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Corporate Level Strategies

Corporate level strategies are basically about the choice of direction that a firm adopts in order to achieve its objectives.
Corporate strategy is essentially a blueprint for the growth of the firm.
The corporate strategy sets the overall direction for the organization to follow.
It also spells out the extent, pace and timing of the firm’s growth.

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Corporate Level Strategies

  1. 1. Corporate Level Strategies Dr. NISHIKANT C. WARBHUWAN Ph. D. MBA (HRM) BE (IT) Research Scholar, S.R.T.M. University, Sub centre, Latur, India. Email: nishikant.warbhuwan@gmail.com
  2. 2. Strategies  1. Corporate Level Strategies (Grand Strategies)  2. Business Level Strategies (Generic Strategies)  3. Functional Level Strategies
  3. 3. Corporate Level Strategies  Corporate level strategies are basically about the choice of direction that a firm adopts in order to achieve its objectives.  Corporate strategy is essentially a blueprint for the growth of the firm.  The corporate strategy sets the overall direction for the organization to follow.  It also spells out the extent, pace and timing of the firm’s growth.
  4. 4. Corporate Level Strategies  Corporate strategy is mainly concerned with the choice of businesses, products and markets.  The competitive and functional strategies of the firm are formulated to synchronize with the corporate strategy to enable it to reach its desired objectives.  Corporate strategy addresses the issues of a multi business enterprise as a whole. Also addresses issues relating to the intent, scope, and nature of the enterprise and in particular has to provide answers to the following questions…
  5. 5. Corporate Level Strategies  Questions:-  1. What should be the nature and values of the enterprise in the broadest sense? What are the aims in terms of creating value for stakeholders?  2. What kind of businesses should we be in? What should be the scope of activity in the future so what should we divest and what should we seek to add?  3. What structure, systems and processes will be necessary to link the various businesses to each other and to the corporate centre?  4. How can the corporate centre add value to make the whole worth more than the sum of the parts?
  6. 6. Types of Corporate Level Strategies  A. STABILITY STRATEGY Make no change to the company’s current activities  B. EXPANSION STRATEGY Expand the company’s activities  C. RETRENCHMENT STRATEGY Reduce the company’s level of activities  D. COMBINATION STRTAEGY A combination of above activities
  7. 7. A. STABILITY STRATEGY-  Stability strategy is a strategy in which the organization retain its present strategy at the corporate level and continues focusing on its present products and markets.  Make no change to the company’s current activities  The firm stays with its current business and product markets; maintains the existing level of efforts; and is satisfied with incremental growth.
  8. 8. A. STABILITY STRATEGY-  It does not seek to invest in new factories and capital assets, gain market share, or invade new geographical territories  Organization choose this strategy when the industry faces slow or no growth prospects  They also choose this strategy when they go through a period of rapid expansion and need to consolidate their operations before going for another bout of expansion
  9. 9. Conditions Favoring Stability Strategy  An organization might change stability when:-  1. The industry or the economy is disturbed; The environment is volatile; Uncertain Conditions  2. Environment turbulence is minimal and the firm does not foresee any major threat to itself and the industry concerned as a whole  3. The organization just finished a period of rapid growth and needs to consolidate its gains before pursuing more growth  4. The firm’s growth ambitions are very modest and its content with incremental growth  5. The industry is in a mature stage with few or no growth prospects and the firm is currently in a comfortable position in the industry
  10. 10. A. STABILITY STRATEGY- Types  A (i). No Change Strategy  A (ii). Profit Strategy  A (iii). Pause/Proceed with Caution Strategy
  11. 11. A(i) No Change Strategy  This strategy is a conscious decision to do nothing i.e. to continue with the present business definition  Taking no decision sometimes is a decision too !!!  Several small and medium sized organizations operating in a familiar market- more often a niche market that is limited in scope- and offering products or services through a time tested technology, rely on the no change strategy
  12. 12. A (ii). Profit Strategy  No organization can indefinitely continue with a no change strategy. Things do change and the organization is faced with a situation where it has to do something  An organization may asses the situation where the profitability by artificial measures, by adopting a profit strategy  In a situation where the profitability is drifting lower, organizations undertake measures to reduce investments, cut costs, raise prices, increase productivity or adopt some such measures to tide over temporary difficulties
  13. 13. A (iii). Pause/Proceed with Caution Strategy  It is to test the ground before moving ahead with a full fledged corporate strategy or organizations that have had a blistering pace of expansion and wish to rest awhile before moving ahead.  Essential when intervening of consolidation is necessary  The purpose is to let the strategic changes seep down the organizational levels, let structural changes take place and systems to adopt to the new strategies.  It is a temporary strategy  Ex Bata and liberty dominated by global brands like adidas, nike, reebok
  14. 14. B. EXAPNSION STRATEGY-  Also known as growth or intensification strategies  Expand the company’s activities  When aims at high growth by broadening the scope of one of its businesses in terms of their respective customer groups, customer functions and alternative technologies in order to improve its overall performance.  Adopted to accelerate the rate of growth of sales, profits and market share faster by entering new markets, acquiring new resources, developing new technologies and creating new managerial capabilities
  15. 15. B. EXAPNSION STRATEGY-  Growth is a way of life. Almost all organizations plan to expand. This is why expansion strategies are most popular corporate strategies  A growing economy, growing markets, customers seeking new ways of need satisfaction and emerging technologies offer ample opportunities for companies to seek expansion  Firms choose expansion strategy when their resource availability and past financial performance are both high.
  16. 16. B. EXAPNSION STRATEGY- examples  A chocolate manufacturer expands its customer group to include middle aged and old persons to its existing customers comprising children and adolescents  A printing firm changes from the traditional letter press printing to desk top publishing in order to increase its production and efficiency In above examples company moves in one or other direction so as to substantially alter its present business definition
  17. 17. B. EXAPNSION STRATEGY- TYPES  B1.Expansion Through Concentration  B 2.Expansion Through Integration i) Vertical Integration ii) Horizontal Integration  B 3.Expansion Through Diversification  B 4. Expansion Through Cooperation i) Mergers ii) Takeovers iii) Joint Ventures iv) Strategic Alliance  B 5. Expansion Through Internationalization i) International Strategies ii) Multi-Domestic Str. iii) Global Str. iv) Transnational Str.
  18. 18. B1. Expansion Through Concentration Concentration Strategies Market Penetration Market Development Product Development
  19. 19. B1. Expansion Through Concentration  Ansoff’ Product-Market Matrix  Ansoff’ Product-Market Matrix first presented by Igor Ansoff (1968) is useful in discovering growth opportunities Product/ Market Present Market New Market Present Product Market Penetration Market Development New Product Product Development Diversification
  20. 20. B1. Expansion Through Concentration 1. Market Penetration:-  The firm seeks to sell more products to the same market  When a firm believes that there exist ample opportunities by aggressively exploiting its current products and current markets  It achieve growth through existing products by:  Motivating the existing customers to buy its product more frequently and in larger quantities (ex- Volume discounts, bonus cards, customer retention)  Increasing its efforts to attract its competitors’ customers (ex- Attractive product design, quality, attractive price)  Targeting new customers in its current market (ex- Price Concessions, better customer services, increasing publicity)
  21. 21. B1. Expansion Through Concentration 2 . Market Development:-  The firm seeks to sell the same products to new markets  A firm seeks to increase its sales by taking its product into new markets. The possible methods for market development are:  The firm can move its present product into new geographical areas. This is done by increasing its sales force, appointing new channel partners, sales agents or manufacturing representatives and by franchising its operation  The firm can expand sales by attracting new market segments. Making minor modifications in the existing products that appeal to new segments can do the trick
  22. 22. 2. Market Development:- Market Development (Selling present products in new markets.) 1. Opening additional geographic markets a. Regional expansion b. National expansion c. International expansion 2. Attracting other market segments a. Developing product versions to appeal to other segments b. Entering other channels of distribution c. Advertising in other media
  23. 23. B1. Expansion Through Concentration 3 . Product Development:-  The firm seeks to sell new products to the same market  Involves development of new products or improved products for its current markets. The possible methods for product development are:  They can expand sales through developing new products  The company can create different or improved versions of the current products  The company can make necessary changes in its existing products to suit the different likes and dislikes of the customers
  24. 24. Conditions Favoring Expansion Through Concentration  Firm’s industry is resistant to major technological advancements  Firm’s target markets are not product saturated  Firm’s markets are sufficiently distinctive to dissuade competitors in adjacent markets from entering firm’s segment  Firm’s inputs are stable in price and quantity and available in the amounts and at the times needed  Firm’s industry is stable  Firm’s competitive advantages are based on efficient production or distribution channels  Success of market generalists
  25. 25. Concentrated Growth: IBM Case Study It is the strategy in which the firm directs its resources to the profitable growth of a single product, in a single market, with a single dominant technology and taking advantage of economies of scale. Issue The company’s semiconductor unit, which had bet on a strategy of manufacturing all kinds of chips for all 400 customers, had lost $ 1.2 billion over the previous 18 months. In spite of spending billions of upgrade its chip plant they were getting thrashed by Asian rivals that were manufacturing at much higher volumes and offering bargain-basement prices. Strategy formulation On July 15, 2003, 70 experts headed by Chief Executive Samuel J. Palmisano gathered in a conference to formulate the strategy. Key outcome  The chip and computer unites would be combined  Instead of manufacturing all kinds of chips for 400 customers, It would focus primarily on one family of chips (Power microprocessors).  It would produce some chips for itself and the remaining for other key partner like Nintendo, Apple G5 computers, Cisco Systems networking gear. It would recruit co-investors to help fund advances in the chip manufacturing technology. Results  IBM gained share in high-end servers.  IBM became processer supplier for next generation game consoles to companies like Sony, Microsoft & Nintendo & controls 100 % market share.
  26. 26. B 2. Expansion Through Integration Integration means combining activities related to the present activity of a firm. Such a combination may be done on the basis of the value chain analysis Integration Strategies Vertical Integration Horizontal Integration
  27. 27. Porter’s Generic Value Chain Inbound Logistics Operations Outbound Logistics Marketing & Sales Services nishikant.war@gmail.com SUPPORTED BY → Firm’s Infrastructure HR Management Technology Development Procurement
  28. 28. B 2.Expansion Through Integration Vertical Integration:  When an organization starts making new product that serve its own needs, vertical integration takes place  Any new activity undertaken with the purpose of either supplying inputs (raw material) or serving as a customer for outputs (distribution) is vertical integration
  29. 29. Vertical Integration Vertical Integration is a strategy for increasing or decreasing operations backward into an industry that produces inputs for the company or forward into an industry that distributes the company’s products. Types of Vertical Integration  Backward Vertical Integration  Forward Vertical Integration  Full Integration  Taper Integration
  30. 30. Vertical Integration
  31. 31. Vertical Integration
  32. 32. Backward integration  Backward integration is also refereed as upstream integration and forward integration as downstream integration  Backward integration means retreating to the source of materials  Nirma undertook backward integration by setting up plant to manufacture soda ash and linear alkyl benzene
  33. 33. Forward integration  Forward integration moves the organization ahead, taking it nearer to the ultimate customer  DCM, Mafatlal and National Textile corporation have set up their own retail distribution systems to have better control over their distribution activities
  34. 34. Tapper integration  Tapper Integration strategies require firms to make a part of their own requirements from other firms in which they have an ownership stake
  35. 35. Full Integration Strategy Real Ind. Ltd. Real PetroChem Real Polyester Real Textile Real Retail
  36. 36. Horizontal Integration  The acquisition of additional business in the same line of business or at the same level of the value chain is referred to as horizontal integration  Horizontal growth can be achieved by internal expansion or by external expansion through mergers and acquisitions of firms offering similar products and services  When an organization takes up the same type of product at the same level of production or marketing process  Ex- Aditya Birla Group’s acquisition of L&T cements from Reliance
  37. 37. Horizontal Integration It is process of acquiring or merging with industry competitors in an effort to achieve the competitive advantages that come with large scale and scope. Manufacturing Car (3 lakhs – 1 lakhs) Manufacturing Car (3 lakhs – 10 lakhs) Manufacturing Car (25 lakhs – 10 lakhs) In-house Distributers In-house Component Parts Manufacturing Raw material
  38. 38. Horizontal Integration  by taking over the united western bank, the IDBI bank increased its retail network from 181 to 410 branches. It added agricultural credit financing to its industrial credit financing. It also gained access to lower cost deposit base.
  39. 39. B 3. Expansion through Diversification  Diversification involves moving into new lines of business  Diversification involves a substantial change in business definition  When new products are made for new markets then diversification takes place(see Ansoff’s Matrix)  Ex- L&T Wha t next ?
  40. 40. Types of Diversification (i) Related (Concentric) Diversification (ii) Unrelated (Conglomerate) Diversification
  41. 41. (i) Related (Concentric) Diversification  When an organization takes up an activity in such a manner that it is related to the existing business definition, it is related diversification  It may be of three types 1. Marketing related diversification Sewing machine company diversifies into kitchen ware and household appliances which are sold through chain of retail stores to family consumers. 2. Technology related diversification Insurance company offering insurance to institutional customers also starts individual customers 3. Marketing and Technology related diversification Synthetic water tank manufacturer makes other synthetic items such as synthetic doors and windows through its hardware suppliers network
  42. 42. (i) Unrelated (Conglomerate) Diversification  When an organization adopts a strategy which requires taking up those activities which are unrelated to the existing business definition  Company seeks to grow by adding entirely unrelated products and markets to its existing business  A firm generally introduces to products using different technologies in new markets  The ITC group is agribusiness, FMCG, hotels, technology, IT, Tyres  The Aditya Birla Group is in a variety of unrelated businesses like aluminum, outsourcing, cement, chemicals, copper, gas, mining, retail, software, telecom, textile
  43. 43. Conditions Favoring Expansion Through Diversification  Increase firm’s stock value  Increase growth rate of firm  Investment is better use of funds than using them for internal growth  Improves stability of earnings and sales  Balance or fill out product line  Diversify product line  Acquire a needed resource quickly  Achieve tax savings  Increase efficiency and profitability
  44. 44. Reasons of M & A  To reduce competition.  To increase growth rate & capture a greater market share  To improve value of organization’s stock.  To acquire a needed resource quickly.  To take advantage of synergy.  To acquire resources to stabilize operations.  To achieve economies of scale.
  45. 45. Corporate Level Strategies  Corporate level strategies are basically about the choice of direction that a firm adopts in order to achieve its objectives.  Corporate strategy is essentially a blueprint for the growth of the firm.  The corporate strategy sets the overall direction for the organization to follow.  It also spells out the extent, pace and timing of the firm’s growth.
  46. 46. TATA- Diversification Engineering Energy & communications Consumer products Chemicals Information systems MaterialsServices Tata’s
  47. 47. Tatas  Founder- Jamshetjee Tata- 1868, Trading  1903- Taj, Mumbai- Luxury Hotels  1907- Tata Steel- Asia’s 1st steel plant  1910- Tata power- Hydro Power  1932- Tata Airlines- Civil Aviation  1968- TCS- Software  1998- Tata Indica  2008- Tata Nano- World’s cheapest car At Tata’s, we have retained the fire of idealism and in its glow we have come to recognise that no wealth or power can be more valuable than our dignity; no loss of profit can be more critical than the loss of our credibility; no skills or qualifications can substitute the integrity of our character- JRD Tata
  48. 48. Ace Magic
  49. 49. Ace Ad The success of Tata Ace, a 4-wheeler, in a market dominated by 3-wheeler load carriers, was due to a deep understanding of the market needs and customer requirements.
  50. 50. Nano- 2008 •World's ULCC •Set to revolutionise Indian car market •Global implications •Huge export potential
  51. 51. Tata Chemicals (1939)  Rs 5,800 cr  Tata Salt- India's largest salt brand  2005- M&A Brunner Mond UK, 526 cr  2008- M&A General Chemicals US, 4020 cr  Global No.2 soda ash producer  Fertilisers
  52. 52. Voltas (1954) •2400 cr •AC & Engg-services •Turnaround •Tapping AC boom in malls, offices, residences •Middle East major- Bahrain City Centre, Royal Palaces & Burj Dubai Tower- world's tallest building
  53. 53. •7200 cr •Global thro’ M&A •VSNL (2002) •Tyco (‘04) 585 cr •TeleGlobe (2005) 1075 cr •Global voice and data services leader •India's top ISP & intl wholesale voice carrier •2008- India WiMax rollout, worlds largest Tata Communications (2002)
  54. 54. Amul's Diversification Strategy Background: In 1996, B M Vyas, Managing Director, GCMMF (Gujarat Cooperative Milk Marketing Federation), commissioned the Indian Market Research Bureau (IMRB) to conduct a consumer survey to identify the products consumers wanted from Amul. Based on the findings, Amul entered into the following areas: ice cream, curd, paneer, cheese, and condensed milk.
  55. 55. Amul's Diversification Strategy In 1997, Amul launched ice creams after Hindustan Lever acquired Kwality, Milkfood and Dollops. Positioned as the 'Real Ice-cream,'Amul Ice cream was one of the few milk-based ice creams in the market.. In August 1999, Amul launched branded yoghurt in India for the first time, when it test marketed “Masti Dahi” in Ahmedabad first and then introduced it all over the country. “Masti Dahi” was plain yoghurt sold in plastic cups. Each 400 gm cup was priced at Rs 12 In 2001, GCMMF launched pizzas in the Indian market in the Rs.20-25 price range. They also diversified the Amul portfolio, offering a range of food stuffs such as ketchup, jam, ice-cream, confectionaries, cheese, and shrikhand.
  56. 56. B 4. Expansion Through Cooperation  One company can benefit at the cost of others. It is a win lose situation where if one wins then one or several others to have to lose  Competition could co exist with cooperation  Possibility of mutual cooperation with competitors, at the same time competing with them so that the market potential could expand  The term “Co-Opetition” expresses the idea of simultaneous competition and cooperation among rival firms for mutual benefit.
  57. 57. B 4. Expansion Through Cooperation  The central point is of the complementarities among the interests of rival firms  Cooperative Strategy could be of following types:- (i) Mergers and Acquisition (or Takeovers) (ii) Joint Ventures (iii) Strategic Alliances
  58. 58. (i) Mergers and Acquisition (or Takeovers)  A merger is a combination of two or more organisations in which one acquires the assets and liabilities of the other in exchange for shares or cash, or both the organizations are dissolved and assets and liabilities are combined and new stock is issued  For the organization which acquires another, it is an Acquisition  For the organization which is acquired, it is a merger
  59. 59. (i) Mergers and Acquisition Culture M&A Strategy Resources Business ObjectiveStructure Leadership Person
  60. 60. Major Acquisitions – Big Deals Target Buyer Value($bn) Year Arcelor Mittal Steel 31 2006 NKK Corp Kawasaki Steel 14.1 2001 LNM Holdings Ispat Intl 13.3 2004 Tata Corus 12 2006 Krupp AG Thyssen 8.0 1997 Dofasco Arcelor 5.2 2005 Intl Steel Mittal Steel 4.8 2005
  61. 61. (i) Mergers and Acquisition- Types Horizontal merger : When two merging companies are of the same industry and produce similar products.  Example : Footwear Company Merging with Footwear company Vertical merger : When two companies are producing the same goods, but are at different stages, it is a vertical merger.  Example : Footwear Company Merging with Leather Tannery Concentric merger : when two companies are related to each other in terms of customer functions or customer groups.  Example : Footwear Company Merging with another specialty Footwear Company Conglomerate merger : When two companies operate in different industries.  Example : Footwear Company Merging with Pharmaceutical Firms
  62. 62. Reasons of M & A  To reduce competition.  To increase growth rate & capture a greater market share  To improve value of organization’s stock.  To acquire a needed resource quickly.  To take advantage of synergy.  To acquire resources to stabilize operations.  To achieve economies of scale.
  63. 63. Merger of ING Vysya with Kotak Mahindra Bank Background: The Indian banking sector did not witness too many M&A activities when compared to western and other countries. After the first stage of nationalization in 1969, only 34 mergers took place in the Indian banking sector. In 26 of these deals, PSBs acquired private sector banks that were on the brink of failure, mostly on a directive from the RBI. The remaining 8 deals happened between private sector banks.The merger prior to the Kotak and ING Vysya merger in the private sector banking space took place in 2010 when Bank of Rajasthan merged with ICICI Bank in a US$398 million deal.
  64. 64. Merger of ING Vysya with Kotak Mahindra Bank Kotak started as a Non Banking Financial Company (NBFC) – Kotak Mahindra Capital Management Finance Limited (KMCMFL) – in 1985 in India. KMCMFL was renamed Kotak Mahindra Finance Limited (KMFL) in 1985 and it received its banking license in February 2003 to become the first NBFC to be converted into a full-fledged private bank in India. It was renamed as Kotak Mahindra Bank Limited ING Vysya was incorporated as Vysya Bank Limited (Vysya Bank) in 1930 in Bangalore, Karnataka, in Southern India. In 2002, ING Vysya came into existence when the ING Group acquired a major stake in Vysya Bank. This was the first acquisition of an Indian bank by any foreign bank.
  65. 65. The Merger Deal On November 20, 2014, Kotak announced the merger with ING Vysya in an all-stock deal worth of Rs. 148.51 billion or US$2.4 billion. On regulatory approval, all of ING Vysya’s branches and businesses would merge with Kotak. ING Vysya’s shareholders would get 0.725 share of Kotak stock for every one stock of ING Vysya they held i.e., 725 shares of Kotak for every 1,000 shares of ING Vysya. This exchange ratio indicated that the implied price of each stock of ING Vysya was Rs. 790 which was based on the average stock price of Kotak and ING Vysya for one month – from October 20, 2014, to November 19, 2014 – which came to Rs. 1089.50 and Rs. 682 respectively
  66. 66. Synergies Out Of The Merger  The merger increased the geographical presence and further deepened Kotak’s network, thanks to the complementary network of ING Vysya. The merger increased Kotak’s number of branches and its ATMs network by 47% and 35% to 1,214 and 1,794 respectively. Before the merger, 80% of the Kotak’s branches were in the western and northern parts of the country and only 15% were in the southern part of India. On the other hand, ING Vysya had a greater presence in the southern part of the country with 64% of its branches located there and only 32% its branches in the western and northern parts of the country. After the merger, Kotak had a balanced presence in different parts of the country.....
  67. 67. MERGERS & ACQUISITION- Case Study
  68. 68. PROFILE PRE MERGER  102 years in steel bazaar  World’s 56th largest  Capacity of 30 Million  Founder:J.N. Tata  Presence in 26 nations  World’s 6th largest  2nd in Europe,1st in UK  371st rank in fortune list  Presence in 50 nations  40,000 people worldwide. TATA STEEL CORUS
  69. 69. Acquisition  TATA-CORUS  Tata acquired Corus, which is four times larger than its size and the largest steel producer in the U.K. The deal, which creates the world's fifth- largest steelmaker, is India's largest ever foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the same year.  Tata acquired Corus on the 2nd of April 2007 for a price of $12 billion. The price per share was 608 pence(rs 484), which is 33.6% higher than the first offer which was 455 pence.
  70. 70. Acquisition Process Particulars Corus Currency: Rupee Millions TATA Steel Ltd Currency: Rupee Millions Year 2006 2005 2004 2006 2005 2004 ASSETS 582750.00 533925.00 467775.00 205,450.70 177,033.10 147,988.70 DEBTS 98100.00 105525.00 96000.00 45,932.70 42,073.10 39,982.90 LIABILITIES 231300.00 178425.00 155475.00 30492.10 33146.80 32665.90 REVENUE 760500.00 699900.00 596475.00 202,444.30 159,986.10 111,294.40 NET INCOME 33900.00 33450.00 -22875.00 37,346.20 36,032.60 17,887.80
  71. 71. JOINT VENTURE  A joint venture could be considered as an entity resulting from a long term contractual agreement between two or more parties  An entity formed between two or more parties to undertake a specified activity together. Parties agree to create a new entity by both contributing equity, and they then share revenue, expenses, and control of the enterprise. The venture can be for one specific project only or a continuing business relationship Eg: Sony Ericsson.  Unlike mergers and acquisitions, in joint venture the parent companies does not cease to exist.
  72. 72. Types of Joint Ventures (a) Between 2 Indian org. in one industry (b) Between 2 Indian org. across different industries. (c) Between an Indian org. & a foreign org. in India. (d) Between an Indian org. & a foreign org. in that foreign country. (e) Between an Indian org. & a foreign org. in third country.
  73. 73. Joint Venture It is a contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise.  Types of Joint Ventures:  Between two Indian organisations in one industry. E.g. NTPC ltd. +Indian Railway =Bharatiya Rail Bijlee company  Between two Indian organisations across different industries. E.g. Action Aid India + TISS = offering degree courses in rural India  Between an Indian organisation and a foreign organisation in India. E.g. DLF ltd + Nakheel ( UAE ) = 2 integrated town ships in India  Between an Indian organisation and a foreign organisation in that foreign country. E.g. Kirlosker pumps = SPP Pumps Ltd ( UK) = Catering of EU market  Between an Indian organisation and a foreign organisation in a third country. E.g. Apollo Tyres + Continental AG Germany = Tyre manufacturing facility in Malaysia.
  74. 74. Conditions for Joint Ventures 1. When an activity in uneconomical for an organisation to do alone. 2. When the risk of business has to be shared and therefore , is reduced for the participating firms. 3. When the distinctive competence of two or more organisations can be brought together. 4. When setting up an organisation requires surrounding hurdles such as import quotes , tariffs nationalistic- political interests and cultural roadblocks.
  75. 75. Five Triggers for a Joint Venture 1. Technology 2. Geography 3. Regulation 4. Sharing of Risk and Capital 5. Intellectual Exchange
  76. 76. The Hero Honda Joint Venture The origins of Hero date back to 1944, when four brothers of the Munjal family started a bicycle spare parts business in Amritsar, Punjab, North India. In 1956, Hero Cycles Ltd was established in Ludhiana, Punjab. In the first year, the output was 639 bicycles. They started exporting bicycles in 1963. The Munjals also incorporated several bicycle component manufacturing units, which included Rockman Cycle Industries for manufacturing bicycle hubs and chains, and Highway Cycles for making freewheels. By 1975, Hero had become the largest manufacturer of bicycles in India.
  77. 77. The Hero Honda Joint Venture  In 1978, Majestic Auto Limited, was incorporated. The first product from this venture was Hero Majestic Moped, a motorized two wheeler. In 1986, Hero became the largest bicycle manufacturer in the world.  In the early 1990s, Japan-based Honda was looking at entering the Indian two wheeler market (both scooters and motorcycles) through joint ventures7. Honda had been the largest manufacturer of motorcycles in the world since 1959. In terms of automobile manufacturing, it was the sixth largest in the world.
  78. 78. The Hero Honda Joint Venture  Initially, Honda intended to partner with the then market leader Bajaj Auto Ltd. (Bajaj). But the venture did not work out, and Honda partnered with Kinetic Engineering Ltd. (Kinetic), which manufactured the Luna brand of mopeds. Both the companies entered into a joint venture, with each company holding 28.56% of the equity. The venture, Kinetic Honda Motors Ltd. (Kinetic Honda) opted to produce scooters through the joint venture, as the scooters were highly popular at that time
  79. 79. The Hero Honda Joint Venture  Then for the motorcycle venture, Honda approached Hero. Hero's bicycle business, mopeds, and wide distribution network attracted Honda. Both the companies started negotiating in 1983 and entered into a joint venture in 1984. The joint venture agreement was for a period of ten years. As per the deal, Honda agreed to provide the technical know- how, set up manufacturing facilities, and carry out Research and Development activities. Hero Honda had to pay a royalty of 4% on the ex-factory price of each vehicle for these services. Hero also paid a lump sum fee of US$ 500,000. In the venture, both the partners held 26% of the equity, 26% was sold to the public, and the remaining was held by financial institutions.
  80. 80. The Hero Honda Joint Venture  On the board of Hero Honda, Honda appointed four members and the Munjal family had four representatives. Employees from Honda, Japan, were brought to take care of the quality and engineering functions. Other functions like marketing, finance, HR, and daily operations were managed by the local staff. Hero Honda announced that it would launch a 100 cc motorcycle the next year. At that time, industry observers were of the view that consumers would reject motorcycles as they were more used to and preferred scooters.
  81. 81. The Hero Honda Joint Venture  Hero Honda set up a factory in Haryana, North India. The company launched its first bike - the Hero Honda CD 100 - in 1985. The CD 100 was designed completely by Honda. The four stroke motorcycle was equipped with an electronic ignition system, illuminated speedometer, and 4-speed gear box. The bike set very high standards of fuel efficiency, promising a mileage of 80 km per liter. The Hero Honda CD 100 was launched with the campaign - 'Fill it, shut it, forget it' that highlighted the mileage that it provided. The motorcycle became highly popular owing to its mileage and the fact that it was the only four stroke engine motorcycle at that time in India.
  82. 82. Honda has other Plans as Well...  While the Hero and Honda joint venture was going from strength to strength, the joint venture of Honda with Kinetic was not doing too well. Kinetic Honda was the first gearless scooter in India. The vehicle became highly popular, especially among women, due to its electric start and gearless operation. By the early 1990s, the company started facing competition from TVS which came up with its own version of gearless scooter called Scooty targeted at women. But Kinetic was not allowed to enter the motorcycle segment as Honda already had a joint venture with Hero. In 1993, Honda increased its stake in the joint venture to 50.92%...
  83. 83. Honda has other Plans as Well...  Bone of Contention  When Honda announced in August 1999 that it would set up a subsidiary to manufacture scooters and motorcycles, Hero Honda's stock plunged by 30%. In 2004, when it was time for the agreement with Honda to be renegotiated, Honda announced that it would enter the motorcycle market through HMSI. At the same time, Honda allowed Hero to have a minority stake in HMSI, and allowed Hero to examine the motorcycles that HMSI would release in the market. Though Hero Honda launched several new products from time to time, Honda was reportedly reluctant to share its technology with Hero Honda, though it had an agreement to do so. Company insiders were of the view that Hero Honda was unable to bring out new bikes with better technology while competitors came out with better versions, as innovation was solely in the hands of Honda...
  84. 84. The Split
  85. 85. Honda has other Plans as Well...  The Split and the Aftermath In December 2010, both the companies decided to part ways in a phased manner because of unresolved differences and independent plans. Honda decided to sell its stake of 26% to the Munjal family and to exit from the venture. On the split, Pawan Munjal, said, "The Hero group together with Honda had a great 27 years of the joint venture which all of us have benefited from. It was time for us to get into a new mode where we as a group can then involve a whole lot of our own people here in the company and start doing our own technology development, which was one of the big reasons why we thought of parting ways and also to get into the international market and to take the Hero brand global."...
  86. 86.  In the past when there had been a split between an Indian company and the partner in the joint venture, the results had been mixed. For example, Bajaj and TVS were able to sustain and grow even after breaking away from their joint ventures with Kawasaki and Suzuki respectively. On the other hand, Kinetic and Eicher suffered after falling out with Honda and Yamaha respectively. Regarding the split of Hero and Honda, there was a poll conducted and afaqs asked advertising and marketing professionals about the impact of the split on both brands. The experts felt that the Hero group would continue doing well, especially in the mass markets, but R&D and technology would remain a challenge. They said Honda would do well in the premium segment, but creating a mass market appeal might prove difficult. Another challenge would be in the terms of local distribution, after-sales service, and spare parts... Opportunities and Challenges
  87. 87. Lenovo and NEC Corp form Japan PC joint venture  Lenovo and NEC Corp entered a partnership to target the Japan PC market in 2011.According to the two companies, the venture will create the largest PC group in Japan, the third largest PC market in the world where NEC already leads. As per to the agreement, Lenovo and NEC will form NEC Lenovo Japan Group, and under this group, Lenovo and NEC will establish a new organization known as Lenovo NEC Holdings BV, registered in the Netherlands. Lenovo will hold a 51% stake in the joint venture, while NEC will hold a 49% stake.
  88. 88. JOINT VENTURES IN INDIA 1. Maruti Udyog Ltd. & Suzuki Motor Corp.
  89. 89. JOINT VENTURES- MTNL, VSNL and TCIL New Delhi, April 11,2003: Three telecom giants, MTNL, VSNL and TCIL have formed a joint venture and got licence to offer basic telephony services including wireless in local loop (WLL) based services in Nepal.
  90. 90. Strategic Alliances  Gallo, the world’s largest producer of wine, does not grow a single grape  Nike, the world’s largest producer of footwear does not manufacture a single shoe How is this Possible ??????  These companies have entered into strategic alliances with their suppliers to do much of their actual production and manufacturing for them.
  91. 91. Strategic Alliances  Two or more firms unite to pursue a set of agreed upon goals, but remain independent subsequent to the formation of alliance  The partner firms share the benefits of the alliance and control over the performance of assigned tasks  The partner firms contribute on a continuing basis, in one or more key strategic areas like technology, product, etc  A strategic alliance is a form of affiliation that involves a mutual sharing of resources or “partnering” to improve efficiency.  In strategic alliances, the focus is on “sharing” of resources rather than seeking change in control. Equity investment in each others company is not any focus.
  92. 92. Strategic Alliance Strategic Outsourcing allows one or more of a company’s value-chain activities or functions to be performed by independent specialized companies that focus all their skills and knowledge on just one kind of activity. Distributer Distributer Distributer Distributer Distributer Distributer Regional Center Regional Center Factory Distributer Distributer Distributer Distributer Distributer Distributer Distributer Distributer Distributer Distributer Distributer Distributer Factory FedEx Shared Facility FedEx Shared Facility FedEx Shared Facility FedEx Center
  93. 93. Types of Strategic Alliances  Pro competitive alliance : vertical value chain alliances b/w manufacturers and suppliers.  Non competitive alliances : Intra industry partnerships b/w noncompetitive firms like two firms in same industry but different geographical locations.  Competitive alliance : partnerships which brings two rival firms in a cooperative arrangement where intense interaction is necessary.  Pre competitive alliance : partnerships which brings two firms of different industry together to work on well defined industries such as new technology development.
  94. 94. Reasons for strategic alliances  Market entry – A strategic alliance can ease entry into a foreign market Eg: strategic alliance between British Airways and American Airlines.  Share risk & expenses -firms involved can share risks. Eg: In early 1990’s film manufacturers Kodak and Fuji joined with camera manufacturers Nikon, Canon, and Minolta to create cameras and film for an "Advanced Photo System.  Synergistic Effects of Shared Knowledge and Expertise- help a firm gain knowledge and expertise  Skills+ brand + market knowledge+ assets= synergizing effect Eg: For example, in the early 1990s, Motorola initiated an alliance among various partners, including Raytheon, Lockheed Martin, China Great Wall, and Nippon Iridium, to develop and build a global satellite-based communications network.  Gaining Competitive Advantage  Reducing Manufacturing Costs
  95. 95. Nokia-Microsoft Alliance: Joining Forces in the Smartphone Wars  Background Note  Smartphone Market:The first decade of the 21st century saw a sudden increase in the market for converged-function smart phones. Convergence of technology refers to the coming together of various technologies to work in a synchronized way and deliver better performance as well as offer several new functions which were till then not available in mobile phones. The turn of the century saw the mobile phone turning into an ultimate device of aspiration for consumers around the world...
  96. 96. Nokia-Microsoft Alliance:  Nokia: The origins of Nokia can be traced back to 1865, when an engineer called Knut Fredrik Idestam (Idestam) established a wood-pulp mill in southern Finland to manufacture paper. Idestam later named his business as Nokia Ab in 1871. The company also started an electricity business in 1902...  Microsoft: Microsoft was founded by Bill Gates (Gates) and his friend Paul Allen in 1975. Microsoft was started to develop a programming language called Altair BASIC, an improved version of BASIC. In 1978, Microsoft introduced its own version of COBOL for personal computers (PCs)...
  97. 97. Nokia-Microsoft Alliance:  Problems at Nokia: Nokia, considered to be the pioneer in smartphones and a global leader in the mobile phones market, started to face severe challenges to its dominance in the smartphone market in 2007Nokia faced severe competition from companies like Apple, Inc. and Google, Inc. who entered the market for high-end smartphones after 2007. Analysts said Nokia's poor focus on software and the lack of the latest operating system on its smartphones were the main reasons for its declining market share. Nokia's board appointed a new CEO, Stephen Elop (Elop), who was a former executive at Microsoft, to bring more of a focus on software. Soon after taking over as CEO of Nokia, Elop sent out a memo to the employees emphasizing the need to bring about drastic changes at the company.
  98. 98. Nokia-Microsoft Alliance:  The Alliance  In February 2011, Nokia announced the alliance with Microsoft in which Nokia would use Microsoft's mobile OS Windows Phone on its smart phones. As per the deal, Windows Phone would replace Symbian as the primary OS on Nokia's phones and Nokia would pay royalties to Microsoft for using its OS. Microsoft would in turn provide support to Nokia in selling its new Windows Phone powered smartphones.
  99. 99. Nokia-Microsoft Alliance:  In October 2011, Nokia announced the launch of its Lumia 800 mobile phone. The Lumia 800 was Nokia's first mobile phone to be released with the Windows Phone mobile Operating System (OS) of Microsoft Corporation (Microsoft). Nokia and Microsoft had entered into a partnership in February 2011 whereby the Windows Phone would become the primary operating system for Nokia's high-end smartphones. Nokia's partnership with Microsoft was intended to help it face up to the heavy competition in the smartphone segment from the newer entrants into the market. Nokia was a pioneer in the smartphone business and held the majority share in the smartphone market till 2007.
  100. 100. Nokia-Microsoft Alliance: "There were certain things we needed.... There were certain things Microsoft required. We have found them in each other and we have built something here that together is going to be very successful." -Stephen Elop, in February 2011.
  101. 101. Bajaj Tempo, State Bank of Indore in strategic alliance  Bajaj Tempo, a leading manufacturer of tractors in India, and State Bank of Indore, a leading bank in the country, have tied up for promoting agricultural mechanisation in the country through the sale of tractors. An agreement was signed between H G Rindani, deputy general manager, State Bank of Indore and M M Gupta, deputy general manager, Bajaj Tempo, in Indore.  The bank, with this agreement, will offer special terms of finance to customers for the purchase of the Balwan range of tractors under a scheme called Indore Bank-Bajaj Tempo-Krishi Vikas Scheme. The bank, under the scheme, will finance the Balwan tractors, trailers and implements at attractive interest rates and terms.
  102. 102. MERGER AQUISITION JOINT VENTURE STRATEGIC ALLIANCE Usually two companies of equal size merge Together. Voluntary and friendly process Stock swap : both companies surrender their stocks and stocks of new companies are given as replacement. Parent companies cease to exist. Large company takes over the smaller Company. Often forceful or unfriendly where larger company attracts the shareholders of target company by offering them better price for their shares. Parent companies cease to exist. Two or more companies agree to form an Entity for a specific task or period. Always friendly. One company receives financial assistance, Managerial inputs and technological inputs from superior company. Parent companies keep functioning in their Respective areas. To improve efficiency of companies. Includes no equity investments. Parent companies keep functioning as normal by supporting each other.
  103. 103. B 5. Expansion Through Internationalization  International strategies require organizations to market their products or services beyond the domestic or national market.
  104. 104. GLOBALIZATION--->PRINCESS DIANA'S DEATH  Question: What is the truest definition of Globalization? Answer: Princess Diana's death. Question: How come? Answer: An English princess with an Egyptian boyfriend crashes in a French tunnel, driving a German car with a Dutch engine, driven by a Belgian who was drunk on Scottish whisky, followed closely by Italian Paparazzi, on Japanese motorcycles; treated by an American doctor, using Brazilian medicines. This is sent to you by an Indian using Bill Gates's technology, and you're probably reading this on your computer, that uses Taiwanese chips, and a Korean monitor, assembled by Chinese workers in a Singapore plant, transported to you by Bangladeshi rickshaw-driver. That, my friends, is Globalization!!!!!
  105. 105. Model- C.A.Bartlett & S.Ghosal
  107. 107. Expansion Through Internationalization Two set of factors impinge upon a firm’s decision to adopt international strategies:  Cost pressure : It denotes the demand on a firm to minimise its unit costs. Typically, cost pressures are high in industries such as petroleum, chemicals , steel etc.  Pressure for local responsiveness : It makes a firm tailor its strategies to respond to national level differences in terms of variables like customer preferences and tastes, government policies or business practices. A whole range of products and services like cars, clothes, food, entertainment or insurance face pressures for local responsiveness and firms have to tailor them to the requirements of individual country markets.
  108. 108. Types of International Strategies 1. International Strategy 2. Multi-domestic Strategy 3.Global Strategy 4. Transnational Strategy
  109. 109. 1. International Strategy: In this, firms create value by transferring products and service to foreign markets where these products and services are not available. They offers standardized products and services in different countries, with little or no differentiation.
  110. 110. 2. Multidomestic Strategy: In this, firms try to achieve a high level of local responsiveness by matching there products and service offerings to the national conditions operating in the countries they operate in. Here the multidomestic firms attempts to extensively customise their products and services according to the local conditions operating in the different countries. Companies in the food and beverage, consumer products, and clothing and fashion industries often may resort to a country-by- country approach to marketing to specific needs and tastes, laws, and regulations. Industries in which competition takes place on a country-by- country basis are known as multi-domestic industries. In such industries, each country tends to have a unique set of competitors.
  111. 111. Multi-Domestic Strategy  Headquarters delegates considerable autonomy to each country manager allowing him/her to operate independently and pursue local responsiveness.  With this strategy, managers recognize and emphasize differences among national markets. As a result, the internationalizing company allows subsidiaries to vary product and management practices by country.  Country managers tend to be highly independent entrepreneurs, often nationals of the host country. They function independently and have little incentive to share knowledge and experiences with managers elsewhere.  Products and services are carefully adapted to suit the unique needs of each country.
  112. 112. 3. Global Strategy:  In this, firms adopt a low cost approach based on reaping the benefits of experience curve effects and location economies and offering standardized products and services across different countries. Here the firm tries to intensively focus on a low cost structure by leveraging their expertise in providing certain products and services at a few favourable locations around the world in an undifferentiated manner at competitive prices.  With global strategy, the headquarters seeks substantial control over its country operations in an effort to minimize redundancy, and achieve maximum efficiency, learning, and integration worldwide.  In the extreme case, global strategy asks why not make ‘the same thing, the same way, everywhere?’ It favors greater central coordination and control than multi-domestic strategy, with various product or business managers having worldwide responsibility.
  113. 113. Global Strategy  Activities such as R&D and manufacturing are centralized at headquarters, and management tends to view the world as one large marketplace.  Industries such as aerospace, automobiles, telecommunications, metals, computers, chemicals, and industrial equipment are examples of global industries, in which competition is on a regional or worldwide scale.  Formulating and implementing strategy is more critical for global industries than multi-domestic industries. Most global industries are characterized by the existence of a handful of major players that compete head on in multiple markets.
  114. 114. Examples of Global Strategies  Kodak must contend with the same rivals, Japan’s Fuji and the European multinational Agfa-Gevaert, wherever it does business around the world.  American Standard and Toto dominate the worldwide bathroom fixtures market.  Caterpillar and Komatsu compete head-on in all major world markets.
  115. 115. Objectives of Global Integration  Global integration seeks economic efficiency on a worldwide scale, promoting learning and cross- fertilization within the global network, and reducing redundancy.  Headquarters personnel justify global integration by citing converging demand patterns, spread of global brands, diffusion of uniform technology, availability of pan-regional media, and the need to monitor competitors on a global basis.  Companies in such industries as aircraft manufacturing, credit cards, and pharmaceuticals are more likely to emphasize global integration.
  116. 116. Princess Diana's death: the truest definition of Globalization ?  An English princess with an Egyptian boyfriend crashes in a French tunnel, driving a German car with a Dutch engine, driven by a Belgian who was drunk on Scottish whisky: followed closely by Italian Paparazzi in Japanese motorcycles; treated by an American doctor, using Brazilian medicines. And moreover this is sent to you by a Indian, using American (Bill Gates's) technology, and you're probably reading this on your computer, that use Taiwanese chips, and a Korean monitor, assembled by Bangladeshi workers in a Singapore plant, transported by Pakistan lorry-drivers, hijacked by Indonesians, unloaded by Sicilian longshoremen, and trucked to you by Mexican illegal's..... is "" Globalization ""
  117. 117. 4. Transnational Strategy: In this, firms adopt a combined approach of low cost and high local responsiveness simultaneously, for their products and services. Barttlett and Ghosal make a strong case of adopting the transnational strategy as they opine that this is possibly the only viable strategy in a competitive world. According to them, the flow of expertise in a transnational firm is only from a developed country to the developing countries. But now , a transnational firm should transfer the expertise from its foreign subsidiaries to its headquarters and from one foreign subsidiary to another foreign subsidiary through a process they term as ”global learning ”
  118. 118. Transnational Strategy: A Tug of War  A coordinated approach to internationalization in which the firm strives to be more responsive to local needs while retaining sufficient central control of operations to ensure efficiency and learning.  Transnational strategy combines the major advantages of multi-domestic and global strategies, while minimizing their disadvantages.  Transnational strategy implies a flexible approach: standardize where feasible; adapt where appropriate.
  119. 119. What Transnational Strategy Implies  Exploiting scale economies by sourcing from a reduced set of global suppliers; concentrating the production of offerings in relatively few locations where competitive advantage can be maximized.  Organizing production, marketing, and other value- chain activities on a global scale.  Optimizing local responsiveness and flexibility.  Facilitating global learning and knowledge transfer.  Coordinating competitive moves --how the firm deals with its competitors, on a global, integrated basis.
  120. 120. International companies are importers and exporters, they have no investment outside of their home country. Multi-Domestic companies have investment in other countries, but do not have coordinated product offerings in each country. More focused on adapting their products and service to each individual local market. Global companies have invested and are present in many countries. They market their products through the use of the same coordinated image/brand in all markets. Generally one corporate office that is responsible for global strategy. Emphasis on volume, cost management and efficiency. Transnational companies are much more complex organizations. They have invested in foreign operations, have a central corporate facility but give decision- making, R&D and marketing powers to each individual foreign market.
  121. 121. Advantages and Disadvantages of Expansion through Internationalisation Advantages  Realising economies of scale  Realising economies of scope  Expansion and extension of markets  Realising location economies  Access to resources overseas Disadvantages  Higher risks  Difficulty in managing cultural diversity  High bureaucratic costs  Higher distribution costs  Trade barriers
  122. 122. C. RETRENCHMENT STRATEGY  When aims at concentration of its activities through substantial reduction of the scope of one/more of its businesses  This is done through an attempt to find out the problem areas and diagnose the causes of the problems.  Next steps are taken to solve the problems  Basically retrenchment strategies are a response to decline in industries and markets
  123. 123. C. RETRENCHMENT STRATEGY  Internal 1. Ineffective Top Management 2. Inappropriate Strategies 3. Excess Assets 4. High Costs 5. Unproductive Dev.  External 1. New Dominant Technologies 2. New business models 3. Adverse Govt. Policies 4. Demand Saturation 5. Changing customer Needs Factors leading to decline:
  124. 124. C. RETRENCHMENT STRATEGY Decline Industries/ Products:-  Coal Mining  Cotton Textiles  Fountain Pens  Jute  Manual Typewriters  Steam Engines
  125. 125.  TYPES OF RETRENCHMENT STRATEGY- 1. Turnaround Strategy 2. Divestment Strategy 3.Liquidation
  126. 126. TURNAROUND STRATEGY:  Retrenchment may be done either internally or externally.  For internal retrenchment to take place, emphasis is laid on improving internal efficiency.  This usually takes form of Turnaround Strategy  Turnaround= Reversing a negative trend and turning around the organization to profitability
  127. 127. 1.Change in Management 2. Cost Reduction 3. Asset Reduction Major Steps in Turnaround process
  128. 128. MANAGING TURNAROUND STRATEGY: Three ways of managing  1. The existing chief executive and management team handles the entire turnaround strategy, with the advisory support of a specialist external consultant  2. In another situation, the existing team withdraws temporarily and an executive consultant or turnaround specialist is employed to the job  3. The last method involves replacement of the existing team, specially the chief executive or merging the sick organization with a healthy one
  129. 129. Hindustan Motors' Struggle for Survival  Background Note  HM was incorporated in 1942 by the GP-CK Birla Group of companies in collaboration with General Motors (GM),4 USA. The CK Birla group was one of the well known family-owned business houses in India, with 17 companies in businesses such as automobiles, engineering, paper, and auto-components.
  130. 130. The Turnaround Efforts - Phase I  In the early 1990s, when the Indian economy was opened up for foreign players, many multinational automobile companies entered the country.  In the 1990s, companies including Daewoo, General Motors, Daimler Benz, Hyundai and Honda entered India through joint ventures and partnerships with Indian firms. HM was one of the worst affected companies due to this inflow of competitors. Forced to react due to the poor performance of its vehicles, HM launched the Ambassador Nova in 1990 (with better interiors) and an improved Ambassador 1800 ISZ (with better engine performance) in 1993. The company also appointed consultants McKinsey & Co for a restructuring plan to turn around its business.
  131. 131. The Turnaround Efforts - Phase I  McKinsey asked HM to focus on the marketing of components, refurbish the Ambassador model and upgrade other vehicles, speed up the delivery process and improve productivity through reengineering on the floor shop and reduce the workforce in its production plant at Uttarparadesh
  132. 132. The Turnaround Efforts - Phase II  When its attempts to reorganize its operations did not pay off, HM decided to look beyond its existing product portfolio to come out of its problems. As per McKinsey's recommendations, the company explored the global auto components business in 2000 and established a unit at Indore to assemble engines and gearboxes.  Analysts said that this was a wise move because HM with its expertise, could easily become a component supplier for both domestic and global car majors
  133. 133. DIVESTMENT STRATEGY:  A Divestment strategy involves the sale of a portion of a business, or major division, SBU  It is a part of a rehabilitation or restructuring plan and is adopted when a turnaround has been attempted but was not successful
  134. 134. Divestiture This strategy involves the sale of a firm or a major component of a firm. Reasons for Divestiture Hurdles in Divestiture  Partial mismatched between acquired firm & parent firm  Corporate financial needs  Government antitrust actions  Finding a buyer who is willing to pay a premium above the value of a going concern’s fixed assets
  136. 136.  Liquidation= bankruptcy  Liquidation is the final resort for a declining company.  Liquidation involves closing down an organization and selling its assets LIQUIDATION STRATEGY:
  138. 138. D.COMBINATION STRATEGY-  When Organization adopts a mixture of stability, expansion, and retrenchment either at same time in its different businesses or at different times in same business with the aim of improving its business  1. Simultaneous Strategy  2. Sequential Strategy
  140. 140. Which Strategy to adopt?
  141. 141. Rapid Market Growth Slow Market Growth Weak Compet itive position Strong Compet itive position  Concentrated Growth  Vertical Integration  Concentric Diversification  Reformulation of concentric growth  Horizontal Integration  Divestiture  Liquidation  Turnaround or Retrenchment  Concentric Diversification  Conglomeratic Diversification  Divestiture  Liquidation  Concentric Diversification  Conglomeratic Diversif.  Joint Venture Model of grand strategy clusters
  142. 142. Internet Strategies for Traditional Business nishikant.warbhuwan@srtmun.ac.in
  143. 143. E- Business
  144. 144. E- Commerce Electronic commerce:- refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. www.flipcart.com www.ebay.com
  145. 145. E- Communication  Video Conferencing  Web Publishing  Internet  Telephones
  146. 146. E- Collaboration  The groups could be teams or virtual teams with different member strengths. They come together to perform a task to achieve certain results
  147. 147. References  Azhar kazmi- Strategic Management and Business Policy, Third Edition, Tata McGraw Hill  Henry, Mintzberg, Bruce, Ahlstrand and Joseph, Lampel (1998)- Strategy Safari, 2nd Edition, Free Press, New York.

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Corporate level strategies are basically about the choice of direction that a firm adopts in order to achieve its objectives. Corporate strategy is essentially a blueprint for the growth of the firm. The corporate strategy sets the overall direction for the organization to follow. It also spells out the extent, pace and timing of the firm’s growth.


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