Strategy Management

Strategy Formulation
Strategy Formulation is a strategic planning

or long range-planning. This process is
primarily analytical, not action oriented.
This process involves scanning external and
internal environmental factors, analysis of
the strategic factors and generation,
evaluation and selection of the best
alternative strategy appropriate to the
analysis.
Strategy Making in Three Modes
• Entrepreneurial mode:
– Strategy is formulated by one powerful
individual
– Focus is on opportunities rather than on
problems
• Adaptive Mode:
– It is characterized by reactive solutions to
existing problems rather than a proactive
search for new opportunities
• Planning Mode:
– Analysts assume main responsibility for
strategy formulation
– Strategic planning includes both the proactive
search for new opportunities and the reactive
solution of existing problems
Kinds of Strategies
• Corporate Level Strategies
• Business Level Strategies
Corporate Level Strategies
Kinds of Grand Strategies:
• Stability Strategies
• Growth Strategies
• Retrenchment Strategies
• Combination Strategies
Stability Strategies
The basic approach is ‘maintain present
course: steady as it goes.’
In an effective stability strategy, companies
will concentrate their resources where the
company presently has or can rapidly
develop a meaningful competitive
advantage in the narrowest possible
product-market scope consistent with the
firm’s resources and market
requirement's.
Types of Stability Strategies
• Maintenance of Status Quo:
– Firms adopting this strategy maintain the
same level of operations
– Small business firms desire satisfactory level
of operations rather than growth
• Sustainable Growth:
– Slow growth is more desired rather than
maintenance of status quo
– A sustainable growth strategy is more
optimistic than the zero growth
Reasons for adopting Stability
Strategies
• Managers of small business desire a
satisfactory level of profits rather than
increased profits
• Maintenance of status quo involves less
risk than a more growth strategy
• Change may upset the smooth operations
and result in poor performance especially,
if the firm considers itself successful with
the present level of operations
Strategies
• Changing operations to pursue a more
aggressive growth strategy usually
requires an increased investment and
managerial support. Firms, which cannot
provide resources, may continue with the
stability strategy
• Some executives maintain with the
stability strategy due to inertia for change
Strategies
• In some cases, firms are forced to adopt stability
strategy, if they operate in a low-growth or no-
growth industry
• Sometimes, firms may find that the cost of
growth is more than the benefits of the same
• Firms that dominate its industry through their
superior size and competitive advantage may
pursue stability to reduce their chances of being
prosecuted for engaging in monopolistic
practices
Strategies
• Smaller firms that concentrate on
specialized products or services may
choose stability because of their concern
that growth will result in reduced quality
and customer service
Stability Strategy of Indian
Companies
• Many companies in different industries have
been forced to adopt stability strategy because
of over capacity in the industries concerned.
For Example:
Steel Authority of India has adopted stability
strategy because of over capacity in steel sector.
Instead it has concentrated on increasing
operational efficiency of its various plants rather
than going for expansion.
Others industries are ‘heavy commercial vehicle’,
‘coal industry’.
Companies
Example:
Apart from over capacity, regulatory restrictions in
some industries have forced companies to adopt
stability strategy.
Cigarette, liquor industries fall in this category
because of strict control over capacity
expansion.
Both these industries require license under the
provisions of Industries (Development and
regulations) Act, 1951.
Companies
Example:
Many companies in public sector have
been forced to adopt stability strategy
because of government’s policy of cutting
the role of public sector and budgetary
support for expansion of these companies
has been withdrawn.
Growth Strategies
A growth strategy is one that an enterprise
pursues when it increases its level of
objectives upward in significant increment,
much higher than an exploration of its past
achievement level. The most frequent
increase indicating a growth strategy is to
raise the market share and or sales
objectives upward significantly.
Growth Strategies
If we look at the corporate performance in
the recent years, we find how the various
organizations have grown both in terms of
sales and profit as well as assets.
For example:
Reliance Industries Limited
Nirma Limited
Growth Strategies
• Organizations may select a growth
strategy to increase their profits, sales
and/ or market share.
• They also pursue growth strategy to
reduce cost of production per unit.
• Growth Strategies involve a significant
increase in performance objectives.
Growth Strategies
• These strategies are adopted when firms
remarkably broadens the scope of their
customer groups, customer functions and
alternative technologies either singly or in
combination with each other.
Reasons for adopting Growth
Strategies
• In the long run, growth is necessary for the very
survival of the organizations themselves,
particularly when the environment is quite
volatile
• Growth offers many economies because of large
scale operations
• Growth Strategy is taken up because of
managerial motivation to do so. Managers with
high degree of achievement and recognition
always prefer to grow
Reasons for adopting Growth
Strategies
• There are certain intangible advantages of
growth. These may be in the form of
increased prestige of the organization,
satisfaction to employees and social
benefits.
Example: Growing companies have high
level of prestige in the corporate world,
e.g., Reliance, Infosys, Hindustan
Unilever, etc.
Types of Growth / Expansion
Strategies
Concentric Expansion Strategy
The first route of growth is to expand the
present line of business. It can be aimed
at market penetration, market
development and / or product
development.
• Market Penetration: The organization
tries to capture market share in the
existing product and aims at expanding its
business at a rate higher than the industry
growth.
• Eg. :Reliance has captured substantial
market share in textile yarn and
intermediaries
• Eg. : ITC has captured substantial market
share in cigarettes.
• Market Development: Attempt is made to
increase sales by developing new markets either
geography-wise or segment-wise.
• For eg. Many companies which find that the
urban market is saturated and there is little
scope for expansion, opt for developing new
market in rural areas. Some of the companies
which have made keen attempt to develop rural
market are HUL (personal products), Colgate
(oral care products), LG (TV), Videocon
(Consumer durables), etc.
• Product Development: efforts are
attempted at to achieve growth through
product innovation so as to penetrate in
new segment.
• For eg. SAMSUNG (TV) may offer slim
line TV, Plasma TV, etc.
Benefits of Concentric
Expansion Strategy
• A firm that is familiar with an industry
would naturally like to invest more in
known business rather than unknown
ones. Eg. Bajaj Auto
• It involves minimal organizational changes
• It enables the firm to master one or a few
businesses and enable it to specialize by
gaining an in depth knowledge of these
businesses
Benefits of Concentric
Expansion Strategy
• Managers face fewer problems when
dealing with known situations
• Past experience is valuable as it is
replicable
Limitations of Concentric
Expansion Strategy
“Putting all one’s eggs in one basket has
its own problems”
• Concentration strategies are heavily
dependent on the industry
• Factors like product obsolescence,
fickleness of markets, and emergence of
newer technologies are threats to
concentrated firms
Expansion Strategy
• Concentration strategies may result in
doing too much of a known thing. This
may create an organizational inertia;
managers may not be able to sustain
interest and find the work less challenging
and less stimulating
Expansion Strategy
• Concentration strategies may lead to cash
flow problems that may pose a dilemma
before a firm. Large cash inflows are
required for building up assets while the
business are growing. But when these
businesses mature, firms often face a
cash surplus with little scope for investing
in the present businesses.
Strategies
Integration Strategy
When firms use their existing base to expand in
the direction of their raw materials or the ultimate
consumers, or, alternatively they acquire
complimentary or adjacent businesses,
integration takes place.
Integration basically means combining activities
related to the present activity of a firm.
Reason For Adopting Integration
Strategy
• Transaction cost economics
– ‘make or buy’ decision (move up the value
chain)
– ‘make it sell or sell’ (move down the value
chain)
Types of Integration Strategy
• Vertical Integration
• Horizontal Integration
Vertical Integration
When an organization starts making new

products that serve its own needs, vertical
integration takes place.
Any new activity undertaken with the
purpose of either supplying inputs (such
as raw materials) or serving as a customer
for outputs (such as, marketing of firm’s
product) is vertical integration
Types of Vertical Integration
• Backward Integration: retreating to the

source of raw materials
• Forward Integration: moves the
organization nearer to the ultimate
customer
Vertical Integration at Reliance
Industries
• Reliance started its business with textiles
and went for backward integration to
produce PFY and PSF, critical raw
materials for textiles, PTA and MEG-raw
materials for PSF and PFY, paraxylene
-raw materials for PTA and MEG, and
finally naphtha for producing paraxylene.
Vertical Integration at Reliance
Industries
• NaphthaParaxylenePTA + MEG
PSf(fibres) and PFY yarns Textiles
Vertical Integration at Modern
Group
• Expansion strategies at Modern Group,
consisting of five companies having a
combined turnover of Rs.115 crore in
1989, involved diversification in the form of
backward and forward integration.
– Forward integration took place at Modern
Suiting when it diversified into worsted suiting.
With an investment of Rs.7 crore, it acquired
sulzer looms, sophisticated fabric processing
facilities and other sophisticated equipments
to manufacture a premium terry wool suiting
with the brand name ‘Amadeus’.
Vertical Integration at Modern
Group
– Backward integration at Modern Woolens
involved a collaboration with Schild of
Switzerland for wool processing, combing,
and woolen tops which are necessary for the
production of woolen textiles.
In this manner, a number of backward and

forward linkages were being attempted within
the Modern Group with the objective of raising
the turnover to Rs.250 crore by 1992.
Horizontal Integration
• When an organization takes up the same type of
products at the same level of production or
marketing process, it is said to follow a strategy
of horizontal integration
– For Eg.: When a luggage company takes over its rival
luggage company
• Horizontal Integration strategy may be frequently
adopted with a view to expand geographically by
buying a competitor’s business, to increase the
market share or to benefit from economies of
scale.
• Solidaire India Ltd. is a prominent manufacturer
of TVs and has a sizeable presence in the
market in southern India. It started with the
name of Hi Beam Electronics Ltd. in 1974.
Subsequently, this unit was merged with two
other units to form a consortium called TriStar
Electronics. In 1978, the brand name Solidaire
was adopted. In this manner the growth strategy
of the company started with Horizontal
Integration.
• Takeover of Neyveli Ceramics and
Refractories Ltd. (Neycer) by Spartek
Ceramics India Ltd. in the early 1990s.
Both the companies were in sanitary ware
and tile production. By acquiring Neycer,
Spartek became the largest ceramic tile
manufacturer in the country.
Strategies
Expansion through Diversification:
Diversification is the process of entry into
a business which is new to an
organization either marketwise or
technology wise or both.
Diversification may involve internal or
external, related or unrelated, horizontal or
vertical, and active or passive
dimensions------ either singly or
collectively.
Diversification Strategy
Eg.: “Kesoram Cotton Mills” into textiles,
cellophane paper, firebricks, cast-iron
pipes, and cement.
“ITC Ltd.” (a cigarette major) into hotel,

paper and packaging; edible oils,etc.
Types of Diversification Strategy
• Horizontal Integration
• Vertical Integration
• Concentric Diversification
• Conglomerate Diversification
Concentric Diversification
When an organization takes up an activity
in such a manner that it is related to the
existing business definition of one or more
of a firm’s business, either in terms of
customer groups, customer functions or
alternative technologies, it is called
Concentric Diversification.
Types of Concentric Diversification
• Marketing-related Concentric
Diversification: When a similar type of
product is offered with the help of unrelated
technology
– For example: a company in the sewing machine
business diversifies into kitchenware and
household appliances, which are sold to
housewives through a chain of retail stores.
• Technology-related Concentric
Diversification: When a new type of product or
service is provided with the help of related
technology
– For example, a leasing firm offering hire-purchase
services to institutional customers also starts
consumer financing for the purchase of durables to
individual customers.
• Marketing-and-Technology-related
Concentric Diversification: when a
similar type of product or service is
provided with the help of related
technology
– for example a raincoat manufacturer makes
other rubber-based items, such as, waterproof
shoes and rubber gloves, sold through the
same retail outlets.
Conglomerate Diversification
• When an organization adopts a strategy
which requires taking up those activities
which are unrelated to the existing
business definition of one or more of its
business, either in terms of their
respective customer groups, customer
functions or alternative technologies
Conglomerate Diversification
• For Example:
– ITC, a cigarette company diversifying into the hotel
industry
– Essar Group in shipping, marine construction, oil
support services, and iron and steel
– Shriram Fibres Ltd. In nylon industrial yarn, synthetic
industrial fabrics, nylon tyre cords, fluorochemicals,
fluorocarbon refrigerant gases, ball and needle
bearings, auto electrical, hire-purchase and leasing,
and financial services
Reasons for adopting
Diversification Strategies
• To minimize the risk by spreading it over
several businesses
• To capitalize on organizational strengths
or minimize weaknesses
• Diversification may be the only way out if
growth in existing business is blocked due
to environmental and regulatory factors
Managing Diversification at the
Munjal Group
In 1978, the Munjal Group of Ludhiana, Punjab
established manufacturers of Hero Bicycle-
planned to diversify into yarn manufacture. The
reasons for diversification were:
• 95 % of acrylic yarn used in India comes to
Ludhiana
• A lot of cotton grows in Punjab and could be
used in manufacturing yarn
• Group philosophy to involve itself in providing
basic inputs to industry
• In the seventies, yarn was a profitable sector
Munjal Group
But the company (Hero Fibres) faced
many problems like a downsizing in the
cotton and acrylic yarn market, differing
work ethos in the yarn industry as
compared to that in the light engineering
industry, and a high rate of turnover. The
problems were resolved by adopting a
plan under which the following steps were
taken:
Munjal Group
1. Close involvement of the top management and
personnel from existing companies took place
2. Avoiding employment of groups of workers to
prevent the formulation of a coterie, the orientation
and training of managers and workers, and providing
jobs to family members of workers to make migration
of labour difficult
This case of Hero Fibres illustrates that despite strong

reasons for diversification, the actual implementation
of plans is crucial to the success of diversification
strategies
Strategies
Expansion through Cooperation:
This can be done through simultaneous
competition and cooperation among rival
firms for mutual benefit
Types of Cooperative Strategies
• Mergers
• Takeovers (or Acquisitions)
• Joint Ventures
• Strategic Alliances
Merger Strategy
A merger is a combination of two or more
organizations in which one acquires the
assets and liabilities of the other in
exchange for shares or cash, or both the
organizations are dissolved, and the
assets and liabilities are combined and
new stock is issued.
Merger Strategy
Examples:
• Polyolefin Industries with NOCIL
• TVS Whirlpool Ltd. with Whirlpool of India
Ltd.
• Sandoz (India Ltd.) with Hindustan Ciba
Geigy Ltd.
• Nirma Detergents Ltd., Nirma Soaps and
Detergents Ltd., and Shiva Soaps and
Detergent Ltd. With Nirma Ltd.
Types of Mergers
• Horizontal Mergers: Combination of firms
engaged in the same business
– Eg.: Footwear Company combines with another
footwear company
• Vertical Mergers: Combination of different firms
engaged in activities complimentary to each
other like supply of raw materials, production of
goods and marketing
– Eg.: Footwear Company combines with a leather
tannery or with a chain of shoe retail stores
Types of Mergers
• Concentric merger: Combination of firms
related to each other in terms of customer
groups or customer functions or
alternative technologies
– Eg.: Footwear Company combines with a
hosiery firm making socks or with a leather
goods company making purses, handbags,
and so on.
Types of Mergers
• Conglomerate Merger: Combination of
firms unrelated to each other in terms of
customer groups or customer functions or
alternative technologies
– Eg.: Footwear Company combines with a
pharmaceutical firm
Important Issues in Mergers
• Strategic issues: It relate to the
commonality of strategic interest between
the buyer and seller firms. The strategic
advantages and distinctive competencies
of the merging firms have to be analyzed
• Financial issues: It relates to the
valuation of the seller firm and the sources
of financing for mergers to take place.
Value may be assessed keeping in view
the assets, market standing and
opportunity, earnings potential, or stock
value.
• Financial issues: The basic point is to arrive at
a valuation model where the impact on the EPS
of the merging firm is either positive or neutral
– Eg. Where this took place successfully is the
‘Ranbaxy-Crosslands’ merger where there was a
considerable appreciation of the EPS of the merged
identity
– E.g. Where it did not took place is the case of
‘Punjab National Bank – New Bank of India’
merger where the EPS of the merged entity became
negative
• Managerial Issues: it relate to the
problems of managing firms after the
merger has taken place
Usually, mergers are followed by the
changes in staff, specially chief executives
and top managers
• Legal issues in Merger: It relate to the
provisions made in law for the purpose of
mergers.
Acquisition or Takeover Strategy
• Acquisition or Takeover is the attempt of
one firm to acquire ownership or control
over another firm against the wishes of the
latter’s management.
• But in practice it can be hostile or friendly
Controversies created by
• Takeover attempt of Escorts and DCM by
Swaraj Paul, a non resident Indian based
at London, created lot of resentment in
Indian Business scene in 1990s
• Takeover of Raasi Cement by India
Cement have generated lot of tension
• Friendly Takeover: Tata Tea’s takeover
of Consolidated Coffee (a grower of coffee
beans) and Asian Coffee (a Processor)
Joint Venture Strategy
• Joint Ventures are partnerships in which
two or more firms carry out a specific
project or corporate in a selected area of
business.
• It can be temporary, disbanding after the
project is finished, or long-term.
• Ownership of the firms remains
unchanged
Joint Venture Strategy
“Even a successful joint venture may not
last forever. Nor does the collapse of a
joint venture always imply failure. Actually,
corporate partnerships are formed for
specific and time bound objectives which,
once achieved, leave little reason for the
alliance to be continued. Joint Ventures
that last longer do so because their
objectives have been redesigned”.
Strategic Issues in Joint Venture
Strategy
• It offers the advantages of achieving objectives
mutually by the participating firms
• Eliminating, controlling, or reducing competition
may be of strategic importance
• An increase in market share
• If technology is a critical variable in strategy,
then Joint Ventures with foreign companies can
be feasible
Examples of Joint Venture
• IBM World Trade Corporation and Tata
Industries Ltd. Created joint venture to form Tata
Information Systems Ltd. The stated purpose
was to make it India’s top information technology
company
• Cummins Engine Company and TELCO formed
a joint venture to manufacture Telco Engines
• Reliance Industries and Nynex Corporation
• Tata Industries and Bell Canada
• Ashok Leyland and Singapore Telecom
Strategic Alliances
• Strategic Alliance is a combination of the
efforts of two or more organizations to
develop competitive advantage
• In Strategic Alliance, two or more partners
join hands together for certain specified
objectives, generally, for certain specific
period. When these objectives are
achieved, partners terminate their alliance.
Joint Venture & Strategic Alliance
• In Joint Venture, all partners bring their
equity to establish Joint Venture while in
Strategic Alliance, there is no contribution
of equity from any partner.
• A joint venture has a distinct identity and
continues for longer time while a strategic
alliance is of temporary nature and called
off when its purpose is over.
Types of Strategic Alliance
• Technology Development Alliance
• Operations and Logistic Alliance
• Marketing, Sales and Service Alliance
• Single Country or Multi Country Alliance
• X and Y Alliance: In ‘X’ alliance, activities are
divided among partners depending on the
strengths of the partners.
In ‘Y’ alliance, different partners have similar
type of skills and they join together to reap the
benefits of economies of scale.
Strategic Alliances in India
‘Oberoi group of Hotels’ has entered into
Strategic Alliance with ‘Lufthansa Airlines’, ‘Hong
Kong Bank’, and ‘Mercury Travels’. All these four
organizations undertake promotional activities
jointly.
Any person who stays in Oberoi hotels gets
bonus point. His bonus point increases if he
travels by Lufthansa, uses Hong Kong Bank
facilities, and engages Mercury Travel’s
services. On the basis of his accumulated bonus
points, he gets various prizes including free air
ticket to New York
Strategies
• Internationalization Strategy:
International Strategy is a type of
expansion strategy that require firms to
market their products or services beyond
the domestic or national market.
Firm would have to assess the
international environment, evaluate its
own capabilities, and devise strategies to
enter foreign markets.
Types of International Strategies
• International Strategy: Firms adopt
International Strategy when they create value by
transferring products and services to foreign
markets where these products and services are
not available.
International firm, by maintaining a tight
control over its overseas operations, offers
standardized products and services in different
countries with little or no differentiation
Like IBM, Kellogg, Proctor & Gamble,
Microsoft, etc adopt this strategy for the different
countries they operate in.
• Multidomestic Strategy: Firm adopts a
Multidomestic Strategy when they try to achieve
a high level of local responsiveness by matching
their products and services offerings to the
national conditions operating in the countries
they operate in.
Multidomestic firm attempts to extensively
customize their products and services according
to the local conditions operating in the different
countries.
Like Coca Cola, McDonald, Pizza Hut, etc.
• Global strategy: The global firms tries to focus
intensively on a low cost structure by leveraging
their expertise in providing certain products and
services, and concentrating the production of
these standardized products and services at a
few favourable locations around the world.
These products and services are offered in
an undifferentiated manner in all countries the
global firm operate in, usually at competitive
prices.
• Transnational Strategy: Firms adopt a
Transnational strategy when they adopt a
combined approach of low-cost and high
local responsiveness simultaneously for
their products and services.
Entry Modes
• Export Entry Mode
• Contractual Entry Mode
– Licensing Mode
– Franchising
– Technical Agreements, Service Contracts
• Investment Entry Mode
– Joint Venture
– Independent Venture
Illustrative Example
• Blue Dart Express, the courier company
which started in 1994, tied up with Gelco
International which was acquired by the
US courier giant, Federal Express
(FedEx). Later it entered into a financing
arrangement with Schroeder Asia to part
finance its air operating company, Blue
Dart Aviation Ltd. Although FedEx has set
up its own operations in India, Blue Dart
continues as its associate
Illustrative Example
• Archies Greetings and Gifts has
collaboration with Gibson Greetings and
American Greetings Corporation and has
adopted the franchising route for
expansion through which it operates in
more than 120 Indian Cities and six
countries abroad
Strategies
• Retrenchment Strategy: When a firm’s
position is disappointing or, at the
extreme, when its survival is at stake, then
Retrenchment Strategy may be
appropriate
Types of Retrenchment Strategies
• Turnaround Strategy: If the firm chooses
to focus on ways and means to reverse
the process of decline, it adopts a
turnaround Strategy
Approaches of Turnaround
Strategy
• Surgical Approach: It is mostly mechanic and
requires tough attitude of the top executive. The
executive issues direction for change, fire
employees, close down divisions/plants, drops
the product lines, replaces the machinery, issues
production, marketing and finance controls,
fixation of accountability for results.
• This approach continues until the firm is turned
around. Later the chief executives relaxes the
tough environment and controls.
Approaches of Turnaround
Strategy
• Human Resources Development Approach: It
involves-
– Chief Executive conducts a series of meetings,
encourages the managers to be open, understand
each other, understand the problems and diagnose
the root cause for poor performance of the firm
– He encourages the employees to suggest methods of
turning around
– He encourages the managers and employees to
implement the solutions offered by them in a highly
coordinated, committed team spirit
Rehabilitation package for Metal
Box India Ltd.
Metal Box India Ltd. a reputed company in
the packaging industry, turned sick due to
its wrong strategic move of diversifying
into bearings manufacture in the early
eighties. Eight of its nine units closed
down as a results of which the BIFR and
the ICICI formulated a rehabilitation
package for the turnaround of the
company
Rehabilitation package for Metal
Box India Ltd.
The BIFR-ICICI package covers the following:
• Closure of three unprofitable units at Calcutta, Bombay
and Cochin
• Retrenchment of 3000 workers drawn from all the nine
through compensation
• A flat 20 percent cut in wages for the remaining workers
• Write-off or conversion of outstanding loans from
financial institutions and banks
• Concessions and relief of up to 50 percent in sales,
octroi, and turnover taxes, among others from the state
governments
• Introduction of a new promoter in place of the parent
multinational Metal Box,plc, of UK which wanted to
divest its 33.02 % shareholding
• Captive Company strategy: This strategy is
pursued when a firm sells the majority of its
products to one customer (Wholesaler/retailer)
who in turn perform some of the functions
normally done by an independent firm.
The customer, in this strategy, provides the
product design to the captive manufacturer, who
in turn produces according to the design and
supplies the product to the customer. The firm
need not involve the cost o product design and
marketing.
• Divestment Strategy: It involves the sale
or liquidation of a portion of business, or a
major division, profit centre or SBU.
This strategy is usually adopted when the
company is performing poorly or when it
no longer fits the company’s strategic
profile.
Divestment of TOMCO
Tata group is a highly-diversified entity
with a range of businesses under its fold.
They identified their non core businesses
for divestment. TOMCO was divested and
sold to Hindustan Levers as soaps and
detergents was not considered a core
business for the Tatas.
Divestment of VST
‘VST Natural Products’, the food business
company of ‘VST’, the tobacco firm, was
divested to the ‘Global Green Company’ of
the ‘Thapar group’. The reasons for
divestment were: non availability of raw
materials and inadequate working capital
infusion. ‘VST’, the parent company, could
not invest more as it was itself running
under a loss.
• Liquidation Strategies: This involves
closing down a firm and selling its assets.
It is considered as a last resort because it
leads to serious consequences such as
loss of employment for workers and other
employees, termination of opportunities
where a firm could pursue any future
activities, and stigma of failure
Liquidation at Empress Mills
On May 14, 1986, the Bombay High Court
appointed a provisional liquidator in the
petition for the voluntary liquidation of
Empress Mills at Nagpur. Empress Mills
was a 113-years-old mill owned by the
Tatas. Behind the liquidation petition lay a
host of reasons.
The major strategic cause for liquidation
lies in the fact that for nearly 50 years,
Empress Mills did not invest in
modernization or keep pace with
competition. In the wider context, the
government policies did not prove
favourable for the cotton textile industry.
The management of the mill carried the
blame for neglect and delayed action.
After Mr.Ratan Tata took over as chairman
of the company in 1977, some efforts were
made for modernization but these proved
to be grossly insufficient. A proposal to
merge the mill with other textile units of
the Tatas could not materialize.
Rationalization of the product-mix across
these units also proved to be a non-starer
owing to resistance offered by executives.
Efforts to negotiate a voluntary retirement
scheme to cut down on the 6000 workers-
employees strength also failed. Ultimately,
the banks and financial institutions
delayed the formulation of a rehabilitation
package that could turn the mill around.
The state government apparently did not
provide the much needed political support
that could have helped save the jobs of
the workers.
Conclusion: Liquidation at Empress
Mills
The case of Empress Mills provides the
important lesson that if timely strategic
action is not taken and the situation is
allowed to drift, even the largest business
group of India, such as the Tatas, cannot
save a company from inevitable death.
Combination Strategies
• Combination Strategies are a mixture of
stability, expansion or retrenchment strategies
applied either simultaneously (at the same time
in different businesses) or sequentially (at
different times in the same business).
• It would be difficult to find any organization that
has survived and grown by adopting a single
‘pure’ strategy. The complexity of doing business
demands that different strategies be adopted to
suit the situational demands made upon the
organization.
Company adopted Combination
Strategies to deal with the
complexity of the environment
• The Tube Investments of India (TI), a
Murugappa group company, has created
strategic alliances in its three major businesses:
tubes, cycles, and strips. In cycles, it has
entered into regional outsourcing arrangements
with the UP-based Avon (which we could term
as co-opetition, as Avon is TI’s competitor in the
cycle industry) and Hamilton Cycles in the
western region. In steel strips, TI has entered
into a manufacturing contract with Steel Tubes
of India, Steel Authority of India, and the Jindals.
ASSIGNMENT for PGP-II
Pick up several business magazines.
Locate the corporate reports of different
types of companies according to different
factors such as industry, size or type.
Analyze these reports to identify the
types of corporate-level strategies the
companies chosen by you are employing.

Strategy Management

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