Business Strategies as the Long-Term Directions of an Organisation - Coursework Example

Abstract Business strategy can be referred as the long-term direction of an organisation that aims at attaining a competitive edge of the organisation. It identifies the markets that the organisation should venture in to and the advantages of the organisation over the competitors in the industry. The business strategy also identifies the critical resources and environmental factors that will either hinder or facilitate the success of the organisation in the industry. Business strategies aim at increasing the market share, penetrating in to new markets, diversifying the product portfolio and enhancing the brand recognition. The paper will discuss several business strategies and provide an example on each business strategy. Business strategies Forward integration Forward integration is a type of vertical integration whereby the firm expands its operations through controlling the downstream supply chain especially the direct distribution of the products. An example of forward integration was the acquisition of Hong Kong GreenLife Ltd at US $ 9.03 million in 2007 by Natural Health care products company Comvita in 2007. The companies benefit from distributing their products directly to the customers (Mindtools 2013). Backward integration Backward integration is a business strategy that aims at controlling the upstream supply chain activities through purchasing the suppliers of raw materials. Some advantages include timely delivery of raw materials and innovation benefits. An example of backward integration is purchase of Coffee farms by Starbuck or Amazon.com purchasing the major book publishing companies (Mindtools 2013). Horizontal integration It is a business strategy that increases the company market share through taking over a similar company either by merger, acquisition or buyout. Basically, it refers to acquiring additional business activities at the same level of the value chain. Examples include acquisition of You Tube by Google. The aim is to increase market share and reduce competition (Mindtools 2013). Market penetration This is a business strategy that entails increasing the market share of an existing product or promoting an existing product through offering discounts, lower prices and also advertising. An example of market penetration strategy is lowering the prices and advertising in order to attract new users of the product in the same market. For instance, Google released the Android operating system in order to penetrate in the smart phone market segment (Marketing91.com 2013). Market development This strategy entails entering new markets using an existing product. It entails moving in to other countries using the same product. Examples include leading footwear companies such as Nike and Adidas entering in to other countries (Marketing91.com 2013). Product development Product development strategy entails developing new products for the existing market. An example is McDonald introducing new burgers in the current market. It mainly happens when existing products are declining in sales volumes or when the customer needs and tastes change with time. P & G keeps on introducing new products for the same customer base (Marketing91.com 2013). Related diversification Related diversification entails firms expanding their operations beyond the current market or products, but still maintaining the existing capabilities in the new setting. The new products and market are similar and related to the current market and products in terms of resources required and technical capabilities. An example is a motorcycle manufacturers diversifying in to car manufacturing. Another example is steel making firms diversifying operations in to mining business (Marketing91.com 2013). Unrelated diversification This strategy entails expanding in to new markets and products, but beyond the current capabilities and resources. It diversifies the business risks. An example is a textile manufacturing company diversifying its operations to car manufacturing industry (Marketing91.com 2013). Retrenchment Retrenchment entails scaling down the size of business operations of a firm. It entails shutting down some operations in order to cut costs. An example is closing a shop or factory in order to make the firm financially stable, implement a turnaround or withdraw some products. Divestiture This is a form of retrenchment strategy that entails scaling down the size of the business through eliminating certain business activities. An example is closing down unprofitable business line or product line (Mindtools 2013). Liquidation Liquidation is an exit strategy that entails selling the entire firm to interested buyers. It is used by firms in distress and entails selling the company assets in order to pay off the creditors. An example of liquidation includes Enron after the bankruptcy charges (Mindtools 2013). Cost leadership- low cost Cost leadership is a business strategy whereby the firms positions itself as the lowest cost product provider in order to increase the market share. The company utilizes its economies of scale in order to attain low cost leadership position in the market. An example is Wal-Mart that strives to reduce the costs of products with minimal regard to customer value. Such firms accept low margins for the products in order to benefit from large sales volumes (QuickMBA 2013). Cost leadership- best value This strategy entails providing the highest possible customer value at the minimal cost when compared with the competitors. The firm balances the quality of products with price of the products. An example is Southeast Airlines that strives to provide high customer value through reduced tickets, high customer efficiency and added travelling benefits (QuickMBA 2013). Differentiation This is a business strategy that entails the development of products or services with unique attributes that are demanded by the customers thus perceived to be superior to those offered by competitors. Example of differentiation strategies include new marketing channels, new product design and added product benefits. Some differentiating product attributes include durability, reliability and efficiency of product use (QuickMBA 2013). Focus- low cost Focus-low cost strategy entails concentrating on a narrow market segment whereby the customers need a low cost product. The firm aims at becoming the low cost producer for that particular market segment. For instance, a focus-low cost strategy may entail providing bank loans to the low income earners especially casual labors in the construction industry (QuickMBA 2013). Focus- best value This strategy entails targeting a particular market segment within the wider market and providing high quality products with superior benefits when compared with the competitor offering. Example of focus-best value includes car manufacturing firms targeting the celebrities providing the luxury cars that offer best driving experience to the car owner (QuickMBA 2013). References: Marketing91.com. “Ansoff matrix”. (Web). Accessed on 2nd April, 2013 from http://www.marketing91.com/ansoff-matrix/. Mindtools. “strategy tools: mapping out your best possible direction”. Accessed on 2nd April, 2013 from http://www.mindtools.com/pages/main/newMN_STR.htm. QuickMBA. “Porter’s generic strategies”. (Web). Accessed on 2nd April, 2013 from http://www.quickmba.com/strategy/generic.shtml. Read More