Week 17

1. Can you think of an organization that has implemented a ‘high risk strategy’ that has resulted in success (why was it high risk at the time and why was it a success – was it good luck or good judgement)?

I think Samsung entering into mobile phone market was high risk strategy and has resulted in success. Before 2000 Samsung were more focused on home appliances and in early 2000 they entered into mobile phone market for the first time. During their time of entrance they could not compete with other well established mobile companies like Nokia, Motorola and Sony Ericsson. Later in mid 2000 when the trend of Smartphone was growing Samsung went from selling zero phones to quarterly sales of 50 million units in two years. In 2008 Samsung took no.1 spot in U.S. mobile market and now it has the largest market share in mobile phone market with 32.1% market share (Samsung, 2013).

2. Now, do the same for an organization who embarked on a high risk strategy that resulted in some sort of failure (why was it high risk and why did it fail – bad luck or poor judgment?)

I have chosen Kingfisher Airlines as an organization which embarked on a high risk strategy and resulted in some sort of failure. Although most of the management gurus and experts say the failure of Kingfisher Airlines is because of global recession of 2008 but there were other many reasons behind the failure. First of all, the owner of the company Mr. Vijay Mallya didn't take suggestions on business operations and didn't involve any skilled executives in decision making process. Likewise, he squandered the opportunity of attracting middle class families by projecting Kingfisher as elite or executive class airlines. The major cause of failure of this company was because of poor judgment made by the executives or owner.

References:

G. Johnson and K. Scholes (eds), Exploring Techniques of Analysis and Evaluation in Strategic Management, Prentice Hall, 1998.

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 14 

Samsung, 2013. Samsung.com. [Online]
Available at: http://www.samsung.com/in/aboutsamsung/
[Accessed 25 11 2013].

Week 16

     1.   In your own words and using referenced quotes describe the difference between organic growth, merger & acquisition and strategic alliance.

Organic growth:

It is a process of expanding firm's operation from its own resources or following concept of 'do it yourself'. In this approach growth of the company can be slower than others. It is an attractive option for small-business who wants to expand business but don't have excess amount of liquid capital (Mack, 2013).

Merger and Acquisition:

The term 'merger' might be used when two companies of roughly equal size get together and collect their resources. The term 'takeover' or 'acquisition' would be more likely to be used where a large company purchases a smaller company. Nevertheless, whether the event is termed as merger or an acquisition the activities of two companies are combined into single entity (Lumby & Jones, 2013).

Strategic Alliance:

It is a process of undertaking a beneficial project by t an arrangement between two companies mutually. In this approach both companies collect their resources to make a separate business unlike merger and acquisition where resources are collected to make two different business same.  A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities.

    2.      Give an example of a company that has grown through a) organic growth, b) merger or acquisition and c) strategic alliance

Organic Growth:

Tiffany & Company also uses a three-prong-growth-initiative strategy. Tiffany is the leading luxury jewelry brand in the United States and ranks second in the world. The company operates through 167 locations globally and generates over $2.6 billion in revenue. Its growth strategy has been a combination of top-line and bottom-line initiatives. First, Tiffany expanded geographically. Next, it introduced new products annually across its jewelry lines and then moved to capture value along the jewelry supply chain by vertically integrating its diamond business. Then, it added new distribution channels and more designer jewelry. Finally, Tiffany created IRIDESSE, its new pearl jewelry store chain, which it is now scaling. (Hess, 2013)

Merger and Acquisition:

Google has acquired about 130 companies from 2001 to 2013 and most popular amongst them was acquiring YouTube in 2006 for $ 1.65 billion.

Strategic Alliance:

Samsung and many other mobile brands have made a strategic alliance with Google for android operating system.

    3.      Briefly discuss the merger between Britvic and AG Barr. What advice would you give to the new Board?

The combination of AG Barr and Britvic is said to be a merger, with management coming from both companies. It is structured as an acquisition of Britvic by Barr and Barr will own 37 percent of combined company but will contribute 16 percent of sales and 23 percent profits. This acquisition will make £35 million of annual cost saving and 23 percent of combined operating profit. As operating margins and earnings per share of Barr is greater than Britvic, latter's management should benefit of it.

Some advices to the new board are:

• Introducing new independent brand
• Promoting new brand effectively
• Effective flow of information between board members
• Effective market research to find out new market segment

Case study

1) Evaluate the case for the merger

                         I.            What are the positives and benefits? What should work well?

Some positives and benefits of mergers are:

• Annual cost savings of £35 million
• Operating profit of 23 percent
• Relationship with Pepsi
• Chance to sell drinks to Britvic's customers
• After valuation Britvic's share price might increase

With formation of new company they can emerge as a new competitor to other soft drink producing companies.

                        II.        What are the negatives and potential risks? What problems might occur?

There is no assurance whether the new company can perform well, utilize advantages gained from acquisitions and achieve expected growth. Likewise, there can be problem while valuating the share price of two companies. Competition with Coke can be tough and could be taken as a potential risk for failure.

III.    What advice would you give the newly formed Board?

Some advices to the new board are:

•  Introducing new independent brand
• Promoting new brand effectively
• Effective flow of information between board members
• Effective market research to find out new market segment

References

Mack, S., 2013. smallbusiness.chron.com. [Online]
Available at: http://smallbusiness.chron.com/organic-growth-strategy-57130.html

Lumby, S. & Jones, C., 2013. Corporate Finance. 7th ed. s.l.:South Western Cenage Learning.

Hess, E. D., 2013. www.edhltd.com. [Online]
Available at: http://www.edhltd.com/articles_OGlessons.htm