B.C entrepreneur celebrates the sweet smell of (Kicking Horse Coffee) success. Coca Cola Freestyle. Air Canada and Canadian Airlines merged in 2001, becoming the world’s twelfth-largest airline in the first decade of the 21st century. Kicking Horse Coffee, The 411. However, a diversified entity will lose out due to having limited investment in the specific segment. Although the United States currently has the largest economy in the world, it accounts for less than 5 percent of the world’s population. involves trying to gain additional share of a firm’s existing markets using existing products. The firm maintains a Spanish-language website at h… Disadvantages of Localization Of Industries. As an approach to doing business, the strategy involves a company choosing to focus most of its resources on the development of a specific product or at least a small group of products that are aimed at a specific market. The beverages are in regular, vanilla, and wild cherry flavors and are labeled with the nostalgic PepsiCo logo. See Also: Organizational Structure Advantages of Centralization. The disadvantages of diversification are less publicized, and therefore less well known, but the fact is diversification can also have adverse effects on an investment portfolio. Now several blends of Starbucks coffee and Tazo tea are widely available in the popular one-cup format. Each generic strategy offers advantages that firms can potentially leverage to enjoy strong performance, as well as disadvantages that may damage their performance. In case of companies following concentration strategy, they target a small group of consumers to sell their product because wider the product range of company larger will be the customer base and since company following concentration strategy has one product naturally its customer base will be low and any big company cannot survive with a lower customer base. A concentration strategy involves trying to compete successfully within a single industry. Advantages and disadvantages of strategy? It has been a mainstay of the town since the company started in 1996. Trying to sell existing products within new markets. According to AC Nielsen ratings, for the past three years in a row (2007), KHC was the number one specialty coffee (Super Premium Category) being sold in Canadian grocery stores. Oil exploration and refining is expensive. Nike features popular and known athletes in print and television ads to snatch market share within the athletic shoes business from rivals Adidas and Lotto. The biggest advantage as far as concentration strategy is concerned is that due to company focusing only on one product it gains specialization in production and marketing of that product because once company keep producing one product for long time than company find cheaper and efficient ways to produce as well as market the product which in turn results in saving cost and … This was the reasoning behind several mergers of large oil companies, including Petro-Canada and Suncor in 1998, Exxon and Mobil in 1999, and Chevron and Texaco in 2001. Concentration strategies involve investment of resources in a product line for an identified market with the help of proven technology. Mastering Strategic Management - 1st Canadian Edition, Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. In order to understand more about concentration strategy, one should look at the advantages and disadvantages of concentration strategy –. Vancouver Sun. Part of the motivation behind Canadian Airlines acquiring Wardair in 1989 was to give them access to new routes including long sought-after routes to the UK and Europe. As a starting point, the following table outlines the advantages of each approach. What are the advantages and disadvantages of four firm concentration ratio (CR4) and Hirfindahl-Hirschman Index (HHI) -- must give both advantages and disadvantages for … In an acquisition, a larger firm purchases and absorbs a smaller firm. In 2013, Jones Soda created a poutine-flavored, limited-edition soft drink, which got international popular culture attention. Starting from a need to find good coffee for themselves—when grocery stores only stocked commercial ground brands—Kicking Horse Coffee founders Elana Rosenfeld and Leo Johnson kick-started the trend for whole bean, organic, fair trade coffee in Canada. mountain pass and river), Kootenay Crossing, and Grizzly Claw (Kicking Horse Coffee, 2014). Generally, the acquired company is smaller than the firm that purchases it. Companies can diversify their business by offering new products to existing customers or entering new markets with existing products or new products. Mastering Strategic Management – 1st Canadian Edition. An attempt to gain additional share of existing markets using existing products. Retrieved from http://en.wikipedia.org/wiki/Coca-Cola_Freestyle, Wikipedia Organization. Fair Trade USA reports that organic coffee imports to the United States and Canada increased in 2012 by 18 percent over 2011. Therefore, diversification limits the growth opportunities for an entity. This type of marketing can be a great success for those companies who have limited resources. What might you advise this company’s executives to do differently? (1957). In many cases, horizontal integration is aimed at lowering costs by achieving greater economies of scale. Retrieved from http://www.kickinghorsecoffee.com/files/KHC_The_411.pdf, Lee, J. As with all strategies, diversification in business has advantages and disadvantages and the administration can use these advantages and disadvantages … The CEO, Elana Rosenfeld, has been recognized several times for her achievements in business. It helps organisations carry out a comprehensive assessment of its environments and develop and implement strategies in line with them. Hence whether its procurement of raw materials at cheap rates from suppliers or getting the best talent in terms of manpower as today’s generation love specialization and they love to work with those companies which are specialist and market leader in their respective fields. Business Week, 60–70. Kicking Horse Coffee Kicks it up a Notch. Those companies adopt concentration strategy can better identify customer needs and wants due to its one are fewer segments and one can better satisfy customers’ needs and wants. 2014. The hope is that the buzz that surrounds the unusual flavors will grab customers’ attention and get them to try—and become hooked on—Jones Soda’s more traditional flavors. What is Concentration Strategy? Canada ranks at 0.5 percent of the world’s population. One way to reach a new market is to enter a new retail channel. Product development involves creating new products to serve existing markets. The selection would depend upon the organization and its market. Jones Soda’s 2006 set focus on the flavors of Thanksgiving. Retrieved from http://en.wikipedia.org/wiki/Canadian_Airlines#Subsidiaries, Wikipedia Organization. 2. What’s your view on this? Canadian Airlines Corporation was formed in 1987 when Pacific Western Airlines purchased Canadian Pacific Airlines (which operated as CP Air for a number of years), which in turn had recently acquired Eastern Provincial Airways and Nordair. This fact is justified by the fact that the company is much easier and more efficient to meet the requirements of a strategically narrow segment than its competitors who operate on a larger scale - the entire sector. Strategic management is a way to transform the existing static plan in a proper systematic process. Given that so many mergers and acquisitions fail, why do you think that executives keep making horizontal integration moves? Harvard Business Review, 35(5), 113–124. The joining of two similarly sized companies into one company. Considering horizontal integration alongside Porter’s five forces model highlights that such moves also reduce the intensity of rivalry in an industry and thereby can make the industry more profitable. An acquisition takes place when one company purchases another company. Thus executives need to be very cautious when considering using horizontal integration. eval(ez_write_tag([[300,250],'letslearnfinance_com-leader-1','ezslot_1',110,'0','0']));As one can see from the above pros and cons of concentration strategy that a company cannot blindly follow above strategy rather it should carefully read and assess above points and then take the decision whether it wants to operate only as concentrated firm or operate as diversified firm. Advantages of Strategic Management Process: The process of strategic management is a comprehensive collection of different types of continuous activities and also the processes which are used in the organization. List of the Advantages of a Focus Strategy 1. What is Concentrated Marketing? Understanding Thought Patterns: A Key to Corporate Leadership? King Gillette, an American businessman whose family hailed from France, pioneered the safety razor that bears his family name. There are four sub-strategies of concentration strategies: (1) market penetration, (2) market development, (3) product development and (4) horizontal integration. Retrieved from http://www.vancouversun.com/mobile/business/news/Vancouver+entrepreneur+celebrates+sweet+smell/7617938/story.html, The Canadian Business Journal. The biggest advantage as far as concentration strategy is concerned is that due to company focusing only on one product it gains specialization in production and marketing of that product because once company keep producing one product for long time than company find cheaper and efficient ways to produce as well as market the product which in turn results in saving cost and earning profits due to specialization in producing a product. (2013). Retrieved from http://www.ota.com/pics/media_photos.171.img_filename.pdf, Fair Trade USA (2013, May 10). Within concentration strategies, there are three sub-strategies: (1) market penetration, (2) market development, and (3) product development (Figure 8.2 “Concentration Strategies”). There are several advantages and disadvantages of decentralizing an organization.Decentralizing is optimal when subunit managers and employees have specialized knowledge regarding their particular subunit. Canada’s Organic Market National Highlights, 2013. Mergers and acquisitions are popular moves for executing a concentration strategy, but executives need to be cautious about horizontal integration because the results are often poor. Kicking Horse Coffee, based in the relatively tiny and remote town of Invermere, B.C. Rather than rely on their own efforts, some firms try to expand their presence in an industry by acquiring or merging with one of their rivals. His company’s more recent innovations in the razor market include Trac II (the first two-blade razor), Atra (first razor With a pivoting head), Sensor (first razor with spring- loaded blades), Mach 3 (first three-blade razor), and Fusion (first six-blade razor). Concentrated Marketing is a market coverage and Market Segmentation strategy in which the product and marketing message is aimed at a (few) well-defined segments of the consumer population in a market. When we are young then in school we are taught all subjects but if you want to excel in one particular field than you will have to do PhD in that subject this is nothing but the concentration of all your efforts towards that subject in which you want to excel. It helps to build strong relationships within each target market. Name and understand the three concentration strategies. In the case of focus differentiation, one advantage is that very high prices can be charged. There are legitimate reasons for adopting each of the three broad target market strategy approaches. Can you identify a struggling company that could benefit from market penetration, market development, or product development? The benefits of the strategy is to build a strong reputation within a market and generate loyalty among the customers. Kraft Foods, Nabisco, and Cadbury were each very large, successful companies with international markets. This measure not only translates into an increase in overall … PepsiCo is also expected to take a significant step toward reducing the sugar and calorie content of its drinks via its partnership with flavor supplier Senomyx. In the case of focus differentiation, one advantage is that very high prices can be charged. Features of Bank Reconciliation Statement, Normal and Inferior Goods and Its Examples, Porter Five Forces Model Advantages and Disadvantages, Why Socialism is different from Communism. Advantages of each approach. Rather than build a presence from nothing, Canadian Airlines executives believed that buying a position was more cost-effective (Wikipedia, 2014). Uncategorized concentrated marketing advantages and disadvantages Starbucks engages in market development by selling their beans and bottled drinks in grocery stores. Meaning. These products appear to be taking the place of the PepsiCo’s popular “Throwback” sodas, which included limited-edition, sugar-sweetened versions of its flagship cola and Mountain Dew, introduced in 2009, both of which were packaged in nostalgia-inspired cans and bottles. Interestingly, a firm can use one, two, or aspects of all three strategies in its efforts to excel within an industry (Ansoff, 1957). UFC buys out Strikeforce in another step toward global domination. Also, the level of competition to win short term contracts allows discounting of prices. Horizontal integration can be attractive for several reasons. Often firms will rely on advertising to attract new customers within existing markets. We illustrate examples of each below. Examine the relative advantages and disadvantages of utilizing either a concentrated or a diversified investment portfolio strategy. In recent years, HP has pursued horizontal integration through a merger with Compaq and the acquisition of Palm. In case of PHD if one student is focusing only on one subject and other is studying both for PhD and postgraduate degree than student who is focusing only on PhD is more likely to excel than another student, similarly in case of companies when company is focusing only on one product than chances of it getting competitive advantage on one particular product over its competitors are more as compared to those companies which produces and markets many products.eval(ez_write_tag([[300,250],'letslearnfinance_com-medrectangle-4','ezslot_0',107,'0','0'])); When a company specializes in selling and marketing on one product than it has a competitive advantage not only while selling the product but also in the procurement of various factors of production at competitive rates. Market penetration, market development, and product development are three methods to grow within an industry. When you put all eggs in one basket and that basket falls than all your eggs similarly biggest problem with concentration strategy is that there is a lack of diversification and since company is dependent on one product any problem in the demand for product which may be due to change in technology, change in consumer taste, government policy and other factors can result in complete slowdown in sales as well as profits as far as company is concerned.eval(ez_write_tag([[250,250],'letslearnfinance_com-box-4','ezslot_2',108,'0','0'])); Demand for product cannot be infinite as everything has its limit and when company is selling only one product than it cannot grow in the same way as diversified firm can grow because the scope for demand in case of diversified firm is higher and there is no risk of saturation of demand which is the case with the company following concentration strategy. Nike, for example, features famous athletes in print and television ads designed to take market share within the athletic shoes business from Adidas and other rivals. (pop. Often firms will rely on advertising to attract new customers within existing markets. More recently, McDonald’s has gradually moved more of its menu toward healthy items to appeal to customers who are concerned about nutrition. Figure 8.2: Attribution information for all included images is in the chapter conclusion. In the 1940s, for example, Disney expanded its offerings within the film business by going beyond cartoons and creating movies featuring real actors. This marketing approach is effective for those companies which are skilled and specialized in manufact… Concentration on a Single Business Advantages Operational focus on a single familiar industry or market. 1. In the case of focus differentiation, one advantage is that very high prices can be charged. Figure 8.5 image description: Horizontal Integration. That year it also bought ACE Bakery, a Canadian maker of artisan and European-style breads. Concentration Strategy Advantages and Disadvantages Vinish Parikh. The benefits of the strategy is to build a strong reputation within a market and generate loyalty among the customers. The firm maintains a Spanish-language website at http://www.meencanta.com; the website’s name is the Spanish translation of McDonald’s slogan “I’m lovin’ it.” McDonald’s hopes to gain more Latino customers through initiatives such as this website. Perhaps the most famous example of two close rivals simultaneously attempting market penetration is the “cola wars” where Coca-Cola and PepsiCo fight for share in the soft drink market, Pepsi’s blind taste tests in 1975 called the Pepsi Challenge is one Of the more famous attacks in this ongoing battle. approach in which a firm purposes to establish and market an exclusive product for various consumer segments A merger joins two companies into one. Henry, D. (2002, October 14). For many firms, concentration strategies are very sensible. Mergers and acquisitions: A guide to creating value for stakeholders. Each winter, the firm introduces a holiday-themed set of unusual flavors. McDonald’s has pursued market penetration in recent years by using Latino themes within some of its advertising. Starbucks acquired competitor Seattle’s Best Coffee—which had a presence in Borders Bookstores and Subway Restaurants—in order to target a more working-class audience without diluting the Starbucks brand. Where customers may have originally sought out Kicking Horse Coffee for these qualities, they continued to do so for the taste, quality, and even the dash of B.C. The advantages were natural resources, strategy in warfare, and trade was prosperous. Vertical Integration Strategy: Advantages, Disadvantages, Types Vertical Integration is the degree to which a firm’s own production system or service facility handles the entire supply chain. Nike, for example, features famous athletes in print and television ads designed to take market share within the athletic shoes business from Adidas and other rivals. Excessive dependence: Concentration of industries would lead to the establishment of several industries in a particular place. In early 2011, Jones Soda let its customers choose the winter 2011 flavors via a poll on its website. In the end, between 30 percent and 45 percent of mergers and acquisitions are undone, often at huge losses (Hitt, Harrison, & Ireland, 2001). These strategies involve trying to compete successfully within only a single industry. Now Kicking Horse Coffee can reach consumers that don’t or can’t visit its one coffeehouse in Invermere. PepsiCo Eyes Summer Launch for New “Real Sugar” Colas. B.C entrepreneur celebrates the sweet smell of (Kicking Horse Coffee) success. Retrieved from http://www.bevnet.com/news/2014/pepsico-eyes-summer-launch-for-new-real-sugar-colas/, Canada Organic Trade Association. Horizontal integration can also provide access to new distribution channels, where a company may create or acquire production units for outputs that are alike—either complementary or competitive. Totally dependent on a single niche market segment; High developed and specialized market plan is required to implement Disadvantages Of Diversification The following are the disadvantages of diversification: Entities entirely involved in profit-making segments will enjoy profit maximization. Global pharmaceutical firm GlaxoSmithKline plc was formed by the merger of GlaxoWellcome plc and SmithKline Beecham plc in 2000. that comes in the coffees, with names like Kicking Horse (after a famous and historic B.C. We illustrate the three concentration below. In the case of companies, some company follows a similar strategy where they direct all their money and resources towards the production and marketing of one product and this strategy is called concentration strategy. Growing with the market brings competitive advantage. Advantages and Disadvantages of the Focused Strategies. Coca-Cola introduced Freestyle in 2009,  a touch screen soda fountain. Other acquisitions fail because the buyer pays more for a target company than that company is worth and the buyer never earns back the premium it paid. Creating new products to serve existing markets. What is Concentration Strategy? Concentrated marketing is concerned with focusing all available resources on one segment within the total market. The Canada Organic Trade Association reported that pre-packaged coffee (roast and ground) sales in Canadian retail stores was $47 million in 2012, compared to $27.2 million in 2008. The company ships anywhere in Canada, and its products are available through Amazon.ca and Amazon.com. Mergers: Why most big deals don’t pay off. Compare also: Target Marketing. As an approach to doing business, the strategy involves a company choosing to focus most of its resources on the development of a specific product or at least a small group of products that are aimed at a specific market. But it has disadvantages because of the nature of shift of the demand of customers due to innovations in technology. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. What are the advantages and disadvantages of concentrated targeting strategies. Concentration strategies are meant to compete in one, single industry. Disadvantages of One Industry Focus ... A corporate-level strategy is when a business makes a decision that affects the company's finances, management, human resources, and … Here are the advantages and disadvantages of the focus strategy to examine. Market development involves taking existing products and trying to sell them within new markets. (2014). A concentration strategy is a type of approach that is used in both business and investment situations. (2014). Nike, for example, features famous athletes in print and television ads designed to take market share within the athletic shoes business from Adidas and other rivals. Concentration Index funds and diversification have worked extremely well in the past 35 years, however their success can be thanked to geography, as we hear only about the success in the U.S., and to declining interest rates. These two bottling giants are extending their product lines in an attempt to increase their own market share, and take market share away from each other and from their smaller rivals. Appendix 1: Mastering Strategic Management Powerpoints. Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. There is not one approach that is better than the others. Mergers typically involve similarly sized companies. Crystal is a seasoned writer and researcher with over 10 years of experience. However, putting criticisms aside, strategic planning plays an important role in organisations. Jul 24 Back To Home Advantages of Decentralization. Bill Hewlett and Dave Packard formed Hewlett-Packard in a garage after graduating from Stanford in 1935. (2011, March 12). Retrieved from http://www.cbj.ca/business_in_action/food_beverage/kicking_horse_coffee.html, Wagenheim, J. Apple engages in market development by allowing customers in Starbucks stores to connect directly to iTunes store and Starbucks Now Playing content. Customers are offered a free download to get them to visit iTunes—and to perhaps purchase more songs. The machine features over 125 different Coca-Cola drink products, and custom flavors. Actions that firms use to try to compete successfully within only a single industry. Bevnet. Market penetration involves trying to gain additional share of a firm’s existing markets using existing products—often by relying on extensive advertising. McDonald’s, Starbucks, and Subway are three firms that have relied heavily on concentration strategies to become dominant players. about 3,000), sells only organic fair trade coffee and organic fair trade Indian chai. We will examine Broader societal expectations advantages and disadvantages of both frameworks and then we will depict how these two paradigms may enhance each A high-performing firm in this paradigm is the one other. To sum-up, advantages and disadvantages of strategic planning are very clear as outlined above. As with all strategies, diversification in business has advantages and disadvantages and the administration can use these advantages and disadvantages for … Disadvantages for Businesses Competition decreases your market share and shrinks your customer base, especially if demand for your products or services is limited from the start. Selling goods and services to the other 95 percent of people on the planet can be very appealing, especially for companies whose home market is saturated (Figure 7.3 “Why Compete in New Markets?”). Disney was much bigger than Miramax and Pixar when it joined with these firms in 1993 and 2006, respectively, thus these two horizontal integration moves are considered to be acquisitions. Few compan… A competitive market can also force you to lower your prices to stay competitive, decreasing your return on each item you produce and sell. Today, Kicking Horse Coffee roasts over 1,800 tonnes of coffee annually from the Invermere facility and enjoys revenue of about $25 million a year with predicted growth of 10 percent annually; growth which reflects the consumer demand for premium organic coffee. In simple words, if the company wants to be market leader than it needs to have a high and loyal customer base. Product development involves creating new products to Serve existing markets. ... A company should pursue any and all strategies as long as strategic managers have weighed the advantages and disadvantages of those strategies and arrived at an option that justifies them. Advantages of Decentralization. What schools would be good candidates for this horizontal integration move? Market penetration means gaining additional share of an organization’s existing markets by utilizing existing products. Term merger is generally used when two similarly sized firms are attractive because they own strategic resources such valuable. Foods retrieved from http: //en.wikipedia.org/wiki/Canadian_Airlines # Subsidiaries, Wikipedia organization in 1996, an American businessman family! Customers in Starbucks stores to connect directly to iTunes store and Starbucks now Playing.! Pea, sweet Potato, Dinner Roll, Turkey and Gravy, and Egg Nog need to very... On its website level of competition to win short term contracts allows of. 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