Strategic Positioning and Growth Strategies 2

8/4/2019 Strategic Positioning and Growth Strategies 2

1/24


2/24


3/24

Alternative Growth Strategies

IV. Vertical Integration Strategies Forward integration

Backward integration

Present Products New Products

PresentMarkets

New

Markets

VerticalIntegration

II. Product DevelopmentAdd product features, product

refinement Expand the product line

Develop a new generationproduct

Develop new products forsame market

I. Growth in existingproduct markets

Increase market share Increase product usage

Increase the frequency used Increase the quantity used Find new applications for

current users

III. Market Development Expand geographically

Target new segments

V. Diversification involvingnew products and new

markets Related Unrelated

Figure 13.1


4/24

y Increasing Market Share

y Increasing Product Usage

y Revitalize the Brand

yNew Applications for Existing Product Users

Growth in Existing Product

Markets


5/24

Increasing Market Sharey To increase market share a business has to take customers

from its competitors or attract new customers. Achieving

this requires a thorough understanding of both your owncustomer base and that of rival businesses.

y Ways t I cr as Mar t har s

y Sell More to Current Customers

y Get Back Former Customersy Try Different Types of Channels

y Target a New Market Segment

y Diversify


6/24

Increasing Product Usagey Provide Reminder Communications e.g. reminder e-mails

y Position for Regular or Frequent Use e.g.3 glasses of milk per day,

brushing twice or thrice a day to increase usage of tooth paste.

y Make the Use Easier - e.g., microwaveable containers, prepared foods

y Provide Incentives e.g., offers like buy one get one free, free samples

y Reduce Undesirable Consequences of Frequent Use e.g., shampoo,low fat, sugar, calorie, sodium foods


7/24

Revitalize the Brandy Building a strong brand takes time, commitment, and hard

work, but the result is one of the most valuable assets a

company can own.

y Instant identification in the mind of the customer, a reputation

for competence and quality, the knowledge that the promises of

the brand are genuine and not just slogansthe list of benefits

goes on.


8/24

Contd

Examples


9/24

New Applications for ExistingProduct Users

y An actively managed branded feature, service,

program or ingredient that provides meaningfuldifferentiation to the parent brand

y McDonalds is always within the fast-food industry, butfrequently markets new burgers.

yWhirlpool refrigerator


10/24

Product Development for the

Existing Markety Line Extensions e.g, Nimbus

y Developing New-Generation Products e.g., Apple

with iPody Incumbents Curse

1. Even if new technology is successful may be making

investment just to maintain same level of sales and profits

2. Need to improve costs, quality, and service for existing offering,which leaves little time to explore new technologies.


11/24

Product Development for the

Existing Market

y Expand the Product Scope e.g., lifebuoy

yNew Products for the Existing Markets e.g., handwash


12/24

Product Line Expansionsy Will customers benefit from a systems capability or service

convenience made possible by a broad product line?

y Do potential manufacturing, marketing, or distribution cost

efficiencies exist from an expanded product line?y Can assets or competencies be applied to a product-line

expansion?

y Does a firm have the needed competencies and resources inR&D, manufacturing, and marketing to add the various

products proposed?


13/24

Market Development Using Existing

Products

Expanding Geographically

yWhen were thinking about expanding, first think about where wewant to cultivate new business.

yWe have options: other regions, nationally, or internationally.

yGeographical expansion works well for a company that wants toexpand its service territory because it needs a physical location to serveits customers.

yClearly our ability to expand is subject to our ability to finance suchas expansion.

yMany of the big boys of business, including McDonalds, Wal.Mart,and Home Depot, have exported their operations to other countries.


14/24

Expanding into New Market Segments

y Market expansion can also occur when we identify new

groups of target customers in our current region.E.gMcDonald's.


15/24

CountIncrease present customers rate of use:

y Increasing the size of purchase

y Maximizing the rate of product obsolescencey Finding new uses for your product

y Advertising other uses

y Offering incentives for increased use


16/24

Evaluating Market Expansion

Alternatives Is the market attractive?

Do the resources and will exist to make the necessary

commitment in the face of uncertainties? Can the business be adapted to the new market?

Can the assets and competencies that are at the heart ofthe business success be transferred into the new

business environment?


17/24

Why Diversification ?y Advantages

y Control of inputs, leading to continuity and improvedquality.

y Control markets by guaranteeing sales and distribution.

y Take advantage of existing expertise, knowledge andresources in the companywhen expanding into newactivities.

y Disadvantages

y Cost

y Synergy


18/24

Diversificationy Diversification is achieved in following ways

y Vertical integration

y Forward integration Integrating Distribution

y Backward integration - Integrating Supplierse.g.:

y

Relatedy Unrelated


19/24

Related(Concentric)

Diversificationy Here we can take the best example of the concept of

maggi because of addition of various flavours.

yThis is only possible because of technology relatedconcentric diversification

y Eg. Maggi noddles


20/24

Samsung Unrelated(Conglomerate)

Diversificationy 1954 Woolen Mill

y 1960 Electronic Division

y

1980 - Acquired Hanguk Jeonja Tongsin manufacturingTelecommunication devices

y Largest chip producer afterINTEL

y Largest Memory Chip Supplier

y

Manufactures aircraft engines.y Samsung Group Diversification


21/24

Vertical Integration Strategiesy A business situation where a company expands by buying up its suppliers or its

customers, thus controlling all the processes of production, from raw materials throughto the sale of the final product.

y The advantages for a company are that, since it owns its suppliers or customers, theprofits made by them are kept in the firm.

y Owning suppliers should ensure delivery of the materials and components theyproduce, and owning customers guarantees a market for the firm's products.

y

The major disadvantage is that management may not have expertise in all stages.

y A current example is the oil industry, in which a single firm commonly owns the oilwells, refines the oil, and sells gasoline at roadside stations.


22/24

Three types

y There are three varieties: backward (upstream) vertical integration, forward(downstream) vertical integration, and balanced (both upstream and downstream)vertical integration.

y A company exhibits backward vertical integration when it controls subsidiaries that

produce some of the inputs used in the production of its products. For example, anautomobile company may own a tire company, a glass company, and a metal company.Control of these three subsidiaries is intended to create a stable supply of inputs andensure a consistent quality in their final product. It was the main business approach ofFord and other car companies in the 1920s, who sought to minimize costs by centralizethe production of cars and car parts.

y A company tends toward forward vertical integration when it controls distributioncenters and retailers where its products are sold.

y Balanced vertical integration means a firm controls all of these components, from rawmaterials to final delivery.


23/24

Questions:1. What are the ways to increase market shares?

2. State advantages and disadvantages of diversification?

3. How are related and unrelated diversification alsoreferred as?

4. What are the three types of vertical integration?

5. State true or false:

a) Strategy for new Market and present product is Diversificationinvolving new products and new markets .

b) Strategy for present market and new product is Product Development


24/24

Thank you!!!

Documents

Strategic Positioning and Growth Strategies 2