(2014). Market penetration, market development, and product development are three methods to grow within an industry. What schools would be good candidates for this horizontal integration move? 1. 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. Trying to sell existing products within new markets. 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. Canada ranks at 0.5 percent of the world’s population. Uncategorized concentrated marketing advantages and disadvantages Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. Advantages and Disadvantages of the Focused Strategies. Perhaps the most obvious reason to compete in international markets is gaining access to new customers. Advertising is a major way to attract customers within the existing markets. SI.com. McDonald’s, Starbucks, and Subway are three firms that have relied heavily on concentration strategies to become dominant players. UFC buys out Strikeforce in another step toward global domination. List of the Advantages of a Focus Strategy 1. Nike features popular and known athletes in print and television ads to snatch market share within the athletic shoes business from rivals Adidas and Lotto. 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. What is Concentration Strategy? In the end, between 30 percent and 45 percent of mergers and acquisitions are undone, often at huge losses (Hitt, Harrison, & Ireland, 2001). eval(ez_write_tag([[300,250],'letslearnfinance_com-leader-1','ezslot_1',110,'0','0']));As one can see from the above pros and cons of concentration strategy that a company cannot blindly follow above strategy rather it should carefully read and assess above points and then take the decision whether it wants to operate only as concentrated firm or operate as diversified firm. 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. Also, the level of competition to win short term contracts allows discounting of prices. (2014). Kicking Horse Coffee Kicks it up a Notch. We illustrate examples of each below. Oil exploration and refining is expensive. Retrieved from http://www.ota.com/pics/media_photos.171.img_filename.pdf, Fair Trade USA (2013, May 10). However, putting criticisms aside, strategic planning plays an important role in organisations. Understanding Thought Patterns: A Key to Corporate Leadership? Figure 8.5: Attribution information for all included images is in the chapter conclusion. 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. The term merger is generally used when two similarly sized firms are integrated into a single entity. As with all strategies, diversification in business has advantages and disadvantages and the administration can use these advantages and disadvantages for … 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. Often firms will rely on advertising to attract new customers within existing markets. For a focus strategy to be successful, businesses and brands must actively listen when hearing about the needs and concerns of their targeted demographic. 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. 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. 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. Rather than build a presence from nothing, Canadian Airlines executives believed that buying a position was more cost-effective (Wikipedia, 2014). Within concentration strategies, there are three sub-strategies: (1) market penetration, (2) market development, and (3) product development (Figure 8.2 “Concentration Strategies”). 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. An acquisition takes place when one company purchases another company. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. Horizontal integration can also provide access to new distribution channels, where a company may create or acquire production units for outputs that are alike—either complementary or competitive. Disadvantages for Businesses Competition decreases your market share and shrinks your customer base, especially if demand for your products or services is limited from the start. Creating new products to serve existing markets. Advantages and Disadvantages of Market Penetration Strategy/Pricing Market penetration strategy takes advantage of low prices to increase product demand and increase market share. Kicking Horse Coffee has now stepped beyond selling coffee only from its one location. Coca-Cola introduced Freestyle in 2009,  a touch screen soda fountain. We illustrate the three concentration below. Few compan… Canada’s Organic Market National Highlights, 2013. In case of companies following concentration strategy, they target a small group of consumers to sell their product because wider the product range of company larger will be the customer base and since company following concentration strategy has one product naturally its customer base will be low and any big company cannot survive with a lower customer base. The marriage failed, and Chrysler is currently owned by Italian auto maker Fiat in its new holding company, Fiat Chrysler Automobiles. Business Week, 60–70. 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). (1957). It helps organisations carry out a comprehensive assessment of its environments and develop and implement strategies in line with them. Now several blends of Starbucks coffee and Tazo tea are widely available in the popular one-cup format. In the case of focus differentiation, one advantage is that very high prices can be charged. UFC buys out Strikeforce in another step toward global domination. Fair Trade Certified™ Coffee Imports Hit Record High in 2012. It is an arrangement in which the supply chain of a company is owned by that company. Starbucks engages in market development by selling their beans and bottled drinks in grocery stores. Interestingly, a firm can use one, two, or aspects of all three strategies in its efforts to excel within an industry (Ansoff, 1957). In order to understand more about concentration strategy, one should look at the advantages and disadvantages of concentration strategy –. (2012, November 28). Figure 8.5 image description: Horizontal Integration. Horizontal integration can be attractive for several reasons. What are the advantages and disadvantages of four firm concentration ratio (CR4) and Hirfindahl-Hirschman Index (HHI) -- must give both advantages and disadvantages for … Mergers and acquisitions: A guide to creating value for stakeholders. 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. Chapter 1: Mastering Strategy: Art and Science, Defining Strategic Management and Strategy, Intended, Emergent, and Realized Strategies, Understanding the Strategic Management Process, Chapter 3: Evaluating the External Environment, The Relationship between an Organization and Its Environment, Beyond Resource-Based Theory: Other Views on Firm Performance, Chapter 5: Selecting Business-Level Strategy, Understanding Business-Level Strategy through “Generic Strategies”, Focused Cost Leadership and Focused Differentiation, Chapter 6: Supporting the Business-Level Strategy: Competitive and Cooperative Moves, Chapter 7: Competing in International Markets, Advantages and Disadvantages of Competing in International Markets, Drivers of Success and Failure When Competing in International Markets, Options for Competing in International Markets, Chapter 8: Selecting Corporate-Level Strategies, Portfolio Planning and Corporate-Level Strategy, Chapter 9: Executing Strategy through Organizational Design, The Basic Building Blocks of Organizational Structure, Chapter 10: Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social Responsibility, Corporate Ethics and Social Responsibility. 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