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 Strategies
3)Retrenchment Strategies
4)Combination Strategies
 Business defination

• Customer groups
• Customer functions
• Alternative technologies
 Concentration Strategies

Diversification Strategies

Horizontal Integration
Growth
Strategies Vertical Integration

Joint Venture
Stability
Grand
Strategies
Strategies

Retrenchment Harvesting Strategies

Strategies
Turnaround Strategies

Combination Divestiture Strategies

Strategies
Liquidation 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 Strategy
3)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
 Backward
Horizontal 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 FIBERS
SBI
 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
 Retrenchment Strategies
Retrenchment Strategy includes:
1.Harvesting Strategies
2.Turnaround Strategies
3.Divestiture Strategies
4.Liquidation Strategies
• 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, but do not have coordinated
product offerings in each country. More focused
on adapting their products and service to each
individual local market.
•
• 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
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