1.

Identify a business group such as Reliance that has relied extensively on

backward integration for expansion. Analyze the reasons why the business
group you chose did so and whether it is likely to continue doing so in the
foreseeable future.

Ans 1 - Starbucks has relied extensively on backward integration for the

expansion .

Starbucks Corporation  is an American

multinational chain of coffeehouses and roastery reserves headquartered
in Seattle, Washington. As the largest coffeehouse in the world, Starbucks is
seen to be the main representation of the United States' second wave of
coffee culture. Since the 2000s, third wave coffee makers have targeted
quality-minded coffee drinkers with hand-made coffee based on lighter
roasts, while Starbucks nowadays uses automatic espresso machines for
efficiency. The company operates 30,000 locations worldwide in over 77
countries, as of early 2020. Starbucks locations serve hot and cold drinks,
whole-bean coffee, microground instant coffee known as
VIA, espresso, caffe latte, full- and loose-leaf teas including Teavana tea
products, Evolution Fresh juices, Frappuccino beverages, La
Boulange pastries, and snacks including items such as chips and crackers;
some offerings (including their annual fall launch of the Pumpkin Spice
Latte) are seasonal or specific to the locality of the store.

Backward Integration at Starbucks

The Wall Street Journal reports that Starbucks has acquired a 600 acre coffee farm in
Costa Rica.  You might ask: Why is Starbucks backward integrating?  They probably do
not think they can operate the supply chain more efficiently through vertical
integration.   They certainly aren't going to obtain a significant amount of coffee
beans through one 600 acre farm.  What are they doing?

They are learning, experimenting, and innovating.  It's a terrific reason to engage in

partial/limited backward integration.   Starbucks CEO Howard Schultz explained, "We
are talking about doing innovative things we would not be able to do without this
farm."   Craig Russell, a Starbucks senior vice president, explained that the company
would try to identify ways to address a fungus problem that is affecting coffee farm
yields in Central America: "It's a dynamic situation and we will absolutely use this
farm for testing different methodologies and ways to use new types of coffee trees
we've developed that have become more disease- and rust-resistant."   Finally and
most importantly, Starbucks intends to share what they learn about the fungus with
other farmers, so that coffee bean production improves overall for the industry.   

This example demonstrates that a small bit of vertical integration (backward) can be
very effective as a means of innovation and experimentation.  Many companies simply
view vertical integration from the perspective of its immediate effect on the bottom
line.   Ironically, many of those efforts actually decrease profits much to the chagrin
of senior executives.   Of course, many of those efforts are not small experiments. 
They are bold moves down without a good pilot to test the concept.  In this case, a
small bit of experimentation could yield large improvements in profits over time.  

The value chain refers to all of the various steps that go into the production and sale of the
product. The number of these steps controlled by the company in question determines its
degree of vertical integration. Companies can both forward and backward integrate. In
forward integration, the company gains control of steps closer to the interaction with the
final customer. In backward integration, the company adds control of steps that must occur
in order for the company to create its product. Starbucks has demonstrated backward
integration by farming its own beans. On SeekingAlpha.com, Alex Cho describes that not only
does the acquisition of the farming portion of the equation allow the company to actively
manage the supply of beans but also serves to hedge against alterations in coffee bean prices.

Backward vertical integration can be defined as a firm increasing the number of value chain
stages that move them farther away from a product’s or service’s ultimate
customer.Starbucks has recently implemented a strategy of backward vertical integration as
they have just purchased a 600-acre coffee bean farm in Costa Rica.  By doing this, Starbucks
hopes to develop proprietary coffee varietals, which could lead to new blends in addition to
the 55 blends that are currently being offered.  Furthermore, the new farm will facilitate
Starbucks with research and development to offer new hybrid coffee beens, and the
opportunity to study specific diseases that are devastating coffee been crops around the
world.   

Current Key Strategies Employed by Starbucks:

Horizontal Integration: This strategy is employed by Starbucks to control its competition and
reach new customers. It has used this acquisition of Seattle’s best, Torrefazione Italia, and
Coffee people to accomplish this. It tied up long terms contract with varius other stronger
brands to develop and penetrate other product lines.

Q2 Explain the BCG matrix. Identify the following products of google company
in which quadrant of BCG matrix do they fall into: Google Search Engine,
Google Ads, Google Wallet, and Google Nexus Phone.
Ans 2 - The BCG Matrix (also known as the Boston Consulting Group analysis, the Growth-
Share matrix, the Boston Box or Product Portfolio matrix) is a tool used in corporate strategy to
analyze business units or product lines based on two variables:
 Relative market share and
 The market growth rate.
By combining these two variables into a matrix, a corporation can plot their business units
accordingly and determine where to allocate extra (financial) resources, where to cash out and
where to divest. The main purpose of the BCG Matrix is therefore to make investment
decisions on a corporate level. Depending on how well the unit and the industry is doing, four
different category labels can be attributed to each unit: Dogs, Question Marks, Cash Cows and
Stars.

 Stars

As the name suggests, this quadrant of the BCG Matrix indicates those products that are a huge hit
among the clientele. Products that are first-to-market or monopolies usually fall under this category.
However, producing stars at massive rates costs the business quite a lot of money. And at times it is
equal to the money that they get in as profits. Companies invest in stars as they eventually become
cash cows until the decline of their market growth.

 Cash Cows

Generating more profits than the money going into producing them, cash cows are the biggest
players for any business. They are generally identified as having a vast market share but seemingly
lower capacities of growth over time. Sometimes, cash cows can provide the extra cash needed to
turn question marks into market leaders, fund research and development, cover the administrative
cost of the company or pay the dividends to shareholders. Companies like to invest in cash cows to
keep the level of productivity undisturbed.

 Question Marks

Products or aspects of the business with high growth prospects but comparatively lower market
share are the question marks in BCG Matrix. They consume a lot of cash at the production stage but
bring in very few returns of significance. However, with the correct analysis of market factors and the
right kind of back-up, question marks can turned into stars, and eventually cash cows. Companies
only invest in question marks if they believe they have long-term potential. The wise move for
question marks with a questionable profit margin is to sell them off.

 Dogs
Finally, come the dogs or pets in the BCG matrix model. These do not take up much cash and do
not bring in any significant returns either. They have low market share and low growth rate. Usually,
these are cash traps for companies that have money tied up in them with almost no returns to show.
Hence it is best to do away with these at the earliest. Divestiture is the best way to deal with the
dogs, according to the BCG approach.

BCG METRIX OF GOOGLE

Cash Cow - The Search-Ad business is Google's Cash Cow, and at the moment makes
all the profit Google earns - they have a very large (dominant) market share, but over
time it is a slowing market (relative to the rapid growth of technology sectors and
under increasing competitive pressure). They are thus doing what every company is
advised to do in this position, ie to invest their surplus in faster growing industries
and so keep up the pace. To this end their rate of acquisition has been phenomenal,
not least because - by and large - their ability to launch their own successful products
has so far been pretty lacklustre (Buzz is just the most recent to join the list)
Google search engine is a Cash Cow . The google’s search engine generate more
cash then required . Google extract profit by investing as little cash as possible .
Google search engine is a mature , not growing or decline .They have a large market
share but due to more search engine like yahoo search engine the market share is
declining .
Star - Stars have a high market share and a high growth rate. They
can generate some profit, however, growth is at the expense of
money and these are cash consuming. The hope is that eventually
the stars will be transformed into cash cows.

Android (Google Nexus Phone) is a Star. They have a very high

market share in a high growth market but it is consuming money.

Question Mark – Google Wallet comes under the question mark .

Google Wallet has small market shares but in rapidly growing
markets.The strategic thinking is that the Google infrastructure will
be able to rapidly ramp up the growth of small companies.

Q3 . Compare and assess two industries of your choice in terms of key

environmental influences and competitive forces. What is competitive analysis
framework used for comparison