Strategies

– 3 types of strategies• Corporate –They lay down the framework in which

business in which business strategies operate. – They decide whether the organization

should Stabilize, Expand, Retrench or any combination of these

• Business (SBU level)• Functional ( finance, mtkg, mis , it)

Corporate Strategies

• They include making decisions related to allocating resources among the different businesses of an organization.

• Transferring resources from one set of businesses to others and

• Managing a nurturing a portfolio of businesses• Shift resources from cash rich to another

business which have good potential

Business Strategies

• Made at the business level

• Get directions from the corporate level strategies.

Corporate Strategies- EXPANSION

• ExpansionConcentration, Integration, Diversification,

Cooperation, Internationalization, Digitalization• Stability

• Retrenchment

• Combination

Internationalization

International Strategies require organizations to market their products/ services beyond the domestic product.

Why firms go International?-active reasons

• Additional resources• Lowered Costs• Incentives• New expanded markets• Synergy• Economies of scale• Power and Prestige

Why firms globalize?-reactive reasons

• Trade barriers• International customers• International Competition• Regulations

HOW CAN COMPANIES KNOW WHICH COUNTRY TO ENTER ?????

• PORTER MODEL OF COMPETITIVE ADVANTAGE OF NATIONS…

• ALSO KNOWN AS PORTER DIAMOND MODEL

PORTER DIAMOND MODEL

• Factor conditions• -The special factors or inputs of production

such as natural resources, raw materials, labour etc, that a nation is blessed with

• Demand Conditions• -The nature and size of Buyer’s needs in the

domestic market.

PORTER DIAMOND MODEL

• Related and Supporting Industries• -The existence of related and support

industries

• Firm Strategy, Structure and Rivalry• -The conditions in the nation determining how

the firms are created, organized and managed AND the nature of the domestic competition

PORTER DIAMOND MODEL• Chance or Serendipity• -Just by chance a country may be having blessed

with very high industrial concentration.• Government • -It can influence each of the above four

determinants of competitiveness. Clearly government can influence the supply conditions of key production factors, demand conditions in the home market, and competition between firms. Government interventions can occur at local, regional, national or supranational level.

• ANY FIRM WHO GO INTERNATIONAL FACES 2 CHALLENGES:

• Pressure of COST reduction• Pressure of LOCALIZATION

International Pressures

International Strategy Options

Export Country Centred Offices

Country Centred manufacturing

One World One Strategy

4 Types of Int Strategies

• Int Str : Create Value by transferring Products % Services to foreign Mkts. Std products & Services with no Diffrentiation

• Multidomestic : Achieves high level of local responsiveness. This leads to high cost structure as R & D and Production & Mkting functions have to be duplicated

• Global Str : Intensively focus on low cost structure by leveraging their expertise in providing certain limited products & services

4 types cont

• Transnational : Combination of low cost and high local responsiveness . Dealing with these two contradictory things is a difficult propositon

• Acc to Bartlett & Ghoshal this is the best strategy in the world to follow

• Indian firms find it challenging to adopt any four • Only Int Industry we have is software cost is low &

responsiveness is not a problem

Mode of Operations

International Entry Modes

• Export Entry Modes : Direct & Indirect . Direct does not involves home country Intermediaries

• Indirect Involves home Countries Intermediaries

Contractual Entry Modes

• Franchising-– Use trademark of parent (KFC, SUBWAY, Mc

Donald) . Fee based upon the SALES is paid by the franchisee to the firm.

• Foreign Branching– It is an extension of the company in its foreign

market. Just fulfills the duties of corporate office– Sales, Customer Service and Distribution.

Mode..

• Licensing– For some fee is an Arrangement where the

International company transfers knowledge , technology , patent etc for a limited period of time

Mode

• Private Equity investment• Money from private sources that is invested

by a venture capital OR private equity company in start-ups and other risky- but potentially very profitable-small and medium-size enterprises

Mode• Private Equity investment• Money from private sources that is invested

by a venture capital OR private equity company in start-ups and other risky- but potentially very profitable-small and medium-size enterprises

• Wholly owned Subsidary.• Hyundai India is the Fully owned Subsidiary of

Hyudai Korea

ADVANTAGES OF INTERNATIONALIZATION

• Realizing Economies of Scale

• Realizing Economies of Scope

• Expansion of Markets

• Access to resources overseas

• Realizing location economies

DISADVANTAGES OF INTERNATIONALIZATION

• Higher Risks (PESTEL)

• Difficulty in monitoring cultural diversity

• Trade barriers

• Higher distribution costs

Expansion-Cooperation

• Involvement of two different firms required

• WIN-WIN SITUATION FOR BOTH THE FIRMS

• Cooperation can be in 3 ways-Mergers, Acquisitions, Alliances

MERGER and ACQUISITION

• MERGER• When two firms agree to go forward as a single

new company rather than remain separately • Both companies' stocks are surrendered and

new company stock is issued in its place. • For example, in the 1999 merger of Glaxo

Wellcome and SmithKline Beecham, both firms ceased to exist when they merged, and a new company, GLAXOSMITHKLIME was created.

MERGER and ACQUISITION

• ACQUISITION• When one company takes over another and

clearly establishes itself as the new owner, the purchase is called an "acquisition".

• The target company still exists as an independent legal entity, which is controlled by the acquirer.

• (Daichi acquired Ranbaxy)

Types of MERGER and ACQUISITION

• Horizontal

• Vertical

• Concentric

• Conglomerate

Reasons of MERGER and ACQUISITION• Reduce competition

• For Synergy

• Increase the growth rate

• Increase the Value of Stock

• Acquire the needed resources quickly

Issues in Mergers and Acquisitions• Strategic issues• Financial Issues– Valuation/ Sources of Financing/Taxation matters

after the m&a

• Managerial issues– Sometimes no synergy

• Legal Issues

Alliances• Partnership between firms whereby their

resources, capabilities and core competencies are Combined

• It is done to pursue mutual Interest to develop, manufacture, or distribute goods and services.

Examples Alliances1st Company 2nd Company FOR WHAT?ISA Blue Star Sale and Service of

ISA ACsHilton hotels East India hotel Manage, operate

and Marketing of its Hotels

BOGEN NPIL Marketing of Avonex Drug

Indore bank Bajaj Tempo Special terms for Tempo under Indore Bank-Bajaj tempo KRISHI VIKAS SCHEME

Reasons for Alliances• Entering new market

• Developing and Diffusing Technology

• Reducing Manufacturing Costs

RISKS in ALLIANCES

• Lack of Trust

• Misunderstandings

• Conflicting goals and interests

• Controlling Vs managing

Expansion-Digitalization

• Computerization of everything • E portal• E reading• Internet • E business

Expansion-Digitalization

• E commerce• E banking

• E tailing

• E trading• E-healthcare

Expansion-Digitalization

• Digitalization is good ? Why

• It helps firms to Store, Retrieve, and ANALYZE data

• What about Digitalization of VALUE CHAIN? Is this bad or Good?

CORPORATE STRATEGY CHART

• ExpansionConcentration, Integration, Diversification, Cooperation,

Internationalization, Digitalization• Stability

– No change – Profit– PAUSE / proceed with caution

• Retrenchment

• Combination

Thanks