External growth strategies can therefore be divided between M&A (Mergers and Acquisitions) strategies and Strategic Alliance strategies (e.g. You got into business to solve a problem for a certain audience. Traditional means of operating with little cultural diversity and without global competition are no longer effective firms. The hostile takeover is against the wishes to the target company management. A strategic alliance integrates the synergetic talents of alliance partners. However, to mould their firms into truly global companies, managers must develop global mind-sets. Merger is said to occur when two or more companies combine into one company. Welcome to EconomicsDiscussion.net! Example – Colgate-Palmolive has been trying to maintain its share of the toothpaste market by introducing new brands. Where the company is closely held by small group of shareholders, the controlling interest is obtained by purchasing the shares of other shareholders. (Conglomerate means a larger company that is formed by joining together different firms). Joint ventures with multinational companies contribute to the expansion of production capacity, transfer of technology and capital and above all penetrating into global market. Tata Tea’s takeover of Consolidated Coffee (a grower of coffee beans) and Asian Coffee (a processor) are the examples of related diversification. Strategic management is the management of an organization’s resources to achieve its goals and objectives. (c) Convert non-users of a product into users of the product and making potential opportunity for increasing sales. Retrenchment Strategy: Retrenchment strategy is a corporate level, defensive strategy followed by a … The types of strategic management strategies have changed over time. Activities, which have no contractual arrangements to establish joint control, are not joint ventures. Win-Win . Internal development can take the form of investments in new products, services, customer segments, or geographic markets including international expansion. It may help the enterprise in developing strategies of product differentiation and beating powerful forces of competition. Growth strategy can be adopted in the form of expansion, vertical integration, diversification, merger, acquisition and joint venture. use of coffee during summer season by way of cold coffee or coffee-shake. If as a result of a merger, a new company comes into existence it is called as ‘amalgamation’. At The Coca-Cola Company, we see M&A as an enabler of our growth strategy rather than a strategy in and of itself. Intensive growth strategies aim at achieving further growth for existing products and/ or in existing markets. There are four basic growth strategies you can employ to expand your business: market penetration, product development, market expansion and diversification. Another licensing strategy is to contract the manufacturing of its product line to a foreign company to exploit local comparative advantages in technology, materials or labour. This is the first type of strategy for growth that you need to know about. (iii)Organisational restructuring might be a major problem to introduce and successfully implement new technology. Merger can be merger of equals, both companies are of equal sizes, large company merge with smaller one volunta… (c) By entering new geographical markets. When evaluating M&A opportunities we must ensure we strike the right balance between strategic rationale, financial returns, and risk profile. This combination may be either through absorption or consolidation. (e) Use of common distribution channels and uniform brand name. The marketing efforts are made on existing products, to customers in related market areas, by adding different channels of distribution or by changing the current content of the advertising and promotional efforts. Lack of enough additional staff with sufficient expertise and loyalty; 4. Internationalization Expansion Strategy. When manufacturers at successive stages of production integrate backwards up to the source of raw materials; it is known as backward merger. Latest topics: Podcast Building a great digital business. Diversification means going into an operation which is either totally or partially unrelated to the present operations. (v) Joint venture strategy provides opportunity to small firms to become big through joining with others and add to their prospects of survival. Cooperative strategy is the third major alternative (internal growth and mergers and acquisitions are the other two) firms use to grow, develop value-creating competitive advantages, and create differences between them and competitors. TOS 7. Combination of firms may take the merger or consolidation route. In market development strategy, a firm seeks to increase the sales by taking its product into new markets. Strategic Management - Growth Strategies; 5. As a strategy the purchaser keeps his identity a secret. However, diversification spreads resources over several areas, similarly decreasing the probability that the firm can be a strong force in any area. Diversification makes addition to the portfolio of business the growth strategy is pursued when the firm’s growth objectives are very high and it could not be achieved with in the existing product/market scope. In forward vertical diversification, the aim of a firm is to move forward towards distribution process so as to reach the final consumer. 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 modern discipline of strategic management traces its roots to the 1950s and 1960s. Integration at the same level of business, popularly known as horizontal integration, involves the acquisition of one or more competitors. (iv) Modernisation gives a new looks to the enterprise and its functioning; thus adding to its goodwill in the market. 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. These acquisitions are called ‘management buyouts’, if managers are involved, and ‘leveraged buyout’, if the funds for the tender offer come predominantly from debt. Firms adopting this strategy can have a regular and uninterrupted supply of raw materials components and other inputs and the quality is also assured. Pressure from public opinion; 2. Diversification refers to the directions of development which take the organization away from both its present products and its present markets at the same time. iii. Disclaimer 9. There has been an addition of a wide range of products such as fertilizers, sugar, chemicals, rayon, trucks etc. 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. Growth strategies are extremely popular because most executives tend to equate growth with success. 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