Usha Martin: Unraveling the Vertical Integration Strategy

In May 2020, Usha Martin Limited (Usha Martin), a diversified engineering group based in India, was debating strategies for continued future growth. In April 2019, the company had divested its steelmaking and related operations to reduce its debt load. Though the divestment meant a large decline in the company’s sales for the year ended March 2020, the company managed to reverse the trend of losses incurred in several recent quarters and years to earn positive profits. However, attaining future growth remained a challenge for the smaller, focused company, especially given the economic disruption caused by the COVID-19 crisis. It was critical that Usha Martin’s management made the correct strategic choices so that the company could achieve good, long-term, profitable growth.

This case can be used in a graduate-level strategic management course to illustrate issues relating to vertical integration and growth strategy in emerging markets. The case is suitable for the second half of a strategy course, after students have acquired a basic understanding of key business strategy issues such as competitive advantage and industry structure or economics. After working through the case and assignment questions, students will be able to do the following: <ul><li>Explain how a niche company builds a set of capabilities.</li><li>Explain how an emerging market and its context may induce companies to pursue strategies such as vertical integration.</li><li>Describe the impact of product portfolio complexity on a firm’s operations, especially when the complexity is created by taking on debt financing.</li><li>Identify the downsides of vertical integration, especially if the capital intensity of the destination industry is much greater than the origin industry and the destination industry is less attractive than the origin industry.</li></ul>

• Emerging market strategy, Risks