STRATEGIC MANAGEMENT

An Integrated Approach

Charles W. L. Hill
Gareth R. Jones

Strategic Planning: A number of business writers have emphasized that

strategy is the outcome of formal planning process and that top
management plays the most important role in this process.

A Model of the Strategic Planning Process: The formal strategic planning

process has five main steps:
1. Select the corporate mission and major corporate goals.
2. Analyze the organizations external competitive environment to
identify opportunities and threats.
3. Analyze the organizations internal operating environment to identify
the organizations strengths and weaknesses.
4. Select strategies that build on the organizations strengths and
correct its weaknesses in order to take advantage of external
opportunities and counter external threats.
5. Implement the strategy.

The task of analyzing the organizations external and internal environment

and then selecting an appropriate strategy is normally referred to as
strategy formulation. In contrast, strategy implementation typically involves
designing appropriate organizational structures and control systems to put
the organizations chosen strategy into action.

These steps are illustrated in the plan of this book. Each step illustrated in
the constitutes a sequential step in the strategic planning process. At step 1,
each round or cycle of the planning process begin with a statement of the
corporate mission and major corporate goals. The mission statement is
followed by the foundation of strategic thinking external analysis, internal
analysis, and strategic choice of which strategies to pursue. The strategy
making process ends with the design of the organizational structure and
control systems necessary to implement the organizations chosen strategy.
 Mission and
Goals

External Analysis: Internal Analysis

Opportunities SWOT Strategic Strengths and
And Threats Choice Weaknesses

Functional Level Strategy

Business Level Strategy

Global Strategy

Corporate Level Strategy

Corporate Performance,
Governance, and Ethics
 Implementing Implementing
Strategy in a Strategy across
Single Industry Industries and
Countries

Some organizations go through a new cycle of the strategic planning

process every year. This does not necessarily mean that managers choose a
new strategy each year. In many organizations, the results of the annual
strategic planning process are used to shape resources allocation within the
organization.

Mission Statement: The first component of the strategic management

process is crafting the organizations mission statement: a description or
declaration of why a company is in operation, which provides the
framework or context within which strategies are formulated. A mission
statement typically has three main components: a statement of the raison
d etre of a company or organization its reason for existence which is
normally referred to as the mission or vision of the company; a statement
of the key values or guiding standards that will drive and shape the actions
and behavior of employees; and a statement of major goals or objectives.

The Mission or Vision The mission or vision is a formal declaration what the
company is trying to achieve over the medium to long term. (The term
vision and mission are often used interchangeably). Its purpose is to provide
a platform for thinking strategically. The Boeing Company states that its
vision for Boeing in 2016is people working together as a global enterprise
for aerospace leadership. Microsoft vision is to empower people through
great software, any time, any place, on any device.

Similarly, Microsoft wants its software to run on any device, not just
personal computers or servers, and at any time, any place. This statement
emphasizes the companys ambitions to have its software running all
computing devices, including videogame terminals, hand held computers,
smart phones, embedded processors, and set-top boxes. This vision
statement, which has grown broader over time as new uses for software are
being developed, has guided Microsofts product diversification efforts
because mission and vision statement help set the context within which
strategies are formulated.

Formulating the Mission: An important first step in the process of

formulating a mission statement is to come up a definition of the process of
formulating a mission statement is to come up with a definition of the
organizations business. Essentially, the definition answers these questions:
What is our business? What will it be? What should it be? The responses
guide the formulation of mission statement.

The answer the question, What is our business? Derek Abells, a

prominent business scholar, has suggested that a company should define its
business in terms of three dimensions who is being satisfied (what
customer groups), what is being satisfied (what customer needs), and how
customers needs are being satisfied (by what skills, knowledge, or
distinctive competencies). Abells approach stresses the need for a
customer oriented rather than a product oriented business definition.

Lakshmi Mam notes

Strategic Planning at Micro Soft Exhibits:

The worlds most successful high-tech companies Microsoft has had

a formal strategic planning process in place for many years. The genesis of
Microsofts Planning Process goes back to 1994 when the rapidly growing
company hired Bob Her Bold from Procter and Gamble as Microsofts chief
operations officer.
Her Bold, Gate and Balmer understood that any assumptions
underlying a plan could be made invalid by unforeseen changes in the
business environment and such changes were common place in the
software industry. Moreover the company needed to plan for the future of
its newer business, such as MSN, the video game business (X-Box) and its
hand-held computer business.
What has emerged at Microsoft is a three-year planning process that
compares the subsequent performance of divisions and units against the
strategies and goals outlined in the plan to determine future resources
allocation. The planning process is built on to compare the performance
data obtained from each of Microsofts different business or divisions,
planning data include projections for market share, revenues and profits
three years into the future as well as a statement of major strategies and
goals. These projections are updated every year in a rolling plan because
the industry changes so much.
Unit strategies are hashed out over the year in strategies planning
review meetings between top managers and division managers typically,
the unit managers develop strategies is the top managers probe the
strategic thinking of unit managers, asking them to justify their assumptions
and ultimately appearing, amending or not appearing the strategy. Thus the
plan not only drives resource allocation it is also used as a control
mechanism.
The planning process is formal decentralized and flexible. It is formal
insofar as it is a regular process that uses standard information to help drive
resources allocation for the coming year and holds managers accountable
for their performance.
It is decentralized insofar as unit managers propose many of the
strategies that make up the plan and those plans are accepted only after
scrutiny by the top managers. It is flexible in that top mangers do not see
the plan as a strait packet, but as a document that helps to map out where
Microsoft may be going over the rent few years. All managers recognize that
the assumptions contained in the plan may be invalidated by unforeseen
events so they are committed to rapidly changing strategies if the needed
arises.

Values:
The values of a companies state how managers and employees
should conduct them selves how they should do business and what kind of
organization they should build to help a companies achieve its mission. The
set of values norms and standards that contract how employees work to
achieve an organizations mission and goals.
For example: Nucor steel is one of the most productive and profitable
steel firms in the world. The company maintains, that is direct the results of
its cultural values, which determine how it treats its employees. The values
are as follows.
 Management is obligated to manage nicor in such way that
employees will have the opportunity to earn according to their
productivity.
Employees should be able to feel confident that if they do their jobs
properly they will have a job tomorrow.
Employees have the right to be treated fairly and must believe that
they will be.
Employees must have an avenue of appear when they believe they
are being treated unfairly.
Organizational values identified a set of values associated with high
performing organizations that help companies achieve superior financial
performance thought their impact on employee behavior. These values
included respect for the interests of key organizational stakeholders.
Individuals or groups that have an interest claim or stake in the company in
what it does and in how well it performance. They include stakeholders
bondholders, employees customers the communities in which the company
does business and the several public.
Hew left Packard walmeet and Pepsi Co. deep respect for the
interests of customers employees suppliers and shareholders was
associated with high performance.

Major Goals and Objectives:

A goal is a desired future state or objective that a company attempts
to realize. The purpose of goals is to specify with provision what must be
done if the company is to attain its mission or vision.
Four characteristics of goals are:

1. They are precise and measurable: Measurable goals some managers

a standard against goals to their performance.
2. They address crucial issues: To maintain focus managers should
select a limited number of major goals to are === the performance of
the company. The goals that are selected should be crucial.
3. They are challenging but realistic : They fore all employees an
incentive to look for ways of improving the operations of an
organization. If the goal is unrealistic in the challenge it poses,
employees may save up, a goal that is too easy may fail to motivate
managers and other employees.
 4. They specify a time period in which they should be achieved when
that is appropriate. Time constraints tell employees that success
requires a goal to be attained by a date not after that date,
deadlines can inject a sense of urgently into goal attainment and act a
motivator.

In the books
External Analysis: The second component of the strategic management
process is an analysis of the organizations external operating environment.
The essential purpose of the external analysis is to identify strategic
opportunities and threats in the organizations operating environment that
will affect how it pursues its mission. Three interrelated environments
should be examined at this stage: the immediate or industry environment in
which the organization operates, the country or national environment, and
the wider socioeconomic or microenvironment.

Internal Analysis: Internal analysis the third component of the strategic

management process, serves to pinpoint the strengths and weaknesses of
the organization. Such issues as identifying the quantity and quality of a
companys resources and capabilities and ways of building unique skills and
company specific or distinctive competencies are considered here when
we probe the sources of competitive advantage. Building and sustaining a
competitive advantage requires a company to achieve superior efficiency,
quality, innovation and responsiveness to its customers. Company strengths
lead to superior performance in these areas, whereas company weaknesses
translate into inferior performance.

Swot Analysis and the Business Model: The next component of strategic
thinking requires the generation of a series of strategic alternatives, or
choice of future strategies to pursue, given the companys internal strengths
and weakness, opportunities and threats. The comparison of strengths
weakness, opportunities and threats is normally referred to as a Swot
analysis.

Strategic managers compare and contrast the various alternative possible

strategies against each other with respect to their ability to achieve major
goals and superior profitability. Thinking strategically requires managers to
identify the set of strategies that will creates and sustain a competitive
advantage.

Functional-level strategy directed at improving the effectiveness of

operation within a company, such as manufacturing marketing, material
management, product development, and customer service.

Business level strategy, which encompasses the businesss overall

competitive theme, the way it positions itself in the marketplace to gain a
competitive advantage, and the different positioning strategies that can be
used in different industry setting-for example, cost leadership,
differentiation focusing on a particular niche or segment of the industry or
some combination of these.

Global strategy, addressing how to expand operations outside the home

country to grow and prosper in a world where competitive advantage is
determined at a global level.

Corporate-level strategy, which answers the primary questions: What

business or business should be in to maximize the long run profitability of
the organization, and how should we enter and increase our presence in
these businesses to gain a competitive advantage.

Strategy Implementation: Having chosen a set of strategies to achieve a

competitive advantage and increase performance, managers must put that
strategy into action : strategy has to be implemented. In this book, the
subject of strategy implementation is broken down into three main
components: (1) corporate performance, governance, and ethics; (2)
implementing strategy in a single industry; (3) implementing strategy across
industries and across countries.

The Feedback Loop: Once a strategy has been implemented, its execution
must be monitored to determine the extent to which strategic goals and
objectives are actually being achieved and to what degree competitive
advantage is being created and sustained. This information and knowledge
pass back up to the corporate level through feedback loops and become the
input for the next time more conservative objectives are set.
Practicing Strategic Management:
SMALL-GROUP EXERCISE: DESIGNING
A PLANNING SYSTEM

Break up into groups of three to five people each. Appoint one group
member as a spokesperson for the group, who will communicate your
findings to the class when called on to do so the instructor.
You are a group of senior manager working for a fast-growing
computer software company. Your product allows users to play interactive
role-playing games over the Internet. In the past three years, your company
has gone from being a start-up enterprise with 10employees and no
revenues to a company with 250 employees and revenues of $60 million. It
has been growing so rapidly that you have not had time to create a strategic
plan, but now your board of directors is telling you that they want to see a
plan, and they want it to drive decision making and resource allocation at
the company. They want to design a planning process that will have the
following attributes:
1. It will be democratic, involving as many key employees as possible in
the process.
2. It will help to build a sense of shared vision within the company
about how to continue to grow rapidly.
3. It will lead to the generation of three to five key strategies for the
company.
4. It will drive the formulated of detailed action plans, and these plans,
and these plans will be subsequently linked to the companys annual
operating budget.
Design a planning process to present to your board of directors. Think
carefully about who should be included in this process. Be sure to
outline the strengths and weaknesses of the approach you choose, and
be prepared to justify why you approach might be superior to alternative
approaches.

Lakshmi Mam notes

Strategic Management Project:

Module I
1.Pick up any one company and explain its strategic planning process.
 Mission, vision, goal and objectives.
Companies organizational structure.
SWOT Analysis of that companies.
2. Pick a small company in your city or town to steady about the strategic
planning, companies Mission, Vision, Goal, objectives.

Tips to write your assignment for module:

Give a short account of the history of the company.
Trace the evolution of its strategy evolution of your company is the
product of intended strategies emergent strategies or some
combination of the two.
Identify the mission and major goals of the company.
Do a preliminary analysis of the internal strength and weaknesses of
the company and the opportunities and threats that it faces in its
environment.
On the basis of this analysis identify the strategies that you think the
company should pursue.
Then find the CEOs of the company and identify its leadership
capabilities.

Case Study Financial Express

Andhra Pradesh on a Mission to boast Milk productivity.
Andhra Pradhesh a Product planned Milk Mission a project worth
Rs.6,000 Cr. Which would be rolled out over the rent four years.
Advanced Tax Payment Absolutely hassle free.
Pay your Advance tax through SBH (State Bank of Hydrabad).
Easy payment online through SBH
Safe anywhere anytime ten facility.
ATUL AUTO Limited Company Website : www.atulauto.co.in
Suzuki Maruti.
Nokia
In Tamil Nadu special Incentives for student X, XI, XII have
implemented.
Laptop computers for students in Govt., Govt. Aided Educational
Institutions.
This scheme is to be empower nature and ---- students and to enhance
there stills and take advantage of the information technology revolution
 Rs. 912 crores has been allotted this year for 9.12 Lakh laptop
computers.

Raising the living stats of poorest familiars

The GOVT. proposes to distribute four goals/sheep to each poor
family and create a regular stream of additional income for such poor
familiars Rs.135Crore has been allotted for his purpose to cover 1 Lakh
families this year.

Govt. Plan :

My government is committed to bringing about including growth and is

adopting a two pronged strategy to eradicate poverty and improve the
standard of living at the people. I believe that economic growth should
include uplift all the poor.

Case Study: Shirke Bricks Industries

The shirke Bricks industries commenced in the year 1994. They are
one of the removed manufactures of fly Ash Bricks and blocks in Pune,
Maharashtra fly ash bricks manufacturing done by indigenous fly ash brick
making machines.
Their sophisticated manufacturing units and quality control
management allow us to produce the range of industrial standard that
meets the exact demand of clients.
These bricks are three times stronger than conventional bricks with
consistent strength. These are made from thermal waste and it is eco
friendly. Its very economical/cost effective, low wastage while transporting
and handling .
The noble cause is supporting by manufacturing and suppling by
manufacturing and suppling bricks made from re-usable fly ash.
Strength of shirke Bricks Industries
With 17 years of experience in the realm shirke bricks have been
officing excellent quality bricks such as fly ash bricks and blocksfabricated
using with grade raw material their prices range is diversely used in
construction industry. This company are trusted name and engaged in the
manufacturing and supplying of an array of superior and high quality range
of fly Ash Bricks and Blocks.
 Their products are very highest quality high compressive strengths,
low water absorption because of their manufacturing in compliance with
ASTM and IS standards.
Their Bricks and Blocks are made of latest concept technology,
pressing load of 70 tons. Their Bricks bring higher compression strength (80-
85kg cm2) and low water absorption (8.12%). Our bricks and blocks are
machine made and hence each brick is perfect in shape and size having
density of 1700kg/m3 and nil efflorescence.

HR Strategies:
The company values performance and motivates its employees to five
their best every time. Best performing employees are foren performance
oriented incentives and increments, Also every employee treated as
efficient service to its clients. The trusted name in the surface transport
industry by strictly advising and timelines and safe delivery of goods and
services.

Vision :
Consistently deliver quality products and service to out customers
and also create move value for our valuable customers.

Mission :
To Britinvoushy aim for higher growth. Set new bench marks and
provide innovative cost, effective solutions to our customers.

Case Study (A.S.C.S)

Strategic Planning Asian Paints:
Asian Paints industry Manufactures of the Decorate and industrial
Paints. It is Indias largest paints company and has three main business
divisions decorator paints, Industrial Paints and International business. The
company operates in 18 countries and has 26 paint manufacturing facilities
servicing more than 65 countries.

Business Challenge:
 Asian Paints needed an interacted solution that would address
variable demand and determine which products should be produced at
which manufacturing plants.

Business Benefits:

Reduced finished goods inventory from 56 days to 30 days.

Achieved 87.90% service levels for skv sales at the location level.
Dramatically improved debt to asset ratio.

Marketing Strategies of Asian Paints:

Asian Paints in Indias largest paint company and is ranked among
the top 10 decorative coatings companies in the world. It provides
innovative solutions for decorative home improvement, industrial and
automotive painting requirements. It sells though some 25000 local
retailers, who resell its products to home users, contractors and painters.
The company also sells paints and colors to original equipment
manufactures (OEM) and to large contractors seoving the OEM
Marketplace.
They are interacting those manufacturing sites into a lohesive entity
that delivers products to our customers without holding a large amount of
inventory, while managing our cash cycle.
This dynamic marketing and production supply chain. The objectives
of Asian Paints are for st they sought to deliver product efficiency to
customers without holding a large amount of inventory. Second they
wanted to manage their cash cycle to force up funding for an aggressive
growth by acquisition strategy.

Building a strategic supply chain:

Asian Paints began leveraging advanced JDA solutions for supply chain
master planning materials and distribution planning, production scheduling
and change management. It implemented key solutions from JDAs
advanced planning solutions to cover the processes from sales forecasting
master production planning raw material planning distribution planning and
shop floor scheduling.
It applies advanced master planning technologies to decide which
products should be produced at which products should be produced at
which manufacturing plants, incorporating variables such as cost and
demand volume, capacity current inventory levels environmental
refreshments and their factors, optimizing across multiple objective levels
like capacity demand satisfaction, safety stock refreshments, inventory
optimization and transportation costs.

Production strategies:
The paint company sources raw materials from domestic suppliers
and international vendors and the company uses a sophisticated materials
planning system to manage those crucial supplies raw materials comprise
60% of its value chain. To ensure optimum raw materials solution. Assian
paints uses JAs factoy planning software to manage a wide range of
variables such as the inflow and use of raw materials among multiple
possible alternates across multiple alternate vendors and possible
production routes JDA advanced scheduling software is used to set weekly
time refreshments on a plant unit and machine and machine basis. The
beffer materials planning system allow the company to create more
complex paint formulas and to select the best endor and manufacturing
method for any given situation.
Modern distribution planning enables assian paints to plan
deployment on a weekly basis and to quickly and easily adjust those
distribution plans as needed by adopting a robust approach to change
management the company can now adopt more nimbly to shifts in market
demand to new manufacturing processes and to changing regulatory
pressures or business requirements. Then marketing performance had been
increased font times the size it was 10 years ago.
 Student Assign-1
SWOT Analysis of MC Donald

1. Strengths:
a) Mc Donalds has been a thriving business since 1955 and 20 of the 50
companies staff employees started as a restaurant level employee. In
addition, 67000 Mc Donalds restaurant managers and assistant
managers were promoted from restaurant staff fortune magazine 2005
usted Mc Donalds as the best place to work for minorities. Mc Donalds
invest more than $1 annually in training its staff and every year more
than 25,000 employees graduate from Mc Donalds training facilities,
hamburger university.
b) The business is ranked no.1 in fortune magazine 2008 list of most
admired food service companies.
c) One of the most recognized logos (The golden arches) and spokes
character (Ronald Mc Donald the clown). At the Packard Childrens
hospitals centre for healthy bright children age 3 to 5 were given food in
Mc Donalds packaging and then given the same food without the
packaging and they preferred the food in the Mc Donalds packaging
every single time.
d) Mc Donald is a community oriented, socially responsible company. They
run Ronald Mc Donald house facilities, which provide room and board,
food and families with children needing extensive hospital care. Ronald
Mc Donalds houses are located in more than 259 local communities
worldwide, and Ronald Mc Donalds care mobile programs offers cost
effective medical, dental and education services to children. They also
sponsor Olympic athletes.

2.Weakness:

a) Their test marketing for pizza failed to yield a substantia product leaving
them much less available and able to compete with fast food pizza
chains.
b) High employee turnover in their restaurants leads to more money spent
on training.
c) They have yet to capitalize on the trend towards organic foods.
d) Mc Donalds have problem with fluctuations in operating and net profit
which ultimately impact investor relations. Operating profit was $ 3984
million (2005), $4433 million (2006) and $3879 million (2007). Net
profits were $ 2602 million (2005), $ 3544 million (2006), $ 2395 million
(2007).

3.Opportunities:
a) In today health conscious societies the introduction of a healthy
hamburger is a great opportunity. They would be the first QSR (Quick
service restaurants) to have FDA approval in marketing a low fat low calorie
combo alternatives. Currently Mc Donalds and its competition health
choice items do not include hamburgers.

b) They have industrial, formica restaurants settings, they could provide

more upscale restaurants settings, like the one they have in new York city
on broadway, to appeal to a worse upscale target market.

c) Provides optional allergen free items, such as gluten free and peanut
free.

e) In 2008, the business directed efforts at the breakfast chicken, beverages

and convenience categories not only secure sales, but also mean that
restaurants get easy number of customers visit. In 2009, Mc Donalds
saw the full benefits of a venture into beverages.

4.Threats:

a. They are a benchmark for creating cradle to grave marketing. They

entice children as young as one year old into their restaurants with
special meals, toys, playgrounds and popular movie character tie-ins
children grow up eating and enjoying Mc Donalds and they continue
into adulthood. They have been criticized by many parents advocate
groups, for their marketing practices towards children which are seen
as marginally ethical.
b. They have been sued multiple times for having Unhealthy food,
allegedly with addictives, contributing to the obesity epidemic in
America. In 2004, Michael Spulock, filmed the documentary super
 size me where he went on all the Mc Donalds diet for 30 days and
wound up getting cirrhosis of the lives. This documentary was an
direct attack on the QSR industry as a whole and blamed them for
Americas obesity epidemic due in part to the documentary, Mc
Donalds no longer pushes the super size option at dive thru window.
c. Any contamination of food supply, especially, e-coli.
d. Major competitors, like burger king, strabuck, taco bell, wends KFC
and any MID range sit down restaurants.

Student Assign-2
GLOBALIZATION OF TATA MOTORS: STRATEGIC PLAN FOR THE FUTURE

Tata Motors produces vehicles both in the Light Commercial Vehicled (LCV)
and the Medium and Heavy Commercial Vehicles (M and HCV) segements.
It faces higher comptition in the LCV segment, where its Tata ACE has been
a huge success. Internationalization forms a key component of Tata Motors
strategy and it has successfully entered countries having a demand similar
to India like South Africa, Thailand and Argentina, mainly through
acquisitions and joint ventures. It needs to improve its product reliability,
service network and channel reach in order to mainting and replicate this
success in other markets. Some of the recommendations for Tata Motors
are exploring mass customization options in the Small Commercial Vehicle
(SCV) segment, improving brand reputation and technology appropriation
to bring out a world class ultra HCV segment.

Tata Motors is currently Indias largest automobile company with revenues

of $7.2 billion on 2006-07. It is by far the leader in commercial vehicles and
the second largest player in the passenger vehicles market with winning
products in the compact, midsize car and utility vehicle segments.
Employing around 23000 people and headquartered in Mumbai, Tata
Motors became the first company from Indias engineering sector to be
listed in the NYSE in September 2004. While currently about 18% of its
revenues come from international business, the companys objective is to
expand its international business, both through organic and inorganic
growth routes.

Overview of the Truck Industry in India

 The truck market in India comprises the light trucks (LCV) and
medium and heavy trucks segments (M and HCV), of which the M and HCV
segment constitutes nearly 78% of the total Indian truck market.

a)Light Commercial Vehicles (LCV)2

The market for light trucks is composed of pickups, vans and coaches
weighting up to 3.5 tones. This segment has exhibited a consistent growth
rate of over 20% in the past 5years. This growth is expected to continue
with the launch of Tata Ace by Tata Motors and similar plans by other
players like Mahindra & Mahindra, Eicher, etc.

b) Medium and Heavy Commercial Vehicles (M and HCV)3

The medium and heavy trucks include commercial vehicles, heavy

buses and coaches weighing 3.51-16 tonnes. This segment has stabilized
and is expected to grow at 10% over the next 5years. The major players in
this segment has include Tata Motors and Ashok Leyland which account for
more than 85% of the market.
Competitive Threats in the Industry
The Porters analysis for the LCV and the M and HCV segments show
strikingly similar results except for the threat of new entrants. In the LCV
market there exist a small number of large companies between whom
there is high degree of competition. TO gain market share companies are
focused on innovation and strong marketing strategies. The companies are
usually not diversified beyond automotive manufactures. As a result, if the
automotive sector is in a downturn, it could raise exit barriers. Hence the
overall rivalry is strong in this market.

Financial Performance of Tata Motors

Over the years the company has performed exceptionally well
financially inspite of the cyclical nature of the industry. A critical analysis of
the financial statements provides us with the following insights.

1. The issue of Cyclicality is plaguing the automotive sector and the

future outlook in India is not great considering the robust
 performance of the past 3 year. Tata motors has countered this by
increasing the share of exports in the sources of revenue.
2. Excess debt has led to a high Debt to Equity ration and this is not
good news as the company plans to go future capital expansion. Also
the percentage of cash flow used for CAPEX is increasing as shown in
Exhibit 1.
3. Rising interest rates in the economy is cause of concern as it
dampens both capital investments and softens the domestic demand.

4. Positives : The cash flow from operations has grown 11 times

compared to last year despite a huge CAPEX. Tata Ace single
handedly raised the market share of Tata Motors in LCV segment by
5%. The operating leverage for Tata Motors is higher due to the high
fixed costs of CAPEX. But still the overall financial leverage of Tata
Motors is well under control when compared to Ashok Leyland.

Internationalization :
As a part of the companys new internationalization strategy, the
company has decided to focus on a narrow base of 14-15 countries where
market conditions are similar to that of India. In these countries, Tata
Motors now has dedicated manufacturing facilities, marketing teams and
sales teams. The idea is to have self sustained operations in this narrow
band of countries. The company evaluates locations on the basis of market
opportunities and labour skills.
Korean Operations
Tata Motors entered the advanced Korean Market by acquiring Daewoo,
with which it has tremendous synergies in terms of product strategy and R
& D. Tata Motors has planned to use this merger and leverage the
technology for developing a World Truck for India and international
markets.

South African Operations

In the export market, Tata Motors moved from a fragmented approach to
specific markets, chosen in terms of consumer behavior, distribution
networks, supply chain, etc. and identified South Africa as one of the best
markets. The sales in this region are about 15,000 units4. This is a significant
improvement over what Tata Motors was cumulatively exporting (8000
units) before adopting its new internationalization strategy.

Thailand Operations
Tata Motors formed a joint venture with Thonburi Automotive Plant to
enter Thailand. Thailand is the second most competitive market for pickups,
and the new pickup trucks developed here will be sold in both domestic and
export markets.

Latin American Operations

Tata Motors has taken its alliance with Fiat to produce a new one-tonne
pick-up truck, for Latin American markets from Fiat's facility in Argentina.
This arrangement will also see Tata Motors forming a joint venture with a
subsidiary of Iveco, the commercial vehicle division on Fiat, to set up a
distribution network.

Now that Tata Motors has established a sustainable model in some

countries, its main challenge is to replicate this model in other countries as
well.