Running head: “TYPES OF ALTERNATIVE STRATEGIES”
Types of Alternative Strategies
In APA Style
There are 11 alternative strategies; forward integration which means gaining ownership or increased control over distributors and retailers, backward integration which is seeking ownership or increased control of a firm’s suppliers, horizontal integration which is seeking ownership or increased control over competitors, market penetration which is seeking increased market share for present products or services in present markets through greater marketing efforts, product development which is seeking increased sales by improving present products or services or developing new ones, related diversification which is adding new but related products or services, unrelated diversification which is adding new, unrelated products or services, retrenchment which is regrouping through cost and asset reduction to reverse declining sales and profit, divestiture which is selling a division or part of an organization, and liquidation which is selling all of a company’s assets, in parts, for their tangible worth. Integration Strategies: Forward, Backward, & Horizontal Integration “There are 6 scenarios in which forward integration can be used effectively for an organization:” (David, 2011) 1. When your current distributor is too expensive, unreliable and not meeting the needs of your company. 2. When quality distributors are limited.
3. When an organization competes’ in an industry that is constantly growing and expected to stay updated which is a factor that reduces the organization’s chance to diversify if put in the position. 4. When an organization has the capital and human resources to manage the process of distributing their own products and services. 5. When the advantages of stable production is high considering the fact that the organization can predict the demand of output with forward integration. 6. When your current distributors or retailers have high profit margins which suggest that a company profitably distribute their own products and price them competitively by integrating forward. “There are 7 scenarios in which Backward Integration may be an effective strategy:” (David, 2011) 1. When an organization’s current suppliers are too expensive, unreliable, or incapable of meeting the firm’s needs for parts, components, assemblies, or raw materials. 2. When the number of suppliers is small and the number of competitors is large. 3. When an organization competes in an industry that is growing rapidly; this is a factor because integrative-type strategies reduce an organization’s ability to diversify in a declining industry. 4. When an organization has the capital and human resources to manage the process of supplying its own raw materials. 5. 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 association price of its product(s) through backward integration. 6. When your current suppliers have high profit margins, which suggests that the business of supplying products or services in the give industry is a worthwhile venture. 7. When an organization needs to quickly acquire a needed resource. “These 5 Guidelines indicate when Horizontal Integration may be an effective strategy:” (David, 2011) 1. 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. 2. When an organization competes in a growing industry.
3. When increased economies of scale provide major competitive advantages. 4. When an organization has the capital and human talent needed to successfully manage an expanded organization. 5. When competitors are faltering due to a lack of managerial...
References: David, Fred R. (2011). Strategic Management Concepts and Cases. Upper Saddle River: Pearson Education, Inc
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