A firm following this strategy focuses its resources on a single product, in a single
market, using one tested technology to ensure profitable growth. Companies
adopt this strategy as it is less risky and does not demand scarce additional
Example 1: FedEx
Fredrick Smith, an entrepreneur identified the opportunity and established
Federal Express (FedEx) in 1973. Smith operated flights exclusively for cargo
and offered home delivery and pick-up services. The business model was a big
hit and there was no looking back for the company. Looking at the success of
FedEx many other companies imitated the model. Thus FedEx concentrated on
the Courier industry in order to gain the competitive advantage over other players
in the market.
FedEx differentiates itself from other player based on its delivery process.
Example 2: Swarovoski Crystals
It provides crystal products to the higher end only.
Example 3: Rolls Royce
Rolls Royce follows the strategy of focusing on the single market. It
manufactures only luxurious car and caters to higher income class.
2. Market Development:
This process involves marketing existing products with little modification, to
customers in relates market areas. The organization employs different channels of
distribution, changes the content of advertising or the medium of promotion.
Example 1: HLL’s E-tailing Venture
Sangam Direct is a Hindustan Lever Limited initiative in Mumbai to
provide home delivery of various FMCG, food and grocery products to the
customers directly. The company boasts of a product range of 3500 products
including those of its competitors and unbranded products. The customer can
order through phone – 55550000 or through email –
firstname.lastname@example.org and the order are delivered in 24 hours. For
availing free home delivery the minimum order size must be worth Rs 400 else
the customer has to pay Rs 20 as delivery charges.
Example 2: NIIT
NIIT, India‟s leading information technology training institute is a good
example of a company followed the market development strategy. It started its
operation in 1982 when computer education was accessible only to engineers and
other science graduates. During 1982-1992, it focused on building awareness
about computer careers. NIIT had to change the mindset of the people to make
them consider computers as a career option. In 1992, it introduced the
“Bhavishya Jyoti Scholarship” for students who secured high marks in the
entrance test for its course. NIIT also entered into alliances with foreign
universities, these enabled students to get admission into foreign universities fir
degree courses at the end of a minimum 2 years of any NIIT course after 12 years
Example 3: Allen Solly brand to Women’s wear.
Allen Solly is a brand of Madura, a leading Indian apparel company.
Madura employed the Indian Market Research Bureau (IMRB) to conduct a
market study on clothing requirements of working women. The study revealed
that while Indian women loved ethnic clothes, they ware not comfortable to work
in. The study indicated a growing need for Western wear. The study also
revealed that the western wear available in the market was unsuitable for Indian
women. This information motivated Madura to extend its Allen Solly brand to
3. Product Development:
This process involves the modification of existing products or the creation of new
items in a related category. These products are marketed to current customers
through established channels.
Example 1: Nokia launches Nseries N80
Nokia‟s latest addition to its Nseries family, the Nokia N80, weighing
only 134 grams, Nokia N80 is the first quad band handset designed to work both
on 3G and four GSM bands. The convenient, in-built intuitive browsing and fast
internet access makes it possible to send and receive e-mails at WLAN speeds.
The Nokia N80 demonstrates the cutting-edge technological leadership of
the Nseries and offers an unparalleled experience to consumers. This compact,
internet-optimized and feature-rich device has raised the bar for mobile devices.
Comprising the functionality of a highly advanced converged mobile device, the
Nokia N80 empowers people to pursue professional goals and personal passions
with equal fervor.
Example 2: Indica by TELCO
Development of Indica by TELCO is a good example of successful
product development. TELCO had emerged as a leading name in commercial
vehicles, passenger vehicles, constructions equipment, metal cutting and grinding
machines, industrial shutters, high quality steel, alloy castings and other related
products. TELCO sought of transform itself from truck manufacturer to an
automobile integrator so in early 1990s, TELCO‟s chairman planned to develop a
small car i.e. Indica.
Example 3: New Coke
In April 1985, Coca-Cola, the largest aerated beverage manufacturer in the
world launched a sweeter version of soft drink named “New Coke”. Coca-Cola‟s
decision to change Coke‟s formulation was one of the most significant
developments in the soft drink industry during that time. The taste of New Coke
was similar to that of Pepsi. The main idea of launching New Coke was to
Innovation involves the use of a new idea or method. A firm which brings out an
innovative product usually enjoys the „first mover‟ advantage.
Example 1: Process Innovation – Dell’s Direct Model
The direct model was strong differentiator for the company as its reduced
unnecessary distribution overheads that logged other PC major.
The direct model was based on direct selling, with no retail channel or
reseller. The telephone operator used to take the order from the customer and his
requirements for the system; sometimes he even helped the customer select a
system that would meet his requirement. Then the order was passed on to the
manufacturing people. When the system was assembled, the PC was delivered to
This enables the people at DELL to benefit from real-time input from
customers regarding products and services.
Example 2: Product Innovation – Gillette
In recent years, Gillette introduces more than 20 products annually. The
differentiated products include Sensor Excel and Mach 3. Product Innovation has
become an integral part of Gillette‟s strategy. Gillette excelled in creativity and
tried to commercialize new product designs. It also tried to market the new
products as fast as possible to get the product design. As a result, 40% of the
Gillette‟s revenue comes from products introduced in the past five years.
Example 3: Strategy Innovation – Wipro
At Wipro, innovation is used to provide added value to customers. Wipro
has an innovation team and employees who work on development of innovative
projects are rewarded. Projects are executed in three areas: Home networking,
collaboration, and knowledge management. The goal is to shape ideas into
products that are viable and marketable. Currently, Wipro has over 200 people
working on innovative projects
2. Horizontal Integration:
If a firm grows through acquiring one or more similar business which is operating
at the same stage of production-marketing chain, then the firm is said to be
following a strategy of horizontal integration. With these acquisitions, the firm
gets access to new markets and eliminates competitors
Example 1: Global Green Company (GGC) acquired InterGarden Group
Thapar Group‟s GGC acquired Belgium based InterGarden Group for € 50
million. The acquisition will give GGC a strong foothold in key European
GGC supplies gherkins, jalapenos and other preserved foods to retail and
other food service to customer in more than 23 countries and about 30 cities in
Intergarden has processing factories in Belgium, Hungary, Turkey and
India. The company produces pickled products such as gherkins, silverskin,
cherries, red peppers, etc.
With this acquisition GGC has extended global footprints, giving
themselves better access to customer.
Example 2: GAP Inc.
The GAP Inc. retail clothing corporation is a good example of a business
that practices horizontal integration. GAP Inc. controls three distinct companies,
Banana Republic, Old Navy, and the GAP brand itself. Each company has stores
that market clothes tailored to appeal the needs of a different group. Banana
Republic sells more expensive clothes with a more "upscale" image, the GAP
sells "moderately" priced clothes that appeal to middle-aged men and women, and
Old Navy sells "inexpensive" clothes geared towards children and teenagers. By
using these three different companies, GAP Inc. has been very successful at
controlling a large segment of the retail clothing industry.
Example 3: Bank of Madura – ICICI Bank
The acquisition of the Bank of Madura (BOM) by ICICI bank is an
example of the horizontal integration. With this acquisition ICICI bank has
become one of the largest private sector banks in India and has consolidated its
presence in South India.
3. Vertical Integrations:
This type of integration involves the acquisition of suppliers of inputs or the
buyers of the output.
Example 1: Apollo Health Street (AHS) Pvt. Ltd. Acquires Armanti
Financial Services (AFS)
AHS, the healthcare services company of Apollo group has acquired US
based company AFS, working in hospital billing and receivables management
The acquisition would promise outstanding growth and redefine the
market space. Post acquisition the company expected to achieve $45 million in 12
months and $100 million in next 18 months
Example 2: Chirag Din
Chirag Din is one of the leading brands of the country. It has its own
manufacturing unit and it sells the apparels through its own outlet.
Example 3: Disney
Disney owns companies mainly in the exhibition sector with TV channels
such as Disney Channel and ABC. It is a media institution owns companies in
only one sector of the industry (production, distribution or exhibition).
Diversification is the process of entering into different industries either to exploit
untapped potential or to minimize the risk of changing business trends.
Example 1: Britannia Industries Limited (BIL)
As part of its strategy to reduce its dependence on biscuits, BIL sought to
diversify its product portfolio. BIL saw an opportunity in the dairy segment as it
had only one large player, Amul. In 1997, BIL entered the dairy segment with
cheese and milk powder or dairy whiteners. By 2000, BIL captured about 35% of
market share of cheese market and 20% in the dairy whitener segment. It
launched butter in 1998, tetra packs in 1998 and ghee in 2000. The company
relaunched its entire dairy business in late April 2000 by bringing it under the
Example 2: Piramal Enterprises
As a part of its strategy, Piramal Enterprises sought to diversify its product
portfolio. Piramal Enterprises saw an opportunity in retail sector as it was largely
driven by un-organized market. In September 1999, Piramal Enterprises launched
India‟s first shopping mall „Crossroads‟ in Mumbai. Apart from this they also
launched in-house retail store Pyramid and Truemart.
Example 3: ITC
ITC has diversified into a completely unrelated industry such as food,
A turnaround occurs when “a firm preserves through an existence – threatening
performance decline; and the threat with a combination of strategies, systems,
skills and capabilities; and achieves sustainable performance recovery. The
obverse of performance recovery is failure and eventual death.”
Example 1: Turning Around IBM
IBM‟s decline started in the late 1980s. During the period 1986-1992,
IBM‟s overall market share in the IT industry in US fell by 37%, while its global
market share fell by 30%. In 1993, it reported a record net loss of $8.1 billion.
IBM‟s decline can be attributed more to R-extinction that to K-extinction
factors. The company had 24 product units functioning independently, even
though they were a part of IBM
Louis Gerstner took over as the CEO of the company from John Akers and
turned the company around. He brought about a radical change in the work
culture of IBM. In 1993, he reduced the workforce by 35000 and under took cost
cutting initiatives. He also reversed the decision of Akers to split IBM into 11
entities. IBM also shifted from product-centric to customer-centric in order to
provide complete solution to its client.
In 1994, Gerstner made effort to improve reporting procedures across
different units of the firm. He started focusing on specific problems related to
The outcome of Gerstner efforts were seen after eight years in 2001. In
that year, the company reported a net income of $7.7 billion. During the period
1993-2001, the share price of IBM shot up by nearly 800%.
Example 2: Turning Around Chrysler
Chrysler Corporation‟s decline started in the early 1970s. The decline can
be attributed to both internal and external factors. The top management lacked an
understanding of the strategic direction of the company and the dynamics of the
industry in which the firm was operating.
Iacocca joined the company in 1978; it was only 1983 that Chrysler
announced that it would repay the entire $1.5 billion government backed loan by
the end of year 1983. Thus there was a gap of about 5 years between the time
Iacocca joined the company and the official announcement of the repayment of
the loan amount.
Over a period of 3 years, Iacocca fires 33 of 35 vice presidents and in
1979-80 fired 15500 workers, saving $500 million in annual cost. Iacocca visited
every single plant, conducted sessions with plant supervisors and spoke directly to
By 1983, Chrysler offered 26 million shares, and its stock price rose from
$16 to $35 within weeks. Chrysler paid off its entire loan seven years before it
was due. Chrysler‟s achievement showed that it had accomplished a turnaround.
Example 3: Turning Around Nissan
Nissan‟s problem started in early 1990s. Nissan‟s decline was caused by
both internal and external factors. The culture at Nissan was such that everyone
was eager to blame someone else for poor performance. Its organizational
structure was also responsible for its decline. The external factor responsible for
Nissan‟s decline was low growth in the Japanese economy in the 1990s. Post
World War II, the Japanese economy grew rapidly and Nissan seized this
opportunity and expanded not only within Japan but also overseas. This
expansion was funded through debt. But once the economy slowed down. As a
result of which there was decline in vehicle sales, loss of market share, huge debt
and low stock price brought Nissan to near bankruptcy.
Carlos Ghosn, who became COO of Nissan in 1999, turned the company
around. To bring about changes within Nissan, Ghosn introduced a new
organizational structure. Security was eliminated and those who had few
responsibilities were given new assignments. In addition, compensation packages
were revamped to reflect performance.
The outcome of all these measures was that the turnaround was faster than
expected. In the fiscal year 2000, sales increased by 4%; 20 new models were
launched; management was streamlined; purchasing costs reduced by 11% and
the company earned 5.4% operating income on sales.
A divestiture is the sale of a part or a division of a company to a third party. The
division may include assets, product lines or subsidiaries.
Example 1: Divestitures in Grasim
Grasim Industries divested its loss-making fabric manufacturing
operations in Gwalior to Melodeon Exports Ltd. and its associates. The new
management will provide continued employment to the plant‟s 1250 employees.
After undertaking a techno-commercial evaluation of its units at Gwalior
and Bhiwani, the company decided to manufacture both its brands – Grasim and
Graviera –at a single location at Bhiwani. This will help improve the competitive
position of its fabrics business in terms of economies of scale and operations.
This move is expected to have a positive impact on the company‟s bottom-
Example 2: Divestitures in Tata Group
In 2001, Tata chemicals did a major restructuring exercise. The company
decided to divest the detergent and chemical division, but retain the soda ash, urea
and salt division as a part of Tata Chemicals.
Example 3: Divestitures in ITC Group
The divestiture of ITC Classic Finance by ITC group is one of the best
examples of divestiture. ITC Classic Finance was a loss-making company of ITC
Group. In order to get rid of loss-making company, the ITC group divested ITC
Classic Finance which subsequently got merged with ICICI.
Liquidation involves selling parts of a firm or the entire firm at auction or to a
private buyer for its tangible asset value. The intent is not to operate an ongoing
business. Contrast this strategic action with divestiture.
Example 1: Petrofils Ltd.
Petrofils Ltd. was PSU. During late 1980s, Petrofils had tough competition
from Reliance. In order to overcome this competition, Petrofils made investments
in Ankleshwar, Gujarat. As a result of these investments, Petrofils incurred huge
loss and was liquidated.
Example 2: John Stevenson Company
John Stevenson Company was a horse car and carriage builder based in
New York, New York in 1831 and folded in 1867 due to financial difficulty.
It re-emerged as the John Stevenson Company Limited of Linden, New
Jersey and was building streetcars. The company was acquired by J. G. Brill
Company in 1904 and continued to operate under the JGS name until 1919 when
the plant and corporation was liquidated.
Example 3: Skyline NEPC
NEPC airlines acquired Damania airlines. The new entity was known as Skyline
NEPC Airline. Skyline NEPC incurred heavy losses due to high operational
expenditure. Due to which it was liquidated in 1996.
Bankruptcy involves legal protection against creditors or others allowing the firm
to restructure its debt obligations or other payments, typically in a way that
temporarily increases cash flow. Such restructuring allows the firm time to
attempt a turnaround strategy
Example 1: The Fall of Daewoo Motors
In the late 1990s, the leading South Korean car manufacturer, Daewoo
Motors was in deep financial trouble. For the financial year ending 1999-2000,
Daewoo generated revenues of $197.8 million and a net loss after tax of $10.43
billion. The company‟s revenue had dropped by 94% since 1999. The loss
reported was also three times higher than that reported in 1999, and was ranked as
South Korea‟s largest ever corporate loss. In November 2000, the Korean
Government officially announced Daewoo‟s and its assets were out on sale.
The reasons for Daewoo‟s problem were Daewoo‟s borrowings for its
expansion programs into risky and uncertain markets like Vietnam and its
decision to sell products at very low prices to gain market share, and
mismanagement and the corrupt governance practices adopted by Kim Woo
Choong, the founder of Daewoo Group.
Example 2: Enron Energy Services
Enron Energy Services (EES) was a business unit of Enron Corporation,
whose purpose was to provide gas, electricity, and energy management directly to
businesses and homes.
EES's best known area of business was California. Part of their strategy
was to use two-way wireless electric meters, which could be read remotely and
eventually turn air-conditioning and lighting systems on and off by telephone.
Enron bought thousands of these meters as well as millions of dollars worth of
wireless air time. Enron Energy Services promised business and home users
average annual savings from 5% to 15%.
EES spent millions of dollars on advertising to attract customers. This
business strategy depended on a large, deregulated market, and it became clear in
the late 1990s that states were not deregulating fast enough. Enron decided to
change its strategy and target businesses, organizations, and corporations with
offices distributed around the United States.
After spending on ads and marketing with little return, the company‟s
operations were in a deficit of over 500 million dollars. Enron Energy Services
was one of the many business units that filed for bankruptcy with Enron
Corporation on December 2, 2001
Example 3: Ames
Ames was a chain of discount stores based out of Rocky Hill, Connecticut
in the United States. The chain went into bankruptcy in 2002.
Ames began in 1958 when two Connecticut brothers, Milton and Irving
Gilman, opened their first store in the Ames Worsted Textile Co. mill in
Southbridge, Massachusetts. -- was once the nation's sixth-largest discount retailer
with annual net sales of $2.2 billion. Before going out of business, Ames operated
452 stores in 19 states, including the Northeast, Southeast, Midwest and the
District of Columbia.
The firm requested bankruptcy protection on August 20, 2001, and a year
later, on August 14, 2002, Ames Discount Stores announced it would close all
452 stores in the chain and wind down business.
Analysts generally believe that debt related to the acquisition of Hills
Department Stores caused the bankruptcy.
1. Joint Venture:
Joint Venture allows companies to own stake and play a role in the management
of the joint operation. Joint Venture require more direct investment and training,
management assistance and technology transfer.
Example 1: Mitsubishi Heavy Industries, Kawasaki, Fuji and Boeing
Three Japanese firms - Mitsubishi Heavy Industries, Kawasaki and Fuji
have a complex joint venture with the US Company, Boeing. The Japanese firms
manufacture key portions of aircraft fuselages, aircraft bodies and contribute
important fabrication skills and gain access to Boeing‟s global distribution and
marketing network. Thus, while Japanese firms hope to learn how Boeing
organizes and manages its global marketing efforts, Boeing seeks to improve its
existing highly refined assembly techniques with valuable insights from Japanese
Example 2: Orchid Chemicals and Bexel Biotechnology
In 2002, Chennai based Pharma Company, Orchid Chemicals
Pharmaceuticals Ltd, entered into a joint venture with Bexel Biotechnology Ltd of
US. The purpose was to discover new drug for therapeutic diseases. Orchid
would benefits from the joint venture by learning the methods developed by Bexel
for identifying new drugs for diabetes.
Example 3: Peugeot and Premier Automobiles Ltd (PAL).
In October 1994, Europe‟s 4th largest automobile major Peugeot of France
entered the Indian Automobile market through a joint venture with PAL.
After the Indian economy was opened up to foreign players in the early 1990s,
many multinational auto manufacturers entered the country. Lured by the
prospects of a booming automobile market, Peugeot too decided to enter India
through a joint venture with PAL.
2. Strategic Alliance:
A strategic alliance is a cooperative agreement between potential or actual
Example 1: Aerostar – FSA pact for pilot training.
Aerostar Aviation has joined hands with FSA of US in order to impact
commercial pilots training in India. FSA in one of the world‟s largest pilot
training academies in the world with 43 training / learning centers in Europe and
The tie-up will offer Indian students a ground to fulfill their dreams. The
alliance will provide an opportunity to overcome the existing shortfall of pilots in
Example 2: AT&T – NEC Corporation
In 1990, AT&T entered into an alliance with NEC Corporation of Japan to
trade technological skills. This was a trading in core competencies where AT&T
gave NEC some of its computer aided design technology and NEC gave AT&T
access to its technology for advanced computer chips.
Example 3: Philips NV – Matsushita
Philips NV‟s alliance with global competitor Matsushita in 1992 to
manufacture and market the digital compact cassette (DDC) was an effort to
establish the DDC system as a new technological standard in the recording and
consumer electronics industry. This was important because Sony had also
developed “minicompact disc” technology and hoped to establish it as the new
technological standard. Philips wanted to win the race by forming an alliance
A consortium is an association of two or more individuals, companies,
organizations or governments (or any combination of these entities) with the
objective of participating in a common activity or pooling their resources for
achieving a common goal. Each participant retains its separate legal status and the
consortium's control over each participant is generally limited to activities
involving the joint endeavor, particularly the division of profits. A consortium is
formed by contract, which delineates the rights and obligations of each member.
Example 1: Six Companies, Inc.
Six Companies, Inc. was a joint venture of construction companies that
was formed to build Hoover Dam and later went on to build Grand Coulee Dam
and other large projects. It was a consortium formed by six smaller general
contractors in order to submit a bid for the Hoover Dam contract. Because of the
immense size of the dam, no single contractor had the resources to make a
qualified bid alone. Six Companies started working in about June 1931. Six
Companies was composed of:
1. Morrison-Knudsen of Boise, Idaho 10%,
2. Utah Construction Company of Ogden, Utah 20%,
3. Pacific Bridge Company of Portland, Oregon 10%,
4. Bechtel Corporation of San Francisco, California, and Henry J. Kaiser of
Oakland, California, (Bechtel-Kaiser) 30%, and
5. MacDonald and Kahn of Los Angeles, California 20%, and
6. J.F. Shea of Portland, Oregon 10%
Example 2: PICMG
The PCI Industrial Computer Manufacturers Group (PICMG) is a
consortium of over 450 companies that collaboratively develop open
specifications for high performance telecommunications and industrial computing
applications. The members of the consortium have a long history of developing
and using leading edge products for these industries.
It was founded in 1994 with an original mission to extend the PCI
standard. Its specifications include AdvancedTCA, AdvancedMC, and
Example 3: Airbus
Airbus Industries ("Airbus"), is one of the world's premier manufacturers
of civilian airliners. Airbus is owned by EADS (80%) and British Aerospace
(20%). EADS itself is a merger of Aérospatiale-Matra of France, Daimler-
Chrysler Aerospace of Germany, and Construcciones Aeronáuticas of Spain,
which were originally separate partners in the consortium, owning 37.9%, 37.9%,
and 4.2%, respectively. Airbus' status as a consortium means that profits accrue to
the partner companies‟ representative to their interests. Work is allocated on the
same basis as profits.
Keiretsu are Japanese business combinations that may involve as many as 50
firms that are related through a large trading company or bank. The companies are
coordinated through interlocking directors. A keiretsu is an "intricate web of
relationships that links banks, manufacturers, suppliers, and distributors with the
Example: Horizontal keiretsu are headed by major Japanese banks and include
Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa, and Dai-Ichi Kangyo Bank Groups.
Example: Vertical keiretsu are industrial groups connecting manufacturers and
part suppliers or manufacturers, wholesalers and retailers. Vertical keiretsu
include car and electronics producers such as Toyota, Nissan, Honda--Matsushita,
Hitachi, Toshiba, and Sony.
Chaebol are South Korea's business conglomerates. The English word is a
transliteration of the Korean word 재벌, which is now romanized as Jaebeol. The
Korean word means business group, trust (as in Standard Oil Trust), or plutocrat,
and is often used the way "Big Business" is used in English.
Chaebol refers to the several dozen large, family-controlled Korean corporate
groups, assisted by government financing, which have played a major role in the
South Korean economy since the 1960s.
Examples: Some have become well-known international brand names, such as
Samsung, Hyundai, and LG. Hyundai even played a role in the slight thawing of
relations between North and South Korea since 2000.
The top 10 largest chaebol in Korea in 2004 by total revenues were Samsung
($89.1 billion), Hyundai Motor Company ($57.2 billion), LG ($50.4 billion), SK
($46.4 billion), Hanjin ($16.2 billion), Hyundai Heavy Industries ($10.5 billion),
Lotte ($6.3 billion), Doosan ($4.5 billion), Hanhwa ($4.4 billion), and Kumho
Asiana or Kumho ($2.8 billion).