2. Business is somewhat like Driving…
Open Roads, Fast Traffic
does it matter if you are driving a
new fast or an old modest car?
Just like driving, best business
strategy is to be in an industry that
is growing fast
3. Unfortunately most of us drive with
the traffic …
Congested Roads, Slow Traffic
does it matter if you are driving a new
fast or an old modest car
Just like congested roads, we are in
slow growing industries with many
competitors.
4. In congested roads, how will you reach
your destination quickly?
•Be an aggressive driver and maneuver
through the traffic
•Drive in the car pool
•Drive on the shoulder
•Drive in an ambulance or a police car
•Use a different route
•Use helicopter
For our businesses we also need an
helicopter strategy that make our
competition irrelevant.
6. GROWTH STRATEGY
• It’s a corporate level strategy, designed to achieve
increase in sales, assets and profits.
• Companies expand business for its own survival
• Reducing cost per unit cost, there by increasing profits
Why it is important ?
• A growing firm will provide a lot of opportunities in
terms of new jobs, career advancement and promotion
Example : Motorola spent huge sum of money in product
development such as cellular mobile , pagers, two way
radio and so on..
7. Growth Strategies
Concentration Diversification
Concentration :
Results in concentration of resources on those
products lines, which have growth potential
Concentration strategy is adopted is adopted in
growing industry by growing firms
Vertical Integration Horizontal Integration
8. HORIZONTAL INTEGRATION
• It’s a process in which a firm acquires another firm that produces
the same type of products with similar production process/
marketing strategies
Why ??
• This strategy is adopted to acquire competitors business or to
acquire market share or to reduces the competition or to gain
economy of the scales operation
• Examples
Spartek and Neycer became the largest ceramic tile manufacture in the
country after this integration
Jet airways has alliance with British Airways, KLM Royal Airlines and
Northwest airlines so that they offer complete range of flights
operations directly from the destinations outside India for domestic
travelers
9. VERTICAL INTEGRATION
• Vertical integration means the degree to which a firm
operates vertically in multiple locations on an industries
value chain from extracting raw materials to manufacturing
and retailing
• It occurs when a company produces its own inputs
• It is either backward integration or forward integration
• Backward integration means doing the suppliers function
• Forward integration means doing the retailers functions
• These are done for reduction of cost, gain control, grantee
quality and access to potential customers
11. • Asian Paints acquired Pentasia Chemicals for its raw
materials
• Relaince Industries has agreement with Jamnager
refinery complex to supply Naptha which it gets from
synthetic fiber industry for petroleum manufacturing
Advantages
• It helps company to exercise control over critical
sources of supply
• Limits competition
• Helps to make investments in specialized asset
Disadvantage
• When the technology is changing fast
• Its risky when demand conditions are unstable and un
predictable
12. DIVERSIFICATION
It is considered to be complex as it involves a simultaneous
departure from current business, familiar product and
familiar markets
• It makes addition to the portfolio of business
• Firms will adopt this , when they make high profits and
want to explore new markets
• If the existing products does not show much profit
Related Diversification
The firm enters into new business, which is linked to a
company ‘s existing business
Linkage are based on manufacturing , marketing and
technology
Ex: IBM operates in 20 fields and all such diversification have
greater probability of success due to interlinkage
13. Unrelated Diversification /
CONGLOMERATIC DIVERSIFICATION
• Firm enters into a new business area that has no
obivious connection with any of the existing
business
• Its possible when companies core functional skills
are highly specialized and have few applications
outside the companies core business
• Top management should turn the sick business
into suitable once
• New business / products are unrelated to
process/ technology functions of existing
business
14. EXAMPLES
• Ponds – Cosmetic company(Talcum Powder, Vaseline,
Rexon ) has entered into leather products, thermostat
and mushrooms and are exported
• BPL – Electronic company into Computer Software
owned in US
• Godrej into poultry business
• Titan into watches , jewelry, sunglass
• ITC in hotel and agro Products
15. CONCENTRIC DIVERSIFICATION
• Its like related diversification as there are synergy
effect when new business is related to existing business
through the process, technology, and marketing.
• New products will be spin off from the existing
facilities, products and process.
• Examples :
• Philips – strong in lighting and electronics company
which entered into communication systems,
telecommunication equipment, cable television and
multimedia
16. EXAMPLES
• Usha International has diversified into home
appliances like juicer, mixer, water heater etc
• Eureka Forbes entered into electric iron and
food processors
• Sanghi ployester’s diversification into cement
proved to be suicidal and then it launched
Telugu daily Vaartha which also proved to be
blunder
