COMPETITIVE TACTICS

PGEXP 2012-14

TACTICS
Anticipatory Engagement

Offensive

PREEMPTION *Pioneering *Intimidation *Capture

ATTACK *Frontal assault *Flanking *Siege warfare *Guerilla warfare

Defensive

DETERRENCE RESPONSE *Raise structural barrier *Counter attack *Increased expected retaliation *Fast Follower *Lowering inducements for attack *Retrenchment *Diplomatic peacekeeping *Withdrawal

STRATEGIC ALLIANCE

PGEXP 2012-14

Alliance is a formal and mutually agreed upon commercial collaboration between companies

Alliance
Firm Maintain Legal Independence Domination Co-operation Acquisition Alliance Forfeit Legal Independence Merger

Types of Alliance
EQUITY ALLIANCE NON-EQUITY ALLIANCE

Joint venture

Licensing Franchising R&D Agreement Joint Marketing Joint Production

Purpose of Alliance

Collaborative Advantage

(ex)

Collaborative Advantage
Collaborative advantage Increase my value Value Creation Unit Sales Buyer-Supplier Relationship Alliance with Complementor *Explore emerging segments *Product Bundling *Co-marketing *Product & Process technology *Pre-empt similar alliances *Increase rivals costs of R&D, Mktg. & operations *Increase rivals costs of R&D, Mktg. & operations Alliance with Competitor *Enhance market power *Joint R&D *Interfirm Learning *High bargaining power against buyers *Power against suppliers *Economies of Scale *Pre-empt similar alliances *Joint bidding lowers rivals profits *Win industry standards battle

*Enter new market

*Product Development

Unit Price Unit Cost

*Increase differentiation *Inventory management *Co-specialisation *Entry barriers *Vertical Integration that excludes rivals *Intensify scarcity of suppliers & distribution channels *Intensify scarcity of suppliers & distribution channels

Decrease rivals value

Unit Sales

Unit Price

Unit Cost

Alliance Process

Strategic Rationale

Partner Selection

Negotiation/ Design

Implement

Continue/ Terminate

Strategic Rationale
Strategic Importance
1.What is our strategy? 2.What are our capability gaps? 3.Is alliance the best alternative? 4.What do we expect the alliance to achieve? 5.Exactly how does that support the strategy?

1.Are organisational practices conducive to alliance? 2. Do we have people to manage the alliance? 3. Is our organisation culturally ready?

Commitment

Timing
1.Is it too late? 2.Can we do it later? 3. Is the timing right?

1.Do we have the funds & technical expertise to engage in alliance for long term? 2. Are we prepared to commit the necessary resources?

Organisational Readiness

Proceed to Partner Selection

Capability Gaps
What is needed? Current Capability Marketing Human Resource 1. 2. 1. 2. 1. 2. 1. 2. 1. 2. 1. 2. 1. 2. 1. 2. Measure Gap 1. 2. 1. 2. 1. 2. 1. 2. 1. 2. 1. 2.

Financial Resource 1. 2. Infrastructure Operations Other Competence 1. 2. 1. 2. 1. 2.

Partner Selection

Strategic Rationale

Partner Selection

Negotiation/ Design

Implement

Continue/ Terminate

Partner Selection
Develop Criteria
1.What capabilities are needed to close gaps in our strategy? 2.What kind of partner would need the kind of strengths that we offer? 3. What synergies are involved? 1.Have we explored all sources- personal networks, associations,advisors? 2. Have we generated a sufficient size of list?

Conduct Due Diligence

1.Are we culturally, structurally compatible? 2.Are they committed to this alliance ? 3. Will we achieve what we want from this partner?

Identify Short List

1. Which candidate best fits our criteria? 2.Does the analysis require adjustment in the criteria?

Identify Potential Partners

Proceed to Negotiations

Cultural Fitness
Parameters Features Features

Strategic Orientation

ST Time Orientation LT 1 2 3 4 5 Cen. Structure Decent. 1 2 3 4 5 Think Prob.Solving Act. 1 2 3 4 5 Ind. Performance Team 1 2 3 4 5

RT Risk Tolerance 1 2 3 4 5

RA

Organisational structure

Con. Locus of Power Diff. 1 2 3 4 5 Collab. Decision Autocrat. 1 2 3 4 5 Neg. Reinforcement Posi 1 2 3 4 5

Management Style

Human Resource Philosophy

Matrix for Partner Selection

From your gap analysis, list partner competencies sought. (Customer base, infrastructure) What are the characteristics of partners that would find our core competencies desirable? What is the ideal size & structure of a partner? (Revenues) Any other factor crucial to partner selection 1. 2. 3. 1. 2. 3. 1. 2. 3. 1. 2. 3.

Negotiation/Design

Strategic Rationale

Partner Selection

Negotiation/ Design

Implement

Continue/ Terminate

Negotiation/Design
Assemble the team
1.Have we included key operational executives who will implement the agreement? 2.Does our team have experience?Do they require training? 3. Will they be effective negotiators?

1. What they will ask for? 2.What are the risks and obstacles we will need to overcome?

Complete the agreement

1. Do we allow for conflict resolution? 2.Are there clear performance measures? 3.Have we allowed for termination?

Negotiate
1. Have we clarified structural and decision making issues? 2. Have we discussed technological/marketi ng issues?

Proceed to
Implementation

Preparation

Implementation

Strategic Rationale

Partner Selection

Negotiation/ Design

Implement

Continue/ Terminate

Implementation
Lay ground work
1.Have we assigned the best candidate for alliance? 2.Are the roles, responsibilities & linkages clear?
1.Have e identified early tasks that can be achieved and generate quick success? 2. Is our mutual understanding of alliance converging or diverging?

Does alliance serve our intended objectives?

After honeymoon
1.When conflict arise how do we address them? 2.Are we able to protect IP and learn from the alliance?

YES Continue

NO
Intervene/Terminate

First six months

Termination

Strategic Rationale

Partner Selection

Negotiation/ Design

Implement

Continue/ Terminate

Termination
Hard
Partner dependent on alliance Firm not dependent on alliance

Alliance hinges on both partners and moves towards goals PARTNER Alliance term expires Goals achieved Goals impossible to meet Easy Easy FIRM Hard Firm dependent on alliance Partner no longer dependent

Multiple Alliance
CUSTOMERS (Patients)

COMPETITORS (Other hospitals)

COMPANY (Hospital)

COMPLEMENTORS (Path. Labs)

SUPPLIERS (Equipments etc.)

Constellation
Prime
Philips

DEC

Toshiba MIPS Sun NEC

AT&T
Fujitsu

Sony
IDT

EDS

Hitachi

NAS Sequoia

Samsung HP

Constellation
Prime
Philips

DEC

Toshiba MIPS Sun NEC

AT&T
Fujitsu

Sony
IDT

EDS

Hitachi

NAS Sequoia

Samsung HP

Constellation
Alliances Compete

Collaboration + Competition= Co-opetition

Cartel

THE COMPETITION ACT 2002 as amended by The Competition (Amendment) Act, 2007

THE COMPETITION ACT

Competition Commission of India To prevent practices having adverse effect on competition To protect the interests of consumers
JurisdictionWhole of India except J&K Acts taking place outside India but having an effect on competition in India

THE COMPETITION ACT

Cartel includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control production, distribution, sale or price of goods or services

THE COMPETITION ACT

Sec-3 PROHIBITION OF CERTAIN AGREEMENTS Sec-4 ABUSE OF DOMINANT POSITION

PROHIBITION OF CERTAIN AGREEMENTS (Section 3)

No enterprise or association of enterprises shall enter into any agreement which causes an appreciable adverse effect on competition within India. Any agreement entered into in contravention of the provisions shall be void.

Appreciable Adverse Effect on Competition

Determines purchase or sale prices Limits or controls production, supply, markets, technical development,

investment or provision of services

Act allows joint ventures for increasing efficiency in production, supply,

distribution, storage of goods or services.

Prohibition of abuse of dominant position (Section 4)

Dominant position means a position of strength, enjoyed by an enterprise in the market which enables it to (i) operate independently of competitive forces prevailing in the relevant market (ii) affect its competitors or consumers or the market in its favour.

Prohibition of abuse of dominant position

No enterprise or group shall abuse its dominant position. There shall be an abuse of dominant position if an enterprise or a group
a) Imposes unfair or discriminatory condition in purchase or sale/price of goods or service

(predatory pricing)

b) Limits or restricts production of goods/provision of services c) Indulges in denial of market access

(d) Makes conclusion of contracts subject to acceptance by other parties of supplementary obligations with no connection with the subject of such contracts (e) Uses its dominant position in one relevant market to enter into, or protect, other relevant market.

Penalty Structure
Discontinue and not to re-enter such agreement Discontinue such abuse of dominant position Impose penalty , not more than ten per cent of the

average of the turnover for the last three preceding financial years, upon person or enterprises which are parties to such agreements or abuse

Penalty structure
Non-furnishing of information Furnishing false information Non-compliance with Commissions orders

Case of Cement Industry

Alleged Cartelization by Cement Manufacturers

(Dated: 30 July 2012)

Complaint
Price (Rs/-) 240 220 200 180 160 140 120 100 Year 2003 2004 2005(Dec) 2006(Jan)

Complaint
No corresponding increase in limestone price, royalty,

excise duty, sales tax, railway freight or demand-supply mismatch warranting such abnormal increase.
Cement companies had resorted to unfair trade practices by

under-production or choking up of supply in the market, thereby raising the sale price.

Inquiry u/s-4
S.no . 1 2 3 ACC Ambuja Cements Company Ultratech Cement Market share (%) 18.12 10.4 9.78

4
5 6 7 8 9

Jaiprakash Associates
Indian Cements Shree Cements J.K. Group Century Textiles Madras Cement

7.41
4.89 4.47 4.29 3.65 3.39

10
11

Lafarge (India)
Others

3.22
30.38

Inquiry u/s-3

Price Parallelism

CCI-Observation
The coordinated act has neither caused any improvement in production or distribution of goods or services nor any promotion of technical, scientific and economic development

CCI-Observation
Cement companies have acted in their own selfinterest to maximize the profit depriving both the consumers and economy from the possible benefits

CCI-Verdict

Cement Companies are a CARTEL u/s-3 of the

Act
CCI imposed penalty