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1. Module Title
……………………………………………………… 02
2. Instruction Sheet ..
…………………………………………….. 03
3. Questionary Sheet
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4. Table of Content
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6. Answer to Question – 1
……………………………………. 07 - 19
7. Answer to Question – 2
……………………………………. 20 - 28
8. Answer to Question – 3
……………………………………. 29 - 35
9. References
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MSc in Engineering Business Management
University of Warwick
UK
Total Marks
Marks Awarded
Question 1
Question 2
Question 3
Question 4
Marks Awarded
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CII - WMG
Course Administrator
Mr. S D Puranik
Executive Director
CII Naoroji Godrej Centre of Excellence
Godrej Station-side Colony
Opposite Vikhroli Railway Station
Vikhroli (East)
Mumbai – 400 079
3. Please include the Cover Sheet, the Instruction Sheets and the Question Sheet
alongwith your Answers.
SUBMISSION DATES:
6. The last date for receipt of PMA at CII Naoroji Godrej Centre of
Excellence for the module on Business Strategy & Strategic Management
held during 8 – 12 February 2010 is 29 March 2010.
LATE SUBMISSION
7. 3% per working day will be deducted for late submission, up to two weeks
(14 days) late, after which no credit will be awarded.
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MSc in Engineering Business Management
WMG, University of Warwick, UK
Q1. Select a large company from an industry with which you are familiar, or alternatively
a strategic business unit or functional department within the company.
Write a brief introduction, describing the history, purpose and organisation of the company
or business unit. Describe the products/services and markets with which it is involved.
Using the Internal Factor Evaluation Matrix and External Factor Evaluation Matrix
formulate a simple strategic audit of the company or business unit.
Q2. How are the SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix and Grand Strategy
Matrix similar? How are they different?
Q3. What are the major advantages and disadvantages of an integrative strategy?
Q4. Analyse the business model of a company of your choice, describe the company’s core
competencies and threshold competencies.
Care should be taken with regard to structure, content, critical analysis and original
comment.
Relevant course material, strategic models and appropriate references (including
websites) should be included.
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Table of Content
No. Of Contents Page
Content No.
1.1 Introduction - Problem Defination 07
1.2 History of Organisation 07
1.3 Present Status of Organisation 10
1.4 Vision statement of LOPSPL 15
1.5 Mission statement 15
1.6 Analysis based on Audit point 15
1.7 Conclusión & Suggestión 19
2.1 Introduction - Comprehensive Strategy 20
Formulation Framework
2.2 Theory of Different Analytical Tools 21
2.2.1 SWOT Matriz 21
2.2.2 BCG Matriz 22
2.2.3 Internal External (IE) Matrix 24
2.2.4 The Strategic Position and Action Evaluation 25
(SPACE) Matrix
2.2.5 Grand Strategy Matrix 26
2.3 Analysis 27
2.4 Conclusion 28
3.1 Introduction of Integrative Strategies 29
3.2 Vertical integration 31
3.2.1 Disadvantages of vertical integration 33
3.3 Horizontal Integration 33
3.3.1 Disadvantages of Horizontal integration 34
3.4 Conclusión 35
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List of Tables & Fig
ures
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1 2.5 The SPACE Matrix 26
4
1 2.6 The GRAND Strategy Matrix 27
5
1 3.1 The Five Tasks of Strategic Management 29
6
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1.1 Introduction Problem Defination:-
First chairman Late Mr. Kalgonda Patil had started small repair
workshop in out skirt of Solapur city. He was true visionary
leader. According to Carinne Mc Laughlin [2] “Visionary leaders
are the builders of new dawn, working with imagination, insight
& boldness. They present a challenges that calls forth the best in
people & bring them together around shared sense of purpose”
It was in mid 60’s, when there was much boost for agricultural
sector because of third 5th year plan of central govt (which was
majorly based on agricultural development). Increasing demand
of diesel engine driven pump sets for agricultural sector had
given the opportunities to start the manufacturing unite, and
“Laxmi Engineering Works” (former name of LOPSPL) was came
in existence. Initially manufacturing of pump sets was started
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with limited resources. But soon it was realized the necessity for
backward integration. The main raw material was Cast Iron
casting for pump set was not readily available in near by places
because of geographical location. Dependence on foundry
supplier located outside the state, become hindrance for
increasing the capacity. For captive consumption Cast Iron
foundry named Laxmi Foundry was started in year 1969.
After early sad demise of Mr Kalgonda Patil (1970) his son Mr.
Jaykumar Patil was the chairman of the group. As a strategic
leader he pursued the vision of his father & expanded the group
further. During the wealth creation process he nurtured
technical & managerial skill of his two young brothers who joined
him after graduation study of engineering in mid seventies.
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Fig 1.1 shows year wise growth of Laxmi group, which has
started from one unite in year 1965 to multidivisional group of
having turnover around 160 carores in year 2008-09.[4] During
this growth process the resources of base unite were used
effectively for development of different product. And once the
product is established then separate facilities were created to
facilitate the growth of individual unite. Fig 1.2 shows how
different alternate strategies were used to cope up the growth
model adopted. This model worked well up to 1990. During late
nineties Indian economic structure had changed drastically.
Because of adoption of partial open economic policies by
Government their was lot of turbulence in industry. Protection
for SME sector has removed. SME need to compete with new
entrant of multi national. Trade union activities had increased.
In year 1991, three months long strike had put the strategist on
back foot. They had to think for the change in the business
model itself for the survival.
R a w M a t e P r ri a o l c e s s i n g A s s e m b l y M a r k e t i n g
-L a xH m y id r a u l i cL s a xP .m L i t d S . a l e s
L a x m i F o u n L d a r xy m i -L a x m is OL t i d l .E C n og
E n g i Wn e o e r r k i- L n s r i pn oe r a t i o n
ag x m i D r a u k e n
K o m p o n e n t s
L R a ax w m Mi G a t r e o r ui a p l
Fig. No. 1.3 Integrated Business Model
P r o c e s s i L n ga x m i L a x m i L a x m i OL x ai lm i D r a u k e n
& E n g i n e e r Hi n u g d r a u l iE c ns g i n e s K L ot d m p o n e n t s
A s s e m b Wl y o r k s P v t . L t d .
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C u s t o m e r
Fig. No. 1.4 Business Model After De-Integration
Fig 1.3 & Fig 1.4 shows the two different models adopted by
group. Earlier each unite was interdependent, marketing was
centralised. But after 1990 the decision was taken to become
self sufficient unite. External forces like Govt policies, Interest
rate, trade union activities had compelled. Chairman, to take
decision of making every division as a separate profit centre.
There was lot of internal forces too for this reform like internal
transfer pricing, debt recovery, leadership conflicts etc.
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With exploring the expertise in pump manufacturing and
experience gained in automobile, new product Lube Oil pump
was developed in year 1999. The unite gained acceleration in
developing various models to supply as OE to engine
manufacturer. In 2002 partnership firm (Laxmi Engineering
Works) was converted into private limited company named
Laxmi Oil Pumps & Systems Pvt Ltd.
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Fig 1.5 LOPSPL’s Sales Growth
C
L M
M
C BE
I
LG
E
P
K
IL
C
CIL
KOEL
O
WFO
F
W
KPCL
BEML
KMC
ELGI
L
E
O
K
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Growth of LOPSPL’ s turnover is shown in fig 1.5 [4] And
customer with it’s business share are shown in fig 1.6 [4].
Kirloskar Oil Engines Ltd. Pune and Cummins (I) Ltd are major
customers located at Pune & Kolhapur. Solapur is being placed
within vicinity of their production facilities it gives location
advantage to set up vendor manage replenishment system with
better logistics. For many models of pumps, ‘LOPSPL’ is single
source for these customers. In most of the cases the design of
the pumps were given by customers, but the recently this trend
is changing and customers are looking for “complete solution”
for cooling systems which forces the need to develop in house
design centre for LOPSPL. Considering the present plant
capacities 80% capacities are already booked by present
customer and for nearly 15% of capacities, contract are in hand
for which product are in development stage. For further
expansion LOPSPL needs to plan for infrastructure development
like plant and machinery etc.
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consumers mainly during peak hours. MSEB has estimated that
the energy requirement will increase from 59295 MU in 2001-02
to 87262 MU in 2011-12 and peak demand from 9893 MW in
2001-02 to 14104 MW in 2011-12. This would necessitate
further investments in generation sector estimated at Rs. 11,905
crores over the next 10 years. In addition, it is essential to
modernize and expand the transmission and distribution system.
The sector also needs to keep up with technological
developments. The total requirement of funds for investments in
generation, transmission and distribution is estimated to be Rs.
30,475 crores in the next 10 years”.
LOPSPL has got 11% market share in lube oil pump domestic
market which has increased from 2% in the year 2002. Though
they have entered in global market the presence is negligible in
the export market and left with good potential. Recent economic
recession had put the cap on development of new market. Giant
engine manufacturers are eager to enter in to Indian market.
Some of them have already started manufacturing plants in
India (“MAN DIESEL ENGINES”) and are looking local supplier for
the components and assemblies. Manufacturers from US &
Europe prefer China over India as preferred source for
manufacturing. Fig 1.7 & Fig 1.8 gives the data showing
competitive advantage of both the countries.
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Fig. No. 1.7 Outsourcing : Relative Ranking For Countries, 2003
Fig. No. 1.8 Outsourcing : Relative Ranking For Countries – Snapshot Matrix,
2003
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to “Through Put” word which provides better decision rule for
accepting smaller batch qty order. LOPSPL has setup separate
cell for product development which is geared up to shorten the
development lead period with using Project management tool in
“TOC” All the managers and department heads are nurtured
with training on “5 focusing steps” . And their performance is
measured with scale of global matrix of “T”, “I” & “OE” [8] in line
with the objective.
Apart from the ISO 9000-2008 system certification, unit has got
“Classification” approval which is mandatory for the assemblies
which goes in ship building equipments. Also many six sigma
projects are identified to increase the internal efficiencies &
effectiveness of the process.
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We will achieve this through continuous improvement in all
spheres of our working.” [10]
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POSITIVE/ HELPFUL NEGATIVE/
HARMFUL
to achieving the to achieving the
goal goal
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5) Sum the weighted score to result total EFE score.
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Total 1.00 2.84
Table No 1.2 External Factor Evaluation Matrix for LOPSPL
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3 Old infrastructure gives bad first impression 0.07 1 0.07
Conservative management view of family 0.06 1 0.06
4
owned business
5 Internal fund generation is limited 0.04 2 0.08
6 Material to sale ratio is increasing 0.04 2 0.08
7 Product realisation cycle is very high 0.02 2 0.04
8 Less inventory turns increases inventory cost 0.03 2 0.06
Old workers not having modern skills are not 0.02 2 0.04
9
easily replaceable
Logistics is always problem due to low batch 0.04 2 0.08
10
qty.
Total 1.00 2.61
Table No. 1.3 Internal Factor Evaluation Matrix for LOPSPL
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alternate strategy like back word integration for supply of
gears /casting can be worked out.
comprehensive S t a strategic
g e 1 : formulation framework. The whole
T h e I n p u t E x t e r n a l F a c t o r E v a l u a t i o
process can be S t adivided
g e in to three stagesM as a t r shown
i x ( E F E in) Fig 2.1.
I E M a t r i x
G r a n d S t r a t e g y M a t r i x
S t a g e 3 : Q u a n t i t a t i v e S t r a t e g i c
T h e D e c i s i o n P l a n n i n g( Q M S aP t Mr i x)
S t a g e
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Fig. No. 2.1 Comprehensive strategy formulation
frame work
2.2 Theory of Different analytical tools:-
According to Robert Grant [14] “Strategy is sometimes defined
as match an organisation makes between its internal resources
and skill, and opportunities and risks created by its external
factors”
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Strengths are those resources or capabilities of organisation
which can be utilised to built competitive advantage. Scare
resources, technical knowhow, experienced work force, strong
brand name are few examples.
Strengths Weakness
Opportunit
S-O strategies W-O Strategies
ies
The out come of this matrix may result in one or more strategy
of four types. S-O strategy are those which can be built with
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using the organisations best strengths for utilizing the available
opportunities. S-T strategy uses organisation’s strength in
reducing the effect of external threats. W-O strategy focus on
improving the internal weakness of organisation in order to meet
the external opportunities. Some times opportunities are
knocking the door but internal weaknesses prevent the
organisation from grabbing it. W-T strategies are defensive
actions to avoid the external threats and reducing internal
weakness.
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Fig No. 2.3 The BCG Matrix
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attractiveness also divided in low (1.00 to 1.90), medium (2.00
to 2.99), high (3.00 to 4.00). With those divisions total nine cells
are formed. As illustrated in Fig No. 2.4. All the divisions are
marked with circle with same understanding as in BCG matrix.
Cell formed by 1, 2 & 4 are called as ‘Build and Grow’ region. All
Intensive and integrative strategies are guide line for this cells.
Cell no. 3,5 & 7 forms the region called ‘Hold & Maintain’, Market
penetration and product development may be the alternatives
.And finally cell 6, 8 & 9 are called ‘Harvest and Divest’ which
indicate weak position in hostile environment.
T H E I F E T O T A L W E I G H T E D S C O R E
G r o w a n d b u i l d S t r o n g A v e r a g e W e a k
3 . 0 t o 4 . 0 2 . 0 t o 2 . 9 9 1 . 0 t o 1 . 9 9
4 . 0 3 . 0 2 . 0 1 . 0
H i g h
3 . 0 t o 4 . 0 I I I I I I
T H E 3 . 0
E F E
T O T
A L M e d i u m
W E I G H 2 . T0 Et o D 2 . 9 9 I V V V I
S C O R E S
2 . 0
L o w
1 . 0 t o 1 . 9 9 V I I V I I I I X
1 . 0
H o l d a n d m a i n t a i n H a r v e s t o r d i v e s
T h e I n t e r n a l- E x t e r n a l ( I E ) M a t r ix f o r H a r r a h ’s ( 2 0 0
Fig. No. 2.4 The Internal-External (IE) Matrix for Harrah’s (2004) (Based on
Region)
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can choose from various factors which make up the axis of
SPACE Matrix, from Table No. 2.1
Table No. 2.1 Example Factors That Make Up the SPACE Matrix
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Fig. No. 2.5
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Fig. No. 2.6
2.3 Analysis:-
The strength of SWOT lies in its simplicity and experienced
application. It is very quick, easy and intuitive. It is not the
analysis but summary of the analysis done in previous step. This
gives the understanding of organisation and situation. Once it is
done properly it gives border picture of most important factor
that affects the survival, growth and existence of an
organization. Simultaneously it is very subjective and results
may influenced by the ability and experience of the participant.
External threat from one’s perception may be is opportunity
from other’s view, hence the outcome of all individuals may
different and leaders must play a decisive role.
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Matrix making it snap shot at a given time. Synergy between
different organisations is neglected during this analysis.
2.4 Conclusion:-
During the second stage of strategy formulation framework the
focus is on generating feasible alternate strategy by aligning
key external and internal factors. Five analytical tools like SWOT
Matrix, BCG Matrix, IE Matrix, SPACE Matrix and Grand strategy
Matrix are used either in combination or in isolation depending
up on the situation. Though there are some similarities in these
tools each tool has unique advantage for particular organisation
in given situation. Various alternative strategies selected
through these stage can be further evaluated in stage three i.e.
‘The decision stage’.
3.1 Introduction of Integrative Strategies:-
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While studying the various integrative strategies it is inevitable
to study the total structure of strategic management model.
According to Richard D. Irwin [18] there are five task of strategic
management as shown in Fig. No. 3.1.
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Strategy Definition Example
Forward Owning / gaining "Laxmi" group had set up
Integration control of further the marketing
process in the supply organisation to sale of
chain product direct in to
market with putting
different branch offices
and dealer network
Backward Owning / gaining Manufacturing of casting
Integration control of upward was started which is raw
process in the supply material for pump unit
chain, like raw (LOPSPL).
material supplier /
transporter
Horizontal Establishing the Small company supplying
Integration control over shell core has taken over
competitor's unite by "Laxmi" group
Market Increasing market "LOPSPL" offered quantity
penetration share for existing discount for increasing
product with extra the market share
efforts
Market Developing new "LOPSPL " had entered in
developme territory for exiting to European market
nt product
Product Expansion of product New N14 series pumps
developme range were developed for
nt Cummins (I) Ltd.
Related Developing/ adding of Manufacturing of Priming
Diversificat new but related pump used in compressor
ion product. industry.
Unrelated Addition of new but "Laxmi" group entered in
diversificati unrelated product / to selling of two wheeler.
on services
Retrenchm Regrouping through Water pump unite and
ent cost & asset reduction. Electric motor units and
merged in one single
unite in order to reduce
the cost.
Divestiture Selling a Division or "Laxmi" group sale out
part of unite the casting division in
Page 34 of 44
1997
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concludes that textile industries will generate 12.02 million
direct and 5.36 million indirect jobs by 2012. Various levels of
vertical integration are present in a textile industry and thus
require a variety of manufacturing processes and management
requirements. Bhilwara possess cutting edge industrial solutions
with special emphasis on textile ancillary” [21]
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increases the barriers to potentially new entrant. With vertical
integration organisations can leverage the economics of scale.
Prime view (Kindle Manufacturer) buys E INK is an example.
“Taiwan-based Prime View International has signed a definitive
agreement to acquire E Ink Corporation for approximately US
$215 million, the two companies said in a joint statement on
Monday. Prime View and E Ink will become a dominant force in
the growing electronic reader segment. Prime View
manufacturers Amazon's Kindle and a number of other products,
and E Ink has developed the digital-ink technology that makes
electronic readers easier on the eyes compared to traditional
computer screens. They support about 20 manufacturers
worldwide, according to a statement. Prime View has been
building a dominant position in the electronic reader segment
since it acquired the e-Paper business of Philips Electronics in
2005” [24]
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3.2.1 Disadvantages of vertical integration:-
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another one having the same type of product / services is called
horizontal merger / integration. The main objective behind this is
the economy of scale. This can be achieved by expanding
internally or externally with avoiding duplication of production
process, assets and service by acquiring or mergers.
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ArcelorMittal have taken in post merger integration activity. The
objectives set are
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3.4 Conclusion:-
Though there are merits and demerits of this strategy one can
not overlook this great tool while doing the strategic
management. For small organisations economy decide the fate
but this strategy gives light in the dark. For the large
organization to manage growth exponentially this strategy gives
cutting edge solutions.
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Reference List
[1] “LAXMI” a group of companies, privately owned, located at
Solapur & Kolhapur manufacturing various products under brand
name “LAXMI”
[9] & [10] ‘Vision Statement ‘ and ‘Mission Statement’ with kind
courtesy taken from LOPSPL’s quality Manual
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[13] F R David “Strategic Management” Concepts ( Eleventh
Edition ) Chapter 6 – page 218
[15] Rowe, A., Mason, R., Dickel, K., and Mann, R., (1994),
Strategic Management: A Methodological Approach, Reading,
MA, Addison Wesley.
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[25] Don Tapscott “ Vertical Integration Spells Danger For Indian
Companies” The Financial Express. Posted Monday , Feb 17,
2003.
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