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Case Study

The Managing Director of Big Ltd. called a meeting to discuss acquiring Small Ltd. for Rs. 350 crores. This would make Big Ltd. the second largest consumer goods company in India with over Rs. 4500 crores in sales. It would provide more money for marketing, products, and price cuts. The acquisition aims to create shareholder value above the sum of the two companies. Both companies have faced tough competition recently. The merged company hopes to gain market share and efficiency. The Head of Production said production facilities need to be combined, and two high-cost locations in eastern India should close since sales are in the south and west. The Head of Marketing said the market growth is low, Small Ltd. has

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618 views2 pages

Case Study

The Managing Director of Big Ltd. called a meeting to discuss acquiring Small Ltd. for Rs. 350 crores. This would make Big Ltd. the second largest consumer goods company in India with over Rs. 4500 crores in sales. It would provide more money for marketing, products, and price cuts. The acquisition aims to create shareholder value above the sum of the two companies. Both companies have faced tough competition recently. The merged company hopes to gain market share and efficiency. The Head of Production said production facilities need to be combined, and two high-cost locations in eastern India should close since sales are in the south and west. The Head of Marketing said the market growth is low, Small Ltd. has

Uploaded by

yared haftu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
  • Case Study #01: Examines issues involved in acquiring Small Ltd. by Big Ltd., with observations on pricing strategies and market shares.
  • Case Study #02: Explores strategic equity stake options for Cool Garments with risks and recommendations for future strategy.

Case Study # 01

The Managing Director of Big Ltd. called an internal meeting of senior managers to discuss
issues involved in acquiring Small Ltd. for about Rs. 350 crores. He started the meeting with
following observations:

‘After acquiring Small, we will become the second largest consumer goods company in India
with sales of over Rs. 4500 crores. We will have more money for marketing initiatives, product
launches and aggressive price-cuts. The key reason behind buying Small is to create shareholder
value over and above that of the sum of the two companies. Recent years have been tough for
both the companies with strong competition. The merged company hopes to gain a greater
market share and achieve greater efficiency.’

Different issues were discussed between the managers. Pertinent points that were raised were as
follows:

Head Production. ‘Although, I am involved little, till now, in the discussion regarding the
acquisition, I have closely studied various production facilities available to both the companies. I
feel production facilities of both the companies need to be synergised. There is also need to close
down production facilities of two locations out of seven locations of Small. The costs of
production of these locations is very high and also they are located in eastern India, whereas our
major sales is in south and west.’

Head Marketing. We need to analyse it further. The market of the products is in mature phase
with low growth rate. Small Ltd. has little presence in some regions and is not a major
competitor for us. Further, there is marginal gap between our existing third position and second
position. We can easily achieve second position if we are able to fully utilise our capacities.

(a) In a low growth product what are the different options available to a company.

(b) If you are appointed as a consulted, advise the Big Ltd. how to proceed before arriving at
decision to acquire any company.

(c) Conduct SWOT analysis from the facts given in the case.

Page 1 of 2
Case Study # 02

Cool Garments is exploring options of picking up a strategic equity stake in north based Jazzy
Wear, a Kanpur -based garment manufacture catering to gents segment. The takeover may boost
its production of premium garments. This will also increase Cool Garments’ presence in the
North.

The size of the acquisition would be small — within Rs 50 crore — compared to Cool Garments
recent big deals in other states. Jazzy Wear special products fit perfectly into Cool Garment’s
future plans. Acquiring Jazzy will give it a bigger product portfolio and also a considerable
presence in the north Indian market.

With the fragmented shareholding the top managers of Jazzy Wear know that the Cool Garments
will be definitely able to acquire controlling share in their company. They feel that if a deal is
striked it would also be in their favour. However, they are not clear how to formulate right
strategy for the Jazzy Wear.

If you are appointed as strategic consultant by the Jazzy Wear, explain to their top managers the
process of strategy formulation.

Discuss the nature of strategy for both the companies.

Essay type questions

1. Strategy is partly proactive and partly reactive. Discuss.

2. Discuss various stages in strategic formulation and implementation process.

3. Discuss strategic alternatives with reference Michael Porter’s strategies.

Page 2 of 2

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