Strategy is considered as one of the interesting and engaging subject to discuss in business management schools. The strategy can be described or can be explained as a detail and systematic plan of particular action that has to be performed when it is required or when a requirement is envisaged. Different types of strategic problems form part of the strategic management process. Is it necessary for the companies or the organizations to focus more on the market share or focus on the revenue capital of the company or the organization? What are the plans and the processes required and necessary for the organization to focus on as to reach its goal and to reach the market shares? The great authors of Strategy Safari like Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel have explained strategies in their own words with their experiences. The strategy is explained in different approaches which includes Continue reading
Corporate Strategies
Merger Approaches
Irrespective of the type of merger, there are at least two firms involved. One, the buying company that acquires the other company, and survives after merger. This firm is known as an acquiring firm or transferee company. The other is the company, which is merged and loses its identity in the process. This is called the acquired company, or transferor company or the target firm. There are various modes in which the acquiring firm can attempt a merger move and therefore, merger can also be classified on the basis of initiative style or the procedure adopted by the acquiring firm. The most important merger approaches are as follows: 1. Negotiated Merger It is also called friendly merger. In this case, the management/owners of both the firms sit together and negotiate for merger. The acquiring firm negotiates directly with the management of the target firm. So, the willingness of the management Continue reading
Selection of the Target Firm and it’s Valuing in Acquisitions
Once a firm has an acquisition motive, there are two key questions that need to be answered. The first relates to how to best identify a potential target firm for an acquisition, given the motives. The second is the more concrete question of how to value a target firm. Choosing a Target Firm Once a firm has identified the reason for its acquisition program, it has to find the appropriate target firm. If the motive for acquisitions is under valuation, the target firm must be under valued. How such a firm will be identified depends upon the valuation approach and model used. With relative valuation, an under valued stock is one that trades at a multiple (of earnings, book value or sales) well below that of the rest of the industry, after controlling for significant differences on fundamentals. Thus, a bank with a price to book value ratio of 1.2 Continue reading
Prescriptive and Descriptive Schools of Strategy – Similarities and Differences
Strategy is a direction and scope of an organization over the long term, which achieves advantage in changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. Having strategy in an organization is very important because it helps on how to meet the goals in consideration with the organization’s situation. An organization strategy answers all questions about fundamental business whether to concentrate in single business or build a group of several businesses, either to go for a broad range of customers or to concentrate on a market niche, either to focus on a wide or narrow product line, whether to base on competitive advantage with low cost or product differentiation. An organization has to know deeply everything concerned strategic management, strategic levels, and has to reach to the level of achievement of the strategic goals. Organizations also use strategy as the most important tool Continue reading
Business Valuation Methods
The cardinal rule of business valuation is, that the value of something cannot stated in an abstract form; all that can be stated is the value of a thing in a particular place, at a particular time, in particular circumstances. Valuation of the target requires valuation of the totality of the incremental cash flows and earnings. Valuation of a target is based on expectations of both the magnitude and the timing of realization of the anticipated benefits. Where, these benefits are difficult to forecast, the valuation of the target is not precise. This exposes the bidder to valuation risk. The degree of this risk depends on the quality of information available to the bidder, which, in turn, depends upon whether the target is a private or a public company, whether the bid is hostile or friendly, the time spent in preparing the bid and the pre-acquisition audit of the target. Continue reading
Case Study: Delta Airlines Successful Business Turnaround Strategy
In 1924 Collet Everman Woolman and an associate started the Huff Daland Dusters crop dusting operation, this was the first agricultural airplane made for the purpose of crop dusting for getting rid of boll weevils and insects. The dusting speed was 80-85 mph and the advantage it had was low speed flying, heavy payload capacity and low maintenance cost. This creation was the roots of Delta Air Lines. In 1928 the crop dusting operation broke away from the parent company and became Delta Air Service. The company began getting contracts in delivering airmail and then in 1929 Delta began transporting passengers flying them to Dallas, Jackson and Mississippi. Later other routes were added to Atlanta and Charleston. Delta’s success was growing and began getting popular when the U.S. government awarded it an airmail contract in 1930. It remained in business during a temporary but costly suspension in the airmail contract Continue reading