CORPORATE STRATEGY

CORPORATE
STRATEGY
1
CORPORATE STRATEGY
CHAPTER1
Meaning of corporate strategy
CORPORATE STRATEGY is the direction an organization takes with the
objective of achieving business success in the ong ter!" Recent a##roaches have focused on
the need for co!#anies to ada#t to and antici#ate changes in the business environ!ent$ i"e" a
fe%ibe strateg&" The deveo#!ent of a cor#orate strateg& invoves estabishing the #ur#ose
and sco#e of the organization's activities and the nature of the business it is in$ taking the
environ!ent in which it o#erates$ its #osition in the !arket#ace$ and the co!#etition it faces
into consideration( !ost ti!es ana&zed through a S)OT ana&sis"
Cor#orate strateg& is the seection and deveo#!ent of the !arkets *or
industries+ in which a fir! co!#etes" Therefore$ cor#orate strateg& deas with what
industries *or !arkets+ a fir! seeks to co!#ete in" ,usiness eve strategies *ow cost$
differentiation$ and focus+ that were discussed ast cha#ter are -O) a fir! co!#etes in a
singe !arket or industr&" Therefore$ cor#orate strateg& and business strateg& describe ver&
different issues .. be carefu not to confuse the!"
/nike business eve strateg&$ work on cor#orate strateg& fra!eworks is not
near& as advanced or we done" 0ost e!#hasis is on describing cor#orate strateg&"
1escribing cor#orate strateg& invoves two #ri!ar& di!ensions$ vertica integration$ where
fir!s engage in activities that were for!er& done b& their bu&ers or su##iers and
diversification where the& enter additiona !arkets" )hie that often gets a ot of attention$
2-ow diversified is the fir!34 is not rea& that i!#ortant for understanding wh& fir!
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CORPORATE STRATEGY
#erfor!ance differs" )hat rea& aows cor#orate strateg& to resut in su#erior fir!
#erfor!ance are what 56 ca the 2buiding bocks of cor#orate strateg&4 . sharing resources$
transferring co!#etencies$ and creating s#ecific assets"
Organizations are facing e%citing and d&na!ic chaenges in the 78st centur&"
5n the gobaized business$ co!#anies re9uire strategic thinking and on& b& evoving good
cor#orate strategies can the& beco!e strategica& co!#etitive" A sustained or sustainabe
co!#etitive advantage occurs when fir! i!#e!ents a vaue : creating strateg& of which
other co!#anies are unabe to du#icate the benefits or find it too cost& to initiate" Cor#orate
strateg& incudes the co!!it!ents$ decisions and actions re9uired for a fir! to achieve
strategic co!#etitiveness and earn above average returns" The goas of cor#orate strateg& are
chaenging not on& for arge fir!s ike 0icrosoft but aso for s!a oca co!#uter retai
outets or even dr& ceaners"
0intzberg has identified the ; P6s of strateg&" Strateg& coud be a #an$ a
#attern$ a #osition$ a #o&$ or a #ers#ective"
8" A #an$ a 2how do 5 get there4
7" A #attern$ in consistent actions over ti!e
<" A #osition that is$ it refects the decision of the fir! to offer #articuar #roducts or services
in #articuar !arkets"
=" A #o&$ a !aneuver intended to outwit a co!#etitor
;" A #ers#ective that is$ a vision and direction$ a view of what the co!#an& or organization
is to beco!e"
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CORPORATE STRATEGY
INDIAS TOP TEN STRATEGISTS
Name of te
company
Position in te
in!"stry
5nfos&s
Technoogies
8
Reiance 5ndustries 7
)i#ro <
-industan >ever =
0aruti /d&og ;
1r" Redd&6s
>aboratories
?
-1@C ,ank A
Bet Airwa&s
C
5C5C5 ,ank
D
Ranba%&
>aboratories
8E
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CORPORATE STRATEGY
Descri#ing Corporate Strategy
There are two basic descri#tive di!ensions of cor#orate strateg&$ how
diversified and how vertica& integrated an organization is" 5t !a& be he#fu to think of both
of these di!ensions as a continuu!"
Di$ersification occurs when a fir! enters a new industr& or !arket" Bust ike
when we discussed Porter's @ive @orces$ the definition of an industr& or !arket is critica&
i!#ortant" There are for!a cassification codes$ the Forth A!erican 5ndustria Cassification
S&ste! *#revious& Standard 5ndustria Cassification codes : see bo% in e%terna ana&sis+$
for tr&ing to cassif& a industries in an econo!&" -owever$ for our #ur#oses the FA5CS is
not ver& usefu" -owever$ it is critica when doing &our ana&sis to carefu& define industries
in describing fir! diversification" @or e%a!#e$ was Coca.Coa's !ove fro! carbonated
beverages into botted water an instance of diversification3 1e#ending on how &ou define the
industr&$ it coud be &es or no"
-ow diversified a fir! is can be deter!ined b& what #ortion of its saes are
derived fro! different !arkets" The arger a #ercentage of saes are derived fro! different
!arketsGindustries the !ore diversified the fir! can be said to be" A wide range of abes can
be a##ied to the eve of a fir!'s diversification fro! singe business *D;H of saes fro! one
industr&+$ do!inant business *AEH fro! one industr&+ to diversified *ess than AEH fro! an&
one industr&+")hie singe business fir!s are usua& found in fast !oving$ ra#id& evoving
industries where there is a need to focus$ there are e%ce#tions" )iia! )rige&$ the chewing
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CORPORATE STRATEGY
gu! !anufacturer$ is #erha#s the !ost fa!ous singe business fir!" -owever$ !ost arge
fir!s engage in so!e diversification" Reated vs" /nreated" 1iversification can be either
reated or unreated"
The ke& issue here is if the o#erations of the fir! in the new industr& share
so!e ink in with the fir!'s e%isting vaue chain" 5s there so!e vaue adding activit& that can
be shared3 @or e%a!#e$ is there a #roduction faciit&$ a distribution network$ or a !arketing
co!#etence that both can use3 -istorica& it was thought that reated diversification woud
be better than unreated diversification" -owever$ the coordination costs of reated
diversification a##ear to consu!e a ot of the e%#ected benefits" Therefore$ whie !ost fir!s
see! to engage in reated diversification its benefits are on& sight&$ if at a$ better than
unreated"
%ertica& integration occurs when a fir! takes on activities that were for!a&
done b& others on its behaf" 5n a wa&$ vertica integration is just a s#ecia case of
diversification$ a fir! is diversif&ing into either its su##iers' or its bu&ers' industries" @or
e%a!#e if a co!#an& starts to !ake co!#onents for its #roducts on its own or if it starts to
distribute #roducts direct& to custo!ers it is engaged in vertica integration" @ord 0otor
Co!#an& under -enr& @ord was e%tre!e& vertica& integrated going so far at one ti!e as
to own the iron ore !ines that fueed its stee !is that fed its auto!obie asse!b&
o#erations"
-owever$ recent& vertica integration has faen out of favor in #reference to
contract !anufacturing and outsourcing" 5n fact$ outsourcing$ the o##osite of vertica
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CORPORATE STRATEGY
integration$ has beco!e so co!!on that su##& chain !anage!ent has beco!e an i!#ortant
area of stud&" 5t wi be interesting to see how the e%#ansion of the internet creates
o##ortunities for fir!s to vertica& integrate downstrea! into direct distribution"
A fir!'s eve of vertica integration can be !odeed using an industr& *rather
than a fir!+ vaue chain" An industr& vaue chain !odes a the significant vaue adding
ste#s that occur in an industr& fro! the !ost basic raw !aterias to the fina consu!ers" The
!ore of these activities a fir! enco!#asses the !ore vertica& integrated it is" A fir! that
enters activities to its eft on the industr& vaue chain$ re#acing a su##ier$ is said to be
vertica& integrating Iu#strea!I" A fir! entering activities to its right$ su##anting a bu&er$
is said to be !oving Idownstrea!I" So continuing the historica @ord e%a!#e$ @ord bu&ing
coa !ines woud be u#strea! whie hi! bu&ing a deaershi# woud be downstrea! vertica
integration" Jertica integration entais coordination *bureaucratic+ costs just ike reated
diversification" @or e%a!#e$ a !ajor issue for vertica& integrated fir!s is transfer #rices$
what shoud one #art of the fir! charge another3 @urther!ore$ a vertica& integrated fir!
faces greater technoogica risk and de!and uncertaint&" 5n !an& wa&s vertica integration is
a ot ike financia everage$ when ti!es are good$ the&6re ver& good as the fir! #rofits a
aong the vaue chain$ but when the& go bad$ it's corres#onding& bad a aong the vaue
chain"
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CORPORATE STRATEGY
'y Corporate Strategy(
Strategic !anage!ent is basica& needed for ever& organization and it offers
severa benefits"
8"/niversaK
Strateg& refers to a co!#e% web of thoughts$ ideas$ insights$ e%#eriences$
goas$ e%#ertise$ !e!ories$ #erce#tions$ and e%#ectations that #rovides genera guidance for
s#ecific actions in #ursuit of #articuar ends" Fations have$ in the !anage!ent of their
nationa #oicies$ found it necessar& to evove strategies that adjust and correate #oitica$
econo!ic$ technoogica$ and #s&choogica factors$ aong with !iitar& ee!ents" ,e it
!anage!ent of nationa #oices$ internationa reations$ or even of a ga!e on the #a&fied$ it
#rovides us with the #referred #ath that we shoud take for the journe& that we actua& !ake"
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CORPORATE STRATEGY
7" Lee#ing #ace with changing environ!entK
The #resent da& environ!ent is so d&na!ic and fast changing thus !aking it
ver& difficut for an& !odern business enter#rise to o#erate" ,ecause of uncertainties$ threats
and constraints$ the business cor#oration are under great #ressure and are tr&ing to find out
the wa&s and !eans for their heath& surviva" /nder such circu!stances$ the on& ast resort
is to !ake the best use of strategic !anage!ent which can he# the cor#orate !anage!ent to
e%#ore the #ossibe o##ortunities and at the sa!e ti!e to achieve an o#ti!u! eve of
efficienc& b& !ini!izing the e%#ected threats"
<" 0ini!izes co!#etitive disadvantageK
5t !ini!izes co!#etitive disadvantage and adds u# to co!#etitive advantage"
Or e%a!#e$ a co!#an& ike -industan >ever >td"$ reaized that !ere& b& !erging with
co!#anies ike >ak!e$ 0ik food$ Ponds$ ,rooke bond$ >i#ton etc which !ake fast !oving
consu!er goods aone wi not !ake it !arket eader but venturing into retaiing wi he# it
rea# heav& #rofits" Then e!erged its retai giant 20argin @ree6 which is the !arket eader in
states ike Leraa" Si!iar&$ the R"P" Goenka Grou# and the 0urugu##a grou# reaized that
!ere takeovers do not he# and there is a need to re#osition their #roducts and reengineer
their brands" The strateg& worked"
=" Cear sense of strategic vision and shar#er focus on goas and objectivesK
Ever& fir! co!#eting in an industr& has a strateg&$ because strateg& refers to
how a given objective wi be achieved" MStrateg&6 defines what it is we want to achieve and
charts ourcourse in the !arket #ace( it is the basis for the estabish!ent of a business fir!(
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CORPORATE STRATEGY
and it is a basic re9uire!ent for a fir! to survive and to sustain itsef in toda&6s changing
environ!ent b&#roviding vision and encouraging to define !ission"
;"0otivating e!#o&eesK
One shoud note that the abor efficienc& and o&at& towards !anage!ent can
be e%#ected on& in an organization that o#erates under strategic !anage!ent" Ever&
guidance as to what to do$ when and how to do and b& who! etc$ is given to ever& e!#o&ee"
This !akes the! !ore confident and free to #erfor! their tasks without an& hesitation"
>abor efficienc& and their o&at& which resuts into industria #eace and good returns are the
resuts of broad.based #oicies ado#ted b& the strategic !anage!ent
?" Strengthening 1ecision.0akingK
/nder strategic !anage!ent$ the first ste# to be taken is to identif& the
objectives of the business concern" -ence a cor#oration organized under the basic #rinci#es
of strategic !anage!ent wi find a s!ooth saiing due to effective decision.!aking" This
#oints out the need for strategic !anage!ent"
A" Efficient and effective wa& of i!#e!enting actions for resutsK
Strateg& #rovides a cear understanding of #ur#ose$ objectives and standards
of #erfor!ance to e!#o&ees at a eves and in a functiona areas" Thereb& it !akes
i!#e!entation ver& s!ooth aowing for !a%i!u! har!on& and s&nchron&" As a resut$ the
e%#ected resuts are obtained !ore efficient& and econo!ica&"
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CORPORATE STRATEGY
C" 5!#roved understanding of interna and e%terna environ!ents of businessK
Strateg& for!uation re9uires continuous observation and understanding of
environ!enta variabes and cassif&ing the! as o##ortunities and threats" 5t aso invoves
knowing whether the threats are serious or casua and o##ortunities are worth& or !argina"
As such strateg& #rovides for a better understanding of environ!ent"
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CORPORATE STRATEGY
)e$e&s of strategy
A t&#ica business fir! shoud consider three t&#es of strategies$ which for! a
hierarch&K
8" Cor#orate strateg& : )hich describes a co!#an&6s overa direction towards growth b&
!anaging business and #roduct ines3 These incude stabiit&$ growth and retrench!ent"
@or e%a!#e$ Coco coa$ 5nc"$ has foowed the growth strateg& b& ac9uisition"
5t has ac9uired oca botting units to e!erge as the !arket eader"
7" ,usiness strateg& . /sua& occurs at business unit or #roduct eve e!#hasizing the
i!#rove!ent of co!#etitive #osition of a fir!6s #roducts or services in an industr& or !arket
seg!ent served b& that business unit" ,usiness strateg& fas in the in the rea! of cor#orate
strateg&"
@or e%a!#e$ A##e Co!#uters uses a differentiation co!#etitive strateg& that
e!#hasizes innovative #roduct with creative design" 5n contrast$ AFN Grinda&s !erged with
Standard Chartered ,ank to e!erge co!#etitive&"
<" @unctiona strateg& : 5t is the a##roach taken b& a functiona area to achieve cor#orate and
business unit objectives and strategies b& !a%i!izing resource #roductivit&" 5t is concerned
with deveo#ing and nurturing a distinctive co!#etence to #rovide the fir! with a
co!#etitive advantage"
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CORPORATE STRATEGY
@or e%a!#e$ Procter and Ga!be s#ends huge a!ounts on advertising to
create custo!er de!and"
=" O#erating strateg& . These are concerned with how the co!#onent #arts of an organization
deiver effective& the cor#orate$ business and functiona .eve strategies in ter!s of
resources$ #rocesses and #eo#e" The& are at de#art!enta eve and set #eriodic short.ter!
targets for acco!#ish!ent"
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CORPORATE STRATEGY
CHAPTER *
Te +enefits of Corporate Strategy, Te +"i&!ing +&oc-s of Corporate A!$antage
A *we DEHO+ cor#orate strateg& is !otivated b& what we' ter! the three
buiding bocks of cor#orate strateg&K shared resources$ transferred co!#etencies$ and the
creation of s#ecific assets" )hie there are !an& #ossibe reasons given for things ike
diversification$ the& can a!ost a be traced back to one of these three !otivations"
Saring reso"rces is taking so!ething an organization aread& has and using
it in a new industr&" @or e%a!#e$ )a.0art #unking down one.hour #hoto abs in its stores
is an e%a!#e of sharing a resource" )0T aread& has stores *a resource+ ocated a over the
countr&" Adding this service is si!#& a !atter of sharing its e%isting resource" Econo!ies of
sco#e$ efficiencies *i"e" cost reduction+ gained due to the breath of one's goodsGservices$ is a
funda!enta e%a!#e of sharing resources"
Transferring competencies, is taking so!ething that an organization is good
at and using it in a new industr&" The !ost fa!ous e%a!#e of this of a ti!e was -enr&
@ord and his !ass #roductionGasse!b& ine techni9ues" Toda& @ord is !ost fa!ous for cars$
however @ord took his ideas and a##ied the! to far! e9ui#!ent$ arge trucks$ and even
air#anesP So!e of these businesses re!ain to this da& as &ou can sti find @ord far!
e9ui#!ent"
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CORPORATE STRATEGY
Specific Assets, 0uch !ore co!#e% is the idea of s#ecific assets" S#ecific
assets are assets that have a !uch ower vaue in their ne%t best use OR to their ne%t best
user"
A great e%a!#e of a s#ecific asset !ight be a te%tbook for a coege course" 5t
has great vaue if &ou are a coege student in that course$ but it doesn't have !an& aternate
uses$ e"g" firestarter$ and few #eo#e other than a coege student taking that course woud #a&
a ot of !one& for it" Therefore$ it is a s#ecific asset" Co!!on e%a!#es of s#ecific assets are
things ike unifor!s and #i#eines" 5t !a& be he#fu to think of s#ecific assets as assets that
have been custo!ized" This is because b& custo!izing so!ething it fre9uent& beco!es
!ore vauabe to the #erson or fir! who did the custo!izing but ess vauabe to ever&one
ese" S#ecific assets are i!#ortant for cor#orate strateg& for two reasons" @irst$ if &ou don't
own the s#ecific asset it #robab& wi not get created at a" After a @ord is not ike& to
ever #roduce a car in &our schoo6s coor sche!e with &our !ascot #ainted on the hood" 5f
&ou want one$ &ou6 have to have it done &oursef" Second$ &ou fre9uent& want to own
s#ecific assets so that &ou are not Ihed u#I b& an o##ortunistic #artner" -od u# can occur
when the #rovider of a s#ecific asset decides to withhod it fro! &ou at a critica ti!e" @or
e%a!#e$ what if &ou rented &our te%tbook fro! !e rather than owned it3 5 !ight have an
incentive to increase the renta rate right before the e%a! when &ou needed the book the
!ost" You !ight be abe to take !e to court and win for vioation of contract$ but b& then the
test is ong #ast" You6 have to #a& !& higher rent" This is what econo!ists !ean when the&
refer to 2hod u#"4 A great iustration of the buiding bocks co!es fro! Back )ech6s
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CORPORATE STRATEGY
!anageria evauation s&ste! at GE . #robab& the !ost diversified arge co!#an& in the
/"S"
The centra focus of the s&ste! was the divisiona director's abiit& to
recognize$ deveo#$ and S-ARE the taent of their e%ecutives" 5f so!eone had so!eone who
was rea& good at soving #robe! Q that another division had$ then the& were e%#ected to
reassign that #erson to the other division" This further encouraged e!#o&ees to devote
the!seves to earning about GE and doing a great job$ the& knew good work woud be
rewarded" This is a cassic e%a!#e of wh& sharing resources$ transferring co!#etencies$ and
getting #eo#e to invest in s#ecific assets *es#ecia& i!#ortant for organizationa knowedge+
is i!#ortant for the !anage!ent and ongoing success of diversified cor#orations"
0anageria attention shoud be #aid to these three factors on an ongoing basis$ not just at the
ti!e a diversification or vertica integration decision is !ade"
Therefore$ in order for a cor#orate strategic decision to he# resut in a
sustained co!#etitive advantage for a fir! the benefits fro! the shared resources$ transferred
co!#etencies$ and s#ecific assets !ust be greater than the integration and bureaucratic costs
of #erfor!ing the function interna&" -owever$ this eads to an interesting 9uestion$ what
about fir!s that have #ursued co!#ete& unreated diversification &et have #erfor!ed 9uite
we3 )hie these are rather rare$ e%a!#es of these fir!s have incuded -anson Trust and
#resent da& ,erkshire -athawa& *,RL+" )hat !a& have ha##ened is that these fir!s wind
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CORPORATE STRATEGY
u# e!bod&ing a contro or resource aocation function *#erha#s ca#ita+ that is su#erior to
what their co!#onent fir!s coud do individua&" @or e%a!#e$ )arren ,uffett often targets
ac9uisitions on the foundation of taking awa& the current CEO's headaches of deaing with
boards and reguators and etting the CEO get back to focusing on running the co!#an& that
the& ove" This of course is just a transferred co!#etenc& on the #art of ,RL that takes over
cor#orate governance concerns of the CEO" )arren ,uffett's e%ce#tiona ski in investing
coud aso be a transferred co!#etenc& and his co!#an&'s e%ceent credit rating a shared
resource"
'arning on MatricesK 5nitia&$ consuting grou#s and !anagers atte!#ted to dea with the
co!#e% chaenges of cor#orate strateg& through I!atrices"I The !atrices$ e"g" ,oston
Consuting Grou# *Stars$ Probe! Chidren$ Cash Cows$ and 1ogs+$ &ou often see associated
with cor#orate strateg& can be great e%terna ana&sis toos and visua aids" -owever$ since
the& don't te &ou how to share resources$ transfer co!#etencies$ or create s#ecific assets$
the& are I!ost& worthessI for e%#aining wh& fir! #erfor!ance differs"
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CORPORATE STRATEGY
CHAPTER .
Types of corporate &e$e& strategy
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CORPORATE STRATEGY
MERGER AND AC/0ISITION
Mergers an! ac1"isitions *abbreviated M2A+ are both an as#ect of cor#orate
strateg&$ cor#orate finance and !anage!ent deaing with the bu&ing$ seing$ dividing and
co!bining of different co!#anies and si!iar entities that can he# an enter#rise grow
ra#id& in its sector or ocation of origin$ or a new fied or new ocation$ without creating a
subsidiar&$ other chid entit& or using a joint venture"
The distinction between a I!ergerI and an Iac9uisitionI has beco!e
increasing& burred in various res#ects *#articuar& in ter!s of the uti!ate econo!ic
outco!e+$ athough it has not co!#ete& disa##eared in a situations" @ro! a ega #oint of
view$ a merger is a ega consoidation of two co!#anies into one entit&$ whereas
an ac1"isition occurs when one co!#an& takes over another and co!#ete& estabishes
itsef as the new owner *in which case the target co!#an& sti e%ists as an inde#endent ega
entit& controed b& the ac9uirer+" Either structure can resut in the econo!ic and financia
consoidation of the two entities" 5n #ractice$ a dea that is an ac9uisition for ega #ur#oses
!a& be eu#he!istica& caed a Imerger of e1"a&sI if both CEOs agree that joining together
is in the best interest of both of their co!#anies$ whie when the dea is unfriend& *that is$
when the target co!#an& does not want to be #urchased+ it is a!ost awa&s regarded as an
Iac9uisitionI"
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CORPORATE STRATEGY
Reasons for merger strategy,
13 O#erationa efficienc&K 5t enabes the #ooing of resources and strea!ining of
o#erations$ thereb&$ resuting in i!#roved o#erationa efficiencies"
*3 Econo!ies of scaeK The !erged entit& enjo&s econo!ies of arge scae of #roduction"
0erger$ therefore$ i!#roves the overa co!#etitiveness"
.3 -e#s to face the co!#etitionK due to econo!ies of arge scae #roduction and
distribution$ the for! is in #osition to offer not on& better 9uait& of goods and
services$ but aso at better #rices$ and therefore$ it can effective& face co!#etition in
the !arket"
43 Ta% advantageK 0erger can be used as effective source of ta% #anning$ es#ecia&$
when one of the !erged entities was having accu!uated osses" 5n such a case$ it can
resut in severa ta% saving for the !erged entit&
53 Growth rateK 0erger can #rovide o##ortunities for faster growth rate than can be
achieved through interna sources" This is because( !erger offers advantages in
severa areas such as !arketing$ #roduction$ finance$ research and deveo#!ent and
so on" The o#erationa advantages of various functiona areas can bring faster growth
rate to ther !erged entit&"
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CORPORATE STRATEGY
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CORPORATE STRATEGY
TA6EO%ER
)hen an ac9uiring co!#an& !akes a bid for a target co!#an&" 5f the takeover
goes through$ the ac9uiring co!#an& beco!es res#onsibe for a of the target co!#an&6s
o#erations$ hodings and debt" )hen the target is a #ubic& traded co!#an&$ the ac9uiring
co!#an& wi !ake an offer for a of the target6s outstanding shares"
A takeover is virtua& the sa!e as an ac9uisition$ e%ce#t that 2takeover4 has a
negative connotation$ indicating the target does not wish to be #urchased" )h& woud one
co!#an& want to bu& another co!#an& against that co!#anies wi3 The bidder !ight be
seeking to increase its !arket share or to achieve econo!ies of scae that wi he# it reduce
its costs and thereb& increase its #rofits" Co!#anies that !ake attractive takeover targets
incude those that have a uni9ue niche in a #articuar #roduct or service$ s!a co!#anies
with viabe #roducts or services but insufficient financing$ a si!iar co!#an& in cose
geogra#hic #ro%i!it& where co!bining forces coud i!#rove efficienc& and otherwise viabe
co!#anies that are #a&ing too !uch for debt that coud be refinanced at a ower cost if a
arger co!#an& with better credit took over"
Takeover can he# a fir! to enter a new business without the advantages of
gestation or set.u# ti!es" @oreign 0FCs !a& take over e%isting units in the overseas
!arkets so as to faciitate eas& entr& in the overseas !arkets"
22
CORPORATE STRATEGY
7OINT %ENT0RE
A business agree!ent between two different co!#anies to work together to
achieve s#ecific goas" /nike a !erger or ac9uisition$ a strategic joint venture does not have
to be #er!anent$ and it offers co!#anies the benefits of !aintaining their inde#endence and
identities as individua co!#anies whie offsetting one or !ore weaknesses with another
co!#an&'s strengths" A strategic joint venture !a& aso be caed a Istrategic #artnershi#"I
A joint venture takes #ace when two #arties co!e together to take on one
#roject" 5n a joint venture$ both #arties are e9ua& invested in the #roject in ter!s of !one&$
ti!e$ and effort to buid on the origina conce#t" )hie joint ventures are genera& s!a
#rojects$ !ajor cor#orations aso use this !ethod in order to diversif&" A joint venture can
ensure the success of s!aer #rojects for those that are just starting in the business word or
for estabished cor#orations" Since the cost of starting new #rojects is genera& high$ a joint
venture aows both #arties to share the burden of the #roject$ as we as the resuting #rofits
Reasons for joint venture strategy:
1. Joint ventures are suitable for large projects wit uge capital
reuir!ents an" of long gestation.
2. Joint venture brings in s#nergetic e$ect. %is is "ur to te co!bine"
e$ort of te parties to te joint venture.
23
CORPORATE STRATEGY
3. Joint venture ensures opti!u! use of available resources. &ll te
resources ' u!an (nancial an" p#sical resources are put to best
possible use.
4. Joint venture is a !eto" of saring ig business ris) a!ong
parties to te joint venture.
24
CORPORATE STRATEGY
DI%ERSI8ICATION
Di$ersification is a cor#orate strateg& to increase saes vou!e fro! new
#roducts and new !arkets" 1iversification can be e%#anding into a new seg!ent of an
industr& that the business is aread& in$ or investing in a #ro!ising business outside of the
sco#e of the e%isting business"
Product diversification invoves addition of new #roducts to e%isting #roducts
either being !anufactured or being !arketed" E%#ansion of the e%isting #roduct ine with
reated #roducts is one such !ethod ado#ted b& !an& businesses" Adding tooth brushes to
tooth #aste or tooth #owders or !outhwash under the sa!e brand or under different brands
ai!ed at different seg!ents is one wa& of diversification" These are either brand e%tensions
or #roduct e%tensions to increase the vou!e of saes and the nu!ber of custo!ers"
Reasons for !i$ersification,
8" S#reading of RisksK diversification enabes to s#read the risks" A fir! o#erating in one
#roduct and in one !arket is e%#osed to high risks of oss" This is because( the oss in
one area can be co!#ensated fro! the #rofit fro! another area"
7" 5!#rove cor#orate i!ageK The fir! serves to cross section of consu!ers in the
!arket" Thus it can bring na!e and goodwi in the fir!$
25
CORPORATE STRATEGY
<" @ace co!#etition effective&K There is ot of co!#etition in the !arket$ and one wa&
to face the co!#etition is to introduce wide rand of #roducts$ as is done b& -industan
/niever >i!ited"
=" -igher #rofitsK diversification can generate higher #rofits to the fir!" 1iversification
can be used to e%#oit new o##ortunities for higher #rofitabiit&"
T0RNARO0ND
The financia recover& of a co!#an& that has been #erfor!ing #oor& for an
e%tended ti!e" 5n order to affect a turnaround$ a co!#an& !ust acknowedge and identif& its
#robe!s$ consider changes in !anage!ent and deveo# and i!#e!ent a #robe!.soving
strateg&" 5n so!e cases$ the best strateg& !a& be to cut osses b& i9uidating the co!#an&
rather than tr&ing to turn it around" Possibe characteristics of a troubed co!#an& in need of
a turnaround incude revenues that do not cover costs$ an inabiit& to #a& creditors$ a&offs$
saar& cuts for officers and a significant decine in stock #rice" Poor !anage!ent andGor
socia$ technoogica and co!#etitive changes !a& have caused the #roducts or services the
co!#an& ses to be #erceived as sub#ar b& consu!ers" A s#ecuator !a& #rofit fro! a
turnaround if he or she accurate& antici#ates the i!#rove!ent of a #oor& #erfor!ing
co!#an&.
26
CORPORATE STRATEGY
DISI%ESTMENT
This strateg& invoves dro##ing so!e of the #roducts$ !arkets of functions"
The dro##ing of activities or business can be attained either through sae or i9uidation"
There are severa reasons for ado#ting divest!ent strateg&"
8" )ithdrawa of obsoete #roductsK obsoete #roducts$ which do not generate ade9uate
returns to the fir!$ !a& be divested" for e%a!#e$ ,ajaj Auto have discontinued its
scooters unit$ and Son& withdrawn its )ak!an fro! the !arket"
2. Probe! of !is!atchK A business that has been ac9uired b& the fir! !a& #rove to be
a !is!atch with the e%isting business and therefore$ such business !a& be difficut to
integrate with e%isting business of the co!#an&"
)I/0IDATION
)i1"i!ation is the #rocess b& which a co!#an& *or #art of a co!#an&+ is
brought to an end$ and the assets and #ro#ert& of the co!#an& redistributed" >i9uidation is
aso so!eti!es referred to as winding.u# or dissoution$ athough dissoution technica&
refers to the ast stage of i9uidation" The #rocess of i9uidation aso arises when custo!s$
an authorit& or agenc& in a countr& res#onsibe for coecting and safeguarding custo!s
duties$ deter!ines the fina co!#utation or ascertain!ent of the duties or drawback accruing
on an entr&"
27
CORPORATE STRATEGY
)hen a business or fir! is ter!inated or bankru#t$ its assets are sod and the #roceeds
#a& creditors" An& eftovers are distributed to sharehoders"
An& transaction that offsets or coses out a ong or short #osition
Reasons for &i1"i!ation,
8" )hen a fir! continuous& suffers osses$ and a efforts to !ake it #rofitabe again
have faied"
7" )hen a fir! has accu!uated osses and so!e other fir! offer better #rice$ then it
!akes sense to se the unit"
<" At ti!es$ a fir! !a& get a better offer fro! another fir! and therefore$ a fir!$ which
is offered a better dea !a& offer to divest"
28
CORPORATE STRATEGY
RE)ATIONSHIP +ET'EEN
INTERNATIONA) STRATEG9 AND CORPORATE STRATEG9
Cor#orate strateg&
Cor#orate strateg& detai action to gain a co!#etitive advantage through the
seection and !anage!ent of the !i% of businesses co!#eting in a severa industries or
#roduct !arket"
1eveo#ing and i!#e!enting !uti business strategies !a& be necessar& for
effective use of a e%cess resources$ ca#abiities and core co!#etencies that have vaue
across severa businesses"
The !ain objective of a cor#orate strateg& is to enhance strategic
co!#etitiveness$ and earn good returns" The #ri!ar& a##roach to cor#orate eve strateg&
is diversification" The fir!s diversif& when the& have e%cess resource ca#abiities and
core co!#etencies that have !uti#e uses"
5nternationa strateg&
1uring the ast decade of the 7E
th
centur&$ !an& barriers to internationa trade fe and a
nu!ber of fir! begun #ursuing goba strategies to gain a co!#etitive advantages"
-owever$ so!e industries benefit !ore fro! gobaization than do others$ and so!e
nations have co!#etitive advantage over other nations in certain industries"
29
CORPORATE STRATEGY
CHAPTER4
MERGER AND A/0ISITION O8 PATNI AND IGATE
Patni Co!#uter S&ste!s >i!ited was incor#orated as Patni Co!#uter
S&ste!s Private >i!ited on @ebruar& 8E$ 8DAC under the Co!#anies Act$ 8D;?" 5n 8DCC$ b&
virtue of Section =<A of the Co!#anies Act$ the Co!#an& beca!e a dee!ed #ubic co!#an&
and subse9uent& on A#ri 8;$ 8DD8 it was converted into a #rivate i!ited co!#an&" ,&
virtue of its turnover e%ceeding #rescribed i!its under the then.a##icabe Section =<A of
the Co!#anies Act$ on Bu& 8$ 8DD;$ the Co!#an& beca!e a dee!ed #ubic co!#an& and
conse9uent to the deetion of Section =<A fro! the Co!#anies Act$ 8D;?$ the Co!#an& was
converted to a #rivate i!ited co!#an& on Bune 7A$ 7EE7" The Co!#an& was again converted
to a #ubic i!ited co!#an& on Se#te!ber 8C$ 7EE<" The origina activities of the Co!#an&
were co!#uter ti!e renta$ the resae of i!#orted co!#uter hardware$ and software e%#orts"
5n 8DC8$ the Co!#an& #ro!oted PCS 1ata Products *Private+ >i!ited *PCS1P+ for the sae
and !arketing of co!#uter e9ui#!ent and hardware !aintenance" 5n 8DCA$ the Co!#an&
#ro!oted PCS 1ata Genera 5ndia *PCS1G+$ a joint venture with The 1ata Genera
Cor#oration$ /SA$ for the !anufacture and !aintenance of co!#uter hardware" 5n 8DD=$ the
na!e of PCS1P was changed to PCS 5ndustries >i!ited *PCS5>+ and PCS1G was !erged
into PCS5>" Since 8DD=$ the Co!#an& has been entire& focused on software e%#orts" 5n
8DDD$ the shares of PCS5> hed b& the Co!#an& and other non.o#erating assets were de.
!erged into other grou# co!#anies and the Co!#an& e!erged as a focused 5T services
co!#an&" Patni Co!#uter S&ste!s >i!ited is a se#arate entit& fro! PCS 5ndustries >i!ited$
which is a grou# co!#an&"
30
CORPORATE STRATEGY
7EE=
.Co!es out with 5nitia Pubic Offering *5PO+ of 8C$A7=$EEE e9uit& shares in the #rice of Rs
7<E #er share for a face vaue of Rs 7 each
.Assessed at >eve ; of the Ca#abiit& 0aturit& 0ode 5ntegration *C005 SEGS) version
8"8+ for a its deveo#!ent centers in 0u!bai R Favi 0u!bai after a rigorous !onth.ong
SCA0P5 assess!ent b& LP0G$ 5ndia
.5nks 0O/ with the ,ira 5nstitute of Technoog& R Science S,5TST$ Piani to offer
educationa #rogra!!es to Patni e!#o&ees through the ',5TS off.ca!#us 1istance
>earning R Coaborative Progra!!es' sche!e"
7EE;
.Patni Co!#uter S&ste!s wins awards for e%ceence in cor#orate #erfor!ance"
.Patni Co!#uter S&ste!s a##oints >oek Jan 1en ,oog as director"
.Patni Co!#uter aunches 1efined ,PO Service for 5nsurance Carriers"
.Patni Co!#uter aunches >ife Few ,usiness STP Soution"
7EE?
.Patni Co!#uter wins significant !uti.services teeco! dea fro! /L's argest inde#endent
retaier of !obie co!!unications
.Patni Co!#uter S&ste!s gets C5O 8EE award
.0ercer -R in BJ with Patni Co!#
31
CORPORATE STRATEGY
.Patni join hands with E5S>
7EEA
.Patni wins Goden Peacock Award 7EEA for Training E%ceence
.Patni Co!#uter ac9uires >ife Sciences Services Co!#an& Taratec for U 7A !iion
.Patni Co!#uter ac9uires Teeco!s Consuting S#eciaist >ogan.Orviss 5nternationa
.Patni inks 0o/ with ,5TS Piani
.Patni to ac9uire /S.based Taratec
7EEC
.Patni sets u# green ,PO centre in Foida
.Patni Co!#uter ties u# with Schinder
.Patni achieves god certified #artner status in 0icrosoft #artner #rogra!
7EED
. Patni Co!#uter S&ste!s a##ointed Jija& 0ehra as E%ecutive Jice.President and head of
business verticas"
.Patni Co!#uter S&ste!s receives '5T su##ier of the &ear' award
.Patni Co!#uters o#ens new E0EA head9uarters to drive growth for outsourced 5T and
,PO services"
32
CORPORATE STRATEGY
A $ie: on IGATE
T&#eK Pubic
Traded asK FAS1AVK 5GTE
5ndustr&K 5nfor!ation technoog& and Services
@oundedK 8DD? S8T
-ead9uartersK Caifornia$ /nited States
Area servedK )ordwide
Le& #eo#eK Ashok Je!uri *Chief E%ecutive Officer+S7T
RevenueK 5ncrease /SU 8"8; biion *7E8<+ S<T
Fet inco!eK 5ncrease /SU DA"7 !iion *7E87+
Tota assetsK 5ncrease /SU ;"7 biion *7E87+
Tota e9uit&K 5ncrease /SU ?EE !iion *7E87+
E!#o&eesK 7D$AA< *7E8=+
)ebsiteK www"igate"co!
33
CORPORATE STRATEGY
INTROD0CTION
8" 5ntroduction
iGATE is an acron&! for Iintegrated Genera Aviation Training Environ!ent"I
5t is integrated$ !eaning that a re9uired digita devices$ hardware co!#onents and
software interface as an integra #art of one s&ste!" This is not a new conce#t as oder
anaogue eectro!echanica trainers !anufactured in the AE's and CE's were #owered b& a
singe eectrica source"
The uni9ueness is that iGATE trainers with their digita co!#onents co!bine
severa new technoogies to #rovide a si!uator with state.of.the.art fight d&na!ics for
severa t&#es of aircraft$ and other training ca#abiities at a singe training station" A
station that can be used on a deskto# or used in an encosed cock#it environ!ent"
iGATE Cor#oration *5GTEK/S+ is a FAS1AV.isted$ /S.incor#orated
outsourcing co!#an& with the !ajorit& of its o#erations in 5ndia and !ost of its <E$EEE
e!#o&ees based in ,angaore" 5n 7E88$ iGATE !erged with another 5ndian 5T services
fir!$ Patni Co!#uter S&ste!s$ in a Rs ;$;?E crore *a##ro%" U8 bn+ dea" iGATE is the
brand na!e of iGATE Cor#oration and its subsidiaries"
5ts fagshi# co!#an& is iGATE Goba Soutions in )hitefied in ,angaore$
5ndia" 5t was founded b& Suni )adhwani and Ashok Trivedi" iGate 5nc is an A!erican
!utinationa cor#oration which #rovides infor!ation technoog&$ consuting and
34
CORPORATE STRATEGY
business #rocess outsourcing *,PO+ services" 5t is head9uartered in @re!ont$ Caifornia$
/SA"
Custo!ers incude co!#anies in banking R financia services( insurance R
heathcare( ife sciences( !anufacturing$ retai$ distribution R ogistics( !edia$
entertain!ent$ eisure R trave( co!!unication$ energ& R utiities( federa govern!ent(
and inde#endent software vendors across the A!ericas$ Euro#e. 0idde East.Africa
*E0EA+ and Asia.Pacific"
Patni Co!#uter S&ste!s >td" *Patni+$ incor#oratedin 8DAC$ is a eading 5T
consuting services andbusiness soutions #rovider based in 5ndia"The!ajorit& of the
services offered incude those inthe do!ains of insurance$ !anufacturing$ retai$teeco!$
etc" Patni has a strong tea! of over87$;EE #rofessionas$ with 7< saes and
!arketingoffices across the gobe and !uti#e offshoredeveo#!ent centres across eight
cities in 5ndia"The business #rocesses at Patni are in co!#iancewith Si% Sig!a and ,S
AADD"The co!#an& has been accredited with the 5SO DEE8K7EEEcertification and is
assessed at SE5.C005 eve ; and P.C00 eve <"Patni has aiances with !an& eading
5T vendors such as 0icrosoft$ SAP$ Siebe and Orace"The co!#an& generates
a##ro%i!ate& ?E #er cent of its revenues fro! its cients in the !anufacturing and ,@S5"
-owever$ its teeco! do!ain is asogaining !o!entu! and is now contributing
significant& to its overa revenues" Though the /SA is the co!#an&6s ke& !arket$
itscontribution to the overa revenue has decined fro! CC"C #er cent in 7EE< to C="C #er
cent in7EE;"The Euro#ean region6s contribution has been steadi& increasing fro! A"7 #er
35
CORPORATE STRATEGY
cent in 7EE< to D"8 #er cent in 7EE; "beside" Patni is isted on the ,o!ba& StockE%change
and the Fationa Stock E%change"
iGATE green buiding Foida
36
CORPORATE STRATEGY
HISTOR9
iGATE Goba Soutions >td" was estabished in 8DD<" )hat startedas a #ure.
#a& 5T services co!#an& grew to beco!e one of theargest 5ndian #a&ers in the 5T
soutions and a##ication deveo#!ent!arket at one ti!e and now the co!#an& has
further evoved ins&nchronicit& with !arket needs$ to beco!e an integrated
business#rocess !anage!ent soutions #rovider" iGATE$ toda&$ has buit astrong ,PO
#ractice deivered through its uni9ue 5ntegratedTechnoog& and O#erations *iTOPS+
fra!ework" 5t has co!#e!entedits heritage technoog& and #rocess ca#abiities with
strategicac9uisitions of focused and niche consuting fir!s in the /SA andEuro#e" These
fir!s have strong #ractices in #rocess consuting andCusto!er E%#erience consuting for
o#ti!ising contact centres and,PO o#erations" iGATE is #oised to carve a uni9ue niche
b& #rovidingdefinitive vaue addition to cients"
37
CORPORATE STRATEGY
OPERATIONS
The t&#ica iGATE custo!er is a @ortune 8EEE enter#rise in thebanking$
insurance$ financia !arkets$ !anufacturing$ retai orteeco! industries"iGATE's
offerings s#an high.end consuting$ custo! 5T soutionsdeveo#!ent incuding ERP
i!#e!entation$ data !anage!entservices$ and business #rocess outsourcing"Since
iGATE is an integrated technoog& and o#erations co!#an&$its strateg& and #rocess
consutants$ technoog& e%#erts and do!aine%#erts work in tande! to deveo# o#ti!a
soutions to addresscients' needs"
@or e%a!#e$ co!!unication withcusto!ers is estabished in such a wa& that
there is awa&s a fa back #ath whichbeco!es o#erationa$ shoud the #ri!ar&
connectivit& fai" Si!iar&$ iGATE's faciitiesin ,angaore and Foida have buit.in
redundanc& and are designed to serve as co!#e!entar& business continuit& Centre sin
the event of a disaster" 5GATE has a we.defined ,usiness Continuit& and 1isaster
38
CORPORATE STRATEGY
Recover& Pan*,CP G 1RP+ which are !anaged b& an actionabe Crisis 0anage!ent
Pan and tested to address a business continuit& needs" The ,CP G 1RP strategies are
integrated with the Vuait& 0anage!ent s&ste!s to ensure high 9uait& and !ini!a
during #roject initiation and re9uire!ents gathering stage and runs through the ifeti!e of
the #roject" 5GATE aso invests a ot of effort in foreseeing #erceived and rea ee!ents of
risk and has !eticuous #ans in #ace forei!inating$ !itigating$ and !ini!izingthe
i!#act of risk at a eves" ,eing ocatedout of !ore than four centers in 5ndia$ iGATE
has buit suitabe redundancies toensure co!#ete s&ste! u#ti!e and#ro!#t disaster
!anage!ent"
0ERG5FG
After the ac9uisition of Patni Co!#uter S&ste!s in 7E88$ it started the
!erging #rocess and changed its na!e to iGATE Patni" 5t was changed to iGATE again
on A 0a&$ 7E87" After breaking into the biion doar cub . he#ed b& the 7E88 Patni
ac9uisition . iGate ed b& for!er 5nfos&s e%ecutive Phaneesh has been #ursuing an
aggressive strateg& to change outsourcing industr&'s traditiona !ode of charging for
ti!e and effort" 5nstead$ 0urth& wants to charge for outco!es deivered$ thus sharing
greater risk with cients"
39
CORPORATE STRATEGY
iGATE Patni Profi&e,
iGATE Patni herads the beginning of a new era b& bringing together two
co!#anies : iGATE and Patni" ,etween the two$ we #rovide fu.s#ectru! consuting$
technoog& and business #rocess outsourcing$ and #roduct engineering services" 5n a
crowded and intense& co!#etitive !arket#ace for such offerings$ we have buit a
re#utation and core differentiating attribute around our uni9ue ,usiness Outco!es.based
!ode" Ar!ed with over three decades of 5T Services e%#erience and our distinctive
#hioso#h& of MAccountabe for Cients6 ,usiness6 #owered b& the iTOPS *5ntegrated
Technoog& and O#erations+ #atfor!$ our !uti.ocation goba organization consistent&
deivers effective soutions to over <?E @ortune 8EEE cients"
40
CORPORATE STRATEGY
Our custo!er foot#rint s#ans across verticas ikeK banking R financia
services( insurance R heathcare( ife sciences( !anufacturing$ retai$ distribution R
ogistics( !edia$ entertain!ent$ eisure R trave( co!!unication$ energ& R utiities(
#ubic sector( and inde#endent software vendors"
A diversified$ we.trained and !otivated taent #oo of 7?EEE #eo#e works
cohesive& to deiver soutions based around a !ature goba deiver& !ode to cients
across the A!ericas$ Euro#e. 0idde East.Africa *E0EA+ and Asia.Pacific" 1es#ite the
reach and goba.s#anning ca#abiities of our deiver& centers$ we are arge enough to be
resourcefu and s!a enough to be fe%ibe$ !aking us one of the !ost d&na!ic and
high& ada#tabe 5T service giants"
Our co!#rehensive #ortfoio of services incudes a##ication deveo#!ent and
!anage!ent$ verification R vaidation$ enter#rise a##ication soutions$ infrastructure
!anage!ent$ custo!er interaction services R business #rocess outsourcing$ #roduct
engineering services$ and business R technoog& consuting"
41
CORPORATE STRATEGY
42
CORPORATE STRATEGY
'y iGATE Erase Patni(
-owever$ a !ore sur#rising !ove has recent& trans#ired with iGATE Patni
deeting the ast fives etters of its na!e to ca itsef si!#& 2iGATE4" )hie &ou can
understand Qero% #referring their !ore fa!ous and recognized brand to ACS$ and the
#rocure!ent gu&s si!#& wanted to sound se%ier$ it6s curious wh& iGATE woud dro# the
fa!ous Patni brand bare& a &ear after its !erger" You woud have thought the esser.
known iGATE eadershi# woud #refer to !aintain the egendar& technoog& services
brand founded b& three brothers$ Farendra Patni$ Gajendra Patni and Ashok Patni$ in
8DAC3
So we asked -fS6 5T services guru$ ,rian Robinson to discuss wh&"""
This !onth iGATE Cor# announced that it had raised an additiona
U7?; !iion to bu&.out the re!aining sharehoders of Patni stock and to deist Patni
fro! the 5ndian bourse" 0ore i!#ortant&$ the co!#an& wi ike& re!ove the Patni
na!e fro! its future go.to.!arket and branding strategies"
This co!es on the hees of what !ust have been a ong &ear for the
organization" You wi ike& reca that iGATE announced its intent to take a !ajorit&
stake in Patni in ear& 7E88" At the ti!e$ industr& and financia ana&sts were u# in ar!sK
revenues and ke& cients were at risk$ attrition was a concern$ and divergent cutures
!ight not find e9ua footing" )e first wrote about the ac9uisition in Banuar& of 7E88" )e
43
CORPORATE STRATEGY
then co!#eted a <?E degree assess!ent of the organization in V8 of this &ear distiing
the co!#an&6s strengths and o##ortunities for future i!#rove!ent" @or our !ost recent
assess!ent$ iGATE Patni gave us unfettered access to both senior staff and cients"
So what did we find in our !ost recent stud&3
8+ not a singe cient o#ted to eave iGATE Patni for reasons of change of contro
foowing the !erger in Banuar& 7E88$
7+ the organization continues to i!#ress it cients$ which incude so!e of the !ost !ature
bu&ers of services$ and
<+ the& continue to !eet financia esti!ates set b& a broad range of financia ana&sts"
Additiona&$ !anage!ent has set an aggressive target to reach U<, in revenues b& 7E8A"
,ut$ if a was going s!ooth&$ then wh& woud iGATE Patni s#ash out U7?; !iion to
tighten its !arketing #rogra!3 Three reasonsK
Contro&; Ego an! +"siness strategy
13 Contro&,
)ithout fu contro$ their !anage!ent risks that an active sharehoder
coud interfere or disru#t their future road!a#" ,u&ing u# the re!aining Patni shares
!itigates this threat and !anage!ent o#ted to #u this trigger sooner rather than ater"
44
CORPORATE STRATEGY
7" EgoK
iGATE is known to be an aggressive grou# of !anagers" The& set high
standards for the!seves and their cients$ and this attitude co!es right fro! the to#"
Phaneesh 0urth&$ CEO$ has done what !an& in the industr& thought was i!#ossibeK
ac9uire a arger service #rovider b& evering u# his baance sheet" The strateg& has
worked so far : iGATE Patni has sur#assed the biion doar revenue threshod" -is
tea! sti has a ot of work to do$ but first he wants to ce!ent his roe as eader"
.3 +"siness strategy,
5n order to reach the 7E8A target$ !anage!ent wi need to integrate the
two deiver& organizations" The co!#an& coud chose to do this whie !anaging a
dua.brand" )e think this o#tion woud si!#& confuse both cients and interna
!anage!ent" The better choice woud be to integrate the co!#an& under one brand
reducing the associated co!#e%it&$ ti!e and resources" 0oreover$ working a singe
brand wi give !anage!ent the runwa& the& need to evove the co!#anies co!bined
strengths into new vaue #ro#ositions and services"
So!e #undits 9uestion wh& iGATE woud retire the Patni na!e"
@ounded b& three Patni brothers$ the co!#an& is one of the forefathers of an industr& that
has he#ed transfor! 5ndia" 0oreover$ the co!#an& has an outstanding re#utation for
consistent service deiver& to its cients" ,oth are 9uaities that !an& s!aer
organizations #a& for dear&" Our research indicates that !anage!ent !a& discard the
45
CORPORATE STRATEGY
Patni na!e$ but not the strong deiver& attributes that !ade it successfu" As we note in
our <?E degree assess!ent$ the co!#an& wi need to focus on severa ke& areas be&ond
branding in order to reach its growth targets"
So here is our short ist of #redictions the industr& observers wi ike&
see at iGATE Patni foowing this recent announce!ent" The co!#an& wiK
8+ deist the Patni na!e fro! the 5ndian bourse$
7+ dro# the Patni brand fro! a go.to.!arket and branding !aterias$ and !ost
i!#ortant&
<+ fu& integrate the two co!#an&6s deiver& organizations" To date$ the union of iGATE
Patni has #ri!ari& been cient facing"
Cients6 and #ros#ects6 re#orts regarding the changes wi ike& be
!i%ed" iGATE Patni6s argest cients : in ter!s of revenue : wi ike& re#ort itte or
on& !ini!a changes to their services and transfor!ation #rogra!s" These ke& accounts
are critica to stabe cash fows and to overa co!#an& stabiit&" An& change here wi
tricke in over ti!e" Pros#ects and s!aer cients wi ike& see the introduction of the
co!#an&6s iTOPS !ode for outco!e based #ricing" At the heart of iTOPS is iGATE
Patni6s wiingness to !ake invest!ents in #arae with cients in order to #roduce
continuous i!#rove!ents" 0an& cients need additiona ti!e to transfor! their services
to enabe out#ut based #ricing$ and iGATE Patni often invests aong with its cients"
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CORPORATE STRATEGY
These invest!ents invove both #rocess and technoog& and resut in a business #atfor!
for the cient"
The services industr& wi ike& refect #ositive& on the announce!ent
and the continued integration of the two co!#anies for the foowing reasonK continued
success woud highight that !id.tier #roviders : not on& the goba !ajors : can
integrate their ac9uisitions to bring new ca#abiities and scae to a broader brand na!e"
Other !id.tier #rovides wi everage the iGATE Patni !ode as a #recedent to 9uaif&
and buid ac9uisition and integration #ans" 0ost i!#ortant&$ if the industr& sees even a
s!a u#tick in consoidation ste!!ing fro! this ac9uisition$ then bu&ers wi have a
greater nu!ber of 9uaified goba services #rovider to choose fro!"
So!e observers !a& concude that iGATE Patni !anage!ent #aid a
high vaue to retire the Patni na!e" ,ut further refection shows that this invest!ent is
!ore about co!#eting the #rocess of integration started in ear& 7E88 and #ositioning the
co!#an& to reach its stretch 7E8A targets"
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CORPORATE STRATEGY
CONC)0SION
Cor#orate strateg& is the strateg& deveo#ed and i!#e!ented to the goas set
b& the co!#an&6s business #oic&" As a co!#an&.wide strateg&$ cor#orate strateg& is
concerned #ri!ari& with answering the 9uestion 2what set of businesses shoud the
co!#an& be in34 and shoud be distinguished fro! business strateg&$ which focuses on
answering the 9uestion 2how to buid a sustainabe co!#etitive advantage in s#ecific
business or !arket34 0ore s#ecifica&$ cor#orate strateg& can be defined as the wa& a
co!#an& creates vaue through the configuration and coordination of its !utibusiness
activities"
There is no singe best cor#orate.eve strateg&( rather$ !an& vaue.
creating cor#orate strategies can be deveo#ed based on different configurations of the
various co!#onents of cor#orate strateg&" @ir!s6 cor#orate strategies and their theoretica
rationaes have evoved over ti!e in res#onse to the #ressures of the fir!6s e%terna as
we as interna environ!ents" 1iversification is one of the !ain ee!ents of cor#orate
strateg&$ such that a fir!6s eve of diversification infuences its #erfor!ance and that
cor#orate strateg& !atters" -owever$ a theor& of cor#orate strateg& enco!#ass !ore than
the ink between diversification and #erfor!ance" A theor& of cor#orate strateg& aso
incor#orate or infuence a theor& of the growth of the fir!$ a theor& of the
48
CORPORATE STRATEGY
organizationa structure of the fir!$ a theor& of !uti#oint co!#etition$ as we as a
theor& of cor#orate governance"
+I+)IOGRAPH9
www"unifr"chG"""G7E8<WfurrerWenc&co#ediaWofW!anage!entWtheor&
strateg&"sauder"ubc"caGne!etzGStrateg&>ecturesshortened
www"kantei"go"j#Gj#GsingiGkeizaisaiseiG#dfGenWsaikouWj#n
Econo!ies of goba trade and finance : S"Parveen
49