Appendix 1: Mastering Strategic Management Powerpoints. In 2012, Leo Johnson sold all of his shares and Rosenfeld retained her CEO position, but sold a chunk of her ownership in a deal worth “under $100 million,” according to the Vancouver Sun. It helps to build strong relationships within each target market. In 2013, Jones Soda created a poutine-flavored, limited-edition soft drink, which got international popular culture attention. Diversification vs. Disadvantages. Mastering Strategic Management - 1st Canadian Edition by Janice Edwards is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted. The concentration strategy, in contrast to other competition strategies, focuses primarily on the good service of a specific market segment, the implementation of strategic goals relating not to the entire sector, but only to a given segment. Disadvantages Of Diversification The following are the disadvantages of diversification: Entities entirely involved in profit-making segments will enjoy profit maximization. King Gillette, an American businessman whose family hailed from France, pioneered the safety razor that bears his family name. Retrieved from http://www.cbj.ca/business_in_action/food_beverage/kicking_horse_coffee.html, Wagenheim, J. There is not one approach that is better than the others. There are legitimate reasons for adopting each of the three broad target market strategy approaches. Here are the advantages and disadvantages of the focus strategy to examine. In 2000, Kraft bought Nabisco Holdings, and in 2009 bought Cadbury for about US$19 billion, making Kraft a “global confectionery leader.” At the time, Cadbury was the second-largest confectionery brand in the world after Wrigley’s (Wikipedia, 2014). Can you identify a struggling company that could benefit from market penetration, market development, or product development? The joining of two similarly sized companies into one company. Market development involves taking existing products and trying to sell them within new markets. Each winter, the firm introduces a holiday-themed set of unusual flavors. However, a diversified entity will lose out due to having limited investment in the specific segment. Hence whether its procurement of raw materials at cheap rates from suppliers or getting the best talent in terms of manpower as today’s generation love specialization and they love to work with those companies which are specialist and market leader in their respective fields. Market development involves taking existing products and trying to sell them within new markets. This measure not only translates into an increase in overall … None of these holiday flavours are expected to be big hits, of course. It has been a mainstay of the town since the company started in 1996. Would the move be a success? Mergers and acquisitions: A guide to creating value for stakeholders. The machine features over 125 different Coca-Cola drink products, and custom flavors. Creating new products to serve existing markets. (pop. 2014. There are four sub-strategies of concentration strategies: (1) market penetration, (2) market development, (3) product development and (4) horizontal integration. mountain pass and river), Kootenay Crossing, and Grizzly Claw (Kicking Horse Coffee, 2014). Mergers typically involve similarly sized companies. Perhaps the most famous example of two close rivals simultaneously attempting market penetration is the “cola wars” where Coca-Cola and PepsiCo fight for share in the soft drink market, Pepsi’s blind taste tests in 1975 called the Pepsi Challenge is one Of the more famous attacks in this ongoing battle. Customers are offered a free download to get them to visit iTunes—and to perhaps purchase more songs. Figure 8.2: Attribution information for all included images is in the chapter conclusion. It contained Green Pea, Sweet Potato, Dinner Roll, Turkey and Gravy, and Antacid sodas. Mergers and acquisitions are popular moves for executing a concentration strategy, but executives need to be cautious about horizontal integration because the results are often poor. Rather than build a presence from nothing, Canadian Airlines executives believed that buying a position was more cost-effective (Wikipedia, 2014). See Also: Organizational Structure Advantages of Centralization. 1. However, putting criticisms aside, strategic planning plays an important role in organisations. Few compan… Similarly, Daimler-Benz bought Chrysler in 1998 for $37 billion. Starbucks acquired competitor Seattle’s Best Coffee—which had a presence in Borders Bookstores and Subway Restaurants—in order to target a more working-class audience without diluting the Starbucks brand. Crystal is a seasoned writer and researcher with over 10 years of experience. But it has disadvantages because of the nature of shift of the demand of customers due to innovations in technology. With sales of diet beverages slumping, PepsiCo is boldly going in the opposite direction: launching products with “real sugar” in 2014. Mergers: Why most big deals don’t pay off. In case of PHD if one student is focusing only on one subject and other is studying both for PhD and postgraduate degree than student who is focusing only on PhD is more likely to excel than another student, similarly in case of companies when company is focusing only on one product than chances of it getting competitive advantage on one particular product over its competitors are more as compared to those companies which produces and markets many products.eval(ez_write_tag([[300,250],'letslearnfinance_com-medrectangle-4','ezslot_0',107,'0','0'])); When a company specializes in selling and marketing on one product than it has a competitive advantage not only while selling the product but also in the procurement of various factors of production at competitive rates. These companies cannot expand after a certain level and need a concentrated efforts for a selected niche. Despite the potential benefits of mergers and acquisitions, their financial results often are very disappointing. Retrieved from http://sportsillustrated.cnn.com/2011/writers/jeff_wagenheim/03/12/strikeforce-purchased/index.html, Wikipedia Organization. Is the ten-blade razor coming soon? As with all strategies, diversification in business has advantages and disadvantages and the administration can use these advantages and disadvantages … Horizontal integration refers to pursuing a concentration strategy by acquiring or merging with a rival. ... A company should pursue any and all strategies as long as strategic managers have weighed the advantages and disadvantages of those strategies and arrived at an option that justifies them. The machine allows users to select from mixtures of flavors of Coca-Cola branded products which are then individually dispensed. Concentrated Marketing is a market coverage and Market Segmentation strategy in which the product and marketing message is aimed at a (few) well-defined segments of the consumer population in a market. What’s your view on this? Concentration Strategy Advantages and Disadvantages Vinish Parikh. Bill Hewlett and Dave Packard formed Hewlett-Packard in a garage after graduating from Stanford in 1935. For example, Mattel purchased The Learning Company in 1999 for $3.6 billion and sold it a year later for $430 million—12 percent of the original purchase price. Some purchased firms are attractive because they own strategic resources such as valuable brand names. ... concentration is often a better way to build a fortune. The following problems are faced by the industries due to the concentration in a single place. Its beans are now sold at food stores across Canada, including Loblaws, Overwaitea, Thrifty Foods, Sobeys, Shoppers Drug Mart, and London Drugs. Canadian Airlines Corporation was formed in 1987 when Pacific Western Airlines purchased Canadian Pacific Airlines (which operated as CP Air for a number of years), which in turn had recently acquired Eastern Provincial Airways and Nordair. Mastering Strategic Management – 1st Canadian Edition. Market penetration, market development, and product development are three methods to grow within an industry. Also, the level of competition to win short term contracts allows discounting of prices. Kicking Horse Coffee, The 411. Horizontal integration can be attractive for several reasons. In order to understand more about concentration strategy, one should look at the advantages and disadvantages of concentration strategy –. Actions that firms use to try to compete successfully within only a single industry. McDonald’s has pursued market penetration in recent years by using Latino themes within some of its advertising. Canadian Airlines Subsidiaries. In the case of companies, some company follows a similar strategy where they direct all their money and resources towards the production and marketing of one product and this strategy is called concentration strategy. Disney was much bigger than Miramax and Pixar when it joined with these firms in 1993 and 2006, respectively, thus these two horizontal integration moves are considered to be acquisitions. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. Strategies for diversification. Retrieved from http://www.bevnet.com/news/2014/pepsico-eyes-summer-launch-for-new-real-sugar-colas/, Canada Organic Trade Association. Advantages of Decentralization. Each generic strategy offers advantages that firms can potentially leverage to enjoy strong performance, as well as disadvantages that may damage their performance. Disadvantages of One Industry Focus ... A corporate-level strategy is when a business makes a decision that affects the company's finances, management, human resources, and … Compare also: Target Marketing. Kraft Foods, Nabisco, and Cadbury were each very large, successful companies with international markets. that comes in the coffees, with names like Kicking Horse (after a famous and historic B.C. Vancouver Sun. There are several advantages and disadvantages of decentralizing an organization.Decentralizing is optimal when subunit managers and employees have specialized knowledge regarding their particular subunit. Kicking Horse Coffee has now stepped beyond selling coffee only from its one location. In the 1940s, for example, Disney expanded its offerings within the film business by going beyond cartoons and creating movies featuring real actors. The advantages were natural resources, strategy in warfare, and trade was prosperous. Disadvantages Of Diversification The following are the disadvantages of diversification: Entities entirely involved in profit-making segments will enjoy profit maximization.However, a diversified entity will lose out due to having limited investment in the specific segment. The hope is that the buzz that surrounds the unusual flavors will grab customers’ attention and get them to try—and become hooked on—Jones Soda’s more traditional flavors. The term merger is generally used when two similarly sized firms are integrated into a single entity. Starting their coffee business from their garage, they focused on roasting small batches of premium specialty coffee and packaging the coffee the same day to maintain freshness. Often firms will rely on advertising to attract new customers within existing markets. Jones Soda’s 2006 set focus on the flavors of Thanksgiving. 2. What is Concentrated Marketing? Nike, panneau d’affichage JC DECAUX (PARIX,FR75). Advertising is a major way to attract customers within the existing markets. Part of the motivation behind Canadian Airlines acquiring Wardair in 1989 was to give them access to new routes including long sought-after routes to the UK and Europe. (2014). In the case of focus differentiation, one advantage is that very high prices can be charged. Although the United States currently has the largest economy in the world, it accounts for less than 5 percent of the world’s population. The company ships anywhere in Canada, and its products are available through Amazon.ca and Amazon.com. The disadvantages of diversification are less publicized, and therefore less well known, but the fact is diversification can also have adverse effects on an investment portfolio. Given that so many mergers and acquisitions fail, why do you think that executives keep making horizontal integration moves? The benefits of the strategy is to build a strong reputation within a market and generate loyalty among the customers. Generally, the acquired company is smaller than the firm that purchases it. UFC buys out Strikeforce in another step toward global domination. Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. These two relationship are associated with advantages and disadvantages’ As R.Morgan (2004) states, short term relationship gives the buyer option to switch suppliers for products where the price of materials are easily changeable. More recently, McDonald’s has gradually moved more of its menu toward healthy items to appeal to customers who are concerned about nutrition. Nike, for example, features famous athletes in print and television ads designed to take market share within the athletic shoes business from Adidas and other rivals. Market penetration involves trying to gain additional share of a firm’s existing markets using existing products—often by relying on extensive advertising. 3. What is Concentration Strategy? Executives in charge of each of these six corporations believed that greater efficiency could be achieved by combining forces with a former rival. Market penetration involves trying to gain additional share of a firm’s existing markets using existing products. Retrieved from http://fairtradeusa.org/press-room/press_release/fair-trade-certified-coffee-imports-hit-record-high-2012. Product development involves creating new products to Serve existing markets. In the case of focus differentiation, one advantage is that very high prices can be charged. Retrieved from http://www.vancouversun.com/mobile/business/news/Vancouver+entrepreneur+celebrates+sweet+smell/7617938/story.html, The Canadian Business Journal. A merger joins two companies into one. Business Week, 60–70. The selection would depend upon the organization and its market. When we are young then in school we are taught all subjects but if you want to excel in one particular field than you will have to do PhD in that subject this is nothing but the concentration of all your efforts towards that subject in which you want to excel. Some of these moves struggle because the cultures of the two companies cannot be meshed. Figure 8.5: Attribution information for all included images is in the chapter conclusion. Types of Growth Strategies: Concentration Expansion Strategy, Integration Expansion Strategy and Other Details ... Each method of entering an overseas market has its own advantages and disadvantages that must be carefully assessed. Now several blends of Starbucks coffee and Tazo tea are widely available in the popular one-cup format. Today, Kicking Horse Coffee roasts over 1,800 tonnes of coffee annually from the Invermere facility and enjoys revenue of about $25 million a year with predicted growth of 10 percent annually; growth which reflects the consumer demand for premium organic coffee. Daimler Chrysler was formed in 1998 when Chrysler entered into what was billed as a “merger Of equals” with Germany’s Daimler- Benz AG. The benefits of the strategy is to build a strong reputation within a market and generate loyalty among the customers. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. (2014). In an acquisition, a larger firm purchases and absorbs a smaller firm. Interestingly, a firm can use one, two, or aspects of all three strategies in its efforts to excel within an industry (Ansoff, 1957). Global pharmaceutical firm GlaxoSmithKline plc was formed by the merger of GlaxoWellcome plc and SmithKline Beecham plc in 2000. Bevnet. The CEO, Elana Rosenfeld, has been recognized several times for her achievements in business. According to AC Nielsen ratings, for the past three years in a row (2007), KHC was the number one specialty coffee (Super Premium Category) being sold in Canadian grocery stores. Advantages and disadvantages of strategy? Fair Trade Certified™ Coffee Imports Hit Record High in 2012. Product development involves creating new products to serve existing markets. This type of marketing can be a great success for those companies who have limited resources. B.C entrepreneur celebrates the sweet smell of (Kicking Horse Coffee) success. Kraft Foods Retrieved from http://en.wikipedia.org/wiki/Kraft_Foods, Figure 8.2 image description: Concentration Strategies. Fair Trade Certified™ Coffee Imports Hit Record High in 2012. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. Retrieved from http://en.wikipedia.org/wiki/Canadian_Airlines#Subsidiaries, Wikipedia Organization. Name and understand the three concentration strategies. In terms of corporate marketing, business diversification is the strategy to increase profits by selling new products in new markets. Rather than rely on their own efforts, some firms try to expand their presence in an industry by acquiring or merging with one of their rivals. Hitt, M. A., Harrison, J. S., & Ireland, R. D. (2001). Nike, for example, features famous athletes in print and television ads designed to take market share within the athletic shoes business from Adidas and other rivals. Figure 8.5 image description: Horizontal Integration. Meaning. All is not well with the concentration of industries. Mastering Strategic Management - 1st Canadian Edition, Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. As with all strategies, diversification in business has advantages and disadvantages and the administration can use these advantages and disadvantages for … Retrieved from http://www.ota.com/pics/media_photos.171.img_filename.pdf, Fair Trade USA (2013, May 10). Now Kicking Horse Coffee can reach consumers that don’t or can’t visit its one coffeehouse in Invermere. When the acquisition was undone in 2007, Daimler recouped only $1.5 billion worth of value—a mere 4 percent of what it paid. SI.com. Features of Bank Reconciliation Statement, Normal and Inferior Goods and Its Examples, Porter Five Forces Model Advantages and Disadvantages, Why Socialism is different from Communism. As an approach to doing business, the strategy involves a company choosing to focus most of its resources on the development of a specific product or at least a small group of products that are aimed at a specific market. By now consumers are well aware of the benefits of fair trade—fair labour conditions, direct trade, democratic and transparent organizations, and community development—and organic products. Since then, GSK has spent billions to acquire and sell several businesses, and formed joint ventures with other pharmaceutical companies. What schools would be good candidates for this horizontal integration move? Be able to explain horizontal integration and two reasons why it often fails. That year it also bought ACE Bakery, a Canadian maker of artisan and European-style breads. This fact is justified by the fact that the company is much easier and more efficient to meet the requirements of a strategically narrow segment than its competitors who operate on a larger scale - the entire sector. A competitive market can also force you to lower your prices to stay competitive, decreasing your return on each item you produce and sell. One study found that more than 60 percent of mergers and acquisitions erode shareholder wealth while fewer than one in six increases shareholder wealth (Henry, 2002). George Weston Limited, for example,  acquired Keystone Bakery, a U.S. maker of frozen cupcakes, doughnuts, and cookies in 2010. In the case of focus differentiation, one advantage is that very high prices can be charged. His company’s more recent innovations in the razor market include Trac II (the first two-blade razor), Atra (first razor With a pivoting head), Sensor (first razor with spring- loaded blades), Mach 3 (first three-blade razor), and Fusion (first six-blade razor). Pursuing a concentration strategy by acquiring or merging with a rival. Jul 24 Back To Home Advantages of Decentralization. Concentrated marketing is concerned with focusing all available resources on one segment within the total market. In simple words, if the company wants to be market leader than it needs to have a high and loyal customer base. The firm maintains a Spanish-language website at http://www.meencanta.com; the website’s name is the Spanish translation of McDonald’s slogan “I’m lovin’ it.” McDonald’s hopes to gain more Latino customers through initiatives such as this website. Harvard Business Review, 35(5), 113–124. This strategic move is known as horizontal integration (Figure 8.5 “Horizontal Integration”). When one company purchases another company. Oil exploration and refining is expensive. Uncategorized concentrated marketing advantages and disadvantages Fair Trade USA reports that organic coffee imports to the United States and Canada increased in 2012 by 18 percent over 2011. Retrieved from http://en.wikipedia.org/wiki/Coca-Cola_Freestyle, Wikipedia Organization. Totally dependent on a single niche market segment; High developed and specialized market plan is required to implement A concentration strategy is a type of approach that is used in both business and investment situations. In the end, between 30 percent and 45 percent of mergers and acquisitions are undone, often at huge losses (Hitt, Harrison, & Ireland, 2001). As an approach to doing business, the strategy involves a company choosing to focus most of its resources on the development of a specific product or at least a small group of products that are aimed at a specific market. (2012, November 28). Growing with the market brings competitive advantage. 1. What are the advantages and disadvantages of concentrated targeting strategies. about 3,000), sells only organic fair trade coffee and organic fair trade Indian chai. We illustrate examples of each below. New York, NY: Oxford University Press. Ansoff, H. I. This marketing approach is effective for those companies which are skilled and specialized in manufact… The biggest advantage as far as concentration strategy is concerned is that due to company focusing only on one product it gains specialization in production and marketing of that product because once company keep producing one product for long time than company find cheaper and efficient ways to produce as well as market the product which in turn results in saving cost and … By roasting small batches, selling whole beans—rather than ground coffee—and using state-of-the-art packaging, Kicking Horse Coffee ensured quality control and consistency of product (Lee, 2012). Coca-Cola has installed Freestyle machines in Canada in select Wendy’s, Burger King, and Hero Certified Burgers restaurants, as well as entertainment venues such as Cineplex Entertainment cinemas and Canada’s Wonderland. Disadvantages of Localization Of Industries. For a focus strategy to be successful, businesses and brands must actively listen when hearing about the needs and concerns of their targeted demographic. December 30, 2018. Originally from Vancouver, B.C., Jones Soda Co. takes a novel approach to product development.

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