These acquisitions are called ‘management buyouts’, if managers are involved, and ‘leveraged buyout’, if the funds for the tender offer come predominantly from debt. It is a case of down-stream integration extends to those businesses that sell eventually to the consumer. In strategic alliances, the focus is on �sharing� of resources rather than seeking change in control. Growth strategies are extremely popular because most executives tend to equate growth with success. When evaluating M&A opportunities we must ensure we strike the right balance between strategic rationale, financial returns, and risk profile. Discover a great deal of useful information on our website! If the new lines added make use of the firm’s existing technology, production facilities or distribution channels or it amounts to backward or forward integration, it may be regarded as related diversification. (iii)Vertical merger facilitates research in production processes because of integration of processes. Tata Tea’s takeover of Consolidated Coffee (a grower of coffee beans) and Asian Coffee (a processor) are the examples of related diversification. Identify the objectives of your organization. It is today the most fully integrated company in the world (from petroleum exploration to textiles retailing). You got into business to solve a problem for a certain audience. Equity investment in each other�s company is not any focus.Merger: In merger two firms agree to move ahead and exist as a single new company. Who is … Prominent thinkers in the field include the Peter Drucker, sometimes referred to as the founding father of management studies. Some popular external growth strategies are described below: Joint venture is a growth strategy in which two or more companies, establish a new enterprise (or organisation) by participating in the equity capital of the new organisation and by agreeing to participate in its management in an agreed manner. Goenka and Manu Chabria are described as “take-over kings.”. Diversification is quite an important growth strategy. The reasons for horizontal integration are as follows: (a) Elimination or reduction in intensity of competition. Growth strategies that include mergers, acquisitions and strategic alliances are usually considered to be healthy. The merger activities are as a result of following factors and strategies, which are classified under three heads: A takeover generally involves the acquisition of a certain block of equity capital of a company which enables the acquirer to exercise control over the affairs of the company. If it experiences problems at any of these stages, it may not progress further. However, to mould their firms into truly global companies, managers must develop global mind-sets. It is a case of forward merger. For smooth functioning of an alliance, partners are required to have preset priorities and expectations from each other. Concentration involves expansion within the existing line of business. Encouraging new uses of the old product e.g. If as a result of a merger, a new company comes into existence it is called as ‘amalgamation’. Strategy. (iv) It increases competitive power of the group and provides synergistic effect. Merger is said to occur when two or more companies combine into one company. Entering into a Joint venture is a part of strategic business policy, to diversity and enter into new markets, acquire finance, technology, patent and, Types of Growth Strategies – Top 5 Types: Concentration Expansion Strategy, Integration Expansion Strategy, Diversification Expansion Strategy and a Few Others, Type # 1. A textile unit takes over cotton ginning and yarn spinning units to get smooth supply of raw materials. a footwear company combines with a cement company or a ready-made garment manufacturer etc. Concentration expansion strategy involves safeguarding the present position and expanding in the current product-market space to achieve growth targets. Product Development. The element of willingness on the part of the buyer and seller distinguishes an acquisition from a takeover. For example- a cement manufacturing company undertakes the civil construction activity; it will be a case of diversification with forward linkage. The strategic alliance agreement contains the terms like capital contribution, infrastructure, decision making, sharing of risk and return etc. As such, diversification may lead to cost reduction and profit-maximization. Theres no single formula for delivering organic growth. Defining Strategic Management; 3. Previous Topic Previous slide Next slide Next Topic. (ii)Modernisation leads to qualitative production; attracting quality-conscious consumers. A firm selecting an intensification strategy, concentrates on its primary line of business and looks for ways to meet its growth objectives by increasing its size of operations in its primary business. Modernisation is a growth strategy in the sense that it helps to achieve more and qualitative production at lower costs; thus helping to increase sales and profits for the enterprise. The market development can be achieved in any of the following ways: (a) By adding new distribution channels to expand the consumer reach of the product. The eagle eyes of raiders are on the lookout for cash rich and high growth rate companies with low equity stake of promoters. Thus, a takeover is different from merger in that under a takeover, the company taken over maintains its separate entity, while under a merger both the companies merge to form single corporate entity, and at least one of the companies loses its identity. (iv) Diversification acts as shock-absorber for a company, in phases of business cycle. (ii) Diversification creates problems of co-ordination among lines of diversified production. As growth entails risk, diversification, as a growth strategy, implies developing a wider range of products to diffuse risk or to reduce risk associated with growth. In technology related concentric diversification, new products are provided by using technologies similar to the present product line. International expansions increases coordination and distribution costs, and managing a global enterprise entails problems of overcoming trade barriers, logistics costs, cultural diversity, etc. The acquired firm will continue to exist as long as there are minority stockholders who refuse the tender. This does not necessarily mean no turnover. Some joint ventures involve the joint control, and often the joint ownership, by the venturers of one or more assets contributed to, or acquired for the purpose of, the joint venture and dedicated to the purposes of the joint venture. exchange of old scooters or TV for new ones at a discount etc. 6. Examples: introduction of Babool and Promise toothpastes by Balsara Hygiene Products Ltd.; introduction of Colgate Super Shakti by Colgate-Palmolive (India) Ltd. etc. Intensive expansion of a firm can be accomplished in three ways, namely, market penetration, market development and product development is first suggested in Ansoff’s model. The horizontal integration will increase the monopolistic tendency in the market. • To formulate and efficiently implement corporate level strategies to enhance the hotels’ business growth. and Tata Oil Mills Company (TOMCO) by Hindustan Lever.