NATIONAL INSTITUTE OF STUDIES

ASSIGNMENT

HARINDER KUMAR

Diversification is a form of corporate strategy for a company. It seeks to increase profitability through greater sales volume obtained from new products and new markets. Diversification can occur either at the business unit level or at the corporate level. At the business unit level, it is most likely to expand into a new segment of an industry that the business is already in. At the corporate level, it is generally very interesting entering a promising business outside of the scope of the existing business unit. NZ Milk Ltd got three diversification options available. 1. Manufacturing electrical appliances 2. Manufacturing breads 3. And manufacturing milk products.

Going into an unknown market with an unfamiliar product offering means a lack of experience in the new skills and techniques required. Therefore, the company puts itself in a great uncertainty. Moreover, diversification might necessitate significant expanding of human and financial resources, which may detracts focus, commitment, and sustained investments in the core industries. Therefore, a firm should choose this option only when the current product or current market orientation does not offer further opportunities for growth. In order to measure the chances of success, different tests can be done:

The attractiveness test: the industry that has been chosen has to be either attractive or capable of being made attractive. The cost-of-entry test: the cost of entry must not capitalize all future profits. The better-off test: the new unit must either gain competitive advantage from its link with the corporation or vice versa.

Developing or modify products is called product market strategy and this could be used to increase the sales and profit of the company. The software can be used as a potent market penetration tool, they could assemble a service portfolio that could include recovery software, spam/virus filtering and as required by the market. Developing a new market for the existing company product is called market development strategy. This is the process of finding new customers to increase company profits and sales. Companies can develop markets on geographical such as city, country, region, state etc and demographical such as age, sex, gender, class etc.

Rapidly expanding consumer demand for greater touch-screen capability, mobile computing and increased affordability of PCs in emerging economies - combined with the continued expansion of LCD TVs around the world - are likely to create demand for touch technology. The company could create netbook computers, touch pad computers etc. To stay in the competition, they can divide shares at low price or give bonus shares to its existing customers. It could also tie-up with other software companies, so that they recommend its product to its own customers and making a new customer profile.

Answer: The appropriate strategy for this company is diversification and product market strategy. In diversification, it seeks to increase profitability through greater sales volume obtained from new products and new markets. Diversification can occur either at the business unit level or at the corporate level. Product market strategy is developing or modify products is called product market strategy and this could be used to increase the sales and profit of the company. If the company develops a new server product, it will just be the first stage of a product development.

Answer: they will have to sell their product in order to maintain or increase their share in the market.

Answer: Integration means control over the company resources. The company got two types of integration options available. 1. Horizontal integration 2. Vertical integration Horizontal integration describes a type of ownership and control. It is a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. Horizontal integration in marketing is much more common than vertical integration is in production. Horizontal integration occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm, in a kid cloth retailer merging with another car retailer. In this case both the companies are in the same stage of production and also in the same industry. This process is also known as a "buy out" or "take-over". The goal of Horizontal integration is to consolidate like companies and monopolize an industry. Vertical integration describes a style of management control. Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. Vertical integration is one method of avoiding the hold-up problem. There are three types of Vertical integration:

1. Backward vertical integration: it controls subsidiaries that produce some of the

inputs used in the production of its products. In this case if they buy that Australian manufacturing unit, it is going to control over its input system.

2. Forward vertical integration: it controls distribution centres and retailers where

its products are sold. 3. Balanced vertical integration: it means a firm controls all of these components, from raw materials to final delivery.

The benefits of Horizontal integration are, it allows:

Economies of scale: it refers to the cost advantages that a business obtains due to expansion. There are factors that cause a producers average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.

Economies of scope: Economies of scope are conceptually similar to economies of scale. Whereas 'economies of scale' for a firm primarily refers to reductions in average cost (cost per unit) associated with increasing the scale of production for a single product type, 'economies of scope' refers to lowering average cost for a firm in producing two or more products.

Strong presence in the reference market.

The advantages of forward integration include excluding competing suppliers, greater ability to reach end customers and better access to information about end customers.

Answer: Competitive advantage is a theory that seeks to address some of the criticisms of comparative advantage. Competitive advantage theory suggests that states and businesses should pursue policies that create high-quality goods to sell at high prices in the market. Competitive advantage rests on the notion that cheap labour is ubiquitous and natural resources are not necessary for a good economy. The value chain is a systematic approach to examining the development of competitive advantage. The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organisation. The 'margin' depicted in the diagram is the same as added value. The organisation is split into 'primary activities' and 'support activities. Primary Activities. Inbound Logistics. Here goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organisation. Operations. This is where goods are manufactured or assembled. Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine.

Outbound Logistics. The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer. Marketing and Sales. In true customer orientated fashion, at this stage the organisation prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix. Service. This includes all areas of service such as installation, after-sales service, complaints handling, training and so on. Support Activities. Procurement. This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organisations), and ePurchasing (using IT and web-based technologies to achieve procurement aims). Technology Development. Technology is an important source of competitive advantage. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments. Human Resource Management (HRM). Employees are an expensive and vital resource. An organisation would manage recruitment and s election, training and development, and rewards and remuneration. The mission and objectives of the organisation would be driving force behind the HRM strategy. Firm Infrastructure. This activity includes and is driven by corporate or strategic planning. It includes the Management Information System (MIS), and other mechanisms for planning and control such as the accounting department.