Essay 1 - Horizontal Integration: Single industry strategy Managers use corporate-level strategy to identify which industries their company

should compete in to maximize its long-run profitability. This profitability could happen in single market or industry over time. Examples are Mc Donalds which is focused on global fast-food or Walmart global discount retailing.with staying inside of industry it allows company to focus managerial,financial,technological and financial resources and capabilities on competing successfully in one area.it is Important in big and changing industries, in which demand on company resources and capabilities is important as well as long-term profit from competitive advantage. Second advantage of staying in single industry is that company sticks to the knitting,what means it stayed focused on what it knows and does best. Even when company stays in one industry, keeping successful business over time is hard because all conditions are changing, advances technology Inside one industry it is easy for managers to fail to see forest (changing nature of industry that result in new product opportunities) for the trees (focusing only on how to position current product). Focus on corporate level strategy can help managers to anticipate future trend and change in business models and to compete successfully. One corporate-level strategy that has been widely used to help managers to strengthen their business model is horizontal integration. It is the process of merging with industry competitors to achieve competitive advantage that arise from large size and scope of operations. Acquisition occurs when one company uses its capital resources, stock,debt or cash, to purchase another company and merger is agreement between equals to create new entity. Horizontal integration can improve competitive advantage and profitability of companies whose managers decide to stay inside of one industry.

Essay 2 - Benefits of Horizontal Integration In order to use horizontal integration, managers invest their companys resources to purchase assets of industry competitors to increase profitability of its single business model. Profitability increase when horizontal integration: 1) lowers cost structure - it can do this because it is creating increasing economies of scale. Achieveing economies of scale is important in industries to have high fixed-cost structure. In such industries, large-scale production allows companies to spread their fixedcosts over large volume and in this way to drive down average unit costs. Company can also lower its cost structure when horizontal integration allows it to reduce duplication of resources between two companies such by eliminating need for two sets of corporate head offices and so on.

2) increased product differentiation - it can be done by increasing flow of innovative new products that company can sell to its customers at premium prices. Horizontal integration can increase differentiation when it allows company to combine product lines of merged companies so that it can offer customers wide range of products that can be also bundled together. Product bundling involves offering customers opportunity to buy compete range of products at single combined price. This increases value of companys product line because customers often obtain price discount from buying set of products. Increase product differentiation could be done through cross-selling, which involves company taking advantage of or leveraging its established relationship with customers by acquiring additional product lines or categories that it can sell to them. In this way company satisfies customers in tota, and it satisfies all their needs. 3) replicating business model - company that can replicate its business model in new market segments within industry can also increase profitability. Walmart for example took its low cost/low-price discount retail business model to enter into even lower-priced warehouse segment by opening its chain in Sams Club. 4) reduced industry rivalry - horizontal integration can help with this in two ways: first, acquiring or merging with competitor helps to eliminate excess capacity in industry which often triggers price wars. By eliminating excess capacity, horizontal integration creates environment in which prices migh stabilize or even increase. Second, by reducing number of competitors in industry, horizontal integration often makes it easier to implement tacit price coordination between rivals, or coordination reached without communication. If there is larger number of competitors in industry,it is more difficult to establish informal pricing agreements, such as price-leadership by dominant company. 5) increased bargaining power - some companies use horizontal integration because it allows them to obtain bargaining power over suppliers or buyers and to increase profitability at expense of suppliers or buyers. By consolidating industry through horizontal integration, company becomes much larger buyer of suppliers products and uses this as leverage to bargain down the price it pays for its inputs, thereby lowering cost structure.

Essay 3 - Vertical integration Companies that use horizontal integration use also use corporate-level strategy of vertical integration for strengthen their business model and improve competitive position. In case of this integration company is entering new industries to support business model. Company must formulate multibusiness model that explains how entry into new industry using vertical integration will improve profitability. Company that is using strategy of vertical integration expands its operations either backwards into industry that produces inputs for companys products (backward vertical integration) or forward into industry that uses or sells companys products (forward vertical integration). To compete successfully firm can build own value chain. Four main stages in typical raw materials-to-customer-value-added chain are: raw materials, component parts manufacturing,final assembly, retail. In each of these stages value is added to product, where company at that stage takes product made in previous stage and then transform it to more worth product for company and then send it to customer. Vertical integration presents companies with choice about which industries in raw-materials-to-customer chain to operate and compete in. Vertical integration increases product differentiation, lowers costs or reduces industry competition when it: 1. facilitates investments in efficiency-enhancing specialized assets; 2. protects product quality; 3. results in improved scheduling.

Essay 5 - Problems with Vertical Integration Vertical integration can be used to increase profitability or to strengthen companys business model. Opposite can happen when vertical integration results in: 1. increasing cost structure 2. disadvantages that arise when technology is changing fast 3. disadvantages that arise when demand is unpredictable. These disadvantages can sometimes reduce profitability-in which case company vertically disintegrates and exits industry. Although vertical integration usually lowers companys cost structure,sometimes it can raise the, if company makes mistakes like continuing to buy inputs, when it already exists. Vertical integration can be major disadvantage when company-owned suppliers develop higher cost structure than those of independent suppliers. Because company-owned suppliers do not have to compete with independent,they have much less incentive to look for new ways to reduce operating costs or increase quality. There comes transfer prices, prices one division of company charges other divisions for its products. Term bureaucratic costs refers to costs of solving transaction difficulties that arise from managerial inefficiencies. These costs become significant component of companys cost structure because considerable managerial time and effort must be spent to reduce or eliminate managerial inefficiencies. Technological change - when technology is changing fast,vertical integration may lock company into old,inefficient technology and prevent it from changing to new one that would strengthen its business model. Sometimes if there is technological change and company does not think it should prevent it, firm could lose competitive advantage and also share in market.Thus vertical integration can pose serious disadvantage when it prevents company from adopting new technology to match with the requirements of changing. Demand unpredictability - if demand for companys core products is predictable, company could organize and coordinate efficiently flow of products, which may result in major cost savings. But if demand is not predictable, company cannot know how many products to produce,what it needs to make a products or some parts can be out dated. So vertical integration can be risky when demand is unpredictable because it is hard to manage volume or flow of products along value-added chain.

Essay 6 - Related diversification There are two types of corporate strategies that can be distinguished by how they attempt to realize 5 profit-enhancing benefits of divesification, and those are: Related diversification; Unrelated diversification.

Related diversification is a corporate-level strategy that is based on the goal of establishing a business unit in a new industry that is related to a company's existing business units by some form of commonality or linkage between the value-chain functions of existing and new business units. The goal of this strategy is to obtain the benefits from tranferring competencies, leveraging competencies, sharing resources and bundling products. This form of diversification can further be broken down: 1. Backward diversification 2. Forward diversification 3. Horizontal diversification One other advantage is that related diversification is that it can also allow a company to use any general organizational cometency it possesses to increase the overall performance of all its different industry divisions. Disadvantage is complexity and difficulty of coordinating different but related businesses. Also, there are three main reasons why a business model based on diversification may lead to a loss of competitive advantage: a) Changes in the industry inside the company that occur over time; b) Diversification pursued for the wrong reasons; c) Excessive diversification that results in increasing bureaucratic costs.

Essay 7 - Related versus Unrelated Diversification Related diversification is a corporate-level strategy that is based on the goal of establishing a business unit in a new industry that is related to a company's existing business units by some form of commonality or linkage between the value-chain functions of existing and new business units. The goal of this strategy is to obtain the benefits from tranferring competencies, leveraging competencies, sharing resources and bundling products. Unrelated diversification is a corporate-level strategy based on a multibusiness model whose goal is to increase profitability through the use of general organizational competencies to increase the performance of all the company's business units. Companies pursuing this strategy are often called conglomerates, business organizations that operate in many diverse industries. To choose between there 2 strategies, company needs to make the comparison of the benefits of each strategy against the bureaucratic costs of pursuing it. It pays a company to pursue related diversification when: 1. The company's competencies can be applies across greater number of industries; 2. The company has superior strategic capabilities that allow it to keep bureaucratic costs under close control. It also pays a company to pursue unrelated diversification when: 1. Each business unit's functional competencies have few useful applications across industries; 2. The company's managers use their superior strategic management competencies to improve the competitive advantage of their business units and keep bureaucratic costs under control. It is important to mention that nothing stops the company of pursuing both strategies at the same time, as well as some other known strategies. A company should pursue any and all strategies as long as strategic managers have weighted the advantages and disadvantages of those strategies and arrived at multibuness model that justifies them.

Essay 8 - Entering New Industries: Joint Ventures A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.With individuals, when two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such partnership can also be called a joint venture where the parties are " co-venturers". A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. While joint ventures are generally small projects, major corporations also use this method in order to diversify. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits. Since money is involved in a joint venture, it is necessary to have a strategic plan in place. In short, both parties must be committed to focusing on the future of the partnership, rather than just the immediate returns. Ultimately, short term and long term successes are both important. In order to achieve this success, honesty, integrity, and communication within the joint venture are necessary. Although joint ventures usually benefit both partner companies, under some conditions they may result in problems. While a joint venture allows companies to share the risks and costs of developing new business, it also requires that they share the profits id it succeeds. So if one partner is better than the other, they will have to give away some profits in order to follow 50/50 rule. Problems can tear joint ventures apart.

Essay 9 - Building Blocks of Organizational Structure After formulating a company's business model and strategies, managers must make designing an organizational structure their next priority. Managers must make 3 decisions. Grouping tasks, functions and Divisions Ogranizational structure follows the range and variety of tasks that the organization chooses to pursue. In general, most companies first group people and tasks into functions and then functions into divisions. A function is a collection of people who work together and perform the same types of tasks or hold similar positions in an organization. As organizations grow and produce a wider range of products, the amount and complexity of the handoffs increases as well. Allocating Authority and Responsibility As organizations grow and produce a wider range of goods and services, the size and number of their functions and divisions increase. Managers must develop a clear and unambiguous hierarchy of authority that defines each manager's relative authority, from CEO down through the middle managers to the nonmanagerial employees who actually make goods and services. Company can be based on tall and flat structure. Tall structure has many levels of authority relative to company size and flat structure has fewer levels. The more taller the hierarchy, the less flexible organization is will slower managers' response to changes in competitive environment. Minimum chain of command is selecting the fewest levels of authority necessary to use. Centralization is when managers at the upper levels make all decisions and decentralization is vice-versa situation. Integration and Integrating mechanisms Top managers need to use various integrating mechanisms to increase communication and coordination among functions and divisions. The greater the complexity of an organization's structure, the greater the need for coordination among people, functions and divisions. Direct contact among managers creates a context within which managers from different functions or divisions can work together to solve mutual problems. Liaison roles occur when the volume of contacts between 2 functions increase. Teams are more than 2 functions or divisions which share many common problems.

Essay 10 - Functional Structure: Grouping by Function Functional structures group people on the basis of their common expertise and experience or becaues they use the same resources. Functional structures have several advantages: a) If people who perform similar tasks are grouped together, they can learn from one another; b) They can monitor each other in order to make sure that all are performing their tasks effectively and not shrinking their responsibilites; c) It gives managers greater control of organizational activities. Grouping by function also makes it easier to apply output control. In their operations they are using middle managers, but if they could eliminate them, they could practice management by objectives, a system in which employees are encouraged to help set their own goals. To understand how structure, control and culture can help create distinctive competencies, we need to see how they affect the way these three functions operate: manufacturing, R&D, and sales. Manufacturing In manufacturing, functional stratefy usually centers on improving efficiency and quality. Pursuing TQM, the inputs and involvement of all employees in the decision making process are necessary to improve production efficiency and quality. It becomes necessary to decentralize authority to motivate employees to improve the production process. R&D The functional strategy for an R&D department is to develop distinctive competencies in innovation and quality as excellence that result in products that fit customers' needs. The R&D department's structure, control and culture should provide the coordination necessary for scientists and engineers to bring high-quality products quickly to market. these systems should also motivate R&D scientists to develop innovative products. Sales Salespeople work directly with customers, and when they are dispersed in the field, these employees are especially dificult to monitor. The cost-effective way to monitor their behavior and encourage high responsiveness to customers is usually to develop sophisticated output and behavior controls.