Read-to-lead

INTEGRATED MARKETING COMMUNICATIONS (IMC)

noreply@blogger.com (Read-to-Lead) — Fri, 10 Jul 2020 16:05:00 +0530

Introduction

Concepts of IMC When all marketing practices, resources and tools are used (for an organisation) in an integrated manner affect the minds of customers at a maximum level along with maximising the organisational profit al minimal cost, it is called Integrated marketing communication. In general, marketing begins with “Marketing Mix”. Marketing communication or promotion is one of the elements of the Marketing Mix. Advertising using different media, personal selling sales promotions (sales and trade promotion), sponsorship marketing, database marketing, public relation, direct marketing and internet marketing are the activities included in the promotion.

So, integrated marketing communication is the integration of all these tools with other marketing mix elements in order to get a competitive advantage. 'Integrated Promotion Mix' is the other term used broadly to Integrated Marketing Communication (IMC).

In conventional marketing, different professional agencies are appointed for the promotional ac the effect of marketing communications is not evenly distributed which results in contradictory communications making the customers confused. Therefore, money, time and effort, all are wasted. IMC, on the other hand, maximises the marketing impact on customers as well as other end-users with minimum expense.

A holistic approach to promotion is integrated marketing communication which has the purpose of ensuring uniformity of the message and the complementary use of media. Both online and offline marketing channels are included in this concept.

Features of IMC

Customer as to the Initial Point:- One of the primary features of Integrated Marketing Communication is that it considers customer as a preliminary step. It indicates that customer is considered to be paramount in designing a suitable message and media for disseminating brand information; so that they can be convinced and attracted. Generally, an 'inside-out' approach is avoided in IMC, while selecting the appropriate communication channels and outside-in' approach is preferred for this purpose; so that the customers are lured to buy the products.
Coordination of the Organisation:- It is vital that several marketing tools should be used by the marketing managers This feature springs from the first one and hence stresses upon considering customers as the starting point. However, this feature can be valuable only when attempts are made to use various tools of marketing communication just like those employed in the craft industry like plumbing, carpentry. motor vehicle repairs, etc. There are numerous tools used in each of these crafts and coordination of those can help in attaining the desired results.
Several Messages One Voice:- One of the intrinsic features of IMC is that various communication channels, such as advertisements, purchasing point, sales promotions and sponsorships should focus on delivering a single message through multiple channels or various contact points in a consistent manner. In other words, all marketing communication might have multiple echoes but should have one voice. For the purpose of establishing an image, it is vital to ensure harmony between media and messages. Absence of such an effort might spell a disaster on the brand image due to contradictory messages or may lead to wastage of time and money on duplicate activities.
Concentrates Mainly on Final Goal:- The fifth feature of IMC is its ultimate objective to influence the target market or target customers. It indicates that the task of commune simply creating brand awareness or influencing customer's perception about evoking some behavioural response in the customers. It can also be said that the sou people to take action in the form of making purchases: however, this point should not be misinterpreted. The success of IMC is depicted in terms of the degree to which it brings Dan ould be quite impractical to expect actions from each and every effort of communication.

Purpose of IMC

To Create Brand Equity:- Creating brand equity through developing the global brand as well as effective corporate image is one of the main objectives of IMC. The set of specific features associated with a brand which is the reason behind increased demand of brand among businesses and consumer equity'. With the combination of integrated marketing communication and quality products, features can be increased. IMC is an important element in the process of building brand equity. Being “top of mind "consumers' top choice” are the two main features of successful brands. One particular brand is always pointed out when consumers are questioned to name a brand in a given product category. This particular brand name has the feature of being top of mind.
To Provide Information:- Along with having the objective of creating brand equity, IMC is also focussed towards other objectives. One such objective is to provide useful information to consumers as well as organisational buyers. Information provided to customers may involve store hours of a particular retailer, detailed description of a particular product, or even business location. Complete and relevant information helps in making the purchase process convenient and quite simple. It induces the consumer to select a store and complete the purchasing process.
To Influence Consumer Choices:- Another objective of IMC is to influence consumer choices. It acts as a guide or counsel for customers and makes them use their dominance power (king of the market) in the most effective way. By providing updated and complete information about available products and services, IMC enables the customers to purchase sensibly. It is the objective of IMC to show customers the superiority of a particular brand over another brand. It also highlights the consequences of avoiding a particular brand. It is very difficult to modify consumer attitudes and thereafter convince them to sustain the new choice.
To Differentiate Product:- Differentiating the organisational product with that of the co another important objective of IMC. The process through which, a perceived difference between organisational products and competitors' products are developed in the mind of consumer 'differentiation'. Through this definition, it is clear that consumer perception is the basis of brand differentiation. The perceived difference developed through differentiation can be tangible or sometimes intangible (based on image or style) in nature.
To Position Products/Brands:- Along with differentiating the product, positioning the product/brand is also an important objective IMC. Process of developing a brand in such a way that it occupies a distinct and respective position (with respect to the other brands) in the minds of target consumers and then highlighting this distinctiveness through promotional efforts is called positioning. As in the case of differentiation, the perceived image of product features (tangible or intangible) is also an important factor here. A perceived image or perceptual space is how customers see a particular brand in comparison to another brand number of dimensions like price, quality, taste, or social display value.

IMC Components

Promotion/Communication is one element of the Marketing Mix. Promotional activities include using different media), sales promotion (sales and trades promotion), and personal selling ac present scenario, the promotional tools have widened their scope and number of types. In promotional tools also which are considered under the promotion mix such as e-commerce sponsorship, exhibitions, packaging, point-of-purchase displays, corporate communications trade shows, and customer service. And integration of all these promotional tools along with of the marketing mix to gain an edge over a competitor is called promotion mix. Marketers have major methods of promotion; taken together these comprise the promotion mix. When these in a harmonious manner to reach and exceed the promotion objective, the outcome Marketing Communication (IMC). IMC has been adopted as the best possible way to pr according to the situation. The major elements and scope IMC are as follows:-

Advertising:- Advertising is a kind of promotional message developed by organisational get consumers to buy the offered product(s). This is done through different paid med on radio and television, billboards, ads in newspapers, etc. Nowadays, 'product place advertising.
Sales Promotion:- Apart from advertising, another significant promotional tool is sales promotion, which helps in improving sales by influencing the potential customer to buy the promoted product. The different sales promotion techniques include sample distribution, point of purchase display, premium coupon, off-price selling, etc.
Personal Selling:- Personal selling is the personal interface (telephonic or face-to-face) between the prospective buyer and the seller. Influencing the buyer to acknowledge a particular issue, convincing the buyer to follow a particular course of action or building a sound customer relationship, are the primary intentions of this interface.
Publicity:- Publicity is an impersonal not-paid technique of promotion, where the demand for organisational products and services is enhanced through devising editorial remark or supporting news within the print media or through finding an encouraging presentation of it on stage, TV or radio.
Public Relations:- Generally, the public relations (PR) is a promotional tool responsible for developing and maintaining the brand image of an individual, institution or organisation, within the eyes of the concerned public. In terms of PR, a public is someone, who can draw an opinion about the concerned individual, institution or organisation.
Direct Marketing:- Sometimes, organisations directly approach to prospective customers to develop feedback and/or build sales. Conventionally, direct marketing has not been included in the promotional mix. But, nowadays, as it encompasses different strategies, budgets and purposes, and is utilised by different organisations as a part of their IMC plan, marketers regularly claim direct marketing as a part of the promotion mix.
Word.of-Mouth:- Word-of-mouth is referred to as the transiting of information from the individual to individual. Initially, the term was associated only with oral communication. But, now it covers all kinds of human interfaces, such as face-to-face interaction, email communication, telephone and through sending texts. Positive word-of-mouth promotion is not possible until the customers have a positive experience with an organisation. Such word-of-mouth promotions can be developed through providing services of high standards.
Online Marketing:- Online marketing or interactive marketing is a new technique of promotion. Apart from other conventional forms of promotion like advertising, personal selling or sales promotion, which are directed towards the customers only, this interactive marketing facilitates the target customers to interact with the organisation also.

IMC Planning Model

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Factors Contributing to IMC

Fragmentation of Media:- There has been a tremendous increase in the availability of media options for marketers. Marketers are now able to reach customers at more specific locations like metro stations, airports and supermarkets cash counters through the new offering by broadcast media known as "narrowcasting". Not only this, but print media has also witnessed remarkable growth. For example, there was a time when the United States brought up 197 different sports magazines in the market. As a result of mass fragmentation, marketers are now less dependent on mass media and have increased their focus on additional options for promotion such as POP (Point-of-Purchase), event sponsorship, etc.
Better Audience Assessment:- More accurate and specific research techniques have been introduced for the marketers to recognise and target particular market segments like teenagers, old-age people, Dual-Income Households with No Kids (DINKS), Asian-Americans, Hispanics, etc. This has led the marketers to serve the specific target segments with the help of promotional tools rather than using mass media.
Consumer Empowerment:- Nowadays, consumers are more aware, informed and empowered. These powerful consumers are mostly highly educated people, smaller families, single-person households, and experienced consumers. They demand customised information just related to their needs and are usually doubtful about commercial messages. For this purpose, technological systems such as PVR TiVo/DVR play a crucial role in controlling the empowered consumers.
Increased Advertising Clutter:- Consumers are becoming bored and cynical and this is the reason they are transforming themselves as more advanced and revolutionary. The rapid increase in advertising stimuli has weakened the effect of single advertising messages. The rise in the messages has no end, they will be increasing simultaneously.
Database Technology:- Various communication opportunities have been created for marketers to generate, assemble and manage databases. These databases can be used to create customer and non-customer profiles. Marketers can undertake direct-response marketing and telemarketing programmes with the help of this information. This can be enhanced more with the growth of the internet.
Channel Power:- In several products and market segments, there has been a transfer of power from the big manufacturers to big retailers. "Power retailers" like Big Bazaar and Spencer are charging fees and allowances from manufacturers to promote their products in special events and various other retail promotional events.
Accountability:- In order to attain increased accountability, companies are adopting short-term promotional methods such as direct mail, sales promotion, etc., instead of using advertising methods.

Types of IMC Partners

Advertiser (Client):- The advertisers or clients are the key partners in the IMC process. They have the products, services or causes to be marketed and they provide the funds that pay for advertising and promotions. The advertisers also assume major responsibility for developing the marketing program and making the final decisions regarding the advertising and promotional program to be employed. The organisation may perform most of these efforts itself, either through its own advertising department or by setting up an in-house agency.
Advertising Agency:- However, many organisations use an advertising agency, an outside firm that specialises in the creation, production and/or placement of the communications message and that may provide other services to facilitate the marketing and promotions process. Many large advertisers retain the services of a number of agencies, particularly when they market a number of products. For example, Kraft Foods uses as many as 8 advertising agencies for its various brands, while Procter & Gamble uses 12 ad agencies and 2 major media buying services companies. More and more, ad agencies are acting as partners with advertisers and assuming more responsibility for developing the marketing and promotional programs.
Media Organisations:- Media organisations are another major participant in the IMC process. The primary function of most media is to provide information or entertainment to their subscribers, viewers or readers. But from the perspective of the promotional planner, the purpose of media is to provide an environment for the firm's marketing communications message. The media must have editorial or program content that attracts consumers so that advertisers and their agencies will want to buy time or space with them. Media perform many other functions that help advertisers understand their markets and their customers, a medium's primary objective is to sell itself as a way for companies to reach their target markets with their messages effectively.
Specialised Marketing Communications:- The next groups of participants are organisations that provide specialised marketing communications services. They include direct-marketing agencies, sales promotion agencies and interactive agencies and public relations firms. These organisations provide services in their areas of expertise. A direct-response agency develops and implements direct-marketing programs, while sales promotion agencies develop promotional programs such as contests and sweepstakes, premium offers or sampling programs. Interactive agencies are being retained to develop websites for the Internet and help marketers as they move deeper into the realm of interactive media. Public relations firms are used to generate and manage publicity for a company and its products and services as well as to focus on its relationships and communications with its relevant publics.
Collateral Services:- The final participants shown in the promotions process of are those that provide collateral services, the wide range of support functions used by advertisers, agencies, media organisations and specialised marketing communications firms. These individuals and companies perform specialised functions the other participants use in planning and executing advertising and other promotional functions.

Functions/Importance of IMC

Consistent Delivery of Messages:- When a company follows its planning process in a holistic manner, its audience. Most significantly, it demands to implement the same strategy for the brand instead of developing separate strategies for different tools of marketing communication. Here, the prime concern of any effective communication programme is the clarity of messages.
Corporate Cohesion:- IMC is considered as a strategic method of the company corporate image and benefits of its products and services. It significantly affects the company at both external and internal levels. The intent of IMC is to portray the company's image in an effective manner as the inclination of customers is usually towards the companies with whom they feel the introduction of cohesive communication programme in the company is essential. It enables all the employees to understand the company's goals and motives. Whereas, cohesive building a good image of the company.
Client-Agency Relationship:- IMC plays a major role in developing the communication programme in the agency and hence has become an important part of the relationship. Rather than performing one or more tasks, the market communicator must feel responsible for the entire communication programme and its related requirements. It will aid the company to implement a significant strategic position and will also provide advantages over its competitors.
Strategic Development:- IMC facilitates improved communication and builds a strong relationship between agencies and the client company. Due to this, information is communicated freely among the participants;n this helps them on focussing more on organisational goals than on their individual agendas.
Motivation:- IMC acts as a motivator for agencies. It instils a sense of motivation among all the participants (mostly all the stakeholders). As a result, employees are able to show their creativity and potential.
Team Spirit:- Each of the participants owns the company's final plan. They think together, implement the strategies together, avoiding all the internal politics. This helps to resolve the issues which usually arise in individual departments.
Measurability:- Measuring the reaction and responsibility for the communication programme is one of the most important benefits of IMC.
Technology-Based:- Technology advancements are introducing new methods to reach out customers in a better way but this is adversely affecting the traditional media. The scope of radio, television, newspapers, etc is getting fragmented and limited to the audience. The emergence of e-commerce and internet has changed the company's way of doing the business and interacting with its customers developing trends are database marketing, online marketing, etc.
Cost-Effective Budget:- The new marketing communication tools are evolving which are cost-effective and more target-specific compared to other traditional media. Companies are now shifting their marketing more target specific compared to other traditional media. Companies are now shifting their marketing budget from advertising to other promotional methods like consumer and trade promotions. IMC is considered as the most appropriate method for allocation of budget.

Challenges in IMC

Top Management Support:- The implementation of IMC involves a number of changes at an organisational level which is not possible without the consent of the company. Hence, top management plays a crucial role in the successful implementation of IMC. Sometimes, top management may not allow the IMC process implementation due to their ego problems or different viewpoints.
Organisational Barriers:- Company's organisational structure acts as another challenge in the implementation of IMC. Typically, companies consist of several departments having their own set of duties whereas IMC requires a hierarchical organisational structure which is flexible in nature. There are many companies which are still persuading Strategic Business Units (SBU) strategy and functional strategy, where each unit takes its own decisions. In such a situation, it becomes difficult for a company to integrate its communication programme.
Cultural Factors:- The organisational culture may also hinder the implementation of IMC. For successful integrated marketing communication, cooperation and coordination among the employees are important. If the organisational culture is unwilling to adopt the changes, then this may cause a problem in the implementation process. Mainly, government-controlled companies are unlikely to adopt any changes.
Functional Specialisation:- The specialised function of employees also acts as a barrier to integrating the marketing communication process. The IMC theory states that the members of the top management of any organisation should be communication generalists. The concept of IMC encompasses a broader view of the marketplace, customers, competition and communication. In reference to the IMC theory, companies are training their employees to become a specialist in a specific field. But, the specialists hardly communicate with other functional groups. All the functional groups work towards their own objectives following a specific procedure within a limited budget.
Decentralisation:- Decentralisation is the process of redistributing the power and authority of decision making powers among all the employees so that they can be responsive to the needs of consumers instantly. Various management theories also follow the concept of decentralised decision-making instead of the traditional one, where the decision is taken by top management by using the top-down approach it gets conveyed at all the levels of the organisation. But, despite all this, the concept of decentralised decision-making is a barrier for integrating the marketing communication programme.
Short-Term Planning:- One of the prime concerns of IMC is to adopt a long-term planning process in order to create a positive image of itself among its customers and stakeholders. However, many organisations prefer short-term planning to achieve their financial goals rather than focus on customer requirements. Therefore, short-term planning is also a barrier to the implementation of IMC.
Budget Allocation:- Successful implementation of IMC requires cooperation among the departments and employees. For budget allocation, performance evaluation of various departments is done but due to their long-term goals and choice of different communication tools, it becomes difficult for the organisation to compare different departments. It is not possible to assess all communication activities but sales promotion activities can be evaluated as they provide instant results of their cost and returns received,
Unwillingness to Change:- Another barrier for implementation of IMC is the unwillingness to change. Fear of change may arise because of the complex nature of IMC which may affect the areas other than the territory in which it is implemented. The reasons behind the unwillingness to change are uncertainty, the threat to self-interest, the feeling of loss, etc. Out of all the factors, uncertainty is the biggest fear.

STRATEGIC ALLIANCES

noreply@blogger.com (Read-to-Lead) — Tue, 7 Jul 2020 14:47:00 +0530

Meaning of Strategic Alliance

Image Source - Google | Image by - https://blogs.kent.ac.uk

A Strategic Alliance is a formal relationship between two or more parties to pursue a set of agreed-upon goals or to meet a critical business need while remaining independent organizations. During the past decade, companies in all types of industries and in all parts of the world have elected to form strategic alliances and partnerships to complement their own strategic initiatives and strengthen their competitiveness in domestic and international markets. This is an about-face from times past, when the vast majority of companies were content to go it alone, confident that they already had or could independently develop whatever resources and knowhow were needed to be successful in their markets.

But the globalization of the world economy, revolutionary advances in technology across a broad front, and untapped opportunities in national markets in Asia, Latin America, and Europe that are opening-up, deregulating, and/or undergoing privatization have made partnerships of one kind or another integral to competing on a broad geographic scale.

Many companies now find themselves thrust into two very demanding competitive races:-

The global race to build a presence in many different national markets and join the ranks of companies recognized as global market leaders.
The race to seize opportunities on the frontiers of advancing technology and build the resource strengths and business capabilities to compete successfully in the industries and product markets of the future.

Reasons for Strategic Alliances

Entering New Markets:- A company that has a successful product or service may wish to look markets. Doing so on one's own capabilities may seem to be difficult.
Reducing Manufacturing Costs:- Strategic alliances are used to pool resources to gain economies of scale or make better utilization of resources to reduce manufacturing costs.
Developing and Diffusing Technology:- Strategic alliances may be used to develop technological capability by leveraging the technical expertise of two or more firms; an act which may be difficult to perform if these firms act independently.
Obtain Technology and/or Manufacturing Capabilities:- Strategic alliances can be used for obtaining new technologies. For example, Intel formed a partnership with Hewlett-Packard to use HP's capabilities in RISC technology to develop the successor to Intel's Pentium microprocessors.
Reduce Financial Risk:- It reduces the risk of the business. For example, because the costs of developing a new large jet aeroplane were becoming too high for any one manufacturer, Boeing, Aerospatiale of France, British Aerospace, Construcciones Aeronautics of Spain and Deutsche Aerospace of Germany planned a joint venture to design such a plane.
Reduce Political Risk:- Strategic alliance help in creating a good political condition. For example, to gain access to Srilanka while ensuring a positive relationship with the often sensitive Srilankan government, Indian Oil Corporation formed an MoC (Memorandum of Collaboration) with Ceylon Petroleum Corporation for Indian Oil's entry into the downstream petroleum sector.
Achieve or Ensure Competitive Advantage:- For achieving a competitive advantage. For example, General Motors and Toyota formed Nummi Corporation as a joint venture to provide Toyota with a manufacturing facility in the United States and GM access to Toyota's low-cost, high-quality manufacturing expertise.
Vertical Integration:- Trying to attain the benefits of vertical integration (without the costs of doing it alone) is a critical reason why many firms enter strategic alliances. Vertical integration is designed to help firms enlarge the scope of their operations within a single industry. Yet, for many firms, expanding their set of activities within the value chain can be an expensive and time-consuming proposition. Engaging in full vertical integration is especially risky for companies that compete in fast-changing industries. Alliances can help firms retain some degree of control over crucial supplies at a time when investment funds are scarce and cannot be allocated to backward integration. Also, alliances can assist firms to achieve the benefits of vertical integration without saddling them with higher fixed costs and risks. This benefit is especially appealing when the core technology used in the industry is changing quickly.
Shaping Industry Evolution:- Strategic alliances can help shape what industry may look like in the future. In the semiconductor and biotechnology industries, many firms have formed alliances to define emerging standards or new products.

Types of Strategic Alliances

Based on Directions of Alliances:- Like M&As collaborative ventures can be categorized as vertical backward (or upstream), vertical forward (or downstream), horizontal or diversified. The company must always retain control of its core strategic assets and activities but can outsource other activities to partners. Following are the types of strategic alliances:

⇉Diversification Alliances:- Alliances between businesses in unrelated areas are often used by one or more of the businesses to take them into a new competitive arena. This form of the alliance is viewed as important from a portfolio perspective in so far as the key advantage of diversification is to broaden product and market portfolio to reduce the risk of trauma in any one sector.

⇉Vertical Networks and Alliances:- These can be upstream in the supply chain toward suppliers or downstream toward distributors and customers. These alliances produce the following potential benefits

a) The ability for each collaborating business to concentrate on its own core competence, while at the same time benefiting for the core competences of the other businesses in the alliance, creating synergy;

b) Improved responsiveness if just-in-time management techniques are employed;

c) Creating of new barriers to entry;

d) Production of logistical economies of scale;

e) Generation of superior information on activities at all stages of the supply chain; and

f) Tying in of suppliers, distributors, and customers to the business.

Based on the Extent and Timescale of Collaboration:- There are several other methods than can be used to distinguish alliances, which are as follows:

i) The extent of Cooperation Focused and Complex Alliances:- It is possible to distinguish alliances by where they are positioned concerning the number of areas in which the parties cooperate with each other. Some alliances are set-up between businesses to collaborate in only one area of activity, such as joint purchasing, shared research, or shared distribution. A continuum exists between the two extremes of fully focused (collaboration in one activity only) and complex (collaboration in all activities - the parties act in concert to the point where they appear to be one single organization). As with all continua, the majority of real-life cases fall somewhere between the two extremes.

ii) Timescales of the Collaboration:- Another way in which alliances can be sub-divide is by asking how long they are intended to last. Some are set-up for a specific project only and are referred to as 'joint ventures' - time-limited arrangements for the joint accomplishment of a shared aim or project. Others can last for many years and are intended to enable both (or all) parties to intensify the strength of their strategic position on an ongoing basis. Longer-term alliances tend to be more common when the partners are from different countries, as the interpenetration of markets can take many years to achieve and consolidate.

iii) Consortiums:- One particular type of (usually) short to the medium-term alliance is the consortium. Consortiums are often created for time-limited projects, such as civil engineering or construction developments. The channel tunnel was constructed by several construction companies in a consortium that was called Trans Manche Link (TML). TML was dissolved on completion of the project Camelot, the first U.K. National Lottery operator was another example of a consortium.

Advantages of Strategic Alliances

Capabilities:- An enterprise may want to produce something or to enquire certain resources that it lacks in the knowledge, technology, and expertise. It may need to share those capabilities that the firms have. Thus, a strategic alliance is an opportunity for the enterprise to achieve its objectives aspect. Further to that, in later time the enterprise also could then use the newly acquired capabilities by itself and for its own purposes.
Easier Access to Target Markets:- Introducing the product into a new market can be complicated costly. It may expose the enterprise to several obstacles such as entrench competition, hostile government regulations, and additional operating complexity. There are also the risks of opportunity costs and direct financial losses due to improper assessment of the market situations. Choosing a strategic alliance as the entry mode will overcome some of those problems and help to reduce the entry cost. For example, an enterprise can license a product to its alliance to widen the market of that particular product.
Sharing the Financial Risk:- Enterprises can make use of the strategic arrangement to reduce their individual enterprise's financial risk. For example, when two firms jointly invested with an equal share on a project, the greatest potential that each of them stand to lose is only half of the total project cost in case the venture failed.
Winning the Political Obstacle:- Bringing a product into another country might confront the enterprise with political factors and strict regulations imposed by the National Government. Some countries are politically restrictive while some are highly concerned about the influence of foreign firms on their economics that they require foreign enterprises to engage in the joint venture with local firms. In this circumstance, a strategic alliance will enable enterprises to penetrate the local markets of the targeted country.
Achieving Synergy and Competitive Advantage:- Synergy and competitive advantage are elements that lead businesses to greater success. An enterprise may not be strong enough to attain these elements by itself, but it might be possible by joint efforts with another enterprise. The combination of individual strengths will enable it to compete more effectively and achieve better than if it attempts on its own.

Problems/Disadvantages of Strategic Alliances

The high incidence of failure of collaborative arrangements reportedly, 60% of alliances fail, is typically linked to the risks associated with collaborative organisational forms; risks associated not only with the lack of cooperation among partner firms but also with performance failure despite full cooperation.

Lack of Clarity:- When we have a common objective inside within two organisations that cooperate and the corporation leaders fail to clarify their philosophy/objectives, thus the businesses will collide and will fail.
Infighting:- Between the senior managers of the collaborated organisations. They may battle because of their corporate strategy or because of the management philosophy differences or even for their top position in the hierarchy
Culture of Secrecy:- When the cooperated companies are holding secrets from the other one like general information, performance, new product plans, operating issues, organisational structures, etc.
Misaligned Incentives:- When the incentive or rewarding system is not aligned between the two cooperated companies.
Excessive Performance:- When the managers are pushed to catch the managers are pushed to 'catch' impossible figures or any impossible performance. That is happening when we have two different companies cultures, mentalities and learning schools.
Insulation on Performance:- When the one organisation pressures its people and the other one prevents that pressure.
Mistrust:- Undermines any cooperation as good this cooperation could be. Especially when one company believes that the other one is trying to take advantage of her. Either in know-how (in learning) or in power. So, if mistrust exists in collaboration and each company is defensive, we have bad cooperation and the whole atmosphere becomes untrustworthy.

STRATEGIC DECISION MAKING

noreply@blogger.com (Read-to-Lead) — Thu, 2 Jul 2020 15:26:00 +0530

Introductions Strategic Decision Making

Meaning and Definition of Strategic Decision Making The act of selecting between two or more options is known as a decision. A strategic decision is a chosen alternative which influences the major factors that decide whether the organisation's strategy is successful or not. In contrast, a tactical decision influences the daily execution of steps involved in the attainment of organisational strategic goals. Strategic decisions are defined as the decisions which are related to the entire working environment where the firm operates its resources, the people who form the firm and the relationship between the two. The process of choosing the best alternative from the prevailing conditions for making the decisions which provide long-term impact on the organisational performance is referred to as "strategic decision-making”. For example, the development of a new product or replacing old machines with new ones to improve the product or service.

Definitions

"Decision-making is the selection based on some criteria from two or more possible alternatives".

“Strategic decisions are important, in terms of the actions taken, the resources committed, or the precedents set".

“Strategic decisions those infrequent decisions made by the top leaders of an organisation that critically affect organisational health and survival”.

Many times in business organisations, managers fail to make the right decision at the right time. This enables the competitors to grab the opportunity and intensify the problem which converts into a major crisis for the organisation. Therefore, it is important to take a decision at the right time and implement it once the problems are analysed. In simple terms, decision-making means arriving at a conclusion and implementing it instantly.

Nature of Strategic Decision Making

Impacts the Long-term Direction:- The long-term direction of an organisation is largely affected by the strategic decisions. Such decisions are usually taken to help the organisation to attain some advantage.
Concerned with the Scope of an Organisation's Activities:- Strategic decisions are always related to the scope of activities of an organisation.
Issue of Scope of Activity is Fundamental to Strategic Decisions:- For strategic decisions, the issue of the scope of activity is very important. Since the scope defines the boundaries of the organisation for managing it effectively, it is directly concerned with the manager's vision and mission towards the organisation.
Matching Organizational Activities:- Strategic decisions are also concerned with matching organisational activities with the environment where it functions.
Influences Operational Decisions:- Operational decisions can be influenced by the strategic decisions to 'set off waves of lesser decisions'.
Complex in Nature:- Generally, strategic decisions are complex in nature. It can be said that the level of complexity differentiates strategic management from other aspects of organisational management. There should be at least three reasons for this complexity.
High Level of Uncertainty:- The level of uncertainty is high in strategic decisions. The decisions might be taken based on views regarding the future, the exact prediction of which is not possible for the managers.
An Integrated Approach is needed:- To manage the organisation effectively, an integrated approach is needed by strategic decisions. These are not similar to functional problems where single area expertise or perspective can explain or solve the problems.
Involve Key Organisational Change:- Strategic decisions bring in major organisational changes. These changes are not only difficult to decide and plan but they are even more challenging to implement. Thus, the level of complexity involved in strategic management is much more than other operational tasks.
Implication:- Strategic management makes sure that strategy is put into action and it is implemented through an action plan.

Levels of Decision

Mostly, managers are defined by their way of decision-making. For making exceptional decisions, it is necessary for a manager to have sound judgment and to be objective. The company, its profit, employees and the success of managers all are greatly influenced by the wise decisions. Although managers at all level can take decisions, the most critical decisions are made by the top management. It is very important to obtain feedback from other managers during the decision-making process. A manager who makes the right decisions is known as an effective leader. In an organisation, decisions can be made at different levels, such as:

Top Management's Strategic/Critical Decisions:- Such decisions have a long-term effect. The impact and outline the strategy of the entire business which is usually made by top management. Managers must make decisions in an organised way. The Chief Executive Officer or the Board of Directors are considered as the top managers of a company. All the critical decisions regarding strategic planning and development of the organisation are made by them. These managers are also responsible for deciding the launch of a product and handling a major crisis. In addition to this, they identify competitors, decide upon mergers and acquisitions, define a company's corporate vision, create a budget and determine the long-term organisational objectives. For analysing the organisation's strengths and weaknesses comprehensively, a CEO can work undercover as an entry-level executive.
Middle-Level Management Decisions/ Tactical Decisions:- The organisational strategies are implemented through these decisions which are generally made by middle-level managers. The non-critical decisions are mostly taken by middle-level managers. The top management always encourages the middle-level managers to make the right decisions. If a topmost manager is an effective leader then he allows his middle-level managers to make decisions and supports them without interfering in it. The various jobs of middle-level managers include taking tactical decisions, managing the regional markets and making plans to attain short-term organisational goals. In addition to this, middle management is also eligible to make decisions on marketing a new product, interacting and handling lower-level management and discussing the organisational issues with the top management. It is the responsibility of the middle-level managers to design a strategy for achieving the inter-departmental goals.
Lower-Level Management Decisions/Operational Decisions:- These decisions are related to the daily operational activities of the business. Such activities are held in routine and can be taken up by middle-level or lower-level managers. The most common mistake done by managers is that they hear or see only those things which they want to. They should try to make the decisions keeping in mind a clear picture. Here, the supervisors or team leaders may decide on issues related to employees such as overtime, promotions, pay rates, training, hiring or termination of employees. A lower-level supervisor can also make decisions on rewarding the most efficient employee of the month or offer this award in the form of incentives like gift vouchers or holiday packages.

Modes of Strategic Decision Making

There are certain strategic decisions which are only undertaken by the sole authority that has far-sightedness and a high convincing power like an influential CEO or a dynamic entrepreneur. Other than this, some strategic decisions are formed based on incremental choices which drive the organisation more towards one direction than the other after some time. According to Henry Mintzberg, the three modes of strategic decision-making are adaptive, entrepreneurial, and planning. The fourth mode, i.e., logical incrementalism was later added by Quinn. These four modes are discussed below in detail:-

Entrepreneurial Mode:- In this approach, the strategy is formulated by a single person. This mainly focuses on the opportunities which are directed by the founder's vision and are held by powerful decisions. Here, opportunities are considered first and problems are kept secondary. The most important goal is the growth and development of the organisation. The real-world examples of this strategy formulation are Wipro and Infotech.

Adaptive Mode:- This approach is also known as "muddling through". Unlike entrepreneurial mode, here the search for opportunities is ignored and the main focus is on reactive solutions. For example, Wipro and HCL became responsive by selling customised Personal Computers only after Dell Computers were introduced in the markets of India. A lot of bargaining that occurs is concerned with the priorities of the organisational objectives. As a result, the prevailing strategy is fragmented and the most suitable strategy is developed which would take the organisation ahead incrementally. Generally, this model is adopted by many hospitals, government agencies, universities and also by various organisations.

Planning Mode:- The planning mode includes the systematic collection of information for situational analysis, development of alternative strategies and selection of appropriate strategy. This mode is both proactive and reactive to the current problems. For example, Maruti Suzuki started introducing new models and abandoned the production of non-moving and old models, when MNCs entered into Indian automotive market.

Logical Incrementalism Mode:- This is the fourth mode of strategic decision-making which combines all the other three modes of decision-making. According to Quinn, "Logical incrementalism is an interactive process in which the organisation probes the future, experiments and learns from a series of partial (incremental) commitments rather than through global formulation of total strategies.”

Broadly, it is an added mode of decision-making, which can be described as the combination of other modes mentioned above. Here, the mission and objectives of an organisation are crystal clear to the top management. But while formulating the strategies, it selects "an interactive process where the organisation explores the future, experiments and learns from a series of partial (incremental) commitments rather than through global creation of overall strategies”. Even though the mission and objectives are pre-defined, the strategy can be formed out of several discussions, debates and experiments.

Strategic Decision Making Process

Planning Process:- The process and behaviour that leads the activities and directions of an organisation to achieve the pre-defined goals in pre-defined timeframe are known as planning. The planning process aims to promote the organisational mission continuously. For example, to be socially constructed, intuitively improvised, politically negotiated and shaped through emergent behaviours. Seven factors are involved in the process of strategic planning:

Decision Parameters:- The measurable factors like manpower, material, marketing, method, and machine are functions which form boundaries for strategic decision-making are referred to as decision parameters.

Decision Criteria:- Decision criteria are the measurement standards, rules or tests for assessing the feasibility of activities regarding their effectiveness. These are specific measurable goals which are derived from the strategic objectives. \

Decision Conditionality:- These are the factors which condition or enforce the restriction on the effectiveness of organisational activities. The strategic decisions are affected by both internal and external environmental factors.

Decision Alternatives:- Decision alternatives are defined as the choices between two options or courses of action. In a decision-making process, when a decision-maker chooses a course of action from the given alternatives, this decision is known as 'choice'.

Technical Model:- Technical model has been derived through the use of the scientific methodology. Usually, an organisation subconsciously or consciously compares the known alternatives that are derived from subjective probabilities to test the feasibility of each alternative on the grounds of all the objectives and their subjective sides also.

Technological Model:- This model is a strategic choice which is associated with the value-adding system of organisation.

Correction Factor:- The process of strategic planning should be such that the outcome of the implemented decision is equivalent to the organisational objectives. This is the main reason behind its occurrence.

Programming System:- Once the strategic action is planned it should be programmed. Programming is defined as a system of opportunities, services, and projects which are sequenced to assist economical and timely strategic action. There must also be a clear schedule of resources which are required for performing the programmed services, opportunities, and projects. The organisation acts as a 'taker' of programming activities at the individual and organisational levels in all decision-making situations. Depending on the demand for strategic decision-making, an organisation can choose the most appropriate programming or even adopt ‘reprogramming' for itself.

Performing Modalities:- Once the decision regarding the programming is finalised, the next step is to determine the execution of the specific elements of strategic decision-making. However, the programming provides the fundamental heuristic operations, but still, specific actions are required to be performed for attaining the desired outcome.

Profitability Factor:- An organisation can competitively execute its strategic decision-making with the help of sound planning, effective performance and well-organised programming. While the profitability level of the firms' strategic initiatives is dependent on their institutional systems, the organisations who wish to go global must take into account the validity of the institutional systems and their effects and if required they can adopt re-institutionalisation.

Developmental Growth:- The decision-making process is decided based on the reoccurrence of regular schedules. The decision-makers believe that repetition will provide a constant level of profitability therefore they repeat the most profitable strategic decision-making process programmatically. Alternatively, repetition is rare in the emerging markets and if done then the profits are sustainable. In such markets, the technological endowments of organisations are less refined. Thus, it is convenient for other firms (whether local and overseas) to acquire, replicate and replace these endowments.

Issues in Strategic Decision Making

Contextual Issues:- Many researchers and writers have issues regarding the ambiguous and fluid nature of the prevailing business environment. This has created doubt upon the effectiveness of the strategic decisionmaking process as it does not consider such factors. Another critical issue in the business environment is complex. In addition to this, fluidity is not just about to change rather it also denotes unpredictability and instability. Therefore, the strategic decision-makers need to make sure that the contextual issues are addressed in the models or methods they are adopting. At last, it can be said that using the simple, neat, orderly and rational model will not be of much use in the current scenario.

Personality/Style:- One of the important factors to be considered in strategic decision-making is the style and personality of the decision-maker. Different people have different viewpoints therefore decisions vary from person to person. Like, some people rely on data, some people have self-belief and take decisions on their own, and some people go with their intuitions and do remarkably well, while others depend on other's opinions. There are situations where conflicts are managed effectively and in other cases, it is covered up which often results in harming the organisation and its decisions as a whole. Such personality and style issues must be categorised while making and implementing the strategic decision-making process. This enables the organisation to run smoothly and without facing any problems regarding personality/style.

Effects of Biases:- Another major issue that must be taken into account is the business of people who are a part of the decision-making process. Research usually identifies three kinds of bias:

↣ Causal Attribution:- In this type of bias, a person takes the credit of good results and blames others for bad results. This leads to misinterpretation of information and hinders the overcoming of situations.

↣ Escalating Commitment:- It is the trend of lining up a large number of resources deliberately towards the course of action which is not sound. Wasting good money post bad money is something that happens frequently but most decision-makers do not confess it easily.

↣ Distorted Re-Collections:- Often it is heard that "if memory serves". Inappropriately, it does not do that many times. Memories are not only selective, but they are also even distorted sometimes. It makes little difference whether it happens intentionally or unintentionally. But, since not much of the thoughts and plans are jotted down on paper, it is important for the memory to remain intact and for the decision-makers to take care of the distorted recollections. These biases can be guarded in a few ways and also by putting them in use by strategic decision-makers.

Role of Values:- The role of values is very similar to personality/style. Values are promoted by the leaders and redirected in their actions. These set of values outline the issues which are to be addressed in the strategic decision-making process. These will also be showing up while designing substitutes, the course of action using which they are judged, and the final procedure that is to be followed. In such a case, it is advisable to formulate a strategic decision-making process to carefully analyse the organisational values.

Role of Consensus:- According to many researcher and writers, consensus plays an important role in the strategic decision-making process. This is because consensus provides the best proof of commitment towards the decision, in the absence of which the decisions are carried out ineffectively. Other than this, the challenging process of striving towards the fulfilment of commitment not only yields commitment but also improves decisions. Notably, striving to achieve consensus means that neither harmony is needed nor authority is handed over. It is ultimately the decision-maker who makes the final decision.

However, strategic decisions cannot be conveniently taken by a single person having an autocratic approach as he would not be aware of each and every detail that is required for making a strategic decision of an organisation. Therefore, consensus plays a significant role in strategic decision-making in most of the organisations.

Nature of Strategic Decisions:- As discussed earlier, strategic decisions are referred to as complex, ambiguous, fluid and uncertain. Strategic decisions have some outlining features which are as follows:

Direction:- Strategic decisions modify or approve the direction of the organisation.
Finance:- Strategic decisions also have few financial implications. It is an issue of “betting the company” in certain cases.
People:- People having key roles in an organisation are highly impacted by the strategic decisions which affect their morale, commitment and motivation.
Risk:- At last, strategic decisions have a considerable amount of risk. In this case, the results are uncertain and involve high-end threats.

Strategic Retail Planning: Retail Planning

noreply@blogger.com (Read-to-Lead) — Tue, 30 Jun 2020 14:56:00 +0530

Introduction Strategic Retail Planning

The vision and mission of a retail organization can be determined with the help of a retailing strategy. It is an organized plan with the help of which retailers can manage competitive, technological and even international movements. In the context of retailing, the concept of strategic management is not old. Traditionally, retailers only responded to the changes taking place in the business environment. But, these changes are occurring in the technological environment as well as in the tastes and preferences of consumers.

Capitalizing on the growth opportunities and taking actions at the correct time to overcome the possible threats of the business environment can be ensured with the help of a continuous and strategic SWOT analysis. Through retail strategy, an organization can ensure optimum use of resources leading to gaining sustainable competitive advantage. To win over the competitors, the retailer needs to define its specific mission statement. This mission statement helps in defining the scope of tasks and functions of the retail stores, matching the functions with the present business environment, developing competitive and skilled manpower, allocating tasks to the manpower and defining the budget and timeline for the completion of tasks. The proper implementation of these initial exercises will lead to the long-term survival of the retail stores.

Retail Mix

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Defining the Business Philosophy, Mission and Corporate Objectives

Defining the mission of the business is the initial step in the process of strategic retail planning. It is the statement that describes the objectives of the business and the activities to be undertaken by the retailer to meet those objectives. Unlike public organisations, which focus on maximising the wealth of its stockholders by increasing the stock value and dividends, a small, private firm focuses on mitigating risks and obtaining a particular level of income.

A mission statement of the business describes the targeted retail segments and suitable retail formats to be adopted. For example, for an office supply category specialist, the mission statement could be "to create opportunities for associates, serve the customers, and generate value for shareholders.”

After the determination of the mission of the organisation, the next step is to determine its objectives and the desired future positions, i.e., where the organisation wants to reach. The objectives of the stores refer to ends which the stores want to attain through its operations and USP, i.e., unique selling proposition.

Objectives of the stores can be divided into two categories, i.e., internal store objectives and external store objectives:

Internal Store Objectives:- With the available resources, the level expected to be achieved is defined by the internal store objective. For example, increasing the income of store in the upcoming year by 17%.

External Store Objectives:- Objectives defining the bearing of the store on its environment are referred to as external store objectives. For example, offering quality products at low prices to gain a high degree of customer's confidence.

Situation Analysis

The other name for situation analysis is situation audit. It aids in knowing the current position of the organisation and forecasting as to where the organisation will be if the present strategies are continued. Strategic gap refers to the gap between the current and the anticipated future position of the firm. Bridging this gap is the objective of strategic management. There are two broad categories into which situational analysis can be divided, viz., internal analysis and external (environmental) analysis.

An internal analysis is carried out to identify the organisation's strengths and weaknesses, whereas an external analysis is carried out to identify the opportunity and threats in the business environment

Internal Analysis:- The other name for internal analysis is the internal audit. It aims to determine the quantity and quality of the available resources, the effectiveness of utilisation of these resources and the degree to which these are distinct and difficult to be imitated by the competitors. As such, retailers' strategic capabilities can be assessed.

There are different categories of resources, viz., intangible resources, financial resources, human resources and physical assets. The image of the retailer and the goodwill personified in the brands of the retailer is the intangible resources, while the tangible resources include physical assets, human resources, and financial resources.

Finance:- This involves determining the organisation's ability to raise equity and debt financing and the flow of cash from the present activities. This is dependent on the organisations' financial position and presents the debt-equity ratio.
Merchandising:- This involves determining the level of skills and knowledge of the buyers, the relationship between the organisation and the suppliers and the effectiveness with which the organisation develops and manages its brands.
Marketing:- This involves determining the organisation's marketing capability, its level of market orientation, its effectiveness in marketing research and mechanism of competitor intelligence, along with determining the effectiveness of marketing in maintaining customer loyalty and developing new customs.
Management Capabilities:- This involves determining the management skills of the company, i.e., the adequacy of the company's top management and to know the abilities and commitment of middle level management.
Store Management:- This involves determining the skills and qualities of store managers and sale. assistants, the staff turnover ratio and the adequate level of training and motivation amongst the employees of the non-management grade.
Operations:- This involves determining the overhead cost structure, the effectiveness of the informative systems, stock control systems, loss prevention systems and determining the overhead cost structure, capability of the supply chain system to deliver goods to stores.

External Analysis:- Determining the opportunities and threats in the retailing environment of the store is referred to as external analysis. It involves factors that have an effect on the macro environment of the retail industries and their activities. This analysis helps retailers in the study of the following;

International retailing environment
Legal retailing environment
Technological retailing environment
Political environment
Economic environment
Socio-cultural retailing environment

Identification and Evaluation of Strategic Opportunities

Deciding the strategic direction for the company is the next step after the situational analysis. Portant strategies used by the organisations are growth, consolidation and harvesting. For example, monocular mund exit the market or consider productivity improvements when they are in maturing or declining Sligo. muse scenarios, it would be difficult to justify a large amount of infusion of capital in the business.

Strategies for Growth

➳ Market Penetration:- This strategy leads to an increase in market share by increasing sales in the existing market. Retailers target existing customers with existing products range. Retailers have to ensure that their existing customers visit their stores frequently or purchase more on every visit. Thus, the following activities can result in market penetration

Reduction in prices
Increase in impulse purchases through improved visual merchandising
Increasing convenience
Increasing customer loyalty
Store revamps or extensions
Increasing promotions.

➳ Market Development:- This strategy involves the introduction of an existing product in a completely new market. This can be done either by targeting the new segment of the customers or by the geographical expansion within the native environment. It involves greater risk as compared to market penetration because appealing to a new audience requires some product repositioning strategies. This strategy also involves a greater amount of capital.

➳ Product Development:- This strategy is just a reverse of market development strategy as it involves introducing a new product in the existing market to increase the sales from the existing market. This can be undertaken by introducing a new product line or by replacing the old product with the new one. For example, grocery retailers use this strategy very effectively. They do so by introducing non-food line items (viz., stationery products, electrical goods, CDs etc.) in their stores.

➳ Diversification:- This strategy aims at launching the new product in a completely new market. Generally, diversification can be divided into two categories, i.e., related diversification and unrelated diversification. When an organisation expands its existing product line or makes additions to it, it is known as related diversification. On the other hand, when an organisation adds unrelated or new product lines and attempts to enter new markets, then it is known as unrelated diversification

Evaluating Retailing Strategies

Evaluating retailing strategy assists in the determination of the potential of the retailers to gain long-term profits and maintain a competitive advantage by grasping the opportunities. While evaluating the strategic opportunities, strengths and weaknesses of the retail organization and marketing attractiveness should be kept in mind. Higher reserves should be invested in market opportunities to maintain a strong competitive advantage. The retailer evaluates market opportunities while targeting the new market segments relating to;

Technological requirements
Degree of competition
Environmental issues
Market size
Rate of growth of the market
The requirement of human resources
The profitability of the segment
Legal and regulatory issues

The above factors are compared with the strength of the retailer such as:

Financial resources
Buying power
Financial resources
Salesforce
Managerial competence
Current market share
New product development
Own-label reputation
Merchandising skills
Customer service, quality and reliability, fit with the current image of a retailer concerning the depth and breadth of the product line.

Two-dimensional matrixes are plotted by the combination of the index rating of the strength of the retailer and market attractiveness. Basically, there are three categories in each dimension, viz., low, medium and high. Market attractiveness and a course of action to be undertaken are reflected by the product's position. For example, the retailer should capitalize on the opportunity and invest aggressively in case of strong business position and market attractiveness.

On the other hand, the retailer should consider harvesting or divesting in case of weak business position and market attractiveness. And finally, firms should invest selectively in case of an intermediate situation, i.e., when the opportunities on both aspects are moderately strong or moderately weak on one aspect and moderately strong on another aspect.

Development of Marketing and Positioning Strategies

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

What is Industry and Competitive Analysis ?

noreply@blogger.com (Read-to-Lead) — Thu, 25 Jun 2020 17:47:00 +0530

Introduction of Industry and Competitive Analysis

Several environmental factors influence organisations. It is up to managers to ensure that this influence used positively, leading to organisational success. For the firm to make a profit, it must create value for customers or buyers. Hence, the firm needs to understand its customers. While creating value, the firm has to obtain goods and services from suppliers.

So, it must value its suppliers and form enduring business relationships with them. While creating value for its hovers, the firm must closely look at the rivals who are there in the arena competing for the same 'space'. Hence, the firm must understand the competition. Thus, buyers, suppliers and competitors form the substance of a firm's industry environment.

Forces from the industry environment directly affect the firm, and the amount of influence the firm has over its industry is dependent on the dominance of its competitive position. Most strategic management books utilise Michael Porter's Five Forces Model as a framework for analysing the competitive forces within the industry. Like so many other models used to make strategic decisions today, the implicit assumption of this model is that the industry is operating within an economy closed to the greater society and ecosystem.

From the view of the Five Forces Model, industry analysis is traditionally portrayed in strategic management books from the rather static perspective of "what is" within the industry. This model suggests that strategic managers scan the product market segments in which they compete for opportunities and threats without much regard for context.

Their primary focus is on increasing market share within defined industry boundaries, and the competition is defined as those competitors who directly compete with them in individual product or service categories. Cooperative relationships are typically limited to those with direct suppliers and buyers. Capabilities to create value are viewed as residing in a single firm, and organisational performance is measured primarily in terms of how well the individual firm is managed concerning its economic sustainability.

Thus, within this traditional paradigm of industry analysis, strategic managers engage in adaptive learning within well-defined industry segments.

Components of Porter's Five Forces Model

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Dominant Economic Features

↪ Market Size and Growth Rate:- A company needs to have an overview of the industry market size. The market size of an industry is equal to the number of companies in a particular industry. Knowledge of industry growth rate helps in identifying the industry's position in its lifecycle, i.e., early development stage, rapid growth stage, early maturity stage, maturity stage, stagnation stage, decline stage.

↪ Number of Rivals:- Before making an entry, a company should identify the rivals I there may be numerous small rivalling companies or a small number of big business companies or a small number of big business houses. For example, the petrochemicals industry is dominated by Reliance and a few other larger players industry like the FMCG industry has many players - both big and small. It is also important to be aware of the current developments in the industry like mergers and acquisitions, strategic alliances.

↪ Scope of Competitive Rivalry:- The firm needs to know about the extent or scope of competition in its industry. For example, if product diversification is identified as a future then a new company in the industry should also a plan for future diversification.

↪ Buyer Requirements and Needs:- A company needs to know about the needs and requirements of its customers. It also requires to keep a track of the changing patterns of buyer's needs so that it can acquire new customers and retain the existing ones. It can do this by doing systematic research on buyer behaviour and other market trends.

↪ Degree of Product Differentiation:- The degree of differentiation in the industry will define the kind of pricing premium that a firm can charge its customers. In case the level of differentiation is low then the prices charged by the firms will also below. This will, in turn, raise the level of competition in the industry. It becomes very difficult for new players to compete based on price due to low-profit levels.

↪ Product Innovation:- Product innovation is also an important dominant feature. There are industries where companies are characterised by short span of product life cycles and high product innovation levels. Research and Development is a very important function in these industries and industry participants should always try to create new and innovative products for maintaining their market position. For example, there is a very high rate of innovation in the smartphone industry. The typical lifecycle of a smartphone phone is very short as the buyers are on the lookout for new features all the time.

↪ Rate of Technological Change:- Industries that are dependent on the rapid diffusion of new technologies are characterised by high investment in R&D on new technologies. When a company enters an industry where the rate of change of technology is high it must direct its efforts in staying at par with the latest technological changes in the industry. Companies which don't adjust to the rapid change of technology lose their market share, e.g., Nokia.

↪ Vertical Integration:- It is necessary to analyse the level of integration of the companies. Analysis of industry is largely affected by the horizontal and vertical in integration levels as both the level have their respective advantages and disadvantages. Apart from the integration activities competitive advantages and competencies of the rivals firms should also be analysed.

↪ Economies of Scale:- Companies also need to analyse and keep abreast of economies of scale in the industry may bring the cost down. They need to analyse the scale of operations of their competitors and see if a larger scale of economies brings about reduction in their cost structures. High economy scales lead to low production costs and high-profit returns.

Factors Analysed in Industry Analysis

↬ Basic Features and Conditions of the Industry:- The most basic task is to analyse the general features and condition of the industry.

The basic feature of industry involves the size of the industry, the products and services offered by the companies, variants of the products and services, past performances of the industry, current industry position, future expectation, etc.

↬ Industry Environment:- Another factor that must be studied in the industry analysis is the environment of the industry. The environment of an industry can be classified fragmented, emerging, matured, declining and global industries.

↬ Industry Structure:- To analyse the industry in a better way, the structure of that particular industry should be understood. Every industry has a specific market size, a certain number of companies and each company has its own market share.

The firms in an industry compete with each other to capture the market. These characteristics determine the severity of competition in the industry, the extent of profitability and attractiveness of the industry.

↬ Industry Attractiveness:- Industry attractiveness is determined by factors like industry potential, industry growth, the profitability, future trends for the industry, the entry and exit barriers in the industry, etc. All these play a vital role in developing the attractiveness of an industry.

↬ Industry Performance:- The determinants of an industry's performance are its annual production, profitability per year, technological advancements, etc.

↬ Industry Practices:- The practices of an industry can be defined as the products or services in which the companies deal in, the type of markets they share, the business practices they carry-out, such as pricing, promotion, selling, research and development, etc. All of these factors affect the overall industry in significant ways.

↬ Emerging Trends:- The trends that are going to define the industry in future also impact the business practices indirectly Some of the important factors like product life cycle, industry life cycle, changes in needs and preferences of the consumers, changes in laws, possibilities of new entrants, innovation, changes in technology, etc., are some variables that have a significant impact on the industry.

What is Demerger ?

noreply@blogger.com (Read-to-Lead) — Thu, 18 Jun 2020 16:19:00 +0530

Introductions Demerger

Demerger or Spin-off refers to a business strategy where a company particularly the larger company is divided or split into two or more units i.e., into the number of small units operating separately. The objective of all smaller units is the same. Thus, the shares are individually sold to the public. Generally, demerger is done so that each of the units can perform its business efficiently by focusing on the specific task which will contribute to the easy achievement of the objectives.

In order to sell the subsidiaries and smaller units of the company, the demerger is adopted. The main objective of the demerger is to divide a company into various units for achieving the specialization in a particular segment. Demerger or spin-off is just the reverse strategy of merger which implies the strategy to join the number of companies so that the firms intend to work together under the same roof.

Alternatively, the demerger is the opposite of 'uniting of interest' or 'amalgamation like merger'. The shares are issued to the shareholder of the demerged company by the new company that is having an individual economic and legal identity distinct from the demerged company. Consequently, the large numbers of shareholders of the larger company come up as a shareholder of the smaller companies of the new company.

Demerger is a method of corporate restructuring where the investor has the advantage of having direct ownership in the head entity which was indirectly owned in the previous time. There is no variation in ultimate ownership of the companies or trust which was formed as part of the group. The company or trust which come to an end to own the entity is called 'demerging entity.

Reasons For Demerger

Rearrangement of the current business by way of separating various activities into several segment.
In order to divide the management into various smaller units.
To use the concept of responsibility accounting and accountability.
To have an efficient management system in the units.
To provided security against the valuable assets from the predator through a hostile takeover.
To provide security against the valuable assets from the predator through hostile takeover.
Division of undesirable activities and focusing on the main activities.
Facilitating management buy-out.

Types of Demerger

There are two main types of demerger which are discussed:-

Split-Off:- Split-off refers to the restructuring of an existing corporate structure in which the stock of a smaller business unit or subsidiary is transferred to the parent company for shares. This transferring of share by the business unit or subsidiary to a shareholder of the parent company in place of the same amount of stock to be traded in the latter time is a very unusual situation. A split-off is also called as a "tender offer exchange". Hence, due to this reason the parent company is separated from its subsidiary units.

Split-Up:- Split-up refers to a corporate strategy in which the parent company come to an end or closes down after transferring all its assets to the other two or more companies. The parent company in this situation give up the total amount of their stock in exchange for the stock of the transferee company.

Advantages of Demerger

The advantages of demerger are as follows:-

Separation of Management of Divisions:- The main advantage is the separation of management to division to determine the responsibility and accountability of we responsibility and accountability of each individual company. Thus, to have a proper management structure. As a result, the efficiency and productivity of the company are increased.

Safeguard against Cash Loss Risks/Non-Profitability due to High Risk:- To minimize the risk in the company mainly at the time of high risk is expected in the business then each individual unit is separate a separate entity from the parent company and with specialized responsibility centres such as profit centre.

Enhancing Responsibility and Accountability:- It becomes very easy to look after the performances of each unit very efficiently as each individual company has its distinct head. As a result, the employees of the company work very effectively without any disturbance which will yield a positive return for the company and also lead to better accountability and increased responsibility.

Decluttering Management Processes:- The activities in the business processes which are useless and irrelevant can be removed by the help of the chance provided by spin-offs. It aids in restructuring the processes and also aid in decluttering. Hence, leads to an increase in productivity and optimum utilization of resources are available in the parent company as well as in its segments.

Defence against Hostile Takeover:- Spin-off is a very important defensive strategy. Spin-off aid in protecting the valuable assets from the predator is the most profitable portion of the business. To acquire the benefits, the companies display the risky and non-attractive the situation in front of the predator.

Disadvantages of Demerger

The disadvantages of demerger are as follows:-

Loss of Economies of Scale:- The cost of production might increase scale: The cost of production might increase and profitability may be reduced when a demerger is done in a situation when the company does not undergo the situation of diseconomies of scale.

Increased Costs and Overheads:- Demerger is a quite expensive process as a breakdown into numerous companies which will incur the cost. Therefore, the costs are increased by answer separate entity which will affect the profitability of the company. As a result, there will be a need for repetitive allocation of resources or equipment which automatically raises the cost of production. Hence, the additional expenditure incurred should be carefully analyzed.

Difficulty in Raising Additional Funds:- The reliability of the demerged company as a new entity is very less with the lenders of funds because the parent company has portrayed risk for the investors against the demerged or the subsidiary company. Therefore, it becomes very difficult to raise additional funds to form the new company.

Lower Turnover and Profits:- The overall profits and turnover may be reduced for the new companies as it was anticipated because of the increase in costs, scarcity of resources and funds. One other important reason for the lowering of profit is that it is very challenging the task to form a company as a new entity.

Loss of Synergistic Operations:- The spirit of working together or synergies may be lost which was in existence at the time of incorporation of the parent company because of demerger was the single parent company is divided into several units. Hence, the resources might also not give effective result as it was supposed to give when the integrated output was produced.

What is Business Ethos?

noreply@blogger.com (Read-to-Lead) — Sun, 14 Jun 2020 16:06:00 +0530

Business Ethics Business ethics means how ethics can be used in conducting the business. It helps businessmen in determining the difference between the correct and incorrect and ethical and unethical activities. A set of moral standards is provided by business ethics which helps in carrying-out business ethically. Each and every person engaged in executing and administrating business is required to adhere to these moral standards.

The business environment is filled with several problems that involve ethical issues. Business ethics is a tool that helps. In solving those problems by providing ethical criteria, standards and principles. Business ethics is a type of applied ethics as it is the application of ethical values, codes and principles in the real business world. These ethical values, codes and principles help in defining the principles and preferences to be followed by the organizations.

The need for Business Ethics

Protect Consumer Rights:- Today consumers are considered asking. All businesses should focus on fulfilling the needs of the consumers. But in actual, businessmen are busy in earning profits for themselves instead of taking care of consumer's interest. They get indulged in unethical practices like adulteration, misleading advertisements, etc. This is why the need for business ethics arises in the business world. Business ethics helps in protecting consumer rights by controlling businessmen activities and making business more consumer-focused

.Socially Accountable:-Organizations are now exploiting employees and customers. They are making excessive and unethical use of natural resources. Business ethics is a tool to make an organisation socially answerable and accountable for its activities. It means that organisations are now required to protect consumer, society, employees and natural resources

.Introducing Socialism:-Business ethics helps in introducing the theory of socialism in a country. In socialism, business is not the sole property of the business owner. Success and growth of any business also depend on the endeavours of many stakeholders like shareholders, employees, creditors, customers, etc. Hence, profit must be distributed among all the stakeholder's

Protect Small-Scale Industries:-Large-scale organisations share a major portion of the market. They overshadow the small-scale industries and try to terminate them from a business. Business ethics helps smallscale industries to stand in the market by providing ethical standards and code of conduct to be followed by the small-scale industries.

Consumer Strength:-Consumers are nowadays becoming more aware of their rights. Due to increased consumer knowledge and awareness, the need for business ethics arises among the businessmen. Organisations are expected to perform activities keeping in mind various ethical guidelines.

Strengthening Business-Society Relationship:-Business can be connected with society in terms of several aspects like the business connection with employees, customers, creditors, shareholders, competitors and government. Business ethics helps in strengthening the connection between business and society. It builds a strong relationship by fulfilling the entire stakeholder's interest.

Focus Shifts from Sellers to Buyers:-In the beginning, the major focus of any business was to earn the profit. Every business activity was performed based on the seller's interest. But now the focus of the business has shifted from sellers to buyers. Business activities are done not only to make a profit but also to satisfy customers.

Benefits to Business and Society:-Business and society directly or indirectly influence each other. Business ethics is useful for business as well as to society. It helps businessmen in adopting justice, truthfulness, reliability and the human element in their actions. It guides businessmen in distinguishing among right and wrong, just and unjust and acceptable and non-acceptable actions. Not only this, but business ethics also helps in protecting consumer and employees' interest, promoting healthy competition and sustaining values and morals of society. Thus, business ethics also helps in the growth and development of society.

Ethical Concerns in Organisation

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Principles of Business Ethics

Be Credible:-Business should be based on credibility. Business ethics explains that customers can do business with an organisation only if they have faith and confidence in the organisation. An organisation following credibility as its major principle can be easily identified by the customers. Credibility can be gained by adopting principles like justice, truth and fairness in business activities.

Be Broad-Minded:-For the success of a company, leaders of the company should be broad-minded. They should be willing to consider the ideas of others. They should also take suggestions and feedback of consumers as well as team members so that the best idea can be implemented.

Fulfil Liabilities:-No business can go through good times forever. There are also situations of crisis. Therefore, businessmen should try to fulfil their liabilities to regain lost customer's and creditor's faith, even in the worst business conditions as well.

True Documentation:-One of the important principles of business ethics is documentation. Organisations reach to their customers through advertisements, pamphlets, brochures, etc. Organisations should maintain all these paper records correct, clear, concrete, concise and professional. They should also check these records periodically to ensure that they are not misunderstood by the customers.

Involvement in Society:-Business should actively contribute to society for its betterment. For this, a business should indulge in social activities and solve social problems.

Proper Check of Financial Statements:-Companies should make proper records of accounting and financial statements. These financial statements depict the true financial conditions of a company. These records also help in controlling unethical and unjust activities by highlighting transactions which are doubtful in nature.

Respect Others:-Respect can be gained only by giving respect to others. Businessmen should treat everyone with humility and dignity. They must not discriminate others based on their status, power, age, religion, caste, etc.

Factors Influencing Business Ethics

Social Institutions:-Various social institutions exist in a society like family, school, religion, government. These institutions are also linked with each other. Individuals acquire the values taught by these institutions. These institutions set norms according to which they reward or punish the actions of individuals in society. As a result of which individuals learn to adopt values from their day-to-day life experiences.

Organisational Goals:-Ethics in business is also affected by the goals and objectives of the organisation. Companies have to make decisions to achieve their goals. These decisions can be in contradiction to the ethical values of managers. But some values like leadership, integrity, truth, knowledge, etc. can help in changing organisational goals and employee's action to achieve these goals.

Work and Career:-One of the important factors affecting business ethics is work and career. WON the job or tasks to be performed by the individual whereas career is a systematic arrangement of me work profiles of an individual during his lifetime. Some values are associated with each and every work. Individuals are required to conform to those values.

Superiors:-Superiors also affect the ethical values of subordinates. Subordinates are forced to do activities which are beyond the ethical boundaries. For example, superior may ask a subordinate to prepare an advertisement having a misleading message to gain profit.

Peers and Colleagues:-Peers and colleagues are the other factors affecting ethical values of an individual. An individual cannot work alone. He has to make an informal relationship with peers and co-workers also. To remain in the group he has to follow group norms. Group norms are the standards to be followed by all group members. Therefore, it can be said that an individual's values and beliefs are influenced by the values and beliefs of his colleagues to a great extent.

Professional Codes:-Professional codes are the codes made by the management to influence the actions of members of their organisation. For example, bodies of law professionals, company secretaries. accountants, engineers, doctors like Institute of Chartered Accountants of India (ICAD. Institute of Cost and Works Accountants of India (ICWAI), All India Management Association (AIMA), have made certain ethical codes. Not only professional bodies, but companies also formulate code to advise the employees to act ethically. These are made to show that the company takes care of the interest of employees, consumers, and society. Codes are generally made regarding policies of companies like fair recruitment and wage policy.

What is Marketing?

noreply@blogger.com (Read-to-Lead) — Tue, 26 May 2020 19:09:00 +0530

Marketing is a place where you can buying and selling, goods and services to customers and other business. Marketing including advertising, promotion, selling to customers. They are some types of marketing which effecting market structure like- social media ( Facebook, YouTube, Instagram etc), newspaper, T.V & radio, or affiliated marketing on behalf of a company.

Marketing also defines by traditional marketing or modern marketing. Both marketing channels were different and unique. Promotion, Placement, Product, Price are the marketing mix were marketing in these Maine categories.

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Marketing Mix

Product:- This represents an item or service designed to satisfy customer needs and needs. To effectively market a product or service, it is vital to spot what differentiates it from competing products or services. it is also important to work out if other products or services are often marketed in conjunction with it.

Price:- The sale price of the goods reflects what consumers are willing to buy it. Marketing professionals got to consider costs associated with research and development, manufacturing, marketing, and distribution—otherwise referred to as cost-based pricing. Pricing based totally on consumers' perceived quality or value is understood as value base prices.

Placement:- the kind of product sold is vital to think about when determining areas of distribution. Basic consumer products, like paper goods, often are readily available in many stores. Premium consumer products, however, typically are available only in select stores. Another consideration is whether or not to put a product during a physical store, online, or both.

Promotion:- Joint marketing campaigns are also called a promotional mix. Activities might include advertising, advertisement, personal selling, and PR. A key consideration should be for the budget assigned to the marketing mix. Marketing professionals carefully construct a message that always incorporates details from the opposite three Ps when trying to succeed in their audience. Determination of the simplest mediums to speak the message and decisions about the frequency of the communication are also important.

Extended Marketing 7P’s

People:- All companies are reliant on the people that run them from battlefront staff to the director. Having the proper people is important because they're the maximum amount a neighbourhood of your business offering because the products/services you're offering.

Processes:- The delivery of your service is typically through with the customer present so how the service is delivered is once more a part of what the buyer is paying for.

Physical Evidence:- Most services include some physical elements albeit the majority of what the buyer is paying for is intangible. for instance, a hair salon would offer their client with a completed hairdo and an insurance firm would give their customers some sort of printed material. albeit the fabric isn't physically printed they're still receiving a “physical product” by this definition.

Traditional Marketing vs Modern Marketing

Traditional Marketing

Traditional marketing has been used and enjoyed by people everywhere on the planet, so it’s no surprise that everybody is conversant in this idea. It’s also designed to focus more on selling a particular service or product and uses a spread of mediums to advertise a brand.

Because of these factors, traditional marketing is simpler to know, and corporations won’t have any difficulty explaining their product or service to varied age groups. It also works best with an area audience because it is often centralised during a city or region. What’s more, they will be accessed without an online connection and kept for reuse.

NewsPaper:- This sort of traditional marketing strategy may be a quick way for a corporation or individual to spread their information. As such, it’ll forever endure the ever-changing marketing strategy landscape.

TV and radio ads:- Thousands of individuals tune to the radio a day, so advertising a product or service through this channel still works.

Flyers and brochures:- Flyers and brochures are designed to capture the eye of a good audience. They typically use vibrant colours to convey a message or display a picture the reader can easily remember.

Billboards and signage:- Using outdoor billboards and signage are great ways to advertise a business to daily drivers, commuters, and other people who are walking around the city. Direct mail. This traditional marketing strategy is employed to spread awareness of a particular product or service to a selected target market. It uses mail to deliver promotional printed pieces like postcards, brochures, and letters.

Modern Marketing

While traditional marketing’s focus is that the company’s product or service, modern marketing is more customer-oriented. Businesses that adopt this strategy always put their consumers’ satisfaction in particular else, so they’re ready to address their audience’s unique wants and wishes.

Since modern marketing uses a digital platform, it’s more customisable. It also can easily adapt to vary, so it's no problem maintaining with the newest marketing trends. Plus, it is often accessed on any device, which suggests companies have a better chance of reaching a worldwide audience. All of those factors help build customer loyalty and trust, also as worldwide brand recognition.

Email marketing:- People check their emails multiple times each day, so email marketing may be a fantastic strategy to advertise a product. However, this works best with individuals who have already engaged with the brand.

Internet ads:- Many websites and online platforms are willing to display advertisements for a price. Google ads and YouTube video ads, for instance, are two large advertising platforms which will advertise a particular product or service to high-targeted audiences.

E-Commerce Websites:- Creating an e-commerce website is an efficient way for people to conveniently learn more a few brand’s products. By sharing the online site's URL, people that click on the link are instantly delivered to the e-commerce website where they will scroll through the pages and appearance at the brand’s offerings.

Using social media sites like Facebook, YouTube, Twitter, and Instagram:- Social media websites have a built-in data analytics tool that permits brands to stay an eye fixed on their success, engagement, and ad campaigns. It’s also easier to make a buzz using Facebook, YouTube, Twitter, or Instagram thanks to online marketing trends like using hashtags.

What is Strategy?

noreply@blogger.com (Read-to-Lead) — Mon, 25 May 2020 19:31:00 +0530

The term strategy entered the business world from military services where it was originally used. The strategy works as a blueprint of an organisation that defines its vision, mission, and also helps in determining the future course of action. The strategy helps an organisation to minimise the strengths of competitors by maximising its own strengths. The strategy is formulated to achieve current goals of an enterprise by optimum allocation and utilisation of internal resources and by collaborating different organisational pursuits.

Strategy tries to achieve synergy and balance between objectives, resources and concepts to maximise the possibility of success and fruitful results. In wider terms, strategy refers to determining the fundamental longterm organisational goals and at the same time developing plans, acquiring, allocating and deploying resources to achieve those goals. The purpose of formulating strategy is to bring consistency and alignment in the activities of an organisation, which can be accomplished by various endeavours, methods and resources.

Type of Strategy

Shareholders:- Shareholders of an organisation can also be seen as strategists for that organisation. In the case of public sector organisations, the government plays the role of the shareholder; whereas, in the case of private organisations, the general public and lenders are the shareholders. The shares of individuals in case of organisations are very less in any the organisation, which is why; it will not affect the strategic eval shareholders of private organisations especially lenders (banks and other financial institutions participate in strategy formulation within the organisation; their only motive is to make a handsome on their investment. The government can perform an important role in the strategic control and evaluation of public sector organisations through its various agencies.

Board of Directors:- Another strategist in an organisation is the board of directors. The formal evaluation ar selection of different executive decisions within the organisation along with understanding they're respective environmental. business and organisational consequences are the responsibility Of Board of Directors. In certain organisations, the actual power to supervise strategic evaluation can be in the hand of the Board. On the contrary, in other organisations, this power/authority can be seized by the Chief Executive Officer or any other higher authority like headquarter (in case of MNC), concerned ministry (in case of a public organisation), etc

Chief Executives:- Chief executives are also strategists in the organisation. The overall strategic evaluation and control within the organisation is the responsibility of chief executives. Ideally, the performance of the organisation under a CEO is not the basis to judge him/her. To accurately judge the CEO, only his/her performance should be evaluated. Now, the question arises who should be given the responsibility of evaluating the CEO. In cases where the chief executive is not answerable to anyone (mainly in case of an entrepreneurial organisation), it became difficult to assign this responsibility rather than depend on self-evaluation. However, in case of the presence of higher authorities like majority shareholders or family council (in case of family organisations), the performance of the CEO is evaluated by these higher authorities.

Managers:- Individuals executing the management functions within the organisation are called managers. These are also strategists. A manager is charged with the responsibility to control the one or more employees/departments to safeguard that these departments or employees complete their allotted duties in a pre-determined manner. Individuals making important decisions in the organisation which can affect its growth and performance are shareholders or Board of Directors. These constitute the top management of the organisation. Any type of managerial position is accountable for more responsibility and normally gets higher pav as compared to a general employee. To take the right decisions, middle-level managers can contribute to the strategic control and evaluation as the addressees of directors, and as providers of feedback and information.

Level of Strategy

There is only three strategy level here, they have been further defining.

Corporate Strategy
Business Unit Strategy
Functional Strategy

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

7s Strategy

Strategy: The strategy concept includes the purpose, mission, goals, objectives, action plans and policies framed by the organisation. The 7S framework recognises the fact that it is easier to frame a strategy than to execute it.

Structure: The structure denotes the organisational chart. In other words, it systemically signifies the
whole business organisation. It also allocates various roles and responsibilities to each unit. This is the most visible and easiest to change element in the 7S framework.

System: Systems determine the rules, regulations and procedures which govern the functioning of the organisation. These systems are made by the organisation and govern the way of doing business in the organisation. It is considered as the main agenda of managers during any process of organisational change.

Staff: Staff is a very important element of the 7S framework. It is concerned with the recruitment of individuals for different departments and evolves them as managers of tomorrow. It is a comprehensive process of recruitment, selection, motivation, and reward-giving. It also denotes the kind of culture the organisation wants to create in the organisation and whether new recruits can assimilate in the organisation.

Skills: Skills are the ‘unique competencies’ which redirect the organization's abilities. These skills can be in the of engineers skills, new product development, market research, analytics. These skills can bein the of engineering skills, new product development, market research, analytics, customers care and delight, quality etc.

Style: Style is a variable which determines the effectiveness of the management tones the effectiveness of the management to successfully implement the organisational changes. It is a way the managers handle the clients, top-level management, severed action plans, etc. Style defines a true leader of the company.

Shared Values: Shared values are the basis of the McKinsey framework. It defines the values beyond the set goals and objectives of the organisation. These are the norms and etiquettes which govern the working of the organisation and which guide the behaviour of the members of the organisation. The shared values are also called superordinate goals.

Scope of Strategic

The decisions and activities which define the future perspective of an organisation by outlining its activities and structure are called strategic management. These activities and structure determine the scope of strategic management, which are described below:

Economics:- Strategic management involves analysing and studying the market for formulating the strategies according to the market conditions. It is the field that is concerned with monitoring the patterns of competitors to scrutinise their competitive strategies, their production process, their costing strategy, etc. so those counter-strategies can be formulated. It tries to understand the degree of competition in the market. Strategic management also facilitates in analysing the environmental factors and their relations with the organisations as well as their relative influences on organisational operations.

Sociology:- An organisation operates in an environment and in a specified market. Strategic management is a study of this environment and market. It includes providing a direction to the organisational activities. It strives to achieve the organisational objectives by establishing a relation between the strategic alternatives and employee performance outcomes. It correlates employee performance with organisational activities and how performances can be improved. Moreover, a business has some responsibilities towards the society in which it operates, as an organisation is a social entity.

Marketing:- Strategic management involves studying the market structure, competitor analysis, strategic of the firm's products, etc., so that effective strategies can be formulated for becoming a market leader. It emphasises on conducting researches on market structure and studying the influence of market-oriented factors and strategic alternatives that in turn helps in strategic planning. It is an interrelated field of study that requires concentrating on the factors that influence the business and planning so that they are handled effectively.

Management:- Strategic management strives to achieve the organisational goals by continuously encouraging internal capabilities and utilising the resources in an optimum way so that the needs of holders can be satisfied. It deals with analysing the decisions made by the top management for the sustainable development of the organisation. It is the responsibility of the management to identify the environmental factors that influence the organisation, recognise the opportunities and threats existing in the environment, and formulate the strategies accordingly to deal with them.

Basic Model of Strategy

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Environmental Scanning:- There basic is the monitoring, scanning and collections information internal and external environment.

Strategy Formulations:- There basic is the formulations vision, mission, objective etc are formulations for long-term or short-term plan help to recognized activities.

Strategy Implementation:- In the Implementation as the selected strategy must be effectively put into action for organizations.

Evaluations and Control:- After a strategy is an implementation successfully worked or not checked under Evaluation or control activities.

Benefits of Strategic

Fulfilling the responsibilities of the Board Members:- One of the most important reasons for implementing the process of strategic management in an organisation is that it relieves the board members from their duties.

Helps in Assessing the Objectives:- Strategic management relieves the board and senior management from their daily tasks to some extent so that they can focus on securing the future of the organisation. Disciplines of strategic management help the organisations to gain a wider perspective instead of putting all their efforts in meeting short-term challenges.

Develops a Decision-Making Framework:- With the help of an appropriate strategy, employees can make routine decisions within a framework while ensuring that those decisions are contributing to the progress of the organisation in one direction. The strategy helps in setting the vision, checks reason for existence and values of the organisation, defines its objectives, differentiates between threats and opportunities, identifies techniques to enhance organisation's strengths and minimise the weaknesses. Thus, it defines an outline and specifies the limits within which decisions are made.

Helps in Measuring the Progress:- By implementing the process of strategic management, the organisation is forced to establish objectives and set measures of organisational success. To establish success measures, t is important that the organisation analyses the factors that are crucial to its current success. Then the organisation needs to revise, re-evaluate or update, and then implement its objectives. It is also important that the board members and corporate-level managers are also aware of these performance measures.

Provides an Organisational Viewpoint:- While handing the operational issues, managers generally tend to overlook the interdepartmental issues or the issues related to the organisation as a whole. Strategic management considers the organisation's viewpoint and also lays stress on the interrelated sectors so that a strategy that is beneficial for the entire organisation is developed.

Improves Stability:- Certain strategies provide strength to the organisation by opening more avenues of growth. For example, if a business deals with only a couple of clients, then to survive, it is not in the position to lose any one of them. Strategic management aims at helping the organisations in acquiring more customers so that the business is no longer dependent on only a few clients. By implementing strategic management, an organisation can enhance its stability by executing strategies like - developing a new product line, acquiring a new company, catering a new customer segment, etc.

Strong Labour Supply:- Strategic management helps in conducting hands-on staffing practices so that the quality and quantity of labour can be improved. A strong workforce can be developed by – preparing organisational charts, providing employees with a comprehensive job description, refining recruitment policies, conducting yearly appraisals, organising training sessions, taking measures to lower employee turnover rate, preparing a succession plans, developing competitive compensation plans and abiding by the laws and regulations related to central and state government.

Strengthens Brand Management:- A company's brand image can be damaged by introducing a new product in the product line or by acquiring a company that does not match the market image of the organisation. Strategic management keeps in mind the objectives of brand management while making organisational decisions.

Identifies SWOT:- Strategic management scans the organisation's environment for identifying the strengths, weaknesses, opportunities and threats that are faced by the organisation as a whole, as well as by its separate departments. Once these are identified, it becomes easy to find out the issues related to the product line, marketing channels, pricing methods, marketing practices, staffing practices, e-commerce activities, etc.

Limitations of Strategic

Time-Consuming:- Strategic management process is extremely time-consuming. An organisation has to put immense efforts and resources for implementing the process of strategic management.

Challenging Process:- Implementing the process of strategic management is quite difficult. It takes a highly skilled and specialised workforce to craft and execute a strategy. A Master's or Doctorate degree in the same discipline is needed to become a strategist. Appointing these strategists or working with an organisation providing strategic assistance is generally quite expensive for an organisation.

Absence of Short-Term Benefits:- Although the investors are interested in achieving quick returns, the rewards for applying strategic management principles can be realised only in the long-run. At times, strategic management causes short-term losses for the organisation to deliver long-term benefits. These short-term losses can diminish the value of the organisation that may cause it to shut down.

Unexpected Outcomes:- Many concepts of strategic management are related to making future predictions. But practically the future cannot always be foretold. Any significant political or financial change in the environment may lead to results that would be totally different from those that were projected while formulating a strategy. It is very challenging to predict future business outcomes due to the dynamic nature of the environment. Hence, in such circumstances, strategic management can prove to be a bane for the organisation.

Poor Adaptability:- Strategic management may create inflexibility and bureaucracy in an organisation and takes away the ability of the organisation to react to the changes in the environment. As a result, the organisation is not able to exploit environmental opportunities and steer clear of the threats.

Limited to Set of Rules:- An organisation cannot apply the process of strategic management according to some prescribed norms, programmes and schedules. It is based on a theory that deals with every situation in a prescribed manner. This makes strategic management a belief or dogma of business and management rather than a practical approach. This becomes a hindrance in strategy formulation.

Failure, Reasons and Values

noreply@blogger.com (Read-to-Lead) — Sun, 24 May 2020 12:50:00 +0530

Ways to Measure the Success of Merger and Acquisition

The ways to measure the success of merger and acquisition are as follow:-

Achieving Strategic Goals and Objectives:- The first measure of success is the degree to which the merger has moved the combined firm towards achieving its strategic goals and objectives. It is important to understand that merger is not a strategy, but a means of implementing strategy. This difference is critical. A firm's strategy must be driven by clients and practices. The likelihood of a successful merger is higher when firms have identified and agreed upon their long-range business goals and the steps necessary to achieve them. Each firm should be able to articulate why merger will help them to achieve their long-term vision and improve on their ability to serve clients.

Economic Factors:- The second type of merger success measures are economic ones, which are the most difficult to define. The corporate Return on Investment (ROI) measure really does not apply to law firm mergers. First, it is hard to quantify the investment, because law firms are not purchased. The investment might be the merger integration costs (e.g., technology), professional services relating to finding and negotiating the merger, opportunity costs for lawyer time spent on merger discussions and implementation, or some combination of these three things. It is also difficult to measure return because law firms do not show profits in the corporate sense. A law firm's profits are distributions to its partners, and it is hard to distinguish between the compensation portion and true profit. Finally, even if the partner compensation and profits were clearly delineated, or if assumptions were made regarding "notional salaries” for the partners, it would still be difficult to distinguish merger-related performance from either market factors or internal factors unrelated to the merger.

Measure Change:- The third measure of success is the degree to which the combined firm has changed. There must be a change within the firm in order for a merger to be successful. If the merged firms maintain the status quo, then the combined firm has probably not moved forward. Firms that take advantage of their merger will make both internal changes (e.g., changing compensation structure, changing the practice management structure) and external changes (realigning practice groups, evaluating client relationships). It is important for lawyers from both predecessor firms to work together, which requires flexibility and willingness to change.

Client Base:- The fourth measure of success is the additional clients or matters that the combined firm can attract These are clients or matters that neither firm would have been able to attract independent of the merger This is an external affirmation of the firm's strength and position in the market. It may be related to increased depth and the ability to handle larger matters, or increased breadth and the ability to provide additional services. One way to measure this is to look at the increase of work from existing clients. Of course, consideration should be given to market factors, such as a big case, which might skew the numbers.

Value Creation in Mergers and Acquisitions

The merger should be attractive to the shareholders of the companies involved if it increases the value Value creation may result from a number of factors such as economies of scale in production, distribution and management, a technology that can be best deployed by the surviving company, the acquisition Allow what distribution, and cross-selling of each other's products. However, experience shows that merger synergies de difficult to attain and their size can be disappointing. Acquisitions are sometimes made to re-deploy excess corporate cash and avoid double taxation of dividends to shareholders, but the tax argument may lead the acquirer to overreach into areas beyond its competency. Changes in technology and the globalization of markets have led to many recent mergers. These factors have created opportunities for mergers activities. The value of the merged firms appears to be greater than the sum of the components. This implies that value is created and increased by mergers, reflecting underlying economics and efficiencies of corporate fusion

→Shareholders of acquired firms during the period just before the announcement date of a merger or tender offer gain by about 15 per cent in mergers and about 30 per cent in tender offers. However, in earlier periods, the abnormal returns of acquired firms are negative, indicating that their managements were not performing-up to their potentials.

→Shareholders of acquiring firms for the period before the announcement dates realize modest positive returns, but these are not always statistically significant in earlier periods, however, their shareholders' abnormal returns are positive, indicating that, acquiring firms previously had a record of successfully managing asset growth.

→Target residuals do not decline after the merger. This further indicates that the mergers, on average, are based on valid economic or business reasons.

Value Creation in Horizontal Mergers

"Usually, conjunctions are called horizontal if the partnering firms produce the same or similar products". Similarly, "Horizontal conjunctions of firms are done by companies that are operating with the same products within the same markets meaning they are competing directly".

Horizontal conjunction reinforces the market position, i.e., the market share of the integrated firm. A strong market the position has advantages in negotiating with suppliers as well as with buyers. In addition to these synergy effects based on external scale economies, horizontal mergers can lead to a better cost structure based on an internal scale economy. The better cost structure is the result of a number of synergies effects such as:

→Specialization advantages, which result from possibilities of the division of labour in larger organizational units.

→Construction technology-related effects, according to which investment costs increase sub-proportionally with increases of capacities.

→Advantages, which the result from a reduction of spare part volumes for production facilities thanks to central warehousing

→The principle of least common multiples, according to which consecutive production steps reach the lowest Å level of cost at their least common capacity multiple.

→Economies due to lot sizes, as larger lots, can be produced and set-up costs can be lowered. In a nutshell, horizontal acquisitions can generate synergy effects based on economic synergy mechanisms as well as on resource-based synergy mechanisms.

Value Creation in Vertical Mergers

Vertical mergers increase the vertical integration of a firm by taking over a customer or a supplier. Similarly, “The merger is vertical if there has been a kind of buyer-seller relationship between the partnering firms and they thus seek integration along with the value chain", Value creation in a vertical merger can be done as:

→Vertical mergers and acquisitions mainly reduce market uncertainties, which results in lower transaction costs. These transaction cost savings include search and information cost to gather prices and product characteristics of suppliers, the cost for contract conclusion, as well as the cost for quality control, and other costs such as administration and taxation. At the same time, vertical mergers can reduce warehousing costs and increase capital turnover as stocks can be reduced.

→In a vertical merger or acquisition, a firm acquires a supplier or distributor, and the acquirer modifies and improves the value chain through calibration of various value drivers. For example, in the pharmaceutical industry, the manufacturer has the tendency to acquire the drug distributor to create more value by owning its own distribution source.

→Sometimes, vertical acquisitions lead to alienate some of the customers, even though there are chances of increasing the firm's performance. For example, PepsiCo discovered this effect after acquiring Pizza Hut, Taco Bell, and KFC. One objective of these acquisitions was to use the three restaurant chains as distribution channels to sell Pepsi's drinks. Soon, Coca-Cola convinced Wendy's and other fast-food chains that selling Pepsi in their stores indirectly benefited those of its competitor that PepsiCo owned. Later, PepsiCo spun-off its three food units to form Tricon, a separate entity. Thus, many firms balance the anticipated benefits of a vertical merger and acquisition having potential risks.

Value Creation in Conglomerate Mergers

M&A-transactions leading to diversification are conjunctions of firms that do neither operate in the same markets nor in the same industry. In the literature, authors often refer to this type of M&A transaction as a conglomerate. “In conglomerate conjunctions, partnering firms do not have any relatedness between their products and/or their markets.”

→Some conglomerate mergers and acquisitions might profit from better management. This corresponds to a transfer of scarce resources, i.e., management capabilities from one firm to the other firm.

→Synergy effect in conglomerate mergers is based on specific risk reduction, which lowers the cost of capital. “In unrelated acquisitions, where such efficiencies (internal synergy effects) are not expected to be present, value creation occurs nevertheless, and is associated with the co-insurance effect.” This synergy effect is based on external economics of scope.

→The co-insurance effect has been subjecting of an ongoing debate, in which opponents of conglomerate mergers and acquisitions argue that shareholders can achieve co-insurance effects better by diversifying their share portfolio and that diversified companies create less value than a portfolio of focused companies.

Reasons for Failure of Merger and Acquisitions

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Limited or no Involvement from the Owners:- Appointing M&A advisors at high costs for various services is almost mandatory for any mid to large size deal. But leaving everything to them just because they get a high fee is a clear sign leading to failure. Advisors usually have a limited role, until the deal is done. Following that, the new entity is the onus of the owner. Owners should be involved right from the start and rather drive and structure the deal on their own, letting advisors take the assistance role. Among others, the inherent benefit will be a tremendous knowledge-gaining experience for the owner, which will be a lifelong benefit.

Cultural Difference:- One of the major reasons behind the failure of mergers and acquisitions is the cultural difference between the organisations. It often becomes very tough to integrate the cultures of two different companies, who often have been the competitors. The mismatch of culture leads to deterring working environment, which in turn ensure the downturn of the organisation.

Flawed Intention:- Flawed intentions often become the main reason behind the failure of mergers and acquisitions. Companies often go for mergers and acquisitions getting influenced by the booming stock market. Sometimes, organisations also go for mergers just to imitate others. In all these cases, the outcome can be too encouraging

.Integration Difficulties:- Companies very often face integration difficulties, i.e., the combined entity has to adopt a new set of challenges in the changed circumstances. To do this, the company should prepare plans to integrate the operations of the combined entity. If the information available on related issues is inadequate or inaccurate, integration becomes difficult.

Overestimated Synergies:- Mergers and acquisitions are looked upon as an important instrument of creating synergies through increased revenues, reduction in net working capital and improvement in the investment intensity. It is important to know the required capacity potential versus the current bandwidth of the merger.

What is Corporate Restructuring ?

noreply@blogger.com (Read-to-Lead) — Sat, 23 May 2020 15:00:00 +0530

The terms “corporate restructuring' refers to the complete process in which the company combines its business operations and increase its positions for attaining the predetermined goals, stay in the competition and earn more profits. The basic goal of corporate restructuring is to manage the business operations in an effective, efficient and competitive manner for increasing the market share, brand power and synergies of the organization. It consists of significant re-orientation, reorganization or realignment of assets and liabilities of the organization through conscious management actions with the objective of drastically altering the quality and quantity of the future cash flow streams. In the present situation, the joint ventures, alliances, mergers, amalgamations and takeover is the simple and fast way of increasing ability and obtaining a large number of market share.

Reasons for Corporate Restructuring

The companies have to open new export houses in order to survive in the cut-throat competition due to globalisation. As only the producers having a lower cost of production can exist in the market according to the global market concept. Hence, restructuring of the companies becomes compulsory.

The companies are compelled to approach a new market and new types of customers due to the modification in fiscal and government policies such as deregulation or decontrol.

In order to enhance the performance of the organisation, it becomes very important for companies to accept the alterations made in the sector of information technology.

There are numerous companies divided into the smaller business segment The corporate restructuring also arises due to the wrong division of the businesses? The division of product that is not suitable for the company must be disposed of. The companies are forced to re-launch themselves due to cut-throat competition.

The reduction in the number of personnel becomes important both at work and managerial level to increase the level of productivity and to minimise the cost.

The various medium scale companies are influenced to work in the global markets because of the easy convertibility of rupee.

The companies operating in the competitive market requires to emphasis on the basic activities of the business for earning synergy benefits, lowering the operating costs, to increase the productivity of the operations and to make use of managerial knowledge so that the business can earn a profit.

The combination of various abilities and development of activities will help to attain the economies of scale.

The business risk can be reduced by expanding and changing the business activities which will help the firm to attain the minimum target rate of return.

The unprofitable company by the help of re-structuring can be transformed into a profitable company.

What is Acquisitions?

noreply@blogger.com (Read-to-Lead) — Fri, 22 May 2020 14:43:00 +0530

An acquisition is when one company purchases most or all of another company's shares to gain control of that company. Purchasing more than 50% of a target firm's stock and other assets allows the acquirer to make decisions about the newly acquired assets without the approval of the company’s shareholders. Acquisitions, which are very common in business, may occur with the target company's approval, or in spite of its disapproval.

The acquiring company buys the shares or the assets of the target company, which gives the acquiring company the power to make decisions concerning the acquired assets without needing the approval of shareholders from the target company.

Types of Acquisitions

There are various takeovers according to the type of acquiring a business and the business being acquired and also the method required for acquiring business to purchase the other. The various types of acquisition are as follows:

Friendly Takeover:- The takeover when both the companies agree for the takeover is known as a friendly takeover. The shareholder of the acquired company gets cash or may receive some number of shares from the acquiring company.

Hostile Takeover:- In this takeover, one company acquires the other company without agreement. It is done only in public business because the acquiring companies take control of shares in the stock of the target company.

Reverse Takeover:- In the reverse type of the takeover, the small company buys the bigger company or private company buys the public company for avoiding the security regulation required to become a public company.

Back-Flip Takeovers:- This is a rather uncommon type of takeover in which the acquirer company becomes a subsidiary of the target company. After the takeover, the business is carried out in the name of the acquired company.

Process of Acquisitions

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Benefits of Acquisitions

Reduced entry barriers:-With M&A, a company is able to enter into new markets and product lines instantaneously with a brand that is already recognized, with a good reputation and an existing client base. An acquisition can help to overcome market entry barriers that were previously challenging. Market entry can be a costly scheme for small businesses due to expenses in market research, development of a new product, and the time needed to build a substantial client base.

Market power:- An acquisition can help to increase the market share of your company quickly. Even though competition can be challenging, growth through acquisition can be helpful in gaining a competitive edge in the marketplace. The process helps achieves market synergies.

New competencies and resources:- A company can choose to take over other businesses to gain competencies and resources it does not hold currently. Doing so can provide many benefits, such as rapid growth in revenues or an improvement in the long-term financial position of the company, which makes raising capital for growth strategies easier. Expansion and diversity can also help a company to withstand an economic slump.

Access to experts:-When small businesses join with larger businesses, they are able to access specialists such as financial, legal or human resource specialists.

Access to capital:- After an acquisition, access to capital as a larger company is improved. Small business owners are usually forced to invest their own money in business growth, due to their inability to access large loan funds. However, with an acquisition, there is an availability of a greater level of capital, enabling business owners to acquire funds needed without the need to dip into their own pockets.

Fresh ideas and perspective:-M&A often help put together a new team of experts with fresh perspectives and ideas and who are passionate about helping the business reach its goals.

What is Merger ?

noreply@blogger.com (Read-to-Lead) — Thu, 21 May 2020 14:44:00 +0530

A merger is an agreement that unites two existing companies into one new company. There are several types of mergers and also several reasons why companies complete mergers. Merger and Acquisition (M&A) are commonly done to expand a company’s reach, expand into new segments, or gain market share. All of these are done to increase shareholder value Often, during a merger, companies have to prevent purchases or mergers by additional companies.

Mergers and acquisitions (M&A) can be a sell or buy-side deal. Depending on which type of deal it is, determines what type of institutions are involved.

Examples of Sell-Side Firms

Investment Bank (primary institution)
Commercial Bank
Stock Brokers
Market Makers

Examples of Buy-Side Firms

Hedge Funds
Asset Managers
Institutional Investors
Retail Investors

A list of Successful Mergers and Acquisitions ( M&A ) in India

Vodafone-Idea merger
Snapdeal and Freecharge
Flipkart and Myntra
Ola and TaxiForSure

Examples Successful Mergers and Acquisitions ( M&A ) in India

Vodafone-Idea merger:- Vodafone India and Idea Cellular, two of India top wireless carriers, are merging operations in the country to create an entity that will be equally owned by UK’s Vodafone Group and India’s diversified Aditya Birla Group. The USD 23 billion deal has received the CCI's approval and is likely to be completed in 2018. This deal may well create India’s largest telecom operator.

Snapdeal and Freecharge:- E-commerce startup Snapdeal acquired mobile recharge service Freecharge in April 2015. The cash plus stock deal was pegged at USD 400 million, making it the biggest acquisition in the history of India's internet industry. When the deal took place, Snapdeal raised around USD 1.1 billion in funding, while Freecharge had total funding of USD 120 million. Freecharge continued to operate as a separate entity following the acquisition, which allowed Snapdeal to expand its digital commerce ecosystem. After a turbulent last few months, Snapdeal finally sold Freecharge to Axis Bank for USD 60 million.

Flipkart and Myntra:- After months of speculations, India's premier e-commerce startup Flipkart acquired its fashion-focused rival Myntra in May 2014, a move which was in light of Amazon's expanding presence in India. Neither party confirmed the exact value of the acquisition, but reports placed the cash and stock deal between USD 300 million and USD 330 million. Myntra remained a separate entity following the acquisition and continued to expand its presence in the country, as did Flipkart. Myntra founder and CEO Mukesh Bansal was appointed on Flipkart's Board and was made head of the fashion division of the e-commerce conglomerate.

Ola and TaxiForSure:- Ola, one of India's largest ride-hailing service, acquired the smaller-but-value-centric TaxiForSure for USD 200 million in a cash and equity deal in March 2015. The deal saw Ola expand its presence considerably in the country by adding TaxiForSure's 15,000-plus fleet across 47 cities onto its own platform. TFS COO Arvind Singhal was appointed the company's new CEO, while its founders Aprameya Radhakrishna and Raghunandan G served in advisory roles for a month before quitting. Even as both companies initially operated as separate entities, Ola shut down TFS in August 2016 and laid off 1,000 of its employees.

Types of Mergers

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Horizontal Merger:- The merger is said to be horizontal when the companies that are combined operate in the same industry or deal in similar lines of business. The market share of the newly formed company is greater than the individual entities. It is aimed at reducing competition, increasing market share, economies of scale and research and development.

Vertical Merger:- Vertical merger takes place when companies are having ‘buyer-seller relationship’, join to create a new company. It is an integration of two companies that are working in the same industry, though at a different stage of production and distribution. It can be upstream or downstream, i.e. where the business takes over its suppliers, then it is an upstream merger while if the company extend to its distribution entities, the merger is termed as downstream.

Conglomerate Merger:- A type of business integration, in which the merging companies are not related to each other, i.e. neither horizontally nor vertically. In a conglomerate merger, two or more companies operating in different business lines combine under one flagship company. This is further divided into, managerial conglomerate, financial conglomerate and concentric conglomerate.

Congeneric Merger:- In the congeneric merger, the firm of the same industry are merged but they do not have anything in common like buyer, customer or supplier like a merger between man salon and female salon. For example, Prudential's acquisition of Bache & Company.

Reverse Merger:- In the reverse merger, a profit-earning the company merges into the loss bearing company and the identity of the profit-earning company is lost. It is the opposite of an ordinary merger in which the profit-earning company takes over the loss earning company. The reverse merger is the easy method of going public without any expenditure and less time is required as in case of raising the IPO and it also helps in making use of the provision of Income Tax Act, 1961 which lets the company carry forward the losses to set off against the profit.

Other Kinds of Merger:-The various other types of mergers are as follow.

Cash Merger: In this type of merger the firm acquires the share of the company in exchange for cash in place of exchanging their own shares. It is done when the shareholder of the target firm wants to be related to the new firm made due to the merger. In this, some shareholders want cash for their shares while the other wants shares in the surviving company.

Short-Form Merger: In this merger, the parent company acquires the total voting rights in the subsidiary company. It does not follow any provision of statutory compliance and is also economical. It is done without the approval of shareholders under the following conditions when:

a) The shares of the company are given to the small group of shareholders which approves the merger.

b) The various legal provisions of states allow the short-form of the merger.

If these conditions are satisfied then the majority of shareholders and board of directors will support the merger without the concern of minority shareholders. In various legal provisions, there is a method of merging in which approval is not required.

What is Mergers, Acquisitions and Corporate Restructuring ?

noreply@blogger.com (Read-to-Lead) — Wed, 20 May 2020 14:44:00 +0530

WHAT IS MERGERS?

Image By:- iPleaders Blog.com

Introduction to Mergers

The merger refers to combining two or more companies into one companioning two or more companies into one company. It can either be done by merging of one or more companies into the existing company or framing a new to the existing company or framing a new company by merging two or more existing company. The word 'amalgamation is used for the merger by the Income Tax Act,

The merger is done in the following two types:

· Merger by absorption:- Combining two or more companies into the existing company are known as absorption. In this merger, one company loses its entity and goes into liquidation and all other companies remain the same. For example, there are two companies A Ltd. and B Ltd., company B Ltd. is merged in the assets and liabilities of company B Ltd will be acquired by company A Ltd. and company B Ltd. will be liquidated. For example, in India, there was a merger by absorption of Reliance Polypropylene Ltd. (RPPL) by Reliance Industries Ltd. (RIL) due to which RPPL was liquidated and the shareholders were given 20 shares of RIL for every 100 shares of RPPL presented with them.

· Merger by consolidation:- The combination of two or more companies for forming one new company is known as consolidation. This is also called a triangular merger. Amalgamation is sometimes used in place of consolidation. In this merger, all the existing companies lose their identity and are liquidated for making the new company. All the assets and liabilities of the consolidating company are acquired by the new company or cooperation. The old assets are sold to the new company and the control and management are given to the new company. Like the two companies, A Ltd. and B Ltd. are merged to form a new company known as AB Ltd. or C Ltd. There is difference between merger through absorption and merger through consolidation. In absorption, one company acquire another company, no new company is made while in consolidation, both the companies are merged to make a new company. In consolidation, the companies are of the same size while in absorption the size of the companies is different. Usually, the small company is merged into a big company. Both absorption and consolidation are used correspondently while the ways and issues of both the forms of mergers are the same.

WHAT ARE ACQUISITIONS?

Introduction to Acquisitions

An acquisition is also known as a takeover. It is when one company buys another company. In other words, an acquisition is when the buyer company purchases the assets or shares of the seller by paying cash, the securities of the buyer and other assets of value to the seller. When there is stock purchase transaction then the shares of the seller are not going to be combined with the existing company of the buyer and may be kept separately as the new subsidiary or operating division while in the asset purchase transaction, the assets taken by the seller to the buyer becomes an extra asset for the company of buyer. It believes that the value of assets purchased will be more than the price paid over the time period. It will increase the value of the shareholder as a result of strategic or financial advantages of the transaction.

It is a friendly or hostile process. In friendly a takeover, the companies negotiate about the cooperation to be done by each other while in hostile the takeover is not informed to the target company and they are forced to go for a takeover. Thus, acquisition refers to when the large firm purchases small firm.

WHAT IS CORPORATE RESTRUCTURING?

Introduction to Corporate Restructuring

Corporate Restructuring means any modification in the ownership, business mix and alliances for increasing the iconic of the shareholders. The important characteristic of the business and investment is corporate restructuring.

It consists of proceedings related to expansion and contraction of operations of the firms and changes in its assets or finiretal or ownership structure. Restructuring means the important changes required in the strategy and policy offers its site with the assets liability composition, equity and debt proportion financing and the operations. Company the restructuring includes all the activities undertaken for making balanced organization, profitable and help the organization in attaining the objectives of the company in an effective way as compared to the previous way.

Corporate the restructuring includes the following:-

1) Ownership Restructuring: The company by the help of activities like merger and acquisitions, leveraged buy-outs, buyback of shares, spin-offs, joint ventures and strategic alliances try to change the company ownership structure.

2) Business Restructuring: The business restructuring refers to the reorganization of the business units or divisions like diversification into new businesses, outsourcing, disinvestment, brand acquisitions, etc.

3) Assets Restructuring: Asset restructuring refers to the acquisition or sale of assets and their ownership structure. For example, sale and leaseback of assets, debt securitization, receivable factoring, etc.