An organization that adopts a differentiation strategy seeks to distinguish itself from competitors through the quality of its products or services. Organizations that successfully implement a differentiation strategy are able to charge more than competitors because customers are willing to pay more to obtain the extra value they perceive. For example in case of Rolex they pursue a differentiation strategy, Rolex watches are handmade precious metals like gold or platinum and stainless steel and are subject to strenuous tests of quality and reliability. The firm’s reputation enables it to charge thousands of dollars for its watches. Firms use differentiation strategy to achieve a competitive advantage by providing unique products and these products attributes high quality and innovations. Differentiation is not just limited to the product but it also covers the delivery system and many other factors. Firms provide additional services to its customers with these differentiation characteristics which brings more Continue reading
Corporate Strategies
Acquisition Strategy Development
Not all firms that make acquisitions have acquisition strategies, and not all firms that have acquisition strategies stick with them. In this section, we consider a number of different motives for acquisitions and suggest that a coherent acquisition strategy has to be based on one or another of these motives. Firms that are undervalued by financial markets can be targeted for acquisition by those who recognize this mispricing. The acquirer can then gain the difference between the value and the purchase price as surplus. For this strategy to work, however, three basic components need to come together. A capacity to find firms that trade at less than their true value: This capacity would require either access to better information than is available to other investors in the market, or better analytical tools than those used by other market participants. Access to the funds that will be needed to complete the Continue reading
Motives for Mergers and Acquisitions
Mergers and acquisitions are strategic decisions leading to the maximization of a company’s growth by enhancing its production and marketing operations. They have become popular in the recent times because of the enhanced competition, breaking of trade barriers, free flow of capital across countries and globalization of business as a number of economies are being deregulated and integrated with other economies. A number of motives are attributed for the occurrence of mergers and acquisitions. In this section, we consider a number of different motives for mergers and acquisitions. 1. Synergies through Consolidation Synergy implies a situation where the combined firm is more valuable than the sum of the individual combining firms. It is defined as ‘two plus two equal to five’ (2+2=5) phenomenon. Synergy refers to benefits other than those related to economies of scale. Operating economies are one form of synergy benefits. But apart from operating economies, synergy may Continue reading
Merger Through Board for Industrial and Financial Reconstruction (BIFR)
The companies (Amendment) Act, 2001 has repealed the Sick Industrial Companies Act (SICA) 1985, in order to bring sick industrial companies within the purview of companies Act 1956 from the jurisdiction of SICA, 1985. The Act has introduced new provisions for the constitution of a tribunal known as the National Company Law Tribunal with regional benches which are empowered with the powers earlier vested with the Board for Industrial and Financial reconstruction (BIFR). (Note: Board for Industrial and Financial Reconstruction (BIFR) was established by central government under SICA, 1985 for detection of sick and potentially sick industrial units and speedy determination pf their remedial measures and to exercise the jurisdiction and powers and discharge the functioning and duties imposed on the Board by or under the Act.) Before the evolution of SICA, the power to sanction the scheme of amalgamation was vested only with the high court. However, sec.18 of Continue reading
Corporate Governance Models – Anglo-American Model and European Model
Corporate governance comes into play in cases where the management of the organization has to be carried out by a manager or a group of managers who are not the owners of the organization. In essence, corporate governance is implemented by a business’ financers in order to monitor and regulate the organization’s utilization of its investments. In this case, the individuals hired to manage the business are paid employees and are responsible for the effective execution of the organization’s processes. As a result of this arrangement, it is only natural for a separation to exist between the ownership of the organization and the management of the organization. While this may appear to be a simple concept, modern-day business models have allowed corporate governance models to develop rapidly over the last few years and this has led to the development of different corporate governance models. The implementation of these corporate governance Continue reading
First Mover Advantage Vs Late Mover Advantage
Companies across the country are consistently being faced with tough decisions regarding business moves to make that will launch them forward in a new competitive market. There are two types of strategies that companies look into when they want to diversify into a different product market. The first approach is called the ‘first mover’ theory and the second is called the ‘late mover’ theory. Both of these strategies have strengths and weaknesses that can either solidify or act as a detriment to the company’s entry into the market. First Mover Theory Advantages and Disadvantages The potential advantages of the first mover theory are numerous. For one, the corporation has the ability to attain exclusive company-product association. It can also find success through the effects of networking and see a rise in consumption as demand grows. First mover theory can help the company determine economies of scale and it can also Continue reading