Strategy Digest Volume 1

Strategy Digest is an endeavor to bring to your notice such recent happenings in the business world that will help understand particular strategies adopted or executed by various companies in different industries. The frequency of this digest will be weekly, any feedback or suggestions are welcome.

SWIFT looking to expand into domestic money transfers

SWIFT, the entity through which almost half of the money that is sent across borders gets processed, is now looking on the domestic payments market. Given that, in India, Swift is helping mutual funds put in place automated straight through processing of transactions and also helping BSE vertically integrate its exchange with the depository, they are now looking at a JV or a partnership, possibly with a networks or an IT provider. The local remittances market in India is making great leaps. From the popular RTGS system, there are steps towards making mobile payments easier.

Reliance building shale assets in the US to build capabilities for the domestic market

Reliance Industries has acquired its third shale gas asset in the US this year. The latest investment was the US$392 million joint venture agreement with Texas-based Corrizo Oil and Gas. The company’s heightened interest in this new source of energy will give it an exposure to the new technology that it could then apply in India. Not much has been done in India on shale gas prospecting so far, even though the rock formation is common in several parts of the country. ONGC, probably the only company actively searching for shale gas, has been studying the formations over the past five years. Hence, there is a huge untapped opportunity back home and Reliance has chosen this indirect approach to build competency in the area.

Hospital operators looking at overseas expansion to leverage on exisiting capabilities

India’s top hospital operators are looking to expand overseas to leverage their strengths in other markets as well as to attract medical tourists. Industry leader Apollo Hospitals is looking for contracts to manage hospitals abroad, while Fortis Healthcare is aggressively looking for acquisitions as an expansion strategy. An overseas acquisition can give Indian hospital chains access to advanced knowledge base and technology and also help it offer cheaper drugs and services to the patients at target companies. Fortis is preparing for other opportunities beyond India to become Asia’s healthcare leader after it lost out in the race to acquire Singapore-based hospital chain Parkway Holdings. Apollo has a stake in a Mauritius hospital- its only investment overseas- but manages a few hospitals on contract overseas.

Adanis plugging the gaps in their business chain, building an end-to-end model

After acquiring the coal assets of Australia’s Linc Energy, the Adani group is looking at coal reserves in South Africa and Vietnam, to assure raw material supplies for their power generation ambitions. The Adanis aim to produce 20,000MW by 2020. This backward integration also includes building the logistics for the transportation of coal. In all, the group plans to invest A$6 billion in Australia to develop infrastructure – ports, railway lines and warehouses. In addition to Mundra port that they manage, the Adanis plan to build seven more ports. Adani Shipping too will have a bigger fleet. This integration is expected to bring down costs substantially and give them greater control over their business.

GSK’s diversification drive leads to entry into the noodles market

The new instant noodles on the shelf, Foodles, is GSK’s diversification strategy to go beyond malted health drinks. At present, almost 60 per cent of GSK’s revenue comes from Horlicks, that too mostly from the South and the East of India. Hence the need to spread its risks across more products and more markets. Leveraging the Horlicks brand, Foodles has been positioned as a healthy and nutritious product, competing against Maggi, which accounts for over 90% of the instant noodles market.
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