QUESTION 1
CASE STUDY - CORPORATE LEVEL STRATEGY
Why would Procter and Gamble (P&G), a company with 300 brands, five billion customers in 140 countries, and more food and beverage patents than the combined total of the three largest U.S. food companies, want to team up with another company to sell fruit juice?
P&G recently announced a joint venture that combines resources with the Coca-Cola Company. The two firms, each contributing different resources and expertise, will jointly own the new company. P&G will bring Pringles potato chips, Sunny Delight, and Punica fruit juices. Coke will add its line of beverages including Minute Maid, Hi-C, Fruitopia, Cappy, Kapo, Sonfill, and Qoo
Through the joint venture, both companies hope to accomplish what each would find difficult to do without the combined resources of the endeavour. They believe the venture will bring three key synergies-
- Revenue growth for Pringles using Coke's distribution channels. Distribution points will increase from the current 150 000 to 16 million. The firms estimate this will increase Pringle's revenue by an additional $120 million
- Revenue growth of the companies' combined juice product lines, primarily through P&G's Sunny Delight. As with Pringles, the revenue growth will come from increased distribution using Coke's established channels. This should provide an additional $ 30 million in sales revenue
- Decreased costs by combining manufacturing, distribution, and administrative costs. The firms estimate $ 50 million in annual cost savings
Coke's primary contribution to the venture is its vast distribution system. P&G's contribution is its research and development resources and new ideas for consumer snack and beverage products. The venture will have a total of 40 brands, 6 000 employees, 15 manufacturing sites, and estimated sales of $ 5 billion after two years. The firms hope to profit from the joint venture. The synergies should create a win-win opportunity for both P&G and Coke. By combining resources, both companies stand to lower costs and increase revenues beyond what either could do alone
Questions:
(a) 'Overall cost leadership' is based on creating a low-cost position relative to a firm's peers. With this strategy a firm must manage the relationships through its value chain and be devoted to lowering costs throughout the chain. Discuss how Procter and Gamble and Coca Cola Limited are trying to reduce costs
(b) Evaluate the risk involved in undertaking such diversification
(c) The 'five forces' model is most commonly used as an analytical tool for examining the competitive environment of a firm. Discuss how each force affects a firm's ability to compete in its market. (Your answer must make reference to the case study)
QUESTION 2
Explain the Portfolio Approach to Strategic Analysis and discuss its limitations (you may choose either the BCG Matrix or the McKinsey/GE Matrix)
QUESTION 3
Write short notes on each of the following (questions carry equal marks)
(a) Explain the term 'Competitive Advantage'
(b) Give a schematic description of the Value Chain Concept
(c) Describe the different types of diversification by Integration, giving examples
(d) Distinguish between the terms 'Vision' and 'Mission'
(e) Briefly describe Porter's Generic Strategies
QUESTION 4
Research has shown that the success of a strategy is strongly correlated to how it is implemented. Discuss the key issues that must be addressed when implementing a strategy
QUESTION 5
Discuss the following statement
A strategy can be monitored through operational controls only