Presentation on

Expansion Strategy

Group Members
Nikhil Pimple (89)
Introduction Expansion through intensification Product development Market Development Combination strategy Mergers Take over

Swapnil Narake (64)

Abhishek Goel (101)

Nikhil Shinde (90)

Sanket Mehta (44)

Joint Venture

Shrikant Pachpor (57)

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Strategic Alliance
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Expansion Strategy
Expansion strategies are the most popular corporate strategies. It is followed when an organization aims at high growth by substantially broadening the scope of one or more of its businesses. It is characterized by high involvement and investment. May involve a redefinition of the business of the corporation.

Expansion strategy is highly versatile strategy as firm can try several permutation and combination regarding products,markets and functions and pick one that suits.
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Reasons underlying growth strategies

Source of strength Need for Survival Better positioning & Effective Management Economies of Scale
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Product development

Intensification

Market development

Integration

Market penetration

Diversification Expansion strategy

Merger

Take over

Combination
Join venture internationalization Strategic alliance
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Expansion through Intensification

First level type of expansion strategy.

It involves converging resources in one or more of a firms businesses in terms of their respective customer needs, customer function, or alternative technologies, either individually or jointly, which results in expansion. It is apparent that intensification strategies would apply to situations where the firm finds expansion worthwhile.

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Expansion through intensification

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Market penetration
Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Objectives of market Penetration Strategy; Maintain or increase the market share of current products Secure dominance of growth markets

Increase usage by existing customers

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Example;

Pizza hut offering discounts to the customers at night to increase the sales and each customer purchase value.

Airtel providers offering low price packages to increase talk time of the customers.
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Market Development Strategy

Developing a new market for the existing products Widen the customer base - to increase sales and profits
Geographical/ Demographical Customers of rival companies Previously unserved segment Current customers (potentially easy to sell )
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 Rival companies - finding ways to appeal them

Market Segment Decision
existing customers, competitor customers, non-buying in current segments, new segments

Limited by only having a small share - Difficult to

sell more products, raise capital expand their operations
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Product development strategy

Developing new products or modifying existing
Time and money Requires keen attention to competitor customer needs now and in the future Creative marketing and communications plan

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Product Development Diversification Strategy Product Modification Strategy

Revolutionary Product Development Benchmarking the Process Consumers Front And Center
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The process of Product development

Idea Generation Idea Screening Concept Development and Testing

Implementation

Market Testing

Business Analysis

Commercialization

New Product Pricing

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Expansion through Cooperation

Evolution
Old Thought One company benefits at the cost of others. It is a win-lose situation. New Thought Competition can co-exist with cooperation. Corporate strategies should take into account the possibility of mutual cooperation.

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Co-operation Strategies
Corporate strategies can take into account the possibility of mutual cooperation with competitors while competiting with them at the same time, so that the market potential could expand. The term co-opetition expresses the idea of simultaneous competition and cooperation among rival firms for mutual benefit.

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Types of Cooperative Strategies

Cooperative Strategies

Mergers

Takeovers

Joint Ventures

Strategic Alliance

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Merger Strategies
A merger is a combination of two or more organizations in which one acquires the assets and liabilities of the other in exchange for shares or cash, or both the organizations are dissolved, and the assets and liabilities are combined and new stock is issued.

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Features of Merger Strategies

An external approach to expansion. Takes place when the objectives of the buyer firm and seller firm are matched to a large extent. If both organizations dissolve their identity to create a new organization, it is consolidation.

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Reasons for Mergers

To increase the value of the organization's stock. To increase the growth rate and make a good investment.

To balance, complete or diversify product line.

To acquire needed resources quickly. To take advantages of synergy.
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Types of Mergers

Mergers

Horizontal Mergers

Vertical Mergers

Concentric Mergers

Conglomerate Mergers

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Horizontal Mergers
Horizontal Mergers take place when there is a combination of two or more organizations in the same business.

Example: Mc. Donald's and KFC.

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Vertical Mergers
Takes place when there is a combination of two or more organizations, not necessarily in the same business. It helps the firms either in supply of materials (inputs) or marketing of goods and services (outputs). Example: A footwear company combining with a leather tannery or with a chain of shoe retail stores.

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Concentric Mergers
A combination of two or more organizations related to each other either in terms of customer groups. Example: A footwear company combining with a hosiery firm making socks.

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Conglomerate Mergers
Combination of two or more firms unrelated to each other. Example: A Garment company combining with a Pharmaceutical firm.

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TAKE OVER

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Post Liberalization Scheme

Real impetus came after 1991. MRTP act amended. SEBI introduced Substantial Acquisition of Shares and Takeover Regulatory,1994. Bhagwati committee set up in 1996.
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How Takeover Takes Place

FRIENDLY TAKEOVER Motivation. Arrange for financing. Negotiation.
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How Takeover Takes Place

HOSTILE TAKEOVER Shares picked from open market and controlling interest obtained. Entry into companys board. Resistance is offered by the existing management.

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Process of Takeover

Takeover preparation

Selection of target companies

The first talks

Negotiation

The offer

Finalization

pros
Increase in sales/revenues Venture into new businesses and markets Increase market share Decrease competition (from the perspective of the acquiring company) Reduction of overcapacity in the industry Enlarge brand portfolio (e.g. L'Oral's takeover of Bodyshop) Increase in economies of scale

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cons
Goodwill, often paid in excess for the acquisition. Likelihood of job cuts. Cultural integration/conflict with new management Hidden liabilities of target entity. The monetary cost to the company. Lack of motivation for employees in the company being bought up.
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Joint Ventures

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 Type of consolidation Two or more companies combine to form new company. JVs a special case where two or more companies form a temporary partnership for a specified consortium.
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Conditions for Joint Ventures

JVs are useful to gain access to a new business mainly under four conditions: 1. An activity is uneconomical for an organization to do alone. 2. Risk of business to be shared. 3. Distinctive competence. 4. Surmounting hurdles such as import quotas, tariffs, cultural roadblocks.
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Types
Between two firms in one industry Between two firms across different industries Between an Indian firm and a foreign company

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Pros & Cons

Pros: 1. Minimising risk 2. Minimising investment 3. Access to Foreign technology. 4. Broad-based equity 5. Govt. & political support 6. New fields & synergistic advantages.
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Cons: 1. Problems in equity participation. 2. Forex regulation 3. Lack of proper co-ordination 4. Cultural and behavioral difference 5. Possibility of conflict
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Sony Ericsson Mobile Indo Zambia Bank Limited, in Lusaka, Zambia. Bharti - Wall mart HPCL-Mittal Energy Ltd.(HMEL)

BP- Reliance Industries limited

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THANK YOU

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