What is Grand Strategy ?• Grand strategy is a general term for a broad statement of

strategic action. A grand strategy states the means that will be used to achieve long-term objectives.

• Grand strategies , often called master or business strategies, provide basic direction for strategic actions

• Indicate the time period over which long-range objectives are to be achieved

• Firms involved with multiple industries, businesses, product lines, or customer groups usually combine several grand strategies

• Achieving the major long-term objectives of a single firm

Grand Strategy includes :

1)Growth Strategies 2)Stability Strategies3)Retrenchment Strategies 4)Combination Strategies

Business defination

• Customer groups• Customer functions• Alternative technologies

Grand Strategies

Growth Strategies

Stability Strategies

Retrenchment Strategies

Combination Strategies

Concentration Strategies

Diversification Strategies

Horizontal Integration

Vertical Integration

Joint Venture

Liquidation Strategies

Divestiture Strategies

Turnaround Strategies

Harvesting Strategies

Dimensions of grand strategy

• Internal/ external dimension• Related / unrelated dimension• Horizontal/ vertical dimension• Active / passive dimension

Stability Strategies

• Are pursued by the firms who want to achieve a slow and steady improvement in their performance and are doing well in the industry which itself is a trouble free.

• It is less risky, involves fewer changes• Environment is relatively stable• Example- Corporation Bank

Stability Strategy

1) No Change Strategy :• It is a conscious decision to do nothing new• Because no Major Strengths and weakness

within the organization and no new competitors and external and internal environment

• Small Medium sized operating in a familiar market , more often a niche market that is limited in scope and product or services through a time tested technology rely on this strategy

Stability Strategy

2)Profit Strategy :• Firm reduces investments, cut costs,raise

prices, increase productivity because of the problems like recession, industry downturn, Competitive pressure

• It is a frequent method to get rid from the temporary difficulties

Stability Strategy3)Pause/Proceed- with-caution Strategy:• This is tactic in nature.• It is employed by firms that wish to test the

ground before moving ahead with the full fledged grand strategy

• It is a temporary strategy

Growth/Expansion Strategies

Pursued by service firms when it wants to increase its relative market share. The benefits of such strategy range from acquiring economies of scale, strength from a larger presence, increase effectiveness etc

Expansion strategy is adopted because

• Environment demands increase in pace of activity

• Increasing size may lead to more control over the market.

• Psychologically strategist may feel more satisfied with the prospect of growth

Types

• Expansion through concentration• Expansion through integration• Expansion through diversification • Expansion through cooperation• Expansion through internationalisation

Expansion through concentration• Intensification, Focus or specialization

strategy• It involve investment of resources in a product

line for an identified market with the help of proven technology.

• For expansion concentration is often the first preference strategy

• It requires minimal organizational changes so that is less threatening

• Fewer problems as dealing with known situation

Expansion through integration

• Integration basically means combining activities related to present activity of a firm. Such combination may be done on basis of value chain.

• Integration is expansion strategy as its adoption results in widening of scope of business definition

• Transaction cost economy is a reason to adopt this strategy.

• Vertical integration- New product that serves own needs

Forward BackwardHorizontal Integration - When an organization takes

up the same product at the same level of production or marketing.

• A service firm increases its market presence by acquiring other service firms in the similar business

• ICICI Bank took over Bank of Madura • Neyveli ceramics and Neycer ltd by Spartek ceramics

Expansion through Diversification

Concentric diversification- when an organistion takes up activity in such a manner that it is related with existing business definition of one or more of firms business

Marketing related Concentric diversification- Technology related Concentric diversification- Marketing and technology related Concentric

diversification-

• Conglomerate diversification• ITC

SHRIRAM FIBERSSBI

Expansion through Cooperation

• Mergers• Takeovers( acquisition)• Joint ventures • strategic alliances

Merger and Acquisition

• Mergers and acquisitions are strategic decisions taken for maximisation of a company's growth by enhancing its production and marketing operations.

• A merger is a combination of two or more businesses into one business. Laws in India use the term 'amalgamation' for merger.

Examples of mergers and acquisition in india :

• Examples of mergers and acquisition in india Centurion Bank and Bank of Punjab. Worth $82.1 million (Rs. 3.6 billion in Indian currency), this merger led to the creation of the Centurion Bank of Punjab with 235 branches in different regions of India.

• Mergers and Acquisitions in India in 2007 Mahindra and Mahindra acquired 90% stake in the German company Schoneweiss.

• Corus was taken over by Tata.• Vodafone took over Hutchison-Essar in India.

TYPES MERGER• HORIZONTAL - merger combination of two or

more organizations in the same business. Ex: a company making footwear combines with another company making footwear

• Vertical merger is combination of two or more organizations, not necessarily in the same business, which creates complementary either in terms of supply of materials or marketing of goods and services Ex: a footwear company combines with a leather tannery or with a chain of shoe retail stores.

• 3. Concentric mergers is combination of two or more organizations related to each other either in terms of customer functions, customer groups, or alternative technologies used Ex: a footwear co. combines with a hosiery firm making socks

• 4. Conglomerate mergers is combination of two or more organizations unrelated to each other either in terms of customer functions, customer groups, or alternative technologies used Ex: a footwear co. combines with a pharmaceutical company

• the merger between the Walt Disney Company and the American Broadcasting Company.

Two forms of Merger

• Merger through Absorption:-An absorption is a combination of two or more companies into an 'existing company'. All companies except one lose their identity in such a merger. For example, absorption of Tata Fertilisers Ltd (TFL) by Tata Chemicals Ltd (TCL). TCL, an acquiring company(a buyer), survived after merger while TFL, an acquired company (a seller), ceased to exist. TFL transferred its assets, liabilities and shares to TCL.

Merger through Consolidation

A consolidation is a combination of two or more companies into a 'new company'. In this form of merger, all companies are legally dissolved and a new entity is created . Here, the acquired company transfers its assets, liabilities and shares to the acquiring company for cash or exchange of shares. For example, merger of Hindustan Computers Ltd, Hindustan Instruments Ltd, Indian Software Company Ltd and Indian Reprographics Ltd into an entirely new company called HCL Ltd

DEMERGERS :

• DEMERGERS “Spinning off an unrelated business or division in a diversified company into a stand alone company, along with a free distribution of its shares to the existing shareholders of the original company” Example: Reliance industries ltd. Following the death of Dhirubhai Ambani - : * Reliance Communication ventures, * Reliance Energy ventures Ltd. * Reliance Capital ventures Ltd * Reliance Natural resources Ltd

REASONS FOR MERGERS AND ACQUISITIONS :

• To increase value of organisation’s stock • To increase growth rate • To make good investment• To improve stability of earnings and sales• To diversify product line To reduce

competition

Advantages of Mergers & Acquisitions

• Accelerating a company's growth, particularly when its internal growth is constrained due to scarcity of resources.

• Enhancing profitability• Diversifying the risks of the company• A merger may result in financial synergy• Limiting the severity of competition by

increasing the company's market power.

IMPORTANT ISSUES IN M&A :

• STRATEGIC ISSUES CONSIDER • MANAGERIAL ISSUES • LEGAL ISSUES

Acquisition and Takeover• An acquisition may be defined as an act of acquiring

effective control by one company over assets or management of another company without any combination of companies. Thus, in an acquisition two or more companies may remain independent, separate legal entities, but there may be a change in control of the companies.

• When an acquisition is 'forced' or 'unwilling', it is called a takeover. In an unwilling acquisition, the management of 'target' company would oppose a move of being taken over. But, when managements of acquiring and target companies mutually and willingly agree for the takeover, it is called acquisition or friendly takeover.

TAKE OVERS

• Exg: Mahindra and Mahindra’s takeover of a 90 % stake in Schoneweiss, a family owned German co. with over 140 years of experience in forging business

JOINT VENTURES STARATEGY

It is an Entity resulting from a long term contractual agreement between two or more parties, to undertake mutually beneficial economic activities, exercise joint control and contribute equity and share in the profit and losses of the entity.

Example of joint venture

Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector. Both companies have stopped making their own mobile phones.

STRATEGIC ALLIANCE :

Strategic Alliance is a formal relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise. The alliance is a cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts

•

Examples of strategic alliances in india :

• Tata Motors and Fiat are close to signing a worldwide agreement that will have the two automobile majors cooperating in a wide range of areas, including joint research and development for cars for overseas markets and the use of Fiat's retail presence abroad for marketing Tata cars.

• Blue star has entered into a strategic alliance with Italian co., ISA, for providing a range of supermarkets and food refrigeration solutions

• Example of joint ventures in india Virgin Mobile India Limited is a cellular telephone service provider company which is a joint venture between Tata Tele service and Richard Branson's Service Group. Currently, the company uses Tata's CDMA network to offer its services under the brand name Virgin Mobile.

STRATEGIC ALLIANCE :

A Strategic Alliance is a formal relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise The alliance is a cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts

•

Examples of strategic alliances in India

• Tata Motors and Fiat are close to signing a worldwide agreement that will have the two automobile majors cooperating in a wide range of areas, including joint research and development for cars for overseas markets and the use of Fiat's retail presence abroad for marketing Tata cars. Blue star has entered into a strategic alliance with Italian co., ISA, for providing a range of supermarkets and food refrigeration solutions

Expansion through Internationalisation

• International companies are importers and exporters, they have no investment outside of their home country.

• Multinational companies have investment in other countries. Attempts to customize their products and services.

This leads to high cost structure.

• Global companies have invested and are present in many countries. They market their products through the use of the same coordinated image/brand in all markets. Generally one corporate office that is responsible for global strategy. Emphasis on volume, cost management and efficiency. Transnational companies are much more complex organizations. They have invested in foreign operations, have a central corporate facility but give decision-making, R&D and marketing powers to each individual foreign market.

Entry Modes

• Export entry mode• Contractual entry mode• Investment entry mode

Retrenchment Strategies

Retrenchment Strategy includes:1.Harvesting Strategies 2.Turnaround Strategies3.Divestiture Strategies4.Liquidation Strategies

Retrenchment Strategies 1)Harvesting Strategies: • It is guide on how to minimize investments in

certain product line• And Maximize short term profits and cash flows • These are the cash cows of BCG matrix 2)Turnaround Strategies:• It is to bring the service firm to its old

performance levels by restructuring the firms operation.

• Unit Trust of India

Retrenchment Strategies 3) Divestiture Strategy:• It is adopted by a multi-unit service firm when it

wants to divest or sell off one or more of its units. • Bank of America exited from retail banking by

selling it off to ABN Amro 4)Liquidation Strategy:• It is the termination of the service firm’s

existence through the sale of its assets• Satyam

Combination Strategies

• Any firm which follows the combination of Growth, Stability and Retrenchment called combination strategy