International Environment

Strategies to go global

Introduction

• Globalization • Changing trends• Expansion & Growth objective• Markets are growing• Varied demand hence market for all• Global demands to be scatted• Divides risk• Technology GrowingHence …Strategic approach need Of the Hour

For going Global..Strategies To Go Global

Internal

Intensification / intensive

Diversification

External

Collaboration

Mergers

Acquisition

Internal Growth Strategies

Intensification/Intensive Strategy involves the internal growth of the concern within its existing corporate structure. It is also known as growth through aggregation. The management of a firm may decide to grow through expansion of scale of operations in order to attain optimum size. The

firm will achieve many economies in purchasing, production, financing, marketing and management.

Market penetration

Eg: Dairy Milk Shots

Diversification • Why Firms Diversify

– To grow– To more fully utilize existing resources and capabilities.– To escape from undesirable or unattractive industry environments.– To make use of surplus cash flows.

Expansion is different from diversification it expansion of a firm through the expansion of its product line

According to Calori and Harvatopoulos (1988), there are two dimensions of rationale for diversification. The first one relates to the nature of the strategic objective: Diversification may be defensive or offensive.– Defensive reasons may be spreading the risk of market contraction, or being forced to diversify

when current product or current market orientation seems to provide no further opportunities for growth.

– Offensive reasons may be conquering new positions, taking opportunities that promise greater profitability than expansion opportunities, or using retained cash that exceeds total expansion needs.

Types of Diversification

Horizontal or related diversification

•Strategy of adding related or similar product/service lines to existing core business, either through acquisition of competitors or through internal development of new products/services•acquiring or developing new products or offering new services that could appeal to the company´s current customer groups. In this case the company relies on sales and technological relations to the existing product lines..•Eg: HUL SOAPS-Hamam, Lirel, Dove , •Tooth Paste : Colgate, Close up,•Shampoos: Sunsilk, Clinic Plus.•END USE THE SAME BUT CATERS TO VARIED CHOICES? DEMANDS

Conglomerate or lateral or unrelated

diversification•is moving to new products or services that have no technological or commercial relation with current products, equipment, distribution channels, but which may appeal to new groups of customers. The major motive behind this kind of diversification is the high return on investments in the new industry. •lead to additional opportunities indirectly related to further developing the main company business - access to new technologies, opportunities for strategic partnerships, etc.•Eg Reliance trends, fresh, telecom , digital, Gold , Cinema

Vertical •occurs when the company goes back to previous stages of its production cycle or moves forward to subsequent stages of the same cycle - production of raw materials or distribution of the final product. •Eg: Hiranandani Residential Constructions –Hospitals, school, malls, Food courts.etc. •Constructs Entire Township amenities needed for settlement.

Concentric•enlarging the production portfolio by adding new products with the aim of fully utilising the potential of the existing technologies and marketing system.• The concentric diversification can be a lot more financially efficient as a strategy, since the business may benefit from some synergies in this diversification model.• It may enforce some investments related to modernizing or upgrading the existing processes or systems. •Eg Monginies Cakes Introduced Pasties , Breads, Biscuts-cookies etc along with Cream Cakes

External Growth Strategies

Foreign Collaboration

• Cooperation for Specific Purpose

• Types:• Technical : Provides

Technical know-hows• Financial: Supply of finance ,

inflow of Foreign capital • Marketing : to promote Exports

& local sales

• Consultancy : Provides managerial Expertise

Mergers / Amalgamation

• Mergers: Two CO.s come together and only one survival

• Amalgamation: Mixed to form new

•

Takeover/ Acquisition

• Purchase of co. or only control of co.•Takeover is forces acquisition whereas acquisition is willing to merger•Eg FAME taken by INOX

What are MNCs?

• “Corporation which have their home in one country but operates and live under the laws and Customs of other countries”

• Holding H/O in one country and business operation spread in many other countries including origin,

• Eg: P&G, Coca-Cola, Pepsi, Microsoft etc

Features of MNCs• MNCs have managerial headquarters in home countries, while they carry out operations in a

number of other (host) countries.• A large part of capital assets of the parent company is owned by the citizens of the company's home

country.• The absolute majority of the members of the Board of Directors are citizens of the home country.• Decisions on new investment and the local objectives are taken by the parent company.• MNCs are predominantly large-sized and exercise a great degree of economic dominance.• MNCs control production activity with large foreign direct investment in more than one developed

and developing countries.• MNCs sustained by modern technologies, management skill, product differentiation and enormous

advertising.• MNCs are not just participants in export trade without foreign investments.• Varied operations & activities undertaken• Invest in countries like LDC, DC• Dominate Economy as need for growth • Functioning Based on local laws• Different investment methods applied-JV, TECHNi,• Supports Host Countries growth-Welfare, need satis

MNCs

Advantages•Promote foreign investment•Transfer of technology•Accelerates industrial growth •Professionalism

Disadvantages•Provide out-dated technology•Local industries affected•Charge heavy fees•Recklessly use natural resources•Interfere in economic & political system•Invest in profitable sectors•Focus on Profit more than local welfare

TNCs

• Company that does research in one country ,production in one country, assembling in third country, and marketing in another country is Knw as TNCs

• Different between MNCs & TNCs Structure & function differentMNC Act as Holding Co. whereas TNC act as

one strong biz group

Features of TNCs

• Large Company with global operations• Decentralized Activities• TNC is a MNC in which both membership &

control is dispersed at global level • Integrates world economy

How MNCs / TNCs expand business activities? (Growth strategies of MNCs & TNCs)

• FDI- Foreign Direct Investment• Transfer of Technical Know-Hows• Licensing• Turnkey Projects• Global Marketing• Merger & Acquisition• Estb Public utilities• Through Subsidiaries