Upload
mahtaabk
View
547
Download
8
Embed Size (px)
Citation preview
Strategic Management
Friday, 02 September 2011
Case Analysis: Havells india
Submitted by:
PGP/14/260 NITESH KUMAR GUPTA PGP/14/280 MAHTAAB KAJLA PGP/14/287 PRACHI CHAWLA PGP/14/290 RAHUL MITTAL PGP/14/313 VINNY ARYA PGP/14/315 VISHAD DUBEY
Group V
• Electrical & Electronics Equipment supplies
Industry defined
Strategic Management © Group V
• Financing is difficult considering the size of SLI
• Small size of senior management group Not formal M & A personnel
• Integrating the SLI managers with Indian team
Challenges
Strategic Management © Group V
6–4
Value-creating Strategies of
Diversification: Operational and
Corporate Relatedness
Strategic Management © Group V
• Operational Relatedness (High) – Economies of scope by acquiring light & fixtures
company
– Access to distribution channels
– Access to wide marketing network for marketing Havells’ products in Europe
• Corporate relatedness (Low) – Product offering & R&D of both the firms is different
– Hence low transfer of core competencies & operational know how is low.
Related constrained diversification
Strategic Management © Group V
• The attractiveness test: overall attractive – verdict “diversify” – Threat of new entrants: low
• Presence of stringent international and domestic quality as well as safety standards which are difficult to achieve
– Bargaining power of suppliers: low • Fragmented industry and small companies • Switching costs are low as players can purchase resistors,
capacitors etc; from other suppliers
– Bargaining power of buyers: low to moderate • Buying decision were dependent on brand and certification
of international and domestic bodies
Tests for diversification
Strategic Management © Group V
– Threat of substitutes: low
• No substitutes are present
– Competitive Rivalry: high
• Competition was intense from large and established players – Players CG, bajaj electricals – ECDs (very high)
– L&T, simmens – Industrial switchgear
– Legrand, indoaisan – domestic switch gear
– Cable and wire – polycab, finolex, cci, universal cables (very high)
Tests for diversification
Strategic Management © Group V
• The cost-benefit test: verdict “diversify” – Cost of acquisition from valuation – Havells believed that in the long run the cost advantage,
brand equity of Sylvania, access to EU markets would make it a good acquisition
• The better off test: verdict “diversify” – Positive synergies: Havells
• Increased opportunities for globalization and internal growth • After the acquisition, Havells would have broader product offering • Increased market capitalization
– Positive synergies: SLI • Management saw a need for fresh capital infusion in order to
survive and grow business
Tests for diversification
Strategic Management © Group V
Resources
Human Resources - Retaining intellectual capital of Sylvania and Havells
Intangibles - World’s third largest company in lighting industry next to GE and Phillips - Brand visibility in more than 30 countries
Physical Resources -11 manufacturing plants in 5 countries, 22 sales & distribution facilities in Europe, South America & middle east
Nature of Resources - Had hard(plant & equipment) resources and employees(8400) constitutes soft resources
Extent of redundant Resources
Synergies
Reciprocal synergies - Sharing of distribution and marketing network
Modular synergies - Havells & SLI will manage most of their resources independently and pool only results
Analysing the candidature for acquisition
Strategic Management © Group V
Market Factors
Market Uncertainty - Low Havells keeps pace with technology to produce quality products. Its are certified &abide all safety standards. Hence customers will continue to buy their products.
Forces of Competition -Competition was intense from large and established players Players CG, bajaj electricals – ECDs (very high) L&T, simmens – Industrial switchgear Legrand, indoaisan – domestic switch gear Cable and wire – polycab, finolex, cci, universal cables (very high)
Collaboration Capabilities
Collaboration Capabilities - Past experience to acquire Electrium was in vain due to its inexperience in M&A field - But they have now learned how to negotiate international deals and build relationship with bankers
Analysing the candidature for acquisition
Strategic Management © Group V
Analysis of Factors
Factor Degree Strategy
Types of Synergies Reciprocal-Modular Acquisition-Non Equity alliance
Nature of Resources Low/Medium Acquisition
Extent of Redundant Resources low Non Equity alliances
Degree of Market Uncertainty Low/Medium Acquisition
Level of Competition High Acquisition
Recommendation: the synergy generating resources are hard mostly, combining the resources would definitely be a plus, the degree of market uncertainty is low-Medium
because of wide dimensions of market, and the level of competition both in domestic as well as international market is high; so it’s a good idea to go for acquisition than alliance.
Analysing the candidature for acquisition
Strategic Management © Group V
• Increased market power
• Overcoming entry barriers
• Increased diversification
• Reshaping the firm’s competitive scope
• Lower risk as compared to developing new products
• Learning and developing new capabilities
Reasons for acquisitions
Strategic Management © Group V