Dr.S.Karthikumar skarthikumar@gmail.com

1. Business Growth Strategy
S.Karthikumar,
Asst.Prof./Dept. Of Biotechnology
Kamaraj College of Engineering and Technology
Virudhunagar-626001, TN, INDIA

2. Growth Strategy-
Firms grow in order to achieve their objectives,
including increasing sales, maximising profits
or increasing market share. Firms grow in two
ways; by internal expansion and through
integration..
Types of Growth Strategies
• Internal
• External

3. • Internal expansion
• To grow organically, a firm will need to retain sufficient profits to
enable it to purchase new assets, including new technology. Over
time, the total value of a firm’s assets will rise, which provides
collateral to enable it to borrow to fund further expansion.
• External expansion
• The second route to achieve growth is to integrate with other firms.
Firms integrate through mergers, where there is a mutual agreement,
or through acquisitions, where one firm purchases shares in another
firm, with or without agreement.
• There are several types of integration, including: Vertical integration,
Horizontal integration

4. Ansoff’s Product-Market Expansion Grid
Internal Expansion

5. • Increase sales through effective marketing strategies within the current target
market
1. To maintain or grow the market share of the current product range
2. Become the dominant player in the growth markets
3. Drive out competitors
4. Increase the usage of a company's products by its current customers
Market Penetration

7. • Expand sales in new markets through
expanding geographic representation
• An organization's current product can be
changed improved and marketed to the
existing market.
• The product can also be targeted to anther
customer segment. Either way, both
strategies can lead to additional earnings for
the business.
Market Development

8. • Increase sales through new products/services
• An organization that already has a market for its products might try and
follow a strategy of developing additional products, aimed at it's current
market.
• Even if the new products are need not be new to the market, they remain
new to the business.
Product Development

9. • Diversification Strategy is the development of new products in the new market.
Diversification strategy is adopted by the company if the current market is
saturated due to which revenues and profits are lower.
• It is of two types:-
• Synergistic
• Conglomerate
Diversification

10. • Vertical integration
• Backwards
• Backward vertical integration occurs when a firm merges with
another firm which is nearer to the source of the product, such
as a car producer buying a steel manufacturer.
• Forwards
• Forwards vertical integration occurs when a firm merges to
move nearer to the consumer, such as a car producer buying a
chain of car showrooms.
• Horizontal integration
• Horizontal integration occurs when firms merge at the same
stage of production, such as a merger between two car
producers, or two car showrooms. Horizonal integration is also
referred to as lateral integration.
• Conglomerate integration
• Conglomerate, or diversified, integration, occurs when firms
operating in completely different markets, merge - such as a car
producer merging with a travel agency. In this case, firms tend
to retain their original names, and are owned by a ‘holding’
company.

12. The advantages of mergers
Mergers can generate a number of advantages:
1.Firms that merge can take advantage of a range of economies of scale, such as cost savings
associated with marketing and technology.
2.In the case of vertical integration there are savings in terms of not having to pay ‘3rd party’ profits.
For example, if a tour operator owns its own hotels it will not need to pay profits to the hotel, and will
be able to keeps costs and prices down.
3.Economies of scope are also available to firms that merger and are benefits associated with using the
fixed assets of one firm to produce output for the other firm.
4.Unexpected synergies are unpredicted benefits that arise when firms merge or undertake a joint
venture, such as when two pharmaceutical companies merge, and create a new drug.
5.Rationalisation is the process of eliminating parts of a business that are inefficient or unprofitable,
and is a possible consequence of two or more firms merging.
6.When firms merge, they can share knowledge with each firm benefitting from the knowledge and
experience acquired by the other. With vertical integration, information asymmetries can be reduced
or removed.
7.The merger of two firms may send out a signal to other firms not to attempt a take-over bid.
8.Firms that merge may be able to allocate more funds to Research and Development (R&D) and
generate new products as a consequence. This may increase their competitiveness and profitability in
the long run.

13. Disadvantages of mergers
1.Increased concentration and reduced competition are obvious disadvantages of a merger between
two dominant firms.
2.Firms that merge may experience diseconomies of scale, such as difficulties with co-ordination and
control. This will increase average cost in the long run, and reduce profitability.
3.Higher prices are a likely consequence of a merger because, with less competition, demand is more
inelastic and raising price will raise revenue.
4.There may be less output from the merged firm, compared with combined output of the two firms.
5.Rationalisation is likely to lead to lost jobs as the merged firms attempt to increase profitability. For
example, two advertising agencies that merge could dispense with two design departments, and share
one.
6.Consumers are likely to suffer from reduced choice following a merger of two close competitors. This
is a common criticism of banking and supermarket mergers, and one reason why they are the subject of
scrutiny
7.The economies of scale and scope derived from a merger may increase barriers to entry and make the
market less contestable. In the case of forward vertical integration, new entrants may be denied access
to outlets for its products. With backwards vertical integration, new entrants may find it difficult to
secure a source of supply of materials or products.
8.Merged firms may have more monopsony power which they may use to dictate terms of business to
suppliers, or keep wages below the competitive market equilibrium.

14. • Joint Ventures
• A joint venture is an entity created when two or more firms pool a portion of
their resources to create a separate, jointly owned organization. All involved
will have an equity stake in the new venture
• It is a legal partnership between two(or more) companies where in they both
make a new (third) entity for competitive advantage
• Unlike mergers and acquisitions, in joint venture the parent companies does
not cease to exist
• India's Sun Pharmaceutical Industries and U.S.-based Merck & Co. have
formed a joint venture focused on emerging markets
Joint Ventures

15. • 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.
• It is a kind of partnership between two entities in which they take
advantage of each other’s core strengths like proprietary processes,
intellectual capital, research, market penetration, manufacturing and/or
distribution capabilities etc.
• they simply would want to work with the other organizations on a
contractual basis, and not as a legal partnership.
Strategic Alliance

18. Pfizer Merger And Acquisition (M&A) Analysis 1995 To 2015
• Pfizer ranked no. 1 in terms of revenues (including Allergen) has grown
big by megamergers and acquisitions.
• Pfizer acquired Warner–Lambert in 2000 for $111.8 billion, mainly to
gain control of Lipitor.
• In 2002, Pfizer agreed to buy Pharmacia for stock valued at $60.0 billion,
again to acquire full rights to a product, Celebrex (celecoxib).
• On January 26, 2009, Pfizer agreed to buy Wyeth for $68.0 billion.
• In February 2015, Pfizer acquired Hospira for $15.2 billion.
• Same year on November 23, 2015, Pfizer and Allergan, Plc announced
the merger for an approximate sum of $160.0 billion.

19. • Atorvastatin, marketed under the trade name Lipitor among others,
is a member of the drug class known as statins, which are used
primarily as a lipid-lowering agent and for prevention of events
associated with cardiovascular disease
• Celebrex (celecoxib) is a nonsteroidal anti-inflammatory drug
(NSAID). Celebrex is used to treat pain or inflammation caused by
many conditions such as arthritis