Management Development Institute, Gurgaon

Name of Programme:- PGDM-2020-22

Midterm Examination, Term-IV
Name of the Course – SM-2
Name of the Course Faculty: - Prof. Ankur Roy

Name :- Shubham Kumar Roll Number:- 20P057

Answers –

Q1.
The topic of discussion: The case between Renew Power & L&T is of related diversification. Renew
Power is a leading company in the domain of renew power of solar energy and hydropower. The L&T
is a conglomerate with a diverse portfolio in construction, energy, IT, etc. To quantify the diversification
by the L&T cannot be ascertained as the revenue source from the core industries which is solar power
is not provided in the case.

It is achieving diversification with the help of related acquisitions. The acquisition provides the
opportunity for better market reach, better go to market strategy and means and minimum risk
associated with a new acquisition as the plant is already operational. The amalgamation of the
operational team will provide the existing know-how of the hydro-power industry. Hence removing a
major barrier of entry to renewable power.

Diversification creates value by focusing on economies of scale and market strength. Renewable
energy resources include solar, wind, hydro, and others from a market power standpoint, and Renew
Power is predominantly in the solar energy sector. They are creating multipoint competition in the
market by entering the hydropower industry. From a financial standpoint, the factory is already
operating, so there is no need to spend a significant amount of money to get it back up and running.
Renew Power has strategic portfolios and less diversity under its portfolio, with this acquisition they
are targeting to create a cooperative strategy between the businesses to create more value in the
overall scheme of the business.

The potential synergies, Economies of scope in case of Related diversification are broadly classified
into Operational relatedness and Corporate relatedness.

Operational relatedness - It can be formulated for primary activities or secondary activities when
diversification happens. In case, related diversification will help Renew power create more shareholder
value by sharing resources. Consumers receive electricity through the grid and having a diverse
portfolio will help Renew power emerge as a trusted energy producer. The solar energy generation
cycle will be complemented by a hydro-power plant. Integration in the end output location ensures that
the economies of scope are high. Sharing the grid will also help reduce costs of using the grid with the
help of higher utilisation. Technical advances in newer methods of maintenance, renewal and repair
will improve capacity utilisation.

1
Corporate relatedness - When a company diversifies into new markets or introduces new goods, it
employs its core capabilities to help the acquired organisation get up to speed. In this scenario, Renew
Power may apply its considerable experience in the solar power sector to assist the other facility in
implementing industry best practices. The choice by Renew to absorb the L&T plant's operations staff
was a wise one because they are familiar with the plant's climatic conditions and complexities. With
ReNew's assistance, this phase will improve the plant's preparedness to create value at a quicker rate.

Q2.

The alliance between the IIM Sambalpur and Flipkart is an example of Learning Alliances. The
intended objective of the alliance between the IIM Sambalpur and Flipkart is to promote and support
remote small businesses, artisans and weavers by leveraging technology, e-commerce platform, and
market insights.

Partner Analysis - Being a start-up itself, Flipkart wants to provide continuous support to the Indian
entrepreneurs & the start-up ecosystem in India. Apart from this, they also want to prove their
commitment to India. Whereas, being a new IIM, Sambalpur is looking for big initiatives to be taken,
to prove their mettle. Hence, this deal is highly critical for the partners, and are Fit.

Role of IIM Sambalpur - The prestigious academic institute IIM Sambalpur has professors with rich
industry experience and maintains a good contact with ground reality with their consultancy projects
and zeal to gain knowledge in their interested domains. They will provide the initial hand-holding for
the companies to scale their operations from a household income-generating activity to a small-scale
industry by providing them with the required knowledge and insights gathered over time. With the
experience of the incubation centre of the institute, they understand the forthcoming challenges
associated with the setting up of a new venture. These experiences and knowledge base will be
leveraged by the upcoming businesses for their future growth and establishment.

Role of Flipkart – Flipkart will provide all the necessary support to these remote small businesses,
artisans and weavers to gain market access. Flipkart has the algorithm to provide the required
audience from all over India who will be interested in buying these handicrafts. The state-of-the-art
logistics arms of Flipkart will provide the pan-India market to them hence providing the required
economies of scale. With E-commerce being the preferred choice of shopping and increasing
dispensable income of the middle-class group will provide a target audience and cohort for selling the
product. It will also simplify the complex transactional steps involved in the business by providing their
online wallet and bank account link support, hence streamlining the income of the remote small
businesses, artisans and weavers.

The Khadi and Village Industries Commission (KVIC) is the apex body formed by the government
of India under the MSME Ministry for the promotion of Khadi, handlooms and village industries. The
reason for its failure is that it provided the technical support at the local level of the manufacturing
without any scope of scaling it higher as well as providing a platform to sell the product and ultimately
earn a livelihood out of it. The biggest reason for their failure is that they do promote the new small-
scale industries but do not provide them with the opportunity to venture into the new market and allow
them to interact with their target audience and streamline the most difficult part that is logistics support
to them for providing the physical evidence to the services or products.