Business Growth Strategies Overview

International Corporate Strategy

• Course offered by ESCP Europe in 2025
• Taught by Louis Mulotte, Tilburg University

Team Project Guidelines

• Firms selection deadline: Saturday, January 18, noon
• Choose a firm using the link: https://go.uvt.nl/escp2025
• Avoid firms previously studied in the course (Ahold, Apple, Danone, Heineken, Honda, LuxotticaEssilor, Microsoft, Newell Rubbermaid, Nestle, PepsiCo, Safran, Stellantis)
• Select a diversified firm

What is Corporate Strategy?

• Unknown

Puzzle

• A cartoon depicting two business people reviewing corporate strategy.
• The cartoon's message is that a review of corporate strategy is needed.

Real Examples

• Multiple business logos are displayed for example companies

What is Corporate Strategy About?

• How to create added value across businesses.
• Is there a limit to value creation?
• How can businesses be developed & organized to maximize value creation?

Sources of profitability

• Corporate level (20%)
• Business level (40%)
• Industry (10%)
• Other (27%)
• Data from Vanneste (2017) meta-analysis from 16 studies and 225,183 business-year observations (1974-2013)

What is Corporate Strategy About? (Page 8)

• Which expansion moves? (Where?)
• Which activities or assets?
• Which corporate benefits? (Why?)
• How to get them? (How?)

Where? (Page 9)

• Industry A (Headphones/AirPods): Desktops (iMac), Suppliers, Laptops(MacBook), Buyers, More of the same, Retail (Apple Stores)
• Industry B (Phones): Phones (iPhone), New business

Where? (Page 10)

• Business Development (BD): More extant activities (VW, Audi, Skoda, Seat, Porsche)
• Horizontal Expansion (HE): Combining extant activities with new activities, varying levels of relatedness (Mercedes: cars & vans to trucks & busses)
• Vertical Expansion (VE): Internal production of activities, formerly outsourced to specialized firms (Forward VE: Zara, Backward VE: Total)

ABC Types (Page 11)

• A: Luxottica (Italy) and Essilor (France) agreed on a €46 billion to create a global eyewear powerhouse. The deal includes brands like Oakley and Ray Ban and leading manufacturer of ophthalmic lenses (MS 45%-80%).
• B: British American Tobacco (BAT) agreed on $50 billion to acquire Reynolds American, creating the largest listed tobacco company.
• C: French aero engine maker Safran launched a €10 billion bid for aircraft seats maker Zodiac Aerospace.

How? (Page 12)

• Build: Greenfield, Corporate venturing, Internal Development, Internal Growth, Organic Growth
• Blend: Alliances & JVs, Equity sharing, Technology partnerships
• Buy: Mergers, Acquisitions, Takeovers
• Adapted from Capron & Mitchell HBR (2012)

The 'corporate expansion matrix' (Page 13)

• A table showing different expansion types with the same business, the same industry and different business
• Shows expansion modes (how?)

The 'corporate expansion matrix' (page 14).

• Shows specific companies categorized based on the same business, same industry and different business. This allows for an understanding on how the firm expands from one type to another.

Why? (Page 15)

• Value Creation: Value (A+B) > Value (A)*Value(B)
• Cost Synergies: Costs(A+B) < Costs(A) + Costs(B)
• Revenue Synergies: Revenue (A+B) > Revenur (A)*Revenue(B)

The Grand Challenge (Page 16)

• A seesaw analogy depicting lower input cost, lower production cost, and higher revenue influencing the decision on whether to "build," "blend," or "buy".

Logics for Corporate Growth (Page 17)

• Various factors affecting business growth (Decreased input costs, decreased production costs and Increased revenues).

Logics for Corporate Growth (Page 18)

• Different areas of focus within business development (Increased bargaining power, scale economies, scope economies), Horizontal expansion (increased bargaining power, scope economies, eliminating costly friction) and Vertical expansion (access to cheaper inputs, eliminating costly friction between stages).

ABC Synergies (Page 19)

• A: Italy's Luxottica and France's Essilor have agreed a €46bn deal to create a global powerhouse in the eyewear industry. The deal brings together Luxottica, the world's top spectacles maker with brands such as Oakley and Ray Ban (Mkt Share 10%), with Essilor, the world's leading manufacturer of ophthalmic lenses (Mkt Share 45%-80%).
• B: British American Tobacco acquired Reynolds American for $49.4bn.
• C: French aero engine maker Safran launched a €10 billion bid for aircraft seats manufacturer Zodiac Aerospace to create the world's third-largest aerospace supplier.

Horizontal Expansion: Net effect (Page 20)

• A graph showing the relationship between synergistic gains, coordination costs, and the number of businesses.

Average Number of Businesses (Page 21)

• Data on diversification of US public companies (2020). Shows the average number of businesses per firm.

Expansion Performance (Page 22)

• Shows a grid categorized by Build, Blend and Buy showing in which categories expansion has more potential.

Key Takeaways (Page 23)

• Where to expand?: Business Development, Vertical Expansion, Horizontal Expansion.
• How to expand?: Build, Blend, Buy.
• Why expand?: Lower input cost, Lower production cost, Higher Revenue.

M&AS and Corporate Strategy (Page 24)

• Title of a presentation, likely detailing mergers and acquisitions, as they relate to corporate strategy.
• Presented by Louis Mulotte from Tilburg University.

International Corporate Strategy (Page 25)

• Title of a presentation, likely detailing mergers and acquisitions, as they relate to corporate strategy.
• Offered by ESCP Europe.

Vertical Acquisitions (Page 26)

• Title of a presentation, discussing specific types of acquisitions.

Terminology (Page 27)

• Backward Vertical Expansion: Inputs obtained from a supplier are now produced internally at a cheaper cost.
• Forward Vertical Expansion: Operations done by a buyer are undertaken internally.

Examples (Page 28)

• Backward Vertical Expansion examples: From Production to Supply - EV batteries (replacing LG), Apple acquisition of Beats
• From Retail to Production - Intermarché, Decathlon acquisition of Dita hockey brand.
• Forward Vertical Expansion examples: From Supply to Production - Microsoft entry into hardware (Surface tablets), BSN acquisition of Gervais-Danone.
• From Production to Retail - Apple retail entry, LVMH acquisition of DFS Group.

The 'corporate expansion matrix' (Page 29)

• A table visualizing different expansion types, categorized based on whether the business is same or different and the type of activity (Upstream/Downstream).

Logics for Corporate Growth (Page 30)

• Summarizes the conditions related to business development, horizontal expansion and vertical expansion.

Decreasing input cost via (backward) VE (Page 31)

• Addresses market failures in the upstream market from reducing input costs.
• Explains when backward VE is preferable over forward VE.
• Includes examples such as VW, Tesla and Apple.

Factors driving market failures (Page 32)

• Addresses Transaction Cost Economics, Monopolistic Risk, Market Risk and Renegotiation Risk.

Printing or not Printing? (Page 33)

• Choosing between vertical expansion or outsourcing when setting up a publishing company. Discusses scenarios of newspaper and magazine publishing.

Market failures (Page 34)

• Tables describing the risk in monopolistic risk, market risk and renegotiation risk in printing for newspapers and magazines and the best strategy.

Inputs also refer to financial resources (Page 35)

• Discusses the challenges firms face in finding adequate financial resources, and why joining a larger, financially-stable firm might be beneficial. Mentions conglomerates in India (TATA, Mittal).

Decreasing production cost via VE (Page 36)

• Describes the use of coordination-based cost economies to decrease production cost.
• Presents examples like ALCAN (aluminum processing) and Dassault.

Fast fashion (Page 37)

• Examines the strategies of companies like Zara, American Apparel, and Benetton.

Increasing revenues via VE (Page 38)

• Explores how vertical expansion (VE) can increase revenues via price premium (eliminating excessive purchasing power of corporate buyers) and sales premium (internal sales can beat market sales).
• Suggests instances where acquisition of beauty retailer Sephora by LVMH enhances revenue.
• Also mentions Microsoft's expansion into consumer electronics and Apple's acquisition of Beat's headphones as examples.

Reputation (Page 39)

• Discusses how Microsoft leveraged its reputation in software to charge premium prices for its products in the consumer electronics market.
• Mentions examples such as HP, Dell, and Lenovo.
• Also covers how brand reputation aids in selling more and more expensive products.

Outsourcing vs Vertical Integration (Page 40)

• Compares outsourcing with vertical integration, summarizing advantages and disadvantages.

Outsourcing vs Vertical Integration (Page 41)

• A table comparison of outsourcing and vertical integration as corporate strategies
• Analyzing market factors, production scale, coordination economies, and increased revenues influence the choice between these strategies.

Expansion Performance (Page 42)

• Summarizes potential performance in different scenarios of corporate expansion.

Key takeaways (Page 43)

• Summarizes topics focused on the strategy of expansion.

How to expand? (Page 45)

• Presents how a firm can expand their corporation via "build", "blend" or "buy" strategies.

How? (Page 46)

• Explains the three main methods for expanding a business: "Build", "Blend", and "Buy".

Which mode to choose? (Page 47)

• An image representing different strategic choices in business expansion.

BBB: Pros & Cons (Page 48)

• Lists the advantages and disadvantages of the methods of "Build", "Blend" and "Buy"

Acquisition premium (Page 49)

• Graph presenting data on the median one-week acquisition deal premium from 1990 to 2020

Financial Markets Reactions (Page 50)

• Provides cumulative abnormal returns data for various corporate announcements (Acquisition, divestiture, earning announcement, alliances, change in name, new product, lay off).

Short-Term M&A performance (Page 51)

• Graph depicting average cumulative abnormal returns for acquirers and target companies (public-to-public deals) in short-time periods (1990-2018)

Long-term M&A performance (Page 52)

• Examines the results of firm performance (relative to S&P 500) from 1999-2013. Explores the relationship between firm's performance and the value of organic growth relative to M&A

Perceived M&A performance (Page 53)

• Data from McKinsey on M&A effectiveness. Showcases percentage of M&As that achieve cost savings or revenue synergies.

Reasons for failures / pitfalls (Page 54)

• Categorizes reasons for M&A failures (complexity, poor candidate, wrong timing, etc.).

Reasons for failures / pitfalls (Page 55)

• Shows the stages in a typical M&A deal and summarizes the issues that occur at each of these stages.

Timeline (Page 56)

• Illustrates the different phases and duration of an acquisition process (pre-acquisitions, signing agreements, due diligence and deal completion).

Reasons for failures // pitfalls (Page 57)

• Explains the problems that can arise during the pre-closing and post-closing stages of mergers and acquisitions

Which mode to choose? (Page 58)

• Shows a diagram relating to the different methods of business expansion that a company can utilize.

Insights from Academic Research (Page 59)

• Highlights the importance of resource gap assessment in guiding corporate expansion decisions. Empirically tests the mode driven by Resource Gap.

The "Christmas tree" (Page 60)

• Simple diagrams in order to visually represent an idea visually.

Why Acquiring? Catch-up acquisitions (Page 61)

• Describes when one company acquires another firm ("bold-on acquisitions.") and the driving factor behind this is either for the firm to do better things or better their existing activities.

Bold-on Acquisitions (Page 62)

• Microsoft's acquisitions, specifically those related to enterprise communication (Skype, Lync, and Teams)

Bolt-on acquisitions (Page 63)

• Presents examples of acquisitions made to improve cost or increase revenue. These strategies are called "bolt-on" acquisitions.

Catch-up Acquisitions (Page 64)

• Example of Apple's acquisitions in the music streaming sector (Beats Music) to better their existing strategy.

Transformation acquisitions (Page 65)

• Presents examples of businesses that changed direction dramatically because of acquisitions. Demonstrates how acquisitions led to transformation within existing businesses.

The "Christmas tree" (Page 66)

• Visual representations that summarize ideas presented in previous pages.

M&As and Corporate Strategy (Page 67)

• Presentation title, focusing on information provided within the pages.

International Corporate Strategy (Page 68)

• Presentation title focused on information within the pages

M&A Implementation (Page 69)

• Explains the process and the different factors to consider when implementing mergers and acquisitions

Post Merger Integration (PMI) (Page 70)

• Discusses the potential for interdependence between the target and acquiring companies, and the need for autonomous decision-making within the acquired company

Post Merger Integration (PMI) (Page 71)

• Matrix showing different types of post-merger integration strategies: Preservation, Symbiosis, Holding, and Absorption

Post Merger Integration (PMI) (Page 72)

• Matrix illustrating different post-merger integration strategies (Preservation, Symbiosis, Holding, Absorption), focusing on the intended value creation and the necessity of autonomous management decisions in order to create maximum success.

More about Holding (Page 73)

• Discusses the specifics of the Holding strategy, covering private equity, corporate venture capital, and internal markets involved in the process.

Post Merger Integration (PMI) (Page 74)

• A matrix outlining various PMI strategies (Preservation, Symbiosis, Holding, Absorption) highlighting different goals and potential outcomes.

Post Merger Integration (PMI) (Page 75)

• Defines post-merger integration strategies using a matrix (Preservation, Symbiosis, Holding, Absorption).

Post Merger Integration (PMI) (Page 76)

• Explanation of why certain mergers and acquisitions could have failed, along with a further explanation of the different strategies and their appropriate contexts.

Expansion Trajectories (Page 77)

• Outlines a presentation topic related to learning in corporate development

Puzzle (Page 78):

• Presents a question about the impact of experiences on business decisions, with a diagram related to that.

Experiential Learning (Page 79)

• Presents the concept of learning through experience, but also points out the problem of causal ambiguity (experiential learning in ambiguous environments).

Causal ambiguity (Page 80)

• Illustrates the concept of causal ambiguity with visual representations.

Can experience harm performance? (Page 81)

• Summarizes whether business experience based on past performance choices can negatively impact the business if there are poor cause-and-effect relationships apparent.

The 'Experiential Learning' Matrix (Page 82)

• Provides a framework that classifies how past business experience can help or hurt future decisions based on clarity on the reasons for past actions and whether they relate to future goals .

Impact of experience in M&As (Page 83)

• Outlines why M&A success is affected by high degrees of complexity and dissimilarity, highlighting the advantages of novice companies in M&A situations.

Philip Morris expansion - Step 1 (Page 84)

• Discusses Philip Morris's expansion strategy, focusing on its entry into the tobacco market.

Philip Morris expansion - Step 2 (Page 85)

• Documents Philip Morris's next expansion in the beer market, exploring the techniques used.

Philip Morris expansion - Step 3 (Page 86)

• Explores when the company expands into soft drinks, showing the characteristics of that market similar or different to tobacco and beer markets.

Philip Morris: So, what happened? (Page 87)

• Shows a table comparing the characteristics of the tobacco/beer and soft drink market.

Misleading experience: PM (Page 88)

• Explores the concept of experience-based bias that can influence decision making

What does the “PM Case” tell us? (Page 89)

• Explains how the Philip Morris case study allows us to find and follow a particular strategy for our expansion strategy, suggesting ways to avoid the mistakes PM made.

Divestitures (Page 90)

• A title on divestments

The Corporate Strategy's missing link (Page 91)

• Presents the impact announcements have on stock prices.

Types of divestitures (Page 92)

• Categorizes different types of divestitures (Horizontal and Vertical, specifically Backward and Forward).

Nestle corporate strategy (Page 93)

• Discusses different divestment strategies adopted by Nestle.

Nestlé to divest US water business (Page 94)

• Summarizes a Nestlé's divestment of its water business in North America.

Nestle's core transformation (Page 95)

• Presents a timeline of Nestle's acquisitions and divestitures from 1905-2013.

Divestitures. More examples (Page 96)

• Presents examples of divestitures that have happened in recent years in different industries

Legacy divestitures (Page 97)

• Explains situations where firms sell an existing business because of a decrease in that business.

IBM announcement of the divestiture of its server division (Page 98)

• Graph representing when public announcement for divestiture happened

Combining corporate development activities (Page 99)

• Shows how divestment, internal growth, external growth (acquistion/alliances) are all forms of corporate development.

The "Transformation Path" (Page 100)

• This page emphasizes the concept of how acquisitions can lead to organizational changes and learning of new abilities.

Performance (Page 101)

• Graph showcases the performance metrics of M&A activities relative to divestitures through the measurement of cumulative annual shareholder value (2005-2015).

Optimal growth trajectory (Page 102)

• Discusses two methods of increasing a business's capabilities: internal growth and transformation acquisitions.

M&AS AND CORPORATE STRATEGY (Page 103)

• Title slide of a presentation likely focused on mergers and acquisitions and corporate strategy.

Explore key concepts of business growth strategies, including backward and forward vertical expansion, horizontal expansion, and their respective impacts on companies. This quiz covers real-world examples such as Unilever and Total to illustrate these strategies in action. Test your knowledge on how these expansions affect supplier relationships and input costs.