The document discusses various types of integration strategies including vertical, horizontal, forward, and backward integration. It provides examples of companies that have implemented different integration strategies, such as Starbucks purchasing a coffee farm in China through backward integration to secure a supply of coffee beans. Microsoft is also pursuing a forward integration strategy by opening its own retail stores similar to Apple. Vertical integration can lower costs but also presents higher risks if a company cannot efficiently manage new business activities.
Amazon's European Distribution Strategy Case StudyYASSER ELSEDAWY
Amazon's supply chain challenges in Europe
Amazon.Com was launched on 16th July 1995 by Jeff Bezos. In the beginning, Amazon.com started as an online bookstore, With 25 million titles it became the earth's biggest bookstore but soon diversified. In 2008, Amazon had 8 warehouses in the U.S. and another 15 in the rest of the world. Amazon now has around 50 warehouses, 20 in the US and rest in Canada, France, Germany, Italy, UK, China, Japan. At Present the company is providing three primary customer sets; consumers, Sellers, and developers.
Amazon balances between the cost of distribution and levels of services by having efficient distribution centers and multi-tier inventory networks.
Amazon's European Distribution Strategy Case StudyYASSER ELSEDAWY
Amazon's supply chain challenges in Europe
Amazon.Com was launched on 16th July 1995 by Jeff Bezos. In the beginning, Amazon.com started as an online bookstore, With 25 million titles it became the earth's biggest bookstore but soon diversified. In 2008, Amazon had 8 warehouses in the U.S. and another 15 in the rest of the world. Amazon now has around 50 warehouses, 20 in the US and rest in Canada, France, Germany, Italy, UK, China, Japan. At Present the company is providing three primary customer sets; consumers, Sellers, and developers.
Amazon balances between the cost of distribution and levels of services by having efficient distribution centers and multi-tier inventory networks.
Manufacturing industry represents Japanese superior character. Even now, leading Japanese market fundamental, gaining competitiveness on the global business stage. On the high volatility market condition, it had been considering the best way to produce most comfortable experience for the driver. From this chapter, we’ll show you the trace of Japanese automobile industry.
In this report we will discuss about Phase– Introduction, Introduction of a Company, Brief History, International / National Introduction, Vision, Mission, Core Values, Goals, Nature of Business, Type of Ownership, Identify Key Players and Roles, Organizational Hierarchy, Location(s) of Facility, Number of Technical Employees, Products / Services (single product), Phase– EXTERNAL ANALYSIS, Natural Environment:, Natural Resource Coca Cola need, Present and Future needs of Natural Resources, International Arrangement of Water, Issues they face during arranging and managing, Task Environment: Porter’sForces Model, When (situation), Why (objective / reasons), How (process), who (participants), Issues faced, In what format they collected the data of Porter’s Analysis, What benefits they get from conducting PORTER’s Analysis, Societal Environment: PESTEL Analysis, Phase– Internal Analysis: Organizational Perspective, Vision / Mission / Core Values (discuss separately), Vision, Mission, Core Values, Organizational Policies, CLIMATE CHANGE POLICY, CODE OF BUSINESS CONDUCT(INTEGRITY IN THE COMPANY), GUIDANCE FROM CORE COMPLIANCE OFFICER, ENVIRONMENTAL POLICY, HUMAN RIGHTS POLICY, POST-CONSUMER PACKAGING WASTE MANAGEMENT POLICY STATEMENT, Organizational Culture, How Policies and Core Values are helping in developing culture in their organization (examples), What Factors are Influencing their culture and How, Through what method(s) keep the culture alive, Organizational Structure, Degree to which organizational design elements exit in company structure , Core competencies, What are the company-wide core competencies, Which and How capabilities are linked with each core competency, Which and How resources are linked with each capabilities, On the basis of market analysis (Phase ), evaluate each core competency through Criteria Matrix, Coca - Cola Porter's Value Chain Analysis, Inbound Logistics, Operations, Outbound Logistics, Sales and Marketing, Service, Strategic Objectives, WE FOCUSED ON DRIVING REVENUE AND PROFIT GROWTH, WE INVESTED IN OUR BRANDS AND BUSINESS, WE BECAME MORE EFFICIENT, WE SIMPLIFIED OUR COMPANY, Current Strategies (to achieve above objective) (combination of strategies / single strategy for each objective), Corporate Level Strategies, Business level strategies, Functional level strategies, Financial Strategies, Identify Rival Firms: PepsiCo, PepsiCo’s Strengths (Internal Strategic Factors), PepsiCo’s Weaknesses (Internal Strategic Factors), Opportunities for PepsiCo (External Strategic Factors), Threats Facing PepsiCo (External Strategic Factors), Objectives of PepsiCo, PepsiCo’s Generic Strategies, SWOT Analysis , Phase– Gap Analysis & Recommendations, External Analysis, Internal Analysis
Manufacturing industry represents Japanese superior character. Even now, leading Japanese market fundamental, gaining competitiveness on the global business stage. On the high volatility market condition, it had been considering the best way to produce most comfortable experience for the driver. From this chapter, we’ll show you the trace of Japanese automobile industry.
In this report we will discuss about Phase– Introduction, Introduction of a Company, Brief History, International / National Introduction, Vision, Mission, Core Values, Goals, Nature of Business, Type of Ownership, Identify Key Players and Roles, Organizational Hierarchy, Location(s) of Facility, Number of Technical Employees, Products / Services (single product), Phase– EXTERNAL ANALYSIS, Natural Environment:, Natural Resource Coca Cola need, Present and Future needs of Natural Resources, International Arrangement of Water, Issues they face during arranging and managing, Task Environment: Porter’sForces Model, When (situation), Why (objective / reasons), How (process), who (participants), Issues faced, In what format they collected the data of Porter’s Analysis, What benefits they get from conducting PORTER’s Analysis, Societal Environment: PESTEL Analysis, Phase– Internal Analysis: Organizational Perspective, Vision / Mission / Core Values (discuss separately), Vision, Mission, Core Values, Organizational Policies, CLIMATE CHANGE POLICY, CODE OF BUSINESS CONDUCT(INTEGRITY IN THE COMPANY), GUIDANCE FROM CORE COMPLIANCE OFFICER, ENVIRONMENTAL POLICY, HUMAN RIGHTS POLICY, POST-CONSUMER PACKAGING WASTE MANAGEMENT POLICY STATEMENT, Organizational Culture, How Policies and Core Values are helping in developing culture in their organization (examples), What Factors are Influencing their culture and How, Through what method(s) keep the culture alive, Organizational Structure, Degree to which organizational design elements exit in company structure , Core competencies, What are the company-wide core competencies, Which and How capabilities are linked with each core competency, Which and How resources are linked with each capabilities, On the basis of market analysis (Phase ), evaluate each core competency through Criteria Matrix, Coca - Cola Porter's Value Chain Analysis, Inbound Logistics, Operations, Outbound Logistics, Sales and Marketing, Service, Strategic Objectives, WE FOCUSED ON DRIVING REVENUE AND PROFIT GROWTH, WE INVESTED IN OUR BRANDS AND BUSINESS, WE BECAME MORE EFFICIENT, WE SIMPLIFIED OUR COMPANY, Current Strategies (to achieve above objective) (combination of strategies / single strategy for each objective), Corporate Level Strategies, Business level strategies, Functional level strategies, Financial Strategies, Identify Rival Firms: PepsiCo, PepsiCo’s Strengths (Internal Strategic Factors), PepsiCo’s Weaknesses (Internal Strategic Factors), Opportunities for PepsiCo (External Strategic Factors), Threats Facing PepsiCo (External Strategic Factors), Objectives of PepsiCo, PepsiCo’s Generic Strategies, SWOT Analysis , Phase– Gap Analysis & Recommendations, External Analysis, Internal Analysis
Strategic intent is an aspirational plan which is helpful to achieve the vision of the organization.
It inspires winning: winning of customers, winning against competitors, winning over the broader market.
It focuses on firm’s taking initiatives to change the strategy of the firm that will lead to competitive advantage.
Whatever the case, strategic intent turns strategy from a “fit” exercise to a “stretch” exercise.
Example: An intent retailer does not think about how to match a competitor’s operation, but to create even a better operation.
The specific features of strategic intent can be easily explained with the help of hierarchy or pyramid of the organization from the top-bottom.
Example: “Toyota motors” use quality circle (QC) and Just In Time (JIT) to get competitive advantage.
Example: When “Honda” entered the motorcycle market competitors thought there was no threat as it did not imitate Harley Davidson or Yamaha. But it chose to start with products that were internationally different. Then by carving out new, white space it developed a customer base & strong brand image.
The strategic intent of Reliance is to being a global leader of the lowest cost producer of polyester products by focusing on vertical integration & operational effectiveness.
strategic pyramid or hierarchy of strategy can be broadly categorized in the following manner.
Corporate level
Business level
Functional level
Corporate level strategy is a comprehensive plan which is developed by the top management for the company as a whole whether the firm is a small one product or large multinational corporation. on a continuous basis.
In a large multinational company corporate strategy is also about managing various product lines & business units for value maximization.
For example: corporate headquarters must play the role of “organizational parent” in that it must deal with various product & business unit as “children”. Even though each product line or business unit has its own competitors & it has to obtain its own competitive advantage in the market. The cooperation among different units as a whole succeed the “family”.
Corporation’s directional Strategy is composed of three general orientations towards growth such as: Growth strategy expands the company’s activities.
Stability strategies make no change to company’s current activities.
Retrenchment strategies reduce the company’s level of activities.
Growth strategy is widely pursued by the corporations or industries those are designed to achieve growth in sales, profit & assets.
It can be achieved by both concentration & diversification.
Concentration within one product line or industry & diversification into other product line & industries.
It can use investing for new product or new market development internally or through mergers, acquisitions or strategic alliances.
Concentration strategies are very sensible as they try to compete successfully only within single industry.
Examples: McDonald’s, Starbucks
Strategic intent is an aspirational plan which is helpful to achieve the vision of the organization.
It inspires winning: winning of customers, winning against competitors, winning over the broader market.
It focuses on firm’s taking initiatives to change the strategy of the firm that will lead to competitive advantage.
Whatever the case, strategic intent turns strategy from a “fit” exercise to a “stretch” exercise.
Example: An intent retailer does not think about how to match a competitor’s operation, but to create even a better operation.
The specific features of strategic intent can be easily explained with the help of hierarchy or pyramid of the organization from the top-bottom.
Example: “Toyota motors” use quality circle (QC) and Just In Time (JIT) to get competitive advantage.
Example: When “Honda” entered the motorcycle market competitors thought there was no threat as it did not imitate Harley Davidson or Yamaha. But it chose to start with products that were internationally different. Then by carving out new, white space it developed a customer base & strong brand image.
The strategic intent of Reliance is to being a global leader of the lowest cost producer of polyester products by focusing on vertical integration & operational effectiveness.
strategic pyramid or hierarchy of strategy can be broadly categorized in the following manner.
Corporate level
Business level
Functional level
Corporate level strategy is a comprehensive plan which is developed by the top management for the company as a whole whether the firm is a small one product or large multinational corporation. on a continuous basis.
In a large multinational company corporate strategy is also about managing various product lines & business units for value maximization.
For example: corporate headquarters must play the role of “organizational parent” in that it must deal with various product & business unit as “children”. Even though each product line or business unit has its own competitors & it has to obtain its own competitive advantage in the market. The cooperation among different units as a whole succeed the “family”.
The Corporation’s directional Strategy is composed of three general orientations towards growth such as: Growth strategy expands the company’s activities.
Stability strategies make no change to company’s current activities.
Retrenchment strategies reduce the company’s level of activities
The growth strategy can be achieved by Integration. Integration can be horizontal & vertical.
Horizontal Integration is the degree to which a firm operates in multiple geographic locations at a time and increases the range of product & services offering to the current customers.
SBU: The corporations are responsible for creating value through their business. They do so by managing their portfolio of business, ensuring that the businesses are successful over long-term by developing Business Units & focusing on the compatibility of those.
HOW CAN YOU LEARN WHAT STRATEGIES ARE USED BY MARKETIERS? THIS ONE EXPLAINS ALL BUSSINESS STRATEGIES USED IN MARKETING.WHAT IS THE NATURE OF LONG TERM STRATEGIES? HOW EXPEIENCED SEE IT? WHAT ARE MARKETING MANAGERS LOOKING FOR?
Jason StudentManagement 497 -x, Strategic ManagementFebrua.docxchristiandean12115
Jason Student
Management 497 -x, Strategic Management
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Strategic Leadership and Strategic Management
Introduction
In a fragmented Industry there are many options for a company to develop strategies in
order to realize the advantages of a cost-leadership or differentiation business model. I however
believe that pursuing horizontal integration is the most effective in the current economic rapidly
changing business environment and it will also set the foundation for the company to perform
successfully in both the short- and long-term marketplace.
This reporl discusses the advantages of horizontal integration in a fragrnented industry. I
will first explain why the potential benefits of a well-implemented horizontal integration strategy
outweigh the potential limitations. I will then discuss the advantages and disadvantages of other
possible strategies and explain why horizontal integration would be superior in each case. To be
sure, all of the other strategies can be effective and have been used by very successful companies
in the past. But in today's economy I believe that a horizontal integration strategy presents the
rnost options and possibilities for success. I will conclude describing why a horizontal integration
strategy is the best option in today's changing business climate and why a well-implemented
strategy of horizontal integration will be a solid business strategy for a company's future
endeavors.
Potential Benefits of Horizontal Integration
There are two main approaches to horizontal integration: acquisition of another company
or a merger between two companies to create a new entity. There are several obvious reasons
why horizontal integration can benefit a company as well as several reasons that rnight be more
hidden and cornplex. First, if a company decides to stay in one industry, it will allow them to
focus on its total managerial, financial, technological, and functional resources and capabilities
on competing successfully in one area. "This is important in fast-growing and changing
industries, where demands on a company's resources and capabilities are likell,' to be substantial,
but where the long term profits from establishing a competitive advantage are also likely to be
significant" (Hill, 305). For example, a well-established company that produces several models
of high definition televisions could decide to get into the market to rnake video game systems.
For the company to successfully move into the new market, it will require thern to fotm a new
management division fbr the video game system, transfer alarge amount of funds towards R&D
among other expenses, and invest in the required resources to make the game consoles. This
varies among industries because of the high and low levels of barriers to entry but it is an issue
fbr any company to consider regardless the level. For this company the.
PPT on acquisition, meaning of acquisition, what it is? types,
examples. Benefits of acquisition. Corporate strategy, Acquisition chapter in MBA. Short PPT. Finance major, Business studies. slide share ppt, for students, self study, business management, MBA studies, merger and acquisition, educational. Bschools, management subject.
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3. Integration Strategy also called Management
Control Strategy .
Integration strategies allow a firm to gain control
over distributors, suppliers, and/or competitors.
Types of Integration Strategy
Integration
Strategy
Vertical
Integration
Forward
Backward
Horizontal
Integration
4. “Vertical integration” is a strategy used by a company
to gain control over its suppliers or distributors in
order to increase the firm’s power in the marketplace,
reduce transaction costs and secure supplies or
distribution channels.
“Forward integration” is a strategy where a firm
gains ownership or increased control over its previous
customers (distributors or retailers).
“Backward integration” is a strategy where a firm
gains ownership or increased control over its previous
suppliers. (raw material provider )
5. Vertical integration (VI) is a strategy that many
companies use to gain control over their industry’s
value chain.
This strategy is one of the major considerations when
developing corporate level strategy.
The important question in corporate strategy is,
whether the company should participate in one
activity (one industry) or many activities (many
industries) along the industry value chain.
For example, the company has to decide if it only
manufactures its products or would engage in retailing
and after-sales services as well.
6. Costs: An organization should vertically integrate
when costs of making the product inside the company
are lower than the costs of buying that product in the
market.
Scope of the firm: A firm should consider whether
moving into new industries would not dilute its
current competencies. New activities in a company are
also harder to manage and control. The answers to
previous questions determine if a company will pursue
none, partial or full VI.
7.
8.
9. If the manufacturing company engages in sales or
after-sales industries it pursues forward integration
strategy.
This strategy is implemented when the company wants
to achieve higher economies of scale and larger market
share.
Forward integration strategy became very popular with
increasing internet appearance.
Many manufacturing companies have built their
online stores and started selling their products directly
to consumers, bypassing retailers.
10. Few quality distributors are available in the industry.
Distributors or retailers have high profit margins.
Distributors are very expensive, unreliable or unable to
meet firm’s distribution needs.
The industry is expected to grow significantly.
The company has enough resources and capabilities to
manage the new business.
There are benefits of stable production and
distribution.
11. When the same manufacturing company starts
making intermediate goods for itself or takes over its
previous suppliers, it pursues backward
integration strategy.
Firms implement backward integration strategy in
order to secure stable input of resources and become
more efficient.
12. Firm’s current suppliers are unreliable, expensive or
cannot supply the required inputs.
There are only few small suppliers but many
competitors in the industry.
The industry is expanding rapidly.
The prices of inputs are unstable.
Suppliers earn high profit margins.
A company has necessary resources and capabilities to
manage the new business.
Balanced integration strategy is simply a combination
of forward and backward integrations.
15. Lower costs due to eliminated market transaction costs
Improved quality of supplies
Critical resources can be acquired through VI
Improved coordination in supply chain
Greater market share
Secured distribution channels
Facilitates investment in specialized assets (site,
physical-assets and human-assets)
New competencies
16. Higher costs if the company is incapable to manage
new activities efficiently
The ownership of supply and distribution channels
may lead to lower quality products and reduced
efficiency because of the lack of competition
Increased bureaucracy and higher investments leads
to reduced flexibility
Higher potential for legal repercussion due to size (An
organization may become a monopoly)
New competencies may clash with old ones and lead
to competitive disadvantage
17. This strategy may not always
be the best choice for an
organization due to a lack of
sufficient resources that are
needed to venture into a new
industry.
Sometimes the alternatives
to VI offer more benefits.
The available choices differ
in the amount of investments
required and the integration
level.
18. Definition
“It is the process of acquiring or merging with
competitors, leading to industry consolidation.”
“Horizontal integration is a strategy where a
company acquires, mergers or takes over another
company in the same industry value chain.”
For example, Disney merging with Pixar (movie
production),
19. Organization competes in a growing industry.
Competitors lack of some capabilities, competencies,
skills or resources that the company already possesses.
HI would lead to a monopoly that is allowed by a
government.
Economies of scale would have significant effect.
The organization has sufficient resources to manage
M&A.
20.
21. Acquiring company + Acquired company
PepsiCo + Quaker Oats (in 2001)
Glaxo Wellcome+SmithKline Beecham=GlaxoSmithKline (in 2000)
HP + Compaq (in 2002)
Oracle + PeopleSoft (in 2005)
United Airlines + Continental (in 2010)
Microsoft + Yahoo! (in 2013, 2014)
Apple + AuthenTec (in 2012)
22. Coke’s Strategy
The Coca Cola Company used forward vertical
integration to move a step closer to their consumers.
Forward vertical integration refers to a management
style of involves a form of vertical integration whereby
activities are expanded to include control of the direct
distribution of its products”.
https://amebeobariollor.wordpress.com/2012/05/01/coca-colas-strategy-for-intergration/
23. DirectTV
The 2003 purchase of DirectTV by News
Corporation is an example of a forward integration
through acquisition.
DirectTV is a satellite TV company, and its
purchase enabled News Corporation to use it as a
medium to distribute more of its news, movies and
television shows by managing the process itself.
http://smallbusiness.chron.com/example-companys-forward-integration-37601.html
24. Costco Wholesale
Costco Wholesale is one of the largest wholesale-to-
consumer business operations.
A key quality of wholesalers that forward integrate is that
they typically sell to both consumers and business buyers.
Wholesalers normally offer bulk quantities or sizes that
other small businesses buy and use.
A restaurant might purchase a case of ketchup, for
instance.
Consumers may also see a benefit in buying large,
economical quantities of products the routinely use, such
as pickles, diapers or frozen foods.
http://yourbusiness.azcentral.com/example-companys-forward-integration-28860.html
25. Apple:
Vertical integration dictates that one company controls the
end product as well as its component parts.
In technology, Apple for 35 years has championed a vertical
model, which features an integrated hardware and software
approach.
For instance, the iPhone and iPad have hardware and
software designed by Apple, which also designed its own
processors for the devices.
This integration has allowed Apple to set the pace for
mobile computing. “Despite the benefits of specialization,
it can make sense to have everything under one roof,”
http://knowledge.wharton.upenn.edu/article/vertical-integration-works-for-apple-but-it-wont-for-
everyone/
26. Microsoft is opening its own retail stores, a forward integration strategy
similar to rival Apple Inc., which currently has more than 200 stores
around the world.
Microsoft wants to learn firsthand about what consumers want and how
they buy.
CompUSA Inc. recently closed most of its retail stores, and neither
Hewlett-Packard nor IBM have retail stores.
Some Microsoft shareholders are concerned that the company’s plans to
open stores will irk existing retail partners such as Best Buy.
Automobile dealers have for many years pursued forward integration,
perhaps too much.
Ford has almost 4,000 dealers compared to Toyota, which has fewer than
2,000 U.S. dealers. That means the average Toyota dealer sold, for example,
1,628 vehicles in 2007 compared to 236 vehicles for Ford dealers. GM, Ford,
and Chrysler are all reducing their number of dealers dramatically.
27. A simple example of backward vertical integration
strategy is an ice cream company that buys a dairy
farm. The company requires milk to make ice cream
and either can buy milk from a dairy farm or other
milk supplier or could own the dairy farm itself. This
ensures that it will have a steady supply of milk at its
disposal and that it will pay a reasonable price. This
can protect the ice cream maker in the event that there
are several other buyers vying for the same milk
supply.
28. Amazon.com
Booksellers set the price at which Amazon.com can
buy a book from them. This in turn limits the amount
that Amazon.com can charge a customer for a book
and still make a profit. If Amazon.com publishes the
book itself, it can acquire its books cheaper, as its
publishing arm does not need to produce a profit as an
independent publisher would. Amazon can choose
whether to sell the books it publishes to other
bookstores or sell its books only through Amazon.com.
In this way, it can control competition for its books
and the price it can charge for them.
http://smallbusiness.chron.com/examples-backward-vertical-integration-strategies-14703.html
29. Starbucks
Starbucks chose to buy a coffee farm in China, an area
that showed tremendous growth in the number of
coffee drinkers. At the same time, there was increased
competition among companies selling coffee, such as
McDonald's and other chains such as Costa Coffee.
Adding so many new coffee drinkers to the market
creates competition for high-quality beans, with every
coffee shop needing to buy them. By backward
vertically integrating by buying a coffee farm,
Starbucks ensures that it will have a bean supply and
that it will receive it at a reasonable price.
http://smallbusiness.chron.com/examples-backward-vertical-integration-strategies-14703.html