Exam 9: Strategic Management

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1. Growth through concentration is achieved when an organisation focuses on its primary line of business and increases the number of products offered or markets served in this primary business.No other firms are acquired or merged with; instead, the company chooses to grow by increasing its own business operations.For instance, Bakers Delight has pursued a growth strategy by way of direct expansion.The company has grown by awarding franchises to people who are willing to be trained in the Bakers Delight 'way' and by opening company-owned outlets in Australia, Canada and New Zealand.It is also continuously modifying its product range, yet all its products are yeast-raised baker's products.
2. Growth through vertical integration: This is an attempt to gain control of inputs (backward vertical integration), outputs (forward vertical integration)or both.In backward vertical integration, the organisation attempts to gain control of its inputs by becoming its own supplier.For instance, eBay bought PayPal, an online payment business, in 2002 that helps it to provide more secure transactions and to control one of its most critical processes.In forward vertical integration, the organisation becomes its own distributor and is able to control its outputs.For example, Apple has over 400 retail stores worldwide (in Australia, there were 20 at the end of 2013)to distribute its own brand of products.
3. Growth through horizontal integration: In horizontal integration, a company grows by combining with other organisations in the same industry; that is, combining with competitors.For instance, French cosmetics giant L'Oreal acquired The Body Shop.Horizontal integration has been used in a number of industries in the past few years - financial services, consumer products, airlines, department stores and software, among others.
4. Growth through diversification: An organisation can grow through diversification, either related or unrelated.Related diversification is when a company grows by merging with or acquiring firms in different but related industries.For example, Jollibee Foods Corporation (JFC)is a highly successful Philippines-based food services company that owns, franchises and manages a network of more than 2500 fast-food restaurants locally and internationally.JFC has developed its international business through a number of strategies, including diversification.Its corporate strategy is one of related diversification into the fast-food, restaurant and bakery sectors of the food industry.Unrelated diversification is when a company grows by merging with or acquiring firms in different and unrelated industries.For instance, the Tata Group of India has businesses in chemicals, communications and IT, consumer products, energy, engineering, materials and services.This seems an odd mix, and in this case, there is no strategic fit among the businesses.They are different AND unrelated.