What are the integration strategies?
Forward integration - Gaining ownership or control over distributors or retailers
Backward integration - Gaining ownership or control over suppliers
Horizontal integration - Seeking ownership or control over competitors.
Under what conditions should you consider a Forward integration? (6)
1. An organization's present distributors are unreliable.
2. An organization competes in an industry that is growing and is expected to continue to grow markedly this is a factor because forward integration reduces an organization's ability to diversify if its basic industry falters.
3. An organization has both the capital and human resources needed.
4. The advantages of stable production are particularly high; this is a consideration because an organization can increase the predictability of the demand for its output through forward integration.
5. Present distributors or retailers have high profit margins; this situation suggests that a company could profitably distribute its own products and price them more competitively by integrating forward.
Under what conditions should you consider a Backwards integration? (5)
1. An organization's present suppliers are especially expensive, unreliable.
2. The number of suppliers is small and the number of competitors is large.
3. An organization competes in an industry that is growing rapidly; this is a factor because integrative-type strategies (forward, backward, and horizontal) reduce an organization's ability to diversify in a declining industry.
4. An organization has both capital and human resources needed.
5. The advantages of stable prices are particularly important; this is a factor because an organization can stabilize the cost of its raw materials and the associated price of its product(s) through backward integration.
The following five guidelines indicate when horizontal integration may be an especially
effective strategy: (5)
1. An organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for "tending substantially" to reduce competition.
2. An organization competes in a growing industry.
3. Increased economies of scale provide major competitive advantages.
4. An organization has both the capital and human talent needed.
5. Competitors are faltering as a result of a lack of resources that an organization possesses.
What are the intensive strategies?
Market penetration - Increased market share for in present market.
Market development - Introduce present product to new geographical areas.
Product development - improving present products and services or developing new ones.
The following five guidelines indicate when market penetration may be an especially effective strategy:
1. Current markets are not saturated with a particular product or service.
2. The usage rate of present customers could be increased significantly.
3. The market shares of major competitors have been declining while total industry sales have been increasing.
4. The correlation between dollar sales and dollar marketing expenditures historically has been high.
5. Increased economies of scale provide major competitive advantages.
These five guidelines indicate when market development may be an especially
effective
strategy:
1. New channels of distribution are available that are reliable, inexpensive, and of good quality.
2. New untapped or unsaturated markets exist.
3. An organization has the needed capital and human resources to manage expanded operations.
4. An organization has excess production capacity.
5. An organization's basic industry is rapidly becoming global in scope.
These
following five guidelines indicate when product development may be an especially
effective strategy to pursue:
1. An organization has successful products that are in the maturity stage of the product life cycle; the idea here is to attract satisfied customers to try new (improved) products as a result of their positive experience with the organization's present products or services.
2. An organization competes in an industry that is characterized by rapid technological developments.
3. Major competitors offer better-quality products at comparable prices.
4. An organization competes in a high-growth industry.
5. An organization has especially strong research and development capabilities.
What are the diversification strategies?
Related diversification - Adding new related products or services
Unrelated diversification - Adding new unrelated products or services.
The guidelines for when related diversification may be an effective strategy are: (6)
1. An organization competes in a no-growth or a slow-growth industry.
2. Adding new, but related, products would significantly enhance the sales of current products.
3. New, but related, products could be offered at highly competitive prices.
4. New, but related, products have seasonal sales levels that counterbalance an organization's existing peaks and valleys.
5. An organization's products are currently in the declining stage of the product's life cycle.
6. An organization has a strong management team.
The 6 guidelines when unrelated diversification may be an especially effective
strategy are:
1. Revenues derived from an organization's current products or services would increase significantly by adding the new, unrelated products.
2. An organization competes in a highly competitive or a no-growth industry, as indicated by low industry profit margins and returns.
3. An organization's present channels of distribution can be used to market the new products to current customers.
4. New products have counter cyclical sales patterns compared to an organization's present products.
5. An organization's basic industry is experiencing declining annual sales and profits.
6. An organization has the capital and managerial talent needed to compete successfully in a new industry.
What are the defensive strategies? (3)
Retrenchment (nedskärning) - regrouping through cost and assets to reverse declining sales and profits.
Divestiture (avyttring) - Selling a part or division of organisation
Liquidation - Selling all of a company´s assets in parts.
Five guidelines for when retrenchment may be an especially effective strategy to pursue are
as follows:
1. An organization has a clearly distinctive competence but has failed consistently to meet its objectives and goals over time.
2. An organization is one of the weaker competitors in a given industry.
3. An organization is plagued by inefficiency, low profitability, poor employee morale, and pressure from stockholders to improve performance.
4. An organization has failed to capitalize on external opportunities, minimize external threats, take advantage of internal strengths, and overcome internal weaknesses over time; that is, when the organization's strategic managers have failed (and possibly will be replaced by more competent individuals).
5. An organization has grown so large so quickly that major internal reorganization is needed.
Guidelines for when divestiture may be an especially effective strategy to
pursue are: (6)
1. An organization has pursued a retrenchment strategy and failed to accomplish needed improvements.
2. To be competitive, a division needs more resources than the company can provide.
3. A division is responsible for an organization's overall poor performance.
4. A division is a misfit with the rest of an organization; this can result from radically different markets, customers, managers, employees, values, or needs.
5. A large amount of cash is needed quickly and cannot be obtained reasonably from other sources.
6. Government antitrust action threatens an organization.
These three guidelines indicate when liquidation may be an especially effective strategy to
pursue:
1. An organization has pursued both a retrenchment strategy and a divestiture strategy, and neither has been successful.
2. An organization's only alternative is bankruptcy. Liquidation represents an orderly and planned means of obtaining the greatest possible amount of cash for an organization's assets. A company can legally declare bankruptcy first and then liquidate various divisions to raise needed capital.
3. The stockholders of a firm can minimize their losses by selling the organization's assets.