Business Policy and Strategy - Strategic Management - ICFAI Solved assignments and papers

 

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Business Policy and Strategy / Strategic Management

 

·       Section 1: Caselets (30 Marks)

·       Read the Caselets and Answer All the Questions

 

Caselet 1 (15 Marks):

 

In 2002, the South African brewing major South African Brewing Company (SAB) acquired one of the leading brewing companies of the US - Miller Brewing Company (MBC) - to form SABMiller, Plc (SABMiller). In the 1970s, MBC was an aggressive player in the beer market but gradually lost its edge by the late 1990s. Though it was one of the oldest and most renowned brewing companies in the US, the period between 1990 and 2002 saw stagnation in the sales of MBC, while its arch rival Anheuser-Busch (AB) went from strength to strength. While MBC was finding it hard to increase its beer sales beyond 43 million barrels throughout that decade, AB increased its beer sales by around 27.9 million barrels between 1999 and 2002. MBC's new product launches, such as 'Miller Clear' beer also failed to make an impact in the market. Its relationship with distributors also deteriorated. In 2002, MBC showed a 1.25 percent decline in revenues as compared to 2001.

SAB, which took over MBC, had a strong focus on resourcefulness, integrity, drive, and excellence. The company maintained this culture globally through a Performance Management (PM) system. Shortly after the acquisition of MBC in 2002, the management at SABMiller realized that a lot needed to be done to develop the performance culture within MBC in line with the organization. Norman Adami (Adami), a veteran at SAB, was sent to MBC to transform it.

Adami had joined SAB in 1975 and had held a number of senior positions including Regional Director, Operations Director, Managing Director and Chairman, at SAB. Before coming to MBC, Adami headed SAB for nine years. On joining MBC, he was appalled by the "tolerance for mediocrity" prevalent in the organization. The existing PM system was not much of a challenge for employees. According to him, there was no accountability and executives were rewarded regardless of their performance. For instance in 2001 and 2002, when the group's performance was at its nadir, 55 percent and 61 percent of managers got a '4/5' or '5/5' rating respectively. Targets were not taken seriously since underperformance was not punished. People were activity-oriented rather than being result-oriented. They were rewarded for completing activities and there was no correlation between business performance, individual performance, and reward. That is why Adami called the culture prevalent in MBC, “The Socialist Republic of Miller”. Analysts felt that the MBC staff did not even have an adequate awareness about the dynamics of the beer industry. Adami called it a "moribund" culture. Though he felt that MBC was suffering from problems that were fundamental and deep-rooted, he felt that things could be streamlined. "We've got to break out of the cycle of a tolerance for mediocrity. It's about instilling a will to win. We have people who are determined to win. We've got to give them the space and create the environment for them to play the game."

Mobilizing and invigorating the organization and its people to instill the performance culture at MBC was one of the four components of the turnaround plan. The other three were - building brands and shaping the portfolio, getting sales and distribution right, and cutting costs and raising productivity. As part of a restructuring program that took about one year, "dead wood" (i.e. underperforming employees) was removed as MBC transformed into a leaner organization and towards a performance-oriented culture. But Adami did not try to implement the culture of SAB in MBC in toto. According to Adami, bringing about a change in culture involved engaging the hearts and minds of all the employees. It had to go beyond business and touch the employees on a personal level, giving the employees a feeling that whatever they were doing makes a difference. One of the first things Adami did was to build a pub 'Fred's Pub', named after the company's founder Frederick Miller, in MBC's Milwaukee headquarters. He was criticized for this move by some people in the company. This "out of the box" move was undertaken in order to instill a sense of pride in the employees and break down hierarchical barriers. “We work for a brewing company. We need to be proud of what we stand for, of what we do as a company. We need to be knowledgeable about what it is that we do," explained Adami.

Adami believed that opening the pub would be one step in enabling change. In the pub, people from different departments and different positions could talk to each other in an informal atmosphere. Adami frequented the pub too, and he felt the pub helped the management to "connect the dots" as it provided a way to stay in touch with the realities of the business. It also helped as a channel to get the perspective of employees on various issues and gave them access to the senior management. Adami also decided to set up the Beer University. All the company's employees had to undergo a one-day course. "It's a way to build a passion and let people remember once again what we're all about - beer," said Virgis W. Colbert, a director of MBC. The employees smelled hops and discovered for themselves the difference between pilsner and ale. They were also reminded that the yeast their company used in making beer descended directly from the batch brought over from Germany in 1855.

In addition to this, Adami imported heavily from the "SAB Ways" to put in place PM systems that would make employees more accountable. Apart from realigning the organization, the management moved toward top-down goal setting. A sense of urgency was inculcated and people were evaluated against their goals. The performance reviews also became tough, and performance was directly linked to pay. There was an extensive drive to recruit the right kind of people for key jobs, and selective training was provided to employees to build a talent pipeline for succession planning and cover.  Analysts noted that after two years of rigorous implementation, there was a visible change in MBC's culture and performance results. For the year ended March 31, 2005, for the first time since 1998, MBC posted growth in retail sales and domestic shipments. In 2005, Miller Lite grew 3.2 percent, whereas the sales of its main competitor Bud Light, from AB, were stagnant. The year 2005 also saw the first profit decline for AB in a decade. AB's operating income in 2005 fell by 22 percent, to US$2.6 billion.

After the three year "turnaround phase," MBC entered the "step-up" phase. This involved maintaining the growth of the Miller Lite brand as well as resurrecting other brands in its portfolio such as Miller Genuine Draft. Analysts felt that the situation was particularly tough as it faced cut-throat competition from the wounded giant AB. Adami commented: “The turnaround phase was a tough period. There was a lot of fear from people, trepidation. The next phase is just as tough.” However, the management at SABMiller felt strongly that the people at MBC would deliver the goods. According to the company, despite the challenges posed by the competitive environment, MBC would continue its upward trend due to its emerging performance culture. Analysts attributed this reversal of fortunes to the arrival of Adami at MBC. They credited Adami with bringing around this turnaround by changing the mind-set at MBC with his "able challenger" approach. According to SABMiller, MBC had become a potential challenger to AB, the market leader in the US, and used the phrase 'able challenger' to describe the required competence and capability MBC had, to give the market leader a tough fight, as to project itself as a strong contender.

Answer the following Questions:

A. Discuss the various factors responsible for poor performance of MBC. (7 Marks)

Answer : The Miller Brewing Company is an American brewery and beer company in Milwaukee, Wisconsin. In 2016, Molson Coors acquired the full global brand portfolio of Miller Brewing Company.

SABMiller plc is one of the world's largest brewers with brewing interests and distribution agreements across six continents. The group's wide portfolio of brands includes premium international beers such as Grolsch, Miller Genuine Draft, Peroni Nastro Azzurro and Pilsner Urquell, as well as market-leading

 

 

B. Examine the steps taken by Adami to increase the competence and capability at MBC to withstand in the competition. (8 Marks)

Answer: Mr. Adami, 48, has spent nearly a decade as chairman of SABMiller's South African operations. Colleagues describe him as "tough and gruff." During an interview, Mr. Adami said he was determined to bring SAB's culture of discipline and performance to Miller.

 

 Mr Adami faced one of his biggest challenges. Before SABMiller’s arrival, Miller was still clinging to a “command and control” system for distributors, the legacy of a time when most Miller distributors sold only Miller

 

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Caselet 2 (15 Marks):

 

Nokia had always been at the forefront in coming out with products that would cater to the needs of the Indian consumers. While it focused on launching products for the urban market, it also focused on serving the rural population. In 2002, Nokia announced its emerging market strategy under which it planned to lower the initial costs of owning a mobile phone in addition to lowering the operating costs. This was a bid to enable the rural customers to reap the benefits of mobile telephony.

Taking its rural thrust forward, Nokia planned to offer Value Added Services (VAS) through its mobile handsets to the rural consumers. The company felt that adding content that would benefit the rural consumers while offering the mobile handset at an affordable price would help it further tap the rural market. In 2008, the company adopted a ground-up approach and the Emerging Markets Services research team at Nokia did extensive research on the lives of rural consumers, the services accessed by them, and the areas that needed improvement. The research team found that the rural markets faced several constraints related to infrastructure, distances, cost, and the vast number of local languages. The team then concluded that the rural consumers had little or no access to information on agriculture and education. The farmers had to go to the markets several times to get to know about the crops and the market prices of seeds, fertilizers, pesticides, etc. Moreover, they had to deal with unscrupulous agents who often cheated them due to their lack of knowledge and education. Students also suffered since they could not gain the required educational material for their exams due to lack of resources and the erratic Internet connections in villages. The company felt access to the Internet would improve the lives of people living in such areas since they could get the information they needed. However, the cost associated with buying a PC posed a big challenge. The team said that most of the rural consumers they interviewed expressed their desire to get such information on their mobile phones.

Based on the recommendations made by research team Nokia started the Nokia Life Tools (NLT) service. NLT offered rural consumers access to a range of information in the areas of agriculture, education, and entertainment. The pilot program was enabled on the Nokia 2600 and the Nokia 1680 models priced at Rs. 3,000 and Rs. 2,560 respectively and was offered in three languages - Hindi, Marathi, and English. The program ran for four months and the results were revealed in April 2009. The users using the 'agriculture' module said that they could get to know about the market rates that were being offered for their produce.

Buoyed by the success of the NLT pilot program, Nokia launched the service commercially in Maharashtra, on June 12, 2009. The company signed a Memorandum of Understanding (MOU) with the Maharashtra State Agriculture Marketing Board (MSAMB). Under this agreement, the MSAMB sought to offer knowledge on commodity prices from their 291 local mandis (market yards). Nokia also collaborated with the Indian Government in conjunction with multiple partners and NGOs to deliver information through its NLT service. The private collaborators extending their support to Nokia comprised Idea Cellular Ltd. (Idea Cellular), Reuters Market Light (RML), Syngenta India Limited (Syngenta), Pearson Education India (Pearson), and OnMobile Global Ltd. (OnMobile). Idea Cellular was the first GSM operator in India to collaborate with Nokia for the NLT service.

The NLT services utilized an icon-based, graphically rich user interface that consisted of tables and displayed information concurrently in two languages. SMSs were used to deliver the information easily. The NLT service was offered through two Nokia models - the Nokia 2323 classic and the Nokia 2330 classic priced at Rs. 2,500 and Rs. 3,076 respectively, in three areas such as agriculture, education, and entertainment. The user had to subscribe to each of the services in order to access the information. After subscribing to the service, the user could use it seamlessly. The NLT supported only three languages - Hindi, English, and Marathi during the pilot program, but after its commercial roll-out, the handsets supported other languages such as Punjabi, Gujarati, Bengali, Kannada, Malayalam, Tamil, and Telugu as well.

Users could subscribe to the 'agriculture' module through their Nokia handsets. The service offered two plans. The first plan was a basic one that was available at a rate of Rs. 30 per month. Under this plan, subscribers could get daily updates on the weather, market prices, information related to seeds, fertilizers, pesticides, etc. In addition to the basic plan, a premium plan was provided at a subscription rate of Rs. 60 per month. In this plan, the subscriber could choose to get the closest market prices of three crops selected by the subscriber, in addition to news, updates, and tips on agriculture. The basic plan was to be made available throughout the country while the premium plan was to be made available only in 10 states including Maharashtra. RML was the exclusive provider for the content in the pilot program and also continued to provide the content in the 'agriculture' module.

The 'education' module comprised three service components - learning English with basic, intermediary, and advanced levels; tips on exam preparation for state-boards, ICSE, and CBSE boards, and general knowledge, through which the subscribers could get to know about the world around them. The education services were offered at a subscription of Rs. 30 per month. In addition to the language learning lessons and general knowledge, the students also received career guidance, tips on exam preparation, and exam results. The content was offered through Pearson.

Through its 'entertainment' module, Nokia enabled its subscribers to personalize their phones by tuning in to the latest ring back and ring tones. People could also enjoy jokes, news, and cricket scores, in addition to availing of the astrology service. The entertainment services were offered at existing prices charged by Nokia throughout the country that ranged from Rs. 6 per minute for every download to Rs. 30 for every download of a ring tone. The content was aggregated and brought on the mobile through OnMobile.

Analysts appreciated Nokia for its efforts to serve the rural consumers. They lauded Nokia for launching VAS (which, till then, had been mostly offered to the young urban customers) through its mobile phone for the rural people. They said that the NLT service gave farmers an opportunity to gather information relevant to the cropping cycles. They could access information related to the weather that helped them to plan work that depended on the weather conditions. They also said that the farmers could spend their money wisely by getting to know information related to fertilizers, pesticides, and seed, and that this would help them to improve their productivity and increase their earnings.

Some industry experts pointed that with the information on hand; the farmers could deal more effectively with the agents besides saving on time and money as they did not have to go to the market to get access to the latest rates. They also commended Nokia for its 'education' module that sought to help students who aspired to learn English and gain general knowledge.

One of the biggest challenges that Nokia faced with its NLT service was in offering timely and accurate information to the subscribers, according to experts. Some experts also felt that the growth of this service would be limited since it was offered only in some areas such as agriculture, education, and entertainment. They also opined that though the NLT services sought to offer an array of benefits to the rural consumers, the affordability of the handset still posed a significant challenge. Nokia, however, maintained that it had launched low-cost handsets targeted at the rural consumers. It added that it was considering entering into deals with microfinance institutions to offer easy financing options to make the mobile handsets affordable to the rural consumers.

Nokia, however, maintained that by launching NLT, it aimed to overcome constraints related to information and to contribute toward employee empowerment by enabling them to make informed decisions. It also said that it planned to bridge the digital divide prevalent in emerging markets through this service. Experts felt that Nokia's strategy of using VAS to sell its handset sales would succeed in emerging markets, as these handsets could serve as the main way to access the Internet in countries where most people did not have access to PCs. However, they also felt that this strategy was bound to fail in more developed countries where Internet usage was well defined.

 

Answer the following Question:

A. Taking its rural thrust forward, Nokia planned to offer Value Added Services (VAS) through its mobile handsets to the rural consumers. Discuss various factors that motivated Nokia to offer such services to the rural customers in India. (7 Marks)

Answer: “Filling in the information gaps in agriculture and education with Nokia Life Tools, we strive to contribute towards empowering people with the right tools to help them make informed decisions in their daily lives. Nokia Life Tools was developed to help bridge the Digital Divide in the emerging markets."

- Jawahar Kanjilal, global head of Emerging Market Services at Nokia Corporation (Nokia), in November 2008.

"There were many in the rural and

 

B. Explain how the Nokia Life Tools (NLT) service would benefit concerned stakeholders. What are the challenges that Nokia faced with its NLT service? (8 Marks)

Answer:  NLT is offering a wide range of unique, innovative and up-to-date Education services and Agriculture information that is targeted for the rural customers. Under the NLT services, the customers can choose from various kinds of information or service that they want to gather from this platform. The main services available for the customers are as follows:

NLT Agriculture services – The main aim is to plug all information gaps and requirements of the farmers through their mobile devices. The customers such as farmers are provided the information about fertilizers, seeds, market prices,

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Section 2: Applied Theory (20 Marks)

Answer any One Question:

1. ‘According to Michael E. Porter, the five forces, namely, the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the rivalry among existing players and the threat of substitute products, play a vital role in shaping the company’s future.’ In this context, examine the various circumstances where the bargaining power of buyers and suppliers is high.

(Or)

Answer: What is Bargaining Power of Suppliers?

The Bargaining Power of Suppliers, one of the forces in Porter’s Five Forces Industry Analysis Framework, is the mirror image of the bargaining power of buyers and refers to the pressure that suppliers can put on companies by raising their prices, lowering their quality, or reducing the availability of their products. This framework is a standard part of business strategy.

The bargaining power of the supplier in an industry affects the competitive environment and profit potential of the buyers. The buyers are the companies and the suppliers are those who supply the companies

 

 

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