Corporate level strategies


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Corporate level strategies

  1. 1. ., Corporate level strategies
  2. 2. Grand Strategies  Stability Strategy: Less risky, stable environment, expansion threatening, consolidation after stabilisation  Expansion strategy: increase pace, more prospects, increasing the size, advantages accrue  Retrenchment strategy:Management try to give up, threatening environment, unprofitable situation  Combination Strategies: Large set up, complex environment, different businesses
  3. 3. Stability strategy  No change strategy  Profit strategy  Pause/proceed strategies
  4. 4. Expansion strategy  Expansion through concentration:one activity (Bajaj auto)  Expansion through integration:vertical & horizontal  Expansion through diversification:Concentric & Conglomerative ( different)  Expansion through cooperation:Mergers,(horizontal –same, vertical – process centric, concentric-related), takeovers, joint ventures, strategic alliance  Expansion through internationalisation
  5. 5. Mergers  Types: Horizontal, Vertical, concentric, conglomerate(unrelated) Issues in mergers: Strategic issues, financial issues, managerial issues, legal issues  Reasons:(buyer)  To increase the value of the orgn stock  Increase the growth rate & make good investment  Improve stability of earning and sales  Balance, complete and diversify product line  Reduce competition  Acquire needed resources quickly  Avail tax concessions and benefits  Take advantages of synergy  Seller  Increase the value of equity  Increase the growth rate  Stabilise operations  Take the benefit of tax legislation  Deal with top management succession problem
  6. 6. Mergers and acquisitions in India  Tata Steel's mega takeover of European steel major Corus for $12.2 billion. The biggest ever for an Indian company. This is the first big thing which marked the arrival of India Inc on the global stage. The next big thing everyone is talking about is Tata Nano.  Vodafone's purchase of 52% stake in Hutch Essar for about $10 billion. Essar group still holds 32% in the Joint venture.  Hindalco of Aditya Birla group's acquisition of Novellis for $6 billion.  Ranbaxy's sale to Japan's Daiichi for $4.5 billion. Sing brothers sold the company to Daiichi and since then there is no real good news coming out of Ranbaxy.  ONGC acquisition of Russia based Imperial Energy for $2.8 billion. This marked the turn around of India's hunt for natural reserves to compete with China.  NTT DoCoMo-Tata Tele services deal for $2.7 billion. The second biggest telecom deal after the Vodafone. Reliance MTN deal if went through would have been a good addition to the list.  HDFC Bank acquisition of Centurion Bank of Punjab for $2.4 billion.  Tata Motors acquisition of luxury car maker Jaguar Land Rover for $2.3 billion. This could probably the most ambitious deal after the Ranbaxy one. It certainly landed Tata Motors into lot of trouble.  Wind Energy premier Suzlon Energy's acquistion of RePower for $1.7 billion.  Reliance Industries taking over Reliance Petroleum Limited (RPL) for 8500 crores or $1.6 billion.
  7. 7. Take over strategies  Seen after 1991  Substantial Acquisitions of shares and takeovers Regulations, 1994 (take over code)  Procedure: spell out objectives, indicate how objectives achieved, assess managerial quality, check the compatibility of business styles, anticipate and solve problems, treat people with dignity and concern.
  8. 8. Joint venture strategies  Temporary partnership (consortium)  Conditions: when difficult to operate alone, when distinctive competence needed, when hurdles in setting up organisation  Types: two firms in one industry, two firms in different industries, Indian firm and foreign company in India, Indian firm and foreign company in that foreign country, Indian firm and a foreign company in third country.  Eg. IBM World Trade Corporation and Tata Industries Ltd formed Tata Information Systems Ltd, Cummins Engine company and TELCO form to mfr TELCO engines
  9. 9. Strategic alliances  Yashino and Rangan: agree upon goals but remain independent, share the benefits, contribute in key strategic areas-technology, product etc.  Lando Zeppei: win win attitude, relationship reciprocal, pooling resources for mutual gain  Types: Pro-competitive alliances, Non-competitive alliances,competitive alliance, precompetitive alliance  Reasons for strategic alliance: entering new market, reducing manufacturing costs, developing and diffusing technology  Managing strategic alliance: define a strategy and assign responsibility, Phase in the relationship with partners, Blend the cultures of the partners, provide for an exit strategy.
  10. 10. Expansion through internationalisation  International strategy: create product & services to international markets  Multi domestic strategy:achieve high level of domestic response  Global strategy: low cost structure  Transactional strategy: low cost and high level domestic response  Forms:  Export entry mode- direct, indirect  Contractual entry mode-licensing, franchising, technical agreements, service contracts,contract manufacturing, production sharing, build-operate-transfer  Investment entry mode- joint venture, independent ventures
  11. 11. Retrenchment strategy  Reduce the scope of its activity  Find out problem areas  Identify the threats  Forms:  Non-recovery situation  Temporary recovery situation  Sustained survival situation  Sustained recovery situation
  12. 12. Turnaround strategies  Reversing a negative trend like  Negative cash flow  Negative profits  Declining market share  Deterioration in physical facilities  Overmanning, high turnover of employees, low morale  Uncompetitive products or services  Mismanagement Approaches: Surgical Non surgical or humane
  13. 13. Divestment strategies  Withdraw  Turn down  Cut back  Liquidation strategies  Combination strategies
  14. 14. Methods of Organisational appraisal  Value chain analysis  Quantitative analysis  Financial analysis  Non-financial quantitative analysis  Qualitative analysis  Comparative analysis  Historical analysis  Industry norms  Benchmarking  Comprehensive analysis  Balanced scrorecard  Key factor rating
  15. 15. Value chain analysis (Porter 1985)- value creating activities  Porter (1985)  Value creating activities  Generic Value chain:  Primary: inbound logistics, operations, outbound logistics, marketing and sales, service  Supportive activities: Procurement, HRD, technology development, infrastructure
  16. 16. Quantitative analysis  Financial Analysis:  Ratio analysis – liquidity, profitability and leverage ratios  Economic value-added analysis (stern stewart & company US) –profitability in terms of Return on capital  Activity Based Costing (ABC)  Non financial analysis:  Employee turnover, absenteeism, market ranking, rate of advertising recall, total cycle time of production, inventory units, service call rates, number of patents registered per period
  17. 17. Qualitative analysis  Corporate culture  Ability and skill component of employees  Level of morale
  18. 18. Comparative analysis  Historical analysis: past performance  Industrial norms:competition, cost structure  Benchmarking: find the best practices  Performance benchmarking  Process benchmarking  Strategic benchmarking  Generic benchmarking (compare own process to others)  Internal benchmarking  Functional benchmarking  Competitive benchmarking
  19. 19. Comprehensive Analysis : Balanced Scrore card  Balanced scorecard : Robert S Kaplan and David P Norton  Customer perspective: how customer see us?  Internal business perspective: what must we excel at?  Innovation and learning perspective: Can we continue to improve and create value  Financial perspective: How do we look at shareholders
  20. 20. Key factor rating:  Financial  Marketing  Operations  Personnel  Management  General management
  21. 21. Thank you