Renjith J CyriacRoll No.26Ex-Pgdm 2013-14

VMS & HMS/STRATEGIC ALLIANCES MERGERS,AQUISITIONS

JOINT VENTURES

25TH January 2014

• Introduction• VMS (Vertical Marketing System)• HMS (Horizontal Marketing System)• Mergers• Acquisitions• Strategic Alliances• Joint Ventures

Contents..

• Firms are increasingly paying greater attention to how they manage their marketing channels, so that products and services are delivered at the right time, right place and the right price.

• The new forms of marketing channels have evolved based on robust partnerships, with long-term commitment to each other and the customer.

Introduction..

• Main members of a distribution channel - producer, wholesaler, and retailer work together as a unified group in order to meet consumer needs.

VMS (Vertical Marketing System)..

VMS (Vertical Marketing System)..• Combines

successive stages of production and distribution under single ownership in order to establish channel leadership.

Vertical Marketing System..

• Combines successive stages of production and distribution under single ownership in order to establish channel leadership.

Corporate VMS

Corporate VMS-Sherwin Williams Paints

• Coordinates successive stages of production and distribution, not through common ownership or contractual ties, but through the size and power of one of the parties

Administered VMS

• Companies like General Electric, Procter & Gamble, and kraft can command unusual cooperation from resellers regarding displays, shelf space, promotions, and price policies.

Dominant Channel Member Manufacturer

• Large retailers such as Wal-Mart, Home Depot, and Barnes & Noble can exert strong influence on the manufacturers that supply the products they sell.

Dominant Channel Member Retailer

• Independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact than they could achieve alone.

Contractual VMS..

VMS Contractual

• Wholesalers organize voluntary chains of independent retailers to help them compete with large chain organizations

Wholesaler Sponsored Voluntary Chains

• Retailers join together to organize a new wholesaling business

Retail Cooperatives

• A channel member called a Franchisor might link several successive stages in the production-distribution process.

Franchise Organizations

VMS Contractual Franchise Organizations

Manufacturer Sponsored Retail Franchise

• Coca-Cola licenses bottlers (wholesalers) in various markets who buy Coca-Cola syrup concentrate and then bottle and sell the finished product to retailers in local markets.

Manufacturer Sponsored Wholesale Franchise

• A system of service product delivery in which an organisation producing a service (eg. car rental, restaurants, financial services, etc.) sets up a number of independently-owned franchised outlets in locations convenient to its customers.

Service Firm Sponsored Retail Franchise

• Advantages :• Greater control over system• Elimination of duplication• Elimination of conflict

VMS (Vertical Marketing System)..

• Disadvantages :• Employees at the bottom of a vertical

structure may feel less valued than those higher up in the chain.

• Some employees may not relish the accompanying culture of politics, which places heavy emphasis on pleasing the boss.

• Take a great deal of time for top management decisions to filter down through multiple layers, reducing the organization's ability to react quickly to a rapidly changing business climate.

• Because of the centralized control of power, weak leadership at the top can hamper the effectiveness of the entire organization.

VMS (Vertical Marketing System)..

• Horizontal Marketing System is a set up where 2 or more unrelated companies put together resources or programs to exploit an emerging market opportunity

HMS (Horizontal Marketing System)..

• A transaction where two firms agree to integrate their operations on a relatively co-equal basis because they have resources and capabilities that together may create a stronger competitive advantage.

Mergers..

Daimler Chrysler..

Glaxo Smithkline..

AOL-Time Warner..

• A transaction where one firms buys another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiary within its portfolio of business

Acquisitions..

• In October 2006, Tata Steels acquired Corus with an outstanding price of $12.98 billion.

Tata Steel..

• In February, 2010, Bharti Airtel added 180 million new customers in its list by acquiring an African Mobile Network provider called Zain Africa. This acquisition took place against an amount of $10.7 billion.

Bharti Airtel..

• On August 15, Google announced an agreement to acquire Motorola Mobility, based in Libertyville, Illinois, for $40 per share.

Google Motorola

Source-http://www.google.com/press/motorola/

Tata Motors..

• ONGC acquisition of Russia based Imperial Energy for $2.8 billion. This marked the turn around of India’s hunt for natural reserves to compete with China.

ONGC..

• An agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations

Strategic Alliances ..

Apple-Starbucks

Jet-Etihad ..

Nokia Windows Mobiles • On 11 February 2011,a new strategic alliance

with Microsoft announced (Till August 2013)

• Replacement of Symbian and the MeeGo project with Microsoft's Windows Phone operating system

• Business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity.

• They exercise control over the enterprise and consequently share revenues, expenses and assets.

Joint Ventures..

Sony Ericsson..

Nokia Siemens Networks..

• Tata Sons, Singapore Airlines joint venture orders Airbus A320s

• TATA SIA Airlines will start flying in the full service segment in the second half of 2014

TATA SIA..

Difference..

• Advantages :• Employees may attain greater

satisfaction due to greater freedom and autonomy.

• Keeps the organization ahead of the competition

• Streamlined communications and reporting processes making the organization more nimble and adaptable to change.

HMS (Horizontal Marketing System)..

• Disadvantages :• The decentralized structure could lead

to a "loose ship”. • A resulting lack of control can lead to

finger-pointing when things go awry, which can hinder productivity

• Organizations attempting to convert from a vertical to a horizontal structure can face challenges, as management needs to adjust to a less authoritarian and a more peer-like relationship with subordinates.

HMS (Horizontal Marketing System)..

“The greatest change in corporate culture and the way business is being conducted , may be the accelerating growth of relationships based not on ownership, but on partnership.” -Peter F Drucker

“Successful business strategy is about actively shaping the game you play, not just playing the game you find.” -Adam Brandenburger & Barry Nalebuff