Frequently Asked Questions in Management
STRATEGY
Question 1.
What is BCG Matrix and what does it show?
Answer:
This matrix was coined by Boston Consulting Group, a reputed management consultancy
firm. This is a portfolio evaluation model, which evaluates various Strategic Business
Units (SBUs) of the firm on relative market share and industry growth rate. This matrix
helps managers address the issue of resource allocation between various SBUs and the
business that the firm should exit/reinforce its presence.
Question 2.
Explain Competitive Advantage, Competitive Strategies, and Generic Strategies. Which
one are we following? (Hotel Industry)
Answer:
There are multiple sources for a firm to buildup competitive advantage. For example
Sony’s competitive advantage is in miniaturization, 3M in innovation etc. However the
central issue is sustaining the competitive advantage.
Michael E Porter has proposed three generic strategies viz., cost leadership,
differentiation and focus. Motels and wayside inns generally aim for cost leadership.
Other high-end players like Hilton, Marriott etc., have found innovative basis for
differentiation.
Question 3.
What are ‘competitive advantage’ and ‘core competence’ of a company? How are they
different? Illustrate your answer with the help of a suitable example.
Answer:
Competitive Advantage:
Competitive edge with respect to its competitor
Core competence:
Competence inherent within the company
The concept of competitive advantage means a superior position relative to competition.
There are two questions.
1.
Do I perform some function in a superior/distinctive way, compared to competition?
2.
Does the superiority/ distinction mean something in terms of customer value?
It is essentially a position of superiority on the part of the firm in relation to its
competition in any of the functions/activities performed by the firm. The
functions/activities may include R&D, production, finance, marketing etc. The
superiority may also cover the resource and capability dimension and factors like
technology. The big winners in any industry usually possess superiority/distinction in
several functions/areas.
For strategies to work, a firm must possess relevant competitive advantage. For long-term
success, the competitive advantages have to be durable. And a durable competitive
advantage can emanate only from a strength that is unique to the firm. It thus follows
that no firm can keep succeeding over the long term, without such a unique strength.
This unique strength is the subject of core competence. What we are talking about is a
durable and unique competence.
The attributes of core competence as propounded by Prahalad and Hamel are
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1.
Core competence is a fundamental, unique and inimitable strength of the firm
2.
It is largely a technological competence
3.
It is a knowledge base
Sl.No.
Name
Core competence
1
Sony
Capability for miniaturization
2
Canon
Unique strength in Optics, Imaging and microprocessor
controls
3
3M
Capability for making coatings, adhesive and substrates and
combining them in multiple ways
4
Honda
Capability of making different size engines which gives it an
advantage in diverse products like cars, motorcycles,
lawnmowers and generators
5
Dupont
Unique strength in chemical technology
Question 4.
Explain Porter’s five forces Model with the help of the example of your business school.
Answer:
Five forces that determine the intrinsic long-run profit attractiveness of a market or
market segments are: Potential Entrants, Suppliers, Industry Competitors, Buyers and
Substitutes.
Industry Competitors: IIMs, XLRI, SOM of IIT Bombay, ISB, Jamnalal Bajaj, SP Jain
Narsee Monjee, Symbiosis and several other private sector players, State universities
Buyers: Graduate students seeking a career in Management in India
Suppliers: Faculty, Books, Software companies, Hardware companies, classroom
equipment etc
Potential Entrants: Educationists setting up their enterprises, private sector companies
wanting to diversify into management education (example of ISB) etc
Substitutes: Management education abroad in USA, UK, Australia etc
Question 5.
How are the SBUs categorized in the BCG matrix? Where will you put the manual
typewriters of Godrej?
Answer:
Question Mark, Cash Cow, Stars and Dogs.
Typewriters from Godrej can be categorized as Dogs
Question 6.
How does the Dell model of SCM work?
Answer:
To start with, Dell broke up its downstream operations into three separate channels for
sales, service and delivery. Each channel has built-up competencies that are in many ways
superior to other companies in the industry. As opposed to push strategy, Dell works on
pull strategy since every link in its supply chain is linked.
Question 7.
What are push and pull strategies?
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Frequently Asked Questions in Management
Answer:
In Toyota Production System (TPS), the pull system is accomplished by KANBAN. In pull
system, the following processes go to pick up what they need to replace what they have
used up from preceding processes. An approach opposite to this / push system.
Question 8.
Can you explain the following competitive strategies with suitable examples?
Answer:
a)
Frontal attack
b)
Flank attack
c)
Bypass attack
d)
Guerrilla attack
Frontal Attack: Frontal Attack is a game for the No. 2 or No.3 company in a field. The key
principle is to find a weakness inherent in the leader’s strength and attack at that point.
1.
The main consideration is the strength of the leader’s position
2.
Find a weakness in the leader’s strength and attack at that point
3.
Launch the attack on as narrow a front as possible
Pepsi-Cola is winning the cola war with archrival Cola Cola. One major reason is that
Coke has not been effectively utilizing its strategic advantages.
Flank attack: The most innovative form of marketing warfare is flanking. Over the years,
most of the biggest marketing successes have been the flanking moves.
1.
A good flanking move must be made into an uncontested area
2.
Tactical surprise ought to be made into an important element of the plan
3.
The pursuit is as critical as the attack itself
McDonalds continues to dominate the burger business, but Burger King and Wendy’s
have made progress using some of the classic principles of marketing warfare.
Bypass Attack: This is a game for market leader only. There are three key principles to
follow, the most surprising of which is the strategy of attacking yourself and not the
enemy.
1.
Only the market leader should consider playing defense or bypass
2.
The best defensive strategy is the courage to attack oneself
3.
Strong competitive moves should always be locked
Nobody plays the marketing warfare game as well as Big Blue in Computers. But even
IBM can fall flat on its face when it tries to compete on a battleground it doesn’t own
Guerrilla attack: Most of the players in a marketing war should be guerillas. Smaller
companies can be highly successful as long as they try to emulate the giants in their field.
1.
Find a segment of the market small enough to defend
2.
No matter how successful you become, never act like the leader
3.
Be prepared to bugout at a moment’s notice
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Marketing
The beer business was in the process of consolidation in 1986, from hundreds of local
breweries down to a handful of national ones in US. At a time when the smaller
competitors should concentrate their forces, they did just the opposite.
Question 9.
Please tell us the type of industries which you would like to target to market our hotel
and why.
Answer:
One has to thoroughly understand the existing segments to answer this question since
segmentation precedes target marketing.
Question 10. What are the drivers of demand of cement products in the near future?
Answer:
This is a case of derived demand. Demand for cement depends on user industries viz.,
housing activity, infrastructure projects, tax breaks for housing activities, interest rate on
housing loans etc.
Question 11. Why are foreign players coming into cement industry?
Answer:
Size of the market, future growth potential, saturation in their domestic markets,
strength of organized players compared to their global counterparts etc.
Question 12. Explain market development, product development and market penetration strategies.
Answer:
Market penetration strategies consider gaining more market share with its current
products in their current market. Product development strategy considers whether it can
develop new products of potential interest for its current markets. Market development
strategies consider whether it can find or develop new markets for its current products.
Market penetration strategy is fraught with less risk as it capitalizes on existing
competencies. The challenges involved are (i) increasing usage rate (ii) converting nonusers into users (iii) taking away customers from the competitors.
Market development and product development are the strategies of a higher degree of
risk than market penetration.
Question 13. If I give you a totally new product and ask you to penetrate a totally new market, how
would you go about it?
Answer:
Understand the need the given product satisfies, identify the options customers have got
to satisfy the need, identify the segment that has the greatest urge to satisfy the need,
communicate to the target segment about the product, make it available at appropriate
price.
Question 14. How do markets evolve, and what marketing strategies are appropriate at each stage of
market evolution?
Answer:
Markets go through the following four phases:
Introduction, Growth, Maturity, and Decline.
Introduction: Major R&D emphasis, minimal growth in sales, rapid technological change
in the product, operating losses and a need for resources to support a temporarily
unprofitable operation.
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Frequently Asked Questions in Management
Growth: More competitors enter in the market at this stage. Factors such as Brand
recognition, product/market differentiation and financial resources to support both
high marketing expenses and the effect of price competition on cash flow become
important. IBM entered the personal computer market in the growth stage and was able
to rapidly become the market leader with a strategy based on key strengths in brand
awareness and the financial resources to support advertising
Maturity: As the product/market moves through a “shakeout” phase and into the
maturity stage, market growth continues but at a decreasing rate. The number of market
segments begins to expand, while technological change in product design slows
considerably. The result is more intense competition, and promotional or pricing
advantages or differentiation become key internal strengths. Technological change in
the process design becomes intense as the many competitors seek to provide the product
in the most efficient manner. Where R&D was critical in the development stage, efficient
production has now become critical to the business’s continued success in the broader
market segments.
Decline: Here the important factors tend to be cost advantages, superior or customer
relationships, and financial control. Competitive advantage can exist at this stage, at least
temporarily, if a firm serves gradually shrinking markets that competitors are choosing to
leave.
It is important to note that the relative importance of various functional strategies differs
across stages of Product/market evolution.
Question 15. Please give us an overview of the evolution of telecom market in India.
Answer:
For a long time state owned companies dominated this industry. Mostly they were driven
by social objectives. Cross subsidization was rampant and network penetration is abysmal.
Technologically the network was in a bad shape. This industry has seen sweeping
changes, in the post liberalization era. Customers have more options today. This industry
is also experiencing great amount of convergence, especially in the last two decades.
Question 16. What is benchmarking? Describe the steps in carrying out benchmarking in the realm of
marketing.
Answer:
Benchmarking: - Benchmarking is the process of determining who is the very best, who
sets the standard, and what that standard is.
Eg: in retail banking provision of getting bank balance over telephone.
Steps in bench marking:
1)
Determine the function to benchmark
2)
Identify the key performance variables to measure
4)
Identify the best in-class companies
5)
Measure the companies’ performance
6)
Specify the programs and actions to close the gap
7)
Implement and monitor results
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Question 17. As a marketing manager one should always be on the lookout for potential customers.
How do you know who is your target customer?
Answer:
Out-of-box thinking is very essential for this. Marketer has to answer how his offer can
satisfy the existing/modified/new need of the customer. The onus of educating the
customer about the usage of his offer in different situations is on the marketer.
Question 18. What is customer delivered value? What is a value chain?
Answer:
Customer delivered value is the difference between total customer value and total
customer cost. Total customer value is the bundle of benefits customers expect from a
given product or service. Total customer cost is the bundle of costs customers expect to
incur in evaluating, obtaining, using and disposing of the product or service.
The customer seeks a mix of benefits. The customer seeks value. The customer has to pay
a cost for acquiring this value. The cost includes the price plus other elements of cost to
him, economic and non-economic. He is happy when the value exceeds the cost he
incurs. The larger the value gap, the greater is his satisfaction. He compares the valuechain gaps of competing offers and selects the one that gives the best trade-off.
Marketing is a value creating and value delivering process
Standard Chartered Bank: The company offers global credit to all its cardholders, while
most others have country specific cards. Thus, the Standard Chartered customer gets a
substantial facility at no extra cost.
Federal express: The company allows customers to track packages through the
company’s web site. This facility has enhanced the value of FedEx’s offer for the
customer.
Porter has suggested that every activity performed by a firm creates some value, which
reflects finally in the firm’s product offer, and that these activities are linked into a chain.
He calls it the firm’s value chain. The significance lies in the fact that he views the whole
business task as a unified chain meant to deliver value to the customer.
Question 19. What are the approaches to segmentation?
Answer:
The approaches to segmentation are: Geographic Segmentation, Demographic
Segmentation, Psychographic Segmentation, Behavioral Segmentation, Multi - attribute
Segmentation and Hybrid Segmentation
Question 20. What is the basic difference between differentiating and positioning? Can you illustrate
your answer with the help of a suitable example?
Answer:
Product Differentiation refers to a strategy a company adopts to differentiate one
product (or brand) different from other product (brand) in terms of features and
benefits they offer to customer.
Eg: HMT – wrist watch offers accuracy of time.
Rolex – differs from HMT. It provides ego satisfaction to buyer (pride of possession)
For successful marketing organization, it is imperative that their product, is different
distinctive and unique.
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Frequently Asked Questions in Management
Positioning is how the product is perceived by the “Mind’s Eye” of customers. Positioning
for the product is planned based on consumer psychology.
Eg: Colgate tooth paste is positioned as a tooth paste for total protection of tooth while
Close up is positioned as the toothpaste for fresh breath
Question 21. Gap wants to introduce Kurta Paijamas for the Indian Market? What challenges does Gap
face in developing these new products?
Answer:
Major challenges could be:
1.
2.
3.
4.
5.
Lack of Consumer / Market knowledge
Low level Technology
Govt. Policies / Local constraints
Understanding the psychology of channel members
Trained / Skilled manpower
Question 22. IBM, Compaq, Zenith, HP, HCL are some of the leading PC manufacturers for the
Indian market. A Taiwan based company considers entry in the market. What are the
major attributes on which it can decide to compete by differentiation?
Answer:
Performance
Price
Brand Image
Features
After sales services
Facility upgradation/Compatibility with other systems
Question 23. What will constitute the macro environment of an oil producing and distribution
company like IOC?
Answer:
Research in the following key areas:
1)
Socio-cultural
2)
Demographic
3)
Economic
4)
Technological
5)
Politico-legal
Question 24. What is repositioning? How can you reposition Bata?
Answer:
Repositioning involves altering or changing a product’s or brand’s position in the minds
of consumers through a change in marketing communication.
Bata is positioned as a durable but costly shoe brand. To reposition itself, Bata has to
change its pricing strategy, advertising focus and perhaps the distribution strategy too.
Question 25. What are the different approaches towards positioning? How is Hero Honda positioned
vis-à-vis Enfield in India?
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Answer:
The different approach towards positioning areAttribute positioning, Benefit positioning, Use or Application positioning, User
positioning, Competitor positioning, Product Category positioning, Price positioning
and Quality.
Hero Honda is positioned in the consumer’s mind as a fuel-efficient two-wheeler for the
college-going or young male, where as Enfield symbolizes ‘macho’ image. It typifies a
rough-and-tough strength.
Question 26. Define
1.
Under positioning
2.
Over positioning
Give examples for the above positioning errors and explain
Answer:
Under positioning: Buyers have only vague idea of the brand.
Eg. Coke and Pepsi, in spite of their ads, are still under positioned leading to such trust
war
Over positioning: Buyers may have too narrow image of the brand.
Eg. Cherry Blossom as a brand is so over-positioned that consumers have not accepted
C-B shoe horns, C-B instant polish, which are mere brand-line extensions.
Question 27. What is value delivery network? How is it different from supply chain management?
Answer:
Companies partner with specific suppliers and distributors to create a superior valuedelivery network. The value delivery network is a concept broader than Supply Chain
Management. It rests on the premise that consumers need value addition through
consumption rather than just access to the products/services. Value connects customer
driven approach, rather than an efficiency-driven approach as in Supply Chain
Management.
Question 28. What are the marketing strategies appropriate for each stage of the product life cycle?
Answer:
Introduction: Skimming, Penetration
Growth Stage: Product Improvement, entry into the new market, enhancement of
distribution channel
Maturity stage: Market modification, product modification, and marketing mix
modification
Decline stage: Harvesting, Divesting
Question 29. In a competitive industry, what can a market leader do to expand, defend, and prolong
its market leadership? How have Cinthol, Cibaca tooth paste, Godrej Storewels, Onida
T.V etc., been able to do it?
Answer:
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Expand the market. Redefine the boundaries. Stimulate new customers to enter the
market. Have an abundant mentality.
Frequently Asked Questions in Management
Have courage to attack oneself. Kill your own products through introduction of new
products like the way 3M does.
The Leader defines the race. He sets the bar and becomes the trendsetter. Like Sony
does in consumer electronics.
Strong competitive moves should always be blocked.
This is the game played by the market leaders. And you find strands of this strategic
theme amongst Cinthol, Cibaca Toothpaste, Godrej Storewels, Onida TV etc.
Question 30. Give an example of any reputed company to elucidate the following terms. Mission,
Vision, Strategy, Goal, Marketing Plan and Product Plan.
Answer:
Coca Cola India
Mission: To take coke at the arm’s reach of desire
Vision: Vast potential in increasing 10 to 15 times in terms of per capita consumption of
beverage
Strategy: Building Coke brand and retail infrastructure to achieve twin objective of
increasing market size and taking leadership position in cola market
Goal: Rs10, 000 crore by 2004
Marketing Plan: Sales target and resource requirement in terms of financial budget,
manpower, logistics for a market like Delhi, or any other specific market.
Question 31. How is strategic planning carried out at the corporate and business level? Do you know
any model, used for carrying out strategic planning exercise? Can you briefly explain the
model with the help of a suitable example?
Answer:
Corporate level: SBU wise
Business unit level: Product-market wise
BCG matrix
Strategic Management Model consists of the following:
1.
2.
Strategic analysis & Choice
a.
Mission
b.
External Environment Analysis (PEST Analysis, Porter’s 5 forces analysis)
c.
Company Analysis (Value Chain Analysis, comparison with competitors)
d.
Analysis & Choice
i.
At the corporate level – BCG Matrix, GE Nine Cell Matrix
ii.
At the business level – SWOT analysis
iii.
Selection of Strategy – Selection Matrix, Model of Grand Strategy Clusters,
Ansoff’s product-market matrix
Strategy formulation
a.
LT Objectives
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3.
b.
Grand Strategies – Concentration strategy, Product development, Market
development, Innovation, Vertical integration, Horizontal integration,
Concentric diversification, Conglomerate diversification, Joint venture,
Turnaround, Divestiture, Liquidation.
c.
Annual Objectives
d.
Functional Strategies
Strategy Implementation
a.
Policies
b.
Structure
c.
Control and Evaluation
d.
Feedback
Explain by giving the example of Infosys, HLL etc
Question 32. ‘Marketing strategy is a series of integrated actions leading to a sustainable competitive
advantage’, said John Scully. Can you explain competitive advantage to a non-MBA, semiliterate dealer of yours? How?
Answer:
The concept of competitive advantage means a superior position relative to competition.
There are two questions.
1.
Do I perform some function in a superior /distinctive way, compared to
competition?
2.
Does the superiority/distinction mean something in terms of customer value?
It is essentially a position of superiority on the part of the firm in relation to its
competition in any of the functions/activities performed by the firm. The
functions/activities may include R&D, production, finance, marketing etc. The
superiority may also cover the resource and capability dimension and factors like
technology. The big winners in any industry usually possess superiority/distinction in
several functions/areas.
Competitive advantage stems from Positioning and the Value Chain tailored for that
positioning. Based on Segmentation and Targeting, typically a company adopts one of
the three positioning and in turn helps the company in deciding to adopt one of the
three generic strategies – cost leadership, differentiation or focus.
The primary and support activities in the value chain are tailored to meet that
positioning. Competitive advantage stems from the unique activities of the company in
relation to the competition. The activities have a fit and are mutually reinforcing. It is not
the individual activities but the activity system that gives the competitive advantage.
Question 33. How can an IT company practice total quality management? Explain with suitable
examples.
Answer:
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TQM is an organization wide approach to continuously improving the quality of all the
organization’s process, products, and services.
Frequently Asked Questions in Management
IT companies practice TQM through the Capability Maturity Model (CMM) formulated
by Software Engineering Institute (SEI) of Carnegie Mellon University. CMM Level
ranges from 1 to 5. At level 5, the error level is at its lowest. Higher the level, more is the
capability in the prevention of errors through matured processes.
In India, Infosys, Wipro, Satyam have achieved CMM Level 5
Question 34. Describe ‘core competence’ for the following companies. Colgate & Palmolive,
Microsoft, Haldiram Bhujiwala, SBI, Bharat Sevashram.
Answer:
Colgate & Palmolive: Branding
Microsoft: Leadership position
Haldiram Bhujiwala: Franchisee network
SBI: wide reach of its branches
Bharat Sevashram: Network and image
Question 35. What do you understand by the intensive growth strategy?
Answer:
Intensive growth strategy is used to identify opportunities to achieve further growth
within the company’s current businesses. The three intensive growth strategies are
Market-penetration strategy, Market-development strategy and Product-development
strategy.
Question 36. What are the major dimensions along which a company’s marketing offering can be
differentiated? How can you differentiate a service offering say, a banking, insurance, a
consultancy etc?
Answer:
Forms
Features
Performance quality
Conformance quality
Durability
Reliability
Reparability
Style
Design
Service differentiation
Personnel differentiation
Channel differentiation
Image differentiation
The differentiation strategy revolves around aspects other than price. A firm adopting
differentiation strategy can price its product on the perceived value of the attributes of
the offer. Differentiation helps a firm move away from price competition. In the
marketplace, firms differentiate not only on the unique features of their products, but
even on simple facts like the collaboration, location of plant etc. Firms use any particular
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one that gives them a relative advantage. To make differentiation of work, a firm should
possess relevant competitive advantages.
Citibank differentiates on its personalized service. It claims that it employs only
professionally qualified personnel and the person who answers a customer’s phone call
will be competent to solve all the problems faced by the customer.
IBM uses technology and service as its differentiation planks.
Caterpillar Tractor uses its service strength / global dealer network.
Rolls Royce, its quality
We must also appreciate that Price and Differentiation cannot remain mutually exclusive.
Jack Welch, the CEO of GE, aptly captures this idea when he says that in a highly
competitive market, a firm has to offer the best product, coming out of the best
technology, at the lowest price. In short, meaningful differentiation is competitively more
effective and enduring than low-cost production alone. When the two strategies are
combined in a single company, the results are spectacular. So the winner is one whose
offer is distinct and also price competitive.
Question 37. Differentiate between a Joint venture and a licensing as strategies to enter a foreign
market. Which is a riskier proposition? Why?
Answer:
Licensing is an entry and expansion strategy with considerable appeal. A company with
technology, know-how, or a strong image can use licensing agreements to supplement its
bottom-line profitability with no investment. The only cost is the cost of signing the
agreements and of monitoring their implementation.
The principal disadvantage of licensing is that it can be a very limited form of
participation. Potential returns from marketing and manufacturing may be lost. The
agreement may have a short life if the licensee develops its own know-how and capability
to stay abreast of technology in the licensed product area. In some cases, licensees may
turn themselves into competitors or industry leaders. This is especially true because
licensing enables one company to leverage and exploit another company’s resources.
The advantages of a joint venture include the sharing of risk and the ability to combine
different value chain strengths. One company might have in-depth knowledge of a local
market, an extensive distribution system, or access to low-cost labor or raw materials.
Such a company might link up with a foreign partner possessing considerable expertise
in the areas of technology, manufacturing, and process applications. Companies that lack
sufficient capital resources might become partners to jointly finance a project. Finally, a
joint venture may be the only way to enter a country or region if governments favor local
companies. Alternatively, there may be local laws that prohibit foreign control but permit
joint venture.
Joint ventures have their own disadvantages. The main disadvantage is the very significant
costs of control and coordination associated with working with a partner. Also, as noted
previously with licensing, a dynamic joint-venture partner can evolve into a stronger
competitor. Cross-cultural differences in managerial attitudes and behavior can present
formidable challenges as well.
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Frequently Asked Questions in Management
Question 38. A South Korean Company is going to enter Indian market very soon. They hire you as a
marketing consultant. What kind of analysis you should be carrying out for them?
Answer:
Industry analysis – Suppliers, buyers, substitutes, threat of entry, rivalry
Porter’s diamond – Related industries, Competitive rivalry, Factor conditions, Demand
conditions
Political risk analysis – Stability of government, government policies, etc.
Question 39. How has Mohans Meakins benefited with the entry of Kelloggs in the breakfast cereal
market?
Answer:
Kelloggs invested huge amounts, educated customers and created the market. Mohan
Meakins has taken full advantage and has grabbed a good market share. Essentially,
Mohan Meakins has reaped free rider advantages.
Question 40. What should be the right recourse for a typical Indian company in the confectionery
business like Parrys in the context of globalization of business? Please give examples in
support of your argument.
Answer:
It is inconceivable that Parrys will be not able to compete with MNCs who have deep
pockets. It may be better to sell off its brands for a good price now and become a
contract manufacturer for one of the global MNCs.
Eg.- Parle brands such as Gold Spot, Limca, Citra sold to Coke
Question 41. BATATA was a strategic alliance of three very reputed companies. Can you name them?
What are the factors responsible for the formation of such a strategic alliance? In
general, why would a company go in for a strategic alliance?
Answer:
Birla, AT&T, TATA
MNCs form strategic alliances for various reasons. A few of them are listed below.
1.
To access new markets – eg: Mobil’s alliance with BP to penetrate European
markets.
2.
To gain access to local distribution network – eg: P&G’s joint venture with Godrej in
India.
3.
To improve manufacturing processes and gain access to new technology– eg: HCL’s
tie up with HP in India.
4.
To gain access to management know-how – eg: Elbee’s tie up with UPS in India.
5.
To gain access to additional financial resources – eg: Nissan's tie up with Renault in
Japan.
6.
To achieve risk reduction – eg: collaborative research efforts between Siemens and
Philips in the semiconductor business.
7.
To pre-empt competition – eg: the recently announced alliance between General
Motors and Fiat.
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Question 42. What is the impact of China’s entry into WTO? Do you think India needs to panic about
China’s competitiveness?
Answer:
China has demonstrated in the past two decades that it is very competitive in the exports
of low cost manufactured items. In items like toys for example, China is a truly global
player. The Chinese are also attempting to replicate their success in consumer durables.
But in truly value added items, the Chinese are still way behind. The Chinese are also
handicapped by lack of knowledge of English. But the Chinese can never be
underestimated. They are making a lot of effort to move into high tech industries. The
overseas Chinese are playing a very important role in this regard. So, Indian companies
must take the Chinese seriously.
Question 43. Is it possible to improve both, the customer satisfaction and profitability, simultaneously?
Can you give an example for that?
Answer:
Yes, it is possible to improve both the customer satisfaction and profitability,
simultaneously.
Sony Corporation: Quality
Maruti Udyog limited: Value for money
Hindustan Lever: Brands, Distribution network
Sail: Largest steel maker of India
Taj Group hotels: Premium but unique Five star hotels
Calcutta university: Traditional and orthodox system
Question 44. Do you think satisfying 100% customers all the time is a worthwhile mission for a
company? Why?
Answer:
It is difficult to be all things to all people. The best position to take would be that of
differentiation. And this would mean segmenting the market, targeting the marketing
and positioning the product with differentiation.
The factors that allow a company or product to stand out in an increasing competitive
market-place area.
Tyranny of choice: Consumers have more choices. Companies must give customers
the tools they need in purchasing decisions, to draw them to their products.
These days the average supermarket stocks 40,000 brand items. However an average
family gets 80% of its needs from 150 brand items, which means that there is a good
chance the other 39,850 items in the store will be ignored. Those that don’t stand
out will get lost in the pack. Companies must address differentiation in 3 key ways.
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1.
If you ignore your uniqueness and try to be everything for everybody, you
quickly undermine what makes you different.
2.
If you ignore changes in the market, your difference can become less
important.
3.
If you stay in the shadow of your larger competitors and never establish your
“differentiation” you will always be weak.
Frequently Asked Questions in Management
b.
Reinventing the USP: Companies must move away from differentiation based solely
on product, and engage consumers in ways that truly reach them.
Gillette reinvents shaving every few years: with two bladed razors (Trac II),
adjustable two-bladed razors (Atra), shock-absorbent razors (Sensor) and now with
three bladed razors (Mach 3). The last product is the result of $750 million in
research, patents, testing and all-round excruciating hard work.
c.
Successful differentiation strategies: It has little to do with creativity or imagination
and more to do with a logical approach to engaging customers.
1.
Be first. Gillette pioneered razor blades and remains the leader.
2.
Maintain Attribute Ownership.
3.
Specialize in your market. Examples of Gap, Victoria’s Secret and Foot Locker
4.
Make your product in a special way. When Crest introduced its fluoride cavity
prevention toothpaste, they made sure everyone knew that it contained
Flouristan, though no one knew what that was. However, it sounded impressive.
Four Steps to Differentiation:
d.
Step 1:
Make sense in Context. Nordstorm’s idea of “better service” played
perfectly into the context of a department store market that was reducing
its people and service as a way of cutting costs.
Step2:
Find the differentiating idea.
Step3:
Have credentials. As the world’s favorite airline, British Airways should fly
more people than any other airline.
Step4:
Communicate your difference
Growth and Sacrifice in Differentiation: Growth can kill differentiation by tempting
companies to thin out their product lines in search of mass acceptance. The
negative effects are very well explained in two key ways.
1.
The company becomes distracted
2.
The company overextends its product lines. McDonald’s, for instance, built a
successful business on inexpensive, high-speed cheeseburgers.
3.
When the company decided to branch out into pizzas, chicken and kid’s menu
items, its growth slowed and its hold on the fast food market weakened. When
you study categories over along period of time, you can see that adding more
can weaken growth, not help it. The more you add, the more you risk
undermining your basic differentiating idea.
Pursue profitable growth. And not growth for growth’s sake
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