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1. Corporate Strategy 1 Introduction Types of Corporate Strategies Expansion Strategy: Concentration Integration Diversification Cooperation Internationalisation

2. Strategic Management Process comprehensive model: Introduction

3. Organisations are complex entities ! Introduction

4. Introduction Organisation formulate Strategies at 3 levels: Corporate Business / SBU Functional Choice of Strategy depends upon  How the organisation perceives its Strengths & Weaknesses vis-à-vis its perception of the Opportunities & Threats presented by the environment Internal Strengths & Weaknesses  Organisational Appraisal External Opportunities & Threats  E nvironmental Appraisal

5. Types of Corporate Strategies Corporate Strategies : for decisions related to; Resource allocation within various businesses of the Company Transferring resources from one business to another Managing & Nurturing a portfolio of businesses The 4 strategic alternatives for Corporate: Expansion Strategies Stability Strategies Retrenchment Strategies Combination Strategies & Restructuring

6. Types of Corporate Strategies The 4 strategic alternatives for Corporate: Expansion Strategies Stability Strategies Retrenchment Strategies Combination Strategies / Restructuring 1.Expansion through Concentration 2.Expansion through Integration 3.Expansion through Diversification 4.Expansion through Cooperation 5.Expansion through Internationalisation

7. Types of Corporate Strategies

8. Corporate Strategy - Expansion Expansion strategy is adopted because: Environment may demand more activity Increase in size tends to have more clout in the market compared to the competitors Advantages from Learning curve & Economies of scale may accrue Growth orientation strategies satisfies ego of CEOs & Stakeholders Eg.: Chocolate manufacturer with existing end-consumers as children, also targets segment of young-adults to increase its business. Tata group started TCS as unrelated diversification Facebook took over WhatsApp as related diversification Reliance started crude oil refinery as vertical backward integration

9. Corporate Strategy - Expansion Expansion strategy - types: Expansion through Concentration Expansion through Integration Expansion through Diversification Expansion through Cooperation Expansion through Internationalisation

10. Corporate Strategy - Expansion Expansion strategy - through Concentration : It’s the most basic strategy with renewed FOCUS on existing business. Involves converging resources in one or more of a company’s businesses, with focus on customer needs / customer functions / alternative technologies so that expansion results. Concentration  Focus / Intensification / Specialisation  Do what you do the best ! Involves investments in the existing Product lines / Similar products / existing Markets / Similar markets. Note: There in no change in technology ; therefore total investments are not high!

11. Corporate Strategy - Expansion Concentration strategy : Ansoff’s Product-Market matrix

12. Corporate Strategy - Expansion 1.Market Penetration Selling same products more & more in the same market Increase market share through available techniques in Marketing ! Increase per capita consumption among the customers Win through cut-throat market competition Eg.: Budget airlines TV channel Bathing soap Bank & Mutual funds Automobiles – Car, 2Wheeler,… Concentration strategy : Ansoff’s Product-Market matrix

13. Corporate Strategy - Expansion 2.Market Development Selling the same product to new markets in a new geographic region Within same region, includes attracting new users i.e. selling to new market segment based on demographic or economic ! Eg.: All major foreign brands are coming to India; Mercedes, BMW, Pepsi, Coke, Nike, Reebok, etc. Earlier chocolates were for children. Then companies started targeting young adults, adults, senior citizens, thus creating new segments. Earlier fairness cream were targeted to Women. Later they added new segment of Men. Concentration strategy : Ansoff’s Product-Market matrix

14. Corporate Strategy - Expansion 3.Product Development Selling new products in the same market. Product development may consists of upgradation, value addition, improved quality, longer life, time saving, faster performance, economy, etc. Based on the feedback of marketing team  Operation team ie. Technical/R&D makes these product amendments Eg.: Honda MSI continues to be leader in scooter segment of the 2-wheeler market by effective product developments over the years. McDonald & KFC have launched products suitable to Indian taste like aloo tikki and chicken tikka ! Concentration strategy : Ansoff’s Product-Market matrix

15. Corporate Strategy - Expansion Expansion strategy - through Integration : Integration means combining activities related to the present activity of the company. It’s the next level strategy involving addition of new business based on the value-chain of the existing business. Michael Porter’s Value-chain analysis : a set of interlinked activities performed by an organisation Includes procurement of raw materials to the marketing of finished goods In Integration; the organisation moves up (towards finished goods) or down (towards raw materials) However, the set of end-customer or the end-application remain unchanged !!

16. Integration strategy: Michael Porter’s Value chain Corporate Strategy - Expansion

17. Integration strategy Corporate Strategy - Expansion Scope of business definition widens  New technology & Investment is introduced in the adjacent activity in the value-chain  but same set of customers/end-users are served !!! Integration is more similar to Diversification than Concentration since definition of business changes! Integration may be organic (start and develop new business) or inorganic (acquire or take-over) ! Eg.: Process industries like; Hydrocarbons Petrochemicals Steel Textiles Fundamental analysis is Transaction cost economics for “MAKE or BUY” decision! Eg.: Vertical backwards integration is feasible if, cost of inhouse product < cost of procurement. (note: vice versa holds true for OUTSOURCING)

18. Integration strategy: Ansoff’s matrix for diversification Corporate Strategy - Expansion

19. Integration strategy Corporate Strategy - Expansion 1.Horizontal Integration : In this strategy, an organisation takes over same type of product at the similar level of production or marketing in the same or different geographical region. As per value-chain the organisation remain at the same level. Only volumes increase; whereas industry, technology, market or customers remain the same. Usually Horizontal Integration is an inorganic expansion method involving buyouts or mergers !! Eg.: A shoe manufacturer acquires another shoe manufacturer and becomes bigger. A dog food company buys out a cat food firm, is a horizontal integration since it still remain as animal feed industry. Canara Bank integration with Syndicate Bank.

20. Integration strategy Corporate Strategy - Expansion 2.Vertical Integration : It’s a strategy wherein a company starts making new products or doing new activity that serves its own needs. Backward integration: starting activities towards the raw materials or other input. Forward integration: moving towards the ultimate customer or end-user. Fully integrated consists of both backward & forward integrations. Eg.: A fully integrated steel mill means having business activity right from mining of Iron ore & coal to rolling/casting of heavy products. The whole process becomes capital intensive  Becomes risky since the industry and end-customer remain the same  has to used judiciously since it is a double edged sword !!! For Vertical integration, both the routes i.e. Organic & Inorganic are popular.

21. Integration strategy: Vertical integration in textile industry Corporate Strategy - Expansion

22. Integration strategy Corporate Strategy - Expansion 2.Vertical Integration : Vertical disintegration  opposite of integration  in simple words it is known as “Outsourcing”. Outsourcing has been very popular strategy in industries like; Manufacturing of Automobile, Electronics, Durables, FMCG,… Engineering, Construction,… BPOs after the advent of high speed internet.

23. Corporate Strategy - Expansion Expansion strategy - through Diversification : Diversification involves a substantial change, in atleast one of the three aspects of the business definition ( by Abell ) i.e. Customer function (What?) , Customer group (Who?) or Alternative technologies (How?) , of the Company’s business. Refer Ansoff’s product-market matrix  New product in new market is Diversification. Refer Ansoff’s diversification matrix  New product with existing/new technology through existing/new marketing  i.e. 3 rd dimension of “Technology” is added ! Types: Concentric (Related diversification) Conglomerate (Unrelated diversification)

24. Corporate Strategy - Expansion Abell’s 3-dimensions for defining the business (Abell & Hammond, 1979)

25. Corporate Strategy - Expansion Expansion strategy - through Diversification : Types: Concentric (Related diversification): when atleast one aspect of business definition i.e. Customer function , Customer group or Alternative technologies , remain unchanged. Types: Related Marketing-and-Technology concentric Related Technology concentric Related Marketing concentric Conglomerate (Unrelated diversification): when each of the aspect of business definition i.e. Customer function , Customer group or Alternative technologies , changes. Note: In Ansoff diversification matrix, horizontal diversification already discussed as horizontal integration as per the new terminology.

26. Diversification strategy Corporate Strategy - Expansion 1. Related Marketing-and-Technology Concentric diversification : Similar type of product/service is provided with the help of related technology and sold through existing marketing channel. Eg.: Sintex , a manufacturer of synthetic water tanks started making other synthetic items like pre-fabricated doors and windows, road barricades, industrial bins, etc. sold through existing hardware suppliers network. 2. Related Technology Concentric diversification : New type of product/service is provided with the help of related technology and sold through new marketing channel. Eg.: Bajaj Finance, a firm offering hire-purchase institutional customers also started financing retail consumer finance for purchase of 2-wheeler, car, electronics, etc.

27. Diversification strategy Corporate Strategy - Expansion 3. Related Marketing Concentric diversification : Similar type of product/service is provided with the help of unrelated technology and sold through existing marketing channel. Eg.: Usha, originally manufacturing sewing machines, started other household products like kitchen appliances sold through same channels. In general, related diversification has been one the most successful strategy for many companies to grow over past few decades. It enables diversification as well as keeps it close to the original business. Eg.: L&T grew multiple times in the last 3 decades through related diversification within its largest business of engineering & construction.

28. Diversification strategy Corporate Strategy - Expansion Conglomerate unrelated diversification : Here each of the aspect of business definition i.e. Customer function , Customer group or Alternative technologies , changes  new business is no way related to the original one ! Eg.: Reliance starting Jio mobile & data services. Bajaj Auto started Finance company in late 80s. Tata started TCS in late 70s. Very risky proposition  sound rationale required since the company promoters divert focus to non core-competence area !!! By operating very different businesses the promoters become portfolio managers  thereby managing various businesses through techniques like BCG matrix or GE matrix This is the paradox  if shareholders want to invest in a new business they could easily buy shares of a company already successful in that business  Why should the existing company promoters become portfolio managers ?

29. Diversification strategy Corporate Strategy - Expansion Conglomerate unrelated diversification : Diversified groups’ strategists  use portfolio management skills  act as per financial acumen  acquire undervalued companies at low price  Prepare turnaround strategy & infuse funds  quickly implement the plans based on experience of handling multiple business over the decades  enjoy ROI or may even sell off at higher prices !!! Due to historical reasons many business groups in India are conglomerates: Group Businesses Aditya Birla Aluminium, carbon black, cement, chemicals, copper, fertilisers, insulators, mining, retail, telecom, textile, Financial services, Insurance. Godrej White goods & appliances, Toilet Soap, Furniture, locks & security, poultry, processed food & grocery, pest management, property development, Engineering & tooling, material handling, Agriculture products, animal feed, Audio Visual solutions, chemicals, Green building consultancy services, construction.

30. Diversification strategy Corporate Strategy - Expansion ADVANTAGES DISADVANTAGES Minimises Risk. All businesses will not have downside simultaneously. Realising synergy like marketing, production, technology (in related diversification) Capitalise on the learning curve of successfully handling various businesses (especially for unrelated diversification) Harping upon the opportunity created by technology innovation or change in rule of game due to Govt or change due war, virus, climate, geology, etc. Requires high investments. Unrelated diversification demands high level of managerial, operational and financial competence  high cost! Unrelated diversification requires dissimilar set of skills and business acumen. Reduction of focus in operating original business reduces effectiveness & efficiency which in turn may affect the core competence. “Farther pastures are always greener”