environmentalchanges and trends for firms strategies and their management .

Series of Layers

The most general layer of the environment is macro environment .

Any specific factor in the general environment will affect some

organisations more than others .


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If the future environment is likely to be very different from the past it is

helpful to construct pictures or scenarios .

Strategic groups are organisations within an industry that have similar

characteristics to each other but are quite different from those in other

strategic groups .

The concepts of market segmentation , customer value and life cycles are

relevant .

General Environment /PESTEL Framework

Political- Govt stability , taxation policy ,foreign trade regulation , social

welfare policies , labour laws , anti-trust laws etc.

Economic factors : Inflation , interest rates , Trade deficits / surpluses ,

Budget deficits /surpluses , Personal / Business savings rates , GDP

Socio-cultural : Work force diversity , Attitudes about quality of life ,

Shifts in work and career preferences , shifts in preferences regarding

product and service characteristics .

Global : Important political events , critical global markets , newly

industrialised countries , different cultural and institutional attributes .

Technological : Product innovations , Applications of knowledge , Focus

of private and government support , R & D Expenditures , New

communication technologies .

Demographic : Population size , Age structure , Geographic distribution ,

Ethnic mix , Income DistributionEnvironmental : Green house effect , environmental pollution , global

warming etc.

PESTEL Framework

Lobbying : GOI opening up Telecom industry for private players . DOT

auctioning spectrum region wise

Demographics (Demography forecasting ): India having over 50 per cent

of population below age group of 35 years .

Socio-cultural (Environmental sensing ) : Growing health consciousnessand social pressures have led to severe restrictions on use of tobacco

products .

PESTEL framework

Technology ( R & D Policy ) :The introduction of new multi media

mobile service such as data , entertainment and text messaging has been


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more than just the next level . These new data services require secure

transactions over mobile networks , more processing power , and increased

memory capacity . As a result , smart-card manufacturers , banking

applications developers and billing software developers have all increased

their investments in R &D in order to capitalise on this technology ,

PESTEL framework

Capital Markets (Financial Policy ) : Boom in IT stocks during 1999 and

2003 . Burst of Dotcom . Current phase of global recession .

Labour market ( Labour Policy and industrial relations ) : Government

notifying certain services as Essential Services . Regulating Strikes in such

areas .

Competition ( Marketing policy ) : Deregulation of Banking , Oil Sector ,

Telecom etc.

Economic forecasting (Economic policy ):Taiwan with a population of 22million people played vital role in electronics industry . Taiwans

electronics factories evolved from contract manufacturers into designer

manufacturers . Taiwans prosperity as an electronics workshop has been

the result of partnering with the US Computer industry .

PESTEL framework

Ecology ( Environmental sensing and R & D policy )Huntingdon Life

Sciences , the biggest drug-testing company in Europe was targetted by

anti-vivisection protestors and animal groups following a documentaryabout the company in 2000 . HLS used about 70,000 animals a year to test

the effectiveness of pharmaceuticals . As a result of protestors tactics and

negative publicity , many shareholders sold their shares and banks called

back loans , leaving HLS on the verge of bankruptcy .

Suppliers ( Purchasing ) : The price of crude oil rose to near $140 per

barrel . During last 4 months , crude prices collapsed to below $ 40 per

barrel . OPEC and suppliers are have cut down their production levels .

Poters Fundamental Determinants of a Firms ProfitabilityFive competitive forces :

The entry of new competitors

The threat of new substitutes

The bargaining power of buyers


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The bargaining power of suppliers

The rivalry among existing competitors

Impact of Five Competitive Forces

The Five Forces determine industry profitability because they influence : Prices

Costs

Required investments

Entry Barriers for New Entrants

Economies of scale

Proprietary product differences

Brand Identity

Switching costs

Capital requirements

Access to distribution

Absolute cost advantages

- proprietary learning curve

- access to necessary inputs

- Proprietary low cost product design

Govt policyLicensing , FDI , Tax etc.

Determinants of suppliers power

Differentiation of inputs

Switching costs of suppliers and firms in the industry .

Presence of substitute products

Supplier concentration

Importance of volumes to suppliers

Cost relative to total purchases in the industry

Impact of inputs on cost or differentiationThreat of forward integration relative to threat of backward integration

by firms in the industry .

Determinants of Buyer Power

Bargaining Leverage

Buyers concentration vs Firms concentration


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Buyer volume

Buyer switching costs relative to firms switching costs

Buyer information

Ability to backeward integration

Substitute productsPrice Sensitivity

Product Differences

Brand Identity

Impact on quality Performance

Buyer Profits

Decision Makers Incentives

Rivalry Determinants

Industry GrowthFixed Storage Costs / value added

Intermittent overcapacity

Product differential

Brand Identity

Switching Costs

Concentration and balance

Informational complexity

Diversity of competitors

Corporate stakes

Exit barriers

New Products

A new product design that undercuts entry barriers or increases volatility

of rivalry , for example , may undermine the long run profitability an

industrythough imitator may enjoy higher profits temporarily .

In the Tobacco industry , generic cigarettes are a potentially a serious

threat to industry structure . Generics may enhance the price sensitivity of

buyers , trigger competition , and erode the high advertising barriers that

have kept out new entrants .

Structural Drivers of Change


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Are forces likely to affect the structure of industry , sector or market . It

will be the combined effect of some of these separate factors that will be

so important rather than factors separately .

Drivers of Globalization in some Industries

Global market convergence : 1.Similar customer convergence 2.Globnal

customers .3. Transferable marketing .

Government influence : 1.Trade policies 2.Technical standards. 3.Host

government policies .

Cost advantages : 1. Scale economies 2.Sourcing efficiencies 3. Country

specific costs 4.High product development costs .

Global competition : Interdependence 2. Competitors global 3. High

exports / imports

Building scenarios

The book publishing industry is facing changing environments which are

hard to predict on the basis of experience or historical analysis .

1. Development of electronic communications market

2.Consumer perception of books compared with electronic substitutes .

3.Costs of paper and other raw materials

4.Government spending and regulation .

Key Success Factors

Key Success Factors (KSFs) are those competitive factors that most

industry members ability to prosper in the market place the particular

strategy elements , product attributes , resources , competencies ,

competitive capabilities and market achievements that spell the difference

being a strong competitor and a weak competitor .

In apparel industry , the KSFs are appealing designs and colour

combinations ( to create buyer interest ) and low cost manufacturing

efficiency ( to permit attractive retail pricing and ample profit margins )

Common Types of KSFs

Technology related :1. Expertise in a particular technology or in scientific

research ( important in pharmaceuticals , Internet applications , mobile

communications ,and most high tech industries ).2. Proven ability to

improve production processes .


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Manufacturing related KSFs :1. Ability to achieve scale economies and /

or capture learning curve affects. 2. Quality control knowhow.3.High

utilisation of Fixed Assets .4.Access to attractive supplies of skilled labour

.High labour productivity etc.

Distribution related KSFs : 1. A strong network of wholesale distributors

.2.Strong direct sales capabilities via the internet and/or having company

owned retail outlets.

Marketing-related KSFs :Breadth of product line and selection 2. A well

known and well respected brand name . 3.Fast , accurate technical

assistance .4.Courteous , personalised customer service .5.Accurate filling

of buyers orders . 6.Customer guarantees and warranties . 7. Clever

advertising .

Skills and capabilityrelated KSFs :1. Talented workforce .2.National or

Global distribution capabilities 3.Product innovation capabilities 4.Design

expertise 5.Short-delivery-time capability .6.Supply chain capabilities

.7.Strong e commerce capabilities .

Other types of KSFs : Overall low costs 2. Convenient locations 3. Ability

to provide fast , convenient fter sales services etc.

Driving Forces

Industry conditions change because important forces are driving industry

participants ( competitors , customers , or suppliers ) to alter their actions .

Driving forces in an industry are the major underlying causes of changing

industry and competitive conditions some driving forces originate in the

macro environment and some originate from within a companys immediate

industry and competitive environment .

Most Common Driving Forces

1.Growing use of the Internet and emerging new internet technology

applications

2.Increasing Globalisation of industry

3.Changes in the long term industry growth rate

4.Changes in who buys the product and how they use it .

5.Product innovation

6.Technological change and manufacturing process innovation

7.Marketing Innovation

8.Entry or exit of major firms


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9.Diffusion of technical know how across more companies and more

countries

10.Changes in cost and efficiency

11. Growing buyer preferences for differentiated products in stead of

standardized commodity products

12.Reduction in uncertainty and business risk

13.Regulatory influences and government policy changes

14.Changing social concerns , attitudes and life styles .

Assessing the Impact of the Driving Forces

The following three questions are to be answered

1.Are the driving forces causing demand for the industrys product to

increase or decrease ?

2.Are the driving forces acting to make competition more or less intense ?

3.Will the driving forces lead to higher or lower industry profitability ?

Strategic Group Mapping

Strategic group mapping is a technique for displaying the different market

or competitive positions that rival firms occupy in the industry.

A strategic group is a cluster of firms in an industry with similar

competitive approaches and market positions .

Steps in constructing a Strategic Group Map

1. Identify the competitive characteristics that differentiate firms in theindustry , typical variables are price / quality range ( high , medium , low ) ,

geographic coverage , ( local , regional , national , global ) , degree of

vertical integration , product line breadth , use of distribution channels

and degree of service offered ( no frills , limited , full ) .

2.Plot the firms on a two variable map using pairs of these differentiating

characteristics .

3.Assign firms that fall in about the same strategy space to the same

strategic group .4.Draw circles around each strategic group , making the circles

proportional to the size of the groups share of total industry sales revenue .

What can be learned from Strategic Group Maps ?


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Driving forces and Competitive pressures donot affect all strategic groups

evenly . Profit prospects vary from group to group according to the relative

attractiveness of their market position .

What extent industry driving forces and competitive pressures favour

some strategic groups and hurt others.

What extent the profit potential of different strategic groups varies due to

the strengths and weaknesses in each groups market position .

Closer strategic groups are to each other on the map , the stronger the

cross-group competitive rivalry tends to be .

Modules2

Internal Analysis

Liberalisation and Globalisation

Indian Industry exposed to sudden spurt in competition due to

- reduction in Custom Tariffs

- removal of restrictions on imports

-new ventures by MNCs

- expansion and diversification by existing players

Necessity is the mother of invention To survive and grow in competition ,

Indian Industry realised to focus on

Quality and Standardisation

Reduce costs

Become customer friendly

International business practices

Sources of Competitive Advantage

A low cost advantage may stem from such disparate sources as a low

cost physical distribution system , a highly efficient assembly process , or

superior sales force distribution .

Differentiation can stem from similarly diverse factors including the

procurement of high quality raw materials , a responsible order entry

system , or superior design system .

SingleIndustry Firm

Diversified Firm

McKinsey Cos Business System Concept

A firm has a series of functions e.g R & D , manufacturing , marketing ,

channels and and each is performing relative to others .


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Value

Value is measured by total revenue a reflection of the price a firms

product commands and the units it can sell .

Value activities classified into Primary and Supportive .

Primary Activities

Inbound Logistics : Activities associated with receiving , storing , and

disseminating inputs to the product such as material handling , warehousing

, inventory control , vehicle scheduling , and returns to suppliers .

Operations : Activities associated with transforming inputs into the final

product firm , such as machining , packaging , assembly , equipment ,

maintenance , testing , printing , and facility operations .

Outbound Logistics : Activities associated with collecting , storing and

physically distributing the product to buyers , such as finished goods

warehousing , material handling , delivery vehicle operations , orderprocessing , and scheduling .

Marketing and Sales : Activities associated with providing a means by

which buyers can purchase the product and inducing them to do so , such as

advertising , channel selection , channel relations and pricing .

Service : Activities associated with providing service to enhance or

maintain the value of the product adjustment .

Supportive Activities

Procurement

Technology Development

Human Resource Management

Firm Infrastructure

Activity Types

Within category of primary and support activities , there are three

activity types that play a different role in competitive advantage :

1.Direct : Activities directly involved in creating value for the buyer ,

such as assembly , parts machining , sales force operation , advertising ,

product design , recruiting , etc.

Indirect : Activities that make it possible to perform direct activities on a

continuing basis such as maintenance , vendor record keeping , etc.


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Quality Assurance : Activities that ensure the quality of other activities

such as monitoring , inspecting , testing , reviewing , checking , adjusting ,

and reworking.

Linkages among value activities arise from number of generic causes

:

The same function can be performed in different ways : High quality

inputs or high quality assurance :

The cost or performance of direct activities is improved by greater efforts

in indirect activities Better scheduling (an indirect activity ) reduces sales

force travel time or delivery vehicle time .

Activities performed inside a firm reduce the need to demonstrate explain

or service a product in the field .

Quality assurance function can be performed in multiple ways .

Vertical LinkagesLinkages exist not only within a firms value chain but between a firms

chain and the value chains of suppliers and channels .

The linkages between suppliers value chain and a firms value chain

provide opportunities for the firm to enhance its competitive advantage .

Channel linkages are similar to supplier linkages .

Competitive Scope and Value Chains

Competitive scope can have a powerful effect on competitive advantage ,

because it shapes the configuration and economies of the value chain .Segment scope : The product varieties produced and buyers served

Vertical scope : The extent to which activities are performed in-house

instead of by independent firms .

Geographic scope : The range of regions , countries or groups of countries

in which a firm competes with a coordinated strategy .

Industry scope : The range of related industries in which the firm

competes with a coordinated strategy .

Coalition and Scope

A firm can pursue the a broader scope internally or enter into coalitions

with independent firms to achieve some or all of the same benefits

.Coalitions are long term agreements among firms that go beyond normal

transactions but fall short of mergers .


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Examples : technology licenses , supply agreements , marketing

agreements , and joint ventures .

The Value Chain and Organisational Structure

The value chain provides a systematic way to divide a firm into its

discrete activities and thus can be read to examine how the activities in a

firm are and could be grouped .

What is meant by Core Competence ?

Core Competence may be defined as inherent superior strength of an

organisation in a product or service line arising out of Technology ,

Governance Process ( ability to work across business and functional unit

boundaries ) and Collective Learning :

Core competency

Core competences are activities that critically underpin an

organisations competitive advantage . They create and sustain ability tomeet the critical success factors of particular customer groups better than

other providers in ways that are difficult to imitate .

Criteria for Core Competency

1. The competence must relate to an activity or process that

fundamentally underpins the value in the product or service features .

2.The competence leads to levels of performance from an activity or

process that are significantly better than competitors .

3.The competence must be robust .

Core Competencies for Consumer Goods

. Brand

. Innovation Success

.Good Service

.Reliable delivery:

.Solving buyers problems

. Good personal relations with buyers

Accepting returned goods :

Fast turnaround of orders .

Using sub contractors for transport

24 hour dispatch

What is meant by Competitive Strategy ?


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A Strategy that gives advantage to compete successfully with

competitors could be under stood as Competitive Strategy .

Various functional areas in a Company

Corporate Planning

Purchases

Stores and Inventory Control

Production

Finance

Accounting and MIS

Marketing

Advertisement and Sales Promotion

Personnel and Administration

HR and Training

Various kinds of industriesCommodity Process Industries

Agro Commodities

Mineral and Metal Based industries

Chemical

Capital Goods Sector

Hi -Tech Industries

Service Industries

Hospitality , Finance , Marketing , Consultancy , Education etc.

Inter-Related Aspects which make Core Competence

Production Technologies

Human Processes

Systems

Customer Synergies

Cost Efficiency

Cost efficiency is a measure of the level of resources needed to create a

given level of value . Sources are :

1. Economies of scale

2.Supply costs

3.Product or process design

4.Experience

Effectiveness


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Effectiveness is the ability to meet customer requirements on product

features at a given cost . It will be achieved only if managers are able to do

the following :

Clear about which product feaures are valued by customers .

Drivers of uniquness within the organisaion

Price that customers ready to pay for uniqueness

Products featurs are communicated .

Competitive advantage is more of product service rather than product per

se .

Critical Success Factors and Core Competencies that change over time

Market Access :1. Global network . 2. Overseas plants .

Quality / Reliability : 1. Production processes 2. Supplier management

Product features (at low volume ) : 1. Life style niche marketing .

2. Agile ProductionHistorical Comparison

Historical comparison looks at the performance of an organisation in

relation to previous years in order to identify any significant changes .

Industry norms compare the performance of organisations in the same

industry or sector against a set of agreed performance indicators

Benchmarking Health Care

In January 2001 , Sunday Times -Hospital Guide (in association with Dr.

Foster ) published the first guide to hospitals in Britain :Mortality Index :

Doctors per 100 beds

Nurses per 10 beds

Waiting time for in-patient treatment

Waiting time for out-patient treatment

Patients trust in doctors

Sources of Robustness

A. Rarity : 1.Unique Resources .2. Preferred access . 3. Situation

dependent :4. Sunk costs .

B. Complexity : 1.Internal linkage :2. External linkages .3. Linked

technologies .

C. Causal ambiguity : Competitors are unclear about bases of success .

Culture : Culturally embedded comptences : Dificult to identify .


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Knowledge creation and integration

Socialisation : Honda set up brain storming campus .to solve p roblems

in developing projects .

Externalisation : In Canons case the origin of using a disposable drum

came from Hiroshi Tanakaa team leader of task force .

Combination : EPOS Electronic Point of Sale produced a unique

classification of stores and shoppers and were capable of pinpointing who

shopped where and how

Internalisation : GE documented all customer enquiries and complaints (

more than 14, 000 per day ) and then programmed into 1.5 million potential

problems and their solutions .

Spiral of knowledge creation :

Reliance Industries Ltd

Started trading in PFYManufacturing PFY

Refineriery

Oil exploration

A Back ward integration - Core Competence in Petrleun Technology and

Processes .

Using Core Competence as competitive strategy companies opted for

Expansions - Horizontal

Expansion - vertical - backward or forward .integration .

Merger and Amalgamation with a company engaged in same or similar

line -

Getting controlling stake in a company having similar product line and

technological strengths

Philips / Sony / BPL/Videocon

Radios

Tape Recorders

Televisions and VCRs

Washing machines

Pencil Bastteries

Mobile phones

Core competence Electronics and Targetting family segment business

Bajaj / Hero/TVS


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Scooters

Motor bikes

Mopeds

General Motors , Ford , Toyoto, Suzuki

Cars

Vans

Trucks

Ashok Leyland , TELCO, Mahindra & Mahindra

Trucks

Vans

Medium and Heavy Motor Vehicles .

Bayers , Du pont ,

Industrial Chemicals

Indian MNCs abroadSwaraj Paul Capro group in steel industry group in UK

Mittals in different countries

Difference old Pharma and new Pharma Groups of India .

Old Groups Sarabhai alembic New Groups Ranbaxy Cipla Sun Pharma

Dr Reddy Labs

Oberoi

Hotel Industry

Indian Express /Times of IndiaMedia Print

Media ) Electronic

CDS

Business India Group

Print Medias - Business India

Electronic Media - Aaz Thak

MARG which merged with PRG became ORG MARG

Nirma Ltd

Washung Powder

Detergent Cake

Toilet Soaps

Caustic Soda

Plans to get in to Tea etc., using distribution network .


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Shri Kumaram Birla of A V Birla group emphasing

Concentrate on Commodities like

Cement

Fertlisers

Textiles

Keeping that Grasim took shares of L & T

Want to get out of BATATA

Why companies diversify in to industries where they lack core

competence

1. To spread risk over different industrial segments . rather than

concentrate on only one industry .

2. When a company has huge reserves and surpluses , promoters

decide to expand their industrial empire and they diversify in to new

areas for the following reasons : a) Current industrial segment has reached saturation and has huge

capacities .

b) Find new sun rising industries where the growth potentials are

excellent .

When promoters are very big industrial houses . The industrial houses

diversify in to new areas

Promoters place themselves more as entrepreneurs leaving all

managerial functions to top class Professionals in the world . The bestexamples in the world are

1. GE

2. 3 M

3. Lever

In India , it is Government of India where industries spread over highly

capital intensive Oil and Petroleum to TVs ,

Many State Governments role of Promoter very effectively .

Tata Group

Birlas

Hindustan Lever

Industrialists also realised core competency does not ensure success always

:Examples are

Binny group which was wedded to only textiles .


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Kirloskars by concentrating in Engineering and Electrical industries

To conclude Like any other strategy , Core Competence as Competitive

Strategy also to be used with caution : Care competence as strategy could

fail in areas :

1. If over all demand is shrinkingdue slackness in demand like in case of

jute and cotton and handloom

2. If the overall performance in given industrial segment is below

industrial average for various reasons

Strategy FormulationModule 3

Characteristics of Strategic Decisions

Strategy is likely to be concerned with the long term direction of an

organisation .

Strategic decisions are normally about trying to achieve some advantage

for the organisations over competition .

Strategic decisions are likely to be concerned with the scope of an

organisations activities .

Strategy can be seen as the matching of resources and activitiesof an organisation to the environment in which it operates This is also

known as strategic fit . Strategic fit is developing strategy by identifyingopportunities in the business environment and adapting resources and

competences so as to ka advantage of these .

Strategy can be seen as building on or stretching an organisations

resources and competences to create opportunities or to capitalise on them .

Strategies may require major resources changes for an organisation

Strategic decisions are likely to affect operational decisions .

Characteristics of Strategic Decisions

The strategy of an organisation is affected not only by environmental

forces and resource availability but also by the values and expectations of

those who have power in and around the organisation .

Consequences of Characteristics of Strategy

Strategic decisions are likely to be complex in nature .


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Strategic decisions may also have to be made in situations of uncertainty .

Strategic decisions may also have to be made in situations of uncertainty .

Strategic decisions may also have to manage and perhaps to change

relationships and networks outside the organisation .

Involve change in organisations which may prove dificult because of theheritage of resources and because of culture

Elements of Strategic Management

Strategic Management : Three major elements of strategic management are

: 1.Strategic position :2.Strategic choices and 3. Strategy into action .

Strategic position is concerned with impact on strategy of the external

environment , internal resources and competences and the expectations and

influence of stakeholders .

Elements of Strategic Management

Strategic Choices involve understanding the underlying bases for future

strategy at both the corporate and business unit levels and the options for

developing strategy in terms of both the directrions in which strategy might

move and the methods of development .

Strategy into action is concerned with ensuring that strategies are working

in practice .

Levels of Strategy

Corporate levels of strategy

Business unit strategy

Operations strategies

Business Level Strategy

Is an integrated and coordinated set of commitments and actions the firms

uses to gain a competitive advantage by exploiting core competencies in

specific product markets .

Business level strategy indicates the choices the firm has made about

how it intends to compete in individual product markets .

How could we say business level strategy is core strategy ?


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A firm competing in a single product market area in a single geographic

location does not need a corporate level strategy to deal with product

diversity or an international strategy to deal with geographic diversity .

In contrast a diversified firm will use one of the corporate level strategies

as well as a separate business level strategy for each product market areain which it competes .

Every firmfrom the local dry cleaner to the multinational corporations

choose at least one business level strategy . Thus business-level strategy is

the core strategy the strategy that the firm forms to describe how it

intends to compete in a product market .

In terms of customers , the firm must determine :

1. Who will be served ?

2.What needs those target customers have that it will satisfy ?

3.How those needs to be satisfied ?

Customers : Their relationship with Business Level Strategies

Example of Dell vs HP

Dell captured a significant market share in the personal computer market

by using a low cost strategy while simultaneously satisfying customer needs

Hewlett Packard learned how to manage its supply chain to lower costs ,

thereby gaining competitive parity with Dell . It also provided a broaderportfolio of goods and services that better satisfied customer needs and

thereby customers from Dell

Who : Determining the Customers to Serve :

Basis for Customer Segmentation :

Consumer Markets :

1. Demographic factors

2.Socioecomnomic factors ( social class , stage in the family life cycle )

3.Geographic factors (cultural , regional and national differences )

4.Psyxchological factors (life style , personality traits )

5.Consumption patterns ( heavy , moderate , and light users )

6.Perceptual factors ( benefit segmentation , perceptual mapping )



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Industrial Markets :

1. End use segments (identified by SIC codes )

2. Product segments (based on technological differences or production

economics )

3. Geographic segments (defined by boundaries between countries )

4. Common buying factor segments (cut across product market and

geographic segments )

5.Customer size segments

Five broad approaches of Competitive Strategy

A focussed (or market niche ) strategy based on lower cost relying on

narrower buyer segment and out competing rivals by serving nichemembers at a lower cost than rivals .

5. A focussed ( market niche ) strategy based on differentiation :

Concentrating on a narrow buyer segment and out competing rivals by

offering niche members customised attributes that meet their tastes and

requirements better than rivals products .

A best-cost provider strategy upscale attributes

HDFC Bank and iCICI Bank .

Bata

TVS , Bajaj

Agro Industry

Nescafe and BRU

Annapuna

Tata Salt

A low cost provider strategy

Nirma

Akai

Parle

Link

Zenith


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SBI Loans

Lifebuoy soap of HLL

A broad differentiation strategy :.

Tooth pasteTooth Powder

Face cream

Health Beverage Drink

VIP

Vicco Vajradhanti Daburs Laldant Manjan Vicco Vanishing Cream Horlics Safety : Less Weight and DurabilityA focussed (or market niche ) lower cost than rivals

Citi Bank

British Airways

Sterling Resorts

Transport , Food ,

Concentrating on a narrow buyer segment and out competing rivalsby offering niche members customised attributes

Apollo Hospitals

Eimco Elecon Capital Equipment

SOTC

YMCA LIONS CLUB ROTARY

In respect of thirteen customers provide imported equipment

Life time members get Heavy discounts

CITI BANK , ANZ , AMEX

Thomas Cook and Western Union .

Hero Honda Passport

Flying Clubs :


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Golf Clubs

Race Clubs

Strategy at Business Level

Customers : Their Relationships with Business Level Strategies

Dell captured a significant market share in PC market by using low cost

strategy .

HP learned how to manage its supply chain to lower costs .

Dell became too inward focused and did not take actions to avoid the

imitation of the capabilities .

Effectively Managing Relationships with Customers

The firms relationships with its customers are strengthened when it

delivers superior value to them .

Harrahs Entertainment believes that it provides superior value tocustomers by beingservice oriented company in gaming ..

Amazon.com is an Internet based venture widely recognised for the

quality of information it maintains about its customers , the services it

renders , and its ability to anticipate its customers needs .

CEMEX SA a leading building-solutions company in the world uses

internet to link its customers , cement plants and main control rooms ,

allowing the firm to automate orders and optimise truck deliveries .

Reach , Richness and Affiliation

Reach dimension of relationships with customers is concerned with the

firms access and connection to customers .Amazon.com offers more than

4.5 million titles and is located on tens of millions of computers.

Richness is concerned with the depth and detail of the two way flow of

information exchanges with their customers .Amazon bills itself as

customer centric company .

Affiliation is concerned with facilitating useful information with

customers . E.g MSN Autos helps online clients find and sort information .

In terms of customers , the firm must determine :

1. Who will be served ?

2. What needs those target customers have that it will satisfy ?

3.How those needs to be satisfied ?



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Consumer Markets :

1. Demographic factors

2.Socioecomnomic factors ( social class , stage in the family life cycle )

3.Geographic factors (cultural , regional and national differences )

4.Psyxchological factors (life style , personality traits )

5.Consumption patterns ( heavy , moderate , and light users )

6.Perceptual factors ( benefit segmentation , perceptual mapping )



Industrial Markets :

1. End use segments (identified by SIC codes )

2. Product segments ( technological differences or production economics

)3. Geographic segments (defined by boundaries between countries )

4. Common buying factor segments (cut across product market and

geographic segments )

5.Customer size segments

What : Determining Which Customer Needs to Satisfy

Successful firms learn how to deliver to customers what they want and

when they want it .

Needs are related to a products benefits and features . From strategicperspective , a basic need of all customers is to buy products that create

value for them .

Most effective firms continuously strive to anticipate changes in

customers needs .

How Determining Core Competencies Necessary to Satisfy Customer

Needs.

Firms use core competencies (how) to implement value-creating

strategies and thereby satisfy customers needs .SA Institute is the worlds largest privately owned software company .

Allocating more than 30% of revenues on R&D SAS relies on its core

competence in R & D t satisfy the data related needs of customers US

Census Bureau etc.

Purpose a Business Level Strategy


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To create difference between the firms position and those of its

competitors .

Choosing to perform activities differently or to perform different

activities than rivals is the essence of business-level strategy .

Firms develop an activity map to show how they integrate the activities

they perform .

Types of Business Level Strategies

Cost Leadership

Differentiation

Focused Leadership

Focused Differentiation

Integrated cost leadership / differentiation

Cost Leadership Strategy

The cost leadership strategy is an integrated set of actions taken to

produce goods or services with features that are acceptable to customers at

the lowest cost , relative that of competitors .

Cost leaders concentrate on finding ways on finding ways to lower their

costs relative to those of their competitors by constantly rethinking their

primary and support to reduce costs still further while maintaining

competitive levels of differentiation .

Firms implement a cost leadership strategy through each of 5 forces

Rivalry with Existing Competitors :Walmart is known for its ability to

both control and reduce costs making it difficult for firms to compete .

Bargaining Power of Buyers : Powerful customers can force a cost leader

to reduce its prices . Walmart has to compete with Costco.

Bargaining power of Suppliers : Cost leader operates with greater margins

than those of competitors make it possible for the cost leader to absorb

increases .

Potential entrants : Because of ever improving levels of efficiency (

economies of scale ) enhance profit margins they serve as a significant

entry barrier to potential competitors .

Product substitutes : A product substitute becomes an issue for the cost

leader when its features and characterstics are potentially attractive to the

firms customers

Competitive Risks of the Cost Leadership Strategy


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1.Risk of Process of obsolescence : Process used by cost leader may

become obsolete because of innovation by competitors .

2.Too much focus by the cost leader on cost reduction may occur at the

expense of trying to understand customers perceptions of competitive

levels of differentiation

Differentiation Strategy

Is an integrated set of actions taken to produce goods or services (at an

acceptable cost ) that customers perceive as being different in ways that are

important to them .

Firms implement a differentiation strategy through each of 5 forces

Rivalry with Existing Competitors : Customers tend to be loyal purchasers

of product differentiated in ways that are meaningful to them . As loyalty

increases , sensitivity to price increases decreases .

Bargaining Power of Buyers : Customers are willing to accept a price

increase when a product still satisfies their perceived unique needs better

than a competitors offering can .

Bargaining power of Suppliers : The high margins the firm earns partially

insulate it from the influence of suppliers in that higher supplier costs .

Potential entrants : Customer loyalty and the need to overcome the

uniqueness of a differentiated product present substantial barriers to

potential entrants .

Product substitutes :Firms selling brand-name goods and services to loyalcustomers are positioned effectively against product substitutes .

Competitive Risks of Differentiated Strategy

1. Customers might decide that the price differential between the

differentiators product and the cost leaders product is too large .

2. A differentiated product becomes less valuable if imitation by rivals

cause customers to perceive that competitors offer essentially same goods .

3.Experience can narrow customers perceptions of the value a products

differentiated features .Focus Strategies

Firms choose a focus strategy when they intend to use their core

competencies to serve the needs of a particular industry segment or niche to

the exclusion of others .


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The focus strategy is an integrated set of actions taken to produce goods

or services that serve the needs of a particular competitive segment .

Firms can create value for customers in specific and unique product

segments by using focused cost leadership or focused differentiated

strategy

Competitive Risks of Focus Strategies

A competitor may be able to focus on more narrowly defined competitive

segment and out focus the focus .

A company competing on an industry wide basis may decide that the

market system served by the focus strategy firm is attractive and worthy of

competitive pursuit .

The needs of customers within narrow competitive segment may

become more similar to those of industry wide customers as a whole over

time .

Integrated Cost Leadership / Differentiation Strategy

The objective of using this strategy is to efficiently produce products

with differentiated attributes .

Efficient production is the source of maintaining low costs while

differentiation is the source of unique value .

Flexible Manufacturing System

Flexible Manufacturing System increases the flexibilities of human ,

physical , and information resources that the firm integrates to create

relatively differentiated products at relatively low costs .

FMS is a computer controlled process used to produce a variety of

products in a moderate , flexible quantities with a minimum of manual

intervention .

Information Net Works and TQMFirms develop and use TQM systems in order to 1. increae customer

satisfaction 2. cut costs 3. reduce the amount of time required to introduce

innovative products to the market place .Competitive Risks of Integrated Cost Leadership / Differentiation Strategy

Firms that fail to perform the primary and support activities in an

optimum manner become stuck in middle means that the firms cost

structure is not low enough to allow it so attractively price its products and


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that its products are not sufficiently differentiated to create value for the

targeted customer .

Firms can be stuck in middle when they fail to successfully implement

cost leadership or differentiation strategy .

Corporate Level Strategy

Specifies actions a firm takes to gain competitive advantage by selecting

and managing a group of different businesses competing in different

product markets.

Product diversification , primary form of corporate level strategies ,

concerns the the scope of the markets and industries in the firm competes

as well as how managers buy , create and sell different businesses to

match skills and strengths with opportunities presented to the firm .

Reasons of Diversification

A. Value Creating Diversification

1.Economies of Scope ( related diversification)

a) Sharing Activities

b) Transferring core comptencies

2. Market Power (related diversification )

a) Blocking competitors through multipoint competition

b) Vertical integration

3.Financial Economies (unrelated diversification ) a) Efficient internal capital allocation

b) Business restructuring

B. Value Neutral Diversification

i. Anti Trust Legislation

2. Tax Laws

3.Low performance

4..Uncertain future cash flows

5. Risk reduction for firm6. Tangible resources

7. Intangible resources

C. ValueReducing Diversification

1. Diversifying managerial employment risk

2.Increasing managerial compensation


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Value Creating Diversification Related Constrained and Related

Linked Diversification

Firm builds upon or extends its resources and capabilities to create value .

Economies of Scope are cost savings that the firm create by

successfully sharing some of its resources and capabilities or transferring

one or more corporate level core competencies that were developed in one

of its businesses to another of its businesses .

Operational Relatedness : Sharing Activities : P&G s paper towel business

and baby diaper business .

Market Power : exists when a firm is able to sell its products above the

existing competitive level or to reduce the costs of its primary and support

activities below the competitive level or both .

Nestle is attempting to do by acquiring Gerber Products , firms can create

market power through multipoint competition and vertical integration .Multi point competition exists when two or more diversified firms

simultaneously compete in same product areas or geographic markets .

ValueNeutral Diversification

Incentives to Diversify : External Incentives include anti trust regulations

and tax laws .Internal incentives include low performance , uncertain

future cash flows , and the pursuit of synergy and reduction of risk for the

firm .

Value Reducing Diversification :The desire for increased compensation

reduced managerail risk are two motives for top-level executives may

diversify a firm beyond value creating and value neutral levels . Top

executives may diversify a firm in order to diversify their own employment

risk as long as profitability does not suffer excessively .

Acquisitions and Restructuring Strategies

Merger is a strategy through which two firms agree to integrate their

operations on a relatively co-equal basis . Daimler Chrysler AG was termed

a merger of equals .

Acquisition is a strategy through which one firm buys a controlling or 100

percent interest in another firm with the intent of making acquired firm a

subsidiary business within its portfolio .


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A takeover is a special type of an acquisition strategy where in target firm

does not solicit the acquiring firms bid .

Reasons for Acquisitions

1.Increased Market Power : exists when a firm is able to sell its goods and

services above competitive levels or when the cost of its primary or support

activities are lower than those of its competitors . Companies resort to a)

Horizontal Acquisitions ( increases a firms market power by exploiting

cost-based and revenue based synergies) . B) Vertical Acquisitions (a firm

acquiring a supplier or distributor of one or more of its goods or services )

c. Related Acquisition ( acquisition of a firm in a highly related industry ) .

2. Overcoming Entry Barriers : Factors associated with the market or with

the firms currently operating the market or with the firms currently

operating in it , which increase the expense and difficulty faced by newventures trying to enter that particular market .

Ex: Cross border acquisitions : Acquisitions made between two companies

with headquarters in different countries are called cross-border acquisitions

3.Reshaping the Firms Competitive Scope : To reduce the negative effect

of an intense rivalry on their financial performance , firms may use

acquisitions to lessen their dependence on one or more products or markets

. Reducing a companys depence on one specific markets alters the firms

competitive scope .3.Learning New Capabilities

Pharma , IT Software etc., are industries

Problems in Achieving Success

1. Integration dificulties

2.Inadequate evaluation of target

3.Large or extraordinary debt

4.Inability to achieve synergy

5.Too much diverisification

6.Managers overly focused on acquisitions

7.Too large

International Strategy


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Is a strategy through which the firm sells its goods and services outside its

domestic market

Raymond Vernon suggested that typically a firm discovers an innovation

in its home market , especially in countries like USA , often demand for the

product then develops in other countries .Another motive for firms to become multinational is to secure needed

resources .

New largescale , emerging markets , such as China and India , provide a

strong internationalization incentive based on their potential demand for

consumer products and services .

Identify International opportunities

Increased market size

Return on investment

Economies of scale and learning

Location advantages

Explore Resources and Capabilities

International strategies :

International business level strategy

Multi-domestic strategyGlobal Strategy

Transnational strategy

Use Core Competence

Modes of Entry

Exploring

Licensing

Strategic Alliance

Acquisitions

Newly wholly owned subsidiary

Strategic Competitiveness outcomes

Better Performance


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Innovation

Michael Porters National Advantage International Corporate Level

Strategy

Multi-domestic strategy :is an international strategy in which strategic and

operating decisions are decentralized to the strategic business strategy in

each country so as to allow that unit to tailor products to the local market .

Global strategy: to offer standardized products across country markets.

Transnational Strategy: is an international strategy through which firm

seeks to achieve both global efficiency and local responsiveness.

AXIS Bank Banking on Technology and Market Segments for

Competitive Space

Vision 2015 and Core Values

VISION 2015:To be the preferred financial solutions provider excelling in customer

delivery through insight, empowered employees and smart use of

technology

Core Values

Customer Centricity

Ethics

Transparency

Teamwork

Ownership

The Bank Today Is Capitalized To The Extent Of Rs. 408.84 Crores With

The Public Holding (Other Than Promoters And Gdrs) At 53.81%.

The Bank Has A Very Wide Network Of More Than 1095 Branches

(Including 57 Service Branches/Cpcs As On 30th September 2010).

The Bank Has A Network Of Over 4846 Atms (As On 30th September

2010) Providing 24 Hrs A Day Banking Convenience To Its Customers.

This Is One Of The Largest Atm Networks In The Country.

Performance in 2008

1. Expansion of Branch Network143 new branches during year (total to

651 )

2.Significant Presence in Semi Urban and Rural Areas .( 158 branches

about 25% )


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3.Geographical Reach extends to 29 States and 3 Union Territories

covering 405 Centre (as per Annual Report 2008) and

Shift in Strategy

Initial Business Model :

Corporate assets being the main focus area .

Corporate advances witnessed a high growth rate and accounted for 80 %

funds lent till 2002

Strategic Inflection Point :

In 1999 , the Banks net NPAs to advances ratio jumped to 6.3% in FY

1999 from 3.7% in FY 97.

Reflected from a marginal in 17% growth in Banks Total Advances in FY

02 from a CAGR of 44% .

Shift in Strategy from Corporate to RetailRetail Focus with building up of physical and technological infrastructure

Branches increased to 450 from just 35 in FY 99

95 extension counters and 1890 +ATMs

First Bank in the country to adopt Finacle as its core banking software 9

of Infosys)

First Indian Bank to have a remote disaster recovery management system

to protect its business from any eventualities .

AXISs Current Strategy

Broad Differentiation :

1.Managing changing customer needs :

a. Moving to increasingly powerful back office hubs

b. Centralised Phone Banking Centre

c. Zonal level Nodal Offices to ensure quick redressal of Customers

Grievances

d . Implementation of KYC norms

Growth Strategy

Objectives

1. Increasing the market share in various businesses resulting in an

enhancement in its core income streams .

2. Improve the quality of its income streams .


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Complementary Strategies for Growth and Development

A. Strategic alliances and Collaborative partnerships :

i) Tie-ups with Maruti and Hyundai

Co-financing pact with India Infrastructure Finance Company Ltd.

Tieup with Bajaj AlliancZ General Insurance Tieup with MetLife as

Bancassurance Partner .

ATM sharing with other Banks

Economic Times Remit 2India for money transfer .

Outsourcing Selected Value Chain Activities

1. Outsourcing recruitments to Monster India .com BenefitTime costs

are halved . Relies on headhunters for specialised positions .

2. Outsourcing Print operations to Xerox : Benefit : able to mail

personalised cheque books to its customers within 24 hours of a request .

3.Outsourcing of electronic bill payment (EBP) and ATM management to

Billjunctiona specialist bill management service provider .

Offensive Strategic Moves

Aggressive strategy to to tap retail domain via the use of ATMs and

alternate tech-enabled business .

Superior Customer service : Customer oriented approach , deepening of

customer relationships and increasing cross-selling activities

Range of services on ATM machines : Network of more than 18000 ATM

machines , LIC premium payments for service providers like MTNL andBSNL and mobile facilities for Airtel , Hutch , Orange and Idea cellular

service providers .

Aggressive growth in cards business : Debit Cards (grew from by nearly

10 lacs in 2005-06 ) in association with VISA and MasterCard .First to

introduce travel currency card , a foreign denominated pre-paid card ,

Remittance Card and Rewards Card .

Offensive Strategic Moves

Risk Management : processes are guided by well-defined policiesappropriate for various risk categories , independent risk oversight and

independent risk management committee of the Board .

Risk limits are set according to a number of criteria like market analysis ,

business strategy and management experience .


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Dealing with Regulations : Undertaken an internal assessment of its

preparedness for the implementation of the Basel II Accord .

Keeping pace with Technology :The Banks IT team developed a process

called SETU (Seamless Electronic Transfer to AXIS Bank ) internet

based funds transfer . I trade to route corporate procurement transactions .

Product and service innovation : Low cost ATMS , Channel Finance Hub ,

ATM-centred delivery models .

Expansion of geographical reach to semi urban , rural aras . SMI and

agricultural sectors .

Financial advisory services

Q1.Banking Industry Scenario and Global Driving Forces

Scenario for Banking Industry :

Consolidation and move towards Universal Banking

Moving from a regime of "large number of small banks" to "small numberof large banks."

The new era is going to be one of consolidation around identified core

competencies.

Mergers and acquisitions in the banking sector are going to be the order of

the day.

Successful merger of HDFC Bank and Times Bank earlier and Stanchart

and ANZ Grindlays three years ago has demonstrated that trend towards

consolidation is almost an accepted fact. NPAs,.

Financial super market chain, making available all types of credit and non-

fund facilities under one roof.

Potentially dramatic changes that include, among others, a sliding dollar,

rising interest rates, introduction of Basel II accord and international

accounting standards, and the possible flattening of consumer lending

boom.

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