Types of Strategies

INTEGRATION STRATEGY
VERTICAL VERTICAL INTEGRATION
: BACKWARD
INTEGRATION : INTEGRATION
FORWARD
INTEGRATION A company
exhibitsbackward vertical
integrationwhen it controls
A company tends subsidiaries(suppliers) that
produce some of the inputs
towardforward used in the production of its
vertical products.
integrationwhen it Control of these subsidiaries
controls distribution is intended to create a stable
supply of inputs and ensure a
centers and retailers consistent quality in their
where its products are final product.
sold
 VERTICAL INTEGRATION : EXAMPLES
The Ford Motor company was a perfect example of vertical
integration.
During the 1910's and 1920's when Henry Ford was still in charge of
the Ford Motor company, he believe that the cost of manufacturing his
automobiles began from the moment the raw materials were obtained
up until the time that the finished product was sold to the customer. As
a result of this thinking, he wanted to control every aspect of it. So he
built a new manufacturing complex near Dearborn Michigan called the
Rouge and where he consolidated his entire business there in 1928.
This complex controlled the production, assembly and transportation
of his product. He next purchased a railroad, coal mines, timberland,
freighter ships, and a glassworks plant. He also built his own sawmill.
At the peak of his success, Henry Ford owned businesses in 33
different countries that all contributed to his automobile product.
During this whole time, Ford Motor company was producing the Model
T automobile. It was a utilitarian type of vehicle that came in one color
with few design changes over the years. So he never had to retool any
of his manufacturing machinery. It took no longer than 93 minutes to
assemble. The Model T was a huge success. Over 15 million were
manufactured. At one time, 90% of all cars in the WORLD were Model
HORIZONTAL INTEGRATION
Horizontal integration is accomplished by
expansion into additional business activities that
are within the same level of the value chain.
It is a strategy of seeking ownership of or
increased control over a firms competitors.
Mergers, acquisitions and takeovers among
competitors allow for increased economies of
scale and enhanced transfer of resources and
competencies.
Using the gemstones as an example, a wholesale
jeweler could acquire or merge with another
wholesale jeweler in an attempt to horizontally
integrate the company.
The merger of Bank of Mathura with ICICI
(Industrial Credit and Investment Corporation of
India) Bank
INTENSIVE STRATEGY
Market Penetration
A market penetration strategy seeks to
increase market share for present products or
services in present markets through greater
marketing efforts.

Market penetration includes increasing the

number of salespersons, increasing advertising
expenditures, offering extensive sales promotion
items, or increasing publicity efforts
Coca-Cola advertising $2.9 billion
budget(2010)
Microsoft advertising budget (2010) $1.6 billion

Apple advertising budget (2010) $691 million

Market Development
Market development involves introducing
present products or services into new geographic
areas.
Product Development
Product development is a strategy that seeks
increased sales by improving or modifying
present products or services.
Product development usually entails large
research and development expenditures.
 DIVERSIFICATION STRATEGIES
RELATED DIVERSIFICATION
A process that takes place when a business
expands its activities into product lines that are
similar to those it currently offers.
Either through acquisition of competitors or
through internal development of new
products/services.
Unrelated diversification
An unrelated diversification strategy favors
capitalizing on a portfolio of businesses that are
capable of delivering excellent financial
performance in their respective industries, rather
than striving to capitalize on value chain strategic
fits among the businesses.
A form of diversification when the business adds
Coca-Cola
 Defensive strategies
A management approach designed to reduce the
risk of loss

Retrenchment
A retrenchment grand strategy is followed when an
organization aims at a contraction of its activities
through substantial reduction or the elimination of
the scope of one or more of its businesses in terms
of their respective customer groups, customer
functions, or alternative technologies either singly
or jointly in order to improve its overall
performance.
 Divestitur
Selling aedivision or part of an organization
Can be part of an overall retrenchment strategy to rid
an organization of businesses that are unprofitable,
that require too much capital, or that do not fit well
with the firms other activities
Example:
TATA group is a highly diversified entity with a range
of businesses under its fold. They identified their non
core businesses for divestment. TOMCO was divested
and sold to Hindustan Levers as soaps and a
detergent was not considered a core business for the
liquidation
Tata.
Selling all of a companys assets, in parts, for their
tangible worth
A recognition of defeat and consequently can be an
emotionally difficult strategy
 Example:
Subhiksha Trading Services Limited (Subhiksha), one of the
leading retailers in India. Subhiksha, which was started as
a discount store in 1997, was based in Chennai, India.
It started with retailing grocery items and later expanded
into medicines, mobiles, electronics, and consumer
durables.Since September 2008, Subhiksha faced
difficulties in operating its stores. The company had
reportedly defaulted on its vendor payments which
resulted in empty shelves on its stores. The employees of
the retailer were not paid salaries since September 2008.
On January 31, 2009, Subhiksha admitted in media that it
was facing a major financial crisis.
On February 11, 2009, following an attack on its stores and
warehouses, Subhiksha announced that it was closing
down all its 1600 outlets till May 2009. Although, the
management of Subhiksha claimed that the financial
problem was due to its inability to raise enough equity
capital, analysts opined that the fact that the retailer