In effect, various manufacturers sell their products directly to consumers through company-owned stores -- companies such as Nike, Tommy Hilfiger, Sketchers, Pepperidge Farms, Samsonite, etc.
There are several types of vertical integration strategies: Either strategy may opt to target abroad market or focus on a narrow market segment. Strategy formulation exists on a three-level hierarchy see Figure 1 below.
On the other hand, Bob Evans Farms Inc. For example, when choosing internal growth mechanisms, a firm develops and markets new products, improves upon existing products, or sells existing products to new markets.
Must the firm look outside of its current industry for growth opportunities, and if so, which industries? Within a broad business context, strategy is an integrated set of plans for achieving long-term organizational goals.
Functional area strategies include: In order to ensure reliable supply and to control costs, manufacturers have been acquiring suppliers of critical inputs to their production processes. Strategy is defined as "the art of devising or employing plans or stratagems toward a goal" Merriam-Webster online, Multiunit corporations have three levels of organizational strategy: The entire section is 3, words.
More on the degrees of vertical integration shall be discussed later in the topic. Applications Corporate strategy responds to a number of questions related to how a firm intends to compete on a broad scale. Porter outlines a set of generic business strategies, such as a cost leadership strategy, emphasizing low-cost production or distribution of products.
Full integration occurs when a firm takes over the entire value chain of supplying the inputs of production i.
Business Strategy -- Once corporate strategies are developed, the focus is upon formulating business-level strategies. Gateway switched to marketing PCs exclusively through their website and over the phone. Best known for offering pork sausage products to the retail grocery market, Bob Evans controls the supply function of their business by raising and slaughtering hogs on company-owned farms, then preparing and packaging their park sausage products for sale.
Note that vertical integration exists in varying degrees along the value chain. More successful examples of companies taking over the distribution function are found in the factory outlet shopping mall phenomenon.
These fully integrated companies engage in oil exploration, extract crude oil with their own drilling operations, refine oil into gasoline at company-owned refineries, and then distribute gasoline products through company-owned gas stations.
Yet, depending on the organization, managers at the functional and business levels provide varying degrees of input throughout the entire strategy formulation process.
Alternatively, when a firm implements external growth strategies, the firm acquires growth assets outside of the organization. Forward vertical integration strategy involves a manufacturer assuming the distribution function for their product. Full Integration discussed above is when a manufacturer retains in-house responsibility for its supplies and is the sole distributor of its products.
Financial Strategy -- Preparing budgets and securing needed financial resources. With increasing global competition and the rising costs of commodities, e. Human Resource Strategy -- Recruiting, selecting, training, compensating, and organizing employees.
In a broad sense, corporate strategy establishes the overall direction of the firm. Is growth strategy an appropriate option to choose from? This strategy was a failure due to the high overhead costs associated with their bricks-and-mortar retail stores.
Also, differentiation strategy may be used, which distinguishes company products and services on the basis of superior service, quality, unique features, etc. These are but a few of the questions corporate strategy addresses. However, unlike Gateway, these companies do not rely on forward vertical integration entirely, as they also rely upon third-party retailers for the bulk of their sales.
Typically, the strategy formulation process is an interactive top-down process beginning with corporate-level strategy developed by top management, followed by the business and functional levels of strategy. The two types of concentration strategies are vertical integration and horizontal integration.
Backward vertical integration is when a firm assumes the supply function for their respective value chain.Free example research paper on Marketing Strategy topic. Free sample term paper on Marketing Strategy.
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