Strategy Lecture #8. “Strategy” Greek word origin (~400 B.C.) Pertained to the art and science...
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Transcript of Strategy Lecture #8. “Strategy” Greek word origin (~400 B.C.) Pertained to the art and science...
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Strategy
• Lecture #8
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“Strategy”
• Greek word origin (~400 B.C.)
• Pertained to the art and science of directing military forces
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Six Basic Strategies
• Stability
• Product Development
• Market Development
• Vertical Integration
• Merger
• Retreat
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Stability
• No new products, markets, acquisitions
• For example: Retain current market share.
• For example: 11% of market; 110,000 unit sales
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Product Development
• New products for an existing market.
• Same customers will buy continuing line of products.
• Products aimed at same customer base.
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Product Development
• RCA TV, Video Recorders, Video Discs
• Cereals: Plain, sugared, frosted, colors, shapes, characters, etc.
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Chocolate Frosted Sugar Bombs
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Market Development
• New markets for existing products
• New uses for existing products
• New geographic markets for existing products
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Market Development
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Market Development
• Japanese sports car to the U.S.
• Tried to get car renamed, because the translated name was “Fairy Princess”
• Automaker agreed to market the car using the internal production number
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Market Development
• 8 oz. Servings
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U.S. per capita: 310 / year
Russia per capita: / year
China per capita: / year
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Vertical Integration
• Firm incorporates pre- or post- operation enterprise into its business
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Tire Manufacturer Example
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Tire Manufacturer
• Rubber Tree Plantation
• Rubber Processing Plant
• Tire Manufacturer
• Retail Store
• Consumer
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Tire Manufacturer
• If buys out Rubber Processing Plant, this is known as Backward Vertical Integration
• Rubber Tree Plantation• Rubber Processing Plant• Tire Manufacturer• Retail Store• Consumer
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Tire Manufacturer
• If buys out Retail Store chain, this is known as Forward Vertical Integration
• Rubber Tree Plantation• Rubber Processing Plant• Tire Manufacturer• Retail Store• Consumer
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Vertical Integration
• Eliminates Middleman
• Which results in more profit potential for the firm
• ALSO…
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Vertical Integration
• Reduces uncertainty
• For example, what happens if your supplier dries up?
• Or, your retail outlet no longer chooses to carry your product?
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Merger
• A type of diversification.
• Firm enters a related business area. Examples: Mattel buys Tyco, Hershey buys Peter Paul.
• Firm enters unrelated business area. Example: Ralston Purina buys the Blues
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Merger
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Merger
• PepsiCo owns Pepsi Cola
• PepsiCo owns Frito Lay
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PepsiCo
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Retreat
• Firm gets out of businesses it once thought were good opportunities.
• Example: Ralston Purina
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Ralston used to own:
• St. Louis Blues hockey team
• Tuna fishing operation
• Mushroom growing business
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Retreat at Ralston
• Sold off these divisions
• Got back to basics
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