Corporate strategies unit 4


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Corporate strategies unit 4

  1. 1. Corporate Strategies
  2. 2. Integration strategies• Combining activities related to present business process of the firm• Refers to the Value Chain• Expansion through integration -- in adjacent business and results in serving the same set of customers.
  3. 3. Why Integrate ??• Make of Buy analysis..• Types of Integration• Horizontal Integration• Vertical Integration
  4. 4. Horizontal Integration• Takeover or acquisition of similar firms operating at same stage.• Normally it is a geographical expansion
  5. 5. Benefits of H I• Reduce costs• Increased Value through a wide range of bundled products• Reducing industry rivalry• Increased Bargaining power
  6. 6. Limitation of HI• No evidence of value creation• Attracts attention of regulation
  7. 7. Vertical Integration• When a firm deals in business to serve its own needs• A firm expands either to supply inputs or to distribute its products.• So it resorts to ..• Forward I and• Backward I• Besides this, there are two types..• Full Integration and Taper Integration
  8. 8. Advantage of V I• Builds barrier to entry• Protects product quality• Improves scheduling
  9. 9. Disadvantage of V I• Cost Disadvantages• Technological change• Demand unpredictability
  10. 10. Diversification• Dependence on a single industry makes a firm vulnerable, hence firms diversify• Process of adding new business that are distinct from established operations• Involves two or more distinct businesses• It means new products for new markets
  11. 11. Diversification takes place when…• Firms want to invest in distinct business• When a company wants to leverage on competencies• Sharing resources• Managing rivalry – multipoint competition
  12. 12. Types of diversification1) Related Diversification two types… a) Market Related D b) Technology related D2) Unrelated Diversification
  13. 13. Reasons for related Diversification• Financial synergies in terms of cost reductions• Marketing synergies• Operational synergies• HR synergies Reasons for related Diversification• Maximising returns by investing in profit sector• Leveraging opportunities especially emerging• Stability in earnings• HR synergies
  14. 14. Risks of Diversification• Unrelated diversification may lead to unsuccessful ventures• Dissimilar skill sets a risk• High costs of diversification
  15. 15. Expansion through Cooperation• Coexist with cooperation• Rival firms get together for mutual benefit• Through……..• Mergers and Acquisitions• Joint Ventures• Strategic Alliances
  16. 16. Mergers and Acquisitions• Merger is a combination• Acquisition is a takeover
  17. 17. Types of Mergers• Horizontal M• Vertical M• Concentric• Conglomerate(collection)
  18. 18. Reasons for Mergers• To reduce competition• Take advantage of synergies• To increase growth rate• To diversify• To improve stability and earnings• To avail tax concessions