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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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    http://www.mba-tutorials.com/wp-content/uploads/2009/08/market_expan.jpghttp://www.mba-tutorials.com/wp-content/uploads/2009/08/market_expan.jpghttp://www.mba-tutorials.com/wp-content/uploads/2009/08/market_expan.jpghttp://www.mba-tutorials.com/wp-content/uploads/2009/08/market_expan.jpghttp://www.mba-tutorials.com/wp-content/uploads/2009/08/market_expan.jpg
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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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