2. Contents of the Unit
Advantages and disadvantages
of organic growth.
What reasons lead to mergers
and acquisitions?
What strategies of integration
are available for acquisitions?
Why do companies form alliances?
What factors influence the
decision in favor of strategic
growth?
2
5. Doing it Yourself
◦ In order to embark on the path of strategic growth, organizations have
three different options:
◦ Can grow organically
◦ Can merge or acquire with another organization
◦ Form strategic alliances
The following section looks at the do-it-yourself option also referred to as (DIY)
approach
5
7. Organic Growth
Organic growth is the investment into the development and growth
of the company’s own resources and capabilities.
This type of growth being slow and self-sustaining makes this
growth much easier to finance than other growth options.
The organic growth option, is also known as the ‘do-it-yourself’ (DIY)
approach.
7
8. ◦ Firms such as Walmart, Costco, and other big-box retailers report
comps on a quarterly basis to give investors and analysts an idea
of their organic growth.
◦ Walmart grew its comp sales by 2.5% in the 53 weeks ending Jan.
31, 2020, excluding fuel—a clear example of organic growth that
Walmart's CEO attributed to a strategic focus on comp sales over
new store openings by improving the in-store experience for
customers.
8
9. Other examples of Organic Growth
◦ One example of an organization that decided to grow
organically is Amazon. Amazon developed the e-book-
reader ‘Kindle’ and its own e-book store.
◦ Amazon used its experience from the online book business
and its software competence.
◦ After many years of being an online store for all products,
Amazon went back to its roots with this new technology
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11. Merger/Acquisition
By merging or acquiring a
company for strategic objectives
attainment. The M&A strategy is
more permanent/ long term in
nature.
Two Major approaches for inorganic growth
Strategic Alliance
A strategic alliance is an
arrangement between two
companies to undertake a
mutually beneficial project while
each retains its independence
11
12. Some recent examples
Mergers/Acquisitions
◦ Elon Musk/Twitter
◦ Adani Group/ NDTV
◦ Tata Group/ Air India
◦ Vodafone India/Idea
Strategic Alliances
◦ ICICI Bank/ Vodafone
India m-Pesa
◦ Maruti/Suzuki
◦ Uber/Spotify
12
13. M&A (Merger and Acquisition)
◦ Companies can also grow by merging with
another organization or acquiring another
organization.
◦ A merger is defined as the formation of a
larger organization by two companies that
operate as more or less equal partners.
◦ Which is different than the acquisition of the
company.
13
14. Motives for M&A
Strategic Motives
Companies can expand
their range of products
through mergers and
acquisitions (M&A).
Example: Apple, Google
Financial Motives
Corporations may
increase their financial
efficiency by offsetting
the profits of one entity
with losses from
another.
Example: Mergers in
banking sector in India
Management motives
General management
motives/biases also
influence the decision
in favor of a merger or
acquisition.
14
15. ◦ Over the course of the last decade, Google has acquired
over 30 artificial intelligence (AI) startups, acquiring a
range of capabilities in a technology that is set to be
hugely influential in the years ahead.
15
17. For the M&A motive has to go through three checks.
Cultural Fit
The areas to
analyze are
communication
style, openness,
management
styles etc.
Strategic Fit
A fit with the
strategic goals,
of the acquisition
and the acquired
or merged target
Fundamental Fit
The fundamental
fit looks at the
organizations’
willingness and
readiness to
merge.
17
18. Hostile Takeovers
18
o If the acquisition is clear with the strategic and cultural fit but does not
confirm the fundamental fit.
o Such strategic takeover is referred to as a hostile takeover
o A few other cases of hostile takeovers in India include the acquisition of
Adani Group's takeover of NDTV, India Cements' acquisition of Raasi
Cements in 1998, Emami's acquisition of Zandu in 2008, and Larsen &
Toubro's acquisition of Mindtree Limited via Cafe Coffee Day's VG
Siddhartha.
19. Case Study on Cultural Issues in M&A
https://www2.deloitte.com/content/dam/Deloitte/us/Docume
nts/mergers-acqisitions/us-ma-consulting-cultural-issues-in-
ma-010710.pdf
19
20. Integrating with
another organization
The integration process of two organizations depends on the strength of
their strategic interdependence and their need for organizational
autonomy.
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21. Integration Process
The integration process of two organizations depends on the strength
of their strategic interdependence and their need for organizational
autonomy.
Depending on how distinct these two aspects are with respect to each
of these organizations, the acquired organization will either adapt fairly
quickly to the new strategy, culture, and systems, or not at all.
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22. There are four integration scenarios:
Symbiosis
Absorbtion
Maintenance
22
Holding
23. Integration Strategies
Maintenance
If merging companies have little strategic
interdependence, maintenance (also
called preservation) is the strategy of
choice.
Often these companies operate in
different businesses and are not
dependent on each other’s products or
services.
(Autonomy required: High;
Interdependence: Low)
Symbiosis
A strategy of symbiosis is
recommended if the two companies
show high strategic interdependence
and have a marked need for
organizational autonomy.
In this case, the two companies are
mutually dependent; certain processes
and systems have to be integrated in
order to increase the efficiency of the
M&A.
(Autonomy required: Moderate
Interdependence: High)
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24. Integration Strategies
Absorption
If merging companies are strategically
very interdependent and have little need
for organizational autonomy, one
company may completely absorb the
other company. Absorption speed is high
in such type of integration.
(Autonomy required: Low
Interdependence: High)
Holding
Holding describes a situation where the
companies show little interdependence
and need organizational autonomy. In
this situation, integrating the company
does not bring any additional benefit
or advantage hence it is ultimately
sold.
(Autonomy required: Low
Interdependence: Low)
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26. Types of Strategic Alliances
o There are two types of strategic alliances in terms of the ownership
structure: equity alliances and non-equity alliances.
o For example, two pharmaceutical companies invest together in a
research institute.
o Non-equity alliances are partnerships that do not involve a claim to
a property, such as a research institute.
o Case report on JV in India Automobile Industry:
o https://www.ibef.org/blogs/joint-ventures-in-india-s-automobile-
industry
26
27. o One motive is, how fast a company wants to grow, which describes the
urgency to expand.
o Uncertainties in specific regional markets or technologies, or market
fluctuations also influence which strategy to pursue.
o The types of capabilities to be acquired, play a major role in the strategic
decision-making process. Finally, the degree of modularity of the
capabilities influences the decision.
Motives of Alliances
27
28. Summary of the Unit
• Criteria for M&A
• Types of
Integration
Strategies
• Organic
methods to
grow
• Motives for
M&A
• Inorganic Ways
to grow
• Motives for
Strategic
Alliances
Ways in which
companies can
grow organically
and inorganically.
