Corporate Strategies

Corporate-level strategies (or simply, corporate strategies) are

basically about decisions related to:
• Allocating resources among the different businesses of a firm;
• Transferring resources from one set of businesses to others;
• Managing and nurturing a portfolio of businesses; and
• Creating value across businesses in the portfolio.

Corporate strategies help to exercise the choice of direction that

an organisation adopts. There could be a small business firm
involved in a single business or a large, complex and diversified
conglomerate with several different businesses.

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Expansion Strategies

The corporate strategy of expansion is followed when an organisation

aims at high growth by substantially broadening the scope of one or more
of its businesses in term of their respective customer groups, customer
functions, and alternative technologies - singly or jointly - in order to
improve its overall performance.Ex- A chocolate manufacturer expand its customer
groups to include middle aged and old persons to its existing customers comprising
children and teenagers

The major reasons for adopting expansion strategies are as below.

• It may become imperative when environment demands increase in pace of
activity.
• Increasing size may lead to more control over the market vis-à-vis
competitors.
• Advantages from the experience curve and scale of operations may accrue.
• Psychologically, strategists may feel more satisfied with the prospects of
growth from expansion: chief executives may take pride in presiding over
organisations
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& ADELA KAZMI 3
ADVANTAGES

1.Increased Market Share

2.Diversification
3.Economies of Scale
4.Access to New Talent and Resources
5.Brand Recognition and Reputation
6.Increased Profit Potential
7.Learning and Innovation
8.Competitive Advantage
9.International Presence
10.Enhanced Financial Performance

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DISADVANTAGES

1.Increased Costs and Financial Risks

2.Market Saturation and Oversupply
3.Operational Complexities
4.Cultural and Regulatory Challenges
5.Competitive Response and Rivalry
6.Brand Dilution and Reputation Risks
7.Resource Allocation Issues
8.Uncertain Market Demand
9.Integration Challenges in Mergers and Acquisitions
10.Managerial and Organizational Challenges

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TYPES OF EXPANSION STARTEGY

1. Expansion through Concentration.

2. Expansion through Integration.
3. Expansion through Diversification
4. Expansion through Internationalization.
Concentration Strategies

Concentration is a simple, first-level type of expansion strategy. It involves

converging resources in one or more of a firm's businesses in terms of
their respective customer needs, customer functions, or alternative
technologies - either singly or jointly - in such a manner that expansion
results.
In strategic management terminology concentration strategies are known
variously as intensification, focus, specialisation or organic growth
strategies.
Peter and Waterman(1982) in their book ,In search of excellence
advocated Concentration as “Stick to the knitting", they elaborated by
emphasising that excellent firms tend to rely on doing what they
know ,they are best at doing”

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 ANSOFF’s product market matrix/Types of
Concentration strategies
The matrix was developed by applied mathematician and business
manager H. Igor Ansoff and was published in the Harvard Business
Review in 1957. The Ansoff Matrix is often used in conjunction with
other business and industry analysis tools, such as the PESTEL,
SWOT, and Porter’s 5 Forces frameworks, to support more robust
assessments of drivers of business growth.
The Ansoff Matrix is a fundamental framework taught by business
schools worldwide. It is a simple and intuitive way to visualize the
levers a management team can pull when considering growth
opportunities. It features Products on the X-axis and Markets on the
Y-axis.
Ansoff’ Product-Market Matrix Strategies

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Types of Concentration Strategies

MARKET PENETRATION involves selling more products to the

same market: a firm may attempt focussing intensely on existing
markets with present products using a market penetration type of
concentration. Low cost airlines in India went into aggressive
marketing with low pricing
MARKET DEVELOPMENT involves selling same products to new
markets: it may try attracting new users for existing products
resulting in a market development type of concentration. A coffee
company that has only been selling its products in the US
could expand to Europe or Asia.

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 CONTD..

PRODUCT DEVELOPMENT
It involves selling new products to same markets: it may introduce newer
products in existing markets by concentration on product development.
For example- the development of Fanta Icy Lemon. Coca-Cola developed
this new product to sell to its existing markets to increase sales. Apple
products follows the strategy of Product development . In the service industry,
promoting India as Ayurveda based medical treatment destination or
promoting green lush plantation of Kerala ,serenic beaches of
Karnataka in the tourism to its existing set of customers.

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DIVERSIFICATION STRATEGIES

In relative terms, a diversification strategy is generally the highest risk endeavor; after all, both
product development and market development are required. While it is the highest risk
strategy, it can reap huge rewards – either by achieving altogether new revenue
opportunities or by reducing a firm’s reliance on a single product/market fit (for whatever
reason).

There are generally two types of diversification strategies that a management team
might consider:

1. Related Diversification – Where there are potential synergies that can be realized
between the existing business and the new product/market.An example is a producer of
leather shoes that decides to produce leather car seats.

2. Unrelated Diversification – Where it’s unlikely that any real synergies will be realized
between the existing business and the new product/market.Let’s work on the leather shoe
producer example again. Consider if management wanted to reduce its overall reliance on
the (highly cyclical) consumer discretionary high-end shoe business, they might invest
heavily in a consumer packaged goods product in order to diversify.

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Ansoff’s Matrix for Diversification Strategies

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ADVANTAGES

1.Specialization and Expertise

2.Cost Efficiency
3.Enhanced Market Penetration
4.Brand Building
5Competitive Advantage
6.Targeted Marketing
7.Faster Decision-Making
8.Resource Allocation
9.Risk Mitigation
10.Innovation and R&D

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DISADVANTAGES

1.Vulnerability to Market Fluctuations

2.Limited Diversification
3.Dependency on a Single Market or Product
4.Reduced Adaptability to Changing Trends
5.Market Size Constraints
6.Competitive Risk in the Chosen Niche
7.Over-reliance on Specific Customers
8.Regulatory and Legal Risks
9.Potential for Saturation in the Target Market
10.Difficulty Expanding into New Markets

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Integration Strategies

Integration means expanding through combining businesses or

activities related to the present business or activity of a firm. This
can be done in two ways.
One, the organisation can take over or partner with another firm at
the same point of production to expand its size of operations in
the present business. This is integrating horizontally.
Two, an organisation can take over or partner with another firm at
a different point of production in which case it is integrating
vertically.
Integration strategies push the organisations outside their
boundaries.

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Horizontal Integration and Vertical Integration
When an organisation takes up the same or similar type of products at the
same level of production or marketing process keeping it at the same
stage of the value chain, it is said to follow a strategy of horizontal
integration.
When an organisation starts making new products that serve its own
needs, vertical integration takes place. In other words, any new activity
undertaken with the purpose of either supplying inputs or serving as a
customer for outputs is vertical integration.
Vertical integration could be of two types: backward and forward
integration. Backward integration means retreating to the source of raw
materials. Forward integration means moving the organisation ahead to
the ultimate customer or end user, the company owns and controls
business activities that are ahead in the value chain of its industry.

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Examples of horizontal and vertical
integration
Horizontal-Takeover and acquisition of Sangli Bank by ICICI and United western
Bank by IDBI. IDBI was able to substantially increase its retail presence by
adding 230 bank branches network to its 180 branches network. Getting
through RBI,restrictions on opening new bank branches is easier through such
amalgamations.

VERTICAL

BACKWARD-The Swedish Furniture And Home Accessories Giant IKEA. The

Organization Purchased 83,000 Hectares Of Forests In Romania To Supply Its
Timber Requirements

FORWARD-E-commerce giant Amazon acquired grocery brand Whole Foods to

venture into the brick-and-mortar business so that customers could buy the
products from the outlets. Nike reducing dependence on wholesalers, distributors &
retailers, and prioritizing direct-to-consumer sales is an example of Forward
Integration

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Types Of Partial Vertical Integration
Strategies
Taper integration strategies require firms to make a part of their
own requirements and to buy the rest from outside suppliers or
when firms sell some of their products through company outlets
and others through independent retailers. Ex-Tim Hortons owning
some of its retail outlets but also using franchising, Coca-Cola and Pepsi
both having integrated bottling subsidiaries while also relying on
independent bottlers for production and distribution in some markets
Quasi integration strategies firms purchase most of their
requirements from other firms in which they have an ownership
stake or when firms sell most of their products through their own
stores. Ex-. a large pharmaceutical firm that acquires part interest in a
drugstore chain in order to guarantee that its drugs have access to the
distribution channel(DRL in Medplus).
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Benefits and Limitations- Horizontal
Integration

Benefits: Horizontal integration leads to economies of scale,

economies of scope, increased market power, increased
product differentiation, replicating a successful business
model and reduction in industry rivalry .
Limitations: Horizontal integration increases size but it may
attract the provisions of monopolies, restrictive trade
practices act or anti-trust laws.
Economies of scope may not arise in most cases
Vertical Integration- Advantages

1. Major advantages of adopting vertical integration

2. Greater control over value chain resulting in economies of scale and scope and
improving supply chain coordination
3. Greater control over market coverage leading to a bigger customer base
4. More streamlined manufacturing processes with shorter production cycles
5. More opportunities to differentiate products by means of better control of
inputs
6. Enhancing learning across processes and cross-functional experience
7. Raising the entry barriers for potential competitors
8. Savings in transportation costs due to proximity of value chain partners
Vertical Integration- Disadvantages

1. Increased costs of coordinating integration over multiple stages of value chain

2. Potential for either excess capacity or under-utilisation of resources because of
uneven productivity across different value chain activities
3. Technological obsolescence due to relying on outside manufacturers
4. Loss of strategic flexibility owing to dependence on outsiders
5. Increased mobility and exit barriers
6. Tight coupling to poor performing business units owing to dependence
7. Lack of information and feedback from suppliers and distributors
Diversification Strategies

Diversification involves a substantial change in business definition

- singly or jointly - in terms of customer functions, customer
groups, or alternative technologies of one or more of a firm's
businesses.
There could be many types of diversification strategies depending
on whether the organisation uses related or unrelated technology
to make its new products for new markets.
Two basic strategic alternatives of diversification are: related and
unrelated diversification. In Ansoff’s terminology, they are called
concentric and conglomerate diversification respectively.

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Concentric Diversification

When an organisation takes up an activity related to the existing

business definition of one or more of a firm's businesses either in
terms of customer groups, customers functions or alternative
technologies, it is concentric diversification.
An example of concentric diversification would be if a
smartphone company began selling smartwatches (i.e.,
Apple, Samsung), or if a furniture company began selling
home décor

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 Conglomerate Diversification
When an organisation adopts a strategy which requires taking up those
activities which are unrelated to the existing business definition of one
or more of its businesses either in terms of their respective customer
groups, customer functions or alternative technologies, it is
conglomerate diversification.
Suppose a company started as a cement provider and gradually expanded into
sectors such as home décor, electronics and education industry. Inevitably, it
became a conglomerate by diversifying from its core business of cement
generation towards many unrelated businesses. The Tata Group is a good
example of a highly successful Indian conglomerate. Founded in 1868 by
Jamsetji N. Tata, the group has become India's best reputed and most
diversified business house.

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EXAMPLE

Now let’s discuss the real-life example of Amazon’s

diversification strategy. Amazon is a
multinational company that provides various online
services such as e-commerce, cloud computing, email
delivery, online video, music streaming, e-payment, and
affiliate marketing. Apart from this, Amazon also introduced
a virtual assistant, Alexa, in 2014. Further, it operates
brick-and-mortar stores in the United States.Thus, Amazon
has been successfully following a business diversification
strategy that has been helping it grow its profits. Therefore,
e-commerce is no more the only major source of income for
Amazon. In fact, its cloud service business is now valued at
$3 trillion. 26
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Defensive Diversification

As the word ‘defensive’ suggests, this strategy is a response to

losing profits and market share, and an effort to defend its
status and position.
Defensive and offensive diversification are terms that have more
to do with why a company wants to diversify, rather than how.
For example, an orange juice brand releases a new “Organic
” orange juice drink to defend its position or beauty soap
adding “Ayurveda”. HUL adding “Ayush soap”
offensive diversification

Offensive diversification is when a business aims to attack

existing markets. The goal is to take market share from its
competitors. This is an aggressive strategy that involves a
multi-pronged attack.
For example, a business that sells laptops may decide to start
selling desktop computers, opening up a new revenue stream
that could bring more money into the company.HCL is
known example of Offensive diversification to combat
competition.

28
Types of Concentric Diversification
(Pg.184)
Marketing-related concentric diversification: A similar type of
product is offered with the help of unrelated technology.

Technology-related concentric diversification A new type of

product or service is provided with the help of related technology.

Marketing- and technology-related concentric diversification A

similar type of product or service is provided with the help of
related technology.

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Why are Diversification Strategies Adopted?

Diversification strategies are adopted to minimise risk by

spreading it over several businesses.
Diversification may be used to capitalise on its capabilities and
business model so as to maximise organisational strength or
minimise weaknesses.
Diversification may be the only way out if growth in existing
businesses is blocked due to environmental and regulatory
factors.
Diversification takes an organisation away from the comfortable
confines of concentration and integration strategies to that of an
environment fraught with many risks.

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Risks of Diversification

Diversification, especially unrelated, is a complex strategy to

formulate and implement.
Diversification strategies demand a wide variety of skills.
Diversification results in decreasing commitment to a single or few
businesses and diverting it to several of them at the same time.
Diversification often does not result in the promised rewards.
Diversification increases the administrative costs of managing,
integrating, and controlling a wide portfolio of businesses.

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Ansoff’s Matrix for Diversification Strategies

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International Strategies

International strategies are a type of expansion strategies that

require organisations to market their products or services beyond
the domestic or national market. For doing so, an organisation
would have to assess the international environment, evaluate its
own capabilities, and devise strategies to enter foreign markets.

The major factors for the growth are the technological

developments reducing the transportation costs, improvement in
communication technology enabling better contact between
trading and investing nations, and the policy-induced trade
liberalisation leading to lowering of barriers to international trade
and investment

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EXAMPLE OF INTERNATIONAL STRATEGIES

Walmart’s annual worldwide sales, for example, are larger than the dollar
value of the entire economies of Austria, Norway, and Saudi Arabia.
Although Walmart tends to be viewed as an American retailer, the firm
earns 35% of its revenues outside the United States. Walmart owns
significant numbers of stores in Mexico, Central America, Brazil, Japan,
the United Kingdom, Canada, Chile, Botswana, and Argentina.. If Kia
were a country, its current sales level of approximately $21 billion would
place it in the top 100 among the more than 180 nations in the world.

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Relevance of WTO in the Internationalisation
for Companies
The WTO was founded on January 1, 1995 as a successor to the General
Agreement on Trade and Tariff (GATT) by the Uruguay round negotiations.
While GATT focussed mainly on trade in goods, the WTO covers cross-
border trade in services and ideas, and the movement of personnel. It has
a membership of 150 countries as in January 2007.
The functions of the WTO are:
• Administering WTO trade agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
• Technical assistance and training for developing countries
• Cooperation with other international organizations

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Porter’s Model of Competitive Advantage of
Nations
Michael Porter of Harvard Business School developed a new model to explain
national competitive advantage in 1990. Porter's theory stated that a nation's
competitiveness in an industry depends on the capacity of the industry to
innovate and upgrade,this model describes the competitive advantage that
nations or groups possess based on factors available to them. The theory
explains how governments can act to improve a country's position in a
globally competitive economic environment.
An example where Porter's Diamond can be used to explain a regional advantage
is in Germany's luxury high power car manufacturing industry, for brands such
as Audi. The car manufacturing industry in German has a regional advantage
because it satisfies the four key factors in Porter's Diamond

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Porter’s Model of Competitive Advantage of
Nations
Factor conditions: The special factors or inputs of production such as
natural resources, raw materials, labour, etc. that a nation is especially
endowed with.
Demand conditions: The nature and size of the buyer's needs in the
domestic market such as sophisticated and demanding buyers and large
markets in the nation.
Related and supporting industries: The existence of related and
supporting industries to the industries in which a nation(Assist in value
chain)
Firm strategy, structure, and rivalry: The conditions in the nation
determining how firms are created, organised, and managed, and the
nature of domestic competition such as strong rivals. For example, Italy,
known for its fashionable clothing, will definitely have a different approach than
Greece, which emphasizes tourism and related facilities.
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Porter’s Model of Competitive Advantage of
Nations

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Modes of International Entry

Export entry modes: Under these modes, the firm produces in

the home country and markets in the overseas markets.
Contractual entry modes: These modes are non-equity
associations between an international company and a company
or any other legal entity in the overseas markets.
Investment entry modes: These modes involve ownership of
production units in the overseas market based on some form of
equity investment or direct foreign investment.

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 INTERNATIONAL ENTRY MODES
1. Exporting -The traditional mode of entering into international business is
Exporting. Exporting is the simplest way to get started in foreign business. As a
result, most businesses begin their global expansion in this manner. The act of
selling goods and services produced domestically in other countries is known as
exporting. Exports are classified into two types:
Direct exports are transactions in which a company sells its products directly to a
buyer in another country. At this company, you will gain firsthand market
knowledge
Indirect exports include hiring a third party's skills to facilitate the transaction.
The fee is the amount charged by the intermediary for its services.

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 2. Licensing

When a corporation from one country (the Licensor) grants a license to a company from another country
(the Licensee) to use its brand, patent, trademark, technology, copyright, marketing skills; etc., to assist
the other firm sell its products, this contractual agreement is referred to as Licensing..
For instance, Pepsi and Fanta are made and distributed globally by local bottlers in other nations under
the licensing system.
The company that provides such authorisation is known as the Licensor while the other company in a
different country that receives these rights is known as the Licensee. The mutual sharing of knowledge,
technology, and/or patents between the companies is called Cross-licensing.

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 3.FRANCHISING

Franchising is a contractual agreement that involves the grant of rights by one

party to another for use of technology, trademark, and patents in return for the
agreed payment for a certain period of time. The business that gives the rights
(i.e., the parent company) is referred to as the Franchisor, and the business that
purchases the rights is referred to as the Franchisee.
Examples of Franchising models include Subway, McDonald's, Pizza Hut, Burger
King, and Dunkin' Donuts

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 CONTD..

4. Management Contracts-A company essentially rents out its knowledge or

know-how to a government or business in the form of individuals who enter the
foreign setting and manage the business under management contracts and
do contract manufacturing.
Contract manufacturing is a type of international business, in which a firm enters
into a contract with another firm in a foreign country to manufacture certain
components or goods as per its specifications. Multinational firms, like Maybelline,
Loreal, Levis, and others use contract manufacturing to have their products or
component parts produced in developing nations. Contract manufacturing is also
known as international outsourcing.

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 5. Strategic Alliances-

• Another way to enter a new market is through a strategic alliance with a

local partner. A strategic alliance involves a contractual agreement
between two or more enterprises stipulating that the involved parties
will cooperate in a certain way for a certain time to achieve a common
purpose. For example, Cisco formed a strategic alliance with Fujitsu to
develop routers for Japan. In the alliance, Cisco decided to co-brand
with the Fujitsu name so that it could leverage Fujitsu’s reputation in
Japan for IT equipment and solutions while still retaining the Cisco
name to benefit from Cisco’s global reputation for switches and
routers . Spotify And Uber. A prominent strategic alliance example is
the partnership between Spotify and Uber ,MasterCard And Apple
Pay. ...
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 6.FOREIGN DIRECT INVESTMENT

Foreign direct investment (FDI) is an investment made by a company or an

individual in one country into business interests located in another country.
FDI is an important driver of economic growth. From April to August
2020, total Foreign Direct Investment inflow of USD 35.73 billion was
received. It is the highest ever for the first 5 months of a financial year.

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FDI Routes in India

Automatic Route FDI

In the automatic route, the foreign entity does not require the prior approval of the government or the RBI.

Examples:

• Medical devices: up to 100%

• Thermal power: up to 100%

• Services under Civil Aviation Services such as Maintenance & Repair Organizations

• Insurance: up to 49%

• Infrastructure company in the securities market: up to 49%

• Ports and shipping

• Railway infrastructure

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 Government Route FDI

Under the government route, the foreign entity should compulsorily take the approval of the government. It should file
an application through the Foreign Investment Facilitation Portal, which facilitates single-window clearance.

• Retail sector (Single )-100%

• Banking & Public sector: 20%

• Food Products Retail Trading: 100%

• Core Investment Company: 100%

• Multi-Brand Retail Trading: 51%

• Mining & Minerals separations of titanium bearing minerals and ores: 100%

• Print Media (publications/printing of scientific and technical magazines/speciality journals/periodicals and a

facsimile edition of foreign newspapers): 100%

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Sectors where FDI is prohibited

There are some sectors where any FDI is completely prohibited. They are:

• Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries,
tea plantations.)

• Atomic Energy Generation

• Lotteries (online, private, government, etc.)

• Investment in Chit Funds

• Any Gambling or Betting businesses

• Housing and Real Estate (except townships, commercial projects, etc.)

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TYPES OF FDI

Horizontal-The most common type of FDI is Horizontal FDI, which primarily revolves
around investing funds in a foreign company belonging to the same industry as that
owned or operated by the FDI investor. For example, the Spain-based company Zara may
invest in or purchase the Indian company Fab India, which also produces similar
products as Zara does.
Vertical-A vertical FDI occurs when an investment is made within a typical supply chain in
a company, which may or may not necessarily belong to the same industry., the Swiss
Coffee producer Nescafe may invest in coffee plantations in countries such as Brazil,
Columbia, Vietnam, etc. Since the investing firm purchases, a supplier in the supply
chain,is backward FDI, forward vertical integration is said to occur when a company
invests in another foreign company which is ranked higher in the supply chain, for
instance, a coffee company in India may wish to invest in a French stores where people
prefer drinking coffee.
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 Conglomerate FDI

When investments are made in two completely different companies of entirely

different industries, the transaction is known as conglomerate FDI. As such, the
FDI is not linked directly to the investors business. For instance, the US retailer
Walmart may invest in TATA Motors, the Indian automobile manufacturer.

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Advantages Of International Strategies

Realising economies of scale

Realising economies of scope
Expansion and extension of markets
Realising location economies
Access to resources overseas

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Disadvantages Of International Strategies

Higher risks
Difficulty in managing cultural diversity
High bureaucratic costs
Higher distribution costs
Trade barriers

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Strategic Decisions in Internationalisation(Pg.221)

Which international markets to enter?

Timing of entry into international markets
Scale of entry into international markets

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Factors influencing International Strategies

Cost pressures denote the demand on a firm to minimise its unit

costs. By doing so, the firm tries to derive full benefits from
economies of scale and location economies.

Pressures for local responsiveness makes a firm tailor its

strategies to respond to national-level differences in terms of
variables like customer preferences and tastes, government
policies, or business practices.

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Types of International Strategies

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Types of International Strategies
Firms adopt an international strategy when they create value by
transferring products and services to foreign markets where these
products and services are not available.
Firms adopt a multi domestic strategy when they try to achieve a high
level of local responsiveness by customising their products and services
according to the local conditions present in the different countries they
operate in.
Firms adopt a global strategy when they rely on a low-cost approach
based on reaping the benefits of experience-curve effects and location
economies and offering standardised products and services across
different countries.
Firms adopt a transnational strategy when they adopt a combined
approach of low-cost and high local responsiveness simultaneously for
their products and services.
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INTERNATIONAL STRATEGIES

Firms pursuing an international strategy are neither concerned

about costs nor adapting much to the local cultural
conditions. They attempt to sell their products
internationally with little to no change.
Belgium chocolate exporters do not lower their price when
exporting to the American market to compete with
Hershey’s, nor do they adapt their product to American
tastes. They use an international strategy. Kellogg’s ,Rolex
and Gillette very rarely adopt no changes ,where as
Starbucks very rarely in limited way.

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MULTI-DOMESTIC STRATEGY

A firm using a multi-domestic strategy does not focus on cost or

efficiency but emphasizes responsiveness to local requirements
within each of its markets. Rather than trying to force all of its
American-made shows on viewers around the globe, Netflix
customizes the programming that is shown on its channels within
dozens of countries, including New Zealand, Portugal, Pakistan,
and India. Similarly, food company H. J. Heinz adapts its products
to match local preferences. Because some Indians will not eat
garlic and onion, for example, Heinz offers them a version of its
signature ketchup that does not include these two ingredients.

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 GLOBAL STRATEGY

A firm using a global strategy sacrifices responsiveness to local requirements

within each of its markets in favor of emphasizing lower costs and better
efficiency. This strategy is the complete opposite of a multi-domestic strategy.
Some minor modifications to products and services may be made in various
markets, but a global strategy stresses the need to gain low costs and economies
of scale by offering essentially the same products or services in each market.
Microsoft, for example, offers the same software programs around the world but
adjusts the programs to match local languages. Similarly, consumer goods maker
Procter & Gamble attempts to gain efficiency by creating global brands
whenever possible

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 TRANSNATIONAL STRATEGY

A firm using a transnational strategy seeks a middle ground between a multi-

domestic strategy and a global strategy. Such a firm tries to balance the desire
for lower costs and efficiency with the need to adjust to local preferences
within various countries. For example, large fast-food chains such as
McDonald’s and Kentucky Fried Chicken (KFC) rely on the same brand names
and the same core menu items around the world. These firms make some
concessions to local tastes too. In France, for example, wine can be purchased
at McDonald’s. This approach makes sense for McDonald’s because wine is a
central element of French diets. In Saudi Arabia, McDonalds serves a
McArabia Chicken sandwich, and its breakfast menu features no pork products
like ham, bacon, or sausage.

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Born-Global Firms (Pg.224)

The born-global firms are business organisation that, from or near their founding,
seek superior international performance from the application of knowledge-based
resources to the sale of outputs in multiple countries. Some of the characteristics
are:
• Emphasis on differentiation strategy
• Emphasis on superior product quality
• High activity in international markets from or near the founding
• Leveraging advanced information and communications technology
• Limited financial and tangible resources
• Managers have a strong international outlook and international entrepreneurial
orientation
• Present across most industries
• Using external, independent intermediaries for distribution in foreign markets

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Challenges for Indian Companies Competing
Abroad

The Indian firms were not concerned with size and expansion as
protectionism within the country made these considerations redundant.
Secondly, the market potential in practically every industry was not
realised and firms perceived adequate opportunities within the country.
Thirdly, the Indian firms did not possess sufficient resources - particularly
financial resources - to venture outside.
Fourthly, the government policies did not favour and facilitate
internationalisation.
Lastly, India as a nation ranks very low on rating of international
competitiveness and a country to do business with.

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Indian Firms- International Strategies
The forces of globalisation and internationalisation have impacted the
government policies to change creating an increasing awareness of the
need to adopt international corporate- and business-level strategies.
The nature and intensity of domestic competition has changed in recent
years making several industries highly competitive.
Business houses realised the limits of expansion within national markets
so they adopted international strategies.
The corporate governance reforms in India have resulted in greater
transparency in company operations resulting in opportunities for
networking with global firms in manufacturing and services.
The presence of extensive diasporas-based networks of Indians around
the world has contributed positively to the efforts of firms to
internationalise.

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Regionalisation Strategies
The home base strategy entails embarking on international expansion by
starting catering to nearby foreign markets from the home country.
The portfolio strategy consists of establishing or acquiring businesses
outside the home country but reporting to the home base.
The hub strategy requires building regional bases or hubs. These hubs
provide shared resources to the local operations in the countries around
the hub.
The platform strategy is establishing interregional base of activities that
can be shared across the region benefiting from economic of scale and
economies of scope.
The mandate strategy focuses on the economies of specialisation apart
from economies of scale. The specialisation is achieved by allotting
certain regions broad mandates to perform certain specialised roles or
supply unique products or services for the whole organisation.
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Strategies for the Bottom-of-the-pyramid(BoP)
Essentially, the idea of BoP is addressed to the MNCs that have
increasingly found the markets saturating at most places they operate in.
The BoP strategy is meant to show the way to MNCs how to exploit the
opportunities that are believed to be available in serving the poorer
sections of the society.
These sections of the society constitute huge markets that have people
who have very little income; prefer to buy cheaper products and services
or products in lesser quantities; and may not be much concerned with
high quality or other differentiating propositions.
The BoP idea not only is meant to widen the market base for MNCs or
local firms but also serve as one of the significant social objectives that
firms may pursue so that they can attempt to achieve their economic
objectives while simultaneously serving the society through poverty
alleviation.
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Strategies for competing with Global
Companies in India

With the emergence of a vast domestic market and relatively low-

cost workers with advanced technical skills, India is very much on
the radar of MNCs. Increasingly multinationals are setting up
manufacturing operations in India.

When MNCs enter into emerging economies, most local firms

assume they can respond in one of only three ways: by calling on
the government to reinstate trade barriers or provide some other
form of support; by becoming a subordinate partner to a
multinational; or by simply selling out and leaving the industry.

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Challenges before Indian Brands in
International Markets

Foreigners don’t trust Indian brands.

Most Indian MNCs have a very broad product portfolio that fails to
focus on markets.
India does not have the reputation for innovation.
Beyond Indian markets, Bollywood endorsements, logos and
brand identities do not scale as marketing communication.
The advertising department can’t fight the CEO.

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Strategy Options for Local Companies
against Global Companies

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Strategies for Foreign MNCs in India

Foreign companies can also set up joint ventures with other

foreign companies or Indian companies.
Liaison office can be created by a foreign company represent it or
for other purposes such as facilitating import or export, and
technical and financial collaboration.
Branch office of foreign companies can be set up for a range of
purposes such as import and export, consultancy and research
work, providing IT services and designing software, and other
similar activities.
Foreign companies that are engaged or contracted by an Indian
company for a particular project can open a project office for a
limited duration.
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Blueprint for MNCs in India

Bain & Company offers a five step blueprint for MNCs operating in
or planning to enter Indian markets:

• Bold commitment to India MNCs

• Tailor offerings for India MNCs
• Adapt repeatable models
• Invest in local talent
• Create roadmap for results

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CO-OPERATIVE STRATEGIES

In many cases, pursuit of corporate objectives may be achieved

through cooperating with other firms.
It focuses on the benefits that can be gained through cooperation and
how the management of cooperation can realize these benefits.
These are broadly known as cooperative strategies
Some of these strategies include mergers and acquisitions, Joint
ventures and Strategic alliances

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Mergers And Acquisitions

Mergers take place when the objectives of the buyer firm and the
seller firm are matched to a large extent; acquisitions or takeovers
usually are based on the strong motivation of the buyer firm to
acquire.
Takeover is a common way for acquisition and happens when one
firm acquires ownership and control over another firm. Mergers
carried out in reverse are known as demergers or spin-offs.
Demerger involves spinning off an unrelated business / 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.

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Types of Mergers and Acquisitions

Horizontal mergers take place when there is a combination of two or more

organisations in the same business, or of organisations, engaged in
certain aspects of the production or marketing processes.
Vertical mergers take place when there is a combination of two or more
organisations, not necessarily in the same business, which create
complementarities either in terms of supply of materials (inputs) or
marketing of goods and services (outputs).
Concentric mergers take place when there is a combination of two or
more organisations related to each other either in terms of customers
functions, customer groups, or alternative technologies used.
Conglomerate mergers take place when there is a combination of two or
more organisation unrelated to each other, either in terms of customer
functions, customer groups, or alternative technologies.

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Reasons For Mergers And Acquisitions

Why the buyer wishes to merge:

• To increase the value of the organisation's stock.
• To increase the growth rate and make a good investment.
• To improve stability of earning and sales.
• To balance, complete, or diversify product line.
• To reduce competition.

Why the seller wishes to merge:

• To increase the value of the owner's stock and investment.
• To increase the growth rate.
• To acquire resources to stabilise operations.
• To benefit from tax legislation.
• To deal with top management succession problem .
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Issues and Procedures in Mergers and
Acquisitions
Issues:
• Strategic
• Legal
• Financial
• Managerial

Procedure:
• Spell out the objective.
• Indicate how the objective would be achieved.
• Assess managerial quality.
• Check the compatibility of business styles.
• Anticipate and solve problems early.
• Treat people with dignity and concern.
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Joint Ventures

A joint venture could be considered as the new entity resulting

from a long-term contractual agreement between two or more
parties to undertake mutually beneficial economic activities,
exercise joint control, contribute equity, and share in the profits or
losses of the entity.
Conditions calling for joint ventures:
• When an activity is uneconomical for an organisation to do alone.
• When the risk of business has to be shared and, therefore, is reduced for the
participating firms.
• When the distinctive competence of two or more organisation can be brought
together.
• When setting up an organisation requires surmounting hurdles such as import
quotas, tariffs, nationalistic-political interests, and cultural roadblocks.

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Triggers for a Joint Venture

Technology
Geography
Regulation
Sharing of risk and capital
Intellectual exchange

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Types Of Joint Ventures

Between two Indian organisations in one industry

Between two Indian organisations across different industries
Between an Indian organisation and a foreign organisation in
India
Between an Indian organisation and a foreign organisation in that
foreign country
Between an Indian organisation and a foreign organisation in a
third country
Between government and private sector organisations in the form
of public-private partnerships

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Joint Ventures : Benefits And Drawbacks

The major benefits that are likely to accrue from joint ventures
include: minimising risk, reducing an individual company's
investment, and creating access to foreign technology, broad-
based equity participation, access to governmental and political
support, and entering new fields of business and synergistic
advantages.
Reasons joint ventures can fail includes:
• Change of strategy
• Regulatory changes
• Success of joint venture
• Having partners hampers growth
• Lack of transparency

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Strategic Alliances
Strategic alliances as an arrangement for “cooperation between
two or more independent firms involving shared control and
continuing contributions by all partners for mutual benefit.

In order to be strategic, an alliance must satisfy one of these

criteria:
• Be critical to the success of a core business goal or objective
• Be critical to the development or maintenance of a core competency or other
source of competitive advantage
• Enables blocking a competitive threat
• Creates or maintains strategic choices for the firm
• Mitigates a significant risk to the business

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Reasons For Strategic Alliances

Entering new markets: A company that has a successful product

or service may wish to look for new markets. They enter into a
partnership with a local firm in that foreign market which
understands the markets better and is more culturally attuned to
them.
Reducing manufacturing costs: Strategic alliances are used to
leverage resources by pooling resources to gain economies of
scale or making better utilisation of resources in order to reduce
manufacturing costs.
Developing and diffusing technology: It helps develop
technological capability by leveraging the technical expertise of
two or more firms.
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Types of Strategic Alliances

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Types Of Strategic Alliances

Pro-competitive alliances (Low interaction / Low conflict): These are

generally inter-industry, vertical value-chain relationships between
manufacturers and their suppliers or distributors.
Non-competitive alliances (High interaction/ Low conflict): These are intra-
industry partnerships between non-competitive firms. Such alliances can
be entered upon by firms that operate in the same industry yet do not
perceive each others as rivals.
Competitive alliance (High interaction/ High conflict): These are
partnerships that bring two rival firms in a cooperative arrangement where
intense interaction is necessary.
Precompetitive alliance (Low interaction/ high conflict): These
partnerships bring two firms from different, often unrelated industries to
work on well-defined activities .

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Alliances: Principles and Pitfalls

Principles:
• Clearly define a strategy and assign responsibilities
• Phase in the relationship between the partners
• Blend the cultures of the partners
• Provide for an exit strategy

Pitfalls:
• Lack of trust and commitment, perceived misunderstandings among
partners, conflicting goals and interests, inadequate preparation for
entering into partnership, hasty implementation of plans, and focussing
on controlling the relationship rather than managing it for mutual benefit
are some of the dangers of strategic alliances.

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Digitalisation

Digitalisation is defined as digital coding of information and the

growing productivity gains in processing and transmission it
enables.
The versatility and economy of digitalisation makes it possible for
information to be available efficiently, sufficiently, inexpensively
and extensively within and outside organisations. This has
significant implications for the strategies of organisations.
Digitalisation is a vast subject encompassing a number of areas
such as business, social sciences or technology.
The phenomenon of digitalisation has the potential to redefine the
business of an organisation radically.
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Methods of Digitalisation

Deconstruction: Through deconstruction, the total product or service is

broken down into components some of which can be delivered digitally
thus enhancing the value to the customers.
Disintermediation: When some processes in the value chain are
eliminated it is called disintermediation.
Re-intermediation: When processes in the value chain are supplemented
by one or more intermediaries it is called re-intermediation.
Industry morphing: Digitalisation has created a situation where traditional
industries are transforming into entirely new types of industries. In this
way, the traditional boundaries that defined a particular business are
being transformed – a process called morphing.

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Methods of Digitalisation

Cannibalisation: In many businesses, a set of activities performed

in the value chain are being replaced by a new set of activities
thus eating away that part of the value chain. This eating away is
called the cannibalisation of value chain.
Techno-intensification: Digitalisation of the value chain and value
system results in a situation where there is more intensive use of
technology and decreasing use of human resources. This
phenomenon is termed as techno-intensification.
Re-channelling: Deconstruction of value chain results in breaking
it down into components and divesting or outsourcing these
components to external suppliers and alliance partners.

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Terms used in Digitalisation

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E-business

E-business is “a business process transformed to leverage the

World Wide Web (www) (Internet, intranet and extranet)
technology for business benefit. It is about using the Internet
infrastructure and related technologies to enable business
anywhere and anytime.
Internet technologies can be used in multifarious ways by
organisations. They can be used, for instance, to build
relationship with customers, automate the ordering process, allow
customers to make secure payments online, speed up processes,
and reduce costs of doing business significantly.
E-commerce is concerned with conducting commerce i.e. buying
and selling over an electronic network usually the Internet.

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Digitalisation: Competitive Advantage and
Corporate Strategy
If an organisation can get a hold on some relevant new
technology such as state-of-the-art information technology
applications, it can use that to get ahead of its rival and thereby
gain competitive advantage.
Organisations can leverage Internet capabilities for their
corporate-level strategies:
• New means of generating synergies
• Enhancing revenue among elements of a diverse firm
• Linking sources of supply more efficiently
• Streamlining distribution
• Dealing with suppliers more efficiently

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Digitalisation and Business Strategy

The business strategy of cost leadership lays emphasis on efficiency

leading to cost advantage over its rivals. Digitalisation must help a cost
leader in attaining efficiency and cost advantage by whatever means
available. This could be done, for instance, by making efficiency work to
build economies of scale leading to cost advantage for the organisation.

The business strategy of differentiation lays emphasis on differentiation of

products and services from those of rivals. Digitalisation must help a
differentiator in attaining differentiation by whatever means available. This
could be done, for instance, by creating and offering unique value
propositions that the customers would value and be willing to pay a
premium price for.

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Integrating Sustainability into Strategy

Sustainability remains rhetoric unless integrated into strategy. When

integrated into strategy, sustainability gains traction towards simultaneous
and balanced achievement of environmental, economic and social
objectives of organisations. Balanced growth is based on the triple bottom
line of people, planet and profit.
Organisations need to embed sustainability into the corporate strategy as
a part of a comprehensive plan to rewrite the present strategy in the form
of a new or adapted strategy. For this they need to:
• Adapt the present corporate strategy to include objectives related to
environmental, social and economic performance;
• Define a specific sustainability strategy as a part of the corporate strategy;
• Redefine the corporate strategy based on the premise of creating a holistic
sustainability strategy

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Areas of Integration into Corporate Strategy

Composition of business portfolio

Mitigating risks to strategy through sustainability
Innovation and new businesses
Reaching new customers and markets
Sustainable value chains
Involvement of stakeholders in sustainability
Exploring opportunities for recycling waste

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Integrating Sustainability into Business
Strategy
For integrating sustainability into business strategies, organisations need
to reduce costs and differentiate their products.
Organisation could strive to become low-cost producer through adopting
waste minimisation and energy conservation or pursue differentiation
strategy through incorporating green product features.
Organisations come up with innovative means to create opportunities out
of producing detergents from agricultural waste, turning rice husk into fuel-
efficient tyre treads, recycling gadgets such as refrigerators and water
filters and similar product development.
They may actively support minimisation of waste by using paperless
communication and gaining access to alternate sources of energy.

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