Corporate-level

Strategies
Presented BY:
Raghav Biyani()
Nishit Thakkar()
Prajapati Pradeep(23)
Nisha Josept(31)
Expansion Through
Cooperation
Strategic alternatives based on cooperation
1. Mergers:- Objectives are matched. MTNL-Bharti.
2. Takeovers ( or acquisitions):- Strong motivation of buyer firm to
acquire, against the with of seller firms management. Cadburry-
Kraft foods
3. Joint Ventures:- Independent firm is created by two firms. Hero-
Honda.
4. Strategic alliances:- Partnership is formed between two
firms.TechMahindra WIN for mobile platform.
Merger Strategies
Combination of two or more organizations, one acquires
assets and liabilities in exchange of shares or cash.
Acquisition, Merger and Consolidation.
Types of mergers.
1. Horizontal mergers: Organizations in same business. Two
companies in foot wear. Air India, Indian Airlines
2. Vertical mergers. Organizations which are complementary,
in terms of inputs or outputs. Backward or forward. NTPC
Merger Strategies

3. Concentric mergers: Organizations related in terms of

customer functions, customer groups or alternative
technologies. Eg making socks and footwear or leather
company making purses, handbags etc. Telephone and
Internet services.
4. Conglomerate merger: unrelated organizations. Footwear
company with pharmaceutical firm.

Demerger: Reverse of merger: Diversified company into stand-

alone companies.e.g Reliance demerger.
Reasons for merger
According to Gluek
Why Seller merge.
Why Buyer Merge.
1. To increase the value of stock, 1. To increase the growth
growth rate and make good rate, value of stock and
investment.
investment.
2. Improve stability of earnings and
sales. 2. To acquire resources to
3. Balance or diversify product line. stabilise operations,
4. Reduce competition, acqurie
resources.
benefit from tax.
5. Acquire tax concessions and 3. To deal with top
benefits and synergy management succession.
Issues with mergers
Strategic issues: positive synergy, objective of firm. Air In.dia-
Inidan Airlines
Financial issues:
Valuation (Satyam Rs 58/share),
Effect on EPS ( PNB New Bank of India, Ranbaxy Corsslands)
Source of financing: exchange of shares, NRI or Reserves.
Managerial issues: Assured status quo leads to smooth merger than
change in management.
Legal issues: The companies Act 1956 Section 390,394 and 396,
Competition Commission ( MRTP ).
Takeover Strategies
Post- Liberalization scene.
MRTP act was amended.
No Government permission required.
SEBI Takeover Code introduced transparency in
takeover dealings.
Out of top 100 private sector companies 40 are
involved in takeover as raiders or targets or victims.
Almost all 20 top business houses have done takeover
or are taken over.
How takeovers take place
Six step recommended procedure. Define Motivation: quick
1. Spell out the objective. growth, diversification,
2. Indicate how the objective would be competition, market share
achieved. etc. ( greed )
3. Assess managerial quality. Arrange for finance.
4. Check the compatibility of business (Leverage Buyout/Boot strap
styles. acquisition).
5. Anticipate and solve problems early. Negotiations and fixing price.
6. Treat people with dignity and Hostile: Shares are picked up
concern. from market.
Pros and Cons of takeovers
Pros
They ensure management accountability.
Offer easy growth opportunities.
Create mobility of resources.
Reduce gestation period.
Offer chance for sick units to survive.
Cons
Do not create real investment and interest of minorities share holders is
not protected.
Avoidable stress and strain are created in organizations exposed to
threats.
Joint Venture Strategies.
Joint Venture is special case of consolidation.
( temporary partnership)
Conditions for Joint venture.
1. Activity is uneconomical alone.
2. When risk has to be shared.
3. When distinctive competence can be brought together.
4. Hurdles like import quotas, tariffs, political and cultural
road blocks.
Types of Joint ventures.
Between two firms in one industry. Hero- Honda.
Between two firms across different industries. Bharti-
Wallmart.
Between an Indian firm and a foreign company in India.
Bharti wallmart.
Between an Indian firm and foreign company that foreign
country.
Between an Indian firm and a foreign company in a third
country.
Strategic advantages in joint
ventures.
Eliminating, controlling or reducing competition.
IBM World trade and Tata Industries LTD. Tata
Information System.
Increase in market share. AV Birla Group and
AT&T
Diversification Strategies. Essar Vodafone.
Technology: Maruti- Suzuki.
Legal and Regulatory hurdles. Birla Sunlife.
 Benefits and Drawbacks
Benefits Drawbacks
Minimizing risk. Problems in equity
Reducing individual investment. participation.
Foreign exchange
Foreign technology.
regulations.
Equity participation. Lack of proper coordination.
Government and political Cultural and behavioral
support.
differences
Synergistic advantages. Possibility of conflict.
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