Intensive Distribution: Definition, Strategy & Examples Video & Lesson Transcript

In strategic alliance, two or more firms that unite to pursue a set of agreed upon goals; remain independent subsequent to the formation of an alliance. In theory, the acquirer must buy more than 50% of the paid-up equity of the acquired company to enjoy complete control. But in practice, however effective control maybe exercised with a smaller shareholding, because the remaining sharehold­ers scattered and ill-organized are not likely to challenge the control of acquirer. Takeover is an acquisition of shares carrying voting rights in a company with a view to gaining control over the assets and management of the company. A vertical integration refers to the integration of firms in successive stages in the same industry. The integration of different levels/stages of the industry is known as vertical integration.

All joint ventures are typically characterized by two or more ventures being bound by a contractual arrangement which establishes joint control. Activities, which have no contractual arrangements to establish joint control, are not joint ventures. The contractual arrangements establish joint control over the joint venturers. The acquired firm will continue to exist as long as there are minority stockholders who refuse the tender. From a practical standpoint, however, most tender offers eventually become mergers, if the acquiring firm is successful in gaining control of the target firm. In a tender offer, one firm offers to buy the outstanding stock of the other firm at a specific price and communicates this offer in advertisements and mailings to stockholders.

intensive strategies

A growth strategy is one that an enterprise pursues when it increases its level of objectives upward, much higher than an exploration of its past achievement level. What problems would employing an intensive distribution strategy create for a manufacturer? One of the problems that manufacturers have with intensive distribution is that sales vary by retail location. Products that are intensively distributed are most often low cost products with low margins.

Some companies expand the business into unrelated industries (Example – Wipro which is in the business of several FMCG, electrical and lighting, furniture and IT). Other examples- include the V-Guard, Reliance, LG, Samsung, Hyundai, General Electric, etc. Expanding the market to geographical areas where the company has not had business is also regarded as diversification. All the original business entities cease to exist after the combination. Since mergers and consolidations involve the combination of two or more companies into a single company, the term merger is commonly used to refer to both forms of external growth.

Disadvantages of Intensive Distribution

However, in differentiation focus, Nike’s strategic objective is to target buyers in a subset or segment of the global sporting goods market. For example, the company has shoes that are especially designed for soccer and football, featuring studs not suitable for use on streets. Such focus is achieved through research and development, with this generic competitive strategy associating Nike brands to athletic use. The generic strategy of differentiation focus influences product development, which is one of Nike’s intensive growth strategies for enhancing its products’ competitive advantages.

The strategic alliance agreement contains the terms like capital contribution, infrastructure, decision making, sharing of risk and return etc. A joint venture by a domestic company with multinational company can allow the transfer of technology and reaching of global market. The partners in joint venture will provide risk capital, technology, patent, trade mark, brand names and allow intensive strategies both the partners to reap benefit to agreed share. A person seeking control over a company, purchases the required number of shares from non-controlling shareholders in the open market. This method normally involves purchasing of small holding of small shareholders over a period of time at various places. The hostile takeover is against the wishes to the target company management.

intensive strategies

Manufacturers use an intensive distribution strategy with products that need to be quickly replenished. The advantages of this strategy include money, product awareness, and impulse buying. The disadvantages include sales vary, low prices/low margins, and lack of retailer control. Determining whether or not an intensive distribution strategy is the best strategy to employ is often dependent on factors such as organizational resources or the availability of retail locations. For example, companies with limited resources may not have the capacity to support an intensive distribution strategy. Large stores, such as Walmart or Target, are often hard for companies to get their products into, which could limit a company’s ability to distribute its products.

Coca Cola has managed its place through some critical factors which are a source of sustainable competitive advantage for it. Michael E Porter has highlighted three key strategies that come in handy if you are trying to build a competitive advantage. Looking at the two major elements of product and market, the model offers a wide range of variations that can help organizations select which option is or are the most suitable. Since businesses differ in the way they operate even if they belong to the same industry, there is not a single strategic option that is suitable to all, much more at all times. The most suitable may be derived only after all the variables have been considered. The company can make necessary changes in its existing products to suit the different likes and dislikes of the customers.

Behavioral Leadership Model

A business that operates in an expanding market can grow through market penetration. However, a business in a mature, stable market may choose to grow either through market development or product development depending on its internal strengths. If neither of these offers sufficient potential, a business may consider diversification to achieve further growth. For this purpose, the firm must develop significant competitive advantages. Attractive product design, high product quality, attractive prices, stronger advertising, and wider distribution can assist an enterprise in gaining lead over its competitors.

  • Diversification is the most risky of the four growth strategies since it requires both product and market development and may be outside the core competencies of the firm.
  • AT&T’s concentric diversification strategy has led the firm into talks with American Online about a possible joint venture or merger to provide AOL customers cable access to the Internet.
  • In order to make market penetration strategy effective, certain guidelines should be followed by the organization in this regard.
  • On the other hand, PepsiCo’s intensive growth strategies are a response to the evolving global food and beverage market conditions.
  • Internal development can take the form of investments in new products, services, customer segments, or geographic markets including international expansion.

It has introduced a number of healthy products including health drinks and juices that are aimed at the health conscious customers. So, Coca Cola has used a mix of cost leadership and differentiation to gain competitive advantage and to build customer loyalty. Strategies for market penetration are one of the core elements of any intensive growth plan.

Uses of Ansoff Matrix

International Journal of Production Management and Engineering, 8, 1-12. Market penetration strategy has the advantage of capitalizing on existing knowledge and expertise in a particular technology and production process. This could lead to increase in sales by offering products to customers who have not previously had the chance to purchase them. In order for your business to maximize economic value, you must balance customer satisfaction and competitive market forces with internal cost and growth consideration.

Vertical integration may be either backward integration or forward integration. Increase sales to current customers by habituating existing customers to use more. Current markets are not saturated with a particular product or service.

intensive strategies

Product Development – the firms develops new products targeted to its existing market segments. Some firms pursue conglomerate diversification based in part on an expectation of profits from break up acquired firms and selling divisions piecemeal. This strategy is not as risky as conglomerate diversification because a firm already should be familiar with its present customers.

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 The strategies require intensive efforts if a firm’s competitive position with existing products is to improve. The main generic strategy used by Coca Cola is that of cost leadership. This is a strategy employed by several big brands of the world that are leading in the market.

Strategic outcomes can reinforce the cultural characteristics of the sporting goods business. Moreover, Nike’s operations management influences productivity and effectiveness in implementing generic competitive strategies and intensive growth strategies. PepsiCo applies market development as its supporting intensive growth strategy. This intensive strategy supports business growth by capturing new markets or market segments. For example, PepsiCo continues to expand its distribution network to reach the last remaining markets or segments, especially in developing regions. However, market development is only a supporting intensive growth strategy because PepsiCo already has significant presence in all regional markets worldwide.

From time to time, Coca Cola also uses discounts and promotional campaigns to increase sales and popularity. It is mainly for the affordability of its products however, that the sales of the brand and its products have remained high. It helps achieve higher sales, build a large customer base and also gain recognition. Coca Cola spends a lot on marketing and promotion but still if its products’ prices were not as affordable, its sales would have been lower. While cost leadership is the main generic strategy used by Coca Cola, it has also used differentiation to gain an advantage over the competitors.

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