2. • MICHAEL PORTER’s assumption- companies
compete in market for a limited market share.
• Win-Lose situation
• Contrary view- competition could co-exist,
competition is possible with mutual
cooperation and beneficial to all parties
concerned i.e. “co-opetition”
• “co-opetition”- simultaneous cooperation and
competition among rival firms.
3. Types of Cooperative Strategies :-
MERGERS
• Objectives of buyers and sellers match to a large extent
TAKEOVERS
• Acquisition-usually based on the strong motivation of the buyer firm
to acquire
JOINT VENTURES
• Independent firm is created by 2 or more firms
• Invaluable strategy for utilizing global expansion opportunities
STRATEGIC ALLIANCE
• Resources capabilities & core competencies are combined to pursue
mutual interests to develop, manufacture or distribute goods or
services.
4. 1.MERGER STRATEGIES
HORIZONTAL
• In same business
VERTICAL
• Create complementarity in terms of supply(inputs) or marketing
of goods & services (outputs)
CONCENTRIC
• Related in terms of customer functions customer groups or
technology
CONGLOMERATE
• 2 or more unrelated organizations
5. REASONS FOR MERGERS( FOR BUYERS)
• To increase the value of the organization’s stock
• To increase the growth rate and make a good
investment
• To improve stability of earnings and sales
• To balance,complete,or diversify product line
• To reduce competition
• To acquire needed resources quickly
• To avail tax concessions and benefits
• To take advantages of synergy
6. REASONS FOR MERGERS
(FOR SELLERS)
• To increase the value of the owner’s stock and
investment
• To increase the growth rate
• To acquire resources to stabilize operations
• To benefit from tax legislation
• To deal with top management succession
problem
7. Important issues in mergers
• Strategic issues
• Financial issues
• Managerial issues
• Legal issues
8. 2. Takeovers
How takeovers take place :-
• Spell out the objective
• Indicate how the objective would be achieved
• Assess managerial quality
• Check the compatibilty of business styles
• Anticipate and solve problems early
• Treat people with dignity and concern
9. Hostile Takeovers
• Where a takeover is resisted or expected to be
opposed by the existing management or
professionals.
• Shares are picked from open markets and
controlling interests obtained.
• With help from majority shareholders a bid is
made to enter the company’s board and to
acquire control.
• Political support believed to be crucial in hostile
takeovers.
10. PROS AND CONS OF
TAKEOVERS
PROS CONS
• Ensure management • Professionalism gets
accountability replaced by money-power
• Offer easy growth • Do not create any real
opportunities assets for society and are
• Create mobility of resources detrimental to national
• Avoid gestation periods and economy
hurdles involved in new • Interests of minority
projects shareholders is not
• Offer a chance to sick units protected
to survive
• Open up alternatives for
selective divestment
12. JOINT VENTURES cont..
• Joint ventures are a special case of
consolidation where two or more
companies form a temporary
partnership (also called a
consortium) for a specified purpose.
13. Conditions for joint ventures
• useful to gain access to a new business mainly
under four conditions.
1. Activity is uneconomical
2. For risk sharing
3. to bring together distinctive competencies
4. When setting up an organization requires
surmounting hurdles.
14. Types of Joint Ventures
• Between two firms in one industry
• Between two firms across different industries
• Between an Indian firm and a foreign
company in India
• Between an Indian firm and a foreign
company in that foreign country
• Between an Indian firm and a foreign
company in a third country
15. Benefits and drawbacks
in Joint Ventures
Benefits Drawbacks
• Minimizing risk • Problems in equity
• Reducing an individual participation
company’s investment • Foreign exchange
• Having access to foreign regulations
technology
• Lack of proper coordination
• Broad-based equity among participating firms
participation
• Access to governmental • Cultural and behavioural
support differences
• Entering new fields of • Possibility of conflict among
business the partners
• Synergistic advantage
16. Strategic Alliances
• Necessary and sufficient characteristics
1. 2 or more firms unite to pursue a set of
agreed upon goals but remain independent
subsequent to the formation of the alliance
2. The partner firms share the benefits of the
alliance and control over the performance of
assigned task
3. The partner firms contribute on a continuing
basis in one or more key strategic areas for
e.g. technology ,product etc
17. Strategic Alliance is a cooperative
arrangement between two or more
companies where :
• Win-Win attitude is adopted by all
parties
• Reciprocal relationship
• Pooling of resources, investments, and
risks occurs for mutual gain
18. Types of Strategic Alliances
Non-Competitive Competitive
High Alliance Alliance
Pro-Competitive Pre-Competitive
Low Alliance Alliance
Interaction
Low High
Conflict
19. Reasons for Strategic
Alliances
1.Entering new markets
2.Reducing manufacturing
costs
3.Developing and diffusing
technology
21. Managing strategic alliances
1. Clearly define a strategy and assign
responsibilities
2. Phase in the relationship between the
partners
3. Blend the cultures of the partners
4. Provide for an exit strategy
