Internal development - self-reliance Mergers and Acquisitions--Using Doctrine Strategic alliance - a perfect match

Integrated growth strategy (unity is strength)

intensive growth strategy (Injury to ten of his fingers is worse than cutting off one of his fingers)

Diversified growth strategy (Portfolio diversification of risks)

pause strategy

unchanged strategy

Maintain profit strategy

Turnaround Strategy (TCM)

Divestment Strategy (WM)

Liquidation strategy (treatment ineffective, inheritance divided)

cost leadership differentiation

Concentrated cost leadership Concentrated differentiation

Definition: Vertical integration strategy: Vertical integration strategy refers to the enterprise's Product or business chain forward or backward, extending and expanding the company's existing business strategy

excellent lack point

Main risks

forward one integrated strategy

backward one integrated strategy

Definition: Horizontal integration strategy refers to corporate acquisitions, Strategies to merge or combine competing businesses.

Purpose: Reduce competitive pressure and achieve economies of scale and enhance their own capabilities to gain competitive advantage.

Method of implementation: purchase, merger, alliance

Applicable conditions

Horizontal integration strategy mainly This is achieved through the following ways:

The basis of this strategy is to increase the market share of an existing product or service , or grow a business that is operating in an existing market. The goal is to increase the frequency of product use through various methods.

Applicable situations:

Especially suitable for expanding market share for an overall growing market.

Developing niche markets If the company’s performance compares to its competitors On a smaller scale, this method is particularly suitable.

Maintain market share, especially When a market downturn occurs.

definition

Ways to achieve

Reasons for adoption

Applicable situations

Example

Definition: Market development strategy refers to converting existing products or services into Strategies for entering new markets. The strategic costs and risks of the market are also relatively low.

Ways to implement: The main ways to implement market development strategies include opening up other regional markets and market segments.

Reasons for adoption

Applicable situations

Example

(1) Continue to operate in existing products or markets and Unable to reach target. (proven through gap analysis)

(2) "Money is rich"-previously due to existing products or markets A successful operation that retains more capital than is needed for financial expansion in existing products or markets

Liquidity → internal flexibility external flexibility

(3) A diversification strategy means higher profits than expansion in existing products or markets. (Law of Diminishing Marginal Utility)

(1) Related diversification. More related Yuanhua is also called concentric diversification. It means that the enterprise uses its existing business as Basic strategies for entering related industries.

(2) Unrelated diversification. Not relevant Diversification is also called centrifugal diversification. refers to the enterprise entering into the current industry Strategies for unrelated industries.

① Enterprises hope to find high-profit market opportunities; (profit-only)

② Existing products and markets have defects; (congenital deficiencies)

③The capabilities of a certain department of the enterprise are too weak, and the enterprise group must be diversified; (Kill the rich and help the poor)

④ Benefit from increasing product market breadth and flexibility; (both sides)

⑤ Can avoid monopoly-related restrictions that prevent companies from developing beyond existing products and markets; (curve to save the country)

⑥ Easier access to funds, partly because funds can be obtained from a wider portfolio of activities; (Caiyuan Guangjin)

⑦ Management preferences and training may make them inclined to choose enterprise group diversification. (Leadership Intention)

① Diversify risks. When existing products and markets fail, New products or markets can provide protection for a business.

② Obtain high profit opportunities. The buyer purchases from the same industry Enterprises with better economic characteristics than their own to improve their profitability and flexibility.

③Withdraw from existing business.

④ It is easier to obtain financing from the capital market.

⑤Find new growth points when the company cannot grow.

⑥Use surplus funds.

⑦ Utilize underutilized resources.

⑧Obtain funds or other financial benefits, such as accumulated tax losses.

⑨Use the company's image and reputation in a certain market to enter another market, To succeed in another market, corporate image and reputation are crucial.

①If the company enters a market with a low price-to-earnings ratio In growth industries, shareholder returns will be diluted.

② Enterprise group-style acquisitions will not bring additional benefits to shareholders. Because there is no synergy effect, compared with investing in a holding company, Individual investors will receive higher investment returns by investing in their subsidiaries.

③ Enterprise group enterprises lack a common identity and purpose. In order for a conglomerate-type enterprise to succeed, Various headquarters responsible for joint operations must have excellent management and financial capabilities.

④The failure of one business will drag down other businesses because it will use up resources.

⑤This is not a good idea for shareholders. Shareholders diversify by purchasing A stock portfolio can easily diversify investment risks, without the need for management to overstep its bounds.

The goal of a cost leadership strategy is to become the lowest cost manufacturer in the entire industry. Lower costs may not reduce the value consumers get from the product; Even when purchasing a low-cost product, they are still willing to pay a reasonable price [Consumers pay the price according to the utility/function they receive]. Through low-cost production, manufacturers can compete on price with any manufacturer in the industry, and earn higher unit profits. (Utility/use value remains unchanged, Costs are reduced, prices remain unchanged, and greater profit margins are obtained)

1. There are a large number of price-sensitive users in the market

2. It is difficult to differentiate products

3. Buyers don’t pay much attention to the brand

4. Consumer switching costs are low

1. Set up production equipment to achieve economies of scale

2. Adopt simple product design by reducing the functions of the product But at the same time, it can fully meet consumer needs and reduce costs.

3. Adopt the latest technology to reduce costs and/or improve productivity, or use cheap labor where feasible

4. Focus on productivity improvements

5. In high-tech industries, product design and production methods rely on labor technology. In the industry of high performance, make full use of the learning curve effect (practice makes perfect)

6. Minimize manufacturing costs

7. Get better supply prices

1. Can resist competitors’ attacks

2. Have strong bargaining power with suppliers

3. Forming barriers to entry

1. It may be imitated by competitors, reducing the profitability of the entire industry.

2. Technological changes lead to the loss of original cost advantages

3. Buyers begin to pay attention to product features other than price

4. There is a big difference between the products of competitors (simple → simple, one step away)

5. Those who adopt a cost concentration strategy may gain cost advantages in market segments

Differentiation strategy refers to a company targeting large-scale markets by offering products that are different from those of competitors. A strategy to gain competitive advantage through differentiated products or services. This differentiation can come from design, brand image, technology, Various aspects such as performance, marketing channels or customer service.

1. Products can be fully differentiated and recognized by customers 2. Customer needs are diversified 3. The industry in which the company operates is undergoing rapid technological changes, and innovation has become the focus of competition.

1. Strong R&D capabilities 2. Strong product design capabilities 3. Creative 4. Strong marketing capabilities 5. The company enjoys a high reputation for quality and technology leadership 6. Able to obtain strong support from sellers

A successful differentiation strategy can attract consumers with high brand loyalty and price-consciousness. insensitive customers, thereby achieving revenue that exceeds the industry average, Unlike cost leadership strategy which is mainly used to increase market share, A differentiation strategy has the potential to achieve higher profit margins than a cost leadership strategy.

1. Competitors may imitate, causing differences to disappear. 2. Product or service differences have lost their significance to consumers. 3. The cost difference with competitors is too large. 4. Those who adopt a differentiated concentration strategy can achieve greater success in market segments. Big differentiation 5. Those who adopt a cost concentration strategy may gain cost advantages in market segments

1. Enterprise resources and capabilities are limited, making it difficult to realize costs across the entire industry Leading or differentiated, only individual market segments can be selected

2. The target market has large demand space or growth potential.

3. Competitors in the target market have not yet adopted the same strategy

1. Competitors may imitate

2. The target market is driven by technological innovation and substitute products. Decline in demand due to reasons such as

3. Because the target market segment is different from other market segments The difference is too small, and a large number of competitors flood into the market segment

4. New entrants re-divide the market

① It only focuses on internal measures. The concept of cost leadership only focuses on internal measures rather than market demand. It can be used to gain market share, but internal measures only target significant market share, not costs All market shares referred to in leadership. ② It assumes that there is only one enterprise. If a comprehensive cost leadership strategy is applied to the entire industry, Then only one company can succeed through this strategy. But this is not absolutely the case, Because there may be many companies in the market that want to adopt a comprehensive cost leadership strategy, Especially in markets where new technologies are frequently introduced. Companies that compete in the entire market There may be various capabilities or strengths that enable successful cost leadership strategies in different market segments. ③It assumes that low cost means lower product pricing. The fact is, low cost doesn’t mean you have to Adopt lower prices or enter into a price war with competitors. Companies adopting a cost leadership strategy can choose "Invest high profits in R&D or marketing" or implement a differentiation strategy on products. Implement differentiation strategy Strategies can also generate higher profits. Firms with a cost leadership strategy have more freedom in choosing other competitive strategies.

① Porter believes that differentiated products can always be sold at high prices. However, in order to increase market share, Differentiated products may be sold at the same price as competing products.

② It is difficult to make a decision on the choice of competitors: Which companies should we differentiate from? Who are the competitors? Do they serve other market segments? Do they compete on the same basis?

③It is difficult to determine the source of differentiation: including the information provided by the enterprise All aspects of our products and services, not just the products.

There may be fewer conceptual difficulties with a centralized strategy because it is related to The concept of market segmentation comes together very well. In practice, Most companies will adopt this strategy to a greater or lesser extent, and the design can meet Products and services for specific target markets.

popular-circulation

horizontal merger

vertical merger

Mixed M&A

Friendly mergers and acquisitions: refers to the acquiring party and the acquired party determining the terms of the merger and acquisition through friendly negotiations, and the opinions of both parties are basically consistent. A type of merger and acquisition that realizes the transfer of property rights under certain circumstances. In this type of merger, the acquirer usually first selects the acquiree and takes the initiative to Engage with the other party's management to discuss the merger. After full consultation between the two parties, the well purchase agreement was signed and the necessary The merger and acquisition is completed after the formalities. Under special circumstances, there are also situations where the acquired party actively requests the acquiring party to take over the company.

Hostile merger: usually refers to when friendly negotiations are rejected, the acquiring party ignores the A type of merger and acquisition in which the acquiring party adopts coercive means to forcibly acquire the other party's enterprise. Hostile mergers may also take the form of not having any contact with the acquired party, while holding shares in the stock. Acquire the shares of the acquiree in the market to achieve control or merger of the acquiree. Due to various reasons, mergers and acquisitions (especially mergers) often cannot be reached through friendly negotiation. The acquired party, based on its own interests, refuses to accept the acquiring party's merger conditions. And may take all measures to resist the merger and acquisition to resist. In this case, a hostile takeover may occur.

Industrial capital mergers and acquisitions

Financial capital mergers and acquisitions

(1) Prospects for technological progress in the industry;

(2) Competitors’ reaction to the acquisition;

(3) The possibility of government intervention and regulatory restrictions;

(4) The size and advantages of competitors;

(5) Synergies obtained from mergers or acquisitions;

(6) The stage of the industry and its long-term prospects.

Synergies arise from complementary resources that are The products or markets developed are mutually compatible and synergies usually This is achieved through technology transfer or sharing of business activities.

(1) Marketing and sales synergy: that is, using one company’s brand for another company’s products, Use a common sales force and advertising to offer customers a wider range of products. For example: Dangdang’s brand + a logistics company’s channels and services

(2) Operational synergies: including: ① Economies of scale in purchasing raw materials and fixed equipment, etc. ; ② Common use of distribution channels and warehouse storage; ③ Integration of logistics, stores and factories; ④ Eliminate the impact of seasonal fluctuations, such as one company in the peak season while another company is in the off-season. (The total cost of two people after getting married < the sum of the costs of two singles) (Portfolio management similar to financial cost management)

(3) Financial synergy: Risk diversification allows companies to obtain funds at a lower cost. If the merging companies belong to similar industries, market competition can be reduced. can share benefits from the same research and development, Maintain more stable cash flow and sell surplus assets. (From an investment perspective, It is also high-risk and high-yield, so low-risk companies have relatively low financing costs)

(4) Management synergy: Hire managers with high salaries to manage poor conditions enterprises rather than well-managed enterprises. across the enterprise dissemination of knowledge and provide greater opportunities for managerial specialization in larger enterprises.

1. “Cost of entry” test. In fact, generally attractive industries tend to require higher entry costs. The premium paid to acquire the business is an important consideration. COST

2. “Complement each other” test. Acquisitions must provide benefits to shareholders that they cannot create themselves. Diversification mergers and acquisitions carried out solely for the benefit of the company cannot increase the wealth of shareholders. Asset divestiture can only produce one-time benefits and cannot lay a good foundation for long-term investment. WIN-WIN

It refers to the establishment of a third-party organization by two or more enterprises for joint management, Enterprises that share risks and profits or cooperate in other systematic ways to jointly control the enterprise.

Particularly attractive to small or risk-averse businesses, Or it is particularly suitable for technology development where R&D costs are very high.

(1) Allows enterprises to cover a large number of countries or regions; (2) Reduces the risk of government intervention; (3) Allows closer control over operations; (4) There are local companies in the joint venture that can provide local knowledge; (5) ) It can also be used as a learning activity; (6) Provide funding for high-cost technology research projects; (7) Often can be used to purchase or establish a wholly-owned foreign manufacturing enterprise; (8) Can be obtained from another enterprise in Core competencies that cannot be obtained in a company.

(1) There are serious conflicts in terms of profit sharing, investment amounts, joint venture management and marketing strategies; (2) Conflicts arising from the joint venture parties’ efforts to protect intellectual property rights (such as proprietary product designs); (3) When When one partner changes its business strategy or is acquired by another company, it may plan to withdraw from the joint venture; (4) Without management rights, the managers of the joint venture may be excluded from the core management of the parent company; (5) It is possible that It would be difficult to enforce contractual rights across geographic or regulatory areas.

Refers to enterprises with competitive advantages in products, services or brands that choose and A business method that authorizes several enterprises to engage in their franchised business activities.

The essence of franchising is control, communication, autonomy and ongoing relationships, that is, authorization In order to achieve "win-win cooperation", the enterprise provides operational guidance and control to the enterprise that accepts the franchise. And charge a certain franchise fee. There is a control relationship between cooperative enterprises. It is also an ongoing relationship of mutual communication, collaboration, and mutual respect for each other’s autonomy.

① The combination of manufacturing companies and retail industries, such as automobile companies or petroleum companies franchising sales stores or gas stations; ② The combination of manufacturing companies and wholesalers, such as famous beverage companies transferring trademark or brand franchise rights to wholesalers; ③ The combination of service enterprises and retail stores, such as fast food services and retail stores often encountered in daily life Service-centered retail franchises such as food sales and beauty salons; ④ The combination of wholesalers and retail stores, that is, a relationship formed by wholesalers selling their personal goodwill to retail stores, It is a brand obtained by a retail store or a franchise or underwriting right in a certain area.

OEM is to provide one party (the client) with technology, processes, design solutions, markets, specifications, Standards, quality requirements and other product elements are processed by the other party (manufacturer) according to the order. Long-term strategic alliance method, also known as commissioned manufacturing.

1. Conditions that the client should possess: excellent technical output capabilities; excellent brand image; Extensive market network; product development capabilities; technical control capabilities. 2. Conditions that the manufacturer should possess: excess and excellent manufacturing capabilities; Sincere willingness to cooperate; lack of market development ability.

The OEM method is actually a strong alliance, and the two partners have complementary advantages. Each takes what he needs. One party has excess productivity and can reduce the manufacturing cost of unit products through an increase in production and sales; The other side is promoting product sales through its original network advantages and brand advantages. Reduce various advertising and promotion expenses and relatively reduce marketing costs. This way saves fixed asset investment, The large amount of capital investment can be used for better resource allocation, so that the financial cost of the project can be reduced.

"Other people's equipment, your own brand." On this basis, it is required to establish a systematic OEM operating system and a complete management mechanism to ensure the efficient operation of the OEM.

Suitability refers to whether alternative strategies are consistent with the organization's expectations and capabilities. and whether the strategy responds appropriately to relevant surrounding events and trends. Consistent with corporate goals; Consistent with internal and external environments; Consistent with difference analysis results (resolving differences)

1. Maintain market share, that is, the company maintains its existing market share in a certain market. 2. Market expansion, that is, an enterprise increases its market share in a certain market. 3. Market contraction, that is, a company reduces its market share in a certain market. 4. Internal development 5. Merger development 6. Joint development and strategic alliances

Life cycle analysis Consideration of resources and capabilities (1) Whether it is based on existing resources and capabilities (core competencies) (2) Formulating strategies to develop other, new resources and capabilities (new core competencies) Enterprise profile analysis

1. Scenario analysis method 2. Rating and scoring methods 3. Decision tree method

Feasibility assessment of a strategy involves assessing whether the strategy can be successfully implemented.

(1) Whether the strategy can receive sufficient financial support;

(2) Whether the performance of the enterprise can reach the necessary level, For example, whether the quality or service reaches the required level;

(3) Whether it can achieve the necessary market position, and whether they have the necessary marketing skills;

(4) Whether the company can handle challenges from competitors

(5) How will the company ensure that management and operations have the necessary capabilities?

(6) Whether it is sufficient to perform in the market Technologies to compete effectively (technology related to products and processes);

(7) Whether necessary raw materials and services can be obtained;

(8) Whether the company can deliver the goods and services specified in the strategy;

(9) Whether there is enough time to implement the strategy.

If the strategy is not based on existing resources and capabilities, Then its feasibility will be questioned.

Mainly to assess the views of all shareholders, especially those Shareholders who have significant rights and are willing to exercise them. It involves assessing people's expectations and the expected performance of the strategy. This includes an assessment of return on investment (possible benefits to shareholders) and risk (the risk of not achieving objectives and associated consequences).

(1) Estimated profits of the enterprise: return on investment, growth rate, Earnings per share and cash flow (these financial indicators are mainly used to measure shareholder satisfaction) (2) Financial risk (liquidity) (3) Capital structure (asset-liability ratio, share ownership, etc.) (4) Definition of responsibilities (5) Relationship with stakeholders (6) Relevant laws and regulations (7) Environmental protection, ethics and social responsibility (8) Risks (risk attitude, risk preference, etc.)

(1) Environmental factors (addressing threats, exploiting opportunities, harmony between man and nature) (2) Internal capabilities and characteristics (characteristics refer to management capabilities) (3) Available resources: The strategy must be applicable to the physical facilities available to the enterprise now and in the future and financial resources. (4) Risk Appetite: This involves ensuring that the selected strategy is fully suitable for the risk-return preferences of management and owners. Risk-taking individuals will tend to choose strategies that involve high risk but may lead to high rewards. They tend to emphasize The strengths of the business and the opportunities created by the environment, operating with confidence and ambition, and handling the challenges it faces; Usually they prefer innovation to imitation. Risk-averse people, on the other hand, prefer more defensive, conservative strategies. They try to maintain existing capabilities and do not want to undertake projects that require new capabilities and technologies and encounter uncertain situations. Will hold back and tend to be followers rather than leaders in the market.

1. Return on invested capital method and set return on capital Minimum acceptance level comparison (related to capital cost)

2. Net cash flow method: Net cash flow = Profit before depreciation - Periodic investment in project working capital The importance of this method of calculating cash flows lies in the ability of a business to withstand negative cash flows from bankruptcy. It's entirely possible that it will generate huge profits in the future, so the return on capital looks good. However, there may be a large amount of negative cash flow in the short term, which means that the company will go bankrupt. A business may not be able to pay its current liabilities while it waits for future profits. B.S. Another way to approximate net cash flow is to divide the new strategy into The total pre-tax profit plus depreciation minus the capital invested in the new strategy

3. Investment payback period method

4. Discounted future cash flow analysis method (DCF)

For public utilities and NFP organizations, there are often factors It’s impossible to quantify, whether it’s cost or benefit.

Various assessment methods: qualitative and quantitative

Alternative Strategies ←→ Stakeholders