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The main fundamentals behind this growth strategy were favorably exploited by Symantec's CEOs in the recent years. For example, answering the question 'Why is Symantec's strategy to become a full service security company while others in the market are just focusing on single areas for future development, such as antivirus?' Of a journalist, Symantec's chairman and CEO John W. Thompson, answered: 'Look at some of the market leaders from a few years ago which were focused on a single technology. Today they find their businesses stalled. Companies that specialise in firewalls today face low growth and few new customers. If you close your eyes to the emerging threat landscape your ability to service customers is limited. The nature of today's threats means that antivirus technology alone is not enough; you need a combination of tightly integrated technologies operating at each tier of the network'. Another fundamentals behind this strategy can be traced in the words of Symantec officials on their competitiveness, presented at the beginning of this essay.
The second successful rapid growth strategy is mass market development strategy which involves reconfiguring a manufactured product that changes expectations revealing a new, mass market potential. The potential market needs to be developed over time and regulatory, cultural, transportational, production and cost barriers need to be overcome, as the potential market becomes known to the firm, it must consolidate it and keep out potential entrants. The main implementation methods are reduction of costs and prices to appeal to a mass market and using aggressive marketing strategies.
The third is increasing value to select customers strategy and maximize their profits on selected customers. The fourth strategy is knows as the distributions innovation strategy which can be used by the newcomers to the industry to break into the market segments which have been underserved by the incumbents. The already existing companies in this market area dominate some channels and they do not want to break the existing relations by introducing new channels.
This refers to international markets and a new company trying to enter it and distribution innovations may depend on facilitating technical change such as credit card usage, efficient postal systems, telephone penetration, and Internet access. The fundamental point for implementing this strategy is understanding the weaknesses of the operations and services of already existing companies in this very market segments and then exploiting existing channels them with innovation and adjusting for the possible mistakes.
The fifth, or the acquisition and consolidation strategy, can be pursued in fragmented industries composed of numerous firms. Industry deregulation and innovation create market disequilibrium that encourages acquisition and consolidation because deregulation increases competition and weakens many firms, that may merge to reduce costs and to increase their market power. Innovations in technology or operating methods can create untapped scale economies in specific functions that firms pursue through consolidation after acquisition. This strategy was successfully applied by Symantec lately and thus deserves consideration.
The first step is to develop new business model and acquisition target profile by identifying sources of scale economies in the industry; defining functions to integrate, to decentralize, to outsource, and insource after acquisitions, developing a profile of ideal acquisition targets; making acquisitions early to obtain choice picks and lower prices; benchmarking post-acquisition rub-off benefits.
The second step in the acquisition and consolidation strategy is refocusing acquisitions to fit new business model by: integrating functions that have scale economies; retaining management talent in acquired companies or bringing in specialized talent; decentralizing functions where acquisitions have an edge; outsourcing functions where parent and acquisition have limited resources; insourcing functions where firm has an edge that were previously outsourced because of small scale; investing in human resources and infrastructure to improve productivity; extending new business model to acquisitions; refocusing acquisitions on market growth segments; developing and cross-selling related products and services.
The final stage is to further enhance acquisition capabilities of parent by: using new technologies to manage larger volume; targeting and developing relationships with larger suppliers and customers; elevating role of investor relations and providing forward looking information; investing in more acquisitions with greater capital resources of parent. When implementing this strategy, it is vitally important to keep strong investor relations and upgrade all the information for the financial community to maintain their interest in the company.
All the growth strategies are supported by scale, scope and/or time-based advantages and each strategy has its' own mix of the multiple advantages. Scale advantages refer to lower unit costs that occur when increasing the volumes of production/services as well as higher prices permitted by stronger market influence and stronger brand name, this also allows to exploit purchasing economies and satisfaction of larger customers' needs. The scope advantages relate to domain of the firm's customer, market, product, geographic, and technology segments and change in it which allows to shift the shared cost structure, customer benefits such as bundling and interoperability, and firm growth prospects tied to growth of the underlying segments. Time-based advantages encompass first mover effects, such as wider choice of resources and longer time to learn or build a reputation, as well as benefits associated with reduced cycle time, and quicker diffusion. To make a recapitulation, Symantec's recent corporate strategy possesses fundamentals of proliferation, mass market development, acquisition and consolidation strategies and they are recapitulated in Table 1.
Table 1. Sources of Advantages Within Symantec's Growth Strategies.
Source of advantage
Low unit production anddistribution costs, global demand
Consistency and umbrella brand across products; Cross-selling products and markets
Early domination of product category, quick product development and diffusion
Mass Market Development
Reconfigure product to have mass market demand
Broaden geographic scope; Outsource functions to reduce costs and increase capacity
Develop policies that travel; Use alliances to hasten international expansion
Acquisition and Consolidation
Capture scale economies in various functions enabled with larger firm size after acquisition; Develop relationships with larger buyers and suppliers
Reorient acquisition toward growth market segments; Reevaluate outsourcing decisions in all functions after acquisition; Cross-sell products and markets across acquisitions; Invest in new technologies that help to manage larger firm.
Start integration process early to hasten returns from acquisitions.
Along with product proliferation and mass market development strategies, the acquisition and consolidation strategy plays a vital role and is articulated in company literature. 'One cornerstone of Symantec's strategy is the pursuit of acquisitions as a way to supplement its in-house product development in the three major categories of development tools, utilities and productivity applications'. Since late 1989, Symantec has acquired more than 22 software companies. 'Mergers and acquisitions (M&a) is an important business process for the company in moving toward its goals. Symantec combines with other companies that have complementary strengths to our own. By combining, Symantec can do more than either company could do on its own. The combined entity becomes a more attractive long-term partner for our customers'. Furthermore, the comment on Symantec's latest integration with Veritas is that it will make the corporation more diversifiable, thus reducing unique risks due to volatile demand and less vulnerable to incoming Microsoft's move into the segment market where Symantec competes.
The major obstacles that Symantec managers face when planning the acquisition, are the market risk, especially in emerging markets with rapidly changing competitive landscapes which makes the matter of whether the customer will buy the product questionable; the product risk with increasingly complex development challenges and shortened product life cycles -- will the product work properly; and finally, the people risk because the entrepreneurial challenge is often far different from that of a more mature software company -- will the acquired talent stay on hand, and do they truly understand the market and technology challenges they face? In order to evaluate the possible acquisition precisely and then carry it out property, Symantec managers have developed their acquisition philosophy, which possesses the following general points: partner with companies that are best in their class; remember that this is a selling process from the first conversation with the acquisition prospects through the close of the deal, thus just keep selling; be open and respectful of the ideas and processes developed by partner; manage the people issues in acquisition aggressively and candidly. As for the financial goals, they are set: ensure that the financial analysis of the merger becomes the budget for the new group and sustain revenue momentum during the integration process.
With the years of experience, Symantec has developed its' acquisition strategy into a disciplined approach. The first step is prospecting the acquisition deal with includes deal desirability and feasibility review. The second stage is scrubbing which implies detailed due diligence and announcement preparation. Finally, the integration stage encompasses building working relationships. The…[continue]
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