RAYMART M.

COPIAR CBM 71 – STRATEGIC MANAGEMENT

BSA – 701 MR. CRISANTO PACHEJO

ASSIGNMENT 1
11 STRATEGIES OF STRATEGIC MANAGEMENT

FORWARD INTEGRATION

 NIKE
Nike sells millions of shoes and shirts in a variety of retail stores ranging
from Foot Locker to J.C. Penney, but the company is rapidly boosting its direct-to
consumer business, bypassing retail stores. This forward integration strategy has
hundreds of retails stores upset with Nike, as the firm’s business on the Nike.com
website rises 50 percent in many quarters. Modern day Nike is a much more
forward integrated or specialized firm that focuses its efforts into an innovative
focus in designing and marketing their athletic textiles and brand. Manufacturing
in a sense takes away from this focus so it is nothing more than an afterthought
in Nike's total corporate strategy plan. In regards to the decisions leading up to
this strategy of vertical integration then and now, Nike's positions can be
explained by three logic-based choices: transaction costs economics, capability
theory, and real options theory.

 PURINA CORPORATION
The chicken industry has grown to the magnitude that it is today by
combining production stages into large vertically integrated firms able to take
advantage of rapidly changing technology. Vertically integrated companies in a
supply chain are united through a common owner. Usually each member of the
supply chain produces a different product or service, and the products combine
to satisfy a common need – in this case, the production of broiler chicken.
Forward integration of the broiler industry allows producers to combine different
biosecurity and sanitation practices, housing technologies and feeding regimens
to improve food safety. This structure allows greater governance over each
 aspect of food safety from the breeder farm to the hatchery through the
processing plant

BACKWARD INTEGRATION

 STARBUCKS
Starbucks is best known as a chain of coffee shops. As such, it has
various suppliers and inputs -- it buys coffee beans to make coffee as well as
customized mugs and products to sell in its stores. It backward vertically
integrated when it bought a coffee farm in China, because normally it would have
to buy coffee beans from a coffee bean supplier. Starbucks chose to buy a coffee
farm in China, an area that showed tremendous growth in the number of coffee
drinkers. At the same time, there was increased competition among companies
selling coffee, such as McDonald's and other chains such as Costa Coffee.
Competition for high-quality beans means that some competitors will not receive
them at all and that those who do will pay a high price driven up by competition.
By backward vertically integrating by buying a coffee farm, Starbucks ensures
that it will have a bean supply and that it will receive it at a reasonable price.

 IKEA – PHILIPPINES
Ikea has purchased a forest in order to have better control over their
supply chain. Simply put, this move is backward integration – moving “back” or
further up the supply chain, closer to raw materials and farther from end
customers. It’s an interesting strategy from both the supply chain and cost
perspective and also from a branding viewpoint. This acquisition will give Ikea
control over the cost of lumber, which is expected to increase globally as
renewable energy becomes more popular. The company is also focused on
optimizing its furniture design to use trees in the most efficient way. In addition,
Ikea has run into some environmental and sustainability challenges in the past
and was banned from logging in Russia for a time in 2012. Owning this forest will
help avoid pauses in the supply chain and help with quality control and
 environmental concerns. The acquisition is a smart-move for Ikea, both for the
short-term and long-term.

HORIZONTAL INTEGRATION

 DISNEY & PIXAR

In 2006, Walt Disney bought Pixar Animation Studios for approximately
$7.4 billion USD. Walt Disney had been facing stagnation during the jump from
cell animation to digital. Pixar, by contrast, didn’t have Disney’s legacy, but it did
have newer techniques and more modern technologies to produce digitally
animated films. This merger proved extremely beneficial to both companies, even
without merging the “houses” that produced the animation. Pixar’s innovation,
when combined with Disney's formulaic storytelling method and top-notch
character marketing, led to both increased market shares and spikes in profits.
The proposed merger kicked off by Walt Disney was a prime example of
horizontal integration working in the same industry. Apart from the usual benefits
of the coming together of the finest entities in the industry, it also worked as a
means to ward off potential competition for Disney and thus continue and
potentially improve on its market share.

 PLDT
The horizontal growth of telecommunication industry is being limited and
one of the key factors is telecommunication companies find it difficult and
expensive to expand in rural regions so consumer in those areas are left with
less than a handful of options when it comes to internet, mobile and television
packages. Being in charge of both internet and mobile carriers,
telecommunication companies, they must cope up with the needs of their
consumers. Before entering new markets or an existing one, it is important to
evaluate carefully these standards that are required to operate in these kind of
markets. It means although the Globe has already caught up to PLDT the PLDT
 still has the bigger revenue which is P119M compare to P89M of Globe. It means
that the company is still growing and highly profitable through their successful
implementation of horizontal integration

MARKET PENETRATION

 UNDER ARMOUR
Under Armour is a good example of a company that has demonstrated
successful market penetration. The company sells performance apparel, and in
recent years it has surpassed Adidas to become the number-two athletic-wear
provider in the U.S. The company has persistently focused on selling athletic
footwear, clothing, and accessories, and was able to capture a leadership
position in the market with that strategy. Throughout the year, Under Armour
fueled its growth by focusing largely on promotion, distribution, and consistent
product. As a result, the company could claim major success—especially relative
to major competitors Nike and Adidas—in the fight for its share of the fitness
apparel market. Like Nike, Under Armour’s has been very effective at
developing inspiring advertisements that feature well-known male and female
athletes.

 FIREFLY MOBILE
Firefly Mobile, which started out as an Original Equipment Manufacturer
(OEM) based in Hong Kong, used to manufacture mobile phone parts and
materials. When it entered the Philippines market, Firefly Mobile had to take on
large existing players such as Samsung and Apple. It differentiated itself by
targeting a specific niche within the affordable-premium smartphone category.
Although the Philippines is experiencing a rise in median incomes, the majority of
the population remains within middle to low income bands, which tends to make
them highly price sensitive. This allows Firefly Mobile to capitalize on this niche
market sector by selling aesthetically pleasing low-priced smartphones, packed
with features, which provide excellent value for money. Adopting these
 approaches has helped Firefly Mobile quickly gain market share in the
Philippines. The company success is underpinned by competitive pricing across
all their phone tiers in comparison to market rivals. It wins over consumers with a
market position based on strong value for money, while still offering premium
features that its target niche demands.  

MARKET DEVELOPMENT

 NETFLIX
This intensive growth strategy works as a secondary growth plan for the
development of Netflix organization. The market development plan is based on
the introduction of the firm’s online streaming system and authentic information to
the customers of other international countries. Market development across
international borders may also be considered as a growth opportunity. Netflix has
acquired a regional license from 42 states of Central America, South America
and the Caribbean, to sell its online media streaming The primary objective of
Netflix linked with market development is to increase the growth and revenues of
a firm by entering into new markets. The cost-effective strategy of Netflix that is
selling at a low price helps to strengthen the intensive growth strategy. The
profitability of a firm depends upon the implantation of the effectiveness of the
company’s business model that’s why it is important to attain a competitive
advantage.

 CHERRY MOBILE
Market development strategy entails expanding the potential market
through new customers for Cherry Mobile. New customers can be defined as:
new geographic segments, new demographic segments, new institutional
segments or new psychographic segments. Another way is to expand sales
through new uses for the product. There can be a new demographic segment
that Cherry Mobile can carry on these is under lifestyle. As new product offerings
of Cherry Mobile have been launched in the market it can now cater the high
class societies. As technological breakthroughs a new breeds of phones units of
 Cherry Mobile can now compete head on the mobile giants. The Cosmos android
phone units have powerful specs that can be compared to Galaxy series of
Samsung and IPhones of Apple. With this expansion of unit’s new customers can
enjoy a whole new experience of android OS craze.

PRODUCT DEVELOPMENT

 NETFLIX
Product development plays an important role in the growth and
development of business but still, it cannot be considered as the primary
intensive growth strategy of Netflix. The success of Netflix’s product development
strategy depends upon its generic strategies that help to attain a competitive
advantage for the efficient production of goods and services. Both intensive and
generic growth strategies contribute to the expansion of business at a large
geographical extent to earn heavy profit and income. The introduction of the
latest online streaming method is a major component of the company’s pipeline
business model. The proficiency of the company’s product development plan
relies on the organizational culture of Netflix that how it supports the relevant
innovation activities. Another example of product development is that Netflix is
developing millions of DVDs at high production costs. Currently, the movie
industry is switching towards the online streaming of the films which may
adversely affect the profit margins of Netflix.

 PROCTER AND GAMBLE

Procter & Gamble is a large company in the U.S. that manufactures
consumer products. It has earned public image and reputation as one of the
global best marketers. The produces and markets above two hundred products
that it vends in approximately one hundred and thirty nations across the world.
Procter & Gamble is leading international force in cleaning products, laundry
detergents, pet food products and personal care products. Currently, the
 company is engaged in manufacturing, marketing and distributing of more than
200 products worldwide. However, in order to achieve and maintain such growth,
the company has faced with significant challenges and barriers associated with
operating in culturally diverse markets. It diversified its business operations
globally after the Second World War through exporting its brands, products and
marketing policies to the Western Europe, originally with substantial prosperity.

RELATED DIVERSIFICATION

 ADIDAS
The Adidas group has one of the most diverse product portfolios in the
sporting goods industry over the past several years. Through several acquisitions
and mergers, the company has brought together different brands with different
sport interests to develop itself into a multifaceted powerhouse organization. The
Adidas Group practices the related diversification strategy, in which it introduces
new products to the market that are all related to each other in some way. Some
of the benefits of a related diversification strategy include; creating a synergy
within the business, increases market shares and it improves product production.
As it stands today, The Adidas Group is composed of several different product
lines, that all relate to one another.

 HONDA
Honda Motor Company provides a good example of leveraging a core
competency through related diversification. Although Honda is best known for its
cars and trucks, the company started out in the motorcycle business. Through
competing in this business, Honda developed a unique ability to build small and
reliable engines. When executives decided to diversify into the automobile
industry, Honda was successful in part because it leveraged this ability within its
new business. Honda also applied its engine-building skills in the all-terrain
vehicle, lawn mower, and boat motor industries. Honda Company took the
decision of leveraging the core competency of the company in the automobile by
 producing the other vehicles for the other industries like the all-terrain vehicle,
lawn mower, and motor boat industries besides motorcycles, car, and truck.
Thus, we can conclude that the Honda Company's diversification strategy was
very successful that help the company in expanding its business into many fields
and industries including the boat motors just because of its capability of having
the strong engine.

UNRELATED DIVERSIFICATION

 THE GOKONGWEI GROUP

The Gokongwei group (Gokongwei) may be considered as historically the
most aggressive diversifier among the business groups. Indeed, it may be said
that the Gokongwei group entered nearly all the notable business areas seen in
Philippines since the 1950s During the 1990s, Gokongwei increasingly expanded
into major unrelated fields under JG Summit Holdings, which was organized in
1990. In 1992, Gokongwei entered the power generation business as a partner of
the Lopez’s in First Philippine Power Corporation. Digital Telecommunications
Philippines (Digitel) was acquired shortly after. In 1994, JG Summit
Petrochemical Corporation was organized to manufacture polyethylene and
polypropylene for plastic packaging materials. In 1996, Cebu Pacific started
competing in the domestic airline business. The continued success of the
Gokongwei group in running such a large and diverse group of enterprises is
remarkable. While it is true that some businesses have been closed down and
others are not yet clearly profitable, Gokongwei businesses as a whole appear to
be in sound financial health and to have strong competitive positions in their
fields.

 THE METRO PACIFIC GROUP

Metro Pacific is the investment arm in the Philippines of First Pacific of
Hong Kong, owned by the Salim group of Indonesia and managed by Manuel V.
 Pangilinan. Before the 1997 financial crisis, it went into an extensive unrelated
diversification through acquisitions strategy in the Philippines. Its acquisitions
included, but were not limited to, the following: (1) Telecommunications (e.g.,
Smart); (2) Packaging (e.g., Stengel); (3) Shipping (e.g., Negros Navigation); (4)
Confectionery (e.g., Goya Products); (5) Banking (e.g., PDCP); and (6) Drug
Distribution (e.g., Marksman). Of all these acquisitions, it can be argued that
only Smart turned out to be a real success. Pursuing unrelated diversification
even further, the group entered the mining industry. First Pacific acquired the
controlling interest in Phelix Mining, the largest mining company in the
Philippines.

RETRENCHMENT

 COCA - COLA
The retrenchment program is part of Coca-Cola's larger 'Beverages for
Life' restructuring strategy and includes plans to cut the number of operating
units from 17 to only nine across four regions to reallocate resources to only the
most popular products. For businesses that have not grown during a definite
period of time, Coca-Cola will use a Retrenchment strategy to offer a number of
different ways for these businesses, such as cutting budgets for some
departments. manufacturing, marketing, R&D, eliminating operations, or selling
out whole unit to private investors. Coke’s restructuring plan comes as the
company streamlines its drink portfolio to focus on larger and more popular
brands. The overall move is in response to Coca-Cola’s falling sales amid the
COVID-19 pandemic, which has significantly strained businesses that depend on
large social gatherings. About half of the company’s sales are generated at
public events, such as sporting events, concerts and movie screenings.

 TOYOTA
Toyota finds itself in a situation where their profit is declining, it would
have to purse this strategy. Declining profits can result from a variety of reasons,
including a decline in sales, adverse economic conditions, increased competition,
 products becoming outdated ineffective production and distribution processes
and poor management. A retrenchment strategy focuses on improving the unique
competencies of the organization in order to break the downward twist with
regards to sales and profits. Activities focus on ways to decrease costs and
assets in order to become stable with the financial condition of the organization
and to put the organization on a path of recovery. Activities often include the
selling of tangible assets, the outsourcing of activities that are not the core
competencies of the organization, decreasing of personnel and limitation of
perks. Organizations that follow turnaround strategies often employ new
managers with new perspectives and specialized skills to facilitate dramatic
changes like restructuring.

DIVESTITURE

 THE AYALA GROUP

Ayala Corporation (Ayala) is the oldest and one of the largest holding
companies in the Philippines, with assets in excess of Ph. 196 billion in 2007. Its
main affiliates are Ayala Land (ALI), Bank of the Philippine Islands (BPI), Globe
Telecommunications (Globe), and Manila Water Company—all of which are
listed in the Philippine Stock Exchange (PSE). Ayala owns a significant interest
both in the Philippine automotive industry, being the local joint venture partner of
Japan‐based companies Honda Motors and Isuzu Motors, and in hotel
operations. Previously, it also owned the food company, Pure foods, but divested
from this business by selling the same to San Miguel Corporation in 2001.
Besides completely divesting from Pure foods, Ayala has also recently sold
significant portions of its stock holdings in Globe, ALI, BPI, and even Ayala
Corporation itself. In an interview with Bloomberg in late 2007, Jaime August
Zober identified two areas that represent the new diversification targets of Ayala:
Business Process Outsourcing (BPO) and international property development.

 WEYERHAEUSER
 Since 2004, Weyerhaeuser has divested operations totaling more than $9
billion and used the capital raised and the management resources released to
transform itself from a traditional pulp-and-paper company into a leader in timber,
building materials, and real estate. In the process, Weyerhaeuser has produced
some of the highest returns in its sector. Research shows that the most effective
divestors follow four straightforward rules: They set up a dedicated team to focus
on divesting. They avoid holding on to businesses that are not core to their
portfolio—no matter how much cash they may generate. They make robust de-
integration plans for the businesses they intend to sell. And they develop a
compelling exit story to use internally and externally, taking the buyers’ and
employees’ perspectives very much into account.

LIQUIDATION

 STEEL CORPORATION
The move to liquidate Steel Corp. is seen as a way to resolve the
company's outstanding financial obligations to a consortium of creditor-banks,
which include Planters Bank, China bank, Land Bank of the Philippines, BDO
and DEG. The steel manufacturer has failed to comply with the provisions of the
rehabilitation plan and with the orders of the rehabilitation court. The company
has also failed to achieve the targets in the approved rehabilitation plan. The
court's liquidation order declared Steel Corp. as insolvent and dissolved, and
ordered the sheriff to take possession and control of all the properties of the
debtor, except those that may be exempt from execution. It also directed
payments of any claims and conveyance of any property due debtor SCP to the
liquidator; prohibiting payments and transfer of any property by SCP; directing all
creditors to file their claims with the liquidator within the period set by the rules of
procedure; and, authorizing the payment of administrative expenses as they
become due.

 MF GLOBAL
 Under the stewardship of the former senator and governor of New Jersey,
Jon Corzine, MF Global collapsed into bankruptcy after investors became
startled by the firm’s exposure to $6.3bn of European sovereign debt. The failure
of the firm, the eighth largest bankruptcy in US history, became all the more
controversial when it emerged that $1.6bn was missing from the accounts of MF
Global’s commodities customers. In the aftermath of MF Global’s insolvency, Mr.
Corzine and a number of other executives were ordered to appear at multiple
congressional hearings. The controversial European bonds purchased by the
firm were not, however, the only reason behind the collapse of MF Global.
Indeed, the bonds which so distressed investors, customers and ratings agencies
recently matured, finally paying out. Thankfully for the financial sector, however,
the impact of MF Global’s insolvency has not been as disastrous as originally
feared.