Corporate Level Strategies

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

Strategies
 1. Corporate Level Strategies
(Grand Strategies)
 2. Business Level Strategies
(Generic Strategies)
 3. Functional 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.

 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…

 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?

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

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.

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

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

A. STABILITY STRATEGY- Types
 A (i). No Change Strategy
 A (ii). Profit Strategy
 A (iii). Pause/Proceed with Caution
Strategy

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

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

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

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

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.

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

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.

B1. Expansion Through Concentration
Concentration
Strategies
Market
Penetration
Market
Development
Product
Development

 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

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)

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

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

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

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

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.

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

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

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

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

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

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

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

Full Integration Strategy
Real Ind.
Ltd.
Real
PetroChem
Real
Polyester
Real
Textile
Real
Retail

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

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)
lakhs – 10 lakhs)
lakhs – 10 lakhs)
In-house
Distributers
In-house Component Parts
Manufacturing
Raw material

 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.

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
?

Types of Diversification
(i) Related (Concentric) Diversification
(ii) Unrelated (Conglomerate) Diversification

(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

(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

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

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.

TATA- Diversification
Engineering
Energy &
communications
Consumer
products
Chemicals
Information
systems
MaterialsServices
Tata’s

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

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.

Nano-
2008
•World's ULCC
•Set to revolutionise
Indian car market
•Global implications
•Huge export potential

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

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

•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)

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.

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.

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.

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

(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

(i) Mergers and Acquisition
Culture
M&A
Strategy
Resources
Business
ObjectiveStructure
Leadership
Person

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

(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

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.

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.

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

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.....

MERGERS & ACQUISITION- Case Study

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

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.

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

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.

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.

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.

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.

Five Triggers for a Joint Venture
1. Technology
2. Geography
3. Regulation
4. Sharing of Risk and Capital
5. Intellectual Exchange

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.

 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.

 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

 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.

 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.

 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.

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%...

 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...

 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."...

 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

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.

JOINT VENTURES IN INDIA
1. Maruti Udyog Ltd. & Suzuki Motor Corp.

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.

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.

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.

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

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.

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

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...

 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)...

 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.

 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.

 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.

"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.

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.

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.

B 5. Expansion Through Internationalization
 International strategies
require organizations to
market their products or
services beyond the
domestic or national
market.

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!!!!!

Model- C.A.Bartlett & S.Ghosal

Model- C.A.Bartlett & S.Ghosal
GLOBAL
STRATEGY
TRANSNATIONAL
STRATEGY
INTERNATIONAL
STRATEGY
MULTIDOMESTIC
STRATEGY
PRESS
-URES
FOR
COST
RED-
CTIO
N
PRESSURES FOR LOCAL RESPONSIVENESS

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.

Types of International Strategies
1. International Strategy
2. Multi-domestic Strategy
3.Global Strategy
4. Transnational Strategy

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.

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.

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.

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.

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.

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.

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.

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
""

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 ”

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.

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.

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.

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

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

 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:

Decline Industries/ Products:-
 Coal Mining
 Cotton Textiles
 Fountain Pens
 Jute
 Manual Typewriters
 Steam Engines

 TYPES OF RETRENCHMENT STRATEGY-
1. Turnaround Strategy
2. Divestment Strategy
3.Liquidation

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

1.Change in Management
2. Cost Reduction
3. Asset Reduction
Major Steps in Turnaround process

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

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.

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.

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

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

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

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

 Liquidation= bankruptcy
 Liquidation is the final resort for a declining company.
 Liquidation involves closing down an organization
and selling its assets
LIQUIDATION STRATEGY:

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

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

Internet Strategies for Traditional Business
nishikant.warbhuwan@srtmun.ac.in

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

E- Communication
 Video Conferencing
 Web Publishing
 Internet
 Telephones

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

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.

Corporate Level Strategies

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