External Growth Strategies

Joint ventures
 WHAT IS JOINTVENTURE??
• A JOINT VENTURE (JV) IS A BUSINESS AGREEMENT IN
WHICH THE PARTIES COME TOGETHER TO TAKE ON
ONE PROJECT BY EQUALLY INVESTING IN THE
PROJECT IN TERMS OF MONEY, TIME, AND EFFORTS.
• THEY EXERCISE CONTROL OVER THE ENTERPRISE AND
CONSEQUENTLY SHARE REVENUES, EXPENSES AND
ASSETS.
• WITH INDIVIDUALS FORM A TEMPORARY PARTNERSHIP
SUCH PARTNERSHIP CAN ALSO BE CALLED A JOINT
VENTURE WHERE THE PARTIES ARE "CO-VENTURERS".
A joint venture (JV) is a business agreement in which
the parties come together to take on one project by
equally investing in the project in terms of money,
time, and efforts.

MONEY

INPUT TIME
EFFORTS

EQUALLY SHARED BETWEEN THE COMPANIES

REVENUE
OUTPUT
EXPENSES
 IN TR OD U C TION
Mergers and acquisitions are increasingly becoming
strategic choice for organizational growth, and
achievement of business goals including profit,
empire building, market dominance and long
term survival. The ultimate goal of this is however
maximization of shareholder value.
The phenomenon of rising M&A activity is
observed world over across various continents,
although, it has commenced much earlier in
developed countries (as early as 1895 in US and
1920s in Europe), and is relatively recent in
developing countries.
Mergers and acquisitions (M&A) are defined as
consolidation
WHAT IS MERGERS AND of companies.

ACQUISITION?
1. Horizontal Mergers

2. Vertical Mergers

3. Conglomerate Mergers

4. Concentric Mergers
 1.HORIZONTAL MERGERS
A Merger occurring between companies in the
same industry
 2.VERTICAL MERGER
When two companies produce same goods
and services for one specific product
3.CONGLOMERATE MERGERS
A merger between f i rm involved in
totally unrelated business activity
4.CONCENTRIC MERGERS

The merger of firms which are into

similar type of business
AQUISITION
WHAT IS ACQUISITION?
When one company takes over
another and clearly established
itself as a new owner , the
purchase is called an
acquisition
 DIFFERENCES BETWEEN M&A
BASIS MERGERS ACQUISITION

MEANING Fusion of two or more When one entity

companies voluntarily purchases the business
form a new company of other entity
Formation of new yes no
firm

purpose To decrease competition For instantaneous

& increase operational growth
efficiency

Size of merging Size of the acquiring company

Size of business
companies is more or is bigger than acquired
less same company
No. of companies
3 2
involved
1.TATA STEEL–CORUS: ($12.2
billion)
COMPANY
TATA STEEL CORUS

India United Kingdom

 January 30,2007

 Largest Indian Takeover

IMAGE:  After the deal TATA’S became the 5th

Mutharaman, Tata largest STEEL company
Steel MD Ratan
Tata, Tata Chairman  100 % stake in CORUS paying Rs 428/-
J.Leng, Corus per share
Chairman Varin,
2.VODAFONE-HUTCHISON ESSAR: ($11.1
billion)
COMPANY
VODAFONE HUTCHISON ESSAR

United Kingdom India

 TELECOM sector

 11 February 2007
IMAGE:  2nd Largest takeover deal
ARUN SARIN, CEO of
Vodafone and ASIM  7 % stake holdings in Hutch
GHOSH, MD of
Hutchison Essar
 3.HINDALCO-NOVELIS: ($6
billion)
COMPANY

HINDALCO NOVELIS

 June 2008

 Hindalco aquired noviles

Hindalco entered fortune-500 listing

of worlds largest companies by sales
IMAGE:
revenue
KUMAR MANGALAM, Aditya Birla Group
Chairman.
STEVE FISHER, Novelis Chairman .
4.RANBAXY- DAIICHI SANKYO
($4.5billion)
COMPANY
RANBAXY DAIICHI SANKYO

India Japan

 Pharmaceuticals sector.
 June 2008.
 Largest ever deal in the indian pharma.

 Daiichi sankyo has mejarity stake of more

IMAGE:
than 50 % in ranboxy .
MALVINDER SINGH, ex CEO of Ranbaxy.
TAKASHI SHODA, President & CEO of  15th biggest drug maker.
Daiichi Sankyo.
 5.ONGC–IMPERIAL ENERGY:
($2.8 billion)
COMPANY
ONGC IMPERIAL ENERGY

India United Kingdom

 January 2009.
IMAGE:  Imperial energy company
CHRISTOPHER HOPKINSON, Imperial is one of the biggest UK
ENERGY, CEO. company.
DINEDH KUMAR SARRAF, MD and chairmen,  ONGC has 97 % of stake in Imperial
ONGC. energy .
 ONGC wanted to tap
Siberian market.
 Retrenchment Strategies
Corporate Level Strategies
Retrenchment
Strategies
 Retrenchment strategy
• A retrenchment grand strategy is
followed when an organization
aims at a contraction of its
activities through substantial
reduction or the elimination of
the scope of one or more of its
businesses in terms of their
respective customer groups,
customer functions, or alternative
technologies either singly or
jointly in order to improve its
overall performance.
 Examples of Retrenchment strategy
• General Motors of the
United States stopped
producing a number of
"makes" of automobile. GM
decided that it needed to
retrench by concentrating
on just a few "makes." It
hoped this would help it
return to profitability.
 Divestment strategy
• A divestment strategy

involves the sale or

liquidation of a portion of

business, or a major

division.
 Divestment strategy
• TATA group is a highly diversified
entity
with a range of businesses under its fold.

They identified their non – core

businesses for divestment. TOMCO

was divested and sold to Hindustan

Levers as soaps and a detergent was

not considered a core business for the

Tatas.
 Turnaround
• strategies
Turn around strategies derives
their name from the action
involved that is reversing a
negative trend. There are
certain conditions or indicators
which point out
that a
turnaround is needed for
organization to survive. a
n An
organization which faces one or
more of these issues is referred
to as a ‘sick’ company.
 Turnaround strategies
• There are three ways in which
turnarounds can be managed
– The existing chief executive and
management team handles the
entire turnaround strategy with
the advisory support of a
external consultant.
– In another case the existing
team withdraws temporarily
and an executive consultant or
turnaround specialist is
employed to do the job.
– The last method involves the
replacement of the existing
team specially the chief
executive, or merging the sick
organization with a healthy one.
 Examples of Turnaround
strategies
• Xerox revealed a
Turnaround Programme in
December 2000, which
included cutting $1 billion in
costs, and raising up to $4
billion through the sale of
assets, exiting non-core
businesses and lay-offs.
Subsequently, in August
2001, Mulcahy was made
CEO. Xerox continued to
report losses in 2001, but it
returned to profit in 2002
and continued to report
profits in 2003.