few examples of concentration strategies

7/27/2019 Few Examples of Concentration Strategies

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Few examples of concentration strategies

Unilever to introduce Sunsilk shampoo in US.

Currently sold in Europe, Latin America and Asia.


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MARKET FOCUSED DEVELOPMENT

Selling same products to new markets

Entering other channels of distribution

Attracting new users for existing product

For example: Offering same product with a different

pricing to a different set of customers. RIN supreme waslaunched with a name of RIN shakti for the middle class

users of detergent.


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STRATEGY WILL BE EFFECTIVE WHEN

New untapped markets exist

New channels of distribution are available

Firm has excess production capacity

Firms industry is becoming rapidly global


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PRODUCT DEVELOPMENT

Selling new products to the same markets

Introducing newer products in the existing markets.

Change styles, options and colours available

Example:

Fair n handsome

Bournvita for women

Variety of shampoos


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STRATEGY WILL BE EFFECTIVE WHEN

Firms product are in maturity stage

Rapid technological developments are there in industry

Firm is in a high growth industry

Competitors bring out improved quality

products from time to time

Firm has strong R & D capabilities


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Benefits of adopting concentration strategies

It is less risky

Involves minimal organizational changes

Firms may gain specialization

enables a firm to develop competitive advantage

Higher level of predictability


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Limitations of concentration strategies

Risk of being heavily dependent on one industry

Threats like product obsolescence , substitute

products, emergence of new technologies may be

detrimental to a firm

Sometimes this may create an organizational inertia

This strategy may lead to cash flow problems


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Reasons for change of a firm from

concentration strategy

Temptation of diversification

Underestimation of present opportunities

Impatience to grow

Overconfidence


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Integration strategies

Combining activities related to the present activity of a firm.

Firm may move up or down the value chain

More comprehensive concentration on the customer groups

and needs that firm is already serving

Widening the scope of business definition


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Horizontal Integration

Seeking ownership or increased control over

competitor through acquisition and merger

Result in bigger size with benefit of a stronger

competitive position in industry.


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Few more Example

A Shoe manufacturing company acquisition of a

sport shoe manufacturing company

A media company ownership of Radio,

television, newspaper, magazine or book.


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Advantages of Horizontal Integration

Firm can gain monopolistic characteristics without beingchallenged by federal government

Competes in growing industry

Increased economies of scale provide major competitiveadvantages

Increased product differentiation

Reduction in industry rivalry


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Integration Strategies

Vertical Integration

Forward Integration

Backward Integration


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Vertical Integration strategies

Allow a firm to gain control over:

Distributors

Suppliers

competitors


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Vertical Integration Strategies

Forward Integration:-

Gaining ownership or increased control overdistributors or retailers


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Backward Integration Strategies

Backward Integration:-

Seeking ownership or increase control of afirms suppliers


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Advantages of vertical integration

Secure supply of raw materials or distributionchannels

Control over the inputs of production &distribution channel

Access to new business opportunities

Firm can lower down the selling prices to endusers


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Guidelines for Concentric Diversification

few examples of concentration strategies

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