1. Strategy Lecture #8

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

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

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

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

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

7. Chocolate Frosted Sugar Bombs

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

9. Market Development

10. 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

11. Market Development 8 oz. Servings

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

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

14. Tire Manufacturer Example

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

16. 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

17. 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

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

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

20. 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

21. Merger

22. PepsiCo owns Pepsi Cola PepsiCo owns Frito Lay

23. PepsiCo

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

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

26. Retreat at Ralston Sold off these divisions Got back to basics