This comprises the overall strategy elements for the corporation as a whole,

the grand strategy. Corporate strategy involves four kinds of initiatives:

Making the necessary moves to establish positions in different businesses
and achieve an appropriate amount and kind of diversification. A key part
of corporate strategy is making decisions on how many, what types, and
which specific lines of business the company should be in. This may
involve deciding to increase or decrease the amount and breadth of
diversification. It may involve closing out some LOB's (lines of business),
adding others, and/or changing emphasis among LOB's.

Initiating actions to boost the combined performance of the businesses the
company has diversified into: This may involve vigorously pursuing rapid-
growth strategies in the most promising LOB's, keeping the other core
businesses healthy, initiating turnaround efforts in weak-performing LOB's
with promise, and dropping LOB's that are no longer attractive or don't fit
into the corporation's overall plans. It also may involve supplying
financial, managerial, and other resources, or acquiring and/or merging
other companies with an existing LOB.

CORPORATE LEVEL STRATEGY


Pursuing ways to capture valuable especially transferring and
sharing related technology, procurement leverage, operating
facilities, distribution channels, and/or customers.

Establishing investment priorities and moving more corporate
resources into the most attractive LOB's.

CORPORATE LEVEL STRATEGY
All growth strategies can be classified into one of two fundamental
categories:
concentration within existing industries or
diversification into other lines of business or industries. When a
company's current industries are attractive, have good growth
potential, and do not face serious threats, concentrating resources in
the existing industries makes good sense.
Diversification tends to have greater risks, but is an appropriate
option when a company's current industries have little growth
potential or are unattractive in other ways. When an industry
consolidates and becomes mature, unless there are other markets to
seek (for example other international markets), a company may have
no choice for growth but diversification.

Growth Strategies

ANSOFFS PRODUCT MARKET
EXPANSION MATRIX
ALTERNATIVE PRODUCT MARKET
EXPANSION MATRIX SOURCE
ALTERNATIVE EXPANSION
STRATEGIES
1. Increase market share.
2. Increase the product
usage by,
a) Frequency of use
b) Quantity used
c) New applications and
users- By conducting
market research or
surveys

PENETRATION STRATEGY FOR
GROWTH IN EXISTING MARKETS
Make additions to product features
Product line extensions
Is the companys R&D, manufacturing and marketing functionally
integrated to undertake the proposed changes?
Is the new product line compatible with the existing product or brand?
Can the existing assets and skills be applied to the product line
extension?
PRODUCT DEVELOPMENT IN
EXISTING MARKETS
A company may use its core
competence or R&D
manufacturing-marketing
synergy to develop a new
product.
It can use the existing brand
image or brand equity and
exploit its market strength.
It needs to ensure that the
new product does not dilute
or damage the association of
the brand.

NEW PRODUCT DEVELOPMENT
CTo ascertain acceptability and commercial viability of a new
product.
CIn industrial products, test marketing may be comparatively
easy and simple.
CFor most of the consumer goods, test marketing is generally
more complex and difficult.


MARKET TESTING
POSSIBLE ALTERNATIVE
TEST MARKETING OUTCOMES
New product development can get innovation at either/all of these
ways of innovation:
Product innovation
Marketing innovation
Promotion innovation
Distribution innovation
NEW PRODUCT DEVELOPMENT
AND INNOVATION
Geographic expansion in the existing market segment(s)-
Examples: Nirma, Ford, Honda, KFC, McDonalds, Dominos
Pizza, etc.
Developing new market segments- Examples: Cadburys
(CDM) rejuvenation, Johnson & Johnsons baby shampoo
MARKET DEVELOPMENT FOR
EXISTING PRODUCTS
A COMMON STRATEGY FOR MARKET
PENETRATION AND MARKET
DEVELOPMENT: COKE AND PEPSI
Keeping away from direct
confrontation strategies.
Game plans based on price
point and bottling strategy.
Focus now shifting to new
consumers.
Soft drinks have hit the
price point of Rs. 5 (200 ml)
entering the market.

Related/ Concentric diversification means that the new
business has commonalities with the core business or core
competence of the company; and, these commonalities provide
the basis or strength for generating synergies.
Unrelated/ Conglomerate diversification is less related to
the present business and skills and resources (except financial)
and, may mean venturing into an entirely new area.
EXPANSION THROUGH
DIVERSIFICATION
GUIDING FACTORS FOR RELATED/
CONCENTRIC DIVERSIFICATION AND
UNRELATED/ CONGLOMERATE
DIVERSIFICATION
Strategic Alliance
Joint Venture (JV)
Takeover/Acquisition
Merger
EXTERNAL EXPANSION OR
DIVERSIFICATION
Strategic alliance may be defined as cooperation between two
or more organizations with a common objective, shared
control and contributions by the partners for mutual benefit.

STRATEGIC ALLIANCE
O Two or more organizations join together to pursue a defined
objective or goal during a specified period, but, remain
organizationally independent entities;
O The organizations pool their resources and investments and also
share risks for their mutual interest/benefit;
O The alliance partners contribute, on a continuing basis, in one or
more strategic areas like technology, process, product, design, etc;
O The relationship among the partners is reciprocal with partners
sharing specific individual strengths or capabilities to render power
to the alliance;
O The partners jointly exercise control over the performance or
progress of the arrangement with regard to the defined goal or
objective and share the benefits or results collectively.

FIVE FEATURES OF STRATEGIC
ALLIANCE
ALTERNATIVE FORMS OF
STRATEGIC ALLIANCE
Development of a new product
Development of a new technology
Reducing manufacturing cost
Entering new markets
Marketing and Sales
Distribution
OBJECTIVES OF STRATEGIC
ALLIANCE

EXAMPLE: STRATEGIC ALLIANCE
1. Define clearly the alliance strategy and assign responsibilities
to the partners;
2. Phase in the relationship between partners for developing
understanding with each other;
3. Blend the organizational cultures of the partners;
4. Provide for an exit route or strategy.

MANAGING STRATEGIC
ALLIANCE
A joint venture may be defined as a business venture in which
two or more independent companies join together, contribute
to equity capital in equal or agreed proportion and establish a
new company.

JOINT VENTURE (JV)
1. The new business is uneconomical for a single organization to
undertake;
2. The risk of the business should be distributed or shared;
3. The technology for the new business can be shared only
through a joint venture, or, there exists a need to introduce a
new technology quickly;
4. Competence or capabilities of two or three companies can be
brought together to produce synergy for better market impact,
competitiveness and success of business; and
5. A joint venture is the only way to gain entry into a foreign
market, particularly if the foreign government requires that,
for entry into that market, a local partner has to be chosen.

JVS ARE USEFUL UNDER FIVE
CONDITIONS
-An agreement between the parties for common long-term business
objectives such as production, marketing/sales, research
cooperation, financing, etc.
-Pooling of assets and resources by the parties for achievement of
the agreed objectives;
-Characteristics of the pooled assets and resources as contributions
by the respective parties;
-Pursuance of the agreed objective through a new management
system or structure, which is separate from the existing
management systems of the parties;
-Sharing of profits from the joint venture between the parties
usually in proportion to their capital contributions.
IMPORTANT CHARACTERISTICS
OF JVS
1) Between two (or more) companies in the same industry;
2) Between two (or more) companies across different industries;
3) Between a local company and a foreign company with
technological capability in the home country;
4) Between a local company and a foreign company in the
foreign country;
5) Between a local company and a foreign company in a third
country.

FORMS OF JOINT VENTURES
Choice of partner
Pattern of
shareholding
Management
system or
organizational
structure

STRATEGIC ISSUES IN JV
JVs within the same country and within the same industry or
related industries;
JVs between the domestic companies and foreign companies
in foreign countries in the same industry or related industries;
JVs between the foreign companies and local companies in the
domestic country in the same or related industries.

JVs IN PRACTICE
TYPE OF JV COMPANIES INVOLVED
JVs between Indian companies IPITATA Sponge Iron Ltd JV between
TISCO and IPICOL, Neelanchal Ispata JV
between MMTC and Orissa Mining
Corporation for manufacturing steel
JVs between Indian companies and foreign
companies in foreign countries
Aditya Birla group companies in Malaysia,
Indonesia, Thailand and other countries for
textiles, sugar and viscose staple fibre;
Kirloskars in Malayasia and other countries
for compressors; Oberois in Australia and
other countries for hotels and others.
JVs between Indian companies and foreign
companies in India
Maruti Udyoga JV between
Government of India and Suzuki of Japan;
Hero BMWbetween Hero Motors and
BMW, AG, Germany for assembling BMW
cars; HCL HPbetween Hindustan
Computers (HCL) and Hewlett-Packard, US for
PCs;

JVs IN PRACTICE IN INDIA
In takeover or acquisition, one company takes over another
organization its resources, management and control.
Takeover or acquisition can be friendly or hostile.

TAKEOVER OR ACQUISITION
1. What or how the prospect can contribute to the organizational
objectives or goals of the company or its long-term plan?
2. What tangible or intangible assets or resources and
capabilities will flow from the prospect to enhance the
competence level of the company?
3. How can the company contribute to the turning around or
rehabilitation of the prospect?
4. Is the acquisition a related diversification or an unrelated
diversification?
5. If it is an unrelated diversification, does the company possess
requisite resources and capabilities to manage the prospect
and add value for its shareholders?
BEFORE TAKING OVER A
COMPANY
1. Eliminating or reducing competition;
2. Spreading business risks over a wider range of activities to
reduce chances of company failure;
3. Acquiring businesses already active in certain markets and/or
possessing certain specific equipment or skills;
4. Securing patents, licences and other intellectual property;
5. Economies of scale to be made possible through more
extensive operations;
6. Acquisition of land, buildings and other fixed assets which
can be profitably sold off;

MOTIVES FOR ACQUISITION:
BENNETT
7. Possibility of controlling supply of raw materials/ inputs;
8. Expert use of resources, e.g., if one company posseses large
real estates and the other is specially skilled in property
trading or management;
9. Desire to become involved with new technologies and
management methods;
10. Potential ability of a larger organization (after takeover) to
influence local or national government;
11. Tax considerations, e.g., carry-over of trading losses into the
merged business to obtain income tax benefits;
12. Additional financial and other resources including greater
capacity for R&D or market research.
MOTIVES FOR ACQUISITION:
BENNETT
Spell out the objective or reason for takeover
Work out or specify how the objectives would be fulfilled
Assess management quality of the prospect
Check the compatibility of business styles of the two
companies
Anticipate and solve takeover problems promptly so that
complications do not prolong the process
Treat people of the prospect with care during the period of
takeover.
SIX STEPS IN THE TAKEOVER
PROCESS
SELECTED ACQUISITIONS BY
INDIAN COMPANIES
SELECTED FOREIGN AND
INTERNATIONAL ACQUISITIONS
POST-ACQUISITION
INTEGRATION PROCESS
A merger is a combination of two or more organizations, in
which one acquires the assets and liabilities of the other in
exchange for shares or cash, or the organizations are dissolved,
and a new company is formed, which takes over the assets and
liabilities of the dissolved organizations and new shares are
issued.

MERGER
To increase value of the companys stock;
To make profitable investment and increase the growth rate;
To balance, complete or diversify product line;
To improve stability of sales and earnings;
To reduce or eliminate competition;
To acquire resources quickly;
To avail tax concessions/benefits;
To take advantage of synergy.
WHY THE BUYER WISHES TO
MERGE?
To increase the value of investment and stock;
To increase revenue and growth rate;
To acquire resources to stabilize operations;
To benefit from tax legislation;
To deal with top management succession problems;
To take advantage of synergy.
WHY THE SELLER WISHES TO
MERGE?
Horizontal merger
Vertical merger
Concentric merger
Conglomerate merger

TYPES OF MERGERS
SYNERGISTIC ADVANTAGES
UNDER DIFFERENT TYPES OF
MERGER
Financial issues-valuation of the seller company and sources
of financing
Legal issues-legal aspects; provisions of law of mergers
Strategic issues-strategic interests of the buyer and seller
organizations
Managerial issues-management problems, both during and
after merger

MANAGING MERGERS
FAILURE RATES OF DIFFERENT
TYPES OF MERGERS

INTEGRATION STRATEGY
Improving supply chain
Better control over raw material supply
Strengthening marketing/distribution
Operating economies
Diversifying product portfolio
Direct access to demand or customers
Cost effectiveness

INTEGRATION BENEFITS
VERTICAL AND HORIZONTAL
INTEGRATIONS
IMPACT OF VERTICAL
INTEGRATION ON PROFITABILITY
ECompetitive overcrowding
EChanges in key success factors
EResource constraints for fast growth
RISKS IN HIGH GROWTH
MARKETS
REVITALIZING A STAGNANT OR
DECLINING MARKET
EInvest and grow
EHold or maintain
EMilk or harvest
EDivest or exit
HOW TO BECOME A PROFITABLE
SURVIVOR
STRATEGY SELECTION IN
STAGNANT/ DECLINING
MARKETS
STRATEGIES FOR STAGNANT
OR DECLINING MARKETS
Phase 1: Margin Pressure
Phase 2: Market Share Shift
Phase 3: Product Proliferation
Phase 4: Self-defeating Cost Reduction
Phase 5: Business Consolidation
Phase 6: Rescue or Rehabilitation
SIX PHASES OF MARKET
HOSTILITY
Focus on large customers
Differentiation through reliability
Broad spectrum of price points
Turning price into commodity
Effective cost structure
STRATEGIES FOR WINNING IN
HOSTILE MARKETS