Most organization has gone international while others have chosen to develop within their countries. This involves setting of strategies and always setting or choosing a strategy is a complex process. Strategies like investments are set under conditions of uncertain i.e. strategy development is about the future and this future is unknown, as the paths companies follow, are dynamic (Numfor& Ajang, 2007). In this thesis am going to carry out a study on growth strategies like vertical integration, geographical expansion and product development in order for managers to have first hand information about the strategies. Most strategic decision makers in organization rely on their experience or on the acquired knowledge in strategic seminar. This case of Uni- President and group Danone will give managers and business executives an insight of the complexities involved in decision -making.In only 3 hours we’ll deliver a custom Growth Strategy in Businnes World Analysis essay written 100% from scratch Get help
The study was set in a company I work for Uni-president and another called group Danone; A Taiwan company one struggling to be a multinational company while the latter is French company that has successful entered the international market. Both are food companies that started 40 years ago. In my study have to identify market growth strategies implemented by each company, their strategy development process and how the strategy is formulated and the effect of the strategy to its market competitiveness.
As the world of business is in the midst of revolution, in which the key ingredient are corporate growth through international expansion, product innovation, and Integration.
Every business executive and managers wants to move forward should take this study serious. The main purpose of businesses is the maximization of goals. In order for companies to achieve these goals in this era of corporate sustainability, there is need to move towards diversification and expansion. Companies need to develop strategies that will lead them to grater heights in the world stage market.
Therefore, to accommodate the rapid changes occurring in business world, quick decisions about growth strategy is made. Geographical expansion, vertical integration and product development are some of strategies that have helped multinationals survive in these hard economic times. This study is paramount to the company understudy because the researcher works there thus will assist in decision-making.
This chapter deals with the background of the study and the background of the companies under study. Then statement of the problem, purpose of the study, research questions and research hypothesis are made. The contribution of this research, its limitations, definition of terms and overall overview of the entire dissertation is represented.
There various reasons for various for international expansion and the mode of expansion selected. World over most companies are experiencing trends of geographical growth, vertical integration while others experience product development or differentiation. To some they may pursue two or all them in their expansion strategies. Whichever expansion strategy adapted profitability and corporate sustainability objectives are expected to be attained. However, of late some expansions strategies have resulted into deterioration financial performance at some point in the cycle of expansion. “This has been mostly associated with poor decisions by management for of expansion adapted or market erosion of the product. Based on a deterministic perspective this organizational decline can be attributed to environmental factors while the voluntaristic perspective attributes decline to internal factors, particularly management actions and perceptions. Whether causality is attributed to external factors, internal factors, or both, managers can respond by selecting strategies that redirect resources in an attempt to improve their firm’s competitive position” Rasheed (2006).Academic experts
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Penrose, (1959); Ackoff, (1970); Hofer & Schendel, (1978); Hitt & Ireland, (1985); and Wernerfelt, (1984) in their works argued that organizations decline in performance is attributed to strategic decisions or reactions by management of corporations that seek growth through expansion. Most strategic decisions made by companies are related to growth, stability, or retrenchment strategies, which the ultimate aim to increase profitability or reduce costs.
Research on growth strategies has considered a number of factors that influence the increase of profitability.” Among Asian firms, Tan and See (2004) suggested that strategic choice is a function of organizational slack, size, and management’s perception of external factors controllability. However, the effects of the degree of deterioration and limits to resource availability on strategic choices for small business owners have not been adequately addressed. The issue of decline is of particular interest for small businesses, given the exceptionally high mortality rate (Chowdhury and Lang, 1993). Previous small business research has addressed certain elements of decline and failure, but has not been conclusive” Writes Rasheed (2006).
The findings of this research seek to identify opportunities to develop new products for existing markets and how to remain a head. Product development is the extending the existing Product range to developing a completely new Product range. Uni-President introduces a new brand of food in order to capture new market. “Most discussion about Product development focuses upon the need to engage in or gain access to research and development. However, whilst there is great potential benefits such activity is not always a good. Johnson and Scholes discussed the implications and problems undertaking research and development. In particular, they point to the PIMS evidence that highlights the dangers of supporting a broad Product range and shortening time scales between new Product introductions. They argued that rapid Product development damages profits because companies can struggle to learn new competences and successfully launch new products. The risks of failure of new products can be high and shortening Product life cycles can mean that the costs of development are not fully recouped. All these problems can be a particular problem for companies with low market shares as the costs are spread over smaller sales base and the risks of failure are proportionately higher”.
Background of the Study
“Strategy or strategic management evolved from a number of sources including case studies and the discipline of economic theories. It evolved, as theoretical disciplines in response to the frustration of managers at the limited help the economic theories were able to give them in running their businesses. This was so, because these theories operated on very restricted set of assumptions that were unrealistic in many areas of actual business life. That is why in the past strategic management was the responsibility of senior executive officers that implement strategies in the companies based on lessons drawn from company’s case studies” complements Numfor& Ajang, (2007).
For the last ten years, we have seen business re-organizational change where companies have embrace new techniques, and this reorganization is likely to continue or even new strategies to come up. This realignment made organizations establish relationship with suppliers and customers or even owning the supply chain. This has led to electronic commerce and change of marketing strategies, reducing cost through staff re-organization. “As strategies change and evolve in companies, it is increasingly becoming necessary to examine organizational issues in terms of implementation of marketing strategies. As companies, become stimulated to rethink how to organize the market to counter performance shortfalls, better integration to globalize products and brands effectively in order to increase their market shares. Building market strategies in every organization underlines the corresponding need to manage organizational strategies. So it is very important to make decisions regarding to strategic management based on the conceptualization of specific situations” (Numfor& Ajang, 2007).
I will be going the through concepts and ideas of strategic decision to help in understanding, how strategies are developed in organizations. I will also is distinguish between the three concepts and ideas of my topic. I will also need to explain the process strategies decision making. Strategies emerge or developed for a specific purpose. In their thesis Numfor& Ajang, (2007) observed the following relating to development of strategies “The strategies developed by organizations are either intended or emergent and there is no one right way strategies can be developed. This is so because strategy development differs over time and in different contexts, the preconceptions of how strategies develop are seen indifferent ways by different people and multiple processes through which strategies are developed in organizations. As strategy, development/implementation and organizations quickly become less than perfect as the environment, competitors or strategic priorities change. As days went by, these theories were of limited help to managers in building profitable companies as economist are inclined toward the admiration of perfect market. On the other hand, strategists actively seek market imperfections to help them in the unending search for perfect products that no competitor could touch. This can explain by the fact that strategic management is about “charting how to achieve a company’s objectives and adjusting the directions and methods to take advantage of the changing circumstances”. Strategies can adopt to solve organizational problems or to grasp new opportunities in order to ensure for the company’s survival or growth. To the best of our knowledge, one of the ways to assess the success or failure of the strategies (for instance market) implemented by any company can be done in regards to the company’s market share, market coverage and/or turnover/profit’’.
In my opinion the best way to understand, strategic management is through exploring case studies like that Uni-president and Group Danone to learn the strategies they have adopted and how they are developed. This because corporate strategies that once were like ‘’soviet five-year plan that were monumental pieces of work, for which a lot of effort went in. They conceived blue-sky ideas, put them into somewhat actionable elements, and attempted to execute them, without ever considering whether the plans succeeded or failed, whether they were feasible or not. The corporate strategy was somewhat similar; a thick binder put together by the most expensive and famous consultants that money could buy, with no regard how well the company could execute on it to deliver the potential results implied therein” (Parekh D, 2005) have now changed to dynamic documents that reflect more of a “business plan” than a “business monument. This document is used acts like personal Navigation assistant of boards and their chief executive officers to take the through the turbulent waters of competitive marketplaces, internationalization, mergers and acquisitions, diversification, divestiture, new market exploration, and many more exciting places. Corporate strategies also provide the company’s leaders with a systematic approach to the mundane necessities of cost reductions, efficiency and productivity increases, and operational effectiveness ( Parekh D,2005).15% OFF Get your very first custom-written academic paper with 15% off Get discount
Statement of the Problem
Making a decision, which growth strategy (vertical integration, geographical expansion, or product development) and which parts of the value chain to engage in, has become one of the most difficult decisions for boards and chief executives. The conventional analysis of vertical integration has looked simply at efficiency of markets as compared to the efficiency of firms: if the cost of transacting through the market is greater than the cost of administering within the firm, then the company should vertically integrate across the stages. Transaction cost analysis does not, however, provide the complete answer. In the first place, vertical strategies are not simply made or buy choices—there are wide varieties of ways in which a company can structure vertical relationships. Secondly, the most critical long-run consideration is the development of organizational capability. If a company is to sustain competitive advantage, it must restrict itself to those activities where it possesses the capabilities that are superior to those of the other companies that perform those activities. The most difficult issues arise where there are linkages between value chain activities. Even though a contract manufacturer may be able to manufacture my remote-controlled lawnmower more efficiently than I can internally, what would be the implications for my new product development capability if I no longer have in-house manufacturing?
Ultimately, vertical integration decisions revolve around two key questions. First, which activities will we undertake internally and which will we outsource? Second, how do we design our vertical arrangements with both external and internal suppliers and buyers? In the case of external relations, this is conducted through whether spot contracts, long-term contracts, or some form of strategic alliance. Similar ranges of alternatives face the vertically integrated firm—including the option of arms-length negotiated contracts. Both types of decision are critically dependent on the firm’s competitive strategy and the capabilities it possesses. As we have already noted, the critical issue for the individual business is not to follow conventional wisdom but to carefully evaluate its strategic needs, its resources and capabilities at different stages at the value chain, the characteristics of the transactions involved, and relative attractiveness of different stages of the value chain”.
Purpose of the Study
The objectives of this study is:
- to identify the strategic market types implemented by a Group Danone company and they are developed
- How vertical integration, geographical expansion and product development affects the market share of a company.
- Assess the relative merits of vertical integration and market transactions in organizing vertically related activities and understand the circumstances that influence their comparative advantages
- Identify a range of possible relationships among vertically related firms, including spot market transactions, long-term contracts, franchise agreements, and alliances
- Identify scenarios of geographical expansion
- Explain why some types of vertically related activities are integrated within a single company, whereas others are performed by separate companies
- Identify the critical considerations pertinent to make-or-buy decisions and the extent to which Uni-president should vertically integrate, geographical expand or product development
- Develop a Marketing strategy that is most advantageous form Uni-President.
- To achieve the objectives I will go through case studies of Group Danone and Uni-president whereby the concept of vertical integration, Geographical expansion and product development strategies are in use and in latter will be used.
The scope of the study
To understand international business expansion and diversification for multinationals, a comprehensive analysis is carried out to ascertain the various needs of expanding companies in the international arena. This research project is on Group Danone and Uni president. In carrying out this project, certain constraints will inhibit effective study, firstly due to short deadline period to finish this write, time factor will render certain aspects not to be examined in details. Secondly, the study assumes that effective and efficient management and application of Diversification and geographical are the determinant of performance and greater market position. On the other hand, in economic reality, there are features that affect performance and market position such as Capital deployment, employee’s motivation, organizational structure, organization capacity, supply chain management and technology. However, this study does not consider these factors. This study also assumes that all strategies applied by group Danone and uni-president are geared towards international expansion in terms of market share. It also assumes that they are ready to implement are both multinational and global as they adopt some principles. Nevertheless, this is not the case in the real strategic management situation in as these strategies are often separated and could be use for survival.
Significance/Importance of the Study
My research study will be of great value to future researchers, management of Uni-President, investors, educators and others because:
• To highlight the important role that market growth strategies play on the company market share.
• It highlights how growth strategies are made and how they strategies affect the company market share.Get your customised and 100% plagiarism-free paper on any subject done for only $16.00 $11/page Let us help you
• It helps the management in strategic decision-making.
- Which strategic market types implemented by a Group Danone company and they how have they developed them?
- How vertical integration, geographical expansion and product development do affect the market share of a company?
- What are the advantages of each form of growth strategies.
- What are possible relationships among vertically related firms, including spot market transactions, long-term contracts, franchise agreements, and strategic alliances?
- What is the relationship between the three growth strategies?
- What growth strategy is favorable to Uni-president board members?
- What drove Uni-president to multinational (China and Hong Kong)?
- What is in house policy and what is it used for?
- Are the products of Uni-president different from those of competitors?
- What can you say about the past and present market situation of the company in term of market growth and market share?
The following hypothesis will guide the research:
- The company Uni-President has financial resource that can use to enter any market without straining.
- Uni-President and Group Danone have equal Chances of succeeding in the international marketing.
- The board of directors is ready to enter any market without much opposition.
- Their products meet international standards.
Limitation of the Study
This research project is on a session of the entire Uni-president project. In carrying out this project, certain constraints will inhibit effective study:
- Time factor will render certain aspects not to be investigated in details because of the deadline period to finish this thesis,
- The study assumes that effective and efficient management and application of growth strategies are the sole determinant of performance and greater market position. However, in economic reality, there are features that affect performance and market position such as Capital deployment, employee’s motivation, organizational structure, organization capacity, supply chain management and technology. This study does not consider these factors (Numfor& Ajang, 2007)
- My study also assumes that the three growth strategies will be applied by uni-president and they are geared towards increasing market share.
Delimitation of the Study
The researcher is a student, he will be carrying out the research with the trust that managements will co-operate.
The research will be carried out by a full time student thus having enough time for coverage of the topic.
The researcher will access the Uni-President with easy because of he is an insider of that is he works for the company.
Definition of Terms
The terms that are in use in this thesis are defined in the context in which they are being used in this research and they are as follows:
Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through the configuration of resources and competencies with the aim of fulfilling stakeholders’ expectations.
Growth strategies: This refers to the power to capture growth in terms of turnover, expansion as well as recuperation of market share.
Vertical Integration: The degree to which a firm owns its upstream suppliers and its downstream buyers.
This refers to the total sales of a company divided by the total sales of other firms for a specified product –market. It may be calculated on the basis of actual sales or forecast sales.
This is an expression of desired strategic direction deliberately formulated or planned by managers.
Emergent strategy is a strategy developed through everyday routines, activities and process in organizations.
Is a company that has branches in more than one country. In order for most these companies to set up branches in other countries, enables them to go global or international. The three words are interchanged in this study, as there is not clear-cut demarcation between them when referring to this company.
This section gives a general outline of the main parts of this Thesis. It will have an abstract and five chapters written and each chapter will contain the following.
The final report will begin with an abstract that will summarize the topic, the findings and the importance.
This will summarize all the chapters and the conclusion reached.
The chapter will have introduction, which will explain issues surrounding the topic and the importance of the study. Then there will be background information that will cover topic and the company under study , it will also provide with an overview of the study, purpose of the study, research question, research hypothesis, limitation and delimitation, Significant of the study and definition of the terms used.
This chapter covers literature relating to the topic under study and in my case this will cover an introduction, Perspective of the study historical perspective of growth strategies, Vertical Integration, geographical expansion, product development, What is a multinational company?, The concept of strategy, the processes of strategy development, The market share, Collection of theories and secondary sources and Criticism of secondary sources
In this chapter the researcher will explain the methodology used that is the Research Approach, the Research Design and discussion of its quality, validity and reliability, The Target company, Procedure, Instruments for data and continuous prose collection and data analysis technique.
This chapter contains empirical data presentation, which is made up of the strategies implemented by Group Danone and Uni-president and their market situation. Secondly analyzing the strategies of Uni-president with reference to concepts of strategies of multinational companies and discussion of the implications of the study
This will be the last chapter. It will contain summary of the findings recommendations and conclusion
Relevant Literature Review
Overview of the Topic
This is literature review of the teacher qualification, leadership skills, standards consolidate of information from various literature written by different groups There are two basic theories that have dominated management of organizations failures. At deterministic and voluntaristic theories. Deterministic perspective suggests that managers are constrained by environmental factors therefore; they have little choice in strategic management. 1. Voluntaristic perspective deals with organizational physiology. It suggests that manager’s actions and perceptions are important to organization failures. (Mullah & Wilkinson, 2004). Looking at Cameron, Sutton and Whetten, we find that organizational failures are too fold. They argue that organization decline occur when they try to adopt their core business objectives. The actor stage in failure is in the stage of human resources and financial resources when they begin to diminish or their misuse. We can conclude that the two stages brought by Mullahi & Wilkinson we can say that an organizations failure is due to adoption to micro niche objectives and being unable to successfully exchange it is out put for new input vise versa.
Weitzel & Honsson (1989) also argued that the decline of the organization is due to environmental factors. They suggested that organization start failing when they fail to anticipate, reorganize, avoid, neutralize or attacked external pressures and take up internal opportunities that threaten organization survival. This argument puts an organization in an awkward position if they do not take proper SWOT analysis and PESTLE analysis. Researchers, academicians and business executives have argued that in order that an organization to have turned around strategies to match the pressures they must become competitive. Small farms like group Danone have problems in turning around even though the company has been in existence for 40 years. While unit president Taiwan company which have been operating at the same period has managed to move strategically into various places in the world.
During growth faces, organizations try to adopt competitive strategies, which are positive for organization growth. Competitive strategies include, cost differentiation, product differentiation, vertical integration, geographical expansion and retrenchment. If an organization adopts competitive strategy they will face negative growth, produce obstruct product or failure to respond to market demand. According to the theory of disequilibrium and chaos organizations start failing when the founders fail to introduce innovation but they will continue to succeed when they introduce innovation. The best example in this case is Sony Company, Standard immediately after Second World War and they have introduced various products in the market within short period. They have also acquired various farms including Wega of Germany. The other differences for small farms are the limitation of financial resources meaning they have little strategic alternative since they cannot work beyond what they have. However Malaysia entrepreneurship cases has proved the all opposite.
Collection of theories and secondary sources
The researcher will use books available in the university in collection the literature. The computer la will pay an important role in access other scholarly written articles. Therefore, the process of gathering articles and other forms of literature will be done primarily the frequent use university facilities. Research on internet was done through a funnel manner by using key words highly qualified teacher. In addition, the government and state documents have been used extensively as supplementary source during the search of information.
What is a multinational company?
A multinational company is one that “owns outputs of goods or services originating in more than one country” and this is the simplest definition for such a company. There are other many ways that can be used to identify a company as a multinational company but the most commonly used alternatives of definition are four and they include operating, structural, performance and behavioral criterion. According to these four definitions, a multinational company can be seen as
In operational aspects as a firm or company that owns or controls income-generating assets in more than one country, that is the ownership-threshold definition (Numfor N. and Ajang P.E., 2007).
According to the structural definition, a multinational company is judged according to the organization of the company structurally at an international level (that is the structures are built up of separate divisions in different geographical areas). In regards to performance terms of definition, it incorporates some relative or absolute measures of international spread, for instance the number of foreign subsidiaries or percentage of sales accounted for by foreign sales. Behavioral definitional aspects are based on the corporation’s degree of egocentricity. All these ways of defining a multinational company are very important as each perspective adds more understanding to what a multinational company is. No matter the criterion on which multinational companies are defined, they play a staring role in the current process of globalization. Due to this we can consider multinational companies as global or international companies, as a global company is one in which its competitive position in one country is significantly affected by its position in other countries and multinational companies also face this. This can be seen through globalization of markets and these can seen as some of the factors that motivates companies to go multinational. This is so because markets now our days tend to be globally integrated. Further more what drives these companies global other than market aspects are globalization of government polices; cost globalization and globalization of competition and these factors also affect multinational companies if they place a role in globalization ( Numfor N. and Ajang P.E. 2007).
For these multinational companies to survive and growth, they need to implement some strategies in order for them to achieve their goals and objectives. Some authors identified the reasons for Multinational to go abroad or global is to gain access to host-country markets or to exploit international factors-cost differences. This means that when factor prices differ across countries, firms become multinational by locating production in countries where manual-labor cost are low and headquarters in countries where skilled-labor cost are low.
The concept of strategy
Strategy is “the direction and scope of an organization over a long period of time, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations”. From this definition, strategies are complex, uncertain, affect operational decisions and require an integrated approach and change. Complexities in strategies are in the way of defining features of strategies and strategic decisions, for instance a multinational company may face complexity in the organization of its wide geographical scope. This complexity makes the definition of strategy context dependent and this supported by Mintzberg “five Ps” of strategy that includes strategy as a plan, ploy, pattern, and position. These “Five Ps” explain the various perspectives in which strategies are view in this context.
The five Ps of strategy
Strategy as a plan is a consciously intended course of action, a guideline to deal with situations. For example, strategy as a plan in management is a unified, comprehensive and an integrated plan designed to ensure that the basic objectives of the company are achieved. In order to use a strategy to achieve a company’s objectives, a ploy is required to achieve the said objectives. For instance a multinational company wants to expand its market in another country in order to prevent the threat of competitors’ entry that market. So the real strategy as plan is the threat of entry and the strategy as a ploy is the expansion of the market. Viewing strategy as a plan or as a ploy illustrates that a strategy can be either general or specific. These perspectives of explaining what strategy is means that strategies are intended, of which they are not only intended but also emergent. Therefore, there are another ways in which strategies can be defined. Strategy as a pattern is as a stream of action, that is a consistent behavior in which things are done in an organization and this consistency in behavior can be intended or not.
This perspective indicates that strategy can also be emergent. Furthermore, strategy can be seen as a position, which is a means of locating a company with its environment. This means that referring to this perspective, strategies are used as a mediating force between the company (internal context) and the environment (external context). Strategy as position aims at matching the internal to the external, but strategy as perspective concerns the internal context of an organization. That is how members in the organization share their perspectives to other organizational member through their intentions or actions. From the various definitions above, strategies do have the similar characteristics such as, every strategy is an invention, a figment of someone’s imagination, whether conceived as intentions to regulate behaviors before it takes place or inferred as patterns to describe behaviors that has already occurred”. Having this in mind, it will be appropriate to identify the types of strategies implemented by multinational companies. (Numfor N. and Ajang P.E. 2007);
The market share
Market share by definition refers to company sales divided by the total sales of all firms for a specified product in a given market over a given time period. It can be calculated on basis of actual sales or forecasted sales. In this study, we looked at market share from the “Marketing concept” which defines the marketing management philosophy, which holds that achieving organizational goals depends on determining the needs, and wants of target and delivering the desired satisfaction more effectively and efficiently than competitors (Numfor N. and Ajang P.E. 2007).
One of the ways in which success of any strategy implemented in any company can easily be identified from it profits and market share. In this study we will concentrate more on the market share/turnover to assess the efficiency of strategies adopted by multinational companies, as “the ultimate test to assess whether multinational companies are global themselves in their actual penetration level of markets across the globe”. This level of market penetration across the globe can be seen in terms of market share, and the Boston consulting Group (BCG) matrix is appropriate for our use.
The BCG matrix: The BCG matrix indicates the balance of a portfolio of a business in terms of relationship between market share and market growth The context of which this BCG matrix is used has excluded the idea of balance of matrix and only considers the relationship between the market share and market growth
As market growth rate is important for a business or company seeking to dominate the market, it is appropriate for that company to be a star. This is explained by the idea that higher profit levels often come from product or business with high market share in more stable markets.
It is worth noting that an in-depth review of all the different theories mentioned above, is beyond the scope of this thesis. However, the perspective of market growth strategies of multinational companies will provide the main support and serve as a foundation for the research reported in this thesis specifically as this thesis intends to use them to assess the strategies adopted by multinational companies towards market growth. The original business and corporate level strategy theory will be looked at in more detail hereof as explained in the figure below.( Numfor N. and Ajang P.E. 2007).
This is where a firm owns its upstream suppliers and its downstream buyers. It is important because it can have a significant impact on a business unit’s position in its industry with respect to cost, differentiation, and other strategic issues. This makes an important consideration in corporate strategy for all companies that are to survive in this world of economic dynamism. Expansion of activities downstream is referred to as forward integration, and expansion upstream is referred to as backward integration.
We can look at vertical integration from the concepts of the value chain supply management. Consider organization with product net through assembly and are distributed.
A number of issues are considered which method of integration is to be adopted. In addition, these are the two generic strategies of Michael porter, which are cost, and control. Cost depends on the market transaction of funds and the cost of administering the same services within an organization while the other issue of control is about asset control which ensures there are various to the entry into the market.
Factors Favoring Vertical Integration
The following situational factors tend to favor vertical integration:
- Taxes and regulations on market transactions
- Obstacles to the formulation and monitoring of contracts.
- Strategic similarity between the vertically related activities.
- Sufficiently large production quantities so that the firm can benefit from economies of scale.
- Reluctance of other firms to make investments specific to the transaction.
Factors against Vertical Integration
The following situational factors tend to make vertical integration less attractive:
- The quantity required from a supplier is much less than the minimum efficient scale for producing the product.
- The product is a widely available commodity and its production cost decreases significantly as cumulative quantity increases.
- The core competencies between the activities are very different.
- The vertically adjacent activities are in very different types of industries. For example, manufacturing is very different from retailing.
- The addition of the new activity places the firm in competition with another player with which it needs to cooperate. The firm then may be viewed as a competitor rather than a partner
Advantages of Vertical Integration
Vertical integration has the following Benefits to the firm:
- Reduction of transport costs if ownership results in closer geographic proximity of the firms.
- Improve supply chain coordination.
- Provide more opportunities to differentiate by means of increased control over inputs.
- Capture upstream or downstream profit margins.
- Increase entry barriers to potential competitors, for example, if the firm can gain sole access to a scarce resource.
- Gain access to downstream distribution channels that otherwise would be inaccessible.
- Facilitate investment in highly specialized assets in which upstream or downstream players may be reluctant to invest.
- Lead to expansion of core competencies.
Disadvantages of Vertical Integration
While some of the benefits of vertical integration can be quite attractive to the firm, the drawbacks may negate any potential gains. Vertical integration potentially has the following disadvantages:
- Capacity balancing issues. For example, the firm may need to build excess upstream capacity to ensure that its downstream operations have sufficient supply under all demand conditions.
- Potentially higher costs due to low efficiencies resulting from lack of supplier competition.
- Decreased flexibility due to previous upstream or downstream investments. (Note however, that flexibility to coordinate vertically related activities might increase.)
- Decreased ability to increase product variety if significant in-house development is required.
- Developing new core competencies may compromise existing competencies.
- Increased bureaucratic costs.
Alternatives to Vertical Integration
There are many options available to vertical integration, which gives benefits to the firm. Among the alternatives available are franchise agreement, joint ventures, long-term contract, reallocations and strategic alliances.
Vertical integration is normally an ownership of an individual farm where the farm owns a value change. It may refer to the single ownership of more than one part of the organization’s supply chain. Some companies own their suppliers, some own their logistics providers or distributors, and some own the retail end of the chain. Corporate decisions such as acquiring or divesting of a supplier are made when companies want to gain more control and margin, or cash and focus, respectively.
Product development is where the firm develops a new product for the existing market or innovate the existing product for the same market. For example, Coca Cola Company can be said to be producing the refreshing product for the existing market using a different test. Although the product is in the market, the production of light coke is the product development, which at times is called product differentiation. A company also can produce a new product, which has not been in the market, and this is through research and development of the product. Product diversification is also part of product development. A company can be involved in developing a new product and at the same time liking market for the product. That is called product differentiation.
Product development involves product mix strategy, which was brought forward by an off, and he threw the following product market mix matrix strategy. Where the firm uses the current product and the current product as a form of product development is called market penetration. In addition, market penetration is to assist the firm in maintaining or increasing its market share of the current product. It will also seek to dominate the market by driving out competitors and increase customer usage. When they use the current product and explore new market, we call it product market development, and market development, which will be discussed in fully when looking at geographical expansion, involves expanding to new geographical areas parking the product in quantities acceptable in the market starting new distribution channels and having price differences to different types of customers.
Introducing new products to the existing, current, or present market is called product development. Product development has many advantages, which include innovation-discouraging entry to the market there is also a risk of failure.
Product Market Mix Strategy
Product Market Mix Strategy – An off drew up a growth vector matrix, describing a combination of a firm’s activities in current and new market, with existing and new products. The product-market mix strategy is illustrated in diagram below: Current products and current market- market penetration
Market penetration: the firm seeks to:
- Maintain or increase its share of the current market with current products.
- Secure dominance of growth markets.
- Restructure a mature market by driving out competitors.
- Increase usage by existing customer.
Present products and new markets: market development
- New geographical areas and export markets
- Different package sizes for food and other domestic items so that those who buy in bulk and small quantities are catered for.
- New distribution channels to attract new customers (e.g. organic foods sold in supermarkets not just specialist shops)
- Differential pricing policies to attract different types of customer and create new market segments.
New products to present markets: product development
- Advantage – Product development forces competition to innovate, new comers to the market might be discouraged.
- The drawbacks include the expense and the risk.
New products and new markets: diversification
Diversification occurs when a company decides to make new products for new markets. It has to have a clear idea of what it hopes to gain from diversification. There are two types of diversification, related and unrelated diversification.
- Growth – new products and new markets should be selected which offer prospects for growth, which the existing product market mix does not.
- Investing surplus – funds not required for other expansion needs: but the funds could be returned to shareholders.
- The firm’s strengths matches the opportunity if – the company has developed outstanding new product’s research and development department. The profit opportunities from diversification are high.
Expanding into new geographic markets is a classic form of market development – ancient peoples like the Phoenicians traded throughout the Mediterranean from around 1000 BC. Today, many companies face the challenges of globalization and the need to operate in markets across the world. Increasingly, a high market share in one country is becoming inadequate to deal with the advantages possessed by companies operating across many markets – cost advantages are becoming global. Further, it may be important to locate some operations in strategic markets either in order to gain access to the innovations that emerge from within an industrial cluster like Silicon Valley, or to be close to key customers.
Criticisms of secondary sources
The researcher used literature that was not up to date, however, some of articles and works reviewed or adapted were containing relevant literature for this theme. One major deficiencies noticed in the articles was the absence of the relationship between quality of strategies used by multinationals and market forces. Notwithstanding, all this criticism, they formed the important part of this thesis and have contributed positively to this research.
The intention of research is to identify growth strategies implemented by group Danone and how these strategies have affected its market share. We shall also look at how the same strategies will be implemented by UN president a Taiwan company in its brought strategies.
The main objective of this dissertation is to identify how the chosen research methodology will match the main objective of the dissertation question and how it will be achieved. Essentially, there are two types of research methodology; they are qualitative and quantitative research. While the quantitative research is carried out through obtaining primary data such as questionnaire, qualitative research is a research that is conducted through interviews and observations. Therefore, the method enables a researcher to explore the details of individual perceptions over phenomena.
The research approach that develops the methodology explained below is based on descriptive research theory and inductive reasoning. This is important to develop the foundation by which the research will be designed, conducted and consequently analyzed.
Firstly, it is important to establish the research approach in order to create a significant qualitative methodology. The research approach undertakes a specific design that is “the overall strategy chosen to obtain the information required answering the research question” (Ghauri and Gronhaug p.47, 2002). The research approach will review the types of research design and data collection methods. The research approach is built on logical relations and not just beliefs.
Descriptive research is used when the research question is understood (Ghauri and Gronhaug 2002). In the research approach, the data measurements are dependent on the obtainment of required information and the quality of the information. The outcome of the research, therefore, is dependent on the measurement procedures used in the collection of the data, and this in turn is dependent on the types of data collection (Ghauri and Gronhaug, 2002, p.47).
This is an important concept of qualitative research, where the description is either inductive or deductive. Inductive research begins with a question and seeks to describe it, and deductive research begins with the problem by working backwards to the answers. Therefore, this research uses the inductive approach to build the theory from the data gathered to explore possible conclusions towards Information Systems for Inventory management Study.
Collection of Theories and Secondary Sources
We have gathered information from various literature reviews, which are available at internet scholarly books, journals and newspapers. Theses materials used are not sufficient to add something new to the subject, which has been extensively researched.
There are many approaches to this research being a case study. Case studies are always investigated using two-research method, Qualitative and Quantitative. Quantitative approach involves the collection of figures and facts in a form of tables and graphs. Qualitative involves measuring people’s attitude, behaviors and opinions. One can note that a persons perceptions opinions and attitudes cannot be measured using quantitative technique. i.e. you cannot assign a figure to somebody’s attitude of something. Researchers have written that qualitative method of collecting data or information is through observation, interviews and analysis in a narrative manner. In this case, quantitative analysis will not benefit us much as compared to qualitative analysis.
I am going to use qualitative method of research in analyzing the strategies adopted by group Dan one and uni-president. We shall also look using the same method affect the market share. Therefore, in my final report, I am producing an analysis for the two.
Data collection was carried out through internet search engines and interviews. I am working with UN president in a senior position therefore; interview is not very difficult to carry out. Other considerations have been made for this quantitative method but the result is to interpret the information as it was seen visible through interviews. I shall use questioners I carrying out this important research.
For, me to carry out the test interviews possible and bring an employee of one of the company; I have selected the best option possible for my colleagues. I have also use conventional interviews, which are interview through internet for group Danone a France company. Although I gathered information sufficient for me to make decisions, I realized that face-to-face interview is more appropriate as compared to telephone and internet. This is because face-to-face interviews are easier since the questions can be rephrased if the respondent does not understand the question. However, in the internet and telephone the respondent can choose to ignore the questions.
We shall explore whether there is a quality criteria for the qualitative method used. This will be possible if we give in depth analysis to give the findings a degree of truth and validate them.
The validity of this investigation is achieved if it measures what was intended for. The valuables should be able to measure what the research intended to do. Validity can be characterized by internal and external validities. In this case, we are not going to use laboratory measures.
The purpose of this section is to establish the stance used in the qualitative approach to this
Study. In doing so, the reader will better comprehend the degree of truth that this thesis has
In addition, validate the findings.
The validity of a study is achieved if it measures what it was intended for, that is variables measure what the research was intended to measure with little or no error. This is characterized by internal and external validity, which varies between types of research; field experiments (research done in natural environment) and lab experiment (done in contrived or artificial environment). In lab experiments, the researcher controls the setting, in which the research is been conducted, may influence the variables, while observing the changes or no changes in variables. Due to the ability to control and eliminate certain variables or conditions that may have a profound effect on the outcomes of the research, would likely improve the validity of the research. On the other hand, in field experiments, the researcher retains control over the independent variables but conducts the research in a natural setting, without control over environmental influences.
Internal validity describes or accounts for all factors, including those that are not directly specified in the theory being tested, but might affect the outcome of the study. That is, it usually concerns the soundness of the research being carried out. External validity on the other hand refers to the generalization of the research, which is the ability of the conclusions
To be validly extended from the specific environment in which the research study is conducted to similar real world situations.
The research for this thesis could be considered as a field research (survey) as it is carried out in a particular company in the real world. The literature on this survey was got from an interview on human beings of the company thus; we cannot influence their responses in any significant way. To ensure for both internal and external validity, we believe to have used the most accurate and up-to-date literature, the right and relevant questions asked during the interview (face-to-face interview), the most feasible data collection method utilized and the tools used to analyze the data are also considered to be the most appropriate in this situation. Therefore, this thesis is considered accurate and hence produces valid results. Thus, we assume that the overall validity of the results is considered high. However, we would argue that the internal validity of this thesis is relatively high but the same cannot e said for its external validity. The reason for this position is discussed under the degree of generalization.
The aim of any researcher we believe is to use a given procedure and reach a conclusion that will be applicable in any given environment. The primary objective should be that if a later investigation followed exactly the same procedure as described by an earlier investigator and
conducted the same study all over again; this later investigator should be able to arrive at the same findings and conclusions. Thus, the study could be considered highly reliable. However, due to the very nature of human beings, a 100% reliability (especially regarding
External validity) cannot be guaranteed for this thesis, as errors might occur in the course of writing down answers during the interview or in coding answers due to human nature. In this study, the errors were minimized as one interviewer poses the questions and the other concentrates in writing down responses. Immediately after each interview, the two interviewers sat together to discuss and document the final responses. With all these measures put in place to minimize error, we believe that the results of this study could be regard as reliable.
Degree of generalization
Generalization is the applicability of results of a research study to other settings. Probability sample is only what justifies that inference can be made about the population but this is not a guarantee as the results from the sample cant be generalized because of the risk of random and
Systematic errors in the sample. In case studies, it is not important to make generalization of the study but to explain what is the situation of that company in that particular situation and there is no problem if the results cannot be generalized. This is so because no two companies
can be the same, thereby case studies in general do not return appropriate information for generalization but in optimal case, can produce a rough guideline/understanding of how theories are practically applicable. Thus, our findings from the study can be considered as
Guidelines for companies implementing certain strategies to gain growth in their market
Choice of Case Study
The research problem is that the growth strategies adopted by group Danone for growth as compared to those adopted by uni-president. We have explored the complex and different perspectives on how growth strategies are developed and implemented by group Danone. Therefore, we have used scientific study methods to understand how these strategies have been implemented and how to assist uni-president. It is because of this perspective that I decided to choose group Danone and uni-president companies with different approaches to expansion from different parts of the world i.e developed and developing.
Background of Uni-President
Uni-president is a company incorporated in Taiwan forty years ago for the purpose of manufacture and distribution of food product in Taiwan. The company has for many years tried to expand to neighboring countries at a franchise activities. Forty years later, this company is still struggling in China Hong Kong and South Korea. In Taiwan, they are the forth-largest food manufacturer although they want to be the one of the multinationals from Taiwan operating in neighboring countries. The owners and their families run the management of the company. In addition to production of food product, the company has engaged various developments activities and sales of high quality and reliable food products in the market. At the present the company engages in pursuing strategies that will assist them in growth into geographical and product strategy. This will strengthen their market share and increase profitability. Food product, which is being sold in then market, does not depend on where they come from but how healthy is the food.
Background of Food Danone
Group Danone is a company incorporated in France forty years ago for the purpose of manufacture and distribution of food product in France. The company has for many years tried to expand to neighboring countries at a franchise activities. Forty years later, this company has moved to many companies geographically and they have had product expansion. In France they are the largest food manufacturer and although they want to be the one of the multinationals from Taiwan operating in neighboring countries. The owners and their families run the management of the company. In addition to production of food product, the company has engaged various developments activities and sales of high quality and reliable food products in the market. At the present the company engages in pursuing strategies that will assist them in growth into geographical and product strategy. This will strengthen their market share and increase profitability. Food product, which is being sold in then market, does not depend on where they come from but how healthy is the food.
Results And Discussion
The purpose of the study is to study and propose strategic choices for uni-president for expansion. The result indicates the choice between to what through product development, product development geographical expansion and vertical integration. Firms are also likely to choose a growth strategy if they perceive although it appears to be counter intuitive, this supports previous findings that small business owner/managers remain aggressive in their strategy choice, even when performance and resources are poor (Staw, Sandelands, & Dutton. 1983). Small business owners may, therefore see growth as their only alternative to severe decline. These results support D’Avenis (1989) finding among public firms that resource deficient firms near bankruptcy choose growth strategies.
What drives group Danone multinational
Facing stiff competitive at home and need for more profit were the major reasons for their expansion. Since the success of group Danone lies in its competence outlets that are made up of a
Combination of strong sales and knowledge base of five continents, this gives it a unique position in the world food markets. This explains the fact that this company goes multinational in search for markets and to represent in the different markets. Another reason is to locate near to its distributors who are also located all over the world.
Market strategies implemented
Group Danone has implemented some strategies in order to increase its market share and the strategies implemented are both at the business and corporate level.
These findings also support Burgelman’s (1983) contention that deteriorating performance stimulates efforts to create to new ventures; similarly, diversification strategies have suggested curvilinear relationships between the relatedness of diversification and performance. Finally, these results confirm that turnaround strategies are typically used when decline is not severe (Pearce & Robinson, 1993). Considering other retrenchments strategy alternatives such as liquidation or asst reduction, it is not surprising small business owners may choose to turnaround through growing rather than fail.
One possible limitation of this study is the representative of this convenience sample of small owner/managers, which contract with U.S federal agencies. Since the study did not control for the degree public versus commercial market base, this study may not be generalizable to all firms, secondly, this research does not consider the success of implementing a growth as a response to financial decline. Future research could examine the effects of trends on the strategic choice of small firms in declining using objective financial data, although it is difficult to obtain from privately held companies. In addition, limiting strategic choice to a dichotomy improves the interpretability but lessens our understanding of stability strategy area discrete choice. Finally, using only declining firms and eliminating firms choosing stability strategies reduced the sample, but the power was still sufficient for a study of this nature (cohen & cohen, 1983). Although a mean difference comparison between declining firms and the non-declining firms related to strategy choice did not produce significant results, future research may investigate why not.
Implications Of The Study
Although the generalizability of the study is limited because the convenience sample is small government contractors and predominately ethnic minorities, it still contributes to our understand the dynamics of small business owners in decline. Most scholars and practitioners would suggest that embarking on a growth strategy in decline is counter intuitive. Chow hurry and Lung (1996) did consider entrepreneurial moves as a possible strategic response for small businesses. So, is this unique to small business owner, versus managers of larger firms; or is it unique to government contractors versus commercial firms? Alternatively, is it some psychological or sociological anomaly associated with powers from historically underserved ethnic groups?
Although anecdotal evidence, the author’s observation of this apparently illogical response among small and disadvantaged business owners was the original motivation for this study. If this evidence has any validity, it is important for two reasons. One, small business owners should work toward disassociation the decline of their firm with a personal failure. Although no evidence is presented in this manuscript that this is the case, the likelihood of this possibility is common sense, secondly, small business owners should learn the skills and techniques associated with turnaround strategies, often large firms hire the “gun slinger” to come in and clean house because it requires a dispassionate approach that small business owners have either the psychological objectivity, temperament, or business knowledge to handle. Thirdly, small business owners should accept the fact that more sometimes means less. Aggressively going after more contracts often often leads the owner/manager to accept contracts with less profit margin or that are beyond their core competence. In this case, the hole just gets deeper. Finally, entrepreneurship educators may find it useful to consider growth as alternative turnaround strategies and explore the psychological dimensions associated with this choice for small business owner/managers.
In conclusion, this study suggests there is merit to analyzing how strategic variables interact in periods of decline. It also should encourage the use of a resource –based approach for predicting how small business owner/manager responds to deteriorating financial performance. Although decline is not always the most popular subject, understanding the context of aggressive or passive strategic choices should help explain the behavior of small business owners, when this get tough.
Summary, Conclusion and Recommendation
Deciding which parts of the value chain to engage in presents companies with one of their most difficult strategic decisions. The conventional analysis of vertical integration has looked simply at efficiency of markets as compared to the efficiency of firms: if the cost of transacting through the market is greater than the cost of administering within the firm, then the company should vertically integrate across the stages. Transaction cost analysis does not, however, provide the complete answer. In the first place, vertical strategies are not simply making or buy choices—there are wide varieties of ways in which a company can structure vertical relationships. Secondly, the most critical long-run consideration is the development of organizational capability. If a company is to sustain competitive advantage, it must restrict itself to those activities where it possesses the capabilities that are superior to those of the other companies that perform those activities. If my company’s data processing capabilities are inferior to those of IBM and logistics capabilities are inferior or those of Federal Express—then I should consider outsourcing these activities. The most difficult issues arise where there are linkages between value chain activities. Even though a contract manufacturer may be able to manufacture my remote-controlled lawnmower more efficiently than I can internally, what would be the implications for my new product development capability if I no longer have in-house manufacturing?
Ultimately, vertical development decisions revolve around two key questions. First, which activities will we undertake internally and which will we outsource? Second, how do we design our vertical arrangements with both external and internal suppliers and buyers? In the case of external relations, these may be conducted through whether spot contracts, long-term contracts, or some form of strategic alliance. Similar ranges of alternatives face the vertically integrated firm—including the option of arms-length negotiated contracts. Both types of decision are critically dependent on the firm’s competitive strategy and the capabilities it possesses. As we have already noted, the critical issue for the individual business is not to follow conventional wisdom but to carefully evaluate its strategic needs, its resources and capabilities at different stages at the value chain, the characteristics of the transactions involved, and relative attractiveness of different stages of the value chain.
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