Management Essays – Grand Strategies
Differentiation between Horizontal and Vertical integration
Horizontal Integration: When additional business is acquired at the similar stage of the value chain, this type of integration is called horizontal integration, which is quite opposite to the vertical integration. By expanding externally and internally, horizontal growth can be attained easily by the company. External expansion includes the merger and acquisition.
Examples of horizontal integration are: Manufacturer of automobile acquiring a manufacturer of SUV (sport utility vehicle) and an oil company acquiring forty refineries (Ramaswamy & Namakumari, 2005).
Vertical integration: This integration is said to be more complicated as compared to the horizontal integration. In this type of integration, the firm looks for the expansion in the upstream and downstream activity. It can also be defined as the process in which numerous steps related to the production and distribution of products or services are under the control of a sole company.
Example: when retailer starts the manufacturing of products, which it used to sell, it will be called vertical integration. Vertical integration can be backward or forward. In Backward Integration, the core business is linked with the suppliers. On the other hand, if the core business is combined with the buyers, it is called forward integration (Kazmi, 2002).
Differentiation between Conglomerate and Concentric diversification
Conglomerate diversification: In this type of diversification, the company goes for the marketing of the new products or services, which show no commercial and technological synergies with the present products but have the capability to attract the new customer’s group. This type of diversification has modest relationship with the current business of the firm. The company adopts this strategy to increase profitability and flexibility (Smith and Schreiner, 1970).
Concentric diversification: Concentric diversification is reverse to the conglomerate diversification in the sense that it shows the technological synergy with the industry. This indicates that company can easily leverage on its technical know-how. As a result, the company can gain its market share.
Example include: If a company, which is manufacturing industrial adhesive, diversifies into the adhesives which are sold by the retailers, it will be an example of concentric diversification. In this case, the technology will remain the same but alteration is required in the marketing efforts. This can help a company to earn huge profits (Kotler, 2002).
Differentiation between Product Development and Innovation
Product Development: It concentrates on developing a new product for current market and customers. This strategy tries to achieve growth through new products in existing market. The concentration is mainly on the products related to current offering. The new product is not exactly a new product but improved product or a substitute product serving the similar need. The improved products are not distinct from the existing product (Power, 2008).
For example, Kellogg Company, which is one of the world’s largest cereal maker companies, mentioned some new breakfast cereals like Honey Crunch Corn Flakes and Cocoa Frosted Flakes.
Innovation: An innovation strategy involves making a new product process and business ideas. Innovation is generally combined with other strategies as a complementary strategy. It involves creating a new product life cycle. Through constant innovation, the company can have an edge over its competitors (Kotler, 2002).
For example, Nokia, through its constant innovations in the hand sets, is holding a supreme position in the market.
Differentiation between Joint Venture and Strategic Alliance
Joint Venture:It is a shared ownership agreement between two or more companies, which pools their capital, patents and expertise for serving customers in a target market. Joint ventures are typically structured to accomplish a series of strategic and financial objectives on short term or long term basis. It is a kind of collaboration for creating value. Joint venture is an economic business deal and has political, cultural and organizational aspects (Kazmi, 2002).
For example, joint venture between Ford Motor Company and Mazda Motor Corporation to form Auto Alliance International (Kotler, 2002).
Strategic Alliance: It is a kind of collaboration between two or more firms to pursue a set of agreed goals. They remain independent subsequent to the formation of the alliance. In strategic alliance, no formal joint venture entity is constituted but two independent companies enter into a formal or informal agreement for achieving mutual objectives. The collaborating firms contribute in any of the key strategic fields such as technology, product, marketing and operations (Sherman, 2008).
For example: The strategic alliance between Taj Hotels and British Airways. In this alliance, both the companies create advantages for each other by the complementarities of airline and hotel services.
- Kazmi, A. (2002). Business Policy and Strategic Management (2nd Edition). New Delhi: Tata McGraw Hill Publishing Company.
- Kotler, P. (2002). Marketing Management (11th Edition). New Delhi: Prentice Hall of India Private Ltd.
- Power, D. (2008). Identifying and Evaluating Business Strategies. Retrieved on June 25, 2008 from http://planningskills.com/passwordzone/lecturenotes/unit10.html
- Ramaswamy, V.S & Namakumari, S. (2005). Strategic Planning Formulation of Corporate Strategy (3rd Revised Edition). New Delhi: Macmillan India Ltd.
- Sherman, A.J. (2008). Strategies for Effective Partnering Relationships. Retrieved on June 25, 2008 from http://eventuring.kauffman.org/Resources/Resource.aspx?id=33960
- Smith, K. V. and Schreiner, J. C. (1970). Measurement of Conglomerate Diversification. The Journal of Finance. Blackwell Publishing. 25 (4). pp. 915-916.