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4del Q:esti4n Paper
Paper 32 : Strategic anagement
Time : 3 hours Maximum Marks : 100
PART - A (5 X 8 40)
Anser any ive q:esti4ns
1. DeIine Mission and give examples
2. What constituted core competency?
3. What do your mean by turnaround? Give examples
4. How the diversiIication strategies are undertaken by companies?
5. Illustrate with examples the need Ior corporate strategy.
6. What is management oI change?
7. What are the leadership qualities needed Ior corporate success?
8. Write a note BaaN
PART - (4 X 15 60)
Anser any 4:r q:esti4ns
"uestion No. 1 is Compulsory
9. Evaluate the role played by business policy in organizational success.
10. Critically evaluate the growth strategies adopted by Indian organizations.
11. Mention the oI importance Ior organization to succeed in new areas oI
operations.
12. Describe the various portIolio models and illustrate their limitations
13. Discuss the various elements oI corporate strategy.
14. Elucidate the 7`s Iramework with its uses to Indian companies.
15. Read the Iollowing case careIully and answer the questions at the end oI
the case.
All the major business newspaper headlines in India on 21
st
July 1999 were
screaming ,ssar creates history, defeats on FRN $ million`. Essar group
had deIault on its loan repayments oI $250 million oI Iloating rate notes in
international markets. It became the Iirst Indian Company to deIault in
International market raising Iears in Indian corporate sector regarding Iuture Iund
raising capabilities in the international market.
For last on year it had been Irantically trying to avoid the unavoidable, and in the
process, rolling itselI in many controversies. During 1998, steel consumers had
accused Government oI India in media oI creating import barriers to Iavour and
bail our Essar. This created a political controversy and caused embarrassment to
the government. Essar became an untouchable Ior government controlled
Iinancial institutions. The Iinancial institutions, which had major exposure in
Essar, backed oII the leIt Essar in the lurch when it came to disastrous year Ior the
group but its public image also suIIered a major setback.
Ruia brothers, Sashi, 55 and Ravi, 50 who had stunned Indian corporate sector
with their vision and daring entrepreneurship were today in a quagmire oI their
own making. While on diversiIication spree. Entering one business aIter another,
they were obviously not are that very soon the group would become a case study
at the management school.
Today Essar group is considering various options to consolidate, sell companied
that it had nurtured with heavy debt exposure in past Iew years. Its major
companies are in core inIrastructure areas with strict regulations, controls and
major government role intervention. Essar is wondering what went wrong in its
dreams and their executions. Was it Iate, Pokhran nuclear tests in 1998,
continuing recessions in Indian and world market, stock market depression in
India or was it structured to doom.
7oup P7ofile
Nand Kishore Ruia, a marwari businessmen settled in Madras in 1956, Iounded
the Essar group. Essar started oII by exporting iron ore. In 1956, it acquired a
stevedoring contract Ior bringing iron Irom the mine heads and loading it onto
sheds. Sahsi (ESS) and Ravi (AR) diversiIied Irom Iamily business oI trading and
ventured into shipping in 1969. AIter shipping Essar moved into construction
activity and then into the supply critical support services Ior the oil and gas sector.
Their major breakthrough came in the Iorm oI a drilling contract awarded by
ONGC. From these successIul medium-sized business in marine and port
constructions, oil-drilling, and shipping, Essar Iirst took the opportunity provided
by the gas pipeline to start a very successIul sponge iron business.
It has been the entrepreneurial sprit and opportunism that has been driving the
group Irom a Rs. 150 core shipping company to a Rs. 4000 core conglomerate.
The group was slowly adding one business aIter another until late eighties.
In 1990`s Government oI India started economic liberalization programme
that promised growth and vision oI catching up with the late industrializing
economies oI Southeast. Capital markets were opened up and raising Iinances
became much easier and it became a prime Iacilitator oI rapid growth. The
incredible rate oI growth oI Essar group during this period saw them in virtually
all the core sectors.
Ruia brothers had a resplendent vision oI creating a huge empire and they
exploited every opportunity that came their way and created many new avenues to
realize their vision. Mr. Sashi Ruia engineered Essar`s conquests and they were
well capitalized by his younger brother Ravi, Essar restructured itselI in 1994 to
include senior proIessional managers Irom leading public sector undertakings to
manage their growing, diversiIied businesses. These proIessionals were given Iree
hand Ior running independent units. Mr. Sashi Ruia kept the group`s external
environment & business development activities with himselI. Ravi Ruia was
given charge oI the operations & overseas businesses. The second generation also
started making their way in Iamily business. Today Prashant Ruia is the director-
in-charge oI Essar`s Power, Oil & Steel business along with communications and
personnel. Anshuman Ruia looks aIter shipping.
Essar group entered in global business by commissioning a $90
million cold rolled steel plant, Essar Dhananjaya (ED), in Indonesia in
1994 oI 150,000 tonnes capacity Ied by HRC Irom Essar Gujarat Limited
in a joining venture with the Garama group oI Indonesia. ED was to
import hot rolled coils Irom Essar Gujarat`s Steel plant in India. During
that period Ruias had been working up on setting more such ventures in
Bangladesh, Saudi Arabia or Pakistan. The Iocus Ior such expansions was
to beat possible downturns in domestic demand. Essar also acquired a
three-year-old textile mill Woventex Ltd. in Mauritius. Through this they
wanted to move in AIrica which they believed would soon see and
economic upsurge.
On Essar new business strategy Sashi Ruia commented, 'We will get into
any new business that will make us more money.
Ravi Ruia commented on Essar`s global strategy in 1994, 'We will get
into any new business that will make us more money.
Ravi Ruia commented on Essar`s global strategy in 1994, 'We are looking
at impact oI globalization on existing businesses in country. Next we are looking
Ior opportunities opening up overseas. Not just those with synergies with our
existing operations, but also those that have potential Ior us. Commenting on
new opportunities he said, 'Today the canvas is wide open. We must have an
open mind. We should have basic synergies with what we do, but we must not
miss a major opportunity just because it does not Iit in with our basic operations.
According to Prashant Ruia, Chairman oI ESSMCO Ior reasons oI Iast
acquisition by Essar shipping limited is '. -uying ships has -ecome easier now.
it takes less time and the access to funds us easier`.
This philosophy became their prime motivator Ior a rapid expansion and
acquisition. Their strategy hinged on a simple premise one project will nurture
another project & co on. In mid 90`s the joke at the corporate headquarters oI
Essar group at Essar House, Mumbai used to be that which new company has the
group opened today.
Essar group wanted increase its assets to Rs. 31,300 crore, income to
Rs.19,400 crore and gross proIit to Rs.7,500 crore by the year 2001-02. In this
process they went on an expansion spree even at high cost debt to reap beneIits
Irom the post liberalization growth in India. However the economy growth which
they envisaged didn`t last long. Their steel project was delayed. It was plague and
then Iloods in Sturat, Gujarat (their plant location) that took their tool on project.
But major Iactors ere their planning and project management skills. They had
changed the project plan and basic technology number oI times. Because oI this
they could not exploit the price boom in steel sector and could not repay the loans
to the Iinancial institutions. When they came on stream with steel plant, Indian
economy started cooling oII, Southeast Asian crises happened, overcapacity in
steel sector led to a global glut and price recession in steel, all working against
their risky debt strategy.
Today, it has assets worth Rs. 14,530 crore, income oI Rs. 4,030 crore and
gross proIit oI Rs. 1,150 crore. Essar is one oI India`s leading business groups and
has phenomenal presence in Steel, Shipping, Oil & Gas, Power Telecom and Iew
Iinancial services companies besides other small businesses. Steel accounts Ior
70.30 percent oI the group`s turnover, while shipping accounts Ior 17.30 percent.
The portIolio is rather diverse with very little synergy amongst them, except that
all big companies core industries.
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