Assignmen

t on
Growth
Strategy

SUBMITTED BY:
Nitin Rana
ROLL NO 26 (SECA)
Vertical integration

Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream
buyers. Contrary to horizontal integration, which is a consolidation of many firms that handle the
same part of the production process, vertical integration is typified by one firm engaged in
different parts of production (e.g. growing raw materials, manufacturing, transporting,
marketing, and/or retailing).
There are three varieties: backward (upstream) vertical integration, forward (downstream)
vertical integration, and balanced (both upstream and downstream) vertical integration.
• A company exhibits backward vertical integration when it controls subsidiaries
that produce some of the inputs used in the production of its products. For example, an
automobile company may own a tire company, a glass company, and a metal company.
Control of these three subsidiaries is intended to create a stable supply of inputs and
ensure a consistent quality in their final product. It was the main business approach of
Ford and other car companies in the 1920s, who sought to minimize costs by
centralizing the production of cars and car parts.
• A company tends toward forward vertical integration when it controls distribution
centers and retailers where its products are sold.
• Balanced vertical integration means a firm controls all of these components, from
raw materials to final delivery.
The three varieties noted are only abstractions; actual firms employ a wide variety of subtle
variations. Suppliers are often contractors, not legally owned subsidiaries. Still, a client may
effectively control a supplier if their contract solely assures the supplier's profitability.
Distribution and retail partnerships exhibit similarly wide ranges of complexity and
interdependence. In relatively open capitalist contexts, pure vertical integration by explicit
ownership is uncommon -- and distributing ownership is commonly a strategy for distributing
risk.

Carnegie Steel
One of the earliest, largest and most famous examples of vertical integration was the Carnegie
Steel company. The company controlled not only the mills where the steel was manufactured but
also the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships
that transported the iron ore and the railroads that transported the coal to the factory, the coke
ovens where the coal was cooked, etc. The company also focused heavily on developing talent
internally from the bottom up, rather than importing it from other companies. Later on, Carnegie
even established an institute of higher learning to teach the steel processes to the next generation.

American Apparel

American Apparel is a fashion retailer and manufacturer that actually advertise itself as vertically
integrated industrial company. The brand is based in downtown Los Angeles, where from a
single building they control the dyeing, finishing, designing, sewing, cutting, marketing and
distribution of the company's product. The company shoots and distributes its own
advertisements, often using its own employees as subjects. It also owns and operates each of its
retail locations as opposed to franchising. According to the management, the vertically integrated
model allows the company to design, cut, distribute and sell an item globally in the span of a
week. The original founder Dov Charney has remained the majority shareholder and CEO. Since
the company controls both the production and distribution of its product, it is an example of a
balanced vertically integrated corporation.

Reliance

The Indian petrochemical giant Reliance Industries is a great example of vertical integration in
modern business. Reliance's backward integration from textiles into polyester fibers and further
into petrochemicals was started by Mukesh Ambani . Reliance has entered the oil and natural gas
sector, along with retail sector. Reliance now has a complete vertical product portfolio from oil
and gas production, refining, petrochemicals, synthetic garments and retail outlets.

Hero Honda

Throughout the years of enormous growth, the Group Chairman, Mr. Lall has actively looked at
diversification. A considerable level of vertical integration
Vertical integration
In microeconomics and management, the term vertical integration describes a style of
management control. Vertically integrated companies are united through a hierarchy with a
common owner....
in its manufacturing activities has been ample in the Group's growth and led to the establishment
of the Hero Cycles Cold Rolling Division, Munjal and Sunbeam Castings, Munjal Auto
Components and Munjal Showa Limited amongst other component-manufacturing units.

Then there were the expansion into the automotive segment with the setting up of Majestic Auto
Limited, where the first indigenously designed moped, Hero Majestic, went into commercial
production in 1978. Then came Hero Motors which introduced Hero Puch, in collaboration with
global technology leader Steyr Daimler Puch of Austria. Hero Honda Motors was established in
1984 to manufacture 100 cc motorcycles.

The Hero Group also took a venture into other segments like exports, financial services,
information technology, which includes customer response services and software development.
Further expansion is expected in the areas of Insurance and Telecommunication.

The Hero Group's phenomenal growth is the result of constant innovations, a close watch on
costs and the dynamic leadership of the Group Chairman, characterized by a culture of
entrepreneurship, of right attitudes and building stronger relationships with investors, partners,
vendors and dealers and customers.

Horizontal Integration

The term horizontal integration describes a type of ownership and control. It is a strategy used by
a business or corporation that seeks to sell a type of product in numerous markets. Horizontal
integration in marketing is much more common than vertical integration is in production.
Horizontal integration occurs when a firm is being taken over by, or merged with, another firm
which is in the same industry and in the same stage of production as the merged firm, e.g. a car
manufacturer merging with another car manufacturer. In this case both the companies are in the
same stage of production and also in the same industry.
A monopoly created through horizontal integration is called a horizontal monopoly.
A term that is closely related with horizontal integration is horizontal expansion. This is the
expansion of a firm within an industry in which it is already active for the purpose of increasing
its share of the market for a particular product or service.

White Consolidated Industries

White consolidated industries which expanded in the refrigerator and freezer market
through a grand strategy of horizontal integration by acquiring kelvinator appliances, the
refrigerator product division of Bendix westinghouse automotive air brake, and frigidaire
appliance from general motors.
Chilcott laboratories

Warner Lambert’s acquisition of Parke Davis which reduced competition in the ethical
drugs field for chilcott laboratories.

Blue Star India (BSI)

BSI launched an extensive partner program last year. The objective was to not only extend its
reach across markets but also enlarge its portfolio in terms of domain expertise. The company
plans to continue with this strategy to expand its avenues.
BSI has also partnered with Iris Logic, comprising a group of senior sales and technical
professionals and domain experts. The partnership has already resulted in huge benefits for the
company, including 7-8 new clients, which is expected to double over the coming months.
Another strategy that the company is betting on is its partnership with various business
associates, especially in areas where the company does not have a direct presence. BSI has
signed up with local business associates in Austria and Germany to provide a one-stop shop for
customers.
Other than this, the company is opening offices in newer geographies. Other than the subsidiary
in Malaysia, the company has also forayed into the European market. Currently, the company
has subsidiaries in the US and UK, and is also looking at Japan and the rest of Europe as
potential markets. Elaborates Bhalla, “Almost every major European company has a presence in
India. Even if we get hold of a small percentage of that base it can significantly add to the
company’s coffers.” Currently, European business contributes close to 30 percent of the
company’s revenues.

Mahindra and Mahindra Limited

Over the years, Mahindra has developed their horizontal integration concept. Spanning many
markets and industries, Mahindra has become one of India's largest conglomerate firms.
Mahindra and Mahindra Limited - Farm equipment
The Farm Equipment Sector has been the market leader in India for twenty-two years. It designs,
develops, manufactures, and markets tractors, associated implements, and industrial engines. In
tractors it ranks fourth in the world and number one in India. The sector recently won the
prestigious Deming Prize for Total Quality Management, the only tractor company in the world
and the fourth company in India to do so. It has 450 dealers for sales, service, and spare parts
reaching customers throughout India, along with a network of 140 dealers in the United States
though a subsidiary, Mahindra USA. The sector exports roughly 10% of its production to the
Middle East, Western Europe, CIS, South Asia, Australia, China, and to the US via its American
assembly plants.
Mahindra and Mahindra Limited - Trade & financial
The Trade & Financial Sector includes an import-export arm, a steel service center in the United
Arab Emirates, and the largest rural private finance company in India, which offers loans and
insurance to underserved rural areas. Mahindra Systems & Automotive Technology designs,
engineers, and produces material for major auto manufacturers in India.
Mahindra and Mahindra Limited - Infrastructure
The Infrastructure Development Sector develops commercial and residential real estate
properties and infrastructure, manages India’s first fully integrated Business City in a Special
Economic Zone public-private partnership, and includes Mahindra Holidays & Resorts India Ltd.
thirteen resorts and over forty thousand members and is beginning to target overseas markets.
Mahindra and Mahindra Limited - Telecom and software
In the Telecom & Software Sector, Mahindra British Telecom is India’s top telecom software
solutions company and provides cutting-edge IT solutions to the global telecommunications
industry. A global office network of three thousand professionals spanning four continents serves
clients that include British Telecom, Alcatel, Ericsson, Vodafone, Qatar Telecom, and eServe
Global. Also in TSS, the consulting firm Bristlecone Ltd. is a leading provider of extended
supply chain and business process solutions.

Diversification

Diversification is a form of growth marketing strategy for a company. It seeks to increase

profitability through greater sales volume obtained from new products and new markets.
Diversification can occur either at the business unit level or at the corporate level. At the
business unit level, it is most likely to expand into a new segment of an industry which the
business is already in. At the corporate level, it is generally and it is also very interesting entering
a promising business outside of the scope of the existing business unit.

Virgin Media

Virgin Media moved from music producing to travels and mobile phones example Virgin
Atlantic Airlines and Virgin Mobiles.

Walt Disney

Walt Disney moved from producing animated movies to theme parks and vacation properties
example Disney Amusement Park in Sydney Australia.
Canon

Canon diversified from a camera-making company into producing whole new range of office
equipment example canon printers, etc.

Godrej Group

Godrej Group is one of the largest conglomerates in India, involved in various industries that
include appliances, precision equipment, machine tools, furniture, healthcare, interior solutions,
office equipment, food-processing, security, materials handling and industrial storage solutions,
construction and information technology. Its products include security Systems and Safes,
Typewriters and Word processors, Rocket Launchers, Refrigerators and Furniture, Outsourcing
Services, Machine Tools and Process Equipment, Cosmetics and Detergents, Engineering
Workstations, Medical Diagnostics and Aerospace Equipment, Edible Oils and Chemical,
Mosquito Repellents, Car perfumes, Chicken and Agri-products, Material Handling Equipments
Like FORKLIFT Trucks, Stackers, Tyre handlers, Sweeping machines, access equipments etc.
The Group is headed by Mr. Adi Godrej & Mr. Jamshyd Godrej.

Shriram Fibres Ltd

In nylon industrial yarn, synthetic industrial fabrics, nylon tyre cords,
fluorochemicals, fluorocarbon refrigerant gases, ball and needle bearings,
auto electrical, hire-purchase and leasing, and financial services.

Market Penetration
A market penetration strategy means that the company will aim to sell its
existing products within markets that it already serves but in greater
numbers. This will entail a greater effort in sales and marketing to achieve
higher sale of product, hence aiming for a greater market share.

Toyota
Strategies in Europe, the company expanded its presence in the European
car market. The case discusses the success of Toyota in localizing its
strategies in tune with the needs of the European car market. It also
analyzes the growth strategies of Toyota in Europe in the wake of currency
fluctuations and the new needs of the market.
Matrix Laboratories
Road to Success where the company despite expanding its operations into
other countries focused on the Indian Pharma Industry, thereby moving up
the value chain.

McDonald

McDonald's is always within the fast-food industry, but frequently markets new burgers.

Pacific Andes International Limited

The company achieved considerable growth in seafood and vegetable
business within a short span expanding into other countries. It also increased
its global market share and gained a sustainable competitive advantage
through synergy. The case explains as to how Pacific Andes amidst crisis like
ban on the import of its food products surged forward successfully.

SAMSUNG

The company is achieving considerable growth and market share by

producing Television Sets from normal T.V’s to L.C.D’s and Plasmas. The
company is basically into television production and even targeting rural
areas with new promotional schemes and offers for the people.

Parle

The company is basically into producing biscuits, chocolates, mineral water,

etc. But their main market share comes through Parle-G Biscuits which is
cheaply available for the common man. They basically rule the Indian Biscuit
Industry and set up various production houses in India. Parle-G biscuits are
the most consumed biscuits in the world and they stand first in production as
well as profitability. The second spot is occupied by an American Company.

Bata

Bata from the very start, has been a leader in Indian market for producing
shoes. They occupy a good amount of market share in the shoe industry.
They got a huge consumer base in India and target every individual and
personality related to sex and age. They have production plants in various
parts of India.

Links:
1. www.wikipedia.org

2. www.scribd.com

3. www.mba-tutorials.com

4. www.books.google.co.in

5. Newspapers

6. Business trip to Parle factory organized by NDIM

7. Friends
Thank You