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Presentation on
Expansion Strategy
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Group Members
Introduction
Expansion through intensification
Nikhil Pimple (89)
Product development
Market DevelopmentSwapnil Narake (64)
Combination strategy
MergersAbhishek Goel (101)
Take overNikhil Shinde (90)
Joint VentureSanket Mehta (44)
Strategic AllianceShrikant Pachpor (57)
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Expansion Strategy
Expansion strategies are the most popular corporate strategies.
It is followed when an organization aims at high growth by
substantially broadening the scope of one or more of its businesses.
It is characterized by high involvement and investment.
May involve a redefinition of the business of the corporation.
Expansion strategy is highly versatile strategy as firm can try several
permutation and combination regarding products,markets and
functions and pick one that suits.
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Reasons underlying growth strategies
Source of strength
Need for Survival
Better positioning & Effective Management
Economies of Scale
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Expansion strategy
Intensification
Productdevelopment
Marketdevelopment
Market penetrationIntegration
Diversification
Combination
Merger
Take over
Join venture
Strategic alliance
internationalization
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Expansion through Intensification
First level type of expansion strategy.
It involves converging resources in one or more of a firms
businesses in terms of their respective customer needs,customer function, or alternative technologies, either
individually or jointly, which results in expansion.
It is apparent that intensification strategies would apply tosituations where the firm finds expansion worthwhile.
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Expansion through intensification
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Market penetration
Market penetration is the name given to a growth strategy
where the business focuses on selling existing products intoexisting markets.
Objectives of market Penetration Strategy;
Maintain or increase the marketshare of current products
Secure dominance of growth markets
Increase usage by existing customers
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Example;
Pizza hut offering discounts to the customers at night to
increase the sales and each customer purchase value.
Airtel providers offering low price packages to increase talk
time of the customers.
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Market Development Strategy
Developing a new market for the existingproducts
Widen the customer base - to increasesales and profits
Geographical/ Demographical
Customers of rival companies
Previously unserved segment
Current customers (potentially easy to sell )
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Rival companies - finding ways to appeal them
Market Segment Decision
existing customers,
competitor customers,
non-buying in current segments, new segments
Limited by only having a small share - Difficult to
sell more products,
raise capital
expand their operations
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Product development strategy
Developing new products or modifying
existing
Time and money
Requires keen attention to competitor
customer needs now and in the future
Creative marketing and communications plan
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Product Development Diversification Strategy
Product Modification Strategy
Revolutionary Product Development
Benchmarking the Process
Consumers Front And Center
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The process of Product development
Idea Generation Idea ScreeningConcept
Developmentand Testing
BusinessAnalysis
Market TestingImplementation
CommercializationNew Product
Pricing
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Expansion through Cooperation
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Evolution
Old Thought New Thought
One company benefits at the
cost of others.
It is a win-lose situation.
Competition can co-exist
with cooperation.
Corporate strategies shouldtake into account the possibility
of mutual cooperation.
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Co-operation Strategies
Corporate strategies can take into account the
possibility of mutual cooperation with competitors
while competiting with them at the same time, 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.
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Merger Strategies
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 both the organizations are
dissolved, and the assets and liabilities are
combined and new stock is issued.
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Features of Merger Strategies
An external approach to expansion.
Takes place when the objectives of the buyer firm and
seller firm are matched to a large extent.
If both organizations dissolve their identity to create a
new organization, it is consolidation.
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Reasons for Mergers
To increase the value of the organization's stock.
To increase the growth rate and make a good investment.
To balance, complete or diversify product line.
To acquire needed resources quickly.
To take advantages of synergy.
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Types of Mergers
Mergers
Horizontal
Mergers
Vertical
Mergers
Concentric
Mergers
Conglomerate
Mergers
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Horizontal Mergers
Horizontal Mergers take place when there is a
combination of two or more organizations in the same
business.
Example: Mc. Donald's and KFC.
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Vertical Mergers
Takes place when there is a combination of two or
more organizations, not necessarily in the same
business.
It helps the firms either in supply of materials (inputs)or marketing of goods and services (outputs).
Example: A footwear company combining with a
leather tannery or with a chain of shoe retail stores.
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Concentric Mergers
A combination of two or more organizations
related to each other either in terms of
customer groups.
Example: A footwear company combining with a
hosiery firm making socks.
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Conglomerate Mergers
Combination of two or more firms unrelated to each
other.
Example: A Garment company combining with a
Pharmaceutical firm.
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TAKE OVER
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Post Liberalization Scheme
Real impetus came after 1991.
MRTP act amended.
SEBI introduced Substantial Acquisition ofShares and Takeover Regulatory,1994.
Bhagwati committee set up in 1996.
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How Takeover Takes Place
FRIENDLY TAKEOVER
Motivation.
Arrange for financing.
Negotiation.
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How Takeover Takes Place
HOSTILE TAKEOVER
Shares picked from open market andcontrolling interest obtained.
Entry into companys board.
Resistance is offered by the existingmanagement.
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Process of Takeover
Takeoverpreparation
Selection oftarget
companies
The firsttalks
Negotiation The offer Finalization
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pros
Increase in sales/revenues
Venture into new businesses and markets
Increase market share
Decrease competition (from the perspective of
the acquiring company) Reduction of overcapacity in the industry
Enlarge brand portfolio (e.g. L'Oral's takeover of
Bodyshop) Increase in economies of scale
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cons
Goodwill, often paid in excess for the acquisition.
Likelihood of job cuts.
Cultural integration/conflict with new
management
Hidden liabilities of target entity.
The monetary cost to the company.
Lack of motivation for employees in the company
being bought up.
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Joint Ventures
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Type of consolidation
Two or more companies combine to form
new company.
JVs a special case where two or more
companies form a temporary partnership for aspecified consortium.
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Conditions for Joint Ventures
JVs are useful to gain access to a new business mainly
under four conditions:
1. An activity is uneconomical for an organization to doalone.
2. Risk of business to be shared.
3. Distinctive competence.4. Surmounting hurdles such as import quotas, tariffs,
cultural roadblocks.
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Types
Between two firms in one industry
Between two firms across different industries
Between an Indian firm and a foreign company
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Pros & Cons
Pros:
1. Minimising risk
2. Minimising investment
3. Access to Foreigntechnology.
4. Broad-based equity
5. Govt. & political
support6. New fields &
synergistic advantages.
Cons:
1. Problems in equityparticipation.
2. Forex regulation3. Lack of proper
co-ordination
4. Cultural and
behavioral difference5. Possibility of conflict
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Sony Ericsson Mobile
Indo Zambia Bank Limited, in Lusaka, Zambia.
Bharti - Wall mart
HPCL-Mittal Energy Ltd.(HMEL)
BP- Reliance Industries limited
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THANK YOU
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