Research Project - Cognitive Technologies Inc.

International Business Strategies in the High Tech
Industry – journey of a Start-up
(Branding, Financial, Sourcing, Supply Chain & Strategic Alliance)
Dissertation submitted in partial fulfilment for the degree of
Executive Post Graduate Diploma in International Business Strategy
With special thanks to my mentor & guide
Prof. K. Rangarajan
Submitted by:
Kartikay Malhotra
Roll #21, EPGDIBS 03
Indian Institute of Foreign Trade, New Delhi

Declaration
This is to certify that I, Kartikay Malhotra, student of Executive Post Graduate Diploma in
International Business Strategy (EPGDIBS 03), at the Indian Institute of Foreign Trade, New
Delhi, have submitted my research project “International Business Strategies in the High
Tech Industry – journey of a Start-up” to IIFT, in partial fulfilment of the requirements for the
EPGDIBS degree. The central theme of this research project is original art, and wherever I have
taken reference from sites, books and lecture notes/ reference materials, I have tried to mention
the names or url, as an honour to the publisher, and ready reference for the reader. This work
has never been submitted to any institution or published previously, either partially, or in full. I
remain fully responsible for any error or plagiarism.
Student’s Signature
Date: March 1, 2015

Synopsis (from Interim Project)
Research Objectives:
1. Existing supply chain of a few start-ups and newly established organizations in Hi-Tech
(Consumer Electronics, Medical Electronics etc.) industry, with emphasis on differences
between the chosen firms, and why do such differences exist
2. Find out how the supply chains can be improved through forward vertical integration,
backward vertical integration, horizontal integration, buy-backs (reverse logistics),
customer engagement and brand building etc.
3. Researching into the role of TQM & Lean Manufacturing in gaining Competitive
Advantage
4. Research into the ‘Cost-Benefit’ Analysis of the suggested approaches. Use a modified
form of a Balanced scorecard – Balanced score chart – to analyze the performance of the
respective Supply Chains, and to suggest improvements for gaining Competitive
Advantage
5. Role of IT/ ITES in achieving Competitive Advantage
6. How to determine the CSF required during the Incubation period of Start-ups – and later
as well, while producing/ sourcing Hardware, Software. In other words, Make vs. Buy
decision
7. Risks involved in sourcing from 1 supplier: Demand, Price and Sourcing Country
8. Push vs. Pull Supply Chain Strategies
9. Efficient vs. Responsive Supply Chain – is our product commodity or innovative
10. Usage of CPFR (collaborative planning, forecasting and replenishment) and VMI
(vendor-managed inventory) programs
11. Strategic Management of the Supply Chain
Scope of the project:
1. Introduction
o Background
Supply Chain management is the process of managing the movement of goods
from suppliers to buyers. Supply Chain management (SCM), also known as
supply chain integration or supply chain optimization, is the process of
optimizing a company's internal practices in interacting with suppliers and
customers in order to bring products to market more efficiently.
SCM functions encompass demand forecasting, sourcing and procurement,
inventory and warehouse management, distribution logistics, and other
disciplines
o Problem Discussion
Discussion of reasons of why companies fail in their efforts in judging correct
Supply Chain methodologies, and how incremental approaches to change in
Supply Chain can benefit those companies
o Research Questions
o Proposal

2. Supply Chain analysis of a few start-up and newly established organizations – each of
which has a different approach to supply chain
3. Critical analysis of the approaches adopted by each company
o Role of TQM & Lean Manufacturing to Supply Chain problems
o The role of IT/ ITES in Supply Chain
o Role of Culture in their Supply Chain (if any)
4. Suggested Changes to our Supply Chain process to achieve Competitive Advantage,
including, but not limited to, forward/ backward vertical integration and horizontal
integration
5. Means to justify and apply our proposals through –
o Global Strategy Perspective
o Economics
o Marketing (Total Marketing), Advertising & Promotional expenses
6. Researching additional Cost (CAPEX) involved in creating Differentiation, and
Breakeven period (by means of lower OPEX) with respect to that additional cost in
number of years
7. Allied benefits to our company by following our suggestions including, but not limited to
o Buy-back (reverse path in a supply-chain)
o Single site, routed to multiple locations, and messages according to country -
similar pricing
o Brand shop and website design, both geared towards creating repeated
customers – cross selling and up-selling
8. Commonality/ differences between approaches
9. Conclusions
Proposed Methodology:
 Mainly aimed towards secondary and tertiary research, to find out what already is
known about the subject. It is cheaper than setting up primary research
 The method of Collecting Information is based on Interviews, and a Focus Group
consisting of MBA from IIFT/ IIM, and would-be-MBA from IIM
 We would collect information through journals/ published research from within IIFT
 The core team of Cognitive Technologies Inc. (introduced later)
Introduction/ background to the research:
Hailing from a business family, I always dreamed to do business. Unfortunately, my father’s
modest firm was forced to shut down because of a Supreme Court order of ban on factories in
Delhi. But my dear father did not shut down his unit until I got admission in the Indian Institute
of Technology, Delhi. Then onwards, he said to me that I would get a decent job and he could
wind-up. It was the end of “Kartikay Enterprises”.
12 years would pass since that eventful day; I promised my father that I would revive his dream
one day… I would open a firm coming April, 2015, and it would be an eventful day in our family.
A firm would also mean employment of many Engineers and support staff, which in itself is a
business’ return to society.

I have been a Scientist, Engineer, and would be MBA, who has spent his working life with in Hi-
Tech Consumer Electronics Industry known to everyone as Samsung Electronics. Naturally, my
own organization would produce futuristic products using primarily Software, but may venture
into Hardware design and manufacturing/ sourcing if need arises. I would be basing the
research topic on my own organization, and I would deviate from it as and when required.
Before beginning the synopsis, I wish to seek blessings of my Guru – Dr. K. Rangarajan, Prof.
and Head, Kolkata Campus, Indian Institute of Foreign Trade, who taught me how to align
myself along my dreams and helping me understand the value of strategic thinking.
Introduction to Cognitive Technologies Incorporated
Cognitive Technologies Incorporated is the working name of my Start-up, although I would
research a more ‘suitable’ name. Cognitive Technologies Inc. does not exist as of today, but we
have plans to incorporate this organization by March, 2015. The org would work on Artificial
Intelligence and Machine Learning, and would require an estimated period of 3 2 years in
incubation. The org would require roughly 6~10 crores in seed capital, most of which would go
towards payment of salaries of the Engineers.
We would focus our efforts on development of Software that would be incorporated in devices
such as Televisions, Mobile Phones, Wearables, Tabs, etc. Later on, the same Software, along
with modifications would be incorporated in Robots. The Robots would be the end-product
‘Androids’ (or the human like bot) that are sourced or produced
http://en.wikipedia.org/wiki/Android_%28robot%29

Executive Summary
The current project has evolved over a period of 9 months – firstly, I wanted to work over
Supply Chain Management of 5 different industries. Prof. Rangarajan counseled me against such
a mammoth task, and asked me to work over my current industry (IT/Software), and build upon
my work done in Semester I, EPGDIBS, which I have included as part of Chapter 0, Section B in
this document.
I have ideas to own my own company, a start-up called Cognitive Technologies Inc. – in the field
of Artificial Intelligence & Robotics. I spoke to Prof. Rangarajan again – this time to change the
topic to International SC & Sourcing Strategies for my own company. He smiled, and agreed. I
think he was happy for me to do something for my own sake. I soon realized that Supply Chain &
Sourcing are not an essential portion in the workings of my company – at least till the point it
breaks even (in roughly 3 years). So, I made further changes – added Branding (Marketing),
Finance and Strategic Alliances parts, which would always be critical to a business owner, who
plans for B2C sales.
Since I am an ex-IITian, my idea was to start-up my enterprise in Technology Business
Incubation Unit, FITT, IIT-Delhi. Professors help, free resources, and free PR were looking very
lucrative. To carry out that plan, I did prepare 3 additional documents –
(The excel file contains a cost sheet, which were my first impressions; here my yearly expenses
were about INR 1,27,00,000. I later on, revised it – learnt my lesson in frugality. The newer Cost
Sheet is attached with the report here).
Finally, this report is as complete, as it is empty. I have, for instance, not figured what would be
the cost projections in the year 2018 and 2025. I have also not commented on the Cost
Estimates and the Surplus. Starting from immediate, I take the reader to a point in future, 20
years hence, and leave him there pursuing alliances and M&A on a Global Scale (please see RnR
object attached). In effect, it is my conclusion, and in my opinion, very well deserved, because a
company has perpetual existence, and is successful if it doesn’t conclude.
I understand that whenever I break free of the shackles of the regular office life, and have the
courage (read resources) to go independent, I would be able to use this research project in an
optimal manner. Therefore, I am purposefully not deleting those chapters which are empty. I
hope that day of independence comes soon. Amen!
Buisness Plan.docx Cognitive
Technologies Inc. - Business Presentation.pptx
Cost Sheet
(unrelizable) - Cognitive Technologies Inc.

Acknowledgements
What to say about Prof. Rangarajan? I have not seen a more qualified and genuine teacher in
whole of IIFT. He is the most amazing Professor, who would push you harder and harder, until
your goal is reached. And the way he can mesmerize the class while teaching either Global
Strategic Management or Strategic Alliances is amazing. I wish I had every teacher like him. And
that I could work with him further, and complete my doctoral thesis under his expert guidance.
If indeed I launch my enterprise in future, to be able to meet with him and discuss about what
needs to be done to bring it to success.
Another person deserves to be greeted with utmost respect – our course coordinator, Ms. Tulika
Verma. Had it not been her superb and patient help, my volunteering task as the CR would have
gone for a spin. She is most level headed girl in IIFT; the best coordinator we could have asked
for. I thank her from the bottom of my heart, and if I ever start a business, I promise to invite
(steal) her from IIFT.
Indian Institute of Foreign Trade Kartikay Malhotra
New Delhi EPGDIBS 03
2014~15

Table of Contents
Content Page No.
Declaration 2
Synopsis 3
Executive Summary 6
Acknowledgements 7
Table of Contents 8
S. No. Content Page No.
Section A: Business Plan
1 Mission, Vision, Tag Line, Philosophy, Values, Business Principles 9
2 I. Supply Chain of Cognitive Technologies Inc. (B2C, Easiest, unless Co-
work is considered) 11
3 II. Supply Chain of Cognitive Technologies Inc. (B2B, Hard, Co-work is
Essential) 12
4 III. Supply Chain of Cognitive Technologies Inc. (B2B, Hard, Co-work with
Sourcing Company is Essential) 14
5 IV. Supply Chain Characteristics of Cognitive Technologies Inc. 10 years
down the line 16
Section B: Explanation and Validation of the Business Plan
6 From where it all started 17
7 Product or Service? 17
8 Can Global Sourcing help out a Start-up? 18
9 Sourcing Decisions 19
10 Supplier Integration with Cognitive Technologies Inc. 22
11 Channel Partners 25
12 Indirect Selling Channels 26
13 A different look at ProductLife Cycle(PLC) 28
14 Outsourced Partners 29
15 Product Development to alleviate the Supply Chain difficulties 30
16 Marketing & Branding 31
17 Competition (or Partner) Analysis 33
18 Competitor Selection? 43
19 SWOT Analysis 44
Section C: Financial Analysis
20 Assumptions – Volume, Revenues, Staffing, Inflation Rate, Expenses, Equipment 48
21 Revenue Streams 48
22 Costing 48
23 Surplus 48
24 Forex Strategies 48
25 Market Analysis 49
26 Practical Management: Balanced Scorecharts 50
Section D: Charting out the 5~20 year plan
27 Backward/ Forward & Horizontal Integration 53
28 Birth of a Conglomerate 54
29 Strategic Alliances 61
Bibliography 64
Terms & Abbreviations 66

Section A: Business Plan
Mission: To create trusted and quality products and services having artificial intelligence
Vision: To design and create ever-lasting solutions, which replicate human-like intelligence and
contribute to a better global society
Tag-line: Realizing Perceptions  Perceptions Engineered  Cognition Engineered
A compelling 30 second elevator pitch: (TODO: Reduce)
We build products with human-like intelligence, which have the capability to hold mature
conversations with you. It senses your or the group’s mood, and behaves accordingly. It is one
product that can behave as a mother, as a carer and as your friend, who relaxes, soothes, and
consoles, and brings about positivity. It works over AI, and can self-learn through similar
machines. However, there are features which remain personalized to you.
OR
We build products & applications with human-like intelligence, which have the capability to
hold mature and sensible conversations with you. It senses your or the group’s mood, and
behaves accordingly. It is one product that can behave as a mother, as a carer and as your friend,
who soothes, relaxes, consoles, provide best available suggestions and brings about positivity. It
works over AI, and can self-learn through similar machines. Yet, there are features which
remain personalized to you.
Cognitivists’ Philosophy
We devote our lives to building intelligence in devices that would capture the imagination of
visionaries for years to come…
Cognitivists’ Values
1. Investing in People
2. Together we stand
3. Work is our greatest reward
4. God is in the details
5. Excel at Innovation
Cognitivists’ Business Principles
1. Our ethical compass does not waver
2. We are in the business of manufacturing ‘intelligence’ responsibly
3. We respect our employees, our suppliers, the channel and society at large, and we would
abide by the rules over which markets have been built
4. We wish the coming generations to look at us with pride and remember us as
responsible corporate citizens
5. We are and would remain a Green company

Proposed Architecture
Below are drawn 4 different types of Supply Chains (Network). They are named from I to IV, and
represent different Product Lines. However, there are temporally separated as well – the first,
being the simplest, would come into picture within 1 year of operation. The IV (last), and most
complex, would take us ~10 years to realize.

I. Supply Chain of Cognitive Technologies Inc. (B2C, Easiest, unless Co-work
is considered)
• Three types of Supply chains are considered. The SC I is the simplest, unless co-work is
considered
• The consumers/ customers is the general public, who have a phone/ wearable, and who
download the app from the Android playstore, Windows Mobile or iTunes
• Co-work can be for capital needs, speedy work or better environment, with Software
giants like Microsoft, Google and HW giants such as Samsung, LG, or Sony so that the our
‘app’ functions in the most optimized fashion on one of the Hardware or Software… Intel
has been doing the same exercise for years, but since it is mildly unethical, we would
optimize the app more for certain platforms who are ready to co-work with us
Revenue Streams
• After rounds of deliberation, we have decided to use penetration pricing. At first, we
would give the app for free, and charge an annual subscription at the end of 1 year, very
much like WhatsApp does (Freemium pricing strategy)
• Any modifications brought about for a company would be charged separately depending
on the proposal. We do not expect that to happen till 2017 because of our proposed
product development timelines
I. Supply Chain Diagram (B2C) of Cognitive Technologies Inc. Software

II. Supply Chain of Cognitive Technologies Inc. (B2B, Hard, Co-work is
Essential)
• In this stage, we would embed our binary into Firmware of 3rd party of Hardware
companies. In effect, we would be a Contract Manufacturer for them, except that we
would be working in Software
• We need not advertise or promote the product, but our software. We are, however, not
ruling out co-branding, which depends on what value do we contribute to the final
product
• Cash would arrive as lump-sum (fixed), followed by the sale of units beyond a certain
number (variable)
• Co-work with the OEM is absolutely necessary, because we would begin adding
‘intelligence’ (profiling and storage) from this stage
Revenue Streams
• A fixed revenue stream from sales of our App that would be incorporated in the
Firmware (FW) of the 3rd party Hardware provider
• Although the contractual terms and conditions of the 3rd party manufacturer cannot be
accurately determined at present, we would nevertheless try to protect our core
technology and CSF. For that purpose, we may have to write the app in a certain way
such that it may not be reverse engineered easily
• We could propose a fixed charge, on the basis of number of gadgets sold, and the
features incorporated (intelligence) requirement of the gadget
• Expected time frame – 2018 onwards

II. Supply Chain Diagram (B2B) of Cognitive Technologies Inc. (Software)

III. Supply Chain of Cognitive Technologies Inc. (B2B, Hard, Co-work with
Sourcing Company is Essential)
 We would employ a concurrent ODM and work along with him to produce products
according to our specifications. The products can be nicher – alarm systems, devices in
medical services, or not so niche – guard dogs, robots, etc…
 Integration with System Integrators and Value Added Resellers is possible because we
are the OEM
 For certain products a direct selling seems to be a good idea, as it instills confidence into
the minds of customers
 We may also outsource (part of) the distribution to a 3rd party – depends whether we
are ready to handle the channel, and whether we see it as a CSF
Industry characteristics
 Gadgets sales – primarily robots, but can be wearables, mobiles as well etc. The crucial
aspect is that the device would be designed as per our specifications
 A propriety system would give us more flexibility to experiment
 Revenue generated propriety hardware through low interoperability – be big enough
before interoperability becomes an issue so that we can leverage it to our benefit
 Robotic HW would grow slower – software (i.e., dictionary) would be updated regularly
 Health & Public Safety needs would need to be studied in detail
 If introduced, work needs to be carried out with SI vendors, VARs
 We can outsource to Authorized Service Centers (ASC), or assign it to the sourcing
company’s (concurrent ODM) channel
Revenue Streams
 To be determined
 Expected time frame – 2020 onwards

III. Supply Chain Diagram (B2B and Global Sourcing) of Cognitive Technologies Inc. (HW + SW)

IV. Supply Chain Characteristics of Cognitive Technologies Inc. 10 years
down the line (B2C, B2B, Co-work with Sourcing Company is Imperative,
Separate GBM required, Branding, Promotionsand Advertising, DirectSales
to convince across segments, Pull marketing across Brand Shops)
• Data Mining not considered till now…
• P2P network not considered till now…
• Pricing to be played with:
o Value Based pricing
o Target Pricing
o Price Leadership (in case we are a price and/or actual leader)
o Price Discrimination (across different GBMs)
o High-Low pricing
o Freemium
o Contribution-margin based pricing
o Effect of sourcing on the pricing strategy
• See pricing strategies of Apple, Samsung & Microsoft… find what would work across
Monopoly, Oligopolistic and Monopolistic Competition. For sure, Samsung engages in
Premium pricing
IV. Supply Chain Diagram (B2B and Global Sourcing) of Cognitive Technologies Inc. (HW + SW)

Section B: Explanation and Validation of the Business Plan
Chapter 0: From where it all started
SCM in International
Trade_v7 - PPT.pptx
Chapter 1: Productor Service?
"In services, the company goes to the customer, finds out what the needs are and comes up with
the solution. With products, the entrepreneur is creating something more generic with an
understanding of what the common need is."
It's really hard to design products by focus groups. A lot of times, people don't know what they
want until you show it to them.
—Steve Jobs
If I had asked people what they wanted, they would have said faster horses.
—Henry Ford
Customerfeedbackis greatfor telling youwhatyou didwrong. It's terrible at telling you what you
should do next.
—Phil Libin, CEO of Evernote
Going by the sayings of these great men, we feel confident to embark upon the path of
innovation, and develop apps which are interesting and captivating. And these apps can be
customised to a certain extent.
We may start-out as a service company, developing apps for android, iOS and Windows mobiles
and wearables; the truth is that Cognitive Technologies Incorporated is envisioned as a product
company. Very soon, we would venture into product development, and the apps developed are
going to be instrumental in building products. However, even then, we would continue to
develop apps, however, this time, we may focus on B2B apps instead of B2C ones.
Superior type of Marketing is done in Service Companies. It is our duty to ensure that such type
of marketing is done in our company too, by each and every individual. For doing so, we must
ensure that people take pride in the product they are developing, and chart out their own MBO,
which matches with the organizations MBO.

Chapter 2: Can Global Sourcinghelp out a Start-up?
The 8 steps of the initial screening for global opportunities that exist in a specific company16:
Step 1: Identifying Target Opportunities
Step 2: Identifying Countries of Supply and Suppliers
Step 3: Finding and Using an Agent/ Broker
Step 4: Performing the Financial Analysis
Step 5: Assessing Impact on Local Suppliers
Step 6: Identifying and Managing Risk
Step 7: Deciding on Feasibility and Documenting Your Decision
Step 8: Reviewing to Assess the Impact of Currency Fluctuation
Supply Chain – It is no longer just about supply (it is demand driven), it is no longer a chain (it's
really a network), and the concepts apply equally to services as well as products. Having said
this, the challenges are greater than ever. Global supply chains continue to grow longer and
more complex as companies push deeper into uncharted territory in search of lower costs.
Customers are demanding customized goods and services, made to order and delivered
conveniently, on time and reliably. Opportunities to enhance the customer experience and boost
company economics have never been greater. But finding the right solution, one that balances
risk and reward, requires skilful navigation and a firm hand on the tiller.
Having laid out the foundation about screening Global Sourcing opportunities in general, we
would approach the problem for identifying Sourcing opportunities for Start-ups. A start-up is
usually quick to identify an opportunity and like it or not, it would want to stick to it. It reasons
that since the promoters are presently too busy with business, the present opportunity (with a
supplier) should be pursued – after all, there would be another day when it would have more
time and people, and then the start-up company would grow. It could then onwards pursue the
aforementioned 8 steps in detail. Alas, the start-up could not be more wrong!
Reasons:
Although, not true theoretically, but practically, once a supplier is selected, a start-up company
is trapped with it.

Chapter 3: SourcingDecisions
Outsourcing is of particular interest to our company. In addition to what textbooks mention15,
namely, outsourcing decisions must be based upon the following criteria:
1. Will the third party increase the supply chain surplus relative to performing the
activity in-house?
2. How much of the increase in surplus does the firm get to keep?
3. To what extent do risks grow upon outsourcing?
We mention additional criteria, which are:
4. Do we wish to jump into H/W design?
5. Can we even afford the fixed costs to set up a unit for manufacture?
a. When would we achieve breakeven if we go on to manufacture the units in-
house?
b. We would require excellent HR to carry out H/W manufacturing. Where do
we hire them from?
c. Etc.
Right now, the way Microsoft gets X-box manufactured, gives me confidence that achieving
point 5 is not of prime importance for Cognitive Technologies Incororated. We would however,
have to search out our own Flextronics.
Outsourcing Benefits
• Economies of scale
– Aggregation of multiple orders reduces costs, both in purchasing and in
manufacturing
• Risk pooling
– Demand uncertainty transferred to the suppliers
– Suppliers reduce uncertainty through the risk-pooling effect
• Reduce capital investment
– Capital investment transferred to suppliers
– Suppliers’ higher investment shared between customers.
• Focus on core competency
– Buyer can focus on its core strength
– Allows buyer to differentiate from its competitors
• Increased flexibility
– The ability to better react to changes in customer demand
– The ability to use the supplier’s technical knowledge to accelerate product
development cycle time
– The ability to gain access to new technologies and innovation.
– Critical in certain industries:
 High tech where technologies change very frequently
 Fashion where products have a short life cycle

Outsourcing Risks
• Loss of Competitive Knowledge – Outsourcing critical components to suppliers may
open up opportunities for competitors
• Outsourcing implies that companies lose their ability to introduce new designs based on
their own agenda rather than the supplier’s agenda
• Outsourcing the manufacturing of various components to different suppliers may
prevent the development of new insights, innovations, and solutions that typically
require cross-functional teamwork
• Demand Issues
– In a good economy
 Demand is high
 Conflict can be addressed by buyers who are willing to make long-term
commitments to purchase minimum quantities specified by a contract
– In a slow economy
 Significant decline in demand
 Long-term commitments entail huge financial risks for the buyers
• Product design issues
– Buyers insist on flexibility
 would like to solve design problems as fast as possible
– Suppliers focus on cost reduction
 implies slow responsiveness to design changes
Now, perhaps, I am going to throw away my credibility and reveal something very non-obvious.
I am not very interested in money. Strange, isn’t it? And I know for sure that the reader may
discredit me as a future businessman because I am going against the very values that every
business is built – to make money. However, I have my reasons; Cognitive Technologies Inc. is
not willing to compromise on the product quality by even an iota, even if it saves it lots of
money. And I pray that, any CEO of Cognitive Technologies Incorporated, in future, remembers
this fact.
As far as point 4, namely, “Do we wish to jump into H/W design?” is concerned, yes; we would
want complete trust in our suppliers. Also, we would be able to mitigate some of the risks
concerning Product design issues through H/W design. If we need to make a SA or a JV to
achieve this – so be it. The supplier must, however be ready to share the complete product H/W
design secrets with us. We would also go on and share parts of our S/W (drivers) with the
supplier. The spectrum of supplier integration is thus Grey Box, meaning:
– Formal supplier integration
– Collaborative teams between buyer’s and supplier’s engineers
– Joint development

The core logic, however, would be shared with anyone, for it is our core-competency and CSF.
We are ready to introduce a new business model, wherein, for specific made to order (opposed
to made to stock) products are concerned, and we would be using a pull based strategy, the
product would be like a family member – a bionic kid for the childless couple, or a specialized
home maker for a bachelor – we would deliver such products after n days. This is because each
product would have to be given a personality of its own (depending on what the master)
demands. Please look at Product Development document for details. If the product takes time to
deliver, owing to sourcing delay, or otherwise, we would reduce a fixed amount on its retail
price. Ok, this would make the payments difficult, and harder to forecast (we are forecasting
payments, and not products – therefore please do not confuse it with push strategy), but this
would give the evaluator a metric to gauge the SC performance.
Coming back to the question of a SA or JV, the contract would have a clause to allow member(s)
of our Design Team to be present in the Supplier’s factories/ design centres etc. all year round,
but his expenses would be borne by our company (Cognitive Technologies Incorporated). This
clause would ensure we could easily get to know if the supplier is supplying similar products to
any of our competitors. Of course, we would have to word it in such a way that there are
minimal ego-clashes with our supplier. It also depends on Supplier Powers w.r.t. our company,
and is possible only in cases where the intentions of both parties are very clear from the
beginning.
There is one other possibility – Backward Vertical Integration – or purchasing the supplier unit.
But for BVI, we would have to consult both our finances, as well as government laws, including
anti-competitive laws. Leveraged Buyout (LBO) can be considered as a strategy against a
manufacturing firm, which has its fixed assets in the form of machines and plants. Why would
Cognitive Technologies Inc. be interested in BVI?
 Better integration of all business units
 Greater power in the market to deal with L2 and L3 suppliers
 Less costs of operation
We would like to retain almost all of the workers and lower management. However, it would be
of importance to us to see whether we could utilize the unit to its near-full capacity, or else, we
would have to diversify our operations and supply orders of other companies. For a detailed
analysis on Integration Strategies, the reader is advised to look up Chapter 21.

Chapter 4: Supplier Integration with CognitiveTechnologies Inc.
Making the relationship a success:
– Select suppliers and build relationships with them
– Align objectives with selected suppliers
Which suppliers can be integrated?
– Capability to participate in the design process
– Willingness to participate in the design process
– Ability to reach agreements on intellectual property and confidentiality issues
– Ability to commit sufficient personnel and time to the process
– Co-locating personnel if appropriate
– Sufficient resources to commit to the supplier integration process
EstablishingRelationship – 5phases
• Phase – I: Preliminary phase
 Formation of internal team
 Establish need of partnerships
 Ensure Top Management commitment
• Phase – II: Determine selection criteria for potential partners
• Phase – III: Screening and assessment of candidates considering:
 Cultural Compatibility
 Long term strategies
 Financial stability
 Management compatibility
• Phase – IV: Establishing Relationship
 Clear Benefits realized
 Feedback mechanism put in place
 Mutual sharing of information, risk and reward
 Reduction in cost of purchase
 Long term relationship through Commitment for extended time period of contract
• Phase – V: Continual evaluation and adjustments of the relationship

Contract for Strategic Components
Contract Description
Buy-Back Partial refund for all unsold goods
Revenue Sharing We (Cognitive Tech. Inc.) would share revenue with supplier in return
for discount wholesale price
Quantity-Flexibility Full refund for a limited number of unsold goods
Sales Rebate Incentives for meeting target sales (retailer oriented)
Pay-Back Buyer (We) pay some agreed upon price for any goods that seller has
produced for buyer (us) but the buyer (we) did not purchase the same
Cost Sharing Seller and buyer shares cost of production
Contract Supplier Limitations
Buy-Back&
Quantity-Flexibility
Requires the supplier to have an effective reverse logistics system
which may also increase logistics cost. In case of more than one
supplier with one under buy-back and the other not under buy-back
contract, the firm would have the tendency to consume more of the
latter contract
Revenue Sharing 1. Requires the supplier to monitor our revenue which is likely to
result in increased administrative cost
2. Mere information sharing may not be adequate, building trust
is important which may be difficult
3. We (Cognitive Tech. Inc.) may tend to consume goods from
sellers with whom there is no revenue sharing
4. This contract is likely to reduce profit margins
Contract for Non-Strategic Components
Contract Description
Long term Fixed commitment made in advance
Flexible or Option Prepay for the option to purchase
Spot Market Immediate purchase
Portfolio Combine the first three contract options strategically
Evaluating Foreign Suppliers
 Work Experience
 Credentials
 Credit worthiness
 Product and service Certifications
 Verifying thru Indian Consulates and Missions

 Verifying thru Organisations such as ECGC, DGCIS
 Evaluating FOB along with other INCO term prices such as CIF

Chapter 5: ChannelPartners
A channel partner is a company that partners with a manufacturer or producer to market and
sell the manufacturer's products, services, or technologies. This is usually done through a co-
branding relationship. Channel partners may be distributors, vendors, retailers, consultants,
systems integrators (SI), technology deployment consultancies, and value-added resellers
(VARs) and other such organizations.
SI and VAR are of particular interest to us because of the following reasons:
 They would cut short our average inventory lifecycle, allowing quick in-flow of money
 They would reduce our Warehousing needs… Warehousing Aggregators
 They help us attain B2B business, which would be severely limited
o B2B businesses mean repeated orders due to lock-in effect… Relationship
Aggregators
 They share our promotional co-branding costs
 They would reduce our transportation needs… Transport Aggregators
 They would allow us terminate a B2B product because they may carry our inventory for
spare parts… Inventory Aggregators
 They help us reduce hassle of approaching and catering to a number of businesses – we
save on employee salaries, boarding & lodging, transportation to remote parts where
our products are sold
 Demand forecasting is more stable because of their presence
 And, they directly add additional value to our product… Lower costs and higher
quality
In return, we may have to dispatch a Sales Order via our distributor for delivery of products to
the said SI vendor/ VAR at a lower than market rate. We estimate this to be of the order of 20%.
In effect, the SI vendor/ VAR increases our supply chain surplus, not be increasing prices, in fact,
the overall price would probably reduce, but by more than compensating it by increasing the
quantity sold.
The FVI strategy is more complicated than the BVI strategy, because it involves operations that
may ‘term’ our organization as a ruthless competitor in the public eye. The same people do not
care when BVI is involved, because no one likes to venture into detailed nitty-gritty of their final
products. However, VI by itself need not be ruthless, and can be a pleasant experience for a
majority of stakeholders provided we offer face-saving ways to every party.
 Motivation of Channel is the key to success. Training and development of Suppliers is
the key to motivation. Invite them for a day training session, just as Samsung invited the
channel once a month. Train them and feed them to a wonderful lunch
 Always keep excitement in the Channel by using Promotional Strategies
 CE (Conformité Européenne, meaning "European Conformity") certifications (Europe
certification) for products; ISO for processes; IEEE/ ISO for software products

Chapter 6: IndirectSelling Channels
In PL 3, some 5 years from now, we may deploy Indirect Selling Channels. Indirect Selling
Channel – when we as an OEM, would employ another intermediary to sell
• Advantages
– Simple & Inexpensive
– We would need no startup costs for channel
– Responsibility of moving goods into the Channel – includes Transportation &
Warehousing costs
– Cost reduced as distribution cost may be shared with other manufacturer
– Very good for overseas customers, and building a base abroad. Once we have
knowledge of foreign markets, we can use Direct Selling Channels
• Disadvantages
– We would give control over the marketing of the Product
– Dependency on Channel, even if performance is poor
Types of Intermediaries: Indirect Channel
• Export Broker
– An individual or firm that brings together buyers and sellers for a fee but does
not take part in actual sales transactions
– Cannot Conclude the deal without the Principal Approval
– They do not have title of the goods
– They have knowledge about market supplies and demands
• Sales Representatives Or Manufacturer’s Export Agent
– Independent Business person who usually retains his or her own identity by not
using manufacturer name
– He may be exclusive or non- exclusive
– Works on commission but under a contract
– He is given right to advertising & sales promotion
• Export Management Company : EMC
– External export sales department, which represents your product along with
various other non-competitive manufacturers
– EMC generally receives exclusive rights to sell in all foreign markets, but not
always
– Making money – Commissions, Salaries, Retainer
– Have long established sales network abroad. And sometimes established foreign
sales and warehousing subsidiaries as well. Most commonly EMC appoint export
agents, or representative, and networks of exclusive distributors and dealers in
each foreign market
– Once we become success under this model, contract can be terminated

• Cooperative Exporter /Piggyback exporter/ Export vendor
– Cooperative exporter is a manufacturer with its own export organization that is
used by other manufacturers to sell to foreign markets
– Cost advantages with combined market development activities
• Purchasing/ Buying Agent
– Represent the Buyer. Acts in interest of the BUYER
– May also be used for Quality Control Inspections
– May not be a long term relationship
• Country –Controlled Buying Agent
– These buying agents represent foreign government agencies or governmentally
controlled enterprises.
– They may be independent of or employed by such agencies and enterprises and
are empowered to buy
– desired products and services
• Resident Buyer
– Individual with an office in an important merchandise center. A resident buyer is
crucial to providing valuable merchandising information and allows a company
to keep in close touch with the market. A resident buyer can be inside or outside
the organization
Make Profits rather than fee
• Export Merchant
– These are wholesale companies that buy unpackaged products from
suppliers/manufacturers for resale overseas under their own brand names. The
advantage of export merchants is promotion. One of the disadvantages for using
export merchants result in presence of identical products under different brand
names and pricing on the market, meaning that export merchant’s activities may
hinder manufacturer’s exporting efforts
• Export Drop Shipper / Desk Jobber / Cable Merchant
– Request the manufacturer to DROP SHIP a product directly to overseas customer
– Drop Shipper Collects payments from the buyer and makes payments to the
manufacturer.
– It becomes expensive to handle products Multiple times
– We as a manufacturer might drop the Export Drop Shipper later on and go direct

Chapter 7: A differentlook at ProductLifeCycle (PLC)
Time
Sales
MNC Manufactures
Productin Developed
Countries; Exports to
Developing Countries
Developing Country
Markets Remain Viable
Target Markets for
MNC;
MNC Home
Country Market Is
Diminishing
MNC Moves
Productionto
Developing
Country; Begins
Importing to
Home Country
Developing
Country
Competitor
Exports Product
to MNC Home
Country;
Competes with
MNC Imports
Introduction and
Growth Stages:
Early
Maturity:
Late
Maturity:
Decline:

Chapter 8: Outsourced Partners
1. Evaluate your outsourced supply chain
 Surprise checks of the order shipped, needs to be checked at every stage of the
supply chain to ensure that it is reaching the customer along the fastest route. This is
especially true when we would follow a "reduced price on delayed
delivery" business model and also for pull based SC
 Calls/ Surprise checks at the customer location, to gather his views on his orders – in
effect, we should know the customers
We would attempt to gain differentiation through this functionality17.
2. With the launch of new products, we would begin to carry out HW design in-house, even
though the contract manufacturers may have developed this capability – this
would lower our dependence of the third party for contract manufacturing and we could
be better placed to acquire such firms in future. Also, we could assign the product
manufacturing to several small manufacturing facilities if it gives us gain through supply
chain surplus
3. Forward Integration:
3PL can be incorporated through FVI. However, we cannot exploit EOS in Reverse
Logistics (Recycling, used-asset disposition, customer returns, returnable container
management, repair/ refurbish), and therefore this function can very well be delegated
to 3PL. However, please remember that customer support and after sales service is our
strong point. Also, Forward Logistics, if outsourced, still, is not to be handled by the
same company. We somehow have to incorporate the two way costs – forward dispatch
of products to the channel/ customers, and reverse delivery of the returned product,
and possible delivery of the repaired/ exchanged product back to a customer/ channel.
See the example of servicing of WM/ Ref.
In contrast, if we can formulate a contract with a 4PL, who gives us insight into the
customer base, we can possibly get rid of the hassle of FVI and managing the entire SC,
even if the cost of operations is a bit more. Reasons are obvious - we would be
outsourcing our uncritical responsibilities.
But come to think of it, why do we want to know our customers through the SC? We can
know them equally well if we incorporate a 3G/4G network and allow them to become a
part of the shared knowledge by registering their products on our website :)

Chapter 9: ProductDevelopmentto alleviate the Supply Chain difficulties
We have seen various problems with Product Availability, Sourcing Uncertainties, etc. Can
Product Development help?
 We could manufacture mother boards which are as alike as possible between different
products. We can incorporate a checking mechanism to determine what product it is,
and on the basis of that, product characteristics are determined at run time. For
instance, if the product is a robotic dog, it may require less RAM, and perhaps a poorer
version of Processor. But much functionality would be common to the same board being
plugged into a Television. So, in effect, if we can add more RAM into the board, and
perhaps change the processor in the field, it would mean that the supply chain costs
arising due to uncertainty and stock-outs are very much reduced… and the product may
future ready (Samsung’s EVK).
The scanning operation would happen only when the board is replaced – sort of
hardwired mechanism. Therefore, the time taken would remain the same after first
usage.
A related effect is the increased cost of the configurable mother board. I haven’t done
that costing, and therefore cannot say what percentage the cost of the final product
increases, but it should not be too high that we reject the study altogether.
Reasons:
• We are targeting high end market with niche products
• If and when the market matures, we may take out consumer grade (standard)
products, which would mean a different business model, where this point would
not figure in

Chapter 10: Marketing& Branding
 “If your product requires advertising or salespeople to sell it, it’s not good
enough.”
 I wrote as a Child, “Swami Vivekananda was an Internationalist”. My teacher crossed this
sentence. I didn’t have the confidence or the willingness to question her. Now I get
another chance to use it as a Marketing Term: Internationalization, which states,
Product Conceptualization & Design – US, Software Development in India & Poland,
AssembledinChina,andbroughtto youby <a store near you, followed by the name of that
store/ importer/ licensee>.
The purpose is to retain the best parts from all round the world. A similar tag line
follows in English and a local language. (In some cases, multiple languages can be used
in case we require the product to move around in the channel in order to reduce the lead
time – please refer to Supply Chain Management in Firms engaged in International
Trade, a case study from Samsung’s point of view, for details)
In case of services and support requirements, please contact us on …
Mostly B2B: In case you would like to try out our upgrade, please visit our website…
 We would perhaps be the only company which would offer International Warranty as no
extra price. This would however, not be valid on bulk products routed through B2B
customers, but on B2C products.
 To be able to sell to all social groups – Innovators, Early Adopters, Early Majority,Late
Majority and Laggards. This should be a part of our brand strategy:

Multiple Brands vs Single Brand (in single marketplace)
Local Brand vs Worldwide Brand
Branding (New).docx
Multiple Brands
• Market Segmentation Technique
• Creation of excitement among employees
• Creation of Competitive Spirit
• Avoidance of Negative Connotation of existing
brand
• Gaining of more retail self-space
• Allowance of Trading up or down without
hurting existing brands
Single Brand
• Better Marketing Impact
• Permitting more focused marketing
• Brand receiving full attention
• Reduced advertising cost
• Elimination of Brand confusion among
employees, dealers ,consumers
• Good for product with good reputation and
quality
Local Brand
• Legal Necessity – Trade Mark Issues
• Elimination of Problems due to Language
• Allowance of More meaningful names
• Avoidance of Taxation on International Brand
• Quick Market Penetration by acquiring local
brand
• Allowance of variation of Quality & Quantity
Worldwide Brand
• Better Marketing Impact & focus
• Reduction of Advertising Costs
• Elimination of Brand Confusion
• Good for Culture Free Products
• Good for Prestigious Brands
• Easy Identification / Recognition for
International Traveler
• Good for Culture free product
• Good for well-known designers

Chapter 11: Competition (or Partner) Analysis
Potential Competition:
 GoogleInc.… its comparable SWOT
 MicrosoftInc.
 Samsung Electronics
 LG Electronics
 AB Electrolux
 Amazon.Com,Inc.
 AppleInc.
 Fuji Soft Inc.
 Geckosystems International Corporation
 HondaMotorsCo.Ltd.
 Intuitive Surgical, Inc.
 Irobot Corporation
 Kinova
 Mako Surgical Corporation
 Samsung TechwinCo Ltd
 Sony Corporation
 ToyotaMotor Corporation
 All other product companies, especially from China
 Department of Electronics & Information Technology (DeitY),Ministry of
Communications & IT, GOI, http://deity.gov.in/content/perception-engineering
Google Inc. SWOT20 – not necessarily in Robotics

Amazon.Com, Inc.24 – Virtual Assistant/Problem Solver (Voice; dedicated HW Product)
Smart home tech is still in its early days, but a new product from Amazon may help bring it into
the mainstream.
Called Amazon Echo, it’s a cylindrical speaker that uses far-field voice recognition to pick up and
respond to your commands. For now, it seems to function mostly as a personal assistant — akin
to Siri or Google Now — but, assuming it takes off, the future could hold much more.
At first glance, Echo looks like a typical Bluetooth speaker — and it serves that purpose quite
well. You can play any song or playlist at just the right volume to suit the occasion perfectly.
The device’s 360-degree firing speaker can play music from your phone or tablet via Bluetooth,
and it has built-in support for Amazon Music, Prime Music, iHeartRadio, and TuneIn.
But Echo is so much more than a speaker.
A Personal Assistant
Under the hood lies an array of seven “always on” microphones that can hear your voice from
any direction. When it detects the wake word — Alexa, by default — it lights up and sends your
command to the cloud, where Echo quickly processes and responds to your request.
Echo is always listening, but it does have an on-board mute button in case that makes you
uncomfortable.
As far as commands go, it’s similar to current smartphone-based assistants like Siri. You can ask
about the weather, request a specific type of music or playlist, add an event to your calendar,
and so on.

Because its brain lives in the cloud, powered by Amazon Web Services, it continually learns and
adds more functionality over time. And, perhaps more importantly, Amazon Echo is a
standalone personal assistant. It’s not tied down by the baggage or technical limitations of a
smartphone, which will likely make for a more intuitive product than its phone-based
competitors.
Interestingly, the beauty isn’t in the feature set. What makes Echo great is that it’s completely
hands-free, all the time. There are no buttons to press, and it doesn’t matter how close you are
to the device. It takes everything we love about Siri, Google Now, and Cortana, and removes that
last little bit of friction.

Apple, Inc.25 – Virtual Assistant (Voice)
Your first Siri command couldn’t be easier. Whether your iPhone or iPad is in lock mode or not,
simply press down on the Home button until you here the two-tone prompt and the new Siri
screen comes up. If you don’t know what to say, you can tap on question at bottom-left of the
screen to get a list of commands, or if you don’t speak for a few seconds a list of commands will
appear on the screen.
The list of Siri commands you see are related to all of the default iOS apps. Tapping on a listed
app gets you additional commands and questions you can
PhoneCallsandMessages
Instead tapping and opening the Phone app you can simply tell Siri to call someone on your
Contacts list, (for example “Call Brian”, “Call 911″, or “Redial the last number”). Since the iOS 7
update, you can now ask Siri to play your latest voicemail message which, believe me, is a lot
faster than finding the Phone app and tapping on the message in order to hear messages. Simply
say, “Play voice mail messages,” or “Play voicemail from [name].”

After you use Siri for a while you’ll realize that you don’t have to issue commands
verbatim as they are written in the instructions. You might say something like, “Play last
voicemail message,” or “Play voicemail messages from last week.”
Voice Command Control Centre
Turning off Wi-Fi and Bluetooth when you’re traveling away from home or your office can be a
significant battery safer. You can manually turn off these and other Settings features using the
new Control Center in iOS 7 (swipe up from the bottom of the home screen of your device). Or
even better, you can tell Siri to “Turn off Wi-Fi”, or “Make screen brighter/dimmer” without
having to swipe at all. Naturally you can also send a command to turn the features back on.
A few Control Center features Siri can’t handle is turn on the flashlight or change the screen
orientation. It can though lower or increase the volume on your device.
Launch Applications
If you have lots of apps on your device, you no longer have to search for them in folders. Just tell
Siri to “Open Evernote,” for example. If you send a generic command like “Launch camera”, Siri
might ask you to specify which app you want to open, if two or more similar apps are installed
on your device.

Play iTunes Radio Station
As you might know, radio stations are a new feature added to iTunes, and fortunately instead of
opening the iTunes app on your device, you can simply tell Siri to play “iTunes Radio” or “Play
[genre] station.”
Speaking of iTunes, you can also use Siri to play songs in the music library of your device, (for
example “Play jazz playlist,” “Play songs by Miles Davis,” “Pause,” “Play”, “Skip”). These
commands are very useful if you’re using your iPhone or iPod touch to play music in you car.
Twitter Searches
You can send Twitter updates using Siri (“Tweet: I’m reading MakeUseOf articles”), and now in
iOS 7 you can search Twitter for tweets by a specified user or about a specific topic (“Search
tweets by MakeUseof”).

Questions & Answers
Siri can now provide better answers to mathematical and factual questions such as “What’s the
square root of 128?” or “How far away is the sun?”

Honda
ASIMO, Honda's humanoid robot, goes on a tour of New York City in a new video that is
available via Honda's YouTube channel as well as on Honda and ASIMO social media platforms.
Earlier this year, the newest version of ASIMO completed a successful North American debut in
New York with three major appearances; first entertaining more than three million viewers on
"LIVE with Kelly and Michael," then impressing some of the country's top tech and robotics
media at an invitation-only demonstration event and then wrapping up its visit by stealing the
spotlight at the New York International Auto Show.
But as documented in a unique new video, before all of that, ASIMO spends some time getting to
know the city.
An early-morning visit to Times Square starts the day as ASIMO greets the day's early risers at
one of the world's most famous crossroads. At lunch, ASIMO heads towards Flatbush to spend
time at the scenic Brooklyn Bridge Park. ASIMO makes some new friends at the plaza
overlooking the East River and poses for paparazzi with the iconic Brooklyn Bridge in the
background before travelling back to Manhattan for a stop in the Flatiron District.
ASIMO then joins a surprised crowd in Madison Square Park in the shadow of the historic
Flatiron Building. Taking advantage of the great Empire State weather, ASIMO dances for the
crowd and introduces itself to hundreds of youngsters.
The video can be viewed in its entirety via this YouTube link. The newest version of ASIMO is
now appearing in regular performances at Innoventions in Disneyland Park.
About ASIMO

Honda introduced the first version of ASIMO, the worlds most advanced, bi-pedal humanoid
robot, in 2000, after 14 years of research on humanoid robotics. Honda created ASIMO to help
people and society, to create a helpmate for humans requiring assistance with their daily lives.
The small, lightweight robot is designed to operate fluidly in a human environment, and is
capable of walking, running, climbing and descending stairs, avoiding objects, and recognizing
human faces, among other skills.
The new version of ASIMO is 4'3" tall (130 cm), weighs 110 lbs (50 kg), and is made of
magnesium alloy, plastic resin and other materials. ASIMO runs on a rechargeable lithium ion
battery, with an approximate operating time of 40 minutes before recharging.
Previous versions of ASIMO have entertained people around the United States, while
showcasing its innovative technology, including ringing the opening bell on the New York Stock
Exchange, conducting the Detroit Symphony Orchestra, walking the red carpet at a Hollywood
movie premiere, and in regular appearances at Disneyland.
Brief note on Humanoid
We have included a humanoid in Competition (or partner) Analysis. The reasons are:
 Humanoids have to have a lot of Artificial Intelligence
 They could be a potential source of revenue for us in future; on the contrary, they could
also be a threat to our companies expansion plans as we would be going in the
humanoid business some 5 years from now

Microsoft Cortana – Virtual Assistant (Voice) vs. Google Voice & Apple’s Siri
http://www.youtube.com/watch?v=w0pjD4qpIpg
https://www.youtube.com/watch?v=tYZ5gAQMJg8&feature=player_detailpage
https://www.youtube.com/watch?v=JJgkKBmPkiY&feature=player_detailpage
https://www.youtube.com/watch?v=4Trq7AvtoEY&feature=player_detailpage

Chapter 12: Competitor Selection?
The strategic benefits of Competitors21
 Increased Competitive Advantage
o Absorb Demand Fluctuations
o Enhance the ability to Differentiate
o Serve Unattractive Segments
o Providea Cost Umbrella
o Improve Bargaining Position with Labour or Regulators
o LowerAntitrust Risk
o Increase Motivation
 Improving Current Industry Structure
o Increase Industry Demand
o Providea Second or Third Source
o Reinforce Desirable Elements of Industry Structure
 Aiding Market Development
o Share the Costs of Market Development
o Reduce Buyers’ Risk
o Help to Standardize or Legitimize a Technology
o Promote the Image of the Industry
 Deterring Entry
o Increase the Likelihood and Intensity of Retaliation
o Symbolize the Difficulty of SuccessfulEntry
o BlockLogical Entry Avenues
o Crowd Distribution Channels
In short, having healthy competition is good for a firm, and hopefully it would be the case with
Cognitive Tech. Inc. This is because competitor creates an ecosystem where a firm can thrive,
along the same lines, but broader in scope to clusters that come up near a firm. It is an
ecosystem of the same range and scope of the IT industry flourishing in India along with certain
other countries.
It is therefore, our responsibility to act in a manner that is suitable for good competitors to
remain, whereas bad competitors to deter or withdraw from the industry. We shall study
competitor selection and certain topics that would aid us to keep competitors and ourselves at
bay - Industry Segmentation, Substitution etc.

Chapter 13: SWOTAnalysis
The SWOT Matrix18
A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a
better chance at developing a competitive advantage by identifying a fit between the firm's
strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in
order to prepare itself to pursue a compelling opportunity.
To develop strategies that take into account the SWOT profile, a matrix of these factors can be
constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:
SWOT / TOWS Matrix
Strengths Weaknesses
Opportunities
S-O strategies W-O strategies
Threats
S-T strategies W-T strategies
 S-O strategies pursue opportunities that are a good fit to the company's strengths.
 W-O strategies overcome weaknesses to pursue opportunities.
 S-T strategies identify ways that the firm can use its strengths to reduce its
vulnerability to external threats.
 W-T strategies establish a defensive plan to prevent the firm's weaknesses from
making it highly susceptible to external threats.
Once the SWOT matrix has been filled out with respect to a specific strategic goal, some analysis
can be performed. With that goal in mind, companies can ask themselves questions like:
 How can we leverage our strengths to maximize the opportunities available to us?
 How might our weaknesses impede our ability to exploit opportunities?
 What can we do to address our weaknesses?
 How can we protect our strengths in the long term?
 How can we leverage our strengths to combat or avoid threats?
 Where might our weaknesses leave us vulnerable to threats?
These questions lead to actionable items that a company can undertake to maximize its
advantage in the marketplace. Often these actions are listed (and possibly ranked) in an
advanced SWOT matrix as follows:

By presenting the SWOT analysis visually in this way, it becomes very easy to communicate the
context in which a company finds itself and the possible actions it can undertake to high level
managers or other decision makers.
2015
Strengths
 Small Team – quick decision making
 Working on Technologies which are still
considered futuristic – growth phase
 Scope of patents & papers (white papers) both
by the Prof. at IIT (see opportunities) and by
company personnel (‘consultants’) with
interns
Weaknesses
 In-experienced management
 Low on budgets – until we bag sufficient VC
 Products, in general, would take time to be
market-ready
 ‘Sharing Stock with Consultants’ Business
Model – not sure if it would work
Opportunities
 Gathering an A+ team (PhD in NLP, Image
Processing) is possible these days, especially
when we come from a product company
 IIT background on one of the promoters makes
it easier to cut down on costs (fixed + variable)
by incubating the unit in Technology Business
Innovation Unit, IIT-D
 Free (Earned) public relations by
being at IIT-D
 Lots of chances of capturing VC
 Professors help over needed
technologies
 Students to give out ideas and work as
interns on projects

Threats
 Our competition is product companies, which
are huge
 Competition may buy us out
 Competition may come out with
similar products, making our product
seem poorly designed/ amateurish

2018
2025
Another way to use a SWOT analysis on a competitor is to invert the analysis. Rather than trying
to make decisions on how to leverage strengths to take advantage of opportunities, a company
can look at a SWOT analysis done on a competitor and ask questions like:
 How can I exploit my competitor's weaknesses?
 How can I avoid or weaken my competitor's strengths?
 How can I leverage or facilitate my competitor's threats?
 How can I take away my competitor's opportunities?
Refer to Google’s SWOT Analysis. Also carry out the same for Apple, MS, Samsung, Amazon, etc.
Performing a SWOT analysis on a competitor is typically more difficult that performing a SWOT
analysis on one's own company due to information asymmetry. Without access to internal
documents and other resources of the competitor, secondary information needs to be obtained
from sources like customers, trade shows, media coverage. Many other open sources exist as
well, and a company's own employees will often have insight and information regarding
competitors collected from their day to day activities. While sufficient information is typically
available (and should be verified as per standard competitive intelligence practices), there will
always be a degree of inference that will make a SWOT analysis on a competitor less accurate
than a SWOT analysis on one's own firm.

Section C: Financial Analysis
Valley of Death in the course of a start-up22
1. Show the investor, how are we going to avoid the valley of death
2. Show him, how much time, and how much investment is required
3. Ask him of his expectations from the company, and suggest what your expectations from
him are:
 Mentorship
 Understanding that return on investments, like rockets, don’t always take-off on
time; the key is to keep working on the engines. He must appreciate that we are
giving our life’s-blood to the venture in which he has given only a fraction of his
money. Therefore, its success or failure matters to us supreme

Chapter 14: Assumptions – Volume, Revenues, Staffing, Inflation Rate,
Expenses, Equipment
2015
2018
2025
Chapter 15: Revenue Streams
2015
 B2C App Development
2018
 B2B App Development in 3rd party FW
2025
 Service Robotics (http://www.marketsandmarkets.com/Market-Reports/service-
robotics-market-681.html)
 Military
 Human Profiling & Replication
Chapter 16: Costing
2015
2018
2025
Chapter 17: Surplus
2015
2018
2025
Chapter 18: Forex Strategies
Forex -
simplified.docx
Cost Sheet -
Cognitive Technologies Inc - Frugal_v2.xlsx

Chapter 19: Market Analysis
Perhaps this section should be placed at the beginning. Anyways,I have used a unique method
to analyse the market forSmart-TV, which can be made truly smart & human-like by a method
based on first principle.
Currently, the population of the world is 7 billion people. Roughly 20% of these would be able to
afford a TV. The share of Samsung is 26% in the TV market. If we consider a family of 4
purchases a TV, we arrive at the numbers –
7 billion x 0.2 x 0.26 x 0.25 = 91 million TV sets
Now, among these TV sets that can sell, we consider that roughly half would be having a
Camera. Among the Camera users, roughly 50% of the population would be using the Virtual
Companion feature – installed by default. This brings down the numbers to –
91 million * 0.5 * 0.5 = 22.75 million
We believe people can purchase TVonce every 5 years. Net sales of TV in a year 22.75/5 = 4.55
million.
Revenue (upon TV sales): 4.55 million x USD 5 = 22.75 million (per year)
The TV sells to a family once in 5 years. However, the sale of the EVK (Evolution Kit) is going to
happen every year. Also, more and more of the TV can purchase/ upgrade the app from the
HUB. Cautiously estimating the sales of App – especially by individual users or Hospitality
Industry (although transferring the data bank remains a challenge), and considering no
improvement in adoption of TV, we would arrive at the numbers of same sales every year…
Potential Revenue: 22.75 million/year x 5 = USD 113.75 million / year
The service robotics market is expected to reach $19.41 billion by 2020 at a CAGR of 21.5%
from 2014 to 202019.
We must ensurethat anyincubator,businessangel or VC gains at least 30 times profit on
his investment. If such a profit is not realizable, it must mean that we need to re-design
our business plan.

Chapter 20: Practical Management: Balanced Scorecharts
We can resolve lots of management difficulties like Supplier scoring and assessment, Cash Flow,
Cycle Time, Unit Cost, Marketing Expenditure, Engineering efficiency, product focus, etc.
through the means of Balanced Scorecards. However, we can create a UI above all our metrics,
so that the viewer is able to view the results in graphical form.
As the reader has probably understood, there are two colours in the graphics above: these are
red, which cover the entire semicircle (1800). Overlapped, is a segment of the circle in blue. The
red mark is the ideal condition, which can be determined based on marketing research
companies, or through analysis of the cash flow statements of various companies. The blue
segment is the less than ideal – but not necessarily worrisome position of a company – which
would be Cognitive Technologies in my case, but can be any other company as well.
Below table is for comparison of Cognitive Technologies Inc. w.r.t. the Competition, partners
and customers’ expectations23.
Financial Perspective Customer Perspective
Goals Measures Goals Measures
Survive
Succeed
Prosper
Project
Profitability
Sales Backlog
Profit Forecast
Reliability
Cash Flow
Quarterly sales growth and
operating income by Product
Line/ Division
Increased market share and
ROE
Profitability linked to the
market
New Products
Efficient/
Responsive
Supply Chain
Preferred
Supplier (you,
from customer
perspective)
Branding
Repairs &
Renewal (HW
and SW) time
%age of sales from new
products
On-time delivery (defined
by customer)
Share of key accounts’
purchases vs. purchases
through Competitor
companies
Has the Brand value of the
company increased? (Ask
Gartner; ask Marketing
Dept. to conduct a survey)
What is the average lifecycle
planned for the HW?
What is the average release
Cash Flow Ideal Cash Flow to
maintain business as
per similar-sized co.
ROE Max ROE for any
comparable company in
same industry

Innovation?
Value for
money (ref.
competitor
selection)
Market Share
(Business
Segment, Tier I
Customers, Key
Accounts)
time planned for our SW
products (ref. Apple)?
Internal Business Perspective Innovation & Learning Perspective
Goals Measures Goals Measures
Technology
capability
Partnership/
JV
Manufacturing
(or Sourcing)
excellence
Design
New Product
Introduction
Code Development
capability;
Compliance to Coding
Standards;
Process compliance
capability - ISO/CMMI;
Capability toproduce quality
code within stipulated time
What %age of revenue/
profits/ etc. is invested in JV?
Is the JVbased on Capability,
Knowledge, Money,
Corporate Structure, etc.?
Increase in:
1~2 Core suppliers/ year
3 L2 Suppliers/ year
5 L3 Suppliers/year
Are wethinking about
Supplier integration?
Can we insource what was
outsourced last year?
Is the current design more
capable, more involvedand
simple than last year’s
design?
Actual introduction schedule
vs. plan
Technology
Leadership
ProductFocus
Time to market
Continuous
Improvement/
6-Sigma
Empowered
WorkForce
# of employee
suggestions
Revenue per
Employee
Staff attitude
towards
policies,
working hours,
attitude
towards one
another, etc.
Time needed to develop
next generation of SW, next
gen platform, next gen OS
(?) or device
Percent of products (3/5 =
60%) that equal 80% sales
New product introduction
vs. competition

HBR recommends addition of 2 other parameters to a Balanced Scorecard. These parameters
are Targets and Initiatives against Objectives & Measures for all 4 perspectives – Financial,
Customers, Internal Business Process and Innovation, Learning & Growth. By using these
additional parameters, we can use the BS as an Implementation Tool in addition to a planning
tool.
The question however remains – how to use Targets & Initiatives in the Scorechart? The answer
is simple. Whatever is your current score would be the size of the segment of the circle, shown
in blue. Red would be the ideal score – and the ideal score can be the Target score. However, this
year’s target can be less than ideal. In such a case, we represent that situation as a segment of
Green color (or any color for that matter).
In case the performance improves over and above the set ideal, the Green & Red portions would
be interchanged, to reflect that the overall performance is over and above the set ideal, and from
the next year, the ideal must be increased. (Make sure that the Charts in the Middle East are a
mirror image of this chart, or it would confuse the audience).
Current/ Actual
Score
Target Score
Ideal Score

Section D: Charting out the 5~20 year plan
Chapter 21: Backward/ Forward & Horizontal Integration

Chapter 22: Birth of a Conglomerate27
Diversification strategies are used to expand firms' operations by adding markets, products,
services, or stages of production to the existing business. The purpose of diversification is to
allow the company to enter lines of business that are different from current operations. When
the new venture is strategically related to the existing lines of business, it is called concentric
diversification. Conglomerate diversification occurs when there is no common thread of
strategic fit or relationship between the new and old lines of business; the new and old
businesses are unrelated. Nevertheless as studied in Chapter 0, Section B, a conglomerate like
Samsung can also utilize part of its distribution channel (in general) and Warehouses (in
particular) to strategically link parts of unrelated business and achieve “Economies of
Distribution (EoD)”, Sharing of Information among businesses and Customer Satisfaction.
Economies of Distribution refers to Economies of Scale, but gained through Distribution
process. These includes common Warehouses which could be strategically located and owned
by the conglomerate producing different goods, distribution software to keep track of goods
and transportation, all of which are examples of Forward Vertical Integration, but from a
conglomerates perspectives (unless if the conglomerate is in distribution from the beginning).
However, from individual companies (within the conglomerate) perspective, it is channel
merging to achieve EoD.
Sharing of Information can happen at the Tactical Level amongst businesses so as to provide a
basket of related products to purchasers who have already bought (or about to buy) a product.
This is used as a tactical level strategy in e-tailing businesses like Amazon or Flipkart, where
Amazon seems to be better at it. Can 2 or more unrelated businesses utilize sharing of
information as a Business or even Corporate Level Strategy? We would have to ponder more on
this topic.
Customer Satisfaction can be measured by a decrease in the number of customer complaints
due to faulty products that were attributed to shipping. It could also be measured through
number of repeat orders sent to a customer, or through customer feedback (provided it is short
enough) and faster delivery of products at the customer doorstep. Since, the channel is also a
customer (including SI vendors), similar views can be gathered from the channel (at leisure). In
addition, cost of shipment and ease of doing business (hassle free distribution) must be asked
from the channel.
Diversification in the context of Growth Strategies
Diversification is a form of growth strategy. Growth strategies involve a significant increase in
performance objectives (usually sales or market share) beyond past levels of performance.
Many organizations pursue one or more types of growth strategies. One of the primary reasons
is the view held by many investors and executives that "bigger is better." Growth in sales is
often used as a measure of performance. Even if profits remain stable or decline, an increase in
sales satisfies many people. The assumption is often made that if sales increase, profits will
eventually follow.

Rewards for managers are usually greater when a firm is pursuing a growth strategy. Managers
are often paid a commission based on sales. The higher the sales level, the larger the
compensation received. Recognition and power also accrue to managers of growing companies.
They are more frequently invited to speak to professional groups and are more often
interviewed and written about by the press than are managers of companies with greater rates
of return but slower rates of growth. Thus, growth companies also become better known and
may be better able, to attract quality managers.
Growth may also improve the effectiveness of the organization. Larger companies have a
number of advantages over smaller firms operating in more limited markets.
1. Large size or large market share can lead to economies of scale. Marketing or production
synergies may result from more efficient use of sales calls, reduced travel time, reduced
changeover time, and longer production runs.
2. Learning and experience curve effects may produce lower costs as the firm gains
experience in producing and distributing its product or service. Experience and large
size may also lead to improved layout, gains in labor efficiency, redesign of products or
production processes, or larger and more qualified staff departments (e.g., marketing
research or research and development).
3. Lower average unit costs may result from a firm's ability to spread administrative
expenses and other overhead costs over a larger unit volume. The more capital intensive
a business is, the more important its ability to spread costs across a large volume
becomes.
4. Improved linkages with other stages of production can also result from large size. Better
links with suppliers may be attained through large orders, which may produce lower
costs (quantity discounts), improved delivery, or custom-made products that would be
unaffordable for smaller operations. Links with distribution channels may lower costs
by better location of warehouses, more efficient advertising, and shipping efficiencies.
The size of the organization relative to its customers or suppliers influences its
bargaining power and its ability to influence price and services provided.
5. Sharing of information between units of a large firm allows knowledge gained in one
business unit to be applied to problems being experienced in another unit. Especially for
companies relying heavily on technology, the reduction of R&D costs and the time
needed to develop new technology may give larger firms an advantage over smaller,
more specialized firms. The more similar the activities are among units, the easier the
transfer of information becomes.
6. Taking advantage of geographic differences is possible for large firms. Especially for
multinational firms, differences in wage rates, taxes, energy costs, shipping and freight
charges, and trade restrictions influence the costs of business. A large firm can
sometimes lower its cost of business by placing multiple plants in locations providing
the lowest cost. Smaller firms with only one location must operate within the strengths
and weaknesses of its single location.
Concentric Diversification
Concentric diversification occurs when a firm adds related products or markets. The goal of
such diversification is to achieve strategic fit. Strategic fit allows an organization to achieve

synergy. In essence, synergy is the ability of two or more parts of an organization to achieve
greater total effectiveness together than would be experienced if the efforts of the independent
parts were summed. Synergy may be achieved by combining firms with complementary
marketing, financial, operating, or management efforts. Breweries have been able to achieve
marketing synergy through national advertising and distribution. By combining a number of
regional breweries into a national network, beer producers have been able to produce and sell
more beer than had independent regional breweries.
Financial synergy may be obtained by combining a firm with strong financial resources but
limited growth opportunities with a company having great market potential but weak financial
resources. For example, debt-ridden companies may seek to acquire firms that are relatively
debt-free to increase the lever-aged firm's borrowing capacity. Similarly, firms sometimes
attempt to stabilize earnings by diversifying into businesses with different seasonal or cyclical
sales patterns.
Strategic fit in operations could result in synergy by the combination of operating units to
improve overall efficiency. Combining two units so that duplicate equipment or research and
development are eliminated would improve overall efficiency. Quantity discounts through
combined ordering would be another possible way to achieve operating synergy. Yet another
way to improve efficiency is to diversify into an area that can use by-products from existing
operations. For example, breweries have been able to convert grain, a by-product of the
fermentation process, into feed for livestock. Likewise, Reliance Industries owned by Mukesh
Ambani, invests in petroleum refining, and as a Strategic fit, also has a JV with SIBUR called
Reliance Sibur Elastomers Private Limited. The JV will be the first manufacturer of butyl rubber
in India and with its targeted production of 100,000 tonnes of butyl rubber per annum, it will be
the fourth largest producer globally. How is this relevant? Butyl rubber is made from Petroleum
products – here Reliance is realizing Economies of Scope to venture into its production.
Management synergy can be achieved when management experience and expertise is applied
to different situations. Perhaps a manager's experience in working with unions in one company
could be applied to labor management problems in another company. Caution must be
exercised, however, in assuming that management experience is universally transferable.
Situations that appear similar may require significantly different management strategies.
Personality clashes and other situational differences may make management synergy difficult to
achieve. Although managerial skills and experience can be transferred, individual managers may
not be able to make the transfer effectively.
Conglomerate Diversification
Conglomerate diversification occurs when a firm diversifies into areas that are unrelated to its
current line of business. Synergy may result through the application of management expertise
or financial resources, but the primary purpose of conglomerate diversification is improved
profitability of the acquiring firm. Little, if any, concern is given to achieving marketing or
production synergy with conglomerate diversification.
One of the most common reasons for pursuing a conglomerate growth strategy is that
opportunities in a firm's current line of business are limited. Finding an attractive investment

opportunity requires the firm to consider alternatives in other types of business. Philip Morris's
acquisition of Miller Brewing was a conglomerate move. Products, markets, and production
technologies of the brewery were quite different from those required to produce cigarettes.
Firms may also pursue a conglomerate diversification strategy as a means of increasing the
firm's growth rate. As discussed earlier, growth in sales may make the company more attractive
to investors. Growth may also increase the power and prestige of the firm's executives.
Conglomerate growth may be effective if the new area has growth opportunities greater than
those available in the existing line of business.
Probably the biggest disadvantage of a conglomerate diversification strategy is the increase in
administrative problems associated with operating unrelated businesses. Managers from
different divisions may have different backgrounds and may be unable to work together
effectively. Competition between strategic business units for resources may entail shifting
resources away from one division to another. Such a move may create rivalry and
administrative problems between the units.
Caution must also be exercised in entering businesses with seemingly promising opportunities,
especially if the management team lacks experience or skill in the new line of business. Without
some knowledge of the new industry, a firm may be unable to accurately evaluate the industry's
potential. Even if the new business is initially successful, problems will eventually occur.
Executives from the conglomerate will have to become involved in the operations of the new
enterprise at some point. Without adequate experience or skills (Management Synergy) the new
business may become a poor performer.
Without some form of strategic fit, the combined performance of the individual units will
probably not exceed the performance of the units operating independently. In fact, combined
performance may deteriorate because of controls placed on the individual units by the parent
conglomerate. Decision-making may become slower due to longer review periods and
complicated reporting systems.
Diversification: Grow Or Buy?
Diversification efforts may be either internal or external. Internal diversification occurs when a
firm enters a different, but usually related, line of business by developing the new line of
business itself. Internal diversification frequently involves expanding a firm's product or market
base. External diversification may achieve the same result; however, the company enters a new
area of business by purchasing another company or business unit. Mergers and acquisitions are
common forms of external diversification.
Internal Diversification
One form of internal diversification is to market existing products in new markets. A firm may
elect to broaden its geographic base to include new customers, either within its home country
or in international markets. A business could also pursue an internal diversification strategy by
finding new users for its current product. For example, Arm & Hammer marketed its baking
soda as a refrigerator deodorizer. Finally, firms may attempt to change markets by increasing or
decreasing the price of products to make them appeal to consumers of different income levels.

Another form of internal diversification is to market new products in existing markets.
Generally this strategy involves using existing channels of distribution to market new products.
Retailers often change product lines to include new items that appear to have good market
potential. Johnson & Johnson added a line of baby toys to its existing line of items for infants.
Packaged-food firms have added salt-free or low-calorie options to existing product lines.
It is also possible to have conglomerate growth through internal diversification. This strategy
would entail marketing new and unrelated products to new markets. This strategy is the least
used among the internal diversification strategies, as it is the most risky. It requires the
company to enter a new market where it is not established. The firm is also developing and
introducing a new product. Research and development costs, as well as advertising costs, will
likely be higher than if existing products were marketed. In effect, the investment and the
probability of failure are much greater when both the product and market are new.
External Diversification
External diversification occurs when a firm looks outside of its current operations and buys
access to new products or markets. Mergers are one common form of external diversification.
Mergers occur when two or more firms combine operations to form one corporation, perhaps
with a new name. These firms are usually of similar size. One goal of a merger is to achieve
management synergy by creating a stronger management team. This can be achieved in a
merger by combining the management teams from the merged firms.
Acquisitions, a second form of external growth, occur when the purchased corporation loses its
identity. The acquiring company absorbs it. The acquired company and its assets may be
absorbed into an existing business unit or remain intact as an independent subsidiary within
the parent company. Acquisitions usually occur when a larger firm purchases a smaller
company. Acquisitions are called friendly if the firm being purchased is receptive to the
acquisition. (Mergers are usually "friendly.") Unfriendly mergers or hostile takeovers occur
when the management of the firm targeted for acquisition resists being purchased.
Diversification: Vertical or Horizontal?
Diversification strategies can also be classified by the direction of the diversification. Vertical
integration occurs when firms undertake operations at different stages of production.
Involvement in the different stages of production can be developed inside the company
(internal diversification) or by acquiring another firm (external diversification). Horizontal
integration or diversification involves the firm moving into operations at the same stage of
production. Vertical integration is usually related to existing operations and would be
considered concentric diversification. Horizontal integration can be either a concentric or a
conglomerate form of diversification.

Vertical Integration
The steps that a product goes through in being transformed from raw materials to a finished
product in the possession of the customer constitute the various stages of production. When a
firm diversifies closer to the sources of raw materials in the stages of production, it is following
a backward vertical integration strategy. Avon's primary line of business has been the selling of
cosmetics door-to-door. Avon pursued a backward form of vertical integration by entering into
the production of some of its cosmetics. Forward diversification occurs when firms move closer
to the consumer in terms of the production stages. Levi Strauss & Co., traditionally a
manufacturer of clothing, has diversified forward by opening retail stores to market its textile
products rather than producing them and selling them to another firm to retail.
Backward integration allows the diversifying firm to exercise more control over the quality of
the supplies being purchased. Backward integration also may be undertaken to provide a more
dependable source of needed raw materials. Forward integration allows a manufacturing
company to assure itself of an outlet for its products. Forward integration also allows a firm
more control over how its products are sold and serviced. Furthermore, a company may be
better able to differentiate its products from those of its competitors by forward integration. By
opening its own retail outlets, a firm is often better able to control and train the personnel
selling and servicing its equipment.
Servicing is an important part of many products, having an excellent service department may
provide an integrated firm with a competitive advantage over firms that are strictly
manufacturers.
Some firms employ vertical integration strategies to eliminate the "profits of the middleman."
Firms are sometimes able to efficiently execute the tasks being performed by the middleman
(wholesalers, retailers) and receive additional profits. However, middlemen receive their
income by being competent at providing a service. Unless a firm is equally efficient in providing
that service, the firm will have a smaller profit margin than the middleman. If a firm is too
inefficient, customers may refuse to work with the firm, resulting in lost sales.
Vertical integration strategies have one major disadvantage. A vertically integrated firm places
"all of its eggs in one basket." If demand for the product falls, essential supplies are not
available, or a substitute product displaces the product in the marketplace, the earnings of the
entire organization may suffer.
Horizontal Diversification
Horizontal integration occurs when a firm enters a new business (either related or unrelated) at
the same stage of production as its current operations. For example, Avon's move to market
jewellery through its door-to-door sales force involved marketing new products through
existing channels of distribution. An alternative form of horizontal integration that Avon has
also undertaken is selling its products by mail order (e.g., clothing, plastic products) and
through retail stores (e.g., Tiffany's). In both cases, Avon is still at the retail stage of the
production process.

Diversification Strategy and Management Teams
As documented in a study by Marlin, Lamont, and Geiger, ensuring a firm's diversification
strategy is well matched to the strengths of its top management team members factored into the
success of that strategy. For example, the success of a merger may depend not only on how
integrated the joining firms become, but also on how well suited top executives are to manage
that effort. The study also suggests that different diversification strategies (concentric vs.
conglomerate) require different skills on the part of a company's top managers, and that the
factors should be taken into consideration before firms are joined.
There are many reasons for pursuing a diversification strategy, but most pertain to
management's desire for the organization to grow. Companies must decide whether they want
to diversify by going into related or unrelated businesses. They must then decide whether they
want to expand by developing the new business or by buying an ongoing business. Finally,
management must decide at what stage in the production process they wish to diversify.
RnR.docx

Chapter 23: Strategic Alliances26
Value Chain Analysis should have been part of a Strategic Analysis of a company very early in its
business plan. However, its true meanings and power are clear to me now, after attending Prof.
Rangarajan’s lecture on Strategic Analysis of companies. Hence, I am introducing it under the
chapter Strategic Alliances.
Value Chain Analysis for Cognitive Technologies Incorporated
CSF:
1. Algorithms that make these operations possible. The algorithms can be tweaked and
reused – our way of having Economies of Scope
2. Patents – A team of PhD to file 10~20 patents within the first 5 years
3. Papers – Once the patents are filed, we would work on Papers. It increases ‘value’ of our
company in the eyes of potential VC
(R&D Planning/Future TechnologyDevelopment)
Operations:
 2015: Taking I/Ps from Technology
Development and releasing products every x
months –mobile apps +
 2018: Intelligencebuilt into websites; Apps for
TV, Laptops & Mobile/ Wearables +
 2020 onwards: Tweaking products (robots) for
customers to build customization (boutique
robots)
+
Transportation (Automobiles) Public order
Aircrafts / Shipping
Business Houses
Airports, Railway Stations
Factories –Industrial Robots
Education (Schools, Colleges, Universities,
Adult Education Centres)
Government
Armed Forces
Hospitals
Marketing & Sales:
Branding
+
Communications,
Marketing,
Pricing,
Advertising,
Channel selection

Alliances are different from utilizing the services of the Supplier or Channel. It, however, comes
into play whenever we go and demand some services that are unique to us (or with different
Alliance Partners). More specifically, please consult Chapter 21 for the Vertical Integration.
Here, we are basically talking about companies who can help us in either –
 Coalition
 Co-specialization
 Learning
The alliances are formed through Horizontal Integration.
Value Chain Analysis is a method used to identify where value can be created or improved. The
goal is to increase the profit margin by providing value (a product or a service) by exceeding the
cost to provide it. The analysis can be developed either for an individual competitor or for the
entire industry. The analysis can be done either for a product that will be distributed either to
end customers or to customers within the chain. The questions that we need answers through
the Value Chain Analysis are:
 What are the cost factors?
 Why do the costs differ?
 Why are their fluctuations in profitability?
 What are the efficiencies and the inefficiencies?
 What influences are present?
 What are the competitors’ costs?
 What are the nature and the source of the advantage?
“Strategic and Competitive Analysis”, the following process is identified:
1. Define the firm's strategic business units
o The first step is to draw boundaries around the analytical segments of the
business. Often, the different segments will have different sources of competitive
advantage which would require different strategies.
2. Identifying the firm's critical value-creating activities
o Porter defines value-creating activities by those that have different economic
structure, contribute to a large percentage of total costs and contribute to
differentiation.

3. Conduct an internal cost analysis
o To conduct an internal cost analysis, one needs to assign cost to each activity
identified in step 2, find the cost drivers for each of these and diagnose the firm’s
current strategy for areas of low cost advantage.
4. Conduct an internal differentiation analysis
5. Map out the industry profit pool
1. Define the parameters of the industry profit pool
2. Estimate the total size of the industry profit pool
3. Estimate the distribution of the profit pool
6. Vertical linkage analysis
7. Iteration
o Repeat steps 1 to 6 periodically to ensure that the value chain analysis catches
changes in the industry on a timely basis.

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commands/
26. http://wiki.telfer.uottawa.ca/ci-
wiki/index.php/SWOT_%26_Value_Chain_Analysis:_A_CI_Perspective

27. http://www.referenceforbusiness.com/management/De-Ele/Diversification-
Strategy.html
28. Using the Balanced Scorecard as a Strategic Management Tool, Robert S. Kaplan, and
Norton, David P., Best of HBR, Harvard Business Review

Research Project - Cognitive Technologies Inc.

Research Project - Cognitive Technologies Inc.

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