 In the previous session, we discussed about the first two strategy that is eco-efficiency and post beyond compliance leadership. Now, we will see what are the next two strategy that comes under the broad environmental strategy of the organization. So, the first the third strategy what we are talking about that is eco-branding. Now what is the focus of this strategy? The focus of this strategy is again creating a differentiation in the product and services. So, if you remember the last two strategy what we are discussing here the changes needed over the process both in case of eco-efficiency and the post compliance sorry beyond compliance leadership. But in case of eco-branding even if the focus is differentiation, but the changes needed over here is on the product and services. Now how the eco-branding is defined a form differentiate itself from the competitor when it provides something unique that is valuable to buyers beyond simply offering at a lower price. So, the typical definition of the product differentiation. Now the ecological oriented product and service represent a niche market explored by the firms worldwide and the price of product is same or greater. In most of the cases we find the eco branded product or environmental friendly product typically they are pricing higher than the regular product in the typical range of the product. So, here the product differentiation is bringing the concern of ecology or environmental concern or it is known as the ecology oriented product or the environmental friendly product. Now the eco-branding once you produce environmentally friendly product or eco-friendly product then the next is that how do you brand them or how do you create a create a identity for the product as a eco-friendly product or the environmental friendly product that is through the eco-branding. Now what is different for differentiation on environmental attributes because we have any product if you look at in every product category we have differentiated product available. But what is the when you talk about product differentiation in this case what is different over here? One the typically if you look at any product the appeal for a specific brand comes because of private benefit what we get from that brand. But in case of eco-friendly product it gives both the private benefit and public benefit. The typical example is that if I am using environmental friendly product it gives me private benefit because the environmental impact associated with that is less the types of inputs the type of resources used in the product is more natural. So I get a private benefit so if I am inclined to nature based resources for my product or the typical example is chemical free cosmetics or the cosmetics based on natural resources that gives me private benefit I am using something natural. But also it is a public benefit because it is it is giving the impact or the less impact on water recycling CO2 reduction or such as biodiversity right. Now the other example can be over here is that when we buy something the energy saving product in one way it gives us benefit because the operational cost associated with that is less but in other way also the way whatever the bigger impact it could have been created in the process or the use there is a public benefit associated with that. Now the challenge over here is that communicating the public benefit to consumer and making them ready to pay. So if it is private benefit it is very clear you can communicate that this is what the benefit you are getting from the product or the services but communicating public benefit to the consumer and making them ready to pay because of public benefit or for public benefit that is the bigger challenge associated with this. Now typically how the eco branding happen the eco branding happens through the leveling and what the level we call we call eco levels. So eco levelizing in an environmental claim or any product signifying that it is an environmental friendly. So through the level we know that this is environmental friendly. So if you look at in our day to day usage of product also we find there are numerous level associated. So the simplest example can be if you are using if you find a red dot then it is non-vegetarian if you find a green dot then it is vegetarian. Similarly if you find that there are 3 arrows there in the packaging then the package can be recycled and similarly you will find typically for the cosmetics no trial or no animal testing. So these are some of the level what we get or typically for the fair trade. So there are level what we get in the product. So all this product level is defined into or divided into 3 category of the leveling. Type 1 typically it is a multi-party agreement on criteria and third party certification. So the typical example of type 1 is FSC that is responsible forestry and this certification comes from the forest stewardship council. Similarly type 2 in the tip type 2 leveling is mostly in the packaging it is provided by the manufacturer. So one of the example of type 2 is free range. So this is free range from some of the product which creates the environmental impact. And type 3 where you can find out whatever the impact created by the product the typical example is equally. So you will find that you will get a life cycle analysis of the product and how much impact they have been created in the different stage of the life cycle. And this is the classification of eco level few of them are voluntary few of them are mandatory and you will find mostly this ISO type 1 type 2 type 3 till in many country or the many economy it is still as the voluntary. And few of the example is thus this is CFC free which comes in the ISO type 2 or it is dolphin friendly mostly when it comes to the seafood product or you get into the EPD these are all voluntary in many cases or the many economy. But there are few of the mandatory thing like declaration of the content or the dangers and symbols or conformity with the standard these are what consider in the mandatory category. So this is little bit old this summarization the eco leveling scheme in various countries by the child and waiting in 1998 it has changed over a period of time. So if you go to the UN site they gives the idea about the eco leveling that is being practiced in the different economic context or the different country context. These are few of the eco level that works in India that is prevalent in India mostly the eco mark is the one where the it gives a level of environmental friendly product or the eco friendly product. Now this entire eco branding is from eco leveling to eco branding because since you have to market the product possibly just putting the level will not help to market the product as the eco branded product or the environmental friendly product. So some of the example that where the transition have been taken place from the eco leveling to eco branding like the example of SR one of the initial example where they they were into the eco computer desktop and laptop that is eco friendly computer. Similarly your wheels lifestyle the environmental friendly clothing and support from the green cause and you will find there are many more which comes under this lifestyle where we talk about the handicraft or hand loom how the fair trade is being established how it is support the green causes. Similarly like natural fabric like hand woven wool from saffords, natural silk, recycled junk jewelry, organic knit or ecojoy toy made from sustainable wood source and organic cotton. These are few of the example where we where what we bring it over here which shows that over a period of time it is just not about eco leveling this is kind of a branding which has happened that these are the environmental friendly products. Now there are three basic prerequisite as identified by Reinhart in 1999 to make the environmental product environmental friendly product into a successful one. First consumer must be willing to pay for the cost of the ecological differentiation. So the first prerequisite is that the consumer should be ready to pay for the product. Reliable information about the product environmental performance must be available to the consumer. So whatever information is associated with the product environmental performance there should be transparency there should be a way to reach that to the consumer and differentiation should be such that it is difficult to imitate by the competitors. So typically there should be barrier to imitation willingness to pay and there should be provision to provide the reliable information to the consumer. These are the free basic prerequisite for the successful for the for the success of a environmental friendly product mostly in the category of the differentiation. Now to do this to make it a successful strategy the consumer need to perceive a clear benefit for their purchase which should offer the cost saving, better performance of the product and the risk management. So these are all private but also when you talk about the risk management it also leads to a public benefit. The typical example here is that when we buy a 5 star refrigerator or 5 star AC what is the private benefit? The private benefit is as I was discussing in the previous case also there is a reduced energy cost but by doing this also we are creating since we are demanding less of energy that leads to less of production of the energy less of the impact associated with this. So here typically we know that we are producing we are consuming something which is environmental friendly product which is giving a clear benefit in term of the reduced operational cost in the private benefit category and reduce environmental impact in the public benefit category. So for each of the product which is coming under environmental friendly product the eco branding should be such that it gives a clear idea to the consumer or for what they are paying and what are the benefit associated with this. How they create competitive advantage? This is again if they are meeting the prerequisite, if they are fulfilling the condition for a successful environmental friendly product then it is easy to create a competitive advantage. First one uncontroversial information about the environmental performance is available it should be whatever information needed about the performance of the product the inputs of the product the environmental performance of the product that should be available. Whatever the differentiation the organization is doing in term of product differentiation there should be difficult to imitate and customer they are ready to pay or willing to pay for the cost of the ecological differentiation. And ideally in order to get the competitive advantage at a point of time the public benefit and private benefit should converge. Now let us get into the our fourth strategy that is strategy for 4 that is environmental cost leadership. This is considered to be the most difficult strategy because in this strategy we are not only lowering the cost also lowering the environmental impact. So environmental cost leadership is that through the actions through the way the changes happening in the product and services it will optimize both the cost associated with this and also the environmental impact associated with this. Now the focus over here is the lower cost and the changes needed in the product and services. Now how this is being done typically radical product innovation for lower environmental impact by using the material substitution and the dematerialization. So it has to be use of innovation use of technology through the material substitution and through dematerialization that will give us less of environmental impact. And the lower cost product is typically passed to the consumer because if the innovation and if the cost of innovation is being passed to the consumer possibly the mark again in the at least in the initial stage the product may not be successful the product may not get profit for the organization. So the next challenge is that the first challenge is through the innovation how to reduce the environmental impact associated with the product. But second even if we are doing innovation or the changes in the technology it should not create a higher cost for the consumer. So this has to be also available at a lower cost of the product and that is why this is known as the most difficult strategy to achieve or most difficult strategy to practice. Now if you take the examples there is one example over here in Ecolene packaging is that they did whatever the changes with the packaging they offer that adds 25 percent cheaper than the competitor the inputs what they use no FDA approval required and when at the end of the product is when it is giving dispose through the insulator it reduces the acidity of the fumes. So if it looks like a environmental friendly product because they are using the inputs and also the environmental friendly inputs and also at the end of end level also the impact is less and they are offering it at also 25 percent less than the competitor yet the company does not market this consumer are not ready to pay. Because if you are the typical problem over here in this example is that if you are delivering something good then why at a lower cost. So the consumers typically they always behave in both the way one if the higher price is being charged for a better product they get skeptic that why should we pay more if the real benefits are not known and if you are charging a lower price and still you are offering something good then also they are skeptic because that if there is something good why the prices reduce because the perception. So the basic economic principle is that the Babylon effect works always so unless we are not valuing quality we are not ready to pay more. So unless the perception of higher price is not associated with higher quality consumer they are not ready to pay and they always put that in the category of the luxury goods. Similarly few of the other example which comes under environmental cost leadership is IKS flat packaging reduces the transport cost and emission and the typical example of bio fuel which is less environmental impact and also the cost associated with that is low. So now let us summarize all the four environmental strategy what we discussed. So strategy 1 eco efficiency strategy 2 beyond compliance leadership strategy 3 eco branding and strategy 4 environmental cost leadership. So when we put them into the matrix we see that for strategy 1 and strategy 2 the changes the competitive focus is process the changes in the organization process and for strategy 3 and 4 the competitive focus is on the product and services or the changes needed in the product and services. In case of when we are taking this that what creates the competitive advantage for this strategy for strategy 1 and strategy 4 lowering the cost or the lower cost creates the competitive advantage and for strategy 2 and strategy 3 the differentiation what the company offers in term of their process, in term of their activity, in term their product and services that creates the competitive advantage. So all these three all these four strategies being summarized here in term of their competitive focus and also the through what attributes they create the competitive advantage. Now any advantage so we know that in the previous slide it when we the organization practices this strategy it creates competitive advantage. So all these competitive advantage either they get a cost advantage or they get a product differences on advantage or they get a strategic advantage. So if you will find all these three advantage is summarized in a triangle each tip of this triangle is one of the advantage. So what comes under cost advantage the changes in the manufacturing process and the material usage that can yield the cost saving more than offset the development and the implementation cost. Whatever the cost saving is being done if they are offsetting the development and implementation cost then we get the cost advantage. In case of product differentiation advantage it increase the market share it revive the old mature product and create new market segment and in case of strategic advantage because of this pro environmental action like the example of beyond compliance leadership that can lead to strategic advantage by developing a patented product technology or re-engineering facility in a way that allow company to distress itself from the competitor. So in fact if they are creating a product technology if they are creating a re-engineering facility that creates as a barrier to the other firms to come and operate in that specific space or specific market. So here the forest and heart model will just try to summarize this strategy using the forest and heart model that how they have managed what is the model says about managing the environmental issues or the simple intervention or the clear intervention needed in which part of the business processes which will manage the environmental issues. First invest in environmental friendly process and product managing the environmental regulation invest in environmental performance improvement without increasing the cost. So if you are doing the investing in environmental friendly process and product this comes under your eco efficiency also you will find that this can be part of your eco branding because you are doing a or you are producing a different product and also you are being positioned as the environmental friendly product. When you manage the environmental regulations through the self regulation and also through reacting to the governance or the governance policy this can be this can come under this activity can come under the beyond compliance leadership. Similarly, the third one when you are investing the environmental performance improvement without increasing cost like the typical example here if the input consumption can be reduced by effective recycling then the product price need not be increased higher price need not be imposed to recover the investment made comes under the environmental cost leadership and when we combine all three methods or all four methods coming under the different strategy the it change the basis for competition and redefine market and both the forms and environment can benefit. So if you look at all this example it is not that the organization has to think of a strategy and put some intervention. So whatever the intervention is being done in the process product or with respect to reacting to the regulation compliance to the regulation all this activity all this intervention comes under one of the strategy what we have discussed in this matrix that is the competitive environmental strategy. So in the next class we will try to take some examples and we will see whatever the initiative they have taken how to map together into the part of the competitive environmental strategy. Thank you.