Dialysis Of Multinational Companies' Expansion Strategy

Stopping on the wrong road is also a way forward.

Nike, a world-renowned sports brand, knows well that doing the right thing is a strategy and doing things right is a strategy. Under the pressure of rising cost of various raw materials, its latest strategy is to sell UMBRO's (Umbro) football products and Cole Haan shoes and accessories two brands.

"This will make us Reduce industry costs Concentrating on R & D of core products can focus resources on the most potential opportunities for Nike, so as to continue to drive sustainable profitable growth. The company CEO Mark Parke said. In his view, its brand name and Jordan, CONVERSE and Hurley brand contain more potential, and the latter three brands have "unique customer relationship" to complement Nike brand.

It is not just Nike. In the past two years, the prospects for economic development are uncertain. Capital chain Under tight pressure, most multinational companies began to implement a strategic contraction based on practical considerations, such as the three major American auto companies selling high-end brands such as Volvo, Land Rover and Jaguar. P & G sold pimps chips and Pfizer sold nutriment business.

Many of these brands were their acquisition partners, such as UMBRO (Umbro), which was acquired by Nike in 2008. What are the dominant strategies for expansion and contraction in the complex trading?

"Broken wrist": challenge of cutting opportunities

Just like when house lizard is in danger, it will break away from its body and adjust itself by breaking its wrist. Pan Yifan, senior partner of Beida management consulting group, believes that defense is sometimes carried out for better offense.

Brand contraction is usually based on its Brand strategy Under the guidance of step by step, according to plan, Nike plans to sell the above two brands, in addition to external economic factors, but also part of its brand strategy adjustment.

Previously, Nike also had many similar wrist breaking movements. In 2007, Nike sold its clothing brand STARTER for $60 million, because its growth was not as good as Nike's other brands. A year later, Nike sold its famous hockey brand Bauer, which was purchased at the price of 395 million US dollars in 1995, for a price of 200 million US dollars, and sold it to a private Holdings Company Kohlberg, because the brand has been growing feeble.

In Pan Yifan's view, the more good business opportunities there are, the more enterprises are willing to sell themselves to the enterprise. For these big enterprises, the real challenge is not to find opportunities, but to cut them. If we are tempted by short-term growth and expanding sales, it will be very troublesome for the subsequent development of enterprises to buy some seemingly safe enterprises.

When a company adopts a strategy of shrinking, it must find its core advantages. The most profitable, the most satisfied and the most market oriented brand must be retained. He believes that the brands that can be cut off are often unprofitable brands and those that are not profitable for the development of the main business.

For example, the product line across 9 categories, with more than 20 internationally renowned brands of Nestle, in 2008, the sale of specialized production of ophthalmic products Alcon 77% of the shares. Previously, Nestle had also closed or sold 150 factories with poor performance, but few had a precedent to sell Qian Shu.

The advantages of Nestle are mainly abundant funds, wide product lines, and strong brand influence, but they are inferior to competitors' specialties in the subdivision industry. Jian Aihua, an analyst at CIC, believes that this is also related to Nestle's transformation. It is preparing to transform itself into a healthy, nutritious, high-tech and personalized food advocate from the old European company, which is based on instant infant food and instant coffee.

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Attack expansion

Although strategic contraction has generally become a response for multinational corporations international financial crisis And a rational choice for sustained economic downturn. But at the same time, other companies based on the judgment of the future have increased the proportion of emerging and emerging industries in the global strategy and seized the opportunity of the next prosperity.

In May 29th, GAVILON, a large Japanese comprehensive trading company, acquired a total of 3 billion 600 million US dollars to acquire the third largest Food Corp in the United States. It acquired over 140 food distribution centers and large grain distribution and distribution networks in the United States as well as bases in major food producing areas such as Brazil, Australia and Ukraine, thus becoming one of the world's leading grain traders. In the first 8 days, Dalian Wanda Group, a Chinese company in Asia, signed a merger agreement with the US AMC theater company. Wanda invested $2 billion 600 million to acquire AMC100% equity and debt.

"M & A is indeed a good competitive strategy," said Zhang Yun, general manager of Rees partners (China) marketing strategy consulting firms. However, the premise for enterprises to diversify mergers and acquisitions should be that in the original field, or the leading brands have already achieved the leading position in the industry, they must have a dominant position and have a strong dominance. For example, Procter & Gamble made the first Ivory soap to make an absolute advantage before starting to do other things. After TOYOTA did this brand well, it began to make Chrysler.

Secondly, the merger and acquisition in the expansion of enterprises is best to strengthen the existing brand advantage. Those with direct competition, such as Procter & Gamble's acquisition of PANTENE, and so on, have grasped the new opportunities and consolidated the existing brand position.

There are two main strategies for bad merger and acquisition expansion. One is to see the opportunity of an industry, and then to buy a company to enter the industry. The other is to acquire complementary enterprises, which leads to the loss of the focus of the business and the confusion of consumers' cognition of the brand. Michael Porter, a business professor at Harvard University, found that the failure rate of the two mergers and acquisitions was 80% in the recent 50 years of M & A case studies.

In addition to the merger itself, the ability of the enterprise to integrate itself is also very important. Although Procter & Gamble has also expanded itself through many acquisitions, for example, the brand of herbal shampoo brand is the purchase of it, but more importantly, in this huge consumer goods Empire, its products R & D, marketing, planning, and communication system are perfect, and at its terminal can also form intensive management and use the synergy effect between brands to form an overall advantage.

The secret behind relaxation

One side is the expansion and expansion of enterprises, the other is the contraction of the brand, which seems to be very contradictory. In fact, Zhang Yun found that many multinationals have been expanding, shrinking, wandering in the strange circle of expansion and contraction.

When carrying out the comprehensive expansion strategy, usually after the main business is done well, the enterprises hope to cultivate new growth modules through diversified ways. The strategy of M & A should conform to the future needs of the industry and the company's strategic direction.

However, after the acquisition, Pan Yifan believes that the company may find that its entry field may not be as simple as it was originally intended to be, and that each subdivision may or may encounter different strong opponents, or because of the economic situation, its main business or Core brand They can't wait to wait for the situation. Only by refocusing the business, will they sell the brands that are irrelevant to the core business or low related brands. When Ford sold Volvo, it was under the financial crisis that the cash flow of the parent company had problems and had to take the wrist measure.

When blind expansion meets problems, the way of shrinking focus can often enhance the competitiveness of enterprises and get rid of difficulties. Just as GM's original 9 brands reconstituted with only 4 brands, they quickly realized profits.

However, under the impetus of the growth of capital market and the sober management of enterprises, enterprises in the rising cycle often feel that they can do anything and have to expand again to achieve some "unnecessary growth".

Because China's industry is not very mature, there are still many opportunities for development in different industries, and this creates opportunities for diversification. However, Voight financial (China) CEO Zhang Zhihao believes that the global economic and financial markets are facing too many uncertainties at present and in the coming period. At the same time, the Chinese economy is also facing the arduous test of steady growth and structural adjustment. Chinese enterprises should adopt a more cautious attitude in cross-border mergers and acquisitions or daily operations.