identify and define the three types of integration strategies. Define and give examples of three intensive strategies
Identify and define the three types of integration strategies.
Horizontal Integration: Horizontal integration is the focus on acquiring new firms and competitors in existing markets to eliminate competition. Example McDonald's acquired brands like Chipotle, Boston market and Mexican pizza in the 20th century to eliminate the competition and they divested from them by 2008. Similarly, they acquired Aroma Café in the UK and strategically divested later.
Vertical backward Integration: Vertical backward integration includes buying out your suppliers to get assured supplies of raw material, ensure good quality, derive economies of scale and reduce the cost of sourcing of raw material. This will lead to an improvement in the quality of the product and will also reduce the cost of sourcing.
Vertical Forward integration: Vertical forward integration includes customer’s acquisitions where the franchisee is owned by the company so the company can reduce the overall costs, maximize customer service levels and maximize their profits. Vertical forward integration also helps to be in touch with customers and to take their feedback and continually improve the service levels and product offerings. For example, McDonald's owns most of the land on which they open their outlets which they further let out to the franchises ensuring the outlet's location stays constant and they save the cost of shifting the outlet and renegotiating deals every now and then.
Define and give examples of three intensive strategies
The three intensive strategies are Market penetration, market development, and product development.
Market Penetration: Market penetration strategy deals with enhancing the share of the market by effective and innovative strategies in order to make the current product more effective and attractive to the customer. It focuses on increasing market share by changing marketing strategies and increasing marketing efforts. This includes an increasing number of the sales person, advertising expenditures and publicity efforts. They will also give many sales promotion offers to entice the customers. For example, mass consumer products like washing powder where extra quantity is offered for the same price and the powder would be heavily advertised.
Market Development: Market Development refers to selling existing products and services in new markets. It includes sales promotions, opening offices and making alliances. Example McDonalds started its market expansion in 1967 and had 10000 outlets worldwide by 1988. The continued expanding by alliances across the world and by the beginning of the 21st century they have 35000 outlets in more than 100 countries. They actively promote their products and have offices across the globe.
Product Development: The focus is on product development and modification for currently served markets and customers. The idea is to change product offerings based on customer feedback and studying the market requirements. It gives the company a competitive advantage and maintains its leadership position and market share. Again taking the example of McDonald's, McDonald's had to focus on redoing their menu and customizing their product offerings to match the local tastes in many international markets. Like in India, they predominantly sell vegetarian burgers and have customized their products to give more products offering like rice bowls and kebabs to match the local cuisine and tastes.
identify and define the three types of integration strategies. Define and give examples of three intensive...
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