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There is always strategy in every aspect of life. Strategy is often related to military
term. Based on Merriam-Webster dictionary, Strategy roots from Greek’s word stratēgia in
general, originally from stratēgos, which the meaning is the science and art of employing the
political, economic, psychological, and military forces of a nation or group of nations to
afford the maximum support to adopted policies in peace or war or, the science and art of
military command exercised to meet the enemy in combat under advantageous conditions.
While Wikipedia states that a strategy is a plan of action designed to achieve a particular
goal. Despite the meaning, actually strategy is relevant to many areas of life, from getting
the right date for the school disco to running a business. For example, the goal of a company
may be to increase profits: the strategy chosen might be to undertake an advertising
campaign; invest in a new computer system; or adjust pricing. Then, in business, strategy
represents the actions to be taken to accomplish long-term objectives.
Fred R. David in Strategic Management (Concept and Cases) defined alternative
strategies that an enterprise could pursue into eleven categories. Those Categories are
forward integration, backward integration, horizontal integration, market penetration,
market development, product development, related diversification, unrelated
diversification, retrenchment, divestiture and liquidation.
Alternative Strategies :
Vertical Integration Strategy is means to gain control over distributors, suppliers and
competitors.
1. Forward Integration – gaining ownership or increase control over distributor n
retailer.
2. Backward Integration – gaining ownership or increase control over supplier.
3. Horizontal Integration – gaining ownership or increase control over competitor
through mergers, acquisitions and take over among competitors.
Intensive Strategies is competitive position with existing product of the organization that
required intensive efforts to improve.
4. Market Penetration – increase market share with greater marketing efforts (no
change in product or market) through increase the number of salespersons,
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advertising expenditure, offering extensive sales promotion items or publicity effort
(no saturation).
5. Market Development – introducing present product to new geographic area.
6. Product Development – improving or modifying present product with large research
and development expenditure.
Diversification Strategies relates to value chain in order to transfer valuable expertise,
combine activities or businesses to lower down cost, exploiting common use of another
brand, mutualism collaboration.
7. Related Diversification – new but related product.
8. Unrelated Diversification – different industry for company potentially provide high
return on investment through hunt acquire company whose asset are undervalued,
financially distressed, high growth prospective but short on investment capital.
Defensive Strategies
9. Retrenchment – regroup through cost and asset reduction to reverse declining sales
and profits by selling off assets, pruning product line, closing marginal business,
obsolete factory, reduce employee, instituting expense control system.
10. Divestiture – selling division or part of the organization to raise capital for further
strategic acquisition or investment.
11. Liquidation – sell all parts of the company because of bankruptcy.
The combination of two from those eleven strategies may take place to meet the objective,
but sometimes it is rather risky.
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SUBSTANCE ANALYSIS
These are following ten cases and strategies related to their stance. It states within the
analysis of backgrounds, facts surround and also reason picking up those strategies.
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2. KB Toys filed for bankruptcy and announced plans to close half of its 1,217 stores in
the USA. Toys R Us is the #1 specialty toy retailer. KB is #2.
Background :
KB Toys (previously known as Kay Bee Toys) was a chain of mall-based retail toy stores
in the United States. It was founded in 1922 by the Kaufman brothers. KB operated 605
stores in 44 U.S. states, Puerto Rico as well as Guam. KB Toys operated three distinct
store formats: KB Toys, KB Toy Works, and KB Toys Outlet (aka Toy Liquidators). It was
privately held in Pittsfield, Massachusetts. KB Toys was owned by Big Lots and Melville
Corporation at one time.
Fact :
KB Toys filed for bankruptcy in five years, the chain was liquidated beginning in
December 2008. The sales were concluded by the end of January 2009. The Gordon
Brothers Group handled the liquidation of these stores. On February 9th 2009, KB
closed the remaining stores following the second bankruptcy filing in four years.
Strategy picked upon this case :
Divestiture – selling division or part of the organization to raise capital for further
strategic acquisition or investment
Reasons :
In this case, the description has just stated that KB Toys planned to close half of its
stores in the USA (while the fact, KB Toys had already done liquidation). While at that
time, KB Toys wished might gain capital to survive through divestiture.
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than 2,600 stores outside the United States, Blockbuster is recognized as a world leader
in rentable home entertainment (video and DVD).
Fact :
Viacom's getting out of the video rental business. At the end of 2004, Viacom Inc., the
media and entertainment conglomerate, which owns an 82 percent stake in
Blockbuster, the video and DVD rental chain, received $738 million in cash from
Blockbuster Inc.
Strategy picked upon this case :
Retrenchment – regroup through cost and asset reduction to reverse declining sales
and profits by selling off assets, pruning product line, closing marginal business,
obsolete factory, reduce employee, instituting expense control system.
Reasons :
Viacom's getting out of the video rental business through perspicuously divorced itself
from Blockbuster by spinning it off to its shareholders. The strategy picked by Viacom
that selling off its marginal business, Blockbuster called retrenchment.
4. RJR and Brown & Williamson, two large tobacco firms, merged.
Background :
R.J. Reynolds Tobacco Company (R.J. Reynolds) is the second-largest tobacco company
in the United States. R.J. Reynolds' largest plant – Tobaccoville, a 2 million-square-foot
facility constructed in 1986 – is located in the town of Tobaccoville, near Winston-
Salem. The company also has tobacco-sheet manufacturing operations and a significant
research-and-development facility in Winston-Salem.
Brown & Williamson was an American tobacco company and subsidiary of the giant
British American Tobacco, that produced several popular cigarette brands. Brown &
Williamson had its headquarters at Louisville, Kentucky.
Fact :
On July 30, 2004, Brown & Williamson merged with R.J. Reynolds, creating a new
publicly traded parent company, Reynolds American Inc. Both two companies were
uniting their U.S. operations as a way to weather an onslaught of discounted brands
and lawsuits.
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Strategy picked upon this case :
Horizontal Integration -- gaining ownership or increase control over competitor through
mergers, acquisitions and take over among competitors.
Reasons :
It is clearly states R.J. Reynolds Tobacco Company get along with Brown & Williamson
are merged. It is surely become horizontal integration strategy for both company to
take over among competitors.
5. FedEx acquired Kinko’s for $2,5 billion in order to gain thousands of retail shipping
locations.
Background :
FedEx provides customers and businesses worldwide with a broad portfolio of
transportation, e-commerce and business services. FedEx offers integrated business
applications through operating companies competing collectively and managed
collaboratively, under the respected FedEx brand. FedEx offers delivery services in
several types, logistics services, marketing and information technology (IT) services for
the other FedEx divisions, copying and digital printing, professional finishing, document
creation, Internet access, computer rentals, videoconferencing, signs and graphics,
notary, direct mail, Web-based printing, and FedEx shipping.
Kinko’s is a chain of stores that provide a retail outlet for all FedEx shipping, as well as
printing, copying, and binding services. Many stores also provide video conferencing
facilities. The primary clientele consists of small business and home office clients. There
are more than 1800 centers in Asia, Australia, Europe, and North America. With over $2
billion in revenues, the company is the 7th largest printing company in North America.
Kinko’s is well known for making photocopies, signs and banners, printing and mailing
advertisements and notaries public.
Fact :
In February 2004 Kinko’s was bought by FedEx for $2.4 billion and then became known
as FedEx Kinko’s Office and Print Centers. Currently, Brian Phillips is the President and
Chief Executive Officer, following Ken May’s departure on March 7, 2008. The
acquisition was made to expand FedEx retail access to the general public.
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Strategy picked upon this case :
Forward Integration – gaining ownership or increase control over distributor n retailer.
Reasons :
FedEx gained Kinko’s, its retail outlet for all FedEx shipping, ownership to expand FedEx
retail access to the general public. This strategy is called forward integration.
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and territories. Marriott Lodging operates and franchises hotels under the following
brands: Marriott Hotels & Resorts, JW Marriott Hotels & Resorts
Renaissance Hotels & Resorts, Courtyard by Marriott, Residence Inn by Marriott,
Fairfield Inn by Marriott, Marriott Conference Centers, TownePlace Suites by Marriott,
SpringHill Suites by Marriott, Marriott Vacation Club, Horizons by Marriott Vacation
Club, The Ritz-Carlton Hotel Company, L.L.C., The Ritz-Carlton Club, Marriott ExecuStay,
Marriott Executive Apartments and Grand Residences by Marriott.
Strategy picked upon this case :
Backward Integration – gaining ownership or increase control over supplier.
Reasons :
A furniture manufacturer produces high quality customized case goods for large hotel
chains. In other term, a furniture manufacturer is like a supplier for lodging firm. The
acquisition made by Marriott International, Inc. for a furniture manufacturer indicate a
backward integration strategy.
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Strategy picked upon this case :
Market Development – introducing present product to new geographic area.
Reasons :
USA’s market had already saturated for The Lone Star Steakhouse to develop. Then it
came up with market development strategy to expand its market to Europe, the new
land of opportunity.
9. IBM began opening its own chain of retail stores to exclusively sell its own product.
Background :
IBM's character has been formed over nearly 100 years of doing business in the field of
information-handling. Nearly all of the company's products were designed and
developed to record, process, communicate, store and retrieve information -- from its
first scales, tabulators and clocks to today's powerful computers and vast global
networks. IBM helped pioneer information technology over the years, and it stands
today at the forefront of a worldwide industry that is revolutionizing the way in which
enterprises, organizations and people operate and thrive. The pace of change in that
industry, of course, is accelerating, and its scope and impact are widening. In these
pages, you can trace that change from the earliest antecedents of IBM, to the most
recent developments. You can scan the entire IBM continuum from the 19th century to
the 21st or pinpoint -- year-by year or decade-by-decade -- the key events that have led
to the IBM of today. We hope that you enjoy this unique look back at the highly
textured history of the International Business Machines Corporation.
Fact :
At the beginning February 2009, Microsoft will open its own chain of stores, following
Apple's lead by giving itself and its brands a bigger presence on the front lines of the
retail industry. IBM so far won’t.
Strategy picked upon this case :
Market Penetration – increase market share with greater marketing efforts (no change
in product or market) through increase the number of salespersons, advertising
expenditure, offering extensive sales promotion items or publicity effort (no
saturation).
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Reasons :
IBM picked market penetration as its strategy to increase market share by exclusively
sell its own product through its own chain of retail stores.
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expenditure, offering extensive sales promotion items or publicity effort (no
saturation).
Reasons :
Advertising is one of market penetration strategy. It may increase market share with
greater marketing efforts without changing the products which spend higher cost.
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CLOSING
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