RETAIL STRATEGYGROWTH STRATEGIES

Submitted by:-

Submitted to:-

Ankit Jain
Ashish Singh
Dinesh Gupta
Mukesh Sharma
Priya Bajaj
Sunbeam S Sandhu

Mr.Amit Sharma
Faculty-Retail Strategy

Centre For Retail Management

FDDI

BIBLIOGRAPHY

Strategic Management and Business Policy

Azhar Kazmi

Times of India and Hindustan Times

Ezines Journals: Google

Definitions
Strategy- means to achieve objectives.
Strategy helps in pursuing activities which move an organization to move
from the current position to desired future state.
Growth Strategy- An organization substantially broadens the scope of one or
more of its business in terms of their respective customer group, customer
functions and alternative technologies to improve its overall performance.
Types of Growth Strategies

MERGER
ACQUISITION
JOINT VENTURE
STRATEGIC ALLIANCE

MERGERS
In merger two firms, agree to move ahead and exist as a single
new company. Merger can be
merger of equals : both companies are of equal sizes.
merger of unequal's : large company merge with smaller one
Voluntary process : consent of both companies.
Name of new merged entity is usually a combination of both
parent companies
Mergers are mostly financed by a stock swap. Both companies
surrender their stocks and stock of the new company is issued
as a replacement.

Types of merger
Horizontal merger : When two merging companies are of the same
industry and produce similar products.
Example : Footwear Company Merging with Footwear company
Vertical merger : When two companies are producing the same
goods, but are at different stages, it is a vertical merger.
Example : Footwear Company Merging with Leather Tannery
Concentric merger : when two companies are related to each other
in terms of customer functions or customer groups.
Example : Footwear Company Merging with another specialty
Footwear Company
Conglomerate merger : When two companies operate in different
industries.
Example : Footwear Company Merging with Pharmaceutical Firms

Are all mergers successful?

Hindalco-Novelis (failure)

Hindalco (metal maker of Birla group) acquired Novelis for a

staggering $ 5.76 billion.
Novelis , on a net worth of $ 322 million, had a debt of $ 2.33 billion

Hindalco took $ 3.13 bn loan to aquire Novelis. Right after the

acquisition hindalco came on a rough road.
With the debt market tightening , the metal maker is left with no choice
but to dilute its equity through a 1:3 rights issue.

Further, high interest costs, which rose by over 490 % loan increased
from Rs 3.13 billion in FY 07 to Rs 18.49 billion in FY 08.

Finally Hindalcos earning per share in FY08 dropped to Rs.15.76,

from Rs. 26.73 in FY07, a fall of 41% !

AQUISITION
Acquisition is a deal when one company takes over another
company and buyer becomes sole proprietor.
At times takeover occurs when the target company does not
want to be purchased. However with better offering of prices
shareholder are attracted by acquirer.
In legal terms, the target company ceases to survive. The buyer
swallows the company and the buyer's stock continues to be
traded.
Unlike mergers which are friendly, acquisitions can be friendly
and unfriendly.

Why M & A OCCUR ?

To reduce competition.

To increase growth rate & capture a greater market share

To improve value of organizations stock.

To acquire a needed resource quickly.

To take advantage of synergy.

To acquire resources to stabilize operations.

To achieve economies of scale.

Disadvantages of M&A

Reduced competition may even facilitate monopolistic or

oligopolistic tendencies among firms.

Increase of prices.

Job losses for employees.

Difficulties in cultural integration of the merging firms.

Interest of minority shareholders is not protected.

Tata Steel and Corus

On January 31, 2007, Tata Steel Limited, one of the leading steel producers in India, acquired
the Anglo Dutch steel producer Corus Group for US$ 12.11 billion.
Corus was 2.5 times bigger company than TATA.
It took nine rounds for Tata to acquire Corus. In the first bid Tata had closed the deal at US $
7.6 bn and later it ended up by paying US $ 12.11 bn, making it an expensive turnover.
This acquisition was the biggest overseas acquisition by an Indian company. Tata Steel
emerged as the fifth largest steel producer in the world.

After acquisition Tata benefited itself from Corus:

Distribution network of Europe.
expertise in steel making for automobiles.
In return Corus benefit itself from Tata Steel's expertise in low cost manufacturing of steel.

JOINT VENTURE

An entity formed between two or more parties to undertake a specified activity

together. Parties agree to create a new entity by both contributing equity, and they
then share revenue, expenses, and control of the enterprise. The venture can be for
one specific project only or a continuing business relationship Eg: Sony Ericsson.

Unlike mergers and acquisitions, in joint venture the parent companies does not
cease to exist.

Types of Joint Ventures

(a) Between 2 Indian org. in one industry
(b) Between 2 Indian org. across different industries.
(c) Between an Indian org. & a foreign org. in India.
(d) Between an Indian org. & a foreign org. in that foreign country.
(e) Between an Indian org. & a foreign org. in third country.

Joint Venture
Maruti Udyog Ltd. & Suzuki Motor Corp.

Maruti Suzuki is one of India's leading automobile manufacturers and the market leader
in the car segment, both in terms of volume of vehicles sold and revenue earned.

Until recently, 18.28% of the company was owned by the Indian government, and
54.2% by Suzuki of Japan.

The Indian government held an initial public offering of 25% of the company in June
2003.

As of May 10, 2007, Govt. of India sold its complete share to Indian financial
institutions. With this, Govt. of India no longer has stake in Maruti Udyog.

During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were exported.

In all, over six million Maruti cars are on Indian roads since the first car was rolled out on
December 14, 1983.

Strategic alliances
A strategic alliance is a form of affiliation that involves a mutual sharing of resources or
partnering to improve efficiency.
In strategic alliances, the focus is on sharing of resources rather than seeking change in
control. Equity investment in each others company is not any focus.

Types of strategic alliances :

Pre competitive alliance : vertical value chain alliances b/w manufacturers and suppliers.
Non competitive alliances : Intra industry partnerships b/w noncompetitive firms
like two firms in same industry but different geographical locations.
Competitive alliance : partnerships which brings two rival firms in a cooperative
arrangement where intense interaction is necessary.
Pre competitive alliance : partnerships which brings two firms of different industry
together to work on well defined industries such as new technology development.

Reasons for strategic alliances

Market entry -A strategic alliance can ease entry into a foreign market . Eg:
strategic alliance between British Airways and American Airlines.

Share risk & expenses -firms involved can share risks. Eg: In early 1990s film
manufacturers Kodak and Fuji joined with camera manufacturers Nikon, Canon,
and Minolta to create cameras and film for an "Advanced Photo System.

Synergistic Effects of Shared Knowledge and Expertise- help a firm gain

knowledge and expertise
Skills+ brand + market knowledge+ assets= synergizing effect
Eg: For example, in the early 1990s, Motorola initiated an alliance among
various partners, including Raytheon, Lockheed Martin, China Great Wall, and
Nippon Iridium, to develop and build a global satellite-based communications
network.
Gaining Competitive Advantage-

Pitfalls

Lack of trust & commitment.

Perceived misunderstanding among partners.
Conflicting goals & interests.
Inadequate preparation for entering into partnership.
Hasty implementation of plans.

Jet airways-Kingfisher Alliance

market leaders with share of
Jet 30%
kingfisher 29%

Economic slowdown and high ATF prices resulted in decline of air travel both in
international and domestic segments of the air travel market.
Airline sector is set to incur a loss of $ 2bn (Rs.10,000 Crore) this year

Thus Jet and Kingfisher have decided to form an alliance in fields including fuel
management, ground handling, sharing of technical resources and crew for training
and cross-utilization on similar aircraft types.

This will help both carriers to significantly rationalize and reduce costs and provide
improved standards of service and a wider choice of air travel options to consumers
with immediate effect.

They could not merge as of rule that two airline companies with
combined market share greater than 40 % can not merge in India. So they formed an
alliance.

MERGER

AQUISITION

Usually two companies of equal size merge

Together.

Large company takes over the smaller

Company.

Voluntary and friendly process

Often forceful or unfriendly where larger

company attracts the shareholders of target
company by offering them better price for
their shares.

Stock swap : both companies surrender their

stocks and stocks of new companies are given
as replacement.
Parent companies cease to exist.
JOINT VENTURE

Parent companies cease to exist.

STRATEGIC ALLIANCE

Two or more companies agree to form an

Entity for a specific task or period.

To improve efficiency of companies.

Always friendly.

Includes no equity investments.

One company receives financial assistance,

Managerial inputs and technological inputs
from superior company.

Parent companies keep functioning

as normal by supporting each other.

Parent companies keep functioning in their

Respective areas.