chapt-7_3.ppt

Editor's Notes

• #4: • When an organization’s present distributors are especially expensive, or unreliable, or incapable of meeting the firm’s distribution needs. • When the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward. • When an organization competes in an industry that is growing and is expected to continue to grow markedly; this is a factor because forward integration reduces an organization’s ability to diversify if its basic industry falters. • When an organization has both the capital and human resources needed to manage the new business of distributing its own products. • When the advantages of stable production are particularly high; this is a consideration because an organization can increase the predictability of the demand for its output through forward integration. • When present distributors or retailers have high profit margins; this situation suggests that a company could profitably distribute its own products and price them more competitively by integrating forward.
• #5: • When an organization’s present suppliers are especially expensive, or unreliable, or incapable of meeting the firm’s needs for parts, components, assemblies, or raw materials. • When the number of suppliers is small and the number of competitors is large. • When an organization competes in an industry that is growing rapidly; this is a factor because integrative-type strategies (forward, backward, and horizontal) reduce an organization’s ability to diversify in a declining industry. • When an organization has both capital and human resources to manage the new business of supplying its own raw materials. • When the advantages of stable prices are particularly important; this is a factor because an organization can stabilize the cost of its raw materials and the associated price of its product(s) through backward integration. • When present supplies have high profit margins, which suggests that the business of supplying products or services in the given industry is a worthwhile venture. • When an organization needs to quickly acquire a needed resource.
• #6: • When an organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for “tending substantially” to reduce competition. • When an organization competes in a growing industry. • When increased economies of scale provide major competitive advantages. • When an organization has both the capital and human talent needed to successfully manage an expanded organization. • When competitors are faltering due to a lack of managerial expertise or a need for particular resources that an organization possesses; note that horizontal integration would not be appropriate if competitors are doing poorly, because in that case overall industry sales are declining.
• #8: • When current markets are not saturated with a particular product or service. • When the usage rate of present customers could be increased significantly. • When the market shares of major competitors have been declining while total industry sales have been increasing. • When the correlation between dollar sales and dollar marketing expenditures historically has been high. • When increased economies of scale provide major competitive advantages.
• #9: • When new channels of distribution are available that are reliable, inexpensive, and of good quality. • When an organization is very successful at what it does. • When new untapped or unsaturated markets exist. • When an organization has the needed capital and human resources to manage expanded operations. • When an organization has excess production capacity. • When an organization’s basic industry is rapidly becoming global in scope.
• #10: • When an organization has successful products that are in the maturity stage of the product life cycle; the idea here is to attract satisfied customers to try new (improved) products as a result of their positive experience with the organization’s present products or services. • When an organization competes in an industry that is characterized by rapid technological developments. • When major competitors offer better-quality products at comparable prices. • When an organization competes in a high-growth industry. • When an organization has especially strong research and development capabilities.
• #12: • When an organization has a clearly distinctive competence but has failed consistently to meet its objectives and goals over time. • When an organization is one of the weaker competitors in a given industry. • When an organization is plagued by inefficiency, low profitability, poor employee morale, and pressure from stockholders to improve performance. • When an organization has failed to capitalize on external opportunities, minimize external threats, take advantage of internal strengths, and overcome internal weaknesses over time; that is, when the organization’s strategic managers have failed (and possibly will be replaced by more competent individuals). • When an organization has grown so large so quickly that major internal reorganization is needed.
• #14: • When an organization has pursued a retrenchment strategy and failed to accomplish needed improvements. • When a division needs more resources to be competitive than the company can provide. • When a division is responsible for an organization’s overall poor performance. • When a division is a misfit with the rest of an organization; this can result from radically different markets, customers, managers, employees, values, or needs. • When a large amount of cash is needed quickly and cannot be obtained reasonably from other sources. • When government antitrust action threatens an organization.
• #16: • When an organization has pursued both a retrenchment strategy and a divestitute strategy, and neither has been successful. • When an organization’s only alternative is bankruptcy. Liquidation represents an orderly and planned means of obtaining the greatest possible cash for an organization’s assets. A company can legally declare bankruptcy first and then liquidate various divisions to raise needed capital. • When the stockholders of a firm can minimize their losses by selling the organization’s assets.
• #19: 1. When price competition among rival sellers is especially vigorous. 2. When the products of rival sellers are essentially identical and supplies are readily available from any of several eager sellers. 3. When there are few ways to achieve product differentiation that have value to buyers. 4. When most buyers use the product in the same ways. 5. When buyers incur low costs in switching their purchases from one seller to another. 6. When buyers are large and have significant power to bargain down prices. 7. When industry newcomers use introductory low prices to attract buyers and build a customer base.
• #25: 1. When there are many ways to differentiate the product or service and many buyers perceive these differences as having value. 2. When buyer needs and uses are diverse. 3. When few rival firms are following a similar differentiation approach. 4. When technological change is fast paced and competition revolves around rapidly evolving product features.
• #28: 1. When the target market niche is large, profitable, and growing. 2. When industry leaders do not consider the niche to be crucial to their own success. 3. When industry leaders consider it too costly or difficult to meet the specialized needs of the target market niche while taking care of their mainstream customers. 4. When the industry has many different niches and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its own resources. 5. When few, if any, other rivals are attempting to specialize in the same target segment.