The Managing Director of B.S. Ltd. A consumer goods manufacturing firm, called an internal meeting of senior managers to discuss issues involved in acquiring SV Ltd. for about Rs. 350 crores. He started the meeting with following observations: ‘After acquiring SV, we will become the second largest consumer goods company in India with Sales of over Rs. 4500 crores. We will have more money for marketing initiatives, product launches and aggressive price-cuts. The key reason behind buying SV is to create shareholder value over and above that of the sum of the two companies. Recent years have been tough for both the companies with strong competition. The merged company hopes to gain a greater market share and achieve greater efficiency.’ Different issues discussed between the managers. Pertinent pointed out critical aspects: Like VP Productions emphasized that production facilities of both the companies need to be synergized. There is also need to close down production facilities of two locations out of seven locations of SV. The costs of production of these locations is very high and they are located in eastern India, whereas majority sales occurred in western and southern parts of the country. While VP marketing argued that, the market of the products is in mature phase with low growth rate. SV Ltd. has little presence in some regions and is not a major competitor for B.S. Further, there is marginal gap between third position and second positions in the market. The second position can be achieved by fully utilizing the capacities and competences.
As a consultant advice B.S. Ltd, how to proceed for any growth strategy? In low growth market, what options are generally there for a company?
