Text book: Johnson & Scoles.

Readings for S8-10: CHAP_05 Cases: Growth strategy for Fenesta

Strategic Management S8
New Delhi, Sep 2012

Saurabh Agarwal, MBA (INSEAD) Independent Consultant Mob: +91-9560453234 Email: saurabh@saurabh-agarwal.com
CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of Saurabh Agarwal is strictly prohibited

Agenda

Outline for next 7 sessions (5 min)

Intro to BU strategy (15 min)

BU strategy Profitability case (15 min) Fenesta case (75 min)

Outline for remaining sessions

S8: BU case - Fenesta S/L and Analysis plan S9: BU case Class to present Fenesta Analysis results

S10: BU case - Fenesta Synthesis and Final recommendation

S11: CS case - MG S/L and Analysis plan S12: CS case Class to present MG Analysis and Synthesis results

S13-14: Class to present Group Projects

Agenda

Outline for next 10 sessions (5 min)

Intro to BU strategy (15 min)

BU strategy Profitability case (15 min) Fenesta case (75 min)

BU Strategy
Objectives Growth of the BU Profitability of the BU Sustaining the competitive advantage of the BU

Questions

Growth of the BU Which markets to target for growth? (e.g. Samsung mobiles) How to grow? (e.g. Cafe coffee day) When to grow (e.g. Future Group)? Profitability of the BU How to increase the BU profits? (e.g. Telecom case) Sustaining the competitive advantage of the BU How to sustain it? (e.g. sustaining innovation at Google) Common questions: What strategic positioning to choose (e.g. South West airlines)? What business model to choose (e.g. Dell)?
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Agenda

Outline for next 10 sessions (5 min)

Intro to BU strategy (15 min)

BU strategy Profitability case (15 min) Fenesta case (75 min)

Profitability analysis
Context Your company is a travel agency making a 10% commission on travel bookings

Problem

The current profits before taxes are much lower than the industry average Your task is to diagnose and come with a resolution Total time: 45 min
Diagnosis: 20 min Discussion: 10 min

Plan

Resolution: 10 min Discussion: 5 min

Example: Profitability analysis

Situation

1. A travel agency makes a 10% commission on travel bookings 2. Their current profit before taxes is much lower than the industry average
1. Their revenues have stayed stable over time 2. Cost Structure has also not changed over time though overall costs have gone up 1. Their Customer mix is unfavorable 1. They serve a higher proportion of Leisure travelers vs. Business travelers 2. Leisure travelers are less profitable, thereby dragging the overall profitability down 1. Negotiate with the airlines on the possibility of charging a premium for leisure tickets 2. Capture a larger commission through cost charged to the customer 3. Move focus to the Business travel segment
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Complication

Diagnosis

Resolution

Agenda

Outline for next 10 sessions (5 min)

Intro to BU strategy (15 min)

BU strategy Profitability case (15 min) Fenesta case (75 min)

BU Strategy: Fenesta Case

Context

Fenesta is a market leading UPVC Fenestrations player in India Annual revenues: INR 150 Crores It operates in an market that has huge untapped potential Current market penetration of UPVC is only 5-10% Over time, Fenesta has failed to grow fast Its profitability has also suffered a bit in the recent past Given the huge market opportunity, many national and international competitors have entered the market

Task

The CEO of Fenesta is not unduly concerned about the Profitability He wants us to develop mainly a Growth strategy for the company

BU Strategy: Fenesta Case

Question: How should we start?

Step 1

Develop a initial (day-1 or week-1) storyline for the Growth Strategy for Fenesta Time: Develop storyline: 10 min Class discussion: 10 min

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BU Strategy: Fenesta Case (Initial Storyline)

Version 1 1. The fenestrations market has the following segments

2. These segments have the following sizes and growth rates

3. Our analysis of the competitive landscape in this business indicates the following 4. Our analysis of Fenestas internal operations indicates the following 5. Our interviews with Fenestas key customers indicate the following 6. Our survey of Fenestas potential customers indicates the following

7. We have also studied the success and failure stories in international markets
8. The above analysis leads to the following strategy 1. Strategic positioning 2. Target segments 3. Marketing strategy 4. Operations strategy 5. Etc.
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BU Strategy: Fenesta Case (Initial Storyline and Analysis Plan)

Analysis
1. The fenestrations market has the following segments 1. Done These segments have the following sizes and growth rates 1. 1 hour Our analysis of the competitive landscape in this business indicates the following 1. 4 hours. Profile at least 4 competitors and their strategies Our analysis of Fenestas internal operations indicates the following 1. 1 hour. Identify key probable issues based on web-search. Submit top-3 hypotheses to me Our interviews with Fenestas key customers indicate the following 1. 1 hour. Identify key probable issues based on web-search. Submit top-3 hypotheses to me Our survey of Fenestas potential customers indicates the following 1. 2 hours. Identify key probable issues. Make a short-survey to test the issues/hypotheses. Submit your survey to me We have also studied the success and failure stories in international markets 1. 3 hours. Draw learnings from 2-3 international markets Write so-whats from each pience of analysis 1. 3 hours

2.

3.

4.

5.

6.

7.

So-whats

1.

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How to do Market Sizing: Example

Context
You are Chief product manager of an Audio maker that sells audio systems for use at home. While looking for alternate markets of your products, you observed that sale of cars is growing in India, and hence, car audio can be a good market to explore. As the first step you want to do a rough estimate of the market size of Car Audio Systems in India in retail segment to make sure that opportunity is large enough. Calculate the market size of Car Audio systems Total number of cars sold every year = 12 lakhs. (Even if you dont know this number, you can guestimate it - Total population is 120 crore - 24 crore households assuming 5 members/house Upper Middle class (who can afford a car) is less than 10% or 2 crore (given 20% is below poverty line and 70% earns less than a dollar a day) Average age of car is 10-15 years so ~12 Lakhs car/year are sold. Now assuming around 10% of the cars sold are top end variants or cars that already have an audio system fitted and not suitable for our market sizing. Then cars sold without audio system are around 11 lakhs. Assume that 80% of these will buy an audio. This leaves us with 9 lakhs cars only. Take an average price tag of Rs. 7,000 for audio system, this gives an approx number of 7K * 900K = ~650 crores
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Answer