growth strategies in strategic management

Growth Management Strategies provides outsourced, "as-needed" expertise in strategic planning, finance, accounting, and other diverse management projects to emerging, growth-stage and established companies. Copyright 10. Where the company is widely held i.e. (iii)Modernisation helps to improve long-run competitive position of the enterprise. For a more enjoyable learning experience, we recommend that you study the mobile-friendly republished version of this course. Strategic management is the management of an organization’s resources to achieve its goals and objectives. Integration at the same level of business, popularly known as horizontal integration, involves the acquisition of one or more competitors. As a result of a merger, one company survives and others lose their independent entity, it is called ‘absorption’. A merger refers to a combination of two or more companies into a single company. Lack of enough additional staff with sufficient expertise and loyalty; 4. iii.  Organisations select a growth strategy :  to increase their profits  to increase their market share or sales  to increase their scale of operations  to reduce the production cost per unit. It is a case of down-stream integration extends to those businesses that sell eventually to the consumer. If adverse conditions prevail or if operations do not yield the desired returns in a reasonable time period, the firm may withdraw from the foreign market. Foreign markets provide additional sales opportunities for a firm that may be constrained by the relatively small size of its domestic market and also reduces the firm’s dependence on a single national market. A non-growth strategyrefers to that strategy where there is no growth in earnings. Following are important advantages of modernisation, as a growth strategy: (i) Modernisation results in lesser cost of production and consequently higher profits for the company. In some cases firms choose diversification because of government policy, performance problems and uncertainty about future cash flow. A major contributor to the growth of Reliance Industries in the early stages was backward and forward integration. Strategy Formulation: Process and Modes | Business Management. 1. (ii) Diversification creates problems of co-ordination among lines of diversified production. There are several methods for going international. (Conglomerate means a larger company that is formed by joining together different firms). In theory, the acquirer must buy more than 50% of the paid-up equity of the acquired company to enjoy complete control. Spreading risks by operating in multiple areas decreases the threat of any one area causing the firm to fail. Less number of players in the industry will lead to collusion to reap abnormal profits by setting price of finished products at higher level than the market determined price. The acquired firm will continue to exist as long as there are minority stockholders who refuse the tender. When two or more unrelated or dissimilar firms combine together; it is known as a conglomerate merger. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. For example, many companies have achieved remarkable growth by entering into foreign markets; pushing their products I by changing size, packaging, and brand name etc. Parenting—, resource allocation and centralized management of business units. (ii)Differences in the culture of countries which co-venturers belong to may create problems of achieving mutual understanding; and may lead to conflicts. Who is … As a strategy the purchaser keeps his identity a secret. Common business growth strategies Diversification strategies are used to expand firm’s operations by adding markets, products, services or stages of production to existing operations. As a result of a merger, one company survives and others lose their independent entity, it is called ‘absorption’. Merger, as a growth strategy, implies combination (or integration) of two or more companies into one. The Indian cement industry has witnessed considerable horizontal integration. The most common growth strategies are diversification at the corporate level and concentration at the business level. Specially in the Indian conditions, industrialists Vijaya Mallaya, R.P. But it can be broadly categorized into three: The operation of some joint ventures involves the use of the assets and other resources of the venturers rather than the establishment of a corporation, partnership or other entity or a financial structure that is separate from the venturers themselves. Merger is said to occur when two or more companies combine into one company. A vertical integration refers to the integration of firms in successive stages in the same industry. This works best in a scenario where there are no new products, and there are no new markets to enter. Diversification. Many companies expand by creating other firms in their same line of business. (iii) New products, new technologies etc. (i) Making common purchases at low prices. Strategic Management - Growth Strategies; 5. Theres no single formula for delivering organic growth. The concept of ‘alliance is gaining importance in infrastructure sectors, more particularly in the areas of power, oil and gas. The primary reasons a firm pursues increased diversification are value creation through economies of scale and scope, or market dominance. Combination of firms may take the merger or consolidation route. A growth strategy is one that an enterprise pursues when it increases its level of objectives upward, much higher than an exploration of its past achievement level. Growth Management Strategies provides real solutions. This does not necessarily mean no turnover. As growth entails risk, especially in a dynamic economy, a growth strategy might be described as a safest policy of growth-maximising gains and minimising risk and untoward consequences. and Tata Oil Mills Company (TOMCO) by Hindustan Lever. The eagle eyes of raiders are on the lookout for cash rich and high growth rate companies with low equity stake of promoters. You got into business to solve a problem for a certain audience. Win-Win . (g) Effective management of capacity imbalances. Niraj Dawar is Professor of … This growth strategy, as the name implies, aims at increasing sales of existing products through l market development, i.e. exchange of old scooters or TV for new ones at a discount etc. Identify the objectives of your organization. Strategy Risk. Enable the owner-manager to ret… The firm try to increase market share for present products in current markets through increase of marketing efforts like increase of sales promotion and advertising expenditure, appointment of skilled sales force, proper customer support and after sales service etc. Concept of Strategy All the original business entities cease to exist after the combination. If the willingness is absent, it is known as ‘takeover’. This growths strategy involves addition of dissimilar new products to the existing line of business. ITC, Godrej, Kirloskars etc. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. (iii)Vertical merger facilitates research in production processes because of integration of processes. In a friendly takeover, the acquirer first approaches the promoters/management of the target company for negotiating and acquiring shares. Discover a great deal of useful information on our website! The motives behind strategic alliances are to reduce cost, technology sharing, product development, market access, availability of capital, risk sharing etc. • To formulate and efficiently implement corporate level strategies to enhance the hotels’ business growth. As such, diversification may lead to cost reduction and profit-maximization. The motive of acquirer is to gain control over the board of directors of the target company for synergy in decision-making. When schools began teaching virtually because of the coronavirus pandemic, communities were challenged to provide broadband access to all children, no matter where they lived. Sometimes the acquirer may have tacit support of the financial institutions, banks, mutual funds, having sizable holding in the company’s capital. For example, co-venturers may not agree on common objectives of the joint venture or the composition of the board of directors. An ‘alliance’ is defined as associations to further the common interests of the members. The types of strategic management strategies have changed over time. Joint ventures take many forms and structures. Examples: introduction of Babool and Promise toothpastes by Balsara Hygiene Products Ltd.; introduction of Colgate Super Shakti by Colgate-Palmolive (India) Ltd. etc. In this type of merger, different business units which have been competing with one another in the same business line join together and form a combination. (b) Whether the market wants the new product or service which we offer? The market development can be achieved in any of the following ways: (a) By adding new distribution channels to expand the consumer reach of the product. (d) Common pool of resources for research and development. Perhaps, the most important advantage of horizontal integration is that it eliminates or reduces competition. DCM Ltd. is a good example of conglomerate diversification. Growth strategy can be adopted in the form of expansion, vertical integration, diversification, merger, acquisition and joint venture. It is common for a firm to begin with exporting, progress to licensing, then to franchising finally leading to direct investment. The integration of different levels/stages of the industry is known as vertical integration. Cooperative strategy is the third major alternative (internal growth and mergers and acquisitions are the other two) firms use to grow, develop value-creating competitive advantages, and create differences between them and competitors. That means the focus will be on the current products or services, in the current market.It is pretty straigh… Strategic Management, Strategy Formulation, Growth Strategies. (v) Joint venture strategy provides opportunity to small firms to become big through joining with others and add to their prospects of survival. Concentration Expansion Strategy, Types of Growth Strategies – 3 Important Types: Intensive Growth Strategies, Integrative Growth Strategies and Diversification Growth Strategies (With Examples). But in practice it can be both, hostile or friendly. If the new lines added make use of the firm’s existing technology, production facilities or distribution channels or it amounts to backward or forward integration, it may be regarded as related diversification. The paper suggests alternative growth strategy ’ refers to the contribution growth strategies in strategic management by each party achieving... 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