Ten Examples Of Strategies

INTRODUCTION

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.

1. JP Morgan Chase acquired Bank One for $60 billion. Background : JPMorgan Chase & Co. is a leading global financial services firm with assets of $2.2 trillion and operations in more than 60 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan, Chase and WaMu brands. While Bank One (6th largest bank, assets $320B) is formed from the 1998 merger of Banc One of Ohio and First Chicago Corporation. Fact : J.P. Morgan Chase & Co. had bought Bank One Corp. in a merger that has combined two of the biggest banks in the United States (in 2004). Strategy picked upon this case : Horizontal Integration – gaining ownership or increase control over competitor through mergers, acquisitions and take over among competitors. Reasons : J.P. Morgan Chase & Co. would had fallen to No. 3 after Bank of America Corp.'s buying $47 billion over FleetBoston Financial Corp. While Bank One ranked No. 6. That was why J.P. Morgan Chase & Co. dealt to buy Bank One to merge for increasing its position into second rank after Citigroup. J.P. Morgan Chase & Co. also got a strong retail and credit card presence with Bank One, the world's largest Visa card issuer. The way picked by J.P. Morgan Chase & Co. to pull its rank up is by horizontal integration with Bank One.

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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.

3. Viacom sold its 82 percent stake in Blockbuster. Background : Viacom serves an ever-growing population of kids, tweens, teens and adults who want their favorite media and entertainment. As a leading global entertainment content company, its prominent and respected brands includes the multiplatform properties of MTV Networks, BET Networks, Paramount Pictures and Paramount Home Entertainment. The Blockbuster Corporate Communications Department assists the media in providing company specific and home entertainment industry related information. With more

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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 WinstonSalem. 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.

6. Fishing Charters, Inc. acquired a local radio station. Background : Fishing Charters, Inc. is a company dedicated to it’s customers and captains in bringing them together. Fishing Charters, Inc. can accommodate from individuals to corporate group charters for freshwater bass fishing in Kissimmee/Orlando area or inshore saltwater fishing, for Snook, Redfish, Tarpon, and more in Fort Myers/Sanibel Island area, offshore fishing charters can produce Dolphin, Kingfish, Grouper, and Snapper and also offer Scenic/Eco and Nature Tours on Big Lake Tohopekaliga in Kissimmee, Florida. All of our captains are USCG licensed and have over 30 years experience in catching fish and showing our guest a good time. Strategy picked upon this case : 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. Reasons : Fishing Charters, Inc. tried to diversify its business through acquiring a local radio station that was indirectly related to its core business, fishing area. Fishing Charters, Inc. acquired the local radio station might be to ease its advertisement access of its events. The acquisition, no matter what reasons behind, shows the unrelated diversification strategy made by Fishing Charters, Inc.

7. Marriott acquired a furniture manufacturer. Background : Marriott International, Inc., is a leading lodging company. Today, Marriott International has about 3,100 lodging properties located in the United States and 67 other countries

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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.

8. Lone Star Steakhouse expanded into Europe. Background : Lone Star Steakhouse & Saloon, Inc. ("Lone Star" or the "Company") has positioned itself as "The Steak Company" which will operate three distinct steakhouse restaurant concepts consist of the mid-scale steak segment The Lone Star Steakhouse & Saloon restaurant and upscale steakhouse market, Del Frisco's Double Eagle Steak House ("Del Frisco's") and Sullivan's Steakhouse ("Sullivan's"). The Lone Star Restaurants are midpriced, full service casual dining restaurants which embrace a Texas-style concept featuring Texas artifacts and country and western music. The Lone Star Restaurants serve mesquite grilled steaks, ribs, chicken and fish. Fact : The Company currently owns and operates almost 300 Lone Star Restaurants spread over 32 states of USA. Internationally, the Company's Australian joint venture owns and operates 11 restaurants in Australia. The Company currently operates three Lone Star Restaurants in Europe in a joint venture agreement.

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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.

10. Avon doubled its advertising efforts worldwide. Background : As a top global brand and world leader in lipsticks, fragrances and anti-aging skincare, Avon continues to revolutionize the beauty industry by launching innovative, first-tomarket products using Avon-patented technology. Since 1886, Avon has been building bonds with women, offering them a dynamic earnings opportunity to achieve economic independence, accomplish their financial goals and transform their lives. Avon has been consistently recognized as one of the most admired companies and one of the best companies to work for, with a highly diverse global workforce of nearly 42,005 employees. Fact : Avon is now almost one year into its restructuring plan, which has seen a number of its distribution and manufacturing operations closed or consolidated. As part of the company's attempts to stay ahead in a market that continues to remain fiercely competitive worldwide, advertising will receive a lot more attention, with the budget increased by 50 per cent worldwide this year and set to double by 2008. The Avon’s CEO Jung also says that resources will also be plowed into the internet. Not only can the internet be used as a tool to reduce costs and speed up customer service, but it can also be used to help reach consumers that have traditionally been hard to penetrate particularly those in rural communities or in markets where the company is still trying to increase its penetration. Such a market is China, and with the company now racing to increase its presence in the market following the resumption of direct sales there at the start of the year, the internet is also likely to play an increasingly important part in the development of this rapidly growing market. 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

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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

To Conclude, Those Cases meet strategies are : 1. JP Morgan Chase acquired Bank One for $60 billion. Strategy picked upon this case is Horizontal Integration. 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. Strategy picked upon this case is Divestiture. 3. Viacom sold its 82 percent stake in Blockbuster. Strategy picked upon this case is Retrenchment. 4. RJR and Brown & Williamson, two large tobacco firms, merged. Strategy picked upon this case is Horizontal Integration. 5. FedEx acquired Kinko’s for $2,5 billion in order to gain thousands of retail shipping locations. Strategy picked upon this case is Forward Integration. 6. Fishing Charters, Inc. acquired a local radio station. Strategy picked upon this case is Unrelated Diversification. 7. Marriott acquired a furniture manufacturer. Strategy picked upon this case is Backward Integration. 8. Lone Star Steakhouse expanded into Europe. Strategy picked upon this case is Market Development. 9. IBM began opening its own chain of retail stores to exclusively sell its own product. Strategy picked upon this case is Market Penetration. 10. Avon doubled its advertising efforts worldwide. Strategy picked upon this case is Market Penetration. Those above strategies are chosen to meet the objective of each business firm. Identifying and analyzing strategy and reason behind helps us to broaden our view in this management strategic area, specifically in strategy formulation phase.

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