82

Strategic Management (MMS.Sern.

Chapter
Mergers and Acquisitions, Strategic alliance and Joine
10 Ventures, Vertical Integration, Offensive, Defensive
Strategies
10.1 MERGERS & ACQUISITIONS, VERTICAL
ALLIANCE AND JOINT VENTURES INTEGRATION,STRATEGIC
A. Mergers and Acquisitions
.......M.U. Nov. 2017) (5
The tems "mergers" and "acquisitions" are often used marks)
meaning. interchangeably, but they differ in
Amerger is the combination of two
the banner of one firms, which subsequently form a new legal
corporate name. entity under
In an acquisition, one
as the attempt of one firm to
company purchases another outright. Thus acquisition can be
acquire ownership or control over another firm termed
the latter's management. against the wishes of
Horizontal Merger Horizontal Integration -
Ahorizontalmerger is a union of businesses that
ie., of rival businesses. manufacture and market the same goods,
Horizontal mnergers are frequently examined by
because, if they are considerable in scale, they may competition authorities
think of horizontal mergers is as the lessen competition in a market. One way to
horizontal integration of businesses within or across
marketplaces.
It is also called LATERAL
integration. Acquiring companies in similar lines of businesses.
Examples:
Integration of Facebook, Whatsapp, Instagram & Messenger.
Frito Lay &Uncde Chipps.
Pepsi Co &Rockstar.
T-Mobile &Sprint...
Disney + &Hotstar.
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IAcquisition,Strateigcalliance and Joint Ventures, Vertical

Horizontal Inteqration -
Mergaer
nd

of
Advantages
market share.
Increassingyour
Eliminationof.competition.
(economies of scale).
Reductionof,Cost
or moving into new markets.
Expanding.geographically
- It is any new activity undertaken with the purpose
of supplying
Integration
Vertical
raw materials output is called as Vertical Integration.
or serving the customers with two
inputs
or
more organizations in
the complementary business. It is dividedinto
Combinationof two or
Forward Integration Backward Integration
&
categories:F business activities that are
integration is where the Company gains control of the control of the
Forward is where the company gains
value chain. Backward integration involves the
in the chain. Forward integration
ahead activities that were behind in their value
business with a distributor. Backward intearation involves a
joining forces the
coporation buying or
manufacturer or supplier. Increasing market share is
coporation acquiring or merging
with a integration'sprimary
integration. Realizing economies of scale is backward
ol of forward
goal.
FMCG goods production company acquires or starts a
Example of Forward Integration: A strategy.
corporation may now fully manage its distribution
distribution company. The buys or
integration is when a cdothing manufacturing company making
An illustration of backward have enough raw materials
for
the company can
ostablishes a fabric business. Now
dresses.
B. Vertical Integration

Advantages
external suppliers.
Company does not rely on
1
integration when its suppliers have alot of market
2. Companies benefit from vertical
terms
power and can dictate
company Economies of Scale.
3. Vertical integration gives the
well.
4. retailer with vertical integration knows what is selling
A customers.
costs and these can be transfered to the
5. Vertical intearation can lower

Disadvantages
takesareat deal of capital.
1. It is expensive and
cultural diversity at workplace.
2. They have a problem with
 Strategic Managernent (MM.S. Sern, I
C
Strateglc Alliance
Agreements beween two or more independent businesses to work together on tho
production, development, or sale of goods and services, as well as other business goals, are
known as strategic aliances, The idea of this arrangement is to share the resources and create a
win - win situation for both the organízations.

Advantages
1 Be quick to enter a new market.
2 Enhance sales.
3. Learn new technologies and abilities.
4. Share resources and fixed costs.
5. Expand your routes of distríbution.
Disadvantages
1 Less engagement from the management.
2. Ineffective dialogue.
3 It is challenging to maintain goals on track over time.
4 Loss of controlover matters such as product quality, operating costs, and personnel
D. Joint ventures
Characteristics
1. Purpose is to execute aparticular venture
2. Temporary nature
3 Companies in joint venture share profit and loss in an agreed ratio
4. During the tenure of Joint venture, the co-venturer is free to continue with their own
business.
Advantages
1 More resources since two or more fims are together.
2. Access to new markets.
3 Sharing costs and risks with partners.
4. Diversification of business by producing new products or entering new areas of
business.
5 Increased productivity and greater profits
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r and Acquisition, Straleigc alliance and Joint Venlres, Vertical
Disadvantages
1.
It takes time and effort to form the right relationship

2. The objective of each partner may differ.

between the
3. Imbalance in share capital, expertise. investments may cause friction
partners.
4 Difference in culture may affect the business in a negative manner.
Lack of communication between the partners may affect the business.
5
In a Nutshell

Merger
Acquisition
takes Over smaller company, Oten
Usually two companies of equal size merge Large company
together forceful or unfriendly
New company formed. New company formed
Operated as a single entity. Operated as a single entity.
Joint Venture Strategic Alliance
improve efficiency of companies
Two or more companies agree to form an entity To new Company is formed
for a specific task or period No
companies keep functioning as
nomal by
Always friendly Parent
supporting each other
Parent companies operate individually

OFFENSIVE STRATEGIES
10.2.CONCEPTS OF DEFENSIVE &
before
comparisons between business and conflict
"Marketing Warfare" strategies make to sides in a
military tactics in a business scenario. Competing firms are compared
employing
share is compared to territory that is in contention. According to this
military conflict, and market zero-sum game in play in
is negative or low, there is a
marketing theory, when real GDP growth another player is one participant's gain
Only at the expense of
mature, low-growth markets. for market share.
must compete
attainable. To be successful, businesses
A. Defensive Strateqv:
warfare. The
share, the market leader engages in defensive marketing
To defend his market itself. This entails determining whether
the
is to relentlessly attack
leader's best course of action customer needs, whether any new
needs are
competitively satisfying
curent product lineup is distribution strategy is
lineup cannot address, and whether the curent
emerging that the curent is necessary. The
emerging market segments and needs or whether a change
sufficient to address targeted and current market
positioning, pricing
also need to re-examine its
corporation would defensive warfare. This
promotional programmes in order to engage in
of its
tactics, policy, and
company can only keep up its dominance while letting go
suggests that the market leader their market dominance as a result of
complacency
businesses often lose
myopia. Unfortunately,
success.
and inertia brought on by marketing
 86 Strategic Management (M.M.S. Sem, I)

Defensive marketing warfare also requires the leader company to thwart any powerful tival
movements. For instance, the leader firm increases its promotion budget (both for consumers
and for the trade), fills retail spaces with its brand, or offers special bonuses to intermediaries if
hey push its brand duringthe competitor brand's launch period, the launch of a new and "better
product byacompetitor firm can be effectively stopped.
The market leader should always have a backup plan in place. Like in a chess match or a
game of cards, the leader should never show allof his armor at once. Finally, the market leader
should refrain from doing actions that could expose them to more legal risk. For instance,
targeting small businesses may result in a monopoly claim being made against the market leader.
If it did, the people would always support the smaller businesses. No company, least of all the
market leader, can afford the unfavorable publicity that the outcry against it would bring about.
Characteristics of Defensive strategy
1. Only the Market leader should consider playing defense.
2. The best defensive strategy is the courage to attack yourself. Strengthen your postion by
introducing new products that obsolete your existing ones.
3 Exclusive arrangements with suppliers in the market.
4. Price cuts as long as price war does not get out of hand.
5 Adding new features and capabilities to counter competition.
6. Emphasizing on after-sales service or warranties.
7. Implicitly demonstrating the superiority of its products.
8. CSR participation in community and family-oriented events to position them as friendly and
familiar with the customers
B. Offensive Strategy
The company striving for the top spot in the market, or the market challenger, is engaging in
this conflict. The challenger must evaluate the leader's advantages and pinpoint the
disadvantages. A rival company shouldn't ignore the flaws in its own strengths. This approach
aims to take something away from a target rival, typically market share. An offensive plan could
be created to acquire key clients, high margin market segments, or high loyalty market sectors in
addition to market share.
Characteristics of Offensive stratecy
1. The main consideration is the strength of the leader's position.
2. Find the weakness in a leader's strength and attack it at that point. Slashing prices, launching
comparative advertisements unfavorable to competition.
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Mergerand| Acquisition, Strateigc alliance and Joint Ventures, Vertical
industry.
3.
Goingto unoccupied markets or countries that have been ignored by the rest of the
Truto be the first company to enter into anew market.
4
competitive business with ample resources can buy out a rival firm.It brings increased
A
5. contributing to the bottom line.
geographic coverage and better relationships, thus

REVIEW QUESTIONS

defensive & Offensive strategies

01. Elucidate the characteristics of
of the following.
02. Explain in brief the characteristics
a.
Srategic alliance
b. Mergers & Acquisitions
C.
Vertical Integration
d. Joint Ventures