- Explain each of the following strategies and indicate situations when each might be effective strategic choice:
- Market penetration
- Unrelated diversification
- Horizontal integration
The theme for market penetration strategy is to increase market share for an existing product in an existing market. The marketing efforts and the advertising expense for companies tend to increase greatly because the company would need to increase customer awareness in a mass market so that the product is deeply rooted in the existing market. Furthermore, the company applying the particular strategy enables it to increases the number of salespersons to deliver pitch to consumers, extensive sales promotion, and increasing efforts for viral marketing(Strategic Management, pp. 141-142).
Market penetration could be implemented in a situation where the existing marketing is in the phase of growth and there is enough room and potential for companies to enter the market. Furthermore, it could be used in a situation where competitors in the industry are not performing well, but the overall sales in the industry have been on the verge of rise. Moreover, in a situation where prospects for sales and revenues are high and where there is a competitive advantage in implementing economies of scale strategy, the company shall apply market penetration strategy(Strategic Management, pp. 141-142).
A diversification strategy in which an organization capitalizes on increasing its business portfolio for the purpose of achieving exceptional financial performance. The company searches for various opportunities in different industries so that they could diversify regardless of considering a value chain which strategically fits the organization(David, 2013, pp. 144-145).
Companies search for a potential business that reveals high return on investments. Mostly, companies acquire those companies that have the potential regarding their business model but do not have the financial capital to exist in the market. Companies acquire these businesses to diversify their businesses(David, 2013, pp. 144-145).
The particular strategy could be implemented in a situation when the performance of the existing products of the company would improve due to the addition of unrelated products. Furthermore, it could also be used in a situation where an organization competes in an industry where there is limited or no growth, therefore in order to increase revenues the company can perform unrelated diversification to earn revenues from different sources(David, 2013, pp. 144-145).
The concept is defined as a strategy which a company applies in order to gain a strong hold over its competition. This strategy requires the use of acquisition, mergers, joint ventures, and other various strategies to have their say in the market. This strategy has become the most common in the market and is used in the situation when a company needs to gain a monopolistic advantage(David, 2013, p. 141).
Furthermore, it also occurs when a company I competing in a growing industry, while it needs to acquire various companies in order to expand quickly in the industry. When there is a need of economies of scale and the company lacks in the production capabilities in order to increase production so that the demand of the product could be made along with the decreased prices(David, 2013, p. 141).
Differentiation is referred to as the strategy in which a company offers a slightly differentiated product or service than its competition. However, this does not mean that the company can gain competitive advantage through the use of differentiation strategy, but it could be used to identify from the competitor’s products and the company’s products. When a successful differentiation strategy is applied by the company, then it would be able to achieve lower cost, enhanced features, convenience for its customers, improved service or product, and many other related features(David, 2013, pp. 153-154).
The situation in which the differentiation strategy is used when a buyer or a consumer perceives that a differentiation from another company’s product provides them with greater value. Furthermore, it could also be used in a situation where there is market saturation with limited growth and a presence of various competitors. Therefore, the product offering in the market would be similar to that of a competitor. The company can construct slight variations which could enable it to increase customer value through differentiation strategy(David, 2013, pp. 153-154)…………………….
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