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Mastering Strategic Management – 1st Canadian Edition. Name and understand the three concentration strategies. These two relationship are associated with advantages and disadvantages’ As R.Morgan (2004) states, short term relationship gives the buyer option to switch suppliers for products where the price of materials are easily changeable. Disadvantages. These two bottling giants are extending their product lines in an attempt to increase their own market share, and take market share away from each other and from their smaller rivals. Oil exploration and refining is expensive. Nike, panneau d’affichage JC DECAUX (PARIX,FR75). Mastering Strategic Management - 1st Canadian Edition, Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. ... concentration is often a better way to build a fortune. Today, Kicking Horse Coffee roasts over 1,800 tonnes of coffee annually from the Invermere facility and enjoys revenue of about $25 million a year with predicted growth of 10 percent annually; growth which reflects the consumer demand for premium organic coffee. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. 1. Market penetration involves trying to gain additional share of a firm’s existing markets using existing products—often by relying on extensive advertising. Product development involves creating new products to Serve existing markets. (2013). We illustrate examples of each below. The biggest advantage as far as concentration strategy is concerned is that due to company focusing only on one product it gains specialization in production and marketing of that product because once company keep producing one product for long time than company find cheaper and efficient ways to produce as well as market the product which in turn results in saving cost and … As with all strategies, diversification in business has advantages and disadvantages and the administration can use these advantages and disadvantages … In case of PHD if one student is focusing only on one subject and other is studying both for PhD and postgraduate degree than student who is focusing only on PhD is more likely to excel than another student, similarly in case of companies when company is focusing only on one product than chances of it getting competitive advantage on one particular product over its competitors are more as compared to those companies which produces and markets many products.eval(ez_write_tag([[300,250],'letslearnfinance_com-medrectangle-4','ezslot_0',107,'0','0'])); When a company specializes in selling and marketing on one product than it has a competitive advantage not only while selling the product but also in the procurement of various factors of production at competitive rates. Market penetration means gaining additional share of an organization’s existing markets by utilizing existing products. Not only is Invermere the base for the 8400 m² production facility, it is home to the company’s flagship (and only) Kicking Horse Café, where fans of the brew can get a close up look at the operation that has married both ethical trade and enviable business success. Canadian Airlines Subsidiaries. Fair Trade Certified™ Coffee Imports Hit Record High in 2012. Strategic management is a way to transform the existing static plan in a proper systematic process. Hence whether its procurement of raw materials at cheap rates from suppliers or getting the best talent in terms of manpower as today’s generation love specialization and they love to work with those companies which are specialist and market leader in their respective fields. What are the advantages and disadvantages of concentrated targeting strategies. Canada’s Organic Market National Highlights, 2013. Some purchased firms are attractive because they own strategic resources such as valuable brand names. In terms of corporate marketing, business diversification is the strategy to increase profits by selling new products in new markets. Jones Soda’s 2006 set focus on the flavors of Thanksgiving. Executives in charge of each of these six corporations believed that greater efficiency could be achieved by combining forces with a former rival. Considering horizontal integration alongside Porter’s five forces model highlights that such moves also reduce the intensity of rivalry in an industry and thereby can make the industry more profitable. Advertising is a major way to attract customers within the existing markets. 1. Other acquisitions fail because the buyer pays more for a target company than that company is worth and the buyer never earns back the premium it paid. According to AC Nielsen ratings, for the past three years in a row (2007), KHC was the number one specialty coffee (Super Premium Category) being sold in Canadian grocery stores. Coca-Cola introduced Freestyle in 2009,  a touch screen soda fountain. Canadian Airlines Corporation was formed in 1987 when Pacific Western Airlines purchased Canadian Pacific Airlines (which operated as CP Air for a number of years), which in turn had recently acquired Eastern Provincial Airways and Nordair. The machine allows users to select from mixtures of flavors of Coca-Cola branded products which are then individually dispensed. PepsiCo is also expected to take a significant step toward reducing the sugar and calorie content of its drinks via its partnership with flavor supplier Senomyx. Starbucks engages in market development by selling their beans and bottled drinks in grocery stores. Market penetration, market development, and product development are three methods to grow within an industry. A competitive market can also force you to lower your prices to stay competitive, decreasing your return on each item you produce and sell. Often firms will rely on advertising to attract new customers within existing markets. Each winter, the firm introduces a holiday-themed set of unusual flavors. In many cases, horizontal integration is aimed at lowering costs by achieving greater economies of scale. Types of Growth Strategies: Concentration Expansion Strategy, Integration Expansion Strategy and Other Details ... Each method of entering an overseas market has its own advantages and disadvantages that must be carefully assessed. Rather than build a presence from nothing, Canadian Airlines executives believed that buying a position was more cost-effective (Wikipedia, 2014). Horizontal integration refers to pursuing a concentration strategy by acquiring or merging with a rival. Retrieved from http://sportsillustrated.cnn.com/2011/writers/jeff_wagenheim/03/12/strikeforce-purchased/index.html, Wikipedia Organization. Disadvantages of Localization Of Industries. But it has disadvantages because of the nature of shift of the demand of customers due to innovations in technology. That year it also bought ACE Bakery, a Canadian maker of artisan and European-style breads. Kraft Foods, Nabisco, and Cadbury were each very large, successful companies with international markets. For a focus strategy to be successful, businesses and brands must actively listen when hearing about the needs and concerns of their targeted demographic. Ansoff, H. I. When the acquisition was undone in 2007, Daimler recouped only $1.5 billion worth of value—a mere 4 percent of what it paid. Retrieved from http://www.bevnet.com/news/2014/pepsico-eyes-summer-launch-for-new-real-sugar-colas/, Canada Organic Trade Association. Concentration Index funds and diversification have worked extremely well in the past 35 years, however their success can be thanked to geography, as we hear only about the success in the U.S., and to declining interest rates. The benefits of the strategy is to build a strong reputation within a market and generate loyalty among the customers. In the case of companies, some company follows a similar strategy where they direct all their money and resources towards the production and marketing of one product and this strategy is called concentration strategy. Mergers: Why most big deals don’t pay off. Business Week, 60–70. Vertical Integration Strategy: Advantages, Disadvantages, Types Vertical Integration is the degree to which a firm’s own production system or service facility handles the entire supply chain. The machine features over 125 different Coca-Cola drink products, and custom flavors. When one company purchases another company. However, putting criticisms aside, strategic planning plays an important role in organisations. Features of Bank Reconciliation Statement, Normal and Inferior Goods and Its Examples, Porter Five Forces Model Advantages and Disadvantages, Why Socialism is different from Communism. Market penetration involves trying to gain additional share of a firm’s existing markets using existing products. Fair Trade USA reports that organic coffee imports to the United States and Canada increased in 2012 by 18 percent over 2011. Horizontal integration can also provide access to new distribution channels, where a company may create or acquire production units for outputs that are alike—either complementary or competitive. Concentration on a Single Business Advantages Operational focus on a single familiar industry or market. Thus executives need to be very cautious when considering using horizontal integration. What’s your view on this? Advantages of Strategic Management Process: The process of strategic management is a comprehensive collection of different types of continuous activities and also the processes which are used in the organization. The selection would depend upon the organization and its market. Now Kicking Horse Coffee can reach consumers that don’t or can’t visit its one coffeehouse in Invermere. Figure 8.2: Attribution information for all included images is in the chapter conclusion. What is Concentration Strategy? Retrieved from http://www.ota.com/pics/media_photos.171.img_filename.pdf, Fair Trade USA (2013, May 10). Coca-Cola has installed Freestyle machines in Canada in select Wendy’s, Burger King, and Hero Certified Burgers restaurants, as well as entertainment venues such as Cineplex Entertainment cinemas and Canada’s Wonderland. Retrieved from http://www.cbj.ca/business_in_action/food_beverage/kicking_horse_coffee.html, Wagenheim, J. (2014). Customers are offered a free download to get them to visit iTunes—and to perhaps purchase more songs. His company’s more recent innovations in the razor market include Trac II (the first two-blade razor), Atra (first razor With a pivoting head), Sensor (first razor with spring- loaded blades), Mach 3 (first three-blade razor), and Fusion (first six-blade razor). The term merger is generally used when two similarly sized firms are integrated into a single entity. In 2013, Jones Soda created a poutine-flavored, limited-edition soft drink, which got international popular culture attention. Crystal is a seasoned writer and researcher with over 10 years of experience. In 1989, Kraft’s parent company merged Kraft and General Foods. The joining of two similarly sized companies into one company. Although the United States currently has the largest economy in the world, it accounts for less than 5 percent of the world’s population. It has been a mainstay of the town since the company started in 1996. This fact is justified by the fact that the company is much easier and more efficient to meet the requirements of a strategically narrow segment than its competitors who operate on a larger scale - the entire sector. Actions that firms use to try to compete successfully within only a single industry. For example, Mattel purchased The Learning Company in 1999 for $3.6 billion and sold it a year later for $430 million—12 percent of the original purchase price. Henry, D. (2002, October 14). Most recently, Weston Foods worked out a deal to acquire bankrupt Colonial Cookies of Kitchener, Ontario—a baker of Loblaw private label products and in particular its bestselling President’s Choice Decadent Chocolate Chip Cookie. Also, the level of competition to win short term contracts allows discounting of prices. Growing with the market brings competitive advantage. Here are the advantages and disadvantages of the focus strategy to examine. In the case of focus differentiation, one advantage is that very high prices can be charged. eval(ez_write_tag([[300,250],'letslearnfinance_com-leader-1','ezslot_1',110,'0','0']));As one can see from the above pros and cons of concentration strategy that a company cannot blindly follow above strategy rather it should carefully read and assess above points and then take the decision whether it wants to operate only as concentrated firm or operate as diversified firm. This was the reasoning behind several mergers of large oil companies, including Petro-Canada and Suncor in 1998, Exxon and Mobil in 1999, and Chevron and Texaco in 2001. All is not well with the concentration of industries. Global pharmaceutical firm GlaxoSmithKline plc was formed by the merger of GlaxoWellcome plc and SmithKline Beecham plc in 2000. Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. There are legitimate reasons for adopting each of the three broad target market strategy approaches. December 30, 2018. What is Concentrated Marketing? What might you advise this company’s executives to do differently? Concentrated Marketing is a market coverage and Market Segmentation strategy in which the product and marketing message is aimed at a (few) well-defined segments of the consumer population in a market. The winners were Candy Cane, Gingerbread, Pear Tree, and Egg Nog. There is not one approach that is better than the others. Bevnet. The soft drink industry is an example of frequent product development efforts. Kicking Horse Coffee, The 411. Examine the relative advantages and disadvantages of utilizing either a concentrated or a diversified investment portfolio strategy. Advantages: concentration of resources, meets narrowly defined segment, small firms can compete and strong positioning Disadvantages: segments too small or changing and large competitors may market to … Since then, GSK has spent billions to acquire and sell several businesses, and formed joint ventures with other pharmaceutical companies. Canada ranks at 0.5 percent of the world’s population. Retrieved from http://www.kickinghorsecoffee.com/files/KHC_The_411.pdf, Lee, J. (2014, April 18). Concentration strategies are meant to compete in one, single industry. In an acquisition, a larger firm purchases and absorbs a smaller firm. These products appear to be taking the place of the PepsiCo’s popular “Throwback” sodas, which included limited-edition, sugar-sweetened versions of its flagship cola and Mountain Dew, introduced in 2009, both of which were packaged in nostalgia-inspired cans and bottles. Pursuing a concentration strategy by acquiring or merging with a rival. B.C entrepreneur celebrates the sweet smell of (Kicking Horse Coffee) success. Hitt, M. A., Harrison, J. S., & Ireland, R. D. (2001). Originally from Vancouver, B.C., Jones Soda Co. takes a novel approach to product development. Now several blends of Starbucks coffee and Tazo tea are widely available in the popular one-cup format. Similarly, Daimler-Benz bought Chrysler in 1998 for $37 billion. Retrieved from http://fairtradeusa.org/press-room/press_release/fair-trade-certified-coffee-imports-hit-record-high-2012. Air Canada and Canadian Airlines merged in 2001, becoming the world’s twelfth-largest airline in the first decade of the 21st century. about 3,000), sells only organic fair trade coffee and organic fair trade Indian chai. Therefore, diversification limits the growth opportunities for an entity. The firm maintains a Spanish-language website at http://www.meencanta.com; the website’s name is the Spanish translation of McDonald’s slogan “I’m lovin’ it.” McDonald’s hopes to gain more Latino customers through initiatives such as this website. Coca Cola Freestyle. By roasting small batches, selling whole beans—rather than ground coffee—and using state-of-the-art packaging, Kicking Horse Coffee ensured quality control and consistency of product (Lee, 2012). Those companies adopt concentration strategy can better identify customer needs and wants due to its one are fewer segments and one can better satisfy customers’ needs and wants. Strategies for diversification. The biggest advantage as far as concentration strategy is concerned is that due to company focusing only on one product it gains specialization in production and marketing of that product because once company keep producing one product for long time than company find cheaper and efficient ways to produce as well as market the product which in turn results in saving cost and earning profits due to specialization in producing a product. Here are the advantages and disadvantages of the focus strategy to examine. In recent years, HP has pursued horizontal integration through a merger with Compaq and the acquisition of Palm. As an approach to doing business, the strategy involves a company choosing to focus most of its resources on the development of a specific product or at least a small group of products that are aimed at a specific market. Appendix 1: Mastering Strategic Management Powerpoints. Would the move be a success? (2012, November 28). The marriage failed, and Chrysler is currently owned by Italian auto maker Fiat in its new holding company, Fiat Chrysler Automobiles. Concentration Strategy Advantages and Disadvantages Vinish Parikh. Be able to explain horizontal integration and two reasons why it often fails. Disadvantages of One Industry Focus ... A corporate-level strategy is when a business makes a decision that affects the company's finances, management, human resources, and … It helps organisations carry out a comprehensive assessment of its environments and develop and implement strategies in line with them. A concentration strategy is a type of approach that is used in both business and investment situations. Concentration strategies involve trying to grow by successfully competing only Within a single industry. (2014). 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