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Presentation on

Expansion Strategy


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Group Members

Introduction

Expansion through intensification

Nikhil Pimple (89)

Product development

Market DevelopmentSwapnil Narake (64)

Combination strategy

MergersAbhishek Goel (101)

Take overNikhil Shinde (90)

Joint VentureSanket Mehta (44)

Strategic AllianceShrikant Pachpor (57)

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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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Expansion strategy

Intensification

Productdevelopment

Marketdevelopment

Market penetrationIntegration

Diversification

Combination

Merger

Take over

Join venture

Strategic alliance

internationalization

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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 tosituations 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 intoexisting markets.

Objectives of market Penetration Strategy;

Maintain or increase the marketshare 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 existingproducts

Widen the customer base - to increasesales 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 ScreeningConcept

Developmentand Testing

BusinessAnalysis

Market TestingImplementation

CommercializationNew Product

Pricing

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Expansion through Cooperation


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Evolution

Old Thought New Thought

One company benefits at the

cost of others.

It is a win-lose situation.

Competition can co-exist

with cooperation.

Corporate strategies shouldtake 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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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 ofShares 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 andcontrolling interest obtained.

Entry into companys board.

Resistance is offered by the existingmanagement.

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Process of Takeover

Takeoverpreparation

Selection oftarget

companies

The firsttalks

Negotiation The offer Finalization


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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 aspecified 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 doalone.

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 Foreigntechnology.

4. Broad-based equity

5. Govt. & political

support6. New fields &

synergistic advantages.

Cons:

1. Problems in equityparticipation.

2. Forex regulation3. Lack of proper

co-ordination

4. Cultural and

behavioral difference5. 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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