Strategy Lecture #8. “Strategy” Greek word origin (~400 B.C.) Pertained to the art and science of directing military forces.

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Presentation transcript:

Strategy Lecture #8

“Strategy” Greek word origin (~400 B.C.) Pertained to the art and science of directing military forces

Six Basic Strategies Stability Product Development Market Development Vertical Integration Merger Retreat

Stability No new products, markets, acquisitions For example: Retain current market share. For example: 11% of market; 110,000 unit sales

Product Development New products for an existing market. Same customers will buy continuing line of products. Products aimed at same customer base.

Product Development RCA TV, Video Recorders, Video Discs Cereals: Plain, sugared, frosted, colors, shapes, characters, etc.

Chocolate Frosted Sugar Bombs

Market Development New markets for existing products New uses for existing products New geographic markets for existing products

Market Development

Japanese sports car to the U.S. Tried to get car renamed, because the translated name was “Fairy Princess” Automaker agreed to market the car using the internal production number

Market Development 8 oz. Servings

U.S. per capita: 310 / year Russia per capita: / year China per capita: / year

Vertical Integration Firm incorporates pre- or post- operation enterprise into its business

Tire Manufacturer Example

Tire Manufacturer Rubber Tree Plantation Rubber Processing Plant Tire Manufacturer Retail Store Consumer

Tire Manufacturer If buys out Rubber Processing Plant, this is known as Backward Vertical Integration Rubber Tree Plantation Rubber Processing Plant Tire Manufacturer Retail Store Consumer

Tire Manufacturer If buys out Retail Store chain, this is known as Forward Vertical Integration Rubber Tree Plantation Rubber Processing Plant Tire Manufacturer Retail Store Consumer

Vertical Integration Eliminates Middleman Which results in more profit potential for the firm ALSO…

Vertical Integration Reduces uncertainty For example, what happens if your supplier dries up? Or, your retail outlet no longer chooses to carry your product?

Merger A type of diversification. Firm enters a related business area. Examples: Mattel buys Tyco, Hershey buys Peter Paul. Firm enters unrelated business area. Example: Ralston Purina buys the Blues

Merger

PepsiCo owns Pepsi Cola PepsiCo owns Frito Lay

PepsiCo

Retreat Firm gets out of businesses it once thought were good opportunities. Example: Ralston Purina

Ralston used to own: St. Louis Blues hockey team Tuna fishing operation Mushroom growing business

Retreat at Ralston Sold off these divisions Got back to basics

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