Volume 15, Number 1 Article by V S Pai March, 2003
Developing Business Strategy: A Synthesis of Approaches :
In the post globalisation world, Indian companies are pitted against multinational companies (MNCs) who are well versed in the competition game, having made successful forays into emerging markets and parallely perfecting the art of formulating and implementing strategies. How can Indian companies rise to the occasion and deliver?
Most firms forge their strategy based on one or a combination of two broad approaches to business strategy: the positioning school and the learning school. The positioning school advocates an analysis of the industry structure and competitors in order to position the firm such that it can compete successfully while maximising profits. The strategy thus developed is based on the competitive advantage of either low cost or differentiation of the product/service. However, such competitor-based strategy formulation runs the risk of sidelining the customer and is difficult to sustain in these days of lean manufacturing; moreover, the process is difficult to formalise. The learning school advocates strategy formulation by focussing on the firm’s internal strengths, by building on the core competence of the firm instead of being competitor driven. Firms could also develop capabilities not necessarily related to manufacturing and leverage resources like brand name and patents to develop business strategies.
A holistic process combining the two approaches, incorporating what is relevant for a given business situation, is the ideal approach to strategising for Indian firms. Moreover, in relatively high technology businesses the process becomes more complex. This necessitates joint ventures with transnational companies, redesigning the value chain and exploiting the value curve in a given industry.
V S Pai examines whether Indian players have been able to devise sustainable business strategies in these volatile times, and what the future holds for them. In drawing a road map for Indian companies, he concludes that Indian firms have either to become niche players like Ranbaxy or Dr Reddy’s Lab, targetting a particular set of customers with specific needs, or acquire world class capacities and compete head on with large MNCs, as companies like Arvind Mills and Reliance are attempting to do.
Reprint No 03106
