REQUIREMENT

Find a current example of a business for each of the strategies presented in the table below.
Use the Internet as well as magazines and newspapers to find your examples. You may
browse Business Week, Forbes, Fortune, Industry Week, Malaysian Business, The New
Straits Times etc.

For each example, briefly analyse the corporate strategy used by the business.
Name: [nama student]

Type of Strategy Current Business Example and Brief Analysis of Strategy

Used

(a) Forward integration Current Business Example:

Apple (Technology Company)

Analysis:

Forward integration strategy is the most common strategy

that has been used by many companies in the world. Forward
integration is a business strategy that involves a form of
direct or vertical integration whereby activities are expanded
to include control of the direct distribution of its products
(direct control on their distributor). For this example, Apple
has been using this technique from long time ago (35 years),
which features an integrated hardware and software
approach.

For instance, the iPhone and iPad have hardware and

software designed by apple, which also designed its own
processors for the devices. This integration has allowed apple
to set the pace for mobile computing. They have everything
including product and distribution of product under specific
control system which is Apple company itself.

There are few benefits from this integration that can be look
up including controlling retail, establishing outlets, creating
monopoly and many more.

(b) Backward Current Business Example:

integration Starbucks
Analysis:

Backward integration is referring to a company buying or

internally producing parts of its supply chain. This
integration is the opposite of forward integration strategy. A
simple example of backward integration is an ice cream
company that buys a dairy farm. The company requires milk
to make ice cream and either can buy milk from a dairy farm
or other milk supplier or could own the dairy farm itself. This
ensures that it will have a steady supply of milk at its
disposal and that it will pay a reasonable price. This can
protect the ice cream maker in the event that there are several
other buyers vying for the same milk supply.

For the current business example is the Starbucks company.

As such, it has various suppliers and inputs; it buys coffee
beans to make coffee as well as customized mugs and
products to sell in its stores. It backward vertically integrated
when it bought a coffee farm in China, because normally it
would have to buy coffee beans from a coffee bean supplier.
Starbucks chose to buy a coffee farm in China, an area that
showed tremendous growth in the number of coffee drinkers.
At the same time, there was increased competition among
companies selling coffee, such as McDonald's and other
chains such as Costa Coffee.

Adding so many new coffee drinkers to the market creates

competition for high-quality beans, with every coffee shop
needing to buy them. Competition for high-quality beans
means that some competitors will not receive them at all and
that those who do will pay a high price driven up by
competition. By backward vertically integrating by buying a
coffee farm, Starbucks ensures that it will have a bean supply
and that it will receive it at a reasonable price.

The benefits from this integration including increased

control, cost control, competitive advantages and
differentiation monitoring in which company can stand out
 from big competition through efficient marketing.

(c) Market penetration Current Business Example:

Nestl

Analysis:

Market penetration is one of the business strategy that can be

define as an activity or fact of increasing the market share of
an existing product, or promoting a new product, through
strategies such as bundling, advertising, lower prices, or
volume discounts. There are companies using this technique
to enhance their business in promoting their product in the
competitive business area.

One of the example companies that use this approach is

Nestls company. Nestl S.A. is a Swiss transnational food
and beverage company headquartered in Vevey, Vaud,
Switzerland. It is the largest food company in the world
measured by revenues, and ranked #72 on the Fortune Global
500 in 2014. Since market penetration is an aggressive
pricings tactic, Nestle used penetration pricing, which is
setting up the price of their products lower than their
competitors companies around the globe. This strategy may
work well in price-sensitive markets. From few analysis,
Nestle be able to maintain a decent level of profits due to the
volume of sales by decreasing their costs per unit for the
product. Additionally, once they have obtained their market
share goal and have achieved a sufficient level of brand
loyalty, they may be able to increase prices in near future.

From among five products mix strategies, Nestl comes with

product line pricing as there are cost difference between the
products from the product line that have difference features
and competitors' prices. For an example, the selling price for
the new product would be 3 pounds for the whole packet
which has 20 small packs inside. Being oligopolistic (market
penetration idea) competition pricing, Nestl Company is
always alert to its competitor's strategies. Moreover, the
 customers' perceptions of price effect on their buying
decisions. Thus, if the new product's demand falls by 10%,
when Nestl raises its price by 2% the demand would be
elastic occurring -5. However, if demand falls by 1% when
the price is increased by 2%, inelastic demand occurs with -
1/2.

Few advantages for this strategy are price reduction which

benefits both supplier and the customer. Not only that, terms
will be improve including payment terms, or any policy that
comes with the products. More on the advantages are market
expanding, product differentiation, distribution channel
expansion and producing more healthy competition market
among rivals.

(d) Market development Current Business example:

RED BULL (Energy drink)

Analysis:

Market development is a business strategy whereby a

business attempts to find new groups of buyers as potential
customers for its existing products and services. In other
words, the goal of market development is to expand into
untapped markets. These potential customer groups may
already be served by competitors or may not be currently
marketed to by anyone for the product. In other words,
market development involves branching out in some way to
increase customers by improving access to a current product.

In addition, a company is focusing on developing a bigger

market for its existing product, as opposed to, say,
developing a better product to attract new customers or trying
to get existing customers to buy more of its products. There
are so many companies that are using this strategy in the
world. We can found that many of cars company or branded
products are using the same strategy to pursue for a better
 business opportunity.

With its good strategy, Red Bull is the perfect example of a

successful business development strategy. In twenty years the
brand has certainly become a reference in terms of energy
drinks but also in terms of marketing strategy. Red Bulls
ambitious objective is to dethrone Coca-Cola by
implementing market development strategies. The two
brands have the same advantage: they are the first product of
their kind in their own markets, and so competitors can only
try to imitate them. Red Bull was the first energy drink to be
launched and has achieved today a clear market leading
position with 4,204 billion cans sold worldwide in 2010,
representing an increase of 7,6% against 2009 (Internet
source).

The most dynamic markets, in terms of sales, are Turkey,

Japan, Brazil and USA; which demonstrates that the brand is
successful in both the developed and the developing
world. Today Red Bull is a company present in 162 countries
with the same, consistently strong brand image all around the
world, and Red Bull ensures to retain the integrity of this
image meticulously. However, if the brand has the same
image worldwide, it does not mean that the methods used to
conquer local markets are exactly the same everywhere. The
company has known how to cleverly implement its strategy
with local teams in each market.

Few advantages for this strategy are increasing customers

rate, attracting competitors, attract nonusers to buy the
products, expanding geographically, increasing branding
value for the product and many more.

(e) Product development Current Business example:

McDonald (Fast food Restaurant)

Analysis:

One of the effective business strategy that has been used by a

lot of companies is a product development strategy. By
definition, product development is the process of designing,
creating and marketing new products or services to benefit
customers. Sometimes referred to as a new product
development, the discipline is focused on developing
systematic methods for guiding all the processes involved in
getting a new product to market. Product development
involves either improving an existing product or its
presentation, or developing a new product to target a
particular market segment or segments. Consistent product
development is a necessity for companies striving to keep up
with changes and trends in the market place to ensure their
future profitability and success.

Fast food restaurants are one of the good example on this

product development strategy. For an instance, McDonald
company. McDonald company implementing product
strategy with step by step planning and based on few criteria
product development. Part of the good example showed by
McDonald from their product development strategy is by
familiarizing with the way McDonald's develops products.
Few criteria for their product development are based from
their location and marketing environtment.

Permanent Product Strategy

i. McDonald's features several products on their

menu that are permanent and do not change.
Examples of this include their basic hamburger
and cheeseburger, the Big Mac and the Quarter
Pounder. After the initial development, these
items remain on the menu for extended periods
of time without undergoing significant changes.
This strategy ensures that there is always
something familiar for consumers on the menu.

Temporary Product Strategy

ii. In addition to its permanent product offerings,

McDonald's regularly develops temporary
 products. The McProsperity, for example, is a
product that is offered only seasonally. The Big
Prosperity burger is an example of a burger that
was developed as a temporary product, offered
only for a few months in festive Chinese New
Year season. The purpose of this product
development strategy is to give customers
something new to experience on each visit and
to experiment with new items that may become
permanent.

Local Product Development Strategy

iii. As McDonald's has expanded internationally, it

has created several products to meet consumer
demand in the local markets. In the
Netherlands, for example, they have developed
the McKroket, a burger featuring a typically
Dutch kroket, a deep-fried, ragout-filled patty.
In the Canadian province of Quebec,
McDonald's offers poutine, a traditional dish of
french fries, gravy and curd cheese. Even in
parts of New England and Atlantic Canada,
they have developed the McLobster, their
version of the local lobster roll sandwich.
Finally for Malaysia, we have our own
McDonald menu which is GCB burger, McRice
and many more. This strategy ensures that local
customers have foods to fit their tastes.

Local Adaptation Strategy

iv. In addition to developing new products for local

markets, McDonald's will also use an
adaptation strategy whereby they take a product
and modify it to fit local tastes. In India, for
instance, the Big Mac has been modified into
the Maharaja Mac which contains no beef, in
 keeping with local diets. In Greece, the Big
Mac has been adapted to use a pita bread
instead of a bun. Even the McLobster has been
adapted to the McCrab in some U.S. markets
where crab is a common food.

Few advantages from this strategy are fitting customer needs,

Brand extension, and companies can easily identify new
product opportunities in terms of quality and value.

(f) Related Current Business example:

diversification SAMSUNG (Technology product)

Analysis:

Related diversification is a process that takes place when a

business expands its activities into new product lines. For a
simple analogy, it is defined as when a business adds or
expands its existing product lines or markets. For example, a
phone company that adds or expands its wireless products
and services by purchasing another wireless company is
engaging in related diversification.

For this strategy, Samsung company is one of the good

example on implementing this kind of strategy. We probably
know Samsung best for its smartphones, tablets and
televisions. However, Samsung's business activities and
operations are spread much wider than just those two
important markets.

Samsung are expanding its business territory by making

technology hardware and ships. Not only that, they are also
making new gadget such as smart watch, modem and many
more. They are expanding into different products or markets
using their existing capabilities, companies can create related
diversification by using its capabilities and resources in other
sections. The business currently has around 350,000
employees and in 2011 reported revenues of $220 billion and
economists estimate that Samsung's revenues account for
about 20% of the value of South Korea's economy. Likewise,
a company such as Samsung might create related
diversification by integrating into the existing value network.

This new business environments serve same initial with

Samsungs origin core business which are technology areas.
They have moves into a new industry that has important
similarities with their existing industries. Whilst there are
plenty of highly diversified businesses out there in the global
economy (conglomerate multinationals). I'm struggling to
think of one of such scale and diversity. Tata Group, for
example, doesn't come close despite its extensive takeover
activities in recent years.

From this analysis, few advantages that can be a good reason

for Samsung to diversified including;

They might wish to create and exploit economies of

scope, in which the company tries to utilize its
exciting resources and capabilities in other markets.
Managerial skills found within the company may be
successfully used in other markets, where the
dominant logic and managerial procedures of
management can be successfully transferred to other
markets.
They are pursuing a diversification strategy may be
able to cross-subsidize one product with the surplus
of another.
They may also want to use a diversification strategy
to spread financial risk over different markets and
products.